Following on from last week's discussion on the manifold changes ongoing in the provision of connectivity, this week we delve into the key findings from some recent research from Transforma Insights on Communications Service Providers (CSPs) in IoT, which forms the basis for the report published on the 15th September 'Communications Service Provider IoT Peer Benchmarking 2020' which examines the capabilities and strategies of the top 10 global IoT connectivity providers with respect to IoT.
The full transcript of the podcast is available below.
After last week’s discussion about changing dynamics in networks for supporting IoT, how do we rank the various communications service providers such as AT&T and Vodafone in delivering the Internet of Things?
One of the most interesting parts of the job of an analyst is in benchmarking of the capabilities of different players. The enterprise adopters are interested in it, naturally, because they want to know who they should be working with. The vendors themselves are also always interested to understand how the match up to their peers.
Over the last few months I’ve been undertaking a substantial amount of research to complete the Transforma Insights inaugural Communication Service Provider IoT Peer Benchmarking. Specifically that’s focused on digging into the strategies and capabilities of the top 10 providers in the space. Companies like AT&T, Deutsche Telekom, Telefonica, Telenor and Vodafone.
We looked at technical capabilities, service offerings, geographical reach and so on.
The report came out today and I’m delighted to share some of the findings from it. Firstly in terms of the key trends we’ve seen, and secondly what marks out the top vendors.
The analysis of the strategies of these key ten players have revealed a number of interesting developments across all of the areas considered.
More independence for IoT business units
One of the more interesting trends in the last couple of years, and particularly in the last 12 months has been the increasing independence of the IoT units within the bigger operators.
For some it’s nothing new. Telenor Connexion has always been highly independent, and Aeris and KORE are completely focused on IoT, but for several of the others there has been a definite move to pull IoT out of the wider organisation. Deutsche Telekom formed DT IoT GmbH and Telefónica now has Telefónica Tech. Telia did a similar thing a few years ago with Division X.
There are strong arguments for breaking the IoT unit out from the wider organisation, mostly related to being more nimble. However, there is a counter argument that it’s very useful to have an integrated approach, supporting all of an enterprise’s needs regardless of whether they relate to IoT or more mainstream enterprise ICT services. If I work for a large enterprise, do I really want to have two conversations?
Networks go local again
I talked about this topic in the last episode. The funny thing is that after many years of taking global availability of connectivity for granted, we now find ourselves comparing coverage maps and discussing newly established roaming agreements. This feels like a regression. In reality it reflects the teething problems of a new set of very useful technologies. After years when the connectivity piece of the equation was undifferentiated, today it is again valuable to be able to stitch together a global connectivity offer.
All change for platforms and alliances
The last few years have seen a substantial evolution in CSP approaches to middleware platforms, i.e. the software that controls the activation, billing and control of the device and application. Historically for connectivity platforms, i.e. the things that managed the SIM cards, there were three options: Jasper’s Control Center, Ericsson’s DCP and Vodafone’s in-house developed GDSP. Others were available including platforms from Comarch, Huawei and ZTE. But the world broadly split between those three platforms.
Over the last few years we have seen this fragment. Increasingly, operators using third party platforms have built on them to include capabilities covering for instance eUICC, public cloud integration, device management, application enablement capability and the provision of APIs, and even data exchange, to run in parallel or as an add on to those platforms.
In part the fragmentation has been a reaction to the failure of the platform players, particularly Cisco (now owner of Jasper) to continue to enhance the offering. In particular, they have failed to spot the need for multiple variants to address diverse client needs from low cost/low touch through to highly customised requirements. Their ‘one size’ certainly hasn’t ‘fit all’.
All of this means that those operators which developed their own platform from scratch (Verizon and Vodafone) and those where the relationship with the third party platform developer was more arm’s length while maintaining their own parallel capability (DT IoT, Orange and Telefónica) are in a better position than those relying exclusively on third parties. The benefit of scale from using those third party offerings have all but disappeared due to the requirement to plug gaps and build on top of them.
In parallel with the depolarisation of the platforms space has been a similar diminishing of the importance of the ‘alliances’. Five years ago, the users of the three main platforms also broadly split between three alliances. Think airline alliances like Star Alliance. That kind of thing. Those using Jasper Control Center formed the M2M (later IoT) World Alliance, with the notable exception of AT&T. Those that used Ericsson DCP formed the Global M2M Association (GMA). The third group were those within the Vodafone partner network, some of whom made use of GDSP. The mapping between platform use and membership of an ‘alliance’ wasn’t perfect, but it was close.
Today the GMA and the MWA/IWA are more or less irrelevant. The problem was that it always proved impossible to cross-sell each others products. That’s something the airline alliances certainly could do, but these operator alliances couldn’t. They each became little more than talking shops although often the bilateral relationships between carriers proved useful.
Finally I should flag up a much more rational approach to verticals
It is notable that CSPs have reined in their ambitions with regard to vertical-specific offerings. The amount of undifferentiated direct-to-enterprise services have declined. What remains are much more targeted and market leading. The ‘me too’ offerings have been abandoned. This is hardly surprising; the markets for specific end user applications are typically much more fiercely contested and the CSPs have only thrived where they have a true differentiator. In most cases this has come from acquisition, for instance Telefónica of OnTheSpot, Vodafone of Cobra Automotive, Telia of Faltcom, or Verizon of various fleet management assets. In some cases the decision is to focus not on verticals, but on horizontal capabilities and particular types of customers, which has generally been the continuing approach of Telenor Connexion, DT IoT and Orange.
So, the big question is, who tops the rankings. Well, there is a message that we will repeat ad nauseam: there is a no single ‘best’ company for providing connectivity in IoT. Any analysis that indicates that there is, would be extremely reductive. There will however be a ‘right’ provider (or providers) for any enterprise wishing to procure connectivity.
It is likely, but not certain, to be one of the operators listed in this report. The ten companies we cover are what we consider to be the best ‘global’ operators, most able to support connections around the world. In many cases, however, a local carrier may be equally well suited, if not better.
The deciding factors for selecting a provider of IoT connectivity should be some combination of three things:
Technical – All CSPs provide some form of IoT connectivity, but there are many other capabilities which they may or may not be able to support which might set them apart from their competitors.
Geographical – Coverage and presence are still important, and in fact arguably increasingly so. Consideration here includes indirect market access via partnerships, alliances and other commercial agreements.
Vertical – CSPs have different capabilities for addressing particular verticals, or systems integration/consulting capabilities for building solutions across multiple verticals.
In the report we put together heat maps to present our views on how the ten operators match up according to eight technical criteria, seven vertical sector capabilities and the ability to address opportunities in six regions. Clearly most operators are strong on the provision of connectivity, but with rather more variation on other capabilities. Verticals is much more of a mixed bag, with some very strong dedicated propositions and some cases where the CSP has elected to focus solely on the provision of horizontal connectivity. Geography is also, naturally, fragmented, with all operators having particular geographical focus, being naturally focused on their nominal ‘home’ regions. Aeris, AT&T and Verizon, for instance, are strongly focused on the US. Geographical coverage is also expanded by partnerships, which give significant variation in the ability to address other regions such as China.
Technical capabilities is our first port of call.
The first sub-categories within Technical relate to the provision of access networks: public broadband, public narrowband, and private networks.
All of the providers listed in this report have very strong capability in the provision of public broadband connectivity, and there’s not a huge amount to choose between them. For narrowband networks, however, there’s quite a variety of strategies. Technology deployments, roaming arrangements and maturity of offering all help to score high here. High scorers in this category included AT&T, Telia and Vodafone. The final network sub-category is private networks which are attracting increasing interest from many of the companies profiled. These are typically campus-style deployments for factories, ports and similar. These have been a particular focus of Deutsche Telekom, Orange, Telefónica and Vodafone, all of whom have been developing strong propositions in this area. It is worth noting that 5G seems to have been a stimulus for a lot of the interest in private networks, but the majority of implementations are still using LTE.
The connectivity platform category I spoke about earlier. Strong performance here depends on having in house control and having a segmented approach, e.g. with explicit platforms for particular types of customer. Vodafone, Verizon, DT IoT and Telefonica all score well here. The other platform areas are device management, application enablement and data exchange and analytics. Here again DT IoT scores well, particularly thanks to its unique Data Intelligence Hub offer. As do Vodafone, Verizon and Telefonica, the latter having strong heritage in data analytics through its LUCA subsidiary.
The final rating is on professional services which relies on the CSP having consulting and systems integration capabilities. Some have strong capabilities in this space, most notably Deutsche Telekom via T-Systems. Others have almost non-existent capabilities, relying entirely on horizontal off-the-shelf offerings and/or partnering with third parties or customised solutions.
Our second set of capabilities are vertical
Specifically we look at how good the CSPs are at addressing what we at Transforma Insights have identified as the biggest opportunities for CSPs. In some cases the CSPs have a direct service offering, for instance Verizon’s extensive fleet management and logistics ‘Verizon Connect’ offering, Aeris’s Mobility Suite which provides a full connected vehicle offering, or Telefónica’s OnTheSpot in retail. In other cases it’s related to having the appropriate experience or constituent capabilities to provide the most complete set of tools for a third party service provider.
The most developed capabilities in each of the verticals are as follows:
Utilities: Telefónica, Telia and Verizon have the most experience in this category today by virtue of supporting extensive smart meter and grid deployments.
Connected Car: This has been a strong focus for most CSPs. Aeris’s Mobility Suite is worth calling out here as a white-label connected vehicle platform. For other CSPs the focus has been more on providing the most appropriate connectivity offering to secure a large proportion of car manufacturers. AT&T and Vodafone have been particularly strong here. Vodafone has further strong credentials through its Vodafone Automotive business unit, which provides a full set of capabilities from device through to installation.
Transportation: Verizon has made a USD3 billion bet on fleet management and associated applications. By virtue of this it has a genuinely market leading offer for end customers. Telia has also established strong credibility for its public transport offering.
Smart building: This category represents a very strong revenue opportunity but is not typically associated with wide area connectivity, therefore CSPs have largely not pursued it in an aggressive way. However, some, including Verizon, Telia and Orange are starting to make good headway.
Retail: Few CSPs have much of an offering dedicated to retail IoT. Telefónica, via its OnTheSpot acquisition is the most notable exception.
Smart Cities: Both AT&T and Verizon have been quite progressive in pursuing the smart cities space, taking the lead on developing a number of projects. The role for most other CSPs has generally been as a connectivity provider. The big exception in Europe is Telefónica, which has had some strong wins with its FI-WARE-based platform.
Industrial: This is a big focus for CSPs currently, being perceived as a sector with a natural fit with newly deployed 5G networks. Orange has a strong co-innovation approach, while Vodafone has seen some strong wins for industrial private networks.
Geographical capabilities is our final part of the equation.
The importance of geography is very closely linked to the specifics of any deployment. Some will be focused on connecting devices within a single country, such as smart metering, whereas others will involve deployments to dozens of countries worldwide, sometimes static in a single country and sometimes cycling between countries. Our main consideration in the report is global deployments, i.e. those involving several countries. All of the operators listed support global connectivity through a combination of their own networks within footprint countries and through roaming and localisation of devices on partner networks. Higher ratings for each of the six super-regions covered come from having a facilities-based network, e.g. AT&T or Verizon in the US, and after that based on roaming agreements and alliances.
Vodafone rates very high for coverage, courtesy of a strong footprint and an extensive network of partner operators. Telenor, Telefónica and DT IoT also score strongly here based on extensive partnerships and, in the case of DT, own networks in both Europe and North America. Virtual network operators KORE and Aeris score well here also, thanks to a strong heritage of securing connectivity agreements around the world. AT&T and Verizon tend to be highly focused on their own region to the exclusion of global opportunities.
Of course, having create such a heat map, any analyst will have the overwhelming urge to apply some weightings to each of the categories and thereby create a ranking. For the technical capabilities, the highest weightings go to the public broadband and connectivity platform elements, as well as professional services. For verticals, utilities and connected car score highest. In terms of regions, based on our assessment of market value from our IoT Connected Devices forecasts, North America, Europe and China are equally split with ‘Other Asia’ approximately half as important as those three, and the other two regions half as important again.
I’ve run through some of the thinking in looking at qualitatively who provides the best services. There is always, however, lots of interest in how many IoT connections are declared by mobile network operators, not least because it is one of the few quantitative measures of success.
If you want to take a look at the numbers, there is a blog post on TransformaInsights.com, which shows a dynamic chart tracking the numbers of connections for the top 25 operators. It’s very pretty.
The biggest 33 communications service provider groups worldwide accounted for 1.27 billion cellular IoT connections at the end of 2019, up from 948 million at the end of 2018, an increase of 34%. The lion’s share of connections is accounted for by Chinese operators, which have 857 million connections, up from 605 at the end of 2018 (42% growth). The other 30 non-Chinese operators that are tracked collectively saw annual growth of 21%, from 343 million to 415 million.
Notably, Transforma Insights has reviewed and revised down the numbers of connections for the Chinese operators compared to their published figures, which were collectively over 1.2 billion at the end of 2019. There’s little disputing the dominance of the Chinese operators, but the sheer scale of reported figures naturally set alarm bells ringing for our analysts. Based on some further digging we think the real figures for what we would define as IoT connections are about 30% lower than the official stated numbers for IoT connections.
Another notable trend is the wide divergence in average-revenue-per-connection for the operators around the world. Based on limited available public data the highest was over $4 per month. The Chinese operators reported only a small fraction of that, 15-20 cents per month.
We can’t reinforce enough that discussions about overarching trends and numbers of connected devices are all very well. But more important to anyone actually procuring IoT is who can best meet your requirements. If you’re a buyer of these types of services, focus on qualitative and specific. Who can do what you want them to do and has a track record of doing so. If an operator has millions of connections in a different vertical, doing different stuff, in a different place it’s nowhere near as valuable to you as a smaller niche provider who knows your area, vertical or geographical, inside out.
Next week I’m going to have a look at the so-called hyperscalers, Microsoft, Google and AWS and their strategies. It’s probably the hottest topic of the day to understand what they’re doing with regard to AI, edge computing, IoT, and a host of other disruptive technologies. Everyone is worried about them eating their lunch. Given how big these companies are and how wide their coverage, I will only be able to touch on a few areas. But it’s sure to be one we come back to.
I hope you can join me.
Links to some of the research that I’ve refered to in this week’s show, as well as a transcript of the recording, will be available on the podcast website at WirelessNoodle.com
Thank you for listening to The Wireless Noodle. If you would like to learn more about the research that I do on IoT, AI and more, you can follow me on Twitter at MattyHatton and you can check out TransformaInsights.com.
Thanks for joining me. I’ve been Matt Hatton and you’ve been listening to the Wireless Noodle.