Saturday, July 2, 2016

Why IoT Matters for Consumer Internet Access

The connection between the industrial Internet of Things and widespread consumer Internet access is not always crystal clear.

But there is a direct connection: all ubiquitous networks eventually wind up being supported by a range of revenue sources from both consumer and business customer segments.

Historically, low consumer communications prices were possible only because high-profit business services were used to subsidize the consumer services which sometimes lost money and sometimes only were profit neutral.

That is less true than in the monopoly era, but Verizon, in 2014, still generated more than half its total fixed network revenues from business customers (wholesale, enterprise, small business).

Something like that is likely to develop with industrial Internet of Things or enterprise IoT services as well: they will generate both revenue and profit margin to feed the one network used by all customers, business or consumer.

In a sort of similar way, each new Internet facilities domain tends to improve the value of the whole interconnected set of networks. Such network effects mean the value of the whole network grows with the volume of end points or connections.

The point is that IoT revenues matter because they can provide enough gross revenue and profit margin to help fund upgrades and operation of the whole network. And anything the improves the sustainability of the network as a whole makes possible services for consumers, especially the more cost-conscious consumers who might use the network.

Cable TV providers likely still earn most of their revenue from consumer segments. But for telcos, business customers arguably drive more business revenue, and telcos earn higher margins on business customer accounts.

That is likely to be the case for IoT as well.

source: Deloitte University Press

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