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Revenue opportunities in revived market for wireless M2M applications

Jessica Scarpati

Telcos have dabbled in machine-to-machine (M2M) services for years, but the market for wireless M2M applications has been a sleepy one, limited to industrial uses such assmart

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grid utility meters sending data over cellular networks. But carriers have the opportunity to tap into what's expected to be a lucrative commercial and consumer market for wireless M2M applications embedded into nontraditional devices.

Once you embed that [wireless M2M application] in a business process, for example, customers are probably not going to rip you [out] when your annual contract is up.

Danny Bowman
President of Integrated Solutions
Sprint Nextel Corp.

Carriers are seeing a bigger opportunity for wireless M2M applications because chipsets are getting smaller and cheaper, opening the door to connecting nontraditional commercial and consumer devices to carrier networks, according to Kathryn Weldon, principal analyst at Current Analysis.

"Everyone in the ecosystem is being happily dragged along into the hype cycle, which is interesting because machine-to-machine was sort of neglected for years," Weldon said. "It's like the carriers woke up to this opportunity that has been sitting there -- going slowly, not really explosive -- for years."

"The Internet is no longer just an information superhighway. It's expanding beyond that and becoming a platform," said Padmasree Warrior, CTO of Cisco Systems, in her keynote at CTIA Wireless 2010 last week in Las Vegas. "We are now beginning to see the acceleration of machine-to-machine networks … [with applications that use] low bandwidth, continuous streaming of data and wireless sensors that are deployed everywhere."

Cellular networks supported 500 million devices in 2007, Warrior said. This year, Cisco expects that number to rise to 35 billion connected devices. By 2013, Cisco aggressively estimates it will be 1 trillion devices connected to mobile networks, including traditional devices, such as cell phones and smartphones. Considering only M2M connections, AT&T and ABI Research painted a more conservative picture for the market in 2014 -- 400 million and 200 million, respectively.

Sprint Nextel Corp. announced recently that it will lease its 3G network to Walsh Wireless, which sells a device to log driver behavior for auto insurance companies to help develop usage-based policies, instead of relying on factors such as age and gender.

"I definitely see it as double-digit growth for us in this space," said Danny Bowman, president of the integrated solutions group at Sprint. "These types of solutions become very sticky, so to speak. Once you embed that [connection] in a business process, for example, customers are probably not going to rip you [out] when your annual contract is up."

Chipset costs, consumer push revive market for wireless M2M applications

Falling chipset costs encouraged Sprint to push more aggressively into the wireless M2M application market, jumping on the chance to use its existing assets to develop new services, Bowman said. The savings meant Sprint could also price out competitors using expensive satellite GPS for their M2M services.

"A lot of these tracking types of [services] don't use a lot of bandwidth -- at all. All [it is] doing is tracking you … and uploading information once in a while. I don't need it real time. It could be batched," Bowman said. "Video is what drives tremendous traffic usage … and frankly, that's part of why we're launching 4G so fast -- because we believe that the market is really underserved."

Mobile operators have "a tremendous growth opportunity" with wireless M2M applications, according to Ralph de la Vega, president and CEO of AT&T Mobility and Consumer Markets, addressing the issue in his keynote. Late last year, AT&T signed a deal with Amazon to provide the network for its Kindle e-book readers, a lucrative arrangement that was previously enjoyed by Sprint.

"Every emerging device category shows tremendous potential," de la Vega said. "In the fourth quarter of last year, the U.S. led the world in e-book downloads with 34% of the world's downloads. On the business side, the potential is even more jaw-dropping."

Wireless M2M applications and embedded mobile in nontraditional devices could reap $1 billion annually for AT&T once the market is fully revived, Dow Jones Newswires reported. Juniper Research estimates that revenues will rise to $19 billion globally by 2014.

Elbowing its way into the healthcare market, AT&T announced at CTIA that its cellular network will carry data traffic from Vitality Inc., which markets Internet-connected pill bottle caps, GlowCaps.

The cap alerts patients who have missed a medication dose with light, then sound, according to AT&T. If the lapse continues, the wireless M2M application places a phone call or sends a text message to the patient with a reminder. It eventually learns and favors the alert that is most effective. The device can also automatically refill a prescription and email progress reports to patients, doctors and caregivers.

Other services running consumer and commercial wireless M2M applications on AT&T's 3G network include a tablet computer that consumers can use to remotely set a thermostat or home security system and a tracking system that monitors location and condition for pallets and dog collars, alerting owners via SMS when cargo or canines wander outside a virtual "geo-fence."

"You can only sell so much voice service," said Weldon of Current Analysis. "It's not clear to me which [M2M customer base] is the bigger opportunity, but it's clear [the consumer market] is the sexier one."

Let us know what you think about the story; email: Jessica Scarpati, News Writer


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