460 Million M2M Connections by 2018?

Mobile machine to machine (M2M) connections are set to reach over 450 million by 2018, according to ABI Research. That likely will be important for mobile service providers anxious to drive revenue and connection growth once sales to people saturates.

Other analysts have M2M forecasts in the same general range. Juniper Research, for example, a year ago forecast 400 million M2M connections in service by about 2017.

In the United States, The mobile M2M market will reach 114.7 million connections by 2016 with a compound annual growth rate of over 36 percent.

The largest business-to-business vertical market (most of the revenue likely will be B2B, some would argue) is the transportation vertical, with over 40 percent market share.

By 2015 more than 40 percent of M2M connections in the United States could be running on 3G, 3.5G or 4G networks. That also suggests that much of the demand for M2M connections will not rely much bandwidth, as 60 percent of M2M connections will use 2G networks.

Europe dragged down worldwide connection growth in 2011 and 2012, but connection growth will accelerate to a CAGR of 26 percent through 2018, ABI Research forecasts.

M2M average revenue per user connection ARPUs frequently are much lower than for human communications accounts, and ABI Research says competition is putting even more pressure on ARPU.

As do other analysts, ABI Research notes the importance of relatively bandwidth-limited 2G network connections.  Some 70 percent of mobile M2M connections were on 2G networks in 2012, ABI Research estimates.

ABI Research also suggests that the cost of M2M transponders is one reason for the heavier reliance on 2G networks, even though it also is true many M2M apps do not require lots of bandwidth.

In fact, the firm argues 3G transponders are more than twice as expensive as 2G transponders, while 4G transponders are six times more expensive than 2G versions.

As with many other communication services, much of the potential revenue will be earned by providers of apps and services other than the basic connections.