The Rise of the Machine-to-Machine Sector

Carl Weinschenk

Carl Weinschenk spoke with Steve Pazol, the president of nPhase. At the World Mobile Conference last month, nPhase, Verizon Wireless and Vodafone announced a strategic alliance aimed at simplifying remote management of devices on M2M networks in Europe and the United States. Machine-to-machine communications holds tremendous promise for wireless carriers who are nearing saturation in the voice market. Pazol says the areas with the most potential are utilities/smart grid, connected consumer devices and telematics. The bottom line, however, is that M2M is different from the world of voice, and and both carriers and enterprises have to prepare for its unique and exacting demands.

Weinschenk: Where is machine-to-machine right now?
Pazol: The machine-to-machine market segment has been around for eight or nine years. Companies started using cellular technology to connect to different assets. One of the best-known names is OnStar. They have been doing it perhaps closer to 12 years. Large-scale commercial deployments have been relatively limited and the market quite fragmented. The big players are starting to get involved in the last couple of years, such as Qualcomm and industrial companies like Honeywell and others. Very recently, the most activity has been with wireless operators.


"What fundamentally needs to happen is we need to give application developers the tools to write applications where they don't have to be an expert in wireless networks. That's what we do."

Steve Pazol
President, nPhase

Weinschenk: What is driving the wireless companies?
Pazol: A challenge the operators have is that revenues are flattening. The cost-per-megabit [they can charge] is shrinking and the amount of usage is growing dramatically. They still have to spend real dollars to keep their infrastructure up and running. They have to put up more towers, buy more spectrum and deploy more antennas. There is real cost associated with that... The fundamental reason [for M2M growth] is that their growth is starting to flatten out. Voice revenues, if not declining, are at least flat. The cell phone market is saturated as far as people are concerned.


Weinschenk: So move from people to things.
Pazol: There are a lot more things out there than people. There are thinks like OnStar, pieces of construction equipment [to track], smart meters and medical or consumer devices such as Kindle, picture frames and gaming devices. The carriers have started to focus on this new market, "the Internet of things."


Weinschenk: How promising is it?
Pazol: When you talk about penetration into customer base, you are talking about 300 percent penetration, 500 percent penetration. One person could have kind of a family plan for things. It's because the market conditions are approaching saturation, so carriers are looking for adjacent markets and more greenfield opportunities so that they can grow.


Weinschenk: What is nPhase doing?
Pazol: We have a three-way deal with Verizon Wireless and Vodafone. The whole idea is to make it simple for companies who want global end-to-end solutions. One contract, one certification and one platform -- which is us. It's local economics. You are not roaming all over the place. Vodafone is the largest carrier globally, Verizon Wireless is the largest in the U.S. It's starting to hit the mainstream. With operators focusing from the sales and marketing perspectives, it's going to grow the pie enormously. My job is to make it easier to plug in.


Weinschenk: Is it true that M2M generally uses less bandwidth?
Pazol: Not necessarily. When people talk on the phone, they are not consuming a huge amount of bandwidth. Systems are very efficient at moving voice. When they are doing data, which M2M is, depending on application and the vertical, you have widely differing use profiles. For example, smart meters may send a little bit of data once a week, which is no incremental load on the network at all. But a medical device or digital signage -- where streaming video is going on-is consuming more bandwidth. [The problem is] developers are not necessarily writing well-behaved network applications.

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