Of all current generations, LTE will be the dominant machine-to-machine (M2M) technology in the long term, accounting for 212 million connections in 2021.
The increasingly competitive nature of the M2M market demands forecasts with greater segmentation and more accuracy. With the industry enjoying more transparency, as an increasing number of carriers report on M2M subscriptions, Ovum has taken the opportunity to overhaul its forecast methodology.
Our Cellular Machine-to-Machine (M2M) Forecasts: 2016–21 incorporate data available from 589 carriers at a country-by-country level, split by technology family (i.e. 2G, 3G, and 4G). The forecasts cover the traditional cellular M2M market only, so NB-IoT data is not included.
During the five-year forecast period, M2M service revenues will grow at a CAGR of 13.3% to reach a global annual total of $67bn in 2021. The greatest value contributions will come from Asia & Oceania, North America, and Western Europe (worth $22bn, $16bn, and $14bn, respectively, in 2021), but revenues will grow at the fastest rate in the later-to-start markets of the Middle East and Africa, where the CAGR for the region will be 16.7%.
In 2021, 2G and 4G will be at a point of parity, with 212 million M2M connections each; 3G will have 172 million. Yet, by this time, 2G and 3G will be plateauing, while LTE will be firmly in ascendance.
Machine-type connections need to stay alive for many years and are not transitioned to new air interfaces as a matter of course. Doing so breaks the economics of deploying fully autonomous nodes. Instead, M2M contracts typically reach the end-of-life stage before any migration occurs. Consequently, 2G, specifically GSM, will persist for far longer in M2M.
Large carrier groups with established M2M businesses will not seek to switch off 2G until 2020 – and for some this will not be until 2025. But this decision is not merely for the sake of legacy support: 2G M2M connections will continue to be added, because 2G still represents the most affordable and internationally available form of coverage.
WCDMA will be the least successful and least enduring M2M bearer, but it will be useful as a default for carriers and service providers that have little or no M2M business today. Although cost-effective for a time, it has neither the flexibility of LTE, nor the economies of scale inherent in GSM and NB-IoT.
LTE is an exciting technology for machine communications, because unlike 2G and 3G it is “tunable.” LTE was designed for high-speed data, but it need not be used at its full spectrum ability. With Cat-0, Cat-M, and NB-IoT specifications, data communications for a range of throughput requirements can be affordably provided over – so of all current generations, it is LTE that will be the dominant M2M technology in the long term.
Straight Talk is a weekly briefing from the desk of the Chief Research Officer. To receive this newsletter by email, please contact us.