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Straight Talk Telecoms

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Unless you follow the IoT sector closely you may have missed the emergence of a new category of IoT network operators all vying to provide low-power wide area (LPWA) coverage for applications which may only generate a few cents of (connectivity) revenues per month.

French company Sigfox is the most high profile of these LPWA network technology companies because its backers include Orange and Telefonica. But there are a number of others, including LoRa, Qowisio, Nwave, Ingenu, Telensa, and Rajant. There is even a dedicated association, the Wireless IoT Forum.

The rapid emergence of this type of company is interesting on a number of levels. First, it represents a challenge to operator dominance in the one part of the value chain where operators feel they can generate revenues from their existing network assets – connectivity. Secondly, the wave of LPWA technologies and operators comes at a time when the global cellular industry is in the process of orientating 5G towards the IoT market opportunity. Thirdly, LPWA’s radio capabilities and low cost-base mean that it’s going to be possible to extend coverage to parts of the world that cannot be reached by today’s cellular networks.

LPWA doesn’t require its own licensed spectrum because it uses unlicensed frequencies (although there are calls for dedicated spectrum bands). The LPWA companies listed above have developed different (although sometimes very similar) technologies and either manufacture their own radio network equipment or work with third-party vendors. Some are building networks in single countries while others (Sigfox, LoRa) are looking to build global application capabilities by working with partners in different countries around the world. Sigfox is the most advanced in this regard – it has just announced its tenth country and is looking to extend across the Americas and the MEA region in 2016. Typical partners include mobile operators and infrastructure vendors such as television network infrastructure operators.

The characteristics (and limitations) of LPWA’s technologies mean that it is much more suited to some applications than others. Many vendors list suitable applications on their website, and agriculture, oil & gas, asset tracking, and smart cities feature strongly. In some cases LPWA will compete with cellular technologies but in others (agriculture, oil & gas) there is no mobile coverage. LPWA technologies can be used for private networks as well as public ones.

So, what are the prospects for LPWA? There can be little doubt that LPWA operators will stimulate the market by reaching out to ecosystem partners (e.g. chip vendors, application developers, device vendors, and systems integrators) and target customer groups. But can they take business away from the mobile operator community?

The majority of cellular M2M connections today use 2G technology. This is relatively cheap compared to 3G or LTE and it provides wide-area network capability. But there are limitations such as poor battery life. Furthermore, operators want to shut down 2G networks to free up spectrum for mobile broadband networks such as HSPA and LTE.

The mobile industry has (belatedly) recognized that there is a huge potential market for low-bandwidth IoT applications and that new technologies are needed to deliver affordable connectivity.

Accordingly, standards body 3GPP has defined new profiles of LTE – Category 0 (Cat-0) and Category M (Cat-M). But these will not be ready for commercial deployment until the end of 2016 and the end of 2017, respectively. LTE networks today are typically deployed between 1600MHz and 2600MHz which makes the technology more suited to deployment in towns and cities rather than some of the remote areas and installations targeted by the LPWA community.

For the IoT technology ecosystem – in particular semiconductor companies – the uncertainty and fragmentation of radio-access technologies represents a huge challenge. There is a strong case for supporting all the candidate technologies because it is not possible today to pick winners and losers. But this adds time, complexity, and cost.

The mobile operator community is hedging its bets. Clearly, the reuse of existing networks for the IoT is the most attractive option. But there is also the risk of missing out. Therefore many are building out LPWA networks. The GSMA launched an LPWA initiative in August and, in doing so, gave its backing to clean-slate LPWA technologies. But at a 3GPP meeting at the end of September, the decision was reached to standardize a new narrow-band technology operating within LTE spectrum.

The LPWA–cellular battles to come will have echoes of the fight between WiMAX and the mobile industry 10 to 15 years ago. WiMAX ultimately lost because WiMAX operators did not have the muscle to compete with cellular operators. The WiMAX community could not convince enough mobile device vendors to support its technology. However, the emergence of WiMAX did act as a catalyst for the mobile industry to develop mobile broadband capabilities.

Where the IoT may differ, however, is in the role and influence of the operator. Connectivity will only capture a small percentage of total IoT revenues and in most cases it will be other players in the value chain – the enterprise, the systems integrator, the application developer, or the device vendor – not the operator that decide which connectivity solution to adopt.

Straight Talk is a weekly briefing from the desk of the Chief Research Officer. To receive this newsletter by email, please contact us.

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