Cellular M2M forecasts: unlocking growth
Cellular M2M connections forecast to reach 1 billion by 2020
GSMA Intelligence has recently published a comprehensive forecast of the global cellular M2M market, based on extensive conversations with industry players and an in-depth analysis of current and future trends. Our coverage of the M2M market focuses on cellular M2M connectivity and excludes computing devices in consumer electronics such as smartphones, e-readers, tablets, as well as other types of M2M connection technologies that support the wider universe of the Internet of Things (IoT).
Our research shows that at the current rate of trajectory, global cellular M2M connections will reach close to one billion by 2020, growing at 25% per year (CAGR) over the period 2015 to 2020. However, in our recent report Cellular M2M forecasts and assumptions we have also hypothesised that upside forecast scenarios could emerge if a number of the current growth inhibitors are addressed by both the industry players and governments. This could potentially lead to a faster growth rate of greater than 40% per annum if a range of favourable market conditions are achieved. The best case upside forecast scenario results in the realisation of a potential two billion cellular M2M connections globally by 2020 (see Figure 1).
Figure 1: Cellular M2M connections forecast scenarios
Source: GSMA Intelligence
An expert view on growth levers
In order to gain insight into the potential uplift of the cellular M2M connections growth opportunity, GSMA Intelligence conducted a survey across a number of industry experts (leading mobile operators, vendors and adjacent ecosystem players). The objective of this exercise was to understand these experts’ views on the extent to which the following six key growth drivers could each contribute to an increase in the number of cellular M2M connections by 2020:
- Low power wide area network opportunities are enabled
- Connected consumer goods market grows significantly
- Government policies driving M2M
- Global Big Data analytics emerging rapidly
- End-to-end security being assured
- Sustainable M2M business models are developed
Low power wide area opportunities
These are application environments that require low power, wide area network coverage and transmit small amounts of data. These use cases can potentially be addressed by adapting 2G/3G/4G modules to meet their requirements, by developing a standard cellular IoT based solution or by alternative Low Power Wide Area (LPWA) solutions.
Low data use cases are seen by survey respondents as the lever with the most potential to contribute to the uplift in the number of cellular connections in 2020. Applications within verticals such as utilities, smart cities and agriculture are all cases that require low data and low power elements, and present a significant opportunity for operators. Operational business models and established technological solution standards are still to be defined for low power low data use cases. There is a recognition in the M2M ecosystem that cooperation between MNOs could also see the establishment of a cellular IoT based solution.
Connected consumer goods
These are applications used by consumers, e.g. wearables, healthcare devices, household appliances. They can potentially be enabled by lower cost of modules, standardised APIs, operators offering such products via their own retail channels or partnerships with device manufacturers, and by using “flexible” billing.
Growth in the connected consumer goods sector depends on whether cellular is used at point of aggregation or for point-to-point (P2P) connectivity. In the short term, the cellular business model remains challenging in the connected consumer goods space in terms of:
- Establishing partnerships with consumer goods manufacturers
- Engaging with existing industry alliances to support development of open standards/protocols
- Developing the right business models
- Establishing appropriate channels to market
- Battery life of devices
- Price and size of modules
However, there is a common belief among respondents that the opportunity to generate a viable business case in offering or manufacturing connected consumer goods for sale will emerge in the medium term, potentially by around 2017. Also, in general, respondents foresee this opportunity to be served by a mix of technologies with cellular relevant at point of aggregation/hubbing. Cellular and short range technologies (e.g. Wi-Fi, Bluetooth and ZigBee) will be used to connect consumer goods, particularly in the home.
As a result, a key requirement to secure operators’ ambitions and ensure rapid growth in consumer IoT devices is the enhancement of the connectivity layer that connects intelligent devices to each other and the cloud. This development is also required in order to enable rich data and services ecosystems and remove the cost and complexity for mass market adoption. The importance of an open approach was recently highlighted by Samsung Electronics President and CEO BK Yoon: "The whole industry has to pull together. It’s obvious the industry will touch every aspect of our lives and revolutionise every industry. We have to strike partnerships everywhere". He also announced that 90% of all Samsung’s products will be IoT devices by 2017, and is targeting 100% connectivity by 2020.
For operators looking to move up the stack and bridge the gap between providing seamless connectivity and levering the opportunities to enable identity/security and develop a data ecosystem, engagement in development to standardise such protocols is essential.
Refers to government led policies such as eCall, smart metering or environmental regulation being widely adopted and adhering to planned timeframes.
The impact of government policy on cellular M2M connections growth varies by geography but in general it is seen as a credible growth driver. However, delays in rolling out policies inhibit the connection growth opportunity. Government policies can have a stronger impact if the implementation of regulation is more timely and led by a few countries championing specific regulations. Successful policymaking in key markets could lead to a “spill over effect” into other countries/regions, e.g. U.S healthcare solutions could spread to Europe.
Big Data analytics
Refers to the implementation of standardised data interface frameworks for key M2M/IoT application areas at a global scale. The exchange of data between ecosystem players allows them to identify and receive M2M/IoT data (according to commercial and regulatory conditions).
Big Data is not seen as a connections driver itself in the short term. However, there is strong correlation between achieving large scale deployment of M2M devices and Big Data, with interviewees indicating that to get “value” i.e. insightful information analytics from Big Data there is a need for cross-vertical presence and cross-vertical data mining. In the medium to long term, Big Data opportunities may drive connections growth once the initial deployments of applications utilising this capability demonstrate their value.
Refers to the service provided by the M2M system to M2M applications that establishes trusted security credentials to secure connections between applicative entities, independently of other parties involved.
The risk of having M2M data hacked and leaked is far too great in terms of damaging trust between end-users and providers for doubts over security to exist. Consequently, end-to-end (E2E) security has a marginal effect on cellular M2M connections growth as consumers will expect it as an absolute minimum. Survey respondents pointed to the fact that without partnerships between entities in the M2M ecosystem, E2E security cannot be assured - it is clear that operators, alone, are unable to provide for entire value chain.
The respondents highlighted that the development of sustainable M2M business models will be a significant factor in driving the increase in M2M adoption for operators. They have indicated the following recommendations for operators to consider putting in practice:
- Move away from being product focused to being more service focused
- Work with relevant ecosystem partners e.g. manufacturers and suppliers
- Utilise Big Data analytics over time