As the name suggests, machine-to-machine or M2M connectivity describes the communication, usually over a cellular network, between machines.
These typically low bandwidth communications have a raft of applications, ranging from industrial machinery flagging up problems or the need for a service, to security systems alerting control rooms of breaches and domestic white goods having the capability to be programmed remotely.
What applications does it have?
An early application of M2M technology has been in the automotive sector where systems such as General Motors’ Onstar, which connects in-car computer chips with a central monitoring system, are in deployment. In the event of a vehicle accident, the car triggers a call to the monitoring system which then alerts a human operator who can dispatch help to the scene of the accident. More prosaically, such systems can feed data back to automobile manufacturers to aid their research and development.
Many other applications exist for M2M communications. These include sensors that send an alert when a bridge ices over, vending machines that can alert stockists when inventory is low and smart metering – utility meters that read themselves and report back to the service provider.
The areas of security and healthcare are also expected to become significant. Analyst firm Berg Insight predicts that 34 million security applications will be connected to European cellular networks in 2014. The GSM Association (GSMA) also sees healthcare as a large growth area. It has formed a partnership with the Continua Health Alliance, a non-profit organisation of healthcare and technology companies, to drive uptake of M2M solutions in the sector. The GSMA has referenced figures from management consultancy McKinsey suggesting that the healthcare sector could save $175 to $200 billion each year by managing chronic diseases through remote monitoring.
Why the interest now?
The technology has become available at a cheap enough price point to be embedded in devices, buildings and vehicles and, as they recognise the erosion of their traditional voice revenues, carriers are embracing the concept. Vodafone, for example, has launched a global M2M service platform to help companies deploy and manage large wireless M2M projects. The platform will provide corporate customers with the means centrally to manage and control the process of rolling out M2M devices across many countries, thereby accelerating implementation and reducing the cost, complexity and risk associated with such deployments.
Other stimuli, such as regulatory and legal requirements, will aid the development of the market. For example, the European eCall initiative to equip all cars with GSM/GPS technology to enable automatic calls in case of accidents will, once in place, drive adoption of stolen vehicle tracking services using the same technology.
How large could the M2M sector become?
The GSMA looks upon M2M as a key means by which the number of mobile connections will be increased once the market for human connections has become completely saturated. The association foresees numbers of connected devices reaching 50 billion over the next 15 years. However, much sector development needs to happen before then. Juniper Research predicts that the number of mobile connected M2M devices and embedded devices will rise to almost 412 million by 2014, with connected meters being the single largest devices area. The firm points out that many applications are yet to come to market. Healthcare monitoring for instance is only expected to reach the commercial roll-out stage by 2012.
Analyst firm ABI Research takes a different approach, estimating that cellular M2M connections alone will triple their current number of about 75 million to 225 million by 2014.
Berg Insight is slightly more conservative. The analyst firm reports that 1.4% of mobile network connections worldwide were used for wireless M2M communications at the end of 2009 and forecasts that the total number of wireless M2M connections will grow at a compound annual growth rate of 25.6% to reach 187.1 million connections in 2014. In that year, the firm projects that M2M connections will account for a 3.1% share of total cellular connections.
How much network capacity do M2M communications use?
M2M applications typically have low bandwidth requirements and consequently won’t entail a significant burden on networks – at least until massive volumes come into play. With the exception of a few consumer applications M2M won’t require 3G capacity.
How are carriers monetising M2M services?
It’s a volume business and, scale, along with very low cost of operations, will be critical. ABI Research has reported that while typical ARPU is $50 for people, it tends to range from $5 to $15 for machines. Nevertheless, significant revenue opportunity remains. Berg Insight, says that operator revenues for wireless M2M were €3 billion in 2008. It forecasts revenues will reach €8.9 billion in 2012.