Casually Restrained Thoughts on Sigfox and LPWAN

Sigfox announced its Series D today, and with $115 million it was a big one. The sheer amount of money aside, what’s remarkable about the announcement is the number of strategic investors that are named as the company’s newest shareholders. In a world of zero interest rates, quantitative easing, and too much money chasing too few ideas I personally prefer to take the buzz of most VC announcements, per se, with a healthy grain of salt, but if there’s a strong line-up of strategic investors involved in a round then I’m all ears. For the technology that’s being invested in, they represent a certain vote of confidence that tends to warrant further analysis. Let’s take a look at the industry names behind Sigfox, and speculate a little on what they may be after:

  • GDF Suez: Possibly the most interesting name of them all, the utility group obviously wants to leverage LPWAN to drive its digital transformation strategy. LPWAN networks, such as the one from Sigfox, are a compelling alternative for connecting smart meters – in electricity too, but especially in water and gas. European utilities are in a tough spot balancing between regulatory requirements (“how can we tick the boxes as affordably as possible?”) and genuine business needs (“how can we maximise the value of connections?”), so they’ve got concretely a billion-euro question when it comes to prioritizing the technological choices. Instead of just muddling through it, which is what most other utilities of its size seem to be doing, GDFS seems to be tackling the question head-on.
  • Air Liquide: A supplier of industrial gases, this is one I found quite surprising, really. I’d presume that Air Liquide’s interest is mostly related to asset tracking and inventory management. Gas cylinders are relatively high-cost products, so there probably is a lot of business sense in getting them connected: optimizing the distribution and building a more service-based relationship with the end customer. In a product class such as this, LPWAN’s characteristics might be close to the sweet spot if compared to the alternatives. RFID doesn’t deliver enough data, 802.15.4 falls short on mobility and range, while cellular M2M is too costly and may also struggle with the maximum endpoint density.
  • Eutelsat: This is a satellite operator that, like most of its peers, has ambitions to play a role in the IoT. Eutelsat has been doing some work on making satellite connectivity a better fit for IoT deployments, but it’s not immediately clear to me what the synergy with Sigfox and an LPWAN network would be. Combined, LPWAN-plus-satellite network architectures could play a role in exceptionally remote or otherwise hard-to-cover areas, as well as in territories where Sigfox faces spectrum problems. There might be mutual SLA and QoS benefits to consider, as well.
  • NTT DOCOMO, SK Telecom, Telefonica: A group of telcos that generally tend to think outside the industry box. Docomo has been one of the pioneers for embedded SIM, SKT has arguably the most advanced platform business I’ve come across in the telco industry, while Telefonica overall has a very balanced and global IoT proposition. All are presumably exploring LPWAN as a complementary technology to fill gaps in their network coverage. As for Telefonica, the company’s experiences with the UK smart-metering roll-out give some interesting context here. Perhaps the aim is to drive down the cost of covering sparsely populated areas, which in nationwide projects is a factor that can deceitfully fast eat into the operator’s ROI.  

From an analyst’s point of view, LPWAN has been a fascinating topic to follow over the past year or so. My team is seeing a lot of interest in the concept from a diverse range of organizations, including also companies from verticals where wireless connectivity has traditionally not been of strategic importance.  LPWAN has a lot of promise, yet there are also a number of rather serious question marks over the available technologies (say, the real-life endpoint density vs. simulated density, the future role of LTE-M, or the regulatory outlook), so we’d advice to filter out some of the hype surrounding the underlying companies – including also Sigfox. There is little doubt that as one connectivity option amongst many LPWAN is here to stay, but it’s also far too early to call what level of impact it will ultimately have on the market.