Tech Giants’ Solution to Device Interoperability Outruns Regulation

The smart-home tech market is booming. In 2020, it was almost a 100-billion industry — and it’s expected that in 2028 it will increase its value by a factor of five. Two of the main frictions that prevent this market from developing faster are the lack of compatibility among different devices and the setup complexity.

Additionally, in a recent report on the Internet of Things, the European Commission found that interoperability among smart devices, voice assistants and consumer IoT services was seen as the second-most important barrier to increased competition in this sector.

Read more: EU Report on Internet of Things Highlights Potential Competition Concerns

But this is about to change. The main market actors — including Apple, Google, Amazon, and Samsung — are working on a new standard that aims to eliminate those frictions. This standard is “Matter,” which will act as a common language spoken by most new and many older smart-home products.

Matter may be welcomed by regulators, who are trying to design new laws to prevent Big Tech from locking consumers into their ecosystems and to foster interoperability among different platforms. This market-led initiative may achieve some of the goals laid down in the proposed regulations.

Michele Turner, senior director of Google smart-home ecosystem, nicely summarized the strategy behind Matter: “We all really recognized that unless we solved some foundational problems that were hitting all of us across the industry, this industry just wasn’t going to grow.” The most important benefits Matter will bring are that developers will not have to update software for each platform to add a feature to its smart-home product, and people using different mobile devices within a home will not have compatibility issues when, for instance, one person turns the lights on with Siri, and then another wants to turn them off with Alexa or Google assistant. As the Wall Street Journal puts it, “You could buy any gadget you wanted and connect it to whichever app you prefer. You’ll be able to control it with the voice assistant of your choice, or even use multiple assistants and apps inside your home.” Besides, Matter will ease the setup of devices. It is expected that just scanning a QR code will be enough to add a device to one’s network.

Standard setting can be controversial, however. Its virtues are many. Several of the products we currently use — or have used — were possible thanks to standards that regulated an industry. Think of access to the internet, cable TV, electric power, etc. In these cases, standard setting gives more depth to markets and increases competition among different providers. If I am not satisfied with my internet provider, I may switch to a competitor. This is because there is a common technology that permits several companies to be within the reach of potential consumers. Without standard setting, firms would compete for the market, intending to become the industry leader. In this case, standard setting avoids the lock-in problem consumers would face when dealing with a sole provider.

But competitors may also get together to exclude part of their competition. For example, a handful of manufacturers may choose a standard that is incompatible with a competitor’s technology.  In this case, the standard would allow consumers to choose between the cartel members’ different products — however, the number of players would be reduced, and this would have an impact on the prices consumers pay as well as a potential impact on innovation. Besides, when a standard is protected by a patent, the patent-holder may charge exorbitant fees to license the patent, some of which would be passed onto the consumers. To avoid these risks, regulators usually require standards to be public and/or to license the patent under fair reasonable, and non-discriminatory (FRAND) terms.

Google has been facing several antitrust suits in recent years for different reasons. Facebook is facing a battle over its acquisitions, and the no-poach case against Apple, Google, Intel and Adobe is still fresh in people’s memory. However, Matter is a royalty-free standard adopted by virtually all the main industry actors. When analyzing a standard setting, one should imagine a parallel world in which the market would operate without it. In this case, it is sensible to expect large benefits to both producers and consumers that would not be possible without Matter.

Read also: PriceRunner Hauls Google to Swedish Court Seeking $2.4B in Damages

Sign up here for daily updates on the legal, policy and regulatory issues shaping the future of the connected economy.