The Internet of Things (IoT) integrates the physical world into a computer-based system to allow objects to collect and exchange data. This inter-networking should bring improved efficiency, accuracy and economic benefits. However, many of the benefits of the IoT will occur only as a result of a widespread approach, sharing of data across the value chain and novel services. The adoption of widely accepted standards is the tool to achieve effective and efficient interoperability. The exclusion of all technologies but one might have an adverse effect on competition. Building the IoT on open standards could be the way to maintain a level playing field and promote innovation.
The IoT can build applications for smart transport, health, education, manufacturing and other sectors. It may support more responsive business models thanks to a more granular and frequent data collection that will allow firms to better assess their customers’ needs. Allowing the IoT to live up to our expectations might entail a shift in our approach to governance. If a blanket approach might not be the best solution, it is also true that no one single company, or government, can solve the issue.
The debate on whether there is the need for IoT specific regulation is ongoing and far from being settled. Some consider that the IoT world can be efficiently and effectively governed by current horizontal legislation, such as privacy, safety, environmental and competition rules. However, as a successful IoT environment demands that different devices interact, it is crucial to enable those products to communicate between each other. Hence, it seems impossible to avoid the adoption of a regulatory framework that will allow for interoperability.
Standardisation is critical in establishing a Single Market for IoT. Standards allow complementary or component products from different manufacturers to be combined or used together. They increase consumer choice, convenience and reduce costs of production. They eliminate fragmentation and will enable the emergence of the IoT ecosystem boosting innovation and reinforcing competition.
The endorsement of a particular standard is done at the expense of potentially competing technologies. However, competition in network markets is likely to result in standardisation anyway, as long term coexistence is unlikely given that a small initial advantage is apt to influence consumer expectations regarding the adoption of a specific standard. In markets with network effects, such as the IoT one, the product’s value increases the higher the number of adopters. Consequently, the network’s value increases to future adopters. Consumer expectations are often self-fulfilling and an early lead will turn in a competitive advantage difficult to overcome.
The IoT is expected to improve many aspects of our daily lives. It will influence all major economic sectors, from health to education, from transport to manufacturing. Given the total interconnection between all IoT technology, network effects will strongly influence the competitive features of the market. It seems of excruciating importance to assure that the IoT’s potential is not locked in the hands of few dominant market players.
Amazon, Apple, Google, as well as other companies already offer integrated solutions. SSOs are already working on developing standardised software layers. However, the Garten report predicts that there will not be a dominant ecosystem of platform until 2018.
Many of the existing platforms are based on a proprietary model that locks consumers into specific interface standards. Open standards seem to be preferable to proprietary solutions as they have a positive effects as regard to large scale deployment, widespread adoption and lock-in prevention. Open standards would appear to present a perfect mix of flexible multi-stakeholder arrangements. They ensure an adequate balance between the need to foster private sector innovation and the need to avoid technological lock-in or gridlock. Through the application of the principles of openness, broad consensus, transparency, availability and market-driven adoption, consortia are more likely to develop inclusive technology that more strongly adheres to the principles that are at the basis of some of the best technological innovations of our time, including the free and open Internet. With truly open specifications in place, the pathway to standardisation may also become a more smooth one.
So far the digital ecosystem has proved to be a stimulating and innovative environment, continuously delivering new inventions capable of disrupting our daily routine. For the sake of a successful, competitive and fair IoT market, it is about time for the digital world to deliver a business model that moves away from IP revenues-based models and shift to models that generate income through the delivery of innovative complementary products.