This is a paper I wrote last week for my ECON class. I received a 97%, because I did not put graphs or diagrams, and didn’t number pages. (Note, we weren’t told to either.)
The Internet of Things
ECON103 – Economics in the Information Age
April 26, 2015
The internet of things has become a standard in current business practices, as there are a plethora of uses for its technology in this day and age, even though many aspects could create monopolistic competition in several industries. In a nutshell, the internet of things refers to technology and how it permeates through most everything in one’s day to day endeavors, from the car you drive to the software that allows a machine to dispense your morning coffee and beyond (Chui, Loffler, and Roberts 2010).
Some of this technology runs the machines, telling them what to do and how to do it. The Keurig, for example, has software installed inside that allows you to not only program what time the machine turns on, but also the temperature it heats the water to, as well as the amount of water that gets heated. Almost everything has a technology similar that’s built into its operations.
Another way technology works in the internet of things is by tracking. Tracking works in several different ways. One example is the GPS that’s built into your phone. If you download the app called Foursquare, and choose to give the app the correct permissions, it will send you an alert when you are near certain locations. These are programmed in, so the app can market to those who may be nearby a certain restaurant, explaining a special, and hopefully luring their business away from somewhere else.
This is only one of many ways technology tracking can be used, and many feel this is a slippery slope. Privacy is a large concern, because not only can an app tell you of something nearby that you might be interested in, but it can also be used to find people. Many are worried that this can be used in a bad way, such as by someone stalking another person and possibly doing harm, or tracking their movements and discovering other potentially harmful information.
While marketing a product or location can be of great use to businesses, they also have other concerns where technology is involved. Many companies, such as John Deere and General Motors, spend a lot of time and money developing the software that goes into their machines. It’s understandable that these companies would like to alleviate any concerns over piracy, or another company stealing their programming. In order to protect themselves, these companies are utilizing a law put into place in 1998 called the Digital Millennium Copyright Act (DMCA) (Weins, 2015).
In 1998, the digital world only had a hint of what it would later become. The law is vague, and companies such as John Deere and General Motors are using it to state that the people who purchase their machines, really only purchase a license to use the machine for its lifetime, since software runs throughout the machines’ infrastructure. Many consumers of these products are understandably upset, because they paid good money for something they cannot (by law) fix themselves. Instead of buying new and possibly better working John Deere tractors, farmers are purchasing older used equipment, as they have more leeway to make necessary repairs as needed. Therefore, the copyright office will go back in July and clarify the DMCA (Weins, 2015).
Without this clarification to the DMCA, companies can easily become monopolistic in competition. If General Motors owns all proprietary rights to the software in all its vehicles, then only auto repair centers that General Motors has licensed to work on the cars may do so. Mechanics will become specialized, and this will drive up prices for auto repairs on vehicles that are normally more affordable to drive.
Nissan is a great example of a company that holds its software license away from other mechanics and shops. My Nissan Versa had an electronic signature in the ignition key. If the key did not “talk” to the car properly, the car did not start, so a new key had to be specially programmed. As Nissan had made their software proprietary, I had to go to the dealership for a new key. Without competition, Nissan was able to charge far more (and they did) for this key than others would normally cost. They have since released their programming for keys, but they do keep other licenses in house.
Limiting software and the like by licensing it in this manner does more than just create monopolistic competition. It can tarnish the company’s reputation depending on how they use it. This also can limit future possibilities and improvements. Prices tend to be higher than they should be, as a company’s competition is negligible. On the plus side, by using the internet of things, a company can market to their chosen demographic, without wasting money and effort on those of whom the message would be lost. In the end, the technology world is still the modern Wild West, and until laws are more specific and lines are drawn, companies can do most anything they want with their software, even without informing those very consumers they are trying to attract.
Chui, M., Loffler, M., Roberts, R. (2010, March). Insights & Publications. Retrieved April 26, 2015 from Mckinsey & Company: http://www.mckinsey.com/insights/high_tech_telecoms_internet/the_internet_of_things
Weins, K. (2015, April 21). We Can’t Let John Deere Destroy the Very Idea of Ownership. Retrieved April 26, 2015 from Wired Magazine: http://www.wired.com/2015/04/dmca-ownership-john-deere/