Mobile Sands

February 2, 2010

Billing for Mobile Connected Devices

Filed under: 3G, LTE — Tags: , , , , — AJ @ 4:40 am

Imagine if every home appliance you own required its own electricity subscription, and the price of a light bulb included lifetime electricity usage!

Well, that is how mobile broadband connectivity is being priced today for “connected devices” ranging from tablet computers to electronic book readers. Apple iPad owners need to pay an additional $14.99/month to access AT&T’s 3G network even if they have unlimited data plan with AT&T. And Sprint 3G subscribers need to pay for the data charge bundled with their eBook purchases from Amazon, just like everybody else.

When Edison first started selling electricity to consumers in 1882, he priced it by the light bulb. At that time, the primary application of electricity was illumination. Edison promoted electric lamps as “the sun’s only rival” and often subsidized them. Tied to each light bulb was an unlimited usage plan.  Sounds familiar? It took another ten years before Chicago Edison Company (led by Samuel Insull) started charging for electricity consumed. Insull grew Chicago Edison into one of the largest utilities in America, and the pricing model he pioneered opened the doors led to a proliferation of electricity-consuming appliances, driving decades of rapid growth for the electricity business.

To get similar growth in the mobile broadband business, carriers need to offer plans that cover all devices owned by a single person (or family), and then, charge for bandwidth consumed. An AT&T subscriber who buys an iPad should be able to add it to her existing 3G plan and do the same when she buys a new PlasticLogic e-Reader or Isabella’s VIZIT photo frame. Not only will this make connected devices more affordable and palatable to consumers, it will increase make consumers more loyal to the wireless operators they chose.

Metered pricing is essential for such “converged” pricing to work. Today’s “unlimited” usage plans are often tied to particular devices and are  based on the premise that the device and how it is typically used will limit actual usage to a manageable amount. A typical user of an email device like Blackberry uses just 30-40 MB of data per month. iPhone users use thrice as much data but still, it is not a lot. All this changes when you have dozens of devices connected to the wireless network, soaking up bandwidth all the time.

Carriers are definitely thinking about metered billing, especially as they look at introducing connected devices.   Verizon’s CTO Dick Lynch talked about this topic in an interview with Washington Post last month, and said that metered billing is essential for both, reducing network congestion and to enable “open devices”. The move towards the pricing model that made utilities successful is on.

May 5, 2009

Smart Grid – A billion dollar opportunity for wireless carriers?

Filed under: New business models, Uncategorized — Tags: , — AJ @ 4:15 am

Last month, Verizon, AT&T and T-Mobile announced M2M initiatives targeted at the smart grid, talking about how this may be a multi-billion dollar opportunity.  My analysis suggests otherwise. In my opinion, even if all 175M electricity meters in the US were digitally connected to smart grid, it may not generate more than a few 100 million in annual revenue for wireless operators.

Revenue per smart meter

Typically, a smart meter is expected to record information (approximately 50-100 bytes) every 15 minutes, though it is not expected to upload it that often.  Even if, a meter were sending 50 bytes ever 15 minutes, it would send just 4.7 KB/day or 141 KB/month. Not much.

Today, carriers are earning more than $0.3/MB (or $300/GB) for data downloaded by retail consumers. Even though most data plans offer 5 GB per month, average smartphone usage is between 30 MB (for email devices) to 100 MB (for iPhones). If a carrier prices its retail smartphone offering at $30/month and an average subscriber downloads 100 MB, the effective price would be $0.3/MB. (I hope this also explains why AT&T and Verizon charge around $0.25-0.50/MB for any data usage above 5 GB on their “unlimited” plans).

If utilities were able to negotiate the same rate – 30 cents per MB – they will be paying the wireless carrier 50 cents a year per meter. That puts the market size for 175M meters at a mere $87.5M per year. It is unlikely that this number would get any carrier excited, and probably many utilities see more value than 50 cents. The questions remains – how much more? where will the pricing stick?

Not every smart meter needs to be a 2G/3G node

Many utilities are thinking about aggregating multiple residential meters at a concentrator (or a “collection point”) using private local-area networks and to then connect these concentrators using 2G/3G wireless data.

Different companies are advocating different approaches here:

If there are 17.5M concentration points (1 for every 10 electricity meters), a carrier would have to charge $5/month per concentration point for the total available market to exceed $1 billion a year. There may be some justification to the $5/month number. This is what Aeris used to charge its M2M customers according to an April 2005 story in Forbes. However, by 2015 and with all the competitors in this market, I would be surprised if any carrier can charge a utility more than $2/month per concentration point. At that number, the total available market would be little over $400M/year.

Utilities have strong incentives to go for cap-ex that reduces recurring cost

Over the next few years, utilities will have access to billions of dollars of stimulus money. In addition, unfortunately, regulators are agreeing to levy a surcharge of $3-$4 per month for over a decade on consumers in the name of grid modernization.

Take CenterPoint Energy’s 2.4 million smart meter deployment in Houston as an example. Itron has offered to create meters that can be meshed, and GE is providing WiMAX radios to connect mesh concentration points. This is also the deployment in which regulators have allowed CenterPoint to charge each consumer over $3/month for 12 years for grid modernization.

In my opinion, it is much more cost efficient (cap-ex and continuing op-ex) for a utility to integrate low-cost, high-volume cellular (GSM/CDMA/UMTS) modem in meters and negotiate long-term deals with public network providers rather than build a private radio network. But, I guess, that would not create as many “green jobs”!


Smart Meters is just something I have been reading about recently. If you have a different view on the topics in this post, please do share.

1. Itron investor presentation provides information on number of utility meters in North America and other parts of the world.
2. Interesting article in the MIT Technology Review (registration required) on how the rush to create “green jobs” in the stimulus bill may be hurting technology and innovation.

Create a free website or blog at