NB-IoT? Not at Those Prices, Say DT Customers

Iain Morris
News Analysis
Iain Morris, International Editor
5/26/2017



Deutsche Telekom has still not seen any big tenders for NB-IoT because module costs are far too high for its business customers, says Jens Olejak, the senior product manager at the German operator's M2M unit.

Module prices need to fall closer to the industry's ultimate target of $5 per unit to make projects more feasible, according to Olejak, and they are still way above that level.

"To be honest there are still no big tenders yet for NB-IoT," said Olejak during this week's LPWA World conference in London. "The module cost is still between €10 [$11.22] and €15 [$16.83] rather than the $5 we are looking at and so no customer is doing a serious commercial tender." (The $5 goal is one the 3GPP standards body is said to be aiming for.)

NB-IoT is one of several technologies addressing demand for so-called low-power, wide-area (LPWA) connectivity -- the kind needed for devices like smart meters and gadgetry that monitors the status of industrial equipment.

A cellular standard that forms a part of the 3GPP's Release 13 standards update, it appears to have been developed in response to LPWA technologies born outside the cellular community and based on unlicensed spectrum.

Sigfox and LoRa, the most high profile of these unlicensed-spectrum technologies, will greet any news of NB-IoT cost challenges as an opportunity to make further commercial headway.

Sigfox has previously boasted a huge advantage over NB-IoT on equipment costs and seems likely to maintain that advantage even if NB-IoT can hit the $5 target.

In June last year, Thomas Nicholls, Sigfox's executive vice president of communications, told Light Reading that he expected the cost of a Sigfox module to fall from about $2 then to as little as $0.50 over the subsequent five years. (See Sigfox Said to Face Customer Backlash.)

"The difference between that and $5 is a gigantic amount of business cases," said Nicholls at the time.

High module prices may be a problem for mainstream cellular operators in other ways, too.

Currently, many operators support M2M services on GPRS, an ageing 2G network technology. If they cannot move customers onto 4G-based alternatives, like NB-IoT, they will have either to ditch those contracts or to continue investing in increasingly outdated systems.

At the same time, the industry practice of jumping from one generation of cellular technology to another is fueling concern about the long-term commitment to NB-IoT -- especially as some operators in North America and Asia have either switched off or announced plans for the "sunsetting" of their 2G networks.

Olejak was at pains to address any such anxiety. "When customers speak to us about NB-IoT they expect us to maintain the network for ten to 15 years and I think we can commit to that," he said.


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But operators that expected NB-IoT to swiftly "crush" Sigfox and LoRa now seem likely to be disappointed. (See Vodafone to 'Crush' LoRa, Sigfox With NB-IoT.)

The technology has taken knocks already this year, with Vodafone Group plc (NYSE: VOD), one of its biggest supporters in the service provider community, missing NB-IoT rollout targets in some of its European markets.

There have also been suggestions that LTE-M, another cellular technology aimed at the LPWA opportunity, could supplant NB-IoT as the default standard. (See Could LTE-M Torpedo NB-IoT?)

Although LTE-M supports much higher-bandwidth connections, operators such as AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) in North America, and Orange (NYSE: FTE) in France, appear to have backed it as an alternative to NB-IoT.

Above all, there is a growing perception that NB-IoT equipment from Ericsson AB (Nasdaq: ERIC) is incompatible with that from Huawei Technologies Co. Ltd. -- even though both vendors are pleading ignorance about any such problems. (See Ericsson, Huawei Incompatibility Threatens NB-IoT – Sources.)

Incompatibility would clearly hinder NB-IoT's emergence as a global standard, and without sufficient economies of scale module pricing could remain stubbornly high.

Despite the various teething troubles, there is skepticism that proprietary and unlicensed-spectrum technologies will ultimately be able to withstand the cellular onslaught.

A founding director of Neul, a UK-based IoT startup that was acquired by Huawei in 2014, William Webb doubts that any proprietary technology can make a lasting impact in the wireless sector and says that LoRa -- despite appearing to be more "open" than Sigfox -- is still controlled by Californian chipmaker Semtech Corp. (Nasdaq: SMTC) (See Weightless Aims to Exert Gravitational IoT Pull.)

Syed Hossain, the founder and chief technology officer of a US-based M2M specialist called Aeris Communications, reckons Sigfox could enjoy success in the US market, but only if it can achieve nationwide coverage. "Thirty or 100 cities will not be enough," he told attendees at LPWA World during a keynote presentation. "LPWA must achieve full coverage."

Not everyone is writing off the cellular challengers, though, and some of the world's biggest operators -- including Orange and South Korea's SK Telecom (Nasdaq: SKM) -- have made investments in LoRa networks. (See SK Telecom Sees LTE-M, LoRa as Its 'Two Main IoT Pillars'.)

"We are not religious about that," says Bengt Nordström, the CEO of the Northstream market research and consulting group, when asked if Sigfox and LoRa were ultimately doomed. "From an enterprise customer perspective, if Sigfox as a technology can improve my operating margin and market share, then why shouldn't I pursue it now?"

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

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