London, December 14th, 2022 – New research from connectivity experts Kaleido Intelligence has found that the extractive industries of oil and gas and mining, combined with power generation and distribution, will generate over $7.2 billion for connectivity providers in 2027.

This is driven by increasing demand for real-time data flows, which will predominate particularly in smart mining and smart grid deployments. Between them, these two sectors will account for over 900 PB of data that year as automated systems become more common.

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The new report, Energy & Utilities Cellular IoT Opportunity & Forecasts stresses that cellular will be one technology among many for these industries, with the ability to provide a relay of non-cellular data at the edge to a cellular operations centre of particular importance in many cases. Kaleido also notes that, as the benefits of connectivity become felt, edge computing will take on a much larger role in order to minimise latency and the need for network backhaul.

Connectivity will bring new revenue models

Value-added services like edge computing, push-to-talk functionalities and other features will begin to move the space from a data-driven revenue model to a service-driven revenue model. This shift will be particularly marked in the oil and gas sector, where non-data revenues will make up over 60% of connectivity revenues in the sector.

The shift to service-driven revenue models will also be important for low-data connections, such as smart meters, which typically bring in around 3 MB per connection per month. The transition will not be quite so easy, however,  keeping smart meter connectivity revenues under $2 billion, despite having the largest installed base of devices in the sector.

Multi-connectivity environments will be the norm

The report notes that connectivity is no longer a simple matter of connecting that which was unconnected previously. In addition to providing a use for the data, cellular needs to compete with several unlicensed LPWAN (low power wide area network) technologies, which are particularly common for smart meters. Despite this, we expect cellular smart meters will make up over 1 billion connections by the end of 2026.

James Moar, Principal Analyst at Kaleido remarked: “Connectivity cannot be a battle between cellular and non-cellular technologies. However, cellular often has an advantage for sending data over longer distances, meaning that having platforms and gateways that can handle both cellular and non-cellular technology is a vital capability for connectivity providers serving energy and extractive industries.”

Despite this, the economic incentives to upgrade existing facilities are rarely entirely aligned, and as a result, Kaleido expects less than 5% of mines and oil and gas facilities to have cellular connectivity by 2027. Although environmental concerns are pushing up connectivity demand in many cases, these are having their biggest impact with new deployments, and older and smaller sites often get left with legacy technologies until such systems are in need of replacement, slowing the rate of adoption.

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