Earlier this month, AT&T finally announced it would shut down its 2G network in North America by the start of 2017 in order to refarm the spectrum for HSPA+ and LTE services. Very little mention of M2M users in that although this will affect them much more than most.

This issue has been around for some time and the likely impact on M2M has been discussed many times. One myth that has grown up is that, with the expected volume increases, the cost of 3G modules used for M2M applications will come down quickly towards that of 2G modules. As a result, there will therefore be little or no cost disadvantage for M2M.

I don’t think this is the case. For a start, it ignores what is actually going on in 2G. Over the next few years, while 3G volumes will indeed increase, Beecham Research believes that – given the way major projects are developing right now – worldwide 2G volumes will nevertheless grow much more quickly. This is in terms of numbers of units, not percentages. If you start from a small base, it is obviously a lot easier to grow more quickly in percentage terms but compared with a larger base it is still much smaller volumes. On top of this, 3G modules are inherently more costly than 2G because they have more functionality in them and a lot of unavoidable associated fixed costs are higher. The net result is that, even if you take out some of the added functionality by making it region-specific, you still end up with unit costs declining more quickly worldwide for 2G than 3G. That cost gap between them is not going to go down any time soon.

Then there’s 3G coverage, which is not as extensive as 2G in North America as discussed in a previous post.

So 3G hardware will cost substantially more than 2G for M2M users for the foreseeable future and not have the same coverage. Meanwhile T-Mobile seems committed to supporting 2G indefinitely, so no doubt they will do well out of it if current users are forced to move.

How long before 3G is forced out for 4G? By the same token, what impact will all this have on what customers think about cellular M2M solutions? Maybe good news for WiFi and satellite.