IoT Market Tracker Insights – ARPU Growth Concentrated in One Sector

Average revenue per unit (ARPU) is a common term that is used when connectivity is offered on a subscription basis. Although not all IoT device connections will be priced on a subscription basis, knowing the number of device connections and total revenue generated by these connections enables the ability to calculate ARPUs. This provides a useful means to measure the opportunity by application segment. In this ABI Insight, ARPUs are analyzed for the top application segments showing the highest ARPUs and growth.

Analysis of ARPUs by application segment can identify three buckets based on ARPU range. ARPUs in the three segments are < $50; $50 to $150; > $150 per year. Applications in the > $150 per year are the only ones that show increasing ARPUs over the next 5 years. This bucket is labelled Mobility and Industrial, and includes all the telematics segments (OEM, fleet, aftermarket, UBI), solar/wind energy monitoring, and container monitoring. Later in the forecast period, several new segments will begin to generate annual ARPUs that exceed $150, including healthcare equipment monitoring, remote monitoring and control (primarily industrial assets), and commercial building automation.

The Mobility and Industrial segment bucket is heavily dominated from a pure connection perspective by the telematics segments, including cars, trucks, fleet vehicles, etc. These are high value mobile assets that make up the transportation industry valued at $6 to $7 trillion worldwide. It is natural for this segment to adopt IoT technologies to monitor, maintain, and improve its operation. Moreover, IoT markets also benefit from these mobile assets, including insurance, smart city infrastructure, and aftermarket telematics.  

Several factors drive the Mobility and Industrial segment bucket to not only have the highest ARPUs, but to also increase ARPUs over time. The first factor is that connections to these assets are increasingly shifting from 2G and 3G cellular technologies to 4G technologies. Cellular fees are based on data consumption, and mobile assets are increasingly sending more data not only for vehicle diagnostics, but for other services such as invoice data, driver behavior tracking, infotainment and driver voice, and data communications.

The latter applications are examples of the additional services that constitute a full end-to-end IoT solution. Verticalized solutions are created when a market is large enough and lucrative enough to drive suppliers to offer a full set of services that solve a business problem. These instances include getting goods from point A to point B efficiently with fleet management, or creating new usage-based revenue models to offer insurance products. The end-to-end solution, which includes provisioning and support services, is of higher value and ultimately commands higher ARPUs.

Advanced analytics is the last component in the Mobility and Industrial application segment, and it has the most impact toward increasing ARPUs over the forecast period. Predictive and prescriptive analytics are high value outcomes from data analysis, enabling problem detection before any issues occur. In high-cost assets in both CAPEX and maintenance, eliminating downtime or critical failure is not only cost effective, but it is also a customer benefit. The Mobility and Industrial segment is full of these assets in trucks, construction equipment, farming vehicles, and automobiles. As self-driving and autonomous vehicles start to penetrate the transportation system, advanced analytics will be a necessity and should be applied to both the mobile assets themselves and transportation infrastructure. Overall, 4G connectivity, verticalized end-to-end IoT solutions, and advanced analytics are the key contributors to the highest ARPUs, in addition to increasing ARPUs in the Mobility and Industrial segment.