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

This is like a movie made for television: a truck carrying high-value cargo disappears from the tracking dashboard, the telematics device cannot transmit data, and the driver has to report location and timing to the dispatcher by phone; the electronic logging device (ELD) fails, and the driver faces non-compliance and hefty fines. Meanwhile, at the Port of Los Angeles, the cargo the shipper has long awaited may have arrived, but the freight forwarder cannot confirm it due to a data outage—after all, in 2023, containers and trucks are still using 3G tracking devices.

This nightmare scenario is keeping some supply chain executives up at night. As scheduled, by the end of 2022, Verizon, AT&T, and T-Mobile will phase out their 3G networks.

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

Add to that thechip shortage, supply chain delays for other electronic components, and the time needed to actually locate and replace devices on vehicles and containers, and the timeline becomes even more urgent.

For businesses that miss the deadline, "it's not like turning off a light switch where everything goes dark 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, and will focus capital resources on 4G and 5G."

SkyBitz is working 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 to optimize routes and scheduling.

Why the US is shutting down 3G

Cellular IoT devices send and receive signals globally, operating within the frequency bands supported by their modems. The choice of device must be based on the frequency bands used by the cellular carriers in the countries where it operates, 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.

"Among industrial operating companies that need to comply with 4G telematics requirements, trucking and logistics face the highest risk," he says. Combined with chip production delays, rising component costs, and labor shortages, this is a perfect storm.

It's not just 3G being shut down, but also 2G, which was introduced in 1991. 2G is used for sensors and infrastructure applications such as water meters and gas meters. Devices set for 4G networks will search for a 4G connection, but may fall back to 3G or even down to 2G when necessary.

"This ensures data transmission," says Don Miller, chief sales and marketing officer at Globe Tracker, which provides end-to-end remote reefer management. This feature is especially useful when containers travel between developed and developing countries, because not all countries have 4G networks.

Network standards vary by country

Countries are not uniform in their use of network standards, which adds difficulty to purchasing trackers or choosing models to use. In the UK, 2G is crucial because it is used for residential smart meters, says Gudmundur Oskarsson, vice president of operations at Controlant, a cold chain monitoring equipment provider.

"The US is the most aggressive in terminating the lower bands (2G and 3G), and is the only country terminating both at the same time," he says.

In the US, more than 90% ofVerizon Wireless dataruns on 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.

Out of a total of 700,000 IoT devices, Controlant needs to upgrade the 500,000 used in the US. The company will redeploy the 3G devices to other countries. Its customers are mainly pharmaceutical and food and beverage companies, which typically transport within their region, making it easier to allocate devices to specific markets. Oskarsson says the company is growing, so the large number of devices currently used in the US will still be useful elsewhere.

Upgrading to 4G: the work and the cost

Given the time and cost required for device conversion, businesses are not eager to make the change, especially when existing devices work well on 3G.

"I think they wouldn't touch it unless they had to," says Albrand. It's expensive, disruptive, and inconvenient. But the alternative is worse.

"If they don't do it, they'll have to go back 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 determine when to refill. "If they don't know the liquid level, they could lose hundreds of thousands to millions of dollars due to downtime," he says.

A silver lining to replacing tank IoT sensors? They don't have wheels. The trucking industry is 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 take inventory of all trailers and consider vehicles that will be retired within the next year. Then they develop a project plan and schedule, considering installation locations, identifying sites that require third-party approval to enter (such as Walmart distribution centers), and balancing installation dates at each location against order and inventory levels.

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

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

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

Globe Tracker has deployed 80,000 devices in more than 120 countries. Miller says its largest customer, Hapag-Lloyd, has 135,000 reefer 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 businesses that haven't yet considered switching to 4G devices should act quickly. The chip shortage in the electronics industry, along with shortages of other electronic components, has led to delays in some devices. Miller expects the shortage to continue into 2022.

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

Although some 3G shutdown dates were announced years ago, carriers have pushed them to 2022 as the latest date. Years ago, businesses couldn't always get 4G devices that suited their needs.

Will 4G transition to 5G?

Many companies are slow to transition to 4G, and the pandemic may have prompted carriers to transition earlier.

"The impact of COVID-19 on this 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 US carriers to increase investment in 5G mobile broadband to provide more bandwidth.

Even so, the full rollout of 5G will take longer than carrier advertising suggests.

"This is more of a consumer-level application than commercial," says Albrand. He expects 5G to be more widely used in commercial applications within 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 promise lies in industrial applications, such as navigation."

Such 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 to exist for the next 15 years. 5G devices are expensive and overkill for most supply chain applications, Miller says.

"It might be useful in some big data applications at ports and terminals, but that's about it." The data needs of supply chain applications are small, and 4G is fully sufficient. "They can confidently invest in 4G. From a bandwidth perspective, they don't need more," Miller says.