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The Internet of things

January 31, 2012

We need to talk

Today’s post is written by Rudolf Van der Berg of the OECD’s Science, Technology and Industry Directorate

Look around you for a second and count the number of electronic devices, machines and gadgets. All of them – light bulbs, cars, TVs, digital cameras, refrigerators, stereos, cranes, beds – will be connected to the Internet over the next 15 years, if they aren’t already.

This is the potential of the “Internet of Things”: billions and billions of devices and their components connected to one another via the Internet. 50 billion devices by 2020, according to companies like Ericsson. The Internet of Things will radically alter our world through “smart” connectivity, save time and resources, and provide opportunities for innovation and economic growth.

The trends are already visible: Internet-connected TVs are now widespread; eBook readers must have a Wi-Fi or 3G connection; smart electricity meters have already become standard in many countries.

The Internet of Things is the subject of a new OECD report, Machine-to-Machine Communication: Connecting Billions of Devices that examines new technology (the drivers behind connecting devices to the Internet); new markets (user and business demands); new policies (what governments can do  to promote this new source of growth).

The basic building block of the Internet of Things is machine-to-machine communication (M2M), devices equipped to communicate without the intervention of humans. Different networking technologies can be used to connect M2M devices, depending on the amount of mobility needed and dispersion over an area. Mobile wireless is often an ideal technology for most applications. However, countries may run out of phone numbers in their current numbering plans as a result of M2M, because 2G and 3G equipped M2M devices require a telephone number to work, unlike 4G where M2M can work with just an IP-address.

M2M creates a new player in the mobile market: the “million device” user. These new large scale M2M users will potentially manage hundreds of thousands of smart meters, cars, and consumer electronics, possibly in higher numbers than some countries have citizens.

Large scale M2M users may offer their services dozens of countries, selling the same devices globally. Their customers may buy the devices abroad and travel with them. The telecommunication industry, however, is still largely organised and regulated on a per country basis. Large M2M users will thus place new demands on telecom companies, and regulation and business models will have to adapt.

Companies creating innovative M2M-based services are currently locked into 10-30 year mobile data contracts and high roaming fees; this dependency hinders the roll-out of new services and innovation.

Governments can set large-scale M2M users free by giving them access to wholesale markets. by changing the rules so that large M2M users can have access to numbers and SIM-cards, just like telecom companies. This will open up the market, break lock-ins, make large M2M users responsible for their own innovation and create a competitive market for roaming for M2M services.

Liberalisation will be a major paradigm shift, and might lead to billions in savings and new services.

Privacy and security need to be designed into products from the start. M2M could allow a detailed view of people’s lives, and parliaments have already curbed or changed some projects as a consequence. For example, cars are increasingly using onboard M2M services and the European Union is now mandating their own service (eCall) to be built into every car from 2014. Since EU legislation requires telephone companies to record a person’s location at the start of each mobile communication, and since turning a M2M car on will itself start a communication, these companies will be inadvertently tracking the start and end of any trip, so even if the automobile company does not register the location, the telecommunication company has to by law.

Governments have tried to make spectrum policy more flexible in recent years, allowing companies to change networking technologies when new technology becomes available. M2M may rigidify spectrum policy, however, because anytime M2M uses a particular networking technology, it expects the spectrum to be there for the lifetime of the device, which is 10 to 30 years. Consumer-oriented wireless technology works on a timescale of a maximum 10 years.

Combining data generated by M2M devices may offer insights to improve society. Cars could notify local governments of icy roads or bottlenecks in infrastructures. This may not always be seen as positive, however, as shown by a case in The Netherlands where anonymous and aggregated data from GPS-systems was used by the police to identify prime locations for speed cameras, which led to a public outcry.

What is certain from the report is that governments will have to change regulations in the telecommunications market, will have to be vigilant to apply privacy and security regulation and stay innovative to make use of the many possibilities it offers. Doing so promises to transform the economy, promote growth in the telecommunications sector, and produce growth and efficiency savings in government and society.

Useful links

OECD work on information and communications policy

OECD work on smart sensors

OECD work on smart grids

OECD statistics on broadband

OECD policy guidance on Radio Frequency Identification (RFID)

23 Responses
  1. Sue Kendall permalink
    January 31, 2012

    Big Brother is alive and well and living in my home. Never mind the Internet of things, whatever happened to the Usefulness of things? I now have a toaster that includes a clock and a connection for an MP3 player but makes rubbish toast.

    Now a car that washes itself, or a self-weeding garden, that would be useful……

  2. Ken Figueredo permalink
    January 31, 2012

    Rudolf – It’s good to see you building on your work for the Dutch Ministry of Economics and outlining the different opportunities and challenges facing this market.

    The business model section is particularly interesting at the moment as mobile operators look beyond connectivity as the main value proposition. Some of the emerging models include managed connectivity services (provisioning and SIM/device life-cycle management tailored to M2M), virtual utilities (mobile operator as a supplier of energy or electronic content, for example, direct to consumers) and enabling platform innovators (enablers for third parties to develop value added services based on data analytics, ideally within an interoperable framework that allows for plug-an-play sensors and smart appliances).

    For anybody interested, there will be a seminar dedicated to this topic at Mobile World Congress at the end of February.

    It’s certainly the case that the evolution towards these new (and more complex) business models is already giving rise to M&A activity in Europe and the USA.

  3. February 26, 2012

    With all the attention on WiFi it will be interesting to see how many of these “things” are connected to the web via WiFi (free). Already the chips are cheaper and the technology can be very cost effectively built into the devices; whereas macro-cellular components and service fees are very expensive.

  4. May 25, 2012

    It’s a freakin’ and exciting era we’re living and so much applications to come. Been in a reflexion myself around “connected things” underlining the practical effects on society. I bring it to the table here as: http://evidencesx.wordpress.com/2012/03/20/then-the-objects-go-social
    Feel free to comment and add your opinion to this tremendous topic,

  5. Jason W Lebrecht permalink
    June 27, 2012

    One day soon, we will all be happy to be managing our homes remotely from our smart phones through a single application interface. Imagine easily configuring HVAC setting to save energy. Turning on front yard/driveway and main in door lighting automatically at set times, or remotely when out of town. Through the same interface we will be viewing our surveillance cameras based on a detection alert. Many companies are making progress on mainstreaming Smart Home Solutions that actually make our lives better. Soon, this will be as common as logging into Gmail.

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