M2M has matured and is apparently growing out of its current 2G designation.
Every year the M2M space continues to grow and diversify. As traditional subscriber adoption reaches saturation, carriers are on the move to find new areas of growth. The multiplying verticals that continue to facilitate M2M growth are perhaps the most promising revenue generators available to a carrier population that is struggling to find a balance between data demand, voice revenues and profitability.
This year’s M2M forecast continues to look mostly sunny, with no chance of rain in the foreseeable future. Analysys Mason forecasts that the number of M2M device connections will grow from 62 million in 2010 to 2.1 billion devices in 2020, for a 36 percent year-on-year growth rate. Considering the current macroeconomic environment, that’s not a bad basket in which to put one’s eggs.
Perhaps the carriers’ biggest decision on the M2M docket might be how they plan to evolve support of all those 2.1 billion projected devices. With the advent of next-generation networks, they now have more networks to maintain, and that costs money.
FLAVOR OF THE YEAR
Alex Brisbourne, president and COO of Kore Telematics, a company that provides endto-end M2M solutions, says that every year produces a favorite flavor in the M2M space.
In 2008, he says, it was personal navigation units. Talk of the smart grid dominated 2009, although Brisbourne believes even early adoption is three to four years away. Last year was a hybrid between eReaders and healthcare. So what’s the ticket for 2011? Brisbourne says it hasn’t really surfaced yet this year, but he sees a few promising areas.
“Enhanced payment control, funds management, is going to be a significant area,” Brisbourne says, adding that point of sale (PoS) systems are moving to cellular for security as well as cost reasons.
Brisbourne isn’t concerned with a lack of M2M solutions. Implementations of embedded cellular technology that help companies achieve efficiency emerge naturally, almost organically in response to necessity. What Brisbourne says carriers need now is a discourse around the future of their 2G networks and how they’re going to support all these new devices on their networks.
“The problem is that the 2G population is growing rapidly. Ninety-plus percent of the B2B entrance space is 2G... take it four or five years forward and there could be three or four hundred million devices around the world that are 2G,” he said. “That’s going to be a challenge.” Yankee Group released a report that identifies the 3G/4G evolution as “a delicate issue,” concluding that most M2M applications are well supported by 2G networks, but that carriers are faced with the decision: continue to provide 2G network coverage for the foreseeable future or encourage their M2M customers to more quickly migrate their traffic to 3G networks to increase overall spectrum efficiency.
Brisbourne says the industry has both rallied the M2M cry and also turned a blind eye to what exponential growth means for carrier networks. “It’s inevitable that some reasonable questions have to start getting asked in 2011 as to how long the 2G networks are going to be viable for the market,” he says.
FROM 2G TO 3G IN 10 YEARS
Mike Ueland, vice president and general manager of Telit Wireless Solutions, says that migrating M2M customers to 3G networks has numerous advantages for carriers, as well as drawbacks.
“The big thing for the carriers... is that it’s more spectrally-efficient to run even low-data bandwidth applications over a 3G network,” Ueland says.
The high cost of 3G components is perhaps the biggest inhibitor to developing 3G M2M solutions. Telit and others will be developing a few 3G solutions over the next couple of years, but Ueland says it will take real economies of scale to bring down costs before M2M will see massive deployments on 3G.
“With 3G, we’re just getting to the point to where it makes sense,” Ueland says, adding that with component costs and power drain being higher across the board, it’s difficult to justify 3G for something like a pettracking solution that needs minimal speed and bandwidth.
It appears that the projected length of deployment is a primary reason for carriers to recommend a customer deploy on 3G. The Yankee Group reports that although AT&T has no immediate plans to shut down its 2G network and is still certifying new 2G devices for deployment, the carrier does envision a complete shift to 3G within the next 10 years and is encouraging customers and clients with deployment plans of longer than 10 years to consider embedding 3G or 4G modules.
Eric Krauss, director of M2M product management for AT&T, says the dialogue between his company and M2M customers about planning for the future has definitely begun. “We are messaging to customers that it’s probably in their best interest to start looking at 3G modules. They are available for M2M enterprise needs or for any kind of longer-life deployments on say a truck, where you don’t really want to touch it for the life of the truck,” Krauss says.
But Krauss adds that the carrier is tempering its enthusiasm with realism. “The whole idea of migrating customers now is probably not for everyone. We expect that in two to three years, economies of scale will bring the cost of 3G modules down and we’ve been working with the manufacturers to figure out ways to make that happen sooner,” he says.
For now, 3G is “more of a luxury for M2M customers,” because they don’t really need the speeds, Krauss says. As for running M2M application over LTE, he says the modules aren’t available yet but he wouldn’t rule anything out a few years down the road.
“There are quite a variety of use cases in M2M, so I wouldn’t say 4G is not interesting at all. In some definitions of M2M, you might consider a wireless backup to a router as an M2M solution,” Krauss says, noting that a retail store might use wireless connectivity as a backup or alternative to a fixed-line connection.
All of the major carriers have launched initiatives to remove obstacles and speed deployment of M2M solutions on their network. In their past two quarterly reports, AT&T, Verizon Wireless and T-Mobile USA have all started including “connected devices” in their financials. Yankee Group says that the decision to publicly flaunt these figures “is a clear indicator of M2M’s growing importance.”
The numbers themselves are quite impressive: AT&T added 2 million connected device subscriptions in the fourth quarter of 2010 (including computing devices like tablets and laptops), bringing AT&T’s connected device total to 11 million. Verizon added 187,000 “other” connections during the fourth quarter, bringing its grand total to 8.1 million subscriptions. T-Mobile’s connected devices totaled 1.9 million at the end of 2010, and the Yankee Group estimated Sprint’s connected devices at around 2 million as of the third quarter.
Steve Hilton, research director of enterprise and small enterprise for Analysys Mason, agrees that companies looking to deploy longterm solutions need to be thinking beyond 2G networks. “3g module costs are coming down fairly fast,” Hilton says. “I’d expect to see 3G deployments for applications expected to last more than 10 years. This is certainly the direction with smart metering in the Nordics.”
At Mobile World Congress, Hilton saw an unprecedented buzz surrounding M2M. “I can’t describe to you how hot this M2M stuff is right now. I literally had 20 meetings at MWC in two days talking about nothing but M2M,” he says. “And the meetings were with heavy hitters – 12 major wireless carriers, four IT hardware vendors, three system integrators, one OSS/BSS vendor.”
Hilton calls the current climate amazing. “We’re finally at a point where M2M is on the A-team.”