connectcompute

Machine-to-Machine solutions have been around since analog modems came to market and millions of elevators, alarms, nurse phones, vending machines, franking machines, fax machines, recycling machines and level gauges utilize the fixed telephone networks (PSTN) to communicate. I have been trying for years to collect data on the number of machines connected to PSTN but it is information very hard to find. Operators typically don’t know what is behind the first socket of a PSTN installation and it is common that phones and machines share subscription.The two key limiting factors for M2M over PSTNare obviously that machines have to be connected by wire and the cost involved. The PSTN subscription alone is typically 100-300$/year which immediately prevents massive roll-out. The situation differs from country to country but it is often so that cost for new installations has to be carried by the subscriber and in some markets it takes forever to get a new subscription.Mobile networks rapidly grew to cover most of the geographies, modules were developed for none-phone usage and some operators started quite early on to build a new wireless generation of M2M solutions. This together with the massive Internet forces created a mobile M2M hype around year 2000 and our VC, BrainHeart Capital, invested in Wireless Maingate and Wireless Car at the time. I think most would agree that the ideas were great but it was far too early since technology, networks and services where not ready enough to fly.

GSM was developed to support packet switched data communications (GPRS) but a quite well hidden secret is that GSM also supports the circuit switched data communications (CSD) used in the traditional fixed phone networks (PSTN). CSD made it possible to move terminals from PSTN to GSM-networks which still is an attractive approach in networks where CSD is enabled. Typical usage has been encrypted phones and mobile fax. Still today this is an attractive way to move fixed terminals to a mobile network to save money, add flexibility, enable wireless offices or to enable fixed line operators to remove parts of PSTN that never can be upgraded to broadband and/or don’t have subscribers enough to carry the infrastructure cost. There is an important  difference between moving an existing PSTN terminal to a mobile network and to replace an existing PSTN terminal with an IP-enabled mobile terminal. Reasons for moving terminals include taking advantage of made investments in products and education, a desire to make changes step by step and last but not least that some applications like fax is technically very difficult if not impossible to do over a packet switched network (like GPRS). On top of technical arguments are things like the need to call a place and not an individual. Mobile phones are personal and fixed phones often shared.

The PSTN networks are on their way to be replaced by mobile networks but the situation differs a lot from country to country. In Sweden TeliaSonera has started to take down PSTN in rural parts of the country replacing the subscriptions with mobile alternatives. At the same time subscribers leave their fixed phone subscriptions behind and it was recently proposed that the concept of area codes are taken away to mirror the fact that the fixed phone is going away. The number of fixed line subscribers in Sweden are 2,5 million, almost half of ten years ago, compared to 13 million mobile subscribers. The concept of mobile one phone offices once invented by Spring Mobil in Sweden is now very popular in Northern Europe. By moving the switch to the network and removing the fixed phone infrastructure companies save a lot of cost and increase accessibility and flexibility. But the fixed infrastructure was often used also for other things that has to be taken care of including fax, door opening systems, conference phones, alarms and franking machines. I think the one phone offices will continue to spread and this will be the single biggest market for moving terminals from PSTN to mobile networks over the next couple of years. But it has to be underlined that it is not a simple thing to do since both fixed and mobile networks behave differently and many of the fixed network devices use odd protocols for communication. Most difficult of all is fax since it uses a very sensitive protocol.

In developing countries we often see fixed networks with limited coverage and mobile networks gaining momentum due to speed and cost of deployment. Most of these networks are still 2G and in combination with extensive use of paper mobile fax is a popular CSD application. But generally speaking I think GPRS will be the predominant connectivity method for M2M applications in developing countries many years ahead.

Moving devices from PSTN to mobile networks is an important part of the M2M industry. Since it seems like nobody has good enough data on the size of the M2M over PST market I would appreciate any data you could share with me on connected machines to PSTN and I hope one day to be able to share a decent overview helping us all to address this part of the M2M market which I often refer to as the narrow band data opportunity.