The (Wireless) Logic of IoT Consolidation Excluding the MNOs

November 30, 2022

Written by Alex Lawrence

“IoT is hard and the Mobile Network Operators kinda hate it,” Paul Bullock commented to 6GWorld.

“There’s serious evidence pointing to the MNOs retrenching to wholesale, because it makes financial sense for them,” the Group Chief Product Officer at Wireless Logic noted. “O2 [a British provider] is down to four direct IoT sales guys, while Tele2 fired 70-something people and went from retail to wholesale.”

Bullock is well positioned to tackle the topic. Wireless Logic, a British company, has been aggressively acquiring businesses in this sphere.

In the past two years, acquisitions include Datamobile, New Line Mobile, Jola, Arkessa, Com4, ThingsMobile, Jola, Mobius Networks and IoThink Solutions. Essentially, they are building up the capability for a full-stack IoT solution for enterprises, from the software, the network, service support and more.

 “The thesis, which I think is well supported, is that the world will evolve to a dominant single global brand of IoT MVNO,” Bullock noted. Wireless Logic aims to be that MVNO. As Google in search or Meta in social media, so Wireless Logic in IoT.

Business fundamentals

A significant argument against MNOs leading in IoT is the perennial challenge they have experienced working with small businesses.

“IoT only operates at the scale of an individual customer,” Bullock noted. While operators can, and have, approached major enterprises to provide services, in many cases even a large customer is going to follow received business wisdom and start small, then build. It means that IoT incomes are low down the priority ladder for mobile operators.

“The CFO is going ‘I have to build a 5G network, but I’m paying people 100 grand a year to sell things for two or three cents a month. That can’t make sense,’” said Bullock.

“To make that IOT project successful or bring that customer along, you have to be built and tooled up to deal with those small customers. One in 15, one in 30, whatever the number is, become big customers. Mobile operators are not built like that.”

This is a situation where an MVNO can operate more successfully, as they operate with different constraints and different cost bases.

Another benefit for MVNOs, as Bullock points out, is that they aren’t nationally constrained by either spectrum allocations or physical network rollout. For enterprises aiming at more than a national market – which is many of them – this can be beneficial.

“So rather than roam on the eSIM profile, which doesn’t really work very with LP-WAN multi-IMSI [International Mobile Subscriber Identifier], I can phone up Guatemala Telecom and get some IMSIs, drop those IMSIs into your enterprise server over in Guatemala and I’ve essentially got local service.”

SecurIoTy

Although there have been some major scare stories about the lack of security in IoT deployments, from the Mirai botnet to stealable scooters, Bullock sees the use of SIM or eSIM as a major opportunity both for product designers and for MVNOs to bolster security relatively simply. This is a benefit both to the end users and – more to the point – the companies designing the products.  

Using a SIM might not solve every problem, but it can help a good deal to reduce the risk of hacks and leaks like this one. Bullock described the process.

“I simultaneously wake up, get connection, grab my crypto credentials from a secure element, establish TLS [Transport Layer Security], establish identity and start passing data, all with zero-touch. That’s a way to dramatically reduce the attack surface,” he pointed out.

It also allows for monitoring capabilities, letting the manufacturers keep an eye on performance in the field and opening up scope for different approaches.

“As we evolve, you’ll see things like anomaly detection,” Bullock predicts. “IOT devices are quite predictable, and so anomaly detection, as opposed to packet inspection or intrusion detection, is arguably more useful and actionable.

“There might be a guy in the device manufacturer that logs on every day to see how his million connected doorbells are doing, or he gets an alert from our anomaly detection thing – ‘There’s a doorbell under attack, send out the cops!’ – that sort of thing. Door as a service.”

One MVNO to rule them all

So what of Bullock’s other assertion, that the market is shaping up to have one dominant IoT MVNO globally?

Currently there is no shortage of IoT MVNOs. Earlier this year Kaleido Intelligence projected that, by 2026, Aeris, Truphone, and Kore would be the market leaders out of 29 included in their tracker; while a 2021 report by Transforma Insights turned up no less than 175.

“Overall, few of the 175 we identify are strongly differentiated,” wrote Founding Partner Matt Hatton in a related blog post.

“Connectivity management platforms and value-added features such as private APNs are no longer real differentiators… Few are pursuing vertical solutions or consulting as ways to grow revenue, conscious of the difficulty of competing in those areas in a scalable way. Pricing innovation is surprisingly lacking and (despite some very low headline rates) few are even competing particularly aggressively on price point.”

Clearly there is some scope for consolidation. However, there are a few elements mitigating against Bullock’s stance.

Firstly, any regulators hearing about another global tech oligopoly or monopoly, such as Apple-Android, Apple-Microsoft, Google for search and so on, are unlikely to welcome it. While you might say that regulators were unprepared for how to adapt to and manage competition online, especially given the fundamentally international nature of it, we are seeing a pushback and a desire for regulation post-hoc.

The implementation of various national or regional privacy laws, and cases being brought against hyperscalers on the grounds of anticompetitive behaviour, demonstrate that, even if it’s a bit late in coming, lawmakers are starting to crack down on the wild west that was the internet. It’s hard to imagine that IoT, with its significance growing alongside its implementation, will not receive scrutiny for its competitive environment over time.

The second hurdle to overcome is, quite simply, the diversity of companies playing in this space. For the sake of argument, let’s take some of the top companies Transforma cites in their report: 1NCE, Aeris Communications, BICS, Cubic Telecom, Itron, KORE, Sierra Wireless, Soracom, Transatel, Truphone and Twilio.

These companies come from a diversity of backgrounds. While some companies, such as Aeris and KORE, may be “true” competitors to Wireless Logic, with a focus on being effective IoT MVNO providers, the same does not hold true for all these companies. BICS has built its services on top of being a major international wholesale and roaming partner; Itron comes from a utilities metering background, including hardware; Twilio is all about customer engagement, marketing and operations.

In these cases, the MVNO element has grown out of their core offering and positioning, not least because it’s a relatively simple and inexpensive thing to set up. While competition from other IoT providers is no doubt a factor, it’s not at the heart of what these companies are doing and it makes them resilient to competition in this arena.

The sheer number of MVNOs involved in IoT provision reflects another point – the barriers to entry are relatively low. As telecoms services increasingly move towards a software-based, OpEx-driven model the up-front cost to set up an MVNO will continue to decline. If we see consolidation at the top end then this might deter new entrants from a “pure” MVNO model, but it would still be easy for companies with different specialisations to add on an MVNO capability to their existing offering.

As Bullock observed, “consolidation will happen because of network economics, but it will also stay separate to the MNOs because of what I’ve been saying about SIM technology, global requirements and agility – dealing with small customers that might become big.”

Who lands those small customers remains to be seen.

Photo by Kyrill Tonkikh on Unsplash

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