Machine-to-machine communication is all about efficiency: collecting data from far-flung locations with less labor, less danger, lower power and in real-time. Thus one might conclude that the perennial drive for business efficiency would make M2M applications equally attractive everywhere. Certainly that’s the promise. But as it plays out in the market place in its early- adoption phase, M2M technology implementation varies greatly on both sides of the Atlantic Ocean for several instructive reasons.
In well-penetrated cellular markets such as Europe, for example, network operators have embraced M2M applications as an additional source of revenue. In the United States, network operators focus almost exclusively on their human cellular subscribers for the simple reason that they represent a much more lucrative market-particularly now, while penetration is well under 100%.
In fact, according to Yankee Group data, human subscribers in the United States last year generated more than five times more revenue per month than revenue from data communications between machines.
Another driver in Europe is social policy. Automated meters-telemetry-are now required to foster energy efficiency, for example. Mandates for automated crash notification to reduce vehicular deaths also stimulate the European M2M telematics market.
U.S. network operators would do well to keep close tabs on the M2M market-if not adopt a leadership role-due to the attractive revenue stream it could represent at some future date, according to Marcus Torchia, enterprise analyst at Yankee Group.
“The numbers are appealing in a long-term view,” Torchia said. “Adoption, however, is really about revenue at this point. The domestic carriers here are under pressure by investors to produce ARPU-it affects their stock value.
“M2M technology is about doing what you do more efficiently,” Torchia added. “It’s early in the M2M market here. Thus, most activity in this market is at a custom level. Cellular modems are being retrofitted to machines to provide ‘visibility’ to that machine. Because of those custom applications, however, there’s a struggle to achieve scale.”
MVNOs driving domestic market
Meanwhile, the M2M market for enterprise in North America is left largely to MVNOs such as Aeris Communications, which works closely with the carriers to leverage the latter’s national network coverage to provide those largely custom solutions to its clients.
OEMs and network operators are starting to think about business models and services that could build a new revenue stream out of M2M possibilities, according to Torchia. Energy utilities, for example, are using M2M to obtain real-time information on power demand and provide consumers with rate incentives to use power at certain times of day. That helps manage demand and saves consumers money. M2M growth potential also is high for industrial manufacturing and health care, the analyst said.
OEMs of a wide variety of products are examining the possibility of using M2M to evolve from the simple sale of a machine to a value-added model in which they lease machines, using M2M to keep tabs on the machine’s functions and, thus, provide lucrative support services.
“The technology is in place,” Torchia said. “This is a business decision. Most advanced companies are considering this issue now. Are we there yet? No.”
A Yankee Group report on M2M, published last year, suggested that network operators give their enterprise clients competitive reasons to deploy M2M solutions, which might accelerate development of this market segment.
Chris Purpura, a senior VP for marketing at Aeris, which partners with Sprint Nextel Corp. and AT&T Mobility to provide M2M solutions, explained why MVNOs are better equipped to fill the M2M role than traditional network operators.
“There’s a whole lot of work involved in putting together an end-to-end solution,” Purpura said. “There’s custom hardware for the device side, an application needs to be built. There’s often a call center involved to run the service so the carriers are not in the business of stitching those solutions together.”
Aeris provides solutions for telematics systems for autos and telemetry systems for everything from asset management, automated metering and home security.
“We play the role of a systems integrator, putting all the pieces together for the customer,” Purpura continued. “We negotiate access to a control channel on the carriers’ networks. Then we run our own data network. Data network service runs very reliably with Aeris, more so than standard data services from the carriers. We essentially provide a very reliable, low-latency, higher-liability network. You can’t have a delay in data communications in a possible medical situation.”
What’ll make the segment grow?
“It’s just typical technology adoption,” Purpura said. “Overall costs need to come down. There needs to be some standardization. It’s very expensive to solve one silo’ed piece of the problem.”
Meanwhile, Aeris and its domestic competitors, as well as M2M module vendors, are eyeing the European market, which is attractive due to the mandates for auto safety and energy efficiency. Down the road, the dream is a world where “everything connects.” No need for examples, just think about it. The M2M industry is doing just that.
