The Federal Trade Commission (FTC) is taking a more active interest in state and local barriers to entry and innovation that could threaten the continued growth of the digital economy in general and the sharing economy in particular. The agency recently announced it would be hosting a June 9th workshop “to examine competition, consumer protection, and economic issues raised by the proliferation of online and mobile peer-to peer business platforms in certain sectors of the [sharing] economy.” Filings are due to the agency in this matter by May 26th. (Along with my Mercatus Center colleagues, I will be submitting comments and also releasing a big paper on reputational feedback mechanisms that same week. We have already released this paper on the general topic.)
Relatedly, just yesterday, the FTC sent a letter to Michigan policymakers about restricting entry by Tesla and other direct-to-consumer sellers of vehicles. Michigan passed a law in October 2014 prohibiting such direct sales. The FTC’s strongly-worded letter decries the state’s law as “protectionism for independent franchised dealers” noting that “current provisions operate as a special protection for dealers—a protection that is likely harming both competition and consumers.” The agency argues that:
consumers are the ones best situated to choose for themselves both the vehicles they want to buy and how they want to buy them. Automobile manufacturers have an economic incentive to respond to consumer preferences by choosing the most effective distribution method for their vehicle brands. Absent supportable public policy considerations, the law should permit automobile manufacturers to choose their distribution method to be responsive to the desires of motor vehicle buyers.
The agency cites the “well-developed body of research on these issues strongly suggests that government restrictions on distribution are rarely desirable for consumers” and the staff letter continues on to utterly demolish the bogus arguments set forth by defenders of the blatantly self-serving, cronyist law. (For more discussion of just how anti-competitive and anti-consumer these laws are in practice, see this January 2015 Mercatus Center study, “State Franchise Law Carjacks Auto Buyers,” by Jerry Ellig and Jesse Martinez.) Continue reading →
Yesterday afternoon, the Federal Aviation Administration (FAA) finally released its much-delayed rules for private drone operations. As The Wall Street Journal points out, the rules “are about four years behind schedule,” but now the agency is asking for expedited public comments over the next 60 days on the whopping 200-page order. (You have to love the irony in that!) I’m still going through all the details in the FAA’s new order — and here’s a summary of what the major provisions — but here are some high-level thoughts about what the agency has proposed.
Opening the Skies…
- The good news is that, after a long delay, the FAA is finally taking some baby steps toward freeing up the market for private drone operations.
- Innovators will no longer have to operate entirely outside the law in a sort of drone black market. There’s now a path to legal operation. Specifically, small unmanned aircraft systems (UAS) operators (for drones under 55 lbs.) will be able to go through a formal certification process and, after passing a test, get to operate their systems.
Continue reading →
Last Wednesday, it was my great pleasure to testify at a Senate Commerce Committee hearing entitled, “The Connected World: Examining the Internet of Things.” The hearing focused “on how devices… will be made smarter and more dynamic through Internet technologies. Government agencies like the Federal Trade Commission, however, are already considering possible changes to the law that could have the unintended consequence of slowing innovation.”
But the session went well beyond the Internet of Things and became a much more wide-ranging discussion about how America can maintain its global leadership for the next-generation of Internet-enabled, data-driven innovation. On both sides of the aisle at last week’s hearing, one Senator after another made impassioned remarks about the enormous innovation opportunities that were out there. While doing so, they highlighted not just the opportunities emanating out of the IoT and wearable device space, but also many other areas, such as connected cars, commercial drones, and next-generation spectrum.
I was impressed by the energy and nonpartisan vision that the Senators brought to these issues, but I wanted to single out the passionate statement that Sen. Cory Booker (D-NJ) delivered when it came his turn to speak because he very eloquently articulated what’s at stake in the battle for global innovation supremacy in the modern economy. (Sen. Booker’s remarks were not published, but you can watch them starting at the 1:34:00 mark of the hearing video.) Continue reading →
On Sunday night, 60 Minutes aired a feature with the ominous title, “Nobody’s Safe on the Internet,” that focused on connected car hacking and Internet of Things (IoT) device security. It was followed yesterday morning by the release of a new report from the office of Senator Edward J. Markey (D-Mass) called Tracking & Hacking: Security & Privacy Gaps Put American Drivers at Risk, which focused on connected car security and privacy issues. Employing more than a bit of techno-panic flare, these reports basically suggest that we’re all doomed.
On 60 Minutes, we meet former game developer turned Department of Defense “cyber warrior” Dan (“call me DARPA Dan”) Kaufman–and learn his fears of the future: “Today, all the devices that are on the Internet [and] the ‘Internet of Things’ are fundamentally insecure. There is no real security going on. Connected homes could be hacked and taken over.”
60 Minutes reporter Lesley Stahl, for her part, is aghast. “So if somebody got into my refrigerator,” she ventures, “through the internet, then they would be able to get into everything, right?” Replies DARPA Dan, “Yeah, that’s the fear.” Prankish hackers could make your milk go bad, or hack into your garage door opener, or even your car.
This segues to a humorous segment wherein Stahl takes a networked car for a spin. DARPA Dan and his multiple research teams have been hard at work remotely programming this vehicle for years. A “hacker” on DARPA Dan’s team proceeded to torment poor Lesley with automatic windshield wiping, rude and random beeps, and other hijinks. “Oh my word!” exclaims Stahl. Continue reading →
Farhad Manjoo’s latest New York Times column, “Giving the Drone Industry the Leeway to Innovate,” discusses how the Federal Aviation Administration’s (FAA) current regulatory morass continues to thwart many potentially beneficial drone innovations. I particularly appreciated this point:
But perhaps the most interesting applications for drones are the ones we can’t predict. Imposing broad limitations on drone use now would be squashing a promising new area of innovation just as it’s getting started, and before we’ve seen many of the potential uses. “In the 1980s, the Internet was good for some specific military applications, but some of the most important things haven’t really come about until the last decade,” said Michael Perry, a spokesman for DJI [maker of Phantom drones]. . . . He added, “Opening the technology to more people allows for the kind of innovation that nobody can predict.”
That is exactly right and it reflects the general notion of “permissionless innovation” that I have written about extensively here in recent years. As I summarized in a recent essay: “Permissionless innovation refers to the notion that experimentation with new technologies and business models should generally be permitted by default. Unless a compelling case can be made that a new invention or business model will bring serious harm to individuals, innovation should be allowed to continue unabated and problems, if they develop at all, can be addressed later.” Continue reading →
Yesterday, the Federal Trade Commission (FTC) released its long-awaited report on “The Internet of Things: Privacy and Security in a Connected World.” The 55-page report is the result of a lengthy staff exploration of the issue, which kicked off with an FTC workshop on the issue that was held on November 19, 2013.
I’m still digesting all the details in the report, but I thought I’d offer a few quick thoughts on some of the major findings and recommendations from it. As I’ve noted here before, I’ve made the Internet of Things my top priority over the past year and have penned several essays about it here, as well as in a big new white paper (“The Internet of Things and Wearable Technology: Addressing Privacy and Security Concerns without Derailing Innovation”) that will be published in the Richmond Journal of Law & Technology shortly. (Also, here’s a compendium of most of what I’ve done on the issue thus far.)
I’ll begin with a few general thoughts on the FTC’s report and its overall approach to the Internet of Things and then discuss a few specific issues that I believe deserve attention. Continue reading →
I want to highlight an important new blog post (“Slow Down That Runaway Ethical Trolley“) on the ethical trade-offs at work with autonomous vehicle systems by Bryant Walker Smith, a leading expert on these issues. Writing over at Stanford University’s Center for Internet and Society blog, Smith notes that, while serious ethical dilemmas will always be present with such technologies, “we should not allow the perfect to be the enemy of the good.” He notes that many ethical philosophers, legal theorists, and media pundits have recently been actively debating variations of the classic “Trolley Problem,” and its ramifications for the development of autonomous or semi-autonomous systems. (Here’s some quick background on the Trolley Problem, a thought experiment involving the choices made during various no-win accident scenarios.) Commenting on the increased prevalence of the Trolley Problem in these debates, Smith observes that:
Unfortunately, the reality that automated vehicles will eventually kill people has morphed into the illusion that a paramount challenge for or to these vehicles is deciding who precisely to kill in any given crash. This was probably not the intent of the thoughtful proponents of this thought experiment, but it seems to be the result. Late last year, I was asked the “who to kill” question more than any other — by journalists, regulators, and academics. An influential working group to which I belong even (briefly) identified the trolley problem as one of the most significant barriers to fully automated motor vehicles.
Although dilemma situations are relevant to the field, they have been overhyped in comparison to other issues implicated by vehicle automation. The fundamental ethical question, in my opinion, is this: In the United States alone, tens of thousands of people die in motor vehicle crashes every year, and many more are injured. Automated vehicles have great potential to one day reduce this toll, but the path to this point will involve mistakes and crashes and fatalities. Given this stark choice, what is the proper balance between caution and urgency in bringing these systems to the market? How safe is safe enough?
That’s a great question and one that Ryan Hagemann and put some thought into as part of our recent Mercatus Center working paper, “Removing Roadblocks to Intelligent Vehicles and Driverless Cars.” Continue reading →
As 2014 draws to a close, we take a look back at the most-read posts from the past year at The Technology Liberation Front. Thank you for reading, and enjoy. Continue reading →
Earlier this week I posted an essay entitled, “Global Innovation Arbitrage: Commercial Drones & Sharing Economy Edition,” in which I noted how:
Capital moves like quicksilver around the globe today as investors and entrepreneurs look for more hospitable tax and regulatory environments. The same is increasingly true for innovation. Innovators can, and increasingly will, move to those countries and continents that provide a legal and regulatory environment more hospitable to entrepreneurial activity.
That essay focused on how actions by U.S. policymakers and regulatory agencies threatened to disincentivize homegrown innovation in the commercial drone and sharing economy sectors. But there are many other troubling examples of how America risks losing its competitive advantage in sectors where we should be global leaders as innovators looks offshore. We can think of this as “global innovation arbitrage,” as venture capitalist Marc Andreessen has aptly explained:
Think of it as a sort of “global arbitrage” around permissionless innovation — the freedom to create new technologies without having to ask the powers that be for their blessing. Entrepreneurs can take advantage of the difference between opportunities in different regions, where innovation in a particular domain of interest may be restricted in one region, allowed and encouraged in another, or completely legal in still another.
One of the more vivid recent examples of global innovation arbitrage involves the well-known example of 23andMe, which sells mail-order DNA-testing kits to allow people to learn more about their genetic history and predisposition to various diseases. Continue reading →
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