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US Regulators Will Again Fail Technology in 2020

Posted February 5, 2020 in Business Agility & Software Engineering Excellence, Business Technology & Digital Transformation Strategies, Data Analytics & Digital Technologies Cutter Business Technology Journal
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CUTTER BUSINESS TECHNOLOGY JOURNAL  VOL. 33, NO. 1
 

Cutter Consortium Fellow Steve Andriole discusses the lack of technology regulatory action by the US government. He opens with the assertion that “the proliferation of misinformation on social media, drones flying in protected airspace, and the exploding personal surveillance of Americans are but three examples of the crying need for regulatory action.” Andriole details 10 technology areas in need of attention, and the associated guidelines, policies, and regulations that would go a long way in keeping technology misuse in check.

My 2020 prediction: the US federal government will once again ignore its technology regulatory duties.

Let’s acknowledge that the US has consistently ignored its technology regulatory duties for decades, and it will likely continue to do so for the foreseeable future. Let’s also acknowledge that the need for regulation has never been greater. The proliferation of misinformation on social media, drones flying in protected airspace, and the exploding personal surveillance of Americans are but three examples of the crying need for regulatory action. But federal regulators are nowhere to be found. Other shortcomings abound; the current US technology investment strategy is failing miserably: the US ranks 25th in the world in R&D tax credits,1 has fallen out of the top 10 in global innovation,2 is losing the artificial intelligence (AI) arms race,3 is experiencing falling rankings in computer science and engineering,4 and is ranked 11 in the world in “technological readiness.”5

So what should regulators do? What steps should they take? What should be the guiding principles and policies? There are at least 10 areas screaming for regulation and larger federal policies:

  1. Privacy

  2. Surveillance

  3. Misinformation

  4. Innovation

  5. Robotics

  6. STEM (science, technology, engineering, and mathematics)

  7. Talent

  8. Oligarchy

  9. Cybersecurity

  10. AI

Let’s break them down with a callout of my predictions.

1. Privacy

First and foremost, the US needs to pass an equivalent of the General Data Privacy Regulation (GDPR). Since many private and public corporations are unlikely to help with privacy (since regulations undermine their business models by limiting, protecting, and controlling the information they collect and monetize), the federal government needs to regulate how far corporations can go in their use of individuals’ data. The US State of California has already moved in the GDPR direction with its Consumer Privacy Act, which allows Californians to delete their personal data and block the sale of their data to marketers and other vendors. More states are following, which is why, among other reasons, the US needs a federal law to have a consistent privacy policy across the country.

Will any of this happen in 2020? No, though some states — such as Nevada, New York, and Washington — are following California’s lead.

2. Surveillance

Regulators need to address the growing surveillance culture, which includes the rapid deployment of facial recognition technologies. This is easily a privacy tip­ping point. Or at least it should be. The Surveillance Economy6 is now in full swing. Assuming that you live online and, therefore, provide your personal, professional, location, and behavioral data on a regular basis, there is nothing left that’s protected by regulators.

Will there be any meaningful regulations regarding surveillance in 2020? No, primarily because serious regulation here would threaten the monetization of surveilled data, which is a major pillar of the country’s economic foundation.

3. Misinformation

The need for regulation in the area of misinformation is screaming from every broadcast tower in the country. The problem, of course — again — is business models that depend upon misinformation, such as public and private media that win by attracting as many participants as possible, even if the participants are loathsome. The regulatory agenda here is complex, to put it mildly, since it involves the First Amendment to the US Constitution. That said, there’s a floor upon which “free speech” builds. Hate websites weaken the foundation. The exploitation of media access and the manipulation of content for political advantage require regulation. The dissemination of false content over public networks requires regulation. Recategorizing technology companies as the media companies they clearly are is way overdue.

Prediction? Regulation in this area is not going to happen in 2020, or the foreseeable future.

4. Innovation

The US ranks 25th in the world in R&D tax credits.7 The federal government needs to dramatically increase R&D tax credits to get the country in the top 10, at a minimum. Information Technology and Innovation Foundation (ITIF) Senior Fellow Joe Kennedy tells us that “Germany, the UK and China are sweetening the pot, while the US slides.”8

According to Kennedy, “The United States needs to follow the international trend. The [ITIF] has called for increasing the tax credit’s Alternative Simplified Credit to at least 20% from its current rate of 14%.”9 How about 25%? While the US dual-use technology investment model has worked to some extent in the past, it’s past time for new, single-use investment strategies that bypass the government and go directly to incentivized industries and straight to commercialization.

There are other steps the US should take, as outlined by ITIF President Robert Atkinson:

The last time the federal government had anything resembling a national innovation strategy was almost 40 years ago.… [T]he federal government takes an ad hoc approach to innovation policy, rather than approach it in a strategic way.… And as a result, it misses significant opportunities. There’s also a lack of institutionalization in US innovation policy making; Congress doesn’t require any federal agency to be accountable for innovation policymaking, so an administration only produces an innovation strategy if it’s inclined to do so…. Few if any federal agencies formally recognize the promotion of innovation (either internally or externally) as part of agency agendas or strategic plans. And this is in part because innovation is not explicitly incorporated in agency missions.10

So what will happen in 2020? Will there be a funded innovation strategy instantiated in policies and regulations? Not in 2020, that’s for sure.

5. Robotics

How is it possible to fly a drone onto the White House lawn (as occurred a few years ago)? Here’s the problem:

Thanks to their onboard cameras that transmit a visual feed to a pilot’s smartphone or tablet, drones can be flown miles from their starting point, making it hard to find a pilot even if their drone is caught in a restricted area. And the FAA [US Federal Aviation Administration] itself has “limited boots on the ground,” as a spokesperson put it, often leaving it up to local law enforcement groups to deal with out-of-bounds flyers.11

Drones are the least of our problems with (broadly defined) “robotics.” Where are the regulations around manufacturing robotics? Farm robotics? Autonomous vehicles? Robotic concierges? What’s going on?

Currently, any regulations of robotics and AI are spread out across many organizations. The Federal Aviation Administration, Securities and Exchange Commission, and the National Highway Traffic Safety Administration have some of the responsibility when it comes to robotics regulations. However, this arrangement doesn’t allow for full coverage or expertise in this highly technical and rapidly changing field.

While the US federal government is lagging behind tech­nological advances, many states are struggling to come up with their own solutions. Legislation on autonomous vehicles has been passed [in] Alabama, California, Florida, Louisiana, Michigan, Nevada, North Dakota, Pennsylvania, Tennessee, Utah, and Virginia, as well as in Washington, DC, since 2012. However, when you compare the body of legislation to that of the airline industry, it doesn’t even come close. If every department takes on only the robotics issues that affect it directly, there’s no across-the-board policy, which can lead to confusion.12

Can we expect an integrated set of regulations around robotics? While other countries have begun the regu­latory process, the US lags way behind. The year 2020 will not be a catch-up year.

6. STEM

I cannot think of a more important foundational step the US can take to improve the technology infrastructure of the US than supporting STEM in education, which is why the “US Department of Education Fulfills Administration Promise to Invest $200 Million in STEM Education.”13 Sounds good, right? But it’s sadly laughable — if not insulting to those who believe wider and deeper STEM education helps everyone. Remember that one B-2 Spirit aircraft costs US taxpayers $737 million. One aircraft carrier (without the planes), the USS Gerald R. Ford, cost $13 billion, or 65 times the government’s investment in STEM. The US just christened the aircraft carrier USS John F. Kennedy, which will eventually cost $11.5 billion. Federal STEM funding should be increased by at least 50-fold. Federal STEM educational guidelines should include funding for s­tate-run STEM educational and training programs. Matching federal funding of state-funded programs should also be widely available — and permanent.

Prediction? Not in 2020. Maybe never, which raises questions about US technology policy.

7. Talent

Data reporter Rani Molla succinctly describes how the immigration barriers that the administration of US President Donald Trump has imposed make it increasingly difficult for skilled workers to come to the US:

Using executive orders, the president has made it more difficult — and expensive — to hire high-skilled tech workers from other countries. The administration has throttled a program that encouraged entrepreneurs to come to the US. It’s also ending work permits for spouses of H-1B holders, who are often highly skilled professionals themselves, among other measures to stop immigration. One result has been a net decline in high-skilled visas, known as H-1Bs, which has been bad for tech companies in the US (but good for Canada).14

Similarly, a Wired headline from early 2019 highlights: “Visa Rejections for Tech Workers Spike Under Trump.”15 What else needs to be said about the race for the best and brightest? Sane technology policy (and resultant regulations) is to incentivize the best and brightest around the world to seek the US as their professional destination. A more recent headline summarizes just how the situation stands today: “The Trump Administration Is Denying H-1B Visas at a Dizzying Rate.”16 This is a dangerous, bizarre strate­gy whose consequences will be felt for decades. The regulators must reverse these policies; policy must reflect the desire to attract the best and brightest if technological competitiveness is the objective.

Prediction? No changes in 2020. Perhaps there will be changes in 2021, depending on the results of the US presidential election.

8. Oligarchy

In 2018, the five largest companies in the world (by valuation) were Apple, Google, Microsoft, Amazon, and Facebook, followed closely by Alibaba, Berkshire Hathaway, Tencent Holdings, JPMorgan Chase, ExxonMobil, Johnson & Johnson, and Samsung Electronics.17 Amazon owns around 50% of the e-commerce market, followed by eBay (6.6%), Apple (3.9%), Walmart (3.7%), and Home Depot (1.5%).18 Four vendors own close to 75% of the cloud infrastructure market (Amazon Web Services [AWS], 33%; Microsoft, 13%; IBM, 8%; Google, 6%; and Alibaba, 4%, as of Q1 2018), and three providers — AWS, Microsoft, and Google — own 55% of the overall cloud market.19 Google owns over 90% of the Internet search market.20 Facebook continues to dominate social media, followed by YouTube (Google), WhatsApp (Facebook), Facebook Messenger (Facebook), WeChat (Tencent), and Instagram (Facebook).21 Microsoft owns 36% of the worldwide operating system market, behind Android at 42% (Google and the Open Handset Alliance).22 The same market trends are seen in other industries, such as ridesharing, where Uber and Lyft own over 70% of the market.23

Policies that reflect a commitment to competition and innovation should yield regulations about what’s acceptable and what’s not, since it’s impossible to compete with oligarchies with decades-long leads. David Wessel, writing in the Harvard Business Review, is clear:

Despite their undeniable popularity, Apple, Amazon, Google, and Facebook are drawing increasing scrutiny from economists, legal scholars, politicians, and policy wonks, who accuse these firms of using their size and strength to crush potential competitors. Technology giants pose unique challenges, but they also represent just one piece of a broader story: a troubling phenomenon of too little competition throughout the US economy.24

As many agree, it’s time to resurrect antitrust.

Prediction? Technology oligarchies will not be broken up. Instead, they will grow — regardless of 2020 presidential election results.

9. Cybersecurity

The US digital infrastructure is leaky, to put it ridiculously mildly. Just as dangerous, the digital infrastructure and the most popular applications — such as social media — are vulnerable to manipulation by terrorists, hackers, adversaries, and human and software bots. According to the US Department of Homeland Security (DHS), the threats are everywhere and growing. DHS believes that the US should:

… reduce threats from cyber criminals. In partnership with other law enforcement agencies, DHS must prevent cybercrime and disrupt criminals and criminal organizations who use cyberspace to carry out their illicit activities and leverage identified threat activity and trends to inform national risk management efforts.25

In fact, there are lots of plans, objectives, “sub-objectives,” and goals:

DHS must continue to strengthen our efforts as part of the law enforcement community to pursue, counter, reduce, and disrupt illicit cyber activity by leveraging, in particular, our specialized expertise and capabilities to target financial and trans-border cybercrimes. The transnational and cross-jurisdictional nature of cyberspace, as well as the sheer size of the challenge, requires closer collaboration with other federal, state, local, and international law enforcement partners.26

The problem is enormous and growing faster than anyone can even measure. The proposed 2020 US federal budget for cybersecurity, which includes funding for the Defense and State departments (among other agencies) is up a paltry 4.7%.27 Note that the “budget proposal asks for more than $9.6 billion for Defense Department cyber operations and just over $1 billion for civilian cybersecurity efforts.”28That’s $1 billion for civilian cybersecurity efforts, and a 4.7% overall increase in the cybersecurity budget. One doesn’t have to be an expert to conclude that the funding solution is dwarfed by the problem. The federal cybersecurity budget should be increased by 100% across the board every year until the threat is manageable — noting that the problem will never disappear. But it can, with proper funding, become manageable.

Prediction? Underfunding will persist — until there’s a major attack on the technology infrastructure that affects millions of people.

10. Artificial Intelligence

The Trump Executive Order on “Maintaining American Leadership in Artificial Intelligence,”29 issued 11 February 2019, is, one hopes, just an early shot in the AI war; an implementation war the US is arguably already losing, especially in areas such as robotics. As described by MIT Technology Review Senior Editor for AI Will Knight:

The initiative is designed to boost America’s AI industry by reallocating funding, creating new resources, and devising ways for the country to shape the technology even as it becomes increasingly global.… However, while the goals are lofty, the details are vague. And it will not include a big lump sum of funding for AI research.30

As Knight points out [emphasis added], “other nations, including China, Canada, and France, have made bigger moves to back and benefit from the technology in recent years.”31 

Analysis from Bloomberg Government found that the Pentagon’s R&D spending on AI has increased from $1.4 billion to about $1.9 billion between 2017 and 2019.32 More recently, the proposed 2020 budget has seen more increases in AI R&D. As federal market analyst Chris Cornillie at Bloomberg Government told me: 

The 2020 budget has allocated almost $5B for AI R&D (for the Pentagon and all other US government agencies). From FY 2018 to 2020, the Pentagon’s budget request for AI R&D rose from $2.7 billion to $4.0 billion … [but] when you look at what Google or Apple alone are investing in AI, $5 billion doesn’t seem that large of a figure. Especially if you put that in the context of the federal government’s $1.37 trillion discretionary budget request.33

The Chinese are outspending the US by leaps and bounds. Where’s the federal government? Where are the policies and regulations that would encourage and incentivize investments in AI?

Prediction? There will be no additional funding or funding requests made for AI.

Summing Up

These 10 areas tell us that policy and regulatory failure is the rule. This year, 2020, will be no different, which is an uncomfortable prediction to make. As regulatory requirements scream for attention, we can expect the federal government to further retreat from its respons­ibilities. Longer term, if regulatory failures continue, the US will almost certainly continue to fall behind in the global technology arms race. In the meantime, we should just learn to live with all the robocalls we get these days.

References

1Kennedy, Joe. “We’re No. 25: Why the US Must Increase Its Tax Incentives for R&D.” IndustryWeek, 14 November 2018.

2Jamrisko, Michelle, and Wei Lu. “The US Drops Out of the Top 10 in Innovation Ranking.” Bloomberg Technology, 22 January 2018.

3Andriole, Steve. “Artificial Intelligence, China, and the US: How the US Is Losing the Technology War.” Forbes, 9 November 2018.

4Bothwell, Ellie. “Top US Technology Universities Lose Ground in Computer Science and Engineering.” Times Higher Education, 29 November 2018.

5Mansfield, Emily. “The Best Countries for Tech Companies: 2018 Rankings.” Venture Beat,10 June 2018.

6Cocullo, Jenna. “We Need to Talk About the Surveillance Economy. Now.” Canadian Centre for Policy Alternatives, 1 May 2019.

7R&D Incentives Continue to Draw Government Favor: Reflections from EY’s The Outlook for Global Tax Policy in 2018.” Ernst and Young, 2018.

8Kennedy (see 1).

9Kennedy, Joe. “Countries Continue to Use Tax Incentives to Boost R&D.” Information Technology & Innovation Foundation (ITIF), 25 October 2018.

10Atkinson, Robert D. “How the US Government Falters on Support for Innovation.” Information Technology & Innovation Foundation (ITIF), 28 August 2019.

11Ducharme, Jamie. “How ‘No-Drone Zones’ Are Being Enforced with Software, Gadgets, and Shotguns.” Time, 22 May 2018.

12Marquart, Kelsey R. “If We Don’t Regulate Automation, It Could Decimate the US Economy.” Futurism, 14 April 2017.

13US Department of Education Fulfills Administration Promise to Invest $200 Million in STEM Education.” Press release, US Department of Education, 8 November 2018.

14Molla, Rani. “Visa Approvals for Tech Workers Are on the Decline. That Won’t Just Hurt Silicon Valley.” Vox, 28 February 2019.

15Lapowsky, Issie. “Visa Rejections for Tech Workers Spike Under Trump.” Wired, 25 April 2019.

16Rangarajan, Sinduja. “The Trump Administration Is Denying H-1B Visas at a Dizzying Rate, But It’s Hit a Snag.” Mother Jones, 17 October 2019.

17The 100 Largest Companies in the World by Market Value in 2019.” Statista, 2019.

18Lunden, Ingrid. “Amazon’s Share of the US E-Commerce Market Is Now 49%, or 5% of All Retail Spend.” TechCrunch, 13 July 2018.

19Stalcup, Katy. “AWS vs. Azure vs. Google Cloud Market Share 2019: What the Latest Data Shows.” ParkMyCloud, 30 April 2019.

20Desjardins, Jeff. “How Google Retains More than 90% of Market Share.” Business Insider, 23 April 2018.

21Most Popular Social Networks Worldwide as of October 2019, Ranked by Number of Active Users.” Statista, 2019.

22Operating System Market Share Worldwide, December 2018-December 2019.” Statcounter, December 2019.

23Richter, Wolf. “Uber and Lyft Are Gaining Even More Market Share over Taxis and Rentals.” Business Insider, 30 July 2018.

24Wessel, David. “Is Lack of Competition Strangling the US Economy?Harvard Business Review, March-April 2018.

25Cybersecurity Strategy.” US Department of Homeland Security (DHS), 15 May 2018.

26DHS (see 25).

27Hensch, Mark. “Understanding Trump’s 2020 Budget Requests for Cyber, IT.” GovLoop, 19 March 2019.

28Boyd, Aaron. “Trump’s 2020 Budget Requests About $11 Billion For Cyber Defense and Operations.” Nextgov, 11 March 2019.

29Trump, Donald J. “Executive Order on Maintaining American Leadership in Artificial Intelligence.” The White House, Executive Orders, 11 February 2019.

30Knight, Will. “Trump Has a Plan to Keep America First in Artificial Intelligence.” MIT Technology Review, 10 February 2019.

31Knight (see 30).

32Cornillie, Chris. “Can Pentagon Bridge Artificial Intelligence’s ‘Valley of Death’?” Bloomberg Government, 14 September 2018.

33Cornillie, Chris. Conversation with author, 2019. 

About The Author
Steve Andriole
Dr. Stephen J. Andriole is a Fellow with Cutter Consortium’s Business Technology & Digital Transformation Strategies and Data Analytics & Digital Technologies practices and the Thomas G. Labrecque Professor of Business Technology at Villanova University. His specialty areas include digital transformation, emerging technology trends, cloud computing, social media, technology due diligence, software IP valuation, business technology… Read More