Six challenges for NB-IoT deployment
In a previous post, Bill Harpley, MD and Lead Technologist at Astius Technology, described how some of the brightest minds in the mobile telecoms industry came together to create a set of standards for cellular IoT. But smart technology alone is no guarantee to success. So in this article, Harpley will describe what he thinks are the major challenges that cellular network operators will face as they seek to build profitable Narrowband-IoT (NB-IoT) based businesses in UK and Europe.
On one level, the cellular industry can afford to be bullish about commercial prospects for their planned NB-IoT rollouts. After all, unlike LoRa and Sigfox operators, they don’t have to build their networks from scratch.
But industry leaders also recognise that they have a lot of catching up to do. Both LoRa and Sigfox have demonstrated a clear value proposition to the market, which means the cellular industry must prove the commercial viability of NB-IoT technology.
Here are the six major challenges which the industry will face:
1. Interoperability and compliance
November 2015 saw the launch of the NB-IoT Forum. Key members include Vodafone, Ericsson, Telefonica and GSMA. A major brief will be interoperability testing and compliance certification of NB-IoT equipment.
With this aim in mind, Vodafone has created a dedicated NB-IoT lab at Newbury. The company is planning to open a further lab in Dusseldorf later in 2016.
2. Deployment and long-term support
There have already been a number of NB-IoT proof-of-concept trials, using pre-standards hardware. For example, in December 2015, Vodafone, u-blox and Huawei demonstrated a water meter application in Spain.
The next challenge will be to engage in pre-commercial trials. Vodafone for instance is reported to be planning to launch its first NB-IoT networks in Australia, Ireland, the Netherlands and Turkey.
In my view, the major challenges to deployment will be:
• Time and Cost: Vodafone claim that 85% of the company’s base stations can support NB-IoT with the aid of a software upgrade. But for network operators with older base stations, this may require a hardware upgrade. This is bound to increase the cost and time-scale of NB-IoT network rollout.
• Roaming: Global M2M roaming is another interesting topic which I have yet to see addressed. In theory, operators may need to support all three standards: CAT-M, EC-GSM, NB-IoT , as well as GPRS.
• OTA Updates: endpoints will need over-the-air (OTA) upgrades to provide security and other updates.
3. Applications and business models
The cellular industry has quickly grasped the need to build a partner ecosystem in order to build applications, business models and compelling use cases for NB-IoT.
For example, Deutsche Telecom has established NB-IoT prototyping hubs in Berlin and Kracow. By situating these hubs within incubators, the hope is that it will provide a rapid learning environment for developers, stimulate thinking around new business models and shorten the time to market for products.
4. Competition from rival LPWAN technologies
Both LoRa and Sigfox are proven technologies with a significant and growing presence.
• Sigfox now operates in 24 countries.
• LoRa continues to gain ground through construction of national, private and community networks (inspired by the global Things Network ).
Given that large scale roll-out of NB-IoT will not happen for at least two to three years, rival technology vendors have plenty of time to entrench their market position.
Market penetration of NB-IoT will vary across countries. For example, here in the UK, there are no national Sigfox, LoRa or Weightless networks. So network operators in the UK can afford to be optimistic about prospects for NB-IoT.
But in many countries, potential operators may face strong competition from non-cellular LPWAN networks. For example, in the Netherlands, KPN has built a national LoRa network. In such a scenario, there may be less market adoption of NB-IoT.
5. Go to market strategies
LPWAN applications are characterised by the sending of small payloads of data at infrequent intervals (perhaps just a few times an hour). Arguably, most of these have no compelling reason to require a high quality of service. In which case, potential customers may need a lot of convincing to pay a premium price for such ‘low value’ services.
Consequently, NB-IoT operators need to develop a strategy to create a viable position in this new market. Some possible routes to success are:
• As established market players, they can leverage their trusted ‘brand’.
• Operators can grow market share by reaching out to customers beyond their traditional M2M base.
• Avoid costly price wars at the low end of the market and focus on applications which could command a price premium (e.g. monitoring of medical patients in the community).
• Create value by exploring new business models and engaging in vertical industry partnerships.
6. Design of pricing plans
Intimately bound up with the issue of market positioning is the pricing for IoT data plans. In truth, this is something that people in the IoT data sector are still trying to grapple with, though the efforts of a few early pioneers point the way.
For example, SK Telecom recently launched their nationwide LoRa network in South Korea. A range of six data plans have been announced. Each plan corresponds to a data application usage band.
Take particular note of the fact that in the SK Telecom pricing model, the LoRa data plans cost one-tenth of SK Telecom’s LTE-based IoT services.
If this pricing structure is anything to go by, in countries which have incumbent LoRa or Sigfox services, NB-IoT tariffs will have to be reasonably competitive. After all, it will be hard to tempt customers away by offering them a similar service at a higher price! Here in the UK, there are no national non-cellular LPWAN networks. This will give NB-IoT operators more leeway in designing pricing structures.
1. We are likely to see ambitious rollouts of NB-IoT networks in 2017-2018. However, as Sigfox and LoRa have shown, it takes time to build a complete business ecosystem of customers, developers and vendors. So don’t expect too much of NB-IoT in its early stages.
2. Pricing of NB-IoT services will be a major challenge, especially in markets with incumbent Sigfox/LoRa competitors.
3. NB-IoT operators need to develop a marketing strategy which leverages their existing customer base and expands their business into new market segments.
4. The potential market is huge. According to recent report from ABI Research, sensors and connected peripherals will account for 65% of active connections by 2021. Furthermore, they predict the global number of connected wireless devices to be 47 million by 2021. This is a pretty big pie, which means there is scope for both cellular and non-cellular LPWAN technologies to co-exist and prosper in the future.
5. NB-IoT technology will play a vital role for the provision of IoT data services in the LTE-Advanced and 5G networks of the future.
I leave you with one final observation. In order to create a ubiquitous, scalable Internet of Everything, we need to push the cost of data collection down towards zero. It will be interesting to see what contribution NB-IoT technology makes towards that goal.