Once upon a time, I did not think voice was a product like any other, with a life cycle. Clearly, I was wrong. International voice, long distance and “calling” all are products with a life cycle. As it turns out, text messaging is a product with a life cycle. So is linear video entertainment. Soon, it will be clear, even mobile data--the recent driver of revenue growth--also is a product with a life cycle.
As with any industry, or any business, facing a maturing set of products, new revenue-generating products have to be discovered or created. And that is why, even if internet of things revenues are small at the moment, they are strategically important.
And, at least so far, it is fairly clear that scale is required to participate extensively in the IoT business. In the U.S. market, AT&T and Verizon dominate IoT revenue streams in the operator space.
AT&T’s connected car reached the 10 million connected vehicles milestone in the third quarter of 2016, the first mobile operator to do so, argues Chetan Sharma. AT&T reached that milestone in less than 12 quarters, compared to the 25 quarters it took for tablet connections to reach the same level.
For 2016 through the third quarter, non-phone net account additions represented about 71 percent of all such account adds, with vehicles and IoT dominating.
Verizon’s IoT and telematics revenue rose 25 percent, year over year, in the third quarter of 2016, to reach $217 million of revenue, close to an annual run rate of about $1 billion.
Service provider IoT revenue passed the $1 billion mark in 2013, roughly tracking revenue growth for mobile data. Few likely believe that can continue, as IoT is about solutions, not simple connectivity, and not as direct a value as “mobile access to internet apps.” Also, IoT is industry-specific, and therefore a “vertical” sales opportunity, rather than a horizontal “every firm needs this” opportunity, for the most part.
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