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By Andy Castonguay, Principal Analyst, Machina Research

The US mobile market’s rapidly growing appetite for mobile data, spectrum constraints and fierce competition among the top US operators (i.e. AT&T, Verizon Wireless, Sprint and T-Mobile) have triggered significant network migration strategy decisions by AT&T and Verizon that will support the near nation-wide LTE coverage by 2015. This will also have an important impact on the M2M industry. The changing mobile market dynamics in the US, and a few other advanced LTE markets, are introducing a “perfect storm” of circumstances involving the decommissioning of 2G networks, rapidly expanding LTE network coverage, and large scale LTE deployments (e.g. GM’s integration of LTE modules in all North American cars starting in 2015) that together are ushering in a new era of LTE-based M2M modules and solutions.

As the largest MNO in the US, both for conventional mobile services and M2M, AT&T’s aggressive build-out of its national LTE network is having key impacts on the M2M industry’s existing base as well as future LTE adoption. In the short term, the most important consequence of AT&T’s technology migration strategy is its decision to decommission its 2G GSM/GPRS network by 2017.  With its market leading 15 million+ M2M connections, AT&T’s announced plan to turn off its 2G network is already having repercussions among existing clients as well as technology decisions for device makers and companies currently in the process of choosing the proper technology for future deployments.  For M2M deployments using GSM-based modules, AT&T’s network migration is forcing many enterprises with long-term connected assets to consider either replacing legacy GSM/GPRS modules with either CDMA 1xRTT modules (Verizon and Sprint have committed to supporting CDMA 1xRTT until 2021) or with 3G or 4G modules.

The combination of falling module pricing and the high costs of replacing legacy modules will fundamentally change the technology planning and cost analysis of long-term M2M deployments.  Conventionally, the upfront cost of the module was a primary factor in the choice of technology. However, the decommissioning of 2G networks will often require an expensive replacement of legacy modules (e.g. costs for a truck roll to change out modules can run in excess of USD300), the up-front cost of a module becomes less important in the context of long-term ROI and life-time costs of deployment.  While current LTE modules with 3G fallback cost USD75 and more, the next wave of LTE-only devices will reach the market in the first half of 2014 with pricing as low as USD40.  And within the next 2 years, low capacity LTE modules could reach the market at price points that compete with current CDMA 1xRTT modules.  As a result of these price changes and the expectation that both AT&T and VZW will be all LTE by 2021, for connected devices with expected lifespans of greater than 5-7 years, LTE is quickly evolving into most cost-effective path for long-term deployments of connected machines. These issues, and many more related to technology choices, are addressed in a forthcoming Machina Research Strategy Report on M2M modules and devices.