Senior Consultant, IDATE DigiWorld
This market is considered one of the most promising in the Internet of Things sector with a number of connected things could climb from 200 to 900 million between 2015 and 2025.
The concept of the smart home can be understood as home automation for the Internet era, but it is a concept that has not yet really caught on.
It encompasses all of the machines in the home that could potentially be connected to the Web. It also includes a wide array of applications, from consumer electronics to home appliances, by way of light bulbs and presence sensors. Today’s market is focused mainly on selling hardware with a built-in connectivity module and which can be controlled remotely using a mobile app. But it now also includes hubs, i.e. central systems that allow the different devices to talk to each other.
Many of the currently available products are connected to managing energy consumption and personal security, as consumers are more inclined to invest in solutions that allow them to lower their electrical bill and/or feel safer in their own home.
A large and heavily populated ecosystem
The digital home ecosystem is vast, populated by a multitude of players from a wide range of industries, including veteran CE and appliance manufacturers, along with power companies and players from the lighting and security industries. Samsung is particularly active in this market, especially since it acquired the start-up SmartThings in 2004. The South Korean giant is selling a complete smart home solution, including a hub to which both the manufacturers’ and its competitors’ equipment can be connected. Philips also has a solid presence in the smart home market thanks to its Hue line of smart bulbs.
The marketplace is also populated by newcomers such as pure players specialised in connected devices – marketing smart thermostats, light bulbs and security cameras. Telcos too have joined the fray, taking advantage
of their modems already deployed in customers’ homes to roll out new initiatives. The Internet giants are also on hand: Google through its acquisition of Nest, a start-up that specialises in smart thermostats, and Apple with its HomeKit smart home development platform.
An ecosystem awash with solution providers means that there are multiple communication protocols at work. The current battle for supremacy between standards is pitting a number of initiatives backed by industry giants against one another.
Adoption of the smart home raises severalquestions
This market, fl edgling as it is, is considered one of the most promising in the Internet of Things sector. IDATE estimates that the number of connected things could climb from 200 to 900 million between 2015 and 2025. Most of the market’s revenue today comes from hardware sales, whose prices are still too high compared to virtually identical products without smart capabilities. Several issues, then, need to be resolved before the market can really take off: the price of connected devices and appliances, privacy concerns raised by the use of personal data, a business model that needs clarifying (including monetising data) and the fragmentation of core technologies.
Discover the perspectives, key trends, and scenarios about the Internet and Smart Living market for the next decade through our dedicated report.
Director of Studies, IDATE DigiWorld
The connected object market today shows a real complementarity between the major players in terms of their current positionings, aligned with their core business.
In the longer term, however, IDATE DigiWorld anticipates that competition will grow in ferocity, around the platforms and services which are set to be the next source of revenues.
The automotive market
Around the connected car business, is key for Internet giants and telcos. Competition today is, in the main, on the platform side as both telcos and Internet giants are aiming to position themselves here today. Indeed, it is the platform that is the cornerstone of the next connected car strategy. Looking further ahead, the main competitors will most likely be OTT service providers, as they will offer services by exploiting the data generated by sensors in the vehicle – Uber-like companies are one example. Some industry incumbents are already engaged in the battle: earlier in 2016, GM invested half a billion USD in Lyft, the main competitor to Uber. The major involved players are AT&T and Verizon on the side of the telcos and Google (and Apple to a lesser extent) for Internet players.
The wellness market
This market is very recent. Telcos are absent from its value chain, with the exception of very limited volumes of cellular objects. They only focus on the distribution side, where the reselling business can grab them a sale commission on wearable objects, linked to smartphones. OTT Internet players are eying this promising consumer market for the opportunities it will offer in the near future to manipulate and monetise masses of personal data.
The healthcare market :
A specific market for a long time, its very promising market has been in the growing numbers of potential ‘clients’ as their age increases. The key objectives of healthcare applications are to optimise the treatment of disease and to save costs for national healthcare services. Even though solutions will be provided in partnership with experts, both telcos and Internet players will be push platforms and services.
The smart home market
It will be the arena for immense competition in the next few years. It is considered as a growth area for fixed telcos which are already facing competition from cablecos. On the side of the OTT Internet player, smart home applications are seen as a complementary way to follow their consumers/audience, even though they have different approaches. Competition – again, it will be heavy – will on the platform and services side as all players will be wanting to manage the data.
Today, the industrial Internet market is considered as an extension of the Industrial M2M business for telcos. The Internet giants are notable by their absence, even though some could provide cloud-based tool: Google, and Amazon with its specific IoT AWS offering, are prime examples. Analogous with traditional online services, the main threat for telcos is that they yet again become the pipe, and only the pipe. They have, however, anticipated the connectivity commodity trend by offering data platform solutions and related services. The ARPU from connectivity is very limited and the telcos expect only a small share of connected devices will be equipped with a SIM card. Before services, telcos have backed their core business, by setting their eyes on LPWA technologies (SIGFOX or LoRa) or collaborating on LPWA-like cellular ones such as the NB-IoT ahead. They are also backing the next 5G technologies, which aim to empower various verticals, including healthcare, manufacturing, smart cities and the automotive. It will be a tough battle, given that Internet giants are global by definition. Moreover, compared with traditional Web services, the main difference is that Internet giants manufacture their own objects, providing almost an end-to-end solution of product, platform and services on top. Faced with this kind of solution, traditional players in the industry will also suffer from the invasive nature of the OTT Internet players and their fierce competition.
Find out more information on "Telco's Connected Objects Strategies" in our dedicated market report
Connected things as a strong market game changer?
Connected objects put together several markets. In 2015, 42 billion things are connected. In 2025, 155 billion things will be connected to Internet.
The value chain is different. Machine to machine implies a siloed connectivity, while the industrial network implies an interconnected connectivity.
Smart homes materialize a broad economic system, may be with too many possibilities. At present, the service is not up-front. There is a lack of services on the top of certain devices. The value added services isn't clear up to now. To take off the market needs to lift several barriers. First, price is the limit.
Connected objects will become one of the key pillars of tbe industrial giants in their servicisation strategy.
Luc Bretones, EVP Technocentre & Orange Vallée, Orange
To invent innovation locally you need to work at the local level so Orange has got offices in several countries.
IOT is a pillar of our innovation strategy. Orange has to work on value propositions. SIM-as-a-service is now on the market. New distribution models are created. At the same time, security has to be tackled. We want to customize customer experience.
Our company has a lack of good designers. The model is evolving from an Internet of things towards an Internet of services, from business to customer services, where you can monitor your home thanks to an SMS. Monitored security is on. Every area of life is under way. The car has got a specific need for connection.
Orange is an IOT data operator aiming to implement:
- connected devices
- internet of machines
- internet of objects
The objective is to get quickly a critical mass. To implement open innovation our company has to set up vertical partnerships. IOT is a broadfield in construction. On this topic data privacy is at the heart of Orange's concern.
What are the key current consumer applications and their business models?
- 90% value comes from services other than connected objects: Be it a better management of service to make it smooth, to guarantee the quality of service and delivery;
- Orange packs 4G in expectation to connect any objects, hybrid networks on different spectrum (LoRa and wifi);
- Orange connected services cover both B2B and B2C;
- Extend connectivity from cellular network, wifi to other wireless technologies: BLE, zigbee, etc.
- Spectrum of connected products and services: Orange Drive (critical, launched early 2015), Orange Smart Home, Silver cocoon (plug and go data platform), Pops by Citizen Science (connected health);
- Customer experience is the top priority – recruitment of designers as an example.
Orange ambition to be the data operator by 2020.
Orange Datavenue (data powered open platform): An IoT enabler platform for data storage, aggregation and securing, in wide range of verticals. Development of new B2B services that require to conclude major partnerships on verticals (entreprises and open data).
Round-table: How will connected objects impact our lives?
Moderated by: Olivier CARMONA, Director of Business Development, Awox
Xavier BOIDEVEZI, Vice President Business Development & Digital, SEB
Bernardo CABRERA, Head of M2M Marketing & Projects Management, Bouygues Telecom
Ludovic LE MOAN, CEO, Sigfox
Machine to machine is a reality. Today there are around 10 million of connected objects in France. 10% - 20% home appliances in the market have some connectable features.
From the car to consumer appliances, smart buildings, cities, any object can be connected now. At this level, there is a new business market emerging: security with two key elements simplicity and cost.
Generally four standards for connected devices exists, being endorsed by some telecom and internet giants like Google, Apple Homekit, Qualcomm.
What do I do with a connected object?
The key challenge is to make sense of usage for the consumer in terms of connectivity. The sector has to work more on positioning.
Today, music devices must be connected. For this segment connectivity is a must. For lighting, the market has been tackled with a different approach. With a connected lamp you can change its color right now. It's still a fragmented market.
The key driver is to work on the ecosystem of consumers. The global objective is to simplify life and offer embedded devices.
Experience should be at the benefit of technology. You're at the office and you want to start cooking your meal in the oven. How can we manage interoperability between products? It will bring added value. We need to explain what added-value this will bring to the end-user. So we need to move from manufacturing to service. At first, an innovation always seems crazy. Look at the mobile phone. Hackathons might be a way to develop applications and find a pool of ideas. We need to think big.
In terms of data monetization we have to find new models. There is a surge to be able to network vertical data and aggregate them from several fields of our lives (health, security, trips...). Digitalization and tools are increasing. Brands want to stick to consumers. The focus has to be laid on gather then analyse then exploit to finally aggregate.
Keynote: Paul-Edouard Launay - Jasper
Jasper is a start-up, working on operational excellence in IOT. Its aim is to launch, manage and monetize your IOT devices.
IOT is for everywhere and for all sizes of businesses. Services are for all of us. Jasper means to monitor and master the lifecycle of devices: manage / deploy / monetize. IOT always implies services we support. To deploy the equipment at the international level means having a seamless device.
- Business model is not clear yet (i.e. one of the invited company, SEB is still exploring its Business Model).
- Costs: Talking about Smart cit, how will the charges of connectable infrastructure and devices be covered, to whom?
- Energy: Identify the power consumption of devices; apply Low Power Wide Area (LPWA).
- Technologies come after consumer expectation: important to figure out what consumers value the most, what services can be offered to meet their needs? Then technologies come to serve the purpose.
To drive market taking-off:
- The majority of value will come outside the peripheries of home sensors or devices, but services.
- The market waits some model-effect of big manufacturers’ move, in expectation of lowering entry barriers, for example, lowering the costs.
- After the decision on what services to propose to consumers, both SEB and emphasized that true benefits/utilities will be delivered by partnership (open innovation) and by establishment of the ecosystem.
Data analytics allow home appliance makers to discover some key metrics associated with consumer expectation when the devices are being used, thus in return contributing to new services development ( transform themselves to service providers from pure manufacturers).
Advertising might be possible but commercial viability has not been proven yet. Data analytics are likely to make more sense, estimated by SEB.
Subsidiary of La Poste, DocaPost
- Again the key question is the users’ expectation from IoT
- The objective is to access services in wellness, energy, security, connected home and connected city to have a better life.
- “IoT, new vector to develop proximity services” according to David De Amorim
- The innovation will come from the combination of data from different objects and services . It's important to develop an ecosystem
- The way to develop IoT for DocaPost, subsidiary of La Poste will be done through the development of a cross vertical platform (called Le Hub) to be universal, advantages based on neutral both technically and positioning. La Poste wants to address France entirely. The hub will be launched next year and be showcased during the CES in Las Vegas in 2016 with Atol, BNP, Legrand, schools and other start-ups
- La poste wants to address all the sectors. That implies the use of the integration of many technologies to address specific sector such as Sigfox for smart meters or WiFI for cameras security
- For security concerns, La Poste has planned to enable users to manage data
Industrial Internet round table
Moderated by: Ezio ARMANDO, Managing Director in charge of Emerging Technology for Europe, Afriqua and Latin America, Accenture
Vincent CHAMPAIN, Operations Director, GE Corporate France
Andreas FIER, Head of Academic Relations, Deutsche Telekom AG
Didier GUILLOT, Innovation and multi-utilities Direction, director, Sagemcom
Rolf RIEMENSCHNEIDER, Head of Sector for Internet of Things, European Commission
Soline OLSZANSKI, VP Strategy & Innovation, Hub One
Olivier ROUXEL, in charge of RFID & IOT missions, DGE
The definition of IIoT (Industrial Internet of Things) remains blurred. Here, Accenture defined the IIOt as the connected applications and services for business purpose, a broader scope than the conventional definition focusing on manufacturing.
About the IoT architecture and the technologies:
- Deployment of the architecture is not the key question
- Low cost and very efficient architecture required
- The cost of connecting, analysing is almost zero according to GE
- Building consistent infrastructure to connect objects first !! then modules and devices
- The issue is to integrate, the challenge is who is managing and maintaining this architecture
- LoRa identified by panellists as a good technology thanks to the alliance behind
- Triangulation of technologies to locate objects; it’s the compilation of technologies that bring value
Main benefits from deploying IIoT:
- Additional productivity, more reliability especially for oil and gas sectors, new services to client
- From technical perspective : miniaturization, radio protocols and power consumption
- Environmental (energy, lighting), supervision and monitoring for building, assets and also staff, vertical applications
- Example in the airplane sector, many applications regarding the planes, the truck etc and also for the customer interaction
Keys of success for IIoT as the deployment path is currently low
- Business questions to be resolved : how to bring value out of the combination of the use of the technologies
- Security compliance to be resolved for some sector for instance in airplane sector
- 3 Focus to be addressed for Soline Olszanski from Hub One: what services bring, ecosystem to achieve a mass market, business model
- Standards questions to be fixed : fragmentation and lack of standards. Standardisation is coming
- No technologies war : Each technology will have its place in the IoT according to Didier Guillot from SagemCom
- Ecosystem is required otherwise development projects will take longer
- Needed for skilled people
- Continue beta tests
Next step is the finalisation of end users applications.
IoT : The Internet of Things
Connected objects were everywhere and IoT is now becoming the Internet of everything.
Connected cars attracted a lot of attention with connected vehicles on most of equipment manufacturers’ and MNOs’ booths.
Renault’s CEO made a keynote where he presented the timetable for assisted driving. According to Mr. Carlos Ghosn, despite their numerous initiatives and some acquisition rumours, Internet giants are not rivals to car manufacturers but allies, as they consider electric cars and they help car makers to promote electric cars.
Ford had even its own booth presenting the electric vehicles (both passenger and entreprise cars) with dedicated solutions. In the meantime, Vodafone presented a Porsche Panamera model equipped with its new Telematics solution since the Cobra acquisition.
Smart is also getting traction in the IoT space. In the “innovation city” hall (space dedicated to the connected objects), through the AT&T offering (Digital life) where the home could control through the smartphone and even through the connected car (equipped with an AT&T SIM card). When approaching the home, the car can trigger the opening of gate by itself for instance (pre-programmed distance).
While 5G is already in the tracks, very low throughput network technologies are also under the spotlights. After the recent release of its 100 MEUR fundraising campaign among telecom operators, Sigfox was also on everyone’s lips at the MWC. Among the main new shareholders, Telefonica confirmed its strategic investment and its willingness to integrate the technology into its portfolio to address additional verticals and applications.
The GMA (Global M2M Association) also announced a strategic collaboration with Gemalto and Ericsson to provide a Multi-Domestic Service based on a single SIM (using the eUICC technology) helping global enterprises (chiefly from the automotive and consumer electronics segments) capitalize on the growth of connected devices.
Growing market but still key challenges though
During his keynote, if AT&T Wireless CEO predicted that the smart phone will be the remote control of everything in the next few years, he also pointed out the key challenges to address in order to make the IoT market grow significantly:
• Privacy concerns
• Effortless (ease of use)
Data about devices and their users is generated in real-time, often by default and without the user being aware or having choice (especially for free apps). There is a need for a different approach to giving users transparency, choice and control over their data and privacy.
Generally user has a single choice : accept or not using the service, there should be gradual approach (like sharing some id attributes but not all of them).
Privacy could be a competitive stick for service providers, as users are becoming more aware of privacy.
Facebook in emerging countries
• Airtel: “Operators and Facebook are like the beauty and the beast, but the beast (facebook) is becoming more human nowadays”. Airtel was reluctant to introduce Facebook because of VoIP threat. Is looking at it like the “boiling milk”.
• Millicom, Telenor: have seen ARPU rise thanks to facebook launching, very promising for them.
• Wikipedia has the same approach of “Wikipedia zero”, dealing with operator to provide data access for free.
More informations about IDATE's expertise and events :
Lead Analyst, IDATE
80 Billion things connected in 2020
The Internet of Things is a concept whereby any item can connect to the Internet to retrieve information to enhance its intrinsic value. The scope of the Internet of Things (IoT) is therefore very broad. It includes communicating devices and M2M but it aims to go beyond M2M by enabling any object to connect and leverage the Internet (Internet of Objects - IoO) even if it does not contain the electronics required to connect directly to the Internet; it connects to the internet with the use of an intermediate device.
15 Billion things connected to the Internet in 2012
According to this definition, 15 billion things (machines, connected devices and objects) were connected to the Internet in 2012, up from 4 billion in 2010. According to Samuel Ropert, project leader of this report “In 2020, there will be 80 billion where IoO will represent 85% of the total IoT, ahead of communicating devices with 11% and M2M with only 4%.” In terms of growth, IoO still leads with a 41% CAGR between 2010 and 2020, followed by communicating devices with 22% CAGR and M2M with 16% CAGR.
Evolution of the different components of the Internet of Things
The Internet of Things encompasses multiple and heterogeneous building blocks
The Internet of Things encompasses multiple and heterogeneous building blocks. Underlying M2M and IoO run over different hardware and communication technologies. While RFID and 2D barcodes are used to interact with objects in the IoO concept, M2M application will rely on several different networking technologies that allow the machine to communicate and transmit the data it has generated (or is meant to receive, depending on the application and the machine). While cellular technology is often selected for M2M deployments, new communication technologies (better designed for traditional metering M2M applications) have entered the market in recent years and could act as game changers in the near future (SigFox, Neul, etc). Nevertheless, implementing an open Internet of Things requires a new kind of architecture with scalable naming and addressing (ONS) technologies and new sustainable tools to access the data, as the Internet of Things is designed to browse vast (M2M and IoO) databases.
Internet of Things scope: from M2M to Communicating devices
M2M and IoO are driven by vertical markets
M2M and IoO are driven by vertical markets and will therefore be impacted by vertical environments,but adoption levels vary between the different vertical industries. Business maturity also varies considerably from one industry to another. Indeed, both M2M and IoO applications rely on cost-saving objectives for users, so ROI time is critical. Implementation is not always geared to the same objectives. While the textile industry targets item-level deployments for inventory, manufacturing-type industries like automotive and aeronautics use RFID for quality processes across the supply chain where different parts are assembled to form a finished product (only the RTI is tagged, not the part itself). The leading verticals in terms of connected objects (IoO) will be the pharmaceutical and textile industries by 2020.
IDATE has published its report on the Internet of Things Market. It provides an opportunity to clarify the frontiers of this new promising market and to present and analyze the key building blocks; the market structure, the players’ strategies and the dynamics of the key vertical markets (automotive, aeronautics, energy, food and retail, connected home, healthcare, textile).
COMMUNICATIONS & STRATEGIES No. 87, 3rd quarter 2012
Internet of Things: A new avenue of research
Summary : The Internet of Things (IoT) endows objects with intelligence and ability to communicate, connecting people and machines anywhere, anytime. IoT applications exist in various domains: health, domotics, security and control, the supply chain. IoT exemplifies - and is driven by - major changes in technological convergence, pervasiveness and ubiquity, increases in mobility, traceability, and so on. This special issue aims to develop a better understanding of what the Internet of Things is and what its potential impacts may be. This Dossier includes contributions from different fields of research in order to grasp the various dimensions of IoT in a multidisciplinary perspective (law, economics and management, political science, etc.).
Interview with Rudolf van der BERG
Economist & Policy Analyst, OECD
Conducted by Martin CAVE (Imperial College Business School, London)
C&S: Could you introduce yourself?
Rudolf van der BERG:
I'm an Economist/Policy Analyst at the Organisation for Economic Co-operation and Development (OECD) working on telecommunications and Internet-related policy. I've been working here for one and a half years and before that in the private and public sector in various roles. My most recent research focuses on machine-to-machine communication (M2M) and specifically the regulatory implications of liberalizing the telecommunications market to better enable M2M*.
As a disclaimer, this interview represents my personal views and not those of the OECD or its member countries.
What is the Internet of Things?
The term 'Internet of Things' (IoT) is a very flexible term and it isn't the only term used. Alternative terms like 'connected devices', 'M2M' and 'smart' are also used interchangeably and mean roughly the same thing. 5 years ago it meant mostly radio-frequency identification (RFID) enabled devices; however, as we're getting more creative, more things fall under the term. According to some, it is any Internet-enabled thing which is not a smartphone, personal computer or server. This distinction is rather moot though, as any connected device will no doubt be controlled through a smartphone, server or PC.
Essentially, it is a term that represents the next era of the Internet. Today there are several billion computers connected to the Internet. The next 20 billion hosts, however, will not be traditional computers but rather a variety of 'things': photo cameras, cars, sports shoes, watches, light bulbs, street lights, electric meters, home appliances, health monitoring equipment and home entertainment devices.
Why is this happening now?
The Computer Science lab of Carnegie Mellon University had a network connected Coke vending machine in 1982, so to some extent what we are seeing isn't new. What is new is the ubiquity of Internet connectivity. There is hardly a place in the developed world where there isn't some form of connectivity available. That connectivity now enables a global market for connected things. That market is now delivering on low-cost connectivity solutions.
For example, light bulb manufacturers are expecting LED light bulbs with Internet capabilities to be available in mass volume in the next 3-5 years. These new light bulbs will allow users to take advantage of dimming and colour display capabilities currently missing from standard lamps, and could easily transform spaces into modern multi-coloured light shows. Add to this that the LED light bulb is assembled like any other piece of electronics and adding connectivity comes at a relatively low extra cost, but does add functionality.
Connected street lights are a similar development, and promise a 70% decrease in energy use. That's up to 70 US dollars per street light per year! With roughly 5-7 million street lights in the UK, and a medium sized city easily managing over 10,000, the savings would be enormous. These new Internet-connected lights will also bring new functionalities: sensors that sense the presence of traffic, radio controls that allow street lights to be brighter at the request of emergency services, the possibility to signal routes through town by changing the colour of the lights, etc. Lower operational cost and more functionality? That's a win-win for every government in the OECD!
RFID was predicted to become really big; how is this different?
The difficulty with RFID was that the prices of tags haven't come down enough and RFID is competing with ink – a very versatile competitor – to deliver basic identification functionality. Add to this some technical difficulties, like reading tags when there is tin foil around, and implementation turned out more difficult than predicted. This doesn't mean there isn't a future for RFID, but it may not be as big and may take awhile longer.
The current trend is different in the respect that it is more high-end than RFID. Internet connectivity is installed in "things" that now already have ICTs on board, or where it is relatively cheap to add. If you now use a remote control to control a device, then in the near future there is likely to be a chipset available that allows Internet connectivity at the price point of a traditional infrared remote control. Furthermore many machines are already equipped with sensors and computing power. A car can have as many as 70 processing units (computers), many of which make the car more efficient, comfortable and safe. Connectivity is then a small step that promises an extra step in efficiency, comfort and safety.
What is the OECD's role in analyzing the Internet of Things?
The OECD performs trend and impact analysis of new technologies for its 34 member countries. Our analysis allows policy makers to understand the drivers behind technology, its impact on business and the role of governments in implementing and regulating these technologies. Several studies have already been specific instances of IoT, like RFID, sensor networks, smart energy grids, electric cars, smart water, eHealth, smart transport, etc. Our most recent work includes a study on machine-to-machine communication, and there are forthcoming studies on smart networks, cloud computing and big data.
What are the main policy topics involved in the Internet of Things?
There is very little that will not be impacted by the Internet of Things in the near future. It is just one application of ICTs and as a result carries with it many of the same policy issues as other ICTs. So the main policy areas for government – innovation, transport, health, environment, energy, and to a lesser extent, education – all are influenced. Governments can be one of the main drivers toward the roll out of connected devices, for instance, by creating policies that require smart meters. The European Union, for example, is now mandating its own location-based service system (eCall) to be built into every car from 2015. Governments will also need to put in place policies that anticipate the impact of the Internet of Things in such general areas as privacy, security, competition, numbering, spectrum, and job creation.
Could you expand a bit on Privacy?
Privacy is obviously an important point because devices are increasingly recording data that can be traced back to individuals. And it doesn't look like there is an opt-out available anymore. You can decide to leave your phone at home, but you can't opt-out of a street light sensing your presence. You can't opt-out of the European eCall system installed in your car, or the mobile networks recording its location. Now add to this the enormity of scale and you can begin to see how everything will communicate, everywhere.
Countries are debating the privacy implications of this new connectivity. For instance, smart meters have been dubbed by some as spying devices because they might instantaneously record what you do in your home. Many countries have responded by scaling back their roll outs and reducing the number of samples taken to once every 15 minutes. However, a consumer may want to share that information with a third party service provider, not being the energy company, because the same data can give important insights into energy savings and allow them to automate their home. Or the data could provide alerts when a freezer needs of de-icing or a fan develops a mechanical failure.
Governments understand the benefits, but still haven't determined how the current rules can effectively be applied to the new privacy concerns. Existing privacy frameworks were developed for a world where small units of data are stored by organizations we interact with. But today's reality is that large amounts of data are stored by a variety of organizations that may not have a relationship with us personally. Furthermore, even anonymously collected data can be increasingly combined with other data sources to become personally identifiable. The concepts of notice and consent that are now central to privacy regulation become more difficult in this context.
Take for instance the data from street lights (I like street lights as examples because they are everywhere and thus easy to relate to). Now if that street light is equipped with a sensor that measures the presence of pedestrians and cars to turn the light brighter, this action can generate data that can be stored. Not only could this provide great data on traffic volume at certain times of the day, it could also be used to verify whether your neighbour left the house at 3am and walked two streets down to the house of his friend and back again. Just follow the street light. Our privacy frameworks weren't designed with these kinds of situations in mind. We're now talking about billions of sensors, cloud-based processing and big data analysis.
With privacy often comes the question of security.
Security and reliability of Internet of Things is vital. It will control many elements of our lives and we will rely on it to work and not to be abused. With everything becoming more interconnected there are more interdependencies. Given the long lifecycle of Internet of Things, devices remain active for up to 30 years, it is difficult to foresee all possible uses. Looking at industrial control systems, used in factories and utilities, the signs aren't good. A recent study showed that almost all commonly used systems were susceptible to many basic attacks. In another case an industrial control system would reactivate the default password, which was "100" even when it had been changed. It is scary to see what will happen in the long run as these systems will remain online for 30 years and it is unclear who has the responsibility for their safe operation for all those years. There is however, room enough for a few scare stories. Could you imagine what happens if the neighbours kid could turn on all the lights in every house in the street (or city)? The solution lies probably in better accountability for these companies, but how this is achieved is still a question.
So what about competition, you've worked quite a lot on this?
Yes, competition – especially in the 2G/3G/4G networks – is affected greatly by the Internet of Things. GSM, CDMA, UMTS and LTE all share the incredible advantage of being available up to high speeds almost anywhere in the world. This is something few other networking technologies can do. So it is great for running applications on geographically-dispersed devices, either mobile or fixed. Another advantage is that the authentication method on 2G/3G/4G networks is via a unique smart card, i.e. a SIM-card.
SIM-cards are great from a machine and usability point of view, because they allow authentication to a network without user interaction. It is a secure, trusted element that allows user friendly operation. It is plug and play. Imagine using this easy type of authentication with a wifi-enabled alarm clock, thermostat, etc.
However, the drawback of the SIM-card is that it is not controlled by the end-user. It is the property of the telecom operator. This can causes problems when, for example, a company may want to switch mobile operators. Under the current system, businesses would have to physically remove every SIM-card in their devices and manually replace it with the SIM-card of another operator. Multiply this by 10,000 to 100 million devices and it is clear this model is economically unrealistic. So unfortunately, for the moment, anyone using a SIM-card for an IoT service is locked in with their mobile operator for as long as the device lives. Manufacturers of IoT devices have little room to make mistakes; even if they're unhappy with a mobile service provider, they can't recall several million cars to change operators.
In total, there are five market failures tied to the control of a SIM-card:
- 20 year lock-in with mobile operator
- Changing SIM is impossible for millions of devices
- No competition in roaming fees
- No way to route around network failure
- Research by Simula in Norway shows that 20% of devices are unavailable for more than 10 minutes/day
- Mobile networks only cover 80% of connected devices
- It isn't just the countryside with spotty network coverage. As a result of "cell site breathing" (contraction and expansion of cell site based on traffic demand) and radio propagation through and around buildings, networks can't reach all sites all of the time even in densely populated cities.
- No innovation, without the prior consent of the mobile operator, for instance to bypass mobile operator.
- There is a solution to this problem. Make the large scale end-user, i.e. the car manufacturer in the above example, the owner of the SIM-card and the associated authentication infrastructure. This would be the same as the way mobile roaming currently works: the car company doesn't own the infrastructure in the area it roams, but it can log on to mobile networks, as long as it can be authenticated and there is a place to send the bill. It's all bog-standard GSM-protocol. We've seen a lot of interest from big energy, car and consumer electronics companies. It would give them a competitive market for both national as well as international connectivity. It would save billions of euros every year.
There's just one problem: it's illegal.
Most national regulations stipulate that only providers of public electronic communications networks and services can have access to the IMSI-numbers that uniquely identify a SIM-card. In some countries the rules are even more stringent and even virtual network operators can't have access to these numbers.
Now a car company can't really claim it is offering (predominantly) an electronic communication service; otherwise it would have to qualify the vehicle as a very feature rich phone (to be fair, it does do more than an iPhone!). An energy company can just forget about trying to make a case. Consumer electronics companies might have a better case to make (an opportunity here for lawyers!), but it's fair to assume in many countries they wouldn't be allowed the numbers to enter the market either.
Now there doesn't really seem to be any technical reason to have this rule. True, there is some worry that there may be too big a market for connected devices and we run out of numbers (IMSI), but I can't really see how that is a problem. Even though countries currently use two digits, they could easily expand to three digits… and the ITU still holds over 500,000 numbers in reserve. But even if the Internet of Things does in fact prove to be really, really popular, what is the problem? That we have a well-functioning market that serves the needs of thousands of businesses? That companies save billions of euro every year? That telecommunication companies can offer their services to thousands of companies and not fear that a potential customer could be lost forever? Don't forget that if many companies would do this there is also a drive to update standards to allow more companies in. And if the opposite is true, that only a few big companies in the current market are going to successfully manage this transition, well, then I will stand corrected, but at least it isn't the government that breaks the market.
What is the impact on spectrum policy that you foresee?
Wireless technology is first and foremost a "last meter" technology. In theory, bits shouldn't travel exclusively in the air because they clog up the airwaves for other bits; they should only travel short distances and then hop on a wire. That being said, people want their devices to be free and unfettered. If our data needed to only travel through a wire, we would lose mobility. So basically any device will have a wireless component that will aim to reach the nearest antenna as quickly as possible, to save energy and to save bandwidth. We will therefore need pervasive wired broadband networks that at their endpoints connect to antennae for the last meter.
The Internet of Things will make spectrum policy even harder than before. It will force spectrum policy to move at the speed of the devices the Internet of Things is built into. A car generally lasts for 15 years; that means all the Internet-connected devices in it should work for that period too. It also means you can't shut down a wireless network in seven years from now, which is half way through the lifetime of a vehicle, because that will mean 75 million vehicles in Europe will not have a working network connection anymore. Many devices have similar lifecycle-related problems. Smart meters should work for 30 years – that means our choices today will be important for a very, very long time.
What is your perspective on jobs and growth and the Internet of Things?
In the M2M paper this wasn't examined. It is also out of my area of expertise. In general the impact of technology on growth and jobs is of great interest to the OECD, but it took years to see the macro-level impact of ICT's on society in general and we have only started with the introduction of the Internet of Things. Of course, the billions saved in the street light example could certainly be put to good use in various parts of the economy. However on a personal note and having just read Brynjolffson's "Race against the machine", I can also foresee a problem with employment growth. One of the prospects of the Internet of things is the autonomous machine, i.e. flying drones or Google's driverless car. Now fast forward 10-20 years and we may see the driverless taxi and the driverless truck. Those are jobs that are often held by lower skilled workers and those jobs may go away. That is potentially a big problem, because I don't know what, if anything will come back.
But there is no sense in being a Luddite and breaking the machines that promise to make our lives more simple and easier. It's just important to note that it will not be all positive and it will not be positive for everyone always.
Are governments currently taking the right role?
Well, I think governments are taking a more forward-looking role than in the past. Of course, I would like them to move a bit quicker with liberalizing the telecommunications market for large scale M2M users. I've been working on this issue for three years now and would like one day to call it done. Governments are however major instigators in Internet of Things, through eCall, smart meters, eHealth etc. They are also potential big users, as governments own and operate billions of machines and devices that will one day be hooked up. Even things that wouldn't be regarded often as machines or even as "things", like dykes in the Netherlands or roads and rivers, will be connected. Privacy regulators seem to be very aware of what is coming. They may not have a full answer yet, but they are forward-looking. On the security side of networks, we will have to improve the government's role in holding companies accountable for what they put in the market and how well it works and performs.
At the OECD we're working with governments on finding those answers and learning from best practices. We're working on the general horizontal policy issues that stem from the current trend towards the Internet of Things, Cloud and Big data. At the same time we work on best practices of using these technologies in specific verticals like transport, healthcare, energy and government.
Thank you very much. This has been an interesting and enlightening conversation.
Rudolf van der BERG has been an Economist/Policy Analyst at the OECD, since 2011. Here he has worked on topics regarding M2M, Smart networks, telephony and internet interconnection and telecommunications policy. He started his career at the NDIX Internet Exchange Point located in Germany and The Netherlands. He worked five years at the Ministry of Economic Affairs, first with a responsibility towards lawful intercept and he negotiated the EU Data retention directive. Later he wrote the first documents on Net Neutrality for the Dutch government and was seconded to the OECD to write on the future of Broadband networks. As a management consultant for Logica he worked with clients on structural separation of energy companies, smart metering, information exchange in the energy sector and next generation number portability. It was here where the topic of liberalization of the mobile market for M2M first became apparent through a clients question on how to move 10,000 devices from one operator to another. Subsequently he wrote analysis on the impact of liberalizing the market for the Dutch Ministry of Economic Affairs and a discussion paper for the OECD.
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COMMUNICATIONS & STRATEGIES
* Machine-to-Machine Communications: Connecting Billions of Device, OECD 2012, DSTI/ICCP/CISP(2011)4/FINAL.