M2M Spectrum Networks aims to steal M2M biz from Tier 1 carriers

Startup firm M2M Spectrum Networks is aiming to launch a purpose-built M2M network using licensed spectrum later this year with the hope of stealing away M2M business from Tier 1 wireless carriers by giving vendors cheaper prices and a dedicated network for their data.

The company, which emerged from stealth mode less than a month ago, has announced a bevy of partners to help get its network off the ground. And M2M Spectrum has large ambitions; the company hopes to cover 194 cities by the end of this year, and then go on to cover 75 percent of the U.S. population by the end of 2015 and 95 percent by the end of 2016.

M2M Spectrum's network will run over "Part 90" spectrum, according to M2M Spectrum CEO Barclay Knapp. Knapp called the spectrum "unloved and underused." Part 90 spectrum is narrowband spectrum that exists below 1 GHz in multiple bands, including VHF, UHF and the 800 MHz and 900 MHz bands. Part 90 spectrum is designated for "private land mobile radio services" and public safety users are one of the primary users of the spectrum. Knapp declined to discuss the company's network technology.

In an interview with FierceWireless, Knapp said that traditional cellular networks are designed for human-to-human communications and have grown in size and capacity to handle massive amounts of data traffic. "They have had to build a semi-trailer truck" that can "handle big loads" of data, he said.

In contrast, most M2M communications are not large loads of data and could "fit in a shoebox" he said. "You don't call up a semi-trailer to haul a shoebox," he said.

Wireless carriers have "architected themselves and priced themselves above this market," Knapp said. "Once you get into the machine world, the whole premise of charging per month per device is a problem."

Instead, Knapp wants to use a different business model, though he admitted it hasn't been refined yet. Instead of charging per device per month, M2M Spectrum would get a percentage of revenue or a percentage of the value of the application. Knapp said the company will have APIs or open standards for vendors to put M2M applications onto the company's network.

Knapp also said that M2M Spectrum has benefited from Tier 1 carriers' indications that they plan to sunset their 2G networks. That has security, tracking and vending companies interested in long-term M2M solutions that do not require moving to LTE modules in the near future, he said.

AT&T Mobility (NYSE: T) has said its plans to shut down its 2G network by 2017 as it refarms that spectrum and deploys more advanced services, including HSPA+ and LTE. Verizon Wireless (NYSE: VZ) plans to shutter its 2G and 3G CDMA networks by 2021. Neither Sprint (NYSE: S) nor T-Mobile US (NYSE:TMUS) has said when they will shutter their 2G networks.

In the last few weeks M2M Spectrum has announced a raft of network and technology partnerships. The company is working with TrueNet Communications to manage the build-out; tower company Crown Castle for tower leasing and full site development services; GlobeRanger for its RFID solutions platform; Raveon Technologies for its custom wireless M2M data platform; Commdex for engineering expertise; 4G Unwired to provide the RF system design; and Powder River Development Services as a site acquisition and architectural and engineering services partner.

M2M Spectrum has conducted trials of its network in Jacksonville, Fla., near where a few of its vendor partners are based, Knapp said. He said that the 194-city goal is a "plant the flag strategy" to get the network up and running--then the goal is to fill in customers region by region.

M2M spectrum will be turning on some of its initial sites in the next few months, Knapp said, and has some pilot customers, which he declined to name. "We would like to start a dialogue with more customers sooner rather than later," he said.

Knapp has a long history in wireless. He was the co-founder and president of Cellular Communications, the first cellular company in the U.S. to go public. He sold the company to Airtouch in 1996 for $3.3 billion, one deal that led to the formation of Verizon Wireless. He also co-founded NTL in 1993, which later became Virgin Media, now the largest cable and broadband provider in the UK.  

Knapp said the initial idea for M2M Spectrum came from a failed parking payment system business. He said the automatic parking payment system--which would track motorists and automatically bill them for their time in parking spots--was going to be tested by the city of Philadelphia, but AT&T wanted to charge $8 per month per device. The average bill for the service was only going to be $4. That effectively killed the plan, and spurred Knapp to develop a cheaper service.

Nonetheless, Knapp knows M2M Spectrum is going up against some big players. "I'm the small guy," he acknowledged, and said the company is "looking for small niches to participate in."

Knapp said M2M Spectrum has been funded by investors familiar with the communications industry, who he described as "some institutional, high-net-worth individuals" and that the company is "well capitalized." He declined to name the company's investors or how much the firm has raised, but said it will be enough to deploy in 194 cities in a year.

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