Telecommunications have the role of digitally integrating all sectors of the economy, fomenting a revolution in business marked by connectivity and innovation; Internet of Things is the star of this movementOctober-December | 2017
The telecommunications market is experiencing a unique moment, instigated by the speed with which the digital transformation is encroaching on the everyday life of people and companies and changing habits and business models around the world. In this scenario, the keyword is connectivity, in an industry that changed its vocation from voice to data, reaching an unprecedented level of interactivity.
This evolution is even greater because the communication is changing from interaction between people to communication also with “things”, boosting innovation in various sectors of the economy. This is observed by Craig Wigginton, Deloitte Telecommunications global leader, who was in Brazil in October to join the organization’s entourage of experts at Futurecom – the largest telecommunications and technology event of Latin America, held in São Paulo – and in the third edition of IoT Lunch, a meeting held in the same week, by Deloitte.
We are only at the beginning of a transformation being heated by the Internet of Things. In five to ten years, we will jump from the current two things connected per person to 40 or 60. And smartphones will be the main hub of those connections., Craig Wigginton, Deloitte Telecommunications global leader.
The Ministry of Science, Technology, Innovation and Communications (MCTIC) estimates that the expected benefit with Internet of Things (IoT) may reach US$ 200 billion per year in 2025, representing 10% of the current Gross Domestic Product (GDP) of Brazil. The Ministry evaluates that IoT will be a milestone in the national economy, comparable to the privatization process which took place in late 1990.
The Government’s actions provided for in the National IoT Plan aim to enlarge the Brazilian economy’s competitiveness on the global stage and to substantially contribute to areas such as health, industry, agribusiness and cities.
For Marcia Ogawa, Deloitte Technology, Media and Telecommunications lead partner in Brazil, the country is at the mobility and execution stage. Now, it is needed to enter into practice.
The president of the Brazilian Association of Competitive Telecommunications Service Providers (Telcomp), João Moura, emphasized that any drive for the strengthening and dissemination of IoT in Brazil is relevant and believes it is this a one-way street in the evolution of Brazil’s technological scenario.
“Technology is the protagonist of the digital transformation and has contributed to the creation of a new value chain design in various industries. The market is increasingly more diversified, with new players. Traditional competitors that do not transform will not survive to tell this story”, warned the executive.
The telecommunications industry plays an important role in the mission of integrating the other sectors and improving their productivity. For that, we should pursue the inclusion of our companies in the global chains and also of our young people in this movement., Marcia Ogawa, Deloitte Technology, Media and Telecommunications lead partner in Brazil.
For a more competitive country
The public company Financiadora de Estudos e Projetos (Finep) is a strong ally in IoT development on domestic soil. “We are creating conditions for funding to support this evaluation and the technology’s evolution”, says André Castro Pereira Nunes, Superintendent of Finep’s Innovation in Defense, Energy and Information Technology area.
In May this year, Finep promoted the first public call round for the innovative startups Investment Program. “The market responded very well. We’re selecting projects from the 503 proposals received. Among them, 135 were IoT, that is nearly 30% of the demand. This means that there’s really an effervescence in this sector” says Nunes.
Nunes estimates that businesses are still in an early stage of technology, which was reflected in the quality of the proposals. “This is natural, because they are very new firms that do not have capacity to submit proposals that are more robust and more focused on the market and in the benefit to society than just in the technology”, warns the Superintendent.
In May 2017, Finep also waved to the market with the Telecommunications Program, which aims to finance companies for the purchase of telecommunication equipment developed in Brazil. Domestic or foreign companies can participate, as long as the development is done in Brazil.
The connectivity challenge
Agribusiness, a significantly representative industry in the Brazilian economy, awaits for those IoT breakthroughs, one of the great promises to make it even more competitive. However, this path may encounter obstacles on the issue of connectivity in Brazil, whereas the regions of activity in this sector are the mostly neglected in their infrastructure.
For José Gontijo, from MCTIC, companies are still attached to traditional business models, but will have to change their strategies and seek partners in a pattern in which we all win. “I understand that the investment in little dense regions is not attractive when the return, initially, is not favorable. However, several negotiations can be made, such as seek the private sector to invest in local development, make the region commercially more attractive and thus identify profits and justify the commitment”, he highlights.
Small providers, great agents
According to the National Telecommunications Agency (Anatel), currently, more than 60% of Brazil’s broadband growth is attributed to the performance of small regional providers. This means that they have pulled the internet investment exactly in small towns of the countryside.
Aníbal Diniz, from the Anatel Board, agrees that small national providers will be key to the formation of the IoT ecosystem in Brazil, as they enter into an infrastructure sharing system. “Nobody will be able to provide this megastructure alone”, he said during his panel participation at Futurecom 2017.
“Between 2016 and 2017, more than 50% of broadband additions in Brazil were made through providers. We are, of course, natural players in that scenario and we’re taking care of the connectivity”, says Erich Rao, Vice President of the Board of the Brazilian Association of Internet and Telecommunications Providers (Abrint).
Investment in infrastructure is key
According to Duncan Stewart, Deloitte Canada’s Director of Research in Technology, Media and Telecommunications, developing economies that have not yet invested in telecommunications infrastructure are now in a position to lead these investments, using low-cost wireless technologies, moving faster than the developed countries. For this reason, Brazil must hurry to upgrade its networks to prepare the environment for the advancement of telecommunications and IoT.
Stewart alerts to the next generation of mobile telephony, the 5G, that needs this update to happen. According to the Deloitte Director, this will require the construction of fiber-optic networks, with expansion of the infrastructure. This evolution with 5G, estimated for 2020, will revolutionize the market with provision of super-fast internet, with low latency and high network reliability, and will expand the IoT business.
The initiative, however, will require many investments for the fiber implementation in metropolitan areas. “In the United States, between US$ 130 billion and US$ 150 billion will be invested in the construction of 5G in the next five to seven years”, estimates Stewart.
A lot of 5G investment will be required, but the benefits are impressive. Fiber is a necessity to have quality wireless connectivity., Duncan Stewart, Deloitte Canada’s Director of Research in Technology, Media and Telecommunications.
Many companies have been allies on the journey of strengthening IoT in Brazil. This union of efforts will provide more intelligence in the provision of public and private services, empowerment of people, innovation and entrepreneurship, as well as putting the Country as a technology developer in the global marketplace.
Pollux, an industrial technology company, is one of them. Its President, José Rizzo, has the role of encouraging the IoT development on the national industry, bringing together groups of different spheres of private sector and universities. Rizzo has strengthened his performance on this journey for being also the co-founder and president of the Brazilian Association of Industrial Internet (ABII).
“Brazil has what it takes to be successful in this market”, says Rizzo. The Executive reports that Pollux has brought unprecedented industrial internet models for the Country, in a way that all the whole Brazilian industrial segment gains strength before important advances observed in Europe, North America and in Asia.
“The ‘robot as a service’ business model is a trend in the industry abroad and now we can offer it here, in industries in which we had no access. When we talk about robots in Brazil, about 85% are in the automotive industry. We need to open this discussion to other sectors”, he believes.
Urban mobility innovation
The means of payment systems have also much to benefit from the evolution of the telecommunications industry in Brazil. In one example, Alelo, a card company specialized in benefits solutions and corporate expenses management, prepares to enter the electronic tolling segment in highways and mall’s parking lots.
The new venture happens through the Veloe brand, created to offer a fully digital service with a focus on customer experience and simplicity of use. “Our services will be supported by cutting-edge technologies, such as Internet of Things, which will allow the expansion of communication through a variety of devices, from smartphones to wearable technologies”, says Raul Moreira, Alelo’s president.
This transforming strategy is supported by the use of technologies such as business intelligence and analytics, contributing to promote the company’s digital culture.
Also on this path, TIM prepares a business unit focused on IoT and analytics; a co-working to receive startups and business partners to develop solutions in this area. The space will feature a multidisciplinary team, supported by startup concepts and methods, and is born with a revenue of over R$ 50 million per year from the M2M (“machine to machine”) connections. The goal, according to the provider, is to add value services to connectivity, especially in areas such as agriculture and livestock, cities, health and transport.
“In addition to the company being seeking strategic partners, we also want to stimulate and develop new business models, offering intelligence aggregated to connectivity”, says Luís Minoru Shibata, TIM Brasil’s Vice President of Strategy and Innovation.
José Gontijo, from MCTIC, designs a hyperconnected future, in which society as a whole can enjoy the IoT benefits (which, according to him, will drop that name and become simply “internet”), with people having more time for themselves and their family. “Services will be more automated, agile and integrated, resulting in greater convenience, productivity, profit and innovative professions and in a more prosperous Brazil.”
Brazilians are connected at dawn
The survey “Global Mobile Consumer Survey 2017” held in 21 countries, including a sample of 2,000 mobile users in Brazil, brought curious results about the connected Brazilian profile. One of them is that 45% of Brazil’s youth between 18 and 24 years tend to check their social networks during the early hours.
The behavior came to attest that the Brazilians are increasingly connected to their smartphones. According to Marcia Ogawa, Deloitte Brazil’s lead partner of Technology, Media and Telecommunications, for this reason, the survey identified, even with the country’s economic crisis, a 7% increase in the number of owners of smartphones compared to 2016.
“It was one of the surprises we recorded that 87% of respondents have smartphones. This is also reflected in the drop in use of tablets, reaffirming the preference for smartphones, considered the devices with greatest acceptance in Brazil”, says Marcia.
Despite the increase of more than 38% in the 4G penetration in Brazil, identified among the study participants in the Country, wi-fi has consolidated its position as the most used internet access connection by the Brazilians interviewed. “This hyperconnectivity reality puts on the telecommunications industry the need to adapt channels, infrastructure and the service offerings to meet this growing demand”, punctuates the Deloitte’s partner.