Presentation on machine to machine (M2M) and mobile virtual network operators (MVNO) in the context of mobile telecommunications. Explanation of business models; overview of legal and regulatory issues; case studies

1. M2M and MVNOs
Mobile telecommunications in 2014
Dr Martyn Taylor
Partner
January 2014

2. Overview
GSMA intelligence: “M2M and MVNOs are driving current
growth in mobile connections” (August 2013)
Machine to Machine (M2M) growth
•
The M2M business model
•
Opportunities and international developments
•
Legal and regulatory issues
•
Case study: existing M2M operations and issues
Mobile Virtual Network Operator (MVNO) growth
•
The MVNO business model
•
Opportunities and international developments
•
Legal and regulatory issues
•
Case study: the introduction of MVNOs in China
Discussion
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M2M and MVNOs – Mobile telecommunications in 2014
Dr Martyn Taylor
Partner
+61 45 777 4711
martyn.taylor@nortonrose.com

3. The M2M business model
•
Machine to machine (M2M) is the name given to a range of
technologies that permit information to be exchanged automatically
between machines or devices, without human intervention.
•
M2M has existed for many years (eg SCADA). However, greater use
of low-cost broadband wireless and Internet applications is now driving
innovation and rapid M2M market growth.
•
M2M covers a broad range of technologies and applications and has
provides significant further potential for business innovation:
•
•
More timely (including real-time) information flows.
•
Automated diagnosis and implementation of solutions.
•
Greater ability to react to information, providing greater control.
•
3
Greater ability to collect more accurate information.
Overall, greater efficiency and quality in service delivery.
M2M and MVNOs – Mobile telecommunications in 2014

4. Elements of the M2M process
An M2M process involves a number of discrete stages:
• the collection of a data event by an autonomous hardware device, such as a sensor or meter;
• the transmission of that data through a wireline and/or wireless communications network;
• the receipt and analysis of that data by another autonomous device (sometimes as part of a set of
data from multiple autonomous sources) using a telemetry-based software application;
• the translation of that telemetry into meaningful information, including computer-generated
directions given to further machines or humans.
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M2M and MVNOs – Mobile telecommunications in 2014

5. M2M growth forecasts – a USD 1.2 trillion market
Source: Machina Research (2012)
•
Currently around 2% of mobile connections, by 2022 this will increase to around 22%.
•
Global M2M revenue forecast to increase from USD 200 billion to USD 1.2 trillion, of
which around 10% involves connectivity and associated services.
•
M2M data traffic usage is expected to remain low, at around 1 - 2% of network traffic.
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M2M and MVNOs – Mobile telecommunications in 2014

6. Existing and future applications
Areas of future innovation may include…
•
Remote
security
monitoring
systems and
monitoring
smart
metering for
utilities
6
Qatar ‘Smart
City’ initiative
(Dec 2013)
smart medical
devices
M2M and MVNOs – Mobile telecommunications in 2014
inventory
management
traffic
management
•
law enforcement and surveillance
•
tailored insurance premiums
•
tailored products and marketing
•
anticipatory healthcare and support
•
intelligent transport
networks
‘just in time’ inventory monitoring
asset geotracking and monitoring
•
preventative maintenance
•
intelligent and networked cars
•
intelligent houses and appliances
•
information-intensive micropayments
Automated
provisioning

7. Customer expectations are driving industry innovation
Customer expectation
October 2013:
Malfunctions in devices
can be quickly
distinguished from
network malfunctions.
Replacement of
customer helpdesks with
on-line network status
reports and diagnostics.
“The GSMA’s vision is a world
empowered by the capability to
remotely provision mobile operator
credentials to support the huge
growth of M2M devices.”
Switching devices to
different networks
without swapping SIM
cards.
Embedded SIM cards
with remote activation.
Switching devices to
different networks during
a home network
downtime.
Domestic roaming where
the home network has
an outage.
“To deliver this, the GSMA are
working with operators and SIM
solution suppliers from around the
world to create a common, secure,
interoperable architecture to
facilitate the commercial
deployment of systems that enable
remote ‘over the air’ provisioning
and management of the SIM.”
Integrated M2M
connectivity platforms,
devices and software
solutions.
7
Industry innovation
Joint ventures and
alliances between telcos
and other suppliers of
M2M solutions.
M2M and MVNOs – Mobile telecommunications in 2014
“The automative industry is
currently trialling the new
remotely provisionable SIM to
manage operator subscriptions and
support the continuously evolving
new services available in your car.”

8. Legal and regulatory issues
•
Common issue in 21st century telecoms are regulatory systems based
on 20th century technologies. Pace of technological innovation has
far exceeded pace of regulatory change.
•
While many legal issues are common to other technologies, there are
some nuances and issues that are unique to the M2M environment.
•
Key issues:
•
•
•
•
•
•
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spectrum management;
device certification;
numbering,
data security and privacy;
contractual liability.
Also market liberalisation issues such as regulatory restrictions on
roaming and restrictions on the use of MVNOs, as well as general
competition policy where mobile operators refuse to provide access.
M2M and MVNOs – Mobile telecommunications in 2014

9. Spectrum management
•
Key implications for spectrum policy:
• greater flexibility in use of spectrum (technology neutral);
• spectrum usage locked in for longer periods (e.g., 2G devices).
•
If an operator does not hold its own spectrum and wishes to sell
M2M services, it would be necessary to enter into an MVNO or
resale arrangement with an existing operator – see later slides.
•
Many existing wireless standards are optimised for traditional
mobiles (high data rates with fewer devices), but would have
difficulty supporting M2M (low data rates with many devices.
•
Some jurisdictions are considering allocating spectrum specifically
for M2M purposes (e.g., US – auction in 2014 for 3.5GHz band).
•
Global industry standards are evolving, including in the context of
LTE, to carve out a niche for M2M decides (e.g., low cost devices
that use half duplex or single receivers on lower power levels).
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M2M and MVNOs – Mobile telecommunications in 2014

10. Device certification
•
Most jurisdictions require certification of radiofrequency devices with
certification requirements varying between regimes.
•
There are typically three layers of regulation: (a) regulator approval;
(b) industry standards association approval; and (c) operator
approval. The latter is often the most difficult to obtain.
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11. Numbering – generally a scarcity issue
•
M2M devices require numbers to function, including:
• IP-addresses (IPv4 and IPv6);
• telephone numbers (E.164);
• IMSI numbers (E.212).
•
Compatibility with IPv6 is mainly a software/firmware issue,
so should be fixed. Regulatory intervention could be
necessary to mandate updating of equipment.
•
Scarcity of E.164 telephone numbers is real risk, meaning
that technology solutions may be required or that the ITU
expands the E.164 numbering allocations.
•
A single network can allocate between 1 and 10 billion IMSI
numbers, so IMSI number exhaustion is highly unlikely.
•
Open questions include whether M2M should have specific
numbers and whether such numbers should be portable.
.
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M2M and MVNOs – Mobile telecommunications in 2014
Singapore IDA, April 2013:
“It not clear when non- Mobile
Subscriber Integrated
Services Digital Network
Number identification and
addressing standards,
e.g.,IPv6, for communication
amongst M2M devices will be
finalised and become
mainstream for M2M
addressing purposes.“

12. Data security and privacy
•
Significant increase in the range of information potentially gathered on
individuals, including ability to assimilate and process information.
•
Key issues with generic privacy laws include:
• obtaining consent to the use of personal data;
• Requirements limiting the retention of personal data to defined
periods;
• Requirements regarding the security of personal data that is stored;
• Restrictions on export of personal data to other jurisdictions.
•
Privacy laws can be applied to individual sectors and activities - such
as collection of data from smart meters (e.g., California, Germany).
•
If proprietary rights exist in M2M data, it may be often unclear whether
such data is owned by the end user, the distributor or the telco. The
relevant contracts may need to address this issue.
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13. Mobile Virtual Network Operators
•
A mobile virtual network operator (MVNO) is a company that provides
mobile services but does not have its own spectrum, nor does it
necessarily have all of the relevant network infrastructure.
•
Rather, the MVNO uses the spectrum and network infrastructure of an
existing mobile network operator (MNO).
•
The MVNO enters into a wholesale arrangement with the MNO to
obtain bulk access to the infrastructure of the MNO at wholesale rates.
For example, it may buy airtime on a wholesale basis.
•
The MVNO supplies independently of the MNO in the retail market, as
a competitor of the MNO, and can set its own retail pricing structures.
•
MVNO market is currently 3% of total mobile market. Hong Kong has
world’s highest MVNO penetration at 7.5%.
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14. Elements of MVNOs
•
The more elements in the core network the MVNO itself owns, the greater the functionality that the MVNO
is able to offer that differentiates the MVNO’s services from the operator’s services.
•
An MVNO typically has its own customer service and billing support systems and its own customer
relationship, marketing and sales personnel.
•
The MVNO does not own any spectrum and does not seek to share any of the radio access network (RAN)
infrastructure (other than using the operator’s RAN).
•
An MVNO normally obtain bulk access to RAN network services at wholesale rates.

15. The MVNO business model
•
In mature markets, the existing mobile operators typically target the
mass market, while the MVNOs target niche market segments that are
underserved or have a low incumbent penetration:
• Discount MVNOs, targeted at price sensitive consumers (eg Virgin Mobile).
• Lifestyle MVNOs, targeted at niche market demographics, such as teenagers.
• Ethnic MVNOs, targeted at particular ethnic groups, supported by cheap calls to
the relevant home country.
• Limited MVNOs, targeted at particular types of mobile services, such as data
•
As 4G LTE networks are being rolled out, we are also likely to see a
growth in data-oriented MVNOs, such as M2M (see earlier slides).
•
A number of jurisdictions are achieving liberalisation by issuing MVNO
licences, rather than permitting market entry by additional mobile
operators. As a result, the number of global MVNOs continues to grow.
15 M2M and MVNOs – Mobile telecommunications in 2014

16. Categorisation of MVNOs
RAN and
spectrum
Switching
& core
VAS &
Apps
Billing &
CRM
Subscriberspecific services
Value added
services
Customer
relationship
management
External
interconnection
Unique
applications
Interconnection
revenue
Rebrands SIM
cards of network
operator
Branding
& tariffs
Own unique SIM
cards and
functionality
Reseller
Light MVNO
Medium MVNO
Heavy MVNO
Full mobile operator
Rebiller
Customised
invoicing
Service
differentiation
Sales
channels

17. Key differences between the categories
‘Skinny’ or ‘Light’ MVNO
‘Hybrid’, ‘Thin’ or
‘Medium’ MVNO
‘Thick’, ‘Full’ or ‘Heavy’
MVNO
Does not own any
spectrum or RAN
infrastructure.
Does not own any
spectrum or RAN
infrastructure.
Does not own any
spectrum or RAN
infrastructure.
Does not own any core
network elements.
Owns part of the core
network for valueadded services.
Has its own core
network infrastructure.
Does not issue its own
SIMs, but rebrands
those of the MNO.
Does not issue its own
SIMs, but rebrands
those of the MNO.
Has its own IMSI and
network code.
Responsible for its own
billing and customer
care.
Responsible for its own
billing and customer
care.
Issues own SIMs and is
responsible for billing
and customer care.
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18. Network elements in a 3G MVNO
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19. Interconnection in a 3G MVNO
•
•
In this manner, a heavy MVNO can
act as if it is a mobile network
operator and negotiate
interconnection arrangements
separate from the MNO.
•
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Where the MVNO has its own
network code, it has the ability to
receive inbound calls at its gateway
mobile switching centre.
However, an MNO may have
concerns that the MVNO may
undercut the mobile termination
rates offered by the MNO and transit
calls.

20. Key commercial and regulatory issues
Commercial:
Regulatory:
•
•
Rebillers, resellers and MVNOs tend not to
be subject to significant regulation.
•
Mandated resale of mobile services is also
less common, given existence of significant
mobile competition in many jurisdictions.
•
Accordingly, there is a heavy emphasis on
commercially negotiated arrangements.
Regulators less inclined to intervene.
•
However, still scope for regulatory
involvement to resolve issues with:
•
•
•
Rebill and resale arrangements are
generally straightforward. The wholesale
customer may acquire the retail service, less
a wholesale volume discount.
MVNO arrangements tend to be customised
and non-standard hence are more
document-intensive and heavily negotiated.
MVNO arrangements may raise complex
interconnect issues, such as whether mobile
call termination charges are appropriate,
and arrangements for MVNO interconnect
with third party operators. May involve
charges for transiting of calls, SMS, MMS.
MVNOs offer heavily differentiated services.
•
network access and interconnection;
•
wholesale pricing (eg price squeezes);
•
discrimination (price and non-price).

21. Regulatory stance towards MVNOs
•
A regulatory regime friendly to MVNOs is important, given that
MVNOs are dependent on the MNO and potentially at risk of
discrimination.
Regulatory stance
Require MNOs to share with MVNOs
Hong Kong, Norway
Regulatory measures facilitate MVNOs
Belgium, France, Denmark, UK
Regime indifferent to MVNOs
Australia, Canada, Japan, Portugal
Discourage MVNOs
Argentina, Bolivia
Prohibit MVNOs
•
Example jurisdictions
Italy, Greece
Generally, nations that permit MVNOs have more competitive mobile
markets. However, the extent of price competition associated with
MVNOs will depend on the terms and conditions on which the
MVNOs get access to the mobile networks of the MNOs.
21 M2M and MVNOs – Mobile telecommunications in 2014

22. China’s new MVNO policy
•
Over the past 15 years, China has built an extensive
mobile infrastructure that now supports the largest mobile
subscriber base of any country in the world.
•
In order to promote Chinese technology, the PRC
Government required each of the three operators to use
different 3G standards and technologies.
•
Following concerns with insufficient competition in PRC
telecoms and a stagnation of investment and innovation,
the PRC Government has been taking steps to open up
the sector, but in a limited manner.
•
China is adopting an MVNO programme in which market
entrants are permitted to acquire wholesale minutes from
existing mobile operators and resell them at retail.
•
China is expected to announce which companies have
been selected as the MVNOs by the end of this year.
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