As important as internet of things is likely to be for telecom revenue opportunities in the 5G era, it is not at all going to be easy to realize those gains. In a real sense, IoT and 5G represent the first era of mobility where the real upside has to come from applications, not access.
Even if connectivity revenue has driven industry growth for all of its history, that is likely to begin a historic change in the 5G era. This is more than a new emphasis on "moving up the stack."
Eventually, if not so clearly at first, revenue either will be dominated by applications or total telecom revenue will shrink.
By 2025, Analysys Mason predicts, global mobile operator revenue will reach about $888 billion (fixed network revenue not included). Some expect or hope that special-purpose wireless networks and fixed networks will play connectivity roles, with direct or indirect revenue models, as well. But the direct mobile opportunity seems to lie outside connectivity, per se.
Connectivity revenues earned by mobile ISPs will amount to about $28 billion. With the caveat that the forecasts might be too pessimistic, if correct, that prediction suggests there is not as much internet of things connections revenue as many might believe.
If correct, that reinforces the argument that most of the potential revenue upside from IoT for ISPs will come from participation in other segments of the ecosystem.
It always is important to differentiate between robust growth of broad IoT revenue streams and the portion that specifically will accrue to mobile and other ISPs in the form of connectivity revenue.
It is the same issue we faced early in the development of either internet retailing, mobile payments and smartphone markets. Total transaction value (the value of merchandise purchased through online channels) is not revenue for telecom providers. Nor is transaction value the same as profit, for any ecosystem participants.
Analysys Mason estimates total revenue from IoT solutions enabled by mobile operators (devices, applications, connectivity) of something greater than US$200 billion in 2025, with revenue growing at a compound annual growth rate of 18 percent.
But telecom access revenues, though growing, might still represent just about three percent of total telecom industry revenue by 2025. Machina Research research suggests “connectivity” might be the absolute smallest revenue opportunity within the ecosystem.