10 Policy Principles for Unlocking the Potential of the Internet of Things

Daniel Castro Joshua New December 4, 2014
December 4, 2014
This report presents ten principles to help policymakers accelerate deployment of the Internet of Things.

The Internet of Things encapsulates the idea that ordinary objects—from thermostats and shoes to cars and lamp posts—will be embedded with sensors and connected wirelessly to the Internet. These devices will then send and receive data which can be analyzed and acted upon. As the technology becomes cheaper and more robust, an increasing number of devices will join the Internet of Things. Though many of the changes to everyday devices may be subtle and go unnoticed by consumers, the long-term effect could ultimately have an enormously positive impact on individuals and society. A connected world is capable of anything from improving personal health to reducing pollution to making industry more productive. The Internet of Things offers solutions to major social problems, but this vision of a fully connected world will not be achieved without initiative and leadership from policymakers to promote its deployment and avoid pitfalls along the way.

The potential size and scope of the Internet of Things is enormous, with over 16 billion devices estimated to be in use today, and many more to come. By 2020, the total worldwide count is expected to reach over 40 billion. This growth is visible across practically every industry. By 2020, the number of wearable devices will surpass 100 million, the number of Internet-connected cars will exceed 150 million, and the number of connected wireless lights will reach 100 million—to name just a few.

The magnitude of the benefits brought by the Internet of Things is also impressive, and this technology may improve nearly every aspect of life. Consider the benefits of smart homes. Connected devices that automatically regulate electricity usage based on whether anyone is home can cut energy usage and bills. Smart meters can send dynamic price signals to smart appliances to reduce peak energy consumption. Connected sensors can improve home safety by detecting fires and other emergencies more quickly and reliably than traditional methods, alerting authorities sooner. Blinds that automatically detect and filter out sunlight, smart heating and cooling systems that can maintain different rooms at different temperatures, and lighting that automatically adapts to time of day and can be controlled from a smartphone will make home life more comfortable than ever before.

Connected devices can also provide consumers important new insights about their health and fitness. Companies are designing wearables for every stage of life from smart “onesies” with embedded sensors that help parents monitor their infants’ health to activity sensors that allow elderly adults to live safely and independently. Wearable biometric monitors can help individuals track their health, monitor chronic medical conditions, and improve health care outcomes.In addition, fitness trackers such as FitBit and Nike FuelBand can help consumers be more active and engage in healthy behaviors.

Local leaders can help build smart cities by integrating the Internet of Things into public buildings and infrastructure, including roadways, transit systems, and utilities. These technologies can help make cities safer, more sustainable, and more resilient while also providing new economic opportunities for their residents. For example, networked sensors can monitor the structural integrity of bridges and highways in real time to prevent catastrophes from happening and encourage cost-savings through timely preventative maintenance. And, intelligent transportation systems can make roads safer, facilitate traffic flow, and make public transportation more efficient.

Industries that restructure their practices around the Internet of Things can improve productivity and sustainability. With everything from networked assembly lines that track every screw turn to ensure quality control and safety to connected supply chains that reduce downtime and ensure transparency in material sourcing, the Internet of Things will increase industry competitiveness. The increased capacity for data collection from the Internet of Things brings benefits as well. Insurers can use actuarial models that factor in data from connected devices to better understand risk and reduce costs for their customers. Companies can monitor and enhance the safety of their workers in real time and prevent accidents.

Overall, global spending on the Internet of Things is predicted to grow to approximately $3 trillion by 2020. Of course, any capital equipment represents a cost, not a benefit. In that businesses and consumers purchase technology only if benefits exceed costs and because many benefits extend beyond the immediate purchasers to the entire network, the overall economic benefits from the Internet of Things will be even more significant.

As technological barriers decrease and adoption of the Internet of Things takes off, its potential benefits depend in part on how policymakers respond to this technology. There are four main approaches policymakers could employ regarding the Internet of Things:

  1. Precautionary regulations: Some policymakers focus on the potential risks associated with the Internet of Things and want to regulate it accordingly. These policymakers believe that preemptive regulations will increase consumer trust and therefore increase adoption, but the reality is that heavy-handed rules would likely imposes costs, limit innovation, and slow adoption.

  2. No intervention: Some policymakers resist laws and regulations for the Internet of Things because they believe the free market operating independently of government interventions achieves the maximum possible consumer benefit. However, by avoiding all interventions, policymakers miss the opportunity to proactively support the deployment of the Internet of Things.

  3. Indigenous innovation: Some policymakers view the Internet of Things as an opportunity to create export opportunities for domestic firms. These policymakers may endorse policies that hinder foreign companies from competing in the domestic market, such as adopting national technical standards rather than adopting international ones. Such policies are anti-competitive and create fragmented markets for the Internet of Things.

  4. Technology champions: Some policymakers have taken a proactive role in accelerating the development and deployment of the Internet of Things, such as by funding research on sensor networks, creating pilot projects for smart cities, preventing over-regulation of wearable health technologies, and providing incentives for smart grid deployment. These policymakers see government as a critical partner in promoting the benefits that come from using these technologies.

Recognizing why the first three approaches are wrong is crucial to developing sound policy for the Internet of Things. Its status as an emerging innovation necessitates the “technology champions” approach in order to create a policy framework that is fully cognizant of its benefits, allows for future innovation, and responsibly protects against misuse without restricting its capacity to deliver social, civic, and economic benefits.

10 Policy Principles for the Internet of Things:

  1. Chart the course for adoption.
  2. Lead by example.
  3. Look to partnerships to overcome obstacles.
  4. Reduce regulatory barriers and delays for getting smart devices to market.
  5. Minimize the regulatory cost of data collection.
  6. Make it easy to share and reuse data.
  7. Relentlessly pursue better data.
  8. Reduce the “data divide”.
  9. Use data to tackle hard problems.
  10. Where rules are needed to protect consumers, keep them narrow and targeted.