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Q&A: M2M by the numbers -- and by the solution


03/08/2011

One of the hottest topics in telecom at the moment is M2M. To separate the hype from reality, Connected Planet asked Dr. Mike Short, vice president of Telefonica Europe, previously a chairman of both the global GSM Association and UK Mobile Data Association to shed some light.

More on this Topic Industry News Blogs Briefing Room

Connected Planet: We hear from a couple sources that by 2020 there will be 50 billion connected devices. Do you think this is reasonable?


Mike Short: Both Ericsson and Cisco have predicted 50 billion by 2020 and Cap Gemini estimates that the world M2M market will be worth US$38.8 billion by 2013. These are all possible but they do raise questions about pricing, revenue per connection/ARPU and the actual rate of uptake. 50 billion by 2020 is a very rapid growth profile in barely nine years. A key question is also whether society will accept so many so quickly, particularly given the issues around privacy.


We can, therefore, predict that we could reach 20 billion by 2020, but for 50 billion it would require very low unit pricing/low usage, as well as high demand. Connections would have to be over many bearers - cellular/WiFi/Bluetooth - as well as other short range radios to achieve such high targets.


50 billion is more likely to be the number of devices that are “internet connection capable” rather than those that are permanently connected to the internet.


Also some M2M connections may not touch the Internet at all; for instance, I tend to exclude NFC from my M2M estimates.


Connected Planet: Which areas do you think will be in the vanguard of this connected universe?


Mike Short: This is more likely to be phased over time: phase one will, I think, be in automotive, street furniture, security and smart metering. Phase two will be in consumer electronics and healthcare.


The transformation potential is enormous but more through connected systems (or M2M systems) where the devices can be managed and used to provide business and consumer benefits. For example we already see the trend in automotive to support fleet management, navigation and better safety.


Connected Planet: Do you think it is plausible that, for instance, your fridge will either transmit your order to the supermarket or tell you what groceries you need?


Mike Short: Some demonstrators for this exist today but for a mass market this scenario is more of a long-term option. We do not change our fridges that often! But domestic appliances are more likely to start with a connected boiler, air conditioning or home security alerts and the related systems information. These may be coupled with advanced smart metering programs to help control energy bills and better address climate change.


A further phase for the home may follow later this decade with high-end kitchen appliances, but the use cases need to demonstrate real benefits and cost recovery.


Connected Planet: How do you think telcos will make money out of this? Presumably just connecting things is not a great business model - or is that wrong?


Mike Short: Growth opportunities are many - however, we could see distribution and marketing, connectivity, customer care, payments and even full solutions being available from telcos, depending on the sector and actual levels of demand. For example, many telco solutions and partnerships have been adapted already for European-wide approaches to automotive M2M solutions.


Connected Planet: What do telcos need to do to be ready for this - what infrastructure and BSS/OSS, in general, is going to be needed? Is it already in place or is there a way to go?


Mike Short: The primary change is a clear focus on M2M which meets the different market segments - this is international and needs scalable low cost operations and in some cases key partnerships/channels. Infrastructure needs to be optimized for data services and end-to-end solutions, from provisioning through to 24x7 support.


Connected Planet: Is M2M as big a deal as the press is making out?


Mike Short: In growth terms it is very big, but some aspects are certainly over-hyped. It is also true that M2M may not all be connected to the internet or the “internet of things”, unless the internet adds real value.


Connected Planet: Thank you very much for putting this into perspective. Before you go, one last question - what do you think is going to be the focus for telcos in the next two years?


Mike Short: It is going to be assured customer services in a competitive environment and sustainable growth through digital innovation. M2M systems are an important part of this.


Connected Planet: Thank you very much.



 

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