Five Times as Many IoT Devices as Mobile Phones Already in Operation

One way of illustrating the impact of internet of things on public network demand and revenues is to note how many IoT devices already are in use, and how relatively slight the revenue uplift has been. Simply, there may already be five times as many IoT devices in use as mobile phones, for example.

And it all those devices are generating extensive revenue, it has not been reported by mobile operators.

There are perhaps 6.2 billion connected human devices devices used by people in 2021, with possibly 4.3 billion to 4.4 billion using a direct mobile connection. Roughly two billion use indirect connections (Wi-Fi or Ethernet) that do not have a direct account associated with them. 

There also are perhaps 34 billion connected internet of things devices in use in 2021, likely mostly using an indirect connection (Wi-Fi, another short-range communications protocol or Ethernet). Perhaps two billion of those devices are connected by mobile networks, according to Ericsson.  

source: Statista

That points to a significant difference between human-used devices and IoT devices: most human-used devices will rely on a mobile account; most IoT devices likely will not. 

source: Gartner

Since the typical sensor connection generates far less revenue than a smartphone account, for example, that also implies that IoT connection revenue will provide less connection revenue uplift than might be expected. An IoT sensor might represent connectivity revenue two orders of magnitude less than a smartphone connection does, for example. 

Volume will matter, but it is the average revenue per device and the prevalence of non-mobile connectivity and non-public-network connectivity that really matter more. Sensors and devices often will use a local untethered connection such as Wi-Fi or Bluetooth and not create immediate demand for a dedicated mobile or other public network connection. 

6G Will be About New Apps, NGMN Alliance Argues

As it might be fair to argue that 5G was the first mobile generation built with new non-human applications in mind, some telco executives seem to be positioning thinking on future 6G in similar ways. 

A white paper published by the Next Generation Mobile Networks Alliance talks about new services and features that “enable significant and novel capabilities, supporting radically new and differentiated services.”

Of course, one might well argue that has been said of every mobile generation since 3G. And some might note that such thinking is crucial for reasons related to firm equity value. You can imagine what financial and securities analysts are likely to say if mobile operators argue they will have to invest capital in 6G in a decade, but with financial opportunities about the same as 5G. 

So some new “sizzle” will have to be part of the argument for 6G, even if the prosaic fact is that mobile networks are upgraded, routinely, every decade to support higher capacity and lower latency. 

“New applications and services based on future technologies should be driven by their scope and scale for applications, and market opportunity,” NGMN says. “Development of new technology should consider the law-of-diminishing returns, among others, quantifying demand for it in terms of market value.”

In other words, performance needs to be designed with new applications and use cases in mind, with network costs matched to those expected new opportunities. Nobody knows yet what those opportunities might be. 

So far, holographic features, artificial reality and virtual reality are among the use cases proposed for 6G. 

source: RF Wireless World 

Of course, some might also argue that most proposed 6G use cases are among those touted for 5G as well. That perhaps is not surprising. Many use cases imagined for 3G became commercial realities in the 4G era. Perhaps many 4G use cases will actually become common in the 5G era. If so, many hoped-for 5G applications might not emerge until the 6G era. 

source: Techplayon 

LEO Will Grow, but Remain a Niche

Low earth orbit satellite constellations such as Spacelink will allow satellite broadband provides to serve 3.5 million subscribers in 2021, growing at an eight-percent compound annual growth rate to reach 5.2 million users in 2026, according to ABI Research.

To keep that in perspective, in 2021 there are about 4.93 billion regular internet users, using 1.2 billion fixed connections and upwards of seven billion mobile internet subscriptions, supporting mobile phone users, PCs and internet of things devices.

The point is that, as important as LEO constellations might be, they will remain a niche supplier of internet access services. By 2026, says ABI Research, LEO service revenue might reach US$4.1 billion. 

In 2020 fixed network internet access in the United States alone generated more than $100 billion in annual revenue in 2013, by some accounts. By other accounts consumer access spending amounted to that much in 2013, without including business purchases. 

Business access contributes at least $115 billion annually.  

For that reason, other estimates suggest internet access sold to businesses and consumers generates $200 billion annually in service revenues. 

The point is that LEO constellations are probably going to be the driver of satellite internet access revenues in the future. But it will still be a niche within the internet access business.

Covid Lockdowns Shift Data Consumption to Fixed Networks

Most of the data people consume has always been on the fixed network. And though the long-term impact of Covid-19 on consumption patterns remains to be seen, government lockdown policies actually increased the amount of data consumption on the fixed network, compared to mobile networks, Ofcom has found. 

Fixed network data consumption grew from 65 percent to 74 percent as people stayed home for work and education during the pandemic, for example. 

source: Ofcom 

AT&T Seems to be Seeking 3 Types of Private 5G Roles

AT&T appears to be positioning to supply private 5G networks in three ways: managed private 5G; edge computing and enterprise private 5G that might have AT&T involved in design and implementation. 

It will be a bit of a challenge for all the usual reasons. Enterprise networking is lucrative enough that lots of others are in the business, especially system integrators. 

And the communications service provider portion of the business (access, wide area network) is a relatively small part of the total business, possibly on the order of $16 billion to $12 billion globally. 

Private 5G--unlike traditional local area networking--does require use of “mobile” and therefore “public network” infrastructure, unlike other local area networks including Wi-Fi. 

The ecosystem is easier to visualize in the mid-size business portion of the market, where tier-one telcos might not have too many advantages. 

Channel players such as managed service providers (MSPs) and systems integrators (SIs) are taking more share, Analysys Mason argues. “Meanwhile, channel players such as resellers, retailers and value-added resellers (VARs) that deal with customers on a transactional basis, and are less involved in supporting operational changes at customer organisations, are losing share,” the firm says. 

Smaller businesses buying IT products rely heavily on resellers and value-added resellers, but also often buy direct from infrastructure providers. System integrators and managed service providers also play a role, as do communications service providers. But the point is that, in the smaller business IT services market, most of the activity (buying) is by others in the ecosystem. 

Communications service providers might represent about 10 percent of sales volume. 

source: Analysys Mason 

To be sure, 5G private network managed services, edge computing and implementation services are legitimate revenue opportunities for mobile operators. What remains unclear is the extent of new revenue that can be earned by mobile operators supporting private 5G networks.

Mobile Data Costs Have Fallen, Other Consumer Prices Have Risen Since 2010

With the caveat that retail prices are not the same as device, software or network costs, end user data prices; mobile data costs have fallen for more than 20 years. One can see the trend at work in global mobile operator revenue per gigabyte, U.S. mobile prices per gigabyte or U.S. price indices since 2010. 

source: Strategy Analytics 

source: CTIA

source: CTIA

4G Impact Exceeded Expectations. Will 5G Do So As Well?

The economic impact of 4G was--as one would expect--believed to be large when first launched in the U.S. market. So, a decade later, were forecasters correct? By some estimates, 4G was expected to produce $73 billion to $151 billion in gross domestic product growth and 371,000–771,000 new jobs. 

After about six years, it was argued that 4G accounted for nearly $100 billion of the increase in annual GDP by 2016, according to one analysis by Recon Analytics.

Such analyses always hinge on the assumptions, but mobile industry revenues alone grew by about $100 billion between 2011 and 2014, for example. If one counted only mobile industry direct service revenues, 4G might account for 40 percent to all of that increase, as 4G adoption was about 40 percent in 2014. 

According to the CTIA, In 2011, the mobile industry contributed $195.5 billion to U.S. GDP. “Based on historical 3G trends, the industry’s GDP contribution was projected to grow by 126 percent, to $441.8 billion by 2019,” CTIA says. “In reality, 4G blew past all expectations. The industry’s contribution grew to a staggering $690.5 billion in 2019, $248.7 billion more than projected.”

source: CTIA 

In a broader sense, it was the perceived value of mobile apps and mobile web that arguably drove much of the revenue increase; 4G being an enabler of that broader trend. 

Qualcomm has estimated a 5G economic impact of about $13 trillion by 2035, citing research by IHS. 

According to Accenture, the gains will take many forms. In manufacturing, 5G-enabled factories experience about 20 percent to 30 percent overall productivity gains including up to 50 percent savings in assembly time, up to 20 percent in asset life and up to 90 percent gains in defect detection.

In retail, 5G enables up to 50 percent increase in sales growth combined with human-focused processes and extended reality visualizations, Accenture says. 

In healthcare, 5G allows more remote post-acute care, home-based models, with savings greater than 30 percent and driving better patient outcomes.

Connected vehicle technologies have the potential to reduce the severity of non-impaired accidents by up to 80 percent, potentially saving $3.6 billion in collision costs and possibly reducing traffic by 25 percent, Accenture estimates.

By other estimates 5G will have a $35 trillion impact on new global goods and services by about 2035. Based on experience with 4G, it is conceivable such estimates are correct. 

The automotive industry alone might account for $2.4 trillion alone.  

The experience with 4G between 2011 and 2019, when gains--even measured mostly in terms of direct impact--exceeded expectations, might well happen with 5G as well. 

source: CTIA

T-Mobile Home Broadband Available to 30 Million U.S. Homes

T-Mobile Home Internet now is available to more than 30 million U.S. households, the company says. Nearly 10 million of those households are in rural America.

T-Mobile Home Internet costs $60 a month, with AutoPay payment plans, with no added taxes or fees, equipment fees or contracts. The home router is designed for self install, and connects to both 4G and 5G networks. 

Average speeds are said to be 100 Mbps for most new customers, with unlimited data and no usage caps.

T-Mobile Attack Focuses on Taking Share

T-Mobile’s approach to  edge computing is more than a hedge, but not a priority, either. Rather than chasing new markets--including edge computing--T-Mobile will concentrate on taking share in existing markets, a time-tested attacker's strategy. 

That goes against the grain of public statements by other mobile operators and others that new 5G use cases in IoT and edge computing are the growth areas. But proponents might be overstating revenue upside in such areas. As with other new use cases, it takes time before value propositions are widely understood and ability to deliver value is ubiquitous and affordable. 

T-Mobile says it will focus on taking share in business accounts, rural customers and home broadband markets, essentially relegating new areas such as multi-access edge computing, internet of things and private networks are areas T-Mobile has not said it will target. 

T-Mobile historically has had less share from business customers than AT&T or Verizon, and likewise has been under-represented in rural markets. With spectrum assets that now help it address performance and coverage in rural areas, T-Mobile now is in position to address the coverage issues that have hampered it in rural areas, and with business accounts. 

The home broadband attack likewise aims to take share in a big market worth about $195 billion a year, with a well-understood value proposition and pricing characteristics, where T-Mobile’s share of market is zero. 

Comcast and Charter Communications alone book $150 billion annually from internet access services that largely are generated by home broadband customers. 

T-Mobile has zero market share in that market. Taking just two percent means new revenues of perhaps $4 billion annually. That really matters, even if cable operators minimize the threat.

Verizon LMDS Sale is Not about Millimeter Wave

Verizon’s likely sale of all of its LMDS spectrum (29 GHz, 31 GHz) is less related to its views on millimeter wave spectrum and more on the restriction of LMDS to fixed applications. The Federal Communications Commission does not allow use of LMDS for mobility operations. 

Verizon acquired LMDS spectrum in 2016 as part of the XO Communications acquisition. XO, for its part, had amassed LMDS spectrum as part of its hoped-for business customer access strategy. Prior to that use case, Local Multipoint Distribution System (LMDS) was envisioned as a way to support television delivery. As with much of the spectrum originally proposed for educational television, including Multichannel Multipoint Distribution System (MMDS), the practical use cases did not develop. 

T-Mobile bases much of its 5G coverage strategy on use of 2.5-GHz former MMDS spectrum, for example.

Enterprises View 5G, Wi-Fi 6 as Sources of Competitive Advantage

In early 2020, a Deloitte survey of enterprise executives found their networking thinking focused on 4G and Wi-Fi. Significantly, those execs indicated that the networks were working fine.

“More than eight in 10 of these executive decision-makers are ‘satisfied’ or ‘extremely satisfied’ with a range of traditional performance characteristics of their current wireless networks, including reliability and resilience, data speed, latency, coverage, location accuracy, energy efficiency, and device density,' Deloitte reports. 

In other words, the value of 5G and Wi-Fi 6 is viewed as coming elsewhere, providing competitive advantage. 

source: Deloitte

 

source: Deloitte

Bandwidth Demand Eventually Will Moderate, But Not Soon

Though bandwidth consumption seems to continue to increase as much as 40 percent each year, we can probably predict with confidence that growth will not continue at that rate indefinitely. Even if one assumes people will watch lots of video, which drives bandwidth demand at present, there are only so many hours in a day. 

At some point, consumption will level off because people simply cannot spend another hour each day watching streaming video, playing games or otherwise consuming bandwidth. 

But significant growth will continue for some time, forcing internet service providers to add capacity. The business problem is that propensity to pay is relatively fixed; consumption is not. 

This is a huge business model change for connectivity providers. In the past, usage was tied to cost; so investment was relatively well matched to revenue and profit. 

source: GSMA Intelligence 

In the internet era, spending--and therefore revenue--tends to be rather fixed, no matter how much consumption grows. That is why new C-band capacity, millimeter wave assets and Citizens Broadband Radio Service have been so important for U.S. internet service providers. 

source: Mobile Experts 

There is no way consumer bandwidth demand can be met within the confines of low-band mobile spectrum, for example. Every next-generation mobile network has required new allocations of spectrum and 5G is no different in that regard. 

For 5G it is mid-band and millimeter wave that are essential, though the role of millimeter wave might not be so obvious for a few years.

The other issue is that the importance of Wi-Fi or other offloading mechanisms will continue to be crucial for indoor coverage, as millimeter wave and teraHertz signals will not propagate through walls and buildings. That is not to say indoor small cells will be unimportant, simply to note that offloading to Wi-Fi is a simple way to support many use cases.

The issue might come when 5G and other networks use features of virtualized core networks that require support all the way to the radio edge. In such instances, indoor small cells might well be necessary, to preserve use of the features.

We Might be Wrong About Where Near-Term 5G Upside Exists

One of the issues for connectivity providers trying to create new revenue streams--aside from a reputation for not being good at innovation--is the challenge of finding innovations that represent enough incremental revenue to justify the cost of developing them. 

It is one thing to see projections of the new revenue from private 5G networks; something else to figure out how much of that opportunity realistically can be addressed by connectivity providers. 

We face the same problem when trying to estimate the value of edge computing or internet of things markets as well. How much of that opportunity realistically could be converted into revenue for connectivity providers?

Since estimates of edge computing, unified communications, IoT and private 5G always involve a mix of infrastructure sold to create the networks; management solutions of some type; design, installation and operating support and some connectivity revenues, the issue is how to estimate realistic connectivity service provider roles and therefore revenues. 

History suggests connectivity providers might have a role earning up to five percent of any of those proposed new areas of business, based on past experience with local area networks in general, or business services such as enterprise voice, conferencing and collaboration.

The global unified communications  and collaboration market might have reached about $47.2 billion in 2020, IDC says. But most of that revenue was earned by entities other than connectivity providers. 

For example, revenue booked by Microsoft, Cisco, Zoom, Avaya and RingCentral totaled about $26 billion for the year. Those five firms represent 55 percent of total UCC revenues for the year, IDC figures suggest. 

Relatively little UCC market revenue is earned by connectivity service providers. 

Direct connectivity provider revenue from local area networks is almost completely related to broadband access bandwidth sold to enterprises, smaller businesses and consumers. Almost all the rest of the revenue is earned by hardware and software suppliers, third party design, installation and maintenance firms, chip and device vendors.  

The point is that the traditional demarcation point between cabled public networks and private networks--wide area and local networks--happens at the side of a building or in the basement. WAN and connectivity service providers make their revenue.

The demarcation point between mobile customers and the public networks is the device. The capacity services supplier owns everything from spectrum to tower, then tower to switches and other controllers, then the core network. The consumer owns the phone. 

Traditionally, the “private network” has been the province of different firms than public networks, which is why interconnect firms and system integrators or LAN specialists exist. 

Even in some “core” WAN areas--including virtual private networks--third party specialists and infrastructure suppliers dominate the revenue production. Software-defined WANs, for example, can be created at the edge using gear owned by the enterprises who set up the SD-WANs. 

SD-WANs can also be created by managed services firms, which includes connectivity providers. But most of the revenue is earned by infrastructure suppliers or managed services specialists, not connectivity providers. 

Much the same can be said for internet of things revenue upside. Most of the revenue will be earned by LAN hardware and software suppliers, sensor and devices suppliers and app providers. WAN connectivity will be a contest between specialized WAN providers using unlicensed spectrum and mobile operators using licensed spectrum. 

But all WAN connectivity collectively will be a small part of the IoT revenue opportunity. 

 

source: IoT Analytics 

In edge computing, most of the actual “computing” will be done by hyperscalers and others, even when mobile and fixed network operators supply real estate or access connections. It already seems clear that most telcos are not going to try and challenge hyperscalers for the actual “edge computing” function.  

Private 5G is mostly going to create revenue for infrastructure sales (hardware and software), as private 5G or 4G are local area networks, like Wi-Fi. The enterprise or the consumer “owns” that network.  

All of which raises an interesting question. “Everybody” seems to concur that businesses and enterprises will drive most of the incremental new revenue from 5G. What if that expectation is wrong? And it could be wrong, in the early days.            

Consider private 5G or edge computing or IoT opportunities. How much enterprise or business revenue do you actually believe connectivity providers in any single country can generate, compared to any other initiative in consumer segments?

Consider fixed wireless, for example, in the U.S. market. 

You can get a robust debate pretty quickly when asking “how important will 5G fixed wireless be?” in the consumer home broadband market. Will it matter? 

Keep in mind that the fixed network home broadband market presently generates $195 billion worth of annual revenue. Comcast and Charter Communications alone book $150 billion annually from internet access services that largely are generated by home broadband customers. 

Mobile service providers have close to zero--and in some cases actually zero--market share. 

Taking just two percent means new revenues of perhaps $4 billion annually, within a couple of years. How long do you think it will take T-Mobile to earn that much money from IoT, edge computing or 5G private networks? T-Mobile’s effective answer is “too long,” as it is not pursuing those lines of businesses in an active sense. 

T-Mobile is launching new initiatives for consumer home broadband and business mobility services, though. 

And the growth path for T-Mobile is clear. Instead of supplying new customers, with new needs, with new products, T-Mobile in its home broadband push only has to take a few points of market share in an established market. 

So it is possible that early incremental new revenue will be found by at least some mobile operators not in the sexy IoT, edge computing or private networks but in the less-sexy business of home broadband. 

Not to mention profits. The cost of creating a $1 billion revenue stream in IoT, edge computing or private networks--within a few years--will be somewhat daunting. The cost of creating $4 billion in home broadband revenues in the same time frame might be a simpler matter of applying marketing effort.