Analysis of the Impact of 3G Network Shutdown on Supply Chain Visualization Technology

It's a movie made for television: a truck carrying high-value cargo disappears from the tracking dashboard, the telematics device fails to transmit data, and the driver has to call the dispatcher to report location and timing; the electronic logging device (ELD) also fails, leaving the driver facing non-compliance and hefty fines.

At the Port of Los Angeles, cargo that shippers have long awaited may have arrived, but the freight forwarder can't confirm because there's no data transmission—after all, it's 2023, and containers and trucks are still using 3G tracking devices.

This nightmare scenario keeps some supply chain executives up at night. If all goes as planned, by the end of 2022, Verizon, AT&T, and T-Mobile will have phased out their 3G networks.

In the U.S., companies that rely on connected devices for tracking and visibility have a relatively tight window to upgrade to 4G equipment. The first carrier's 3G shutdown date is January 2022.

Add to that thechip shortage, delays in other electronic component supply chains, and the time needed to physically locate and replace devices installed on vehicles and containers, and the timeline becomes even tighter.

For companies that miss the deadline, "it's not like a light switch that goes off all at once," says Anton Albrand, vice president of sales and chief revenue officer at SkyBitz, an industrial IoT solutions provider. Instead, service and coverage will gradually deteriorate. Carriers "won't send technicians to repair 2G and 3G base stations; they'll focus capital resources on 4G and 5G."

SkyBitz works with customers in the trucking and logistics sector, serving the oil, gas, and chemical industries. These customers use sensors to measure liquid fill levels and send alerts when refills are needed; they also use IoT sensors to track assets and delivery services and optimize routes and scheduling.

Why the U.S. is phasing out 3G

Cellular IoT devices send and receive signals globally, operating on frequency bands supported by their modems. Device selection depends on the bands used by cellular carriers in the countries where they operate, transmitting data via spectrum wavelengths.

"Spectrum is a limited and precious resource," says Albrand. Carriers want to reallocate 2G and 3G spectrum to 4G.

Although 4G will improve the quality and speed of IoT, the timing of the 2G and 3G shutdowns is not ideal, says Albrand.

"For industrial operations that require compliant 4G telematics, trucking and logistics are at the highest risk," he says. Combined with chip production delays, rising component costs, and labor shortages, it's a perfect storm.

The shutdown isn't just about 3G; it also includes 2G, introduced in 1991. 2G is used for sensors and infrastructure like water and gas meters. Devices set for 4G networks will search for a 4G connection but may fall back to 3G or even 2G when necessary.

"This ensures data transmission," says Don Miller, chief sales and marketing officer at Globe Tracker. This feature is especially useful when containers travel between developed and developing countries, as not all countries have 4G networks.

Networks depend on the country

Countries don't use network standards uniformly, which adds difficulty to purchasing trackers or choosing models to use. In the UK, 2G is important because residential smart meters rely on it, says Gudmundur Oskarsson, vice president of operations at Controlant, which provides cold chain monitoring equipment.

"The U.S. is the most aggressive in phasing out lower bands (2G and 3G), and it's the only country phasing out both simultaneously," he says.

In the U.S., more than 90% ofVerizon Wireless datauses the 4G network. According to the 2020 "State of Mobile Connectivity" report released byGSMA, an organization representing mobile operators, more than 50% of global mobile connections run on 4G.

Of its total 700,000 IoT devices, Controlant needs to upgrade 500,000 used in the U.S. The company will redeploy 3G devices to other countries. Its customers are mainly pharmaceutical and food and beverage companies, typically shipping within regions, making it easier to allocate devices to specific markets. Oskarsson says the company is growing, so many devices currently used in the U.S. will still be useful elsewhere.

Upgrading to 4G: The work and the cost

Given the time and cost involved in device conversion, companies are reluctant to make changes, especially when existing devices work well on 3G.

"I don't think anyone wants to do this unless they have to," says Albrand. It's expensive, disruptive, and inconvenient, but the alternative is worse.

"If they don't, they'll have to revert to manual processes, which is extremely inefficient," says Albrand. Gas companies that rely on IoT solutions don't want their tanks to go "blind" because they use sensors to decide when to refill. "If you don't know the liquid level, downtime losses can range from hundreds of thousands to millions of dollars," he says.

A silver lining for replacing tank IoT sensors? They don't have wheels. Trucking is being flooded with freight, and replacing equipment means pulling trailers off the road.

"They move around and aren't always where they should be—it's like herding cats," says Albrand.

When customers convert devices, they inventory all trailers and consider vehicles that will be retired in the coming year. They then develop a project plan and timeline, consider installation locations, identify sites requiring third-party approval for access (such as Walmart distribution centers), and balance installation dates at each location against orders and inventory levels.

"They focus on freight delivery and pursue maximum efficiency, and this is a disruption," says Albrand.

And it's costly. In addition to the $220 to $300 per device cost for Globe Tracker equipment, each device requires an additional $35 to $50 for removal and installation.

"If union labor is involved, costs can be higher," says Miller. Even a half-hour installation can be extended if equipment is moved or set aside. Moving a container in a yard can cost $25 to $50.

Globe Tracker has deployed 80,000 devices in over 120 countries. Miller says its largest customer, Hapag-Lloyd, has 135,000 refrigerated containers. Smaller companies might have 9,000, while mom-and-pop fleets might have only 50. "Either way, these are big numbers," and costs quickly add up when companies need to upgrade devices at scale.

Experts say companies that haven't yet considered switching to 4G equipment should act quickly. The chip shortage in the electronics industry and delays in other electronic components have led to supply delays for some devices. Miller expects the shortage to last into 2022.

Capital expenditure budgets may also need adjustment because this transition is coming sooner than some expected. Miller says many companies bought new 3G equipment three years ago, expecting the investment to last 7 to 10 years.

Although some 3G shutdown dates were announced years ago, carriers delayed them, with 2022 as the latest deadline. Years ago, companies couldn't always get 4G equipment that met their needs.

Will 4G be replaced by 5G?

Many companies are slow to transition to 4G, and the pandemic may prompt carriers to move faster.

"COVID's impact on this issue is far greater than people understand," says Michael Skurla, chief product officer at Radix IoT, a manufacturer-agnostic IoT data access platform. The pandemic led U.S. carriers to increase investment in 5G mobile broadband to provide more bandwidth.

Even so, 5G adoption will take longer than carrier advertising suggests.

"It's more of a consumer application than a commercial one," says Albrand. He expects 5G to be more widely used commercially in five to eight years. "5G is still in its infancy."

Consumers see a lot of 5G advertising, but for phones, 5G offers "limited perceived improvement," says Skurla. "Its potential lies in industrial applications, like navigation."

That navigation could include smart cars or delivery trucks using low latency to make operational decisions in milliseconds.

Just as 3G has been around for about 20 years, Miller expects 4G to continue for the next 15 years. 5G equipment is expensive and overkill for most supply chain applications, says Miller.

"It might be useful for certain big data applications at ports and terminals, but that's about it." Supply chain applications have smaller data needs, and 4G is sufficient. "They can confidently invest in 4G. From a bandwidth perspective, they don't need more," says Miller.