ETNO views on M2M
This ETNO position was drafted following a request from the BEREC M2M Project Team, further to a meeting held with ETNO in June 2014. The topic of M2M spans several ETNO WGs (NANI, DI and SPEC) and as such, an informal expert group was formed within ETNO to address the topic, with input from the 3 WGs.
1. Ensuring the growth of Machine to Machine in Europe
- To ensure growth in Europe, regulators need to understand the global nature of the Machine to Machine (M2M) services. Although some services are sold at national level, the majority are sold cross-border.
- Service Providers who have a device with potential global distribution have the need for a well-tested scalable and cost-effective platform that allows their devices/services to work in a proper manner in all places where there may be demand. An economically viable platform to deploy products globally, including in Europe, represents huge potential for European businesses. So far, International Roaming and Embedded SIM are platforms adopted by the industry for deploying M2M services cross-border. In this context, regulators should avoid prescribing the adoption of one specific solution.
- To enable growth, governments should ensure that policies and regulations are clear, flexible, balanced and technology neutral. Regulators should let the ecosystem decide which business models works and avoid mandating (either directly or by the inadvertent application of current regulation which is not intended to regulate these services) any specific technical solution.
- Regulation has to take into account the emerging nature and specificities of M2M services, enabling flexible interpretations of the current regulations so as to enable European players to avail of the opportunities that M2M can offer, and at the same time, enable the proper remuneration of the resources used for the delivery of M2M services.
2. Market, main actors and market forecasts
Globally, M2M connections account for 2.8% of total mobile connections (195 million) in 2013, while the ratio in Europe is 5.1%. Overall, the Nordic countries are leading worldwide. However, while the global M2M market is growing at almost 40% per year (38% CAGR between 2010 and 2013), growth in Europe has stalled at 28.6%.
The main applications developed today in Europe are related to smart meters, smart grids, smart cities. Current and possible applications of M2M solutions allow for the provision of cost effective high quality consumer and businesses oriented services in various vertical sectors, from the automotive industry to utilities or mobile health uses (clinical remote monitoring and assisted living).
In particular, M2M services for connected cars may have a significant impact on transport systems and logistics. Smart fleet management and SVR as well as car sharing and smart parking solutions have been developed, allowing an increase in the overall use efficiency.
Other significant applications fields are utilities, with dedicated gas metering solutions that allow automated meter readings (applied also to water metering) and vending machines, which permit cost reductions and better user experience as well as boost marketing intelligence.
The GSMA estimates that by the end of 2014, there will be 250 million M2M connections worldwide, and that this number will continue to grow rapidly.
The M2M value chain involves several players in the development and delivery of M2M services:
- Hardware Vendors develop and maintain the needed HW components for M2M devices, accounting for 20 - 25% of the whole value generated.
- Telecoms operators intervene both in the ‘bit pipe’, providing connectivity by means of SIM and access to mobile networks (APN) and in the ‘smart pipe’ where they enable the services through cross vertical asset management platforms and programming tools.
- System integrators and vertical solutions providers play a major role in the development of applications and custom solutions, generating up to 60% of the value produced in the whole chain. However some players (including telco operators) can play the role of end-to-end solution providers over nearly the whole value chain.
3. The distinctive nature of M2M services
M2M services are different to traditional telecommunications services and to ensure growth, regulators need to understand these fundamental differences:
- M2M services are those delivered by Service Providers via devices to a defined closed user group where open Internet and any-to-any communications are not the primary purpose of the service; mobile connectivity is utilised to deliver value-added functionality. In some cases those value added services might not even qualify as telecommunication services as the service sold might no longer consist in the conveyance of signals over the network.
- M2M services are based on data communications (e.g. point to point) and possibly on a limited voice access, as a voice communication to an identified service point (e.g. call center) might be an additional feature of the service. The M2M device can be human or machine activated. The end user of the service, if any, is in most cases not identifiable by the mobile operator. As a result, M2M services typically develop traffic which is very different from human services traffic, both in terms of type (usually data, and only in exceptional cases voice) and volume. Certain devices use a very limited amount of traffic at periodic intervals and in some cases no traffic at all, only signaling. The average revenue per M2M connection will typically be significantly lower per connection than traditional voice and messaging services.
- To reflect these specificities, M2M contracts usually foresee a fixed fee for the service and a variable amount for the traffic.
- M2M services are either sold at national level or cross-border. When services are sold cross-border, in most cases international roaming/permanent roaming is used. International roaming and permanent roaming are a platform that can facilitate the development of M2M services in Europe, as it provides for pan-European, well-tested and scalable solutions on a pan-European basis. International Roaming and permanent roaming have been consistently adopted to deploy services in Europe and worldwide, such as for automotive and asset management services. Solutions other than roaming, which leave flexibility to the customer to select the communications provider, are represented by local solutions which have already been deployed in some areas but are still in their infancy.
- In most cases additional regulation will not be necessary. On the contrary, enabling flexible interpretations of current regulations would enable the development of the market and the take-up of services. Most M2M services will be regarded as private services (i.e. ‘non-public services’, or services ‘not offered via a public network’) and should consequently not be subject to regulatory obligations, which are applicable to public services only.
4. Potential issues
Proper remuneration of visited network
M2M services differ from other roaming services to end users. The current EU roaming regulation doesn’t recognise the traffic and volume characteristics of M2M services; certain devices use a very limited amount of traffic at periodic intervals and in some cases no traffic at all, only signaling. The suitable model will have to ensure the visited network receives sufficient remuneration and, at the same time, safeguards the reasonable and economically scalable roaming access of pan European M2M devices to the visited networks. There is also the risks of non-agreed permanent roaming which might be proposed by some players to national operator’s customers for non M2M services. Such possible arbitrages would strongly destabilise national markets. Consequently M2M should not be legislated in the same way as other (human, that typically are not in permanent roaming) roaming services and should not be covered by the roaming regulation.
In addition, there is a need for an appropriate taxation policy in relation to M2M services. For example, tax or fees structures with high ‘per-device’ costs will result in the slow national development of M2M.
Potential problems related to the availability of resources in the medium to long term, with regards to numbering
ETNO considers that any issue related to the availability of resources in the mid to long term will depend on a number of variables such as the nature of the plan, the uptake of full IP-based technology and the expected growth of each and every M2M application that uses these resources. As a result, the benefits of making structural decisions with regard to each individual plan and the actual market demand should be carefully assessed before revising those plans, given the impact and costs incurred for the industry at large and the fact that such revisions cannot be undone.
For example, ETNO notes that the national portion of the international E.164 numbering has been extended to 14/15 digit numbers in several European countries to meet the maximum capacity of the E.164 recommendation only in countries that identified such a need. Such decisions were made on a country-by-country basis because of an expected shortage of mobile resources for two reasons: a) the length of the mobile ranges had originally been defined to accommodate the needs of human-to-human conversational services (typically 11 to 12 digits) and b) the national demands of some M2M mobile based applications would exceed the capacity of these mobile number ranges. Those were national decisions which do not prejudge that similar choices are necessary in other countries where the context can be different both in terms of capacity and market demand.
On the other hand, the E.212 identification does not have such shortage since IMSIs already use the full range permitted by the standard (15 digits). In particular, ETNO does not consider any structural changes to such national identification plans to be appropriate and considers that ITU-T current management rules described in the related Recommendations should be maintained. These ITU-T management rules include, in particular, assignment criteria based only upon explicit needs associated to technical reasons. A deep analysis of the evolution of numbering plans for innovative services, including M2M services, is contained in ETNO Reflection Document 399 on “Draft ECC Report 212: Evolution in the Use of E.212 Mobile Network Codes”, here.
Potential problems or barriers to the development of M2M services related to the use of spectrum.
In relation to spectrum use, ETNO believes that an issue could emerge regarding the expiration of licenses and the phase-out of 2G networks. In fact, most operators in Europe use 2G networks to deliver M2M services, but as 2G networks could be phased-out and licenses expire around the EU, this could impact the delivery of M2M services whose contracts often have 15 to 20 years duration. The eventual reprogramming of the service would require alternative equipment. All the related costs should be considered.
Adherence to specific regulation
For some M2M services it makes, from a practical point of view, no sense to have to adhere to specific regulation. Certain telecoms specific regulations should, preferably, be applied differently to M2M services than to traditional services. Some examples:
- Number portability. In general, this is not relevant as a means to stimulate competition within M2M services. However, from a strict legal point of view it is not evident that this obligation is waived. Compliance is difficult if the device is permanently roaming and porting needs to be made according to each visited country.
- Access to emergency services: devices are not likely to generate such calls.
The current interpretation and application of sector specific telecommunications legislation on M2M services varies from one country to another within Europe. This may hinder the ability to provide pan-European M2M services. A flexible approach and harmonised interpretation of current regulation would be welcomed by the industry in order to scale the development of machine to machine services.
Policies should promote standardisation
Standardisation and interoperability of technology standards is key to promote scalability of M2M communication and IT sector policies should support the development of sustainable M2M ecosystems through standardisation (eg. E-SIM, as proposed by GSMA and ETSI) with the aim of promoting economies of scale.
 Compound Annual Growth Rate
 Source: GSMA Intelligence. Excludes computing devices in consumer electronics.