2G or not 2G, That is the Question
As the mobile world focuses on the future, the very real and valuable present day of machine-to-machine (M2M) applications is at stake. The mobile industry’s concentration on fourth-generation networks, devices, applications and spectrum efficiency threatens to overlook the protection of revenue-generating M2M applications.
The fact is that M2M applications are content to live in a 2G mobile world, and that’s where most of the investment in the infrastructure and devices that support them has been made. These applications include important point-of-sale and mobile payment applications that rely on 2G M2M networks to run efficiently.
However, M2M apps, including those mobile payment and financial apps, are in jeopardy with the looming deadline for the “sunsetting” of second-generation networks in the US - shutting down 2G networks and transitioning customers to devices that work only on upgraded 3G and 4G networks.
Shutting down 2G networks makes sense in terms of cost savings and the demand for higher network speeds, not to mention the need to free up valuable spectrum for next-generation services. But the practice largely ignores the enterprise providers of M2M services, and the cost and complexity of migrating those M2M platforms to a new network.
Millions of M2M devices are connected to 2G networks. When mobile operators shutter their 2G networks - AT&T recently announced they its 2G sunset will be completed by the end of 2016 - many M2M solution partners may lose their ability to effectively provide applications before they can properly ramp up to 4G or beyond. Point-of-sale devices that rely on 2G network connections will be stranded when those networks are shut down. This is of particular concern in the payments sector, as companies that use M2M for payment applications find their service providers shutting off the 2G access that allows those payment applications to run. The migration to next-generation networks will force M2M providers to make costly investments to upgrade.
There are alternatives to the absolute shutdown of 2G networks that would protect M2M customers and services in the long term. Network operators could choose, for example, to re-farm some of their spectrum to next-generation networks, and keep a portion of the spectrum dedicated to M2M, as T-Mobile is doing to protect its M2M customers over the long term. Even a relatively small fraction of spectrum can support hundreds of millions of M2M devices.
That’s why companies like end-to-end wireless transaction provider Apriva opted to utilize the RACO Wireless/T-Mobile 2G network partnership to ensure reliable service for its customers using 2G POS devices for the foreseeable future. Continued support of 2G means uninterrupted service, continued growth, and peace of mind that you don’t need to redesign your M2M module in the short term.
Industry research backs up the need to provide long-term support for M2M services on 2G networks. Consulting firm Analysys Mason recently forecast that the number of M2M device connections will grow from 62m in 2010, to 2.1bn devices in 2020, for a 36 per cent year-on-year growth rate. And the range of potential applications for M2M technology - along with the number of vertical industries in which those applications can save money, resources and time - gets broader every year.
Obviously, mobile operators need to use their spectrum more efficiently. In a recent report, The Yankee Group characterized 3G/4G evolution in the M2M sector as “a delicate issue” given the choice carriers face: do they continue to provide 2G network coverage, or do they migrate M2M traffic to 3G and 4G to increase overall spectrum efficiency?
In some cases, migrating M2M services to next-generation platforms is justified - such as when the applications in question are focused on video, in scenarios such as residential security or medical diagnostics. In those applications, using more spectrally efficient 3G networks make sense.
But the vast majority of M2M applications simply don’t require spectral efficiency: for 99 per cent of them (including POS and mobile payments apps), second-generation networks are perfectly acceptable. And by migrating those applications to 3G and 4G systems, carriers face the prospect of creating higher cost for next-generation M2M devices, that potentially threatens end-user acceptance of the applications.
What makes M2M profitable is long-term usage - devices that are deployed and sit there for a very long time supporting the applications they’re deployed to support. If solution providers have to replace devices repeatedly, that will destroy M2M’s ROI for the vast majority of applications. For the thousands of other M2M applications now being used or not yet envisioned - applications concerned with simple asset management or tracking, that require very little bandwidth - second-generation capacity remains sufficient. Carriers can re-farm the majority of their 2G spectrum for 3G and 4G, but they must leave enough to continue to support the millions of deployed devices on second-generation networks.
The irony of those who argue against continuing to support 2G networks is that once a network is installed, it costs more to tear it out than to leave it. The issue is that spectrum is valuable, and carriers want applications off their 2G spectrum so that they can get more calls and more data on the same spectrum, using next-generation technologies.
The fact is, again, that carriers can have most of that spectrum for consumer smartphones. The remaining 2G spectrum required to support M2M devices will use little data (one smartphone can use more data than 10,000 M2M devices), so there’s no reason not to leave a little behind to support M2M.
The ability of M2M to be a reliable, long-term provider of revenue for carriers is indisputable. In a volatile world of ever-changing consumer behaviour and spending cycles, M2M applications are rock-solid. The challenge now is for carriers to recognize the value of M2M services and - like T-Mobile - take steps to support the 2G networks that are so critical to their business value.
John Horn is president of RACO Wireless