The end of Insteon and why the smart home keeps faltering

Smart home company Insteon has shut off its servers, lost its management team, and on Thursday sent an email to customers explaining how it plans to sell any remaining assets to help pay off creditors as part of a formal dissolution of the business. It has been the most drama-filled end of a consumer IoT company to date — and also represents one of the biggest opportunities left for the Matter smart home standard going forward.

On Friday, April 15, customers started reporting that their Insteon app was down and their hubs could no longer communicate with the cloud. After reading those reports, I went online and discovered that, according to their LinkedIn bios, no one from the SmartLabs/Insteon management team was still working at the company.

Three of them had stripped the company name from their bios altogether, including Rob Lilleness, the former CEO. Lilleness founded Richmond Capital Partners, the company that invested $7.3 million in Insteon in 2017 with the idea of capitalizing on interest in smart homes. After I reached out to him on Saturday and reported the original story, he truncated his name on LinkedIn to R. Li. On the following Tuesday, he responded to my original inquiry by replying to me on LinkedIn saying, “Unfortunately, I am not involved with the company.”

By that time he also had taken his name, photo and bio off LinkedIn, appearing only as an anonymous LinkedIn member.

His statement to me was true, because as customers learned via email two days later, Insteon’s parent company SmartLabs had transferred its assets to a separate legal entity on March 22 called SmartLabs (ABC) LLC. SmartLabs ABC is a legal entity created to sell any assets and pay off the original SmartLabs’ creditors.

As part of that process, the new LLC contracted with a company to collect claims, and on April 12 issued a letter telling companies that have a claim on SmartLabs/Insteon to file them before Sept. 18, 2022.

SmartLabs ABC may have some assets to sell, including the source code that many customers would like to see made available, but the idea that Insteon will continue as a sort of going concern for anything but the most tech-savvy users is misplaced. A connected product is far more than its source code.

While a company might buy the SmartLabs code and host it, it’s unclear why a buyer would invest in paying for Amazon servers, continued updates, and the skills necessary to rebuild all of the integrations without the promise of some sort of new revenue. This also assumes that some of the more valuable integrations, such as those that link to Amazon Alexa or Google Assistant, would be approved by the larger companies.

After such a public shutdown of the Insteon service, many customers are likely to cut their losses as opposed to paying a new company to restart the service. We have offered a list of potential alternatives to keep some Insteon gear limping along. But many of those options require a level of comfort with smart home services such as Home Assistant, HomeBridge, HOOBS, or other DIY smart home tools.

Casual users of Insteon gear will likely look at ripping and replacing what they can. The good news is there’s an option on the horizon that can help. Matter, a smart home protocol championed by Google, Apple, Amazon, and Samsung (as well as hundreds of other companies in consumer IoT) is expected later this year.

The standard will create an interoperable data model for a selection of devices such as locks, lightbulbs, and HVAC equipment that will enable any Matter-certified devices to talk to them. Which means that if one Matter-certified hub stops working, a consumer can easily swap it out for a new one that can work with peripheral Matter devices.

Because the Matter standard isn’t actually here yet, this is all still theoretical. But the problem it could solve is very real. Insteon is only the latest example of a smart home company going out of business and stranding its users. We’ve also seen the death of early hubs and gear built by retailers such as Lowe’s and Staples.

We’ve also seen some connected device companies try to restart with a subscription model, as Wink did. That said, because Insteon’s technology used proprietary wireless radios to communicate among light switches, garage door openers, and other products, the loss of its service is a bit more complicated. Whereas companies such as Universal Devices have licensed the radio technology, so we could see new options that work with the stranded devices. But if a smart home is what you’re after, there are still no guarantees that anything you buy will stand the test of time.

Maybe Matter will change that. Then again, maybe it won’t.