IoT Market Tracker - Cellular Gangs Up on Fixed Line Connections

ABI Research recently updated its IoT Market tracker which included results for LPWA technologies and short-range wireless connections. This Insight discusses the WAN technology results, showing that fixed line technologies, while still an important connection medium for IoT, dramatically lose connection share, declining from nearly 60% of connections in 2015 to 39% in 2021.  Cellular technologies will take over as the connectivity leader starting in 2018, helped significantly by new LPWA technologies that include 3GPP cellular versions (LTE Cat 1, M and NB-IoT), and the mostly proprietary technologies from a healthy handful of suppliers such as Sigfox, Ingenu, FlexNet suppliers, such as LoRa and Xylem, and vendors, such as Semtech, to name a few.

Important Note:  This data is based on the application segments covered by the IoT Market Tracker. As the application bucket that defines IoT can vary significantly depending on the source, it behooves the reader to review the app segments that are measured in the IoT Market Tracker. 

Fixed line technologies enabling IoT include bidirectional landline technologies, such as Ethernet, DSL, cable, and PSTN. Power line technologies are also an important WAN technology serving primarily the smart electricity meter segment. As well, analog fixed line technologies are still a prominent but rapidly decreasing share of legacy video surveillance connections.

The top segments using fixed line technologies are smart meters, video surveillance, home automation/security, and POS. Fixed line use is highly dependent on region with developed regions using it far more than developing country regions. When taking out China from the calculation (as they are hard to categorize as a developing country anymore), developed countries will constitute 65% to 70% of all fixed line IoT connections through 2021.

Cellular technologies grow to dominate the IoT connectivity landscape because of their versatility, decreasing access fees, availability of new LPWA technologies, and because of the rapidly growing IoT segments that sit in the telematics bucket. These segments are connected car, fleet management, aftermarket telematics, and usage-based insurance. Worldwide, these four application segments will constitute nearly half of IoT cellular connections by 2021 out of the top 32 IoT segments—those IoT applications are defined in ABI Research’s IoT Market Tracker.

In the non-LPWA segment, 2G and 3G technologies maintain approximately 30% share over the next five years. Maintaining 2G share will come from EC-GSM, a 3GPP release 13 technology based on eGPRS with features of extended coverage and lower power consumption in the end nodes. Another factor: lower migration to 4G across nearly all other regions, except North America, Japan, and South Korea, will also slow 2G’s loss of IoT connections. For 3G, a vast swath of verticals will be using this technology as a result of 2G network shutdowns, lower module pricing relative to 4G, and smaller 4G network coverage.

4G, as defined in the IoT Market Tracker, is Cat 3 technologies and higher. This connection technology does not break 10% share of connections until 2021—connected car being an important application segment driving its use mainly in North America, Japan and South Korea. 4G’s share could be higher but are not because Cat 1 technologies are placed in the LPWA category. In practice, Cat 1 has decent throughput of 5 Mbps uplink and 10 Mbps downlink. But those features also make it applicable to many IoT segments that want the extra capacity if needed. Also driving Cat 1 adoption is it being offered in both multi-mode and single mode variants. Multimode makes it suitable for telematics segments; single mode lowers the device price (lower price than 3G devices), which effectively makes it an option for any IoT segment.

Boosted by current availability of proprietary LPWA technologies, Cat M and NB-IoT then help drive a significant uptick in connection share by the LPWA category to 25% of connections in 2021. Smart metering, including water and gas meters, will drive adoption but many segments will use this technology including aftermarket telematics, POS, and security applications.  Asset tracking is expected to be a huge segment for Cat M and NB-IoT technologies, but network coverage will delay adoption hence a longer term opportunity. The big question is how will the proprietary technologies fair as Cat M and NB-IoT networks standardized and supported by a much bigger vendor ecosystem become available. Holding back use of Cat M and NB-IoT will be pricing—AT&T recently released IoT pricing based on pooled data use. The pricing is attractive if message size is small and delivery volumes are low. But if IoT app developers and solution providers are unsure how these operational characteristics will change as their solution evolves, the business case can’t be nailed down. As a result, the lowest available per device price becomes attractive and so it is not a surprise that some operators decided to roll out LoRa networks before their Cat M networks.  SK Telecom announced in July it completed its LoRa network and Softbank is in the midst of its nationwide LoRa network rollout.