Verizon Battles AT&T for M2M Supremacy

Updated: Verizon’s Wireless (s vz) subscriber additions fell by 20 percent in the third quarter, to 997,000 new adds, the lowest figure in a decade, giving it a total of 101.1 million connections. However, the carrier maintained its top spot ahead of AT&T (s t), which added 2.6 million new subscribers to climb to 92.8 million total connections.

As the race for subscribers is slowing down, (although if the iPhone (s aapl) moves over to Verizon Wireless next year it could heat up again), another race is emerging for connected devices. These are sensors, cars and connected machines that will make up the Internet of Things.

Verizon reported it added 251,000 other connections in the quarter, raising its total of connected devices to 7.9 million Updated: (that number does not include laptops with integrated modems). AT&T, meanwhile, added 1.16 million new connected devices, bringing its total to 7.8 million. AT&T said this morning that when you count embedded devices including laptops and netbooks, its total is 8.5 million. This is still a far cry from traditional consumer subscriber numbers, but it’s where the real growth lies for carriers both, because of saturation and because of the economics of carrying data on cellular networks. As my colleague Stacey wrote earlier this year:

So even as data revenue and traffic rises [sic], carriers face two key challenges: One, the handset market is saturated; and two, users on smartphones are boosting their consumption of data at a far faster rate than carriers are boosting their data revenue. The answer to these challenges is selling data plans for your car. Your kitchen. And even your electric meter.

AT&T, in the last year, for example, has more than doubled its connected devices from 3.3 million to 7.8 million, which is why it’s betting big on this market. The next battleground isn’t in your pocket or your briefcase, but in the home, connecting refrigerators and cars other consumer electronics devices. Ericsson’s (s eric) CEO said earlier this year he expects 50 billion connected devices by 2020.

As we reported, wireless penetration has hit 95 percent in the U.S., and is over 100 percent if you rule out kids under five. At the end of the day, there are only so many phones people will carry. That may be what we’re seeing from Verizon’s slowing additions. Even with an army of Droids, the addressable market is slowly shrinking, making it more a game of stealing subscribers instead of minting new ones. So while we keep an eye out for a Verizon iPhone and see what the effects will be, stay tuned to the connected device battle. This will may be the one to watch.

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