According to Machina Research, by 2020 there will be 1.5 billion M2M connections in the utilities business, the vast majority being smart meters. However, such stellar growth belies a risky market.
There is so little traffic generated by smart meters that MNOs cannot rely on carrying traffic to make money. They need to be heavily involved in service provisioning and management if they’re going to convert the massive growth in connections into any meaningful revenue.
Utilities have been using M2M-style monitoring equipment for decades so the market is not a new one. However Machina Research expects the segment to see very rapid growth over the next 10 years driven by government intervention in the form of legal requirements for smart meter deployment, stimulus packages for smart grid roll-outs and wider installation of electric vehicle charging points.
Machina Research’s Connected Intelligence report Machine-to-Machine (M2M) Communication in the Utilities Sector 2010-20 forecasts the following:
- The number of M2M connections in the utilities industry will grow from 100 million in 2010 to 1.5 billion in 2020, of which 99% will be smart meters.
- Cellular connections will ultimately dominate, growing from 38% to 57% of installed base by 2020. Metropolitan Area Networks (MANs), including powerline communications (PLC) and community WiFi connections, will also be significant, accounting for 28% of connections in 2020, albeit down from 53% in 2010. Of the wireless wide area connections, 3G is will dominate.
- The total market for M2M in the utilities segment will be worth EUR24 billion in 2020, up from EUR4 billion in 2010 and having peaked at EUR28 billion in 2017. From 2017 onwards the number of new additions starts to decline, resulting in a reduction in device, installation and provisioning revenue.
- The largest region in revenue terms is Emerging Asia-Pacific, courtesy of China’s significant investments in utilities upgrades. By 2020 China will account for 40% of global M2M utilities connections and 31% of revenue.
Pure traffic revenue, that is the revenue associated with carrying bits, is tiny. Excluding device, installation, provisioning and other associated services, mobile traffic revenue will amount to only EUR50 million worldwide in 2010, growing to EUR1.2 billion by 2020. Proportionately that is 1% of total revenue growing to 5%.
The revenue opportunity for M2M in the utilities sector does not lie in carrying traffic. Mobile network operators must be involved in other associated elements of the service provision if they are to secure a significant portion of the EUR190 billion that will be generated between 2011 and 2020 in the sector.
