Capturing a share of the M2M market How can Australian companies participate in this growth sector

1
Capturing a share of the M2M market How can
Australian companies participate in this growth
sector?
Presented by Daryl Chambers April 2004
2
Contents

• What is M2M?
• Who are the main players in Australia?
• Australian market status
• The M2M Developer market
• Key markets in Australia
• Business models for the M2M market
• QA

3
What is M2M

• M2M is short for machine-to-machine
• Wireless M2M relates to the connection of
  machines to other machines or people wirelessly
• Wireless connectivity can be by cellular, radio,
  satellite or any other wireless means
• Here I cover cellular M2M communications

4
Who are the main players

• Operators
• In GSM/GPRS Optus/Vodafone/Telstra
• In CDMA / 1x / EV-DO Telstra / Hutchison
• Cellular M2M Hardware vendors
• Main GSM suppliers include SonyEricsson, Wavecom,
  Motorola
• In CDMA - Maxon and Kyocera
• Developers
• There are over 500 developers in Australia who
  develop applications to connect wirelessly
  to/from machines
• Almost all are developers not end-customers for
  the applications
• End customers
• Typically these are the commercial users of M2M
  applications

5
Key Enablers

• Packet data over cellular
• Either GPRS or CDMA 1x
• Allows always-on connection
• Has created a direct competitor to many fixed
  wire services
• Airtime tariffs
• Packet data cost for M2M applications has fallen
  to levels far below fixed line
• Mobile M2M - SIM card, monthly connection and
  1M/byte of data for 5-10 per month
• Fixed M2M - 20 just for a fixed phone line
• M2M typically is a low bandwidth user (up to 1
  m/byte per month)
• GPRS/1x provides low cost airtime for M2M
  applications
• Hardware costs are falling
• GPRS module cost dropped from US100 in 2002 to
  US65-70
• Module is typically 25-50 of a hardware
  application

6
Status of Australian M2M Market

• M2M market has been in existence since 1996/7
• Growth rates typically at 100 per year (from low
  base)
• Typical developers have been small cottage
  industry companies building specific
  applications for customers
• Market is now emerging into the mainstream
• In 2004 many developers are selling 000s of
  units
• Export orders are starting to come in for some
  developers
• Large end-customers are moving to commercial
  roll-outs
• Some operators strongly support the segment to
  win data traffic

7
M2M Australian Growth
8
Is this growth real?

• Forecasters predict continued double or triple
  digit growth over the next 4-8 years
• Many forecasters expect global M2M user numbers
  to exceed that of phone users worldwide within
  this decade 
• Nowadays there is much talk of B2B and B2C
  applications, but the key Internet relationship
  of the future will be the M2M relationship from
  machine to machine.
• Dr Volker Jung President BITKOM, the German
  Association for IT,T New Media
• Previous CEO of Nokia recently stated a belief
  that cellular M2M connections would outweigh
  voice connections before the end of this decade,
  by a factor of 8!

9
Opportunities for Australia

• M2M market is still in an emergent phase, locally
  and internationally
• Australian developers are at forefront in some
  application areas
• There is a growing understanding among customers
  of the benefits of wireless
• Cost
• Convenience
• Often better performance/ reliability
• Some of the largest global opportunities are in
  Asia where developers are behind Australia

10

• We have talked about the M2M market status, now
  lets look at the Developer market

11
The M2M Developer Market

• Typical module characteristics
• General development guidelines
• Typical development lead times
• Key markets in Australia

12
Typical M2M Modules

• Modules need to be fully integrated into the
  developers application and are useless
  stand-alone
• Some Key Features
• Small size
• Multi-band
• Able to send and receive data by packet data,
  SMS, CSD, HSCSD,
• Can handle voice and fax calls
• GPS interoperability
• Broad operating temperature range
• Some also include
• Embedded TCP/IP stack
• Embedded controller for hosting applications
• Additional PINs for I/Os

13
Typical M2M Modems

• Modems are really modules with a simple
  application to make them into a modem that can
  connect externally to a hardware application to
  wirelessly enable it
• Some Key Features
• Multi- band
• Instant and cost effective solution with
• RS232 serial modem or USB modem or ethernet
• Standard connectors for power, antenna, phone
• Integral SIM card reader
• Support data, fax, SMS and voice and packet data
• Easy to integrate

14
Some General Development Guidelines

• Which M2M product should a developer work with?
• Several factors to consider before selecting the
  M2M product to develop with including
• Time to market
• Installed base of applications to be converted to
  GPRS/1x
• Volume
• TCP/IP
• Price
• Temperature Range

15
Development Guidelines what to use?

• Time to market
• Where time to market is critical to the developer
  consider developing with an external modems
• Pick a modem/module with in-built TCP/IP
• Installed Base
• If developer has installed application base to be
  converted to GPRS/1x (e.g. today uses wire-line
  or private radio) consider external modem
  connected to existing hardware
• Volume
• Where application sales volume exceeds 500 per
  year then consider developing integrated product
  with embedded module
• Cheaper hardware cost
• Higher development costs
• Longer lead times

16
Development environment

• AT commands
• Cellular M2M modules and modems are just another
  type of modem
• Use standard AT commands
• Manufacturers have created unique sub-sets of
  vendor specific commands to access various
  functions
• Developers run their applications in almost all
  popular programming languages including
• .NET
• Windows CE
• Linux
• ANSI C
• Manufacturers have developed software coding
  tools to simplify application development for
  devices with on-board embedded memory
• Examples include M2mpower, MUSE

17
Typical development cycle Company with an M2M
business idea

• Entering market for the first time
• Estimated Development Time to Commercial Sales
• 8 12 months

18
Typical development cycle Company with existing
M2M business using fixed or other wireless systems

• Already develop fixed line M2M applications
• Estimated Development Time to Commercial Sales
• 5-8 months

19
Key markets

• Security
• POS
• Telematics/tracking
• Utilities
• Remote telemetry

20
Security Monitoring

• 5-6 companies provide hardware and central
  monitoring station equipment/software for GSM
  based wireless monitoring
• Often used as a back-up to fixed line monitoring
• Also used where fixed lines are not convenient
  such as ATM machines, remote locations
• Push in 2004 by several suppliers to roll-out a
  GPRS based always on monitored service to
  compete with fixed line monitoring
• Could open the entire market to wireless
  suppliers
• Current volumes (Aust/NZ) estimated at 1000/month
• Expected to grow to 5000/month with GPRS launch
• New opportunity with CDMA for video monitoring

21

• SCSI launches its DirectWireless network and
  Guardcell at the Security Show on 28 April, 2004.
• The DirectWireless network is a Virtual Private
  Network operating within the Optus GSM/GPRS
  network, dedicated to high security alarm
  monitoring
• DirectWireless Guardcell will facilitate wireless
  alarm monitoring to AS2201.5-1992 Class 4 and 5
  for alarm transmission services
• Benefits
• Cost
• Coverage versus Securitel
• Harder to corrupt and better redundancy options
  
• May be first in world to deliver true GPRS
  security monitoring

22
Five POS opportunities

• Cellular EFTPOS models
• E.g. Keycorp and Akyman
• Fixed but wireless EFTPOS terminals connected to
  banks
• E.g. Keycorp, Akyman
• Opportunities to connect older fixed EFTPOS units
  from ISDN/PSTN to wireless
• E.g. Keycorp, Hypercom, Braintree, Fox
  Technology,
• Connect existing fixed line ATM transaction
  terminals to a GPRS network
• E.g. Braintree, Akyman
• Increase in provision of information through POS
  information and loyalty programs
• E.g. S4, Fox Technology
• Current volumes (Aust/NZ) estimated at 500/month
  but expected to grow to 2-4000 /month in 2004

23

• Braintree Communications has trialed its wireless
  EFTPOS gateway with the Commonwealth Bank and
  retail customers using GPRS connection
• Uses Braintree's GPRS terminal adaptor to send
  EFTPOS transactions from existing EFTPOS
  terminals over GPRS network into the CBA's host
• Converts EFTPOS transaction from fixed wire to
  mobile networks giving the combined benefits of
• Much cheaper tariffing without the monthly line
  rental
• Greater mobility
• Easier terminal fleet management
• Expected roll-out to be in the 000s per quarter

24
Telematics and vehicle/asset tracking

• Many developers work with cellular M2M to track
  vehicles/assets
• Over 20 developers in Australia/NZ
• Some are replacing old proprietary radio systems
  as CDMA and GPRS have better coverage and cheaper
  and better featured
• Expected to grow to 2000/month in 2004
• One specific area is embedded systems in vehicles
  (telematics)
• Services provided include report of accidents,
  support to drivers (e.g. to unlock car) and to
  offer value-added services
• Current volumes (Aust/NZ) estimated at 600/month
• Market is expected to grow to 2000/month with
  GPRS and increased uptake by insurers
• Several major car brands are providing this as a
  feature in high end vehicles

25

• Holden sells a telematics solution as a standard
  add-on accessory when ordering a new car,
  providing
• Emergency service support
• Providing content to assist the driver
• On-board assistance 24 hours, 365 days of the
  year
• System uses GPS and GPRS to provide advanced
  satellite car monitoring
• Uses include
• If you lock your keys in your car Holden Assist
  can unlock your car remotely
• If your battery is low the car notifies Holden
  Assist who will contact you
• In an emergency, press the red SOS button to
  contact the National Emergency Response Centre
  (NERC).
• In the event of a crash, if an airbag has been
  deployed, the system will automatically contact
  the NERC.
• If you need roadside assistance, press the
  "Holden Assist" button
• If your car is stolen Holden Assist can locate
  and track your stolen car

26
Utility monitoring

• This was the first M2M segment to take off in
  Australia
• Uses GSM wireless to monitor electricity, gas,
  water
• Use for control/billing to larger industrial
  customers
• Gives real time usage and billing
• Use for monitoring of utility networks to ensure
  smooth operation
• E.g. sewerage stations, power sub-stations, power
  lines
• Installed base estimated at around 50 000 users
• Sales volumes (Aust/NZ) estimated at
  500-1000/mnth
• Expect to grow to 2-4000/month in 2004
• GPRS services are rolled out
• Lower cost
• Better reporting

27

• Energy Intellect (Ei) have developed a two-way
  communications platform linking energy suppliers
  with customer sites
• Their advanced utility and commercial/industrial
  AMR devices add immediate value to any smart
  meter application.
• The platform provides real-time, two-way
  communications enabling energy suppliers to
  maintain connectivity with customers, offer new
  services and work collaboratively to manage
  customer load
• Ei has a range of GPRS wireless remote
  communications devices, which provide
• for any commercial/industrial AMR
• or load control requirements

28
Remote telemetry

• Covers a cross section of applications including
  
• Vending Machine monitoring
• Weather stations
• Small unmanned airports
• Farms and irrigation
• Rail lines and roads (including road
  signage/messages)
• Gas tank monitoring
• Children's rides in shopping malls
• Newspaper sales stands
• Current volumes (Aust/NZ) estimated at
  500-1000/month
• Expected to grow to 2000/month in 2004/5
• Already 100 developers working in this area on
  targeted applications

29
Coca - Cola Vending Machines

• Coca-Cola have over 60,000 vending machines
  wirelessly connected primarily in New Zealand,
  Australia, U.S.
• Based on technology from a small NZ company,
  Harvest, which has now been acquired by CCA
• Provides intelligent vending technology and data
  management support to The Coca-Cola Company
• Monitoring of vending machines (vandalism, power,
  problems)
• Sales monitoring
• Support for distribution (route planning)

30
Business models for the M2M market

• ASP opportunities
• Enabling technologies
• Export opportunities

31
ASP Model

• Developer bundles in hardware, services, airtime
  in one fixed charge per period
• Brands the service, not the components
• Takes responsibility for end-to-end process
• Can add margin without price visibility (e.g.
  airtime tariff becomes meaningless)
• Areas where this has started
• Security monitoring companies offering wireless
  security bundles
• Vehicle tracking companies offering the response
  centre servcie bundled with the hardware
• Vending machine operator offering support
  services to machine owners

32
Enabling Technologies

• The cellular operators have a number of tools to
  support for wireless services
• Premium SMS is a micro-payment mechanism
• E.g. 1.50 for a soft drink, 0.50 for a local
  surf report
• Location Based Services can be generated from
  cell ID (and from GPS) and provided to users
• Wholesale and Aggregation tariffs
• Blockers
• Operators take too large a slice of pie
• Not worth using premium SMS as they take 25-50
  of revenue
• Too expensive for fleets to contemplate using
  operator based LBS when access costs are in line
  with SMS
• Aggregation and wholesale is still in infancy in
  M2M market

33
Thank - you
34
QA
35
Glossary of Terms

• GSM Global System for Mobiles
• GPRS - General Packet Radio Service
• CDMA Code Division Multiple Access
• 1x Packet data over CDMA
• M2M Machine-to-machine