Where to now for M2M operators?

John Vidler
09 Apr 2013

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How often is a technology introduced to Mobile Service Providers in the mid 90’s and based off even earlier control systems, touted as a key component of a technological revolution (the Internet Of Things or IoT) almost 20 years later? We have been hearing a lot about M2M over recent years and despite all the promotion and optimistic growth forecasts in many ways it appears that the go to market strategy used by most operators remains stuck in first gear.

Perhaps I’m being a tad harsh in my characterization of operator M2M efforts but even a cursory examination of the current market does reveal an immaturity in their approach, especially within the Asia Pacific region. As a first step, in order to lay the foundation for M2M connectivity, many operators have chosen to move to hosted platforms with revenue share arrangements between them and the hosting provider. A few have chosen to install their own platform. Unfortunately, in many instances this appears to have been the first and only step taken to date and there is a terrible sameness about the offerings from the operators, in particular those running on a hosted environment. Where is the innovation? Clearly, each operator must choose for itself what level of presence it would like to have within the M2M market and there is no room for complacency. We are already seeing other players move to capture the market.

One innovative way to capture the M2M market would be to build a network to supplant that provided by traditional operators. In Europe, we are seeing the rise of an alternative cellular network built from the ground up for low throughput M2M and the IoT – Sigfox. Within the next two years they hope to have a network covering most of Europe. In North America, specialist MVNOs have made great inroads in the provision of M2M services and this is being replicated in Asia. Given their incumbent advantages, operators may scoff at the idea that the market will support another M2M network and they may believe they can squeeze the MVNOs out when they choose but these are dangerous assumptions to make. Fundamentally, to capture the predicted growth within the M2M market outside of the low hanging fruit in acting as a dumb pipe for Point Of Sale, vending machines and the like an operator must succeed in an area in which most of them have had great difficulty in the past.

You see, it’s all about the applications. Well, the applications and the data. To the customer, it’s not an M2M solution it is an application which fulfills a key business need or requirement. He or she doesn’t care how many bytes it consumes on a daily basis. They don’t particularly care whether it comes packaged with x number of SMS per SIM.

What they do care about is how quickly the application can be developed, how it’s going to be rolled out, what kind of support they can expect to receive and what kind of financial models are possible. When something goes wrong and invariably it will, they want to talk to someone who understands that application and its context within their business. Alongside the need to be more intimately aware of the application layer, operators should also address the business opportunities which the collection of vast amounts of mobile data offers. What revenue potential currently lies untapped in the collection, analysis, use and monetization of the existing M2M data flows?

Operators around the world, with a few notable exceptions, have been slow to establish themselves as anything other than an M2M connectivity supplier just as they were (and still are) slow in coming to grips with the application market. If we embrace the assumption that what is needed is the creation of an ecosystem capable of nurturing and supporting the customer solution within a flexible business framework then the question becomes – who will supply that ecosystem? There are three main choices:

  1. Be the best dumb pipe you can be. Structure the business to efficiently deliver M2M connectivity only. There is some virtue in this approach as it plays to core strengths but does it stunt future potential?
  2. Become an application service provider. Develop the capability to respond effectively to end customer issues and requirements across a variety of industries and segments. This would be difficult and easy to lose focus.
  3. A mix of the previous two options. Grow a partnership ecosystem. Don’t outsource your ecosystem to an external host and take direct control of the financial models and partnership arrangements in a joint approach to the market.

To continue with the current approach invites the risk that other players will dictate that operator’s place within the market and the revenue that accrues from that. The choice must be made and soon.

John Vidler is Director of Solutions Architecture, ICT Solution Marketing, South Pacific Huawei

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