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What kind of charging models for IoT subscriptions?

  • 1.  What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 11, 2018 07:07
    ​In Mobile voice, we normally charge customers by how many minutes of calls per $.
    In Mobile data, we normally chrage customers by traffic volume, like how many MB per $.
    So, would any expert advise me how IoT is best to be charged?
    It could be based on used cases, as some applications such as metering has low data volume, but there could be a large quantity of meters.
    But some cases can be complicated, such as connected cars, in which the same SIM card can be used for telematics (which is lower volume) and infotainment (which is higher volume).
    Thanks!
    #IoTandSmartCity

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    Dominic Law
    PCCW Global
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    DT Asia


  • 2.  RE: What kind of charging models for IoT subscriptions?

    Posted Dec 12, 2018 05:10
    Edited by Ike Alisson Dec 13, 2018 04:46
    This is an interesting question as it has several aspects due to the changes that 5G and related to 5G new Services functionalities impact brings on services related to IoT. These new functionalities are:
    1. Revised mobility (of UE) in terms of "stationary", "nomadic" (but only active while stationary), constrained area and WAN
    2. Dynamic Subscriber Management (enabling connection of several/multiple UE)
    3. Access to ICPs/ISPs through 5G (Network) System Functionalities SEES and FMSS (enabling "Service Slicing" and the Services shall be (at this initial stage) hosted at the Operator's domain).

    Besides, as we move from solutions that are Application-centric to Data-centric and use of AI/ML algorithms (primarily utilizing Supervised Learning and in need of labelling Data), generated Data (even the one that during the Application/Protocol coding was/is defined as "incorrect") is the key ingredient for training the ML algorithms.
    As a result of that, in order to be able to train the AI/ML algorithmic Platforms, "Data" will be needed and the Business models will be inclined towards "trading" the Services for access of Data. This is also on-going on micro level as there is a coffee shop in Bostin ofering free coffee in case of the possibility to get access to the Data the users surf on in the coffee shop.
    Besides, these Business Models shall be enforced and specialised due to profiliration of Zero-touch operation Platforms (such as ONAP, ODA) and with the growing (use of 3D Prinintin in Manufacturing and possibility to offer Products and Services) for Scale Customization, the need for (personal/customized/specialized) "Data" shall become an imperative.
    Access to that shall be enabled throgh individual's use of a "Hybrid Cloud" (with Public and Private access to selected Trusted parties).

    I do appologise for the long reply, but it is an impoerative the take into account the multi-aspect factors in the upcoming Technology shift and ground for new Services/Capabilities as well as new type of Market segments/users (e.g Millennials and iGens).

    Sincerely yours,
    Ike Alisson

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    Ike Alisson
    Sales and Operations at ALICON SWEDEN

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    DT Asia


  • 3.  RE: What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 12, 2018 05:10
    ​Hi Dominic,

    I believe event based charging could well be an option. Events could well be related to a) regular sync updates between the IoT device to the network ( which I believe could be zero charge), b) change events ( know the status, or modify any settings, in the context of the edge device i.e car etc) and also any c) emergency events ( could have a premium charging compared to the change events). [ am sure there would be other related events specific to each of the Edge device in the context]

    Just a thought though!

    Regards
    Ram

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    Ramachandra Dasari
    Vodafone UK Ltd
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    DT Asia


  • 4.  RE: What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 12, 2018 05:10
    Dominic,

    My view is that the IoT billing is still an open field and we should also be open minded when it comes to it.

    The term Machine to Machine has been used carelessly over the years however, this realy give us the direction to say we are not reinventing the machines we have to connect them, measuring tools withing this exiting Machines are already in place and we just have to digitally represent them and the data they produce.

    We have to come up with new Algorithms for Terms such as:
    • Mb per Gallon/Litre
    • Mb per distance
    • Thresholds as well
    • Time will still play a huge factor in billing same as weight & size(width and height) 


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    Oscar Morei
    Telkom SA
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    DT Asia


  • 5.  RE: What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 12, 2018 05:44
    Dominic, thanks for this very interesting query. It's true there is still a lot of experimentation around IoT monetisation and pricing structures. Subscriptions are certainly leading, but there are other models for charging that have been covered by the IoE & Digital Ecosystems collaboration team. As a member you can access TR 271 on Monetizing IoE here. I hope this will be of interest.

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    Thandi Demanet
    TM Forum
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    DT Asia


  • 6.  RE: What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 12, 2018 07:05

    Hi Dominic,

    1st - Operator creates a kind of Subsciprion/Service Package - a list of allowed services (SMS, Data, voice, etc.), a list of allowed APNs, roaming profile. Plus maybe some QoS options (upload/download speed, etc.).

    2nd - Operator creates a kind of Price Plan/Package:

    •     Define a one-time fees for SIM card related activities (activation/pause, changing Subsciprion/Service Package, etc.)
    •     Define a monthly fees for different services (SMS, Data, etc.)
      • per bytes/Kb/Mb/etc, per item (SMS), per second/minutes/etc (voice)
      • define discounts (could be tiered and depend on the total consumed traffic)
    •     Define a kind of Bundles:
      • Type 1 - dependent on the number of active SIM cards.
        Specify the volume offered for free per SIM card;
        Then all SIM cards subscibed to such Bundle can share the total amount of volume (for example if operator offers a bundle of 5 SMS messages per SIM card for 10 active SIM cards, the total offered bundle is 50 SMS messages.; this bundle can be "consumed" by a single SIM card that consumes those 50 SMS messages or by more SIM cards, each one consuming a portion of the bundle)
      • Type 2 - independent on the number of active SIM cards.
        Specify the volume offered for free independetly of number of SIM cards subscribed to this bundle (for example if operator offers a bundle of 100 SMS, then all SIM cards attached to this bundle can use those 100 SMSs)


    3rd - it is useful to define a kind of triggers to monitor the traffic volume consumption. Set thresholds - if traffic consumption is under/over of that threshold then either notification should be send (sms/email) or SIM temporary deactivation performed. (If for example SIM card assumed to be inserted into some meter consumes more than 100Mb per day it looks incorrect and such SIM card is better to pause/deactivate and investigate the situation.)

    BR,
    Denis



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    Denis Kiselev
    Ericsson Inc.
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    DT Asia


  • 7.  RE: What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 12, 2018 07:05
    Hi Dominic,
    To your question; The charging model to use is the one that make sense to your company. If every service provider follow the same model, we will just continue to all having the same business model and little to no differentiation.

    For CSPs, firstly they need to free themselves from "rating" orientation only,
    Second, they have to create a platform that can support products as well as service and subscriptions.
    Thirdly be able to do uplift and margins from wholesale price to retail pricing

    Then you can mix and match the various offer elements, and only then can you be flexible to customer desires.

    Must telco billing systems are not able to do this, but some are.

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    Cato Rasmussen
    Independent
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    DT Asia


  • 8.  RE: What kind of charging models for IoT subscriptions?

    Posted Dec 15, 2018 15:51
    Dominic,

    For me the best way to price it would be outcomes based.
    What I mean by that is link the price of the service with the business value that it brings, making it easier to both buy AND sell ;-)

    Hope this helps!


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    Pedro PAIVA
    www.linkedin.com/in/pedropaiva
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    DT Asia


  • 9.  RE: What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 17, 2018 02:57
    Dear experts,
    Thanks for your advice. It seems to me the conclusion the variety of charging models for IoT will be a lot wider than ​what we currently have for voice and data services.
    Hence the challenge is also on OCS and also customer services. What do you think?
    Thanks!

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    Dominic Law
    PCCW Global
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    DT Asia


  • 10.  RE: What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 17, 2018 07:05
    Hi Dominic,

    To be honest the variety of charging models (variety of provided services) is a common trend, not only specific for IoT. You know - popular term now is Digital. Flexibility and Auotomation ("digitalization") - this is current challenge for Operator/ISP/CSP.
    And this challenge in not only for OCS, it is for Billing, CRM, Order Management, Product Catalog, omnichannel Front-Ends, etc.

    BR,
    Denis

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    Denis Kiselev
    Ericsson Inc.
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    DT Asia


  • 11.  RE: What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 17, 2018 07:30
    Hi Dominic some models are considering feeless transaction for IOT and the billing being based on the value to the community of participants, which is even more interesting! Paul

    Sent from my iPhone



    DT Asia


  • 12.  RE: What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 18, 2018 15:43
    Unfortunately, we are struggling to effectively prepare our leaders and organizations to handle the chaos and complexity that accompany the rate and intensity of today's dynamic change forces. As Ertel and Solomon share in their work Moments of Impact, "we still hire and reward people mainly for their ability to exploit known ideas."

    Being stuck in terminologies like BSS/OSS, OCS etc. stand a good change of failing to move the needle.

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    Cato Rasmussen
    Independent
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    DT Asia


  • 13.  RE: What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 24, 2018 02:21
    ​Thank you everyone for your advice. I have learnt at lot from you.
    Charging is an interesting topic, and I am sure there will be more innovative ideas as we have learnt more about 5G, IoT and digital transformation.
    Wish you Merry Christmas & have a great festive season!

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    Dominic Law
    PCCW Global
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    DT Asia


  • 14.  RE: What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 18, 2018 02:19
    Edited by Shashank Singh Dec 18, 2018 02:24
    Hi,

    I would like to add my 2 cents to the discussion. There has been a lot of discussion about the complex logical changes that will be introduced as the 5G network continues to evolve.
    With the evolution of 5G networks, I also agree that the subscription and the charging mechanism will not stay as conventional as it is being handled currently in 3G/4G data consumption BSS models.

    But, the subscription/charging model for IoT might not be different either. 5G consumption would be a combination of access speed, latency and other non-functional abilities like availability, reliability, etc. From a network perspective, these factors are a huge impact; but from the BSS perspective, these factors roughly translates to something called as Rating-Groups in 3G/4G networks.
    These rating groups can be defined by the telecom operator based on the network capabilities provided as well as the business/commercial use of the network.

    E.g. A connected car may need a bare-minimum latency, access-speed and availability and can be stated as RG1 and associated with the cost. It may use Event based Reservation (ECUR) or IEC (Immediate deduction) based on the agreement with the network and business.
    OR
    A smart home will have a different set of parameters and a business purpose and can be put as RG2 with different charging rates.

    Surely, there is more to it, but it has to be simple enough for the operators and the end-customers (B2B or B2B2X) to understand.

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    Shashank Singh
    Cerillion Technologies Limited
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    DT Asia


  • 15.  RE: What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 18, 2018 09:20
    Scanning though tase responses, I think Cato's is the one that stands out.  However, the thing that is missing in all of this - and it's the same mistake telcos make over and over - is designing model inside out.  When faced with a new opportunity such as this, Telcos invariably think "what pricing models have we used before, what can our systems support, how is our business organized, etc."  Why not do something crazy like figure out how customers want to consume these services?

    First, there is probably more than one model depending on use case, market sector, geography and more.  Performance and meaningful SLAs also play a large role.  Airlines price on demand (how badly do you need to get to where you want to go), delivery companies and Amazon price largely on some combination of size/weight/distance and speed.  Telecom currently charges by minutes used or data volume because that's how they priced things 50 years ago and despite a lot of makeovers, they still think and act like "the phone company."  Most customers don't like consuming services this way hence the popularity of unlimited plans.

    The first thing one must do is pretend you don't work for a telecom company.  Create your own "Reality Distortion Field" and imagine what sort of model would entice customers to beat a path to your door.  The mold your business model, organizational structure, processes and systems around that.

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    Jim Warner
    Westport Group
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    DT Asia


  • 16.  RE: What kind of charging models for IoT subscriptions?

    Posted Dec 18, 2018 10:34
    @ Jim Warner - either you didn't see my response or (most probably) didn't understand it (which would indicate that I wasn't clear enough)?!

    My suggestion was to try to price a service relative to the business value that it can bring to its customers (so really designing outside in :-). For example assume you can demonstrate that a given IoT service can save 1€ per connected node (fro example in transport and/or maintenance costs for remote monitoring), you could price it between 0.10€ and 0.50€ (then you also need to look at the CSP's financial viability).

    I don't currently work for a CSP, so no need to pretend ;-), even if I did in the past and then worked on selling to CSPs​...

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    Pedro PAIVA
    www.linkedin.com/in/pedropaiva
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    DT Asia


  • 17.  RE: What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 18, 2018 11:09
    You are right Pedro - I most certainly am unable to understand your comments.  Where were you when I was CEO of TMF?  Could've used your help.

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    Jim Warner
    Westport Group
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    DT Asia


  • 18.  RE: What kind of charging models for IoT subscriptions?

    Posted Dec 18, 2018 10:34
    It is very difficult to have a pricing model for a new service. In some cases, it is very difficult to quantify the monetary value. May be the best thing is to start with a very basic model of cost+profit and then refine the business model with the experience.

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    Damodar Arapakota
    TO BE VERIFIED
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    DT Asia


  • 19.  RE: What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 18, 2018 11:09
    Don't confuse cost with price.  Cost + is usually a bad idea for a new service unless there are extraordinary set-up costs per customer for the service.  Most IoT services will involve some form of network connection and cloud processing which are already sunk costs to the telco.  Little incremental hard costs incurred. Mainly service setup which should be pocket change if done properly.  The per customer "EBIDTA" should be extremely high.  The key is to get them inside the tent first and foremost.

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    Jim Warner
    Westport Group
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    DT Asia


  • 20.  RE: What kind of charging models for IoT subscriptions?

    Posted Dec 18, 2018 11:09
    Excellent discussion and with variety of directions and concepts seems to be gelling well with the IoT. What am seeing so far in context of the widespread predicted and nearly visible usage of the IoT especially with the connected devices that it is going to be a big number game . While the demand based upon possible use cases is going to be very tough around reliability, coverage, latency it is not going to cover the cost with lower number of subscriptions. I visualize with a corporate billing model where a lot of 1000 devices are billed by the operator where as the corporate has full control of the billing of the 1000 it is going to manage for it's business or reselling. Not many solution existing off the bat and not many with online billing of that sort. Some customizations within business and not relying entirely on a end to end suite going to be a game change. Standard billing/charging providers going to limit the IoT considerably.

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    Pardeep Kumar
    Digicel Group
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    DT Asia


  • 21.  RE: What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 19, 2018 12:15
    A conservative estimate, 90% of IoT devices are simply going to use OTT, using local WiFi connectivity. A percentage of the remaining devices 'may' have physical connectivity, the remaining will use the cellular network. But I don't see my coffee maker using anything other than WiFi.

    That leaves two billing models for cellular data, consumer or company. A consumer is not going to want metered billing, hence the popularity of unlimited plans that Jim pointed out. While a company is going to press for bulk rates, pushing the cost per unit as low as possible.

    These are the current cellular data billing models used today, IoT will not change this. If anything, it would probably give a company more leverage in price negotiation. Allowing a company to push down the cost of every end-point, IoT and other services.

    What CSP's need to do, is add value somewhere in the middle. Such as data aggregation, but that depends on the functionality of the IoT device. This opens a wide range of billing models for computing and storage. But more importantly, aggregation would probably be a 'sticky' service.

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    Brian LaVallee
    INVITE Communications Co. Ltd
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    DT Asia


  • 22.  RE: What kind of charging models for IoT subscriptions?

    Posted Dec 20, 2018 06:23
    Nice discussion and valuable considerations, thanks to all. By now, trust no one can avoid watching up the costs of the IoT infrastructure and solutions to put in place. Volume remains a key factor, leading to consider price as MRC on a per managed device. Yet cost+mark up won't work in the mid-term as it is not attractive enough and would refrain growth. Longer term, it should shift to customer perspective and ROI for the IoT solution in place. A % of the achieved ROI per solution may then become the revenue driver.
    Views?
    Francis Venant
    SITA

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    Francis VENANT
    SITA
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    DT Asia


  • 23.  RE: What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 26, 2018 04:48

    Interesting discussion. Good to understand views across industry. Let me present my views as Product Manager for OCS. I will try to keep it short but anyone's welcome to reach out for further discussion.

    It has been mentioned in opening remarks that most prevalent charging mechanism today is either time or volume based. But even in 2G/3G/4G, we have other charging capabilities like Session and Event based, Access Specific, Application based, Policy based ,Sponsored charging etc. These capabilities were employed in limited scenarios because in current business of MBB, there was only one type of device with primarily need based data/voice consumption behavior.

    With advent of 5G, capabilities of NR (capacity, throughput) as well as architectural changes in Core network (SBI, CUPS) will enable many more use-cases, classified as mMTC, eMBB and cMTC.  Now since operators would play a role of use-case enabler instead of just connectivity provider, they will be in a position to extract higher value of the bit. Thus, charging would be based on the device behavior and on the enabled use-case instead of just quota based. There's the additional parameter of the slicing which is a major enabler for cMTC use-cases.

    Examples of charging models would be probably based on: triggers, number of times device has connected to network, shared data across devices, slice subscription or slice usage, annual rental, etc.

    Most important impact on OCS would be : Handling the high number of devices, device segmentation, enabling charging based on triggers and of course, supporting the 5G Core Architecture.



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    Saket Kumar
    Ericsson Inc.
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    DT Asia


  • 24.  RE: What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 26, 2018 10:22
    I think it's important to point out that by in large, telecom creates pricing models that are way more complex than they need to be.  The vast majority of people and businesses cannot decipher their "phone bill" and it's one of the top 2 or 3 complaints.  There's an entire sub-industry devoted to doing forensics on a telecom bill and being paid from the savings (aka inaccurate charges).  To say nothing of the fact that all of these schemes require complex rating and billing systems that are expensive to maintain and change.  If telecom follows its normal instincts, they will get outflanked by far more nimble providers who are better attuned to customer's desires and once again, for the 17th time, telecom operators will be left scratching their heads muttering "what happened" followed by 3x as many conference presentations discussing how telecom missed another opportunity that was theirs for the taking.

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    Jim Warner
    Westport Group
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    DT Asia


  • 25.  RE: What kind of charging models for IoT subscriptions?

    TM Forum Member
    Posted Dec 28, 2018 16:43
    I agree that deciphering phone bill was an issue couple of years back becasue telecom providers tried to create the value through differential pricing. ​But now, with almost flat pricing of data and no value in voice, plan accross the world have become quite simple. Although, there still are few regions where we have many different offers based on different apps, websites or media type. But in 5G, most of the business models would be business to business and that's where use-case based pricing will make sense. I don't see consumers getting a slice of their own to play a VR/AR game but I see gaming companies providing a slice subscription to their consumers and chare a combined rentals of gaming experience. For Mobile Boradband subscriptions, we still will have simple data based flat pricing, maybe a bit higher for 5G Access type but that's it.

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    Saket Kumar
    Ericsson Inc.
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    DT Asia