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China goes up a gear

China’s carriers compete vigorously to meet strong demand for the IoT

China and the internet of things (IoT) may be a match made in heaven. This week, China Telecom, the country’s leading fixed-line carrier, reported a 303% increase in IoT subscriptions in the year to June 30th. That suggests the Middle Kingdom’s IoT market is gaining new momentum as competition between its three major carriers intensifies.

China’s early global leadership in M2M (machine-to-machine) communications, and now the IoT, was largely driven by public policy. In an effort to expand the country’s intellectual property and alleviate the pressures of urbanization, the Chinese government has provided extensive funding for research and pilots of M2M and IoT solutions. But now the IoT concept has been proven commercially, the next phase of growth is being driven by competition between the three major telcos – China Mobile, China Telecom and China Unicom. Although all three are controlled by the state, they compete vigorously in most sectors of the cellular market. It seems like China’s distinctive managed market economy may be well suited to harnessing the potential of the IoT, which cuts across both the private and public sectors.

Although China Telecom didn’t reveal how many IoT connections it has, it surely still trails rival China Mobile by some distance. Earlier in August, China Mobile reported that it now serves more than 80 million IoT connections, up from 60 million connections at the end of 2015. By way of comparison, Deutsche Telekom reported that it served 5.57 million M2M connections in Germany at the end of June, up 31% year-on-year. The Germany-based telco is also pursuing the IoT with gusto, running trials of smart lighting, parking and safety solutions in Dubrovnik, Bucharest, Pisa and other European cities. In the first six months of the year DT “added 626,000 new M2M SIM cards in a very aggressively priced market. This growth was due to the increased use of SIM cards, especially in the automotive and logistics industries.”

Smart cities, surveillance and security

China, where urbanisation continues at a torrid pace, is also running extensive trials of smart city solutions as it three major telcos build out their 4G and fiber networks. China Telecom, in particular, seems to be targeting the public sector. It attributed the quadrupling of its IoT connections to the introduction of a “nationwide centralized and dedicated operation” in April 2016 and “breakthroughs in key industries, such as surveillance and security, public affairs and smart transport.” Moreover, China Telecom said it is running more than 100 projects providing “Internet + services” to three key sectors: government administration, healthcare and education.

China Telecom also revealed that it plans to refarm its 800 MHz spectrum to support voice over LTE (VoLTE) and Narrowband IoT (NB-IoT) services. NB-IoT is a new low power, wide area network technology that is specifically designed for connecting far-flung industrial and agricultural equipment, such as irrigation systems and energy meters. The carrier’s plans to use 800 MHz spectrum is also significant. In this low frequency band, radio signals travel relatively long distances and penetrate deep inside buildings.

Although China Telecom has fewer customers and fewer 4G base stations than China Mobile, it does have the advantage that it is using the same version of LTE as most other mobile operators worldwide, enabling it to tap economies of scale. China Mobile, on the other hand, was instructed by the Chinese government to use LTE with a time division duplex (TDD) modulation, which isn’t widely-used outside Asia. As a result, China Mobile may not be able to source IoT modules as cheaply as China Telecom. However, in its interim results presentation, China Mobile made a point of saying it has “facilitated the scale promotion of smart module products with competitiveness and low entry barrier.”

The third carrier in the Chinese market, China Unicom, is also trying to expand its IoT business. Reporting its interim results, Unicom said it is focusing on education, healthcare, automotive and government administration. It added that it is accelerating its trials of NB-IoT technologies.

Of course, China Mobile will respond to the growing IoT competition from its rivals by lowering prices and/or further enhancing its supporting services, such as data analytics and device management. In the future, the telcos may also need to offer sophisticated artificial intelligence capabilities as they increasingly come up against leading Chinese internet players, such as Alibaba and Tencent, which are pushing cloud-based services to help companies analyse and act on the data captured by IoT deployments.

But the Chinese market should be big enough and diverse enough for all these players to thrive: The sheer size and density of its population means the China has an acute need to manage resources and space as efficiently as possible.  China’s love affair with smart connectivity will only intensify.

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