Kaleido Intelligence’s recently-released smart cities research examines changes going on in the smart cities market, and what that means for CSPs servicing the sector. Some of the most interesting changes here are happening in how the value chain is shifting in response to changing needs and an evolving telecoms technology ecosystem.
The smart city sector value chain looks largely similar to many other industries concerning the players involved; regulators define the overall scope of the ecosystem, device OEMs and component manufacturers engage CSPs (connectivity service providers) to integrate connectivity into devices and sensors, while end users also potentially use CSPs to manage smart cities projects end-to-end, or involve integrators and managed service providers.
There is a recent increase in on-device processing, driven both by an evolution of AI use cases and data protection legislation. This means that only the results of computations get transported, which reduces overall cellular data volume. It will require CSPs to be more involved with other elements of the connectivity, leaning harder on VAS for their overall revenue. While the most popular of these are vertical-specific tools likely to be highly useful for CSPs to present a coherent service proposition, it is worth noting that almost half of MVNx (MVNO/MVNE) respondents to Kaleido’s CSP survey do not currently offer these sorts of tools.
5G as a Key Driving Force
Integrators and platform providers have traditionally subcontracted CSPs for smart cities products, with connectivity being a single part of the software-led project. In recent years, this has shifted towards CSPs more often offering full-stack solutions directly, in part because of 5G’s greater ability to integrate other forms of connectivity via the N3IWF (Non-3GPP Interworking Function). This tendency is greater in areas where MNOs have strong ties to the state, and can be beneficiaries of protectionist technology policy, which is particularly prevalent in the Middle East and Central Asia. While China has similar protectionist dynamics, the country also has equally strong infrastructure providers in ZTE and Huawei, and so China’s ecosystem tends to result in partnership-based projects.
MNO Provider Evolution
MNOs are shifting positioning to increasingly resemble integrators themselves, able to provide end-to-end solutions and services for smart cities goals. The underlying architecture of the solution is often similar to the historical model, with MNOs having partnerships with software providers who offer their platforms either to the MNO directly or through a ‘marketplace’, which the MNO can effectively draw on as a portfolio of digital services to augment their offerings.
This kind of marketplace is also a strong framework to offer VAS, which is a reason why MNOs typically offer more VAS than any other kind of CSP serving the smart cities sector. These are also focused on MNOs’ strengths, focusing on network management and adjustment features. This is in contrast to MVNOs, which are slightly more inclined to offer VAS targeting other areas of the value chain.
Smart Cities CSP VAS Offerings
Source: Kaleido Intelligence 2025 CSP Survey
The Place of MVNx
The movement towards ongoing operations management benefits MNOs more than integrators or IoT MVNOs, because they can adjust the underlying infrastructure more easily than MVNOs, who are typically limited to specific vertical applications, traditionally those that require large numbers of low-data connections. These are use cases like air quality monitoring, smart waste management and the like, where the need for specific QoS (and the higher network service revenues that come with that) is not required. To compete in these areas, IoT MVNOs need more direct network control, which will limit them to either private network opportunities or leveraging what network APIs are available for such network tailoring.
This means that the natural place for IoT MVNOs in this environment is frequently as suppliers to integrators or OEMs, rather than engaging directly with end users. This plays to typical IoT MVNO strengths of serving large international markets, which can scale easily. It is also reflected by the tendency of MVNOs to be more likely to offer device-based services and business intelligence tools as VAS, which are less likely to be directly linked to network management, compared to those provided by MNOs.
The increasing role of sovereignty requirements may force IoT MVNOs into a larger role over time, as even basic connectivity may need some degree of infrastructure localisation. The ability to offer LBO is seen as important by virtually all CSPs, and most have it in target markets already, with over 95% of MNOs and MVNx survey respondents either already having the capability or planning it for the next 24 months. This will allow IoT MVNOs to be compliant with most smart cities data residency and routing requirements, although there may also be some effect on procurement as well, given potential supply chain restrictions across certain markets.
Smart Cities CSP Threat Perceptions
Source: Kaleido Intelligence 2025 CSP Survey
Blog Author: James Moar (Principal Analyst)