|Tim McElligott Blog|
Evidence Matters for M2M Planning
Does it matter to say how many grains of sand comprise the beaches of Alabama or the dunes of Michigan, or is it enough to know they are beautiful? Would it matter if we knew precisely how many stars filled the night sky knowing darn well we’ll never travel to even the closest one? If someone gave you a number for how many angles could dance on the head of a pin, would you believe in angels any more or less than you do today? Does it matter if the number of Machine-to-Machine connections in 2021 is 1.6 billion or 2.6 billion?
As a matter of fact, it does. The amount of sand can inform us of changes to the environment. The volume of stars and how fast they are fleeing from us tells us something about how long the universe could conceivably last. That no one can give you a number for those dancing angles tells you something about whether to believe in them or not. And the size of the M2M space matters because it gives business modelers a clue about what it will take to provide M2M connectivity and services in an affordable manner.
I have heard many industry experts speak flippantly about the number of devices predicted for this market as if it were either another case of over-hyping the market or that it was so big that the case has already been made, and whether it is 2 billion, 10 billion of 50 billion hardly matters. Some used the numbers to make the opposite point: that the number of devices was going to be so huge that the prices would be too low to bother supporting them. I have rolled my own eyes at these numbers at times. But numbers do matter. And Analysys Mason’s new number – 2 billion by 2021 – seems reasonable in light of much of the discussion at Connected World’s M2M Conference last week in St. Charles, Il., from experts in the automotive, health-care, insurance, retail, financial and telecom industries.
Analysys Mason applies revenue expectations and geographic market-share expectations that help make the job of network planners for mobile operators easier. It also may help those vendors that will need to support planners with business solutions. The revenue associated with M2M connectivity also is expected to increase dramatically and reach $50.9 billion by 2021. That is a healthy market, but one with very tiny margins on individual connections. The average revenue per user is expected to drop from a worldwide average of $4.71 per month per connection to just $1.98 in 2021.
Landline service providers have worked with tiny margins before, but mobile operators haven’t had to learn to operate that way. Besides, the delivery and value chains for M2M will be much more complex than the most seasoned telecom managers have had to deal with. This doesn’t make the market bad, or unworthy, it just means that operators will have to be more strategic, more streamlined and more creative with their partnerships than before. And the more solid numbers that come in around this market, the easier that will be to do.
There are so many cool things that can be done with M2M that both operators and customers are going to have to decide which of them really matter, which are essential vs. which are an indulgence and which are most compatible with value-added services that help make it profitable for everyone in the value chain.
Do you need a Jetsons-like automated inventory control for your refrigerator that tracks expiration dates and suggests recipes? It may all depend on how many levels of the word “need" you can count.
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