Market Insight

The MVNO concept is far from dead in the M2M market…Panasonic launches M2M MVNO service

March 11, 2015  | Subscribers Only

Sam Lucero Sam Lucero Senior Principal Analyst, IoT Platforms

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Key Points

  • Panasonic announced the launch of its own M2M-oriented mobile virtual network operator (MVNO) connectivity service at the Mobile World Congress (MWC) 2015 tradeshow.
  • Cellular connectivity will be offered for Panasonic devices. At present, the company has not revealed any plans to offer connectivity to non-Panasonic devices.
  • Connectivity will be offered using the Orange network to start, with other operator partners to be announced in the future.
  • The first device connected via the Panasonic MVNO service is the Nubo 4G monitoring camera. Other connected devices on display at the MWC includes Panasonic projectors and the company’s heating and cooling units.
  • Panasonic also announced two Remote Equipment Monitoring (REM) services targeting Panasonic projector and display devices, respectively.

Our Analysis

M2M-oriented MVNOs, like Numerex, Wyless and KORE, started forming in the late 1990s and 2000s because of the significant differences between the needs of the M2M market and the consumer-oriented mobile phone market. In particular, MVNOs offered tariffs and connection management capabilities that traditional mobile operators were not willing to offer except for the very largest and high profile accounts (e.g GM OnStar).

However, by 2010 it looked like the MVNOs’ window of opportunity in the M2M market was closing. Cellular M2M was beginning to receive enough attention (and generate enough revenue) that traditional operators became interested in addressing the market directly, rather than through wholesale arrangements with the MVNOs. Many large operators established M2M business units and created their own in-house M2M connection platforms (MCPs).  Even smaller operators enhanced their M2M resources and positioned themselves to address the market‘s unique customer requirements more efficiently, thanks in large part to third-party MCP provider Jasper (and, eventually, others).

Many market participants assumed these developments would erode the value proposition of MVNOs in the M2M market. As such, MVNOs in the M2M market seemed destined to face the same competitive challenges from the traditional operators as did other MVNOs competing in the mobile phone market.

However, as of early 2015 the MVNO concept in the M2M space is still thriving, though it has clearly evolved from the traditional pure re-seller arrangements typical in the last decade. Certainly, many MVNOs in the market have recognized the need to consolidate and pool their resources in order to compete against the larger operators. Most significantly, KORE acquired RACO Wireless in December 2014, creating a supersized MVNO that now provides connectivity to 3.2 million devices and manages another 500,000 under its agreement with Audi.

In addition to pure MVNO consolidation, there has been vertical integration in the M2M value chain. Panasonics’ MVNO launch is a key example of this trend. At the component level of the value chain, two of the three leading cellular M2M module vendors have also acquired MVNO companies and began providing connectivity services in recent years. Telit was the first with its acquisition of GlobalConect in 2011, which it followed up with its acquisition of CrossBridge Solutions in 2013. More recently, Sierra Wireless acquired Wireless Maingate in December 2014, which garnered the company roughly 500,000 connections.

IHS believes the MVNO role in the M2M market has continued and evolved, rather than disappeared, due to several factors:

  • First, M2M application development remains complex, costly and time-consuming. MVNOs provide one means of reducing this complexity and risk for customers, especially in the context of an integrated service offering, such as what Panasonic is providing.
  • Second, the customer base for M2M connectivity services is shifting as the market matures. Originally, customers were principally application service providers (ASPs), whose main business focus was the development and launch of an on-going M2M service. Increasingly, customers are corporate adopters and product OEMs, who have a non-M2M core competency and seek to outsource the complexity of M2M application development and deployment.
  • Third, operators tend to focus on the “low hanging fruit” among the M2M customer base: large volume projects where any development support needed by the customer typically comes at a high price in consulting fees. MVNOs are more willing to undertake the plethora of small volume projects where they can provide significant added value to the customer during the development process. MVNOs have also shown ability to market their experience and solitary focus on the M2M market as an important differentiator from operators, whose primary focus remains serving the high-revenue generating consumer market.
  • Fourth, there has been a push by module vendors to move up the value stack, by providing platform and connectivity services, which garner a larger share over overall value compared to modules and other components. This feature also allow module vendors to offer customers a more complete end-to-end M2M solution, a feature that will be become increasingly important in upcoming years as new (and existing) M2M customers look to avoid the complexity that comes with dealing multiple partners.
  • Finally, the M2M market remains highly fragmented, with a wide diversity of small volume projects in many different vertical markets and applications. Following on the points made above, this is a customer environment where small, nimble MVNOs can excel, as can other value chain players with an integrated connectivity services offering.

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