The OneM2M joint standards groups partition the Internet of Things (IoT) ecosystem by access domain, network domain and application domain. Within these domains the service providers (SP), specifically wireless SPs, are in the network domain and are responsible for the operational and business system services of the devices (OSS/BSS), for example, SIM provisioning, monitoring and management of the device over the “air,” routing traffic from the device to backend systems and applications or to other devices in the network, billing and recording of device activity based on bandwidth usage or further analytics associated with the application deployed. In a legacy machine to machine (M2M) scenario the value chain for the SP was clear; however, with the new IoT ecosystem this and business models have changed. How can SPs obtain the most value and retain reasonable financial margins within today’s IoT ecosystem?
Traditional M2M Business Models
Established M2M business models, which are limited in scope and structured, were quite clear and the revenue share among the domains was evenly distributed and predictable. Leading SP network operation field specialists acknowledge that the device provider, network provider and the application provider each receive one-third of the revenue. A customer would request a defined service, such as a fleet/asset tracking service, from the service provider who most likely had a purpose-built solution. Depending on the quantity of assets that needed to be tracked, the service provider would know precisely how many unintelligent devices and SIMs to purchase from his device supplier, servers from the network provider and software packages to order from the applications provider. The SP would be responsible for provisioning its custom OSS/BSS systems and application services and provide the management. The customer would pay for the devices and software licenses upfront and either pay the SP per connection or by bandwidth usage. The device and software vendors would require a maintenance fee, which the SP would pass on to the customer. This is now an obsolete business model.
Present M2M/IoT Business Models
In the new M2M/IoT ecosystem SPs’ role and business models have changed. According to Network specialists, the device vendor gets around 20 percent; the network provider gets 15 percent and the application provider gets 65 percent. The new enhanced M2M devices have advanced processors that make them more intelligent, aware and thus more valuable. Because of enhanced hardware and firmware these devices can be embedded with antennas that can speak directly to the internet via 3/4G cellular or via WiFi routers. In most cases the radio access portion of the network domain has not been upgraded (2G or 3G wireless) so the expense is less. SPs use OSS/BSS platform partners because the OSS/BSS layer must be enhanced to accommodate the intelligent access devices. Application layer services are leveraged between application platform providers’ partnerships. These providers employ their own device, storage, cloud suppliers and application designers. To compete SPs have to engage in various business arrangements and complex strategic alliances with equity interests and exclusivity clauses. The negative effect is revenue fragmentation; however, providers can charge the customer more and thus raise the overall average revenue per unit. In this fragmented and crowded environment, how can the SPs continue to earn their full value?
Service Provider-Centric Use Cases
To earn their full value in the M2M/IoT ecosystem, SPs have to select their verticals and use cases very carefully. What are the characteristics of a monetizable use case for SPs? Service providers must adopt use cases that require a highly managed infrastructure and within these verticals should be mission critical and/or life dependent as well as wireless connectivity. These use cases will warrant more liability and require more regulatory demands but will enhance the importance of the SP’s network. The SP will maintain the value in the IoT ecosystem and customers will pay premium for the enhanced quality service. The following are examples of service provider-centric vertical use cases:
- Healthcare: Remote heart/lung/brain monitoring for patients in transit; remote surgical services (monitoring/surveillance)
- Transportation: Fleet/Asset tracking services where environmental controls for cargo/livestock need monitoring; telemetry (driverless vehicles); highly critical vehicle diagnostic monitoring and proactive resolution services
- Manufacturing: Airborne robotic devices; off-shore mobile device control and monitoring services
- Utilities: SCADA monitoring and proactive purification services for gas, water, soil, etc.
- Government: Surveillance of mission-critical items; disaster recovery bots
- Telecommunications: Banking processes and monitoring in remote areas