Update on IoT Status of Network roll outs and applications

Update on IoT Status of Network roll outs and applications CME Sharing Initiative Prepared by Youssef El Shaarany, Robert Knechtel, José Alejandro Rojas and Astrid Soufflay September 21 th, 2017

What is the hype all about? Definition of the Internet of Things (IoT) We define the Internet of Things as sensors and actuators connected by networks to computing systems. These systems can monitor or manage the health and actions of connected objects and machines. Connected sensors can also monitor the natural world, people, and animals. THE INTERNET OF THINGS: MAPPING THE VALUE BEYOND THE HYPE McKinsey Global Institute June 2015 The objective of this sharing is to : Understand the roles of alternative LPWA IoT technologies And the impact on telecom operators of main unlicensed LPWA technologies*: LPWA: Low Power Wide Area technologies are a type of wireless communication technologies designed to allow long range communications at a low bit rate. Two main categories of LPWA exist: licensed and unlicensed (not requiring a telecom operator). Source ARCEP CME SharingCall #64 IoT Update, July 20 th, 2017 Confidential. 2017 BearingPoint France SAS 2

Contents 1 Today s IoT market environment 2 Deep dive on LPWA networks 3 Conclusions CME SharingCall #64 IoT Update, July 20 th, 2017 Confidential. 2017 BearingPoint France SAS 3

Contents 1 Today s IoT market environment 2 Deep dive on LPWA networks 3 Conclusions CME SharingCall #64 IoT Update, July 20 th, 2017 Confidential. 2017 BearingPoint France SAS 4

I. Today s IoT market environment IoT market size Expect strong growth ahead Global IoT market size and forecast US$ billion Number of connected devices billion units 778.4 17,22 CAGR +31.7% 543.8 CAGR +39,0% 12,22 401.1 8,71 196.3 241.6 304.3 3,32 4,54 6,25 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 Today s IoT market is at valued around US$ 400 billion, more than doubled its original size in 2014 With a CAGR of 31.72 % it is expected to reach US$ 778,43 billion in 2019 Strong market growth is mainly driven by a high adoption rate from companies entering the IoT market Device interoperability solutions represents 40% of IoT value creation potential, compared to 5% for connectivity solutions Data source on this slide: TechNavio report Global Internet of Things (IOT) Market 2015-2019 Current forecasts predict 17.22 billion devices connected in use, starting from 3.32 billion devices back in 2014 and growing with a CAGR of 39% CME SharingCall #64 IoT Update, July 20 th, 2017 Confidential. 2017 BearingPoint France SAS 5

I. Today s IoT market environment IoT market drivers, challenges and market segmentation Key market drivers: Drivers & Tends Decline in Cost of Communication Devices -> faster adoption on B2B and B2C segments : Increased Adoption of Smart Devices by Consumers-> Enhanced services and customer experience Increased Adoption of IoT by Enterprises -> Value chain optimization and data gathering capabilities IoT blurs industry barriers allowing to develop new business models Market Challenges Major challenges for further IoT market growth: Data protection and security concerns Lack of standardization High cost of implementation Monetization remains challenging for TelCos, with an ARPC of US$ 1.6 in the IoT business Geographical distribution 2017 US$ billion 2019 15.7% 35.8% 35,8% 48.9% EMEA Market size 2017 196.32 2019 778.43 APAC Americas 15,2% 49,1% APAC constitutes largest regional market of the global IoT market Although total market volume almost triples, the relative geographical distribution remains the same Growth path for telcos Telcos can increase their IoT revenue generating potential by: Moving up the value chain : entering the market for platform services. Roughly 80% of the value of IoT applications is in this segment. Embracing more connectivity choices (licensed and unlicensed LPWA, Wi-Fi ) Enabling interoperability across application silos Source: TechNavio report Global Internet of Things (IOT) Market 2015-2019, McKinsey Global Institute, The Internet of Things, mapping the value beyond the hype, 2015, and Digital Ecosystem Management for Telco IoT by BearingPoint. CME SharingCall #64 IoT Update, July 20 th, 2017 Confidential. 2017 BearingPoint France SAS 6

I. Today s IoT market environment IoT market Star End user applications Smart Cities Public transportation optimization Smart Home Home controllers and security systems Industry 4.0 Operation & equipment optimization Transportation and logistics: Merchandise tracking IoT helps to generate value by: Transforming business process Enabling new business models Energy and Utilities Smart grids & predictive maintenance Retail environments Automated checkout surface optimization Human: Healthcare & fitness Maintain human wellness, manage disease Connected Vehicles Autonomous vehicles & predictive maintenance Source: McKinsey Global Institute, The Internet of Things, mapping the value beyond the hype, 2015 CME SharingCall #64 IoT Update, July 20 th, 2017 Confidential. 2017 BearingPoint France SAS 7

I. Today s IoT market environment Value chain and key technologies (non exhaustive list of actors) Device manufacturers Connectivity layer Platform layer Solution layer OEMs developed developed LTE-M SAMI platform allows to connect devices from different OEMs Software companies /integrators Application mgmt. platforms including API services for B2B clients Telecom Operators deploys LTE-M and NB IoT deploys NB IoT Application mgmt. platforms including API services for B2B clients Smart object services (m-health, smart home ) Unlicensed LPWA technologies deploys deploys Partner integration via DEM. Example Orange Shine & R6 Private network solutions for corporate and public sector customers Source: Orange, Connectivité et Plateformes IoT dans le monde, July 2016 We focus on the impact of LPWA networks on telecom operators CME SharingCall #64 IoT Update, July 20 th, 2017 Confidential. 2017 BearingPoint France SAS 8

Unlicensed IoT Connectivity Licensed IoT Connectivity I. Today s IoT market environment No dominant LPWA technology has yet emerged, with networks competing on the same regions Mobile IoT (LTE-M, NB-IoT) North America (LTE-M): AT&T (US), Verizon (US) Europe (NB-IoT): British Telecom/ Everything Everywhere (UK), Deutsche Telekom (D), TDC (DK), Telefónica (ES) and Vodafone (UK) Asia (NB-IoT): China Mobile (CN), China Unicom (CN), M1 (SG), NTT Docomo (JP) North America Europe Africa Middle East Asia Pacific Latin America Sigfox Europe: T-Mobile Czech (CZ), Tele2 (SE), SFR (FR) MEA: Omantel (OM) LATAM: Telefónica (BR & CL) LoRa Europe: KPN (NL), Orange (FR), Proximus (BE), Swisscom (CH) MEA: du (UAE), Telkom SA (SA) Asia: Tata Communications (IND), SK Telecom (SK), Softbank (JP) Unlicensed IoT Connectivity Source: Orange, BADIM Internet des Objets, du Hype à la réalité, Q3 2016 CME SharingCall #64 IoT Update, July 20 th, 2017 Confidential. 2017 BearingPoint France SAS 9

Contents 1 Today s IoT market environment 2 Deep dive on LPWA networks 3 Conclusions CME SharingCall #64 IoT Update, July 20 th, 2017 Confidential. 2017 BearingPoint France SAS 10

II. Deep dive on LPWA networks Low Power Wide Area (LPWA) networks are designed to answer industrial IoT connectivity needs. Two competing approaches exist: Unlicensed LPWA Unlicensed LPWA are the narrowband, low-energy consumption equivalents of WiFi and satellite communications. Main features are: wide area coverage, low power consumption, low unit cost and the use of unlicensed spectrum Licensed LPWA As competing technologies to Sigfox and LoRa, operators developed cellular-based LPWA-alternatives. Since these technologies use the operator s spectrum, they are also referred to as licensed LPWA. So far two LTE-based technologies are available and one based on the 2G/ GSM networks: Sigfox A French startup created in 2009, developing low-cost LPWA devices. LoRa A 330 member alliance that specified the LoRaWAN protocol. This standard ensures inter-operability LoRa devices EC GPRS: Based on 2G networks, this LPWA technology is especially suitable for deploying IoT services in the absence 3G/ 4G net-works, e.g. emerging countries NB-IoT: (LTE Derivative) Direct competitor of LoRa. Co-developed by both equipment manufacturers (Ericsson, Huawei, Intel) and operators (Vodafone, AT&T, DT). Collaborating within the 3GPP standardization body LTE-M: (LTE derivative) Its larger bandwidth targets IoT applications with a demand for large data volumes, e.g. managing industrial processes, machinery or infrastructure Sources: Orange, Telco 3.0 IoT, Sep. 2016, SigFox and Lora websites CME SharingCall #64 IoT Update, July 20 th, 2017 Confidential. 2017 BearingPoint France SAS 11

II. Deep dive on LPWA networks Comparison of the four major LPWA network technologies: Sigfox vs. LoRa vs. EC-GPRS vs. LTEderivatives Company or service description Bandwidth spectrum and range SigFox Sigfox manufactures low-cost LPWA devices featuring: Low cost transparent and simple pricing policy. Price decreases as the customer adds devices <100 bit/s Unlicensed 868 MHz Range <13 KM LoRa Alliance LoRa shares Sigfox LPWA features. Other features are: Coverage of all network elements: devices, software and terminals Adaptive data rate maximizes battery life and network capacity Secured encrypted connectivity From 300 bit/s to 100 kb/s Unlicensed 868 MHz Range <11 KM EC-GPRS Extended Coverage-GSM (EC- GSM) Up to 7-times extension of range, especially well suited for remote area locations or indoor scenarios Software upgrade of existing 2G networks Supports extended battery lifetime Up- & downlink 500 kb/s 900 Mhz band Range <15 km LTE-derivatives NB IoT (Narrowband IoT) is a SIM based alternative to LoRa and SigFox. It features: Lower device cost and battery consumption than regular SIM devices Carrier grade connectivity Spectrum use optimization (high device density) From 20 to 80 kb/s Licensed 700 900 MHz Range <15 KM Module cost <5 USD, <2 USD in some cases <5 USD 10 to 25 USD <5 USD, not yet standardized Use cases Utilities (metering) Agriculture: irrigation, silo monitoring, livestock mgmt. Smart home :monitoring Industry: prev. maintenance Intelligent building mgmt. Logistics: inventory mgmt., route optimization Agriculture: soil monitoring and water use optimization Smart meters/ smart grids Fleet management Maintenance monitoring of utilities Point of sale terminals Vehicle fleet management Asset tracking Maturity (TTM) Proven technology, with 19 clients in 26 countries Proven technology with 22 clients in 19 countries Ericsson, Intel and Orange completed live trials in 2016 Currently deployed by DT in the NL and GER Vodafone installation in ES Network at glance Inexpensive no frills NB connectivity Secured, carrier compatible unlicensed IoT alternative Licensed NB alternative for emerging countries Carrier grade NB & BB IoT connectivity CME SharingCall #64 IoT Update, July 20 th, 2017 Confidential. 2017 BearingPoint France SAS 12

II. Deep dive on LPWA networks Which are the pros and cons per each technology from the customer s perspective? SigFox LoRa Alliance EC-GPRS LTE-derivatives Pros Low cost devices and services, starting 10 EUR year Ability to cover a large geographical scope and industries Wide existing geographical coverage Useful for private networks requiring only local connectivity needs. Open system Devices can operate in private or public networks Full data emitting and receiving capabilities Network and battery optimization capabilities according to device/application needs High security standards (encryption) Implemented as a software upgrade to existing GPRS networks Improved coverage at challenging locations, e.g. deep indoor basements Already existing standards and infrastructure -> easy and fast deployment in LTE equipped areas Support from large telecom operators and equipment manufacturers Proven 3GPP characteristics: QoS, roaming capabilities, secured communications Pros Limited data receiving capabilities (can receive only 4 eight bit messages per day) Potential security issues (no encryption features) Less precise geolocation capabilities Potentially higher energy consumption than SigFox devices Asynchronous protocol that cannot offer the same QoS as cellular networks Currently lacks full national coverage Relatively small bandwidth, not suitable for application with high data demand Only available in 4G/LTE equipped areas Lagged deployment compared to SigFox and LoRA Less suitable for clients requiring a truly private network Higher battery consumption due to synchronous protocol We will focus on SigFox, currently the most widely spread technology due to it simplicity and low cost Sources slides 12&13: Orange, Connectivité et Plateformes IoT dans le monde, July 2016; and Orange, Telco 3.0 IoT, Sep. 2016 CME SharingCall #64 IoT Update, July 20 th, 2017 Confidential. 2017 BearingPoint France SAS 13

II. Deep dive on LPWA networks SigFox s low subscription price and wide network is reinforced by alliances the company made with Telco operators across the globe SigFox s Business Model Low subscription prices and pay for use Subscription : between 1 and 14 euros per year for each connected device Degressive tarification : the more devices there are, the cheaper it is Indicators which SigFox is looking at during transactions Increase of volume of connected devices Type of traffic per device Number of maximum messages uplink/downlink Duration of the average subscription SigFox and Telco Operators In every country Sigfox starts business by setting up a partnership with a telco operator. It s already deployed in 15 countries. In USA and Europe, its used a non licensed bandwidth of 868MHz in Europe and 915MHz in the US In 2015, Sigfox used a public fundraising in order to extend its business, and several telco operators answered the call like Telefonica and SK Telecom. In France, SigFox signed a deal with SFR in 2016 which praised its innovative technology and broad network existing in 15 countries. The main arguments for choosing the company were Global coverage Absence of SIM card Overall simplicity of the system Examples of applications The deal implies that SFR will accompany SigFox in developing its infrastructures in countries were it is not yet present such as Israel or the United States. Sources : Orange, BADIM Internet des Objets, du Hype à la réalité, Q3 2016 CME SharingCall #64 IoT Update, July 20 th, 2017 Confidential. 2017 BearingPoint France SAS 14

II. Deep dive on LPWA networks Target customers and differentiating characteristics Target customers SigFox LoRa Alliance EC-GPRS End users: B2B customers (private networks) requiring low device cost Telecom operators End users: B2B customers (private networks) requiring low device cost and a secured connection Telecom operators Telecom operators offering IoT connectivity LTE-derivatives End users B2B or B2C customers requiring low latency and high QoS Telecom operators Differentiators Existing national coverage in various countries (France, UK, Italy, Spain) Optimized energy consumption Suits companies requiring basic connectivity needs Ability to operate in public, private and hybrid network modes Deep indoor (and underground) coverage Increased indoor coverage Very simple roll-out by installing software-only updates to existing 2G networks Fast deployment potential (uses already existing networks) End-device mobility (connectivity is not limited to on site networks) Carrier grade connectivity Unlicensed networks are suitable for local connectivity needs while licensed networks allow higher data transmission rates higher security standards Sources: Orange, BADIM Internet des Objets, du Hype à la réalité, Q3 2016 ; and ICT Express A Survey on LPWA Technology, March 2017, publisher Elsevier. CME SharingCall #64 IoT Update, July 20 th, 2017 Confidential. 2017 BearingPoint France SAS 15

II. Deep dive on LPWA networks Key takeaways. Which network technology should I choose if I need: SigFox LoRa Alliance EC-GPRS LTE-derivatives Low operating costs High QoS Secured private networks (industrial applications) Latency / performance Reaching rural or suburban areas Sources : ICT Express A Survey on LPWA Technology, March 2017, publisher :Elsevier. CME SharingCall #64 IoT Update, July 20 th, 2017 Confidential. 2017 BearingPoint France SAS 16

What next? A look at the potential of 5G networks What is 5G? The fifth generation mobile networks (5G) will be composed of a new interface radio, but also of LTE and Wi-FI while still being handled by the same heart of network. 5G is predicted to arrive by 2020. Ericsson plans that by 20222, 5G will make up to 15% of the networks. What is its potential? 5G is 10 times faster than 4G. It decreases significateviely the latency in cellphone networks which currently limits IoT applications. It was designed for IoT use. It will strongly increase the efficiency and the number of connected devices. What does it mean for IoT? This increase in latency could bring a whole new world of IoT devices. The needs of IoT devices have been taken into consideration when constructing 5G. By 2022 it is expected that 5G will allow low bandwidth usage. The viability of connectivity will also significantly increase allowing usage of IoT restricted until now, especially in health, transport and industry. CME SharingCall #64 IoT Update, July 20 th, 2017 Confidential. 2017 BearingPoint France SAS 17

Contents 1 Today s IoT market environment 2 Deep dive on LPWA networks 3 Conclusions CME SharingCall #64 IoT Update, July 20 th, 2017 Confidential. 2017 BearingPoint France SAS 18

Our conclusion and areas where BearingPoint could support TelCos with the IoTchallenges ahead Challenges for Telcos in today s IoT environment Telcos experience great challenges creating new business models to monetize the IoT business opportunities. As classical connectivity revenue declines (ARPC) over the next years TelCos must adapt their market approach and business models in order to stay competitive Staying competitive in an adaptive and increasingly dense market as that of IoT implies a change of mindset and culture for Telco actors which might be difficult faced with startups which are extremely reactive and adaptive Rise of the various new low power network technologies means it can be difficult to select the the right technology. However, licensed and unlicensed LPWA-technologies should be seen as complementary to each other. There is no right or wrong answer! Business opportunities for BearingPoint Telcos can move up the IoT value chain by building automated and scalable platforms to orchestrate a complex partner digital ecosystem. This strategy has an important revenue generating potential as applications represent roughly 80% of IoT revenue stack. BearingPoint s Infonova R6 can be implemented as an IoT DEM solution, as proven by the award winning Orange LoRA Orange Shine experimentation in Marseille CME SharingCall #64 IoT Update, July 20 th, 2017 Confidential. 2017 BearingPoint France SAS 19