$22 Billion in M2M Revenues in 2017

“What drives revenue after mobile Internet access?” is a question mobile service providers and telcos have been asking themselves, and working on,  for some time. Of the myriad potential opportunities, machine-to-machine (M2M) revenue seems to be percolating to the top of every list of potential sizable medium-term revenue growth.

With the caveat that people differ on what M2M services and apps include (some prefer the term “Internet of Things,” which in some cases seems to include use of mobile networks by tablets; others tend to define M2M as sensor apps operating without a direct human end user actively involved), there is a good reason for the optimism.

The easiest path forward for any business is a simple line extension that builds off existing competencies. And use of mobile networks for sensor operations and applications simply builds off communications capabilities originally designed to connect people.

The number of cellular M2M connections will more than triple by the end of 2017, according to IHS, growing to 375 million in 2017, up from 116 million in 2012.

As a result, revenue generated by mobile M2M services will grow to $22.4 billion in 2016, up from $9.6 billion in 2012. Those are significant amounts, if you assume a tier-one carrier generally is interested in new revenue sources capable of driving at least $1 billion in new annual revenues.

 

Mobile service providers of course benefit from providing access services. But much of the M2M business involves a mix of horizontal (access, security) and vertical (line of business) industry segment expertise.

In many cases, that means service providers will partner with industry specialists with domain expertise in a particular industry vertical. Generally, mobile service providers also will be looking to create M2M platforms such partners can use.

Volume will be key for the new business. Consumer smart phone accounts might generate $80 a month revenue. Sensor connections will be a fraction of that amount, perhaps $5 a month.

Operating costs might also be a key operating cost input, since sensors, unlike smart phones, might need to be repaired or replaced in the field.

People tend to bring their failed devices to a retail store for repair or exchange, so there is no need for a truck roll.

And where phones get replaced every couple of years, on average, sensors might be in place for considerably longer periods of time, necessitating a longer-term view of device capabilities and end user business objectives.

Mistakes will be costly. So the emphasis will be on deploying network sensor elements that can be provisioned remotely, by the customer, and monitored remotely, using simple application programming interfaces.

Google Core Revenue Driver Now is Advertising; Could Commerce Lead in Future?

Google's development of products and services has sometimes confounded observers who wondered what the heck those developments had to do with the core advertising business.

The answer seems to be that not everything Google works on is related, even tangentially, to the core advertising business. The self-driving car is the best example of that. 

But even when there is a somewhat-clearer relationship between operating systems, devices, apps and capabilities, it is not always immediately clear what value Google sees. 

Some might argue that operating systems, browsers, devices, maps,  search, Google Now, Google Wallet and  the Play store could be assembled as a complete ecosystem for finding and buying products and services.

In that sense, all the various pieces would add up to a commerce, or shopping, revenue capability. 

41 Percent of YouTube Viewing is on Mobiles

Some idea of the rapidly-growing traffic demand represented by video can be gleaned from one bit of news: 41 percent of YouTube traffic now occurs on mobile devices (phones and tablets), up from about six percent of total traffic in 2011.

To be sure, that traffic appears mostly to happen when mobile devices are connected to Wi-Fi networks. 

In part, increased mobile viewing of mobile video will help justify or spur adoption of mobile broadband. For the most part, mobile devices will be used to watch video while connected to Wi-Fi networks in peoples' homes. 

source: Mobidia

That does not yet appear to the case on every mobile network, in every country. 

Still, the dominant trend is for users to switch to use of Wi-Fi when they can, especially in the home, and especially when they will be watching video.

Mobile Customers, Accounts, Lines, Devices: What are We Counting?

For whatever combination of reasons, Verizon Wireless has been outpacing AT&T, Sprint and T-Mobile US at adding net new “customers” since about 2010. That is especially crucial as overall net additions are shrinking since the end of 2011.

Perhaps 90 percent of all new net additions now are taken from another service provider.

All that might raise a question: will Sprint and T-Mobile US take share from each other, from AT&T or from Verizon Wireless? It’s a hard question to answer, in part because the subscriber figures actually do not quite add up in a logical way.

Verizon Wireless, for example, added 1.1 million net retail connections, including 927,000 retail postpaid net connections, in the third quarter, to grow total retail connections to 101.2 million connections, up 5.5 percent year over year.

Some 95.2 million of those retail connections were postpaid connections.

If AT&T, T-Mobile US and Sprint report third quarter results in line with their second quarter reports, we might expect T-Mobile US to add a million customers, AT&T to gain half a million and Sprint to lose about half a million.

So we might expect about 2.5 million net adds at Verizon, AT&T and T-Mobile US, with Sprint losing about half a million. In other words, about two million net accounts would be added, of which possibly 1.8 million represent market share shift.

So where are those customers coming from? One suspects the issue is “accounts” or “users” rather than “customers.” That is about the only way to explain the numbers.

To be sure, the shift of postpaid users to prepaid is a complicating factor, but it seems likely that the carriers are reporting something more akin to “connected devices” (phones, tablets, data cards) rather than customer accounts (which often are family or shared plans) or “lines” (connected phones).

Those estimates assume the third quarter results from T-Mobile US, AT&T and Sprint will be about the same as their second quarter results.

T-Mobile US added 1.1 million customers in its second quarter of 2013, for example.

In its second quarter of 2013, Sprint lost about 520,000 net customers, though it gained 194,000 postpaid customers. AT&T, in the second quarter of 2013, gained a net 632,000 customers, including 551,000 postpaid customers.

Scratch Wireless Launches with "Wi-Fi First" Access Model

Add Scratch Wireless to the list of firms that believe Wi-Fi can be a primary access method for at least some smart phone users. 

The new U.S. service is based on “Wi-Fi first” mobile service, with passes used to get access to a Long Term Evolution network. So far, only one device is supported, the Motorola Photon, a 4.3-inch screen, Android-powered device outfitted with dual cameras, 4G LTE, and a slide-out keyboard for $269.

Scratch Wireless allows full-time use of text messaging, with voice and data available for no charge when a user is on a Wi-Fi network.

Scratch Wireless sells a day pass costing $1.99 for voice access, and a separate pass costing $1.99 for mobile data access. The 24-hour passes support a total of 30 minutes of calling, or 25 Mb of data usage.

Monthly passes are available for $14.99, using the same voice or data approach. The voice pass offers 250 minutes of talk for a 30-day period, while the data pass supports 200 Mb of data access.

The assumption is that much of the time, users will have access to Wi-Fi. Republic Wireless also uses a Wi-Fi first access model.

America Movil Abandons KPN Acquisition Effort

Telecommunications remains a business with perceived national interest implications. In recent days, America Movil has tried to buy incumbent Netherlands telco KPN. But America Movil has been blocked by the KPN Foundation, which had temporarily increased its stake in KPN to just under 50 percent in order to fend off the takeover. 

Liberty Global tried to buy German cable company KDG, as well as Netherlands cable company Ziggo, and also failed in both attempts. LIberty Global was successful at acquiring Virgin Media in the United Kingdom. 

But Telefonica successfully has concluded its acquisition of Germany's E-Plus (partially owned by KPN), at least in terms of the shareholder vote. Regulatory clearance still is required. 

If and when AT&T makes an acquisition bid of its own, national interest, or at least European interest concerns are expected to arise as well. 

Google Fiber Adds ESPN, Disney Streaming for Smart Phones, Tablets

Starting Oct. 16, 2013, Google Fiber TV customers can stream  the WatchESPN and WATCH Disney apps to their smart phones and tablets for free. The deal isn't unusual or exclusive, as WatchESPN and WATCH Disney are available from most Internet service providers. 

But the deal adds one more important ISP, and makes streaming direct to end users by a content provider more common. Eventually, the accumlated weight of such direct-to-consumer content offers is going to help create the foundation for widespread delivery of programming network content as well.

It will take a while, and Disney is more comfortable with such concepts than most other programming networks. But, little by little, the barriers to direct distribution over the Internet are being chipped away. 

WatchESPN provides live access to eight networks, including live events and all of ESPN’s sports and studio shows (including ESPN, ESPN2, ESPNU, ESPN3, ESPN Deportes, ESPNEWS, ESPN Goal Line and ESPN Buzzer Beater). 

WATCH Disney gives users live access to Disney Channel, Disney Junior and Disney XD networks. Just go to WatchDisneyChannels.com and log in using your Google Fiber username and password.