M2M: the new frontier (and potential saviour)

Mobile operators in Europe are strenuously denying that they're facing the perfect storm of declining voice revenues, a huge upsurge in data traffic and the need to finance new spectrum licences.

For many years, operators did all they could to boost mobile data traffic realising that voice revenues slide downwards as the market becomes saturated and competition increases.

The novel concept of offering low-cost unlimited data bundles certainly attracted consumer attention and drove traffic volumes to record levels. For example, consumers in the UK significantly increased data usage during last year by an estimated 68 per cent, with data volume over the mobile networks increasing by a startling 240 per cent.

Unfortunately, UK mobile operator revenues fell by 3.5 per cent to £14.9 billion in 2009 despite this leap in data traffic.

While there seems little operators can do to halt the steady fall in voice revenues, M2M might provide a route forward whereby a fresh income stream could be generated.

This new opportunity is arriving from two directions: the growing interest by utility companies--provoked by increasing regulation--to implement smart metering, and the drive to enable consumer devices with a network connection, such as Kindle e-books.

This, according to the market research firm Ovum, opens the door for operators for major customer deals, some of which could be global in scale. However, the firm believes that not all mobile operators will see value in such deals, and struggle to construct a revenue model that is advantageous to themselves.

Others, however, will recognise this huge opportunity in terms of numbers of connected devices, and the possibility to develop new delivery and business models that might be applied elsewhere.

The challenge, warns Ovum, will be for operators with M2M ambitions to go beyond simple network provision and add value by working with partners, such as module suppliers and system integrators, to accurately map the service to their clients' business requirements.

Conversely, suggests Ovum, operators could choose the wholesale route whereby they provide the connectivity and relevant partner relationships, but devise revenue models centred on volume.

While this latter option has the dread odour of dumb pipe, becoming deeply involved with M2M might just be the panacea to the ‘death by data traffic' that seemingly confronts a growing number of Europe's operators. -Paul

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