[Senate Hearing 114-237]
[From the U.S. Government Publishing Office]
S. Hrg. 114-237
THE CONNECTED WORLD:
EXAMINING THE INTERNET OF THINGS
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 11, 2015
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
JOHN THUNE, South Dakota, Chairman
ROGER F. WICKER, Mississippi BILL NELSON, Florida, Ranking
ROY BLUNT, Missouri MARIA CANTWELL, Washington
MARCO RUBIO, Florida CLAIRE McCASKILL, Missouri
KELLY AYOTTE, New Hampshire AMY KLOBUCHAR, Minnesota
TED CRUZ, Texas RICHARD BLUMENTHAL, Connecticut
DEB FISCHER, Nebraska BRIAN SCHATZ, Hawaii
JERRY MORAN, Kansas EDWARD MARKEY, Massachusetts
DAN SULLIVAN, Alaska CORY BOOKER, New Jersey
RON JOHNSON, Wisconsin TOM UDALL, New Mexico
DEAN HELLER, Nevada JOE MANCHIN III, West Virginia
CORY GARDNER, Colorado GARY PETERS, Michigan
STEVE DAINES, Montana
David Schwietert, Staff Director
Nick Rossi, Deputy Staff Director
Rebecca Seidel, General Counsel
Jason Van Beek, Deputy General Counsel
Kim Lipsky, Democratic Staff Director
Chris Day, Democratic Deputy Staff Director
Clint Odom, Democratic General Counsel and Policy Director
C O N T E N T S
----------
Page
Hearing held on February 11, 2015................................ 1
Statement of Senator Thune....................................... 1
Statement of Senator Nelson...................................... 2
Prepared statement........................................... 3
Statement of Senator Ayotte...................................... 128
Statement of Senator Peters...................................... 130
Report dated November 12, 2014 entitled ``Consumer Privacy
Protection Principles--Privacy Principles for Vehicle
Technologies and Services'' by the Alliance of Automobile
Manufacturers, Inc. and the Association of Global
Automakers, Inc............................................ 131
Statement of Senator Schatz...................................... 138
Statement of Senator Daines...................................... 140
Statement of Senator Heller...................................... 142
Statement of Senator Booker...................................... 144
Statement of Senator Fischer..................................... 146
Statement of Senator Gardner..................................... 149
Statement of Senator Moran....................................... 151
Statement of Senator Klobuchar................................... 152
Statement of Senator Manchin..................................... 154
Statement of Senator Markey...................................... 156
Report dated February 2015 entitled ``Tracking & Hacking:
Security & Privacy Gaps Put American Drivers at Risk'' by
the staff of Senator Edward J. Markey...................... 157
Statement of Senator Cantwell.................................... 171
Statement of Senator Blumenthal.................................. 173
Letter dated February 10, 2015 to Chairman John Thune and
Ranking Member Bill Nelson from Gary Shaprio, President and
CEO, Consumer Electronics Association...................... 175
Letter dated February 11, 2015 to Hon. John Thune and Hon.
Bill Nelson from Scott Belcher, President,
Telecommunications Industry Association.................... 176
Witnesses
Michael Abbott, General Partner, Kleiner Perkins Caufield & Byers 5
Prepared statement........................................... 7
Douglas Davis, Vice President and General Manager, Internet of
Things Group, Intel............................................ 9
Prepared statement........................................... 11
Lance Donny, Founder and Chief Executive Officer, OnFarm......... 21
Prepared statement........................................... 22
Article dated January 2, 2015 entitled ``Towards Smart
Farming--Agriculture Embracing the IoT Vision'' by the
Beecham Research Ltd....................................... 25
Article entitled ``Agricultural Water Conservation in the
Lower Flint River Basin of Georgia'' by the Flint River
Basin Partnership.......................................... 31
Report dated January 26, 2015 ``NEAA Technical Advisory Group
Report--NW Agriculture Irrigation Energy Efficiency
Initiative'' by the Northwest Energy Efficiency Alliance... 32
Article dated December 4, 2014 entitled ``10 Policy
Principles for Unlocking the Potential of the Internet of
Things'' by Daniel Castro and Joshua New, Center for Data
Innovation................................................. 50
Report dated April 2014 entitled ``AgTech: Challenges and
Opportunities for Sustainable Growth'' by Suren G. Dutia,
Ewing Marion Kauffman Foundation........................... 57
Report dated May 2014 entitled ``Agriculture Gets Smart: The
Rise of Data and Robotics by Amanda Faulkner, Research
Manager, Cleantech Group and Kerry Cebul, Principal,
Cleantech Group............................................ 83
Adam D. Thierer, Senior Research Fellow, Mercatus Center at
George Mason University........................................ 89
Prepared statement........................................... 91
Justin Brookman, Director, Consumer Privacy Project, Center for
Democracy & Technology......................................... 116
Prepared statement........................................... 117
Appendix
Letter dated February 9, 2015 to Hon. Fred Upton, Hon. Frank
Pallone, Hon. John Thune and Hon. Bill Nelson from Thomas E.
Kern, Interim President and CEO, Intelligent Transportation
Society of America (ITS America); Mitch Bainwol, President and
CEO, Alliance of Automobile Manufacturers; Michael P.
Melaniphy, President and Chief Executive Officer, American
Public Transportation Association; Frederick ``Bud'' Wright,
Executive Director, American Association of State Hihgway and
Transportation Officials (AASHTO); John Bozzella, President and
CEO, Association of Global Automakers, Inc.; Greg Cohen,
President & CEO, American Highway Users Alliance; Jill
Ingrassia, Managing Director, Government Relations and Traffic
Safety Advocacy, AAA; Roger A. Wentz, CAE, President and CEO,
American Traffic Safety Service Association; Brian Pallasch,
Managing Director of Government Relations and Infrastructure
Initiatives, American Society of Civil Engineers............... 191
Response to written questions submitted by Hon. John Thune to:
Michael Abbott............................................... 192
Douglas Davis................................................ 193
Response to written questions submitted to Lance Donny by:
Hon. John Thune.............................................. 194
Hon. Roy Blunt............................................... 195
Response to written questions submitted by Hon. John Thune to:
Adam D. Thierer.............................................. 196
THE CONNECTED WORLD:
EXAMINING THE INTERNET OF THINGS
----------
WEDNESDAY, FEBRUARY 11, 2015
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 9:47 a.m. in room
SR-253, Russell Senate Office Building, Hon. John Thune,
Chairman of the Committee, presiding.
Present: Senators Thune [presiding], Blunt, Ayotte, Heller,
Fischer, Moran, Gardner, Daines, Nelson, Cantwell, Klobuchar,
Blumenthal, Schatz, Markey, Booker, Manchin, and Peters.
OPENING STATEMENT OF HON. JOHN THUNE,
U.S. SENATOR FROM SOUTH DAKOTA
The Chairman. Good morning. This hearing of the Commerce,
Science, and Transportation hearing will come to order.
This morning we convene to examine what may be the most
important trend in technology today: the Internet of Things.
I want to thank Senators Fischer, Ayotte, Booker, and
Schatz for their leadership on this issue and for encouraging
this committee to examine the IoT.
By now, all of us are very used to having at least one or
two electronic items near us that are connected to the
Internet, such as computers, phones, and TVs. Increasingly,
however, we are seeing common everyday objects being connected
online, a literal Internet of Things that will soon be
ubiquitous.
These things unobtrusively gather data and communicate with
users and with other devices to solve a variety of consumer and
business needs.
Some have argued the Internet of Things is the third wave
of the Internet following the fixed Internet of the 1990s and
the mobile Internet of the 2000s.
The economic impact of IoT promises to be significant and
will drive growth in every sector of our economy.
According to McKinsey & Company, the Internet of Things has
the potential to create a global economic impact of up to $6.2
trillion annually by 2025, with 50 billion Internet-connected
devices by 2020.
There are some truly fascinating examples of the Internet
of Things: a bed with smart fabric and sensors that tracks your
sleep habits and uses the data to make sure your sleeping
environment stays comfortable throughout the night; mobile apps
that use roadside sensors to inform drivers of empty parking
spots; an automated sprinkler system that saves money by using
real-time weather data to make automatic, water-saving
adjustments; a Web-enabled toothbrush that tracks the user's
brushing habits to improve oral hygiene. One of my staffers,
interestingly enough, actually uses one of these and swears by
it.
As exciting as those applications sound, we are only at the
beginning of this technology trend, and there is no telling how
far it will go. The number of connected things will continue to
explode and they will increasingly interact with each other
dynamically, seamlessly, and automatically without human
intervention.
With significant economic and societal impacts, the
Internet of Things also brings complex policy questions. By
their nature, IoT devices require Internet connectivity and we
will need to be bold in thinking of clever ways to unleash
licensed and unlicensed spectrum for the private sector.
IoT devices can collect sensitive consumer and business
data. Therefore, privacy considerations should be at the
forefront as we consider this great technological wave.
Security will also be a critical concern of the Internet of
Things due to the scope and sensitivity of the data collected
due to the interconnection of devices and networks.
These issues are real, but I encourage policymakers to
resist the urge to jump head first into regulating this dynamic
marketplace. Let us tread carefully and thoughtfully before we
consider stepping in with a ``government knows best'' mentality
that could halt innovation and growth. Let us treat the
Internet of Things with the same light touch that has caused
the Internet to be such a great American success story.
We should let consumers and entrepreneurs decide where IoT
goes rather than setting it on a Washington, D.C.-directed
path. If evidence shows that there are discrete problems, we
should examine ways to solve those problems. But let us have
the humility to recognize that the best solutions are often not
government solutions, and let us not stifle the Internet of
Things before we and consumers have a chance to understand its
real promise and its implications.
We have a fantastic panel with us today with diverse
experience in the IoT marketplace, and I am looking forward to
hearing from each of you in a moment.
Right now, I would like to turn to my distinguished Ranking
Member, the Senator from Florida, Senator Nelson, for his
opening statement.
STATEMENT OF HON. BILL NELSON,
U.S. SENATOR FROM FLORIDA
Senator Nelson. Thank you to the distinguished Chairman.
And we are going to have a bed that will help us improve
our sleep.
The Chairman. Sounds good.
Senator Nelson. That does sound good.
But as we get into this subject of the Internet of Things,
no one is talking about over-regulating. The promise of the
Internet of Things must be balanced with real concerns over
privacy. If you saw ``60 Minutes'' last Sunday, the Internet of
Everything could allow everything to be the portals of the
Internet and consequently the threat of cybersecurity. Hackers,
as shown on ``60 Minutes,'' can access your car and take over
the basic functions of driving your car. It was demonstrated
there with Lesley Stahl trying to drive the car under
controlled conditions, and suddenly the car braked or suddenly
the car turned or suddenly the car accelerated.
The Internet of Things can hack into insulin pumps and
cause an overdose to occur or take over a pacemaker and cause a
heart attack. And it is not the stuff of TV drama. It is the
real threats to our Nation's cybersecurity, but also to our
physical safety.
Now, I am looking at this through the lens of being the
Ranking Member of the Cybersecurity Subcommittee on the Armed
Services Committee, where we are getting into this in detail.
We opened over the weekend a cybersecurity center at the
University of South Florida in Tampa. And I was shown a device
that is called a ``Pineapple,'' which costs about 100 bucks.
You can buy it in commercial stores. And what happens is if I
walk into a place where I suddenly tap into the WiFi such as a
Starbucks, someone with this device can suddenly have me on
their wireless instead of the wireless in the particular store
or in my apartment. And all of a sudden, I am in their system.
And so interconnected devices collect, amass, transmit
personal information. Consumers' personal privacy is obviously
at risk; and it is an aspect of the extraordinary things where
we can improve our sleep, but we are going to have to watch out
for whether or not we have any privacy.
Now, the FTC just settled a case with a company that
manufactured household security cameras that, because of their
faulty software, allowed anyone online to peep into hundreds of
households.
And some companies may transmit the information they
collect to third parties without consumer consent. It is one
thing for my refrigerator to inform me that I need more milk.
It is another for my refrigerator to tell the local grocery
store the same thing for marketing purposes.
And more recently we learned that Samsung's privacy policy
for its voice-activated Smart TV informed consumers that their
indoor conversations can be recorded by the television and sent
to third parties.
Did you ever read ``Animal Farm'' and learn about Big
Brother?
Mr. Chairman, I will insert the rest of my opening
statement for the record so that we can get on to the
witnesses.
But we are at a time of extraordinary challenge. It is a
time of great opportunity with what we have, but at the same
time, where is our privacy?
Thank you.
[The prepared statement of Senator Nelson follows:]
Prepared Statement of Hon. Bill Nelson, U.S. Senator from Florida
Thank you, Chairman Thune, for holding this hearing today.
In just the past couple of weeks, we have been hearing a lot about
the proliferation of Internet connected devices.
And the news is not all good.
We have smartphones with web trackers that you can't delete called
supercookies.
We have connected devices in cars out there that are potentially
collecting all sorts of information about us--without express consent.
And now, we have news reports about televisions that send household
recordings in our homes to third parties.
Make no mistake, the advent of the Internet of Things could result
in a sea change in the way we interact with our world, how we go about
our lives in our homes, and economic growth and jobs.
Home automation and integration could mean limitless conveniences
and save consumers thousands of dollars each year.
Wearables and connected healthcare devices could drive down costs
and pave the way for a better life for all of us.
Smart electric grids, traffic monitoring systems, and new
industrial processes could revolutionize our country and the economy.
No one is debating the promise of the Internet of Things, and no
one is talking about ``overregulating.'' This is a red herring. But the
promise of the Internet of Things must be balanced with real concerns
over privacy and the security of our networks.
As we saw on Sunday night's episode of 60 Minutes, the Internet of
Everything could allow ``everything'' to be portals to the Internet
and, consequently, threats to our cybersecurity.
Hackers can access your car and take over basic functions, such as
acceleration and braking control.
They can also hack into insulin pumps and cause an overdose or take
over a pacemaker and cause a heart attack.
This is not the stuff of TV drama--these are real threats not only
to our Nation's cybersecurity but also to our physical safety.
In fact, this technology is nothing new. For years, the so-called
``Pineapple Mark IV'' has been able to hack into Wi-Fi networks and
wreak havoc on your laptops and smartphones.
Furthermore, as these interconnected devices collect, amass, and
transmit personal information, consumers' personal privacy is
increasingly at risk.
The FTC just recently settled a case with a company that
manufactured household security cameras that, because of faulty
software, allowed anyone online to peep into hundreds of households.
Furthermore, some companies may transmit the information they
collect to third parties without consumer consent.
It's one thing for my refrigerator to inform me that I need more
milk; it's another for my refrigerator to tell that to the local
grocery store for marketing purposes.
And, more recently, we learned that Samsung's privacy policy for
its voice-activated ``Smart TV'' informed consumers that their indoor
conversations can be recorded by the television and sent to a third
party.
So, Big Brother may really be listening to us.
The FTC just released a report on this very topic, making some wise
recommendations--for best practices--for companies as they design,
sell, and service their connected devices.
I hope it's the start of real conversation and cooperation between
the FTC and industry to make sure the promises of the Internet of
Things don't fall victim to a lack of foresight and protections for
consumers.
Finally, another important aspect in looking toward the future of
the Internet of Things is the platform on which the majority of these
new devices connect--wireless spectrum.
Spectrum is the lifeblood of these devices, as well as for so much
other innovation in the U.S. economy. We must engage in a careful
consideration to balance competing needs for this finite, yet critical
public resource.
I want to thank the witnesses for appearing before the Committee,
and I look forward to hearing your testimony.
The Chairman. Thank you, Senator Nelson.
And we are going to turn to our distinguished panel to
answer all the questions that you have just raised. Hopefully,
they will help us figure out how we get all the up-side
benefit, opportunity and potential that comes with this great
technology but also the risks which very clearly exist and to
which you alluded.
We will start with Mr. Michael Abbott. Mr. Abbott is a
General Partner at Kleiner Perkins Caufield & Byers.
Mr. Douglas Davis. Mr. Davis is the Vice President and
General Manager for the Internet of Things Group for the Intel
Corporation.
Mr. Lance Donny. Mr. Donny is the Chief Executive Officer
for OnFarm Systems.
Mr. Adam Thierer. Mr. Thierer is the Senior Research Fellow
for the Mercatus Institute at George Mason University.
And Mr. Justin Brookman. Mr. Brookman is the Director for
the Consumer Privacy Project at the Center for Democracy &
Technology.
So we are delighted that you have all made time to be with
us today and look forward to hearing from you.
We will start at my left and your right Mr. Abbott, and if
you could confine your remarks as close to 5 minutes as
possible, we would certainly appreciate that. Mr. Abbott?
STATEMENT OF MICHAEL ABBOTT, GENERAL PARTNER, KLEINER PERKINS
CAUFIELD & BYERS
Mr. Abbott. Chairman Thune, Ranking Member Nelson, and
distinguished members of the Senate Commerce Committee, I
appreciate the opportunity to testify before you today on the
exciting and important topic of our connected world and the
dynamic role of the Internet of Things.
I would also like to thank Senators Fischer, Booker,
Ayotte, and Schatz for your interest in this topic and for
requesting this hearing.
I am here today in my capacity as a General Partner at the
Silicon Valley-based venture capital firm, Kleiner Perkins
Caufield & Byers. Our firm, Kleiner Perkins, has more than 40
years of experience helping entrepreneurs deliver world-
changing ideas to market. Through our consumer digital and
enterprise digital initiatives alone, we have invested in and
are mentoring more than 30 entrepreneurial companies with over
$300 million in investments in the IoT space today. I am by
background an engineer, an entrepreneur, an investor, and a
serial optimist about the power of technology and innovation to
help improve our lives.
Today I will focus my testimony on three key areas.
One, the Internet of Things is a robust and vibrant
ecosystem in both the consumer and enterprise space, with new
platforms and applications coming online every day and strong
venture capital investments to help grow it.
Two, the rapid growth in both data and devices leads to a
next wave of innovation focused on efficiencies and smart
systems using the cornerstones of successful IoT smart
hardware, software, and cloud integration.
Third, IoT, or the Third Wave of the Internet as analysts
like to call it, is nascent but very competitive. Consumer
confidence is paramount, but we must not over-regulate and
stifle innovation.
As we look back on investments in the verticals we called
``bits,'' ``bytes,'' ``bugs,'' and ``drugs,'' we now see the
rise of the Internet of Things, a connected world that allows
us to jump from old platforms of the last decade into a new
world in which we can manage every aspect of our lives, from
our health to our finances, to our home, all with the swipe of
a finger on a smart phone. And the market is responding.
Overall venture investments, $48 billion, in 2014 reached their
highest levels since 2000, and the 2014 IPO market was strong
both domestically and globally. Overall, IoT investment is
harder to immediately qualify since it crosses over so many
sectors.
So what do we mean by the IoT?
IoT enables the collection of an unprecedented quantity and
quality of data through sensors and devices. According to an
often-cited Cisco report, there will be more than 50 billion
connected devices by 2020, approximately 2x growth every 5
years. And as the recent EMC Digital Universe and market
research company IDC report noted, data is doubling in size
every 2 years and expected to reach 44 zettabytes by 2020. That
is 44 trillion gigabytes. To put that in perspective, we were
at 4.4 zettabytes, just over a tenth of that, in 2013.
So how will we deal with our data obesity problem? What are
the smart solutions for managing all of this data in a way that
improves, rather than complicates our lives? With many
platforms to spur technological advances from the home, to the
body, to the car, to the factory, to the farm, we must innovate
our way into a smarter connected future. At Kleiner Perkins, we
are looking across platforms and enterprises at disrupters and
at incumbents, and at the entire IoT ecosystem to use
connectivity to transform how we work, play, and care for our
families and ourselves.
If great hardware and software are the cornerstones of a
robust IoT ecosystem, it is the third element, hardware,
software, and cloud services, that will show major advances and
create smarter systems. With all these new devices, the stream
of data will continue to accelerate. Successful systems must
provide data-driven intelligence at both the endpoint devices
and through machine learning in the cloud. In order for IoT to
grow in meaningful ways to keep both the consumer and the
enterprise users engaged, we must have a more intelligent way
to manage and rank-order data with real-time usage feedback on
what needs a fix or an upgrade. Recent advances in deep
learning, the use of algorithms in machine learning for
modeling abstractions in data, combined with these streams of
real-time sensor data, will present enormous opportunities for
innovation on which we are focused.
My testimony today is based primarily on my experience as
an engineer and investor. I am not an expert in public policy.
There is so much promise in this space, but we are in the early
days. Consumer confidence is paramount to growth and innovation
in the IoT space and reasonable security and best practices
should help bolster that confidence.
The FTC has thoughtfully presented ideas, benefits, and
risks in its Internet of Things Privacy & Security in a
Connected World report. Congress, as evidenced by today's
hearing, is also looking at the intersection of technology and
public policy.
However, I would ask that regulators and legislators
proceed with caution when considering over-regulation in this
space to prevent stifling innovation. As is common in nascent
markets, interoperability in IoT is now a challenge, and over
time, standards will emerge from the winners in the market. We
are at a critical comment in this industry in which innovators
and entrepreneurs are competing with some of the biggest and
most historically successful enterprises in the country. And
that is healthy. This competition is creating consumer choice
in the marketplace, delivering to consumers much better
products and services at a lower cost.
An insightful colleague of mine once said that we will all
know we have succeeded when we no longer use the term
``Internet of Things,'' just as we no longer say that we
downloaded MP3's. As we have found with our music and phones,
innovators are turning the scientific and technical
breakthroughs of our time into products that benefit everyone,
changing the way we live and giving us new opportunities to
connect with and relate to one another and achieve our goals.
Soon, my bet is that these technologies will likewise become
unobtrusive, another chapter in how entrepreneurs and their
innovations can help improve the quality of life for new
generations in this country and around the world.
I would like to thank the Committee for the opportunity to
testify today, and I look forward to answering any questions.
[The prepared statement of Mr. Abbott follows:]
Prepared Statement of Michael Abbott, General Partner,
Kleiner Perkins Caufield & Byers
Chairman Thune, Ranking Member Nelson, and distinguished members of
the Senate Commerce Committee, I appreciate the opportunity to testify
before you today on the exciting and important topic of our connected
world and the dynamic role of the Internet of Things (``IoT''). I would
also like to thank Senators Fischer, Booker, Ayotte and Schatz for your
interest in this topic and for requesting this hearing.
I am here today in my capacity as a general partner at the Silicon
Valley-based venture capital firm, Kleiner Perkins Caufield & Byers.
Our firm, Kleiner Perkins has more than 40 years of experience helping
entrepreneurs deliver world-changing ideas to market. Through our
Consumer Digital and Enterprise Digital initiatives alone, we have
invested in and are mentoring more than 30 entrepreneurial companies
with over $300 million in investments in the IoT space. I am by
background an engineer, an entrepreneur, an investor, and a serial
optimist about the power of technology and innovation to help improve
our lives.
Today I will focus my testimony on 3 key areas:
1. The Internet of Things is a robust and vibrant ecosystem--in both
the consumer and enterprise space--with new platforms and
applications coming on-line every day and strong venture
capital investments to help grow it.
2. The rapid growth in both data and devices leads to a next wave of
innovation focused on efficiencies and smart systems using the
cornerstones of successful IoT: smart hardware, software and
cloud integration.
3. IoT--or ``the Third Wave of the Internet'' as analysts like to
call it, is nascent but very competitive. Consumer confidence
is paramount, but we must not over-regulate and stifle
innovation.
As we look back on investments in the verticals we called ``Bits,
Bytes, Bugs, and Drugs,'' we now see the rise of the Internet of
Things: a connected world that allows us to jump from old platforms of
the last decade into a new world in which we can manage every aspect of
our lives, from our health to our finances to our home, all with the
swipe of a finger on a smartphone. And the market is responding.
Overall venture investments ($48 billion) in 2014 reached their highest
levels since 2000 \1\ and the 2014 IPO market was strong, both
domestically and globally. Overall IoT investment is harder to
immediately qualify since it crosses over so many sectors. So what do
we mean by the IoT?
---------------------------------------------------------------------------
\1\ NVCA, ``MoneyTreeTM Report by PricewaterhouseCoopers
LLP (PwC) and the National Venture Capital Association (NVCA), based on
data from Thomson Reuters,'' January 16th, 2015. http://nvca.org/
pressreleases/annual-venture-capital-investment-tops-48-billion-2014-
reaching-highest-level-decade-according-moneytree-report/
---------------------------------------------------------------------------
It is my understanding that the primary focus of this hearing is
the consumer side of the IoT. But it's worth mentioning that there are
many other applications for IoT including business-to-business and
machine-to-machine--applications that will only expand. As such, I tend
to categorize IoT in two ways:
First is the consumer market, what I call ``The Internet of
Me,'' because it enables people to use connectivity to enrich
their lives and the lives of their family and friends.
Second is ``The Internet of IT,'' consisting of large data
generation for enterprises to make smarter systems for
everything from precision agriculture to efficiencies in large-
scale manufacturing.
IoT enables the collection of an unprecedented quantity and quality
of data through sensors and devices. According to an often-cited Cisco
report, there will be more than 50 billion connected devices by 2020
\2\--approximately 2x growth every 5 years. And as the recent EMC
Digital Universe and market research company IDC report noted, data is
doubling in size every two years and expected to reach 44 zettabytes by
2020 \3\--that's 44 trillion gigabytes. To put that in perspective, we
were at 4.4 zettabytes, just over a tenth of that, in 2013.
---------------------------------------------------------------------------
\2\ Dave Evans, ``The Internet of Things: How the Next Evolution of
the Internet Is Changing Everything,'' Cisco Internet Business
Solutions Group (IBSG), April 2011. http://www
.cisco.com/web/about/ac79/docs/innov/IoT_IBSG_0411FINAL.pdf
\3\ EMC Digital Universe & IDC, ``The Digital Universe of
Opportunities: Rich Data and the Increasing Value of the Internet of
Things,'' April 2014. http://www.emc.com/leadership/digital-universe/
2014iview/executive-summary.htm
---------------------------------------------------------------------------
So how will we deal with our data obesity problem? What are the
smart solutions for managing all of this data in a way that improves,
rather than complicates, our lives? With many platforms to spur
technological advances from the home to the body to the car to the
factory to the farm, we must innovate our way into a smarter, connected
future. At Kleiner Perkins, we are looking across platforms and
enterprises, at disrupters and at incumbents, and at the entire IoT
ecosystem to use connectivity to transform how we work, play, and care
for our families and ourselves.
We have two critical issues on this front. The first is power
management of the devices themselves, and the second is data
management, including machine learning. With a growing number of power
hungry devices, our firm is looking at innovators working in the Low
Power Everywhere space--devices getting lighter, smaller and more
efficient. We're also looking at low power processors and energy
scavengers that search for energy sources without batteries. There are
promising advancements in this space such as the work being done by
Ambiq Micro in sub-threshold circuits to improve efficiency in sensors
and devices.
As investors, we do extensive analysis before investing in a
company. But when you are at the disruptive edge of a new technological
revolution, it's hard to fully predict how consumers will react. In
order for a technological revolution to take root, you must invest
early and work with the company to produce some wins.
A great example of this is our investment in Nest. When we started,
we couldn't know for sure that Nest would be an attractive device to
consumers. But now, with great technology and smart marketing, it's
influencing the development of the smart home. This is because the Nest
team got two of the most critical IoT elements right: intuitively
designed and aesthetically pleasing hardware, and smart software.
Together, these produce a seamless and enjoyable user experience,
enabling the customer to easily, and remotely as needed, adjust the
temperature in one's home and save on heating and cooling costs.
It's the possibility of more stories like Nest that led Kleiner
Perkins to partner with Google Ventures to start the Thoughtful Things
Fund. The Thoughtful Things Fund is an initiative to back the ideas and
companies that can expand what the conscious homeTM can do.
Consumers see immediate benefits from a connected home, whereas the
cycle for enterprise systems may take a longer period of time. But the
seeds of change for both consumers and enterprises are there, and we've
already had thousands of submissions from all over the world.
If great hardware and software are the cornerstones of a robust IoT
ecosystem, it is the third element--hardware + software + cloud
services that will show major advances and create smarter systems. With
all of these new devices, the stream of data will continue to
accelerate. Successful systems must provide data-driven intelligence at
both the endpoint devices and through machine learning in the cloud. In
order for IoT to grow in meaningful ways to keep both consumer and
enterprise users engaged, we must have a more intelligent way to manage
and rank order data, with real-time usage feedback on what needs a fix
or an upgrade. Recent advances in ``deep learning''--the use of
algorithms in machine learning for modeling abstractions in data--
combined with these streams of real-time sensor data, will present
enormous opportunities for innovation on which we are focused.
My testimony today is based primarily on my experience as an
engineer and investor. I am not an expert in public policy. There is so
much promise in this space, but we are in the early days. Consumer
confidence is paramount to growth and innovation in the IoT space and
reasonable security and best practices should help bolster that
confidence.
The FTC has thoughtfully presented ideas, benefits and risks in its
Internet of Things: Privacy & Security in a Connected World report.
Congress, as evidenced by today's hearing, is also looking at the
intersection of technology and public policy. However, I would ask that
regulators and legislators proceed with caution when considering over-
regulation in this space to prevent stifling innovation. As is common
in nascent markets, interoperability in IoT is now a challenge and,
over time, standards will emerge from the winners in the market. We are
at a critical moment in this industry, in which innovators and
entrepreneurs are competing with some of the biggest and most
historically successful enterprises in the country--and that is
healthy. This competition is creating consumer choice in the
marketplace, delivering to consumers much better products and services
at a lower cost.
An insightful colleague of mine once said that we'll know that
we've succeeded when we no longer use the term the ``Internet of
Things''--just as we no longer say that we ``download MP3s.'' As we've
found with our music and phones, innovators are turning the scientific
and technical breakthroughs of our time into products that benefit
everyone, changing the way we live and giving us new opportunities to
connect with and relate to one another and achieve our goals. Soon, my
bet is that these technologies will likewise become unobtrusive,
another chapter in how entrepreneurs and their innovations can help
improve the quality of life for new generations, in this country and
around the world.
I would like to thank the Committee for the opportunity to testify
today. I look forward to answering any questions.
The Chairman. Thank you, Mr. Abbott.
Mr. Davis?
STATEMENT OF DOUGLAS DAVIS, VICE PRESIDENT AND GENERAL MANAGER,
INTERNET OF THINGS GROUP, INTEL
Mr. Davis. Good morning, Chairman Thune, Ranking Member
Nelson, and members of the Committee. Thank you for the
opportunity to provide testimony on the importance of the
United States establishing a global leadership role in the
Internet of Things.
As head of Intel's IoT Group, I own the company's overall
strategy in this space. Intel's 30 years of investment,
innovation, and standards leadership in the evolution of
computing provide the foundational elements of that strategy.
Intel believes the Internet of Things represents a
transformational opportunity for the U.S. and the world. It
will enable innovation, increase productivity, and deliver
efficiencies across both public and private sectors.
Now, while some think the Internet of Things is smart
thermostats and wearables, these consumer devices are just a
few of the many applications. The primary economic driver will
be non-consumer areas such as industrial and commercial
applications.
I will address three topics that are important to consider
as you chart your policy.
One, why is the IoT important?
Two, what are the potential barriers to successful IoT
ecosystems?
And how can policymakers accelerate deployments to ensure
U.S. leadership?
So first, why is the Internet of Things important? It will
drive unprecedented benefits for the Government, businesses,
consumers, and communities. As Mr. Abbott pointed out, the
growth in the number of devices and the amount of data that
they are generating will increase at dramatic levels by the end
of the decade. The IoT presents the opportunity to connect
these devices, efficiently analyze the data, and use the
information to improve decisionmaking. And in doing so, the IoT
is expected to have a multi-trillion dollar global impact, as
we have noted.
What should most excite U.S. policymakers is that America
and other developed economies are expected to capture 70
percent of this impact if we lead.
Let us consider one IoT application. SAIA Trucking, located
in Georgia, has a nationwide fleet of about 3,000 trucks. They
recently deployed an Intel-based IoT solution which alters
routes and guides driver performance real-time. SAIA increased
fuel efficiency by 6 percent, translating into $15 million in
annual savings.
The U.S. trucking industry consumes 54 billion gallons of
fuel per year. Extrapolating SAIA's success, our Nation could
save over 3 billion gallons of fuel yearly while reducing
CO2 emissions.
Second, what are the potential barriers to a successful IoT
ecosystem? One barrier could be security if not implemented at
the outset. For this reason, Intel prioritizes security as the
foundation of our IoT solutions. We will integrate security at
the outset, building cryptography into our chips to enable
strong identity and data protection. In addition to the compute
device itself, our solutions will employ advanced software
security to prevent harmful applications from being activated
on the device or taking down the network. Integrating multiple
layers of security at the outset enables trusted data
transmission necessary for successful IoT implementations.
Other potential barriers include connecting to legacy
infrastructure, interoperability amongst devices, and
developing global standards. To address these barriers, Intel
collaborated with industry leaders to define five tenets for
successful IoT solutions. They are security, ease of
connectivity, interoperability, data analytics, and ease of
deploying new applications and services. Based on these tenets,
we recently launched the Intel IoT Platform.
Finally, how can policymakers accelerate IoT deployments to
ensure U.S. leadership? Well, candidly, the U.S. is behind.
Other countries are aggressively investing in and deploying IoT
implementations to transform their economies, address societal
problems, and spur innovation. China, Brazil, the United Arab
Emirates have all adopted national IoT plans with time-bound
goals and are investing heavily in IoT R&D and infrastructure.
The U.S. must leverage our vast resources and capabilities.
Promoting industry alignment around these large-scale IoT
deployments based on secure, open, and interoperable solutions
will showcase U.S. leadership.
Congress can advance our Nation's IoT momentum by
collaborating with industry to establish a national IoT
strategy, encouraging public-private partnerships, and
investing in IoT research.
Intel is confident that the U.S. can lead the IoT
transformation with a continued open dialogue, as you are doing
here today, and by implementing these recommendations.
Thank you for your time, and I look forward to your
questions.
[The prepared statement of Mr. Davis follows:]
Prepared Statement of Intel Corporation
Intel Corporation (``Intel'') respectfully submits this statement
for the record in conjunction with the Senate Commerce, Science &
Transportation Committee's hearing on ``The Connected World: Examining
the Internet of Things.'' Our statement focuses on the opportunity to
unleash the vast potential of the Internet of Things (IoT) through
public-private partnerships and to create a leadership opportunity for
the U.S. in this multi-industry transformation.
Witness: Doug Davis is the vice president and general manager of
Intel's worldwide IoT Group (IOTG). Doug has been an Intel employee for
31 years, and began his career as a product engineer in the company's
Military and Special Products Division. Over the last decade, Doug has
run Intel's worldwide Embedded and Communications Group, managed wafer
factory operations, and now leads the IoT Group. This organization is
responsible for the company's IoT strategy and solutions--consisting of
hardware, software, security and services across a wide range of market
segments, including transportation, manufacturing, healthcare, retail,
smart home, smart buildings and smart cities. For the past 30 years,
Intel has made significant investments, driven exciting innovations,
led standards activities, and supported what has evolved to become the
Internet of Things. At Intel, we like to say IoT is an overnight
transformation thirty years in the making.
Intel and the Internet of Things
Intel's Role
The evolution of IoT goes back more than 30 years with Intel as a
leader from the start. In 1972, Intel introduced the Intel 4004, the
world's first commercially available microprocessor--an invention
foundational to the ``computer revolution.'' In the late 1970s, came
the Intel 8048, the world's first commercially available
microcontroller, which integrated memory, peripherals and the
microcontroller on a single chip. These microcontrollers fueled new
business opportunities in a variety of markets. In 1981, IBM launched
the IBM 5150, igniting the rapid-paced growth of the ``personal''
computer (PC) market segment. This first IBM PC ran on an Intel 8088
microprocessor and used Microsoft's MS-DOS operating system.
Initially, microprocessors were used for personal computing,
leaving microcontrollers for `use specific or `embedded' applications
like factory controls. A critical shift occurred in the mid-1990s as
customers began using Intel microprocessors in embedded market
segments, bringing the power of computing to what had traditionally
been based on microcontrollers. Intel began a concerted effort to
support the unique attributes of embedded market segments including
manufacturing life-cycle support for 7-10 years, extended operating
temperatures, and utilization of real-time operating systems.
The early 2000s saw an unprecedented uptake in Internet usage, as
the PC and mobile markets exploded. This ``connectivity'' trend wasn't
limited to connecting people; embedded systems were simultaneously
taking advantage of this powerful capability. Over the course of just a
few years, industries worldwide were profiting from the scaling
benefits of computing and networking and consumers were enjoying the
benefits of connected PCs.
In the late 2000s, ``Machine to Machine'' (M2M) emerged. M2M refers
to technologies that allow both wireless and wired systems to
communicate with other devices of the same type. Before M2M, people had
to be physically located at the machine to analyze the data to make
decisions for managing each machine. With the introduction of M2M,
machines could now be managed remotely. All of these innovations within
the datacenter, cloud computing, wireless communications and M2M formed
the basis of what is now widely known as the IoT.
Moore's Law, the business model that drives the semiconductor
industry, states that the number of transistors in an integrated
circuit doubles approximately every two years. In essence, the
marketplace experiences a doubling of the computing capability at
approximately the same price every other year. The observation is named
after Intel co-founder Gordon E. Moore. This explosion of networked
devices also began to represent another ``law'' of scaling called
Metcalfe's Law. Metcalfe's Law states that the value of a
telecommunications network is proportional to the square of the number
of connected users of the system (n\2\). This enables the Network
Effect, whereby the value of a product or service is dependent on the
number of others using it. Together, Moore's Law and Metcalfe's Law
demonstrate how the power of intelligent, connected devices like
connected digital signs, cars and homes can unleash innovation, leading
to the creation of platforms for new applications and services.
IoT Definition
IoT is defined as endpoint devices such as cars, machinery or
household appliances that connect to the Internet and generate data
that can be analyzed to extract valuable information. There are three
sub-definitions emerging out of the IoT space, however, all three
definitions overlap. The ``Mobile IoT'' comprises devices like cars,
wearables, sensors and mobile phones which all connect directly through
broadband wireless networks. The ``Industrial IoT'' connects devices in
industrial environments like factory equipment, security cameras,
medical devices, and digital signs. These devices are able to connect
to the Internet and into the datacenter (cloud) through an industrial
``gateway.'' \1\ Finally, the ``Home IoT'' connects devices like game
consoles, smart TVs, home security systems, household appliances and
thermostats through at gateway to the internet.
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\1\ A gateway is a node on a network that serves as an entrance to
another network.
The Five Critical Tenets of IoT
In September 2014, Intel and key global partners collaboratively
identified five critical IoT tenets which describe how endpoint devices
should connect to the cloud. Here are the five key tenets, as
illustrated in the graphic below:
First, Security as the Foundation: With billions of internet-
connected devices by 2020, it is important that IoT is secure from the
sensor to the cloud, including all hardware and software. Second,
Connectivity, Device Discovery, and Provisioning: Billions of devices
cannot be managed manually. Rather, devices need to be able to
communicate their ``status'' to the rest of the system independently.
Third, Data Normalization: With so many different data types, there
must be some level of interoperability between devices such that they
are speaking the same language. Fourth, Actionable Analytics: The data
must be turned into meaningful information through analytics. Fifth,
Monetize Hardware, Software, and Data Management: The IoT
infrastructure must be built to allow developers to manage and monetize
innovative applications and services.
With these tenets in mind, in December of 2014, Intel launched the
Intel IoT Platform,\2\ which unifies security and connectivity to
enable scalable IoT deployments. The Platform provides a secure device-
to-cloud (end-to-end) open reference model for connecting devices to
deliver trusted data to the cloud and value through analytics. The
Platform enables tenets 1-3--security, connectivity, and
interoperability--by creating a foundation on which to build IoT
solutions. This enables tenets 4 and 5--data analytics and monetization
of new products and services, many of which we never could have
imagined a decade ago and may not even conceive of today.
---------------------------------------------------------------------------
\2\ Intel Unifies and Simplifies Connectivity, Security for IoT,
Intel Corp. (Dec. 2014), http://
newsroom.intel.com/community/intel_newsroom/blog/2014/12/09/intel-
unifies-and-simplifies
-connectivity-security-for-IoT.
---------------------------------------------------------------------------
IoT: A Transformational Opportunity Built on a Foundation of Security
With respect to the critical element of security, Intel values this
first and foremost. We believe that security is the foundation of IOT
and it is fundamental to Intel's roadmap planning. We have dedicated
security products and security features embedded into both our hardware
and software products. Our hardware and software are being designed
from the beginning to be secure. This is important for trusted data
exchange in the IoT, as data generated by devices and existing
infrastructure must be able to be shared among the cloud, the network,
and intelligent devices for analysis. This enables users to aggregate,
filter and share data from the edge of the network all the way to the
cloud with robust protection. Moreover, data must be accurate to be
beneficial. Intel prioritizes the security, accuracy, privacy and
integrity of data in all market sectors, and especially in the
industrial domain where the safeguarding of critical infrastructure can
be vital to economic and social stability. Intel understands that we
must deliver and evoke consumer and industry trust through these
hardened security solutions in order to motivate adoption and
participation in the IoT marketplace.
Intel believes it is critical to integrate security into the
hardware and the software, from the smallest microcontroller (MCU) at
the edge of the network to the most advanced server CPU in the data
center (cloud) and all gateways and devices in between. These hardware-
and software-level security capabilities will create redundancies which
prevent intrusions and enable a robust, secure, trusted IoT end-to-end
solution.
Hardware. Intel's hardware will provide transistor-level security
on the actual compute device itself. By integrating security into the
device itself from the outset (rather than layering it on top at a
latter point in the design cycle with other, less secure external
features), Intel's IoT solutions will enable our customers to know the
exact unique identity of every device on their network. This technology
also has the capability for encrypting that unique identity to provide
anonymity properties in addition to hardware enforced integrity.
Because each compute device can have an immutable identification to
enable secure provisioning, a non-approved device will not be allowed
to access the network. The MCU or CPU itself will provide the ``baked
in'' (irremovable, non-changeable) identity of the device, making the
level of security significantly more robust.
On top of this immutable device identification, Intel's IoT
solutions will employ advanced hardware level security capabilities
such as ``whitelisting,'' which prevents harmful applications like
viruses, control agents, and malware from ever being activated on the
device. What this means is that, if the CPU ever ``sees'' an
application that is not on its known good list (``whitelist'') try to
run on the device, it will automatically lock out that device and not
allow it turn on. At other layers in IoT solutions, Intel also uses
another advanced hardware security capability called ``blacklisting,''
which blocks a defined list of known malware from entering the device
and the network.
Software. In addition to the advanced hardware security
capabilities in Intel's IoT solutions, Intel Security (formerly McAfee)
integrates advanced security capabilities that provide robust software-
level protection. This means that the software is continually
monitoring the activity of its networked devices-and looking for any
abnormalities or possible threats. If the monitoring software
identifies a threat, it proactively notifies users and/or automatically
quarantines any devices on the network that could be at risk.
By employing this combination of transistor-level security, along
with advanced hardware and software level security, from devices on the
edge of the network all the way to the data centers in the cloud, Intel
will protect IoT assets and information in ways few others can. Intel
knows that security is critical to protect the integrity of IoT
solutions, so we will design it in from the outset.
IoT Priorities--Enablers of Scale
Security
As discussed above, security is foundational to the IoT ecosystem
and a top Intel priority. With billions of connected devices producing
enormous amounts of data -EMC/IDC forecasts that devices will generate
more than 44 zeta bytes of data by 2020 \3\--security of this data will
be critical to enable scale of IoT deployments. That is why we
emphasize again the importance of having security designed into the IoT
systems from the outset. Secure data delivery systems are critical to
enabling trusted data exchange and scale, thereby unlocking the full
potential of IoT.
---------------------------------------------------------------------------
\3\ The Digital Universe of Opportunities: Rich Data and the
Increasing Value of the Internet of Things, EMC/IDC (April 2014),
http://www.emc.com/leadership/digital-universe/2014iview/executive-
summary.htm .
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Interoperability
The IoT marketplace is currently aligning around industry sectors/
verticals that are starting to deploy IoT solutions to meet their
specific business requirements: manufacturing, retail, transportation,
healthcare, and others. As early adopters deploy technologies to enable
IoT solutions, it is important that the various IoT technologies are
``interoperable'' with each other as well as being able to adapt and
grow to accommodate new and changing business requirements. Proprietary
technologies that are inherently antithetical to the concept of the
Internet of All Things will slow down IoT adoption, limit scalability
and delay economic benefits.
The Intel IoT Platform's building block components are secure,
interoperable, and scalable, enabling ``horizontal'' end-to-end IoT
deployments across industry sectors from transportation to energy to
healthcare and beyond. By creating a secure, horizontal, interoperable
platform, Intel will enable IoT to scale quickly by creating a
repeatable (reusable) foundation that ultimately enables choice and
interoperability in the marketplace. For example, Intel offers
businesses that use the Intel IoT Platform the choice and flexibility
to use some or all of the technology components from Intel, or
interchange them with ecosystem partner components. In summary, if the
U.S. wants to lead in IoT, we must prioritize interoperability from the
start.
Open Standards
How do we drive a secure solution that is interoperable and scales
across a global IoT ecosystem? The solution is a voluntary, global,
industry-led, open set of standards which enable scale to drive cost-
effective solutions. Over the last 10 months, Intel co-founded two
industry consortia focused on interoperability and open standards: The
Industrial Interconnect Consortium (IIC) \4\ and the Open Internet
Consortium (OIC).\5\
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\4\ http://www.industrialinternetconsortium.org/
\5\ http://openinterconnect.org/
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IIC founding members include major U.S. companies such as AT&T,
Cisco, GE, IBM and Intel. The IIC has reached over 135 members since
its inception in March 2014. IIC goals are to: (i) build confidence
around new and innovative approaches to security; (ii) drive innovation
through the creation of new industry use cases and test beds for real-
world applications; (iii) define and develop the reference architecture
and frameworks necessary for interoperability; (iv) influence the
global development standards process for Internet and industrial
systems; and (v) facilitate open forums to share and exchange real-
world ideas, practices, lessons and insights.
The OIC was founded by leading technology companies with the goal
of defining the connectivity requirements for devices, and for ensuring
interoperability between the millions of devices that will make up the
emerging IoT. OIC founding members include Cisco, GE, Intel, MediaTek
and Samsung, and membership has reached over 54 members. OIC goals are
to: (i) define the specification, certification and branding to deliver
reliable interoperability; (ii) ensure this standard will be an open
specification that anyone can implement and is easy for developers to
use; (iii) include IP protection and branding for certified devices and
service-level interoperability; (iv) provide an open source
implementation of the standard; and (v) ensure this open source
implementation will be designed to enable application developers and
device manufacturers to deliver interoperable products across Android,
iOS, Windows, Linux, Tizen, and more.
Both IIC and OIC recognize that a certain level of standardization
and interoperability is necessary to achieve a successful IoT
ecosystem. In the emerging IoT economy, voluntary global standards can
accelerate adoption, drive competition, and enable cost-effective
introduction of new technologies. Furthermore, open standards which
facilitate interoperability across the IoT ecosystem will stimulate
industry innovation and provide a clearer technology evolution path.
Industry is in the best position to develop the technological standards
and solutions to address global IoT ecosystem opportunities and
challenges, and Intel is taking a leading role.
Market Trends Driving the Emergence of IoT
If we've had broad use of the Internet for over two decades why is
the IOT industry emerging now? Intel believes there are three emerging
trends are driving the inflection:
Ease of connectivity--Whether it is an unlicensed (WiFi, Bluetooth)
or licensed (3G, LTE, 5G) spectrum, connectivity is becoming more
pervasive and inexpensive. The opportunity to add value via increased
connectivity is extremely large, as 85 percent of devices are not
connected today.
Compute economics--Moore's Law is impacting technologies that range
from the cloud to the network to storage to sensors. This means that
the economics for ``compute'' have become much more appealing.
Specifically, there has been a huge drop in cost for ``compute''
technologies over the last 10 years; the cost of sensors has decreased
2X, the cost of bandwidth has decreased 40X, and the cost of processing
has decreased 60X.
Big Data and Analytics--The emergence of data science (extracting
knowledge from data) combined with the reduction in the cost of high
performance computing has created an opportunity to turn data into
actionable information, thereby enabling new services and new business
model innovation.
These three market trends are generating unprecedented
opportunities for the U.S. public and private sectors to develop new
services, enhance productivity and efficiency, improve real-time
decision making, solve critical societal problems, and develop new and
innovative user experiences. All of these opportunities are
revolutionizing sectors like smart buildings, transportation,
healthcare, and manufacturing. Here are just a few examples of
quantitative results already enabled by IoT:
Smart Buildings: The integration of Intel IoT technology with
sensors and building automation systems, such as heating and air
conditioning, allows for the identification of opportunities in real-
time to reduce energy costs. In conjunction with Intel and Cisco, Rudin
Management, a large, commercial real estate company in New York City,
deployed Intel's Smart Building IoT solution, which saved Rudin $1
million in just one building in the first year of deployment. Consider
the U.S. potential opportunity: There are over 5 million commercial
buildings and industrial facilities in the U.S.,\6\ with a combined
annual energy cost of more than $202 billion.\7\ It is estimated that
the U.S. could save $20 billion if all commercial buildings and
industrial buildings increased their energy efficiency by just 10
percent.\8\
---------------------------------------------------------------------------
\6\ Commercial Buildings Energy Consumption Survey (CBECS), US
Energy Information Administration (5.6 million commercial buildings in
U.S. in 2012), http://www.eia.gov/consump
tion/commercial/reports/2012/preliminary/
index.cfm?src=%E2%80%B9%20Consumption%20%
20%20Commercial%20Buildings%20Energy%20Consumption%20Survey%20(CBECS)-
b1.
\7\ http://thesemco.com/about-us/why-energy-efficiency/
\8\ Id.
---------------------------------------------------------------------------
Smart Transportation: The integration of Intel IoT technology with
New York-based Vnomics fleet management solutions enabled real-time
monitoring and feedback to Georgia-based SAIA Trucking drivers and
headquarters. The goal was to reduce maintenance costs and improve
driver safety by monitoring braking in real-time. In the first year,
SAIA increased fuel efficiency by 6 percent across a fleet of 3,000
trucks, achieving a savings of $15 million. Consider the U.S. potential
opportunity: The U.S. trucking industry accounts for about 13 percent
of all fuel purchases in the U.S. and trucks consume about 54 billion
gallons/year for business purpose.\9\ Extrapolating SAIA's success, a 6
percent improvement in fuel efficiency across all trucks in the U.S.
would save more than 3 billion gallons of fuel each year, as well as
help reduce CO2 emissions.
---------------------------------------------------------------------------
\9\ http://www.truckinfo.net/trucking/stats.htm
---------------------------------------------------------------------------
Smart Healthcare: Intel has partnered with the Michael J. Fox
Foundation to research the use of big data analytics to help improve
the treatment of Parkinson's disease. Our IoT personal healthcare
solution enables 300 observations per second per patient, thereby
monitoring patients' symptoms and drug effectiveness in real-time. This
real-time data collection and analysis allows for the identification of
the first signs of disease progression and enables physicians to
instantly address changes. Patients can receive better, personalized
care, and physicians can make improved decisions for treatment in the
event that the patient does not notice slight changes that could cause
a decline in health before their next regularly-scheduled appointment.
Consider the U.S. potential opportunity: Imagine what real-time
monitoring of Parkinson's patients' vitals, as well as the ability to
make drug and treatment adjustments in real-time, in addition to better
tracking and predictability of disease progression could do to improve
the quality of life of Parkinson's patients not only in the U.S., but
the world.
Smart Cities: Intel has partnered with the City of San Jose,
California in a public-private partnership to further the city's `Green
Vision' goals. This Smart Cities Project, announced as part of the
Smart America Challenge in 2014,\10\ is expected to help drive San
Jose's economic growth, foster 25,000 clean-tech jobs, create
environmental sustainability and enhance the quality of life for
residents. Together, Intel and San Jose City Management are deploying a
network of sensors to create a ``sustainability lens'' that uses Intel
IoT technology to measure characteristics such as particulates in the
air, noise pollution and traffic flow. This real-time city data will
produce meaningful insights that enable the City to make better
management decisions, and lead to improvements in air quality,
transportation efficiency, environmental sustainability, health, and
energy efficiency. Consider the U.S. potential opportunity: The ten
largest U.S. cities alone have an aggregated population of 25,292,500
people.\11\ What if we initially focused on 10 cities, 10 counties, and
10 rural towns from across the Nation and implemented IoT ``smart
city'' solutions into those communities?
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\10\ Intel Helps San Jose Become America's First Smart City: http:/
/www.psfk.com/2014/06/san-jose-intel-smart-city.html
\11\ United States Census Bureau: U.S. and World Population Clock
http://www.census.gov/popclock/
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IoT: Extraordinary Positive Impact on U.S. GDP
The IoT presents staggering economic opportunities for the U.S. and
the world. Market research firm IDC estimates that there will be 50
billion connected devices in the marketplace by 2020,\12\ and Morgan
Stanley forecasts 75 billion in that same time period.\13\ These
estimates would equate to 6 to 10 connected devices for every person on
earth. Whether the exact number of devices is 50 billion or 75 billion
or something more, one thing is for certain: The number of connected
devices will explode in the next five years. In just the automotive
industry alone, it is projected that 250 million (or one in five) cars
worldwide will be connected to the Internet by 2020--via technologies
like WiFi, LTE, Bluetooth, satellite, and 5G communications
networks.\14\ For perspective, 250 million is roughly the same number
of total cars on U.S. roads in 2013.\15\
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\12\ Business Strategy: The Coming of Age of the ``Internet of
Things'' in Government, IDC (April 2013), http://www.idc.com/
getdoc.jsp?containerId=GIGM01V.
\13\ Morgan Stanley: 75 Billion Devices Will Be Connected To The
Internet Of Things By 2020, Business Insider (Oct.2 2013) http://
www.businessinsider.com/75-billion-devices-will-be-connected-to-the-
internet-by-2020-2013-10.
\14\ Gartner Says By 2020, a Quarter Billion Connected Vehicles
Will Enable New In-Vehicle Services and Automated Driving Capabilities,
Gartner Inc. (Jan. 26, 2015), http://www.gartner.com/newsroom/id/
2970017.
\15\ Average Age of Vehicles on the Road Remains Steady at 11.4
years, According to IHS Automotive, IHS (June 2014) (253M cars on U.S.
roads in 2013), http://press.ihs.com/press-release/automotive/average-
age-vehicles-road-remains-steady-114-years-according-ihs-automotive.
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The reason that policymakers should be excited about this explosion
of devices and this technological revolution is the staggering positive
impact that the IoT is projected to have on the U.S. and global
economy. McKinsey projects that IoT will have an incredible $2.7
trillion to $6.2 trillion global economic impact by 2025.\16\ And what
should most excite U.S. policymakers is that the U.S. and other
developed economies are expected to capture a remarkable 70 percent of
this economic impact, if we develop a leadership position.\17\ In fact,
GE estimates that IoT could boost average incomes in the U.S. by an
exceptional 25 to 40 percent over the next twenty years.\18\
---------------------------------------------------------------------------
\16\ Disruptive Technologies: Advances that will transform life,
business, and the global economy, McKinsey Global Institute (May 2013),
http://www.mckinsey.com/insights/business_
technology/disruptive_technologies.
\17\ Id.
\18\ New ``Industrial Internet'' Report From GE Finds That
Combination of Networks and Machines Could Add $10 to $15 Trillion to
Global GDP, GE (Nov. 2012), http://www.gere
ports.com/post/76430585563/new-industrial-internet-report-from-ge-
finds-that.
---------------------------------------------------------------------------
Moreover, a recent Accenture survey of CEOs reveals that 87 percent
of CEOs expect long-term job growth from IoT.\19\ This will positively
impact American lives from our Nation's farms and factories to markets
and Main Street. Indeed, ``as the world struggles to emerge from a
phase of weak productivity growth, fragile employment and pockets of
inadequate demand, the [IoT] offers a chance to redefine many sectors
and accelerate economic and employment growth.'' \20\ The U.S. must
lead in this technological revolution.
---------------------------------------------------------------------------
\19\ CEO Briefing 2015, From Productivity to Outcomes: Using the
Internet of Things to drive future business strategies, Accenture, at 7
(2015), http://www.accenture.com/SiteCollection
Documents/PDF/Accenture-Industrial-Internet-of-Things-CEO-Briefing-
Report-2015.PDF.
\20\ Winning the Industrial Internet of Things, Accenture, at 2
(Jan. 2015), http://www.accenture.com/SiteCollectionDocuments/PDF/
Accenture-Industrial-Internet-of-Things-Positioning-Paper-Report-
2015.PDF.
---------------------------------------------------------------------------
Recommendations for Policymakers
Given the predicted enormous positive impact on the U.S. economy
and society, how can policymakers help accelerate IoT and ensure the
U.S. leads this next evolution of computing?
1. Continue an open dialogue with industry, experts and stakeholders
as you are doing today. This IoT hearing is a promising start
and the right first step. Intel believes that an open, multi-
stakeholder process can best enable a secure and vibrant IoT
ecosystem. Also, legislators may want to consider encouraging
the Department of Commerce to create a non-partisan National
IoT Advisory Board of policymakers, agency representatives,
industry leaders, think tanks, academia, and leaders of IoT-
focused consortia like IIC and OIC.
2. Encourage focus on security and interoperability as critical
foundational elements of IoT. While industry is in the best
position to develop and determine security and interoperability
solutions, government can encourage industry alignment around
large-scale IoT deployments based on secure, open and
interoperable IoT solutions. This will enable deployments to
scale quickly and provide both short-term and long-term
economic and social benefits to consumers, government, and
businesses.
3. Encourage open standards and open architectures to maintain the
long term viability of IoT, based on an approach that is
scalable, interoperable and reusable across a variety of use
case deployments, vendors and sectors. While industry is in the
best position to develop the technological standards and
solutions to address global IoT ecosystem opportunities and
challenges, government should encourage industry to collaborate
in open participation global standardization efforts to develop
technological best practices and standards. Specifically,
government should encourage the use of commercially available
solutions to accelerate innovation and adoption of IoT
deployments. The emphasis on commercially available solutions
and market-adopted voluntary standards will allow for faster
adoption and increase innovation, bringing the IoT and its
benefits to reality sooner.
4. Collaborate with the industry to develop a U.S. National IoT
Strategy with time-bound goals for sector-specific IoT
deployments over the next 3 to 5 years. These deployments will
not only address critical societal issues and save tax payer
dollars, but also will demonstrate U.S. leadership. A National
IoT Strategy will help align IoT stakeholders and incentivize
innovation, ultimately creating value for society by increasing
efficiencies and productivity, creating jobs, sustaining our
environment, and improving quality of life in our cities and
towns.
5. As part of our National IoT Strategy, encourage Public-Private
Partnerships (PPPs) to address societal problems and accelerate
more rapid deployment of IoT solutions. Government and industry
collaboration can be one of our Nation's best assets to
accelerate the adoption of a world-class IoT ecosystem. Viable
PPPs will make IoT deployments an appealing investment for both
government and industry, while ensuring scalability and
sustainability of infrastructure and technological innovation
over the long term. Notably, countries like China,\21\ the
UAE,\22\ Malaysia,\23\ Germany \24\, Brazil \25\ and others are
moving aggressively ahead on IoT deployments--establishing
national IoT plans and blueprints establishing time-bound
measurable goals, investing substantial funding in IoT research
and deployments, and launching PPPs to jumpstart these
opportunities and quickly enable IoT scale. As these other
countries have recognized, a vibrant and state-of-the-art IoT
ecosystem is critical to a nation's global competitiveness and
economic stability in the 21st century. By adopting and
implementing a National IoT Strategy, the U.S. can seize the
leadership position in this next evolution of computing.
---------------------------------------------------------------------------
\21\ China's Ministry of Industry and Information Technology is
implementing a three-year (2013-15) action plan to establish a National
innovation demonstration area of sensor networks in Wuxi, actively
promoting pioneer projects of applications such as intelligent
manufacturing, agriculture, transportation, medical systems, and
environmental protection: http://www.usito.org/news/miit-emphasize-iot-
rd-sensors-and-chips-2014.
\22\ The Telecommunications Regulatory Authority, in collaboration
with the Prime Minister's Office, is working to announce The National
Plan for UAE Smart Government Goals: http://www.tra.gov.ae/
news_The_TRA_to_announce_The_National_Plan_for_UAE_Smart_
Government_Goals-636-1.php.
\23\ Eyeing a role in global IoT, Malaysia opens CREST centre in
Penang (Feb. 2, 2015), http://www.mis-asia.com/tech/applications/
eyeing-a-role-in-global-iot-malaysia-opens-crest-centre-in-penang/
#sthash.enmSihPu.dpuf.
\24\ ``As part of its High-Tech Strategy (``Ideas. Innovation.
Prosperity.'') to consolidate German innovation leadership, Germany is
making significant R&D investment in the Internet of Things and new
services for the diverse application areas within this new connected
world.'' http://www.gtai.de/GTAI/Navigation/EN/Invest/Industries/
Smarter-business/smart-products-indus
trie-4.0.html
\25\ Smart-city to be deployed by Telefonica/VIVO, ISPM in Brazil
http://www.smartgrid
today.com/public/Smartcity-to-be-deployed-by-TelefonicaVIVO-ISPM-in-
Brazil.cfm
---------------------------------------------------------------------------
Public-Private Partnerships--Market Segment Focus
Specifically, over the next 3 to 5 years, the U.S. should focus on
industry vertical segments with the potential to have the most impact:
transportation, cities (generally communities, urban and rural), and
buildings. Here are proposed PPPs for these market segments:
Smart Transportation PPP: The transportation segment is predicted
to be valued at more than $351 billion by 2025, with a CAGR of 19.6
percent (2012-25).\26\ In FY 2012, the Federal Agency fleet consisted
of more than 650,000 vehicles, which collectively drove over 5 billion
miles, consumed nearly 400 million gallons of fuel, and had operating
costs of approximately $4 billion.\27\ The U.S. Postal Service fleet
alone is over 190,000 vehicles.\28\ Intel recommends encouraging an IoT
Smart Transportation PPP around the USPS fleet or another considerably
sized government fleet to implement IoT solutions and benchmark
increases in fuel economy, logistics and driver efficiency, and
improvements in customer service. Focus areas could include, but are
not limited to, fleet and freight management, passenger optimization,
automatic train protection and control systems and advanced driver
assistance and safety.
---------------------------------------------------------------------------
\26\ Strategic Opportunity Analysis of the Global Smart City
Market: Smart City Market to be Worth a Cumulative $3.3 Trillion by
2025, Frost & Sullivan (Sept. 2013) (``Frost & Sullivan''), http://
www.frost.com/prod/servlet/report-brochure.pag?id=M920-01-00-00-00.
\27\ Federal Motor Vehicle Fleet Report FY 2012, http://
www.gsa.gov/portal/mediaId/181179/
fileName/FY_2012_Federal_Fleet_Report.action.
\28\ Delivery Vehicle Fleet Replacement (June 10 2014) Office of
the Inspector General United States Postal Service [https://
www.uspsoig.gov/sites/default/files/document-library-files/2014
/dr-ma-14-005.pdf]
---------------------------------------------------------------------------
Impact--Logistics and Transportation was a $1.3 trillion industry
in the U.S. in 2012, and represented 8.5 percent of GDP. With almost 9
percent of the U.S. labor force employed in the transportation sector
and the U.S. spending roughly $160 billion annually on highway
infrastructure (about \1/4\ funded by the Federal Government), a more
efficient and effective trucking industry has the potential to yield
significant savings to the U.S. economy. For example, the commercial
trucking industry in the U.S. uses about 50 billion gallons of fuel
each year. A 7 percent increase in fuel efficiency results in more than
3.5 billion gallons of fuel saved. Imagine if we set a national goal
for 25 percent of the Federal Fleet in 3 years, and 50 percent in 5
years, be retrofitted with IoT transportation solutions, not just for
telematics but to increase fuel economy by a minimum of 5 percent, with
incentives for higher efficiency.
Approach--Consistent with existing national goals to improve the
fuel efficiency of American trucks--thereby bolstering energy security,
cutting carbon pollution, saving money, and spurring manufacturing
innovation \29\--this proposed PPP would leverage private sector and
academia IoT expertise in ``Intelligent Transportation'' solutions. The
PPP would accelerate efforts by Congress, DOT, DOC, DOE, EPA, and U.S.
commercial fleet managers to increase engine efficiency and fuel
economy of large fleets traveling our Nation's roads and highways. It
would realize direct economic savings including increased fuel
efficiency, reduction in carbon dioxide emissions, labor savings,
improved driver safety, accident savings, productivity and distribution
proficiency, and logistics tracking effectiveness. The PPP also would
provide insights into improvements and new business models for the U.S.
transportation sector at large, leading to more satisfied employees and
customers. Notably, this PPP would be an early step toward the ultimate
goal of an autonomous trucking industry; the estimated savings to the
U.S. freight transportation industry from autonomous vehicles is $168
billion per year, with savings from labor ($70 billion), fuel
efficiency ($35 billion), productivity ($27 billion), and accident
savings ($36 billion).\30\ Funding for and benefits from the PPP would
be shared across public and private sector partners, and could range
from in-kind to matching funds to purely financial investments. One
possibility could be for public and private partners to share in the
transportation fuel savings. For example, if the PPP were to reduce a
department', or commercial end user operator's fleet, fuel expenses by
7 percent, the department (operator) could allot 2 percent of that
savings to the (other) private partners over a specified period of time
until the (other) private partners recoup their upfront investment plus
some incremental percent of return. The department operator would
retain the remaining percentage of the savings, after which time, the
department and U.S. taxpayers (operator) would retain 100 percent of
the fuel savings benefit in perpetuity.
---------------------------------------------------------------------------
\29\ Improving the Fuel Efficiency of American Trucks--Bolstering
Energy Security, Cutting Carbon Pollution, Saving Money and Supporting
Manufacturing Innovation, White House (Feb 18, 2014), http://
www.whitehouse.gov/the-press-office/2014/02/18/fact-sheet-opportunity-
all-impro
ving-fuel-efficiency-american-trucks-bol.
\30\ Autonomous Cars: Self-Driving the New Auto Industry Paradigm,
Morgan Stanley Research (Nov. 6, 2013), available at http://
www.morganstanley.com/public/11152013.html. The authors indicate that
$1.3 trillion is a base case estimate and indicate a bear case scenario
of $0.7 trillion savings per year in the U.S. and a bull case scenario
of $2.2 trillion per year.
---------------------------------------------------------------------------
Smart Cities PPP: Today's cities consume two-thirds of the world's
energy.\31\ By 2025, 37 cities worldwide will each have a population of
greater than 10 million.\32\ To address the escalating demands of
existing and future residents, cities are looking for ways to introduce
more technology to become ``smarter'' about the use of limited
resources and more flexible in responding to residents' needs. Examples
of ``Smart Cities'' capabilities could include but are not limited to:
City Sensing including monitoring and providing IoT data to improve air
quality, noise pollution, ambient light, weather, and traffic flow;
smart parking which is using IoT to ``smartly'' guide citizens to open
parking spaces; smart roads that enable ``smart'' traffic navigation
and roadside service; smart emergency response which facilitates
``smart'' public and residential community alert and response for
vulnerable areas; and smart energy/grid that facilitates ``smart''
renewable energy and distributed power.
---------------------------------------------------------------------------
\31\ World Urbanization Prospects The 2011 Revision, United Nations
Department of Economic and Social Affairs (March 2012), http://
esa.un.org/unpd/wpp/ppt/CSIS/WUP_2011_
CSIS_4.pdf.
\32\ Nate Berg, The Uneven Future of Urbanization (April 9, 2012),
http://www.citylab.com/housing/2012/04/uneven-future-urbanization/
1707/.
---------------------------------------------------------------------------
Impact--IoT technologies could realize direct economic savings for
cities and municipalities (and their local tax base) due to more
efficient city planning and management. Results would include
improvement in city residents' quality of life, health, and safety.
Some examples of this benefit could include more efficient traffic
flow, real-time public notifications of pollution ``hot spots,'' and
early detection and correction of chemical and gas leaks in aging city
infrastructure.
Approach--Consistent with the goals of NIST's Smart America and
Global Cities Team Challenges \33\--to use IoT solutions to improve
services, promote economic growth, and enhance quality of life--this
proposed PPP would leverage private sector IoT expertise in deploying
``Smart Community'' solutions. These IoT solutions would accelerate
local government and municipality efforts to improve urban management
and planning in a variety of ways. For example, the PPP could provide a
model to improve operational efficiencies and safety across existing
and new city infrastructure by utilizing air quality and traffic flow
data to enable sustainable traffic management and planning, and create
an innovative tool for urban growth management and planning. The
funding for and benefits from the PPP would be shared across public and
private sector partners, and could range from in-kind to matching funds
to purely financial investments. One opportunity may include public and
private partners to share in new revenue streams by leveraging the IoT
sensor network infrastructure to deliver new services to city
residents. For example, if the PPP were to deliver new services to city
residents (i) via the city sensor network or (ii) by sharing the real-
time data generated by the city sensor network, the city could share
the new revenue stream with the private partners. The city (and its
taxpayers) would enjoy the benefits of improved traffic flow, air
quality, and safety, and avoiding the hefty cost to rebuild city
infrastructure.
---------------------------------------------------------------------------
\33\ http://www.nist.gov/cps/sagc.cfm
---------------------------------------------------------------------------
Smart Buildings PPP: The smart building segment is predicted to be
valued at almost $249 billion by 2025, with a CAGR of 4.1 percent
(2012-25).\34\ The U.S. Government owns or manages more than 900,000
buildings or other structures across the country making it the Nation's
largest landlord. Smart building examples could include, but are not
limited to, Smart Government Buildings enabling ``smart energy'' (HVAC)
management, water flow and usage, predictive maintenance/mechanical
operations and building security, and smart military bases facilitating
the integration of systems and logistics for ``smart'' traffic flow,
people flow, air quality, retail commerce operations, personnel safety
and parking.
---------------------------------------------------------------------------
\34\ Frost & Sullivan.
---------------------------------------------------------------------------
Impact--The proposed PPP would help the U.S. save on energy
expenses while reducing carbon pollution. The U.S. Government--and thus
U.S. taxpayers--would realize direct (and possibly significant)
economic savings due to improved efficiency in consumption,
distribution, and management of energy and utilities across Federal
Government buildings and installations. The PPP also would provide
insight into savings opportunities and consumption planning for other
Federal properties, as well as state and local government properties.
In addition, the PPP would introduce new business models that could
increase efficiencies and offer new revenue streams for building owners
in the public and commercial sectors, while improving services for
building tenants and residents.
Approach--Consistent with the goals of the Better Buildings
Challenge, to realize building energy savings of 20 percent or more
over 10 years \35\ and other current initiatives, this proposed PPP
would leverage private sector IoT expertise in ``Smart Building'' IoT
solutions to accelerate the U.S. Government efforts to improve
operational efficiencies across Federal buildings and/or military
installations. Imagine if we set a national goal for 25 percent of
Federal Government buildings to be retrofitted with IoT solutions in
three years, and 50 percent to be retrofitted with IoT solutions in
five years, to increase energy efficiency by a minimum of 20 percent.
Upfront funding for the PPP would be shared across public and private
sector partners, and could range from in-kind to matching funds to
purely financial investments. Benefits from the PPP also would be
shared among public and private sector partners over the short-and
long-term, ensuring PPP viability and creating a win-win scenario. One
possibility in this case could be for public and private partners to
share in the Federal building/installation's energy and utility
savings. For example, if the PPP were to reduce a department's energy
and utility expenses by 20 percent, the U.S. Government could allocate
10 percent of that savings to the private partners over a specified
period of time until the private partners recoup their upfront
investment plus some incremental percent of return, and the U.S.
Government (U.S. taxpayers) would retain the remaining 10 percent of
the savings. After which time, the U.S. Government would retain 100
percent of the energy and utility savings benefit.
---------------------------------------------------------------------------
\35\ Administration Announces 14 Initial Partners in the Better
Buildings Challenge, White House (June 30, 2011), http://
www.whitehouse.gov/the-press-office/2011/06/30/obama-administration-
announces-14-initial-partners-better-buildings-chal.
---------------------------------------------------------------------------
Conclusion
Intel appreciates the opportunity to share our perspective on the
enormous opportunity of the IoT and a proposed strategy for U.S.
leadership in the next evolution of computing.
The Chairman. Thank you, Mr. Davis.
Mr. Donny?
STATEMENT OF LANCE DONNY, FOUNDER AND CHIEF EXECUTIVE OFFICER,
OnFarm
Mr. Donny. Chairman Thune, Ranking Member Nelson, and
members of the Committee, my name is Lance Donny, and I want to
thank you for the opportunity to appear before you today and
share my thoughts on how connected devices and data will enable
farmers to meet global agricultural challenges.
I am the Founder and CEO of OnFarm, a company focused on
solving the interoperability and use of devices and data in
agriculture.
I grew up on a farm, my family's farm, in California. And I
have spent more than 20 years in technology and the last half
dozen in leading companies in agriculture. In that time, I have
overseen thousands of connected devices and have studied how
technology has both succeeded and failed the farmer.
It is clear--and the time is now--agriculture is on the
march to adopt and use technology. All of it will be connected.
And this trend will enable farmers to make better decisions
about how they grow. It will allow them to be globally
competitive, and it will be the driving force to meet a global
food demand.
My testimony aims to highlight challenges and opportunities
as we move to adopt devices and data in ag. One is a means to
increase agriculture production and profitability. Two, to help
farmers adopt and easily use technology, and third, to advocate
for smart, modern policies that spur adoption, avoid
unnecessary regulation, and enable U.S. farmers to be globally
competitive.
Since the 1950s, farming has doubled production through the
use of supplemental nitrogen, irrigation systems, and
mechanization of harvesting and planting. But those advances,
while momentous, will not suffice to meet the global food
demand. By 2050, 9.5 billion people on the planet will require
70 percent more food than we produce today. We will not succeed
at meeting this challenge by adding new acres, using more
nitrogen or more water.
Connected devices and data fundamentally change how the
industry works, and agriculture is no different. It will not
escape that trend. Agriculture has moved into the information
age.
Data is everywhere. It drives decisions and enables farmers
to adopt and be globally competitive. In the day of $3 and $4
corn, farm prosperity will occur using technology and data as a
competitive advantage against farmers that do not.
There are two core and interconnected concepts for the
Internet of Things in agriculture. First is the connected
device itself. Today we see sensors on nearly every part of the
farm: the soil, plants, equipment, people, drones, and
satellites. Sensors are the first step to better farm
management and provide important field data, but sensors on
their own will not allow the farmer to change how they farm.
If you ask a farmer today how much data they have, you will
almost always hear too much or it is overwhelming. This flood
of data has already surpassed most farmers' capability of
managing it. Analytics or big data systems create order and
provide insights to keys to delivering the promise of
technology in agriculture.
Together, connected devices and analytics give farmers the
ability to monitor and use information to manage resources, and
as the demand for food increases, these solutions will be the
tool that farmers use to help global demand.
In good years, farmers can grow more and more efficiently.
In difficult years, like the last several in California due to
the drought, connected devices and analytics enable farmers to
monitor their fields, to apply the right amount of water at the
right time as the crop needs it.
Technology studies have shown the possibilities of
increasing yields by a third while reducing water consumption
by 20 percent.
Unfortunately, technology can often be cost-prohibitive to
farmers. In order to ensure we are globally competitive, we
must help growers adopt technology. I support innovation and
grants that can dramatically reduce the cost of technology and
increase the adoption for the farmer. With modest efforts, we
can solve fundamental problems. Today technology is still too
costly for farmers. We can and should support them in how they
adopt it.
Two, we must help farmers access broadband. In many rural
areas, broadband is not available to them, and wireless or
cellular coverage is not available on many farms. We can and
should accelerate the availability of low-cost, long-range
communication to ensure that we move data out of the farm to
the cloud as easy as from your Fitbit to the WiFi.
I support a common sense approach to data rights, such as
the American Farm Bureau's Privacy and Security Principles that
enable the marketplace, the farmer, and the market, to solve
conflicts of data and data ownership quickly and easily.
Technology has shown the ability to increase yields, reduce
inputs, and enable more productive and sustainable farms. If we
achieve technology adoption on a wide scale in the U.S., we can
meet global food needs. We can help U.S. farmers maintain their
superior position globally, and we can ensure the next
generation of farmer is as successful as their parents'
generation.
Thank you again for your time today. I look forward to your
questions.
[The prepared statement of Mr. Donny follows:]
Prepared Statement of Lance Donny, Founder and Chief Executive Officer,
OnFarm
Chairman Thune, Ranking Member Nelson, and Members of the Committee
my name is Lance Donny. I want to thank you for the opportunity to
appear before you today and share my thoughts on how connecting devices
and data will enable farmers to meet global agriculture challenges.
I am the Founder and Chief Executive Officer of OnFarm, a company
focused on solving the interoperability and use of devices and data in
agriculture.
I grew up on my family's farm in California. I've spent more then
20 years in technology and the last half dozen leading companies in
agriculture. In that time I've overseen thousands of connected devices
and have studied how technology succeeds and often fails farmers.
It is clear, and the time is now, Agriculture is on the march to
adopt and use technology, all of it connected, and this trend will
enable farmers to make better decisions about how they grow, it will
allow them to be globally competitive, it will be the driving force to
meeting global food demand.
My testimony aims to highlight challenges and opportunities as we
move to adopt connected devices and data:
1. as a means to increase agriculture production and profitability;
2. to help farmers afford and easily adopt technology; and
3. to advocate for smart, modern policies that spur adoption, avoid
unnecessary regulation, and enable U.S. agriculture to be
competitive globally.
Since the 1950s farming has doubled production through the use of
supplemental nitrogen, irrigation systems, and mechanization of
planting and harvesting.
But those advances, while momentous will not be sufficient to meet
the growing global demand for food. By 2050 over 9.5 Billion people on
the plant will require 70 percent more food then we produce today. We
will not succeed at meeting this challenge by adding new acres, using
more nitrogen or more water.\1\
Connected devices and data fundamentally change how people and
industries work and agriculture has not escaped that change.
Agriculture has moved into the information age.
Data is everywhere. It drives decisions and enables farmers that
adopt it to be globally competitive. In the day of $4 corn, farm
prosperity will occur using technology and data as a competitive
advantage against those farmers who don't.
There are two core and interconnected concepts for the Internet of
Things in Agriculture. First, is the connected device itself. Today we
see sensors on nearly every part of the farm: from soil moisture, to
plants, equipment, and people. Sensors are the first step to better
management and provide important field data, but sensors on their own
will not allow the farmer to change the way they farm.
If you ask a farmer today how much data they have, you will almost
always hear ``too much'' or ``it's everywhere''. This flood of data has
already overwhelmed farmers. Analytics or ``Big Data'' software that
create order and provide insights is the key to delivering the promise
of the Internet of Things.
Together, connected devices and analytics give farmers the ability
to monitor and use information to manage resources. And as the demand
for food increases these solutions will be the tool that farmers use to
help meet global demands.
In good years farmers can grow more and more efficiently. In
difficult years, like the last several in California due to the
drought, connected devices and analytics enable farmers to monitor
their fields and to apply the precise amount of water when and where
the crop needs it.
Technology studies have shown the possibilities for increasing
yields by 33 percent while we reduce water consumption by 20
percent.\3\ Unfortunately that technology can often be cost
prohibitive. In order to ensure U.S. farmers are globally competitive
we must help farm adoption.
I support both innovation and grants that can dramatically reduce
cost and increase adoption. With modest efforts we can solve these
fundamental challenges. Today;
1. technology is still too costly for many farmers; we can and
should support innovations and incentives that can improve
adoption;
2. many farms have no broadband access and cellular coverage is
unreliable; we can and should accelerate the availability of
low-cost long range communication technology to ensure we can
move data from the field to the cloud on every farm; and
3. I support a common sense approach to data rights such as the
American Farm Bureau's Privacy and Security Principles\2\ that
will enable the marketplace to solve conflicts quickly and
efficiently.
Technology has shown the ability to increase yield, reduce inputs,
and enable more profitable and sustainable farms. If we achieve
technology adoption on a wide scale, we can meet global food needs, we
can help U.S. farmers maintain global competitiveness, and we can
ensure the next generation of farmer is as successful as their parents'
generation.
Thank you again for inviting me today, I look forward to your
questions.
References
1. ``Towards Smart Farming--Agriculture Embracing the IoT Vision''--
Beecham Research Ltd., January 2, 2015, http://
www.beechamresearch.com/download
.aspx?id=40
2. ``Privacy and security Principals for Farm Data''--The American
Farm Bureau Federation, December 19, 2014 http://www.fb.org/
tmp/uploads/Privacy
AndSecurityPrinciplesForFarmData.pdf
3. ``NEEA Technical Advisory Group Report--NW Agriculture Irrigation
Energy Efficiency Initiative''--Northwest Energy Efficiency
Alliance, January 26, 2015
4. ``10 Policy Principles for Unlocking the Potential of the
Internet of Things''--Center for Data Innovation, December 4,
2014 http://www.datain
novation.org/2014/12/10-policy-principles-for-unlocking-the-
potential-of-the-internet-of-things/
5. ``The Internet of Things Will Drive Wireless Connected Devices to
40.9 Billion in 2020,'' ABI Research, August 20, 2014, https://
www.abiresearch.com/press/the-internet-of-things-will-drive-
wireless-connect.
6. ``Agriculture Water Conservation in the Lower Flint River Basin
of Georgia''--Flint River Basin Partnership
7. ``Ag-Tech Challenges and Opportunities for Sustainable Growth''--
Kauffman Foundation, April 2014 http://www.kauffman.org/ /
media/kauffman_org/
research%20reports%20and%20covers/2014/04/
agtechwhitepaper_42314_
final2.pdf
8. ``Agriculture Gets Smart: The Rise of Data and Robotics''--The
Cleantech Group, May 2014 http://info.cleantech.com/Ag-Get-
Smart-Report-Submit.html
Towards Smart Farming--Agriculture Embracing the IoT Vision
Agricultural Water Conservation in the Lower Flint River Basin of
Georgia
By investing in ``smarter'' irrigation, farmers are conserving water
while enhancing productivity and yields.
Improving the efficiency of agricultural water use is a shared goal
of farmers, researchers and conservationists. Since 2000, these groups
have leveraged significant resources to develop and deploy new
conservation based technologies in the Lower Flint River Basin of
southwest Georgia. The goal is to move innovative agricultural water
conservation practices from the research laboratory to the working farm
so as to determine economic feasibility, field functionality and
conservation impact. Projects are funded through contributions from
farmers and cost-share programs. Farmers in the Lower Flint River Basin
of Georgia are employing (5) key water conservation measures:
1. Low pressure drop nozzle retrofits with end gun shut-off: Savings
are generated by applying irrigation water at a lower pressure
nearer the soil surface to reduce evaporation and wind drift
losses; installing end gun controls to keep irrigation inside
the field boundary; and, repairing leaks. Retrofits (LDR)
reduce water use by up to 22.5 percent.
2. Variable rate irrigation: Savings are generated by removing non-
crop areas from irrigation; coordinating application amounts
with variations in soil type and field topography; and,
eliminating double application due to pivot overlap. Variable
rate irrigation (VRI) reduces water use by an average of 15
percent.
3. Advanced irrigation scheduling: Savings are generated by
identifying precise periods of time in which a farmer can
irrigate less by using objective field data such as soil
moisture, soil temperature, crop growth stage and localized ET.
Advanced irrigation scheduling (AIS) reduces water use by up to
15 percent.
4. Conservation tillage: Savings are generated by using a cover crop
and leaving plant residue in the field, which modifies plant
rooting structure and physiology to enable more efficient water
use by crops; improves water holding capacity in the soil;
increases water infiltration rates; and, reduces soil
temperature, evaporative loss and field run-off. Conservation
tillage (CT) reduces water use by up to 15 percent.
5. Sod based rotation: Savings are generated by incorporating a
rotation of a warm season perennial grass into a conservation
tillage based production system which yields improved soil
quality and water holding capacity, and increased water
infiltration and retention. Sod based rotation (SBR) reduces
water use by up to 30 percent.
Note: These measures, while in many cases complementary, are not
necessarily additive as per the savings generated. Water
conservation estimates are based on an average application rate
of 13 acre inches per field in a dry year. Estimated reductions
in water use are based on field experience, ongoing research
and the Project Report 32: Irrigation Conservation Practices
Appropriate for the Southeastern United States. Average cost
per acre to deploy is $100-LDR, $175-VRI, $40-AIS, $40-CT and
$400-SBR. Many of these practices create economic and
environmental benefits beyond water conservation which help to
offset per acre cost.
Who we are? This information is provided by David Reckford, Flint
River Basin Partnership; Calvin Perry, UGA C.M. Stripling Irrigation
Research Park; Rad Yager, UGA Cooperative Extension; Jim Marois and
David Wright, UF/IFAS Extension; Wilson Faircloth, USDA-ARS; Richard
Barrett, USDA-NRCS; and, Marty McLendon, Flint River SWCD.
Why the Lower Flint? Incorporating 27 counties in southwest
Georgia, the Lower Flint is one of the most diverse and ecologically
rich river systems in Georgia. Together with the upper part of the
Apalachicola, the area is home to the highest density of reptile and
amphibian life in the United States, and four federally protected
mussel species--the Fat threeridge, Gulf moccasinshell, Oval pigtoe and
Shinyrayed pocketbook. The area is also one of the most agriculturally
intensive regions in Georgia with more than 40 percent of the Basin's
land mass producing $2 billion in farm based revenue annually.
Irrigation is central to production with 6,250 center pivot systems in
operation.
The Flint River Basin Partnership was formed by the Flint River Soil
and Water Conservation District, Natural Resources Conservation Service
and The Nature Conservancy to promote agricultural water conservation
in the Lower Flint.
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NEAA Technical Advisory Group Report--NW Agriculture Irrigation Energy
Efficiency Initiative
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10 Policy Principles for Unlocking the Potential of the Internet of
Things
Center for Data Innovation
By Daniel Castro & Joshua New / December 4, 2014
The success of the Internet today can be credited in part to
policymakers actively taking a role to ensure its growth, and this same
approach should to be applied to build the Internet of Things.
Summary: ``The Internet of Things'' encapsulates the idea that ordinary
objects will be embedded with sensors and connected to the Internet. To
date, most discussion of the Internet of Things has highlighted the
technology; to the extent it has addressed policy, the focus has been
largely negative (i.e., how to limit the supposed risks from
deployment). In contrast, this report highlights principles that
policymakers in all nations need to apply in order to maximize the
considerable promise of the Internet of Things for economic growth and
social well-being. Of two conflicting approaches to the Internet of
Things, neither: the ``impose precautionary regulations'' nor the
counter ``leave it completely up to the market'' will allow societies
to gain the full benefits from the Internet of Things revolution. This
report presents ten principles to help policymakers establish policies
and programs to support and accelerate the deployment and adoption of
the Internet of Things.
The Internet of Things encapsulates the idea that ordinary
objects--from thermostats and shoes to cars and lamp posts--will be
embedded with sensors and connected wirelessly to the Internet. These
devices will then send and receive data which can be analyzed and acted
upon. As the technology becomes cheaper and more robust, an increasing
number of devices will join the Internet of Things. Though many of the
changes to everyday devices may be subtle and go unnoticed by
consumers, the long-term effect could ultimately have an enormously
positive impact on individuals and society. A connected world is
capable of anything from improving personal health to reducing
pollution to making industry more productive. The Internet of Things
offers solutions to major social problems, but this vision of a fully
connected world will not be achieved without initiative and leadership
from policymakers to promote its deployment and avoid pitfalls along
the way.
The potential size and scope of the Internet of Things is enormous,
with over 16 billion devices estimated to be in use today, and many
more to come.\1\ By 2020, the total worldwide count is expected to
reach over 40 billion.\2\ This growth is visible across practically
every industry. By 2020, the number of wearable devices will surpass
100 million, the number of Internet-connected cars will exceed 150
million, and the number of connected wireless lights will reach 100
million--to name just a few.\3\
The magnitude of the benefits brought by the Internet of Things is
also impressive, and this technology may improve nearly every aspect of
life. Consider the benefits of smart homes. Connected devices that
automatically regulate electricity usage based on whether anyone is
home can cut energy usage and bills.\4\ Smart meters can send dynamic
price signals to smart appliances to reduce peak energy consumption.\5\
Connected sensors can improve home safety by detecting fires and other
emergencies more quickly and reliably than traditional methods,
alerting authorities sooner.\6\ Blinds that automatically detect and
filter out sunlight, smart heating and cooling systems that can
maintain different rooms at different temperatures, and lighting that
automatically adapts to time of day and can be controlled from a
smartphone will make home life more comfortable than ever before.\7\
Connected devices can also provide consumers important new insights
about their health and fitness. Companies are designing wearables for
every stage of life from smart ``onesies'' with embedded sensors that
help parents monitor their infants' health to activity sensors that
allow elderly adults to live safely and independently. Wearable
biometric monitors can help individuals track their health, monitor
chronic medical conditions, and improve health care outcomes.\8\ In
addition, fitness trackers such as FitBit and Nike FuelBand can help
consumers be more active and engage in healthy behaviors.\9\
Local leaders can help build smart cities by integrating the
Internet of Things into public buildings and infrastructure, including
roadways, transit systems, and utilities. These technologies can help
make cities safer, more sustainable, and more resilient while also
providing new economic opportunities for their residents. For example,
networked sensors can monitor the structural integrity of bridges and
highways in real time to prevent catastrophes from happening and
encourage cost-savings through timely preventative maintenance.\10\
And, intelligent transportation systems can make roads safer,
facilitate traffic flow, and make public transportation more
efficient.\11\
Industries that restructure their practices around the Internet of
Things can improve productivity and sustainability. With everything
from networked assembly lines that track every screw turn to ensure
quality control and safety to connected supply chains that reduce
downtime and ensure transparency in material sourcing, the Internet of
Things will increase industry competitiveness.\12\ The increased
capacity for data collection from the Internet of Things brings
benefits as well. Insurers can use actuarial models that factor in data
from connected devices to better understand risk and reduce costs for
their customers. Companies can monitor and enhance the safety of their
workers in real time and prevent accidents.
Overall, global spending on the Internet of Things is predicted to
grow to approximately $3 trillion by 2020.\13\ Of course, any capital
equipment represents a cost, not a benefit. In that businesses and
consumers purchase technology only if benefits exceed costs and because
many benefits extend beyond the immediate purchasers to the entire
network, the overall economic benefits from the Internet of Things will
be even more significant.\14\
As technological barriers decrease and adoption of the Internet of
Things takes off, its potential benefits depend in part on how
policymakers respond to this technology. There are four main approaches
policymakers could employ regarding the Internet of Things:
1. Precautionary regulations: Some policymakers focus on the
potential risks associated with the Internet of Things and want
to regulate it accordingly. These policymakers believe that
preemptive regulations will increase consumer trust and
therefore increase adoption, but the reality is that heavy-
handed rules would likely imposes costs, limit innovation, and
slow adoption.
2. No intervention: Some policymakers resist laws and regulations
for the Internet of Things because they believe the free market
operating independently of government interventions achieves
the maximum possible consumer benefit. However, by avoiding all
interventions, policymakers miss the opportunity to proactively
support the deployment of the Internet of Things.
3. Indigenous innovation: Some policymakers view the Internet of
Things as an opportunity to create export opportunities for
domestic firms. These policymakers may endorse policies that
hinder foreign companies from competing in the domestic market,
such as adopting national technical standards rather than
adopting international ones.\15\ Such policies are anti-
competitive and create fragmented markets for the Internet of
Things.
3. Technology champions: Some policymakers have taken a proactive
role in accelerating the development and deployment of the
Internet of Things, such as by funding research on sensor
networks, creating pilot projects for smart cities, preventing
over-regulation of wearable health technologies, and providing
incentives for smart grid deployment. These policymakers see
government as a critical partner in promoting the benefits that
come from using these technologies.
Recognizing the inherent shortcomings and limitations of some of
these approaches is crucial to developing sound policy for the Internet
of Things. The status of the Internet of Things as an emerging
technology necessitates a policy framework that is fully cognizant of
its benefits, allows for future innovation, and responsibly protects
against misuse without restricting its capacity to deliver social,
civic, and economic benefits.
10 Policy Principles for the Internet of Things
1. Chart the Course for Adoption
Every nation should develop a strategic roadmap to guide the
deployment and adoption of the Internet of Things. In addition to a
comprehensive roadmap, national agencies involved in specific sectors
can develop targeted action plans for particular industries. In the
United States, for example, the Department of Housing and Urban
Development should develop an action plan to promote smart homes, and
the Department of Energy should develop a plan to improve energy
efficiency with connected devices. The private sector will be more
likely to embrace the Internet of Things if government leaders are
paving the way for deployment.
Policymakers should actively work to overcome barriers to adoption,
such as security risks or a lack of interoperability. For example,
electronic health records should be able to integrate data from
wearable medical devices and the government can promote industry
adoption of voluntary cybersecurity principles to protect consumer
data. Since many of the benefits from the Internet of Things will occur
with widespread adoption, policymakers should promote efforts to
develop global, industry-led standards and oppose efforts to develop
nation-specific standards. To maximize the potential benefits of data
analytics, developers should also be able to easily share and integrate
data across organizational, political, and geographic boundaries.
2. Lead by Example
The government should be an early adopter of the Internet of Things
to demonstrate the benefits of the technology. From sewers to
streetlights, government agencies should make ``smart'' the default for
all new investments and allocate funding for smart city demonstration
projects. For example, all government infrastructure projects should
incorporate the Internet of Things into their design. Investing in
smart technology for public infrastructure projects will increase
safety, reduce maintenance costs, and improve operations. In addition,
these projects will generate valuable data that should be made
available to the public.
To maximize the benefits of the Internet of Things, government
agencies should restructure their practices around the new capabilities
offered by the technology. Public services that incorporate connected
sensors can provide important benefits to the public. For example, the
City of Buffalo, New York uses sensor-equipped snow plows to respond to
citizens' snow-clearing requests more quickly and to target problem
areas more efficiently.\16\ And, government agencies that perform
inspections of equipment and facilities can use the Internet of Things
to perform their duties more quickly and effectively. For example, the
U.S. Department of Agriculture (USDA) approved new regulations to allow
advanced imaging sensors to evaluate food safety and quality. As a
result, a single poultry food safety inspector can now process 175
birds per minute, up from a previous speed of 35 birds per minute, a
substantial gain in efficiency.\17\
3. Look to Partnerships to Overcome Obstacles
Many Internet of Things projects will benefit from government
agencies establishing partnerships with both the private sector and
others in government. In particular, funding these types of projects
can be challenging for cities with limited budgets. For example, a city
may not have the budget to install smart streetlamps, even if they
would end up paying for themselves in energy savings. Innovative
partnerships whereby the private sector pays for, builds, and manages
certain technology projects while receiving a portion of the savings
can allow local leaders to deliver the Internet of Things and its
benefits in situations where budget constraints would have otherwise
impeded progress. For example, the City of Mumbai, India partnered with
a smart metering company to help with its failing water infrastructure
that was leaking 50 percent of its water a day. For the same amount of
money the government would have spent patching new leaks without ever
improving the overall integrity of the system, the partnership with the
metering company cut the water loss in half.\18\
4. Reduce Regulatory Barriers and Delays for Getting Smart Devices to
Market
A lengthy and cumbersome regulatory review process that increases
the time to market for smart devices can discourage entrepreneurs from
developing new and potentially lifesaving products. Wearable
technologies can allow individuals to spend less time in the hospital,
receive better treatments, and more easily monitor their personal
health. Since subjecting these technologies to lengthy regulatory
review processes can delay these benefits from reaching consumers,
policymakers should work to ensure that these processes are as
efficient as possible. Moreover, most of these technologies will
undergo continuous innovation and improvement and the regulatory review
process should allow for, and encourage, upgrades. In a clear example
of a review process with room for improvement, it takes on average over
two and a half years for the U.S. Food and Drug Administration to
approve a low-risk medical device, compared to an average of seven
months in Europe.\19\ These delays can cost a company an average of
$500,000 per month and discourage entrepreneurs from bringing products
to market.\20\ While consumer safety should remain a top priority, the
human cost of delaying lifesaving technology should not be ignored.
5. Minimize the Regulatory Cost of Data Collection
Policymakers should create laws and regulations that allow
businesses and governments to build products and services efficiently,
using the highest quality, most complete data possible. For example,
obtaining explicit consent for data collection would be an unnecessary
cost for the vast majority of applications of the Internet of Things
that pose no real threat to consumer welfare. Regulations requiring
individuals manually to give consent to data collection would impose
costs on companies that ultimately would be passed on to consumers.
Instead, the standard method of data collection for the Internet of
Things should be ``opt out''; this would ensure that the data is
accurate, complete, and useful, yet still provide those who wish not to
share their data that option.
Similarly, policymakers should recognize that consumers do not
benefit from being inundated with notices, especially since most data
collection would be routine and insignificant. Rather than require that
all devices directly notify consumers of their policies and terms of
service, companies should simply make this information available to
those who wish to read it. This type of shift is especially important
since many devices that will make up the Internet of Things will have
only a small display or no display at all.
6. Make It Easy to Share and Reuse Data
The Internet of Things will generate an unprecedented quantity of
data, and policymakers should be careful not to equate simple data
sharing with harmful misuse. Data collected from connected devices
offer a myriad of potential benefits to consumers, clinicians,
researchers, government agencies, and commercial entities, and if these
datasets are shared, these benefits are multiplied. There may be one
primary reason to collect data, but one hundred good applications of
this data beyond its initial purpose. In order to maximize the social
and economic benefits of information, data users of all kinds acting in
good faith must be able to share and reuse data with ease.
As governments at the municipal, state, and Federal levels
integrate connected devices into public infrastructure and government
services, the de-identified data they collect should be treated as a
public resource and shared with the public accordingly. Making this
data easy to access, such as through portals and application
programming interfaces (APIs), and free to reuse without restrictions
creates tremendous opportunity for private-sector innovation, academic
research, and improvements in government transparency.\21\ The City of
Chicago, which has been integrating the Internet of Things into city
infrastructure and services as part of its Array of Things project, has
made over 600 machine-and human-readable datasets freely available
online.\22\ With this new resource, citizens have been able to more
easily navigate public transit, the city's pest-control agency has
reduced the rat population, and the police have created predictive
models to fight crime more effectively.\23\
Since the full potential benefits of the Internet of Things will
not be realized until data from interconnected technology are widely
used, policymakers should incentivize both individuals and the private
sector to share data. For example, governments can support the
development of new tools and techniques to properly de-identify
different types of data so that they are still useful for analysis.\24\
Where possible, companies should be encouraged to provide consumers
access to their data to stimulate the development of new applications.
For example, the U.S. Department of Energy's green button initiative
gives consumers access to their energy usage data and allows them to
share their data with third-party developers who provide services such
as virtual energy audits.\25\ Policymakers should also work to ensure
data can flow across borders and eliminate digital barriers to trade,
such as data residency requirements and other localization policies.
7. Relentlessly Pursue Better Data
With ever-higher-quality sensors and an increasing number of them,
the Internet of Things allows for the capture of an unprecedented
quantity and quality of data. Policymakers should continue to invest in
opportunities to collect more granular, timely, and complete data.
Government agencies should use better data to better monitor internal
processes and improve productivity and outcomes. For example, police
departments can use sensors to better monitor the safety of their
officers in real time and to hold officers responsible for their
actions. Port authorities can use sensors to better protect the border
by tracking containers and shipments coming into the country. Better
data enables not only a more effective government, but a more
transparent one as well.
8. Reduce the ``Data Divide''
Policymakers should encourage widespread adoption of connected
devices, from wearable fitness trackers to sensors on street corners,
to close the ``data divide''--the social and economic inequalities that
may result from a lack of collection and use of data about an
individual or community.\26\ The goal of policymakers should be to
ensure that no groups are systematically excluded from data collection
activities so that all individuals have the opportunity to obtain the
social and economic benefits of data.
Policymakers should work to develop programs to ensure that all
communities can benefit from the Internet of Things. For example,
funding for smart city infrastructure should be made available to a
diverse set of neighborhoods, including low-income ones.
9. Use Data to Tackle Hard Problems
While the Internet of Things offers many economic benefits,
policymakers need to ensure that opportunities to use these devices to
address important social issues, such as health care and public safety,
are also a top priority. For example, aggregate data from personal
fitness devices can provide health officials with unprecedented
insights into public health. Tracking changes in biometric readings
across a city could even help identify the spread of deadly outbreaks,
helping public officials better contain diseases and start treating
sick individuals earlier. As Google's CEO and co-founder Larry Page has
noted, public squeamishness over mining of health data likely costs
around 100,000 lives a year.\27\ Policymakers should support efforts to
collect and aggregate data on a large scale to solve collective
problems.
Networked sensors can detect flooding and trigger emergency
responses more quickly.\28\ Wearable technologies and sensors on street
corners can give new insights onto air quality on a block-by block-
basis and help develop strategies to curb pollution.\29\ The list of
ways public welfare could be enhanced by the Internet of Things is
long, but if it is to be fully effective in addressing these problems,
policymakers should shift their focus to the problem-solving
capabilities of smart devices.
10. Where Rules Are Needed to Protect Consumers, Keep Them Narrow and
Targeted
Many technologies are often met with fear, uncertainty, and doubt,
especially by those who are unfamiliar with them or opposed to change.
Policymakers cannot afford to succumb to these forces if they expect to
enable society to take full advantage of the Internet of Things. In
particular, policymakers should be extremely cautious about regulating
on the basis of purely speculative concerns that might not even come to
pass, especially when doing so might curtail substantial economic and
social benefits, many of which are already being realized today.\30\
Most hypothetical concerns are likely to never become realities if
factors such as market forces, cultural norms, and new technologies,
intervene. In addition, existing laws, such as anti-discrimination
statutes, often protect individuals from certain types of abuses and
harms.
However, policymakers should intervene promptly if specific
problems arise. In doing so, they should be careful to ensure that
their rulemaking targets specific, demonstrated harms. Attempting to
erect precautionary regulatory barriers for purely speculative concerns
is not only unproductive, but it can discourage future beneficial
applications of the Internet of Things. For example, privacy activists
raised objections when several cities made plans to install gunshot
detection equipment in public spaces. However, the effectiveness of
these technologies in reducing gun crime has proven to be incredibly
valuable to law enforcement.\31\
Conclusion
These ten policy principles serve as a blueprint for Internet of
Things policies that promote adoption, increase the value of data
collected from connected devices, and maximize the benefits of the
Internet of Things for consumers, government, and industry. While many
of the future challenges of the Internet of Things may still be
unknown, a policy framework built around these principles should
maximize the benefits from the Internet of Things. The success of the
Internet today can be credited in part to policymakers actively taking
a role to ensure its growth, and this same approach should to be
applied to build the Internet of Things.
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2. Ibid.
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28. ``Smart Water: wireless sensor networks to detect floods and
respond,'' Libelium, September 5, 2011, http://www.libelium.com/
smart_water_wsn_flood_detection/.
29. Davey Alba, ``This Wearable Detects Pollution to Build Air
Quality Maps in Real Time,'' Wired, November 19, 2014, http://
www.wired.com/2014/11/clarity-wearable and Martin LaMonica, ``Greenbiz
10: What you need to know about the Internet of Things,'' GreenBiz, May
14, 2014, http://www.greenbiz.com/blog/2014/05/12/greenbiz-101-what-do-
you-need-know-about-internet-things.
30. Daniel Castro and Travis Korte, ``A Catalog of Every `Harm' in
the White House Big Data Report,'' Center for Data Innovation, July 15,
2014, http://www.datainnovation.org/2014/07/a-catalog-of-every-harm-in-
the-white-house-big-data-report/.
31. Dan Keating, David Fallis, and Andras Petho, ``ShotSpotter
detection system documents 39,000 shooting incidents in the District,''
Washington Post, November 2, 2013, http://www.washingtonpost.com/
investigations/shotspotter-detection-system-documents-39000-shooting-
incidents-in-the-district/2013/11/02/055f8e9c-2ab1-11e3-8ade-
a1f23cda135e_story.html.
About the Authors
Daniel Castro is the director of the Center for Data Innovation
where he leads the Center's research efforts. Mr. Castro is also a
senior analyst at the Information Technology and Innovation Foundation.
Previously, he worked as an IT analyst at the Government Accountability
Office. He has a B.S. in Foreign Service from Georgetown University and
an M.S. in Information Security Technology and Management from Carnegie
Mellon University.
Joshua New is a policy analyst at the Center for Data Innovation.
He has a background in government affairs, policy, and communication.
Prior to joining the Center for Data Innovation, Joshua graduated from
American University with degrees in C.L.E.G. (Communication, Legal
Institutions, Economics, and Government) and Public Communication.
About the Center for Data Innovation
The Center for Data Innovation is the leading think tank studying
the intersection of data, technology, and public policy. Based in
Washington, D.C., the Center formulates and promotes pragmatic public
policies designed to maximize the benefits of data-driven innovation in
the public and private sectors. It educates policymakers and the public
about the opportunities and challenges associated with data, as well as
technology trends such as predictive analytics, open data, cloud
computing, and the Internet of Things. The Center is a non-profit, non-
partisan research institute proudly affiliated with the Information
Technology and Innovation Foundation.
______
AgTech: Challenges and Opportunities for Sustainable Growth
Ewing Marion Kauffman Foundation--April 2014
Suren G. Dutia
Table of Contents
Foreword
I. Introduction
II. Global Challenges
III. Overview of the AgTech Sector
IV. The Investment Case for AgTech
V. Opportunity for AgTech in the U.S. Heartland
VI. Recommendations
VII. Conclusions
VIII. Acknowledgements
______
Foreword
The information technology revolution has prompted flights of fancy
among some observers who seem to think we have transcended the physical
bounds of economic activity. Terms such as the ``weightless economy,''
the ``intangible economy,'' and others suggest that we are moving
toward an economy with little connection to the more humdrum things
that characterized the economy of yesteryear.
Yet even the intangible economy has an inescapable physical
foundation: agriculture. We are still human, after all, and the extent
to which we can exploit digital technologies is determined by whether
or not we can produce enough food--efficiently and sustainably--to
support ourselves. On this single factor, perhaps more than any other,
hangs the fate of our economies and societies.
Because of this, our two organizations have supported the
production of this white paper, which explores the potential for higher
levels of innovation, entrepreneurship, and productivity in
agricultural technology (AgTech). The challenges facing agricultural
production in the next generation are formidable, and we believe that
AgTech requires higher levels of policy attention, public research, and
private investment to set agriculture on a path toward greater
efficiency and sustainability. Suren Dutia and his colleagues have
provided here a good overview of the AgTech landscape, and where
untapped opportunities may exist.
The Donald Danforth Plant Science Center's mission is to improve
the human condition through plant science. Specifically, the Center's
research aims to feed the hungry and improve human health, preserve and
renew the environment, and position the St. Louis region as a world
center for plant science. Access to its state-of-the-art core
facilities gives AgTech businesses a crucial advantage toward achieving
success, and its annual Ag Innovation Showcase brings together
investors, entrepreneurs, and business leaders to establish new
collaborative ventures in agriculture and related industries.
At the Ewing Marion Kauffman Foundation, one of our principal areas
of interest is entrepreneurship. We are particularly interested in
identifying opportunities for greater entrepreneurial entry and growth
in specific sectors of the American economy.
Entrepreneurs are problem solvers, and twenty-first century
agriculture has no shortage of problems that, looked at another way,
are opportunities for innovation. We look forward to the next steps
that follow from this paper, and to recruiting other organizations to
join us in promoting entrepreneurship and innovation in AgTech.
Sam Fiorello
Chief Operating Officer
and Senior Vice President for Administration
Donald Danforth Plant Science Center
Dane Stangler
Vice President of Research and Policy
Ewing Marion Kauffman Foundation
______
I. Introduction
In this white paper, we provide an overview of a new emerging
economic sector: sustainable agricultural technology or, more simply,
``AgTech.'' This sector has the potential to completely reshape global
agriculture, dramatically increasing the productivity of the
agriculture system while reducing the environmental and social costs of
current ag production practices. Given that we must produce more food
in the next forty years than during the entire course of human history
to date, and must do so on a planet showing signs of severe
environmental stress, AgTech innovations will be absolutely essential.
We believe humanity can rise to the occasion and overcome these
monumental global challenges, but to do so will require sustained
attention, significant investment, and AgTech-specific entrepreneur
support systems to help spur innovation in the field.
Our purpose in writing this paper is threefold. First, we seek to
increase awareness of the productivity and sustainability challenges of
the food system and inspire entrepreneurs to enter the field. Total
demand is expected to rise 70 percent by 2050, and current growth rates
in agriculture are not sufficient to meet this goal. However, the ag
sector faces an even greater challenge because of the uncertainty posed
by climate change on future production and constraints posed by the
limited availability of land, water, and other key resources. These
twin challenges of productivity and sustainability translate to
countless opportunities for innovation across the complete value chain,
from inputs and agricultural production to transport, processing,
distribution, storage, and waste disposal. Visionary entrepreneurs will
have the ability to solve pressing societal challenges while capturing
the economic value of their new AgTech products and processes.
Our second purpose is to help increase the flow of capital to
investments in AgTech. The agriculture sector as a whole is one of the
world's largest economic sectors, with net farm income of around $120
billion and farm assets at around $2 trillion with little leverage. Yet
there has been relatively little investment in AgTech compared with
other industries like clean energy. Venture capital firms compiling
portfolios of new AgTech companies are seeing more startups seeking
funding than available capital, and other investor groups thus far have
not entered the field in significant numbers. Given the size of the
potential market and the vital societal need for agricultural
innovation, we expect that investors soon will realize the opportunity
of AgTech and invest substantially in this emerging field.
Our third purpose is to highlight the need for regional AgTech
entrepreneur support systems to accelerate innovation. We believe that
the American heartland provides an ideal example of a region poised to
make great strides forward in developing an entrepreneurial sector for
AgTech. The heartland has some of the world's best growing conditions
and natural resources, and currently produces 27.2 percent of the
world's corn, 29.75 percent of its soybeans, 6.7 percent of its beef,
and 6.9 percent of its pork, making this region an epicenter of global
agricultural activity. The heartland houses some of largest and most
progressive agricultural companies in the world, looked upon as leaders
in their field. The heartland is blessed with highly developed
transportation networks along its waterways and railroads, allowing for
efficient logistics and transport of ag products. In addition, the
heartland has world-class AgTech research capabilities with its land-
grant universities and city-level clusters of expertise, such as plant
sciences in St. Louis and animal sciences in Kansas City. Given the
overall AgTech entrepreneurial activity in the region and the large
number of significant multinational players, the American heartland can
be a powerful influence in driving the objectives of the AgTech
revolution. Taken together, these resources indicate a regional
competitive advantage in AgTech, similar to what the Silicon Valley
cluster has provided for the IT industry. For these reasons, we believe
a concerted effort to develop a regional AgTech entrepreneurial support
system will result in immense benefits for the region itself and set an
example for other agricultural communities across the world.
We hope this paper launches a larger dialogue on the monumental
challenge of sustainable food production for the next forty years and
opportunities for the AgTech sector to help solve this challenge. We
look forward to hearing your thoughts and ideas on these important
topics.
II. Global Challenges for Agriculture: Producing More With Less Impact
Over the next 40 years, land, energy, water, and weather
constraints will place unprecedented pressure on mankind's
ability to access its most basic goods--food, fuel, and fiber.
Humanity must now produce more food in the next four decades
than we have in the last 8,000 years of agriculture combined.
And we must do so sustainably. (``The 2050 Criteria,'' World
Wildlife Fund)
The global agricultural system faces tremendous challenges. The
United Nations Food and Agriculture Organization (UN FAO) projects that
food production must increase by 70 percent over the next forty years
to satisfy increasing demand due to population growth and rising
economic prosperity (Conforti, 2011). The main challenge of global
agriculture often is framed in terms of feeding a growing population,
which is expected to increase from seven billion people today to
approximately nine billion in 2050.
At the same time, there is limited opportunity to expand the land
used in agricultural production, and agriculture also must deal with
environmental risks such as climate change. To succeed in sustainably
increasing food production, major innovations in AgTech are required
that increase agricultural productivity and improve the efficiency and
resiliency of the entire food system.
Figure 1. Projections for rising global demand for crops and
declining arable land per capita.
While many variables will determine the food demanded in 2050 and
the ease with which that food can be produced, the general trends
suggest that we will need significantly more food while facing an
increasingly hostile environment due to climate change and diminishing
resources. Projections from IHS Global Insights show large increases in
the global demand for corn and soybeans, while the amount of arable
land per capita continues to decline due to population growth and urban
development. The UN FAO projects that both per capita and total demand
for cereals, meat, and oil crops will rise by 2050, with little
increase in the amount of arable land. Climate change will pose a large
challenge to these projections: the International Food Policy Research
Institute (IFPRI) projects that climate change impacts will nearly
double the price of corn, rice, and wheat. Figures 1-3 showcase these
projections.
Key Variables Influencing Agricultural Production from UN FAO's ``World
Agriculture Towards 2030/2050: The 2012 Revision''
Source: HIS Global Insights, Agriculture Division.
Figure 2. Projections for key agricultural variables in 2050.
Source: IFPRI, ``Food Security, Farming, and Climate Change to
2050,'' policy seminar, December 1, 2010.
Figure 3. Projected impact of climate change on crop prices.
Recently, Oxfam commissioned modeling to make estimates about what
food prices would look like twenty years from now, and determined that
under normal circumstances, food commodity prices are likely to
increase about 50 percent between now and 2030. And if estimates of
climate change are factored in, food prices could be up to 100 percent
higher than they are at present. This would put enormous pressure on
the world's population and especially its poor.
Source: Alexandratos & Bruinsma, "World Agriculture Towards 2030/
2050: The 2012 Revision," UNFAO, 2012.
Figure 4. UN projections for urban and rural changes in population
Projected changes in global mean consumption
The Key Demand Drivers: Population Growth, Rising Incomes, and Demand
for
Renewable Energy
However, the food shortfall challenge will be made even more
difficult by the demographic shift in incomes occurring as the
population rises; not only will there be more people overall, but more
wealthy people who demand more food with greater resource requirements.
Figure 4 shows that the fastest growing segment of world population
is urban in the developing world. Billions of people already have moved
from the rural country side into rapidly growing megacities, and
billions more are expected to make this transition over the next forty
years.
As they gain affluence through rising incomes, the emerging middle
classes of the developing world are consuming more meat, fish, dairy,
and processed foods, all of which require higher levels of input
resources and much higher levels of overall agricultural production.
As a case study of rising affluence driving changes in dietary
preferences, consider Taiwan. Between 1975 and 1990, Taiwan's GNI per
capita rose from $3,368 to $8,325. In this same period, per capita
annual meat consumption rose from 30 kg to 70 kg (see Figure 5). A
similar trend emerged in China over the past thirty years, with annual
per capita meat consumption growing from 9 kg to 58.2 kg.
Sources: Taiwan Council of Agriculture, China Statistical
Yearbookand Nomura Global Economics.
Figure 5. Changing dietary preferences in Taiwan.
A consequence of this rapid growth in meat intake is that China now
consumes twice as much meat as the United States. Figure 6 shows the
total consumption of meat in China relative to the United States. While
Chinese per capita meat consumption currently sits at 58.2 kg per year,
U.S. per capita meat consumption is double that at 120.2 kg per year.
With increasing populations, even small shifts in meat consumption in
the developing world can have large aggregate impacts on total demand.
Source: Basch et al., ``Harvesting Opportunities for a Sustainable
Food Supply.''
Figure 6: Total meat consumption in the United States and China.
Increased demand for meat poses a host of challenges to the global
agricultural system, as livestock requires up to 8 kilograms of feed
for every kilogram of meat produced (see Figure 7 for requirements
based on type of meat). Significantly more water is required to produce
a kilogram of meat than a kilogram of plant crops.
Source: Basch et al., ``Harvesting Opportunities,'' SAM Robeco
2012.
Figure 7. Animal feed requirements per kg of protein.
Meat production's high energy, water, and other resource costs thus
lead to direct competition between crops grown for direct human
consumption and crops grown as inputs for raising livestock or fish in
aquaculture.
Biofuels also will be a huge source of competition for diminishing
resources available for food production. According to the International
Energy Agency, biofuel production will see an 800 percent increase
between now and 2050. While much of that biofuel will come from nonfood
crops and second-generation production techniques such as cellulosic
ethanol, most of the current supply of biofuels and production in the
near term will provide direct competition with resources used to grow
crops for human consumption and feed for livestock. Projected growth in
biofuel demand also is expected to require more than triple the land
currently used for production, as shown in the bottom graph of Figure
8, further intensifying competition between food crops and biofuel
crops.
Source: International Energy Agency, ``Technology Roadmap: Biofuels
for Transport,'' 2011.
Figure 8. Demand for biofuels (top) and resulting demand for land
(bottom).
Planetary Boundaries and the Risk Posed to Agriculture
In order to continue sustainably, agriculture must exist within a
stable environment. Like other biological systems, agriculture is
dependent upon earth's biosphere for resources, such as water and soil.
Much of current agriculture also is dependent on manmade inputs like
synthetic fertilizer. However, global environmental challenges threaten
the sustainability of these inputs.
Recent advances in earth systems science have yielded a new
understanding of processes that threaten the stability of the earth's
current biosphere conditions. A landmark 2009 study in the journal
Nature first proposed the concept of ``planetary boundaries,''
geophysical thresholds that, if crossed, could be dangerous for
humanity (Rockstrom et al., 2009). Some of these planetary boundaries,
such as climate change and biodiversity loss, are fairly well known.
Other boundaries, such as the nitrogen cycle and global land use
change, have received relatively little attention as issues of global
concern. The full list of planetary boundaries and their proposed
constraints is included in Figure 9 below.
Source: Rockstrom et al., ``A Safe Operating Space for Humanity,''
Nature 461 (2009).
Figure 9. Planetary boundaries relevant to the global agriculture
system.
* Proposed Planetary Boundaries (starred are relevant to
ag, red have been crossed)
Six of the proposed planetary boundaries are especially relevant to
global agriculture:
Climate change: modern agriculture produces several
greenhouse gases, including carbon dioxide, methane, and
nitrous oxide. Agriculture contributes 13.5 percent of global
GHG emissions (IPCC, 2007).
Biodiversity loss: agriculture depends on a unique ecosystem
of bacteria, fungi, and other microorganisms present in the
soil, and this ecosystem often is disrupted by modern
agriculture activities.
Nitrogen cycle: the production of nitrogen-based fertilizer
through the Haber-Bosch process removes roughly four times the
atmospheric N2 recommended in the proposed boundary.
Phosphorus cycle: the mining of finite sources of P and its
concomitant application as fertilizer with subsequent erosion
into rivers, estuaries and oceans. Nitrogen and phosphorus
contribute to eutrophication.
Global freshwater use: freshwater usage can grow only by
1,400 km-3 per year, and agricultural production accounts for
roughly 92 percent of total human water usage (Hoekstra &
Mekonnen, 2012).
Global land use: agricultural cropland is 11.7 percent of
total global land cover and must not exceed 15 percent, leaving
limited land available for agricultural expansion.
Demand for food, fiber, and energy will continue to rise throughout
the coming decades, and agriculture's impact on planetary boundaries
also likely will rise. However, crossing the planetary boundaries is
not sustainable in the long term, as it will trigger geophysical shifts
that will decrease agricultural production and lead to other
devastating impacts. Ultimately, humanity must operate within the
planetary boundaries to allow for a stable global environment and a
sustainable civilization.
AgTech innovations can help to reduce or even eliminate the
negative global environmental impacts of agriculture by reducing the
fossil fuel, fertilizer, water, and land requirements for food
production. Increasing resource efficiency can help to ensure a more
sustainable and more productive food system.
The Dream of the ``Evergreen Revolution''
The goal of increasing agricultural production by 70 percent while
not pushing the global environment beyond the nine planetary boundaries
presents an unprecedented challenge for humanity. We believe innovation
in AgTech has the potential to meet both of these challenges, but we
will need a new revolution in sustainable agricultural production for
this to happen.
The Green Revolution of the mid-twentieth century provides a recent
example of what can happen through technological innovation. In the
1960s, scientists grew increasingly concerned about the growing world
population and warned that mass famines were imminent. Yet since 1960,
the world population has doubled while the food supply has tripled (UN
Food and Agriculture Organization, 2012). Even more astounding, land
under cultivation only grew by 12 percent from 1960 until today; most
of the growth in yields came from increases in productivity. The Green
Revolution saved many ecosystems from destruction, for without this
dramatic increase in productivity, hungry nations likely would have
converted more rainforests and wetlands to cropland.
However, the Green Revolution had large environmental consequences.
Improvements in yields from the Green Revolution required heavy usage
of fertilizer, disrupting the nitrogen cycle and leading to
eutrophication and ``dead zones'' of oxygen-deprived, largely lifeless
areas in the ocean. Green Revolution increases in yields also relied on
chemical herbicides and pesticides, contributing to local air and water
pollution. In addition, Green Revolution crops demanded large amounts
of irrigated water, which in some areas has dramatically lowered water
tables and depleted aquifers. Finally, the various technologies used in
the Green Revolution, from fertilizer to herbicides to irrigation, all
require large amounts of fossil fuel energy, leading to further
greenhouse gas emissions and climate change.
Our new agricultural revolution must be an ``evergreen
revolution,'' one that increases food production while ensuring
environmental sustainability. It must go further than reducing
agriculture's negative impacts; ultimately, agriculture must positively
contribute to the global environment.
Johan Rockstrom, lead author of the group of scientists who created
the planetary boundaries concept, proposes the following global goals
for an ``evergreen revolution'' (Rockstrom & Karlberg, 2010) in Figure
10 below:
Source: Rockstrom & Karlberg, ``The Quadruple Squeeze: Defining the
safe operating space for freshwater use to achieve a triply green
revolution in the Anthropocene,'' Ambio 39 vol. 3 (2010), 257-65.
Figure 10. Global goals for an ``evergreen revolution'' in
agriculture.
Meeting these goals requires AgTech innovations that can produce
food with significant improvements in resource efficiency. To put it
another way, we will need to produce more units of output with fewer
units of input. Through innovations along the entire agriculture value
chain, we can increase the productivity of our farming systems while
simultaneously transforming agriculture into a source of environmental
health. But achieving the dream of the evergreen revolution will not be
easy; it will require sustained investment, increasing collaboration
and enlightened public policy. We also must know the current progress
of innovations in AgTech, the subject of the next section of this
paper.
III. An Overview of the AgTech Sector
The global imperatives presented by the soaring demand for food and
the danger of crossing planetary boundaries underscore the need for an
``evergreen revolution'' in agriculture. This revolution largely will
be driven by innovations in sustainable agriculture technologies. In
this paper, we refer to this sector as ``AgTech,'' with a clear
implication of environmental, social, and economic value. AgTech
describes innovative technologies in the agricultural sector that
demonstrably enhance the sustainability of the practice by increasing
productivity, improving the efficiency of resource use, and reducing
ecological impacts. They also yield sustained or enhanced profitability
to investors by increasing the long-term value of ag production.
Global agricultural production is far from monolithic, and involves
many different production methods ranging from the advanced technology
and high-yield mainstream U.S. model to low-yield subsistence farming,
with many variations in between. In this paper, we will focus solely on
advanced technology agricultural production, as we believe that this is
the best method to produce 70 percent more food while also respecting
the planetary boundaries for climate change, biodiversity, nitrogen,
water, and land. With this focus, our view of AgTech will center on
North America, where adoption of advanced technology for agriculture is
most prevalent.
Recent trends in U.S. agriculture illustrate the potential for
improvements in AgTech to move us toward meeting the global imperatives
of the ``evergreen revolution.'' Figure 11 indicates changes in
environmental impact of three U.S. crops (corn, soy, and wheat) over
the last twenty-five years. While productivity has risen for these
three crops, the environmental impact of growing them has decreased.
Corn and soybeans show greater improvement than wheat because of the
adoption of biotechnology products and techniques made possible by
these products, such as no-till agriculture.
However, these diagrams also represent the environmental impact per
unit of production, meaning that as production has increased, the total
aggregate environmental impact still has continued to rise. As the
planetary boundaries framework shows, rising aggregate environmental
impacts are not sustainable. Further innovations in AgTech will be
necessary if the U.S. agriculture sector is to achieve full
environmental sustainability at the production levels needed to meet
the world's growing demand.
Source: Field to Market, 2012 Environmental and Socioeconomic
Indicators Report.
Figure 11. Resource efficiency and environmental sustainability
improvements for three U.S. crops.
The AgTech Value Chain
In order to better understand the potential for AgTech innovations,
we crafted an AgTech value chain diagram that traces inputs to their
final products. This value chain contains seven intermediary steps:
physical inputs, information inputs, plant farming, animal farming,
bio-based processing, food processing, and logistics (see Figure 12).
The value chain can produce three final products: fossil-fuel
substitutes (such as biofuel), plant-based food, and animal-based food.
Each of the steps in the supply chain has inefficiencies and
environmental impacts that must be improved if global agriculture is to
reach the goals of an ``evergreen revolution.'' Thus, each step in the
value chain has the potential for innovation.
Figure 12. The AgTech value chain.
One Vision for AgTech: Integrating Genetics, Physical Inputs, IT, and
Smart
Machinery
Innovations in AgTech do not need to be constrained to only one
step in the value chain; rather, the most disruptive breakthroughs in
AgTech may come from combining innovations in multiple areas. One
particular exciting illustration of this combination is an idea known
as ``integrated farming systems'' that will integrate genetics,
physical inputs, IT sensing, and smart machinery. Through advances in
software and environmental testing, farmers will be able to create
custom field prescriptions for seeds, fertilizer, pest controls. Smart
machinery then will carry out the prescribed treatment, all the while
collecting further data that will provide feedback to the farmer. This
data also will allow seed and farm input companies to develop custom
products for farmers. Figure 13 demonstrates this AgTech vision.
The idea of ``integrated farming systems,'' which currently is
being advanced by several established companies and by entrepreneurs,
still is in early development. This idea of combining advances in
genetic engineering, information technology, and smart machinery likely
will be pursued by many established companies and startups due to the
vast potential for investment and innovative new products in these
three areas.
Source: ``Precision Planting/Monsanto Field Scripts program,''
Precision Planting 2012.
Figure 13: An illustration of ``Integrated Farming Systems,'' a
vision of potential AgTech innovations.
Examples of AgTech Startup Activity
To provide an overall state of the innovation ecosystem for AgTech,
we analyzed a dataset from the agriculture venture capital group
Cultivian of over 900 AgTech startup companies from around the world.
This dataset consists of companies that Cultivian considered investing
in for their funds, and was obtained through direct contact,
conferences, referrals and other methods. We have removed any
identifying information from the data and present only aggregate
information.
We categorized each of the startup companies by its position in the
AgTech value chain. After sorting the data, we were left with 738
companies that fit within the value chain framework. The database also
contains the year that Cultivian first became aware of the venture or
when the venture was seeking investment. We used this as a proxy to
signify the year when the venture perceived itself as mature enough to
seek funding. From this data, we created Figure 14, which summarizes
Cultivian's deal flow from 2006 until 2012.
From this dataset, it is evident there is robust stream of new
business startup activity occurring across the agricultural value chain
in technology inputs, crop production, animal production, processing,
and manufacture and distribution. This innovation activity has occurred
over a sustained period of six years, averaging 132 startups per year
for a single venture firm.
Figure 14. Summary of Cultivian AgTech dataset.
To showcase some of the many innovation opportunities in the AgTech
sector, we chose four examples of startup companies from different
steps in the AgTech value chain. The quoted description for each
company comes directly from Cultivian's portfolio website.
While we believe that these four companies are a good
representation of the diversity of activity in the AgTech sector, the
inclusion of these companies should not be taken as an endorsement.
AgTech and the Controversy Surrounding Genetically Modified Foods
We would be remiss if we did not acknowledge an ongoing debate
around genetically modified (GM) foods. GM foods have been sold
commercially for about two decades in the United States and there is
broad scientific consensus that GM foods do not pose greater risk than
conventional foods. However, a simmering debate remains about the
potential adverse impacts these products could have on the environment
and human health, with public opinion deeply divided over safety
concerns.
While we recognize the importance of reviewing a wide range of
scientific studies and opinions on the use of GM foods, it is beyond
the scope of this white Paper. However, we should note that no major
scientific body ever has found that GM foods pose a risk to public
health. The U.S. National Academy of Science noted that after billions
of meals served with GM ingredients, ``no adverse health effects
attributed to genetic engineering have been documented in the human
population.'' European scientific agencies agree with this conclusion,
and the scientific advisor to the European Commission has stated that
``there is no more risk in eating GMO food than eating conventionally
farmed food.''
Further, scientific analysis of the environmental impact of GM
crops has, to date, not found evidence of environmental harm caused by
the products. Instead, a U.S. National Academy of Science 2010 report,
``Impact of Genetically Engineered Crops on Farm Sustainability in the
United States,'' found that GM crops reduced agriculture's
environmental impact, reducing insecticide and toxic herbicide use;
increasing the use of conservation tillage and no-till farming;
reducing carbon emissions and soil runoff; and improving soil quality.
Given the monumental challenge of sustainably producing 70 percent more
food over the next forty years, we believe that no potential tools
should be excluded. Without the use of GM foods or other biotech
products, meeting the global agriculture challenge will become
significantly more difficult.
As outlined in this paper, it is our strong belief that during the
twenty-first century, humankind will be confronted with an
extraordinary set of challenges. It is essential that we improve food,
feed, fiber, and energy production while reducing environmental impact
and enhancing societal development. Meeting these challenges will
require new knowledge generated by continued scientific advances, the
development of appropriate new technologies, and a broad dissemination
of this knowledge and technology, along with the capacity to use it,
throughout the world. It also will require that wise policies be
implemented through informed decision making on the part of national,
state, and local governments in each nation. Regulatory oversight of
technology development should continue to be science-based, while
recognizing the responsibility of government, industry, and the
scientific and medical communities to educate the public and improve
availability of unbiased information.
Genetically modified foods have the potential to solve many of the
world's hunger and malnutrition problems, and to help protect and
preserve the environment by increasing yield and reducing reliance upon
chemical pesticides and herbicides. Yet there are many challenges ahead
for governments, especially in the areas of safety testing, regulation,
international policy, and food labeling. Many people feel that genetic
engineering is the inevitable wave of the future and that we cannot
afford to ignore a technology with such enormous potential benefits.
However, we must proceed with caution to avoid causing unintended harm
to human health and the environment as a result of our enthusiasm for
this powerful technology.
The AgTech space has the unique opportunity to gain ground by
counteracting the fearmongering about genetically engineered crops and
bringing about more openness, education, and transparency while working
with farmers and innovators. While biotech advances in medicine and
pharmaceuticals have been well received by the public, individuals view
innovations in plants and food more skeptically. We must bring about a
broad-based understanding of the enormous challenges that lie ahead to
create meaningful change. It is essential to bring a congruence of
pragmatic innovators, humanitarians, and environmental organizations
together with entrepreneurs and ag companies to achieve the common
objective of producing adequate food for the next century.
IV. The Investment Case For AgTech
The AgTech sector has tremendous opportunities for investment. The
demand for sustainable food, fiber, and energy production has been
growing throughout the twenty-first century, making agriculture a
stable and reliable investment. Below are five reasons why we believe
AgTech innovation is a smart investment:
1. Grain consumption is increasing worldwide.
2. Demand for sustainable energy is growing.
3. Access to quality arable land and soil is constrained.
4. Access to adequate water quality and quantity is decreasing.
5. Current cultural practices are not sustainable in the face of
increasing environmental challenges.
Figure 15 provides a glimpse of the various demand drivers and
supply constraints for the entire agriculture system. Because of the
factors shown on the figure's right side, demand for agricultural
products will continue to rise, while the supply constraints will make
meeting the demand extremely difficult. AgTech innovations that help
meet these challenges will offer investors and entrepreneurs a fertile
opportunity for investment and invention.
Figure 15. Demand drivers and supply constraints in the
agricultural system.
Logistics, which coordinates the movement of ag products and
support availability and the timely balance of supply and demand, is
another area essential to the success of AgTech innovations. Because of
its critical role, we have given logistics special prominence in the
above graphic.
Some Areas of Opportunity for Ag Tech Investment
The AgTech sector holds many opportunities for investment, with
innovation needed throughout the entire value chain. Specific areas
available for investment in this sector include:
Animal Nutrition & Health
Aquaculture
Bioenergy
Biological Pest Control
Biomaterials
Bionutrition
Biotechnology
Crop Nutrition
Crop Protection
Decision Support Technologies
Feed Efficiency
Fertilizer Efficiency
Food Traceability and Safety
Food Storage and Preservation
Information Systems
Integrated Pest Management
Irrigation Efficiency
Land Management
Machinery
Precision Agriculture
Robotics
Seeds and Genetics
Soil Amendments
Soil Health
Sustainable Production Systems
Technology Transfer
Urban Agriculture
Water Quality and Preservation
Waste Mitigation and Manure Management
Changes in U.S. Public and Private AgTech R&D Spending
Throughout most of the twentieth century, much research and
innovation in agriculture was funded with public money. Since the early
1980s, however, public expenditures on agriculture R&D have stagnated,
even as demand for ag products continues to rise. As public funding has
ebbed, new flows of capital from the private sector have increased.
This is particularly evident in developed countries like the United
States, where private spending on agriculture R&D has been consistently
higher than public spending for the past three decades. The decline in
public R&D is a trend affecting primary research in the United States
for all types of science and is not just an issue for AgTech. However,
the needs and opportunities present in the AgTech sector deserve
special attention from policymakers (see Figure 16).
Sources: (above left) USDA, ``Background: Agriculture Depends on
Research and Technology Development,'' 2012; (above right) Fuglie et
al., ``The Contribution of Private Industry to Agricultural
Innovation,'' Science 338, no. 6110 (2012).
Figure 16. Trends in public and private AgTech R&D spending in the
United States.
The growth of private R&D spending on AgTech illustrates a simple
and, on its face, obvious point: investing in AgTech offers solid
opportunities for innovation and value creation. Corporations and
private investors largely are rational in their decision making,
generally only investing capital when they have a high degree of
confidence of a good return. When entrepreneurs and private industry
develop business models that capture the value of needed AgTech
innovations, they have a tremendous opportunity to achieve high
returns. Indeed, this has happened with the development of
biotechnology. The right-hand graphic in Figure 16 shows the dramatic
increase in private R&D spending in crop seed and biotechnology between
1979 (shortly before the U.S. Supreme Court allowed for patenting of
biotechnology traits) and 2006; this research spending occurred because
of the opportunity to capture value from novel applications of genetic
engineering.
The Important Contribution of Private R&D Spending to Global
Agricultural Growth
Global gains in agricultural productivity realized during the Green
Revolution of the 1960s, 1970s, and 1980s were driven by input
intensification and crop-area expansion. In comparison, the
productivity gains achieved in the 1990s and 2000s largely were driven
by innovations (total factor productivity) and less from input
intensification or new land being brought into cultivation. Figure 17
highlights the shift away from heavy spending on increasing fertilizer
and pesticide inputs to investments in genetic engineering and other
high-tech improvements that increased yields with fewer units of input.
This trend towards greater resource efficiency is encouraging, but much
more needs to be done.
Source: Fuglie et al., ``Productivity Growth and Technology Capital
in the Global Agricultural Economy,'' Productivity Growth in
Agriculture 2012.
Figure 17. Relative contributions to growth in global agricultural
production.
With public R&D spending in advanced developed countries stagnating
or declining, private investment may be the best way to spur further
innovations in AgTech and achieve the growth in production needed to
sustainably meet the rising demand for ag products. Figure 18
demonstrates that private sector investment in food and agriculture has
increased steadily in the past decade, reaching $8 billion annually for
crop inputs and $2 billion annually for animal inputs by 2010. However,
private investment must increase even further if advances in innovation
are to continue.
Source: Fuglie et al.
Figure 18: Global private investment in food and agriculture
research.
Overall Comments on the Future of AgTech Investment
As can be seen from the top-level investment data in Figure 18 and
the micro-level Cultivian data, AgTech investments are being made
across the supply chain. There also are interrelationships between
supply chain categories. For example, the value of new seed traits may
not be fully realized without other equipment and information
innovations needed to advance precision agriculture. Additionally,
advances in logistics will be needed to segregate outputs as crops
become optimized for specific uses such as animal production, human
nutrition, or bio-based substitutes. Further, as climate change
negatively affects current production methods, still more innovations
will be needed.
Crucially, demand necessitates innovations. Over the past five
years, innovations in agriculture technology (precision ag innovations,
data analytics and processing, platforms for the collection and
distribution of complex data streams, and IT-driven extensions) are on
the rise in the heartland, and in California and North Carolina.
Pressing needs and challenges often fuel research and innovative
outcomes in various global farming hubs. New Zealand is one of the
world's largest producers of dairy as well as lamb and sheep, while
Australia is a leading producer of wheat and animal feed. Investment
authorities and private wealth funds from Singapore, Dubai, and Qatar
are beginning to take notice of geographic centers with farming
capabilities, including those in China, Brazil, and Chile.
Government policies, regulations, incentives, and penalties will
play an important role in determining the AgTech sector's future. It
either could result in growth spurts or constrain innovation and
entrepreneurial activity in the sector, and investors will need to stay
abreast of how these are impacting returns.
We also want to highlight a potential trend where investors may
have a more diverse set of return motivations. Economic returns still
dominate, but goals relating to social consciousness and environmental
returns also are on the rise. These types of returns always have
existed and historically have received philanthropic and government
support. However, new sources of capital are emerging that seek
environmental and social returns or, at least, having these returns
blended with economic returns, including: social entrepreneurship
innovations funded by socially conscious investors; declared socially
conscious corporations; socially conscious innovator and corporation
partnerships; consumers making purchasing choices based upon
environmental and social factors; crowd funding; and others. As these
trends gain momentum, there may be opportunities in the AgTech sector
to translate shared social returns to individual economic returns.
Overall, we see the AgTech sector evolving through an increasing
number of agriculture technology entrepreneurs connecting with angel,
venture capital, corporate, philanthropic, government, and other
investors to create an even more vibrant sector within the global
economy. We foresee many ``green'' opportunities across the supply
chain categories to suit the size and characteristics of different
entrepreneurs and investor classes. The attributes of a potential
investment opportunity and associated return on investment also will be
key. As always, the most disruptive and quickly scalable breakthroughs
will deliver the most handsome economic, social, or environmental
returns. Investors and entrepreneurs will have many opportunities to
collaborate given the magnitude of the need and the return
opportunities.
V. The Opportunity for AgTech in the U.S. Heartland: An Example of
Regional Assets and Expertise to Drive Innovation
While the Ever-Green Revolution is a global challenge and AgTech is
broadly applicable across North America, the AgTech innovation required
to achieve sustainable increases in productivity will happen through
research and entrepreneurial networks at a regional scale. We believe
that the American heartland is one of the regions especially well-
suited for the challenge of developing a robust innovation ecosystem in
AgTech. The American heartland already has the research and innovation
hubs needed to develop the new AgTech products and processes, and is
beginning to develop the entrepreneurial hubs needed to grow these
innovations to scale. But it will need to do more if it hopes to be the
center of the emerging AgTech revolution and capture the value of the
resulting products and processes.
Defining the U.S. Heartland
For our purposes, we define the U.S. heartland as the collection of
midwestern states that generate the highest concentration of
agriculture-related economic value in the United States. Commonly
referred to as America's heartland, or the Midwest, this region
consists of twelve states in the north-central United States: Illinois,
Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North
Dakota, Ohio, South Dakota, and Wisconsin. The area has some of the
richest farming land in the world, and has come to be known as the
Nation's ``breadbasket.''
Figure 19: U.S. and heartland region net farm income by state.
As a group, the twelve states listed in Figure 19 generated $60.3
billion in net farm income in 2011, or 51.2 percent of all U.S. net
farm income. The heartland produces 85 percent of U.S. corn, 85 percent
of U.S. soybeans, 70 percent of U.S. pork, 45 percent of U.S. eggs, 33
percent of U.S. milk, and 30 percent of U.S. beef. This high quantity
of production makes the heartland important in global commodity
markets, as heartland corn and soy comprise 27.2 percent and 29.75
percent of global production, respectively.
Heartland Assets for AgTech
The heartland is one of the world's most fertile crop production
areas, with abundant soil and a climate that currently is amenable to
producing large amounts of food. In 2006, a study by the Potsdam
Institute for Climate Impact Research simulated what optimal global
agricultural production would look based solely on climate, soil, and
water constraints, without any regard to existing ag infrastructure.
The results of this simulation, displayed in Figure 20 below, show that
the U.S. heartland and central Europe are the two most fertile areas in
the world. Thus, the heartland's unique geography explains its high
concentration of farms of the United States, as shown in Figure 21.
The heartland also has unique advantages in its transportation and
processing infrastructure. Goods can be moved by rail, truck, or barge,
and transportation networks are concentrated within the region (see
Figure 22). Farm products can be shipped from any coast, reaching the
Pacific Ocean by rail, the Gulf of Mexico via the Mississippi River,
and the Atlantic Ocean via the Gulf of Mexico. Value-added products,
such as ethanol or biofuels, can be processed directly in the heartland
due to its concentration of processing facilities, as shown in Figure
23.
Source: Kahn & Zaks, ``Investing in Agriculture: Far-Reaching
Challenge, Significant Opportunity,'' Deutsche Bank Group, 2009.
Figure 20: Simulation of globally optimized agricultural
production.
Figure 21. Concentration of cropland in the United States.
Source: ``Freight Analysis National Freight Statistics,'' U.S.
Department of Transportation 2007, USDA 2012.
Figure 22. U.S. transportation networks for shipping freight.
Source: ``Production by County and Location of Ethanol Plants,''
USDA, 2012
Figure 23. Location of ethanol processing plants in the United
States.
In addition, the heartland has a strong concentration of human
capital and research infrastructure focused on AgTech, including land
grant public universities and prestigious research institutions. The
land grant universities provide a unique network of cutting-edge basic
science platforms, which are catalyst of innovation, knowledge
transfer, entrepreneur development and a well-trained workforce.
An Opportunity for the Heartland: Building AgTech Entrepreneur Support
Systems
It seems only natural that the heartland would serve as the
epicenter for development of a comprehensive innovation ecosystem and
entrepreneurial economy around the emerging AgTech sector. However,
several factors are holding back such a collaborative effort. First,
the heartland does not have a strong regional identity, with various
states claiming sole ownership of the ``midwestern'' identity. This
leads to competition between states and a narrowness of vision, only
looking within the state's borders for beneficial economic
opportunities and preventing larger interstate projects. The heartland
also has resisted letting go of its current economic practices, having
experienced a very prosperous twentieth century after the rise of
organized labor and American superiority in global agriculture. While
globalization has upended this established economic model, Americans in
the heartland often are hesitant to let go of the recipe that led to
success in the past. Finally, the open culture of investment of
innovation that exists in places like San Francisco or Boston does not
exist in much of the Midwest, which maintains a more stable and
sometimes hierarchical social order.
Figure 24: Heartland land-grant universities and research centers.
These cultural dynamics can be a huge obstacle to building
successful innovation ecosystems and entrepreneurial economies, but
Midwestern cities already are starting to have some success. Two of the
most hopeful places for entrepreneurial activity in the AgTech sector
are the St. Louis and Kansas City, Missouri, metropolitan areas. St.
Louis has invested in institutions like the Danforth Center and BRDG
Park, and the combination of its universities and the large AgTech
research company, Monsanto, have helped it develop a fairly robust
economy around innovations in the plant sciences. Kansas City has
focused on animal health, and traditionally has had expertise in the
areas of livestock and animal sciences. While Kansas City itself does
not have any animal health research centers, the larger region
incorporates top-tier veterinary schools at the University of Missouri,
the University of Kansas, and Kansas State University. Both cities now
are in the early stages of developing more comprehensive
entrepreneurial support systems for their respective focus areas.
Some of the world's leading agribusiness, chemical, and farming
companies are located in the heartland: Dow Chemicals, an American
multinational chemical corporation headquartered in Midland, Michigan;
Monsanto, the world's largest seed comp agricultural biotechnology
corporation headquartered in Creve Coeur, Missouri; Deere & Company,
commonly known by its brand name John Deere, one of the world's largest
manufacturers of agricultural machinery, based in Moline, Illinois; the
Archer Daniels Midland Company, an American global food-processing and
commodities-trading corporation, headquartered in Decatur, Illinois;
Cargill, an international producer and marketer of food, agricultural
and industrial products and services, based in Minneapolis; And Procter
& Gamble, a multinational consumer goods company headquartered in
Cincinnati. These are just a few of the leaders in the agricultural and
food spaces, and with their combined forces, they can make a real
difference in the amalgamation of clean energy, sustainable
agricultural practices and productivity, and advances in new
technology. These large players have the potential to create the right
ecosystem and inspire new startups in their communities.
Many of the developing nations look up to the U.S. heartland in
terms of advances in farming technologies and mechanization of their
agriculture sectors. AgTech entrepreneurs and innovators can get a head
start by incubating in close proximity to these advanced companies.
Similar to the technology prowess of Silicon Valley, the financial
leadership of New York, or the entertainment hub of Los Angeles,
American's heartland has the right ingredients to be a powerhouse in
the agriculture technology space.
VI. Recommendations
We conclude this paper with five major recommendations:
1. Educate and promote the opportunities provided by AgTech.
2. Build and support regional AgTech innovation support systems with
``agripreneur'' champions.
3. Enable the transition to new technology around the theme of
``Green and Lean Efficiency.''
4. Engage nonpartisan groups.
5. Develop human capital to meet the needs of tomorrow.
1) Educate and promote the need and opportunity for AgTech and
sustainable agriculture.
For entrepreneurs to build AgTech companies, for investors to
direct capital to AgTech ventures, and for public officials to promote
AgTech development through public policy, they first must know that
AgTech exists. They must learn about the major challenges of meeting
rising global demand for ag products while staying within the planetary
boundaries. And they must realize how the United States, and in
particular the heartland, can play a hugely constructive role in moving
AgTech forward.
2) Build and support regional AgTech entrepreneur support systems with
``agripreneur'' champions.
Two sets of factors will be needed to create an AgTech
entrepreneur-friendly culture. The first factors needed are social
relationships and a collaborative culture, which we believe to be the
most essential elements in building an effective entrepreneur support
system. The support system should be led by an AgTech entrepreneur
champion. This person must serve selflessly for the benefit of the
whole, contributing countless hours toward building a system that will
help others succeed. The champion must have deep expertise in the area
of entrepreneurial activity, but must be willing to set aside his or
her ego and let others take credit. Such a champion will create a
collaborative, grassroots entrepreneurial culture. As this culture
matures, deal quality and volume will grow naturally, creating a
scalable culture with many investment opportunities. For AgTech, such a
champion must be an ``agripreneur,'' someone completely immersed in the
agriculture system across the complete value chain and with deep
entrepreneurial experience in agricultural innovation.
Regional agripreneur champions should be consciously and regularly
(at least quarterly) connected across regions. The purpose should be to
enhance the overall network, and the goal to share ideas about how
individual regions are developing and supporting entrepreneurs. As the
collective support systems gain momentum, entrepreneurial activity and
needed innovations will blossom. Thus, agripreneurs will attract and
develop more agripreneurs.
The second set of factors that needs to be created relates to
economic development items. These include infrastructure and capital
formation. Some of these assets already exist in the some regions and
more will be needed as the AgTech entrepreneur culture grows and
scales. Economic development investments usually are made regionally
and should be guided by direct feedback from agripreneurs.
``Agripreneur'' champions particularly are needed in the heartland,
where the culture of entrepreneurship and collaboration is not as
strong as on the coasts. There already are many AgTech startups in the
heartland: in the Cultivian dataset, 305 companies out of the 800 full
companies represented in the database were headquartered in the
heartland, and 200 were located in the ``corn belt'' subregion (Iowa,
Illinois, Indiana, Missouri, and Ohio).
Figure 25. Map showing the number of AgTech startups per state in
the Cultivian dataset.
Figure 25 displays the number of AgTech startups in each state,
which shows that, overall, AgTech entrepreneurial activity is higher in
the heartland than in any other U.S. geographic region. The challenge
is that most of this activity appears to be separate or confined by
state boundaries. Agripreneur champions will unite the independent
startup efforts of AgTech ventures into a movement, and hopefully
someday will develop a ``Silicon Valley of AgTech'' in the American
heartland.
3) Enable the transition to new technology around the theme of ``Green
and Lean Efficiency.''
The term Green Revolution was coined in 1968 to indicate
revolutionary improvements in crop yield in several Asian countries.
Many of these improvements came at the cost of adverse environmental
effects in areas subjected to intensive farming. However, where
population pressure is high, there is no option except to produce more
food. Productivity must increase, but in ways which are environmentally
safe, economically viable, and socially sustainable. This has been
christened an ``evergreen revolution.''
We are shifting from scale-driven efficiency to ``green and lean''
efficiency. After sixty years of chemical control, farming now is
entering an era of responsible, transparent, and ecological control,
driven in part by consumer demand. AgTech is at the cusp of a new
revolution in which innovations in seeds, nutrition, protection, and
agronomics are merging. Experts have pointed to similarities with the
IT field, in which leading players have embraced convergence and
interdependence in Internet search, cloud storage, smartphones,
tablets, and PCs, and still carve out their own space to effectively
compete. AgTech must go through a similar revolution wherein players
will unite to implement state-of-the-art developments in crop
nutrition, crop protection, biotechnology, and agronomics, leading to
integrated agricultural productivity.
4) Engage nonpartisan groups.
Independent, nonpartisan organizations have the unique ability to
bring like-minded people and those with divergent views to the table.
Having these organizations take up the cause will help further the
common goal of providing nutritious food to a growing population in an
environmentally sustainable way. They can be instrumental in providing
connectivity to implement agri-tech best practices to farming
communities worldwide by fostering networks in which knowledge is
shared across communities.
5) Develop human capital to meet the needs of tomorrow.
The solutions that may be available to address the expected food
and water shortages likely will require expertise in the development
and application of information technology. This expertise currently is
not broadly available within the agricultural community and needs to be
developed through the whole continuum of our existing learning
institutions, including high school, trade schools, community colleges,
and higher education institutions.
VII. Conclusion
The task of sustainably increasing global food production is one of
the monumental challenges of our time. The framework of an ``evergreen
revolution'' is helpful in reminding us that, while technology has
worked to produce more food in the past, we now must produce more food
while also eliminating agriculture's negative environmental. A
successful evergreen revolution will require many actors, but in
particular, it will require entrepreneurs who are passionate about
promoting innovation and investment in AgTech.
In short, our overall objectives should be to:
Increase awareness so that more entrepreneurs and investors
can seize this opportunity while helping meet this most basic
societal need
Foster vital communities of AgTech activity across the world
focused on ``Lean and Green'' theme based on unique assets and
core competency of each region
Enable strong networks across communities so that ideas and
solutions can flow seamlessly for the benefit of all
Develop strong educational pillars so that talent and skills
are up to par to the challenge at hand.
VIII. Acknowledgements
This white paper would not have been possible without the help of
many persons in so many ways. It is the product of tireless dedication,
systematic research, constant guidance, and invaluable support rendered
by the following people.
At the outset, Sam Fiorello, chief operating officer of the
Danforth Center for Plant Science, convincingly identified an
opportunity in regard to the research paper, persuaded me to get
engaged, agreed to co-sponsor it, and provided thoughtful and
invaluable guidance on a regular basis. The germination of this idea
for a white paper came from Spencer Maughan, vice president of Venrock
Associates in Palo Alto, California. If not for their vision and
conviction, the paper would not have been brought to fruition in the
first place.
We owe profound gratitude to Adam Hasz, our talented research
fellow, who has worked tirelessly and made tremendous research
contributions in shaping the foundation of this paper. Without his
ingenuity, intellect, passion, commitment, and diligent efforts, we
would not have been able to successfully produce this thought-provoking
document.
I must express my deepest appreciation and thanks to Ken
Harrington, managing director of the Skandalaris Center at Washington
University in St. Louis, for his able guidance, many constructive
suggestions, and unwavering support since the inception of this
research project and through its completion.
In addition, I would like to thank Joseph Cornelius, PhD, for his
technical guidance and expertise in global agricultural production
systems and sustainability that contributed greatly to this paper.
Special thanks are extended to Andy Ziolkowski and Ron Meeusen from
Cultivian Ventures for advice on the research paper approach and for
providing access to valuable data that critically facilitated this
paper. We also wish to express our sincere thanks to Nandini Taneja,
program associate of LARTA, for her contribution in compiling the LARTA
data set.
I would like to acknowledge Jason Hall, former director of the
Missouri Department of Economic Development, who provided valuable
information on the current AgTech activities in Missouri. Also, I would
like to thank Kim Young, vice president of the Kansas City Area
Development Council, who provided insights on animal health investment
activities in greater Kansas City. On the same note, I would like to
express my thanks to Tom Overbay, partner at Expedite Animal Health,
who patiently provided a detailed overview of the animal health
industry and R&D practices observed.
Finally, I would like to express my special thanks to the Ewing
Marion Kauffman Foundation for support and encouragement.
Suren G. Dutia,
Senior Fellow,
Ewing Marion Kauffman Foundation.
Additional Sources
Bernick, Jeanne. ``Ag Goes Natural with Biologics,'' Farm Journal
AgWeb, June 21, 2012, http://www.agweb.com/article/
ag_goes_natural_with_biologics/.
Blumfeld, Jenna. ``New GMO-Education Site Funded by Monsanto,
Dupont.'' New Hope 360 Blog, July 31, 2013. http://newhope360.com/blog/
new-gmo-education-site-funded-monsanto-dupont.
Budzynski, Jim. Ag Innovation Showcase. St. Louis, Missouri,
September 11, 2013.
LeClerc, Rob. ``Is Agriculture the New Cleantech?'' note from CEO
of Agfunder.
National Public Radio. ``Feeding A Hotter, More Crowded Planet.''
August 12, 2011.
http://www.npr.org/2011/08/12/139579616/feeding-a-hotter-more-
crowded-planet.
http://evergreen-revolution.tripod.com/evergreenrevoldefined.html
______
Agriculture Gets Smart: The Rise of Data and Robotics
The Chairman. Thank you, Mr. Donny.
Mr. Thierer?
STATEMENT OF ADAM D. THIERER,
SENIOR RESEARCH FELLOW, MERCATUS CENTER,
GEORGE MASON UNIVERSITY
Mr. Thierer. Mr. Chairman and members of the Committee,
thank you for inviting me here today to comment on the policy
implications of the Internet of Things. My name is Adam
Thierer, and I am a Senior Research Fellow at the Mercatus
Center at George Mason University where I study technology
policy.
My message here today is condensed from a recent book, as
well as a forthcoming law review article on the Internet of
Things. My research focuses primarily on the privacy and
security implications associated with the Internet of Things
and wearable technology in particular.
The three general conclusions of my work are as follows.
First, the Internet of Things offers compelling benefits to
consumers, companies, and our country's national
competitiveness that will only be achieved by adopting a
flexible policy regime for this fast-moving space.
Second, while there are formidable privacy and security
challenges associated with the Internet of Things, top-down or
one-size-fits-all regulation will limit innovative
opportunities.
Third, with those two points in mind, we should seek out
alternative and less costly approaches to protecting privacy
and security that rely on education, empowerment, and targeted
enforcement of existing legal mechanisms. Long-term privacy
security and protection requires a multifaceted approach
incorporating many flexible solutions.
I will briefly discuss each point.
First, the Internet of Things will benefit the ``3 Cs'' of
consumers, companies, and our country. Consumers will benefit
from more of their devices being networked, sensing, and
communicating. It offers us more choices and convenience,
especially for personal health and productivity. Companies will
benefit from increased efficiencies and the ability to offer a
staggering array of new product and service options to their
customers. And our country will benefit by maintaining our
global competitive advantage in the digital economy.
The magnitude of the opportunity here is breathtaking.
Technology analysts and economic consultancies have predicted
economic benefits in the trillions of dollars.
The positive effects of the Internet of Things will
reverberate throughout every sector of the economy, and as
Progressive Policy Institute economist Michael Mandel notes, it
has the ``potential to help revive the high-growth economy.''
It will revolutionize manufacturing, health care, energy,
transportation, retailing, and various government services.
But if America hopes to be a global leader in the Internet
of Things, as it has been for the Internet more generally over
the past 2 decades, then we will have to get public policy
right first.
America took a commanding lead in the digital economy
because in the mid-1990s, Congress and the Clinton
administration crafted a nonpartisan vision for the Internet
that protected permissionless innovation, or the idea that
experimentation with new technologies and business models
should generally be permitted without prior approval.
Congress embraced permissionless innovation by passing the
Telecom Act of 1996 and rejecting archaic analog era command-
and-control regulations for this exciting new medium.
And the Clinton administration embraced permissionless
innovation with its 1997 Framework for Global Electronic
Commerce, which outlined a clear vision for Internet governance
that relied upon civil society, voluntary agreements, and
ongoing marketplace negotiations.
This nonpartisan blueprint, sketched out almost 2 decades
ago for the Internet, is every bit as sensible today as we
begin crafting a policy paradigm for the Internet of Things.
Again, the first order of business is for policymakers to
send a clear green light to entrepreneurs letting them know
that our Nation's default policy position remains ``innovation
allowed.'' Second, we should avoid basing our policy
interventions on hypothetical worst-case scenarios or else
best-case scenarios will never come about. Our policy regime,
therefore, should be responsive, not anticipatory.
Of course, privacy- and security-related challenges remain
that deserve our attention. Data is going to be moving fluidly
across so many platforms and devices that it will be difficult
to apply traditional Fair Information Practice Principles in a
rigid regulatory fashion for every conceivable use of these
technologies.
Specifically, it will be challenging to achieve perfect
notice and choice in a world where so many devices are
capturing volumes of data in real time. Moreover, while data
minimization remains a worthy goal, if it is mandated in a one-
size-fits-all way, it could limit many life-enriching
innovations.
Law must still play a role, but we are going to need new
approaches.
Policymakers can encourage privacy and security by design
for the Internet of Things and its developers, but these best
practices should not be mandated as top-down controls.
Flexibility is essential.
More privacy-enhancing tools, especially robust encryption
technologies, will also help, and Government officials would be
wise to promote those tools instead of restricting them.
Increased education is also essential, and Government
should help get out the word about inappropriate uses of these
technologies.
Existing privacy torts and existing targeted rules, like
Peeping Tom laws, will also likely evolve to address serious
harms as they develop.
Finally, the Federal Trade Commission will continue to play
an important backstop role using its Section 5 authority to
police unfair and deceptive practices. The FTC has already been
remarkably active in encouraging companies to live up to the
privacy and security promises they make to their consumers, and
that will continue.
In closing, we should never forget that no matter how
disruptive these new technologies may be in the short term, we
humans have the extraordinary ability to adapt to technological
change and bounce back from adversity. That same resilience
will be true for the Internet of Things.
We should remain patient and continue to embrace
permissionless innovation to ensure that the Internet of Things
thrives and American consumers and companies continue to be
global leaders in the digital economy.
Thank you.
[The prepared statement of Mr. Thierer follows:]
Prepared Statement of Adam D. Thierer, Senior Research Fellow,
Mercatus Center, George Mason University
Mr. Chairman and members of the Committee, thank you for inviting
me here today to comment on the policy implications of the Internet of
Things. My name is Adam Thierer, and I am a senior research fellow at
the Mercatus Center at George Mason University, where I study
technology policy.
My message today is condensed from a recent book \1\ and a
forthcoming law review article \2\ on the Internet of Things, which
refers to a world full of ``smart'' devices equipped with sensing and
networking capabilities.
---------------------------------------------------------------------------
\1\ Adam Thierer, Permissionless Innovation: The Continuing Case
for Comprehensive Technological Freedom (Arlington, VA: Mercatus Center
at George Mason University, 2014).
\2\ Adam Thierer, ``The Internet of Things and Wearable Technology:
Addressing Privacy and Security Concerns without Derailing Innovation''
(Mercatus Working Paper, Mercatus Center at George Mason University,
Arlington, VA, November 2015), which will be published in the Richmond
Journal of Law and Technology 21, no. 6 (2015), http://mercatus.org/
publication/internet-things-and-wearable-technology-addressing-privacy-
and-security-concerns-without.
---------------------------------------------------------------------------
My research focuses primarily on the privacy and security
implications of the Internet of Things and wearable technology. The
three general conclusions of my work are as follows:
1. First, the Internet of Things offers compelling benefits to
consumers, companies, and our country's national
competitiveness that will only be achieved by adopting a
flexible policy regime for this fast-moving space.
2. Second, while there are formidable privacy and security
challenges associated with the Internet of Things, top-down or
one-size-fits-all regulation will limit innovative
opportunities.
3. Third, with those first two points in mind, we should seek
alternative and less costly approaches to protecting privacy
and security that rely on education, empowerment, and targeted
enforcement of existing legal mechanisms. Long-term privacy and
security protection requires a multifaceted approach
incorporating many flexible solutions.
I will discuss each point briefly.
Benefits of IoT
First, the Internet of Things will benefit the ``3-Cs'' of
consumers, companies, and our country:
Consumers will benefit from more of their devices being
networked, sensing, and communicating. The Internet of Things
offers us more choices and convenience, especially for personal
health and productivity.
Companies will benefit from increased efficiencies and the
ability to offer a staggering array of new product and service
options to their customers.\3\
---------------------------------------------------------------------------
\3\ Michael E. Porter and James E. Heppelmann, ``How Smart,
Connected Products Are Transforming Competition,'' Harvard Business
Review, November 2014, https://hbr.org/2014/11/how-smart-connected-
products-are-transforming-competition.
And our country will benefit by maintaining our global
---------------------------------------------------------------------------
competitive advantage in the digital economy.
The magnitude of this opportunity is breathtaking.\4\ Technology
analysts and economic consultancies have predicted economic benefits in
the trillions of dollars.\5\
---------------------------------------------------------------------------
\4\ Emily Adler, ``The `Internet of Things' Will Soon Be a Truly
Huge Market, Dwarfing All Other Consumer Electronics Categories,''
Business Insider, July 10, 2014, http://www.businessinsider.com/
internet-of-things-will-soon-be-a-truly-huge-market-dwarfing-all-other-
consumer-electronics-categories-2014-7.
\5\ Gil Press, ``Internet of Things by the Numbers: Market
Estimates and Forecasts,'' Forbes, August 22, 2014, http://
www.forbes.com/sites/gilpress/2014/08/22/internet-of-things-by-the-
numbers-market-estimates-and-forecasts.
---------------------------------------------------------------------------
The positive effects of the Internet of Things will reverberate
throughout every sector of the economy, and as Progressive Policy
Institute economist Michael Mandel notes, it ``has the potential to
help revive the high-growth economy.'' \6\ It we let it, it could
revolutionize manufacturing, health care, energy, transportation,
retailing, and various government services.
---------------------------------------------------------------------------
\6\ Michael Mandel, ``Can the Internet of Everything Bring Back the
High-Growth Economy?'' (Policy Memo, Progressive Policy Institute,
Washington, D.C., September 2013), 9, http://www.progressivepolicy.org/
2013/09/can-the-internet-of-everything-bring-back-the-high-growth-
economy. (``No one can predict the ultimate course of innovative
technologies, but it appears that the Internet of Everything has the
potential to help revive the high-growth economy.'')
---------------------------------------------------------------------------
Getting Policy Right
If America hopes to be a global leader in the Internet of Things,
as it has been for the Internet more generally over the past two
decades, then we first have to get public policy right.
America took a commanding lead in the digital economy because, in
the mid-1990s, Congress and the Clinton administration crafted a
nonpartisan vision for the Internet that protected ``permissionless
innovation''--the idea that experimentation with new technologies and
business models should generally be permitted without prior
approval.\7\
---------------------------------------------------------------------------
\7\ Adam Thierer, ``Embracing a Culture of Permissionless
Innovation'' (Cato Online Forum, Cato Institute, Washington, D.C.,
November 2014), http://www.cato.org/publications/cato-online-forum/
embracing-culture-permissionless-innovation.
---------------------------------------------------------------------------
Congress embraced permissionless innovation by passing the
Telecommunications Act of 1996 and rejecting archaic Analog Era
command-and-control regulations for this exciting new medium.\8\
---------------------------------------------------------------------------
\8\ Adam Thierer, ``The Greatest of All Internet Laws Turns 15,''
Forbes, May 8, 2011, http://www.forbes.com/sites/adamthierer/2011/05/
08/the-greatest-of-all-internet-laws-turns-15.
---------------------------------------------------------------------------
The Clinton administration embraced permissionless innovation with
its 1997 ``Framework for Global Electronic Commerce,'' which outlined a
clear vision for Internet governance that relied on civil society,
voluntary agreements, and ongoing marketplace experimentation.\9\
---------------------------------------------------------------------------
\9\ Specifically, the Clinton framework stated that ``the private
sector should lead [and] the Internet should develop as a market driven
arena not a regulated industry.'' It also argued that ``governments
should encourage industry self-regulation and private sector leadership
where possible'' and ``avoid undue restrictions on electronic
commerce.'' White House, ``The Framework for Global Electronic
Commerce'' (July 1997), http://clinton4.nara.gov/WH/New/Commerce.
---------------------------------------------------------------------------
This nonpartisan blueprint sketched out almost two decades ago for
the Internet is every bit as sensible today as we begin crafting a
policy paradigm for the Internet of Things.\10\
---------------------------------------------------------------------------
\10\ Adam Thierer, ``15 Years On, President Clinton's 5 Principles
for Internet Policy Remain the Perfect Paradigm,'' Forbes, February 12,
2012, http://www.forbes.com/sites/adamthierer/2012/02/12/15-years-on-
president-clintons-5-principles-for-internet-policy-remain-the-perfect-
paradigm.
---------------------------------------------------------------------------
Again, the first order of business is for policymakers to send a
clear green light to entrepreneurs letting them know that our Nation's
default policy position remains ``innovation allowed.'' Second, we
should avoid basing policy interventions on hypothetical worst-case
scenarios, or else best-case scenarios will never come about.\11\ Our
policy regime, therefore, should be responsive, not anticipatory.
---------------------------------------------------------------------------
\11\ As analysts at the Center for Data Innovation correctly argue,
policymakers should only intervene to address specific, demonstrated
harms. ``Attempting to erect precautionary regulatory barriers for
purely speculative concerns is not only unproductive, but it can
discourage future beneficial applications of the Internet of Things,''
they say. See Daniel Castro and Joshua New, ``10 Policy Principles for
Unlocking the Potential of the Internet of Things,'' Center for Data
Innovation, December 4, 2014, http://www.datainnovation.org/2014/12/10-
policy-principles-for-unlocking-the-potential-of-the-internet-of-
things.
---------------------------------------------------------------------------
Flexible Solutions
Of course, privacy-and security-related challenges exist that
deserve attention. Data is going to be moving fluidly across so many
platforms and devices that it will be difficult to apply traditional
Fair Information Practice Principles \12\ in a rigid regulatory fashion
for every conceivable use of these technologies.\13\
---------------------------------------------------------------------------
\12\ The Fair Information Practice Principles (FIPPs) traditionally
include (1) notice, (2) choice, (3) purpose specification, (4) use
limitation, and (5) data minimization.
\13\ Adam Thierer, ``Some Initial Thoughts on the FTC Internet of
Things Report,'' Technology Liberation Front, January 28, 2015, http://
techliberation.com/2015/01/28/some-initial-thoughts-on-the-ftc-
internet-of-things-report.
---------------------------------------------------------------------------
Specifically, it will be challenging to achieve perfect ``notice
and choice'' in a world where so many devices are capturing volumes of
data in real time. Moreover, while ``data minimization'' remains a
worthy goal, if it is mandated in a one-size-fits-all fashion, it could
limit many life-enriching innovations.
Law will still play a role, but we're going to need new approaches.
Policymakers can encourage privacy and security ``by
design'' for Internet of Things developers, but those best
practices should not be mandated as top-down controls.
Flexibility is essential.\14\
---------------------------------------------------------------------------
\14\ Adam Thierer, ``Striking a Sensible Balance on the Internet of
Things and Privacy,'' Technology Liberation Front, January 16, 2015,
http://techliberation.com/2015/01/16/striking-a-sensible-balance-on-
the-internet-of-things-and-privacy. See also Adam Thierer, ``Muddling
Through: How We Learn to Cope with Technological Change,'' Medium, June
30, 2014, https://medium.com/tech-liberation/muddling-through-how-we-
learn-to-cope-with-technological-change-6282d0d342a6.
More privacy-enhancing tools--especially robust encryption
technologies--will also help, and government officials would be
---------------------------------------------------------------------------
wise to promote these tools instead of restricting them.
Increased education is also essential, and governments can
help get the word out about inappropriate uses of these
technologies.
Existing privacy torts and existing targeted rules (such as
``Peeping Tom'' laws) will also likely evolve to address
serious harms as they develop.
Finally, the Federal Trade Commission will continue to play
an important backstop role, using its Section 5 authority to
police ``unfair and deceptive'' practices. The commission has
already been remarkably active in encouraging companies to live
up to the privacy and security promises they make to their
consumers, and that will continue.
Conclusion: We Can Adapt
In closing, we should also never forget that, no matter how
disruptive these new technologies may be in the short term, we humans
have an extraordinary ability to adapt to technological change and
bounce back from adversity.\15\ That same resilience will be true for
the Internet of Things.
---------------------------------------------------------------------------
\15\ Adam Thierer, ``Muddling Through: How We Learn to Cope with
Technological Change,'' Medium, June 30, 2014, https://medium.com/tech-
liberation/muddling-through-how-we-learn-to-cope-with-technological-
change-6282d0d342a6.
---------------------------------------------------------------------------
We should remain patient and continue to embrace permissionless
innovation to ensure that the Internet of Things thrives and American
consumers and companies continue to be global leaders in the digital
economy.
Appendices to Testimony of Adam Thierer
1. Selected Readings from Adam Thierer on the Internet of Things
2. What Is the Internet of Things?
3. Projected Use and Economic Impact of the Internet of Things
4. A Nonpartisan Policy Vision for the Internet of Things
5. Some Initial Thoughts on the FTC Internet of Things Report
6. Why ``Permissionless Innovation'' Matters
7. How We Adapt to Technological Change
______
Appendix 1: Selected Readings from Adam Thierer on the Internet of
Things
law review article: ``The Internet of Things and Wearable
Technology Addressing Privacy and Security Concerns without Derailing
Innovation,'' forthcoming, Richmond Journal of Law & Technology, Vol.
21, No. 6, (2015), http://papers.ssrn.com/sol3/
papers.cfm?abstract_id=2494382.
essay: ``A Nonpartisan Policy Vision for the Internet of Things,''
Technology Liberation Front, December 11, 2014, http://
techliberation.com/2014/12/11/a-nonpartisan-policy-vision-for-the-
internet-of-things.
essay: ``Some Initial Thoughts on the FTC Internet of Things
Report,'' Technology Liberation Front, January 28, 2015, http://
techliberation.com/2015/01/28/some-initial-thoughts-on-the-ftc-
internet-of-things-report.
essay: ``Striking a Sensible Balance on the Internet of Things and
Privacy,'' Technology Liberation Front, January 16, 2015, http://
techliberation.com/2015/01/16/striking-a-sensible-balance-on-the-
internet-of-things-and-privacy.
slide presentation: ``Policy Issues Surrounding the Internet of
Things & Wearable Technology,'' September 12, 2014, http://
techliberation.com/2014/09/12/slide-presentation-policy-issues-
surrounding-the-internet-of-things-wearable-technology.
essay: ``CES 2014 Report: The Internet of Things Arrives, but Will
Washington Welcome It?'' Technology Liberation Front, January 8, 2014,
http://techli
beration.com/2014/01/08/ces-2014-report-the-internet-of-things-arrives-
but-will-washington-welcome-it.
essay: ``The Growing Conflict of Visions over the Internet of
Things & Privacy,'' Technology Liberation Front, January 14, 2014,
http://techliberation.com/2014/01/14/the-growing-conflict-of-visions-
over-the-internet-of-things-privacy.
op-ed: ``Can We Adapt to the Internet of Things?'' IAPP Privacy
Perspectives, June 19, 2013, https://privacyassociation.org/news/a/can-
we-adapt-to-the-internet-of-things.
agency filing: My Filing to the FTC in its `Internet of Things'
Proceeding, May 31, 2013, http://techliberation.com/2013/05/31/my-
filing-to-the-ftc-in-its-internet-of-things-proceeding.
book: Permissionless Innovation: The Continuing Case for
Comprehensive Technological Freedom (Arlington, VA: Mercatus Center at
George Mason University, 2014), http://mercatus.org/permissionless/
permissionlessinnovation.html.
essay: ``What's at Stake with the FTC's Internet of Things
Workshop,'' Technology Liberation Front, November 18, 2013, http://
techliberation.com/2013/11/18/whats-at-stake-with-the-ftcs-internet-of-
things-workshop.
law review article: ``Removing Roadblocks to Intelligent Vehicles
and Driverless Cars,'' forthcoming, Wake Forest Journal of Law & Policy
(2015), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2496929.
______
Appendix 2: What Is the Internet of Things? \16\
---------------------------------------------------------------------------
\16\ This section adapted from Adam Thierer, ``The Internet of
Things and Wearable Technology: Addressing Privacy and Security
Concerns without Derailing Innovation'' (Mercatus Working Paper,
Mercatus Center at George Mason University, Arlington, VA, November
2015), which will be published in the Richmond Journal of Law and
Technology 21, no. 6 (2015), http://mercatus.org/publication/internet-
things-and-wearable-technology-addressing-privacy-and-security-
concerns-without.
---------------------------------------------------------------------------
Many of the underlying drivers of the Internet and Information Age
revolution--massive increases in processing power, exploding storage
capacity, steady miniaturization of computing and cameras, ubiquitous
wireless communications and networking capabilities, digitization of
all data, and massive datasets (or ``big data'')--are beginning to have
a profound influence beyond the confines of cyberspace. It is cheaper
than ever, for example, to integrate a microchip, a sensor, a camera,
and even an accelerometer into devices today. ``Thanks to advances in
circuits and software,'' observe Neil Gershenfeld and J. P. Vasseur,
``it is now possible to make a Web server that fits on (or in) a
fingertip for $1.'' As costs continue to fall and these technologies
are increasingly embedded into almost all devices that consumers own
and come into contact with, a truly ``seamless web'' of connectivity
and ``pervasive computing'' will exist.
As a result of these factors, mundane appliances and other machines
and devices that consumers have long taken for granted--cars,
refrigerators, cooking devices, lights, weight scales, watches,
jewelry, eyeglasses, and even their clothing--will all soon be
networked, sensing, automated, and communicating. In other words,
consumers are transitioning to what Alex Hawkinson, CEO and founder of
SmartThings, calls a ``programmable world'' where ``things will become
intuitive [and] connectivity will extend even further, to the items we
hold most dear, to those things that service the everyday needs of the
members of the household, and beyond.'' \17\
---------------------------------------------------------------------------
\17\ Alex Hawkinson, ``What Happens When the World Wakes Up,''
Medium (Sept. 23, 2014), https://medium.com/@ahawkinson/what-happens-
when-the-world-wakes-up-c73a5c931c17.
---------------------------------------------------------------------------
This so-called Internet of Things--or ``machine-to-machine''
connectivity and communications--promises to usher in ``a third
computing revolution'' \18\ and bring about profound changes that will
rival the first wave of Internet innovation. The first use of the term
Internet of Things is attributed to Kevin Ashton, who used it in the
title of a 1999 presentation.\19\ A decade later, he reflected on the
term and its meaning:
---------------------------------------------------------------------------
\18\ Timothy B. Lee, ``Everything's Connected: How Tiny Computers
Could Change the Way We Live,'' Vox (Aug. 13, 2014), http://
www.vox.com/2014/5/8/5590228/how-tiny-computers-could-change-the-way-
we-live.
\19\ Kevin Ashton, ``That ``Internet of Things'' Thing,'' RFID
Journal (June 22, 2009), http://www.rfidjournal.com/articles/view?4986.
If we had computers that knew everything there was to know
about things--using data they gathered without any help from
us--we would be able to track and count everything, and greatly
reduce waste, loss, and cost. We would know when things needed
replacing, repairing, or recalling and whether they were fresh
---------------------------------------------------------------------------
or past their best.
We need to empower computers with their own means of gathering
information, so they can see, hear, and smell the world for
themselves, in all its random glory. RFID [radio-frequency
identification] and sensor technology enable computers to
observe, identify, and understand the world--without the
limitations of human-entered data.\20\
---------------------------------------------------------------------------
\20\ Ibid.
More recently, analysts with Morrison & Foerster have defined IoT
as ``the network of everyday physical objects which surround us and
that are increasingly being embedded with technology to enable those
objects to collect and transmit data about their use and
surroundings.'' \21\ These low-power devices typically rely on sensor
technologies as well as existing wireless networking systems and
protocols (Wi-Fi, Bluetooth, near field communication, and GPS) to
facilitate those objectives. In turn, this reliance will fuel the
creation of even more ``big data.'' Many of these technologies and
capabilities will eventually operate in the background of consumers'
lives and be almost invisible to them.
---------------------------------------------------------------------------
\21\ Amy Collins, Adam J. Fleisher, D. Reed Freeman Jr., and
Alistair Maughan, ``The Internet of Things Part 1: Brave New World,''
Client Alert (Morrison Foerster), March 18, 2014, 1, http://
www.jdsupra.com/legalnews/the-internet-of-things-part-1-brave-new-
23154.
---------------------------------------------------------------------------
IoT is sometimes understood as being synonymous with ``smart''
systems: smart homes, smart buildings, smart appliances, smart health,
smart mobility, smart cities, and so on. Smart car technology is also
expanding rapidly.\22\ The promise of IoT, as described by New York
Times reporter Steve Lohr, is that ``billions of digital devices--from
smartphones to sensors in homes, cars, and machines of all kinds--will
communicate with each other to automate tasks and make life better.''
\23\ ``Consumers and public officials can use the connected world to
improve energy conservation, efficiency, productivity, public safety,
health, education, and more,'' predicts CEA.\24\ ``The connected
devices and applications that consumers choose to adopt will make their
lives easier, safer, healthier, less expensive, and more productive.''
\25\ In addition to giving consumers more control over their lives,
these technologies can also help them free up time by automating
routine tasks and chores.
---------------------------------------------------------------------------
\22\ See Patrick Thibodeau, ``Explained: The ABCs of the Internet
of Things,'' Computerworld, May 6, 2014, http://www.computerworld.com/
s/article/9248058/Explained_The_ABCs_of_
the_Internet_of_Things_.
\23\ Steve Lohr, ``A Messenger for the Internet of Things,'' N.Y.
Times Bits, April 25, 2013, http://bits.blogs.nytimes.com/2013/04/25/a-
messenger-for-the-internet-of-things.
\24\ Consumer Electronics Association, Comment to the Federal Trade
Commission on Internet of Things, Project No. P135405 (June 10, 2013),
7.
\25\ Ibid.
______
Appendix 3: Projected Use and Economic Impact of the Internet of Things
\26\
---------------------------------------------------------------------------
\26\ This section compiled with the assistance of Andrea Castillo,
Program Manager of the Technology Policy Program at the Mercatus
Center.
---------------------------------------------------------------------------
The Internet of Things is already growing at a breakneck pace and
is expected to continue to accelerate rapidly. Below is a summary of
recent forecasts regarding the growing device connectivity as well as
potential economic benefits of the IoT.
A. Connectivity
Cisco projects that 37 billion intelligent things will be
connected and communicating by 2020.\27\
---------------------------------------------------------------------------
\27\ Dave Evans, ``Thanks to IoE, the Next Decade Looks Positively
`Nutty,' '' Cisco Blog, February 12, 2013, http://blogs.cisco.com/ioe/
thanks-to-ioe-the-next-decade-looks-positively-nutty.
ABI Research estimates that there are more than 10 billion
wirelessly connected devices in the market today and more than
30 billion devices expected by 2020.\28\
---------------------------------------------------------------------------
\28\ ``More Than 30 Billion Devices Will Wirelessly Connect to the
Internet of Everything in 2020'' (Press Release, ABI Research, May 9,
2013), https://www.abiresearch.com/press/more-than-30-billion-devices-
will-wirelessly-conne.
IDC (International Data Corporation) predicts far greater
penetration of 212 billion devices installed globally by the
end of 2020.\29\
---------------------------------------------------------------------------
\29\ Antony Savvas, ``Internet of Things Market Will Be Worth
Almost $9 Trillion,'' CNME, October 6, 2013, http://www.cnmeonline.com/
news/internet-of-things-market-will-be-worth-almost-9-trillion.
Gartner anticipates that 25 billion Internet of Things
devices will be in operation by 2020.\30\
---------------------------------------------------------------------------
\30\ ``Gartner Says 4.9 Billion Connected `Things' Will Be in Use
in 2015'' (Press Release, Gartner, 2014), http://www.gartner.com/
newsroom/id/2905717.
VisionMobile projects that the number of IoT developers will
grow from roughly 300,000 in 2014 to more than 4.5 million by
2020.\31\
---------------------------------------------------------------------------
\31\ Matt Asay, ``The Internet of Things Will Need Millions of
Developers by 2020,'' ReadWrite, June 27, 2014, http://readwrite.com/
2014/06/27/internet-of-things-developers-jobs-opportunity.
Business Insider estimates that will be a total of 23.4
billion Internet of Things devices connected by 2019 and that
their adoption will be driven by the enterprise and
manufacturing sectors.\32\
---------------------------------------------------------------------------
\32\ John Greenough, ``The Enterprise Internet of Things Report:
Forecasts, Industry Trends, Advantages, and Barriers for the Top IoT
Sector,'' Business Insider, 2014, https://
intelligence.businessinsider.com/the-enterprise-internet-of-things-
report-forecasts-industry-trends-advantages-and-barriers-for-the-top-
iot-sector-2014-11.
Harbor projects that 21.7 billion Internet of Things devices
will be connected and in use by 2019.\33\
---------------------------------------------------------------------------
\33\ Harbor Research, Smart Systems and the Internet of Things
Forecast (2013), http://harborresearch.com/wp-content/uploads/2013/08/
Harbor-Research_2013-Forecast-Report_
Prospectus.pdf.
Machina Research reports that roughly 7.2 billion ``machine-
to-machine connected consumer electronic devices'' will be in
global use by 2023.\34\
---------------------------------------------------------------------------
\34\ ``The Connected Life'' (Press Release, Machina Research,
2014), https://machinaresearch
.com/static/media/uploads/machina_research_press_release_-_ce_report_-
_2014_07_
28.pdf.
Navigant Research states that more than 1 billion smart
meters will be installed globally by 2022, up from 313 million
in 2013.\35\
---------------------------------------------------------------------------
\35\ Smart Electric Meters, ``Advanced Metering Infrastructure, and
Meter Communications: Global Market Analysis and Forecasts,'' Navigant
Research, November 2013, http://www.navigantresearch.com/research/
smart-meters.
IHS Automotive anticipates that the number of cars connected
to the Internet will grow more than six fold from 2013 to reach
152 million internationally by 2020.\36\
---------------------------------------------------------------------------
\36\ ``Emerging Technologies: Big Data in the Connected Car''
(Press Release, IHS Automotive, November 2013), http://press.ihs.com/
press-release/country-industry-forecasting/big-data-drivers-seat-
connected-car-technological-advance.
ON World projects that roughly 100 million Internet-
connected wireless lights will be in operation by 2020.\37\
---------------------------------------------------------------------------
\37\ Mareca Hatler, Darryl Gurganious, and Charlie Chi, ``Smart
Wireless Lighting,'' ON World, 2013, http://onworld.com/smartlighting.
---------------------------------------------------------------------------
B. Economic Impact
McKinsey Global Institute researchers estimate the potential
economic impact of IoT technologies to be from $2.7 to $6.2
trillion per year by 2025.\38\
---------------------------------------------------------------------------
\38\ James Manyika, Michael Chui, Jacques Bughin, Richard Dobbs,
Peter Bisson, and Alex Marrs, ``Disruptive Technologies: Advances That
Will Transform Life, Business, and the Global Economy,'' McKinsey, May
2013, http://www.mckinsey.com/ /media/McKinsey/dotcom/
Insights%20and%20pubs/MGI/Research/Technology%20and%20Innovation/
Disruptive%20tech
nologies/MGI_Disruptive_technologies_Full_report_May2013.ashx.
IDC estimated in 2013 that this market would grow at a
compound annual growth rate of 7.9 percent to reach $8.9
trillion by 2020.\39\
---------------------------------------------------------------------------
\39\ Antony Savvas, ``Internet of Things Market Will Be Worth
Almost $9 Trillion,'' CNME, October 6, 2013, http://www.cnmeonline.com/
news/internet-of-things-market-will-be-worth-almost-9-trillion.
Cisco analysts estimate that IoT will create $14.4 trillion
in value between 2013 and 2022.\40\
---------------------------------------------------------------------------
\40\ Joseph Bradley, Joel Barbier, and Doug Handler, ``Embracing
the Internet of Everything to Capture Your Share of $14.4 Trillion,''
CISCO, 2013, http://www.cisco.com/web/about/ac79/docs/innov/
IoE_Economy.pdf.
Business Insider estimates that IoT will add approximately
$5.6 trillion in value to the global economy in between 2014
and 2019.\41\
---------------------------------------------------------------------------
\41\ John Greenough, ``The Enterprise Internet of Things Report:
Forecasts, Industry Trends, Advantages, and Barriers for the Top IoT
Sector,'' Business Insider, 2014, https://
intelligence.businessinsider.com/the-enterprise-internet-of-things-
report-forecasts-industry-trends-advantages-and-barriers-for-the-top-
iot-sector-2014-11.
Accenture estimates that the industrial IoT could add $14.2
trillion to the global economy by 2030, and that the U.S.
economy will gain at least $6.1 trillion in cumulative GDP by
that year.\42\
---------------------------------------------------------------------------
\42\ ``Winning with the Industrial Internet of Things''
(Positioning Paper, Accenture, 2015), http://www.accenture.com/
SiteCollectionDocuments/PDF/Accenture-Industrial-Internet-of-Things-
Positioning-Paper-Report-2015.PDF.
General Electric projects that industrial IoT technologies
will add about $15 trillion to global GDP by 2030 (in constant
2005 dollars).\43\
---------------------------------------------------------------------------
\43\ Peter C. Evans and Marco Annunziata, ``Industrial Internet:
Pushing the Boundaries of Minds and Machines,'' General Electric, 2012,
http://www.ge.com/docs/chapters/Industrial_Internet.pdf.
Morgan Stanley forecasts that driverless cars will save the
U.S. economy $1.3 trillion per year once autonomous cars fully
penetrate the market, while saving the world another $5.6
trillion a year.\44\
---------------------------------------------------------------------------
\44\ Ravi Shanker et al., ``Driverless Cars: Self-Driving the New
Auto Industry Paradigm'' (Blue Paper, Morgan Stanley, November 6,
2013), http://www.wisburg.com/wp-content/uploads/2014/09/%ef%bc%88109-
pages-2014%ef%bc%89morgan-stanley-blue-paper-autonomous-cars%ef%
bc%9a-self-driving-the-new-auto-industry-paradigm.pdf.
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______
Appendix 4: A Nonpartisan Policy Vision for the Internet of Things \45\
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\45\ This section is adapted from Adam Thierer, ``A Nonpartisan
Policy Vision for the Internet of Things,'' Technology Liberation
Front, December 11, 2014, http://techliberation.com/2014/12/11/a-
nonpartisan-policy-vision-for-the-internet-of-things.
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What sort of public policy vision should govern the Internet of
Things? I recently heard three public policymakers articulate their
recommended vision for the Internet of Things (IoT), and I found their
approach so inspiring that I wanted to discuss it here in the hopes
that it will become the foundation for future policy in this arena.
On December 4, 2015, it was my pleasure to attend a Center for Data
Innovation (CDI) event on ``How Can Policymakers Help Build the
Internet of Things?'' As the title implied, the goal of the event was
to discuss how to achieve the vision of a more fully connected world
and, more specifically, how public policymakers can help facilitate
that objective. It was a terrific event with many excellent panel
discussions and keynote addresses.
Two of those keynotes were delivered by Senators Deb Fischer (R-
Neb.) and Kelly Ayotte (R-N.H.). Below I offer some highlights from
their remarks and then relate them to the vision set forth by Federal
Trade Commission (FTC) Commissioner Maureen K. Ohlhausen in some of her
recent speeches. I will conclude by discussing how the Ayotte-Fischer-
Ohlhausen vision can be seen as the logical extension of the Clinton
administration's excellent 1997 ``Framework for Global Electronic
Commerce,'' which proposed a similar policy paradigm for the Internet
more generally. This shows how crafting policy for the IoT can and
should be a nonpartisan affair.
A. Sen. Deb Fischer's Remarks
In her opening remarks at the CDI event in December 2014, Sen. Deb
Fischer explained how ``the Internet of Things can be a game changer
for the U.S. economy and for the American consumer.'' ``It gives people
more information and better tools to analyze data to make more informed
choices,'' she noted.
After outlining some of the potential benefits associated with the
Internet of Things, Sen. Fischer continued on to explain why it is
essential we get public policy incentives right first if we hope to
unlock the full potential of these new technologies. Specifically, she
argued that:
In order for Americans to receive the maximum benefits from
increased connectivity, there are two things the government
must avoid. First, policymakers can't bury their heads in the
sand and pretend this technological revolution isn't happening,
only to wake up years down the road and try to micromanage a
fast-changing, dynamic industry.
Second, the Federal Government must also avoid regulation just
for the sake of regulation. We need thoughtful, pragmatic
responses and narrow solutions to any policy issues that arise.
For too long, the only ``strategy'' in Washington policy-making
has been to react to crisis after crisis. We should dive into
what this means for U.S. global competitiveness, consumer
welfare, and economic opportunity before the public policy
challenges overwhelm us, before legislative and executive
branches of government--or foreign governments--react without
all the facts.
Fischer concluded by noting, ``It's entirely appropriate for the
U.S. government to think about how to modernize its regulatory
frameworks, consolidate, renovate, and overhaul obsolete rules. We're
destined to lose to the Chinese or others if the Internet of Things is
governed in the United States by rules that pre-date the VCR.''
B. Sen. Kelly Ayotte's Remarks
Like Sen. Fischer, Ayotte similarly stressed the many economic
opportunities associated with IoT technologies for both consumers and
producers alike. Ayotte also noted that IoT is going to be a major
topic for the Senate Commerce Committee. She said that the role of the
Committee will be to ensure that the various agencies looking into IoT
issues are not issuing ``conflicting regulatory directives'' and ``that
what is being done makes sense and allows for future innovation that we
can't even anticipate right now.'' Among the agencies she cited that
are currently looking into IoT issues: FTC (privacy and security), FDA
(medical device applications), FCC (wireless issues), FAA (commercial
drones), NHTSA (intelligent vehicle technology), and NTIA (multi-
stakeholder privacy reviews) as well as state lawmakers and regulatory
agencies.
Sen. Ayotte then explained what sort of policy framework America
needed to adopt to ensure that the full potential of the Internet of
Things could be realized. She framed the choice lawmakers are
confronted with as follows:
We as policymakers we can either create an environment that
allows that to continue to grow, or one that thwarts that. To
stay on the cutting edge, we need to make sure that our
regulatory environment is conducive to fostering innovation.''
[. . .] We're living in the Dark Ages in the ways the some of
the regulations have been framed. Companies must be properly
incentivized to invest in the future, and government shouldn't
be a deterrent to innovation and job-creation.
Ayotte also stressed that ``technology continues to evolve so
rapidly there is no one-size-fits-all regulatory approach'' that can
work for a dynamic environment like this. ``If legislation drives
technology, the technology will be outdated almost instantly,'' and
``that is why humility is so important,'' she concluded.
The better approach, she argued was to let technology evolve freely
in a ``permissionless'' fashion and then see what problems developed
and then address them accordingly. ``[A] top-down, preemptive approach
is never the best policy'' and will only serve to stifle innovation,
she argued. ``If all regulators looked with some humility at how
technology is used and whether we need to regulate or not to regulate,
I think innovation would stand to benefit.''
C. FTC Commissioner Maureen K. Ohlhausen
Fischer and Ayotte's remarks reflect a vision for the Internet of
Things that FTC Commissioner Maureen K. Ohlhausen has articulated in
recent months. In fact, Sen. Ayotte specifically cited Ohlhausen in her
remarks.
Ohlhausen has actually delivered several excellent speeches on
these issues and has become one of the leading public policy thought
leaders on the Internet of Things in the United States today. One of
her first major speeches on these issues was her October 2013 address
entitled, ``The Internet of Things and the FTC: Does Innovation Require
Intervention?'' In that speech, Ohlhausen noted that, ``The success of
the Internet has in large part been driven by the freedom to experiment
with different business models, the best of which have survived and
thrived, even in the face of initial unfamiliarity and unease about the
impact on consumers and competitors.''
She also issued a wise word of caution to her fellow regulators:
It is . . . vital that government officials, like myself,
approach new technologies with a dose of regulatory humility,
by working hard to educate ourselves and others about the
innovation, understand its effects on consumers and the
marketplace, identify benefits and likely harms, and, if harms
do arise, consider whether existing laws and regulations are
sufficient to address them, before assuming that new rules are
required.
In this and other speeches, Ohlhausen has highlighted the various
other remedies that already exist when things do go wrong, including
FTC enforcement of ``unfair and deceptive practices,'' common law
solutions (torts and class actions), private self-regulation and best
practices, social pressure, and so on.
D. The Clinton Administration Vision
These three women have articulated what I regard as the ideal
vision for fostering the growth of the Internet of Things. It should be
noted, however, that their framework is really just an extension of the
Clinton administration's outstanding vision for the Internet more
generally.
In the 1997 ``Framework for Global Electronic Commerce,'' the
Clinton administration outlined its approach toward the Internet and
the emerging digital economy. As I've noted many times before, the
framework was a succinct and bold market-oriented vision for cyberspace
governance that recommended reliance upon civil society, contractual
negotiations, voluntary agreements, and ongoing marketplace experiments
to solve information-age problems. Specifically, it stated that ``the
private sector should lead [and] the Internet should develop as a
market driven arena not a regulated industry.'' ``[G]overnments should
encourage industry self-regulation and private sector leadership where
possible'' and ``avoid undue restrictions on electronic commerce.''
Sen. Ayotte specifically cited those Clinton principles in her
speech and said, ``I think those words, given twenty years ago at the
infancy of the Internet, are today even more relevant as we look at the
challenges and the issues that we continue to face as regulators and
policymakers.''
I completely agree. This is exactly the sort of vision that we need
to keep innovation moving forward to benefit consumers and the economy,
and this illustrates how IoT policy can be a bipartisan effort.
Why does this matter so much? As I noted in this essay from
November 2014, thanks to the Clinton administration's bold vision for
the Internet:
This policy disposition resulted in an unambiguous green light
for a rising generation of creative minds who were eager to
explore this new frontier for commerce and communications. . .
. The result of this freedom to experiment was an outpouring of
innovation. America's info-tech sectors thrived thanks to
permissionless innovation, and they still do today. An annual
Booz & Company report on the world's most innovative companies
revealed that 9 of the top 10 most innovative companies are
based in the U.S. and that most of them are involved in
computing, software, and digital technology.\46\
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\46\ Adam Thierer, ``15 Years On, President Clinton's 5 Principles
for Internet Policy Remain the Perfect Paradigm,'' Forbes, February 12,
2012, http://www.forbes.com/sites/adamthierer/2012/02/12/15-years-on-
president-clintons-5-principles-for-internet-policy-remain-the-perfect-
paradigm.
In other words, America had the policy right before and we can get
the policy right again. Patience, flexibility, and forbearance are the
key policy virtues that nurture an environment conducive to
entrepreneurial creativity, economic progress, and greater consumer
choice.
Other policymakers should endorse the vision originally sketched
out by the Clinton administration and now so eloquently embraced and
extended by Sen. Fischer, Sen. Ayotte, and Commissioner Ohlhausen. This
is the path forward if we hope to realize the full potential of the
Internet of Things.
______
Appendix 5: Some Initial Thoughts on the FTC Internet of Things Report
\47\
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\47\ This section is adapted from Adam Thierer, ``Some Initial
Thoughts on the FTC Internet of Things Report,'' Technology Liberation
Front, January 28, 2015, http://techliberation.com/2015/01/28/some-
initial-thoughts-on-the-ftc-internet-of-things-report.
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On January 27, 2015, the Federal Trade Commission (FTC) released
its long-awaited report on ``The Internet of Things: Privacy and
Security in a Connected World.'' The 55-page report is the result of a
lengthy staff exploration of the issue, which kicked off with an FTC
workshop on the issue that was held on November 19, 2013.
In this essay, I will offer a few general thoughts on the FTC's
report and its overall approach to the Internet of Things and then
discuss a few specific issues that I believe deserve further attention.
A. Big Picture, Part 1: Should Best Practices Be Voluntary or
Mandatory?
Generally speaking, the FTC's report contains a variety of ``best
practice'' recommendations to get Internet of Things innovators to take
steps to ensure greater privacy and security ``by design'' in their
products. Most of those recommended best practices are sensible as
general guidelines for innovators, but the really sticky question here
continued to be this: When, if ever, should ``best practices'' become
binding regulatory requirements?
The FTC does a bit of a dance when answering that question.
Consider how, in the executive summary of the report, the Commission
answers the question regarding the need for additional privacy and
security regulation: ``Commission staff agrees with those commenters
who stated that there is great potential for innovation in this area,
and that IoT-specific legislation at this stage would be premature.''
But, just a few lines later, the agency (1) ``reiterates the
Commission's previous recommendation for Congress to enact strong,
flexible, and technology-neutral Federal legislation to strengthen its
existing data security enforcement tools and to provide notification to
consumers when there is a security breach,'' and (2) ``recommends that
Congress enact broad-based (as opposed to IoT-specific) privacy
legislation.''
Here and elsewhere, the agency repeatedly stresses that it is not
seeking IoT-specific regulation, merely ``broad-based'' digital privacy
and security legislation.
The problem is that once you understand what the IoT is all about
you come to realize that this largely represents a distinction without
a difference. The Internet of Things is simply the extension of the Net
into everything we own or come into contact with. Thus, this idea that
the agency is not seeking IoT-specific rule sounds terrific until you
realize that it is actually seeking something far more sweeping--
greater regulation of all online and digital interactions. And because
``the Internet'' and ``the Internet of Things'' will eventually (if
they are not already) be consider synonymous, this notion that the
agency is not proposing technology-specific regulation is really quite
silly.
Now, it remains unclear whether there exists any appetite on
Capitol Hill for ``comprehensive'' legislation of any variety, although
perhaps we'll learn more about that possibility when the Senate
Commerce Committee hosts a hearing on these issues on February 11. But
at least so far, ``comprehensive'' or ``baseline'' digital privacy and
security bills have been non-starters.
And that's for good reason in my opinion: Such regulatory proposals
could take us down the path that Europe charted in the late 1990s with
onerous ``data directives'' and suffocating regulatory mandates for the
IT and computing sector. The results of this experiment have been
unambiguous, as I documented in congressional testimony in 2013. I
noted there how America's Internet sector came to be the envy of the
world while it was hard to name any major Internet company from Europe.
Whereas America embraced ``permissionless innovation'' and let creative
minds develop one of the greatest success stories in modern history,
the Europeans adopted a ``Mother, may I?'' regulatory approach for the
digital economy. America's more flexible, light-touch regulatory regime
leaves more room for competition and innovation compared to Europe's
top-down regime. Digital innovation suffered over there while it
blossomed here.
That's why we need to be careful about adopting the sort of
``broad-based'' regulatory regime that the FTC recommends in this and
previous reports.
B. Big Picture, Part 2: Does the FTC Really Need More Authority?
Something else is going on in this report that has also been
happening in all the FTC's recent activity on digital privacy and
security matters: The agency has been busy laying the groundwork for
its own expansion.
In this latest report, for example, the FTC argues that:
Although the Commission currently has authority to take action
against some IoT-related practices, it cannot mandate certain
basic privacy protections. . .. The Commission has continued to
recommend that Congress enact strong, flexible, and technology-
neutral legislation to strengthen the Commission's existing
data security enforcement tools and require companies to notify
consumers when there is a security breach.
In other words, this agency wants more authority. And we are
talking about sweeping authority here that would transcend its already
sweeping authority to police ``unfair and deceptive practices'' under
Section 5 of the FTC Act. Let's be clear: It would be hard to craft a
law that grants an agency more comprehensive and open-ended consumer
protection authority than Section 5. The meaning of those terms--
``unfairness'' and ``deception''--has always been a contentious matter,
and at times the agency has abused its discretion by exploiting that
ambiguity.
Nonetheless, Section 5 remains a powerful enforcement tool for the
agency and one that has been wielded aggressively in recently years to
police digital economy giants and small operators alike. Generally
speaking, I'm alright with most Section 5 enforcement, especially since
that sort of retrospective policing of unfair and deceptive practices
is far less likely to disrupt permissionless innovation in the digital
economy. That's because it does not subject digital innovators to the
sort of ``Mother, may I?'' regulatory system that European
entrepreneurs face. But an expansion of the FTC's authority via more
``comprehensive, baseline'' privacy and security regulatory policies
threatens to convert America's more sensible bottom-up and responsive
regulatory system into the sort of innovation-killing regime we see on
the other side of the Atlantic.
Here's the other thing we can't forget when it comes to the
question of what additional authority to give the FTC over privacy and
security matters: The FTC is not the end of the enforcement story in
America. Other enforcement mechanisms exist, including privacy torts,
class action litigation, property and contract law, state enforcement
agencies, and other targeted privacy statutes. I've summarized all
these additional enforcement mechanisms in my 2014 law review article
referenced above.
C. FIPPS, Part 1: Notice and Choice vs. Use-Based Restrictions
Let's drill down a bit and examine some of the specific privacy and
security best practices that the agency discusses in its new IoT
report.
The FTC report highlights how the IoT creates serious tensions for
many traditional Fair Information Practice Principles (FIPPs). The
FIPPs generally include (1) notice, (2) choice, (3) purpose
specification, (4) use limitation, and (5) data minimization. But the
report is mostly focused on notice and choice as well as data
minimization.
When it comes to notice and choice, the agency wants to keep hope
alive that it will still be applicable in an IoT world. I'm sympathetic
to this effort because it is quite sensible for all digital innovators
to do their best to provide consumers with adequate notice about data
collection practices and then give them sensible choices about it. Yet,
like the agency, I agree that ``offering notice and choice is
challenging in the IoT because of the ubiquity of data collection and
the practical obstacles to providing information without a user
interface.''
The agency has a nuanced discussion of how context matters in
providing notice and choice for IoT, but one can't help but think that
even they must realize that the game is over, to some extent. The
increasing miniaturization of IoT devices and the ease with which they
suck up data means that traditional approaches to notice and choice
just aren't going to work all that well going forward. It is almost
impossible to envision how a rigid application of traditional notice
and choice procedures would work in practice for the IoT.
Relatedly, as I wrote in January 2015, the Future of Privacy Forum
(FPF) released a white paper entitled, ``A Practical Privacy Paradigm
for Wearables,'' that notes how FIPPs ``are a valuable set of high-
level guidelines for promoting privacy, [but] given the nature of the
technologies involved, traditional implementations of the FIPPs may not
always be practical as the Internet of Things matures.'' That's
particularly true of the notice and choice FIPPS.
But the FTC isn't quite ready to throw in the towel and make the
complete move toward ``use-based restrictions,'' as many academics
have. Use-based restrictions would focus on specific uses of data that
are particularly sensitive and for which there is widespread agreement
they should be limited or disallowed altogether. But use-based
restrictions are, ironically, controversial from both the perspective
of industry and privacy advocates (albeit for different reasons,
obviously).
The FTC doesn't really know where to go next with use-based
restrictions. The agency says that, on one hand, ``has incorporated
certain elements of the use-based model into its approach'' to
enforcement in the past. On the other hand, the agency says it has
concerns ``about adopting a pure use-based model for the Internet of
Things,'' since it may not go far enough in addressing the growth of
more widespread data collection, especially of more sensitive
information.
In sum, the agency appears to be keeping the door open on this
front and hoping that a best-of-all-worlds solution miraculously
emerges that extends both notice and choice and use-based limitations
as the IoT expands. But the agency's new report doesn't give us any
sort of blueprint for how that might work, and that's likely for good
reason: because it probably won't work at that well in practice, and
there will be serious costs in terms of lost innovation if they try to
force unworkable solutions on this rapidly evolving marketplace.
D. FIPPS, Part 2: Data Minimization
The biggest policy fight that is likely to come out of this report
involves the agency's push for data minimization. To minimize the risks
associated with excessive data collection, the report recommends that:
Companies should examine their data practices and business
needs and develop policies and practices that impose reasonable
limits on the collection and retention of consumer data.
However, recognizing the need to balance future, beneficial
uses of data with privacy protection, staff's recommendation on
data minimization is a flexible one that gives companies many
options. They can decide not to collect data at all; collect
only the fields of data necessary to the product or service
being offered; collect data that is less sensitive; or
deidentify the data they collect. If a company determines that
none of these options will fulfill its business goals, it can
seek consumers' consent for collecting additional, unexpected
categories of data.
This is an unsurprising recommendation in light of the fact that,
in previous major speeches on the issue, FTC Chairwoman Edith Ramirez
argued that ``information that is not collected in the first place
can't be misused'' and that:
The indiscriminate collection of data violates the First
Commandment of data hygiene: Thou shall not collect and hold
onto personal information unnecessary to an identified purpose.
Keeping data on the off chance that it might prove useful is
not consistent with privacy best practices. And remember, not
all data is created equally. Just as there is low quality iron
ore and coal, there is low quality, unreliable data. And old
data is of little value.
In my forthcoming law review article, I discussed the problem with
such reasoning at length and note:
If Chairwoman Ramirez's approach to a preemptive data use
``commandment'' were enshrined into a law that said, ``Thou
shall not collect and hold onto personal information
unnecessary to an identified purpose.'' Such a precautionary
limitation would certainly satisfy her desire to avoid
hypothetical worst-case outcomes because, as she noted,
``information that is not collected in the first place can't be
misused,'' but it is equally true that information that is
never collected may never lead to serendipitous data
discoveries or new products and services that could offer
consumers concrete benefits. ``The socially beneficial uses of
data made possible by data analytics are often not immediately
evident to data subjects at the time of data collection,''
notes Ken Wasch, president of the Software and Information
Industry Association. If academics and lawmakers succeed in
imposing such precautionary rules on the development of IoT and
wearable technologies, many important innovations may never see
the light of day.
FTC Commissioner Josh Wright issued a dissenting statement to the
report that lambasted the staff for not conducting more robust cost-
benefit analysis of the new proposed restrictions and specifically
cited how problematic the agency's approach to data minimization was.
``[S]taff merely acknowledges it would potentially curtail innovative
uses of data . . . [w]ithout providing any sense of the magnitude of
the costs to consumers of foregoing this innovation or of the benefits
to consumers of data minimization,'' he says. Similarly, in her
separate statement, FTC Commissioner Maureen K. Ohlhausen worried about
the report's overly precautionary approach on data minimization when
noting that, ``without examining costs or benefits, [the staff report]
encourages companies to delete valuable data--primarily to avoid
hypothetical future harms. Even though the report recognizes the need
for flexibility for companies weighing whether and what data to retain,
the recommendation remains overly prescriptive,'' she concludes.
Regardless, the battle lines have been drawn by the FTC staff
report as the agency has made it clear that it will be stepping up its
efforts to get IoT innovators to significantly slow or scale back their
data collection efforts. It will be very interesting to see how the
agency enforces that vision going forward and how it impacts innovation
in this space. All I know is that the agency has not conducted a
serious evaluation here of the trade-offs associated with such
restrictions. I penned another law review article in 2014 offering ``A
Framework for Benefit-Cost Analysis in Digital Privacy Debates'' that
they could use to begin that process if they wanted to get serious
about it.
E. The Problem with the ``Regulation Builds Trust'' Argument
One of the interesting things about this and previous FTC reports
on privacy and security matters is how often the agency premises the
case for expanded regulation on ``building trust.'' The argument goes
something like this (as found on page 51 of the new IoT report):
``Staff believes such legislation will help build trust in new
technologies that rely on consumer data, such as the IoT. Consumers are
more likely to buy connected devices if they feel that their
information is adequately protected.''
This is one of those commonly-heard claims that sounds so straight-
forward and intuitive that few dare question it. But there are problems
with the logic of the we-need-regulation-to-build-trust-and-boost-
adoption arguments we often hear in debates over digital privacy.
First, the agency bases its argument mostly on polling data.
``Surveys also show that consumers are more likely to trust companies
that provide them with transparency and choices,'' the report says.
Well, of course surveys say that! It's only logical that consumers will
say this, just as they will always say they value privacy and security
more generally when asked. You might as well ask people if they love
their mothers!
What consumers claim to care about and what they actually do in the
real-world are often two very different things. In the real-world,
people balance privacy and security alongside many other values,
including choice, convenience, cost, and more. This leads to the so-
called ``privacy paradox,'' or the problem of many people saying one
thing and doing quite another when it comes to privacy matters. Put
simply, people take some risks, including some privacy and security
risks, to reap other rewards or benefits. (See this essay for more on
the problem with most privacy polls.)
Second, online activity and the Internet of Things are both growing
like gangbusters despite the privacy and security concerns that the FTC
raises. Virtually every metric I've looked at that track IoT activity
show astonishing growth and product adoption, and projections by all
the major consultancies that have studied this consistently predict the
continued rapid growth of IoT activity. Now, how can this be the case
if, as the FTC claims, we'll only see the IoT really take off after we
get more regulation aimed at bolstering consumer trust? Of course, the
agency might argue that the IoT will grow at an even faster clip than
it is right now, but there is no way to prove one way or the other. In
any event, the agency cannot possible claim that the IoT isn't already
growing at a very healthy clip. Indeed, a lot of the hand-wringing the
staff engages in throughout the report is premised precisely on the
fact that the IoT is exploding faster that our ability to keep up with
it. In reality, it seems far more likely that cost and complexity are
the bigger impediments to faster IoT adoption, just as cost and
complexity have always been the factors weighing most heavily on the
adoption of other digital technologies.
Third, let's say that the FTC is correct--and it is--when it says
that a certain amount of trust is needed in terms of IoT privacy and
security before consumers are willing to use more of these devices and
services in their everyday lives. Does the agency imagine that IoT
innovators don't know that? Are markets and consumers completely
irrational?
The FTC says on page 44 of the report that, ``If a company decides
that a particular data use is beneficial and consumers disagree with
that decision, this may erode consumer trust.'' Well, if such a
mismatch does exist, then the assumption should be that consumers can
and will push back or seek out new and better options. And other
companies should be able to sense the market opportunity here to offer
a more privacy-centric offering for those consumers who demand it to
win their trust and business.
Finally, and perhaps most obviously, the problem with the argument
that increased regulation will help IoT adoption is that it ignores how
the regulations put in place to achieve greater ``trust'' might become
so onerous or costly in practice that there won't be as many
innovations for us to adopt to begin with! Again, regulation, even very
well-intentioned regulation, has costs and trade-offs.
In any event, if the agency is going to premise the case for
expanded privacy regulation on this notion, they are going to have to
do far more to make their case besides simply asserting it.
F. Once Again, No Appreciation of the Potential for Societal Adaptation
Let's briefly shift to a subject that isn't discussed in the FTC's
new IoT report at all.
Major reports and statements by public policymakers about rapidly-
evolving emerging technologies are always initially prone to stress
panic over patience. Rarely are public officials willing to step-back,
take a deep breath, and consider how a resilient citizenry might adapt
to new technologies as they gradually assimilate new tools into their
lives.
That is really sad, when you think about it, since humans have
again and again proven capable of responding to technological change in
creative ways by adopting new personal and social norms. I won't
belabor the point because I've already written volumes on this issue
elsewhere. I tried to condense all my work into a single essay
entitled, ``Muddling Through: How We Learn to Cope with Technological
Change.'' Here's the key takeaway:
Humans have exhibited the uncanny ability to adapt to changes
in their environment, bounce back from adversity, and learn to
be resilient over time. A great deal of wisdom is born of
experience, including experiences that involve risk and the
possibility of occasional mistakes and failures while both
developing new technologies and learning how to live with them.
I believe it wise to continue to be open to new forms of
innovation and technological change, not only because it
provides breathing space for future entrepreneurialism and
invention, but also because it provides an opportunity to see
how societal attitudes toward new technologies evolve --
and to learn from it. More often than not, I argue,
citizens have found ways to adapt to technological change by
employing a variety of coping mechanisms, new norms, or other
creative fixes.
Again, you almost never hear regulators or lawmakers discuss this
process of individual and social adaptation even though they must know
there is something to it. One explanation is that every generation has
their own techno-boogeymen and lose faith in the ability of humanity to
adapt to it.
To believe that we humans are resilient, adaptable creatures should
not be read as being indifferent to the significant privacy and
security challenges associated with any of the new technologies in our
lives today, including IoT technologies. Overly exuberant techno-
optimists are often too quick to adopt a ``Just get over it!'' attitude
in response to the privacy and security concerns raised by others. But
it is equally unreasonable for those who are worried about those same
concerns to utterly ignore the reality of human adaptation to new
technologies realities.
G. Why are Educational Approaches Merely an Afterthought?
One final thing that troubled me about the FTC report was the way
consumer and business education is mostly an afterthought. This is one
of the most important roles that the FTC can and should play in terms
of explaining potential privacy and security vulnerabilities to the
general public and product developers alike.
Alas, the agency devotes so much ink to the more legalistic
questions about how to address these issues, that all we end up with in
the report is this one paragraph on consumer and business education:
Consumers should understand how to get more information about
the privacy of their IoT devices, how to secure their home
networks that connect to IoT devices, and how to use any
available privacy settings. Businesses, and in particular small
businesses, would benefit from additional information about how
to reasonably secure IoT devices. The Commission staff will
develop new consumer and business education materials in this
area.
I applaud that language, and I very much hope that the agency is
serious about plowing more effort and resources into developing new
consumer and business education materials in this area. But I'm a bit
surprised that the FTC report didn't even bother mentioning the
excellent material already available on the ``On Guard Online'' website
that it helped create with a dozen other Federal agencies. Worse yet,
the agency failed to highlight the many other privacy education and
``digital citizenship'' efforts that are underway today to help on this
front.
I hope that the agency spends a little more time working on the
development of new consumer and business education materials in this
area instead of trying to figure out how to craft a quasi-regulatory
regime for the Internet of Things. As I noted in 2014 in this Maine Law
Review article, that would be a far more productive use of the agency's
expertise and resources. I argued there that ``policymakers can draw
important lessons from the debate over how best to protect children
from objectionable online content'' and apply them to debates about
digital privacy. Specifically, after a decade of searching for
legalistic solutions to online safety concerns--and convening a half-
dozen blue ribbon task forces to study the issue--we finally saw a
rough consensus emerge that no single ``silver bullet'' technological
solutions or legal quick-fixes would work and that, ultimately,
education and empowerment represented the better use of our time and
resources. What was true for child safety is equally true for privacy
and security for the Internet of Things.
It is a shame the FTC staff squandered the opportunity it had with
this new report to highlight all the good that could be done by getting
more serious about focusing first on those alternative, bottom-up, less
costly, and less controversial solutions to these challenging problems.
One day we'll all wake up and realize that we spent a lost decade
debating legalistic solutions that were either technically unworkable
or politically impossible. Just imagine if all the smart people who
were spending all their time and energy on those approaches right now
were instead busy devising and pushing educational and empowerment-
based solutions instead!
One day we'll get there. Sadly, if the FTC report is any
indication, that day is still a ways off.
______
Appendix 6: Why ``Permissionless Innovation'' Matters \48\
---------------------------------------------------------------------------
\48\ This section is adapted from Adam Thierer, ``Embracing a
Culture of Permissionless Innovation'' (Cato Policy Forum, Cato
Institute, Washington, D.C., November 2014), http://www.cato.org/
publications/cato-online-forum/embracing-culture-permissionless-
innovation.
---------------------------------------------------------------------------
A. Innovation Policy: Attitudes Matter
``Why does economic growth . . . occur in some societies and not in
others?'' asked Joel Mokyr in his 1990 book, Lever of Riches:
Technological Creativity and Economic Progress.\49\ Debate has raged
among generations of economists, historians, and business theorists
over that question and the specific forces and policies that prompt
long-term growth.
---------------------------------------------------------------------------
\49\ Joel Mokyr, Lever of Riches: Technological Creativity and
Economic Progress (New York: Oxford University Press, 1990), 8-9.
---------------------------------------------------------------------------
As varied as their answers have been, there was at least general
agreement that institutional factors mattered most: it was really just
a question of what mix of them would fuel the most growth. Those
institutional factors include: government stability, the enforceability
of contracts and property rights, tax and fiscal policies, trade
policies, regulatory factors, labor costs, educational policies,
research and development expenditures, infrastructure, demographics,
and environmental factors.\50\
---------------------------------------------------------------------------
\50\ For a listing and discussion of these and other factors, see
Robert D. Atkinson, ``Understanding the U.S. National Innovation
System,'' Information Technology and Innovation Foundation, June 2014,
http://www.itif.org/publications/understanding-us-national-innovation-
system.
---------------------------------------------------------------------------
This leads many scholars and policymakers to speak of innovation
policy as if it is simply a Goldilocks-like formula that entails
tweaking various policy dials to get innovation just right.\51\ Such
thinking animates the Obama administration's ``Strategy for American
Innovation,'' which catalogs ``policies to promote critical components
of the American innovation ecosystem.'' \52\ The White House claims its
strategy plays a ``critical role in guiding the development of new
policy initiatives that can help unleash the transformative innovation
that leads to long-term economic growth.'' \53\
---------------------------------------------------------------------------
\51\ Michael Nelson, ``Six Myths of Innovation Policy,'' The
European Institute, Washington, D.C., July 2013, http://
www.europeaninstitute.org/EA-July-2013/perspectives-six-myths-of-
innovation-policy.html. (``On Capitol Hill and in Brussels, there seems
to be a belief that if only governments adopt the right tax policies,
adequately fund R&D, enforce patents and copyrights, and support
manufacturing, innovative, then start-ups will pop up everywhere and
supercharge economic growth. Unfortunately, that misses an underlying
problem: In many parts of the U.S. and Europe, innovation is not really
welcome. It is misunderstood and even feared.'')
\52\ White House, ``Notice of Request for Information: Strategy for
American Innovation,'' Federal Register, July 29, 2014, https://
www.federalregister.gov/articles/2014/07/29/2014-17761/strategy-for-
american-innovation.
\53\ Ibid.
---------------------------------------------------------------------------
Unfortunately, far less attention has been paid to the role that
values--cultural attitudes, social norms, and political
pronouncements--play in influencing opportunities for
entrepreneurialism, innovation, and long-term growth.\54\ Does a socio-
political system respect what Deirdre McCloskey refers to as the
``bourgeois virtues'' that incentivize invention and propel an economy
forward? \55\ ``A big change in the common opinion about markets and
innovation,'' she has argued, ``caused the Industrial Revolution, and
then the modern world. . . . The result was modern economic growth.''
\56\
---------------------------------------------------------------------------
\54\ Donald J. Boudreaux, ``Deirdre McCloskey and Economists' Ideas
about Ideas,' '' Online Library of Liberty, July 2014, http://
oll.libertyfund.org/pages/mccloskey.
\55\ Deirdre N. McCloskey, The Bourgeois Virtues: Ethics for an Age
of Commerce (Chicago: University of Chicago Press, 2006).
\56\ Deirdre McCloskey, ``Bourgeois Dignity: A Revolution in
Rhetoric'' (Cato Unbound, Cato Institute, Washington, D.C., October 4,
2010), http://www.cato-unbound.org/2010/10/04/deirdre-mccloskey/
bourgeois-dignity-revolution-rhetoric.
---------------------------------------------------------------------------
There are limits to how much policymakers can influence these
attitudes and values, of course. Nonetheless, to the extent they hope
to foster the positive factors that give rise to expanded
entrepreneurial opportunities, policymakers should appreciate how
growth-oriented innovation policy begins with the proper policy
disposition.\57\ As Mokyr notes, ``technological progress requires
above all tolerance toward the unfamiliar and the eccentric.'' \58\
---------------------------------------------------------------------------
\57\ Randall Holcombe, ``Entrepreneurship and Economic Growth,''
The Quarterly Journal of Austrian Economics 1, no. 2 (Summer 1998): 58,
http://mises.org/journals/qjae/pdf/qjae1_
2_3.pdf, (``When entrepreneurship is seen as the engine of growth, the
emphasis shifts toward the creation of an environment within which
opportunities for entrepreneurial activity are created, and successful
entrepreneurship is rewarded.'')
\58\ Mokyr, Lever of Riches, 182.
---------------------------------------------------------------------------
For innovation and growth to blossom, entrepreneurs need a clear
green light from policymakers that signals a general acceptance of
risk-taking, especially risk-taking that challenges existing business
models and traditional ways of doing things.\59\ We can think of this
disposition as ``permissionless innovation.'' If there was one thing
every policymaker could do to help advance long-term growth, it is to
first commit themselves to advancing this ethic and making it the
lodestar for all their future policy pronouncements and decisions.
---------------------------------------------------------------------------
\59\ Mokyr, Lever of Riches, 12 (``Economic and social institutions
have to encourage potential innovators by presenting them with the
right incentive structure.''); Bret Swanson, ``More disruption,
please,'' TechPolicyDaily, August 20, 2014, http://
www.techpolicydaily.com/technology/disruption-please/
#sthash.PVUNga9N.dpuf (``To reignite economic growth, we need a broad
commitment to an open economy and robust entrepreneurship.'').
---------------------------------------------------------------------------
B. Permissionless Innovation vs. the Precautionary Principle
While it would seem self-evident that pro-innovation attitudes
matter and that a general embrace of risk-taking and commercial
pursuits is crucial to unlocking entrepreneurial creativity and
opportunities, scholars have typically failed to put a name on this
disposition. ``Permissionless innovation'' is a phrase of recent (but
uncertain) origin that nicely summarizes that vision. Permissionless
innovation refers to the notion that experimentation with new
technologies and business models should generally be permitted by
default.\60\ Unless a compelling case can be made that a new invention
or business model will bring serious harm to individuals, innovation
should be allowed to continue unabated, and problems, if they develop
at all, can be addressed later.
---------------------------------------------------------------------------
\60\ Thierer, Permissionless Innovation.
---------------------------------------------------------------------------
Permissionless innovation is not an absolutist position that
rejects any role for government. Rather, it is an aspirational goal
that stresses the benefit of ``innovation allowed'' as the default
position to begin policy debates. It switches the burden of proof to
those who favor preemptive regulation and asks them to explain why
ongoing trial-and-error experimentation with new technologies or
business models should be disallowed.
This disposition stands in stark contrast to the sort of
``precautionary principle'' thinking that often governs policy toward
emerging technologies. The precautionary principle refers to the belief
that new innovations should be curtailed or disallowed until their
developers can prove that they will not cause any harms to individuals,
groups, specific entities, cultural norms, or various existing laws,
norms, or traditions.\61\
---------------------------------------------------------------------------
\61\ Ibid., vii. See also Adam Thierer, ``Technopanics, Threat
Inflation, and the Danger of an Information Technology Precautionary
Principle,'' Minnesota Journal of Law, Science and Technology 14
(2013): 309-86, http://conservancy.umn.edu/handle/144225.
---------------------------------------------------------------------------
When the precautionary principle's ``better to be safe than sorry''
\62\ approach is applied through preemptive constraints, opportunities
for experimentation and entrepreneurialism are stifled. While some
steps to anticipate or to control for unforeseen circumstances are
sensible, going overboard with precaution forecloses opportunities and
experiences that offer valuable lessons for individuals and society.
The result is less economic and social dynamism.
---------------------------------------------------------------------------
\62\ Indur M. Goklany, The Precautionary Principle: A Critical
Appraisal of Environmental Risk Assessment (Washington, D.C.: Cato
Institute, 2001), 3.
---------------------------------------------------------------------------
Innovation is more likely in systems that maximize breathing room
for ongoing economic and social experimentation, evolution, and
adaptation. Societies that appreciate those values--and allow them to
influence both social norms and policy decisions--are likely to
experience greater economic growth.\63\ By contrast, those that deride
such values and adopt a more precautionary policy approach are more
likely to discourage innovation and languish economically.
---------------------------------------------------------------------------
\63\ Joshua C. Hall, John Pulito, and Benjamin J. VanMetre,
``Freedom and Entrepreneurship: New Evidence from the 50 States''
(Mercatus Working Paper, Mercatus Center at George Mason University,
Arlington, VA, April 17, 2012), http://mercatus.org/publication/
freedom-and-entrepreneurship-new-evidence-50-states (``There is a
positive and statistically significant relationship between the level
of economic freedom in a country and that country's total
entrepreneurial activity.'')
---------------------------------------------------------------------------
Unlocking long-term growth opportunities, therefore, depends upon a
rejection of precautionary principle thinking and an embrace of
permissionless innovation as the default policy disposition.
C. The Secret Ingredient that Powered the Information Revolution
Consider how permissionless innovation powered the explosive growth
of the Internet and America's information technology sectors
(computing, software, Internet services, etc.) over the past two
decades. Those sectors have ushered in a generation of innovations and
innovators that are now the envy of the world.\64\ This happened
because the default position for the digital economy was permissionless
innovation. No one had to ask anyone for the right to develop these new
technologies and platforms.\65\
---------------------------------------------------------------------------
\64\ See Bret Swanson, ``The Exponential Internet,'' Business
Horizon Quarterly (Spring 2014): 40-47, http://
www.uschamberfoundation.org/sites/default/files/article/foundation/BHQ-
Spring12-Issue3-SwansonTheExponentialInternet.pdf.
\65\ Ibid., 46. (``The entrepreneurship and investment that has
sustained such fast growth for so long is due, in substantial part, to
light-touch government policies (at least compared to other industries.
. . . There have been mistakes, but for the most part, scientists,
entrepreneurs, and big investors have been allowed to build new things,
try new products, challenge the status quo, cooperate, and compete.
They have also been allowed to fail.'') See also Bret Swanson, ``Long
Live the Risk Takers,'' Business Horizon Quarterly 8 (2013): 30, http:/
/www.uschamber
foundation.org/bhq/long-live-risk-takers (``Failure is a core
competency of capitalism and a key component of resilience. Wealth is
about creating new ideas. New ideas can only emerge through experiments
of science, technology, and enterprise, all of which must be capable of
failure in order to generate newness. Failure flushes away bad ideas
and points us toward good ones. The failures may at times harm
individuals and waste resources--people lose jobs and investments can
be lost. The larger effect, however, is to lift the economy to a higher
plane of knowledge, efficiency, and resilience.'')
---------------------------------------------------------------------------
A series of decisions and statements in the mid-1990s paved the
way, beginning with the Clinton administration's decision to allow
commercialization of what was previously just the domain of government
agencies and university researchers. Shortly thereafter, Congress
passed, and President Clinton signed, the Telecommunications Act of
1996, which notably avoided regulating the Internet like earlier
communications and media technologies. Later, in 1998, the Internet Tax
Freedom Act was passed, which blocked governments from imposing
discriminatory taxes on the Internet.
Perhaps most important, in 1997, the Clinton administration's
released its ``Framework for Global Electronic Commerce,'' outlining
its approach toward the Internet and the emerging digital economy.\66\
The framework was a succinct and bold market-oriented vision for
cyberspace governance that recommended reliance upon civil society,
contractual negotiations, voluntary agreements, and ongoing marketplace
experiments to solve information age problems.\67\ Specifically, it
stated that ``the private sector should lead [and] the Internet should
develop as a market driven arena not a regulated industry.'' \68\
``[G]overnments should encourage industry self-regulation and private
sector leadership where possible'' and ``avoid undue restrictions on
electronic commerce.'' \69\
---------------------------------------------------------------------------
\66\ White House, ``The Framework for Global Electronic Commerce,''
July 1997, http://clinton4.nara.gov/WH/New/Commerce.
\67\ Adam Thierer, ``15 Years On, President Clinton's 5 Principles
for Internet Policy Remain the Perfect Paradigm,'' Forbes, February 12,
2012, http://www.forbes.com/sites/adamthierer/2012/02/12/15-years-on-
president-clintons-5-principles-for-internet-policy-remain-the-perfect-
paradigm.
\68\ White House, ``Framework for Global Electronic Commerce.''
(The document added that, ``parties should be able to enter into
legitimate agreements to buy and sell products and services across the
Internet with minimal government involvement or intervention. . . .
Where governmental involvement is needed, its aim should be to support
and enforce a predictable, minimalist, consistent and simple legal
environment for commerce.'')
\69\ Ibid.
---------------------------------------------------------------------------
This policy disposition resulted in an unambiguous green light for
a rising generation of creative minds who were eager to explore this
new frontier for commerce and communications. As Federal Trade
Commission Commissioner Maureen K. Ohlhausen observes, ``the success of
the Internet has in large part been driven by the freedom to experiment
with different business models, the best of which have survived and
thrived, even in the face of initial unfamiliarity and unease about the
impact on consumers and competitors.'' \70\
---------------------------------------------------------------------------
\70\ Maureen K. Ohlhausen, ``The Internet of Things and the FTC:
Does Innovation Require Intervention?'' Remarks before the U.S. Chamber
of Commerce, Washington, D.C., October 18, 2013, http://www.ftc.gov/
speeches/ohlhausen/131008internetthingsremarks.pdf.
---------------------------------------------------------------------------
The result of this ``freedom to experiment'' was an outpouring of
innovation. America's info-tech sectors thrived thanks to
permissionless innovation, and they still do today. A 2013 Booz &
Company report on the world's most innovative companies revealed that 9
of the top 10 most innovative companies are based in the United States
and that most of them are involved in computing, software, and digital
technology.
D. And What's Good for the Goose . . .
What's even more powerful about this story is how the information
technology and ``data-driven innovation'' became the goose that laid
the golden eggs for the broader U.S. economy.\71\ Brink Linsdey has
noted that ``economists generally agree that information technology
(IT) was behind the decade of high TFP [total factor productivity]
growth that ran from the mid-1990s to the mid-2000s.'' \72\ It also
boosted overall economic growth during that period.\73\
---------------------------------------------------------------------------
\71\ A study commissioned by the Direct Marketing Association, John
Deighton of Harvard Business School and Peter Johnson of Columbia
University found that data-driven marketing added $156 billion in
revenue to the U.S. economy and fueled more than 675,000 jobs in 2012.
See also John Deighton and Peter A. Johnson, ``The Value of Data:
Consequences for Insight, Innovation & Efficiency in the U.S.
Economy,'' Data-Driven Marketing Institute, New York, NY, 2013, http://
ddminstitute.thedma.org/#valueofdata. Major reports from economic
consultancies Gartner and McKinsey Global Institute have also
documented significant consumer benefits from ``big data'' across
multiple sectors. See Gartner, ``Gartner Says Big Data Will Drive $28
Billion of IT Spending in 2012,'' October 17, 2012, http://
www.gartner.com/newsroom/id/2200815; James Manyika, Michael Chui, Brad
Brown, Jacques Bughin, Richard Dobbs, Charles Roxburgh, and Angela Hung
Byers, ``Big Data: The Next Frontier for Innovation, Competition, and
Productivity,'' McKinsey, May 2011, 97-106, http://www.mckinsey.com/
insights/businessxtechnology/big_data_the_next_frontier_for_innovation.
\72\ Lindsey, ``Why Growth Is Getting Harder,'' 14.
\73\ Harold Furchtgott-Roth and Jeffrey Li, ``The Contribution of
the Information, Communications, and Technology Sector to the Growth of
U.S. Economy: 1997-2007'' (Research Paper, Center for the Economics of
the Internet, Hudson Institute, Washington, D.C., August 2014), http://
hudson.org/content/researchattachments/attachment/1425/m0810_2.pdf
(``For the years 1997-2002, we find the sector contributed 19 percent
of measurable economic gross output growth, or more than 582 billion
2013 dollars. For the period 2002-2007, we find the sector contributed
9.3 percent of gross output growth, or more than 340 billion 2013
dollars.'')
---------------------------------------------------------------------------
If an embrace of permissionless innovation can unlock this sort of
entrepreneurial energy within the information technology sectors, it
can also provide a shot in the arm to other sectors. The rest of the
economy could certainly use such a boost since ``the evidence of a real
decline in business dynamism keeps stacking up.'' \74\
---------------------------------------------------------------------------
\74\ Richard Florida, ``The Troubling Decline of American Business
Dynamism,'' The Atlantic City Lab, July 31, 2014, http://
www.citylab.com/work/2014/07/the-troubling-decline-of-american-
business-dynamism/375353.
Recent studies ``suggest that incentives for entrepreneurs to start
new firms in the United States have diminished over time'' \75\ and
that this is hurting job creation and productivity.\76\ Two recent
Brookings Institution studies by Ian Hathaway and Robert E. Litan also
documented a decline in business dynamism in the American economy
across a broad range of sectors--including a ``precipitous drop since
2006 [that] is both noteworthy and disturbing'' \77\--as well as the
increased ``aging'' of businesses, with the share of older firms in the
U.S. economy increasing by 50 percent over the past two decades.\78\
---------------------------------------------------------------------------
\75\ Ryan Decker, John Haltiwanger, Ron Jarmin, and Javier Miranda,
``The Role of Entrepreneurship in U.S. Job Creation and Economic
Dynamism,'' Journal of Economic Perspectives 28, no. 3 (Summer 2014):
4, http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.28.3.3.
\76\ Robert J. Samuelson, ``Where have all the entrepreneurs
gone?'' Washington Post, August 6, 2014, http://www.washingtonpost.com/
opinions/robert-samuelson-where-have-all-the-entrepre
neurs-gone/2014/08/06/e01e7246-1d7c-11e4-82f9-2cd6fa8da5c4_story.html.
\77\ Ian Hathaway and Robert E. Litan, ``Declining Business
Dynamism in the United States: A Look at States and Metros'' (Economic
Studies at Brookings, Brookings Institution, Washington, D.C., May
2014), http://www.brookings.edu/research/papers/2014/05/declining-
business-dynamism-litan.
\78\ Ian Hathaway and Robert E. Litan, ``The Other Aging of
America: The Increasing Dominance of Older Firms'' (Economic Studies at
Brookings, Brookings Institution, Washington, D.C., July 2014), http://
www.brookings.edu/research/papers/2014/07/aging-america-increasing-
dominance-older-firms-litan.
---------------------------------------------------------------------------
Many different institutional factors affect business dynamism,
especially the regulatory environment that new startups face. ``If you
look over time, the number of rules has just proliferated,'' says
Litan. ``The cumulative weight of regulation--federal, state and
local--is probably the most important impediment to starting a
business.'' \79\ Unfortunately, many current public policies ``are rife
with barriers to entrepreneurship, competition, innovation, and
growth,'' notes Lindsey.\80\
---------------------------------------------------------------------------
\79\ Quoted in Rick Newman, ``What Obama Gets Wrong about Corporate
America,'' Yahoo Finance, August 4, 2014, http://finance.yahoo.com/
news/what-obama-gets-wrong-about-corporate-america-200338595.html.
\80\ Lindsey, ``Why Growth Is Getting Harder,'' 18.
---------------------------------------------------------------------------
As a result, ``the regulatory environment in the United States has
become less favorable to private-sector activity in recent years
compared to other countries,'' a Mercatus Center report concluded.\81\
This is especially true for new start-ups.\82\ Even if it is the case
that ``established firms that have the experience and resources to deal
with [regulatory burdens],'' Litan notes, the cumulative effect of
regulations ends up hampering innovation by new, smaller firms.\83\
---------------------------------------------------------------------------
\81\ See also Steven Globerman and George Georgopoulos,
``Regulation and the International Competiveness of the U.S. Economy''
(Mercatus Working Paper, Mercatus Center at George Mason University,
Arlington, VA, September 18, 2012), 4, http://mercatus.org/publication/
regulation-and-international-competitiveness-us-economy.
\82\ Jason J. Fichtner and Jakina R. Debnam, ``Reducing Debt and
Other Measures for Improving U.S. Competitiveness'' (Mercatus Working
Paper, Mercatus Center at George Mason University, Arlington, VA,
November 13, 2012), http://mercatus.org/publication/reducing-debt-and-
other-measures-improving-us-competitiveness (``Regulations have been
historically biased toward existing technologies and increasing
regulatory burdens on new entrants to a sector. This negatively impacts
growth, and increases prices for consumers.'')
\83\ Quoted in Robert J. Samuelson, ``Where Have All the
Entrepreneurs Gone?'' Washington Post, August 6, 2014, http://
www.washingtonpost.com/opinions/robert-samuelson-where-have-all-the-
entrepreneurs-gone/2014/08/06/e01e7246-1d7c-11e4-82f9-
2cd6fa8da5c4_story.html.
---------------------------------------------------------------------------
The reason this is important is not just because ``business
dynamism is inherently disruptive,'' as Hathaway and Litan note, ``but
[that] it is also critical to long-run economic growth'' since ``a
dynamic economy constantly forces labor and capital to be put to better
uses.'' \84\ Thus, because economists widely acknowledge that ``young
firms are known to play a central role in job creation,'' \85\ it is
especially important that policymakers get their signals right.
---------------------------------------------------------------------------
\84\ Hathaway and Litan, ``Declining Business Dynamism,'' 1.
\85\ Chiara Criscuolo, Peter N. Gal, and Carlo Menon, ``DynEmp: New
Cross-Country Evidence on the Role of Young Firms in Job Creation,
Growth, and Innovation,'' Vox, May 26, 2014, http://www.voxeu.org/
article/dynemp-new-evidence-young-firms-role-economy.
---------------------------------------------------------------------------
Again, an embrace of permissionless innovation is the way out of
this conundrum.
E. Operationalizing the Vision
Patience, flexibility, and forbearance are the key policy virtues
that nurture an environment conducive to entrepreneurial creativity. As
the FTC's Ohlhausen argues, it is ``vital that government officials. .
.approach new technologies with a dose of regulatory humility, by
working hard to educate ourselves and others about the innovation,
understand its effects on consumers and the marketplace, identify
benefits and likely harms, and, if harms do arise, consider whether
existing laws and regulations are sufficient to address them, before
assuming that new rules are required.'' \86\
---------------------------------------------------------------------------
\86\ Maureen K. Ohlhausen, ``The Internet of Things and the FTC:
Does Innovation Require Intervention?,'' Remarks before the U.S.
Chamber of Commerce, Washington, D.C., October 18, 2013, http://
www.ftc.gov/speeches/ohlhausen/131008internetthingsremarks.pdf.
---------------------------------------------------------------------------
Beyond its importance as an aspirational vision, permissionless
innovation can guide policy in concrete ways, especially regulatory
policies. Possible reforms include regulatory streamlining \87\ and
flexibility requirements,\88\ ``sunsetting'' provisions,\89\ better
benefit-cost analysis,\90\ and a greater reliance on potential non-
regulatory remedies--education, empowerment, transparency, industry
self-regulation, etc.--before resorting to preemptive controls on new
forms of innovation. Relying on common law solutions is also preferable
to top-down administrative controls.\91\
---------------------------------------------------------------------------
\87\ Sherzod Abdukadirov, ``Evaluating Regulatory Reforms: Lessons
for Future Reforms'' (Mercatus Working Paper, Mercatus Center at George
Mason University, Arlington, VA, May 29, 2014), http://mercatus.org/
publication/evaluating-regulatory-reforms-lessons-future-reforms;
Joshua C. Hall and Michael Williams, ``A Process for Cleaning Up
Federal Regulations'' (Mercatus Working Paper, Mercatus Center at
George Mason University, Arlington, VA, December 20, 2012), http://
mercatus.org/publication/process-cleaning-federal-regulations.
\88\ Richard Epstein, ``Can Technological Innovation Survive
Government Regulation?'' Harvard Journal of Law and Public Policy 36,
no. 1 (Winter 2013), http://www.harvard-jlpp.com/wp-content/uploads/
2013/01/36_1_087_Epstein_Tech.pdf (``What is at stake in this area is
nothing less than the question of how to preserve technical innovation
in the face of wall-to-wall regulation. The prognosis is grim. Unless
we reform agencies like the FDA and their procedures and operations,
this country will suffer from a long-term drag on innovation that
could, if the trend is not abated, lead to long-term mediocrity, as
inventors and scientists flee our shores for friendlier environments.
The pace of regulation is one of the central issues of our time.'')
\89\ Adam Thierer, ``Sunsetting Technology Regulation: Applying
Moore's Law to Washington,'' Forbes, March 25, 2012, http://
www.forbes.com/sites/adamthierer/2012/03/25/sunsetting-technology-
regulation-applying-moores-law-to-washington; Patrick McLaughlin, ``A
Solution to the Old Rules vs. New Tech Problem,'' The Hill, July 8,
2014, http://mercatus.org/expert
_commentary/solution-old-rules-vs-new-tech-problem.
\90\ See Susan E. Dudley and Jerry Brito, Regulation: A Primer, 2nd
ed. (Arlington, VA: Mercatus Center at George Mason University, 2012).
\91\ See Thierer, Permissionless Innovation, 74-78.
---------------------------------------------------------------------------
F. Conclusion: Reasons for Optimism
In sum, attitudes matter as much as institutional factors in
understanding what drives innovation and long-term growth, and there
are reasons for optimism if policymakers embrace permissionless
innovation as their default policy disposition.
Pessimists who predict permanent productivity and growth slowdown
shouldn't forget that ``the rate of growth of productivity at the
frontiers of knowledge is especially difficult to predict; and it is
unwise to underestimate human ingenuity,'' as Federal Reserve Vice
Chairman Stanley Fischer noted in a 2014 speech.\92\ While ``it is
difficult to know exactly in which direction technological change will
move and how significant it will be,'' Joel Mokyr reminds us that,
``something can be learned from the past, and it tells us that such
pessimism is mistaken. The future of technology is likely to be
bright.'' \93\ Contrary to the belief that all the ``low-hanging
fruit'' has already been picked, Mokyr notes that ``we can also plant
new trees that will grow fruits that no one today can imagine.'' \94\
---------------------------------------------------------------------------
\92\ Stanley Fischer, ``The Great Recession--Moving Ahead,'' a
Conference Sponsored by the Swedish Ministry of Finance, Stockholm,
Sweden, August 11, 2014, http://www.federal
reserve.gov/newsevents/speech/fischer20140811a.htm.
\93\ Joel Mokyr, ``The Next Age of Invention,'' City Journal,
Winter 2014, http://www.city-journal.org/2014/24_1_invention.html.
\94\ Ibid.
---------------------------------------------------------------------------
Getting the disposition right will be more important than ever with
so many exciting--but potentially highly disruptive--technologies
starting to emerge, including the ``sharing economy;'' \95\ 3D
printing; the ``Internet of Things'' and wearable technology;\96\
digital medicine; virtual reality and augmented reality technologies;
commercial drone services;\97\ autonomous vehicles;\98\ and various
robotic technologies.\99\
---------------------------------------------------------------------------
\95\ Adam Thierer, ``The Debate over the Sharing Economy: Talking
Points & Recommended Reading,'' Technology Liberation Front, September
26, 2014, http://techliberation.com/2014/09/26/the-debate-over-the-
sharing-economy-talking-points-recommended-reading.
\96\ Adam Thierer, ``Slide Presentation: Policy Issues Surrounding
the Internet of Things & Wearable Technology,'' Technology Liberation
Front, September 12, 2014, http://techliber
ation.com/2014/09/12/slide-presentation-policy-issues-surrounding-the-
internet-of-things-wearable-technology.
\97\ Jerry Brito, Eli Dourado, and Adam Thierer, ``Federal Aviation
Administration: Unmanned Aircraft System Test Site Program Docket No:
FAA-2013-0061'' (Public Interest Comment, Mercatus Center at George
Mason University, Arlington, VA, April 23, 2013), http://mercatus.org/
publication/federal-aviation-administration-unmanned-aircraft-system-
test-site-program; Eli Dourado, ``The Next Internet-Like Platform for
Innovation? Airspace. (Think Drones),'' Wired, April 23, 2013, http://
www.wired.com/opinion/2013/04/then-internet-now-airspace-dont-stifle-
innovation-on-the-next-great-platform; Adam Thierer, ``Filing to FAA on
Drones & `Model Aircraft','' Technology Liberation Front, September 23,
2014, http://techliber
ation.com/2014/09/23/filing-to-faa-on-drones-model-aircraft.
\98\ Adam Thierer and Ryan Hagemann, ``Removing Roadblocks to
Intelligent Vehicles and Driverless Cars'' (Mercatus Working Paper,
Mercatus Center at George Mason University, Arlington, VA, September
17, 2014), http://mercatus.org/publication/removing-roadblocks-
intelligent-vehicles-and-driverless-cars.
\99\ Adam Thierer, ``Problems with Precautionary Principle-Minded
Tech Regulation & a Federal Robotics Commission,'' Medium, September
22, 2014, https://medium.com/@AdamThierer/problems-with-precautionary-
principle-minded-tech-regulation-a-federal-robotics-commission-c71
f6f20d8bd.
---------------------------------------------------------------------------
Permissionless innovation can help spur the next great industrial
revolution by unlocking amazing opportunities in these and other
arenas, boosting long-term growth in the process.
______
Appendix 7: How We Adapt to Technological Change \100\
---------------------------------------------------------------------------
\100\ This section adapted from Adam Thierer, ``The Internet of
Things and Wearable Technology: Addressing Privacy and Security
Concerns without Derailing Innovation'' (Mercatus Working Paper,
Mercatus Center at George Mason University, Arlington, VA, November
2015), which will be published in the Richmond Journal of Law and
Technology 21, no. 6 (2015), http://mercatus.org/publication/internet-
things-and-wearable-technology-addressing-privacy-and-security-
concerns-without.
---------------------------------------------------------------------------
A. From Resistance to Resiliency
Citizen attitudes about these technologies will likely follow a
cycle that has played out in countless other contexts. That cycle
typically witnesses initial resistance, gradual adaptation, and then
eventual assimilation of a new technology into society.\101\ Some
citizens will begin their relationship with these new technologies in a
defensive crouch. In the extreme, if there is enough of a backlash, the
initial resistance to these technologies might take the form of a full-
blown ``technopanic.'' \102\
---------------------------------------------------------------------------
\101\ See Adam Thierer, ``Technopanics, Threat Inflation, and the
Danger of an Information Technology Precautionary Principle,'' Minn. J.
L. Sci. & Tech. 14 (2013): 309.
\102\ Ibid., 53-60.
---------------------------------------------------------------------------
Over time, however, citizens tend to learn how to adapt to new
technologies or at least become more resilient in the face of new
challenges posed by modern technological advances. Andrew Zolli and Ann
Marie Healy, authors of Resilience: Why Things Bounce Back, define
resilience as ``the capacity of a system, enterprise, or a person to
maintain its core purpose and integrity in the face of dramatically
changed circumstances.'' \103\ They continue:
---------------------------------------------------------------------------
\103\ Andrew Zolli and Ann Marie Healy, Resilience: Why Things
Bounce Back (New York: Simon & Schuster, 2012).
To improve your resilience is to enhance your ability to resist
being pushed from your preferred valley, while expanding the
range of alternatives that you can embrace if you need to. This
is what researchers call preserving adaptive capacity--the
ability to adapt to changed circumstances while fulfilling
one's core purpose--and it's an essential skill in an age of
unforeseeable disruption and volatility.\104\
---------------------------------------------------------------------------
\104\ Ibid., 7-8.
Consequently, they note, ``by encouraging adaptation, agility,
cooperation, connectivity, and diversity, resilience-thinking can bring
us to a different way of being in the world, and to a deeper engagement
with it.'' \105\
---------------------------------------------------------------------------
\105\ Ibid., 16.
---------------------------------------------------------------------------
Those who propose more precautionary solutions to challenging
social problems often ignore this uncanny ability of individuals and
institutions to ``bounce back'' from technological disruptions and
become more resilient in the process. Part of the reason precautionary
thinking sometimes dominates discussions about emerging technologies is
that many people hold a deep-seated pessimism about future developments
and a belief that, with enough preemptive planning, they can anticipate
and overcome any number of hypothetical worst-case scenarios.
Consequently, their innate tendency not only to be pessimistic but also
to want greater certainty about the future means that ``the gloom-
mongers have it easy,'' notes author Dan Gardner.\106\ ``Their
predictions are supported by our intuitive pessimism, so they feel
right to us. And that conclusion is bolstered by our attraction to
certainty.'' \107\ Clive Thompson, a contributor to Wired and the New
York Times Magazine, also notes that ``dystopian predictions are easy
to generate'' and ``doomsaying is emotionally self-protective: if you
complain that today's technology is wrecking the culture, you can tell
yourself you're a gimlet-eyed critic who isn't hoodwinked by high-tech
trends and silly, popular activities like social networking. You seem
like someone who has a richer, deeper appreciation for the past and who
stands above the triviality of today's life.'' \108\
---------------------------------------------------------------------------
\106\ Dan Gardner, Future Babble: Why Pundits Are Hedgehogs and
Foxes Know Best (New York: Plume, 2012), 140-1.
\107\ John Seely Brown and Paul Duguid, ``Response to Bill Joy and
the Doom-and-Gloom Technofuturists,'' in Albert H. Teich, Stephen D.
Nelson, Celia McEnaney, and Stephen J. Lita, editors, AAAS Science and
Technology Policy Yearbook (Washington, D.C.: American Association for
the Advancement of Science, 2001), 79.
\108\ Clive Thompson, Smarter Than You Think: How Technology Is
Changing Our Minds for the Better (New York: Penguin, 2014), 283.
---------------------------------------------------------------------------
Luckily, as science reporter Joel Garreau reminds readers, ``the
good news is that end-of-the-world predictions have been around for a
very long time, and none of them has yet borne fruit.'' \109\
Doomsayers have a bad track record because they typically ignore how
``humans shape and adapt [technology] in entirely new directions.''
\110\ ``Just because the problems are increasing doesn't mean solutions
might not also be increasing to match them,'' Garreau correctly
notes.\111\
---------------------------------------------------------------------------
\109\ Joel Garreau, Radical Evolution: The Promise and Peril of
Enhancing Our Minds, Our Bodies--and What It Means to Be Human (New
York: Broadway Books, 2006), 148.
\110\ Ibid., 95.
\111\ Ibid., 154.
---------------------------------------------------------------------------
In their 2001 ``Response to Doom-and-Gloom Technofuturists,'' John
Seely Brown and Paul Duguid note that ``technological and social
systems shape each other. . . . [They] are constantly forming and
reforming new dynamic equilibriums with far-reaching implications.''
``Social and technological systems do not develop independently,'' they
continue. Rather, ``the two evolve together in complex feedback loops,
wherein each drives, restrains, and accelerates change in the other.''
\112\
---------------------------------------------------------------------------
\112\ Brown and Duguid, supra note 106, 79, 82, 83.
---------------------------------------------------------------------------
This is how humans become more resilient and prosper, even in the
face of sweeping technological change. Wisdom is born of experience,
including experiences that involve risk and the possibility of
occasional mistakes and failures while both developing new technologies
and learning how to live with them.\113\ Citizens should remain open to
new forms of technological change not only because doing so provides
breathing space for future entrepreneurialism and invention, but also
because it provides an opportunity to see how societal attitudes toward
new technologies evolve--and to learn from that change. More often than
not, citizens find creative ways to adapt to technological change by
using a variety of coping mechanisms, new norms, or other creative
fixes. Although some things are lost in the process, something more is
typically gained, including lessons about how to deal with subsequent
disruptions.
---------------------------------------------------------------------------
\113\ Thierer, Permissionless Innovation, viii.
---------------------------------------------------------------------------
Case Study: The Rise of Public Photography
Consider the jarring impact that the rise of the camera and public
photography had on American society in the late 1800s.\114\ This case
study has implications for the debate over wearable technologies.
Plenty of critics existed, and many average citizens were probably
outraged by the spread of cameras \115\ because ``for the first time
photographs of people could be taken without their permission--perhaps
even without their knowledge,'' notes Lawrence M. Friedman in his 2007
book, Guarding Life's Dark Secrets: Legal and Social Controls over
Reputation, Propriety, and Privacy.\116\
---------------------------------------------------------------------------
\114\ This section was condensed from Thierer, ``Technopanics.''
\115\ For a discussion of the anxieties caused by photography
during this time, see Robert E. Mensel, Kodakers Lying in Wait: Amateur
Photography and the Right of Privacy in New York, 1885-1915, Amer.
Quar. 43 (March 1991): 24.
\116\ Lawrence M. Friedman, Guarding Life's Dark Secrets: Legal and
Social Controls over Reputation, Propriety, and Privacy (Palo Alto, CA:
Stanford University Press, 2007), 214.
---------------------------------------------------------------------------
In fact, the most important essay ever written on privacy law,
Samuel D. Warren and Louis D. Brandeis's famous 1890 Harvard Law Review
essay ``The Right to Privacy,'' decries the spread of public
photography. The authors lament that ``instantaneous photographs and
newspaper enterprise have invaded the sacred precincts of private and
domestic life'' and claim that ``numerous mechanical devices threaten
to make good the prediction that `what is whispered in the closet shall
be proclaimed from the house-tops.' '' \117\
---------------------------------------------------------------------------
\117\ Samuel D. Warren and Louis D. Brandeis, ``The Right to
Privacy,'' Harv. L. Rev. 4 (1890): 193, 195.
---------------------------------------------------------------------------
Despite the profound disruption caused by cameras and public
photography, personal norms and cultural attitudes evolved quite
rapidly as cameras became a central part of the human experience. In
fact, instead of shunning cameras, most people quickly looked to buy
one. At the same time, social norms and etiquette evolved to address
those who would use cameras in inappropriate or privacy-invasive ways.
In other words, citizens bounced back and became more resilient in the
face of technological adversity.
Although some limited legal responses were needed to address the
most egregious misuses of cameras, for the most part the gradual
evolution of social norms, public pressure, and other coping mechanisms
combined to solve the ``problem'' of public photography. In much the
same way IoT and wearable technology will likely see a similar
combination of factors at work as individuals and society slowly adjust
to the new technological realities of the time. The public will likely
develop coping mechanisms to deal with the new realities of a world of
wearable technologies and become more resilient in the process.
That being said, resiliency should not be equated with complacency
or a ``Just get over it!'' attitude toward privacy and security issues.
With time, it may very well be the case that people ``get over'' some
of the anxieties they might hold today concerning these new
technologies, but in the short run, IoT and wearable technologies will
create serious social tensions that deserve serious responses.\118\
---------------------------------------------------------------------------
\118\ Adam Thierer, ``Can We Adapt to the Internet of Things?,''
Privacy Perspectives, June 19, 2013, https://
www.privacyassociation.org/privacy_perspectives/post/
can_we_adapt_to_the
_internet_of_things.
The Chairman. Thank you, Mr. Thierer.
Mr. Brookman?
STATEMENT OF JUSTIN BROOKMAN, DIRECTOR,
CONSUMER PRIVACY PROJECT,
CENTER FOR DEMOCRACY & TECHNOLOGY
Mr. Brookman. Thank you, Chairman Thune, Ranking Member
Nelson, members of the Committee. I very much appreciate the
opportunity to testify here today.
I am here today on behalf of the Center for Democracy &
Technology. We are a digital rights advocacy group based here
in D.C. where I head up our work on commercial data privacy.
So let me start by saying as a consumer advocate I am
extremely optimistic about the value of what that Internet of
Things devices can deliver for everyday citizens. Smart cards
and infrastructure have the capacity to save lives, reduce
travel times, and reduce our dependence on oil. Connected
medical devices have the potential to revolutionize health
care, giving patients constant real-time data about their
medical conditions without tethering them to a hospital bed or
medical facility. And already today smart phones, computers,
TVs mean the wealth of the world's information is always at our
fingertips, and on a whim, we have the ability to watch any
movie, listen to any song, or read any book we want.
But some consumers are nervous about the sudden
proliferation of Internet of Things devices and worry about too
much exposure of their personal information. If the Internet of
Things is going to be fully realized, there are a few policy
challenges we are going to need to confront: first, poor data
security practices; second, unexpected or unwanted data
collection; third, a loss of control over our own devices; and
fourth, potential government abuse of these technologies. I am
going to go through each of these concerns.
An overarching theme is that Internet of Things products
need to be designed with privacy and security and user
empowerment in mind. Otherwise, the actions of a few careless
actors may fundamentally stunt innovation of these incredibly
powerful technologies.
So first let us talk about data security. Unfortunately,
far too many Internet of Things devices built today are
developed with security as an afterthought. Even at this early
stage, we have seen all sorts of IoT devices be vulnerable to
attack. Home alarm systems have been hacked. Baby monitors have
been hacked. Smart refrigerators and toasters have been hacked.
Medical devices, routers, thermostats--you mentioned, Senator
Markey, in the 60 Minutes report that smart vehicles may be
vulnerable to attack. The list goes on and on. We absolutely
need to find a better way to incentivize rigorous security
practices built into products from the beginning because the
status quo is not cutting it.
Smart devices also need to be designed to make sure that
data collection is consistent with consumer expectations and
desires. Again, you mentioned that Samsung has been in the news
this week for language in its terms of service saying it had
the right to record and send to an unnamed company any
conversations you have around your Smart TV in order to improve
its voice recognition capabilities. Now, I suspect that
Samsung's actual data collection practices are much more
limited, but it is very hard for an ordinary consumer to know.
And it raises a really important question. Just because a
device can collect some personal data that might be useful one
day, should it? A consumer might be okay with constant voice or
even constant video collection going on all the time to make
their device better; they might not. Ultimately, consumers
should be empowered to make that choice and to control what the
devices collect about them.
Connected devices also need to be configured to allow
consumers to use them however they want and not to artificially
constrain their choices. As one example, Keurig, the single-cup
coffeemaker, configured their latest smart coffee machines to
only work with Keurig-approved coffee pods, limiting consumers'
ability to use their own machines to make whatever coffee they
wanted. Here at least, the market seems to have noticed. Amazon
reviews of these new machines are extremely critical of this
feature and sales have fallen. I encourage Internet of Things
designers to keep this case study in mind and make sure they
are creating functionality that serves the consumers, the
person who paid money for these products.
And finally, we fundamentally need to reform our government
access and intelligence laws to make sure that consumers trust
the Internet of Things. Forrester Research recently released a
report dealing with the Snowden revelations about the PRISM
program could result in a net loss of $180 billion to the U.S.
IT sector by 2016. And that is just one program. Internet of
Things devices are especially vulnerable to these fears. These
devices have the potential to collect vast amounts of
incredibly sensitive information about us, information that
might be available without a warrant under the PATRIOT Act. If
the Government wants access to this data about us, there need
to be robust, due process requirements in place to make sure
that consumers are confident that these databases will not be
abused. At the end of the day, consumers need to trust the
Internet of Things is working for them.
Thank you very much, and I look forward to discussing this
further.
[The prepared statement of Mr. Brookman follows:]
Prepared Statement of Justin Brookman, Director, Consumer Privacy,
Center for Democracy & Technology
The Center for Democracy & Technology (CDT) is pleased to submit
testimony to the Senate Committee on Commerce, Science, and
Transportation for today's hearing on the privacy and security
implications of the Internet of Things (IoT).
CDT is a non-profit, public interest organization dedicated to
preserving and promoting openness, innovation, and freedom on the
Internet. I currently serve as the Director of CDT's Consumer Privacy
Project. Our project focuses on issues surrounding consumer data, and I
have previously testified before Congress on issues such as data breach
notification legislation, commercial privacy, and cybersecurity.
The Internet of Things presents amazing opportunities for enriching
citizens' lives. As consumer advocates, CDT is extremely enthusiastic
about the potential advances to public health, the environment,
education, and quality of life that will be brought about by the coming
wave of IoT devices. However, in order to achieve this enormous
potential for improving the lives of Americans, these sensor-and
internet-enabled devices must be purposefully designed with consumer
privacy and empowerment in mind. My testimony today will address four
key policy areas that must be addressed for the Internet of Things to
be fully realized: weak data security practices, unexpected and
unwanted secondary data collection and use, diminishing user control
over their own devices, and the potential for law enforcement and
intelligence abuse. Companies must respond to these challenges, or user
adoption of these valuable and even life-saving technologies will be
dramatically stunted.
I. The transformative potential of the Internet of Things
We read about new smart technologies seemingly every day: keyless
cars that you start with a cell phone, refrigerators that automatically
order eggs when you've run out, dog collars equipped with GPS trackers,
and even baby booties that monitor a child's heart rate and oxygen
levels. This is a remarkable time for innovation and growth. According
to recent reports, 26 to 30 billion devices will be connected to
wireless Internet by 2020. This means in just five years, the number of
connected gadgets could grow to over 30 times its size in 2009.\1\
---------------------------------------------------------------------------
\1\ Press Release, Gartner, Gartner Says the Internet of Things
Installed Base Will Grow to 26 Billion Units By 2020 (Dec. 12, 2013),
http://www.gartner.com/newsroom/id/2636073.
---------------------------------------------------------------------------
In addition to their cool factor, smart devices enhance healthcare,
education, finance, agriculture, and a number of other fields.
Connected cities are also starting to leverage these technologies
regularly: Philadelphia has saved over $1 million by placing smart
garbage cans around the city that alert sanitation workers when pick-up
is necessary; New York City plans to convert outdated public pay phones
into free open WiFi hotspots.\2\
---------------------------------------------------------------------------
\2\ Sarah Ashley O'Brien, The Tech Behind Smart Cities, CNN MONEY
(Nov. 11, 2014), http://money.cnn.com/gallery/technology/2014/11/11/
innovative-city-tech/index.html.
---------------------------------------------------------------------------
In many ways, consumers have already embraced many smart Internet
of Things devices. Over 70 percent of Americans now own a smartphone,
giving each of us access to the wealth of the world's information at
our fingertips as we go about everyday life.\3\ Many of us have smart
TVs or smart DVD players, meaning we have access not just to what's on
TV or in our video library, but we can connect to Netflix, Amazon, or
YouTube to watch virtually anything, or use Skype or Hangouts to call a
loved one. In the near future, smart car technologies have the
potential to dramatically reduce accidents, improve traffic flows, and
reduce greenhouse gas emissions.
---------------------------------------------------------------------------
\3\ Asymco: Smartphone penetration reaches 70 percent in the U.S.,
GSMArena (Jul. 9, 2014), http://www.gsmarena.com/
asymco_pricing_doesnt_affect_smartphone_adoption_in_the_
us-news-8982.php.
---------------------------------------------------------------------------
Without question, IoT has real revolutionary potential. However
efforts to make all of our things smarter raise unique consumer
protection concerns. Reports of major electronics companies planning to
connect all of its consumer devices to the Internet in the next five
years \4\ suggests the question: do consumers want everything to be
smart? Is there a meaningful use case for a smart toaster? Even if
there are incremental advantages to some connected devices, might the
downsides in some cases outweigh the benefits? Unfortunately, some poor
design decisions today are compromising the revolutionary potential of
the Internet of Things, with the potential result that many if not most
consumers will reject many of these innovations.
---------------------------------------------------------------------------
\4\ Rachel Metz, CES 2015: The Internet of Just About Everything,
MIT TECHNOLOGY REVIEW (Jan. 6, 2015), http://www.technologyreview.com/
news/533941/ces-2015-the-internet-of
-just-about-everything/.
---------------------------------------------------------------------------
Smart technologies often involve the mass collection, storing and
sharing individuals' data. While much of this is necessary and
unobjectionable--the very nature of some devices (such as health
wearables) is to track a user's data for that user's benefit--certain
data practices seriously threaten individuals' security and right to
privacy.
Internet of Things devices collect extremely sensitive personal
information about us. This is especially true about IoT devices in our
homes. In his majority opinion for Florida v. Jardines,\5\ Justice
Scalia articulated the high level of privacy an individual is entitled
to in his or her home, writing ``when it comes to the Fourth Amendment
the home is first among equals. . .At the Fourth Amendment's `very
core' stands `the right of a man to retreat into his own home and there
be free from unreason-able governmental intrusion' '' \6\
---------------------------------------------------------------------------
\5\ Florida v. Jardines, 133 S. Ct. 1409 (2013).
\6\ Id.
---------------------------------------------------------------------------
The Supreme Court has repeatedly held that people have heightened
privacy interests in what happens within their home--even over
information \7\ that is technologically observable \8\ by others. We
have ``peeping tom'' laws to protect against private observation in the
home for the same reason--just because someone has the means to watch
what you're doing in your home doesn't mean they should. Our homes are
our most personal, private spaces and we maintain this expectation even
if we bring smart devices into our home.
---------------------------------------------------------------------------
\7\ Kyllo v. United States, 533 U.S. 27 (2001).
\8\ Florida v. Jardines, 133 S. Ct. 1409 (2013).
---------------------------------------------------------------------------
Internet of Things devices not tied to the home also have the
potential to collect sensitive information. Certainly geolocation
information--generated by several IoT devices--is extremely sensitive
and revealing: unwanted disclosure can endanger one's personal safety
by letting an attacker track your physical location. Otherwise,
geolocation can reveal other deeply personal information, such as where
you worship, where you protest, and where (and with whom) you sleep at
night. Other IoT technologies often collect sensitive information on an
individual that is not immediately apparent when that person is in a
public space--such as his physical or mental health, emotions, and
preferences.
In many cases, consumers will gladly share this information with
IoT service providers in order to receive a particular service.
However, in other cases, consumers won't want this information
collected at all. Internet of Things devices must be designed with this
fact in mind, or consumers will reject these products as not worth the
risks.
II. There are currently insufficient security protections in place
to
regulate IoT data collection
It is no exaggeration to say that academics have documented the
security vulnerabilities of the Internet of Things for years. Central
to some of these concerns is that IoT devices use embedded operation
systems, where computing is implanted into the device itself. The
computer chips that power these systems are often cheaply produced,
rarely updated or patched, and highly susceptible to hacks. Users do
not have the expertise to regularly patch the system or install system
updates manually, nor are they typically alerted of security updates.
As prominent technologist Bruce Schneier succinctly puts it, ``hundreds
of millions of devices that have been sitting on the Internet,
unpatched and insecure, for the last five to ten years. . . . We have
an incipient disaster in front of us. It's just a matter of when.'' \9\
---------------------------------------------------------------------------
\9\ Bruce Schneier, Security Risks of Embedded Systems, Schneier on
Security Blog (Jan. 9, 2014), https://www.schneier.com/blog/archives/
2014/01/security_risks_9.html.
---------------------------------------------------------------------------
While some large, complex, smart IoT systems may have WiFi
connections, software updates, and multiple types of functionality and
interfaces, many of the more widely deployed IoT systems will be more
modest, without such capabilities. These devices will be cheap, even
disposable, and the incentives for the manufacturer to provide regular
security updates will be minimal. Such incentives have failed certain
elements of the smart phone market, resulting in millions of vulnerable
devices that will remain so for the remainder of their shelf life.\10\
Eventually, we expect to see entirely new types of market events, such
as product recalls, based solely on vulnerabilities in the network and
computational interface that provide IoT-like communication services.
Otherwise, many of these devices and systems may never be updated in
their after-market environment, and home networks and IoT-capable
communication platforms will have to be designed to deal with errant
and outright hostile (e.g., hacked through a flaw or vulnerability)
participants on the local network. Compounding this problem is the fact
that home routers--the devices that link all these devices together--
are also famously vulnerable to attack.\11\
---------------------------------------------------------------------------
\10\ Dan Goodin, ACLU Asks Feds to Probe Wireless Carriers over
Android Security Updates, ArsTechnica, (April 17, 2013), http://
arstechnica.com/security/2013/04/wireless-carriers-deceptive-and-
unfair/.
\11\ Dan Goodin, 12 million home and business routers vulnerable to
critical hijacking hack, ArsTechnica, (Dec. 18, 2014), http://
arstechnica.com/security/2014/12/12-million-home-and-
business-routers-vulnerable-to-critical-hijacking-hack/; Brian Krebs,
Lizard Stresser Runs on Hacked Home Routers, KrebsOnSecurity, (Jan. 15,
2015), http://krebsonsecurity.com/2015/01/lizard-stresser-runs-on-
hacked-home-routers/.
---------------------------------------------------------------------------
Even at this early stage of IoT development, seemingly every type
of connected device has already experienced these vulnerabilities: spy
chips have been discovered in tea kettles and irons \12\; hackers have
stolen Smart TV login credentials in order to listen in and spy on
people in their homes \13\; live streams from baby monitors have been
uploaded to public websites \14\; thieves can disable home alarm
systems with a tool from 250 yards away \15\; and even smart toilets,
refrigerators and printers have been compromised.\16\ And a report
released this weekend by Senator Markey raises serious questions about
whether connected cars are being designed to ensure that their systems
are protected from malicious hackers seeking to take physical control
over the vehicles.\17\
---------------------------------------------------------------------------
\12\ Erik Sherman, Hacked from China: Is Your Kettle Spying on
You?, CBS (Nov. 1, 2013), http://www.cbsnews.com/news/hacked-from-
china-is-your-kettle-spying-on-you/.
\13\ Lorenzo Franceschi-Bicchierai, Your Smart TV Could be Hacked
to Spy on You, MASHABLE (Aug. 2, 2013), http://mashable.com/2013/08/02/
samsung-smart-tv-hack/.
\14\ Loulla-Mae Eleftheriou-Smith, Baby Monitors, CCTV Cameras and
Webcams from UK Homes and Businesses Hacked and Uploaded onto Russian
Website, THE INDEPENDENT (Nov. 20, 2014), http://www.independent.co.uk/
life-style/gadgets-and-tech/baby-monitors-cctv-
cameras-and-webcams-from-uk-homes-and-businesses-hacked-and-uploaded-
onto-russian-website
-9871830.html.
\15\ Kim Zetter, How Thieves can Hack and Disable Your Home Alarm
System, WIRED (Jul. 23, 2014), http://www.wired.com/2014/07/hacking-
home-alarms/.
\16\ Lily Hay Newman, Pretty Much Every Smart Home Device You Can
Think of Has Been Hacked, Slate Blog (Dec. 20, 2014), http://
www.slate.com/blogs/future_tense/2014/12/30/
the_internet_of_things_is_a_long_way_from_being_secure.html.
\17\ Report, Tracking and Hacking: Security & Privacy Gaps Put
American Drivers at Risk, Office of Senator Ed Markey, (Feb. 2015)
http://www.markey.senate.gov/imo/media/
doc/2015-02-06_MarkeyReport-Tracking_Hacking_CarSecurity%202.pdf.
---------------------------------------------------------------------------
Currently, the United States does not have a dedicated data
security law requiring companies to use reasonable protections to
safeguard personal information. Since 2005, the Federal Trade
Commission has used its general consumer protection authority under
Section 5 of the FTC Act to bring enforcement actions against companies
that do not safeguard personal data.\18\ The Commission has argued that
the FTC Act's prohibition on ``unfair'' business practices extends to
companies using poor data security; two years ago, it brought its first
enforcement action against the manufacturer of an Internet of Things
device.\19\ However, ongoing legal challenges threaten to undermine the
agency's efforts in this area: some defendants have argued that they
are not, in fact, legally obligated to use reasonable data security
practices.\20\
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\18\ Press Release, Federal Trade Commission, DSW Inc. Settles FTC
Charges (Dec. 1, 2005), http://www.ftc.gov/news-events/press-releases/
2005/12/dsw-inc-settles-ftc-charges.
\19\ Press Release, Federal Trade Commission, Marketer of Internet-
Connected Home Security Video Cameras Settles FTC Charges It Failed to
Protect Consumers' Privacy (Sept. 4, 2013), http://www.ftc.gov/news-
events/press-releases/2013/09/marketer-internet-connected
-home-security-video-cameras-settles.
\20\ See G.S. Hans, CDT Files Brief in Wyndham Supporting FTC
Regulation of Data Security Center for Democracy & Technology Blog
(Nov. 13, 2014), https://cdt.org/blog/cdt-files-brief-in-wyndham-
supporting-ftc-regulation-of-data-security/; See also Press Release,
Federal Trade Commission, FTC Files Complaint Against LabMD for Failing
to Protect Consumers' Privacy (Aug. 29, 2013), http://www.ftc.gov/news-
events/press-releases/2013/08/ftc-files-complaint-against-labmd-
failing-protect-consumers.
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Increased reports of massive data breaches (including the highly
publicized Sony studios and Anthem healthcare hacks) have prompted new
dialogue around the need for updated data breach notification laws to
respond to such incidents. Unfortunately, many of the data breach
notification legislative proposals would actually dial back legal
incentives for companies to properly secure the data they collects from
consumers. For example, only requiring agency or consumer notification
when a specific ``harm'' has been identified would discourage companies
from fully investigating a breach for fear of triggering the
notification requirement. Further, data breach law that omits any
affirmative requirement that companies design robust security
procedures for their products will ultimately do little to expand upon
existing state law protections and deter or prevent future breaches. In
order to encourage better security than exists under the law today, a
Federal breach notification bill would need to offer new protections
not reflected in existing law, and still allow states to innovate on
data sets not covered by a Federal standard.\21\ For more information
on this topic, visit https://cdt.org/insight/cdt-issue-brief-on-
federal-data-breach-notification-legislation/.
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\21\ CDT Issue Brief on Federal Data Breach Notification
Legislation, Center for Democracy & Technology Insights, (Jan. 27
2015), https://cdt.org/insight/cdt-issue-brief-on-federal-data-breach-
notification-legislation/.
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III. Sensitive personal data may be collected contrary to consumer
wishes and expectations
As noted above, IoT devices have the potential to collect a
tremendous amount of detailed personal information about consumers.
Some of the data collected is of course expected; if I buy a fitness
tracker, for example, I shouldn't be surprised that the device tracks
my steps throughout the day--indeed, that's the reason I bought it. On
the other hand, I might be surprised if that device were also recording
all my conversations with my friends, or transmitting my geolocation to
third party data brokers.
As an example of surprising--and potentially unwanted--IoT data
collection, last year, an independent researcher noticed that LG was
monitoring what TV shows people watched on their smart TVs, and sending
that information back to LG's corporate servers.\22\ The purpose
appeared to be for a future undeveloped advertising product; LG was
also collecting and reporting back information about the names of files
consumers accessed on computers connected to the same home network,
though it's not clear why. In response to user complaints, LG initially
directed people to a long, legalistic terms of service that vaguely
reserved broad rights to transmit user data. The company backtracked
after a host of media attention around its practice, and LG enabled an
opt-out feature for users who did not want their information collected
in this manner. This was a start, however, it is not clear that opt-out
is sufficient to meet reasonable consumer expectations in this case.
Should home appliances be monitoring consumers and reporting everything
they can detect back to manufacturers by default? Certainly, other
interconnected devices don't do this today. Your computer doesn't
report back to Lenovo or HP everything that you do. Your phone doesn't
report everything back to Motorola or Apple. When a consumer buys a TV,
they are not typically looking for or expecting a relationship with LG
or Samsung: they may appreciate additional smart capabilities like
connecting to Skype or the web, but their TV is a platform for them to
access others' content--it is not a destination in itself. A users'
smart phone could have its microphone and camera transmitting 24 hours
a day, seven days a week (setting aside battery and bandwidth issues)--
it could collect significant amounts of interesting information in the
name of ``Big Data'' but such data collection would go well beyond
consumers' reasonable privacy expectations.
---------------------------------------------------------------------------
\22\ Justin Brookman, Eroding Trust: How New Smart TV Lacks Privacy
by Design and Transparency, IAPP Blog (Nov. 27, 2013), https://
privacyassociation.org/news/a/eroding-trust-how-new-smart-tv-lacks-
privacy-by-design-and-transparency/.
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This precise scenario arose last week in fact, when it was revealed
that Samsung's privacy policy appeared to reserve the right to collect
any voice communications in proximity to its Smart TVs and send that
information to an unnamed voice recognition service provider.\23\
Samsung's actual practices are not easily discernable: perhaps Samsung
is only collecting and transferring voice data for the limited times
when a consumer is trying to use certain voice recognition commands.
This might be consistent with reasonable consumer desires and
expectations. Or perhaps Samsung wants to collect and process all
dialogue in proximity to its televisions in order to refine its (or its
partner's) voice recognition software. There certainly would be a
benefit--to Samsung and the consumer--from that collection and
processing, but query whether most consumers would find the benefit
worth the persistent collection of all conversations in a living room
or bedroom by an unknown third party. Ultimately, consumers must be
empowered to make the determination about what data is collected and
why.
---------------------------------------------------------------------------
\23\ Shane Harris, Your Samsung SmartTV is Spying on You,
Basically, THE DAILY BEAST (Feb. 5, 2015), http://
www.thedailybeast.com/articles/2015/02/05/your-samsung-smarttv-is-
spying-on-you-basically.html.
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We believe that the United States should enact a comprehensive
privacy law regarding the collection and use of personal information.
Companies should be required to offer consumers reasonable transparency
and control over how their data is collected; today, the U.S. is one of
the few developed nations not to have such consumer protections in
place. The purpose of such a law wouldn't be to ban or prevent
particular practices, but should require actionable information and an
ability to express real preferences in order for a market to develop
for personal information. Today, absent such requirements, too much
data collection is opaque and unaccountable; consumers have a vague
sense that their privacy is being violated, but don't have the
information or tools available to make decisions about their personal
information.
With or without a law, companies should set reasonable defaults for
data collection and use based on consumer expectations. Some data may
require clear opt-in because it's sensitive or the collection or use
would be surprising to a user; other information may be collected
automatically but consumers should have the ability to opt out of
secondary data use, retention, or transfer; and some data consumers
shouldn't have control over because it is fundamentally necessary for
operation of the device. However, consumers must generally be empowered
to make decisions about how their devices work (and what data is
collected and shared with other entities). IoT should work for the
consumer--the person who bought the product; the Internet of Things
shouldn't be something that happens to a begrudging populace.
IV. Device connectivity and intelligence could diminish user autonomy
over the devices they buy
Adding sensors and connectivity to IoT devices has the potential to
make them much more useful for consumers. On the other hand, these
features could also be abused to deprive consumers of continuing
services, expected interoperability, or control over their own devices.
Objects included in the ``Internet of Things'' consist of two basic
components: the physical object and the software that connects it to
the network. Traditionally, when you buy something, it is yours and you
are free to do with it whatever you'd like including altering,
repairing, or re-selling it. However, objects within the Internet of
Things do not fit into our traditional understanding of ownership.
While you still take possession of the physical object, the software is
typically licensed to you under an End-User License Agreement (EULA).
The implications of this vary with how integral the software is to the
functioning of the device--in some cases, like a washing machine that
you can monitor/control from your phone, losing access to this feature
wouldn't affect the core functionality and value of the machine very
much. In other cases, the object itself is essentially useless without
the software controlled by licensing agreements, or can quickly become
obsolete without updates. For example, imagine a thermostat that only
works if you can program the software. In this case, a lapse in
software updates could render the physical object useless even if the
physical mechanism were still in good repair.
Last year, Keurig--the popular single cup coffee maker--put
software controls on its coffee maker to prevent users from using non-
Keurig approved coffee pods in their machines. Though this
functionality did not rely upon Internet connectivity, it did take
advantage of increasingly cheap and sophisticated sensors to allow the
Keurig machine to detect proprietary codes on approved coffee pods. As
result of this technology, consumers were prevented from brewing their
preferred brand of coffee in the devices they bought and paid for. In
this case, Keurig's decision appears to have backfired: featured
reviews for Keurig's new line of coffee makers on Amazon prominently
criticize this design feature,\24\ and sales fell 12 percent last
quarter.\25\
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\24\ Keurig 2.0 K350 Brewing System--Black, Amazon.com, http://
www.amazon.com/Keurig-2-0-K350-Brewing-System/dp/B00KYWL34Q/
ref=sr_1_1?ie=UTF8&qid
=1423266957&sr=8-1&keywords=keurig+2.0 (last visited Feb. 9, 2015).
\25\ Josh Dzeiza, Keurig's attempt to ``DRM'' its coffee cups
totally backfired, THE VERGE (Feb. 5, 2015), http://www.theverge.com/
2015/2/5/7986327/keurigs-attempt-to-drm-its-coffee-cups-totally-
backfired.
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In other cases, policymakers have intervened to mitigate potential
monopolistic effects of proprietary software. One example is the repair
codes used by automobile manufacturers. Cars include systems that
provide a specific diagnostic code that explains, for example, the
cause of a ``check engine'' light. Originally, the guide that explains
these codes was withheld from consumers and the majority of auto repair
shops, forcing drivers to use specific repair shops for their vehicles.
However, some states now require that the explanations for the codes be
widely available.\26\ In another example, the Librarian of Congress, in
consultation with the Copyright Office, eliminated an exemption to laws
prohibiting circumvention of digital rights management for users
seeking to unlock their mobile phones and change wireless providers.
Mobile phone unlocking had been an entirely legal and common practice
for years before the Librarian eliminated the exemption. More than
114,000 Americans petitioned the White House to overturn the ban and,
after both the Federal Communications Commission and the White House
recommended doing so, Congress ultimately enacted legislation restoring
consumers' right to unlock their own phones. Unfortunately, the
exemption applies only to mobile phones and is examined de novo every
three years.
---------------------------------------------------------------------------
\26\ Mass. lawmakers approve ``Right to Repair'' bill, FoxNews,
(August 1, 2012), http://www.foxnews.com/leisure/2012/08/01/mass-
lawmakers-approve-right-to-repair-bill/.
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In the Internet of Things, digital rights management affects
intellectual property accessed through networked devices as much as the
devices themselves. For example, users do not own the content they
purchase for their e-readers (Kindle, Nook, etc.). The physical tool
allows readers to buy rights to access the content of their choice, but
readers do not own the book. Additionally, this access is restricted in
many users may not fully understand because the relationship is so
different from the physical world. For example, there are typically
restrictions on lending the book to a friend. In this case, if the
licensing agreements for that content were revoked because of a
perceived or alleged violation of the license, the object itself would
be useless to the average consumer who would have no way to load
content.
Additionally, connectivity can allow other entities to access and
control the device in ways not possible in an un-networked world. One
prominent example is lenders who use technology in connected cars to
punish those who are late in making payments by disabling the vehicle.
In a case reported by the New York Times,\27\ subprime borrowers were
allowed to lease vehicles provided they gave permission for the lender
to remotely disable the ignition in the event of a late payment or
default. Some argue this technology allows the lender to provide credit
to a broader audience than would otherwise be possible; others argue
that it is unethical and perilous to put people in a situation where
they may have an emergency and cannot access their vehicle, as was the
case for the woman in the article who needed to use her car to take an
asthmatic child to the doctor. Moreover, vulnerable borrowers might be
subject to egregious reconnection fees that had been disclosed only in
inscrutable contracts. Regardless of what you believe, it is undeniable
that this technology shifts the balance of power from the user to the
company or institution that controls the software.
---------------------------------------------------------------------------
\27\ Michael Corkery & Jessica Silver-Greenberg, Miss a Payment?
Good Luck Moving That Car, THE NEW YORK TIMES (Sept. 24, 2014), http://
dealbook.nytimes.com/2014/09/24/miss-a-payment-good-luck-moving-that-
car/.
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V. Our government access and intelligence laws must be reformed
Finally, the default of IoT devices to phone home by reporting data
to a company rather than storing it locally on the device raise
concerns about government surveillance as well. Many of the same
concerns that apply to in-the-home monitoring devices like smart grid
technologies \28\ apply to objects in the Internet of Things. IoT
systems will, in most cases, be sensing platforms augmenting devices
and objects in the home or in businesses. Light sensors can tell how
often certain rooms are occupied at night or how often the refrigerator
is opened. Temperature sensors may be able to tell when one bathes,
exercises, or leaves the home entirely. Microphones can easily pick up
the content of conversations in the home and, with enough fidelity, can
identify who is speaking. In essence, the privacy and security concerns
highlighted by the revelation that law enforcement has access to data
stored by private companies are elevated exponentially in a future with
increased connectivity and automated collection.
---------------------------------------------------------------------------
\28\ Ctr. for Democracy & Tech. & Elec. Frontier Found., ``Proposed
Smart Grid Privacy Policies and Procedures,'' before The Public
Utilities Commission of the State of California (December 18, 2008),
available at https://cdt.org/files/pdfs/CDT_EFF_PoliciesandProcedures
_15Oct2010_OpeningComment_1.pdf.
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Government access without robust due process protection is already
arguably the most significant threat posed by the collection of
personal information. As the recent NSA revelations aptly demonstrate,
much of the data that governments collect about us derives not from
direct observation, but from access to commercial stores of data. Even
in the United States and Europe, that data is often obtained without
transparent process, and without a particularized showing of
suspicion--let alone probable cause as determined by an independent
judge. Unfortunately, there is almost nothing that consumers can do to
guard against such access or in many cases even know when it occurs.
The revelation that commercial data is tied to government
surveillance has the potential to fundamentally change the conversation
about IoT. For the vast majority of consumers, unwanted surveillance--
quite apart from practical effects of such surveillance--is the harm
they're seeking to avoid. Therefore, considerations of risks associated
with IoT must address harms from government surveillance as well as
private sector risks.
This loss of consumer confidence has a quantifiable impact on
corporate bottom lines and hence the development of these useful new
technologies. For example, according to Forrester Research the losses
to U.S. technology companies from revelation of the PRISM program
(detailing once facet of U.S. surveillance practices) could result in,
``a net loss for the service provider space of about $180 billion by
2016 which would be roughly a 25 percent decline in the overall IT
services market by that final year.'' These costs demonstrate the
market value of business practices and government policies that respect
privacy.\29\
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\29\ James Staten, ``The Cost of PRISM Will Be Larger Than ITIF
Projects,'' FORRESTER, August 14, 2013, http://blogs.forrester.com/
james_staten/13-08-14-the_cost_of_prism_will_
be_larger_than_itif_projects
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Nor is the point in sighting this figure to single out the NSA and
U.S. surveillance. As CDT has noted repeatedly, all governments are
interested in data collection and have extensive legal tools to access
that information. In an Internet connected future it is not only the
U.S. government but also the governments around the world that may be
interested in IoT and the information it reveals. For more on legal
tools that governments possess to access personal information please
see: http://govaccess.cdt.info/.
Government surveillance reform is a much broader topic than the IoT
and this committee's hearing today. However, the continuing access by
government to commercial information highlights the need to build
systems that minimize the amount of information they share and also
give consumers control over what information their devices collect.
The potential benefits of the IoT are exciting and profound. It is
incumbent upon manufactures of these devices and governments to make
sure that those benefits are fully realized while protecting the
privacy of consumers.
Conclusion
Recognition of the threats to collected personal information is
particularly important because in recent years, some have argued for a
new definition of privacy where there are no limits on what information
companies (and governments) can collect about us or how long they
retain it. Privacy is in effect redefined to only prohibit certain
harmful uses of personal information. For example, President Obama's
Council of Advisors on Science and Technology last year released a
report on Big Data making precisely this point: because of the
potentially awesome power of personal information, we shouldn't put
limitations on what information is collected; instead, we should just
make sure that that data is not subsequently misused.\30\
---------------------------------------------------------------------------
\30\ EXECUTIVE OFFICE OF THE PRESIDENT, REPORT TO THE PRESIDENT,
BIG DATA AND PRIVACY: A TECHNOLOGICAL PERSPECTIVE (2014). http://
www.whitehouse.gov/
sites/default/files/microsites/ostp/PCAST/pcast_big_data_and_privacy_-
_may_2014.pdf
?utm_content=buffer06b57&utm_medium=social&utm_source=twitter.com&utm_ca
mpaign
=buffer.
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This view, however, presumes a perfect world of unbreakable
security, where consumer and company expectations are fully aligned,
and where due process protections fully assure there is no potential
for government abuse.\31\ Obviously, these conditions are not met
today, and likely will never fully be realized. As such, consumers have
a rational interest in exercising control over how their data is
collected and retained. Without affording consumers meaningful control
over their own devices, IoT adoption is seriously threatened. Today,
the highly sensitive data collected by IoT devices is exposed to a
variety of threats, and designers must keep these threats in mind when
developing their products for market. Consumers would benefit
tremendously from a full-fledged, user-centric Internet of Things.
Developers must keep personal privacy and empowerment in the front of
their minds in creating these products.
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\31\ JUSTIN BROOKMAN & G.S. HANS, WHY COLLECTION MATTERS:
SURVEILLANCE AS A DE FACTO PRIVACY HARM (2013), http://
www.futureofprivacy.org/wp-content/uploads
/Brookman-Why-Collection-Matters.pdf.
The Chairman. Thank you, Mr. Brookman.
We will go 5-minute rounds. I may have to duck out of here
for a little while to do a Finance Committee markup, but I hope
to give everybody a chance to ask questions, and we will see
where it goes.
I will start by asking you, Mr. Donny. You mentioned in
your testimony the challenge of taking advantage of the
Internet of Things on farms due to the lack of reliable
broadband access and cellular coverage. I would like you to
elaborate on the recommendation you made that we accelerate the
availability of low-cost, long-range communication technology
to ensure that we can move data from the field to the cloud on
every farm. Would you please talk a little bit about that and
then maybe elaborate on what you see as some of the policy
impediments to that.
Mr. Donny. Thank you, Senator Thune, for the question.
So let me actually elaborate on the challenge as well. The
challenge in agriculture specifically for connecting devices is
that the farm--both the topography of the farm, the rolling
hills, as well as the trees and plants and corn stalks
themselves are a lousy place for our cellular and RF signals.
The plants and so forth consume a lot of that energy that comes
out of those devices. So it makes it difficult to move data
from a device in the field, unless you have a really tall
antenna, out to a collector device. And so the traditional
technology today that has been used is satellite 2.4 gigahertz,
900 megahertz RF signals, and cellular. And the challenge is,
if you are in a rural area, you oftentimes do not have good
cellular coverage. We have all experienced that.
And so the opportunity that we see that in particular I am
interested in is the white space in which we have unused now
white space channels that were used by televisions that provide
the opportunity to move data around the farm very long
distances at almost no cost. So I know the FTC is looking into
that and reviewing that.
There are companies globally that are developing hardware
in which to take advantage of that white space. So in the case
of those channels, we can now move data from a sensor in the
field that is no bigger than the size of your cell phone
several miles, 5, 6, 7 miles in our experience--we have tested
some of these earlier models--out to a device. And so for a
farmer, instead of having to spend $7 or $8 or $10 a month on a
cellular data communication charge per device, we can move data
for free from the device to the backhaul system to get data at
a central data point.
So if you are looking at farm adoption and how do we enable
communication methods to improve what farmers are doing,
density of data is extremely important in that analysis. So the
lower we can reduce the cost of the device in the field vis-a-
vis the communication channel, vis-a-vis the device, the more
data we will have, the more enabled that farmer will be to make
a better decision. So specifically we are interested in how do
we use what we know today, the white space and other RF
signals, to enable the industry to go out and innovate, go
figure out how we are going to move data around 5, 6, 7 miles
at no cost and enable those companies to go out and do that
today.
The Chairman. Mr. Thierer or Mr. Brookman, do you have any
ideas, any thoughts on how to ensure that we have sufficient
wireless capacity to power the Internet of Things?
Mr. Thierer. Well, I will make a brief comment on that. It
is not the primary focus of my own research, but generally
speaking, we need to get a better process in place at the
Federal Communications Commission. Freeing up a lot more
spectrum is something I think everybody on this committee and
many policy circles agrees on. It is a question of where do we
get it. Creating more and better incentives to do that is going
to be essential because these devices are going to be eating up
a lot of it in a short time.
Mr. Brookman. And I am not remotely a spectrum expert. So I
am not going to weigh in on that.
The Chairman. How about on the issue of interoperability?
We have all these devices, Do we have to have standards for
these devices, and if there are standards, who creates them?
Does anybody want to take a stab at that?
Mr. Thierer. I will just make a brief comment that we all
have devices we are carrying with us here today that have
numerous standards in them and have a lot of complex
interoperability problems. But somehow we figured it out for
this. I think we can figure it out for the Internet of Things
space as well.
The Chairman. Anybody else?
Mr. Donny. The industry and agriculture are actually trying
to tackle this interoperability challenge, and it is a mixed
bag. So you can try to focus on a standard, but the problem
with standards are there are 16 other standards you are trying
to displace to begin with and another standard necessarily does
not fix that.
Modern data in general--you tend to publish how that data
looks and is used, and then companies that need that data then
build systems around consuming that. So lots of other devices
have solved that problem without creating huge standards in the
space.
Mr. Abbott. I think along those lines that if we go back in
time to just networking that the same challenges around
interoperability existed then, and over time we saw certain
winners emerge. And I think at that point in time, it would
make sense to have some national or even actually ideally
global kind of standard around that particular protocol. So in
the case of the Internet, a standard Internet protocol emerged,
and I think we would anticipate something along those lines.
One interesting thing to note is that as we are in this
early phase of IoT, which challenges interoperability, that as
we become more homogenous from that heterogeneous world, it is
likely that the security issues will actually increase because
actually by having more heterogeneity is actually decreasing
the security exposure today.
The Chairman. Thank you all.
Senator Nelson?
Senator Nelson. The allocation of additional spectrum, Mr.
Chairman, is a subject that we need to get into. It has been
raised here, and it is a very important one.
Before you and I have to go off and vote in the Finance
Committee, I want to get back to this question of security,
Samsung, and the Smart TV. According to its privacy policy, the
television records your conversations when you activate the
microphone and sends those recordings to a third party. Do you
want to tell me yes or no? Should consumers be given adequate
notice of such a practice? Let us start. Just go down. Yes or
no.
Mr. Abbott. I think that actually consumers should have the
ability to opt out, and it should be very clearly communicated
what data is being collected by that particular device or that
service.
Senator Nelson. We are going to run out of time. So opt out
is your answer instead of opt in.
Mr. Abbott. Correct.
Senator Nelson. How about it, Mr. Davis?
Mr. Davis. Well, I certainly think we need to be able to
balance privacy and innovation. As the developers of these
products, we need to be stewards of that privacy.
Senator Nelson. Yes or no. Opt out or opt in?
Mr. Davis. I think consumers ought to be able to opt in.
Senator Nelson. Opt in?
Mr. Davis. Yes.
Senator Nelson. OK.
Mr. Donny?
Mr. Donny. Thank you, Senator.
I think they need to affirmatively agree to that policy.
Senator Nelson. So you are saying opt in.
Mr. Donny. Correct.
Mr. Thierer. They can opt out and they do not have to buy
the TV in the first place.
Senator Nelson. So when they buy the TV, and there is the
privacy policy, should they opt out or opt in?
Mr. Thierer. They should opt out.
Senator Nelson. Opt out.
Mr. Thierer. Yes.
Mr. Brookman. If you are using voice recognition, it is
kind of clear what is going on ephemerally. If it is collecting
data all the time, there is an obligation to go out of their
way to explain that to folks.
Senator Nelson. What does that mean? Opt out or opt in?
[Laughter.]
Mr. Brookman. I will say opt in then.
Senator Nelson. Opt in.
OK. Three opt ins and two opt outs.
Is there a role for the Congress to play here? How do we
make companies accountable, or is this something the FTC should
do?
Mr. Thierer. Well, Senator, as I already stressed, the FTC
is already very active on this front, and has already pursued
security cases against many major Internet giants. There is
something like over 50 data security consent decrees that have
been out there. Major fines have been levied. Twenty-year
privacy audits have been imposed. So there is a very aggressive
enforcement regime already in place using the unfair and
deceptive practices at the FTC. And I think that will and
should continue.
Mr. Brookman. Yes. I think that existing law arguably
already requires reasonable security. I think it would be
useful to have a statute saying that.
On privacy, I would like to see flexible requirements.
Requiring some level of transparency is better today. A lot of
these practices today are very opaque. So I think just giving
companies an obligation to actually say what they are doing I
think would create a better market for these products.
Senator Nelson. Take my refrigerator example, which is not
an extreme example. A smart refrigerator tells me I need milk.
What about the refrigerator telling the local grocery store
that I need milk? Should that be done opt out or opt in?
Mr. Abbott. That is absolutely enabling the consumer to go
select that service provider to share that data.
And just to expand, Senator, on my prior answer, opt out
works when there is a very clear communication to the consumer,
what data is being collected, why it is, and if you want to
actually not have that data collected, how that consumer can
actually select that.
Senator Nelson. You know why I asked that question? Because
we have got a real-life example. Verizon had implanted these
super cookies, codes, and then that data was transmitted to
third parties selling that information in order for the
consumer on that Verizon smart phone to start getting all kinds
of information that was recorded because of that super cookie.
Now, AT&T tried it and pulled back because of the privacy
implications, but Verizon today is still studying what they
have done even though we have called this out.
And if you have been the recipient of unwanted
advertisements because you happen to go to a certain place or
buy from a certain store, you can start to see how the privacy
is beginning to be invaded.
Thank you, Mr. Chairman.
The Chairman. And I used to like super cookies.
[Laughter.]
The Chairman. Senator Ayotte?
STATEMENT OF HON. KELLY AYOTTE,
U.S. SENATOR FROM NEW HAMPSHIRE
Senator Ayotte. I am just thinking about the milk the
refrigerator could tell me to have with my super cookie.
[Laughter.]
Senator Ayotte. I wanted to follow up on a couple of
different things. You know, as we look at something that has
been a consistent challenge for us--and that is data breaches.
As we see more homogeneity in the consolidation of data, I
think this becomes a bigger issue. This is something that we
have had numerous discussions on legislating on.
I will give you an example. Recently the big Anthem breach.
22 percent of my state got hit by that. 80 million people in
the country got hit.
So I wanted to hear--I think it is probably best to direct
it to Mr. Davis and Mr. Thierer--about what your thoughts are
and what we should be doing on data breach legislation. I
certainly want to make sure we do not do things that hurt
innovation and thwart new technologies, but this seems to be a
repetitive issue that we need to address. Your thoughts.
Mr. Davis. Thank you for the question.
You know, certainly from an Intel perspective, we think you
have to design security into these implementations from the
beginning not only on the endpoint device but throughout that
end-to-end implementation. There are multiple levels of
security in terms of how the device powers up and behaves when
it is first powered, the kinds of applications it is allowed to
run when it begins to run applications, and the ability to
limit the types of things that can be launched on that
particular device at any point in time, and then be able to
manage that data through the network such that the information
they are receiving from that data is trusted information. You
are getting what you would expect to be getting out of that
device.
At the same time, I think we have to be a bit careful in
terms of how we create legislation or policy around that in
terms of enabling the industry to innovate as well. So I think
certainly as we talk to customers, as we talk to others in the
industry, security is the number one concern, and we believe we
can build that into the technologies that these products are
being developed around.
Mr. Thierer. Well, Senator, many states already pursue data
breach notification requirements, and there is a case to be
made for it. But I would just remind the Committee that you
already have many other legal enforcement mechanisms to deal
with these things. The Federal Trade Commission has gone after
many companies who have had breaches like this. You have State
attorneys general who have been very active on this front.
Senator Ayotte. So I was a State AG, and I pursued some of
these cases. Now, sitting with this hat on in the U.S. Senate,
what are your thoughts on a national standard in terms of
notification?
Mr. Thierer. Eventually I think we are probably going to
get there. I think there is probably a case to be made for some
uniformity in this case because many states pursuing it or
others do not have any at all.
Senator Ayotte. I appreciate it.
I also wanted to follow up with you. You talked about the
ability under the FTC to determine unfair and deceptive
practices in this realm. So the FTC is pursuing those cases.
But if you look at it from the perspective of innovation
and having a larger plan in terms of the Internet of Things,
isn't one of the challenges we face that people do not really
fully understand? There has not been a full definition under
section 5 of what is an unfair and deceptive practice, and so
therefore, that lack of certainty to businesses can create some
ambiguity about what is acceptable and what is not. So I wanted
to get everyone's thoughts on that.
Mr. Thierer. I think that is a fair point, Senator, but I
would also say that this is an issue we have had for many
decades. Unfair and deceptive practices go back over a century,
and so we are going to continue to see the evolution of that
standard. But you are right. We have to be careful that it is
not overzealously enforced.
Senator Ayotte. Do you think that the FTC needs to provide
further guidance on what they believe is unfair and deceptive
under section 5?
Mr. Thierer. I think that is evolving out of the body of
decisions that they have been handing down on data security and
privacy.
Senator Ayotte. Mr. Davis, I was very curious. In your
testimony, you talked about what other countries are doing to
really look at making sure the infrastructure is there,
national Internet of Things plans. So what is it you would like
to see us do here in a way that would be a productive role for
Congress and not one that thwarts innovation?
Mr. Davis. Well, certainly one of the recommendations that
we are making is that we support public-private partnerships so
that we go out and identify areas in, say, transportation, in
manufacturing, and some of these industrial areas where we can
innovate. We can spur these industries to go implement new
technologies and drive the productivity services and new
product benefits. So certainly public-private partnerships are
a key area that we are recommending.
Senator Ayotte. And, Mr. Abbott, from the financing end,
what are your thoughts? You are the ones allowing for
investment. You are looking at new companies. What is your
thought on that?
Mr. Abbott. Well, I think there needs to be more
coordination, I think, through the public and the private
sector especially on these issues. We are, obviously, very,
very focused on looking at how we can help these early stage
companies, much smaller than Intel, not be stifled and so they
can actually kind of grow and expand.
Senator Ayotte. Thank you all.
The Chairman. Thank you, Senator Ayotte.
Senator Peters?
STATEMENT OF HON. GARY PETERS,
U.S. SENATOR FROM MICHIGAN
Senator Peters. Thank you, Mr. Chairman.
And, panelists, thank you for your testimony here today.
As the Senator from Michigan, you can imagine the auto
industry is very important to me. And the auto industry is
certainly much more than just horsepower and torque, although
those are the two things that I like best about the auto
industry. But it is, as you know, very complex, sophisticated,
and very tech heavy with some of the best minds working to
develop some new safety technologies, as well as environmental
technologies using the Internet of Things. Advanced technology
in vehicles today have fewer crashes. They have significantly
reduced injuries and fatalities, lowered emission levels, and
have increased fuel economy dramatically.
In recent years, automakers have delivered advanced safety
features such as lane departure warning devices, adaptive
cruise control, and crash-imminent braking, features that were
made possible through the use of sensors, actuators, artificial
intelligence systems, and increasingly wireless connectivity
that will enable these vehicles to basically have their own
situational awareness and the ability to perceive and react to
the environment to avoid harm.
So what comes next I think is very significant. It will
save lives as the Government and industry will deploy the
vehicle-to-vehicle communications system and infrastructure
communication networks. The National Highway Traffic Safety
Administration estimates that V2V technology has the potential
to mitigate or eliminate 80 percent of the accidents that are
involved in non-impaired drivers. That is significant. 80
percent of accidents could be avoided.
But in order to implement this V2V technology and in a
sense then save lives, the 5 gigahertz band of spectrum will
need to be preserved for its use. And I know that some of my
colleagues on this committee have actually expressed an
interest in opening up this band of spectrum for WiFi use, but
I would caution that this should only be done after full
interference testing has been completed and it is ensured that
intelligent transportation technologies operating on this band,
which have the potential to save lives, as I mentioned, are
fully protected.
I think it is also important that the benefits made
possible by advanced technologies are delivered to consumers in
a transparent way that respects consumer privacy. As auto
companies continue to develop these technologies, automakers
must address data privacy and cybersecurity issues head on. And
that is why, in November of last year, the auto industry agreed
to set a set of privacy principles and practices that is
currently working to establish an auto ISAC, information
sharing and analysis center, to enable these companies to share
information in real time about cyber threats. And I certainly
look forward to seeing the auto industry's continued leadership
in this area.
And I know the Chairman has gone, but on behalf of the
Committee, I would like to ask for unanimous consent to enter
into the record the consumer privacy protection principles put
together by the industry.
Senator Moran [presiding]. Without objection.
[The information referred to follows:]
Alliance of Automobile Manufacturers, Inc.
Association of Global Automakers, Inc.
Consumer Privacy Protection Principles
Privacy Principles for Vehicle Technologies and Services--November 12,
2014
I. Introduction
The automotive industry is developing innovative technologies and
services that promise to deliver substantial benefits and enhance the
driving experience. These technologies and services may assist in
enhancing safety, reducing the environmental impacts of vehicles,
diagnosing vehicle malfunctions, calling for emergency assistance,
detecting and preventing vehicle theft, reducing traffic congestion,
improving vehicle efficiency and performance, delivering navigation
services, providing valuable information services, and more. The
Alliance of Automobile Manufacturers, the Association of Global
Automakers, and their members are excited about the benefits offered by
today's vehicle technologies and services and look forward to expanding
the array of innovative technologies and services offered to consumers.
Many of these technologies and services are based upon information
obtained from a variety of vehicle systems and involve the collection
of information about a vehicle's location or a driver's use of a
vehicle. Consumer trust is essential to the success of vehicle
technologies and services. The Alliance, Global Automakers, and their
members understand that consumers want to know how these vehicle
technologies and services can deliver benefits to them while respecting
their privacy.
Privacy is important to consumers, and it is important to us. That
is why the Alliance and Global Automakers have issued these Privacy
Principles (``Principles''). The Principles provide an approach to
customer privacy that members can choose to adopt when offering
innovative vehicle technologies and services. Each member has made an
independent decision about whether to adopt the Principles, and other
companies may choose to adopt them as well. We provide a list of those
companies that have adopted the Principles in the Appendix, and they
are referred to as ``Participating Members.''
The Principles apply to the collection, use, and sharing of Covered
Information in association with Vehicle Technologies and Services
available on cars and light trucks sold or leased to individual
consumers for personal use in the United States.
The Principles are subject to change over time. When they do
change, the Alliance and Global Automakers will post the updated
Principles at www.automotive
privacy.com and ________. The Principles are not intended to replace
inconsistent or conflicting applicable laws and regulations, where they
exist. So, the Principles should be interpreted as subject to and
superseded by applicable laws and regulations.
Participating Members may implement the Principles in different
ways, reflecting differences in technologies and other factors. And
Participating Members may choose to incorporate into their privacy
programs elements that are not addressed in the Principles and are free
to take additional privacy steps. But regardless of how Participating
Members design their privacy programs and implement the Principles,
Participating Members affirm the following fundamentals, as detailed in
the relevant sections that follow:
Transparency: Participating Members commit to providing
Owners and Registered Users with ready access to clear,
meaningful notices about the Participating Member's collection,
use, and sharing of Covered Information.
Choice: Participating Members commit to offering Owners and
Registered Users with certain choices regarding the collection,
use, and sharing of Covered Information.
Respect for Context: Participating Members commit to using
and sharing Covered Information in ways that are consistent
with the context in which the Covered Information was
collected, taking account of the likely impact on Owners and
Registered Users.
Data Minimization, De-Identification & Retention:
Participating Members commit to collecting Covered Information
only as needed for legitimate business purposes. Participating
Members commit to retaining Covered Information no longer than
they determine necessary for legitimate business purposes.
Data Security: Participating Members commit to implementing
reasonable measures to protect Covered Information against loss
and unauthorized access or use.
Integrity & Access: Participating Members commit to
implementing reasonable measures to maintain the accuracy of
Covered Information and commit to giving Owners and Registered
Users reasonable means to review and correct Personal
Subscription Information.
Accountability: Participating Members commit to taking
reasonable steps to ensure that they and other entities that
receive Covered Information adhere to the Principles.
The application of these fundamental principles is described in
more detail in the sections that follow.
II. Applicability
The Principles apply to the collection, use, and sharing of Covered
Information in association with Vehicle Technologies and Services
available on cars and light trucks sold or leased to individual
consumers for personal use in the United States.
Participating Members are listed in the Appendix.
Each Participating Member commits to complying with the Principles
for new vehicles manufactured no later than Model Year 2017 (which may
begin as early as January 2, 2016) and for Vehicle Technologies and
Services subscriptions that are initiated or renewed on or after
January 2, 2016. To the extent practicable, each Participating Member
commits to implementing the Principles for Covered Information
collected from vehicles manufactured before January 2, 2016. If
compliance with the Principles involves a vehicle engineering change,
each Participating Member commits to complying with the Principles as
soon as practicable, but by no later than vehicle Model Year 2018.
Some Participating Members may work with Third-party Service
Providers to provide some or all of their Vehicle Technologies and
Services. When doing so, Participating Members commit to taking
reasonable steps to ensure that Third-party Service Providers adhere to
the Principles in providing Vehicle Technologies and Services that
involve the collection, use, or sharing of Covered Information.
Businesses other than Third-party Service Providers may provide Owners
and Registered Users with apps or other offerings that involve the
collection of information from vehicles. Participating Members will
encourage those businesses to respect the privacy of Owners and
Registered Users and will take reasonable steps to provide those
businesses with an opportunity to provide Owners and Registered Users
with information about the businesses' privacy practices.
However, the Principles directly apply only to Participating
Members. The Principles do not apply directly to vehicle dealerships
that are not owned by Participating Members.
III. Scope of the Principles and Definitions
The Principles provide a framework for Participating Members to
embrace when collecting, using, and sharing Covered Information. The
following defined terms are used in the Principles. Together, the
definitions describe the scope of the Principles.
Affirmative Consent: An Owner's or Registered User's clear action
performed in response to a clear, meaningful, and prominent notice
disclosing the collection, use, and sharing of Covered Information.
Biometrics: Covered Information about an Owner's or Registered
User's physical or biological characteristics that serves to identify
the person.
Covered Information: (1) Identifiable Information that vehicles
collect, generate, record, or store in an electronic form that is
retrieved from the vehicles by or on behalf of a Participating Member
in connection with Vehicle Technologies and Services; or (2) Personal
Subscription Information provided by individuals subscribing or
registering for Vehicle Technologies and Services.
Exclusion from Covered Information: If Participating Members
collect Covered Information and then alter or combine the
information so that the information can no longer reasonably be
linked to the vehicle from which the information was retrieved,
the Owner of that vehicle, or any other individual, the
information is no longer Covered Information. If Participating
Members attempt to link the information to specific, identified
individuals or vehicles or share the information without
prohibiting the recipients from attempting such linking, the
information becomes Covered Information.
Driver Behavior Information: Covered Information about how a person
drives a vehicle. Examples are vehicle speed, seat belt use, and
information about braking habits. This does not include information
that is used only for safety, diagnostics, warranty, maintenance, or
compliance purposes.
Geolocation Information: Covered Information about the precise
geographic location of a vehicle.
Identifiable Information: Information that is linked or reasonably
linkable to (i) the vehicle from which the information was retrieved,
(ii) the Owner of that vehicle, or (iii) the Registered User using
Vehicle Technologies and Services associated with the vehicle from
which the information was retrieved.
Owners: Those individuals who have legal title to a vehicle that
receives or is equipped with Vehicle Technologies and Services that use
Covered Information; those entitled to possession of such a vehicle,
like purchasers under an agreement (for example, a vehicle loan where
the vehicle is collateral); and those entitled to possession of such a
vehicle as lessees pursuant to a written lease agreement that, at its
inception, is for a period of more than three months. The term
``Owners'' does not include lienholders and lenders.
Personal Subscription Information: Information that individuals
provide during the subscription or registration process that on its own
or in combination with other information can identify a person, such as
a name, address, credit card number, telephone number, or e-mail
address.
Registered User: An individual other than an Owner who registers
with, and provides Personal Subscription Information to, a
Participating Member in order to receive Vehicle Technologies and
Services that use Covered Information.
Third-party Service Providers: Companies unaffiliated with
Participating Members that receive Covered Information when conducting
business on behalf of a Participating Member.
Vehicle Technologies and Services: Technologies and services
provided by, made available through, or offered on behalf of
Participating Members that involve the collection, use, or sharing of
information that is collected, generated, recorded, or stored by a
vehicle.
IV. Specific Principles
1. Transparency
Participating Members commit to providing Owners and Registered
Users with ready access to clear, meaningful notices about the
Participating Member's collection, use, and sharing of Covered
Information.
Participating Members commit to providing notices in a manner that
enables Owners and Registered Users to make informed decisions.
How Participating Members may provide notices: Participating
Members may make notices available in a variety of ways. Depending on
the nature of the Vehicle Technologies and Services and the
circumstances in which they are offered, different mechanisms may be
reasonable to provide Owners and Registered Users with ready access to
clear, meaningful notices about the Covered Information that
Participating Members collect, use, and share.
There is no one-size-fits-all approach. Among the various ways
Participating Members may choose to provide notices are in owners'
manuals, on paper or electronic registration forms and user agreements,
or on in-vehicle displays. At a minimum, Participating Members commit
to making information regarding the collection, use, and sharing of
Covered Information publicly available via online web portals.
When Participating Members may provide notices: Participating
Members commit to taking reasonable steps to provide Owners and
Registered Users with ready access to clear, meaningful notices prior
to initial collections of Covered Information. Notices need not be
provided prior to every instance of collection where addressed by prior
notices.
Content of notices: Participating Members commit to designing the
notices so that they provide Owners and Registered Users with clear,
meaningful information about the following:
the types of Covered Information that will be collected;
the purposes for which that Covered Information is
collected;
the types of entities with which the Covered Information may
be shared;
the deletion or de-identification of Covered Information;
the choices Owners and Registered Users may have regarding
Covered Information;
whether and how Owners and Registered Users may access any
Covered Information; and
where Owners and Registered Users may direct questions about
the collection, use, and sharing of Covered Information.
Notices regarding the collection of Geolocation Information,
Biometrics, and Driver Behavior Information: When Participating Members
collect, use, or share Geolocation Information, Biometrics, or Driver
Behavior Information, Participating Members commit to providing clear,
meaningful, and prominent notices about the collection of such
information, the purposes for which it is collected, and the types of
entities with which the information may be shared. Please see the
Choice section below for information about the Principles' Affirmative
Consent conditions if Participating Members use Geolocation
Information, Biometrics, or Driver Behavior Information as a basis for
marketing or share such information with unaffiliated third parties for
their own purposes.
Changing notices: Participating Members commit to taking reasonable
steps to alert Owners and Registered Users prior to changing the
collection, use, or sharing practices associated with Covered
Information in ways that have a material impact on Owners or Registered
Users. If the new practices involve using Covered Information in a
materially different manner than claimed when the Covered Information
was collected, Participating Members commit to obtaining Affirmative
Consent from Owners and Registered Users to the new practices.
2. Choice
Participating Members commit to offering Owners and Registered
Users with certain choices regarding the collection, use, and sharing
of Covered Information.
Certain safety, operations, compliance, and warranty information
may be collected by necessity without choice.
When Participating Members provide notices consistent with the
Transparency principle, an Owner's or Registered User's acceptance and
use of Vehicle Technologies and Services constitutes consent to the
associated information practices, subject to the Affirmative Consent
provisions below.
Participating Members understand that the sharing and use of
Geolocation Information, Biometrics, and Driver Behavior Information
can raise concerns in some situations, therefore Participating Members
also commit to obtaining Affirmative Consent expeditiously for the
following practices:
using Geolocation Information, Biometrics, or Driver
Behavior Information as a basis for marketing; and
sharing Geolocation Information, Biometrics, or Driver
Behavior Information with unaffiliated third parties for their
own purposes, including marketing.
Affirmative Consent is not required, however, when Geolocation
Information, Biometrics, or Driver Behavior Information is used or
shared
as reasonably necessary to protect the safety, property, or
rights of Participating Members, Owners, Registered Users,
drivers, passengers, or others (this includes sharing
information with emergency service providers);
only for safety, operations, compliance, or warranty
purposes;
for internal research or product development;
as reasonably necessary to facilitate a corporate merger,
acquisition, or sale involving a Participating Member's
business;
as reasonably necessary to comply with a lawful government
request, regulatory requirement, legal order, or similar
obligation, which, in the case of requests or demands from
governmental entities for Geolocation Information, must be in
the form of a warrant or court order, absent exigent
circumstances or applicable statutory authority; and
to assist in the location or recovery of a vehicle
reasonably identified as stolen.
Participating Members also need not obtain Affirmative Consent when
sharing Geolocation Information, Biometrics, or Driver Behavior
Information with Third-party Service Providers that assist in providing
Vehicle Technologies and Services if those parties are not permitted to
use that information for their independent use and the sharing is
consistent with the notices that Participating Members have provided.
Participating Members may obtain Affirmative Consent at the time of
vehicle purchase or lease, when registering for a service, or at
another time.
3. Respect for Context
Participating Members commit to using and sharing Covered
Information in ways that are consistent with the context in which the
Covered Information was collected, taking account of the likely impact
on Owners and Registered Users.
The context of collection: Various factors will determine the
context of collection, including the notices offered to Owners and
Registered Users, the permissions that they have provided, their
reasonable expectations, and how the use or sharing will likely impact
them.
When Participating Members present clear, meaningful notices
about how Covered Information will be used and shared, that use
and sharing is consistent with the context of collection.
Participating Members commit to making reasonable and
responsible use of Covered Information and may share that
information as reasonable for those uses. Reasonable and
responsible practices may vary over time as business practices
and consumer expectations evolve.
The following examples illustrate some of the reasonable and
responsible ways in which Participating Members may use or share
Covered Information consistent with the context of collecting that
information, taking into account the likely impact on Owners and
Registered Users The list is not meant to be exhaustive.
Using or sharing Covered Information as reasonably necessary
to provide requested or subscribed services;
Using or sharing Covered Information to respond to a
possible emergency or other situation requiring urgent
attention;
Using or sharing Covered Information to conduct research or
analysis for vehicles or Vehicle Technologies and Services;
Using or sharing Covered Information to diagnose or
troubleshoot vehicle systems;
Using or sharing Covered Information as reasonably necessary
to facilitate a corporate merger, acquisition, or sale
involving a Participating Member's business;
Sharing Covered Information for operational purposes with
affiliated companies that are clearly associated with the
Participating Member or with the Vehicle Technologies and
Services from which the Covered Information was collected or
derived;
Using or sharing Covered Information to prevent fraud and
criminal activity, or to safeguard Covered Information
associated with Owners or their vehicles;
Using or sharing Covered Information to improve products and
services or develop new offerings associated with Vehicle
Technologies and Services, vehicles, vehicle safety, security,
or transportation infrastructure;
Using Covered Information to provide Owners or Registered
Users with information about goods and services that may be of
interest to them;
Sharing Covered Information as reasonably necessary to
comply with a lawful government request, regulatory
requirement, legal order, or similar obligation, which in the
case of requests or demands from governmental entities for
Geolocation Information, must be in the form of a warrant or
court order, absent exigent circumstances or applicable
statutory authority; and
Using or sharing Covered Information to protect the safety,
property, or rights of Owners, Participating Members, or
others.
4. Data Minimization, De-Identification & Retention
Participating Members commit to collecting Covered Information only
as needed for legitimate business purposes. Participating Members
commit to retaining Covered Information no longer than they determine
necessary for legitimate business purposes.
5. Data Security
Participating Members commit to implementing reasonable measures to
protect Covered Information against loss and unauthorized access or
use.
Reasonable measures to protect Covered Information: Reasonable
measures include standard industry practices. Those practices evolve
over time and in reaction to evolving threats and identified
vulnerabilities.
6. Integrity & Access
Participating Members commit to implementing reasonable measures to
maintain the accuracy of Covered Information and commit to offering
Owners and Registered Users reasonable means to review and correct
Personal Subscription Information.
Participating Members may provide the means to review and correct
Personal Subscription Information in a variety of ways, including but
not limited to web portals, mobile applications, or in-vehicle tools.
Participating Members commit to exploring additional means of
providing Owners and Registered Users with reasonable access to Covered
Information, taking into account potential security and privacy issues.
7. Accountability:
Participating Members commit to taking reasonable steps to
ensure that they and other entities that receive Covered
Information adhere to the Principles.
Accountability mechanisms that Participating Members may implement:
Participating Members commit to implementing reasonable policies,
procedures, and practices to help ensure adherence to the Principles.
Participating Members may implement training programs for employees and
other personnel that handle Covered Information. Participating Members
may consider creating internal privacy review boards to evaluate and
approve new technologies and services involving Covered Information.
Participating Members should make available reporting mechanisms for
consumers to report concerns to Participating Members. Participating
Members also commit to taking reasonable steps to ensure that Third-
party Service Providers adhere to the Principles in providing Vehicle
Technologies and Services that involve the collection, use, or sharing
of Covered Information.
V. Contact Information
Alliance of Automobile Manufacturers
803 7th Street, N.W., Suite 300
Washington, DC 20001
Tel: (202) 326-5500
Global Automakers
1050 K St., NW Suite 650
Washington, DC 20001
Tel: (202) 650-5555
______
Appendix Participating Members
BMW of North America, LLC
Chrysler Group LLC
Ford Motor Company
General Motors LLC
Mazda North American Operations
Mercedes-Benz USA, LLC
Mitsubishi Motors North America, Inc.
Porsche Cars North America
Toyota Motor Sales, USA
Volkswagen Group Of America, Inc.
Volvo Car Group
Senator Peters. Thank you.
Having said that, Mr. Brookman, the problems of privacy and
security certainly are widespread in the context and not
limited to the Internet of Things, as we have been hearing
about today. But having said that, with the auto industry being
very proactive with their set of principles that they just
recently put together to protect consumer privacy and personal
information from cyber threats, do you agree that this is a
step in the right direction? What are some of your thoughts
about the industry's efforts?
Mr. Brookman. Yes, I think it is really great to see them
being proactive on this issue, recognizing they take privacy
very seriously especially with their cars. Cars are incredibly
personal devices. So I think those principles are a very good
first step.
I would probably want to see a little more control over
whether your car company always knows your location. In those
principles, that is not an element. I know that the CEO of Ford
was embarrassed last year at one point when he said, ``well, we
always know where you are.'' There was kind of an uproar around
that because I am out driving on the road. I want to be alone.
I do not necessarily want Ford to know every place I go. And he
had to kind of dial back those remarks. So I think we have
smart car technologies that can be deployed in ways that are
very privacy-preserving. Vehicle-to-vehicle, vehicle
infrastructure communications do not need to have a lot of
personal information in there. As a car company, I do not need
to know that it is Adam's black SUV. I just need to know that
it is a big, 6,000-pound vehicle. So they can be deployed in
really privacy-preserving ways.
I want to make sure that whatever principle is going to be
adopted, the fundamental idea of user autonomy is really
important, that I am in control of my car. I paid $30,000 for
this thing. It should work for me. And, you know, maybe I am
totally happy having Ford give me turn-by-turn instructions,
but it should be a question of user choice.
Senator Peters. Great. Thank you.
And, Mr. Davis, in your testimony you mentioned the
integration of Intel into the Internet of Things with sensors,
and you talked about heating and air conditioning which allows
the operator to identify opportunities in real time to reduce
power usage.
I am sure you are doing a number of things in the
manufacturing sector, which of course has major ramifications.
You mentioned it briefly in some of your answers. Could you
tell us a little bit more about what Intel is doing in
manufacturing and how that is going to transform that industry?
Mr. Davis. Certainly from an Intel manufacturing
perspective, I think we are one of the most sophisticated
manufacturers in the world. We certainly create the most
complex devices on the planet. And our factories today are
really already kind of models of the Internet of Things. And
what we are learning, as we go further along in the
implementation of these kinds of technologies, we are learning
even more as we can gain more access to data inside our
factories. And it is allowing us to have better insights into
how our products perform.
We can improve the overall output of the factory. We can
also make the operations much more efficient by using
technologies like predictive analytics to be able to identify
equipment that is nearing a point of failure and being able to
take it offline in a proactive manner, in a scheduled kind of
downtime, saves us a tremendous amount in terms of factory
interruption and improves the overall productivity.
And these are the kinds of technologies that we are putting
into our own factories. We are learning as we do these and then
offering those kinds of technologies and learnings to other
industries as well. Things like motors and pumps and
compressors, any kind of piece of equipment like that can
benefit from the basic physics of understanding how that device
operates, being able to apply data analytics and predict when
it might fail, and avoid that failure in a manner that we can
anticipate and even get to a point of machines being able to
acknowledge with each other that something is going awry.
Senator Peters. We have a question to go down the panel in
the remaining minute here. We are seeing self-driving cars. We
are seeing crockpots that are enabled by Internet technology as
well, the full gamut of things. So some industries are
embracing this. Others not so much.
What would be your view of what industries are really on
the cutting edge right now? Maybe we can just start with Mr.
Abbott, if you were to pick one industry that is just really
leading the way.
Mr. Abbott. I think particularly in the enterprise phase,
like manufacturing and logistics.
Mr. Davis. We would say that retail is one of the
industries really most poised to take advantage. Manufacturing
would be close behind that.
Mr. Donny. I agree. Industrial applications of sensors are
probably the driver for most of the Internet of Things.
Mr. Thierer. At the consumer level, I would just add that
health and fitness for wearables is exploding, and there are
probably many people in this committee room who are wearing a
wearable fitness device on their wrists and used it like me to
lose 30 pounds.
Mr. Brookman. And I would say in the consumer space the
area that I am most excited about is actually cars due to the
incredible safety benefits and convenience benefits you are
talking about.
Senator Peters. Right. Thank you.
I yield back.
Senator Moran. Senator Schatz?
STATEMENT OF HON. BRIAN SCHATZ,
U.S. SENATOR FROM HAWAII
Senator Schatz. Thank you.
Mr. Davis, you mentioned that China and Brazil are ahead of
the United States in developing a plan. And I guess my question
is, are they only ahead in terms of having developed a plan on
paper, or are they actually ahead of us in terms of developing
and taking advantage of the Internet of Things?
Mr. Davis. It is really both. It is having that plan that
is a national plan and then aligning the implementation around
it. So we are actually seeing both in the examples that we
cited.
Senator Schatz. And I assume in the examples that you
cited, that these were government-driven plans more so than any
of us would be comfortable with in the American democracy
system?
Mr. Davis. You know, the level of comfort, I guess--we will
have to assess that.
But certainly I think there are opportunities to encourage
innovation, to drive public-private partnerships.
Senator Schatz. So my question is, if we are going to
develop a national Internet of Things plan that is in the
context of a free market and the context of a democracy, how do
we strike the right balance in terms of it being private
sector-driven, which I think we all agree on, and having a
light touch and not getting into regulating right away? So that
is one question.
The other concern I have is simply time. In order to
develop a plan in an American-style democracy, it may be a
couple of years before we are able to render one. And I feel
like we do not have enough time for that.
So I would like you to address both questions, the public
and private balance and how do we do this efficiently enough to
have a plan that is meaningful.
Mr. Davis. I certainly agree. I think trying to regulate it
or legislate it, given the pace of technology and the pace of
innovation, it will be tough to keep up.
I think there are things we can do that help lead the way,
again working with different industries to understand barriers
and freeing those barriers, encouraging them to innovate in
very specific areas, and also driving research.
A great example would be data analytics. As we look for
data scientists who can extract the information from the 44
zettabytes of data that is coming our way by the year 2020,
certainly encouraging the education of the next wave of
engineers and scientists to be able to support that I think is
a good area.
Then the last I would cite is there are some industry
consortiums that are moving fast in the U.S. There is the
Industrial Internet Consortium. You know, five U.S. companies
founded that. It is over 100 companies I believe today
globally. It is intended to define areas of innovation that the
industries need to align around, creating workgroups to
actually go implement these recommendations, and then also
making recommendations to standards bodies to evolve the
standards as necessary. So I think there are things that we can
do to use those consortiums to lead the way.
Senator Schatz. I have to move on to the next question.
There was a mention of encryption but it was brief. And I am a
little surprised that we have not kind of dug deeper into the
question of encryption because it seems to me that a
combination of empowering consumers, some light but not zero
touch on the regulatory side, and increased and improved
encryption technology is going to be what addresses a lot of
the concerns expressed by my ranking member and others about
the Internet of Things. And so if we could just go down the
line and if you could just talk briefly, each of you, about the
potential for encryption to resolve and solve some of these
data security and personal privacy issues.
Mr. Abbott. Thank you, Senator.
So encryption will be helpful. It will not be the panacea.
And I think one way to look at this is if you looked at how e-
commerce emerged on the Internet. Initially there were websites
that did transact--that were not necessarily over an encrypted
piece, and there were attacks. And I think in the same way that
over time best practices were adopted by engineering teams, the
same will actually occur with IoT and is occurring today.
Mr. Davis. So we think the use of encryption is important
in how data traverses networks. We need to make sure that the
data that we are receiving from that device is data we can
trust. So trust is essential, I think, to the evolution of the
Internet of Things.
But encryption alone I do not think solves the problem.
Again, I think there are some best practices that we are
learning and evolving and we can do so through these
consortiums to implement those effectively.
Senator Schatz. I am almost out of time, so I am going to
call an audible and not go down the line because I have a
feeling you are all going to be for encryption and find the
potential there.
But it does seem to me that one of the challenges is to
empower consumers to know whether there can be some kind of
Good Housekeeping Seal of Approval so that a consumer can know
whether this is an IoT device that they ought to feel safe
about, that they ought to feel comfortable with, and whether it
is opt in or opt out, I think those are important policy and
consumer choices to be made. But on a very basic level,
consumers have to know whether someone is meeting some basic
standards, and I think that is one of the challenges right now.
Thank you.
Senator Moran. Thank you, Senator.
The Senator from Montana, Senator Daines?
STATEMENT OF HON. STEVE DAINES,
U.S. SENATOR FROM MONTANA
Senator Daines. So I get to represent the great state of
Montana, and one of the things I will hear is when a bureaucrat
flies into Montana from D.C. and they say they are there to
help, we get really scared about that.
So I have a question regarding--and I say this in the
context of someone who was part of a cloud computing startup we
took public. We had an office just north of you there from
Kleiner Perkins in Menlo Park. We were up in San Mateo, had 17
offices around the world, 33 languages, and our product is a
cloud computing CRM map called RightNow Technologies that
Oracle acquired a couple of years ago.
And I do have concerns as a consumer, as a parent about
privacy and security, but I have also a great concern about the
ability for technology innovation to move quickly. Somebody
asked what made your company successful. Our CEO said we can
run faster than anybody else, and that was our competitive
differentiator.
Unlike the glacial speed of D.C., you all are living in a
very different world than the Beltway here in Washington. You
move at the speed of electrons and we move at the speed of
glaciers here.
So a top-level question is, can the Federal Government be
helpful in regulating something I do not think they even
understand? Who would like to take that question?
Mr. Thierer. Well, I think they are going to have a really
hard time regulating the Internet of Things. I mean, the
Internet of Things, as you suggested, Senator, moves the pace
of Moore's Law and is doubling every 18 months just like
processors do. So that sort of speed is going to be hard for us
to set in stone any sort of rules that basically can govern
that kind of innovation.
What policymakers can do, beyond establishing a clear
vision for how the Internet of Things can be fostered, is to
suggest efforts to educate consumers and make them aware of
potential security and privacy risks and vulnerabilities. Our
government has a long track record of doing an excellent job of
this in other contexts. I would just commend the Federal Trade
Commission and many other Federal agencies who have OnGuard
Online, which is a wonderful online portal for consumers to
find great information about privacy and security best
practices.
Mr. Brookman. Yes. I mean, to some extent, the Federal
Trade Commission is already active in this area. Mr. Thierer
mentioned 50-some data security cases, which I think most
people recognize is probably a good idea. You should be using
reasonable data security requirements.
On the privacy side, we are primarily just asking for
better transparency. Right now I have a device. It is really
hard to figure out what it does. At the very least, it should
be written down somewhere what the company does. If you cannot
explain it in a statement, maybe you do not really understand
what it is doing, and that poses some privacy and security
risks.
Senator Daines. All right. Thank you.
And I think that whole opt in/opt out was an interesting
discussion. I look at that--because I am running around with my
devices. As someone who is a father of four children, they will
say, Dad, you are so January 2015 already. You know, I mean, it
is already outdated 2 weeks into February.
But I think information does become currency, and so when I
opt in to one of my apps--perhaps it is my airline when it
knows I arrive in a certain city--it performs at a high level.
It becomes currency with that information as the consumer makes
that choice ultimately.
And I guess I also have great faith in the power of
crowdsourcing and what happened--the example you had in the K
cups there of the reviews on Amazon. The consumers are not--I
think they control the world. The horse left the barn a long
time ago in terms of the consumer having the ultimate voice
oftentimes in these debates in the free markets.
I do believe, though, that national infrastructure and fin
services perhaps and maybe others should be held to a higher
standard and more strict standards as we look at the risk
management. As you think about any kind of regulatory touch,
how would you differentiate perhaps the Internet of Things from
fin services infrastructure and so forth? Mr. Davis?
Mr. Davis. I am clearly not the expert on financial
services. So I will say that up front.
But as we look at this breadth of Internet of Things, given
the breadth of it, yes, I believe there will be different
expectations for different industries and different market
sectors. What happens in the consumer space I think is
certainly critical in terms of both security and privacy. In
the industrial space, there are many opportunities where we can
open up and look at data from different data types and
different sources that will enable us to derive the value of
the Internet of Things, new services, new products. So I think
we are going to see different requirements, different needs
across different industries, and to your point, financial
services could certainly be that example.
Senator Daines. I am running out of time. I wanted to make
sure I asked this question, though, and this is as a father of
four children. With digital natives now running everywhere in
America as they are growing up here, believe me, everything
opens up with a swipe of the finger. Are there appropriate
security measures and parental disclosures we should be
thinking about to protect our children from the dangers of
online security and privacy?
Mr. Thierer. Well, Senator, I have testified in front of
this committee many times on online child safety issues and
have written books on parental controls and online safety
technologies. And I can tell you this is a never-ending battle
with myself as a father of two young children who are digital
natives as well, and they are sometimes ahead of us as parents
in terms of their capabilities. That being said, it is a
constant educational process, and there is never any end to it.
What the government can do is get more serious about media
literacy and technological literacy efforts in what is called
digital citizenship programs to try to make children more aware
of appropriate uses and inappropriate uses of their
technologies.
Senator Daines. Yes. I am out of time. But this is a case
where our kids are faster and more quickly adopting this
technology oftentimes than parents are. It is a profound issue
we have to deal with here I think as a country as parents
around how do we protect our children in this evolution.
Senator Moran. The Senator from Nevada, Senator Heller.
STATEMENT OF HON. DEAN HELLER,
U.S. SENATOR FROM NEVADA
Senator Heller. Chairman, thank you. Thanks for holding
this hearing. It is an unusual topic, to say the least, but one
I think just as important as it is odd.
I want to thank all the witnesses for being here taking
time out of your day to help us better understand where we are
trying to go on this.
I have a Microsoft Fit-band--now, whether it is mine or a
member of my staff's sitting behind me, I am not going to tell
you. But, you know there is tremendous amount of information
you get out of this Fit-band. I am looking at downloading how
many steps. I am downloading sleeping habits. I can tell how
many hours slept, how many times you woke during the night,
what the efficiency of the sleep was--and I do not even know
what that means--how many calories burned while you are
sleeping for those 8 hours. It is incredible the amount of
information that you get out of one of these Fit-bands.
But just as this information is available to me, I guess
the question we are trying to ask here on this committee is who
else has this information. Where does all this information go?
There is another app on calories. It tells you what you
ate, links the two programs together. It tells you how much you
are exercising, how much you are eating at the end of the day.
At the end of the day, you are, I guess, figuring out whether
you are making progress or not.
And I guess we are trying to decide whether you know that
or does the rest of the world have access to that kind of
information. Is that not in essence what we are dealing with?
Is this not what we are trying to figure out?
The amount of information that is out there--I read a
number. Let us see if I can find it. The amount of information
that is available to us. Here it is. We are producing multiple
ziggabytes each year, a number that I do not quite understand.
I do know it is 21 zeros behind a 1 or a trillion a million
times. That is the kind of information that is out there.
I may not be the only one that is wearing a Fit-band. There
is probably multiple people here in this room that are also
wearing these Fit-bands.
I guess the question is, is there a way--and, Mr. Thierer,
maybe I can ask you first. Can we identify ways in which this
data can be protected without doing harm?
Mr. Thierer. Yes, Senator, I think we can. I think,
obviously, consumers are going to be concerned about certain
types of personal information, specifically sensitive health
information, being shared too broadly, and that is going to
necessitate different types of approaches and policies for that
sort of information. But a lot of the information that is being
collected by these devices and the information, the data that
we are shedding, sort of what is called our data exhaust, is
going to be more easily shared and probably a lot of consumers
want it to be more easily shared. The complaints that a lot of
app developers get is that it is not easy enough to share some
of this data with some friends and other people or maybe your
doctor because of existing policies or laws.
Senator Heller. Is that not where we are going? This
information is going to be linked to your personal physician?
Mr. Thierer. I think so, but of course we have to deal with
things like HIPAA and other types of laws that make that
potentially difficult. And I think there are going to remain
some policies in place to deal with very sensitive forms of
information like health, financial information, and so on. But
I think for the most part there is a really delicate balance
here because a lot of consumers are going to want to have more
personalization and customization in their devices so they can
learn and share even more about themselves with friends,
colleagues, physicians, and others. So that is the balance we
have to walk.
Senator Heller. Mr. Brookman, how does this happen? How do
we make this happen without harming innovation?
Mr. Brookman. Yes. I think Fitbit is actually a really good
example. You are creating a lot of really personal and
interesting information, but you kind of want to have control
over it. You do not necessarily want the world to know what
your heart rate is. And people might be able to do really
interesting research on it, but you do not want to necessarily
be everyone's guinea pig.
I think Fitbit actually understands that. They actually
have a really good rule in their privacy policy. You are
creating really a lot of information, but it is yours. You are
in control over it. We are not going to sell it to data
brokers. And I think that should probably be the default
especially for really sensitive stuff like this.
If you want to sell it to somebody or make it available to
researchers, just get my permission for it. If you want to sell
it to data brokers and, say, we will give you $5 off your
Fitbit, that is fine. Make a value proposition for it. And so I
think for things that would be surprising or confusing to a
consumer, I think there should be a little more obligation to
say, OK, here is what you are going to do. It is your device.
You paid for it. You make the decision about what you want to
do.
Senator Heller. Yes. Thank you very much for your comments.
Again, I want to thank the panel for being here.
Chairman, I support where Chairman Thune is coming from on
this particular issue, trying not to do harm without harming
innovation as we wrestle with the very issues that the panel
and I discussed today.
Thank you.
Senator Moran. Thank you, Senator Heller.
The Senator from New Jersey, Senator Booker.
STATEMENT OF HON. CORY BOOKER,
U.S. SENATOR FROM NEW JERSEY
Senator Booker. Thank you very much, Mr. Acting Chairman.
You know, I just want to pick up on it. This is a
phenomenal opportunity for a bipartisan, profoundly patriotic
approach to an issue that can explode our economy. I think
there are trillions of dollars, creating countless jobs,
improving quality of life, democratizing our society in ways
that gives advantages to people who are being marginalized on
the edges, breaking down barriers of race and class. We cannot
even imagine the future that this portends of, and we should be
embracing that. America right now is the net exporter of
technology innovation in the globe, and we cannot lose that
advantage. It to me is something that we should continue to be:
the global innovators on these areas.
And so a lot of my concerns are really what my Republican
colleagues also echoed, which is we should be doing everything
possible to encourage this and do nothing to restrict it. And
there are a lot of legitimate fears, but in the same way of
every technological era, there must have been incredible fears
starting with the airline industry, just human beings taking
flight, had tremendous fears. But for us to do anything to
inhibit that leap in humanity to me seems unfortunate.
And so from copyright issues, security issues, privacy
issues, all of these things are worthy of us wrestling and
grappling with, but to me we cannot stop human innovation and
we cannot give advantages in human innovation to other nations
that we do not have. America should continue to lead.
And I also believe that this has got to be a public-private
partnership, that we all have a role. The very Internet itself
is the result of a public-private partnership, investments made
by the public space, by the civic space that innovators and
entrepreneurs have made, again, beyond the imagination people
had just 20-30 years ago.
So I want to jump in on two things, and I imagine there
might be another round, but the first issue is spectrum. I have
a bias. I think government hoards too much spectrum, and I
think that there is a need for more spectrum out there.
Everything we are talking about--and I think the word was used,
an ``obesity'' of usage and needs going out there--is going to
necessitate more spectrum. And so for me, yesterday Senator
Rubio and I, again in a bipartisan way, reintroduced the WiFi
Innovation Act which aims to address this need by encouraging
more spectrum sharing and freeing up more spectrum.
And so I just want to highlight the importance of these
sharing agreements and increased spectrum availability is going
to be in this just for the record. And let us just do it really
quick. Anybody who wants to jump in on that.
Mr. Donny. I will lean in and weigh my support. In
agriculture we have very unique challenges in moving data. You
do not have a building, your home in which your Fitbit when you
walk in the door, syncs up with the WiFi that you have got
available. On the farm, you do not have broadband. You do not
have WiFi available to you. So if we want to lead the world,
continue to lead the world in agriculture--and it will be
through technology--we have to solve--this is a fundamental
problem that I think a public-private partnership is perfect
for.
Senator Booker. Right. And so do not get me started about
states that are banning broadband innovation by municipalities.
Do not get me started on that. But you agree that we have to
solve these problems. We have to create more spectrum
availability. And the fact that countries like South Korea and
others have more broadband penetration than the United States
of America is absurd, and we need to solve these problems.
But I want to stick with you being that you are the
courageous one. And another thing that is an issue for me,
where this issue of fear and legitimate concerns undermine
American leadership, is the issue of drones. It is one of those
issues that strikes fear in Americans' concerns. But the
potential and possibility for drone technology to alleviate
burdens of our infrastructure, to empower commerce, innovation,
jobs, to really open up unlimited opportunities in this country
is pretty incredible to me. And in your area of agriculture, as
I watch our government go slow in promulgating rules, holding
back American innovation, what has happened as a result of that
is innovation has spread in other countries that do not have
these rules, have put in sensible regulations, but now we are
seeing innovation and technology export from America and going
other places.
In the agricultural context, as my time runs out, could you
just give us a picture? Because I see mine surveys,
agricultural uses abroad that are not being done here. Could
you just comment on that real quick?
Mr. Donny. Thank you, Senator. It is a great topic.
Agriculture is a wonderful use case for drones. There are wide
open areas, lots of land to survey and crop scout. We can use
drones to improve productivity. So instead of sending someone
out to look at the field to go look for disease and pests, you
can send a drone out that identifies those unique challenges,
and then when you identify that space, you can be more
effective with pesticide applications, with use of resources.
And it is a wonderful use case. We should be leading this. And
the industry is spending hundreds of millions of dollars in
drones, and agriculture is waiting for this to happen.
Mr. Abbott. I can comment, Senator, from the investment
side. This is an area that in particular we have been focused
in and have made investments and plan to continue additional
investments in because we do see that we are at a very early
stage of a massive disruption in a lot of these commercial
opportunities.
Senator Booker. My friends at Kleiner have told me
basically a lot of the innovations now are not happening in the
United States. A lot of the research and investments are
happening overseas because of Government policy that is
restricting that here. Is that correct?
Mr. Abbott. It is correct that there are countries outside
the U.S. that are further along on the regulatory side that we
should try to learn from.
Mr. Thierer. Senator, I would just add that we need to be
thinking of the drone opportunity as creating airspaces of
platform for innovation the same way the Internet created a
platform for new innovation. And the way we counter the fear
that you correctly identified that is out there is to counter
it by talking about the life-enriching and lifesaving
opportunities of these and other Internet of Things devices.
Senator Booker. I am now really over on my time. We have
people that get injured every year, and other countries like
France are using drones to fix poles, not putting human beings
in danger, doing it at a fraction of the cost and a fraction of
the time. Forgive me.
Mr. Davis. Senator Booker, if I could just add on to that.
I think you made two really great points around efficient use
of spectrum. As we think about 50 billion devices, I think that
is a really key topic.
The other is around the distinction between consumer
applications. Drones are a great example. A lot of the
attention is around consumer applications. But around the
Internet of Things, we are going to see the economic benefit in
the commercial and industrial applications. Drones are a great
example. There are many others.
Senator Booker. Thank you.
Senator Moran. Senator, thank you.
The Senator from Nebraska, Senator Fischer.
STATEMENT OF HON. DEB FISCHER,
U.S. SENATOR FROM NEBRASKA
Senator Fischer. Thank you, Senator Moran.
I loved Senator Booker's enthusiasm on this, and we are
working on the Internet of Things with Senator Ayotte and
Senator Schatz and trying to move forward.
I think I am past the basic question on what is the
Internet of Things. That is always a good first start here.
But there are, I believe, huge benefits out there. I would
like to ask you, Mr. Abbott, what do you see as truly the
benefits of the Internet of Things? And do you think, as we
move forward, this space is going to be dominated by
established companies or is there going to be room for those
small startups? Where are we on that? And how can we continue
to be a force for innovation instead of stomping down that
entrepreneurial spirit?
Mr. Abbott. Thank you for the question, Senator. And I will
actually come back also to reiterate some of the comments I
made to Senator Booker.
Senator Fischer. Well, his time is done.
[Laughter.]
Mr. Abbott. We are particularly excited with the commercial
applications in the drone space, whether it be mining,
inspection, precision agriculture, or just pure safety. And
there are a couple examples there with companies we are working
with and we are really excited about.
We tend to believe, certainly, that it is going to be these
small companies that disrupt the large companies in this space.
And I think we are seeing this at the early days for some of
these contractors on the Government side realizing that drones
can be built by these small companies for much lower costs in
much more innovative ways, realizing at the same time that we
do need some guidance on the policy side, which I know the FAA
is working on.
Senator Fischer. And, Mr. Thierer, when you were giving
your opening statement, it reminded me that 9 out of the 10 top
innovative companies in the world in 2013 are American. Is that
going to continue? What kind of policies are we going to need
as we address the Internet of Things? I guess I am really
concerned about Government getting in the way and getting in
the way of that innovation, whether it is a large company or a
small startup. Sure, there are concerns out there, but I do not
want to see all the excitement that is with the Internet of
Things move overseas. So what can we do with that?
Mr. Thierer. Well, absolutely, Senator. And I want to
commend you on your recent speeches on this issue and your
leadership on it because you have identified that we got policy
right when it came to the Internet more broadly, and we now
need to get it right for the Internet of Things.
In essence, America found the sort of secret sauce of
modern innovation. We figured out how to get the right policy
prerequisites in place starting with essentially a light touch
vision instead of a plan. Senator Schatz pointed out earlier,
do we need a plan? I think we need a vision more than we need a
plan. And the vision we had, led by Congress and the Clinton
administration in a nonpartisan fashion, was that sort of light
touch, market-driven approach that addressed harms as they
developed instead of trying to preemptively anticipate every
one of those problems like some of our competitors did overseas
and say we need to preemptively figure out how to solve every
problem before we allow technology and innovation to go
forward. Well, there is a reason that the household names in
Europe on technology are American companies. Meanwhile, it is
hard to name any European innovators here in the states.
Senator Fischer. Well, I know I am working with my
colleagues, Senators Booker and Schatz and Ayotte. Hopefully,
we are going to present a vision as we work on a resolution
that we will get before Congress. I think that is very, very
important that we have that vision and that light touch.
I would like to just touch on something that, Mr. Brookman,
you and also Mr. Davis said earlier about security is an
afterthought and when new products are built, that is when the
security needs to be designed and put in them.
We had a hearing earlier about data security, and I have
deep concerns about cybersecurity in this country. And at that
hearing, we heard about businesses that may be getting
pressured by foreign governments to give up their software in
order to get a bigger market share in another country.
What do you feel about that? And what do you think should
be a response by our government by this Congress because of the
interrelationship that we see with much of the software and
what we have seen with nation states creating mischief with
companies?
Mr. Brookman. Yes. I certainly do not want to see any
mandated vulnerabilities in encryption technologies, including
backdoors. Unfortunately, it is something that the U.S.
Government has asked for, which I think sets a really bad
precedent for the rest of the world, saying that we need to
have mandated vulnerabilities into data security. So I think
the best thing we can do is not doing it ourselves. Therefore,
we would have some high ground to stand on to say, no, other
countries should not be doing it either.
Senator Fischer. But other countries are doing it. So what
steps do we need to take, or do we need to take anything? How
would you prohibit this or would you?
Mr. Brookman. It is a really good question. It is one I
have not put a lot of thought into. My hope is that companies
doing business overseas will resist those sorts of requests. It
is a tough issue for companies that are spread out all over the
globe. When do you censor speech? When do you take down
information in response to the right to be forgotten? Companies
have a really delicate balancing act. I have never heard the
best answer as far as how do you take inconsistent legal
obligations when you are spread out all over the globe.
Mr. Thierer. And I would just add, Senator, that this is
exactly where our Government needs to be standing side by side
with companies when they have these problems internationally
and defending them when they bake in better encryption and
security by design instead of, as Mr. Brookman suggested,
undermining them and saying, well, maybe you need to have some
backdoors for us instead. That is not going to be a consistent
principal message to take out globally.
Senator Fischer. Mr. Davis?
Mr. Davis. Senator Fischer, I think you made a great
comment in terms of the legacy devices that exist today as
opposed to security being an afterthought. Really, I think part
of the challenge today is about 85 percent of the billions of
devices that exist today that have integrated computing are not
connected to each other or the Internet. That is an
opportunity. We can connect to those devices. We can start
finding data that we did not have before. I gave the
manufacturing example earlier. The ability to extract data that
we have had access to in the past is one of the promises of the
Internet of Things to drive greater efficiency. But we can do
so in a way that we can connect those securely. There are
technologies that allow us to even connect those older legacy
devices, be able to feed that data up into a data center or
cloud to do the kinds of big data analytics that are going to
be so valuable in addition to building it in from the beginning
with a broad end-to-end security technology strategy in mind to
begin with.
Senator Fischer. Thank you so much.
Thank you, Mr. Chairman.
The Chairman [presiding]. Thank you, Senator Fischer.
I understand Senator Moran has done a brilliant job of
presiding. So thank you.
Next up is Senator Gardner.
STATEMENT OF HON. CORY GARDNER,
U.S. SENATOR FROM COLORADO
Senator Gardner. Thank you, Mr. Chairman.
And thanks to the witnesses for being here today.
Where else in Congress, I guess, do you discuss super
cookies, milk, and drones in the same committee hearing?
[Laughter.]
Senator Gardner. This has been fascinating to hear, but it
is exciting to talk about the future of technology and where we
have been and where we are heading.
So it was 1997, I believe, when our farm equipment
dealership sold our first GPS satellite system, advanced
farming system. And we sold it to a gentleman who was right
around 65 or 70 years old and it had the PC MCA card, the pin
card that you put in to download the data. And I think at that
point there were three data points that we were measuring off
of the combine. It was probably some kind of a protein count,
moisture count, and of course your yield. And so those were the
three things that we did.
And over the past 20 years, of course, now we have seen
layer after layer of data, whether it is moisture data, whether
it is--you know, information that you can plug into your seed
application, your seed rate, your flow rates on fertilizers and
things like that. And of course, we have been using phones to
turn on and off the sprinkler for decades in agriculture. And
so all a part of prescription farming and how we can do a
better job of providing food, fiber for the world.
The same thing we can do in the supply chain with
manufacturing in industry, whether it is the vehicles or
furniture. We can do the same kind of approach with the new
technology.
But so much of this is tied together with how we are going
to approach spectrum, getting back to Senator Booker's point,
and how we are going to approach availability to innovate.
So keeping in mind the farm model, you have a combine--say
you have a tractor going through the field with a cultivator.
You have a sprinkler in the field that has--maybe it has got
valves on it that are each individually controlled through the
Internet, WiFi, perhaps from the tractor itself or the farm or
your phone, wherever you are to apply a different percentage of
fertilizer as your chemigation system is working. You have a
drone flying over the field that is taking a picture of it to
see where you may need a little bit more or less nitrogen. All
this, I am assuming, is going to be with unlicensed spectrum.
There was a situation in Congress just over the past year
where--many of us do not even know it--in our offices there was
an unlicensed spectrum issue that came up in our offices here
on Capitol Hill. And it was an unlicensed spectrum issue where
the FCC had sort of said, yes, go ahead, and then a license
came in to take this spectrum.
How are we going to handle the Internet of Things? How are
we going to handle and approach these issues when you have
conflicts of more need for spectrum, issues of unlicensed
spectrum, issues of people coming in and getting licenses for
an area that may already have a campsite in it, so to speak?
Mr. Abbott, I do not know. That is a very open-ended
question. Do we have policies in place, I guess, to address the
balance--growing the Internet of Things, growing device
application, growing utilities that we can be more productive
with without a better definition of how we are going to handle
unlicensed spectrum issues?
Mr. Abbott. Thanks for the question, Senator.
I do think that we do need to provide more licensed
spectrum for innovation. I think today, while it is not a
constraint we are seeing in early stage companies, it soon will
be as more and more of these services and applications get
deployed in the enterprise and in the consumer space.
Senator Gardner. Mr. Davis?
Mr. Davis. Well, we certainly see there is an important
need for licensed spectrum and unlicensed spectrum. And my
comments to Senator Booker earlier--you know, what we are
really looking at is how do we most efficiently use that
spectrum that is available? Because as we think about
connecting 50 billion devices, it is really how to most
efficiently provide that to the different kinds of uses and
applications.
Senator Gardner. Mr. Donny, I do not know if you want to
address that or not.
Mr. Donny. I think I have addressed it several times. Both
licensed and unlicensed, as you know, is used in agriculture
and we need all we can eat really.
Senator Gardner. Mr. Thierer?
Mr. Thierer. Yes, we all agree on this one. And I think
what you and Senator Booker raise is a valid point. I think the
problem is a political problem of when you have incumbent
constituencies who already hold or hoard a lot of this
spectrum, shaking some of that loose, you are going to have to
create better incentives for them. And we are going to have to
counter the narrative that only they have sort of lifesaving or
life-enriching applications. We do too on this side, and we
need more spectrum for it.
Senator Gardner. And as Mr. Donny said, though, at the same
time in rural America, we do have a separate challenge of
making sure that we have enough mobile broadband to supply cell
phone signals and everything else. So you do have this kind of
a challenge particularly in rural areas where you have a
conflict even within itself that needs to be addressed.
I guess I have a lot of questions. I would love to just
have this conversation all day, but at this point, Mr.
Chairman, I will yield back.
The Chairman. Thank you, Senator Gardner.
Senator Moran?
STATEMENT OF HON. JERRY MORAN,
U.S. SENATOR FROM KANSAS
Senator Moran. Mr. Chairman, thank you very much.
Last week, a subcommittee held a hearing on data breach
security, data security. We talked about breach. We talked
about the standard of what a breach is. We talked about whether
there ought to be preemption. In the kind of, I think, data
breaches that we have been considering, what we are worried
about is a consumer's personal information is obtained by those
who should not have it, financial information, Social Security
number, and how that information can be used to the consumer's
detriment.
And certainly here there are security issues. Part of it is
related, as we have heard, to privacy. But what is different
about the Internet of Things? What kind of data breach should
we be worried about? So somebody learns that your milk needs to
be replaced in the refrigerator, are the data breach security
consequences--let me say it differently. Is the data breach,
the consequences of that breach, something different than what
we normally think about when we talk about data security? And
if so, what should we be thinking about as we try to solve the
issue of the breach and the consequences?
Mr. Abbott. So I do think that it is somewhat relative to
the domain and the application in regards to the severity of a
data breach, indeed.
Senator Moran. What would be the spectrum within the
Internet of Things?
Mr. Abbott. So at one end of the spectrum, you have a
sensor just emitting temperature. On the other end, a sensor in
the medical world that is emitting some type of physiological
response that has control. Because there are sensors that are
just emitting data, and there are sensors that actually can
control. So we have this spectrum of, we will say, criticality,
if you will. And so I do not think there is a one-size-fits-all
data breach definition. And it is the same way that I do not
think it would be appropriate to have a single policy for
security across that spectrum.
And I think it also relates to data sharing. If you look at
temperature, that might be actually a great sensor to share
widely, whereas you go to the more personal data, maybe that
should be shared locally, just that individual, and have a very
clear ability to opt out if the user does not understand the
benefit that he or she is getting by sharing that data.
Senator Moran. Mr. Abbott, let me ask you. I will come
back, Mr. Brookman. Mr. Abbott, let me ask you in particular.
When you are looking for investors in companies or you, Mr.
Donny, when you are finding somebody who wants to invest in a
company involved in the Internet of Things, do they consider
their investment risk based upon the potential of security/
privacy breaches? Is that built into the investment?
Mr. Abbott. It typically is, and I think it is more a
function of the team that is involved that is actually building
the company and building that product. So if we look at a
company like NEST that we are investors in, certainly that was
a consideration.
Senator Moran. Is there any private insurance that is
developing to protect your companies and the investors in those
companies from the consequences of a breach? Can you become
insured in a private sector way?
Mr. Abbott. There may be but I am not aware of them.
Senator Moran. Mr. Brookman, you wanted to respond earlier.
Mr. Brookman. Yes. So I know traditionally data breach
notification has been about financial information, but I think
we are increasingly recognizing that you can lose other
personal information as well. Think about the iCloud celebrity
hack. I mean, we have a personal interest in that. If my
pictures were hacked, I would want to know about it. The Sony
case, for example. If my e-mails get hacked, I would want to
know about it. So we are actually seeing some states pass some
broader breach notification laws, saying if your online
accounts get hacked, well, of course, you should tell them
about it. So I think any Federal standard should consider that
as well or at the very least not preempt those states from
passing breach notification laws that extend to new categories
of data that are not addressed by a relatively narrow financial
data bill.
Senator Moran. Mr. Chairman, thank you.
The Chairman. Thank you, Senator Moran.
Senator Klobuchar?
STATEMENT OF HON. AMY KLOBUCHAR,
U.S. SENATOR FROM MINNESOTA
Senator Klobuchar. Thank you very much, Mr. Chairman. I
think I have a worse cold than you. So this will not be one of
these filibustering-by-the-Senator moments. I will let you guys
answer as long as you want.
[Laughter.]
Senator Klobuchar. This is a very important issue, of
course, the future of connected technologies. This year at the
consumer electronics show in Las Vegas, companies from around
the world showed off their newest technologies, 900 of which
were connected devices. So it is a pretty exciting time but
also, as we know and have discussed, a time of making sure that
consumers are protected as well.
Senator Hoeven and I--maybe you are aware of this--last
year introduced the Data Privacy Act, and we plan on
reintroducing it again.
An event data recorder, as I think many of you know, is a
device that records about 5 seconds of technical safety data
when a crash occurs. EDR's can be the only resource available
to determine the cause of a crash by providing information
about what a driver was doing in the seconds leading up to the
crash.
Starting in September 2014 all new vehicles will have an
EDR, and NHTSA does not have the authority to determine who
owns the EDR data, which is why we introduced this Data Privacy
Act bill. Our bill makes clear that the owner of the vehicle is
the rightful owner of the data collected by that vehicle's EDR
and may only be accessed under rare circumstances.
Mr. Brookman, do you agree that empowering consumers to
have ownership of their data is important, similar to what we
have outlined in the Data Privacy Act?
Mr. Brookman. So I have not looked at that bill in some
time. So forgive me for not supporting it right now.
My recollection of it is I think I very much agree with the
general principles of it. This is my car. I paid a lot of money
for it. I should have control in most situations of when that
data is accessed. Obviously, in an accident, there will be a
process for accessing that information, but fundamentally you
should not be sending it off in other circumstances without my
control.
So I want to look at the bill specifically, but I think
that I very much agree with the general tenor of your
statement.
Senator Klobuchar. OK, very good. Thank you. I just want
everyone to be aware of that bill.
One of the concepts that the FTC recommends for business
dealing with consumer data is to design privacy and security
into each product. It is oftentimes more difficult to retrofit
a device with new technology to combat threats or to patch
privacy controls than it is to design or install it to begin
with.
Mr. Davis, if businesses and innovators keep consumer data
privacy control in mind throughout the development process at
the get-go, do you believe they will continue to have the
flexibility needed to innovate while also protecting consumers?
Mr. Davis. Certainly there is a balance. Thank you for the
question. Certainly there is a balance between security and
privacy. Security I think we often think of as the technical
implementation of the product in such a way that we can provide
the level of privacy that consumers would expect. And so
certainly I think as we develop the kinds of products that we
are developing, with both in mind. So we have a set of
requirements around both that our developers need to meet. And
we have part of our organization who is looking at those
implementations and making sure that our engineers and
developers are adhering to those requirements.
And so I think from a higher level, being able to define
what the end looks like in terms of where we need to get to as
industries in the objectives that we are trying to accomplish
is a way to implement these kinds of things into a national IoT
plan that has long-reaching objectives without limiting the
short-term innovations that are possible.
Senator Klobuchar. OK, very good. Thank you.
One of the issues I have been working on since I got here
has been cell phone unlocking. You mentioned it, Mr. Bookman, I
think in your testimony. In fact, it was one of the first bills
I introduced, The Cell Phone Bill of Rights. As you know, there
have been changes, and today is the anniversary of carriers'
voluntary agreement with the FCC to increase transparency for
their unlocking policies.
Yesterday I sent a letter to the FCC and the CTIA for an
update on that agreement.
Mr. Brookman, you mentioned in your written testimony that
cell phone unlocking was an example of why policies need to be
in place in order to ensure there is competition for connected
devices. Can you expand on that from your written testimony?
You should also know I am the ranking on the antitrust
committee in Judiciary, and so we also do a lot of work with
telecom.
Mr. Brookman. Yes. I think it is just normal consumer
expectations where they have a device. They do not necessarily
expect it to be locked down to certain carriers. If it has the
technological ability to communicate with other Verizon or
AT&T, of course, I should have the ability to do that. And
unfortunately, it should not be incumbent upon the Library of
Congress to have to pass an exception every 3 years.
You know, Samsung makes a device. It has the ability to
connect to whoever it wants to. We should have that right. I
mentioned the example of coffeemakers trying to lock down what
coffee you can use. These products really need to be designed,
you know, as a service to the consumer who is paying money for
them. I own it. I bought it. It should be trying to act in a
way that is consistent with my reasonable desires.
Senator Klobuchar. OK.
Anyone else want to pitch in on that? OK, thank you very
much.
The Chairman. Thank you, Senator Klobuchar. And I know that
you and I are both hoping that the Internet of Things will lead
to a cure for the head virus right now.
Senator Klobuchar. It is a Midwestern problem.
[Laughter.]
The Chairman. I have in this order, Senators Manchin,
Markey, and Cantwell. And I have to step out for just a minute.
So Senators Manchin, Markey, and Cantwell.
STATEMENT OF HON. JOE MANCHIN,
U.S. SENATOR FROM WEST VIRGINIA
Senator Manchin. Thank you, Mr. Chairman.
I had to miss part of this meeting because I had another
Armed Services meeting. So I am very sorry that I did not get
the first of it.
Senator Booker. We know that because we had an Internet of
Things LoJack on you.
[Laughter.]
Senator Booker. We are tracking your movements.
Senator Manchin. I do not think there is anybody who wants
to stymie innovation and entrepreneurship. I do not know if 535
Members of Congress would. And we know that we are all
connected because you just look out and everybody's head is
down. They are working on their phones. They are working on the
iPads and they do not even know we are talking.
[Laughter.]
Senator Manchin. So with that being said, we are moving
forward.
I have a hard time believing that you are concerned that if
we do a privacy bill, that you might not have access for the
latest, greatest innovation in technology. If that would be the
case, Facebook would have a serious problem because there are
many millions and millions of people who want to share every
little aspect of their life. So I do not think you are going to
have a problem with people sharing with you.
But I think some of us have a problem if we do not want our
information shared. Is there a middle ground here?
I know with the phones, when I was Governor, people would
just--they wanted privacy. They said I am getting tired of all
these telemarketers calling me all the time and get these
unlisted phone numbers so they could block them. And they were
able to block. It did not stop any innovation and creation.
Nobody's business got hurt.
And I will have to be the cynic. How much money do
companies make off the sharing of information right now? You
all have seen it. Now come on. It is over $600 billion. So
being the cynic that we might be at times, I can understand why
companies do not want any type of a privacy thing because it is
a big moneymaker. Correct? Anybody want to speak to that?
Mr. Abbott. Senator, I think one thing to keep in mind too
is that by sharing that data, oftentimes it improves the
consumer experience. There are many examples of products that--
--
Senator Manchin. I am saying if it improves it, do you not
make it from the product itself? You are making it from selling
that.
Mr. Abbott. And the user actually gets a reward for the
sharing of that information. Let us say as an example if I am
sharing data from my thermostat back to a cloud service and
that collectively improves the product for the population of
those users--they have already purchased the product--that is a
great experience.
Senator Manchin. Where does this $600 billion of the
economy come from? Where does it go? You are selling it and you
are getting something for that, not just you are giving me more
efficient service. You are selling that information to somebody
else. The IoT basically is $600-plus billion growing very
rapidly. So for those of us who want a little bit of privacy,
we think you are doing pretty darned good.
Mr. Thierer. But, Senator, the question of where the value
is going, a lot of it is going to the consumer in the form of
cheap or zero prices. I mean, the fact that we do not have to
spend $20 a month for Facebook or pay for every search we do on
a search engine, that is value to consumers. That is an
improvement in our quality of life. And if you ask most
consumers how much would you pay for these services, the answer
is usually very little or nothing. They like that cost. Free is
a good number.
The question is what would regulation do to alter that
balance and if it raised prices, would consumers appreciate it
and understand why it happened. I am not so sure.
Senator Manchin. You are not opposed to the privacy and us
being able to block. You all do it, Mr. Donny, do you not?
Mr. Donny. We believe in the agriculture data that is owned
by the farmer. That is very clear. Our objective is how do we
work with the farmer to enable them to use data to make better
decisions. Sometimes that is a relationship in which we are
looking at data----
Senator Manchin. It would be a volunteer relationship.
Mr. Donny. That is right to help that relationship.
Senator Manchin. So you believe in the privacy that we
should have----
Mr. Donny. I am very straightforward. I think that data
privacy is important, but it is truly dependent on what data
you are looking at. In ag, I think that is a very important set
of information. It derives commodity prices. It could be used
for regulatory purposes because there is a lot of tail end of
that data use. And so we want to make sure that the grower owns
their data.
Senator Manchin. I can understand where you all are coming
from because you are afraid we might go too far. I understand.
And with that being said, we have a hard time understanding
that you do not believe you have enough information now because
I am sure there is an awful lot of information that you do have
because the financials show that. And we are just trying to
find that balance I believe, and if you could help us do that--
Mr. Davis, I think you want to comment on that.
Mr. Davis. Senator, I think your point is really important
in terms of the relevance of security in everything that we are
talking about with the Internet of Things. As we talk to our
customers, as we talk to analysts in the industry, the number
one topic--and it is foundational, the five tenets that we
described--is security. And so the ability to integrate
security knowing that a device that is added to my network is a
device that is supposed to be on the network and the
information I am getting from it is what I would expect to be
getting--it is valid information--those are foundational to the
Internet of Things.
In terms of privacy, you are absolutely right. We are
stewards of that information in terms of balancing the value
that I think has been described from having access to some of
that data and the importance of protecting it and being
stewards of that data in terms of the consumer. There is a
balance and it is something that will continue to evolve
industry by industry.
Senator Manchin. Thank you.
Senator Markey?
STATEMENT OF HON. EDWARD MARKEY,
U.S. SENATOR FROM MASSACHUSETTS
Senator Markey. I am Chairman again.
[Laughter.]
Senator Markey. By unanimous consent, I recognize myself.
[Laughter.]
Senator Markey. So cars are a major part of the Internet of
Things, and every year new cars are more connected than ever
before. One reason that cars are such an important example of
connected devices is that they are so dangerous. A small
vulnerability or error in coding can lead to a catastrophic
consequence for drivers, passengers, and pedestrians.
On Monday, I released a report on our connected
automobiles, the Internet of Things, which describes how new
cars are really no longer just internal combustion engines.
They are computers on wheels.
I ask unanimous consent to submit my report for the record.
[The information referred to follows:]
Tracking & Hacking: Security & Privacy Gaps Put American Drivers at
Risk
A report written by the staff of Senator Edward J. Markey
Senator Markey. I asked 20 automakers what they are doing
to protect these computers on wheels, and what I found is that
they are not doing enough. Cars today are highly connected.
Every new car has some wireless technologies built into it. The
problem is that there are massive holes in how car companies
are securing these features against hackers. Only two of the 16
car companies who responded have developed any capability to
detect and respond to a hacking attack in real time. Thieves no
longer need a crowbar to break into your car. They just need a
smart phone. And they can do much worse than open the doors. It
is possible for wireless hackers to honk the horn, control the
steering, and even cut the brakes.
Today's cars are also collecting tremendous amounts of
personal driving information. Cars know where you are, where
you have been, how fast or slow you drive, and even the mileage
since your last oil change. This information can be used to
help drivers find their destinations, get more miles per
gallon, and drive more safely. But it can also jeopardize the
security and privacy of drivers, of families across our country
because there are currently no rules of the road to protect
driver privacy and security. There are currently no rules for
how to protect this data as it is being gathered, and most
customers do not even know that their information is being
gathered as they drive and that that information is being sent
to third parties who the drivers do not even know about.
And that is why in the coming weeks, I plan to introduce
legislation that directs the National Highway Traffic Safety
Administration and the Federal Trade Commission to establish
Federal standards to secure our cars and protect our drivers'
privacy. We need the electronic equivalent of seatbelts and
airbags to keep drivers and their information safe. We have
stickers on cars for safety. We have stickers on cars for fuel
economy standards. Well, we need a new set of minimum standards
to protect driver security and privacy in new vehicles that the
customer will know that the company built into that car or did
not build in. If they want a zero on the sticker, they can have
a zero. They can say it is too expensive. They can use the same
argument the auto industry used in this committee opposing
seatbelts and airbags, saying it is too expensive for the auto
industry. They can make that argument, but there will be a zero
on the dashboard so that people can see it.
These security performance standards should include a
requirement that all wireless access points in the car are
protected against hacking attacks, evaluated using penetration
testing, requirements that all collected information is
appropriately secured and encrypted to prevent unwanted access,
and a requirement that the manufacturers or third party feature
provider be able to detect, report, and respond to real-time
hacking events.
And the privacy standards should include transparency
requirements so drivers are made explicitly aware of data
collection, transmission, and use of driving information;
consumer control over that data; and a prohibition on the use
of the personal driving information for advertising or
marketing purposes unless you get permission from the driver.
New cars will also be evaluated by a rating system, a cyber
dashboard that informs customers about how well the vehicle
protects drivers beyond those minimum standards. This
information will be displayed on the label of all new vehicles
just as fuel economy is today.
Mr. Brookman, do you believe that every car should be
protected against hackers who can remotely access and take
control of your car?
Mr. Brookman. Yes.
Senator Markey. If a car does get hacked, Mr. Brookman, do
you think it would be good for there to be a system to detect
and alert the automaker or authorities that something is
happening?
Mr. Brookman. I do.
Senator Markey. Do you believe customers should be made
aware of the personal information their car is collecting about
them?
Mr. Brookman. Absolutely.
Senator Markey. Do you think that drivers should be given
control over their personal information and be allowed to
choose whether the data is collected about them or sold to
third parties?
Mr. Brookman. In most cases, yes.
Senator Markey. Do you believe that car companies should be
allowed to sell an owner-sensitive driving history to insurance
companies, data brokers, or anyone else?
Mr. Brookman. The consumers could obviously consent to
that, as they do today, but absent user control, no.
Senator Markey. Thank you.
So that is the point. A software that can be built in that
makes all these wonderful things possible by companies should
have the same geniuses in those companies with the capability
to build in a protection for security and privacy. All of a
sudden, they cannot figure out how to do that? All of a sudden,
they cannot figure out how to protect the consumer, their
privacy, their security? No. If you can figure out an algorithm
that sends information around the world in a blink of an eye,
you should be able to figure out an algorithm that also
provides consumers with the privacy and security which they
need as they are driving their vehicles.
I thank you, and I yield back the balance of my time.
Senator Cantwell. I am not sure there is any balance left.
But thank you.
[Laughter.]
Senator Markey. I am talking to the ether here.
Senator Klobuchar. That was a very generous offer.
[Laughter.]
Senator Markey. Thank you.
STATEMENT OF HON. MARIA CANTWELL,
U.S. SENATOR FROM WASHINGTON
Senator Cantwell. Thank you.
Well, gentlemen, I want to maybe come with a little bit
broader perspective. And I apologize too. We were in a Finance
markup.
One, I want to hear about some of the applications that you
think might actually financially benefit consumers in the
future. I mean, obviously, one of the issues here is, you know,
you go to the grocery store, the soup deli, and you get a
little punch. You buy so many soups or so many coffees. You get
a reward. So what is the reward going to be here? What are the
applications for loyalty or sharing non-personal data that
might benefit consumers?
Second, we are talking about applications for privacy today
on these devices just as we did for banking and health care and
other applications 15-20 years ago. So are we going to continue
to go by device, by sector on privacy laws, or do you think we
will get to a point where we need a brighter Larry Lessig kind
of privacy right issue? Do you see that happening?
And third, if you could comment on the importance of net
neutrality and the open Internet for keeping the application
and device economy going? Mr. Abbott?
Mr. Abbott. Sure. I will begin. Thank you, Senator.
So on your first topic, in terms of an example, I think one
clear benefit in one scenario is around thermostats and energy
conservation in the home, saving both cost to the consumer in
terms of the money spent on heating his or her home. And
oftentimes there are examples where the tuning of that
algorithm for heating your home on and off when you are away is
actually built from a population of users. So you are looking
at personalization but driven off a population that is de-
identified. It is really, really important.
Senator Cantwell. I think now because so many people look
at what is happening now in the identifiers or, like you were
talking about, precision agriculture and the data that has been
mined by the big companies, what individual consumers want to
know--I am a big hiker. I want to know, OK, I will tell
everybody I am a big hiker, but then I want you, if you are
going to be sending me these ads, whether it is REI or someone
else--I want a discount because I told you that. Because what
is happening now is everybody is figuring that out by somebody
else's mechanism and making benefit off of that. But I am
saying I am willing to share some of that, but I want to know
what my discount is going to be as part of that process and if
there are applications out there that are like that.
So I get the energy thing, and it is very, very important.
But I guess I am thinking a more up-front dialogue with the
consumer about this data.
Mr. Abbott. I think, Senator, we talked a couple times
before around the transparency need in this environment, and I
think that is particularly important because people immediately
oftentimes, when they think of data sharing, they are thinking
immediately of advertising. And in those cases, at least my
view is that user should be able to opt out based on a very
clear communication of how that data is being used.
In the same case, that user may opt out of sharing that
data around their thermostat in their home as well, but I would
imagine a lot of consumers, if they understand the benefit of
sharing, let us say, that data for their usage, we tend to
believe that that actually will be collectively in the best
interest of the consumer.
On the second question you had, in terms of sectors, we
certainly see that there is going to be likely policies around
privacy that vary by the use case. So certainly very different
in medical with, let us say, HIPAA compliance versus, let us
say, the Internet of Things of watering a lawn and actually
addressing, let us say, outdoor landscape issues.
Mr. Davis. Thank you, Senator. I think a great set of
questions.
We have seen so many examples over the past 12 to 18 months
of companies delivering either significant economic value or
new products and services as a result of the Internet of
Things. You know, you are asking for examples that are close to
consumers. You see companies that are taking smart city
information, so traffic information, air quality information,
and combining it with the availability of open parking spaces.
And those cities then are starting to look at ways in which
they can alter traffic flows during certain times of the day,
making that information available to us as consumers to say I
am not going to circle the block three times to find a parking
space. I am going to go where I know no one is currently
available. So I think there are a number of instances we are
already starting to see that will see benefit in addition to
productivity and greater efficiency in how the infrastructure
around this operates.
I would agree with Mr. Abbott. I think from a privacy
perspective, we are going to see differences by market sector.
There may be some areas again around city infrastructure where
we as consumers want to be able to have rich access to data,
and as that innovation evolves, it will offer new products and
services contrasted against health care or financial services
kinds of industry.
And then on your last point, I think we have seen the cost
of connectivity come down about 40X in the past 10 years, and
that is even without considering some of the new technologies
that are moving into the network infrastructure today that I
think will dramatically transform it over the next 10 years.
That availability of connectivity cost effectively is an
essential tenet to the Internet of Things.
Senator Cantwell. Thank you.
The Chairman. Thank you, Senator Cantwell.
Senator Blumenthal?
STATEMENT OF HON. RICHARD BLUMENTHAL,
U.S. SENATOR FROM CONNECTICUT
Senator Blumenthal. Thank you, Mr. Chairman, and thank you
for having this hearing on this profoundly important topic.
I have been in and out, and I apologize. I have not heard
all the testimony.
But I am very interested in the security issues, some of
them raised by Senator Markey so far as automobiles are
concerned, and I feel those same potential security threats
exist with regard to a wide variety of devices and appliances
that Americans use every day. And we have heard a lot about the
coming wave of connected devices. The FTC report estimates that
there will be 25 billion connected devices by the end of the
year and 50 billion by the end of 2020. And each of them
presents a potential attack surface for hackers and thieves.
Essentially as every one of us brings a new device into our
home, we create a vulnerability to those hackers and thieves to
use portals that cyber criminals can attempt to access for very
sensitive and confidential information.
So let me begin by asking Mr. Brookman, right now, the
majority of devices have no encryption. 70 percent of these
devices have no encryption on communications. The average is, I
think, 60 percent have insecure Web interfaces and 60 percent
have insecure software. What is the answer?
Senator Markey very eloquently indicated that if we can do
the algorithms that send messages around the world, we can have
algorithms that protect us. And it is not just automobiles but
every one of these devices. Is encryption the answer? What
would you advise? And I will open the same question to the
others.
Mr. Brookman. It is a really important question. It is a
hard question.
I think what Congress can do is I think they can pass an
affirmative data security requirement law. Already the Federal
Trade Commission thinks they can enforce reasonable security
requirements on companies under section 5. That authority is
being attacked in court by a few companies. I know Wyndham
Hotels is challenging the FTC. FTC says the unfairness law
requires you to use reasonable security. Wyndham Hotels says
no. It actually does not. So having that written down in law I
think would be useful.
I think having a process requirement for companies that
collect this sort of information should have to think about in
advance. I think institutions and people in general are really
bad at considering the very small chance of a very bad thing
happening. So having a process in place to think about that I
think would be really good because right now security is often
thought of as a cost. I am not going to get any profit from it.
But when it goes bad, it goes really bad.
I also think we probably need better breach notification
laws. You know, 47 states have it covering financial
information. I think we should expand those laws to include
online accounts like things that were compromised in the iCloud
incident, in the Sony incident. This is personal information
that people care a lot about. Internet of Things devices reveal
really sensitive stuff about us, and if my Smart TV there has a
camera and the microphone and my Samsung account gets
compromised, I want to know about it. Because there are
websites you can go to now where you can find thousands and
thousands, like 100,000 different webcams you can find online.
Just watch the live feed. Right? And I think if a company knows
they get compromised, they have an obligation to tell you about
it.
Senator Blumenthal. And notification is kind of a basic
minimum common denominator of what all of us should favor. If
somebody knows about a breach, there ought to be notification
to the person who is threatened by it.
Mr. Brookman. Absolutely, but I think that level of
notification, like if your e-mail account gets breached, is
only required--I think notification is only required in two
states today, Florida and California.
Senator Blumenthal. And imposing the costs of a breach on
the one responsible, the one who can do something about it,
also seems pretty basic.
Mr. Brookman. Yes, absolutely. I think that has been an
incredibly important thing for credit card fraud. It is not the
consumers who bear the cost of that. It is actually split
between the merchants and the banks. And I think because of
that, they have really strong incentives to get security right.
Senator Blumenthal. Any of the other members of the panel?
Mr. Thierer. Senator, briefly on the concerns you have
raised about security and those raised by Senator Markey as
well. Let us keep in mind a couple of general things.
First and foremost, no consumer is going to want to buy or
use a device, especially a car, that is fundamentally insecure.
Second of all, if firms do sell these sorts of devices that
are fundamentally insecure to the public, class action lawsuits
will fly and State AG's will be very active, as you know.
Senator Blumenthal. We are going to have to have a law on
which to sue.
Mr. Thierer. There are consumer protection laws already on
these things, and of course, there are other general torts----
Senator Blumenthal. And that goes back to Mr. Brookman's
point about establishing some legal standard that provides a
cause of action.
Mr. Thierer. But firms are already being sued under
existing causes of action, and firms understand that they are
never going to make any money if they sell devices that are
fundamentally insecure and do not protect----
Senator Blumenthal. If consumers know, number one, and
number two, if they can make informed decisions among products
that actually offer this kind of protection. The fact that
protection is offered as one of the features of a device or
automobile or appliance may not be decisive for a consumer who
is looking at a bunch of other features and colors and
attractions that may be part of the vehicle.
Any other members of the panel?
[No response.]
Senator Blumenthal. Thank you.
The Chairman. Thank you, Senator Blumenthal.
I think we are ready to wrap it up. I have got a couple of
letters I would like to put in the record, one from the
Consumer Electronics Association, the other from the
Telecommunications Industry Association and their report on
this subject, the Internet of Things.
[The information referred to follows:]
Consumer Electronics Association
Arlington, VA, February 10, 2015
Chairman John Thune and Ranking Member Bill Nelson,
U.S. Senate Committee on Commerce, Science, and Transportation
Washington, DC.
Dear Chairman Thune and Ranking Member Nelson:
On behalf of the Consumer Electronics Association (CEA) please
accept our views on the role of government and industry in the next
shift in innovation, the Internet of a Things (IoT).
CEA is the trade association representing the $223 billion U.S.
consumer technology industry. Every day, our more than 2,000 member
companies are busy innovating; introducing extraordinary products and
services and creating American jobs. At CEA, we work to advance
government policies that encourage innovation and job and business
creation.
CEA members are driving the growth of the IoT. Over 900 exhibitors
displayed IoT devices at the 2015 International CES. The convergence of
connected devices, cloud computing services, and powerful data
analytics will help drive near to mid-term economic growth.
While businesses have been using connected devices, the IoT is new
to the consumer market. Consumers are realizing its benefits, and our
interactions with these devices will become so routine that they will
go almost unnoticed. The IoT has profound potential to improve the
lives of our citizens. Within a few years, Americans will be able to
connect with their doctors remotely, share their health data and
information and better manage their diseases. Home automation systems
will enable consumers to manage their security systems, turn on
appliances, and maximize their home's energy efficiency, all from a
smart phone. Connected cars will eventually avoid collisions, but
before then will notify first responders of an accident immediately,
saving time and lives.
As this transition takes place, manufacturers and service providers
will be focused on making good decisions about the privacy and security
of information that devices collect and share. It is not only important
to their customers; it is vital for them as well, because consumer
adoption hinges on building trust. Devices that do not meet consumer
privacy and security expectations will fail.
Along with the new capabilities that emerging technologies create
also come questions about how to best protect users and promote
consumer practices. CEA and others are exploring these issues and how
best to ensure consumer privacy and security while enabling new
technologies to develop. We believe that industry-driven solutions are
the best way to promote innovation while protecting consumers.
We are just beginning to understand the benefits and challenges of
the IoT. In this dynamic and rapidly changing environment, governments
should exercise regulatory restraint. Overly prescriptive mandates or
technologically biased standards will stymie growth and become
outdated. If governments must act, such actions should be narrowly
tailored to address tangible harms without creating roadblocks for
future innovation.
Please recognize that the evolution of things comprise only part of
the value of the entire IoT ecosystem. Analytics software extracts
value and finds useful patterns in data collected by IoT devices. Data
analytics are a vital tool in understanding consumers' needs and uses
for products and allow companies to both improve current products and
create new ones that meet consumers' needs and desires. The Internet
runs on data. Restrictions on data collection may hurt new services
which provide personal and societal benefits. We ask policymakers to
tread carefully as they explore the potential and growth of the IoT.
The connected world of tomorrow will improve people's lives. CEA is
proud to represent the companies whose products and services largely
comprise the Internet of Things, and we look forward to working with
the Committee to ensure the government supports growth and innovation
through thoughtful policies.
Sincerely,
Gary Shapiro,
President and CEO.
CC: Members of the U.S. Senate Committee on Commerce,
Science, and Transportation
______
Telecommunications Industry Association
Arlington, VA, February 11, 2015
Hon. John Thune,
Chairman,
Committee on Commerce, Science, and Transportation,
United States Senate,
Washington, DC.
Hon. Bill Nelson,
Ranking Member
Committee on Commerce, Science, and Transportation
United States Senate
Washington, DC.
Dear Chairman Thune and Ranking Member Nelson:
The Telecommunications Industry Association (TIA), the leading
trade association for global manufacturers, vendors, and suppliers of
information and communications technology (ICT), writes to communicate
our support for your holding of a hearing this week to examine how
devices will be made smarter and more dynamic through Internet
technologies, and related policy implications. TIA and its member
companies believes that this increasingly connected world--commonly
referred to as an ``Internet of Things'' (IoT)--holds immense promise
for investment and innovation that will translate to wide societal
benefit and improvements in countless aspects of American consumers'
everyday lives.
At its most basic, the IoT is a label for an increasingly connected
future in which regular, everyday items--from household appliances to
cars to medical devices--are outfitted with sensors and connected to
the Internet to share their data. Viewed more broadly, the Internet of
Things will give rise to an entire ecosystem for interconnected
devices, objects, systems, and data all working together. In this new
world, most communications will be machine-to-machine (M2M), and there
will be a continuous exchange of information between devices, sensors,
computers, and networks.
While the potential for benefits in an IoT world are widely
recognized, there are a number of horizontal policy issues that impact
the IoT across markets and use cases, such as interoperability,
privacy, security, and spectrum availability, among others. With these
common threads running across IoT applications and use cases, a
significant danger exists that vertical regulations imposed in one
market will be inappropriate for another, which could lead to a
balkanized regulatory approach, stifling innovation and delaying or
degrading the economic and social potential of the IoT. To avoid this
scenario, IoT policy discussions should begin with a common horizontal
framework whenever possible, followed by tailoring for specific
vertical applications only as necessary.
TIA has developed Realizing the Potential of the Internet of
Things: Recommendations to Policy Makers, a white paper offering a
general framework for these IoT policy discussions, which is appended
to this letter. The recommendations in this white paper are applicable
across market sectors, and will help ensure that the full economic,
societal, and technological potential of the Internet of Things is
ultimately realized. In your February 11, 2015, hearing, we urge you
and other members of the Senate Committee on Commerce, Science, and
Transportation to consider the industry consensus recommendations in
this white paper, which include:
Ensure Competitive-and Technology-Neutrality: The IoT will
be driven by the convergence of exponentially-increasing
availability of connected devices in both the public and
private spheres, across markets. The ICT industry is continuing
to work towards realizing this continuum of connectivity, and
we urge policymakers to ensure a competitive-and technology-
neutral approach is taken to any activity that may impact the
deployment of the IoT.
The Role of Global, Open, Voluntary, and Consensus-Based
Standards: We urge for recognition of the importance of the use
of global voluntary, open, and consensus-based standards in the
IoT which will drive interoperability. These standards are
under development in a number of fora, including TIA, with
adoption being mainly driven through competition. Reliance on
these standardization efforts ensures that scientific expertise
from implementers in the private and public sectors is
reflected in approaches to the IoT. TIA further strongly
encourages recognition of the global consensus that ``open''
standards are market-driven and allow for the inclusion of
patented technologies, which are addressed through the use of
fair, reasonable, and non-discriminatory patent policies.
A Spectrum Policy that Enables the IoT: For the IoT to
succeed, the United States must employ a spectrum policy that
enables the wide range of products and services falling under
this concept. Such a spectrum policy prioritizes
predictability, flexibility, efficiency, and priority for
superior rights from harmful interference. Reallocation and
sharing efforts in the United States are crucial to the IoT's
success, and will also serve as a helpful use case for
regulators around the globe.
Utilize a Voluntary, Flexible, and Collaborative Approach to
Data Security Based on International Standards: When addressing
data security and resilience, TIA urges for policymakers to
ensure respect for competitive differentiation as a primary
driver of enhanced security solutions, rely on international
standards and best practices, fully leverage the public-private
partnership model, and to prioritize end-user awareness and
education.
Ensure Feasibility and Flexibility in Addressing Data
Privacy: The ICT industry prioritizes data privacy, and
policymakers should ensure that their activities are
technically feasible and do not impose barriers that would
discourage the use of existing and developing voluntary
solutions that typically emerge from standardization and best
practice development fora, as well as public-private
partnerships. Further, government should partner with the
industry on efforts to ensure informed uses of products and
services by consumers.
Thank you for your work to realize the potential of the IoT, and
TIA looks forward to working with you moving forward. For more
information, please contact Danielle Coffey at (703)-907-7734 or by e-
mail at [email protected].
Sincerely,
Scott Belcher,
President,
Telecommunications Industry Association.
Attached: TIA's Realizing the Potential of the Internet of Things:
Recommendations to Policy Makers
Attachment
Realizing the Potential of the Internet of Things
Recommendations to Policy Makers
The Internet of Things (IoT)--the term that has come to represent
an envisioned ecosystem of interconnected objects, people, systems, and
information assets working in concert with intelligent services to
allow them to process information of the physical and the virtual world
and react--represents an enormous market segment for information and
communications technology (ICT) manufacturers, vendors, and suppliers
that promises great societal benefit. Across segments impacted by the
IoT, policymakers are becoming increasingly interested in the impact of
the IoT as laws and regulations attempt to keep pace with innovation.
Below, the Telecommunications Industry Association (TIA) provides an
overview of the IoT's potential benefits and key recommendations for
policymakers that the ICT industry believes will ensure the realization
of the full benefits of the IoT.
The Potential for the Internet of Things
The ``Internet of Things'' is a broad label for the idea of an
increasingly connected future where regular, everyday items will be
fitted with sensors and the ability to connect to networks and transmit
data. Machine-to-machine (M2M) communications is a networking term that
describes the technology that enables devices to communicate with each
other. M2M is the key to the IoT because it encompasses the
technologies that are necessary to enable a successful IoT environment.
In the new M2M-driven world, there will be a continuous exchange of
information between sensors attached to connected, everyday items or
infrastructure, computers, and the networks. For the future, to work as
envisioned, the IoT must be designed to handle the transmission,
receipt, and processing of exponential amounts of data.
The penetration of Internet adoption, faster mobile connections,
and the availability of advanced computing capability in the form of
cheaper, smaller devices with significant processing power has
facilitated the growth of the IoT. The key element driving this market
is the ability to install inexpensive sensors in machines and devices
due to advances in sensor technology that have dramatically reduced the
cost, and may rely on geo-location technology, RFID, and many other
technologies. The increased availability of low-cost sensors will
expand the potential market for M2M, as cost issues in installing
sensors in devices are not expected to be significant. These sensors
collect real-time data and transmit it via the Internet or wireless
networks to computers, other machines, or to people. At the receiving
end, application software converts data to useful information. This
ability to collect and analyze significant amounts of data is the
aspect of the IoT that will be truly transformative. With low-cost
sensors allowing virtually any device to become M2M-capable, this new
data-centric information, consumers and businesses can make decisions
that are more efficient, allowing them to maximize time and cost.
In 2012, an estimated 8.7 billion things were connected worldwide
and projections show that with the new technological capabilities this
could grow to 50 billion by tehe year 2020,\1\ generating global
revenues $8.9 trillion by 2020.\2\ TIA projects the IoT will provide
significant impacts across service sectors, representing an emerging
market that is both unique and enormous. IoT will have a transformative
impact in a host of market sectors such as healthcare, transportation,
and energy, manufacturing, defense, and emergency services, such as:
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\1\ http://share.cisco.com/internet-of-things.html.
\2\ http://www.idc.com/getdoc.jsp?containerId=prUS24366813.
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Recommendation: Policymakers' Approach to the Internet of Things Should
Adhere to Competitive-and Technology-Neutrality Principles
As ICT manufacturers and vendors work to meet the needs of their
customers, competition will ultimately determine which products and
services succeed and fail in the market thereby fueling further
innovation. As businesses increasingly make investments in the IoT, an
utmost concern for policymakers should be to take a competitive-and
technology-neutral approach that respects the need for specific sectors
to utilize creative solutions, and for innovators to address the needs
of market segments. Policy makers should be wary of taking any action
that locks the market to a limited set of solutions when new
innovations are constantly being rolled out, some of which cannot be
predicted. No industry illustrates the need for flexibility and
technology neutrality more than the dynamic ICT industry.
Policymakers should also avoid any situation that would put a
government actor in a position to determine the future design and
development of technology. To do otherwise would set a precedent of
interference with the core innovation engine of the ICT sector,
negatively impacting the interoperability and standards that are needed
for IoT proliferation. Should a well-developed public policy case based
on the consensus of stakeholders find that regulatory action by is
needed, we strongly encourage policymakers to promote the competitive
dynamic by adopting regulations that are outcome-based, allowing
innovation to thrive while still achieving the regulatory requirement.
Recommendation: Policymakers Should Encourage and Leverage Voluntary,
Open, and Consensus-Based Standards
A major driver of the IoT will be the development of open,
voluntary, and consensus-based standards. Ongoing and future
standardization efforts that enable the success of the IoT will cut
across market segments, and will range from overarching guidelines to
specific technical criteria, ensuring increasing interoperability as
well as backwards-compatibility. Importantly, these standards are able
to dynamically adapt to needed changes based on the expertise across
stakeholders. These standards also reduce costs because manufacturers
and software developers can produce for multiple applications and
multiple end uses allowing for the benefits of economies of scale. TIA
expects the development of IoT to be driven by a global--not regional--
approach that is based on the development of open, voluntary, and
consensus-driven standards.
Numerous existing standardization efforts, as well as future
efforts, to address industry-consensus needs, will define and
contribute to the development of an interoperable IoT. TIA broadly
supports the ``multiple paths'' approach to the development of
international standards whereby healthy competition amongst the
different efforts will result in market-driven solutions that provide
customers with the best options. TIA houses such standardization
efforts, such as its Engineering Committee TR-50 M2M (Smart Device
Communications).\3\ Another example of such standardization activities
include oneM2M, an international partnership that is working to develop
technical specifications which address the need for a common M2M
Service Layer that can be readily embedded within various hardware and
software, among many others.
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\3\ Engineering Committee TR-50 M2M (Smart Device Communications)
is responsible for the development and maintenance of access agnostic
interface standards for the monitoring and bi-directional communication
of events and information between machine-to-machine (M2M) systems and
smart devices, applications or networks. These standards development
efforts pertain to but are not limited to the functional areas as
noted: Reference Architecture, Informational Models and Standard
Objects, Protocol Aspects, Software Aspects, Conformance and Testing,
and Security.
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Standardization is a form of economic self-regulation that can
relieve the government of the responsibility for developing detailed
technical specifications while ensuring that voluntary, consensus
standards serve the public interest, saving resources that can be used
to serve the public interest in other ways. TIA urges policymakers to
defer to these standards as they are developed and come to define the
IoT. By taking this approach, policymakers can use these standards as
valuable sources of scientific and technical information developed with
the assistance of private sector experts, allowing for agencies to use
standards as a resource for advanced technical information without
first-hand independent knowledge of research in the area.
Policymakers should avoid any approaches that would redefine ``open
standards'' in a way that equates patented technology with ``free'' (as
in without payment) or ``free to use freely'' (as in without payment
and without any restrictions). These kinds of redefinitions would
undermine the rights of those who have invested in the development of
standardized technologies that enable the functioning of countless
sectors of the economy. Technological capabilities and innovations most
often result from substantial investments in research and development
thus, if patent holders in standards-setting activities are expected to
give away or waive their patent rights there are likely to be
significant adverse results, including that technology leaders will
reduce or cease participation in voluntary standards-related
activities; or that individuals and organizations will not invest in
the development of next-generation technology in the technical areas
subject to standardization, creating innovation ``dead zones'' in those
areas.
Recommendation: Policymakers Should Employ Regulatory Approval
Approaches That Are Globally Harmonized, Transparent, and
Streamlined
The ICT industry is one of the most far-reaching and competitive
global ICT segments of the global economy. Across jurisdictions, the
varying requirements that a ICT and presents unique challenges to
ensuring governments, consumers, and other stakeholders in a diverse
marketplace have the ability to readily determine whether a device has
been properly certified, and to obtain additional information about a
device as efficiently as possible. With the drastic increase in the
amount of connected things in the IoT, it will be very important for
policymakers to work to ensure that regulatory approval processes are
transparent and efficient. We urge policymakers to methodically examine
their regulatory device approval mechanisms to ensure that these
systems are as globally-harmonized, predictable, transparent, and
reliable as possible. This will promote the ``build once, sell
anywhere'' principle which drastically reduces regulatory costs, time-
to-market, and cost to end users throughout the business and consumer
markets.
For example, policymakers are strongly urged to consider permitting
the use of Supplier Declarations of Conformity (SDoCs) for trusted
classes of products as an alternative means by which an ICT
manufacturer may demonstrate compliance with regulatory rules to
streamline the process ICT manufacturers must go through to get
products to market. The benefits of such an allowance include
flexibility and objective treatment for manufacturers in where to have
their products tested, high compliance levels, and lower administrative
costs. The appropriate allowance of SDoCs would also lend to the mutual
recognition agreements (MRAs) among trading partners and widespread
recognition of another country's conformity assessments, further
reducing associated costs. Based on a long-standing record of
compliance, many technologies have proven to hold very low risk exists
for violating the technical rules primarily because they are built to
meet consensus technical standards, allowing the policymakers to be
assured that they can take this step to allow for more rapid
availability of products into the marketplace at reduced cost to
stakeholders, including consumers.
As a further example, the use of physical markings or labels have
played a key role in providing this important information, but the
continuous evolution of industrial design and multiple regulatory
environments has led to increased costs and difficulty in ensuring all
relevant markings or labels are affixed in an efficient and convenient
manner for the user of the device. An effective solution to this
problem is the non-exclusive use of electronic labeling, which allows
consumers and other users access to easily readable and prominently
displayed information about each device. This information should
include required regulatory markings and other important information
including proper device care, electronic recycling programs, and
warranties. Already, through close work with TIA, several key
jurisdictions have allowed this approach.
Recommendation: Utilize a Spectrum Policy that Maximizes a Continuity
of Connectivity
The IoT will rely significantly upon maximizing continuity of
connectivity. With the world rapidly becoming wireless, establishing an
appropriate spectrum policy is therefore essential to ensure that the
IoT will be successful. In commercial communications networks, mobile
data use is exploding as consumers embrace smartphones, tablets and
other devices. Wireless connectivity is becoming the way in which
consumers access the Internet from technologies such as LTE, Wi-Fi and
satellite. Governments worldwide also have a significant dependency on
spectrum for both communications and non-communications purposes.
Meanwhile, radio technologies themselves are changing, placing new
demands on spectrum allocations, and raising new operational and
regulatory challenges. At the moment, there are several new or emerging
technologies which are competing in the marketplace to serve the
Internet of Things. These include Near Field Communication (``NFC''), a
standards-based short-range wireless technology widely linked with
mobile payments. More recently, Bluetooth Low Energy (``Bluetooth LE''
or ``BLE'') has been built specifically to consume small amounts of
energy; it is also viewed as a good candidate for small data packets
sent from wearable computing such as smart watches and fitness
trackers. Traditional Wi-Fi is also expected to play a key role due to
its low cost and ubiquity in the marketplace. Indeed, the future
Internet of Things will likely be based on heterogeneous networks
whereby devices can sequentially or simultaneously use different
network technologies.
As a result of these dynamic changes, spectrum allocations and uses
that may have sufficed during the 20th century are increasingly under
stress. Unfortunately, policymakers are no longer writing spectrum
policy on a blank sheet of paper, and virtually all spectrum suitable
for mobile service has been allocated. For that reason, TIA believes
that any spectrum policy must reflect the following principles to allow
the use of radio spectrum to evolve to meet changing demand and promote
innovation:
Predictability. Spectrum allocations need to be predictable.
Identifying demand and changes in demand, understanding the
pace of radio technology development by platform, and long term
planning are all essential parts of a spectrum policy that can
provide predictability for both commercial and government
users.
Flexibility. For commercial allocations, flexible use
policies consistent with baseline technical rules that are
technology-neutral have proven to be the best approach. Any
government allocations of spectrum should be managed to ensure
better usage of scarce spectrum resources for all users.
Efficiency. Policies should encourage more efficient use of
spectrum where technically and economically feasible. In
particular, policies should prioritize global harmonization and
coordination or spectrum allocations;\4\ protection from
harmful interference for licensed uses; adjacency to similar
services; and allocations of wide, contiguous blocks of
spectrum. Cleared, exclusively licensed spectrum allows for the
most efficient and dependable use of spectrum for commercial
mobile broadband deployment.
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\4\ Globally harmonized spectrum is essential to ensure the
economies of scale that will facilitate the large-scale deployments
necessary to fully utilize the promise of new technologies. Global
harmonization also facilitates roaming, which is an important part of
creating the ``continuity of connectivity'' required for the Internet
of Things.
Priority. In cases where spectrum sharing is technically and
economically possible, policies must advance good engineering
practice to best support an environment that protects those
---------------------------------------------------------------------------
with superior spectrum rights from harmful interference.
Furthermore, spectrum sharing represents a means for increasing the
efficient use of spectrum and to help alleviate challenges in spectrum
scarcity, and could eventually prove critical towards enabling the
continuity of connectivity that is so critical for the Internet of
Things. In addition to ongoing efforts underway to realize successful
sharing regimes, other promising efforts include the deployment of
Authorized Shared Access (ASA)/Licensed Shared Access (LSA) approaches,
a ``third way'' spectrum management system that combines elements of
traditional ``command and control'' spectrum management with
geolocation technology, e.g., by providing users with a ``token'' to
use spectrum at certain times/places. ASA/LSA approaches show great
promise as they provide a means to ensure ongoing viability of
incumbent uses by creating a policy environment that enables compatible
operations with new uses while also providing secondary users a means
to gain access to spectrum that is already licensed to one or more
primary users, but may be under-utilized or capable of supporting
multiple uses.
IEEE P2413--group recently formed, designed to aggregate technical
standards from various other IEEE efforts.
IEEE 802.3 working group (Ethernet)--two efforts to look at reduced
twisted pair. High data rate, includes power for applications where
batteries are difficult, lower cost vs. older 4-pair technologies
(e.g., Cat 5 cabling). This would be useful for industrial
applications, deploying lots of parking space sensors, etc.--a smarter
replacement for low-voltage wiring. There are two efforts underway--one
using 100MHz, one using 1GHz--over single twisted pair.
Mesh networks--Zigbee isn't just used for home standards, but also
industrial applications. There are also several other mesh network
protocols that could/should be mentioned in the paper.
Recommendation: Utilize a Voluntary, Flexible, and Collaborative
Approach to Data Security based on International Standards
With the IoT naturally involves an ever-increasing number of
``things'' being connected throughout society, new and evolving
security issues will emerge as challenges. Already, ICT members
consider security issues throughout the design process, and this
approach will continue to be employed to mitigate threats in the IoT.
TIA urges policymakers to regard the IoT as an opportunity for greater
security, since using a network approach that is paired with proper
risk management techniques, IoT devices can be made to work together to
produce comprehensive, actionable security intelligence in near real-
time. These approaches and risk management techniques are by and large
driven by market demands, typically manifested through industry-driven
best practices and standards developed in open, voluntary, and
consensus-based fora.
To support high levels of security and resilience in the IoT, TIA
urges policymakers to be guided by the following principles:
Respect competitive differentiation and business continuity. As ICT
manufacturers and vendors work to meet the needs of their customers,
less secure products that are more vulnerable to cyber attacks will
naturally be less attractive in the market. Today, this drives ICT
manufacturers and vendors to strive to make their products and services
less susceptible to cyber attacks, and this is expected to increase
dramatically.\5\ The degree to which an organization's performance
goals are used to ensure their ability to provide essential services
while managing cybersecurity risk will be dependent upon the specific
needs of their sector and organization. However, in the ICT sector,
manufacturers work with the range of organizations they supply to
ensure that performance goals of those organizations are reflected in
the ICT they purchase. The flexibility to innovate and the use of
voluntary, consensus-based standards are both key enablers of this
capability. There is no ``one size fits all'' solution to securing the
IoT. The reach of the IoT across segments of the economy that will have
varied levels of risk illustrates this.
---------------------------------------------------------------------------
\5\ http://www.gartner.com/newsroom/id/2828722.
---------------------------------------------------------------------------
Rely on international standards. Numerous standards, guidelines,
best practices, and tools are used by ICT manufacturers and the owners
& operators of telecommunications networks to understand, measure, and
manage risk at the management, operational, and technical levels. TIA
urges policymakers to ensure that their approaches to the IoT reflect
the priority for the development of internationally-used standards and
best practices. The global nature of the ICT industry necessarily
requires a global approach to address cybersecurity concerns, and a
global supply chain can only be secured through an industry-driven
adoption of best practices and global standards. Country-specific
standards should be avoided, as they would ignore the benefits of
global harmonization, restricting trade in telecommunications equipment
imported to, or exported from, other countries that are part of the
global trading system.
Utilize the successful public-private partnership model. Public-
private partnerships are an effective tool for collaboration on
addressing current and emerging threats, and will serve as a key
incentive to encourage businesses to make investments in cybersecurity
that are appropriate for the risks that they face. The voluntary,
public-private model is also able toevolve in response to changes in
threats and the risk environment. As both the complexity and number of
attacks grow, it will be critical that policymakers leverage and
augment, or create where necessary, public-private partnerships.
Increase end-user education. This is a crucial aspect to improving
cybersecurity in the IoT, as many cyber vulnerabilities are already
known and related attacks are relatively easily preventable.
Policymakers should lend focus to efforts which inform end users across
the business and consumer communities of proper steps to take to ensure
that proper cyber ``hygiene'' is impressed.
Recommendation: Ensure Flexibility and Feasibility in Addressing Data
Privacy
The ICT industry recognizes privacy as a priority in the success of
the IoT, and understands the wide range of related concerns held by
policymakers. Industry believes that IoT services must adopt principles
similar to those that have worked successfully on the Internet to
enable informed consumer choice: transparency about what data will be
collected, how it will be used, and who will have access. We urge
regulators not to adopt privacy regulations that would make it
impossible for IoT systems to flourish, as full consumer benefits will
require that data be retained and used in ways not currently
contemplated, even by IoT innovators themselves. Instead, industry
should be allowed to adopt best practices which can be responsive to
fast-paced developments and that allow individual users to manage their
level of data sharing. Policymakers are encouraged to ensure that their
activities do not impose barriers that discourage the use of the use of
existing and developing voluntary efforts to address privacy concerns
that are developed through standardization, best practice activities,
and public-private partnerships. Internationally, policymakers should
work towards interoperable privacy systems to avoid unnecessary
impediments to the cross-border flow of information, which will be
critical to the growth and functionality of the IoT.
Policymakers should avoid implementing privacy obligations which
are ambiguous, overly burdensome, or technically infeasible. The effect
of adopting such policies would be to decrease industry's incentive to
invest in IoT opportunities due to resulting regulatory uncertainty and
unnecessarily higher risk. Industry members exploring IoT opportunities
should have certainty and the ability to determine the most appropriate
method to meet any regulatory requirements. This approach would best
promote the development of the IoT as it is a fluid and quickly
evolving market opportunity.
In addition, policymakers may serve an important role in ensuring
IoT data privacy through public awareness efforts. Through ``cyber
hygiene'' education efforts, many breaches that would result in a loss
of data privacy can be avoided. In addition, a more informed end-user
is less likely to make voluntary decisions with IoT devices and
services that allow data usage beyond their individual comfort.
Conclusion
The IoT represents an immense opportunity for the improvement of
the lives of citizens around the globe, across use cases. By ensuring
that the path taken forward is collaborative and pro-innovation
consistent with the above, TIA believes that policymakers can help
these benefits materialize rapidly.
About TIA
The Telecommunications Industry Association (TIA) represents
manufacturers and suppliers of global communications networks through
standards development, policy and advocacy, business opportunities,
market intelligence, and events and networking. TIA enhances the
business environment for broadband, mobile wireless, information
technology, networks, cable, satellite and unified communications.
Members' products and services empower communications in every industry
and market, including healthcare, education, security, public safety,
transportation, government, the military, the environment, and
entertainment. Visit tiaonline.org for more details.
TIA is accredited by the American National Standards Institute
(ANSI) and is a proud sponsor of ANSI's Standards Boost Business
campaign. Visit www.standards
boostbusiness.org for details.
TIA Policy Committees & Divisions
TIA conducts its policy and government affairs Innovation Agenda
through membership committees. A TIA Board Member serves as TIA's
Policy Chair and represents TIA's Government Affairs activities on the
TIA Board of Directors.
TIA's Communications Research Division, User Premises Equipment
Division, and Wireless Communications Division are also represented on
the TIA Board of Directors. The Chairs and TIA Staff for each
committee, working group and division can be found at http://
www.tiaonline.org/policy/tia-policy-committees-divisions.
For more information on TIA's Government Affairs activities, please
contact James Reid, Senior VP of Government Affairs, at
[email protected].
The Chairman. We will keep the hearing record open for a
couple of weeks.
Senator Booker. Mr. Chairman?
The Chairman. Yes, sir.
Senator Booker. Along with Senator Rubio's staff, we would
like to--and while you were out, I was talking about the
spectrum availability and how that potentially could be
constricting to American innovation if we do not find ways to
meet the growing demands that innovation is going to bring
about, not to mention the millions of people globally every
month that are coming online.
So I would like to submit for the record a series of
statements in support of Senator Rubio and my WiFi Innovation
Act, which aims to make more spectrum available. I would love
to encourage you to potentially hold a hearing just on that
issue that they brought up as something to be of concern.
The Chairman. We will certainly make that a part of the
record and look forward to having a hearing on the subject,
which is an important one for all the reasons that have been
mentioned today.
[The information referred to follows:]
For Immediate Release
CEA Praises Bipartisan, Bicameral Congressional Effort to Expand Wi-Fi
Arlington, Va., February 10, 2015--The following statement is
attributed to Gary Shapiro, president and CEO of the Consumer
Electronics Association (CEA), regarding today's introduction of the
House and Senate Wi-Fi Innovation Act by Senators Marco Rubio (R-Fla.),
Cory Booker (D-N.J.) and Representatives Bob Latta (R-Ohio), Anna Eshoo
(D-Calif.), Darrell Issa (R-Calif.), Doris Matsui (D-Calif.) and Suzan
DelBene (D-Wash.):
``We enthusiastically applaud congressional members for taking
a bipartisan and bicameral approach toward increasing speeds
and easing congestion for Wi-Fi by identifying new spectrum for
unlicensed uses.
``Unlicensed spectrum is a catalyst for innovation, how we get
online through Wi-Fi and how our wireless carriers manage the
ever-growing traffic on their networks. And unlicensed spectrum
is a boon to the U.S. economy, generating $62 billion a year.
``A look around the show floor at the 2015 International CES
confirmed: from smart homes and unmanned systems to streaming
content and wearables, many of today's consumer technology
innovations are mobile-first, connected to the Web and to one
another.
``The Federal Communications Commission has already committed
to freeing up underutilized high-frequency spectrum in the
lower 5 GHz band for Wi-Fi. And the study initiated by this
legislation should empower the FCC to explore putting even more
of this spectrum to use for faster Wi-Fi.''
Need help imagining life without unlicensed spectrum? Click here
for a look at A Day Without Unlicensed Spectrum, an animated video
produced by CEA.
About CEA: The Consumer Electronics Association (CEA) is the
technology trade association representing the $223 billion U.S.
consumer electronics industry. More than 2,000 companies enjoy the
benefits of CEA membership, including legislative and regulatory
advocacy, market research, technical training and education, industry
promotion, standards development and the fostering of business and
strategic relationships. CEA also owns and produces the International
CES--The Global Stage for Innovation. All profits from CES are
reinvested into CEA's industry services. Find CEA online at CE.org,
DeclareInnovation.com and through social media.
______
CTIA-The Wireless Association Statement on the Reintroduction of the
Wi-Fi Innovation Act in the Senate
WASHINGTON, February 10, 2015--The following statement should be
attributed to CTIA-The Wireless Association Vice President of
Government Affairs Jot Carpenter:
``CTIA appreciates Senator Rubio's and Senator Booker's leadership
in pushing to make additional spectrum available for unlicensed use.
Freeing additional spectrum in the 5 gigahertz band will help meet
Americans' increasing demand for mobile Internet access and support the
growth of the Internet of Things.''
CTIA-The Wireless Association (www.ctia.org) is an international
organization representing the wireless communications industry.
Membership in the association includes wireless carriers and their
suppliers, as well as providers and manufacturers of wireless data
services and products. CTIA advocates on behalf of its members at all
levels of government. The association also coordinates the industry's
voluntary best practices and initiatives, and sponsors the industry's
leading wireless tradeshow. CTIA was founded in 1984 and is based in
Washington, D.C.
Twitter: @ctia--Blog: http://ctia.it/Na6erv--Facebook: http://ctia.it/
LCm4Nn
LinkedIn Group: http://ctia.it/Na6cA2--Google+: http://ctia.it/12PfCrO
Press Contact: Amy Storey, [email protected],
______
High Tech Spectrum Coalition
FOR IMMEDIATE RELEASE
Contact: Jared Weaver
(202) 548-2308
[email protected]
www.hightechspectrumcoalition.org
High Tech Spectrum Coalition (HTSC) Commends Introduction of the
Wi-Fi Innovation Act
Washington, D.C. February 10, 2015--The members of the High Tech
Spectrum Coalition (HTSC) commend Senators Rubio and Booker and
Representatives Latta, Eshoo, Issa and Matsui for reintroducing the Wi-
Fi Innovation Act. This important bill will continue the expansion of
unlicensed spectrum use in the 5 GHz band. We are optimistic that
sharing at 5.9 GHz will be successful and lead to greater and more
efficient use of the band. As the need for more spectrum is ever more
evident, it is imperative that we continue to explore new spectrum
bands to help satisfy consumer demand for mobile broadband. We
appreciate their recognition of the need to maximize this finite
resource. Spectrum is the single most critical element for the
continued growth of our Nation's Internet economy. We look forward to
working with Congress to find additional bands of spectrum for wireless
broadband use in order for consumers to continue to see the benefits of
innovation and connectivity.
______
Bipartisan Wi-Fi Innovation Act Introduced in the House and Senate
By Vince Jesaitis (ITI)
Spectrum may not be a household word, but we rely on it every day
for the connected devices like smartphones and portable devices that
are a central part of our lives. Spectrum is a term used to describe
the radio frequencies that all wireless communications use. And, as
there are only so many radio frequencies, spectrum is a limited and
valuable resource. As the Internet of Things (IoT) connects everyday
devices from household appliances and our cars, to industrial systems
and commercial transportation fleets, more spectrum will be required
and spectrum will become an even more important issue for connectivity
and future innovations. ITI has long held the view that we must make
efficient use of all spectrum to meet our Nation's growing demand.
The bipartisan Wi-Fi Innovation Act bills introduced today in the
Senate by Sens. Cory Booker (D-NJ) and Marco Rubio (R-FL); and in the
House of Representatives by Reps. Bob Latta (R-OH), Anna G. Eshoo (D-
CA), Darrell Issa (R-CA), Doris Matsui (D-CA), and Suzan DelBene (D-
CA); would help utilize and manage the upper 5GHz band of spectrum more
efficiently to meet the growing demand for bandwidth from connected
vehicles and next generation Wi-Fi.
The Wi-Fi innovation Act would direct the Federal Communications
Commission (FCC) to facilitate technical and engineering analysis to
determine how unlicensed Wi-Fi use can coexist with connected vehicle
technology without jeopardizing safety. Moreover, with this bill, we
are optimistic that if the significant technical expertise and input
from many of our member companies is included to advance the technical
process, successful sharing of the upper 5 GHz band is feasible.
The 5 GHz band offers tremendous opportunity to expand unlicensed
Wi-Fi use and features, building on the benefits tens of millions of
Americans already use to connect in their homes, at work, and in public
spaces across the country. We commend these lawmakers for working
together in a bipartisan fashion to introduce this proposal, and look
forward to working with them to encourage their colleagues to support
these bills to benefit the American public and our economy.
About ITI. The Information Technology Industry Council (ITI) is the
global voice of the tech sector. As the premier advocacy and policy
organization for the world's leading innovation companies, ITI
navigates the relationships between policymakers, companies, and non-
governmental organizations, providing creative solutions that advance
the development and use of technology around the world. Visit
www.itic.org to learn more. Follow us on Twitter for the latest ITI
news @ITI_TechTweets.
Duncan Neasham,
Director of Communications,
Information Technology Industry Council (ITI).
www.itic.org
Follow ITI on TWITTER: @ITI_TechTweets
______
http://www.pcia.com/pcia-press-releases/700-pcia-commends-senators-
rubio-booker-for-introducing-wi-fi-innovation-act/
PCIA Press Releases
PCIA Commends Senators Rubio, Booker for Introducing
Wi-Fi Innovation Act
February 10, 2015/Alexandria, Virginia, The head of PCIA--The
Wireless Infrastructure Association today commended Senators Marco
Rubio (R-FL) and Cory Booker (D-NJ) for introducing bipartisan
legislation aimed at allocating greater spectrum use for wireless
broadband and bringing leading-edge wireless service to low-income
neighborhoods.
``Senators Rubio and Booker should be commended for recognizing
that the U.S. faces both an unprecedented `wireless data crunch' and a
`digital divide' that puts lower-income Americans at a disadvantage,''
said Jonathan Adelstein, PCIA's President and CEO. ``Their Wi-Fi
Innovation Act would allocate more spectrum use for the rapidly growing
wireless industry while also eliminating barriers to and creating
incentives for Wi-Fi deployment in low-income neighborhoods. Senators
Rubio and Booker are taking a crucial bipartisan step toward the
adoption of policies that will ease the wireless data crunch and help
bridge the digital divide,'' Adelstein said.
The Rubio-Booker bill directs the FCC to conduct testing to gauge
the feasibility of opening the 5850-5925 MHz band to unlicensed use. It
also urges that the 5 GHz band be explored for Intelligent
Transportation and other ``shared'' purposes. Finally, it establishes a
study aimed at reducing the barriers to Wi-Fi deployment in low-income
rural and urban areas and encourages the FCC to evaluate incentives and
policies that could enhance wireless adoption.
``The demand for wireless mobile data is continuing to explode.
Yes, we need to allocate more spectrum--but that only addresses a
fraction of what we need to be doing to spur greater wireless
infrastructure deployment. PCIA will continue to work hand-in-glove
with Congress, the FCC, and other federal, state, and local
policymakers to embrace policies that facilitate the construction and
upkeep of a world-class wireless broadband network,'' Adelstein said.
PCIA--The Wireless Infrastructure Association is the principal
organization representing the companies that build, design, own and
manage telecommunications facilities throughout the world. Its over 200
members include carriers, infrastructure providers, and professional
services firms.
______
For Immediate Release
February 10, 2015
Public Knowledge Applauds Congress for Introducing Wi-Fi Innovation Act
Today, Members of Congress introduced bipartisan, bicameral
spectrum legislation that seeks to expand the availability of
unlicensed spectrum. Senators Marco Rubio (R-FL) and Cory Booker (D-NJ)
reintroduced the Wi-Fi Innovation Act, while Representatives Robert
Latta (R-OH), Anna Eshoo (D-CA), Darrell Issa (R-CA), and Doris Matsui
(D-CA) introduced companion legislation in the House.
The Wi-Fi Innovation Act directs the Federal Communications
Commission to investigate ways to open the 5GHz band to unlicensed use
and recognizes the need to balance the importance of developing
Intelligent Transportation and incumbent licenses in the 5GHz band. The
legislation also seeks to increase innovation and economic progress by
establishing a study to examine Wi-Fi deployment in low-income
communities.
The following can be attributed to Martyn Griffen, Government
Affairs Associate of Public Knowledge:
``The Wi-Fi Innovation Act legislation provides an excellent
example of how bipartisan legislation on spectrum issues can
work. Public Knowledge supported the Rubio-Booker language when
it was introduced in the 113 Congress and we are pleased to see
it reintroduced in the 114 Congress. This bill provides a road
map for agencies that respects both the need for wireless
capacity for safer smart cars and the need for more open
spectrum for the Internet of Things.
``Furthermore, we are pleased that this legislation addresses
broadband access in underserved areas by establishing an FCC
study to examine Wi-Fi deployment in low-income communities and
the barriers preventing deployment of wireless networks in low-
income neighborhoods. As Americans become increasingly more
connected through mobile devices and the Internet of Things,
our wireless spectrum demands increase.
``We applaud Senator Booker, Senator Rubio, Congresswoman Eshoo
and other co-sponsors for taking steps toward addressing this
growing concern, while working to expand Internet access to
those in underserved areas.''
You may view our full release here.
Public Knowledge is a Washington D.C.-based public interest group
working to defend consumer rights in the emerging digital culture. More
information is available at http://www.publicknowledge.org
______
National Cable & Telecommunications Association
FOR IMMEDIATE RELEASE
February 10, 2015
CONTACT: Brian Dietz/Joy Sims
202-222-2350
Statement of NCTA Regarding Introduction of the Wi-Fi Innovation Act
``We congratulate Senators Rubio and Booker on the introduction of
Wi-Fi Innovation Act which would secure more unlicensed spectrum in the
5 Ghz band. With more and more Wi-Fi-enabled devices coming to market
everyday, consumers will continue to need additional spectrum to use
these tools. This bipartisan legislation provides a clear path forward
for properly allocating a finite and increasingly necessary public
resource and continues to establish the U.S. as a global leader in
public Wi-Fi availability, speed, and scale.''
NCTA is the principal trade association for the U.S. cable
industry, representing cable operators serving more than 90 percent of
the Nation's cable television households and more than 200 cable
program networks. The cable industry is the Nation's largest broadband
provider of high-speed Internet access, serving more than 54 million
customers, after investing $230 billion since 1996 to build two-way
interactive networks with fiber optic technology. Cable companies also
provide state-of-the-art digital telephone service to more than 28
million American consumers.
______
FOR IMMEDIATE RELEASE
CONTACT: Farrah Kim, [email protected]
TIA Applauds the Re-Introduction of the Wi-Fi Innovation Act
Arlington, Va. (February 10, 2015)--The Telecommunications Industry
Association (TIA), the leading association representing the
manufacturers and suppliers of high-tech communications networks, today
applauded Sens. Rubio (R-FL) and Booker (D-NJ) for re-introducing the
bipartisan Wi-Fi Innovation Act.
The Wi-Fi Innovation Act would require the Federal Communications
Commission (FCC) to move forward on testing for unlicensed operations
in the 5.9 GHZ band. As the sponsors noted, the Wi-Fi Innovation Act
aims to provide more unlicensed spectrum use in order to bolster
innovation, spur economic development, and increase connectivity.
TIA CEO Scott Belcher commented, ``The U.S. is in vital need of
more spectrum in order to meet unprecedented and growing demand for
video, data, Wi-Fi connectivity and more. The Innovation Act identifies
meaningful steps to help alleviate the spectrum crunch that threatens
the advancement of global communications. TIA supports efforts to work
towards a workable spectrum sharing solution for the 5.9 GHz band, and
agrees that sharing proposals need to be thoroughly tested, leading to
the creation of a record that can be the basis for regulatory action.
We thank Senators Rubio and Booker for their sponsorship of the Wi-Fi
Innovation Act and look forward to working with them on this important
legislation.''
Follow TIA on Facebook, LinkedIn, Twitter, YouTube, TIA NOW and
Google+ for the latest updates.
About TIA
The Telecommunications Industry Association (TIA) represents
manufacturers and suppliers of global communications networks through
standards development, policy and advocacy, business opportunities,
market intelligence, and events and networking. TIA enhances the
business environment for broadband, mobile wireless, information
technology, networks, cable, satellite and unified communications.
Members' products and services empower communications in every industry
and market, including healthcare, education, security, public safety,
transportation, government, the military, the environment, and
entertainment. Visit tiaonline.org for more details.
TIA is accredited by the American National Standards Institute
(ANSI), and is a proud sponsor of ANSI's Standards Boost Business
campaign. Visit www.standardsboostbusiness.org for details.
Farrah Kim,
Rational 360.
______
Wi-Fi Alliance welcomes introduction of Wi-Fi Innovation Act
Austin, Texas, February 10, 2015--Today in the United States
Congress, Senators Rubio (R-FL) and Booker (D-NJ) introduced the Wi-Fi
Innovation Act, with a House companion measure co-sponsored by
Representatives Latta (R-OH) and Eshoo (D-CA). The bill directs the
U.S. Federal Communications Commission (FCC) to work with the U.S.
Department of Transportation (DoT) and National Telecommunications and
Information Administration (NTIA) to closely study the impact of
opening the 5.9 GHz spectrum band for use by a wide array of devices.
Wi-Fi Alliance welcomes the proposed U.S. legislation and urges
lawmakers to take action swiftly to advance innovation in unlicensed
spectrum.
``We applaud this group of Senators and Representatives for their
recognition of the value of unlicensed spectrum in enabling innovation
and economic benefits today,'' said Edgar Figueroa, president and CEO
of Wi-Fi Alliance. ``It's well understood that more unlicensed spectrum
is critical to meet our society's ongoing requirements for
connectivity.''
Unlicensed spectrum has created significant economic opportunities
in the U.S. and worldwide. Recent studies assess the worldwide economic
value of Wi-Fi to have been well above $200 billion in 2013, and with
growth in Wi-Fi offloading, sales of Wi-Fi equipment, and other drivers
of economic activity related to unlicensed spectrum usage, the economic
benefit is predicted to exceed $500 billion in 2017.
The proposed legislation would require the FCC to develop spectrum-
sharing tests to examine how devices may use the 5.9 GHz spectrum band
in the U.S. without negative impact to other users, and to open the
spectrum to Wi-Fi devices, unless it identifies a compelling reason not
to do so.
``Although this spectrum was allocated fifteen years ago for future
use in vehicular communications, it remains underutilized today,''
continued Figueroa. ``Wi-Fi includes a number of proven mechanisms that
make it capable of sharing spectrum with other technologies, and these
mechanisms can be adapted to enable shared use of the 5.9GHz band. We
are eager to work closely with the FCC, DoT and NTIA to provide
technical expertise and industry feedback during their examination of
the issue.''
Please visit www.wi-fi.org for more information on the various Wi-
Fi Alliance technologies and certification programs available today and
in development.
About Wi-Fi Alliance
www.wi-fi.org
Wi-Fi Alliance is a global non-profit industry association--our
members are the worldwide network of companies that brings you Wi-Fi.
The members of our collaboration forum come from across the Wi-Fi
ecosystem and share a common vision of connecting everyone and
everything, everywhere. Since 2000, the Wi-Fi CERTIFIED TM
seal of approval designates products with proven interoperability,
industry-standard security protections, and the latest technology. Wi-
Fi Alliance has certified more than 23,000 products, delivering the
best user experience and encouraging the expanded use of Wi-Fi products
and services in new and established markets. Today, billions of Wi-Fi
products carry a significant portion of the world's data traffic in an
ever-expanding variety of applications.
Senator Booker. Thank you, sir.
The Chairman. And thank you and Senator Rubio for your work
on it.
All right. If there is nothing else, we will keep the
record open, and witnesses are requested to submit written
answers to the Committee as soon as possible to questions for
the record.
I want to thank the witnesses today. It has been a great
panel, a lot of good discussion and back-and-forth on a subject
of just enormous importance to our economy. We want to make
sure that when we approach this issue, we get it right from a
public policy standpoint. So thank you for your very thoughtful
suggestions in that regard.
This hearing is adjourned.
[Whereupon, at 12 p.m., the hearing was adjourned.]
A P P E N D I X
February 9, 2015
Hon. Fred Upton,
Chair,
Committee on Energy and Commerce.
Hon. Frank Pallone,
Ranking Member,
Committee on Energy and Commerce.
Hon. John Thune,
Chair,
Committee on Commerce, Science, and Transportation,
Hon. Bill Nelson,
Ranking Member,
Committee on Commerce, Science, and Transportation.
We the undersigned associations, representing automobile
manufacturers, motorists, state highway and transportation officials
and the intelligent transportation community, write to you today to
respectfully request your opposition to the Wi-Fi Innovation Act.
Introduced last Congress, this bill would open up previously dedicated
auto safety spectrum to unlicensed Wi-Fi users and jeopardize the
implementation of a safety critical crash avoidance system that has the
potential to significantly reduce traffic crashes and assist in
reducing greenhouse gas emissions. While this legislation currently
does not have a bill number, we anticipate its re-introduction soon.
Over the past two decades the auto industry, the U.S. Department of
Transportation (USDOT), the American Association of State Highway and
Transportation Officials (AASHTO), the Intelligent Transportation
Society of America (ITS America) and its member companies and
university research centers such as the University of Michigan
Transportation Research Institute (UMTRI), have invested significant
resources and over a billion dollars researching, developing and
testing a vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I)
communication system collectively referred to as V2X.
The V2X communication system is comprised of seven safety channels
utilizing 75 MHz of spectrum located in the upper 5.8 GHz and lower 5.9
GHz band. This system enables vehicles to communicate with each other
and with the world around them (traffic signals, bicycles, pedestrians,
buses, trucks and even mobile phones) providing real-time 360 degree
high-speed situational safety warnings allowing drivers to respond or
in some cases the vehicle to respond for them. Happening ten times per
second, these communications must be free of any signal interference.
One miscommunication or blocked signal could cause a crash and,
possibly, serious injuries or deaths.
The Wi-Fi Innovation Act would require the Federal Communications
Commission (FCC) to open up the reserved 75 MHz of spectrum to
unlicensed Wi-Fi use and eliminate the proper safety mechanisms
provided to the FCC to ensure the protection of the V2X communication
system. The opening of this spectrum without proper interference
testing would reverse decades of efforts. It would also negate the
ongoing efforts of the various constituencies who are exploring whether
a technical solution exists to allow sharing of the spectrum. These
wide ranging constituencies include automakers, the Wi-Fi community,
the FCC, the U.S. DOT and innovators from across the transportation,
technology and research communities. This collaborative process should
proceed without pre-emptive legislation that sets arbitrary deadlines
and restrictive parameters.
Connected vehicle technology may significantly impact the future of
auto safety and must be protected. In fact, the National Highway
Traffic Safety Administration (NHTSA) has initiated a rulemaking to
establish standards for this technology to operate in unison in all
vehicles. They estimate that at full penetration, V2X technology could
prevent or mitigate up to 80 percent of the annual unimpaired vehicle
crashes saving thousands of lives and reducing the $871 billion cost to
our Nation's economy each year. `Talking cars' that avoid crashes and
reduce traffic congestion and pollution are being deployed today as
tests continue. That is why we ask for you to oppose any legislation,
such as the Wi-Fi Innovation Act, that could set the program back and
risk the implementation of this life saving technology and safety
system.
Thank you for your consideration of our views. Please do not
hesitate to reach out to us for further information or to answer any
questions.
Sincerely,
Thomas E. Kern
Interim President and CEO
Intelligent Transportation Society of America
(ITS America)
Mitch Bainwol
President and CEO
Alliance of Automobile Manufacturers
Michael P. Melaniphy
President and Chief Executive Officer
American Public Transportation Association
Jill Ingrassia
Managing Director, Government Relations
and Traffic Safety Advocacy
AAA
Roger A. Wentz, CAE
President and CEO
American Traffic Safety Services Association
Frederick ``Bud'' Wright
Executive Director
American Association of State Highway
and Transportation Officials (AASHTO)
John Bozzella
President & CEO
Association of Global Automakers, Inc.
Greg Cohen
President & CEO
American Highway Users Alliance
Brian Pallasch
Managing Director of Government Relations
and Infrastructure Initiatives
American Society of Civil Engineers
cc: Members of the House and Senate
______
Response to Written Questions Submitted by Hon. John Thune to
Michael Abbott
Question 1. Mr. Abbott, as an investor, you have finite resources
and need to pick and choose between great ideas. What is it about the
Internet of Things that has you and your firm excited? What concerns do
you see on the horizon that may temper that enthusiasm?
Answer. We are excited because of the incredible wave of innovation
that we see coming in this space. Analysts today are projecting
anywhere from 20 to 50 billion new sensors within the next five years.
Those sensors will be deployed across consumer, industrial, and
enterprise sectors. Some sensors will replace existing processes,
enabling better products and services at a lower cost. Others will
create entirely new capabilities, whether they are autonomous vehicles
or sensor-equipped industrial machinery or delivery drones.
Beyond the developments that get headlines, there are others that
are just as important. When we deploy sensors at this scale, we have
new tools for quality control, moving from a timed approach to
maintenance--checking the crane or the elevator or the brakes every set
number of months--to knowing immediately when a product is overheating.
This needs-based approach improves quality, improves durability,
improves productivity, and--perhaps most important--improves workplace
safety. This is just another example of how the Internet of Things will
change the way we live and work. And as the best engineers in Silicon
Valley focus on this area, whether in manufacturing and logistics or in
other functions that make a difference for the enterprise, the
possibilities will continue to increase--and the costs, for consumers,
will continue to fall.
Some of the creation and deployment of these new technologies will
come from existing companies. But others will come from resourceful
entrepreneurs who draw on their own creativity and expertise to build
meaningful standalone businesses. Our firm exists to find and back
those entrepreneurs and help them build great companies.
Our main concern is not with the state of technology but with the
prospect of ill-designed regulation. We know that there are legitimate
concerns about how the data collected by new sensors will be used, and
we support clear transparency about what data is being collected and
how it is being used. But we also know that the new sensors, if they
are to unlock the power of this technology to improve the lives of
consumers, require sufficient data. The technology is young--We are
still learning what data is most useful and why, and we are still
learning how to use data more efficiently. Our hope is that
policymakers will recognize that the ability to use big data, so long
as the consumer has not opted out, is essential to innovation in this
space.
Question 2. Mr. Abbott, in your testimony, you urged regulators and
legislators to proceed with caution when considering regulation
regarding the Internet of Things. As you note in your testimony, the
FTC recently released a staff level report on the Internet of Things
which makes ``best practice'' recommendations on privacy, security, and
data minimization. I understand many IoT companies are concerned about
whether today's best practices may tomorrow become ``reasonable''
practices subject to enforcement by the FTC. This could lead to a great
deal of uncertainty in the marketplace for startups. How do questions
about the FTC's reach affect investors like yourself?
Answer. Starting a successful company, even in a space with as much
opportunity as the Internet of Things, is never easy. If the FTC's
reach began to factor more significantly into our calculations as we
considered whether and how a startup would succeed, the decision to
back an IoT entrepreneur would become more difficult.
This is especially true because early-stage companies, unlike large
tech firms, generally do not have existing data to draw on. Their
ability to innovate depends on their ability to learn from the data
generated by users. If they faced restrictions in doing this, they
would have a harder time getting off the ground, as so many startups
fail to do. As investors, we would be more skeptical of the prospects
for success when the market is constrained, and we might instead turn
our attention to other markets--and perhaps look for opportunities
abroad if the regulatory environment there were more favorable for
entrepreneurs.
We fully support clear transparency around data collection
practices and believe that the consumer should know what is being
collected as a user of the product. We simply hope that the legitimate
need for transparency will not turn into regulatory practices that
stifle innovation in this space at such an important time.
______
Response to Written Questions Submitted by Hon. John Thune to
Douglas Davis
Question 1. Mr. Davis, Intel is opposed to FCC reclassification of
broadband service under Title II of the Communications Act, a view that
I share. Do you think that reclassification could harm growth of the
Internet of Things? If so, how?
Answer. As a world leader in computing and communications
technologies, Intel wants net neutrality rules that foster an open,
accessible Internet and affordable, high quality broadband. Therefore,
we support FCC rules regarding disclosure, blocking and discrimination.
We filed Reply Comments in the FCC's Open Access proceeding opposing
reclassification of broadband providers as utilities under Title II,
because we believe it is not necessary and could discourage expensive
and risky ``last mile'' broadband investment. Specifically, as to IoT,
Intel wants both open and high-quality connectivity for all. With a
projected 50 billion connected devices by 2020, investment in
ubiquitous, faster and more affordable Internet connectivity will be
even more critical. In that regard, we generally believe that ``light
touch'' regulation promotes more broadband investment while still
protecting open access, and thus we encourage the FCC to implement its
Title II authority in a light touch manner.
Question 2. Mr. Davis, these days, hacking and security concerns
are seemingly always on the front pages. Data breaches have affected
many millions of consumers and some of the largest corporations in this
country. Consumers are right to be excited about the benefits of the
Internet of Things to their lives, but it is reasonable to be concerned
about whether IoT opens consumers up to potential harm by cyber
criminals. What steps is the technology industry generally, and Intel
specifically, taking to secure IoT devices?
Answer. Security must be a foundational building block for IoT in
order to establish consumer trust--whether that consumer is a business,
government, or an individual. Intel believes we can provide robust
consumer protections, while enabling IoT investment and innovation that
will improve the economy and GDP. (Of note, primary economic drivers of
IoT will be commercial and industrial use cases, not consumer-facing
applications.) For trusted data exchange in an IoT ecosystem, data
generated by devices and existing infrastructure must be able to be
shared between the cloud, the network, and intelligent devices for
analysis--enabling users to aggregate, filter, and share data from the
edge to the cloud with robust protection. For this reason, security is
fundamental to Intel's IoT roadmap.
As discussed in my Prepared Statement for the Record (pp. 4-6),
Intel believes that it is critical to integrate security into hardware
and software from the smallest devices at the edge of the network to
the most advanced server in the cloud and all gateways and devices in
between. These multi-level security capabilities create redundancies
which prevent intrusions and enable a robust, secure, trusted end-to-
end IoT solution. Intel's hardware will provide transistor-level
security on the actual compute device itself at the outset (rather than
layering it on top at latter point in design cycle with other, less
secure external features). This means each compute device can have an
irremovable identification which prevents any non-approved device from
accessing the network. Intel's IoT solutions also will employ advanced
hardware level capabilities--``whitelisting'' (prevents harmful apps
from being activated) and ``blacklisting'' (blocks list of known
malware from entering device or network). Intel Security also
integrates advanced software level security capabilities which enables
the software to identify threats and proactively notify users and/or
automatically quarantines devices that could be at risk. With this
combination of transistor-level security, plus advanced hardware and
software level security, Intel will protect IoT assets and data in ways
few others can.
With respect to the technology industry generally, Intel and other
technology companies collaborate with government, non-governmental
organizations, and other private industry stakeholders to improve
cybersecurity in a way that promotes innovation, protects citizens'
privacy and civil liberties, and preserves the promise of the Internet
as a driver of global economic development and social interaction. A
recent example of such collaboration is the Cybersecurity Framework led
by the National Institute of Standards and Technology (NIST). Executive
Order 13636 (issued in February 2013) directed NIST to work with
stakeholders to develop a voluntary framework--based on existing
standards, guidelines, and practices--for reducing cyber risks to
critical infrastructure. Intel and other technology companies worked
collaboratively with other private industries and U.S. government
partners to develop the Framework. Intel then took it a step further by
creating, implementing and publishing a case study that encourages use
of the Framework as a process and risk management tool.
______
Response to Written Questions Submitted by Hon. John Thune to
Lance Donny
Question 1. Mr. Donny, you stated the Internet of Things technology
can often be cost prohibitive for farmers. One reason we've seen IoT
proliferate is huge cost reductions for bandwidth, processing, and
sensors. Are these trends helping to drive IoT adoption on the farm?
What is needed to bring the cost of technology down for farmers?
Answer. Yes, generally these trends help farmers adopt technology
in greater numbers and this is evidenced by the price of cellular data
transmission falling slightly over the last several years. We expect to
see this trend continue, and through better wireless technology, the
ability to move greater amounts of data over fewer discrete cellular
bands; further driving data transmission costs down.
Question 2. Mr. Donny, in your testimony, you talked about the
drought in California and how challenging that has been. Would you
please elaborate on how the Internet of Things is helping farmers deal
with a lack of water?
Answer. Farmers in California have been devastated by what now is a
four-year drought. Farmers have begun to deploy a greater number of
soil moisture sensors to increase the understanding of the amount of
available water they do have. Technology like moisture sensors provide
accurate management tools that take the guess work out of irrigation.
We see farmers save from 5-25 percent of their overall water though
these methods.
______
Response to Written Questions Submitted by Hon. Roy Blunt to
Lance Donny
Question 1. As the ``Internet of Things'' includes modems talking
to each other, and machines talking to each other, how reliable is
wireless connectivity in remote areas today?
Answer. Wireless connectivity varies based on a number of factors
but are most impacted by topography, crop canopy density, and antenna
height. We've seen poor connectivity outcomes where both factors are
challenging, in some cases a few hundred feet of range to ranges of 10-
miles where we have ideal conditions. While we don't need to see every
installation achieve 10-mile range, we need reliably to cover a full
section (640 acres) in most cases.
Question 2. What broadband capacity is needed and how soon will it
be available for the potential of the ``Internet of Things'' to be
realized in agriculture--particularly for precision agriculture?
Answer. The bandwidth demand in agriculture is not as significant
as other demands such as online learning or telemedicine. We can
reliably move most data (excluding large image files) over relatively
low bandwidth speeds, less then 10mbps. More importantly is the
coverage area. If large agriculture areas go uncovered, the industry
will continue to rely on cellular and satellite for communication,
which is costly and less then reliable.
Question 3. A number of colleagues from this committee and myself
recently wrote the Federal Communications Commission to emphasize that
``rural households and businesses stand to benefit'' from the Mobility
Fund for wireless broadband in rural areas, and the Connect America
Fund for fiber broadband in rural areas.
Today's hearing underscores that need, as the ``Internet of
Things'' is dependent on broadband connectivity--both wireline and
wireless.
What is your opinion of the Federal Communications Commission's
attempt so far to reform the Mobility Fund for rural wireless, and the
Connect America Fund for fiber to unserved rural areas?
Answer. In all fairness, I am not fully versed on the Mobility
Fund. In my opinion the changes to increase 4G services with Phase II
funding must not inadvertently allow whatever level of data service,
which support IoT, in rural markets to deteriorate. In addition, in
order to ensure IoT data services don't diminish over time the FCC
should consider grouping areas that lack 2G coverage in an auction
separate and apart from those areas in which carriers are seeking to
upgrade from 2G, 2.5G and 3G services to 4G services. This, in my
opinion, will enable lower cost carriers a means to support the vast
amount of connected devices in rural markets.
Question 4. In your testimony, you cite the American Farm Bureau's
Privacy and Security Principles. These principles cover a wide range of
issues including education about rights and responsibilities, ownership
of data, the collection and use of data, notice, transparency, and
choice for consumers.
Did the American Farm Bureau need a government agency to instruct
them in developing these principles, or were they able to come up with
them on their own?
If the American Farm Bureau can establish a set of principles
regarding expectations of rights and responsibilities for the
``Internet of Things,'' can other sectors of the economy do the same?
Answer. The American Farm Bureau, given it's breath of farm
knowledge, 6 million members, industry relations, and capacity to
engage farmers in dialog regarding their concerns and needs was able to
develop these principles without government agency support.
While I'm not an expert on other sectors their make up or
challenges, I firmly believe in the power of collaboration. The most
efficient and realistic method of developing principles is for industry
and it's customers to work together. In this way needs, fears,
opportunities, and challenges can be discussed and solutions can be
agreed upon that will achieve actual success once implemented.
______
Response to Written Questions Submitted by Hon. John Thune to
Adam D. Thierer
Question 1. Mr. Thierer, in comments to the FTC, you argued that
policymakers should exercise regulatory humility in the face of
uncertain technological change and address harms only after conducting
a cost-benefit analysis of various remedies. FTC Commissioner Wright
raised similar concerns about the FTC's recent staff report on the
Internet of Things. What are the dangers of not doing a cost benefit
analysis before moving forward with policymaking in this space?
Answer. Although benefit-cost analysis is extremely challenging in
the field of digital privacy policy, it is essential that analysts and
policymakers attempt to conduct such reviews of any regulatory
proposals aimed at curbing private sector data collection. While we
will never be able to perfectly determine either the benefits or costs
of data controls, the very act of conducting a regulatory impact
analysis will help us to better understand the trade-offs associated
with various regulatory proposals. In this case, benefit-cost analysis
would help us determine the impact of new data regulation on
technological innovation, consumer choice, entrepreneurialism, economic
growth and the competitiveness of America's digital economy. And
because data has powered the Information Revolution and brought
consumers a cornucopia of new choices, it is essential that we
carefully evaluate any new rules for their impact on the economy.
Question 2. Mr. Thierer, in a submission to the FTC you wrote that,
``It is likely that citizen attitudes about IoT technologies will
follow a familiar cycle we have seen play out in other contexts:
initial resistance, gradual adaptation, and then eventual assimilation
of that new technology into society.'' Where are we today on the
spectrum of Internet of Things adoption?
Answer. We are still in the very early stages of Internet of Things
adoption and, at least thus far, we've not seen as the same sort of
initial resistance to IoT technologies that we witnessed with many
previous technologies. While some privacy and security concerns have,
perhaps, held back some consumer adoption at the margin, it appears
that the public is quickly moving into the ``gradual adaption'' phase
and embracing these technologies. It could be the case that the
public's remarkably rapid assimilation of smartphone technology into
their lives since 2007 has acclimated consumers to IoT technologies and
made their adoption less jarring.
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