Q&A: How can telcos make money on M2M?
With the wildly differing predictions about the size of the market and opportunities of machine-to-machine (M2M) communications, Connected Planet had a coffee with Jim Dunlap, CEO of Cycle30, a billing vendor with an M2M mission.
Connected Planet: The first question must be: do you agree with the Cisco and Ericsson estimates of 20-50 billion M2M connected devices by 2020? The numbers seem to vary from a couple of billion to a trillion….
Jim Dunlap: I think that 50 billion, or anyway between 20 and 50 billion, is realistic if you are counting the number of microprocessors connected to the network. This business will be built on scale but it is important not to think of every type of device in the same way. Some will only need partial connectivity, some will demand full time connectivity and some will demand the most robust, fool-proof connectivity.
Connected Planet: The current wisdom seems to be that telcos will make money out of the provisioning, monitoring and providing customer support. Is that your view?
Jim Dunlap: In very simple terms, that is true, but I believe that the opportunity is greater than that. My view is that telcos and their partners have the chance to identify and create value based on the function of the device and then bill for that value. It is not just about linking up chips and charging for the connectivity. Let me give you a couple of examples. We have a client called Arrow, a big M2M player, except they think of themselves primarily as a parking meter provider. The new parking meter can accept credit cards and debit cards and our value is that we enable the transaction, provide reporting and analysis and then manage the settlement process with the City. That has more value than simply hooking things up and we are helping Arrow provide real value.
Take that example and extend it into other areas – toll roads, healthcare, the automotive industry. We are enabling more than just connections, we are making money for our customers on the value that they bring.
Connected Planet: So what about utilities? Everyone talks about telcos’ opportunities there?
Jim Dunlap: There are many opportunities in the utility industry. Apart from the smart metering market, which is huge, as a telco man I see a great opportunity in transferring skills and experience to the utilities markets. Telcos have spent 20 years getting themselves competitive and dealing with the legacy problem. There are great opportunities in enabling utilities to short-cut many of the problems that we had to figure out from the ground up.
Connected Planet: But there is a huge culture gap isn’t there?
Jim Dunlap: There is certainly a different culture but there are trying to achieve the same things as we were, so we should be able to bridge the gap.
Connected Planet: If you are a telco man, not a subscription man, where did Cycle30 come from?
Jim Dunlap: We were part of a public telecoms group – providing multiple services and we decided that we could maximize our $50 million investment in systems and processes by spinning off the department. So I took 80 employees and we became Cycle30 about two years ago. Part of the pitch to the Board was that most hosted service providers are data centers and think like data centers and our telco background gave us a natural advantage – we could speak the same language as telcos.
Connected Planet: Let me ask you, then, as a telco man, what are the greatest challenges for telcos in the next year or so?
Jim Dunlap: The global economy is the biggest challenge right now and it is difficult to see when long term growth will restart. That is a big barrier at the moment but once we get beyond that then I see further refinement happening in the whole convergence space. I wonder whether wireline ‘anything’ service is dead or will be soon. Mobiles are fast overtaking fixed devices for accessing everything, anywhere, even in the home. I think LTE will be a tipping point for this, when it comes.
Connected Planet: We have managed an entire conversation without mentioning the customer. That must be a first.
Jim Dunlap: One thing I do know, probably based on a previous career with Nordstrom is that no-one in this industry really ‘gets’ that the customer is king. It is true and an urgent issue for the industry.