Show me the IoT Money – Opportunity for investment

Within the telecoms industry, views differ widely on the scale of the IoT investment opportunity

Asked at a recent conference when the Internet of Things (IoT) will make a material difference to his company’s financial performance, the CEO of one major telecoms operator replied: “Not in my tenure.”
That response highlights the lingering doubt within the telecoms industry about the scale of the addressable opportunity represented by the IoT. That’s important because telcos need to see a strong business case to justify the investment in additional connectivity that will be required to bring billions of sensors, monitors, switches and devices online.
Part of the problem for carriers is that raw connectivity will only generate a small fraction of overall IoT revenues, according to analysts. To really move the needle, telcos need to also provide provisioning and device management services, systems integration, data analytics, together with flexible platforms and middleware.
Earlier this month, Machina Research predicted the value of global IoT market will rise from 892 billion USD in 2015 to a massive 4 trillion USD in 2025. However, that forecast encompasses the extended value chain, in addition to connectivity, taking in:

• Project work, including work by systems integrators and strategy consultancies
• Platforms and middleware, including middleware and all platform activities other than connectivity support
• Applications, including application provision and hosting and application development
• Data monetization, including API monetization, and sales of data and IoT services

Strong growth from a small base

The recent round of earnings reports suggests that most telcos aren’t yet tapping these opportunities. Telefónica, which has operations in western Europe and Latin America, said its M2M (machine-to- machine) revenues in the first quarter amounted to a modest 43 million euros. Still that figure grew almost 42% year-over- year – a marked acceleration on the 36% growth seen in the fourth quarter of 2015.
Other telcos are also seeing strong growth, albeit from a low base. In the first quarter Deutsche Telekom reported the addition of 354,000 new M2M SIM cards “in a very aggressively priced market. This growth was due to the increased use of SIM cards, especially in the automotive and logistics industries.” Year-over- year, the number of M2M connections to Deutsche Telekom’s networks rose 33% to 5.3 million. Most of these are likely to be in Germany where the telco has a strong enterprise proposition. That compares with the more than 60 million Internet of Things connections supported by China Mobile, which is probably the world leader in this market.
Staying in Europe, the CEO of Dutch telco KPN, Eelco Blok, recently told investors: “In [the business market], we are in a transformation phase with lower revenues from traditional telco services, partly offset by promising growth in multi play and new services, such as cloud and Internet of Things applications.”
In the US, Verizon reported IoT revenues grew 25% year-on- year to approximately 195 million dollars in the first quarter. Indeed, Verizon does appear to be moving up the value chain. “We have launched our own utility, transportation, and healthcare solutions with products like Networkfleet, Grid Wide, Verizon Share, hum, and one of our newest products, Intelligent Track and Trace,” it said. “Our ThingSpace platform is set to accelerate the adoption of Internet of Things products and solutions by making it easier, faster, and more accessible to develop applications.”

Are partnerships the path to prosperity?

Although Verizon’s main rival, AT&T, didn’t discuss the IoT in its recent earnings announcement, the largest US telco continues to be very active in this space. AT&T is expecting to connect more than 10 million cars by 2017. It says it has already connected more than 1.9 million fleet vehicles.
It is also targeting the energy sector. At the end of April, AT&T entered into an agreement with SunPower to bring IoT technology to SunPower’s newest home energy solution—SunPower Equinox. Over the next two years, AT&T and SunPower expect to wirelessly connect at least 100,000 solar electric systems in the U.S. providing customers with access to system performance information through AT&T’s IoT capabilities. The collaboration is designed to reduce the need for onsite homeowner visits by allowing SunPower to wirelessly support solar power systems as needed and in near real-time.
As even the largest telcos lack the in-house expertise to pursue all the IoT opportunities identified by Machina, it is these kinds of partnerships that will help telcos to move up the value chain, earn more revenues and justify the investment in new networks. The arrival of 5G technologies, in particular, could also open new doors for telcos. The ability to slice up capacity on a 5G network and provide dedicated bandwidth to specific applications will make it easier for telcos to add value beyond raw connectivity.

It is clear that the health of the IoT depends on the whole-hearted involvement of telcos and that depends on their CEOs believing in the business case.

Source:Telecoms.com

How different networking standards are competing to connect the Internet of Things

The Internet of Things (IoT) —  a vast network of connected devices — is set to become the world’s largest device market over the next decade, potentially creating trillions of dollars in economic value. However, without a reliable and secure network connection, these devices will fail to deliver that value. Device owners can choose between a number of established and emerging networking technologies to connect their IoT devices and collect data from them for analysis.

BI Intelligence’s new IoT Networks Report examines these different networking technologies, their pros and cons, and how well they are positioned for future growth in the IoT market. We also outline how different networks are best suited for connecting specific types of IoT devices, including connected cars, drones, smart home devices, and wearables.
BI Intelligence

Here are some of the key takeaways:

• The need for interoperability — the ability for different devices to share data with each other — is driving the development of new networking technologies specifically designed for IoT devices.
• How Nest’s Thread network standard is positioned against other standards for connecting the smart home like ZigBee and Z-Wave.
• New developments in Wi-Fi and 4G LTE technologies could make them more suitable for connecting low-power devices like sensors and smart lights.
• New standards for low power wide area networks (LPWANs) could make it more cost-effective to connect large numbers of small devices over large geographic areas. 

Source: Business Insider

The end of a mobile wave

The mobile phone industry has had two waves - first voice and SMS and then the smartphone.  The voice wave has taken it from zero to 5 billion people on earth with a mobile phone, and now close to 2 billion mobile phones are sold every year. In parallel, starting 9 years ago, the smartphone wave converted a larger and larger percentage of those phone sales to smartphones. 

And since smartphones could be sold for higher average prices than feature phones, revenue grew even faster than unit sales. This was a great multiplier for the right companies - smartphones were a growing percentage of growing phone sales at growing prices. 

All of this is now reaching an end - the wave is almost over. 

By 2020 there'll be 6bn adults on earth and more than 5bn people with phones, and the last billion are necessarily the slowest and hardest to reach.  Phone sales are a function of the install base and the replacement rate - the install base hasn’t got much more growth and the replacement rate is also starting to lengthen (or at least not shorten). So phone sales will slow. Then, most phone sales now are already smartphones (as seen in the chart above), so the conversion of phone sales to smartphone sales also hasn’t got much further to grow. The smartphone install base does have a lot of room to grow, but that's a function of replacement at close to existing volumes, and even that will be largely done in a few more years. Hence: smartphone sales growth is slowing down. 

On one level this is just classic saturation - no industry can grow forever. But what happens next? 

At the level of the consumer internet, it’s been clear for some time that Apple and Google won the platform war and that the important questions have moved up the stack - how far can Google and Facebook capture attention and intent, what other interaction models will emerge, how far Android and iOS can shape interaction and consumer behaviour, and so on. 

For the hardware companies themselves, though (and that includes Apple), when you’re selling to everyone on earth (something the tech industry has never really done before), what do you do next? TV, once thought of as the next phase after PCs, turned to be an accessory to smartphones, and so are watches and (to some extent) even tablets. VR and AR are some time away withunclear market size, though I think AR could in principle be the next ecosystem after the smartphone. 

The obvious next market is cars, which in aggregate are much larger in revenue terms, and where a large part of the supply chain will be fundamentally remade by the shift to electric and (in due course) to autonomy.  Cars are a Big Deal for the tech industry. 

But it’s also interesting to think about the phone market itself, which isn’t going away any time soon (though AR may affect that in the next decade).

I spent some time chatting to Condor at MWC this spring. It's a subsidiary of an Algerian family-owned conglomerate, which began in the cement business and expanded into white goods - fridges and washing machines - and then televisions ('brown goods'). It built a nation-wide network of 150 stores to support that business. Then it got into the phone business, and last year it sold 3m phones, of which 2.8m were Android smartphones. The best-selling model retails for $80. It expects to reach sales of $1bn this year, and has around a third of the Algerian market. 

Condor is possible because mobile phone technology became something that you could buy off the shelf - if you can make a TV, you can make a mobile phone or a smartphone, without needing deep understanding of how cellular technology works anymore, or writing your own OS. In parallel, the manufacturing base of the industry moved from factories you own yourselves to outsourced contracting. So, you can make phones, or get someone else to make them for you, or some combination of the two, with much lower barriers to entry. And if you come from the cement business, your idea of a great margin looks rather different to Sony's. 

However, there's a big difference between making a phone and selling it. It’s all very well to put it in a shipping container in Shenzhen, but what happens after that? A lot of Apple's sales growth since 2007 has actually been about expanding distribution through mobile operators (which sell far more iPhones than Apple retail does), with the really big additions being Verizon Wireless and China Mobile. Indeed, the fact that it has now signed up all the operators that matter is one reason sales growth has slowed. In parallel, distribution was a big part of the Samsung story. It has effectively cloned Nokia: it offers every technology, frequency and specification, at every price point, for every operator, through every sales channel, and spends billions of dollars on sales and distribution to support that, of which a very large part will be sales commissions. 

That is, with the tech available off the shelf, the barrier to entry has moved from the creation and manufacture of the phones themselves to sales, distribution, marketing and support, and a lot of the innovation in the handset business now is around how to address that. Which part of the value chain do you start from and try to leverage, and which parts you outsource? Someone has to make it, someone has to import it, someone has to put into shops, or market it for online sales, and (especially in developed markets) someone has to provide support if you smash the screen. But all of those are being disassembled and reassembled in different combinations. 

Hence, at one end of the spectrum are Chinese companies that are just looking for distribution deals overseas, and will sell you a few thousand or tens of thousand with the brand of your choice printed on the back, and what happens after the shipping container (or suitcase) leaves Shenzhen is up to you. The next step along are those trying to create a brand of their own, often in parallel with selling phones under other people's brands. So I've met several companies that have a slick new consumer brand of their own with nicely designed handsets and a decent Android skin, and are thinking about how to take that abroad - what that sales and distribution might look like, and where it should be. One interesting illustration of this is Wiko, which has a double-digit share of the French market and is expanding in south-east Asia. The back of the phone says ‘Designed in France, Assembled in China’, but in fact Wiko seems to be majority owned by a Chinese company, Shenzhen Tinno Mobile Technology Company Ltd. 

Sitting right next to Wiko are ever more companies starting from the other end - building brand, distribution and marketing locally, adding some design, and outsourcing the manufacturing. Wiley Fox in the UK comes from people with a background in mobile operators, selling a premium design at a mid-range price with a lightly skinned version of Android. BQ in Spain originates in ereaders, amongst other things. Blu in Latin America has built a huge business on distribution. And of course Google sells its own ’Nexus’ line, using a rarely-encountered custom build of Android and adding a small amount of marketing and distribution. 

As the price for a good Android experience moves from $600 to $150 or $250, these companies can increasingly pass up operator subsidies, with burdens of inventory etc. that this imposes, and move straight to selling unsubsidised and online. The poster-child for this model is of course Xiaomi, which has pioneered an online-only flash sales model, backed by an attempt to build a passionate community around the brand and software experience. This has worked well in China but it's not clear how well it can be made to work elsewhere, and whether it can be built once and scaled globally or whether you need to do it one country at a time from scratch. 

Then, coming from the other end of the spectrum, mobile operators are increasing buying in a selection of low-end smartphones than they sell (generally unsubsidised on prepay) under their own brand. Sometimes these have operator apps preloaded (if they've not given up on that yet), sometimes not. One could argue that the value being added here is really only distribution, and so one might see other companies with distribution getting into this, such as mass-market retailers. Some of these have already experimented with Android tablets, with mixed results (as of course they did with MVNOs). 

This is all rather like the PC clone market of the 1980s - hundreds of undifferentiated companies fighting it out to sell commodity computers built with commodity components running a commodity operating system (though those companies mainly made the PCs themselves, where many phone brands do not). That world in due course led to companies like Dell - people who embraced the volume, low-margin commodity model and found an angle of their own. We’re starting to see equivalent model-creation now. 

Source: Benedict Evans

BMW Motorrad Equips Motorbikes with "Smart" eCall System.

The automatic emergency call (eCall) system will be mandatory for cars in the European Union from 2018. Since the risk to incur severe injuries in a traffic accident is significantly higher for bikers than for car drivers, BMW Motorrad has developed a specific eCall system for motorbikes. In some ways, it is smarter than the standard eCall for cars.

Though the result of synergies with “standard” eCall for cars, the bike emergency call system needs to understand the situation better. After  all, accident scenarios for two-wheelers are more diverse than for cars.

The motorbike eCall system, expected to be available early in 2017, will distinguish between three crash scenarios: First scenario: Severe crash or cropper. Such a crash immediately activates the system, triggering an emergency message to the next BMW call center. This status is indicated at the bike’s instrument panel. While the call center will try to get into voice contact with the driver, an emergency service is sent to the crash site in any case. The call center will try to maintain this contact until an emergency service is arriving, the emergency call cannot be aborted by the driver. Second scenario: Light crash. In such cases, the emergency call will only be activated after 25 seconds. In case no assistance is required, the driver can stop the call by the push of a button. If there is no action whatsoever from the driver, the rescue chain is activated like in case one. Third scenario: Manual activation. In such cases, the driver pushes a button at the right hand side of the handlebar. In this case, the system transmits a datagram and establishes a voice connection to the call center. Manual activation is only possible at zero speed and ignition switched on. The driver can terminate the process at any time by pushing a button or switching ignition off.

To prevent false alarms, the system detects non-emergency situations such as falling over in a stationary position, minor accidents at low speed, concussion through potholes or off-road riding or minor jumps. Sensors on the motorcycle detect which event occurred. A crash sensor detects events such as collisions with another vehicle or crashing into an obstruction. A banking angle sensor detects high and low-siders, i.e. which position the motorcycle is in.