What to do if NB-IoT charges are too expensive? China Telecom: Do it first!

Latest update time：2017-07-14

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Yesterday, China Telecom Beijing Company launched a major action: it grandly held the official commercial launch conference of NB-IoT in Beijing.

Zhang Zhiyong, General Manager of China Telecom Beijing Company, delivered a speech

Announcement of four important news

We have mentioned before that China Telecom has always been at the forefront of NB-IoT deployment and has many "firsts". This press conference mainly announced four major news, including a new "first".

1. Commercial use of “sample”

China Telecom, ofo and Huawei jointly released the ofo smart bike based on NB-IoT technology for commercial use. The NB smart lock project has completed internal and external field tests in the first half of this year. The smart lock closes in less than 5 seconds and the battery can last for more than 2 years . The NB smart bike is planned to be launched in Beijing on a large scale in July and will be gradually promoted to the national market.

2 Reaffirming subsidies

China Telecom announced that it would provide 300 million yuan in subsidies for IoT modules and IoT projects, which is consistent with what China Telecom announced previously .

Among them, 200 million yuan is used for direct subsidies for key IoT module products, including subsidies for CAT1 single-mode products and NB-IoT products. The subsidy amount for CAT1 single-mode products is 40 yuan/module, and the subsidy amount for NB-IoT products is 20 yuan /module. However, thresholds such as network time and subsidy rate are set.

3. Build an Ecosystem

Beijing Telecom has signed a strategic cooperation agreement with Beijing Gas, Beijing Environmental Sanitation Group, ETCP Group, and module manufacturers including Shanghai Quectel, SIMCom, Lierda, and Lenovo Connect to jointly build Beijing's IoT industry ecosystem.

At the press conference, Xiang Huangmei, deputy general manager of Beijing Telecom, answered an interesting question, which is why China Telecom was the first to commercialize NB-IoT services on a large scale. She said that because China Telecom has the 800MHz frequency band, it can build NB-IoT networks with better coverage faster and at a lower cost.

China Telecom has more than 300,000 NB-IoT base stations, of which 4,000 are in Beijing. From this point of view, this launch is the key link for China Telecom's NB-IoT to truly move from network preparation to business commercialization. Next, China Telecom companies in various regions will launch commercial NB-IoT services one after another .

Didn't we say there were four important pieces of news? What about the other one? Actually, the order of the press conference was not like this. I deliberately messed it up. Now let's focus on today's topic - tariffs.

4Introduction to NB-IoT tariffs

Xiang Huangmei introduces NB-IoT package

At the press conference, China Telecom also introduced the NB-IoT tariff, which has been the focus of attention. In fact, China Telecom has already released the NB-IoT package on June 20, which began to circulate widely last week. This press conference is the first time that the specific details of the NB-IoT tariff package have been introduced in public.

Unique and creative IoT tariff design

Since China Telecom's NB-IoT service package was launched earlier than Deutsche Telekom's, it is called "the world's first NB-IoT package". The specific contents of the package are as follows:

The connection service fee is divided into two packages:

1) Annual package, which is a fixed fee per year, with a connection service fee of 20 yuan per user per year;

2) Lifecycle package, that is, according to the accumulated package fees over the years, single users are divided into 7 levels from 2 to 8 years, of which 8 years only costs 105 yuan, which is equivalent to only about 13 yuan a year.

In addition, in addition to the connection service fee, an overlay package for high-frequency function fees is set up. Every 20,000 times/year (data traffic is generated approximately once every half an hour on average) is defined as high-frequency usage. In the case of high-frequency usage, each user needs to add 20 yuan/year.

根据中国电信公布的套餐内容，可以看出显著特点是“重连接、轻流量”。它没有采用以往的流量计费方式，而是以“连接数”计费。

Since NB-IoT scenarios are originally for small traffic and low-speed scenarios, the benefits of using traffic billing may be much lower than charging by connection, which will put greater pressure on the return on investment of operators' network construction. Traffic billing also does not reflect the connection value that the Internet of Things brings to customers, so this move is very reasonable.

At present, there are not many operators that have announced Internet of Things (LPWAN) tariff packages. Internationally, there are only SK Telecom of South Korea, AT&T of the United States, Verizon and Deutsche Telekom, a total of four companies. China Telecom's tariff design ideas are still very innovative.

LoRa

In July 2016, SK Telecom of South Korea completed the deployment of the carrier-grade LoRa network and released a standard package. This package charges fees based on traffic and sets a traffic cap in the package.

The entry-level tariff is 350 won per 100KB of traffic, which is approximately equivalent to RMB 2. SK Telecom will also provide customers with different discounts depending on the length of the contract and the number of items connected.

eMTC

In May this year , when the US operator AT&T announced the construction of an eMTC network covering the entire United States, it formulated eMTC service packages, which are divided into five types: 1 year, 3 years, 5 years, 10 years and monthly packages. Each package contains a certain amount of data traffic.

AT&T plans with 0KB of data

The more interesting one is the monthly package.

The lowest tier is $1.5/month/device, which includes 0KB of traffic. Any traffic exceeding this limit will be charged at $2.49/MB, and a $2 activation fee is required.

0KB of traffic? Yes, you heard it right! This means that both the connection and the traffic are charged.

Verizon, another US operator, also launched eMTC service packages in March this year. Its packages are charged on a monthly basis, with a certain amount of traffic included in the monthly package and additional charges for exceeding the traffic.

Verizon Rates

Like AT&T, the general trend of its package rules is that the more you use, the more connections you have, and the cheaper it is.

For example, the lowest-tier monthly access fee is $2 per device, including 200KB of traffic, and the excess traffic is charged at $1 per MB. The highest-tier monthly access fee is $80 per device, including 10GB of traffic, and the excess traffic is only charged at $0.015 per MB.

NB-IoT

Deutsche Telekom is a strong promoter of NB-IoT. On June 26, it released NB-loT tariff packages in two tiers.

1) NB-IoT access

This is a connectivity-only package starting at €199 for 25 SIM cards with 500KB per SIM card for six months.

2) NB-IoT access and IoT cloud

This is a more comprehensive package. In addition to the NB-IoT access service, it can also access Deutsche Telekom's IoT cloud platform to achieve device management, data collection and analysis, etc. The starting price is 299 euros.

Deutsche Telekom's network coverage in the Americas

Deutsche Telekom is a mainstream operator in Europe and the second operator to launch NB-IoT service packages . Its solutions have a certain impact on the industry.

Comparing the IoT tariff packages of the above operators, it is found that China Telecom’s tariff structure is the simplest and does not mention traffic. It is obvious that Telecom did not care about connection income in the early stage.

Are NB-IoT charges too expensive?

China Telecom Don't care about connection revenue? Are you kidding me? Many people think that this rate is too expensive!

Since network services are very localized, unlike other goods and services, which are free to flow and compete globally to form global price comparability, it is impossible to directly compare the tariff packages launched by operators in Europe, the United States, and South Korea.

In fact, the Internet of Things tariff of another domestic operator was previously circulated online. Its charges for ultra-small traffic connections are also based on the number of connections, but the monthly charges corresponding to different traffic package sizes are more detailed.

IoT tariffs of a certain operator

It can be seen that if you only use the annual package, China Telecom charges 20 yuan per connection per year. In comparison, another operator charges 1 yuan per month for a 1MB monthly traffic limit, and also needs to pay a 1 yuan/month platform usage fee, so it charges 24 yuan per connection per year, which is slightly higher than China Telecom.

On the customer side, a major advantage of NB-IoT is that it is specially optimized for power consumption, so terminal devices do not need to frequently replace batteries. Therefore, applications with high battery replacement costs and long life cycle requirements, such as water meters, gas meters, environmental protection, fire protection, and security, can use NB-IoT as a transmission channel.

In response to the needs of these customers, China Telecom launched a lifecycle package: the longer the package is ordered at one time, the lower the average annual fee. When the period is as long as 8 years, the average annual fee is only 13 yuan.

13 yuan! This price is close to the price of GSM network (such as 6 yuan/year for meter reading applications). NB-IoT network was originally worried that it was too expensive to replace the widely used GSM network. If it is charged at this price, the disadvantage of network tariff will be greatly reduced.

Compared with GSM networks, although the price of NB-IoT is more than twice as high, it corresponds to better coverage, lower power consumption and higher network capacity, and will gain space in industries and other fields with relatively high network requirements.

Therefore, the release of China Telecom's package brings NB-IoT one step closer to industry maturity.

In addition, the original GSM network can hardly support high-frequency applications, such as real-time water leakage monitoring, medical data feedback, etc., while NB-IoT can easily support these functions.

这也是为什么中国电信设置了高频使用功能费——20元每年每连接。如果开启高频服务能力，则每年资费提升到33-40元，可显著提升物联网业务的ARPU值（每用户平均收入）。

Of course, even an ARPU value of 40 yuan still has limited direct revenue contribution to operators. Based on the 1 billion connections of the three major operators in 2020 (now estimated to be 200-300 million connections), an annual ARPU value of 40 yuan corresponds to 40 billion in revenue, which is still not worth mentioning compared to the current revenue volume of 1 trillion yuan of the three major operators.

Therefore, if operators want to make money from the Internet of Things, they must move into the upstream and downstream links.

According to relevant reports, operators' options include:

1) Providing hardware. For example, China Mobile used to sell IoT communication modules to China Mobile Communications, but now it develops and sells communication modules on its own;

2) Provide an application platform to facilitate downstream customers to develop IoT applications by themselves, such as China Mobile OneNET and China Unicom’s Lizi Cloud;

3) Develop applications directly for downstream customers, such as IoT big data analysis, asset tracking services, online medical alerts, etc.

These services can be provided by the operators themselves, but more likely, they will be provided together with external professional partners.

Conclusion

China Telecom has worked hard to take the lead in NB-IoT. Faced with a market of only 40 billion yuan, it is clear that China Telecom is not interested in this. At present, it is important to first occupy the land, expand the scale, and then explore the value-added space of the Internet of Things, and even use this as an opportunity to promote the comprehensive business model transformation of operators.