HITT – Understanding RedCap and its Impact on LTE

Please welcome Graeme Scott, VP of networking and mobility. Graeme, welcome to the call. I’ll go ahead and turn it to you.

Yeah. Thanks, Cass, and excited to be here. Good to see so many familiar names out on the chat there. Great to see you guys.

Welcome to our call here today. Today, we’re gonna talk about something that is on the horizon. Right? We’re starting to see it now, but this is something we’re probably gonna see more of in the next couple of years, and that is the red cap reckoning.

Chandler, if you wanna go to the next slide there for me. Actually, before I do that, I think I’ll, I’m supposed to promote my, virtual webinar coming up right now. So, just wanna let everybody know on the October 1, I will be doing my final virtual beyond the solution of the year. So that is a two hour event where we get on.

We’ve got a couple of great suppliers, Spectrum and Lumen joining us for that. So we hope you guys will tune in for that. Cass is gonna drop the registration link in the chat, we hope that you guys will join us. That will be the last one of the year.

We’ll have a little bit of fun with it, and, you know, should be a good session with Spectrum and Lumen as always. So let’s get back to our topic of the day. Beyond the bars, the red cap reckoning. Now this sounds very ominous title, but reality is it was just kinda click baity to get everybody to join.

But change is on the horizon. Right? We are in the process of a change in the wireless space. So, Chandler, you can go ahead to the next slide.

So what’s going on with this? Here, let me lay a scenario out for you. You get a call from one of your customers. Their modem is not functioning.

Right? So you head out there. You bring out a new part. You grab a new modem, you go out there to do a a simple job, swap that out, and all of a sudden, you’re like, hey.

Wait a minute. This part number doesn’t exist anymore. This is a totally different module. This is happening all over the as we are moving to RedCap.

Now that old unit is sitting there. It’s still showing full bars. It still shows you that it’s operational, but the reality is the part, the replacements, all the different things you need for that no longer exist because everybody is transitioning to a new format. The bars were never gonna warn you.

The signal was never the problem. The part was the problem was that the the modems stopped existing. So here’s what’s actually going on. Now because I know some of you guys have probably already started googling REDCap and trying to figure out what the heck am I talking about, but REDCap stands for reduced capacity five g.

So, essentially, this is a new format that has been launched across the country to try and replace LTE. Right? Every network gets retired eventually, and we’ve seen this before. So what’s happening?

Carriers have already decided that they are gonna transition LTE band to this new five g RedCap. Right? It’s stepping in to fill in that replacement. It’s built specifically for mid tier devices caught between that sort of low power IoT realm and full five g service.

So, again, REDCap stands for reduced cap capability five g, and it’s a leaner five g device category built specifically for that mid tier. Real bandwidth, but a fraction of the cost, draw, and the complexity of five g. So why we’re here and why we’re talking about this today is because that decision when to refresh to these new red cap devices is happening now. Within the next couple of years, we’re gonna see a fairly aggressive timeline from the carriers to start to sunset LTE, and a lot of these devices that are out in the marketplace are going to be, you know, transitioned or sunsetted.

So we wanna basically make sure that you as our advisers are prepared for this and starting to have this conversation today. So, Chandler, next slide.

And we’ve seen this movie before. Right? This isn’t the first time we’ve seen this. This may be the first time you’ve heard of RedCap, and, honestly, your customers may not have ever heard of it either, but they have seen something like this before.

Right? We used to have two g. Go ahead and drop a two in the chat if you were around during the two g deep days or sold two g wireless modems because they were out there. They were big.

And, of course, those are gone now. Right? Nobody did those. Those were fully retired by 2024.

Two g doesn’t exist anymore. Three g. Right? AT and T, Verizon, T Mobile, Sprint fully retired that in 2022, so even before two g.

And that happened in The US. Elsewhere in, in the rest of the world, they’re also phasing out two g and three g, which you’ve got 37 operators globally phasing out two g and 39 operators phasing out three g. So for a lot of our customers who don’t pay attention to this kind of stuff, that transition, if you recall, was kinda sudden. All of a sudden, those devices stopped working.

We’re looking at the same thing happen again here with LTE. So the question this you know, belabors, obviously, is if LTE is next, what’s the timeline on that? Right? And this isn’t a hypothetical risk model.

This is a pattern with a perfect track record. We have seen this before. And what I’m encouraging you guys to do is use this as a conversation starter. Use it to build urgency within your customer base.

So let’s go ahead to the next slide.

So here’s what we know, and here’s what we don’t know. Okay? So what we know is LTE M and MB IoT support is committed by the carriers through at least 2035. So this isn’t a massive change that’s gonna happen.

It’s not necessarily the networks that’s being shut down. It’s the devices as they need to be refreshed. Those new devices that are coming out are going to be REDCap compatible, and we’re gonna need to swap them out. So the network isn’t really what’s driving this, although, of course, it is ultimately, but it’s the device refresh cycle that is the most is the most promising or the most urgent.

And so we’ve got about a decade plus runway before for the low power IoT realm at least and a couple of other things. But, you know, we wanna get on this sooner rather than later as always. What we don’t know, okay, is there has been no published shutdown date for LTE from either AT and T, Verizon, or T Mobile. So none of them have come out and said, hey.

We are shutting this down by this day, but we know it’s coming. Right? So industry analysts point to initial shutdown notices probably in the early twenty thirty, so three to four years away. So what I don’t want you to do is run out there and sell off of fake fear, sell off a fake date.

What we wanna do is start having proactive conversations to tell our customers what’s coming. Right? One of the things they value most about us as advisers is when we can tell them, hey. Here’s what’s coming down the horizon.

So let’s go to our next slide there, Chandler.

So why should we talk about this? Okay? Number one, this is a trigger event, right, not a feature pitch. So this is a reef anytime you’re going with refresh cycles, expiring contracts, RFPs, those are all commission events.

Right? Those are events where we have an opportunity to open up accounts and get in the door. And, obviously, we want to be the ones that ask the right questions and show that we’re ready to position the customers for what’s coming. That lends us credibility and gets us in those doors and gets us in those accounts.

Okay? Number two, why should we talk about this? Because within your existing book, this is something that they’re going to be dealing with. Right?

Every mobility, eSIM, or WAN WAN failover that you’ve already closed probably has one of these aging technologies sitting behind it. It’s quietly aging like milk. Right? This is expansion, not prospecting.

So a great opportunity to go in there and say, hey, mister customer. I’m your adviser. I’m your trusted technology adviser here, and I am helping you position for what’s coming up. So as these device start to age, let’s make sure we’re getting devices that are ready for what’s coming, not ready for what has been.

Third, of course, getting this wrong costs you credibility. Right? Either a, overselling full five g, which is significantly more expensive than RedCap, or recommending hardware, using hardware, implementing hardware that’s a dead end in three years. This is the kind of mistake that customers remember.

Right? And, of course, can hurt you in the long run. So we wanna make sure that we are the ones that are in the know. We know it’s coming, and we’re ready to have those conversations.

And then finally, right, because you represent the whole carrier landscape, you’ve got that sort of unique position to help them best be ready for what’s coming. You know? You’re not stuck with selling old inventory with an existing carrier. You can go to the carrier.

You can go to the solution provider, supplier, partner, whatever you wanna call it, that makes the most sense for your customer in that moment. Okay. So let’s go to the next slide, talk a little bit about what this looks like in the environment. Chandler, next slide.

So, basically, every device that’s out there belongs in one of these three buckets. And I know there’s probably some odd device that doesn’t fit into one of these, that we can sort of point out. But, yeah, these these most devices that are out there are gonna fall into one of these three buckets. So you’ve got the NB IoT or LTE M that sort of that’s a device that sort of checks in occasionally, runs a decade on on, like, a coin battery.

That’s your your meters, your trackers, basically what we’d call the introverts of the device world. Right? Not out there, not not doing a lot of communication on the regular. The second bucket we’ve got there is RedCap.

Right?

And this is the tier for things that need real bandwidth but aren’t, like, live streaming five k and that kind of thing. So think your POS terminals, some cameras, some wearables, that sort of, like, middle child of the of the ecosystem. And then we’ve got devices that need that full five g. Right?

And this is the tier. This is where people actually sort of picture when they hear the word five g. You’re talking your fixed wireless connections, either your backup or primary, AR, robotics, you know, some cameras as well if you’re live streaming those kind of things. These are the overachievers and, of course, always the ones that require the most power, the most bandwidth, and consequently are the most expensive.

So this is kind of the mental model I want you to walk into your customers with as you start to look at these devices that they’ve got in place. What bucket does what does that device fall in? What are the bandwidth needs for that device? So let’s move it to the next slide here.

How do we put this to a practice? What does this look like in the environment? So, again, things like your water meters, your gas meters, your temperature control meters, those kind of things, those are gonna be on that MBIOT or LTE M tier. Fleet asset tracking typically also gonna sit in that MB tier, but some of them do require REDCap.

So you wanna kinda get it dig in there a little bit and figure out what’s going on. Things like POS terminals, that those are RedCap devices. Right? Not a lot of volume, smaller transactions, but needs consistent quality bandwidth.

Security cameras can kinda fall into either bucket depending on how they’re utilized in the environment, full five g or that red cap space. Industrial sensors, wearables, things like that, we’re starting to see those a lot more commonly in environments. Those fall into that red cap tier as well. And then, of course, your FWA or basically Internet access, that’s the full five g. And then things like robotics, AR, VR, video, those kind of things, that’s that’s gonna be your your full five g as well.

So screenshot this table. This is kind of the cheat sheet. You can pull up mid call when a customer names a device you haven’t teared yet. Way more convincing than promising you already know.

This is a great thing to show your customers. Customer. Just kinda let them know what’s going on. So next slide, Chandler.

So two years ago, the answer to the question, can I actually buy this stuff? Was no. Right? Nobody had actually certified hardware, and RedCap was basically a rumor with a with a spec sheet, but that changed fast. All three national carriers certify RedCap modules today, and pricing is dropping as volume scale. So the network side has kept pace too.

73 operators worldwide are already live on stand alone five g, and the infrastructure is just basically caught up here. Right? We I know there was a lot of questions in the chat about cost. We’re starting to see this come back down more in line with LTE pricing. So this is, again, a very sort of promising, promising technology that’s out there, and it is ready for prime time. Next slide, Chandler.

So here’s some questions that, will help you guys sort these out as you get into. I know you guys always love to, be provided with some questions here, asking how many cellular devices are in the field and what generation they are. Now customer may not know what generation they are. Right?

But even asking the question kinda opens the door to move to that further, like, okay. Well, let’s find that out because here’s what’s happening in the cellular world today. We’re moving to that. So surface is hidden legacy feet fleets and all kinds of opportunities that may be out there that they weren’t even aware of.

When’s your next refresh cycle? This is a real important one. Right? You put a check-in on the calendar before that date.

Make sure you know when they are looking at that, hey. Our contract’s up in x amount of time. You wanna be involved in that discussion to make sure they’re not bringing in old hardware and are moving to the newer certified devices. Another question, were any of these already moved off of two g or three g?

These are the ones that you’re gonna be kind of put urgent on the top of your list. Right? Because those devices are probably gonna be some of the first ones that transition. And then, of course, we always wanna know who’s in charge of these things.

Right? Who owns procurement? IT, OT, or the device vendor? And that sort of brings us right into the conversation to make sure that we’re having the right conversation with the right people about this transition.

So next slide.

So you guys know we’re big on OBS outcome based selling here at Telarus. It’s been the cornerstone of most of our education this year. So let’s take a look at what this would look like for an outcome based sales scenario.

A regional retail retail chain calls in a routine hardware swap, 40 POS terminals, like for like, same carrier, same part number. On paper, that’s an easy order. Right? Come out there, swap those out.

But here’s what changes it. Right? Before quoting it, the adviser asked two things. How many units, and were any of these ever moved off three g before?

The answer, yes. Back in 2022, we did that transition. We moved these off three g. So the outcome, the fleet that’s already survived one force migration and LTE won’t run forever either.

Instead of a like for like reorder, the adviser repositions the deal. Let’s make sure this is the last time you have to do this and opens up to a red cap upgrade instead of just replacing the existing devices and having to deal with this again in a couple of years. So a great way giving the customer the outcome they want. Right?

They want technology that works, that they don’t have to worry about, and, asking those additional questions helps position you as their, valued technology adviser. So go ahead and bring on my guest. This gentleman is I always call him he’s my smart friend. Right?

He’s the guy that I I always call when I when I need some information, when I need some smart. Please welcome to the call big friend of Telarus and a friend of mine personally, mister John Reed. John, are you there?

I am here. Thanks for helping me.

Go. Alright. Now, John, obviously, you know, being the principal of For2Fi, the CEO, you have been very involved with this red cap discussion. And and, actually, you were the first one that brought it to my attention saying, hey, Graeme. Are you, are you having these conversations? Because you’re seeing it a lot in the marketplace. So tell us a little bit about what’s going on with you guys, John, and how you guys are starting to see this, take shape in the environment.

Yeah. Our biggest concern is not necessarily the shutdown forecast of 2030 to 2032. Our biggest concern is we are already starting to see the carriers pull cell bands and spectrum off of LTE to bolster the growth of five gs. So we’re going to start to see a slow progression and slow performance issues on the LTE network, right? Customers that are happy with getting their 80 meg by 20 meg upload download speeds today may not get those speeds in the future depending on the bands they’re on and the spectrum they’re on, because we know five gs is growing, we know unlimited data plans are here, we know more customers are leveraging five gs today. And the biggest concern that our customers are having has been the cost, right?

A five gs modem is two to three x an LTE modem. And what we really like about RedCap is we’re able to do an LTE to five gs RedCap swap at a basically the same price. There isn’t an increase for that extra to get on that five gs network today, right.

For our customers that are looking to build out a redundant network, they’re looking to incorporate wireless into their SD WAN connectivity portfolio, we’re recommending they do not buy LTE today and they go right to Redcap and incorporate that today.

More and more customers are looking to acquire this hardware on an OpEx and going to a managed service and it’s all part of the conversation in that transition. As we sunset LTE into five g, this is a great bridge for all of our quick serve restaurants and our retail customers and everyone that, you know, really goes after redundancy around point of sale. Those are the big things that we’re seeing.

Yeah. And the reality is, I think, really, where this where this kind of the rubber meets the road with this conversation is a lot of these devices that are out there don’t need full five g. Right? And and you’re starting to see the you know, if the LTE is indeed being sunsetted, which we see and we know and maybe faster than we think as you as you pointed out, over it’s overkill to move to full five g for a lot of these devices in what they do from a cost perspective and even from a capability standpoint.

Right? We they don’t need that kind of power. They don’t need that kind of bandwidth. So why pay for it?

And I think this RedCap I mean, I love how the carriers have done this. They’ve they’ve kinda saw the need in the market and said, hey. We’ve gotta do something for this. And, actually, what I also love is they didn’t give us another three letter acronym.

Right? You know? We didn’t need any more of those. REDCap, I actually kinda like that term.

It’s pretty good. But yeah. No. I I think it it fits a need in the marketplace, and I and I love that.

So I know you’ve got some other stuff to share with us, John, here. If you wanna go into, maybe the next slide there, Chandler. Here’s some stats that you’re starting to see out there. Right?

Yeah. I mean, obviously, you know, 55,000,000 LTE routers in The US alone that we’re gonna see transition to five g over the next five years. Right? And I think that’s really that momentum that you were talking about, right, is how do we have these conversations with customers today?

How do we prepare them today, right? How do we, you know, we don’t want to swap like for like at this point in time because a three year contract is going to be an issue, right? And then they got to swap it out again, right? And the ability to be able to migrate into something that they can get four, five, six years out of is the conversations we want to be having with our customers, right?

And, you know, we’re seeing a little bit of different transition, you know, we think that the carriers are probably going to stop certifying LTE routers in the next year and really focus a 100% on five gs.

And let’s be honest, the carriers are in different spots. Right? T Mobile is significantly ahead of Verizon and AT and T and rolling out their five g network, especially on the on the standalone SA network.

And we’re going to continue to see this shift as we move forward.

If you’d move to the next slide, I just got some more stats that talk about where the networks are going. You know, obviously it’s a big play here in The US as wireless continues to be a a solid replacement for broadband and other solutions that are out there. But, you know, I think it’s gonna be a a really big topic of conversation going into ’27.

Yeah. And and I I gotta give a shout out to Tim Hammer’s question in the comment there. That’s a it’s a good one. You know, RedCap, it sounds worse, but it’s really better.

It’s really about getting the right tool for the job. Right? And having the right you know, like, you don’t wanna bring a Phillips head screwdriver when you need a flathead. And I think that’s really the talk track there.

Yeah. But it’s it’s too.

I I will tell you. Right? If you look at your retail customers, right, and your quick serve restaurants in these you know, we have customers with thousands of locations. Right?

They’ve never bought fiber, and they’ve all gone with broadband. Right? So it’s it’s not much of a difference. Right?

It’s the same reduced capacity, but it’s about putting the right fit for the right op the right job. Right? And and that’s really what RedCap does. It takes the the right tool and puts it in the in the hands of the customer to allow them to achieve the things they need at the price point they need.

Right? And I think that’s the big focus here. You know, we’re not asking customers to go out and spend three x. Right?

And everybody knows what’s going on with memory and and hardware right now. Right? To be able to go spend even more to upgrade your your wireless failover or your wireless network, I think Red Cap’s positioned perfectly where it needs to be.

Yeah. And and especially as we’re seeing this proliferation of IoT and and everything’s got a got a sensor. Right?

Those devices need different grades of bandwidth. They need different power. They need different they all have different criteria. And having different categories, different buckets as I showed on that one slide that you can put them in, I think is really critical. It is not a one size fits all on, on the wireless network, and understanding the needs and the application of the devices helps you position it where it is. And, you know, for our advisers that are on the call here, this is just about being ready to have those conversations, being proactive, and, again, positioning yourself as someone that they can trust who understands the landscape, what’s happening, what’s coming down the road, and and can best position them, for taking advantage of that.

Yeah. And and even to highlight Tim’s comment about, you know, when we get to RedCap, is that gonna be gone? Right? I I really believe five g is the technology of the future, right, that six g is just a an augment to five g. And we’re not even seeing the full benefits of five g today. You know, when we get into standalone and we get into network slicing and all the things that are still to come with ultra, you know, wideband and, you know, there’s so much more development within that five g spectrum that the sooner we can get customers on the network, the better it’s gonna be long term. And it’ll be there for a long time.

Right. And I think you had one more, one more slide here for us, John, kind of the the money slide here. Right? This this is what I love. This is some you know, as you’re having your conversations out in the field, these are the kind of things you’re gonna hear from your customers, and here’s some great great responses to to have back have back.

Yeah. Absolutely. And we talked through a lot of these, right, with the ESLTE is gonna be fine. Right?

But, you know, it’s the cost point. It’s it’s a road map item. You know? We’re still not there seeing all the full benefits of five g, you know, and then and then how do we how do we handle a refresh, right?

And what’s that look like and and those pieces of it. But, you know, these are some great points that, you know, our advisors can use and take back to their customers and have really good conversations about what what they’re gonna do with their network.

Yeah. No. I love it. And, again, a couple of questions in the chat we’ll maybe tackle here.

Good stuff from John. Cass, I don’t know if you wanna jump on here. It looks like we’ve got some good questions if there’s any you wanna highlight. But, a lot of questions about, you know, LTE.

Again, LTE is still out there. And, actually, I’ll give bonus points to anybody who could drop in the chat. What does LTE stand for? And that actually kinda gives us a little hint about the whole plan here all along.

But drop in the chat if you know what LTE stands for. But, yeah, LTE is still out there today. It’s it was a tier of service that was built for offer you know, to for wireless, but it is being sunsetted because it is not as cost effective, and it requires a lot of spectrum for not a lot of bandwidth. And that but long term evolution, that’s it.

Correct. So that tells us, right, this was kind of a midway product from the beginning. Right? It was the evolution.

This is just a step on the chain there. So, John, what do you say to people? Like, we got a couple questions here about, you know, hey. LTE is still good.

Like, what is the time frame on this? When should we start having these conversations? What do you have to say to the tech advisers asking those questions?

Yeah. It’s it’s the the devil’s in the details. Right? And and and the carriers are never gonna come and tell you that they are pulling spectrum from certain LTE bands and bands are going away and the performance of the network is gonna get worse. Right? They’re never gonna come out and publicly say that, but we see the signs of that. We see the signs of it happening today.

They’ve got so much money and infrastructure and and and investment in five g that they are gonna try to get there as fast as they can.

And we’re starting to see that shift. Right? And, you know, I just I I try to tell customers, like, if you can get there today at the same price point, why not? Right?

What what’s holding you back? You know? Let’s make the leap. Let’s get you there. Let’s get you on five g.

Let’s let’s get that performance where it needs to be.

Yeah. And I think, again, when when customers are already looking at a refresh, when there’s a device that’s having challenges, when there’s some reason to make a switch, that’s the ideal time to do it. That’s the ideal time to have that conversation. And, obviously, then doing it now, doing it proactively when eventually LTE is no longer supported, your customer’s already well positioned to, to move forward with the, with the REDCap devices.

Absolutely.

Yeah. Well, John, last word for you, man. Anything, just a last word of wisdom for our advisers before we before we move on to our brand new supplier GuideStar?

No. I just say, you know, like I said, mobility IoT, it’s it’s a conversation to have with your customers. Right? Have it know, take every opportunity you can to ask them about how they’re using wireless as, you know, as a as a important tool in their network and, you know, and and let the conversation take you from there, you know, but it’s a it’s a great conversation piece and it’s one you should be having with all your customers because their wireless spend is going up considerably every year and all different components from IoT to cell phones, to modems, to network connectivity, and and everything in between. So Yeah. Just make sure you’re having that conversation.

And, of course, For2Fi, one of our great suppliers on the wireless side, John Reed, again, my smart friend. He can be your smart friend as well. So if you have questions about this, you get caught in a conversation, you need some help. Obviously, our sales engineers are there, some of our excellent excellent suppliers like John are also there to help you. John, thanks a lot for joining us today, brother. Appreciate you.