Four billion mobile subscribers. But is the vision slowing?

Just in time for the annual Mobile World Congress in Barcelona, the GSM Association has published a new milestone – the number of mobile subscribers in the world has just passed the four billion mark. That’s a pretty amazing number – equivalent to almost 60% of the world’s population. It seems that the demand for mobile connectivity is unstoppable. The same report predicts that the number of subscriptions will rise to six billion in 2013. That’s one phone for every person over the age of ten.

With numbers as spectacular as these it’s easy to sit back, smile smugly and give ourselves a well deserved pat on the back. But there’s another school of thought that says is six billion just being complacent? The insatiable desire for personal connectivity will almost certainly deliver the six billion, but what about the market for mobile subscriptions for machines. M2M has always been touted as the next great marketplace for mobile connectivity. The GSM Association acknowledges this with a new initiative. But if we look at numbers of machines, they’re an order of magnitude greater than people. Some years back Deloitte suggested that there would be 60 billion machines in existence by 202. If just a small percentage of these are connected, then the six billion target begins to look decidedly unambitious.

Obviously we are never going to want to connect every one of the potential sixty billion machines that are around us. I personally have no desire to have my toaster, electric toothbrush or razor connected to the internet (although that may change if consumer health product designers get their heads around good product design – more of that in one of my future blogs on device design). For that reason the connection levels for machines will never reach the levels that we now expect for connected humans. However, the cost of a connection is going down, which has to be good news for the future of the M2M (Machine to Machine) market.

Some sections of the market are already progressing well. In the US, GM’s Onstar program is adding connectivity to a good percentage of their new vehicles. Fleet managers are increasingly seeing the advantage of knowing where their vehicles are and E911 and eCall initiatives are likely to see us move towards the point where a cellular data modem becomes a standard fit in every new vehicle.

Telematics has been a key first entrant in M2M and remote monitoring, not least because it can justify the cost of the hardware and services. Conversely, that cost has been a major barrier to other usage models. However, over the past few years the cost of hardware has started to plummet.

A few years ago it cost around $100 to provide the hardware to connect a machine up to a cellular network. Today, riding on the back of low cost chipsets, the bill of materials for a GPRS modem has fallen below $10. The appearance of software SIMS will knock that down even lower, as well as helping to lower the network’s provisioning cost. That means that a cellular modem link will soon reach a price point where it becomes feasible to integrate into large numbers of consumer products.

At the same time there are an increasing number of business models that make this attractive. Already we’re at a point where insurance and maintenance contracts can be the more profitable side of selling major consumer AV and white goods. Adding a monitoring link to these makes the service and maintenance more cost effective, potentially paying for the cost of hardware and service provision

Coupled to this, growing environmental concerns over energy usage are driving governments and manufacturers to look at improving energy efficiency. To do that effectively means a return path from electrical products or smart meters to allow dynamic control. If cellular M2M can reach the right price point, it’sanother massive market.

A third area is personal health and fitness devices. Although many of these will probably connect as accessories to a mobile handset, there is still a healthy market for independent devices, particularly where they are aimed at a mobile lifestyle.

None of this will happen just because the hardware is getting cheaper. It also needs network operators to build networks capable of a much higher number of subscribers, but accepting the fact that most of these will never transmit more than a few bytes of data every day. And to accompany this it needs a constructive approach to M2M data tariffs that match the price reductions of the hardware, such that it becomes cost effective for machines to have a cellular link. And it needs service applications that save money and time for consumers and businesses.

If the networks can do this, then the GSM Association needs to think again about the future. Add machines to the current four billion subscribers and we need to start to consider how soon we can reach ten billion subscribers.