March 2, 2020
5G/IOT – The Next Market Inflection Point? Can SPAC help?
Last month, the Federal Communication Commission (FCC) announced the full commercial operation of the 3.5GHz Citizens Broadband Radio Service (CBRS) for broadband and 5G applications. This important step of the FCC followed last year’s announcements of 5G auctions for various bandwidths across the mmWave spectrum for ultra-broadband connectivity, in addition to the establishment of a $9B fund available for the deployment of advanced 5G mobile services in US rural area. From the standardization point of view, the final major step, the 3GPP Release 16, which will bring the 5G system to its completion, is expected to be completed by June of this year. Industry leaders confirm that, in the next two years, we will see the real 5G infrastructure deployment for macro-cell towers and the small-cells with fully operational 5G in 2022-2023.
Based on the Ericsson data, 20M smartphones are already using today’s 5G connectivity and, a few weeks ago, football fans could watch the live the Super Bowl 2020 in the Miami stadium, recording the match and downloading it to family and friends at 1Gigabit per second by means of 5G-enables devices.
On the Internet of Things (IOT) front, we can also see rapid progress in the deployments, despite the challenges due to the complexity and the fragmentation of the eco-system. For the IOT to be successful, multiple stakeholders need to play their roles to support the various layers of the IOT architecture, like the Physical Layer (sensors, gateway hubs), the Network and Security Layer (cloud management, data storage), and the Application and Analytics Layer (pattern recognition and analytics tools, application control, dashboards).
For what concerns connectivity, IOT devices need to be treated differently in respect to consumer cellular devices. 4G-LTE was optimized for mobile consumers and not for an extremely large number of devices with low cost and low power consumption constraints, shorter range, and limited bandwidth requirements. A dedicated Low Power Wide Area Network (LPWAN) had to be developed for this scope with the release of 3GPP-sponsored platforms, like NB-IOT, LTE-M and LTE-CAT1, each of them supporting different speed, range and power requirement, and other proprietary solutions like LoRa and Sigfox.
Verizon was the first operator to launch LTE-M in 2018, AT&T followed just afterwards. T-Mobile took the lead in 2018 with the deployment of NB-IOT to contrast to its rivals. Today, all the Big 4s, i.e. AT&T, Verizon T-Mobile and Sprint, offer LTE-M and/or NB-IOT platforms. Sprint announced at the CES 2020 its latest generation of IOT Factory, a custom Plug&Play solution or “IOT in a Box” for small and medium business, aimed at solving the complexity issues of an IOT network implementation.
With such technologies already deployed, Ericsson reports today +40M connected devices for massive IOT application and +100 commercial networks in 40 markets, for applications such as Smart Cities, asset tracking, fleet management, supply chain management, wearables and drones. By 2026, 6 billion IOT devices are expected to be connected.
The 5G New Radio (5G NR), differently from 4G-LTE , was conceived since the beginning to manage communications for both mobile devices and billions of IOT devices, allowing a cost effective scalability and, at the same time, offering much greater bandwidth and lower latency, supporting more complex applications like VR/AR, automotive, smart grids, critical missions and advanced industrial automation.
The business opportunities that 5G and enhanced performance IOT networks will bring are unquestionable and, in most cases, still to be uncovered, considering that organizations will navigate through an uncharted territory with tools never available before.
Indeed, the possibility of monitoring 24/7, by means of IOT devices, of the consumers behaviors, usage and the state of domestic appliances, equipment, automobile, offices, facilities and so on, in combination with edge computing and high-performance data analytics, enabling on-site decision –making and reaction without man-in-the-loop, will pave the way to unlimited opportunities for monetization beyond standard conventional businesses, unleashing the creativity of marketing, business development and engineering teams. However, large scale IOT networks will also bring challenges like network vulnerability, with the need for enhanced security techniques at each layer and extremely large data management.
The companies that will embrace this transformation, making the right capital investment and exploiting such new technologies effectively and in a timely manner, will be able to ride the 5G wave successfully.
To this point, one example, which I find interesting as an indication on how new paradigms can bring unexpected changes in market trends, is the on-going evolution in the retail world. It has been common sense to think that, due to the success of e-commerce and online shopping, physical retail locations will disappear. It seems logical and it is a fact that a lot of stores went out of business in the last few years due to this trend, which is often dramatically referred to as a Retail Apocalypse. This January, Macys announced the closing of 30 stores across 19 states and the plan to add another 125 to the list within the next three years. JC Penney followed just few days ago with the announcement of the closing of six additional stores in addition to a total of 200 stores closed in the last 5 years.
Ironically, in the same month, Amazon announced the plan for opening new physical stores in New Jersey and Connecticut, in addition to the 500 already existing or planned Amazon stores, including 476 Whole Foods Markets, 26 Amazon Go convenience stores, and 22 Amazon Bookstores. Why?
Amazon is one of the most innovative technology-based companies continuously embracing evolutions and understands that the convergency of IOT, 5G and analytics/cognitive technologies will empower retailers to optimize and make physical stores more efficient and desirable than ever before, implementing a customer experience similar to the online shopping, transforming stores into smart environments with onsite digital marketing and other digital services by means of mobile devices.
Smart Stores will be able to complement the e-commerce part of the business, closing the gap between offline and online customer experience, by gathering more data on consumer behavior and preferences, integrating new digital marketing solutions, offsetting the continuous increase of logistics costs, and supporting online shopping returns.
Smart stores will give to the consumer the best of the two worlds: the frictionless experience typical of online shopping and the physical experience of the store, where customer can try or taste products, and hopefully meet real people and socialize! A feeling of what I am describing can be already enjoyed strolling around the futuristic store Re:STORE in San Francisco, as nicely described in a recent article by The Economist.
Therefore, we should expect that the so-called Retail Apocalypse is in reality a transitional phase towards a new concept of Brick and Mortar stores.
This kind of transformations, enabled by new connectivity technologies, are on-going in many other fields like automotive, agriculture, supply chain, marketing, security, finance, and so on.
CEOs, entrepreneurs and business leaders, facing an inflection point, will need to make hard decisions on strategies and implementations, in order to be ready to catch the coming new wave of opportunities. Either you are part of the 5G and IOT ecosystem and infrastructure, striving for a leadership role in the market, or you are looking to adopt such technologies and platforms to enhance capabilities in your present lines of business or to create entire new business models, the time to act is now. The range of strategies available to business leaders include organic investment in new skills, capabilities and technologies, implementation of strategic M&As to acquire enabling technologies or new businesses, and/or creating solid partnership within the ecosystem.
This is where a PPETM/Special Purpose Acquisition Company (SPAC) becomes an attractive tool for the innovative and creative business leaders. The advantages of a PPETM/SPAC vs standard IPO or Direct Listing are extensively explained in clear and elegant way by GigCapital’s team in various publications. While I invite the reader to explore and learn more about the SPAC platform and the unique advantages of working with the GigCapital team by browsing through our website and some of our white papers, I would like to mention two main advantages critical within the context of this blog:
- Straightforward access to public capital market with shorter process respect to traditional IPO, critical since it empowers business leaders to implement their M&A and investment strategy fast and with minimum management distraction.
- Retention of management control and leverage of experienced SPAC management team.
As a founder and the CTO of a semiconductor company, I carry the scars and the pain of growing an organization in a highly competitive environment with continues technology evolution. However, I am also proud and grateful for a lot of accomplished successes. One of the steps that our executive team, who are today members of GigCapital Global, never regretted, and indeed considered an important milestone for the success of the company, was to “reverse merge” into a publicly traded company, which is considered by many as the predecessor to the SPAC process. We also faced an inflection point of the market and of the technology. This decision gave us fast access to public capital market, enabled the implementation of our M&A strategy to acquire technologies and skills needed to address a fast and competitive growing market, increased credibility with customers with consequent boost of our business and market share, provided liquidity opportunity for the employees, increased our retention and attracted more talents, and, last but not least, maintained the ownership and control of our own destiny.