Ericsson will help Tier 3 carriers in Internet of Things push

ATLANTA--Ericsson (NASDAQ: ERIC)  hopes to help Tier 3 carriers expand their business into the Internet of Things, according to an Ericsson executive. However, challenges await smaller carriers that are looking to expand beyond providing traditional voice and data services to consumers.

Walter Megura, Ericsson's vice president and head of industry and society for North America, noted that there is a collision happening in the industry between communications and IT technologies as LTE and cloud computing expand their reach. Smaller operators have a role to play in that world, he said, but it will not be as easy as simply upgrading their network gear.

"I think for them the challenge is a combination of [their] business model and desire to adapt and change, and that has a couple of dimensions," Megura said in an interview with FierceWireless here at the Competitive Carriers Association Global Expo.

Megura said that smaller carriers will need to work with an ecosystem. CCA plans to change its Global Expo next year to the "Mobile Carriers Show" and invite a wider range of vendors and software developers to help smaller carriers expand their business into the realms of the connected car, home automation, mobile healthcare, connected farming and more.

To that end, Megura said that bringing in new companies is important. "In this emerging environment you are going to work with partners," he said. "You're not going to do everything yourself."

Ericsson can bring "huge value" to Tier 3 carriers as they make those transitions, he said. Megura noted that Ericsson has a history and relationship with many small carriers, knows their networks and has built up trust with them. According to Ericsson, the company has deals with 60 to 70 percent of CCA's members outside of Sprint (NYSE: S) and T-Mobile US (NYSE:TMUS). Ericsson can bring tools such as the cloud, service enablement, data analytics, managed services, and device testing and verification, either on its own or in conjunction with others, Megura said.

From a technology standpoint, Ericsson has solutions to help smaller carriers, Megura added. The real question is whether the carriers are "open and willing" to evolve their business models. Over time, as mobile saturation continues, and as customers move to IP-based services, the smaller carriers will face pressure on their traditional sources of revenue, he said.

To combat that, smaller carriers should not limit themselves to their existing network footprint, he said. For instance, small and rural carriers can connect to CCA's roaming hub to roam onto the networks of any other players that are also connected to the hub.

"They have the best customer relationships," Megura said. "What those relationships give them access to are the real problems of their business customers." If carriers can leverage their network to solve the problem of a business customer in their network footprint, Megura said, why can't they do the same thing for another customer that might not be in their footprint? "Ericsson is prepared as a company to help lead and work that discussion and open up those doors," he said.

Helping smaller carriers push into IoT is in keeping with Ericsson's long-term strategic goals. Last year the vendor derived 15 percent of its revenues from customers that are not wireless carriers, up from 10 percent in 2013 and 5 percent in 2009. Ericsson aims to boost that figure to 25 percent in 2020.

Ericsson is pushing hard in three main vertical markets, Megura said: energy and utilities, transportation, and public safety. In energy, Ericsson is working with companies including Consolidated Edison and Hydro-Québec to create a common platform for all of their networks. In transportation, Ericsson is thinking beyond connected cars and fleet management to vehicle-to-vehicle and vehicle-to-infrastructure communications. And in public safety, the company is teaming up with Motorola Solutions on solutions for FirstNet, the interoperable broadband network for first responders.

Despite the enthusiasm to get smaller carriers more involved in IoT, Patrick Kaiser, Huawei's director of wireless-product management in North America, said that although he thinks there is an opportunity, he is "conservative with respect to the size." Kaiser noted that the average revenue per user of an M2M connection is typically no more than one-tenth that of consumer ARPU.

However, George Reed, senior vice president of solutions and marketing at Huawei Technologies USA, said that once smaller carriers "get onto the LTE train, now they can move onto the next train, whatever that is." He noted that sensor-based applications are "huge" in the agriculture market and in farming.

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