Google will use self-driving cars to compete with Uber — California’s proposed regulations for self-driving cars — Z-Wave’s new security protocols

Google will use self-driving cars to compete with Uber — California’s proposed regulations for self-driving cars — Z-Wave’s new security protocols

BI Intelligence

ALPHABET’S SELF-DRIVING CAR PROJECT WILL BECOME INDEPENDENT COMPANY NEXT YEAR: Alphabet’s business plans for its ongoing self-driving car project are becoming clear: the project will spin off next year into its own business, and that business will compete directly with Uber. Rather than selling self-driving cars to consumers, Alphabet (formerly Google) is going to offer a ride-hailing service similar to Uber with its self-driving cars, Bloomberg reported.

Uber has been working hard to develop self-driving cars for its own ride-hailing service. Self-driving cars would drastically lower costs for Uber rides to the point that it would be less costly for many consumers to take Uber rides everywhere instead of owning their own car. Asset management firm ARK Invest estimated earlier this year that self-driving cars would cut the cost of Uber rides to only 25 cents per mile. Uber has even hired a number of former Google employees to help with its own self-driving car efforts.

As Uber and others pour resources into developing self-driving cars, they’re all playing catch up to Google, which has been working on self-driving cars the longest. In the last six years, cars equipped with Google’s self-driving software have driven more than one million miles on the road. That means that Google’s software has more experience handling real-world obstacles and situations on the road than any other company’s self-driving technology right now. So Google is likely closer to delivering a ride-hailing service using self-driving cars than Uber is.

Although this could be bad news for Uber, it might be even worse news for automakers. If self-driving cars make ride-hailing services like Uber as cheap as ARK Invest predicts, it could make auto sales fall off a cliff. A Barclays analyst note earlier this year predicted that ride-hailing services combined with self-driving cars could reduce US auto sales by 40% in the next 25 years.

CALIFORNIA RELEASES SELF-DRIVING CAR REGULATIONS FOR THE PUBLIC: California’s Department of Motor Vehicles released a draft of proposed regulations that would allow self-driving cars to be used by the public on the state’s roads. This makes California the first state to propose legislation that would give consumers the right to ride in self-driving cars on public roads. Tech Insider provided a rundown of the proposed rules:

• The regulations won’t allow fully autonomous cars without a steering wheel: somebody would have to sit in the driver’s seat at all times, prepared to take the wheel if necessary.
• Anyone who wants to drive a self-driving car would have to take additional training beyond what’s included in normal driver’s license exams.
• The public also won’t be able to buy a self-driving car – they’ll have to lease them from the car manufacturer.
• Self-driving cars will also go through additional screening beyond normal safety certifications. Once a car passes the additional screening, it will get a three-year permit to operate in the state. During that three-year term, the manufacturer will need to provide a monthly report on the car’s safety, usage, and performance.

California was early in allowing self-driving car tests on its roadways. Google started testing self-driving cars in Mountain View, California back in 2009. The state is clearly trying to lead the way in becoming the first to propose rules to regulate the use of self-driving cars by consumers. Other states might look to California’s rules as a blueprint for their own self-driving car regulations. However, companies currently testing their self-driving cars in California might find these rules restrictive, and could look to take their self-driving car projects elsewhere if other states create more lenient regulations.

SMART HOME MESH NETWORK Z-WAVE IMPLEMENTS NEW SECURITY FRAMEWORK: Research has shown over the past year that many smart home devices are vulnerable to common cyber attacks. Z-Wave, one of the more popular mesh networks used to connect different smart home devices, is looking to relieve some of these security concerns with a set of new security features in its latest software development kit.

The security protections Z-Wave is issuing will help prevent hackers from compromising IoT devices to infiltrate home networks and steal consumers’ data. Those protections include strong encryption for any data sent over a Z-Wave network and secure exchange protocols that prevent hackers from stealing the encryption keys that protect that data. Without such protections, a hacker could infiltrate the home Wi-Fi network via the hub to steal data such as the homeowner’s financial credentials.

Z-Wave is already installed on more than 50 million smart home devices throughout the world including smart lights, smart thermostats, smart plugs, and hubs. Z-Wave is the second oldest mesh network designed specifically to serve the smart home besides Zigbee, it’s biggest competitor. Earlier this year, security researchers found a vulnerability in Zigbee’s communication protocols that allowed them to steal the encryption keys used to protect data sent over Zigbee networks. Z-Wave could be angling to promote its security as a competitive advantage over Zigbee, which has gained far wider acceptance so far than Z-Wave has.

 

How self-driving cars will disrupt auto parts suppliers — Can self-driving cars make ethical choices? — Jasper integrates with IBM

How self-driving cars will disrupt auto parts suppliers — Can self-driving cars make ethical choices? — Jasper integrates with IBM

BI Intelligence

SELF-DRIVING CARS WILL UPEND THE AUTOMOTIVE SUPPLY CHAIN: With the rise of self-driving cars on the horizon, traditional auto parts manufacturers will face increasing competition from new suppliers and startups that specialize in components for self-driving cars. This new group of suppliers is already helping companies like Tesla and Google build self-driving vehicles. Here are some of these new suppliers featured in a recent article by re/code:

• Canada-based Magna International sells technology and components for driver assistance features like lane departure warning systems. Those driver assistance features are considered precursors for self-driving cars, and require some of the same hardware components like sensors and radar. Magna has a full vehicle-assembly subsidiary, so it could potentially assemble a self-driving car for Google, Apple, Uber, or other companies looking to develop self-driving cars.
• Velodyne has been producing LIDAR systems for a decade. LIDAR systems help self-driving cars measure the distance between themselves and other objects, like other cars or pedestrians on the road. Velodyne provides parts for the LIDAR systems in Google’s self-driving cars, and produces three different LIDAR systems: an $80,000 unit for trucks, a $32,000 unit, and a recently released “Puck” unit for $8,000. The company expects the two cheaper units will be in high demand as adoption of self-driving cars grows.
• Israel-based Mobileye provides a high-tech camera that can serve as an alternative to LIDAR systems. Tesla uses its cameras, and GM is testing them with new models of the Chevy Volt. The camera is part of a full software and hardware package that provides a 360-degree view around the vehicle and costs less than $1,000.
• Nvidia is the leading supplier of chips that provide processing power for cars right now. Tesla and Google are already using its chips, which can process streaming data from up to 12 cameras, as well as from LIDAR systems and sensors. Nvidia’s automotive unit grew annual sales by 85% in its last fiscal year, although it faces growing competition from other chips suppliers like Qualcomm and Samsung looking to jump on the huge market opportunity in computing chips for vehicles.

AUTONOMOUS CARS AND ETHICAL CHOICES: One of the significant challenges still remaining to the adoption of fully autonomous vehicles is how they will make choices to minimize damage in an accident, a recent MIT Technology Review article said. For instance, if something goes wrong and an autonomous car is about to hit a group of pedestrians, should it swerve out of the way, even if it could hit a wall and kill the car’s occupant? In other words, should the car minimize loss of life by avoiding the pedestrians, or risk the life of the occupant?

This question might seem like a faraway, abstract exercise, but with several automakers lining up to launch self-driving cars over the next few years, it will soon become a real dilemma for automakers and their customers. The question also goes to the heart of how much the public really trusts autonomous vehicles: will they trust them even in life-threatening situations?

It turns out they don’t. Researchers at the Toulouse School of Economics in France asked hundreds of people whether they think an autonomous car should swerve out of the way of 10 pedestrians even if it guaranteed that the car would crash and kill its owner. In general, the respondents said that the car should be programmed to minimize the death toll, even if it killed the occupant. However, the majority of the respondents said they wouldn’t drive themselves in a car programmed to do that.

This is why many industry experts expect that even though self-driving cars will hit the market relatively soon, it will be many years before steering wheels are removed from them. Consumers will want the ability to take control of the car in a dire situation. If consumers want to do that, than automakers will likely require that they keep their hands on the steering wheel when the car is self-driving to avoid liability in the case of an accident, just as Tesla is doing with its Autopilot mode.

JASPER INTEGRATES WITH IBM’S IOT FOUNDATION: Jasper, an IoT platform provider, announced this week that it is integrating its Control Center with IBM’s IoT Foundation platform. This will tie together the Control Center’s device management and task automation capabilities with IBM’s application development, data management, and analytics tools.

This combination will help enterprises bring services for their IoT devices to market much faster by combining all of these capabilities into a single solution. For example, an enterprise could manage a fleet of vehicles using the integrated solution, automating alerts and notifications for predictive maintenance while gathering and analyzing vehicles’ speed and location data to optimize routes and cut fuel costs.

Jasper has already integrated its platform with several other major enterprise IT providers including SAP, Microsoft, and Salesforce to offer device management and task automation capabilities for IoT devices through those providers’ platforms as well. Adding Jasper’s capabilities helps these providers offer a one-stop shop for IoT device, network, and data management and analytics.

Top 5 barriers to IoT adoption — Tesla Model S crosses the US in Autopilot – How the IoT can help emergency responders

Top 5 barriers to IoT adoption — Tesla Model S crosses the US in Autopilot – How the IoT can help emergency responders

BI Intelligence

TOP BARRIERS TO ADOPTION OF THE IoT: The Internet Society, which advocates for public policy and standards that help develop the internet, released a white paper last week detailing the top five barriers to the adoption of the IoT.

• The most significant obstacle to adoption is security, and the paper points out that security vulnerabilities that leave consumers open to attacks will wear down consumers’ trust in the IoT and the internet over time. Studies and hacks by security researchers have demonstrated that IoT devices currently on the market including smart home devices, wearables, and connected cars are rife with vulnerabilities that make them easy targets for hackers. The paper correctly placed the blame for these vulnerabilities at the feet of device manufacturers that often cut corners in regards to security to reduce development costs and get their products to market as soon as possible.
• Privacy is another issue that can damage consumers’ trust in the IoT. Consumers will likely consider data from IoT devices — like health data from medical devices — as very personal, and will want that data to remain private between themselves and their service provider. Additionally, devices like IP cameras or voice-controlled devices could monitor consumers and their conversations without them even knowing it. Legal and regulatory frameworks need to be developed that ensure companies are transparent about what data they collect from IoT devices and how that data is shared with third parties.
• Interoperability is the ability for different devices from different manufacturers to communicate and share data with each other, and it is an imperative if individuals and organizations are to gain the full benefits of their connected devices. The white paper cited a McKinsey study from earlier this year that said that a lack of interoperability would cost trillions of dollars in the potential overall economic impact of the IoT. A number of different companies and organizations are developing different open and proprietary standards that can deliver interoperability between different IoT devices, but these standards have limited adoption right now. Until these standards are more widely tested in the real world and prove themselves technically sound and scalable, this issue will continue to plague the development of the IoT.
• Legal and regulatory barriers still exist to the adoption of the IoT. A good example of this is the lack of standardized regulations around self-driving cars that is inhibiting the development of that technology, as it is unclear who would be liable if a self-driving car were involved in a crash. Data privacy regulations also differ widely across different geographies, making it impossible in some cases to transport certain types of data outside of some jurisdictions. That could make enterprises hesitant to deploy IoT technologies in such jurisdictions if they don’t have the infrastructure in place to locally store and analyze data from their IoT devices.
• The IoT has uniquely urgent applications in the developing world, but economic and regulatory barriers could limit IoT adoption in developing markets. For example, connected cars and connected road infrastructure could help overcrowded cities reduce traffic congestion and air pollution, and smart grids could help cut down on power outages. However, many of these developing economies lack the resources needed to invest in IoT technologies to gain these benefits. Additionally, many developing countries need to improve their internet infrastructure before they can connect billions of new IoT devices.

BI Intelligence agrees that these barriers represent the chief obstacles to the development of the IoT. However, we expect that the enormous economic potential of the IoT will push governments, enterprises, and consumers to deploy billions of connected over the next five years despite these obstacles.

THREE DRIVERS CROSS THE UNITED STATES IN A TESLA ON AUTOPILOT: A trio of drivers set a record for the fastest cross-country trip in an electric vehicle on Wednesday. They drove a Tesla Model S from Los Angeles to New York in 57 hours and 48 minutes, and they drove 96% of the trip in Autopilot, according to WIRED.

The drivers said that they used the Autopilot mode at speeds around 90 miles per hour, which almost led to a couple of accidents. There were a few instances where the car almost spun out and went off the road taking highway bends at such high speeds.

One of the drivers admitted that they set the car’s speed too high, making it difficult for the Autopilot to compensate during turns. However, the drivers also pointed out that the car shouldn’t be allowed to go so high over the speed limit on Autopilot either. The Autopilot software can adjust speed to follow other vehicles at a safe distance, but apparently doesn’t prevent the car from pushing well past speed limits.

Tesla’s Autopilot software beeps at the driver if the driver doesn’t touch the steering wheel every few seconds, and drivers can quickly take back control of the vehicle by turning the steering wheel slightly with both hands. Tesla has also told its customers that they need to keep their hands on the wheel while the car is in Autopilot in an effort to avoid any liability if a Tesla vehicle crashes while in Autopilot mode.

Regulations are still hazy around liability and self-driving cars, with different states setting their own regulations. If an accident occurs, Tesla could still be on the hook, and could have to recall its cars equipped with Autopilot, one legal expert told WIRED. This liability issue is the reason that many automakers that are also working on self-driving cars haven’t released their self-driving technology yet.

HOW EMERGENCY RESPONDERS CAN USE THE IoT: Gemalto announced a new cloud-based platform this week that collects data from IoT devices like sensors and IP cameras to generate insights for law enforcement and emergency responders. Through a mobile app, the platform can provide first responders with alerts about the location and timing of an incident, and continuously update them with more data as they rush to respond.
The platform was developed in cooperation with Intrado, which provides technology solutions for emergency responders, Prodapt, an IT services company, and Commnet, a networking provider that helps connect the sensors and devices back to Gemalto’s platform.

The solution is already being used in parks, where sensor data can provide real-time information on weather conditions and visitors’ location within the park. Visitors can report emergencies to park rangers through SMS texts, and IP cameras can be used to find visitors who are in an emergency or detect trespassers in the park. If someone gets lost or loses their child, geo-fencing technology can be used to help locate them. Additionally, the platform can send real-time updates to visitors about developing emergencies such as a wildfire or approaching storm.

The companies involved will look for more emergency response use cases beyond parks, and as cities begin to connect their infrastructure with sensors and IP cameras, it’s easy to imagine this type of system finding favor with emergency responders in smart cities.

Verizon launches IoT platform — Connected cars could cost consumers’ privacy — AIG offers insurance for enterprise drones

Verizon launches IoT platform — Connected cars could cost consumers’ privacy — AIG offers insurance for enterprise drones

BI Intelligence

VERIZON LAUNCHES IoT PLATFORM: Verizon became the latest major tech company to launch an IoT platform for managing IoT devices and building IoT applications on Wednesday, according to a press release. IBM, Amazon Web Services, Salesforce, SAP, and Microsoft have all launched IoT platforms as well.

Verizon’s platform, called ThingSpace, provides tools for developers to create, test, and deploy applications for IoT devices. It also provides tools for managing IoT devices and the data they generate, as well as Verizon’s own internal analytics engine to help gain insights from that data. Verizon will hold a hackathon in December in Boston where it will make the platform’s APIs available to developers.

Along with the platform, Verizon announced initiatives to lower the cost of providing connectivity for IoT devices through its 4G LTE network:

• Verizon introduced a new chipset that connects IoT devices to Verizon’s 4G LTE network that costs half as much as traditional 4G chipsets used in smartphones and tablets. It also said that it would be rolling out more 4G chipsets for IoT devices in 2016 that will be even cheaper. This will help lower the cost of IoT devices that use 4G LTE connectivity.
• Verizon also announced a new network core for IoT devices leveraging its LTE infrastructure. This will help Verizon offer an alternative network that will be launched in the first quarter of 2016 for connecting low-power IoT devices like sensors. Normally, it isn’t worth paying for a 4G data plan to connect such devices because they transmit very small amounts of data at intermittent periods. The new network that Verizon is building will be designed to handle those smaller data transmissions at a lower cost to Verizon and its customers, creating a more cost-effective network.

Verizon has already made nearly $500 million in revenues from its IoT and telematics businesses already this year, according to their latest earnings report. The new platform and cheaper networking offerings should help Verizon grow those businesses over time.

THE PRIVACY IMPLICATIONS OF VEHICLE-TO-VEHICLE COMMUNICATIONS: Vehicle-to-vehicle (V2V) communications can help cars on the road relay their precise location to each other to help avoid collisions, but the technology could also make it easier for governments, enterprises, and hackers to track connected vehicles’ exact location. Researchers from two European universities recently demonstrated how they could track cars using V2V communications protocols with radio modules and antennas as the cars traveled around a college campus, according to WIRED. With more radio modules and antennas, someone could track all of the vehicles traveling around a small city at the cost of less than half a million dollars, the researchers said.

V2V communications could prevent up to 81% of car accidents, according to a study by the National Highway Traffic and Safety Administration (NHTSA) that was cited by WIRED. The NHTSA announced last year that it is looking into mandating V2V communications in all new vehicles by 2017. BI Intelligence estimates that 22 million connected cars will be shipped in 2017 that could be covered by that mandate if it’s enacted.

V2V communications will also be one of the foundational technologies for the development of self-driving cars, allowing self-driving vehicles to communicate their position and speed on the road to prevent collisions.

Privacy remains one of the biggest barriers to IoT adoption in general, and this example shows how that applies to connected vehicles. Although V2V technology offers clear safety benefits, it could also open the door for governments, enterprises, or even criminals to track cars’ locations. Other IoT devices like sensors, wearables, connected cameras, and voice-controlled smart home devices could be used to constantly monitor consumers’ movements and conversations without their consent or knowledge. That potential for constant monitoring and eavesdropping could turn consumers off to IoT technologies unless regulations and penalties are put in place that prevent the collection and sharing of data from these devices without users’ consent.

Graph: Estimated Global Connected Car Shipments

AIG OFFERS INSURANCE FOR DRONES: AIG is now offering insurance to enterprises that use drones for commercial purposes, according to Fortune. The insurance policies cover physical damage to the drones if they’re involved in a collision, and covers liability expenses resulting from a collision. It also offers optional coverage for damage caused by hacked drones.

Right now the policies will cover drones that weigh up to five pounds and have a wingspan of three feet or less. AIG is covering drones used for aerial photography and other commercial done uses, as well as drones used by government organizations to perform tasks like search and rescue missions in natural disasters.

Very few insurers currently offer coverage for drones because there is little historical data about drone collisions and accidents to help determine the cost of premiums for drone coverage. This could be a barrier for enterprise drone adoption, as enterprises will likely be hesitant to fly large numbers of drones without insurance coverage to protect them from the potential costs of an accident.

Google Loon’s first internet-coverage deal — Mobile dominates Facebook growth — Samsung earnings disappoint

Google Loon’s first internet-coverage deal — Mobile dominates Facebook growth — Samsung earnings disappoint

BI Intelligence 

GOOGLE LOON INKS FIRST LARGE-SCALE DEAL: Sri Lanka will have affordable widespread internet coverage as early as March 2016 thanks to Google’s Project Loon, according to a tweet by Information and Communication Technology Agency’s Muhunthan Canagey. The deal, the first for Project Loon, was completed on July 27, 2015. The balloons are expected to start launching in the country in the next few months.

Google plans to launch 13 balloons equipped with internet broadcasting capabilities to cover airspace over Sri Lanka, a report on phys.org stated. The balloons will provide the entire country with 3G broadband, which is especially scarce in rural areas where mobile broadband providers have struggled to build needed infrastructure. Each of these balloons, or “floating cell towers in the sky,” as GoogleX Project Leader Mike Cassidy put it, is now capable of staying in the air for up to 6 months at a time and beaming internet access to a region roughly the size of Rhode Island.

In Sri Lanka, specifically, network coverage is highly prevalent in cities, however it is scarce in rural regions, where a majority of the population still reside.

• There were just over 606,000 fixed internet connections in the country at the end of 2013, according to the latest stats published by the Board of Investment (BOI) of Sri Lanka.
• In addition, there are five mobile internet companies that provide data coverage to 2.8 million of the 22 million total mobile subscribers in the country. This brings the percentage of mobile users with internet-capable connections to a mere 13%.

Google is not the only company working towards worldwide internet coverage. Facebook is providing internet access in 17 countries through drones, satellites, and lasers as a part of their Internet.org initiative. And OneWeb, partnered with Airbus, has recently stated that they are on route to building a global communications system through satellites, which will provide internet access worldwide by 2019.

While there is a humanitarian aspect to providing internet coverage in underserved regions, these programs also give Google, Facebook, and telecom vendors an opportunity to monetize formerly unconnected mobile phone users through mobile ads and fees from data plans for select services.

MOBILE CONTINUES TO DOMINATE FACEBOOK’S GROWTH: Facebook attributed both its ad revenue and user growth to its increasing mobile presence, in the company’s second quarter earnings report. The social media giant tallied over $3.8 billion in ad revenue this quarter, 76% of which came from mobile ads. A year ago, mobile ad revenue accounted for 62% of total ad revenue. Mobile ad revenue grew to over $2.9 billion, up from $2.4 billion last quarter and rising 74% year-over-year (YoY). Marketers are flocking to mobile ad spots as a larger share of users access the site through mobile devices.

Here are some other key points from the quarterly earnings call:

• Facebook’s monthly active users (MAU) reached 1.49 billion, up from 1.44 billion last quarter, a 13% YoY increase. These users also access the site frequently, as 65% of MAU visit the platform daily.
• A vast majority of Facebook’s users access the platform through mobile devices. Mobile users made up 88% of MAU, growing 23% YoY. Mobile-only users rose 64% YoY.
• Facebook will continue to build up its video ad business. Auto-play and in-feed video ads will drive Facebook’s video ad growth. The social media giant is also looking to boost its own video content through monetization schemes for content producers and through a separate video viewing portal.

Graph: Facebook Revenue

Notably, Facebook may look to build its mobile messenger properties into more robust businesses by the end of the year. MAU on Facebook Messenger and WhatsApp reached 700 million and 800 million, respectively, and are growing at a pace that will likely see each pass the 1 billion MAU mark by the end of 2015. Facebook CEO Mark Zuckerberg has previously stated that the company typically seeks to monetize their products after their user bases surpass 1 billion. Zuckerberg intimated that the company would employ a similar approach with Messenger and WhatsApp.

Facebook has spent the past several quarters growing its Facebook Messenger service in terms of both users and product offerings with the end-goal of eventually monetizing the service. Facebook has already launched peer-to-peer payments on Messenger and earlier this year announced plans to let businesses use the messaging platform to interact with consumers. Both of these moves suggest that Facebook sees Messenger as an opportunity to go after commerce revenues.

Although WhatsApp’s user base is also large and on the cusp of the 1 billion mark, it’s uncertain what approach Facebook will take to earn money off the platform. WhatsApp has so far been a basic messenger service without most of the bells and whistles of larger platforms like LINE and WeChat.

Graph: Facebook Property MAUs

SAMSUNG FALTERS: Samsung’s second-quarter earnings highlight challenges in the wake of lackluster smartphone shipments.

• Smartphone shipments for the South Korean device manufacturer dipped to 73.2 million in the quarter, down from 82.4 million in the previous quarter, according to the IDC. Samsung’s share of all smartphone shipments in the quarter was ~22%, the most recent dip in a downward trend spanning back to Q2 2014.
• Shipments growth declined -11% sequentially and -2% year-over-year (YoY). This is the second time in the company’s recent history that it experienced both sequential and YoY declines. The first was in Q4 2014, when Apple matched Samsung in smartphone shipments for the first time.

Samsung has faced difficulties in the first half of 2015 mainly due to a drop in market share in China and missteps in its own inventory planning for its newest flagship devices. Competitors like Xiaomi and Lenovo, have eaten into the mid- to low-end handset market, with their ultra affordable handsets, while Apple has begun encroaching on the high-end side, where Samsung previously enjoyed the lion’s share of the market.

Graph: Samsung Smartphone Shipments and Market Share

JUNIPER RESEARCH PROJECTS 38 BILLION DEVICES WILL BE CONNECTED BY 2020: The global number of devices connected to the internet will almost triple from 13.4 billion this year to 38.5 billion in 2020, according to new projections from Juniper Research. This estimate includes IoT devices like sensors, connected lights, connected vehicles, and smart meters, as well as PCs, smartphones, tablets, and connected TVs. Juniper’s projections are slightly higher than BI Intelligence’s forecast of 34 billion devices connected to the internet by 2020.

COMPANIES IN THE NEWS

• AT&T is requesting that phone manufacturers turn on the FM device in their phones, a report by The Verge states. The carrier has not given a reason for the request, however, it is thought that it could be receiving ad revenue or music sales through the app NextRadio, which it supports.
• Yahoo has introduced Yahoo Livetext, a messaging app which uses video (minus sound) as well as text, according to their blog. Tests have been run over the past few weeks in places like Hong Kong, Taiwan, and Ireland. It has recently been released in the US, UK, Canada, Germany, and France.
• Android Auto will be added to a majority of new model Volkswagens by 2016. The Google OS is one of a number of operating systems which are being used for the connected cars through the automaker’s App-Connect feature, which allows app integration from Android Auto, Apple’s CarPlay, and MirrorLink. Entry-level models will not be outfitted with App-Connect.

Smartwatches pose significant security risk — Fraudulent apps lost ad companies $1 billion — Connected cars driving AT&T subscriber growth

Smartwatches pose significant security risk — Fraudulent apps lost ad companies $1 billion — Connected cars driving AT&T subscriber growth

BI Intelligence

SMARTWATCH SECURITY IS NONEXISTENT: 100% of the smartwatches that had their security tested failed in a recent study conducted by HP Fortify. In the study, which was a part of a series looking at the Internet of Things, 10 of the top smartwatches were tested on a number of metrics for their ability to securely hold personal information. Here are some of the greatest security flaws found by the study:

• A lack of two-factor authentication and “lock-out” ability. In every case, access to the smartwatch through a password lacked a second step, and there was no lockout feature if the password was input incorrectly between three and five times.
• A lack of transport encryption. When personal information is transported from a smartwatch to multiple locations in the cloud, that data becomes vulnerable. More than half of the watches tested had transport encryptions that proved to be inefficient against certain hacking attacks.
• Interface vulnerability. The smartwatch can store very personal information, including weight, age, location, and birthdate. More than 30% of the watches tested showed vulnerabilities that enable hackers to easily identify this data.

The overall concern is that smartwatches are intrinsically personal devices as part of an ecosystem of mobile technology and cloud-based systems with access to very personal and sensitive data. This is a considerable risk, as the IoT continues to become a bigger part of everyday life. It should be noted that on the plus side, it was found that, for now, there are no security issues with Bluetooth, which is how many watches are connected to their mobile devices.

These security concerns pose a significant issue for smartwatch adoption in the enterprise. While a recent study found that the majority of CIOs believe that wearables like the Apple Watch and Google Glass will be used by employees in the workplace, 61% of them don’t see this adoption happening at critical mass within the next three years. The rate of adoption for wearables in the workplace is somewhat predicated on general consumer adoption; therefore, smartwatches will likely be among the first to see enterprise adoption. We recently forecast that wearable device shipments will grow 22% per year on average through 2020, from ~100 million shipments in 2015 to 235 million shipments in 2020.

Graph: When Will Wearables Become a Common Workplace Tool?

ESTIMATED $1 BILLION LOST THROUGH FRAUDULENT APPS: More than 5,000 mobile applications were found to have committed ad fraud, a recent report by Forensiq discovered. It was found that mobile advertisers could be losing 13% of their ad spend to device hijacking run through apps legally downloaded from leading app stores. Once downloaded, the apps continue to run on mobile devices, even when they’re not being used.

Here’s how they work and why this is such a huge issue for mobile marketers:

• The apps run independently of the user, mimicking real user activity and, in one day, download 2GB of data. This can also result in loss of battery life.
• The projected losses for 2015 equaled around $1 billion. This number is staggering considering the rise of programmatic advertising in 2015.
• There are such fraudulent apps are across all platforms, however, the largest numbers are in the Android Google Play store and outnumber fraudulent apps on iOS by a factor of almost three.
• As mobile ad spend continues to rise and is set to overtake desktop within the next year or so, we expect that this kind of malicious app-fraud will continue to be a problem.

Since the release of the report, the Google Play store has suspended a number of its apps suspected to be part of the fraudulent adware.

This is a big problem for advertisers. As consumers shift their time spent on digital from desktops to mobile devices, the ad dollars are following. Mobile search alone accounted for 49% of all mobile ad revenue in 2014, with the rest split between banner ads, digital video, digital audio, sponsorships, and rich-media advertising on mobile devices, according to a recent report from the IAB.

Graph: Share of Internet Advertising Revenue, By Category

AMAZON’S AWS GROWS LEAD IN CLOUD MARKET: Amazon has reported massive earnings for Q2 of 2015, a quarter in which it beat analyst expectations and saw revenue from its AWS cloud segment grow by 81% year-over-year (YoY) (see chart, below). AWS provides customers with on-demand delivery of large computing capacity, IT resources, and applications on a pay-as-you-go pricing system. Despite that AWS accounts for just 8% of the company’s revenue, Amazon CFO Brian Olsavsky stated that the segment is booming and is expected to continue its strong performance in quarters to come.

Growth in the greater cloud-provider market, including Amazon competitors IBM and Microsoft, has been ramping up in the last year and will continue to grow, according to a recent report by Synergy Research Group. YoY figures show that from the second quarter of 2013 to the second quarter of 2015, global revenue has more than doubled. The US still accounts for more than half of the global market.

Here’s an overview of where the cloud market stands now:

• Currently, the market for cloud service providers is controlled by four major vendors: AWS, Microsoft, IBM, and Google. Together they have a 54% market share as of the second quarter of 2015. The fact that these companies had a combined 46% market share at the same time last year shows that the market will likely split to have two distinct segments: large companies like IBM and Amazon taking the lion’s share, and a long tail of smaller boutique providers picking up the rest.
• Last quarter, a report put AWS’ revenue growth ahead of its four main competitors combined, and AWS holds a majority of the 29% market share. Revenue is up 81% from this time last year and 85% from first quarter this year. Forecasts have suggested more growth on the horizon.
• The big four are growing much faster than the rest of the market, which, in turn, means that not only are they increasing their lead, but also defining where the market for cloud-based services is headed in the future. The average growth rate of the other services during the second quarter is 33%, as compared with 84% for the big four. This does not necessarily mean that the market will diminish, but merely that niches must be found in order for the smaller servers to turn revenue.

Graph: Amazon AWS’s Growth and Investment

TABLETS AND CONNECTED CARS LIFT AT&T’S SUBSCRIBER ADDS: AT&T had a strong second quarter, in which the majority of its subscriber additions were not smartphones, the company announced during its earnings call last week. The No. 2 US mobile operator posted a total increase of 2.1 million wireless customers during the second quarter and an increase in revenue of 1.4% since the same quarter of last year. Unsubsidized smartphone plans have also increased, and more than three-quarters of those are on data-sharing plan packages.

• Notably, connected cars accounted for half of the 2.1 million new wireless customers during the quarter. Connected cars will continue to be a catalyst for telecom subscriber adds each quarter, as more connected cars come into the market and take up a larger share of all automobiles in use (see chart, below).
• AT&T’s Mobile Share plan, a data-sharing package, has become increasingly popular among customers. The plan allows customers to purchase a set amount of full-speed data, such as 10GB, that can be accessed on any shared device the customer chooses. The model relies on customers connecting more devices and therefore increasing their data usage; over the quarter, the mobile operator added 600,000 customers who use nonphone devices.
• U-Verse, AT&T’s fiber-optic, triple-play communications service has increased by 19% YoY. This was expected and we believe that this service should continue to surge as a way to mitigate and control loss of TV and broadband subscribers through OTT products such as Netflix and Hulu.

These trends of multi-faceted connectivity are indicative of our current mobile milieu, and should continue to drive revenue for telecoms, particularly, as 4G LTE becomes more widely accepted and utilized both locally and globally.

Furthermore, the impact from the acquisition of DirecTV, which was approved yesterday afternoon, will create more options for bundled entertainment and connectivity, which have been growing in popularity among consumers in Europe and have driven consolidation in the European markets among internet service providers, broadcasters, and mobile telecom companies for the past few years.

Graph: US – Connected Car Shipments

COMPANIES IN THE NEWS

• Apple has removed the connected thermostat by Nest from its online and retail stores and replaced it with Apple’s HomeKit compatible Ecobee 3, a Toronto-based competitor. No reason has been given for the transition, however, another Nest product, the drop camera Nest Cam, has also been removed from shelves. Nest assures its customers that this is only temporary. Nest founder Tom Fadell was formerly the Senior Vice President of the iPod division at Apple.
• Facebook officials have won the case against them by shareholders after it was alleged they concealed threats to the company’s growth before it went public in 2012. CEO Mark Zuckerberg, COO Sheryl Sandberg, Goldman Sachs Group, and JPMorgan Chase & Co. were among the defendants in the case, which upheld a dismissal ruling from February 2013.
• Square has filed for an initial public offering, according to a report from Bloomberg. The mobile payments company reportedly processed $30 billion in payments in 2014 and is looking to file an IPO under the Jumpstart Our Business Startups Act, which allows companies with less than $1 billion in revenue in secret.

Intel’s IoT growth — Google to provide free internet for public housing — Smart home appliances projections

Intel’s IoT growth — Google to provide free internet for public housing — Smart home appliances projections

BI Intelligence

INTEL’S IoT STRATEGY IS STARTING TO PAY OFF: Intel’s Q2 earnings beat Wall Street expectations with help from its burgeoning IoT group. The company reported $13.2 billion in revenues, topping expectations of $13.04 billion. The small but growing IoT group reported $559 million in revenues, up four percent from $539 million in the same quarter last year.

Intel is going through a massive business shift as offerings in new areas like data centers and the IoT start to make up lost revenue from declines in the PC market (Intel’s traditional stronghold).

Intel has invested heavily in building up its IoT group, which it created in late 2013. The company lost out on the chip market for mobile, and is determined to get in on the next big device market – the IoT.

Earlier this year Intel acquired Lantiq, a German chipmaker with patents for broadband chips that can connect devices to broadband DSL networks. Combined with Intel’s offerings for Wi-Fi and 3G/4G connectivity, the Lantiq acquisition will allow Intel to provide chips with both wired and wireless connectivity. Such chips would be perfect for routers and other gateway devices that connect IoT devices to broadband networks and to each other.

Intel can also provide auxiliary services like cloud-based analytics and security services (thanks to its ownership of McAfee) through its IoT platform, giving it more advantages in the IoT chip market. Qualcomm, which has its own IoT platform and a portfolio of chips for low-power IoT devices, is Intel’s biggest competitor in that market.

GOOGLE TO PROVIDE FREE INTERNET FOR PUBLIC HOUSING IN US: As we mentioned in our coverage yesterday, income is the biggest factor in determining internet access in the US, according to a study from the White House Council of Economic Advisors. On Wednesday, Google announced a partnership with the Obama administration to provide free internet access for public housing residents via its Google Fiber network.

Google Fiber provides high speed broadband internet and cable television for homes and businesses, but it is only available in Kansas City, Austin, and Provo, Utah. Google announced earlier this year that it would expand the service to a few other cities including Atlanta and Nashville, Tennessee.

The partnership with the White House is part of an effort by the Obama administration to provide internet access at home to poorer students to help with their school work. The initiative, called ConnectHome, aims to connect 275,000 low-income households with school-age children in 27 cities for less than $10 per month.

SHIPMENTS OF SMART HOME APPLIANCES TO REACH 223 MILLION IN 2020: A new report from IHS forecasts tremendous growth for smart home appliances. IHS projected global shipments of smart home appliances would grow at a CAGR of 134% from less than 1 million last year to 223 million in 2020. The forecast included smart washing machines, clothes dryers, dishwashers, refrigerators, room air conditioners and large cooking appliances. Including smaller appliances like smart coffee makers, robotic vacuum cleaners, rice cookers, microwaves, and air purifiers would bring the total number of smart home appliance shipments in 2020 all the way up to 700 million.

The report said that the adoption of interoperability standards would be critical to adoption. IHS predicted that consolidation in the near future would lead to two or three dominant standards by 2018, and cited the recent partnership between the Zigbee and Thread standards as an example. Such consolidation would simplify the smart home experience for users and encourage adoption of the appliances mentioned in the report.

Graph: Shipments of Smart Home Appliances

HYUNDAI AND ACCENTURE CONNECT SHIPS TO THE IoT: Shipbuilder Hyundai Heavy Industries is partnering with Accenture to deploy sensor networks to gather information on ships’ location, speed, cargo, equipment, and surrounding environment. Data from these “smart ships” will be analyzed to give ship owners real time insights on navigation, ship diagnostics, and fuel efficiency. That will help provide real time alerts to ships’ crews about possible diagnostic issues and perform predictive maintenance before issues require down time for repairs in a port.

WASTE MANAGEMENT COMPANY WANTS TO TURN NYC TRASH BINS INTO WI-FI HUBS: BigBelly, a waste management company, has applied for a grant form the New York City mayor’s office to turn public trash bins into free Wi-Fi hotspots. This kind of scheme could potentially deliver municipal Wi-Fi throughout the city, as the Wi-Fi hubs would be at street level so tall buildings wouldn’t block their signal. That kind of widely available municipal Wi-Fi network could be used to connect IoT devices for smart city use cases. For instance, sensors connected to that Wi-Fi network could gather data on foot or road traffic throughout the city to alert municipal services about congestion issues.

The Chinese smartphone market in Q3 — The impact of an AT&T/DirecTV merger — Enterprises slow to deploy IoT solutions

The Chinese smartphone market in Q3 — The impact of an AT&T/DirecTV merger — Enterprises slow to deploy IoT solutions

BI Intelligence

HIGH-END SMARTPHONES DRIVE CHINESE MARKET IN Q3: All eyes are on China after both Apple and Huawei announced their high-end smartphone sales figures for the first half of this year. Both companies’ strong performance on the high-end suggests that consumers in China are moving away from low-end smartphones. This is notable because low-end sales of smartphone products has typically been how Xiaomi and Lenovo have secured sales in the region. Earlier this year, the head of Huawei’s consumer business group Richard Yu predicted that most low-end vendors from China would disappear from the market due to saturation.

The Chinese market has been volatile recently, with a recent report from IDC suggesting that this may be the first time in six years that the country will see lower smartphone sales growth than the global market as a whole. Despite this, Apple CEO Tim Cook has singled out China as a major sales driver for Apple’s flagship devices the iPhone 6 and 6 Plus, the company’s most expensive smartphones. While China’s smartphone market overall may be stagnating, it’s potential for high-end manufacturers is still significant.

Here are some of the key figures for major mobile companies in the greater China region:

• Apple is leading in China, with a 15% share of smartphone sales in shipments, according to IDC’s first quarter data. Apple CEO Tim Cook has singled out iPhone unit growth in the Greater China region (which is inclusive of Hong Kong and Taiwan) where smartphone shipments rose by 87% from last year’s figures.
• Huawei recently reported 48.2 million smartphone sales in the first half (H1) of this year in China. This is up 39% on last year’s H1 numbers. Over the last three years, Huawei has moved from low-end smartphones into the high-end market. Global shipments of the company’s smartphones priced at $300 or more have increased by 70% in the first half of this year, according to a report by the WSJ. The fact that the company’s premium smartphone segment is growing much faster than its less expensive counterparts is an important indicator of consumer purchasing habits. Huawei’s premium smartphone sales could get a boost in the mid-term if rumors that Google wants Huawei to be the first Chinese collaborator for its Nexus smartphone comes to fruition.
• Xiaomi, which primarily makes quality low-cost smartphones, became one of the world’s most valuable tech startups late last year after raising $1.1 billion. In the first quarter of 2015, Xiaomi was in second place in China with 14% market share, according to the IDC. After seeing the quickest ascent to the top 5 ranking for smartphone manufacturers by shipment volume, it appears the company’s momentum in China may be slowing. Q2 sales of 34.7 million were less than extraordinary. And Huawei’s latest figures suggest that the company could unseat Xiaomi for the second place spot in Q3.
• Samsung’s Chinese sales numbers have been dropping steadily over the past year, with IDC figures placing the tech company’s market share at 9.7% after its shipment volumes decreased by 53% YoY. Samsung’s particularly hard pressed in the Chinese market where consumers who previously flocked to its phablet devices (smartphones with screens that measure 5 inches or greater) prior to the launch of Apple’s large iPhone 6 and 6 Plus are switching to iOS.
• Lenovo, another low-end manufacturer, is in fifth place, and noted a -22.1% Q1 year on year unit growth.

This heightened adoption of premium smartphones is reflective of a greater trend in the smartphone market. In 2014 the mid-tier smartphone category had the smallest share of all smartphone sales. The ultra-cheap and premium ends are growing at opposite sides of the spectrum as emerging markets get mobile access for the first time via cheap devices and developed markets embrace larger and more powerful smartphones.

Graph: 2014 Smartphone Sales Share by Price Tier

FCC LIKELY TO APPROVE MERGER BETWEEN AT&T AND DIRECTV – A $49 billion merger between AT&T and DirecTV has received the go-ahead from Federal Communications Commission (FCC) Chairman Tom Wheeler, and approval from the Justice Department. In approving this merger, the FCC hopes to get AT&T on board with net neutrality. Right now ISPs like AT&T are appealing the FCC’s decision that went through earlier this year.

• The merger, which has been conditionally approved by Wheeler and is expected to be approved by the FCC’s other 4 commissioners, must stay within the guidelines of the bright-lines rules of net neutrality in order to protect competition in the growing online video arena. The bright-line rules prohibit selective data throttling, blocking, and paid prioritization.
• The merger will help AT&T and DirecTV improve their consumer bases where they each have weakness. AT&T will now have the opportunity to increase their pay-TV market share. U-Verse (AT&T’s pay-TV division) has only 5.7 million subscribers, compared with DirecTV’s 20 million US users. DirecTV can leverage AT&T’s internet services to bundle with their pay-TV package. Pay-TV packages are often offered at a loss.
• AT&T will have a greater opportunity to break into the Latin American market, where DirecTV has 18 million subscribers. OTT solutions tend to be less problematic for ISPs in Latin America than they do in the US. This will also likely help AT&T compete against competitors in the mobile telecom market which are working on expanding services across North America.

One particularly notable impact of this merger is that it would create a quadruple-play service option for consumers, allowing them to purchase a bundle of services including mobile phone subscriptions, fixed-line services, internet, and pay-TV. Robust bundle options like these have been growing in popularity among consumers in Europe, and have driven consolidation in the European market among internet service providers, broadcasters, and mobile telecom companies for the past few years. Now such consolidation could be coming to the US.

ENTERPRISES AND GOVERNMENTS SLOW TO DEPLOY IoT SOLUTIONS: A new survey commissioned by Red Hat found that only 12% of enterprise and government IT organizations are in the process of rolling out IoT solutions. The survey included 565 IT decision-makers in a wide range of organizations, including small businesses, local governments, and Fortune 500 companies.

Even though few organizations represented in the survey are launching IoT projects, many of them are in different stages of experimenting with IoT technologies. The survey, taken this past spring, found that 46% of the respondents were evaluating, experimenting, or prototyping IoT solutions. Additionally, 43% of respondents said that IoT technologies are immediately important to their business.

This interest and experimentation shows that enterprises and government agencies are being cautious in launching IoT solutions. These organizations typically lag the consumer market in adoption of new technologies like the IoT because of regulatory and security concerns. We’re seeing this take place in the IoT, where consumer wearables is now the fastest-growing segment. In the long term, BI Intelligence expects the enterprise and government IoT solutions market to surpass the market for consumer solutions in both investment and number of devices.

Graph: Estimated Number of Installed IoT Devices by Sector

COMPANIES IN THE NEWS

• Facebook lost a case in New York that would protect the company from being forced to provide personal information about consumers suspected of committing Social Security fraud. The court found that Facebook must provide the photos, private messages, and other account information of 381 suspects, and that the warrants could only be challenged by the individual users themselves. Numerous internet companies, including Google and Microsoft, argued against the ruling, saying it would set a dangerous precedent for digital privacy rights.
• AT&T will be the first carrier in the US to offer Microsoft’s Surface 3 tablet, which is slated to go on sale tomorrow. The new Surface device has 4G LTE capabilities, and AT&T will be offering several promotional deals for the device.
• Google’s revamped Enterprise Edition of its Google Glass product is foldable, will be more water resistant, and boast a host of improved features like a better processor and longer battery life.

Autonomous cars and urban streets — US Senate bill targets connected car security — Enterprises lag in IoT adoption

Autonomous cars and urban streets — US Senate bill targets connected car security — Enterprises lag in IoT adoption

BI Intelligence 

UNIVERSITY OF MICHIGAN OPENS “TEST CITY” FOR AUTONOMOUS VEHICLES: MCity, a mini-city on the grounds of the University of Michigan, opened earlier this week to start testing driverless autonomous cars in an urban-like environment. The testing site has traffic laws as well as robotic pedestrians and cyclists. The autonomous cars will have to navigate those obstacles along the site’s bridges, tunnel, traffic circle, and highway with off- and on-ramps.

The testing site cost $6.5 million to build and is conveniently located close to Michigan’s major automakers like Ford and GM, both of which helped build the site. Testing autonomous cars in M City will help those automakers stay apace of new autonomous-car developers like Google, which recently started testing its self-driving cars in Austin, Texas. Previously, most of Google’s highly publicized self-driving car tests had taken place on California’s highways.

Navigating urban environments will be key to the future of autonomous cars, as global urbanization swells city populations in the coming years. Ride-hailing services like Uber could connect passengers with autonomous taxi vehicles, decreasing the number of private cars owned by individuals and improving traffic congestion on city roads. That would be a massive disruption to established automakers though: A Barclays analyst report earlier this year predicted that increasing shared use of autonomous vehicles could cut US auto sales by 40% in the next 25 years.

US SENATORS INTRODUCE BILL TO PROTECT CONNECTED CARS FROM HACKERS: US Senators Richard Blumenthal (D-CT) and Edward Markey (D-MA) introduced the Security and Privacy in Your Car Bill yesterday to protect cars from hacking threats.

The bill would require automakers to isolate critical software systems to limit access if a hacker were to infiltrate one of the car’s systems. It also requires automakers to find ways to identify and stop hacks in real time and restricts the type of data carmakers can collect from connected cars. These criteria would then be used to create a “security and privacy score” for every car model that would be displayed on cars for sale.

The bill was introduced on the same day that WIRED published a report on how two security researchers were able to wirelessly hack a Jeep driving on the road and take control of its brakes, transmission, dashboard, and steering.

The researchers discovered a vulnerability in Chrysler’s Uconnect connectivity system that enables anyone who knows the car’s IP address to gain access to the car’s systems from anywhere in the country. The researchers were able to upload code into the firmware of the chip that runs the Jeep’s infotainment system. That code allowed them to send commands to the car’s other internal systems. The researchers said they will reveal more details on the vulnerability they found at next month’s Black Hat conference.

ENTERPRISES AND GOVERNMENTS SLOW TO DEPLOY IoT SOLUTIONS: A new survey commissioned by Red Hat found that only 12% of enterprise and government IT organizations are in the process of rolling out IoT solutions. The survey included 565 IT decision-makers in a wide range of organizations, including small businesses, local governments, and Fortune 500 companies.

Even though few organizations represented in the survey are launching IoT projects, many of them are in different stages of experimenting with IoT technologies. The survey, taken this past spring, found that 46% of the respondents were evaluating, experimenting, or prototyping IoT solutions. Additionally, 43% of respondents said that IoT technologies are immediately important to their business.

This interest and experimentation shows that enterprises and government agencies are being cautious in launching IoT solutions. These organizations typically lag the consumer market in adoption of new technologies like the IoT because of regulatory and security concerns. We’re seeing this take place in the IoT, where consumer wearables is now the fastest-growing segment. In the long term, BI Intelligence expects the enterprise and government IoT solutions market to surpass the market for consumer solutions in both investment and number of devices.

Graph: Estimate Number of Installed IoT Devices By Sector

APPLE HIRES FORMER CHRYSLER EXEC: Doug Betts, a former Chrysler Group executive and 25-year veteran of the auto industry, was recently hired by Apple with an unspecified title. The hire is the latest indication in a growing pile of evidence that Apple is building a car.

A survey released last week from Nielsen and SBD asked iPhone owners how likely they would be to buy a car made by Apple. The answers weren’t very promising for Apple: 47% of the respondents said they wouldn’t likely buy an Apple car, and another 20% said they’d be “somewhat likely.” One-third of the respondents said they were at least likely to buy an Apple car. Even if interest among its loyal iPhone owners isn’t very high, Apple’s history of delivering outstanding products along could make it a threat to upend the auto market.

Graph: How likely would you be to buy a car manufactured and branded by Apple? 

THE APPLE WATCH’S APP PROBLEM: The Apple Watch is seeing much faster user adoption than smartwatches on competing platforms, and yet some companies with the most popular iOS apps are shying away from developing apps for the new device, as noted in a report from The New York Times. Facebook, Snapchat, and Google, companies whose smartphone app downloads reach 8 to 10 figures, have yet to build dedicated Apple Watch apps and may not in the near-term. These companies and others like them are abstaining from dedicating resources to building a product for the Apple Watch until more users adopt the device; this presents a problem for the watch, as consumers may be holding off on purchasing the device until more apps are available on the watch.

• Lack of a distinct use for the watch likely plays into delayed development. The Apple Watch currently acts as an extension of smartphones and fitness trackers, and has yet to prove itself as much more than a notifications screen. Despite lack of a clear use case, consumers are finding the watch valuable in many activities, and the device will likely develop a distinct use case in due time as we recently noted (see chart, below).
• The watch’s small screen size may also act as a deterrent. The Apple Watch screen is so small that functions standard for apps on a smartphone are impractical on the device.
• The watch’s reliance on the iPhone is also an issue, though one that may be remedied soon. Currently, the Apple Watch relies on the iPhone to do the processing for running apps, and then relays information from the iPhone to the Apple Watch to display. Apple is expected to launch new software this fall that will bring the watch’s processing power over to the watch itself and expand what apps and functions developers can pack into an Apple Watch app.

Apple didn’t disclose sales numbers for the Apple Watch in its Q2 2015 earnings call yesterday, but global sales of the device are estimated to be between 3 million and 5 million.

Graph: How valuable is your apple watch while _____?

Autonomous cars and urban streets — US Senate bill targets connected car security — Enterprises lag in IoT adoption

Autonomous cars and urban streets — US Senate bill targets connected car security — Enterprises lag in IoT adoption

BI Intelligence

UNIVERSITY OF MICHIGAN OPENS “TEST CITY” FOR AUTONOMOUS VEHICLES: MCity, a mini-city on the grounds of the University of Michigan, opened earlier this week to start testing driverless autonomous cars in an urban-like environment. The testing site has traffic laws as well as robotic pedestrians and cyclists. The autonomous cars will have to navigate those obstacles along the site’s bridges, tunnel, traffic circle, and highway with off- and on-ramps.

The testing site cost $6.5 million to build and is conveniently located close to Michigan’s major automakers like Ford and GM, both of which helped build the site. Testing autonomous cars in M City will help those automakers stay apace of new autonomous-car developers like Google, which recently started testing its self-driving cars in Austin, Texas. Previously, most of Google’s highly publicized self-driving car tests had taken place on California’s highways.

Navigating urban environments will be key to the future of autonomous cars, as global urbanization swells city populations in the coming years. Ride-hailing services like Uber could connect passengers with autonomous taxi vehicles, decreasing the number of private cars owned by individuals and improving traffic congestion on city roads. That would be a massive disruption to established automakers though: A Barclays analyst report earlier this year predicted that increasing shared use of autonomous vehicles could cut US auto sales by 40% in the next 25 years.

US SENATORS INTRODUCE BILL TO PROTECT CONNECTED CARS FROM HACKERS: US Senators Richard Blumenthal (D-CT) and Edward Markey (D-MA) introduced the Security and Privacy in Your Car Bill yesterday to protect cars from hacking threats.

The bill would require automakers to isolate critical software systems to limit access if a hacker were to infiltrate one of the car’s systems. It also requires automakers to find ways to identify and stop hacks in real time and restricts the type of data carmakers can collect from connected cars. These criteria would then be used to create a “security and privacy score” for every car model that would be displayed on cars for sale.

The bill was introduced on the same day that WIRED published a report on how two security researchers were able to wirelessly hack a Jeep driving on the road and take control of its brakes, transmission, dashboard, and steering.

The researchers discovered a vulnerability in Chrysler’s Uconnect connectivity system that enables anyone who knows the car’s IP address to gain access to the car’s systems from anywhere in the country. The researchers were able to upload code into the firmware of the chip that runs the Jeep’s infotainment system. That code allowed them to send commands to the car’s other internal systems. The researchers said they will reveal more details on the vulnerability they found at next month’s Black Hat conference.

ENTERPRISES AND GOVERNMENTS SLOW TO DEPLOY IoT SOLUTIONS: A new survey commissioned by Red Hat found that only 12% of enterprise and government IT organizations are in the process of rolling out IoT solutions. The survey included 565 IT decision-makers in a wide range of organizations, including small businesses, local governments, and Fortune 500 companies.

Even though few organizations represented in the survey are launching IoT projects, many of them are in different stages of experimenting with IoT technologies. The survey, taken this past spring, found that 46% of the respondents were evaluating, experimenting, or prototyping IoT solutions. Additionally, 43% of respondents said that IoT technologies are immediately important to their business.

This interest and experimentation shows that enterprises and government agencies are being cautious in launching IoT solutions. These organizations typically lag the consumer market in adoption of new technologies like the IoT because of regulatory and security concerns. We’re seeing this take place in the IoT, where consumer wearables is now the fastest-growing segment. In the long term, BI Intelligence expects the enterprise and government IoT solutions market to surpass the market for consumer solutions in both investment and number of devices.

APPLE HIRES FORMER CHRYSLER EXEC: Doug Betts, a former Chrysler Group executive and 25-year veteran of the auto industry, was recently hired by Apple with an unspecified title. The hire is the latest indication in a growing pile of evidence that Apple is building a car.

A survey released last week from Nielsen and SBD asked iPhone owners how likely they would be to buy a car made by Apple. The answers weren’t very promising for Apple: 47% of the respondents said they wouldn’t likely buy an Apple car, and another 20% said they’d be “somewhat likely.” One-third of the respondents said they were at least likely to buy an Apple car. Even if interest among its loyal iPhone owners isn’t very high, Apple’s history of delivering outstanding products along could make it a threat to upend the auto market.

THE APPLE WATCH’S APP PROBLEM: The Apple Watch is seeing much faster user adoption than smartwatches on competing platforms, and yet some companies with the most popular iOS apps are shying away from developing apps for the new device, as noted in a report from The New York Times. Facebook, Snapchat, and Google, companies whose smartphone app downloads reach 8 to 10 figures, have yet to build dedicated Apple Watch apps and may not in the near-term. These companies and others like them are abstaining from dedicating resources to building a product for the Apple Watch until more users adopt the device; this presents a problem for the watch, as consumers may be holding off on purchasing the device until more apps are available on the watch.

• Lack of a distinct use for the watch likely plays into delayed development. The Apple Watch currently acts as an extension of smartphones and fitness trackers, and has yet to prove itself as much more than a notifications screen. Despite lack of a clear use case, consumers are finding the watch valuable in many activities, and the device will likely develop a distinct use case in due time as we recently noted (see chart, below).
• The watch’s small screen size may also act as a deterrent. The Apple Watch screen is so small that functions standard for apps on a smartphone are impractical on the device.
• The watch’s reliance on the iPhone is also an issue, though one that may be remedied soon. Currently, the Apple Watch relies on the iPhone to do the processing for running apps, and then relays information from the iPhone to the Apple Watch to display. Apple is expected to launch new software this fall that will bring the watch’s processing power over to the watch itself and expand what apps and functions developers can pack into an Apple Watch app.

Apple didn’t disclose sales numbers for the Apple Watch in its Q2 2015 earnings call yesterday, but global sales of the device are estimated to be between 3 million and 5 million.