IoT Connectivity Revolution: New MVNO Models Threaten Traditional Operators

The global IoT connectivity market is accelerating at a pace unmatched in 2017, driven by new entrants such as Twilio and 1NCE. According to Tom Rebbeck, Research Director at Analysys Mason, these companies are building their IoT businesses on models inspired by cloud leaders like AWS rather than traditional network operators such as Vodafone. As revenue per connection falls—thanks to the proliferation of NB‑IoT and LTE‑M—these scalable models are poised to set the industry standard.

Investors outside the telecom space are also paying attention. In June 2018, ARM acquired Stream Technologies to broaden its services portfolio, and private‑equity firm Montagu purchased Wireless Logic for a reported £400 million (US$530 million, €455.47 million). The acquisition came after Wireless Logic generated £45 million (US$60 million, €51.56 million) in revenue and £16 million (US$21 million, €18.05 million) EBITDA in the year to April 2017.

This article examines the implications of these developments, drawing on our recent report, IoT MVNOs: Case Studies and Analysis (Volume II), which profiles eight IoT MVNOs. The evolving market presents a significant challenge to both MNOs and established MVNOs that rely on consultative sales and bespoke contracts.

New Entrants Forge a Distinct Connectivity Model

AWS‑style IoT MVNOs are creating a new category of connectivity that departs from the traditional ‘consultative sale’ model. In this model, connectivity is sold independently of other services such as hardware, platforms, or security. Companies can operate across multiple categories—for example, an MNO may sell pure connectivity to some customers while bundling services for others.

Figure 1: Three categories of connectivity type Source: Analysys Mason, 2018

Implications for Traditional Operators and MVNOs

Key Takeaways for Operators

• Public, low prices will pressure all providers. Even customers who do not use Twilio or 1NCE will benchmark against their rates and challenge higher premiums from traditional MVNOs and MNOs. For instance, AT&T and Verizon charge two‑to‑three times more than Twilio for comparable connections.
• Lower prices force tighter cost management. New entrants expect MNOs to respond slowly; however, a rapid price reaction will require all players to scrutinise their cost bases. While consumer MVNOs have succeeded on low‑cost distribution and support, IoT MVNOs must identify sustainable cost advantages—likely in wholesale deals and virtualised core networks, as eSIMs and self‑service reduce the importance of physical distribution.
• Competition may shift from price to features. As price spreads narrow, connectivity providers will compete on platform breadth, security, API access, and support levels—mirroring the AWS advantage of an extensive feature set rather than sheer cost.
• The consultative model faces erosion. The traditional multi‑stage sales approach may be challenged by self‑service models, especially for low‑cost, low‑bandwidth devices. However, complex, high‑bandwidth deployments may still require bespoke guidance.

Operators must assess how these shifts affect their business models. While current models have delivered steady growth, the new, cloud‑inspired frameworks offer the potential for accelerated revenue and are essential for the lower‑cost NB‑IoT and LTE‑M segments. Those unable to adapt risk losing market share.

The author of this blog is Tom Rebbeck, Research Director at Analysys Mason.