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How Big is the Internet of Things Market?

By Gary Kim March 03, 2014

Count Telefónica among global telcos most committed to the strategy of partnering even with over the top competitors to create new "digital" services to drive new revenues. In the latest move, Telefónica signed deals with LG, Samsung and Sony on their development of wearable technology.

Telefónica will work with the three companies on the integration of its services, such as its VoIP app Tu Go, into their hardware.

At least for the moment, smartwatches are to mobile connections as Wi-Fi is to a fixed network connection. In other words, end users “pay” for the fixed access connection, and then use “no incremental charge” Wi-Fi or Bluetooth to extend the access connection and services to the remote device.

That adds yet one more wrinkle to any forecasts of the impact of sensor applications, machine-to-machine or Internet of Things on mobile service provider revenue, whatever else those trends might mean for app or device suppliers.

As consumer use of Wi-Fi drives other economic activity, such as purchasing of high-speed access or use of revenue-generating apps and services, so integration of Tu Go with a smart watch could incrementally boost Telefónica revenues.

Possibly more significantly, such functionality might drive more consumers to choose Telefónica access services, over those provided by its rivals, or possibly prevent some amount of customer churn.

But the impact is likely to be subtle. At least in the early years, it also is likely that machine to machine or Internet of Things revenue upside for service providers will be rather modest. And it might be much more modest than some believe, since analysts now use wildly divergent definitions of IoT devices in use, just as observers used similarly used the term “connected device” to include both access connections used by tablets as well as industrial sensors.

Some analysts go even further, and would consider a “smartphone” within the framework of Internet of Things. That means one cannot evaluate any projections of future market size or revenue without also knowing the definitions being used to make the projections.

By some estimates, the number of IoT devices connected to networks will number as many as nine billion in 2018, up from about two billion in 2014.

But Analysys Mason estimates machine to machine connections at only 200 million devices in 2013, while the GSMA predicts there will be 250 million M2M connections in service in 2014. In other words, there already is an order of magnitude divergence in unit sizing, when looking either at machine to machine or IoT adoption, based on the definitions. 




Edited by Cassandra Tucker
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