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LPWA: A Threat to 'Wait & See' IoT Operators?

Steve Bell
4/16/2015
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In my former life I was a WiMax product and business development executive, and so I can't help but consider the emergence of Low Power Wide Area (LPWA) technology as the innovation catalyst for the Internet of Things (IoT), in the same way that WiMax was for mobile broadband and 4G.

What do I mean by this?

When WiMax first emerged, the biggest challenge (beyond the technical) was creating a mobile Internet business model that made sense. Once that was achieved by Sprint Corp. (NYSE: S) and others, the big US operators were galvanized into action, accelerating the development and deployment of 4G LTE. They couldn't risk being at a competitive disadvantage, in terms of speed and service capability. The rest is history, as they say.

Fast forward to 2015: Global mobile operators are deploying LTE to deliver video and OTT services to the ever-expanding number of Internet-connected smartphone and tablet subscribers. But (and this is a big "but") there is a growing need from industrial, utility and enterprise customers exploring the deployment of IoT, M2M and smart systems, for low-cost, low-data rate connectivity that consumes very little power. This is the market that will generate the projected 25 to 50 billion connected sensors and devices by the year 2020; it is also the market that, some estimate, will generate $225 billion in software and services revenue in that same year.

It's no wonder that an increasing number of companies are starting to focus on this market. IBM Corp. (NYSE: IBM)'s recent announcement that it's going to invest $3 billion in IoT, and create a separate business to focus on it, seems more than justified by the potential that's available. In my experience, this type of focus generates innovation in technology and solutions, as well as business models. This, in turn, will create traction and real change in the market. (See IBM to Pump $3B Into IoT.)

An early example of this innovation was IBM's announcement that it was exploring LPWA capability, in cooperation with Semtech Corp. (Nasdaq: SMTC), and was participating in the recently formed LoRa Alliance . The Alliance is dedicated to driving the global success of the LoRa protocol (LoRaWAN) in LPWA networks. IBM is combining LoRa wireless sensor networks with its Long Range Signaling and Control (LSRC) software and its IoT Foundation cloud-hosted service, to enable large-scale M2M deployments. IBM's focus on this pivotal technology could change the structure of the industry, and provide the cost catalyst for acceleration.

LPWA, in one of its many forms, has the potential to rapidly reshape the industry, the network and the business model -- certainly more so than 5G is likely to during the next five years. France's Bouygues Telecom recently announced a June launch of its new IoT network, based on LoRa technology. This is clearly a competitive response to the success of Sigfox in France and other European countries. Sigfox uses an alternative LPWA ultra-narrow band technology in the ISM band, and recently attracted $115 million in funding, including investments from NTT DoCoMo, SK Telecom and Telefónica. (See Sigfox Closes $115 Million Funding Round and Sigfox Plans Global IoT Network.)

Telefónica also announced that it is partnering with Sigfox in Spain to explore the potential of the technology, as they see a gap in the market that's not adequately addressed by the current network. Sigfox, with its partner-based business model, intends to enter 60 markets worldwide within the next five years, with plans for the US already underway (but undisclosed). It recently partnered with Arqiva in the UK, and, purely from a speculative perspective, wouldn't it be interesting if Sprint or Dish Network LLC (Nasdaq: DISH) were next on its dance card? Or maybe another global integrator, utility or industrial giant in the industrial Internet of Things Consortium? The permutations are interesting to consider. (See IoT Tech Options.)


Want to know more about the Internet of Things? Check out our dedicated IoT content channel here on Light Reading.


Huawei Technologies Co. Ltd. is a new entrant in the LPWA space, having recently acquired Neul, a UK company developing similar technology. Huawei, working with partners Vodafone Group plc (NYSE: VOD) and u-Blox AG , has developed this into a cellular IoT approach that will ultimately be published as an open industry standard by 3rd Generation Partnership Project (3GPP) for others to develop and deploy. Vodafone intends to fit this new technology into its Global M2M Platform as a dedicated network access layer, specifically for M2M and IoT applications. (See Huawei Promises 4.5G & LTE-M in 2016.)

What's clear at this stage is that the discussion around LTE-M, as the planned approach for addressing the M2M market, may be too much too late. There's serious concern that the stripped-down approach won't achieve the power levels, or the cost levels, required for this burgeoning market and certainly not in the time required, based on current roadmaps. Does this draw parallels to the North American market dilemma over WiMax?

With this type of activity around LPWA technology, and huge multinational service and integration companies focusing on the IoT space, there's a significant challenge rapidly building for existing mobile operators. Could alternative networks appear quickly and relatively cheaply? The Sigfox example in France suggests that the answer is "Yes."

If, during the next five years, mobile operators want to participate in this $750 billion market for software and services, then they'll have to step up. Apart from the 20 or so operators that have dedicated IoT business units or teams, the rest of the mobile industry has adopted a "wait and see" strategy that could prove to be very dangerous. (See IoT: The Future Is Bright for Operators.)

It appears that the LPWA train is about to leave the station, and, if the mobile operators don't get on board, then John Chambers at Cisco Systems Inc. (Nasdaq: CSCO) may well be right in his prediction that "40% to 50% of service providers over the next decade will probably become irrelevant." (See Cisco CEO: Get Ready for New Digital World .)

Where Chambers may be wrong is that this might happen even sooner, especially if alternative providers take their place.

In the meantime, have your say in our poll on the potential role of LPA in the IoT space -- cast your vote right here.

— Steve Bell, Senior Analyst, Heavy Reading

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mendyk
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mendyk,
User Rank: Light Sabre
4/17/2015 | 12:21:14 PM
Re: Irrelevancy rules
CEOs like to make these kinds of pronouncements, but it's hard to envision any consolidation that lowers the the number of operators to two or less. To your other point, do you think there's a case to be made for a niche operator that just focuses on IoT mobile services?
Steve Bell
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Steve Bell,
User Rank: Blogger
4/17/2015 | 12:05:06 PM
Re: IoT Wait & See
Excellent observation Gabriel, I think that the lesson learnt over the last 10 years is that although standards are great you can't ignore new or adjacent technologies. I believe the concept of het nets was a direct response to benefits of Wi-Fi, and this architectural concept gives the opportunity for operators to trial and embrace LPWA earlier rather than later.
Steve Bell
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Steve Bell,
User Rank: Blogger
4/17/2015 | 12:04:03 PM
Re: Irrelevancy rules
Dennis the irrelevance quote was from the interview Steve Saunders did with John Chambers and yes there are 3 or 4 providers in most markets today but that could change rapidly because of 3 things:

1.       Inability to respond to customer requirements because of technology shifts (LPWA)

2.       Inappropriate and inflexible cost structure because no investment in NFV

3.       Price pressure in consumer markets and OTT competition

It could go multiple ways including consolidation of the existing players and / or the introduction of numerous niche players serving new markets.
mendyk
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mendyk,
User Rank: Light Sabre
4/17/2015 | 10:12:58 AM
Irrelevancy rules
Steve -- Can you explain the "40% to 50% of service providers may become irrelevant" observation a bit more? The mobile sector is already basically a three- or four-horse race in most markets.
Gabriel Brown
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Gabriel Brown,
User Rank: Light Sabre
4/17/2015 | 4:53:53 AM
IoT Wait & See
Good piece Steve. This is exactly the position many mobile operators (and others) find themselves in. Wait and deploy IoT using LTE-M with in-band spectrum, or go early with a specialist, out-of-band solution.

What would you advise? The column appears to advocate moving sooner with LPWA.
nasimson
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nasimson,
User Rank: Light Sabre
4/16/2015 | 9:11:28 PM
under the radar
Somehow I had not heard of this until today. LPWA is very promising, but remains under the radar. It appears to be a wild card that can go in any direction. Something to keep a close eye on.
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