How Important are Mobile Service Provider IoT Revenues?

Some might argue that 5G was the first mobile platform intentionally designed to support internet of things services in addition to mobile phone services.

That noted, IoT mobile service revenues arguably represent less than four percent of total mobile service provider revenues using any mobile platform (2G, 3G, 4G and 5G combined). As important as service providers hope IoT will be, the bulk of revenues will continue to come from the staple "voice and internet access" services used by consumers and their smartphones.

Revenue Source	Percent of Total Revenue
Voice Services	20-30%
Data Services	30-50%
Messaging Services (SMS)	2-5%
Roaming Charges	3-7%
Value-Added Services	5-10%
Device Sales	5-15%
Content and Digital Services	5-10%
Enterprise and IoT Solutions	5-10%
Wholesale Services	5-10%
Other Revenues	1-5%

On the other hand, some estimates suggest IoT will be a significant portion of the enterprise customer revenue stream, eventually. 

source: IoT Analytics 

IoT percentage of connections is higher, but revenue per connection is an order of magnitude lower than traditional phone connections, generally speaking. 

Study	Date	Publisher	Estimate
Global Cellular IoT Connectivity Tracker & Forecast	June 2024	IoT Analytics	Cellular IoT (2G, 3G, 4G, 5G, LTE-M, and NB-IoT) makes up nearly 21% of global IoT connections
Global IoT Connections Forecast	2024	IoT Analytics	Global cellular IoT connections grew 24% year-over-year in 2023
Ericsson Mobility Report	June 2023	Ericsson	5.5 billion cellular IoT connections by the end of 2027, majority on 4G/5G.
GSMA Intelligence IoT Report	2023	GSMA Intelligence	3.2 billion IoT connections on mobile networks by 2025, with rapid 5G growth.
Cisco Annual Internet Report	March 2023	Cisco Systems	10% of global IoT connections will be 5G by 2025.
Statista IoT Connectivity Forecast	2023	Statista	2.7 billion IoT devices connected via cellular (4G/5G) by 2025.
IoT Analytics Cellular IoT Report	2023	IoT Analytics	4.3 billion active cellular IoT connections by 2026.

At least one reason connections might not be as high as some might have forecast is that there are other ways to connect IoT devices, including unlicensed wireless such as Wi-Fi or Bluetooth and other methods. 

Study	Date	Publisher	Estimate
Global IoT Connectivity Tracker	2024	IoT Analytics	Wi-Fi makes up 31% of all IoT connections4
Global IoT Connectivity Tracker	2024	IoT Analytics	Bluetooth accounts for 25% of connected IoT devices worldwide4
IoT Device Connections Report	2023	Pondiot	Bluetooth offers a maximum data transfer rate of approximately 3 Mbps for IoT devices1
IoT Connectivity Analysis	2023	Very Technology	Bluetooth range for IoT devices can be anywhere from 1 meter to 1 kilometer depending on device class and context2
IoT Project Connectivity Study	2023	Euristiq	Bluetooth Low Energy (BLE) can transfer data at a rate of approximately 100-250 KBps for IoT applications3
Global IoT Connections Forecast	2024	IoT Analytics	There were 0.7 billion wired IoT aggregation nodes in 2023, representing 4% of total IoT connections

That experience is worth keeping in mind as we start to hear about 6G platforms and their ability to support other types of enterprise or consumer applications, such as virtual reality, autonomous vehicles and so forth.

One always hears about such “futuristic” new use cases whenever a next-generation mobile platform is proposed. Rarely do the proposed innovations reach revenue scale, compared to supporting mobile devices such as smartphones.

6G Bandwidth: More, Says NextG Alliance

Discussing spectrum and capacity needs for 6G networks, the NextG Alliance suggests that the highest requirements will be for business-to-business or business-to-consumer applications such as extended reality, which might require 500 Mbps or more. 

Other relatively-high-bandwidth use cases include entertainment (100 Mbps to 500 Mbps) and robotics and autonomous systems. 

source: NextG Alliance 

That noted, most use cases will require far less bandwidth. 

How Much New Capacity Will 6G Require?

Discussing spectrum and capacity needs for 6G networks, the NextG Alliance suggests that the highest requirements will be for business-to-business or business-to-consumer applications such as extended reality, which might require 500 Mbps or more. 

Other relatively-high-bandwidth use cases include entertainment (100 Mbps to 500 Mbps) and robotics and autonomous systems. 

source: NextG Alliance 

That noted, most use cases will require far less bandwidth. 

Each Next-Generation Mobile Network Since 2G Has Reduced Latency

As 5G core networks have shifted to a decomposed and virtual architecture, latency can become an issue, since functions can be performed remotely. But SKT and Intel say they have a way to reduce latency in virtualized 5G core networks substantially, by as much as 70 percent for transactions between the session management function (SMF) gateway and packet data unit (PDU) session microservices. 

The approach also enables a 33 percent reduction in gateway CPU usage, the firms say in a white paper. 

They believe the architecture will be useful for 6G, but the approach also works for 5G, illustrating the ways one mobile generation preps the way for the next, as key features and principles evolve. 

Mobile service providers would like nothing so much as a graceful evolution to “6G” performance, without disruptive changes to platform elements. Obviously, collaboration with device manufacturers, chip suppliers and other stakeholders will happen, to ensure device compatibility, standards alignment, and smooth integration of 6G technologies. 

But we should expect to see many other ways mobile operators will pursue an evolutionary 6G transition. As we have seen with 5G, existing spectrum will be leveraged, even if new spectrum allocations are made. 

Software-defined networks will facilitate network  upgrades that avoid hardware replacements. 

Network slicing might also be used to enable the coexistence of diverse 5G and 6G services on the same infrastructure.

We might also see efforts to conduct Incremental upgrades, where 6G features and functionalities are introduced in stages, in much the way that 4G voice services relied on 3G and 5G relies on 4G for voice. More advanced features, such as network slicing, might be introduced later than basic functions such as new frequency bands for capacity boosts, as happened with 5G. 

Why Orange Will Not Market "6G"

It is a bit of a subtlety, but Orange is not sure it will “market 6G,” which is not the same thing as saying it will not use 6G. Unless something very unusual happens, such as the global industry deciding it does not want creation of a “6G” standard, 6G is going to happen, for the simple reason that mobile operators will continue to need additional bandwidth and capacity, and 6G is going to be needed to accomplish that.

Aside from all other matters, 6G will mean regulators must authorize additional spectrum for the platform, and additional spectrum is among the main tools mobile operators have for increasing capacity on their networks. 

Nor does such a stance really mean that Orange will stop investing in the latest generations of mobile networks. It does mean Orange will deemphasize “generation” as personal computer makers have deemphasized “clock speed” as a value driver or differentiator. 

Mobile phone suppliers, meanwhile, once marketed “smartphones” based on screen size,  touchscreen interfaces rather than keypads and ability to use mobile internet and apps. 

These days, much more emphasis is placed on battery life and camera features. One can safely predict that artificial intelligence features will be the next marketing battleground. 

In similar fashion, personal computers once marketed their devices on “performance” and a few lead use cases (word processing or spreadsheets). So processor speed, storage and memory were key messages. 

Later, bundled apps, connectivity and user-friendly interfaces became more important. These days, mobility (weight, form factor), multi-function use or sustainability are more prominent messages. 

The point is that features once considered differentiators often lose their appeal as markets mature. 

ITU Releases Framework Document for 6G

The International Telecommunications Union has published some details of its framework for 6G  networks, and many of the objectives are what you’d expect. Compared to 5G, 6G will support higher speeds, lower latency, be more spectrally efficient, energy efficient, feature artificial intelligence and sensing. 

• Peak data rates of 50 Gbps, 100 Gbps or 200 Gbps

• User experienced data rates of 300 Mbps and 500 Mbps

• Spectrum efficiency 1.5 and 3 times greater than that of IMT-2020 (5G)

• Area traffic capacity of 30 Mbps/m2 and 50 Mbit/s/m2

• Connection Density could be 106 to 108 devices/km2

•  Mobility Maximum speed, at which a defined QoS and seamless transfer between radio nodes could be 500 – 1 000 km/h

• latency (over the air interface) could be 0.1 – 1 ms.

In addition to those quantitative metrics, there are the expected qualitative benefits. The framework document includes talk of ubiquitous computing, ubiquitous intelligence, immersive multimedia, digital twins, virtual worlds, smart industrial apps, digital health, ubiquitous connectivity and sensing integration.  

As with prior generations (3G, 4G, 5G), many of those qualitative outcomes might be delayed or available only in rudimentary form. 

There are good reasons why mobile operators are much more concerned about “application revenue” than home broadband providers. Mobile operators always are in the “applications” business, where home broadband providers are only in the “internet access” business. 

In other words, mobile operators derive significant revenue from their own voice and messaging applications. ISPs providing home broadband mostly make money from subscriptions providing the internet access function. Most of their other revenue is related to the access function, such as equipment rentals or install fees. 

Revenue Source	Home Broadband Network	Mobile Operator Revenue
Subscription Fees	70.00%	40.00%
Voice Services	0.00%	25.00%
Data Services	0.00%	20.00%
Equipment Rental Fees	10.00%	0.00%
Installation Fees	5.00%	0.00%
Roaming Fees	0.00%	5.00%
Other Revenue	15.00%	10.00%

Also, mobile operators are dependent on government regulators to authorize additional spectrum, so there is a political underpinning to arguing that additional spectrum will lead to public advantages beyond “faster speeds.”

Still, in large part, the success of  built-in “app capabilities” will likely be hard to predict. Since mobile network value includes a mix of “apps” (largely voice and messaging) and “internet access” (dumb pipe access), much--if not most--of the value comes from the “internet access” function. 

As for home broadband networks, faster speeds are a continual requirement, as are support for carrier voice and messaging. Beyond those essential functions, it always is difficult to say how much other value can be reaped directly by mobile operators in the “apps” space and beyond connectivity itself. 

6G might not be so different from earlier generations in that regard.