Good, better, best: Key factors in selecting an IoT connectivity solution
Lawrence Latham, managing directorof everynet
The market is awash with options for IoT connectivity, and as we discussed in an earlier blog post, IoT is bringing to the forefront the fact that pennies matter. Billions of transactions mean that billions of pennies are at stake, and those pennies add up to real money.
As the projections for IoT grow, so too do the options available to businesses looking to incorporate IoT into their strategies: LPWA, and NB-IoT and 4G, oh my!, says Lawrence Latham, managing director of everynet.
However, it’s not quite that overwhelming. In fact, finding the best IoT connectivity option is as simple as answering a handful of key questions:
- What are my bandwidth requirements? Does the solution require high or low bandwidth? Are you streaming live video or gathering a sensor reading once a day, or something in between?
- What kind of power source is available where I intend to use this solution? Does the solution require a battery that needs to last up to 10 years, or is a power source readily available?
- What quality of service (QoS) level is required for this solution? Is this a critical medical application that needs near-real-time feedback, or is it a soil reading that needs to be collected once a week?
- What is the delta on CapEx or monthly service cost attributable to the hardware based on connectivity choice?
- How much per month will it cost me to connect? (Data plan)
The chart below provides estimated ARPUs for cellular, LPWA licensed and LPWA unlicensed technologies. If we compare, the licensed LPWA solution stack contains spectrum and SIM solution costs that unlicensed does not. It’s hard to make that up on volume.
| ARPUs | ||
| Cellular | $0.30-$30 ($2.40 average) | |
| LPWA Licensed | $0.25-$1.00 * | |
| LPWA Unlicensed | $0.06 – $0.25 | |
| * estimated | ||
Source: James Brehm & Associates
Unlicensed LPWA equipment is inexpensive, with carrier-grade, tower base stations starting around $1,000 USD. Licensed LPWA is supposedly a “simple software upgrade” … provided you have the latest LTE equipment. Unspoken is the cost of having the latest equipment and the cost of the software upgrade. Simple? Not so simple.
Then there is the cost of silicon. If we look at current ratios of licensed to unlicensed IoT connections, we can safely assume end customers do not want to pay for licensed spectrum solutions when they have unlicensed alternatives. It is about a 70/30 ratio of unlicensed to licensed today. Let’s assume that ratio holds going forward. I have trouble seeing how licensed solutions will be able to make the math work on any silicon cost advantages.
For long-distance IoT connectivity, with apologies to our satellite friends, let’s limit the choices to unlicensed LPWA, licensed LPWA, and 4G, just to make things simple.
- If we need low bandwidth and we just need a simple sensor reading, we go with unlicensed LPWA. (Good)
- If we need low bandwidth, but we need a guaranteed QoS that can be met with licensed spectrum, we go with NB-IoT. (Better)
- If we need high bandwidth, it’s obvious we are going to go with 4G. (Best)
What we end up with is a highly effective product strategy: Good, Better, Best. If you don’t believe me, maybe you will believe this Harvard Business Review columnist, who has nailed the benefits of offering pricing choice to consumers. It’s all about matching requirements with the connectivity option that best suits the end user.
The author of this blog is Lawrence Latham, managing director of everynet
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