As the first blog in this series on smart homes explored, smart home technology brings the potential for increased connectivity, efficiency, and convenience, but also imposes new cybersecurity and privacy risks for users. Today, a lack of standardization across smart home devices and manufacturers introduces security risks and complicates the sector for users. However, the industry has taken a significant step in proposing a new communications and cybersecurity standard known as Matter. Matter aims to address many of the issues that exist today, such as interoperability or the ability for devices to exchange information with one another. This blog will explore why Matter was created as well as the potential pitfalls and changes it could bring when it launches later this year. Further, it will describe why policymakers should continue to evaluate the need for potential regulation and the standard’s impact on consumers and the market.
Fragmentation and Interoperability
For a variety of reasons, the smart home industry currently has poor device and system interoperability. These conditions have created an environment of fragmentation, limiting the adoption and growth of the technology by driving potential buyers away and worsening the user experience for those who do purchase smart devices. With negative impacts on both buyers and sellers, the issue of fragmentation is a substantial challenge for the industry.
A significant contributing factor to fragmentation is the many platforms, apps, and systems present in the smart home ecosystem. For example, a smart lightbulb might come with an app created by the device manufacturer to control the device but also be able to interface with platforms like Amazon Echo, Google Home, or Apple HomeKit. While the lightbulb might be able to interface with multiple platforms, the platforms themselves cannot communicate with each other. Further, platforms frequently lack control over advanced, device-specific features – like the ability to synchronize light patterns with music – which are only accessible through the manufacturer’s own app. This makes it more difficult for users to control their devices and requires the use of multiple apps and accounts. This patchwork of differing platforms, standards, and compatibility confuses consumers, forcing a complex and often uninformed choice when deciding which products to purchase.
Another major cause of fragmentation is the differing security requirements and costs for integration among each of the major platforms. For example, some platform owners have prioritized the wide adoption of devices on its platform by providing ample development resources (like subsidized development kits) and comparatively lax security requirements. By contrast, others have placed emphasis on security for their platform by mandating stricter encryption technology requiring more computational power, charging developers annual fees, and requiring the adoption of costly dedicated hardware.
The first blog in this series briefly discussed the costs associated with implementing more sophisticated encryption techniques, and the same can be said for compatibility. Necessitated by development tradeoffs and the costs associated with compatibility, many developers have opted to either support only a single smart home platform or to make their devices work only with their own proprietary control software. Given the top priority many first-time smart home customers place on price, many users are pushed towards budget devices that eschew both strong cybersecurity measures and broad compatibility in order to hit a lower price point. While many first-time smart home buyers have near-zero initial brand loyalty as they prioritize cost, the inconvenience of using multiple apps and the lengthy expected lifespan of home appliances create high switching costs that cause a lock-in effect when they go to purchase additional devices.
The Matter Standard
In late 2019, the Connectivity Standards Alliance (CSA) and 220 of its members announced the Matter smart home standard, aimed at alleviating the fragmentation and competing standards the industry faces. Matter hopes to unify the smart home industry under a single standard that allows for more seamless development and seamless user switching across providers when it launches later this year. In the future, consumers may purchase any Matter-compatible device, such as a smart lightbulb, perform a one-time setup process, and then use it freely on any platform like Echo or HomeKit. It could also operate seamlessly alongside other Matter-compatible smart lightbulbs from different manufacturers. This would mark a significant shift away from the patchwork of compatibility which exists today.
An important distinguishing factor for the standard is the broad support from nearly all key industry players. Though the smart home industry has seen previous attempts at unifying standards – like a precursor to Matter known as Zigbee – none have reached widespread adoption due to a lack of support from key industry firms and a limited range of products supporting the standard. With Matter, smart home platform manufacturers like Amazon, Apple, Google, and Samsung, as well as manufacturers like Philips, Ecobee, August, and iRobot, are all supporting the standard at launch. Industry estimates suggest that more than 5.5 billion Matter compliant smart home devices will ship by the end of the decade. If post-launch support remains strong, Matter could fundamentally reshape the industry by lowering switching costs and decreasing barriers to entry.
The implementation of Matter’s cybersecurity standards remains unclear. As the previous blog in this series discussed, the smart home standards popular today have different cybersecurity implementations, which may make defining those standards for Matter difficult. For the firms involved in the development of Matter, deciding whether to use Apple’s stricter, privacy-focused HomeKit encryption standards or Google Home’s looser, developer-friendly approach could have important implications. Beyond the security of the standard itself, this decision could also affect the level of commitment and resources put towards supporting Matter by its member companies – a critical component of Matter’s long-term success and adoption. Whether the CSA’s member organizations can successfully agree upon specifications for the standard remains to be seen.
The broad agreement on a standard among major smart home companies was a significant and perhaps surprising development for many industry observers, but the decision was likely motivated by several factors that incentivized the move, even though it would typically go against the firms’ competitive interests. For one, the expansion of the market to new buyers as a result of streamlining purchasing decisions and configuration could be projected to outweigh the loss of sales as a result of decreased switching costs from a unified standard. Additionally, the agreement could have been an effort to preempt potential government regulation of cybersecurity or interoperability. The industry-led standardization allows the involved firms to set the conditions of compatibility and security on their own terms rather than those dictated by a regulatory agency or policymakers. Here, the regulatory action (or lack of it from the government) provides critical insight into both where the industry presently sees itself and what it believes the future holds, but questions remain about the standard’s ability to address these issues.
While many industry observers have applauded Matter for its efforts to address interoperability and cybersecurity concerns, others have cautioned that the standard could have negative impacts on competition and innovation. The industry has seen rapid growth in recent years, fueled by intense competition, rapid innovation, and the entrance of new firms. If Matter introduces new development or compliance costs, new firms may be discouraged from entering the market, and larger incumbents with the resources to adhere to the standard’s requirements could expand their market share and push out smaller competitors. Critics have also expressed skepticism about the CSA’s ability to continually update the standard to accommodate new technological developments, given the rapid pace of innovation in the industry today. Whether these concerns come to fruition remains to be seen once Matter’s rollout begins.
Policy Impacts and Conclusion
As the launch of the Matter standard draws closer, key groups across the industry are closely observing impacts on competition and security. Though the industry appears on track to self-standardize and address issues including interoperability and security, the success of Matter’s launch and implementation remains to be seen. The standard could significantly impact consumer utility and reshape the market by altering the dynamics that currently dominate the industry. As the next blogs in this series will explore, Matter could also have major implications for privacy and security for the industry. With these factors in mind, policymakers should remain wary of the potential need for regulation and any impacts on consumers.
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