A sim gives an ID for the telephone network. But it does need to be able to communicate with cell towers somehow, so I would think a monthly data fee would be needed. That $5 per year makes me suspicious that the company shall not be around for long.
I'm mystified as to why not put in a more powerful battery - and of course the more popular a device such as this gets, the more likely that it would be removed by the thief. One hidden inside the bikes' tube, now that would be my preference, along with a longer life battery. Add some storage capacity and a music player and a headphone jack while at it, please.