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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How Service Providers Can Profit From Smart Cities

The UN estimates that at some point between 2008 and 2009 the world’s urban and rural populations became equal in size for the first time in human history.  Urbanization is set to continue as the rural population seeks the wealth and social opportunity that cities offer. In the period from 2007 to 2050, the UN estimates the urban population will grow from 3.1bn to 6.4bn.  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. The challenge of managing sustainable urban growth is one of the defining challenges of the 21st century. In parallel, city leaders are looking for ways to establish clear identities for their cities and to use the growing connectivity of everything to improve urban life for their citizens.

Cities as diverse as Barcelona, Nice, Dallas and Songdo in South Korea, are already 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 there are great opportunities for the vendors and partners who help the cities to create and operate these digitally smart cities of the future.

Connecting all of the sensors, devices, people and data is critical to making a city smart.  With highly developed wireline and mobile networks, Service Providers are at the center of providing this network connectivity.  However, Cisco believes that the SPs have a much greater role to play beyond simply providing the connectivity.  There are numerous opportunities for them to move up the stack to extract a much greater portion of the more than $1.5 trillion that Cisco estimates will need to will need to be invested in ICT and “smart” urban infrastructure worldwide over the next decade.

To understand the best role for a service provider in smart cities and how they can make money, we need to consider three strategic dimensions – benefits, role and finance/governance.

1.    Benefits to the Service Provider – Different types of potential benefits include:

·         Direct – network access; network management; services (e.g., location-based, cloud, security); solutions (e.g., smart parking, traffic, lighting); technology/business platform (build and operate)

·         Ancillary – rights of way for network deployment on city assets; upsell to city, local businesses and consumers; customer retention

·         Indirect – branding; PR/communications; customer experience; regulatory relief; government relations

2.    Service Provider Role – We view the potential SP smart city roles as a pyramid, or set of layers with each layer supporting the layer above and increasing the potential business return as we move up the pyramid.

 

3.    Financing/Governance Models – Range of financing and ownership models:

·         City Funded and Owned – City buys and owns the equipment and services and funds through budget or bond issue

·         Vendor/SP Funded – Vendor/SP finances and owns the infrastructure and leases it to the city with services

·         Public-Private Partnership – Funded and operated through a partnership of City and one or more private providers

·         New Separate Entity – Create new legal entity of key ecosystem partners, finance and operate as a separate business with profitability/break-even goals

By carefully assessing their options and opportunities along these three dimensions service providers can define a successful strategy and operating model for profiting from smart cities.  SPs are in a unique position to deliver Internet of Everything enabled, smart digital city services to key urban areas by providing a combination of connectivity, Wi-Fi network, platform, operations, implementation and integration, and specific applications and solutions.

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Understanding the Changing Mobile User

Mobile communications today is virtually indistinguishable from the first mobile call that was made four decades ago.  We have gone from monster handsets to pocket-sized portable computers.  Mobile communications has become an essential part of our daily lives.  For mobile operators and other companies operating in this space it is essential to know the facts about the mobile market and how the mobile user is changing.

The recent video by Cisco “Understanding the Changing Mobile User” provides key insights for SPs into how mobile users are using LTE, Wi-Fi and their changing mobile behavior.  The video identifies options for operators to be successful in the changing mobile world.

The video highlights the results of Cisco’s recent mobile consumer research study.  The complete results and white paper can be found at “Service Provider Wi-Fi and Small Cells:  Discover What Consumers Want from Wi-Fi and Mobile”

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Understanding the Changing Mobile User: Gain Insights from Cisco’s Mobile Consumer Research

Video highlighting the results and interests of our mobile consumer research.

View here

A World of Wi-Fi Opportunities

An article that I recently published in Mobilize Magazine

A World of Wi-Fi Opportunities

New research reveals substantial business opportunity within Wi-Fi services.

Cisco recently conducted an online survey of 620 U.S. mobile users to better understand their needs and behaviors, current and future use of public hotspots, and unmet demands. The results were clear:

·    Consumers increasingly rely on and prefer Wi-Fi for connecting their devices to the Internet.  In fact, the Cisco research reveals that the average smartphone user employs Wi-Fi 44 percent of the time. This is a significant increase from just one year ago, when one-third of the total smartphone data usage was through a Wi-Fi connection, rather than a mobile network.

·    A remarkable 70 percent of mobile users are now using public Wi-Fi hotspots. According to the survey, close to six out of ten public Wi-Fi users now connect to a hotspot at least weekly, and one-third connect more than once a week. Users spend an average of 44 minutes connected to these hotspots. 

What does this mean for consumer-focused companies, service providers, and other businesses? Opportunity. And lots of it.

 “Many innovative companies are discovering new ways to make money by unlocking the inherent business value of Wi-Fi,” says Stuart Taylor, Director of the Service Provider Transformation Group at Cisco. “They can create localized and personalized mobile services, for example, which improve the customer experience and provide a vast amount of business intelligence.”                        

Taylor highlights three business models that are ripe with opportunity: 

1.   Enhanced Retail Experience. Imagine a service that would enhance your in-store retail shopping experience on your own Wi-Fi-enabled mobile device at a large retailer. The service could include such things as product information, an in-store location finder, integrated shopping lists, coupons for special offers, and automated checkout.  

2.   Enhanced Airport Experience. Imagine a service that would enhance your experience when you are in an airport. The service could include such things as airport information, mobile check-in, maps and directions, coupons for special offers at shops and food outlets, and flight and gate alerts. 

3.   Enhanced Public Venue Experience. Imagine a service that would enhance your experience on your own Wi-Fi-enabled mobile device while you were in a large public venue, such as a shopping mall, amusement park, sports stadium, or resort. The service could include such things as venue information, maps and directions, coupons for special offers at shops and food outlets, and information on upcoming events.  

The Cisco research reveals consumers are eager to embrace such services to enhance their experiences in retail locations, airports, hotels and resorts, stadiums, and shopping malls. And while many consumers are concerned about who will have access to their data and how it will be used, most recognize that they will have to relinquish some of their personal information to get a better mobile experience.  

Taylor offers several pieces of advice for businesses seeking to capitalize on the emerging prospects of Wi-Fi services: 

·    Actively pursue new Wi-Fi monetization opportunities. Develop new offers that enhance the customer experience and deliver new sources of revenue.

·    Take advantage of technical and business capabilities. Combine the inherent capabilities of Wi-Fi with personal metadata and customer relationship management (CRM) data to create compelling new localized offers.

·    Develop proactive personal data strategies and communications. Undertake extensive customer research to formulate comprehensive data policies and strategies to allay customers’ concerns.

·    Actively communicate privacy policies. Make customers aware of privacy policies and the value delivered from the localized services.

“If your business isn’t providing Wi-Fi access to customers then it better be the number one item on your agenda,” Taylor suggests. “Customers expect it now almost everyplace they do business, and if they don’t find it they are voting with their feet.”

Observations from Mobile World Congress 2014

I have just returned from a very interesting and jammed-packed week at Mobile World Congress 2014 in Barcelona. More than 75,000 people were estimated to have attended this year’s MWC, and its fabulous new conference facilities proved a great place to celebrate the industry’s accomplishments and catch a glimpse of its potential future.  Much has changed in the industry over the last year since I reported my observations of MWC 2013.  However, what is most remarkable is how the boundaries of mobility continue to expand and morph – everything now seems to be mobile? 

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.       Awaiting the Next New Technology—Like last year, there was no big “buzz” technology pervading the show.  At previous shows everyone was talking about LTE (Long Term Evolution) as the latest mobile network technology.  This year it was virtually impossible to see those letters anywhere, and they didn’t seem to be on the tip of anyone’s tongue.  Though many countries in the world still lack 4G coverage and many others are just beginning to deploy LTE, the industry seems to have moved on but doesn’t yet know what the next new, shiny network technology will be.

2.       Next Generation Mobile Monetization — Mark Zukerberg’s keynote address and Facebook’s $19 B acquisition of WhatsAp made clear what MNOs already know – their business model is changing rapidly.  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.  Hence, there was a big focus on what that next wave of monetization looks like with everything from mobile cloud, network enhanced services and new solutions and services on display.

3.       Building the New Mobile – With the near ubiquity of Wi-Fi enabled devices, Wi-Fi access in homes and offices and the growth of public Wi-Fi, non-traditional mobile operators are exploring how they can create a “Wi-Fi Max-Mobile Min” mobile service.  Cable companies and other fixed line providers are asking if they can extend their voice and video offerings outside of the home and office, by anchoring the Internet connectivity with Wi-Fi access.  To avoid costly network builds and spectrum purchases, they would fill the 10-20% of the time that the user cannot access Wi-Fi by purchasing mobile connectivity from a MNO.

4.       Small Cells 2.0, From Legitimacy to Money Maker — Wi-Fi is now accepted as an integral part of the mobile network architecture.  Beyond delivering in-building coverage and offload relief, Wi-Fi is beginning to deliver alternative monetization opportunities.  For example, sophisticated location-based, Wi-Fi-enabled solutions that enhance the users experience and deliver benefits to the company’s bottom-line.  Operators are now seeking the same advanced monetization opportunities from licensed small cells.

5.       Virtualize Everything — Virtualization and the cloud have finally hit the core mobile network elements.  A number of vendors, including Cisco, announced that they have virtualized many of the EPC (Evolved Packet Core) components.  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 mobile network to extend well beyond the boundaries of the traditional mobile network.

6.       SPs Manning the Booths, Turning the Tables — At one time, service providers were the kings of the show, being courted by vendors and other companies looking to sell them their mobile products and services. The tables seemed to have turned somewhat. I was surprised by the number of prominent service providers from around the world who had their own large and prominent booths.  Now, it seems that SPs are keen to show off and sell their latest applications, cloud services, gaming and other innovative mobile offerings. These services are seen as new revenue-generating opportunities that will hopefully deliver the next wave of monetization opportunities

7.       Bigger and Better — Not so long ago mobile devices kept striving to keep getting smaller and more compact, whereas their TV cousins were all about getting bigger and brighter.  As the smartphone market starts to mature, device manufacturers are trying to bring the TV to our hand by creating larger devices.  The tablet and phone are merging to create the “phablet” - devices with a 6 to 7 inch screen that were on display at every manufactures’ booth.  Equally, the smartphone is getting bigger with Samsung launching the 5.1 inch S5 and LG’s 5.2 inch G2, almost a full inch larger than the original models.

8.       From M2M to the Internet of Everything — Pervasive, fast, mobile connectivity is finally creating a real market, not just for machine-to-machine but for everything that can be connected wirelessly.  As at the Consumer Electronics Show, connected devices such as wearables, appliances, home automation and cars were everywhere.  With the prevalence of things like Wi-Fi, Bluetooth, sensors and big data it seems like we are finally at the dawn of a new world where all animated and inanimate objects are connected. 

9.       Making Cities Smarter — When the Internet of Things, mobility and cities all collide good things begin to happen.  Barcelona is actually one of the best places to see the future of cities.  Its smart city initiatives not only greatly reduce costs and improve efficiencies, but improve the quality of life for its citizens.  I personally spent considerable time touring the city with customers to show how Barcelona is deploying such things as smart bus stops, parking, garbage collection, lighting, and providing municipal information to create the world’s leading smart city.

10.   Enterprise Mobility, the Next Phase— Most companies are beginning to embrace bring-your-own-device (BYOD) policies to allow employees to use their own mobile devices for business.  Many vendors are helping this trend along through better device management, security, and dual-persona solutions.  A number of innovative companies, consultancies and service providers are now developing unique solutions to take enterprise mobility to the next phase—beginning to truly transform businesses and industries using mobility.

11.   Security — While security has always been paramount in mobility, it seems like a couple of three letter acronyms (IoT and NSA) are escalating its importance.  For the Internet of Things to really take off people have to be certain that their car’s operating system, home sensors or information collected about their personal health is absolutely secure.  One of the most interesting devices launched at MWC, the Blackphone, is designed to protect users from unauthorized surveillance.  Presumably, in response to government spying controversies. 

12.   Mobile Money, Again, Again, and Again—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. But, once again, that still seems to be some distant future world.  While there were lots of interesting technologies and solutions on display and evidence ofsome consumer adoption, I think that we still have a long way to go and I suspect that I will be reporting on the future promise of mobile payments yet again next year.

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Discover What Consumers Want from Wi-Fi and Mobile

Consumers have a true love of mobile devices, as evidenced by recent Cisco mobile consumer research.  Significant percentages of respondents reported using everything from laptops, smartphones, and tablets to eReaders and mobile gaming devices. Americans now own an average of three mobile devices each, up from 2.6 devices in the 2012 Cisco mobile consumer study.  Perhaps more significant, our findings show that the number of smartphone users has grown by 21 percent in just one year, now reaching 68 percent of the population, at the expense of basic phones. Most remarkable is that the number of tablet owners has expanded by over 90 percent in just one year, with close to four out of ten consumers possessing one of these new devices.

The insatiable demand for mobile devices and new applications that use large amounts of bandwidth is generating staggering volumes of mobile data. In parallel, the use of Wi-Fi for Internet access is exploding, as more mobile devices are Wi-Fi enabled, the number of public hotspots expands, and user acceptance grows. Most mobile operators now realize that offloading data traffic to Wi-Fi can, and must, play a significant role in helping them avoid clogged networks and unhappy customers. Many service providers are now constructing extensive networks of public Wi-Fi hotspots for use by their mobile or home broadband customers. The networks allow mobile offload and help enhance and differentiate their offerings. In addition, service providers are struggling to understand new business models for making money from Wi-Fi.  However, very little is currently known about how consumers are actually using public Wi-Fi and how they view the overall experience. Nor is there much information about mobile users’ appetite for these new services, their willingness to use them, or their privacy or security concerns surrounding these data-based services.

To learn more, Cisco conducted a survey of 620 U.S. mobile users to understand their needs and behaviors, use of devices, applications and mobile access technologies, and how they have changed since our 2012 mobile consumer study.

Top 10 Research Findings

 

1.    It’s all about the home.

2.    Wi-Fi is the connection of choice for all mobile users.

3.    LTE is a complement to Wi-Fi, not a substitute

4.    Public Wi-Fi is now a big part of the mobile life.

5.    Consumers are communicating and surfing at established hotspots.

6.    Public Wi-Fi needs to be faster, more secure, and in more locations.

7.    Users are generally satisfied with public Wi-Fi, but have concerns with some locations.

8.    Mobile users are interested in localized, personalized, and enhanced experiences when using Wi-Fi.

9.    Consumers are willing to surrender personal data for a better experience.  But they want control.

10.  Small cells provide an opportunity to improve mobile quality and coverage and reduce churn.

The complete results can be found at Discover What Consumers Want from Wi-Fi and Mobile.

Cisco mobile consumer research clearly demonstrates that consumers are using a greater number of mobile devices to do a greater number of things. As demand for mobile devices and network connectivity continues to grow, Wi-Fi, small cells, and traditional macro mobile networks will all be critical to meeting the needs of mobility-enabled consumers. Service providers are in the enviable position of being able to successfully integrate these networks and deliver new sources of value.

This white paper is part of a series presenting 2013 Cisco mobile consumer research findings.  Previous blogs and white papers have highlighted What Mobile Consumers Want from Public Wi-Fi, Understanding the Changing Mobile User and Unlocking Wi-Fi Enabled Value-Added Services.  

 

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Unlocking Wi-Fi Enabled Value-Added Services

Competing with the virtual, e-commerce world is becoming increasingly challenging for real-world businesses. Traditional retailers have long envied the massive amounts of valuable data that online retailers have available to help them better understand customer behavior and implement winning marketing tactics. Online retailers know valuable information such as how frequently customers return, how long they spend on their sites, what the customers looked at but didn’t buy, and where they went before and after coming to the site. Businesses as diverse as hotels, banks, stadiums, airports, and large public venues are all looking for ways to get similar detailed data on customer activities in their facilities, so they can improve the customer experience and their bottom lines. The data and insights have not been available to bricks-and-mortar facilities, until now.

That situation is changing through the growing availability of Wi-Fi in business locations. Many retailers, hotels, and other businesses are increasingly offering Wi-Fi as a service that allows their customers to connect mobile devices to the Internet. Hidden in this valuable service is a vast amount of information and insight, which retailers and others can use to deliver tangible value to their bottom lines. Hypersensitive location information, device details, identification of returning customers, and sophisticated path analysis are just some of the customer data captured by Wi-Fi networks. Businesses are now realizing that the data and capabilities offer new ways to improve the customer experience and support a range of market-leading monetization models.

For many businesses, these new location-based experiences and monetization models offer new ways to compete with e-commerce. However, very little is currently known about mobile users’ appetite for these new services, their willingness to use them, or their privacy and security concerns surrounding these data-based services.
To learn more, Cisco conducted a survey of 620 U.S. mobile users to understand their needs and behaviors, use of devices, applications and mobile access technologies, and how they have changed since our 2012 mobile consumer survey.

The study revealed that consumers are very interested in new localized services and solutions that are delivered directly to their mobile devices.  Our findings show that consumers would embrace such services to enhance their experiences in retail locations, airports other large public venues, such as stadiums or shopping malls.  In addition to access to free Wi-Fi, mobile users value the convenience and efficiency of the service, the ability to locate themselves in the venue, and being offered personalized deals or coupons.  However, they are concerned about security on their devices and the use of their personal data.   

We explored these personal data concerns in much more detail.  The good news is that consumers are willing to sacrifice some of their privacy and personal data to derive the value of these personalized services, but they want to be in control.  They want to control what data can be used, when and where, and by whom, and they want to control the experience.  Our research revealed that consumers have a “data sharing threshold”.  Beyond this threshold consumers do not feel that the value of the benefit justifies the value, or intimacy, of the personal data that they are being asked to give-up.

Wi-Fi value-added services allow businesses to compete on more equal terms with the data-driven world of e-commerce, and the financial returns more than justify the investment in Wi-Fi infrastructure. Best of all, as our study shows, consumers want these enhanced mobile experiences and the value that they offer.  Of course, consumers have privacy concerns, but these concerns are not insurmountable and incompatible with the new localized services if the insights from the research are incorporated into the design of these services.

The complete results can be found at Unlocking Wi-Fi Enabled Value-Added Services

This white paper is part of a series presenting 2013 Cisco mobile consumer research findings. Previous blogs and white papers have highlighted What Mobile Consumers Want from Public Wi-Fi and Understanding the Changing Mobile User.  

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