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Who'll Connect 'Connected Devices'?

10:30 AM -- In reading through the transcripts for both Verizon's and AT&T's earnings calls (thanks, Seeking Alpha), it was interesting to note the very public call-out both carriers gave to the notion of "connected devices," meaning those things that aren't phones or modems but still have a network connection -- with Amazon's Kindle and now Apple's iPad being the most prominent examples.

While the market for such devices is currently small, it could get bigger soon -- and could be the next battleground for wireless providers as new entrants like Clearwire LLC (Nasdaq: CLWR) try to horn in on what the big telcos see as an enormously profitable future.

During his CTIA keynote speech, Clearwire CEO Bill Morrow made mention of some innovative connected-devices partnerships his company is working on, and hopes to announce later this year. Given its ability to provide high-speed IP-based connections with its nascent national WiMax network, Clearwire would seem a natural choice for a consumer-device manufacturer seeking to add connectivity to a camera, a TV, or a car. Or maybe a refrigerator. While Clearwire's upcoming earnings call on May 4 may be too soon to hear about any such deals, it seems a good bet that we'll be hearing more and more about connected devices -- a list that could include more power meters, digital signs, and mall kiosks -- before 2010 is over.

So which carrier is best poised to take advantage? While both Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T) now have specialized units dedicated to building such businesses, it's worthwhile to ask where the big carriers will find extra network capacity if such deals mushroom quickly, as the iPhone did for AT&T.

On one hand such deals may be inherently more manageable, since (like the Kindle) the connectivity is managed behind the scenes, meaning you won't be able to use your camera to download P2P files or stream live video. But with Long Term Evolution (LTE) chips still in their design infancy, that means Big Red and Ma Bell will be putting such devices on their 3G networks for the time being -- and on AT&T's side, anyway, the ability to accurately predict network loads for new devices seems to be a game the big providers are still learning.

Clearwire and Sprint Corp. (NYSE: S), meanwhile, can tout the speed and capacity of the WiMax network Clearwire is building, but are hindered by the fact that they still are far from offering a nationwide footprint for the services. Having widespread coverage seems to be the ante to get into the consumer-device game, because people who sell products by the millions don't want to have to tailor their national ad campaigns to reach only selected markets.

The race right now seems to be whether or not Clearwire can build out its network quickly enough to take advantage before the LTE ecosystem matures. Maybe it's not as sexy as following iPhones left in bars, but it's an interesting competition to watch going forward.

— Paul Kapustka is the founder and editor of Sidecut Reports, a Wireless analysis site and research service. He can be reached at [email protected]. Special to Light Reading Mobile.

LaurieLamberth 12/5/2012 | 4:37:08 PM
re: Who'll Connect 'Connected Devices'?

Kap,


You overlooked the significant efforts being made by Sprint and T-Mobile in the connected device arena.  While it's true that AT&T and Verizon have snagged big headlines with their high-profile 2009 alliances in support of connected devices (AT&T + Jasper Wireless, Verizon + Qualcomm/nPhase), Sprint Nextel and T-Mobile have been in the game at least as long -- probably longer.


Sprint and Nextel both had deep connected device programs before their 2005 merger, which they finally organized into an M2M business unit under the leadership of Nextel veteran Danny Bowman in late 2009 (http://www.fiercewireless.com/... I know -- I was there.  I led business development for Nextel's M2M initiative starting in late 2001 (we called these devices "embedded solutions" back then), and for Sprint Nextel another two years after the merger. Sprint is the service provider behind the Kindle, and their "stable" of connected solutions runs the gamut from pet and people trackers to sensor networks that monitor and report bridge fatigue and water quality.


T-Mobile has had an M2M business unit since at least 2007:  I interviewed the leader of this team, John Horn, at the Connected World conference that year.  T-Mobile and their reseller partners offer a wide range of connected devices, most targeted to Enterprise apps, but including the Cameo cellular picture frame.


Then there are the resellers/MVNOs/MMOs that resell carrier services, often with more flexible pricing models, and also the machine-only networks operated by Skytel and paging network operators.  Add in satellite-based machine communication networks, plus wifi clouds everywhere, and you find that the universe of connection options for connected devices is very large.


You should also note that broadband connections are not required for a large segment of connected devices.  Data payloads vary from mere kilobytes polled from a device once a day to real-time streaming video.  Most of the connected devices on mobile operator networks today are on data plans that include 2 gigs or less of monthly data throughput.


Thanks for highlighting the topic.  It's timely, and I'm finding more and more people jumping onto the "connected device" or M2M bandwagon.  It's about time, from my perspective.  After almost a decade relentlessly toiling to bring connected devices to the forefront, the industry's newfound adoration for these solutions feels like a breath of fresh air to me.


Best-


Laurie


www.laurielamberth.com

kaps 12/5/2012 | 4:38:34 PM
re: Who'll Connect 'Connected Devices'?

I think the compelling pricing model that will (may) emerge is a "network sub" model -- so I just pay some monthly fee but can connect as many devices as I want. Clearwire's started down this path with home & away (one contract, two devices) but could it be pushed farther?

kaps 12/5/2012 | 4:38:34 PM
re: Who'll Connect 'Connected Devices'?

I think the compelling pricing model that will (may) emerge is a "network sub" model -- so I just pay some monthly fee but can connect as many devices as I want. Clearwire's started down this path with home & away (one contract, two devices) but could it be pushed farther?

sarahthomas1011 12/5/2012 | 4:38:36 PM
re: Who'll Connect 'Connected Devices'?

I thought it was interesting that AT&T has made a lot of noise about M2M, whereas Verizon hasn't said a word until last week, but actually has more connections than AT&T.


M2M is a really exciting market - I'd love to have 8 to 10 connected devices, but I think it will come down to business model. Whichever carrier comes out ahead, I hope they get more creative with pricing than requiring 8 to 10 individual service plans.

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