Wednesday, 18 May 2011

Sprint's M2M ARPU of USD5-10/month will be hard to maintain

Hooray for Sprint. They're the first MNO to put out anything approaching usable figures for M2M ARPU*. Speaking at the Ericsson Business Innovation Froum, Geoff Martin, Manager of Platforms and head of Sprint's new M2M Collaboration Centre spilled the beans on how much revenue some M2M applications generated.

Overall ARPU from M2M was USD5-10 per month. The outliers are digital signage, generating USD150/month, while smart grids accounted for a more modest USD1/month. To be honest, they'll be very lucky indeed to maintain a USD1/month ARPU on smart meters over the long term. More competition, OTA provisioning and increasing awareness by utilities will drive that down. In terms of traffic it's at most a few MB per month. Not worth USD1. More on this issue in our recent report Machine-to-Machine (M2M) Communication in the Utilities Sector 2010-20.

Critically M2M is flagged up by Martin as being very profitable with no handset subsidies and no customer care. The latter point is somewhat debatable. There is no direct customer care for the end-point itself. However, the enterprise customer, which control the lion's share of the M2M market, will be demanding. These are business critical systems in many cases and MNOs will have to make commitments regarding QoS.

One of the biggest issues for Sprint going forwards is what technology choices they make. Currently running CDMA, WiMAX and iDEN (courtesy of the Nextel acquisition a few years back) and with some strong hints that they'll switch to LTE, there is some technological uncertainty for Sprint's customers. For a lot of applications, most notably smart grid, the devices have a long life expectancy. Chopping and changing technology causes a high degree of consternation for potential customers.

Martin also revealed some figures relating to module cost. Referring specifically to the "Qualcomm tax" he commented that CDMA modules are 15-20% more expensive than GSM. He also noted that WiMAX modules were half of the price of CDMA. However, he also noted that M2M applications were very light in terms of bandwidth. Obviously we know this already but it is perhaps a hint that low bandwidth mature techs (in Sprint's case CDMA) should be retained. LTE modules cost USD60-USD70 but the price needs to come down to be attractive.

Machina Research has recently published a report on M2M in the utilities market (including smart meters and smart grid) with comprehensive forecasts for 54 countries of connections, revenue and technology. Click here or email me here for more details.

*Obviously "ARPU" isn't really the right term here as there isn't really a user, but we'll stick with the term for now until something more appropriate comes along.

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