There are "Computing Platforms" for IoT and "Business Model Platforms" That are Completely Different

Few concepts in communications are harder to define than “platform.” A computing platform is a group of technologies that are used as a base upon which other applications, processes, services, or technologies are developed. Platforms can be hardware (e.g., chips, devices) or software. Types of software platforms include operating systems, development environments (e.g., Java, .NET), and digital platforms. Digital platforms are highly configurable/extensible software tools that sit above traditional development platforms. 

An IoT platform is a type of digital platform that is used for building and managing IoT solutions.

source: IoT Business 

It is important to distinguish between a computing “platform” and a platform business model. 

A platform business model essentially involves becoming an exchange or marketplace. That can be contrasted with the “pipe” business model, which has a firm acting as a direct supplier of some essential input in the value chain. 

A platform functions as a matchmaker, bringing buyers and sellers together, but classically not owning the products sold on the exchange. A pipe business creates and then sells a product directly to customers. Amazon is a platform; telcos and infrastructure suppliers are pipes. 

As used by IoT Business, an IoT platform has four main layers:

• Application management / enablement – providing the ability to rapidly develop, test, and seamlessly manage IoT applications

• Data management / enablement – providing the ability to ingest, store, and analyze data from IoT devices

• Telco management – providing telecommunications companies the ability to manage the connectivity to IoT devices at scale

• Device management – providing the ability to remotely configure, monitor, and manage IoT devices, including over-the-air updates

The IoT platform ecosystem includes several key roles, according to IoT Business:

• Applications

• Computing infrastructure

• System integration

• Connectivity

• Integrated vertical solutions

5G and other connectivity service providers having one “natural” role (connectivity) and one related role (bundling connectivity with an owned or partner IoT platform. 

 

• Applications. Both platform vendors themselves and 3rd parties are monetizing the applications built on top of IoT platforms (e.g., Siemens’ Closed-Loop Foundation application for MindSphere, Edge2Web’s Director application for MindSphere)

• Compute infrastructure. Cloud hyperscalers are realizing IaaS revenue by hosting other companies’ IoT platforms on their infrastructure (e.g., MachineMetrics on AWS, Uptake on Azure, Oden Technologies on Google Cloud).

• Services. Platform vendors themselves as well as third party systems integrators offer services related to designing, integrating, and operating IoT platforms (see our blog post on IoT system integration services for more info).

• Connectivity. Telco companies are bundling their own IoT platforms with connectivity services (e.g., Verizon’s network and ThingSpace) or integrating with existing IoT platforms to provide seamless connectivity (Eseye + AWS).

• End-to-end solutions. As the platform layer becomes less differentiated, companies are increasingly offering more vertical or use case specific solutions that include hardware and software and leverage some underlying IoT platform technology (e.g., ABB Ability solutions, AWS Monitron).

Facilities-Based U.K. Independent ISPs Hope to Boost Market Share to 21% by 2025

By 2025, independent U.K. internet service providers aim to pass 30 million homes with fiber-to-home or premises service largely operating at gigabit-per-second  speeds, according to the Independent Networks Cooperative Association and PointTopic. 

Take rates are expected to be about 20.6 percent of locations passed. That would represent a gain of home broadband market share of eight percent over present levels. BT’s retail market share at the moment is about 33 percent. Cable operator Virgin has nearly 20 percent share. 

Other suppliers--mostly using wholesale access from OpenReach--have about 61 percent share. The independent ISPs have about 12 percent share. 

source: INCA

Dell Offers 5G Service Providers a Cloud-Native Ecosystem

Dell Technologies now is moving to supply a cloud-native ecosystem for connectivity service providers, especially mobile operators offering 5G. 

Service providers initially will be able to deploy:

• Core software solutions from Affirmed Networks.

• Private network solutions from CommScope RUCKUS.

• Multi-access edge computing (MEC) solutions with Intel Smart Edge.

• Dell Technologies is collaborating with Mavenir to develop 5G Open RAN software with Dell EMC PowerEdge XR11 ruggedized servers.

• Core software solutions from Nokia

Cloud native is among the concepts associated with network virtualization. A virtualized communications network uses cloud computing (remote computing) and software that can be abstracted from hardware, some note. 

Cloud native refers less to where an application resides and more to how it is built and deployed, IBM argues, involving discrete, reusable components known as microservices that are designed to integrate into any cloud environment, often packaged in containers. All can be independently scaled, continuously improved, and quickly iterated through automation and orchestration processes. 

The moves are the latest of many. 

Dell Technologies, VMware and SK Telecom earlier partnered to supply edge computing for connectivity service providers. The OneBox MEC is a single-box way for enterprises to build a private 5G and edge computing platform, Dell says. 

Dell earlier had struck a deal with AT&T to develop open source edge computing infrastructure. 

The Dell EMC Streaming Data Platform offers real-time analytics at the edge. The Dell Technologies Manufacturing Edge Reference Architecture with PTC helps manufacturing companies derive insights from workstations, computers, mobile devices and other endpoints within the manufacturing environment.

The Apex storage as a service also is part of the portfolio of services and products supporting cloud computing in general.

How Big a Revenue Opportunity for Network Slicing?

As you might expect, telecom infrastructure firms are big believers in the potential for new services such as network slicing. Ericsson, citing Arthur D. Little estimates, has said service provider network slicing revenue upside of as much as $200 billion by 2030. 

Others suspect connectivity revenue will be quite a bit smaller, as little as less than $1 billion in annual revenues by about 2026. The other issue is that the “market” includes both sales of infrastructure to create the service provider capability, and the value of services sold by connectivity providers to customers. 

The infrastructure portion of the market is far larger than the connectivity services segment. Also, we may quibble about what constitutes “network slicing” investments, since that capability is a feature of the 5G core network. 

We might reasonably discount such figures, as those figures represent “potential” opportunities. The only issue is how large a discount is warranted.

Some of us might discount as much as 90 percent of the forecasted revenues, as it is likely mobile service providers will not, in the end, be able to become leading suppliers of most of the ecosystem value or revenue. That suggests a figure more like $20 billion by 2030. 

source: Ericsson 

Healthcare represents 21 percent of service provider addressable revenues; government 17 percent, transportation 15 percent; energy and utilities 14 percent; manufacturing 12 percent and media and entertainment 11 percent. 

Ericsson sees a $23 billion opportunity for connectivity providers, if service providers act as network developers or service creators. As a service creator the CSP would engage in activities like reselling devices, application platform provisioning, data monetization or offering support. 

The network developer role includes the supply of connectivity services and bandwidth.  

source: Ericsson

 

Healthcare represents a $6 billion opportunity for service providers in 2025 and could grow to $23 billion in 2030. 

In the energy segment, typical customers include small and medium-sized energy companies and power plants. By 2030, slicing-enabled revenue is expected to approach $46 billion and the addressable revenue for service providers will approach $20 billion.

Do Some Electrical Utilities Cross Subsidize Home Broadband, and Do Such Subsidies Increase Electricity Rates?

Cross subsidization of competitive lines of business by common carrier operations is a matter of decades-long interest with respect to home broadband services. It was an issue in the monopoly era of telecom as well, the concern being that lines of business outside the common carrier core not be subsidized. 

Over the past two decades, the issue also has been raised with respect to common carrier electrical utilities diversifying into home broadband services. 

In a detailed financial analysis of the utility-funded broadband network in Opelika, Alabama (which was recently sold after years of heavy losses), Phoenix Center Chief Economist George S. Ford found direct evidence of rate increases for the city’s electric customers to cover the broadband network debt payments.

In other words, there was clear evidence of cross subsidization.  In that city, electricity rates were increased by an average rate of $5.39 to cover a $0.8 million revenue shortfall, an amount well short of the $1.4 million in annual debt service for the broadband network placed on the electric utility’s books, Ford notes. 

Two of the nation’s largest utility-owned broadband networks are operated in the Tennessee cities of Chattanooga and Clarksville. The two cities also are ideally suited to an analysis of the electricity rate effects of a GON since both cities loaded most of the debt of the broadband network on the city’s electric utility, says Ford. 

There is strong evidence of significant electricity rate increases in cities using the utility-funded model. The average monthly increase of nearly $12 for residential and commercial users translates into millions of dollars of cross-subsidy from captive electric rate payers to the broadband networks, says Ford. 

No electricity rate increases are found for GONs funded through general obligation bonds.

How Big--or Small--Is Service Provider Network Slicing Market?

Among possible new revenue sources created by 5G, network slicing is expected to support advanced connectivity use cases for enterprises and governments that are primarily, though not exclusively, driven by untethered end points. 

Most observers now believe 5G revenue growth will be disproportionately driven by new use cases and value for enterprise, business and government. 

In large part, that is because businesses are expected to be the buyers of edge computing, network slicing and internet of things sensor applications. 

That noted, consumer revenues in Europe, for example, are stable at about 68 percent of total revenue (mobile and fixed). In some markets, business revenues could range from 30 percent to 40 percent of total. Smaller providers might generate only about 15 percent of total revenue from business segments. 

The issue is how much additional 5G revenue lift might be possible, from network slicing, for example. Some believe the connectivity portion of the market is fairly small, despite the hype. 

How small? Less than $1 billion globally by 2026. That is hardly a “market” at all, by global telecom standards. That noted, value sometimes is monetized in other ways, such as higher new account rates, lower churn, higher gross revenue, lower capex, lower opex or some combination of those benefits. 

source: GM Insights 

A network slice is a virtual network created through a 5G core network able to maintain private network features all the way to the end point. In principle, a network slice should be easier and faster to create and tear down, with advantages for temporary networks or use cases including disaster recovery, large events or other instances where unexpected--but temporary--demand emerges.  

 source: Nokia

Mobile gaming is one consumer use case while internet of things applications are the best examples of enterprise or government use cases.

Network slicing allows creation of virtual networks whose characteristics (bandwidth, speed, latency, reliability, and security) can be optimized. Network slicing offers a way to create virtual networks with performance characteristics optimized for lead applications. 

Mobile gaming using virtual reality or artificial reality might benefit from latency and bandwidth assurances. Other use cases in the financial industry might benefit from enhanced security and network availability guarantees. 

In the fleet management industry, different core functions might benefit from use of distinct network slices. Low latency and ultra-reliable performance might be best for  traffic notification, where infotainment requires higher bandwidth but less need for low latency or robustness. 

It is conceivable network slicing protects core transport bandwidth for fixed wireless operations, since fixed wireless peak bandwidth usage might be an order of magnitude higher than typical mobile data requirements. 

Quality of service also has been a driver of product pricing differentiation. Business services with QoS guarantees, support services reaction times and financial advantages for customers if the policies are violated, have been a staple of communications product pricing for decades. 

The ability to support 5G network slicing in the core network, all the way to the mobile edge, is supposed to create new product capabilities, such as networks optimized for particular parameters. 

Ultra-low latency performance; bandwidth guarantees, security or performance predictability will be touted as values of network slicing, a new way of creating virtual private networks. 

Network slicing value for retail customers, though, will have to be proven. One might argue that edge computing is a functional substitute for many network slicing use cases, for example. 

It would be fair to note that connectivity providers often have developed and offered  many features and services they  believed customers would want. The catch is that revenue for connectivity providers is the cost for enterprises, businesses and consumers who are asked to buy and use the features and services. 

If ultra-low-latency applications are those which could benefit from network slices, one alternative is to do commuting at the edge, and not sending data across wide area networks that are optimized for low latency. In other words, edge computing might often be a functional substitute for network slicing.  

In many use cases, the value of ultra-low-latency computing is supplied by edge computing services, with non-real time backup across wide area networks. 

Perhaps ironically, consumer customers who have few other alternatives might be good candidates for internet access with quality of service features a network slice offered by a connectivity provider, providing governments deem this lawful. Network neutrality rules often var the offering of consumer services with quality of service guarantees, for example. 

Gaming services, work-from-home conferencing and ultra-high-definition video are among potential consumer use cases for network slicing, where lawful.

How Much Share Can Telcos Claim as They Step Up FTTH Investments?

U.S. cable operators have taken market share in consumer broadband for most of the last two decades. But some analysts believe a new wave of investment in fiber to home facilities will allow telcos to claw back significant amounts of installed base. 

Long term, MoffettNathanson sees cable having a 50 percent broadband market share in markets in which they compete with fiber-to-home facilities. That implies a shift of 20 percent of the installed base from current levels. 

Not all observers agree with that analysis. S&P Global Market Intelligence, for example, does not expect stepped-up telco FTTH investment to change share statistics very much. 

But S&P Global Market Intelligence does believe new competition from mobility suppliers using fixed wireless (T-Mobile, for example) will gain about six percent share of the aU.S. residential broadband market with about 7.19 million subscribers. 

It is not yet clear how much of that share gain will be claimed by upstarts in the home broadband market such as T-Mobile, and how much will be gotten by fixed wireless operations conducted by incumbents such as AT&T and Verizon. 

The former gains will represent market share gains by telcos, but perhaps some losses for AT&T and Verizon. The latter could increase the installed base held by AT&T and Verizon. 

Also, some of that share will be gained by independent wireless internet service providers. 

S&P Global Market Intelligence also estimates there will be about 1.52 million satellite customers by the end of 2021, accounting for just one percent of the installed base of home broadband accounts. 

Today, cable operators get as much as 85 percent market share when facing telcos using VDSL and 95 percent market share competing against telco DSL facilities, the firm says. Where cable companies compete against telco FTTH, the big telcos have gotten somewhere in the range of 40 percent or slightly-higher share of the installed base. Some smaller telcos manage to get 50 percent of the installed base.  

In the first quarter of 2021, the largest U.S. telcos had about 31 percent share of the installed base and got about eight percent market share of net new accounts, according to Leichtman Research. 

Mobile market share gains could also be an issue. T-Mobile, for example, expects to gain home broadband share, especially in rural areas, at the same time it gains mobile account share. 

Some 15 percent of U.S. adults are mobile only for home broadband, says Pew Research.  The point is that telco FTTH competes against cable, other mobile companies, independent ISPs and satellite. 

And stranded assets and financial return remain issues for telcos investing in new FTTH facilities. As voice and video entertainment revenue streams have dwindled, the business case for home broadband using FTTH increasingly relies on internet access as the main revenue driver for the FTTH business case. 

That is why some see fixed wireless as important. It might be the only way for telcos to compete against cable and other competitors in many geographies. 

Always a difficult business decision, the economics arguably have become worse as voice and entertainment revenues dwindle, increasingly making FTTH viable in some urban or suburban locations, not all. Rural deployments rely on subsidies. 

Rural customers represent about 40 percent of the entire mobile services marketplace, including 54 million households and about 140 million people, according to T-Mobile. Historically, T-Mobile has been underrepresented in rural markets, compared to AT&T and Verizon.