There is no doubt that the Internet of Things (IoT) will change our way of life, and inevitably the economic environment. But by how much? Antonio Rocamora, analyst in our Madrid office, presented the results of a Frontier analysis at the International Conference on Competition Law and Big Data in Valencia, Spain, today.

Our study finds investment in IoT technology increases Gross Domestic Product (GDP) significantly. A 10% increase in IoT capital – measured by the number of machine to machine (M2M) connections – increases GDP by around 0.7%. Put another way: over the next 15 years, a 10% increase in M2M connections would increase GDP in Germany by US$370 billion, and US$2.26 trillion in the USA.

The IoT is complex, comprising any number of different applications and services, so measuring its impact is tricky. We draw on data from 27 EU and OECD countries between 2012 and 2015, including information on production, capital, labour and machine-to-machine connections.

If anything, our findings might be understating the impacts. We only assess direct economic effects, but the indirect impact of IoT technology on productivity could also give a boost to growth. What’s more, our study is based on data to 2015. Things are moving fast in the world of technology – the future impact may well be more intense.

We recently published a bulletin on the topic which can be downloaded via this link.

Frontier regularly advises organisations and regulators on competition and policy issues in the telecommunications and media sector.

For more information, please contact Julia Caldano on j.caldano@frontier-economics.com, or call +34 91 343 2350.