IoT : The Internet of Things
Connected objects were everywhere and IoT is now becoming the Internet of everything.
Connected cars attracted a lot of attention with connected vehicles on most of equipment manufacturers’ and MNOs’ booths.
Renault’s CEO made a keynote where he presented the timetable for assisted driving. According to Mr. Carlos Ghosn, despite their numerous initiatives and some acquisition rumours, Internet giants are not rivals to car manufacturers but allies, as they consider electric cars and they help car makers to promote electric cars.
Ford had even its own booth presenting the electric vehicles (both passenger and entreprise cars) with dedicated solutions. In the meantime, Vodafone presented a Porsche Panamera model equipped with its new Telematics solution since the Cobra acquisition.
Smart is also getting traction in the IoT space. In the “innovation city” hall (space dedicated to the connected objects), through the AT&T offering (Digital life) where the home could control through the smartphone and even through the connected car (equipped with an AT&T SIM card). When approaching the home, the car can trigger the opening of gate by itself for instance (pre-programmed distance).
While 5G is already in the tracks, very low throughput network technologies are also under the spotlights. After the recent release of its 100 MEUR fundraising campaign among telecom operators, Sigfox was also on everyone’s lips at the MWC. Among the main new shareholders, Telefonica confirmed its strategic investment and its willingness to integrate the technology into its portfolio to address additional verticals and applications.
The GMA (Global M2M Association) also announced a strategic collaboration with Gemalto and Ericsson to provide a Multi-Domestic Service based on a single SIM (using the eUICC technology) helping global enterprises (chiefly from the automotive and consumer electronics segments) capitalize on the growth of connected devices.
Growing market but still key challenges though
During his keynote, if AT&T Wireless CEO predicted that the smart phone will be the remote control of everything in the next few years, he also pointed out the key challenges to address in order to make the IoT market grow significantly:
• Privacy concerns
• Effortless (ease of use)
Data about devices and their users is generated in real-time, often by default and without the user being aware or having choice (especially for free apps). There is a need for a different approach to giving users transparency, choice and control over their data and privacy.
Generally user has a single choice : accept or not using the service, there should be gradual approach (like sharing some id attributes but not all of them).
Privacy could be a competitive stick for service providers, as users are becoming more aware of privacy.
Facebook in emerging countries
• Airtel: “Operators and Facebook are like the beauty and the beast, but the beast (facebook) is becoming more human nowadays”. Airtel was reluctant to introduce Facebook because of VoIP threat. Is looking at it like the “boiling milk”.
• Millicom, Telenor: have seen ARPU rise thanks to facebook launching, very promising for them.
• Wikipedia has the same approach of “Wikipedia zero”, dealing with operator to provide data access for free.
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The United States’ telecommunications services industry posted consolidated sales of EUR 239 billion in 2011. Compare this figure to those of the related television services industry (116 billion) and the European telecommunications sector (248 billion for the EU-27). For the past two years or more, mobile services revenues (126 billion) have surpassed those from broadband and data (53 billion) and the shrinking fixed telephony segment (60 billion) combined.
Like most Western countries, the industry has experienced major upheavals in recent years. For decades US telephony had been essentially structured around a private monopoly. In 1982, as the result of an antitrust lawsuit, AT&T agreed to divest itself of its regional companies. It preserved its domestic and international long-distance activities but then had to fend off aggressive competition in those markets from MCI and WorldCom, while the regional companies remained very dominant in their local markets. Ultimately the heightened competition in long distance and the overinvestment that led to the bursting of the bubble (and the historic collapse of WorldCom) in the early 90s paved the way for the Baby Bells. After multiple mergers, including the ultimate absorption of MCI and AT&T, the Baby Bells grew up into the two market leaders: Verizon and AT&T.
While both American and European markets are hemorrhaging landlines (-9% per year in the US) and the related phone revenues, there are at least two differences on the US side:
- The influence of cable, which is available to some 90% of households: In just five years, cable’s market share of new broadband subscribers has leapt from 40% to more than 80%. AT&T and Verizon are only competing where they have made massive investments to rebuild their access networks (U-verse for AT&T, mainly with hybrid FTTN technology, and FiOS for Verizon, with FTTH/B). Note that ARPU for these two operators’ triple play bundles in these areas is over USD 140, in stark contrast with the ARPU of triple play offerings in Europe . It is possible that the difference in television spending between the two regions is one of the particular challenges European operators face in achieving a satisfactory return on their FTTH investments. For many years Europe seemed ahead of the rest in broadband development with the success of ADSL, but cable’s ability to offer ever-higher data speeds (thanks to Docsis 3.0) and Verizon’s and AT&T’s newly built FTTx networks have turned the tables when it comes to super-fast broadband.
- Strong mobile revenue growth: For a long time the mobile segment in the United States seemed to lag behind its European counterpart in terms of penetration rates, handicapped by the presence of multiple competing standards (CDMA, GSM, iDEN). But here too the tables have turned over the past two to three years. Verizon Wireless has established itself as the world leader in 4G (with more than 10 million LTE users as of Q2 2012), followed by AT&T, Sprint and MetroPCS rollouts now. Plus, while Europe’s revenues are shrinking by 3% to 4% per year, the US market continues to grow in value at a pace of about 5% annually. Several factors can explain this difference. First is the impact of the macroeconomic situation on the markets in the south of Europe, which has resulted in plummeting revenues in Greece, Spain and Italy. In France, the more recent entry of low-cost operator Free has further accentuated the downward trend in that market. But even in Germany revenues have slipped the past several years. In the States, on top of a strong subscriber growth rate (+6% per year), the increase in data revenue spurred by the smartphone boom has more than offset the drop in per-minute prices for mobile calling. This is much less true in Europe, where competition is much more competitive and the attrition rate is much higher , driving down prices. Thus in the one case we see ARPU continuing to trend upward (especially for Verizon and AT&T), while in the other case ARPUs seem doomed to slide further.
In these differences we can see why the markets’ valuation of telecom securities varies depending on whether they are looking at the big European operators or the North American market leaders.
Are US operators benefiting from a lack of competition, while Europe is handicapped by its more than 90 active mobile operators (EU-27)? This is a much-discussed point. According to the Herfindahl-Hirschman Index (HHI) the US market, which has four national operators and a handful of others with more limited coverage , is less concentrated than most national markets in the Old World, and much more so than the European market as a whole (if the entire 27-country Union were considered a true single market). Furthermore, if you consider the advantage of the economies of scale in a market as large as AT&T and Verizon have (each with more than 100 million customers), the absence of any truly pan-European operators seems to be a handicap.
Overall, though American operators too must face the major changes of an all-IP world where services and applications are shifting to OTT players, this market’s leaders appear to be in the best position to deal with these challenges.