Can Deutsche Telekom’s IoT Networks as a Service Boost Customer Confidence as well as NB-IoT Take-Up?

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By Jamie Moss | 1Q 2018 | IN-5047

Deutsche Telekom (DT) is to take on the cost of deploying networks of parking sensors. DT is assuming the burden of proof-of-value for Internet of things (IoT) projects, in a gamble designed to eliminate hesitancy on the part of municipalities. DT is sourcing innovative design and manufacturing startups, around whose device hardware it is building a portfolio of similar off-the-shelf managed IoT services.

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Smart Parking as a Service


DT is to take on the cost of deploying networks of parking sensors, on behalf of municipalities and other parties that may wish to purchase access to the information those networks collect. DT will cover the sourcing of components, the manufacturing of devices, the hardware installation, and any ongoing maintenance. The networks consist of puck-based sensors which are attached to parking spaces and use narrowband IoT (NB-IoT) for point-to-point, wide-area connectivity. DT is learning about NB-IoT battery life expectancy from the first wave of sensors. Later generations will last longer, purportedly due to expected improvements in the quality and efficiency of their battery-powered NB-IoT modems, which in the future are expected to use less electrical energy. DT’s IoT sensor network as a service is called “Park and Joy.”

The results so far for DT have been impressive. By the start of 2018, eight cities had signed up as partners, and DT has a sales pipeline that will see that number increase significantly across Europe by the end of the year. DT licenses access to the sensor networks and the data they collect, building in the connectivity and any necessary service level agreements (SLAs). It will take several years for each smart parking as a service deployment to cover its rollout costs and become profit-generating for the carrier. IoT projects in the public sector are often about laying the foundations for long-term financial gains, despite existing to create an immediate benefit for society.

Park and Joy is part of a wider scheme by DT to offer a portfolio of prepackaged, off-the-shelf IoT services that are underpinned by strategic device hardware partnerships. DT is sourcing innovative design and manufacturing startups, around whose products it can build a fully-managed service. The carrier is also investing in some of these device companies to secure its supply of IoT hardware and to have part ownership of the underlying intellectual property behind it. Ten device-led service packages have been launched with an additional six due to become available in 2018. Park and Joy stands out from the rest by already being successful despite involving high upfront capital expenditure costs, or is it because of them?

Reassessing Cost Considerations


When thinking about IoT network deployments, we have become obsessed with the cost of connectivity. In assessing the proliferation of IoT devices, the industry has fixated on the price of the modem that provides the information pathway to make a dumb device “smart.” This cost is important when designing connected versions of devices that already exist as any increase in the bill of materials (BoM) must be outweighed by the incremental revenue generated by the utility of the new connectivity. Yet this still makes the modem, be it a chipset or module, no more important than the inclusion of any new component in an iteration of any established product line.

When considering networks of devices that have not existed before, the price for a modem is even less important, especially when compared to the logistics of deploying a new network of sensors. It is these physical setup costs that are most likely to impede the realization of medium- to large-scale IoT projects. But with network rollout and maintenance being a long-established core competency of wireless carriers, IoT sensor networks are something that carriers may be perfectly placed to offer as a managed service. It is also a means carrier realizing a greater relevance in the IoT, proving they can make money from more than the transport of bytes of data, and becoming value-added partners in the long-term strategies of municipalities and enterprises.

By eliminating hesitancy on the part of municipalities, which is caused by uncertainty around how to guarantee that costs will prove economical in the long run, DT is successfully accelerating the proliferation of smart parking while maximizing its service provider ownership of that market. Municipalities should not have to become experts in sensors, communications, and back-end data storage technology to be able to offer smart services to citizens. Especially when other companies can do these things for them. DT’s smart parking as a service should remove the need to develop expensive bespoke systems and could help to minimize fragmentation in system design and technology choices and inconsistency in service performance from one city to the next.

Assuming the Burden


Assuming the burden of proof-of-value for IoT projects is a gamble; it means taking on a level of risk other parties are not comfortable with. The multi-year time-to-profitability for Park and Joy makes it easy to understand why municipalities might be reluctant to independently commission such projects. So why should Deutsche Telekom be doing so? Deploying, running, and licensing access to Park and Joy networks shows a long-term commitment to both the IoT market, as well as to the support of the municipalities. DT stands to win their trust and to hopefully position itself as a preferred service provider for future smart city deployments. Crucially, it also allows DT to introduce new and more meaningful IoT service pricing plans.

When carriers only provide connectivity for IoT systems, it is difficult for them to prove to their customers the contribution they make to the value generated by the overall solution. The carrier provides one component of the system and is only able to charge a data transport fee. But when a service provider owns and leases an IoT sensor network, its customer is always aware of the role it plays in any increased profitability enjoyed, and is conscious of the consequences of no longer having that service. End-to-end provision allows for the potential negotiation of value-share payments, the worth of which scales as the customers’ gains grow. This is a situation wherein all parties may agree and respect the carrier’s entitlement to a portion of the profitability the IoT service it offers brings.

For municipalities, the benefits of a fully-managed service are something to be seriously considered, as many have evidently done with Park and Joy. Upfront costs are reduced or removed while recurring costs scale with utilization and benefit, greatly reducing the investment risk on the municipalities’ part. If a service does not prove to be useful for them, then it can simply be cancelled. Should other wireless carriers follow DT’s lead? Not every carrier can possibly afford to do so, but there is an opportunity there for DT to license its off-the-shelf services, as well as its supply chain, to carriers in other countries so that they may offer the same utility. Horizontal applicability, ready reusability, and an emphasis on existing core competencies are the keys to successful IoT service provision for carriers. Those core competencies may be inherent, acquired, or provided through strategic partnerships.


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