How Roaming Clearing Houses Can Capitalise on the IoT Roaming Opportunity

September 2023

Alex Webb

Senior Research Analyst

IoT devices are becoming increasingly vital, with their wide array of applications enabling operators, enterprises, consumers, and governments to integrate them into everyday life. As a consequence, the number of roaming IoT devices is also expected by Juniper Research to grow over the next five years, from 146 million in 2023, to 595 million in 2028.
 
However, as we discuss in our latest roaming clearing research, while enterprises stand to benefit handsomely from this growth, operators are anticipated by Juniper Research to see limited revenue per connection from these new IoT devices. This is especially true for new LPWA (Low-power Wide-area Networks), which are expected to account for over 80% of connections in 2028. LPWA networks are anticipated to account for a high proportion of connections by Juniper Research, as they allow users to reduce the cost of operating roaming IoT devices, via power-saving modes and reduced hardware costs.
 
However, despite this demand, operators receive a fraction of the marginal revenue from LPWA roaming devices that they receive from alternative networks such as 4G and 5G. This is as these devices produce limited volumes of data, and the diverse collection of use cases. Moreover, Juniper Research anticipates that the average revenue per LPWA roaming connection will decline over the next five years, from $0.08 a year in 2023 to $0.05 in 2028, as operators face increasing pressure for competitive pricing.

New Strategies Required

 
In order to capitalise on the growing demand for their services, data and financial clearing houses must adopt two key monetisation strategies specific to IoT:
 
Firstly, clearing houses must provide highly scalable services to operators, with the necessary capacity to handle the increasing volumes of data and other information produced by IoT roaming. Whilst important in monetising the demand for the services of all operators, this strategy will be particularly important when providing services to large-scale operators and those in emerging markets. Large operators will require their clearing houses to be able to handle the increasingly vast amounts of traffic and data over their networks, adjusting where resources are deployed according to region or country-specific trends.
 
In emerging markets, scalability will be crucial to data and financial clearing houses providing high-quality services. This is as the number of IoT devices in these markets is expected to grow rapidly over the next five years, meaning that clearing houses must be able to scale up their operations to keep pace with this growth. For example, the number of IoT roaming devices is expected to grow 408% over the next five years, from 146 million in 2023 to 595 million in 2028.

Achieving Scalability & Capacity

 
To achieve this scalability and capacity, Juniper Research recommends that data and financial clearing houses utilise two key technologies.
 
Firstly, clearing services must become increasingly cloud based. Entirely cloud based clearing solutions have already been launched in the securities and financial markets, and roaming clearing houses must follow suite if they wish to keep pace with operator demand. For these solutions to be effective, their traffic must be treated as mission critical, as otherwise clearing houses run the risk of limiting their NRTDRE (Near Real-time Data Roaming Exchange) capabilities. Mission-critical cloud access and services will result in additional operating costs for clearing houses.
 
Secondly, data and financial clearing houses must also look to take advantage of developments in traffic segmentation. As operator networks become increasingly virtualised, clearing houses can begin to segment traffic by a growing number of parameters. This allows specific connections or behaviours to be isolated and have different clearing solutions applied.
 
Characteristics of IoT such as low revenue per connection mean that there is limited viability to apply traditional clearing house solutions and methods. Even in circumstances where this is somewhat effective, operator revenue will still remain constrained. Juniper Research recommends that clearing houses utilise new tools, such as micro-segmentation, to achieve the necessary traffic divisions for maximising IoT revenue.
 
Micro-segmentation approaches utilise far greater volumes and detailed information in segmentation processes. This enables policies that are more flexible and granular to meet highly specific demands. As a result, micro-segmentation is especially useful when looking to identify specific behaviours from roaming IoT devices, such as permanent roaming.