Exploiting the Full Scope of IoT Opportunity

IoT has been contending for the most-hyped technology of our time, and a recent T3C Summit event that cause got a big boost.  According to SDxCentral’s summary of a panel at the event, “…it makes sense that in the Internet of Things (IoT) boom, with its expected 20 billion to 50 billion connected devices by 2020, there’s money to be made by telcos.”  The title of the article characterizes this as a “multi-billion-dollar opportunity.”  Not necessarily, or even probably, unless you look way beyond the obvious.

IoT suffers, as most modern technology developments do, from “bracket creep”.  It gets good ink.  Therefore vendors append the IoT tag to anything that remotely resembles it.  Therefore there’s a constant advance in claims and stories that attract reporters and editors.  Therefore it gets good ink.  You get the picture.  So, yes, we may well end up with 20 to 50 billion connected devices by 2020, but my model says that far less than a tenth of 1% of those devices will be in any way visible to the telcos, much less earning them revenue.

The reason I’m harping on this is that we’re seeing another great market opportunity suffer from stupid positioning.  Any telco who thinks they’ll make their future numbers from IoT is not only doomed to disappointment on that specific opportunity, they’re probably overlooking the real opportunity in IoT.  The wrong focus is not only wrong, it usually precludes having the right focus, which is edge computing.

Another article, this one from Light Reading’s Carol Wilson, quotes the PCCW VP of Engineering as saying that “Competing in the digital services space doesn’t mean going up against web-scalers, it means doing edge-computing….It all comes back to FOG and edge cloud architecture.”  That’s the real point for sure, and IoT would surely be able to earn operators billions if they listened.

Operators have one unique advantage in the fog space—they have real estate.  There are about 70,000 edge offices of telcos worldwide, and another 30,000 deeper-sited offices, for a total of over a hundred thousand locations.  It’s tough to put a data center in the back of a truck and make all the necessary connections; you need permanent real estate, so operators have the place to put over a hundred thousand incremental fog data centers without buying any new buildings.  Amazon, Google, and other OTTs don’t have that advantage, so it would make sense for operators to exploit their real estate assets.

This ties into IoT for two reasons.  First, IoT isn’t about on-the-Internet sensors at all, because the majority of sensors are designed to be used in private applications.  If we put those billions of connected devices directly on the Internet, we’d have billions of hacks and spoofs and spend tens of billions on security making it look like the devices weren’t really there at all.  The fact is that the model of IoT we’ll see dominating is one where the sensors are on a private network that might not even use Internet technology at all (home sensor networks typically don’t).  The sites where they’re located are already connected, so there’s zero revenue associated with connecting those sensors.

Where the revenue comes from is digesting, summarizing, and correlating sensor data.  As I’ve said in other blogs, nobody is going to succeed in IoT if every application has to deal with raw sensor data.  Apart from access, security, and sheer ability to field all the requests, it would be too much work to write something like that and the result would be so sensor-specific it would be brittle.  An army would be needed to keep it up to date.

A better approach would be to presume that there are trusted providers who subscribe to sensor information and do various cuts and splices to create insight.  For example, if there’s a sensor that records ambient temperature in a bunch of places, you could look at patterns of change to detect conditions that range from a sudden cold front to a power failure.  In traffic terms, you could assess traffic patterns at a high level and even predict when a mess of cars in one area was going to translate to a mess in another because of movement along predictable routes.  There are many, many, types of insight that could be drawn, and many applications that would want to take a stab at drawing it.

Who provides all this good stuff, and where is it run?  The second point I talked about is that edge computing is close to the source of telemetry.  Quick access means timely analysis and correlation, which means edge-processed IoT events can lead to more timely insights.  That makes these event-analysis processes valuable in themselves, meaning something others would subscribe to for a fee.  Not only that, edge locations are able to initiate responses with a lower delay, so if the application demands reaction and not just analysis, you could sell the hosting of the reactive process at the edge more easily than somewhere deeper.

Connecting IoT devices is a silly mission.  Sure, operators could offer 5G connectivity (at a cost) to users, but would the users pay when some vendor offered them a free local connection to the same devices by utilizing WiFi or ZigBee or some other protocol?   Picture AT&T going to New York City and telling them they can telemetrize every intersection by adding 5G sensors, while meanwhile ConEd says that they’ll simply carry the traffic on the power connection.  Everyone with a current Internet connection can simply use it to get access to sensors connected to some local control point.  Not a good business for operators to get into, in short.

Turning sensor data into useful, actionable, intelligence?  That’s a whole different story.  Here we have an opportunity to add value, which is the surest way to add revenue.  The challenge is that it’s not at all clear how regulators would treat this kind of telco mission.  Regulatory policy on higher-level services has traditionally said that telcos have to offer such things through a separate subsidiary.  That could preclude their exploiting regulated assets, which in most cases would include real estate.  How that subsidiary was capitalized might also be an issue, and this combination makes it much harder for operators to exploit their advantages.

It also makes it a lot harder for IoT to happen, at least happen in an optimal way.  It’s hard to pick a group that has better assets to develop the market, and enlightened policy would try to encourage them to do that rather than put barriers in place.  I don’t know what other group of companies could even make the kind of investment needed in edge computing, and I don’t know whether we can really get to IoT without it.  Perhaps this is something regulators in major markets need to think about while planning policy changes.