NB-IoT sounds like the name of a robot, but it stands for Narrowband Internet of Things. You probably have heard of Internet of Things (IoT), in which every device is collecting data and connected to the internet. As an example of the benefits of IoT, an IoT fridge can keep track of the groceries stored inside. If any grocery were to run low, it can place an order for fresh groceries to be delivered to your home automatically. You do not need to worry about groceries running low any more. It is an exciting future, isn't it? For the IoT fridge to be able to place orders online, it needs to be connected to the internet, either through WiFi at home or the telco network. Herein comes the NB-IoT. It is a 4.5G telco network that caters for machines instead of humans. NB-IoT is not the only telco network that machines can get connected to the internet, neither will it be the final telco network, but for now, it is a feasible network that enables IoT to take off.
M1 is the first telco to launch NB-IoT in Aug 2017. This is followed by Singtel in Feb 2018. Starhub's roll-out is still in progress, together with its enhancement of the 4G peak speed from 400Mbps to 1Gbps. How is the NB-IoT network going to play out for telcos?
Unlike the 4G networks that cater for human-to-human communications, there is an inherent advantage that incumbent telcos have in NB-IoT networks, which is switching cost. It is easy for 5 million people in Singapore to replace the SIM cards of their 8 million handphones to that of a different telco, but it is not easy for, say, an utility company to replace the SIM cards of the smart power meters in 1 million homes. To do so, they have to incur much manpower and transport costs to visit these smart power meters. Thus, if the differences in monthly subscription costs from other telcos are not too much, customers are unlikely to switch to a different telco. First-movers will have some advantages. Having said that, NB-IoT is still fairly new and not many companies are ready to launch NB-IoT devices now.
In the area of data costs, M1 seems to have an edge for now. If you read last week's post on No Competition for M1's Big Data Plans, it appears that M1 has a cost advantage over the other 2 telcos on big data.
Although NB-IoT holds promises with millions of devices to be connected up, I am still not particularly excited over telcos' prospects. The key question I have is that is the NB-IoT service that telcos provide a dumb pipe or a smart pipe? If it is a dumb pipe, any telcos could have provided the connectivity and price competition would be present. However, if it is a smart pipe, telcos would be able to hold off the competition and derive better value from NB-IoT.
Let us consider M1's collaboration with Otto Waste Systems and SmartCity Solutions to implement an intelligent waste management system based on NB-IoT. The sensors used to determine whether the bins are full is provided by Otto Waste Systems, while the centralised management system to monitor which bins need to be cleaned is provided by SmartCity Solutions. M1 provides the NB-IoT connectivity and the data analytics to determine the distribution of bins and the frequency of collection. Based on this description, M1's pipe is a half-dumb pipe. They could derive some additional value from the provision of data analytics, but M1 is not the only telco that has such data analytics capabilities. Otto Waste Systems and SmartCity Solutions could have worked with any other telcos and still not suffer a drop in the quality of service.
In conclusion, NB-IoT is the next frontier for telcos. Unlike 4G networks, telcos can better hold on to their customers because of high switching costs. They probably also can derive more value from the provision of data analytics to their customers, but some levels of price competition among telcos will still be around.
P.S. I am vested in M1, Netlink Trust and Singtel.
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Hello chin wai,ReplyDelete
In your line of work or personal life, do you see any gradual implementation of IOT at the moment? The growth story of this future tech IOT sounds good, but without widespread implementation, growth projections will not transit to actual revenue growth and profit to shareholders.
There is sizeable support by the government on this area but I don't see many private sector companies (retail or commercial usage) jumping onto it yet. Hope this growth story plays out.
Agree, IoT devices are still fairly new.