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Challenges Posed by M2M M2M & the Internet of Things

Peter Waters

Adrian Chotar

Andrew Hii

Joshua Gray

19 June 2012

Overview

1. M2M solutions: key components and issues 2. Commercialising M2M: Drivers enabling M2M solutions and factors inhibiting M2M development 3. Impact of M2M on business models 4. Legal risks and challenges posed by M2M technology

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The 8 characteristics of M2M


Issue
Multitude Variety Invisibility

Consequence
Magnitude in number of devices creates scalability problems for networks designed with fewer users at greater throughput levels M2M devices vary widely in data exchange rates, computing capabilities etc Mainly designed as vertical applications interoperability No or limited human control otherwise cost driven into application

Intrusiveness
Criticality

As Google shows, privacy is no longer regulatory compliance headache but about product acceptability
mission/life critical messages problem of network latency in current store an forward model for data such as SMS

Low throughput / frequent tolling


Functionality Embedded

Challenge to usage based charging ARPUs at 5-10% of traditional data usage Set-up/tear costs much the same Cuts across capacity management and strategies
Limited functionality to keep costs down Often lack remote software update capabilities + captive base churn difficult - long life can be drag on technology change
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But the Big Four Issues are 1. Challenge of aligning technical/economic characteristics of networks and M2M requirements different traffic profile of M2M requires re-engineering of network architecture but also tariff models does M2M really need high speed fixed or wireless broadband? 2. Managing risks and liability Although individual messages may only bear a low usage charge, the risks may be substantially greater because they involve mission critical or life line services contractual risk allocation across complex supply chain
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But the Big Four Issues are 3. Challenge of traditional end user pays model economic model needs to take into account avoided costs of current service delivery e.g. should health payments models cover doctors using M2M rather than face to face? scalability global solutions based on roaming: economics and regulatory viability 4. Privacy and data security end user acceptance critical to ubiquity: concerns over tracking and surveillance over end user activity
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M2M solutions key components

Need for SLAs Privacy Cost Who funds?

Monetisation Reconfiguring networks Risk allocation

Lock in Monetisation Risk allocation

Willingness to pay? Privacy Liability claims against providers Commercialisation challenges

Solution complexity across software / network layer stack Legal issues cut across the value chain

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Case study of M2M application Consider a medicine bottle with device tracking dosage of pills similar to Vitalitys GlowCap Who ultimately pays for the application? Traditional user pay model will not work Government costs saving in providing better delivery of health services Economic model needs to take into account the avoided cost of service delivery
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Will a patient pay 20 cents every time they unscrew the pill bottle lid?

22172840_1.PPT | Legal Risks and Challenges Posed by M2M | May 2012

No single value proposition = no consistent business case


M2M
Anti-theft/service automobile applications Telematics-based insurance Smart energy grid

Who realises value?


End user Car manufacturer End user End user in lower charges Generator/distributors with lower investment Societal benefit re global warming society Government health budgets Government revenue

Health care Road tolls

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Legal issues Risk allocation Whos doing what? M2M value chain features vertical integration of a number of players Risk allocation: managing legal risks and liability within a complex supply chain and the overall M2M solution traditional approaches to contractual risk allocation mechanisms for once-off technology purchase will not work within complex supply chains where parties have ongoing relationship
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Legal issues Risk allocation Risk allocation (contd):

contractual performance needs to be assessed over an extended period of time rather than single event (eg through SLAs) Independent standardisation and universal specifications can assist in providing baseline for measuring performance technology solution has to match risk allocation: changes in network core for M2M
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Legal issues Privacy and data security Pervasive nature of monitoring and collection of data raises serious concerns about use and disclosure of personal information Potential use of personal information to market goods and services based on individuals behavioural patterns and preferences

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Legal issues Privacy and data security Examples of privacy legislation regulating a utilitys use of a consumers energy consumption data Privacy concerns in the Netherlands saw an initial proposal for mandatory introduction of smart to give consumers a right to refuse the service anti-surveillance laws: eg, Australia European Commissions public consultation on the Internet of Things seeking views on ethical and legal framework to manage privacy, safety and security concerns
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Conclusions M2M business cases need to be built on a fundamentally different equation:


high volume + low throughput + low usage charge + high risk = what reward / who pays?

M2M involves a complex ecosystem in which commercialisation depends on multiple participants agreeing a new business model allocating value, costs and risks compared to todays voice and data models Privacy and data security hurdles to end user acceptance
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Slides and useful links can be downloaded from www.gtlaw.com.au

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