M2M mobile: Will carriers rise to meet M2M ecosystem challenges?

Ron Westfall current analysisThere exists a clear industry consensus that mobile machine-to-machine (M2M) communications will play an increasingly prominent role in carrier networks and IT operations. Market estimates range as high as 25 percent compound annual growth rate (CAGR) projected during the 2010 and 2014 time frame for the amount of mobile connections used in M2M communication. This will logically and likely entail more than doubling mobile M2M's portion of overall worldwide mobile network traffic over the next four years.

The burgeoning potential of the mobile M2M market segment has clearly attracted the increased resource investment and marketing attention of the major mobile carriers as evidenced by recent moves such as the creation of in-organization M2M business units dedicated to the space. Since 2009, the expanding importance of the mobile M2M market segment in the overall mobile industry is reinforced by major carriers, U.S.-based carriers as a case in point, creating business units dedicated to addressing M2M verticals and applications. The creation and expansion of dedicated M2M units within major mobile carrier organizations is also required to better combine internal resources to address a diverse range of verticals that fall under the M2M aegis.

This includes verticals such as digital signage, security, vending, ATM, home communications, automation and control, telematics/fleet management, smart grids/utility metering, public safety/transport, and infotainment. This begs the question as to whether carrier organizations will embark on the path of further honing its vertical expertise flexibility to effectively address such a diverse range of M2M verticals. This entails deciding how much in-house M2M vertical expertise they would like to cultivate in relation to the wide variety of application providers they already partner with to address such verticals. Equally important carriers still must prove they can better meet the challenge of creating the partnerships and overall ecosystems required to adapt and meet the distinct requirements of the mobile M2M market.

Currently there seems to be an industry consensus that the verticals within the M2M universe are experiencing across-the-board expansion and adoption rates with no vertical standing out as generating a potential stand-out boom trajectory. This stability in the current market can help ease the process of carriers adopting their M2M solutions to meet gradually evolving market needs. However there are some mobile M2M players projecting that security-related verticals such as surveillance and public transport/safety (e.g., cargo monitoring) will witness higher degrees of short-term uptick due to expected increased resource allocation toward anti-terrorism measures and overall public safety enhancement. Moreover, some carriers have invoked auto telematics and eHealth as possible breakout verticals. Should one or two verticals breakout this can also create a distinct opportunity for a couple of carriers to demonstrate that they can quickly identify and drive a high upside M2M market vertical to their long-term competitive advantage in winning more M2M business over the long term as well as realizing more robust revenues and margins beyond bandwidth provisioning.

In August 2009, Verizon Wireless and Qualcomm revealed their M2M-centric joint venture nPhase. The nPhase JV reveals the strategic importance of combining and linking Verizon network resources with Qualcomm M2M chipset expertise to more effectively target M2M verticals such as smart grids and fleet tracking versus their less integrated/coordinated pre-JV approach. In October 2010, in order to improve its M2M service integration proposition, Verizon/nPhase announced its M2M Management Center that seeks to extend to enterprise customers the tools required to implement the evolved business models, improve time-to-market intervals, operating cost reductions, key performance tracking, and aftermarket services to further lower the barriers of adopting their enterprise M2M solutions. 

Likewise in October 2010 Sprint launched its M2M Collaboration Center to bolster and complement its ongoing Emerging Solutions Group/Sprint Wholesale M2M solution efforts. The Sprint M2M Collaboration Center brings together 30 high-profile inaugural partners, including silicon vendors such as Intel, to use their extensive M2M portfolio and expertise to collaborate with innovators in lab settings to produce more tightly integrated M2M solutions for the market. This includes bringing together previously disparate but overlapping M2M-related disciplines in areas such as telematics, cloud computing, and 3G/4G mobile networks and devices, under a more tightly coordinated umbrella. Sprint M2M sales efforts have already yielded high-profile customers such as Amazon Kindle, Omnlink and DriveCam.

AT&T's M2M 360 program invokes a ten-year track record of enabling M2M deployments as a selling point, although AT&T started to focus extensively on M2M in 2009. This track record extends to the telematics, security solutions, monitoring, SCADA, point of sale, and asset management verticals. The program includes over 300 M2M AT&T-certified devices and over 350 AT&T approved M2M solutions as part of its M2M portfolio arsenal. AT&T uses its Jasper Wireless service delivery platform as a key value-add, particularly critical in attracting consumer electronics companies with its flexible rate plan generation and diagnostics capabilities.

T-Mobile has a different approach than the other major U.S. carriers, as T-Mobile USA doesn't sell M2M directly, partnering instead with solutions providers and wholesaling its connectivity and bulk SIMs to MVNOs such as Wyless and RACO Wireless. T-Mobile has been showcasing its partners' solutions, with its GSM network described as the unifying foundational element. While this model has provided some traction, the lack of control or direct contact with customers and lack of value-added services poses some limitations.

However even with dedicated M2M business units, mobile carriers will continue to face challenges in capitalizing on rapidly expanding mobile M2M business opportunities. This includes evolving sales and marketing techniques from a consumer-centric handset model to better defined M2M solution packages attuned to enterprise/public sector networking and overall M2M realities. For the most part mobile carriers appear to be making progress in crafting M2M solution sets attuned to the specific networking requirements of M2M customers and users and getting beyond baseline device certification and rate plan sales and marketing approaches. In this regard mobile carriers have effectively worked with and relied on experienced M2M silicon and equipment partners to better navigate the development and sales cycles of the mature M2M market verticals.

Overall the major U.S. mobile carriers are demonstrating advances in better addressing the distinct requirements of the mobile M2M market. One common thread among the major mobile carriers is improved cultivation of mobile ecosystem partnerships (e.g., new collaboration centers, JVs, expanding device/solution certification programs) focused specifically on mobile M2M applications. Conversely some M2M ecosystem partners, such as key M2M silicon vendors, need to tighten their sales and marketing messages with carriers to include how their evolving service delivery platforms and processor technologies could improve average revenue per user (ARPU) models in the mobile M2M arena. This includes going beyond touting vanilla support of wireless connectivity technologies such as GPS, Bluetooth and WiFi to address M2M applications and demonstrating how enabling customized M2M techniques can specifically improve the ARPU picture of their mobile device/mobile carrier partners.  

Ron Westfall is the Research Director of Silicon at Current Analysis and is responsible for tracking the evolution and the competitive landscape within the global chipset market, including the mobile silicon segment and its impact on the mobile ecosystem. Ron brings over twelve years of analytical experience to the overall telecommunications and silicon market, including specialization in mobile silicon/ecosystems, regulatory issues, and telecom infrastructure technologies. Follow Ron on Twitter @ sirronsilicon