The market for the LPWA Internet of Things has entered the hype cycle.  During the past six months, we have seen hundreds of interesting new use cases and more than 50 startup companies that are stepping in line to pursue the market.

Technology markets have a natural evolution. During the hype phase, plenty of new ventures appear with a huge variety of approaches.  Typically, this phase is followed by a period of rationalization, where some technology ideas flounder while others take over.    Finally, there is a growth phase in which the ecosystem and business model mature.    

Mobile Experts recently completed a technical and cost study, which examines 28 wireless formats and variations.  Our findings came from deep technical details and a thorough cost modeling process:

• GSM is well established, but mobile operators are starting to phase out support.
• Multiple LTE (News - Alert) categories can carry high data throughput, with Category 1, Category 0, Category minus 1, and NB-IoT moving steadily toward lower bandwidth, lower throughput, and lower cost.  Still, any device in the LTE family will be expensive.
• LoRa has great range and a growing ecosystem.  
• SigFox has inexpensive devices and higher capacity than LoRa. 
• Weightless-P works over long ranges and, as an open standard, holds the potential to scale up with a growing ecosystem.
• DART, Zigbee, WirelessHART, ISA100.11a, UNB, RPMA, 802.11af, and 802.11ah all have advantages and disadvantages – all with different priorities on reliability, range, latency, capacity, and cost.

From a technical point of view, our study concludes that low power wide area standards hold great promise for low-bandwidth, nomadic applications. Our line-by-line link budget calculations show that LPWA beats GSM and LTE for some cases.  Regional regulatory requirements play a role here, and we’ve been able to identify big differences between various world regions in terms of the cost effectiveness of LPWA options. 

Range vs. data rate for IoT connectivity technologies

From a business point of view, LPWA has a headstart compared with 3GPP technologies, as well as significant cost advantages in the client devices. In private networks, this headstart means that many large enterprises will be locked into a set of vendors and a technology solution, and LTE options may come too late. In public networks, GSM and LTE have advantages in their ability to deploy rapidly through software upgrades of existing mobile networks, as well as possibilities for global roaming.  

Our calculations of capex, opex, and client device costs show the strength of some LPWA options compared to LTE.  However, more than 30 million mobile radios are already deployed in the field that support GSM and LTE technologies, so the mobile players have an ace card in their sleeve – they can instantly turn on a nationwide network via software upgrade. The success of LTE will depend on the willingness of major OEMs to support cheap software upgrades.

Our conclusion is that mobile network operators are likely to base their business model around 3GPP technologies over the long term, especially LTE Cat-m1 devices as defined in 3GPP Release 13. The NB-IoT standard provides the ultimate in range and performance, but time to market will be an issue.  

IoT connectivity market structure

In the end, LPWA options are likely to win the low-cost wide area IoT market, while LTE standards are likely to win for applications that require mobility and high reliability.  Together, we expect the market to converge toward two to three winners over the next 5 years. Despite these well-engineered solutions, the outdoor nomadic IoT market will grow by millions, not billions, because this market will rely on organic growth of new business models. That’s the nature of the hype cycle; mainstream adoption will not happen until the standards and products are rationalized, the ecosystem settles down to a few key players, and the products converge for economy of scale.

To achieve the explosive growth of billions of devices in the next 5 years, wide area technologies need to steal from more established markets that are based on existing business models. That means competing with Wi-Fi and ZigBee (News - Alert)/802.15.4BLE, which have already pushed through the initial stages of the hype cycle for home automation and some industrial applications. Of the roughly 26 billion devices that many people expect to be connected to the 2020 Internet of Things, at least 24 billion of them are likely to use short-range, best-effort approaches. The near-term success of LPWA and LTE-M hinges on their ability to steal market share from Wi-Fi and BLE.

Frank Rayal is with Xona Partners and Mobile Experts (www.mobile-experts.net).