The connected planet: Smartphones aren’t the only player

1Executive Summary

The number of connected devices is steadily on the rise, but it’s not smartphones or computers that will lead us to the 50 billion connected devices expected by the year 2020. Even if everyone on the planet had a 3G handset, for example, that would only account for some 7 billion links to the web, or just 12 percent of the 50 billion that Ericsson President and CEO Hans Vestberg predicts. Rather, the Internet of Things — numerous smart objects that speak to the web and one another — is the next wave of wireless and will power a wide range of devices as we want remote access to everything all the time.

Recently, IHS offered a glimpse into this future and suggested that web-capable consumer electronics such as media tablets, televisions and Blu-Ray players will outsell traditional PCs in 2013 — just under two years from now. This category is fast growing, with expected sales of 503.6 million units in 2013, up from 161 million in 2010. Half a billion consumer electronics devices are still just a drop in the bucket as compared to 50 billion.

As the Internet of Things comes of age over the next decade, a key challenge that we face today could become even more problematic: network congestion. Devices that connect to a home network will rely upon broadband wired to the home, while other devices will compete with smartphones for the already stressed wireless networks. It’s possible that we’ll need specific machine-to-machine networks to help mitigate this potential pitfall.

First, let’s take a look at the kinds of connected devices available or soon to be.

The obvious

Everywhere you turn in an electronics retail store or website, you can see the growing trend of connected devices:

  • Media tablets. This category includes the iPad and other tablets that run Google’s Android Honeycomb, BlackBerry’s QNX operating system and HP’s webOS. HP is no longer building hardware for webOS devices, and as I mentioned last month in a related report, the tablet market is essentially still an iPad market, due to Apple’s commanding market share in this segment. Still, regardless of who makes the tablet or what it runs, connected slate sales are on the rise. How much? UBS figures the 17.8 million tablet sales of 2010 will grow to 60 million this year and 90 million the year after that. As popular as video game consoles are and have been for a number of years, tablets are expected to outsell game consoles, which, according to IHS, hit 50.5 million sales last year and may only come close to reaching but not surpassing that number this year.
  • Video game consoles. Consoles continue to morph into multipurpose boxes that tap the web for voice and video chat, simultaneous multiplayer gaming, music streaming and online video consumption. They may be usurped by tablets, but they are still selling in the tens of millions each year. Online services have been developed for all the major brands (Microsoft, Sony, Nintendo), and, of course, all of these rely on a web connection. All three major consoles, for example, support Netflix streaming, and Microsoft’s Xbox adds video chat through the Kinect add-on.
  • Blu-Ray players and smart TVs. Once designed solely for packaged content playback, Blu-Ray players are gaining web capabilities for additional entertainment options such as social networking and other media streaming options like music and video through the integration of Netflix, Pandora, YouTube and other services. Likewise, televisions with integrated Wi-Fi radios from Sony, Samsung, LG, Panasonic and others will add similar capabilities and move from early adopter stage to becoming standard equipment within a few years.
  • E-readers. The days of connecting a device to a computer with a cable for content synchronization are coming to a close. Electronic reading devices have cut the cord by adding Wi-Fi and 3G mobile broadband radios for access to content nearly everywhere. The line between e-readers and tablets began to blend with the arrival of the Nook Color in October 2010. Amazon is poised to continue this trend with a tablet of its own that will add digital music- and video-streaming services to the Kindle reading experience; the more features added to these devices, the more that reliance on a connection will be needed.
  • Cameras. It’s no surprise why a smartphone — the iPhone 4 — is the most-used camera on photo site Flickr: Aside from offering great picture quality, the connectedness of the iPhone makes it easy to share photos. While there are unique wireless solutions that add connectivity to cameras, such as the EyeFi SD card, I expect wireless radios to find their way into more cameras over the next few years. The cost to add a Wi-Fi radio to a camera is negligible, so the bigger challenge is managing battery life with the additional component. But that can be mitigated through smart software. One example of such a device is Sony’s Cybershot DSC-G3, which debuted in 2009 with free Wi-Fi access at AT&T hotspots and the ability to upload images to several photo-sharing sites.

The less obvious

While all of the above connected categories are on the rise, in addition to smartphones, they still don’t come close to the total of 50 billion connected devices. So what will help us reach that total? Other industries such as cleantech, health care and the automotive industry are also making progress in the connected device space:

These are just a few examples of connected devices outside the traditional consumer electronics world. As the web and supporting services grow in size, scope and coverage, there’s practically no limit to the number and type of connected things. Small sensors in mailboxes may shoot texts upon receipt of mail; desk chairs could become hard-wired to IM systems for presence status; and roads could monitor their traffic, to name a few ideas.

Connected devices are great, but are networks ready for them?

Considering that today’s networks really weren’t built for tomorrow’s Internet of Things, what happens to the already congested and relatively high-priced mobile broadband networks, which make up much of the backbone for how these devices will interact? Put another way: The existing 3G and in-progress 4G networks are attempts to keep up with the growing demand for everyday data on traditional computing devices such as smartphones and laptops. The web is agnostic in terms of data types, but perhaps machine-to-machine or device-to-service traffic should be on alternative networks designed solely for this traffic type.

Obviously, this idea is a complete change in the current mobile broadband business. Instead of nontraditional connected devices competing with data-hungry smartphones for operator resources on the same network, new networks could be devised solely for machine-to-machine traffic. One could argue that data is data, so why have a growing number of power meters, automobiles and traffic meters congest networks that are already heavily used by consumers and enterprises for a varying number of needs?

Network operators could take this path as they move consumers from existing 3G networks to next-generation 4G networks between now and 2020, just in time for those 50 billion connected devices. Once Verizon, for example, moves both voice and data traffic to its LTE network, it could repurpose the legacy 3G network for nationwide M2M purpose, provided it doesn’t need to reallocate the 3G spectrum for other reasons.

Another option might be a public-private cooperative network between operators and government. The Utilities Telecom Council recently noted it would spend $1 billion in telecom costs for two-way smart metering. Investments like this could be funneled to fund alternative network options that separate always-on metering data, for example, with videos, music and web services that consumers use on an on-demand basis. And over time, it could be more cost-effective.

Regardless of the network solution that will power the future, there is little doubt that connectivity will continue to find its way into all sorts of devices, ranging from the obvious to the types of devices and sensors we’re just now imagining. Provided that tomorrow’s networks are up to the task of connecting 50 billion devices this decade, we will all benefit from the Internet of Things.

Relevant analyst in broadband
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