TSW ALPHA – Optimized Connectivity Solutions

The future of connectivity: Enabling the Internet of Things

With new connectivity technologies unlocking opportunities along the IoT value chain, companies must create detailed plans to harness their potential.


The Internet of Things (IoT)—the network of connected “smart” devices that communicate seamlessly over the Internet—is transforming how we live and work. At farms, wireless IoT sensors can transmit information about soil moisture and nutrients to agricultural experts across the country. IoT alarm systems, equipped with batteries that last for years, provide homeowners with long-term protection. Wearable fitness devices—for both people and pets—can monitor activity levels and provide feedback on heart rate and respiration. Although these applications serve different purposes, they all share one characteristic: dependence on strong connectivity.Stay current on your favorite topicsSubscribe

IoT stakeholders seeking connectivity solutions include radio and chipset makers, platform vendors, device manufacturers, and companies in various industries that purchase IoT-enabled products, either for their own use or for sale to the public. These companies can now choose from more than 30 different connectivity options with different bandwidth, range, cost, reliability, and network-management features. This wide variety, combined with constantly evolving technology requirements, creates a quandary. If stakeholders bet on one connectivity option and another becomes dominant, their IoT devices, applications, and solutions could quickly become obsolete. If they hesitate to see how the connectivity landscape evolves, they could fall behind more aggressive competitors.

Cellular 5G networks—now being refined—might eventually become a universal solution for IoT connectivity. Although some global telecommunications networks and industrial applications now use 5G, this technology will not be widely available for at least five years, because of high development and deployment costs. With annual economic benefits related to the Internet of Things expected to reach $3.9 trillion to $11.1 trillion by 2025, companies cannot afford to defer their IoT investment until 5G arrives.

To help business leaders identify the connectivity solutions that best meet their current needs, we analyzed 13 sectors, including automotive, manufacturing, construction, and consumer, where IoT applications are common.1 In each sector, we focused on connectivity requirements for likely use cases—in other words, the tasks or activities that may be most amenable to IoT solutions. We then identified the most relevant connectivity solutions for each one. In addition, we examined business factors that may influence how the connectivity landscape evolves, as well as the elements of a strong connectivity strategy.

A vast assortment of connectivity offerings

When contemplating their options for IoT connectivity, companies must choose among solutions from four categories: unlicensed; low power, wide area (LPWA); cellular; and extraterrestrial. Companies may find it difficult to choose among these technologies because each IoT use case presents unique requirements for bandwidth, range, and other connectivity features. LPWA options are also difficult to evaluate because they are still in the early stages of deployment, and their full potential and drawbacks will not become obvious until they are implemented on a greater scale.

Unlicensed connectivity solutions

These solutions are not exclusively licensed to a particular company, allowing the public to access them on any IoT device that uses this technology. Unlicensed solutions are relatively inexpensive and allow businesses to manage their own networks, rather than relying on a mobile operator to do so. On the downside, unlicensed technologies are vulnerable to interference from electrical or environmental obstacles, such as a large number of buildings that may interfere with signal transmission. They also face difficulty providing connectivity over long distances (more than 100 meters). Companies have various options for unlicensed connectivity, all of which have distinct features. For instance, Wi-Fi—perhaps the most well-known unlicensed option—has bandwidth of up to one gigabyte per second. That is higher than the bandwith for Bluetooth, Zigbee, and Z-Wave.

Low-power, wide-area connectivity

LPWA technologies are relatively new. As their name implies, they have two characteristics:

  • Low power. They can allow devices to operate for years, assuming that they collect and analyze data hourly and factoring in the typical impact of battery self-discharge and degradation.
  • Wide area. These technologies deliver at least 500 meters of signal range from the gateway device to the end point. Coverage is lowest in challenging deployment environments, such as urban or underground locations.

In addition to providing long battery life and extensive range, LPWA technologies are reliable and associated with low costs. No other technology offers these four characteristics in combination. For instance, unlicensed technologies are unreliable, while cellular technologies are expensive and cannot provide power for multiple years on a single charge. Thus, LPWA fills an unmet need in IoT connectivity.

Only 20 percent of the global population is now covered by LPWA networks, so they cannot become the default solution within the next five years, but their availability is growing rapidly. By 2022, we expect that most IoT applications will use LPWA networks, which will make connectivity choices less confusing. (5G will still not be widely available at that point).

Some companies have developed proprietary LPWA technologies, including Ingenu (formerly On-Ramp Wireless), Link Labs, LoRa, Sigfox, and Weightless. The 3rd Generation Partnership Project, an organization that develops connectivity guidelines, is also working to standardize several nonproprietary technologies that are supported by many or all mobile-equipment, chipset, and module manufacturers. These include narrowband IoT (NB-IoT), which is the newest LPWA option and was specifically developed for the Internet of Things. Other nonproprietary technologies include LTE machine-type communications (user equipment categories 1, 0, and M), extended-coverage GSM (EC-GSM), and low-throughput networks.Would you like to learn more about how we help clients understand the Internet of Things?

Each LPWA technology has different advantages and implementation requirements. For instance, Sigfox manages its own networks, while LoRa is supported by more than 400 partners. NB-IoT relies on existing cellular infrastructure for the small pilots in which it is being tested. This will also be the case when NB-IoT becomes more widely available and is applied in larger-scale programs. Since the LPWA market is still in its early stages, it is difficult to predict which LPWA solution will emerge as the winner.

Cellular connectivity

Current 4G LTE technology offers high bandwidth of up to 100 megabytes per second and a large range of more than ten kilometers. Reliability and availability are also good. On the downside, 4G LTE technology is associated with high costs—several dollars or more for a module compared to less than a dollar for Wi-Fi. Cellular connectivity also has high power-consumption requirements, making it less than ideal for IoT applications, where battery life should extend over multiple years.

Companies can deploy 4G LTE connectivity over public or private networks. Public networks use the same connectivity infrastructure as mobile phones, while private networks segregate devices into a separate system by sublicensing unused frequencies from mobile operators with enterprise-owned infrastructure. Some companies in our analysis managed private networks, but most lacked the necessary capabilities and budget. This will also be the case within the wider population.

Extraterrestrial connectivity

This connectivity option includes satellite and other microwave technologies. IoT stakeholders generally use it only when cellular and fiber options are not feasible, since it has the highest costs. For instance, organizations within national defense may use satellite connectivity for unmanned drones. Extraterrestrial options have low-to-medium bandwidth, high range, and medium-to-high reliability and availability. Only a few industries rely on extraterrestrial connectivity for IoT apps.

Exhibit 1 summarizes the different categories of connectivity solutions.Exhibit 1https://view.ceros.com/mckinsey/iot-connectivity-bandwidth

Connectivity requirements across industries

While no connectivity solution is perfect, we were able to determine the most appropriate options for each industry by identifying the likely use cases in each sector. Many of these involved cost reduction and productivity improvement. For instance, companies in many industries value IoT solutions that reduce machine downtime by providing predictive maintenance, as well as those that give them better visibility into the supply chain and eliminate bottlenecks. There is not yet an IoT-based “killer application” for these services, or any other task, but one could emerge over the next few years as connectivity technology advances. That could increase both the volume and value of IoT.

Our research showed that connectivity requirements often varied by industry, even when the potential use cases were identical (Exhibit 2). For instance, predictive maintenance and operations optimization are potential IoT use cases for manufacturing, mining, construction, and oil and gas. Range and reliability requirements varied by industry, however, as did the willingness and ability to manage networks.

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