The Internet of Things (“IoT”) connects markets and supply chains around the world. Industry, governments and consumers around the world are embracing IoT technologies to improve research and public policy, to accelerate service delivery and to monitor global development programs across healthcare, agriculture, natural resource management, climate, and energy sectors. Industry experts project that between 20 to 30 billion IoT devices will connect to the internet by 2020. Some estimate that IoT could generate up to $11.1 trillion per year in economic value across industries, comprising up to 11 percent of the world economy by 2025.
IoT is not a single network of connected devices, but a set of technologies that must communicate with one another to function. To function properly, information must flow across international borders in a standard fashion often using globally or regionally harmonized radiofrequency spectrum. The flow of IoT-generated information today is significant, but barriers to information sharing remain.
In Europe, many countries advocate pan-European data protection rules and technology standards prior to allocating spectrum for IoT applications and negotiating data sharing agreements outside of the EU. The European Commission has developed a series of regulations and policies introduced as the Digital Single Market (“DSM”). The three structural foundations of the Digital Single Market are (1) improved consumer and enterprise access to digital goods and services across Europe, (2) strong data protection rules to encourage internet adoption and information sharing, and (3) growth of a European digital economy in which consumers and businesses across the EU more broadly adopt the Internet, use cloud, big data, and other innovative services, share information and conduct e-commerce, and embrace a “digital by default” strategy. The DSM proposes 16 key actions to remove barriers among EU countries. By comparison, regulators in the United States have tended to permit innovation and then develop a regulatory framework after technologies and business models emerge. The U.S. Federal Communications Commission, for example, has proposed opening many new frequencies for potential IoT applications in tandem with new rules and standards for these uses.
At Hogan Lovells’ Fifth Annual Winnik International Telecoms and Internet Forum, leaders met to discuss how collaboration among industry, governments, and civil society groups could promote the growth and development of IoT. As FCC International Bureau Chief Mindel DelaTorre explained during a panel discussion, the U.S. is striving to strike the right balance between allowing the private sector to drive IoT development and adopting a regulatory framework that protects and promotes innovation without being overly prescriptive.
The Winnik Forum panelists reported on how United States and European Union countries are working to develop harmonized policies to protect consumer data and privacy while also increasing access to digital goods and devices around the world. For example, the European Commission has started an Alliance for IoT Innovation (“AIOTI”), which uses horizontal and vertical working groups to coordinate research, innovation, policy and standardization recommendations across device and industry sectors. The AIOTI also involves agencies such as the U.S. Department of Commerce’s National Telecommunications and Information Administration in developing IoT policies. Likewise, the recently adopted EU-U.S. Privacy Shield provides a mechanism for companies in the U.S. and the EU to harmonize data sharing policies, comply with EU data protection requirements and keep business and information flowing across the Atlantic Ocean.
Brexit and the recent U.S. Presidential election have introduced new uncertainty to the future of IoT both in the U.S. and the EU. According to Winnik Forum panelist and Hogan Lovells partner Peter Watts, the United Kingdom has generally adopted a light-touch attitude toward telecom regulation more similar to the U.S. than to the rest of the EU. The U.K.’s outward-looking market approach has led to the digital economy in the U.K. growing to twice the size of the G-20 average. Forum panelists projected that without the U.K., the EU may move toward heavier regulations for IoT and other telecommunications services and make less effort toward harmonization with the U.S. and other non-EU countries. Panelists also noted that Brexit may further threaten IoT-based transactions if the EU and the U.K. cannot reach an agreement on cross-border IoT operations. Meanwhile, many are left questioning the future of international trade relations following the U.S. Presidential election. One of President-Elect Trump’s major campaign promises was to withdraw from the Trans-Pacific Partnership trade agreement and to take other steps to reduce the effects of globalization, which President-Elect Trump has blamed for “wip[ing] out [America’s] middle class.” Some observers have predicted that smart cars, smart city programs, and industrial IoT products and services could stagnate under a Trump Administration.
The ramifications of Brexit and the U.S. Presidential election on IoT remain uncertain. As companies assess their strategic approaches, Hogan Lovells has prepared a robust Brexit Toolkit that offers options for designing best practices for managing risks and seizing opportunities in the IoT space. For developments in the United States, Hogan Lovells’ Election 2016 Election Center analyzes how President-elect Trump’s policies will affect information technology and telecommunications. Whatever the outcome, IoT devices will continue to expand into new facets of consumers’ lives and business operations. Staying alert to the changing global public policy landscape promises to prove more important than ever for successful IoT businesses.