Network Maturity Matters More than Innovation for the IoT

By Jamie Moss | 3Q 2024 | IN-7436

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When cellular Low-Power Wide Area (LPWA) networks were standardized in The 3rd Generation Partnership Project (3GPP) Release 13, it was easy to assume that uptake would be immediate and overwhelming. After all, wasn't this precisely the performance and the price point that the Internet of things (IoT) had been crying out for-for decades? This followed years of device Original Equipment Manufacturers (OEMs) complaining about the high cost of mobile data and forever asking "who will pay?" The correct answer to which was always implicit: the device OEM pays, as the service of embedded connectivity, and not the embedded hardware (the two should never be conflated), must not just be a just a value-add, but must be foundational to the value proposition of the product.

It has taken 8 years for the cellular LPWA technologies LTE-M and Narrowband IoT (NB-IoT) to generate a meaningful number of IoT connections. But most participants, from chipset manufacturers to wireless carriers, have been very disappointed with the results considering the time and money they invested. Many chipset manufacturers have abandoned Cat-M and NB-IoT, and there have been recent rumors of some carriers planning to shutter their NB-IoT networks. 5G Reduced Capabilty (RedCap) and Enhanced RedCap (eRedCap) are the new cellular network technologies of focus for the future of the IoT. But in order for 5G to be successful at serving the IoT as soon as possible, there are important lessons it can learn, from both LPWA, and 2G and 4G.

Cat-M and NB-IoT were created in light of concern that proprietary LPWA technologies that make use of the unlicensed Industrial Scientific and Military (ISM) band and whitespace spectrum would eat the cellular industry's lunch. Proprietary LPWA was developed by agile, private organizations that did not have to struggle against the weight and inertia of an entire industry. However, a fundamental truth was missed: for cellular, the IoT was a parallel market, reusing sunk-cost technology already made ubiquitously available and highly commoditized as a consequence of being originally created for the consumer services market. This technology could have never been affordably developed from the ground up just for the IoT.

This was true in terms of network infrastructure and end-user equipment. It is the reason why we still have 2G today-33 years after it was first launched; with carriers maintaining just enough 2G capacity explicitly for the sake of legacy IoT devices, albeit with no new device certifications or registrations now allowed. By contrast, LPWA came to market explicitly designed for the IoT, but with zero availability. ABI Research has tracked all Cat-M and NB-IoT network rollouts since Release 13 in 2016, an 8-year history. Cat-M went from 2 network launches in 2016 to a high of 23 in 2020, to just one new launch in 2023, for a total of 79 live networks today. While NB-IoT went from 3 network launches in 2016 to a high of 36 in 2018, to just 1 new launch in 2023 and 2024, for a total of 118 live networks today.

Cat-M witnessed an almost 50:50 split in network deployments by domestic carriers, versus deployments that were part of a concerted international group-level strategy. For NB-IoT, it has been a 60:40 split in favor of independent domestic operators. NB-IoT was picked up the soonest and by the greatest number of carriers, as its suitability for stationary IoT devices made it ideal for domestic deployments and ergo an potential opportunity for any carrier. Cat-M is intended for mobile devices, so it is more likely to cross borders and require roaming, making it a focus for adoption by carriers with international operations. Small domestic operators that would create and receive less roaming traffic were uninterested and had other network investments priorities.

Neither network types offer anything close to global coverage today, with Cat-M being strong in North America, Europe, and Australasia. NB-IoT has patchy coverage in Latin America, with next to no coverage in the Middle East & Africa. NB-IoT has done well in China where there is no Cat-M, but has struggled throughout the rest of the world, with even the largest IoT service provider, Vodafone, only having about 10% of its connections on NB-IoT. NB-IoT also presented the most immediate opportunity as it allowed the connection of something new, namely sensors, while Cat-M was the natural successor to 2G and 3G. Cat-M has been experiencing success recently, but only since 2G and 3G networks have finally started to be sunset.

Network availability and coverage matters enormously for the IoT. It has prolonged 2G, hampered Cat-M and NB-IoT, greatly elevated 4G even late in its history, and will be hugely important to 5G migration. LTE and specifically Cat-1 are vital to the IoT right now because 4G is the default cellular technology worldwide. Cat-1 was never useful for consumer devices, but since 2016, it has driven 4G adoption in the IoT, receiving a further boost in affordability with the standardization of Cat-1bis resulting in modem chipsets and modules that are half the price of their 2016 forebears. It is ironic that Cat-1 started to succeed just as Cat-M came to market, with Cat-M now being forced to share its market opportunity with Cat-1bis wherever global connectivity is required.

Cat-1bis also looks likely to impede 5G uptake. The industry is very keen for 4G to avoid becoming the "new 2G" by overstaying its welcome. 5G RedCap is ultimately set to replace LTE Cat-4, and perhaps some Cat-6. And the soon-to-be standardized eRedCap will take the place of Cat-1 and Cat-1bis. It is inevitable that these recent 5G variants will, in time, serve all the market opportunity for IoT connectivity once attributable to Long Term Evolution (LTE), but how long will that take? RedCap and eRedCap are network software upgrades that will sit atop a 5G Standalone (SA) core network. Unlike Cat-M and NB-IoT, RedCap and eRedCap are not IoT-only technologies, so they can at least benefit from network investment for the sake of consumer service offerings, just as with 2G and LTE.

As of the end of 1Q 2024, ABI Research counted 55 public 5G SA network deployments globally, 15 of which were nationwide. And if there's one thing the IoT needs, it is guarantees-of continuity of network availability. If RedCap, in any form, is to be an actual successor to LTE for the IoT, it will need far greater global support in the long term. In turn, adoption is likely to depend on investment driven by RedCap's utility for the consumer market; just as Non-Terrestrial Networks (NTNs) also will. The IoT-only opportunity is unlikely to be sufficient alone to compel carriers to upgrade to SA, or to deploy the necessary software overlays. And if it is sufficient, it would only be so for select carriers, not all, just as with Cat-M and NB-IoT.

The IoT does not care about technology, it cares about outcome. The price of network technology will always be vital to adoption, but it will never be the most important factor. Performance, especially in terms of power savings, is always more important. A product's connected nature defines how much it is priced at and how it is paid for, based on the Return on Investment (ROI) it delivers for the enterprise or municipal end user. If there is ever any question about the validity of paying for IoT connectivity, the fault lies with the business model of the device. And if the underlying enabling technologies, namely modem hardware and especially connectivity, need to be so cheap as to be offered effectively for free, then a company does not have a valid IoT business model in the first place.