Cellular network operators need to think about more than connectivity if they want capture a slice of the emerging M2M market.
Well-publicised predictions of 50 billion plus connected devices by 2020 are wide of the mark, according to Tom Rebbeck, research director at consultancy Analysys Mason, and if anything have harmed the sector by raising and then dashing investors’ hopes.
But with Analysys Mason’s latest forecast showing that the number of M2M connections worldwide will grow by 29 per cent a year through to 2023, there are plenty of opportunities for cellular network operators to cash in on the rise of Internet of Things if they are prepared to diversify.
“Connectivity is only a small part of the M2M market,” said Rebbeck, speaking at an even organised by Cambridge Wireless in London yesterday. “If operators are only going to get into connectivity they are only going to get a tiny sliver of the market.”
Low revenue per user and a highly competitive market revolving around just a few sectors, such as utilities, automotive and transport, make M2M a difficult area to operate in.
“You either win that contract or you don’t, it’s kind of binary. It’s very much concentrated in a small number of vertical markets and a small number of companies in those verticals,” said Rebbeck.
But the stagnating growth elsewhere is forcing companies to look at increasing efficiency and M2M infrastructure and network costs constantly dropping.
According to Rebbeck, operators who are prepared to provide customers with added value communication services that are both secure and flexible can take advantage of the next big area of growth for cellular communications.
“For M2M you need patience, it isn’t going to happen overnight,” her said. “Operators and investors need to take a long term view of M2M.”
More pressing though, according to Tony Milbourn from Swiss component manufacturer u-blox, is defining an appropriate standard for M2M cellular connections as traditional LTE (3G) and GSM (2G) networks are not fit for purpose.
While the Internet of Things will rely largely on short range radio technologies such as Bluetooth and Wi-Fi, cellular is going to be the primary wide-area technology for M2M and Milbourn predicts it will account for roughly a tenth of the market.
“The problem is that the current networks are driven towards providing mobile broadband to the consumer – video on your smartphone – and they’re designed to make that cost effective for the operator,” he said. “M2M does not need that, what it needs is cost effective, but it needs much lower data rate and much lower cost infrastructure.”
An effective cellular standard for M2M would need to be able to provide pervasive coverage, significantly better than GSM, support very low cost modems and operate for years on a single battery, according to Milbourn, as well as operating in licenced spectrum for reliability which would rule out plans to use TV white space.
And while a number of proprietary technologies such as Sigfox and Weightless are emerging and 3GPP, the partnership behind the 3G and 4G standards, is working to adapt LTE for new classes of device to meet these needs, M2M will struggle to reach its potential until a common standard is adopted.
“This is where the future of cellular is,” he said. “If we don’t have the right standard people won’t invest to create the core technology and the volumes won’t happen quickly. So we need a global standard to allow the investment to then drive the price point down.”