Another provocative view from Yiru Zhong on NB-IoT, Chinese telecommunications and implications for the global telecoms market.


During the 5th China Mobile Global Partner Conference on the 24th November, China Mobile announced a RMB2bn (US$300mn) subsidy fund for use in 2018 to support the development of IoT infrastructure, specifically of NB-IoT and 4G modules.   Considering that NB-IoT deployments are expected to have a lower total cost of ownership to enterprises to run, its move could be generously considered as a desire to grow the market or as a more commercially minded strategy to capture first mover advantage and win market share against its peers in China. 

Despite this occurring in China, this subsidy has relevance for mobile operators globally too. 

1.       It is only a very small step from giving something away for free.  In the traditional perception that connectivity is a commodity, the reliance on price as the sole differentiator gives a false impression to enterprises that connectivity is easy to do.  IoT connectivity is complex to deploy and manage; operators rely on managing different types of connectivity and ability to offer carrier-grade IoT connectivity for guaranteed reliability, availability and security. 

2.       The subsidies suggest this is one of many options towards encouraging the scale of connections needed to compensate mobile operators for migrating some 2G IoT connections to NB-IoT technology.  For example, China Mobile revealed that they expect to charge a 2 tier tariffs; RMB20/connection/year (US$3) for up to 55 pings per day and another RMB20/connection/year for the 56th ping per day.  If we assume a 2G connection yields US$3/connection/month average revenue of a 2G connection, the volume of NB-IoT needs to be 12 times more than that of 2G’s to yield the same revenue per year.  I am not certain all the water metering and agriculture monitoring connections will reach the volumes needed to avoid a temporary dip in IoT connectivity revenue.   


3.       Another route to enjoy longevity in IoT connectivity revenue is to cultivate the eco-system that yields new services and data monetisation opportunities because of having a greater number of NB-IoT connections in the field.  This means funding for innovations projects, involving small and medium sized enterprises across all walks of life, to identify the use cases and revenue models. 

Overall, the tendency to drive down prices to encourage adoption often leaves scarce room for enterprises to innovate.  More importantly, economic inefficiencies from subsidies that distort market prices make society as a whole worse off.  The alternative use of that funding to support innovation efforts that yield new use cases and revenue models offers a more hopeful and sustainable route for IoT. 


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