November 19, 2016

The Future of Connectivity: Next Gen Networks, Emerging Business Models, Better Bandwidth Solutions, and More from the Verizon Venture Forum

In late September, Verizon Ventures held a Venture Forum at the Fairmont Hotel in San Francisco. The goal of these Forums is to share insights between the venture community and Verizon’s senior leadership. These off-the-record events give participants the chance to openly discuss key trends and share unique insights that come from trying to build and scale innovative new ventures.

The theme for this Venture Forum was the “Future of Connectivity”. Within this topic, some of the specific areas of discussion revolved around next generation networks, emerging business models for connectivity, and new applications for high bandwidth/low latency networks. Here are a few of the key takeaways from the day:

Startups provide signals about the future: Technological change is happening at a much faster rate than ever before and the primary force driving this accelerated change is innovation from startups . We view startups as experiments due to their undertaking in new business models, new technology developments and new go-to-market strategies. Paying attention to the unique experiments startups are running, and the results they are producing, gives us early access to valuable signals that help us better understand evolving markets and future demand. The signals from the startups participating in our Venture Forum, as well as those from the broader startup community, offer glimpses of future scenarios that have significant impact on our business.

It is no secret that mobile data consumption is growing and has been for quite some time. What is not so obvious is that while cellular consumption has grown rapidly, Wi-Fi has grown even faster and now accounts for over 80% of wireless usage (Click to Tweet). During the Forum, we heard from a startup that has developed a solution to simultaneously bond Wi-Fi and cellular signals to provide superior mobile performance. Another startup is creating spot markets that will allow connectivity providers to wholesale excess capacity. These two companies are both looking to combine licensed and unlicensed spectrum to effectively increase the supply of bandwidth in order to meet the escalating demand for mobile service. These types of new offerings, together with new technology standards like e-SIM that allow devices to more easily switch between carriers, are powerful signals that point to a radically different market for mobile connectivity. Devices could dynamically discover, select, authenticate and access connectivity options across multiple technologies and providers.In dense urban environments, where connectivity options are richest, new entrants could look to capitalize by acting as matchmakers between end users and connectivity providers, further disintermediating carriers from their subscribers. Actively looking for these types of early signals from the startup community increases the speed at which we develop key insights and extends our strategic lens further into the future, which ultimately strengthens our ability to meet new market challenges.

Bandwidth consumption needs of the future: During our “Breaking the Internet” pitch session, we heard from two companies in very different businesses that collect enormous amounts of data. The first company builds highly accurate 3D maps in real-time for autonomous vehicle applications. They collect roughly 100GB of visual, sensor and telemetry data per kilometer of driving. The second company builds autonomous security patrol machines. These machines collect 1–2 terabytes of real-time video, audio and sensor data a week. Both companies signal a trend towards autonomous vehicles and remote monitoring that require massive amounts of data to be collected, transferred and analyzed in real-time. Due to network constraints, these companies must significantly compress their data sets so that only the most essential bits are delivered over cellular links back to their data centers. While that is an innovative practice, they would much prefer to transfer and analyze all of their data. There are many other startups emerging that use advanced sensors and video in mobile environments where only LTE is available. A common refrain we hear is that cellular connectivity is their data bottleneck and that it often forces them to perform work-arounds, such as extreme compression or forgo real-time analysis by offloading data via SD cards or waiting till they have high-throughput Wi-Fi or Ethernet to transfer data (Click to Tweet). This speaks to the promise and impact of 5G when we can wirelessly transfer significantly larger data sets.

VZV-Venture -Forum -recap -inline -image -111016

Startups can evolve from being signals into great partners: During the Venture Forum, we heard from two Verizon Ventures portfolio companies, ItsOn and Kumu Networks, which are helping us shape our future in a changing landscape. ItsOn speaks to the potential disintermediation of carriers and their subscribers due to eSIM and the rise of unlicensed spectrum. While ItsOn is working on a solution that allows consumers the ability to seamlessly access the best and most secure network available (i.e. 3.5GHz, Wi-Fi, 4G, 5G, etc.), it allows carriers the ability to set the boundaries for network selection and give them the ability to upsell premium services (i.e. speed and data plans), on a time-based or permanent basis, which helps strengthen relationships with subscribers.

Kumu Networks speaks to the issue of network constraints and the high cost of always on bandwidth. Their wireless full duplex solution allows a radio to simultaneously send and receive over the same frequency, effectively doubling capacity, which is obviously a huge boon for carriers. Both ItsOn and Kumu are great examples of how startups can not only provide signals of market trends, but also of ways in which carriers can react and partner with them to build value (Click to Tweet).

While it is early days for self-driving vehicles, the signals are certainly encouraging: Marni Walden, EVP & President of Product Innovation and New Businesses at Verizon, led a fireside chat with the founder of a leading autonomous trucking company. In the course of this discussion, a few points stood out:

  • Self-driving technology is not rocket science. The basic building blocks were already there (algorithms, computers, sensors, etc.). All that was needed was assembly and a sense of urgency.

  • Autonomous vehicles will have difficulties in inclement weather conditions. Nevertheless, improvements are expected in this area, using some of the same techniques that humans would, such as watching the curb for guidance while driving in a snowstorm. Interestingly, it is believed that self driving technology could eventually be better than humans in those conditions due to faster analytics, response times, and vision.

  • Telematics is a natural complement to autonomous trucks. Case in point, it provides fleet operators transparency into what has been a bit of a black box, insomuch as no one really knew where these valuable trucking assets were or their condition. With respect to drivers, telematics serves as a great tool for routing and location assistance.

  • Among regulators there is a healthy mix of forward thinkers and the cautious who want to know more about autonomous vehicles. The Obama administration has been particularly supportive and open to experimentation, evidenced by the newly released National Highway Traffic Safety Administration (NHTSA) guidelines.

  • Aside from regulators, the rest of the ecosystem believes the industry as a whole is at a breaking point. While trucking remains one of the few well-paying jobs available to those without college degrees, it is a difficult profession. Drivers are away from their families and on the road for extended periods of time (in some cases 300 days a year), and many suffer from medical conditions. As a result, there is a significant shortage of truck drivers. According to the American Trucking Association, the shortage was estimated to be about 47,500 at the end of 2015 and is expected to grow to as high as 174,500 by the end of 2024. As a result, many are looking to self-driving vehicles as a life vest for the industry.

As we look to close out this Venture Forum and the year, our discussions about the future of connectivity provided us with a window into the earliest signals of potentially disruptive innovation. As we look to digest these signals to inform our strategic thinking, we can recommit to live the future now, and continually strive to integrate more and silo less. We expect to touch on these themes in our 2017 Venture Forums. Stay tuned!

Special thanks to Zeev Klein and the Landmark Ventures team for helping us put on another stellar event.

Tags: investing , Venture Forum , Transportation , Enterprise , connectivity