The document discusses the legal risks and challenges posed by machine-to-machine (M2M) technology. It outlines eight characteristics of M2M, including the multitude of devices, variety in capabilities, invisibility without human control, and intrusiveness raising privacy concerns. The "Big Four" issues are challenges in aligning M2M with network architectures, managing risks across complex supply chains, challenges with traditional payment models, and privacy/data security concerns. Case studies on smart pill bottles and risk allocation in M2M value chains are provided. The document concludes that new business models are needed to address M2M's different traffic profiles and allocate costs, value and risks compared to traditional network models.

1. Peter Waters Adrian Chotar Andrew Hii Joshua Gray
Challenges Posed by M2M
M2M & the Internet of Things
19 June 2012

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Overview
1. M2M solutions: key components and issues
2. Commercialising M2M: Drivers enabling M2M
solutions and factors inhibiting M2M development
3. Impact of M2M on business models
4. Legal risks and challenges posed by M2M
technology

3. The 8 characteristics of M2M
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Issue Consequence
Multitude • Magnitude in number of devices creates scalability problems for networks
designed with fewer users at greater throughput levels
Variety • M2M devices vary widely in data exchange rates, computing capabilities etc
• Mainly designed as vertical applications – interoperability
Invisibility • No or limited human control – otherwise cost driven into application
Intrusiveness • As Google shows, privacy is no longer “regulatory compliance headache” but
about product acceptability
Criticality • „mission/life‟ critical messages – problem of network latency in current store an
forward model for data such as SMS
Low throughput /
frequent tolling
• Challenge to usage based charging – ARPUs at 5-10% of “traditional” data usage
• Set-up/tear costs much the same
• Cuts across capacity management and strategies
Functionality • Limited functionality to keep costs down
• Often lack remote software update capabilities
Embedded • + captive base – churn difficult
• - long life can be drag on technology change

4. But the ‘Big Four’ Issues are
1. Challenge of aligning technical/economic characteristics
of networks and M2M requirements
– different traffic profile of M2M requires re-engineering of
network architecture but also tariff models
– does M2M really need high speed fixed or wireless
broadband?
2. Managing risks and liability
– Although individual messages may only bear a low
usage charge, the risks may be substantially greater
because they involve mission critical or life line services
– contractual risk allocation across complex supply chain
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5. But the ‘Big Four’ Issues are
3. Challenge of traditional end user pays model
– economic model needs to take into account avoided
costs of current service delivery
– e.g. should health payments models cover doctors
using M2M rather than face to face?
– scalability global solutions based on roaming:
economics and regulatory viability
4. Privacy and data security
– end user acceptance critical to ubiquity: concerns over
tracking and surveillance over end user activity
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6. M2M solutions – key components
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Need for SLAs
Privacy
Cost
Who funds?
Monetisation
Reconfiguring
networks
Risk allocation
„Lock in‟
Monetisation
Risk allocation
Commercialisation
challenges
Legal issues cut across the value chain
Solution complexity across software / network layer stack
Willingness to pay?
Privacy
Liability claims against providers

7. Case study of M2M application
• Consider a medicine bottle with device
tracking dosage of pills – similar to
Vitality‟s “GlowCap”
• Who ultimately pays for the application?
• Traditional user pay model will not work
• Government costs saving in providing
better delivery of health services
• Economic model needs to take into
account the avoided cost of service
delivery
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Will a patient pay 20 cents
every time they unscrew the
pill bottle lid?

8. No single value proposition = no consistent
business case
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M2M Who realises value?
Anti-theft/service automobile
applications
• End user
• Car manufacturer
Telematics-based insurance • End user
Smart energy grid • End user in lower charges
• Generator/distributors with lower
investment
• Societal benefit re global
warming society
Health care • Government health budgets
Road tolls • Government revenue

9. Legal issues – Risk allocation
• Who‟s doing what? M2M value chain features vertical
integration of a number of players
• Risk allocation:
– managing legal risks and liability within a complex
supply chain and the overall M2M solution
– traditional approaches to contractual risk allocation
mechanisms for once-off technology purchase will not
work within complex supply chains where parties have
ongoing relationship
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10. Legal issues – Risk allocation
• Risk allocation (cont‟d):
– contractual performance needs to be assessed over an
extended period of time rather than single event (eg
through SLAs)
– Independent standardisation and universal
specifications can assist in providing baseline for
measuring performance
– technology solution has to match risk allocation:
changes in network core for M2M
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11. Legal issues – Privacy and data security
• Pervasive nature of monitoring and collection of data raises
serious concerns about use and disclosure of personal
information
• Potential use of personal information to market goods and
services based on individual‟s behavioural patterns and
preferences
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12. Legal issues – Privacy and data security
• Examples of privacy legislation regulating a utility‟s use of
a consumer‟s energy consumption data
– Privacy concerns in the Netherlands saw an initial
proposal for mandatory introduction of smart to give
consumers a right to refuse the service
– anti-surveillance laws: eg, Australia
• European Commission‟s public consultation on the
“Internet of Things” seeking views on ethical and legal
framework to manage privacy, safety and security
concerns
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13. Conclusions
• M2M business cases need to be built on a fundamentally
different equation:
high volume + low throughput + low usage charge + high risk
= what reward / who pays?
• M2M involves a complex ecosystem in which
commercialisation depends on multiple participants
agreeing a new business model allocating value, costs and
risks compared to today‟s voice and data models
• Privacy and data security hurdles to end user acceptance
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14. Slides and useful links can be
downloaded from www.gtlaw.com.au
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