Oct 01, 2015 - 9:00am

How Do You Regulate the Internet of Everything? A Q&A with FTC Commissioner Ohlhausen


Senior Editor, Digital Content

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FTC Commissioner Ohlhausen speaks at the U.S. Chamber of Commerce Foundation's Internet of Everything event.
FTC Commissioner Ohlhausen speaks at the U.S. Chamber of Commerce Foundation's Internet of Everything event. Photo credit: Ian Wagreich / © U.S. Chamber of Commerce.

Note: FTC Commissioner Maureen Ohlhausen talked about preserving an environment of innovation for the Internet of Everything at the U.S. Chamber of Commerce Foundation’s event, “The Internet of Everything: Data, Networks & Opportunities.” I spoke with her after her talk.

Question: What are the implications of the Internet of Everything (IoE)? We've gone through 20 years of the Internet and the Web, but this seems bigger, and we don't fully grasp what this is.

Answer: I think we don't know yet. There are people in their labs and garages figuring out what the future is going to be like. But I think what it means, the Internet initially connected people to sources of information. Now, the Internet of Everything is connecting the physical world in the same kind of way so that you can control things, you can have readings, you can know where things are in a dynamic sense through this web of interconnection.

What does that mean for consumers, I think is, we're just starting to find that out. I think it can have enormous benefits for consumers--I consider it the democratization of customized services. Now, the everyday consumer can have access to some of the kinds of services that only wealthy people had before--a car on demand, someone to pick up or deliver your dry cleaning. It kind of goes on and on.

I think some of the biggest advances will be in the health care area to allow real time monitoring of people's physical condition, so that we can reduce health care costs, improve quality of life, allowing people to age in their homes more, better interaction with health care providers. Some of the biggest benefits for consumers will probably be in the health care space although we all really like hearing about ride services and Airbnb.

Q: For regulators, is this industry still too young to think about a regulatory framework? Or should we get a step ahead to make sure the environment is ready for that innovation?

A: I don't think that we should jump to the conclusion that we need a new regulatory structure. I mentioned regulatory humility, and that's based on the idea that it's very hard to know the future and have the right information you need to have a highly-detailed rule that will be beneficial down the road. Instead, I'm a big believer in saying, we need to understand what the technology is and what the business models are that it enables--what the possible harms are to consumers. Then say, "Are those harms actually occurring? Are we starting to see these kinds of harms to consumers to their privacy to their security of their data, maybe physical harms?” Then ask, "Do we already have the tools in place to address those harms?"

Q: What do you mean by "regulatory humility" and how does that fit into regulating the Internet of Everything?

A: Regulatory humility to me goes back to understanding that fundamental knowledge problem about how difficult it is to predict the future. Not just where the technology is going but what the benefits will be to consumers. And also to say, we don't even know what technologies are going to develop that if we can maybe theorize harm, there may be a technology that solves that harm.

Given that fundamental limitation on any regulator's ability to come up with an appropriate structure, what I think we need to do is understand the technology and the markets, identify likely risks and benefits, then ask, "Are the harms actually occurring?" Then ask, "Do we already have the tools in place?"

Once you go through that, occasionally at the end of that, you may find, yes, there's a harm occurring, and we don't have the right tool, and it's occurring right now. That's when you start thinking about what new regulation would be appropriate. Rather than: "There's new technology. There must be a new regulatory structure."

Q: One of the biggest fears when you have all these devices and sensors collecting data and information and then talking to each other is privacy. In a world where everything is connected and talking to each other how do we deal with that from a privacy perspective?

A: Consumers want to know if someone is collecting sensitive information. You want to know if somebody is collecting your Social Security number, your real time location data over time--like where you're going, your financial information, information about your children, medical data. But outside of that, consumers I think have shown a little more comfort.

We should really be moving more towards a concern about harmful uses of data for consumers. I think that as we're moving into the Internet of Everything focusing much more on that kind of framework will allow the benefits of innovation, the types of conveniences and services consumers want while still giving them some of the protections and assurances they need. 

Q: You mentioned in your talk at the American Enterprise Institute in April that regulators are incapable of collecting what you called, "practical knowledge." F.A. Hayek called it, "tacit knowledge." How big an influence is Hayek in your thinking, and how can regulators deal with an industry they might not have a lot of understanding about and get the data to make good decisions?

A: Hayek definitely has a big influence in my thinking. I think his ability to articulate the problems with centralized planning, the failures that led to. But it has wider implications for government, for society. Who's in the best position to decide? I usually think it's the people who have the most at stake and are closest to the issue. They have the knowledge.

Q: But a lot of practical knowledge isn't quantitative as Hayek pointed out.

A: One of the tools the FTC uses is--we're primarily a law enforcement agency--but we have a big policy function, and I used to be the head of the policy office at the FTC. When I talk about gathering knowledge and educating ourselves before we move into regulatory mode, those are the kinds of tools we should use. We use workshops. We have industry in and academics in and lawyers in and consumers groups in to tell us what they're thinking about. When we did the Internet of Things report it was based on a workshop that we did. We need to hear from the most-interested parties. 

We also have a whole bureau of economics. We do economic research that can be very useful in these areas. Getting out and talking to people. I go to Silicon Valley a couple times a year. I have an open door policy. I reach out to consumer groups. I reach out to academics and technologists and say, "What are you thinking?" Not to try to operate in a vacuum.

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About the Author

About the Author

Sean Hackbarth
Senior Editor, Digital Content

Sean writes about public policies affecting businesses including energy, health care, and regulations. When not battling those making it harder for free enterprise to succeed, he raves about all things Wisconsin (his home state) and religiously follows the Green Bay Packers.