Trading Mobile Dollars for IoT Pennies

Jeff Zucker of NBC Universal coined the prescient expression “Trading analogue dollars for digital pennies” in 2008 to describe the huge gap that he was observing between the lucrative promises of online and digital advertising and the reality of the meager revenues that it was in fact producing.  Could the same be true of the Internet of Things revolution?  Are we trading the hundreds of dollars that we are generating from mobile users for the pennies that providers get for connecting “things”? 

Connecting the 50 billion projected devices, or things, to the Internet is the cornerstone of the Internet of Things.  Given the challenges of remoteness, mobility and the cost of wiring up these devices, many of these connections will be made over mobile networks.  In fact, Beecham Research estimates that the number of cellular machine-to-machine connections will grow to 1 billion by 2020, up from 172 million in 2013.  It is no wonder that the mobile operators are salivating at the prospect of all this new revenue to be earned from connecting inanimate objects.  This windfall is especially at a time when there traditional mobile business is under attack.  Changes in voice usage and bundled minutes are causing voice revenues to decline and data revenues are under attack from Wi-Fi connections and over-the-top providers (see The Mobile Paradox).  

Like the analogue to digital advertising shift, the shift in IoT connectivity is not a straight substitution.  Let’s look at the economics.  The average mobile user in the U.S. spends $589 annually for his mobile phone service ($381 per year in Europe).  Connecting things is a lot different than connecting chatty or data hungry mobile users.  In the IoT world, many devices simply convey their status on an occasional basis and then remain dormant until this status changes.  For example, I am familiar with an interesting company that provides a compelling solution to cities to better manage their public trash.  Each of the trash bins that are located on sidewalks, parks and other public venues is connected to the Internet, communicating its status to the city operations so they know when the bins need emptying.  As a result, the city only has to empty them when they are actually full, saving considerable money from not having to send out crews to collect half-empty trash bins. 

Because these bins are conveying very little information (“I am full; “I am empty”), at infrequent intervals they do not require the fast 4G LTE connectivity that allows us to quickly browse the web and stream videos on our smartphones.  In fact, they get by with a decade’s old technology – SMS.  The same technology that we use to send each other messages on our phones.  For that, the mobile operator charges the company 50 cents per bin; or, annual revenues of just $6.  That means that a mobile operator would have to connect close to 100 bins to equal just the revenue of one mobile user.   

Of course not all devices will require simple mobile connectivity.  But, when we talk about IoT the majority of the use cases are like my trash bin example - sensors monitoring the temperature of transportation cargo, parking sensors alerting when a spot is free, or smart meters communicating daily energy consumption.  This would mean that these 1 Billion new M2M connections could represent just 1 percent of the revenue that the industry would have traditionally collected if those connections had been to people and their smartphones, rather than to inanimate “things”. 

So, while IoT promises huge numbers of new mobile connections, the economics are fundamentally different than the traditional mobile business.  IoT offers mobile operators huge quantities of connections but potentially very little new revenue.  If providing mobile connectivity is nowhere near as lucrative as it would appear, how are mobile operators to prosper from the IoT revolution?  The obvious answer is to move up the value chain, providing a wide variety of value-added solutions and services that are required for successful IoT implementations and realization of business value. 

In a future article I will explore what these value-added services and solutions are and who will be the winners in the Internet of Things revolution.


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Observations from Mobile World Congress 2015

I have just returned from a very interesting and jammed-packed week at Mobile World Congress 2015 in Barcelona.  A record 93,000 plus people are estimated to have attended this year’s premier technology festival.  Much has changed in the industry over the last year since I reported my observations of MWC 2014.  However, what is most remarkable is how the boundaries of mobility continue to expand and morph – everything now seems to be mobile?  As such, the show offers a fascinating glimpse into the future of technology and the major social and business shifts that we can expect in the next few years.
The following are my personal observations and extrapolations from the show, based on my conversations with operators, customer meetings, analysts, and colleagues, as well as from simply walking the show floor.

1. 5G – The Next New Technology — What is a technology show without a shiny new technology? Despite the fact that less than 5 per cent of global subscribers have adopted the previous new technology (4G), and over half of mobile users are still back on the second generation (2G) technology, we are now entering the fifth generation of mobile technology – 5G. The remarkable thing though is that no one really knows what 5G is. There are no technical standards or industry agreements on the definition of 5G. However, every major vendor is now “5G ready” and promoting their 5G solutions. And mobile operators like KT and SKT in South Korea are aggressively promoting their pending 5G deployments.
2. IoT – The Year’s Hottest Three Letter Acronym — These 3 letters – standing for the “Internet of Things” – were everywhere. They were on the signs of practically every booth and on the tip of everyone’s tongue. No doubt, the ability to connect sensors, devices and “things” to the Internet is the next wave of mobile growth and presents tremendous opportunities for technology vendors to sell new products and services. A number of key partnerships were announced and some very interesting and compelling industrial IoT case studies were promoted. The mobile operators shouted out their relevance in IoT by displaying their platforms, capabilities and lighthouse customer engagements.
3. Smart Phone Wars – Samsung won the unofficial market launch of the show with its slickly executed unveiling of the new S6. This stunning new device is Samsung’s attempt to get back into the game – trying to recover some of the ground lost to the new iPhone 6 and to firmly establish itself as the Android leader. While many other manufacturers launched new smartphones, Samsung was by far the most talked about brand at MWC. In the continuing saga of the smart phone wars, it looks like we might be back to a 2 player game again for a while?
4. Building the New Mobile — For those of you who follow me, you will know that I have long been a proponent of a “Wi-Fi Max-Mobile Min” strategy to create a new mobile service.   With the near ubiquity of Wi-Fi enabled devices, Wi-Fi access in homes and offices and the growth of public Wi-Fi, there is an opportunity to create a new type of mobile service running largely over Wi-Fi. While there have been a number of smaller, niche players (e.g., Republic Wireless, Scratch), it wasn’t until Google announced that they were getting into the game that it started to get serious. Sundar Pichai of Google gave an unsettling (at least for the traditional MNOs) keynote describing how Google’s MVNO would be primarily based on Wi-Fi, and when that was absent it would select the best, and cheapest, cellular coverage from a number of the big mobile providers.
5. The Connected Car Show — At times you could be forgiven for thinking that you had wandered into the auto show in Geneva or Detroit instead of MWC. There were cars everywhere. The industry sees these as “smart phones on wheels.’ Operators, such as AT&T were crowing about their big deal to connect all new Audis. Auto manufactures, such as Ford, were demonstrating the cool things that you could do with their connected cars. And for some reason, even exhibitors like Visa had cars at their booths. These were not just any cars – they were Porches, Audis, Mercedes, Maserati’s and every other high-end auto you can imagine.   Fancy cars are now the standard “eye candy” at big technology shows.
6. Virtual Reality — Samsung demonstrated a very cool technology for adapting one of their Galaxy Note 4’s or the new S6 into a virtual reality device. Not only does VR make games incredibly cool, but it has lots of applications to industry, enhancing solutions and business processes. HTC is working on a similar VR adaptor for its mobile devices. Several exhibitors were also using virtual reality devices to enhance the impact of their messaging. As virtual reality becomes integrated with cost-effective, and near ubiquitous smart phones, we can expect it to have a big impact on re-shaping many businesses – far beyond the gaming world.
7. Virtualization Reality — Virtualization and the cloud have finally hit the core mobile network elements. Not only will this make it less expensive for operators to build networks, but will provide them with much greater flexibility and responsiveness and allow the network to extend well beyond the boundaries of the traditional mobile network.   This is the year that the promise finally started to become a reality. Mobile operators, such as Telefonica, China Mobile and NTT DoCoMo, announced fully operational NFV (Network Functions Virtualization) deployments. AT&T reiterated its desire to move 75 percent of its network to a cloud architecture by 2020.
8. Making Wearables Wearable — There were 53 wearable devices on display at the show – 10 of which had their own SIMs to connect directly to the mobile network. The majority of these were smart watches and fitness trackers. The challenge, however, seems to be getting people besides device geeks to wear these. Huawei made a very interesting debut in this category with a high-end watch with a round-faced classic design. It looked like something that even James Bond might wear. And, although Apple was nowhere to be seen, rumors (and subsequent launch) of its new Apple Watch presented additional hope that wearables might in fact become wearable.
9. Mobile Monetization – An Industry on the Edge — At one time, service providers were the kings of the show. They are now just one of the participants in the massive and rapidly changing mobile industry. The decline in voice traffic, loss of messaging and competition to their data business from over the top providers and alternative access networks such as Wi-Fi, means that they desperately need to find new ways to make money. Most of the world’s major mobile operators now have their own large and prominently placed booths on the show floor. They are proudly displaying the latest business solutions, cloud services, gaming, IoT and other innovative mobile offerings that they have to sell. They are hoping that these new revenue-generating opportunities will move them beyond merely connectivity providers and deliver the next wave of monetization opportunities.
10. The Battle for the Great Indoors — Changes in devices, applications and social behavior are re-defining mobility from an on-the-go activity to a more nomadic activity, which takes place largely indoors. Traditional macro networks have a tough time penetrating buildings and reaching indoors. Hence operators are struggling to provide 5 bar coverage in homes, offices and public spaces. Traditional mobile technology vendors are now showcasing their small cell, Wi-Fi and DAS solutions as the answer to this challenge of lighting up the indoors. At one time, these solutions were relegated to the back corner, but they are increasingly becoming center stage as a solution to this new and growing problem. Not to mention, they offer an attractive new revenue opportunity for traditional macro network vendors.
11. Selfie Journalism – TV Production in the Palm of Your Hand – It was truly amazing to watch journalists reporting on the show holding their smartphones at arms-length in one hand and an attached professional-grade microphone in the other. In the past crews of cameramen and soundmen would have been needed to produce professional quality reporting from remote locations. The mobile revolution has created “selfie-journalism”, replacing these crews with one reporter, a smartphone and some clever software. The BBC did an interesting story on how they filmed, edited and produced their coverage of MWC entirely on mobile devices.
12. Mobile Payments – This May Be The Year? — The last point that I always seem to make on these reviews of MWC is on mobile payments. Once again, mobile payment solutions from banks, credit-card companies, MNOs and other providers were all competing to create a wallet-less world. However, unlike the promises of past shows, this may be the year that mobile payments finally take-off. With the launch of Apple Pay earlier this year and the big announcement that Samsung’s new S6 would incorporate technology from their recent acquisition of Loop (making mobile phones work with any existing magnetic card reader) we may finally start to leave our wallets at home.

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The Mobile Paradox – Why Are There Price Wars in a Time of Plenty?

One of the first lessons that every economics student is taught is “supply and demand” – the fundamental economic principle that price goes up with increased demand.  Yet we are witnessing the opposite to these age old principles in the mobile business.  Despite phenomenal demand for mobility services, the mobile operators that provide these services are engaged in a fierce price war.

Faster, sleeker, and more powerful mobile devices, running countless of applications have transformed businesses and our personal lives.  The insatiable demand for mobile devices and new bandwidth-hungry applications is generating enormous amounts of mobile data. The Cisco Visual Networking Index™ (Cisco VNI™) predicts that these trends will cause global mobile data traffic to increase 11-fold from 2013 to 2018, surpassing 15 exabytes per month by 2018.  Operators continue to invest in leading technologies like LTE, purchase more spectrum, and race to deploy ever more network infrastructure to meet this huge demand. 

In spite of this phenomenal growth and insatiable consumer demand, many MNOs are struggling to profit from this mobile gold rush. Mobile operators are watching as their average revenue per customer (ARPU) flattens or declines. Despite increasing customer appetite for mobile data, minutes of use in their cash-cow voice business are falling off sharply, and usage of text messaging is peaking. In fact, Ovum predicts that 2018 will mark the first year of revenue contraction in the history of the global mobile market. Following four years of less than 1 percent growth between 2012 and 2017, revenues will decline by 1 percent in 2018, ending the year $7.8 billion lower than in 2017.

When other industries, such as the automobiles, hotels, or airlines, face healthy customer demand, they build out more capacity, raise or maintain prices and sell more products, reaping greater profits.  However, the mobile industry doesn’t seem to be like other industries?  This “Mobile Paradox” - huge growth and customer demand, yet significant business and market challenges for MNOs to make money - seems to be unique to the mobile industry. 

Yet given this grim outlook we are witnessing very aggressive price wars in the US, and other markets.  In the US, T-Mobile has significantly disrupted the market by slashing prices, dropping device subsidizes which had tied consumers to their carrier, and most recently, introduced “rollover data” – allowing subscribers to rollover their unused data allocation to the next month.  All of the American operators have been forced to follow T-Mobile’s lead or watch their customers walk out the door.

What gives?

In seeking to understand this paradox and the current price wars, we need to consider three critical characteristics of the industry: 

1. High Fixed Cost Business – Operators spend billions of dollars to acquire spectrum and deploy far-reaching sophisticated networks to service a large base of subscribers.  Once they have built this expensive asset every new customer that they add contributes significant revenue at a very low marginal cost.  Operators have every incentive to add new customers and to keep the ones that they have to profit from these huge economies of scale.  Most markets are now saturated, with mobile penetration rates of 80 percent and higher.  So, it becomes a zero-sum battle with competitors to steal customers.  While a somewhat blunt instrument with huge long-term profitability implications, T-Mobile has clearly demonstrated that slashing prices is an effective means to fight this battle.
    
2. Substitutes and Alternatives – While it lacks many of the quality, coverage and features of cellular mobile, Wi-Fi has quickly become an important means to connect devices to the Internet without wires.  Aside from smartphones, most of the important and fast growing mobile devices, such as tablets, eReaders and laptops, are exclusively Wi-Fi enabled.  In fact, smartphones, which we tend to think of as synonymous with the mobile industry, are increasingly accessing Wi-Fi for Internet connectivity.  Our research shows that smartphone users actually connect to the Internet through Wi-Fi over one-half of the time, versus accessing the mobile network.  The Cisco VNI™ study confirms that Wi-Fi will account for 56 percent of all IP traffic in 2017, versus 12 percent from mobile.
    
3. Value Migration – Mobile operators once controlled all of the value that was created on their networks.  Whether that was voice, messaging or the early media services that they offered (e.g., music, games, ringtones) through their exclusive “walled garden” platforms.  Much of this business is now being lost to substitute over-the-top (OTT) services and to major shifts in usage behaviors. Mobile consumers would rather pay for these OTT services or be subjected to advertising from the likes of Google, Facebook, YouTube, and the App Store, than pay more to mobile operators.

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10 Predictions for the Future of Wi-Fi and Mobility

The close of every year brings startling headlines that herald the continued meteoric rise of mobility.  This past year was no exception.  The 2014 announcement that there are now more mobile subscribers than inhabitants on the planet exemplified the mobile zeitgeist and its importance in our daily lives. 

But, the big mobile news in 2014 was around Wi-Fi.  Wi-Fi continues to blanket the world, with iPass estimating that the number of public hotspots will increase almost 8-fold over the next four years to cover 1 out of every 20 people on the planet.  And, Wi-Fi is becoming more like the mobile cellular experience.  The seamless authentication and experience promised by Hotspot 2.0 is now available, with Time Warner and others announcing last year that they would roll it out across their entire Wi-Fi networks. And, we can now roam to other international Wi-Fi networks, like we do on cellular, with Comcast and Liberty Global, and other providers, announcing global roaming agreements.  And, 2014 saw mobile operators beginning to embrace Wi-Fi in a big way.  T-Mobile USA began shipping wireless routers to provide five bars coverage at home by allowing customers to make calls over Wi-Fi instead of the mobile network.   

Of all the 2014 Wi-Fi activities, perhaps the biggest event was Apple’s announcement that the new iPhone 6 would support Wi-Fi calling (Voice over Wi-Fi).  This technology bombshell indicated that Wi-Fi had truly arrived and should now be considered a true partner and complement to traditional cellular. 

What does 2015, and beyond, have in store for Wi-Fi and mobility?  The following are my ten predictions of what we have to look forward to: 

1.    Wi-Fi will be “almost everywhere” – While we may not find it on mountain tops, in remote locations or along highways, Wi-Fi will be in most places where we spend our lives – homes, schools, work, shopping malls, hospitals, sports facilities, etc. 

2.    Providing Wi-Fi will be a “cost of doing business” – Like providing lighting and heating, customers of retailers, restaurants, sports venues and all other customer-facing organizations will expect Wi-Fi to “just be there”. 

3.    Consumers will expect Wi-Fi to be free, or almost free – The bar has largely been set – with the exception of some “expense account” venues like hotels, customers will expect to have Wi-Fi included as part of the overall service. 

4.    Wi-Fi will become an important part of indoor mobile coverage – As the mobile battle moves indoors, Wi-Fi and Wi-Fi calling will be important ways for mobile operators to enhance their indoor coverage. 

5.    Wi-Fi will be a key access technology for Internet of Things enablement – Due to cost, coverage and bandwidth challenges of mobile cellular, Wi-Fi will be the key connectivity technology for home, business and public IoT deployments. 

6.    Public Wi-Fi will get better – With growing customer demand and expectations, public hot spots will need to upgrade their infrastructure to move beyond the initial “trial” phase of many public deployments. 

7.    Service Providers will be the major builders and operators of Wi-Fi networks – Given the growing complexity and importance of their Wi-Fi networks, many business will want to outsource the deployment and operations to a service provider as a managed service; concurrently allowing SPs to expand their growing Wi-Fi networks. 

8.    Wi-Fi wholesale and roaming agreements – We will see more domestic and globally roaming agreements to create a mobile-like experience.  Wi-Fi network operators will wholesale network capacity, and site locations for licensed small cells, to mobile operators to help them to extend their networks. 

9.    New Wi-Fi Max models – Wi-Fi centric mobile offerings, with cellular fallback, will expand beyond niche providers, such as Scratch Wireless and Republic, to more mainstream landline and cable service providers as their core mobile offering. 

10. “Next Generation Wi-Fi Monetization” – With public Wi-Fi becoming essentially free, businesses will look to new monetization models, like advertising, data analytics and advanced location-based services, to recover Wi-Fi network costs.

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New Smart City Opportunities for Service Providers

Tremendous new opportunities are being created for technology vendors and service providers as cities around the world look to build out smart cities to reduce municipal costs, tap new sources of revenue, and improve the overall quality of urban life. The previous blog (Smart Cities Are a $7.5 Billion Annual Opportunity for Technology Providers) described all of the essential requirements of the smart city architecture and quantified the great opportunities for technology vendors and partners to help to create and operate these digitally smart cities of the future.  The last question to address is what are the specific opportunities for SPs and where should they play to extract the most value from the deployment of smart cities?

The potential revenue opportunities available to SPs depend upon the strategic fit to their business.  Specifically, we evaluated the opportunities across three strategic fit criteria:

1.    Core Business – How closely is the solution or service aligned with the SP’s core business (e.g., using existing assets, leveraging current business operations and expertise, in regional footprint)

2.    Stretch – To what extent would new investments or operations be required to deliver the solution or service (e.g., Capex for new assets, creation of new business operations, acquisition of new expertise, out of region play)

3.    Deal Dependent – To what extent would the nature of the deal and the governance structure influence the potential revenues available? (e.g., vendor or lead, city investment or PPP)

Assessing the smart city revenue opportunities across these criteria reveals a number of strategic options for how SPs can think about approaching the smart city opportunity:

·         Core Business – essential part of the existing SP business – Network Connection

·         Closely Aligned – typically some of these are part of the existing SP business, or not very far removed from existing capabilities – Network Access; Technology Platform

·         New Area – new investments and capabilities would be required, but typically leveraging some existing capabilities – Operational Services; Smart City Solutions

·         Stretch – these are area that are not typically part of the existing SP business and would require considerable investment and new build – Program Management, Orchestration

·         Deal Dependent – these are the new sources of monetization (subscription, advertising, analytics, etc.); the realization of which will be dependent upon the deal structure – Monetization

Returning to our example of a smart city deployment for a city like Seattle in the USA (metropolitan population of 3 million), service providers could potentially generate new revenue across each of the strategic options as shown below.

For a typically medium size city deployment, like Seattle, a typical service provider could potentially generate at least $15M in new annual revenues from core or closely aligned businesses. Or, roughly one-half of the total smart city opportunity.  A global market opportunity of $3 to $4 billion of new annual revenues is readily within the grasp of SPs to help cities to deploy smart city initiatives.   And, that number could increase considerably if a service provider is willing to make investments in creating new capabilities and expertise. 

While there is a significant upside of new potential revenue, smart cities often have a broader strategic context for service providers.  As described in How SPs Can Profit from Digital Cities, there are additional benefits, beyond the direct revenue benefits, that SPs should also evaluate when assessing their involvement and options in smart cities.  Consideration of Ancillary Benefits (e.g., rights of way for network deployment on city assets; upsell to city, local businesses and consumers; customer retention) and Indirect Benefits (branding; PR/communications; customer experience; regulatory relief; government relations), together with the new sources of revenue, can create a very compelling business case for a SP’s active involvement in smart city opportunities.

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How To Make Money From Smart Cities

As cities around the world grow in size, we are beginning to see that strained resources, infrastructure, and services are causing natural limits to urban growth, which in turn limits the economic growth opportunity.  To combat this, cities as diverse as Barcelona, Nice, Kansas City and Songdo in South Korea, are starting to leverage advanced technologies and data analysis to create smart, connected cities.  These cities, and others around the globe, are building out new digital services such as smart lighting, traffic, waste management and data analytics to reduce costs, tap new sources of revenue, create new innovation business districts and improve the overall quality of urban life.

Not only will the creation of smart cities generate huge value for the cities and their inhabitants, but great opportunities will also exist for the vendors and partners who help to create and operate these digitally smart cities of the future.  However, the question is where and how can partners such as infrastructure providers, technology and services companies, and communication providers participate?  And, what types of revenues can they generate from helping to create smart cities?

Based on our extensive experience in creating and supporting smart cities around the world, Cisco has identified a number of essential ingredients required to deliver and run a successful smart city.  The Cisco Smart City Business Architecture categorizes a set of requirements in a number of different business layers, with each layer supporting the layer above and increasing the potential business return as we move up the stack. 

 

Starting from the bottom, the layers comprise:

 

1.    Network Connection – connecting all of the solutions, data and applications through fiber backhaul or licensed cellular.

2.    Network Access – a managed Wi-Fi, or other unlicensed wireless network, to connect all of the sensors and applications.

3.    Technology Platform – a platform to allow new devices and solutions to readily and securely “plug and play” into the overall architecture, and to connect to cloud storage and compute services.

4.    Smart City Solutions – the combination of devices and applications that deliver the specific solutions, such as smart lighting, parking and traffic management.

5.    Platform Monetization – opportunities to leverage the platform and network create new sources of revenue in areas such as advertising, data analytics and subscriptions

6.    Shared Operating Platform – a shared platform to consolidate the management, customer care and service issues across all of the solutions.

7.    Professional Services – services to support areas such as systems integration, planning and design.

8.    Program Leadership – services to program manage the entire implementation, operations and partner ecosystem of the smart city initiative.

Cities will need vendors and partners to provide solutions and services in each of the different layers of the business architecture to make their smart city initiatives a success.  Future blogs will explore how much revenue is available in each of the layers of the business architecture and how providers can best capture it.

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What do predictions about 5G mean for the Future of Mobility?

With the recent exponential growth of mobile devices, it is hard not to look ahead for the next big thing that will transform technology as we know it.

One current hot topic is 5G. While most industry experts agree it is a ways off, there are obvious reasons for excitement -- including how it will impact the future of mobility, the Internet of Things, and ultimately the Internet of Everything.

If 5G is all that it’s speculated to be, the mobility landscape will be in for a dramatic change , especially as businesses and organizations embrace all that 5G stands to offer such as ultra-fast network speeds and an increase in capacity.

However, while the industry grapples with understanding “just what is 5G” many experts, such as Peter Jarich, Vice President of Current Analysis Consumer and Infrastructure services, declares that it is “more relevant today than you might think” as 5G will introduce new network architectures. In addition, many of the technologies being developed today will be a part of the longer-term implementation of 5G.

Recently, I participated in a new Future of Mobility podcast with Peter Jarich to discuss what IT and business leaders can do today to prepare for the evolution of the 5^th generation of mobility and speculate on long-term implications. You can listen to the full recording here.

In this post, I’ll share some of those key insights from my discussion with Peter and discuss why 5G will revolutionize how we define mobility.

Let’s start at the beginning. What’s all the hype with 5G?

Since we are in the technology industry, it’s pretty standard to hype emerging solutions and ideas. However, the jump from 4G to 5G will be similar to the evolution of 2G to 3G, in that it will enable a broad range of new capabilities through lower costs and faster speeds.

We see a lot of buzz words surrounding 5G such “infinite capacity” and “virtualization of the network,” but really, it’s not just about how wireless technologies can be applied to what people are doing, but also how we connect everything to the network in a way to best meet our needs.

In terms of mobility, 5G is an enabler of a new world.

Gartner often refers to a Nexus of Forces – the convergence of four major tech trends: social interaction, mobility, cloud, and information – as a means of changing our business landscape. Today, we are seeing this convergence first hand. And it needs a network to support it. For example, the influx of mobile devices and applications are measuring heartbeats and monitoring brake pads on trains. This capability is being combined with an influx of data – available in real-time through the cloud.

From a network technology standpoint, 5G will continue to connect these capabilities.  It’s hard to predict exactly how all these pieces will come together, however 5G will be able to provide relevant networking – both over licensed and unlicensed spectrums – independent of people managing that process. With this in mind, 5G will be essential to bringing together people, process, data and things in an Internet of Everything world.

So, what can I do today to prepare for 5G?

I agree with Peter Jarich when he said, “You don’t need to wait until 5G arrives to figure out what you can do with it.”

If you’re a retailer, what does this mean?  How do you start running your business differently?  How do you start using mobility to engage with the customers that come in to your store like any e-commerce experience?

If you are a mobile operator, what does 5G mean for your business? In this new 5G world built on heterogeneous networks, how will your business need to evolve to stay competitive?

Regardless of your industry, the future of mobility – and next generation networks – will require every IT and business leader to redefine, reengineer and recreate business models based on the an infrastructure that is a lot more powerful and more pervasive than it is now.  5G isn’t here yet – but it is never too early to prepare and begin building a strategy.

Listen to the podcast: What do predictions about 5G mean for the Future of Mobility? featuring Cisco’s Stuart Taylor and Peter Jarich, Current Analysis.

How Will Mobile Operators Make Money in the Future?

The mobile market continues to evolve at a blindingly fast pace. It seems as though new faster, sleeker, and more powerful mobile devices are launched every day. And new categories of mobile devices are created almost overnight. The number of applications available to run on these revolutionary new mobile devices is staggering, numbering in the millions. The insatiable demand for mobile devices and new bandwidth-hungry applications is generating enormous amounts of mobile data. The Cisco Visual Networking Index™ (Cisco VNI™) predicts that these trends will cause global mobile data traffic to increase 11-fold from 2013 to 2018, surpassing 15 exabytes per month by 2018.

In spite of this phenomenal growth and insatiable consumer demand, many MNOs are struggling to profit from this mobile gold rush. Mobile operators are watching as their average revenue per customer (ARPU) flattens or declines. Despite increasing customer appetite for mobile data, minutes of use in their cash-cow voice business are falling off sharply, and usage of text messaging is peaking. In fact, Ovum predicts that 2018 will mark the first year of revenue contraction in the history of the global mobile market. Following four years of less than 1 percent growth between 2012 and 2017, revenues will decline by 1 percent in 2018, ending the year $7.8 billion lower than in 2017.

This mobile paradox - huge growth and customer demand, yet significant business and market challenges - seems to be unique to the mobile industry. When other industries, such as the automotive industry, face healthy customer demand, they build out more capacity, sell more cars, and reap greater profits. Mobile operators need to build out more network capacity to keep up with the voracious customer demand, but they are struggling to convert these investments into higher revenues and profitability. Much of this business is being lost to substitute over-the-top (OTT) services and to major shifts in usage behaviors. Mobile consumers would rather pay for these OTT services or be subjected to advertising from the likes of Google, Facebook, YouTube, and the App Store, than pay more to mobile operators.

Not only is it a challenging world for mobile operators to be doing business in, but a number of major disruptors are radically altering the entire mobile ecosystem. The rise of software platforms (from “walled gardens” to “walled ecosystems”), the availability of new fast mobile networks, and the Internet of Everything (growth of network-connected devices) are causing significant disruption and uncertainty across the industry. Equally, the move to cloud delivery models (“everything as a service”), the changing industry structure, and the role of regulators are fundamentally changing the mobile ecosystem.

The history of the mobile industry has involved huge and successful waves of revenue growth.  For a long time the mobile industry made huge sums of money from the mobile killer app - voice. However, high or unlimited minute plans and changing usage have meant the end of that growth wave. Messaging provided operators with perhaps one of the highest-margin and highest-growth products of all time, from any industry. OTT applications such as WhatsApp, Snapchat, and social media saw that revenue wave crest. Lately, MNOs are watching mobile data access rise to well over one-half of their total revenue, fueled by the insatiable consumer need to connect their mobile devices and applications. However, the crest of this third growth wave is visible on the horizon as the industry disruptors begin to shape a new mobile world.

The question for mobile operators everywhere is, what is this fourth, or next, wave of mobile growth? What are the new opportunities for them to monetize their assets and extensive investments in their mobile networks? How can MNOs continue to enjoy the success and profitability in this new mobile world that they have had in the past?
 
Questions to these answers can be found in our white paper:  Digging for the New Mobile Gold: The Next Generation of Mobile Monetization

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