M2M, the Quiet Giant


Mobile industry observers are keenly aware of the huge growth in smartphones, laptops and a long list of other mobile devices. This growth is rightly thought to be largely responsible for the pressure being put on the network infrastructure, which manifests itself in the need for address-expanding Internet Protocol version 6-which I blogged about last week-and other workarounds to the stresses and strains that network operators are feeling.


Machine-to-machine (M2M) communications is a silent wildcard in the growth of the cellular network usage. This is good news for carriers and service providers, since as I wrote about M2M in March, M2M is a relatively undemanding source of a lot of business.


The growth rate of M2M is dramatic. On Monday, Swedish firm Berg Insight AB reported that M2M accounts for 1.4 percent of mobile connections worldwide. The numbers are even higher -- 4.3 percent and 2.4 percent -- in the U.S. and European Union, respectively. The firm predicts a compound annual growth rate of 25.6 percent, and says that in 2014 M2M will represent 3.1 percent of mobile connections. Telefonica appears to agree: Yesterday, the carrier announced the formation of an international M2M unit that will employ more than 100 people.

Paula Bernier and Internet Telephony magazine last month posted a long feature on M2M. It provides a good flavor of the growing industry. The piece includes analyst firms' take on how quickly M2M is growing, a look at some of the vendors and carriers that are playing in the sector and some key definitions.

M2M is an interesting area because its profile is so different from network traffic that has a human on at least one end. M2M messages are short, and perfectly capable of being carried on 2G networks. A truck reporting that the temperature in its freezer compartment is rising to a danger point or a consumer's refrigerator warning that its bearings are about shot are exceedingly short and light on data, especially compared to a mobile video download and other consumer applications. Thus, the number of total connections that Berg predicts have fundamentally different ramifications than the same number of person-to-person connections. It's a lot of calls -- but not necessarily a mountain of data.


The other core difference is that refrigerators and freezer trucks don't shop around for the best cellular plan. Companies that use M2M networks, insiders say, tend to like long-term and stable contracts. The idea is that each connection doesn't produce the same level of revenue, but is reliable and long term.


The common wisdom-that M2M is a significant, albeit low profile, opportunity for the wireless industry-seems to be on the mark. And, with the excitement surrounding wireless and cellular today, the prospect of a reliable and quiet source of revenue probably sounds pretty good to service providers and vendors.