New IoT Tariffs are a Practical Example of "S Curve" Strategy

There is no shortage of critics who argue Verizon cannot create a huge advertising business to compete with Google and Facebook; as there are many who believe (or believed) that AT&T was making a big mistake buying DirecTV. Some might argue AT&T and Verizon are mistaken about 5G.

Execution and strategy risk is real, but it is hard to fault any of those firms for investing heavily in new lines of business.

T-Mobile US, for example, launched two new low-cost Internet of Things (IoT) connection plans, including the access module. For applications that use a little data, customers can get up to 5MB of data per month for $20 per year per device in the first year and $6 per year per device afterwards.

For unlimited data at 64 kbps, connections cost $25 per year per device. For a limited time, these customers get $5 off the first year for each device, T-Mobile US says.

With both T-Mobile IoT Access packs, T-Mobile will cover the cost of a Sequans Cat1 module, up to $16 per module.

Verizon and AT&T likewise have created service plans for unmanned aerial vehicle communications. AT&T’s “Machine Type Communication”  prepaid plans, which target developers and businesses, include three tiers of data and text messages: 1 gigabyte of data valid for up to 1 year and 500 text messages for $25; 3 GB of data valid for up to 1 year and 1,000 text messages for $60; and 5 GB of data valid for up to 2 years and 1,500 text messages for $100.

As always is the case, pricing will be an issue as mobile operators and IoT specialists try to grab leadership in the IoT connections business. In some cases, narrowband IoT networks offer connections about an order of magnitude lower than mobile rates.

All those moves are concrete examples of how tier-one U.S. service providers are following a business strategy based on “S curves,” growing entirely new lines of business and creating new products to replace maturing products.

The product life cycle and technology “S curves” are different expressions of a fundamental business model reality in the telecom business, in the digital era. The fundamental insight is that any product will tend to have a life cycle, from birth to death. And that has crucial implications for any “one-product” company or industry.

Consider only cable TV and telecom companies. Had cable TV remained a one product supplier, it would already have rapidly contracted. The same is true for traditional fixed network telcos and mobile operators. By becoming multi-product suppliers (voice, video and internet access), both cable and telco companies and industries have managed to keep growing revenue. Mobile operators have replaced declining voice and messaging revenues with mobile internet access revenues.

In addition, the development of the internet ecosystem as other implications for potential growth. In that new ecosystem, growth is lead by applications, not access services (think Google, Facebook, Netflix, rather than AT&T, Verizon, CenturyLink).

As internet access now has become a “legacy” service, the next waves of growth will come from the “applications” layer of the business.

And that is why big investments in new lines of business, ranging from mobile advertising to over-the-top video to IoT and connected cars, are imperative.