The Helium Network and its community has been credited with kickstarting decentralized wireless. It promises to fundamentally shift the paradigm of how wireless networks are both built and operated. With its token-based incentive system, Helium succeeded in building the largest contiguous wireless network in the United States.
Nova Labs (formerly Helium Inc.), founder of the core technologies powering the Helium Network, is now moving into 5G and carrier services. At our Creative Technologist conference in October, I spoke with Mark Phillips, VP of Business Development at Nova Labs about the latest in DeWi and what the future looks like for the Helium network.
We think the transformative model the Helium ecosystem is pioneering within mobile has the potential to revolutionize how people perceive and participate with their cellular carriers, so we’re very excited to share this conversation with you.
Mark Phillips: Nine years ago, when our company was founded, we were called Skynet. We were Helium Systems after that. And then about six months ago, alongside a D round fundraise, we changed our name to Nova Labs. We started as an IoT sensing wireless company. When I joined the company in San Francisco about nine years ago, we were building public IoT networks for companies that wanted to put a sensor inside their refrigerator to make sure, for instance, their sushi inventory didn't go bad. That was moderately successful, but we ran into an issue where the quick service restaurants didn't want to maintain their own wireless networks. So after that, we tried a few different vertical products. And then, in the middle of 2017, when Bitcoin and Etherium were experiencing their second wave of attention, we thought, what if there’s a way to compel people with an incentive to build this wireless network?
In 2019, we launched with 140 of these pieces of hardware called hotspots that look like Apple TV. You put the hotspot in your window and it contributes to making a BIG IoT wireless network. We wrote the Helium Blockchain from scratch, which I do not recommend doing, but we wrote it to reward people for providing coverage with the token HNT. And our vision was always to apply this incentive to other wireless networks. So we started with IoT and we just announced that Nova Labs will be rolling out a mobile carrier service for devices using 4G and 5G connectivity, based on this same incentive mechanism. The model has been wildly successful, at least in creating supply of coverage. We've created the largest contiguous wireless network in the world. And when I say we, I mean the community, the millions of people across the world who are participating in this.
Today, in about 185 countries, in 75,000 cities, you can get some amount of Helium coverage. Most major cities in the world, where we can get radios in, have very good Helium coverage. Meaning you could take a device with a radio module that uses the Helium network, and turn it on, and it will start transmitting data. And so, we’re now switching away from supply and switching our focus toward demand. We’re exploring how to demonstrate that for the next 5, 10, 15 years, this incentive-driven mesh network will have as much, if not more, data usage than traditionally built wireless networks. So that's where we're at.
Tyler Mincey: From my professional investor point of view, I think the fact that you started out by addressing a set of problems and built a model focusing on network expansion, using tokens to help you do this, is important. You didn’t start out as a crypto enthusiast looking for some way to apply crypto.
Mark Phillips: Right. We started by asking, how do we build this network faster? The use of crypto in the Helium blockchain was out of necessity. It was not driven by thinking we’d get a lot of attention and hype just for slapping a blockchain label on the project.
Tyler Mincey: And what's most exciting about the network to me is really the innovation in the business model itself. You used these technological tools to transform a fundamental problem with wireless networks, and lots of capital intensive systems in general. It's very capital intensive to deploy a wireless network. In order to have that capital, you need customers. But you can't get the customers, because you don't have the network yet, right? It’s a chicken and egg problem. It’s why wireless networks have been so slow to be deployed over the years, and why we’ve seen it take decades to develop networks.
Mark Phillips: And even if you do get to that point, the carriers want the network to be entirely their own. The first network that our community built is using something called LoRaWAN. LoRaWAN is a wireless protocol that’s been around for about 12 years but requires a ton of capital to build. And there are companies out there that have been doing this for a long time, but they only fund network deployments when their customers cut a big check for it. So, if you go to a utility and say you want to monitor your meters, that’s great. They’ll say, we can put 50,000 meters out there, but we’re going to have to spend $500,000 in CapEx to build this network for these two cities, and you're going to pay for that, and sign a contract for 20 years. So they can lock you into stuff.
LoRaWAN has a ton of promise for IoT devices. We're still very early in the IoT space. When you're talking about noncellular connected devices and you go to a CEO of a company that wants to build something that gets deployed everywhere, you can't say, we can connect it in this city, but in these 15 other cities which are major markets for you, that’s going to take 6 or 12 months to build. That doesn't work. But now, with the massive coverage we’ve gained just over the last six to 12 months, we can have very serious conversations with enterprises that are rolling things out at a national level, even an international level. And they can trust that instead of being in just 20% of the cities they want to roll out in, they can be in 85% of those cities. And this is going to grow to 100% over the next six to 12 months. And that's a huge change.
Tyler Mincey: It’s amazing to see how the network has grown to be the largest contiguous network, and it was deployed basically in two years.
Mark Phillips: Our growth rate now, though down quite a bit from its peak, is still impressive. We're still adding 15,000 - 20,000 of these IoT hotspots every month. And now, we're adding more cellular radios.
Tyler Mincey: It's incredible to see that growth given what's been happening in the consumer electronics supply chain where you're basically device limited.
Mark Phillips: Yeah, for the longest time we had hit this sort of magical and wildly frustrating confluence of crypto exploding in popularity and Helium sort of riding along with it. Which of course, spurred more people to get involved purely for the incentive mechanism, which in turn crushed our already weak supply chains for the components that our community needed. We’re about to pass one million hotspots. We may have gotten there a lot sooner, if people hadn’t had to wait three to five months to get a hotspot and instead, had gotten them in one to two weeks, the way they can now.
Tyler Mincey: To recap some of the economics, at the peak stage of the network's growth, there was a period of time where if you were deploying a new hotspot at the edge of the network even the relatively expensive hotspot (about $500 at the time) would pay itself off with rewards within a week or two. That was amazing to see.
Mark Phillips: Yes, and the community built myriad tools to help people investigate this. From a rewards perspective, we use something called Proof of Coverage (PoC), which is a way to verify, as best we can, the usefulness of the coverage as being provided by this piece of hardware. Proof of Coverage incentivizes good, robust, not overly dense coverage. Kate (McAndrew) was complaining earlier, because her hotspot in San Francisco doesn't earn very many rewards. In that case, I would argue you should move your hotspot out of there, maybe send it to your mother. What we’ve found fascinating about the incentive mechanism is that incentives drive every single bit of behavior. Early on, that surprised us. We now spend a lot more time thinking about this as a community.
Tyler Mincey: It's important to consider what’s driving the market around these tokens, and it raises questions about speculation. I believe there are both healthy and unhealthy forms of speculation. As a VC, our business is hopefully the healthy kind. Our focus is to invest in companies that will create real value. Many people have a negative perception of the speculation involved in some crypto projects because they can’t see a fundamental use case that would drive value. But with a wireless network, you can do real modeling of the data transfer market today, where you think it’s going in the future, the price per gigabyte of data transfer, etc. You can apply real analysis to the market which, for me, substantiates the value of the token. There are good economic fundamentals to the market itself.
Mark Phillips: Yeah, I would agree. We don't get into the speculative side of other projects. Our community's known for not allowing any discussion about speculation. If you go into the Helium Discord server, it's a wild, absurd place (there are 200,000 people who are super rabid about the entire thing), but if you say anything about exchanges, or pricing, or trading, a bot comes in and shuts you down. It's not allowed. The price of the token over time should reflect the value stored there. The way we've crafted it in the community is that as the usage of the network increases, there should be more value conferred upon the token, because the token itself is actually used for the transaction fees for sending data.
There’s another mechanism called a data credit, which is derived from the HNT. As a customer of the blockchain, you pay data credits. If you talk to some users of the Helium Network, they will tell you that when they run their cost benefit analysis of using it, they often think there's a bug in their Excel sheet, because it's far too cheap in their minds.
I've actually got a couple sensors with me today. This is a location tracker from a company out of the Netherlands called Viloc , it's kind of like a LoJack for micromobility assets. You put this on a scooter and if someone steals it, which happens all the time, you can go out into the field and retrieve it. This thing probably sends a packet every five minutes, that packet is like 15 bytes, incredibly small, and probably costs about one US dollar per year to operate this on the Helium Network, which for this company is remarkably good. But when we're trying to demonstrate usage of the Helium Network, even in a world where there are 10 billion devices all transmitting constantly, it's very hard to make a dent in what is typically viewed as blockchain protocol spend. If you look at all the protocol spend on the Helium Blockchain, we're consistently in the top three or four of all these layer one chains (Etherium, Solana, Avalanche, etc.), but a very small percentage of that is actually data transfer. And that's just going to take time, especially on the IoT side.
Tyler Mincey: When you compare that to the timescales of network deployment, you’re just at the end of network rollout. It’s natural and normal for it to be where it is today.
Mark Phillips: Exactly. I mean, talk to me in 10 years. We think we have other mechanisms on the cellular side, but with the IoT and small device market, it’s going to take 10 years for these companies to get one hundred thousand, one million, ten million devices out there.
Tyler Mincey: So let's talk a bit about the future. I’m curious what you see happening with 5G. A lot of things are evolving, the types of people operating the network and doing the deployment are shifting a little bit more to the enterprise end of the spectrum, but still very accessible for the average person relative to the past.
Mark Phillips: Yeah, so when we first started out with IoT and LoRaWAN, we had this idea that with a long enough timeline, if the model was true, we could revolutionize how most wireless networks are built. About a year ago, a company called FreedomFi (who Nova Labs actually acquired a few months ago), introduced the idea of using the Helium incentive mechanism and the token HNT for cellular networks, specifically using spectrum the United States calls CBRS, which is a public cellular band. Typically, to build a network like T-Mobile or AT&T, you license spectrum from the FCC, and pay billions of dollars for this. And then you put up radios, and create your own network, and you sell and support a subscription service. CBRS is actually something that Ajit Pai, who is the former FCC commissioner, made possible. It’s a way for you and me and Tyler to deploy our own cellular radios.
Our community approved a few radios that can be deployed to create 4G and 5G coverage. Today, there are about 6,400 of these cellular radios deployed to the Helium Network (and earn a token incentive for that). We needed to tune the reward mechanism for this different network so we have a new token called MOBILE. And now my company Nova, which is a for-profit entity that is the founding member of the ecosystem but now very much just an ecosystem member, has announced a carrier product. In Q1 2023, we’re releasing Helium Mobile, which is a cellular carrier you would use instead of Verizon, or AT&T, or T-Mobile, or any of these companies that would sell you a subscription product. It’s easiest to think of it as a MVNO, or a mobile virtual network operator. And there are hundreds of these MVNOs who go to AT&T or T-Mobile and say, we want to buy a ton of data from you and we’re going to put subscribers on your network. We have a relationship with T-Mobile, where when you subscribe to the Helium Mobile Network, when you don’t have Helium 5G core coverage, you’ll use T-Mobile’s macro-network and it will function as a national network.
As our infrastructure gets bigger over time, we think we can change the economics of the game. The more data we can put onto the Helium core network, the less we’ll need to put onto macro-networks, and subscribers will see the price of their connectivity come down. Our initial offering includes three data plans that are competitive with most plans out there. Over time, the price will go down, because our coverage will increase. And with the crypto incentive, we think we can give people an excuse to actually like the carrier they’re with. Incentives in the network are crafted so you earn rewards just for using it. And if you are also helping to build the network by having a radio or two in your house, you’re earning tokens for providing that coverage as well. And what’s fascinating about the mobile network vs. IoT is the usage is tangible. I think we can fundamentally change how people view carriers, and we intend to be the first company there.
Tyler Mincey: I’m excited about the prospect of communities being able to manage their own cell coverage. If you’ve ever lived in a dead spot, it’s horribly painful. And there are issues around how dense of an area you need to be in for the major carriers to care about you.
Mark Phillips: Yeah, the carriers do some modeling and figure out what it's going to cost to create coverage. And then they consider whether they can sell enough subscriptions to recoup their costs. In a lot of places in the US, it's still not there. The carriers are still not going to provide coverage. We see an opportunity to change that. You can put your own tower up then tell your neighbors about it, and they can use it. It's pretty beautiful.
Question: I'm curious what's in it for T-Mobile with this deal? Because it seems like it’s really putting a competitor in business.
Mark Phillips: First and foremost, this is an established product they have in market. It's a T- Mobile MVNO relationship. There's a rate card,etc. Now, they don’t automatically approve you to be a carrier partner. You have to jump through some hoops. But there's a dollars and cents relationship here that they’ll benefit from. In addition to signing us up as a customer, they’re actually very interested in where the space is going. On a long enough timeline, we envision a future where someone like T-Mobile would start to view the Helium Network as more of a neutral host network, where there’s coverage available for any carrier to use. For example if you go to SFO and you’re on AT&T, you’re not actually on AT&T’s hardware, you’re using Boingo’s physical infrastructure and they just sell connectivity back to AT&T. We think we can get to the point where the coverage we’re building is resilient enough and the quality of service is high enough, where someone like T-Mobile would roll onto Helium Mobile coverage in places where they don’t have coverage.
Question: One thing that comes to mind with the telecom industry in general is how entrenched it is in terms of policy lobbying. The large carriers spend a lot. How do you think about being a startup within an ecosystem like this that’s so heavily regulated?
Mark Phillips: At a very tactical level, anything that gets deployed on the Helium Network has to comply with any regulation of the FCC. The hardware is manufactured by independent manufacturers that are part of the ecosystem and go through all the standard processes to get these things approved. I mentioned before that we're using something called CBRS, which is a public piece of cellular spectrum. Again, as long as you're complying with the rules for CBRS, you can make use of that. So we feel very comfortable with our current approach. That said, we're always looking to see what might be coming down the pipeline.
Question: How do you deal with the incentive system disappearing at scale and how do you prevent the network from collapsing at that time?
Mark Phillips: That's a big question, a very good question. The cycle we've gone through when it comes to deploying coverage, specifically on the IoT side, is starting with the early, bleeding edge adopters, people who cared about the technology, people who sort of sat at the intersection of the bleeding edge in tech and crypto and who wanted to spend $300/$400/$500 and put this thing in their window. That portion of the deployment cycle worked very well and lasted for probably 18 to 24 months. Then we moved into a period, and this is actually how the incentives are crafted on the network, where over time you are rewarded more for usage versus being rewarded purely for mining. And as you alluded to, we don't just create tokens in perpetuity. There's a system where they tier down by half every two years. And the goal is to have the usage component replace the raw, Proof of Coverage component. Coupled with that, we have also seen a huge and very promising trend in the last 6 to 12 months, where instead of someone deploying purely for the incentive mechanism, we get an enterprise that needs more coverage. There’s a business use case behind this, because the amount of capital a company will spend with us is the same or cheaper than they’d have to spend for a private network that doesn’t have the benefit of mining. And even if you mine just a very small amount of the token, you can pay for most of your data traffic from your devices just by virtue of the fact that you're putting this network out there.
With cellular, the tangible benefit of using the network is massive, right? The fact that you can use this thing, and it's in your home, or your business, or on a tower that you own, fundamentally changes how people view the relationship with something that's mining a token. We are trying to get ahead of the question you raised by stressing usage on day one versus stressing the building out of the supply of coverage. It’s certainly a hard balance to strike, but if we can get the usage ahead of the curve on the cellular network before we’re 18 to 24 months in, we basically can get ahead of all the concerns around purely mining a token, just for the incentive, and instead have people who are interested in actually using the network coverage.
(Excerpt has been edited & condensed)