Opportunities and Challenges in the U.S. Cellular M2M Communications Market


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An analyst briefing by senior industry analyst Vikrant Gandhi, on the

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Opportunities and Challenges in the U.S. Cellular M2M Communications Market

  1. 1. Opportunities and Challenges in the U.S. Cellular Machine-to-Machine Communications Market  <br />Vikrant Gandhi, Senior Industry Analyst<br />Mobile & Wireless Communications<br />June 29,2011<br />
  2. 2. Presenter for Today<br />Vikrant Gandhi<br />Senior Industry Analyst, Mobile & Wireless Communications<br />Frost & Sullivan<br />North America<br />San Antonio<br />
  3. 3. Focus Points<br />1<br />Connected Devices Ecosystem – Market Segmentation<br />2<br />U.S. Cellular Market—Market Engineering Measurements<br />3<br />U.S. Mobile Communication Markets – Connections, Voice Revenues, Data Revenues <br />4<br />Machine-to-Machine (M2M) Communications – A Simplified View of the Value Chain<br />5<br />Cellular M2M Communications – Vertical Segmentation<br />6<br />Key Market Realities in Cellular M2M –Past , Present and the Future<br />7<br />Cellular M2M Communications – Key Drivers Summary<br />8<br />Cellular M2M Communications – Key Challenges Summary<br />9<br />Cellular M2M Communications - Market Forecasts<br />10<br />Cellular M2M Communications - Other Key Highlights<br />11<br />Cellular M2M Communications – Overview of Operator Strategies<br />12<br />Cellular M2M Communications – Key Conclusions<br />
  4. 4. Connected Devices Ecosystem – Market Segmentation<br />Mobile & Wireless Connected Device Ecosystem<br />Smartphones<br />Feature Phones<br />M2M<br />Tablets<br />Mobile Computers<br />MiFi<br />Air Cards<br />Netbooks<br />Notebooks<br />Security & Home/Building Automation<br />Others<br />Financial Services & Retail<br />Smart Grid, Utilities, Industrial<br />Transportation & Telematics<br />Healthcare /Wellness<br />Consumer Electronics<br />eReaders<br />Intrusion Detection & Safety Systems<br />Business Apps<br />Vehicle Convenience, Safety, & Diagnostics<br />POS Terminal Solutions<br />Wireless Patient Monitoring<br />Smart Metering, Smart Grid, Utility Routers<br />Connected Display, Navigation, Gaming<br />Remote Surveillance, Access Control, Building Automation<br />Miscellaneous Systems<br />GPS & Fleet Tracking<br />Vending Machines, ATM, Kiosks<br />Patient Care & Scheduling<br />Remote Telemetry, SCADA<br />
  5. 5. U.S. Cellular Market—Market Engineering Measurements<br />Market Overview<br />Mobile Connected Devices Market: 2010-2017<br />Stable<br />Increasing<br />Decreasing<br />Market Stage<br />Market Revenues<br />Mobile Connections<br />Average Revenue Per Connection<br />Connections at End of Forecast Period<br />Mature<br />$172.6 B<br />311.5 M<br />~$52.50<br />418.0 M<br />(Revenue/Connections/12)<br />(2010)<br />(2010)<br />(Projected 2017)<br />6 Year Forecast M2M Market<br />6 Year Forecast Feature Phones<br />6 Year Forecast Smartphones<br />6Year Forecast Mobile Computing<br />6 Year Forecast Tablets<br />Connections:<br />Connections:<br />Connections:<br />Connections:<br />-21.0%<br />20.4%<br />18.4%<br />49.0%<br />Connections:<br />22.3%<br />Data Consumption:<br />Data Consumption:<br />Data Consumption:<br />Data Consumption:<br />Data Consumption:<br />-2.0%<br />49.1%<br />36.7%<br />91.8%<br />38.6%<br />(CAGR)<br />(CAGR)<br />(CAGR)<br />(CAGR)<br />(CAGR)<br />Note: All figures are rounded. The base year is 2010. Source: Frost & Sullivan analysis.<br />
  6. 6. U.S. Mobile Communication Markets – Connections, Voice Revenues, Data Revenues <br />Connections and penetration expected to exceed 400 million and 125 percent respectively by 2017.<br />Wireless will become the prime data connectivity medium for multiple types of devices which will drive adoption.<br />Total market revenues to reach $ 240 billion by 2017. Within the next five years, data revenues will exceed voice revenues. <br />Eventually, all services – including voice will be packet-based and all we will have it plans for ‘data’.<br />Source: Frost & Sullivan.<br />
  7. 7. Machine-to-Machine (M2M) Communications – A Simplified View of the Value Chain<br />III<br />II<br />I<br />Data <br />Collection<br />Data <br />Sharing<br />Data <br />Interpretation<br />Key Functions<br />M2M Devices and Endpoints<br />Wireless / Wireline Networks <br />Enterprise Backend Systems<br />Key Enablers <br />Key Participants<br />Device & Module Vendors<br />Access Network Providers <br />Application / Platform Providers<br />Communication Flow<br />In its simplest form, M2M communications refers to data sharing between endpoints (electronic devices) and an enterprise backend systems through a wireless/ wireline channel. The device may be used for monitoring, control and notification, or information sharing and presentation purposes.<br />
  8. 8. Cellular M2M Communications – Vertical Segmentation<br />Consumer Electronics<br />Transportation and Telematics<br />•Laptops/Netbooks/Notebooks<br />•eReaders<br />• Others - Connected Consumer Display, Picture Frames, Others<br />• Vehicle Convenience & Safety<br />• Vehicle Diagnostics<br />• Others - Fleet & Asset Tracking, Others<br />Healthcare<br />Security & Safety<br />• Patient Monitoring & Reporting<br />• Adherence & Reminders<br />• Others - Patient-Provider Collaboration(video communication, image uploads & management), Others<br />• Intrusion Detection & Safety Systems<br />• Remote Surveillance & Access Control<br />• Others - Roadside Speed Monitors, Automatic Lighting Controls, Others<br />Financial Services & Retail<br />Utilities & Industrial<br />• POS Terminals & Devices<br />• ATMs, Vending Machines, Kiosks<br />• Others - Digital Signage, Asset Tracking <br />• Smart Grid Components<br />• Industrial Monitoring & Control Applications and Devices<br />• Others - Industrial Routers, M2M Gateways, Agriculture Systems, Others<br />
  9. 9. Key Market Realities in Cellular M2M – Past , Present and the Future<br />2000-2008<br />2009-2011<br />2012-2016<br />Market Adoption<br />Customer Care Requirements<br />ARPU<br />Bandwidth Consumption<br />3G/4G Usage<br />Medium<br />High<br />Low<br />Source: Frost & Sullivan.<br />
  10. 10. Cellular M2M Communications – Key Drivers Summary<br />Support & Focus of Mobile Operators<br />Independent M2M Service Providers and M2M MVNOs<br />Other Unique <br />Aspects <br />of Cellular M2M – <br />Mobility, Location<br />Strong Demand from Different Industry Verticals<br />Lower Pricing for Modules & Data – Esp. over 2G-2.5G<br />Proven Benefits & Industry’s Experience with M2M<br />Source: Frost & Sullivan.<br />
  11. 11. Driving Adoption <br />of 4G<br />Immense Service & Support Requirement for Evolving M2M Market<br />Device & Module Certification<br />What to Focus On – Connections or Revenues?<br />Cellular M2M Communications – Key Challenges Summary<br />Need to Generate<br /> Price Premium – <br />‘Beyond <br />Bandwidth’ <br />Pricing<br />Source: Frost & Sullivan.<br />
  12. 12. Cellular M2M Communications - Market Forecasts<br />M2M connections on cellular networks in the United States to exceed 75 million in 2017. <br />These figures do not include laptops, netbooks, notebooks and tablets, which would be in tens of millions as well .<br />Top three categories by connections will likely be Transportation and Telematics, Consumer and the Utilities and Industrial.<br />In many cases, a single endpoint (such as a rugged router) will support a large number of other connected devices. The ‘wireless-supported’ vertical breakdown will likely look very different then. <br />Source: Frost & Sullivan.<br />
  13. 13. Cellular M2M Communications - Market Forecasts (contd..)<br />Source: Frost & Sullivan.<br />A large majority of cellular M2M connections still use 2G-2.5G networks. This is changing rapidly due to a strong adoption of consumer devices as well as various other high-bandwidth applications across the other verticals ( in-car infotainment, security and surveillance, digital signage, and others).<br />
  14. 14. Cellular M2M Communications - Other Key Highlights<br />1<br />Annual data consumption of nearly 7000 million MB by 2017 <br />2<br />Base data access revenues of more than $ 4.0 billion by 2017<br />3<br />4G module pricing to become less than half of what it is today<br />4<br />Tiered pricing for high-bandwidth M2M applications to become more prevalent<br />5<br />Different pricing for different speeds<br />6<br />Role of M2M cloud to become increasingly important going forward<br />
  15. 15. Cellular M2M Communications – Overview of Operator Strategies<br /><ul><li>Tiered Pricing
  16. 16. Low pricing for slower networks, off-peak hours
  17. 17. Position high-speed networks for high-bandwidth M2M apps
  18. 18. Complete network enhancements to support M2M</li></ul>The <br />Network<br />Optimize <br />Data<br />Pricing<br /><ul><li>Reduce time for network certification
  19. 19. Approve devices with approved modules faster
  20. 20. M2M innovation centers
  21. 21. Partner with specialized M2M platform vendors to simplify device on-boarding and management
  22. 22. Focus on vertical solutions</li></ul>Operator Strategy for M2M<br />Partnerships <br />& <br />Ecosystem<br />Certification <br />& Training<br /><ul><li> Multiple pricing options – large vs. smaller upfront investments
  23. 23. Reduced limits of liability</li></ul>Other <br />Value-added <br />Services<br />Promote <br />M2M <br />MVNOs<br /><ul><li>Rely on specialized M2M service providers
  24. 24. Enable business collaborations through their network platforms</li></ul>Source: Frost & Sullivan.<br />
  25. 25. Cellular M2M Communications – Key Conclusions<br /><ul><li> Strong growth expected in the M2M communications market in the United States
  26. 26. Virtually all segments of the value chain working hard to support growth of the M2M segment
  27. 27. Ease of deployment ,and ease of management of existing implantations will be the key to achieving long-term success in this market
  28. 28. Frost & Sullivan believes that eventually, both direct connections and revenues from M2M could become larger than traditional mobile phone business in several regions of the world, including the United States – this could take anywhere from 12 to 24 (or 30) years.</li></li></ul><li>Next Steps<br /><ul><li>Request a proposal for or Growth Partnership Services or Growth Consulting Services to support you and your team to accelerate the growth of your company. (myfrost@frost.com) 1-877-GoFrost (1-877-463-7678)
  29. 29. Join us at our annual Growth, Innovation, and Leadership 2011: A Frost & Sullivan Global Congress on Corporate Growth (www.gil-global.com)
  30. 30. Register for the next Chairman’s Series on Growth: Driving Innovation – The What, Why, and How. Visions and Benchmarks as the Innovation Key(October 5th)(http://www.frost.com/growth)
  31. 31. Register for Frost & Sullivan’s Growth Opportunity Newsletter and keepabreast of innovative growth opportunities(www.frost.com/news)</li></li></ul><li>Your Feedback is Important to Us<br />Growth Forecasts?<br />Competitive Structure?<br />Emerging Trends?<br />Strategic Recommendations?<br />Other?<br />What would you like to see from Frost & Sullivan?<br />Please inform us by rating this presentation.<br />Frost & Sullivan’s Growth Consulting can assist with your growth strategies<br />
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  33. 33. For Additional Information<br />Mireya Espinoza<br />Corporate Communications<br />Information & Communication Technologies<br /> (210) 247-3870<br />Mireya.espinoza@frost.com<br />Craig Hays<br />Sales Manager<br />Information & Communications Technologies<br />(210) 348-6420<br />chays@frost.com<br />Brent Iadarola<br />Global Research Director<br />Mobile & Wireless Communications<br />(210) 481-0752<br />biadarola@frost.com<br />