T-Mobile: M2M connections to outnumber humans 4-to-1

[connected planet online] For every single human being punching phone numbers or surfing the net on the T-Mobile network, there could be four machines chirping away quietly, embedded in utility meters, cars, freight containers, medical equipment, wristwatches and even the oversized flashlights carried by cops. T-Mobile national director of M2M John Horn believes that machine-to-machine (M2M) communications will not only be huge factor in T-Mobile’s future growth, but that it will become the dominant form of connection on T-Mobile’s GSM network.

“Every analyst has a different prediction,” Horn said. “I don’t know what the exact number will be, but at the end of the day we could see a 4-to-1 ratio, easy.” Embedding every utility meter, every vehicle and every home with an M2M module would get you at the number without difficulty, Horn said, but with the pace of M2M innovation accelerating their applications out there the industry hasn’t yet conceived of that could send that ratio far higher in favor of machines.

As for how long it will take T-Mobile to hit that 4-to-1 mark, Horn wouldn’t say. Nor would reveal how many M2M connections T-Mobile has on its network today. The only M2M data T-Mobile has released is that it has enjoyed 100% growth in M2M connections on its network every year for the last four years. Horn explained that T-Mobile is still trying to figure out how to quantify M2M connections. It can’t just add those connections to its overall subscriber numbers because they are so vastly different from its consumer handset and data card businesses. Most of those connections consume only a modicum of capacity each month and most of them bring in only a relatively small amount of revenue. That’s one of the reasons why scale is so important, he said. Even if T-Mobile reaches that 4-1 ratio of machines versus handsets today, the revenues resulting from those 120 million-plus machines would still only be a small percentage of its overall revenue.

“But if you can get 200 million [M2M users], I’ll take a buck a meter,” Horn said. “It’s a much leaner business. If I had to go out and build a new network to do it, it wouldn’t be worth it.”

Ultimately adding any number of M2M devices to the network costs T-Mobile very little. It’s mainly a wholesale business model, so T-Mobile doesn’t have to acquire individual customers or activate individual connections—it just ships bulk SIM cards. It also doesn’t incur customer care or billing costs. And most importantly, it doesn’t have to make any additional network investment to support those millions upon millions of devices, Horn said.

T-Mobile would have to well exceed that 4-to-1 machine-to-human ratio before it would even contemplate adding 2G capacity to the network, Horn said. The vast majority of M2M apps work in the gaps of the GSM network and have no effect on call capacity over GSM or data capacity on EDGE in the typical cell, Horn said. The one caveat to that business model is the eventual deployment of higher-bandwidth M2M applications such as on-board vehicle entertainment systems. But Horn said those new apps will have different usage and revenue models and run on a different network, namely T-Mobile’s high-speed packet access + network. An application that is downloading gigabytes of data each much will have a data plan resembling that of a smartphone or laptop card. “Eventually, yes, you may need to add capacity for those types of apps, but then you have the revenues to justify that build,” Horn said.

T-Mobile: M2M connections to outnumber humans 4-to-1