The Uphill Climb to IoT Profitability

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March 26

By: Curtis Govan

The Internet of Things (IoT) is on an upward swing as the world becomes more connected, enterprises turn toward digital solutions for efficiencies and scale, and computing and network technologies allow for greater data generation, consumption, and analysis. 

It is an exciting opportunity for connectivity players to broaden services from consumers into connecting all manner of “things” from streetlights and vehicle cameras to healthcare equipment and water meters. 

Both Mobile Network Operators (MNOs) and Mobile Virtual Network Operators (MVNOs) are positioned to tap into the IoT market for new revenue streams, but there can be hurdles when attempting to reach those revenue streams.

IoT Profitability for Mobile Network Operators

MNOs face significant challenges in profiting from IoT due to a variety of factors that complicate their traditional business models. Despite the growing prevalence of IoT devices, several key obstacles hinder the profitability for these operators.

Communication Protocols

One major challenge is the diversity of IoT devices and their varied communication requirements. Unlike smartphones that have standardized communication protocols, IoT devices encompass a wide range of applications with distinct connectivity needs. Some devices require low-power, long-range communication, while others demand high bandwidth and low latency. Adapting to this heterogeneity requires substantial infrastructure investments and technological upgrades, making it difficult for mobile operators to provide seamless connectivity for all IoT applications without incurring substantial costs.

Alternate Sources

Moreover, the competition from alternative connectivity technologies, such as LoRaWAN (Long-Range Wide Area Network) presents a formidable challenge to mobile operators. This often offers lower costs and better coverage for specific IoT use cases, diverting potential revenue away from traditional mobile networks.

Low ARPU

Another obstacle is the low average revenue per user (ARPU) associated with many IoT devices. These devices often generate minimal data traffic compared to smartphones, resulting in lower revenue streams for mobile operators. As a result, the traditional subscription-based business models may not be economically viable for IoT connectivity. Operators need to explore alternative pricing strategies and revenue-sharing models to ensure profitability, adding another layer of complexity to their business operations.

Limited Footprint

MNOs are, by design, regionally based. There is no single operator that covers an entire area of the globe or serves customers on a global scale. An operator in Europe is not going to offer its services in the United States unless it’s on a roaming basis, which becomes complicated, not very profitable, and the world is shifting more toward permanent roaming bans for IoT devices. 

IoT is driving the need for global connectivity, but MNOs are running into a hard stop in where they can offer services. 

IoT Profitability for Mobile Virtual Network Operators

MVNOs face several challenges when profiting from IoT. While MVNOs play a crucial role in the telecommunications ecosystem by leasing network infrastructure from Mobile Network Operators (MNOs), the unique characteristics of IoT pose hurdles that impact their profitability.

Myriad Applications

One significant challenge is the diversity of IoT devices and the associated communication requirements. IoT devices span a wide spectrum of applications, each with specific connectivity needs. MVNOs must invest in versatile and flexible infrastructure to cater to these diverse requirements. This adaptability often demands substantial capital investments and ongoing maintenance costs, making it challenging for MVNOs to maintain profitability, especially when catering to a market characterized by low-cost, low-data usage devices.

Complication Ecosystem

To offer geographically broad connectivity, MVNOs must leverage relationships with multiple MNOs. This creates a cumbersome business model that involves multiple billing and usage systems and managing multiple contracts. 

Because of these complexities in managing numerous relationships, it can detract from SLAs, QoS, and ultimately impact the bottom line. 

Lack of Flexibility and Visibility

MVNOs are highly dependent on both the network and the connectivity management platforms (CMPs) of MNOs. Without direct control and insight into how devices are connected, managed, and controlled, blind spots can occur, and customer challenges with connectivity and services cannot be met in real time, which impacts service level and reputation. 

Competition

Additionally, competition from larger MNOs and specialized IoT connectivity providers poses a formidable challenge. These entities often have the resources to invest in cutting-edge technologies, offer specialized services, and negotiate more favourable agreements with device manufacturers. In the face of such competition, MVNOs may struggle to establish a strong foothold in the IoT market.

Maximizing IoT Profitability in the Connected Ecosystem

The path to profitability in IoT does not have to be complicated with these hurdles, whether it is for MVNOs, MNOs, IoT Service Providers, Connectivity Service Providers, or even enterprises. floLIVE’s core network, connectivity management, IMSI library, and much more make a simpler approach to IoT success. 

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