Prepaid plans for IoT projects: Not always a good choice

"One-off for 10 euros" or "Data flat rate for your IoT devices for €5 a month" - what sounds cheap at first glance can end up being expensive. Really expensive. For example, if the provider's business model turns out to be neither sustainable nor economical and the IoT SIMs can no longer be used due to the provider's insolvency. In this article, we explain what the risks are and what you should keep in mind.

Why prepaid plans are not always suitable for IoT projects

Basics: Price structures of IoT and M2M plans

One-off fees for the purchase of IoT SIM cards, monthly basic fees, activation fees and more - M2M and IoT SIM cards incur different costs than a standard SIM card in a smartphone. In addition to an online portal, which is usually maintained for the management of IoT SIMs, remote access options, e.g. via VPN, and the ability to access a data pool, the support requirements on the customer side are often higher. Each provider of IoT SIM cards factors these costs into their offers in their own way.

On the provider side, there are also the framework agreements with different network operators so that their M2M SIMs can use different mobile networks at all. Without these agreements, IoT SIM cards can neither roam cheaply nor enable end devices to connect to data from anywhere. These agreements are fixed for a specific term, after which the conditions are renegotiated. However, depending on the contract design, a network operator can also make cost adjustments during the validity period of the prepaid product. And it is precisely in these adjustments that the greatest risk lies dormant, both for providers and users of M2M prepaid tariffs.

Economic misplanning: insolvency or additional costs

If the conditions deteriorate for the prepaid provider, the SIM cards sold will cost them more than they originally calculated. If too many SIM cards are affected, in the worst-case scenario the business is no longer profitable for the provider - so instead of earning money, the provider pays more.

In such a case, there are usually only two options: Pass on the increased costs for the IoT SIMs to their own customers, or stop the loss-making business, either through insolvency or termination of the SIM cards concerned. In both cases, the customer ultimately loses out. They either have to pay more than they had budgeted for, making their project more expensive for the entire remaining term. This is particularly annoying if other providers that initially seemed more expensive would have been cheaper for them in the long term. Alternatively, they may have to look for a new provider, go through the entire selection process again and also replace the IoT SIMs they have used so far.

Insolvency in IoT prepaid plans: Lack of backup for continued operation

In most cases, IoT SIM cards are not used for short-term projects, but for long-term projects. Everyone wants to be sure that the installed M2M SIM cards will also transmit data in the long term. Especially when end devices are in use worldwide, replacing the IoT SIMs is a logistical nightmare - which is also quite cost-intensive. So what happens if the provider becomes insolvent?

M2M SIM card providers usually have contractual partners who contractually take over the IoT SIMs sold in the event of insolvency, thus ensuring continued operation. At wherever SIM , we have secured our customers via two major international network operators in the very unlikely event of insolvency. However, if a prepaid provider goes bankrupt because the operation of the IoT SIMs it sells is not profitable, it is highly unlikely that it will be worthwhile for another company to continue operating it. So if there is no backup to ensure continued SIM operation, the only option for customers is to replace the SIM cards. IoT SIM cards that can be remotely loaded with a new network operator profile are rarely available in prepaid tariffs.

Insolvency may be an extreme case. However, this risk cannot be dismissed, especially with pure providers of prepaid IoT tariffs, and is by no means low. Costs are calculated very tightly, especially for the particularly low-cost IoT prepaid tariffs. The goal behind this: Get into projects, gain market share - and raise prices or sell additional services at a later date. After all, once IoT SIMs are in use, switching is usually not that easy or involves a lot of effort for customers.
So if you are considering using an IoT prepaid tariff for your project, we strongly recommend that you check with the provider in question before purchasing how SIM operation is secured in the event of the provider's insolvency.

Prepaid plans for IoT projects: Not always a good choice

Laura Gaber, M.Sc., is the longest-serving of our two Marketing Lauras. The Cologne native worked for several years as a communications all-rounder at EU level for the renewable energy sector. In 2016, Laura's curiosity drove her further afield - straight into the north and our arms. Since then, she has been dealing with the latest developments in digitalization, M2M communication and the IoT on a daily basis.


Laura Gaber
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