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M2M: Ready For an Explosion, So Where’s the Bang?

Machine-to-machine (M2M) communications is a technology that allows machines to communicate and to perform specific tasks without human intervention. It is intended to improve monitoring, control, supervision, and optimization tasks while reducing operational costs and increasing the efficiency of business processes. Convergence of the Internet and mobile communications has created the perfect environment for M2M services to flourish. This environment has been further enriched with advances in sensor, microcontroller, and battery technologies coupled with significant reduction in costs. It all sounds like the conditions are right for an M2M explosion, but why don’t we hear the bang?

Although not new, M2M is a great idea. However, the impact of M2M applications isn't felt on a day-to-day basis. It hasn't had the same effect as Facebook, Twitter, or the tablet PC. One of the key reasons why: Mobile operators’ existing business model has provided a huge growth opportunity for a long time. The model is based on increasing the number of subscribers as much as possible. This is a straightforward model with straightforward pricing. The complexity of the M2M business model is more than what operators have been willing to take on.

Because mobile operators did not push M2M services as aggressively as increasing subscribers, the M2M applications we have seen to date have been fragmented. Successful M2M services require service providers to get closely involved in the business processes of customers — a lengthy and complex task. In a typical M2M service, the customer gets a solution as a result of successful collaboration between an application developer, system integrator, technology provider and a mobile operator (the main contractor). Although provision of an M2M service is complex, the relationship between the operator and the customer is close, mutually profitable, and lasts for a long time.

A lack of standardization in M2M services also keeps the relationship close. Once an M2M service engagement is up, running and performing as expected, customers won't switch service providers. Changing an M2M service provider is never as straightforward as simply changing a SIM card because the M2M solution is customer-specific. Currently, changing an operator means a redesign of the M2M solution from scratch. This situation will remain unchanged until M2M services are standardized (if ever).

Mobile operators will wait until human subscriber growth plateaus before launching M2M services. This approach reminds me of the famous phrase “If it ain't broke, don't fix it.” Considering the operator's investment in an M2M venture, this strategy is justified. But it doesn't change the fact that mobile operators will have to offer M2M services if they want to maintain growth and profitability.

Let me try to explain why that is with a simple example:

Imagine a family of three whose members have one mobile phone each, which means three mobile phone subscriptions in total. Let us assume that each member of this family also has a laptop that connects to the Internet via a 3G modem. This brings the total number of subscriptions to six in this household.

Under normal circumstances, there is very little reason why this household should get another mobile phone subscription. That's where the growth bottleneck for mobile phone operators is. If a mobile operator is able to offer a home monitoring M2M solution to this family, a new “machine” subscriber — and therefore, a new source of revenue — can be generated.

Maybe the same household will also need an M2M security and safety application, which will increase the number of subscriptions further. As the number of M2M applications increases and new “needs” are created for consumers, the number of machine subscriptions will surpass that of human subscriptions. Therefore, it is not surprising to hear that some mobile operators expect four times as many M2M connections as humans on their networks in the near future.

According to Berg Insight AB, chip manufacturers will also benefit from M2M growth. By 2017, M2M is expected to comprise 16 percent of all chip sales in the world.

Most operators prefer to have a dedicated department (with top level managers as well as a dedicated development team) to develop and handle their M2M services and technologies. Although on the technology side most M2M applications will share a common base, the business and the marketing side of the picture is very different. This is because the diversity of the business problems that can be solved via M2M is huge. These problems include, but are not limited to, street lighting, courier services, bus services, vending applications, tele-health, meter reading etc.

In order to get a basic perception of the size of the M2M market, let’s just visualize the number of companies that provide a unique product or service. Each unique business will have at least one problem which M2M technology can solve. This is where I think the true potential of M2M technology is.

One very important challenge that mobile operators face is developing price plans suited for M2M applications. The last thing any M2M user wants to worry about is how much M2M communication costs per minute and how many megabytes are left on the M2M data plan. With so many M2M devices running simultaneously, it's easy to see why customers might avoid M2M services. Although I cannot provide any solid cost figures as a suggestion, the ideal M2M subscription (although probably unrealistic) in my mind would be:

  • Free SIM card and free activation for each M2M device.
  • Fixed M2M data cost per month without any cap on data usage (or with a sufficiently large upper limit).
  • Reduced cost and attractive incentives for adding new M2M devices (i.e., creating new M2M subscriptions) that use the same mobile operator.

Due to different data traffic requirements of M2M applications, I think most operators will prefer to classify the M2M applications and charge accordingly. Although treating all M2M applications the same will provide a better ecosystem for M2M growth, this may not be practical.

Let us know how you feel about this as a consumer, or as a business. What's the right way to structure an M2M service plan?

14 comments on “M2M: Ready For an Explosion, So Where’s the Bang?

  1. Barbara Jorgensen
    July 13, 2012

    I'm a little unclear on one issue here: does m2m service require a subscription for each device? In other words, instead of multiple PCs using a single modem (one charge), m2m would require each machine to be identified and charged separately? If that's the case, it seems m2m would be very profitable.

    Or I might be missing something….?

  2. bolaji ojo
    July 13, 2012

    M2M might actually make multiple charging unnecessary. We already have a lot of M2M activities with modems and routers, for instance. One of the things that M2M offers is in trimming costs as the work that used to be manually performed gets assigned to a machine. One wireless broadband card, for instance, allows up to 5 people to get online without multiple charges. I see M2M as a tool that allows companies to offer increased automation at lower pricing.

  3. Cryptoman
    July 13, 2012

    That is a very good point indeed Barbara. Technically, one GSM/3G modem with one SIM card would suffice for many M2M applications. However, the mobile operators prefer alternative architectures where multiple SIM cards are necessary to build M2M networks.

    There are two ways the mobile operators will be able to make money from M2M applications:

    1 – Sell as many “machine” subscriptions as possible.

    2 – Increase the data usage per subscription as much as possible.

    With most M2M applications, the data usage per device is not high enough e.g. a home security application that alerts the user when there is a break in. Although there may be exceptions to this, the safest way to ensure a sizable revenue for the operators is option 1, where a small fixed fee will be charged per M2M device.

    As a matter of fact, in 2010 the GSM Association (GSMA) has formed a task force to develop something called “embedded SIM” technology. This task force includes many big names such as AT&T, Deutche Telecom, France Telecom, NTT DOCOMO, Verizon Wireless and Vodafone who agreed to spearhead this development. Besides making remote activation of SIM cards possible, embedded SIM is also targeted to deeply integrate the SIM technology into a device, making miniaturisation and subscription management of M2M devices easier. We should soon start to see devices with embedded SIM soon as the products were targeted for 2012.

    Embedded SIM is a means for the mobile operators to reach the volume of billions of M2M devices operating on their networks. Nobody wants to install each SIM card individually and activate them one by one on a modest M2M network say with 100 devices. Therefore, embedded SIM does make a lot of sense and is a strong indication of how the mobile operators are planning to make money from M2M.

     

  4. t.alex
    July 14, 2012

    What will be the trend in connectivity between machine and machine. Is it wifi or 3G data plan?

  5. Cryptoman
    July 14, 2012

    Connectivity will be based on GPRS/3G/4G as these are SIM based services and can be charged based on mobile operators' existing subscription plus data usage plans.

  6. stochastic excursion
    July 14, 2012

    I see an opportunity to use this technology in the commercial sector.  Off-site, staff people use their mobiles extensively, and macro access to site servers or the cloud can route documents remotely.

    The use of mobile devices to capture alert messages is used now with courier services.  This makes use of e-mail to SMS text messaging, which offers possibilities for smart security and appliance safety applications.

  7. prabhakar_deosthali
    July 15, 2012

    For M2M to be cost effective , what we need is a single gateway device which can communicate with the rest of the world using whatever form of communication media is available ( say mobile) and has a local area communication system with all the devices in and around the home.

  8. Cryptoman
    July 15, 2012

    Hi Prabhakar, There is the technical aspect as well as the business side with M2M. If the revenues are not satisfactory, the mobile operators are unlikely to invest in M2M. I think this is one of the reasons why M2M has not grown as fast as expected. I agree that gateway is the most cost effective method of owning an M2M solution but this is not what the mobile operators want for obvious reasons. Unfortunately, as the mobile operators are the key contractors to make M2M a success, users will end up paying more than what is technically possible when it comes to M2M applications.

  9. Taimoor Zubar
    July 15, 2012

    @prabhakar: Isn't that easily possible through a Wi-Fi based wireless router? Already all your laptops and smartphones are connected through the router so M2M communication can be done with the router acting as the gateway. All the external communication can be handled by the router through internet then.

  10. mfbertozzi
    July 15, 2012

    @p_d: according to your thoughts, it seems new architectures/protocols as 6LowPan could exactly feet the needs, but it is still not used abroad…I am missing something with regard to the real reason?

  11. SunitaT
    July 16, 2012

    By 2017, M2M is expected to comprise 16 percent of all chip sales in the world.

    @Dr.Cagri, thanks for the informative post. I never imagined that M2M is such a huge market. Thanks to these new emerging technologies,  we will not see slow down in the chip sales. Curios to know which companies will benefit more from this  new technology ?

  12. Cryptoman
    July 17, 2012

    Hi tirlapur.

    I think the 8-bit and the 16-bit MCU manufacturers will benefit the most as these processors are capable and cheap enough for most M2M applications.

    Also, for GSM/GPRS/3G OEMs there are great opportunities. Companies such as Motorola, Sierra Wireless and Cinterion will greatly benefit from this opportunity.

    The mobile operators already provide development kits (including the development environments as well as the hardware and the SIM card) that simply let the software developers and the designers to experiment with the M2M technologies.

    I also see a great growth opportunity for the battery as well as the energy harvesting companies that will constitute an indispensable part of most M2M applications.

    Of course, the health of the above growth comes down to how well the mobile operators create the correct ecosystem for M2M to grow.

  13. t.alex
    July 18, 2012

    prabhakar, that sounds like a good idea. Are you referring to some central home control gateway which allows people to have access from outside, say to turn on the heater before hey come home?

  14. prabhakar_deosthali
    July 19, 2012

    Yes ! That would be my idea as to how the M2M networks should be implemented. Instead of individual machines in a home or office communicating over independent communication channels , a gateway would help in economizing the cost, as well as we can deploy a proper security firewall in the gateway – it being more powerful tan the individual controllers in the appliances and other home machines.

    Such gateway would allow the owner of the house ( or an authorized home care and security agency to communicate , query and control various gadgets and appliances

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