Wednesday, August 3, 2016

Why IoT is Directly Related to Rural Internet Access

It might not be self evident that there is a direct relationship between Internet of Things revenues and profits earned by mobile and other service providers, and rural Internet access services. Simply, one day IoT revenues will be necessary to support rural Internet and other communications services.

The reason is simple enough. At some point, after voice, texting and mobile data revenue growth has ended, some big new sources, likely including IoT, will be needed to generate financial surplus that can be tapped to provide rural Internet access.

How to subsidize rural communication networks is a problem for service providers, regulators and policymakers in most countries, except for some small city-states that essentially have no rural areas. .

In developed or developing nations, mobile or communications network rural coverage is an issue. In the United Kingdom, for example, two percent of road miles have zero 2G network coverage, while 12 percent of road miles have only partial 2G coverage, the RAC Foundation says.

On six percent of road mileage, there is no 3G coverage, while 45 percent of road miles have only partial 3G coverage.

Some 56 percent of road miles have no 4G coverage, while 27 percent of road miles have only partial 4G coverage.

Miles (%) of road in Britain with…
Full network coverage
Partial network coverage
No network coverage

As a general rule, networks serving such areas are not sustainable on their own, meaning that potential revenues never will justify building facilities. Instead, such investments must be subsidized either from surplus generated elsewhere on the network, or by direct government subsidies.

In the past, rural service has been subsidized both by profits earned from customers in urban areas, by business users and by government support programs. That will continue to be necessary.

But profits from sales of voice services or text messaging services are becoming more difficult. Mobile data services are the current driver of surpluses in most developed nations, and will become the key drivers in most developing nations, eventually.

But what happens when mobile data revenues have reached saturation? What comes next?

Internet of Things is the big answer many believe will develop. In other words, revenues and profits earned from IoT will drive supplier business models, generating enough surplus to keep extending service to rural areas.

That is one reason why IoT is a key focus of the Spectrum Futures conference this year. Here’s a  fact sheet and Spectrum Futures schedule.

At some point, after mobile data access has reached saturation, IoT services and revenues will be required to sustain the mobile business model in general, and pay for money-losing services in rural areas.

That is why work on new platforms, more affordable and therefore potentially able to close the business model gap between revenues and cost, are so important.

Put simply, costs must drop much more, consumers must perceive the value of Internet services and be able to pay for such services, or alternative methods of subsidizing end users must be created.

Some of us would argue all of those developments are required. That is why developments such as Telecom Infra Project, Free Basics, Project Loon, unmanned aerial vehicles, unlicensed and shared spectrum, use of millimeter wave radio and creation of new apps and services that drive value are so important.

Without serious innovation in the access networks business, it might literally not be possible for many service providers to continue operating.

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