LPWA: Established operators need to rethink their strategy or risk failure

Tom Rebbeck, research director - digital economy, Analysys Mason

Low-power, wide-area (LPWA) networks are a hot topic among telecoms operators. All of the major established telecoms operators are experimenting with various forms of this new technology. However, many of these efforts risk failure, unless these operators take a new approach. To benefit from this disruptive technology, companies need to accelerate commitments and structure their organisation to match the opportunity. This article builds on Clayton Christensen’s thinking on disruptive technology to illustrate how telecoms operators can use LPWA technology to their advantage.

The innovator’s dilemma – operators are slow to commit to LPWA because they are uncertain about its potential

In his book, The Innovator’s Dilemma, Clayton Christensen describes how new technology has disrupted many industries and established companies have failed to react as ably as smaller start-up companies.

The development of LPWA networks fits many of the conditions described by Christensen.

  • “The larger and more successful a company becomes, the weaker the argument that emerging markets can remain useful engines for growth”. LPWA could generate connectivity revenue of just USD1 per connection per year. This is likely to seem too small to be worthwhile for telecoms operators that earn billions of US dollars in revenue per year from existing business. Even if established players launch LPWA, scepticism about the market potential within the business may undermine these efforts, for example if the product development or marketing support that it needs are denied. The counter argument is that LPWA networks may open entirely different, new markets, which could involve billions of devices. With the right support, investing in LPWA could give established players more options in the future.

“Incumbent firms are likely to lag in the development of technologies that only address customers’ needs in emerging [opportunities]”. Again, this can be applied to LPWA networks. Operators have concentrated on migrating to 4G, driven by the needs of mobile handsets, while the demands from new markets are given less priority (see Figure 1).


  • “The essence of the attacker’s advantage is the ease with which entrants, relative to incumbents, can identify and make strategic commitments”. For a smaller company, like SIGFOX in France, exploiting a disruptive technology is simpler than for larger players, such as major telecoms operators. Start-up companies do not have revenue from a legacy business and are therefore excited about new revenue opportunities, even if they are (initially at least) relatively small. Perhaps more importantly, start-up companies can focus on what these new markets require. They are not focused on moving to the top right of Figure 1.

Established operators can make LPWA work if they respond correctly

Christensen provides recommendations for how established companies should respond to new disruptive technologies. Again, these can be applied to LPWA.

  • “In disruptive technologies, there are strong first-mover advantages”. Christensen argues that when dealing with disruptive technologies, established players should not assume that they will be able to catch up when the new market has been proven. To benefit from the disruptive technology, the established player needs to be an early adopter.
  • “Match the size of the organisation to the size of the market”. Christensen advises companies to set up separate divisions that will get excited about the opportunity, rather than trying to chase the opportunity using legacy structures. A USD10 000 contract is small for an established player, but a major contract win for a start-up. Rather than launch LPWA services as part of the core enterprise team, operators should consider creating a separate division or company to pursue the opportunity.
  • “The popular slogan ‘stay close to your customers’ appears not always to be robust advice”. Christensen suggests that rather than focus on the needs of current customers, who will probably want more performance from existing products, companies should search out new opportunities from different types of customer.

Few established telecoms operators are following this advice in terms of their approach to LPWA. Only a small number are early adopters of LPWA. Of those that have launched a network, only Telkom in South Africa has placed it in a separate division and its LoRa network is operated by its FastNet division (a company of 200 people compared to 20 000 in the parent). Many operators have separate M2M teams, but these teams may not have the required autonomy or independence to build and exploit a new type of network. Equally, most operators, when faced with a choice between meeting the needs of existing customers or investing in LPWA, are choosing the former (that is, most operators would invest an additional EUR10 million in 4G upgrades rather than LPWA).
The potential opportunity for LPWA is huge and could be greater than traditional cellular in terms of numbers of connections. That said, it is emerging new market that is full of uncertainty. Operators that are bold and willing to support LPWA with the requisite resources could find themselves well positioned to exploit this opportunity. For other established players, making a delayed commitment or making LPWA fight against the core business for resources, are likely to see their efforts fail.

The author of this blog is Tom Rebbeck, research director – digital economy, Analysys Mason

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