FEATURE M2M
M2M devices generating $4 a month ARPU,”
says Brisbourne. “Is that the right strategy?
It’s one leg. But lasting low cost of acquisition
in M2M as that market comes of age, can be
the next logical growth point—especially as
it is accretive: you don’t have to steal another
provider’s customer at a high subsidy to get
the business.”
Another development that might help focus
operators’ minds on steady revenue stream
M2M offerings is the move in the consumer
space to all you can eat data tariffs. A bit pipe
future scares carriers, but it need not signal
the end of growth.
“They should have done this long ago—and
recognised that the ‘pipe’ is a highly valuable
utility that they price accordingly,” says
Brisbourne. “It would have saved countless
tens of millions of wasted dollars on content
and platforms. Think of the internet: lots of
money in pipes there, driven by ubiquitous
connectivity and no responsibility for content
management. As they come to grips with the
‘smart utility’ function of the network, so they
recognise open access, complex applications
and integration is best done by others and
they benefit from the traffic.”
If the carriers do decide to move more aggressively
into the telematics space it’s more
than likely that we’ll see a round of acquisitions
as network operators seek to snap up
M2M application providers and MVNOs. “The
sentiment at carriers will change over time
and they will begin to see M2M as strategic
to their growth,” says eDevice’s Freudmann.
“I expect at that point they will be poised to
take over their partner MVNOs by buying
them out or taking ownership of their users
in another way.”
Some MNOs, though, will believe that they
can be the provider of integrated solutions in
their quest to ‘own the customer’ and believe
their brand stretches. “This is almost certainly
a recipe for failure,” warns Brisbourne. “It says
that the MNO knows how to choose the best
application, keep it current, support and sell
it. In reality, the M2M market is multitudes of
micro segments, with domain understanding
and integration paramount.”
Others will attempt to build platforms and
presence in the market, to greater or lesser
success thinks Brisbourne. “The real fear here
is that they revert to the game they know best,
pile it high and sell them cheap—rather than
recognise the complex, critical integration
needed here.”
In all likelihood, there will be consolidation
Another development that
might help focus operators’
minds on steady revenue
stream M2M offerings is
the move in the consumer
space to all you can eat
data tariffs
both in specialised providers as they seek
to extend geographic reach, and potentially
by MNOs finding quick entries to market.
Brisbourne predicts that in five years, the
market will be dominated by these latter
two activities.
He’s not alone, Macario Namie at Jasper
Wireless: “The M2M ecosystem is fragmented
today and a key driver of any bourgeoning
industry is consolidation—not just in terms
of mergers and acquisitions, but also in
development of common standards and
adopted technologies.
Namie believes that the industry will develop
according to subscribers’ demands. “If carriers
need to quickly bring new services to market,
they are more likely to look at acquisitions and
white labelling. The M2M business is very different
from the traditional voice business, making
it difficult for carries to grow organically if that
is not their core business,” he says.
The margins on M2M need not necessar-
40 Mobile Communications International | First for news, best for business
ily be as slim as operators’ fear. In terms
of earned revenue per KB, or per message,
margins can be better than in consumer
services. The devices use low levels of data,
so where a consumer could buy 1Gb of data
today for under $50 per month, an M2M
‘user’ might pay something in the region
of $4 per Mb—but then only use 350KB to
1Mb monthly. So profitability per subscriber
becomes more relevant.
“Revenue per subscription is lower, so costs
must be lower. With automation tools and
operational software built for specific vertical
industries, costs can be easily managed out
of the process. This is what can make M2M
highly profitable for both MNOs and enterprises
alike,” says Jasper’s Namie.
The telematics industry could be boosted
further as M2M providers and their enterprise
customers realise the cost benefits of more
affordable 3G technology. Although, at present,
M2M is still largely based on GPRS networks,
Namie believes that over the next five years
there will be a transition to 3G. “Consumers
are willing to pay $600 for the latest iPhone.
In the M2M world, companies are looking
to deploy hundreds of thousands of these
devices and they need to control costs,” he
says. “3G modems can be two to three times
more expensive than a GPRS modem and data
costs can add up quickly. Eventually this will
change and M2M devices will mature and
require more bandwidth.”
Rami Avidan of Wyless thinks next generation
technologies will help drive the business
in new and innovative ways, however, this is a
long term view: “I strongly believe that these
new technical developments are very good for
the industry as new technologies drive new
thinking. Having said that it, is very unlikely
that broader connectivity is going to have a
massive implication for the M2M segment in
the next three to five years simply because
there are very few applications or customer
requests that demand the existing high speed
connectivity.”
Avidan estimates that 95 per cent of the applications
and customers are very happy with
GPRS/EDGE/3G today. This does not mean that
the future will not require the new technologies
but the impact of them is some time away.
It’s unlikely that Craig David’s ‘chilled’
lifestyle will become commonplace, even with
next generation networks, but the march of
the machines is well underway and in time
will prove to be a rich source of MNOs’ data
revenues. ■
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