Different Perspectives on M2M

One of the significant themes of this year’s Mobile World Congress is operators lining up to address the growing opportunities in machine-to-machine (M2M) and embedded cellular connections. I’ve noticed a lot of activity in this area and seen demos of several working products and services. It has the feel of something that’s about to cross the chasm out of experimental projects and become a large market.

However, operators and technology suppliers seem to be taking different approaches to the opportunities. For example, in the GSMA Embedded Mobile House area I’ve seen demos from both groups. Suppliers’ products included connected outdoor signs, smart meters, rich content delivery to cars, and healthcare accessories and applications. In almost every case, when I asked about operators’ role in such systems, the answer was always “connectivity” — that is, little more than bit pipes.

In contrast, when I discussed the same topic with network operators actively involved in it, I came away with a different perspective. The people I spoke to pointed out four things:

  • Provisioning and managing large numbers of embedded or M2M devices is not trivial and needs integration with rating engines, billing and other systems.
  • Many customers will opt for two sources of hardware, which has the effect of beating suppliers up on price.
  • The operating costs over the life of the system tend to eclipse the capital cost and — although the operators obviously have to provide an efficient service at a sensible price — there’s good business for operators in serving the client, which goes far beyond just being a bit pipe.
  • The market’s young and the lines between players aren’t firmly established. This means that many different options exist about where operators can play, ranging from full hosting and outsourcing through to wholesaling airtime to their customers, which then do all the rest.

These factors don’t mean serving the market will be easy. The new business areas will need very different approaches from operators. The deals are big and lumpy, need radically different sets of tariffs, and are often based on long contracts. One operator told me, “Imagine connecting 2 million SIMs on a 15-year contract”. Addressing this market will require much greater openness and flexibility from operators about how they approach agreements and about the types of deal they make. They’ll have to overcome the stress placed on systems such as billing and make investments in areas such as provisioning platforms.

In 2010 Ericsson talked about this market in terms of 50 billion connections. It’s not yet clear whether that number’s realistic, but it’s certain that connections will far exceed the number of people on the planet, and that a huge opportunity is opening up now.