Wireless carriers are on the verge of having too much of a good thing: Demand for their services is growing in machine-to-machine communications (M2M) and 4G LTE.
Why are these twin pieces of good news a problem? Simply, there is only so much bandwidth to go around, and carriers may be bumping up to some significant limitations. M2M traffic traditionally is carried on older 2G networks. This spectrum is needed for the higher-profile and sexier 4G services. The two biggest carriers are “re-framing” — reassigning — much of their spectrum from 2G to 4G. This means that some subscribers in the M2M sector may have the bandwidth doors shut in their faces.
This issue is forcing the industry to grapple with the question of precisely what M2M is. Is it rudimentary communications aimed at ensuring control center data is still flowing through a pipeline and a refrigerator truck still is cold, and little else? Or is it that and a large number of add-on services, some of which involve video.
Right now, industry use focuses on the more rudimentary mode.“The bottom line is that in this space the majority of M2M apps are comfortable with 2G,” said John Horn, the president of RACO Wireless, a wireless company that serves the M2M sector. “Ninety to 95 percent use very low data applications.”
But it may not stay that way. In any case, M2M is not a business to trifle with. Like the dark matter that represents most of what is in the universe, M2M is a massive business that hides in plain sight. It covers everything from GPS in motor vehicles and other transportation-type services, such as traffic control and fleet tracking, to home security and automation, pipeline and agricultural monitoring and an almost-endless list of other businesses. And it is a list that is growing almost daily.
Verizon Wireless and AT&T are sun-setting their 2G networks as their 4G business grows. Therefore, the other two major carriers — T-Mobile and Sprint — seem well positioned because they will be able to offer both high-speed 3G or 4G M2M support and the base-level 2G service. But customers now are spread across all four carriers, so a redistribution is in the offing.
The bifurcation of the industry will require some decisions by customers. Moving from one carrier to another is not a simple matter. M2M devices often are difficult to reach — perhaps encased and obscured in a pipe — and tend to be geographically remote. They also are numerous; it doesn't make sense to monitor a pipeline unless you do some ubiquitously. While relatively few scenarios exist in which the device absolutely can’t be touched — since the ability to replace malfunctioning equipment must be designed in the process — there are instances in which equipment is exceedingly difficult to reach.
Multiply the remoteness of many M2M implementations and the time-consuming nature of replacing the equipment suggests that the cost and general pain of switching carriers is great. The actual costs of the modules are quite different as well: RACO’s Horn said that a 2G module may cost less than $20, a 3G module may run $30 to $40 and a 4G version generally is in the $50- to $80-range, respectively.
But, in many cases, it will be a necessary move. Verizon Wireless and AT&T haven’t provided their end-of-service dates, but they are coming. The prospect of making all those trips is a very real one for M2M subscribers of the three carriers.
The other possibility, of course, is upgrading the services taken from 2G to 3G or 4G. This may not completely eliminate the need to visit devices, but it clearly would change the business context of those visits. In a 2G environment, very little data is exchanged between the device and the network operations center (NOC) or other monitoring entity. Indeed, it can be as small as sending a message only when things go awry. Such exception alerts may in some cases only be sent every few years.
2G customers are encouraged to upgrade to future-proof their businesses. For instance, a security company may, to date, simply link its smoke, heat and window pane monitors to the NOC over a 2G network. It’s simple: Send for the police if a window is reported broken or the fire department if the sensors report a smoke condition.
However, some of these companies may shift from barebones security to far more sophisticated home automation services. They can add video to the security features. They also can include climate control in which more voluminous and frequent feedback from the home is necessary. In such a case, the company may be a great candidate to upgrade from 2G to 3G or 4G.
Another example is something that at first glance seems as one dimensional and binary: A pipeline sensor (oil is flowing/no oil is flowing) can become something more if it is upgraded to 3G or 4G. For instance, that sensor can provide real-time data on the pressure of the flow, the temperature of the liquid and other metrics that can paint a clearer picture of the situation in that pipe. Such data would have been invaluable, for instance, in the Deepwater Horizon oil rig crisis two summers ago. “I believe — and most people believe — that there are a lot of solutions that can take advantage of 4G and the bandwidth that it offers that are not being offered today,” said James Brehm, the senior strategist for Compass Intelligence.
Companies that are on the cusp of M2M deployments but haven’t yet deployed systems must also think carefully about which type of network they use. At this point, going with a 2G deployment seems problematic. There will be only one service provider and the upside of expanding the business it is serving is limited. If it is assumed that 3G and 4G M2M is the way to go, the increased costs both in capex (the modules) and opex (the subscription) are greater and must be factored into the business plan.
How a carrier approaches its current 2G customers is a sensitive issue. At the end of the day, supporting 2G will be a good business for Sprint and Nextel, but the focus clearly will shift to 3G and 4G, especially for new M2M subscribers. “It will be a short-term issue for existing customers. It is a pain to swap out the equipment and it costs more, [but] if you look at it from the long-term … it seems kind of crazy to go with 2G now,” said Kitty Weldon, a principal analyst with Current Analysis.