When I first started in the cellular industry in the later part of the 1990s, Machine to Machine accounted for an extremely small part of the overall activations at the carriers and an even smaller portion of the overall traffic.  It was deemed to be "extremely niche" by most industry experts and it was often relegated to back communication channels (such as some of the control-channel based telematics) or legacy data only networks.  

As we moved into the 21st century, M2M data began to pick up steam, based on a few factors that worked in its favour:

  1. Newer network technologies allowed for stable, always-on IP-based connections, allowing M2M solutions to fit easier into existing solutions.
  2. Network latency improved dramatically, improving the performance of many solutions.
  3. Important to some applications, networks gained dramatically in speed with each new version, allowing for an increased amounts of applications that could now make the transition from landline to wireless
  4. Cellular data networks greatly improved their network coverage, allowing for a greater chance of sufficient coverage at the required locations
  5. Finally, the cost per MB of data has dramatically decreased with each new technology, making the business case for M2M much more compelling when compared to the cost of using a legacy landline

 So, just how important is M2M to the cellular industry?  It is important to look at the main sources of growth (whether it be subscribers, data usage or revenue) that the carriers have had over the past few decades:

  1. In the late 1980s and into the 1990s, cellular usage was primarily for voice traffic and was limited to a select few (as the cost of hardware and airtime was prohibitive for many consumers).  As the 1990s progressed, the cost of hardware (combined with increased competition among the carriers that drove down airtime costs) made cellular usage by the general public much more affordable.
  2. As we hit the turn of the century, while the growth in voice usage was still climbing, the penetration of cellular phone usage made it more difficult to continue its previous growth rate on voice alone (i.e. most people that wanted a cell phone probably had one).  This was the time that devices such as the Blackberry from RIM came to the forefront.  This move customers from having "one ARPU" stream (one source of revenue, namely voice) to being a "dual-ARPU" (voice and data) customers, dramatically driving up usage and revenue at the carriers.
  3. As we hit the later part of last decade, smartphone sales were hitting their stride just in time for cellular-enabled tablets and laptops (from companies such as Samsung and Apple) came to market.  This provided an increase in data traffic for many customers, although the traffic was not always overly profitable for the carriers, due to competition and the heavy upfront subsidy required to gain new customers.

As we close in on 2013, it is quite likely that the cellular industry may need to find its next area of growth and find it quickly.  Traditional voice-only handset sales/usage are definitely not an area for growth, smartphones still have some sales growth (but a lot of that will be upgrades of existing smartphones) and consumers have not adopted using cellular data on their tablets as well as they might have hoped (with the vast majority of devices being WiFi only).  So, is M2M the next saviour?  Ok, I may be a bit biased, but I think that M2M is going to be a major growth area for a few reasons.

Like the cellular industry, many large technology companies are also looking for their next area of growth, and many of them are focusing in on M2M.  This ranges from large ERP/Business systems providers who are looking at M2M as a way to drive traffic into their "big data" systems.....it might be large infrastructure/integration firms who are looking to use M2M as a backbone for large consulting/management contracts in areas such as smart metering, green energy and traffic management systems.....it might also be large router/gateways companies who see M2M communication as a major growth area, now that the PC market is showing signs of topping out.  The cellular carriers may find themselves with an increased interest from many new players in this space, which will inevitably drive up M2M data traffic.

As the costs of M2M (ranging from hardware to airtime) begin to decrease and the capabilities of cellular networks increases, the business case for adding M2M capability to a device makes much more sense as the cost of ownership is much lower.  At one time, the cost of adding cellular capability to an existing product meant that it often made products uncompetitive versus non-cellular enabled products, made worse when one factored in high costs of deployments.  With module prices only a fraction of what they were even a few years ago, and with cellular data plans being had for as little as $1/month, it makes so much more business sense for manufacturers to add wireless capability to their products.  With more products being available, it is inevitable that they will be used more, driving up data usage.

Aside from costs, one the biggest obstacles in deploying an M2M solution was its complexity and integrating the solution into a company's existing structure.  The introduction of many application enablement platforms has taken a lot of the complexity out of an M2M solution, decreasing its deployment costs and the time it takes to get to market.  For small businesses, the increased usage of these platforms has greatly increased the ability (and lowered the cost) for developers to bring new solutions to market.  It has also lead to the explosion of "M2M in the cloud", greatly increasing the penetration of M2M solutions in this market.  For the larger business/government customers, the use of application enablement platforms have helped in two ways.  First, for customers that are using large scale ERP/Business Intelligence platforms, it is much easier to port the information from the field and directly into these complex (but valuable) systems.  For customers that have a customized platform that they use to run their organizations, these platforms have incredible flexibility that allows for much quicker and less complex deployments.

Finally, the carriers have yet to see tremendous growth from a market that has traditionally not been big users of M2M solutions.  The SOHO (Single user, Home office) and consumer channels are going to see some solutions meant just for them, greatly driving up M2M usage.  For now, most of the usage in M2M space has been focused on basic tracking applications (such as a worried parent using GPS to track the driving of their 18 year old), but this will change as companies (such as Novotech!) launch more consumer oriented M2M solutions.  These solutions will allow for easy monitoring of key items, and the ability to better keep track of key things.

So, yes, I do think that M2M will prove to be a major growth area for the cellular carriers.  It will be counter-balanced by the continued growth in other key areas such as Mobile commerce and increased importance that smartphones/tablets are having in every day life.

As always, let me know what you think of this (and any posting).  You can drop me a note to Larry(@)novotech.com.