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3 big risks with 'smart homes'

Rick Newman
Senior Columnist
Daily Ticker
3 big risks with 'smart homes'

Since my house was built in 1928, I’m eager to do anything I can to drag it into the digital age. So when I needed to replace the electric garage-door opener recently, I was delighted to discover a “smart” model I could install and control from my iPhone, to monitor my kids’ ins and outs and lock up from afar if somebody left the door open.

Just one question stood between me and this Jetsonian magic: What if I got hacked? After looking into it, I’ve changed my mind about sentient gizmos and scotched my plans for digitized home improvements. The smart home might be trendy, but the dumb home, for now, seems a lot more secure.

Tech heavyweights such as Apple (AAPL) and Google (GOOG, GOOGL) are beginning to invest heavily in smart-home technology, with Apple due to announce a major push next week and Google digesting Nest, the maker of futuristic thermostats and smoke detectors it bought in February for $3.2 billion. With some parts of the digital economy cooling off, gadgets that monitor or control your home’s locks, lights, appliances, climate and entertainment choices look like the next booming business. Juniper Research estimates the global smart-home market will grow from $33 billion last year to $72 billion by 2018.

But you may want to let others be the guinea pigs. Here are three problems with smart-home technology:

Hackers. Earlier this year, a Cincinnati couple, Adam and Heather Schreck, were horrified when they heard a hacker shouting, "Wake up, baby!" at their 10-month old daughter, through a Foscam monitoring device they had set up in the baby’s room. The hacker could even swivel the camera back and forth to follow whatever interested him. Like many smart-home gizmos, the Schreck’s baby monitor was synced with their home Wifi network, so the parents could check on the child over the Internet via a smartphone or remote computer. Once a device is connected to your home network, however, it’s vulnerable to any hacker able to get in. Your smartphone is another vulnerability, since anyone who can crack into that might be able to access smart-home apps a threat that surfaced recently in Australia, where several Apple customers had their mobile devices frozen, with hackers demanding a $100 ransom to unlock them.

Such incidents appear rare so far, but hackers seem sure to target smart homes as the technology proliferates. “These devices turn out to be pretty insecure,” says Daniel Crowley of Trustwave, a Chicago-based information security firm. “There are certain devices I would not put in my home.” Crowley and two other researchers tested eight smart-home devices last year, including centralized smart-home controllers from Belkin and Insteon; a Linksys media adapter; a component of the Sonos audio system and even the Lixil smart toilet. To varying degrees, they were able to hack into each gizmo. “Poor security measures,” they wrote, “suggest that introducing network-controlled embedded devices into one’s home or business puts one at risk for theft or damage.”

Most firms identified in Crowley’s report made upgrades to improve the security of their devices. Yet the tenacity and sophistication of some hackers keeps them a step ahead of the best security measures. During the past 12 months, hackers have accessed personal information on half the adult U.S. population. Prominent intrusions at firms such as Target (TGT) and eBay (EBAY) have occurred despite corporate anti-fraud resources far greater than any homeowner could muster.

When hackers access consumers' personal data held by a bank or retailer, the company typically handles the problem. Responsibility is murkier for technology that resides in the home. Earlier this year, the Federal Trade Commission gave a wrist-slap to Trendnet, which makes home-monitoring cameras hackers were able to take control of in several instances. But the FTC didn’t hold the company liable for any consumer losses. And in some cases, hackers could gain access to a smart-home network to fiddle with locks or steal private information without ever revealing themselves or how they got in. Smart-home security features ought to improve over time, and firms such as Lookout are working on beefier security measures that could be standardized among device markers. But for now, security seems like an afterthought at many firms hustling to get gadgets out while interest is growing. 

Clutter. Remember how you once ended up with half a dozen remote controls for your living-room entertainment system? Smart-home gizmos are heading the same way, since new devices are coming out piecemeal, as various manufacturers focus on different elements of your home. Chamberlain, which built my garage door opener, offers smart controls for garage doors and household lights, but not for thermostats, doors or windows. Dropcam makes popular surveillance cameras and is coming out with window monitors soon, but it doesn’t handle garage doors, lights or locks. Netflix (NFLX) could play an important role in the smart home, since it’s already sitting right there on thousands of smart TVs, waiting for the command to warm the house or start the dishwasher. It’s just not into those lines of business yet.

Many companies would like to become your all-in-one smart-home provider, allowing them to cash in on every corner of the house, plus vacuum up loads of valuable personal data about their customers. A complete smart-home ecosystem may be what Apple is poised to propose. But Juniper and other analysts foresee a fractious market, with many providers, for the foreseeable future. That means a bunch of different apps on your smartphone, several passwords to keep track of, and a lot of software to update on a regular basis (which is one way to at least make sure you have the latest security patches).

A single point of failure. As the smartphone becomes increasingly useful, it also becomes a mission-critical piece of equipment in our everyday lives: Lose your phone or get it stolen, and routine things might suddenly stop working. For the most digitized citizens, it would be like losing your wallet, keys, computer and phone all at once.

You can always use your old-fashioned metal key to open your front door, the clicker in your car to access the garage, and the knob on the thermostat to turn the heat on. But the idea of smart technology is to reduce complexity and improve functionality, not to over-complicate and create new vulnerabilities. At some point, the smart home will probably become as commonplace as TV and air-conditioning. But the dumb home will serve a purpose for a while longer.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.