As China Telecom begins rolling out NB-IoT across its network, Huawei is telling the cellular industry to expect to 30+ NB-IoT networks deployed in 20 countries, this year. However, Rethink believes the revenue opportunity for these networks is small, as device connections only require tiny data transmissions – and it’s hard to charge high prices for such small packages.
NB-IoT as a specification can support throughput of 250kbps downlink/uplink, this technical capability will be largely unnecessary. Huawei’s LTE marketing vice director, Jimmy Xujianmin, told Riot that LPWAN connections would account for 70% of all Cellular IoT connections , with smart meters being a very prominent use case – along with parking, agriculture, and wearables. None of these use cases will drive a ton of revenue.
Devices like smart meters will only be transmitting incredibly small amounts of data on an operator’s network. Xujianmin could not give us pricing data, but our own research suggests that China Telecom will be charging $0.15 per month per smart meter device connection. This is in line with SK Telekom’s 100KB data connection (an appropriate amount for a smart meter) price of $0.30, on its LoRa network.
For NB-IoT, that means each smart meter is worth about $1.80 per year to the MNO. We reckon that as many as 70% of NB-IoT connections could be smart meters, and there are about 1.5 to 2 smart meters per person in any given country (for water, electricity, gas). At 100% penetration in China, which has
456 million households, that’s around 680 million meters, which would bring in some $1.22 billion in annual MNO revenue. And total NB-IoT revenue ion China might go as high as would sit at around $1.75 billion
This is a drop in the ocean for Chinese MNO revenues and is why Riot has problems believing the apparent enthusiasm for NB-IoT that we see in marketing materials – it looks like a fraction of total MNO revenues.
The challenge then for operators planning to deploy NB-IoT networks, will be to encourage utilities to pick NB-IoT and install devices volumes as yet unseen in the LPWAN sector. In this respect, NB-IoT appears to be going in the right direction, and can certainly rely on MNO brand credibility.
Huawei president of marketing and solutions Zhang Shunmao told TelecomAsia, that Huawei is currently shipping 200,000 NB-IoT capable chips per month, and expects to see the figure increase to 1m per month in the near future. Today there are still no active public NB-IoT networks, but the shipments suggest strong interest from developers and OEMs.
Not only are early shipment figures promising, the total scale of the metering market should give operators reason for optimism.
The country has been a world leader in installing smart grid technologies. State Grid Cooperation of China is in the middle of an investment plan to convert all electric meters into smart meters by 2020, costing $45bn.
A report published by Research and Markets found that 150m smart meters were shipped in China in 2015, 88% of which were electric meters – predominantly using NFC to link meters to smartphones. Penetration rates for smart gas and water meters are still relatively low at 6% and 12%. These rates are in part thanks to the different challenges presented in developing a smart gas or water meter as opposed to a smart electric meter.
An electric smart meter doesn’t have to deal with any power constraint issues, whereas water and gas meters do not have a direct supply of electricity, these meters require their own sources of power. In addition, water and gas meters are often located deep below ground, meaning radio frequency penetration is an important factor to consider.
NB-IoT, according to Huawei and Qualcomm at least, meets both the outlined requirements for water and gas meters, the chips power consumption makes for long battery life, especially when factoring the small amounts of data the devices are actually sending. Module vendors inform us that NB-IoT connections can penetrate up to 4 meters deep in embedded concrete.
Meeting these requirements will mean Huawei and its operator partners will be able to capture the second wave of mass smart metering in China and other developed economies through NB-IoT. The volumes that exist in these markets make even the low prices for device connection potentially profitable for operators – especially because infrastructure providers envision there being tens of thousands of possible NB-IoT connections per 200-meter grid, in urban environments.
Huawei’s NB-IoT strategy was prompted by the success of proprietary LPWAN technology, and the fear of missing out. Xujianmin explained that the success of the LoRa Alliance and its ability to court utility customers, forced Huawei to develop its own LPWAN technology as a defensive strategy. Huawei’s network operator partners had become concerned that they were about to miss out on a sizable chunk of revenue and new customer relations, through utilities deploying private LPWAN networks.
Huawei’s response was to purchase Neul with its cellular network technology and then get NB-IoT certified in Release 13 of 3GPP. Although currently Huawei is the only company with a purpose-built NB-IoT chipset (via HiSilicon), we expect a raft of new chipsets to enter the market in the next year as more operators look to copy China Telecom.