Mobile operators AT&T and Sprint have recently struck deals with cellular embedded module vendors to provide modules for machine-to-machine (M2M) application developer partners at discounted rates. Their goal is to encourage app developers to embrace 3G – and now 4G – M2M modules.

Why do developers need these incentives? The M2M market largely consists of low data rate, low data consumption applications where 2G technology is perfectly adequate. Given a choice, M2M application developers would prefer to stay with older technology that is not only adequate from a connectivity standpoint, but more optimized from a cost component standpoint. In 2010, a 2G GSM/GPRS cellular embedded module cost approximately $18, while a 3G WCDMA module was roughly $65.

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ABI Research forecasts that as W-CDMA module shipments grow from less than four million last year to more than 62 million in 2016, ASPs will fall by more than half, approaching $30 in 2016. According to ABI Research Practice Director Sam Lucero, “The operator-module vendor deals we are seeing today may cause that ASP to be reached much sooner for the overall W-CDMA market.”

The operators, in contrast, want all data devices on the network to use the most spectrally efficient technology – 3G or even 4G rather than 2G. “It makes sense for the mobile operators to do whatever they can to facilitate adoption of 3G/4G technology by the M2M ecosystem,” notes Lucero. “The AT&T/Sprint deals are examples of just such symbiosis: large mobile operators using their size to benefit typically much smaller M2M application developers.”

AT&T is working with Ericsson, Huawei and ZTE (the latter two being leading China-based module vendors) while Sprint has selected Fusion Wireless, an innovative new CDMA-focused module vendor based in San Diego, CA.

Lucero concludes, “We anticipate other mobile operators in North America, as well as in other regions, will come to similar arrangements to help facilitate M2M application development.”

Many M2M market trends are quantified in ABI Research’s “M2M Market Data” which tracks the M2M market, presenting statistics and forecasts for shipments, connections, and revenue segmented by region, application, and air interface standard. It also includes M2M embedded module vendor annual market shares for 2010.