The M2M industry has attracted increasing attention during the past five years or so, as mobile operators and vendors have sought ways to offset the decline in mobile ARPU from consumers. Consumer demand for new services and enterprises’ need to reduce costs will drive significant growth in the M2M market during the next ten years. Analysys Mason forecasts that the number of M2M device connections will grow from 62 million in 2010 to 2.1 billion devices in 2020, at a 36% year-on-year growth rate.
M2M solutions are nothing new – the technology sector has dabbled with them for at least ten years. Most deployments have focused on the commercial segment in developed markets – particularly in the automotive and transport sector, where the first solutions appeared. We expect this balance to shift markedly during the next ten years: from developed to emerging markets; from commercial to consumer applications; and from a focus on one sector to a much wider spread of applications.
The automotive and transport sector accounts for the most M2M device connections today, but other sectors will have overtaken it by 2020 (see Figure 1). The fastest-growing sectors will be utilities, healthcare and security, thanks to a proliferation of connected device-centric solutions in areas such as smart metering, supply-side generation management, home and business surveillance, cardio-vascular disease and diabetes management, and body area networks.
Figure 1: Commercial and consumer M2M device connections by industry sector, worldwide, 2020 [Source: Analysys Mason, 2011]
Similarly, while the commercial segment accounts for well over half of today’s M2M deployments, consumer connections will grow to outpace commercial ones during the next ten years. The result will be a greatly changed M2M landscape. Consumer demand for real-time access to information will foster new services, including home security, health management, vehicle monitoring and connected engine diagnostics, to name a few.
Declining equipment costs and increasing labour costs will also drive demand for M2M solutions in emerging markets, which will achieve much higher growth rates than developed markets. The latter accounted for the majority of M2M device connections in 2010, but we expect their share to decline to 50% by 2020. Several factors will inhibit the growth of this promising market. In particular, it has a cumbersome supply chain, which hinders the development of industry-standard M2M solutions. This supply chain spans from chip and SIM manufacturers to IT vendors, communications service providers, application vendors and systems integrators. The leaders in each supply chain category vary by industry solution and geography. Therefore, the leaders within the automotive and transport sector might be completely different from those in the utilities sector. Furthermore, the leaders in the automotive and transport sector in the UK might be different from those in the USA.
Nevertheless, the financial incentive for operators is real – if not immediately apparent. The average ARPU from M2M services is substantially lower than that from mobile voice or traditional mobile data services: about USD5–7 per SIM per month, however, M2M ARPUs for a given solution can range from USD0.25 to USD40.00 per month. The ARPU per kilobyte of data can be very high. In addition, M2M-related data does not necessarily have a negative impact on the peak-hour dynamics of a mobile network, so adding small amounts of M2M traffic can yield positive cash flow for a carrier with minimal network-related costs.
Analysys Mason’s forecast of M2M device connections is subdivided into 8 geographical regions, 7 industry segments and 20 categories of M2M solution, and split into consumer and commercial connections (see Figure 2). It available to clients who subscribe to our Enterprise research programme.
Figure 2: Sub-categories for our M2M device connections forecast [Source: Analysys Mason, 2011]
Analysys Mason’s Enterprise programme will continue to track M2M services this year. Our research will include a series of reports on M2M industry solutions (such as m-health and smart metering), as well as case studies on supply chain partnerships, and vendors’ and service providers’ successes and failures. We will also be profiling and scoring participants in the M2M supply chain for various industry solutions and in various countries. These supply chains will include the utility sector for smart metering, the healthcare sector for acute disease monitoring solutions and the security sector for asset surveillance solutions.