Cellular M2M connections to cross 450 million in 2018

Infotech Lead America: Cellular M2M connections are set to reach over 450 million by 2018, according to the latest update to ABI Research’s M2M Market Data.

The research notes that Europe dragged down worldwide connection growth in 2011 and 2012 to the high teens but with improving world economics connection growth will accelerate to a CAGR of 26 percent through 2018.

However, recent connection growth has come in the face of declining connection ARPUs. According to ABI Research practice director, Dan Shey, the market for M2M connections can be classified as very competitive to hyper-competitive depending on the country.

“As a result, connection ARPUs have declined dramatically over the last two years as operators fight for M2M business,” Shey added.

Contributing to the pain of declining ARPUs has been slower than expected migration to 3G and 4G technologies which offer better margins per megabit of traffic. Over 70 percent of cellular M2M connections were on 2G networks in 2012.

Connection traffic and application needs have not grown enough to require 3G and 4G connections. But another reason is disparity in M2M module pricing – 3G and 4G cellular modules are over 2 times and 6 times more expensive than 2G modules, respectively.

But connection revenues are not where the money is says Shey: “While connection revenues are important, the money in the M2M market is in value added services – applications, systems integration, big data and analytics. Operators dedicated to the M2M market are aggressively moving up the stack and either adding services or partnering to grow their share of the M2M pie.”

ABI Research recently predicted that M2M applications security market will touch $198M by 2018. According to the report, Most M2M applications are lacking the basic security requirements that have been a non-negotiable standard for information and communication technologies elsewhere.

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