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That Disappointing Internet of Things Trade is About to (Finally) Heat Up

As Amazon's device announcement shows, the status of IoT today is not where the Internet of Things will be a year from now, or in a decade

By James Brumley, InvestorPlace Feature Writer

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A couple of years ago when companies like Cisco Systems, Inc. (NASDAQ:CSCO) and Sierra Wireless, Inc. (USA) (NASDAQ:SWIR) were heralding the arrival of the so-called Internet of Things (IoT), visions of automated homes and one-touch changes in manufacturing operations created quite a buzz.

That Disappointing Internet of Things Trade is About to (Finally) Heat Up
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Now here we are, more than a few years after IoT became a thing, and those faithful owners of CSCO stock, SWIR stock and several other high-profile players are wondering if the there was more bark than actual bite to the concept’s practicality.

Fear not, IoT fans and believers. As is the case with most sweeping technological advances (like the advent of 3D printers), the rise of the Internet of Things still looms. It’s just taking longer than the earlier outlooks implied.

When Does IoT Get Here?

Truth be told, IoT is here… more or less. The connected home is a prime example. A smart refrigerator from Samsung Electronics, for instance, can see what you have and don’t have, and automatically order the food you need and have it shipped right to your doorstep.

It’s clever, to be sure, but hardly the sweeping overhaul of life as we know it that would usher in utopia. Don’t throw in the towel just yet though.

Giving credit where it’s due, it was Pavan Singh, of industry-centric website IoT Agenda, who most recently served up some informed perspective of where the movement is in terms of adoption. He says of the four stages we’ll need to work our way through before IoT becomes commonplace, we’re still only in the first one — operational efficiency. That’s the one where assets (technologies) are just starting to be utilized in a new way. Though not yet perfected, these underlying technologies are “good enough” and “cheap enough” to start increasing productivity rather than simply being employed to perform menial tasks like ordering groceries.

The best is yet to come. The next of the four stages is the launch of actual new products and services, followed by outcome-based initiatives, and finally, the establishment of an autonomous pull-based economy where users of IoT technologies want and expect the availability of these platforms that help make and save money. In the last stage, every aspect of a product is automated, from creation to final consumption.

And, what sort of actual new products and services should we expect?

Look no further than yesterday’s announcement by Amazon.com, Inc. (NASDAQ:AMZN) of six new hardware products. Not only are these portals and enablers of e-commerce, but they show that the company is positioning its Alexa from being a connected speaker to taking on Samsung’s SmartThings, Alphabet Inc‘s (NASDAQ:GOOGL) Nest, and Apple Inc.’s (NASDAQ:AAPL) HomeKit, according to The Verge’s senior editor Tom Warren.

It’s not just consumers and business psyches — the perception of need and subsequent demand — that have been holding the Internet of Things back, though. The technologies and radio signal bandwidth we need have also been limited.

Bandwidth No Longer a Problem

While industry experts ultimately believe IoT will interconnect 20 billion devices by the end of the year, with one trillion expected to be linked by 2035, the bulk of them will be connected wirelessly using radio transmissions. Problem: There aren’t enough available radio frequencies to go around without these signals interfering with one another.

Companies are working on solutions, though. While like water and land, we can’t make more bandwidth, we can make the constant data traffic between hardware require much less of it, and we can tweak these cell phone connections and mobile broadband signals to carry more data when signals are sent from point A to point B.

The deployment of 5G connectivity is one such prod.

 

It’s different than the now-common 4G connectivity that powers your smartphone in that even as fast as 4G is, only one connection per radio frequency can be made at a time. With fifth-generation signals, the network understands and manages the high-speed connections being made at any given time by a massive number of devices, allowing them to share radio frequencies with minimal degradation of their connection speed. That’s how 5G connections will effectively be up to three times faster than 4G connections are.

5G connectively is in its infancy, however, only being tested in real-world settings rather than sold as an outright feature for wireless phone subscribers. Wireless telecom carriers know, however, the real opportunity in 5G is in providing the backbone for the radio-based connections the real rise of IoT will require. It’s coming though, and soon.

AT&T Inc. (NYSE:T) is setting the stage for a major victory on the 5G front, though you won’t see it until next year; it’s not ready for mass rollout just yet. Ditto for T-Mobile US Inc (NASDAQ:TMUS), which recently caught up with AT&T in its effort to reach 5G speeds in excess of one gigibit per second.

Indeed, T-Mobile is on track to unveil the nation’s first narrowband IoT network next year, directly addressing and removing one of the key bottlenecks that had been holding the movement back.

Bottom Line for the Internet of Things

None of this is to suggest the aforementioned Cisco and Sierra Wireless have suddenly become investment-worthy names (nor that they weren’t before). It’s also not to suggest you have to own TMUS and T stock because they’re the frontrunners in terms of making the Internet of viable when it wouldn’t otherwise be.

It is to say, however, whatever bet you may have been mulling as a long-term IoT may be on the verge of starting to pay off in a much more meaningful way.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter.


Article printed from InvestorPlace Media, https://investorplace.com/2017/09/that-disappointing-internet-of-things-trade-is-about-to-finally-heat-up/.

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