Qualcomm, Verizon form new joint venture

The new company will support machine-to-machine products and services and will make it easier for developers to bring their products to market

Verizon and Qualcomm on Tuesday announced they are forming a new joint-venture company designed to support so-called machine-to-machine wireless services.

In their most basic form, machine-to-machine systems automatically transmit data between a device and a network. An example is a water meter in a home that sends data about water usage back to the water company. But more recently, devices like Amazon's Kindle have been lumped into the category because the Kindle wirelessly downloads books and transmits other data to and from Amazon, without the end-users directly paying for the connection or explicitly knowing that they are using the wireless connection.

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The joint venture, yet to be named and equally owned by Verizon and Qualcomm, will aim to make it easier for product and application developers to bring their offerings to market, executives from both companies said.

"It has been a niche space that has been fragmented," said Steve Pazol, who will head the new company and previously served as president of Global Smart Services at Qualcomm. "This partnership with Verizon, we believe, will bring us to the next level."

The new company will deliver middleware and application programming interfaces to ease development; offer device performance services to protect devices from malware; help providers provision, manage and activate devices; and offer application services.

Despite Verizon's stake in the new company, the joint venture will support services that run on any network around the world, Pazol said.

"If you're a large enterprise and you try to bring a solution globally, you're dealing with different carriers with different rates and different coverage in each region, so it's complex," Pazol said. The venture will aim to simplify that process for customers, he said.

The new company may have some hurdles, however, because of competitive issues facing both companies. Qualcomm has traditionally met with resistance in Europe, where operators settled on GSM (Global System for Mobile Communications) rather than Qualcomm's competing CDMA (Code Division Multiple Access) mobile technology. Operators in the U.S. may be reluctant to use a service developed by a competitor.

In addition, the executives acknowledged that it will be a challenge to make the business model work. "When we thought of this venture, we recognized that the economics are different," said Tony Lewis, vice president of open development at Verizon Wireless.

But costs have dropped for chips and for transmitting data over networks, said Pazol. "And with these [machine-to-machine] apps, they typically don't churn," he said. For example, a tractor in use in the field for 20 years might only send data infrequently, but over that time it is very unlikely that the tractor would switch to a different wireless network.

In addition, Verizon has laid the groundwork for making it easier for developers to attach their devices to its wireless network. "If we didn't make it simple for device manufacturers to certify devices on our network, this would never succeed," Lewis said. Last year, Verizon launched its Open Network Initiative in an effort to streamline the process for approving new devices that can run on the company's network.

Verizon is aiming for the new services to run on its LTE (Long Term Evolution) network, which the company plans to begin rolling out next year.

Pazol said that one of the strongest components of the venture will be the access to Verizon's existing sales force to sell products and services to its customer base, including banks, utilities, health-care organizations and essentially any other kind of company. The venture has not yet targeted specific verticals, Lewis said.

Analysts expect the market for machine-to-machine communications to grow. Shipments of the radio units used in machine-to-machine products will total nearly 80 million modules in 2013, analysts at ABI Research predict.

Copyright © 2009 IDG Communications, Inc.

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