2G Re-Farming: How Does this Affect the Growth of M2M?

K. Weldon
K. Weldon

Summary Bullets:

  • AT&T’s announcement that it will gradually (market by market) shut down its 2G network to reutilize spectrum resources for higher bandwidth technologies and applications (and that this re-farming will be complete by 2017) spurred controversy last week. Competitors implied that many M2M customers would be stranded and would either have to change providers or pay more to AT&T for 3G or even 4G connections.
  • AT&T notes that only 12% of all post-paid connections over its network are 2G today . While the make-up of these connections or how many of them are for M2M deployments are unknown, the general estimate in the market has been that at least 80% of worldwide M2M connections are on 2G networks and that this is still sufficient for the kinds of low bandwidth, infrequent data usage scenarios that still dominate the market.

Competitive operators have been the most vocal about AT&T’s plan. Those operators that do not plan to shut off 2G (or haven’t officially announced such plans) include Sprint and T-Mobile (along with the latter’s MVNO partner, RACO Wireless) , although T-Mobile is actually re-farming about 75% of its 2G spectrum but keeping about 5 MHz available for M2M and other 2G customers. Verizon has not announced any specific plans and is looking to other sources of new spectrum (such as its deal with several cable companies) to fuel its continued LTE build-out and ensure high-capacity and good performance on the new network. So Sprint and RACO appear to be excited about AT&T’s plan, because they intend to lure those 2G M2M customers who really have no need for an upgrade.

While it seems likely that these competitors will be able to grab some of the remaining 2G customers (a number which will continue to dwindle by 2017), the M2M market is evolving to where new customers are already looking to 3G for “future-proofing” solutions. In other words, if there is any possibility that customer needs for bandwidth will increase due to use of more data (and video) – hungry applications, more frequent sensor polling, etc., it may make sense to go with 3G a bit in advance. Verizon is even more aggressive in pushing 4G M2M connections (as it has the biggest supply of them today) because it wants all mobile traffic to eventually ride on its more efficient LTE network. Verizon is also working with its suppliers to bring down the costs of 3G and 4G M2M modules.

All in all, AT&T clearly views that losing a few low-speed customers is worth it, as its short term revenue and profit calculations are already tied to 3G, and its longer term future is married to 4G LTE. It also has other ways to acquire new spectrum in place, with its plans to buy Nextwave Wireless, which holds spectrum in the 2.3 GHz band. And by 2017, other operators may end up viewing their 2G networks as more of a liability than a source of revenue.

What do you think?

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