Ref: 18721-486

The total cost of ownership for embedded mobile devices

Ian Streule

8 December 2010

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18721-486

Embedded mobile applications are forecast to grow significantly

Diagnostic and control systems

Traditional telemetry and M2M

systems

Connected enterprise and

business equipment

New connected consumer devices

Health monitoring

Source: cepro.com, cambridgeconsultants.com

…and many, many more applications

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Today’s deployment decisions could create long-term problems

Around 90% of the devices currently being deployed are 2G*

2G module prices are lower

Many devices have long lifespans (up to 20 years)

A base of 2G devices could constrain the way that operators use their spectrum

especially their ability to re-farm 2G spectrum

decommissioning 2G networks may trigger large costs to replace 2G devices

We’ve calculated the total cost of ownership (TCO) for

both 2G and 3G devices

We’ve assessed the impact of deploying 2G devices on

mobile operators’ network strategies

* Source: Stakeholder interviews

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Our approach was twofold

Interviews with 24 stakeholders

6 mobile operators

5 module designers/developers

4 solution/platform providers

7 suppliers specific to certain vertical sectors

2 retail/consumer players

Detailed modelling of TCO and replacement costs

TCO:

we modelled the costs by year over the lifetime of the device

Replacement costs:

we calculated the costs to replace legacy 2G modules if operators wish to decommission 2G networks

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We have defined a ‘cost stack’ for embedded mobile devices

Approvals

Components

Design

Integration manufacturing

Distribution and installation

Systems and platforms

Service connection

Network usage

Comms module

Design and

provisioning

Network

Cost stack Summary

Aggregated

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18721-486

Source: Analysys Mason, 2010

The comms module contributes only a small proportion of the TCO

0

200

400

600

800

1000

Network traffic

Design andprovisioning

Consu

mer

/h-h

old

Ave

rage

TC

Os

for

2G a

nd 3

G

devi

ces

depl

oyed

in 2

011

(US

D)

USD

as % of TCO

20

6%

23

5%

21

12%

20

2%

25

6%

20

6%

26

13%

Comms module

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18721-486

Ave

rage

TC

Os

for

2G a

nd 3

G d

evic

es d

eplo

yed

in 2

011

in th

e tr

ansp

ort s

ecto

r (U

SD

)

Source: Analysys Mason, 2010

Fleet vehiclemanagement

systems

Private vehicletheft/ecallsystems

Enforced replacement Network traffic Design and provisioning Comms module

The TCO of 3G modules is almost always lower than for 2G modules

2G

3G

2G 3G

0

500

1,000

1,500

2,000

2,500

3,000

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Today’s device choices could limit mobile operators’ flexibility

Replacing legacy 2G modules in order to decommission 2G networks and re-farm 2G spectrum is likely to be costly

The opportunity cost of retaining a 2G network and acquiring additional spectrum for 3G or 4G is even higher

Cost of replacing 2G modules for typical W. European operator*

decommissioning 2G network in 2020

0

50

100

150

200

250

300

US

D m

illio

ns

Industry continues to use 2G modules

Industry adopts 3G modules for long-service devices

* Defined as having 10 million traditional subscribers

Source: Analysys Mason, 2010

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Our conclusion …

In almost all scenarios 3G embedded mobile devices have a lower TCO than 2G

They are also a more future-proofed solution, as:

they lead to mobile operators having more flexibility regarding their network strategies

they are better equipped to meet future demand for embedded mobile applications (e.g. higher throughput, lower latency)

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18721-486

Ian Streule

Ian. Streule@analysysmason.com

Analysys Mason Limited

St Giles Court, 24 Castle Street

Cambridge CB3 0AJ, UK

Tel: +44 (0)1223 460600

Fax: +44 (0)1223 460866

www.analysysmason.comRegistered in England No. 5177472