What does NB-IoT need to do to transform from the world's best 2G network to the world's best IoT network?

At the recent Global Terminal Summit, China Mobile released the "5G Terminal Product Guidelines", which caused a great response in the industry, but the main focus was not on 5G, but on 3G. Specifically, in the guidelines, whether it is NSA mode or SA mode, China Mobile no longer requires the terminal to support TD-SCDMA in the mode frequency band of the terminal, that is, the mobile phone must support at least 5 modes (NR/TD-LTE/LTE FDD/WCDMA/GSM), and 5G data terminals must support at least three modes (NR/TD-LTE/LTEFDD). The content of the guidelines was interpreted by industry insiders as China Mobile's strategy to take the lead in withdrawing 3G from the network and retain 2G. This world's largest 2G network is still playing a role and has become the main infrastructure for carrying IoT services. In the future, it will gradually be replaced by cellular IoT networks represented by NB-IoT/eMTC, but this will be a gradual process.

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The Internet of Things has become the main service carried by 2G networks

From the perspective of the operators' overall development strategy, the withdrawal of 2G networks is an inevitable trend. It is only a matter of time to free up resources for the development of 4G and 5G. However, the length of this time is often difficult to predict. The length of this process can be seen from the services currently carried by the 2G network.

In recent years, in addition to supporting voice services, another popular service of 2G networks is the Internet of Things. Public data shows that by the end of 2017, China Mobile's number of IoT connections was 229 million, and its goal is to exceed 320 million in 2018; China Unicom's number of IoT connections exceeded 70 million, and there is no doubt that it will exceed 100 million in 2018. The two operators only announced the total number of connections, and did not disclose the proportion of different networks, but according to industry feedback, most of these connections are achieved through their 2G networks.

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Looking at the voice services of operators, by the end of May, China Mobile had more than 670 million 4G users. However, since its 3G cannot effectively carry voice services and the number of VoLTE users is limited, most of China Mobile's users' voice services are still realized by the 2G network. Therefore, voice has become the most important service carried by China Mobile's 2G network; however, the more than 200 million IoT terminals are also a number that cannot be underestimated, constituting the second largest service carried by China Mobile's 2G network. On the other hand, China Unicom, since its WCDMA network can carry voice services, users do not need to switch to the 2G network for voice calls, which greatly reduces the proportion of its 2G users. Although there is no exact data on its 2G users, it can be predicted that with the development speed of the number of IoT connections, the IoT has become or will soon become the largest service carried by China Unicom's 2G network.

Although operators are currently accelerating the construction of NB-IoT networks and have started eMTC pilots, the replacement effect of 2G networks has not yet emerged in the short term. 2G is facing a dilemma. The author has analyzed this. Due to the existence of a large number of IoT services and the long cycle of IoT services, the speed of 2G network withdrawal is very slow. Rapid withdrawal affects the normal use of existing IoT users, while if the network is not withdrawn, it will have to carry the growing number of IoT connections. The massive number of IoT connections makes it difficult to reverse the situation. Due to the special development history of China's mobile communications industry and IoT, domestic operators, especially China Mobile, face a more complicated situation in the withdrawal of 2G networks, while foreign countries are relatively simpler. As early as several years ago when there was no large-scale demand for IoT, many overseas mainstream operators had already started to reduce the frequency of 2G networks and withdraw from the network. Now they can calmly deploy NB-IoT/eMTC networks to carry IoT services.

The existing advantages of 2G networks attract rapid growth in IoT connections

Since the launch of the first GSM network in Guangdong at the end of 1994, the 2G network has been around for more than 20 years. In particular, China Mobile's construction and operation of the 2G network has made it the world's best network. This network not only provides ubiquitous call services, but also has a strong appeal to the Internet of Things business. From the perspective of the Internet of Things alone, China Mobile's 2G network has many advantages in supporting the Internet of Things business:

First of all, network coverage. In more than 20 years of operation, the coverage depth and breadth of 2G networks are the best in the world. In addition to all densely populated areas, China Mobile has also achieved network coverage in a large number of remote areas due to corporate social responsibility and special needs. In many remote areas where IoT terminals need to be deployed, there is China Mobile's 2G network coverage. In the short term, other cellular networks, including NB-IoT, will find it difficult to reach the coverage depth and breadth of 2G networks, so it has become the main way for users to choose IoT channels.

The second is the maturity of the industry chain. Although many 2G network devices are slightly outdated, the 2G-based IoT industry ecosystem is already very mature. After more than ten years of development, hardware such as chips and modules have met industry expectations in terms of reliability and cost. For example, the cost of a 2G module is only a dozen yuan, which is ready for large-scale adoption.

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The third is network charges. From the user's perspective, the current 2G package charges are very low. In many cases, operators adopt a traffic pool approach for IoT services. For many customers with low-frequency use and small traffic packages, the average price per terminal per year may be as low as 2-3 yuan. High-frequency and large traffic packages also have corresponding preferential charges, which are basically within the range that the user can afford. From the operator's perspective, since the initial investment cost of the 2G network has long been recovered, if we only calculate the cost-benefit of 2G, carrying IoT services is entirely incremental revenue. The author has also discussed this in the article "When will the price of NB-IoT modules drop below 20 yuan?"

Due to the advantages in network coverage, industry chain maturity, and tariffs, a large number of IoT users choose 2G, a network originally designed to serve people, as their IoT network. It is estimated that the number of IoT connections carried by domestic operators' 2G networks is increasing at a rate of 20 million per month. The growth rate of IoT users is likely to exceed the number of mobile phone users who have left, and the 2G network is very attractive.

Migration and bootstrapping: It won’t happen overnight

Of course, many industry experts point out that a considerable number of IoT users only regard 2G networks as pure pipelines and lack the design and adaptation for the coordination of networks and business models. In addition to providing pipeline functions, NB-IoT will also combine the needs of different industries to conduct business model analysis and design, bringing more value to users.

Comparing the growth rates of 2G IoT connections and NB-IoT IoT connections, NB-IoT is unlikely to replace 2G in the short term, and long-term IoT services will not migrate from 2G networks. In fact, there is no difference in the effect of a large number of IoT business needs using 2G or NB-IoT connection solutions, and rational users generally choose the former due to 2G's inherent coverage, industry chain maturity, and network tariff advantages; of course, there are also a large number of businesses that have more obvious advantages after using NB-IoT, and at this time, users need to be guided.

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In my opinion, the industry should first vigorously expand those applications where NB-IoT has a significant effect over 2G, and ensure the number of NB-IoT terminals through policy guidance, demonstration projects, subsidies, etc. With the trial and commercial use of eMTC networks, more business scenarios have been expanded to support voice, mobility, switching and other features, which can also bring a certain number of connections.

Of course, whether it is NB-IoT or eMTC, the easiest to promote are the application scenarios that are difficult for 2G itself to achieve. In order to form a large-scale substitution effect on 2G, it is still necessary to form advantages over 2G in terms of basic characteristics such as coverage, industry chain maturity, and tariffs. This process cannot be achieved in a short period of time. Although operators have completed the construction of hundreds of thousands of base stations, it still requires long-term and extensive network optimization and maintenance work to achieve deep coverage. The maturity of the industry chain and the substantial reduction of tariffs also take time, just like these advantages of 2G have been formed over many years.

3GPP has decided to include NB-IoT, eMTC and their evolution into the 5G low-power large-connection family, providing a long-term evolution process for low-power cellular Internet of Things. Similarly, NB-IoT/eMTC replacing 2G will also be a long-term evolution process.

In the past 20 years, we have built the world's largest 2G network and have carried the largest number of IoT connections in the world. In the future, cellular IoT based on NB-IoT/eMTC will gradually replace this 2G network. Can it continue to write a legend and become the world's best IoT network?