When the machines start talking

By Masoom Gupte, Business Standard, March 24, 2014 Section: News Category: Digital Currently, the focus of M2M communication revolves around connectivity, but the next and the more profitable wave will be around applications. The year 2014 has only just begun, but the $19 billion acquisition of WhatsApp by Facebook has already claimed its spot as a key event of the year. While the world toasts this underdog success story, one group adamantly refuses to tip their hats in reverence. They can't be blamed. WhatsApp and its ilk in the free messaging app space have (almost) led to the demise of the short message service (SMS), clamping down one of the most lucrative revenue streams for the telecom services providers. Estimates by Informa Telecoms & Media suggest the annual SMS revenues globally will fall to $96.7 billion from the $120 billion in 2013. Asia Pacific is forecasted to experience the highest drop from the $45.8 billion in 2013 to $38 billion in 2018. The situation isn't any better for the Indian market. According to the Internet and Mobile Association of India (IAMAI), the average revenue per user (ARPU) has shown a steady decline over time, owing partly to falling call rates and partly to the concerted effort among telecom service providers to reduce dependence on voice-based services. This is further corroborated by the numbers put together by the Cellular Operators Association of India (COAI). The association puts the ARPU for GSM users at Rs 156 in FY 2010, which has fallen to Rs 111 as of quarter-ended June 2013. The minutes of usage (MOU) per subscriber per month for GSM service has also dropped from 425 to 388 during the same period. The good news is, this drop has been compensated to an extent by an uptick in the mobile value added services (MVAS)- that is, data usage. As per IAMAI, MVAS stands at 27 per cent of the ARPU today and will largely contribute to any subsequent rise in ARPUs. Even with the instant messaging apps, while telecom players may be losing SMS revenues, they gain significantly in data terms: Instant message services are used to send large audio and larger video files. A one-minute video sent via WhatsApp or WeChat can be more than 100 times larger than a text-only message over the same app. These apps ease the use of video, audio or photo sharing. While sending multimedia message is not only limited to smartphones, it is also expensive at the same time. The foreseeable problem: similar to voice, data services are also facing bitter price wars. By extension therefore, while data usage may continue to rise, a commensurate increase in the revenues seems a fantasy stretched too far. In other words, relying on data alone to drive revenues may be a mistake on the part of service providers. Telcos need to seek greener pastures. Enter M2M. Says Sunil Tandon, head, non-voice business and devices, Tata Teleservices, "The traditional voice and data services are becoming increasingly commoditised across the world. As the economies grow and communities become social the revenues from both these traditional breadwinners of a telecom company will plateau. The need of the hour therefore is to find your blue ocean, an alternate source of revenue that utilises your existing capacities and creates a hitherto untapped income. Increasingly we have observed that the machines are connected to the net at all levels and for even bare minimal tasks." According to 6Wresearch, a global market research and consulting firm specialising in emerging markets, India's M2M market is expected to touch $98.38 million by 2016 at a compound annual growth rate of 33.81 percent from 2011. Cellular M2M modules will account for over 42 per cent of the market by 2016 (the rest made up by short range and satellite-based services). According to the latest report by Machina Research, India will reach 7.93 million M2M connections by 2015, earning more than Rs 2,200 million in revenues. Undoubtedly, the market is driven by the shift towards "smart communities". So what is M2M? In its bare skeletal form, M2M can be defined as the automated exchange of information between machines - or machine to machine communication. With telcos, it involves the use of SIM (subscriber identity module) cards that are embedded in machines to provide real-time exchange of data that can improve productivity. Doors opening and closing automatically on entry or lights switching on and off are the most common examples of M2M solutions. Or take the use of mobile wallets. Here, M2M, in conjunction with near field communications (NFC) uses the mobile as a medium for monetary transactions, cutting out the need for credit/debit cards. The opportunity for telcos is enormous. The number of devices far outstrips the number of people. Look around. A single individual may own a mobile phone, a music player, a tablet, a laptop, a camera etc. Research indicates a 10:1 ratio between machines and people, states a Wipro white paper on the subject. PARTNERS IN PROGRESS Connected car: Vodafone-Mahindra IN 2013, Mahindra partnered with Vodafone to facilitate the Mahindra Reva e2o, the first car in its class to be connected to its user through a smartphone app. Using their smart phones or any internet connected computer, e2o owners can monitor the level of charge in the battery of their car and how far they can travel with the available charge. They can also remotely control the vehicle's air-conditioning and set schedules to pre-heat or pre-cool the car before they use it. The driver can also receive alerts on various events with the car such as a disruption in charging due to power cuts, safety-related reminders such as a door being left unlocked or a parking brake not applied. In an emergency he can boost charge with a command on the smartphone to go an extra 8-10 kms. Smart meter: Airtel-Government of India AIRTEL BUSINESS has provided complete connectivity solutions to connect data centres, regional offices, other offices, substations and consumer meters for Restructured Accelerated Power Development Reforms Programme (R-APDRP), a Government of India initiative, projects in different states. A range of applications are being installed under the R-APDRP at different electricity boards. MDAS (Meter Data Acquisition System) is one of the applications for automatic meter data reading. Airtel provides connectivity between meters and servers for automatic meter reading and also connects offices and substations of the electricity board to a centralised data centre for other applications. This enables the state to reduce outages and interruptions in power, identify losses in the distribution setup and effectively monitor the performance of transformers and grids. Vehicle tracking: Tata Teleservices' smart bus tracker system THIS TRACKER is specially designed for schools to manage their fleet of buses. It allows schools to track the position, speed and route of their buses. The Smart Bus Tracker System is aimed at easing the administrative tasks while also ensuring the safety of a child. Parents also get constant SMS alerts on their smartphones about the current position of the buses and the expected arrival time of the buses. As things stand M2M is an ecosystem play where typically there is device manufacturer, device installation and post-sales support partner, application/portal developer, telco etc. The entire piece needs to come together to deliver the required customer experience. Tandon of Tata Teleservice sums up the challenge facing the telcos: "M2M is a relatively new area for Indian telecom companies. It entails capital expenditure in a host of areas starting from M2M devices for various use cases to standardisation of communication protocols to building a backend platform for diagnostics, remote management and customer servicing of these devices." The opportunity is immense. "At present, telecom network-enabled telematics is gaining momentum as modules based on 2G/2.5G platforms are less costly than satellite modules. The 2G/2.5G based modules have dominated the Indian telematics market but with the launch of 3G and 4G networks, a shift towards 3G and 4G-based modules is expected over the coming years," says Anuj Mehrotra, analyst, electronics vertical, 6Wresearch. Globally, M2M has made inroads into industrial automation, energy monitoring and vehicle telematics. In India the space is driven largely by commercial telematics and smart metering, says Mehrotra. Commercial telematics mainly involves vehicle tracking, helping in better fleet management. Smart metering helps transmit information about the exact energy consumption to your energy supplier, doing away with manual intervention. Naveen Chopra, director, Vodafone Business Services, corroborates Mehrotra's views. He says, "M2M is widely adopted in smart meters in utilities, fleet management, retail wireless point of sale (PoS) machines. New areas are also emerging, such as healthcare, sales generating assets management, remote security and surveillance." Going beyond vehicle tracking and smart metering, telcos have entered the residential and government space as well. As part of its M2M suite, Tata offers the Smart Home Solution whereby all devices in the house are connected and can be controlled remotely. Bharti Airtel is working in Bangalore and Chennai for improving e-governance initiatives. Then there are the industrial grade SIMs, required to suit the unique machine operating conditions like high temperature, high pressure etc. Vodafone offers special purpose M2M SIMs (embedded SIM and special plastic) that can withstand temperature range of -40C to +85C, and extreme operating conditions, and are therefore fit for industrial grade deployments. The next waves of M2M applications are expected in healthcare, industrial automation, and consumer electronics, says a Frost & Sullivan report. There will also be steady demand for security and remote surveillance, retail and other process automation applications. However, for the surge to occur, consumer education is imperative. Till then the task is simple: M2M telcos must therefore continue to provide consulting services to build use cases and define an acceptable return on investments.