An airline model for mobile data

“If it weren’t for all of those discounted airfares there would never be the volume of travelers necessary to support the enormous number of flights leaving every city each hour,” Brisbourne said. By filling those seats with discounted travelers, an airline can offer 12 flights a day between Chicago and Cleveland — frequency that business travelers need to ensure their work weeks aren’t spent waiting in airport terminals or trapped in hotels post-conference. If it weren’t for that family visiting grandma in Tampa off of a Priceline deal, you wouldn’t be able to make your weekly commute to headquarters.

Now apply those same principles to the wireless network. Consumers built the wireless networks we have today. Operators fully fess up to the fact that they would never have built extensive 2G or 3G network for cellular M2M. But now that’s the network is built on the backs of consumer subscriptions they’re perfectly willing to sell the fruits of those labors to vertical industries and enterprises. And let’s face it, the driving force behind 4G and mobile broadband in general is still consumer broadband, not for video surveillance or telemedicine or e-book downloads. Those applications will take advantage of 3G and 4Gs’ capabilities, but they’ll always be piggy-backing off investments made to meet smartphone and mobile computing demand.

So could business critical machine traffic take up so much of the wireless networks resources that it could effectively subsidize the consumer data market? Could their willingness to subscribe to more complicated billing models counteract the consumer’s inherent aversion to such complexity?
Maybe.

Like a lot of the questions we’ll be exploring in the Mobile Data Paradox, there is no clear-cut answer (it’s a paradox after all, right?). In theory a booming world of machine data, could make the consumer data business model moot or at least relevant, but there’s still a big question as how much M2M communications can boom. Beecham Research senior analyst Bill Ingle pointed out that the M2M market — at least as far as mobile wireless is concerned — is still small, and of the value in that market, the mobile connection’s proportion of that value is even smaller. In the M2M value chain the big money is still in the application, not the network. That is changing as demands on the mobile data network become more intense with the introduction of more bandwidth intensive applications, but Ingle pointed out that consumer applications like video are generating demand for capacity to a much greater extent than M2M is emerging into the 3G broadband. In short, no matter how quickly M2M grows, consumer applications are growing faster, at least as far as overall network resources are concerned.

But what of this picture we’re painting of a world dominated by machines.? Surely 50 beeping machines will be able to keep pace with one iPad, right? Not necessarily. Kore’s Brisbourne pointed out that 50 connected machines don’t equate 50 network connections. A car might have 20 different location and diagnostic sensors as well as a huge complement of Web-surfing and cloud-based entertainment services, but it will likely only have one 3G or 4G network connection. A good portion of the machines will also be connected through WiFi or directly to a wired network — smart meters don’t exactly need mobility.

No one doubts the age of wireless machines is fast approaching, but it will take a considerable amount of time for the pace of M2M data growth to equal that of consumer mobile broadband growth, to say nothing of overall M2M data traffic surpassing that of consumer traffic. By the time that happens, the mobile data paradox will be well upon us. We’ll have to look elsewhere for answers.