M2 m communication whitepaper

M 2 M communication: Worldwide future prospects and potential impact

analysis in India

Author:

Aditya Mishra

Founder & CEO, Research48

Phone no: +91 -9916389769

Email id: [email protected], [email protected]

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The undersigned hereby transfers all rights in respect of the work including without limitation all

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The undersigned hereby represents and warrants that the work is original not published anywhere

else and s/he is the author of the work.

Aditya Mishra

M 2 M communication: Worldwide future prospects and potential impact analysis in India

A lot has been said and written about M2M communication over the last few years. The idea

behind this paper is to present the concept in a lucid and compact manner, to understand its

potential impact, and to clear the misconceptions surrounding the acronym.

What actually is M2M all about?

The term M2M has been the “Buzzword” across different sectors and industries around the world

over the last few years. Unfortunately, it has also been one of the most misunderstood and

misused term. Its acronym is “Machine to Machine”, but it hardly explains the unexplored sea of

communication concept that this term actually represents.

There are good reasons for the widespread misuse of the term: The biggest reason is the

application diversity. It is applicable to almost all sectors, thus it becomes very difficult to

formulate an identity that is acceptable and applicable across all contexts. Besides, the term is

evolving at such a fast pace that it is virtually impossible to keep up with the latest

developments, thus making the prior knowledge antiquated.

M2M can be defined in simple terms as , “Machines” (can be a sensor, meter, valve etc) using

network resources (can comprise of core telecom network, back-end server, access and radio

networks, and a gateway) to communicate with remote application infrastructure for the purposes

of monitoring and control, either of the “machine” itself, or of the surrounding environment.

Thus, it is said that M2M creates an intelligent inter-machine co-ordination ecosystem.

M2M leads to different types of machines being nodes of personal wireless networks, and allows

remote applications to be developed. This will lead to machines being more autonomous and

smarter and will decrease the cost incurred due to involvement of human resource. Its scope is so

big because it not only covers smart devices having an IP address but even links passive objects

on the network.

The M2M communication spectrum is very wide, and includes innovative channels from

telematics (i.e. intelligent remote control of machine parts) to telemetry (i.e. remote reading of

the electric meters). In fact, according to an estimate, by 2020, more devices will be connected to

the Internet than human beings!1

So, what are the benefits?

Importance of this term depends on the perspective of the user. But for a layman, the least it will

do is it will reduce the bill amount we pay for electricity, gas and water, as these sectors will be

able to minimize wastage and by take advantage of off-peak tariffs, using M2M communication.

1 The Internet of Things How the Next Evolution of the Internet Is Changing Everything, CISCO

The M2M prospects are extremely challenging on one hand, but are amazingly rewarding on

other. Challenge comes from the complexity of the value chain, and reward from the benefits

that it offers in the long run.

We strongly believe that the immediate benefits of M2M will be available to businesses and end

customer will benefit in long run. Let us take an example of a refrigerator manufacturer. An end

customer may not want to talk to the refrigerator but the manufacturer can get great insights

about the customer behavior with reference to refrigerator, for example the usage pattern of

consumers that will help in making the refrigerator more user friendly, insights about

performance of the refrigerator and to get an idea of potential wear and tear which will help them

notify customers when the refrigerator need a service. This will not just help in retaining the

customer but will also bring down the cost of ownership of the refrigerator.

To elaborate, let us take another interesting example could of a car leasing company. For

automotive firms, a big portion of cost comes from electronic equipment and gadgetry. Using

M2M, different information about the car like engine oil change, malfunction information, tire

pressure etc can be made available to the driver well in advance!

Which all fields will it touch and what differences will it make?

Let us take a look at some of the potential applications in Indian scenario across different

industries:

Automotive: Car infotainment, Telematics, and LBS applications are becoming more and more

popular with modern cars in India today. Besides, fleet management services, fuel consumption

tracking, GPS asset tracking, cargo management will all be very common words in years to

come. Another interesting potential application is a pay-as-you-drive solution that is being used

by some European firms in the insurance sector.

Buildings & Homes: We may soon be living in Smart homes which will be able to calculate,

estimate and even control energy consumption and closely follow the home health. “Energy

Harvesting” is another interesting application to look at. It is a technology that harvests the

necessary power from the locality. Thus, the energy obtained is used to send a signal and

perform some task, like turning on a fan switch. Combining this solution with wireless switches

and wireless sensors can simplify the building cablings. This can be a real cost saver!

Smart Energy: This sector will be as large as $150-180 billion worldwide in next three years2.

Smart meters can be used inside homes to monitor the gas, water, electricity consumption and

can directly give output by connecting to an in-house display. This will improve consumer

awareness and will lead to consumer control on the energy bills. In fact, Smart energy meters

will also be used as a gateway for tomorrow’s network homes.

2 Global Smart Energy Meter Market 2011-2015, TechNavio's analysts forecast report

Health Care: Patient-premise solutions will drive the future of healthcare industry in coming

years. They are not just more efficient, but also cost effective, and many medical equipment

manufacturers are already venturing into this space. These mobile health solutions make it

possible to observe daily living, which can be recorded and transmitted from the patient’s house

or on mobile devices, which can help doctors to act quickly. Thus, this can be much more

efficient than the current system, where the patient visits doctor periodically, and for short time

span only.

Industrial and Infrastructure: A whole new range of solutions and services has been

developed in Industrial & Infrastructure sectors too, like weather & seismic sensor measurement,

real-time traffic monitoring, remote video monitoring, etc. In fact, it is said that the concept of

M2M started with wired network, and on the factory floor, where data was sent from machines to

PCs over Ethernet LANs!

Transportation: Fleet management was one of the few sectors that adopted M2M very early .Its

working is very simple, yet innovative: GPS terminals embedded in the vehicles find out the

location and the data is transmitted over a cellular network to a hub, where it can be displayed on

a screen in form of a map.

The service definition has become much broader today and new features like broadband access

and vehicle diagnostics has been added to the portfolio of M2M offerings.

Retail: The ability to be able to manage mobile card payment transactions in a fast and secure

way is becoming vital for many players in the retail sector. Wireless card payment transactions

may soon be available to taxi, ferry and ice cream van and other on-the move players. Most retail

players are today looking for the ways out to manage mobile card payment transactions in a

secure way, and M2M offers the fast and simple solutions. Add to it the facilities like parking

meters, online vending machines etc, and you can easily see the huge impact of M2M on this

sector.

Networks: High-speed cellular networks are fast replacing the wireline networks for enterprises,

whose needs are consistently changing and quick and flexible deployment of resources to

temporary offices and remote locations have become an integral component of the business

today. Intelligent gateways and routers are been developed for M2M applications, to better

handle the complex routing and networking solutions. Besides, intelligence and robust remote

management tools facilitate quick and easy deployment of primary as well as back-up solutions.

Besides, Agriculture, Security, Digital Billboards are other areas of application of M2M

solutions, to name a few.

So, who all are the stakeholders?

The perfect M2M solution will need to have a right mix of hardware, software, communication

and value added services. As discussed earlier, each M2M solution is unique, and depends

largely upon what needs to be recorded, controlled, corrected, or reported. Thus, there are many

stakeholders, and each of them need to come together to formulate and foster a solution from the

scratch, i.e. visualize, define its scope, develop, test, maintain and sustain the solution. Thus the

ecosystem needs strong partnerships and alliances for M2M to achieve its true potential.

Typically, an M2M solution will comprise of following stakeholders:

Network infrastructure firms like Ericsson, NSN, Tejas, Huawei etc

Semiconductor & Hardware companies that provide the customer premise equipments

(CPEs) and platforms from where data is captured, like Honeywell, Motorola, Intel, Dax

Networks etc

Middleware solutions companies which act as industry-specific application software or

solution providers, like Electrolux, Qualcomm etc.

System integrators that will have IT domain expertise to keep the entire process under

one umbrella like TCS, IBM.

The cellular network operators, which acts as communication medium for transmission of

the measured data, like Airtel, Vodafone etc.

Depending on the use case, each stakeholder will assume different level of responsibility. Given

the current status of telecom industry worldwide and the prospects that M2M present with, we

can say that M2M holds potential to revive the operating models for carriers as well as for the

infrastructure firms and CPE manufacturers.

The major benefit for the carriers will be in form of recurring network usage cost i.e. the

installation and subscription charges. Besides, carriers will play an integral role in building data

models, deploying the service and providing service to end device.

Carriers, vendors and System integrators will together build a scalable infrastructure to leverage

M2M potential. In fact the existing telecom infrastructure is already in sync with M2M

requirements to a large extend.

IT firms will play an important role in Development, Product lifecycle management, Technology

transformation, Network Services and Testing, OSS/BSS Integration across the technology

nodes, complimenting the niche technology skills necessary for the M2M business.

Middleware firms will work on many fronts to enable the Internet of Everything and pave the

way for new types of connected products, business models and services.

The embedded chipset technologies will lead to cellular connectivity and home area

connectivity.

Fig1. M2M Ecosystem

Let us take a look at how a generic M2M value chain may look like:

Fig 2: M2M Value Chain

This is the generic value chain for an M2M solution. The roles played by different

players will vary according to the solution requirements, but the players will remain the

same. The blocks have been explained below:

Application Design: This module is taken up by software firms and comprises of

the initial phase of the software life cycle.

Application Hosting: This block involves hosting the software code and the data

needed for running the application. This is often outsourced too.

Application Provision: This module will involve delivery and sales of software to

specific market segments and also the technical support.

Network Equipment Development: This module involves the design and

development of network equipment, & needs intellectual capital to be developed.

Network Equipment Integration: It comprises of the provisioning of integrated

network solutions to network operators.

Mobile Access Provision: This module includes providing access of the network

to the customers. It also includes backbone provision, last-mile provision and

broadband access provision.

Consumer Electronics (CE) Device Development: This module involves the

design and development of CE devices.

CE Device Marketing: This involves bringing to market consumer electronics

devices to be used by consumers to interact with applications.

To elaborate further, let us take an industry-specific example of Smart Grid communication

and understand how each player in the value chain plays its role in enabling an end-to-end M2M

solution:

Figure 3: Smart Grid Communication Value Chain

Let us take a look at the key entities involved in Smart Grid Communication value chain:

Chip manufacturers: These companies are involved in manufacturing of building blocks

like processors, modem, memory, GPS etc.

Cellular module OEMs: They play an important role of integrating the chips into the

module. They also provide the interface to work with multiple carriers.

Device OEMs: These OEMs integrate the cellular modules with the smart grid devices

like meters, gateways, concentrators etc.

Carriers: They give wireless connectivity to utility devices.

Utility: Finally, they integrate or bundle the devices and the network together, to make

the smart grid system possible.

What is in it for the Indian Cellular Operators?

According to a recent survey, developing countries account for only about 1.5% of total M2M

deployment3. There are several reasons for this; one of them is lack of M2M strategy from

cellular operators in these countries.

Taking about India, Mobile M2M is just an emerging service in its nascent stage, and very few

operators have tried their hands on this front so far. But according to an estimate from Tonse

Telecom, by year 2014-15, mobile M2M data revenues will contribute to about 5.97% of

projected total mobile VAS revenues in India4.

We firmly believe that M2M will drive unparalleled amount of data traffic in coming years,

which will create new revenue streams for bleeding cellular operators in India. LTE connectivity

will also play very important role in the future of M2M communications, as 4G technologies is

necessary to manage the large number of M2M devices coming online.

Moreover, with emergence of new technologies, telcos in India are struggling to boost their

existing infrastructure. M2M will present them with a tremendous business opportunity in terms

of monitoring and tracking individual base stations.

But precursor to success of M2M in India would be fair and well designed revenue models.

Some of the models that can be used are the transaction-based model charging on basis of extent

of usage or a package-based model (a fixed payment at regular intervals) or a model where the

M2M earnings can be shared between the user and the provider. Moreover, it would be a good

idea for the operators to establish network-sharing partnerships, to minimize the cost associated

with providing M2M services, especially in remote areas.

A recent example of emerging business opportunity for Indian operators is the Vodafone-

Mahindra tie-up. Mahindra Reva partnered with Vodafone to power its electric cars with M2M

communication services, with which users can remotely lock their car, control air conditioning

and get emergency boost charge. Users can control different aspects of their vehicle and get

information about battery back-up, lock control, charging locations etc using an app available on

their smartphone.

This is a unique partnership, first on this type in India, and gives a fair indication of how M2M

can present unseen business opportunities for telcos in India.

Another name worth mentioning in this space is Reliance Communications. The company is

exploring the M2M business opportunities in rural India. As part of Green VAS & M2M Rural

Internet Plan, the company is planning rural deployment of M2M technologies, with steps like

3 The Other M2M Opportunity: Enhanced Utility Access in Emerging Markets, GSMA Report

4 Mobile M2M Market in India, Tonse Telecom

automation of agriculture & Irrigation services, water level monitoring, and data gathering for

milk & cooperatives, fisheries, poultry, etc.

Undoubtedly, in last couple of years, the eco-system has begun to grow, driven by various

factors like the requirement from the inefficient state electricity boards (SEBs), and other

industries like health, agriculture and transportation.

We believe that the compliance and regulatory aspects won’t be the drivers of M2M in India like

they have been in many countries. Rather, the drivers in India will be to improve processes,

reduce power losses, and improve logistics and transportation efficiency, and the drive from the

security and healthcare sectors.

Many other solutions are running in pilot phase while some operators like Airtel and Vodafone

are evaluating solution readiness and end to end SLA management. Few operators are also

exploring opportunities in cloud based data analytics solutions, and are exploring different

business models and first mover’s market entry strategies.

The carriers will also play integral role in form of providing access to terminals, CPEs, building

the use case models, subscriber management, terminal management application and portal etc,

i.e. they will be the centre point in the entire process of delivering a complete M2M solution.

Few other initiatives in India so far:

Loop Mobile came up with “Dial an auto” service in Mumbai that provisions M2M module in

rickshaws to track them. The system uses Loop SIM card.

In Rajasthan, Bharti Airtel came up with “Street Light Automation” service, trying to real-time

monitor and control the power of street lights based on GPRS solution.

IBM is working with Tata power to achieve digital automation of smart energy based solutions,

with help of NDPL (New Delhi Power Limited).

Reliance Infrastructure recently came up with advanced metering solutions that aims to connect

households with main electricity supply units.

Similarly, in Bangalore, Bangalore Electricity Supply Company Limited is planning to install

smart prepaid meters for about 8 million customers.

What are the challenges confronting the concept?

As one would expect, there are certain practical concerns confronting the M2M industry today,

which the industry needs to overcome before realizing its true potential.

Standardization

The need for standardization and Interoperability within various smart devices is of paramount

importance here, especially because of the diversity in the application and players involved like

devices, networks, industries and geographical locations. Although it is a well accepted fact, still,

as of now, there is no single standards body which is moderating and controlling the

standardization. But many organizations across the globe have taken pro-active steps to come up

with the their own standards like DASH7 Alliance, HomePlug Alliance, ZigBee Alliance, ETSI,

TIA , CCSA etc.

Moreover, each industry is trying to come up with its own idea on standardization. European

Smart Metering Industry Group (ESMG) and HomePNA Alliance are couple of examples.

The problem of standardization is mostly coming from the device manufacturers, as each of them

may use their own technology for data collection and one-size-fits-all kind of a standard is hard

to come up with.

But we have reached the point where we urgently need for the basic level of standardization

acceptable to all parties. However there is no blueprint for this as of now. We can surely expect

some consolidation on this front and undoubtedly, the acceptance of industry specific standards

will gain momentum in couple of years.

Security

Most of the platforms used for M2M applications are proprietary, which involves very less

coding, and makes hacking a difficult task. Besides, use of VPNs and lack of too much memory

used makes the solutions security robust, and lots of effort will be required to inflict even small

damage on such systems. Security still remains an area of concern for M2M solutions though. If

we talk about the B2C scenario, smartphone market has picked up rapidly in India (right now

they comprise of 8-10% of total mobile phone shipments5) and they will drive the M2M growth

in future. They have an open OS, thus making them vulnerable to viruses and worms. In 3-4

years from now, when M2M solutions and data generated from it will become an integral

component of corporate MIS, security will surely assume much more importance. We believe

that the evolving roles of different players in the M2M eco-system will change the focus point of

M2M solutions.

Besides, M2M deployments do not have the valuable input of traditional communications

networks, in which human subscribers quickly alert the carrier to suspicious activity.

Also, some of the M2M devices will be placed at remote location, and will not be easily

accessible. This will make the investigation cost much higher. Besides, security assumes even

more importance if we consider the fact that M2M will involve utility and healthcare

5 IDC Report, Q4 2013

connections, which involve critical information which can present a serious threat to our daily

lives.

Data Collection & Storage

When we come up with smart homes, the data coming via sensors from different appliances will

be needed to be stored at one central location. We don’t have a fixed format and structure of data

collection right now, which could be a bottleneck in long run. Later, real-time invigilation will

come into picture which will require transmission of audio and video files and images too, and

proper data collection format will assume even more importance.

As far as storage is concerned, the marriage of M2M & Cloud-computing is unavoidable

according to us. The reason is easy to see: M2M solution will mostly end up having a central

storage. That is where cloud-based solutions will score over all other options like on-premise

storage as it is always accessible, cost efficient as well as scalable. The only issue with cloud

based solutions, as has been discussed over the years, is the security concern. But still, the

benefits offered by cloud to M2M solutions far overshadow the disadvantages.

Analytics & BI

Data coming out of M2M solutions will be huge, and many solutions will need real-time action

based on the data achieved. Thus, we can’t keep the BI and Analytics aspects out of the picture.

In fact, it will throw new and never seen before challenges as well as opportunities for the

analytics industry, and new solutions will come up, with different sets of Key Performance

Indicators (KPIs) for each industry or sector. For example, for security systems, frames captured

per hour in a live video stream feeding may be the KPI, while for power management system, it

may be the estimated energy savings.

Thus analytics software market needs to be in a very strong position, which might not be the case

in India as of now.

Growth drivers and challenges in India:

Apart from the above mentioned challenges, some of the significant hurdles to the growth of

M2M in India are:

Limited knowledge and experience of M2M among end users and customers , Very high/

Prohibitive cost aspects for deployment , high dependence on 3G/4G , congestion of mobile

networks, and the potential risk of failure.

Despite these challenges, M2M holds tremendous potential for India. A good segment to look at

is rural India. As explored by Reliance communication, in rural India, M2M can lead to better

utilization of scarce resources like water & energy, and provide well planned healthcare and

education services to rural population through remotely managed applications.

Some services have already been launched, such as SMS to provide weather updates and

wholesale crop prices to farmers. Such solutions will provide rural masses with more

personalized real-time information and help them take better decisions.

Projects such as Aadhaar will give further impetus. Coupled with M2M, the national

identification number can be used to improve both transparency as well as utilization of financial

benefits being provided to the rural masses.

One M2M application that have gained popularity in rural India are Nano Ganesh, which lets

farmers use phones to monitor and switch on irrigation pumps in remote locations. It works in

conjunction with Tata Teleservices phones.

There are many other apps like SmartMoo and Silent Observer. Stellapps Technologies built the

SmartMoo automated cow-milking app with the aim to reduce wastage.

While the prospects for such systems are good, they need proper support and backing up by the

government. Energy sector is a good example where M2M modules are used to capture readings

from energy meters. The Indian government is mandating the deployment of digitized energy

meters to minimize power loss and theft, and this is expected to create high demand for M2M

modules in the country.

The government is taking initiatives on its part, eg. The establishment of research institutes such

as the Centre of Excellence in Wireless Technology. This is a public-private initiative established

by the government's Department of Information Technology in partnership with the Indian

telecom industry. But more needs to be done in terms of supporting new M2M initiatives by

private players.

The bigger boost to the industry could be the government launching a few M2M initiatives and

showcase their success. This will automatically lead to more private sector participation and

involvement.

We believe that in India, government regulations, decline in hardware cost, need for new

business models and innovation, improvement in GPRS and 3G connectivity and the price-

performance trade-off will drive the M2M market in years to come. Government will have a

major role to play, as is already evident in initiatives like Bangalore Electricity Supply Company

Limited (BESCOM) metering initiatives, Aadhar, Microfinance & financial inclusion programs,

R-APDRP (Restructured-Accelerated Power Development and Reform Program), etc. Besides,

the need for process control will drive growth in retail sector for product tracking, logistics

management, in transportation sector for traffic management (video & surveillance) & for fleet

management.

Besides, the IPv6 standardization will open up new avenues in terms of allowing countless

number of devices to be seamlessly addressed. Global players like Vodafone and Telefonica are

already focusing on it as a big opportunity.

So, in a nutshell:

Given the current state of telecom industry in India, the transition to data era is inevitable. In

years to follow, traffic will come from “Things” more than from “Human”. Assuming that the

data services will be steadily available in sufficient amount, and the vertical applications take off,

India will become a huge market for M2M devices, aptly aided by government initiatives. While

initially the demand will be driven by B2B customers; process improvement, power distribution

& transmission losses, the need for tracking of goods movement, healthcare applications,

surveillance needs and POS based applications will drive the growth of M2M communication in

future. The stakes are huge, the value chain is extremely complex and disjointed, and the

industries are all geared up to embrace the concept and explore the huge opportunities. But the

telecom operators need to take a more pro-active approach toward M2M, as it holds the potential

to increase ARPUs and reduce the subscriber churn. The government, telcos, as well as solution

providers and consultants in the M2M space need to come together.

References:

Following references have been used to prepare this document:

Reports & Publications:

MACHINE TO MACHINE, The Technology of the Future Report (March 2013). WIPRO

Technologies.

M2M communication in India: The future is here (June 2012). CDAC.

M2M communication and Indian market needs (September 2011). NEC Corporation.

M2M Technology: Challenges and Opportunities (2011). Tech Mahindra.

More than 50 billion connected devices (2011). Ericsson.

Technology Review and Trends in M2M Communication (February 2012). TCS.

Websites:

Cerebral business website, http://www.cerebralbusiness.com/m2m/ (November 2012)

GlobalTelecomBusinesswebsite,

http://www.globaltelecomsbusiness.com/Article/2702078/Regions/25187/Industry-excited-

about-M2M-potential.html (October 2012)

Indiatechonline website, http://indiatechonline.com/indian-mobile-m2m-market-study-

712.php (November 2012)

Information week website, http://www.informationweek.com/big-data/news/software-

platforms/m2m-big-data-opportunity-for-mobile-operators/240007095 (November, 2012)

M2M communications website, http://www.m2mcomm.com/about/what-is-m2m/index.html

(October, 2012)

Telecom lead website, http://telecomlead.com/contributed/machine-2-machine-m2m-

opportunities-in-indian-telecom-market/ (October 2012)

Telematics update website, http://analysis.telematicsupdate.com/ (October 2012)

Teliasonera website, http://www.teliasonera.com/en/newsroom/news/2012/m2m_mainstory/

(October 2012)