How NB-IoT is Being Priced Today

by Jamie Moss | 3Q 2019 | IN-5527

 

Differing Schemes: Tiered versus Unlimited

NEWS


Over the last two and a half years, more than 70 Narrowband Internet of Things (NB-IoT) networks have been commercially launched worldwide. By now there should be no mystery to wireless carrier NB-IoT pricing models, but there still is. No one pricing strategy can be seen to be definitive and, at present, all bets are still on. T-Mobile Germany offers a three tier Low-Power Wide Area (LPWA) tariff plan, with a single upfront fee per connection in return for a set amount of data and 250 SMS sent or received. Refills are available for half the price of the initial fee, providing half the initial allowance again. Buyers have 60 months to use the allowance, and as a non-recurring contract may terminate their connection at the end of any month. A one-time premium is charged for each MFF2 form factor Subscriber Identification Module (SIM) ordered, minimum quantities per order are five plug-in SIMs, or 100 embedded SIMs. The plans provide access to T-Mobile’s NB-IoT network in Germany, as well as 2G and 3G networks in 28 European countries for roaming. All tariffs include the use of T-Mobile’s Business Smart Connect Portal to allow the enterprise to manage its connections.

Orange Belgium, the traditional home of the Orange Group’s IoT business, has three NB-IoT plans targeted at different user groups. Coverage is nationwide only and, despite functioning on Orange’s NB-IoT, 2G, 3G and 4G networks, throughput is limited to 20 Kbps, with 2G, 3G and 4G effectively being supported for the sake of fallback. All Orange plans are automatically-renewing annual contracts that are paid in advance. “Maker” plans are targeted at developers that require a low volume of SIM cards. There is no specific data limit, but there is a fair use policy of 1 megabyte per day. Access to the Orange Maker platform is also included. Meanwhile, the less expensive enterprise plans designed for a higher volume of orders do have a monthly megabyte allowance. The price of the sign-up/activation fee for all plans falls with the purchase of more SIMs.

Most carriers are offering plans that are friendly to low-volume orders, though providing this flexibility while ensuring profitability can complicate tariff plan details. One exception is China Telecom, whose simple charging is designed to support long-term business commitments, and to maximize the volume of sales volumes right from the get-go. This is unsurprising considering the strength of the opportunity in China for NB-IoT, because of state support for network rollout timelines and the subsidization of NB-IoT hardware. China Telecom charges an upfront fee per connection that depends on contract duration; the longer the term, the lower the cost per device each year. A premium is added per connection every 20,000 connections - a “high frequency function fee” - but, vitally, the amount of traffic does not impact the pricing at any point.

Competitive Markets: The United States versus Russia

IMPACT


T-Mobile USA’s plans exemplify the restrictions that can apply to devices on NB-IoT networks. The carrier offers a set rate for a set number of megabytes per year. Depending on which expires first, an enterprise can refill for the same time-period or same allowance at the same price. Each device is limited to ten single-packet transactions per hour at a capped throughput rate. Coverage is not guaranteed nationwide and no provision exists for roaming. T-Mobile USA also offers a deal on NB-IoT modules for five dollars a-piece, but only with a minimum purchase of 20,000 modules over a 12-month period. Common to all T-Mobile USA plans is a rule that customers consuming less than 50 gigabytes per month may be subject to reduced throughput, due to data prioritization when the network is congested. As strategically important NB-IoT is, T-Mobile’s bread-and-butter is mobile broadband, for which the IoT must take a back seat when required.

AT&T offers six monthly-rolling NB-IoT plans with differing allowances plus a “One Rate” tariff that has unlimited data for a set annual fee. These are precisely the same plans and rates that AT&T applies to its Cat-M network. Auto-renewal occurs whenever the term expires or when the allowance drops below 50 KB. No roaming is available for NB-IoT either. Verizon, similarly, has 12 monthly plans with different allowances for different fees, the very lowest of which is reserved for NB-IoT only. Plans are divided into four tiers, with Verizon allowing device pooling for plans within the same tier although, unlike AT&T, Verizon does not currently have any NB-IoT tariffs with unlimited data. Monthly rolling or one and two-year minimum terms are available, but any value distinctions between them are not apparent.

Russian carrier MegaFon combines many of the best elements of other carriers’ strategies: it has a single tariff plan for NB-IoT and, like China Telecom, does not consider traffic in its pricing but differs by offering a monthly-recurring instead of an annual upfront fee. Like T-Mobile, MegaFon also offers inclusive access to its Machine-to-Machine (M2M) Monitoring Service platform, although no roaming is available. The primary restriction for MegaFon customers is geographic, even domestically, with its NB-IoT coverage concentrated on Moscow and St. Petersburg and a selection of much smaller cities in Russia. Conversely, key competitor MTS has a three-tier NB-IoT tariff plan with a set amount of data for an annual cost, just like T-Mobile USA and with the same refill rules. Both Russian carriers seek to optimize the efficiency of their customers’ allowance consumption by charging for IoT service by kilobyte. Interestingly, MTS also offers consultation for the deployment of NB-IoT coverage on a customer’s territory, should general national coverage be lacking.

All Bets Are On

RECOMMENDATIONS


There is no consensus on the best way to price NB-IoT connectivity. Even within competitive markets carriers have reached no alignment and are experimenting with a range of strategies, most of which resemble Pay as You Go (PAYG) consumer plans. In 2016, T-Mobile Germany was the first carrier to launch an NB-IoT tariff and has already simplified its scheme by adopting the platform of European M2M MVNO 1nce, although their tariff structure and prices differ. T-Mobile Germany also shows that there is still a premium for M2M Form Factor (MFF) SIMs, a possible bottleneck for NB-IoT, as MFF2 seems the natural choice for inexpensive, sensor-based devices. Little real roaming is available, only fallback to other non-NB-IoT networks abroad, with most carriers not provisioning for roaming at all.

Unlimited data plans may never accommodate roaming, so they are likely to only be used for domestic services. But this may not be a problem, as NB-IoT is oft-cited as most suitable for devices that will remain stationary. Many enterprises are still discovering what they require from their IoT service provider and an unlimited one-size-fits-all tariff simplifies things, but only if it really does fit all, i.e., is sufficiently affordable even for those that require the fewest connections while still being profitable for a carrier to provision. As a point of comparison, AT&T’s only unlimited plan is ten times more expensive than China Telecom’s cheapest. Fixing costs is important, and simplicity is ideal, but it should not be at the expense of usability. However, one clear trend to have emerged in NB-IoT pricing is the use of auto-renew instead of overage as soon as an NB-IoT tariff term or allowance expires.

With massive connectivity, carriers must very carefully manage their network resources to successfully maintain a business-critical service for enterprises. The premium cost of licensed networks demands a higher quality of service and makes mere best-efforts unacceptable. Yet carriers only have so much bandwidth with which to support many millions of anticipated connections. To which end NB-IoT connection rules are reminiscent of Industrial, Scientific, and Medical (ISM) band duty cycle restrictions, as they are not allowed to establish continuous, unattended connections, in addition to operating at a very low throughput rate by design. Normalizing across the publicly available NB-IoT price plans published to date yields an average cost per megabyte of US$2.50, but this is not necessarily representative. It does not take into account the relative popularity of each plan and only represents ten percent of carriers with a commercial NB-IoT network.

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