Ready or Not, IoT is Coming

We are getting very close to the time when just about every appliance you buy is going to be connected to the IoT, whether you want it or not. Chips are getting so cheap that manufacturers are going to soon understand the benefits of adding chips to most things that you buy. While this will add some clear benefits to consumers it also brings new security risks.

IoT in everything is going to redefine privacy. What do I mean by that? Let’s say you buy a new food processor. Even if the manufacturer doesn’t make the device voice-controlled they are going to add a chip. That chip is going to give the manufacturer the kind of feedback they never had before. It’s going to tell them everything about how you use your food processor – how long before you take it out of the box, how often you use it, how you use the various settings, and if the device has any problems. They’ll also be able to map where all of their customers are, but more importantly they will know who uses their food processor the most. And even if you never register the device, with GPS they are going to know who you are.

Picture that same thing happening with everything you buy. Remember that Tostitos just found it cost effective to add a chip to a million bags of chips for the recent Superbowl. So chips might not just be added to appliances, but could be built into anything where the manufacturer wants more feedback about the use of their product.

Of course, many devices are going to go beyond this basic marketing feedback and will also include interactions of various kinds with customers. For instance, it shouldn’t be very long until you can talk to that same food processor through your Amazon Alexa and tell it what you are making. It will know the perfect settings to make your guacamole and will help you blend a perfect bowlful. Even people who are leery of home automation are going to find many of these features to be too convenient to ignore.

There is no telling at this early stage which IoT applications will be successful. For instance, I keep hearing every year about smart refrigerators and I can’t ever picture that ever fitting into my lifestyle. But like with any consumer product, the public will quickly pick the winners and losers. When everything has a chip that can communicate with a whole-house hub like Alexa, each of us will find at least a few functions we love so much that we will wonder how we lived without them.

But all of this comes with a big price. The big thing we will be giving up is privacy. Not only will the maker of each device in our house know how we use that device, but anybody that accumulates the feedback from many appliances and devices will know a whole lot more about us than most of us want strangers to know. If you are even a little annoyed by targeted marketing today, imagine what it’s going to be like when your house is blaring everything about you to the world. And there may be no way to stop it. The devices might all talk to the cellular cloud and be able to bypass your home WiFi and security – that’s why both AT&T and Verizon are hyping the coming IoT cloud to investors.

There is also the added security risk of IoT devices being used in nefarious ways. We’ve already learned that our TVs and computers and other devices in the house can listen to all of our private conversations. But even worse than that, devices that can communicate with the world can be hacked. That means any hacker might be able to listen to what is happening in your home. Or it might mean a new kind of hacking that locks and holds your whole house and appliances hostage for a payment like happens today with PCs.

One of the most interesting things about this is that it’s going to happen to everybody unless you live in some rural place out of range of cell service. Currently we all have choices about letting IoT devices into our house, and generally only the tech savvy are using home automation technology. But when there are chips embedded in most of the things you buy it will spread IoT to everybody. It’s probably going to be nearly impossible to neutralize it. I didn’t set out to sound pessimistic in writing this blog, but I really don’t want or need my toaster or blender or food processor talking to the world – and I suspect most of you feel the same way.

Standards for 5G

itu_logo_743395401Despite all of the hype that 5G is right around the corner, it’s important to remember that there is not yet a complete standard for the new technology.

The industry just took a big step on February 22 when the ITU released a draft of what it hopes is the final specification for 5G. The document is heavy in engineering detail and is not written for the layman. You will see that the draft talks about a specification for ‘IMT-2020’ which is the official name of 5G. The goal is for this draft to be accepted at a meeting of the ITU-R Study Group in November.

This latest version of the standard defines 13 metrics that are the ultimate goals for 5G. A full 5G deployment would include all of these metrics. What we know that we will see is commercial deployments from vendors claiming to have 5G, but which will actually meet only some parts of a few of these metrics. We saw this before with 4G, and the recent deployment of LTE-U is the first 4G product that actually meets most of the original 4G standard. We probably won’t see a cellular deployment that meets any of the 13 5G metrics until at least 2020, and it might be five to seven more years after that until fully compliant 5G cellular is deployed.

The metric that is probably the most interesting is the one that establishes the goal for cellular speeds. The goals of the standard are 100 Mbps download and 50 Mbps upload. Hopefully this puts to bed the exaggerated press articles that keep talking about gigabit cellphones. And even should the technology meet these target speeds, in real life deployment the average user is probably only going to receive half those speeds due to the fact that cellular speeds decrease rapidly with distance from a cell tower. Somebody standing right next to a cell tower might get 100 Mbps, but even as close as a mile away the speeds will be considerably less.

Interestingly, these speed goals are not much faster than is being realized by LTE-U today. But the new 5G standard should provide for more stable and guaranteed data connections. The standard is for a 5G cell site to be able to connect to up to 1 million devices per square kilometer (a little more than a third of a square mile). This, plus several other metrics, ought to result in stable 5G cellular connections – which is quite different than what we are used to with 4G connections. The real goal of the 5G standard is to provide connections to piles of IoT devices.

The other big improvement over 4G are the expectations for latency. Today’s 4G connections have data latencies as high as 20 ms, which accounts for most problems in loading web pages or watching video on cellphones. The new standard is 4 ms latency, which would improve cellular latency to around the same level that we see today on fiber connections. The new 5G standard for handing off calls between adjoining cell sites is 0 ms, or zero delay.

The standard increases the demand potential capacity of cell sites and provides a goal for the ability of a cell site to process peak data rates of 20 Gbps down and 10 Gbps up. Of course, that means bringing a lot more bandwidth to cell towers and only extremely busy urban towers will ever need that much capacity. Today the majority of fiber-fed cell towers are fed with 1 GB backbones that are used to satisfy upload and download combined. We are seeing cellular carriers inquiring about 10 GB backbones, and we need a lot more growth to meet the capacity built into the standard.

There are a number of other standards. Included is a standard requiring greater energy efficiency, which ought to help save on handset batteries – the new standard allows for handsets to go to ‘sleep’ when not in use. There is a standard for peak spectral efficiency which would enable 5G to much better utilize existing spectrum. There are also specifications for mobility that extend the goal to be able to work with vehicles going as fast as 500 kilometers per hour – meaning high speed trains.

Altogether the 5G standard improves almost every aspect of cellular technology. It calls for more robust cell sites, improved quality of the data connections to devices, lower energy requirements and more efficient hand-offs. But interestingly, contrary to the industry hype, it does not call for gigantic increases of cellular handset data speeds compared to a fully-compliant 4G network. The real improvements from 5G are to make sure that people can get connections at busy cell sites while also providing for huge numbers of connections to smart cars and IoT devices. A 5G connection is going to feel faster because you ought to almost always be able to make a 5G connection, even in busy locations, and that the connection will have low latency and be stable, even in moving vehicles. It will be a noticeable improvement.

Time for a New Telecom Act, Part 2

FCC_New_LogoYesterday’s blog postulated that we would see a new telecom act this year from Congress. That blog looked at what was accomplished by the last Telecommunications Act of 1996. Today I’m looking ahead at the issues that a new Act needs to address.

Last week we learned more about how the process will probably work. A new telecom act would likely be spearheaded by the Energy and Commerce Subcommittee on Communications and Technology. Last week Rep. Marsha Blackburn, head of that committee, told the press that she favored giving the new FCC a shot at fixing the things under its purview before the House would tackle a new Act. The FCC doesn’t have the authority to make many of the needed changes in telecom regulation, but it does have considerable power. Anyway, this probably means a new act is at least a year away.

Here are some of the things that I think the FCC and Congress need to address to modernize telecom:

Need for More Spectrum. It’s becoming clear that a lot of big ISPs are thinking of deploying 5Gn and various other millimeter wave technologies. The FCC needs to continue to open up more spectrum for broadband. There is still a lot of spectrum has been reserved for government use and there needs to be more attempts to share frequency when possible. There also needs to be a fresh look taken at how frequency is used. Historically many bands of frequency had narrow channels aimed at accommodating voice traffic or a single channel of television. From an engineering perspective we can get a lot more out of spectrum if we can make wider channels in the spectrum bands that are already in use.

Tackling Cybersecurity. 2016 was a year when security breaches led the industry news weekly. There is no easy fix for security issues, but there are big steps that can be taken. For example, we are flooding the world with IoT devices that are easily hacked and which can now be used to launch coordinated denial of service attacks. With Congressional backing the FCC could create standards to make IoT devices more secure. The government will never make us free from hacking, but there are a lot of sensible standards and fixes needed for IoT devices.

Expanding Access to Fast Broadband. As somebody who works regularly in rural America I know that lack of broadband there is now one of the biggest problems identified by rural households. We need to find ways to get good broadband to more places, and we have to do this smartly by building infrastructure that will last for decades. We’ve already seen how not to do this with the CAF II program that is being used to expand DSL and LTE wireless – two technologies that are already inadequate today.

Unless we see that fiber is built everywhere this is going to be an ongoing major issue. For example, if we fix broadband for those that have none but ignore the bigger swathe of the country that has only marginally acceptable broadband today, we will be back in a decade looking at how to fix broadband in those places.

We also need rules that unleashes anybody willing to spend money on fiber. I see numerous rural counties and towns that are ready to spring for bond issues to get fiber. We need rules that allow anybody willing to invest in fiber be able to do so – be that local governments, electric cooperatives, rural telcos or anybody else.

Infrastructure Issues. There are still a lot of infrastructure roadblocks to deploying fiber. We have never done a good job of fulfilling the mandate from the 1996 Act to provide access to poles and conduit. And we are now looking at deploying a fiber-fed wireless network that is going to mean bringing both fiber and power to buildings, rooftops, poles and other infrastructure. We need to find a way to get this done without also trampling over the legitimate concerns of local jurisdictions. For example, the FCC can’t just demand that cities allow free and quick fiber construction if that means digging up newly paved streets or overburdening poles – we need to find rules that work. And we need to do a much better job of this than we have done so far.

Programming. It’s now clear that online video content is competitive alternative to traditional cable TV. We need rules that unleash cable companies and anybody else to sell programming that people really want to buy. That means stepping away from the current rigid cable rules that mandate the giant channel lineups. Companies need to be free to create programming bundles that people want to buy. This might mean allowing a la carte programming. And there must be rules that require content providers to sell to everybody in an unbiased manner.

I don’t know how many of these big issues the current FCC is going to be willing to tackle. It seems like a lot of their agenda for the first six months will be to undo things ordered by the previous FCC. While I understand the desire to mold the FCC to the political persuasion of whatever party is in power, most of the issues on my list above are not partisan. They are just things that we all need to solve if we are to have a telecom infrastructure that serves us all well.

Regulating the IoT

Nest_Diamond_ThermostatThe FCC has joined other government agencies and private organizations that are concerned about the lack of security with the Internet of Things. The agency issued a 50-page research paper that discussed the issue and came to some troubling conclusions.

From the report: The large and diverse number of IoT vendors, who are driven by competition to keep prices low, hinders coordinated efforts to build security by design into the IoT on a voluntary basis. Left unchecked, the growing IoT widens the gap between the ideal investment from the commercial point of view and from society’s view.

That’s not nearly as strident as the sentiment expressed by most industry experts who understand that most IoT device makers look at security only as an afterthought. It’s been demonstrated repeatedly that almost every IoT device on the market can be hacked, often quite easily. There are exceptions, but a large percentage of devices have little or no defense against hacking.

The Department of Homeland Security is also looking at IoT and issued a set of guidelines they want to the industry to adopt. DHS believes that unprotected IoT devices are a national security threat. We now saw good evidence of this last month after massive denial of service attacks were launched from security cameras and home appliances. The DHS guidelines suggest some common sense requirements like allowing devices to have unique passwords and allowing IoT devices to receive needed software updates.

The Federal Trade Commission is also looking at IoT security issues. The agency recently announced a $25,000 prize to anybody who could offer a security solution for dealing with outdated software in IoT devices.

The Department of Commerce also recently issued IoT guidelines, but the guidelines seem to be aimed internally at the agency and not at the wider world.

This all raises the question of who should be regulating IoT? Right now the answer is nobody – there is no agency that has clear jurisdiction to impose any requirements on the IoT industry. And that is because such authority can only be granted by Congress. We’ve seen this same thing happen many times in the last fifty years as new technologies spring into existence that don’t fit neatly into any existing jurisdictional bucket.

The closest process we have to what is needed to regulate at least part of the IoT today is the way the FCC certifies new wireless and other telecom devices. Most people don’t realize it, but all phones and many other kinds of telecom gear undergo vigorous testing at the FCC to make the sure the devices do what they say they do and to make sure that they won’t interfere with the rest of the world. We need a similar process to tst and certify IoT devices because we can’t ever just take the IoT manufacturers’ words that their devices meet and standards that are developed.

But the FCC today has zero authority to regulate the IoT. For now they have created the ability to regulate ISPs through Title II regulations – but that is expected to be reversed or watered down soon. But even that authority doesn’t give them any jurisdiction over the IoT. Like many technologies, the IoT is something new that doesn’t fit into any existing regulatory framework.

It’s not really comforting, but there are a bunch of other new industries with the same situation. There is no agency that has any clear regulatory authority over driverless cars. Nobody has any real authority to regulate artificial intelligence. There are only very minimal regulations for gene-splicing.

I think most of us believe that some level of regulation is good for these big society-changing technologies. Certainly if nobody regulates the IoT we will have disaster after disaster from misuse of the technology. I hope we don’t wait too long to tackle this until it’s too late and there are billions of poorly manufactured IoT devices in the world that can’t be fixed.

The Internet of Everywhere

tostitos-logoForget the Internet of Things. That is already passé and I saw something yesterday that made me realize we have now moved on to the Internet of Everywhere.

Tostitos has put out a special ‘party bag’ of chips for the SuperBowl. The bag contains a chip and a tiny sensor that can detect traces of alcohol on your breath when you breathe on it. If you test as intoxicated the bag will light up red and flash “Don’t Drink and Drive.” But that’s only the beginning. If you set off the red flash you can tap the bag against your smartphone and it will automatically call Uber and give you a $10 discount on your ride.

This is obviously a super-cool marketing idea and I expect the company to sell lots of bags of chips and will get a lot of positive press. And I would expect a lot of people will strive to make the bag flash red. But this demonstrates how cheap computer chips have become when a company can design a campaign using millions of chips in throwaway bags for a one-time promotion. This goes to show how amazingly small sensors have become that this bag can give you a mini-breathalyzer. I’m sure the test is not super-accurate, but the very fact that it can do this and still be affordable is amazing.

Engineers have been predicting this sort of technology for a few years. For example, there are now chips that can be printed onto human skin and can act as a keypad for your smartphone. We are not far away from having chips printed on every grocery item in the store, which will simplify checkout and will fully automate inventory control. With cheap chips we can literally sprinkle sensors throughout a farm field to cheaply monitor for the localized need for water, fertilizer or the presence of pests.

The real Internet of Things isn’t going to be unleashed until we can develop affordable swarms of sensors and also provide a way for them to communicate with each other. Today the IoT is being used mainly to monitor factory production and in homes for alarm monitoring and other similar functions. But the revolutionary value of IoT will come when it can grow to be the Internet of Everywhere.

Then we can have constant monitors inside our blood stream to sense for diseases and to fight them off early. We can monitor sensitive environmental areas to protect endangered wildlife. We can monitor our homes to a degree never done before – want to know if a mouse just snuck in – done!

There have been a lot of breakthroughs in creating small, low-power sensors. But the real challenge is still to find a way to communicate easily and reliably with a cloud of sensors. We are not going to be able to create a WiFi path with a thousand different home sensors but will need some sort of mesh technology that can first collect and make sense of what the sensors are telling us.

But I have no doubt that if a potato chip bag can tell me if I’ve had too much to drink and can then call for a ride to take me home, that we are making great progress.

And as I write this blog I’m sitting here thinking of if only I could show this bag to one of my long-passed grandparents. What would they ever make of this flashing chip bag, of my smartphone and of Uber? But then again, perhaps their biggest question might first be, “What is a Tostito?”

2017 Technology Trends

Alexander_Crystal_SeerI usually take a look once a year at the technology trends that will be affecting the coming year. There have been so many other topics of interest lately that I didn’t quite get around to this by the end of last year. But here are the trends that I think will be the most noticeable and influential in 2017:

The Hackers are Winning. Possibly the biggest news all year will be continued security breaches that show that, for now, the hackers are winning. The traditional ways of securing data behind firewalls is clearly not effective and firms from the biggest with the most sophisticated security to the simplest small businesses are getting hacked – and sometimes the simplest methods of hacking (such as phishing for passwords) are still being effective.

These things run in cycles and there will be new solutions tried to stop hacking. The most interesting trend I see is to get away from storing data in huge data bases (which is what hackers are looking for) and instead distributing that data in such a way that there is nothing worth stealing even after a hacker gets inside the firewall.

We Will Start Talking to Our Devices. This has already begun, but this is the year when a lot of us will make the change and start routinely talking to our computer and smart devices. My home has started to embrace this and we have different devices using Apple’s Siri, Microsoft’s Cortana and Amazon’s Alexa. My daughter has made the full transition and now talks-to-text instead of screen typing, but us oldsters are catching up fast.

Machine Learning Breakthroughs will Accelerate. We saw some amazing breakthroughs with machine learning in 2016. A computer beat the world Go champion. Google translate can now accurately translate between a number of languages. Just this last week a computer was taught to play poker and was playing at championship level within a day. It’s now clear that computers can master complex tasks.

The numerous breakthroughs this year will come as a result of having the AI platforms at Google, IBM and others available for anybody to use. Companies will harness this capability to use AI to tackle hundreds of new complex tasks this year and the average person will begin to encounter AI platforms in their daily life.

Software Instead of Hardware. We have clearly entered another age of software. For several decades hardware was king and companies were constantly updating computers, routers, switches and other electronics to get faster processing speeds and more capability. The big players in the tech industry were companies like Cisco that made the boxes.

But now companies are using generic hardware in the cloud and are looking for new solutions through better software rather than through sheer computing power.

Finally a Start of Telepresence. We’ve had a few unsuccessful shots at telepresence in our past. It started a long time ago with the AT&T video phone. But then we tried using expensive video conference equipment and it was generally too expensive and cumbersome to be widely used. For a while there was a shot at using Skype for teleconferencing, but the quality of the connections often left a lot to be desired.

I think this year we will see some new commercial vendors offering a more affordable and easier to use teleconferencing platform that is in the cloud and that will be aimed at business users. I know I will be glad not to have to get on a plane for a short meeting somewhere.

IoT Technology Will Start Being in Everything. But for most of us, at least for now it won’t change our lives much. I’m really having a hard time thinking I want a smart refrigerator, stove, washing machine, mattress, or blender. But those are all coming, like it or not.

There will be More Press on Hype than on Reality. Even though there will be amazing new things happening, we will still see more press on technologies that are not here yet rather than those that are. So expect mountains of articles on 5G, self-driving cars and virtual reality. But you will see fewer articles on the real achievements, such as talking about how a company reduced paperwork 50% by using AI or how the average business person saved a few trips due to telepresence.

The Battle for IoT Connectivity

Amazon EchoThere is a major battle brewing for control of the connections that control the Internet of Things. Today in the early stage of home IoT most devices are being connected using WiFi. But there is going to be a huge push to have connection instead made through 5G cellular.

I saw an article this week where Qualcomm said that they were excited about 5G and that it would be a world-changing technology. The part of 5G that they are most excited about is the possibility of using 5G to connect IoT devises together. Qualcomm’s CEO Stephen Mollenkopf talked about 5G at the recent CES show and talked about a future where 5G is used for live-streaming virtual reality, autonomous cars and connected cities where street lamps are networked together.

Of course, Qualcomm and the cellular vendors are most interested in the potential for making money using 5G technology. Qualcomm wants to make the hundreds of millions of chips they envision in a 5G connected world. And Verizon and AT&T want to sell data connections to all of the 5G connected devices. It’s an interesting vision of the world. Some of that vision makes sense and 5G is the obvious way to connect outdoors for things like street lights.

But it’s not obvious to me at this early stage of IoT that either 5G or WiFi are the obvious winner of the battle for IoT connectivity in the home. There are pros and cons for each technology.

WiFi has an upper hand today because it’s already in almost every home. People are comfortable using WiFi because it doesn’t cost anything extra to connect an IoT device. But WiFi has some natural limitations that might make it a harder choice in the future if our homes get filled with IoT devices. As I’ve discussed in some recent blogs, the way that WiFi shares data can be a big problem when there is a lot of steady and continuous demand for the bandwidth. WiFi is probably a great choice for IoT devices that only occasionally need to make a connection or that need short-burst connections to share information.

But the WiFi standard doesn’t include quality of service and any prioritization of which connections are the most important. WiFi instead always does its best to share bandwidth, regardless of the number of devices that are asking to connect to it. When a WiFi router gets multiple demands it shuts down for a short period and then tries to reinitiate connections again. If too many devices are demanding connection, a WiFi system goes into a mode of continuously stopping and restarting and none of the connections get a satisfactory connection. Even if there is enough bandwidth in the network to handle most of the requests, too many simultaneous requests simply blows the brains out of WiFi. The consequence for this is that having a lot of small and inconsequential connections can ruin the important connections like video streaming or gaming.

But cellular data is also not an automatic answer. Certainly today there is no way to cope with IoT using 4G cellular networks. Each cell site has a limited number of connections. A great example of this is that I often talk to a buddy of mine in DC while he commutes, and he usually loses his cellular signal when crossing the between Maryland and Virginia. This is due to there not being enough cellular connections available in the limited area of the American Legion bridge. 5G will supposedly solve this problem and promises to expand the number of connections from a cell site by a factor of 50 times or so – meaning that there will be a lot more possible connections. But you still have to wonder if that will be sufficient in a world when every IoT device wants a connection. LG just announced that every appliance it sells will now come with an IoT connection, and I imagine this will soon be true of all appliances, toys and almost anything else you buy in the future that has any electronics.

Of a bigger concern to me is that 5G connections are not going to be free. With WiFi, once I’ve bought my home broadband connection I can add devices at will (until I overload my router). But I think Verizon and AT&T are excited about IoT because they want to charge a small monthly fee for every device you connect through them. It may not be a lot – perhaps a dollar per device per month – but the next thing you know every home will be sending then an additional $50 or more per month to keep IoT devices connected. It’s no wonder they are salivating at the possibility. And it’s no wonder that the big cable companies are talking about buying T-Mobile.

I’m also concerned from a security perspective of sending the data from all of my IoT devices to the same core routers at Verizon or AT&T. Since it’s likely that the recent privacy rules for broadband will be overturned or weakened, I am concerned about having one company know so much about me. If I use a WiFi network my feeds will still go out through my data ISP, but if I’m concerned about security I can encrypt my network and make it harder for them to know what I’m doing. That is going to be impossible to do with a cellular connection.

But one thing is for sure and this is going to be a huge battle. And it’s likely to be fought behind the scenes as the cellular companies try to make deals with device manufacturers to use 5G instead of WiFi. WiFi has the early lead today and it’s still going to be a while until there are functional 5G cellular networks. But once those are in place it’s going to be a war worth watching.

Too Many Gadgets?

ibm_chip1It seems that we have reached a point where the typical consumer thinks there are too many gadgets in his (or her) life and the average person is becoming less interested in buying new ones. A poll conducted earlier this year by Accenture showed that consumer demand for personal electronics is greatly reduced compared to recent years.

The drive to have personal electronics was spurred by the smartphone revolution, which has outperformed sales compared to almost any other product in history. But there have also recently been other personal electronics products like the Fitbit and health wearables that have done very.

But it looks like the shine might be coming off of the personal electronics industry. The Accenture survey showed that fewer people are considering buying every category of personal electronics. For example, the poll showed that only 13% of respondents were considering buying a new smartphone in 2016. That is far below the levels seen in recent years where a significant percentage of smartphone users upgraded their phone every 2 or 3 years.

And the survey also showed weak demand for wearables like Fitbit, for virtual reality, for drones and for the Internet of Things. If this poll is true, then all of these industries are going to underperform compared to expectations. We are certainly seeing this in the real world. Apple stock just stumbled due to falling demand for the iPhone. Samsung and the other smartphone makers went through the same thing last year.

The poll didn’t ask why this was so, but just measured consumer demand. I can think of several reasons why demand is down. First is cost. None of these personal electronics are particularly cheap and it’s unrealistic for the market to expect that all of these electronics will sell as wildly as is predicted by industry insiders. If you listen to the hype each year at places like CES you would expect that everyone in America will soon be buying drones and piles of IoT devices for their homes.

I think another primary reason for the decline is performance. My wife has a sports device to track her running. It works great for what she wants from it and there is no particular reason for her to upgrade it. And every runner she knows has one. Once the market for runners and walkers is saturated there is only so much that can be expected in demand for a device with such a specific function. There is just not much difference between the newer sports wearables and ones sold just a few years ago.

And performance is now a bit issue with smartphones. There is not much difference any more between one generation and another. The new smartphones look the same, feel the same and do about the same things and the old ones. And this is more the fault of the slowing of Moore’s law than anything else.

Since the early 70s chip makers like Intel have released a new chip about every two years that crammed about twice as many transistors into the same chip space. This is the primary reason why each new generation of the iPhone has been a noticeable improvement over the previous model. Each new chip has meant a big leap upward in speed, energy-efficiency and performance of the smartphone.

But in the 10-K filed with the Securities and Exchange Commission at the end of 2015 Intel disclosed that the pace at which it will launch new chips is going to be slower in the future. Intel’s latest mass-production chips for smartphones now have a gap between components of 14 nanometers. Physics is going to limit that ultimate gap to perhaps 4 or 5 nanometers at the smallest due to the size of the molecules of the chip materials. There isn’t very much more room for improvement.

This is not to say that there won’t continue to be improvements in computers – but soon the improvements are not going to come from more compact chips. There are amazing new breakthroughs coming in other areas. IBM has a new chip that works in 3 dimensions that has a lot of promise for supercomputers. There are computers becoming faster by using light instead of electricity. And there is a lot of promise from quantum computing. But all of these improvements, at least for now, are likely to help larger computers and don’t lend themselves to the cheap mass-produced chips that drive personal electronics.

And none of this means that the market for personal electronics is dead. There are still huge numbers of all of these devices being sold. But when you use the performance of Apple over the past decade as the way to measure success in the electronics world it’s likely that nothing is ever going to measure up to that yardstick.

This is a cautionary tale for any carrier that is considering selling home automation, energy management or security. There is a decent living to be made in all of these areas, but don’t get sucked into the hype that every home in America is going to want all of these devices and services within the next few years. Because it appears that is definitely not true.

IoT as a New Product Line

Light bulbLast week Google and Nest announced that they were discontinuing the Revolv IoT hub for the home. The hub is the smart device that sits at the core of an IoT network and is generally the device that lets a user communicate with any other devices in the network. The Revolv hub will still work for anybody that owns one, but there will be no further development on the hub and no new devices designed to work with it.

And this got me thinking about small carriers offering IoT as a product. Big companies like Comcast are now offering a home automation package. Comcast has integrated nine different devices together that range from security, smart locks, smart lights, smart thermostat, etc. Comcast reports that they are surpassing their early goals and have a penetration rate of over 5% of total broadband customers.

But I would think that a company as large as Comcast has developed their own proprietary IoT hub to work seamlessly with all of the various devices. But finding a reliable hub vendor, and working to get any hub to work with a core set of devices can be a daunting task for smaller carriers. And since there are not yet any industry standards for IoT, devices don’t automatically integrate into different brands of hubs and will not work at all in many cases.

The real fear for a small carrier is that you’d build a product line around some specific brand of hub and that hub would either be discontinued or the company that makes it might even disappear. If you can’t trust somebody as large as Google for an IoT hub, then who can you trust in an industry that doesn’t yet have any clear dominant IoT manufacturers?

There are other issues with the IoT business plan that have to be considered. Probably the most immediate and costly issue is the fact that supporting residential IoT means a lot of truck rolls. I’ve looked at the cost of a truck roll for some of my clients and it’s not unusual to see costs of $50 to $75 for a truck roll, and so any business plan has to compensate for a product that is going to require multiple visits to customers over time.

Another issue to consider is customer expectations. There is now a huge variety of smart devices on the market and the vast majority of them are not going to work with whatever hub you choose. I would expect that once customers have some IoT devices from an ISP that they are going to buy other devices and will be disappointed when they won’t work with the hub that they are already paying for. And it’s virtually impossible for a small ISP to integrate incompatible devices with their hub of choice.

Yet another issue that is still of concern for the whole industry is security. Smart devices tend to have very rudimentary operating software and IT experts say that hacking IoT networks is relatively easy. I don’t think many of us are too worried about somebody hacking into our smart coffee pot, but when you put your thermostat, front door locks and watering systems onto a network together there is a lot of chance for damage from malicious hacking.

But a greater security concern is that an IoT network can be a gateway to your entire network and can let in malware and other problems that can create havoc with finances and personal data stored on your computers.

There are certainly customers that will buy these services, as has been demonstrated by Comcast. We might be decades away from a time where there might be significant penetration rates like we see with triple play products. But there probably is an opportunity today to get a small, but potentially profitable product out into the market. But the risks and costs of offering residential IoT still looks to be out of the comfort zone of many small ISPs. Perhaps rather than try to offer a full suite of products like Comcast is doing, a more workable strategy might be to concentrate on a small handful of functions like security and smart thermostats.

Three Years and Counting

2014_Rolling_Sculpture_Car_Show_67_(1969_Porsche_911_S)Today is the three year anniversary of this blog. I started writing this blog as a way to force myself to keep up with industry news. During the first month of writing the blog I worried that I would quickly run out of topics. But I underestimated then how dynamic our industry has become. The changes from just three years ago are amazing. Instead of running out of topics I often have to toss away topics because I can’t get to them fast enough.

I mostly write about the topics in the industry that I find most interesting, but I must be striking a chord because I pick up new readers to the blog daily. I now know that I am the only one writing daily about broadband and related topics and it makes me happy to see that others find these topics to also be of interest. Just since I’ve started this blog we’ve seen the following changes in the industry (and this is a short list):

An Activist FCC. The current FCC has waded into more new topics than any other FCC in my memory. The most significant one is the net neutrality decision that reclassifies broadband as a regulated service. But there have been many other rulings from this FCC. There was a time a few years ago when industry pundits predicted that regulation was dying, but it has done just the opposite.

Exploding Demand for Broadband. The penetration rates for broadband have continued to grow and in urban areas it seems like we are getting close to the time when everybody that can afford broadband has it. But there are still huge numbers of rural homes and businesses without broadband and they are starting to stridently demand it.

Growth of the OTT Industry. While Netflix has been streaming content a little longer than I have been writing this blog, the whole OTT phenomenon has really taken off in the last few years. Netflix now claims over 75 million customers and there is now a growing host of other OTT providers. Online video has completely transformed the Internet and video is by far the majority of online traffic.

New Products from the IoT. There are new products available to carriers for the first time in many years. I have a number of clients who are now successfully selling security and a number of them are getting into home automation and the many other related services associated with the Internet of Things.

Use of WiFi instead of Wires. It’s become recently obvious that the large ISPs have abandoned home wiring for delivering data. They now bring bandwidth into the home to a central WiFi router and don’t install wires to anything else. But a single WiFi router is already not sufficient for high-bandwidth homes and the next trend in this area is going to be the networking of multiple WiFi routers.

Services in the Cloud. More and more services are moving to the cloud. Carriers can buy voice and cable TV programming from the cloud today, something that was unimaginable just a few years ago. It was always assumed that expansive bandwidth made cloud cable TV impractical, but as bandwidth prices continue to tumble it makes more sense to buy programming from the cloud instead of building or maintaining a cable headend.

Public Private Partnerships. There were very few Public Private Partnerships a few years ago and now it’s something that everybody talks about. This is particularly relevant in rural America where communities are willing to kick in money to find a broadband solution. But we are even seeing this in urban areas, such as the deal just announced between Google Fiber and Huntsville.

Erosion of Landline and Cable Customers. Landline penetration rates are now under 50% nationwide and we are starting to see the erosion of traditional cable customers. The challenge for the next few years will be for triple play providers to find ways to replace these shrinking revenues and margins.

Massive Realignment of Rural Subsidies. We’ve seen subsidies shrink for small telcos. Access charges are being phased lower and the Universal Service Fund is being redirected from telephone to broadband. This has put a lot of pressure on some small carriers, but anybody who survives the end of this shift will probably be ready to succeed in the long run.