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Putting a Sigfox in Canada's IoT Henhouse

Sigfox technology is due to arrive in the Canadian market, and the boss of the local business is confident that low prices and small share of the market will translate into big profits.

Iain Morris

April 9, 2019

8 Min Read
Putting a Sigfox in Canada's IoT Henhouse

Sigfox has looked like an endangered species in North America during the past couple of years. In the US market, reports of executive departures, office closures, missed coverage targets and efforts to sell the network have dogged the French Internet of Things (IoT) specialist. But north of the US border a new partner thinks it can nurture Sigfox into a profitable business.

Sigfox Canada claims to be roughly three quarters of the way through building a network that will cover 14 million Canadians. Kent Rawlings, the company's president, expects to finish the job in June and to have the first active connections on the network by the fourth quarter of this year. If Sigfox has struggled elsewhere, the environment in Canada looks ideally suited to a small IoT predator with its qualities, he says.

Despite the name, Sigfox Canada is not owned and operated by the main Sigfox business in France. Like most other Sigfox networks, it is a partner that licenses the French company's technology, takes on the full cost of building out a business and agrees to split any service revenues it generates. Sources indicate that Sigfox in France usually takes a 40% cut, a generous share by any measure.

Figure 1: Ludovic Le Moan, founder and CEO of Sigfox, speaks at an industry event. Ludovic Le Moan, founder and CEO of Sigfox, speaks at an industry event.

The branding is unusual. Elsewhere, the Sigfox name is used only in countries where the network is run by Sigfox, including the US, France, Germany and Spain. But as Sigfox reportedly looks to sell some of these network assets, it is understood to have leant on partners to use Sigfox and the country name in their branding.

Sigfox Canada, then, appears to be the first network partner to adopt this naming convention without being an offshoot of the French company. Its main financial partner in Canada is a real estate company called Fontur, which has provided site acquisition services to the telecom sector for about 15 years. Thanks to this partnership, it has been able to get its network built rapidly, says Rawlings.

"We have good relationships with property managers and so facilitating the locations, which has been a challenge for a lot of the other Sigfox operators, has been simple for us," he tells Light Reading. "We are confident we can build out to any of our customers within 90 days."

Much like other those Sigfox operators, Rawlings believes the Sigfox technology will give his company a big advantage in the market for low power, wide area data connectivity. That technology works by transmitting very small amounts of data over unlicensed spectrum at very low cost, making it highly suited to applications such as smart metering and asset tracking.

While Sigfox operators must buy all their network equipment through Sigfox, a basestation costs just $7,000 to $10,000 to install, says Rawlings -- far less than estimates for cellular equipment. He also reckons as few as 100 of those basestations would be enough to cover about 14 million people, the target his company expects to achieve by the end of June. Even at the upper end of the cost range, this would put overall deployment costs at only $1 million.

Rawlings also sees a gap in the Canadian market that does not exist in some other countries. The main telcos have backed a cellular IoT technology called LTE-M, which is a more bandwidth-hungry system than NB-IoT, the other cellular option, although perhaps more suited to applications requiring mobility, such as fleet management. Services on LTE-M networks cost between $4 and $12 per device monthly, according to Rawlings. His own business plan is based around charging between $0.50 and $1.25, depending on volumes and customer arrangements. "We forecast a very small market share and we see significant profits from this," says Rawlings.

If Sigfox Canada's market predictions are accurate, then its targets do not seem outlandish. Based on industry expectations of between six and eight IoT devices per person, Rawlings thinks Canada will eventually have between 250 million and 400 million connected objects. The goal is to capture a "single digit percentage" of this market. With just 5% of the smaller figure, Sigfox Canada should be able to generate $12.5 million in monthly revenues. A 60% cut would translate into $7.5 million, way more than the upfront investment in network rollout.

Of course, none of this considers the company's operating costs, but Sigfox Canada currently has just five employees, including Rawlings, and he does not expect the number to exceed 14 by the end of this year. He relies partly on the administrative and financial resources of Fontur and uses an installation company, rather than internal employees, for site buildout.

Next page: Silencing the Sigfox skeptics

Silencing the Sigfox skeptics
The big uncertainties are whether Canada's IoT market will rapidly grow to the size Rawlings anticipates, and how much of that business will fall to Sigfox Canada. Despite some juicy IoT forecasts, the market has not developed as quickly as IoT players once hoped, and Sigfox has remained a relative weakling on the international stage. Across all operations, it had previously claimed to support 12 million connections, but that number was revised down sharply, to around 2.5 million, in early 2018, and Sigfox ended last year with roughly 6.2 million connections in total. Given the network footprint of more than 60 countries, the headline figure suggests many Sigfox operators have a small number of active connections at best.

The financial stability of France's Sigfox is also cause for concern. Last year it made €60 million ($68 million) in revenues, up from €50 million ($56 million) in 2017 but far less than its reported target of €80 million ($90 million). If Rawlings' pricing metrics accurately reflect what Sigfox operators charge elsewhere, then most of these revenues must come from one-off equipment sales and upfront licensing charges, and not from recurring service revenues. On the cost side, a source close to the matter estimates that Sigfox, with its payroll of about 400 employees, is burning through €5 million ($6 million) a month.

Profitability has certainly remained elusive and plans for an initial public offering have repeatedly been delayed. In the meantime, funding may also be drying up. In late 2016, Sigfox claimed to have landed €150 million ($169 million) from investors including Salesforce.com and French energy giant Total, having previously secured $115 million in February 2015. But subsequent funding rounds in 2018 and 2019 each raised the comparatively modest sum of €40 million ($45 million), with the second tranche coming from the European Investment Bank, according to a reliable source. Asset sales in the US or Europe could raise additional capital and help to reduce cash burn, but they would also force Sigfox to relinquish its role as a network operator.

Critics, including former employees, have identified some fundamental problems with the Sigfox strategy. Among those are an overly hasty expansion into new geographical and vertical markets; the revenue-sharing demands Sigfox makes on network operators; and the proprietary nature of Sigfox technology, which means that anyone who wants to operate a Sigfox network must deal with Sigfox. Proponents of a rival technology called LoRa claim to have a more open ecosystem. And while the intellectual property behind LoRa is owned by Californian chipmaker Semtech, there were an estimated 80 million LoRa connections at the start of the year, nearly 13 times as many as Sigfox reports.

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Analysts are increasingly skeptical Sigfox will emerge as one of the main players in the future IoT market. "Considering the challenges lying ahead, along with the company's newly disclosed connection numbers, it's difficult to see how Sigfox will compete at the same level as similar low-power wide-area network standards, such as LoRa and NB-IoT," said Lee Ratcliff, a senior principal analyst for connectivity and IoT with IHS Markit, in a blog published in May last year.

Could Rawlings be the one to prove the naysayers wrong? That mission will not be easy. While NB-IoT might not yet have made inroads into the Canadian market, LoRa is increasingly visible. Three operators -- Xtelila, IOTcan and Eleven-X -- have already deployed 800-1,000 gateways in Canada, according to a representative of the LoRa industry, and a fourth player is due to be announced shortly. With an ecosystem of more than 700 devices, Sigfox can today boast a major advantage over LoRa, which has far fewer. But sustaining it will be tricky, with the LoRa industry apparently determined to address the device deficit.

Nevertheless, the boss of Sigfox Canada does look to have an impressive track record in the telecom industry. After stints at BT and AT&T Canada, he joined Rogers, where grew the high-speed Internet business from just 3,000 to more than 750,000 customers. He was attracted to Sigfox after noticing similarities between the nascent IoT business and the "early days of the Internet at Rogers," he says. If he can succeed amid the doubts that surround the French firm, he could become the man who puts the teeth back into Sigfox.

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— Iain Morris, International Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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