Capturing a share of the M2M market – How can Australian companies

participate in this growth sector?

Presented by Daryl ChambersApril 2004

Contents

What is M2M? Who are the main players in Australia? Australian market status The M2M Developer market Key markets in Australia Business models for the M2M market Q&A

What is M2M

M2M is short for “machine-to-machine” Wireless M2M relates to the connection of machines

to other machines or people wirelessly Wireless connectivity can be by cellular, radio,

satellite or any other wireless means

Here I cover cellular M2M communications

Who are the main players

Operators In GSM/GPRS – Optus/Vodafone/Telstra In CDMA / 1x / EV-DO – Telstra / Hutchison

Cellular M2M Hardware vendors Main GSM suppliers include SonyEricsson, Wavecom, Motorola In CDMA - Maxon and Kyocera

Developers There are over 500 developers in Australia who develop

applications to connect wirelessly to/from machines Almost all are developers not end-customers for the applications

End customers Typically these are the commercial users of M2M applications

Key Enablers Packet data over cellular

Either GPRS or CDMA 1x Allows “always-on” connection Has created a direct competitor to many fixed wire services

Airtime tariffs Packet data cost for M2M applications has fallen to levels far below

fixed line Mobile M2M - SIM card, monthly connection and 1M/byte of data

for $5-10 per month Fixed M2M - $20+ just for a fixed phone line

M2M typically is a low bandwidth user (up to 1 m/byte per month) GPRS/1x provides low cost airtime for M2M applications

Hardware costs are falling GPRS module cost dropped from US$100 in 2002 to US$65-70 Module is typically 25-50% of a hardware application

Status of Australian M2M Market

M2M market has been in existence since 1996/7 Growth rates typically at 100% per year (from low base)

Typical developers have been small “cottage industry” companies building specific applications for customers

Market is now emerging into the mainstream In 2004 many developers are selling ‘000’s of units

Export orders are starting to come in for some developers

Large end-customers are moving to commercial roll-outs

Some operators strongly support the segment to win data traffic

M2M Australian Growth M2M Hardware Sales Growth

0

100000

200000

300000

400000

500000

600000

700000

2000 2001 2002 2003 2004 2005 2006

GSM/GPRS CDMA/1x

Is this growth real?

Forecasters predict continued double or triple digit growth over the next 4-8 years

Many forecasters expect global M2M user numbers to exceed that of phone users worldwide within this decade 

“Nowadays there is much talk of B2B and B2C applications, but the key Internet relationship of the future will be the M2M relationship – from machine

to machine.”Dr Volker Jung President BITKOM, the German Association for IT,T & New Media

Previous CEO of Nokia recently stated a belief that cellular M2M connections would outweigh voice connections before the end of this decade, by a factor of 8!

Opportunities for Australia

M2M market is still in an emergent phase, locally and internationally

Australian developers are at forefront in some application areas

There is a growing understanding among customers of the benefits of wireless Cost Convenience Often better performance/ reliability

Some of the largest global opportunities are in Asia where developers are behind Australia

We have talked about the M2M market status, now lets look at the Developer market

The M2M Developer Market

Typical module characteristics General development guidelines Typical development lead times Key markets in Australia

Typical M2M Modules

Modules need to be fully integrated into the developers application and are useless stand-alone

Some Key Features Small size Multi-band Able to send and receive data by packet data,

SMS, CSD, HSCSD, Can handle voice and fax calls GPS interoperability Broad operating temperature range

Some also include: Embedded TCP/IP stack Embedded controller for hosting applications Additional PINs for I/O’s

Typical M2M Modems

Modems are really modules with a simple application to make them into a modem that can connect externally to a hardware application to wirelessly enable it

Some Key Features Multi- band Instant and cost effective solution with

RS232 serial modem or USB modem or ethernet Standard connectors for power, antenna, phone… Integral SIM card reader

Support data, fax, SMS and voice and packet data Easy to integrate

Some General Development Guidelines

Which M2M product should a developer work with? Several factors to consider before selecting the M2M

product to develop with including: Time to market Installed base of applications to be converted to GPRS/1x Volume TCP/IP Price Temperature Range

Development Guidelines – what to use? Time to market

Where time to market is critical to the developer consider developing with an external modems

Pick a modem/module with in-built TCP/IP Installed Base

If developer has installed application base to be converted to GPRS/1x (e.g. today uses wire-line or private radio) consider external modem connected to existing hardware

Volume Where application sales volume exceeds 500 per year then consider

developing integrated product with embedded module Cheaper hardware cost Higher development costs Longer lead times

Development environment AT commands

Cellular M2M modules and modems are just another type of modem Use standard AT commands Manufacturers have created unique sub-sets of vendor specific

commands to access various functions Developers run their applications in almost all popular

programming languages including .NET Windows CE Linux ANSI C

Manufacturers have developed software coding tools to simplify application development for devices with on-board embedded memory Examples include M2mpower, MUSE

Typical development cycle Company with an M2M business idea

Entering market for the first time Estimated Development Time to Commercial Sales

8 – 12 months

Development Activity TimelineDevelop prototype with developers kit 1 month

Test prototype 1 month

Build and test early samples 1 month

Build and install pilot products (typically 5-50) 2+ month

Monitor performance and make hardware/software upgrades 2+ months

Find commercial trial customer and install commercial trial Parallel time

Commercial Launch 1-2 months

Typical development cycle Company with existing M2M business using

fixed or other wireless systems

Already develop fixed line M2M applications Estimated Development Time to Commercial Sales

5-8 months

Development Activity TimelineDevelop prototype with developers kit ½ month

Test prototype ½ month

Build and test early samples 1 month

Build and install pilot products (typically 5-50) 1+ month

Monitor performance and make hardware/software upgrades 1+ month

Find commercial trial customer & install commercial trial Parallel time

Commercial Launch 1 months

Key markets

Security POS Telematics/tracking Utilities Remote telemetry

Security Monitoring 5-6 companies provide hardware and central monitoring

station equipment/software for GSM based wireless monitoring Often used as a back-up to fixed line monitoring Also used where fixed lines are not convenient such as ATM machines,

remote locations

Push in 2004 by several suppliers to roll-out a GPRS based “always on” monitored service to compete with fixed line monitoring

Could open the entire market to wireless suppliers Current volumes (Aust/NZ) estimated at 1000/month Expected to grow to 5000/month with GPRS launch New opportunity with CDMA for video monitoring

SCSI launches its DirectWireless network and Guardcell at the Security Show on 28 April, 2004. The DirectWireless network is a Virtual Private Network operating

within the Optus GSM/GPRS network, dedicated to high security alarm monitoring

DirectWireless Guardcell will facilitate wireless alarm monitoring to AS2201.5-1992 Class 4 and 5 for alarm transmission services

Benefits Cost Coverage versus Securitel Harder to “corrupt” and better redundancy options

May be first in world to deliver true GPRS security monitoring

Five POS opportunities

Cellular EFTPOS models E.g. Keycorp and Akyman

Fixed but wireless EFTPOS terminals connected to banks E.g. Keycorp, Akyman

Opportunities to connect older fixed EFTPOS units from ISDN/PSTN to wireless E.g. Keycorp, Hypercom, Braintree, Fox Technology,

Connect existing fixed line ATM transaction terminals to a GPRS network E.g. Braintree, Akyman

Increase in provision of information through POS information and loyalty programs E.g. S4, Fox Technology

Current volumes (Aust/NZ) estimated at 500/month but expected to grow to 2-4000 /month in 2004

Braintree Communications has trialed its wireless EFTPOS gateway with the Commonwealth Bank and retail customers using GPRS connection Uses Braintree's GPRS terminal adaptor to send EFTPOS

transactions from existing EFTPOS terminals over GPRS network into the CBA's host

Converts EFTPOS transaction from fixed wire to mobile networks giving the combined benefits of:

Much cheaper tariffing without the monthly line rental Greater mobility Easier terminal fleet management

Expected roll-out to be in the ‘000’s per quarter

Telematics and vehicle/asset tracking

Many developers work with cellular M2M to track vehicles/assets Over 20 developers in Australia/NZ Some are replacing old proprietary radio systems as CDMA and

GPRS have better coverage and cheaper and better featured Expected to grow to 2000/month in 2004

One specific area is embedded systems in vehicles (telematics) Services provided include report of accidents, support to drivers (e.g.

to unlock car) and to offer value-added services Current volumes (Aust/NZ) estimated at 600/month

Market is expected to grow to 2000/month with GPRS and increased uptake by insurers

Several major car brands are providing this as a feature in high end vehicles

Holden sells a telematics solution as a standard add-on accessory when ordering a new car, providing Emergency service support Providing content to assist the driver On-board assistance 24 hours, 365 days of the year

System uses GPS and GPRS to provide advanced satellite car monitoring

Uses include: If you lock your keys in your car Holden Assist can unlock your car

remotely If your battery is low the car notifies Holden Assist who will contact you In an emergency, press the red SOS button to contact the National

Emergency Response Centre (NERC). In the event of a crash, if an airbag has been deployed, the system will

automatically contact the NERC. If you need roadside assistance, press the "Holden Assist" button If your car is stolen Holden Assist can locate and track your stolen car

Utility monitoring

This was the first M2M segment to take off in Australia Uses GSM wireless to monitor electricity, gas, water

Use for control/billing to larger industrial customers Gives real time usage and billing

Use for monitoring of utility networks to ensure smooth operation E.g. sewerage stations, power sub-stations, power lines

Installed base estimated at around 50 000 + users Sales volumes (Aust/NZ) estimated at 500-1000/mnth Expect to grow to 2-4000/month in 2004

GPRS services are rolled out Lower cost Better reporting

Energy Intellect (Ei) have developed a two-way communications platform linking energy suppliers with customer sites Their advanced utility and commercial/industrial AMR devices

add immediate value to any smart meter application. The platform provides real-time, two-way communications

enabling energy suppliers to maintain connectivity with customers, offer new services and work collaboratively to manage customer load

Ei has a range of GPRS wireless remote communications devices, which provide for any commercial/industrial AMR or load control requirements

Remote telemetry

Covers a cross section of applications including : Vending Machine monitoring Weather stations Small unmanned airports Farms and irrigation Rail lines and roads (including road signage/messages) Gas tank monitoring Children's rides in shopping malls Newspaper sales stands

Current volumes (Aust/NZ) estimated at 500-1000/month

Expected to grow to 2000/month in 2004/5 Already 100+ developers working in this area on

targeted applications

Coca - Cola Vending Machines

Coca-Cola have over 60,000 vending machines wirelessly connected primarily in New Zealand, Australia, U.S.

Based on technology from a small NZ company, Harvest, which has now been acquired by CCA

Provides intelligent vending technology and data management support to The Coca-Cola Company Monitoring of vending machines (vandalism,

power, problems) Sales monitoring Support for distribution (route planning)

Business models for the M2M market

ASP opportunities Enabling technologies Export opportunities

ASP Model

Developer bundles in hardware, services, airtime in one fixed charge per period Brands the service, not the components Takes responsibility for end-to-end process Can add margin without price visibility (e.g. airtime tariff

becomes meaningless) Areas where this has started:

Security monitoring companies offering wireless security bundles Vehicle tracking companies offering the response centre servcie

bundled with the hardware Vending machine operator offering support services to machine

“owners”

Enabling Technologies The cellular operators have a number of tools to

support for wireless services Premium SMS is a micro-payment mechanism

E.g. $1.50 for a soft drink, $0.50 for a local surf report Location Based Services can be generated from cell ID (and

from GPS) and provided to users Wholesale and Aggregation tariffs

Blockers Operators take too large a slice of pie

Not worth using premium SMS as they take 25-50% of revenue

Too expensive for fleets to contemplate using operator based LBS when access costs are in line with SMS

Aggregation and wholesale is still in infancy in M2M market

Thank - you

Q&A

Glossary of Terms

GSM – Global System for Mobiles GPRS - General Packet Radio Service CDMA – Code Division Multiple Access 1x – Packet data over CDMA M2M – Machine-to-machine