BARCELONA, Spain — A car that tells your insurance company how you're driving. A bathroom scale that lets you chart your weight on the Web. And a meter that warns your air conditioner when electricity gets more expensive.
Welcome to the next phase of the wireless revolution.
The first wave of wireless was all about getting people to talk to each other on cellphones. The second will be getting things to talk to each other, with no humans in between. So-called machine-to-machine communication is getting a lot of buzz at this year's wireless trade show. Some experts believe these connections will outgrow the traditional phone business in less than a decade.
"I see a whole set of industries, from energy to cars to health to logistics and transportation, being totally redesigned," said Vittorio Colao, the CEO of Vodafone Group PLC, in a keynote speech at the Mobile World Congress in Barcelona, Spain. The British cellphone company has vast international interests, including its 45 percent ownership stake in Verizon Wireless.
Cutting out middlemen
Companies are promising that machine-to-machine, or M2M, technology will deliver all manner of services, from the prosaic to the world-changing. At U.S. chipmaker Qualcomm Inc.'s booth at the show, there's a coffeepot that can be ordered to start brewing from a tablet computer, or an Internet-connected alarm clock. A former president of Costa Rica is also at the show, talking about how M2M can save massive amounts of greenhouse gases by making energy use more efficient — enough to bring mankind halfway to the goal of halting global warming.
The M2M phenomenon is part of the larger drive to create an "Internet of Things" — a global network that not only links computers, tablets and phones but that connects everything from bikes to washing machines to thermostats. Machina Research, a British firm, believes there will be 12.5 billion "smart" connected devices, excluding phones, PCs and tablets, in the world in 2020, up from 1.3 billion today.
But how does this transformation happen, and who stands to profit?
First, the devices have to be able to connect. That's not a trivial undertaking, especially considering that people don't upgrade washing machines or renovate their homes as often as they change cellphones and PCs. One company at the show, a Los Angeles-based startup named Tethercell, has an ingenious solution for battery-powered devices: a "fake" AA battery that houses a smaller AAA battery in an electronic jacket. It can be placed in a battery compartment with other batteries. Within a distance of 80 feet, some smartphones and tablets can then signal the "battery" to turn the device on or off. For instance, parents whose kids have a lot of noisy toys can turn all of them off with touch of a single button. A fire alarm could send a text-message warning that its battery is running low, rather than blaring an audio signal.
Unfortunately, a Tethercell from the first production run costs $35. Co-founder Kellan O'Connor believes the price can come down to $10, but that's still a nontrivial cost, and symptomatic of the high price of building out the Internet of Everything. For devices that need to connect at long range over a cellular network, the cost of radio components alone ranges from $10 to $70, according to analyst Dan Shey of ABI Research.
Driving bigger devices
That's not expensive in the context of some big-ticket items, like cars, which have been forerunners when it comes to nonphone wireless connections. General Motors Corp. started equipping cars with OnStar wireless calling and assistance services in the mid-90s. At the show, it announced it is updating the service for faster data connections, enabling services like remote engine diagnostics and upgrades to the control software. AT&T Inc., which has been aggressive about getting into the M2M business, is ousting Verizon Wireless as the network provider for OnStar.
Colao, the CEO of Vodafone, gave an example of another "smart" car application that might seem intrusive to some: The company has been trying out a service in Italy that lets an auto insurance company know how much a car is being used, and charges premiums accordingly. It can also score the driver based on his or her driving style, and give pointers on how to handle the car more safely.
The real money maker?
Once devices are connected, the next problem is getting them to talk to each other, and making sense of what they're saying. ABI's Shey says this is the real business opportunity in M2M, more valuable than making the modems or providing the wireless connections. He believes that's driving a behind-the-scenes scramble of deal-making at the show, as companies like AT&T seek to bolster their ability to support M2M by acquiring companies that provide a "middle layer" of software between the devices and their owners.
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