This draft opinion involves two issues: one is which IoT technology route is more suitable, and the other is whether it is reasonable to intervene in market competition through administrative means.
Reporter: Zhou Yuan / Editor: Xie Lirong
“Sometimes, what defeats you may not be new technology, but just a document.” Jack Ma, Chairman of Alibaba Group, once lamented in public. In the past month, at least a hundred executives from IoT companies in China have resonated with Ma’s words.
On December 13, 2017, the Radio Administration of the Ministry of Industry and Information Technology published the “Technical Requirements for Low-Power Short-Distance Radio Equipment (Draft for Comments)” (hereinafter referred to as the “draft opinion”) on its official website, with the comment period ending on December 15. The Radio Administration (hereinafter referred to as “the Administration”) is a professional institution responsible for the allocation and regulation of radio frequencies.
This draft, which seems quite obscure to outsiders, contains a provision that stipulates that the “470M-510MHz” frequency band is limited to “single frequency point use and cannot be used for networking applications.” This provision has caused a huge uproar—many industry insiders told the reporter that “it has cut off the lifeline for thousands of domestic LoRa companies.”
Currently, there are no official statistics on how many LoRa companies exist in China, but several professionals in the LoRa camp have indicated that the number has exceeded ten thousand, although most are still small in scale.
The IoT products and technical solutions of these companies are all based on the premise of “networking”. Large companies like China Resources Gas and PetroChina, which have already deployed LoRa IoT solutions, may face the embarrassment of their initial investments going to waste.
In the IoT industry, there are various wireless communication technology routes such as LoRa, NB-IoT, and SigFox, with LoRa and NB-IoT being the mainstream, giving rise to two major technical camps. Many LoRa supporters told the reporter that LoRa, having developed earlier and operating in unlicensed frequency bands, has been chosen by many small and medium-sized enterprises and startups, while the three major operators and Huawei represent the NB-IoT technical camp.
Since NB-IoT technology does not require networking and is not constrained, the Administration’s draft has been interpreted as the government supporting the interests of NB-IoT stakeholders. LoRa supporters have publicly questioned “government intervention in market competition” and privately hinted to the reporter that “Huawei is behind the scenes pulling strings.” However, a third-party IoT expert told the reporter that while there is no absolute superiority or inferiority between the technologies, the strength of the industrial chains of NB-IoT and LoRa may significantly affect the direction of China’s IoT industry, and the government has its long-term considerations.
On January 16, the Administration, which was at the center of public opinion, published the “Q&A on Low-Power Short-Distance Radio Equipment,” conveying the core message that IoT businesses that have “already started” and “will start in the future” can continue as long as they comply with existing policies and regulations.
A survival crisis that has kept thousands of IoT company executives awake at night can be said to have been temporarily resolved. However, many LoRa supporters told the reporter that this “reassurance” is of limited effect because the series of measures from the Administration indicate that revising the existing spectrum policy is on the agenda, but how and when the new policy will be formulated remains unknown, which will also prompt future IoT players and users to more cautiously assess the policy risks when choosing LoRa.
Panic and Self-Rescue
“If the final revised draft is formulated as per the draft opinion, we will lose about 40 to 50 million yuan a year,” said Zheng Fu, Chairman of Liaoning Sikai Technology Co., Ltd., to the reporter.
Liaoning Sikai is a leading company in China designing and manufacturing smart water meters, gas meters, and heat meters, with annual revenue of over 200 million yuan. Zheng also stated that there are about 100 similar companies in the domestic water meter industry, and these companies will face a significant reduction in revenue just like Liaoning Sikai.
More IoT company executives told the reporter that since their core business is affected, it is a matter of “survival or extinction” for them.
A chairman of an IoT company with an annual revenue of around 50 million yuan revealed to the reporter that they had just received a 50 million yuan order from a local government last year—based on LoRa technology to build a smart city locally, and the project is currently underway, with half of the planned 200 LoRa base stations already constructed. “Now the client doesn’t know, but if they find out, it will definitely affect the acceptance.”
He said that if the final policy still prohibits networking in the 470M-510MHz frequency band, they will exit the IoT industry because “there’s no way to make money anymore.”
In addition to different technical standards, another difference between NB-IoT and LoRa is the types of players in the industrial chain they accommodate.In the NB-IoT industrial chain, operators are responsible for building the NB-IoT network, while Huawei (including ZTE) provides NB-IoT chips, NB-IoT modules, and core network equipment. Other players mainly focus on IoT terminal and application development, but apart from some very intelligent IoT terminals, many IoT terminals are various sensors, with the high-end market controlled by foreign manufacturers, and the low-end market being price-transparent with thin profits, making it generally unattractive.
LoRa is different; LoRa solution providers will independently set up a network locally (also known as “small wireless”) to connect hundreds or thousands of IoT terminals, but ultimately still need to rely on the operator’s network to aggregate data in the cloud. The relationship between LoRa networks and operator networks is similar to that between a home WiFi network and an operator’s network.
However, this “small wireless” network uses LoRa base stations and even LoRa’s own core network. In other words, LoRa companies have the opportunity to enter the IoT device provision and operation market (many small IoT operators have already emerged abroad), which is where the lucrative profits and new business opportunities lie, thus quickly attracting a large number of companies.
This draft from the Administration has awakened the dreams of LoRa companies, which hurriedly banded together for “self-rescue,” providing feedback and exerting pressure on the Administration in various ways.
On January 9, the director of the Administration, Xie Yuansheng, led a team to meet with Semtech Corporation from the United States. The LoRa technology is patented by Semtech, which grants more companies the right to manufacture LoRa technology chips through IP licensing, similar to ARM’s IP licensing.
Relevant institutions estimate that from 2013 to the end of 2017, the cumulative shipment of LoRa chips in China exceeded 10 million.
On January 11, over a hundred core executives from IoT companies across the country gathered at a hotel in Beijing to discuss and vote on a “ten-point consensus” regarding the draft opinion, which was then fed back to the Administration. As one of the invited media, the reporter witnessed the entire discussion process.
In addition, some articles interpreting the draft opinion began to appear in the market, with some articles being authored by LoRa supporters, but most were relatively restrained, mainly explaining the value of LoRa from a technical perspective.
The Government’s Intentions
“We must first clarify the government’s intentions.” At the aforementioned “ten-point consensus” meeting, a representative repeatedly emphasized this. However, regarding the government’s intentions, LoRa practitioners only have various speculations and have not formed a unified view.
Many are angry. They believe that “Huawei is pulling strings, influencing the experts of the Ministry of Industry and Information Technology,” but none of them can provide evidence.
Huawei is “caught in the crossfire” because it is indeed the main promoter and beneficiary of NB-IoT. It can be said that Huawei proposed and facilitated NB-IoT to become a 3GPP international standard. From the government’s perspective, this means that China occupies a core position in the global IoT standard field and has gained a leading role.
Moreover, Huawei’s NB-IoT commercial chip shipment capacity has reached millions, while LoRa chips are held by foreign companies.
Although LoRa supporters have cited many technical details to prove that the safety and reliability of LoRa chips are not a concern, the national expectations and investments in the domestic chip industry have continued for many years and are increasing. For example, the reason why Tsinghua Unigroup has been able to make significant investments and acquisitions in the chip industry multiple times is due to government support.
Operators also have the motivation to support NB-IoT because NB-IoT can be integrated with the operators’ existing cellular network base stations, thus protecting their investments.
Currently, China Telecom has announced the establishment of the world’s most widely covered NB-IoT network, achieving upgrades for 310,000 base stations; China Unicom has launched NB-IoT pilot projects in more than ten cities including Shanghai, Beijing, Guangzhou, and Shenzhen, expecting to support tens of millions of connections by 2018; China Mobile is conducting off-site tests for NB-IoT and eMTC.
Many LoRa supporters believe that the government’s support for NB-IoT is well understood, and it is reasonable for operators and Huawei to promote NB-IoT, but using administrative means to “intervene in market choices” is still unacceptable to them.
ZTE Clou is the largest LoRa industry alliance in China, initiated by ZTE Corporation in January 2016, with more than 1,000 formal members. A general manager of a major member unit of this alliance told the reporter that he had communicated with experts from the Administration in 2017, “At that time, the conversation went well, but I didn’t expect such a document to be issued in the end.”
“Technology should flourish, allowing users to choose for themselves. We are puzzled as to why the government still uses administrative means to make choices for the market today,” Zheng Fu said.
In terms of technology itself, all interviewees stated that both NB-IoT and LoRa have their strengths and weaknesses, each suitable for different scenarios, representing a relationship of competition and complementarity.
The reporter contacted the Administration immediately, and they stated that they are still in the stage of collecting and researching opinions and will gradually respond to questions through public documents. Huawei also declined the reporter’s interview request.
However, a third-party expert studying IoT standards and technologies analyzed to the reporter that this draft opinion involves two issues: one is which technology route is more suitable for the development of IoT? The other is whether it is reasonable to intervene in market competition through administrative means?
He believes that if IoT is to be built for large-scale commercial applications, theoretically, a unified network infrastructure based on NB-IoT is the most reasonable, fastest, and best model, with high reusability and controllability in the later stages. Just like the construction of the internet, operators build the backbone network, providing unified access, and connecting to the enterprises’ own data centers, with the public network model dominating, while enterprises building local area networks is only a supplement.
However, the current situation is that NB-IoT started late, and the NB-IoT network is still under construction, with its overall commercialization level not as high as that of LoRa.
LoRa, especially, makes competitors wary because it supports self-organizing networks, quickly forming private island-style IoTs for enterprises, and may also create an independent LoRa network covering the entire country, thus becoming the mainstream IoT faster than the NB-IoT network.
This does not seem to be a baseless guess. At the end of 2016, LoRa chip company Semtech and Dr. Peng Telecom Media Group jointly announced plans to deploy a nationwide LoRa network in China. Dr. Peng plans to deploy the LoRa network on 10,000 base stations in over 200 cities already covered by the network, providing IoT services for over 100 million users, which will also become the largest commercial LoRa network in the world.
Yuhongbiao, General Manager of NPLink, is not optimistic about the prospects of expanding the LoRa network. “Do you think the state is at ease handing over the operation of the foundational network to privately operated companies?” he retorted to the reporter.
NPLink is a subsidiary of Xiamen Julong Software Company, which mainly engages in IoT business. Yuhongbiao participated in the “ten-point consensus” seminar but belongs to the dissenting faction.
The aforementioned IoT expert believes that while the means of national administrative intervention may not be reasonable, the current time window is quite sensitive. “Restrictions may be the most effective way,” he said.
The LoRa support camp naturally scoffs at such views; they believe in market competition, oppose planning and monopoly, and argue that the history of supporting the domestically developed 3G technology TD-SCDMA ultimately failed.
An industry insider who has experienced the development process of TD-SCDMA and is currently witnessing the development of the IoT industry stated that such industrial policies that rise to the level of planning versus market disputes are hard to say who is more justified; it is all “butt determines the brain.”
Returning to the controversial 470M-510MHz frequency band, Yuhongbiao and another professor from the University of Posts and Telecommunications believe that aside from the aforementioned speculations, the Administration’s draft opinion has its professional considerations.
The 470M-510MHz frequency band is an unlicensed band (i.e., it can be used as long as certain power requirements are met), which is favored by LoRa practitioners because it is “clean and has a wide spectrum.” The ZTE Clou Alliance also recommends using this frequency band.
However, the radio frequency spectrum is a national resource and a limited resource that cannot be regenerated and must be used reasonably and limitedly.
“The Administration’s starting point is to solve the background noise problem in the 470-510 frequency band, and they do not want to see everyone acting recklessly on this frequency point, preventing this frequency band from being overused in a few years,” Yuhongbiao said.
The Storm Temporarily Calms
The LoRa camp’s collective “self-rescue” has indeed been effective: on January 16, the Administration published the “Q&A on Low-Power Short-Distance Radio Equipment,” which can be seen as an emergency reassurance.
Regarding this response, Deng Yuping, Product Director of Guomindang Technology, commented to the reporter, “To some extent, it is helpful, but it does not provide a direct response.”Guomindang Technology Co., Ltd. (300077.SZ) is a company mainly engaged in low-power security chips and RF chips, with some products applied in the IoT industry.
Many LoRa supporters expressed the same view to the reporter.
They believe that “it is somewhat helpful” because it affirms that “already started” and “future IoT businesses” can continue as long as they comply with existing regulations. This means that their existing businesses will not be “killed by policy.”
However, “not providing a direct response” refers to the fact that the Administration did not address some core issues, such as how to define “networking” and whether a dedicated IoT frequency band can be allocated (according to existing policies, the 470M-510MHz frequency band is used for metering devices, and there is no dedicated IoT frequency band, which means LoRa players are actually skirting the edges). These issues will determine the future development of Sub GHz technologies, including the LoRa technology camp, and the strength of LoRa directly relates to the future of NB-IoT.
The Administration has not disclosed when new policies will be introduced, which leaves those involved with an ungrounded “shoe dropping.”
This has caused some concern. A general manager of an IoT company is most worried that clients may think the government might abandon LoRa from now on. “I even suspect this is a deliberately staged play to buy time for NB-IoT,” he said, somewhat dejected.
Beyond policies, whether LoRa or NB-IoT, the next three years are a critical time window.
The immediate priority for the NB-IoT camp is to accelerate their pace. The Ministry of Industry and Information Technology has already issued a document urging this: In June 2017, the Ministry released a notice on comprehensively promoting the construction and development of mobile IoT (NB-IoT).
The notice requires that by the end of 2017, NB-IoT network coverage should be achieved in municipalities and provincial capitals, with a base station scale of 400,000; by 2020, the NB-IoT network should achieve nationwide coverage, providing deep coverage for indoor, traffic networks, underground pipelines, and other scenarios, with a base station scale of 1.5 million.
The aforementioned IoT expert believes that NB-IoT practitioners need to work hard to attract industry users to adopt the NB-IoT network rather than building their own networks.
LoRa practitioners believe that the future focus should not only be on conquering cities.
At the “ten-point consensus” meeting, a corporate representative stood up and lamented: “Our IoT companies are all small; we used to fight alone, scattered. In the future, we need to unite and influence the policymakers more.”
(This article was first published in the January 22, 2018 issue of Caijing Magazine)
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