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LTE for M2M: The Long-Term Opportunity Begins Now
At first blush, Long Term Evolution (LTE) seems to have everything that machine-to-machine (M2M) users don't need: a hefty hardware price premium in a sector that's notoriously price-sensitive, band fragmentation that adds cost and complexity, spotty coverage for applications that often are mission-critical and far more bandwidth than most applications will ever need. That assumption is correct, but it also overlooks all of the reasons why so many operators, vendors and end users are already exploring LTE for M2M and, in a few cases, using it.

The M2M sector spans a wide variety of telematics (where the host device is portable or mobile) and telemetry (where the device is stationary) applications and services, including tracking shipping containers, finding lost pets and wandering Alzheimer's patients, smart grid, pay-as-you-drive insurance, subprime auto lending and backhaul for digital signage and video surveillance cameras. Thus M2M is an enormous potential revenue opportunity for LTE module vendors and mobile operators. M2M also is attractive to operators because its customers typically sign contracts several years longer than consumers and other business users, and because a single sales effort can yield hundreds, thousands or hundreds of thousands of revenue-generating devices, such as in the case of automotive M2M.

A couple of factors make LTE intriguing for M2M applications. One is that its spectral efficiency and other attributes reduce the operator's cost of delivering service below that of incumbent technologies such as GPRS, CDMA2000 1X and UMTS. That should help operators turn a profit on the low-ARPU, "ping-and-poke" applications that historically have been the majority of M2M. Another reason is that LTE module prices have already declined significantly to as little as $80. One module vendor believes prices could fall to $40 by late 2014. A major pan-European operator expects a 20 percent annual decline in LTE module prices.

Some users are considering LTE as a form of future-proofing, especially those whose devices need to remain in the field for five, 10 or 15 years. For them, paying a premium for LTE hardware could be less expensive than replacing 2.5G modules when operators shut down those networks. Going to 3G instead might appear to be a less expensive way to avoid the sunset risks that come with GSM, GPRS and 1X, but some operators could shut down their 3G networks sooner than expected. Skeptical? Look at Telstra, which closed its CDMA EV-DO network in 2008 in favor of UMTS/HSPA. Or look at all of the operators and regulators eyeing refarming as a way to free up enough spectrum for 4G.

This report is based on interviews with 17 vendors and service providers from around the world, including AT&T, T-Mobile USA, u-blox and Vodafone. For most of these companies, LTE M2M is a roadmap item at this point rather than a commercial offering. So to encourage them to speak freely about their strategies and market outlook, Heavy Reading Insider offered many of them the option of using their input on background. They also had the option of attribution when discussing topics that were already public or that they were comfortable disclosing for the first time.

LTE for M2M: The Long-Term Opportunity Begins Now identifies and analyzes these and other key issues affecting M2M adoption of LTE through 2015. It explores the major drivers of and barriers to adoption, such as bandwidth requirements, as well as industry strategies for reducing hardware premiums at a faster rate than volumes alone would enable.

Sample research data from the report is shown in the excerpts below:
Table of Contents (4gltei0313_toc.pdf)
As a brand-new technology, LTE carries a hefty price premium simply because it doesn't yet have the sales volumes necessary to start riding down the cost curve. And even when it does, that gap won't necessarily narrow substantially right off the bat. Instead, it will remain significant through at least 2015 because prices for 2G, 2.5G and 3G modules will continue to decline and because some vendors will continue to develop new module products that use those legacy technologies. Thus legacy technologies will remain attractive to some M2M users. The following excerpt compares LTE M2M modules with other technologies. This is information is based on input from mobile operators, module vendors and other ecosystem members.
[click on the image above for the full excerpt]
Total pages: 12
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