Machine-to-machine communications, often
using cellular networks, is undergoing a lot of change.
Oklahoma Natural Gas (ONG) operates and maintains 17,000 miles of pipelines stretching across Oklahoma, providing gas to about 800,000 customers. Federal regulators require the company to monitor those pipelines for leaks or other safety issues.
When the Federal Office of Pipeline Safety issued its “integrity management” mandate in 2003, ONG looked at its options. One of the options was to hire 90 new technicians who each would cover 150 miles of pipeline every day. Add the cost of buying and maintaining the vehicles and ONG was looking at spending $5 million annually.
The company took a second option – wirelessly monitoring the pipelines. It saved $4.8 million a year. The solution was a matter of buying and installing wireless modems from AirLink Communications (acquired this year by Sierra Wireless) and paying a monthly wireless service charge. The system paid for itself in two months.
Such is the attraction of machine-to-machine (M2M) communications, which typically ties together some sort of monitoring equipment with a cellular backhaul. Service providers and equipment manufacturers have been doing this for more than a decade, originally using wireless analog but increasingly going digital and even using 3G networks.
THE NON-HUMAN TOUCH
M2M is not a sexy business – these monitors wake up periodically, send little bits of data and then go back to sleep. Average revenue for a carrier from these applications may be a few dollars a month, less than one-tenth of what they get from humans. But machines vastly outnumber humans, although cellular penetration for humans is still greater.
The analyst firm Berg Insight is forecasting the number of machines that will be connected to cellular networks in North America will reach 66 million by 2011, up from 9 million using cellular and satellite in 2006. Harbor Research says there are 110 million M2M devices in use now globally, communicating among themselves in a kind of “Internet of machines.”
There have been predictions in the past that M2M was going to take one of those hockey stick rides. Although that hasn’t happened, there has been steady growth. Analysts and those in the industry are now saying, however, that M2M has reached one of those inflection and turning points that spells even faster growth.
Sam Lucero, an analyst with ABI Research who has followed cellular M2M for years, expects the industry to grow more than 25% annually over the next several years. He is forecasting M2M service revenues rising from about $2 billion last year to $8 billion in 2012.
“Across the board, vendors and service providers are seeing an inflection point in terms of interest and uptake. Multiple M2M vendors are mentioned in the Fortune 1000,” Lucero says. “Companies are issuing RFPs (requests for proposals), and the conversations that vendors (are having with enterprises) are at a more strategic level, with the CIO or CTO. A corner is being turned.”
|
Gossen: Large companies are beginning to appreciate
M2M’s value. |
Dick Gossen, CEO of Aeris, agrees. “We’ll look back on 2007 as the year it started really taking off,” he says.
But Aeris hasn’t been hurting so far. The privately held company, founded in 1992, has enjoyed 279% revenue growth in the last five years, placing it at No. 38 on Deloitte & Touche’s Wireless Fast 50 list this fall.
Aeris is one of the M2M service providers that leases airtime from traditional cellular operators but also has its own infrastructure to manage its services. It started out with an analog-based MicroBurst technology using the control channel on a network but has started using digital services.
GROWING POPULARITY
MicroBurst over analog was used by customers with “fairly simple needs,” says Gossen, like tracking a truck on the road. Aeris had to show potential customers how the solution could save them money and increase efficiency. Now, Gossen says, big companies such as Caterpillar or International Harvester are driving the demand because they know the value. Caterpillar has been offering MicroBurst tracking as an after-market product to help its customers monitor equipment and engine running hours.
“They have a rich ROI proposition,” Gossen says. He says long-haul trucking companies like to have M2M to monitor vehicle performance in real time. “If the truck has a transmission overheating in the desert, they can get a message to the driver for him to pull over at the next stop,” he says.
Asset tracking and fleet management are among the things that M2M can do. As mentioned earlier, it also can be used to monitor equipment in the field like a pipeline. It also is used for automatic meter reading and surveillance. Sometimes it is even used with other wireless technologies such as ZigBee, Bluetooth or Wi-Fi.
 |
Jasper Wireless uses international SIM cards in modules
to provide global coverage with local service. |
THE MMO PROPOSITION
Like other telecom sectors, M2M includes service providers and infrastructure and hardware vendors. The service providers typically buy airtime from cellular operators but they bristle at the notion that they are mobile virtual network operators (MVNOs), not wanting to be associated with the failures of some MVNOs. ABI’s Lucero calls them MMOs, for M2M Mobile Operators, reasoning that MMOs like Aeris, Jasper Wireless and Kore Telematics have their own infrastructure on top of the cellular network.
That means that a trucking company using an MMO will maintain continuing service even as the truck roams across networks, even into another country. The MMO infrastructure overlay makes it possible to troubleshoot and diagnose problems on several networks.
Another benefit is that normal SMS messages are not guaranteed to arrive at their destination if the receiver is off the carrier network, but an MMO may have its own SMS server and can make that guarantee. An MMO also can guarantee low latency on other data, or even voice. MMOs typically can have greater flexibility in pricing.
 |
Visibility from Jasper Wireless’ wireless control center. |
CHANGE IS IN THE AIR
M2M technology is undergoing some changes.
The analog base it was built on is going away next year because of the FCC ruling that allows carriers to shut down their analog (Advanced Mobile Phone System, or AMPS) services as of Feb. 18, 2008. The M2M industry has been able to plan for this since 2002. But Alex Brisbourne, president of Kore Telematics, says 70% of the M2M devices in use now are analog and have to be migrated to digital radios.
Another trend is the use of 3G data for some services that require more bandwidth. These include multimedia content delivery to point-of-sale terminals, high-speed telematics including real-time navigation, remote information displays like digital mobile advertising, or video surveillance.
Analyst Lucero says 3G modules will make up about one-third of the total M2M market by 2012. He says 2G data using GPRS and CDMA will suffice for most M2M applications. Plus, he says other wireless technologies such as WiMAX or municipal Wi-Fi could grab a share of the market.
“WiMAX and especially municipal Wi-Fi offer attractive alternatives to CDMA 1X EV-DO or HSDPA 3G technologies for wide area wireless M2M,” he says, adding that both are more cost-effective and operationally efficient. He says with the backing of Intel and carriers worldwide, WiMAX and municipal Wi-Fi will become important high-speed wireless M2M networks in coming years.
Yet 3G applications are opening up opportunities. Andrew Berman, senior vice president and general manager of the M2M business unit for Sierra Wireless, says 3G data applications are driving much of the new business for the company. Regulatory agencies have influenced some of that, he says, while operators also have seen data as a bigger source of revenue.
| By the Numbers |
| |
Machines Using M2M |
Technology Connection |
| 2006 |
9 Million |
Cellular & Satellite |
| 2011 |
66 Million |
Cellular |
Daniel Collins, chief technology officer for Jasper Wireless, thinks M2M has only recently started taking off because it has been too complex in the past. Jasper, founded in 2004, has built its business model on providing international services with automated provisioning. It uses international SIM cards in modules that work in 35 countries.
Kore’s Brisbourne says M2M is changing the most because of a combination of the migration to digital, a halving of the cost of M2M modules and devices, and the business cases that can be made for using M2M. He says Kore has experienced an almost viral adoption of its use of monitoring bracelets for criminal offenders on parole.
Another case Brisbourne cites is a courier company whose drivers pick up packages at drop boxes. The unidentified company has started using M2M to monitor whether any packages have been left, so the driver doesn’t have to stop if there is no pick up. This saves the company time and expense that can be multiplied by thousands or even millions of boxes.
That’s what M2M is all about. Millions or billions of machines, all connected.
| M2M Module Market Complexity |
Machine-to-machine communications covers so many uses and technologies that there is no single standard covering the hardware and software it uses. That can make the implementation of M2M complicated.
But Sam Lucero, analyst with ABI Research, says multiple and sometimes proprietary standards don’t appear to have stalled the M2M market. Part of the reason is that consolidation in the industry is bringing solutions together. And it also is partly because companies implementing an M2M solution are finding ways to work around any interoperability issues.
“It’s just not that big a deal anymore,” says Chris Purpura, senior vice president of marketing for the service provider Aeris. He says vendors are getting together on hardware footprints and software.
| M2M Module Market |
 |
Source: ABI Research |
“There is a lack of an industry standard like the W3C (World Wide Web Consortium) but the vendors are cooperating to get the same footprint and compete on the guts of (the M2M module),” Purpura says.
The two largest M2M module providers, Siemens and Wavecom, have different software platforms. Siemens, which Lucero says has about a 26% market share, uses a Java-based platform. Wavecom, which grabbed a 24% market share after acquiring Sony Ericsson’s M2M business in 2006, uses a proprietary OpenAT software suite.
Anders Franzen, COO of Wavecom, says the company’s new StarService platform built around its WMP50 microprocessor, aims to solve service and maintenance costs faced by companies using M2M. Jasper Wireless has started offering StarService with Wavecom’s embedded SIM card, which it calls inSIM. Franzen says StarService provides services and upgradeability, cutting maintenance costs for a product that can be in service more than a dozen years.
“These systems are meant to be in the field for years at a time,” says CEO Ron Black. “The probability that you have to change something in the system over that time is high. If you have 2 million meters in the field and need to upgrade their software, the cost to upgrade can be much higher than the cost of the device. We’ve always offered the ability to change the operating system or application with over-the-air agents embedded in our processors.”
Aviad Gefen, business unit director for Motorola’s M2M Wireless Modules unit, sees continuing complexity in the market if for no other reason than the need to serve new air interfaces. Motorola offers M2M modules with GSM in all its forms, UMTS and CDMA (the latter will see a new module in 2008), as well as ZigBee, Bluetooth and Wi-Fi. The company plans WiMAX and LTE modules in the future.
“It’s a very dynamic market,” Gefen muses. “There’s been consolidation and may be more.”
|