17 Comments

Summary:

Connected tablets will certainly show off the capabilities of the 4G deployed by operators, but the big profits will come from elsewhere. For example? Your medicine cabinet, where a new bill bottle cap sends 20 kilobytes of data per day while costing $15 per month.

pillcap

Tablets are just the tip of the iceberg for the new fourth-generation networks that mobile operators are deploying. Sure the Consumer Electronics Show (CES) offered a tablet for every possible price range and use case, but the bigger news for carriers was buried in smaller items like pill caps or refrigerators or electricity meters. Connecting tablets will certainly show off the capabilities of the Long Term Evolution Networks deployed by Verizon, and planned by AT&T, but the big profits will come from elsewhere.

For example? Your medicine cabinet. AT&T said last week it would provide the service behind an innovative pill cap that will connect to its network and text users when it’s time to take their medicine, or it could text a caregiver.

The nifty little pill bottle top costs $10 per cap and requires a $15 per month service plan. That’s likely worth it for people who need reminders about the drugs they or a loved one are taking, but on a per-megabyte basis that $15 per month nets out to about $25 per MB, although it’s not clear if AT&T gets the full $15. The folks at Vitality, the maker of the cap, said the connected cap transmits less than 20 kilobytes of data per day over the network — a mere crumb when compared to bandwidth hogs watching streaming video on their iPhones.

Compare that to the price of 8 cents per megabyte under AT&T’s 200 MB per month plan for iPhone users or 1 cent per MB for those on the 2 GB for $25 per month plan, and suddenly the focus on falling Average Revenue Per User doesn’t seem as scary for operators who will have an entirely new class of subscribers to go after. There’s a very real possibility that consumers will draw the line at paying $15 per month for their fridge to tell them when to change the water filter, but for the right use case, operators might be able to share in texting-type margins to boost their profits.

Both AT&T and Verizon are looking for extra revenue and low-bandwidth needs from utilities, too, offering their networks to connect smart meters and smart grids. About a year ago, carriers dropped their prices dramatically for utility smart grid projects, evidently finally realizing the low maintenance, steady revenue stream that smart grids can deliver was worth smaller network rental fees.

Machine-to-machine connectivity is also a needed area of expansion in a saturated wireless market like the U.S. As I wrote a few months ago:

The nation’s two largest carriers added more connected devices [in the second] quarter than postpaid subscriptions, according to data released this morning by Chetan Sharma, a wireless analyst. Carriers added 2.6 million connected devices and 1.2 million contract customers. In his quarterly update, Sharma noted that wireless penetration in the U.S. reached 95 percent and surpassed 100 percent if one takes out children younger than five. While there are only 20 million connected devices out of 311.3 million subscriptions, the devices are where the growth is.

Fantastic profits and a chance to keep growing subscriptions? No wonder AT&T and other operators are betting on the Internet of Things.

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  1. Lucian Armasu Friday, January 14, 2011

    This is the reason Verizon and AT&T didn’t want full net neutrality like in the broadband market. It’s sad that they are allowed to take advantage of customers like that.

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  2. Your complaint about the cost per MB is just naive.

    Other data plans are sold to people who also have voice plans and a billing relationship. This is a stand alone plan, there is a cost of maintaining an account, billing, collections, and customer service. There is a cost of keep each SIM working on the network without a single byte of data being exchanged.

    It’s like saying a magazine pays $100 for a 1000 word article, so an author should be willing to turn in a 100 word article for $10.

    Over time there may be better designs for these applications, perhaps using WiFi or Bluetooth that can piggy back on your smartphone or home internet router without incurring the cost of additional data plan. However, in this case, considering the audience, a device that just works out of the box without much set up is likely the right design.

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    1. I am sorry but your just flat out wrong. there is almost no “backend” the pill cap company is doing all that labor and after initial “setup” its almost 100% automated never a human hand to touch it again.

      they literally say “ok” this range is yours do with it what you please. They can do this because they know these things are fixed use devices. no monitoring or tracking is needed on the part of the operator since the data it uses it virtually non existent in the bigger picture.

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  3. Let me see if I have this right.

    I have a product that uses technology to provide a service. It is new, so I can charge a premium price for it, even though the price is ridiculous in light of the fact that it makes use of existing connections to the internet. Let me see what other uses I can develop for this technology so I can generate more income for myself.

    If Kindle can connect wirelessly without charging a monthly fee, why would this company believe they need to charge for it? Only because they can. I would bet it goes over bug in the medical community that adopts technology at a high cost to the patients.

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    1. its not about need its about DESIRE ie profit.

      $15 a month is not bad if it covers “ALL” your interconnected gadgets. (pill caps all of them fridge pantry printers etc.. etc.. etc..)

      your paying for the convenience.

      its when they gouge that I have an issue. bill for the frige bill for the cap each bill for the ink bill for etc.. etc.. you get the idea.

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  4. Let me count the $: I take 4 different pills a days, so it’d cost me $60 a month for “the plan”. Well, Stacey, once in a while, I do forget to take them, but for $60, I’d use 4 strings and try my luck!
    Thank you for the info though! I pass.

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  5. One should consider “the value” added for that $15/month or 50 cents per day. If it can prevent a hospitalization which can cost tens of thousands of dollars then it is certainly worth the cost.

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  6. Ugh. File this under “End of freakin’ civilization”. If you meet anyone you uses these connected pill caps, let them know that I have some electric pencils I’d like to sell them.

    Anyone geek enough to consider using connected caps for text reminders would probably be aware of the Google Calendar option of sending SMS notifications. Presumably, this is meant to be marketed to hospitals that could suggest this “solution” to unsuspecting patients who aren’t tech savvy enough to know they’re being had.

    If, as DTPLASD put it, caps for 4 prescriptions would run you $60 a month to issue reminders, you could hire a virtual assistant to do the same thing (firms like AskSunday and TimeSvr are $40-$70 a month), and get them to perform dozens of other tasks in the bargain.

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    1. +1

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  7. Your missing the real reason why the price tag is so high. Why not bill the insurance company $15 a month for a frivolous connection to the internet. $15 a month x 7 Million subscribers (10% of the baby boom population) = 1.26B a year profit.

    Anyone with half a brain would have built this thing with I don’t know, WiFi or Bluetooth. I thought this was why Bluetooth was invented a local personal area network. A usb port with a small web site to program SMS email and wifi network info would have done just fine, but again why not suck 1.26 Billion a year out of a failing healthcare system.

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  8. And because AT&T doesn’t let you use one data plan for multiple devices, you’ll pay $15/month for each device you want to tell you stuff.

    I can’t wait for Google to start deploying its own fiber and wireless networks to give these f**king criminals some real competition.

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  9. [...] Higginbotham points out $25/MB is a tremendous amount of revenue and a great reason for carriers to love M2M. Another reason carriers love it has to do [...]

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  10. [...] total customer base to 94.1 million people. Another 8.1 Verizon accounts are comprised of highly profitable machine-to-machine connections. Churn was low while revenue and margins were up for the quarter, but looking back, this period may [...]

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