Driving 300 miles from Billings, Mont., to Williston, N.D., Mark Bartolomeo was a long way from home. A vice president at Verizon Communications (VZ), the New Jersey resident was making the trip to scout for customers. Dotted with sagebrush, the rangeland of eastern Montana doesn’t have many potential Verizon smartphone users, even as the area has become one of the fastest-growing oil regions in the U.S. But Bartolomeo wasn’t there for the people—he was there for the machines. “It’s amazing, when you look around out here and see the massive amounts of equipment everywhere,” he says.
Verizon has installed as many as 17 new cellular towers to extend its LTE wireless coverage throughout Montana and North Dakota, Bartolomeo says. His company is pitching its wireless infrastructure as a network for drilling companies’ Web-capable smart sensors and pumps. The idea is that a reliable Internet connection will make it cheaper for drillers to automate more of their operations, creating machine-to-machine (M2M) connections that let human overseers monitor and tweak systems from afar.
From smart utility meters to auto factories, the rise of M2M technology has been promised before, but “it does feel a bit more like it’s arriving now,” says Jeremy Green, a principal analyst with market researcher Ovum. Verizon branched into data centers with its $1.4 billion acquisition of Terremark in 2011, teamed with Redbox (OUTR) the next year to launch a streaming video service, and plans to broadcast the Super Bowl over its LTE network on Feb. 2. Rival AT&T (T) invested in automated home security and worked with General Motors (GM), Audi (NSU:GR), and Tesla Motors (TSLA) to develop Web-connected car technology. Andy Geisse, the chief executive officer of AT&T’s corporate sales division, says M2M is a $500 million business for his company.
Wireless trade group CTIA estimates that U.S. mobile phone penetration is 102.2 percent, meaning the country has more active phones than people. With mobile subscription growth mired in the single digits, Verizon’s foray into oil fields is part of its efforts to reenergize sales. In oil country, where many work sites are off the grid and beyond the reach of phone lines, the leading U.S. wireless carrier provides some of the only connections. Its network can gather data from the GPS beacons, video cameras, and flow monitors attached to oil rigs, vehicles, and pipelines. Among Verizon’s customers is Halliburton (HAL), which has begun using the carrier’s network to remotely manage pumps at wellheads, according to Halliburton spokeswoman Susie McMichael.
Verizon’s revenue was about $121 billion last year, according to data compiled by Bloomberg—almost three times Green’s estimate for the entire M2M industry’s projected sales in 2018. (It’s less than $15 billion now.) Green says most M2M money will go to companies such as Accenture (ACN) and IBM (IBM) that are already selling cloud services to big corporate clients. Still, the low cost of sensors and mini radio transmitters makes LTE-driven automation attractive for oil producers and a good opportunity for carriers, says Jill Feblowitz, an analyst with market researcher IDC Energy Insights. “Verizon is moving in at the right time,” she says.