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1 Telecom Poised for Growth in the Internet of Things

By Chris Neiger – Feb 19, 2014 at 11:00AM

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AT&T is building its partnerships and expanding its reach for the coming Internet of Things era.

The Internet of Things -- where sensors are found in almost all products and communicate data back to us -- is coming. While some of the tech is already here, AT&T's (T -0.89%) goal is stay one step ahead of it and become one of the dominant forces in this growing industry. 

Siphoning connected city data
AT&T's latest move in this direction comes with its new partnership with IBM (IBM -0.33%) to connect cities and utility companies. The new partnerships pairs analytics platforms, cloud services, security, and privacy technologies to help build more connected cities.

That all sounds good, but what does it actually mean?

AT&T says the IBM alliance will improve how cities analyze traffic and parking patterns, as well as utility usage, to assist city planning, reduce costs, and improve traffic. The two companies will do this by using video cameras, mass transit vehicle data, and utility meters to gather the information and then use IBM software to analyze it.

AT&T's role falls primarily in the wireless connections of objects, and it's been part of the company's recent strategy. 

Connecting the Internet of Things
Over the summer, AT&T announced it would open up new foundries in Texas and Georgia to research IoT initiatives. Its Texas office currently looks into machine-to-machine learning (called M2M) while its Georgia office investigates connected consumer devices, lifestyle apps, and connected home and automobiles.

The company has also built its own M2M platform for business to manage connected machines. Back in October, AT&T partnered with General Electric (GE 1.90%) to connect the company's industrial equipment to AT&T's cloud network. GE wants to connect its equipment found in trains, plans, and other systems to so that it can anticipate problems before they surface, and it's using AT&T to make it happen. The company said that its goal in partnering with AT&T is to remotely track, monitor, record, and operate its machinery from anywhere in the world.

Why it matters for AT&T
The International Data Corporation estimates that by 2020, there will be 212 billion connected devices through the Internet of Things. At the Consumer Electronics Show last month, Cisco's CEO, John Chambers, expects IoT to be a $19 trillion market. As a recent Washington Post article noted, a McKinsey report puts the economic impact of the Internet of Things between $14 trillion and $33 trillion by 2025.

AT&T's opportunity in the space is in tapping new revenue sources outside of its current mobile consumer network. Connected cars, trains, buildings, utilities, shipments, industrial equipment, etc., opens up a completely new way for AT&T to use its wireless know-how. AT&T's advantage in this space is that it's already built its own machine-to-machine platform and forged relationships with Qualcomm, GE, and IBM. The Internet of Things industry is still new and unpredictable, but AT&T is positioning itself to take advantage of its growth, and investors should take note of the company's progress.

Fool contributor Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends and Cisco Systems. The Motley Fool owns shares of, General Electric Company, International Business Machines, and Qualcomm. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

International Business Machines Stock Quote
International Business Machines
$148.67 (-0.33%) $0.49
General Electric Stock Quote
General Electric
$86.88 (1.90%) $1.62
AT&T Stock Quote
$19.02 (-0.89%) $0.17 Stock Quote
$94.13 (-1.44%) $-1.37
Cisco Systems Stock Quote
Cisco Systems
$49.70 (-0.54%) $0.27
Qualcomm Stock Quote
$125.66 (-0.91%) $-1.15

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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