U.S. wireless carriers are putting a lot of energy into the Internet of Things (IoT).
AT&T said over the past eight quarters it has added more connected devices than postpaid and prepaid subscribers combined and as of the close of the third quarter had 30.3 million connected devices – including 10.5 million connected cars – on its network.
Competitor Verizon has been working on its own IoT segment, more or less steadily increasing revenues from $150 million in the first quarter of 2015 to $250 million in the second quarter 2016 and collecting a slew of IoT and telematics solutions companies via its recent acquisitions of Telogis, Fleetmatics, and Sensity Systems.
And it’s easy to see why carriers have their eye on the IoT. According to Gartner forecasts, 5.5 million new things will be connected every day in 2016, and a whopping 20.8 billion connected devices will be in use worldwide by 2020.
But what kind of revenues do operators stand to reap from all this hard work? Well, it depends on who you ask.
Back in June, ZDNet reported that New Street Research partner Andrew Entwistle said IoT opportunities don’t translate to “a whole hell of beans for the telecom operator who’s looking to sell services to achieve revenue per customer or revenue per device.”
Entwistle argued the real money will be made by connected device vendors, while operators in the future will be left providing the same connectivity services they do today at a cheaper cost. Operators who think they’ll be making money despite the lower cost simply because there will be more devices are making a “brave assumption,” he said.
But for Roger Entner of Recon Analytics, the math works out.
“They’re not making as much money off (IoT) as they make on a person, but the customer acquisition cost is very low, and it’s usually data so the margins are very healthy,” Entner said. “If they make a buck or two a month with billions of devices, that’s still billions of dollars, and it might be more revenue than just a buck or two. Even at a dollar or two, it’s almost pure profit. They’re simply running more over the same network, while other people are putting the ingenuity (into the devices).”
While any carrier can offer connectivity, Entner said the differentiating factor for operator success in the space will be how easy it is for IoT innovators to jump on the network.
“For the carriers, a large piece is the connectivity piece, as well as the ease with which IoT hardware and software providers can connect with them,” Entner said. “That’s why AT&T has such a lead. They worked very early on with Jasper as an onboarding solution and as the layer that makes it easy for IoT providers to connect to the AT&T network. I think Verizon by now has smartened up and with ThingSpace is getting a lot easier to work with.”
And stateside carriers will have an additional leg up on IoT.
According to a new report from the International Data Corporation, the United States ranked among the top three G20 countries most ready to generate and benefit from the IoT. The report indicated the U.S. scored well on measures including ease of doing business, government effectiveness, innovation, and cloud infrastructure, as well as GDP and technology spending as a percent of GDP.
South Korea and the United Kingdom rounded out the top three, followed by Australia as a runner up.
“Countries are keen to become or maintain a competitive advantage, and as such, are looking to the Internet of Things as one of those initiatives,” said Vernon Turner, senior vice president of Enterprise Systems and IDC Fellow for the Internet of Things. “Knowing where a country stands in the IoT index will help global and local IT vendors know what opportunities lie ahead of them as they line up their strategies at federal, local, and enterprise levels.”
