IoT MVNO’s Turn Their Attention to Value-Added Services as Connectivity Service Revenue Set to Decline to 56 Percent of Total by 2030

14 Nov 2023

An increase in Low Power, Wide Area (LPWA) connections, disruptive pricing models, and discounted connectivity rates has deflated connectivity revenue growth in the IoT Mobile Virtual Network Operator (MVNO) market, prompting virtual operators to increase investments in value-added services. According to global technology intelligence firm ABI Research, IoT MVNO revenue for device and application platform services, IoT security services, managed services, and other value-added services will reach US$1.9 billion in 2030, accounting for 44% of all service revenues in the market.

“Connectivity is the foundational offering of an MVNO,” says Lizzie Stokes, IoT Hardware & Devices and IoT Networks & Services Analyst at ABI Research. “However, MVNOs now recognize that connectivity offerings alone are not sufficiently profitable as several market forces limit revenue growth.”

MVNOs face intense pricing competition as more virtual operators enter the market. This competition, combined with increased LPWA connections following 2G and 3G network shutdowns, has disrupted the profitability of virtual operators’ core offerings. Being connectivity resellers, MVNOs must also offer their services at discounted rates to Mobile Network Operators (MNOs), further inhibiting MVNO connectivity revenue growth.

To insulate their business from declining connectivity Average Revenue Per Unit (ARPU), virtual operators have diversified their businesses, many now offering value-added services throughout an entire IoT project. Some MVNOs offer device expertise and planning services, even after many virtual operators abandoned previous device management efforts. Virtual operators in the recent past hoped to provide device management services by leaning on the Lightweight Machine-to-Machine (LwM2M) standard. However, many soon realized the costs of providing these services outweighed the benefits. Some MVNOs, such as Eseye, have continued to acquire device expertise and provide on-device software—not to offer device management services but to improve connectivity resilience. ABI Research expects virtual operators will continually search for ways to integrate connectivity offerings with IoT devices, knowing that such value-added services could provide a significant competitive advantage in the future of this market.

As connectivity and connectivity management services yield lower returns, MVNOs are also investing in more security services, understanding that IoT customers are increasingly concerned about the privacy of their networks. Some MVNOs provide virtualized private network offerings and invest in SIM technology that enables roaming between an enterprise’s private networks and public networks. MVNOs also prioritize frictionless customer service and verticalized expertise to diversify their product portfolios and compete with carriers. Virtual operators must continually balance competition and cooperation with operators. Verizon’s new global IoT eSIM platform presents new challenges for MVNOs as they attempt to capture more market share.

To further diversify their offerings, some MVNOs, such as Kajeet and Webbing, also provide connectivity to IoT and non-IoT devices, understanding that consumer devices such as smartphones and laptops typically yield higher ARPUs than traditional IoT applications. Catering to non-IoT use cases can help virtual operators fund innovative IoT organizations that lower returns would otherwise limit. Investing in value-added services and expanding connectivity offerings to consumer devices are strategies MVNOs are pursuing to protect their organizations from shifting revenue dynamics. Notable MVNOs investing in value-added services and driving innovation include Sierra Wireless, 1NCE, Eseye, Kajeet, and Wireless Logic.

“MVNOs are incentivized to offer dynamic, specialized services to attract new customers and prove their IoT expertise against the ‘one-size-fits-all’ IoT offerings typical of big operators,” says Stokes. “In the face of thinning connectivity margins, MVNOs will continue to invest in device expertise and other value-added services and will be better equipped to cater to the full spectrum of a customer's IoT needs.”

These findings are from ABI Research’s IoT MVNOs Market Update – Services, Private Networks, and Supplier Analysis application analysis report. This report is part of the company’s IoT Hardware and Devices and IoT Networks and Services research services, which include research, data, and analyst insights. Based on extensive primary interviews, Application Analysis reports present an in-depth analysis of key market trends and factors for a specific technology.

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