NETWORK STRATEGIES


Operator m2m business models


Several recent analyst reports explore the m2m business model options for operators, setting out possible ways to raise ARPUs and manage costs. Current Analysis in Best Practices in m2m: The Operator Perspective, says beyond data connections operators can generate m2m revenues by providing end-to-end systems integration for key applications such as smart grid deployments and asset/fleet management, from offering managed/ hosted m2m services at their data centres, or from data mining. The analyst company says ARPUs could well be higher than $3-4 per line for operators that provide value-added services or high bandwidth real-time, location-enabled or video- enhanced applications. “The possibility of offering tiered services for different device types, at different speeds, or with unique classes of service and prioritisation schemes, or for bundling multiple devices associated with a single subscription are other options to grow revenues.” Current Analysis points to high-end applications such as real-time monitoring of medical devices, patient location and health status, or video surveillance for enhanced security applications that may yield significantly higher ARPUs. Capgemini in its report The Onset of Connected Devices looks at wholesale and retail opportunities for operators. When it comes to wholesale it says: “Telcos should…set up certification laboratories that will pre-test and pre-qualify multiple 3G data modules that independent device vendors can…include in their device. Such streamlined processes help vendors reduce their time-to-market, while helping telcos to rapidly enable connectivity over a wide range of devices.” But for applications where “connectivity is critical to their core function”, such as e-healthcare devices and security solutions, Capgemini advises a direct retail strategy.


Operators will also look to manage the cost of their m2m services strategy. A good service delivery platform can significantly decrease the costs associated with implementation and customer management, says Current Analysis: “Customer acquisition costs (which include marketing, distribution, and device subsidies, if applicable) make up approximately 40% of total costs; implementation and management (including device certification, account creation and rate plan implementation, provisioning, technical/billing customer support, escalation and dispute management) contribute an additional 30% of costs; and the costs associated with radio and core network usage make up an additional 30% of costs.”


of new services. It lowers the incremental cost structure.” Indeed, operators could deliver a profit


margin if they make full use of their exist- ing infrastructure. “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,” says Analysys Mason in its report. Namie at Jasper Wireless says as a result


“m2m can be very high margin, even if it is low ARPU”. Some telcos are looking to m2m serv-


ices as a way to win big enterprise accounts. AT&T, for example, signed a deal for wide-area network (WAN) busi- ness from a utility customer thanks to an m2m service contract. “AT&T was not the incumbent provider of MPLS. [We] provided an m2m architecture and…[as a result] won a contract to become the major global WAN provider,” says Ingle. What’s more, once an operator wins an


m2m account it is very difficult for enter- prises to change suppliers. SIMs are often


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soldered into alarm systems, for example, or built into the body of a car. “There is no mechanism to switch an [m2m] SIM from one [operator] to another,” says Vodafone’s Brenneis. “It can’t be changed over the air.” As a result, enterprises worried about tying in to a single opera- tor for several years currently must install separate SIMs from different suppliers. “A SIM component costs E3–E4.


[Customers] can solder in one from Orange and one from Vodafone and switch on only one,” says Brenneis. “It hurts us because they can’t switch to us. We would support…a structure” whereby enterprise customers could switch suppli- ers without replacing the SIM. Competition to win accounts in sectors


such as utilities promises to be tough. Another new report, from Innovation Observatory, outlines the potentially fierce competition operators will face in delivering and managing m2m services. Utilities worldwide will invest some US$378 billion in building electricity smart grids by 2030, it says, with 80% of spend concentrated in 10 countries.


“Competition to win contracts with


utilities in these leading smart grid markets will be fierce, as the sheer scale of the investment is creating a huge appe- tite to supply,” says the report. In order to deepen their vertical indus-


try knowledge most operators choose to partner with specialists, but some may look to acquire expertise. Orange, for example, acquired Data and Mobiles in 2009 for its m2m transport applications. “In general operators have stayed away from acquiring best-of-breed applica- tions for m2m. I expect that will change as m2m solutions become more produc- tised,” says Hilton at Analysys Mason. But Namie at Jasper Wireless cautions


against such an approach. “Orange has a long history of offering…fleet manage- ment and commercial tracking…[but in so doing]…it is competing with fleet management [providers] and that is not a good position,” he says. The market to deliver consumer m2m


devices—such as electronic readers (e-readers), personal navigation devices (PNDs), netbooks, tablets and handheld games consoles—is also growing: already they account for approximately half of AT&T’s m2m connections. Berg Insight expects 271 million connected consumer electronics devices to ship in 2015. But again operators will have to adapt


to new business models. “There’s going to be a small category of devices where [they] will be an additional line on the phone bill. However, I don’t see that being the standard case,” says Namie. Instead operators will have to get used to big-brand car manufacturers or gaming and e-reader service providers being the customer point of contact. Last month, for example, Vodafone


signed a telematics agreement with Hyundai in Europe, but the billing rela- tionship has yet to be agreed, says Brenneis. He also points to BMW’s ConnectedDrive telematics service, which is branded and billed by the car company. But such services in turn could open up


new opportunities for operators. “Providing OSS/BSS [services] is an enor- mous value add and much more valuable than transport,” says Namie. n


www.totaltele.com March 2011


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