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IoT - Can network minnows compete?

Dennis Juul Poulsen Issue: North America I 2016
Article no.: 11
Topic: IoT - Can network minnows compete?
Author: Dennis Juul Poulsen
Title: General Manager IoT Connectivity & Subscription Management business
Organisation: Spirent Communications
PDF size: 221KB

About author

Dennis Juul Poulsen is the general manager of Spirent Communications’ IoT Connectivity and Subscription Management business.
Mr. Poulsen began his career as product manager for mobile device intelligence company Mobilethink. In 2009, he co-founded Tweakker together with Mobilethink and took up the role of Tweakker’s CEO in 2011.
Tweakker’s cloud-based Over-the-Air (OTA) connectivity product is now the platform of choice of over 70 mobile virtual network operators (MVNOs) in the five continents, helping them to minimise connectivity cost issues of devices joining their networks, and drive user data revenues from power up.
In September 2014, Tweakker was acquired by Spirent Communications plc, a listed company on the UK stock exchange (ticker SPT) with a market capitalisation value of over £450 million and a major supplier of solutions to Tier 1 mobile network operators, OEMs and the automotive industry and he continued to lead Spirent’s Tweakker business unit. In January 2016, Mr. Poulsen was appointed general manager of Spirent’s IoT Connectivity and Subscription Management business.
As a business development, sales and management oriented executive, Mr Poulsen has broad experience within the mobile industry including international B2B sales at executive level. His focus revolves around developing disruptive cloud technologies and products for the mobile provider & consumer space. He enjoys working with start-ups and established companies that aim to capture market share or seek to broaden their market scope by re-positioning their brands and products.
Mr. Poulsen holds a B.Sc. in Information Studies & Organizational Anthropology, Aarhus University, Denmark, as well as an MsC, Science & Information Technology, from the same university.

Article abstract

IoT will revolutionize products. Once composed solely of mechanical and electrical parts, products have become complex systems that combine hardware, sensors, data storage, microprocessors, software, and connectivity in myriad ways. These smart, connected products — made possible by vast improvements in processing power and device miniaturization and by the network benefits of ubiquitous wireless connectivity — have unleashed a new era of manufacturing.
Smart, connected products offer exponentially expanding opportunities for new functionality, far greater reliability, much higher product utilization, and capabilities that cut across and transcend traditional product boundaries. The changing nature of products is also disrupting value chains, forcing companies to rethink and retool nearly everything they do internally.
Can smaller MNOs and MVNOs prosper in the IoT connected world? They can if closed networks become open, roaming agreements between the major networks come to an end and if the consumer is given choice to subscribe to any network in any corner of the world.
And in that scenario, we return to the forward thinking of Adam Smith in 1776 – removing drawbacks to trade.
 

Full Article

If the great Scottish economist Adam Smith was alive and well today, chances are he would be looking at ways to promote free trade and inter-connectivity of devices at the business end of the Internet of Things (IoT).

In 1776, in the Wealth of Nations, Smith published his Absolute Cost Advantage theory aimed at removing drawbacks to trade and to increase trade between countries. He introduced and stressed the theory that free trade increases competition, which, in turn, generates further benefits including lower prices, greater use of new technology and technology transfer between countries. Free trade would also encourage the breakdown of domestic monopolies, and provide greater choice for consumers and firms.

How very relative is Smith’s theory to the state of the IoT industry today?

Ultimately, IoT will only reach its full potential if it benefits consumers and makes life more convenient on a worldwide scale. Coming home to an apartment in New York that is at the right temperature with an oven that is pre-heated and lights that turn on ten minutes before you arrive is no longer a dream. Thanks to smartphone apps, it’s a reality.

But the benefits of IoT extend far beyond household appliances. Smart connected trucks can be tracked by fleet managers in real time. Vending machines in Chicago directly alert vending machine distributors when stocks are low so they can replenish it before the revenue stream is lost. IoT applications and opportunities seem endless but pain points remain.

Seizing IoT opportunities requires fundamental changes. Let’s look at the humble SIM which has served the mobile industry so well over the years. It has served its time and is simply not suited for IoT deployments. It is too big to be embedded in devices like sensors in smart shoes, connected ski vests or smart doors or any other product of the all-connected era.

Instead, the IoT industry will make wholescale moves to minuscule, low footprint ESIM units – a SIM without the card. It is the ESIM that can be embedded in any device and provide more functionality than the traditional SIM.

But is the switch to ESIM enough? As it stands, either solution provides connectivity to only one carrier’s network … a closed mobile ecosystem. Both are barriers to trade and development.

The first is undoubtedly that there are too many M2M solution providers and devices that run on their own dedicated platforms, which means they cannot talk to one another and will not therefore have a relevant role in the global IoT business.
In order to realize the full potential of IoT, the GSMA together with wireless carriers and other major industry stakeholders, have been working to agree a standardization that will make it possible for all devices to communicate with one another worldwide. This means the development of platforms and networks that are inter-connected, rather than forcing customers and consumers to buy into one specific brand. In short, what is needed is an open connected world.
Let’s look more closely at another problem facing the IoT industries – the legacy mobile connectivity models. As an example, physical SIM cards and premium priced subscriptions that lock users into long-term contracts will not be scalable in the IoT era. Looking at the sheer number of connected devices, today’s carrier connectivity will not be scalable from the device makers perspective and pricing would in all probability not be suitable to end users, be it a consumer or a shipping container operator. Local and small scale wireless service providers will not be able to find a relevant business role in the connected products business, which will be largely dominated by global brands and manufacturers and will require seamless global connectivity and a single stock-keeping-unit.

In short, the highly successful connectivity and business model, which has made, and still is, wireless service providers highly successful in the personal communication business will not scale in the IoT business. While preserving the successful service model for personal communication, mobile broadband carriers will have to invent another business model for IoT business.

The new carrier IoT connectivity models will have to support an open connectivity ecosystem, which provides possibilities for locked and open connectivity models where large global carriers as well as local carriers are able to find sustainable IoT business opportunities. It would have to enable pricing models which make sense for device manufacturers and also for end-users. It would have to provide freedom of choice for device manufacturers and end-users which eventually will unlock the vast global explosion of connected product business.

Let’s turn to why embedded SIM and subscription management enables carriers of all sizes and kinds to succeed in the IoT era.

Firstly, the IoT industry will make wholescale moves to minuscule, low footprint embedded SIM units – a SIM without the card. It is the embedded SIM that can be embedded in any device of any size and form and provide more functionality than the traditional SIM. Embedded SIM element eventually enables the economies of scale for manufacturers of all kind of products and devices. The more the connected products, the more there will be need for connection. The barriers of physical hardware and SIM card will have to be torn down before the full potential of connected product business can be achieved.

Secondly, the embedded SIM and its reprogrammability will allow credentials of any available network to be easily provisioned into the SIM. The cloud subscription management allows fast switching to another network’s credentials. In practice, SIM reprogrammability and remote subscription management enable various connectivity models.

It allows connected devices using only one carrier’s subscription if a device manufacturer and a carrier prefer an exclusive business partnership. Essentially, this resembles the current legacy connectivity model. However, the embedded reprogrammable SIM and remote subscription management allows also more open connectivity models where a manufacturer provisions credential of different carriers into its devices depending, for instance, on the geographic location of the device. Reduced lock-in effect to the manufacturer will definitely increase demand for more devices and products as opposed to what would have been achieved with a closed, and potentially a less economical connectivity model.

It also allows a “democratic” business model where the end-user of the product or device chooses the network to which his or her device connects using the subscription management cloud service.

Open ecosystem is not the end of large carriers

Unlike many preconceptions, embedded SIM and its reprogrammable features will not be the end of the carriers. It enables an open ecosystem of unlimited opportunities. Large global carriers that have the capacity to become a global connectivity partner for a global manufacturer will be able to do just that. However, a local wireless service provider will also be able to take part in the global IoT business by becoming a local connectivity provider even for a global manufacturer.

Until such time as global markets operate open networks, the predicted large scale growth of IoT devices and their associated IoT device applications are at risk and will create major challenges for the entire IoT ecosystem. Manufacturers in whatever vertical market will simply not be able to scale-up production lines and achieve economies of scale needed to address the global open-network IoT ecosystem.

An open worldwide connectivity solution is the only route to IoT growth and must be one where the end-user, consumers or enterprises, can decide which MVNO’s or MNO’s networks they wish to subscribe to and they must also be able to switch devices from one network to another. The frontier of closed networks will then disappear.

Remote subscription management over the cloud will also play an important role in the development of IoT opportunities. Connected cars moving across borders must be able to switch networks to their choice and take advantage of the lowest cost of joining a new network. Current network business models and roaming agreements will disappear and be consigned to the dustbin.

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