Northern Sky Research

LPWAN: A Satellite IoT Windfall?

Jan 18th, 2017 by Alan Crisp   More from this Analyst | Profile

Low Power Wide Area Networks (LPWA, or LPWAN) have been thrown onto the telecommunications scene over the last couple of years, promising to revolutionize the way that IoT and M2M devices communicate with not only a central server or management platform, but also with each other. With increasing numbers of these networks becoming established globally, what impact will this have on satellite based M2M technologies?

The largest contenders in the LPWAN space are Sigfox, and LoRa Alliance, and both typically co-locate their base stations at existing GSM or CDMA towers. How LPWAN differs from other networks is their significantly longer battery life – with some lasting over 10 years on 2 AA batteries. However, this is at the expense of bandwidth, with packets limited to ~12 bytes in the case of Sigfox, for example. France based Sigfox is a proprietary network that is rolling out to 27 countries, with company estimates indicating its services will cost as little as $1 per month for basic meter reading applications.

The LoRa Alliance on the other hand, is a not for profit organization creating a standard for Low Power Wide Area (LPWA) networks that members can use for their IoT networks. Members include cellular network operators, device manufacturers, amongst others. On the satellite side, Inmarsat and Thuraya now count themselves as members, with NSR expecting additional satellite operators to join as members in order to leverage their position as backhaul providers for a market environment where ‘always on’ will become the new standard. However, because the LoRa Alliance is not a single network like Sigfox, partnerships will need to be formed with individual member networks to grow revenues.

In its recently released M2M and IoT via Satellite, 7th Edition, NSR expects ‘general’ IoT backhaul (i.e. not for a specific customer) to have relatively modest revenues, with over $5 million in retail revenues in 2025. This is because by its nature, LPWA is most often deployed in regions with existing backhaul, leaving satellite backhaul unnecessary in many cases

However, the larger market for LPWAN backhaul will be for large customers who require hundreds or thousands of individual sensors or devices to be IoT connected. An example of this would be precision farming in rural agricultural areas. Some companies such as Milk Smarts, are already planning to leverage satellite backhaul of LPWA to new precision farming solutions for Australian agribusiness. Companies such as Stream Technologies are also considering using Iridium backhaul to develop ‘pop-up’ IoT networks for either large customers, or for general base station usage. Whilst the per device ARPU remains low, with billions of newly connected devices expected over the coming years, revenue growth for satellite operators will be driven by quantity of LPWA IoT connections, rather than through growing bandwidth demand per in-service unit.

What LPWA networks have in common is their very low bandwidth connectivity, which will primarily target consumer markets. Aside from some specific applications, the large growth in consumer IoT devices will be dominated by terrestrial connectivity for the most part. Further, for some industrial applications such as land transport and cargo tracking, the key value proposition offered by direct satellite is its reliability, and LPWA networks are not proven to be able to offer strong SLAs to their M2M customers. Put together, LPWA networks will have a negligible impact on satellite based M2M operators and service providers. Consequently, NSR sees LPWA IoT networks to be mostly positive for satellite based M2M.

With limited cannibalization, satellite M2M operators and service providers will partner with LPWA networks, in order to backhaul a plethora of IoT connections from the base station. With each base station to eventually connect over tens of thousands of IoT devices, NSR believes the explosion of terrestrially connected IoT devices expected over the next decade will enable sufficient economies of scale to justify such investments, and NSR reiterates that operators need to enter the market earlier to get a first mover advantage on backhaul IoT networks.

Bottom Line

The LPWA satellite backhaul market will grow from 2018, and will present opportunities should millions of LPWA devices reach consumers hands in the coming years. Nonetheless it will remain relatively niche compared to other verticals. A number of operators, such as Inmarsat, Iridium and Eutelsat are early to market and already have their own capabilities to offer to backhaul LPWA networks, resulting in them being in prime position moving forward to take advantage of the growth of the IoT ecosystem. However with only $5 million in annual revenues in 2025, IoT backhaul is not going to be a core revenue generator so the industry needs to move down the value chain if it wants to create higher opportunities for itself. This will involve service providers creating their own solutions which incorporate LPWAN to end customers.

With the overall impact of the growth of LPWAN positive for the satellite industry, operators should be developing partnerships with LPWA networks, both current and future. This will take advantage of growing backhaul ARPUs driven by expanding numbers of LPWA IoT devices longer term resulting in small, but reliable payoffs. The vast majority of LPWA IoT connections will remain backhauled using terrestrial technologies, making satellite backhaul very much the exception  rather than the rule.