Essay: Internet connection and devices

These days the Internet of things becomes one of the essential part in our every day life by giving us products such as streamlining business processes, controlling over door locks, giving a picture of our resource consumption measurements, and better connect us to the people, systems, devices and surroundings that shape our daily lives. Therefore, network and service providers should expect considerable increase of Internet of things devices and amount of the traffic generated by that devices in the near future. It can be predicted that the number of Internet of things devices would be significantly more than mobile phones and become the largest category of connected devices in the next few years. For mobile network operators the main source of their revenue would be to provide connectivity for a such huge number of devices in many different fields.

According to Ericsson estimates:

– a total number of Internet of things devices connections will reach 15,7 billion by 2021, 1.5 billion of them will be using mobile network opposite today’s current 400 million connections. Mobile network operators will gain their revenues even if the Internet of things devices which use cellular systems will account less than 10% of overall connections. It is expected that cellular-connected Internet of things devices will grow 2,7 times compare with 2017;

– by 2018, Internet of things sensors will become the main type of connected devices, due to the growth of their number;

– in 2016 internet traffic passed 1 zettabyte, while in 2020 it is expected that it will grow 30 times. [1]

Figure 1: growth in connected devices

[Source:]

Kazakhstan has a great interest and potential in terms of Internet of things and Big data. Country has the Internet of things development center, University Alliance SAP which work with biggest banks and business to develop their management processes. Therefore, Internet of things aspect is developing very fast in the country.

Almaty is the biggest city in Kazakhstan with the highest population density within a whole country, more than one million. Every year this number grows up to 2-3 percent which led to growth of the number of cars that cause problems with traffic on roads and lack of parking area. To solve these issues a lot of different solutions were looked for by the government. In that purpose I present an idea by implementing “Smart Car Parking” technology. The whole of the process includes sensors sending data about occupancy of the parking area towards car drivers and parking owners. Drivers can send a request or monitor for the spare space in the parking, thus be informed about spare parking places which allows them to not spend their time on finding it. After receiving all the data is analyzed and then used to manage parking area be more properly.

In every business model the value chain is the most significant part. For Internet of things sector it becomes more complicated, due to the large number of processes involved in it. In order to deliver a service for end user in Internet of things a lot of stakeholders have to work together in partnership. It is important for each of them to allocate in the position in terms of value chain. Figure 1 illustrates simplified model of the value chain and collaboration between them.

Figure 1: Generic value chain for Internet of things services, including share of value

[Source:]

In the first box of this model is occupied by input systems or hardware. It can be various types of devices here such as sensors, meters, Bots, SIM cards and others. They can differ from each other, however there are some defined standards for devices with similar characteristics. In “Smart Car Parking” eye 3-axis magnetic sensors are used to generate and send data about place in the parking. They indicates every movement of vehicles in the area.

Device producers capture up to 25% of the total value. In this part of the chain revenue goes to device vendors. In other words to companies which produce Internet of things connected devices. Hardware can be designed by several manufacturers or network operators. Some of them can be produced by alliances between several producers, which of them focused on a thin area of the device. For instance, one company can provide some of the elements of hardware and other companies assemble the final product. Mobile network operators can get some revenues in this stage depending on how they work in partnerships with device vendors. In this case usually aside from offering connectivity operators afford some sort of hardware. For example, SIM cards for mobile devices or modems for remote connection such as wi-fi modems based on cellular network.

However, the vast majority of the revenue for mobile network operators is got from provisioning a connectivity and connectivity management for Internet of things and can reach up to 15% of the total value. Moreover, connectivity mostly can gain a high level of margin, approximately 10%. Network operators’ main part of the revenue will be earned through management of the network, data analysis and use of data they collect. Beyond on transporting data from one end point to another one, they have to provide data-centric value in terms to make more money. Many companies nowadays demonstrate that they become more assured about evolving connectivity as a component of their business strategy to update and operate in new other fields of the whole market. From these developments it can be observed that most of the mobile operator companies started offering machine to machine services, which comprise elements for medium levels of the value chain. Operators are moving from simple business models that were focused on just offering connectivity to becoming much closer to the end users.

Mobile network operators should to rethink about their infrastructure in order to empower smooth work of these services and change their business models. Otherwise, network operators will not be able to attract Internet of things spend. Most of the operators will not stop on providing just connectivity. Their main obvious ambition is to earn a larger share of spend on Internet of things by moving along the value chain by leveraging their core assets, offering platforms for Internet of things processes, creating necessary ecosystems, providing analytics to big companies and becoming transformation partners. Some of the big operators nowadays have abilities to offer for their customers end-to-end Internet of things solutions. However, they can face with different competitors such as start-ups or big internet companies. It means that operators are worried about in what part of Internet of things services to invest.

While network operators take only up to 15% of the whole revenue, over the top companies which provide applications and services on collecting and managing data gather more than a half. As it was mentioned above in this part provider could be a little start up company or huge internet company, which allocates in the market for a long time. There are no doubts that the biggest part of Internet of things’ revenues will be allocated in added-value services and applications. Service providers are more concentrated on data monetization. To be successful they offer such services as collecting, assembling data from the network, applications and different devices in order to present it to customers or third-party analytic companies.

2. Environmental analysis

The mobile market as whole showed significantly increase for fifteen years in Kazakhstan. Mobile operators now turn to be focused on offering machine to machine connectivity, data collection and all services related to Internet of things. There are four factors should be taken into account by company before entering this market.

Political: Internet of things and Big Data is still new and developing technology for Kazakhstan. Nevertheless, there are numbers of programs opened by government initiative such as “Informative Kazakhstan 2020” and others. The main objectives and aiming targets is to help and encourage telecommunication and IT companies to evolve wireless networks and IT technologies. Some of the biggest projects related to Internet of things and Big Data traffic are carried out by orders from government agencies. Nevertheless, there are some problems need to be solved. For example, there are still no generally accepted standards in this industry. The variety of such standards that exists now, unfortunately, does not work. This is not very good for business, since providers must match all these protocols and solve many related tasks. However, this is a question not only for Kazakhstan. Providers now have to talk a lot about this with regulators and public organizations. But, in general, Kazakhstan is ready to work with large data, for the concept of the Internet of things.

Telecommunication companies and operators Kazakhstan are over regulated. For this reason, usually companies do not have big authorities and have some obstacles in determining the price for services. For example, the antimonopoly committee is now busy studying the activities of cellular operators for anti-competitive activities. This test followed after the largest cellular operator of Kazakhstan “Kcell” was convicted of violations of competition law. For mobile providers it means that followed tests will become more strict and will take place periodically.

However, it is expected that from the first of July this year Kazakhstan government can refuse regulation of pricing in regulated sectors of the economy, such as telecommunication sector. The government believes that market pricing will replace it and there will not be need for such over regulating. Such norms are stipulated in the draft amendments to the legislative acts on competition issues. The administration is aiming that these innovations will allow to increase competition in the market, as a result prices for products of providers will decrease. For mobile operators it means that instead of strict regulations that were before they will have capabilities to have more freedom in establishing prices on their offered services by themselves. [4]

Econimical: in 2015 country experienced two devaluations of national currency. People’s revenues depreciated twice. Consequently, they tended to spend their money more carefully. Naturally it had a significant influence in all factors of life, including a business sector. Almost in all sectors of business there was a significant slowdown. The amount of investments reduced from investment companies due to increased risk factor for investors.

By 2015 market almost reached its peak and the increase slowed down. Even so, mobile operators still have good chances to get the high revenues from offering mobile network services. In 2015 the penetration rate of mobile communication in Kazakhstan reached 185%. It means that more than 31 million SIM-cards were registered, while population of the country counts only seventeen million. It can be described by peculiarity of territory. In the vast majority of rural territories fixed telephone networks are not developed respectively. Therefore, not all of the people in these areas have proper to access the Internet. People in rural terrains have to use mobile network for this purpose. Second main reason is that commonly tariffs for voice calls and Internet became cheaper by mobile network than by fixed telephone network. [3] These all factors have a good influence and give opportunity to expand internet of things within the whole country.

Social: since January 2016 customers were allowed switch mobile operator retaining their mobile number without changing it. Subscribers owned possibility to choose operator depend on services it provides, tariffs and quality of offered service. These changes encouraged mobile network providers to be more competitive and focused on customers’ loyalty. However, the proportion of the market share between main mobile operators did not change dramatically, which means that each operator has its own constant client base. [5]

Since the market in Kazakhstan is oversaturated network operators are more focused not on gaining new client base but to keep its own on the same level. It is because the whole market is already shared between main 4 operators in the country. By announcing new technology and services it is quite important for providers to be the first among other providers. People tend to trust more that company that offers new product first rather than following companies. Furthermore, consumers pay big attention on the quality and spread of the network. “Beeline” company has a considerable advantage. It has the biggest network covered area in the country. Its network covers all settlements with population more than one thousand people. Although, another competitive company “Kcell” is associated with high quality among population. Therefore, “Beeline” is doing its best to grant its customer with the highest quality and keep cost at the same level.

Technology: In 2016 the government started a program founded on affording all the country by 4G network. Almost all 4G stations belonged to the company “Altel” because only this operator had a license to upgrade its network to work on 4G network. It gave the company a huge privilege over other operators. However, in 2016 all Kazakh operators got the license to work on LTE frequencies and render services in the 4G standard, which increased the level of competition in this sector. For every operator it was extremely important to configure its previous network in terms to provide 4G technology for further. Now “Beeline” is trying to integrate itself with all enhancements and changes that have taken place. It is a long process by reconfiguration its network in big cities firstly with high demand and density of people, then move to small cities and rural territories.

First steps in technological progress were done in 2016 by implementing first network based on LPWAN for Internet of things technology in Shymkent city. This network is specified for smart metering, management of security, weather and climate, street lighting, city parking and household services.

3. SWOT analysis

The main advantage of “Beeline” over its competitors is that it is a company which is trying to implement and adapt new advanced technologies as fast as possible. This could be the main excellence over competitors. It started to implement new technologies related to Internet of things few years ago. Firstly, it was the first network operator which provided initial services related to Internet of things in the country. Service was focused on car monitoring using cellular network. The main customers were formed by business, other companies. They had abilities to track paths of their cars, consumption of oil and time spent to get to the destination. But in that time no data was collected or analyzed. Customers were not provided by any application or tools to do it. Nevertheless, now company has an experience and some kind of understanding of implementing of similar technology. This knowledge company will try to use in “Smart Car Parking” technology. Information about parking places in the area will be carried through cellular network. It is predicted that users will make use of SIM cards as previously. Accordingly network provider already has a platform specialized on carrying some sort of data within same SIM used for voice calls.

Strengths: “Beeline” is realizing a corporate platform for monitoring and managing SIM cards machine to machine named Jasper. The Jasper platform is a single control center, accessible remotely and at any convenient time. This service allows you to use various settings and get a complete history of connections between equipment in real time. Data is provided in both digital and graphical form. This is a new product that has no analogues in Kazakhstan. Consequently the company can be the first company implementing Internet of things technologies within the country. It is clear for telecommunication business that the mobile communication market can no longer grow, increasing the base of subscriber-people. After all, almost all people have phones. Today, the exchange of data between machines is rapidly being introduced, and “Beeline” becomes the leader in this field. By using Jasper system, providers can control not only the operation of devices remotely, but also monitor cases of misuse of sim cards, monitor traffic consumption. Now company is actively working on testing the system and preparing for submission of proposals on the market. All of these gives a company opportunity to achieve significant goals

In addition this network provider has the broadest network system in the country. Thus it will take less additional expenses to implement new technologies into established networks. Additionally “Beeline” is a part of “Vympelcom” group of companies and it can use previous experience of companies that also belong to this group. For example, it can use previous Georgia’s experience in implementing sensors for car parking. All these factors can be evaluated as big opportunities for company to get leadership over other companies.

Moreover, “Beeline” has its own broadband network. In this terms provider can use it in the future when implementing new services at subscribers’ homes. For example, broadband network can be used in “Smart home” technologies.

Weakness: Barriers to entry to the wide-area connectivity market are high for mobile Internet of things connectivity, but Internet of things can leverage an existing network serving many customers. At the same time “Beeline” is inferior in quality of the provided network services in comparison with other operator such as “Kcell”. Not all big cities are covered by 4G network. It is a big challenge for the provider because it owns the largest nationwide telecom coverage and penetration. Implementing every new technology requires more time to install it within a whole network wide.

Provisioning services relating to Internet of things are totally new field of the market for Kazakhstan. Possibility to earn big amount of revenues are attractive for all mobile operators sharing the market. Here “Beeline” clearly will meet a high level of competition. Providers such as “Altel” and “Kcell” which have a wide 4G coverage area now are focusing on projects relating to machine to machine connectivity, Big data etc. For example, “Kcell” last year has announced its new product named “Telemetry”. This product is widely used with an eye to present data about ongoing transactions in each bank equipment. In this field “Kcell” was first company provided such kind of service and works with almost all banks in the country and got leadership in this part of the business. [6] However, other providers can occupy other fields.

Opportunities: There are a lot of opportunities and potentiality for business in terms of emerging market. Data gained from Internet of Things is not big traffic and does not require high speeds and throughput. It can be carried through 3G or 2G network in technical terms. As a result, it offers big opportunities for mobile operators to make good business by providing its own networks to carry such data. In rural areas or territories without broadband fixed network the best solution is to use mobile network for connectivity. Cellular network’s penetration and coverage is broader than fixed telephone network in some parts of the country. Other main advantage of mobile connectivity is that for subscribers it is cheaper to carry such traffic through cellular network.

Threats:

4. Market analysis and Service positioning

Nowadays a lot of big cities are faced with problems related to the lack of spare parking area and traffic jam. Usually drivers spend a large amount of time looking for spare place to park their vehicles. For the city administration it becomes a big problem to grant its citizens with enough number of such places. Service which I present to “Beeline” company is “Smart Car Parking” technology. This service is focused on providing relevant data for drivers and parking owners about occupancy of parking places. Consequently, it becomes as solution for both sides to car owners and the government. It is expected from this service that it will bring a lot of features such as: low cost management solutions, parking becomes quicker and easier for subscribers, reducing traffic congestion and amount of emissions produced from cars, more efficient utilization of parking, increasing parking revenue, real-time data about parking behavior, increase of customer’s satisfaction.  

The whole system by itself consists of sensors which will identify availability and occupancy time of the parking place, mobile phone application which provides user interface, mobile-phone automated payment systems that will allowed drivers to pay for parking and book the place in advance through their phones, data centers. All necessary connectivity will be wireless, i.e. will be provided via cellular network. Mobile operators will occupy the whole part related to interaction between customer and Internet of things devices, sensors and other more. Telecommunication companies will gain some revenues by providing technological platforms to maintain online payments and collecting data.

Provisioning of this service does not require serious upgrades or additional investments in infrastructure of the network. It requires all parking resources either indoor or outdoor being occupied by sensors. Detection system works on wireless and wired sensor network. In this type of method the data center and sensors are connected wireless by using LoRaWAN system. That system is not announced in Kazakhstan yet. Therefore, for “Beeline” it is a good opportunity to be the first provider working with LoRa Alliance and get private resolution to work and implement this technology in its network system. Existing cellular network of operator could be used for interacting processes between server and subscribers’ phones. It will totally meet requirements for such type of connectivity.

There are several infrastructure and software investments needed in order to provide this service properly. First of all mobile operator must be sure that all the territory that is expected to be offered by this service is covered by mobile network. It means that clients should have an access for the network in all parts of the city. Furthermore, good quality of network coverage is required in parking with implemented sensors to send appropriate data about occupancy of parking. Secondly, this technology implies mobile application. The main purpose of it is to supply clients by interface to have an access for service resources. In this point “Beeline” does not have experience in providing IT services or any services related to this field. Therefore, company can work with other companies that focused and have more experience and knowledge in developing mobile applications in alliance or in partnership model. For example, “Beeline” can hire other company which can develop an application as a vendor and share some part of the revenue with them. The other option for “Beeline” is to organize new department in the company which will be focused on mobile application developing. But in this situation company can meet other obstacles linked to the necessity of reorganization and learning company’s stuff. The whole process requires a time to bring it to life and has a high risk that the new department will not be as sufficient and good like other vendors. The principle of connection between sensors data center is shown in Figure 3.

Figure 3: Example of “Smart Car Parking” technology

[Source:https://www.alibaba.com/product-detail/Accurate-wireless-smart-LoRa-parking-sensor_60569582237.html]

MARKET SHARE revenue in 1,2,3 years,

Potentially, this product will be highly demanded in big cities with crowed traffic on its roads. Firstly, I would recommend to the company to start announcing the service in main and biggest cities of the country like Almaty, Astana and Shymkent. Accordingly, apart from high demand they have technological potential to offer such service. Network provider has an opportunity to charge both type of subscribers: administrator and ordinary users. Administrators will use the service to manage the parking and analyze gained data, while ordinary subscribers will be provided by interface to search car parking free spaces. Probably primary customers of such technologies will consist of the government, city administration, parking managers, companies owned big buildings with parking area near them. For instance, malls and entertainment centers.

For such kind of the product it is expected that the main client will appear as the government, because it is the major instate interested in the intelligent usage of the city’s infrastructure. In addition to that for “Beeline” it is a good chance to engage the government as a investor to the project. In other words, city government can make some investments or pay for service to the mobile company after it performed. For mobile operator the best scenario is when the government invests money to the project in the beginning. While network provider can optimize and develop its own network. In that way the company will expect profit of that product more earlier, probably in first two or three years. In another case “Beeline” will cover all expenses by itself and revenue from first three-four years will be directed to cover them. However, the company in this case could get all the revenue from offering such type of service.

On other hand “Beeline” with “Smart Car Parking” service can find clients among private business owners and parking managers. Typically, in megacities there are a quantity of places where many people are going to, which can cause a stack on the parking. By implementing this system administration of such establishments can control and monitor parking area to satisfy their customers. Parking managers are expected to use it to increase their revenues and utilization of parking. Here the switching cost of this type of subscriber would not be as high as government’s. Nevertheless, it will depend on the size of parking and value of the provided service.

For ordinary subscribers payment method can be based on the payment for use at once. Customers will be charged after offering the information about free parking places. Obviously, provider can not charge its clients high. Otherwise, service could not be used widely. I would recommend company to charge clients with extra fees when applying for parking by one-two percent of total cost of the parking price.

The pricing system of the service will depend on the type of customer which will use the product. For example, the payment method between government and network provider may be defined by contract based arrangements. The duration of which can vary from couple years. The amount of payment will be defined by the area and traffic will be served by provider. Pricing system can be regulated by governance of the city. Mainly the price will be based on historical charge of the similar products in other countries. Administrator will be charged annually or monthly, while ordinary customers will pay upon use of the service.

During the process of determining the price for the service competitors should be taken into account. There are 4 main mobile network operators which provide voice and data services In Kazakhstan. Two of them “Beeline” and “Kcell” are leading and sharing the market by 38 percent and 35 percent respectively. Remaining two have only up to 15 percent each. Such pattern in market sharing stays constant for several years. [3] As a result the barriers for new entrants are highly protected. Mainly because new companies require a big capital to compete against already established network providers. Moreover, there are high government requirements to mobile operators to enter country’s market and get license for providing the service. Companies targeting to be a mobile network provider must have traffic accounting systems, qualified staff of technical managers and specialists, hardware and software to ensure the conduct of operational and search activities on all communication networks, as well as the collection and storage for two years of service information about subscribers of all communication networks, trunk communication lines, management center in the territory of the Republic of Kazakhstan.

5. Financial projections:

1. The 2016 Ericsson Mobility Report

2. “The Big Data Market: Business Case, Market Analysis and Forecasts 2017-2022” report mozhet ne ispolzovala- proverit

3. http://expertonline.kz/a14161/

4. http://www.kazpravda.kz

5. https://activ.kz/en/press/3024

6. https://kapital.kz/business/50956/telemetriya-ot-ksell-v-pomocsh-kazahstanskomu-biznesu.html

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Essay Sauce, Internet connection and devices. Available from:<http://www.essaysauce.com/information-technology-essays/internet-connection-and-devices/> [Accessed 24-10-18].