    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

                       DISRUPTER SERIES: WEARABLE DEVICES

    =======================================================================

                                    HEARING

                                   BEFORE THE

               SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 MARCH 3, 2016

                                   __________

                               Serial No. 114-125

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

                                 _________

                    U.S. GOVERNMENT PUBLISHING OFFICE

     20-248 PDF              WASHINGTON : 2016
    ____________________________________________________________________
     For sale by the Superintendent of Documents, U.S. Government Publishing Office,
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                        COMMITTEE ON ENERGY AND COMMERCE

                              FRED UPTON, Michigan
                                     Chairman

    JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
      Chairman Emeritus                    Ranking Member
    ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
    JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
    JOSEPH R. PITTS, Pennsylvania        ELIOT L. ENGEL, New York
    GREG WALDEN, Oregon                  GENE GREEN, Texas
    TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
    MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
    MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
      Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
    STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
    ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
    CATHY McMORRIS RODGERS, Washington   KATHY CASTOR, Florida
    GREGG HARPER, Mississippi            JOHN P. SARBANES, Maryland
    LEONARD LANCE, New Jersey            JERRY McNERNEY, California
    BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
    PETE OLSON, Texas                    BEN RAY LUJAN, New Mexico
    DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
    MIKE POMPEO, Kansas                  JOHN A. YARMUTH, Kentucky
    ADAM KINZINGER, Illinois             YVETTE D. CLARKE, New York
    H. MORGAN GRIFFITH, Virginia         DAVID LOEBSACK, Iowa
    GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
    BILL JOHNSON, Ohio                   JOSEPH P. KENNEDY, III,
    BILLY LONG, Missouri                 Massachusetts
    RENEE L. ELLMERS, North Carolina     TONY CARDENAS, California
    LARRY BUCSHON, Indiana
    BILL FLORES, Texas
    SUSAN W. BROOKS, Indiana
    MARKWAYNE MULLIN, Oklahoma
    RICHARD HUDSON, North Carolina
    CHRIS COLLINS, New York
    KEVIN CRAMER, North Dakota

                                     _____

               Subcommittee on Commerce, Manufacturing, and Trade

                           MICHAEL C. BURGESS, Texas
                                     Chairman
                                         JANICE D. SCHAKOWSKY, Illinois
    LEONARD LANCE, New Jersey              Ranking Member
      Vice Chairman                      YVETTE D. CLARKE, New York
    MARSHA BLACKBURN, Tennessee          JOSEPH P. KENNEDY, III,
    GREGG HARPER, Mississippi                Massachusetts
    BRETT GUTHRIE, Kentucky              TONY CARDENAS, California
    PETE OLSON, Texas                    BOBBY L. RUSH, Illinois
    MIKE POMPEO, Kansas                  G.K. BUTTERFIELD, North Carolina
    ADAM KINZINGER, Illinois             PETER WELCH, Vermont
    GUS M. BILIRAKIS, Florida            FRANK PALLONE, Jr., New Jersey (ex
    SUSAN W. BROOKS, Indiana                 officio)
    MARKWAYNE MULLIN, Oklahoma
    FRED UPTON, Michigan (ex officio)

                                      (ii)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Michael C. Burgess, a Representative in Congress from the
      State of Texas, opening statement..............................     1
        Prepared statement...........................................     3
    Hon. Frank Pallone, Jr., a Representative in Congress from the
      State of New Jersey, opening statement.........................     4
    Hon. Janice D. Schakowsky, a Representative in Congress from the
      State of Illinois, opening statement...........................     5

                                   Witnesses

    Thomas D. Bianculli, Vice President, Enterprise Technology
      Office, Zebra Technologies.....................................     6
        Prepared statement...........................................     9
        Answers to submitted questions...............................    80
    Meg Burich, Director of Commercial Development and Marketing,
      Adidas Digital Sports..........................................    16
        Prepared statement...........................................    18
        Answers to submitted questions \1\...........................    86
    Suresh Palliparambil, American Sales and Business Development
      Director, NXP..................................................    21
        Prepared statement...........................................    24
        Answers to submitted questions...............................    87
    Scott Peppet, Professor of Law, University of Colorado School of
      Law............................................................    29
        Prepared statement...........................................    32
        Answers to submitted questions \1\...........................    91
    Doug Webster, Vice President, Service Provider Marketing, Cisco..    43
        Prepared statement...........................................    45
        Answers to submitted questions...............................    92

                               Submitted Material

    Letter of March 3, 2016, from Steven K. Berry, President and
      Chief Executive Officer, Competitive Carriers Association, to
      Mr. Burgess and Ms. Schakowsky, submitted by Mr. Burgess.......    58
    Statement of Mercatus Center at George Mason University, by Adam
      Thierer, Senior Research Fellow, Technology Policy Program,
      March 3, 2016, submitted by Mr. Burgess........................    60

    ----------
    \1\ Ms. Burich and Mr. Peppet did not answer submitted questions
      for the record by the time of printing.

                       DISRUPTER SERIES: WEARABLE DEVICES

                                  ----------

                            THURSDAY, MARCH 3, 2016

                      House of Representatives,
    Subcommittee on Commerce, Manufacturing, and Trade,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 10:02 a.m., in
    room 2123, Rayburn House Office Building, Hon. Michael C.
    Burgess (chairman of the subcommittee) presiding.
        Members present: Representatives Burgess, Lance, Harper,
    Guthrie, Bilirakis, Brooks, Schakowsky, Kennedy, Welch, and
    Pallone (ex officio).
        Staff present: Leighton Brown, Deputy Press Secretary;
    Rebecca Card, Assistant Press Secretary; James Decker, Policy
    Coordinator, Commerce, Manufacturing, and Trade; Graham
    Dufault, Counsel, Commerce, Manufacturing, and Trade; Melissa
    Froelich, Counsel, Commerce, Manufacturing, and Trade; Giulia
    Giannangeli, Legislative Clerk, Commerce, Manufacturing, and
    Trade; Paul Nagle, Chief Counsel, Commerce, Manufacturing, and
    Trade; Olivia Trusty, Professional Staff Member, Commerce,
    Manufacturing, and Trade; Dylan Vorbach, Deputy Press
    Secretary; Michelle Ash, Democratic Chief Counsel, Commerce,
    Manufacturing, and Trade; Christine Brennan, Democratic Press
    Secretary; Elisa Goldman, Democratic Counsel, Commerce,
    Manufacturing, and Trade; Caroline Paris-Behr, Democratic
    Policy Analyst; Diana Rudd, Democratic Legal Fellow; and Matt
    Schumacher, Democratic Press Assistant.
        Mr. Burgess. The Subcommittee on Commerce, Manufacturing,
    and Trade will now come to order.
        I will recognize myself for 5 minutes for an opening
    statement.

    OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
                  IN CONGRESS FROM THE STATE OF TEXAS

        And I do want to welcome all of our witnesses here today
    and welcome everyone to another installment of our Disrupter
    Series hearings. Today, we will examine wearable technologies
    and how they are disrupting traditional business processes and
    transforming ways that consumers can engage in commerce.
        Last year, we held a hearing to examine the Internet of
    Things, a network of Internet-connected physical objects that
    gather information in realtime to predict circumstances,
    prevent problems, and create opportunities. That market has now
    matured, and wearable technologies have come to represent a
    growing segment within that digital ecosystem of interconnected
    devices and their applications and platforms.
        The defining characteristic of wearables is that they offer
    consumers and businesses access to realtime, highly
    personalized information through products and devices that are
    physically worn by the user. Many of us are familiar with
    fitness tracking bands on the market today. They gather
    information about an individual's physical activity, or lack
    thereof, and are intended to motivate users to improve their
    fitness, wellness, and health regimens.
        While inspiring better fitness habits is a positive use of
    wearable technology, the societal and economic benefits of
    these products extends far beyond those applications. We are
    just beginning to see the potential of wearable technology
    across multiple economic sectors and industries, such as
    energy, health care, transportation, retail, professional
    sports, manufacturing, education, and others.
        In manufacturing, for example, wearables can provide
    businesses with greater insight into the daily operations of
    their production practices, their workflows, their supply chain
    processes.
        In sports, coaches and athletic trainers can use wearables
    to better assess player recovery time and inform return-to-play
    considerations to reduce the risk of further injury. I just
    think back to my own brief high school sports career. The coach
    would know if I was dogging it realtime. He wouldn't have to
    accuse me; he would have the data.
        In the automotive sector, wearable technology can sense
    early signs of driver fatigue, prompting the wearable device or
    vehicle to send alerts or another type of warning to the
    driver.
        And in the retail industry, retailers can use wearable
    technology to customize product offerings and better meet
    consumer preferences and demand.
        The appeal of this technology is pervasive because of what
    it can offer in terms of operational efficiencies, public
    safety, improved performance, and cost savings for every
    business type and size. The potential for wearable technology
    is virtually limitless.
        Much of the excitement surrounding wearables is rooted in
    the promise to create new opportunities for economic growth,
    economic development, and job creation. Wearables create
    economic opportunities by providing insights into an
    individual's behavior and driving changes to that behavior to
    improve job performance and job execution. This can lead to
    increased productivity and efficiency, helping a business
    reduce waste and optimize resources.
        The technology also facilitates smarter decisionmaking,
    increased information-sharing, and augmented interactions
    amongst workers. The productivity gains achieved through these
    operational advances are fundamental to a stronger and more
    prosperous economy.
        As with all connected technologies, there are important
    privacy and security considerations that should be part of
    today's discussions. Unlike other connected things within the
    Internet of Things, such as connected thermostats,
    streetlights, and refrigerators, wearables are physically worn
    by users and capable of extracting highly personalized
    information about an individual's activities or whereabouts.
        In our examination of these issues, it will be important to
    understand how consumers are using these technologies and how
    they will be protected while preserving the flexibility and the
    ingenuity of the innovators that are driving this market
    forward.
        Once again, I want to thank our witnesses for taking the
    time to inform us about the applications and future potential.
        I recognize the gentleman from New Jersey, 5 minutes for an
    opening statement, please.
        [The prepared statement of Mr. Burgess follows:]

                 Prepared statement of Hon. Michael C. Burgess

        Good morning and welcome to another installment of our
    Disrupter Series hearings. Today we will examine wearable
    technologies and how they are disrupting traditional business
    processes and transforming the ways that consumers engage in
    commerce.
        Last year we held a hearing to examine the Internet of
    Things--a network of Internet-connected physical objects that
    gather information in real-time to predict circumstances,
    prevent problems, and create opportunities. As that market has
    matured, wearable technologies, or ``wearables'', have come to
    represent a growing segment within that digital ecosystem of
    connected devices, applications, and platforms. The defining
    characteristic of wearables is that they offer consumers and
    businesses access to real-time, highly personalized information
    through products and devices that are physically worn by the
    user.
        Many of us are familiar with the fitness tracking bands on
    the market today. They glean information about an individual's
    physical activity habits, and are intended to motivate users to
    improve their fitness, wellness, and health regimens. While
    inspiring better fitness habits is a positive use of wearable
    technology, the societal and economic benefits of these
    products and devices extend far beyond those applications.
        We are just beginning to see the potential of wearable
    technology across multiple economic sectors in industries such
    as energy, health care, transportation, retail, professional
    sports, manufacturing, education, and many others.
        In manufacturing, for example, wearables can provide
    businesses with greater insight into the daily operations of
    their production practices, workflows, and supply chain
    processes. In sports, coaches and athletic trainers can use
    wearables to better assess player recovery time and inform
    return-to-play considerations to reducfacebooke the risk of
    further injury. In the automotive sector, wearable technology
    can sense early signs of driver fatigue, prompting the wearable
    device or vehicle to send alerts, haptic feedback, or another
    type of warning to the driver. And, in the retail industry,
    retailers can use wearable technology to customize product
    offerings and better meet consumer preferences and demand.
        The appeal of this technology is so pervasive because of
    what it can offer in terms of operational efficiencies, public
    safety, improved performance, and cost savings for every
    business type and size. The potential for wearable technology
    is virtually limitless.
        Much of the excitement surrounding wearables is rooted in
    their promise to create new opportunities for economic growth,
    development, and job creation. Wearables create
    economicopportunities by providing insights into an
    individual's behavior and driving changes to that behavior to
    improve job performance and execution. This can lead to
    increased productivity and efficiency, helping businesses
    reduce waste, optimize resources, and enhance communications.
    The technology also facilitates smarter decision-making,
    increased information sharing, and augmented interactions among
    workers. The productivity gains achieved through these
    operational advancements are fundamental to a stronger and more
    prosperous economy.
        As with all connected technologies however there are
    important privacy and security considerations that should be a
    part of today's discussion. Unlike other connected things
    within the Internet of Things ecosystem, such as connected
    thermostats, street lights, and refrigerators, wearables are
    physically worn by users, and capable of extracting highly
    personalized information about an individual's activities. In
    our examination of these issues, it will be important to
    understand how consumers using these technologies will be
    protected while preserving the flexibility and ingenuity of
    innovators that are driving this market forward.
        I thank the witnesses for taking the time to inform us
    about the applications and future potential of wearable
    technology. I look forward to a thoughtful and engaging
    discussion.

        Mr. Burgess. I recognize the gentleman from New Jersey, 5
    minutes for an opening statement, please.

    OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
                IN CONGRESS FROM THE STATE OF NEW JERSEY

        Mr. Pallone. Thank you, Mr. Chairman.
        Today's hearing gives us an opportunity to look at a
    diverse and quickly developing field. Wearable technology, part
    of the broader Internet of Things, provides consumers with
    capabilities that would have seemed more like science fiction
    than reality only a decade ago.
        Today, you can buy a wristband that measures UV exposure,
    helping you avoid sun damage, or a sensor that sticks to skin
    and teaches you how to stretch to alleviate back pain or smart
    shoes that give you directions through buzzes to their feet.
        Researchers from WINLAB, the Wireless Information Network
    Laboratory at Rutgers University in my district, collaborated
    to design a wearable that could replace passwords for head-worn
    devices by authenticating the user by measuring the unique
    movements of the head in response to audio stimulus. WINLAB
    reports that the device can accurately tell that the right
    person is wearing it at a rate of over 95 percent through tiny
    movements of the head alone.
        Many wearables measure biometric data, giving consumers
    access to a wealth of personal information. Not long ago, if
    someone wanted to know their heart rate, quality of sleep, and
    calories burned, they would have had to be hooked up to a
    roomful of equipment. Today, they can simply put on a small
    bracelet and have all of that information at their fingertips.
        And these are amazing advancements, but with these new
    innovations come new vulnerabilities. For example, when a
    doctor measures your heart rate, that information is protected
    from unauthorized disclosure. Those privacy protections do not
    apply to the same information collected through most wearable
    devices. And there are no standards for encryption or other
    security measures to protect the data wearables collect.
        Long and complicated user terms and agreements have further
    compounded the problem. Some include clauses saying that the
    data they collect belongs to the company, not to the user. Most
    of us do not read every online user agreement word for word, so
    many wearable users are surprised when they learn that they may
    not own their own data.
        Whether by sale or by data breach, the release of personal
    information from wearables can have serious implications.
    Employers, credit agencies, and health insurers can all use the
    data collected from wearables to draw inferences that may have
    a negative effect on the user.
        As with other Internet of Things products, by building in
    security from the beginning, manufacturers of wearables can
    more effectively prevent hackers from gaining access to a
    device or the data it collects. By building in privacy,
    consumers can have confidence in these products and buy them
    knowing that highly personal information will not be shared
    without their consent.
        So I look forward to discussing the many great innovations
    in wearable technology today, but with these innovations we
    must also devote serious attention to how we can better protect
    consumers and their personal information in this space. When
    privacy and security are made a priority, both businesses and
    consumers benefit.
        I yield back, Mr. Chairman.
        Mr. Burgess. The Chair thanks the gentleman. The gentleman
    yields back.
        The Chair would inquire of the gentlelady from Illinois if
    she wishes to make an opening statement.
        Ms. Schakowsky. I have a short statement.
        Mr. Burgess. You are recognized for 5 minutes.

           OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A
         REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

        Ms. Schakowsky. Thank you, Mr. Chairman. And I really
    apologize for being late. I thank you, and I thank our panel.
        So wearable devices have taken off in the last couple of
    years. I am sure there are a lot of people in this room who are
    wearing a Fitbit or some similar device. I happen to have lost
    mine. It fell off the first week I got it, and I haven't
    replaced it.
        Companies have developed numerous applications in medical
    testing and health monitoring. For consumers, wearables mean
    convenient collection of detailed data. There is clearly great
    potential here, but as I am sure has been said before--and I
    know Chairman Pallone did--we need to make sure the consumers
    fully understand what they are getting into.
        Let's talk about health applications. When a hospital
    collects your health information, that personal data is
    protected by HIPAA. Your healthcare provider is not allowed the
    share that information with marketers or send it to your
    employers without your consent. However, those privacy
    protections don't apply to most wearable devices.
        In addition, consumers have been surprised to find that
    they don't own the data collected through their devices. Last
    year, Lark, a company that created a sleep coaching wristband,
    stopped supporting its device and the related app. Lark's
    customers lost easy access to their data. At the same time,
    Lark's privacy policy stated that it could sell this personal
    information if it is acquired or goes bankrupt.
        This matters to consumers, because some of the data they
    collect through wearable devices is very valuable. Minute-by-
    minute data from a fitness tracker can be enough to determine
    your gender, age, stress level. That is why it is vital for
    wearable device companies to adequately protect consumer
    information.
        Last year, the Federal Trade Commission issued a report
    concluding that companies making these devices must adopt
    reasonable security measures. The FTC also recommended that
    Congress enact baseline consumer privacy legislation for such
    devices. In today's hearing, I would like to delve deeper into
    these privacy concerns as we consider how today's laws must
    evolve to fit tomorrow's technology.
        Here are some basic principles that I think we should start
    from. Consumers should be able to expect that a company
    collecting their personal data is protecting this personal
    data. Consumers need to be informed what, how, and when data is
    shared. In addition, they need to know if they may lose access
    to information they have collected through a wearable device.
    Technology is developing rapidly. We need to ensure consumer
    protection keeps pace.
        With that in mind, I would like to welcome our panelists.
    Your testimony is important to informing this discussion.
        I yield back.
        Mr. Burgess. The Chair thanks the gentlelady. The
    gentlelady yields back.
        This concludes member opening statements. And the Chair
    would remind members that, pursuant to committee rules, all
    members' opening statements will be made part of the record.
        We do again want to thank our witnesses for being here, for
    taking their time to testify before the subcommittee.
        Today's witnesses will have the opportunity to give opening
    statements, followed by a round of questions from members. Our
    witness panel for today's hearing will include Mr. Thomas
    Bianculli, Vice President for Enterprise Technologies at Zebra
    Technologies--you guys got out of order--Meg Burich, Director
    of Commercial Development and Marketing for Adidas Digital
    Sports; Suresh--help me pronounce your last name.
        Mr. Palliparambil. Palliparambil.
        Mr. Burgess. Suresh, welcome to the hearing.
        Mr. Palliparambil. No problem.
        Mr. Burgess. The Director of Sales and Business Development
    for NXP; Mr. Scott Peppet, Professor of Law at the University
    of Colorado School of Law; and Mr. Doug Webster, Vice President
    for Service Provider Marketing at Cisco.
        We do appreciate you all being here with us today.
        We are in the middle of a vote on the floor, but, Mr.
    Bianculli, I think we have time if you would like to give your
    opening statement. Then we will take a brief recess and come
    back and resume.
        You are recognized for 5 minutes, please.

     STATEMENTS OF THOMAS D. BIANCULLI, VICE PRESIDENT, ENTERPRISE
    TECHNOLOGY OFFICE, ZEBRA TECHNOLOGIES; MEG BURICH, DIRECTOR OF
     COMMERCIAL DEVELOPMENT AND MARKETING, ADIDAS DIGITAL SPORTS;
     SURESH PALLIPARAMBIL, AMERICAN SALES AND BUSINESS DEVELOPMENT
     DIRECTOR, NXP; SCOTT PEPPET, PROFESSOR OF LAW, UNIVERSITY OF
       COLORADO SCHOOL OF LAW; AND DOUG WEBSTER, VICE PRESIDENT,
                   SERVICE PROVIDER MARKETING, CISCO

                    STATEMENT OF THOMAS D. BIANCULLI

        Mr. Bianculli. Thank you, Chairman Burgess, Ranking Member
    Schakowsky, and members of the subcommittee, for the
    opportunity to testify before you today.
        I am the Vice President of the Emerging Technology Office
    at Zebra Technologies Corporation in Lincolnshire, Illinois.
    With nearly $4 billion in annual revenue, Zebra is a global
    market leader in a number of advanced technologies, including
    the Internet of Things and the related area of wearable
    technology.
        While many Americans may not recognize Zebra by name, they
    come into contact with our solutions every day. For example,
    the barcode labels that are prominently featured on airline bag
    tags, express delivery packages, and pharmaceutical
    prescription bottles are often generated by a Zebra barcode
    label printer and tracked and managed by Zebra scanners, mobile
    computers, and wireless infrastructure.
        Our pioneering technology vision and trusted enterprise
    solutions, particularly our wearables that are the focus of
    today's hearing, are dedicated to helping business, Government,
    and nonprofits make smarter decisions and take smarter actions
    by providing them with realtime visibility and mission-critical
    information in an ever-more-efficient manner.
        Zebra commends the subcommittee for hosting this series of
    hearings on technological disrupters. Mr. Chairman, I will
    stress five key points.
        First, let me begin with Zebra's role in the wearable
    market. Zebra's leadership in this market derives from our
    recreation of the overall wearables product category nearly 25
    years ago. With the launch of our wrist-mounted terminal and
    ring scanner in 1992, we invented the first handheld laser
    barcode scanner, the first barcode printer, and the first WiFi-
    enabled mobile computer. We remain at the very forefront of
    breakthrough innovation as we continue to create wearables that
    go from the wrist and hand, as you see before me, to lanyards
    and heads-up computing solutions.
        Second, we commend the subcommittee for its recognition of
    the wearable category as a disrupter. Wearables earn this
    status because they empower workers with total hands-free
    mobility in a manner that also provides instant access to
    business-critical information.
        Instead of needing multiple devices that are all directed
    by hand, wearables enable new levels of productivity by
    providing employees with tools that marry natural language
    interaction with immediately available information, be it
    visual, verbal, or augmenting the user's physical reality.
        Imagine, Mr. Chairman, a simple verbal command that
    provides a worker with full access to data and subject matter
    expertise in realtime. Imagine, further, the same worker using
    another verbal command to respond back and transmit data or
    pictures to a main office, aremotely located colleague, or to
    another machine. Now imagine having that ability while
    suspended high above the ground repairing the electrical grid
    or working inside an aircraft, no hands required. Wearable
    technology makes it happen.
        Third, I would like to offer a quick look into the future.
    Awareness and acceptance of smartphone technology has grown at
    a tremendous pace and has built the foundation for wearable
    device adoption. Current technologies will continue to evolve
    and revolutionize the way people instinctively work with
    computers and intuitively interact with their virtual or
    augmented reality environments. It is not an overstatement to
    say that the possibilities of these devices are limitless.
        Over the next few years, they will get smaller with
    technological improvements in computing, analytics, power, and
    display optics. As part of this trend, we will continue to
    advance our portfolio of wearables. We are presently focused on
    developing an augmented reality wearable system for true hands-
    free application, providing a future solutions approach for
    uninterrupted workflow and opening up the possibilities of what
    realtime, eye-level information can do.
        Fourth, the economic benefits of wearables come from its
    significant impact on productivity across virtually every
    industry and economic sector. This is because visual computing
    or the ability to work hands-free while receiving eye-level
    information will drive a major paradigm shift in how we, as
    humans, directly interface with computers. Visual or hands-free
    computing will enable this kind of frictionless, uninterrupted
    workflow. Even a small increase in the efficiency of
    manufacturing or warehouse workers through wearables could
    bring a profound economic benefit to our economy.
        Fifth and finally, we urge Congress and the administration
    to take a light touch where wearable technology is concerned,
    for the same reasons that many in industry as well as in
    Congress and the administration have advocated for a light
    regulatory approach to the Internet of Things.
        The primary challenge is to allow for the rapid
    development, deployment, and subsequent advancement of
    wearables in a manner that simultaneously addresses concerns
    over data, security, and encryption. The goal is to encourage
    technologies which provide enhanced, secure, and realtime
    visibility and access to information in a way that empowers
    workers to undertake more effective and timely decisions and
    actions.
        To this end, Mr. Chairman, Zebra stands ready work with the
    subcommittee inadvancing policies which keep the United States
    at the leading edge of this exciting technology. And I again
    thank you for the opportunity to provide our views on
    wearables, and I look forward to your questions.
        [The prepared statement of Mr. Bianculli follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Burgess. The Chair thanks the gentleman.
        Because of the vote, we are going to go into recess.
        Look, I want you all to know what you are up against with
    this congressional panel. Look at his notes, all stuck together
    and handwritten. You are down there with all of these fantastic
    technological devices, and we are kind of in the Stone Age.
        But thank you for your forbearance. We are going to go
    vote. We will reassemble as soon as the last vote is over.
        Mr. Bianculli. Thank you, Chairman.
        [Recess.]
        Mr. Burgess. I thank everyone for their forbearance. The
    subcommittee will resume.
        We will resume with the testimony of Ms. Meg Burich from
    Adidas Digital Sports.

                        STATEMENT OF MEG BURICH

        Ms. Burich. Good morning, Chairman and members of the
    subcommittee. Thank you for having me.
        Mr. Burgess. If I could just ask you if your microphone is
    on?
        Ms. Burich. It is on.
        Ms. Schakowsky. Pull it a little more closer.
        Ms. Burich. Yes. OK. I am Meg Burich here on behalf of
    Adidas Digital Sports, and I am Director of Marketing and
    Commercial Development.
        Adidas Digital Sports is the business unit within Adidas
    that drives the development of wearable technology. Our team
    consists of technology experts in the fields of data science,
    experience design, industrial design, algorithm development,
    software and hardware engineering. We have centers of
    excellence located in Portland, Oregon, Chadds Ford, PA, and
    Herzogenaurach, Germany where our headquarters is.
        We have been active in the wearable space for over 15
    years, with the first commercial launch of sensor-enabled
    footwear in 2001, and the introduction of real-time coaching
    under the Adidas miCoach brand in 2008. MiCoach offers real-
    time coaching to users, enabling them to achieve their goals by
    training with heart rate, speed, and distance to run faster and
    further.
        Today, we are repositioning our wearables offering to
    address the growing opportunity for the larger population to
    benefit from this technology. All these products are enabled by
    companion software applications designed for mobile or desktop.
        I am going to go through three examples to demonstrate the
    range of applications for wearables in sports, fitness, and
    health, and the first one will be related to schools and school
    children.
        Adidas is partnering with Interactive Health Technologies
    to make fitness personal for kids in phys ed classes. Instead
    of competing with each other, kids can wear an Adidas heart
    rate monitor that uses simple color zones to guide them through
    a fitness challenge. Wearable technology gives every kid the
    chance to know the good feeling that comes from a successful
    workout.
        Next, I would like to cover the use of wearables in
    competitive and professional sports. We have a system. This is
    the jersey that athletes wear on the training field. Coaching
    software is coupled with this system, and coaches can see in
    real time what results are coming from the athletes on the
    field. So instead of just driving them to train as hard as they
    can, they are really trying to train them in a smarter way, and
    in professional sports, there is kind of a fine line between
    peak performance and injury, so you want to really have this
    data to help you tell when you are really stressing an athlete
    versus when you are coaching him to the level where he can
    perform better.
        Adidas uses in-depth experience with professional athletes
    and coaches to understand the cutting edge of performance. We
    also believe that all athletes and fitness participants deserve
    the best coaching, so we take what we learn working with the
    elite athletes, and then we translate that to smart systems for
    consumers, because consumers don't always have the option to
    hire a professional trainer. So we are making those consumer
    systems smart systems based on what we know about the cutting
    edge of coaching.
        The third use case that I am going to go into focuses on
    women, and this is kind of a pivot for us in terms of how we
    see the market and the opportunity. Today, we know that women
    are managing their own health, and they have multi-generational
    influence. They are supporting healthcare decisions of their
    families and of their parents sometimes, so they are really
    kind of that officer of health.
        These women are also the main users of fitness apps and
    devices. They are participating in digital social communities
    that help them stay engaged in their fitness routine. They may
    be going for a daily walk, getting ready for a 5K, or training
    for a marathon, but we have coaching solutions that will help
    them achieve their goal.
        We have been talking a lot to women and researching their
    needs to understand what they are looking for, and basically,
    women are saying step counting is not enough. When they have a
    step counter, they either lose it or they drop it within 3 to 6
    months. In fact, nearly 40 percent stop using it after 6
    months. So we know they are looking for insights beyond how
    many steps they took. They really want the picture of their
    whole health, and managing it in a proactive way is important
    to them, so they are looking for tips on nutrition, they are
    looking for exercise tips, they are looking for guidance for
    how much to move during the day, how much they should sleep,
    and how that connects to their whole health and wellness.
        So we know it is hard to stick to an exercise routine, and
    we are looking at how we can help women through digital
    wearables and digital experiences to stick with their exercise
    routine throughout their life, because we know that has an
    overall impact on health, disease prevention, and keeping
    people well. So we really believe that wearables is in its
    infancy, and wearables 2.0 is where we need to go, connecting
    consumers to health care and keeping them kind of on the
    wellness side. Thank you.
        [The prepared statement of Ms. Burich follows:]

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        Mr. Burgess. The Chair thanks the gentlelady, and the Chair
    now recognizes Mr.--try again, Palliparambil.
        Mr. Palliparambil. You got it.
        Mr. Burgess. Five minutes.
        Mr. Palliparambil. Thank you.
        Mr. Burgess. Plus the 1 minute it took me to pronounce your
    name.

                   STATEMENT OF SURESH PALLIPARAMBIL

        Mr. Palliparambil. Thank you. Good morning, Chairman, and
    members of the committee. Thank you for holding this important
    hearing on wearable technologies today. My name is Suresh
    Palliparambil, and I am the America's Director of Sales and
    Business Development for NXP's secure identification solutions
    business line.
        NXP helps to make today's ideas into tomorrow's exciting
    reality as the supplier of end-to-end solutions that range from
    semiconductor ICs to infrastructure components and secure
    applications.
        We are the inventor of MIFARE and the co-inventor of NFC,
    the wireless proximity technology bringing new levels of
    simplicity and security to interactions of all kinds. NXP
    powers and enriches the IoT as a high-level contributor to
    standards bodies, including the FIDO Alliance, whose work
    promises to usher in a new era of online security, making the
    need to remember complex passwords a thing of the past.
        As a proud employer of nearly 7,000 staff members in the
    U.S., NXP is committed to security leading-edge design and
    bringing products to the domestic market that have a
    substantial share of domestically built content and local value
    add to end products in which NXP plays a role.
        Our company is dedicated to leveraging all of those
    resources and partnering with America's leaders to invest in
    the country's future and safer, more convenient lives for its
    citizens. From rockets in the air, to cars on the road, and
    cards in your wallet, our innovation at NXP has been integral
    to America's past and the success it enjoys today. As an
    important legacy as that is, we at NXP are looking to the
    future in building a better, easier, and safer tomorrow with
    exciting leading-edge technologies of utmost quality.
        This is no small task. The rapid expansion of public and
    private data networks, the rise of social media, and the mass
    deployment of smart objects across the Internet of Things, IoT,
    have connected us in ways we didn't think possible two decades
    ago. They have also left us open, vulnerable, and exposed.
        To counteract these vulnerabilities, NXP is focused on,
    one, avoiding unauthorized access in public and private areas
    of the IoT, developing tamper-resistant secure element devices,
    and perfecting the end-to-end solution that power the new,
    often wearable technologies will use to improve and simplify
    health care, entertainment, transportation, and the rest of our
    everyday lives
        Online security can mean different things to different
    people, but the task of keeping data private and ensuring cyber
    safety essentially comes down to one thing, access.
        NXP has made authentication a top priority for more than 20
    years and has continually reached new levels of performance by
    making algorithms more resilient, and by increasing the
    robustness of secure elements. We are recognized as leaders in
    authentication, known for our ability to deliver trusted
    security in many of the world's most high-profile applications.
        NXP produces chips that have their own unique fingerprint
    based upon their crystalline structure, so no two chips are
    alike, preventing cloning. NXP's strength in authentication is
    closely tied to eGovernment and banking. With roughly 80
    percent market share of the electronic passport market, our
    technology is trusted by more national governments to increase
    security while reducing wait times at international borders. We
    are helping governments expand the use of electronic documents,
    and our repeated success with large-scale implementations of
    electronic IDs, public transportation, and multi-application
    cards, which combine payment, transportation, identification,
    and other services on a single card make a trusted partner to
    municipalities, transit authorities, and banking and payment
    organizations worldwide.
        NXP brings a comprehensive set of skills to each
    authentication challenge and leverage outstanding relationship
    with broad spectrum of security leaders to develop and deliver
    tailored solutions that address needs in the market. The
    evolution in wearable technology is all about enhancing users'
    lives and making everyday functions simpler and easier so we
    can concentrate on the things that matter.
        NXP creates the security, connectivity, and circuitry
    solutions that enable these wearable devices their convenient
    applications in today's society and the innovative ways they
    could be used in the future.
        Many applications for wrist-based wearables are in place
    through entertainment venues and in the healthcare industry.
    The most popular example include keyless entry, smartwatches
    for luxury cars, Disney's RFID wristband, the MagicBand, an
    all-in-one device that serves as a room key, a park ticket to
    get in line, and also the payment, too.
        There are already many existing areas where smartwatches
    could improve users' lives. Today's keyless entry for vehicles
    will probably move to a wearable platform, and in the future,
    watches will act as the key for an entire car. In fact, most
    luxury car makers already offer their own wristwatches. It is a
    great channel to help build their brand recognition.
        In the home environment, smartwatches will interact with
    communication protocols such as ZigBee and Bluetooth, allowing
    users to control the home environment. Heating, lighting, AV
    equipment and more, will all be controlled by simply making a
    gesture with an arm or using apps installed on the watch. Soon,
    the smartwatch will be the only key anyone needs, the
    technology passport that gives access and control to your
    entire life.
        NXP is working hard to simplify lives of citizens to secure
    transactions in the connected world, and we currently have the
    following tools and accomplishments in place to securely
    connect the next generation devices. We have a smart
    microcontroller platform; we have MIFARE, the world's leading
    contactless technology platform; Near Field Communications,
    which is a wireless proximity and contactless technology; and
    then high-level contributions to standards bodies, including
    the FIDO Alliance for online security.
        Thank you for the opportunity to participate in today's
    hearing. Thank you very much.
        [The prepared statement of Mr. Palliparambil follows:]

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        Mr. Burgess. The Chair thanks the gentleman. Mr. Peppet,
    Professor Peppet, you are recognized for 5 minutes for your
    opening statement, please.

                       STATEMENT OF SCOTT PEPPET

        Mr. Peppet. Chairman Burgess, Ranking Member Schakowsky,
    members of the subcommittee, I appreciate the opportunity to
    talk to you about wearables. I am a Professor of Law at the
    University of Colorado Law School in Boulder, where I work on
    markets, technology, and privacy. I should say I am also a
    member of the board of directors of Anixter International, an
    Illinois-headquartered company, so my remarks today are in my
    own capacity, and in no way represent Anixter or anyone else
        I also want to say I am involved with four entrepreneurship
    and innovation centers: one in Colorado, one at Kellogg in
    Illinois, and one at the University of Michigan, and one
    actually in Israel at a university called IDC. And in that, in
    those roles, I have worked with student teams creating
    startups, many of whom are interested in or working in the
    wearable space. So I sort of got various perspectives on this
    set of issues.
        These are exciting technologies, and I agree with my fellow
    witnesses who have said how much innovation is happening in
    this space, and I agree with all of that and just want to focus
    on three things in terms of privacy and security that I think
    deserve attention.
        The first is one that you have already mentioned, which is
    data security, and I think there are two issues in data
    security. The first is, is the device itself secure? And that
    is a technical matter. Mostly, we know from research, that many
    of these devices have not been secured in the first wave of
    consumer devices, for example, and the reason is obvious: They
    are small, they are generally designed to be relatively
    inexpensive. It is hard to pack data security measures into a
    thing with a small processor, very limited connectivity, they
    are hard to update because they don't talk to the Internet that
    frequently.
        And so it has been a challenge, and the FTC has worked with
    companies, continues to work to try to push companies in that
    space, or in the security issue, and I think we will see more
    innovation there to try to resolve some of those questions.
        The second data security issue is actually not about the
    device, it is about the data. What happens to these data once
    they are off the device, they are stored in a company's cloud
    server somewhere, and someone hacks into that server. At the
    moment, if your credit card information is stolen from Target,
    for example, as you have all heard about that example, Target
    has to say, Hey, we were hacked, and they have to notify the
    public. That is our market-based response to data security in
    this country is to say, Listen, give consumers information,
    they will then choose with their dollars or their feet whether
    they want to go back to that store.
        In all but one State, and Mr. Chairman, it is the great
    State of Texas, only Texas' data breach notification statute
    would actually apply to biometric data coming off of most of
    the wearables that we are talking about in the consumer space.
    The rest of the States really have not yet seen the risk that
    these incredibly sensitive data, as you said, pose if they were
    to be hacked, which I think is an odd and sort of unfortunate
    anomaly.
        To the extent that Congress ventures into the data breach
    notification area, that is something that it should consider.
    So that is security.
        The second thing I will talk about is use, and I will just
    give a very simple example. There are lots of different devices
    at the moment being used in hospitals that keep track of
    whether a hospital worker washes his or her hands when they use
    the restroom. What they do is they have a lanyard on, you know,
    or some kind of ID badge, and there is a device at the sink and
    it literally just says how long did they spend standing in
    front of the sink? And then if they approach a hospital bed and
    they haven't washed their hands properly, their lanyard starts
    to buzz and say, hey, wait a minute, and it records that they
    have done that, and that is not a good thing.
        That is a great idea, right? I think that is a terrific
    idea. I hope that every hospital I ever use has that, and
    employees, consumers, whoever we are talking about, need to
    know what those kinds of data are being used for. So for
    example, there might be no issue at all for a hospital or an
    employer using the data coming off a wearable for the obvious
    use that it was designed for, but I would guess that if one of
    the hospital employees discovered that their hand-washing
    habits had leaked out into data brokerages and was being used
    in credit decisions or insurance decisions or any other kind of
    decisions in the economy, they would be both surprised and
    unhappy. So the use issue is a very complicated one.
        And the last one I will say something about is consent.
    Consent is hard, particularly in the consumer space, for these
    little devices. A study that I did, I brought 20 of these very
    popular devices, I opened all the boxes, and I looked inside.
    There is almost never any privacy information. I didn't test
    Adidas', but there is almost never privacy information in the
    box. Sometimes you get the privacy information when you
    download the app that pairs with the device. Often, you are
    sent to the Web site or you have to go to Web site of the firm,
    and often, when you get there and you read their privacy
    policy, it doesn't apply to the data coming off the device. It
    applies to the use of the Web site.
        So at the moment, we are in a bit of a backward situation
    on how to give users and consumers, in particular, good
    information about these devices. Is the device information
    protected? Who owns the data? Can users go in and delete their
    data? Many have discovered that they can't, so their fitness
    data is being stored in the cloud somewhere and they say, I
    don't want to use this device anymore. They didn't just lose
    it. They affirmatively decided they don't like it anymore, and
    they say, I want to get my data back. I don't want you to have
    it anymore.
        Many companies actually will not permit that or permit
    editing of this data. And most important, who is the data being
    shared with? Can it be sold in a bankruptcy, in an acquisition,
    or just in general?
        So again, the FTC has been working with industry to try to
    come up with some guidance on those issues, but those consent
    questions are very difficult at the moment.
        I will stop there. Thank you for allowing me to testify.
        [The statement of Mr. Peppet follows:]

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        Mr. Burgess. The Chair thanks the gentleman. Mr. Webster is
    recognized for 5 minutes for your testimony, please.

                       STATEMENT OF DOUG WEBSTER

        Mr. Webster. Thank you, Mr. Chairman and members of
    subcommittee. The Internet has revolutionized the world around
    us, transforming the way we use and share data to communicate,
    to collaborate, and consume entertainment and information. Yet,
    the next wave of technology isn't about moving data from one
    place to another, it is about connecting physical objects to
    the Internet on an unprecedented scale.
        Now, increasingly, the things connected are the shirts on
    our backs, the glasses on our foreheads, the watches on our
    wrists, and the jewelry around our necks, and collectively,
    these emerging devices are referred to as wearables.
        To be sure, some wearables are mere novelties. However,
    many others, like the Fitbit or Apple watch, are improving our
    health and wellness by tracking our daily activities, and the
    most advanced wearables have the power to save lives and
    improve patient outcomes. For example, there is an FDA-approved
    heart rate monitor that provides precise information from
    cardiac patients to their physicians between visits to the
    doctor's office.
        Another device looks like a typical smartwatch, but in
    reality, it helps epileptic patients manage their stress and
    alert family members and physicians when a convulsive seizure
    happens.
        And a third, a prototype in development, is a glucose-
    monitoring contact lens that allows diabetics to monitor their
    blood sugar continuously, and the possibilities are endless
    here. I mean, virtual reality goggles that provide for
    immersive education, connected football helmets to alert the
    team physical to a possible concussion, GPS-enabled slippers to
    make sure an elderly relative is getting out of bed and doesn't
    wander off, and accessories that make mobile payments faster
    and easier.
        Now, the one feature that unites these devices is their
    wireless connectivity to the Internet. Each contains a tiny
    radio transmitter that sends data to a receiving device, such
    as a WiFi router or a smartphone, and then the data is
    transmitted over an IP network to a server or data storage
    facility.
        Now, once online, software allows you to visualize and
    analyze the data to help improve decisionmaking, whether it is
    information about your daily run, your average number of steps
    per day that gauge your fitness progress, or simply storing
    videos so you can decide whether to post it at a later date.
        Now, at Cisco, we have been monitoring the growth of
    wearables for 3 years, and it is fair to say that these devices
    are poised to take off. Here is the forecast from our most
    recent Cisco mobile visual and networking index report. By
    2020, we forecast approximately 600 million wearable devices
    globally, up from 97 million in 2015.
        Now, fewer than 15 percent of these devices are expected to
    be directly capable of transmitting on a cellular network.
    Most, instead, will use WiFi or Bluetooth to connect to the
    Internet. Now, the data generated by wearables represents a
    tiny trickle in the larger stream of mobile data, mostly
    because only a few of these devices are being used to transmit
    video.
        Traffic from wearables is forecast to account for only 1
    percent of total mobile data traffic by 2020, even as the
    amount of data generated by each device is expected to grow.
        Now, North America has a 40 percent share of global
    connections today, and it is because we are early adopters, but
    that falls to 30 percent by 2020 as Europe and Asia catch up
    with us. By 2020, there are forecasts to be over 180 million
    wearable devices in use in North America, compared to about 40
    million today, representing a 4 \1/2\-fold increase in just 5
    years.
        Now, given this growth, it is important for policymakers to
    understand the issues affecting wearables. We need to ensure
    that radio spectrum is available with the right set of rules to
    make sure these devices can connect to the network, to
    encourage policy that support investment in the service
    provider networks that are needed to transport data to the
    Internet.
        We need policies that encourage startups and small
    companies by ensuring access to venture capital to tax policies
    that support research and development, as well as encouraging
    more young people to enter careers in science, technology,
    engineering, and math, also known as STEM. And we need to
    ensure that device manufacturers and applications developers
    understand privacy and security threats and take the steps to
    protect their devices and the personal information of
    consumers.
        Here is the bottom line: Wearables represent a measurable
    component of the mobile landscape, and they are projected to
    continue to grow. They hold incredible promise to improve our
    lives. Public policies that encourage the development of this
    category should be supported so that the United States can
    continue to be a leader in this next chapter of the Internet.
        Thank you for your attention, and I look forward to
    answering your questions.
        [The statement of Mr. Webster follows:]

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        Mr. Burgess. The Chair thanks the gentleman. Thanks to all
    of our witnesses for your testimony. We will move into the
    question-and-answer portion of the hearing.
        I would begin the questioning this morning by recognizing
    Mrs. Brooks from Indiana for 5 minutes for questions.
        Mrs. Brooks. Thank you, Mr. Chairman. Thanks for holding
    this hearing. I happen to be one of those brand new users, just
    acquired a couple of weeks ago. I kind of wish I had been a
    part of this hearing before I bought this. However, I am
    excited to be part of the wearable technology consumer base,
    and, in fact, bought several of these for my parents and in-
    laws for the holidays.
        And so we often think about fitness trackers when we hear
    wearable technology, and so we are certainly learning a lot,
    and when, in preparing for this hearing, learning about
    innovations in manufacturing. In Indiana where I am from, is a
    heavy manufacturing State, one of the top manufacturing States
    in the country.
        And so, Mr. Bianculli--I am not sure I caught----
        Mr. Bianculli. Bianculli, yes.
        Mrs. Brooks [continuing]. Bianculli, what kind of cost
    savings--can you talk a little bit more about wearables with
    respect to manufacturing?
        Mr. Bianculli. Sure.
        Mrs. Brooks. What kind of cost savings can be expected in
    this area, and how do we achieve this in the manufacturing
    sector?
        Mr. Bianculli. Yes. Absolutely. Thank you, Congressman.
        Looking in the manufacturing sector and breaking it down
    really into kind of three major components: raw materials
    coming into a manufacturing facility, those raw materials being
    processed in the outbound side of that where the goods are
    sorted, picked, packed, loaded, and then transported down the
    supply chain. Some of the early adoption we are seeing for the
    kinds of wearables I spoke about, which is basically being able
    to capture and get the right information in front of a worker
    in real time have been on the third category, picking, packing,
    sorting.
        Think about an eCommerce order that is being built, think
    about an order that is coming from a manufacturer to a
    distribution center, being able to sort the goods, load those
    goods, be able to optimize the volumetric efficiency of those
    goods onto a trailer or onto a pallet for distribution. A lot
    of these cases, we are starting to see be adopted or using
    wearables to seamlessly present information in front of the
    user as they are going through their workflow to be able to get
    the right goods in the right place, to be able to optimize the
    way they are loaded onto vehicles, and to be able to get them
    down and through the supply chain faster than they have
    previously.
        So it is really about worker productivity. I use the word
    in my testimony about frictionless workflow, so think about it
    as taking the--literally taking the friction out of the
    workflow and allowing workers to simply get their job done and
    let the technology take a back seat and just augment their
    capabilities
        Mrs. Brooks. Thank you. Ms. Burich. So my daughter was a
    college athlete and--but many--several years ago, and so none
    of this technology. In fact, when she was in youth soccer, that
    is when Under Armour came to be, OK. So just talking about that
    type of advancement during this time period and now all of this
    wearable technology. What do you anticipate--how do you
    anticipate it being used from the youth--the youth sector all
    the way up to the professional athlete sector?
        Ms. Burich. Yes. We look at the market in terms of like
    team sports and individual sports or individual----
        Mrs. Brooks. Can you turn your mike on, please.
        Ms. Burich. We look at the market in terms of like team
    sports, organized sports, which is what you are referring to,
    and then individual use for fitness, so where we have our elite
    system, it is very sophisticated, and there is definitely an
    opportunity to translate it for youth sports, and I would say
    recreational team sports to high school, even colleges who
    can't afford the solution today. So that is a development and
    an opportunity for growth, and again, it is something that the
    technology and capability is there and it should be accessible
    to more--to broader population.
        And then, I think, just connecting that down, there is
    probably--it turns into more of the individual use case where
    you want kids in phys ed to be using technology so that it is--
    they are not--so that you are giving them the right amount of
    exercise for their fitness condition, and you are not
    overstressing them.
        Mrs. Brooks. And these kids at all ages are so tech savvy
    from a very, very young age----
        Ms. Burich. They like it.
        Mrs. Brooks. --so they are going to love this.
        Mr. Webster, just shifting gears very briefly, you talked
    about the spectrum. Are most wearable devices operating on
    unlicensed spectrum or licensed spectrum, if you know, and
    could the spectrum be an obstacle hindering widespread adoption
    of these devices? We are getting ready to have an auction with
    respect to the spectrum. Can you just talk a little bit more
    about the spectrum issues?
        Mr. Webster. Yes, ma'am. Our forecast indicates about 15
    percent of all wearables will directly be connected to the
    Internet that would be using a license spectrum. The vast
    majority or 85 percent of them will be connected via unlicensed
    spectrum to the respective Internet-connected device.
        Now, it is important to know that wearables is just one
    small part of an even larger Internet of Things----
        Mrs. Brooks. Right.
        Mr. Webster [continuing]. Initiative, and so when you take
    that all en masse, then absolutely, the importance of
    continuing to increase the amount of license and unlicensed
    spectrum will be key to help really make this industry segment
    that is so beneficial to so many continue to prosper.
        Mrs. Brooks. Thank you. Thank you all for your testimony. I
    yield back.
        Mr. Burgess. The gentlelady yields back. The Chair thanks
    the gentlelady. The Chair recognizes the gentlelady from
    Illinois, 5 minutes for questions, please.
        Ms. Schakowsky. Mr. Peppet, I am going to ask you some
    questions, but I wanted to first--this idea of kids. To me, I
    am a little concerned about that. Is this going to be more
    anxiety-provoking, now we are measuring and another way that
    you have to look at an electronic device.
        I am just wondering if Adidas, in marketing to children,
    has talked to child psychologists, to educators on whether or
    not, as you say, that forget the awkward, social situation, et
    cetera, I mean, that could be a positive. But I feel like now
    encouraging kids to measure their every step or their heart
    rate or something, I am just wondering if you have done the
    kind of research I think would be important before we really
    market this to grammar school kids, or middle school kids.
        Ms. Burich. I would say in that space, we are providing a
    piece of a system that our partners are providing them to the
    schools. I don't know how much research they have done in that
    area. I know they have done research and they have positive
    findings from the use of technology related to attendance and
    kids' grades and other things that this is impacting.
        Ms. Schakowsky. There is also, you know, a real pushback on
    all the testing that is going on. I kind of feel like this may
    be in that category. I just wanted to raise that. I don't
    immediately accept that this is a great thing to push to kids.
        But anyway, let me just raise that and go on to Mr. Peppet,
    who actually--and you have a quote at the beginning of your
    testimony: Very soon we will see inside ourselves like never
    before with wearable, even internal sensors that monitor even
    our most intimate biological processes. It is likely to happen
    even before we figure out the etiquette and laws around sharing
    this knowledge.
        In a way, I think I am getting at that with that earlier
    question, but here is what I want to get more specific.
        In January of last year, the Federal Trade Commission
    released a report entitled ``Internet of Things: Privacy and
    Security in a Connected World.'' In the report, the FTC states
    that there is, quote, a ``need for substantive data security
    and breach notification legislation at the Federal level'' and
    that such legislation should, quote, ``protect against
    unauthorized access to both personal information and device
    functionality.''
        So in your testimony, Professor Peppet, you say that small
    sensor-based connected devices like wearables are inherently
    prone to security problems. Can you explain what you mean by
    that? What are some of the vulnerabilities specific to wearable
    devices?
        Mr. Peppet. Sure. Thank you for the question. As I said,
    the devices tend to be small, they tend to be designed for a
    low price point, and they tend to have very limited computing
    and even communication power, and that presents a whole set of
    security challenges.
        When the first wave of fitness trackers came out, computer
    science, you know, security folks discovered very quickly how
    easy it was to hack into them, largely because they hadn't
    secured whether it was the Bluetooth connectivity or the WiFi
    connectivity, whatever they were using, they hadn't secured
    those connections. And you know, that was several years ago,
    some of those studies were done.
        A study came out, I think, three weeks ago, testing some of
    the most current and most popular versions of those devices and
    found, essentially, the same set of results. So when I talk
    with computer scientists, this is a real technical problem
    because they are small, and it is very hard to design security
    in a comprehensive way.
        It will happen, but the FTC, for example, has really been
    pushing companies to try harder.
        Ms. Schakowsky. So would you say the biggest barrier is
    that there are technical issues, or are these wearable
    manufacturers taking into account security sufficiently, or
    even thinking about it?
        Mr. Peppet. I think it is both. Excuse me. I think it is
    both on the technical side, as I already described. On the are-
    they-trying-hard-enough side, there is at least two problems.
    One is a lot of these devices originally have been coming up as
    start-ups, and start-ups often, you know, are rushing to market
    with a product, may not spend enough time on data security.
        The converse problem is interesting, too, which is some of
    these devices have come out of very big companies, very
    established companies that don't have much experience with the
    data stack. They are not IT companies. They are some other sort
    of firm, and so when they venture into the tech space--and we
    have seen examples of this--they may not have the either
    expertise or the depth to build that kind of security.
        Ms. Schakowsky. Well, let me ask you this: Get to the
    regulatory part. You pointed out Texas. I actually have a bill,
    too, that would require breaches to be--also this biometric
    stuff and to be--consumers to be reported. Should we follow
    Texas' lead in requiring that notification as well?
        Mr. Peppet. I think we should. Whether States do it or
    Congress does it, I think that consumers should know if their
    biometric data or other sensor-based biologic data has been
    hacked. I think you would choose between fitness--you know, the
    two of you each had fitness devices. I think you might choose
    which one you wanted if you knew that one of them, the data had
    been stolen. So yes, I think that is something that we should
    do for consumer----
        Ms. Schakowsky. I am going to submit the rest of my
    questions for the record, and I really appreciate all of you.
    Thank you. I yield back.
        Mr. Burgess. The gentlelady yields back. The Chair thanks
    the gentlelady. The Chair recognizes the gentleman from New
    Jersey, Mr. Lance, 5 minutes for questions.
        Mr. Lance. Thank you. Mr. Webster, we have heard a lot
    about the benefits of this technology. Why is it more advanced,
    for example, than the smartphone?
        Mr. Webster. Well, Congressman, I believe that it is one
    part of the broader ecosystem. The sensors can be in a number
    of different places and across all different industry verticals
    and aspects of our lives. Oftentimes, they will pair it with a
    smartphone or another Internet-connected device, and then that
    data then will go back to a cloud area or data center where
    analytics can be done. So while, oftentimes, the focus on these
    types of discussion is on the sensor itself, the reality is it
    is the full ecosystem and how they are all interrelated.
        And that is why we believe, at Cisco, it is very important
    that there is security by design and privacy by design in each
    and every one of those parts so that you are able to look at it
    in aggregate as opposed to just looking down on one aspect of
    the broader ecosystem.
        Mr. Lance. Thank you. My son got a--would it be called a
    smartwatch?--for Christmas. I don't have one yet, but I am sure
    he will inform me about all of this as he does on so much of
    the technology, and thank you for the testimony of the entire
    panel. It is certainly the wave of the future, and I am pleased
    that the chairman and the ranking member have chosen to hold
    this hearing, and I yield back the balance of my time.
        Mr. Burgess. The Chair thanks the gentleman. The Chair
    would note that there are votes on. Mr. Harper, I will
    recognize you for 5 minutes for questions, but I do want to
    point out to you the Chair has not taken his time for questions
    yet, so govern yourself accordingly.
        Mr. Harper. With that, I will be brief and respect my
    chairman.
        Thank you all for being here. Mr. Webster, if I could ask
    what types of economic and workplace problems do wearables
    solve for business?
        Mr. Webster. Congressman, wearables can solve a number of
    different problems. We discussed a little bit about the medical
    benefits that could be coming about and how it pertains to
    workers in hospitals. There is a great example about assembly
    line workers that were going through, and because they have
    wearables that are giving them step-by-step instructions when
    they are doing their quality checks, there is measurably less
    defects, and a much greater quality of the products that are
    served, and especially as you start going into more complex
    maintenance areas, especially safe for remote workers. They are
    going to be able to go and create a much higher quality of
    step-by-step instructions,
        Mr. Harper. Mr. Bianculli, can you comment on that as well?
        Mr. Bianculli. Certainly. Yes, we are seeing a host of
    opportunities. Something I would call--the movement in the
    consumer space has really been around Fitbit and these other--
    Adidas as well--around something called quantified self. So
    quantifying my behaviors, and what we are seeing in the
    enterprise markets is quantifying environments, quantifying
    workflow, you fundamentally can't improve what you can't
    measure. And so the use cases we are seeing are capturing those
    trapped inefficiencies that are there because we are not able
    to quantify what is happening in a given workflow, and
    basically, you could think about it as, you know, in a large
    tier 1 transportation company who might employ, or large
    retailer who might employ 300,000 people to restock shelves
    every evening in a retail store, understanding the workflow of
    each one of those 300,000 workers, which ones are performing in
    the best ways possible, and then helping the others to be able
    to achieve that level of performance by quantifying the
    environment.
        Mr. Harper. All right. Thank you very much.
        Mr. Bianculli. So lots of opportunities around quantifying
    the workflow.
        Mr. Harper. Thank you. Mr. Palliparambil, given NXP's
    presence in many of the wearable devices on the market today,
    do we currently have the infrastructure to support the rapidly
    growing wearables market and accommodate multiple users?
        Mr. Palliparambil. Yes, sir. Thank you for the question.
    Yes, we do, and as you pointed out, the Adidas products and
    some of the products from Zebra, so we have the sensors, we
    have the micro controllers and the security element that I
    talked about in my testimony, which allows to provide that
    level of security and often preferences for the consumer is
    available today. The technology is available. It is just a
    matter of choosing to use it.
        Mr. Harper. Thank you.
        Mr. Palliparambil. Thank you
        Mr. Harper. In the interest of time, I am going to yield
    back. The chairman may want to talk. Thank you.
        Mr. Burgess. The Chair thanks the chairman. We have been
    joined by Mr. Bilirakis of Florida. Mr. Bilirakis, I will
    recognize you for questions. You know we have votes on. The
    Chair has generously allowed members to go before the
    chairman's time, so do bear in mind both you and I have to ask
    questions.
        Mr. Bilirakis. OK.
        Mr. Burgess. I will recognize you for 5 minutes and hope
    that you don't----
        Mr. Bilirakis. Well, I will yield.
        Mr. Burgess. I hope that you don't use all of it.
        Mr. Bilirakis. I yield to the chairman.
        Mr. Burgess. No, no. I want you to go ahead.
        Mr. Bilirakis. OK. All right. I won't use all of it,
    promise you.
        For the whole panel, what are the incentives for business
    and consumers who are not using wearables to start utilizing
    wearables and this kind of technology now? And this is for the
    whole panel.
        Ms. Burich. I can take it.
        Incentive. I think there is a lot of data that shows that
    when you use a wearable, it can really help you stay on your
    fitness journey longer. I mean, there is also data that shows
    the more active and fit you are, it prevents disease, it keeps
    you out of the healthcare system. So it is a proactive way to
    manage your health.
        Mr. Bilirakis. Very good.
        Anyone else.
        Mr. Palliparambil. Sure. So for a regular consumer, beyond
    fitness tracking and health, using a wearable for multiple
    applications, like payments, transit, and access into
    buildings, so logical and physical access. So the same wearable
    can, today's technology, allows you to use it for multiple
    applications, so beyond life and fitness. And that is the big
    advantage that I see, where you can have frictionless movement.
    So you have convenience, but you have the security to
    conveniently use this in your everyday life.
        Mr. Bilirakis. Thank you.
        Anyone else.
        Mr. Webster. Congressman, the benefits of wearables that I
    have seen, in general, really it comes down to a competitive
    issue. It is allowing people to be more productive, businesses
    to gain more productivity. It is going to help empower those
    that are using this is a way that can't be matched in other
    ways.
        So it is very much a competitive issue, and I think it is
    very important that policymakers take the steps to really help
    propel this industry forward with the appropriate safeguards
    that we can maintain appropriate competitive positioning.
        Mr. Bilirakis. Very good. Thank you.
        Anyone else?
        Mr. Bianculli. Congressman.
        Mr. Bilirakis. Yes, please.
        Mr. Bianculli. Congressman Bilirakis, I would say we break
    this down to two components. One is the input side of
    wearables, so being able to collect information about a
    particular workflow or what is happening in a given
    environment. So that is the input side. Think of that as
    Internet of Things sensor connectivity.
        And then the wearable instructive part of this, which is
    being able to aim somebody in the right direction, being able
    to give them information on their wrist or a heads-up
    presentation of information while they are going through a
    workflow.
        So think about the input side as being the Internet of
    Things of wearables, and think about the output side as being
    an efficient mechanism for being able to consume the data that
    is generated by the Internet of Things sensing technology.
        Mr. Bilirakis. Very good. Thank you.
        Anyone else?
        Mr. Peppet. And then just very briefly, another incentive
    is that consumers in some contexts are being paid to use these
    devices. So many consumers, for example, myself, my healthcare
    plan at my employer gives me discounts if I use a wearable and
    track my fitness. We have also seen a life insurance company
    that has now issued a life insurance policy that gives you a
    discount on your premiums if you track your fitness using a
    wearable. So there are all sorts of actual direct incentives
    being used as well.
        Mr. Bilirakis. Very good. Thank you.
        And I will yield back, Mr. Chairman. Thanks for the
    opportunity.
        Mr. Burgess. The gentleman yields back. The Chair thanks
    the gentleman.
        I will now recognize myself for questions.
        And I do, again, want to thank you. This has been a
    fascinating hearing. Again, we do have a vote on, but let me
    see what I can get through.
        Mr. Peppet, you brought up something that actually I am
    very interested in.
        And, Mr. Webster, obviously, some of the work you do in the
    healthcare space. The Affordable Care Act has brought us
    insurance with deductibles unlike anything anyone has ever
    seen.
        But I guess what I am interested in is your comments, Mr.
    Peppet, on the monetization of the wearable or the monetization
    of the data and the ability to, perhaps, forgive a portion of
    the deductible to get the patient's buy-in to the continuation
    of the monitoring. So unlike Ms. Burich's population, people
    won't drop out of the monitoring, they will continue because
    they are getting something positive.
        Could either of you speak to that?
        Mr. Peppet. That is a very interesting question, and it is
    a very interesting domain, because you are exactly right that
    ongoing compliance with whatever the medical prescription is
    difficult for doctors to get patients to follow through. And
    both wearables and other Internet of Things devices, there is a
    smart pill bottle that every time you unscrew the cap, it is
    connected to WiFi and sends a message to your doctor saying:
    They took their pills today.
        Those sorts of devices do allow a medical facility,
    whatever it is, to extend their reach out to their patients in
    all sorts of environments, and that is a potential huge
    benefit.
        Now, in terms of, I think your question precisely was about
    payment or how premiums----
        Mr. Burgess. To actually monetize the participation in the
    use of a wearable.
        Mr. Peppet. Yes, I am not sure I know enough yet to know
    how that is going to play out.
        Mr. Burgess. But you are experiencing it as a consumer in
    your insurance policy. Is that correct?
        Mr. Peppet. Yes, you are seeing it in the insurance space,
    that is right. And I think what we are seeing is a huge number
    of consumers are being introduced to wearables for the first
    time in those wellness programs, through that insurance
    vehicle.
        Now, again, I am actually relatively in favor of that kind
    of incentive. The one concern I would express is, for example,
    in my own experience with the program that I am involved with,
    it was very hard to figure out or to get information about the
    use that the data would be put to. So when an employee or a
    consumer signs up for that kind of incentive, you want to make
    sure they know what they are signing up for.
        Mr. Burgess. Mr. Webster, just in general, is there a way
    to quantify the benefit from the use of some of these wearables
    in the healthcare space?
        Mr. Webster. Congressman, I don't claim to be an expert
    into the healthcare industry, but, no question, it is a major
    vertical where IoT is being leveraged. I think if we start
    looking at the quality of care that is able to be delivered, to
    the extent of the medical reach, as was mentioned, and also
    just, I think, to the well-being, knowing that an elderly
    relative is active, for example, or being able to track them
    down should they wander off, say, an Alzheimer's patient, I
    think there are a lot of benefits there that I think could be
    challenging to quantify from a monetary benefit, but all
    recognize that it is good from a social benefit as well.
        Mr. Burgess. Thank you.
        Mr. Bianculli and Ms. Burich, you both have stuff that you
    brought with you. Would you spend just a minute and tell us
    what you have brought?
        Let's start you, Mr. Bianculli.
        Mr. Bianculli. Yes, certainly. We had mentioned in the
    testimony that we developed wearable categories in the early
    1990s actually, particularly for warehouse workers. And that
    has evolved over the last 25 years. And so one of the
    capabilities we have today is a wrist-mount mobile computer
    that is worn on the wrist of a user inside of a warehouse or a
    distribution center-type facility; a ring scanner that is able
    to image, take images, and also read machine-readable codes,
    like bar codes, inside of a warehouse-type environment.
        And so a user as they are, for instance, loading a vehicle
    with goods that are coming from, say, an e-commerce order
    online, they are scanning those packages with that scanner that
    is mounted to their hand, loading them into the vehicle. Their
    hands are staying free--again, back to the frictionless notion
    before--allowing them to get their work done without having the
    technology get in the way.
        And so this is a probably very early example of application
    of wearable inside the enterprise space. We have got the
    Bluetooth ring scanner connected to a mobile computer on the
    wrist. That mobile computer on the wrist is connected over a
    WiFi network back to the IT systems of some of these major
    carriers.
        The second example, and a more recent one, and one that we
    continue to invest in and we are going to see more of over the
    next 3 to 5 years, is this notion of eye-level information. So
    being able to have a device, as I am showing here, be worn on
    the head and then present through a screen which, if you look
    at the screen just a couple inches from your eye, it is going
    to look like a 15-inch laptop screen floating right in front of
    you.
        So if you think about working on an aircraft, where you may
    have several hundred thousand pages of schematic drawings about
    that aircraft, being able to bring up just the right drawing at
    the right moment that tells me what procedure I should do.
    Similarly, in battlefield and Government applications, where
    you might be working on a tank or a piece of heavy machinery
    out in the field, not having to deal with multiple devices,
    laptops competing with the sun and everything else that can get
    in the way, simply be able to pull that information up on the
    screen; or be able to, via the camera that is mounted on this,
    send the video that I am seeing, the particular piece of
    apparatus that I am looking at, back to a remote expert who can
    then talk me through a scenario for repair.
        Thank you.
        Mr. Burgess. Thank you. And thanks for bringing the
    peripherals today.
        Ms. Burich, can you do the same with your----
        Ms. Burich. Yes, sure. And I think our coaches could wear
    that while their players are wearing this.
        Mr. Burgess. There you go.
        Ms. Burich. This the Elite jersey that professional
    athletes wear on the field that contains some sophisticated
    sensors in this pod that goes in the back of a shirt. And then
    there is integrated heart rate sensing.
        So in terms of compliance, it is important to put it all
    into one wearable that they can put on and not worry about,
    that goes through consumer laundry or laundry without any
    special care. So that is the Elite.
        Mr. Burgess. Wait, wait, wait. You can put that through the
    laundry?
        Ms. Burich. Without this.
        Mr. Burgess. Oh, without that. OK.
        Ms. Burich. You can put this through the laundry.
        Mr. Burgess. Just in case anyone was wondering, we do have
    a vote on. And I have a voting card that I will go put in. I
    have actually laundered it twice and it seems to still work. So
    maybe you can work on that same kind of technology.
        Ms. Burich. Yes. And then these are some of our hardware
    devices for the consumer market, a high-end running watch and
    kind of a mainstream fitness device that also has step counting
    on there. And I think that is the critical thing, is that
    throughout the day you need to be getting intensity, frequency,
    and volume in terms of your exercise. So we are learning that
    it is not just about your workout, it is about what you are
    doing all day.
        And then these garments are the translation of the Elite
    for consumers. So you can, again, just snap in a heart rate
    monitor. It is directly reading your heart rate off your chest.
    These are FDA approved in terms of the sensors, so wearable for
    consumer population as well.
        Mr. Burgess. Very good. Well, thank you. Thank you for
    that.
        I will tell you this was a fascinating hearing. And I
    apologize that we have had votes that have kind of disrupted
    things. This is a disrupter series, after all. But there is a
    lot that has been shared today.
        One of the things that we hear a lot about is on the issue
    of encryption. We are hearing questions about privacy and
    security of data. Encryption seems to be one of those ways. But
    there also seems to be some problems with encryption.
        So I am actually going to ask each of you to respond, I
    realize we are really out of time and I have to go vote, but I
    would like a response to or at least your thoughts on that. As
    we develop our policies going forward, how do you balance this
    privacy question? Is encryption the way to go?
        And then, as we know, we have got the FBI concerned about
    the makers' ability to encrypt and whether or not that is a
    good thing from a law enforcement standpoint.
        So that is one of the questions that actually may end up
    before this very subcommittee when it comes down to a
    legislative product.
        But I can't thank you all enough for being here. Wait a
    minute, I have got to do this. Seeing that there are no further
    members wishing to ask questions or for any other purpose, I
    would like to thank all of our witnesses for being here.
        Before we conclude, I would like to submit the following
    documents for the record by unanimous consent: a letter from
    the Competitive Carriers Association, a letter from the
    Mercatus Center at George Mason University. Without objection,
    so ordered.
        [The information appears at the conclusion of the hearing.]
        Mr. Burgess. And pursuant to committee rules, I remind
    members they have 10 business days to submit additional
    questions for the record, and I ask the witnesses to submit
    their responses within 10 business days upon receipt of the
    questions.
         So without objection, and thanking everyone once again,
    the subcommittee is adjourned.
        [Whereupon, at 11:40a.m., the subcommittee was adjourned.]
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        [Mr. Peppet did not answer submitted questions for the
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