Leonardo Hodgson, Senior Consultant at Cerillion, investigates the burgeoning Machine-to-Machine (M2M) market and assesses its impact on Mobile Network Operator (MNO) operations.
According to some widely published forecasts from industry analysts, the M2M market is poised to be one of the next big waves to help carriers grow new revenue streams in these mature and saturated market times. Projections vary between the various research companies, and of course the equipment vendors who have their own vested interests, however there is unanimous belief that the M2M opportunity is enormous.
The latest figures from the GSM Association (GSMA)
put the M2M market size at $1.2tn revenue with 12 billion connected mobile devices by 2020. These numbers alone are enough to excite the most conservative of operators and wobble the subscriber-centric business models that currently prevail.
The existing model adopted by CSPs that the more subscribers it has, the more successful and profitable it is considered to be, is about to be tested by this massive new market. This is mainly because the Average Revenue Per User (ARPU) in the M2M business is on average below ten cents per device, but on the other hand the connection density can be virtually endless. So success will depend on how dynamically the CSP reacts to provide new and flexible platforms to support the every-day new devices, applications and verticals that M2M will address.
Mobile Network Operators (MNOs) are well suited to secure a central role in this opportunity thanks to their end-to-end connectivity and mature business support systems. However, unlike the standard mobile market with a set range of devices, tariffs and service packages, M2M can require a lot more flexibility and innovation to meet the demands of a wide variety of business partners ranging from health, security, emergency, transportation, utilities, smart gadgets, you name it.
Many operators have been supporting M2M services for a number of years, for example courier / despatch type services. But these have been of limited scope and volume, meaning they have been supported on an ad-hoc basis rather than as strategic propositions. The arrival of LTE, the move to IPv6 and programmes like the GSMA’s Embedded Mobile initiative mean that the time is now for MNOs to take a more strategic approach to the M2M market. IPv6 addressing will also make M2M services not just a mobile proposition, but applications that can work seamlessly across both mobile and wired broadband connections.
And what will be the impact of the introduction of billions of new M2M devices into the existing MNO operations?
The BSS/OSS platforms will have to evolve and offer a mature support for this new breed of machine subscribers. In particular, the OSS side will have to handle a vast amount of connected radios that will have to be completely operated and managed remotely via automated fulfilment and assurance processes, since most of the applications are, as the name says, machine based.
The BSS side will also face significant challenges to support, manage and deploy complex M2M products which quickly emerge in this dynamic market. The massive amount of additional transactions that these additional devices will generate will likely affect not only billing, but also heavily impact the mediation layer. Things like real-time charging, flexible billing, hybrid customers, wholesale and retail pricing, multi-tenancy and self-care management portals are all critical features to fulfil the different business models. Sophisticated business intelligence and analytic capabilities will also be crucial to understanding performance in this fast-moving market.
Whilst much of the M2M focus is on LTE and the future, another interesting opportunity comes through increasing the ROI of existing network assets. For some types of application, where the bandwidth is not crucial, M2M services can yield additional revenue by loading small amounts of extra traffic into existing data networks, off-peak of course, increasing the life of these legacy technologies.
One thing is certain, whatever the forecast figures we are indeed moving towards a fully connected life, where for each one of us a small universe of connected wireless devices are due to be orbiting around sending and receiving information about our activities, interests and our environment. This is indeed a huge opportunity, and those operators who invest in preparing appropriate M2M platforms now will be the ones who can reap the rewards of connecting this new wave of devices in the future.