The growth spurt in the Asian telecom landscape has resulted in us seeing many related gold rushes over the years, including SMS, voice call revenues and now mobile broadband and LTE. With mobile technology increasingly considered a necessity rather than a nice-to-have for consumers, regional operators have ensured that they diversify their services to add new offerings and value to their subscriber base.
From games, photos, mobile internet to music streaming and downloads – the mobile phone has become the personal device of the 21st century. However, some of the gold rushes have not always worked out. Mobile TV is still in development, as well as mobile advertisement and location-based services not yet fully taking off in the region, even in more mature markets.
With consumer ARPUs in decline, operators are now feeling the pressure to diversify and use their technologies in innovative ways. But the new opportunity is already here – machine-to-machine (M2M) is the future revenue gold rush for the telecommunications industry.
We believe that M2M is already established, albeit in its infancy, and is gathering pace as we speak. Several service providers have already partnered with M2M specialists like Convergys to provide the infrastructure needed to connect a vast array of machines and automate data readings. For many other Asian operators looking to diversify the versatility of service offerings, the opportunity to use mobile technology for intelligent new services is there to take.
Experts within analyst houses are also predicting huge success for the M2M industry. Berg Insight forecasts that M2M mobile connections worldwide at the end will grow to 3.1% by 2014. Meanwhile, Juniper Research predicts that embedded mobile and M2M device revenues will rise to almost $19 billion globally.
Ovum also supports the view of rising popularity of M2M technology. With expectations of Asian operators cementing M2M strategies by the first half of 2011, this spells exciting revenue opportunities for the Asian telecommunications industry.
Unlike previous telecommunications gold rushes that operators considered as add-ons to existing voice and data businesses, M2M communications are viewed as a market opportunity in their own right. But to maximize returns and offer an effective service, operators need to form alliances and partnerships with M2M specialists for long-term success.
Most operators possess limited competencies in the support and management requirements associated with M2M enterprise solutions in particular. It is likely we will witness acquisitions that will help build out operators’ M2M capabilities.
By connecting machine-to-machine, new business models emerge to increase revenues and profits. Some operators have spotted this opportunity, but the potential is likely to increase dramatically with consumers driving demand for more intelligent machines in the energy and security spaces, thus creating the need for M2M.
Partnerships have already been formed by some operators globally who are looking to capitalize on the opportunity. On the smart grid roll-out front, AT&T has teamed up with clean tech firm Petra Solar, which specializes in solar generation and smart grid technology.
Also, a partnership between Orange Business Solutions and Telit Wireless Solutions will see Orange’s M2M offerings serving the French market. In turn, a partnership between Telit and Deutsche Telekom is focusing on delivering integrated solutions for the networking of vehicles, machines, measurement, and control modules, along with a comprehensive range of customized services.
While these partnerships and others demonstrate how operators are looking to unleash the revenue potential of M2M, there are unique technical challenges that Asian operators need to recognize. For example, existing network infrastructure needs to be updated with technologies that support real-time networks, such as the smart grid.
There is also the issue of revenue projections. Convergys’ own projections put monthly revenues per unit at a tenth to a twentieth of conventional services. M2M systems will need to be supported by highly automated provisioning, billing, and support systems. These must be able to scale to millions, if not billions, of transactions monthly across a widely versatile customer base to ensure profitability.
Despite M2M still being in its infancy in Asia, two key drivers have emerged for its future. First, it is likely that M2M will not rely on short-term customers, as operators have experienced with their retail clients.
M2M requires long-term enterprise customers. If operators fail to negotiate contracts and partnerships now, they will miss out on profitability five years down to the line to those who were proactive in building relations across the complex value chain.
Second, whether in a mature or developing telco market, it is vital to keep M2M as a separate business model with a distinct support infrastructure and with a dedicated BSS and billing system. The number of partners and enterprise customers, not to mention the consumers at the front end, makes for a highly complicated, potentially regional ecosystem.
Aside from planning ahead, operators must have the knowledge and experience of relevant management systems by partnering with specialists in the M2M space who can provide technical and dedicated infrastructure and tools. They can ensure their venture into M2M drives revenues, but also maintains the customer experience for enterprises.
Tony Jackson is director for telecoms solutions at Convergys,For more information go to www.convergys.com/