M2M services performing below expectations

The take-up of machine-to-machine services is lagging behind analyst expectations, according to the latest data from Informa Telecoms & Media. The analyst firm reported that M2M service revenues still only account for 0.5 per cent of mobile operators’ total service income.

This is despite the number of M2M cellular connections having increased 22 per cent in the last year to stand at 132 million, generating $5.68bn over the period. However, the figures are diminutive compared with the cellular business as a whole, with one M2M connection existing for every 50 person-to-person connections.

“M2M connections and M2M revenues are neither as high nor growing as rapidly as some are anticipating,” said Jamie Moss, senior analyst for M2M at Informa. “However, this does not detract in the slightest from the validity – or long-term prospects – of the market.”

“Indeed, M2M could do well without the hype that is associated with every ‘next big thing’, for it operates on entirely different grounds to consumer services and as a consequence needs to be judged by different standards.”

The analyst firm outlined three reasons why expectations for the growth of M2M have been exaggerated. Firstly, contrary to popular belief, internet connectivity is not likely to find its way into every product that consumers own. Instead, it will be restricted to products for which a viable business model exists for the manufacturer or service provider concerned. Where connectivity does have a role to play, in many cases it will be on a per-household basis rather than at the per-person level, such as one smart meter and one connected car per family.

Secondly, many M2M connections will not be point-to-point; they will involve one or more steps of aggregation. Only a portion of all M2M connections will be cellular.

And thirdly, carrier reporting of M2M connections is inconsistent and is often combined with cellular connectivity for all manner of devices, such as tablets. To assume that these reported figures all relate to M2M devices runs the risk of over-estimating the size of the current market by up to 100 per cent, depending on the carrier in question.

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