The new model of selling IoT connectivity presents a challenge for traditional MVNO and MNO provider

By Anasia D’mello

The market for IoT connectivity worldwide continues to evolve rapidly – if anything, at a faster pace during 2018 than in 2017. New providers, such as Twilio and 1NCE, are entering the market says Tom Rebbeck, research director at Analysys Mason.

More importantly, these providers are building their IoT businesses on new models that have been inspired more by cloud players such as AWS than traditional network operators such as Vodafone. These new models that are built for scale are likely to become the standard for much of the market as revenue per connections for IoT fall further (thanks to the growing presence of NB-IoT and LTE-M).

IoT connectivity is also gaining interest from investors outside the sector. For example, ARM acquired Stream Technologies in June 2018 to realise its ambitions to provide services that complement its core business.

In addition, the private equity firm Montagu paid a reported GBP400 million {US$530 million (€455.47 million)} for Wireless Logic, a substantial multiple for a firm that generated GBP45 million {US$60 million (€51.56 million)} in revenue and GBP16 million {US$21 million (€18.05 million)} of EBITDA in the year to April 2017.

This article explores the implications of these developments and is based on our recently published report IoT MVNOs: case studies and analysis (volume II), which profiles eight IoT MVNOs. The changes in the market create a challenge for both MNOs and for established MVNOs that have built their businesses around the model of a consultative sale and bespoke contracts and pricing.

New entrants are creating a new model for buying connectivity

Tom Rebbeck

The new-entrant, AWS-inspired IoT MVNOs are creating a new category of connectivity, distinct from the traditional ‘consultative sale’ model of selling connectivity and contracts where connectivity is part of a solution that includes other features such as hardware and platforms (see Figure 1).

Companies can be present in more than one category at a time – for example, an MNO can sell pure connectivity to some customers and a mix of connectivity and other capabilities (even complete solutions in some cases) to others.

Figure 1: Three categories of connectivity type [Source: Analysys Mason, 2018]

Transactional sale of connectivity
Consultative sale of connectivity
Sale of connectivity and other services

Offer
A simple, clear offer that can be bought without negotiation or long procurement.
Connectivity is sold to the customer following a consultative process, which may involve joint development of specifications and sometimes includes formal RFI/RFP stages.
Connectivity is sold in conjunction with other services, such as hardware, applications and security.

Price
Public
Available on application
Available on application

Target market
Organisations with some degree of familiarity with IoT connectivity, including:

· enterprises that are developing internal projects;

· technology start-ups (such as those working in consumer electronics);

· solution developers and systems integrators.
· Companies buying IoT solutions for the first time that need support and guidance;

· Companies buying IoT solutions with non-standard requirements;

· Companies with limited technical expertise.
Companies that want to simplify the IoT development process because they do not have either the skills, resources or appetite to do so internally.

Example MVNOs
Twilio, 1NCE and monogoto.
Aeris, Arkessa, BICS, Cubic, Globetouch, Truphone, Wireless Logic and most MNOs.
· […]

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Posted on: September 7, 2018

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