Thursday, 7 July 2011

TeliaSonera joins FT/Orange and DTAG's M2M co-operation cabal

The big M2M news this morning is that TeliaSonera has joined the cooperation agreement that was kicked off earlier this year between FT Orange and DTAG. Link to the announcement here.

The first (and not wildly insightful) observation is that this substantially expands the geographical scope of this burgeoning M2M alliance. To the existing coverage of France, Belgium, Germany, Netherlands, Luxembourg and the UK can be added Sweden, Norway, Finland, Denmark, Estonia and Lithuania. DTAG and Orange have presence in a bunch of other markets too (including Spain, Poland and elsewhere in southern and central Europe), which could be added to the mix at a later date. That said, there seems to be a policy of avoiding including any markets where there is geographical overlap. FT/Orange and DTAG in Poland or Slovakia for instance. It's interesting to note that Spain was excluded from the initial agreement. Perhaps they were already planning for a deal with TeliaSonera which is present in Spain. Anyway, footprint overlap shenanigans aside, this is all so far, so helping-compete-with-the-geographical-scale-of-Vodafone.

More important than the geographical scope is what the alliance is for. As we saw in the past with multi-operator alliances, they're of absolutely no value and geographical coverage doesn't matter at all if they don't really DO anything. Think of Freemove for instance. Did it achieve anything? Not really. It's interesting to note that if you throw TIM into this new troika you basically have an M2M version of Freemove. In fact, given that the only major European country that the newly expanded alliance doesn't cover is this space.

So, what should this alliance's objectives be? How can it better allow its members to take advantage of the M2M opportunity? Well, let's start with what they've stated the objectives to be. Basically it's to facilitate multilateral roaming deals, provide better out-of-footprint service guarantees and introduce some economies of scale through joint testing and certification. Sounds pretty reasonable. Let's run through some of those issues.

Roaming rates are an issue today for M2M. Having in-country presence is critical for high bandwidth applications such as In-Vehicle Infotainment (IVI). Paying EUR1 per MB is just not sustainable. Admittedly most M2M applications are relatively light so roaming charges are manageable. However, even with these, having to pay standard roaming fees bumps up the cost relative to an in-country operator. And many non-facilities-based players are struggling to compete with facilities-based today, even with light applications. A function of the increasing interest in M2M and consequent decreasing costs. So either you need to be in-country or have a favourable roaming rate with a national partner.

Many third party device/application providers want to do multinational deals for connectivity. Amazon for the Kindle for instance, or Nissan for the Leaf electric car. They'd rather do that than signing separate deals in each country, particularly as there is likely to be a high degree of roaming with many of these devices anyway. They want regional deals. Being able to point to lower roaming rates, courtesy of international partnerships, should help the likes of DTAG, Orange and TeliaSonera secure more of these. It also potentially gives them access to better rates than the wholesale deals that third party service providers might negotiate with MNOs, allowing them to compete better with MVNO-style M2M providers. I suspect they won't though, simply because MNOs don't have the bandwidth to deal with thousands of small customers across multiple niches. They'll focus on the tier-1 blue chip clients (such as eOn, Amazon or Nissan) and leave the haulage companies and clinical equipment manufacturers to the sector-specific SPs.

It is, of course, a mistake to think of M2M as a thing in itself. It is a convenient term for the application of connectivity to devices across different vertical sectors. As one would expect, the benefits of a multilateral roaming deal vary massively by sector.

  • Utilities don't care about cross-border issues. Everything's national so dealing with a single MNO is the order of the day and they certainly don't give a tuppenny toss whether their MNO partner has international partnerships or not.

  • Transport & Logistics is nominally one of the most sensitive to cross-border interworking issues. A consistent service environment and high availability/reliability are critical. However services here will tend to be managed through a specialist third party service provider such as KORE Telematics, rather than directly by the MNO. Those guys handle QoS, troubleshooting, international roaming and international interoperability. MNO arrangements don't really mean a lot, although I guess it could make the SP's life easier. They also tend to be light applications with high value add, so roaming rates are less important.

  • Healthcare rather depends on the type of healthcare you're talking about. If it's consumer worried-well applications like heart rate monitors etc. then best-in-class service is hardly an issue. Best effort works fine. For mHealth in the clinical environment then will be substantial benefit to adding robustness to any application since it's life critical. However it is a very small piece of the market. See our Machine-to-Machine (M2M) Communications in Healthcare 2010-20 report for more details.

  • Connected Home. Again, no desperate need for high reliability and availability to picture frames and washing machines. Best effort is fine. Also the vast majority of connected home devices are going to be using WiFi anyway.

  • For Automotive, as noted above, there's a lot of roaming and OEMs want to do regional deals. So having this kind of arrangement will help, particularly as there is a requirement for high reliability, particularly for security, tracking, eCall and vehicle diagnostics applications. Also for infotainment, the amount of data being downloaded will make current EUR/MB rates unpalatably expensive for the end user or service provider (depending who pays). Some kind of multi-national discounted rate is vital.

  • Consumer electronics. Again there could be a reasonable amount of roaming here, for instance with eReaders. It all rather depends whether you count that as M2M or not. For the sake of argument, let's include it. Having a single partner who can do better roaming deals is clearly in the interests of someone like Amazon for Kindle. Again, as with many of these sectors, QoS is a bit less of an issue.

So, it's automotive where we expect this alliance to really make the most difference. There are applications that demand high availability, there's lots of roaming, the clients (auto OEMs) want to do pan-European deals and there are high bandwidth applications that won't be acceptable at current roaming rates.

The other element of the arrangement relates to joint testing and module certification. Sensible stuff. Certified modules centrally for use across all operators' footprints. It keeps costs down and there are some benefits to interoperability.

We at Machina Research publish reports on all of these vertical sectors including healthcare, utilities and automotive and the impact of M2M. Drop me a line if you'd like to know more.


David Chambers said...


A good summary, especially about the wide footprint these deals achieve. But I don't see this as mainly about roaming - where the end user takes their equipment abroad from time to time - as about cost-effective multi-national deployment.

The example is a consumer electronics gadget that is shipped with the same SIM card (or soft SIM) to any country. When turned on, it connects to the local network and is registered as a "local" user, no roaming required. After that, it may either not work abroad or would attract some roaming charges (to be determined).

This allows the consumer electronics companies to do deals with the large multinational networks, but the service is effectively provided locally and very cost effectively.

To me its more than just wholesale roaming deals, its a mechanism of opening up mobile telecom capabilities to a huge range of consumer and other electronic equipment.

This kind of commercial thinking is how we could grow the number of attached devices from 5 billion to 50 billion (or more) within the next decade.

Matt Hatton said...

David, first off sorry this has taken so long to show up. For some reason Google decided your post was spam. Not v helpful (Google that is, not you!).

Secondly I absolutely agree, it's not about actual roaming. It is about the fact that customers will want to do a deal with one MNO across, say, Europe. That MNO then has to pay roaming rates for devices deployed outside its footprint. Expensive. Unless you can do a series of deals with operators in other countries.