In Search of New Streams Parviz Iskhakov March, 2016

The Digital Telecom Internet of Things

SMS and OTT Messages

• Growth in traditional telecom in developed and developing markets is stagnant with declining ARPU and prices.

• The OTT players are long affecting CSPs by substituting voice and messaging services, placing significant strain on the CSP data networks and grabbing consumer mind share, and thus weakening the CSPs’ relationship with their user communities.

• Thus, CSPs find themselves under increasing pressure, they not only want to protect their core business and their relationship with consumers, but have to seek new revenue opportunities in nontraditional markets.

• CSPs are beginning to partner with alternative partner types to fill gaps in their service portfolios and accelerate the time to market of new services. In contrast to aggressive, competitive and alienating tactics to address OTT vendor threats, CSPs can benefit substantially from pursuing these more collaborative approaches.

New Digital Domains CSPs are Focusing on

• Overall, Berg Insight predicted that the number of cellular IoT devices will grow at a CAGR of 20.1 per cent from 2015 to reach 239.7 million units in 2020.

• Separate research by IDATE predicted the broader number of IoT objects will grow from 42 billion in 2015 to 155 billion in 2015, the equivalent to annual growth of 14 per cent.

• The research company said objects currently account for 80 per cent of the overall IoT market, due to widespread adoption by a number of sectors and the very low cost of tags.

• Connected information devices is the second-largest sector in IDATE's analysis, accounting for 13 per cent of the market. The company predicted this sector would enjoy growth of 13 per cent each year through 2025.

The figure is approximate and is based on Gartner’s research- Market trends: Eight

innovative CSPs embark on digital service transformation

- CSPs’ market trends and digital transformation strategy

IoT is at the Peak of the Gartner’s Hype

Cycle 2 years in a row

Other emerging

technologies related to IoT

• Internet of Things Authentication

• Digital Security• Licensing and Entitlement

Management• Energy Harvesting• IoT-Enabled ERP• IoT Business Solutions• Things as Customers• Wearable User Interface in

Logistics• Operational Intelligence

Platforms• Connected Home• IoT Platform• Real-Time Analytics

• Embedded Software and Systems Security• Wide-Area IoT Networks• Event Stream Processing• IoT Architecture• Quantified Self• IT/OT Integration• iBeacons and Bluetooth Beacons• Internet of Things• Predictive Analytics• Smart Transportation• Wearables• Low-Cost Development Boards• Home Energy Management/Consumer Energy Management• IT/OT Alignment

IoT TechnologiesOn the Rise

IoT TechnologiesAt the Peak

Peaking

On the rise

5-10 лет 5-10 лет 5-10 лет

Personified Application

Today We are in the First Wave of

Development of Internet of Things

Internet of

Everything

Personified

Application

Industrial

Application

We are somewhere here as of 2016

• Industry 4.0 or smart manufacturing is thefourth industrial revolution brought by theIndustrial Internet of Things, IIoT. It is the newesttectonic change since the progress of the firstindustrial revolution in the 18th century, thechanges brought by the assembly line in the19th century, and the efficiencies brought byelectronics and automation in the 20th century.

• Industry 4.0 symbolizes a turnaround from intra-plant to inter-plant as a result of businessesbecoming more intelligent and connected.

• Data will be able to be shared throughout theenterprise from all sensors available, than it isdispatched to analytic platforms, processed andgives predictive analytics as the output. This issent to actuators or wearables of workers tomake use of that information with the potentialto streamline processes, optimize supply anddemand, speed time to market of new products,reduce inventories, and more.

Industrial Internet of Thing

People

Computers

Controllers

Identifiable objects

Virtual digital objects

• Future growth of devices connected to the network is basically based on “things”

• And number of “things” at people’s disposal has already begun exploding

Number of Things has Long Outgrown

Number of People

Source: Ericsson

IoT vs M2M in Telecommunication.

Definition

• Machine-to-Machine (M2M) technology connects machines, devices and appliances wirelessly to each other and the Internet, turning them into intelligent assets.

• The Internet of Things (IoT) has almost the same idea behind, a system of interrelated computingdevices, mechanical and digital machines, objects, animals or people that are provided withunique identifiers (an IP Address) and the ability to transfer data over a network.

• Remote device access is a basic differentiator of IoT and M2M. If in M2M it is typically point-to-point communications using embedded hardware modules and either cellular or wired networks, in IoT solutions “things” rely on IP-based networks to interface device data to a cloud or middleware platform.

• Integration of device and sensor data with big data, analytics and other enterprise applications is a core concept behind the emerging Internet of Things.

Source: GSMA Association, as of 2014

Internet of Things

M2M

• M2M is an integral part of the Internet of Things.

• Broadly requires IP-based networks to interface device data to a cloud or middleware platform in order to integrate sensor data with big data, analytics and other enterprise applications

Launched M2M Services Across CSPs Around the Globe

CSP’s foothold in Internet of Things is

growing gradually

Internet of Things

M2M

• Fixed Network• Short-range• Powerline• Satellite

23 billion

10 billion• LPWA• Cellular

1.4 billion

1 billion

Percentage of Total M2M Connections*

Internet of Things connections, average of industry estimates*

Cellular M2MLPWA Non-cellular M2M

Cellular M2M

LPWA

Non-cellular M2M

Connected devices

• Share of cellular is moderate due to power consumption and cost efficiency issues

• Development of LPWA in networks and roll-out of Narrow Band IoTin LTE will impact CSP’s foothold dramatically till 2020

• LPWA is characterized with low data transmission that consumes less data, provides good coverage and has low unit sensor cost

Source: GSMA Intelligence

Current Use Split of Cellular Standards in

IoT

Source: Ericsson Mobility Report, June 2014

• Even though 3G is becoming the most utilized standard in the world with growing share of LTE networks, 2G networks are the most used for M2M

• Research company Berg Insight recently noted that the bulk of today's cellular IoT deployments utilise GPRS (2G) technology due to the cost advantages the technology currently offers. The company forecast that 3G will be largely overlooked in future developments, with LTE set to become the dominant technology by 2019.

Radio capability distribution of M2M devices in measured mobile networks

World population coverage by technology

IoT Scope of Interconnection Technologies

Personal Area NetworkPAN, 802.15

Local Area NetworkLAN, 802.11

Metropolitan Area NetworkMAN, 802.16

Wide Area NetworkWAN, 802.20

Internetworks Communication

IoT. Current Challenges

• GPRS is the leading technology in cellular Internet of Things (IoT) due to the cost advantages. However LTE set to become the leading technology for cellular IoT devices in 2019 thanks to LTE Cat-0 and the upcoming LTE-M standard.

• 3GPP's recent move to define a new Narrowband radio technology for IoT (NB-IoT) along with Extended Coverage GSM (EC-GSM) will significantly change the IoT economics adding better coverage, stable connection and devices power efficiency.

• Gartner predicts that low-power short-range networks will dominate wireless IoT connectivity through 2025, far outnumbering connections using wide-area IoT networks.

• Traditional cellular networks don’t deliver a proper combination of technical features and operational cost for those IoT applications that need wide-area coverage combined with relatively low bandwidth, good battery life, low hardware and operating cost, and high connection density.

• By 2020, addressing compromises in IoT security will have increased security costs to 20% of annual security budgets, from less than one percent in 2015, Gartner says.

• The ubiquitous nature of the IoT and associated devices will lead to the emergence of new security threats and attacks. Huawei

• By 2018, 66% of networks will have an IoT security breach. By 2020, 10% of all attacks will target IoT systems. IDC

• 77 percent of U.S. IT and cybersecurity professionals say manufacturers are not implementing sufficient security in IoT devices. More than 20 percent of enterprises will have digital security services devoted to protecting business initiatives using devices and services in IoT by year-end 2017.

• IoT Device Management – The challenges of enabling technologies that are context, location, and state-aware while at the same time consistent with data and knowledge taxonomies is an area Gartner believes will see significant innovation in the next few years.

• IoT Device Management will most likely break the boundaries of traditional data management and create data structures capable of learning and flexing to unique inbound data requirements over time.

Communication standards

Security

Things and Services Management

Communication Service Providers’ Current

IoT Products

Smart car navigation systems

Emergency and breakdown call services

In-car infotainment

Engine monitoring

Lost and stolen vehicle tracking

Insurance telematics services

Smart metering

Smart grid

Remote monitoring and diagnostics

Patient data record management

Medical imaging services

Comm&collab for medical staff

Asset, staff and fleet management

In-patient services, bedside care

Invoicing and fraud management

Health and wellness apps

Asset management

Fleet management and routing

Intelligent transport systems

Driver monitoring

Vehicle diagnostics

Insurance reporting for businesses

Personal navigation devices

E-readers

Home appliances

Digital cameras

Photo frames

Equipment supervision

Process automation

Remote updates and maintenance

Connected ATMs and vending machines

Digital kiosks

Connected POS devices

Digital signage

The Overall Value of CSPs in IoT Value

Split

SOURCE: Industry interviews; McKinsey Global Institute analysis The Internet Of Things: Mapping The Value Beyond The Hype

• Today’s CSP networks are not well equipped to handle the demands of the Internet of Things. IoT applications require not only a great deal of data capacity, but also need it to be less expensive than current mobile voice or data service.

• So to capture a disproportionate share of IoT value, telecom providers have to go beyond their horizontal platform roots by investing in other levels of technology and developing vertical knowledge to create solutions.

• There would be a choice for many CSPs to put into play a specific vertical niche strategy or to provide a broad horizontal platform to expand market share and to partake in further value distribution

• The second will require huge investment and out-of-the-comfort-zone activities never taken by majority of CSPs

• Simply providing communications services is likely to become a commodity business promising very limited revenue streams

IntegratorAggregatorConnectivity

IoT Value Chain and Possible CSPs

Business Models in the Market

Data Acquisition Data Transport Service Enablement

Hardware Connectivity Service Production

Components Smart ObjectsNetwork Operator

Service Enabler

Service Integrator

Service Provider

Distribution

• Embedded chips• Modules Sensors

and cameras• Routers• Antennas

• Smart Bins• Meters• ATM/POS• Cameras and

Security

• Spectrum allocation• Network infrastructure• Connectivity• QoS• Billing• Customer care

• Software• Infrastructure• Consulting• Solution design• Wireless

network design

• Interfaces• Enterprise system

integration• Application

Development• Security• Data management• Hardware • Installation

• Analytics• App management• Access control• Data management• Device management• QoS• Packaging• Service provisioning• Application hosting

• Product distribution• Reselling• Supply chain and

fulfilment

Product Sale

Service Provider/Reseller

Traditional CSP Role CSP Role – Current Trend CSP Role in Digital Era

Build

Imp

lem

enta

tio

n

Mo

del

s

Build

Buy

Build

Buy

Partner

The IoT Will Be Primarily an Enterprise

Market

• In 2018, the IoT installed base will be split 70% in the enterprise and 30% in the consumer market, but enterprises will account for 90% of the spending (IDC).

• Business-to-business applications will probably capture more value—nearly 70 percent of it—than consumer uses.

• Although consumer applications, such as fitness monitors and self-driving cars, attract the most attention and can create significant value, too (MGI).

90%B2B Spendings

70%B2B Market

One Stop Shop,

Ultimate CSPs Enterprise Integration Approach

Hardware

Marketplace/ Apps

Architecture

IoTSecurity

Customization

Bundling and Solutionizing

Integration services

Consulting

IoT cases in Telecommunication, DT

The Port of Hamburg has been one of the largest logisticsplayers taking advantage of the Internet of Things. As the2nd largest port in Europe, the port handles 140 million tonsof goods in 9 million containers each year. Up to 40,000trucks arrive daily and it’s the port authority’s job to ensurethat truck and ship movement is as smooth as possible. Withtraffic expected to double by 2030, the port needs to handleincreasing freight each day with a limited amount of space,as it’s located right in the middle of Hamburg.

With space limited, the only way to grow was increasedefficiency through technology. The port authority workedwith SAP and Deutsche Telekom on a joint project calledSmart Port Logistics to connect the port’s variedstakeholders through a mobile business cloud. Everycomponent in the harbor – ships, trucks, people, bridges,cranes – is connected with everything else and providingbusiness insight.

Case: AT&T’s Digital Life and Smart and

Safe Home Solutions

• AT&T’s Digital Life service - a security and home automation offering managed through a smartphone app

• It is available across the U.S. • AT&T said Digital Life had 140,000 subscribers at the end of the third

quarter of 2014, with more than half representing additions in the most recent two quarters.

• At its pre-event Developer Summit, AT&T announced that it would open up the Digital Life platform for third party developers, such as Qualcomm Life, Lutro, LG and Samsung.

• Telefónica, which has licensed the Digital Life platform, began a trial service in late 2014 in Europe.

• In France, Orange has launched its Homelive service, which allows users to manage a range of connected devices.

• The connected home and connected car were major themes at the Consumer Electronics Show in January 2015. Google announced an expansion of its ‘Work with Nest’ developer programme with 15 new partners.

Sensors and Alerts

Remote Locks

24/7 Monitoring

Home Safeguard Solution

Global Examples

IoT Cases in China

Thus, not surprisingly, all three of China’s mobile operators are developing sophisticated M2M service propositions that go far beyond the provision of basic connectivity. China Mobile portfolio shows proliferation of services available for both consumers and businesses.

includes “Greenhouse Manager”, “Smart Drip Irrigation System” and a “Crop Status and Environment Monitoring System”.

in-home monitoring of the condition of post-surgery patients with alerts on certain cases.

shares patient data with emergency dispatching centres, which are then able to retrieve medical record and emergency contact information immediately.

system that can automatically collect noise data to monitor construction sites.

the system enables managers to locate the position of personnel and access real-time operational information, such as gas densitysignificantly improving the safety of coal mines.

allows to conduct quick analysis, diagnose irregularities, provide instructions remotely, and achieve automated control.

application which connects to police systems to track a vehicle’s location, send safety warnings and monitor travel routes.

The Chinese central government identified the IoT as a key sector early in 2010. The same year a National IoT Centre was established. This initiative allowed the IoT sector to grow across all the industries.

Vendors

Industry Companies IoT activities

Huawei, ZTE Sensors, Devices, Platforms, Standards

Search Engine Baidu Devices (Baidu Eye), Algorithms, Car Automation

Handset Manufacture

XiaomiDevices, Home and

Health Solutions

Messengers WeChat Device management and remote control

Smart forestry

to monitor fire hazards in real-time and collect data on the weather and temperature.

Smart Oilfield

Emergency Rescue

Safetravel

Noise Monitoring

Smart Agriculture

Smart Mining

Health monitoring

CSPs IoT Implementation Models are

Heavily Dependent on Partnerships

Partnership

Build

Acquisition

Technology partnersModule chipset

OEMsApplications

Operational partnersPlatform

Professional servicesBilling

Go-to-market partnersCar manufacturers

Healthcare providers, retailers, OEMs

Professional and managed services

Verizon – nPhaseHuges Telematics

Vodafone Cobra Orange OCEAN

M2M Platform

IoT. Challenges Going Forward

• Value is shifting from M2M data delivery to data intelligence

• IoT will create massive volumes of time-series data and IoT analytics will become a specialized category and discipline. Forrester

• Corrective analytics—a security option to apply automated corrective measures based on actual real-time outcomes rather than predicted or prescriptive actions—will emerge as a fail-safe approach across a range of sectors. Machina Research

• By 2019, 45% of IoT-created data will be stored, processed, analyzed and acted upon close to, or at the edge, of the network.

• Currently, most IoT data are not used. For example, on an oil rig that has 30,000 sensors, only 1 percent of the data are examined. That’s because this information is used mostly to detect and control anomalies—not for optimization and prediction, which provide the greatest value. McKinsey

• Minimal and small footprint operating systems will gain momentum in IoT through 2020 as traditional large-scale operating systems including Windows and iOS are too complex and resource-intensive for the majority of IoT applications.

• IoT Platforms integrate infrastructure components of an IoT system into a single product. They include low-level device control and operations such as communications, device monitoring and management, security, and firmware updates; IoT data acquisition, transformation and management; and IoT application development, including event-driven logic, application programming, visualization, analytics and adapters to connect to enterprise systems.

• Interoperability between IoT systems is critical. Of the total potential economic value the IoT enables, interoperability is required for 40 percent on average and for nearly 60 percent in some settings. McKinsey

• Through 2018, there will be no dominant IoT ecosystem platform; IT leaders will still need to compose solutions from multiple providers. This is further complicated by the lack of dominant technology service providers in the IoT. Gartner

IoT Intelligence

Operation System

Platforms

In Search of New Streams

Thank you!Should you have any questions or feedback please contact me,

Parviz.Iskhakov@gmail.com

In Search of New Streams

The Digital Telecom Internet of Things