What will be the impact on M2M of announcement to shut down 2G?

August 8, 2012

AT&T just announced that they will shut down their 2G network no later then January 1 2017. They want to free up spectrum for mobile Internet network capacity. “Well in advance of this change, we will reach out to our relatively small percentage of 2G customers and offer them options to meet their needs” says a spokesperson to Fierce MobileIT. According to Berg Insight AT&T had 13.1 million M2M subscribers by the end of 2011. It is often stated that the 2G share of the M2M subscriptions are bigger then 90%. I don’t know the AT&T mix but it is likely that at least half of their 13 million subscribers use 2G.

PricewaterhouseCoopers recently made a study and found that 60 percent of wireless operators plan on decommissioning their legacy networks over the next five years. Their study would suggest that more operators would like to make similar announcements as AT&T.

M2M terminals are often expected to be operational 5-10 years which makes the choice of network technology difficult. From a capacity point of view 2G is often enough and 2G modules are cheaper than modules supporting 3G and 4G/LTE. Coverage of the 3G networks are often not as good as the 2G networks. It is far too early for LTE networks to take over. Support for circuit switched connections which are required when moving terminals from the fixed phone networks (PSTN) to mobile networks is only available in 2G. It will be interesting to see what AT&T’s announcement will do to customers, regulators and other mobile operators. And what about countries were mobile networks are all 2G?

I believe this is a challenge for the development of the M2M market. As far as I understand it, AT&T will have to subsidize the remaining 2G M2M customers to replace terminals or loose the customers to other operators. This new situation for ongoing and planned M2M projects might delay or in worst case kill them if the up-front investment becomes substantially bigger. This news also explains why M2M customers need over-the-air provisioned SIMs.

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ETSI M2M standards and the oneM2M initiative

May 3, 2012

An absolute requirement for M2M to really take off is a common architecture and a set of global standards. A robust common service layer is needed. The standardization organization ETSI started en effort to create such architecture and standard in January 2009 and has started to deliver. ETSI has released a multi-service layer enabling an easier and efficient access to the telecommunications network functionalities, designed to support a wide range of services over different underlying networks. It has to be noted that the work is IP only why issues like moving fax machines and other analog devices from PSTN to mobile networks isn’t covered.

According to Mr Enrico Scarrone, Chairman ETSI TC M2M, they try to build the standard on existing and available bits and pieces and focus on identifying gaps and fill them. At M2M Forum in Milan he presented also the oneM2M initiative which is a global partnership project aiming at removing the barriers for the Internet of Things created by local and industry related differences and approaches. We all know the power of 3GPP which strongly supported the developments of the third and fourth generations of cellular networks. Hopefully oneM2M will pave the way for a rapidly growing Internet of Things where data from different industries can be combined to create new innovative solutions and business models.

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The 2G/3G dilemma – Comments by Martin Svensson, Tele2

January 31, 2012

“I would say that 2G is not going away anytime soon, but if you are concidering new M2M installations today I would definetly recommend going with 3G compatible devices and to use 2G/3G compatible SIM cards. There is no guarantee of a maintained functionality in 2G networks looking ten years down the road (a normal life span for many M2M installations), and 2G CAPEX and OPEX will decline with all operators. Even if you take a slightly higher investment initially using a 3G device you will avoid the risk of having to exchange both SIM card and modem during the life span of your installation. Besides, prices on 3G modules are dropping and are rapidly approaching similar price levels as 2G units. This is of course dependent on the life span of you M2M installation and the amount of data you need to transfer. From an operator point of view, I am curious of which industry will first make use of 4G networks and M2M to rapidly transfer streaming video for specific surveillance tasks or other data intensive applications.”

Martin Svensson, M2M Product Manager, Tele2

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The 2G/3G dilemma

January 29, 2012

Today some 95% of the mobile M2M connections are 2G. It is absolutely natural since the functionality and capacity needed for most of today’s applications is fulfilled in 2G and the modules are substantially cheaper. An off the shelf 2G SIM card would cost around $3-4 per month plus $0,5-2/MB data transmitted (in Sweden) and CSD, GPRS and SMS is enough for most M2M applications today. But there are dark clouds in the horizon! We don’t know how far away or how fast they come forward, but they are definitely there. Let’s try look at what these clouds contain.

A typical M2M deployment would count on terminals to be in service more than five years, often 10 or even 15 years. That’s long time! It is about 20 years since the GSM services came to market, and betting on the same networks to still be there with great coverage and good service might be something to consider carefully. A customer service person at my previous mobile operator in Stockholm told me: “sorry but we don’t invest in the 2G network anymore”. One of my companies, Possio, help mobile operators to move analog devices from the fixed network, PSTN, to mobile networks using primarily circuit switched connections in 2G (CSD). They experience operators, one by one, deciding not to introduce any new CSD based services in their network. They keep the existing ones, but obviously not for ever. I believe CSD will not disappear over night but this is worth looking into when making the bets

The connect part of M2M is the least interesting and rewarding. It is the compute part that makes the difference. IP is today, by all means, the dominating communication platform across all industries. The IP development environment is solid and rich, application support endless and skill is really everywhere, from developers to support people. An M2M bet today should in most cases be built on IP and one should really try understand if performance in 2G GPRS/EDGE will be enough for making all wanted computing during the life cycle. It is easy to foul yourself when it comes to performance and capacity. My first business trip with IBM went to Copenhagen 1983 where serious old men unanimously stated that with this capacity nothing is stopping us any longer. This was an ISDN conference.

The end-of-life problem is always something to take into account. Module manufacturers normally bring to market new pin compatible modules for their most popular models. But one day they will issue an end-of-life notice and then it is last order date and finally the spot market to rely on before it is over. In other words, when a market decrease it’s a chicken race between the module vendors. They not only want to understand how fast the market disappears (remember they have good numbers to watch) but they also want to ensure the best moment to bring their customers forward on a new platform and not lose them to a competitor.

The cost of modules for 2G or 3G differs a lot. As of today a 3G module would be roughly double the price of a 2G module and the difference could be $25-30. That is a lot especially if you need many. But it is important to look at the entire cost envelope, both capex and opex, over time. The cost of the actual deployment is normally high since it takes human beings to prepare the installation, to ensure other people involved are available, to get and verify permission for entrance and finally to go on site. Each installation is obviously different depending on industry, security levels, distances, type of application, etc but it can easily take a couple of hours per terminal which would translate into hundreds of dollars. One of my companies is active in retail environments where they often experience a lot of problems especially with access permission and coordination with other people needed (electricians, operator staff, alarm staff, etc). This is why we need to get it right first time – we can’t afford to go back – and why the installations will have to be operational for many years. When planning an M2M solution this might well be the most important aspect of the business case and the biggest risk for failure.

I believe this question – should I stay or should I go – is very important for all of us in the M2M business. There are no generic answers to the question about going 2G or 3G but it seems inevitable that sooner or later 3G will be the primary network why focus and investments thus quality and coverage in 2G networks will erode. How fast this happens is of course also depending on geography. In order to put more light on this important question I will ask a couple of knowledgeable individuals from within the industry about their views and post them here.

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M2M over fixed lines (PSTN)

November 22, 2011
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.

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