The rise of the machines

There are grand expectations in the growth of Machine-to-Machine (M2M) communications where a device such as your electricity meter communicates with your utility company to report usage and other things. Northstream made a prediction end of 2010 that there will be about 10 billion devices connected in mobile networks by 2015, including tablets and the like.

Some recent reports and estimates may now be dampening the high spirits a bit, not in terms of connected devices growth but on operators’ ability to find business cases that hold. Currently M2M communication is characterized by many devices (e.g. electricity meters or in-vehicle devices) transferring small amounts of data (e.g. status and billing info) on a regular basis (e.g. monthly or daily at 10:00). Compare this to mobile broadband where use and data transfer is more or less irregular depending on whether people are streaming video or writing emails, generating huge amounts of data transfer compared to M2M. This makes for a significant difference between M2M and mobile broadband business propositions. Applying the same principles to M2M as mobile broadband won’t work: merely charging for data isn’t the model that will make M2M explode and go-to-market needs a different approach.

While there is certainly potential for intelligently priced and implemented M2M offerings because so little data is consumed compared to the number of devices connected, the really exciting part is what can be done once the devices are hooked up on the Internet. Having your electricity meter, fridge or car reporting status information is great for the manufacturer because they’ll know when to call you and offer service, but there is plenty beyond that. If the M2M industry opens up with APIs the same way as Internet services have, people will start doing interesting things with the data that becomes available. Your electricity usage information could be combined with other sources of information to see which of your appliances drive the bill up the roof. Or maybe your eco-driving habits can be shared on Facebook automatically by your car. It may sound farfetched but the trend is clear though the technology and business models aren’t supporting the scenarios just yet.

The mobile operators’ opportunity would be the enabling intermediary. When application developers had been waiting years for operators to provide access to e.g. location and presence information, other alternatives eventually came along in the form of GPS and Internet-based substitutes. Operators became irrelevant as platform providers because they hesitated for so long. Now they have a second chance with M2M to provide device manufacturers and developers with a platform that is needed but isn’t in place yet. Operators cannot control the whole value chain but partnerships with system integrators and key players in selected industries could be the way forward. Combine this with open and free data availability to developers, catching on to the revolution that the open source movement initiated and Google industrialized, to spur innovation.

M2M communication business models are in their infancy but the increasing amounts of devices that benefit from a mobile/Internet connection clearly show possible future scenarios. The question isn’t whether devices will communicate but only how it will happen and who will provide the means. Operators still have to do their homework in convincing the market on the benefits of M2M mobile connectivity. Becoming an enabler is an opportunity not to be missed, but operators must be open to new types of business models. Seizing the moment this time truly means opening up to partners and developers and not just provide connectivity with a tariff. We are excited to see who dares to make the first bold move.

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