Evolution of Mobile Network Visibility: ACG HotSeat with Sanjay Munshi, Brocade

Sanjay Munshi, Senior Director of Product Management at Brocade Communications, and Ray Mota, CEO of ACG Research, discuss Brocade’s significant new network visibility product announcement: carrier-grade, physical and virtual network packet brokers, virtual TAPs, an SDN based session director and a single pane of glass management application. Sanjay highlights the challenges operators have in 4G/LTE visibility, how to address them in a cost effective manner and the critical need for new, next-generation network visibility architectures as mobile operators ramp up to virtual EPC and 5G with billions of M2M connections and Internet of Things in the not too distant future.

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Ray Mota

rmota@acgcc.com
www.acgcc.com

IoT B2B Ecosystem: How Can SPs Retain Their Maximum Share?

The OneM2M joint standards groups partition the Internet of Things (IoT) ecosystem by access domain, network domain and application domain. Within these domains the service providers (SP), specifically wireless SPs, are in the network domain and are responsible for the operational and business system services of the devices (OSS/BSS), for example, SIM provisioning, monitoring and management of the device over the “air,” routing traffic from the device to backend systems and applications or to other devices in the network, billing and recording of device activity based on bandwidth usage or further analytics associated with the application deployed. In a legacy machine to machine (M2M) scenario the value chain for the SP was clear; however, with the new IoT ecosystem this and business models have changed. How can SPs obtain the most value and retain reasonable financial margins within today’s IoT ecosystem?

Traditional M2M Business Models

Established M2M business models, which are limited in scope and structured, were quite clear and the revenue share among the domains was evenly distributed and predictable. Leading SP network operation field specialists acknowledge that the device provider, network provider and the application provider each receive one-third of the revenue.  A customer would request a defined service, such as a fleet/asset tracking service, from the service provider who most likely had a purpose-built solution. Depending on the quantity of assets that needed to be tracked, the service provider would know precisely how many unintelligent devices and SIMs to purchase from his device supplier, servers from the network provider and software packages to order from the applications provider. The SP would be responsible for provisioning its custom OSS/BSS systems and application services and provide the management. The customer would pay for the devices and software licenses upfront and either pay the SP per connection or by bandwidth usage. The device and software vendors would require a maintenance fee, which the SP would pass on to the customer. This is now an obsolete business model.

Present M2M/IoT Business Models

In the new M2M/IoT ecosystem SPs’ role and business models have changed. According to Network specialists, the device vendor gets around 20 percent; the network provider gets 15 percent and the application provider gets 65 percent. The new enhanced M2M devices have advanced processors that make them more intelligent, aware and thus more valuable. Because of enhanced hardware and firmware these devices can be embedded with antennas that can speak directly to the internet via 3/4G cellular or via WiFi routers. In most cases the radio access portion of the network domain has not been upgraded (2G or 3G wireless) so the expense is less. SPs use OSS/BSS platform partners because the OSS/BSS layer must be enhanced to accommodate the intelligent access devices. Application layer services are leveraged between application platform providers’ partnerships. These providers employ their own device, storage, cloud suppliers and application designers. To compete SPs have to engage in various business arrangements and complex strategic alliances with equity interests and exclusivity clauses. The negative effect is revenue fragmentation; however, providers can charge the customer more and thus raise the overall average revenue per unit. In this fragmented and crowded environment, how can the SPs continue to earn their full value?

Service Provider-Centric Use Cases

To earn their full value in the M2M/IoT ecosystem, SPs have to select their verticals and use cases very carefully. What are the characteristics of a monetizable use case for SPs? Service providers must adopt use cases that require a highly managed infrastructure and within these verticals should be mission critical and/or life dependent as well as wireless connectivity. These use cases will warrant more liability and require more regulatory demands but will enhance the importance of the SP’s network. The SP will maintain the value in the IoT ecosystem and customers will pay premium for the enhanced quality service. The following are examples of service provider-centric vertical use cases:

• Healthcare: Remote heart/lung/brain monitoring for patients in transit; remote surgical services (monitoring/surveillance)
• Transportation: Fleet/Asset tracking services where environmental controls for cargo/livestock need monitoring; telemetry (driverless vehicles); highly critical vehicle diagnostic monitoring and proactive resolution services
• Manufacturing: Airborne robotic devices; off-shore mobile device control and monitoring services
• Utilities: SCADA monitoring and proactive purification services for gas, water, soil, etc.
• Government: Surveillance of mission-critical items; disaster recovery bots
• Telecommunications: Banking processes and monitoring in remote areas

Dennis Ward

dward@acgresearch.net
www.acgresearch

IoT In Perspective, Ready for Reality?

Kevin Ashton, cofounder of the Auto-ID Center at MIT that created the Radio Frequency Identification (RFID) global standard, is credited with the expression “Internet of Things,” envisioning a “system where the internet is connected to the physical world via ubiquitous sensors.” His vision in 1999 is not far from today’s reality. Technology has advanced to a point where almost anything can be “sensor-ized” to collect, store and transfer data. Interestingly enough, RFID tags were designed to categorize, itemize and quantify things. Hence the question, how big is the IoT market today?

Views in the market are that it is difficult to quantify simply because the concept is too broad and connections are hard to evaluate. Clearer explanations as to what a “connection” is within the IoT sector needs to be defined further. Nevertheless, some companies have generated numbers. Cisco made an attempt to embrace the concept within the explanation of the “Internet of Everything”. Using “Value at Stake” the worldwide market size was predicted to be $14.4 trillion in 10 years, where 45% or ~ $6,480 billion was attributed to machine to machine (M2M) connections. This is particularly interesting to service providers (SPs) because they will own these connections. If we analyze this number linearly, then for one year, the expectation for the worldwide M2M market size is about $648 billion.

Source: Cisco IBSG, 2013; Note: To make the numbers work, the actual IoE should be $14.160 trillion.

But what is the potential value per connection in a year? Revenue estimates for SPs and total cost of ownership (TCO) evaluations for customers are definitely of interest. The total number of M2M cellular connections last year was around 132 million. Thus: $648 B/1 yr x 1 yr/132M connections = $4,909/connection in a year (~ $409 per month).

Last year (August 2013) the top number of M2M connections for U.S. companies:

Service Provider	M2M Connections (Millions)	Revenue(M) (Yr: $4909/conn)
AT&T Mobility	14.7	72,162
Verizon	8	39,272
Sprint	3.3	16,199
T-Mobile	3.3	16,199

Therefore, if the potential values are in the correct order of magnitude for M2M, (not considering the CAGR sifts, etc.), then the increase in connections because of IoT will essentially bring increased revenue to SPs. Is that really true? Much of the margin depends on the revenue shared between the SP’s platform partners as well.

IoT Platforms: The M2M/IoT platforms that are being deployed—some have taken several years to develop—have several vendors within their ecosystems. Bigger SPs had to partner with these platform providers to enter the M2M/IoT market quickly. The following are platform providers for the major U.S.:

Service Provider	Platform Provider	Engagement Year
AT&T	Jasper, Axeda	2009, 2012,
Verizon	Zelitron SA, Qualcomm, nPhase, Axeda	2003, 2010, 2010, 2011
Sprint	Axeda	2010
T-Mobile (now part of Sprint)	Raco Wireless	2006

What kinds of business partnerships have the SPs made with these platform providers? What are the present revenue sharing models and who owns the customers in these scenarios? To what key verticals and monetizable use cases do SPs need to turn their solutions to maximize their profits within these partnerships? For example, what percentage of that monthly revenue of $409 actually goes to the SPs? Can a customer transfer between SP/PP solutions and expect a seamless experience? These are not new questions; however, the issues are still here and need to be explored again with fresh eyes since the technology and market landscape is changing.

For example, virtualization within the core of SPs; networks are giving new agility, efficiency and interoperability choices. Equipment providers such as Ericsson, Alcatel-Lucent, Juniper and Cisco are developing innovative software defined networks- and network fabric virtualization-based appliances in software and hardware to assist SPs in revolutionizing their core OSS/BSS delivery platforms and edge Radio Access Network facilities to rapidly and easily create solutions that can propel the managed M2M/IoT industry forward and fight off over-the-top competition.

What’s the bottleneck? It is not the technology but the ability of the industry to cooperate in normalizing the horizontal layer of the network (actually where the platform providers sit) to serve the verticals appropriately. One of the answers is to urge the standards bodies to more aggressively converge ideas toward this end. OneM2M, the Global Partnership developing standards for M2M communications enabling large-scale implementation of IoT, is in the process of spearheading this effort. However how are they doing with the specification normalization?

In reviewing the OneM2M Technical Report Doc # oneM2M-TR-0003-Architecture_Analysis_Part_2 it is clear that the seven Standards Developing Organizations are well on their way toward integrating a basic framework of functional elements that will prove invaluable in normalizing the playing field. These types of specifications will assist the platform and equipment providers technically so they can clearly see how to design solutions to help the SPs deploy more economical and simpler solutions to the market to effect better results or “outcomes.” The OneM2M 10^th Technical Plenary committee met in Berlin, Germany, on 4/11/14 and confirmed that it will be releasing its initial complete specifications for IoT in August 2014.  

Dennis Ward

dward@acgresearch.net
www.acgresearch

M2M: A Big Deal for Networks or Just Another Flash in the Pan?

I find it amusing that the tech industry starts a topic and tries to make it a market space or definition that just does not make sense. If we look back over the last 10 years, we have many examples of pundits trying too hard to push ideas that are essentially fads or are not a sufficiently differentiated. (Full disclosure: I am one of the industry analysts that contributes to this frenzy at times, so I am criticizing myself to a degree).

When it comes to machine to machine (M2M), I do not understand why it is getting so much attention in the networking space. Sure, I see the forecasts predicting that there will be 10x the number of machines than people and there will be a need for 70B additional machines for connectivity. Even if the forecasts are right, these machines will not create very much network traffic. The average device will not need constant monitoring and will not send a steady stream of data. How much data do you need to get from a refrigerator or thermostat? Temp, humidity, amps, can be monitored continually but even home energy monitoring software only needs that data once a minute at most. Plus, we forget, they are machines and they need bits and bytes, not pretty pictures and video to get the relevant information.

How much data would this mean for the network? Even, very generously, if a device were to send data once every 10 seconds, there would 8,640 transmissions per day times 1 kbyte per transmission would equal 8.64 MB per day or about 3.2GB. This is the equivalent of one Netflix movie per year. Multiply that by the expected number of connected machines per household then we might see the equivalent network load of 64GB per year per household in 5 to 10 years.

This is being generous because many of the devices will not have to transmit all of the data over the network; much of it will be kept locally with aggregated data sent on a schedule or on demand. As a sanity check, I asked a developer in the smart grid/demand side management sector what their traffic pattern looks like. They have devices and meters that talk to each other (over Zigbee, not WiFi). One device acts as a gateway and sends I.D. and usage data every 15 minutes over IP to centralize server. Using these assumptions, the data transiting the Internet would be 100 to 1000 times less.

When I mention this data to some proponents, they respond that video for home monitoring is going to be the big M2M app. My argument is that it probably does not make sense to be broadcasting all of this data across the net if no one is watching. It will work much like webcams and video on demand do today; the stream will be set up when requested.

This also brings me to my other point. M2M does not deserve its own category; it is a technology that will be deployed as a part of other application areas such as home monitoring and smart grid to serve a purpose for the application and is not an end into itself.
To put this in perspective, OTT video is happening now, and it is 40 percent of all traffic (Netflix alone is 30 percent of prime time traffic) and will grow fivefold over the next five years. By my rough estimation, the M2M traffic — if it takes off — will take three to five years to add the equivalent of one streamed movie per year per household. Other issues such as addressing, security and management will not be big issues either, because practicality dictates that most devices will use a low power, self-organizing wireless protocol such as Zigbee or ZWave and will therefore not need an IP address.

Do you agree? I look forward to a debate on this.

David Dines
ddines@acgresearch.net
www.acgresearch.net