3 steps to IoT monetization
The new business opportunities that 5G will enable in the IoT space for CSPs are huge. Operators need to define their positioning within this value chain to predict their addressable market size and start addressing the challenges IoT poses for their BSS. Let´s take a look at a step-by-step approach.
Service providers are in a difficult spot – industry digitalization is coming at full force and brings with it new opportunities to expand into new areas beyond connectivity only. The sooner operators define their roles in the 5G IoT landscape, the better chance they will have to maximize market share. A special challenge will be to address the unique complexities of different target industries. According to Ericsson´s report 5G for business: a 2030 market compass addressing these opportunities could enable service providers to unlock additional revenue streams of up to 35 percent, on top of the current scope of business by 2030.
Service providers will address the opportunities that 5G provides across industries in different ways, or roles – Network Developer, Service Enabler or Service Creator. There are multi-layer relationships between CSPs, partners, solution provider and end-users that vary per role, and the different positionings add a different complexity level in managing all stakeholders. This all means different challenges for the BSS to support the underlying IoT use cases enabled by those roles.
The Network Developer role
The Network Developer role focuses on implementing and operating network infrastructure, including access, core and transport, and applies IT enablers to support consumers and businesses with tailored connectivity solutions that maximize the power of digitalization. This is the first and basic step for service providers to succeed in the 5G IoT journey as it is directly related to their current core business of providing network infrastructure, operations and maintenance, as well as provisioning of connectivity services such as SIM cards. The network developer addressable market can reach up to USD 232 billion globally from a total addressable 5G business in the value chain of USD 260 billion. In this role the CSP acts mainly as a distributor of sim cards and provider of connectivity to end-users and there are no new stakeholders in place.
The impacts in BSS are not so big in this case as this role is mainly applicable for eMBB (enhanced Mobile Broad Band) consumer use cases and low volume mMTC (massive Machine Type Communications) IoT use cases. It means that the CSP will still orchestrate the sales process all the way from catalog discovery – "What is available for me as a customer to buy?“ to the order execution on purchase enabling scale of business and full agility. By making their traditional BSS 5G enabled most CSPs will be able to take on this role and provide new extended data offers, network slices and a service-based architecture. It might seem good enough, but the reality is that in this case the access to new revenue streams is extremely limited as operators will be relying mainly on consumer services with enhanced QoS needs (a simple evolution of today´s existing services) and a small number of IoT cases. If CSPs expect to really expand their businesses and compete for the new money that 5G IoT promises, they need to seriously consider the next role.
The Service Enabler role
The Service Enabler role includes providing digital platforms on which enterprises and industries can configure, integrate and manage value-enhancing digital capabilities into their processes – including service platforms, system integration and content management in some cases. It has the biggest growth opportunity for service providers. Here lies a real opportunity for them to extend their reach beyond traditional offers, using their BSS/OSS to address the enablement part of the business on top of the connectivity part, which means that it is likely that a service provider that addresses the enablement part for industries will also address the connectivity part. Therefore, the service enabler role also includes the opportunities provided by the network developer role, and the combined addressable market can reach up to USD 615 billion globally from a total addressable 5G business in the value chain of USD 754 billion. Here we have at least one new stakeholder – the IoT provider – that will stand between the device (not only sim card now, but any connected IoT device) manufacturer, the CSP and the end-user. All these new interactions add complexity in managing the stakeholders.
New capabilities are now required from the BSS. The CSPs need to manage their partners (the IoT provider in this case), control the massive number of devices including their lifecycle and be able to negotiate, implement and update (on the fly) the agreements and new business models in place (Resale? Revenue share? Supplier?). They will need specific IoT enablement functions, such as IoT Service Exposure and IoT Connectivity Management, to allow partners to access and consume capabilities to enable their IoT applications and provide services at the Edge for critical IoT applications. Complex SLAs must be managed along with charging models for non-telco services (at the same time and place of telco services). With this BSS in place operators will be enabling mMTC, eMBB and now cMTC (critical Machine Type Communications) use cases addressing the business customer segment, especially verticals/industries. In simple words, the Service Enabler CSP will monetize IoT and/or Edge services on top of connectivity – unleashing potential revenues more than 2.6 times the Network Developer.
Quite promising, right? But some may still want more.
The Service Creator role
The Service Creator role encompasses the creation of new digital services and collaborates beyond telecoms to establish digital value systems, in addition to providing digital platforms and infrastructure services. It includes service provisioning, service delivery and end-user applications. Addressing this is likely a stretch for many service providers, but for certain use cases and industries it may still be an opportunity to address, even if the competition from other ICT players currently outside the telco market will be fiercer. The opportunity for this value chain is expected to add USD 85 billion annually by 2030 on top of the addressable market of the previous two roles. Here the CSP will work either as an integrator, distributor, co-seller or supplier taking back the ownership of the customer and possibly launch white label / co-branded IoT services.
In this full 5G IoT ecosystem, BSS will have to handle many different new relationships and be able to provide reconciliation and settlement among several partners. The operator is now taking some of the IoT provider activities from the previous roles and needs to tackle the partner product and service catalog, service inventory and charging, among others. In its full-scale, the full 5G IoT ecosystem will enable the CSP to become a marketplace for IoT providers to build and offer their services through the operator´s capabilities. So, the Service Creator role will allow the operator to not only monetize the IoT services (as in the Service Enabler role) but also create solutions for mMTC, eMBB and cMTC.
Let´s do it step by step towards IoT monetization
In a nutshell:
- Network Developer will monetize connectivity by applying classic subscription based or usage related charging models.
- Service Enabler will monetize IoT and/or Edge services on top of connectivity;
- Service Creator will mostly partner with other stakeholders to address the full value chain of a vertical segment.
Appropriate support in BSS is prerequisite to enable CSP positioning. Traditional BSS supports Network Developer as connectivity provider – considering some adaptations or at least upgrades are needed to support the necessary new 5G capabilities. CSPs need to transform their BSS towards BSS enabled for IoT / Edge platform before transitioning to IoT Enabler. Investing into Full 5G enabled BSS will bring the CSPs a multitude of partnerships to leverage in order to become market influencers or even market drivers.
So, it is not necessary to take an all-in approach. The market size and addressable market of the Service Enabler are already a good starting point for operators to tap into the new IoT revenue streams. Long-term most CSPs will probably adopt the three models simultaneously to maximize the addressable market as well as focus on selected verticals – as long as their BSS support all the needed capabilities to address that specific market and role.
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