The Opportunity and Challenges of M2M

Machine-to-machine (M2M) services are a promising opportunity for carriers struggling with a saturated handset market and data traffic that’s increasingly difficult to manage. M2M promises to boost revenues with minimal network taxation by delivering lightweight data transmissions to everything from e-readers like the Kindle to railroad cars and home appliances. Harbor Research has predicted that shipments of so-called “intelligent devices” will grow to 430 million in 2013 from 73 million in 2008, while total device revenues will exceed $12 billion.

For software developers and hardware manufacturers, then, the question is how to tap the new market for connected devices. How do you add connectivity to existing products, or create entirely new intelligent devices, and what kind of business model should you employ? Those topics are the focus of a Long View I posted today over at GigaOM Pro (sub req’d).

Operators have streamlined certification processes and invested substantially in order to help developers bring products to market as quickly as possible. But not every carrier has achieved the same degree of traction. Other factors must be considered in choosing a carrier partner for M2M deployments, too: Deployments through Verizon or Sprint can be more expensive, due to the costs of licensing CDMA technology, but CDMA can provide superior coverage in rural areas — a key advantage for segments like utility communications, which must cover broad areas. And carriers that have yet to build much of an M2M business may be flexible on price compared to their more established counterparts.

Meanwhile, operators and their partners are experimenting with a variety of business models and pricing schemes as M2M begins to get legs. We’re likely to see business models break down according to how devices are being used. A gadget that intermittently receives premium content at irregular intervals — like an e-reader or connected music player — is a natural fit for pay-per-use models where carriers take a share of the purchase price. Scenarios that require more consistent connectivity but consume little bandwidth — a mobile heart monitor, say, or applications that track energy usage — are likely to leverage traditional subscription models at flat rates.

And complicated alliances between carriers, device manufacturers, application developers and outside vertical markets will require new business models and revenue splits. So while the new world of M2M teems with opportunity for every player in the value chain, some substantial hurdles must be overcome if the segment is going to be the savior mobile network operators hope it will be. Read the full post here.

Image courtesy Flickr user birdphone.