Tuesday, 28 June 2011

No hope for over-the-top M2M as Google dumps Health and PowerMeter

Google has announced the imminent demise of a couple of its vertical initiatives. Google Health is being retired on the 1st January 2012 (with data available for download for a year after that) and Google PowerMeter is being switched off in September this year.

On the official Google Blog, the following comment summed it up:

"Both were based on the idea that with more and better information, people can make smarter choices, whether in regard to managing personal health and wellness, or saving money and conserving energy at home. While they didn't scale as we had hoped, we believe they did highlight the importance of access to information in areas where it’s traditionally been difficult."

The principle behind both was sound. To open up access to information and allow people to make more informed choices. The main problem (as identified above) seems to have been gaining scale. There just weren't enough people interested in these applications to justify continuing with in its current state. This is somewhat ironic since we at Machina Research expect that smart metering and healthcare will be a couple of the major drivers of M2M, accounting for 2 billion connections.

It's also interesting to contrast these free apps with the multi-billion dollar/euro/pound healthcare IT systems which inevitably don't work properly and run over budget. Or indeed to contrast with the billions that will be spent on smart meters. Admittedly both of these will offer additional functionality (for instance, it's tricky doing electricity network load balancing without a smart meter) but the lack of appetite for applications that do broadly the same thing is eye-opening. Admittedly I don't think Google did much of a job of advertising them, so some fault could be levelled at them. It seems however, that at least for these applications, unless someone forces the public to adopt something (e.g. through the EU mandate on smart meter deployments or large IT projects) nothing happens. Google had hoped it was otherwise.

Personally I think they were pushing at an open door with both applications and with a bit more promotion and a lot of patience I think they could well have taken off. It would have taken a few years though. With regard to PowerMeter, I'd anticipate that it will resurface at some time in the future, folded into the Android@Home development, as discussed in an earlier blogpost. Power usage is clearly one of the main parameters relevant to a home automation system, so its inclusion seems obvious.

In the title of this blogpost I've termed this over-the-top M2M. That's a bit of a tortuous expression and not 100% accurate but it is trying a non-facilities-based approach to solving some of the issues that M2M seeks to address. It's not a perfect analogy but I liked it.

Incidentally, Machina Research has reports out currently on M2M in both the healthcare and utilities industries (the latter being focused heavily on smart metering).

Thursday, 23 June 2011

Is it time for car-as-a-service? Adding connectivity changes every business model, as car makers are soon to discover.

A few years ago I was focused heavily on mobile broadband and spent some time looking at the relationship between the mobile broadband service and the laptop. One of the conclusions was that the addition of connectivity (in the form of mobile broadband) could fundamentally change the relationship between the user and their laptop. Whereas previously it had been a unit purchase, the addition of bundled connectivity turned it into a term relationship (i.e. paying monthly). That was usually with the mobile network operator, but we've seen a few examples where it's with the laptop manufacturer, e.g. Macheen with Dell. As a result some of things that were previously bought up-front came to be bought on subscription, such as security, software (e.g. MS Office) or storage. Even the price of the laptop itself could be spread over 2-3 years.

Today I'm working on the Machina Research report on M2M in the Automotive sector and I'm examining the ways in which connectivity changes the model for the automotive industry. The analogy is an interesting one particularly because we're very unlikely to see MNOs taking on the cost of the device as they did with laptops. Subsidised cars from Vodafone anyone? Unlikely. So the impact is all on the automotive industry, and a few other associated sectors. How do they exploit the opportunities allowed by connectivity to build ongoing relationships?

The answer is: in many many ways. As I discussed in a previous blogpost insurers and satnav providers will completely change their way of doing business. For TomTom and its ilk the addition of connectivity turns a business model based on shipping boxes into a business model based on servicing subscribers. This requires a radical rethink in the way that the company works.

More interestingly though is that it allows (or maybe forces) the manufacturers themselves shift from just shipping products to managing the whole 'automotive experience' if that doesn't sound too pretentious. It does? Yes, you're probably right. Anyway, what that includes could range from remote diagnostics and servicing scheduling all the way through to CaaS. Yes, "car-as-a-service". OK, maybe that's an overly buzzwordy expression for car leasing/sharing, but actually it could be much more sophisticated with the manufacturer (or third party) handling every aspect of keeping the vehicle running. No up-front payment for a car, or servicing or oil changes or petrol, just a per-mile fee. OK, maybe it's a bit impractical to have someone come and fill your petrol tank every time you need petrol, but once we've shifted to electric vehicles, bundling in the electricity price into a per-mile rate isn't impossible to envisage.

Adding connectivity changes business models. The automobile manufacturer who realises first will steal a march on the competition.

Wednesday, 22 June 2011

Telenor seeks opportunities outside of Europe

Interesting story from Total Telecom about Telenor's expansion plans in Asia. A couple of points particularly chimed with me.

Firstly, transferring a lot of its learnings from Europe to its A-P territories is a sensible move for Telenor. Few other operators in India, Pakistan, Bangladesh, Malaysia or Thailand can draw upon such a wealth of expertise.

Secondly, where Telenor doesn't have footprint it represents a good opportunity as the region is a few years behind Europe. Once these non-footprint markets get more sophisticated, competition kicks in and prices come down, roaming is not a viable strategy. You need to be an incumbent or have some sort of special low-cost partnership deal. Otherwise you can't compete on price. Telenor has found this in Europe, so it's switching its attention to Asia. It may, however, only have a few years in non-footprint markets to grab market share before competition drives down prices.

Thirdly they have correctly identified that smart metering is a big opportunity in Asia due to the need to reduce "non-technical losses", i.e. theft and fraud. For utilities in Asia the need for smart metering is real and the return-on-investment is substantial. No need for mandates here as we have in the EU. Some of the largest implementations of smart metering so far are in emerging markets. According to Machina Research's Machine-to-Machine (M2M) Communication in the Utilities Sector 2010-20, Telenor's 5 Asian markets will have over 50 million smart meters by 2020, representing an annual revenue opportunity of over EUR1.5 billion. For more details on this report, contact me.

Monday, 20 June 2011

Orange launch sound wave-powered phone charger T-Shirt. If they could only make a rain-powered version.

Orange has launched a T-Shirt that charges your phone from sound waves. And what better place to launch it than Glastonbury. And that's what they're doing. See here.

Anyone who knows me knows that I love Glastonbury. I couldn't get tickets this year but it's a usual fixture in my calendar. Orange has been a long-term sponsor and they've done reasonably well out of the arrangement. The Chill & Charge area where you can charge your phone normally has queues around the block. But I've yet to see a sea of people sporting Orange T-Shirts as I'm sure they'd like. This might change. If you want a charged phone, you'll have to wear an Orange T-Shirt. In terms of branding it's a genius idea. Obviously the idea of everyone wearing a uniform black T-shirt is pretty much anathema to Glasto, but kudos to Orange for coming up with something genuinely useful. Now, if they could just come up with a rain-powered version.

Thursday, 16 June 2011

Latest research: 1.8 billion automotive M2M connections in 2020

The next tranche of Machina Research's highly segmented M2M forecasts is proceeding apace. I'm currently looking at everything transport-related. The report Machine-to-Machine (M2M) Communications in the Automotive Sector 2010-20 will be out in the next few weeks. Here's a preliminary sneak peek of the numbers.

By 2020 there will be around 2.4 billion road vehicles (including cars, motorcycles and commercial vehicles) in the world with approximately 1.8 billion M2M connections between them. Unsurprisingly it is North America and Europe that dominate the figures, by virtue of their larger automotive markets, higher disposable income, faster vehicle replacement, wider mobile broadband deployment and (in some cases) government pressure.

Around 350 million vehicles will have a vehicle platform (such as GM's OnStar) running multiple applications. There will also be a further 1.5 billion stand-alone connected devices, predominantly accounted for by four types. In order of number of connections they are: accident alert systems (e.g. eCall), connected satnav, pay-as-you-drive insurance and security/tracking devices (such as SIMRAV in Brazil).

M2M in the automotive sector is definitely not as simple as one connection per vehicle. Lots of vehicles will have multiple connections. Some application developers/service providers will want to keep their modules separate from the vehicle platform, for example insurance companies. In other circumstances, commercial arrangements will discourage using the vehicle platform. For instance, high bandwidth applications will not be suitable for a roaming SIM since per-MB charges will be too high. However, this is exactly what many cars will have for their vehicle platform since the automobile manufacturer will do a deal for connectivity at a regional level, meaning roaming will be standard. I raised this issue in a previous blogpost here, so please take a look for more detail.

Monday, 13 June 2011

O2 and BT claim UK LTE auctions amount to state subsidy. Really?!?

It looks like the UK LTE spectrum auctions will face another delay courtesy of a challenge from Telefonica O2 and BT that the bidding rules will bake in a GBP1 billion subsidy to Everything Everywhere and 3UK. Their argument is based on the fact that the Ofcom rules require that there will be maximum and minimum amounts of spectrum available to each bidder with the intention of having at least 4 national operators [If you want details of exactly who can bid for what in which frequency bands, see my previous blogpost]. As a result of these restrictions O2 and BT claim there will be a distortion to the bidding process which could result in some companies picking up spectrum cheaper than they otherwise would. This, claim the pair, amounts to state aid. Take a look here for more details.

I'm sorry, what? Really?!? State aid? In other countries auctions have been conducted as beauty contests with spectrum allocated to the best bidder rather than the highest. These haven't maximised the payments for the spectrum. Would they also be categorised as state aid to the winning bidders? According to BT/O2 presumably they would. But, I'm sure there are numerous counter-arguments that could be rustled up to differentiate beauty contests from the Ofcom proposed process. After all, the latter is an auction, but with restrictions, rather than a beauty contest. However, for me it all boils down to the fact that Ofcom is putting the restriction in place for an admirable reason: to promote competition. This is a slightly different admirable reason from the justification for beauty contests, e.g. guaranteed coverage or investment, but it is a reasonable thing for Ofcom to do. They could have simply divided the spectrum into 4 chunks and told the bidders that they couldn't win more than one but that would have been a mess. They wanted to include more flexibility and rightly so.

I'm not so innocent as to believe that this is anything other than a tactic from O2 and BT to gain some advantage. Do they really think it's state aid? I'm sure not, but if they can gain some competitive advantage by appealing then why not? I've been involved in numerous legal challenges and you use every possible line of attack (and a good smattering of mock incredulity) to secure the outcome that you want. So I can understand BT/O2's stance. However, this will continue to delay the LTE spectrum awards. If they appeal on this and get their way, the other operators will appeal on some other points. The whole process could drag on for years and years. But, as I commented in a previous blogpost, perhaps a bit of delay is no bad thing for the MNOs

Friday, 10 June 2011

"Start to prepare" for the internet of things

You know when your mate who doesn't really know a lot about football starts talking about it and you get a bit embarrassed? Well, that's the feeling I get reading this article about Ed Vaizey, UK under-secretary of state for various things including, seemingly, telecoms. Ed was talking on IPv6 day about the move from IPv4 to IPv6 and M2M and the IoT. I guess it's hard to expect an elected official to be a technical expert but it was somewhat cringe-making.

Link here.

The bit that set me laughing was this from Ed: "In fact, the slogan that I came up with this morning, which I thought was rather neat, was, "Don’t panic, but do start to prepare"". Steady on now Ed. Let's not be too hasty now.

Thursday, 9 June 2011

M2M Forum Europe summarised in 2 words: howdy partner

I've been at the M2M Forum Europe for most of this week organised by the lovely people over at IQPC. And very interesting it was to. The big message: partner.

On Monday we at Machina Research ran a pre-conference workshop looking at how MNOs should exploit the opportunities presented by M2M. We focused a lot on the healthcare and utilities segments that have been the basis of a couple of our published Connected Intelligence reports. All very interesting and interactive.

Day 1 highlights included a presentation from Larry Haddad of Nissan which I summarised in yesterday's blogpost and Stephan Keuneke of Deutsche Telekom. Stephane's emphasis was that MNOs' focus M2M should be on partnering. He identified the four different go-to-market models that they would be simultaneously adopting:

  1. 'Sell to' - the customer buys a complete solution from DTAG

  2. 'Sell with' - connectivity is provided by DTAG and the device elsewhere

  3. 'Sell through' - where an M2M partner has a strong relationship with verticals they will effectively sell on DTAG's connectivity

  4. DTAG as a supplier - sales via an MVNO or service provider

At the moment around half of their M2M business is as supplier. He also emphasised that they were addressing M2M in a very different way from traditional services. For example by thinking about lifetime fee rather than monthly fee. Another specific example being not issuing a monthly invoice for connections that barely generate any revenue.

The afternoon saw us all break off into roundtable sessions. The one I ran, covering the impact of EU regulations on smart meter deployments, was a pretty cut and dried discussion. The EU has said member states will probably have to roll out smart electricity meters to 80% of households by 2020, with slightly less stringent requirements for gas. It's not definite until September 2012 and details depend on the member state. The only real stumbling blocks are ensuring that the meters have the right funtionality and issues of privacy, i.e. a conflict with the EU principle that a person should be able to opt-out. Can you opt out of smart metering? These sorts of issues are dealt with in our recent report: Machine-to-Machine (M2M) Communications in the Utilities Sector 2010-20.

The more interesting discussions seemed to be in the other groups. Not sure I should admit that! They were dealing with business models. Again the message came across loud and clear. The key is to partner.

Day 2 saw a diverse bunch of presentations. Mila Milenkovic of Telekom Srbija presented some really interesting case studies across a variety of verticals including fleet management, security, public transport, home automation and healthcare. TS has clearly done some thinking about M2M and is already making progress, even breaking out of the traditional M2M verticals of transport and security. The message from Mila was clear though: the key is to partner. TS handles the connectivity, marketing and sales while the partner looks after devices, maintenance and administration.

DTAG popped up again in the form of Markus Breitbach who also talked about partnerships and the way in which the new M2M competence center can act as an aggregator for application developers in the M2M space. The center provides support to all local entities (of which there are 50+) with M2M-specific knowledge, resources and solutions. In so doing it can bring together an application developer for a particular M2M service from Slovakia with an end customer in the US. The benefits of partnership very clearly work both ways.

And if you want to know more about the DTAG M2M competence center check out the June/July issue of Mobile Europe. There's an Insight Report supplement in the magazine focusing on M2M, compiled by Machina Research, including an interview with J├╝rgen Hase, VP of the center. The supplement should be out soon and available on the Mobile Europe website here.

Markus also talked about DTAG's expectations with regard to the value chain, indicating that about 15-25% of the value was in the devices, 15-25% in the communications and 50-70% in the applications. The message from that is clear (and echoes what we were talking about in our pre-conference workshop): there's not much revenue in carrying traffic. If anything, we think that he might be a bit ambitious with regard to the comms element, certainly in future.

Krzysztof Kwiatkowski of Comarch put it quite neatly when he described how MNOs can adopt one of three approaches: in-house, partnership and licensee. He was discussing M2M management platforms specifically but this applies equally across almost all elements of the value chain from channels and marketing to billing and SIM-management. On this note, Krzysztof provided the quote of the day about how telecoms service providers could not become "civilisation service providers", which is effectively what they're trying to do if they try to cover all of M2M themselves.

There were numerous other interesting presentations on day 2 including Marc Overton of Everything Everywhere on the ways in which MNOs can help freight management (including one client who said that better knowledge of its stock in China can reduce stock in channel by 50%) Davide Pratone of Telecom Italia setting minds at rest about OTA provisioning, Tom Gardner from my old employers 3UK talking about the sweet spot for a 3G-only player and David Boswarthick talking about the role of standards bodies, particularly with regard to smart metering.

Wednesday, 8 June 2011

Electric Vehicles and M2M are made for each other

I've been at the M2M Forum Europe for the last couple of days. My personal favourite of yesterday's presentations was from Larry Haddad at Nissan. It's always useful to hear directly from the industry verticals and Larry didn't disappoint. His focus was on electric vehicles (EVs) and how connectivity was essential for making them as efficient as possible. The big draw-back with EVs is their range, typically 100km today. However, by connecting the car you can mitigate that, or improve the EV experience in some other way:
  • Range indicator telling you how far you can still go with the remaining charge

  • EV charging point locator

  • Timing of charging - so it can charge when it's cheapest, either through remote timing or real-time request.

  • Remotely turn on climate control - if you can get your car gradually to the right temperature before you get to it it is less of a power drain altogether and will get to the right temperature initially while still plugged in meaning the battery still has maximum range.

  • It'll send you a plug-in reminder.

  • You can receive diagnostics and energy efficiency reports, including an element of gamification through telling you how many trees saved.

  • On phone app informing you how much further you can drive (with or without a/c) and you can remotely switch on the climate control.

Given the limitations of battery technology, it seems that the natural status of electric vehicles is as connected devices. Electric vehicles will all be M2M-connected. Nissan bakes in the cost of the connectivity/applications to the purchase price for 5 years.

They partner with AT&T, Rogers Wireless, NTT DoCoMo and Telenor Connexion. The latter provides connectivity across the whole of Europe, primarily through roaming agreements. This leads us to a particularly interesting point: car manufacturers are not in the business of making country-by-country deals for M2M. They need regional agreements such as that done with Telenor. Anything else seems too fiddly. However, Telenor is paying roaming rates for data in countries outside of its footprint (i.e. most countries in Europe). This is OK for low bandwidth, high value applications, but doesn't work for entertainment. The assumption must be therefore that the vehicle platform, paid for by the auto manufacturer, is not the platform for in-car entertainment. From the Nissan perspective, users will bring their own entertainment to the car via their handsets.

I have many other interesting conclusions from day 1. In the next month we at Machina Research will be publishing a report on M2M in the automotive sector. Email me if you would like more details.

Sunday, 5 June 2011

Neul's new kid on the RAN block faces challenges but there are opportunities

Machina Research recently hooked up with the ever-excellent Mobile Europe magazine to produce their Insight Report supplement which dives into a particular theme in depth. For the June/July issue the focus is on M2M. As part of the work I interviewed a lot of people about the evolution of the market. To get the whole thing you'll need to read the report but I thought I'd flag up an interesting interview with newcomers Neul. Here's the gist.

There is a new potential competitor to these established WWAN technologies (GSM/GPRS/EDGE, 3G, LTE) in the form of Neul’s new open standard, “Weightless”, which is specifically aimed at M2M. There is a real need for an M2M-specific WWAN standard according to Neul’s CTO William Webb: “There is no ubiquitous low-cost low-bandwidth M2M network standard. Cellular just about cuts it, but it’s high power, bulky, complex and expensive. GPRS has been around for 15 years and has failed to address the opportunity and with 3G and 4G the operators are going in the wrong direction”. With a battery life of 5-10 years and an expected price point of “a couple of dollars” the new standard does overcome some of the hurdles with traditional WAN technologies.

However, there are some continuing barriers. Unlike existing WAN technologies, there are no existing deployments today although Webb anticipates that roll-out is relatively cheap and easy: the UK would require around 5,000 base stations to achieve 99.7% population coverage. Neul are even prepared to deploy the first network themselves: “The goal is to license our technology to multiple operators around the world” said Webb, “but we may need to deploy the first network, in the UK, to get interest going”. As noted above, it cannot cope with high bandwidth applications such as in-car entertainment. Also, Weightless uses unlicensed spectrum although Webb claims the frequency hopping used by the technology mitigates the risk from other users of the spectrum. In the event that the band does become too crowded Neul also has a strategy to migrate to licensed spectrum. The new standard also has high latency, typically around one second, which is higher than existing WWAN standards although Webb points out that many M2M applications don’t need very low latency when you dig into it.

So do I think Neul is the solution to all of M2M's problems? Of course not. M2M encapsulates a diverse range of applications, all with different needs. There is no single network technology that would be appropriate for every application in every circumstance. Some need coverage, some need capacity, some low latency, some low cost. Even within applications or indeed within a single connection there will be multiple technologies used. Smart metering for instance will use WWAN, powerline, short range or a combination of them depending on circumstances. When the technology answer is 'horses for courses' then a new technology with characteristics that set it aside from the alternatives has an opportunity. Then it just becomes about costs. Is it affordable to deploy and run a network given the amount of revenue that can be generated by the applications that will run on it? Existing WAN networks have the advantage that they are already installed and have profitable services running over them. Supporting M2M has a negligible cost. Deploying a whole new set of infrastructure to support M2M services has radically different economics. That is where Neul will stand or fall.