The rise of the Internet of Things (IoT) has opened up new vistas for businesses and individuals alike, fostering a growing need for global connectivity. At the Mobile Ecosystem Forum (MEF) Wholesale Working Group in June 2023, Andrew Parkin-White of TecFutures led a stimulating discussion on IoT roaming. The presentation encompassed crucial areas that shed light on the immense potential of global IoT connectivity for Communication Service Providers (CSPs) and wholesale providers.
1. Global Outlook for IoT Roaming:
The IoT market is projected to reach 34 billion devices by 2032, with around 20% of these connections stemming from enterprise applications. Top applications account for 70% of the market (Source: Transforma Insights). Cellular connectivity expenses now representing around 7.3% of IoT spending, down from 10% in the past (Source; TecFutures CSP Survey). This same survey also shows a potential ARPU uplift of 5% in the next 12 to 24 months, and revenue growth varies across different applications.
2. Market Dynamics and Drivers:
The IoT roaming market can be classified into two tiers: one where devices are manufactured in one country but activated in another, and the other where global connectivity is essential for enterprises with mobile applications. IoT roaming traffic is growing at an annual rate of 20%, and key markets include the USA, China, and Europe (Source: Kaleido Intelligence).
Certain verticals rely heavily on cross-border connectivity, such as asset tracking for high-value loads, maintaining in-transit connectivity, airlines, automotive, and potentially agriculture as the next wave for in-country roaming.
3. IoT Connectivity Technologies:
Enterprises will be seeking a blended solution to their connectivity requirements across licensed and unlicensed technologies and there is no one single technology that IoT CSPs believe will dominate over the next 12 to 24 months. Enterprises are demanding IoT technologies that are always on, integrated, adaptable, and cost-effective, both domestically and internationally. Non-cellular technologies like LoRaWAN and satellite are gaining traction, particularly in hard-to-reach areas. 5G clearly demonstrates a growing relevance and focus for this cellular connectivity technology. We may well be seeing that enterprises are leapfrogging 4G technologies in favor of 5G.
4. Monetizing IoT Roaming and Changing Business Models:
What's worrying IoT CSPs the most? Most significantly, it is increasing competitive intensity. The IoT connectivity and roaming markets are very competitive and lots of organization are fighting for the same business. Consequently, there has been race to the bottom on prices. This situation could be driven by two reasons. Firstly, consolidation is happening among IoT CSPs and they are building to necessary volume to compete effectively. Secondly, CSPs are moving up the value chain enhancing their connectivity offerings and including non-connectivity services and platforms.
5. Permanent Roaming:
Permanent roaming agreements for IoT devices present both opportunities and challenges. While it offers global connectivity, regulatory complexities require careful consideration.
6. Implications for Wholesale Providers:
Wholesale providers must enhance their IoT wholesale propositions, identify and evaluate key markets for value-added approaches, and accelerate the billing and charge environment assessment process. Collaborative approaches with competitors and customers may be crucial for mutual benefit.
Conclusions
Global IoT connectivity represents a promising opportunity for CSPs and wholesale providers. As the IoT market continues to grow, businesses must adapt their strategies to cater to different application requirements and leverage technologies like LoRaWAN and 5G. Collaboration and flexibility will be essential for delivering value-added services and addressing the complexities of IoT roaming agreements. To capitalize on this evolving market, providers must remain vigilant, innovative, and customer-focused, driving IoT into an interconnected and seamless future.