How AI and the Internet of Things change the game for telecoms

How AI and the Internet of Things change the game for telecoms

Virtual humans and intelligent, automatic fraud detection are among the upgrades AI and IoT can bring to telecoms. Lower operational costs, broader service portfolios, and new revenue streams await companies able to implement AI and IoT-driven upgrades successfully.

Imagine contacting customer support via a video call. You are instantly connected to Mia. Immediate response apart, this may not strike you as particularly unusual. The fact that she is a lifelike AI-powered virtual being capable of understanding and answering your request probably will. Furthermore, she is simultaneously interacting with 50 other customers while handling your request.

The company behind Mia is Soul Machines, which develops “digital people” for a broad scope of industries, including telecoms. The entities, powered by advanced AI systems, can perform various tasks, including customer support and service.

Soul Machine’s AI is just one example of computer intelligence changing and improving operations for telecoms. Similar examples abound not only for AI but also for the related IoT space.

M&A driving developments

Mergermarket M&A data reveals telecoms continued appetite for AI and IoT-related deals and acquisitions. 2022's deal totals and combined value includes activity until August. If the current pace continues, it could match 2021’s deal total and easily surpass its combined deal value.

Data: Mergermarket. Analysis and graph: BDO Global.

Telecoms' deal activity continues at a time marked by rising inflation and macroeconomic uncertainty and points toward several ongoing trends:

Telecoms are focused on developing their product portfolio, services, and business operations through IoT and AI. This observation is backed by telecoms’ responses in BDO’s 2022 Telecoms Risk Factor Survey: rapid technology substitution and increased competition are perceived as significant industry-specific risks. Telecoms seek to mitigate such risks by rapidly onboarding new technologies, including IoT and AI, and are leveraging M&A to speed up the process.

Competition for scarce AI and IoT talent is leading to so-called acqui-hires, where telecoms acquire companies primarily for their employees' skills and expertise.

Simultaneously, AI and IoT are seen as a trillion-dollar opportunity for mobile network operators.

One of the reasons is that they combine cost-cutting with the ability to develop new services that may be game changers for telecoms.

Global, smart communication with eSIMs

Fundamental technological changes often start with subtle shifts. One such example is eSIMs. An eSIM is more akin to a piece of embedded software than a traditional, physical SIM card.

The difference for telecoms and their customers is enormous. For example, eSIMs mean flexible, seamless user profile and network shifting.

For telecoms, it enables straightforward, rapid onboarding of mobile phones, computers, smart watches, IoT devices and more. Each can have a direct, stand-alone network connection.

Customers will not need to exchange eSIMs and can immediately connect to and use – or switch – mobile connectivity plans upon completing the necessary online forms.

For IoT devices, the advantages of eSIMs include flexible optimisation of network connectivity, fluid network switching, future-proofing (for example, SIM upgrades can be deployed as software updates), lower IoT network costs, and easier rollouts.

With that in mind, it is no surprise that the market for IoT eSIMs is set to double by 2025.

Combining IoT and cloud computing

As the overall market for IoT keeps growing and the number of IoT devices climbs to 41.6 billion, so does the need for management systems. Managing IoT devices efficiently often requires dedicated cloud services to handle IoT devices, applications, and data.

For telecoms, it opens possibilities for delivering full-stack application layers and offering IoT as Platform-as-a-service (PaaS). Spanish Telefonica is pursuing such a strategy and offers full-stack IoT services to more than 10,000 customers.

IoT devices are multiplying, increasing the need for storing and processing data at the network’s edge (as close to the devices as possible). By delivering edge cloud capabilities for IoT devices, telecom companies add value to connectivity services.

The move also increases opportunities to further develop business models around areas like sensor data analytics and control of industrial equipment.

AI is changing the customer experience

Customer demands are changing, and being able to resolve issues rapidly is increasingly vital. At the same time, telecoms are looking to optimise outcomes of money spent on customer support initiatives.

The answer, in many cases, is AI. Conversational AI platforms, often called virtual assistants, can handle many customer conversations and cut business expenses by up to 30%. 

Simultaneously, AI can be used to analyse customer needs and tailor their customer journey more accurately.

One example is Nokia, whose virtual assistant MIKA helps customers identify network issues and solutions. The results include a 20% to 40% increase in first-time resolution rates.

Optimising infrastructure

Telecoms can use AI and IoT to monitor and optimise the performance of infrastructure components.

Regular, physical inspections can be replaced by continuous monitoring by automated IoT systems. Simultaneously, IoT sensors can monitor the surroundings and inform authorities in case of hazards, like fires, or help trek ongoing developments and metrics, including traffic or air quality.

The combination of IoT and AI can also optimise network performance and help telecoms predict and manage changes to demand.

The longer-term potential includes building self-optimising networks that adapt to changes and fix issues before customers are negatively affected. 

Enhancing security

Fraud, cloning, illegal access, theft, and cyber-attacks are just some of the risk vectors that telecoms are facing. For example, CFCA analysis shows that fraud costs telecoms $39.89 billion annually.

AI and IoT can help them protect business data, physical infrastructure, and customer data.

For example, in near real-time, AI can detect anomalies in services and interactions, such as unauthorised network access and fake user profiles. Systems can block access when suspicious activity is detected, minimising risks and damages. The speed saves organisations time and enhances security.

With IoT and AI, cybersecurity moves to the network's edge. Telecoms can remotely manage and survey operations and assets, investigate malfunctions, run firmware upgrades, and keep physical devices, such as signal towers, safe.

Building out services with AI and IoT

Disruptive technologies are powerful in their own right. However, combining them multiplies their impact. This dynamic also extends to AI and IoT for telecoms.

As technology transforms core telecom services and opens new opportunities, companies capable of continuously developing and expanding offerings will likely gain a competitive edge.

One good example is developments in the car space. 5G can become the backbone for future generations of driverless cars, delivering the communication speed necessary for their IoT and AI systems. However, we are not quite there yet.

That being said, telecoms already have opportunities to leverage AI and IoT to deliver services in the mobility space. One example is car sharing based on IoT sensors and AI systems. The next step for could be control of connectivity, predictive maintenance, and vehicle checks via IoT sensors in parking areas. For the surrounding infrastructure, AI and IoT can assist with traffic jam detection, route optimisation, dynamic parking, and automated road toll and taxation.

The competition for the position as the preferred platform and service providers across emerging areas such as smart cities, driverless technology, and many more remains open – and the possible winners include telecoms.

This is one of the reasons why we can expect the use of IoT and AI to grow and related M&A to continue.