IoT CONNECTIVITY PRICING: A New Approach

IOT CONNECTIVITY PRICING
A connectivity management platform optimizes IoT connectivity, enabling businesses to deploy services faster and reach further.

For a long time, our understanding of connectivity has been based on connecting people – the device used was simply a tool. Connectivity was therefore based on the users’ needs. This model was so entrenched, that even the name we use to measure the revenue of a provider refers to it – Average Revenue Per User (ARPU). But connectivity growth today is driven by the Internet of Things (IoT), and the multitudes of new devices being added. While the ultimate benefit is still the end-user, the use-cases are fundamentally different – a child’s smartphone receiving a YouTube video will consume gigabytes of data. But in comparison, the data usage of a street full of smart lights that transmit a few times every day, will only consume a tiny fraction. 

Organizations that are launching IoT products need to include connectivity in their solution. They must consider how to access, consume and price connectivity, and how to ensure it is appropriate for their devices’ use-cases. They should also look at the development process as well as the need for scalability. None of these are addressed by traditional service providers, requiring new, more modern models that fit these organizations’ unique needs. For example, if a company creates a “smart light” that consumes minimal data from each device and is starting with a low quantity of units, it will be difficult to approach a traditional operator without a proper commitment to scale and significant revenues.  

The Evolution of Connectivity

A Mobile Network Operator (MNO) is a telecommunications company that has acquired radio frequency (assets) from the regulator in a specific country to provide its infrastructure and equipment. MNO is located at the top of the “mountain” and provides connectivity infrastructure to its users and in some cases, also resells this infrastructure to others.
MNOs use the frequency (spectrum) that they purchase to deploy multiple radio sites (cells and antennas) and gain coverage in a specific region or country. MNOs are obligated by law to provide a certain percentage of coverage in the region. Your calls and texts are broadcast over the airwaves using these frequencies.

Traditional connectivity solutions via Mobile Network Operators (MNOs) tend to be based on a monthly subscription model, with a total fee that incorporates some data usage. They assume one tablet, one SIM card, one user and lots of data on a recurring basis. Even low volume plans can’t justify IoT devices with very small or minimal connectivity needs. 

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But that doesn’t accurately reflect how the IoT industry works. Companies that build products with connectivity need a sim card with connectivity to each device. Data consumption is often ad hoc and/or low consumption, and the number of devices may start small but grow rapidly as the company grows. In addition, to remove friction and speed up the development of an IoT product, an easy-to-use interface or platform is required that allows an organization to control the SIM lifecycle of its devices remotely. If the platform can also offer API’s, the IoT company can also integrate the solution in a more automatic way to the connectivity vendor, to increase security, efficiency and a better user experience.  Essentially, a fully integrated cloud IoT connectivity solution also handles every aspect of IoT connectivity, allowing businesses to focus on what they do best instead of worrying about minor details.

These factors mean that organizations providing IoT products or services need to consider the full lifecycle of a product, including the need for long-term, low-usage connectivity that does not require the user or seller to pay for connectivity on a regular basis: AKA pay once and forget. 

IOT CONNECTIVITY PRICING

Pay-as-you-go IoT Connectivity 

As the number and variety of IoT devices grow, we’re seeing a shift in how connectivity access and pricing is understood. In part, this is because the use of the cloud has changed many business models. Organizations no longer have to build everything themselves, they certainly don’t need to do the scaling themselves, and they can select pricing models that are adaptive and flexible to reflect their usage. For example, server time may be purchased ad hoc on a per hour basis, or it might be paid for upfront as a once-off, whichever suits an organization’s specific requirements. 

Realizing that a pay-monthly subscription model is too restrictive, IoT connectivity is replicating cloud best practices. This is driving the development of new, far more effective and innovative pricing solutions that reflect the increasing variety and use-cases for IoT devices. 

Pay-as-you-go connectivity also facilitates the growth and impact of IoT, by enabling connectivity to be embedded into a product or solution, making it more attractive to the end-user and strengthening the economic viability for the producer. 

For example, a POS (Point-of-Sale) provider whose terminals are mostly connected to customers’ WIFI may select a pay-as-you-go solution. Their customers get guaranteed connectivity and the ability to take payment, even in the case of WIFI failure, but the provider only pays for connectivity as and when it’s needed. On the other hand, a provider of smart lights for industrial purposes, knowing that the data usage may be ongoing for years but at a very low level, may prefer to pay the connectivity as a once-off payment to offer a permanently connected light – a more attractive product – to the end customer. 

For businesses developing their unique IoT products, this new model is an important part in the way to success, providing them the viability to launch and sell their products. Organizations can also operate effectively at any scale with this model, allowing for elastic growth. This is in direct contrast to MNOs which can only deliver premium features and effective pricing for larger, established clients. Pay-as-you-go pricing lets the business leverage these features and rates from the very beginning.

Flexibility and scalability are king 

As IoT has developed, traditional non-flexible methods of pricing simply don’t work because they don’t take into account the reality that device connectivity and people connectivity are fundamentally different. This is as true for large enterprises with multi-zone, secure and controllable connections as it is for IoT start-ups which need to start small, but also to build in the ability to scale fast as they grow. 

At Monogoto, our business model has always been based on cloud best practices, rather than on traditional connectivity processes, meaning we’re in a better position to provide pay-as-you-go solutions based on the actual use-case and connectivity requirements, and irrespective of client type or size. We provide the SIM card, the connectivity and the platform in a convenient, scalable package that is also developer-friendly. This allows clients to scale and grow as needed, without needing to pay and build today for the connectivity and service they hope to need in the future. 

Traditional connectivity operators and business models are rapidly being abandoned in favor of models that reflect the seismic shift in how and when connectivity is required, if IoT products and services are to increase. Cloud-style connectivity such as that provided by Monogoto offers this flexibility, particularly as 5G expands, and will be central to decision making for IoT providers looking for connectivity. 

 

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