Prospering in an M2M world demands a fundamental shift in the way mobile network operators do business
In the spirit of recycling, here's a blogpost that I did for Tekelec the other day. Check here to see their excellent blog.
Mobile telephony is probably the world’s most successful technology: there are in excess of 5 billion mobile connections worldwide, representing an unprecedented level of technology penetration. To date, MNOs worldwide have built successful businesses based on selling voice, SMS and data connectivity to individual handset users. Recently, business dynamics have changed slightly with the introduction of mobile broadband and mobile content data services. On the whole MNOs have coped reasonably well with the arrival of these services although it’s not all been plain sailing as illustrated by continuing fears about exponential data traffic growth and concerns about being relegated to a bit-pipe role. One thing that has helped MNOs is that the underlying business logic is broadly the same: sell a device to a person which they use to access services for which they pay. MNOs may have needed to do some work on the network and create a few product management teams for the new services but it hasn’t required a fundamental shift in how they do business. It is a moot point whether they will cope as successfully with the arrival of machine-to-machine (M2M).
As we set out in the table below, in almost every conceivable way, M2M is different from the services MNOs provide today. The most obvious change, from the perspective of industry-watchers is that expectations for traffic, ARPU and revenue are completely different. This has some implications for how MNOs manage the cost of serving those customers. They must keep it as low as possible if they are to be able to cope with ARPU of less than EUR0.5/month. Also, a new consideration within the M2M market is that data volumes per connection are typically sufficiently low that installation costs are often a more significant financial consideration than on-going data transmission costs. MNOs must adapt their tariffing to reflect this dynamic.
Other immediate differences stem from the fact that M2M communication is typically a component of a wider offering, rather than a service in itself. As a result there is often no active end-user. This has implications for swapping providers, complaint handling and device management. M2M is an enabler, and the more transparent the M2M component of an overall service is, the better. In many cases the end user may not even be aware that the device is connected at all.
Furthermore, M2M connectivity is often mission-critical. In many cases customers are entrusting a key part of their business to telcos. Examples include smart metering, insurance tracking devices for cars, a range of fleet management telemetry services and, of course, mobile connected medical devices. As a result customers will have very different expectations over quality-of-service and service level agreements compared to voice and data services where best effort was often enough. Conversely, latency is often not an issue with M2M connections: devices are often connected via M2M with a view to maintaining a certain level of timeliness of information, but without a requirement for real-time information. For instance, smart meters may take meter readings at quarter-hourly intervals, but there may be no urgency in when they are delivered to the utility.
MNOs must also revise their channels and sales strategies. The sale of M2M connectivity by MNOs is often B2B2C: an MNO’s M2M connectivity solution must be integrated into a product which is then provided to a consumer. As a result MNOs must build completely new channel arrangements including identifying sectors they should address via direct and indirect channels. They must also secure sales in an aggressively competitive B2B environment while at the same time delivering a solution that is sufficiently polished and intuitive for a consumer market.
Mobile telephony is probably the world’s most successful technology: there are in excess of 5 billion mobile connections worldwide, representing an unprecedented level of technology penetration. To date, MNOs worldwide have built successful businesses based on selling voice, SMS and data connectivity to individual handset users. Recently, business dynamics have changed slightly with the introduction of mobile broadband and mobile content data services. On the whole MNOs have coped reasonably well with the arrival of these services although it’s not all been plain sailing as illustrated by continuing fears about exponential data traffic growth and concerns about being relegated to a bit-pipe role. One thing that has helped MNOs is that the underlying business logic is broadly the same: sell a device to a person which they use to access services for which they pay. MNOs may have needed to do some work on the network and create a few product management teams for the new services but it hasn’t required a fundamental shift in how they do business. It is a moot point whether they will cope as successfully with the arrival of machine-to-machine (M2M).
As we set out in the table below, in almost every conceivable way, M2M is different from the services MNOs provide today. The most obvious change, from the perspective of industry-watchers is that expectations for traffic, ARPU and revenue are completely different. This has some implications for how MNOs manage the cost of serving those customers. They must keep it as low as possible if they are to be able to cope with ARPU of less than EUR0.5/month. Also, a new consideration within the M2M market is that data volumes per connection are typically sufficiently low that installation costs are often a more significant financial consideration than on-going data transmission costs. MNOs must adapt their tariffing to reflect this dynamic.
Other immediate differences stem from the fact that M2M communication is typically a component of a wider offering, rather than a service in itself. As a result there is often no active end-user. This has implications for swapping providers, complaint handling and device management. M2M is an enabler, and the more transparent the M2M component of an overall service is, the better. In many cases the end user may not even be aware that the device is connected at all.
Furthermore, M2M connectivity is often mission-critical. In many cases customers are entrusting a key part of their business to telcos. Examples include smart metering, insurance tracking devices for cars, a range of fleet management telemetry services and, of course, mobile connected medical devices. As a result customers will have very different expectations over quality-of-service and service level agreements compared to voice and data services where best effort was often enough. Conversely, latency is often not an issue with M2M connections: devices are often connected via M2M with a view to maintaining a certain level of timeliness of information, but without a requirement for real-time information. For instance, smart meters may take meter readings at quarter-hourly intervals, but there may be no urgency in when they are delivered to the utility.
MNOs must also revise their channels and sales strategies. The sale of M2M connectivity by MNOs is often B2B2C: an MNO’s M2M connectivity solution must be integrated into a product which is then provided to a consumer. As a result MNOs must build completely new channel arrangements including identifying sectors they should address via direct and indirect channels. They must also secure sales in an aggressively competitive B2B environment while at the same time delivering a solution that is sufficiently polished and intuitive for a consumer market.
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