Proliferation of Connected Devices will create a $1.2tr Revenue OpportunityMonday, October 10th, 2011
The Number of Mobile Connected Devices is Expected to Increase by 100 Per Cent to Nearly 12 Billion by 2020; Cross-Industry Collaboration Essential to Deliver the Connected Life
SAN DIEGO — The GSMA, with the support of AT&T, Deutsche Bank, KT, Telenor Connexion and Vodafone, and in partnership with Machina Research, today released research that outlines the market opportunity and revenue potential for connected devices. The research shows that the number of total connected devices(1) is expected to increase from approximately 9 billion today to more than 24 billion in 2020, and within that, mobile connected devices(2) will grow 100 per cent from more than 6 billion today to 12 billion in 2020. This explosive growth will support an addressable revenue opportunity for mobile operators of nearly US$1.2 trillion(3) by 2020, a sevenfold increase from expected revenues in 2011, and will also provide significant growth potential for the entire ecosystem.
“We are entering the next phase in the development of the mobile industry, one where we will see mobile connect everything in our lives,” said Michael O’Hara, chief marketing officer, GSMA. “In this new Connected Life, mobile will transform society and will have a profound effect on the way we interact not only with each other, but also with our surroundings. However, capitalising on this enormous opportunity requires collaboration across the entire ecosystem to demonstrate how mobile technology in everything from tablet PCs to new healthcare devices can enhance people’s personal and business lives.”
Mobile operators can benefit from this important revenue opportunity by addressing key areas of the value chain(4) such as service provision and system integration, as well as collaborating more closely with vertical industry sectors to provide compelling new services to their customers. The sectors that will benefit from this collaboration include the consumer electronics industry, which could generate direct revenues of US$445 billion; the automotive sector, which could generate US$202 billion in revenues; the health sector, which could see growth of US$69 billion; and the utilities sector, which could see an additional US$36 billion in revenue by 2020.
Machina Research has identified a significant addressable market opportunity for mobile operators, although the revenue that can actually be realised will depend on individual business strategies. Mobile operators are uniquely placed to work in partnership with other industries to enable this opportunity because they provide ubiquitous network connectivity; deliver proven customer care, billing and distribution capabilities; and represent a trusted brand for consumers and businesses.
Jim Morrish, director at Machina Research, commented, “We are moving into a new era in connectivity where we will see the proliferation of billions of connected devices in the world. Most of that growth is coming from machine-to-machine: a new market for communications service providers, and with new dynamics. The way that mobile operators, device vendors, service providers and others in the value chain react to this opportunity will have important implications for their future success. Right now, the mobile industry has a clear opportunity to play a central role in the Connected Life.”
Matthew Bloxham, director of telecoms research at Deutsche Bank added, “The growth of connected devices has the potential to offer substantial social, ecological and financial benefits to the world economy. The figures announced today highlight the significant revenue opportunity this space could deliver. However the wider economic impact could be far greater, including indirect benefits to industry such as cost reduction, increased efficiency and the potential for new products and services. We are pleased that many mobile operators are already implementing strategies to tap into this market, although a broad industry-wide approach is essential to realising the full opportunity.”
“There is incredible potential for wireless innovation across so many verticals, from healthcare to automotive to consumer electronics,” said Glenn Lurie, president of Emerging Devices, AT&T. “All types of customers are quick to realise the benefits of embedded mobile technology in everyday products, and this is going to lead to an explosion of creativity and adoption. We’ve made great progress embedding wireless into navigation, tracking, gaming and entertainment devices, but we’ve just scratched the surface here. There are so many exciting possibilities.”
Dong-Ik Lee, senior vice president, KT said, “Our customers are excited about connected experiences. Connecting objects to networks can revolutionise their value. For example, helping turn vehicles into infotainment hubs, CCTVs into commercial area analysis units and toys into educational robots. At KT, we have started a new trial on an ‘open objects’ platform to help people to participate more freely in the connected world, and we expect it to accelerate the growth of this connected market.”
“The services and applications provided by key sectors in the M2M space, such as utilities, telematics, mobile health and automotive, depend on highly reliable and secure solutions and connectivity. Mobile operators must work together to make the most of this opportunity, such as signing M2M roaming agreements and securing price structures that enable M2M-type traffic. Mobile operators should also become more integrated in their customers’ businesses and drive further collaboration with vertical sectors in the Connected Life ecosystem, whilst staying competitive to ensure market growth,” says Fredric Liljeström, SVP, Telenor Connexion.
Erik Brenneis, Head of M2M, Vodafone Group added: “Devices with M2M capabilities are able to give customers a much richer experience than those without. These figures show the enormous potential of M2M services which become even more attractive when delivered wirelessly, such as satnavs which are able to show traffic jams in near real time.”
1. Connected devices are smart wide area and short range devices that have the benefit of connecting to a network, including: remote sensors, remote monitoring, actuating devices, associated aggregation devices, PCs, laptops, tablets, eReaders, mobile handsets, femto cells & routers.
2. Mobile connected devices are either currently or likely to include SIM technology and therefore be connected by wide area mobile networks.
3. The US$1.2 trillion figure is the addressable revenue that a pure-play mobile network operator (MNO) could potentially compete for a share of. This is comprised of revenues from the sale of mobile devices by the MNO, data traffic, applications, system integration, installation, and most significantly, specific service revenues available to MNOs. These revenues are largely incremental to the majority of MNOs’ existing revenue streams and therefore present a real opportunity for future revenue growth beyond basic data browsing, messaging and voice revenues. The addressable opportunity for MNOs that have access to fixed infrastructure and systems integration capabilities is clearly going to be greater.
Regionally, the MNO US$1.2 trillion addressable revenue opportunity equates to:
Asia Pacific: US$447 billion
Europe: US$305 billion
Latin America: US$92 billion
Middle East & Africa: US$87 billion
North America: US$241 billion
4. The connected market value chain, as defined by Machina Research, includes: Hardware (e.g. mobile modules), data traffic, SIM management and data platforms, APIs / developer kits, solution creation and service provision, distribution and sales and customer service. In the home security market, for example, a typical three-year contract within the value chain will be comprised of 14 per cent for the connected alarm, 8 per cent in setting and maintaining the data connection and 78 per cent on alarm monitoring and customer services.
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