Sigfox Said to Face Customer Backlash

Iain Morris
News Analysis
Iain Morris, International Editor
6/27/2016



France's Sigfox has shrugged off concerns that have recently surfaced about the potential shortcomings of its wireless technology.

Sigfox is among several companies developing the so-called low-power, wide-area network (or LPWAN) technologies used to provide connectivity for sensors installed in smart meters, industrial equipment and millions of other devices.

As reported by Light Reading, the company has recently faced a barrage of criticism over its business model -- under which Sigfox takes a huge cut of service revenues from its network partners -- and reliance on a proprietary technology, as opposed to an open standard. (See The Wolf at Sigfox's Door.)

Those criticisms have been made by Sigfox's rivals, which obviously have an axe to grind. But the latest attack on the company has come from Nigiloc, a French startup developing tracking gadgets for bicycles, which was last year reported by Fortune magazine to be a Sigfox customer.

A source close to the matter has recently told Light Reading that Nigiloc is one of several companies to have "terminated" rollout activities with Sigfox because of "bad coverage and failing technology."

Light Reading approached Nigiloc for a response to these comments and received a written statement from CEO Gilbert Wilhelm. "Sigfox's contract is not broken, but it is true that the test we have made with Sigfox for geolocation did not conform with our quality standard," said Wilhelm. "Indeed, I think that Sigfox is a good product for non-moving IoT. In mobility Sigfox has important troubles [sic] for transmitting the data."

According to Light Reading's source, other companies that have experienced problems with Sigfox include Clear Channel Outdoor, an advertising company, and French insurance player MAAF.

Clear Channel was previously reported to be using Sigfox technology to support billboard advertising in France, while MAAF struck an agreement with Sigfox in 2012 regarding the deployment of smoke detectors in homes. Neither of those services would require any mobility.

"We don't want to comment on Sigfox," said a spokesperson for Clear Channel when asked to confirm or deny if the company was still working with Sigfox. MAAF did not respond to requests for comment on the current status of its relationship with Sigfox.


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A second source with knowledge of internal goings-on at Sigfox claims to have heard similar "rumors" about the company's problems and says "things they assumed would be quite easy have turned out to be difficult or impossible using the approach they originally had in mind."

Sigfox would not deny that Nigiloc, Clear Channel and MAAF have experienced difficulties but said it has never provided any commitment to support "quick-moving devices" to Nigiloc and that all three companies are among its "earliest" customers.

"I don't want to go into details on specific customers of what has worked and what hasn't worked for them," says Thomas Nicholls, Sigfox's executive vice president of communications. "[These] are not large-scale customers today … and some of them might have had issues not related to connectivity."

Nicholls also points out that other companies have satisfactorily engaged in much larger-scale deployments of Sigfox technology, singling out alarm-services company Securitas Direct, which accounts for nearly a sixth of the 7 million connections that Sigfox has so far agreed to support worldwide. "Sigfox has a commitment of 1.2 million connections and sells B2C [business-to-consumer] products in Spain and France -- indoor devices that use the Sigfox network today," he says.

Light Reading approached Securitas Direct for a comment on its relationship with Sigfox but had not heard back at the time of publication.

Next page: The LPWAN threats



The LPWAN threats
Sigfox has clearly faced a challenge from other LPWAN technologies and "configurations" that have entered the market in the last few years, according to Light Reading's second source. Competitors include LoRa and Ingenu 's RPMA (for random phase multiple access), which, like Sigfox, rely on unlicensed spectrum to provide connectivity.

Both Ingenu and the LoRa Alliance , an association set up to promote LoRa technology, have been especially critical of Sigfox. Indeed, while rivals are often dismissive of one another, the attacks on Sigfox have been unusually unrestrained.

Last month, Ingenu CEO John Horn said that Sigfox's inability to transmit much data on the downlink connection (from the network to the device sensors) left it "dead in the water." A spokesperson for the LoRa Alliance has also slammed Sigfox for its downlink inferiority, arguing this gives LoRa a much bigger addressable market. (See Ingenu Revs Up IoT Rhetoric.)

Nicholls hits back by arguing that neither Ingenu nor LoRa currently provides nationwide coverage anywhere. "Ingenu says it is in 100 cities but putting up one basestation does not create a large addressable market for people that want to connect devices," he says. "LoRa was built to do point-to-point and local connectivity and is great for that, but we do not see it as a competitor."

All of these LPWAN technologies, however, now face a threat from standards being developed by the cellular communications industry. The most high-profile of these is NB-IoT, which mobile giant Vodafone Group plc (NYSE: VOD) expects to begin rolling out commercially as soon as next year. (See Vodafone Ups IoT Stakes With 2017 Plan for NB-IoT.)

Many mobile operators are likely to prefer standards developed by the 3GPP and based on licensed spectrum to the LPWAN alternatives. That is partly due to concern about interference and congestion on networks using unlicensed frequencies. Upgrading cellular networks to support NB-IoT should also be more straightforward than deploying Sigfox, LoRa or Ingenu from scratch. And service providers want to avoid being "locked in" to one company's proprietary technology.

Because it makes its intellectual property freely available to chipmakers, Sigfox does claim to be "open." Yet companies that want to use Sigfox technology have no choice but to partner and share service revenues with Sigfox. In 2014, following an interview with Sigfox CEO Ludovic Le Moan, Light Reading reported that Sigfox's typical take was as much as 40% of service-based sales. (See Sigfox Plans Global IoT Network.)

All of this could explain why Sigfox has failed to attract many large traditional service providers as partners. Mobile operators that have announced tie-ups with Sigfox include Altice , which owns telecom networks in France, Portugal and the US, and Middle Eastern operator Oman Telecommunications Co. (Omantel) . Neither has shared many details of its plans, although Nicholls says Altice views Sigfox as a "tool in the [IoT] toolbox" and has already been awarded a metering contract in Portugal that will use Sigfox technology. (See Altice, Sigfox Join Forces in French IoT Battle.)

Sigfox does count a number of cellular heavyweights as investors, including Spain's Telefónica , Japan's NTT DoCoMo Inc. (NYSE: DCM) and South Korea's SK Telecom (Nasdaq: SKM). None of these players, however, has embarked on anything approaching a widespread deployment of Sigfox technology. By contrast, SK Telecom has made far bigger rollout commitments to LoRa, as have India's Tata Communications Ltd. , KPN Telecom NV (NYSE: KPN) of the Netherlands and French operators Bouygues Telecom and Orange (NYSE: FTE). (See SK Telecom, Telkom Indonesia Unite on IoT and Tata Comms to Deploy IoT Network Using LoRa.)

Besides boasting technological advantages over Sigfox, LoRa's backers have also been vigorously defending their LPWAN variant as one that, unlike Sigfox, is truly "open." Yet while the LoRa ecosystem might feature more players, Californian chipmaker Semtech Corp. (Nasdaq: SMTC) controls all of the intellectual property behind the technology. Ingenu, similarly, holds all of the RPMA cards. (See LoRa Alliance Defends Tech Against Sigfox Slur.)

A few service providers appear to be hedging their bets. Orange, for instance, has suggested that LoRa is merely a stopgap until a 3GPP alternative appears. An executive at SK Telecom recently told Light Reading "the jury is still out" on a whole array of LPWAN technologies, including Sigfox, LoRa and the standards coming out of the 3GPP. (See LoRa May Not Be for Long Haul at Orange.)

Given the uncertainties surrounding IoT, analysts are wary of passing judgment on Sigfox. Robin Duke-Woolley, the CEO of Beecham Research, points out that IoT software company Jasper Wireless Inc. -- which equipment giant Cisco Systems Inc. (Nasdaq: CSCO) bought for $1.4 billion in February -- was being dismissed as a failure back in 2008. Heavy Reading Senior Analyst Steve Bell suggests the urgency around NB-IoT is indicative of the pressure the cellular communications industry is under from LPWAN rivals. (See Cisco Looks to Jasper Acquisition to Transform Enterprises – & Itself.)

As one of the main actors in the unfolding NB-IoT drama, Vodafone has clearly thrown its full weight behind the emerging standard, even going as far as saying it will "crush" Sigfox and LoRa. As revealed by Light Reading last week, AT&T Inc. (NYSE: T) is also firmly in the cellular camp. But Duke-Woolley harbors reservations about the 3GPP technologies being developed in response to the LPWAN challenge. (See Vodafone to 'Crush' LoRa, Sigfox With NB-IoT.)

"These have potential weaknesses," he says. "After all, we are talking about ARPUs [average revenues per user] that are a fraction of traditional M2M [machine-to-machine communications] ARPUs and -- in my view -- the jury is out on these as to whether MNOs [mobile network operators] can actually sell them in the multi millions they need to in order to make them pay."

Sigfox prefers to see NB-IoT as a "complementary" technology rather than one that is targeting exactly the same opportunity. According to Nicholls, the silicon cost of adding NB-IoT to an end point is set to fall from about $40 today to around $5 in the next five years. For Sigfox technology, those costs are likely to drop from $2 to $0.50 over the same period, he predicts. "The difference between that and $5 is a gigantic amount of business cases," he says. "But we see use cases where NB-IoT and Sigfox could be linked."

One example he cites is a more sophisticated vehicle-tracking solution that would use Sigfox to transmit location data at occasional intervals but switch to NB-IoT for real-time updates in the event of a theft.

Next page: Funding challenges



Funding challenges
If players like Sigfox can make significant headway in the next few years -- either with or without partners from the cellular communications industry -- they may ultimately prove hard to budge. But Sigfox's progress has been relatively slow thus far. Since starting out in 2012, the company has grown its business to just 7 million connections across 20 countries, claiming to provide nationwide coverage in six of those markets. Yet not all of these connections are active today, acknowledges Nicholls. Le Moan last week appears to have told Forbes magazine that Sigfox made $13.5 million in revenues last year. That is much higher than the figure of $5 million that was previously reported, but hardly impressive for a company that has so far raised €127 million ($140 million) from investors.

The problem for Sigfox is that -- much like the MNOs using NB-IoT -- it will not be able to boost sales dramatically without adding a lot more connections to its network. Boasting a major cost advantage over existing cellular technologies, the company reckons it can provide connectivity for as little as $1 per device per year. Calculating the actual figure is difficult because Sigfox shares revenues with partners, has not disclosed details of "live" connections and has also received income from distributor agreements. But even if it were twice as much, Sigfox would probably need to add tens of millions of connections in France alone to achieve a reported target for domestic sales of $100 million by 2020.

Adding connections, however, means building out more basestations, and that will drive up costs. Ingenu claims its RPMA technology works over much longer distances than Sigfox's, and that Sigfox needs between 18 and 40 times as many towers to cover an area of a given size. In a press release distributed last month, the French company said its various agreements gave it access to more than 230,000 sites across the US. Yet Sigfox has reportedly deployed as few as 6,000 antennas globally. According to Light Reading's first source, some of the concerns about Sigfox relate to coverage problems. "It is inevitable that to pursue the strategy they have, they will need more funding," says Duke-Woolley.

According to Forbes, Le Moan plans to raise another $200-300 million from investors. That same figure was previously cited by Light Reading's first source. Nicholls says the company is poised to do "another large [investment] round in the near future" to support rollout activities.

But raising this amount could be tricky in the present circumstances. One uncertainty is how much of Sigfox's funding comes from international technology players and investment companies, and how much is provided by the French government. In the statement about its $115 million funding round in February last year, Sigfox identified one of its investors as Bpifrance, a French investment bank and a joint venture between the Caisse des dépôts et consignations and EPIC Bpifrance, two government agencies.

Light Reading's first source reckons a substantial amount of funding has come from authorities, but Nicholls insists that Bpifrance is "far from being the majority [investor]." Nevertheless, given Sigfox's growing pains, and rising levels of LPWAN competition, the appetite for investment seems unlikely to have improved in the last 18 months. Even Nicholls concedes that IoT is developing at a slower pace than originally envisaged. "It's ridiculous to believe we will go from close to zero to billions of connections in a few years," he says.

If Sigfox is to push on and become a real IoT force, its backers may need to have a lot of faith.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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