Internet Of Things Needs Government Support - InformationWeek

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IoT
IoT
Government // Leadership
Commentary
10/9/2014
09:06 AM
Scott Amyx
Scott Amyx
Commentary
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Internet Of Things Needs Government Support

The US risks being left behind as other countries invest in ubiquitous computing. Here's a seven-point framework to bolster the US's support of IoT technologies.

core IoT technologies. Another KRW 12.3 billion will come from Korea's private sector, giving an overall investment of KRW 50 billion. The government also has plans to increase the technical labor pool in IoT technologies.

What about the US?
It's feasible that the US government has an industry blueprint and policy framework for promoting IoT, or perhaps it's underway. If such a plan exists, the government needs to promote it.

The Smart Cities USA project, a collaboration between Intel and the City of San Jose, Calif., is trying to demonstrate the benefits of IoT to support San Jose's Green Vision initiative, with the hope of spurring other cities across America to adopt a similar IoT-friendly policy.

Anecdotally, in a GovLoop survey of 800 public sector employees, 49% indicated that they have never heard of the term "Internet of Things," 16% had heard of the term but were not sure about the definition, and 35% had heard of the term and had some understanding of IoT. One survey respondent questioned, "what does this even have to do with any of the service-provided departments of government?" This could be due to survey bias in terms of the types of agencies and management levels surveyed, but it does raise a question about the government's awareness and readiness to foster a vibrant IoT market.

Brett Goldstein, Chief Data and Information Officer for the City of Chicago, spoke out through the New York Times to rally public officials to stand behind the IoT. Abroad, BT CIO Clive Selley challenged his UK government to "articulate the business case enough to espouse and publicize the benefits of the Internet of Things."

Case Study: US government's role in the solar photovoltaics industry
Government policies play a pivotal role in nurturing a nascent market. Uncertain market conditions and risks, such as demand, standards, and regulations, and the significant investment costs associated with R&D and infrastructure upgrades keep enterprises and public agencies on the sideline. The solar photovoltaics (PV) industry, as an example, would not have gotten off the ground without government policies to support consumption of solar energy and the production of solar PV products.

In Q2, the US solar PV installations topped the gigawatt mark for the third consecutive quarter to 1,133 megawatts (MW) to bring the cumulative installed solar capacity to 15,900 MW. There are now more than half-a-million homes and businesses nationwide with a solar installation. Through the first half of the year, 53% of all new electric capacity installed has come from solar.

The city of Lancaster, Calif., has gone one step further to require every new housing development to generate at least an average of 1 kilowatt from solar energy. The new requirement will be updated in Lancaster's Residential Zones code.

Government subsidies do have downsides
SolarCity, a publicly traded solar power provider, has never recorded a profit. It was $166 million in the red after losing $55 million in 2013, yet its stock price, $63 at the time of this writing, is up by 688% since its IPO in late 2012. The pricing model for SolarCity's stock implicitly reflects advantages afforded by the government. Buried deep in its third-quarter 2013 report, SolarCity states, "If, for any reason, we are unable to finance solar energy systems through tax-advantaged structures ... we may no longer be able to provide solar energy systems to new customers on an economically viable basis. This would have a material adverse effect on our business, financial condition, and results of operations."

Overseas, government protectionism has resulted in powerful oligopolies (or in some extreme cases, monopolies) across sectors that disproportionately enrich a select few companies and their founders with outrageous valuations and exits, all at the expense of and risk to citizens.

To be fair, the solar PV market fundamentals are not comparable to the IoT industry. For Industrial Things, the issue is not whether it's a financially viable, self-sustaining market; rather it's about the pace of growth vis-a-vis global competitors. It's a race toward global market share that has the potential to power the growth engine of our domestic economy.

Framework for government IoT policy
The role of the government, in this case, is to alleviate the risk barriers of a nascent market. Regulatory uncertainty can be the death of burgeoning industry. What follows is a recommended framework for the US government to support the IoT market:

1. Policy: Create a plan, then promote it
The US government must develop, publish, and promulgate a national IoT plan. As noted earlier, if the plan is not known by the public, if might as well not exist. The government should define a national strategy, a roadmap, and the supporting policy framework and programs to advance the growth of the Internet of Things industry.

2. Risk mitigation: Spearhead technology, privacy, and security standards & enforcement
This is one area that we are seeing positive progress with joint public- and private-sector collaboration. Particularly on the privacy and security

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Scott Amyx is the founder and CEO of Amyx+McKinsey, a wearables strategy agency specializing in smart wearables strategy and development. He writes for InformationWeek, Wired.com, IEEE Consumer Electronics Magazine, andIEEE Technology and Society Magazine, and he ... View Full Bio
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danielcawrey
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danielcawrey,
User Rank: Ninja
10/10/2014 | 1:15:17 PM
Re: Be Careful
It seems as though Asia has a real plan to take IoT to the next level. Government support helps, especially in China where business and policy is closely intertwined. It's clear to me that standardization as well as support from country government helps move all of this forward.

Does it mean the US will be left behind? I hope not. 
MaxineBingham01
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MaxineBingham01,
User Rank: Apprentice
10/9/2014 | 6:55:31 PM
Re: Be Careful
Rob - while this was an interesting article about what governments are investing in IoT, I agree with you. Already users are concerned about privacy and security. The strength of America is in our entrepreneurial and free economy culture. I hope we don't go down the road of planned economies, with their corruption and inefficiencies. Today there is what we at IoT Perspectives call the "IoT Grand Convergence." Billions of dollars are being spent by semiconductor and other infrastructure companies to propel the Internet of Things. Look at ARM, Freescale, Intel, etc., cloud providers, networking companies, such as Cisco, etc. Many large companies are investing in IoT startups and technologies, we don't need the US government to do so. As you note so well, it's been a disaster when the US has acted like a venture firm and/or bailed out failing enterprises for short-term political gain.

We can ask local, state and federal government to reduce taxes and make it easier to be a device - not just a software company, as a number of IoT startups are finding they need to develop ICs and sensors that will do the job. But, as you write - NOT via huge new bureaucracies.

IoT is too critical to let our government drive it. I just don't want them getting in the way.
Jack N FranF583
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Jack N FranF583,
User Rank: Guru
10/9/2014 | 11:47:10 AM
Re: Be Careful
Simple solution, Copy the design attributes of Google's Next: 1) encrypt everyrhing by default. a few square mm dedicated to encryption on every tiny chip. 2) encryption at user's not suppliers demand 3) redundant computer backup among nodes capable of being the hub  3) run any group of iThings like a Globetrotter practice with Meadowlark Lemon (in triplicate at the hub) let Meadowlark speak only to the user and use end to end encryption between owner and Meadowlark.

That way science experiments, engineering monitors, homes, autos, businesses all run the same way and can talk or not only with the expressed written (check mark) consent of the user/owner of all the data.
RobPreston
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RobPreston,
User Rank: Author
10/9/2014 | 10:44:03 AM
Be Careful
I wouldn't be so eager to throw taxpaper money and government bureaucracy at the Internet of Things. To the extent that the feds can facilitate IoT standardization and invest in technical education, terrfiic. But the author seems to be proposing a China-scale national industrial policy. 

Is it the government's business to be picking private sector winners? When it has done that in solar power, it has failed miserably. The author cites SolarCity. Let's not forget the disaster that was Solyndra. Hundreds of millions of dollars poured down the toilet. The author holds up as an IoT investment model China's Ministry of Industry and Information Technology investment, which under a 12-year plan (yes, a 12-year plan!) has committed to scaling the country's IoT market to $163 billion. Which US government 12-year program produced the smartphone, cloud, and big data revolutions? Private sector ingenuity and consumer/business demand produced those revolutions, not government dictates. Governments are terrible at divining technology revolutions.

"As part of its fiscal policy toolbox, the US government should conduct cost-benefit analyses of pursuing public-sector IoT projects, so long as the political winds allow it." In other words, create jobs via massive government spending on IoT projects. The Chinese are held up again as a model: "The Chinese central government has selected 202 cities to pilot smart city projects to collect and analyze transportation, electricity, public safety and environmental data." The Chinese construction market is an enormous bubble ready to burst, yet that's the model?

"The US government can also consider special funds to optimize financing for the Internet of Things, such as infrastructure funds, loans, tax privileges, and other subsidies, while weighing programmatically the economic and social benefits against the investment costs. The key is to ensure that the parameters of government financial support are constrained by the oversight of an independent audit committee to evaluate the merits and management of programs. These tools can be dangerous, fraught with perverse incentives and unintended policy consequences, so they should be used with caution."

My italics. Think massive bureaucracy, corruption, influence peddling, political patronage, and waste. All using taxpayer dollars. Is this really the way to go? The likes of Cisco, Microsoft, Intel, and IBM are behind the Internet of Things -- as are myriad startups of all stripes. Why are we not confident they will drive it forward to the extent that makes economic sense? The government should stick to funding education and basic R&D, and to helping set interoperability, construction, and privacy/security standards where appropriate.

 
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