Navigant Research Blog

Telcos Aggressively Expanding Smart City Services

— December 7, 2017

Among the essential building blocks for the smart cities market are communication networks that connect the sensors, controllers, cameras, and other hardware infrastructure capturing valuable data from the city environment. The need for urban connectivity is creating new opportunities for the telcos responsible for providing public wired or wireless communication services to government, consumers, and businesses. Telcos are increasingly making strategic acquisitions and extending their footprint into solutions and services for smart cities and Internet of Thing (IoT) application areas. Whether through established technology such as 3G/4G or potential disruptors like 5G and narrowband-IoT (NB-IoT), cellular providers are aiming to become the leading suppliers of connectivity for smart cities.

Significant Acquisitions and Service Offerings in North America

In recent years, a number of telcos have made bold expansions into the smart cities market. Verizon, for example, has been working to expand its presence in that industry. It made a major move to extend its footprint with the acquisition of smart street lighting and sensor network provider Sensity Systems in late 2016. Verizon is supporting a wide range of smart city applications, including transportation, public safety, city management, and smart buildings.

AT&T has also significantly increased its visibility in the market since its initial smart cities launch in 2015—notably through its role in the Atlanta and San Diego IoT platform deployment projects. It is supplying Bluetooth and Wi-Fi for short-range connectivity, plus fiber and LTE for backhaul to the cloud.

In early 2017, AT&T obtained exclusive rights to distribute the sensor nodes from Current powered by GE through a reseller agreement in the US and Mexico. AT&T will be the commercial lead on future smart cities projects, with Current as its technology provider.

Significant Global Acquisitions and Offerings

Telefónica, the Spanish-based global telecom provider, has also been targeting smart city opportunities. It was lead commercial partner in the SmartSantander project, which involved deployment of over 20,000 devices in Santander and the surrounding area (including sensors, repeaters, gateways, etc.).

French carrier and service provider Orange is leveraging its expertise in 4G, fiber, LoRa, Wi-Fi, and Bluetooth to install a network of connected sensors for Romania’s Alba Lulia Smart City 2018 project. Telefónica and Orange Group are key players in the development of FIWARE standards—an open source initiative that aims to establish a standard for smart cities based on the FIWARE platform.

Most recently, Telestra, an Australian telecom company, acquired fleet management systems provider MTData and created a partnership with Melbourne-based Smart Parking. The company has already won contracts to install Smart Parking’s sensors in five Australian council regions.

Telco Expansion Challenges Non-Cellular Connectivity Providers

The aggressive telco expansion into the smart cities market should serve as a warning shot to other providers of urban connectivity such as RF mesh and Wi-Fi players. These providers should quickly move to protect market share by emphasizing their relative advantages over cellular (e.g., private networks, lower operating costs) and developing more vertical solution partnerships and connectivity capabilities.

While most cities are likely to have multiple providers and types of connectivity for different use cases, cellular providers are making a clear push to capture the high bandwidth segment of the smart city communication networks value chain. There is evidence that resistance to public cellular is declining in the utility sector. With the deployment of new cellular technologies such as NB-IoT and 5G on the horizon, the same is likely true for cities.

 

Service Providers Capitalizing on Smart Home Opportunity

— October 17, 2017

The smart home is a concept gaining hype and excitement with its futuristic promises. This market is projected to see significant growth, as Navigant Research expects smart home platform revenue to increase from $4.2 billion in 2017 to $39.5 billion in 2026. As discussed in our report, The Smart Home, a range of companies are vying for market share in this hotbed of opportunity, from startups to large tech incumbents.

Recently, I had a chance to attend the Service Delivery Innovation Summit, a conference bringing together a range of service providers to discuss innovations in the service business. Service providers are increasingly looking toward the smart home as a way to create new revenue streams as existing business models are challenged by newer offerings, such as traditional cable TV versus streaming services.

Who Can Take the Chance?

Service providers are arguably the best positioned to seize opportunity in the smart home. These companies are already trusted by consumers and have existing touchpoints and technologies deployed in the home, making it convenient and easy to go to market with smart home technologies. Because service providers are already in the home, they also have the unique position of being the gatekeeper for technologies that enter the home. Thus, service providers can profit from becoming smart home technology aggregators and can assist in solving many of the issues that exist in the smart home, such as technology interoperability, the comprehensiveness of solutions, and data privacy and security.

Additionally, broadband service providers and telcos offer products and services that support the development of smarter homes, such as cellular and broadband connectivity (which allows for the communication of connected devices and smart home data transmission). They can also use existing networks and infrastructure to offer new smart home-related services, such as professional installation and customer support.

Early Smart Home Investors

Some service providers are already making big investments in the smart home space. Comcast has been in partnership with EcoFactor to offer its EcoSaver thermostat-based energy management service to Xfinity Home customers since 2013. In 2016, the company partnered with Earth Networks (which has since spun off its home sensing and software company Whisker Labs) to bring big data and analytics to the EcoSaver service. In 2017, Comcast finished its acquisition of iControl, a home automation company. It will use the acquisition to build a Center of Excellence in Austin, Texas to wholesale its home automation and security services.

Service Providers Are Paying Attention

Comcast is just one example of a service provider ramping up activity in the smart home industry. Others such as energy providers Centrica and Vattenfall, as well as Telefonica, AT&T, Verizon, and Cox, are also offering home solutions. Service providers are increasingly recognizing the opportunity in this market and can help the progression of smarter homes.

 

2016 Marks a Year of Disruption for the Energy Industry

— December 29, 2016

Energy CloudAs 2016 draws to a close, it’s difficult to identify which events of a tumultuous year will affect the energy industry the most. The UK’s vote to leave the European Union and Donald Trump’s victory in the US presidential election will certainly top most lists for significant events in 2016. However, no one yet knows the extent to which either will affect the industry. I would like to remember 2016 for other events that gained less airplay than Brexit and Trump but still demonstrate the significant disruption that is occurring to traditional energy business models.

For many years, I have discussed the hypothetical risk of competitive disintermediation caused by the future convergence of electricity and telecommunications markets. Until this year, I relied on a handful of small-scale projects and strategies that amounted to little substance to make this point. However, events in 2016 show that the risk is no longer hypothetical, nor will convergence happen in the future: major utilities are planning large-scale telecommunications projects now, while telcoms are entering the mass market for electricity.

The Spread of Smart Grid

Enel is Italy’s largest utility and has led the charge into smart grid technology adoption. Italy was the first country to adopt smart meters, and it also has one of the most advanced distribution automation projects in Europe. However, Enel’s ambitions extend well beyond the utility industry. It is targeting the Italian broadband market, aiming to provide 250 towns and cities with broadband, and the company’s recent Metroweb acquisition sets Enel on this path. Enel has also discussed plans to deliver broadband to its international customers through wholly owned electricity subsidiaries in Spain, Romania, and South America.

SoftBank is Japan’s third largest company and provides fixed and mobile telephony, Internet, and digital TV services. When the Japanese market liberalized in early 2016, SoftBank recognized an opportunity to expand its services into electricity supply. It has partnered with TEPCO—the former Tokyo Electric Power Company—to deliver power products to its telecommunications customer base of 60 million. In a bold statement that highlights SoftBank’s ambitions in Internet of Things (IoT), the company also acquired leading chip manufacturer ARM for $31 billion.

Transactive Energy

Finally, 2016 saw a profusion of announcements of transactive energy proofs of concept. From North America through Europe, across Asia and into Australia, utilities are investigating ways that customers can start trading power between themselves. Again, transactive energy has been something the industry has discussed for several years, but has seen very little activity. The combination of solar PV, storage, and transactive energy platforms threatens to turn the old centralized business model on its head. The three technologies are complementary and each contributes to the accelerated deployment of the others: solar PV provides the opportunity to self-generate; storage enables the use of electricity at other times of the day; and transactive energy allows the owner to sell power to whomever they choose, at an optimal price.

Utilities face innumerable risks. There are threats from new entrants encroaching on the mass supply market, and massive changes in consumer behavior bring their own share of uncertainties. How each utility reacts will depend on market conditions and their appetite for change. Some will do their utmost to force regulators to protect their current businesses, and others will procrastinate their way to extinction. The likely winners will be those that recognize where future value lies and innovate their way to future success.

 

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