If history is anything to go by, it’s going to be unlucky for some, but it’s an indication of the momentum which is growing around cellular IoT that so many chip companies have jumped on the bandwagon.
It’s not cheap to develop a cellular chip, even one that is moderately simple, such as is the case with the NB-IoT standard. Back in 2012, when I wrote about the cost of developing wireless standards, I put it at around $6 million for each chip and protocol stack. That was looking at Bluetooth and Wi-Fi. With the additional complexity of any cellular standard, along with network interoperability testing, it becomes far more expensive, as you need to test with as many operators as possible. Hence the development cost to get a chip and stack to market is probably at least $15 million.
With thirteen different companies bringing chips to market, that’s an investment of around $200 million. Some of these have tried to cut their development time by acquiring start-ups which were already some way down the route. Sony purchased Altair, Huawei bought Neul, ARM bought NextG-Com and Mistbase, Goodix acquired CommSolid, while Nordic Semiconductor picked up around 60 engineers in Finland’s Oulu. We don’t know how much they spent on these acquisitions, but it’s probably well over $200 million. Add to that the costs of the standardisation process, infrastructure development and initial market trials and it’s clear that somewhere between $500 million and $1 billion has already been spent on getting NB-IoT to the point where it is today. That’s a level of investment that should be worrying competing standards like LoRa and Sigfox, as the NB-IoT companies will do all they can to recoup their investment.
I’ve been wondering for some time how long it will be before Sigfox ditches their own proprietary protocol and adopts a different standard, probably going for NB-IoT. Whilst many may question why they’d do it, making the assumption that the Sigfox protocol is their crown jewels, I’d question that assumption. Last week, at the Sigfox World Expo in Prague, they made an announcement that suggests that that day may not be too far away. I firmly believe that it has to happen, because Sigfox’s business model is looking a lot like Uber’s, which means going for global domination by any means possible. The means to that end is probably not based on their own proprietary protocol.
As the old adage goes, “while the cat’s away, the mice will play”. In the case of NB-IOT, “when the spec’s delayed, LPWAN will play”, which is exactly what’s happening in the Internet of Things market today. The problem is that 3GPP (the 3rd Generation Partnership Project), the standards body which has been responsible for the 3G, 4G and 5G mobile standards, dropped the ball as far as the Internet of Things is concerned. Seduced by the slabs of black glass which suck up both our attention and the mobile networks’ spectrum, the 3GPP engineers totally forgot to design something to replace the old 2G workhorse of GPRS, which is responsible for most of today’s machine to machine communications. Instead, they spent all of their time designing high power, high speed, expensive variants of 4G to support an ongoing dynasty of iPhones, Galaxys and Pixels, none of which were any use for the Internet of Things.
Noticing this hole, a number of companies who had been developing proprietary, low cost, low speed, low power communication options saw an opportunity and created the Low Power WAN market. Whilst many perceived them as a group of Emperors with no clothes, the network operators were so desperate to have something to offer for upcoming IoT applications that they started engaging with them, rolling out LPWAN infrastructure. Whether they believed the LPWAN story, or just hoped it would fill a hole is difficult to ascertain, but no-one can deny that LPWAN is now firmly on the map, in the form of Sigfox, LoRa, Ingenu and a raft of others. To address that challenge to their hegemony, the GSM Association (GSMA) directed the 3GPP to assemble their own suit of imperial clothing which would be called the Narrow Band Internet of Things, or NB-IoT.
This is the story of why NB-IOT was too late, why it will fail in the short term, why it will win in the long term, and why the industry will struggle to make any money from it.
There‘s a battle going on for the infrastructure technology that will support the Internet of Things. Currently the three most talked about contenders are Sigfox, LoRa and LTE-M. There are a lot of other alternatives and it’s quite possible that none of LoRa, Sigfox nor LTE-M0 will win, but that’s another story. If you search for LPWAN (Low Power Wireless Area Networks) you’ll see that the battle for supremacy is a hot topic. It’s largely because of the impending loss of the GPRS networks which power much of today’s M2M business. As a result, almost every day you’ll find another article debating their respective technical merits.
I’m going to argue that these comparisons miss the point. Which technology will win depends far more on the business model than on the underlying technology. The three technologies listed above are interesting to compare, as they exemplify three significantly different approaches to an IoT business, which can be broadly summed up as:
Sigfox – become a global Internet of Things operator
LoRa – provide a technology that lets other companies enable a global Internet of Things
LTE-M – evolve an existing technology to make more money for network operators
Between them they promise to help us get to the predicted 50 billion connected devices in 2020. A winning solution could allow the IoT to take off and make its supporters a lot of money. The ones that fail may be limited to niche applications and lose investors hundreds of millions of dollars. Only one is likely to win. It’s also possible that all of the current pretenders could lose. So let’s forget the technology and look at the business models.
All of a sudden, there’s a lot of activity in the Long Range wireless network community. In France, Orange has just announced that they’re going to follow in Bouygues’ footsteps in deploying a LoRa network for M2M which will cover the whole of metropolitan France. That in turn follows on from a similar announcement from KPN that they are planning to do the same thing in Holland, while Proximus are going to cover Belgium and Luxembourg. It’s a bit like a rerun of the SigFox PR offensive, after they managed to sign up operators in France, Holland, Portugal, Belgium, Luxembourg, Denmark, Spain, the U.K. and San Francisco. Nor is it just a European phenomenon. In the U.S., Ingenu, the company which was formerly known as On Ramp, has raised $100 million to roll out its own similar, proprietary network. It seems that there’s a new announcement almost every day. So it’s interesting to look at why mobile operators are desperately announcing new network technologies to support M2M and IoT applications, when just a few months ago they gave the impression that they would rule the IoT with their 4G networks.
When you stop and look behind all of this activity, you see something that should be worrying the M2M and IoT industry (which is not the same as the cellular industry). For the last fifteen years they’ve not had to worry much about how they make their data connections – they just embedded a GPRS module and bought a data contract. But look forward a few years and there’s a worrying hole in the air as networks start to switch off their GPRS networks. That’s just beginning to dawn on network operators, who see an unexpectedly unpleasant vision of the future, in which their anticipated IoT revenues could disappear into thin air.