Connected devices are the single biggest opportunity for Sprint (s S) and other carriers, according to Dan Hesse, chief executive officer of the Overland Park, Kansas-based wireless company. In our conversation it became clear as day that Sprint’s future lies in being a wireless data provider.

Hesse is pretty enthusiastic about the opportunities machine-to-machine communications offer a company like Sprint. “Machine-to-machine (M2M) represents the largest growth opportunity for wireless network providers,” said Hesse. “It would help increase wireless penetration by between 200 percent to 300 percent.”

Sprint, like its mobile industry peers such as AT&T (s T) and Verizon (s VZ), has set-up a dedicated business unit to tap into the rich M2M mine. According to estimates, there are about 20 million connected devices in the US. Ericsson has predicted 50 billion connected devices by the end of 2020. “Soon, almost every device will have a wireless chip and it will be the driver for M2M communications,” said Hesse, who predicts that certain verticals such as medical equipment will see the earliest impact of these M2M connections.

In order to cash in on the opportunities, Sprint has set-up a collaboration center based in Silicon Valley and is working on ways to bring together developers, device makers and carriers. When I asked Hesse about the future and if telecoms have to transform themselves and take a more software company-like approach to the market, he responded by candidly admitting to not knowing the answer.

I found his candor quite refreshing. Why? Because I personally believe the telecom industry is on the cusp of a profound shift that is making them reluctantly embrace the Internet ideologies, thanks to the growing popularity of smartphones. “We see ourselves as open enabler of many ecosystem,” said Hesse. He pointed out that every time there is a generational shift in wireless technologies there is a 5X gain in performance and there is downward pressure on prices.

“Carriers have typically tried to control everything so they can be paid because it costs billions of dollars to buy spectrum, build networks and subsidize the devices,” said Hesse. “We need to ensure that our shareholders get good value from these investments.”

As the same time, he said that the telco model is moving to the Internet model. “The Internet model is open and telco model is not,” Hesse said. This is a tough road to travel for the carriers. He is not blind to the future – while it is clear that he is nowhere close to being as hefty as Verizon or AT&T, the #1 and #2 companies in the US – he knows many of today’s partners including content companies and cable providers could be his rivals tomorrow.

“Big (Cable) carriers, potentially software and application companies like Google will be competition, but for now we have a good relationship with them,” he said. “I know we will have new competition. I don’t know where that competition will come from in the future.

So what is his plan? “We want to be the best wireless carrier,” he remarked when I asked him about the future of Sprint. “You don’t have to be the biggest to be really really good.”

In Part I of the three-part conversation, Hesse talked about the importance of Smartphones and the iPad. He discussed Sprint’s relationship with Clearwire, LTE and its 4G strategy in Part II of the interview.

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