[Senate Hearing 117-807]
[From the U.S. Government Publishing Office]
S. Hrg. 117-807
PROTECTING COMPETITION AND
INNOVATION IN HOME TECHNOLOGIES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON COMPETITION POLICY,
ANTITRUST, AND CONSUMER RIGHTS
OF THE
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
JUNE 15, 2021
__________
Serial No. J-117-22
__________
Printed for the use of the Committee on the Judiciary
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
www.judiciary.senate.gov
www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
54-505 WASHINGTON : 2026
COMMITTEE ON THE JUDICIARY
RICHARD J. DURBIN, Illinois, Chair
PATRICK J. LEAHY, Vermont CHARLES E. GRASSLEY, Iowa, Ranking
DIANNE FEINSTEIN, California Member
SHELDON WHITEHOUSE, Rhode Island LINDSEY O. GRAHAM, South Carolina
AMY KLOBUCHAR, Minnesota JOHN CORNYN, Texas
CHRISTOPHER A. COONS, Delaware MICHAEL S. LEE, Utah
RICHARD BLUMENTHAL, Connecticut TED CRUZ, Texas
MAZIE K. HIRONO, Hawaii BEN SASSE, Nebraska
CORY A. BOOKER, New Jersey JOSH HAWLEY, Missouri
ALEX PADILLA, California TOM COTTON, Arkansas
JON OSSOFF, Georgia JOHN KENNEDY, Louisiana
THOM TILLIS, North Carolina
MARSHA BLACKBURN, Tennessee
Joseph Zogby, Chief Counsel and Staff Director
Kolan L. Davis, Republican Chief Counsel and Staff Director
SUBCOMMITTEE ON COMPETITION POLICY,
ANTITRUST, AND CONSUMER RIGHTS
AMY KLOBUCHAR, Minnesota, Chair
PATRICK J. LEAHY, Vermont MICHAEL S. LEE, Utah, Ranking
RICHARD BLUMENTHAL, Connecticut Member
CORY A. BOOKER, New Jersey JOSH HAWLEY, Missouri
JON OSSOFF, Georgia TOM COTTON, Arkansas
THOM TILLIS, North Carolina
MARSHA BLACKBURN, Tennessee
Ajay Kundaria, Majority Staff Director
Wendy Baig, Minority Staff Director
C O N T E N T S
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OPENING STATEMENTS
Page
Klobuchar, Hon. Amy.............................................. 1
Lee, Hon. Michael S.............................................. 3
WITNESSES
Crawford, Matthew................................................ 11
Prepared statement........................................... 42
Lazarus, Eddie................................................... 9
Prepared statement........................................... 48
Responses to written questions............................... 92
McCrate, Ryan.................................................... 7
Prepared statement........................................... 55
Questions submitted with no response returned................ 84
White, Wilson.................................................... 6
Prepared statement........................................... 77
Responses to written questions............................... 102
Zittrain, Jonathan............................................... 13
Prepared statement........................................... 61
Responses to written questions............................... 126
APPENDIX
Items submitted for the record................................... 41
PROTECTING COMPETITION AND
INNOVATION IN HOME TECHNOLOGIES
----------
TUESDAY, JUNE 15, 2021
United States Senate,
Subcommittee on Competition Policy,
Antitrust, and Consumer Rights,
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:44 p.m., in
Room 226, Dirksen Senate Office Building, Hon. Amy Klobuchar,
Chair of the Subcommittee, presiding.
Present: Senators Klobuchar [presiding], Blumenthal,
Ossoff, Lee, and Hawley.
OPENING STATEMENT OF HON. AMY KLOBUCHAR,
A U.S. SENATOR FROM THE STATE OF MINNESOTA
Chair Klobuchar. I call this hearing of the Subcommittee on
Competition Policy, Antitrust, and Consumer Rights on
Protecting Innovation and Consumer Choice in Home Technologies
to order.
Good afternoon. Welcome to our witnesses. This hearing
continues Senator Lee, and my, and our Committee Members'
bipartisan review of America's monopoly problem; and I thank
Senator Lee and his staff for working with our staff to plan
this hearing.
The Competition Policy Subcommittee has been examining the
problems that arise when a handful of companies become powerful
enough to distort competition in the marketplace. So far, we've
seen that excessive market power benefits a few companies able
to wield it at the expense of consumers, businesses, and
workers. Our current antitrust laws have not been effective in
stemming the rise of monopoly power or its abuse by dominate
companies. As a result, we see competition problems in industry
after industry across our economy.
Today, we'll examine an emerging industry that could fall
prey to the same dynamic: connected home technology. Millions
of Americans already have connected devices in their homes,
including speakers, smart television, systems to control
lighting or temperature within the home. I just, Senator Lee,
used my own remote vacuum cleaner just the other day to scare
my daughter as she was watching TV.
[Laughter]
Chair Klobuchar. It wasn't a big deal, but I could just do
it. We are just at the beginning. These technologies will
continue to develop for things like connected refrigerators and
washing machines.
In the years to come, they will play an even larger role in
our lives. Many people are understandably excited about these
technologies. I like them, but we must get ahead of this. So
many of the things we talk about when we are in this room when
it comes to antitrust, or over in the House, are looking back
at things that should have been done differently, privacy
rules, doing more when it comes to apps, doing more when it
comes to what some of these acquisitions were. I'll just use
the examples of Instagram and WhatsApp. At the time, people
didn't see ahead.
We have this moment with this kind of technology to look
around the corner and to see ahead. As we're looking at bills,
Senator Lee just introduced a bill with Senator Grassley. I
have a bill with several Members of this Subcommittee. We have
tech bills that we're all working on over here. We have to
think of these bills in the context of what's happening in this
area as well, given this incredible movement and growth that
we're seeing.
In home technology, we see some of the most powerful firms
that dominate tech today, poised to dominate the platforms of
the future. We hear concerns about Amazon's and Google's
growing market power with connected speakers. Over 50 percent
for Amazon; 30 percent for Google. We're also hearing concerns
about use of consumer's personal information. That would be
privacy. Of course, privacy legislation on the Federal level
has somehow alluded us. Most would be handled in the Commerce
Committee, but that's the other piece of this puzzle in
addition to the work that needs to be done on antitrust.
Americans are counting on us to protect innovation and
competition. To go over the stats, 94 million people in the
U.S. own at least one connected speaker which they can use to
play music, ask about the weather, and tell their kids to come
down for dinner. In the years to come, connected devices in our
home will become even more sophisticated. These devices work
with each other through technology interfaces. Often digital
voice assistants like Alexa.
I want to highlight a few key concerns that we will explore
at the hearing today. First, many consumers use their connected
speakers to operate other connected devices, like asking the
digital assistant to lower the thermostat by 2 degrees. They
should get the very best at digital voice assistance available,
whether that is Amazon's Alexa, Google's Assistant, or a new
entrant. Will Amazon and Google use their market power to block
that new digital voice assistant from being installed on the
connected speakers that are already in consumers' homes? Or
will they let competition flourish, even if it threatens their
dominance?
Second, in a few years, people might easily have 20 or more
connected devices in their home, from a vacuum and a fridge to
speakers and lights. We want those devices to work with each
other seamlessly. In other words, they need to interoperate.
You shouldn't have to choose the right devices for your home
based on whether they play nicely with Google or Amazon's
digital assistants, or whether Google or Amazon has locked them
into an exclusive contract.
We have seen what happens when the largest and most power
tech companies make their own decisions about interoperability.
They embrace it as long as it helps their bottom line. When
interoperability threatens their own products and services,
they change their tune and start boxing out competitors. This
has a real potential harm both to competition and innovation.
Third, concern about self-preferencing. The market leaders
benefit from having their services preinstalled because many
customers never change the default settings. Maybe I know a
little bit about that. Imagine a household with a connected
refrigerator that automatically replenishes the supply of
certain groceries. Do we want Amazon to set Whole Foods or
Amazon Fresh, the grocery store it owns, as the only place to
purchase these groceries? Absolutely not. Consumers should
choose, not vertically integrated tech giants.
Finally, I have concerns, as I mentioned, about privacy.
Connected devices can make our lives easier and more efficient,
but that should not come at the cost of basic privacy rights.
Digital voice assistants could collect data from multiple
connected devices in the home, giving already data-rich
companies even more insight into who visits us, or lives in our
home, what we listen to, what we say to each other, what foods
we eat, how often we do our laundry, and how well we sleep at
night. That highly personal and sensitive information must not
be aggregated and auctioned off to the highest bidder. That
data is ours.
Given these problems facing the connected home industry, we
need to act now to protect competition, innovation, and
consumer. Step one is to give our antitrust enforcers the
resources they need to do their jobs. We took a big step with
the bill we passed out of this Committee; Senator Grassley and
my bill to change the merger fees, filing structure that has
now just passed the Senate as part of a major bill in the last
week. That bill is now going over to the House. We have every
reason to believe it will pass. And then we have to look
through the appropriations and budget process for more
resources.
Secondly, updating our antitrust laws, as I mentioned, we
all have some good ideas on that front, but that has to be a
part of the solution.
Third, Federal privacy legislation.
Let me be clear, this isn't about punishing success or
going after companies just because they are growing. This is
about learning from what we have seen in the recent past.
Instead of just complaining about it after the fact, we have a
chance to include what we know about this market as we look at
legislation and enforcement actions going forward.
I want to thank you so much, and I turn it over to Senator
Lee.
OPENING STATEMENT OF HON. MICHAEL S. LEE,
A U.S. SENATOR FROM THE STATE OF UTAH
Senator Lee. Thanks so much, Madam Chair. Thanks for
convening this hearing. This is one that I'm looking forward
to. I think it raises some very significant and interesting
questions.
First, it raises the question about--by the way, I like the
idea of the vacuum being used to scare intruders.
[Laughter.]
Senator Lee. That's truly multi-tasking----
Chair Klobuchar. That would be my daughter that I did it
to. Yes. Go ahead. Go ahead.
Senator Lee. One of the questions it raises is whether
smart home devices will just provide for one more way for Big
Tech firms to expand their already significant market power.
Google and Apple have duoopoly control over smartphone
operating systems that smart home devices frequently need
access to or combability with, at a minimum, in order for them
to be successful.
Google dominates online advertising, which relies on the
kind of data that smart home devices may be uniquely in a
position to collect. Amazon is the leading online retailer, and
a major Cloud service provider at the same time. Competing
smart home devices will inevitably encounter Amazon just by
trying to host their service and selling their products.
Second, setting aside specific antitrust concerns for just
a moment, why on earth would we want to give Big Tech even more
control and more influence over our daily lives? They already
control how we find information on the internet, and they
influence what products we buy, and how we buy them. They sell
the data collected on us every day and hold the keys to
monetization for an ever-growing array of small businesses. We
already know that they don't always exercise this power in the
best interest of society. As they branch into newer areas,
obviously that raises some concerns.
Big Tech repeatedly silences political and religious views
from the heartland of America. It makes their left coast and
liberal employee base uncomfortable. They've censored criticism
of progressives. They've protected their favorite political
candidates and hidden scientific information that undercuts
whatever happens to be their preferred narrative on any of a
host of issues from day to day. Big Tech has even deplatformed
a sitting President. If you dare to actually try to build your
own platform, like Parlor did, they'll pull the plug on that
too. Big Tech already controls nearly everything we do online.
Are we now willing, for the sake of some minor convenience, to
give them control over our homes as well? Forget the Government
in your bedroom. I don't even want tech in my kitchen. Surely,
we already know enough to know that this isn't going to end
well.
Finally, as a consumer and as a father, I sometimes wonder
whether in the aggregate the conveniences of Big Tech's smart
home scheme outweigh the negative affects on us as a society.
Do we really need WiFi on an oven? Or on a light switch? If we
can't even get off the couch to turn on the lights or check on
dinner, how will we muster the energy to spend quality time
with our families? Meaningfully engage with our neighbors and
participate in self-governance? I have no doubt that Big Tech
will be happy to handle things like that for us as well.
All these questions call for close scrutiny, both during
this hearing and by consumers as they consider purchasing these
products. Protecting competition will be more important than
ever. It's one thing to deal with a monopolist in commerce, but
try dealing with one when you're cooking too.
I look forward to this hearing, and hearing from our
witnesses, and how we can avoid past mistakes and ensure
competitive markets in smart home devices, hopefully to ensure
that they neither serve to augment Big Tech's market power nor
undermine the fabric of society as a whole.
Thank you, Madam Chair.
Chair Klobuchar. Thank you much. I am now going to
introduce our witnesses.
Ryan McCrate is the vice president and associate general
counsel for Alexa and Echo at Amazon, where he leads the legal
team supporting Amazon's Alexa voice service and Echo family of
devices. Ryan joined Amazon in 2007, and has supported a
variety of other Amazon services. Before that, he practiced law
at Kirkland and Ellis.
Wilson White is a senior director on the government affairs
and public policy team at Google, where he leads policy efforts
for our connected devices and Android operating systems. Before
joining Google's public policy team, he was a patent litigation
attorney at Google, where he not only defended Google in patent
infringement lawsuits, but also pushed for patent reform
legislation. Prior to joining Google, he was an associate at a
law firm in Atlanta.
Eddie Lazarus is the chief legal officer at Sonos. He leads
the company's legal corporate governance, SEC reporting,
government affairs, regulatory and compliance activities.
Previously, he was the general counsel and chief strategy
officer for Tribune Media Company and also served as the Chief
of Staff to the Chairman of the FDC--I'm sorry, FCC, from 2009
to 2012.
Matt Crawford is a senior fellow at the University of
Virginia's Institute for Advanced Studies in Culture and New
York Times best-selling author. His books have been translated
into 13 languages. How many book languages was your book
translated into, Senator Lee? Okay. It's one. He holds a PhD in
political philosophy from the University of Chicago, which is
where I went to law school.
Jonathan Zittrain is a professor of law and of computer
science at Harvard. He is also a cofounder of the Burkman Cline
Center for Internet and Society.
With that, if the witnesses could please stand and raise
your right hand.
[Witnesses are sworn in.]
Chair Klobuchar. Thank you. You may be seated. I will now
recognize the witnesses for 5 minutes of testimony each. I
would also note, Senator Lee, that Lina Kahn was just named the
Chair of the FTC, an interesting development from an antitrust
standpoint. With that, I will turn it over to Mr. McCrate, if
you would like to proceed.
[Pause.]
Chair Klobuchar. Mr. McCrate, I know you're remote--there
you are. Oops. We can't hear you. Let's try this again.
[Pause.]
Chair Klobuchar. Do you want to----
Mr. McCrate. Sorry. It looks like----
Chair Klobuchar. Okay. Do you want to start now? Start
over?
Okay. It's not working again. Do you want to go to--maybe
us? It may be on our side. Do you want to go to Mr. Wilson
first, and then we'll go to Mr. McCrate?
Mr. White. Do you hear me? Okay, Senator?
Chair Klobuchar. Yes. I can hear you.
Mr. White. Okay. I'll get started.
Chair Klobuchar. Okay. Mr. Wilson, thank you. Welcome back.
STATEMENT OF WILSON WHITE, SENIOR
DIRECTOR PUBLIC POLICY & GOVERNMENT
RELATIONS, GOOGLE INC., MOUNTAIN VIEW, CA
Mr. White. Thank you, Chairman Klobuchar, Ranking Member
Lee, and distinguished Senators of the Subcommittee. Thank you
for the opportunity to appear before you again today.
My name is Wilson White. I'm a senior director on the
government affairs and public policy team at Google, where I
lead our policy efforts for connected devices and the Android
operating system.
Increasing access to the benefits of technology is what
motivates me to come to work every day. At Google, our goal is
to be helpful to people in moments that matter, including when
you're trying to scare your daughter with a remote vacuum. It's
in those moments that technology can truly improve peoples'
lives.
I think of a Google Pixel user named Chris. Chris was a
passenger in a car that was suddenly struck by a truck
traveling at high speed through a poorly marked three-way
intersection. Stunned by the impact, with the smell of burning
rubber in the air, Chris panicked. Disoriented and unsure what
to do, he felt his Pixel phone vibrating. The phone had
detected that Chris may have been in a car accident, and it was
prompting him to dial 911 so that he and his family could
quickly get the life-saving help that they needed the most. To
us, this is what it means for connected devices and services to
help in moments that matter. That a phone can tell you that you
might need emergency help shows just how far we've come, and
it's just a taste of the innovations that lie ahead.
A few decades ago, most Americans were fortunate if they
had a single computer at home, and even luckier if that
computer could access the internet. Today, most Americans have
a supercomputer in their pocket. Access to the internet on
desktop devices paved the way for the explosion of innovation
and economic growth that we saw in mobile. We're witnessing the
dawn of a new era of computing beyond the mobile phone, where
there will be more and more opportunities to integrate the
benefits of technology into a diverse set of devices and
services.
Technology is helpful only where it can be easily accessed.
Making technology more accessible across a broad range of
devices is what's driving innovation in the connected devices
space. At Google, we believe the future of connected devices
will make people safer, will help them in their daily lives,
and will help businesses more efficient and productive. We're
proud to play a role in spurring innovation in this fast-
moving, hyper-competitive, but nascent space.
We've always believed that open platforms enable
competition, which is the best way to put great services in the
hands of users at the lowest cost. It's in that spirit that
we've pushed for openness across the broad range of connected
devices.
Back in 2019, we joined with others to stand up an
independent working group focused on building an open
connectivity standard that would allow devices to work with
each other across a broad range of smart home ecosystems. Open
standards foster competition by leveling the playing field for
smaller players and new entrants, simplifying product
development, and increasing choice for consumers.
The working group has come a long way. Last month, it
announced an inteoperable secure connectivity standard for the
future of the smart home called MATTER. We're committed to
implementing this new protocol in Android and across a range of
Nest products, making these devices more open, more
customizable.
Connected devices show incredible potential to help
consumers in the moments that matter and in ways that were
unimaginable a few decades ago when Americans got the first
taste of having computing in their home. We've come a long way
since then, but we're still in the very earliest days of an
exciting period of growth, competition, and innovation.
Much of our discussion today will focus on the competitive
efforts and the innovative efforts of some of America's most
successful technology companies, including ours. America's
success in the years ahead isn't guaranteed. Competition is
fierce in this space, and American companies face stiff
competition from companies around the world. Preserving
America's global technological leadership in a field that has
the potential to define the future of how people integrate
technology in their lives will take a collective commitment to
innovation, investments in technological advancements, and
getting the right pro-competitive, pro-consumer, policies in
place so that this verging sector can thrive. It's for that
reason that we're grateful for the opportunity to participate
in this discussion.
We look forward to a continued engagement with this
Subcommittee and others in Congress on these important issues,
and I look forward to answering your questions.
Thank you.
[The prepared statement of Mr. White appears as a
submission for the record.]
Chair Klobuchar. Thank you very much. Thank you. Are we
okay with Mr. McCrate coming up now?
Thanks. Mr. McCrate.
Mr. McCrate [continuing]. And Members of this----
Chair Klobuchar. Yep. I hear your voice.
Mr. McCrate. Okay. You can hear me now? Great.
Chair Klobuchar. I think we need to get a little louder. I
do hear you, though.
Mr. McCrate. Okay.
Chair Klobuchar. I see you. Nice background.
Mr. McCrate. All right.
Chair Klobuchar. Perfect.
Mr. McCrate. Is it coming through now?
Chair Klobuchar. Okay. We're not going to make any assisted
speaker jokes or anything. We're all good. Okay. Go ahead.
STATEMENT OF RYAN McCARTE, VICE PRESIDENT
AND ASSOCIATE GENERAL COUNSEL, AMAZON, SEATTLE, WA
Mr. McCrate. All right. Thank you, Chairman Klobuchar,
Ranking Member Lee, and Members of the Subcommittee. I am Ryan
McCrate vice president and associate general counsel for Alexa
at Amazon.
Amazon's invention of the Echo smart speaker and our
investment to develop Alexa have meaningfully increased
competition in the voice assistant and smart home space.
Increased customer choice provided a new channel for customers
to reach online services and created significant new growth
opportunities for third-party manufacturers.
When we set out to build Echo and Alexa 10 years ago, we
took our inspirations from the Star Trek computer. A service
that would allow customers to access the power of the internet
just by using their voice. It took us longer than we expected
to build Alexa, and it required us to invent our way through
many previously unsolved technical problems, and to invent new
ways to preserve and protect customer privacy. We are
incredibly proud of the success of Echo and Alexa, and we work
to constantly improve them because we know customers have other
options.
Alexa is not the most widely used voice assistant. Google
Assistant and Apple's Siri are both used by many more
customers. The truth is that most voice assistant usage occurs
on mobile phones, and nearly all smartphones sold in the U.S.
today are Google phones or Apple phones, which come with their
assistants.
With Echo and Alexa, we gave customers a new way to access
voice, one that wasn't controlled by the operating system on
their phone. The options for customers only continue to grow.
While building a new voice service was very hard when we
started 10 years ago, it is much easier to get started today.
The state of voice science has advanced rapidly, and many of
the core building blocks for a voice service can now be
licensed off the shelf or accessed through Cloud services
offered by Amazon, Microsoft, IBM, Google, Nuance, or others.
As a result, there are many companies that have or are
developing their assistants, including Samsung, Facebook,
Comcast, LG, SoundHound, and Spotify. Voice assistants are now
available through a wide range of devices, such as smart TVs,
laptops, tablets, set-top boxes, and even thermostats.
As the number of voice assistants grows, we think it's
critically important that customers have the freedom to choose
between multiple assistants, and select their preferred
assistant for any task. That's why Amazon founded the Voice
Interoperability Initiative, a coalition of over 80 companies
dedicated to the vision that customers should have access to
multiple, simultaneous voice services on a single device, each
with its own wake word, enabling customers to talk to the
service of their choice simply by saying its name.
Amazon's willingness to take risk and invest in the
development of Echo and Alexa has been good for consumers and
good for competition. Throughout Amazon's history, we have
focused on empowering third-parties to create and grow their
own businesses. We took the same approach with Alexa. In
contrast to the approach of the incumbent phone-based
assistants at the time, we made our technology available to
third-party developers and manufacturers, allowing them to
bring the power of voice to their own products and services.
For instance, third-party music services like Spotify,
Pandora, and Tunan are available through Alexa. Developers can
create brand new services, like voice-based games or education
skills. We also make Alexa's technology available to third-
party device manufacturers without any exclusivity requirements
or licensing fees. This has allowed dozens of companies to
build voice functionality directly into their own devices,
making those devices more appealing and valuable to customers.
We were the first company to do this, and it has significantly
expanded customer choice and how to access voice assistants.
Finally, through our Alexa Smart Home program, we enabled
manufacturers of smart home devices, such as lights, plugs,
locks, and ceiling fans, to allow customers to control those
devices by voice, making those devices more useful and
valuable.
In conclusion, we are still in the very early days of the
development of voice assistants and smart home devices. It is
an intensely competitive and innovative space made even more so
by Amazon's efforts to empower developers, empower
manufacturers, and provide customers' choice. We appreciate the
important work the Committee is doing in this space. We believe
our goals are fundamentally aligned with those of the Committee
to foster innovation, ensure competition, and create a digital
future that works for all consumers.
Thank you for this opportunity to share our vision. I look
forward to your questions.
[The prepared statement of Mr. McCrate appears as a
submission for the record.]
Chair Klobuchar. Thank you very much. Thank you for your
testimony. Next up, Mr. Lazarus.
STATEMENT OF EDDIE LAZARUS, CHIEF LEGAL
OFFICER, SONOS, SANTA BARBARA, CA
Mr. Lazarus. Thank you, Chair Klobuchar, Ranking Member
Lee, and distinguished Members of the Subcommittee for the
opportunity to appear before you. It is an honor to testify as
the chief legal officer of Sonos, a hugely innovative company
whose history from small startup to global enterprise embodies
American tech innovation at its best.
Sonos was founded in 2002 by a handful of entrepreneurs who
set out to reinvent home audio for the digital age. What Sonos'
founders imagined was a world where the old home audio systems
featuring passive speakers connected by wires to a centralized
receiver would be replaced by a seamless experience where users
could play music on wireless speakers that communicate with
each other to produce what is known today as multi-room home
audio.
Fast forward. Sonos employs roughly 1,500 people, and our
products have been welcomed into more than 11 million homes.
Our success is based in significant part on elevating the idea
of consumer choice rather than a walled garden experience,
including a choice among more than 100 music streaming services
as well as between the two dominate voice assistants, Alexa and
Google Assistant.
From our perspective, we see two possible futures in the
smart home: In the first scenario, resulting from the current
trajectory we're on, every smart home will be controlled by one
of a few dominate companies. These behemoths will exert
overwhelming control over the direction of innovation and what
new ideas make it market. In an alternative scenario, revamped
antitrust law and enforcement will level and broaden the
playing field. The second future is one in which companies like
Sonos and countless others bring novel experiences to customers
with the best ideas rising to the top. Consumers will enjoy
greater choice, not merely to choose alternatives to the
systems by the dominant companies, but also to mix and match
easily among theirs and other offerings.
For Google and Amazon specifically, the smart home, this
new and growing interface between their online enterprises and
consumers presents both a threat and an opportunity. The threat
is that if other companies were to be successful in the smart
home space, they might stand between the dominant companies and
customers. Meanwhile, the opportunity for Google and Amazon is
to dominate yet another important consumer market, and even
more critically, to use their smart home systems to collect
vast amounts of consumer data which can be monetized on their
already dominate and enormously profitable platforms.
In suppressing competition, a common strategy of Google and
Amazon is to take on a competitor by flooding the market with
similar products sold at highly subsidized prices, or even
given away. Amazon and Google can afford to lose money on the
speaker products because they aren't counting on profits from
the product sales themselves. Instead, they make their money
from the rich trove of personal data that these microphone-
enabled products vacuum up from consumers.
The problem of cross-subsidization is compounded by
restrictions on interoperability. The strategy of each of the
dominate players is the aggregate demand on its own individual
platform. They lure you into the walled garden with subsidized
prices, and then they want to lock you in. Sonos and other
innovators want to offer a different model, one that
interoperates with each of the dominate players, but also
unlocks consumers by enabling them to discover and choose from
various other products and innovations. The dominate players
often make that difficult, if not impossible either by
prohibiting the implementation of new ideas or conditioning
access to their platforms with anti-competitive demands.
Google and Amazon run sprawling, irreplaceable empires. One
has to do business with them; and in many respects, those
partnerships are mutually beneficial. There's a downside too.
To gain access to their platforms and integrate with their
services, these companies issue various take it or leave it
demands, including early access to proprietary business
information. This undercuts competition, especially when these
companies then decide to use what they've learned about your
business to produce and sell remarkably similar products.
We've been heartened as State and Federal antitrust
agencies have begun to investigate, and in some cases, bring
enforcement actions about the more egregious anti-competitive
practices. These limited actions are not enough to protect
consumers and promote the competitive process.
For that reason, we very much appreciate that Senator
Klobuchar has introduced legislation to bolster antitrust
enforcement. We know that Ranking Member Lee has now dropped
his own bill that we will be studying closely. It's vitally
important to recognize that a significant range of conduct that
encompasses--that suppresses competition in the smart home
falls outside existing law. An antitrust regime for the digital
age must promote nondiscrimination by addressing restrictions
on interoperability, predatory pricing and cross subsidization,
and misuse of data.
We urge Congress to act soon. Due to strong network
effects, markets in the tech world can tip quickly, and it
would be a shame to look back at the smart home space and
wonder what might have been, if only.
Thank you for your consideration.
[The prepared statement of Mr. Lazarus appears as a
submision for the record.]
Chair Klobuchar. Thank you very much. Thanks for your
testimony. Next up, Mr. Crawford.
STATEMENT OF MATTHEW CRAWFORD,
RESEARCH FELLOW AT THE INSTITUTE FOR
ADVANCED STUDIES IN CULTURE, UNIVERSITY
OF VIRGINIA, SAN JOSE, CA
Mr. Crawford. Chair Klobuchar, Ranking Member Lee, and
distinguished Members of the Committee, thank you for the
opportunity to address you today.
I have no expertise in antitrust. I come to you as a
student of history political thought. The convenience of a
smart home may be worth the price. That's for each of us to
decide. To do so with open eyes, one has to understand what the
price is. After all, you don't pay a monthly fee for Alexa or
Google Assistant.
The Sleep Number bed is typical of smart home devices. It
comes with an app, of course, which you'll need to install to
get the full benefits. Benefits for whom? To know that, you'd
have to spend some time with the 12-page privacy policy that
comes with the bed. There, you'll read about third-party
sharing, Google analytics, targeted advertising, and much else.
The contract specifies that the company can use your personal
information, even after you cancel your Sleep Number account,
and that the firm does not honor ``Do not Track''
notifications. By the way, the bed also transmits the audio
signals in your bedroom, and I'm not making this up.
Whatever its appeal to the consumer, the business rationale
for the smart home is to bring the intimate patterns of life
into the fold of the surveillance economy, which has a one-way
mirror quality. Increasingly, every aspect of our lives, our
voices, our facial expressions, our political affiliations, and
intellectual habits are laid bare as data to be collected by
companies who, for their own part, guard with military grade
secrecy the algorithms by which they use this information to
determine the world that is presented to us. For example, when
we enter a search term, or in our news feeds. They are also in
a position to determine our standing in the reputational
economy. The credit-rating agencies and insurance companies
would like to know us more intimately. I suppose Alexa can help
with that.
Allow me to offer a point of reference that comes from
outside the tech debates entirely, but can be brought to bear
on them. Conservative legal scholars have criticized a shift of
power from Congress to the administrative state which seeks to
bypass legislation and rule by executive fiat through
administrative rulings. The appeal of this move, of course, is
that it saves one the effort of persuading others; that is the
inconvenience of democratic politics. I'd like to suggest that
all the arguments that conservatives make about the
administrative state can be applied as well to this new thing.
I'll call it algorithmic governance that operates through
artificial intelligence developed in the private sector. It too
is a form of power that is not required to give an account of
itself, and is therefore insulated from democratic pressures.
For reasons intrinsic to machine learning, the logic by
which an AI reaches its conclusions is impossible to
reconstruct, even for those who built the underlying
algorithms, due to the complexity of how they interact a
massive-iterated layers of inference. We need to consider the
significance of this opacity in the light of our political
traditions.
When a court issues a decision, the judge writes an opinion
in which he explains his reasoning. He grounds the decision in
law, precedent, common sense, and principles that he feels
obliged to articulate and defend. This is what transforms the
decision from mere fiat into something that is politically
legitimate, capable of securing the ascent of a free people.
One distinguishing feature of a modern liberal society is
that authority is supposed to be grounded in this way in our
shared rationality rather than appealing to, say, a special
talent for priestly divination. This is our enlightenment
inheritance. It appears to be in a fragile state. With the
inscrutable arcana of data science, a new priesthood peers into
a hidden layer of reality that is revealed only by a self-
taught AI program, the logic of which is beyond human knowing.
The feeling that one is ruled by a class of experts who
cannot be addressed, who cannot be held to account, has surely
contributed to populist anger. From the perspective ordinary
citizens, the usual distinction between government and the
private sector starts to sound like a joke, given how
concentrations of economic power order our lives in far-
reaching ways.
Google, Facebook, Twitter, and Amazon have established
portals that people feel they have to pass through to conduct
the business of life and to participate in the common life of
the Nation. Such bottlenecks are a natural consequence of the
network effect. It was early innovations that allowed these
firms to take up their positions. It is not innovation, it is
these established positions and the ongoing control of the data
it allows them to gather that accounts for the unprecedented
rents they're able to collect, as in a classic infrastructure
monopoly. If those profits measure anything at all, it is the
reach of a grid of surveillance that continues to spread and
deepen. It is this grid's basic lack of intelligibility that
renders it politically unaccountable, yet accountability is the
very essence of representative government.
Mr. Zuckerberg has said frankly that, ``In a lot of ways,
Facebook is more like a government than a traditional
company.'' If we take the man at his word, it would seem to
raise the question: Can the U.S. Government tolerate the
existence of a rival government within its territory?
In 1776, we answered that question with a resounding no,
and then fought a Revolutionary War to make it so. The slogan
of that war was, ``Don't Tread on Me.'' This spirited
insistence on self-rule expresses the emotional core of
republicanism. As Senator Klobuchar points out in her book,
``Antitrust,'' the slogan was directed, in particular, at the
British Crown's grant of monopoly charters to corporations that
controlled trade with the Colonies.
Today, the platform firms appear to many as a foreign
imperial power. The fundamental question, who rules, is pressed
upon this body once again.
Thank you.
[The prepared statement of Mr. Crawford appears as a
submission for the record.]
Chair Klobuchar. Thank you very much. Mr. Zittrain.
STATEMENT OF JONATHAN ZITTRAIN, PROFESSOR OF
LAW AND PROFESSOR OF COMPUTER SCIENCE,
HARVARD UNIVERSITY, CAMBRIDGE, MA
Professor Zittrain. Thanks very much. The Internet of
Things might join artificial intelligence as being a little
like asbestos. It's very useful. It can accumulate in your
house without you really thinking about. It may cause
unforeseen problems that make you wish it were gone, at which
point, it's hard to get a do-over.
It's easy to look back at the way the internet developed,
and feel like it was all inevitable. It was not. A few decades
ago, we were on a course toward a very different future. I
know, because I was there, and I was very excited about it. In
the late 1980s, I was a teenage administrator on what I thought
was the future of networking, CompuServe. That's right. I was
the coolest kid on my street.
CompuServe and its many proprietary competitors were walled
gardens. If you were on CompuServe, you could email only other
CompuServe users, and you could only visit pages and services
that CompuServe set up. That tended to lock you in after you
joined. CompuServe failed, along with all its many competitors,
because a small group of engineers, standards committees, and
National Science Foundation-funded researchers came up with a
different idea: an open standard for letting computers connect
to each other.
That idea spawned a new generative network that rendered my
beloved CompuServe obsolete because it was better. Both people
and companies wanted to join it. Why would they lock themselves
into a CompuServe when they could connect to the internet? That
outcome wasn't inevitable, and individual companies like
CompuServe had no incentive to create it. It came about because
of what seems, in retrospect, like happenstance. A well-timed
alchemy of some Federal funding, some creative open standards,
and a relatively small handful of people with an idea who
happened to have no desire to monopolize it.
Today, when you pick a brand of phone or a smart home
control system, you can lock yourself into that platform. If
you have an iPhone, but decide that Alexa or Google's voice
assistant has some feature you like, such as controlling a new
thermostat, what do you do? You can't easily set up an iPhone
to use Google Assistant; or an Android phone to use Siri, and
that's not because of technical hurdles. It's because of
natural plays for advantage by vendors bundling their own
phones with their own assistants. Your not-so-practical option
is to buy a new phone, which might orphan some of the other
devices in your house. Apologies of my use of the digital
assistants' names woke up the devices of anyone watching this
hearing.
Stepping back, it seems absurd that buying a new telephone
could affect your air conditioner, but that's not an unusual
situation right now, and it has a lot of momentum. At its peak,
CompuServe had about two million users. Today there are over 1
billion Apple iPhones in use, and 2 billion users of Google's
Chrome. There are 100 million Alexa devices out there. That's
the upstart.
My written testimony has more on my suggestions, but here
are a few ideas for actions Congress could take toward a better
future that might not happen on its own. First, reform
antitrust law to foreclose some of the vertical integration and
lock-in strategies that would tempt major vendors. The law
should contemplate breaking the artificial connection between
which phone we purchase and which assistant we are to use,
between which assistant we use and which devices it can
instruct, and for the devices themselves between what hardware
we purchase and who can write the software that runs upon it.
To deter lock-in, devices that lose their internet
connection should keep working at least as well as their non-
smart counterparts. No one who buys a coffee maker expects it
to stop working one morning because the company who made it
decided to charge a subscription fee or pivot to mouse traps.
Second, Congress should subsidize people and organizations
developing freely licensed standards and software for smart
devices, and protect those who want to tinker with those
devices and test them for security and privacy. Basic support
for internet protocol development was perhaps some of the best
bang for the buck that the American taxpayer has ever seen in
the history of this country. Those investments pay off, and we
should make more of them.
Third, law makers must set new rules around privacy for the
always-on passive devices all over our homes that can be used
or conscripted to glean constant telemetry, including audio and
video. For many of them, there's simply no way to discover what
they're recording and where they're sending it, whether for
their own purposes or under legal process. We need consistent,
transparent, and appropriately restrictive rules of the road
now before habits of survallience for home technologies are
established and then deemed indispensable.
At least as important, security won't provide for itself.
We need to cultivate a new generation of well-governed App
Store-style marketplaces that can vet applications for safety
without becoming anti-competitive tools. Technology regulators
so often have to take a deep breath and throw a dart somewhere
between too early to tell and too late to do anything about it.
Now is the time to arrive at a vision for what the public
interest demands of this new, promising, and perhaps enduring
set of technologies, and to set clear boundaries for market
players to appreciate and respect. That can help prevent the
problems that will be much harder to patch later.
Thank you very much.
[The prepared statement of Professor Zittrain appears as a
submission for the record.]
Chair Klobuchar. Very good. Thank you to all of our
witnesses. I'll get started, and then I'll turn it over to
Senator Lee. I know Senator Blumenthal is going to be joining
us very soon.
We have heard concerns. I guess I give this to Mr. McCrate
and Mr. White. We've heard concerns that the prominent role
that Amazon and Google play in connected home technologies
could allow your companies to limit or degrade the ability of
smart devices so their companies to operate seamlessly in the
connected home. In theory, you could do this by excluding or
limiting the functionality of competing devices. For now, your
companies do talk about promoting interoperability, but as your
companies expand their connected home device offerings and it
becomes a bigger and bigger market, much bigger than where it
is now, I have concerns about your incentives to preference
your own connected devices over competing products.
Given some of the other self-preferencing we've seen in
other aspects of the tech business, why shouldn't we be
concerned? Even if you're promoting interoperability now, when
these markets are developing, what is to stop you from changing
your policies once you have an even more entrenched market
position? What commitments will you make here today, under
oath, about specifically how you will support interoperability
for how long, and who will oversee these commitments to ensure
compliance for connected home devices?
Those were a lot of questions, so Mr. McCrate, I'll just
sum it up in even if you're promoting interoperability now,
what's to stop you from changing your policies? That's first.
Number two, what commitments you'll make here today about how
you will support interoperability? For how long? Who will
oversee those commitments? Mr. McCrate, do you want to get
started?
We could go to----
Mr. McCrate. Particularly----
Chair Klobuchar. We could go to--again, we could go to Mr.
White first if we want.
Mr. White. Thank you for the question, Senator Klobuchar.
As we've, and several of the other panelists here have said,
this is a new and evolving space. It's very dynamic. I can't
predict what the future of this space will look like, but early
signs are promising, and I think you are grappling with the
right questions of how do we ensure we maximize the benefits of
where this space is heading, and mitigating against some of the
potential issues.
One of the areas that we've identified as an industry is
this area of interoperability, and there is a robust
conversation happening across the industry to try to address
some of these issues. As I mentioned in my testimony, we joined
with almost 200 other companies to work on this secure
connectivity standard; an open protocol so that these various
smart home devices and smart home ecosystems can interact with
each other. That's a promising conversation. The industry is
engaged in that. We are contributing to that.
I think one of the mitigators to the risk that you're
identifying is the fact that it's not just the big companies
that are a part of this working group. It's companies big and
small, and we're hoping that more companies get involved in
this working group so that it really is sustaining this--the
evolution of this technology well into the future.
Chair Klobuchar. Okay. Other than the working group, which
I appreciate, can you specifically say that you will support
interoperability and answer who's going to oversee those
commitments?
Mr. White. Yes, Senator. Generally speaking, on
interoperability, we support, and we will support. It's kind of
our corporate ethos to support openness.
There's some technical specifics on specific
implementations. Like, this is an evolving space where you have
a very diverse set of devices form factors. It's not clear yet,
today, that each of those various form factors will have the
same evolutionary path. I think we need to continue to follow
that and continue to invest and innovate in this space with the
North Star toward interoperability. At a general level, I can
say that.
Then, who oversees this. I think, right now, the industry
is doing a good job of tackling some of these questions. I
think our position would be let's see where the industry--where
the industry can get. And if there are areas where we need
additional help or oversight, I think that's a great area for
this group, across policymakers, academia, civil society----
Chair Klobuchar. Okay.
Mr. White [continuing]. And the private sector to work on
it.
Chair Klobuchar. All right. Thanks. Mr. McCrate, do you
want to answer?
Mr. McCrate. Thank you.
Chair Klobuchar. Okay. I think we hear you there.
Mr. McCrate. I apologize for the challenges here.
Chair Klobuchar. Don't worry about this. It's fine. Go
ahead.
Mr. McCrate. Sure. Thank you for the question. It's a super
important topic. Amazon strives to be Earth's most customer-
centric company, so we make all of our product decisions,
working backward from what we think is in the best interest of
the customer. That's true today and it will be true in the
future.
We think having--giving customers the option to use
multiple different assistants from a single device is
important. We think interoperability is important. We want
customers to have a simple smart home experience where they can
buy a device in a store without a lot of thought of whether
it's going to work with their assistant at home, and things
just seamlessly work.
We are continuing to be focused on making that device
simpler for customers and making sure Alexa works with devices
from all manufacturers.
Chair Klobuchar. Okay. Are you going to ensure us that you
will always support interoperability and who's going to oversee
that?
Mr. McCrate. Senator, I can assure you that we will always
work backward, in the motion of the best interest of our
customers. We think that includes interoperability.
Chair Klobuchar. Thank you. Mr. Lazarus, as a seller of
connected devices at Sonos, that interoperate with Amazon and
Google, does the testimony that you just heard, does that give
you any comfort?
Mr. Lazarus. Not a lot of comfort, Senator.
Chair Klobuchar. Okay. Could you explain why?
Mr. Lazarus. That just give an example on the voice
interoperability. I was interested to hear the emphasis that
the representative from Amazon put on the voice
interoperability initiative----
Chair Klobuchar. Is your microphone on there?
Mr. Lazarus. I apologize.
Chair Klobuchar. That's okay.
Mr. Lazarus. I was very----
Chair Klobuchar. We're having a lot of interesting,
connected speaker issues. No. Okay. Continue on, Mr. Lazarus.
Mr. Lazarus. Could you hear the beginning of what I said?
Chair Klobuchar. You can start over. It's fine.
Mr. Lazarus. I said it didn't give a lot of comfort,
Senator. I wanted to give an example. I was interested to hear
the emphasis that the representative from Amazon put on the
Voice Interoperability Initiative, which is actually an idea
that Sonos promoted to Amazon. The reason I'm interested in
this is the interplay between Amazon and Google here is that it
catches us in the middle.
We actually invented a technology called Concurrency, which
allows you to just look at your speaker and channel into a
variety of voice assistants just using wake words. If you look
at the speaker and say, ``Hey, Alexa,'' it will go into Amazon.
If you say, ``Hey, Google,'' it will go into the Google
Assistant. Or another assistant if there were one.
Google contractually prohibits us from using that
technology, and the Voice Interoperability Initiative, which is
an excellent idea, and we appreciate that Amazon is partnering
with companies, it's just an on-ramp into the Amazon ecosystem
now because you can't mix and match between the big companies.
That's, as Professor Zittrain mentioned, that mixing and
matching ability is crucial when you talk about
interoperability. We would hope that this Committee would look
very carefully as the House Subcommittee did at requiring that
ability to go between the ecosystems seamlessly, and not just
enter one ecosystem with your device.
Chair Klobuchar. Okay. Thank you. Professor Zittrain, in
the European Commissions Preliminary Report about connected
home devices, many connected device manufacturers cited
interoperability as a significant barrier to market entry or
expansion. Are company-lead interoperability efforts the best
way to have a competitive and interoperable home tech
ecosystem? What do you think would work better?
Professor Zittrain. Thanks very much for your question. I
think the answer to that lies a little bit in the previous
exchange. It's totally understandable that our industry
colleagues would say, ``Yes. We like competition. We're here to
promote it. We'll let you know if we need help.'' It's the kind
of thing that may be better as setting certain ground rules for
competition than simply waiting to see if any of them has a
motive to sort of dash if they find themselves in the lead.
I think, for example, Mr. McCrate's discussion of the
current positioning of Alexa and its commitment to
interoperability rings true as pretty accurate to me. Of
course, I might ask him, ``Well, is it possible for somebody to
sell books on a Kindle that they're not going to run through
Amazon?'' That might be a little trickier because that's a
different market in which Amazon has a different configuration.
That gets back to your question about industry initiatives.
They can be very well organized if you bring the right--
``right players'' to the table. They can come to an accord, and
then very quickly, if they are serious about it, implement it
through their respective ecosystems.
The drawbacks are also significant because it may turn out
that they come to an agreement that in turn, to use antitrust
lingo, restrains trade that works for them but not for
everybody else. Figuring out how to have industry associations
and standard-setting processes that might be in a more open,
multi-stakeholder as they call it, realm. In my own testimony,
I liken it to that of the Internet Engineering Task Force,
which has corporate participation, but not corporate
governance. It's those processes that you can't copy and paste
them over, but might be worth exploring to see how best to
represent all of the many spinning gears of this ecosystem.
Chair Klobuchar. Okay. Very good. I'm just going to ask
just one really fast question because we have three Senators
here.
Mr. White and Mr. McCrate, just one-sentence, two-sentence
answers. You store your connected speakers--you store what your
connected speakers hear from consumers in their homes when they
ask something like, ``Play Lizzo, or Prince, or Bob Dylan,''
not to mention only Minnesota artists.
How do you monetize the data you collect from your digital
voice assistants? How much revenue did that generate for each
of your companies last year? Do you monetize that? Mr. White,
you can go first again, if you'd like. Or Mr. McCrate.
Mr. White. I'm happy to go first, Senator. On the financial
side of things, I don't think we break down our profitability
by product area that way. The numbers that I'm able to share
are the numbers that are in our public SEC files on that
particular part of your question.
In terms of how we monetize the data, when you are
interacting with the Google Assistant, your voice recordings
are not stored unless you decide to have those recordings
stored. Then, we give users transparency and control over the
data that's actually being collected from the Google Assistant.
They can go into their Google account, see what data is being
collected. They can make decisions around how that data is
used, whether they want to delete it. Recently, we actually
changed our data retention policy so that for new users, data
is on an auto-delete schedule.
Chair Klobuchar. Okay. Mr. McCrate, do you want to add
anything?
Mr. McCrate. Senator, privacy is the foundation of how we
approach Alexa and our Echo devices. We do not sell customers'
data. We do not sell customers' voice recordings. We make money
through Alexa when customers use paid Amazon services, like our
Amazon Music subscription.
Chair Klobuchar. Okay. All right. I'm going to turn it over
to Senator Lee. Then following that will be Senator Blumenthal,
then Senator Hawley.
Senator Lee. Thank you. Mr. McCrate, I'd like to start with
you. Before we get into smart home devices, I want to follow-up
with you regarding a response that I received from a person
named Shannon Kellog at Amazon. Representative Ken Buck and I
received a letter--we sent a letter to Jeff Bezos with some
fact-finding questions related to some very serious concerns
about Amazon's involvement in the Jedi procurement process at
the U.S. Department of Defense. Instead of a helpful reply, or
any kind of a meaningful engagement from Mr. Bezos or anyone
else at Amazon, we instead received a form letter from Mr.
Kellog, rather cavalierly dismissing our concerns entirely and
refusing to answer our questions.
First, I hope your level of engagement with us today will
rise above that abysmally disappointing level. More
importantly, will you promise to raise this issue with Mr.
Bezos, to ensure that we get some actual answers to our
questions? To be honest, Amazon's initial refusal to answer our
questions only makes it look like there's something to hide. Is
there?
Mr. McCrate. Senator, no. I don't believe so. That's not an
area that I'm familiar with, but I will certainly raise it with
my colleagues, and we can follow-up with your office with more
details.
Senator Lee. Okay. Thank you. This is deeply concerning to
me, and as I'm sure you can appreciate, I expect that when I
raise a very serious question that it will be met with a
serious answer. We did not receive that, not in the slightest,
from Mr. Kellog.
Dr. Crawford, for years I've been concerned about the
Federal Government violating the civil liberties of the
American people, and you raised, in your opening testimony,
some very valid points about how any American concerned about
how civil liberties might be eroded by Government should
likewise be concerned about how that might happen with Big
Business and Big Tech in particular.
We're all voluntarily installing internet-connected
microphones in our kitchens, our living rooms, and even as you
point out, in our bedroom. Do you see a risk that Big Tech and
Big Government might actually work together in the future to
the detriment of the people? In particular, work together in a
way that they could find a way to circumvent some of the
protections that lie against Government simply by virtue of the
fact that they're going through a third-party intermediary
who's been invited into the home?
Mr. Crawford. Thank you for that question. I think it gets
at something very important. One point of historical
comparison, so the progressives of a century ago, Teddy
Roosevelt's time, took on the monopolies not out of class
warfare, but because they understood that once it progresses
beyond a certain point, the concentration of economic power
becomes incompatible with representative government.
What are the prospects for that kind of corrective action
today? Many of today's progressives appear to be preoccupied
with cultural issues rather than securing the conditions for a
widely-shared prosperity. This gets to your question. Will the
tech firms enjoy a light regulatory touch in exchange for
becoming enforcers of a top-down social transformation? This--
the work of censorship would be outsourced to private
corporations not subject to the First Amendment. A creeping
substitution of constitutional government with the kind of
governance we associate with HR departments.
I think any dissident-minded person today fears that kind
of consolidation of power along an axis that runs from DC to
Palo Alto. I think these two polls need to remain separate and
opposed if self-governance is to remain viable.
Senator Lee. Would you agree with me if I added to that
statement, which was very well expressed, that it wouldn't
necessarily even need to be contingent upon a quid pro quo
arrangement for light regulatory touch in exchange for
participation in assorting, sort of brooding omnipresent police
state? This could happen much more subtly, just simply by
virtue of the fact that the First Amendment itself applies to
governments and not corporations. Once a corporation has been
invited into someone's kitchen, living room, or bedroom,
they're collecting business information. That business can then
choose to sell that information to others, including a
government.
Mr. Crawford. I think that's right that quite apart from
any--you know, actually a sort of collusive arrangement, the
issue is cultural. It often appears, you know, from a fly over
country or just a lot of places, that there is a kind of
clearancy that shares a lot of presuppositions about the need
to transform society, and that there's a like-mindedness there.
It doesn't require coordination. It's this--I'm just trying to
give voice to this feeling that we kind of entered a more
oligarchic phase of American history and the power operating in
sort of obscure ways that hard to put your finger on.
Certainly, the mentality that prevails, you know, in Big Tech
is very much aligned with the most progressive elements of the
Democratic Party.
Senator Lee. I've got that--another question that I think
relates to that in some ways. Many of us have heard about
Amazon Sidewalk by now, a feature, if you call it that. Amazon
Sidewalk, a feature of Amazon devices in the home that will
share your internet connection with strangers to facilitate
Amazon services like device location, et cetera. It will do
that unless you affirmatively opt out. Is that something that
you think people ought to be concerned about from a civil
liberties standpoint?
Mr. Crawford. We, I have no expert knowledge or any
knowledge about that in particular. Just speaking as a citizen,
I certainly wouldn't want the comings and goings of, my friends
known in that way. Because we don't know what use that
information has.
There is something called pattern of life analysis. It was
developed for military intelligence purposes that has become, I
think, a prominent part of the business platform. In other
words, if you know peoples' comings and goings, and who they're
meeting with, you can infer quite a bit about people. This has
become one of the planks in the surveillance economy.
Senator Lee. Madam Chair, I see my time is expired. Can I
ask one follow-up question----
Chair Klobuchar. Of course.
Senator Lee. Mr. McCrate, tell me what you're doing. How
are you protecting--how, if at all, are you protecting your
customers' internet security and privacy using this Sidewalk
feature?
Mr. McCrate. Yes, Senator. Protecting the privacy and
security of our customers' data is foundational to everything
that we do at Amazon. Both privacy and security were built into
the Sidewalk Network from the ground up. We apply multiple
layers of encryption to the traffic passed over Sidewalk to
ensure that customers' data is safe and secure.
Senator Lee. All right. I'm going to want to follow-up more
on that later. Thank you, Madam Chair.
Chair Klobuchar. Excellent. Next up, Senator Blumenthal.
Senator Blumenthal. Thank you, Senator Klobuchar, and thank
you for pursuing these very, very enlightening and instructive
hearings. Fortunately, we're not required to read the book--the
book before the hearing, although I am already a major part
through it----
Chair Klobuchar. Very good.
Senator Blumenthal [continuing]. And much better equipped
because of it.
Chair Klobuchar. Okay. I noted the pages you were mentioned
on, Senator Blumenthal.
Senator Lee. I've also translated into Swahili.
[Laughter.]
Chair Klobuchar. Okay. Please continue, Senator Blumenthal.
Senator Blumenthal. Thank you, Madam Chair. In April--well
first, let me say I know earlier in the hearing, I heard
Senator Klobuchar welcome Lina Cohn----
Chair Klobuchar. No. That's not--I don't think it's
officially announced yet.
Senator Blumenthal. I want to welcome her to the FTC, and I
think it will begin a new chapter in the FTC's work, and I look
forward to working with her and the entire FTC, as does Senator
Klobuchar in this vital area of enforcing antitrust.
In April, this Subcommittee held a really compelling
hearing on competition in the app store marketplace, familiar
to all of you. We heard really stunning reports about how
Google and Apple use their control over the app stores and
mobile operating systems to extract rents, really exorbitant
rents, and exclude rival products.
One of the witnesses was Tile, an Internet of Things, a
product designed to help consumers find their lost items, as if
to illustrate the point right before our app store hearing,
Apple launched AirTags, which appears to be a carbon copy of
Tiles products. At the hearing, Tile shared its concerns that
Apple was using its control over iPhones and Apple's operating
systems to unfairly limit competition and benefit AirTags over
Tile products. Though the app store Apple had access to Tile's
sensitive business information with no guarantees Apple would
not repurpose that data to advantage its own products. Tile has
also claimed that Apple has blocked or limited its access to
new iPhone features.
The app store and mobile market have almost taken over the
digital economy. As all of us here know, more and more
consumers are using mobile phones as opposed to laptops or
desktop computers. I believe this area is one where it is
really appropriate for Congress to set some clear, bright lines
about what these gatekeepers can or cannot do.
Let me first turn to Mr. White. As you recall, at the app
store hearing, you testified that it was your ``understanding''
that Google has ``data access controls in place that govern how
data from our third-party services are used.''
I really want to set the record straight. Google performs
platforms for businesses to distribute apps through the Google
Play store and its Internet of Things Echo System. Does Google
have a firewall? Does it have a firewall between these
platforms and its product development teams? In other words,
does Google ensure that the data it collects from third-party
software developers, often sensitive business information, is
not used to compete with those developers?
Mr. White. Thank you for the question, Senator, and good to
see you again in this forum. As I said in the previous app
store hearing, we do have data accessing controls in place. We
also have internal policies in place that govern how we use
data that we get from our partners for competitive purposes.
Senator Blumenthal. You're saying there's an impenetrable
firewall that prevents any exchange of information?
Mr. White. Senator, I can't say that. The term ``firewall''
may have technical understanding of that, and I can't say
that----
Senator Blumenthal. That's why I asked the question with
that word.
Mr. White. Yes. I can't say that, as I sit here today. I'm
happy to have our team follow-up with you to get more specifics
on that. I do know that we have data access controls in place
and internal policies that govern how we use data from our
valued partners.
Senator Blumenthal. From what I take in my understanding of
your response, there is no firewall. There are policies. There
are controls, but no firewall. I'd be happy for your team to
provide more detail. My understanding there is no firewall.
Let me ask Mr. McCrate the same question. You provide one
of the largest marketplaces for electronics, and you provide
the Alexa Voice Assistant to third parties. You collect a lot,
and I mean tons, of confidential business information about
your competitors. Does Amazon have firewalls, I use that word
``firewalls,'' to ensure that it does not use competitors' data
against them or rig the system for Amazon's own product?
Mr. McCrate. Senator, preserving the trust of our third-
party partners is critical to the success of Alexa. We know
that we have to use the data that we receive appropriately in
order for third parties to continue to work with us and make
their services available.
We focus on using the information we receive through
customers' use of Alexa to improve Alexa overall, including for
our third-party partners.
Senator Blumenthal. I'm going to take this as a no, you do
not have firewalls. My time is limited, so I'm happy to have
you respond further in writing. You have no firewalls.
Professor Zittrain, as gatekeepers, Google, Amazon, and
Apple have access to troves of sensitive business information,
as we all know, about their competitors. Don't we need
firewalls between app stores, Internet of Things, platforms,
and other product development teams to restore competition to
marketplaces?
Professor Zittrain. Yes. I'd be supportive of that. I think
that it's understandable that companies, as creative and big,
and with as much spare cash as some of the ones you've
mentioned, they're going to want to get into all sorts of
different businesses. There may be, in that classic word
``synergies'' among them; and that's how you can be both the
platform offering something and then one of the vendors on your
own platform. It's the way Google might offer ads on its own
service for its own stuff. There are sensitivities around when
that form of involvement in so many different aspects of what
otherwise is a marketplace with different players amounts to an
unfair thumb on the scale where instead of the most innovative,
or the cheapest, or the best product winning, you end up with
the one that is sort of on the home team. The sorts of
prophylactic measures you're talking about would be a way of
being able to say, ``Look, if you want to play in multiple
spheres here in their interlinked ones,'' you know, ``we
understand that might be worthwhile.'' There needs to be ways
to ensure that you don't end up in a winner-take-all
environment because of your doing that.
Senator Blumenthal. Thank you. You know, I'll just say in
conclusion, and I apologize I'm a little bit over my time. In
the days of the progressive, mentioned by Mr. Crawford, the
power was in railroad tracks and in oil wells. What we have
here is power in data. Control over data, whether it's the
privacy of individual consumers, data which should belong to
her, or the data that is collected by these behemoths, Amazon
and Google, where they can use it in effect against their so-
called customers and compete against them unfairly, and deprive
consumers of innovation and competition.
That's the reason that we're here today, because the
Internet of Things threatens to become a vehicle for anti-
competitive steps when these behemoths weaponize it. I think we
need to take bold action, like lines of business restrictions
and data firewalls to prevent Big Tech from weaponizing those
troves of sensitive data to further their own business
interests and squash competition. Again, I think we have here
conflicts of interest where gatekeepers and operators of online
platforms and marketers of their own products have dual and
conflicting roles, and it's an environment, as a result of that
conflict, that is rife with exploitation and appropriation
every bit as serious as in the days of the oil well titans or
the railroad behemoths, even though it's a lot less visible.
Thank you, Madam Chair.
Chair Klobuchar. Thank you very much, Senator Blumenthal.
Next up, Senator Hawley. Thank you.
Senator Hawley. Thank you very much, Madam Chair. Thanks to
you and the Ranking Member for organizing these hearings. I
just want to say, in response to some of the last comments from
the last witness, that I personally don't think--I always put
my cards on the table. I don't think there's any reason that
one company aught to be able to be simultaneously--let's take
Amazon for example, a book retailer, a movie studio, a grocery
store, a delivery network, a clothing business, a smart home
business, a TV network, a web technology hosting company, an e-
reading manufacturer, a digital music vendor, a game studio, a
publishing house, and I could go on. Those lines of businesses
aren't related. What we see here, there's a pattern.
You know, these hearings that the Chairwoman has organized
against different industries, there is a distinct pattern here.
We always have the same two or three people are here every
single time: Amazon, and Google, and Apple are here at almost
every hearing. Why? Because they have--they're dominate market
players that are leveraging their dominance in core markets,
and using it to capture dominance in other markets.
It's always the same story, no matter the industry. It's
these two or three behemoths, and then it's some competitor who
they're trying to edge out, and they're trying to box out by
using their market power. We see it over and over, and we see
the same tactics over and over. We see predatory pricing. We
see self-preferencing. We see exclusionary conduct, and we're
seeing it here, in the market that we're talking about today.
I mean, here we've got these companies using their power in
voice assistant services and smart home technology to fortify
their existing search, and shopping, and other lines of
businesses. Again, they do it by cross subsidizing it--cross
subsidizing. They do it by using third-party data that they
have access to. They use it by--they do it by insulating their
own offerings to squeeze out the competition, for instance by
making their own services set as defaults, which is what Amazon
has done with the Sidewalk device setup that Senator Lee was
asking about.
All of that to say I think we're seeing a pretty consistent
pattern here, and I think the time has come to say that we have
got to prevent these massive dominate firms from buying up
market share and using their own dominate positions in one
market to leverage into a dominate position in another market.
I propose legislation to do this. I know the Chairwoman has
legislation of her own that would also update our antitrust
laws. I hope that we can find some agreement here to go forward
because I think it is becoming more and more apparent that we
need big changes in order the confront the big problems that we
have across these different markets.
Mr. McCrate, if I could just come back to you. I want to
follow-up on Senator Lee's line of questioning when it comes to
the Amazon Sidewalk device setup. Why did you decide to make
Amazon Sidewalk opt-out only rather than opt-in? Why did you
set the default that way?
Mr. McCrate. Senator, we make all of our product decisions
at Amazon by working backward from the customer. We think the
Sidewalk network has many benefits that will help customers
better manage their devices, find lost items, and simplify
their smart home setup.
We inform customers about Sidewalk. We make it easy for
them to choose whether they want to participate.
Senator Hawley. Yes. You didn't really answer my question.
I mean, are you worried that your customers would not want to
opt-in? I mean, is that why you set the default the way you
did? Why did you make it difficult? I bet most of your
customers don't even know about this. Why did you default it to
opt it in, and then go figure out how to opt out of it? I mean,
why was the default set where it was?
Mr. McCrate. Senator, we set the default the way that it
was because we think that's the best experience for our
customers. The Sidewalk network provides many benefits in
helping customers keep their devices online and simplify setup.
We did email all customers and notify them that Sidewalk was
going to be available and make it easy for customers to
configure that setting.
Senator Hawley. What's the--well, I'd be interested to see
from a customer's perspective if they think it's easy. What
steps have you taken to ensure that users who's been with get
tapped under this program will not be held liable for any
misuse of their internet connection, or for violations of
Amazon's terms of service by devices from another household?
Mr. T4McCrate. Senator, the Sidewalk network uses only a
very small amount of information. It's help--I think there's a
lot of misperceptions in the press about what Sidewalk is or
isn't. It's not about sharing your internet network to allow
someone to stream a movie, or to check their email, or to
browse websites. It's really focused on sending very small
amounts of information over distances that can't be covered by
WiFi.
Senator Hawley. The Kindle Fire tablets don't----
Mr. McCrate. I think I----
Senator Hawley [continuing]. Have access to the Sidewalk
network?
Mr. McCrate. The tablets might use the Sidewalk network to
help set up another device, but they don't access the internet
or browse websites over the network. An example that might be
helpful, just going back to Tile--talk. Sidewalk network, like
many services at Amazon, was designed to help and enable third-
party developers. Tile, which makes small devices you can
attach to your keychain or put in your purse to help find lost
items, is one of the partners we're working with on Sidewalk.
Today, if you lose a Tile device, you can find the Tile
device if another customer with the Tile app on their phone
happens to walk by that device. A small amount of information
gets sent to the device to that customer's phone through the
internet to the customer who lost the device. Sidewalk just
enables an extension of that, so now you can find your device
if it's within range of a Sidewalk-enabled Echo device.
Again, it's a very small amount of information. Here is the
lost device. Here is the approximate location. The customer who
lost it can help find it.
Senator Hawley. Let me ask you this, in your Sidewalk
paper--the Amazon Sidewalk white paper, you say, ``Amazon
Sidewalk won't support third-party devices immediately at
launch, but we will make careful choices about the information
they receive from Sidewalk. We'll have more details in the
future.'' What third-party devices do you plan to give access
to the Sidewalk network?
Mr. McCrate. Senator, I don't directly support the Sidewalk
team, and I don't have all of those details, but I do know that
Tile is one of the partners we're planning to launch with.
Senator Hawley. Can you give me an answer to that question
in writing, then, what third-party devices you plan to give
access to? Because it seems to me like you're in a bit of a
bind here. On the one end, if you don't open this network up to
third-party devices, then that looks like anti-competitive
conduct. On the other hand, if you do open it up, you've
created a situation in which Amazon device owners, by default
because you've opted to set the default as opted in, not opted
out, they might be inviting all kinds of potential security
threats into their home because of the internet connection. It
seems to me like a pretty relevant question. Can I get an
answer from you in writing about what devices you plan to give
access to?
Mr. McCrate. Certainly, Senator. I'd be happy to do that.
Senator Hawley. Let me, in my brief time remaining, let me,
Mr. McCrate, just ask you about this. What's the cost to make
and sell an Alexa unit approximately?
Mr. McCrate. Senator, I don't have that figure handy.
There's a wide variety of devices in our lineup that come at
different price points and with different costs.
Senator Hawley. Have these products--has the Alexa unit
ever been sold to consumers below cost?
Mr. McCrate. Senator, I'm sure that it has. We focus on
producing our devices as a low cost as possible so that we can
provide competitive pricing to customers. We frequently have to
price match or put our devices on promotion to compete with
other devices. In those instances, I'm sure there's instances
where it's sold below cost.
Senator Hawley. Yes. I'm sure there is too. I'm glad you
admitted it, and I'm sure that Mr. Lazarus could probably speak
to this as well. I mean, when you're facing somebody like
Amazon that has the ability, this is classic cross subsidizing.
They have the ability to sell their units at sometimes
dramatically, probably, below cost for the idea of pricing out
a competitor, it's kind of hard to compete with that. When you
have somebody who is deliberating doing this as policy.
I know I'm over time, Madam Chair. I'll stop here, but
maybe I'll get Mr. Lazarus if it's all right with you. It looks
like it must be. Is that all right with you, Mr. Chairman?
Senator Lee [presiding]. Yes.
Senator Hawley. Good.
Mr. Lazarus. I can be very brief, Senator.
Senator Hawley. Go ahead.
Mr. Lazarus. Amen. It does happen. The devices are even
given away, and it makes it very difficult for companies that
have to make money on the devices as opposed to making money on
the data.
Senator Lee. Okay. Senator Ossoff.
Senator Ossoff. Thank you, Mr. Chairman. Thank you to our
panel. I'd like to begin with you, Mr. McCrate. Regarding
Amazon products that function with connections to WiFi
networks, what data regarding other devices on those same
networks produced by other manufacturers might Amazon devices
collect, particularly Amazon devices that act as a hub or a
bridge between various networked devices?
Mr. McCrate. Senator, I believe you may be referring to
smart home devices that would operate on the same network as,
for instance, an Echo device. Some of our Echo devices include
hub technology, ZigBee in particular, to allow customers to add
smart lights, smart door locks, other things like that through
an Echo device to the internet. In that case, we do receive
information about the status of those devices so that we can
control them on customers' behalf through Alexa.
Senator Ossoff. You'd be collecting information, for
example, in that case about when, where, and in what rooms
customers may be turning on or off the lights; when and where
within their homes they might be using connected cleaning
devices. What other kinds of information might you collect from
third-party devices on the same network as yours? What is the
utility of that data to you from a marketing and commercial
standpoint, please?
Mr. McCrate. Certainly, Senator. Again, in instances in
which customers have connected a smart home device to Alexa,
they want to be able to use Alexa to control that device.
Knowing whether, for instance, a smart light is on or off makes
it easier for us to actuate a route a customer's request if
they say, ``Alexa, turn off the light.'' We would need to know
which lights are on and which lights are off in order to know
which light to direct that to.
We also have a feature where we can proactively notify
customers if something seems off in their house. If they have
left the basement light on late at night, Alexa can notify them
that their light is on and ask them if they would like us to
turn them off for them.
Senator Ossoff. Does that kind of data allow you to
generate market insights, pattern of life information, that
makes you better able to market products to those customers?
Secondarily, do you ever sell any of that data to third
parties?
Mr. McCrate. Senator, no. We do not sell customer data at
Amazon. We're focusing on using the data we receive through
customers' use of our services to provide and improve the
services on behalf of customers. We also put customers in
control of that data. For smart home data in particular,
customers are able to delete that data on demand, or configure
Alexa to automatically delete that data after certain time
periods.
Senator Ossoff. Just returning to the first half of my
question. This allows you to build, particularly as more and
more such devices are implemented in a customer's home, a
pretty comprehensive picture of their pattern of life. When and
where they are moving within their home. When and where they're
activating devices, turning lights off and on, perhaps using
devices related to sleep or childcare. Is that data useful to
Amazon from a marketing and customer profiling, customer
insights standpoint?
Mr. McCrate. Senator, we use that data to provide and
improve the service that we make available to customers. In
particular----
Senator Ossoff. It gets----
Mr. McCrate [continuing]. I can't find----
Senator Ossoff. Then forgive me, Mr. McCrate, but my time
is limited. You've made that statement. My question is whether
or not you are able to glean market insights or information
that improves your marketing capabilities by developing pattern
of life information about users of your devices?
Mr. McCrate. Senator, I'm not sure I'm totally following
the question of what you're asking. We do not use that
information that we receive from customers' smart home devices
to serve advertisements to those customers. I could find----
Senator Ossoff. That wasn't my precise question, but I
think we'll be able to drill down a little bit more on some
specific hypotheticals for the record, Mr. McCrate, just to get
more insight as the utility of all this data that Amazon is
gathering from devices connected on the same networks as Amazon
devices. This is a question, we'll start with you Mr. White,
but for both you and Mr. McCrate. Some Bluetooth low-energy
devices are capable of triangulating the precise location of
other Bluetooth-enabled devices. Do any of your products track
the location of phones, wearables, or other devices within the
home or within the range of a WiFi or a mesh network to which
one of your companies' devices may be connected?
Mr. White. Senator, I'm not--I don't think so. I mean, that
can get hyper-technical around the triangulation of location.
What I can--and I'm happy to follow-up with you on the
specifics of that. In fact, I do think there is some technical
issues that I would want our team to get you on that question.
What I can say, generally, though is that what we aim to do is
ensure that users have transparency and control over the data.
They can go into their Google account, see what, for example,
location data may be stored, and they have controls there to
delete that data or dictate how that data is used across our
services. What we've done recently is also have auto-delete as
kind of an automatic--a default function for users. If users
want to make that shorter, they have the controls to do that as
well, Senator.
Senator Ossoff. Okay. Mr. White, thank you. Mr. McCrate,
just to restate the question. Do any of Amazon's products track
the location of phones, wearables, or other devices within the
home or within range of a WiFi or mesh network? I want to add I
believe Amazon owns the Aero product, which is a mesh WiFi
network product. The question Eero whether you are tracking the
location of user devices within homes where your products are
present?
Mr. McCrate. Senator, I don't support the Eero business.
It's a very important question you're asking, and I will make
sure we get you accurate information. I'd be happy to follow-up
with your office.
I do understand that when customers connect devices to
Eero, which is one of our home router devices, that the Eero
would then know which devices are connected so that, again, it
can provide and route internet traffic appropriately.
Senator Ossoff. Thank you, Mr. McCrate. Mr. White, your
privacy statements indicate that the company uses data
collected from user interactions to develop new products and
services, but does not indicate bounds on what kinds of
products that data may be used to develop. Do you use the video
and image data you collect to develop or train facial or object
recognition software or systems?
Mr. White. Senator, if a user decides to have their audio
recordings, for example, from the Google Assistant stored on
their account, we may use in a very randomized way, we may use
some of that audio recording to help improve our speech
recognition technologies. I'm aware of that. A user also has
the ability to not have their audio recordings, for example, or
the images that's saved on their account.
Senator Ossoff. I just want to make sure we drill down on
the question here with respect to video. Your products which
capture video, whether they're digital assistants,
communications tools, or security services, do you use the
video and image data collected through those tools to develop
or train facial or object recognition systems?
Mr. White. Senator, if a user decides to have their video
stored on their account, I'm not sure whether that's actually
used for our--for machine learning models or not. I'm happy to
follow-up with you on those specifics. What we're focused on in
ensuring that users have that transparency around how their
data is being collected, stored, and used.
Senator Ossoff. Okay. We'll get you a follow-up on the
record so you can answer precisely. I greatly appreciate that,
Mr. White.
Mr. White. Thank you, Senator.
Senator Ossoff. Begging your indulgence, Mr. Chairman, just
to direct that same question to you, please, Mr. McCrate. Does
Amazon use video or image data collected by your devices to
develop or train facial or object recognition systems, please?
Mr. McCrate. Senator, none of Amazon's consumer devices
provide any facial recognition features. I'm not aware of any
of the data we collect being used in that way.
Senator Ossoff. Okay. Thank you so much. We'll get you some
more precision for the record as well. Grateful to you both for
your testimony. I yield back, Mister Chairman.
Chair Klobuchar. Thank you very much, Senator Ossoff. I
have returned from my foray into the Commerce Committee.
Senator Ossoff. Welcome back.
Chair Klobuchar. I will now turn this over. Senator Lee, do
you want to go next again? We can go to Senator Hawley, and
then I'll end. If there are any other Senators, we'll, of
course--please let us know.
Senator Lee. Thanks so much, Madam Chair. Mr. Lazarus, I
want to follow-up on a question that you were asked a few
minutes ago by Senator Blumenthal. Tell me--are you concerned
about Amazon and Google copying ideas and impairing competitors
in the same way that we've heard allegations regarding between
Apple and Tile, for instance? Tell me about your concerns with
that.
Mr. Lazarus. Thank you for the question. Two sets of
concerns. One is that in the certification process that we have
to go through with both of those companies, they often extract
information that we think is irrelevant to the technical
questions of integrating their voice assistance on our
products. They learn a lot about our product road maps. They
sometimes ask for sales forecasts and that sort of thing. That
causes us great concern that what they're looking at what would
be a nice product that they might make themselves, and then we
get into the cycle of cross subsidization that Senator Hawley
and I were discussing.
In addition to that, it's, of course, on the public record,
that we believe that both Amazon and Google infringe, you know,
roughly 150 of our patents and have taken some of our core
technologies to build their smart audio speakers. We do have a
lot of concern in that area, and we are very pleased that this
Committee is looking at it.
Senator Lee. Mr. McCrate, does Google's control of Android
and Apple's control of IOS give those companies an advantage in
the smart home space? How does Amazon compete with that?
Mr. McCrate. Senator, I do think there are benefits to
controlling the smart home--smartphone devices that customers
use. Smartphone devices are, again, the primary way customers
access voice assistance today. My understanding is they're also
the primary way that customers control their smart home
devices. Most smart home devices have applications that
customers access through the Google Store or Apple Store, and
then can use to set up their lights, control their ceiling
fans, et cetera.
I do think the fact that the phones are the gateway that
customers use to receive those apps and are the primary way
that customers access voice is helpful to Apple and Google.
Senator Lee. What would you do if Google or Apple cutoff
Amazon's ability to interoperate with Android or IOS devices?
Mr. T4McCrate. Senator, I think it would be potentially
catastrophic. We make a variety of apps available through both
Apple and Google, our Amazon Shopping app, our Alexa app, our
Prime Video app, our Music app, and those are critical ways
that customers access our service on a day-to-day basis.
Senator Lee. Thank you. Mr. White, I've heard that Google
wants to be open as possible when it comes to Internet of
Things, devices. That makes sense while the market is still
growing and while adoption is still on the increase. What
about--what happens when the market begins to plateau? Won't it
then be in Google's interest to start pushing out rivals by
giving preferential treatment to its own devices and to its own
services?
Mr. White. Senator, before I answer that question, let me
just--let me just note that in Mr. McCrate's previous comment
around what would happen with Android operating system, that
the Android operating system really is a free and open-source
system, and Amazon has actually benefited greatly from that in
building their own Fire operating system.
That level of innovation that's come from having an open
platform is something that we've already seen in the market.
It's something that we think also goes to your question around
what happens as this new and evolving space continues to
evolve. For us, we're motivated by ensuring that we're staying
on the cutting edge of giving consumers the information they
seek and helping them in those moments that matter. Users trust
us----
Senator Lee. Google does control the store. I mean, it
controls the store. Right?
Mr. White. We have the Google Play store, which is our
proprietary app store in the Android ecosystem. There are other
app stores, and we allow other app stores on android, including
Amazon's app store. It's really in our interest, and have
demonstrated interest, to ensure that many people are playing
in this space, because that's procompetition. That's
proconsumer. We've seen the benefits of that with the Android
model.
Senator Lee. Okay. I want to ask you, and I'm going to ask
a similar question in a moment of Mr. McCrate. I frequently see
that your company's--your respective companies literally give
away your smart speakers for free. How do you make money off of
that?
Mr. White. Senator, there is multiple ways of generating
revenue from our devices and services, including things like
licensing fees, subscriptions, selling devices directly, and in
this space, it's a very competitive space. You have several
players who are competing in the smart home space.
Microsoft's Cortana. Amazon's Alexa. Samsung's Bixby.
Apple's Siri. The Google Assistant. New players that are
getting into the space as well: Spotify getting into the voice
assistant space. Sonos recently purchasing a voice AI company.
It's a very active, vibrantly competitive space, but it's still
very new.
Senator Lee. Sure. I get that. It's an active, vibrant
space. You still have to make money off of it. I assume you
make money off of it by encouraging use of it. Sort of
analogous of what happens with video game consoles. Is that
fair to say?
Mr. White. Cellular devices, encouraging use of it.
Competing for promotional opportunities. Licensing fees. It's a
multitude of ways that we are exploring in terms of generating
revenue for this business.
Senator Lee. Do you think giving away those devices
undermines competitions?
Mr. White. No, Senator. I do not. I think we compete
vigorously for promotional opportunities. That's a very common
thing in the hardware industry, and we thing that we're very
much in line with the many competitors that we see in this
space.
Senator Lee. Mr. McCrate, what about Amazon? How do you
make money off of giving away speakers?
Mr. McCrate. Senator, if I could--I'm not aware of any
instances where we have given away speakers. We are proud of
the low prices that we are able to offer customers on our
speakers.
That takes a lot of work. We focus on building quality
devices at as low of a cost as we can so we can price them
competitively. We're often not the cheapest devices in the
marketplace, and we frequently have to discount our devices to
price match others.
Senator Lee. Do you think it would----
Mr. McCrate. Mr. White pointed----
Senator Lee [continuing]. Undermine competition if you were
to give them away?
Mr. McCrate. Senator, I can't say in all cases that it
would. Just as an example, there are many different business
models that companies pursue. Building on the comment Mr. White
had, Spotify recently announced a hardware device that they've
made available with their own voice service to allow customers
to access streaming music content.
My understanding is that they are giving that device away,
and then charging a subscription fee for customers to use it.
We think allowing customers to innovate in the business models
is proconsumer and that lowering prices is proconsumer.
Senator Lee. Mr. Lazarus, what's your view on whether
giving away speakers undermines competition?
Mr. Lazarus. It really depends on the circumstance. The
point here is that they're cross subsidizing. It's one thing to
have a business model within the same market where the device
is not the way in which you're getting your profits. It's
another to take your profits from your dominate platform and
subsidize your devices so that you create a virtuous circle
when then feeds back into your dominant platform, and that's
what we believe is going on in this market.
Senator Lee. Thank you. Thank you, Madam Chair.
Chair Klobuchar. Very good. Thank you, Senator Hawley.
Senator Hawley. Thank you, Madam Chair. If I could just
follow-up, Mr. White, on that same point. Can we talk about the
Nest unit for just a second? Have you ever sold that product to
consumers at below cost?
Mr. White. Below?
Senator Hawley. Below the cost it takes you to manufacture
it.
Mr. White. Yes. I don't know the answer to that, Senator,
because we don't break down profitability by product area. I'm
happy to have our team follow-up with you on the details of
that. I just don't have those numbers here.
Senator Hawley. They do exist, though. Right? I mean, you
do know whether or not you have at any point--Google has at any
point sold that product at below the cost to make it. That
exists, presumably.
Mr. White. I actually personally, Senator, do not know. I'm
happy to follow-up with you.
Senator Hawley. Great. Okay. Thank you. I'd like to see the
number. I noticed that Mr. McCrate said that indeed Alexa had
been sold at below cost. I'd be shocked if Nest hasn't. I just
want to come back to the point that Mr. Lazarus didn't--just
made, which is my real interest here, is in cross
subsidization. Let me just ask you a version of the question
that Senator Lee asked you. If you, indeed, have sold the Nest
unit at a price below cost to customers and have done that in
order to undercut a competitor, that's anticompetitive conduct.
Right? Wouldn't you agree with that?
Mr. White. Senator, as I said, I don't know whether we've
sold devices at cost, but what I can say is that this is a
competitive space. We price our products in a competitive way
along with the other devices that are in this space.
Senator Hawley. Let me ask you about a report that Google
released last year entitled, ``Think with Google.'' It was a--
Think with Google report, rather. It was entitled, ``Connecting
the Dots: Five Consumer Pain Points Stalling the Connected Home
of the Future.'' In the report, the authors said that,
``Consumers want seamless integration.'' They went on to say,
``The smart play for industry players is to find ways to
provide consumers with unified access to different content and
service providers, consider building partnerships with other
companies to let people access all of their devices and all of
their apps from one ecosystem.'' Is Google doing that now? I
mean, currently, does Google provide unified access to
competitor services through your smart home products?
Mr. White. Senator, right now what we're doing is learning
in this very new and evolving space. We're working with
partners across the board. For example, we work with over 2,000
device makers who are bringing their devices online as part of
the connected devices evolution. We're partnering with industry
players, big and small, on questions around a secure
connectivity standard. We're very active in the industry here,
and evolving as this industry evolves.
Senator Hawley. Does that mean that you--is that no? Or
does that mean you don't know? I mean, it didn't sound like yes
to me. Are you saying that you currently don't provide access
to competitor devices on your system? Or do you not personally
know the answer to that?
Mr. White. There are examples of that, Senator, on some
form factors. I'm trying to paint a picture that this is very
much an evolving space. It's diverse. For example, on the
Google Assistant, if a user wants to play music on the Google
Assistant, at setup, they can actually choose a default music
provider. We have partnerships with providers like Spotify,
like Pandora. If a user chooses one of those partners, when
they give the command to the Google Assistant to play music,
we'll honor that default choice by the user. That's just one
example. This is an evolving space, and we'll continue to work
with partners as we integrate more actions on Google.
Senator Hawley. I'll give you this question for the record
so maybe we can get some more precision on it. I'm asking
because some journalist reports, for instance, from just a few
years back, as recently as 2017, wrote that you could connect,
for instance, your Apple Music subscription to your Google home
speakers, but you couldn't tell the speakers to turn the volume
down or to change tracks.
The Google speakers could be used to order an Uber or
understand the command to repay Netflix, but if you wanted to
order a toothbrush off of Amazon, then you were out of luck.
Google home products were not very compatible with competitors.
Again, that was as of 2017. What I'm really driving at here is,
are you giving your competitor services equal levels of
functionality to your own services that are offered in the same
market? Can you answer that for me?
Mr. White. I think that's exactly--yes. Yes, Senator. I
think you're getting at the question of interoperability that
we were talking----
Senator Hawley. Right.
Mr. White [continuing]. With Senator Klobuchar and other
about earlier. That is an evolving area. It's a robust
conversation that the industry is having at a technical level,
and we are participating in that. We hope that over time, we
will see more and more of that level of interoperability
between the broad range of smart home ecosystems.
Senator Hawley. Okay. I'll tell you what, I'll give this to
you for the record because I'd like to drill down on that--
that's a very aspirational statement. I'm sure the market is
evolving. I think it would be helpful for us to have an
understanding of what you're doing right now so that we could
see what your current practices are, and measure those against
what other competitors and rivals are claiming. We'll put this
in writing and see if we can't get a little more precise
answer.
Thank you, Madam Chair.
Mr. White. Thank you, Senator.
Chair Klobuchar. Okay. Very good. Thank you. I want to put
a letter on the record. We received a letter from George Slover
at Summit Charma Consumer Reports in connection with this
hearing. I seek unanimous consent to enter it into the record,
without objection?
[The information appears as a submission for the record.]
Chair Klobuchar. All right. Mr. White, one of the concerns
that has been raised is that companies like Google have the
power to exclude competing voice assistants. I've heard that
Google limits the ability of other voice assistants to exist
concurrently with the Google Assistant on its connected home
systems. That could prevent competing general purposed voice
assistants, and even special purpose voice from competing at
all. Why not let other voice assistants operate alongside
Google Assistant?
Mr. White. Senator, in some areas, we do. As I've said
throughout the conversation today, it is an evolving area. For
example, on some Samsung phones, we have the Bixby Assistant
alongside the Google Assistant. This question around
concurrency----
Chair Klobuchar. Is that just in those specific Samsung
phones? Or do you do it routinely, then, where you allow
another voice assistant to operate concurrently?
Mr. White. I don't think that's the case on every device,
but there are different ways of achieving this idea of
concurrency. For example, on one of the Sonos speakers, you
have both Alexa and you have the Google Assistant. What we
require in that area is for the user to manually decide which
assistant they're interacting with because we're trying to
balance the interoperability with other things we care about,
which is the user experience, mitigating user confusion,
privacy, security. That's the area that we're still working in
and innovating in.
There are some technical challenges around having two voice
assistants that are listening at the same time. What happens if
a user asks one assistant to turn the lights on, and another
assistant to turn the lights off? How are those two assistants
working together? There's some technical challenges there that
I think the industry will have to work out. We're not there
yet, but we're actively engaged in those conversations.
Chair Klobuchar. Okay. That's a good segue to Mr. Lazarus.
I'm interested in your thoughts. Sonos recently invested, I
understand, in voice assistant technology. What do policies
that prevent concurrent operation of more than one voice
assistant due to your incentives to further develop that
technology? I think that Mr. White mentioned the Samsung
example. What's been your experience?
Mr. Lazarus. Google contractually forbids us to have
concurrency between Google Assistant and Alexa on our speakers.
Period. Full stop.
We have the technology that solves the problems that he
described. We've offered to demo it for him--not for him, but
for Google. We've demoed it for any number of other regulators
around the world and this country, and we'd be pleased to demo
it for this Subcommittee so you could see what a great consumer
experience it would be. We would encourage Google to allow us
to bring that consumer innovation to market.
That's just an example. There's all kinds of--you need
companies that are Switzerland-like companies that sit at the
intersection of all of these major ecosystems, and that's the
kind of interoperability we need; and we hope that in reforming
the laws that will set some rules of the road that allow for
that.
Chair Klobuchar. Very good, Mr. Lazarus. I don't know if
you've done research since I'm half Sylvanian, as noted by
Senator Lee, but I'm half Swiss. Thank you very much for
bringing this up.
Mr. White, how would you--how would you respond to what Mr.
Lazarus just said that he would love to do this? He'd love to
demo it. He'd love to show it. Just concerns that this is, you
know, eliminating the incentives of a number of companies to
develop voice recognition technology because it sounds like the
modus operandi for the most part is not to allow concurrence,
even though you did illustrate one example?
Mr. White. Yes. I gave you that one example. Senator, it is
early days. Mr. Lazarus, early in my career, I was an engineer,
so I'd love the opportunity personally to see the demo, aside
from the question--the policy conversation that we're having
here.
It is an evolving space, Senator Klobuchar, and we're
working through those issues. There has to be a conversation
around the consumer protection issues, around privacy,
security, consumer confusion, and the consumer experience
itself. Today, this idea of having a user have the ability to
manually switch between the voice assistants, that exists
today. That switchability exists today. You have two assistants
on the same device.
This will evolve. I think as we are balancing those various
factors, we will get to a place where we're bringing more
innovation to consumers and more benefit to consumers. We look
forward to continue to innovate in this space.
Chair Klobuchar. Mr. Lazarus, could we turn to some
solutions to this? You mentioned my legislation in your written
testimony. We've talked about enforcement resources here, and
I'm not as focused on that right now in this question, and
there have been a number of tech bills introduced in the House.
As I mentioned, we're working on those in the Senate. Senator
Lee and Senator Grassley have a bill. Senator Hawley's worked
on this. Really all the Members of the Committee have been very
busy working on solutions. Do you think antitrust reform
proposals would be helpful to address some of the issues we've
discussed today and could contribute to the development of a
more open and competitive connected home technology market?
What exactly would be helpful?
Mr. Lazarus. There's no question about that, Senator. It
would be enormously helpful. The bipartisan House bill that
addresses interoperability has some terrific language in it
that goes right to the kinds of questions we've been talking
about here. We'd also welcome reform of the predatory pricing
standard to get at the issue of cross subsidization that
Senator Hawley was focused on. The current doctrine that's been
developed over the last 20, 30 years at the Supreme Court has a
recoupment rule that doesn't----
Chair Klobuchar. Yes. I'm aware. Yes.
Mr. Lazarus [continuing]. Doesn't work appropriately, and
also, really doesn't have the right formula for calculating
price for a software environment where the marginal costs of
software is basically zero. We'd really welcome reform in that
area as well as just generally the nondiscrimination kinds of
proposals that you've been looking at. You know, a golden rule
in this area would be great.
Chair Klobuchar. Okay.
Mr. Lazarus. Treat others as you treat yourself.
Chair Klobuchar. Very good. I'd say that was a nice way to
end. I have one more question. Professor Zittrain, according to
your written testimony, you also support reforming the
antitrust laws. What do you think would be helpful in the
market?
Professor Zittrain. I think that looking at just the
exchanges that have happened, to whatever extent the law can
help take what is currently a business development exercise,
subject to all of the dross and the deals that are about that
on whether one assistant is going to connect with Pandora. You
know, is Pandora paying them because they want to get to the
users? Or are they paying Pandora because they really want to
become a popular assistant?
To the extent that that can be transformed into more of a
commics. This is kind of the Switzerland line of talk. I think
that would be great. Some of the provisions in your own bill
that are more generally about antitrust, I think, could be
extremely helpful in that area. Mr. Lazarus already talked
about the ways in which the courts, perhaps understandably in
other areas, have really focused on absolute certainty about
risk, about having to demarcate damages, where in these realms,
that might be a lot harder to do. To be able to have standards
that allow regulators, in support of a free market rather than
against it, to do their work, that seems to be extremely
helpful.
I just also want to note the way in which sometimes some of
the many valid concerns about privacy that have been raised
today. In my own testimony, I considerably said we can have a
privacy apocalypse here. Some of those concerns about privacy
are about asking the big players not to be sharing their data.
Under the same breath, we're asking them to make sure that any
data they make use of daunt the would-be competitors have use
of that too. Figuring out how to square that circle is a big
part, I think, of how to get policy right in this area.
Chair Klobuchar. Okay. One thing we haven't mentioned much
is Apple also offers connected home products, including the
well-known voice assistant, Siri. Of course, Apple has a
different approach than Amazon and Google that is more focused
on integrating its own Apple-branded devices and generating
revenue from device sales and digital services rather than data
and advertising. It seems that Apple's connected home devices
and services are actually less interoperable, perhaps by
design. Mr. Lazarus, in your opinion, does Apple's approach to
the connected home raise competition concerns as well?
Mr. Lazarus. I think it all boils down to the same issue.
Are we going to have a smart home market that is dominated by
just a couple of players? Apple has its strategy. If you want
to be a third-party licensing Siri, you have to actually accept
a home pod into the house, which is a competing product.
Yes. Lots of competitive concerns about that. In the macro,
I would just say it's all part en parcel the same thing. Siloed
ecosystems of a few dominate players is not the best way to
organize the smart home market.
Chair Klobuchar. Professor Zittrain, really briefly. Is
Apple's walled garden approach to the connected home preferable
to Amazon's and Google's more open approach? Or do they just
raise different types of concerns?
Professor Zittrain. It raises different types of concerns,
and we can do better than that. I am completely sympathetic to
what you would hear from Apple if they were here today, that
their, ``It just works. It's seamless,'' kind of consumer
experience is made possible because of the care they exercise
in tightly integrating where they want to, their stuff.
I was, in preparation for this hearing, trying to figure
out if I could make the Google Assistant the default on my
iPhone. It turns out that with enough clicks and about 6 hours
of time, I could probably have it so that I could go, ``Hey,
Siri, hey, Google, what's the weather,'' and literally Siri
would ask Google to ask the weather what the weather is and
then pass it back to Siri to me.
No. We can do better than that. The law, I think, needs to
provide it. I think just asking these companies to kind of be
more--have elbows that are less sharp, they are competitors.
They're trying to compete. They owe to their share-holders that
duty. Let's set up the rules so that they know how to play to
the chalk, but not go beyond it.
Chair Klobuchar. Yes.
Professor Zittrain. It's time to redraw some of those
lines.
Chair Klobuchar. Okay. One last question on ads. September,
we covered this in various ways with Google in the past in a
previous hearing that Senator Lee had in another context. A
September 2020 article in the Wall Street Journal examined how
Amazon restricts the ability of competing smart home devices
such as smart doorbells and video-streaming devices to actually
advertise on Amazon.com. Specifically, the Journal article said
that Amazon won't let competitors buy sponsored product ads
tied to search for Amazon devices such as Echo speakers and
Ring doorbells. Mr. McCrate, does Amazon restrict competitors
from advertising their connected home devices on Amazon.com,
including on sponsored products ads tied to searches for
specific devices?
Mr. McCrate. Senator, that's a very important question. I
want to make sure we're getting you accurate information.
Chair Klobuchar. Okay.
Mr. McCrate. I don't support the sponsored ads part of
business, but I'd be happy to follow-up with those details.
Chair Klobuchar. Okay. Very good. Thank you. We look
forward to that answer. Mr. Crawford, one question of you,
because I didn't ask one. Then I'll see if Senator Lee has any
other questions.
I think we know that the fight against monopoly powers more
than just lower prices. It's about freedom of individuals and
our democracy. You mentioned some of this before. What can we
do to prevent digital monopolies from undermining the
democratic process?
Mr. Crawford. The million-dollar question. I'm not an
expert in how to solve problems with legislation. I just--by
way of an example of the problem, you know, the Nest with the
thermostat sold by Google. Legal scholars who looked into this
discovered that to enter into this knowingly, you'd have to
review almost 1,000 separate contracts. Of course, hardly
anyone reads even one such contract, and perhaps they're
counting on that. That raises the issue of asymmetry of
information, which economists tell us is fatal to a free
market.
Another thing that's not supposed to happen in a free
market is hostage taking. The Nest--the terms of service
stipulate that if you don't agree to all the data gathering,
you could suffer from frozen pipes, failed smoke alarms. The
basic functions that you're looking for, that you think you're
paying for, are held hostage to the submission of data. These
functions are enmeshed in this tangled web of services and
software. The basic idea of a free market is that you're free
to vote with your feet and go elsewhere. If the exit costs are
that high in hassle, well, it's not likely to happen.
Thank you.
Chair Klobuchar. Okay. Thank you. Senator Lee.
Senator Lee. Mr. Crawford, so how would you respond to
critics who might say, in response to your point, that a
company like Facebook can end up starting to resemble a rival
government? How would you respond to those who would say,
``Yes. But Facebook can't--unlike the government, it can't
force you to do something at the point of a gun.''
Mr. Crawford. Right. There's no coercion. There are no
thumb screws applied at any point. It becomes a matter of every
aspect of life being ordered by a handful of firms. As you
know, these firms are now--you know, their market caps are in
the trillions. At some point, the concept of government, I
think, has to be extended beyond these halls to entities that
have such far-reaching control and sort of penetration into our
lives.
Senator Lee. You might say that that's the sort of response
you'd expect in a Stockholm Syndrome sort of situation.
[Laughter.]
Senator Lee. Is that your point that the fact that they're
not behaving as a government, the fact that they're not
literally requiring you to do it at the point of a gun doesn't
mean that there aren't things that are happening that are
anticompetitive or----
Mr. Crawford. With technology, we often say that it's all
optional. There's a sort of tipping of the entire society into
dependence on certain things, certainly platforms such that
just as a kind of subjective experience, it certainly doesn't
feel optional. Can you not have a smartphone? Maybe, but life
would be kind of hard. It's a matter of sort of conditioning
what's possible. That happens--it doesn't happen through
legislation. It happens through these kinds of consolidations
of economic power.
Senator Lee. Got it. Thank you.
Chair Klobuchar. Okay. Very good. Well, thank you. This has
been enlightening; and I think we're going to have a number of
follow-ups, as some of the Senators have mentioned with follow-
up questions. I think, as I said at the beginning of the
hearing, we're a bit ahead of ourselves than we were, where
we're not looking backward at some of the other issues and
raised--that have been raised in the tech industry.
I think the work we're doing with regard to those issues is
going to, for certain, include some of what we've learned today
as we look at this major marketplace in tech as part of the
areas where we're going to have to draft bills and pass bills,
and have our enforcers enforce in this area, and think ahead of
themselves when it comes to tech legislation. Even what I would
like to see, of course, and I know Senator Lee is interested in
this as well. Other pieces of legislation that even go beyond
tech that could make it easier to bring these cases and look at
what's happened in certain industries. That's what we're about
right now.
I've actually been really pleased about the bipartisan work
that went on in this Committee, in the Judiciary Committee a
few weeks ago, and my bill with Senator Grassley. I'm pleased
about the bipartisan work going on in the House. I just talked
to Representative Buck. I know he's a friend of yours, Senator
Lee, last week. It's just time to get moving. We're ready to
go.
Thank you very much to the witnesses, both here and remote.
We look forward to following up with all of you. Thank you.
This hearing is adjourned.
[Whereupon, at 4:49 p.m., the hearing was adjourned.]
[Additional material submitted for the record follows.]
A P P E N D I X
Miscellaneous submissions:
Alliance for Automotive Innovation............................... 150
Coalition Against Patent Abuse (CAPA) Statement.................. 134
Consumer Reports (CR)............................................ 154
Engine........................................................... 129
R Street Letter, June 15, 2021................................... 152
United for Patent Reform (UFPR).................................. 132
USMADE........................................................... 156
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