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By Matt Hatton, Director of Machina Research

Mobile telephony is probably the world’s most successful technology: there are in excess of 5 billion mobile connections worldwide, representing an unprecedented level of technology penetration. To date, MNOs worldwide have built successful businesses based on selling voice, SMS and data connectivity to individual handset users. Recently, business dynamics have changed slightly with the introduction of mobile broadband and mobile content data services. On the whole, MNOs have coped reasonably well with the arrival of these services although it’s not all been plain sailing as illustrated by continuing fears about exponential data traffic growth and concerns about being relegated to a bit-pipe role. One thing that has helped MNOs is that the underlying business logic is broadly the same: sell a device to a person which they use to access services for which they pay. MNOs may have needed to do some work on the network and create a few product management teams for the new services but it hasn’t required a fundamental shift in how they do business. It is a moot point whether they will cope as successfully with the arrival of machine-to-machine (M2M).

As we set out in the table below, in almost every conceivable way, M2M is different from the services MNOs provide today. The most obvious change, from the perspective of industry-watchers is that expectations for traffic, ARPU and revenue are completely different. This has some implications for how MNOs manage the cost of serving those customers. They must keep it as low as possible if they are to be able to cope with ARPU of less than EUR0.5/month. Also, a new consideration within the M2M market is that data volumes per connection are typically sufficiently low that installation costs are often a more significant financial consideration than on-going data transmission costs. MNOs must adapt their tariffing to reflect this dynamic.
Other immediate differences stem from the fact that M2M communication is typically a component of a wider offering, rather than a service in itself. As a result there is often no active end-user. This has implications for swapping providers, complaint handling and device management. M2M is an enabler, and the more transparent the M2M component of an overall service is, the better. In many cases the end user may not even be aware that the device is connected at all.

Furthermore, M2M connectivity is often mission-critical. In many cases customers are entrusting a key part of their business to telcos. Examples include smart metering, insurance tracking devices for cars, a range of fleet management telemetry services and, of course, mobile connected medical devices. As a result customers will have very different expectations over quality-of-service and service level agreements compared to voice and data services where best effort was often enough. Conversely, latency is often not an issue with M2M connections: devices are often connected via M2M with a view to maintaining a certain level of timeliness of information, but without a requirement for real-time information. For instance, smart meters may take meter readings at quarter-hourly intervals, but there may be no urgency in when they are delivered to the utility.

MNOs must also revise their channels and sales strategies. The sale of M2M connectivity by MNOs is often B2B2C: an MNO’s M2M connectivity solution must be integrated into a product which is then provided to a consumer. As a result MNOs must build completely new channel arrangements including identifying sectors they should address via direct and indirect channels. They must also secure sales in an aggressively competitive B2B environment while at the same time delivering a solution that is sufficiently polished and intuitive for a consumer market.

Matt Hatton is a Director of Machina Research, the world’s leading advisors on M2M and mobile broadband strategy. This blogpost is based on an article that Machina Research wrote for the the Machine-to-Machine Insight Report in the June/July issue of Mobile Europe magazine. Matt also maintains his own blog: The Wireless Noodle

New smartphones, tablets, and machine-to-machine devices are providing a compelling mobile experience by allowing people to engage their social networks, conduct business, and manage their day-to-day activities. This new, interactive mobile experience is bringing about a revolution in mobile broadband service models as service providers experiment with innovative ways to monetize mobile broadband, attract and retain customers, and efficiently manage network resources.

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By Joanne Steinberg, Strategic Marketing Director

The M2M industry is rapidly expanding, with analyst firms estimating that we’ll have 50 billion connected devices by 2020. So how can service providers benefit from this proliferation in machine-enabled devices? Here are some of the interesting use cases I’ve seen for M2M services:

• Using policy and device profiles and usage characteristics to create tailored service plans that can be based on connections, transactions, or the amount and frequency of data transmissions.  An example would be allowing electricity meters to securely connect to the network and send data only at certain times of day or when required.
• Being able to offer a variety of service level agreements. For example, a tablet device needs to download new ebooks quickly but infrequently, and usually only from one website. In this case, there is an established model for purchases, where connectivity becomes an add-on or revenue share. The bandwidth needed to read the book is low. On the other hand a traffic surveillance camera with automatic backup to online storage will send large amounts of data.
• M2M services can also monitor the traffic and usage patterns for a smart car and leverage this intelligence to evolve the smart car service and marketing approach.
• And finally there are some important security use cases, such as tracking a machine’s usage and if a threshold is exceeded, an alert or location look up can be sent to ensure the device is not stolen or broken. 

Machine-to-Machine (M2M) services are one of the most significant revenue growth areas for global service providers. However, the rapidly-evolving M2M services environment presents significant challenges in terms of scalability, device management, quality of service, radio-access interoperability, and security. Joanne Steinberg, director of strategic marketing at Tekelec, examines a few of the M2M challenges and opportunities service providers are facing.

Q1:  How do you see the M2M market evolving over the next few years?

J.S.: The M2M market is growing very rapidly and is expected to reach $57B by 2014 and 50 billion connected devices by 2020, according to research firms Strategy Analytics and Analysys Mason. This market is entering a new phase that is characterized by the rapid growth in broadband services, which includes an evolution to multimedia solutions for the smart home, the smart car, and the smart city. More devices we are all familiar with such as home appliances, electricity meters, our cars, and traffic cameras now have embedded wireless sensors, chips, or RFID tags.  This is resulting in a proliferation of new M2M-enabled devices. And finally, real-time information, quality of service, and usage-based business models are becoming more common. These trends are resulting in the need for more intelligent, sophisticated, and scalable M2M network controls.

Q2: What are some of the key service provider challenges in the M2M market?

J.S.: From a strategic point of view they are looking at how they can transform from wholesale connectivity providers to end-to-end M2M service providers that includes integrated device, applications, and managed services offers.  An example of this would be shifting from providing Internet service to a home to providing a smart home solution that includes home energy management, security, and multimedia entertainment.

Another key challenge is scalability.  We are talking about managing hundreds of thousands or millions of devices per “customer,” which can have a lot of variability in terms of transaction volumes, connection frequency, traffic patterns, the amount of network resources they consume, the applications they use, and the quality of service requirements. All these devices also need to be provisioned, updated, and maintained.

Finally, the ‘machine’ service model is very different than the ‘human’ service model. M2M services often have low average revenue per ‘user’ yet they can be highly profitable because of high machine volumes coupled with lower costs in terms of customer acquisition, churn, and usage.  

Q3: What are the key components of an intelligent M2M service delivery platform?

J.S.: The key components are:

• A device data management system to provision devices and track, and manage device profiles, locations, and usage information. This system also ensures device security, identity and address management. It is also important that this system has open application interfaces to enable web services.
• Policy management to define policies that allow service providers to apply different qualities of service to different machines and implement flexible service plans using quotas based on transactions, connections, time of day, location, applications, or data usage to generate revenues. 
• Diameter Signaling Router  to scale the policy, charging, authentication and mobility management information and enable roaming and service portability. 
• The Performance intelligence Center to monitor M2M services and network performance and analyze data to identify trends, diagnose problems and optimize device and service performance.
• Messaging services  such as alerts and notifications based on real-time events and usage play an important role including secure and reliable store and forward messaging.

The M2M solution needs to be able to help service providers deliver solutions for devices and applications that have diverse needs, ranging from sending a single business critical message to high-quality video surveillance over the mobile network.

Billions of connections? Demand for high data volume? Unpredictable traffic?

Tekelec understands the needs and challenges associated with M2M and can help you optimize your network with its synergies between Subscriber Data Management, Messaging Services, Policy Charging Rules Function and Monitoring and Supervision. Check out our new video for more information.