Telecoms battles and the internet - BNP Paribas CIB
Friday 23 September 2016

IoT is already here, with everything from wearable electronic devices to connected cars becoming readily available – how is the telecoms sector responding?

Sixty billion? Fifty billion? Twenty billion? Analyst estimates for the number of connected objects that will exist by 2020 vary significantly, but whichever number turns out to be the most accurate, the resulting surge in the so-called "internet of things" (IoT), and the likely impact on the telecoms sector, is expected to be huge. The technological and commercial battles for control of this market are already being fought between incumbents and new entrants.

From wearable electronic devices to connected cars, the opportunities for the application of IoT are endless. Learning thermostats, smart lighting and interconnected music systems are examples of household devices that are already available to consumers, but IoT devices extend beyond the domestic and retail environments. IoT device usage requires sensors: connecting many small sensors raises many technical considerations, including price and energy efficiency.

Technological scope and key players

Low-Power Wide-Area Networks (LPWANs), a type of wireless network technology used to connect devices, provide minimal bandwidth but long-distance reach. LPWANs, among them Sigfox and LoRa alliance, have the key advantage of being free and out of the national licence-granting procedure requirements. Sigfox is the first independent startup to have rolled out a network designed specifically for the IoT, providing long-range communication solutions suited to light connected objects. Operating in around 20 countries, over seven million objects are already connected through it. While the Sigfox network provides very little bandwidth, it does not require much in the way of resources from the small objects it is connecting, making it an ideal way to enable a sensor to send a simple measurement read-out several times a day. On the other hand, LoRa - a group of network operators and manufacturers who teamed up to promote the technology created by the Grenoble firm Cycleo - offers two possible approaches: using private networks by installing antennae, or opting for a public network.

Competition should bring down prices and increase the service quality of the networks designated by the umbrella term of LPWANs. The main differentiator between LoRa and Sigfox is the issue of roaming: with Sigfox, servers will either gather data from sensors regardless of where they are, while with LoRa the roaming function will work similarly to today's SIM card technology. 

Connectivity and the role of cellular networks

While telecoms operators are determined to compete on low bandwidth, cellular networks cannot not be ruled out of the game when it comes to connecting objects to the internet. LPWANs will galvanise mobile networks into action, and the response is likely to be complementary. As mobile networks have moved from 2G to 3G and now 4G, there has been an increase in bandwidth not currently seen in LPWANs.

Additionally new standards are beginning to develop. The third generation partnership project (3GPP), a consortium of seven telecoms standardisation bodies, published new standards intended to adapt mobile network to the particular functionality requirements of connected objects. The new standards will see mobile networks coming back into contention for the IoT market.

The challengers to telecoms

As the IoT changes things from alarm systems to home appliances and lighting, networks other than standard telecoms operators are also growing in stature. These include WiFi and Bluetooth networks - the newly-released Bluetooth 5 protocol enables the transmission of information at twice the speed of the current 4.0 version.

The designers of connected objects will undoubtedly be interested in the low-energy features of such technologies, including features such as offline mode. Increased speeds could also allow these networks to perform better than the LPWANs.

Opportunities for the sector

As the IoT takes off, there will be an impressive range of communications options available. The expansion in connectivity is creating many opportunities for LPWANs, cellular network providers and challenger networks like Bluetooth and WiFi. Designers of connected projects will have to work out which will reign supreme. 

François Artignan, EMEA Head of Telecoms at BNP Paribas CIB, discusses the key challenges and opportunities for the sector as the IoT begins to take off: 
As always at the early stage of a new development in the digital economy, an existing market suddenly gets bigger, barriers to entry and established frontiers tend to fall away. Bold and agile newcomers are quick to seize the opportunity and rapidly build a client base, taking advantage of their dedicated approach, technology and user experience. The IoT is no exception to this.

With tens of billions of objects soon to be connected to a radio transmission network, the opportunity is clear for the sector and its incumbent players. Conversely, the threat to incumbents is not so much the risk of losing existing network traffic to newcomers, but to become disintermediated, - essentially becoming a "dumb pipe", with newcomers or equipment manufacturers capturing the final client's ownership, and all the added value that comes with it. So the existing players will fight to avoid this threat, and they have strong arguments going for them.

The IoT raises many issues around reliability, privacy and piracy, where existing players with huge client bases and experience in dealing with these issues can make the difference. Such long-established, trusted relationships are not easily replicated. For them, cross-selling a new service to an existing client is simple and synergetic. They also have the required financial means to acquire the most successful challengers - the latest example being Verizon acquiring Sensity Systems, a leading provider of IoT solutions, ensuring they can protect and at the same time extend their existing client base.

The IoT battles will be fierce, the stakes are high, and there is ample room for everyone - except for the slow movers!


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