For all the doubts, there are some positive indicators for the IoT industry in early 2018. For one thing, at this time in 2017, the NB-IoT cellular standard, which promises lower IoT costs than mainstream 2G and 4G technologies, had been a fully standardized option for less than a year. With growing maturity, it has now drawn commitments from some of the world's biggest operators, including Deutsche Telekom AG (NYSE: DT), Vodafone, China Mobile Communications Corp. and T-Mobile US Inc. (See Vodafone to 'Crush' LoRa, Sigfox With NB-IoT, Deutsche Telekom Deploys NB-IoT Across Europe and T-Mobile Rolls Out $6-a-Year NB-IoT Plan.)
Importantly, much of the current NB-IoT action appears to be in China. "A Chinese carrier last year saw the growth of 10 million new [NB-IoT] customers every two months and this growth is quite fast," said Fan at Huawei's February event in London. This could persuade operators in other parts of the world that NB-IoT is ready for mass-market deployment. Given the size of the Chinese market, it should also help to lower equipment and service costs. In the context of these Chinese deployments, a Huawei forecast that NB-IoT will have 150 million connections by the end of 2018, up from 10 million last year, does not seem so far-fetched.
On the non-cellular side, there is also greater momentum. Semtech Corp. (Nasdaq: SMTC), the Californian chipmaker behind LoRa technology, now claims to have sold more than 50 million chips that will support LoRa connections. In the telco world, its supporters include France's Orange, South Korea's SK Telecom (Nasdaq: SKM) and US cable giant Comcast Corp. (Nasdaq: CMCSA, CMCSK). Several operators are using LoRa alongside LTE-M, another cellular technology that supports faster IoT connections and looks more suitable when mobility is a requirement.
In the US, in particular, rivalry between operators backing different technologies could spur deployment. "Comcast is rolling it [LoRa] out in a big way and that will drive the cellular players to make a decision," said Geoff Mulligan, the former chairman of the LoRa Alliance, an association that promotes LoRa, during a conversation with Light Reading in February (the LoRa Alliance announced Donna Moore as its new chair in March).
The non-cellular technology built by France's Sigfox could also have a role. Despite the company's difficulties, the Sigfox technology is still highly regarded in parts of the industry, and currently represents a much lower-cost option than cellular. Sigfox expects to more than double the number of connections this year, from 2.5 million to around 6 million. With additional funding and astute management, it might be able to carve out opportunities with companies that balk at NB-IoT costs. (See Sigfox Poised to Get €40M Funding Prop – Sources and French Toast? Sigfox on Skid Row.)
The number of IoT connections is now growing extremely quickly, says Analysys Mason. Vodafone, for example, finished 2017 with 65 million connections in total, up from 50 million at the end of 2016. That, in turn, is fueling growth in revenues. And even if this accounts for a tiny share of overall sales, the revenue figures are by no means insignificant. In annual sales, IoT is now worth more than $1 billion for Verizon and about $890 million for Vodafone. "If IoT were a standalone business, it would be considered large; it is only small in comparison to the core business," says Tom Rebbeck, a research director at Analysys Mason, in a recent paper.
Even if operators fail in the value-added services market, IoT as a pure connectivity business is not to be sniffed at. While Huawei's forecasts are indisputably optimistic, continued growth in connections should ensure that IoT accounts for a bigger share of total revenues by the mid-2020s. For some operators, IoT could also form a connectivity "beachhead" from which they can bid for larger enterprise contracts, says Rebbeck. With the mainstream consumer business going nowhere fast, that could prove vital.
— Iain Morris, News Editor, Light Reading