Cellular M2M Rate Plans: Next Up Is “Throttling”-as-a-Service

Cellular operators are deploying M2M services with the latest LTE Cat-M and NB-IoT technologies with rate plans for IoT applications and M2M services that are following the traditional smartphone data plan approach. In many applications, the IoT mostly-sleepy-node model is expected to contribute relatively light data loads, on average. Average is a difficult concept in many IoT applications: while the anticipated traffic under normal conditions may be easy to estimate, the exceptional event or emergency attention messages will need both priority handling and reliable network access. M2M cellular data service is evolving to “bandwidth on demand,” and the critical question is, will capacity be available when needed?

Operating an IoT application over a cellular network requires a detailed analysis of the system requirements for data rates at each node. The use case and duty cycle for sensor readings and other message-based events will contribute to the overall data consumption of the system. The recently published ABI Research report IoT Data Traffic: Application and Market Analysis (AN-2790) covers more than 20 key application segments with detailed data traffic projections by application. Cellular operators have all developed rate plans that appear simple and straightforward, ranging from a few kb per month to MB or GB capacity if required. This shifts the burden onto the developer to correctly model the frequency and type of message communication bandwidth that the actual application will require.

In some applications, a cellular uplink may be an alternative connection as a backup to a landline technology from the local IoT gateway, thus a low monthly baseline cellular fee is an acceptable insurance-style option. If the backup option is utilized, the short-term peak load on capacity must be available, even if premium data rates apply.

The practice known as “throttling” on “unlimited” smartphone data plans during periods of excessive bandwidth consumption to maintain an “acceptable” level of service and availability for all users is expected to become a typical policy adopted for M2M in the near future. The LPWA camp are champions of the unlicensed spectrum, and in removing the burden of spectrum licenses, they claim a sustainable cost advantage over the equivalent cellular-based solution. While business models are still evolving, the lower cost basis and less precision over forecasting the monthly message traffic has some merits. Unlicensed spectrum has a unique difference to cellular in that multiple competing technologies, multiple operators, and private networks are all sharing the same finite resource. This multiple player environment in the unlicensed spectrum introduces perhaps a greater risk of interference affecting network availability and capacity, and this is expected to drive cellular operator policies based on this key differentiating advantage.

In a managed network, the cellular operators control the bandwidth allocation across all users. Offering additional tiers of service will capitalize on the advantage of the managed network and the ability to ensure that bandwidth remains available, but at a premium price, of course. The standard data plan may survive as a base price level, but additional service fees will guarantee minimal service levels during periods of high demand. The challenge for the cellular operators will be to develop positioning and marketing messaging to highlight the advantages, and service commitments to explain limits on bandwidth as an advantage and capacity reservation as a good option to have.