Machine-to-Machine (M2M) for Mobile Operators: Lessons from the Market
Machine-to-Machine (M2M) technology and solutions are helping to create an “internet of things” that will drive productivity and improve lives – for consumers and businesses. At the heart of this internet of things is an intelligent IP network that enables harmonious collaboration of devices in ways that appear seamless to the user.
Mobile operators in particular are looking at the explosively growing M2M market as a major source of new services revenue. ABI research predicts that the mobile M2M market is set for explosive growth, from approximately 71 million connections in 2009 to 225 million connections globally by 2014. This growth in mobile connectivity to machines ranging from vending machines to automobiles is being driven by a number of factors including, according to ABI research:
- Telematics (i.e., convergence of telecommunications and information processing) and telemetry (i.e., remote measurement and reporting of information) are seen increasingly across many vertical industries as sources of greater operational efficiency and increased incremental revenue.
- M2M applications are benefiting from the R&D and the scale of the mobile handset industry
- Technical advances in air interface standards are enabling new 3G M2M market segments.
- Government mandates are increasingly requiring the use of telematics and telemetry functionality
- Mobile network operators (MNOs) are seeking to expand their data service offerings into M2M
Challenges for Mobile Operators
The M2M Market presents some unique technical and business requirements for Mobile Operators. The most obvious technical challenge is being able to provide connectivity to potentially many millions of virtually any kind of device. Additionally, while many M2M end devices transmit only limited traffic and thus do not require high throughput or a 3G connection, other devices have the potential to scale up bandwidth requirements significantly, for example, streaming of video from surveillance devices upon detection of a security event. The looming shortage of public IPv4 addresses is also a potential constraint, with some operators postponing commercial M2M service launches because they need to preserve their IP address allocations to satisfy the continued high growth in the number of mobile broadband subscribers.
Operators also need to adopt aggressive new business models to exploit the M2M opportunity. Average Revenue per User (ARPU) for connected M2M devices is much lower compared to mobile broadband subscribers. This can be problematic for operators where an industry indicator of overall financial health is the growth or decline in overall ARPUs. Of course, the number of potentially connected M2M devices is expected to dwarf the number of mobile broadband subscribers. M2M also brings with it specific customer support requirements, often including expertise that operators may not have in key M2M applications such as automatic telematics, transportation fleet management, security and public safety, remote healthcare monitoring, and remote automation for energy and utilities. Lastly, M2M brings with it transnational competitors operators, all seeking to service their enterprise customers with an integrated, global connectivity solution.
M2M operators are increasingly optimizing their networks for the unique needs of M2M applications. A recent M2M study from ABI research, sponsored by Cisco, finds that such optimized networks give operators the ability to differentiate their connectivity offering, compete more successfully for ASP business, and ultimately increase their revenue opportunity from selling connectivity services for M2M applications. For example, mobile packet gateways optimized for M2M traffic need to handle a large number of packet data session activations. Other technical capabilities that operators can deliver to enhance their “M2M-tuned” networks include: IPv6 translation and support, seamless recovery of interrupted sessions, support for M2M application-initiated “triggers” to wake up a device, and enhanced network monitoring and diagnostic tools to enable ASP partners and enterprises to self-provision, manage, and troubleshoot their devices in the field.
Operator Best Practices
In a recent M2M webinar co-hosted by M2M magazine and Cisco, Telenor Connexion, a leader in M2M connectivity services, provided useful lessons from its years experience in the market. As Telenor Connexion evolved from a traditional mobile operator model to a dedicated M2M operator approach, it had to transform from providing best effort network connectivity to becoming an instrumental part of delivering embedded, business critical communication services to its customers. Furthermore, the operator had to extend its mobility expertise to acquire sufficient vertical industry expertise to better understand and meet the business challenges of its M2M customers, both ASPs and enterprises. The network itself had to evolve from a standard infrastructure serving all customers to a dedicated infrastructure with enhanced features required by M2M customers only.
In sum, it’s clear that mobile operators need to adopt a fundamentally different approach to participate and profit from the exploding M2M market. While becoming part of their customer’s business critical solutions, operators need to respond to new challenges for both mobile technical infrastructure as well the overall business model and strategy.
If you will be at CTIA 2010 in Las Vegas, come by the Cisco exhibit stand to see demonstrations of solutions that can help mobile operators profit from the growing M2M market with unique M2M features and value-add.