The iPhone went beyond being an communication tool
Cupboards that order groceries for you when you're running low, cars that automatically drive to the nearest available parking space, and central heating systems that warm up the house and have a hot bath waiting for you when you get home from work – this is the vision of the Internet of Things (IoT).
The term has been bandied around for years, but now the hype is reaching fever pitch. According to some forecasts, there will be 50 billion everyday objects connected to the internet by 2020, and the UK Department for Business, Innovation & Skills claims the global market for smart city technology solutions and services could reach over £250 billion by the end of the decade.
Technology companies from Apple to IBM are developing the devices and platforms that will allow homes and offices to become 'smarter'; construction companies are working out how embed sensors into roads and buildings; fashion brands are integrating connectivity into clothes and jewellery; utilities are changing the way they deliver power and water based on usage data; and governments and regulators are working to establish the standards that will allow all these connected 'Things' to communicate with each other efficiently.
But who will pay for the IoT? Will internet service providers and mobile operators be expected to absorb the cost, as billions of new devices start eating up their network bandwidth? Will the companies that make the 'Things' be forced to pay the internet providers for use of their networks – a cost that will inevitably be passed onto consumers? Or, in the interests of getting ahead in the global race, will governments subsidise the IoT in the same way it subsidises some utilities?
The Internet's the thing
The IoT is an ecosystem that will eventually incorporate almost every aspect of our society, but will be largely invisible. Early attempts to make the IoT a reality have tended to focus on the 'Things' – tangible consumer goods like thermometers and lightbulbs that people can buy in shops and require a significant amount of human interaction. However, the real game-changer is the 'Internet' – the infrastructure and connectivity that will underpin it all.
Putting this infrastructure in place is no small undertaking. While some countries are attempting to build smart cities from the ground-up, with networks and sensors pre-installed, most connected devices need to be retrofitted. This often requires planning permission – particularly in the case of historic or listed buildings – so local councils and town planners need to be involved from the start.
This week, the UK government's innovation agency, Innovate UK, announced its HyperCatCity initiative, which aims to get businesses and cities working together to find new, effective ways to deliver services using data and technology. It builds on the £8 million investment from Innovate UK to develop the HyperCat consortium, which is working to create common standards and protocols for the IoT.
"Nobody wants to live in a 'smart city'. People want to live in a city where their services are being delivered efficiently, where their streets are clean, where the transport systems work effectively and the energy is sustainable," said Dan Byles MP, chairman of the All Party Parliamentary Smart Cities Group.
"If we're going to fully realise the smart city vision, we need to move beyond where we are at the moment – which is a series of discreet pilot projects which are in effect proving the concept, often with their own bespoke funding arrangements that aren't necessarily replicable – to a point where this is simply the way we do things."
In order for this to happen, networks need to be created to relay information between different connected 'Things'. Existing WiFi and 3G/4G mobile networks will shoulder some of the burden, but the configuration of the Internet of Things will be quite different that of from the Internet of People.
For example, a person downloading an HD film might consume several gigabytes of data, whereas a car sending a message to a sensor in a parking bay may only consume a few bytes. The difference is that the film only needs to be sent over the network once, whereas the car may need to send out hundreds of enquiries to different sensors before it finds a free parking bay.
"All of those individual transactions are of minimal value in themselves, and that's the challenge from a business point of view," said Steve Prentice, analyst at Gartner. "How, as a mobile operator, do you put in the infrastructure to cope with billions and billions of devices sending a few bytes at a time? You don't have someone who's going to pay the bill at the moment; it doesn't work with the models that we've got."
The communications regulator Ofcom is currently working to free up spectrum and network address space, in order to support connections between a significantly greater number of devices. However, mobile operators and internet service providers will ultimately need to decide how much of their own money they are willing to invest to support the IoT.
Making money from the IoT
The answer to the question of who will pay for the IoT therefore depends on who is making money from it. For example, the IoT offers mobile operators the chance to deliver a range of innovative new services, as well as build new revenue potential, so some argue that it is in their interests to absorb the cost of delivering it.
Meanwhile, companies making connected 'Things' are gaining access to a wealth of customer data, which they could potentially use to upsell services or deliver advertising.
"Used correctly, this information will allow small business owners an insight into exactly how their customers are interacting with their devices, and will allow them to most efficiently tailor their offering to the marketplace," said Colin Calder, CEO and founder of PassivSystems, a provider of smart technology systems.
Inevitably, consumers will end up paying for some services directly, but analysts predict that these companies will eventually give their 'Things' away for free, in the same way that mobile operators give away phones, because the data they generate will be so much more valuable that the cost of the hardware.
"The data that you're pumping out from these devices is probably being utilised by somebody much bigger than you, and it's being aggregated and then sold on to either advertisers or people that see value in that data," said Tony Poulos, market strategist at business assurance company WeDo Technologies.
"My fear is, If you're using a FitBit and you're terribly overweight and having trouble with your fitness regime, you'll get an ad somewhere along the line saying, 'we've got a solution to your problem'. Google have been masters of doing that just from people doing searches on the internet. Can you imagine if they're inside your home and monitoring when the fridge is open, what comes out of it, when the lights go on and off – Google could become a power supplier overnight."
Business revenue generation also benefits the economy as a whole, and there is an argument that governments should fund public IoT infrastructure to support this. If the government succeeds in its mission to make the UK a leader in this fast growing market, it will be able to export its solutions around the world.
There is also some concern the IoT could affect the economy negatively by causing job redundancies, due to increased automation within industries. However, Accenture claims that it will be a net creator of jobs, enabling machine operators and other workers to use data to achieve more with equipment than they can today.
"It’s not just about productivity but about being able to offer new value with the help of data delivered to workers in new ways," said said Paul Daugherty, chief technology officer at Accenture in a recent report. "The Industrial Internet of Things will not only augment work, but result in more virtual and collaborative working environments, as well as create entirely new categories of jobs."
You have to spend money to make money
As is so often the case, anyone who wants to make money from the Internet of Things will need to invest. The technology is still nascent, and public awareness is low. The security and privacy implications of connecting your home, your car and even your body to the internet are also enough to put many people off.
However, momentum continues to grow and, whether you like it or not, connectivity is coming to a city or a home near you. For those who want to profit, 'owning the customer' will be everything, so being one of the organisations that supports and funds the infrastructure seems like a good place to start.
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