It seems the wireless machine-to-machine market is finally coming into its own.
The industry now boasts a range of players including major names like Nokia Corp. and IBM Corp., it enjoys a healthy value chain, there are a growing number of case studies and success stories, and there is even an M2M industry trade magazine. Although the potentials of wireless machine-to-machine communications have long been discussed, it appears that most of the needed pieces have finally fallen into place.
“Worldwide, cellular M2M represents a $20 billion opportunity in mobile network revenue alone by 2008, and up to $74 billion in service provider revenue,” said Robin Duke-Woolley, director of research and consulting firm E-principles. “M2M is the new business opportunity in wireless.”
At the beginning of the millennium, Japanese wireless data giant NTT DoCoMo predicted that machines would make two-thirds of all wireless connections in 2010. The carrier said everything from cars to elevators to pets would be equipped with wireless eventually, making the M2M market comparable to the massive mobile-phone market. At the time, DoCoMo’s predictions seemed overblown, but today some firms are forecasting numbers far beyond those of DoCoMo.
The FocalPoint Group, a research and consulting firm specializing in wireless machine-to-machine communications, predicts that by 2010 there will be 880 million new M2M devices built every year-far outstripping the mobile-phone market, which is forecast to reach 500 million units this year. Research firm Gartner predicts that by 2007 there will be between 100 million and 160 million M2M connections worldwide working over mobile-phone networks. Wireless technology company Wavecom predicts the number of M2M units shipped will hit 48 million by 2006. Forrester Research goes so far as to predict that the number of remotely connected machines will soon outstrip the number of humans on the planet.
Granted, such predictions and forecasts vary greatly. The reason is likely due to the disordered nature of the machine-to-machine market. M2M applications can span everything from telematics to wireless e-mail, and can work over a variety of networks. But most of the industry’s players today focus on a few specific areas and technologies, such as modules that monitor corporate equipment, vehicles, buildings, elevators, vending machines and even hospital patients. These applications allow businesses to know when a candy machine is out of Snickers, doctors to keep tabs on their patients efficiently, fleet managers to track truckers and industrial corporations to check on gas meters-among many other things.
Although wireless machine-to-machine communications has long been an area of activity, two major factors have conspired to bring the M2M market into its own: falling device costs and network coverage. On the network side, the buildout of CDMA and GPRS packet-data networks has largely contributed to the interest in M2M. These networks can efficiently handle data and voice traffic, and there is an established and reliable chain of service and device providers. On the device side, falling manufacturing costs for wireless phones coupled with saturated phone markets have spurred interest in the M2M market.
Indeed, most of the world’s top mobile-phone makers have engaged in significant M2M efforts. Nokia offers a range of wireless modules and gateways for sale, and teams with companies like Hewlett-Packard Co. and Airdesk to sell the related software and services. Sony Ericsson Mobile Communications L.P. also has a major M2M effort, while Kyocera recently introduced its new CDMA machine-to-machine module. Kyocera Wireless Corp. has been selling its new 200 series M2M product since July.
“We began seeing an increase of about 50 percent per month on volumes,” said Dean Fledderjohn, general manager of Kyocera Wireless’ machine-to-machine business. “It’s a very exciting market to be at the forefront of.”
Fledderjohn said Kyocera is selling its module for around $150, and that CDMA carriers Verizon Wireless and Sprint PCS have recently introduced monthly M2M service plans of around $10 per month. Since some M2M applications generate data traffic of just a few bytes per month, cheap service plans are deemed much more appropriate.
“We can see now, today, that this (M2M) market is really taking off,” said Aram Hekimian, Wavecom’s chief executive officer.
Wavecom is working to become one of the industry’s main wireless technology providers, and Hekimian said he expects the market for M2M modules to soon outsell the market for mobile phones. Thus, the interest in manufacturing and selling M2M products is high, as many of the world’s major mobile-phone markets have become saturated.
Although interest in wireless machine-to-machine applications is great, there are a number of factors that likely will keep it a market second to that of mobile phones. Most importantly, most M2M devices and service plans generate much less revenue than mobile phones. Average mobile-phone selling prices hover around $100, while most M2M modules sell for less than $100.
Also, few businesses are willing to pay $50 per month in service fees for machine-to-machine applications, while some mobile-phone subscribers pay much more than $50 per month. However, as the wireless industry constantly looks for areas of expansion, it seems the M2M market may be the next big thing.
