Jul 21, 2021

How Outsiders are Shaping the Telecommunications Market

A few weeks ago, the editorial panel at IoT Now invited me to give a short talk about innovation in the communications sector and the implications for digital transformation. This talk was part of a series of webinars [1] on 5G promoted by Fibocom, the global supplier of wireless communication modules and IoT solutions.

The key messages from this presentation are worth repeating in light of a recent technology licensing announcement [2] involving Huawei and Volkswagen (VW). This illustrates a reversal of the mobile industry’s approach to service adjacent markets. Now, organizations in adjacent markets are entering the mobile ecosystem through initiatives that will influence mobile operator strategies and business practices.

Role Reversal 

The Huawei/VW news is important because it represents a direct commercial link between vendor and end-user organizations. This is a novelty in the context of industry value-chain relationships that I analyze in my annual reviews of corporate initiatives [3]. VW’s licensing agreement bypasses intermediate suppliers in the IoT supply chain. It provides a fresh perspective on innovation by creating a direct pathway between user needs and technology development. This is also not an isolated example. This story in the Financial Times [4] refers to Daimler and VW buying 3G and 4G licenses directly from Nokia for use in their semi-autonomous driving developments. There are potential extensions to create new service concepts for in-vehicle entertainment. 

 A related development that changes the dynamic between users and technology suppliers has been taking place over the past few years in the 3GPP standardization community. A glance at the membership list reveals the involvement of many industrial organizations in standardization activities. A Siemens co-speaker at the Fibocom webinar explained that participation was the best way to ensure that industrial use cases and their customers’ interests were reflected in emerging standards.

Going beyond the standardization of industrial use-cases, research [5] from CapGemini shows a strong interest on the part of industrial firms to acquire 5G spectrum. This will inevitably force changes in network operator and communications service provider business models. There is also the prospect for market entry by specialist service and technology providers. 

A final example of industry change coming from outside the communications industry is a consultation process that the Bank of England is running on digital currency and payments systems [6]. One of the Bank’s observations is that, in time, IoT devices might initiate digital currency payments, or payment between devices. Should this outcome materialize, the communications industry can expect new requirements and, potentially, new regulatory obligations to meet on financial transaction reporting.

It is worth noting that these four drivers are not about technical capabilities, such as the superior data throughput or latency characteristics of 5G networks. That makes it even more important for traditional players in the mobile industry to develop non-technical strategies to improve competitive performance. 

Treat Outsiders As Your Allies

Platform strategy [7] is one of the recent schools of thinking on how businesses can adapt to new models of operation. It recommends innovative approaches to manage network effects in multi-sided business models as well as the use of digital tools and shared economy ideas. An important concept about value creation is the idea of inverting the firm to maximize value creation opportunities outside the firm’s boundaries. Software firms, for example, rely on independent developers while ride-hailing firms depend on independent drivers and owners of private vehicles. The lesson for mobile-industry businesses is to extend their traditional business boundaries and to implement practices that treat outsiders as business allies.

Along these lines, I offered four items of advice in my webinar presentation. The first is to target market dynamics beyond connected hardware and connectivity services. This involves new product and service offerings as well a change in the incentives that are currently used to measure success (i.e., sales of modules and SIMs). The second suggestion is to think in terms of multi-sided business models. Instead of optimizing the seller-to-buyer relationship, what are the opportunities to expand the addressable market through seller-to-multiple-buyer models?

Many of the large technology vendors and mobile network operators have launched partner programs to make it easy for customers to build IoT solutions from a menu of approved suppliers. One way to boost the effectiveness of these partner eco-systems is to encourage third-party activities, some of which might not involve the lead partner. These interactions have the potential to drive network effects, by encouraging other solution providers to join. By boosting the number of eco-system transactions over time the partner program gains disproportionate value because of self-reinforcing network effects. 

The final piece of advice is to treat IoT data as an asset whose value depends on how it is used. Beyond this, the change in thinking is driven by the notion that aggregated data is more valuable than individual data. However, to capitalize on this new market opportunity, businesses will need new tools and models to share data [8]. 

[1] Fibocom Webinar Series - https://www.fibocom.com/en/eventcenterfeaturepage/index_itemid_2324.html 

[2] Huawei reaches license agreement with Volkswagen’s supplier, marking the company’s largest automotive licensing deal https://www.huawei.com/us/news/2021/7/license-agreement-volkswagen 

[3] Review of IoT Corporate Initiatives - https://www.more-with-mobile.com/p/corporate-initiatives.html 

[4] Daimler settles tech licence dispute with Nokia https://www.ft.com/content/e0f5344d-bb53-4950-bc4c-5654e8141864 

[5] 5G in industrial operations https://www.capgemini.com/wp-content/uploads/2019/06/5G_Infographic.pdf

[6] Responses to the Bank of England’s March 2020 Discussion Paper on CBDC https://www.bankofengland.co.uk/paper/2021/responses-to-the-bank-of-englands-march-2020-discussion-paper-on-cbdc

[7] Platform Strategy https://platformstrategyinstitute.com/

[8] There are New Markets for Industrial IoT Data - https://www.iiconsortium.org/news/joi-articles/2018-June-JoI-New-Markets-for-Tradeable-Data.pdf


  1. 26 July 2021

    It is time to begin thinking about the platform landscape in 2022 and beyond. If your company hasn’t kicked off its strategic planning process for 2022, it is time to start. If platforms are not on the list of things to assess, they should be.


  2. 28 July 2021 update

    Is private 5G a threat or an opportunity for telcos?

    “The telcos now have an opportunity with private networks, but it’s a threat if they don’t adapt to the market and instead maintain the same mindset of: “I am the lead commercial stakeholder and I’m going to do it on my terms… if they stick in that mindset it is completely a threat,” says Amy Cameron, Principal Analyst at STL Partners. The alternative, agrees Ahmed Ali, Senior Analyst at STL and author of the report, is to accept a partial role of some kind, and develop a modular set of solutions that can be progressively offered over time including network slicing when it’s ready.

    “Apart from the modular aspects, what would be great to see is different financing options. Is there a CapEx model for the enterprise versus an OpEx ‘as a service model?” asks Amy Cameron.