IoT policies & IoT regulations are critical for the success of the IoT ecosystem.

The Internet of Things (IoT) is one of the most talked about topics in the tech and telecommunications industries, with many of those conversations debating how telecom operators can best tap into IoT’s revenue potential. Earlier this year Ericsson canvassed 20 multinational telcos to understand their attitude to IoT and how they were positioning themselves in the IoT value chain. According to the subsequent report, Exploring IoT Strategies, more than two thirds of respondents lacked a clearly-defined IoT strategy, with most operators currently involved in testing various approaches. This is understandable; telecoms operators globally are being required to re-strategize and redefine their business models as they explore ways to capture more of IoT’s promised returns. The Ericsson study offers a clue to why, with 80% of the telcos interviewed saying they wanted to create value ‘beyond connectivity’. This highlights what is becoming a widely-held conviction: in the IoT value chain telcos continuing to rely on connectivity-based revenues will miss out.

The IoT ecosystem is complex, with multiple stakeholders needed to deliver the interoperable mix of hardware, software, connectivity and applications components that the system requires. With so many participants spread across the value chain it is often unclear where ownership of the customer relationship resides. Lack of clarity is compounded by the dilemmas of jurisdiction that are raised when global product and platform providers are different from the local service operators in any specific country. In order to IoT capture value outside connectivity, telcos need to navigate this complexity, moving up and down the IoT value chain, launching new ventures or building strategic partnerships.

A range of new business models is available to such operators, depending on the business’s appetite and strategic objectives. As commented in Synergy Consulting Group’s new white paper, Enabling the IoT Ecosystem With Policy and Regulation: ‘Operators that have made a strategic decision, as part of their digital transformation efforts, to be an enabler in the IoT ecosystem can launch IoT platforms that can be bundled with their connectivity.’ Multi-sided markets such as IoT allow telcos to benefit from facilitating relationships between 3rd party app developers and end-user enterprises or consumers, many of whom are existing telco customers. More ambitious telcos may focus on developing clearer vertical propositions targeting specific industries or enterprise types. They may offer everything from tailored IoT applications to fully bundled end-to-end solutions – a one-stop shop for the IOT end-user. Regardless of business model, though, much of the capabilities required for telcos to move beyond IoT connectivity is currently unavailable internally. They need to build, partner or acquire capabilities around app development, IoT platform management, or content and systems integration.

However, as the Ericsson report suggests, finding the right business model requires experimentation. And in testing the numerous possible business models, telcos need some elbow room and flexibility. But this is where telcos suffer unique regulatory limitations. Heavily regulated by national regulatory authorities (NRAs), telcos’ connectivity businesses historically operate under regulatory conditions that are far from flexible. These tight restrictions might be appropriate within the traditional connectivity business where competition is limited. But, as telcos venture out into new non-connectivity territory, the borders between connectivity and the other parts of the IoT value chain become more difficult for NRAs to distinguish. Add to this the stringent rules governing data privacy, switching requirements, data porting, or security regulations in some markets, and the stage is set for challenging times. NRAs might struggle to monitor telcos venturing past the traditional connectivity frontier, and those same telcos struggle to ensure compliance.

It remains a question as to whether NRAs will attempt to extend restrictive connectivity regulations into the telco’s non-connectivity IoT activities. As an example, telcos new to the IoT platform market can differentiate themselves from global IoT platform providers by bundling connectivity with their IoT platform offering. NRAs might see such an offer as an extension of the connectivity business and apply the same restrictive regulations. Such an approach by NRAs could hamper innovative business models by national telcos, and could limit their competitiveness.

The stakes are highest for small regional or single country operators who, even without the growth limitations imposed by restrictive policies, enter the IoT market on marginal terms. If they are to have any chance of success – particularly against multinational device manufacturers and IoT platform providers – the playing fields need to be levelled. This falls to Regulators who are traditionally responsible for managing the policy tools related to domestic network connectivity. If it is within their mandate this work can be done directly. It may also be done indirectly through their influence with other policy making bodies, such as the national competition authority or consumer protection agencies. Either way, it is up to these NRAs to ensure that local operators have the regulatory breathing space needed to compete with large global companies in the IoT platform market.

With the IoT landscape shifting so quickly, NRAs need to up their game to ensure they can accurately assess the connectivity regulations for IoT. This will necessitate a deep understanding of the emerging IoT business models, as well as non-connectivity regulatory issues such as data privacy, security, and competition regulation in multi-sided markets. Telcos, for their part, need to ensure that their Regulatory Affairs Management is upgraded. A proactive approach to engaging NRAs will help ensure that the regulations are not hampering telcos’ IoT-beyond-connectivity ambitions.

Facing significant disruptions by OTT applications and shifting market forces, the world’s most digitally-savvy telcos have responded well by refocusing their business initiatives to capitalize on emergent opportunities. IoT is a prime example of a new arena in which telcos have proved that they still have a significant role to play. However, realization of these possibilities will require telcos and NRAs to redefine their traditional working relationships to be more open and collaborative. Only through such constructive regulatory management can telcos hope to avoid over-regulation, and NRAs fulfil their responsibility to maintain a fair but flourishing economic environment.

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For more information about our insight on IoT policies and regulation, download Synergy Consulting Group’s White Paper: Enabling the IoT Ecosystem with Policy and Regulation