Analysys Mason Telecoms Operators Approaches To M2M and IoT

W H I T E PA P E R
TELECOMS OPERATORS
APPROACHES TO M2M
AND IOT
Operators should consider providing a platform of
capabilities to support the M2M/IoT opportunity
Tom Rebbeck
30 years
30global
ans specialist advisers on telecoms,
30 aos media and technology (TMT)
Celebrating 30 years as
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Introduction
Operator strategies for

IoT tend to be tactical and
ad hoc. Telecoms operators
need to develop a long-term
sustainable position.
The opportunity for the Internet of Things (IoT) is extremely large with
device connections globally forecast to reach billions and touching most,
if not all, vertical markets. Telecoms operators should be at the heart of
this change as many of these services will rely on networks they provide.
To date though, operator strategies for IoT have tended to be, or at least
to appear, tactical and ad hoc. Telecoms operators need to develop a
sustainable long-term position with regard to the M2M market and the
broader IoT opportunity. We believe that telecoms operators can do this
by developing a flexible platform which will act as an enabler for IoT
opportunities by providing a menu of services to customers.

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35
Voice minutes (bn)
1 Amazon and others have

successfully built platform models
30
25.0
24.1
25
25.9
21.8
21.8
20
31.1
28.7
30.2
19.9
21.9
15
8.2
8.0
10
5
6.8
8.4
8.3
6.5
6.1
8.3
8.0
6.0
The idea
of providing a platform
full
e-commerce solutions
20%
25% is not
30%
35%to others (e.g. 40%
new and has been implemented both by
Marks & Spencers entire e-commerce
Smartphone Penetration
telecoms companies and others. Perhaps
operation was outsourced to Amazon
Maxis
Digi untilDTAC
- Thai
TIM - Brazil
the best example is that of Amazon,
2014).
Unlike Google,
all products
illustrated in Figure 1. Amazon has a mix
that Amazon creates must use the same
of revenue streams selling its own
platform.1 Over time, Amazon has opened
up each of the elements of its platform to
products to direct customers (e.g. selling
be sold as a service, Amazon Web
a book on Amazon.com), selling thirdServices (AWS) being the best example.
party products (e.g. selling a product on
Amazon Marketplace), and even selling
Other customers
(e.g. Marks & Spencer)
Direct customers
Amazons platform
(e.g. fulfilment, AWS, payments, customer care)
Own products
(e.g. books)
KEY:
Third-party products
(e.g. Amazon Marketplace)
Amazon-controlled
Third party-controlled
FIGURE 1: SIMPLIFIED VIEW OF THE AMAZON PLATFORM/MODEL

[SOURCE: ANALYSYS MASON, 2015]
The same basic model can be applied to M2M and IoT, as we will see in the following section.
Direct customers
Other customers
Operators platform
(connectivity)
Own products
KEY:
1
In part, this is why Amazon has been less
acquisitive than other companies as any acquisition
would involve migration to this platform.
Operator-controlled
Direct customers
Other customers
Operators platform
(e.g. books)
2 Telecoms operators
typically
add
Amazons platform
capabilities in phases
Own products
KEY:
Amazon-controlled
Own products
(e.g. books)
Telecoms operators have typically
phased2 their involvement in M2M and IoT,
starting with connectivity before adding
more complete solutions.
Direct
KEY: customers
Amazon-controlled
Other customers
Approach 1: Selling connectivity only
Selling connectivity
only puts the operator
in a weak position.
In the first approach, an operator puts

together a basic cellular connectivity
package of pricing and service. This
connectivity is sold to other companies
that use the operators SIM card in their
device and application. For the operator,
these SIMs generate some additional
revenue for a limited investment, but this
model puts the operator in a weak position
as differentiation on connectivity alone is
typically small. As a commodity product,
pressure on connectivity prices will also
be high.
Operators platform
(connectivity)
Direct customers
Other customers
Own products
Operators platform
(connectivity)
KEY:
Selling third-party
products makes the
operator heavily reliant
on partners and these
partnerships can be
difficult to develop and
maintain.
ne 032
ne 032
In this approach, the operator partners

with a provider of IoT/M2M solutions
(solutions that typically comprise
hardware and software), reselling the
solution, often under its own brand to its
own customers. Example applications in
this category are fleet management or
ePOS systems. Illustrations include
Masternauts partnerships with
Telefonica, Swisscom and KPN. In each
case, the Masternaut application and
device is sold and supported by the telecoms
operator, which uses its own brand.
Operator-controlled
FIGURE
2: TELECOMS OPERATORS SELLING CONNECTIVITY
SERVICES
ONLY
Own
products
Third-party
products
Direct customers
KEY:
Other customers
Operator-controlled
Operators platform
(connectivity, support, billing)
Approach 2: Selling third-party products
237/41/57
237/41/57
Amazons platform
Other customers
Direct customers
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Direct customers
Other customers
(e.g. fleet tracking)
Operators platform
(connectivity, support, billing)
Own products
KEY:
Operator-controlled
Own products
KEY:
Operator-controlled
FIGURE 3: TELECOMS OPERATORS SELLING THIRD-PARTY PRODUCTS

This position provides the operator with

more benefit than connectivity alone as it is
adding value and leveraging other strengths
(e.g. ability to bill and support, sales
channel), but is heavily reliant on partners
and the partnerships themselves can be
difficult to develop and to maintain.
The approaches outlined here are not necessarily

chronological. For example, AT&T offered hosting
(i.e. an element of Approach 4) before offering its
own services (Approach 3). However, operators
typically graduate from selling connectivity only to
more complex solutions.
g. Marks & Spencer)
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stomer care)
ird-party products
Amazon Marketplace)
y-controlled
Approach 3: Selling internal products
Other customers
Selling internally
developed products
needs the operator to
pick winners.
The third approach is for an operator to

sell its own solution in selected vertical
markets, either developed internally or
ird-party products
gained through acquisition and to control
the service end to end. Vodafone and
Verizon have followed this approach
through acquisition (of Cobra and Hughes
y-controlled
Telematics respectively) and a number of
operators have also developed small,
often bespoke, products internally.
In this model the operator wins a greater

share of revenues, which puts it in a
Other customers
stronger position, for example to
determine the product roadmap.
ng)
However, there are many downsides to

this approach:
The operator needs to pick winners;
that is the operator needs to invest in a
product and market segment where it
will be sufficiently strong against
competition.
ird-party products
The products potential is likely to be
e.g. fleet tracking)
limited by the operators footprint. At a
y-controlled
Direct customers
later stage, the product could be sold

through partners in other territories,
but this is unlikely to be an early focus.
The operator may not have the internal
expertise or vertical market knowledge
to develop a solution and, given the
number of vertical markets to
potentially address, acquisition is
unlikely to be a realistic option. Any
operator is likely to have to combine
selling internally developed solutions in
some vertical markets with selling
third-party products (Approach 2) and
simple connectivity (Approach 1)
in others.
Other customers
Operators platform
(connectivity, support, billing, hosting)
Own products
(e.g. vehicle tracking)
KEY:
Operator-controlled
FIGURE 4: TELECOMS OPERATORS SELLING INTERNAL PRODUCTS

Direct customers
Other customers
Finally, operators are not always a

We believe that the key for operators is
welcoming environment for the
not to simply follow one of these models
development of products, each of which but to have a more flexible approach in
may generate only millions ofOperators
dollars of platform
which the operator is opening up
revenues (and not hundreds of millions capabilities to different partners, as
(connectivity, support, billing, hosting, application enablement, etc.)
or billions like the core voice and
described below.
messaging products). Additionally,
operators typically like to see rapid
growth in revenues and often do not
Own for
products
have patience
services that may
take(e.g.
manyvehicle
quarterstracking)
to be adopted, or
that may need many tweaks and
developments to meet the market
need. A service
that
does not see fast
KEY:
Operator-controlled
growth is in danger of being withdrawn.
Other customers
Direct customers
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Operators platform
(connectivity, support, billing, hosting)
Own products
ird-party products
KEY:
y-controlled
Approach 4: Providing a broad menu of

M2M services
Other customers
To provide a broad
menu of M2M
services, operators
will need to think
differently.
ng)
ird-party products
Rather than focusing all of its attention
e.g. fleet tracking)
y-controlled
Other customers
on the end-user vertical markets, an

operator could concentrate on what
common elements it can provide for
multiple vertical markets. These could
include traditional operator strengths,
such as connectivity, but also reach into
different areas, such as hosting, support
and application enablement.
Approach 4 does not preclude approaches
2 or 3; the operator can provide complete
solutions to the most attractive targeted
vertical markets. Approach 4, providing a
menu of services, expands an operators
role where it does not want to provide the
complete solution.
We already see many examples of these
individual elements being sold as part of
an operators M2M deal, but not of
operators packaging together these items
as a menu of services that could be
provided to customers.
We list below examples of operators
providing more than connectivity:
Deutsche Telekom, through T-Systems,
is providing a fleet management system
to MAN Trucks. Deutsche Telekom
provides the fleet management
application, as well as first-line
customer support, but the service is
sold and branded by MAN. Rather than
providing an end-to-end solution,
Deutsche Telekom is essentially
wholesaling its fleet management
solution. This approach gives Deutsche
Telekom access to a customer it could
not reach if it only targeted direct
customers.
Operator-controlled
Direct customers
Other customers
Operators platform
(connectivity, support, billing, hosting, application enablement, etc.)
Own products
KEY:
Operator-controlled
FIGURE 5: TELECOMS OPERATORS PROVIDING A BROAD MENU OF M2M SERVICES

AT&T has an agreement with GE to

support the Industrial Internet. The
October 2013 agreement between the
two US companies covered connectivity
of multiple types (e.g. mobile, fixed and
satellite) and also included some
hosting. The end user of the GE
services may be unaware of AT&Ts role
but it gives AT&T access to a customer
it otherwise could not reach.
The benefits of this model are that the
operator:
Does not face an either/or choice. It
can provide end-to-end solutions in
some verticals (Approach 3) and
enabling capabilities in others.
Gains access to customers that are not
interested in an end-to-end solution
but want a white-label offering.
Can build on its scale and strength. The
operator can focus on the aspects
where scale matters (e.g. hosting)
without getting into the detail of
specific niche vertical market solutions.
Moves the focus away from vertical
market solutions to common elements.
This moves it to areas closer to an
operators traditional strengths.
The downsides of this model are that:

Operators will need to think differently.
Historically, operators have been used
to providing end-to-end solutions, and
with M2M the trend is to also think that
end-to-end is the best model.
Operators have multiple elements that
could be included in a broader platform
Ideally, components of a platform should
be scalable and reusable.3 The following
elements could form part of an operators
broad menu of IoT capabilities:
Connectivity: an operator should
provide customers with connectivity,
even if this connectivity is not using its
own network. This will involve roaming
agreements for other countries, fixed
connectivity, satellite connectivity and
may even involve taking connectivity
from other wireless networks (e.g. from
a third partys LPWA network).
Billing and support: few other
organisations have the mechanisms to
bill and support millions of customers.
Telecoms operators do, and can provide
it as a service to others.
3
See http://www.gereports.com/
post/99494485070/everything-you-always-wantedto-know-about-predix for discussion about GEs
definition of a platform for Predix.
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Hosting: for supporting internal

products, but also for IT services for
external clients, telecoms operators
typically have environments suitable for
hosting applications, including IoT/M2M
applications. The operators hosting
environment may be especially
important for applications that require
data to be stored locally (e.g. for legal
reasons), or where latency could be
an issue.
Application enablement: many

operators are assessing application
enablement providers, some already
have deals (e.g. Elisa with ThingWorx,
Deutsche Telekom with Cumulocity) or
have developed platforms internally.
Essentially, this fits with the model of
strengthening the platform using the
operators scale to provide a more
complete solution.
Professional services: these are not

scalable and reusable, and so do not
formally qualify as a platform capability.
However, for those with professional
services, typically large operators with
a strong enterprise focus (e.g. AT&T,
Deutsche Telekom, Orange Business
Services), systems integration and even
managed services could be included as
part of the list of capabilities to be
offered to potential M2M clients.
3 Telecoms operators already have the

capabilities to play a major role in IoT
We should not underestimate the
challenges facing IoT and M2M teams
within telecoms operators. On the one
hand, these teams are confronted by the
enormous expectations surrounding IoT.
On the other hand, the near-term impact
on the operators business is limited as
most provide M2M connectivity for just a
few hundred thousand M2M-enabled
devices, and these are often in low profile
vertical markets (e.g. fleet management)
rather than consumer IoT gadgets (e.g.
smart watches). That said, growth rates
are high (typically 2030% year on year)
and are expected to keep growing.
To position themselves for long-term

growth, telecoms operators need to
develop a more mature, sustainable
positioning. We believe this can be
achieved by bringing together existing
capabilities (e.g. cellular connectivity,
sales, support, hosting), adding some
new ones (e.g. LPWA, application
enablement platforms) and providing a
horizontal menu of capabilities for their
own and partner solutions.
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How Analysys Mason can help with

your M2M and IoT strategy
Through our client projects and published
research, Analysys Mason has
considerable experience of M2M and IoT.
Our first M2M client project was over a
decade ago and we have been publishing
on M2M since mid-2011. In the past three
years, we have done over 30 M2M related
projects, including market sizing projects,
strategic advisory work and white papers.
Recent project performed by Analysys
Mason include:
A series of workshops for an operator
group to develop its strategy across a
number of areas (e.g. product,
marketing, partnerships)
A discussion paper to help a client
decide on its approach to low-power,
wide area (LPWA) networks
An assessment of different vertical
markets, including market sizing, to
help our client select which to enter
and with which partners
If you would like to discuss further how
Analysys Mason can help you with M2M
and IoT please contact Tom Rebbeck on
tom.rebbeck@analysysmason.com
About the author
TOM REBBECK
Research Director
Tom Rebbeck, Research

Director, leads Analysys Masons
client work on M2M and IoT.
He has worked continuously on
M2M and IoT projects since 2012
with clients including telecoms
operators, equipment vendors,
industry bodies and regulators.
Stay connected
You can stay connected by following Analysys Mason
on twitter, LinkedIn, YouTube or sign up to our RSS feed.
@AnalysysMason
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youtube.com/AnalysysMason
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W H I T E PA P E R

Operator strategies for

1 Amazon and others have

FIGURE 1: SIMPLIFIED VIEW OF THE AMAZON PLATFORM/MODEL

(e.g. Marks & Spencer)

Approach 1: Selling connectivity only

In the first approach, an operator puts

In this approach, the operator partners

Approach 2: Selling third-party products

FIGURE 3: TELECOMS OPERATORS SELLING THIRD-PARTY PRODUCTS

This position provides the operator with

The approaches outlined here are not necessarily

g. Marks & Spencer)

Approach 3: Selling internal products

The third approach is for an operator to

In this model the operator wins a greater

However, there are many downsides to

later stage, the product could be sold

FIGURE 4: TELECOMS OPERATORS SELLING INTERNAL PRODUCTS

Finally, operators are not always a

Approach 4: Providing a broad menu of

on the end-user vertical markets, an

FIGURE 5: TELECOMS OPERATORS PROVIDING A BROAD MENU OF M2M SERVICES

AT&T has an agreement with GE to

The downsides of this model are that:

Hosting: for supporting internal

Application enablement: many

Professional services: these are not

3 Telecoms operators already have the

To position themselves for long-term

How Analysys Mason can help with

About the author

Tom Rebbeck, Research

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