Sprint's Big Bet - M2M and More

Speaking with Sprint's Wayne Ward you come away amazed at the potential ahead for wireless carriers in the burgeoning machine-to-machine or M2M space. Just what exactly is M2M? It is simply machines communicating with machines. Quite often this interaction is to satisfy the needs of a person, corporation or system - for example when an automobile senses a mechanical problem and signals the manufacturer for a wireless diagnostic which determines the car needs service and subsequently alerts the driver.

In other cases sensors communicate with backend systems which perform some action as a result of the conditions where the sensor is located.

Wayne explained the opportunity in M2M and moreover that human subscribers in the wireless market have reached saturation with most of the growth coming today from switchers (churn) and prepaid users. He said emphatically on a recent phone call, "The M2M market is wide open."

If there is one thing which is happening faster than change in the communications space it is the pace of convergence. Social networking widgets on televisions, cars which sync with music players, phones with GPS, PCs which double as home entertainment systems, photo frames which can receive MMS photos, there seems to be no stopping this trend.

The consumer, business, wireless and wireline businesses are converging as well and to respond to this new landscape, Sprint has rolled up a few of their existing units into a new Emerging Solutions unit to specifically focus on M2M and mobile computing.

The M2M category alone is massive and Ward is right to be enthused. These are just some of the markets touched by this technology: remote monitoring, asset tracking, fleet management, telematics, automation and control, automated meter reading, smartgrid, point-of-sale/ATM and wireless routing.

Sprint has had many challenges lately such as massive customer churn and general customer dissatisfaction. To fight back, the company is obviously looking at new markets such as M2M and the company touted its relationship with Amazon's Kindle as a major step forward in a new market. While the amount of money being made from the Kindle so far is not great, it is certainly a huge account you didn't want to see go to AT&T. Well, Amazon did leave Sprint for AT&T recently and one reason for this move was the need to access the GSM as the Kindle goes global.

Update: Here is an official statement and clarification from Sprint on the matter:

The Kindle DX will continue to operate on Sprint's network -- existing Kindles currently in use or already in the sales pipeline will still be powered by Sprint. We continue to enjoy a great relationship with Amazon. Though we are disappointed in their decision to work with AT&T for their international version, we understand their international strategy.

A consistent theme on our call was that Ward wants to see M2M getting pushed by other carriers as it grows awareness and the market. Just as the push-to-talk market grew more quickly when new players entered the market, he expects the same thing to happen in M2M.

He then explained how Sprint's various networks can serve the company well in the M2M-based world of the future. Often thought of as a liability in the world of wireless voice the combination of iDEN, CDMA 1xRTT, CDMA EVDO and 4G is a benefit in this new machine-driven world. The reason is, each of these networks has various advantages in terms of speed, performance and/or cost and subsequently the broadest array of networks is best in this new world.

I mentioned the Kindle is not a massive moneymaker and that should get you wondering about this market - can it generate serious revenue for Sprint and others? Ward says the old models of ARPU, subsidies and churn go out the window with M2M and instead there is a much lower ARPU and a small or nonexistent subsidy. What you get instead is a healthy customer lifetime value and higher profit margins. Why? Well, one reason is there is no human interaction as machines deal with rate plans and other issues without using customer service reps.

So what does Sprint's Wayne Ward want to see? Among other things, more M2M adoption which will lead to cheaper chipsets which will lead to even more adoption. He tells me there is lots of business in the pipeline and his company is talking with enterprise customers and their supply chains as well as chipset vendors, module vendors, 3^rd party application vendors, software developers, healthcare companies, VCs and many others.

To me the potential of this new market is massive. Coincidentally, I recently decided to purchase a GPS device because it could connect to the internet and I pay $10/month to keep it connected. What does Ward think about M2M's potential? He summed it up nicely by saying, "There are billions of machines we can assign an IP address to and wirelessly enable."

To stay up to date on the rapidly growing M2M space be sure to attend TMC and Crossfire Media's M2M Evolution Conference and visit M2M Evolution online.