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25 January 2010

Towards 50 billion connected mobile devices?

Filed under: Connectivity, Internet of Things, M2M — David Wood @ 2:33 am

Some time around December 2008, the number of mobile phone connections worldwide reached – according to an estimate by Informa Telecoms & Media – the staggering total of 4 billion.

The growth of mobile phone usage has been meteoric.  Quoting Wireless Intelligence as its source, an article in Gizmag tracks the rise:

  • The first commercial citywide cellular network was launched in Japan by NTT in 1979
  • The milestone of 1 billion mobile phone connections was reached in 2002
  • The 2 billion mobile phone connections milestone was reached in 2005
  • The 3 billion mobile phone connections milestone was reached in 2007
  • The 4 billion mobile phone connections milestone was reached in February 2009.

How much further can this trend continue?

One line of reasoning says that this growth spurt is bound to slow down, since there are only 6.8 billion people alive on the planet.

However, another line of reasoning points out that:

  • People often have more than one mobile phone connection
  • Mobile phone connections can be assigned to items of equipment (to “machines”) rather than directly to humans.

In this second line of reasoning, there’s no particular reason to expect any imminent cap on the number of mobile phone connections.  For example, senior representatives from Ericsson have on several occasions talked of the possibility of 50 billion connected devices by 2020:

In this line of thinking, the following types of machinery would all benefit from having a wireless network connection:

  • Cars;
  • Energy meters (such as electricity meters);
  • Units used in HVAC (Heat, Ventilating, and Air Conditioning);
  • Mobile point-of-sales terminals;
  • Vending machines;
  • Security alarms;
  • Data storage devices (including electronic book readers);
  • Devices used in navigation;
  • Devices used in healthcare.

These devices are, in general, not mobile phones in any traditional sense.  They are not used for voice communication.  However, they have requirements to share data about their state – including allowing remote access to assess how well they are operating.  The phrase “embedded connectivity” is used to describe them.  Another phrase in common use is “M2M” – meaning “machine to machine”.  As interest in tracking energy usage and resource usage grows, so will the requirement for remote access to meters and monitors of all sorts.  An article in Social Machinery reports:

M2M devices will account for a significant share of new mobile network connections on developed markets in the coming years. The main reason is the high penetration of mobile subscriptions and the proliferation of devices. Today, Europeans have more than 14 devices at home waiting to be connected according to Ericsson consumer research.

If by 2020 there are some 3.5 billion people worldwide with as many devices waiting to be connected as today’s average European, we quickly reach a figure of 50 billion devices with embedded connectivity.

Or do we?

This Tuesday and Wednesday, I’ll be taking part in the Informa “Embedded Connectivity” conference in London.  Informa have assembled a very interesting mix of speakers and panellists, covering all aspects of the emerging embedded connectivity industry.  As well as listening carefully to the presentations and (hopefully) asking some pertinent questions from the floor, I’ll be:

  • Chairing the Day One panel “Building the Business Models for a Connected Future”;
  • Speaking on the Day Two panel “The Future of Connectivity”.

One thing I’ll be keen to do is to understand the context of various predictions about the size of this market.  Indeed, although the figure of 50 billion connected devices is already astonishingly large, it’s by no means the largest figure that has been banded around:

For example, Amdocs recently spoke in a press release about:

A not-too-distant future, when more than one trillion devices will be connected to the network, an industry phenomenon the company calls “Tera-play.”

(Here, Tera is one thousand times Giga, namely shorthand for a trillion.)

Similarly, IBM regularly reference a prediction by IDC:

By 2011, IDC estimates, there will be one trillion Internet-connected devices, up from 500 million in 2006.

IBM repeat this figure in their advance publicity for next month’s Mobile World Congress in Barcelona:

Soon there will be 1 trillion connected devices in the world. A smarter planet will require a smarter communications infrastructure. When things communicate, systems connect. And when systems connect, the world gets smarter. Together let’s build smarter communications.

How do we make sense of these radically different predictions (1 trillion vs. 50 billion)?

Is it just a matter of time?

More likely, it’s a matter of different kinds of connectivity.  In all, there are probably at least five levels of connectivity.

Level 1 is the rich and varied connectivity of a regular  mobile phone, driven by a human user.  This can have attractive levels of ARPU (average revenue charges per user) for network operators.

Level 2 involves many of the devices that I mentioned earlier.  These devices will contain a cellular modem, over which data transfer takes place.  This connectivity falls under the label “machine to machine” rather than directly involving a human.  It’s generally thought that the ARPU for M2M will be less than the ARPU for smartphones.  For example, there might only be a data transfer of several kilobytes, every week or so.  Network operators will be interested in these devices because of their numbers, rather than their high ARPUs.

I’ll skip Level 3 for now, and come back to it afterwards.

Level 4 is where we reach the figure of one trillion connected devices.  However, these devices do not contain a cellular modem.  Nor, in most cases, do they initiate complex data transfers.  Instead, they contain an RFID (Radio Frequency IDentification) tag.  These tags are significantly cheaper than cellular modems.  They can be used to identify animals, items of luggage, retail goods, and so on.  Other sensors keep track of whether items with particular RFID tags are passing nearby.  The local data flow between sensor and RFID tag will not involve any cellular network.

Level 5 takes the idea of “everything connected” one stage further, to the so-called semantic internet, in which clumps of data carry (either explicitly or implicitly) accompanying metadata that identifies and describes the content of that data.  This is an important idea, but there’s no implication here of wireless connectivity.  I include this level in the discussion because the oft-used phrase “The Internet of Things” sometimes applies to Level 4 connectivity, and sometimes to Level 5 connectivity.

So where does the idea of 50 billion connected devices fit in?

An ABIresearch report, “Cellular M2M Connectivity Service Providers“, which is available (excerpted) from the website of Jasper Wireless, makes a good point:

The cost of cellular M2M solutions can be an inhibitor for some applications. Mainstream wireless modules range from approximately $25 to $90. These cost points make them difficult to integrate into some end devices, such as utility meters. A key reason for integration of ZigBee and other SRW (Short-Range Wireless) and PLC (Powerline Carrier) technologies into utility meters for AMI (Advanced Metering Infrastructure) applications is that many utilities do not feel a financially sound business case can be made for the integration of a cellular connection into every meter. Rather, a single meter, or concentrator, receives a cellular connection and is, in turn, connected to a group of local meters through less-expensive SRW or PLC connections.

In other words, there may be many devices whose individual wireless connectivity (Level 3 connectivity):

  • Is more complicated than an individual RFID tag (Level 4), but
  • Is simpler (and less expensive) than cellular modems (Level 2).

As time passes, the reducing cost of wireless modules will increase the likelihood that solutions will consider deploying them more widely.  However, at the same time, the simpler hardware options mentioned will also decrease in cost.

It’s for these reasons that I’m inclined to think that the number of cellular modems in 2020 will be less than the above ballpark figure of 50 billion.  But I’m ready to change my mind!

Footnote: A useful additional prediction data point has just been issued by Juniper Research:

The number of Mobile Connected M2M and Embedded Devices will rise to almost 412 million globally by 2014 with several distinct markets accounting for the increase in their number.

The markets include: Utility metering, Mobile Connected Buildings, Consumer & Commercial Telematics and Retail & Banking Connections. These areas will all show substantial growth in both device numbers and in the service revenues they represent, while Healthcare monitoring applications will begin to reach the commercial rollout stage from 2012.

“The most widespread category will be connections related to smart metering, driven partly by government initiatives to reduce carbon emissions,” says Anthony Cox, Senior Analyst at Juniper Research. Other areas, such as the healthcare sector, will ultimately see more potential in achieving service revenues, he says.

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6 Comments »

  1. great post. A few thoughts for you:

    – if you are going to call passive RFID part of the “trillion” connected devices, then might as well include barcode as well. Ten trillion barcodes are created annually and there are, last I looked, around 200 trillion in the world now. The difference between barcode and passive RFID is small relative to the difference between passive RFID and cellular.
    – MEMS sensor forecasts would a useful dimension to this.
    – i would look at this beginning with passive/barcode at level one, then moving up the “pyramid” to cellular/satcom. Why? There is a fundamental “last mile” problem with this vision that is solved with increasing levels of performance (and cost) as you move up the pyramid.
    – In terms of a long-range wireless “last mile” story, I would like to suggest DASH7 (http://www.dash7.org) which has 10 year battery life, operates in unlicensed spectrum (433 MHz), supports sensors, multi-hopping, and PKI. Heavily used by the military, it has 10x the range and battery life of ZigBee at 10% of the cost.

    Comment by Pat Burns — 25 January 2010 @ 12:44 pm

    • Hi Pat,

      Great point about barcodes. You’re right, barcodes have a lot in common with passive RFID. I guess the main difference is that barcodes require some “line of sight” access before they can be read.

      Thanks also for the pointer to the DASH7 website. There’s some interesting material there!

      I’ll look out for anyone from the DASH7 members list at the Embedded Connectivity conference tomorrow and the day after.

      Comment by David Wood — 25 January 2010 @ 12:54 pm

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