Trends in MVNO: flexible pricing for IoT project connectivity

Connectivity is an essential element in any project related to the Internet of Things (IoT). Cost is another. Therefore, making a good plan to ensure flexibility when hiring connection means for IoT solutions is a great way to avoid unpleasant surprises when receiving the bills for communication services.

However, making decisions with long-term repercussions is not always an easy task for IoT project managers. Operational challenges may not be fully known during the solution development phase and sometimes it is not known in which region of the world the solution might be adopted. On the other hand, you need to have a minimum of cost predictability to be able to set budgets. This is why flexibility is crucial when it comes to connectivity in IoT projects.

As prevention is better than cure, it is worth keeping an eye on five trends to watch for in IoT connectivity pricing in 2021. The central theme of all of them is precisely flexibility:

1. Regional plans – In many cases, IoT solutions are intended for local markets and therefore do not need to rely on global connectivity. Regional plans are emerging to cater to this group. There are even global providers that offer a SIM card that can be remotely upgraded with regional connectivity options.

2. Multi-carrier coverage – IoT projects in some sectors, such as agriculture and transportation, may need maximum connectivity in remote areas. So, having carrier redundancy is a great solution. In addition, this type of service allows IoT devices to be manufactured and tested in one geographical area and then shipped to their destinations with the same SIM cards installed. And everything will work perfectly.

3. Uncommitted contracts – Lower prices can sometimes be achieved for long-term contracts. However, this can represent a “prison” for projects that, over time, see their connectivity demands change, either because they have not been successful or because they have evolved faster than anticipated. Contracts with no maintenance commitments (free of the minimum term) can help to solve this dilemma.

4. Volume discounts – IoT projects can scale up over time, integrating more devices than originally calculated. It would be great to be able to reduce the cost of the solution, without having to go back to negotiating with connectivity providers in a short period of time. Because of this, many providers that previously only offered per-device billing models, now also work with “data pooling” billing. This modality allows you to integrate devices with different data consumption profiles and charge the value of the total data of the set of devices.

5. Predictability – Fixed pricing and prepaid amounts with automated alerts and management features can help IoT project managers stay within their planned budget.

Who to turn to?

In general, the flexibility of connectivity plans so sought by IoT projects had not aroused much interest from large communication service providers (Mobile Network Operators – MNOs). For them, adapting to the specific demands of this market segment did not seem to be an interesting business – at least until recently. It was in this vacuum that Mobile Virtual Network Operators (MVNOs) emerged.

An MVNO is a wireless communications service provider that does not have its own network infrastructure. It subcontracts access from larger operators at wholesale prices and resells to other consumers at prices more in line with their needs. The MVNO market can be classified according to the operational model (reseller, service provider, and full MVNO), type of service (postpaid and prepaid), the subscriber (commercial and individual/residential), and geographic location.

The so-called IoT MVNOs, on the other hand, meet specific demands from developers and users of IoT solutions with a few thousand connections, both in relation to the pricing model and technical issues, offering, for example, pre-sales and post-sales support services.

However, some experts warn that the benefits offered by the IoT MVNO model may be under threat for two main reasons. First, the retail price that MNOs are charging for connectivity to IoT solutions is falling rapidly, by as much as 30% to 40% a year in some cases. With that, the market covered by IoT MVNOs is shrinking.

Second, IoT MVNOs are finding it increasingly difficult to contract low-cost connectivity services. Often, these operators were able to get better prices for domestic connectivity services through competitive roaming agreements with large international providers. However, these contracts may start to exclude IoT devices in larger volumes and start to require the payment of a monthly surcharge, putting at risk the lower prices MVNOs used to charge for connectivity to IoT solutions.

As their prices may no longer be as attractive, and the interest of MNOs seems to have picked up, at least for larger contracts such as those involving the automotive sector, experts suggest that MVNOs invest in features such as cloud integration and security to gain some competitive advantage by offering more than just connectivity. Other suggestions for MVNOs include catering to specific verticals and providing IoT consulting services for more complex demands. In addition, MNOs themselves are also looking to partner with some MVNOs to incorporate some solutions developed by MVNOs into their own offerings.

It is expected that, as in any market, the more competition there is in the field of IoT connectivity, the more the users will benefit.