ABI Research has warned MNOs might miss out on the $7.6 billion ‘UnTelco’ revenue opportunity if it waits for the 5G euphoria to kick in.
It’s a story which we have heard before, though the telcos run the risk of missing out on a future craze of the digital economy by doing very little. Although it might seem a long-way off, there will certainly be an opportunity to make money in the smart city segment, as well as a chance to banish the dreaded utility tag.
“Smart cities is a huge and complex market, where a traditional vertical focus is now co-existing with a cross-vertical trend that is gaining momentum,” said Pablo Tomasi of ABI Research. “The size of the market, with all its different sub-verticals, means that MSPs [Mobile Service Providers] can target and assume various roles from system integrators to platform providers.
“While the opportunity is huge, competition is mounting, as proven by network vendors’ aggressive activities in the platform space. MSPs need to balance coopetition and prioritize innovative business models, for instance, based on advertising or performance-based revenues, rather than waiting and fostering the marketing trend centred on the role and potential of 5G in smart cities.”
As Tomasi points out, there is a lot of work which can be done pre-5G to lay the foundations for monetization in the smart city era. There are a couple of companies preparing themselves, Verizon has a smart city strategy focused on M&A after purchasing Sensity System and LQD, while Deutsche Telekom is leveraging aggressive NB-IoT deployments, but the industry on the whole looks sluggish. In waiting for the 5G catalyst the boat might have already been missed.
Of course this is not the first time we have heard this tale. Through inactivity and a lack of foresight, cash cow revenues of SMS and voice were destroyed by the OTTs, who also managed to take ownership of the video segment. The smart home is another which is increasingly looking like a lost opportunity as the focal point of the ecosystem shifts to the smart speaker not the router. Even the connected car is under threat as Google carves out partnerships to launch Android as the OS for a number of different automotive manufacturers.
In each of these examples, ownership of the ecosystem has been shifted elsewhere with the telcos slipping down the value chain. The risk is present again with smart cities and it might not be too long before telcos are simply known as connectivity utilities, offering few value-added services to the customer.
While there is still money to be made from being a utility, the focus is shifted towards operational efficiency as opposed to aggressive rollout of value-add services, the risk is with regulation. Should telcos be branded utilities they will fall under the heavy hand of government regulations. There might be benefits in terms of land access and pricing protections, but the telcos are determined to remain at arms-length from the flurry of red-tape and zombie-like civil servants.
As Tomasi said, there is still time to reverse these doomsday predictions, though the signs are not exactly favourable. The telcos are traditionally incredibly risk-adverse organizations which simply won’t work in the cut-throat digital economy. Companies have to be willing to adopt the fail-fast business model, which occasionally means making a bet on a segment which might not work out. Google partnering with automotive manufacturers with its Android OS is an excellent example. It might get disrupted, it might become irrelevant, or it might now have a foot through a very profitably door.
If you don’t buy a ticket, you’re never going to win the lottery.