Kevin Ashton, cofounder of the
Auto-ID Center at MIT that created the Radio Frequency Identification (RFID)
global standard, is credited with the expression “Internet of Things,” envisioning
a “system where the internet is connected to the physical world via ubiquitous
sensors.” His vision in 1999 is not far from today’s reality. Technology has
advanced to a point where almost anything can be “sensor-ized” to collect,
store and transfer data. Interestingly enough, RFID tags were designed to
categorize, itemize and quantify things. Hence the question, how big is the IoT
market today?
Views in the market are that it
is difficult to quantify simply because the concept is too broad and connections
are hard to evaluate. Clearer explanations as to what a “connection” is within
the IoT sector needs to be defined further. Nevertheless, some companies have
generated numbers. Cisco made an attempt to embrace the concept within the
explanation of the “Internet of Everything”. Using “Value at Stake” the
worldwide market size was predicted to be $14.4 trillion in 10 years, where 45%
or ~ $6,480 billion was attributed to machine to machine (M2M) connections. This
is particularly interesting to service providers (SPs) because they will own
these connections. If we analyze this number linearly, then for one year, the
expectation for the worldwide M2M market size is about $648 billion.
Source: Cisco IBSG, 2013; Note: To make the numbers work, the
actual IoE should be $14.160 trillion.
But what is the potential value
per connection in a year? Revenue estimates for SPs and total cost of ownership
(TCO) evaluations for customers are definitely of interest. The total number of
M2M cellular connections last year was around 132 million. Thus: $648 B/1 yr x
1 yr/132M connections = $4,909/connection in a year (~ $409 per month).
Last year (August 2013) the top
number of M2M connections for U.S. companies:
Service Provider
|
M2M Connections (Millions)
|
Revenue(M) (Yr: $4909/conn)
|
AT&T Mobility
|
14.7
|
72,162
|
Verizon
|
8
|
39,272
|
Sprint
|
3.3
|
16,199
|
T-Mobile
|
3.3
|
16,199
|
Therefore, if the potential
values are in the correct order of magnitude for M2M, (not considering the CAGR
sifts, etc.), then the increase in connections because of IoT will essentially
bring increased revenue to SPs. Is that really true? Much of the margin depends
on the revenue shared between the SP’s platform partners as well.
IoT Platforms: The M2M/IoT platforms that are being deployed—some
have taken several years to develop—have several vendors within their ecosystems.
Bigger SPs had to partner with these platform providers to enter the M2M/IoT
market quickly. The following are platform providers for the major U.S.:
Service Provider
|
Platform Provider
|
Engagement Year
|
AT&T
|
Jasper, Axeda
|
2009, 2012,
|
Verizon
|
Zelitron SA, Qualcomm, nPhase, Axeda
|
2003, 2010, 2010, 2011
|
Sprint
|
Axeda
|
2010
|
T-Mobile (now part of Sprint)
|
Raco Wireless
|
2006
|
What kinds of business partnerships
have the SPs made with these platform providers? What are the present revenue sharing
models and who owns the customers in these scenarios? To what key verticals and
monetizable use cases do SPs need to turn their solutions to maximize their
profits within these partnerships? For example, what percentage of that monthly
revenue of $409 actually goes to the SPs? Can a customer transfer between SP/PP
solutions and expect a seamless experience? These are not new questions;
however, the issues are still here and need to be explored again with fresh
eyes since the technology and market landscape is changing.
For example, virtualization within
the core of SPs; networks are giving new agility, efficiency and
interoperability choices. Equipment providers such as Ericsson, Alcatel-Lucent,
Juniper and Cisco are developing innovative software defined networks- and network
fabric virtualization-based appliances in software and hardware to assist SPs
in revolutionizing their core OSS/BSS delivery platforms and edge Radio Access
Network facilities to rapidly and easily create solutions that can propel the managed
M2M/IoT industry forward and fight off over-the-top competition.
What’s the bottleneck? It is not
the technology but the ability of the industry to cooperate in normalizing the
horizontal layer of the network (actually where the platform providers sit) to
serve the verticals appropriately. One of the answers is to urge the standards
bodies to more aggressively converge ideas toward this end. OneM2M, the Global
Partnership developing standards for M2M communications enabling large-scale implementation
of IoT, is in the process of spearheading this effort. However how are they
doing with the specification normalization?
In reviewing the OneM2M Technical
Report Doc # oneM2M-TR-0003-Architecture_Analysis_Part_2 it is clear that the seven
Standards Developing Organizations are well on their way toward integrating a
basic framework of functional elements that will prove invaluable in
normalizing the playing field. These types of specifications will assist the
platform and equipment providers technically so they can clearly see how to
design solutions to help the SPs deploy more economical and simpler solutions
to the market to effect better results or “outcomes.” The OneM2M 10
th
Technical Plenary committee met in Berlin, Germany, on 4/11/14 and confirmed
that it will be releasing its initial complete specifications for IoT in August
2014.
Dennis Ward
