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Prepare your business for the 2G/GSM network shutdown – Pt 1
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Prepare your business for the 2G/GSM network shutdown – Pt 1

Posted by Zenobia HegdeNovember 12, 2015

The current state of 2G/GSM Networks

As many of you are probably aware, cellular network operators around the world are planning to shut down their 2G networks to re-farm spectrum for more efficient 4G/LTE services.

In the USA, AT&T plans to shut its 2G network by January 1, 2017 , says James Mack of M2M One,. Singapore is one of the first countries in the world to have all 2G networks shut down at once with M1, Starhub and Singtel announcing a joint shutdown on April 1, 2017.

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Here in Australia, Telstra‘s 2G will be shut down on December 1, 2016, with Optus to following suit with their 2G network closure on 1st April 2017. This leaves only Vodafone Australia who has yet to express plans to discontinue their 2G service in Australia, with no official word from Vodafone many M2M/IoT players in Australia are hedging their bets and looking to migrate to 3G or 4G/LTE in anticipation.

Research firm Berg Insight theorise that globally 3G and 4G/LTE technologies will dominate cellular M2M communications by 2018. Pointing to the declining use of 2G by M2M developers in favor of 3G and 4G/LTE technologies, citing the greater reliability, coverage and speeds as the major drawing factor. LTE in particular delivers peak speeds of up to 100 Mbps allowing for faster transfers and better handling of more data intensive applications like video cameras or digital displays.

The majority of mobile networks that are shutting down 2G have plans to re-farm spectrum for additional 4G/LTE network capacity. The business driver behind this decision is that it consolidates and makes more efficient use of their networks resulting in lower operating costs, fewer networks to support, and frees up spectrum for faster more lucrative services.

So why is 2G so popular with M2M/IoT?

The closure of 2G networks has the largest impact in the M2M space with an estimated 70% of M2M devices worldwide still utilising 2G technologies. The major factor behind the prevalence of 2G devices in the M2M/IoT space is a simple one, cost.

Not as simple are the factors that make up the costs behind an M2M device:

Hardware Cost – The fact that 2G modems are less expensive than 3G modems should come as no surprise, it’s not very often that an older technology commands higher prices than it’s successor. The problem in the hardware space has compounded by the ‘Qualcomm tax’, due to the high volume of patents related to 3G owned by Qualcomm the price for 3G modules and modems has remained relatively static, and only recently as companies have got more economical with other elements and 4G/LTE development is ramping up, has the cost started to come down closer to 2G pricing.  This has meant that a lot of businesses that probably should have been developing with 3G technology 2 or 3 years ago have put it off to avoid raising prices. The problem now is that businesses have a much shorter development time frame due to the impending 2G shut down.

Lifecycle – M2M data needs are typically light compared to consumer applications that require the faster speeds and bandwidth of 3G and 4G/LTE so the lifecycle of a field device can be anywhere from 3-10 years compared to an average phone or tablet, which is replaced nearly yearly by most consumers.

Upgrade costs – The nature of most M2M devices is that they are deployed in either very remote areas and connected to mobile assets, in countries with large remote areas like Australia the cost of sending a person out to upgrade or change a device can be in the thousands, even tens of thousands of dollars.

Customer Perception – With customers conditioned to think that prices should come down over time, businesses working on a very thin margin have found themselves in a precarious position as the cost of deploying 3G increases their costs, but their customer base is unwilling to pay for what they feel is an ‘unnecessary’ upgrade. This has meant several businesses have decided to keep 2G technologies in place longer than their initial roadmap might have dictated.

 

The author of this blog is James Mack, general manager, M2M One

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Zenobia Hegde

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