You don’t need to be a wireless carrier to operate an LPWA network and provide IoT connectivity services to hundreds of thousands of devices. LPWA technologies operate in unlicensed spectrum which opens a wide door to anyone to play in the IoT connectivity space, including of course mobile network operators (MNOs). But is LPWA for MNOs? Or more precisely, LPWA opens the door for new applications and business models, but to what extent can MNOs leverage LPWA and can they make a successful business out of it? Or are LPWA networks best run by new entities unencumbered with legacy solutions and processes?
There are many issues gating wide adoption of IoT applications. Fundamentally, the issue comes down to the business case and validating the return on investment. LPWA solves some of the business case problems:
- It promises lower device cost: a GSM/GPRS device costs around $10 whereas LPWA is positioned at sub $5, and even as low as $1-2 in the future in volume quantities. Considering that in some markets 2G is being turned off in favor of LTE (e.g. US, Korea, Japan) and LTE is slated to become the main technology for IoT connectivity through its LTE-M evolution, it will be many years that an LTE modem which stands today at $50 can reach the point to be competitive with LPWA.
- It promises lower radio access network cost: Two issues work in favor of LPWA to achieve this. First, it promises higher scalability than the cellular network. LPWA protocols are designed and optimized for intermittent, small size, data transmissions that would otherwise overwhelm the cellular network with signaling traffic. Second, the system gain of LPWA have is competitive with that of cellular technologies within the limits of spectrum regulations in the ISM band.
Global M2M Connectivity by Network Type.
But there are other issues that impact the return on investment:
- Implementing IoT is vastly different from selling broadband service to consumers and enterprises. System integration is a major activity and the clients adopting IoT have to overhaul their existing processes in favor of IoT. The sales cycle is different and requires active engagement to custom design a solution for specific applications, not to mention demonstrating the value proposition to start. Services have to be tailored to every application and client. The economics, personnel, and processes required to enable this have to be developed by the operating entity.
- The cost of service for most IoT applications has to be low and overall revenue is derived from device scalability. This is not a model that the operators can accommodate with their current cost structure and processes which imposes high overhead.
- The scalability of the core and backend services. Emerging SDN/NFV enables scalability on demand and provides for a lower cost structure than today’s core and backend network technologies which are based on fixed software architecture that’s tightly coupled to hardware to match the requirements for throughput capacity and reliability mandated by the data broadband use case scenario. LPWA has the potential to disrupt the backend and core network by introducing a scalable SDN/NFV core that will better scale with IoT applications and services. This negates a key advantage that MNOs hold today in backend systems by allowing for a more dynamic and adaptive framework with a lower cost structure.
Unless LPWA technologies are implemented in licensed spectrum and such deployments prove to offer significant advantages in reliability and quality that are required by the IoT applications, MNOs will be hard-pressed to offer a competitive business model based on unlicensed LPWA technologies. This issue will be put to the test with a few MNOs announcing commitments to build LPWA networks. It will be interesting to watch how they will execute.
While LPWA provides a technological leap to meet IoT connectivity requirements, it is equally important to devise a go-to-market strategy that takes advantage of the new opportunities LPWA provide. With the door open to multiple players, MNOs will be hard pressed to define this strategy. New entrants have the flexibility to innovate from a market strategy perspective while MNOs can get bogged down breaking out of the structure they operate under today.