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Twilio highlights the threat to operators’ IoT connectivity business

Twilio highlights the threat to operators’ IoT connectivity business

An article by Tom Rebbeck, Research Director Enterprise and IoT at Analysys Mason.

Most operators with a focus on IoT are exploring ways to move into the provision of other services, from hardware to applications, despite earning 90% of IoT revenue from connectivity.

The launch of Twilio’s IoT connectivity offer, in April 2018, shows the threat to the basic connectivity business. If operators fail to address the threat of companies like Twilio, they may lose connectivity business without ever gaining traction in other parts of the value chain.

Twilio was launched in 2007 and has since become probably the largest provider of CPaaS (communications platform as a service), generating USD399 million of revenue in 2017. It is best known for providing companies like Airbnb, Uber and Whatsapp with SMS and voice services. For example, it provides the platform from which passengers can anonymously call (or be called by) their Uber driver.

Twilio’s offer is competitive, but not the cheapest

Twilio’s IoT offer, ‘Programmable Wireless’, is relatively simple in that it is restricted to connectivity only. Customers can buy a regular (USD3) or embedded SIM (USD4), pay a monthly fee and then pay for the data on top. Discounts are offered for greater volumes of data and connections.

Prices are all listed on the Twilio website. This is something that differentiates the offer from those of most operators outside the USA, who only provide pricing details on application, which, in itself, is likely to be a barrier, especially at the low-volume end of the market. We already know that the number of IoT devices using standard consumer mobile broadband tariffs is in the millions, precisely for this reason.

Twilio also provides a full list of the operators that it uses around the world, and the type of connection offered (2G, 3G or 4G). Again, this acts as a differentiator from most other MNOs and MVNOs that only provide these details on request and under non-disclosure agreements.

The prices being offered by Twilio are reasonably competitive, compared to other published prices, without being the cheapest in the market. The main criticism of the price list is its complexity. With so many variables (number of SIMs, data volume and location – prices vary by country, even within the European Union), actual pricing is hard to calculate compared to that of some of the other providers that have appeared recently, such as 1NCE, that are sticking to a single price per SIM, regardless of location and quantity. (1NCE charges a EUR10 fee that includes a SIM and 500MB of data.)

Figure 1: Lowest price for a single SIM with 50MB of data on a 1-year subscription1

Lowest price for a single SIM with 50MB of data on a 1-year subscription

1 All prices are from Analysys Mason’s M2M pricing benchmark 2Q 2018, based on operator data. Note that both 1NCE and Monogoto include 500MB of data to be used within 10 years. T-Mobile’s plan includes unlimited data, but speed is limited to 64Kbps.

Twilio is initially offering connectivity using traditional cellular networks (2G, 3G and 4G), and the use of NB-IoT and LTE-M networks is planned.

Twilio’s background counts

Twilio’s heritage is significant for a number of reasons.

  • Firstly, it is already acting as an intermediary between its customers and the networks of multiple telecoms operators; Twilio exists because it stepped in to fill a gap that the telecoms operators themselves were not filling. There may be parallels with Twilio’s IoT connectivity offering.
  • Secondly, Twilio’s services are designed to be used by developers. All services can be bought and managed through APIs with no manual intervention. This is significant, partly as it will help to appeal to technology firms that are used to dealing with APIs, but more importantly, it fits well with the IoT market. For millions (and potentially billions) of devices to be connected to telecoms networks with low ARPCs, services will need to be completely (or almost completely) automated. Some operators offer similar tools, but these have limitations. For example, Verizon’s ThingSpace APIs are aimed at managing connections on Verizon Wireless’ USA network. Twilio is providing a single set of APIs to work globally.
  • Thirdly, developers are already aware of Twilio. Twilio claims that over 2 million developers have used its tools – far more than have used tools provided by telecoms operators. It has a strong brand awareness in this community, and it has a base of customers to which it can cross-sell its services. However, the significance of this base is unclear; companies like Uber and Whatsapp do not have an obvious need for IoT connectivity, at least for their current core businesses.

Twilio is one of a number of new entrant MVNOs that are exploring the IoT opportunity just as LTE-M and NB-IoT networks are gradually being switched on. Along with 1NCE, in which Deutsche Telekom has a minority stake, there are other players, such as Monogoto (with a similar offer to 1NCE but with a price of USD10).

The existing IoT MVNOs (companies such as Aeris, Arkessa and Kore) have typically worked closely with potential customers to help them to develop their own IoT solutions. The new wave of MVNOs, typified by Twilio, has their sights set on the developer market. While Twilio does have engineers available to work with large clients, it is providing ample documentation to help customers and wants them to be able to serve themselves.

The significance of this should not be lost on MNOs. Twilio’s core business, to aggregate access to telecoms services like voice and SMS and make them accessible to developers through a set of APIs, would not exist if telecoms operators had done a better job of meeting developer needs. As telecoms operators focus on the more complex aspects of IoT solutions, which often need professional services skills such as system design and integration, they risk ignoring part of the market. Cheap connectivity solutions, like NB-IoT, need automation, not systems integration.

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