connectcompute

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.