* Machine-to-machine seen as growth driver for telcos
* E-health, cars, energy, transport show promise
* Multiple challenges for telcos to turn tech into profit
* Telefonica sees annual M2M sales of 500-800 mln by 2015
By Clare Kane and Leila Abboud
BARCELONA, Dec 6 In Barcelona's Hospital Del
Mar, Telefonica is doing more than connecting phone
lines - it is also developing a lucrative new business keeping
patients' hearts in good shape.
A heart-monitoring programme put in place by Telefonica is
just one kind of machine-to-machine (M2M) technology that
telecom operators are racing to develop for sectors including
healthcare, automotive, transportation and energy.
Carriers such as Vodafone, Deutsche Telekom
, AT&T, Verizon, China Mobile,
and France Telecom are betting that M2M will be a
significant source of growth as the number of connected devices
climbs to 12 billion or more by 2020.
In cars, for example, mobile technology can be used to
automatically call emergency services after a road accident. In
offices, France Telecom uses it to tell companies when their
coffee machines need re-stocking, while energy companies are
equipping homes with 'smart meters' to track consumption and
permit differential pricing.
The potential prize is billions of dollars in new business
for telecom groups, many of which are otherwise faced with
declining sales, and the promise of big cost savings for their
Yet turning the 'Internet of Things' into a real business
will not be easy for big telcos, since the market is far more
complicated than their traditional sales of mobile and Internet
contracts to consumers and companies.
To succeed, they have to develop an understanding of a range
of industries, their specific needs and regulatory constraints.
They also have to outfox a phalanx of new competitors such as
start-ups in Silicon Valley, app developers, and corporate
giants like IBM, General Electric and Philips.
Analysts' forecasts vary widely on the size of the M2M
market and how much of it telcos can win, since the biggest
opportunity comes not from putting a mobile SIM card in devices
but from providing the software and services to make them work.
Machina Research predicts revenue of 714 billion euros ($933
billion) by 2020 for M2M overall. Informa Telecoms & Media's
Jamie Moss says the market is growing slowly and will reach 217
million connections and $9.3 billion for telcos by end 2014.
They earned $5.7 billion from M2M this year, dwarfed by the
roughly $1.14 trillion from mobile services in the same period.
"I am very convinced that M2M will be a profit driver," said
Matthew Key, who heads Telefonica's digital unit, which aims to
earn 500-800 million euros in annual M2M revenue by 2015.
"But we need to sell more than just basic connectivity by
adding know-how and a complete service, and build the business
locally step by step."
The opportunity and the challenges for telcos in M2M are on
display at the Hospital Del Mar.
Every morning, patients recovering from heart attacks use
equipment installed in their homes by Telefonica to weigh
themselves, take their blood pressure and answer a few questions
on their symptoms via a touch screen. The information is
transmitted to nurses at the seaside hospital's cardiac unit who
follow up by phone if they have any concerns.
The programme has had a positive effect on mortality rates,
reduced hospital visits and saved 9,000 euros per cardiac
patient since it began two years ago, according to doctors.
Nurse Ana Linas said the system was so simple to use that an
illiterate elderly woman was among the patients able to use it.
Yet the hospital, which experienced some video connectivity
problems that were quickly resolved by Telefonica, has no plans
to expand the project because of the costs involved.
"You have to hire trained people so that it all works.
Although costs fall a lot later on, the initial investment is
high in staff and equipment," said doctor Cristina Enjuanes.
With budgets under pressure and doctors often reluctant,
getting the investment needed to roll out telehealth schemes can
be an uphill struggle.
Telefonica wants to roll out the heart-monitoring programme
elsewhere in Spain and is also investing heavily in projects in
Britain with the National Health Service.
"I cannot tell you when it will ramp up. What I can feel is
that we are getting closer to it ... We will know soon the speed
at which demand will move, and whether there is finally an
opportunity to create a totally new (business) category," said
Jose Perdomo, head of Telefonica's e-Health division.
Telefonica has had more success rolling out e-health in
Latin American markets such as Brazil and Chile, where more
medical care is provided via the private sector than in Europe.
CARS AND HOMES
The M2M gold rush has sent some telcos on the acquisition
trail to get technology and expertise. AT&T bought U.S. start-up
Xanboo and has used its technology to develop security services
for the home, as well as tools for homeowners to control their
heating, lighting and appliances from a mobile phone.
Verizon paid $612 million in June for Hughes Telematics
and plans to build on the company's expertise in M2M
software for tracking truck fleets, as well as crash detection,
emergency calling, and maintenance needs for cars. Hughes has a
worldwide contract with Volkswagen and a U.S. contract with
John Stratton, Verizon's vice-president for enterprise, said
the Hughes deal would allow it to gain know-how in the software
needed to boost the profitability of M2M contracts beyond the
few dollars earned from the connection itself.
"If we only transport the bits of data in M2M projects, that
has relatively modest value, less than 10 percent of the market
opportunity overall," he said in an interview.
"The next big piece is the solutions on top, which is what
motivated us to buy Hughes."
Korea Telecom's experience launching a taxi fleet management
service powered by M2M technology demonstrates the point.
Initially it earned about $5 a month per taxi for tracking taxi
locations with mobile technology. It boosted that to $50 per
month and signed five-year instead of two-year contracts by
selling a software platform and call centre as a package with
the taxi tracking.
Telefonica invested 2 million euros in a Spanish start-up
called addFleet that makes a free taxi-calling app for
consumers, and a paid version for taxi owners to track cars.
"There is no global market for taxi cabs, so you need to go
local first," said Telefonica Digital chief Key.
Martin Garner, an analyst at consultancy CCS Insight, said
telecom operators would have to adapt if they are to succeed in
making M2M a mass technology, adding that for now the market was
growing slower than they would have hoped.
"We do think there is a big world in M2M for the telcos,"
said Garner. "But they have to go and take it: it will not come