Operators will struggle to monetize 5G, NB-IoT, LTE-M in M2M market, says report
Cellular M2M value-added service revenues will account for only 14 per cent of the total revenues gained on the top of straight cellular M2M connection revenues, in the next five years. And 3G and 4G connections – as opposed to either 5G, or twin cellular low-power wide-area technologies – will contribute almost three quarters of this.
A new report by ABI Research says cellular operators will fail to capitalise in terms of M2M service revenues with their new 5G networks, or their new NB-IoT and LTE-M networks. This is because the connected vehicle market, which dominates the M2M sector in connection volumes, and which has buoyed leading M2M operators such as AT&T and Vodafone, will remain a 3G and 4G market, in the main part, even with masses of new cellular M2M connections in the period.
ABI Research said cellular M2M will go from 620 million to three billion connections in five years, in the period to 2024. It said cellular M2M connection revenues will double to $32 billion in the timeframe, but that service revenues gained on top of these connections will only be equivalent to 14 per cent of the $32 billion earned in connection revenues.
The message is the combination of new high-power and low-power cellular networks, in the form of 5G and of LTE-M and NB-IoT respectively, will make little mark in the M2M market before 2024.
Dan Shey, vice president at ABI Research, commented: “While many operators are hedging their bets on the emergence of new 5G and LPWA networks to expand their M2M endeavors, the reality is that in 2024 3G and 4G connections will account for 72 per cent of total M2M value-added services revenues.
“This result is partly due to the influence of connected vehicle markets which will heavily rely on 3G and 4G technologies; but it also reflects supplier focus on bringing full stack solutions to well serve very specific vertical markets.”
Operators must expand their horizontal capabilities and domain expertise, by partnering with specialist industrial outfits, to be able to move up the “value stack” and capture greater share of M2M service revenues, said Shey.
He commented: “Regardless of network technology, operators can gain greater share of value-added services revenues by formulating the right set of services and partnerships to create high-value end-to-end M2M solutions.”
Competition between operators in the old M2M space, as its blurs with the new enterprise IoT sector, is fierce, he said. Only a handful of operators have been able to generate annual revenues close to $1 billion from their M2M activities, achieved by focusing “beyond the device and its connectivity” to explode opportunities for corporate customers with analytics and other platform services. Vodafone, AT&T, and China Mobile were cited as the must successful of these operators.
The cellular M2M market is fragmented, and awash with smaller and more specialist operators. But tier-one operators are starting to have influence. ABI Research said three out of five (58 per cent of) cellular M2M connections are owned by the top 10 operators in 2019; this will shift to two in three (67 per cent) in 2024.
Shey said: “In order for cellular network operators to fully leverage M2M opportunities, they must undertake a critical assessment of their own internal capabilities and implement strategies that enable them to meet the demands of M2M end-users.
“To move up the value-chain, operators need to move past the underlying connectivity technology and establish dedicated M2M teams, partner with vertical specialists along the value chain, and deploy solution-based business models. By moving beyond simple connectivity, network operators can maximize the value of their networks and fully leverage solution opportunities that will eventually transition to LPWA and 5G technologies.”