(published in RCR Wireless - 26 Nov 2012)
A previous article in RCR Wireless magazine highlighted the
topic of new M2M business models with reference to the size and characteristics
of this fast growing market opportunity. It also highlighted the central role that
communications service providers (CSPs) occupy in the eco-system. Beyond
traditional data plans, however, what are the new business models that will
allow the full market potential to be attained?
Many of the large market opportunities
for connected devices, not just M2M, are in typically in the consumer-oriented
and high device-volume markets. These include the automotive, health care and
utilities sectors, for example. To be participate commercially in the
innovative services that are transforming these sectors, however, requires a
degree of expertise that falls outside the core know how of CSPs. CSPs
therefore need to tailor their strategies and business models for these market
sectors.
What choices do CSPs have? We have looked
at several mobile operators around the world to analyse their business models approaches.
Firstly, it is clear that dedicated business units and the allocation of
resources focused specifically on M2M opportunities are the first recurring
theme in their strategies. Dedicated units allow CSPs to tailor their business
approach and avoid being constrained by traditional strategies and procedures
that are most effective for mobile handset offerings.
The extent of dedicated investments depends
on the size of a particular CSP and its M2M ambitions. Large and multi-country
footprint operators are able to address a much wider funnel of opportunities
than a smaller or single-country CSP. These CSPs typically build up their sales
teams and invest in their own platform technologies to automate the
provisioning and life-cycle management of connected devices.
This is not necessarily a disadvantage for smaller CSPs because they can adapt their business models in different ways. They can partner with specialist platform providers such as Axeda, ILS, Jasper Wireless, Numerex etc. to speed their market entry. They can also use a wholesaler strategy to leverage value-added aggregators and distributors in order to extend their market reach and serve niche segments. Multi-country alliances are another business model approach where international reach is a customer requirement. In fact two large groups have been formed amongst operators with a presence in Asia, Europe and Latin America over the past few years.
This is not necessarily a disadvantage for smaller CSPs because they can adapt their business models in different ways. They can partner with specialist platform providers such as Axeda, ILS, Jasper Wireless, Numerex etc. to speed their market entry. They can also use a wholesaler strategy to leverage value-added aggregators and distributors in order to extend their market reach and serve niche segments. Multi-country alliances are another business model approach where international reach is a customer requirement. In fact two large groups have been formed amongst operators with a presence in Asia, Europe and Latin America over the past few years.
In
the US market, the larger CSPs – AT&T, Sprint, T-Mobile and Verizon
Wireless have all targeted the M2M market. AT&T has been especially focused
on this market ever since it established its Emerging Devices Organization
(EDO) to target the market for non-traditional connected devices. The
accompanying high-level timeline of key AT&T corporate events illustrates
how its strategy has progressed, beginning initially with a focus on M2M and
utility markets.
Following the establishment of AT&T EDO, the company put in place a set of testing and certification measures to simplify the process of embedding connectivity and also to partner with platform providers. AT&T also branched out into several non-traditional sectors – healthcare, home automation and mEducation - to expand the scope of its addressable market as illustrated along the following time-line.
Following the establishment of AT&T EDO, the company put in place a set of testing and certification measures to simplify the process of embedding connectivity and also to partner with platform providers. AT&T also branched out into several non-traditional sectors – healthcare, home automation and mEducation - to expand the scope of its addressable market as illustrated along the following time-line.
Sprint is another company to have
established a dedicated emerging devices team. This contrasts with T-Mobile
which has adopted a wholesaler strategy in the US, working closely with
distribution channel partners, notably Raco Wireless.
Verizon Wireless was arguably an early
influencer of the market with its Open Development Initiative which set a
benchmark of 4-weeks to have a new connected device approved for use on its
network. Verizon Wireless continued to build up its M2M activities over its
CDMA platform although it recently announced the launch of a multi-mode module
with Cinterion Wireless to address global application opportunities. The
company has also been more active in using acquisitions as part of its business
strategy. In January 2012, Verizon announced that it had taken full control of nPhase,
an M2M platform for service enablement services. In June, Verizon acquired
Hughes telematics for $612m. This gave it a foothold in the built-in and
after-market vehicle telematics segments. It also provided Verizon with a route
to the embryonic mobile health and personal wellness markets through Hughes’ Lifecomm
business unit.
The early steps of these CSPs have
focused on enabling connectivity in as wide a variety of devices as possible. Subsequent,
platform initiatives have taken CSPs a step up the value chain in relation to
managed connectivity offerings. These include
device monitoring, remote configuration, data security, customer information portals
etc. Platforms are important because they allow connected devices to be
deployed and remotely managed both cost effectively and at scale.
In an earlier study[1] on
the topic of new business models, two additional stages along the value
spectrum were described. There are extensions beyond managed connectivity; one involves
‘stewardship services’ and the other applies to ‘platform innovation’.
In a stewardship services scenario, a
CSP occupies the role of a customer’s steward. It uses information about a customer’s
needs and purchase preferences to makes an informed supplier decision for a
given service. For example, a CSP may be an energy services steward by using
household consumption data to select an electricity supplier and tariff plan
which it then monitors periodically for price and service competitiveness.
The technology
investments and acquisitions by CSPs point to an evolution in their business
models. There is a gradual shift away from basic connectivity, which can be
commoditized, and increasingly into the applications and end-user services
market. Larger revenue opportunities are at stake as long as innovative
business models can be put in place. This will involve a change in how CSPs
operate. Our research from other markets also shows that it will involve a
higher degree of partnering and corporate venturing with companies from
adjacent industries.
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