Cellular and the Future of IoT Connectivity
Cellular is poised to be the new gold standard for IoT connectivity.
Cellular connectivity has become a crucial part of our daily lives. If you can’t imagine a day without your smartphone, imagine going through a day without cellular connectivity. The nearly ubiquitous reliability of cellular has become something we take for granted. Consumers are almost always connected and “Can you hear me now?” is no longer a concern for most people.
The recent proliferation of connected devices including baby monitors, smart thermostats and wearables has been astounding. According to AT&T, the average consumer now owns 1.4 connected devices, a number that is expected to triple over the next three years. In the next 10 years consumers are expected to have between 40 and 160 devices each with each of these devices needing connectivity inside and outside of the home.
Today, most connected products rely on Wi-Fi for connectivity and although it has become the gold standard for connectivity in the home, it does have its challenges:
- Limited Reach: It is not uncommon for consumers to experience “black spots” and weak signals in parts of their homes due to the nature of Wi-Fi. Outside of the home, Wi-Fi simply does not provide a ubiquitous connectivity solution.
- Security: Wi-Fi networks are generally unsecure and not protected by the consumers that set them up.
- Reliability: At some point most consumers have had to reboot a home router, lost Wi-Fi internet access, and gone through the sometimes frustrating process of trying to pair a connected device to a Wi-Fi network. In fact, more than half of U.S. consumers have frequent problems with their Wi-Fi connection.
- Inefficiency: Some devices, if not designed correctly, can be very power hungry over Wi-Fi, resulting in a poor user experience. For example, some of the first generation of mobile cameras in the home needed to be constantly re-charged because they maintained an open connection.
Wi-Fi evolving to address all of these challenges is unlikely, and the device industry has already started looking to other technologies to plug the gap. The answer is cellular.
The new gold standard for IoT connectivity
Cellular is poised to be the new gold standard for IoT connectivity. Cellular networks offer more reliable connectivity and a documented lower Mean Time Between Failures (MTBF). This is important for IoT devices inside, and especially outside the home, where Wi-Fi can be spotty or unavailable. Cellular connectivity doesn’t require pairing devices to the network and is much less prone to interference than a Wi-Fi connection.
There are still hurdles to the widespread adoption of cellular connectivity for IoT products however, especially cost. Typically, the pricing of consumer-connected products sold in retail is based on a multiplication factor of the device’s manufacturing costs. To date, the cellular component of these connected products has been the largest cost and in some cases resulted in devices not being economical for the target market. With demand adversely impacted by the price of these products, some original equipment manufacturers (OEMs) have delayed adopting cellular connectivity in order to offer products at a more compelling retail price based on a Wi-Fi only solution.
The cost of cellular modules, even with the introduction of new technologies such as LTE, is rapidly decreasing. In 2016 there were more cellular connected devices in the market than ever before, and 2018 is set to be the beginning of the exponential growth curve. OEMs can begin capitalizing on this market opportunity, adopting cellular faster, and diversifying their core business models. OEMs and retailers rely on retail and wholesale mark-ups to generate their margin, however with the adoption of cellular connectivity in these devices, new recurring revenue streams may be generated offering a better return on investment for the manufacturers.
Important factors for OEMs considering cellular connectivity
The first thing OEMs should investigate when looking into cellular is which module is right for their product. As mentioned, module prices are coming down due to the demand for LTE solutions, and they are expected to continue to decrease.
Providing a seamless user experience should also be top of mind for OEMs. Cellular connectivity is an advantage, so make it easy for consumers to use and manage their devices and accounts. With the speed of innovation today, even the most well engineered devices have a limited lifecycle, so ensuring a good customer experience is critical to customer retention. Today’s consumers expect to be able to access account information and manage all aspects of their device connectivity through a simple online interface, including setup, payment, activation, billing and support.
The case for cellular: wearables
At least one out of every six people in the United States now owns a wearable device such as a smartwatch or fitness tracker. Gartner estimates that by 2020 over 15% of all smartwatches and wearable devices will have their own cellular connection as opposed to being tethered over Bluetooth to a smartphone. That’s important because smartwatches need to work independently when there is no cellular connection available from the paired smartphone. Great examples of this are wearables for parents tracking their child’s location, tracking physical items such as luggage, or when you simply want to go for a run and not have to carry your smartphone with you as well as wear a fitness tracker.
The use cases for cellular connectivity in these products is powerful; tracking a child, emergency SOS calls, and sending messages to and from the device are just some of the features that have been deployed in these products to date. The challenge for companies developing these wearables is that the devices need a voice/text message and data plan, which is only available from a mobile carrier. The objective is to create a simple out-of-the-box experience whereby a customer can buy one of these devices and seamlessly activate the cellular service plan on it so they can start using it immediately.
The case for cellular: smart home security
Home security is the largest segment of the connected home category which IDC predicts will reach $1.29 trillion by 2020. Traditional home security systems have transferred the costs of their home security system including sensors and cameras into a monthly subscription fee and locked people into a contract. New connected home security systems, on the other hand, are disrupting the home security market by providing affordable home security solutions with a no-contract/zero-commitment monthly subscription service. Though many of these systems currently use Wi-Fi, cellular connectivity does provide security systems with distinct advantages; whereas Wi-Fi service can be interrupted in the event of a loss of power, leaving the home unprotected, cellular can ensure that the home remains secure.
Cellular connectivity offers a true out-of-the-box experience by eliminating the need to pair the system with a Wi-Fi network. It is also more reliable than Wi-Fi because cellular networks are encrypted and the connection cannot be cut by intruders, both of which provide consumers with more peace of mind. OEMs developing connected home security systems also benefit from the added security of cellular because cellular connected security systems are less likely to be targeted by distributed denial of service (DDOS) attacks.
The use of cellular connectivity brings a wider range of value added features to a number of products both in the connected home and out of the home. While adoption of cellular connectivity is currently expensive, it is crucial for devices that require connectivity and security while on the move or where Wi-Fi may not be available. The OEMs that adopt cellular now and optimize their product to use this technology will not only see economic benefit in the short term, but greater benefit in terms of profitability and competitive edge as the pricing decreases.