M2M doomed to remain a cottage industry?

Is the machine-to-machine market doomed to remain a cottage industry dominated by overpriced SMS? Delegates at the 'M2M 2.0' session at the 11th Telco 2.0 Executive Brainstorm in London last month were quite clear what the problems, opportunities, and solutions are.

As this chart shows, the biggest barriers to greater adoption of M2M were the costs of switching between operators, the technical and commercial interfaces between operators and customers, and the lack of global solutions for seamless and economic roaming.

This problem set is no coincidence. In fact, the first and third problems are consequences of the second. Until the GSMA was persuaded to accept OTA SIM update last week, there was no practical way for an M2M customer to switch operator. The security assurance and competitive freedom the SIM provides to individuals was unavailable to machines. At our recent brainstorm, we learned that even in the relatively benign environment of the Netherlands, replacing 10,000 SIMs costs €1m. This represents a major obstacle to adoption, for both private and public sector customers.

OTA SIM update potentially removes the problem of SIM-swapping - but it may need regulatory action to ensure that the operators, who have the keys to the OTA gateways, play ball. It doesn't solve the roaming issue, though, either nationally or internationally. National roaming is unusually important to M2M devices - a beer keg can have a phone number, but it can't walk around until it gets 5 bars. Also, M2M customers may ship products anywhere and be unable to predict where they will end up until the last moment. They therefore require a global solution, and the ability to negotiate pricing certainty in advance.

We expect an increasing demand from customers, systems integrators, and the developers of M2M software, for MVNO status. That brings the right to issue their own numbers and SIM cards, and to negotiate their own wholesale capacity and roaming contracts. More likely, it would give them the right to delegate this to expert third parties. Operators need the capability to create such tailored M2M entities on-demand using their connectivity.

We should expect that the growing M2M software/Web services ecosystem will increasingly develop the features needed to manage the devices and their connectivity - which threatens operators' traditional role as anything other than radio networks. To counter this, operators need to accept that a business model based on lock-in will collapse as soon as the customers defeat the lock, and either partner with or develop the best M2M service enablement technology going.

What do we mean by "service enablement"? M2M deployers need to identify, authenticate, provision, and maintain their device fleets. They need to update and rollback software on the devices. Increasingly, they will need to deploy processing logic into the "Internet of things" in order to render the system more robust, distributed, and autonomous. For us, this is a massive challenge in a field - device management - operators should make their own.

(For more Telco 2.0 analysis on M2M, please go to www.telco2research.com)