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M2M Update - Time for CSPs to Go Over the Top

  • January 2013
  • 10 pages
  • Frost & Sullivan
Report ID: 1698691

Summary

Table of Contents

M2M has passed the hype stage and entered a more realistic phase of development where innovative suppliers are solving tactical problems associated with defining, delivering, managing, and monetizing real products for real customers. That takes time, but the value is there, and the market is now evolving at a much more realistic pace.

Introduction

Another year, another prediction about machine-to-machine (M2M) communications, the Internet of Things, connected devices, or whatever term we choose to describe our relentless pursuit of connecting everything to the Internet. The past few years have been spent trying to figure out how to connect devices, appliances, automobiles, meters, and basically anything with an integrated circuit, to the public network. And, in some respects, we’ve succeeded. Cisco reports in its annual Visual Networking Index (VNI) that in 2011 there were billion connected devices, and that number is expected to reach billion by 2016. The NPD Group reports that there are million connected devices in the U.S. Using those figures, that translates to more than devices for every human on the planet. That’s a lot of connections!

In my house, there are no less than nine devices that are continuously connected—and there are only two of us! But wait, there’s more. There are the GPS devices in our cars, the electric meter, the security system, and our washer and dryer communicate that with each other. I don’t know exactly what they say, but I find it a little unsettling. Yet, for all this connectivity and all this electronic intelligence at our fingertips, my impression is that it is all grossly underutilized. What that tells me is that enabling devices to connect and communicate is easy—making good use of that connectivity is not. Further, the ability of Communication Service Providers (CSPs) to monetize the expensive wireless, fiber, and cable infrastructure underlying all those connections is still a real problem.

While analysts are generally hesitant to revisit previous predictions, looking back at previous Cisco VNI figures is revealing. As recently as 2010, that report predicted one trillion connected devices by 2013. Based on the most recent publication, that forecast was off by nearly a factor of . So was Cisco being overly optimistic or did M2M run into reality? Both. Just because we can connect doesn’t mean that there is value in it; and what value there is has to be apparent to both the users and the providers. M2M has passed the hype stage and entered a more realistic phase of development where innovative suppliers are solving tactical problems associated with defining, delivering, managing, and monetizing real products for real customers. That takes time, but the value is there, and the market is now evolving at a much more realistic pace. So are CSPs.

Starting at the Bottom

We live in such an electronic world that we often forget about the microchips. Those wonderful little pieces of silicon, which enable everything from smartphones to sneaker lights, must meet very rigid specifications for size, performance, and cost before a manufacturer will design them into a product. Whether manufacturing millions of small, low cost, and often disposable M2M devices (e.g. shipping boxes), or more complex, ultra-reliable, long-lived connected devices that operate in harsh environments (e.g. pacemakers), component cost is always an issue. In a manufacturing cycle where production volume reduces cost, there is a need for consistency and commonality. Until now, those semiconductors had to be customized for each network connection, required a large footprint within a small device, and consumed more power than could be economically provided by low cost sensors or remote battery-driven devices. For those reasons, and others, many promising M2M initiatives were delayed.

If each global network requires every device to include unique components, then volume is diminished and economies of scale are lost. If the potential revenue from a single chipset is reduced because of low volumes, less money is invested in research and development efforts that reduce footprint and power consumption, which also keeps costs high. Wireless Long Term Evolution (LTE) is a data-only deployment that presents an opportunity for semiconductor manufacturers to scale up production, reduce size and power consumption, and subsequently lower the cost of LTE devices.

Deploying LTE wireless networks enables CSPs to migrate to a common, interoperable data network infrastructure platform, mitigating the risk that a specific device is unable to communicate with an individual CSP network. Conversion to LTE continues at a rapid pace. AT&T has announced that it will shut down its 2G network, as it focuses on transition from 3G to LTE. However, ubiquitous global LTE availability is still years away, so semiconductor manufacturers are bringing dual-mode chipsets to market that can be cost effectively included in devices and network elements now.

During the transition to LTE, dual-mode chipsets ensure compatibility of existing devices (e.g. tablets, smartphones, and dongles). For customers, network access is seamless, and existing devices continue to perform and transition along with the network. Chipsets are now coming to market from companies like Altair Semiconductor, that deliver dual-mode support in a single chipset and single software source. These new chips are designed to operate with a variety of end user devices, including USB devices, routers, outdoor M2M devices, tablets, smartphones, and medical equipment. Altair has an aggressive pricing model for its data-only chipset. At this lower cost, device manufacturers from medical, transportation, energy, logistics, and most other verticals can now enter the M2M space with affordable devices that work on most networks worldwide. The corollary to cost is capability. The Altair chipset achieved certification in the stringent Verizon Wireless evaluation process in 2012, which is an important endorsement of the Altair data-only strategy. Verizon has embraced an LTE-only strategy for its M2M product offerings, and intends to create new revenue streams outside of its traditional consumer markets.

Applications that Count (and Measure and Report and Analyze)

Both consumer and business customers have been underwhelmed by the applications coming to market for connected devices. Tracking the date on the milk bottle via the refrigerator is no better than opening the door and looking at the date on the lid. However, calling up that date on a smartphone whilst at the grocery store could be useful. What hasn’t happened is the connection of devices to applications that can analyze the data and make it useful. The device is not the user; the device collects data and the data must then be correlated, analyzed, and presented to a user that will benefit from it, or an application that can act upon it. If this sounds suspiciously like OSS/BSS, that’s the point. CSPs have systems in place that poll devices, collect data, correlate it, and distribute that data to a multitude of users and applications.

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