What to Watch for in Tech Policy

Considering that the typical home has an average of 24 consumer electronic gadgets,¹ it’s no wonder that communications and technology policy will continue to occupy a significant amount of attention from Congress and the Administration. On a broader level, technological innovation is responsible for significant economic growth. For example, 75% of U.S. economic growth since World War II has been derived from technological innovation. From production of the automobile to implementation of cloud computing technology on a nearly ubiquitous high-speed broadband platform, millions of American jobs are connected to the information, communications, and technology (ICT) sector.² Because of that, ensuring a robust ICT sector—supported by smart tech and communications policy—is critical to our nation’s future.

And smart policy is more important now than ever, especially with innovation occurring so rapidly. While the United States used to be at the top of the innovation podium, our foreign competitors are out-innovating us in areas that we pioneered. In a survey of the rate of change in innovation capacity over the last decade, the United States ranked 40th—dead last.³

To achieve higher rates of long-term economic growth, the United States must renew its commitment to the power of technological innovation. As policymakers focus on how to support this commitment, we anticipate a number of areas that will see legislative and regulatory action. While this is not an exhaustive list, we will be watching the following policy areas.

Privacy

As technology continues to facilitate education, online commerce, and the creation of new markets, policymakers will need to evaluate how to empower and educate consumers without stifling innovation. And given the Federal Trade Commission’s recent report⁴ that shows identity theft was the top consumer complaint in 2012 for the 13th year in a row, policymakers will be devoting considerable attention to privacy and security.

Consumers need assurances that their sensitive information will remain private. And innovators need regulatory certainty so they can continue to develop cutting-edge products and services, especially in an increasingly mobile world. Here’s what to watch for:

1. Mobile application privacy code of conduct from NTIA.

The National Telecommunications and Information Administration (NTIA) is currently in the process of developing a mobile application transparency code of conduct. On June 15, 2012, NTIA announced a multi-stakeholder process to create a code of conduct that will “provide transparency in how companies providing applications and interactive services for mobile devices handle personal data.”

Working drafts of the code of conduct require mobile applications to inform consumers when certain information is collected (i.e. age, financial information, browser history, location, etc.) and require mobile applications to notify consumers if an app shares data with any third party entities (i.e. advertising networks, affiliated businesses, etc.).⁵ This information is to be displayed to consumers through short-form notices, similar to notices that already appear when some applications are installed. App developers are also encouraged to provide long-form privacy policies and links that will allow consumers to request deletion of any of their stored data, assuming the data can be deleted.

It is expected that the code of conduct will be released relatively soon.⁶ While the NTIA’s code of conduct is voluntary, once a firm has made a public declaration that it will abide by the standards of the code, the Federal Trade Commission (FTC) could enforce the code against that firm under its unfair or deceptive practices authority. Representative Hank Johnson (D-GA) is currently circulating a discussion draft of the Application Privacy, Protection, and Security Act of 2013. The bill shares similar goals to the NTIA’s voluntary code of conduct project and provides exemptions from the federal legislation for developers that comply with the voluntary codes.⁷

2. Updates to the 1986 Electronic Communications Privacy Act.

Senator Patrick Leahy, chairman of the Senate Judiciary Committee has listed updating the 1986 Electronic Communications Privacy Act (ECPA) as one of his top priorities for this year.⁸ In essence, the ECPA governs interception and authorization of wiretaps as well as judicial authorization for stored emails. In the last Congress, Leahy introduced legislation that would make changes to how email is addressed as well as privacy protections over location information used or stored by service providers, smartphones, and other mobile technologies.⁹ And last month, the Senate Judiciary Committee considered updates to ECPA in markup.

House Judiciary Committee Chairman Bob Goodlatte also chimed in recently on ECPA saying that the House committee will “look at modernizing the decades-old Electronic Communications Privacy Act to reflect our current digital economy."¹⁰

3. “Do-Not-Track” discussions.

The Obama Administration supports the creation of an industry-wide option for consumers to be able to choose not to be tracked from one website to another. While the Administration views the issue as a privacy concern, numerous Internet-based industry leaders generate revenue through advertisements that are largely based on their ability to predict consumer interest, which requires some form of tracking. The “Do-Not-Track” issue was handed off to the World Wide Web Consortium (W3C), an international standards organization.

The W3C is working towards a resolution of “Do-Not-Track” by early summer. Meanwhile, the European Union is proposing to put in place an option that would permit consumers to choose to bar the collection of any of their personal data, which is putting additional pressure on the United States. The general sentiment is that if the W3C cannot resolve the issue soon with industry insiders that Congress could take up the issue during this session.¹¹ In fact, Senator Rockefeller has already introduced legislation which would authorize the FTC to develop a “Do-Not-Track” mechanism for Internet users and is coordinating hearings in April on the topic.

Spectrum

Access to spectrum—the wireless communications signals that travel over the air via radio frequency—is critical to our ability to innovate and support economic growth. As the Federal Communications Commission (FCC) notes, “usage of our wireless networks is skyrocketing, dramatically increasing demands on both licensed and unlicensed spectrum…Our country faces a major challenge to ensure that the speed, capacity, and accessibility of our wireless networks keeps pace with these demands in the years ahead."¹² Here’s what to watch for:

1. Completion of the FCC’s reverse auction process.

As part of the Middle Class Tax Relief and Job Creation Act (P.L. 112-96), Congress authorized the FCC for the first time to hold a specialized incentive auction in which broadcast television stations may relinquish spectrum so the FCC can reallocate it for mobile broadband. In September 2012, the FCC adopted a Notice of Proposed Rulemaking in order to develop a rulemaking record that will enable the Commission to meet the challenges presented by the Spectrum Act's unique grant of authority. The FCC estimates it will conclude the incentive auction proceeding in 2013 and hold the incentive auction in 2014.¹³

2. Debate over licensed versus unlicensed spectrum allocations.

Up for debate in 2013 is how much spectrum will be allocated for unlicensed use (e.g. for WiFi use). The House Committee on Energy and Commerce Subcommittee on Communications and Technology held a hearing in December 2012 and Republicans made clear there would be “opposition to giving away large swaths of spectrum for unlicensed use."¹⁴ One area of consensus is allocating parts of the 5GHz band for unlicensed use, as directed by the spectrum law mentioned above. All five FCC Commissioners recently spoke favorably of it as they voted unanimously for a notice of proposed rulemaking to move the process forward.

Furthermore, there appears to be broad agreement across the tech and telecom industries that WiFi is a good solution for supplementing existing network coverage and capabilities. We expect continued debate over which spectrum bands, and how much more of it, will be allocated for WiFi use.

Intellectual Property

Our ability to innovate is grounded in our ability to protect our intellectual property at home and abroad. From how the patent process affects new inventions to how trade deals support American technology abroad, smart regulations are vital to ensure American innovation continues to drive economic growth. Here’s what to watch for:

1. U.S. Patent and Trademark Office implementation of the America Invents Act.

The U.S. Patent and Trademark Office is continuing the implementation of the Leahy-Smith America Invents Act of 2011.¹⁵ The reforms are expected to streamline the patent application process and introduce new procedures to ensure patent quality. As of March 16, 2013, the U.S. moved to a first-inventor-to-file system, which harmonizes the U.S. system with other industrialized nations but represents a significant shift in U.S. patent procedures.

2. The Trans-Pacific Partnership trade agreement.

The United States is currently negotiating with 10 other Asia-Pacific countries^*16 for a Trans-Pacific Partnership (TPP) trade agreement, with the aim of concluding a deal in 2013. A key goal for the United States in the TPP talks is to provide strong protection and improved enforcement for the wide range of intellectual property upon which half of American exports–particularly IT, entertainment, and pharmaceutical products–so strongly depend. The TPP talks are also focusing on rules to improve data flows and reduce impediments to e-commerce for both consumers and businesses. Additionally, TPP negotiators are seeking to develop means to assure more competitive access for telecommunications providers in TPP country markets. In these areas and others, the TPP is intended to be a “high standard” trade agreement–one that will attract new members (e.g., Japan and South Korea) and help set the rules for future regional and multilateral trade agreements.

* Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Japan is slated to officially join the talks soon.

3. Updates to the Information Technology Agreement.

Trade negotiators in Geneva are ramping up talks to update the Information Technology Agreement (ITA), a global trade deal that eliminates duties on communications and information products. Since 1997, the ITA has driven global growth by eliminating duties on important categories of ICT products. But the ITA’s product lists haven’t been revised since 1997.

The Agreement requires its signatories to eliminate customs duties on specified ICT products in key categories including: computers (including PCs and laptops), semiconductors and semiconductor manufacturing equipment, telecom devices (including mobile phones and switching equipment), data storage media (like CDs), among others. Since the ITA’s product lists were agreed upon in 1997, there has been remarkable advancement in information and communications technologies. Continuous innovation and lower costs are forging powerful new links that connect the world in unprecedented ways. The ITA hasn’t kept up and is long overdue for an upgrade.¹⁷

4. Cell phone unlocking.

In response to an online petition to legalize cell phone unlocking, the White House announced in March 2013 that consumers should be able to unlock their cell phones and tablets without risking criminal or other penalties.¹⁸ The issue picked up national attention in response to a regulatory decision by the Librarian of Congress to disallow the unlocking of cellphones after January, 2013. As part of their March announcement, the Administration said that it would be open to narrow legislative fixes on the issue, as well as engagement by the FCC, NTIA, and mobile providers. Various legislators have introduced or announced that they will introduce legislation to repair the rulemaking decision by the Librarian of Congress.

5. Music licensing.

Currently, internet radio compensates record labels under a different rate structure than satellite and cable radio, the latter rate having been in place since the 1970s. Under the different standard, internet radio pays record labels exponentially more for each song played than the other entities.¹⁹ Despite consumer demand for internet streaming, investors are expressing concerns about the viability of the music streaming business.²⁰

Policymakers are expected to weigh in on this issue again as the Copyright Royalty Board starts its internet radio rate setting proceeding next year. Legislation was introduced at the end of the last Congress by Senator Ron Wyden (D-OR) and Congressmen Jason Chaffetz (R-UT) and Jared Polis (D-CO) which would seek to treat all forms of digital radio the same with respect to royalty rates. It is expected that similar legislation will again be introduced this year.²¹

Broadband

In our increasingly connected world, access to broadband is a crucial component to how we learn, how we grow, and how we compete. Ensuring that reliable and affordable broadband is available, and targeting the issue of increasing broadband adoption, will give Americans—from kids to innovators—the tools and opportunity they need to usher in a new era of prosperity and growth. Here’s what to watch for:

1. Connect America Fund transition.

There are two ongoing federal vehicles which direct federal money to fund broadband infrastructure: the broadband and telecommunications programs at the Rural Utilities Service of the Department of Agriculture and the Universal Service Fund (USF) programs under the FCC. In order to modernize and streamline the USF programs, the FCC adopted a landmark plan in 2011 that included putting the program on a firm budget, utilizing market-driven policies, and better focusing funds to areas that lack access to broadband service. Currently, the FCC is undergoing a major transition to the new Connect America Fund, which is targeted to the deployment, adoption, and utilization of both fixed and mobile broadband.²²

Staff from Congressman Lee Terry (R-NE)’s office recently confirmed that while no new legislation for increasing broadband accessibility is before the Energy and Commerce subcommittees, Terry sent a letter to the FCC urging the immediate release of money from the Connect America Fund to companies that are ready to help expand universal service.²³

Oversight of the transition to the Connect America Fund and universal service in general is possible in this Congress.

2. Broadband adoption.

A renewed focus is likely to hasten the transition from antiquated broadband infrastructure technologies to a 21st Century innovation infrastructure. There appears to be consensus between the Administration, the FCC, and public interest groups and companies that adoption is a key topic that needs to be tackled and addressed if we want to see adoption rates meet the President’s objective as well as close the digital divide. Key issues around increased broadband adoption include affordability as well as digital literacy aimed at showing how accessing broadband can open up health, education, civic engagement and economic opportunities not currently available to the non-adopters.

3. FCC Technology Transitions Policy Task Force.

The FCC announced its first agency-wide Technology Transitions Policy Task Force on December 10, 2012. Among other issues, the Task Force will coordinate the Commission’s efforts on IP interconnection,
resiliency of 21st Century communications networks, business broadband competition, and consumer protection with a particular focus on voice services. FCC Chairman Julius Genachowski has stated that the Task Force will determine “how [the FCC] can best ensure that our nation’s communications policies continue to drive a virtuous cycle of innovation and investment, promote competition and protect consumers.²⁴