The Absent Demise of M2M/IoT via Satellite

When most businesses first dabble with machine-to-machine (M2M) and Internet of Things (IoT) communications, the first solution that comes to mind isn’t satellite, but cellular-based options from Vodafone, Verizon or Kore Telematics, to name a few. Why then, are satellite M2M products not in decline despite having a single-digit share of the overall M2M market, with terrestrial services enjoying a continually growing footprint, ever-increasing data speeds and lowering data costs? And what will the impact be of new low-cost cellular operators such as Sigfox?

Looking at data from NSR’s M2M and IoT via Satellite, 5^th Edition, far from any sort of demise, it is expected that overall satellite revenues will reach almost $2.5 billion by 2023. With 50% of these revenues expected to come from North America where terrestrial coverage and reliability is widespread, terrestrial competition isn’t being felt immensely. This trend is combined with a continuing uptake in terminals on satellite M2M networks, reaching nearly 6 million units by 2023 – an impressive growth from 2.4 million units that were in use in 2013, resulting in a CAGR of 9.3% over the period. 

In terms of key sub-verticals, M2M and IoT via Satellite, 5^th Edition breaks the M2M/IoT market into 10 sub-verticals, including Transportation, Green Energy and Civil Government. Of these, the two largest by a wide margin are, and will continue to be, Transportation and Cargo. Throughout the duration of the forecast, these two sub-verticals will account for between 65% and 70% of the total market for in-service units, and just under half of total revenues for much of the forecast. This is despite the Transportation sector being the most prone to terrestrial competition, with trucks and cars spending the majority, if not all, of their time within a cellular footprint.

The strengths of satellite based M2M are many, and in most cases they are strengths that are most relevant, and most valuable, to high-SLA type applications in remote regions, such as offshore Oil & Gas, Transportation, and Cargo shipping. Among other things, satellite connectivity is oftentimes more reliable, especially in remote and underserved regions. In developing regions, terrestrial networks are often nowhere near as reliable as those in the North American region, or is often non-existent in other regions. Without near 100% reliability and availability, the value proposition derived from M2M communications by knowing where everything is at anytime, anywhere, begins to fall apart. Beyond that, satellite-based M2M can offer truly global coverage, with applications such as trans-oceanic shipping being addressable only via satellite.

Countering any perceived decline by the growth of terrestrial M2M, satellite M2M operators are expected to focus on these core strengths in the future, to further differentiate themselves from the perpetually lower costs of terrestrial networks, focusing instead on reliability and global coverage. Additionally cellular networks are slowly moving from high, value-based pricing, to low, cost-based pricing. Satellite operators, rather than “racing to the bottom” and losing out to cellular players on cost, latency and speed, will rest assured that the satellite experience will be near impossible to replicate terrestrially; as much as associations such as the M2M World Alliance and Global M2M Association are attempting to create a single, global and seamless experience over a patchwork of independent terrestrial networks.

Consolidation in the terrestrial M2M market shows that operators are getting serious with competing. With Vodafone acquiring Cobra Automotive technology for vehicle tracking and telematics, Raco Wireless acquiring Position Logic, for B2B location services, and back in 2012, the high profile acquisition of Hughes Telematics by Verizon for in-car wireless services. Along with many more acquisitions, terrestrial operators mean business. With an increasing turn-key application base, it’s becoming easier than ever to setup M2M services for low cost for a wide range of verticals.

Furthermore, new up-and-coming terrestrial players are expected to change the market dynamic, with newer operators such as Sigfox offering low-end M2M and IoT products for as low as $1/month. However, these products are expected to offer very low bandwidth of 100bps on non-traditional wavelengths. Aiming for the low-end, this could be pre-packaged into products with multi-year prepaid deals. Due to the very low-end nature of this new breed of providers, there is likely no threat, nor partnership opportunities, with these low-end providers. Nevertheless, this shows the wide base of M2M opportunities available now and into the future. 

Bottom Line:

Satellite based M2M services, far from being in decline, will continue to offer unique advantages that other forms of M2M communication won’t be able to match. With constantly expanding terrestrial footprints, satellite operators are expected to compete instead on reliability and focus on high value applications such as the Transportation and Cargo sectors, allowing the industry as a whole to not only survive in the face of competition, but also continue to thrive well into the future.