The largest and most advanced operators can look forward to taking five percent of their revenues, at most, from the internet of things (IoT), according to one market watcher.
Bengt Nordstrom, CEO at Northstream, told the European Communications/Mobile Europe IoT Conference 2016 in London last week that the best telecoms practitioners were making, perhaps, one percent of their total revenue from IoT services currently, and that such gains have comes after years of careful strategy and execution in the space.
“The telco industry acts and behaves like IoT is something new. It isn’t; it has been going on for 15 years," said Nortdstrom.
"From an operator and vendor perspective, it is exciting, yes, but we should have reasonable expectations on what it can deliver.
“If we think of leading operators, like Vodafone, about one percent of its revenues come from the IoT.
"And that’s not from something they started yesterday – they are one of the longer-term players.”
He added: “Some of the larger operators that entered this market some years ago, and are really betting on it, might have chance of getting three to five percent of their revenues from the IoT.
"For the rest, it can be an important contributor, but it will be more like the one percent range.”
Given such meagre returns, in context of such hype for the sector today, the industry should not expect to rollout new infrastructure for IoT use cases alone.
“If that’s correct, then we can basically say that the IoT can’t pay for infrastructure – it has to be in place already for operators to make profitable business on it,” Nordstrom said.
Matt Hatton, CEO of Machine Research, told the same event that operators had, effectively three strategies to make IoT pay: to target vertical markets, often via acquisition; to provide a horizontal connectivity platform, from which cross-industry partners can target their specific niches; and to piggyback on the IoT services of larger operators.
He suggested that, in general, operators have struggled to make the best fist of the assets they have at their disposal, and have been left rather like a “beggar on a golden stool” when it comes to their IoT developments.
He pointed to Telefonica’s new LUCA initiative as an example of an operator attempting to make a better fist if its assets.
“It is putting together all of its data analytics assets, and saying we have all this information about people, and surely there is a way to monetise it,” he said.
“I would say as well that there is surely a role for someone to sit in the middle of the IoT as a trusted party to walk enterprise customers through their IoT journey, and provide a bunch of services that simplify the process. And that could just as easily be telcos as anyone else.”
On the consumer side, Nordstrom suggested that the smartphones and routers would be the gateways of choice to two key IoT use cases.
He made the point that smartphones, with running over-the-air updates, typically have more advanced entertainment and navigation technology than the most advanced in-car systems.
Regarding the smart home, he said: “I would almost bet that what you will have is a router from an operator, along with a smartphone. Anything else will probably fail.”