M2M customers may feel the pain of AT&T's 2G shutdown
Last week AT&T Mobility (NYSE:T) downplayed the news that it plans to shut down its 2G network by 2017 and refarm that spectrum so it can launch more advanced services. The company said only about 12 percent of its customers still use the 2G network and it will gradually migrate those customers to 3G and 4G devices.
For the average consumer customer, this migration makes perfect sense. Even the most low-usage customers will likely upgrade their device over the next five years and therefore will be enticed to migrate to 3G.
However, what AT&T didn't address was the impact this transition will have on its core machine-to-machine customers. I queried AT&T about the fate of the company's 2G M2M customers but so far have not received any response.
I suspect that there are at least a few million M2M customers using AT&T's 2G network for their low-bandwidth data communications. For years M2M customers gravitated to 2G modules because their data needs were minimal and 2G modules were significantly less-expensive than 3G modules. Because many of the traditional M2M applications such as remote monitoring and meter reading only require minimal data speeds and a small amount of bandwidth, 2G networks were suitable for their needs.
But now these companies are going to be forced to either leave AT&T's network or upgrade all their 2G modules to 3G. Either solution will likely be a major undertaking. And even though they have been given a lot of notice about the 2G shutdown, most of these firms probably thought their 2G solution would be suitable for many years to come.
In fact, this is one of the big downfalls of using cellular networks for M2M applications--many companies want a solution that has a very long lifespan, and yet cellular network technology changes rapidly and legacy networks must eventually be turned off.
According to Josh Builta, senior industry analyst with IMS Research, "future-proofing" of M2M is a hot topic for enterprises interested in deploying M2M systems. In a recent blog posting, Builta said that IMS estimates that by 2015 3G modules will make up 40 percent of the total market and that percentage will likely accelerate as more operators follow AT&T's lead and shut down their 2G networks. However, it's important to note that while T-Mobile USA is in the process of refarming its 2G spectrum so it can deploy more advanced technologies, it has said it will keep a portion of its 2G GSM network live to accommodate roaming customers and existing M2M customers.
Will AT&T's M2M customers flee to T-Mobile's 2G network or bite the bullet and upgrade to 3G? Builta said that he believes both scenarios are likely. In addition, he thinks that CDMA 1X modules, which run on Verizon Wireless (NYSE:VZ) and Sprint Nextel's (NYSE:S) 2G networks, could also see a boost from AT&T's 2G shutdown. Builta said that total annual shipments of these CDMA 1X devices are now expected to approach 6.7 million in 2013, about a 50 percent increase from 2010.
Either way, the shuttering of AT&T's 2G network will likely cause many M2M customers to rethink their current strategy. Is the answer to move to another 2G network or upgrade to 3G? Is any cellular network technology going to have a long enough lifespan to fulfill their M2M needs? --Sue