Operators urged to make M2M progress by leading analyst

M2M could fail to live up to its billing as the next big thing unless someone takes initiative and stops the fragmentation that currently afflicts the industry.

That seemed to be the message coming out of M2M: Beyond Connectivity, a seminar organized by European Communications magazine in London last week, where analyst speakers presented a rather pessimistic assessment of the state of the market.

Ansgar Schlautmann, an associate director at management consultancy Arthur D Little, used the phrase “it’s a mess” to describe the status quo, imploring operators to “please make something happen”.

The M2M value chain is notoriously complex, involving companies from a variety of different sectors, but none is stepping up to the task of creating an ecosystem that could propel M2M services into the mass market.

Such efforts would drive standardisation, which is sorely needed if M2M is to thrive, according to many experts.

Schlautmann expects M2M connectivity revenues to be marginal and says operators need to extend into other areas and develop complete service offerings to really profit from the new business.

So far, Deutsche Telekom (Bonn, Germany) has developed the most complete M2M service offering, according to Arthur D Little, with its own M2M competence centre and vertical solutions for particular industries.

Schlautmann’s presentation was quickly followed by one from James Monighan, the head of M2M strategy for Telefónica UK (London, UK), who gave several examples of recent M2M deals, including a contract to supply 1.4 million SIM cards to G4S, a UK security company, for a smart-meter project.

But that did not discourage Schlautmann from saying Telefónica (Madrid, Spain) is “not quite there” on M2M.

One problem identified by Matt Hatton, a director at Machina Research, is that few users of M2M services have yet been convinced of their value. “There is clearly value in terms of new service opportunities and cost reductions, but most businesses that could benefit from M2M have yet to be made aware they can benefit from M2M,” he said.

Indeed, speakers and delegates appeared to be in general agreement that smart-meter rollouts were proceeding largely because of government policies forcing utility companies to act, and not because utility companies saw the commercial benefits of doing so.

Further doubts about operators’ M2M activities were raised this week with the publication of a new report by Informa Telecoms & Media, indicating that M2M service revenues still account for just 0.5% of mobile operators’ total service income.

Although the number of M2M cellular connections has risen by 22% over the last year, to 132 million, revenues are not growing as rapidly as some were expecting, says Informa.

The analyst firm says one reason for the bloated expectations is inconsistent operator reporting of M2M, with some companies including devices like tablet computers in their M2M figures.

It is no surprise that researchers relying on those numbers have sometimes overestimated the size and potential of the market.

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