M2M Hits its Tipping Point

By Geoff Long

Machine-to-machine communications is said to have reached its tipping point, the fine line where awareness, supplier activity and demand suddenly meet to create a burgeoning market for new services.

Many in the industry thought that M2M had reached this point a few years ago, but things like a lack of standards and inflated expectations meant that the technology didn’t take off quite as envisaged.

Now, not only is the potential recognised and growing, but analyst data and operator numbers are flowing through to confirm: this time, M2M is for real.

Tipping point: M2M is creating more than just buzz today, as evident by MWC 2013 in Barcelona

In a panel session at this year’sMobile World Congress, ILS Technology CEO Fred Yentz said what many others were thinking – M2M is on every supplier and  operator’s agenda. “The first thing is wireless and connectivity ubiquity, so the affordability and availability is there.

The second piece is the supply chain and the solution set is getting more mature and the tools are getting better . . . and the third piece, which is really evident today on the floor of Mobile World Congress is the awareness – all the way from the business leaders and the C-suites trying to make their business run better to the vendor, of which almost everybody here has some sort of IOT (internet of things) or M2M message,” Yentz said.

Mike Cihra, director of M2M and partners at Telstra, has also witnessed the buzz around M2M this year, noting that it had been building for the last couple of years and is now accelerating. “Historically there has been probably some numbers that have been overly ambitious and they haven’t come to be, but I do believe over the last two or three years we’re starting to see not just predictions but actual returns and growth numbers that are fairly significant. So it’s starting to play out as a real growth opportunity,” Cihra suggests.

Evidence of greater M2M activity appeared most recently in Cisco’s 2013 mobile visual networking index and forecast, which showed growth in M2M both overall globally and across most regions, with strong takeup in Asia Pacific. Robert Pepper, who heads up Cisco’s global technology policy team, said specific
sectors of growth were in manufacturing, supply chain management, transportation and devices for the car.

“We’re seeing a huge growth in machine to machine devices,” Pepper comments. “Most of them are not going to be high data rate, they’re going to be very bursty. When they talk, it’s not going to be continuous but they’ll communicate in bursts and they’ll communicate in mostly small amounts of data but a huge amount of them,” he explained.

Pepper also notes that the countries that are considered advanced in terms of wireless were also seen to have the highest use of M2M. Globally, Cisco is forecasting that M2M will account for 16.5% of all mobile devices on the network by 2017, although in advanced mobile economies including Australia, Japan, New Zealand and South Korea, that figure is closer to 30% of all devices.

However, because of the low data usage, the data traffic from M2M will only be around 5% globally and around 8% in those countries with a high takeup of M2M such as Australia and New Zealand. In the global market, analyst firm Analysys Mason predicts that M2M is set to be one of the fastest-growing connectivity sectors in the next decade, in the process having far-reaching implications for operators, vendors and networks. “Some communications service providers are successfully implementing strategies to seize their share of the market, but others risk getting lost in the market or becoming afterthoughts,” the firm said in a recent report.

It noted that large operators such as AT&T, Deutsche Telekom, Orange, Telefónica and Vodafone currently dominate the market with the largest M2M businesses in terms of the number of enterprise device connections. “They have shown themselves capable of co-ordinating large organisations, networks, partnerships, strategy and R&D,”noted Steve Hilton, principal analyst at Analysys Mason.

“But there are smaller-sized CSPs that are creating successful strategies as well. These so-called ‘niche notables’ include Sprint and TeliaSonera.” Another key group of “notables”, many of them major players in the Asia Pacific region, last year formed an alliance for the global deployment of M2M. The seven mobile operators that comprise the group are KPN, NTT DOCOMO, Rogers Communications, SingTel, Telefonica, Telstra, VimpelCom and most recently Etisalat.

The group bills itself as the largest mobile operatorcoalition in the world, with the aim of eliminating complexity for multinational companies associated with worldwide deployments of connected devices. According to the alliance, it aims to build the technical capability to simplify multi-network M2M solutions for multinational customers in  the retail, healthcare, consumer electronics, transportation and automobiles and energy sectors and on a worldwide scale.

At this year’s Mobile World Congress it demonstrated for the first time the alliance’s platform and single global SIM card. Ovum analyst Pauline Trotter comments that telco partnerships are the only way to go when aiming to tap into the key MNC market.

“As no mobile operator has global wireless assets, a partnership or alliance was always going to be required to serve MNC customers, whether this took the form of a global roaming partnership or an alliance between operators using common M2M platforms,”she says.

Growing pains
While the growth and revenues  are real, there is also no denying that M2M still has some teething problems as it emerges from its infancy. At a recent Australian Computer Society M2M briefing, most of the speakers alluded to the lack of standards as an area that can hamper adoption.

Daryl Chambers, director of M2M Connectivity, said the lack of standards was particularly evident in the area of short-range RF technology. “We just can’t get our head around how any of them are going to be the dominant standard today. It doesn’t matter what the marketing person might say about a particular standard, there are so many out there that we’ll have five or 10 years of standards argument before we’ll see a short range RF technology that works across appliances in the home or works within industry.”

Telstra’s Mike Cihra also notes that standardisation is one of a number of issues that the industry is working to overcome. “There are things that are accelerating in the market and there are things that are still barriers to making it happen faster. It’s still a fragmented industry with a lot of small companies building small applications and there aren’t a lot of standards. So it’s still sort of a cottage industry in many respects. I think there have been some improvements over the last year or so but by and large there is still a fair way to go in terms of having a standards based approach to M2M,” Cihra notes.

And while at events such as Mobile World Congress there tends to a lot more awareness of the technology, outside of the technology industry there is still a lot of education needed too. “I think the biggest blocker is just awareness in the market. We would think in Australia – and I don’t think it’s much different in other countries – there’s still a tremendous percentage of the business community that doesn’t know very much about M2M or what it can do for their business. It’s the business of educating the market, making them aware as to what’s possible.”

Even though awareness is at an early stage, Telstra has done a good job of tapping into its local market.

Citi Research telecoms analyst Justin Diddams described M2M as the fastest growing part of the mobile landscape. Citi estimates the Australian market to be in excess of 1 million subscribers and generating annual revenue of $100 million, with Telstra’s share of the market estimated by a number of research houses at between 70-80% and growing at close to 20% annually. In the company’s first half results for 2013, M2M generated $44 million, up 10% on the first half of 2012.

While there have been some suggestions that M2M is a low ARPU service, Cihra contends that there are other advantages that make up for this. 

“The ARPU is considerably less than some of the other products that we have from a mobile’s perspective, but actually the acquisition costs and the costs to support and churn, those are actually all much lower compared with some of our other products. So if you look at margins and you look at overall profitability, it’s actually highly profitable,” the Telstra M2M director notes.

He also wasn’t overly concerned about falling costs for M2M services. “I expect that just like everything else in terms of connectivity there will perhaps be continued declines in price for connectivity. I don’t expect that will be any different for M2M than it is for other parts of mobility.

And actually in terms of what Telstra is doing we see it as an important step for us to develop more in the way of applications and solutions that complement the connectivity. So it’s not just about providing a SIM card it’s also about providing maybe an application that’s provided in partnership with other companies, providing more of an end-to-end proposition rather than just the SIM card to drive the business and accelerate the market and to hopefully bring more value back to Telstra.”

Of course Telstra won’t have the market to itself – both Optus and Vodafone have also shown recent intentions to try to grow their share of the M2M market. Optus last month announced that it had signed a new vendor partnership with Jasper Wireless, whose management control centre is used by many of the major carriers focussed on M2M, including Optus’ parent Singtel and the members of the M2M Alliance (including Telstra).

Phil Offer, Optus Business VP of mobility and convergence, said the announcement signals Optus’ commitment to expand its M2M capabilities locally and across the Asia-Pacific region. “With Sing- Tel and Optus adopting Jasper Wireless as the common connected device platform, this enables more seamless regional M2M services to enterprise customers across the region. Meanwhile, Optus Business is leveraging the skills and expertise of our system integrator arm NCS to help our customers bring new M2M solutions to market,” Offer said.

Meanwhile, Vodafone has been more active at the group level, with the parent company announcing a major push into M2M at this year’s MWC in Barcelona. In fact the company won a best mobile service award for the DriveNow service, which uses M2M as the basis for a premium car sharing service.

DriveNow already has over 88,000 users and a fleet of 1,500 cars across Germany and the US. Vodafone Group also used MWC to launch its MachineLink 3G M2M terminal, which was developed in conjunction with Australian firm Net-Comm. According to Vodafone, the terminal can be integrated with any sort of IP/Ethernet type applications across a broad cross section of industries. Meanwhile, a spokesperson for Vodafone Australia said locally the company’s focus would be on enabling Australian business to expand globally with single connectivity solutions, with a number of announcements expected in the coming months around M2M.

Mobile trumps fixed
 In all of the recent momentum in M2M, it’s obvious that nearly all of the activity is in the mobile/ wireless world. While there are still some installations of M2M on fixed networks, there numbers are being dwarfed by what’s happening in wireless. Telstra is a good example of the dominance of mobile. “The vast majority of the business that Telstra has seen is mobile,” notes Mike Cihra.

“We do have some customers and products today that service fixed telemetry needs of the market, so we do have that capability and we’ll continue to provide it when the customer is asking for it, but I do see a trend by and large where more and more customers are looking to wireless. And the reason for that is it’s just easier to deploy, it’s faster time to market for them, and that’s something that we’re just seeing more and more of.” According to M2M Connectivity’s Chambers, satellite networks are also growing in importance for M2M.

“The reality is that satellite is a fantastic adjunct to cellular, particularly to extend coverage to places where cellular just doesn’t go,” he said. But he suggested that the next growth spurt for M2M will be on the back of LTE networks. “LTE will be the network of choice for M2M,” he said, noting that the characteristics of the network are better for this type of communications, while the capacity of LTE will be needed to cope with massive growth predicted for M2M. – www.commsday.com 

(This article has appeared in CommsDay Magazine, April 2013)