Moving Into The Billions ABI WP Oct 2019 1 1
Moving Into The Billions ABI WP Oct 2019 1 1
THE BILLIONS
CELLULAR TECHNOLOGIES
IN THE INTERNET OF THINGS
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Figure 1: Global Connectivity: IoE versus IoT versus Cellular
(Source: ABI Research)
30
(Billions)
20 2018
24 Billion
10 2000
1 Billion
0
2000 2005 2010 2015 2020
5 Billion
74%
(Billions)
91%
26%
0 9%
2018 2023
200
US$ 201 B
Cellular IoT Revenue
Modules
150
Services
(US$ Billions)
95%
100
US$72 B
50
4% 5%
96%
0
2018 2023
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2. Sensor-Enabled Ecosystems M and NB-IoT are Low Power Wide Area
The growth of cellular as a driving force in the (LPWA) cellular technologies. The driver for
IoT will be the availability of new technologies cellular LPWA, particularly NB-IoT, is sensor-
designed for the needs of specific use cases. based end points. NB-IoT allows end points
The IoT had its beginning in Machine-to- of lower intrinsic value and greater quantity
Machine (M2M) communications, the market to be affordably connected in a point-to-point
for the supply of connectivity to machine-type manner (i.e., not requiring a local area hub or
devices, as opposed to person-to-person concentrator) over licensed spectrum: devices
communication. This connectivity piggybacked that are little more than a sensor, individually
on existing network infrastructure and acted as dedicated to determining a threshold event,
a parallel market for cellular network operators. in real time and perhaps remaining dormant
It was a secondary opportunity using sunk for years, like an on-off switch. This would not
cost infrastructure, which helped offset the have been possible with 2G or 3G.
saturation of the consumer mobile broadband Examples of live large-scale sensor-based
market and the incremental commoditization point-to-point connected IoT deployments in
of a megabyte of mobile data. the world today include, but are not limited to,
Today, cellular operators are deploying new the following:
connectivity technologies purposely for 1) Smart Parking: Where each parking bay
connected equipment. While 2G and 3G were
in a car park has a sensor embedded in the
relatively inflexible, 4G Long-Term Evolution
tarmac to show whether it is occupied. Where
(LTE) has proven highly tuneable. Not every IoT
cellular “reserved” (i.e., licensed) spectrum
connection needs to use the full bandwidth
guarantees service availability, which alongside
potential of LTE, leading to vendors developing
a suite of cellular modules, each intended for a its encrypted air interface satisfies business
different set of applications according to their criticality.
functional requirements. There are Cat. 12 (LTE
2) Bicycle Sharing: Where the location and
category 12), Cat. 6, Cat. 4, and Cat. 1 in single-
availability of bicycles for rental by the public
mode and multi-mode variations depending
and maintenance by fleet owners is needed.
on mobility and international connectivity
requirements, as well as Cat. M (aka LTE-M) Where cellular wide area network coverage,
and Narrowband (NB)-IoT. and already existent nationwide deployments,
ensure all assets are locatable.
Machine-type modules are paired-down in
complexity to provide specific performance 3) Track-and-Trace for Low-Value, Highly-
at the most cost-effective unit price. Cat. Numerous, Reusable Assets: These include:
1 was among the first five LTE categories pallets, postal package trackers, privately-
standardized in The 3rd Generation
leased equipment (e.g., tools, appliances), and
Partnership Project (3GPP) Release 8. Although
privately-owned personal items by members
too low in bandwidth to competitively support
of the public, where cellular international
the consumer mobile broadband devices LTE
availability ensures seamless roaming.
was conceived for, Cat. 1 found its niche years
later in lower bandwidth, lower power, lower In all cases, the additional features of LPWA
cost connected devices—especially wearables.
make applications affordable at scale,
Cat. M and NB-IoT are special, however, as
regardless of end point value, providing that
they were newly-conceived in 3GPP Release
the underlying business model is sound. The
13 specifically for Bandwidth-reduced, Low-
potential for sensor-based cellular means that
complexity User Equipment (BLUE).
by 2023, 54% of all cellular modules shipped
Definitionally embodying the IoT-specific
will be LTE-M or NB-IoT.
demands on cost, coverage, and power, Cat.
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Figure 2: Sensor-Centricity: Module Shipment Forecasts by Category
(Source: ABI Research)
100%
80%
Annual Shipment Share
60%
54%
40%
43%
31%
20% 23%
14%
8%
0%
2018 2019 2020 2021 2022 2023
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the credentials of the manufacturer’s carrier When a connected device needs to cross
partner in that country. borders, an eSIM can change its IMSI to that of
a new local carrier to avoid roaming costs and
When the country of activation is not known
ensure the enterprise owner is always billed
in advance, and/or when a connected device
at domestic rates. In practice, this requires
is expected to travel across borders during
a lot of carrier collaboration. In addition,
its lifetime, eSIM comes in to play. In the first
carriers tend to only allow such switches as
case, the SIM, embedded in form factor or not,
a last-ditch solution, if a connection becomes
is pre-provisioned with a bootstrap IMSI that
too expensive to provision. In this case, it is
will allow it to connect to a local network, to
better to use eSIM to provision a device on a
remotely register and authenticate itself. The
virtual network, operated by a service provider
device may then stay on that network for the
that can provide international connectivity,
rest of its operational lifetime. Or it may be re-
using aggregated wholesale agreements with
provisioned to a new network at the end of its
domestic carriers. Staying on the same virtual
contract, at the approval of the serving carrier.
network operator’s IMSI at a single price per
This is very useful if a device manufacturer
megabyte, regardless of location, and only
changes the local carriers with which it has a
being switched to a local partner carrier if local
partnership.
regulation precludes permanent roaming.
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satisfaction will enhance an OEM’s brand long-term costs is too risky, making leasing
reputation and make it more likely that a preferred option for buyers.
customers will continue to buy from them.
3. An OEM is not limited to just selling the
2. An OEM’s products no longer need to be utility that a product possesses on delivery.
sold at an upfront sticker price. Products Connectivity is two-way, and the benefit of
can be leased to customers at a rate an uplink for monitoring, plus a downlink
dependent upon their level of usage. In for updating is that hardware vendors
many cases, this will provide a more cost- can become Value-Added Service (VAS)
effective deal for the customer, while providers. OEMs can provide supplemental
allowing the OEM to commercially engage services to customers, based upon those
with a wider range and greater number of identified as most appropriate for the
customers, who may not have been able to customers’ needs and circumstances. The
afford the original upfront fee. Intelligently VAS may have been developed by the OEM
leased products can provide OEMs with or may be resold from a strategic partner
more predictable recurring revenue and represents a brand-new revenue
streams and an easier upgrade path for stream. The additional utility of the VAS can
customers. In uncertain economic times further cement the aftersales relationship,
when companies need to be agile, being making a customer that much more
over-committed and tied to expensive dependent on the OEM.
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Figure 4: Hongdian ATMs and UlikeKorea LiveCare Capsules
(Source: Tata Communications)
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Case Studies: Trimble and Scania
Trimble is a global vehicle tracking provider. In its India market, there is a mandate
that all public service vehicles must have built-in connectivity for both tracking and
public safety purposes, and they must support multiple-carrier access, as well as
the ability to switch between carriers. Trimble’s communications service provider
provides connectivity, cloud-based management software, and communication
hardware with eSIM functionality, which includes data pooling and billing. The
operational savings that result come from simpler and cheaper scalability, as
public vehicle fleets are expanded. Additionally, future-proofing and the maximum
simplification of future connectivity negotiations are enabled, should a change of
carrier be necessary, without the need to replace any equipment. https://www.
trimble.com/
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6. Operator Services even if individual service providers are, by far,
Carriers can seek to serve global connectivity the best in their domestic market, they can still
needs directly. They can have networks in miss out on business. OEMs want a partner
multiple countries, which they can bolster that has already solved all such international
through strategic access partnerships and logistics for them, and that can cover any future
wholesale roaming agreements. A global SIM need for geographic expansion. Some MVNEs
using the non-geographic 901 Mobile Country currently offer products explicitly designed for
Code can facilitate a single phone number carriers that do just this.
with a customizable, guaranteed rate for calls,
Once a carrier has established the competency
avoiding any roaming bill shock. However, few
to serve global connectivity, it has numerous
carriers can negotiate low enough wholesale
service revenue opportunities. The most
rates on a global scale. Those that can tend to
obvious is revenue from pure data transport
be very large carriers that every other carrier
at a rate per megabyte. Supplemental to this
has little choice but to interconnect with, or
are: network service revenue (aka connectivity
very small carriers that others need to work
management), device and application
with to fill the holes in their global connectivity
management revenue, and data and analytics
map.
service revenue, as well as security services
Even though 901 SIMs have no home country, and professional services revenue. Each of
using them may still cause problems in these, except the last one, is provided by
countries where permanent roaming is not software platforms that can be licensed by
allowed, as they do not use domestic IMSIs. carriers directly from individual vendors, or
This is a problem that eSIM can be used to delivered as a modular, managed service from
resolve. There are only a few truly successful an MVNE that has already aggregated all such
examples of a 901 strategy, but smaller vendors and services.
carriers can benefit from the need for global
The functional enhancements that IoT
connectivity, by wholesaling their connectivity
connectivity platforms provide on top of
to Mobile Virtual Network Enabler (MVNE)
data transport can be used by carriers
brokers and aggregators. MVNEs will package
to generate direct and indirect revenue.
connectivity up and re-sell it to Mobile Virtual
Platform services may be priced as modular
Network Operators (MVNOs) and OEMs; re-
functional enhancements that OEMs can
selling connectivity on the serving carrier’s
add to their IoT connectivity needs. The
behalf that it could never have sold directly to
pricing varies by platform type: it may be
those customers.
per million transactions, per device, or as a
The flip side of carriers selling capacity to custom revenue share. Alternatively, platform
MVNEs, is buying back an MVNE’s aggregated functionality can be used as a differentiator
capacity to use themselves; to enable a carrier to win more IoT contracts not specifically
to launch an MVNO sub-brand and to serve charged for. This is most typically the case for
OEMs that have global connectivity needs, connectivity management platforms. By 2023,
which the carrier could not do business with more than US$190 billion will be generated
otherwise. OEMs prefer to work with a single annually in IoT platform service revenue by IoT
service provider, instead of having to negotiate service providers.
and manage multiple access agreements, so
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Figure 6: IoT Service Revenue Opportunity, Globally
(Source: ABI Research)
120
100
80
60
40
20
0
2018 2019 2020 2021 2022 2023
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Figure 7: eSIM Shipments, Globally
(Source: ABI Research)
900
800
700
600
(Millions)
500
400
300
200
100
0
2018 2019 2020 2021 2022 2023
A VPN model enabled by an MVNO or MVNE Not all MVNOs or MVNEs are equal, the
may be the right choice for an OEM, even if its best will have the strongest possible
eSIM-enabled devices stay within one country. cloud competency. Tying together many
A smart MVNO will be able to access multiple international wholesale agreements into a
national wholesale agreements for the sake of single global service is a big logistical exercise.
redundancy; allowing the OEM to receive the And interoperating between the different
strongest possible signal regardless of which connectivity management, subscription
provider has the best coverage. It also gives management, and other IoT platforms used by
the OEM more flexibility in the future if it enters carriers means supporting them all. Supported
new geographic markets, so that it may not by a dedicated core network to optimize the
need to source additional connectivity service routing of IoT data, this is a lot of back-end
providers. When OEMs have international eSIM plumbing. The cloud, and therefore an eSIM
requirements, the virtual network operator provider’s cloud competency, allows diverse
model can be the best choice, with access to assets to be centralized and offered remotely
multiple local networks, rather than a single as a seamless, managed service that simply
domestic carrier. works, anywhere in the world.
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8. Cloud Services understand, and make requests of one
Network Function Virtualization another. This allows plug-and-play specialist
Network Function Virtualization (NFV) is functionality. APIs are important for eSIM, as
software-abstracted networking. Software subscription management platforms are built
implementations of network functions run with a suite of API calls to allow other network
on generic hardware, removing the need for equipment to reach out to it, requesting the
expensive application-specific equipment. execution of its specialized actions.
Network capabilities can be provided at a
APIs unleash the power, flexibility, and
lower cost and greater scale, with shorter
control that eSIM brings, by enabling self-
product cycles and more frequent upgrades.
management. OEMs can plug their back-end
Virtualized infrastructure can span multiple
systems directly into cloud-hosted services,
locations, so it can be cloud-based, residing
including the various types of IoT management
wherever it delivers the most value and/or
platforms, seamlessly integrating the two as
the least cost. It is easy to chain Virtualized
if they were one purpose-built system. The
Network Functions (VNFs) together to build
OEM can control what it wants a subscription
sophisticated services, while an orchestration
management platform to do, as outlined in the
layer manages the interactions between VNFs
terms of its contract, without having to rely on
at the individual customer level, billing them
the responsiveness or manual intervention
for modular, highly-customizable services.
of a third party. This is a better model for the
Flexibility and affordability are greatly service provider, too, as it is a more efficient
increased with NFV and these are tenets way to run its service, i.e., with less expense
that are eminently applicable to, and fully and greater profitability.
aligned with the needs of, the IoT. Dropping
Monitoring and Management Services
eSIM into the domain of highly scalable,
Monitoring and management services for the
individually customizable, lower-cost network
IoT have been both hosted and cloud-native
communications services helps to unlock its
since inception. A proprietary monitoring
potential. eSIM functionality can be easily
and management system developed in-
added to existing service orchestrations at the
house might make sense for vertical specialist
service provider level, and then at the OEM
service providers, but not for general-purpose
or enterprise level as and when it is needed.
providers like carriers, who want to apply
eSIM implementations can just as easily be
themselves horizontally and maximize their
removed, decreasing the risk associated with
enterprise customer base. Cloud-based
the decision to deploy a new technology and
management platforms are independently
making it easier to trial with confidence.
accessible by carriers and their customers,
Application Programming Interfaces so that each may manage the devices under
Application Programming Interfaces (APIs) its domain only; across all enterprises for
abstract underlying code as standalone, yet the carrier, and across all carriers for the
fully-fledged functional objects. APIs can be enterprise. Subscription management is a
used to introduce new processes into a system natural extension of connectivity management,
without the developer having to know all the so eSIM fits perfectly into this existing mode of
details of how that process operates, or how to cloud-based IoT service delivery.
code for it. In this fashion, the enabling features
of one system or platform can be plugged
into another, allowing them to communicate,
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Figure 8: Tata Communications MOVE MVNE Cloud Stack
(Source: Tata Communications)
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Published November 7, 2019
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