Sep 23, 2019

Telcos and Smart Cities

Earlier this month, the publications team from Mobile Europe hosted their Smart IoT Connect event in London [1]. This is one in a regular series that examines the role of the telecoms ecosystem against
a backdrop of opportunities across the Internet of Things (IoT) industry. I was fortunate to attend and here are a few highlights from this year’s event which focused on the smart cities sector.

In broad terms, the supply-side of the industry is maturing. Businesses are focusing on the practicalities of closing commercial deals in contrast to launching exploratory pilot projects. There is a realization that the smart city proposition and sales process spans a wider set of parameters than telco connectivity. Telcos are talking about new commercial models and service solutions, such as data management, that map to higher levels of the IoT solutions stack and above the connectivity layer. However, based on what was presented it is going to take time to translate strategy into execution, at scale, and commercial success. The number of local government representatives attending the event reflected positively on the demand side of the equation. It validates a key theme throughout the event about the need to bridge the public-sector-to-telco knowledge gap.

Vodafone's Head of IoT Strategy (Phil Skipper) kicked the day off. His overview of Vodafone's smart cities strategy emphasized the importance of building an eco-system around the city. This is a familiar story in the IoT industry because no one firm possesses the range of competencies required to deliver smart city solutions (if you set aside silo or single-purpose solutions). The eco-system approach also
recognizes the fact that many organizations, public and private, are involved in delivering city services. This contributes to a fragmented service delivery environment. Vodafone's presentation was light on references to connectivity, a marked change from telco presentations that were common a few years ago. That is a positive sign because the smart cities sales process is a consultative one. It requires a great deal of education, on the part of buyers and sellers. It also requires a willingness to adapt entrenched operational processes, such as vendor engagement and procurement, through new business approaches.

Another presenter with telco perspective was Professor John Davies. He is the Chief Researcher for Applied Research at BT. He explained BT's work in the smart cities arena as an evolution over three phases. In phase 1, BT took a siloed approach. In phase 2, it recognized the need to support multiple applications. This led BT down the path of building information exchanges with a focus on enterprise users. By phase 3, BT's thinking had evolved to address the need for information exchange ecosystems. These involve multiple data providers, multiple data consumers and app developers, and a framework of terms and conditions for users of the exchange.

One of the features of an ecosystem approach is that it provides data uniformity and, potentially, standardized data. One important lesson from BT's experience is about its phased journey and the steps that many other firms should anticipate as they expand their portfolio of IoT solutions. It is also a reminder of the risks that early adopters carry in having to support siloed solutions or figuring out an integration strategy to link together independent solutions and their associated data sets.

As with the Vodafone presentation, BT did not emphasize connectivity as much as the value in other parts of the solution space. In BT's case, it’s a matter of working higher up the IoT solution stack. Data services, such as data cataloging and standardization, are what make data both usable and valuable.

A couple of other presentations provided a snapshot of what leading edge cities are doing to enable the smart cities marketplace. Alan Mayo, the Smart City Strategist at Digital Greenwich and a panel of representatives from the Finnish city of Tampere described their approaches. A common theme in
both cases was the idea of a separate entity to bring together different units in a city's operating structure and private sector partners. As an organizing model, it creates a point of focus around a new set of city activities. It also provides a model for working across city agencies i.e. structured to promote cross-silo strategies from the outset.

For sizing purposes, Tampere's smart city organization employs about 80 people (for a population of 400,000 and about 20,000 municipal administrators). Tampere’s initiative began as a standalone entity but gradually integrated itself across municipal departments to improve its effectiveness. While the Tampere panel included a telco representative (from Elisa), the discussion emphasized the need for a systematic that accommodates multiple telcos and access technologies.

Throughout the day, there were several questions about the return on investment (RoI) for smart city solutions. The reason why there is no easy answer is that RoI depends on who is making the investment case. Each organization has different financing hurdles, short vs. long investment horizons and, capacity to raise funding. The Tampere panel provided the best answer to this question. Their view is that smart city solutions are part of the market dynamic, especially as the tendency will only get stronger considering climate change and citizen expectation factors. There is no longer a question of whether cities will adopt smart city solutions or not. That being the case, vendors need to work on solutions to deliver smart city solutions because this is a market segment that will only grow over time.

With inspiration flagging towards the end of the day, the discussion drifted onto familiar telco territory and the topic of 5G networks. It seems that the metrics to measure success in a 5G world will differ from the average revenue per user (ARPU), subscriber acquisition costs (SAC) and churn measures for which the telco industry is currently set up. Investors are also looking at ways to factor carbon taxes and welfare gains into the smart cities business case. In tackling these ideas, there may be a way for the telco industry to attract infrastructure finance funds that are looking for opportunities from the combination of smart city and 5G developments. A different and holistic approach is precisely the line of thinking that Vodafone opened the day with.

[1] Smart IoT Connect – Intelligent Connectivity and Collaboration for Smarter Cities -

1 comment:

  1. 16 October 2019 update

    The smart district heating project by Tampere Power Utility and a student housing foundation uses AI and apartment-specific sensors to reduce energy consumption and cost.