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Three Thoughts from Ericsson’s Mobility Report

by Yiru Zhong, Principal Analyst

July

For the first time since Ericsson included M2M/IoT connection forecasts in its Mobility reports in 2013, it significantly revised 2 current and future metrics. 

  • The number of cellular IoT connection objects in 2017 is actually higher than expected.  Ericsson increased its estimate for the number of cellular IoT connected objects for 2017.  This reflected a more widespread adoption of NB-IoT and LTE-M; instead of 0.5bn for cellular IoT connected objects for 2017 as reported in the November 2017 report, Ericsson now expects a 40% upward revision to 0.7bn in its June 2018 edition. 
  •  
  • Ericsson projects a more robust 6-year CAGR between 2017 & 2023.  In its June 2018 report, Ericsson expects a more rigorous growth between 2017 & 2023 at a 6-year CAGR at 31%, relative to the 23-25% ranges in its previous editions since 2013.  This also means that the 2023 projection for number of cellular IoT connected objects has increased from an original forecast at 1.8bn to 3.5bn.  This more optimistic outlook reflects the expectation that North East Asia, particularly China, will drive overall cellular IoT connected devices volume.  

        Enabling the Trillion Devices Vision
Thought 1: Where are these NB-IoT & LTE-M connections?  
Beecham Research has conducted an application mapping exercise for NB-IoT as an enhancement to its Sector Map.  As illustrated below, there are currently more than 70 types of assets that can be connected on secure low data connectivity such as NB-IoT.  Forecasters can rely on this map as a systematic path to specify where demand will come from and how might this demand be connected. In order to reach the 3.5bn connection targets or indeed the goal of a trillion devices, IoT service providers must rely on NB-IoT and LTE-M to open up the unconnected opportunities for enabling connectivity for stationary and slow-moving things.  

Thought 2: 2023 Cellular IoT Connected Objects to be mainly Mobile IoT (NB-IoT & LTE-M) & 4G
During Ericsson Mobility Report June 2018 presentation, the forecast team reveals that the 2023 cellular IoT connected objects forecast for 2023 will include mostly Mobile IoT (NB-IoT & LTE-M) and 4G.  Ericsson then adds that 5G at 2023 will not be at a meaningful proportion.  The immediate market implications out of this recent Mobility report is twofold:  
  • The connectivity market will face an intense 12-24 months in migrating 2G/3G connections to the appropriate ones.  There is a window of opportunity for churn as connectivity service providers pitch a sensible, fuss free and cost-effective way to migrate connections off 2G to Mobile IoT.  

  • 5G for IoT is at the infancy stage in 2023 and expectations of significant revenue boost are for post 2023.  The urgency for telecom companies to accumulate expertise across a wider value chain becomes more pertinent in the next 5 years.  Platform capabilities, especially those on the data and application enablement layers, are the most immediate avenues for gaining a bigger revenue share.  

Thought 3: Revision Timing is Most Curious
As a fellow forecaster, I have long held the (stubborn) view that until I receive new information, I do not have a strong reason to revise my assumptions and conclusions. That Ericsson decided to revise at this stage comes at a curious time. There is a sense that licensed Low Power Wide Area (LPWA) access is running behind unlicensed LPWA such as LoRa. Until telecom operators begin to discuss wholesale NB-IoT and LTE-M with Mobile Virtual Network Operators (MVNOs) for IoT, market development and market share capture for LPWA connections will not be as quick as they would like. As telecom operators and MVNOs mostly target very different customer segments, the release of NB-IoT or LTE-M should be negotiated as soon as possible. If not, there is a risk of more fragmentation; there are many ways of connecting the previously unconnected. Cellular is not the ONLY way.  

Beecham Research is currently conducting a forecast exercise that maps out the potential migration path for applications. We look forward to sharing these results soon.  


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