Smart City Service Providers Go Horizontal

The path to building smart cities is paved with platforms -- central hubs that integrate systems within an ecosystem, such as transportation, health or law enforcement. Solution providers will integrate those platforms, then use to deliver services via new and emerging business models, according to Ericsson's IoT marketing head.

This trend, which is expected to occur within the next year or two and build on the strength of 5G, will switch the smart-city service provider model from focusing on verticals -- such as connected cars or security -- to horizontal applications, said Warren Chaisatien, Ericsson's director of IoT Marketing, in an interview with Broadband World News.

Currently, most smart city implementations are for pieces of each ecosystem -- a solution for parking lots or traffic lights, one for connected pumps at the local hospital or school system, he said. They work well independently but their power is multiplied exponentially and service providers' value increases immeasurably as separate ecosystems are joined and data from each separate system is combined for more actionable information, he said.

Shortly, Internet of Things platforms will connect IoT devices and applications, but also will enable service providers to innovate through new digital business models, according to Chaisatien. In turn, this will debut a menu of monetization opportunities for service providers, he said.

These include: Availability monetization, where providers charge for a device or service, for example, within an IoT ecosystem, whether a customer uses it or not; data-based monetization, where customers pay the provider for data the device generates, not the device; usage-based monetization, where cities, agencies or businesses pay for what they use, and performance-based monetization, whereby customers' payment is dependent on a service-level agreement (SLA) and how the IoT product or service performed, Chaisatien explained. Finally, in value-based monetization, customers pay for a pre-defined value-added service or the business value, as opposed to the assets themselves.

"These frameworks are really interesting because they represent new ways of thinking. If you look at the most common monetization model, it relies on availability," he said. "The 'I want something, I pay money for it, now I own it,' model. The usage model: You pay when you use it. There is also data-based, where you pay when you generate or transmit data and performance-based, which is almost like a service-level agreement. In value-based, it triggers certain scenarios so, perhaps, if something is useful then you pay."

Operators most likely would mix and match the best, most appropriate revenue-generating approaches, depending on what they offer, their market and customer bases, Chaisatien added. The combination of broadband and 5G with the ability to identify, measure and monitor data and other parameters crucial to payment are what enable these additional monetization approaches, he said.

Going horizontal
Today, many operators tackle IoT opportunities with a vertical approach, pursuing specific markets such as connected cars, healthcare or a segment of smart cities like parking lots. Within the next two or three years, however, service providers will tackle IoT -- especially areas like smart cities, which have multiple use cases within each segment -- with a horizontal mind frame, Ericsson wrote in "Developing Viable IoT Models."

Municipalities will want to get the most out of each investment by pooling capabilities, need to integrate separate ecosystems within departments such as law enforcement for easier management, and seek the enhanced analytics such pooling delivers. It is then, after all, that cities truly can glean far-reaching insights into constituents' patterns, needs and financial benefits (such as determining wasteful projects or unnecessary spending), said Chaisatien, one of the paper's writers.

"If you look at Verizon, AT&T, Telstra -- of course they provide connectivity and then also selected vertical solutions," he continued. "As service providers move up the value chain they are experiencing two or three steps. They supply connectivity, connectivity management, then platforms, then the true adoption of IoT and a value-based business."

CSPs can translate their skills into the new role of IoT service enablers, which deliver platform services and connectivity across the IoT ecosystem, said Chaisatien. Some will add roles, becoming data brokers for those device owners swamped with information that seek new revenue streams of their own. Some CSPs will nurture integration opportunities within other, complementary ecosystems to deliver additional value to customers and their bottom line. And others will pursue additional monetization opportunities within the expanded smart-city ecosystem, he said.

Where and how will you operate?

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— Alison Diana, Editor, Broadband World News. Follow us on Twitter or @alisoncdiana.