From Data Monetization to the Internet of Things
    Category: Column By : Nitin Bhat, Frost & Sullivan Read : 1445 Date : Monday, December 02, 2013 - 07:34:25

    Monetization of the burgeoning data usage by the Indonesian customer is going to be the key concern of the Indonesian telecom industry. The declining prices of smartphones, their increasing popularity (we expect smartphones to make up 16% of all handset shipments in 2013) and the growing availability of 3G (we expect more than a quarter of subscribers on 3G by the end of 2013) are acting together to drive this data deluge. The key question for the telco industry is how to make money out of this data revolution, while keeping services affordable.

    The key concerns center around two axioms—one, that revenue growth is not commensurate with data growth (as usage increases the average price per unit of usage decreases) and two, the greatest value derived out of the increased data usage is by the so-called Over the Top (OTT) players like Google, Facebook and the ilk.

    All major telcos in the country are increasing their capital expenditure to fund a 3G expansion to carry the growing data traffic; this obviously constricts margins in the near term. Since Long-Term Evolution licensing has been delayed at least until 2015, the telcos are adding cell-sites and to save costs are sharing infrastructure. This infrastructure sharing is also a boost for the tower companies—both telco owned and independent.

    In a voice dominant market, smaller players could survive, as the technology needed for voice was relatively simple, but in a data-driven market, the costs are much higher which threatens the survival of these smaller players. While the top three mobile service providers (PT Telkomsel, PT Indosat and PT XL) should survive, the others face a very dim future.

    A two-step approach should evolve as the industry traverses the data path; one is increased availability and adoption of mobile broadband and two is the need for telcos to offer non-bandwidth based services. We expect mobile broadband to be the preferred form of broadband access over fixed broadband. While mobile broadband is a short-term strategy to get a revenue boost, it is a double-edged sword as a broadband connection allows customer a seamless access to OTT content which turns telcos into a dumb pipe provider.

    One way to obviate the risk of a dumb pipe provider is to participate in the emerging opportunity of the Internet of Things (IoT). The IoT basically means the interaction of connected physical and virtual objects that have been provided an identity. Thus, consumer electronics devices to sensing devices to virtualized objects like barcodes and QR codes, can interact using the various mobile and fixed networks driven by an intelligent platform to either extend (e.g. ERP or CRM application) or derive new applications (e.g. contextual analytics). We are already beginning to see examples in various industry sectors such as smart grids, asset and fleet management, connected cars, and telemedicine. In Indonesia, the highest propensity for IoT would be in such sectors as logistics, transportation and the consumer technology. Indonesian telcos can participate in this opportunity by following a four step approach. First, they can just be a connectivity provider while working with hardware vendors and building partnerships; from here they can possibly graduate to building a platform to manage and provide value-added to IoT connections. Third, they can work toward adding applications to this platform, enhance partnerships and create solutions for clients. Finally, they can enable collaboration across the IoT ecosystem.

    In summary, Indonesia will continue to remain a dynamic telecom market with evolving business models, new services being offered, players being rationalized and, inevitably, data connectivity becoming ubiquitous.