• The value of the IoT connectivity sector grew by 16% in 2023
• But it’s still only moving the needle for a small number of large mobile operators
• 5G is yet to play a major role in cellular IoT, but RedCap could change that

The internet of things (IoT) sector has long excited the mobile operator community, which for many years envisaged incremental machine-to-machine connections, revenues and new business opportunities by using their infrastructure and support systems to connect and help manage IoT devices. That dream has only become a reality for a select number of large operators, but RedCap offers new hope not only for the development of an IoT business but also as an example of that much sought-after prize, the 5G business opportunity.   

As a reminder, 5G RedCap stands for 5G reduced capability – and, perhaps equally,  ‘enhanced capability IoT’ – so you probably need to give it some attention if you haven’t already done so. It is a fully fledged 5G standard, having been included in the 3GPP Release 17 specifications.

The GSMA, Ericsson and other industry worthies are setting great store by RedCap’s ability to ferret out a new service tier in IoT, one that can sit somewhere between low-speed wide area network solutions and full-fat 5G, with capabilities thought to suit specific IoT applications at lower than the normal 5G data connectivity speeds (but far faster than regular IoT), as well as downlink connectivity at up to 150Mbit/s and uplink speeds of up to 50Mbit/s. Along with this, RedCap claims to offer reduced complexity, lower power consumption and enhanced spectrum efficiency compared with existing IoT standards, while maintaining 5G’s improved latency and reliability.

From a telco perspective, RedCap offers another way of slicing and dicing 5G (and ultimately 6G) spectrum, spreading it more thinly at lower pricing. Thus, stripped of many of its ‘full-fat’ features, it is less likely to cannibalise regular 5G services. 

At the same time, such is the flexibility promised by the evolving mobile core, that any missing features and network functions could conceivably be re-supported if demanded, perhaps as ‘Increased Reduced Capability’, without compromising the integrity of the firmware in the RedCap-supporting IoT devices and wearables.

And it’s gaining traction with network operators: Last month, e& United Arab Emirates (UAE) teamed up with Ericsson to conduct “a successful end-to-end verification of the reduced capability (RedCap) software solution on the service provider’s 5G Standalone (5G SA) network, expanding the ecosystem for new types of devices that can be connected to 5G,” according to the vendor. “This marks the first implementation of Ericsson’s RedCap solution in a commercial network in the Middle East and Africa region (MEA),” it added.

Such developments offer opportunities for mobile operators and IoT device manufacturers looking for the next wave of growth. The team at ABI Research expects devices in remote monitoring and control, video surveillance and security, and fixed wireless terminals to be the first to migrate to 5G RedCap: Between 2024 and 2029, approximately 50 million RedCap module shipments are forecast across these application segments, equating to 58% of the IoT RedCap market, the research firm noted recently.

“RedCap is mostly considered as a replacement technology, to provide an affordable migration pathway from [4G] LTE,” according to Jonathan Budd, industry analyst at ABI Research. “5G RedCap is drawing interest across the IoT value chain, with video surveillance and fixed wireless terminal routers and gateways dominating the first device launches in 2024. Devices with lifecycles upwards of eight years are more likely to migrate to 5G RedCap in the near term. Doing so allows manufacturers to future-proof their devices, offsetting some uncertainty surrounding 4G network longevity. There is also strong interest in 5G RedCap from auto OEMs [original equipment manufacturers] in China and Europe to connect entry-level vehicles,” added Budd. 

And what’s the state of the overall cellular IoT market? According to Berg Insight, which specialises in IoT sector research, global IoT connectivity revenues increased 16% to reach €12.4bn in 2023, when global cellular IoT connections reached 3.3 billion: It expects those numbers to increase to €21bn in revenues and 6 billion IoT devices connected to cellular networks by 2028. The Berg Insight team also expects that RedCap will “accelerate the adoption of 5G in IoT” in the coming few years. 

And which mobile operators are leading the way in cellular IoT? The top-10 mobile operator IoT players accounted for a combined active base of 2.9 billion cellular IoT connections at the end of 2023, some 88% of the global total, according to Berg Insight. China Mobile is the top market with 1.32 billion cellular IoT connections, followed by its domestic peers China Telecom (527 million) and China Unicom (494 million). “Vodafone ranked first among the western operators and fourth overall with 184 million connections, followed by AT&T with 128 million in fifth place. Deutsche Telekom and Verizon had in the range of 50 million to 57 million cellular IoT connections each. Telefónica, KDDI and Orange were the last players in the top 10 with about 41 million, 40 million and 37 million connections respectively,” noted the Berg Insight team. 

– Ian Scales, Contributing Editor, TelecomTV