Cellular M2M revenues are set to grow at a compound annual rate of 20.3% between 2013 and 2017, according to new research from Yankee Group.
The market-research company expects connectivity revenues from M2M services provided by cellular operators to rise from $5 billion in 2013 to $10.6 billion in 2017.
The growth rate compares with predictions of an 8.8% increase in mobile data revenues over the same period, and a 3.3% decline in revenues from mobile voice services.
Although average revenue per user is expected to fall from $2.72 a month in 2013 to just $2.09 per month in 2017, the proliferation of M2M devices and subscriptions will support overall revenue growth.
The company expects retail connectivity pricing to fall over the forecast period – especially for 2G deployments – but reckons wholesale connectivity pricing will remain stable.
The real pricing opportunity, however, lies in the provision of value-added M2M services – an area that is increasingly attracting the interest of leading operators.
Brian Partridge, a vice president at Yankee Group, says operators are beginning to see M2M as a strategic rather than a tactical opportunity, and taking the issues of partnership and regulation more seriously than before.
According to Partridge, however, a huge amount of work needs to be done in terms of overcoming industry fragmentation and lowering start-up costs to make M2M a mainstream opportunity.
Network operators also face tough competition from mobile virtual network operators that appear to have flourished in recent years, despite a previous Yankee Group forecast that some of these organizations would be short-lived.
Partridge says the MVNOs remain better positioned to meet specific connectivity needs and have an appetite to engage on smaller projects.
They also look more flexible than network operators, having developed billing systems that are specifically intended for M2M applications.
Speaking about the different vertical market opportunities, Ryan Martin, an associate analyst at Yankee Group, said that usage-based insurance (UBI) and connected energy were among the fastest-growing sectors.
The number of UBI connections is expected to grow at a compound annual rate of 67.8% between now and 2017, while connected energy connections are forecast to grow at a compound annual rate of 50.4% over the same period.
Yankee Group says that regulation is spurring the increase in these areas, with the public sector in Europe playing a pivotal role in mandating smart-meter adoption.
In the UK, for instance, Spanish telecoms operator Telefonica (Madrid) was recently one of the companies to be awarded contracts related to the government-mandated rollout of smart meters over the next few years.