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SK Telecom lays down the table stakes for IoT pricing

This week has seen SK Telecom announce the pricing scheme for its national machine-to-machine (M2M) network, which is based on the LoRa technology. The cheapest plan clocks in at $0.30 for 100KB of data per month, for metering apps, and the most expensive is priced at $1.75 for 100MB.

This got us thinking – on what method is the IoT going to settle for charging for the data it consumes?

The IoT is a digital construct – the sum of components made in silicon foundries and hashed out in labs, but essentially data, generated by the ‘things’ that are connected in labyrinthine manner. The crux of the challenge is to move all that data from one point to another (in a pattern which actually delivers value).

The networking world has a wealth of experience in this department. Data centers, racks, base stations, SDN, NFV, transport protocols, storage – the list of technologies in which thousands of man years have been invested to improve efficiency goes on and on.

The IoT is an extension of this progression – the next spoke in an ever-expanding wheel.

LPWAN (low power wide area networks), in particular, represent ways of transporting data at cost points that were simply unobtainable 10 years ago, and now can be packaged in an install-and-forget manner, for customers looking to generate more of that valuable data.

With the more prominent names in LPWAN, LoRa and Sigfox, feeling the pressure from the 3GPP, which has slowly been responding to the opportunity presented by LPWAN tech with its own variants (LTE Cat M1, and NB-IoT), the IoT industry is going to have to settle on a manner of pricing this data.

With traditional M2M models, there was the cost of the device itself, the cost of the SIM card, and then the per-unit charge of using that cellular network to send data. Sometimes, the per-unit cost of the data would be converted into a single monthly fee, often with an upper limit on the amount of data that could be used, or SMS messages sent.

But that model works better for public wireless networks than private deployments. A systems integrator that tried to charge on a per-MB basis for an Ethernet LAN that they installed would likely be laughed out of the room – as in most people’s eyes, the cost of the Ethernet cable joining two nodes is zero once it is plugged in, aside from its power costs.

Similarly, the wireless equivalent of this Ethernet LAN would never have a per-unit fee attached to it. The customer and the installer would agree a price ahead of time, and stick to the contract. The installer might charge a maintenance or service fee, but the cost of the data flowing through that network would be zero.

So LPWANs like Sigfox, a private network that has global ambitions, seem to have a lot of overlap with the cellular M2M model – as in, a per-unit cost or a monthly fee per device. With a public LoRa network, like SK Telecom, the same model seems to make sense.

Most of the time, the use of licensed spectrum incurs a cost – as the expense of buying the rights to using that portion of RF need to be recouped. Sigfox is an exception here, in that it uses unlicensed spectrum, but it needs to recover the cost of running the global network operations – which have an ongoing cost and would be tricky to price into a fixed or up-front contract.

But a lot of IoT devices will rely on unlicensed spectrum, especially those using WiFi, Bluetooth, ZigBee, Thread – all personal-area networks (PANs) that could use mesh technology to collectively achieve ranges comparable to the likes of cellular.

Most applications that would use a PAN would simply treat the connectivity as a component of the bill of materials (BOM) – and simply adjust the end-price to recoup that amount, as there’s no ongoing fee once that device is out in the field, as a Bluetooth device isn’t dependent on a c loud server to keep it running.

But is that a dynamic that could change? Would we ever see consumer or business applications in which the cost to the end user varies depending on the amount of data used or the number of devices connected, in a monthly cost?

The answer to that question seems to rely on whether we ever see something like an expansive public network comprised by Bluetooth devices, for instance. If there are enough end-points, we could feasibly see applications like Tile and Trackr emerge for other devices – as ways of sending messages and commands to things, or receiving distributed data from environmental sensors that have been backhauled by an ad-hoc and dynamic public mesh network.

That possibility sounds like a security admin’s nightmare, but for those project managers who are conscious of their budgetary limitations, the possibility of free data on a disruptive network like this hypothetical might be too good to pass up.

But then who manages access to this ad hoc network? That’s the first of many questions that the IoT stakeholders will eventually start asking as the different verticals begin to rub together in a hyper-connected world.

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