MNOs Investments in LPWA: Strategic or Tactical Expediency?
March 21, 2016
Over a year ago, SK Telecom invested in SigFox in a round that raised €100 m from a consortium of investors that included Telefonica and NTT Docomo. This week, SKT announces that it will build a LoRa network at a cost of more than $84 m over two years. In the meantime, SKT is working with Ericsson to evaluate the potential of LTE Cat-m2, the new designation for Narrowband-IoT (NB-Iot), which is the latest of a series of LTE-based standards for IoT connectivity. This is only one example among many of a mobile service provider taking a multi-pronged approach to address IoT connectivity. The moves by many MNOs in this space raise many questions, such as: Why are MNOs making multiple investments in IoT? What is the business opportunity? Are MNOs serious about LPWANs? Is this interest based on hype or is there a real business to be had?
There is no question that LPWANs have ignited a sense of urgency in the mobile network operator (MNO) community – one that is reminiscent of the race between WiMAX and LTE in the middle of the last decade. With IoT applications being so numerous with different requirements, LPWANs exposed a gaping hole in the technology roadmap of MNOs. Cat-m2/NB-IoT will attempt to fill this gap, but unlike LPWANs it is not available commercially yet. This led many operators to invest selectively in LPWANs. MNOs such as KPN, Swisscom, Orange, Bouygues, Proximus, DU, SKT, and others have aligned with the LoRa Alliance. T-Mobile aligned with SigFox to build a network in the Czech Republic. Telefonica in Spain collaborates with SigFox.
Interestingly, while many of the MNOs in Europe and Asia are active on LPWANs, MNOs in North America have been slower on pulling the trigger, while remaining very active in 3GPP standard activities to define an LTE-based IoT connectivity standards.
The alignment of MNOs with certain LPWA technologies is largely determined by business model and market expediency rather than technology. LoRa and Weightless take an ecosystem approach based on a standard. Ingenu takes a technology licensing approach to enable service providers deploy their own networks. SigFox chose to become a service provider in the US, while it licenses its technology in other markets. These models have inherent strength and weaknesses, and they are not static. In fact, the strategies LPWA innovators are taking to market is evolving with a marked change over the last two years when new vigor was injected into this market segment.
It remains to be determined if MNOs will be able to capitalize of LPWAN and like technologies to improve revenues. While connectivity is a commodity, the business model of selling subscriptions to access the network will only make an impact when the number of devices is very high. The value of information behind data is often correlated to the amount of data. This is something to watch out for as operators move to provide IoT connectivity services.
Note: At Xona Partners have been exploring different aspects related to developing IoT services including market, financial and technology aspects. Some additional collateral include:
1- Research report on LPWA and LTE IoT connectivity (link).
2- LPWA and LTE IoT Connectivity Executive Summary (link).
3- Observations of key trends from MWC 2016 (link).