ANALYSIS: IoT – the internet’s third evolution

From the connected car to the concept of a “smart”, milk-monitoring refrigerator, the much-hyped Internet of Things (IoT) market is finally beginning to generate global attention.

IoT, simply defined, is the idea of connecting numerous devices over a network to ensure that technology dictates the way people use and respond to the product. These products range from home utility devices, such as a washing machine or a vacuum cleaner controlled by a smartphone, to a car that is connected to a mobile network.

The wearables market, for one, is beginning to take off. Apple and Google both announced iterations of the smart watch this year, while connected smart cars are growing into a multi-billion dollar business.

By 2022, analyst firm Gartner predicts that a typical home in the developed world could have hundreds of connected smart devices. This is largely due to the falling cost of consumer products and the pending development of communications to enable “connected home” technology.

“We expect that a very wide range of domestic equipment will become ‘smart’ in the sense of gaining some level of sensing and intelligence combined with the ability to communicate, usually wirelessly,” said Nick Jones, VP and analyst at Gartner.

On the technology side, Jones predicts there will not be one type of network that dominates in a smart home that is connected to the Internet of Things. A mesh of Bluetooth, Wifi and mobile is likely to be in place for numerous devices to effectively run.

If the IoT fulfils its growing potential, it will be the third wave in the development of the internet. The 1990s saw the fixed-internet boom that connected one billion users, while the 2000s mobile wave connected a further two billion people globally.

Financial Institution Goldman Sachs forecasts that IoT has the potential to multiply this figure by 10, connecting 28 billion “things” to the internet by 2020. Meanwhile, US manufacturer Cisco describes IoT as a “$19 trillion opportunity”.

This time, however, these targets will be a lot more complex to achieve. Traditional technology and telecoms firms committed to ushering in this new wave of technological development have identified numerous verticals to address. This includes wearables, cars, homes, cities and industrials, and telcos will have to find partners in these industries to make IoT a success.

Goldman Sachs agrees. Its recent report based on IoT suggests the initial impacts of this evolution will be on telecoms and technology, but its true growth lies in how other industries adopt the similar principals.

Vodafone has been one of the first movers from the telco side to invest in IoT, and struck a deal to acquire Italy’s connected car service Cobra Automotive Technologies for $115 million earlier this year. More recently, Verizon signed an agreement with US energy company GE Electric to provide its customers with a range of M2M connectivity solutions, including remote monitoring and the ability to resolve maintenance issues virtually.

The battle between telecoms and tech is already shaping up in the content space, and there is now a race to see which segment is best placed to provide the software and solutions for IoT to emerge.

One of the main themes dominating discussions around the research and development of next-generation 5G networks is how this mobile technology will be able to evolve the IoT space. It is clear that telcos see IoT as their opportunity.

Connected devices will predominately rely on mobile networks or Wifi to stay connected, but these devices – unlike high-speed video streaming, for example – will only require a minimal amount of bandwidth to work, but will still require a connection. The dominant smartphone players, Apple and Google, stole a march on the telecoms market in the smartphone handset space, but could the telcos be set to get their own back in the next wave of internet evolution?

“The fragmentation and lack of technology standards could provide the biggest opportunity for telecoms operators in a fast-evolving industry already changing how people live,” said Matthew Howett, analyst at Ovum.

This, of course, is unlikely to stop the ambitious technology players. Google revealed last month a project called The Physical Web, designed as an open platform allowing for smart devices to interact without an app. And it won’t be long before rivals Apple and Samsung get involved.

Goldman Sachs takes a broader view, and states that a world dominated by IoT will create a new standard of companies away from the traditional tech and telecoms paradigm. In this world, success will depend on a company’s ability to adapt to a world where 28 billion devices are connected.

What seems to be safe, at this stage, is the telcos’ position to maintain and upgrade the networks. Expanding telecoms, cable and satellite infrastructure will be essential to carry traffic and maintain connectivity between different platforms.

These “dumb pipes” will just have to become a lot smarter to survive.