Connectivity Issues on IoT Business - The Korean Case of Smart Home Network

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

[email protected], [email protected], [email protected]*

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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Connectivity Issues on IoT Business - The Korean Case of Smart Home Network

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