Post on 05-Mar-2023
Connectivity Issues on IoT Business
- The Korean Case of Smart Home Network
Ji Yeon Cho1, Hye Sun Lee
2, Bong Gyou Lee
1*
1 Graduate School of Information, Yonsei University
2 Technology and Business Administration, Yonsei University
jy.cho@yonsei.ac.kr, emailme@yonsei.ac.kr, bglee@yonsei.ac.kr*
ABSTRACT
Connectivity is one of the most important factor
that may affect as a great benefit to various
domains for the next era of the IoT(Internet of
Things). However, securing connectivity
requires various industry stakeholders to access
freely which cause business and regulatory
issues. The purpose of this study is to explore
challenges in implementing market based IoT
industry, focusing on connectivity issues. We
have investigated cases of the smart home
industry in Korea, presented implications based
on the literatures and the in-depth interviews.
As a result, newly emerging industry based on
technology like IoT tend to have conflicts
between service providers and network
providers. And it expands towards political
issues on data traffic and fostering spectrum
managements by private sectors. Moreover,
connectivity with device-platform-service
protocols and compatibility tend to be
monopolistic structured. Our implications
suggested supplementing ideas for improving
ways of establishing regulations.
KEYWORDS
IoT(Internet of Things), Smart home, Connectivity,
IoT Business, Spectrum policy
1 INTRODUCTION
IoT technology has more advanced abilities and
social impact compare to smartphones. In other
words, IoT is an intelligent service from collect
and generated information, analyze and share
them by the Artificial Intelligence [1, 2].
It is obvious that the expansion of connectivity
will bring the big change beyond smartphone.
Global IT companies – Google, Cisco and etc
have launched IoT related products and services.
Korea government has been preparing for IoT
industry as a new growth engine [3]. Major
Korean enterprises have also begun to make
inroads into the smart home markets [2].
Currently, the market players are from wide
ranges of industry sectors - positioned as a
different domain of the value chain, launching
smart home services with the purpose of
sustaining their market dominance. Thus, this
can work as entry barrier for others introducing
IoT services. The tendency as explained above
directly effects on service connectivity – full
scaled IoT environment, will eventually change
the value chain structure [4]. Moreover, IoT
connectivity may raise several key issues
similarly with the past experience of smart
device industry such as IPTV and Smart TV.
Korea government has struggled with network
occupancy subject issues and management with
IPTV stakeholders and Mobile industry
regarding network neutrality, interconnection
[5]. Therefore, our research question is “what
challenges will be emerging to support IoT
industries competitiveness?”
This study is organized as follows. In chapter 2,
importance of IoT connectivity and smart home
network were reviewed. In chapter 3, we have
analyzed smart home industry in Korea. Finally
comprehensive implications from both
industrial and political perspective regarding
IoT connectivity were given in chapter 4.
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2 RESEARCH BACKGROUND
2.1 The Effects of IoT
According to the Gartner, the number of
connected devices in the Internet of Things will
increase 30 times, approximately 26 billion
devices by 2020. When Kevin Ashton first used
term ‘IoT’, definition is focusing on utilization
of RFID and sensors throughout the daily
activities. Since then, the notion of IoT has
been constantly changing according to the
development of technologies. Nowadays, IoT
means advanced connectivity of anything such
as devices, systems, and service and people at
any time in anyplace [1, 2, 3].
As growing the number of connected device
and related industry, IoT is one of the most
hyped technology trends in recent years. IoT
technologies have significant impact on not
only ICT business but also other converged
industry. Jeong et al.(2013) examined economic
effects of IoT industry in Korea through the
Input-output Analysis [6]. As a result, the
economic effect of IoT industry on production
inducement is over 400 million dollars; effect
on value-added inducement is over 300 million
dollars during 2013 and 2017 in Korea
domestic industry. According to the
GSMA(2012), connected devices will make
revenue in a global business as much as 4.5
trillion dollars by 2020 through facilitating new
business models, and improving existing
services [7]. This impact is caused by extension
of the connectivity with everything. This is the
reason why IoT connectivity issues have been
studied in different domains as common
research interest [4]. As illustrated in Figure.1,
IoT connectivity issues have been discussed a
lot with various perspectives such as devices,
sensors, infrastructures and services [8].
2.2 IoT Connectivity
IoT connectivity issues are studied a lot in
technical perspective including the evaluating
network technologies, testing IoT device and
Figure 1. The perspective of IoT Connectivity
modified from M. Skilton. [8]
studies related to IoT platform. In the connected
environment, it is very important to make any
devices connect all the time with the most
efficient connection methods. Accordingly,
IoT connectivity technology studies are tend to
focus on finding way to interconnect any
product in the physical world with the virtual
world through the any network [9]. So this
issue has been studied a lot in interconnected
real network systems regarding finding
methods to improving network efficiency and
related wireless sensor networks [10]. Also
connectivity issue can be found in existing
studies regarding analyzing IoT architecture
and technologies. According to M. Abomhara
et al.(2014), IoT supporting technologies
concept are mainly categorized as following: 1)
identification technologies 2) networks and
communication technologies 3) software and
hardware technologies [9].
Architecture is basically consists of 4 layers
including contents layer, service layers,
network layers, device layers [11]. IoT has a
more complicated architecture because of
increasing connected device and its different
range of networks. M2M architecture is almost
similar to IoT. Including various range network
protocol and platform [4]. And this architecture
identified three main IoT technical domains
which are device, connectivity and application
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Figure 2. Roles in an IoT ecosystem [13]
service domain. Studies on IoT architecture
have something in common that connectivity
domain were emphasized. The key architecture
components of IoT are focusing to support all
connected environment. Research approach on
the IoT connectivity according to this
architecture tends to focus on technology-
centric issues. However, nowadays IoT agenda
has interests on not only the technology
augmentation but also creating an additional
value for other industry [2]. In this context, IoT
connectivity studies with social science
perspective are needed at the moment.
The ecological approach is useful to understand
comprehensive industry structure and to find
out critical issues from interaction among
participants [12]. Several studies on IoT value
chain and ecosystem have been made and it is
focus on deriving IoT business boundary and
analyzing business model. Compare to studies
regarding ICT convergence industry value
chain which are identifying industry based on
C-P-N-D(Contents, Platform, Network, Device)
concept, IoT ecosystem studies identified
various entity and roles of player related to
connectivity. This approach to IoT industry will
be improve to understand issues regarding
political issues, value chain and business model
in the various industry level. According to
Mazhelis, O. et al.(2012)[13], core of IoT
ecosystem should be explained interconnection
of things. Figure 2 is the map of IoT ecosystem
and key players [13].
The key player’s roles in the figure 3 are
mainly organized as followings: 1) service
delivery dimension, 2) connectivity 3) device.
The roles of player are also categorized with the
concept of lifecycle which is consisting of
development, distribution, provisioning,
assurance, and billing. One of the critical point
of this ecosystem framework is that they are
explains the importance of the political
perspective. The legislative, regulatory,
standardization roles are regarded as essential
roles on IoT ecosystem in this study.
Korean learned from the experiences in smart
phone industry as well as IPTV which is
convergence of broadcasting and
telecommunication industry. Because of the
technological advancements, the boundaries
between broadcasting and telecommunications
are confused. This industrial change makes it
difficult to handle the conflict with the current
regulatory. The current regulation framework
cannot be applied on the new connected
environment with IoT technology. It is
expected to cause players in the IoT industry
feel as if they are being subjected to an
inconsistent regulatory system. Consequently, it
is very important to tackle the relevant issues of
a regulatory framework from the beginning of
making business ecosystem.
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Figure 3. Various industries related to smart home (Home IoT) [17]
2.3 Smart Home with IoT
The IoT Technologies can be converged in a
variety of industry and Smart home is
considered as one of the most promising IoT
application domains [3].Naturally, smart home
became the center of interest for both scholars
and global leading companies. Google has
acquired Nest Labs, smart home appliances
start-up, for 3.2 billion dollar in 2014. Samsung
electronics also announced the plan to achieve a
leading position in emerging businesses such as
smart home industry on IoT platform. They
continuously released the innovative home
appliance at the CES tradeshow and have
entered into IoT platform business for smart
home [14]. The Smart home concept has been
studied for the last decades with different name
such as home network, ubiquitous home and
digital home [4]. Smart home can be defined as
a residence that use an advanced ICT
technology to promote their convenience,
security, entertainment and communication
through the home network within the home and
connections to the world [15, 16]. In other
words, Smart home is a phenomenon that ICT
technology is applied to daily life at home and
related area. The range of smart home field is
expanding rapidly as IoT technologies are
converged [16]. Many researches on smart
home defined smart home and identified related
business with broad perspective. As shown in
Figure 3, smart home encompasses a variety of
industry and applications including
telecommunications, home appliance, education,
security and healthcare etc [17]. To support this
various application service under connected
environment, wired and wireless home
networking technologies considered as core and
basic domain in the smart home era. Because
smart home environment is subject to a
connected everything in an intelligent way.
KCA(Korea Consumer Agency) also place a
stress upon ubiquitous home network system
which is convenient to manage home
environment. According to KCA, stable wired
and wireless network system must be
established first to make smart living space.
Common points in recent definitions of smart
home are as follows: 1) electric home
appliances and service are getting smart. 2) IoT
function and concept is applied 3) network
environment supports IoT business 4) devices
are making information and exchange them
itself. 5) Collected information makes various
services and identifies consumer demand.
Although smart home industry is not matured
enough to promote innovative IoT application
service, it is expected to market growth through
diffusion of the communication function
equipped device. Figure 4 shows the changes of
connected device market structure according to
communication module [18]. When completely
new product with connectivity is emerging in
the smart home industry, the largest new market
creation effect will be expected.
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Figure 4. Connected device market structure: Traditional vs. New market [18]
Table 1 Main Components of the Smart Home Ecosystem [17]
ECOSYSTEM
ELEMENTS SUB ELEMENTS
Network Wired network VDSL, FTTH, GiGA
Wireless network LTE, nationwide broadband LTE-Advanced
Smart Device Home appliance White goods
New smart device Energy, security, health related device
IoT Standards B2B Business area All smart devices
Platform Home Hub(device/cloud) HomeKit, Nest, TV, Set-top etc.
Operation O/S iOS, Android, Tizen
Display Control device TV, PC, smart phone, tablet
Content Home appliance contents Home appliance remote control, Intelligent control
New smart device content Energy, security, health related service
This is similar to the phenomenon in the mobile
ecosystem which is mobile technology get
applied in the various industries. As previously
mentioned, study with ecological perspective is
useful to identify the industrial issues and to
find business strategy. Table 1 is ecosystem
framework for smart home under the IoT
environment that it is difference in including
IoT standards and platform. Device and content
level in C-P-N-D value chain was divided in
more detail. Device level is specified into home
appliances and smart device and content level is
also identified new type of content service. This
changed ecosystem has effects on key player’s
business strategy regarding smart home device
development, network connection methods and
service diversification based on generated data
from connected things. All these issues are
directly related to connectivity issues and
collaboration with other key players same as in
smart phone ecosystem. For this reason, smart
home industry in IoT paradigm is expecting to
be a battle ground as secondary mobile warfare
[19]. The strategic movements among the key
operators from various fields are expected to
secure a leading position in the smart home
ecosystem with their competiveness.
3 CASE ANALYSIS OF KOREA
3.1 Research Methodology
We have analyzed Korea smart home network
industry in order to draw issues on smart home
connectivity with IoT convergence. Because
smart home and IoT embodiment in Korea is
rapidly actualizing yet it is still ongoing
activities that can be seen as a contemporary
phenomenon [20].
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Table 2. Interviewed Experts Domain
EXPERT’S DOMAIN POSITION
Smart Home(including Home
Network), IoT, M2M, Smart Plug
and Smart Grid service, Building
Constructor, Device/Appliance
manufacturer
Professors, CEOs,
Managers,
Executive director,
Consultants
Note: Interviewed 10 experts (+10 years of work
experience)
Thus, we have conducted in-depth interviews as
a data gathering method with smart home and
IoT related industry experts from August 18th
to
27th
in 2014. As a result, total 10 experts with
work experiences of over 10 years in this
domain have been selected for face-to-face in-
depth interviews.
3.2 The Market Movements of the Smart
Home Industry in Korea
Korean Smart Home industry is rapidly
converging with the IoT sector by introducing
products that are compatible with smart home
services. In this study, we have categorized into
two groups that can be described as visible
presence of the current market movements –
home appliances and newly commercializing
products(See Table 3) based on in-depth
interview.
3.2.1 Home appliances market
Home appliances market in Korea consists with
various local firms but the market size of smart
home products has been majorly led by
Samsung and LG for the past few years.
Overall market trend including minor
products(eg. rice cooker and etc.) are tend to
introduce various features of smart control with
the purpose of occupying market dominance.
Firstly, for the case of general home appliance
manufacturers are introducing smart products
that connect manufacturer’s platform by Wi-Fi
Table 3. Visible Presence of the Smart Home Market
HOME APPLIANCES NEWLY
COMMERCIALIZING
Digital TV, Refrigerator,
Washing machine,
Vacuum cleaner washer,
Microwave
Black box, Smart Meters,
Digital sensors & Alarms,
Secondly, Samsung electronics’ home
appliances are embedding smart applications
features for the new products and supplying an
external device(dongle) for legacy system [21].
Currently, Samsung SDS, which is a subsidiary
of Samsung group providing information
technology services, is staring business on
smart homenet application in android and iOS
connecting with their wallpad – existing home
network system installed in residents or
Raemian apartments(Samsung C&T)[22].
Lastly, LG is introducing technology named by
ThinQ and homechat, focusing on realizing
Artificial Intelligence service for automated
home appliance voice control. The aim of this
technology is to support their appliances to be
controlled over the smartphones as well as
automated diagnosis and upgrade firmware,
save electricity, smart management by Wi-Fi
and ThinQ.
The two companies are based on their home
appliances communicating with smartphones
but soon will shift into smart TV for an overall
control box.
Thus, characteristics of the home appliance
sector can be described as follows.
Home appliances manufactures are
expanding inherent industry sector towards
own service platform based on the strength
of product distribution.
Samsung and LG are planning to expand
full-scale of the smart home infrastructure
for the coming IoT service dominance.
Smart Home application and different brand
of appliances are not compatible.
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Figure 5. Visible presence of the Smart Home Players Modified from [17, 23]
3.2.2 Newly commercializing product market
Newly commercializing products that we have
categorized are sensors and devices, can be
connect with the smart home environment -
CCTV, energy saving and monitoring for
lighting, thermostats, home security, u-health,
home hub and etc. However, currently there are
no distinctively dominant products or service
providers in the market. That is these
categorized products and services may be
individual yet relates with large number of
stakeholders across the industries. Therefore, it
has been a time consuming progress for the
standardization or unification to collaborate
with another for providing services. Current
market movements within this sector tend to be
supporting more than one standard formats
rather than unifying service formats by single
consortium. Although the market is in initial
stage, there are visible presences of potential
players mutually competing for the platform
dominance - telecommunication operators, IT
firms, home appliance vendors(See Figure 5).
Firstly, Korean telecommunication operators
are focusing on dominating platform. For the
case of SKTelecom, has recently announced
business plan smart home. They are targeting to
compete with Samsung and LG in home
appliance sector by collaborating with other
local home appliances firms(See Table 4). SKT
has picked up problems of mutual compatibility
between manufacturers and products [24, 25].
Thus, SKT is aiming to release various smart
home products with high market share and
provide connectivity by their wired and
wireless services. However, as a
telecommunication company, SKT has to
charge service rates to manufacturers or users
that there was an announcement for plan yet no
specific rate is opened.
On the other hand, the case of LG telecom is
collaborating with affiliated companies. Unlike
Samsung, LG has a telecom company that
makes their strategy different. Samsung is
focusing on developing standards while LG is
planning to collaborate with others to fulfill
better features of LG’s consumer products.
Table 4. Consortium of SKT and the Local Firms [25]
PRODUCTS MANUFACTURERS
Boiler/
Heater
KDNavien 1st market share of
boiler
DSceltic Condensing boiler
Door Lock Irevo 1st position in the
market
Home
Appliances
CLK corp Carrier, Air
conditioning
Winix corp Dehumidifier
Monueual Robot vacuum cleaner
Yujin Robot Robot vacuum cleaner
Lighting
GE Lighting Global lighting
company
Kumho
Electric
Local lighting
company
AP IPTime 1st position in Wi-Fi
AP
Gas Circuit
breaker Time Valve
Timer type gas circuit
breaker
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That is LG doesn’t have intention to develop
own smart hub device to avoid conflict with
other telecom operators [26]. But in the same
time, LG U+ adopted Z-Wave for the next
home network protocol differentiate with others.
SKT is planning to shift LTE smartphone users
to SKT smart home network rather than
enabling Zigbee or Bluetooth [27]. Therefore,
presently telecom companies are in the initial
progress to see the market consumptions and
they are preparing for brief business model.
Thus, various wireless protocols cannot be
coexist in the market due to customer’s cost
benefit. Universal connection across the
products and networks should be waited until
the dominant de facto protocol appears.
Secondly, IT platform in smart home service
act as a passage between devices and contents.
Like other countries, Korean OS platform has
not been widely used as Apple or Google’s.
With the smart home service platform,
currently Samsung and LG are looking into TV
for embed and diffuse as own platform(see
Table 5). Samsung has embedded Tizen 3.0 in
smartTV that can be compatible with android
OS and contents for wearable devices. LG is
planning to use smartphones or mobile devices
as the platform rather than TV. Field experts
are seeing this strategy from status of webOS
that it needs more time compare to Tizen [28].
On the other hand, there are ongoing progress
by the ones who has been owned market
dominance in traditional industries such as
KDN(Korea Electric Power Data Network Co.,
Ltd.) for smart grid, major security companies
and etc. These firms’ approach towards smart
home is very similar with telecom companies,
Table 5. Samsung and LG’s platform
SAMSUNG LG
Control method Voice Text
Communication
standards OIC AllJoyn
TV OS Tizen 3.0 Web OS
Smart home Hub M&A Smart things Collaborate with
Telecom company
but the service network and business model is
very independent. Thus, characteristics of the
newly commercializing product market sector
can be described as follows.
Players in this area are from wide range of
industry sectors - manufacturers, technology
developers, telecommunication providers,
service providers and energy suppliers.
The market is currently in initial progress
that there is no visible dominant product or
service.
Most of the commercialized products(final
products yet close to test the market) are
based on Wi-Fi protocols.
4 IMPLICATIONS
4.1 Industrial Implication for Connectivity
The framework was drawn through the
literature review and experts interview that
reflect key player’s originality and their market
positioning [4, 17, 18, 30].
Firstly, the most critical implication in the
industrial perspective is identifying the
stakeholder’s connectivity position. In order to
make connectivity more substantial, some
experts have argued that stakeholders should
understand their diversity and make an effort to
define exact market position in smart home
market. In other words, connectivity issues
begin from market positioning and that is
directly related to connectivity solutions. We
divided smart home market into two groups
based on the device characteristics. First part is
home appliance market which is traditionally
dominated by global leading company such as
Samsung electronics and LG electronics.
Second part is newly commercializing product
market involved many companies in making
new type of smart home service. This category
is related to original competiveness and to roles
of player in smart home ecosystem. If business
operators defined their market position
considering competiveness, device life cycle
and service level, then they should try to find
out connectivity position.
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Figure 6. Conceptual Framework for IoT Connectivity Strategy
Competition among key players around
connectivity can be occurred every connectivity
level regarding communication network,
platform, device standard. For Korea smart
home ecosystem, some experts emphasized that
the basic connectivity with wired and wireless
internet access will be the first and the foremost
in the beginning stage of smart home ecosystem
with IoT. Connectivity related to devices
standard and platform is following after. Past
experience in mobile ecosystem shows that
when data traffic increasing rapidly, network
operators has lost their revenue base and
uncertainty of return on investment in network
infrastructure is expected. It has significant
impact on destroying virtuous cycle of mobile
ecosystem and this phenomenon eventually
causes the frequency issues and the decline
competitiveness of connectivity [29]. Therefore,
to make a successful connectivity strategy in
smart home era, key players should understand
their connectivity position and keep favorable
relationship with network operator.
Second important industrial implication is
related to providing smart home service level.
According to the evolving smart home service
level, connectivity issues regarding capabilities
of supporting network, data exchange and
industry boundaries are different.
M. Porter et al.(2014) has explained about
transforming competition with the capabilities
of smart connected products which are four
areas as shown in figure 6: monitoring, control,
optimization, and autonomy [30]. The evolution
of service in smart home means encouraging
innovative business model and redefining
industry boundaries through connecting
everything based on connectivity. The
relationship between service operators will be
very different depends on the service level
positioning. For example, if entrepreneur aims
at doing business within his origin industries,
connectivity capability with other partner is
may not the main concern. However, if he plans
to expand industry boundaries and to have
leading position in convergence industry by
providing comprehensive service, it is expected
that integrated systems and collaboration
strategies will be the essential.
To sum up, through this conceptual framework,
regulatory issues in connectivity can be
identified. In all connected industry,
stakeholders from different industry can be
located in same connectivity position. So,
setting the balanced regulation system is crucial
with understanding of connectivity issues in
business perspective.
4.2 Political Implications on Spectrum Issues
For the next IoT era, connectivity of the smart
home network needs to be accessed freely for
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users and the stakeholders in the value chain.
Currently, Korea is using a very large number
of wireless communication devices for 2.4GHz
band - ISM for wireless LAN such as wireless
home phones, Bluetooth devices. This means
when IoT with personal preference services are
provided as a full-scale, it is expected shortage
of frequency bandwidth [31]. Currently, most
of the Korean smart home services and
products are based on Wi-Fi protocols rather
than low powered protocols. Therefore, scarcity
of the spectrum resources needs to take
complementary measures to promote the smart
home industry. One of the complementary
measures that may supplement the current
spectrum issues can be an open access. Based
on the expert interview, we draw political
implications on realizing open access as 1)
deregulation on unlicensed band and spectrum
sharing and 2) considerations of market based
spectrum management.
Firstly, value of utilizing unlicensed band can
be very high, estimated within U.S.A is
assumed to be over 140 billion US dollars by
annually [32]. Unlicensed band may meet the
requirements of smart home services - a low
powered and flexibility for universal
connectivity. Korean government is also
actively looking forward to support the
spectrum sharing technology and
DSA(Dynamic Spectrum Access) for the
industrial competiveness. However,
government’s execution on allocating new band
or deregulation often challenges practical issues
as well as time consuming for considering
stakeholders position. Thus, it can be a key that
government promptly produces additional
measure to redress all the related possible
drawbacks of the spectrum policy to go along
with the market changes.
Secondly, commercial band manager and
secondary spectrum market needs to be
examined thoroughly in short period time for
ensuring more efficient spectrum usage [33].
This is because realistically it is difficult to
secure a new frequency bands that have mostly
assigned below 3GHz(suitable for mobile
communication). Also, 700MHz bandwidth that
is digital dividend by digitization of terrestrial
broadcasting is having conflicts for its usage
with various sectorial stakeholders’ demands.
5 CONCLUSION
This paper has explored a smart home market
of Korea to assess barriers in implementing
market based IoT industry, focusing on
connectivity issues. Full-scales of IoT service
demands by interconnecting various devices
and information may raise new policy issues. In
the case of new technology based industry
where in formative period, it is important for
the government to policy making and settle
potential conflicts of business players. From the
past experience of IPTV and smart TV, Korean
government has been investigating various
ways to promote flexible and innovative IoT
ecosystem.
In this paper, implications have drawn based on
the literature reviews and in-depth interview to
explore current status of the Korean smart
home industry. As a result, some of the barriers
found in the case analysis were political issues
on fostering spectrum managements by private
sectors. And connectivity with device-platform-
service protocols and compatibility tend to be
monopolistic structured. Thus, the established
firms from the traditional industries are
beginning to strategize to sustain privilege by
expanding their infrastructure for occupying
smart home serviced platform in advance. That
is home appliance manufacturers are framing a
service platform based on their devices, or
telecom operator tend to frame a service
platform affiliating with other smart devices
based on their wired and wireless platform.
Thus, smart devices with enhanced inter-device
communication is important to the firms for
leading smart systems with high degrees of
intelligence and autonomy, facilitating the rapid
IoT application deployment and creating new
services [18]. The suggested barriers and
implications assumed to supplement idea for
improving ways of establishing regulations.
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Moreover, conditions for optimum allocation of
industry positioning between private and public
sectors of IoT will need to be examined for
further study.
ACKNOWLEDGEMENT
"This research was supported by the
MSIP(Ministry of Science, ICT and Future
Planning), Korea, under the ITRC(Information
Technology Research Center) support program
(NIPA-2014-H0301-14-1042) supervised by
the NIPA(National IT Industry Promotion
Agency)"
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