The Internet of Things (IoT) has essentially exploded over the past few years. Throughout this growth, the IoT has been asserted as the frontrunner for most hyped, most talked about, and most anticipated technology. As this hype continues, the innate value and potential of the Internet of Things is becoming more fully realized. Conversely, it is no secret that traditional telco models are becoming more outdated and less profitable. The entire telco and technology industry are undergoing immense changes- with new players entering the market to potentially displace or bypass existing and established market leaders.
The question is simple- will telco’s be the proverbial dumb pipe or is there a value-add beyond being a provider of network bandwidth? Communications Service Providers (CSPs) strength lies in their backend experience- from network connectivity to billing, provisioning, revenue management, customer care and more. In this new IoT world, telco’s have an enormous opportunity of opening the door to becoming the aggregators of data and IoT enablers for enterprise applications, through strategic innovation.
Telco’s Sustainable Business Model
Many of the traditional telco giants have already begun to shift their power plays to reflect the evolution of the IoT era. For example, AT&T offers 2,300+ types of certified connected devices and claims to be a leader in the industry’s selection of fitness, smart locator, and smart watch wearables. Verizon, on the other hand, has taken more of an industrial approach and, in addition to Smart City Solutions, offers Small Business Connected solutions for Energy Management, Healthcare Monitoring, Cloud Services, Real-time Asset Tracking, Fleet Management, and more.
LogiSense customer Numerex, a single-source provider of IoT solutions, offers a Build Your Own M2M Solution option, as well as a large range of connected products to increase data analytics and improve function for a number of vertical markets, such as Waste Management, Energy and Utilities, Public Safety, Healthcare and Medical Devices and more.
These shifts into the IoT are far from minor; rather these service providers clearly are aware of the industry evolution and have begun investing in technologies in support of the future. Yet, while service providers may have a strong existing infrastructure that allows for immense opportunities for wide-scale implementation of connectivity, they need to take a look at their existing billing systems as those are often lacking the capability to accommodate and monetize on this rapidly growing market segment.
As service provider offerings shift from yesterday’s low volume, high-value events to the high-volume, low-cost events of the IoT, average revenue per user (ARPUs) is shifting downward. To accommodate the IoT, accuracy, and precision on an individual event will be paramount; inaccuracies can quickly add up over billions of events or usage data records. Service providers should be looking to upgrade their billing systems to enable the development of new business models that will maximize revenues in order to not just stay afloat but to thrive as the IoT continues to grow.
The New Norm: Freedom to Pay for What You Use
Potentially one of the most disruptive changes to the telco industry will be a shift to a more granular service model where consumers pay for what they use instead of discrete bundles. In just a few years, usage-based models have become more the norm rather than the exception. A widely shared example is the advent of Amazon Web Services (AWS). The AWS model is a simple pay-as-you-go pricing approach where customers only pay for what the need, when they need it. Enterprises, as they grow accustomed to the convenience of these new models of paying for services as they use them, are beginning to demand and expect them. CSPs must utilize these options and leverage them for their own service offerings.
Applying BSS Experience to Launch into the Future
The evidence is conclusive. If service providers take advantage of these vulnerable, beginning stages of the IoT revolution and couple that with their vast experience and the right back-office support systems, their value can become much greater than even in the most profitable telco days. Adapting quickly with automation, flexible integration, and an agility to bill for new business models based on the actual usage of any conceivable service will lead service providers to become the partner of choice for the Enterprise.
Considering new and innovative directions is a trend that may be wise to follow. The telcos must play on their strengths- with decade upon decade of back office management and experience- positioning this in this new era is vital to continued and growing success.