Recent high profile announcements from both Vodafone and Telefonica have catapulted Machine-to-Machine (M2M) applications and services back up the hype list again for 2010. As operators around the world continue to explore ways of countering declining voice revenues, the potential of M2M is huge.
According to industry analysts, Berg Insight, wireless M2M connections accounted for 1.4% of mobile connections worldwide at the end of 2009, with this number forecast to grow to 3.1% by 2014. This in itself will represent 187.1m wireless M2M connections. In fact the GSM Association sees the number of M2M connections leapfrogging the number of mobile handsets and is targeting 50 billion connected devices by 2025.
Vodafone has been building its M2M credentials for a while, with announcements of M2M activities last year from its global enterprise division and the creation in December of an M2M team focused purely on the healthcare sector. Meanwhile, Telefonica are hot on their heels after also announcing in December a brand new M2M business unit.
Data bearers
Ten years ago I stood in the exhibition hall at the GSM World Congress (in the days before ‘3GSM’ and ‘MWC’) and was able to send an SMS to a vending machine to obtain a can of Coke. The vending machine was equipped with an embedded ‘phone’ and SIM card which enabled the service to operate on a standard GSM network, with a piece of software interpreting the text message and vending the appropriate drink. This was one of the early realisations of a consumer-to-machine application and a very appropriate attraction in the stuffy exhibition hall in Cannes.
Since then, there has been a steady growth of connected ‘machines’ with many different types of application already in operation. Like the Coke machine example, many of these devices rely on SMS as the natural bearer. One of the most recent M2M innovations is the smart ‘trash can’ system used in Somerville, Massachusetts, in which the public litter bins send text messages to the local authorities when they are full and require emptying. Click here for the full story.
But SMS is not the only option. For example, the popular TomTom satellite navigation system uses a GPRS connection to deliver live traffic data to the user and to collect traffic speed and direction information from each device.
Though the TomTom traffic services originally required a separate mobile phone to be connected, the latest incarnation includes an embedded SIM card / ‘phone’ making for a much more straightforward ‘user experience’ – plug-in the sat nav system, turn it on, it works.
Embedded mobile modules
There is now a big push for mobile modules to be embedded inside laptops and other electronic equipment, with the GSM Association running their own Embedded Mobile initiative to promote wireless connectivity across industry verticals including the healthcare, transportation and utility sectors.
The rollout of LTE and move to IPv6 will undoubtedly accelerate the M2M market growth and present many new service and revenue opportunities as mobile modules become de facto included in a broad array of consumer electronics and household equipment.
IPv6 addressing will also make M2M services not just a mobile proposition, but applications that can work seamlessly across both mobile and wired broadband connections.
Business model
As with all value-added applications and services, the key question for all operators is what business model to pursue with M2M services? Who provides the order fulfilment and customer services? Will the service be operator-branded, partner-branded or co-branded? Who bills the end-customer? Is the service offered on a usage-based or bundled pricing model? Who pays for the bandwidth? And so on.
Looking at the example of TomTom, the current LIVE service is sold to consumers directly by TomTom with no dependence on the user having a subscription to the correct mobile network for it to work. TomTom has negotiated this directly with Vodafone in several countries in Europe, and Vodafone remains very much a behind-the-scenes partner.
A key determining factor will be the nature of the application and the level of performance and resilience that will be expected or required of the M2M service. For example, healthcare or automotive safety applications are likely to require a much higher level of service than a luxury appliance such as a ‘smart refrigerator’ that automatically re-orders provisions that are running low.
In fact all combinations of business model are possible, resulting in a very fragmented market with network operators, solutions providers and specialist equipment providers all making their own plays for different types of M2M services. Of course the network operator will always be required to provide some level of connectivity for the service to work.
M2M platforms
The widespread use of SMS as the bearer for many content services and applications means that deploying M2M services using SMS should be relatively straightforward. However, more advanced services that take advantage of the ‘always-on’ connectivity and increased bandwidth of 3G and LTE networks are going to require a more sophisticated infrastructure. The big opportunity for operators is to provide dedicated M2M platforms and expertise to help their industry-specialist partners implement the required services.
Key to these M2M platforms will be open and automated provisioning and fulfilment; flexible charging mechanisms for event-based and bundled pricing; support for pay as you go and cyclical billing policies; the ability to mix wholesale and retail pricing and settlement models; and sophisticated business intelligence and analytic capabilities.
It’s probably a touch premature to be talking about the rise of the machines, but the M2M sector is progressing very nicely and those operators who invest in preparing appropriate M2M platforms now will be the ones who can reap the rewards of connecting this new wave of devices in the future.
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