Orange outlines the grand plan for connected devices

With Christmas fast approaching, Orange might not have chosen the worst time to capitalize on the IoT buzz which is beginning to sweep the consumer world.

After launching three new consumer IoT assaults (a 360 degrees camera, a VR headset and a drone), we have a chance to chat with Fabien Dallot, Director of Connected Objects Portfolio at Orange, who outlined the future ambitions of the telco.

“As an industry, we’re not at the level we thought we would be (connected devices penetration), but over the course of next year and 2019 we believe the market will take off,” said Dallot.

And he isn’t wrong. Although Orange’s VR offering has seen considerable growth over the course of 2017 compared to the previous year, mass market penetration has not been as enthusiastic. That said, Orange’s consumer IoT team has seen sales growth of 45%, compared to an industry average of 28%. The team must be doing something right.

When you look at the bigger picture, it is still small fish for the moment though. In the latest quarterly results, ‘other revenues’, which includes the various differentiation ventures such as connected devices and banking, accounted for €138 million of the €4.529 billion in France. But it is the beginning of the curve.

In Orange’s ‘Essentials 2020’ strategy, its cunning plan to make millions and billions, banking and IoT are the two areas which are supposedly going to create the extra mile on the spreadsheets. It’s more than just being a telco, with these extra areas Dallot pointed out the team plan to be major players in several segments, most notably value added services, connectivity and content distribution. In short, Orange doesn’t want to be limited to your smartphone anymore.

The consumer IoT team will factor into several areas, and while there isn’t a direct link to the convergence business right about now, it is logical. As the connected devices become more prominent in the consumer world, the trends will add fuel to the desire for e-SIM and multi-SIM contracts. Offering pricing benefits to the consumer over multiple areas will only increase Orange ‘stickiness’ and reduce customer churn.

This is obviously a long-term ambition of the team, as the consumer IoT market is still embryonic right now. The market is still in the discovery stages in terms of using these new breakthrough technologies, whether it would be VR or drones or 360 cameras. The role of Dallot and his team is to facilitate this learning. Offering content to demonstrate the value of VR or platforms to host and enable user generated content.

It’s a sensible strategy which is built on patience, and in that sense it is very unlike anything telcos usually come out with. It does sound eerily similar to something one of the OTTs would say. Prove the value of something today to monetize it tomorrow. It worked for the likes of Facebook, so why shouldn’t it work for the telcos as well?

But a good plan will only get a company so far. To make a difference in this brave, new world, Orange will have to prove it can play outside its traditional market and create good products in the hardware world; easier said than done. It also has to figure out the economics of scale as well, as right now VR, drones and 360 cameras are pricing a lot of people out of the market.

The right steps do seem to have be put forward. For its camera, Orange is working with Giroptic, an award winning camera manufacturer, and on the VR front, it has made promising steps forward from its first headset release last year. The VR2 device, as Dallot described it, is 30% lighter and also cheaper, while the team is releasing more content as well. There does seem to be a bit of a loss leader approach right now, but, as mentioned previously, proving the value and then thinking about money later is a proven strategy.

As with the bank, Orange is making the positive and patient steps towards the connected devices world. Whether the team can continue to separate financial targets and business vision in the early days might prove to be the game changer here. A lack of long-term ambition, if short-term financial ambitions become too heavy, could result in disaster, but only time will tell.