Amazon’s expansion of Sidewalk highlights a very different approach to IoT connectivity
Amazon is expanding its Sidewalk IoT network with the launch of a new device, the Amazon Sidewalk Bridge Pro.
It is a predictable, and relatively minor, expansion of Amazon’s plans for Sidewalk, and one that represents only a small threat to telecoms operators but it does show a very different way of approaching IoT connectivity.
Sidewalk is Amazon’s network for connecting low bandwidth IoT devices. It uses a version of LoRa. The set up is neat — a Sidewalk gateway is included in fourth generation Echo devices and switched on by default (consumers can opt out). The more Echos (Echoes?) Amazon sells, the bigger its network — Amazon gets a US IoT network but without having to pay for it. (A challenge for Amazon may be that the number of Echos is only slowing increasing — the future growth rate is only expected to be 1.2% [link].)
The newest device, the Sidewalk Bridge Pro, allows businesses to also add network coverage where they are no Echo devices (for example in business parks).
The official blog from Amazon about the Bridge Pro is here [link]. The announcement is also covered by Protocol [link] and this piece is worth reading by anyone interested in IoT networks. It covers the Bridge Pro gateway and also looks more generally into Amazon’s motives in developing Sidewalk.
Sidewalk is ‘free’, but may lock developers in to AWS
A few points from the Protocol article in particular are noteworthy:
“Amazon is making Sidewalk connectivity available for free, hoping that this will give it an edge over cellular-based networks.”
For comparison, Verizon’s IoT pricing plan, for NB-IoT, starts at USD1 per month (including 50KB of data) [link]. The threat to any service provider hoping to charge for connectivity is obvious.
Describing Sidewalk as free may not be completely accurate though — rather, it is bundled in with other AWS services. Businesses will also have to pay for the Bridge Pro gateway.
The Protocol column goes on to discuss why Amazon is using this model.
“So if Sidewalk connectivity is free, and the bridge isn’t meant to generate profits, either, what’s in it for Amazon?”
“the bigger benefit may come down to the thing almost everything comes down to at Amazon these days: the cloud. Sidewalk ties in with AWS IoT, and Landi said that thousands of developers had already signed up to develop Sidewalk-powered apps and services. If a bunch of those developers ultimately rely on AWS, Sidewalk could ensure that Amazon’s cloud services will play a key role in the future of IoT.”
This may limit the appeal of Sidewalk’s ‘free’ connectivity. If the service only works with AWS’s cloud offering, or even, if the service is far easier to use with AWS, then the developer may find themselves (essentially) locked into AWS.
This is probably acceptable if they are committed to using AWS for the life of a service, but not if they want flexibility. Developers may not be willing to pay USD1 per connection (i.e. Verizon’s pricing) per month for flexibility, but will be some value in flexibility.
Free is also not necessarily what businesses want. They typically want a contract and a commitment that they will receive a certain level of service. If it is free, Sidewalk will not offer this.
If a developer is paying to use AWS’s cloud services and is also using Sidewalk and connectivity stops working, who does the developer turn to? Presumably some sort of paid enterprise grade Sidewalk is being considered. If it is not, it’s appeal may be limited. (Gmail exited Beta to help it attract more business users [link].)
AWS is breaking the per connection pricing model
Regardless of whether you view Sidewalk’s connectivity as free or not, it does break the per connection (or per SIM model) of telecoms operators. Possibly coincidently, Amazon’s Private 5G offering, announced in late November 2021 [link], also does not charge per connection (or per SIM).
Developers, who value the overall value of IoT as a system, probably want this. It is another challenge to operators though; their business is built on a per connection pricing model.
The risk to operators isn’t the loss of connectivity revenue
The Sidewalk network is intriguing. The cost of building and running the network is met by users, with many Echo owners presumably unaware that they are also acting as gateways for the network. The additional costs to Amazon of creating and managing the network should be extremely low, though the Protocol piece does suggest that Amazon may fund some network build:
“Amazon may even decide to foot the bill for the hardware if a site helps it to fill key coverage gaps.”
The link to the AWS services also means that it does not need a direct revenue model even to cover these extra costs. Amazon has a freedom to act that telecoms operators just do not have.
Despite this, it is hard to see Sidewalk as a major threat to the operator business — the revenue from IoT connectivity for low bandwidth devices is just too low to be meaningful to operators. Even if Verizon had 100m IoT connections sold at the list price of USD12 per year, it would be less than 1% of total annual revenue. (More realistically, NB-IoT connectivity will generate ~USD1 per year — at that level it is less than 0.1% of Verizon’s annual revenue.)
The risk to operators is that models, like Sidewalk’s, could close off the potential for operators to generate money from the higher value aspects of the IoT value chain.
