Eliminating regulatory roadblocks for M2M deployment

Detecon Executive Briefing Eliminating regulatory roadblocks for M2M deployment In order to achieve growth targets, carriers have to diversify into new promising business areas such as M2M Communications. A market survey however shows, that there are currently several regulatory obstacles that slow down M2M deployment. Hence, regulators key task for pushing M2M growth is eliminating these roadblocks. This requires: 1) developing new numbering solutions, 2) assigning Mobile Network Codes to M2M users or intermediaries and 3) careful regulatory intervention in the M2M roaming markets. We make ICT strategies work Detecon Executive Briefing Connected Machines – the next growth story With Broadband services currently being the only growth engine, carriers worldwide are reaching their growth limits. New markets are needed to achieve ambitious targets. One of these markets is the “Internet of Things” – connected and communicating machines (M2M). M2M communication is defined as fully automated data transfer between two or more remote machines and a central monitoring server. This market is spoiled by two factors: 1. necessity for different industries to fulfil increasing obligations for example with regard to the environment and 2. cost pressure and the possibility to achieve efficiency gains by automation and monitoring of process flows without any necessary human interaction. The ARPU for each M2M device is rather small - each module generally sends only limited traffic on a non-regular basis. However, analysts predict that machines with microSIMs outnumber human-used SIM cards by the factor ten within the next 5 years. The share of M2M connections in all mobile connections will rise from 3 % to 12%. In consequence the M2M market is a multi-billion dollar market with a short term CAGR of about 40%. M2M Communication – Use Cases M2M use cases can be designed for all kinds of industries. Flexible, wireless M2M solutions also enable new businesses. The next figure illustrates this with different established and innovative M2M applications for a variety of industries. Wireless Payment Solutions Handheld Game Consoles Wireless payments possible at any Enhanced user experience and new location with a guaranteed level content distribution channels. of security. Market figures: Playstation Portable Market figures: more than 3bn (> 60mn units sold worldwide), credit cards in circulation Nintendo DS (> 120mn units sold worldwide (2011). worldwide). Public transportation services Smart Metering / Smart Grid Real-time data about revenues, Improved demand planning, location and standing time of taxis. outage preventions and cost reduction. Efficient customer-driver allocation. Monitoring of (Vital) Body Functions Transportation Tracking Possibility of remote body Real-time status reports (for monitoring enhances living location, temperature, weight) in conditions for chronically ill patients. line with regulatory requirements. Market figures: prevalence of Market figures: throughput of global Diabetes worldwide ca. 6% of total ports ca. 560mn TEU; over 2mn population (ca. 285mn people). commercial trucks manufactured worldwide per year. Figure 1: Established and innovative M2M applications Detecon International GmbH 10/2011 2 www.detecon.com Detecon Executive Briefing Obstacles for M2M deployment As the examples in Fig. 1 show, there are ample opportunities for M2M deployment. While M2M in the security and automotive industry is established, sectors like healthcare with high margins are lagging behind. How can the full growth potential of M2M be unleashed? Answering this requires identifying potential roadblocks for worldwide deployment of M2M. The next figure shows results of interviews at the 11th Telco 2.0 Executive Brainstorm, in which industry experts evaluated potential M2M market growth barriers on a scale from 1-4. M2M obstacles Roadblocks Operator changing costs 3.0 1 2 Switching costs Numbering Technical issues 2.9 Distribution Estimated costs for changing 10,000 Roaming aspects 2.6 Shortage in SIM cards: numbering resources expected Developing costs 2.5 1 mn EUR Little market demand 2.3 3 4 Connectivity cost 2.2 Technical Roaming interfaces Module cost 2.1 High international No direct link roaming costs and between network Maintenance cost 2.1 use of operator and device intermediaries deployer Device performance 1.9 Source: Expert interviews at the 11th Telco 2.0 Executive Brainstorm, options were rated with a severity score between 1-4 Figure 2: Industry experts evaluated potential M2M market growth barriers The evaluation points to the importance of the telecommunications regulatory framework for accelerating M2M growth: the top 3 obstacles are regulatory issues that translate into four roadblocks National Regulatory Authorities (NRAs) should address: 1. Numbering distribution 2. Switching Costs 3. Technical interfaces 4. Roaming Detecon International GmbH 10/2011 3 www.detecon.com Detecon Executive Briefing Addressing the roadblocks In order to address each roadblock NRAs have to analyse whether regulatory intervention is justified. Potential reasons are market failure or the need to revise regulatory instruments to support the emerging M2M markets. In these cases appropriate regulatory measures have to be identified.