Tuesday, October 16, 2012

New Value-Added Services will Drive M2M Revenues

Although mobile network operators have relied mostly on connection fees to generate machine to machine (M2M) revenues; network connectivity and connection management revenues represent only 10 to 30 percent of the M2M value chain that's dependent upon communications carrier and geographic location.

Value-Added Services (VAS) for application development, enablement, provisioning, management, and system integration are the bulk of the M2M services opportunity in this growing market that's set to reach $31 billion by 2016, according to the latest market study by ABI Research.

"No one size fits all. Operator choices to capture the burgeoning M2M services market will be dependent not only on the value of their assets and VAS platforms, but also their partnerships and target market verticals," said Dan Shey, M2M practice director at ABI Research.

For instance, connecting coffee vending machines to the internet may be a near term opportunity, but can it grow to a global opportunity? It's not likely.

Commercial video surveillance solutions may provide higher ARPUs due to bandwidth requirements but is this better than the lower bandwidth, but larger volume home security market?

Telecom network service provider partnerships may extend regional market coverage but will businesses get the same service quality and support? Fortunately, VAS-related service delivery platforms can help operators address more than one market need.

Verizon bought Hughes Telematics with the intention to extend the use of the platform to non-telematics verticals -- such as mHealth, asset tracking, and home automation.

Network operators who also leverage their cloud service assets -- such as with application delivery -- lower the barrier to entry and encourage greater vertical market participation.

According to the ABI market assessment, service providers that seek to understand the evolution of vertical adoption across service types, the requirements for tailored applications, and the value and need for network connectivity will more likely be the big winners in the M2M marketplace.

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