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February 25, 2015

Let Us Talk of Many (Internet of) Things

  The Hill

The Senate Commerce Committee held a hearing on the “Internet of Things” this month responding to a call from a bi-partisan group of senators.   The new chairman of the Committee, Sen. John Thune (R-S.D.) set an appropriate tone saying, “Standing on the cusp of technological innovations that will improve both the safety and convenience of everyday items, we shouldn't let government needlessly slow the pace of new development. By engaging early in this debate, Congress can ensure that any government efforts to protect consumers are tailored for actual problems and avoid regulatory overreach." 

As if cued by the words “regulatory overreach,” the Federal Trade Commission (FTC) outlined and released a laundry list of “best practices” for the Internet of Things.  While that sounds innocuous, the truth is that the FTC has a history of using such recommendations as a springboard to regulation.  In particular, these sorts of pre-regulations are worse, as they are based upon nothing more than the mere impression of a nascent industry.   

As Geoffrey Manne, Executive Director of the International Center for Law & Economics was quoted, “This report pays only lip service to meaningful cost-benefit analysis.  The Internet of Things is a nascent and fast-evolving area. To make specific recommendations on the basis of little more than staff impressions of cherry-picked comments about theoretical harms from a one-day workshop — without undertaking any real analysis of any meaningful data — amounts to regulatory malpractice. The FTC has a wealth of economics expertise in-house, which the Bureau of Consumer Protection willfully ignores.” 

Besides such FTC meddling, other dangers lurk.  The FCC, rather than fully devoting itself to the fastest, most efficient deployment of spectrum, has been distracted by seeking greater regulatory control of broadband and by arbitrarily changing the definition of broadband as a means to justify their intervention.  Whether consumers will accept a system of heavy regulatory control by the same administration that has allowed NSA spying via phones and the Internet remains to be seen.   

Perhaps more problematic is the slowdown in finding more spectrum for broader use.  Without a continuing supply of ample spectrum the “Internet of Things” will be the “Internet of a Couple Items With Dicey Connectivity.”  The resulting unpredictability and lower quality could also end in an “Internet of Gadgets,” which is not very interesting.   Consumers want solutions and the real promise of the Internet of Things is the creation of a number of better solutions to everyday challenges. 

The hearing was an appropriate place to illuminate the current market of Internet-connected devices, and to highlight how government can prevent regulation from slowing innovation; that is, how government can get out of the way and let creators create.   

Regulating before we even understand if regulations are needed, what ends regulations might serve, what the challenges might be, or even a useful definition of what would be regulated  would be foolish at best, and likely to impede innovation. 

We used to celebrate unfettered, bottom-up innovation.  When did Washington become frightened of it?

Cleland is resident scholar of tax and innovation policy at the Institute for Policy Innovation (IPI).


 

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