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1.5bn M2M utilities connections by 2020 but telcos could struggle to profit

17 мая 2011

Machine-to-machine (M2M) connections in the utilities space will grow to 1.5 billion worldwide by 2020, generating revenues of €24 billion, according to a new report from M2M specialists Machina Research.

There is an opportunity for mobile network operators to capture a share of that revenue, but with the traffic generated likely to be very low, they will have to be savvy if they are to make any serious money.

Smart meters will account for 99% of M2M connections in the utilities market by 2020, up from 97% last year, with the remainder coming from utility companies' transport & distribution management and electric vehicle charging. That means 1.4 billion new smart meters will be required between 2011 and 2020. But with traffic across smart meters amounting to just a few hundred KB per meter, per year, mobile operators would be well advised to avoid being a bitpipe player in this market.

"There are not enough bits to generate any money," Matt Hatton, director at Machina Research told Total Telecom on Monday.

He urged mobile network operators to work hard to establish direct relationships with utility companies, to become the first port of call, over a systems integrator or third-party service provider, and to get involved in device and service management, rather than just carrying traffic. "It's providing the whole service from end to end," Hatton said.

Indeed, he predicts that network traffic will account for just 5% of total utilities M2M revenue in 2020, or €1.2 billion.

As it stands, there are 100 million M2M connections in the utilities space globally, generating €4 billion in revenues, of which just 1% (€50 million) comes from carrying mobile network traffic. Machina Research's forecasts show that in annual revenue terms the M2M utilities market will peak in 2017 at €28 billion. After that date, the number of new additions will start to decline, which results in lower device, installation and provisioning revenue.

While the mobile operators will have to work hard for their share of the market, there are other companies that should find it easier to benefit. In addition to the firms that make utility meters, Machina Research points out that manufacturers of the telecoms modules, like Sierra Wireless, Telit and Ericsson, stand to prosper from the projected growth, in addition to "those that benefit indirectly, such as Qualcomm".

On a worldwide basis demand will be driven by government initiatives to encourage smart metering: the EU, for example, requires 80% of electricity meters to be upgraded to smart meters by 2020, and similar targets are being set elsewhere in the world.

China is at the forefront of the drive to smart metering and Machina Research predicts it will account for a sizeable 40% of all global utilities M2M connections and 31% of revenue by 2020.

In terms of network technology, 3G will dominate as although second-generation cellular technologies will be easily capable of handling M2M traffic, operators will look to future-proof installations, in the knowledge that 2G networks will at some point be switched off.

Last week Total Telecom reported that U.S. operator Sprint Nextel is looking at using 4G networks to carry M2M traffic, but Hatton believes it will be some time before LTE or WiMAX networks account for a significant portion of M2M traffic.

"We don't think it's mature enough or widely deployed enough to take the majority [of traffic] for quite a long time," he said.

Источник: Total Telecom

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