British MSS operator Inmarsat aims to be at the forefront of an M2M satellite communications market that is set to grow nearly 76% to reach US$5.91bn by 2020, according to a recent MarketsandMarkets report.
SatelliteFinance talks to David Wigglesworth,…
British MSS operator Inmarsat aims to be at the forefront of an M2M satellite communications market that is set to grow nearly 76% to reach US$5.91bn by 2020, according to a recent MarketsandMarkets report.
SatelliteFinance talks to David Wigglesworth, VP for Global Internet of Everywhere, to learn more about how it is approaching this rapidly growing industry
Jason Rainbow: Why is M2M so important to Inmarsat?
David Wigglesworth: The consumer side of the Internet of Things is what has taken people’s imagination recently, but the business side has been around for 20 years or longer, and that ranges from supply chain logistics all the way to a piece of heavy equipment – how many hours has it been operating and so on.
What M2M has done from a business perspective is all about return on investment. If I deploy a managing and monitoring solution in my fleet of trucks can I get more work out of them in a day? If it’s a delivery vehicle, can I limit idling time and fuel consumption when they’re idle?
With the ability to monitor and manage at a large scale too – and that’s what M2M really helps to do is scale up from a small organisation to a big organisation – the cost savings can be enormous. It’s not just costs though, it’s potentially new revenue sources that also feeds into return on investment.
For example, say you rent a piece of heavy equipment like a bulldozer. In the past you’d maybe drive off at 4pm and arrive back next week at 2pm, and the bill would be seven times whatever the daily rate was. But you might have only used that vehicle one hour a day or 24 hours a day.
Now these companies can come up with a different revenue stream by charging per engine hour used, instead of per day that the piece of equipment was not at the rental depot. So there can really be a change of the financial dynamics for the customer and a different return of investment for the rental company.
JR: How significant is the role of satellite in these markets?
DW: We’re one of a range of technologies. Not everything you are monitoring needs a cellular or satellite connection, so technologies range across a continuum from low power/ short distance up through cellular and the ultimate wide area network –satellite.
We tend to be complementary to cellular. In some cases we’re primary, but it really depends on the application and reason for use. For example, with trucking in Brazil, if you’re a manufacturer of goods and you want to ship them to your customer, then you have to use a tracked carrier if you want insurance on that shipment because the risk of theft is high.
If you want to track that truck then you have to use satellite because cellular doesn’t cover some of the rural regions. So sometimes customers use satellite and cellular, but some applications like oil & gas in the US will just use satellite because there is no cellular coverage at all.
We’d estimate 5-10% of the total M2M market is addressable by satellite.
JR: Do you see that increasing with the arrival of Inmarsat’s high throughput services? Will satellite take the place of some of these terrestrial networks?
DW: Not high throughput services specifically. It’s not that you need fantastic amounts of bandwidth to make that happen. Most of the time customers don’t really care how their data went, as long as it got there when it was expected, it was correct and they pay what they expect to pay.
Inmarsat has a range of services which can provide progressively higher bandwidths, but you don’t need multimegabit services for most M2M applications. Inmarsat can provide everything from a very simple low data rate, track and trace product, up to an integrated network capability where a cellular pico-cell is backhauled across the satellite link.
An exception to that is video. We’ve seen video begin to come in. In Australia we’ve seen it used to monitor water in wells. If there is a high or low flow rate, then what you want to do is take a picture of what’s going on there and send that along with an alert to a human to have a look at it – as opposed to trying to instrument every possible scenario. You could never cost effectively sensor all of that.The range of bandwidths for those types of applications are available now and the high throughput really won’t change much.
JR: So satellite is set to remain a small part of the M2M market?
DW: Yes, although whereas the enterprise market used to not worry about having a few assets outside the range of cellular, they realise now that if they don’t have everything monitored and tracked then they’re missing significant value.
Inmarsat fundamentally provides 100% access to asset information. Imagine if you’re a fuel distributor and you have a tanker get into an accident somewhere. In the US that’s a US$5m event when that happens, so not knowing what was going on, and not managing that because the vehicle is going somewhere remote, just isn’t an excuse anymore because the technologies exist and expectations of coverage are higher.
JR: How much demand do you see from maritime?
DW: That’s certainly a big part of M2M. In terms of satellite, maritime and aviation have always been and still are the two core markets. There’s no easy way of putting cell towers in those locations.
Fisheries management is the traditional application in maritime. Europe, the US and many other parts of the world have very strict fishing quotas these days. In the past, they just wanted to know where their vessels were, now they also need to know what they’re catching and what they threw back.
And of course Inmarsat has been tracking maritime vessels long before there was such a thing as an M2M service.
In aviation, a lot of aircraft have had satellite communications services for a large number of years – and it’s not just the big jetliners. They use a combination of tower and satellite, so whereas you have cellular and satellite elsewhere, they use HF/VHF radio and satellite. Again, they all have different performance metrics, but satellite has the ability to reduce the cost of the technologies, and is easier to install to track the safety of all kinds of aircraft.
JR: As countries expand their terrestrial networks into more rural regions, is there a concern that satellite could lose out to cellular networks on land?
DW: No, there will always be increases in cellular coverage but that’s more driven by competition. When you look at the qualifier numbers carriers put out they don’t say they cover 99% of the country but 99% of the population. There are usually pretty significant gaps, and even in the covered places you can’t always find a signal.
Europe is a block that’s pretty well covered with cellular, so there’s never been that much opportunity for satellite, but somewhere like Russia is a totally different market where cellular is very strong in the city, and maybe a few of the roads leading into them, but not in rest of the country. It’s a huge country and most of the business opportunities there – mining, forestry, etc. – are out in the middle of nowhere.
Most of the cellular carriers are looking for people and the smartphone applications because that’s where they see their higher ARPUs coming from.
Will cellular expand? Yes it will. But I still think there’s a very strong market for satellite, especially in the core markets of maritime and aviation.
JR: What position is Inmarsat in the satellite M2M market?
DW: Inmarsat holds a leading position in wholesale satellite M2M. While methodologies to compile such numbers vary, our estimates show that we have approximately a 25% market share by revenue.
JR: Inmarsat struck an alliance in 2013 to forge a standardised M2M platform with Orbcomm, which has been making acquisitions to bolster end user solutions. Could Inmarsat adopt a similar M&A strategy?
DW: From our perspective, we seek to find new business partners to build those end user solutions. You need a lot of knowledge to operate in a particular vertical market, and you also need a grounding in a particular region or country to actually go out and sell that.
We don’t have the expertise in heavy equipment or refrigerated containers and so on, but we do have expertise in funding and operating a satellite network. To get expertise in those vertical markets, for us, we go and find companies that are already doing that – maybe using cellular or some other technology – and work with them to incorporate the Inmarsat technology into their business, and enable them to expand it.
We can’t go into all those solutions because the investment would be enormous, and we’d end up competing with those people who are already there anyway. Our business model is a wholesaler, but we are always looking for ways to improve the overall business ecosystem whether it is investing in core platforms or the core communications technology.
JR: How will the arrival of your next generation system impact the growth of your M2M business?
DW: That’s a big topic of discussion internally right now. I don’t have anything specific to tell you because we haven’t made any decisions, but we’re looking at where we need to be in terms of device technologies, and what types of services customers are looking for. What we’re seeing is people want more frequent updates. It’s not necessarily a large chunk of data. They want lots of updates frequently.
If you hear from a vehicle once a day or once a week then it’s not that interesting. If you hear from it all the time then you can really see what’s going on and do a lot more analysis that drives value for your business.
One of the drawbacks of satellite is you have this long technology cycle, but one of the things that’s exciting about going into the new one is you can peer into the future a little bit, and look at the things you want to do and what you want to be when you launch these services.
One of the areas I think is particular exciting, and we’re still figuring out how to do this, is multi-network capabilities. Is there a way to work with the low powered networks that are out there and how would we do that, for instance?
JR: And how are you positioning yourself to compete with other next generation systems such as Intelsat’s Epic?
DW: The mobility of a solution is key. Anything that’s fixed is relatively easy to do and the mobility of a solution is ultimately the key differentiator in how well you work in that market. So that’s one thing we’re looking at very hard. It’s not just about throwing bandwidth at it, it’s about how well you integrate it into the solution.
Some people would definitely like to have a lot of bandwidth – to stream video, etc. – but not everybody needs that and there’s not always a business case for it.
As you go to higher and higher bandwidth there are also more technical problems to solve. You’ve got to have a more accurate antenna alignment to the satellite, you’ve got bigger power amplifiers, and the cost of the terminal goes up. There’s not necessarily reciprocal value that that capability would have that’s not already available to them.
I’m sure those guys will also look at the whole market, but I think they’re much more focused on far bigger assets like large ships which may have different classes of usage.
M2M at the end of the day generally should not require a lot of data every month. Even in the cellular world it’s very cheap bandwidth. You could probably deal with 99% of the applications with less than 5Mb a month.
JR: What about the impact of the Proton launch delay to your M2M plans? What pressure are you under to get revenues from your new constellation?
DW: Proton is launching a Global Express (GX) satellite. GX’s primary markets are maritime and aviation, M2M is somewhat secondary and in the grand scheme of things it’s not a major impact. We already have two GX satellites in orbit. For the whole ecosystem, we’re still able to develop the technologies and test them. We’re simply just waiting for the remaining part of the network to come online to launch full global services.
There are markets like aviation and maritime where we do need full blown global coverage, and there will be a small impact on revenues, but we don’t believe those revenues have disappeared. They’ve just been pushed a little bit forward into the future.
It’s disappointing but it’s a well-worn path in satellite.
