Sprint is working with Mobilitie LLC, a Newport Beach, Calif., company to build small cellular antenna systems from California to Massachusetts. The company wants to install low-power cellular antennas in public rights of way, land typically holding utility poles, street lamps and fire hydrants. In places where it can’t strap antennas to existing poles, it wants to erect new poles.
However, the new antenna on poles rollout has been delayed as communities confront what some consider unsightly installations and authorities wrestle with new regulatory questions. Sprint recently slashed its capital spending plans for the year as it waits for zoning approvals. Mobilitie says it has about 1,000 permits approved and will start large-scale installations once more are in hand.
Caption: One of the wireless antennas being installed on light poles in cities around the country for Sprint and other carriers to increase cellphone service quality at lower cost than much-larger tower antennas. Pole above is in Los Angeles. PHOTO: CELLTOWERPHOTOS.COM ................................................................................................................................
In the past, wireless carriers built towers of 200 feet or more that could send signals over large areas to cover as many customers as possible. Now that more people use smartphones to stream videos and surf the Web, carriers want to put lower-power antennas closer to the ground so that fewer people will connect to each one—resulting in less network congestion.
“It’s not a new concept,” said John Saw, Sprint’s chief technology officer. “All carriers are trying to ‘densify’ their networks.” But Sprint’s goal is to be “cheaper and faster and more innovative” than its rivals, he said.
Mounting antennas on existing utility poles is something most carriers are hoping to do. But cash-strapped Sprint aims to take the concept further than rivals: It is hoping to install as many as 70,000 antennas in the public right of way over the next few years. By comparison, it has 40,000 traditional antenna sites on towers or rooftops.
It is a central piece of a strategy devised in early 2015 by Sprint Chairman Masayoshi Sonto improve service while keeping costs down. Companies can negotiate with a city for one deal that includes various permits. Mobilitie Chief Executive Gary Jabara says building and operating these so-called small cells costs about $190,000 over 10 years, whereas a traditional tower costs $732,000 because of real estate rents, power and other costs.
The spectrum Sprint owns are ideally suited for this design because their high frequency prevents them from traveling long distances. Rather than string fiber-optic cables to each antenna, Sprint hopes to link them via wireless connections, further bringing down costs and speeding deployment.
“We’re not surprised that sometimes you will run into opposition in certain jurisdictions,” Mr. Saw says. “ ‘Not in my backyard’ has been around for a very long time.”
Sprint’s CFO, Tarek Robbiati, explained to J.P. Morgan analyst Phil Cusick at the bank’s tech conference last month that Sprint envisions using multiple small cells — radios with short range, which can be deployed on lamp-posts and other areas that don’t cost high rents — as a way to make Sprint’s network have better coverage:
There’s not enough towers in the country to do what we intend to do to densify the Sprint network, period. So, you’ve got to think differently. And really, there is great benefit around this, because the cost of deployment of cell sites is a fraction of the cost of the deployment of a tower site. So, whatever number you pick up for a tower site, it’s probably $200,000, thereabout, including all-in costs, labor and equipment. Small cell sites are a fraction of that, 60%, 70% lower.
Sprint’s strategy is sound, says David Dixon of FBR &Co:
While Sprint's lower capex guidance is raising eyebrows across the industry and early execution challenges are
evident, we believe Sprint's plan to use low-cost commodized small cells and CPE solutions leveraging its vast 2.5 GHz spectrum portfolio will allow it to close the multi-faceted performance gap with competitors in the coming years and achieve positive Free Cash Flow (FCF) while staying within the confines of lower capex guidance. If well executed, Sprint has the potential to become the lowest cost and fastest data network among the national carriers that are migrating to greater dependency on low-cost densification for coverage and capacity using commodity hardware solutions and new (shared) spectrum bands.
Majority owner Softbank is highly levered, and investors fear it will be challenged going forward to support its majority investment in Sprint. However, Sprint is benefiting from a change in the technology cycle, leveraging the cloud to nextgen deployment options to spend much less than expected in capital to help generate positive FCF […] There is a general lack of understanding on how Sprint can achieve a 10x increase in downlink network speed at less than half the expected cost and achieve a 30% improvement in network coverage from increasing the maximum power levels in devices, which drives a 30% decrease in cost. Bottom line, existing spectrum in the 2.5 GHz frequency band should sustain Sprint’s improved performance for the next six-plus years [...] 2.5 GHz spectrum is the basis of Sprint s LTE Plus network and makes up the bulk of Sprint’s spectrum portfolio. Sprint controls approximately 120 MHz of 2.5 GHz spectrum in 90% of the top 100 U.S. markets. If Softbank can create low-cost Pico and CPE solutions using 2.5 GHz spectrum to densify its network, Sprint will have the potential to become the lowest-cost and fastest data network among the national carriers that are migrating to a greater dependency on low-cost WiFi spectrum ahead of a migration to low-cost, shared LTE spectrum in the 3.5 GHz band and beyond.
However, other analysts are concerned about Sprint lowering Capex Spending as per this article
In a new video clip, AT&T's AVP Dave Wolter told Light Reading's Carol Wilson that 5G represents a fundamental change. Not just more and faster data, but massive IoT based deployment for a variety of industries. Many new frequency bands are being considered for 5G. However, there is still a lot of work to be done to bring 5G to market. Wolter said that work is well underway, starting with test bed activity this summer.
The core network must be upgraded to support the diverse IoT requirements, Wolter added. SDN and NFV will be key to create "network slices" to particular applications and serves their needs.
Meanwhile, Verizon CEO Lowell McAdam said that the huge wireless network operator sees 5G as a potential cable/DSL replacement for delivering high-speed data to the home. That implies 5G might initially be used for wireless fixed line triple play services.
McAdam said Verizon has now tested its initial 28GHz "5G testbed" at 1.8 Gbit/s in Basking Ridge, New Jersey. Verizon plans a fixed wireless pilot in 2017 but McAdam envisages a broader deployment in the US over time. "I don't know why there would be any limitation on where we would take it," McAdam says. (See Verizon Will Pilot 5G Fixed Wireless in 2017.)
Verizon needs is enough fiber close enough to the 5G radios to make it viable, McAdam noted. "Close is to be defined," he added. "That's why we bought XO Communications," McAdam said. "Because they have 45 of the top 50 markets they have metro fiber rings that gives you the ability to be out into those markets and then you just run your extensions off of them."
"5G as a mobile network standard is probably more of a 2020 proposition," McAdam acknowledged (what every reader of this blog knows already).
Finally, Ericsson has cooperated with academia to produce a comprehensive book about 5G titled,
Samsung Electronics announced a new contract with SK Telecom to deploy a commercial Internet of Things (IoT)-dedicated nationwide LoRaWAN network which is specified by the 300+ member LoRa Alliance.
The network will be deployed across Korea using the 900 MHz unlicensed frequency band. The commercial service is scheduled to launch in Daegu, Korea’s fourth largest city, next month and will be available nationwide by the middle of this year.
Daegu will serve as a test bed for the IoT network, and focus on setting up and adopting infrastructure for renewable energy solutions, cloud platforms and big data analytics of healthcare and medical services, as well as electric vehicle infrastructure for autonomous cars. For example, streetlights in the city will collect weather and traffic information using IoT sensors, enabling cost savings by automatically adjusting the lighting level and also sending air pollution status information.
“With the early deployment of a nationwide IoT network, SK Telecom will be able to maintain its position as pioneer in the field of telecommunications,” said Lee Jong-bong, Executive Vice President and Head of Infra Division at SK Telecom. “SK Telecom will continue to work closely with partners including Samsung to deliver new value and convenience to both individual and enterprise customers over the IoT network.”
“Now is a critical moment for ICT companies looking for new future business opportunities such as IoT services,” said Youngky Kim, President and Head of Networks Business at Samsung Electronics. “We are very pleased to partner with SK Telecom for its pioneering IoT vision. Samsung will contribute in creating the ecosystem for enabling significant changes driven by new IoT services.”
The country has already subsidized the building of Songdo, which is billed as the “world’s first smart city,” and is currently considering lifting regulations on the IoT industry in order to make it easier for companies to commercialize new technology.
South Korea’s Internet speeds are already among the fastest in the world, thanks to policies the government adopted more than a decade ago in order to help it recover from the Asian financial crisis.
Note that France based Orange (formerly France Telecom) has also opted to deploy the LoRa WAN. Further, it's rumored that there will be several large LoRa deployments within the next few months, including a U.S. wireless carrier.
From Craig Miller of Sequans Communications (builds LTE 1, M, M1 and M2 chips- but NOT for LoRa WAN):
"LoRa WAN is a perfectly fine technology, and like I said, there are applications where it (or it's other proprietary rivals) will enjoy some acceptance, where folks are willing to tolerate the risk of relying long-term on a network that doesn't exist on any truly national or global scale (unlike LTE), that runs on unlicensed frequencies (unlike LTE), and where the core IP is held largely by a single vendor (unlike LTE). In campus deployments, in private networks, I'm sure it will do well. BTW, someone still has to build, operate, maintain and upgrade those networks."
IoT (Internet of Things) is a mega technology trend that could very well be the next big marathon (or ultra marathon)! If the IoT marathon has a good finish, it will not only be an endurance test for legacy systems but will also shape the fate of small and big companies in many different industries.
At the Internet of Things (IoT) World conference May 10-12, 2016 in Santa Clara, CA, the mile markers for IoT were reinforced:
- 50 billion IoT devices by 2020 and 100 billion by 2025.
- At 100 billion interconnected things, IoT has the potential to be the largest land grab opportunity of all time.
IoT: The Numbers & Opportunities:
There is a frenzy to get in the IoT race and the barrier to entry is low. That's largely due to the availability of easy-to-assemble IoT kits and reference designs, MEMs based sensors (some popular ones are Samsung Artik, Intel Galileo, Arduino IoT), multiple LAN and WAN connectivity options, and IoT platforms that can be programmed via vendor specific Applications Program Interfaces (APIs).
Several industry enthusiasts perceive the IoT race as being able to convert anything that can be controlled (with on-off switch or manually configured) to a meaningful IoT device.
Thinking about the IoT impact from a product manager’s point of view, let us take an outside-in approach and ask this question: From the users perspective is there a potential wish-list of things we would want to connect to the Internet?
To keep things simple, consider a few high-touch things from the users day-to-day usability:
Thing / Device
Size (in billions)
Garage Door Opener
The numbers in the above chart are based on a conservative adoption rate with a presumed 5x to 10x higher adoption in the industrialized world vs. emerging world countries.
Also, depending on how IoT is defined – smart phones might or might not be considered in the IoT umbrella. A large part of the IoT camp does not consider smartphone as a thing or device given there is a human controlling it. The total above adds to 10 billion+ IoT devices. One can categorize most of these IoT devices/things in the “Smart Home” market segment.
The IoT scope extends manifolds into industrial verticals, like Healthcare and Smart Cities (helping city planners provide a better quality of life experience).
Aari Jaksi, SVP of Connected Devices at Mozilla, a keynote speaker at the IoT World conference, said that IoT is perceived as primarily applicable to the “Home consumer segment” in Silicon Valley vs. “Industrial Segment” in Europe. He agreed IoT has yet to have a “Killer Application.”
The pockets with significant impact, like the automotive industry, are seeing a large inflow of long-term capital investment. The end user benefit, business and revenue opportunities are relatively better understood for the automotive segment. Indeed, there was a dedicated section on Connected Cars at the conference and had representation from big brand auto-makers.
The billions of IoT devices, in any shape, form and application would each need and consume compute, network, and massive amounts of storage.
- The dominant microprocessor vendors for compute are ARM and Intel.
- The sheer number of IoT devices and volume of data generated by each device will test the network scale and capacity.
- Several of these devices will generate continuous stream of data and need an always-on Internet connection.
There are several companies and proposed network solutions (both in wireless and wireline communication - see Alan Weissberger’s article on IoT PANs/LANs/WANs).
The security, configuration and management aspects for the IoT devices are also sought after market opportunities. The cloud service providers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform all have specialized solutions for IoT application developers.
The race to 50/100 billion IoT devices provides several new growth opportunities. There is huge participation in IoT from legacy vendors and start-ups, but there are many unanswered questions and challenges ahead. The IoT racecourse is a work in progress, however several runners would like to see the finish line. What is your IoT strategy?
This is the third and final article reviewing the super charged and ultra hyped IoT World Conference which this author attended on May 10-11, 2016 in Santa Clara, CA. It is by far the most important for any outdoor IoT market segment (e.g. Industrial IoT in the field), because some form of wireless WAN connectivity will be needed for all "things" and devices.
1. Panel: Examining Carrier Business Models & Networks for IoT
- Panel Moderator: Chris Pearson, President of 5G Americas
- Panelist: Craig Miller, Vice President, Worldwide Marketing at Sequans Communications (LTE chip maker)
- Panelist: Jameson Buffmire, Principal at Orange IoT Studio
- Panelist: Brian Huey, M2M & IoT Business Development for Smart Grid and Energy at Sprint
Panel Objectives (from IoT World website):
- Establishing effective business models for collaboration with key verticals
- Where are the partnership & monetization opportunities?
- Optimising networks for IoT
- Leveraging LTE Networks
This session examined the alternatives for wireless WAN connectivity/Radio Access Networks (RANs) that go by monikers such as "NB-IoT" or "Narrow Band IoT," "LPWANs," and other acronyms/ catchy names. Track Chair Daryl Schoolar of Ovum pointed me to 3GPP Release 13 which will cover Low Power, Narrow Band connectivity as a set of additional LTE features. From the 3GPP website:
"(3GPP) Release 13 will be the refinement and enhancement of work started in earlier Releases, including power reduction in both terminals and base stations via more efficient radio transmission. Investigations will continue into Licensed-Assisted Access (LAA), with the start of specification work on LAA downlink operation in Rel-13."
Discussion of Key Points:
1. Cellular standards are evolving to address the IoT market. LTE Category 1 (low data use, low power) has been around for awhile, but not used much if at all.
- 18 months ago, Sequans began a design of LTE Cat 1 chip sets which are now being used by IoT makers in Japan, US, Canada, South Korea, parts of Europe and China. To be successful in the IoT market, LTE Cat 1 "things" need to have very low power consumption and cost.
- LTE Category M1 (formerly called Cat M) and M2 (formerly called NB-IoT) will be specified in 3GPP release 13.
- Sequans has partnered with Gemalto (a digital security company) to develop a new set of narrowband LTE MTC (Machine Type Communications) solutions based on LTE Cat M1 and M2.
- Ericsson is also backing NB-IoT as per this April 25, 2016 article with list of advantages of being part of 3GPP:
-> use of the LTE ecosystem, leading to fast development, economies of scale, and global roaming
-> can be deployed as a simple addition of new software to existing LTE infrastructure
-> a management framework exists, enabling large-scale deployments
-> framework includes state-of-the-art security
-> future feature growth for MBB and NB-IoT use cases
2. Sprint is "excited about LTE Cat 1 as well as 2G/3G- CDMA solutions" that it's used for M2M communications for many years. The company is looking forward to standardized LTE Cat M1 IoT devices which could cost in the $15 to $20 range. "Hockey stick" growth in low bandwidth, low power LTE for IoT is expected. LTE Cat M2/NB-IoT wasn't mentioned nor were the other LPWANs technologies detailed below.
3. Orange (previously known as France Telecom) is one of the largest mobile network operators in Europe. The telco has deployed a low power, long range wireless WAN based on LoRaWAN™ for IoT. LoRaWAN was said to be an open global "standard" for secure, carrier-grade IoT LPWA connectivity from the LoRa® Alliance (which is NOT an official standards making body). LoRaWAN (a Radio Access Network set of protocols) uses a new frequency modulation which produces maximum bit rates from 30K to 50K bits/sec. It operates in the ISM Bands1
Note 1. The industrial, scientific and medical (ISM) radio bands are radio bands (portions of the radio spectrum) reserved internationally for the use of radio frequency (RF) energy for industrial, scientific and medical purposes other than telecommunications.
From LoRa® Alliance: "With a certification program to guarantee interoperability and the technical flexibility to address the multiple IoT applications be they static or mobile the Alliance believes that LoRaWAN can give all THINGS a global voice." View LoRa's short introduction video here.
4. Panel moderator Chris Pearson noted that France based upstart carrier SIGFOX has called attention to the need for low power, low speed wireless networks required for the IoT which they refer to as "ultra narrowband." SIGFOX believes that the overwhelming majority of outdoor IoT applications require low power and low speeds- more like 2G and not anything close to much higher data rates from 3G or 4G-LTE (let alone the elusive "5G").
Note for clarification: The SIGFOX network operates at sub-GHz frequencies, on ISM bands : 868MHz in Europe/ETSI and 902MHz in the US/FCC. SIGFOX uses what they refer to as "Ultra-Narrow Band (UNB)" using Gaussian FSK modulation. They say that's key to its ability to provide a scalable & high-capacity network. With a 162dB link budget, SIGFOX says it enables long range communications, with much longer reach than GSM.
ENGIE M2M is building a SIGFOX compatible, Low Power, Wide Area dedicated IoT network as an exclusive SIGFOX partner and network operator for the Belgian market.
On May 11, 2016, ON Semiconductor confirmed in a press release that its AX-SFEU system-on-chip (SoC) is now fully SIGFOX Ready™ certified for optimal two-way communication in Europe with certification underway for the US. The company's press release states that their new SoC is a "low-power device-to-cloud connectivity solution that is highly optimized for environmental sensors, smart meters, patient monitors, security devices, streetlights and a broad spectrum of other industrial and consumer-oriented applications."
Also see this article which compares SIGFOX's network and LoRaWAN specifications.
Author's Note: Vodafone told Light Reading that the emerging NB-IoT (now known officially as LTE Cat M2) standard will be the death of rival technologies like Sigfox and LoRa, which have been relying on the use of unlicensed spectrum in the ISM bands to support services.
Vodafone has opened a dedicated NB-IoT lab at its Newbury, UK headquarters, in partnership with Chinese equipment supplier Huawei Technologies Co. Ltd. The global wireless operator was already a major player in the NB-IoT Forum, an association established in late 2015 to spur the development of the technology. Developers and organizations looking to use NB-IoT to support commercial services will now be able to test their applications at Vodafone's new facility.
"NB-IoT operates in licensed spectrum and that is important to us at Vodafone because we need to deliver a high quality experience to our customers," wrote Erik Brenneis, group director, Internet of Things (IoT) at Vodafone, in a blog post. "The alternative, using unlicensed spectrum, risks disruption to the signal from other technologies trying to use the same frequencies."
5. Brian Huey of Sprint said the forthcoming LTE Cat M standards from 3GPP would accelerate device to device communications and "mesh hopping" (which was not defined). He also mentioned there were proprietary LPWA network schemes from INGENU (see below) and other start-ups.
Developed country mobile operators were said to have "lit a fire" under the 3GPP, so that that organization would accelerate completion of Release 13 where LTE Cat M1 and M2 will be specified. That's because those operators urgently need a new network solution for IoT outdoor connectivity. He noted that their traditional 3G/4G business has been slowing due to market saturation of smart phones and tablets. So the revenue/profits (?) growth is expected to come from IoT!
6. The "pain point" for operators deploying a new low power, low bandwidth wireless WAN for IoT will be in the certification process, according to the panelists.
7. During the Q&A session, an audience member brought up yet another competing LPWA technology known as Wi-Fi HaLow from the WiFi Alliance. It operates in frequency bands below one gigahertz, offering longer range, lower power connectivity to Wi-Fi CERTIFIED™ products. Wi-Fi HaLow will enable a variety of new power-efficient use cases in the Smart Home, connected car, and digital healthcare, as well as industrial, retail, agriculture, and Smart City environments.
RPMA was said to have "a distinct advantage over cellular rivals thanks to the much lower amount of variations needed to build a global product portfolio. For a globally compatible cellular smart meter, a company might have to ensure that it has upwards of ten different cellular radio modules – to accommodate the variations between different countries or regions and their cellular spectrum and technology. With a technology like RPMA, that manufacturer should only need a single skew – resulting in a much simpler production line and distribution channel."
Panel: Examining the LPWA Networks Market Opportunity
- An analysis of key players and emerging business models
- Addressing key concerns over fragmented standards for both licensed and unlicensed spectrum
- Ensuring greater collaboration to drive interoperability and scale
- Forecasting the number of connections and connectivity revenue enabled by LPWA
- Low-Power, Wide-Area (LPWA) is a generic term for a group of technologies with the following key characteristics:
• Long battery life (often in excess of 10 years whilst supporting a benchmark smart metering application)
• Wide area connectivity characteristics, allowing for out-of-the-box connected solutions
• Low cost chipsets and networks
• Limited data communications throughput capacity
LPWA technologies complement existing cellular mobile network and short range technologies, enabling wide area communications at lower cost points and better power consumption characteristics. These same properties explain the potential for LPWA technologies: lowering the costs of wide area out-of-the box connectivity allows many more solution business-cases to ‘cost-in’, whilst untethering devices from a power supply allows for far greater freedom in terms of deployment locations.
NOTE: This author was not able to attend this late afternoon Wednesday panel session, because he was saturated with conflicting and confusing information from previous panels that day. Also frustrated by the horrible lunchtime logistics which caused him to miss the 1:40pm-2pm session.
From IoT Analytics website:
Mesh networks are emerging as an alternative to LPWANs:
Mesh networks made a few unexpected headlines at IoT World. Mesh networks are communication networks that rely on device-to-device communication rather than connecting individual devices to the network.
SilverSpring Networks introduced their new Starfish connectivity solution (based on the Wi-Sun Mesh standard) for smart meters and similar Smart City Solutions. The talk was also about connected car mesh clouds. From a communications technology point of view, mesh networks represent an alternative to the heavily marketed low-power wide area networks (such as Sigfox or LoRa) for low-powered devices that do not require large amounts of bandwidth – both technologies have their pros and cons.
At IoT World, we heard about the following wireless LPWAN technologies:
- LTE Cat 1, LTE Cat M1, M2 (AKA NB-IoT),
- Sigfox's proprietary 2G RAN,
- Wi-Fi HaLow/IEEE 802.11ah,
- Ingenu RPMA, and
- Wi SUN/IEEE 802.15.4g (smart metering utility industry)
There were also "in the halls, break time chats" about new proprietary LPWAN protocols (mostly based on long range WiFi) being developed for use on unlicensed spectrum. Of course, interference mitigation and/or backoff will be a key issue, because unlicensed spectrum is shared by a large number of players.
From Craig Miller of Sequans via email:
"The lower speed (and cost and power) categories likely to be popular for most IoT applications are LTE Cat 1 (10 Mbps DL/5 Mbps UL) and Cat M1 (1 Mbps/1 Mbps in full duplex FDD, 300kbps/375kbps in half duplex FDD). NB-IoT is coming soon too, and offers even lower speeds, in the neighborhood of 40-50kbps in HD-FDD."
Craig thinks there will be as many wireless WAN categories as are required by the wide range of IoT applications and use cases expected to exist.
"Regarding the 3GPP LTE variants, the different User Equipment categories (Cat 1, Cat M1, Cat M2 or NB-IoT) are merely cost/power/performance optimizations to meet a range of price/performance points. One does not necessarily obsolete the next - all are likely to co-exist, and more importantly, all are compatible with existing LTE spectrum and network deployments. This means a network operator can - on the same radio access network used today for their mobile phone subscribers - support IoT applications ranging from high-throughput infotainment solutions for passenger vehicles, down to VoLTE-capable alarm systems for homes and businesses, to asset tracking solutions, to wearables, and even down to simple sensors or utility meters that send only a few hundred bytes of data a few times a month on a battery that lasts for 10 or more years. This is a remarkably powerful capability, built on a remarkably versatile global standard."
This author agrees with Mr. Miller that the various 3GPP low power, narrow bandwidth categories will be the first choice for most wireless network operators. But what about the others?
- Orange's choice of LoRaWAN?
- Network operators chosing any of the other LPWAN variants noted above?
- What if an IoT big user wants to switch from one wireless network operator to another which does NOT use the same RAN protocols? For example, SIGFOX, Verizon, Orange all use different LPWANs for IoT connectivity!
- How many LPWAN/RAN baseband protocols with analog front ends, different frequencies and antennas, etc can a SoC support and still claim to be "low power?"'
- In March 2015 AT&T said its fully integrated, LTE based, IoT solution platform includes: IoT application services, business rules engine, data model, agents/device protocol adapters, connected products, and management applications. There was no mention of any other wireless WAN other than existing LTE!
- "It is a top priority of our company to continue to be a leader in the IoT space," Chris Penrose, senior vice president of AT&T's IoT organization told Reuters.
- Bottom line: market fragmentation for any IoT application which requires wireless WAN connectivity.
Let's sum up with a quote from John Treadway, of Cloud Technology Partners from his article titled: IoT World: A Conference of Connectivity and Confusion
"There were also comments about the explosion in connectivity options and the need to manage complexity in these environments -- something that is both a threat and an opportunity for integrators and vendors to solve."
Good luck and till next time..................................................................
This article reviews the IoT connectivity options (wireless PANs and wireless LANs) discussed and debated at the IoT World conference IoT Technical Architecture track on Wednesday, May 11, 2016. Surprisingly, no wireline technologies, e.g. Power over Ethernet or Automotive Ethernet for connected cars (e.g. Broadcom offering) were mentioned. Some wireless WAN issues (e.g. licensed vs unlicensed spectrum) were discussed in a panel session that's summarized below.
Part III will focus on IoT Wireless WANs, sometimes referred to as LPWANs or LPWA. See preview at the end of this blog post.
Navigating the IoT Connectivity Landscape, Alex Kengen, International Product Marketing Manager Dialog Semiconductor:
Mr. Kengen identified the following IoT industry verticals: smart car, smart city, smart home and wearables. Presumably, these are the IoT market segments Dialog Semi is pursuing. Notably absent is Industrial IoT, which this author (and many others) think will be the biggest IoT market in terms of revenues.
"Smart home" is characterized by multiple connectivity standards/specs, ease of use (very important), low cost, low power dissipation (=longer battery life), good security, robustness (availability/no downtime), use of IPv6.
There's a "sea of confusion" when it comes to IoT Connectivity standards, such as WiFi, Bluetooth, Zigbe, Thread, and DECT ULE. These are illustrated in the 2 slides below:
Alex noted that DECT ULE was low power, star topology, and a high data rate. IEEE 802.15.4 Zigbee had the advantage of a mesh topology and long range.
Dialog Semiconductor's Portfolio of low power wireless SoCs:
• Optimized for low power, small size and low system cost
• Embedded Software stacks
• Highest levels of integration and ease of use
• Complete development environment and development tools and local support
• Unique innovations on Sensor Fusion, Energy Harvesting, Audio
• Supporting a wide range of IoT applications with reference designs
• DA1458x: Single-chip solution for low cost, small and light devices such as Proximity tags, Beacons, Smart Buttons, Disposables, etc
• DA1468x: Single-chip solution for standalone wearables and other rechargeable devices
• Module Partners include: Murata, Panasonic, TDK, ALPS, LG-Innotech, Samsung (SEMCO)
• Portfolio of Reference Designs (SmartBond [TM])
• DA14583 IoT Sensor Development Kit
Kengen's Closing Comments (Alan's comments in parenthesis):
• There is a massive market opportunity for IoT (but will it be realized?)
• To realize the full potential of IoT, innovations are needed to drive it to the next level (no mention of what type of innovations?)
• Dialog Semiconductor focus is on helping the IoT grow, together with the major players (who are they?)
• Dialog Semiconductor cooperates, not competes, with other standards (presumably the one's noted in above chart)
• Let’s take IoT to the next level!! (whatever that means???)
Panel: Examining the Array of Connectivity Enablers for IoT
- Matt Lear,Representative ATIS1
- Paula Hunter, Executive Director at NFC Forum2
Note 1. ATIS (Alliance for Telecommunications Industry Solutions) is a founding partner of oneM2M - a global standards initiative for M2M communications and the Internet of Things. oneM2M has selected ATIS as the initial Registry Management Authority for the oneM2M Application Identifier (App-ID) registry powered by iconectiv. The Registry enables delivery of globally unique software application identifiers, based upon oneM2M specifications, and provides application identifier management to support developers and enterprises within industry verticals.
Note 2. NFC (Near Field Communication) is a standards-based short-range wireless connectivity technology that makes life easier and more convenient for consumers around the world by making it simpler to make transactions, exchange digital content, and connect electronic devices with a touch. NFC is compatible with hundreds of millions of contactless cards and readers already deployed worldwide. More information at the NFC Forum website.
IoT Issues discussed by the 2 panelists:
- What are the key aspects when considering network connectivity? There will be different evaluation and selection criteria for different connectivity choices. The criteria to be reviewed should include: Range; Data Rate; Power; and Security.
- IoT vendors and solution providers should think about user experience (who is the user of a "thing?"). Interoperability and security are most important for a good user experience. Privacy may also be an issue.
- Range should include ability of the wireless signal to penetrate walls (WiFi is not at all good for that).
- Low power is critical for battery operated "things" in the field, where the battery must last for a very long time.
- Capability to change bandwidth/bit rates for applications like video surveillance, medical videos, and/or data bursting from equipment or controllers will also be an important criteria for those applications.
- As technology evolves, it will be essential to "future proof" IoT modules, equipment and controllers.
- Compatibility with legacy IT networks might also be an issue (except for totally greenfied IoT deployments)
- Huge BATTLE: proprietary specs vs standards for modules, connectivity, messaging formats & protocols and apps.
- IoT industry needs standards for devices, connectivity, protocols, and open APIs.
- Wireless WAN issue: licensed vs unlicensed spectrum.
- Licensed spectrum is owned by a single network operator (in the U.S. the spectrum is usually auctioned by the FCC). 2G, 3G, and 4G-LTE all use licensed spectrum.
- Unlicensed spectrum is not owned by anyone. Rather, it's used by any equipment transmitting/receiving in that frequency band. Because there are many more players, interoperability may be a bigger issue than for licensed spectrum connectivity options. All WiFi WANs use unlicensed spectrum. LTE-M is being developed by 3GPP for unlicensed spectrum.
Note: Wireless WANs for IoT will be the subject of IoT World Part III Summary.
Challenges for IoT Conncectivity:
- Interoperability, in light of the current "chaos and confusion" in connectivity options, forums & alliances, proprietary technologies,etc.
- Solid and widely accepted standards are required for: PHY & MAC/Link layer connectivity, auto-discovery, authentication, reliable messaging, and security.
- Security is critical: If one IoT device on a shared network is compromised, then all networed IoT devices on that network are at risk.
- A shake out is inevitable with only the "robust standards" becoming commercially viable. All IoT industry participants must work together to enable interoperability and "fair behavior" for all players.
- It will be "at least two years before we know who the dominant players will be."
- More IoT solutions are needed to be accessible to customers (no examples given).
- Search engines to find IoT solutions and apps will be needed.
- Lack of spectrum as the number of IoT devices is growing exponentially.
- May have to rely on mesh networking to realize required range.
- The Wi-Fi Alliance® has introduced Wi-Fi HaLow™ as the designation for products incorporating IEEE 802.11ah technology. Wi-Fi HaLow operates in frequency bands below one gigahertz, offering longer range, lower power connectivity to Wi-Fi CERTIFIED™ products. Wi-Fi HaLow will enable a variety of new power-efficient use cases in the Smart Home, connected car, and digital healthcare, as well as industrial, retail, agriculture, and Smart City environments.
True value creation in IoT comes from monitoring and analyzing a system and then modifying it to create a more effective and efficient desired outcome. This results in then taking an action to match where appropriate intelligence can be added along an IoT chain. Every “SMART” step in IoT is an opportunity to create & capture value.
We share some examples to demonstrate value creation and then explain SMART partitioning. It explains the trade-offs of how and where to add intelligence along the signal path and shares some industry trends for SMART IoT design. These are discussed with respect to some key IoT parameters including cost, power and security.
Stay tuned for Part III on Wireless WAN/LPWAN/LB WAN connectivity options.
Preview: This author was aware of the huge number of wireless personal (PAN) and local (LAN) connectivity standards being promoted for IoT and other low power, lower speed applications. Astonishingly, we were not aware of an even bigger set of IoT wireless WANs, because they'd all be based on a low power, low speed version of LTE. WRONG! Many such wireless WAN specs are being generated in forums or alliances, while some are proprietary technology of a single vendor! The resulting chaos and confustion may lead to IoT market fragmentation due to lack of interoperability between IoT "things" and the wireless networks they connect to.
Till next time, here's a pic of Alan asking a question at one of the above sessions. Track Moderator Daryl Schoolar of Ovum is to the right, in back of Alan.
For many years, we've heard tremendous hype about the Internet of Things (IoT) with its immense promise and potential, influence and impact, and how it will radically change our world. Consulting companies like McKinsey, research firms like Gartner Group, and large multinational equipment companies like Cisco, Ericsson and GE, have all predicted from 20 to 50 billion connected devices by 2020 and more beyond.
According to Gartner, the “endpoints of IoT will grow at a 31.7% CAGR from 2013 through 2020, reaching an installed base of 20.8 billion units.”
That tremendous "off the charts" hype continued at the largest IoT conference in North America last week (Tuesday, May 10-through-Thursday May 12, 2016) at the Santa Clara Convention Center. I was told by the registration desk that there were over 10,000 attendees, while observing every square inch of exhibit space was taken. Also, every nearby parking lot was full during show hours Wednesday and Thursday. Please see IEEE Member comments below.
IoT Industry verticals like smart home, connected cars, wearables (fitness trackers, medical monitors, etc), industrial IoT, manufacturing/factory floor, smart building/smart cities were all represented on the show floor, conference sessions, and vision theater. There were also sessions and exhibits on IoT security, IoT cloud, big data/analytics, etc.
Overview of Executive Keynotes on Tuesday, 10 May 2016:
The main theme of Tuesday's executive keynotes - “Disrupt, Innovate, Monetize” - with new business models, improved productivity and other benefits- greatly added to the hype, while providing little or no substance to resolve the critical issues that have plaqued IoT since the name was coined (replacing M2M Communications).
Tuesday's executive keynotes (many were sponsored talks) were from Hitachi, SAP, ADT, Microsoft, Silver Springs Networks, HP Enterprise, Schneider Electric, and JCI. Several key themes emerged as per Bitnavi's blog:
Ubiquitous technology: Various software packages, smaller & more power efficient ARM processors, sensors,cameras, wireless LAN & WANs are coming together to enable the IoT to be a reality, if not a fractured market (even within the same industry vertical) due to lack of universally accepted standards.
More about that in a follow up article where we will convincingly prove that connectivity will NOT be ubiquitous!
New business models: Companies such as Kaiser Permanente (healthcare), Bosch (automotive components), PepsiCo (consumer) and Harley Davidson (motorcycles), among many others, were mentioned as end users of IoT technologies to bring faster, better, more reliable products and services to market. Many of these companies are using technologies such as SAP’s HANA platform to improve manufacturing, lower maintenance costs and improve the overall customer experience.
Smart cities are becoming a reality: Many municipalities from Boston to Chicago and Los Angeles are levering IoT technology to improve the quality of life. For example, the City of San Francisco is using IoT in its quest to become the first U.S. city to have a fully connected “ecosystem of transportation,” where driverless cars and transit, ride sharing services like Uber and Lyft, and even bike-sharing apps will be connected through one platform where residents can easily plan their transportation from Point A to Point B, according to Timothy Papandreou, chief innovation officer for the San Francisco Municipal Transportation Agency.
Collaboration is critical: While in the world of technology, being first to market seems to be the norm, almost all presenters discussed collaboration as being critical to the success of IoT. Clearly this makes sense as no particular company can possibly provide an end-to-end solution, given the vast array of technologies available within the ecosystem.
SAP Keynote at 2pm May 10, 2016:
Tanja Rueckert, Executive Vice President, Digital Assets and Internet of Things at SAP, discussed 2 main drivers within all industries as being critical to the adoption of IoT.
1. IoT is enabling disruptive business models. And second,
2. Companies are now using IoT-enabled technologies to optimize their business processes.
Ms. Rueckert gave examples of non-tech companies such as Under Armour, several shoe manufacturers, and others of using SAP’s software along with thousands of connected devices to collect and analyze millions of data points related to improving operations. Whether its using predictive maintenance to improve maintenance and service costs, or asset intelligence networks to lower their inventory expenses, companies in all industries are now involved in this movement.
You can see a video of her presentation here.
HP Enterprise announces Universal IoT Platform at 4pm 10 May 2016:
"There is no doubt in anybody’s minds, IoT will be a seismic shift in how we interact with technology. Massive change will sweep through all industries, again, and just as mobile communications and the Internet did before, business models will evolve rapidly, with new services and offerings already rapidly becoming available," according to Nigel Upton, General Manager of Hewlett Packard Enterprise (HPE) IoT platform and Global Connectivity Platform.
The new functionality in HP Enterprise Universal IoT Platform was said to be a driving force in building the infrastructure that will enable and sustain the growth of IoT.
“The value of the IoT lies in enriching data collected from devices with analytics and exposing it to applications that enable organisations to derive business value,” said Nigel Upton, director and general manager of IoT at Hewlett Packard Enterprise who spoke at 4pm Tuesday.
“The HPE Universal IoT Platform dramatically simplifies integrating diverse devices with different communications protocols, enabling customers to realise tremendous benefits from their IoT data, and is designed to scale to billions of transactions tried and tested in rigorous large scale global telco and enterprise environments in a variety of smart ecosystems."
The HPE universal IoT platform is aligned with the oneM2M industry standard and is designed to be industry and vendor-agnostic, enabling IoT operators to simultaneously manage heterogeneous sets of sensors, operate vertical applications on machine-to-machine (M2M) devices, as well as process, analyse and monetise collected data in a single secure cloud platform.
The HPE Universal IoT Platform provides increased support for long range, low power connectivity, ensuring that LoRa® and SIGFOX deployments can be supported alongside other connectivity protocols, including cellular, radio, Wi-Fi and Bluetooth.
“From multiple back office IT systems and diverse connectivity technologies to business processes, the biggest barrier encountered by enterprises deploying IoT across multiple countries is complexity," said Jim Morrish, chief research officer, Machina Research. "The most important thing a supplier can provide enterprises is simplicity – HPE certainly helps with reducing the complexity, pulling together components of an end-to-end enterprise IoT offering.”
The HPE Universal IoT Platform is available worldwide and can be deployed on premises or in a private cloud environment for a comprehensive as-a-service model. Read more about this HPE product in the company's press release.
Note that a similar IoT Management platform was announced by Hitachi. The Lumada platform of the new Hitachi Insight Group aggregates data from nodes and edge devices and performs analytics.
Schneider Electric & Silver Spring Networks Keynotes & Panel Session:
1. Schneider Electric announced ecoStruxure.io, an IoT cloud service linking offerings across its portfolio of switches, breakers and electricity distribution products for buildings, factories and cities. Duke Energy is already showing cost savings by using Schneider’s IoT platform, which includes technology from ARM, Cisco and Intel as well as Microsoft’s Azure for IoT cloud service.
“We’ve identified IoT as the biggest opportunity for us,” said Prith Banerjee, Schneider’s CTO in a Tuesday afternoon keynote speech where he traced the hsitory of Scheider Electric.
“We have been connecting things for a long time in industrial automation, but the difference now is the speed and scale of rolling out multi-site and multi-tenet apps, the speed of message processing and the different business models,” said Michael MacKenzie, vice president of IoT platform delivery at Schneider, speaking in a panel session on Wednesday. “This space is huge and there are a lot of problems left to solve,” he added.
2. In a keynote speech on Tuesday, Mike Bell chief executive of Silver Spring Networks said that the near term ROI for IoT will be in industrial and smart cities deployments. Silver Spring is trying to turn its 23.6 million private smart meter installations into a public IoT net it calls Starfish. The company added London to a handful of cities already supporting the concept, but it’s still a few weeks before developer’s kits will be available and prices and first users announced.
“I’m a huge believer IoT is here and getting bigger, but we have to start reinforcing and making this real, so please get out there and start building and shipping things,” Bell said. “We're at the beginning stages of IoT,” he added. (NOTE THAT WAS EXACTLY WHAT IoT CONFERENCE SPEAKERS WERE SAYING IN 2009 AND 2010 WHEN IT WAS CALLED "M2M COMMUNICATIONS" OR "SMART GRID.")
Comment & Analysis:
- The same problems that plagued IoT six years ago are still front and center: security, privacy (of personal info, medical measurements/records, etc), wireless LAN connectivity and - BELIEVE IT OR NOT - wireless WAN connectivity (at least 6 specs besides the current version of LTE are proposed for IoT WAN access!
- BT, HP and a few start ups announced various access networks between IoT and the core network. BT has gotten into the IoT data base business by designing a common API to access data stored in many different formats within its network. Thought that was impressive and gutsy for a network provider! John Davies gave an excellent, but somewhat rushed presentation of BT's place in IoT ecosystem.
- Also, there was no consensus or even DISCUSSION on how much of the "thing" data, control, and status signals should be sent to (or from) the Internet vs being handled by an access controller. Of course, there will likely NOT be any controller for heavy industrial equipment in the field or a cargo container moving through the ocean...But what about a home or factory floor?
- Connectivity is just the 1st step and may NOT be IP based (different packet format and addressing). Many other protocol related issues are still unresolved: message format above the Transport layer, Authentication, Secure messaging, Failover/protection/restoration, OAM&P? etc. They all seem to be different for the IoT vendors I talked to at the show!
- Finally, what ever happened to Smart Grid? Has it been folded into "Smart Electricity IoT" for electric power companies? Or is it part of "Industrial IoT?" Or something else?
IEEE Member Discussion List Comments (any IEEE member can join for free at comsocscv.org):
- In my opinion, one of the major elements of its size is that, to a large extent, nobody knows what IoT is, or other what IoT isn't yet. Thus any vendor who feels like they may have a piece of "this next big market" feel like they can't afford to not participate. About the only thing that seemed to be agreed was that IoT networks didn't have humans at the end of the network. Beyond that, any vendor that had anything at all to do gathering, processing, transmitting or storing digital data or any service business that supported any of those items was there claiming they were into IoT.
- Thank you so much for sending this to us. Represents a lot of hard work, and good judgement on your part to distill all this stuff. In this regard, it seems to me that "Everything" and "Nothing" have a lot in common, in the sense that they are both quite different from "Something."
- It was so packed, that a guy I was set to interview was 20 minutes late as he couldn't find parking. He had to drive back to his office and take Uber to the conference. He is with ABB and they see being able to improve efficiency and operations of "things" they built and installed years ago - like transformers, motors or street lights. Their motto is something like "Internet of Things, Services and People" - I suppose the humans become one of the "things" with the various wearables that are increasingly being embraced. I will publish that interview in a few weeks.
- The only other interview I was able to do in my hour or so at the conference was this one with Jennifer Kent of Parks Associates who talked about the propensity of people with smart home gizmos to more readily embraced connected car features. ...........................................................................................................................
- Alan, I find this type of note from you (and with your expertise) exceptionally useful. It's great bottom up "G2"! Keep it coming!..................................................................................................................................
Nokia cited a wireless spending slowdown and the integration of its new Alcatel-Lucent unit in reporting an unexpected loss in its latest quarter after a profit in the year-earlier period. But higher sales at Alcatel's fixed-line division offset some of the declines. Revenue at Alcatel's mobile networks business declined 28%, which Nokia blamed on customers' delayed buying decisions related to the transition.
Nokia agreed to buy Alcatel-Lucent for about $18 billion last year to seek savings and expand its product range beyond mobile infrastructure as demand from phone carriers wanes. The first-quarter numbers show the short-term costs of such a big transaction are quickly materializing, while the long-term benefits are yet to be proven.
"This was another mixed publication and will be difficult to interpret for investors," analysts at Oddo Securities said in a note to clients.
Nokia Chief Executive Officer Rajeev Suri is betting on the deal to tap into newer products such as Internet-protocol networks, while boosting Nokia’s software offering and research and development capabilities to fend off rivals Ericsson AB and Huawei Technologies Co.
Suri said forecasting was difficult just four months into its merger with Alcatel Lucent: "We don't have quite the visibility I would like to have," he said.
Nordea analyst Sami Sarkamies said the company had given analysts precious little to work with in terms of forecasting when stronger profits might return. "The margin estimates will be revised down clearly for this and next year,” he said.
“Sales were a bit weak, but Nokia showed stronger profitability mostly because of Alcatel-Lucent’s contributions from its fixed-line and IP and applications businesses,” said Mattias Lundberg, an analyst at Swedbank AB in Stockholm.
Revenue was hurt by a 28 percent drop at Alcatel-Lucent’s mobile-networks business, as customers considered how to align their infrastructure to Nokia’s product road map, Ihamuotila said on a conference call.
"It’s understandable that some customers who have been mobile customers on the Alcatel-Lucent side would think of ‘how do I get to the combined road map as quickly as possible’ and that could impact slightly the short-term performance," he said, adding Nokia isn’t losing market share with those customers.
Sales in North America, Nokia’s biggest region, slumped 17 percent to 1.58 billion euros, while revenue from China slipped 5 percent to 572 million euros. Nokia’s overall network sales declined 12 percent to 3.73 billion euros.
The merger is also aimed at reducing costs. Nokia is said to eliminate about 10,000 to 15,000 positions from the combined staff of 104,000, seeking savings by reducing overlapping products, services and sales positions. Savings from the merger are set to surpass the company’s previous estimate and top 900 million euros in 2018, Nokia said.
Phone carriers are curbing investments after spending billions of dollars in the past years to build speedier fourth-generation networks so smartphones can stream video and audio more quickly. With much of the 4G networks already built in key markets such as the U.S. and China, carriers’ investments are set to slump by 7 percent this year and a further 5 percent in 2017, according to Deutsche Bank AG.
This decade long telecom slump is a far cry from the boom years in the 1990s. It's truly mind boggling.
Introduction & Overview: by Alan J Weissberger
Zayo was founded in 2007, to "provide customers with enormous, exceptionally high quality bandwidth."
The company has grown exponentially via acquisitions, taking advantage of transactional demand from hyperscale service providers for bandwidth infrastructure, with its meteoric rise driven by 37 acquisitions in its nine-year history. Zayo has assembled an attractive services mix, with potential for leveraging its dense metro, regional, and long-haul fiber networks.
Late last year, Zayo acquired Allstream, which provides bandwidth and telecom services to business and public sector customers across Canada. Allstream also operates colocation space in Toronto, Montreal, and Vancouver. “Within today’s Allstream is a robust collection of fiber networks, which are enormously valuable to both Allstream and Zayo customers,” explained Dan Caruso, chairman and CEO of Zayo.
“We will unleash the full potential of these assets by combining them with Zayo’s network and focus on providing high-quality and low-cost bandwidth to help fuel the growth of Canada’s economy.”
Zayo currently offers the following services/capabilities: hybrid cloud infrastructure as a service (IaaS), dark fiber, data center & colocation, Carrier Class Ethernet (10M to 100Gb/s), IP services, mobile infrastructure, SONET, and wavelengths (on one or more fibers).
Zayo says they have 7.7M miles of optical fiber installed, 800 data centers connected, with 9,000 miles of fiber buildout underway. The company claims its dark fiber is secure and scalable with virtually unlimited bandwidth. "You get fiber from us, you light it up with your own electronics and you maintain direct operational control of your network while leveraging our dense metro and long haul fiber network."
Industry bandwidth demand continues to increase, but Zayo’s ability to benefit from this growth, against technology shifts in wireline and wireless segments, could be gating factors. In particular, the transition from hub and spoke enterprise networks to cloud wireline and wireless access could prove to be a challenge for Zayo. See question 2. below for wireless industry shifts underway.
Analysis: by David Dixon of FBR & Co.
ZAYO has assembled an attractive mix of high-bandwidth services on its dense metro, regional, and long-haul fiber networks. Although industry bandwidth demand continues to increase, ZAYO’s ability to profitably benefit from this growth against technology shifts in the wireline and wireless segments is a concern.
ZAYO is a high-margin revenue growth story with potential technology related headwinds amid an unclear ability to integrate and maintain revenue momentum while extracting sufficient synergies from its largest and most complex acquisition to date. Based on our industry checks with major Canadian customers, there is a significant portion signaling an intention to change carriers.
Last week, management announced lower-than-expected annualized synergies of $60M (versus our expectation of >$100M) for Allstream, which suggests head-count reductions are behind schedule and interconnection savings are longer dated. Based on results to date, we see increased investment risk from ZAYO's Canadian acquisition, which could warrant a lower implied valuation multiple.
Key Points (David Dixon):
■ Fiscal 3Q16 results recap. ZAYO delivered fiscal 3Q16 consolidated revenue growth of 40.3% YOY, to $478.0M, driven by the inclusion of Zayo Canada, versus consensus of $473.0M and our estimate of $477.0M.
■ Organic revenue momentum on track, but weaker than expected, including Zayo Canada and Allstream. Including Zayo Canada and Allstream, ZAYO reported 2% pro forma recurring revenue growth and 5% constant currency (6% and 8%, respectively, excluding Zayo Canada and Allstream). Excluding Zayo Canada, gross installs were $5.9M, and net installs were $2.1M, driven by record low churn of 1.0%. Excluding Zayo Canada, management reported solid bookings of $7.0M and reiterated guidance of 3.0M in net installs by the end of 2016.
■ Allstream execution is an increasing concern. Last week, management announced lower-than-expected annualized synergies of $60M (versus our expectation of >$100M) for Allstream, which suggests head-count reductions are behind schedule and interconnection savings are longer dated. While management cited increased cross-border transaction opportunities within the core Zayo sales group, we are increasingly concerned about high-margin revenue contraction at Zayo Canada, from both gross billings and churn perspectives. Based on our industry checks with major Canadian customers, there is a significant portion signaling an intention to change carriers. In our initiation note, we highlighted key challenges that could drive slower revenue growth and higher churn: the (1) transactional, versus customer-based, sales platform; (2) entrepreneurial, versus mature, business culture; (3) lack of experience in voice and security services; (4) the transition to a reseller-based SMB business.
Q &A (David Dixon):
1. What is the impact of an architecture shift on Zayo's business model? Do telecom and cable companies have sufficient metro fiber in place to deploy distributed compute networks?
We see limited competition from other dark fiber and mobile infrastructure providers but believe the real question is the impact of network technology changes underway on the outlook for demand for Zayo s products and services. In the metro fiber segment, we see a move underway within the telecom and cable segments toward distributed compute bandwidth and storage platforms, potentially on fiber infrastructure already in place. This will likely serve as the foundation for transferring data traffic from Internet content and applications from the core network to mini datacenters at the edge of the network in each metro location. This is similar to the content (not computing) challenge solved by Akamai in the early days of the Internet.
2. Are there wireless technology shifts underway disruptive to Zayo's business model? On the mobile infrastructure front, there are multiple trends underway:
(1) more heavy lifting by low-cost super Wi-Fi-like indoor, versus outdoor, LTE deployments on commodity servers;
(2) new cloud-based, shared spectrum bands; and
(3) the use of wireless back-haul and front-haul in lieu of fiber connections to cell sites.
3. Synergy potential is high at Allstream, but what is Zayo's ability to execute its largest and most complex acquisition to date?
While Zayo expects $60 million in annualized cost synergies, we see key challenges, including:
(1) a horizontal-based, versus vertical-based, sales and profitability platform (Canadian enterprise customers may not transition well to a transactionalbased relationship);
(2) an entrepreneurial, versus mature, business culture;
(3) Zayo's limited experience in managing a cybersecurity service portfolio, which may increase churn and lower revenue growth;
(4) similarly, management's lack of experience in managing a mature voice service platform (still a key part of an enterprise customer solution), which may result in increased customer and revenue churn; and
(5) the transition of Allstream SMB business to a pure reseller, which may increase customer churn.