The ‘internet of things’ (IoT) market is moving towards new value-based and event-based pricing, led by smart cities and industrial operatives, according to Cisco.
Until now, device-as-a-service, and latterly anonymised data sharing with third-parties, have thrived as business models in the nascent IoT space. However, service providers, struggling to monetise their new low-power wide-area (LPWA) networks, have started to explore new monetisation techniques.
T-Mobile in the US is charging $6 per device per year on its narrowband-IoT (NB-IoT) network, with a data cap of 12MB. Deutsche Telekom in Germany is offering a flat-rate ‘lifetime’ deal of €10 for up to 500MB of data for each device on its NB-IoT network, for a period of up to 10 years.
The anticipated volumes of IoT devices are staggering, but there are better ways to make money from them, reckons Theresa Bui, director of IoT strategy at Cisco.
“Devices on NB-IoT networks consume 20KB of data per day, maybe. It’s not a $10 per-device, per-month charge anymore; it’s pennies per month. But if service providers can show the benefits their NB-IoT networks, and charge per event, then revenue model looks very different,” she says.
In the world of smart cities, not all events are equal, she notes.
“A connected trash can notifying a smart city operations manager it needs to be emptied, is very different to traffic light issuing an alert that it needs changing. The second is a higher value event, and could have a different charge attached,” she explains.
The move towards value based and event based pricing is very new, she says. “The market is only just testing it out; there have been limited trials, notably among more sophisticated smart city providers, notably in Asia.”
Tech providers in the industrial sector are also looking hard at ways to make their IoT services pay. The opportunity is immense. A factory might have 10,000 sensors, generating one petabyte of data per day; an oil rig might have 30,000 sensors, generating 1.5 petabytes of data per day, she says.
An IoT device manufacturer that can show its sensors have reduced valve failures on rod pumps in an oil field by 30 per cent has a new line of negotiation, she suggests; the same for a vendor offering a product that detects gas leakages in hazardous scenarios, or predicts outages on assembly line equipment.
“The question for the customer is what they would you pay each month for reducing downtime and improving productivity,” says Bui.
She adds: “In the world of LPWAN, and specifically NB-IoT, the economic model is no longer feasible to charge per-device per-data-usage each month.”
