About a decade ago, someone in the RFID-tag community coined the “Internet of Things” phrase.  The idea is that the ultimate destiny of the Internet is to be a communication and coordination network, not primarily of people, but of devices–from appliances, to houses to cars…–talking with each other through imbedded chips.

Today, that idea is sounding less and less like science fiction.  During the June quarter, major US wireless networks reported that they hooked up more new devices (such as digital picture frames and internet-enabled TVs) than new people to their networks.  Maybe not such a surprise, given that the US is already 100% penetrated with cellphones.

Another step came last Thursday, when the FCC issued an order allowing the use of wi-fi-like devices over the “white space” frequencies that separate TV channels and are intended to prevent interference.  This is intended, in the words of the FCC press release,  to “unleash a host of new technologies” that include things like:

–home wi-fi without dead spaces,

–“super wi-fi,” that is, long-distance, wide-range wi-fi that should allow inexpensive blanket wi-fi coverage of large areas, like ports or other large distribution hubs, as well as extending wireless internet into sparsely populated locations.

This action opens the door for all sorts of “intelligent” device applications.  Devices and services–like appliances with chips in them that can coordinate their actions (adjust the heat, wake you up earlier is there’s traffic congestion…)–should in theory be available by early 2012.  IBM posted its ideas on what the Internet of Things will be on You Tube in March.

http://www.youtube.com/v/sfEbMV295Kk?fs=1&hl=en_US

There’s still a big issue to be faced , however–net neutrality.  At least some of these wi-fi networks will be built by companies.  Will these be private, or will non-affiliated service providers be entitled to offer their wares on it, even though they have not contributed to the network’s construction costs?  This is the question that GOOG and VZ raised in an oblique way in their “Legislative Framework Proposal” in early August.

To me, it sounds like GOOG and VZ are willing, even eager, to build out “super Wi-Fi” networks and offer new services on them–provided they can either deny access to other potential service providers or give them lower priority on the new systems.

This implies that the development of really revolutionary new services will depend on the FCC clarifying the ownership issue for new commercial Wi-Fi networks.

investment implications

A favorable FCC decision for GOOG and VZ on Wi-Fi network ownership would likely be a big plus for both companies.  In the absence of that, the significant winners–and the safest stock market plays, in any event–will be the chip makers that will supply demand for new-standard Wi-Fi chips.