Wireless carriers turn to fast growing M2M market

CALIFORNIA, USA: Amid a slowdown in their core business of cellphone-based communications, wireless carriers are restructuring to capitalize on the booming market for machine-to-machine (M2M) cellular service.

The number of cellular M2M connections will more than triple by the end of 2017, according to a IHS. Global connections will rise to 375 million in 2017, up from 116 million in 2012. In parallel with the rise of connections, revenue generated by cellular M2M services from wireless carriers will explode during the coming years, rising to $22.4 billion in 2016, up from $9.6 billion in 2012.

The rise of M2M comes at a time when the traditional cellphone-based mobile services market is becoming increasingly mature and saturated, with growth slowing particularly in the developed markets like the United States and Western Europe.

"Wireless service providers ranging from Verizon Wireless, to Vodafone, to China Mobile are turning to the cellular M2M market as a new, high-growth market opportunity. However, to take full advantage of the M2M's market's potential, the wireless firms must deliver their customers much more than simple cellular connectivity such as a full suite of VAS and MAP services, prompting them to establish their own M2M business units," said Sam Lucero, senior principal analyst for M2M and the Internet of Things at IHS

The M2M business unit strategy allows wireless carriers to develop specialized expertise in both horizontal M2M business issues-such as connectivity management-as well as vertical-specific domain expertise. Application complexity is a key feature of many M2M vertical markets. Wireless carriers are finding that they can engage more effectively with application developers, service providers, and corporate adopters when they have in-depth expertise in the technical and business issues facing their partners and customers.

Business unit staff members also can act as M2M champions within the larger wireless organization, and this role has been integral in increasing support for M2M market involvement among the broader base of senior operator executives and leaders. Likewise, M2M business unit staff members at wireless carriers have played an important role in evangelizing M2M to the investor community and educating the investor community about the business dynamics specific to the market.

In parallel with the establishment of M2M-specific business units, wireless carriers are deploying M2M Connection Platforms (MCP) to tailor the operators' infrastructure and systems to the needs of the M2M market. MCPs are required because of the major departure that M2M represents compared to established cellphone-based services.

While it is important to note that M2M services have been implemented using traditional telecom systems, it is unlikely that such services could become an offering by a mainstream wireless carrier without M2M-tailored MCP.