Why The Internet Of Things Hasn’t Gone
Cellular Yet
Particle CEO Zach
Supalla on putting ordinary objects online from anywhere.
In the future that
Particle CEO Zach Supalla envisions, you’ll never lose your luggage, or find
out too late that your basement is flooded. Production lines will recognize
exactly when a single piece of equipment is about to fail, and city workers
will automatically get notified when a garbage can needs emptying.
That’s because every one of these devices will be connected to the
Internet, regardless of whether there’s a functioning Wi-Fi network within
range.Particle is in the business of making the tools that
enable these "Internet of Things" devices, from circuit boards to
software platforms to large-scale manufacturing plans. The company’s latest
product, the Electron, is the first to have a cellular radio and data plan
built in.
Getting to this point
hasn’t been easy, however. For Supalla, the creation of Electron has been a
lesson in how wireless carriers work, including both their networks and their
internal politics. With the first Electron units shipping this week, I talked
to Supalla about what he learned, and what still needs to change before
cellular IoT takes off.
The Internet of Things
isn’t (yet) a big business, and the concept favors lots of small-scale devices,
rather than a handful of hits. Certifying, provisioning, and managing data
plans for all of these devices is a tall order for wireless carriers, who are
used to selling smartphones by the million.
"There are a lot of
really interesting customers out there that they would love to support,"
Supalla says, "but they're just not built to support smaller companies,
and interestingly their definition of a smaller company can be quite
large."
Naturally, Supalla hopes
that carriers will be drawn to aggregators like Particle, which can negotiate
one-size-fits-all data plans on behalf of many startups. If Particle ships Electrons
to 10,000 companies that are building IoT devices, and those customers in turn
ship thousands of Electron-based products, carriers get to scale their Internet
of Things business without much extra effort.
The Data Plans Aren’t Ideal
In negotiating with wireless carriers, Supalla has learned that
old habits die hard, and he acknowledges that Electron’s data plan—which
carries a $3 monthly fee and $1 per megabyte overage charges—was something of a
compromise. (Particle acts as a mobile virtual network operator, working with a worldwide carrier that has agreements with
AT&T and T-Mobile in the United States.)
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"It's so baked into
their DNA, this monthly plan," Supalla says. "Even us getting a plan
where we didn't have a contract associated with it—I mentioned we can suspend
our SIMs and un-suspend them—that was hard to negotiate. They really didn't
want to give that up."
Carriers are insistent
on monthly plans, Supalla speculates, because they’re afraid that any
exceptions they carve out for Internet of Things devices will jeopardize the
smartphone plans at the core of carriers’ business.
"Every time you
create something that's cheaper for an IoT application, you're going to have a
bunch of smartphone companies that are going to say, ‘Hey, I saw what you did
there, and if you can do that, then something's wrong with our contract,’"
Supalla says. "And that's really risky for a carrier, if all your other partners
decide to renegotiate."
That's not to say
carriers have been completely uncooperative. For instance, as a cost-saving
measure they've suggested reducing data rates during off-peak times, which
makes a lot of sense for IoT devices whose transmissions aren't urgent. Still,
Supalla believes Internet of Things devices could communicate in a different
way than smartphone data altogether. He points out that for basic status
messages, Electron devices could easily use the same protocol that text
messages rely on currently, and it would be a lot cheaper for everyone. But
again, in discussing this with carriers, Particle ran into what seemed like
institutional reluctance.
"In theory, every
single party would benefit, but that's not how they charge," Supalla says.
"They charge expensive rates for text messages—absurdly expensive, it's
like back to '90s text-message pricing—and I'd like to see that change."
It may be obvious that
Internet of Things hardware must become smaller and cheaper to achieve
ubiquity. But what’s less obvious is where those costs actually come from.
In cellular, a
significant chunk of the hardware cost comes down to intellectual property.
Every time Particle sells an Electron, for instance, the maker of the device's
cellular modules has to pay a licensing fee to Qualcomm, which owns a
significant number of patents for 3G and LTE radios. A $20 IoT device will have
a harder time absorbing those fees than a $600 smartphone because so much of
the final price goes toward licensing.
"The same kind of
factors that are happening on the plan side are happening on the hardware
side," Supalla says. In other words, if Qualcomm reduced its fees just for
small-scale devices, phone makers might complain or try to exploit that system
to get away with paying less.
Fortunately, this problem may get solved over time. As LTE gets
faster, telecommunications groups have agreed on a range of "categories," each with their
own limits on transfer speeds and simultaneous transmissions. The hope is that
licensors could dial their fees up or down according to these categories, and
Internet of Things devices would sit on the low end. "Those are some of
the issues that kind of have to get worked out, to become truly accessible for
lots of different products," Supalla says.
The last time I spoke with Supalla, he likened today’s Internet of Things devices to the broader Internet of the
1990s. Just as plenty of
people doubted the Internet’s transformative power back then, right now it’s
hard to fathom the impact—both good and bad—of giving an Internet connection to
virtually anything.
If this analogy holds up, the real transformation will happen once
these devices are untethered from a local network, similar to how smartphones
led to an explosion of Internet-based applications. The makers of these
products will even face the same hesitation from wireless carriers that Steve Jobs and Apple faced as they tried to deliver the first iPhone.
But Supalla is
optimistic that carriers will see the light, especially as revenue growth from
smartphones starts to dry up.
"I do think those
market conditions will force them to make IoT work," he says.
JARED NEWMAN
http://www.fastcompany.com/3056442/startup-report/why-the-internet-of-things-hasnt-gone-cellular-yet?utm_source=mailchimp&utm_medium=email&utm_campaign=fast-company-daily-newsletter&position=9&partner=newsletter&campaign_date=02122016
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