(c)iStock.com/lekchangply
The Internet of Things (IoT) has become one of the most important topics in the telecommunications sector. As subscriber growth slows in many markets and over-the-top (OTT) providers intensify competition for services beyond traditional voice and data, communications service providers (CSPs) are looking for fresh revenue streams. Connectivity remains the core strength of telcos and an essential component of IoT deployments, but the IoT landscape differs significantly from the markets CSPs have operated in historically.
Estimates for the number of connected devices vary, but projections consistently point to massive growth. For example, analysts have predicted tens of billions of connected “things” within a few years, with a substantial share deployed in industry verticals like automotive and manufacturing. The remainder will be consumer-focused devices such as wearable health monitors, smart home appliances and other consumer gadgets that will continue to emerge.
One notable feature of many IoT markets is the return of vertically integrated models, where a dominant player owns and manages most elements of the value chain. These orchestrators are frequently not traditional telcos but firms that control hardware, software, platforms and services within a given ecosystem. That integration is especially prominent in sectors that demand strict control over safety, compliance and interoperability—healthcare being a prime example where tightly integrated solutions are likely to persist.
Outside those tightly managed domains, however, there is significant demand for open, flexible platforms that speed development and simplify integration across diverse ecosystems. Such open platforms help device makers, system integrators and service providers build and scale IoT solutions more quickly, lowering barriers to entry for new services and enabling richer innovation.
Market interest is already reflected in significant investment and commercial activity. Global IoT platform revenues are forecast to grow strongly, prompting major industry players to invest in platform development, partnerships and acquisitions. Large technology and telecommunications companies are actively positioning themselves to capture platform and services revenue in addition to connectivity.
Examples of strategic investments include collaborations between device manufacturers and CSPs to build industrial-grade platforms. One telecom operator partnered with enterprise technology firms to create a platform aimed at large-scale deployments—covering use cases such as manufacturing automation, commercial machinery monitoring, connected appliances and fleet telematics. Meanwhile, device and platform vendors have introduced open frameworks intended to accelerate the development of enterprise, industrial and consumer IoT solutions, providing tools and services that reduce time to market for new devices and applications.
For CSPs that want a meaningful role in IoT ecosystems, the rise of vertical integration means that controlling the entire ecosystem will often be impractical. Instead, connectivity will remain a central offering, particularly for mobile and vehicular applications such as telematics and connected cars, where secure, ubiquitous networks are essential. But CSPs can also expand beyond connectivity by offering platform-based services, device management, subscription and billing solutions, security services and analytics.
A platform approach can work well in many consumer-oriented IoT areas—tracking devices, health and wellness monitors, smart-home services—where interoperability and rapid integration are important. By combining platform capabilities with subscription management, charging functionality and robust security controls, CSPs can create integrated offerings that appeal to enterprises and consumers alike. Success in these areas depends on flexible business models and simple contractual structures, since IoT use cases differ widely in traffic patterns, billing requirements and levels of mission criticality.
To succeed in IoT, CSPs should engage early in the market, experimenting with open platform strategies and partnerships that let them move quickly while preserving the option to integrate deeper where needed. Those who learn from early deployments, adapt their commercial models, and provide flexible, secure, easy-to-use platforms are best positioned to capture the growth opportunities the IoT presents.
In short, IoT represents both a challenge and an opportunity for communications providers. Connectivity will remain foundational, but platform services, security, billing and ecosystem partnerships offer multiple pathways for CSPs to remain relevant and profitable as the IoT market matures.