While carriers are keen to play a leading role in the Internet of Things (IoT) and smart cities markets, they may be bypassed by other market players if they do not act. And while a new white paper from ABI Research urges carriers to adopt new strategies to establish their position within the IoT and remain competitive, one conclusion is highlighted: in order to deliver higher-value strategies beyond simple connectivity, the adoption of industry-wide standards is a must.

According to the white paper: “The deployment of open standards-based platforms, solutions, and approaches is the only way to unlock more value faster from IoT markets and, at the same time, allows adopting new business models, opening up new roles for carriers, such as aggregators and orchestrators of IoT ecosystems and market places.”

The report, ‘Role of carriers in smart cities and IoT,’ which was commissioned by InterDigital on behalf of its Smart Cities-focused business, ChordantÔ, outlines the core strategies for carriers to successfully maximise the opportunities presented by the IoT and smart cities.

For over a decade, carriers have been exploring the opportunities that exist for them in these markets and the role they can play beyond connectivity services. But there are questions around the carriers’ expertise, capabilities and operational flexibility.

One of the key decisions for carriers is whether to develop IoT and smart cities platform capabilities in-house, or whether to source them from specialised vendors.

According to ABI Research, there are four strategies that carriers can adopt:

• • Build: Developing smart cities and/or IoT platform capabilities in-house allows carriers to customise technology and optimise integration, but requires high development costs (OpEx/CapEx) as well as expertise.
• • Buy or, more specifically, source from partners: Carriers opting to source IoT technology face a bewildering array of choices from hundreds of IoT platforms. While this gives carriers flexibility and doesn’t require upfront investment, selection is complex, and may require revenue sharing with chosen partners.
• • Vertical integration: Carriers can either offer end-to-end services, or take on the role as a technology service provider, contributing to IoT or smart city services. While this gives carriers end-to-end control and allows them to capture a larger value share, it is complex, involves a legacy strategy, and time to market is much longer.
• • Open, standards-based platforms and marketplaces: Tapping into wider technology and end market ecosystems, and adopting open source approaches and smart city standards, would allow carriers to take on aggregator and orchestrator roles. While this is a forward-looking vision that supports interoperability and flexibility and is vendor agnostic, it requires IP protection and involves increased competition.

Jim Nolan

There are a number of factors that will influence the strategies that carriers decide to adopt. These include international footprint, scale, operational flexibility, time to market, resources, as well as market conditions.

“The advent of 5G makes the IoT and smart cities a reality – which means carriers need to re-think their approach beyond just providing connectivity services,” said Jim Nolan, executive vice president, Products, InterDigital.

“Carriers are in a good position to maximise the opportunities presented by the IoT – they are trusted brands who play a core central role as connectivity enablers. But to remain relevant, they need to do more. And choosing whether to make or buy their technology, or taking on an ‘UnTelco’ role and providing end-to-end vertical services, will play a key role in their future success.”

The ABI Research report concludes that successful carriers will take one of the following roles:

• • Smart pipe providers: While the core business of most carriers will remain in building, maintaining and commercialising cellular connectivity, as 5G becomes mainstream, commoditising basic connectivity services towards a range of premium connectivity services with varying degress of quality of service to power IoT and smart cities applications will improve margins and allow carriers to work closer together with other players in the value chain.
• • Aggregators: For more ambitious larger carriers, an ‘end-game’ role as aggregator and orchestrator of open IoT and smart cities ecosystems is a long-term opportunity for carriers to capitalise on their central role of enhanced connectivity services while leveraging their position as a neutral and trusted partner.

Dominique Bonte

There is a big question as to whether there is a future for carriers beyond connectivity, and whether they can go the ‘UnTelco’ role alone. And while some carriers are pursuing vertical integration strategies, these companies should be seen as exceptions, and an open-ended, standards-based approach will be much more relevant. Ultimately, in the future, no single brand or supplier will be able to control and manage the end-to-end value and supply chain in IoT and smart cities environment.

“The future role of carriers in the transformative IoT and smart cities markets remains  controversial. While carriers have long aspired to moving up the value chain, they are now facing hard choices with the arrival of 5G which will fundamentally disrupt connectivity paradigms across verticals.” said Dominique Bonte, vice presidents Verticals, ABI Research. “Mobile operators will need to adapt fast to capture value in an increasingly complex IoT ecosystem dominated by new collaborative business models ”

The ABI Research report, ‘Role of carriers in smart cities and IoT’, is available to download here.

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