U.S. GOVERNMENT PUBLISHING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Publishing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

99–818 PDF 2016

S. HRG. 114–237 

THE CONNECTED WORLD: 

EXAMINING THE INTERNET OF THINGS 

HEARING 

BEFORE THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

FEBRUARY 11, 2015 

Printed for the use of the Committee on Commerce, Science, and Transportation 

( 

(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

JOHN THUNE, South Dakota, Chairman 

ROGER F. WICKER, Mississippi 

ROY BLUNT, Missouri 

MARCO RUBIO, Florida 

KELLY AYOTTE, New Hampshire 

TED CRUZ, Texas 

DEB FISCHER, Nebraska 

JERRY MORAN, Kansas 

DAN SULLIVAN, Alaska 

RON JOHNSON, Wisconsin 

DEAN HELLER, Nevada 

CORY GARDNER, Colorado 

STEVE DAINES, Montana 

BILL NELSON, Florida, Ranking 

MARIA CANTWELL, Washington 

CLAIRE MCCASKILL, Missouri 

AMY KLOBUCHAR, Minnesota 

RICHARD BLUMENTHAL, Connecticut 

BRIAN SCHATZ, Hawaii 

EDWARD MARKEY, Massachusetts 

CORY BOOKER, New Jersey 

TOM UDALL, New Mexico 

JOE MANCHIN III, West Virginia 

GARY PETERS, Michigan 

DAVID SCHWIETERT, Staff Director 

NICK ROSSI, Deputy Staff Director 

REBECCA SEIDEL, General Counsel 

JASON VAN BEEK, Deputy General Counsel 

KIM LIPSKY, Democratic Staff Director 

CHRIS DAY, Democratic Deputy Staff Director 

CLINT ODOM, Democratic General Counsel and Policy Director 

(III) 

C O N T E N T S 

Page 

Hearing held on February 11, 2015 ....................................................................... 1 

Statement of Senator Thune ................................................................................... 1 

Statement of Senator Nelson .................................................................................. 2 

Prepared statement .......................................................................................... 3 

Statement of Senator Ayotte ................................................................................... 128 

Statement of Senator Peters ................................................................................... 130 

Report dated November 12, 2014 entitled ‘‘Consumer Privacy Protection 

Principles—Privacy Principles for Vehicle Technologies and Services’’ 

by the Alliance of Automobile Manufacturers, Inc. and the Association 

of Global Automakers, Inc. ........................................................................... 131 

Statement of Senator Schatz .................................................................................. 138 

Statement of Senator Daines .................................................................................. 140 

Statement of Senator Heller ................................................................................... 142 

Statement of Senator Booker .................................................................................. 144 

Statement of Senator Fischer ................................................................................. 146 

Statement of Senator Gardner ............................................................................... 149 

Statement of Senator Moran .................................................................................. 151 

Statement of Senator Klobuchar ............................................................................ 152 

Statement of Senator Manchin ............................................................................... 154 

Statement of Senator Markey ................................................................................. 156 

Report dated February 2015 entitled ‘‘Tracking & Hacking: Security & 

Privacy Gaps Put American Drivers at Risk’’ by the staff of Senator 

Edward J. Markey ........................................................................................ 157 

Statement of Senator Cantwell .............................................................................. 171 

Statement of Senator Blumenthal .......................................................................... 173 

Letter dated February 10, 2015 to Chairman John Thune and Ranking 

Member Bill Nelson from Gary Shaprio, President and CEO, Consumer 

Electronics Association ................................................................................. 175 

Letter dated February 11, 2015 to Hon. John Thune and Hon. Bill Nelson 

from Scott Belcher, President, Telecommunications Industry Association ................................................................................................................. 176 

WITNESSES

Michael Abbott, General Partner, Kleiner Perkins Caufield & Byers ................ 5 

Prepared statement .......................................................................................... 7 

Douglas Davis, Vice President and General Manager, Internet of Things 

Group, Intel .......................................................................................................... 9 

Prepared statement .......................................................................................... 11 

Lance Donny, Founder and Chief Executive Officer, OnFarm ............................ 21 

Prepared statement .......................................................................................... 22 

Article dated January 2, 2015 entitled ‘‘Towards Smart Farming—Agriculture Embracing the IoT Vision’’ by the Beecham Research Ltd. ......... 25 

Article entitled ‘‘Agricultural Water Conservation in the Lower Flint 

River Basin of Georgia’’ by the Flint River Basin Partnership ................. 31 

Report dated January 26, 2015 ‘‘NEAA Technical Advisory Group Report—NW Agriculture Irrigation Energy Efficiency Initiative’’ by the 

Northwest Energy Efficiency Alliance ......................................................... 32 

Article dated December 4, 2014 entitled ‘‘10 Policy Principles for 

Unlocking the Potential of the Internet of Things’’ by Daniel Castro 

and Joshua New, Center for Data Innovation ............................................ 50 

Report dated April 2014 entitled ‘‘AgTech: Challenges and Opportunities 

for Sustainable Growth’’ by Suren G. Dutia, Ewing Marion Kauffman 

Foundation ..................................................................................................... 57 

Page

IV 

Lance Donny, Founder and Chief Executive Officer, OnFarm—Continued 

Report dated May 2014 entitled ‘‘Agriculture Gets Smart: The Rise of 

Data and Robotics by Amanda Faulkner, Research Manager, Cleantech 

Group and Kerry Cebul, Principal, Cleantech Group ................................ 83 

Adam D. Thierer, Senior Research Fellow, Mercatus Center at George Mason 

University ............................................................................................................. 89 

Prepared statement .......................................................................................... 91 

Justin Brookman, Director, Consumer Privacy Project, Center for Democracy 

& Technology ........................................................................................................ 116 

Prepared statement .......................................................................................... 117 

APPENDIX

Letter dated February 9, 2015 to Hon. Fred Upton, Hon. Frank Pallone, 

Hon. John Thune and Hon. Bill Nelson from Thomas E. Kern, Interim 

President and CEO, Intelligent Transportation Society of America (ITS 

America); Mitch Bainwol, President and CEO, Alliance of Automobile Manufacturers; Michael P. Melaniphy, President and Chief Executive Officer, 

American Public Transportation Association; Frederick ‘‘Bud’’ Wright, Executive Director, American Association of State Hihgway and Transportation 

Officials (AASHTO); John Bozzella, President and CEO, Association of 

Global Automakers, Inc.; Greg Cohen, President & CEO, American Highway Users Alliance; Jill Ingrassia, Managing Director, Government Relations and Traffic Safety Advocacy, AAA; Roger A. Wentz, CAE, President 

and CEO, American Traffic Safety Service Association; Brian Pallasch, 

Managing Director of Government Relations and Infrastructure Initiatives, 

American Society of Civil Engineers .................................................................. 191 

Response to written questions submitted by Hon. John Thune to: 

Michael Abbott .................................................................................................. 192 

Douglas Davis ................................................................................................... 193 

Response to written questions submitted to Lance Donny by: 

Hon. John Thune .............................................................................................. 194 

Hon. Roy Blunt ................................................................................................. 195 

Response to written questions submitted by Hon. John Thune to: 

Adam D. Thierer ............................................................................................... 196 

(1) 

THE CONNECTED WORLD: 

EXAMINING THE INTERNET OF THINGS 

WEDNESDAY, FEBRUARY 11, 2015 

U.S. SENATE, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, DC. 

The Committee met, pursuant to notice, at 9:47 a.m. in room SR– 

253, Russell Senate Office Building, Hon. John Thune, Chairman 

of the Committee, presiding. 

Present: Senators Thune [presiding], Blunt, Ayotte, Heller, Fischer, Moran, Gardner, Daines, Nelson, Cantwell, Klobuchar, 

Blumenthal, Schatz, Markey, Booker, Manchin, and Peters. 

OPENING STATEMENT OF HON. JOHN THUNE, 

U.S. SENATOR FROM SOUTH DAKOTA 

The CHAIRMAN. Good morning. This hearing of the Commerce, 

Science, and Transportation hearing will come to order. 

This morning we convene to examine what may be the most important trend in technology today: the Internet of Things. 

I want to thank Senators Fischer, Ayotte, Booker, and Schatz for 

their leadership on this issue and for encouraging this committee 

to examine the IoT. 

By now, all of us are very used to having at least one or two electronic items near us that are connected to the Internet, such as 

computers, phones, and TVs. Increasingly, however, we are seeing 

common everyday objects being connected online, a literal Internet 

of Things that will soon be ubiquitous. 

These things unobtrusively gather data and communicate with 

users and with other devices to solve a variety of consumer and 

business needs. 

Some have argued the Internet of Things is the third wave of the 

Internet following the fixed Internet of the 1990s and the mobile 

Internet of the 2000s. 

The economic impact of IoT promises to be significant and will 

drive growth in every sector of our economy. 

According to McKinsey & Company, the Internet of Things has 

the potential to create a global economic impact of up to $6.2 trillion annually by 2025, with 50 billion Internet-connected devices by 

2020. 

There are some truly fascinating examples of the Internet of 

Things: a bed with smart fabric and sensors that tracks your sleep 

habits and uses the data to make sure your sleeping environment 

stays comfortable throughout the night; mobile apps that use roadside sensors to inform drivers of empty parking spots; an autoVerDate Nov 24 2008 11:45 Apr 20, 2016 Jkt 075679 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 S:\GPO\DOCS\99818.TXT JACKIE
2 

mated sprinkler system that saves money by using real-time 

weather data to make automatic, water-saving adjustments; a 

Web-enabled toothbrush that tracks the user’s brushing habits to 

improve oral hygiene. One of my staffers, interestingly enough, actually uses one of these and swears by it. 

As exciting as those applications sound, we are only at the beginning of this technology trend, and there is no telling how far it will 

go. The number of connected things will continue to explode and 

they will increasingly interact with each other dynamically, 

seamlessly, and automatically without human intervention. 

With significant economic and societal impacts, the Internet of 

Things also brings complex policy questions. By their nature, IoT 

devices require Internet connectivity and we will need to be bold 

in thinking of clever ways to unleash licensed and unlicensed spectrum for the private sector. 

IoT devices can collect sensitive consumer and business data. 

Therefore, privacy considerations should be at the forefront as we 

consider this great technological wave. 

Security will also be a critical concern of the Internet of Things 

due to the scope and sensitivity of the data collected due to the 

interconnection of devices and networks. 

These issues are real, but I encourage policymakers to resist the 

urge to jump head first into regulating this dynamic marketplace. 

Let us tread carefully and thoughtfully before we consider stepping 

in with a ‘‘government knows best’’ mentality that could halt innovation and growth. Let us treat the Internet of Things with the 

same light touch that has caused the Internet to be such a great 

American success story. 

We should let consumers and entrepreneurs decide where IoT 

goes rather than setting it on a Washington, D.C.-directed path. If 

evidence shows that there are discrete problems, we should examine ways to solve those problems. But let us have the humility to 

recognize that the best solutions are often not government solutions, and let us not stifle the Internet of Things before we and consumers have a chance to understand its real promise and its implications. 

We have a fantastic panel with us today with diverse experience 

in the IoT marketplace, and I am looking forward to hearing from 

each of you in a moment. 

Right now, I would like to turn to my distinguished Ranking 

Member, the Senator from Florida, Senator Nelson, for his opening 

statement. 

STATEMENT OF HON. BILL NELSON, 

U.S. SENATOR FROM FLORIDA 

Senator NELSON. Thank you to the distinguished Chairman. 

And we are going to have a bed that will help us improve our 

sleep. 

The CHAIRMAN. Sounds good. 

Senator NELSON. That does sound good. 

But as we get into this subject of the Internet of Things, no one 

is talking about over-regulating. The promise of the Internet of 

Things must be balanced with real concerns over privacy. If you 

saw ‘‘60 Minutes’’ last Sunday, the Internet of Everything could 

3 

allow everything to be the portals of the Internet and consequently 

the threat of cybersecurity. Hackers, as shown on ‘‘60 Minutes,’’ 

can access your car and take over the basic functions of driving 

your car. It was demonstrated there with Lesley Stahl trying to 

drive the car under controlled conditions, and suddenly the car 

braked or suddenly the car turned or suddenly the car accelerated. 

The Internet of Things can hack into insulin pumps and cause 

an overdose to occur or take over a pacemaker and cause a heart 

attack. And it is not the stuff of TV drama. It is the real threats 

to our Nation’s cybersecurity, but also to our physical safety. 

Now, I am looking at this through the lens of being the Ranking 

Member of the Cybersecurity Subcommittee on the Armed Services 

Committee, where we are getting into this in detail. 

We opened over the weekend a cybersecurity center at the University of South Florida in Tampa. And I was shown a device that 

is called a ‘‘Pineapple,’’ which costs about 100 bucks. You can buy 

it in commercial stores. And what happens is if I walk into a place 

where I suddenly tap into the WiFi such as a Starbucks, someone 

with this device can suddenly have me on their wireless instead of 

the wireless in the particular store or in my apartment. And all of 

a sudden, I am in their system. 

And so interconnected devices collect, amass, transmit personal 

information. Consumers’ personal privacy is obviously at risk; and 

it is an aspect of the extraordinary things where we can improve 

our sleep, but we are going to have to watch out for whether or not 

we have any privacy. 

Now, the FTC just settled a case with a company that manufactured household security cameras that, because of their faulty software, allowed anyone online to peep into hundreds of households. 

And some companies may transmit the information they collect 

to third parties without consumer consent. It is one thing for my 

refrigerator to inform me that I need more milk. It is another for 

my refrigerator to tell the local grocery store the same thing for 

marketing purposes. 

And more recently we learned that Samsung’s privacy policy for 

its voice-activated Smart TV informed consumers that their indoor 

conversations can be recorded by the television and sent to third 

parties. 

Did you ever read ‘‘Animal Farm’’ and learn about Big Brother? 

Mr. Chairman, I will insert the rest of my opening statement for 

the record so that we can get on to the witnesses. 

But we are at a time of extraordinary challenge. It is a time of 

great opportunity with what we have, but at the same time, where 

is our privacy? 

Thank you. 

[The prepared statement of Senator Nelson follows:] 

PREPARED STATEMENT OF HON. BILL NELSON, U.S. SENATOR FROM FLORIDA

Thank you, Chairman Thune, for holding this hearing today. 

In just the past couple of weeks, we have been hearing a lot about the proliferation of Internet connected devices. 

And the news is not all good. 

We have smartphones with web trackers that you can’t delete called supercookies. 

We have connected devices in cars out there that are potentially collecting all 

sorts of information about us—without express consent. 

4 

And now, we have news reports about televisions that send household recordings 

in our homes to third parties. 

Make no mistake, the advent of the Internet of Things could result in a sea 

change in the way we interact with our world, how we go about our lives in our 

homes, and economic growth and jobs. 

Home automation and integration could mean limitless conveniences and save 

consumers thousands of dollars each year. 

Wearables and connected healthcare devices could drive down costs and pave the 

way for a better life for all of us. 

Smart electric grids, traffic monitoring systems, and new industrial processes 

could revolutionize our country and the economy. 

No one is debating the promise of the Internet of Things, and no one is talking 

about ‘‘overregulating.’’ This is a red herring. But the promise of the Internet of 

Things must be balanced with real concerns over privacy and the security of our 

networks. 

As we saw on Sunday night’s episode of 60 Minutes, the Internet of Everything 

could allow ‘‘everything’’ to be portals to the Internet and, consequently, threats to 

our cybersecurity. 

Hackers can access your car and take over basic functions, such as acceleration 

and braking control. 

They can also hack into insulin pumps and cause an overdose or take over a pacemaker and cause a heart attack. 

This is not the stuff of TV drama—these are real threats not only to our Nation’s 

cybersecurity but also to our physical safety. 

In fact, this technology is nothing new. For years, the so-called ‘‘Pineapple Mark 

IV’’ has been able to hack into Wi-Fi networks and wreak havoc on your laptops 

and smartphones. 

Furthermore, as these interconnected devices collect, amass, and transmit personal information, consumers’ personal privacy is increasingly at risk. 

The FTC just recently settled a case with a company that manufactured household security cameras that, because of faulty software, allowed anyone online to 

peep into hundreds of households. 

Furthermore, some companies may transmit the information they collect to third 

parties without consumer consent. 

It’s one thing for my refrigerator to inform me that I need more milk; it’s another 

for my refrigerator to tell that to the local grocery store for marketing purposes. 

And, more recently, we learned that Samsung’s privacy policy for its voice-activated ‘‘Smart TV’’ informed consumers that their indoor conversations can be recorded by the television and sent to a third party. 

So, Big Brother may really be listening to us. 

The FTC just released a report on this very topic, making some wise recommendations—for best practices—for companies as they design, sell, and service their connected devices. 

I hope it’s the start of real conversation and cooperation between the FTC and 

industry to make sure the promises of the Internet of Things don’t fall victim to 

a lack of foresight and protections for consumers. 

Finally, another important aspect in looking toward the future of the Internet of 

Things is the platform on which the majority of these new devices connect—wireless 

spectrum. 

Spectrum is the lifeblood of these devices, as well as for so much other innovation 

in the U.S. economy. We must engage in a careful consideration to balance competing needs for this finite, yet critical public resource. 

I want to thank the witnesses for appearing before the Committee, and I look forward to hearing your testimony. 

The CHAIRMAN. Thank you, Senator Nelson. 

And we are going to turn to our distinguished panel to answer 

all the questions that you have just raised. Hopefully, they will 

help us figure out how we get all the up-side benefit, opportunity 

and potential that comes with this great technology but also the 

risks which very clearly exist and to which you alluded. 

We will start with Mr. Michael Abbott. Mr. Abbott is a General 

Partner at Kleiner Perkins Caufield & Byers. 

5 

Mr. Douglas Davis. Mr. Davis is the Vice President and General 

Manager for the Internet of Things Group for the Intel Corporation. 

Mr. Lance Donny. Mr. Donny is the Chief Executive Officer for 

OnFarm Systems. 

Mr. Adam Thierer. Mr. Thierer is the Senior Research Fellow for 

the Mercatus Institute at George Mason University. 

And Mr. Justin Brookman. Mr. Brookman is the Director for the 

Consumer Privacy Project at the Center for Democracy & Technology. 

So we are delighted that you have all made time to be with us 

today and look forward to hearing from you. 

We will start at my left and your right Mr. Abbott, and if you 

could confine your remarks as close to 5 minutes as possible, we 

would certainly appreciate that. Mr. Abbott? 

STATEMENT OF MICHAEL ABBOTT, GENERAL PARTNER, 

KLEINER PERKINS CAUFIELD & BYERS 

Mr. ABBOTT. Chairman Thune, Ranking Member Nelson, and 

distinguished members of the Senate Commerce Committee, I appreciate the opportunity to testify before you today on the exciting 

and important topic of our connected world and the dynamic role 

of the Internet of Things. 

I would also like to thank Senators Fischer, Booker, Ayotte, and 

Schatz for your interest in this topic and for requesting this hearing. 

I am here today in my capacity as a General Partner at the Silicon Valley-based venture capital firm, Kleiner Perkins Caufield & 

Byers. Our firm, Kleiner Perkins, has more than 40 years of experience helping entrepreneurs deliver world-changing ideas to market. 

Through our consumer digital and enterprise digital initiatives 

alone, we have invested in and are mentoring more than 30 entrepreneurial companies with over $300 million in investments in the 

IoT space today. I am by background an engineer, an entrepreneur, 

an investor, and a serial optimist about the power of technology 

and innovation to help improve our lives. 

Today I will focus my testimony on three key areas. 

One, the Internet of Things is a robust and vibrant ecosystem in 

both the consumer and enterprise space, with new platforms and 

applications coming online every day and strong venture capital investments to help grow it. 

Two, the rapid growth in both data and devices leads to a next 

wave of innovation focused on efficiencies and smart systems using 

the cornerstones of successful IoT smart hardware, software, and 

cloud integration. 

Third, IoT, or the Third Wave of the Internet as analysts like to 

call it, is nascent but very competitive. Consumer confidence is 

paramount, but we must not over-regulate and stifle innovation. 

As we look back on investments in the verticals we called ‘‘bits,’’ 

‘‘bytes,’’ ‘‘bugs,’’ and ‘‘drugs,’’ we now see the rise of the Internet of 

Things, a connected world that allows us to jump from old platforms of the last decade into a new world in which we can manage 

every aspect of our lives, from our health to our finances, to our 

home, all with the swipe of a finger on a smart phone. And the 

6 

market is responding. Overall venture investments, $48 billion, in 

2014 reached their highest levels since 2000, and the 2014 IPO 

market was strong both domestically and globally. Overall, IoT investment is harder to immediately qualify since it crosses over so 

many sectors. 

So what do we mean by the IoT? 

IoT enables the collection of an unprecedented quantity and quality of data through sensors and devices. According to an often-cited 

Cisco report, there will be more than 50 billion connected devices 

by 2020, approximately 2x growth every 5 years. And as the recent 

EMC Digital Universe and market research company IDC report 

noted, data is doubling in size every 2 years and expected to reach 

44 zettabytes by 2020. That is 44 trillion gigabytes. To put that in 

perspective, we were at 4.4 zettabytes, just over a tenth of that, in 

2013. 

So how will we deal with our data obesity problem? What are the 

smart solutions for managing all of this data in a way that improves, rather than complicates our lives? With many platforms to 

spur technological advances from the home, to the body, to the car, 

to the factory, to the farm, we must innovate our way into a smarter connected future. At Kleiner Perkins, we are looking across platforms and enterprises at disrupters and at incumbents, and at the 

entire IoT ecosystem to use connectivity to transform how we work, 

play, and care for our families and ourselves. 

If great hardware and software are the cornerstones of a robust 

IoT ecosystem, it is the third element, hardware, software, and 

cloud services, that will show major advances and create smarter 

systems. With all these new devices, the stream of data will continue to accelerate. Successful systems must provide data-driven 

intelligence at both the endpoint devices and through machine 

learning in the cloud. In order for IoT to grow in meaningful ways 

to keep both the consumer and the enterprise users engaged, we 

must have a more intelligent way to manage and rank-order data 

with real-time usage feedback on what needs a fix or an upgrade. 

Recent advances in deep learning, the use of algorithms in machine 

learning for modeling abstractions in data, combined with these 

streams of real-time sensor data, will present enormous opportunities for innovation on which we are focused. 

My testimony today is based primarily on my experience as an 

engineer and investor. I am not an expert in public policy. There 

is so much promise in this space, but we are in the early days. 

Consumer confidence is paramount to growth and innovation in the 

IoT space and reasonable security and best practices should help 

bolster that confidence. 

The FTC has thoughtfully presented ideas, benefits, and risks in 

its Internet of Things Privacy & Security in a Connected World report. Congress, as evidenced by today’s hearing, is also looking at 

the intersection of technology and public policy. 

However, I would ask that regulators and legislators proceed 

with caution when considering over-regulation in this space to prevent stifling innovation. As is common in nascent markets, interoperability in IoT is now a challenge, and over time, standards will 

emerge from the winners in the market. We are at a critical comment in this industry in which innovators and entrepreneurs are 

7 

1 NVCA, ‘‘MoneyTreeTM Report by PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), based on data from Thomson Reuters,’’ January 16th, 2015. 

http://nvca.org/pressreleases/annual-venture-capital-investment-tops-48-billion-2014-reachinghighest-level-decade-according-moneytree-report/ 

competing with some of the biggest and most historically successful 

enterprises in the country. And that is healthy. This competition is 

creating consumer choice in the marketplace, delivering to consumers much better products and services at a lower cost. 

An insightful colleague of mine once said that we will all know 

we have succeeded when we no longer use the term ‘‘Internet of 

Things,’’ just as we no longer say that we downloaded MP3’s. As 

we have found with our music and phones, innovators are turning 

the scientific and technical breakthroughs of our time into products 

that benefit everyone, changing the way we live and giving us new 

opportunities to connect with and relate to one another and achieve 

our goals. Soon, my bet is that these technologies will likewise become unobtrusive, another chapter in how entrepreneurs and their 

innovations can help improve the quality of life for new generations 

in this country and around the world. 

I would like to thank the Committee for the opportunity to testify today, and I look forward to answering any questions. 

[The prepared statement of Mr. Abbott follows:] 

PREPARED STATEMENT OF MICHAEL ABBOTT, GENERAL PARTNER, KLEINER PERKINS CAUFIELD & BYERS

Chairman Thune, Ranking Member Nelson, and distinguished members of the 

Senate Commerce Committee, I appreciate the opportunity to testify before you 

today on the exciting and important topic of our connected world and the dynamic 

role of the Internet of Things (‘‘IoT’’). I would also like to thank Senators Fischer, 

Booker, Ayotte and Schatz for your interest in this topic and for requesting this 

hearing. 

I am here today in my capacity as a general partner at the Silicon Valley-based 

venture capital firm, Kleiner Perkins Caufield & Byers. Our firm, Kleiner Perkins 

has more than 40 years of experience helping entrepreneurs deliver world-changing 

ideas to market. Through our Consumer Digital and Enterprise Digital initiatives 

alone, we have invested in and are mentoring more than 30 entrepreneurial companies with over $300 million in investments in the IoT space. I am by background 

an engineer, an entrepreneur, an investor, and a serial optimist about the power 

of technology and innovation to help improve our lives. 

Today I will focus my testimony on 3 key areas: 

1. The Internet of Things is a robust and vibrant ecosystem—in both the consumer and enterprise space—with new platforms and applications coming online every day and strong venture capital investments to help grow it. 

2. The rapid growth in both data and devices leads to a next wave of innovation 

focused on efficiencies and smart systems using the cornerstones of successful 

IoT: smart hardware, software and cloud integration. 

3. IoT—or ‘‘the Third Wave of the Internet’’ as analysts like to call it, is nascent 

but very competitive. Consumer confidence is paramount, but we must not 

over-regulate and stifle innovation. 

As we look back on investments in the verticals we called ‘‘Bits, Bytes, Bugs, and 

Drugs,’’ we now see the rise of the Internet of Things: a connected world that allows 

us to jump from old platforms of the last decade into a new world in which we can 

manage every aspect of our lives, from our health to our finances to our home, all 

with the swipe of a finger on a smartphone. And the market is responding. Overall 

venture investments ($48 billion) in 2014 reached their highest levels since 2000 1

and the 2014 IPO market was strong, both domestically and globally. Overall IoT 

investment is harder to immediately qualify since it crosses over so many sectors. 

So what do we mean by the IoT? 

It is my understanding that the primary focus of this hearing is the consumer side 

of the IoT. But it’s worth mentioning that there are many other applications for IoT 

8 

2Dave Evans, ‘‘The Internet of Things: How the Next Evolution of the Internet Is Changing 

Everything,’’ Cisco Internet Business Solutions Group (IBSG), April 2011. http://www 

.cisco.com/web/about/ac79/docs/innov/IoTlIBSGl0411FINAL.pdf 3 EMC Digital Universe & IDC, ‘‘The Digital Universe of Opportunities: Rich Data and the 

Increasing Value of the Internet of Things,’’ April 2014. http://www.emc.com/leadership/digital-universe/2014iview/executive-summary.htm 

including business-to-business and machine-to-machine—applications that will only 

expand. As such, I tend to categorize IoT in two ways: 

• First is the consumer market, what I call ‘‘The Internet of Me,’’ because it enables people to use connectivity to enrich their lives and the lives of their family 

and friends. 

• Second is ‘‘The Internet of IT,’’ consisting of large data generation for enterprises to make smarter systems for everything from precision agriculture to efficiencies in large-scale manufacturing. 

IoT enables the collection of an unprecedented quantity and quality of data 

through sensors and devices. According to an often-cited Cisco report, there will be 

more than 50 billion connected devices by 2020 2—approximately 2x growth every 

5 years. And as the recent EMC Digital Universe and market research company 

IDC report noted, data is doubling in size every two years and expected to reach 

44 zettabytes by 2020 3—that’s 44 trillion gigabytes. To put that in perspective, we 

were at 4.4 zettabytes, just over a tenth of that, in 2013. 

So how will we deal with our data obesity problem? What are the smart solutions 

for managing all of this data in a way that improves, rather than complicates, our 

lives? With many platforms to spur technological advances from the home to the 

body to the car to the factory to the farm, we must innovate our way into a smarter, 

connected future. At Kleiner Perkins, we are looking across platforms and enterprises, at disrupters and at incumbents, and at the entire IoT ecosystem to use 

connectivity to transform how we work, play, and care for our families and ourselves. 

We have two critical issues on this front. The first is power management of the 

devices themselves, and the second is data management, including machine learning. With a growing number of power hungry devices, our firm is looking at 

innovators working in the Low Power Everywhere space—devices getting lighter, 

smaller and more efficient. We’re also looking at low power processors and energy 

scavengers that search for energy sources without batteries. There are promising 

advancements in this space such as the work being done by Ambiq Micro in subthreshold circuits to improve efficiency in sensors and devices. 

As investors, we do extensive analysis before investing in a company. But when 

you are at the disruptive edge of a new technological revolution, it’s hard to fully 

predict how consumers will react. In order for a technological revolution to take 

root, you must invest early and work with the company to produce some wins. 

A great example of this is our investment in Nest. When we started, we couldn’t 

know for sure that Nest would be an attractive device to consumers. But now, with 

great technology and smart marketing, it’s influencing the development of the smart 

home. This is because the Nest team got two of the most critical IoT elements right: 

intuitively designed and aesthetically pleasing hardware, and smart software. Together, these produce a seamless and enjoyable user experience, enabling the customer to easily, and remotely as needed, adjust the temperature in one’s home and 

save on heating and cooling costs. 

It’s the possibility of more stories like Nest that led Kleiner Perkins to partner 

with Google Ventures to start the Thoughtful Things Fund. The Thoughtful Things 

Fund is an initiative to back the ideas and companies that can expand what the 

conscious homeTM can do. Consumers see immediate benefits from a connected 

home, whereas the cycle for enterprise systems may take a longer period of time. 

But the seeds of change for both consumers and enterprises are there, and we’ve 

already had thousands of submissions from all over the world. 

If great hardware and software are the cornerstones of a robust IoT ecosystem, 

it is the third element—hardware + software + cloud services that will show major 

advances and create smarter systems. With all of these new devices, the stream of 

data will continue to accelerate. Successful systems must provide data-driven intelligence at both the endpoint devices and through machine learning in the cloud. In 

order for IoT to grow in meaningful ways to keep both consumer and enterprise 

users engaged, we must have a more intelligent way to manage and rank order 

data, with real-time usage feedback on what needs a fix or an upgrade. Recent advances in ‘‘deep learning’’—the use of algorithms in machine learning for modeling 

9 

abstractions in data—combined with these streams of real-time sensor data, will 

present enormous opportunities for innovation on which we are focused. 

My testimony today is based primarily on my experience as an engineer and investor. I am not an expert in public policy. There is so much promise in this space, 

but we are in the early days. Consumer confidence is paramount to growth and innovation in the IoT space and reasonable security and best practices should help 

bolster that confidence. 

The FTC has thoughtfully presented ideas, benefits and risks in its Internet of 

Things: Privacy & Security in a Connected World report. Congress, as evidenced by 

today’s hearing, is also looking at the intersection of technology and public policy. 

However, I would ask that regulators and legislators proceed with caution when 

considering over-regulation in this space to prevent stifling innovation. As is common in nascent markets, interoperability in IoT is now a challenge and, over time, 

standards will emerge from the winners in the market. We are at a critical moment 

in this industry, in which innovators and entrepreneurs are competing with some 

of the biggest and most historically successful enterprises in the country—and that 

is healthy. This competition is creating consumer choice in the marketplace, delivering to consumers much better products and services at a lower cost. 

An insightful colleague of mine once said that we’ll know that we’ve succeeded 

when we no longer use the term the ‘‘Internet of Things’’—just as we no longer say 

that we ‘‘download MP3s.’’ As we’ve found with our music and phones, innovators 

are turning the scientific and technical breakthroughs of our time into products that 

benefit everyone, changing the way we live and giving us new opportunities to connect with and relate to one another and achieve our goals. Soon, my bet is that 

these technologies will likewise become unobtrusive, another chapter in how entrepreneurs and their innovations can help improve the quality of life for new generations, in this country and around the world. 

I would like to thank the Committee for the opportunity to testify today. I look 

forward to answering any questions. 

The CHAIRMAN. Thank you, Mr. Abbott. 

Mr. Davis? 

STATEMENT OF DOUGLAS DAVIS, VICE PRESIDENT AND 

GENERAL MANAGER, INTERNET OF THINGS GROUP, INTEL 

Mr. DAVIS. Good morning, Chairman Thune, Ranking Member 

Nelson, and members of the Committee. Thank you for the opportunity to provide testimony on the importance of the United States 

establishing a global leadership role in the Internet of Things. 

As head of Intel’s IoT Group, I own the company’s overall strategy in this space. Intel’s 30 years of investment, innovation, and 

standards leadership in the evolution of computing provide the 

foundational elements of that strategy. Intel believes the Internet 

of Things represents a transformational opportunity for the U.S. 

and the world. It will enable innovation, increase productivity, and 

deliver efficiencies across both public and private sectors. 

Now, while some think the Internet of Things is smart thermostats and wearables, these consumer devices are just a few of the 

many applications. The primary economic driver will be non-consumer areas such as industrial and commercial applications. 

I will address three topics that are important to consider as you 

chart your policy. 

One, why is the IoT important? 

Two, what are the potential barriers to successful IoT ecosystems? 

And how can policymakers accelerate deployments to ensure U.S. 

leadership? 

So first, why is the Internet of Things important? It will drive 

unprecedented benefits for the Government, businesses, consumers, 

and communities. As Mr. Abbott pointed out, the growth in the 

10 

number of devices and the amount of data that they are generating 

will increase at dramatic levels by the end of the decade. The IoT 

presents the opportunity to connect these devices, efficiently analyze the data, and use the information to improve decisionmaking. 

And in doing so, the IoT is expected to have a multi-trillion dollar 

global impact, as we have noted. 

What should most excite U.S. policymakers is that America and 

other developed economies are expected to capture 70 percent of 

this impact if we lead. 

Let us consider one IoT application. SAIA Trucking, located in 

Georgia, has a nationwide fleet of about 3,000 trucks. They recently 

deployed an Intel-based IoT solution which alters routes and guides 

driver performance real-time. SAIA increased fuel efficiency by 6 

percent, translating into $15 million in annual savings. 

The U.S. trucking industry consumes 54 billion gallons of fuel 

per year. Extrapolating SAIA’s success, our Nation could save over 

3 billion gallons of fuel yearly while reducing CO2 emissions. 

Second, what are the potential barriers to a successful IoT ecosystem? One barrier could be security if not implemented at the 

outset. For this reason, Intel prioritizes security as the foundation 

of our IoT solutions. We will integrate security at the outset, building cryptography into our chips to enable strong identity and data 

protection. In addition to the compute device itself, our solutions 

will employ advanced software security to prevent harmful applications from being activated on the device or taking down the network. Integrating multiple layers of security at the outset enables 

trusted data transmission necessary for successful IoT implementations. 

Other potential barriers include connecting to legacy infrastructure, interoperability amongst devices, and developing global standards. To address these barriers, Intel collaborated with industry 

leaders to define five tenets for successful IoT solutions. They are 

security, ease of connectivity, interoperability, data analytics, and 

ease of deploying new applications and services. Based on these tenets, we recently launched the Intel IoT Platform. 

Finally, how can policymakers accelerate IoT deployments to ensure U.S. leadership? Well, candidly, the U.S. is behind. Other 

countries are aggressively investing in and deploying IoT implementations to transform their economies, address societal problems, and spur innovation. China, Brazil, the United Arab Emirates have all adopted national IoT plans with time-bound goals and 

are investing heavily in IoT R&D and infrastructure. The U.S. 

must leverage our vast resources and capabilities. Promoting industry alignment around these large-scale IoT deployments based 

on secure, open, and interoperable solutions will showcase U.S. 

leadership. 

Congress can advance our Nation’s IoT momentum by collaborating with industry to establish a national IoT strategy, encouraging public-private partnerships, and investing in IoT research. 

Intel is confident that the U.S. can lead the IoT transformation 

with a continued open dialogue, as you are doing here today, and 

by implementing these recommendations. 

Thank you for your time, and I look forward to your questions. 

[The prepared statement of Mr. Davis follows:] 

11 

PREPARED STATEMENT OF INTEL CORPORATION

Intel Corporation (‘‘Intel’’) respectfully submits this statement for the record in 

conjunction with the Senate Commerce, Science & Transportation Committee’s hearing on ‘‘The Connected World: Examining the Internet of Things.’’ Our statement 

focuses on the opportunity to unleash the vast potential of the Internet of Things 

(IoT) through public-private partnerships and to create a leadership opportunity for 

the U.S. in this multi-industry transformation. 

Witness: Doug Davis is the vice president and general manager of Intel’s worldwide IoT Group (IOTG). Doug has been an Intel employee for 31 years, and began 

his career as a product engineer in the company’s Military and Special Products Division. Over the last decade, Doug has run Intel’s worldwide Embedded and Communications Group, managed wafer factory operations, and now leads the IoT 

Group. This organization is responsible for the company’s IoT strategy and solutions—consisting of hardware, software, security and services across a wide range 

of market segments, including transportation, manufacturing, healthcare, retail, 

smart home, smart buildings and smart cities. For the past 30 years, Intel has made 

significant investments, driven exciting innovations, led standards activities, and 

supported what has evolved to become the Internet of Things. At Intel, we like to 

say IoT is an overnight transformation thirty years in the making. 

Intel and the Internet of Things 

Intel’s Role 

The evolution of IoT goes back more than 30 years with Intel as a leader from 

the start. In 1972, Intel introduced the Intel 4004, the world’s first commercially 

available microprocessor—an invention foundational to the ‘‘computer revolution.’’ 

In the late 1970s, came the Intel 8048, the world’s first commercially available 

microcontroller, which integrated memory, peripherals and the microcontroller on a 

single chip. These microcontrollers fueled new business opportunities in a variety 

of markets. In 1981, IBM launched the IBM 5150, igniting the rapid-paced growth 

of the ‘‘personal’’ computer (PC) market segment. This first IBM PC ran on an Intel 

8088 microprocessor and used Microsoft’s MS–DOS operating system. 

Initially, microprocessors were used for personal computing, leaving microcontrollers for ‘use specific or ‘embedded’ applications like factory controls. A critical shift 

occurred in the mid-1990s as customers began using Intel microprocessors in embedded market segments, bringing the power of computing to what had traditionally 

been based on microcontrollers. Intel began a concerted effort to support the unique 

attributes of embedded market segments including manufacturing life-cycle support 

for 7–10 years, extended operating temperatures, and utilization of real-time operating systems. 

The early 2000s saw an unprecedented uptake in Internet usage, as the PC and 

mobile markets exploded. This ‘‘connectivity’’ trend wasn’t limited to connecting people; embedded systems were simultaneously taking advantage of this powerful capability. Over the course of just a few years, industries worldwide were profiting from 

the scaling benefits of computing and networking and consumers were enjoying the 

benefits of connected PCs. 

In the late 2000s, ‘‘Machine to Machine’’ (M2M) emerged. M2M refers to technologies that allow both wireless and wired systems to communicate with other devices of the same type. Before M2M, people had to be physically located at the machine to analyze the data to make decisions for managing each machine. With the 

introduction of M2M, machines could now be managed remotely. All of these innovations within the datacenter, cloud computing, wireless communications and M2M 

formed the basis of what is now widely known as the IoT. 

Moore’s Law, the business model that drives the semiconductor industry, states 

that the number of transistors in an integrated circuit doubles approximately every 

two years. In essence, the marketplace experiences a doubling of the computing capability at approximately the same price every other year. The observation is named 

after Intel co-founder Gordon E. Moore. This explosion of networked devices also 

began to represent another ‘‘law’’ of scaling called Metcalfe’s Law. Metcalfe’s Law 

states that the value of a telecommunications network is proportional to the square 

of the number of connected users of the system (n2). This enables the Network Effect, whereby the value of a product or service is dependent on the number of others 

using it. Together, Moore’s Law and Metcalfe’s Law demonstrate how the power of 

intelligent, connected devices like connected digital signs, cars and homes can unleash innovation, leading to the creation of platforms for new applications and services. 

12 

1 A gateway is a node on a network that serves as an entrance to another network. 

IoT Definition 

IoT is defined as endpoint devices such as cars, machinery or household appliances that connect to the Internet and generate data that can be analyzed to extract 

valuable information. There are three sub-definitions emerging out of the IoT space, 

however, all three definitions overlap. The ‘‘Mobile IoT’’ comprises devices like cars, 

wearables, sensors and mobile phones which all connect directly through broadband 

wireless networks. The ‘‘Industrial IoT’’ connects devices in industrial environments 

like factory equipment, security cameras, medical devices, and digital signs. These 

devices are able to connect to the Internet and into the datacenter (cloud) through 

an industrial ‘‘gateway.’’ 1 Finally, the ‘‘Home IoT’’ connects devices like game consoles, smart TVs, home security systems, household appliances and thermostats 

through at gateway to the internet. 

The Five Critical Tenets of IoT 

In September 2014, Intel and key global partners collaboratively identified five 

critical IoT tenets which describe how endpoint devices should connect to the cloud. 

Here are the five key tenets, as illustrated in the graphic below: 

First, Security as the Foundation: With billions of internet-connected devices by 

2020, it is important that IoT is secure from the sensor to the cloud, including all 

hardware and software. Second, Connectivity, Device Discovery, and Provisioning: 

Billions of devices cannot be managed manually. Rather, devices need to be able to 

communicate their ‘‘status’’ to the rest of the system independently. Third, Data 

Normalization: With so many different data types, there must be some level of interoperability between devices such that they are speaking the same language. Fourth, 

Actionable Analytics: The data must be turned into meaningful information through 

analytics. Fifth, Monetize Hardware, Software, and Data Management: The IoT infrastructure must be built to allow developers to manage and monetize innovative 

applications and services. 


0211INTE1.eps
13 

2 Intel Unifies and Simplifies Connectivity, Security for IoT, Intel Corp. (Dec. 2014), http:// 

newsroom.intel.com/community/intellnewsroom/blog/2014/12/09/intel-unifies-and-simplifies 

-connectivity-security-for-IoT. 

With these tenets in mind, in December of 2014, Intel launched the Intel® IoT 

Platform,2 which unifies security and connectivity to enable scalable IoT deployments. The Platform provides a secure device-to-cloud (end-to-end) open reference 

model for connecting devices to deliver trusted data to the cloud and value through 

analytics. The Platform enables tenets 1–3—security, connectivity, and interoperability—by creating a foundation on which to build IoT solutions. This enables tenets 4 and 5—data analytics and monetization of new products and services, many 

of which we never could have imagined a decade ago and may not even conceive 

of today. 

IoT: A Transformational Opportunity Built on a Foundation of Security 

With respect to the critical element of security, Intel values this first and foremost. We believe that security is the foundation of IOT and it is fundamental to 

Intel’s roadmap planning. We have dedicated security products and security features 

embedded into both our hardware and software products. Our hardware and software are being designed from the beginning to be secure. This is important for 

trusted data exchange in the IoT, as data generated by devices and existing infrastructure must be able to be shared among the cloud, the network, and intelligent 

devices for analysis. This enables users to aggregate, filter and share data from the 

edge of the network all the way to the cloud with robust protection. Moreover, data 

must be accurate to be beneficial. Intel prioritizes the security, accuracy, privacy 

and integrity of data in all market sectors, and especially in the industrial domain 

where the safeguarding of critical infrastructure can be vital to economic and social 

stability. Intel understands that we must deliver and evoke consumer and industry 

trust through these hardened security solutions in order to motivate adoption and 

participation in the IoT marketplace. 

Intel believes it is critical to integrate security into the hardware and the software, from the smallest microcontroller (MCU) at the edge of the network to the 

most advanced server CPU in the data center (cloud) and all gateways and devices 

in between. These hardware-and software-level security capabilities will create 

redundancies which prevent intrusions and enable a robust, secure, trusted IoT endto-end solution. 

Hardware. Intel’s hardware will provide transistor-level security on the actual 

compute device itself. By integrating security into the device itself from the outset 

(rather than layering it on top at a latter point in the design cycle with other, less 

secure external features), Intel’s IoT solutions will enable our customers to know the 

exact unique identity of every device on their network. This technology also has the 

capability for encrypting that unique identity to provide anonymity properties in addition to hardware enforced integrity. Because each compute device can have an immutable identification to enable secure provisioning, a non-approved device will not 

be allowed to access the network. The MCU or CPU itself will provide the ‘‘baked 


0211INTE2.eps
14 

3The Digital Universe of Opportunities: Rich Data and the Increasing Value of the Internet 

of Things, EMC/IDC (April 2014), http://www.emc.com/leadership/digital-universe/2014iview/ 

executive-summary.htm . 4http://www.industrialinternetconsortium.org/ 

5http://openinterconnect.org/ 

in’’ (irremovable, non-changeable) identity of the device, making the level of security 

significantly more robust. 

On top of this immutable device identification, Intel’s IoT solutions will employ 

advanced hardware level security capabilities such as ‘‘whitelisting,’’ which prevents 

harmful applications like viruses, control agents, and malware from ever being activated on the device. What this means is that, if the CPU ever ‘‘sees’’ an application 

that is not on its known good list (‘‘whitelist’’) try to run on the device, it will automatically lock out that device and not allow it turn on. At other layers in IoT solutions, Intel also uses another advanced hardware security capability called ‘‘blacklisting,’’ which blocks a defined list of known malware from entering the device and 

the network. 

Software. In addition to the advanced hardware security capabilities in Intel’s IoT 

solutions, Intel Security (formerly McAfee) integrates advanced security capabilities 

that provide robust software-level protection. This means that the software is continually monitoring the activity of its networked devices-and looking for any abnormalities or possible threats. If the monitoring software identifies a threat, it 

proactively notifies users and/or automatically quarantines any devices on the network that could be at risk. 

By employing this combination of transistor-level security, along with advanced 

hardware and software level security, from devices on the edge of the network all 

the way to the data centers in the cloud, Intel will protect IoT assets and information in ways few others can. Intel knows that security is critical to protect the integrity of IoT solutions, so we will design it in from the outset. 

IoT Priorities—Enablers of Scale 

Security 

As discussed above, security is foundational to the IoT ecosystem and a top Intel 

priority. With billions of connected devices producing enormous amounts of data 

–EMC/IDC forecasts that devices will generate more than 44 zeta bytes of data by 

2020 3—security of this data will be critical to enable scale of IoT deployments. That 

is why we emphasize again the importance of having security designed into the IoT 

systems from the outset. Secure data delivery systems are critical to enabling trusted data exchange and scale, thereby unlocking the full potential of IoT. 

Interoperability 

The IoT marketplace is currently aligning around industry sectors/verticals that 

are starting to deploy IoT solutions to meet their specific business requirements: 

manufacturing, retail, transportation, healthcare, and others. As early adopters deploy technologies to enable IoT solutions, it is important that the various IoT technologies are ‘‘interoperable’’ with each other as well as being able to adapt and grow 

to accommodate new and changing business requirements. Proprietary technologies 

that are inherently antithetical to the concept of the Internet of All Things will slow 

down IoT adoption, limit scalability and delay economic benefits. 

The Intel IoT Platform’s building block components are secure, interoperable, and 

scalable, enabling ‘‘horizontal’’ end-to-end IoT deployments across industry sectors 

from transportation to energy to healthcare and beyond. By creating a secure, horizontal, interoperable platform, Intel will enable IoT to scale quickly by creating a 

repeatable (reusable) foundation that ultimately enables choice and interoperability 

in the marketplace. For example, Intel offers businesses that use the Intel IoT Platform the choice and flexibility to use some or all of the technology components from 

Intel, or interchange them with ecosystem partner components. In summary, if the 

U.S. wants to lead in IoT, we must prioritize interoperability from the start. 

Open Standards 

How do we drive a secure solution that is interoperable and scales across a global 

IoT ecosystem? The solution is a voluntary, global, industry-led, open set of standards which enable scale to drive cost-effective solutions. Over the last 10 months, 

Intel co-founded two industry consortia focused on interoperability and open standards: The Industrial Interconnect Consortium (IIC) 4 and the Open Internet Consortium (OIC).5

IIC founding members include major U.S. companies such as AT&T, Cisco, GE, 

IBM and Intel. The IIC has reached over 135 members since its inception in March 

15 

6 Commercial Buildings Energy Consumption Survey (CBECS), US Energy Information Administration (5.6 million commercial buildings in U.S. in 2012), http://www.eia.gov/consump 

tion/commercial/reports/2012/preliminary/index.cfm?src=%E2%80%B9%20Consumption%20% 

20%20Commercial%20Buildings%20Energy%20Consumption%20Survey%20(CBECS)-b1. 7http://thesemco.com/about-us/why-energy-efficiency/ 

2014. IIC goals are to: (i) build confidence around new and innovative approaches 

to security; (ii) drive innovation through the creation of new industry use cases and 

test beds for real-world applications; (iii) define and develop the reference architecture and frameworks necessary for interoperability; (iv) influence the global development standards process for Internet and industrial systems; and (v) facilitate open 

forums to share and exchange real-world ideas, practices, lessons and insights. 

The OIC was founded by leading technology companies with the goal of defining 

the connectivity requirements for devices, and for ensuring interoperability between 

the millions of devices that will make up the emerging IoT. OIC founding members 

include Cisco, GE, Intel, MediaTek and Samsung, and membership has reached over 

54 members. OIC goals are to: (i) define the specification, certification and branding 

to deliver reliable interoperability; (ii) ensure this standard will be an open specification that anyone can implement and is easy for developers to use; (iii) include 

IP protection and branding for certified devices and service-level interoperability; 

(iv) provide an open source implementation of the standard; and (v) ensure this open 

source implementation will be designed to enable application developers and device 

manufacturers to deliver interoperable products across Android, iOS, Windows, 

Linux, Tizen, and more. 

Both IIC and OIC recognize that a certain level of standardization and interoperability is necessary to achieve a successful IoT ecosystem. In the emerging IoT economy, voluntary global standards can accelerate adoption, drive competition, and enable cost-effective introduction of new technologies. Furthermore, open standards 

which facilitate interoperability across the IoT ecosystem will stimulate industry innovation and provide a clearer technology evolution path. Industry is in the best position to develop the technological standards and solutions to address global IoT ecosystem opportunities and challenges, and Intel is taking a leading role. 

Market Trends Driving the Emergence of IoT 

If we’ve had broad use of the Internet for over two decades why is the IOT industry emerging now? Intel believes there are three emerging trends are driving the 

inflection: 

Ease of connectivity—Whether it is an unlicensed (WiFi, Bluetooth) or licensed 

(3G, LTE, 5G) spectrum, connectivity is becoming more pervasive and inexpensive. 

The opportunity to add value via increased connectivity is extremely large, as 85 

percent of devices are not connected today. 

Compute economics—Moore’s Law is impacting technologies that range from the 

cloud to the network to storage to sensors. This means that the economics for ‘‘compute’’ have become much more appealing. Specifically, there has been a huge drop 

in cost for ‘‘compute’’ technologies over the last 10 years; the cost of sensors has decreased 2X, the cost of bandwidth has decreased 40X, and the cost of processing has 

decreased 60X. 

Big Data and Analytics—The emergence of data science (extracting knowledge 

from data) combined with the reduction in the cost of high performance computing 

has created an opportunity to turn data into actionable information, thereby enabling new services and new business model innovation. 

These three market trends are generating unprecedented opportunities for the 

U.S. public and private sectors to develop new services, enhance productivity and 

efficiency, improve real-time decision making, solve critical societal problems, and 

develop new and innovative user experiences. All of these opportunities are revolutionizing sectors like smart buildings, transportation, healthcare, and manufacturing. Here are just a few examples of quantitative results already enabled by IoT: 

Smart Buildings: The integration of Intel IoT technology with sensors and building automation systems, such as heating and air conditioning, allows for the identification of opportunities in real-time to reduce energy costs. In conjunction with 

Intel and Cisco, Rudin Management, a large, commercial real estate company in 

New York City, deployed Intel’s Smart Building IoT solution, which saved Rudin $1 

million in just one building in the first year of deployment. Consider the U.S. potential opportunity: There are over 5 million commercial buildings and industrial facilities in the U.S.,6 with a combined annual energy cost of more than $202 billion.7

16 

8 Id. 

9http://www.truckinfo.net/trucking/stats.htm 

10 Intel Helps San Jose Become America’s First Smart City: http://www.psfk.com/2014/06/ 

san-jose-intel-smart-city.html 11 United States Census Bureau: U.S. and World Population Clock http://www.census.gov/ 

popclock/ 12 Business Strategy: The Coming of Age of the ‘‘Internet of Things’’ in Government, IDC (April 

2013), http://www.idc.com/getdoc.jsp?containerId=GIGM01V. 13Morgan Stanley: 75 Billion Devices Will Be Connected To The Internet Of Things By 2020, 

Business Insider (Oct.2 2013) http://www.businessinsider.com/75-billion-devices-will-be-connected-to-the-internet-by-2020–2013–10. 

It is estimated that the U.S. could save $20 billion if all commercial buildings and 

industrial buildings increased their energy efficiency by just 10 percent.8

Smart Transportation: The integration of Intel IoT technology with New Yorkbased Vnomics fleet management solutions enabled real-time monitoring and feedback to Georgia-based SAIA Trucking drivers and headquarters. The goal was to reduce maintenance costs and improve driver safety by monitoring braking in realtime. In the first year, SAIA increased fuel efficiency by 6 percent across a fleet of 

3,000 trucks, achieving a savings of $15 million. Consider the U.S. potential opportunity: The U.S. trucking industry accounts for about 13 percent of all fuel purchases in the U.S. and trucks consume about 54 billion gallons/year for business 

purpose.9 Extrapolating SAIA’s success, a 6 percent improvement in fuel efficiency 

across all trucks in the U.S. would save more than 3 billion gallons of fuel each 

year, as well as help reduce CO2 emissions. 

Smart Healthcare: Intel has partnered with the Michael J. Fox Foundation to research the use of big data analytics to help improve the treatment of Parkinson’s 

disease. Our IoT personal healthcare solution enables 300 observations per second 

per patient, thereby monitoring patients’ symptoms and drug effectiveness in realtime. This real-time data collection and analysis allows for the identification of the 

first signs of disease progression and enables physicians to instantly address 

changes. Patients can receive better, personalized care, and physicians can make 

improved decisions for treatment in the event that the patient does not notice slight 

changes that could cause a decline in health before their next regularly-scheduled 

appointment. Consider the U.S. potential opportunity: Imagine what real-time monitoring of Parkinson’s patients’ vitals, as well as the ability to make drug and treatment adjustments in real-time, in addition to better tracking and predictability of 

disease progression could do to improve the quality of life of Parkinson’s patients 

not only in the U.S., but the world. 

Smart Cities: Intel has partnered with the City of San Jose ́, California in a publicprivate partnership to further the city’s ‘Green Vision’ goals. This Smart Cities 

Project, announced as part of the Smart America Challenge in 2014,10 is expected 

to help drive San Jose ́’s economic growth, foster 25,000 clean-tech jobs, create environmental sustainability and enhance the quality of life for residents. Together, 

Intel and San Jose ́ City Management are deploying a network of sensors to create 

a ‘‘sustainability lens’’ that uses Intel IoT technology to measure characteristics such 

as particulates in the air, noise pollution and traffic flow. This real-time city data 

will produce meaningful insights that enable the City to make better management 

decisions, and lead to improvements in air quality, transportation efficiency, environmental sustainability, health, and energy efficiency. Consider the U.S. potential 

opportunity: The ten largest U.S. cities alone have an aggregated population of 

25,292,500 people.11 What if we initially focused on 10 cities, 10 counties, and 10 

rural towns from across the Nation and implemented IoT ‘‘smart city’’ solutions into 

those communities? 

IoT: Extraordinary Positive Impact on U.S. GDP 

The IoT presents staggering economic opportunities for the U.S. and the world. 

Market research firm IDC estimates that there will be 50 billion connected devices 

in the marketplace by 2020,12 and Morgan Stanley forecasts 75 billion in that same 

time period.13 These estimates would equate to 6 to 10 connected devices for every 

person on earth. Whether the exact number of devices is 50 billion or 75 billion or 

something more, one thing is for certain: The number of connected devices will explode in the next five years. In just the automotive industry alone, it is projected 

that 250 million (or one in five) cars worldwide will be connected to the Internet 

by 2020—via technologies like WiFi, LTE, Bluetooth, satellite, and 5G communicaVerDate Nov 24 2008 11:45 Apr 20, 2016 Jkt 075679 PO 00000 Frm 00020 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\99818.TXT JACKIE
17 

14Gartner Says By 2020, a Quarter Billion Connected Vehicles Will Enable New In-Vehicle 

Services and Automated Driving Capabilities, Gartner Inc. (Jan. 26, 2015), http:// 

www.gartner.com/newsroom/id/2970017. 15 Average Age of Vehicles on the Road Remains Steady at 11.4 years, According to IHS Automotive, IHS (June 2014) (253M cars on U.S. roads in 2013), http://press.ihs.com/press-release/ 

automotive/average-age-vehicles-road-remains-steady-114-years-according-ihs-automotive. 16Disruptive Technologies: Advances that will transform life, business, and the global economy, 

McKinsey Global Institute (May 2013), http://www.mckinsey.com/insights/businessl technology/disruptiveltechnologies. 17 Id. 18 New ‘‘Industrial Internet’’ Report From GE Finds That Combination of Networks and Ma- chines Could Add $10 to $15 Trillion to Global GDP, GE (Nov. 2012), http://www.gere 

ports.com/post/76430585563/new-industrial-internet-report-from-ge-finds-that. 19 CEO Briefing 2015, From Productivity to Outcomes: Using the Internet of Things to drive 

future business strategies, Accenture, at 7 (2015), http://www.accenture.com/SiteCollection 

Documents/PDF/Accenture-Industrial-Internet-of-Things-CEO-Briefing-Report-2015.PDF. 20Winning the Industrial Internet of Things, Accenture, at 2 (Jan. 2015), http:// 

www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Industrial-Internet-of-Things-Positioning-Paper-Report-2015.PDF. 

tions networks.14 For perspective, 250 million is roughly the same number of total 

cars on U.S. roads in 2013.15

The reason that policymakers should be excited about this explosion of devices 

and this technological revolution is the staggering positive impact that the IoT is 

projected to have on the U.S. and global economy. McKinsey projects that IoT will 

have an incredible $2.7 trillion to $6.2 trillion global economic impact by 2025.16

And what should most excite U.S. policymakers is that the U.S. and other developed 

economies are expected to capture a remarkable 70 percent of this economic impact, 

if we develop a leadership position.17 In fact, GE estimates that IoT could boost average incomes in the U.S. by an exceptional 25 to 40 percent over the next twenty 

years.18

Moreover, a recent Accenture survey of CEOs reveals that 87 percent of CEOs expect long-term job growth from IoT.19 This will positively impact American lives 

from our Nation’s farms and factories to markets and Main Street. Indeed, ‘‘as the 

world struggles to emerge from a phase of weak productivity growth, fragile employment and pockets of inadequate demand, the [IoT] offers a chance to redefine many 

sectors and accelerate economic and employment growth.’’ 20 The U.S. must lead in 

this technological revolution. 

Recommendations for Policymakers 

Given the predicted enormous positive impact on the U.S. economy and society, 

how can policymakers help accelerate IoT and ensure the U.S. leads this next evolution of computing? 

1. Continue an open dialogue with industry, experts and stakeholders as you are 

doing today. This IoT hearing is a promising start and the right first step. Intel 

believes that an open, multi-stakeholder process can best enable a secure and 

vibrant IoT ecosystem. Also, legislators may want to consider encouraging the 

Department of Commerce to create a non-partisan National IoT Advisory 

Board of policymakers, agency representatives, industry leaders, think tanks, 

academia, and leaders of IoT-focused consortia like IIC and OIC. 

2. Encourage focus on security and interoperability as critical foundational elements of IoT. While industry is in the best position to develop and determine 

security and interoperability solutions, government can encourage industry 

alignment around large-scale IoT deployments based on secure, open and interoperable IoT solutions. This will enable deployments to scale quickly and provide both short-term and long-term economic and social benefits to consumers, 

government, and businesses. 

3. Encourage open standards and open architectures to maintain the long term viability of IoT, based on an approach that is scalable, interoperable and reusable across a variety of use case deployments, vendors and sectors. While industry is in the best position to develop the technological standards and solutions to address global IoT ecosystem opportunities and challenges, government 

should encourage industry to collaborate in open participation global standardization efforts to develop technological best practices and standards. Specifically, government should encourage the use of commercially available solutions 

to accelerate innovation and adoption of IoT deployments. The emphasis on 

commercially available solutions and market-adopted voluntary standards will 

allow for faster adoption and increase innovation, bringing the IoT and its benefits to reality sooner. 

18 

21 China’s Ministry of Industry and Information Technology is implementing a three-year 

(2013–15) action plan to establish a National innovation demonstration area of sensor networks 

in Wuxi, actively promoting pioneer projects of applications such as intelligent manufacturing, 

agriculture, transportation, medical systems, and environmental protection: http:// 

www.usito.org/news/miit-emphasize-iot-rd-sensors-and-chips-2014. 22The Telecommunications Regulatory Authority, in collaboration with the Prime Minister’s 

Office, is working to announce The National Plan for UAE Smart Government Goals: http:// 

www.tra.gov.ae/newslThelTRAltolannouncelThelNationallPlanlforlUAElSmartl 

GovernmentlGoals-636-1.php. 23 Eyeing a role in global IoT, Malaysia opens CREST centre in Penang (Feb. 2, 2015), http:// 

www.mis-asia.com/tech/applications/eyeing-a-role-in-global-iot-malaysia-opens-crest-centre-inpenang/#sthash.enmSihPu.dpuf. 24 ‘‘As part of its High-Tech Strategy (‘‘Ideas. Innovation. Prosperity.’’) to consolidate German 

innovation leadership, Germany is making significant R&D investment in the Internet of Things 

and new services for the diverse application areas within this new connected world.’’ http:// 

www.gtai.de/GTAI/Navigation/EN/Invest/Industries/Smarter-business/smart-products-indus 

trie-4.0.html 25Smart-city to be deployed by Telefonica/VIVO, ISPM in Brazil http://www.smartgrid 

today.com/public/Smartcity-to-be-deployed-by-TelefonicaVIVO-ISPM-in-Brazil.cfm 26Strategic Opportunity Analysis of the Global Smart City Market: Smart City Market to be Worth a Cumulative $3.3 Trillion by 2025, Frost & Sullivan (Sept. 2013) (‘‘Frost & Sullivan’’), 

http://www.frost.com/prod/servlet/report-brochure.pag?id=M920-01-00-00-00. 27Federal Motor Vehicle Fleet Report FY 2012, http://www.gsa.gov/portal/mediaId/181179/ 

fileName/FYl2012lFederallFleetlReport.action. 28Delivery Vehicle Fleet Replacement (June 10 2014) Office of the Inspector General United 

States Postal Service [https://www.uspsoig.gov/sites/default/files/document-library-files/2014 

/dr-ma-14–005.pdf] 

4. Collaborate with the industry to develop a U.S. National IoT Strategy with 

time-bound goals for sector-specific IoT deployments over the next 3 to 5 years. 

These deployments will not only address critical societal issues and save tax 

payer dollars, but also will demonstrate U.S. leadership. A National IoT Strategy will help align IoT stakeholders and incentivize innovation, ultimately creating value for society by increasing efficiencies and productivity, creating jobs, 

sustaining our environment, and improving quality of life in our cities and 

towns. 

5. As part of our National IoT Strategy, encourage Public-Private Partnerships 

(PPPs) to address societal problems and accelerate more rapid deployment of 

IoT solutions. Government and industry collaboration can be one of our Nation’s best assets to accelerate the adoption of a world-class IoT ecosystem. Viable PPPs will make IoT deployments an appealing investment for both government and industry, while ensuring scalability and sustainability of infrastructure and technological innovation over the long term. Notably, countries like 

China,21 the UAE,22 Malaysia,23 Germany 24, Brazil 25 and others are moving 

aggressively ahead on IoT deployments—establishing national IoT plans and 

blueprints establishing time-bound measurable goals, investing substantial 

funding in IoT research and deployments, and launching PPPs to jumpstart 

these opportunities and quickly enable IoT scale. As these other countries have 

recognized, a vibrant and state-of-the-art IoT ecosystem is critical to a nation’s 

global competitiveness and economic stability in the 21st century. By adopting 

and implementing a National IoT Strategy, the U.S. can seize the leadership 

position in this next evolution of computing. 

Public-Private Partnerships—Market Segment Focus 

Specifically, over the next 3 to 5 years, the U.S. should focus on industry vertical 

segments with the potential to have the most impact: transportation, cities (generally communities, urban and rural), and buildings. Here are proposed PPPs for 

these market segments: 

Smart Transportation PPP: The transportation segment is predicted to be valued 

at more than $351 billion by 2025, with a CAGR of 19.6 percent (2012–25).26 In FY 

2012, the Federal Agency fleet consisted of more than 650,000 vehicles, which collectively drove over 5 billion miles, consumed nearly 400 million gallons of fuel, and 

had operating costs of approximately $4 billion.27 The U.S. Postal Service fleet alone 

is over 190,000 vehicles.28 Intel recommends encouraging an IoT Smart Transportation PPP around the USPS fleet or another considerably sized government fleet 

to implement IoT solutions and benchmark increases in fuel economy, logistics and 

driver efficiency, and improvements in customer service. Focus areas could include, 

but are not limited to, fleet and freight management, passenger optimization, autoVerDate Nov 24 2008 11:45 Apr 20, 2016 Jkt 075679 PO 00000 Frm 00022 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\99818.TXT JACKIE
19 

29 Improving the Fuel Efficiency of American Trucks—Bolstering Energy Security, Cutting Carbon Pollution, Saving Money and Supporting Manufacturing Innovation, White House (Feb 18, 

2014), http://www.whitehouse.gov/the-press-office/2014/02/18/fact-sheet-opportunity-all-impro 

ving-fuel-efficiency-american-trucks-bol. 30 Autonomous Cars: Self-Driving the New Auto Industry Paradigm, Morgan Stanley Research 

(Nov. 6, 2013), available at http://www.morganstanley.com/public/11152013.html. The authors 

indicate that $1.3 trillion is a base case estimate and indicate a bear case scenario of $0.7 trillion savings per year in the U.S. and a bull case scenario of $2.2 trillion per year. 31World Urbanization Prospects The 2011 Revision, United Nations Department of Economic 

and Social Affairs (March 2012), http://esa.un.org/unpd/wpp/ppt/CSIS/WUPl2011l 

CSISl4.pdf. 32 Nate Berg, The Uneven Future of Urbanization (April 9, 2012), http://www.citylab.com/ 

housing/2012/04/uneven-future-urbanization/1707/. 

matic train protection and control systems and advanced driver assistance and safety. 

Impact—Logistics and Transportation was a $1.3 trillion industry in the U.S. in 

2012, and represented 8.5 percent of GDP. With almost 9 percent of the U.S. labor 

force employed in the transportation sector and the U.S. spending roughly $160 billion annually on highway infrastructure (about 1⁄4 funded by the Federal Government), a more efficient and effective trucking industry has the potential to yield significant savings to the U.S. economy. For example, the commercial trucking industry in the U.S. uses about 50 billion gallons of fuel each year. A 7 percent increase 

in fuel efficiency results in more than 3.5 billion gallons of fuel saved. Imagine if 

we set a national goal for 25 percent of the Federal Fleet in 3 years, and 50 percent 

in 5 years, be retrofitted with IoT transportation solutions, not just for telematics 

but to increase fuel economy by a minimum of 5 percent, with incentives for higher 

efficiency. 

Approach—Consistent with existing national goals to improve the fuel efficiency 

of American trucks—thereby bolstering energy security, cutting carbon pollution, 

saving money, and spurring manufacturing innovation 29—this proposed PPP would 

leverage private sector and academia IoT expertise in ‘‘Intelligent Transportation’’ 

solutions. The PPP would accelerate efforts by Congress, DOT, DOC, DOE, EPA, 

and U.S. commercial fleet managers to increase engine efficiency and fuel economy 

of large fleets traveling our Nation’s roads and highways. It would realize direct economic savings including increased fuel efficiency, reduction in carbon dioxide emissions, labor savings, improved driver safety, accident savings, productivity and distribution proficiency, and logistics tracking effectiveness. The PPP also would provide insights into improvements and new business models for the U.S. transportation sector at large, leading to more satisfied employees and customers. Notably, 

this PPP would be an early step toward the ultimate goal of an autonomous trucking industry; the estimated savings to the U.S. freight transportation industry from 

autonomous vehicles is $168 billion per year, with savings from labor ($70 billion), 

fuel efficiency ($35 billion), productivity ($27 billion), and accident savings ($36 billion).30 Funding for and benefits from the PPP would be shared across public and 

private sector partners, and could range from in-kind to matching funds to purely 

financial investments. One possibility could be for public and private partners to 

share in the transportation fuel savings. For example, if the PPP were to reduce 

a department’, or commercial end user operator’s fleet, fuel expenses by 7 percent, 

the department (operator) could allot 2 percent of that savings to the (other) private 

partners over a specified period of time until the (other) private partners recoup 

their upfront investment plus some incremental percent of return. The department 

operator would retain the remaining percentage of the savings, after which time, the 

department and U.S. taxpayers (operator) would retain 100 percent of the fuel savings benefit in perpetuity. 

Smart Cities PPP: Today’s cities consume two-thirds of the world’s energy.31 By 

2025, 37 cities worldwide will each have a population of greater than 10 million.32

To address the escalating demands of existing and future residents, cities are looking for ways to introduce more technology to become ‘‘smarter’’ about the use of limited resources and more flexible in responding to residents’ needs. Examples of 

‘‘Smart Cities’’ capabilities could include but are not limited to: City Sensing including monitoring and providing IoT data to improve air quality, noise pollution, ambient light, weather, and traffic flow; smart parking which is using IoT to ‘‘smartly’’ 

guide citizens to open parking spaces; smart roads that enable ‘‘smart’’ traffic navigation and roadside service; smart emergency response which facilitates ‘‘smart’’ 

public and residential community alert and response for vulnerable areas; and 

smart energy/grid that facilitates ‘‘smart’’ renewable energy and distributed power. 

Impact—IoT technologies could realize direct economic savings for cities and municipalities (and their local tax base) due to more efficient city planning and manVerDate Nov 24 2008 11:45 Apr 20, 2016 Jkt 075679 PO 00000 Frm 00023 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\99818.TXT JACKIE
20 

33http://www.nist.gov/cps/sagc.cfm 34Frost & Sullivan. 35 Administration Announces 14 Initial Partners in the Better Buildings Challenge, White 

House (June 30, 2011), http://www.whitehouse.gov/the-press-office/2011/06/30/obama-administration-announces-14-initial-partners-better-buildings-chal. 

agement. Results would include improvement in city residents’ quality of life, 

health, and safety. Some examples of this benefit could include more efficient traffic 

flow, real-time public notifications of pollution ‘‘hot spots,’’ and early detection and 

correction of chemical and gas leaks in aging city infrastructure. 

Approach—Consistent with the goals of NIST’s Smart America and Global Cities 

Team Challenges 33—to use IoT solutions to improve services, promote economic 

growth, and enhance quality of life—this proposed PPP would leverage private sector IoT expertise in deploying ‘‘Smart Community’’ solutions. These IoT solutions 

would accelerate local government and municipality efforts to improve urban management and planning in a variety of ways. For example, the PPP could provide a 

model to improve operational efficiencies and safety across existing and new city infrastructure by utilizing air quality and traffic flow data to enable sustainable traffic management and planning, and create an innovative tool for urban growth management and planning. The funding for and benefits from the PPP would be shared 

across public and private sector partners, and could range from in-kind to matching 

funds to purely financial investments. One opportunity may include public and private partners to share in new revenue streams by leveraging the IoT sensor network 

infrastructure to deliver new services to city residents. For example, if the PPP were 

to deliver new services to city residents (i) via the city sensor network or (ii) by 

sharing the real-time data generated by the city sensor network, the city could 

share the new revenue stream with the private partners. The city (and its taxpayers) would enjoy the benefits of improved traffic flow, air quality, and safety, and 

avoiding the hefty cost to rebuild city infrastructure. 

Smart Buildings PPP: The smart building segment is predicted to be valued at 

almost $249 billion by 2025, with a CAGR of 4.1 percent (2012–25).34 The U.S. Government owns or manages more than 900,000 buildings or other structures across 

the country making it the Nation’s largest landlord. Smart building examples could 

include, but are not limited to, Smart Government Buildings enabling ‘‘smart energy’’ (HVAC) management, water flow and usage, predictive maintenance/mechanical operations and building security, and smart military bases facilitating the integration of systems and logistics for ‘‘smart’’ traffic flow, people flow, air quality, retail commerce operations, personnel safety and parking. 

Impact—The proposed PPP would help the U.S. save on energy expenses while 

reducing carbon pollution. The U.S. Government—and thus U.S. taxpayers—would 

realize direct (and possibly significant) economic savings due to improved efficiency 

in consumption, distribution, and management of energy and utilities across Federal 

Government buildings and installations. The PPP also would provide insight into 

savings opportunities and consumption planning for other Federal properties, as 

well as state and local government properties. In addition, the PPP would introduce 

new business models that could increase efficiencies and offer new revenue streams 

for building owners in the public and commercial sectors, while improving services 

for building tenants and residents. 

Approach—Consistent with the goals of the Better Buildings Challenge, to realize building energy savings of 20 percent or more over 10 years 35 and other current 

initiatives, this proposed PPP would leverage private sector IoT expertise in ‘‘Smart 

Building’’ IoT solutions to accelerate the U.S. Government efforts to improve operational efficiencies across Federal buildings and/or military installations. Imagine if 

we set a national goal for 25 percent of Federal Government buildings to be retrofitted with IoT solutions in three years, and 50 percent to be retrofitted with IoT 

solutions in five years, to increase energy efficiency by a minimum of 20 percent. 

Upfront funding for the PPP would be shared across public and private sector partners, and could range from in-kind to matching funds to purely financial investments. Benefits from the PPP also would be shared among public and private sector 

partners over the short-and long-term, ensuring PPP viability and creating a winwin scenario. One possibility in this case could be for public and private partners 

to share in the Federal building/installation’s energy and utility savings. For example, if the PPP were to reduce a department’s energy and utility expenses by 20 percent, the U.S. Government could allocate 10 percent of that savings to the private 

partners over a specified period of time until the private partners recoup their upfront investment plus some incremental percent of return, and the U.S. Government 

(U.S. taxpayers) would retain the remaining 10 percent of the savings. After which 

21 

time, the U.S. Government would retain 100 percent of the energy and utility savings benefit. 

Conclusion 

Intel appreciates the opportunity to share our perspective on the enormous opportunity of the IoT and a proposed strategy for U.S. leadership in the next evolution 

of computing. 

The CHAIRMAN. Thank you, Mr. Davis. 

Mr. Donny? 

STATEMENT OF LANCE DONNY, FOUNDER AND CHIEF 

EXECUTIVE OFFICER, ONFARM

Mr. DONNY. Chairman Thune, Ranking Member Nelson, and 

members of the Committee, my name is Lance Donny, and I want 

to thank you for the opportunity to appear before you today and 

share my thoughts on how connected devices and data will enable 

farmers to meet global agricultural challenges. 

I am the Founder and CEO of OnFarm, a company focused on 

solving the interoperability and use of devices and data in agriculture. 

I grew up on a farm, my family’s farm, in California. And I have 

spent more than 20 years in technology and the last half dozen in 

leading companies in agriculture. In that time, I have overseen 

thousands of connected devices and have studied how technology 

has both succeeded and failed the farmer. 

It is clear—and the time is now—agriculture is on the march to 

adopt and use technology. All of it will be connected. And this 

trend will enable farmers to make better decisions about how they 

grow. It will allow them to be globally competitive, and it will be 

the driving force to meet a global food demand. 

My testimony aims to highlight challenges and opportunities as 

we move to adopt devices and data in ag. One is a means to increase agriculture production and profitability. Two, to help farmers adopt and easily use technology, and third, to advocate for 

smart, modern policies that spur adoption, avoid unnecessary regulation, and enable U.S. farmers to be globally competitive. 

Since the 1950s, farming has doubled production through the use 

of supplemental nitrogen, irrigation systems, and mechanization of 

harvesting and planting. But those advances, while momentous, 

will not suffice to meet the global food demand. By 2050, 9.5 billion 

people on the planet will require 70 percent more food than we 

produce today. We will not succeed at meeting this challenge by 

adding new acres, using more nitrogen or more water. 

Connected devices and data fundamentally change how the industry works, and agriculture is no different. It will not escape that 

trend. Agriculture has moved into the information age. 

Data is everywhere. It drives decisions and enables farmers to 

adopt and be globally competitive. In the day of $3 and $4 corn, 

farm prosperity will occur using technology and data as a competitive advantage against farmers that do not. 

There are two core and interconnected concepts for the Internet 

of Things in agriculture. First is the connected device itself. Today 

we see sensors on nearly every part of the farm: the soil, plants, 

equipment, people, drones, and satellites. Sensors are the first step 

to better farm management and provide important field data, but 

22 

sensors on their own will not allow the farmer to change how they 

farm. 

If you ask a farmer today how much data they have, you will almost always hear too much or it is overwhelming. This flood of 

data has already surpassed most farmers’ capability of managing 

it. Analytics or big data systems create order and provide insights 

to keys to delivering the promise of technology in agriculture. 

Together, connected devices and analytics give farmers the ability to monitor and use information to manage resources, and as the 

demand for food increases, these solutions will be the tool that 

farmers use to help global demand. 

In good years, farmers can grow more and more efficiently. In 

difficult years, like the last several in California due to the 

drought, connected devices and analytics enable farmers to monitor 

their fields, to apply the right amount of water at the right time 

as the crop needs it. 

Technology studies have shown the possibilities of increasing 

yields by a third while reducing water consumption by 20 percent. 

Unfortunately, technology can often be cost-prohibitive to farmers. In order to ensure we are globally competitive, we must help 

growers adopt technology. I support innovation and grants that can 

dramatically reduce the cost of technology and increase the adoption for the farmer. With modest efforts, we can solve fundamental 

problems. Today technology is still too costly for farmers. We can 

and should support them in how they adopt it. 

Two, we must help farmers access broadband. In many rural 

areas, broadband is not available to them, and wireless or cellular 

coverage is not available on many farms. We can and should accelerate the availability of low-cost, long-range communication to ensure that we move data out of the farm to the cloud as easy as 

from your Fitbit to the WiFi. 

I support a common sense approach to data rights, such as the 

American Farm Bureau’s Privacy and Security Principles that enable the marketplace, the farmer, and the market, to solve conflicts 

of data and data ownership quickly and easily. 

Technology has shown the ability to increase yields, reduce inputs, and enable more productive and sustainable farms. If we 

achieve technology adoption on a wide scale in the U.S., we can 

meet global food needs. We can help U.S. farmers maintain their 

superior position globally, and we can ensure the next generation 

of farmer is as successful as their parents’ generation. 

Thank you again for your time today. I look forward to your 

questions. 

[The prepared statement of Mr. Donny follows:] 

PREPARED STATEMENT OF LANCE DONNY, FOUNDER AND CHIEF EXECUTIVE OFFICER, 

ONFARM

Chairman Thune, Ranking Member Nelson, and Members of the Committee my 

name is Lance Donny. I want to thank you for the opportunity to appear before you 

today and share my thoughts on how connecting devices and data will enable farmers to meet global agriculture challenges. 

I am the Founder and Chief Executive Officer of OnFarm, a company focused on 

solving the interoperability and use of devices and data in agriculture. 

I grew up on my family’s farm in California. I’ve spent more then 20 years in 

technology and the last half dozen leading companies in agriculture. In that time 

23 

I’ve overseen thousands of connected devices and have studied how technology succeeds and often fails farmers. 

It is clear, and the time is now, Agriculture is on the march to adopt and use 

technology, all of it connected, and this trend will enable farmers to make better 

decisions about how they grow, it will allow them to be globally competitive, it will 

be the driving force to meeting global food demand. 

My testimony aims to highlight challenges and opportunities as we move to adopt 

connected devices and data: 

1. as a means to increase agriculture production and profitability; 

2. to help farmers afford and easily adopt technology; and 

3. to advocate for smart, modern policies that spur adoption, avoid unnecessary 

regulation, and enable U.S. agriculture to be competitive globally. 

Since the 1950s farming has doubled production through the use of supplemental 

nitrogen, irrigation systems, and mechanization of planting and harvesting. 

But those advances, while momentous will not be sufficient to meet the growing 

global demand for food. By 2050 over 9.5 Billion people on the plant will require 

70 percent more food then we produce today. We will not succeed at meeting this 

challenge by adding new acres, using more nitrogen or more water.1

Connected devices and data fundamentally change how people and industries 

work and agriculture has not escaped that change. 

Agriculture has moved into the information age. 

Data is everywhere. It drives decisions and enables farmers that adopt it to be 

globally competitive. In the day of $4 corn, farm prosperity will occur using technology and data as a competitive advantage against those farmers who don’t. 

There are two core and interconnected concepts for the Internet of Things in Agriculture. First, is the connected device itself. Today we see sensors on nearly every 

part of the farm: from soil moisture, to plants, equipment, and people. Sensors are 

the first step to better management and provide important field data, but sensors 

on their own will not allow the farmer to change the way they farm. 

If you ask a farmer today how much data they have, you will almost always hear 

‘‘too much’’ or ‘‘it’s everywhere’’. This flood of data has already overwhelmed farmers. Analytics or ‘‘Big Data’’ software that create order and provide insights is the 

key to delivering the promise of the Internet of Things. 

Together, connected devices and analytics give farmers the ability to monitor and 

use information to manage resources. And as the demand for food increases these 

solutions will be the tool that farmers use to help meet global demands. 

In good years farmers can grow more and more efficiently. In difficult years, like 

the last several in California due to the drought, connected devices and analytics 

enable farmers to monitor their fields and to apply the precise amount of water 

when and where the crop needs it. 

Technology studies have shown the possibilities for increasing yields by 33 percent 

while we reduce water consumption by 20 percent.3 Unfortunately that technology 

can often be cost prohibitive. In order to ensure U.S. farmers are globally competitive we must help farm adoption. 

I support both innovation and grants that can dramatically reduce cost and increase adoption. With modest efforts we can solve these fundamental challenges. 

Today; 

1. technology is still too costly for many farmers; we can and should support innovations and incentives that can improve adoption; 

2. many farms have no broadband access and cellular coverage is unreliable; we 

can and should accelerate the availability of low-cost long range communication technology to ensure we can move data from the field to the cloud on every 

farm; and 

3. I support a common sense approach to data rights such as the American Farm 

Bureau’s Privacy and Security Principles2 that will enable the marketplace to 

solve conflicts quickly and efficiently. 

Technology has shown the ability to increase yield, reduce inputs, and enable 

more profitable and sustainable farms. If we achieve technology adoption on a wide 

scale, we can meet global food needs, we can help U.S. farmers maintain global competitiveness, and we can ensure the next generation of farmer is as successful as 

their parents’ generation. 

Thank you again for inviting me today, I look forward to your questions. 

24 

References 

1. ‘‘Towards Smart Farming—Agriculture Embracing the IoT Vision’’—Beecham 

Research Ltd., January 2, 2015, http://www.beechamresearch.com/download 

.aspx?id=40 

2. ‘‘Privacy and security Principals for Farm Data’’—The American Farm Bureau 

Federation, December 19, 2014 http://www.fb.org/tmp/uploads/Privacy 

AndSecurityPrinciplesForFarmData.pdf 

3. ‘‘NEEA Technical Advisory Group Report—NW Agriculture Irrigation Energy 

Efficiency Initiative’’—Northwest Energy Efficiency Alliance, January 26, 2015 

4. ‘‘10 Policy Principles for Unlocking the Potential of the Internet of Things’’— 

Center for Data Innovation, December 4, 2014 http://www.datain 

novation.org/2014/12/10-policy-principles-for-unlocking-the-potential-of-theinternet-of-things/ 

5. ‘‘The Internet of Things Will Drive Wireless Connected Devices to 40.9 Billion 

in 2020,’’ ABI Research, August 20, 2014, https://www.abiresearch.com/press/ 

the-internet-of-things-will-drive-wireless-connect. 

6. ‘‘Agriculture Water Conservation in the Lower Flint River Basin of Georgia’’— 

Flint River Basin Partnership 

7. ‘‘Ag-Tech Challenges and Opportunities for Sustainable Growth’’—Kauffman 

Foundation, April 2014 http://www.kauffman.org/∼/media/kauffmanlorg/ 

research%20reports%20and%20covers/2014/04/agtechwhitepaperl42314l 

final2.pdf 

8. ‘‘Agriculture Gets Smart: The Rise of Data and Robotics’’—The Cleantech 

Group, May 2014 http://info.cleantech.com/Ag-Get-Smart-Report-Submit.html 

25 

TOWARDS SMART FARMING—AGRICULTURE EMBRACING THE IOT VISION


0211FARM1.eps
26 


0211FARM2.eps
27 


0211FARM3.eps
28 


0211FARM4.eps
29 


0211FARM5.eps
30 


0211FARM6.eps
31 

AGRICULTURAL WATER CONSERVATION IN THE LOWER FLINT RIVER BASIN OF

GEORGIA

By investing in ‘‘smarter’’ irrigation, farmers are conserving water while enhancing 

productivity and yields. 

Improving the efficiency of agricultural water use is a shared goal of farmers, researchers and conservationists. Since 2000, these groups have leveraged significant 

resources to develop and deploy new conservation based technologies in the Lower 

Flint River Basin of southwest Georgia. The goal is to move innovative agricultural 

water conservation practices from the research laboratory to the working farm so 

as to determine economic feasibility, field functionality and conservation impact. 

Projects are funded through contributions from farmers and cost–share programs. 

Farmers in the Lower Flint River Basin of Georgia are employing (5) key water conservation measures: 

1. Low pressure drop nozzle retrofits with end gun shut-off: Savings are generated 

by applying irrigation water at a lower pressure nearer the soil surface to reduce evaporation and wind drift losses; installing end gun controls to keep irrigation inside the field boundary; and, repairing leaks. Retrofits (LDR) reduce 

water use by up to 22.5 percent. 

2. Variable rate irrigation: Savings are generated by removing non-crop areas 

from irrigation; coordinating application amounts with variations in soil type 

and field topography; and, eliminating double application due to pivot overlap. 

Variable rate irrigation (VRI) reduces water use by an average of 15 percent. 

3. Advanced irrigation scheduling: Savings are generated by identifying precise 

periods of time in which a farmer can irrigate less by using objective field data 

such as soil moisture, soil temperature, crop growth stage and localized ET. 

Advanced irrigation scheduling (AIS) reduces water use by up to 15 percent. 

4. Conservation tillage: Savings are generated by using a cover crop and leaving 

plant residue in the field, which modifies plant rooting structure and physiology to enable more efficient water use by crops; improves water holding capacity in the soil; increases water infiltration rates; and, reduces soil temperature, evaporative loss and field run-off. Conservation tillage (CT) reduces water 

use by up to 15 percent. 

5. Sod based rotation: Savings are generated by incorporating a rotation of a 

warm season perennial grass into a conservation tillage based production system which yields improved soil quality and water holding capacity, and increased water infiltration and retention. Sod based rotation (SBR) reduces 

water use by up to 30 percent. 

Note: These measures, while in many cases complementary, are not necessarily 

additive as per the savings generated. Water conservation estimates are based 

on an average application rate of 13 acre inches per field in a dry year. Estimated reductions in water use are based on field experience, ongoing research 

and the Project Report 32: Irrigation Conservation Practices Appropriate for the 

Southeastern United States. Average cost per acre to deploy is $100–LDR, 

$175–VRI, $40–AIS, $40–CT and $400–SBR. Many of these practices create 

economic and environmental benefits beyond water conservation which help to 

offset per acre cost. 

Who we are? This information is provided by David Reckford, Flint River Basin 

Partnership; Calvin Perry, UGA C.M. Stripling Irrigation Research Park; Rad 

Yager, UGA Cooperative Extension; Jim Marois and David Wright, UF/IFAS Extension; Wilson Faircloth, USDA–ARS; Richard Barrett, USDA–NRCS; and, Marty 

McLendon, Flint River SWCD. 

Why the Lower Flint? Incorporating 27 counties in southwest Georgia, the Lower 

Flint is one of the most diverse and ecologically rich river systems in Georgia. Together with the upper part of the Apalachicola, the area is home to the highest density of reptile and amphibian life in the United States, and four federally protected 

mussel species—the Fat threeridge, Gulf moccasinshell, Oval pigtoe and Shinyrayed 

pocketbook. The area is also one of the most agriculturally intensive regions in 

Georgia with more than 40 percent of the Basin’s land mass producing $2 billion 

in farm based revenue annually. Irrigation is central to production with 6,250 center 

pivot systems in operation. 

The Flint River Basin Partnership was formed by the Flint River Soil and Water 

Conservation District, Natural Resources Conservation Service and The Nature Conservancy to promote agricultural water conservation in the Lower Flint. 

32 

NEAA TECHNICAL ADVISORY GROUP REPORT—NW AGRICULTURE IRRIGATION

ENERGY EFFICIENCY INITIATIVE


0211NEEA1.eps 0211NEEA2.eps
33 


0211NEEA3.eps 0211NEEA4.eps
34 


0211NEEA5.eps 0211NEEA6.eps
35 


0211NEEA7.eps 0211NEEA8.eps
36 


0211NEEA9.eps 0211NEEA10.eps
37 


0211NEEA11.eps 0211NEEA12.eps
38 


0211NEEA13.eps 0211NEEA14.eps
39 


0211NEEA15.eps 0211NEEA16.eps
40 


0211NEEA17.eps 0211NEEA18.eps
41 


0211NEEA19.eps 0211NEEA20.eps
42 


0211NEEA21.eps 0211NEEA22.eps
43 


0211NEEA23.eps 0211NEEA24.eps
44 


0211NEEA25.eps 0211NEEA26.eps
45 


0211NEEA27.eps 0211NEEA28.eps
46 


0211NEEA29.eps 0211NEEA30.eps
47 


0211NEEA31.eps 0211NEEA32.eps
48 


0211NEEA33.eps 0211NEEA34.eps
49 


0211NEEA35.eps 0211NEEA36.eps
50 

10 POLICY PRINCIPLES FOR UNLOCKING THE POTENTIAL OF THE INTERNET OF THINGS

Center for Data Innovation 

By Daniel Castro & Joshua New / December 4, 2014 

The success of the Internet today can be credited in part to policymakers actively taking a role to ensure its growth, and this same approach should to be applied to build 

the Internet of Things. 

Summary: ‘‘The Internet of Things’’ encapsulates the idea that ordinary objects will be embedded with sensors and connected to the Internet. To date, 

most discussion of the Internet of Things has highlighted the technology; 

to the extent it has addressed policy, the focus has been largely negative 

(i.e., how to limit the supposed risks from deployment). In contrast, this report highlights principles that policymakers in all nations need to apply in 

order to maximize the considerable promise of the Internet of Things for 

economic growth and social well-being. Of two conflicting approaches to 

the Internet of Things, neither: the ‘‘impose precautionary regulations’’ nor 

the counter ‘‘leave it completely up to the market’’ will allow societies to 

gain the full benefits from the Internet of Things revolution. This report 

presents ten principles to help policymakers establish policies and programs to support and accelerate the deployment and adoption of the Internet of Things. 

The Internet of Things encapsulates the idea that ordinary objects—from thermostats and shoes to cars and lamp posts—will be embedded with sensors and connected wirelessly to the Internet. These devices will then send and receive data 

which can be analyzed and acted upon. As the technology becomes cheaper and 

more robust, an increasing number of devices will join the Internet of Things. 

Though many of the changes to everyday devices may be subtle and go unnoticed 

by consumers, the long-term effect could ultimately have an enormously positive impact on individuals and society. A connected world is capable of anything from improving personal health to reducing pollution to making industry more productive. 

The Internet of Things offers solutions to major social problems, but this vision of 

a fully connected world will not be achieved without initiative and leadership from 

policymakers to promote its deployment and avoid pitfalls along the way. 

The potential size and scope of the Internet of Things is enormous, with over 16 

billion devices estimated to be in use today, and many more to come.1 By 2020, the 

total worldwide count is expected to reach over 40 billion.2 This growth is visible 

across practically every industry. By 2020, the number of wearable devices will surpass 100 million, the number of Internet-connected cars will exceed 150 million, and 

the number of connected wireless lights will reach 100 million—to name just a few.3

The magnitude of the benefits brought by the Internet of Things is also impressive, and this technology may improve nearly every aspect of life. Consider the benefits of smart homes. Connected devices that automatically regulate electricity usage 

based on whether anyone is home can cut energy usage and bills.4 Smart meters 

can send dynamic price signals to smart appliances to reduce peak energy consumption.5 Connected sensors can improve home safety by detecting fires and other emergencies more quickly and reliably than traditional methods, alerting authorities 

sooner.6 Blinds that automatically detect and filter out sunlight, smart heating and 

cooling systems that can maintain different rooms at different temperatures, and 

lighting that automatically adapts to time of day and can be controlled from a 

smartphone will make home life more comfortable than ever before.7

Connected devices can also provide consumers important new insights about their 

health and fitness. Companies are designing wearables for every stage of life from 

smart ‘‘onesies’’ with embedded sensors that help parents monitor their infants’ 

health to activity sensors that allow elderly adults to live safely and independently. 

Wearable biometric monitors can help individuals track their health, monitor chronic medical conditions, and improve health care outcomes.8 In addition, fitness trackers such as FitBit and Nike FuelBand can help consumers be more active and engage in healthy behaviors.9

Local leaders can help build smart cities by integrating the Internet of Things 

into public buildings and infrastructure, including roadways, transit systems, and 

utilities. These technologies can help make cities safer, more sustainable, and more 

resilient while also providing new economic opportunities for their residents. For example, networked sensors can monitor the structural integrity of bridges and highways in real time to prevent catastrophes from happening and encourage cost-savings through timely preventative maintenance.10 And, intelligent transportation sysVerDate Nov 24 2008 11:45 Apr 20, 2016 Jkt 075679 PO 00000 Frm 00054 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\99818.TXT JACKIE
51 

tems can make roads safer, facilitate traffic flow, and make public transportation 

more efficient.11

Industries that restructure their practices around the Internet of Things can improve productivity and sustainability. With everything from networked assembly 

lines that track every screw turn to ensure quality control and safety to connected 

supply chains that reduce downtime and ensure transparency in material sourcing, 

the Internet of Things will increase industry competitiveness.12 The increased capacity for data collection from the Internet of Things brings benefits as well. Insurers can use actuarial models that factor in data from connected devices to better 

understand risk and reduce costs for their customers. Companies can monitor and 

enhance the safety of their workers in real time and prevent accidents. 

Overall, global spending on the Internet of Things is predicted to grow to approxi- mately $3 trillion by 2020.13 Of course, any capital equipment represents a cost, not 

a benefit. In that businesses and consumers purchase technology only if benefits exceed costs and because many benefits extend beyond the immediate purchasers to 

the entire network, the overall economic benefits from the Internet of Things will 

be even more significant.14

As technological barriers decrease and adoption of the Internet of Things takes 

off, its potential benefits depend in part on how policymakers respond to this technology. There are four main approaches policymakers could employ regarding the 

Internet of Things: 

1. Precautionary regulations: Some policymakers focus on the potential risks associated with the Internet of Things and want to regulate it accordingly. These 

policymakers believe that preemptive regulations will increase consumer trust 

and therefore increase adoption, but the reality is that heavy-handed rules 

would likely imposes costs, limit innovation, and slow adoption. 

2. No intervention: Some policymakers resist laws and regulations for the Internet of Things because they believe the free market operating independently of 

government interventions achieves the maximum possible consumer benefit. 

However, by avoiding all interventions, policymakers miss the opportunity to 

proactively support the deployment of the Internet of Things. 

3. Indigenous innovation: Some policymakers view the Internet of Things as an 

opportunity to create export opportunities for domestic firms. These policymakers may endorse policies that hinder foreign companies from competing in 

the domestic market, such as adopting national technical standards rather 

than adopting international ones.15 Such policies are anti-competitive and create fragmented markets for the Internet of Things. 

3. Technology champions: Some policymakers have taken a proactive role in accelerating the development and deployment of the Internet of Things, such as by 

funding research on sensor networks, creating pilot projects for smart cities, 

preventing over-regulation of wearable health technologies, and providing incentives for smart grid deployment. These policymakers see government as a 

critical partner in promoting the benefits that come from using these technologies. 

Recognizing the inherent shortcomings and limitations of some of these approaches is crucial to developing sound policy for the Internet of Things. The status 

of the Internet of Things as an emerging technology necessitates a policy framework 

that is fully cognizant of its benefits, allows for future innovation, and responsibly 

protects against misuse without restricting its capacity to deliver social, civic, and 

economic benefits. 

10 Policy Principles for the Internet of Things 

1. Chart the Course for Adoption 

Every nation should develop a strategic roadmap to guide the deployment and 

adoption of the Internet of Things. In addition to a comprehensive roadmap, national agencies involved in specific sectors can develop targeted action plans for particular industries. In the United States, for example, the Department of Housing 

and Urban Development should develop an action plan to promote smart homes, 

and the Department of Energy should develop a plan to improve energy efficiency 

with connected devices. The private sector will be more likely to embrace the Internet of Things if government leaders are paving the way for deployment. 

Policymakers should actively work to overcome barriers to adoption, such as security risks or a lack of interoperability. For example, electronic health records should 

be able to integrate data from wearable medical devices and the government can 

promote industry adoption of voluntary cybersecurity principles to protect consumer 

data. Since many of the benefits from the Internet of Things will occur with wideVerDate Nov 24 2008 11:45 Apr 20, 2016 Jkt 075679 PO 00000 Frm 00055 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\99818.TXT JACKIE
52 

spread adoption, policymakers should promote efforts to develop global, industry-led 

standards and oppose efforts to develop nation-specific standards. To maximize the 

potential benefits of data analytics, developers should also be able to easily share 

and integrate data across organizational, political, and geographic boundaries. 

2. Lead by Example 

The government should be an early adopter of the Internet of Things to demonstrate the benefits of the technology. From sewers to streetlights, government 

agencies should make ‘‘smart’’ the default for all new investments and allocate funding for smart city demonstration projects. For example, all government infrastructure projects should incorporate the Internet of Things into their design. Investing 

in smart technology for public infrastructure projects will increase safety, reduce 

maintenance costs, and improve operations. In addition, these projects will generate 

valuable data that should be made available to the public. 

To maximize the benefits of the Internet of Things, government agencies should 

restructure their practices around the new capabilities offered by the technology. 

Public services that incorporate connected sensors can provide important benefits to 

the public. For example, the City of Buffalo, New York uses sensor-equipped snow 

plows to respond to citizens’ snow-clearing requests more quickly and to target problem areas more efficiently.16 And, government agencies that perform inspections of 

equipment and facilities can use the Internet of Things to perform their duties more 

quickly and effectively. For example, the U.S. Department of Agriculture (USDA) 

approved new regulations to allow advanced imaging sensors to evaluate food safety 

and quality. As a result, a single poultry food safety inspector can now process 175 

birds per minute, up from a previous speed of 35 birds per minute, a substantial 

gain in efficiency.17

3. Look to Partnerships to Overcome Obstacles 

Many Internet of Things projects will benefit from government agencies establishing partnerships with both the private sector and others in government. In particular, funding these types of projects can be challenging for cities with limited 

budgets. For example, a city may not have the budget to install smart streetlamps, 

even if they would end up paying for themselves in energy savings. Innovative partnerships whereby the private sector pays for, builds, and manages certain technology projects while receiving a portion of the savings can allow local leaders to 

deliver the Internet of Things and its benefits in situations where budget constraints would have otherwise impeded progress. For example, the City of Mumbai, 

India partnered with a smart metering company to help with its failing water infrastructure that was leaking 50 percent of its water a day. For the same amount of 

money the government would have spent patching new leaks without ever improving the overall integrity of the system, the partnership with the metering company 

cut the water loss in half.18

4. Reduce Regulatory Barriers and Delays for Getting Smart Devices to Market 

A lengthy and cumbersome regulatory review process that increases the time to 

market for smart devices can discourage entrepreneurs from developing new and potentially lifesaving products. Wearable technologies can allow individuals to spend 

less time in the hospital, receive better treatments, and more easily monitor their 

personal health. Since subjecting these technologies to lengthy regulatory review 

processes can delay these benefits from reaching consumers, policymakers should 

work to ensure that these processes are as efficient as possible. Moreover, most of 

these technologies will undergo continuous innovation and improvement and the 

regulatory review process should allow for, and encourage, upgrades. In a clear example of a review process with room for improvement, it takes on average over two 

and a half years for the U.S. Food and Drug Administration to approve a low-risk 

medical device, compared to an average of seven months in Europe.19 These delays 

can cost a company an average of $500,000 per month and discourage entrepreneurs 

from bringing products to market.20 While consumer safety should remain a top priority, the human cost of delaying lifesaving technology should not be ignored. 

5. Minimize the Regulatory Cost of Data Collection 

Policymakers should create laws and regulations that allow businesses and governments to build products and services efficiently, using the highest quality, most 

complete data possible. For example, obtaining explicit consent for data collection 

would be an unnecessary cost for the vast majority of applications of the Internet 

of Things that pose no real threat to consumer welfare. Regulations requiring individuals manually to give consent to data collection would impose costs on companies 

that ultimately would be passed on to consumers. Instead, the standard method of 

data collection for the Internet of Things should be ‘‘opt out’’; this would ensure that 

53 

the data is accurate, complete, and useful, yet still provide those who wish not to 

share their data that option. 

Similarly, policymakers should recognize that consumers do not benefit from 

being inundated with notices, especially since most data collection would be routine 

and insignificant. Rather than require that all devices directly notify consumers of 

their policies and terms of service, companies should simply make this information 

available to those who wish to read it. This type of shift is especially important 

since many devices that will make up the Internet of Things will have only a small 

display or no display at all. 

6. Make It Easy to Share and Reuse Data 

The Internet of Things will generate an unprecedented quantity of data, and policymakers should be careful not to equate simple data sharing with harmful misuse. 

Data collected from connected devices offer a myriad of potential benefits to consumers, clinicians, researchers, government agencies, and commercial entities, and 

if these datasets are shared, these benefits are multiplied. There may be one primary reason to collect data, but one hundred good applications of this data beyond 

its initial purpose. In order to maximize the social and economic benefits of information, data users of all kinds acting in good faith must be able to share and reuse 

data with ease. 

As governments at the municipal, state, and Federal levels integrate connected 

devices into public infrastructure and government services, the de-identified data 

they collect should be treated as a public resource and shared with the public accordingly. Making this data easy to access, such as through portals and application 

programming interfaces (APIs), and free to reuse without restrictions creates tremendous opportunity for private-sector innovation, academic research, and improvements in government transparency.21 The City of Chicago, which has been integrating the Internet of Things into city infrastructure and services as part of its 

Array of Things project, has made over 600 machine-and human-readable datasets 

freely available online.22 With this new resource, citizens have been able to more 

easily navigate public transit, the city’s pest-control agency has reduced the rat population, and the police have created predictive models to fight crime more effectively.23

Since the full potential benefits of the Internet of Things will not be realized until 

data from interconnected technology are widely used, policymakers should 

incentivize both individuals and the private sector to share data. For example, governments can support the development of new tools and techniques to properly deidentify different types of data so that they are still useful for analysis.24 Where 

possible, companies should be encouraged to provide consumers access to their data 

to stimulate the development of new applications. For example, the U.S. Department of Energy’s green button initiative gives consumers access to their energy 

usage data and allows them to share their data with third-party developers who 

provide services such as virtual energy audits.25 Policymakers should also work to 

ensure data can flow across borders and eliminate digital barriers to trade, such as 

data residency requirements and other localization policies. 

7. Relentlessly Pursue Better Data 

With ever-higher-quality sensors and an increasing number of them, the Internet 

of Things allows for the capture of an unprecedented quantity and quality of data. 

Policymakers should continue to invest in opportunities to collect more granular, 

timely, and complete data. Government agencies should use better data to better 

monitor internal processes and improve productivity and outcomes. For example, police departments can use sensors to better monitor the safety of their officers in real 

time and to hold officers responsible for their actions. Port authorities can use sensors to better protect the border by tracking containers and shipments coming into 

the country. Better data enables not only a more effective government, but a more 

transparent one as well. 

8. Reduce the ‘‘Data Divide’’ 

Policymakers should encourage widespread adoption of connected devices, from 

wearable fitness trackers to sensors on street corners, to close the ‘‘data divide’’— 

the social and economic inequalities that may result from a lack of collection and 

use of data about an individual or community.26 The goal of policymakers should 

be to ensure that no groups are systematically excluded from data collection activities so that all individuals have the opportunity to obtain the social and economic 

benefits of data. 

Policymakers should work to develop programs to ensure that all communities can 

benefit from the Internet of Things. For example, funding for smart city infrastrucVerDate Nov 24 2008 11:45 Apr 20, 2016 Jkt 075679 PO 00000 Frm 00057 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\99818.TXT JACKIE
54 

ture should be made available to a diverse set of neighborhoods, including low-income ones. 

9. Use Data to Tackle Hard Problems 

While the Internet of Things offers many economic benefits, policymakers need to 

ensure that opportunities to use these devices to address important social issues, 

such as health care and public safety, are also a top priority. For example, aggregate data from personal fitness devices can provide health officials with unprecedented insights into public health. Tracking changes in biometric readings across a 

city could even help identify the spread of deadly outbreaks, helping public officials 

better contain diseases and start treating sick individuals earlier. As Google’s CEO 

and co-founder Larry Page has noted, public squeamishness over mining of health 

data likely costs around 100,000 lives a year.27 Policymakers should support efforts 

to collect and aggregate data on a large scale to solve collective problems. 

Networked sensors can detect flooding and trigger emergency responses more 

quickly.28 Wearable technologies and sensors on street corners can give new insights 

onto air quality on a block-by block-basis and help develop strategies to curb pollution.29 The list of ways public welfare could be enhanced by the Internet of Things 

is long, but if it is to be fully effective in addressing these problems, policymakers 

should shift their focus to the problem-solving capabilities of smart devices. 

10. Where Rules Are Needed to Protect Consumers, Keep Them Narrow and Targeted 

Many technologies are often met with fear, uncertainty, and doubt, especially by 

those who are unfamiliar with them or opposed to change. Policymakers cannot afford to succumb to these forces if they expect to enable society to take full advantage 

of the Internet of Things. In particular, policymakers should be extremely cautious 

about regulating on the basis of purely speculative concerns that might not even 

come to pass, especially when doing so might curtail substantial economic and social 

benefits, many of which are already being realized today.30 Most hypothetical concerns are likely to never become realities if factors such as market forces, cultural 

norms, and new technologies, intervene. In addition, existing laws, such as anti-discrimination statutes, often protect individuals from certain types of abuses and 

harms. 

However, policymakers should intervene promptly if specific problems arise. In 

doing so, they should be careful to ensure that their rulemaking targets specific, 

demonstrated harms. Attempting to erect precautionary regulatory barriers for 

purely speculative concerns is not only unproductive, but it can discourage future 

beneficial applications of the Internet of Things. For example, privacy activists 

raised objections when several cities made plans to install gunshot detection equipment in public spaces. However, the effectiveness of these technologies in reducing 

gun crime has proven to be incredibly valuable to law enforcement.31

Conclusion 

These ten policy principles serve as a blueprint for Internet of Things policies that 

promote adoption, increase the value of data collected from connected devices, and 

maximize the benefits of the Internet of Things for consumers, government, and industry. While many of the future challenges of the Internet of Things may still be 

unknown, a policy framework built around these principles should maximize the 

benefits from the Internet of Things. The success of the Internet today can be credited in part to policymakers actively taking a role to ensure its growth, and this 

same approach should to be applied to build the Internet of Things. 

References 

1. ‘‘The Internet of Things Will Drive Wireless Connected Devices to 40.9 Billion in 2020,’’ 

ABI Research, August 20, 2014, https://www.abiresearch.com/press/the-internet-of-things-willdrive-wireless-connect. 

2. Ibid. 

3. Jolyon Barker, Paul Lee, and Duncan Steward, ‘‘Technology, Media & Telecommunications 

Predictions 2014,’’ Deloitte, 2014, http://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tech nology-Media-Telecommunications/gx-tmt-predictions-2014.pdf and Keith 

Bloomberg, ‘‘The Race to Market the Connected Car,’’ Automotive News, January 10, 2014, 

http://www.autonews.com/article/20140110/OEM06/301109910/the-race-to-market-the-connected-car, ‘‘100 Million Internet Connected Wireless Lights by 2020,’’ ON World, November 20, 

2013, http://onworld.com/news/100-Million-Internet-Connected-LED-Lights-by-2020.html. 

4. Ilana Greene, ‘‘Smart Houses Help Reduce Energy Use and Save Money,’’ Huffington Post, 

December 19, 2013, http://www.huffingtonpost.com/ilana-greene/smart-houses-help-reduce- lbl4472919.html. 

5. Austin Harney, ‘‘Smart Metering Technology Promotes Energy Efficiency for a Greener 

World’’ Analog Dialogue, Volume 43–01, January 2009, http://www.analog.com/library/ 

analogdialogue/archives/43-01/smartlmetering.pdf. 

55 

6. Juhwan Oh, Zhongwei Jiang, and Henry Panganiban, ‘‘Development of a Smart Residential 

Fire Protection System, Advances in Mechanical Engineering, Volume 2013, 2013, http:// 

www.hindawi.com/journals/ame/2013/825872/. 

7. Jason Chen, ‘‘Home Automation! What You Need to Know to Not Be Dumb,’’ Gizmodo, September 27, 2010, http://gizmodo.com/5647352/home-automation-what-you-need-to-know-to-notbe-dumb. 

8. Joshua New, ‘‘Healthcare Insurance Regs Must Keep Up With Tech Advances,’’ Center for 

Data Innovation, October 13, 2014, http://www.datainnovation.org/2014/10/healthcare-insurance-regs-must-keep-up-with-tech-advances/, Neil Versel, ‘‘Lively, a new eldercare monitoring 

system focused on social connections, heads to Kickstarter,’’ Mobi Health News, April 16, 2013, 

http://mobihealthnews.com/21650/lively-a-new-eldercare-monitoring-system-focused-on-socialconnections-heads-to-kickstarter/and Dana Wollman, ‘‘The Internet of Toddlers: Inter Shows Off 

a Smart Baby Onesie,’’ Engadget, January 7, 2014, http://www.engadget.com/2014/01/07/ 

intel-smart-baby-onesie/. 

9. Kira Newman, ‘‘The ‘Quantified Self’ Is Only the First Step to Better Health,’’ Tech Cocktail, May 28, 2013, http://tech.co/quantified-self-better-health-2013–05. 

10. ‘‘Wireless Structural Monitoring System Deployed in Korea,’’ University of Illinois, November 30, 2009, http://cee.illinois.edu/node/1022. 

11. ‘‘Smart Cities are Built on the Internet of Things,’’ Lopez Research, 2014, https:// 

www.cisco.com/web/solutions/trends/iot/docs/ 

smartlcitieslarelbuiltlonliotllopezlresearch.pdf. 

12. Daniel Castro and Mark Doms, ‘‘Data is the Key to the Factory of the Future,’’ Center 

for Data Innovation, October 2, 2014, http://www.datainnovation.org/2014/10/data-is-the-keyto-the-factory-of-the-future/and Udaya Shankar, ‘‘How the Internet of Things Impacts Supply 

Chains,’’ Inbound Logistics, 2014, http://www.inboundlogistics.com/cms/article/how-the-internet-of-things-impacts-supply-chains/. 

13. ‘‘Finding Success in the New IoT Ecosystem: Market to Reach $3.04 Trillion and 30 Billion 

Connected ‘Things’ in 2020, IDC Says,’’ International Data Corporation, November 7, 2014, 

http://www.idc.com/getdoc.jsp?containerId=prUS25237214. 

14. Peter C. Evans and Marco Annunziata, ‘‘Industrial Internet: Pushing the Boundaries of 

Minds and Machines,’’ General Electric, November 26, 2012, http://files.gereports.com/wp-content/uploads/2012/11/ge-industrial-internet-vision-paper.pdf. 

15. Robert Atkinson, ‘‘ICT Innovation Policy In China: A Review,’’ Information Technology and 

innovation Foundation, July 2014, http://www2.itif.org/2014-china-ict.pdf. 

16. Brian Heaton, ‘‘Internet of Things Helps Buffalo, Other Cities with Snow Removal,’’ Government Technology, November 19, 2014, http://www.govtech.com/data/Internet-of-ThingsHelps-Buffalo-Other-Cities-with-Snow-Removal.html. 

17. Jenni Spinner, ‘‘Headwall inks deal with USAFA on poultry inspection,’’ 

FoodProductionDaily.com, May 2, 2014, http://www.foodproductiondaily.com/Safety-Regulation/Headwall-inks-deal-with-USDA-on-poultry-inspection. 

18. Jim Polson, ‘‘Water Losses in India Cut in Half by Smart Meters: Itron,’’ Bloomberg, 

March 15, 2013, http://www.bloomberg.com/news/2013–03-15/water-losses-in-india-cut-in-halfby-smart-meters-itron.html. 

19. Alan McQuinn, ‘‘Commercial Done Companies Fly Away from FAA Regulations, Go 

Abroad,’’ Inside Sources, September 30, 2014, http://www.insidesources.com/commercial-dronecompanies-fly-away-from-faa-regulations-go-abroad/. 

20. Sandeep Rao, ‘‘Medical device approval plagued by unhealthy delays,’’ Baltimore Sun, February 24, 2011, http://articles.baltimoresun.com/2011–02–24/news/bs-ed-fda-regulations20110224l1ldiseased-heart-valves-cardiology-fda. 

21. Joshua New, ‘‘Will Obama be the Last Open Data President?,’’ Center for Data Innovation, 

November 11, 2014, http://www.datainnovation.org/2014/11/will-obama-be-the-last-open-datapresident/. 

22. Brenna Berman, ‘‘2013 Open Data Annual Report,’’ City of Chicago, 2013, http://report.cityofchicago.org/open-data-2013/. 

23. Josh Taylor, ‘‘Chicago’s smart city: From open data to rat control,’’ ZD Net, October 15, 

2014, http://www.zdnet.com/chicagos-smart-city-from-open-data-to-rat-control-7000034726/. 

24. Daniel Castro, Ann Cavoukian, ‘‘Big Data and Innovation, Setting the Record Strati: Deidentification Does Work,’’ Information Technology and Innovation Foundation, June 16, 2014, 

http://www2.itif.org/2014-big-data-deidentification.pdf. 

25. Nick Sinai and Matt Theall, ‘‘Expanded ‘Green Button’ Will Reach Federal Agencies and 

More American Energy Consumers,’’ White House Office of Science and Technology Policy, December 5, 2014, http://www.whitehouse.gov/blog/2013/12/05/expanded-green-button-willreach-federal-agencies-and-more-american-energy-consumers. 

26. Daniel Castro, ‘‘The Rise of Data Poverty in America,’’ Center for Data Innovation, September 10, 2014, http://www2.datainnovation.org/2014-data-poverty.pdf. 

27. Alex Hern, ‘‘Google: 100,000 lives a year lost through fear of data-mining,’’ June 26, 2014, 

http://www.theguardian.com/technology/2014/jun/26/google-healthcare-data-mining-larrypage. 

28. ‘‘Smart Water: wireless sensor networks to detect floods and respond,’’ Libelium, September 5, 2011, http://www.libelium.com/smartlwaterlwsnlfloodldetection/. 

56 

29. Davey Alba, ‘‘This Wearable Detects Pollution to Build Air Quality Maps in Real Time,’’ 

Wired, November 19, 2014, http://www.wired.com/2014/11/clarity-wearable and Martin 

LaMonica, ‘‘Greenbiz 10: What you need to know about the Internet of Things,’’ GreenBiz, 

May 14, 2014, http://www.greenbiz.com/blog/2014/05/12/greenbiz-101-what-do-you-needknow-about-internet-things. 

30. Daniel Castro and Travis Korte, ‘‘A Catalog of Every ‘Harm’ in the White House Big Data 

Report,’’ Center for Data Innovation, July 15, 2014, http://www.datainnovation.org/2014/07/ 

a-catalog-of-every-harm-in-the-white-house-big-data-report/. 

31. Dan Keating, David Fallis, and Andras Petho, ‘‘ShotSpotter detection system documents 

39,000 shooting incidents in the District,’’ Washington Post, November 2, 2013, http:// 

www.washingtonpost.com/investigations/shotspotter-detection-system-documents-39000-shootingincidents-in-the-district/2013/11/02/055f8e9c-2ab1-11e3-8ade-a1f23cda135elstory.html. 

About the Authors 

Daniel Castro is the director of the Center for Data Innovation where he leads 

the Center’s research efforts. Mr. Castro is also a senior analyst at the Information 

Technology and Innovation Foundation. Previously, he worked as an IT analyst at 

the Government Accountability Office. He has a B.S. in Foreign Service from 

Georgetown University and an M.S. in Information Security Technology and Management from Carnegie Mellon University. 

Joshua New is a policy analyst at the Center for Data Innovation. He has a background in government affairs, policy, and communication. Prior to joining the Center for Data Innovation, Joshua graduated from American University with degrees 

in C.L.E.G. (Communication, Legal Institutions, Economics, and Government) and 

Public Communication. 

About the Center for Data Innovation 

The Center for Data Innovation is the leading think tank studying the intersection of data, technology, and public policy. Based in Washington, D.C., the Center 

formulates and promotes pragmatic public policies designed to maximize the benefits of data-driven innovation in the public and private sectors. It educates policymakers and the public about the opportunities and challenges associated with data, 

as well as technology trends such as predictive analytics, open data, cloud computing, and the Internet of Things. The Center is a non-profit, non-partisan research institute proudly affiliated with the Information Technology and Innovation 

Foundation. 

57 

AGTECH: CHALLENGES AND OPPORTUNITIES FOR SUSTAINABLE GROWTH

Ewing Marion Kauffman Foundation—April 2014 

Suren G. Dutia 

Table of Contents 

Foreword 

I. Introduction 

II. Global Challenges 

III. Overview of the AgTech Sector 

IV. The Investment Case for AgTech 

V. Opportunity for AgTech in the U.S. Heartland 

VI. Recommendations 

VII. Conclusions 

VIII. Acknowledgements 

Foreword 

The information technology revolution has prompted flights of fancy among some 

observers who seem to think we have transcended the physical bounds of economic 

activity. Terms such as the ‘‘weightless economy,’’ the ‘‘intangible economy,’’ and 

others suggest that we are moving toward an economy with little connection to the 

more humdrum things that characterized the economy of yesteryear. 

Yet even the intangible economy has an inescapable physical foundation: agriculture. We are still human, after all, and the extent to which we can exploit digital 

technologies is determined by whether or not we can produce enough food—efficiently and sustainably—to support ourselves. On this single factor, perhaps more 

than any other, hangs the fate of our economies and societies. 

Because of this, our two organizations have supported the production of this white 

paper, which explores the potential for higher levels of innovation, entrepreneurship, and productivity in agricultural technology (AgTech). The challenges facing agricultural production in the next generation are formidable, and we believe that 

AgTech requires higher levels of policy attention, public research, and private investment to set agriculture on a path toward greater efficiency and sustainability. 

Suren Dutia and his colleagues have provided here a good overview of the AgTech 

landscape, and where untapped opportunities may exist. 

The Donald Danforth Plant Science Center’s mission is to improve the human condition through plant science. Specifically, the Center’s research aims to feed the 

hungry and improve human health, preserve and renew the environment, and position the St. Louis region as a world center for plant science. Access to its state-ofthe-art core facilities gives AgTech businesses a crucial advantage toward achieving 

success, and its annual Ag Innovation Showcase brings together investors, entrepreneurs, and business leaders to establish new collaborative ventures in agriculture and related industries. 

At the Ewing Marion Kauffman Foundation, one of our principal areas of interest 

is entrepreneurship. We are particularly interested in identifying opportunities for 

greater entrepreneurial entry and growth in specific sectors of the American economy. 

Entrepreneurs are problem solvers, and twenty-first century agriculture has no 

shortage of problems that, looked at another way, are opportunities for innovation. 

We look forward to the next steps that follow from this paper, and to recruiting 

other organizations to join us in promoting entrepreneurship and innovation in 

AgTech. 

SAM FIORELLO

Chief Operating Officer 

and Senior Vice President for 

Administration 

Donald Danforth Plant Science Center 

DANE STANGLER

Vice President of Research and Policy 

Ewing Marion Kauffman Foundation 

58 

I. Introduction 

In this white paper, we provide an overview of a new emerging economic sector: 

sustainable agricultural technology or, more simply, ‘‘AgTech.’’ This sector has the 

potential to completely reshape global agriculture, dramatically increasing the productivity of the agriculture system while reducing the environmental and social 

costs of current ag production practices. Given that we must produce more food in 

the next forty years than during the entire course of human history to date, and 

must do so on a planet showing signs of severe environmental stress, AgTech innovations will be absolutely essential. We believe humanity can rise to the occasion 

and overcome these monumental global challenges, but to do so will require sustained attention, significant investment, and AgTech-specific entrepreneur support 

systems to help spur innovation in the field. 

Our purpose in writing this paper is threefold. First, we seek to increase awareness of the productivity and sustainability challenges of the food system and inspire 

entrepreneurs to enter the field. Total demand is expected to rise 70 percent by 

2050, and current growth rates in agriculture are not sufficient to meet this goal. 

However, the ag sector faces an even greater challenge because of the uncertainty 

posed by climate change on future production and constraints posed by the limited 

availability of land, water, and other key resources. These twin challenges of productivity and sustainability translate to countless opportunities for innovation 

across the complete value chain, from inputs and agricultural production to transport, processing, distribution, storage, and waste disposal. Visionary entrepreneurs 

will have the ability to solve pressing societal challenges while capturing the economic value of their new AgTech products and processes. 

Our second purpose is to help increase the flow of capital to investments in 

AgTech. The agriculture sector as a whole is one of the world’s largest economic sectors, with net farm income of around $120 billion and farm assets at around $2 trillion with little leverage. Yet there has been relatively little investment in AgTech 

compared with other industries like clean energy. Venture capital firms compiling 

portfolios of new AgTech companies are seeing more startups seeking funding than 

available capital, and other investor groups thus far have not entered the field in 

significant numbers. Given the size of the potential market and the vital societal 

need for agricultural innovation, we expect that investors soon will realize the opportunity of AgTech and invest substantially in this emerging field. 

Our third purpose is to highlight the need for regional AgTech entrepreneur support systems to accelerate innovation. We believe that the American heartland provides an ideal example of a region poised to make great strides forward in developing an entrepreneurial sector for AgTech. The heartland has some of the world’s 

best growing conditions and natural resources, and currently produces 27.2 percent 

of the world’s corn, 29.75 percent of its soybeans, 6.7 percent of its beef, and 6.9 

percent of its pork, making this region an epicenter of global agricultural activity. 

The heartland houses some of largest and most progressive agricultural companies 

in the world, looked upon as leaders in their field. The heartland is blessed with 

highly developed transportation networks along its waterways and railroads, allowing for efficient logistics and transport of ag products. In addition, the heartland has 

world-class AgTech research capabilities with its land-grant universities and citylevel clusters of expertise, such as plant sciences in St. Louis and animal sciences 

in Kansas City. Given the overall AgTech entrepreneurial activity in the region and 

the large number of significant multinational players, the American heartland can 

be a powerful influence in driving the objectives of the AgTech revolution. Taken 

together, these resources indicate a regional competitive advantage in AgTech, similar to what the Silicon Valley cluster has provided for the IT industry. For these 

reasons, we believe a concerted effort to develop a regional AgTech entrepreneurial 

support system will result in immense benefits for the region itself and set an example for other agricultural communities across the world. 

We hope this paper launches a larger dialogue on the monumental challenge of 

sustainable food production for the next forty years and opportunities for the 

AgTech sector to help solve this challenge. We look forward to hearing your 

thoughts and ideas on these important topics. 

II. Global Challenges for Agriculture: Producing More With Less Impact 

Over the next 40 years, land, energy, water, and weather constraints will place 

unprecedented pressure on mankind’s ability to access its most basic goods— 

food, fuel, and fiber. Humanity must now produce more food in the next four decades than we have in the last 8,000 years of agriculture combined. And we must 

do so sustainably. (‘‘The 2050 Criteria,’’ World Wildlife Fund) 

59 

The global agricultural system faces tremendous challenges. The United Nations 

Food and Agriculture Organization (UN FAO) projects that food production must increase by 70 percent over the next forty years to satisfy increasing demand due to 

population growth and rising economic prosperity (Conforti, 2011). The main challenge of global agriculture often is framed in terms of feeding a growing population, 

which is expected to increase from seven billion people today to approximately nine 

billion in 2050. 

At the same time, there is limited opportunity to expand the land used in agricultural production, and agriculture also must deal with environmental risks such as 

climate change. To succeed in sustainably increasing food production, major innovations in AgTech are required that increase agricultural productivity and improve the 

efficiency and resiliency of the entire food system. 

Figure 1. Projections for rising global demand for crops and declining arable land per capita. 

While many variables will determine the food demanded in 2050 and the ease 

with which that food can be produced, the general trends suggest that we will need 

significantly more food while facing an increasingly hostile environment due to climate change and diminishing resources. Projections from IHS Global Insights show 

large increases in the global demand for corn and soybeans, while the amount of 

arable land per capita continues to decline due to population growth and urban development. The UN FAO projects that both per capita and total demand for cereals, 

meat, and oil crops will rise by 2050, with little increase in the amount of arable 

land. Climate change will pose a large challenge to these projections: the International Food Policy Research Institute (IFPRI) projects that climate change impacts will nearly double the price of corn, rice, and wheat. Figures 1–3 showcase 

these projections. 


0211KAUF1.eps
60 

Key Variables Influencing Agricultural Production from UN FAO’s ‘‘World 

Agriculture Towards 2030/2050: The 2012 Revision’’ 

Source: HIS Global Insights, Agriculture Division. 

Figure 2. Projections for key agricultural variables in 2050. 

Source: IFPRI, ‘‘Food Security, Farming, and Climate Change to 2050,’’ policy seminar, December 1, 2010. 

Figure 3. Projected impact of climate change on crop prices. 


0211KAUF2.eps 0211KAUF3.eps
61 

Recently, Oxfam commissioned modeling to make estimates about what food 

prices would look like twenty years from now, and determined that under normal 

circumstances, food commodity prices are likely to increase about 50 percent between now and 2030. And if estimates of climate change are factored in, food prices 

could be up to 100 percent higher than they are at present. This would put enormous pressure on the world’s population and especially its poor. 

Source: Alexandratos & Bruinsma, ′′World Agriculture Towards 2030/2050: The 2012 Revision,′′ UNFAO, 2012. 

Figure 4. UN projections for urban and rural changes in population Projected changes in global mean consumption 

The Key Demand Drivers: Population Growth, Rising Incomes, and Demand for 

Renewable Energy 

However, the food shortfall challenge will be made even more difficult by the demographic shift in incomes occurring as the population rises; not only will there be 

more people overall, but more wealthy people who demand more food with greater 

resource requirements. 

Figure 4 shows that the fastest growing segment of world population is urban in 

the developing world. Billions of people already have moved from the rural country 

side into rapidly growing megacities, and billions more are expected to make this 

transition over the next forty years. 

As they gain affluence through rising incomes, the emerging middle classes of the 

developing world are consuming more meat, fish, dairy, and processed foods, all of 

which require higher levels of input resources and much higher levels of overall agricultural production. 

As a case study of rising affluence driving changes in dietary preferences, consider 

Taiwan. Between 1975 and 1990, Taiwan’s GNI per capita rose from $3,368 to 

$8,325. In this same period, per capita annual meat consumption rose from 30 kg 

to 70 kg (see Figure 5). A similar trend emerged in China over the past thirty years, 

with annual per capita meat consumption growing from 9 kg to 58.2 kg. 


0211KAUF4.eps
62 

Sources: Taiwan Council of Agriculture, China Statistical Yearbookand Nomura Global Economics. 

Figure 5. Changing dietary preferences in Taiwan. 

A consequence of this rapid growth in meat intake is that China now consumes 

twice as much meat as the United States. Figure 6 shows the total consumption of 

meat in China relative to the United States. While Chinese per capita meat consumption currently sits at 58.2 kg per year, U.S. per capita meat consumption is 

double that at 120.2 kg per year. With increasing populations, even small shifts in 

meat consumption in the developing world can have large aggregate impacts on 

total demand. 

Source: Basch et al., ‘‘Harvesting Opportunities for a Sustainable Food Supply.’’ 

Figure 6: Total meat consumption in the United States and China. 


0211KAUF5.eps 0211KAUF6.eps
63 

Increased demand for meat poses a host of challenges to the global agricultural 

system, as livestock requires up to 8 kilograms of feed for every kilogram of meat 

produced (see Figure 7 for requirements based on type of meat). Significantly more 

water is required to produce a kilogram of meat than a kilogram of plant crops. 

Source: Basch et al., ‘‘Harvesting Opportunities,’’ SAM Robeco 2012. 

Figure 7. Animal feed requirements per kg of protein. 

Meat production’s high energy, water, and other resource costs thus lead to direct 

competition between crops grown for direct human consumption and crops grown as 

inputs for raising livestock or fish in aquaculture. 

Biofuels also will be a huge source of competition for diminishing resources available for food production. According to the International Energy Agency, biofuel production will see an 800 percent increase between now and 2050. While much of that 

biofuel will come from nonfood crops and second-generation production techniques 

such as cellulosic ethanol, most of the current supply of biofuels and production in 

the near term will provide direct competition with resources used to grow crops for 

human consumption and feed for livestock. Projected growth in biofuel demand also 

is expected to require more than triple the land currently used for production, as 

shown in the bottom graph of Figure 8, further intensifying competition between 

food crops and biofuel crops. 


0211KAUF7.eps
64 

Source: International Energy Agency, ‘‘Technology Roadmap: Biofuels for Transport,’’ 2011. 

Figure 8. Demand for biofuels (top) and resulting demand for land (bottom). 

Planetary Boundaries and the Risk Posed to Agriculture 

In order to continue sustainably, agriculture must exist within a stable environment. Like other biological systems, agriculture is dependent upon earth’s biosphere 

for resources, such as water and soil. Much of current agriculture also is dependent 

on manmade inputs like synthetic fertilizer. However, global environmental challenges threaten the sustainability of these inputs. 

Recent advances in earth systems science have yielded a new understanding of 

processes that threaten the stability of the earth’s current biosphere conditions. A 

landmark 2009 study in the journal Nature first proposed the concept of ‘‘planetary 

boundaries,’’ geophysical thresholds that, if crossed, could be dangerous for humanity (Rockstrom et al., 2009). Some of these planetary boundaries, such as climate 

change and biodiversity loss, are fairly well known. Other boundaries, such as the 

nitrogen cycle and global land use change, have received relatively little attention 

as issues of global concern. The full list of planetary boundaries and their proposed 

constraints is included in Figure 9 below. 


0211KAUF8.eps
65 

Source: Rockstrom et al., ‘‘A Safe Operating Space for Humanity,’’ Nature 461 (2009). 

Figure 9. Planetary boundaries relevant to the global agriculture system. 

*Proposed Planetary Boundaries (starred are relevant to ag, red have been crossed) 

Six of the proposed planetary boundaries are especially relevant to global agriculture: 

• Climate change: modern agriculture produces several greenhouse gases, including carbon dioxide, methane, and nitrous oxide. Agriculture contributes 13.5 

percent of global GHG emissions (IPCC, 2007). 

• Biodiversity loss: agriculture depends on a unique ecosystem of bacteria, fungi, 

and other microorganisms present in the soil, and this ecosystem often is disrupted by modern agriculture activities. 

• Nitrogen cycle: the production of nitrogen-based fertilizer through the HaberBosch process removes roughly four times the atmospheric N2 recommended in 

the proposed boundary. 

• Phosphorus cycle: the mining of finite sources of P and its concomitant application as fertilizer with subsequent erosion into rivers, estuaries and oceans. Nitrogen and phosphorus contribute to eutrophication. 

• Global freshwater use: freshwater usage can grow only by 1,400 km¥3 per year, 

and agricultural production accounts for roughly 92 percent of total human 

water usage (Hoekstra & Mekonnen, 2012). 

• Global land use: agricultural cropland is 11.7 percent of total global land cover 

and must not exceed 15 percent, leaving limited land available for agricultural 

expansion. 

Demand for food, fiber, and energy will continue to rise throughout the coming 

decades, and agriculture’s impact on planetary boundaries also likely will rise. HowVerDate Nov 24 2008 11:45 Apr 20, 2016 Jkt 075679 PO 00000 Frm 00069 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\99818.TXT JACKIE

0211KAUF9.eps
66 

ever, crossing the planetary boundaries is not sustainable in the long term, as it 

will trigger geophysical shifts that will decrease agricultural production and lead to 

other devastating impacts. Ultimately, humanity must operate within the planetary 

boundaries to allow for a stable global environment and a sustainable civilization. 

AgTech innovations can help to reduce or even eliminate the negative global environmental impacts of agriculture by reducing the fossil fuel, fertilizer, water, and 

land requirements for food production. Increasing resource efficiency can help to ensure a more sustainable and more productive food system. 

The Dream of the ‘‘Evergreen Revolution’’ 

The goal of increasing agricultural production by 70 percent while not pushing the 

global environment beyond the nine planetary boundaries presents an unprecedented challenge for humanity. We believe innovation in AgTech has the potential 

to meet both of these challenges, but we will need a new revolution in sustainable 

agricultural production for this to happen. 

The Green Revolution of the mid-twentieth century provides a recent example of 

what can happen through technological innovation. In the 1960s, scientists grew increasingly concerned about the growing world population and warned that mass 

famines were imminent. Yet since 1960, the world population has doubled while the 

food supply has tripled (UN Food and Agriculture Organization, 2012). Even more 

astounding, land under cultivation only grew by 12 percent from 1960 until today; 

most of the growth in yields came from increases in productivity. The Green Revolution saved many ecosystems from destruction, for without this dramatic increase in 

productivity, hungry nations likely would have converted more rainforests and wetlands to cropland. 

However, the Green Revolution had large environmental consequences. Improvements in yields from the Green Revolution required heavy usage of fertilizer, disrupting the nitrogen cycle and leading to eutrophication and ‘‘dead zones’’ of oxygendeprived, largely lifeless areas in the ocean. Green Revolution increases in yields 

also relied on chemical herbicides and pesticides, contributing to local air and water 

pollution. In addition, Green Revolution crops demanded large amounts of irrigated 

water, which in some areas has dramatically lowered water tables and depleted 

aquifers. Finally, the various technologies used in the Green Revolution, from fertilizer to herbicides to irrigation, all require large amounts of fossil fuel energy, 

leading to further greenhouse gas emissions and climate change. 

Our new agricultural revolution must be an ‘‘evergreen revolution,’’ one that increases food production while ensuring environmental sustainability. It must go further than reducing agriculture’s negative impacts; ultimately, agriculture must positively contribute to the global environment. 

Johan Rockstrom, lead author of the group of scientists who created the planetary 

boundaries concept, proposes the following global goals for an ‘‘evergreen revolution’’ 

(Rockstrom & Karlberg, 2010) in Figure 10 below: 

Source: Rockstrom & Karlberg, ‘‘The Quadruple Squeeze: Defining the safe operating space 

for freshwater use to achieve a triply green revolution in the Anthropocene,’’ Ambio 39 vol. 3 

(2010), 257–65. 

Figure 10. Global goals for an ‘‘evergreen revolution’’ in agriculture. 


0211KAUF10.eps
67 

Meeting these goals requires AgTech innovations that can produce food with significant improvements in resource efficiency. To put it another way, we will need 

to produce more units of output with fewer units of input. Through innovations 

along the entire agriculture value chain, we can increase the productivity of our 

farming systems while simultaneously transforming agriculture into a source of environmental health. But achieving the dream of the evergreen revolution will not 

be easy; it will require sustained investment, increasing collaboration and enlightened public policy. We also must know the current progress of innovations in 

AgTech, the subject of the next section of this paper. 

III. An Overview of the AgTech Sector 

The global imperatives presented by the soaring demand for food and the danger 

of crossing planetary boundaries underscore the need for an ‘‘evergreen revolution’’ 

in agriculture. This revolution largely will be driven by innovations in sustainable 

agriculture technologies. In this paper, we refer to this sector as ‘‘AgTech,’’ with a 

clear implication of environmental, social, and economic value. AgTech describes innovative technologies in the agricultural sector that demonstrably enhance the sustainability of the practice by increasing productivity, improving the efficiency of resource use, and reducing ecological impacts. They also yield sustained or enhanced 

profitability to investors by increasing the long-term value of ag production. 

Global agricultural production is far from monolithic, and involves many different 

production methods ranging from the advanced technology and high-yield mainstream U.S. model to low-yield subsistence farming, with many variations in between. In this paper, we will focus solely on advanced technology agricultural production, as we believe that this is the best method to produce 70 percent more food 

while also respecting the planetary boundaries for climate change, biodiversity, nitrogen, water, and land. With this focus, our view of AgTech will center on North 

America, where adoption of advanced technology for agriculture is most prevalent. 

Recent trends in U.S. agriculture illustrate the potential for improvements in 

AgTech to move us toward meeting the global imperatives of the ‘‘evergreen revolution.’’ Figure 11 indicates changes in environmental impact of three U.S. crops (corn, 

soy, and wheat) over the last twenty-five years. While productivity has risen for 

these three crops, the environmental impact of growing them has decreased. Corn 

and soybeans show greater improvement than wheat because of the adoption of biotechnology products and techniques made possible by these products, such as no-till 

agriculture. 

However, these diagrams also represent the environmental impact per unit of production, meaning that as production has increased, the total aggregate environmental impact still has continued to rise. As the planetary boundaries framework 

shows, rising aggregate environmental impacts are not sustainable. Further innovations in AgTech will be necessary if the U.S. agriculture sector is to achieve full environmental sustainability at the production levels needed to meet the world’s growing demand. 

68 

Source: Field to Market, 2012 Environmental and Socioeconomic Indicators Report. 

Figure 11. Resource efficiency and environmental sustainability improvements for three U.S. 

crops. 

The AgTech Value Chain 

In order to better understand the potential for AgTech innovations, we crafted an 

AgTech value chain diagram that traces inputs to their final products. This value 

chain contains seven intermediary steps: physical inputs, information inputs, plant 

farming, animal farming, bio-based processing, food processing, and logistics (see 

Figure 12). The value chain can produce three final products: fossil-fuel substitutes 

(such as biofuel), plant-based food, and animal-based food. Each of the steps in the 

supply chain has inefficiencies and environmental impacts that must be improved 

if global agriculture is to reach the goals of an ‘‘evergreen revolution.’’ Thus, each 

step in the value chain has the potential for innovation. 

Figure 12. The AgTech value chain. 


0211KAUF11.eps 0211KAUF12.eps
69 

One Vision for AgTech: Integrating Genetics, Physical Inputs, IT, and Smart 

Machinery 

Innovations in AgTech do not need to be constrained to only one step in the value 

chain; rather, the most disruptive breakthroughs in AgTech may come from combining innovations in multiple areas. One particular exciting illustration of this 

combination is an idea known as ‘‘integrated farming systems’’ that will integrate 

genetics, physical inputs, IT sensing, and smart machinery. Through advances in 

software and environmental testing, farmers will be able to create custom field prescriptions for seeds, fertilizer, pest controls. Smart machinery then will carry out 

the prescribed treatment, all the while collecting further data that will provide feedback to the farmer. This data also will allow seed and farm input companies to develop custom products for farmers. Figure 13 demonstrates this AgTech vision. 

The idea of ‘‘integrated farming systems,’’ which currently is being advanced by 

several established companies and by entrepreneurs, still is in early development. 

This idea of combining advances in genetic engineering, information technology, and 

smart machinery likely will be pursued by many established companies and 

startups due to the vast potential for investment and innovative new products in 

these three areas. 

Source: ‘‘Precision Planting/Monsanto Field Scripts program,’’ Precision Planting 2012. 

Figure 13: An illustration of ‘‘Integrated Farming Systems,’’ a vision of potential AgTech innovations. 

Examples of AgTech Startup Activity 

To provide an overall state of the innovation ecosystem for AgTech, we analyzed 

a dataset from the agriculture venture capital group Cultivian of over 900 AgTech 

startup companies from around the world. This dataset consists of companies that 

Cultivian considered investing in for their funds, and was obtained through direct 

contact, conferences, referrals and other methods. We have removed any identifying 

information from the data and present only aggregate information. 

We categorized each of the startup companies by its position in the AgTech value 

chain. After sorting the data, we were left with 738 companies that fit within the 

value chain framework. The database also contains the year that Cultivian first became aware of the venture or when the venture was seeking investment. We used 

this as a proxy to signify the year when the venture perceived itself as mature 

enough to seek funding. From this data, we created Figure 14, which summarizes 

Cultivian’s deal flow from 2006 until 2012. 

From this dataset, it is evident there is robust stream of new business startup 

activity occurring across the agricultural value chain in technology inputs, crop production, animal production, processing, and manufacture and distribution. This inVerDate Nov 24 2008 11:45 Apr 20, 2016 Jkt 075679 PO 00000 Frm 00073 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\99818.TXT JACKIE

0211KAUF13.eps
70 

novation activity has occurred over a sustained period of six years, averaging 132 

startups per year for a single venture firm. 

Figure 14. Summary of Cultivian AgTech dataset. 

To showcase some of the many innovation opportunities in the AgTech sector, we 

chose four examples of startup companies from different steps in the AgTech value 

chain. The quoted description for each company comes directly from Cultivian’s portfolio website. 


0211KAUF14.eps 0211KAUF14B.eps 0211KAUF14C.eps
71 

While we believe that these four companies are a good representation of the diversity of activity in the AgTech sector, the inclusion of these companies should not 

be taken as an endorsement. 

AgTech and the Controversy Surrounding Genetically Modified Foods 

We would be remiss if we did not acknowledge an ongoing debate around genetically modified (GM) foods. GM foods have been sold commercially for about two decades in the United States and there is broad scientific consensus that GM foods do 

not pose greater risk than conventional foods. However, a simmering debate remains about the potential adverse impacts these products could have on the environment and human health, with public opinion deeply divided over safety concerns. 

While we recognize the importance of reviewing a wide range of scientific studies 

and opinions on the use of GM foods, it is beyond the scope of this white Paper. 

However, we should note that no major scientific body ever has found that GM foods 

pose a risk to public health. The U.S. National Academy of Science noted that after 

billions of meals served with GM ingredients, ‘‘no adverse health effects attributed 

to genetic engineering have been documented in the human population.’’ European 

scientific agencies agree with this conclusion, and the scientific advisor to the European Commission has stated that ‘‘there is no more risk in eating GMO food than 

eating conventionally farmed food.’’ 

Further, scientific analysis of the environmental impact of GM crops has, to date, 

not found evidence of environmental harm caused by the products. Instead, a U.S. 

National Academy of Science 2010 report, ‘‘Impact of Genetically Engineered Crops 

on Farm Sustainability in the United States,’’ found that GM crops reduced agriculture’s environmental impact, reducing insecticide and toxic herbicide use; increasing the use of conservation tillage and no-till farming; reducing carbon emissions and soil runoff; and improving soil quality. Given the monumental challenge 

of sustainably producing 70 percent more food over the next forty years, we believe 

that no potential tools should be excluded. Without the use of GM foods or other 

biotech products, meeting the global agriculture challenge will become significantly 

more difficult. 

As outlined in this paper, it is our strong belief that during the twenty-first century, humankind will be confronted with an extraordinary set of challenges. It is 

essential that we improve food, feed, fiber, and energy production while reducing environmental impact and enhancing societal development. Meeting these challenges 

will require new knowledge generated by continued scientific advances, the development of appropriate new technologies, and a broad dissemination of this knowledge 

and technology, along with the capacity to use it, throughout the world. It also will 

require that wise policies be implemented through informed decision making on the 

part of national, state, and local governments in each nation. Regulatory oversight 

of technology development should continue to be science-based, while recognizing 

the responsibility of government, industry, and the scientific and medical communities to educate the public and improve availability of unbiased information. 

Genetically modified foods have the potential to solve many of the world’s hunger 

and malnutrition problems, and to help protect and preserve the environment by increasing yield and reducing reliance upon chemical pesticides and herbicides. Yet 

there are many challenges ahead for governments, especially in the areas of safety 

testing, regulation, international policy, and food labeling. Many people feel that genetic engineering is the inevitable wave of the future and that we cannot afford to 

ignore a technology with such enormous potential benefits. However, we must proceed with caution to avoid causing unintended harm to human health and the environment as a result of our enthusiasm for this powerful technology. 

The AgTech space has the unique opportunity to gain ground by counteracting the 

fearmongering about genetically engineered crops and bringing about more openness, education, and transparency while working with farmers and innovators. 

While biotech advances in medicine and pharmaceuticals have been well received 

by the public, individuals view innovations in plants and food more skeptically. We 

must bring about a broad-based understanding of the enormous challenges that lie 

ahead to create meaningful change. It is essential to bring a congruence of pragmatic innovators, humanitarians, and environmental organizations together with 

entrepreneurs and ag companies to achieve the common objective of producing adequate food for the next century. 

IV. The Investment Case For AgTech 

The AgTech sector has tremendous opportunities for investment. The demand for 

sustainable food, fiber, and energy production has been growing throughout the 

twenty-first century, making agriculture a stable and reliable investment. Below are 

five reasons why we believe AgTech innovation is a smart investment: 

72 

1. Grain consumption is increasing worldwide. 

2. Demand for sustainable energy is growing. 

3. Access to quality arable land and soil is constrained. 

4. Access to adequate water quality and quantity is decreasing. 

5. Current cultural practices are not sustainable in the face of increasing environmental challenges. 

Figure 15 provides a glimpse of the various demand drivers and supply constraints for the entire agriculture system. Because of the factors shown on the figure’s right side, demand for agricultural products will continue to rise, while the 

supply constraints will make meeting the demand extremely difficult. AgTech innovations that help meet these challenges will offer investors and entrepreneurs a fertile opportunity for investment and invention. 

Figure 15. Demand drivers and supply constraints in the agricultural system. 

Logistics, which coordinates the movement of ag products and support availability 

and the timely balance of supply and demand, is another area essential to the success of AgTech innovations. Because of its critical role, we have given logistics special prominence in the above graphic. 

Some Areas of Opportunity for Ag Tech Investment 

The AgTech sector holds many opportunities for investment, with innovation 

needed throughout the entire value chain. Specific areas available for investment 

in this sector include: 

• Animal Nutrition & Health 

• Aquaculture 

• Bioenergy 

• Biological Pest Control 

• Biomaterials 

• Bionutrition 

• Biotechnology 

• Crop Nutrition 

• Crop Protection 

• Decision Support Technologies 

• Feed Efficiency 

• Fertilizer Efficiency 

• Food Traceability and Safety 

• Food Storage and Preservation 

• Information Systems 

• Integrated Pest Management 

• Irrigation Efficiency 

• Land Management 

• Machinery 

• Precision Agriculture 

• Robotics 

• Seeds and Genetics 


0211KAUF15.eps
73 

• Soil Amendments 

• Soil Health 

• Sustainable Production Systems 

• Technology Transfer 

• Urban Agriculture 

• Water Quality and Preservation 

• Waste Mitigation and Manure Management 

Changes in U.S. Public and Private AgTech R&D Spending 

Throughout most of the twentieth century, much research and innovation in agriculture was funded with public money. Since the early 1980s, however, public expenditures on agriculture R&D have stagnated, even as demand for ag products continues to rise. As public funding has ebbed, new flows of capital from the private 

sector have increased. This is particularly evident in developed countries like the 

United States, where private spending on agriculture R&D has been consistently 

higher than public spending for the past three decades. The decline in public R&D 

is a trend affecting primary research in the United States for all types of science 

and is not just an issue for AgTech. However, the needs and opportunities present 

in the AgTech sector deserve special attention from policymakers (see Figure 16). 

Sources: (above left) USDA, ‘‘Background: Agriculture Depends on Research and Technology 

Development,’’ 2012; (above right) Fuglie et al., ‘‘The Contribution of Private Industry to Agricultural Innovation,’’ Science 338, no. 6110 (2012). 

Figure 16. Trends in public and private AgTech R&D spending in the United States. 

The growth of private R&D spending on AgTech illustrates a simple and, on its 

face, obvious point: investing in AgTech offers solid opportunities for innovation and 

value creation. Corporations and private investors largely are rational in their decision making, generally only investing capital when they have a high degree of confidence of a good return. When entrepreneurs and private industry develop business 

models that capture the value of needed AgTech innovations, they have a tremendous opportunity to achieve high returns. Indeed, this has happened with the development of biotechnology. The right-hand graphic in Figure 16 shows the dramatic 

increase in private R&D spending in crop seed and biotechnology between 1979 

(shortly before the U.S. Supreme Court allowed for patenting of biotechnology traits) 

and 2006; this research spending occurred because of the opportunity to capture 

value from novel applications of genetic engineering. 

The Important Contribution of Private R&D Spending to Global Agricultural Growth 

Global gains in agricultural productivity realized during the Green Revolution of 

the 1960s, 1970s, and 1980s were driven by input intensification and crop-area expansion. In comparison, the productivity gains achieved in the 1990s and 2000s 

largely were driven by innovations (total factor productivity) and less from input intensification or new land being brought into cultivation. Figure 17 highlights the 

shift away from heavy spending on increasing fertilizer and pesticide inputs to investments in genetic engineering and other high-tech improvements that increased 

yields with fewer units of input. This trend towards greater resource efficiency is 

encouraging, but much more needs to be done. 


0211KAUF16.eps
74 

Source: Fuglie et al., ‘‘Productivity Growth and Technology Capital in the Global Agricultural 

Economy,’’ Productivity Growth in Agriculture 2012. 

Figure 17. Relative contributions to growth in global agricultural production. 

With public R&D spending in advanced developed countries stagnating or declining, private investment may be the best way to spur further innovations in AgTech 

and achieve the growth in production needed to sustainably meet the rising demand 

for ag products. Figure 18 demonstrates that private sector investment in food and 

agriculture has increased steadily in the past decade, reaching $8 billion annually 

for crop inputs and $2 billion annually for animal inputs by 2010. However, private 

investment must increase even further if advances in innovation are to continue. 

Source: Fuglie et al. 

Figure 18: Global private investment in food and agriculture research. 


0211KAUF17.eps 0211KAUF18.eps
75 

Overall Comments on the Future of AgTech Investment 

As can be seen from the top-level investment data in Figure 18 and the microlevel Cultivian data, AgTech investments are being made across the supply chain. 

There also are interrelationships between supply chain categories. For example, the 

value of new seed traits may not be fully realized without other equipment and information innovations needed to advance precision agriculture. Additionally, advances in logistics will be needed to segregate outputs as crops become optimized 

for specific uses such as animal production, human nutrition, or bio-based substitutes. Further, as climate change negatively affects current production methods, 

still more innovations will be needed. 

Crucially, demand necessitates innovations. Over the past five years, innovations 

in agriculture technology (precision ag innovations, data analytics and processing, 

platforms for the collection and distribution of complex data streams, and IT-driven 

extensions) are on the rise in the heartland, and in California and North Carolina. 

Pressing needs and challenges often fuel research and innovative outcomes in various global farming hubs. New Zealand is one of the world’s largest producers of 

dairy as well as lamb and sheep, while Australia is a leading producer of wheat and 

animal feed. Investment authorities and private wealth funds from Singapore, 

Dubai, and Qatar are beginning to take notice of geographic centers with farming 

capabilities, including those in China, Brazil, and Chile. 

Government policies, regulations, incentives, and penalties will play an important 

role in determining the AgTech sector’s future. It either could result in growth 

spurts or constrain innovation and entrepreneurial activity in the sector, and investors will need to stay abreast of how these are impacting returns. 

We also want to highlight a potential trend where investors may have a more diverse set of return motivations. Economic returns still dominate, but goals relating 

to social consciousness and environmental returns also are on the rise. These types 

of returns always have existed and historically have received philanthropic and government support. However, new sources of capital are emerging that seek environmental and social returns or, at least, having these returns blended with economic 

returns, including: social entrepreneurship innovations funded by socially conscious 

investors; declared socially conscious corporations; socially conscious innovator and 

corporation partnerships; consumers making purchasing choices based upon environmental and social factors; crowd funding; and others. As these trends gain momentum, there may be opportunities in the AgTech sector to translate shared social 

returns to individual economic returns. 

Overall, we see the AgTech sector evolving through an increasing number of agriculture technology entrepreneurs connecting with angel, venture capital, corporate, 

philanthropic, government, and other investors to create an even more vibrant sector within the global economy. We foresee many ‘‘green’’ opportunities across the 

supply chain categories to suit the size and characteristics of different entrepreneurs 

and investor classes. The attributes of a potential investment opportunity and associated return on investment also will be key. As always, the most disruptive and 

quickly scalable breakthroughs will deliver the most handsome economic, social, or 

environmental returns. Investors and entrepreneurs will have many opportunities 

to collaborate given the magnitude of the need and the return opportunities. 

V. The Opportunity for AgTech in the U.S. Heartland: An Example of 

Regional Assets and Expertise to Drive Innovation 

While the Ever-Green Revolution is a global challenge and AgTech is broadly applicable across North America, the AgTech innovation required to achieve sustainable increases in productivity will happen through research and entrepreneurial 

networks at a regional scale. We believe that the American heartland is one of the 

regions especially well-suited for the challenge of developing a robust innovation 

ecosystem in AgTech. The American heartland already has the research and innovation hubs needed to develop the new AgTech products and processes, and is beginning to develop the entrepreneurial hubs needed to grow these innovations to scale. 

But it will need to do more if it hopes to be the center of the emerging AgTech revolution and capture the value of the resulting products and processes. 

Defining the U.S. Heartland 

For our purposes, we define the U.S. heartland as the collection of midwestern 

states that generate the highest concentration of agriculture-related economic value 

in the United States. Commonly referred to as America’s heartland, or the Midwest, 

this region consists of twelve states in the north-central United States: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, 

South Dakota, and Wisconsin. The area has some of the richest farming land in the 

world, and has come to be known as the Nation’s ‘‘breadbasket.’’ 

76 

Figure 19: U.S. and heartland region net farm income by state. 

As a group, the twelve states listed in Figure 19 generated $60.3 billion in net 

farm income in 2011, or 51.2 percent of all U.S. net farm income. The heartland 

produces 85 percent of U.S. corn, 85 percent of U.S. soybeans, 70 percent of U.S. 

pork, 45 percent of U.S. eggs, 33 percent of U.S. milk, and 30 percent of U.S. beef. 

This high quantity of production makes the heartland important in global commodity markets, as heartland corn and soy comprise 27.2 percent and 29.75 percent 

of global production, respectively. 

Heartland Assets for AgTech 

The heartland is one of the world’s most fertile crop production areas, with abundant soil and a climate that currently is amenable to producing large amounts of 

food. In 2006, a study by the Potsdam Institute for Climate Impact Research simulated what optimal global agricultural production would look based solely on climate, soil, and water constraints, without any regard to existing ag infrastructure. 

The results of this simulation, displayed in Figure 20 below, show that the U.S. 

heartland and central Europe are the two most fertile areas in the world. Thus, the 

heartland’s unique geography explains its high concentration of farms of the United 

States, as shown in Figure 21. 

The heartland also has unique advantages in its transportation and processing infrastructure. Goods can be moved by rail, truck, or barge, and transportation networks are concentrated within the region (see Figure 22). Farm products can be 

shipped from any coast, reaching the Pacific Ocean by rail, the Gulf of Mexico via 

the Mississippi River, and the Atlantic Ocean via the Gulf of Mexico. Value-added 

products, such as ethanol or biofuels, can be processed directly in the heartland due 

to its concentration of processing facilities, as shown in Figure 23. 


0211KAUF19.eps
77 

Source: Kahn & Zaks, ‘‘Investing in Agriculture: Far-Reaching Challenge, Significant Opportunity,’’ Deutsche Bank Group, 2009. 

Figure 20: Simulation of globally optimized agricultural production. 

Figure 21. Concentration of cropland in the United States. 


0211KAUF20.eps 0211KAUF21.eps
78 

Source: ‘‘Freight Analysis National Freight Statistics,’’ U.S. Department of Transportation 

2007, USDA 2012. 

Figure 22. U.S. transportation networks for shipping freight. 

Source: ‘‘Production by County and Location of Ethanol Plants,’’ USDA, 2012 

Figure 23. Location of ethanol processing plants in the United States. 

In addition, the heartland has a strong concentration of human capital and research infrastructure focused on AgTech, including land grant public universities 

and prestigious research institutions. The land grant universities provide a unique 


0211KAUF22.eps 0211KAUF23.eps
79 

network of cutting-edge basic science platforms, which are catalyst of innovation, 

knowledge transfer, entrepreneur development and a well-trained workforce. 

An Opportunity for the Heartland: Building AgTech Entrepreneur Support Systems 

It seems only natural that the heartland would serve as the epicenter for development of a comprehensive innovation ecosystem and entrepreneurial economy around 

the emerging AgTech sector. However, several factors are holding back such a collaborative effort. First, the heartland does not have a strong regional identity, with 

various states claiming sole ownership of the ‘‘midwestern’’ identity. This leads to 

competition between states and a narrowness of vision, only looking within the 

state’s borders for beneficial economic opportunities and preventing larger interstate 

projects. The heartland also has resisted letting go of its current economic practices, 

having experienced a very prosperous twentieth century after the rise of organized 

labor and American superiority in global agriculture. While globalization has upended this established economic model, Americans in the heartland often are hesitant 

to let go of the recipe that led to success in the past. Finally, the open culture of 

investment of innovation that exists in places like San Francisco or Boston does not 

exist in much of the Midwest, which maintains a more stable and sometimes hierarchical social order. 

Figure 24: Heartland land-grant universities and research centers. 

These cultural dynamics can be a huge obstacle to building successful innovation 

ecosystems and entrepreneurial economies, but Midwestern cities already are starting to have some success. Two of the most hopeful places for entrepreneurial activity 

in the AgTech sector are the St. Louis and Kansas City, Missouri, metropolitan 

areas. St. Louis has invested in institutions like the Danforth Center and BRDG 

Park, and the combination of its universities and the large AgTech research company, Monsanto, have helped it develop a fairly robust economy around innovations 

in the plant sciences. Kansas City has focused on animal health, and traditionally 

has had expertise in the areas of livestock and animal sciences. While Kansas City 

itself does not have any animal health research centers, the larger region incorporates top-tier veterinary schools at the University of Missouri, the University of 

Kansas, and Kansas State University. Both cities now are in the early stages of developing more comprehensive entrepreneurial support systems for their respective 

focus areas. 

Some of the world’s leading agribusiness, chemical, and farming companies are located in the heartland: Dow Chemicals, an American multinational chemical corporation headquartered in Midland, Michigan; Monsanto, the world’s largest seed 

comp agricultural biotechnology corporation headquartered in Creve Coeur, Missouri; Deere & Company, commonly known by its brand name John Deere, one of 

the world’s largest manufacturers of agricultural machinery, based in Moline, Illinois; the Archer Daniels Midland Company, an American global food-processing and 

commodities-trading corporation, headquartered in Decatur, Illinois; Cargill, an 

international producer and marketer of food, agricultural and industrial products 


0211KAUF24.eps
80 

and services, based in Minneapolis; And Procter & Gamble, a multinational consumer goods company headquartered in Cincinnati. These are just a few of the leaders in the agricultural and food spaces, and with their combined forces, they can 

make a real difference in the amalgamation of clean energy, sustainable agricultural 

practices and productivity, and advances in new technology. These large players 

have the potential to create the right ecosystem and inspire new startups in their 

communities. 

Many of the developing nations look up to the U.S. heartland in terms of advances 

in farming technologies and mechanization of their agriculture sectors. AgTech entrepreneurs and innovators can get a head start by incubating in close proximity 

to these advanced companies. Similar to the technology prowess of Silicon Valley, 

the financial leadership of New York, or the entertainment hub of Los Angeles, 

American’s heartland has the right ingredients to be a powerhouse in the agriculture technology space. 

VI. Recommendations 

We conclude this paper with five major recommendations: 

1. Educate and promote the opportunities provided by AgTech. 

2. Build and support regional AgTech innovation support systems with 

‘‘agripreneur’’ champions. 

3. Enable the transition to new technology around the theme of ‘‘Green and Lean 

Efficiency.’’ 

4. Engage nonpartisan groups. 

5. Develop human capital to meet the needs of tomorrow. 

1) Educate and promote the need and opportunity for AgTech and sustainable agriculture. 

For entrepreneurs to build AgTech companies, for investors to direct capital to 

AgTech ventures, and for public officials to promote AgTech development through 

public policy, they first must know that AgTech exists. They must learn about the 

major challenges of meeting rising global demand for ag products while staying 

within the planetary boundaries. And they must realize how the United States, and 

in particular the heartland, can play a hugely constructive role in moving AgTech 

forward. 

2) Build and support regional AgTech entrepreneur support systems with 

‘‘agripreneur’’ champions. 

Two sets of factors will be needed to create an AgTech entrepreneur–friendly culture. The first factors needed are social relationships and a collaborative culture, 

which we believe to be the most essential elements in building an effective entrepreneur support system. The support system should be led by an AgTech entrepreneur champion. This person must serve selflessly for the benefit of the whole, 

contributing countless hours toward building a system that will help others succeed. 

The champion must have deep expertise in the area of entrepreneurial activity, but 

must be willing to set aside his or her ego and let others take credit. Such a champion will create a collaborative, grassroots entrepreneurial culture. As this culture 

matures, deal quality and volume will grow naturally, creating a scalable culture 

with many investment opportunities. For AgTech, such a champion must be an 

‘‘agripreneur,’’ someone completely immersed in the agriculture system across the 

complete value chain and with deep entrepreneurial experience in agricultural innovation. 

Regional agripreneur champions should be consciously and regularly (at least 

quarterly) connected across regions. The purpose should be to enhance the overall 

network, and the goal to share ideas about how individual regions are developing 

and supporting entrepreneurs. As the collective support systems gain momentum, 

entrepreneurial activity and needed innovations will blossom. Thus, agripreneurs 

will attract and develop more agripreneurs. 

The second set of factors that needs to be created relates to economic development 

items. These include infrastructure and capital formation. Some of these assets already exist in the some regions and more will be needed as the AgTech entrepreneur culture grows and scales. Economic development investments usually are 

made regionally and should be guided by direct feedback from agripreneurs. 

‘‘Agripreneur’’ champions particularly are needed in the heartland, where the culture of entrepreneurship and collaboration is not as strong as on the coasts. There 

already are many AgTech startups in the heartland: in the Cultivian dataset, 305 

companies out of the 800 full companies represented in the database were 

81 

headquartered in the heartland, and 200 were located in the ‘‘corn belt’’ subregion 

(Iowa, Illinois, Indiana, Missouri, and Ohio). 

Figure 25. Map showing the number of AgTech startups per state in the Cultivian dataset. 

Figure 25 displays the number of AgTech startups in each state, which shows 

that, overall, AgTech entrepreneurial activity is higher in the heartland than in any 

other U.S. geographic region. The challenge is that most of this activity appears to 

be separate or confined by state boundaries. Agripreneur champions will unite the 

independent startup efforts of AgTech ventures into a movement, and hopefully 

someday will develop a ‘‘Silicon Valley of AgTech’’ in the American heartland. 

3) Enable the transition to new technology around the theme of ‘‘Green and Lean Efficiency.’’ 

The term Green Revolution was coined in 1968 to indicate revolutionary improvements in crop yield in several Asian countries. Many of these improvements came 

at the cost of adverse environmental effects in areas subjected to intensive farming. 

However, where population pressure is high, there is no option except to produce 

more food. Productivity must increase, but in ways which are environmentally safe, 

economically viable, and socially sustainable. This has been christened an ‘‘evergreen revolution.’’ 

We are shifting from scale-driven efficiency to ‘‘green and lean’’ efficiency. After 

sixty years of chemical control, farming now is entering an era of responsible, transparent, and ecological control, driven in part by consumer demand. AgTech is at the 

cusp of a new revolution in which innovations in seeds, nutrition, protection, and 

agronomics are merging. Experts have pointed to similarities with the IT field, in 

which leading players have embraced convergence and interdependence in Internet 

search, cloud storage, smartphones, tablets, and PCs, and still carve out their own 

space to effectively compete. AgTech must go through a similar revolution wherein 

players will unite to implement state-of-the-art developments in crop nutrition, crop 

protection, biotechnology, and agronomics, leading to integrated agricultural productivity. 

4) Engage nonpartisan groups. 

Independent, nonpartisan organizations have the unique ability to bring likeminded people and those with divergent views to the table. Having these organizations take up the cause will help further the common goal of providing nutritious 

food to a growing population in an environmentally sustainable way. They can be 

instrumental in providing connectivity to implement agri-tech best practices to 

farming communities worldwide by fostering networks in which knowledge is shared 

across communities. 

5) Develop human capital to meet the needs of tomorrow. 


0211KAUF25.eps
82 

The solutions that may be available to address the expected food and water shortages likely will require expertise in the development and application of information 

technology. This expertise currently is not broadly available within the agricultural 

community and needs to be developed through the whole continuum of our existing 

learning institutions, including high school, trade schools, community colleges, and 

higher education institutions. 

VII. Conclusion 

The task of sustainably increasing global food production is one of the monumental challenges of our time. The framework of an ‘‘evergreen revolution’’ is helpful in reminding us that, while technology has worked to produce more food in the 

past, we now must produce more food while also eliminating agriculture’s negative 

environmental. A successful evergreen revolution will require many actors, but in 

particular, it will require entrepreneurs who are passionate about promoting innovation and investment in AgTech. 

In short, our overall objectives should be to: 

• Increase awareness so that more entrepreneurs and investors can seize this opportunity while helping meet this most basic societal need 

• Foster vital communities of AgTech activity across the world focused on ‘‘Lean 

and Green’’ theme based on unique assets and core competency of each region 

• Enable strong networks across communities so that ideas and solutions can flow 

seamlessly for the benefit of all 

• Develop strong educational pillars so that talent and skills are up to par to the 

challenge at hand. 

VIII. Acknowledgements 

This white paper would not have been possible without the help of many persons 

in so many ways. It is the product of tireless dedication, systematic research, constant guidance, and invaluable support rendered by the following people. 

At the outset, Sam Fiorello, chief operating officer of the Danforth Center for 

Plant Science, convincingly identified an opportunity in regard to the research 

paper, persuaded me to get engaged, agreed to co-sponsor it, and provided thoughtful and invaluable guidance on a regular basis. The germination of this idea for a 

white paper came from Spencer Maughan, vice president of Venrock Associates in 

Palo Alto, California. If not for their vision and conviction, the paper would not have 

been brought to fruition in the first place. 

We owe profound gratitude to Adam Hasz, our talented research fellow, who has 

worked tirelessly and made tremendous research contributions in shaping the foundation of this paper. Without his ingenuity, intellect, passion, commitment, and diligent efforts, we would not have been able to successfully produce this thought-provoking document. 

I must express my deepest appreciation and thanks to Ken Harrington, managing 

director of the Skandalaris Center at Washington University in St. Louis, for his 

able guidance, many constructive suggestions, and unwavering support since the inception of this research project and through its completion. 

In addition, I would like to thank Joseph Cornelius, PhD, for his technical guidance and expertise in global agricultural production systems and sustainability that 

contributed greatly to this paper. 

Special thanks are extended to Andy Ziolkowski and Ron Meeusen from Cultivian 

Ventures for advice on the research paper approach and for providing access to valuable data that critically facilitated this paper. We also wish to express our sincere 

thanks to Nandini Taneja, program associate of LARTA, for her contribution in compiling the LARTA data set. 

I would like to acknowledge Jason Hall, former director of the Missouri Department of Economic Development, who provided valuable information on the current 

AgTech activities in Missouri. Also, I would like to thank Kim Young, vice president 

of the Kansas City Area Development Council, who provided insights on animal 

health investment activities in greater Kansas City. On the same note, I would like 

to express my thanks to Tom Overbay, partner at Expedite Animal Health, who patiently provided a detailed overview of the animal health industry and R&D practices observed. 

Finally, I would like to express my special thanks to the Ewing Marion Kauffman 

Foundation for support and encouragement. 

SUREN G. DUTIA, 

Senior Fellow, 

Ewing Marion Kauffman Foundation. 

83 

Additional Sources 

Bernick, Jeanne. ‘‘Ag Goes Natural with Biologics,’’ Farm Journal AgWeb, June 21, 2012, 

http://www.agweb.com/article/aglgoeslnaturallwithlbiologics/. 

Blumfeld, Jenna. ‘‘New GMO-Education Site Funded by Monsanto, Dupont.’’ New Hope 360 

Blog, July 31, 2013. http://newhope360.com/blog/new-gmo-education-site-funded-monsanto-dupont. 

Budzynski, Jim. Ag Innovation Showcase. St. Louis, Missouri, September 11, 2013. 

LeClerc, Rob. ‘‘Is Agriculture the New Cleantech?’’ note from CEO of Agfunder. 

National Public Radio. ‘‘Feeding A Hotter, More Crowded Planet.’’ August 12, 2011. 

http://www.npr.org/2011/08/12/139579616/feeding-a-hotter-more-crowded-planet. 

http://evergreen-revolution.tripod.com/evergreenrevoldefined.html 

AGRICULTURE GETS SMART: THE RISE OF DATA AND ROBOTICS


0211ROBO1.eps
84 


0211ROBO2.eps
85 


0211ROBO3.eps
86 


0211ROBO4.eps
87 


0211ROBO5.eps
88 


0211ROBO6.eps
89 

The CHAIRMAN. Thank you, Mr. Donny. 

Mr. Thierer? 

STATEMENT OF ADAM D. THIERER, 

SENIOR RESEARCH FELLOW, MERCATUS CENTER, 

GEORGE MASON UNIVERSITY 

Mr. THIERER. Mr. Chairman and members of the Committee, 

thank you for inviting me here today to comment on the policy implications of the Internet of Things. My name is Adam Thierer, and 

I am a Senior Research Fellow at the Mercatus Center at George 

Mason University where I study technology policy. 

My message here today is condensed from a recent book, as well 

as a forthcoming law review article on the Internet of Things. My 

research focuses primarily on the privacy and security implications 

associated with the Internet of Things and wearable technology in 

particular. 

The three general conclusions of my work are as follows. 

First, the Internet of Things offers compelling benefits to consumers, companies, and our country’s national competitiveness that 

will only be achieved by adopting a flexible policy regime for this 

fast-moving space. 

Second, while there are formidable privacy and security challenges associated with the Internet of Things, top-down or one-sizefits-all regulation will limit innovative opportunities. 

Third, with those two points in mind, we should seek out alternative and less costly approaches to protecting privacy and security 

that rely on education, empowerment, and targeted enforcement of 

existing legal mechanisms. Long-term privacy security and protection requires a multifaceted approach incorporating many flexible 

solutions. 

I will briefly discuss each point. 

First, the Internet of Things will benefit the ‘‘3 Cs’’ of consumers, 

companies, and our country. Consumers will benefit from more of 

their devices being networked, sensing, and communicating. It offers us more choices and convenience, especially for personal health 

and productivity. Companies will benefit from increased efficiencies 

and the ability to offer a staggering array of new product and service options to their customers. And our country will benefit by 

maintaining our global competitive advantage in the digital economy. 

The magnitude of the opportunity here is breathtaking. Technology analysts and economic consultancies have predicted economic benefits in the trillions of dollars. 

The positive effects of the Internet of Things will reverberate 

throughout every sector of the economy, and as Progressive Policy 

Institute economist Michael Mandel notes, it has the ‘‘potential to 

help revive the high-growth economy.’’ It will revolutionize manufacturing, health care, energy, transportation, retailing, and various government services. 

But if America hopes to be a global leader in the Internet of 

Things, as it has been for the Internet more generally over the past 

2 decades, then we will have to get public policy right first. 

America took a commanding lead in the digital economy because 

in the mid-1990s, Congress and the Clinton administration crafted 

90 

a nonpartisan vision for the Internet that protected permissionless 

innovation, or the idea that experimentation with new technologies 

and business models should generally be permitted without prior 

approval. 

Congress embraced permissionless innovation by passing the 

Telecom Act of 1996 and rejecting archaic analog era commandand-control regulations for this exciting new medium. 

And the Clinton administration embraced permissionless innovation with its 1997 Framework for Global Electronic Commerce, 

which outlined a clear vision for Internet governance that relied 

upon civil society, voluntary agreements, and ongoing marketplace 

negotiations. 

This nonpartisan blueprint, sketched out almost 2 decades ago 

for the Internet, is every bit as sensible today as we begin crafting 

a policy paradigm for the Internet of Things. 

Again, the first order of business is for policymakers to send a 

clear green light to entrepreneurs letting them know that our Nation’s default policy position remains ‘‘innovation allowed.’’ Second, 

we should avoid basing our policy interventions on hypothetical 

worst-case scenarios or else best-case scenarios will never come 

about. Our policy regime, therefore, should be responsive, not anticipatory. 

Of course, privacy- and security-related challenges remain that 

deserve our attention. Data is going to be moving fluidly across so 

many platforms and devices that it will be difficult to apply traditional Fair Information Practice Principles in a rigid regulatory 

fashion for every conceivable use of these technologies. 

Specifically, it will be challenging to achieve perfect notice and 

choice in a world where so many devices are capturing volumes of 

data in real time. Moreover, while data minimization remains a 

worthy goal, if it is mandated in a one-size-fits-all way, it could 

limit many life-enriching innovations. 

Law must still play a role, but we are going to need new approaches. 

Policymakers can encourage privacy and security by design for 

the Internet of Things and its developers, but these best practices 

should not be mandated as top-down controls. Flexibility is essential. 

More privacy-enhancing tools, especially robust encryption technologies, will also help, and Government officials would be wise to 

promote those tools instead of restricting them. 

Increased education is also essential, and Government should 

help get out the word about inappropriate uses of these technologies. 

Existing privacy torts and existing targeted rules, like Peeping 

Tom laws, will also likely evolve to address serious harms as they 

develop. 

Finally, the Federal Trade Commission will continue to play an 

important backstop role using its Section 5 authority to police unfair and deceptive practices. The FTC has already been remarkably 

active in encouraging companies to live up to the privacy and security promises they make to their consumers, and that will continue. 

In closing, we should never forget that no matter how disruptive 

these new technologies may be in the short term, we humans have 

91 

1 Adam Thierer, Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom (Arlington, VA: Mercatus Center at George Mason University, 2014). 2 Adam Thierer, ‘‘The Internet of Things and Wearable Technology: Addressing Privacy and 

Security Concerns without Derailing Innovation’’ (Mercatus Working Paper, Mercatus Center at 

George Mason University, Arlington, VA, November 2015), which will be published in the Richmond Journal of Law and Technology 21, no. 6 (2015), http://mercatus.org/publication/internet-things-and-wearable-technology-addressing-privacy-and-security-concerns-without. 3Michael E. Porter and James E. Heppelmann, ‘‘How Smart, Connected Products Are Transforming Competition,’’ Harvard Business Review, November 2014, https://hbr.org/2014/11/ 

how-smart-connected-products-are-transforming-competition. 

the extraordinary ability to adapt to technological change and 

bounce back from adversity. That same resilience will be true for 

the Internet of Things. 

We should remain patient and continue to embrace 

permissionless innovation to ensure that the Internet of Things 

thrives and American consumers and companies continue to be 

global leaders in the digital economy. 

Thank you. 

[The prepared statement of Mr. Thierer follows:] 

PREPARED STATEMENT OF ADAM D. THIERER, SENIOR RESEARCH FELLOW, 

MERCATUS CENTER, GEORGE MASON UNIVERSITY

Mr. Chairman and members of the Committee, thank you for inviting me here 

today to comment on the policy implications of the Internet of Things. My name is 

Adam Thierer, and I am a senior research fellow at the Mercatus Center at George 

Mason University, where I study technology policy. 

My message today is condensed from a recent book 1 and a forthcoming law review 

article 2 on the Internet of Things, which refers to a world full of ‘‘smart’’ devices 

equipped with sensing and networking capabilities. 

My research focuses primarily on the privacy and security implications of the 

Internet of Things and wearable technology. The three general conclusions of my 

work are as follows: 

1. First, the Internet of Things offers compelling benefits to consumers, companies, and our country’s national competitiveness that will only be achieved by 

adopting a flexible policy regime for this fast-moving space. 

2. Second, while there are formidable privacy and security challenges associated 

with the Internet of Things, top-down or one-size-fits-all regulation will limit 

innovative opportunities. 

3. Third, with those first two points in mind, we should seek alternative and less 

costly approaches to protecting privacy and security that rely on education, empowerment, and targeted enforcement of existing legal mechanisms. Long-term 

privacy and security protection requires a multifaceted approach incorporating 

many flexible solutions. 

I will discuss each point briefly. 

Benefits of IoT 

First, the Internet of Things will benefit the ‘‘3-Cs’’ of consumers, companies, and 

our country: 

• Consumers will benefit from more of their devices being networked, sensing, 

and communicating. The Internet of Things offers us more choices and convenience, especially for personal health and productivity. 

• Companies will benefit from increased efficiencies and the ability to offer a staggering array of new product and service options to their customers.3

• And our country will benefit by maintaining our global competitive advantage 

in the digital economy. 

92 

4 Emily Adler, ‘‘The ‘Internet of Things’ Will Soon Be a Truly Huge Market, Dwarfing All 

Other Consumer Electronics Categories,’’ Business Insider, July 10, 2014, http:// 

www.businessinsider.com/internet-of-things-will-soon-be-a-truly-huge-market-dwarfing-all-otherconsumer-electronics-categories-2014-7. 5Gil Press, ‘‘Internet of Things by the Numbers: Market Estimates and Forecasts,’’ Forbes, 

August 22, 2014, http://www.forbes.com/sites/gilpress/2014/08/22/internet-of-things-by-thenumbers-market-estimates-and-forecasts. 6Michael Mandel, ‘‘Can the Internet of Everything Bring Back the High-Growth Economy?’’ 

(Policy Memo, Progressive Policy Institute, Washington, D.C., September 2013), 9, http:// 

www.progressivepolicy.org/2013/09/can-the-internet-of-everything-bring-back-the-high-growtheconomy. (‘‘No one can predict the ultimate course of innovative technologies, but it appears that 

the Internet of Everything has the potential to help revive the high-growth economy.’’) 7 Adam Thierer, ‘‘Embracing a Culture of Permissionless Innovation’’ (Cato Online Forum, 

Cato Institute, Washington, D.C., November 2014), http://www.cato.org/publications/cato-online-forum/embracing-culture-permissionless-innovation. 8 Adam Thierer, ‘‘The Greatest of All Internet Laws Turns 15,’’ Forbes, May 8, 2011, http:// 

www.forbes.com/sites/adamthierer/2011/05/08/the-greatest-of-all-internet-laws-turns-15. 9Specifically, the Clinton framework stated that ‘‘the private sector should lead [and] the 

Internet should develop as a market driven arena not a regulated industry.’’ It also argued that 

‘‘governments should encourage industry self-regulation and private sector leadership where 

possible’’ and ‘‘avoid undue restrictions on electronic commerce.’’ White House, ‘‘The Framework 

for Global Electronic Commerce’’ (July 1997), http://clinton4.nara.gov/WH/New/Commerce. 10 Adam Thierer, ‘‘15 Years On, President Clinton’s 5 Principles for Internet Policy Remain 

the Perfect Paradigm,’’ Forbes, February 12, 2012, http://www.forbes.com/sites/adamthierer/ 

2012/02/12/15-years-on-president-clintons-5-principles-for-internet-policy-remain-the-perfect-paradigm. 11 As analysts at the Center for Data Innovation correctly argue, policymakers should only intervene to address specific, demonstrated harms. ‘‘Attempting to erect precautionary regulatory 

barriers for purely speculative concerns is not only unproductive, but it can discourage future 

beneficial applications of the Internet of Things,’’ they say. See Daniel Castro and Joshua New, 

‘‘10 Policy Principles for Unlocking the Potential of the Internet of Things,’’ Center for Data Innovation, December 4, 2014, http://www.datainnovation.org/2014/12/10-policy-principles-forunlocking-the-potential-of-the-internet-of-things. 

The magnitude of this opportunity is breathtaking.4 Technology analysts and economic consultancies have predicted economic benefits in the trillions of dollars.5

The positive effects of the Internet of Things will reverberate throughout every 

sector of the economy, and as Progressive Policy Institute economist Michael Mandel 

notes, it ‘‘has the potential to help revive the high-growth economy.’’ 6 It we let it, 

it could revolutionize manufacturing, health care, energy, transportation, retailing, 

and various government services. 

Getting Policy Right 

If America hopes to be a global leader in the Internet of Things, as it has been 

for the Internet more generally over the past two decades, then we first have to get 

public policy right. 

America took a commanding lead in the digital economy because, in the mid1990s, Congress and the Clinton administration crafted a nonpartisan vision for the 

Internet that protected ‘‘permissionless innovation’’—the idea that experimentation 

with new technologies and business models should generally be permitted without 

prior approval.7

Congress embraced permissionless innovation by passing the Telecommunications 

Act of 1996 and rejecting archaic Analog Era command-and-control regulations for 

this exciting new medium.8

The Clinton administration embraced permissionless innovation with its 1997 

‘‘Framework for Global Electronic Commerce,’’ which outlined a clear vision for 

Internet governance that relied on civil society, voluntary agreements, and ongoing 

marketplace experimentation.9

This nonpartisan blueprint sketched out almost two decades ago for the Internet 

is every bit as sensible today as we begin crafting a policy paradigm for the Internet 

of Things.10

Again, the first order of business is for policymakers to send a clear green light 

to entrepreneurs letting them know that our Nation’s default policy position remains ‘‘innovation allowed.’’ Second, we should avoid basing policy interventions on 

hypothetical worst-case scenarios, or else best-case scenarios will never come 

about.11 Our policy regime, therefore, should be responsive, not anticipatory. 

Flexible Solutions 

Of course, privacy-and security-related challenges exist that deserve attention. 

Data is going to be moving fluidly across so many platforms and devices that it will 

93 

12The Fair Information Practice Principles (FIPPs) traditionally include (1) notice, (2) choice, 

(3) purpose specification, (4) use limitation, and (5) data minimization. 13 Adam Thierer, ‘‘Some Initial Thoughts on the FTC Internet of Things Report,’’ Technology 

Liberation Front, January 28, 2015, http://techliberation.com/2015/01/28/some-initialthoughts-on-the-ftc-internet-of-things-report. 14 Adam Thierer, ‘‘Striking a Sensible Balance on the Internet of Things and Privacy,’’ Technology Liberation Front, January 16, 2015, http://techliberation.com/2015/01/16/striking-asensible-balance-on-the-internet-of-things-and-privacy. See also Adam Thierer, ‘‘Muddling 

Through: How We Learn to Cope with Technological Change,’’ Medium, June 30, 2014, https:// 

medium.com/tech-liberation/muddling-through-how-we-learn-to-cope-with-technological-change6282d0d342a6. 15 Adam Thierer, ‘‘Muddling Through: How We Learn to Cope with Technological Change,’’ 

Medium, June 30, 2014, https://medium.com/tech-liberation/muddling-through-how-we-learnto-cope-with-technological-change-6282d0d342a6. 

be difficult to apply traditional Fair Information Practice Principles 12 in a rigid regulatory fashion for every conceivable use of these technologies.13

Specifically, it will be challenging to achieve perfect ‘‘notice and choice’’ in a world 

where so many devices are capturing volumes of data in real time. Moreover, while 

‘‘data minimization’’ remains a worthy goal, if it is mandated in a one-size-fits-all 

fashion, it could limit many life-enriching innovations. 

Law will still play a role, but we’re going to need new approaches. 

• Policymakers can encourage privacy and security ‘‘by design’’ for Internet of 

Things developers, but those best practices should not be mandated as top-down 

controls. Flexibility is essential.14

• More privacy-enhancing tools—especially robust encryption technologies—will 

also help, and government officials would be wise to promote these tools instead 

of restricting them. 

• Increased education is also essential, and governments can help get the word 

out about inappropriate uses of these technologies. 

• Existing privacy torts and existing targeted rules (such as ‘‘Peeping Tom’’ laws) 

will also likely evolve to address serious harms as they develop. 

• Finally, the Federal Trade Commission will continue to play an important backstop role, using its Section 5 authority to police ‘‘unfair and deceptive’’ practices. 

The commission has already been remarkably active in encouraging companies 

to live up to the privacy and security promises they make to their consumers, 

and that will continue. 

Conclusion: We Can Adapt 

In closing, we should also never forget that, no matter how disruptive these new 

technologies may be in the short term, we humans have an extraordinary ability 

to adapt to technological change and bounce back from adversity.15 That same resilience will be true for the Internet of Things. 

We should remain patient and continue to embrace permissionless innovation to 

ensure that the Internet of Things thrives and American consumers and companies 

continue to be global leaders in the digital economy. 

Appendices to Testimony of Adam Thierer 

1. Selected Readings from Adam Thierer on the Internet of Things 

2. What Is the Internet of Things? 

3. Projected Use and Economic Impact of the Internet of Things 

4. A Nonpartisan Policy Vision for the Internet of Things 

5. Some Initial Thoughts on the FTC Internet of Things Report 

6. Why ‘‘Permissionless Innovation’’ Matters 

7. How We Adapt to Technological Change 

94 

16This section adapted from Adam Thierer, ‘‘The Internet of Things and Wearable Technology: 

Addressing Privacy and Security Concerns without Derailing Innovation’’ (Mercatus Working 

Paper, Mercatus Center at George Mason University, Arlington, VA, November 2015), which 

will be published in the Richmond Journal of Law and Technology 21, no. 6 (2015), http:// 

mercatus.org/publication/internet-things-and-wearable-technology-addressing-privacy-and-security-concerns-without. 

APPENDIX 1: SELECTED READINGS FROM ADAM THIERER ON THE INTERNET OF THINGS

law review article: ‘‘The Internet of Things and Wearable Technology Addressing 

Privacy and Security Concerns without Derailing Innovation,’’ forthcoming, Richmond Journal of Law & Technology, Vol. 21, No. 6, (2015), http://papers.ssrn.com/ 

sol3/papers.cfm?abstractlid=2494382. 

essay: ‘‘A Nonpartisan Policy Vision for the Internet of Things,’’ Technology Liberation Front, December 11, 2014, http://techliberation.com/2014/12/11/a-nonpartisan-policy-vision-for-the-internet-of-things. 

essay: ‘‘Some Initial Thoughts on the FTC Internet of Things Report,’’ Technology 

Liberation Front, January 28, 2015, http://techliberation.com/2015/01/28/someinitial-thoughts-on-the-ftc-internet-of-things-report. 

essay: ‘‘Striking a Sensible Balance on the Internet of Things and Privacy,’’ Technology Liberation Front, January 16, 2015, http://techliberation.com/2015/01/16/ 

striking-a-sensible-balance-on-the-internet-of-things-and-privacy. 

slide presentation: ‘‘Policy Issues Surrounding the Internet of Things & Wearable 

Technology,’’ September 12, 2014, http://techliberation.com/2014/09/12/slide-presentation-policy-issues-surrounding-the-internet-of-things-wearable-technology. 

essay: ‘‘CES 2014 Report: The Internet of Things Arrives, but Will Washington 

Welcome It?’’ Technology Liberation Front, January 8, 2014, http://techli 

beration.com/2014/01/08/ces-2014-report-the-internet-of-things-arrives-but-willwashington-welcome-it. 

essay: ‘‘The Growing Conflict of Visions over the Internet of Things & Privacy,’’ 

Technology Liberation Front, January 14, 2014, http://techliberation.com/2014/01/ 

14/the-growing-conflict-of-visions-over-the-internet-of-things-privacy. 

op-ed: ‘‘Can We Adapt to the Internet of Things?’’ IAPP Privacy Perspectives, 

June 19, 2013, https://privacyassociation.org/news/a/can-we-adapt-to-the-internetof-things. 

agency filing: My Filing to the FTC in its ‘Internet of Things’ Proceeding, May 31, 

2013, http://techliberation.com/2013/05/31/my-filing-to-the-ftc-in-its-internet-ofthings-proceeding. 

book: Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom (Arlington, VA: Mercatus Center at George Mason University, 

2014), http://mercatus.org/permissionless/permissionlessinnovation.html. 

essay: ‘‘What’s at Stake with the FTC’s Internet of Things Workshop,’’ Technology 

Liberation Front, November 18, 2013, http://techliberation.com/2013/11/18/whatsat-stake-with-the-ftcs-internet-of-things-workshop. 

law review article: ‘‘Removing Roadblocks to Intelligent Vehicles and Driverless 

Cars,’’ forthcoming, Wake Forest Journal of Law & Policy (2015), http://papers.ssrn.com/sol3/papers.cfm?abstractlid=2496929. 

APPENDIX 2: WHAT IS THE INTERNET OF THINGS? 16

Many of the underlying drivers of the Internet and Information Age revolution— 

massive increases in processing power, exploding storage capacity, steady miniaturization of computing and cameras, ubiquitous wireless communications and networking capabilities, digitization of all data, and massive datasets (or ‘‘big data’’)— 

are beginning to have a profound influence beyond the confines of cyberspace. It is 

cheaper than ever, for example, to integrate a microchip, a sensor, a camera, and 

even an accelerometer into devices today. ‘‘Thanks to advances in circuits and software,’’ observe Neil Gershenfeld and J. P. Vasseur, ‘‘it is now possible to make a 

Web server that fits on (or in) a fingertip for $1.’’ As costs continue to fall and these 

technologies are increasingly embedded into almost all devices that consumers own 

and come into contact with, a truly ‘‘seamless web’’ of connectivity and ‘‘pervasive 

computing’’ will exist. 

As a result of these factors, mundane appliances and other machines and devices 

that consumers have long taken for granted—cars, refrigerators, cooking devices, 

lights, weight scales, watches, jewelry, eyeglasses, and even their clothing—will all 

95 

17 Alex Hawkinson, ‘‘What Happens When the World Wakes Up,’’ Medium (Sept. 23, 2014), 

https://medium.com/@ahawkinson/what-happens-when-the-world-wakes-up-c73a5c931c17. 18Timothy B. Lee, ‘‘Everything’s Connected: How Tiny Computers Could Change the Way We 

Live,’’ Vox (Aug. 13, 2014), http://www.vox.com/2014/5/8/5590228/how-tiny-computers-couldchange-the-way-we-live. 19Kevin Ashton, ‘‘That ‘‘Internet of Things’’ Thing,’’ RFID Journal (June 22, 2009), http:// 

www.rfidjournal.com/articles/view?4986. 20 Ibid. 21 Amy Collins, Adam J. Fleisher, D. Reed Freeman Jr., and Alistair Maughan, ‘‘The Internet 

of Things Part 1: Brave New World,’’ Client Alert (Morrison Foerster), March 18, 2014, 1, http:// 

www.jdsupra.com/legalnews/the-internet-of-things-part-1-brave-new-23154. 22See Patrick Thibodeau, ‘‘Explained: The ABCs of the Internet of Things,’’ Computerworld, 

May 6, 2014, http://www.computerworld.com/s/article/9248058/ExplainedlThelABCslofl 

thelInternetloflThingsl. 23Steve Lohr, ‘‘A Messenger for the Internet of Things,’’ N.Y. Times Bits, April 25, 2013, 

http://bits.blogs.nytimes.com/2013/04/25/a-messenger-for-the-internet-of-things. 24 Consumer Electronics Association, Comment to the Federal Trade Commission on Internet 

of Things, Project No. P135405 (June 10, 2013), 7. 25 Ibid. 

soon be networked, sensing, automated, and communicating. In other words, consumers are transitioning to what Alex Hawkinson, CEO and founder of 

SmartThings, calls a ‘‘programmable world’’ where ‘‘things will become intuitive 

[and] connectivity will extend even further, to the items we hold most dear, to those 

things that service the everyday needs of the members of the household, and beyond.’’ 17

This so-called Internet of Things—or ‘‘machine-to-machine’’ connectivity and communications—promises to usher in ‘‘a third computing revolution’’ 18 and bring about 

profound changes that will rival the first wave of Internet innovation. The first use 

of the term Internet of Things is attributed to Kevin Ashton, who used it in the title 

of a 1999 presentation.19 A decade later, he reflected on the term and its meaning: 

If we had computers that knew everything there was to know about things— 

using data they gathered without any help from us—we would be able to track 

and count everything, and greatly reduce waste, loss, and cost. We would know 

when things needed replacing, repairing, or recalling and whether they were 

fresh or past their best. 

We need to empower computers with their own means of gathering information, 

so they can see, hear, and smell the world for themselves, in all its random 

glory. RFID [radio-frequency identification] and sensor technology enable computers to observe, identify, and understand the world—without the limitations 

of human-entered data.20

More recently, analysts with Morrison & Foerster have defined IoT as ‘‘the network of everyday physical objects which surround us and that are increasingly being 

embedded with technology to enable those objects to collect and transmit data about 

their use and surroundings.’’ 21 These low-power devices typically rely on sensor 

technologies as well as existing wireless networking systems and protocols (Wi-Fi, 

Bluetooth, near field communication, and GPS) to facilitate those objectives. In turn, 

this reliance will fuel the creation of even more ‘‘big data.’’ Many of these technologies and capabilities will eventually operate in the background of consumers’ 

lives and be almost invisible to them. 

IoT is sometimes understood as being synonymous with ‘‘smart’’ systems: smart 

homes, smart buildings, smart appliances, smart health, smart mobility, smart cities, and so on. Smart car technology is also expanding rapidly.22 The promise of IoT, 

as described by New York Times reporter Steve Lohr, is that ‘‘billions of digital devices—from smartphones to sensors in homes, cars, and machines of all kinds—will 

communicate with each other to automate tasks and make life better.’’ 23 ‘‘Consumers and public officials can use the connected world to improve energy conservation, efficiency, productivity, public safety, health, education, and more,’’ predicts 

CEA.24 ‘‘The connected devices and applications that consumers choose to adopt will 

make their lives easier, safer, healthier, less expensive, and more productive.’’ 25 In 

addition to giving consumers more control over their lives, these technologies can 

also help them free up time by automating routine tasks and chores. 

96 


0211ADAM1.eps 0211ADAM2.eps
97 

26This section compiled with the assistance of Andrea Castillo, Program Manager of the Technology Policy Program at the Mercatus Center. 27Dave Evans, ‘‘Thanks to IoE, the Next Decade Looks Positively ‘Nutty,’ ’’ Cisco Blog, February 12, 2013, http://blogs.cisco.com/ioe/thanks-to-ioe-the-next-decade-looks-positively-nutty. 28 ‘‘More Than 30 Billion Devices Will Wirelessly Connect to the Internet of Everything in 

2020’’ (Press Release, ABI Research, May 9, 2013), https://www.abiresearch.com/press/morethan-30-billion-devices-will-wirelessly-conne. 29 Antony Savvas, ‘‘Internet of Things Market Will Be Worth Almost $9 Trillion,’’ CNME, October 6, 2013, http://www.cnmeonline.com/news/internet-of-things-market-will-be-worth-almost9-trillion. 30 ‘‘Gartner Says 4.9 Billion Connected ‘Things’ Will Be in Use in 2015’’ (Press Release, 

Gartner, 2014), http://www.gartner.com/newsroom/id/2905717. 31Matt Asay, ‘‘The Internet of Things Will Need Millions of Developers by 2020,’’ ReadWrite, 

June 27, 2014, http://readwrite.com/2014/06/27/internet-of-things-developers-jobs-opportunity. 32 John Greenough, ‘‘The Enterprise Internet of Things Report: Forecasts, Industry Trends, 

Advantages, and Barriers for the Top IoT Sector,’’ Business Insider, 2014, https://intelligence.businessinsider.com/the-enterprise-internet-of-things-report-forecasts-industry-trends-advantages-and-barriers-for-the-top-iot-sector-2014–11. 33 Harbor Research, Smart Systems and the Internet of Things Forecast (2013), http:// 

harborresearch.com/wp-content/uploads/2013/08/Harbor-Researchl2013-Forecast-Reportl 

Prospectus.pdf. 34 ‘‘The Connected Life’’ (Press Release, Machina Research, 2014), https://machinaresearch 

.com/static/media/uploads/machinalresearchlpresslreleasel-lcelreportl-l2014l07l 

28.pdf. 35Smart Electric Meters, ‘‘Advanced Metering Infrastructure, and Meter Communications: 

Global Market Analysis and Forecasts,’’ Navigant Research, November 2013, http:// 

www.navigantresearch.com/research/smart-meters. 36 ‘‘Emerging Technologies: Big Data in the Connected Car’’ (Press Release, IHS Automotive, 

November 2013), http://press.ihs.com/press-release/country-industry-forecasting/big-data-drivers-seat-connected-car-technological-advance. 37Mareca Hatler, Darryl Gurganious, and Charlie Chi, ‘‘Smart Wireless Lighting,’’ ON World, 

2013, http://onworld.com/smartlighting. 

APPENDIX 3: PROJECTED USE AND ECONOMIC IMPACT OF THE INTERNET OF THINGS 26

The Internet of Things is already growing at a breakneck pace and is expected 

to continue to accelerate rapidly. Below is a summary of recent forecasts regarding 

the growing device connectivity as well as potential economic benefits of the IoT. 

A. Connectivity 

• Cisco projects that 37 billion intelligent things will be connected and communicating by 2020.27

• ABI Research estimates that there are more than 10 billion wirelessly connected 

devices in the market today and more than 30 billion devices expected by 

2020.28

• IDC (International Data Corporation) predicts far greater penetration of 212 billion devices installed globally by the end of 2020.29

• Gartner anticipates that 25 billion Internet of Things devices will be in operation by 2020.30

• VisionMobile projects that the number of IoT developers will grow from roughly 

300,000 in 2014 to more than 4.5 million by 2020.31

• Business Insider estimates that will be a total of 23.4 billion Internet of Things 

devices connected by 2019 and that their adoption will be driven by the enterprise and manufacturing sectors.32

• Harbor projects that 21.7 billion Internet of Things devices will be connected 

and in use by 2019.33

• Machina Research reports that roughly 7.2 billion ‘‘machine-to-machine connected consumer electronic devices’’ will be in global use by 2023.34

• Navigant Research states that more than 1 billion smart meters will be installed globally by 2022, up from 313 million in 2013.35

• IHS Automotive anticipates that the number of cars connected to the Internet 

will grow more than six fold from 2013 to reach 152 million internationally by 

2020.36

• ON World projects that roughly 100 million Internet-connected wireless lights 

will be in operation by 2020.37

98 

38 James Manyika, Michael Chui, Jacques Bughin, Richard Dobbs, Peter Bisson, and Alex 

Marrs, ‘‘Disruptive Technologies: Advances That Will Transform Life, Business, and the Global 

Economy,’’ McKinsey, May 2013, http://www.mckinsey.com/∼/media/McKinsey/dotcom/ 

Insights%20and%20pubs/MGI/Research/Technology%20and%20Innovation/Disruptive%20tech 

nologies/MGIlDisruptiveltechnologieslFulllreportlMay2013.ashx. 39 Antony Savvas, ‘‘Internet of Things Market Will Be Worth Almost $9 Trillion,’’ CNME, October 6, 2013, http://www.cnmeonline.com/news/internet-of-things-market-will-be-worth-almost9-trillion. 40 Joseph Bradley, Joel Barbier, and Doug Handler, ‘‘Embracing the Internet of Everything to 

Capture Your Share of $14.4 Trillion,’’ CISCO, 2013, http://www.cisco.com/web/about/ac79/ 

docs/innov/IoElEconomy.pdf. 41 John Greenough, ‘‘The Enterprise Internet of Things Report: Forecasts, Industry Trends, 

Advantages, and Barriers for the Top IoT Sector,’’ Business Insider, 2014, https://intelligence.businessinsider.com/the-enterprise-internet-of-things-report-forecasts-industry-trends-advantages-and-barriers-for-the-top-iot-sector-2014-11. 42 ‘‘Winning with the Industrial Internet of Things’’ (Positioning Paper, Accenture, 2015), 

http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Industrial-Internet-ofThings-Positioning-Paper-Report-2015.PDF. 43Peter C. Evans and Marco Annunziata, ‘‘Industrial Internet: Pushing the Boundaries of 

Minds and Machines,’’ General Electric, 2012, http://www.ge.com/docs/chapters/IndustriallInternet.pdf. 

B. Economic Impact 

• McKinsey Global Institute researchers estimate the potential economic impact 

of IoT technologies to be from $2.7 to $6.2 trillion per year by 2025.38

• IDC estimated in 2013 that this market would grow at a compound annual 

growth rate of 7.9 percent to reach $8.9 trillion by 2020.39

• Cisco analysts estimate that IoT will create $14.4 trillion in value between 2013 

and 2022.40

• Business Insider estimates that IoT will add approximately $5.6 trillion in value 

to the global economy in between 2014 and 2019.41

• Accenture estimates that the industrial IoT could add $14.2 trillion to the global 

economy by 2030, and that the U.S. economy will gain at least $6.1 trillion in 

cumulative GDP by that year.42

• General Electric projects that industrial IoT technologies will add about $15 trillion to global GDP by 2030 (in constant 2005 dollars).43


0211ADAM3.eps
99 

44 Ravi Shanker et al., ‘‘Driverless Cars: Self-Driving the New Auto Industry Paradigm’’ (Blue 

Paper, Morgan Stanley, November 6, 2013), http://www.wisburg.com/wp-content/uploads/ 

2014/09/%ef%bc%88109-pages-2014%ef%bc%89morgan-stanley-blue-paper-autonomous-cars%ef% 

bc%9a-self-driving-the-new-auto-industry-paradigm.pdf. 45This section is adapted from Adam Thierer, ‘‘A Nonpartisan Policy Vision for the Internet 

of Things,’’ Technology Liberation Front, December 11, 2014, http://techliberation.com/2014/ 

12/11/a-nonpartisan-policy-vision-for-the-internet-of-things. 

• Morgan Stanley forecasts that driverless cars will save the U.S. economy $1.3 

trillion per year once autonomous cars fully penetrate the market, while saving 

the world another $5.6 trillion a year.44

APPENDIX 4: A NONPARTISAN POLICY VISION FOR THE INTERNET OF THINGS 45

What sort of public policy vision should govern the Internet of Things? I recently 

heard three public policymakers articulate their recommended vision for the Internet of Things (IoT), and I found their approach so inspiring that I wanted to discuss 

it here in the hopes that it will become the foundation for future policy in this 

arena. On December 4, 2015, it was my pleasure to attend a Center for Data Innovation 

(CDI) event on ‘‘How Can Policymakers Help Build the Internet of Things?’’ As the 

title implied, the goal of the event was to discuss how to achieve the vision of a 

more fully connected world and, more specifically, how public policymakers can help 

facilitate that objective. It was a terrific event with many excellent panel discussions and keynote addresses. 

Two of those keynotes were delivered by Senators Deb Fischer (R-Neb.) and Kelly 

Ayotte (R–N.H.). Below I offer some highlights from their remarks and then relate 

them to the vision set forth by Federal Trade Commission (FTC) Commissioner 

Maureen K. Ohlhausen in some of her recent speeches. I will conclude by discussing 

how the Ayotte-Fischer-Ohlhausen vision can be seen as the logical extension of the 

Clinton administration’s excellent 1997 ‘‘Framework for Global Electronic Commerce,’’ which proposed a similar policy paradigm for the Internet more generally. 

This shows how crafting policy for the IoT can and should be a nonpartisan affair. 

A. Sen. Deb Fischer’s Remarks 

In her opening remarks at the CDI event in December 2014, Sen. Deb Fischer explained how ‘‘the Internet of Things can be a game changer for the U.S. economy 

and for the American consumer.’’ ‘‘It gives people more information and better tools 

to analyze data to make more informed choices,’’ she noted. 

After outlining some of the potential benefits associated with the Internet of 

Things, Sen. Fischer continued on to explain why it is essential we get public policy 

incentives right first if we hope to unlock the full potential of these new technologies. Specifically, she argued that: 

In order for Americans to receive the maximum benefits from increased 

connectivity, there are two things the government must avoid. First, policymakers can’t bury their heads in the sand and pretend this technological revolution isn’t happening, only to wake up years down the road and try to micromanage a fast-changing, dynamic industry. 

Second, the Federal Government must also avoid regulation just for the sake 

of regulation. We need thoughtful, pragmatic responses and narrow solutions to 

any policy issues that arise. For too long, the only ‘‘strategy’’ in Washington policy-making has been to react to crisis after crisis. We should dive into what this 

means for U.S. global competitiveness, consumer welfare, and economic opportunity before the public policy challenges overwhelm us, before legislative and 

executive branches of government—or foreign governments—react without all 

the facts. 

Fischer concluded by noting, ‘‘It’s entirely appropriate for the U.S. government to 

think about how to modernize its regulatory frameworks, consolidate, renovate, and 

overhaul obsolete rules. We’re destined to lose to the Chinese or others if the Internet of Things is governed in the United States by rules that pre-date the VCR.’’ 

B. Sen. Kelly Ayotte’s Remarks 

Like Sen. Fischer, Ayotte similarly stressed the many economic opportunities associated with IoT technologies for both consumers and producers alike. Ayotte also 

noted that IoT is going to be a major topic for the Senate Commerce Committee. 

She said that the role of the Committee will be to ensure that the various agencies 

looking into IoT issues are not issuing ‘‘conflicting regulatory directives’’ and ‘‘that 

100 

what is being done makes sense and allows for future innovation that we can’t even 

anticipate right now.’’ Among the agencies she cited that are currently looking into 

IoT issues: FTC (privacy and security), FDA (medical device applications), FCC 

(wireless issues), FAA (commercial drones), NHTSA (intelligent vehicle technology), 

and NTIA (multi-stakeholder privacy reviews) as well as state lawmakers and regulatory agencies. 

Sen. Ayotte then explained what sort of policy framework America needed to 

adopt to ensure that the full potential of the Internet of Things could be realized. 

She framed the choice lawmakers are confronted with as follows: 

We as policymakers we can either create an environment that allows that to 

continue to grow, or one that thwarts that. To stay on the cutting edge, we need 

to make sure that our regulatory environment is conducive to fostering innovation.’’ [. . .] We’re living in the Dark Ages in the ways the some of the regulations have been framed. Companies must be properly incentivized to invest in 

the future, and government shouldn’t be a deterrent to innovation and job-creation. 

Ayotte also stressed that ‘‘technology continues to evolve so rapidly there is no 

one-size-fits-all regulatory approach’’ that can work for a dynamic environment like 

this. ‘‘If legislation drives technology, the technology will be outdated almost instantly,’’ and ‘‘that is why humility is so important,’’ she concluded. 

The better approach, she argued was to let technology evolve freely in a 

‘‘permissionless’’ fashion and then see what problems developed and then address 

them accordingly. ‘‘[A] top-down, preemptive approach is never the best policy’’ and 

will only serve to stifle innovation, she argued. ‘‘If all regulators looked with some 

humility at how technology is used and whether we need to regulate or not to regulate, I think innovation would stand to benefit.’’ 

C. FTC Commissioner Maureen K. Ohlhausen 

Fischer and Ayotte’s remarks reflect a vision for the Internet of Things that FTC 

Commissioner Maureen K. Ohlhausen has articulated in recent months. In fact, 

Sen. Ayotte specifically cited Ohlhausen in her remarks. 

Ohlhausen has actually delivered several excellent speeches on these issues and 

has become one of the leading public policy thought leaders on the Internet of 

Things in the United States today. One of her first major speeches on these issues 

was her October 2013 address entitled, ‘‘The Internet of Things and the FTC: Does 

Innovation Require Intervention?’’ In that speech, Ohlhausen noted that, ‘‘The success of the Internet has in large part been driven by the freedom to experiment with 

different business models, the best of which have survived and thrived, even in the 

face of initial unfamiliarity and unease about the impact on consumers and competitors.’’ 

She also issued a wise word of caution to her fellow regulators: 

It is . . . vital that government officials, like myself, approach new technologies 

with a dose of regulatory humility, by working hard to educate ourselves and 

others about the innovation, understand its effects on consumers and the marketplace, identify benefits and likely harms, and, if harms do arise, consider 

whether existing laws and regulations are sufficient to address them, before assuming that new rules are required. 

In this and other speeches, Ohlhausen has highlighted the various other remedies 

that already exist when things do go wrong, including FTC enforcement of ‘‘unfair 

and deceptive practices,’’ common law solutions (torts and class actions), private 

self-regulation and best practices, social pressure, and so on. 

D. The Clinton Administration Vision 

These three women have articulated what I regard as the ideal vision for fostering 

the growth of the Internet of Things. It should be noted, however, that their framework is really just an extension of the Clinton administration’s outstanding vision 

for the Internet more generally. 

In the 1997 ‘‘Framework for Global Electronic Commerce,’’ the Clinton administration outlined its approach toward the Internet and the emerging digital economy. 

As I’ve noted many times before, the framework was a succinct and bold marketoriented vision for cyberspace governance that recommended reliance upon civil society, contractual negotiations, voluntary agreements, and ongoing marketplace experiments to solve information-age problems. Specifically, it stated that ‘‘the private 

sector should lead [and] the Internet should develop as a market driven arena not 

a regulated industry.’’ ‘‘[G]overnments should encourage industry self-regulation and 

101 

46 Adam Thierer, ‘‘15 Years On, President Clinton’s 5 Principles for Internet Policy Remain 

the Perfect Paradigm,’’ Forbes, February 12, 2012, http://www.forbes.com/sites/adamthierer/ 

2012/02/12/15-years-on-president-clintons-5-principles-for-internet-policy-remain-the-perfect-paradigm. 47This section is adapted from Adam Thierer, ‘‘Some Initial Thoughts on the FTC Internet 

of Things Report,’’ Technology Liberation Front, January 28, 2015, http://techliberation.com/ 

2015/01/28/some-initial-thoughts-on-the-ftc-internet-of-things-report. 

private sector leadership where possible’’ and ‘‘avoid undue restrictions on electronic 

commerce.’’ 

Sen. Ayotte specifically cited those Clinton principles in her speech and said, ‘‘I 

think those words, given twenty years ago at the infancy of the Internet, are today 

even more relevant as we look at the challenges and the issues that we continue 

to face as regulators and policymakers.’’ 

I completely agree. This is exactly the sort of vision that we need to keep innovation moving forward to benefit consumers and the economy, and this illustrates how 

IoT policy can be a bipartisan effort. 

Why does this matter so much? As I noted in this essay from November 2014, 

thanks to the Clinton administration’s bold vision for the Internet: 

This policy disposition resulted in an unambiguous green light for a rising generation of creative minds who were eager to explore this new frontier for commerce and communications. . . . The result of this freedom to experiment was 

an outpouring of innovation. America’s info-tech sectors thrived thanks to 

permissionless innovation, and they still do today. An annual Booz & Company 

report on the world’s most innovative companies revealed that 9 of the top 10 

most innovative companies are based in the U.S. and that most of them are involved in computing, software, and digital technology.46

In other words, America had the policy right before and we can get the policy 

right again. Patience, flexibility, and forbearance are the key policy virtues that 

nurture an environment conducive to entrepreneurial creativity, economic progress, 

and greater consumer choice. 

Other policymakers should endorse the vision originally sketched out by the Clinton administration and now so eloquently embraced and extended by Sen. Fischer, 

Sen. Ayotte, and Commissioner Ohlhausen. This is the path forward if we hope to 

realize the full potential of the Internet of Things. 

APPENDIX 5: SOME INITIAL THOUGHTS ON THE FTC INTERNET OF THINGS REPORT 47

On January 27, 2015, the Federal Trade Commission (FTC) released its longawaited report on ‘‘The Internet of Things: Privacy and Security in a Connected 

World.’’ The 55-page report is the result of a lengthy staff exploration of the issue, 

which kicked off with an FTC workshop on the issue that was held on November 

19, 2013. 

In this essay, I will offer a few general thoughts on the FTC’s report and its overall approach to the Internet of Things and then discuss a few specific issues that 

I believe deserve further attention. 

A. Big Picture, Part 1: Should Best Practices Be Voluntary or Mandatory? 

Generally speaking, the FTC’s report contains a variety of ‘‘best practice’’ recommendations to get Internet of Things innovators to take steps to ensure greater 

privacy and security ‘‘by design’’ in their products. Most of those recommended best 

practices are sensible as general guidelines for innovators, but the really sticky 

question here continued to be this: When, if ever, should ‘‘best practices’’ become 

binding regulatory requirements? 

The FTC does a bit of a dance when answering that question. Consider how, in 

the executive summary of the report, the Commission answers the question regarding the need for additional privacy and security regulation: ‘‘Commission staff 

agrees with those commenters who stated that there is great potential for innovation in this area, and that IoT-specific legislation at this stage would be premature.’’ 

But, just a few lines later, the agency (1) ‘‘reiterates the Commission’s previous recommendation for Congress to enact strong, flexible, and technology-neutral Federal 

legislation to strengthen its existing data security enforcement tools and to provide 

notification to consumers when there is a security breach,’’ and (2) ‘‘recommends 

that Congress enact broad-based (as opposed to IoT-specific) privacy legislation.’’ 

Here and elsewhere, the agency repeatedly stresses that it is not seeking IoT-specific regulation, merely ‘‘broad-based’’ digital privacy and security legislation. 

102 

The problem is that once you understand what the IoT is all about you come to 

realize that this largely represents a distinction without a difference. The Internet 

of Things is simply the extension of the Net into everything we own or come into 

contact with. Thus, this idea that the agency is not seeking IoT-specific rule sounds 

terrific until you realize that it is actually seeking something far more sweeping— 

greater regulation of all online and digital interactions. And because ‘‘the Internet’’ 

and ‘‘the Internet of Things’’ will eventually (if they are not already) be consider 

synonymous, this notion that the agency is not proposing technology-specific regulation is really quite silly. 

Now, it remains unclear whether there exists any appetite on Capitol Hill for 

‘‘comprehensive’’ legislation of any variety, although perhaps we’ll learn more about 

that possibility when the Senate Commerce Committee hosts a hearing on these 

issues on February 11. But at least so far, ‘‘comprehensive’’ or ‘‘baseline’’ digital privacy and security bills have been non-starters. 

And that’s for good reason in my opinion: Such regulatory proposals could take 

us down the path that Europe charted in the late 1990s with onerous ‘‘data directives’’ and suffocating regulatory mandates for the IT and computing sector. The results of this experiment have been unambiguous, as I documented in congressional 

testimony in 2013. I noted there how America’s Internet sector came to be the envy 

of the world while it was hard to name any major Internet company from Europe. 

Whereas America embraced ‘‘permissionless innovation’’ and let creative minds develop one of the greatest success stories in modern history, the Europeans adopted 

a ‘‘Mother, may I?’’ regulatory approach for the digital economy. America’s more 

flexible, light-touch regulatory regime leaves more room for competition and innovation compared to Europe’s top-down regime. Digital innovation suffered over there 

while it blossomed here. 

That’s why we need to be careful about adopting the sort of ‘‘broad-based’’ regulatory regime that the FTC recommends in this and previous reports. 

B. Big Picture, Part 2: Does the FTC Really Need More Authority? 

Something else is going on in this report that has also been happening in all the 

FTC’s recent activity on digital privacy and security matters: The agency has been 

busy laying the groundwork for its own expansion. 

In this latest report, for example, the FTC argues that: 

Although the Commission currently has authority to take action against some 

IoT-related practices, it cannot mandate certain basic privacy protections. . .. 

The Commission has continued to recommend that Congress enact strong, flexible, and technology-neutral legislation to strengthen the Commission’s existing 

data security enforcement tools and require companies to notify consumers 

when there is a security breach. 

In other words, this agency wants more authority. And we are talking about 

sweeping authority here that would transcend its already sweeping authority to police ‘‘unfair and deceptive practices’’ under Section 5 of the FTC Act. Let’s be clear: 

It would be hard to craft a law that grants an agency more comprehensive and 

open-ended consumer protection authority than Section 5. The meaning of those 

terms—‘‘unfairness’’ and ‘‘deception’’—has always been a contentious matter, and at 

times the agency has abused its discretion by exploiting that ambiguity. 

Nonetheless, Section 5 remains a powerful enforcement tool for the agency and 

one that has been wielded aggressively in recently years to police digital economy 

giants and small operators alike. Generally speaking, I’m alright with most Section 

5 enforcement, especially since that sort of retrospective policing of unfair and deceptive practices is far less likely to disrupt permissionless innovation in the digital 

economy. That’s because it does not subject digital innovators to the sort of ‘‘Mother, 

may I?’’ regulatory system that European entrepreneurs face. But an expansion of 

the FTC’s authority via more ‘‘comprehensive, baseline’’ privacy and security regulatory policies threatens to convert America’s more sensible bottom-up and responsive regulatory system into the sort of innovation-killing regime we see on the other 

side of the Atlantic. 

Here’s the other thing we can’t forget when it comes to the question of what additional authority to give the FTC over privacy and security matters: The FTC is not 

the end of the enforcement story in America. Other enforcement mechanisms exist, 

including privacy torts, class action litigation, property and contract law, state enforcement agencies, and other targeted privacy statutes. I’ve summarized all these 

additional enforcement mechanisms in my 2014 law review article referenced above. 

103 

C. FIPPS, Part 1: Notice and Choice vs. Use-Based Restrictions 

Let’s drill down a bit and examine some of the specific privacy and security best 

practices that the agency discusses in its new IoT report. 

The FTC report highlights how the IoT creates serious tensions for many traditional Fair Information Practice Principles (FIPPs). The FIPPs generally include (1) 

notice, (2) choice, (3) purpose specification, (4) use limitation, and (5) data minimization. But the report is mostly focused on notice and choice as well as data minimization. 

When it comes to notice and choice, the agency wants to keep hope alive that it 

will still be applicable in an IoT world. I’m sympathetic to this effort because it is 

quite sensible for all digital innovators to do their best to provide consumers with 

adequate notice about data collection practices and then give them sensible choices 

about it. Yet, like the agency, I agree that ‘‘offering notice and choice is challenging 

in the IoT because of the ubiquity of data collection and the practical obstacles to 

providing information without a user interface.’’ 

The agency has a nuanced discussion of how context matters in providing notice 

and choice for IoT, but one can’t help but think that even they must realize that 

the game is over, to some extent. The increasing miniaturization of IoT devices and 

the ease with which they suck up data means that traditional approaches to notice 

and choice just aren’t going to work all that well going forward. It is almost impossible to envision how a rigid application of traditional notice and choice procedures 

would work in practice for the IoT. 

Relatedly, as I wrote in January 2015, the Future of Privacy Forum (FPF) released a white paper entitled, ‘‘A Practical Privacy Paradigm for Wearables,’’ that 

notes how FIPPs ‘‘are a valuable set of high-level guidelines for promoting privacy, 

[but] given the nature of the technologies involved, traditional implementations of 

the FIPPs may not always be practical as the Internet of Things matures.’’ That’s 

particularly true of the notice and choice FIPPS. 

But the FTC isn’t quite ready to throw in the towel and make the complete move 

toward ‘‘use-based restrictions,’’ as many academics have. Use-based restrictions 

would focus on specific uses of data that are particularly sensitive and for which 

there is widespread agreement they should be limited or disallowed altogether. But 

use-based restrictions are, ironically, controversial from both the perspective of industry and privacy advocates (albeit for different reasons, obviously). 

The FTC doesn’t really know where to go next with use-based restrictions. The 

agency says that, on one hand, ‘‘has incorporated certain elements of the use-based 

model into its approach’’ to enforcement in the past. On the other hand, the agency 

says it has concerns ‘‘about adopting a pure use-based model for the Internet of 

Things,’’ since it may not go far enough in addressing the growth of more widespread data collection, especially of more sensitive information. 

In sum, the agency appears to be keeping the door open on this front and hoping 

that a best-of-all-worlds solution miraculously emerges that extends both notice and 

choice and use-based limitations as the IoT expands. But the agency’s new report 

doesn’t give us any sort of blueprint for how that might work, and that’s likely for 

good reason: because it probably won’t work at that well in practice, and there will 

be serious costs in terms of lost innovation if they try to force unworkable solutions 

on this rapidly evolving marketplace. 

D. FIPPS, Part 2: Data Minimization 

The biggest policy fight that is likely to come out of this report involves the agency’s push for data minimization. To minimize the risks associated with excessive 

data collection, the report recommends that: 

Companies should examine their data practices and business needs and develop 

policies and practices that impose reasonable limits on the collection and retention of consumer data. However, recognizing the need to balance future, beneficial uses of data with privacy protection, staff’s recommendation on data minimization is a flexible one that gives companies many options. They can decide 

not to collect data at all; collect only the fields of data necessary to the product 

or service being offered; collect data that is less sensitive; or deidentify the data 

they collect. If a company determines that none of these options will fulfill its 

business goals, it can seek consumers’ consent for collecting additional, unexpected categories of data. 

This is an unsurprising recommendation in light of the fact that, in previous 

major speeches on the issue, FTC Chairwoman Edith Ramirez argued that ‘‘information that is not collected in the first place can’t be misused’’ and that: 

104 

The indiscriminate collection of data violates the First Commandment of data 

hygiene: Thou shall not collect and hold onto personal information unnecessary 

to an identified purpose. Keeping data on the off chance that it might prove useful is not consistent with privacy best practices. And remember, not all data is 

created equally. Just as there is low quality iron ore and coal, there is low quality, unreliable data. And old data is of little value. 

In my forthcoming law review article, I discussed the problem with such reasoning 

at length and note: 

If Chairwoman Ramirez’s approach to a preemptive data use ‘‘commandment’’ 

were enshrined into a law that said, ‘‘Thou shall not collect and hold onto personal information unnecessary to an identified purpose.’’ Such a precautionary 

limitation would certainly satisfy her desire to avoid hypothetical worst-case 

outcomes because, as she noted, ‘‘information that is not collected in the first 

place can’t be misused,’’ but it is equally true that information that is never collected may never lead to serendipitous data discoveries or new products and 

services that could offer consumers concrete benefits. ‘‘The socially beneficial 

uses of data made possible by data analytics are often not immediately evident 

to data subjects at the time of data collection,’’ notes Ken Wasch, president of 

the Software and Information Industry Association. If academics and lawmakers succeed in imposing such precautionary rules on the development of IoT 

and wearable technologies, many important innovations may never see the light 

of day. 

FTC Commissioner Josh Wright issued a dissenting statement to the report that 

lambasted the staff for not conducting more robust cost-benefit analysis of the new 

proposed restrictions and specifically cited how problematic the agency’s approach 

to data minimization was. ‘‘[S]taff merely acknowledges it would potentially curtail 

innovative uses of data . . . [w]ithout providing any sense of the magnitude of the 

costs to consumers of foregoing this innovation or of the benefits to consumers of 

data minimization,’’ he says. Similarly, in her separate statement, FTC Commissioner Maureen K. Ohlhausen worried about the report’s overly precautionary approach on data minimization when noting that, ‘‘without examining costs or benefits, [the staff report] encourages companies to delete valuable data—primarily to 

avoid hypothetical future harms. Even though the report recognizes the need for 

flexibility for companies weighing whether and what data to retain, the recommendation remains overly prescriptive,’’ she concludes. 

Regardless, the battle lines have been drawn by the FTC staff report as the agency has made it clear that it will be stepping up its efforts to get IoT innovators to 

significantly slow or scale back their data collection efforts. It will be very interesting to see how the agency enforces that vision going forward and how it impacts 

innovation in this space. All I know is that the agency has not conducted a serious 

evaluation here of the trade-offs associated with such restrictions. I penned another 

law review article in 2014 offering ‘‘A Framework for Benefit-Cost Analysis in Digital Privacy Debates’’ that they could use to begin that process if they wanted to get 

serious about it. 

E. The Problem with the ‘‘Regulation Builds Trust’’ Argument 

One of the interesting things about this and previous FTC reports on privacy and 

security matters is how often the agency premises the case for expanded regulation 

on ‘‘building trust.’’ The argument goes something like this (as found on page 51 

of the new IoT report): ‘‘Staff believes such legislation will help build trust in new 

technologies that rely on consumer data, such as the IoT. Consumers are more likely 

to buy connected devices if they feel that their information is adequately protected.’’ 

This is one of those commonly-heard claims that sounds so straight-forward and 

intuitive that few dare question it. But there are problems with the logic of the weneed-regulation-to-build-trust-and-boost-adoption arguments we often hear in debates over digital privacy. 

First, the agency bases its argument mostly on polling data. ‘‘Surveys also show 

that consumers are more likely to trust companies that provide them with transparency and choices,’’ the report says. Well, of course surveys say that! It’s only logical that consumers will say this, just as they will always say they value privacy 

and security more generally when asked. You might as well ask people if they love 

their mothers! 

What consumers claim to care about and what they actually do in the real-world 

are often two very different things. In the real-world, people balance privacy and 

security alongside many other values, including choice, convenience, cost, and more. 

This leads to the so-called ‘‘privacy paradox,’’ or the problem of many people saying 

one thing and doing quite another when it comes to privacy matters. Put simply, 

105 

people take some risks, including some privacy and security risks, to reap other rewards or benefits. (See this essay for more on the problem with most privacy polls.) 

Second, online activity and the Internet of Things are both growing like 

gangbusters despite the privacy and security concerns that the FTC raises. Virtually 

every metric I’ve looked at that track IoT activity show astonishing growth and 

product adoption, and projections by all the major consultancies that have studied 

this consistently predict the continued rapid growth of IoT activity. Now, how can 

this be the case if, as the FTC claims, we’ll only see the IoT really take off after 

we get more regulation aimed at bolstering consumer trust? Of course, the agency 

might argue that the IoT will grow at an even faster clip than it is right now, but 

there is no way to prove one way or the other. In any event, the agency cannot possible claim that the IoT isn’t already growing at a very healthy clip. Indeed, a lot 

of the hand-wringing the staff engages in throughout the report is premised precisely on the fact that the IoT is exploding faster that our ability to keep up with 

it. In reality, it seems far more likely that cost and complexity are the bigger impediments to faster IoT adoption, just as cost and complexity have always been the 

factors weighing most heavily on the adoption of other digital technologies. 

Third, let’s say that the FTC is correct—and it is—when it says that a certain 

amount of trust is needed in terms of IoT privacy and security before consumers 

are willing to use more of these devices and services in their everyday lives. Does 

the agency imagine that IoT innovators don’t know that? Are markets and consumers completely irrational? 

The FTC says on page 44 of the report that, ‘‘If a company decides that a particular data use is beneficial and consumers disagree with that decision, this may 

erode consumer trust.’’ Well, if such a mismatch does exist, then the assumption 

should be that consumers can and will push back or seek out new and better options. And other companies should be able to sense the market opportunity here to 

offer a more privacy-centric offering for those consumers who demand it to win their 

trust and business. 

Finally, and perhaps most obviously, the problem with the argument that increased regulation will help IoT adoption is that it ignores how the regulations put 

in place to achieve greater ‘‘trust’’ might become so onerous or costly in practice that 

there won’t be as many innovations for us to adopt to begin with! Again, regulation, 

even very well-intentioned regulation, has costs and trade-offs. 

In any event, if the agency is going to premise the case for expanded privacy regulation on this notion, they are going to have to do far more to make their case besides simply asserting it. 

F. Once Again, No Appreciation of the Potential for Societal Adaptation 

Let’s briefly shift to a subject that isn’t discussed in the FTC’s new IoT report 

at all. 

Major reports and statements by public policymakers about rapidly-evolving 

emerging technologies are always initially prone to stress panic over patience. Rarely are public officials willing to step-back, take a deep breath, and consider how a 

resilient citizenry might adapt to new technologies as they gradually assimilate new 

tools into their lives. 

That is really sad, when you think about it, since humans have again and again 

proven capable of responding to technological change in creative ways by adopting 

new personal and social norms. I won’t belabor the point because I’ve already written volumes on this issue elsewhere. I tried to condense all my work into a single 

essay entitled, ‘‘Muddling Through: How We Learn to Cope with Technological 

Change.’’ Here’s the key takeaway: 

Humans have exhibited the uncanny ability to adapt to changes in their environment, bounce back from adversity, and learn to be resilient over time. A 

great deal of wisdom is born of experience, including experiences that involve 

risk and the possibility of occasional mistakes and failures while both developing new technologies and learning how to live with them. I believe it wise 

to continue to be open to new forms of innovation and technological change, not 

only because it provides breathing space for future entrepreneurialism and invention, but also because it provides an opportunity to see how societal attitudes toward new technologies evolve — and to learn from it. 

More often than not, I argue, citizens have found ways to adapt to technological 

change by employing a variety of coping mechanisms, new norms, or other creative fixes. 

Again, you almost never hear regulators or lawmakers discuss this process of individual and social adaptation even though they must know there is something to it. 

106 

One explanation is that every generation has their own techno-boogeymen and lose 

faith in the ability of humanity to adapt to it. 

To believe that we humans are resilient, adaptable creatures should not be read 

as being indifferent to the significant privacy and security challenges associated 

with any of the new technologies in our lives today, including IoT technologies. 

Overly exuberant techno-optimists are often too quick to adopt a ‘‘Just get over it!’’ 

attitude in response to the privacy and security concerns raised by others. But it 

is equally unreasonable for those who are worried about those same concerns to utterly ignore the reality of human adaptation to new technologies realities. 

G. Why are Educational Approaches Merely an Afterthought? 

One final thing that troubled me about the FTC report was the way consumer 

and business education is mostly an afterthought. This is one of the most important 

roles that the FTC can and should play in terms of explaining potential privacy and 

security vulnerabilities to the general public and product developers alike. 

Alas, the agency devotes so much ink to the more legalistic questions about how 

to address these issues, that all we end up with in the report is this one paragraph 

on consumer and business education: 

Consumers should understand how to get more information about the privacy 

of their IoT devices, how to secure their home networks that connect to IoT devices, and how to use any available privacy settings. Businesses, and in particular small businesses, would benefit from additional information about how 

to reasonably secure IoT devices. The Commission staff will develop new consumer and business education materials in this area. 

I applaud that language, and I very much hope that the agency is serious about 

plowing more effort and resources into developing new consumer and business education materials in this area. But I’m a bit surprised that the FTC report didn’t 

even bother mentioning the excellent material already available on the ‘‘On Guard 

Online’’ website that it helped create with a dozen other Federal agencies. Worse 

yet, the agency failed to highlight the many other privacy education and ‘‘digital 

citizenship’’ efforts that are underway today to help on this front. 

I hope that the agency spends a little more time working on the development of 

new consumer and business education materials in this area instead of trying to figure out how to craft a quasi-regulatory regime for the Internet of Things. As I noted 

in 2014 in this Maine Law Review article, that would be a far more productive use 

of the agency’s expertise and resources. I argued there that ‘‘policymakers can draw 

important lessons from the debate over how best to protect children from objectionable online content’’ and apply them to debates about digital privacy. Specifically, 

after a decade of searching for legalistic solutions to online safety concerns—and 

convening a half-dozen blue ribbon task forces to study the issue—we finally saw 

a rough consensus emerge that no single ‘‘silver bullet’’ technological solutions or 

legal quick-fixes would work and that, ultimately, education and empowerment represented the better use of our time and resources. What was true for child safety 

is equally true for privacy and security for the Internet of Things. 

It is a shame the FTC staff squandered the opportunity it had with this new report to highlight all the good that could be done by getting more serious about focusing first on those alternative, bottom-up, less costly, and less controversial solutions 

to these challenging problems. One day we’ll all wake up and realize that we spent 

a lost decade debating legalistic solutions that were either technically unworkable 

or politically impossible. Just imagine if all the smart people who were spending all 

their time and energy on those approaches right now were instead busy devising 

and pushing educational and empowerment-based solutions instead! 

One day we’ll get there. Sadly, if the FTC report is any indication, that day is 

still a ways off. 

107 

48This section is adapted from Adam Thierer, ‘‘Embracing a Culture of Permissionless Innovation’’ (Cato Policy Forum, Cato Institute, Washington, D.C., November 2014), http:// 

www.cato.org/publications/cato-online-forum/embracing-culture-permissionless-innovation. 49 Joel Mokyr, Lever of Riches: Technological Creativity and Economic Progress (New York: 

Oxford University Press, 1990), 8–9. 50For a listing and discussion of these and other factors, see Robert D. Atkinson, ‘‘Understanding the U.S. National Innovation System,’’ Information Technology and Innovation Foundation, June 2014, http://www.itif.org/publications/understanding-us-national-innovation-system. 51Michael Nelson, ‘‘Six Myths of Innovation Policy,’’ The European Institute, Washington, 

D.C., July 2013, http://www.europeaninstitute.org/EA-July-2013/perspectives-six-myths-of-innovation-policy.html. (‘‘On Capitol Hill and in Brussels, there seems to be a belief that if only governments adopt the right tax policies, adequately fund R&D, enforce patents and copyrights, 

and support manufacturing, innovative, then start-ups will pop up everywhere and supercharge 

economic growth. Unfortunately, that misses an underlying problem: In many parts of the U.S. 

and Europe, innovation is not really welcome. It is misunderstood and even feared.’’) 52White House, ‘‘Notice of Request for Information: Strategy for American Innovation,’’ Federal Register, July 29, 2014, https://www.federalregister.gov/articles/2014/07/29/2014-17761/ 

strategy-for-american-innovation. 53 Ibid. 54Donald J. Boudreaux, ‘‘Deirdre McCloskey and Economists’ Ideas about Ideas,’ ’’ Online Library of Liberty, July 2014, http://oll.libertyfund.org/pages/mccloskey. 55Deirdre N. McCloskey, The Bourgeois Virtues: Ethics for an Age of Commerce (Chicago: University of Chicago Press, 2006). 56Deirdre McCloskey, ‘‘Bourgeois Dignity: A Revolution in Rhetoric’’ (Cato Unbound, Cato Institute, Washington, D.C., October 4, 2010), http://www.cato-unbound.org/2010/10/04/deirdremccloskey/bourgeois-dignity-revolution-rhetoric. 57 Randall Holcombe, ‘‘Entrepreneurship and Economic Growth,’’ The Quarterly Journal of 

Austrian Economics 1, no. 2 (Summer 1998): 58, http://mises.org/journals/qjae/pdf/qjae1l 2l3.pdf, (‘‘When entrepreneurship is seen as the engine of growth, the emphasis shifts toward 

the creation of an environment within which opportunities for entrepreneurial activity are created, and successful entrepreneurship is rewarded.’’) 58Mokyr, Lever of Riches, 182. 

APPENDIX 6: WHY ‘‘PERMISSIONLESS INNOVATION’’ MATTERS 48

A. Innovation Policy: Attitudes Matter 

‘‘Why does economic growth . . . occur in some societies and not in others?’’ asked 

Joel Mokyr in his 1990 book, Lever of Riches: Technological Creativity and Economic 

Progress.49 Debate has raged among generations of economists, historians, and business theorists over that question and the specific forces and policies that prompt 

long-term growth. 

As varied as their answers have been, there was at least general agreement that 

institutional factors mattered most: it was really just a question of what mix of 

them would fuel the most growth. Those institutional factors include: government 

stability, the enforceability of contracts and property rights, tax and fiscal policies, 

trade policies, regulatory factors, labor costs, educational policies, research and development expenditures, infrastructure, demographics, and environmental factors.50

This leads many scholars and policymakers to speak of innovation policy as if it 

is simply a Goldilocks-like formula that entails tweaking various policy dials to get 

innovation just right.51 Such thinking animates the Obama administration’s ‘‘Strategy for American Innovation,’’ which catalogs ‘‘policies to promote critical components of the American innovation ecosystem.’’ 52 The White House claims its strategy plays a ‘‘critical role in guiding the development of new policy initiatives that 

can help unleash the transformative innovation that leads to long-term economic 

growth.’’ 53

Unfortunately, far less attention has been paid to the role that values—cultural 

attitudes, social norms, and political pronouncements—play in influencing opportunities for entrepreneurialism, innovation, and long-term growth.54 Does a socio-political system respect what Deirdre McCloskey refers to as the ‘‘bourgeois virtues’’ that 

incentivize invention and propel an economy forward? 55 ‘‘A big change in the common opinion about markets and innovation,’’ she has argued, ‘‘caused the Industrial 

Revolution, and then the modern world. . . . The result was modern economic 

growth.’’ 56

There are limits to how much policymakers can influence these attitudes and values, of course. Nonetheless, to the extent they hope to foster the positive factors that 

give rise to expanded entrepreneurial opportunities, policymakers should appreciate 

how growth-oriented innovation policy begins with the proper policy disposition.57

As Mokyr notes, ‘‘technological progress requires above all tolerance toward the unfamiliar and the eccentric.’’ 58

For innovation and growth to blossom, entrepreneurs need a clear green light 

from policymakers that signals a general acceptance of risk-taking, especially risktaking that challenges existing business models and traditional ways of doing 

108 

59Mokyr, Lever of Riches, 12 (‘‘Economic and social institutions have to encourage potential 

innovators by presenting them with the right incentive structure.’’); Bret Swanson, ‘‘More disruption, please,’’ TechPolicyDaily, August 20, 2014, http://www.techpolicydaily.com/technology/ 

disruption-please/#sthash.PVUNga9N.dpuf (‘‘To reignite economic growth, we need a broad commitment to an open economy and robust entrepreneurship.’’). 60Thierer, Permissionless Innovation. 61 Ibid., vii. See also Adam Thierer, ‘‘Technopanics, Threat Inflation, and the Danger of an Information Technology Precautionary Principle,’’ Minnesota Journal of Law, Science and Technology 14 (2013): 309–86, http://conservancy.umn.edu/handle/144225. 62 Indur M. Goklany, The Precautionary Principle: A Critical Appraisal of Environmental Risk 

Assessment (Washington, D.C.: Cato Institute, 2001), 3. 63 Joshua C. Hall, John Pulito, and Benjamin J. VanMetre, ‘‘Freedom and Entrepreneurship: 

New Evidence from the 50 States’’ (Mercatus Working Paper, Mercatus Center at George Mason 

University, Arlington, VA, April 17, 2012), http://mercatus.org/publication/freedom-and-entrepreneurship-new-evidence-50-states (‘‘There is a positive and statistically significant relationship 

between the level of economic freedom in a country and that country’s total entrepreneurial activity.’’) 64See Bret Swanson, ‘‘The Exponential Internet,’’ Business Horizon Quarterly (Spring 2014): 

40–47, http://www.uschamberfoundation.org/sites/default/files/article/foundation/BHQSpring12-Issue3-SwansonTheExponentialInternet.pdf. 

things.59 We can think of this disposition as ‘‘permissionless innovation.’’ If there 

was one thing every policymaker could do to help advance long-term growth, it is 

to first commit themselves to advancing this ethic and making it the lodestar for 

all their future policy pronouncements and decisions. 

B. Permissionless Innovation vs. the Precautionary Principle 

While it would seem self-evident that pro-innovation attitudes matter and that a 

general embrace of risk-taking and commercial pursuits is crucial to unlocking entrepreneurial creativity and opportunities, scholars have typically failed to put a 

name on this disposition. ‘‘Permissionless innovation’’ is a phrase of recent (but uncertain) origin that nicely summarizes that vision. Permissionless innovation refers 

to the notion that experimentation with new technologies and business models 

should generally be permitted by default.60 Unless a compelling case can be made 

that a new invention or business model will bring serious harm to individuals, innovation should be allowed to continue unabated, and problems, if they develop at all, 

can be addressed later. 

Permissionless innovation is not an absolutist position that rejects any role for 

government. Rather, it is an aspirational goal that stresses the benefit of ‘‘innovation allowed’’ as the default position to begin policy debates. It switches the burden 

of proof to those who favor preemptive regulation and asks them to explain why ongoing trial-and-error experimentation with new technologies or business models 

should be disallowed. 

This disposition stands in stark contrast to the sort of ‘‘precautionary principle’’ 

thinking that often governs policy toward emerging technologies. The precautionary 

principle refers to the belief that new innovations should be curtailed or disallowed 

until their developers can prove that they will not cause any harms to individuals, 

groups, specific entities, cultural norms, or various existing laws, norms, or traditions.61

When the precautionary principle’s ‘‘better to be safe than sorry’’ 62 approach is 

applied through preemptive constraints, opportunities for experimentation and 

entrepreneurialism are stifled. While some steps to anticipate or to control for unforeseen circumstances are sensible, going overboard with precaution forecloses opportunities and experiences that offer valuable lessons for individuals and society. 

The result is less economic and social dynamism. 

Innovation is more likely in systems that maximize breathing room for ongoing 

economic and social experimentation, evolution, and adaptation. Societies that appreciate those values—and allow them to influence both social norms and policy decisions—are likely to experience greater economic growth.63 By contrast, those that 

deride such values and adopt a more precautionary policy approach are more likely 

to discourage innovation and languish economically. 

Unlocking long-term growth opportunities, therefore, depends upon a rejection of 

precautionary principle thinking and an embrace of permissionless innovation as 

the default policy disposition. 

C. The Secret Ingredient that Powered the Information Revolution 

Consider how permissionless innovation powered the explosive growth of the 

Internet and America’s information technology sectors (computing, software, Internet services, etc.) over the past two decades. Those sectors have ushered in a generation of innovations and innovators that are now the envy of the world.64 This 

109 

65 Ibid., 46. (‘‘The entrepreneurship and investment that has sustained such fast growth for 

so long is due, in substantial part, to light-touch government policies (at least compared to other 

industries. . . . There have been mistakes, but for the most part, scientists, entrepreneurs, and 

big investors have been allowed to build new things, try new products, challenge the status quo, 

cooperate, and compete. They have also been allowed to fail.’’) See also Bret Swanson, ‘‘Long 

Live the Risk Takers,’’ Business Horizon Quarterly 8 (2013): 30, http://www.uschamber 

foundation.org/bhq/long-live-risk-takers (‘‘Failure is a core competency of capitalism and a key 

component of resilience. Wealth is about creating new ideas. New ideas can only emerge through 

experiments of science, technology, and enterprise, all of which must be capable of failure in 

order to generate newness. Failure flushes away bad ideas and points us toward good ones. The 

failures may at times harm individuals and waste resources—people lose jobs and investments 

can be lost. The larger effect, however, is to lift the economy to a higher plane of knowledge, 

efficiency, and resilience.’’) 66White House, ‘‘The Framework for Global Electronic Commerce,’’ July 1997, http:// 

clinton4.nara.gov/WH/New/Commerce. 67 Adam Thierer, ‘‘15 Years On, President Clinton’s 5 Principles for Internet Policy Remain 

the Perfect Paradigm,’’ Forbes, February 12, 2012, http://www.forbes.com/sites/adamthierer/ 

2012/02/12/15-years-on-president-clintons-5-principles-for-internet-policy-remain-the-perfect-paradigm. 68White House, ‘‘Framework for Global Electronic Commerce.’’ (The document added that, 

‘‘parties should be able to enter into legitimate agreements to buy and sell products and services 

across the Internet with minimal government involvement or intervention. . . . Where governmental involvement is needed, its aim should be to support and enforce a predictable, 

minimalist, consistent and simple legal environment for commerce.’’) 69 Ibid. 70Maureen K. Ohlhausen, ‘‘The Internet of Things and the FTC: Does Innovation Require 

Intervention?’’ Remarks before the U.S. Chamber of Commerce, Washington, D.C., October 18, 

2013, http://www.ftc.gov/speeches/ohlhausen/131008internetthingsremarks.pdf. 

happened because the default position for the digital economy was permissionless 

innovation. No one had to ask anyone for the right to develop these new technologies and platforms.65

A series of decisions and statements in the mid-1990s paved the way, beginning 

with the Clinton administration’s decision to allow commercialization of what was 

previously just the domain of government agencies and university researchers. 

Shortly thereafter, Congress passed, and President Clinton signed, the Telecommunications Act of 1996, which notably avoided regulating the Internet like earlier communications and media technologies. Later, in 1998, the Internet Tax Freedom Act was passed, which blocked governments from imposing discriminatory 

taxes on the Internet. 

Perhaps most important, in 1997, the Clinton administration’s released its 

‘‘Framework for Global Electronic Commerce,’’ outlining its approach toward the 

Internet and the emerging digital economy.66 The framework was a succinct and 

bold market-oriented vision for cyberspace governance that recommended reliance 

upon civil society, contractual negotiations, voluntary agreements, and ongoing marketplace experiments to solve information age problems.67 Specifically, it stated that 

‘‘the private sector should lead [and] the Internet should develop as a market driven 

arena not a regulated industry.’’ 68 ‘‘[G]overnments should encourage industry selfregulation and private sector leadership where possible’’ and ‘‘avoid undue restrictions on electronic commerce.’’ 69

This policy disposition resulted in an unambiguous green light for a rising generation of creative minds who were eager to explore this new frontier for commerce and 

communications. As Federal Trade Commission Commissioner Maureen K. 

Ohlhausen observes, ‘‘the success of the Internet has in large part been driven by 

the freedom to experiment with different business models, the best of which have 

survived and thrived, even in the face of initial unfamiliarity and unease about the 

impact on consumers and competitors.’’ 70

The result of this ‘‘freedom to experiment’’ was an outpouring of innovation. 

America’s info-tech sectors thrived thanks to permissionless innovation, and they 

still do today. A 2013 Booz & Company report on the world’s most innovative companies revealed that 9 of the top 10 most innovative companies are based in the 

United States and that most of them are involved in computing, software, and digital technology. 

110 

71 A study commissioned by the Direct Marketing Association, John Deighton of Harvard Business School and Peter Johnson of Columbia University found that data-driven marketing added 

$156 billion in revenue to the U.S. economy and fueled more than 675,000 jobs in 2012. See 

also John Deighton and Peter A. Johnson, ‘‘The Value of Data: Consequences for Insight, Innovation & Efficiency in the U.S. Economy,’’ Data-Driven Marketing Institute, New York, NY, 

2013, http://ddminstitute.thedma.org/#valueofdata. Major reports from economic consultancies 

Gartner and McKinsey Global Institute have also documented significant consumer benefits 

from ‘‘big data’’ across multiple sectors. See Gartner, ‘‘Gartner Says Big Data Will Drive $28 

Billion of IT Spending in 2012,’’ October 17, 2012, http://www.gartner.com/newsroom/id/ 

2200815; James Manyika, Michael Chui, Brad Brown, Jacques Bughin, Richard Dobbs, Charles 

Roxburgh, and Angela Hung Byers, ‘‘Big Data: The Next Frontier for Innovation, Competition, 

and Productivity,’’ McKinsey, May 2011, 97–106, http://www.mckinsey.com/insights/business◊technology/bigldatalthelnextlfrontierlforlinnovation. 72Lindsey, ‘‘Why Growth Is Getting Harder,’’ 14. 73 Harold Furchtgott-Roth and Jeffrey Li, ‘‘The Contribution of the Information, Communications, and Technology Sector to the Growth of U.S. Economy: 1997–2007’’ (Research Paper, Center for the Economics of the Internet, Hudson Institute, Washington, D.C., August 2014), http:// 

hudson.org/content/researchattachments/attachment/1425/m0810l2.pdf (‘‘For the years 1997– 

2002, we find the sector contributed 19 percent of measurable economic gross output growth, 

or more than 582 billion 2013 dollars. For the period 2002–2007, we find the sector contributed 

9.3 percent of gross output growth, or more than 340 billion 2013 dollars.’’) 74 Richard Florida, ‘‘The Troubling Decline of American Business Dynamism,’’ The Atlantic 

City Lab, July 31, 2014, http://www.citylab.com/work/2014/07/the-troubling-decline-of-americanbusiness-dynamism/375353. 

D. And What’s Good for the Goose . . . 

What’s even more powerful about this story is how the information technology and 

‘‘data-driven innovation’’ became the goose that laid the golden eggs for the broader 

U.S. economy.71 Brink Linsdey has noted that ‘‘economists generally agree that information technology (IT) was behind the decade of high TFP [total factor productivity] growth that ran from the mid-1990s to the mid-2000s.’’ 72 It also boosted overall economic growth during that period.73

If an embrace of permissionless innovation can unlock this sort of entrepreneurial 

energy within the information technology sectors, it can also provide a shot in the 

arm to other sectors. The rest of the economy could certainly use such a boost since 

‘‘the evidence of a real decline in business dynamism keeps stacking up.’’ 74


0211ADAM4.eps
111 

75 Ryan Decker, John Haltiwanger, Ron Jarmin, and Javier Miranda, ‘‘The Role of Entrepreneurship in U.S. Job Creation and Economic Dynamism,’’ Journal of Economic Perspectives 28, 

no. 3 (Summer 2014): 4, http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.28.3.3. 76 Robert J. Samuelson, ‘‘Where have all the entrepreneurs gone?’’ Washington Post, August 6, 

2014, http://www.washingtonpost.com/opinions/robert-samuelson-where-have-all-the-entrepre 

neurs-gone/2014/08/06/e01e7246-1d7c-11e4-82f9-2cd6fa8da5c4lstory.html. 77 Ian Hathaway and Robert E. Litan, ‘‘Declining Business Dynamism in the United States: 

A Look at States and Metros’’ (Economic Studies at Brookings, Brookings Institution, Washington, D.C., May 2014), http://www.brookings.edu/research/papers/2014/05/declining-business-dynamism-litan. 78 Ian Hathaway and Robert E. Litan, ‘‘The Other Aging of America: The Increasing Dominance of Older Firms’’ (Economic Studies at Brookings, Brookings Institution, Washington, D.C., 

July 2014), http://www.brookings.edu/research/papers/2014/07/aging-america-increasingdominance-older-firms-litan. 79Quoted in Rick Newman, ‘‘What Obama Gets Wrong about Corporate America,’’ Yahoo Finance, August 4, 2014, http://finance.yahoo.com/news/what-obama-gets-wrong-about-corporateamerica-200338595.html. 80Lindsey, ‘‘Why Growth Is Getting Harder,’’ 18. 

Recent studies ‘‘suggest that incentives for entrepreneurs to start new firms in the 

United States have diminished over time’’ 75 and that this is hurting job creation 

and productivity.76 Two recent Brookings Institution studies by Ian Hathaway and 

Robert E. Litan also documented a decline in business dynamism in the American 

economy across a broad range of sectors—including a ‘‘precipitous drop since 2006 

[that] is both noteworthy and disturbing’’ 77—as well as the increased ‘‘aging’’ of 

businesses, with the share of older firms in the U.S. economy increasing by 50 percent over the past two decades.78

Many different institutional factors affect business dynamism, especially the regulatory environment that new startups face. ‘‘If you look over time, the number of 

rules has just proliferated,’’ says Litan. ‘‘The cumulative weight of regulation—federal, state and local—is probably the most important impediment to starting a business.’’ 79 Unfortunately, many current public policies ‘‘are rife with barriers to entrepreneurship, competition, innovation, and growth,’’ notes Lindsey.80

As a result, ‘‘the regulatory environment in the United States has become less favorable to private-sector activity in recent years compared to other countries,’’ a 


0211ADAM5.eps
112 

81See also Steven Globerman and George Georgopoulos, ‘‘Regulation and the International 

Competiveness of the U.S. Economy’’ (Mercatus Working Paper, Mercatus Center at George 

Mason University, Arlington, VA, September 18, 2012), 4, http://mercatus.org/publication/regulation-and-international-competitiveness-us-economy. 82 Jason J. Fichtner and Jakina R. Debnam, ‘‘Reducing Debt and Other Measures for Improving U.S. Competitiveness’’ (Mercatus Working Paper, Mercatus Center at George Mason University, Arlington, VA, November 13, 2012), http://mercatus.org/publication/reducing-debt-andother-measures-improving-us-competitiveness (‘‘Regulations have been historically biased toward 

existing technologies and increasing regulatory burdens on new entrants to a sector. This negatively impacts growth, and increases prices for consumers.’’) 83Quoted in Robert J. Samuelson, ‘‘Where Have All the Entrepreneurs Gone?’’ Washington 

Post, August 6, 2014, http://www.washingtonpost.com/opinions/robert-samuelson-where-haveall-the-entrepreneurs-gone/2014/08/06/e01e7246-1d7c-11e4-82f9-2cd6fa8da5c4lstory.html. 84 Hathaway and Litan, ‘‘Declining Business Dynamism,’’ 1. 85 Chiara Criscuolo, Peter N. Gal, and Carlo Menon, ‘‘DynEmp: New Cross-Country Evidence 

on the Role of Young Firms in Job Creation, Growth, and Innovation,’’ Vox, May 26, 2014, 

http://www.voxeu.org/article/dynemp-new-evidence-young-firms-role-economy. 86Maureen K. Ohlhausen, ‘‘The Internet of Things and the FTC: Does Innovation Require 

Intervention?,’’ Remarks before the U.S. Chamber of Commerce, Washington, D.C., October 18, 

2013, http://www.ftc.gov/speeches/ohlhausen/131008internetthingsremarks.pdf. 87Sherzod Abdukadirov, ‘‘Evaluating Regulatory Reforms: Lessons for Future Reforms’’ 

(Mercatus Working Paper, Mercatus Center at George Mason University, Arlington, VA, May 

29, 2014), http://mercatus.org/publication/evaluating-regulatory-reforms-lessons-future-reforms; 

Joshua C. Hall and Michael Williams, ‘‘A Process for Cleaning Up Federal Regulations’’ 

(Mercatus Working Paper, Mercatus Center at George Mason University, Arlington, VA, December 20, 2012), http://mercatus.org/publication/process-cleaning-federal-regulations. 88 Richard Epstein, ‘‘Can Technological Innovation Survive Government Regulation?’’ Harvard 

Journal of Law and Public Policy 36, no. 1 (Winter 2013), http://www.harvard-jlpp.com/wpcontent/uploads/2013/01/36l1l087lEpsteinlTech.pdf (‘‘What is at stake in this area is 

nothing less than the question of how to preserve technical innovation in the face of wall-towall regulation. The prognosis is grim. Unless we reform agencies like the FDA and their procedures and operations, this country will suffer from a long-term drag on innovation that could, 

if the trend is not abated, lead to long-term mediocrity, as inventors and scientists flee our 

shores for friendlier environments. The pace of regulation is one of the central issues of our 

time.’’) 89 Adam Thierer, ‘‘Sunsetting Technology Regulation: Applying Moore’s Law to Washington,’’ 

Forbes, March 25, 2012, http://www.forbes.com/sites/adamthierer/2012/03/25/sunsetting-technology-regulation-applying-moores-law-to-washington; Patrick McLaughlin, ‘‘A Solution to the 

Old Rules vs. New Tech Problem,’’ The Hill, July 8, 2014, http://mercatus.org/expert 

lcommentary/solution-old-rules-vs-new-tech-problem. 

90See Susan E. Dudley and Jerry Brito, Regulation: A Primer, 2nd ed. (Arlington, VA: 

Mercatus Center at George Mason University, 2012). 91See Thierer, Permissionless Innovation, 74–78. 

Mercatus Center report concluded.81 This is especially true for new start-ups.82

Even if it is the case that ‘‘established firms that have the experience and resources 

to deal with [regulatory burdens],’’ Litan notes, the cumulative effect of regulations 

ends up hampering innovation by new, smaller firms.83

The reason this is important is not just because ‘‘business dynamism is inherently 

disruptive,’’ as Hathaway and Litan note, ‘‘but [that] it is also critical to long-run 

economic growth’’ since ‘‘a dynamic economy constantly forces labor and capital to 

be put to better uses.’’ 84 Thus, because economists widely acknowledge that ‘‘young 

firms are known to play a central role in job creation,’’ 85 it is especially important 

that policymakers get their signals right. 

Again, an embrace of permissionless innovation is the way out of this conundrum. 

E. Operationalizing the Vision 

Patience, flexibility, and forbearance are the key policy virtues that nurture an 

environment conducive to entrepreneurial creativity. As the FTC’s Ohlhausen argues, it is ‘‘vital that government officials. . .approach new technologies with a dose 

of regulatory humility, by working hard to educate ourselves and others about the 

innovation, understand its effects on consumers and the marketplace, identify benefits and likely harms, and, if harms do arise, consider whether existing laws and 

regulations are sufficient to address them, before assuming that new rules are required.’’ 86

Beyond its importance as an aspirational vision, permissionless innovation can 

guide policy in concrete ways, especially regulatory policies. Possible reforms include 

regulatory streamlining 87 and flexibility requirements,88 ‘‘sunsetting’’ provisions,89

better benefit-cost analysis,90 and a greater reliance on potential non-regulatory 

remedies—education, empowerment, transparency, industry self-regulation, etc.— 

before resorting to preemptive controls on new forms of innovation. Relying on common law solutions is also preferable to top-down administrative controls.91

113 

92Stanley Fischer, ‘‘The Great Recession—Moving Ahead,’’ a Conference Sponsored by the 

Swedish Ministry of Finance, Stockholm, Sweden, August 11, 2014, http://www.federal 

reserve.gov/newsevents/speech/fischer20140811a.htm. 93 Joel Mokyr, ‘‘The Next Age of Invention,’’ City Journal, Winter 2014, http://www.city-journal.org/2014/24l1linvention.html. 94 Ibid. 95 Adam Thierer, ‘‘The Debate over the Sharing Economy: Talking Points & Recommended 

Reading,’’ Technology Liberation Front, September 26, 2014, http://techliberation.com/2014/ 

09/26/the-debate-over-the-sharing-economy-talking-points-recommended-reading. 96 Adam Thierer, ‘‘Slide Presentation: Policy Issues Surrounding the Internet of Things & 

Wearable Technology,’’ Technology Liberation Front, September 12, 2014, http://techliber 

ation.com/2014/09/12/slide-presentation-policy-issues-surrounding-the-internet-of-things-wearable-technology. 97 Jerry Brito, Eli Dourado, and Adam Thierer, ‘‘Federal Aviation Administration: Unmanned 

Aircraft System Test Site Program Docket No: FAA–2013–0061’’ (Public Interest Comment, 

Mercatus Center at George Mason University, Arlington, VA, April 23, 2013), http:// 

mercatus.org/publication/federal-aviation-administration-unmanned-aircraft-system-test-siteprogram; Eli Dourado, ‘‘The Next Internet-Like Platform for Innovation? Airspace. (Think 

Drones),’’ Wired, April 23, 2013, http://www.wired.com/opinion/2013/04/then-internet-now-airspace-dont-stifle-innovation-on-the-next-great-platform; Adam Thierer, ‘‘Filing to FAA on Drones 

& ‘Model Aircraft’,’’ Technology Liberation Front, September 23, 2014, http://techliber 

ation.com/2014/09/23/filing-to-faa-on-drones-model-aircraft. 98 Adam Thierer and Ryan Hagemann, ‘‘Removing Roadblocks to Intelligent Vehicles and 

Driverless Cars’’ (Mercatus Working Paper, Mercatus Center at George Mason University, Arlington, VA, September 17, 2014), http://mercatus.org/publication/removing-roadblocks-intelligent-vehicles-and-driverless-cars. 99 Adam Thierer, ‘‘Problems with Precautionary Principle-Minded Tech Regulation & a Federal Robotics Commission,’’ Medium, September 22, 2014, https://medium.com/@AdamThierer/ 

problems-with-precautionary-principle-minded-tech-regulation-a-federal-robotics-commission-c71 

f6f20d8bd. 

F. Conclusion: Reasons for Optimism 

In sum, attitudes matter as much as institutional factors in understanding what 

drives innovation and long-term growth, and there are reasons for optimism if policymakers embrace permissionless innovation as their default policy disposition. 

Pessimists who predict permanent productivity and growth slowdown shouldn’t 

forget that ‘‘the rate of growth of productivity at the frontiers of knowledge is especially difficult to predict; and it is unwise to underestimate human ingenuity,’’ as 

Federal Reserve Vice Chairman Stanley Fischer noted in a 2014 speech.92 While ‘‘it 

is difficult to know exactly in which direction technological change will move and 

how significant it will be,’’ Joel Mokyr reminds us that, ‘‘something can be learned 

from the past, and it tells us that such pessimism is mistaken. The future of technology is likely to be bright.’’ 93 Contrary to the belief that all the ‘‘low-hanging 

fruit’’ has already been picked, Mokyr notes that ‘‘we can also plant new trees that 

will grow fruits that no one today can imagine.’’ 94

Getting the disposition right will be more important than ever with so many exciting—but potentially highly disruptive—technologies starting to emerge, including 

the ‘‘sharing economy;’’ 95 3D printing; the ‘‘Internet of Things’’ and wearable technology;96 digital medicine; virtual reality and augmented reality technologies; commercial drone services;97 autonomous vehicles;98 and various robotic technologies.99

Permissionless innovation can help spur the next great industrial revolution by 

unlocking amazing opportunities in these and other arenas, boosting long-term 

growth in the process. 

114 

100This section adapted from Adam Thierer, ‘‘The Internet of Things and Wearable Technology: Addressing Privacy and Security Concerns without Derailing Innovation’’ (Mercatus 

Working Paper, Mercatus Center at George Mason University, Arlington, VA, November 2015), 

which will be published in the Richmond Journal of Law and Technology 21, no. 6 (2015), 

http://mercatus.org/publication/internet-things-and-wearable-technology-addressing-privacyand-security-concerns-without. 101See Adam Thierer, ‘‘Technopanics, Threat Inflation, and the Danger of an Information 

Technology Precautionary Principle,’’ Minn. J. L. Sci. & Tech. 14 (2013): 309. 102 Ibid., 53–60. 103 Andrew Zolli and Ann Marie Healy, Resilience: Why Things Bounce Back (New York: 

Simon & Schuster, 2012). 104 Ibid., 7–8. 105 Ibid., 16. 106Dan Gardner, Future Babble: Why Pundits Are Hedgehogs and Foxes Know Best (New 

York: Plume, 2012), 140–1. 107 John Seely Brown and Paul Duguid, ‘‘Response to Bill Joy and the Doom-and-Gloom 

Technofuturists,’’ in Albert H. Teich, Stephen D. Nelson, Celia McEnaney, and Stephen J. Lita, 

editors, AAAS Science and Technology Policy Yearbook (Washington, D.C.: American Association 

for the Advancement of Science, 2001), 79. 108 Clive Thompson, Smarter Than You Think: How Technology Is Changing Our Minds for 

the Better (New York: Penguin, 2014), 283. 109 Joel Garreau, Radical Evolution: The Promise and Peril of Enhancing Our Minds, Our 

Bodies—and What It Means to Be Human (New York: Broadway Books, 2006), 148. 

APPENDIX 7: HOW WE ADAPT TO TECHNOLOGICAL CHANGE 100

A. From Resistance to Resiliency 

Citizen attitudes about these technologies will likely follow a cycle that has played 

out in countless other contexts. That cycle typically witnesses initial resistance, 

gradual adaptation, and then eventual assimilation of a new technology into society.101 Some citizens will begin their relationship with these new technologies in a 

defensive crouch. In the extreme, if there is enough of a backlash, the initial resistance to these technologies might take the form of a full-blown ‘‘technopanic.’’ 102

Over time, however, citizens tend to learn how to adapt to new technologies or 

at least become more resilient in the face of new challenges posed by modern technological advances. Andrew Zolli and Ann Marie Healy, authors of Resilience: Why 

Things Bounce Back, define resilience as ‘‘the capacity of a system, enterprise, or 

a person to maintain its core purpose and integrity in the face of dramatically 

changed circumstances.’’ 103 They continue: 

To improve your resilience is to enhance your ability to resist being pushed 

from your preferred valley, while expanding the range of alternatives that you 

can embrace if you need to. This is what researchers call preserving adaptive 

capacity—the ability to adapt to changed circumstances while fulfilling one’s 

core purpose—and it’s an essential skill in an age of unforeseeable disruption 

and volatility.104

Consequently, they note, ‘‘by encouraging adaptation, agility, cooperation, connectivity, and diversity, resilience-thinking can bring us to a different way of being in 

the world, and to a deeper engagement with it.’’ 105

Those who propose more precautionary solutions to challenging social problems 

often ignore this uncanny ability of individuals and institutions to ‘‘bounce back’’ 

from technological disruptions and become more resilient in the process. Part of the 

reason precautionary thinking sometimes dominates discussions about emerging 

technologies is that many people hold a deep-seated pessimism about future developments and a belief that, with enough preemptive planning, they can anticipate 

and overcome any number of hypothetical worst-case scenarios. Consequently, their 

innate tendency not only to be pessimistic but also to want greater certainty about 

the future means that ‘‘the gloom-mongers have it easy,’’ notes author Dan Gardner.106 ‘‘Their predictions are supported by our intuitive pessimism, so they feel 

right to us. And that conclusion is bolstered by our attraction to certainty.’’ 107 Clive 

Thompson, a contributor to Wired and the New York Times Magazine, also notes 

that ‘‘dystopian predictions are easy to generate’’ and ‘‘doomsaying is emotionally 

self-protective: if you complain that today’s technology is wrecking the culture, you 

can tell yourself you’re a gimlet-eyed critic who isn’t hoodwinked by high-tech trends 

and silly, popular activities like social networking. You seem like someone who has 

a richer, deeper appreciation for the past and who stands above the triviality of today’s life.’’ 108

Luckily, as science reporter Joel Garreau reminds readers, ‘‘the good news is that 

end-of-the-world predictions have been around for a very long time, and none of 

them has yet borne fruit.’’ 109 Doomsayers have a bad track record because they 

115 

110 Ibid., 95. 111 Ibid., 154. 112 Brown and Duguid, supra note 106, 79, 82, 83. 113Thierer, Permissionless Innovation, viii. 114This section was condensed from Thierer, ‘‘Technopanics.’’ 115For a discussion of the anxieties caused by photography during this time, see Robert E. 

Mensel, Kodakers Lying in Wait: Amateur Photography and the Right of Privacy in New York, 

1885–1915, Amer. Quar. 43 (March 1991): 24. 116Lawrence M. Friedman, Guarding Life’s Dark Secrets: Legal and Social Controls over Reputation, Propriety, and Privacy (Palo Alto, CA: Stanford University Press, 2007), 214. 117Samuel D. Warren and Louis D. Brandeis, ‘‘The Right to Privacy,’’ Harv. L. Rev. 4 (1890): 

193, 195. 

typically ignore how ‘‘humans shape and adapt [technology] in entirely new directions.’’ 110 ‘‘Just because the problems are increasing doesn’t mean solutions might 

not also be increasing to match them,’’ Garreau correctly notes.111

In their 2001 ‘‘Response to Doom-and-Gloom Technofuturists,’’ John Seely Brown 

and Paul Duguid note that ‘‘technological and social systems shape each other. . . . 

[They] are constantly forming and reforming new dynamic equilibriums with farreaching implications.’’ ‘‘Social and technological systems do not develop independently,’’ they continue. Rather, ‘‘the two evolve together in complex feedback loops, 

wherein each drives, restrains, and accelerates change in the other.’’ 112

This is how humans become more resilient and prosper, even in the face of sweeping technological change. Wisdom is born of experience, including experiences that 

involve risk and the possibility of occasional mistakes and failures while both developing new technologies and learning how to live with them.113 Citizens should remain open to new forms of technological change not only because doing so provides 

breathing space for future entrepreneurialism and invention, but also because it 

provides an opportunity to see how societal attitudes toward new technologies 

evolve—and to learn from that change. More often than not, citizens find creative 

ways to adapt to technological change by using a variety of coping mechanisms, new 

norms, or other creative fixes. Although some things are lost in the process, something more is typically gained, including lessons about how to deal with subsequent 

disruptions. 

Case Study: The Rise of Public Photography 

Consider the jarring impact that the rise of the camera and public photography 

had on American society in the late 1800s.114 This case study has implications for 

the debate over wearable technologies. Plenty of critics existed, and many average 

citizens were probably outraged by the spread of cameras 115 because ‘‘for the first 

time photographs of people could be taken without their permission—perhaps even 

without their knowledge,’’ notes Lawrence M. Friedman in his 2007 book, Guarding 

Life’s Dark Secrets: Legal and Social Controls over Reputation, Propriety, and Privacy.116

In fact, the most important essay ever written on privacy law, Samuel D. Warren 

and Louis D. Brandeis’s famous 1890 Harvard Law Review essay ‘‘The Right to Privacy,’’ decries the spread of public photography. The authors lament that ‘‘instantaneous photographs and newspaper enterprise have invaded the sacred precincts of 

private and domestic life’’ and claim that ‘‘numerous mechanical devices threaten 

to make good the prediction that ‘what is whispered in the closet shall be proclaimed from the house-tops.’ ’’ 117

Despite the profound disruption caused by cameras and public photography, personal norms and cultural attitudes evolved quite rapidly as cameras became a central part of the human experience. In fact, instead of shunning cameras, most people 

quickly looked to buy one. At the same time, social norms and etiquette evolved to 

address those who would use cameras in inappropriate or privacy-invasive ways. In 

other words, citizens bounced back and became more resilient in the face of technological adversity. 

Although some limited legal responses were needed to address the most egregious 

misuses of cameras, for the most part the gradual evolution of social norms, public 

pressure, and other coping mechanisms combined to solve the ‘‘problem’’ of public 

photography. In much the same way IoT and wearable technology will likely see a 

similar combination of factors at work as individuals and society slowly adjust to 

the new technological realities of the time. The public will likely develop coping 

mechanisms to deal with the new realities of a world of wearable technologies and 

become more resilient in the process. 

That being said, resiliency should not be equated with complacency or a ‘‘Just get 

over it!’’ attitude toward privacy and security issues. With time, it may very well 

be the case that people ‘‘get over’’ some of the anxieties they might hold today conVerDate Nov 24 2008 11:45 Apr 20, 2016 Jkt 075679 PO 00000 Frm 00119 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\99818.TXT JACKIE
116 

118 Adam Thierer, ‘‘Can We Adapt to the Internet of Things?,’’ Privacy Perspectives, June 19, 

2013, https://www.privacyassociation.org/privacylperspectives/post/canlweladaptltolthe 

linternetloflthings. 

cerning these new technologies, but in the short run, IoT and wearable technologies 

will create serious social tensions that deserve serious responses.118

The CHAIRMAN. Thank you, Mr. Thierer. 

Mr. Brookman? 

STATEMENT OF JUSTIN BROOKMAN, DIRECTOR, 

CONSUMER PRIVACY PROJECT, 

CENTER FOR DEMOCRACY & TECHNOLOGY 

Mr. BROOKMAN. Thank you, Chairman Thune, Ranking Member 

Nelson, members of the Committee. I very much appreciate the opportunity to testify here today. 

I am here today on behalf of the Center for Democracy & Technology. We are a digital rights advocacy group based here in D.C. 

where I head up our work on commercial data privacy. 

So let me start by saying as a consumer advocate I am extremely 

optimistic about the value of what that Internet of Things devices 

can deliver for everyday citizens. Smart cards and infrastructure 

have the capacity to save lives, reduce travel times, and reduce our 

dependence on oil. Connected medical devices have the potential to 

revolutionize health care, giving patients constant real-time data 

about their medical conditions without tethering them to a hospital 

bed or medical facility. And already today smart phones, computers, TVs mean the wealth of the world’s information is always 

at our fingertips, and on a whim, we have the ability to watch any 

movie, listen to any song, or read any book we want. 

But some consumers are nervous about the sudden proliferation 

of Internet of Things devices and worry about too much exposure 

of their personal information. If the Internet of Things is going to 

be fully realized, there are a few policy challenges we are going to 

need to confront: first, poor data security practices; second, unexpected or unwanted data collection; third, a loss of control over our 

own devices; and fourth, potential government abuse of these technologies. I am going to go through each of these concerns. 

An overarching theme is that Internet of Things products need 

to be designed with privacy and security and user empowerment in 

mind. Otherwise, the actions of a few careless actors may fundamentally stunt innovation of these incredibly powerful technologies. 

So first let us talk about data security. Unfortunately, far too 

many Internet of Things devices built today are developed with security as an afterthought. Even at this early stage, we have seen 

all sorts of IoT devices be vulnerable to attack. Home alarm systems have been hacked. Baby monitors have been hacked. Smart 

refrigerators and toasters have been hacked. Medical devices, routers, thermostats—you mentioned, Senator Markey, in the 60 Minutes report that smart vehicles may be vulnerable to attack. The 

list goes on and on. We absolutely need to find a better way to 

incentivize rigorous security practices built into products from the 

beginning because the status quo is not cutting it. 

117 

Smart devices also need to be designed to make sure that data 

collection is consistent with consumer expectations and desires. 

Again, you mentioned that Samsung has been in the news this 

week for language in its terms of service saying it had the right 

to record and send to an unnamed company any conversations you 

have around your Smart TV in order to improve its voice recognition capabilities. Now, I suspect that Samsung’s actual data collection practices are much more limited, but it is very hard for an ordinary consumer to know. And it raises a really important question. Just because a device can collect some personal data that 

might be useful one day, should it? A consumer might be okay with 

constant voice or even constant video collection going on all the 

time to make their device better; they might not. Ultimately, consumers should be empowered to make that choice and to control 

what the devices collect about them. 

Connected devices also need to be configured to allow consumers 

to use them however they want and not to artificially constrain 

their choices. As one example, Keurig, the single-cup coffeemaker, 

configured their latest smart coffee machines to only work with 

Keurig-approved coffee pods, limiting consumers’ ability to use 

their own machines to make whatever coffee they wanted. Here at 

least, the market seems to have noticed. Amazon reviews of these 

new machines are extremely critical of this feature and sales have 

fallen. I encourage Internet of Things designers to keep this case 

study in mind and make sure they are creating functionality that 

serves the consumers, the person who paid money for these products. 

And finally, we fundamentally need to reform our government access and intelligence laws to make sure that consumers trust the 

Internet of Things. Forrester Research recently released a report 

dealing with the Snowden revelations about the PRISM program 

could result in a net loss of $180 billion to the U.S. IT sector by 

2016. And that is just one program. Internet of Things devices are 

especially vulnerable to these fears. These devices have the potential to collect vast amounts of incredibly sensitive information 

about us, information that might be available without a warrant 

under the PATRIOT Act. If the Government wants access to this 

data about us, there need to be robust, due process requirements 

in place to make sure that consumers are confident that these 

databases will not be abused. At the end of the day, consumers 

need to trust the Internet of Things is working for them. 

Thank you very much, and I look forward to discussing this further. 

[The prepared statement of Mr. Brookman follows:] 

PREPARED STATEMENT OF JUSTIN BROOKMAN, DIRECTOR, CONSUMER PRIVACY, 

CENTER FOR DEMOCRACY & TECHNOLOGY

The Center for Democracy & Technology (CDT) is pleased to submit testimony to 

the Senate Committee on Commerce, Science, and Transportation for today’s hearing on the privacy and security implications of the Internet of Things (IoT). 

CDT is a non-profit, public interest organization dedicated to preserving and promoting openness, innovation, and freedom on the Internet. I currently serve as the 

Director of CDT’s Consumer Privacy Project. Our project focuses on issues surrounding consumer data, and I have previously testified before Congress on issues 

such as data breach notification legislation, commercial privacy, and cybersecurity. 

118 

1Press Release, Gartner, Gartner Says the Internet of Things Installed Base Will Grow to 26 

Billion Units By 2020 (Dec. 12, 2013), http://www.gartner.com/newsroom/id/2636073. 2Sarah Ashley O’Brien, The Tech Behind Smart Cities, CNN MONEY (Nov. 11, 2014), http:// 

money.cnn.com/gallery/technology/2014/11/11/innovative-city-tech/index.html. 3 Asymco: Smartphone penetration reaches 70 percent in the U.S., GSMARENA (Jul. 9, 2014), 

http://www.gsmarena.com/asymcolpricingldoesntlaffectlsmartphoneladoptionlinlthel 

us-news-8982.php. 4 Rachel Metz, CES 2015: The Internet of Just About Everything, MIT TECHNOLOGY REVIEW (Jan. 6, 2015), http://www.technologyreview.com/news/533941/ces-2015-the-internet-of 

-just-about-everything/. 5Florida v. Jardines, 133 S. Ct. 1409 (2013). 

The Internet of Things presents amazing opportunities for enriching citizens’ 

lives. As consumer advocates, CDT is extremely enthusiastic about the potential advances to public health, the environment, education, and quality of life that will be 

brought about by the coming wave of IoT devices. However, in order to achieve this 

enormous potential for improving the lives of Americans, these sensor-and internetenabled devices must be purposefully designed with consumer privacy and empowerment in mind. My testimony today will address four key policy areas that must be 

addressed for the Internet of Things to be fully realized: weak data security practices, unexpected and unwanted secondary data collection and use, diminishing user 

control over their own devices, and the potential for law enforcement and intelligence abuse. Companies must respond to these challenges, or user adoption of 

these valuable and even life-saving technologies will be dramatically stunted. 

I. The transformative potential of the Internet of Things 

We read about new smart technologies seemingly every day: keyless cars that you 

start with a cell phone, refrigerators that automatically order eggs when you’ve run 

out, dog collars equipped with GPS trackers, and even baby booties that monitor 

a child’s heart rate and oxygen levels. This is a remarkable time for innovation and 

growth. According to recent reports, 26 to 30 billion devices will be connected to 

wireless Internet by 2020. This means in just five years, the number of connected 

gadgets could grow to over 30 times its size in 2009.1

In addition to their cool factor, smart devices enhance healthcare, education, finance, agriculture, and a number of other fields. Connected cities are also starting 

to leverage these technologies regularly: Philadelphia has saved over $1 million by 

placing smart garbage cans around the city that alert sanitation workers when pickup is necessary; New York City plans to convert outdated public pay phones into 

free open WiFi hotspots.2

In many ways, consumers have already embraced many smart Internet of Things 

devices. Over 70 percent of Americans now own a smartphone, giving each of us access to the wealth of the world’s information at our fingertips as we go about everyday life.3 Many of us have smart TVs or smart DVD players, meaning we have access not just to what’s on TV or in our video library, but we can connect to Netflix, 

Amazon, or YouTube to watch virtually anything, or use Skype or Hangouts to call 

a loved one. In the near future, smart car technologies have the potential to dramatically reduce accidents, improve traffic flows, and reduce greenhouse gas emissions. 

Without question, IoT has real revolutionary potential. However efforts to make 

all of our things smarter raise unique consumer protection concerns. Reports of 

major electronics companies planning to connect all of its consumer devices to the 

Internet in the next five years 4 suggests the question: do consumers want everything to be smart? Is there a meaningful use case for a smart toaster? Even if there 

are incremental advantages to some connected devices, might the downsides in some 

cases outweigh the benefits? Unfortunately, some poor design decisions today are 

compromising the revolutionary potential of the Internet of Things, with the potential result that many if not most consumers will reject many of these innovations. 

Smart technologies often involve the mass collection, storing and sharing individuals’ data. While much of this is necessary and unobjectionable—the very nature 

of some devices (such as health wearables) is to track a user’s data for that user’s 

benefit—certain data practices seriously threaten individuals’ security and right to 

privacy. 

Internet of Things devices collect extremely sensitive personal information about 

us. This is especially true about IoT devices in our homes. In his majority opinion 

for Florida v. Jardines,5 Justice Scalia articulated the high level of privacy an individual is entitled to in his or her home, writing ‘‘when it comes to the Fourth 

Amendment the home is first among equals. . .At the Fourth Amendment’s ‘very 

119 

6 Id. 

7 Kyllo v. United States, 533 U.S. 27 (2001). 8Florida v. Jardines, 133 S. Ct. 1409 (2013). 9 Bruce Schneier, Security Risks of Embedded Systems, SCHNEIER ON SECURITY BLOG (Jan. 9, 

2014), https://www.schneier.com/blog/archives/2014/01/securitylrisksl9.html. 10Dan Goodin, ACLU Asks Feds to Probe Wireless Carriers over Android Security Updates, 

ARSTECHNICA, (April 17, 2013), http://arstechnica.com/security/2013/04/wireless-carriers-deceptive-and-unfair/. 11Dan Goodin, 12 million home and business routers vulnerable to critical hijacking hack, 

ARSTECHNICA, (Dec. 18, 2014), http://arstechnica.com/security/2014/12/12-million-home-andbusiness-routers-vulnerable-to-critical-hijacking-hack/; Brian Krebs, Lizard Stresser Runs on 

Hacked Home Routers, KREBSONSECURITY, (Jan. 15, 2015), http://krebsonsecurity.com/2015/ 

01/lizard-stresser-runs-on-hacked-home-routers/. 

core’ stands ‘the right of a man to retreat into his own home and there be free from 

unreason-able governmental intrusion’ ’’ 6

The Supreme Court has repeatedly held that people have heightened privacy interests in what happens within their home—even over information 7 that is technologically observable 8 by others. We have ‘‘peeping tom’’ laws to protect against private observation in the home for the same reason—just because someone has the 

means to watch what you’re doing in your home doesn’t mean they should. Our 

homes are our most personal, private spaces and we maintain this expectation even 

if we bring smart devices into our home. 

Internet of Things devices not tied to the home also have the potential to collect 

sensitive information. Certainly geolocation information—generated by several IoT 

devices—is extremely sensitive and revealing: unwanted disclosure can endanger 

one’s personal safety by letting an attacker track your physical location. Otherwise, 

geolocation can reveal other deeply personal information, such as where you worship, where you protest, and where (and with whom) you sleep at night. Other IoT 

technologies often collect sensitive information on an individual that is not immediately apparent when that person is in a public space—such as his physical or 

mental health, emotions, and preferences. 

In many cases, consumers will gladly share this information with IoT service providers in order to receive a particular service. However, in other cases, consumers 

won’t want this information collected at all. Internet of Things devices must be designed with this fact in mind, or consumers will reject these products as not worth 

the risks. 

II. There are currently insufficient security protections in place to 

regulate IoT data collection 

It is no exaggeration to say that academics have documented the security 

vulnerabilities of the Internet of Things for years. Central to some of these concerns 

is that IoT devices use embedded operation systems, where computing is implanted 

into the device itself. The computer chips that power these systems are often cheaply produced, rarely updated or patched, and highly susceptible to hacks. Users do 

not have the expertise to regularly patch the system or install system updates 

manually, nor are they typically alerted of security updates. As prominent technologist Bruce Schneier succinctly puts it, ‘‘hundreds of millions of devices that have 

been sitting on the Internet, unpatched and insecure, for the last five to ten years. 

. . . We have an incipient disaster in front of us. It’s just a matter of when.’’ 9

While some large, complex, smart IoT systems may have WiFi connections, software updates, and multiple types of functionality and interfaces, many of the more 

widely deployed IoT systems will be more modest, without such capabilities. These 

devices will be cheap, even disposable, and the incentives for the manufacturer to 

provide regular security updates will be minimal. Such incentives have failed certain elements of the smart phone market, resulting in millions of vulnerable devices 

that will remain so for the remainder of their shelf life.10 Eventually, we expect to 

see entirely new types of market events, such as product recalls, based solely on 

vulnerabilities in the network and computational interface that provide IoT-like 

communication services. Otherwise, many of these devices and systems may never 

be updated in their after-market environment, and home networks and IoT-capable 

communication platforms will have to be designed to deal with errant and outright 

hostile (e.g., hacked through a flaw or vulnerability) participants on the local network. Compounding this problem is the fact that home routers—the devices that 

link all these devices together—are also famously vulnerable to attack.11

Even at this early stage of IoT development, seemingly every type of connected 

device has already experienced these vulnerabilities: spy chips have been discovered 

120 

12 Erik Sherman, Hacked from China: Is Your Kettle Spying on You?, CBS (Nov. 1, 2013), 

http://www.cbsnews.com/news/hacked-from-china-is-your-kettle-spying-on-you/. 13Lorenzo Franceschi-Bicchierai, Your Smart TV Could be Hacked to Spy on You, 

MASHABLE (Aug. 2, 2013), http://mashable.com/2013/08/02/samsung-smart-tv-hack/. 14Loulla-Mae Eleftheriou-Smith, Baby Monitors, CCTV Cameras and Webcams from UK 

Homes and Businesses Hacked and Uploaded onto Russian Website, THE INDEPENDENT 

(Nov. 20, 2014), http://www.independent.co.uk/life-style/gadgets-and-tech/baby-monitors-cctvcameras-and-webcams-from-uk-homes-and-businesses-hacked-and-uploaded-onto-russian-website 

-9871830.html. 15Kim Zetter, How Thieves can Hack and Disable Your Home Alarm System, WIRED (Jul. 23, 

2014), http://www.wired.com/2014/07/hacking-home-alarms/. 16Lily Hay Newman, Pretty Much Every Smart Home Device You Can Think of Has Been 

Hacked, SLATE BLOG (Dec. 20, 2014), http://www.slate.com/blogs/futureltense/2014/12/30/ 

thelinternetloflthingslislallonglwaylfromlbeinglsecure.html. 17 Report, Tracking and Hacking: Security & Privacy Gaps Put American Drivers at Risk, OFFICE OF SENATOR ED MARKEY, (Feb. 2015) http://www.markey.senate.gov/imo/media/ 

doc/2015-02-06lMarkeyReport-TrackinglHackinglCarSecurity%202.pdf. 18Press Release, Federal Trade Commission, DSW Inc. Settles FTC Charges (Dec. 1, 2005), 

http://www.ftc.gov/news-events/press-releases/2005/12/dsw-inc-settles-ftc-charges. 19Press Release, Federal Trade Commission, Marketer of Internet-Connected Home Security 

Video Cameras Settles FTC Charges It Failed to Protect Consumers’ Privacy (Sept. 4, 2013), 

http://www.ftc.gov/news-events/press-releases/2013/09/marketer-internet-connected 

-home-security-video-cameras-settles. 20See G.S. Hans, CDT Files Brief in Wyndham Supporting FTC Regulation of Data Security 

CENTER FOR DEMOCRACY & TECHNOLOGY BLOG (Nov. 13, 2014), https://cdt.org/blog/cdt-filesbrief-in-wyndham-supporting-ftc-regulation-of-data-security/; See also Press Release, Federal 

Trade Commission, FTC Files Complaint Against LabMD for Failing to Protect Consumers’ Privacy (Aug. 29, 2013), http://www.ftc.gov/news-events/press-releases/2013/08/ftc-files-complaint-against-labmd-failing-protect-consumers. 21 CDT Issue Brief on Federal Data Breach Notification Legislation, CENTER FOR DEMOCRACY

& TECHNOLOGY INSIGHTS, (Jan. 27 2015), https://cdt.org/insight/cdt-issue-brief-on-federal-databreach-notification-legislation/. 

in tea kettles and irons 12; hackers have stolen Smart TV login credentials in order 

to listen in and spy on people in their homes 13; live streams from baby monitors 

have been uploaded to public websites 14; thieves can disable home alarm systems 

with a tool from 250 yards away 15; and even smart toilets, refrigerators and printers have been compromised.16 And a report released this weekend by Senator Markey raises serious questions about whether connected cars are being designed to ensure that their systems are protected from malicious hackers seeking to take physical control over the vehicles.17

Currently, the United States does not have a dedicated data security law requiring companies to use reasonable protections to safeguard personal information. 

Since 2005, the Federal Trade Commission has used its general consumer protection 

authority under Section 5 of the FTC Act to bring enforcement actions against companies that do not safeguard personal data.18 The Commission has argued that the 

FTC Act’s prohibition on ‘‘unfair’’ business practices extends to companies using 

poor data security; two years ago, it brought its first enforcement action against the 

manufacturer of an Internet of Things device.19 However, ongoing legal challenges 

threaten to undermine the agency’s efforts in this area: some defendants have argued that they are not, in fact, legally obligated to use reasonable data security 

practices.20

Increased reports of massive data breaches (including the highly publicized Sony 

studios and Anthem healthcare hacks) have prompted new dialogue around the need 

for updated data breach notification laws to respond to such incidents. Unfortunately, many of the data breach notification legislative proposals would actually dial 

back legal incentives for companies to properly secure the data they collects from 

consumers. For example, only requiring agency or consumer notification when a specific ‘‘harm’’ has been identified would discourage companies from fully investigating 

a breach for fear of triggering the notification requirement. Further, data breach 

law that omits any affirmative requirement that companies design robust security 

procedures for their products will ultimately do little to expand upon existing state 

law protections and deter or prevent future breaches. In order to encourage better 

security than exists under the law today, a Federal breach notification bill would 

need to offer new protections not reflected in existing law, and still allow states to 

innovate on data sets not covered by a Federal standard.21 For more information 

on this topic, visit https://cdt.org/insight/cdt-issue-brief-on-federal-data-breach-notification-legislation/. 

121 

22 Justin Brookman, Eroding Trust: How New Smart TV Lacks Privacy by Design and Transparency, IAPP BLOG (Nov. 27, 2013), https://privacyassociation.org/news/a/eroding-trust-hownew-smart-tv-lacks-privacy-by-design-and-transparency/. 23Shane Harris, Your Samsung SmartTV is Spying on You, Basically, THE DAILY BEAST 

(Feb. 5, 2015), http://www.thedailybeast.com/articles/2015/02/05/your-samsung-smarttv-isspying-on-you-basically.html. 

III. Sensitive personal data may be collected contrary to consumer wishes 

and expectations 

As noted above, IoT devices have the potential to collect a tremendous amount 

of detailed personal information about consumers. Some of the data collected is of 

course expected; if I buy a fitness tracker, for example, I shouldn’t be surprised that 

the device tracks my steps throughout the day—indeed, that’s the reason I bought 

it. On the other hand, I might be surprised if that device were also recording all 

my conversations with my friends, or transmitting my geolocation to third party 

data brokers. 

As an example of surprising—and potentially unwanted—IoT data collection, last 

year, an independent researcher noticed that LG was monitoring what TV shows 

people watched on their smart TVs, and sending that information back to LG’s corporate servers.22 The purpose appeared to be for a future undeveloped advertising 

product; LG was also collecting and reporting back information about the names of 

files consumers accessed on computers connected to the same home network, though 

it’s not clear why. In response to user complaints, LG initially directed people to 

a long, legalistic terms of service that vaguely reserved broad rights to transmit 

user data. The company backtracked after a host of media attention around its practice, and LG enabled an opt-out feature for users who did not want their information collected in this manner. This was a start, however, it is not clear that optout is sufficient to meet reasonable consumer expectations in this case. Should home 

appliances be monitoring consumers and reporting everything they can detect back 

to manufacturers by default? Certainly, other interconnected devices don’t do this 

today. Your computer doesn’t report back to Lenovo or HP everything that you do. 

Your phone doesn’t report everything back to Motorola or Apple. When a consumer 

buys a TV, they are not typically looking for or expecting a relationship with LG 

or Samsung: they may appreciate additional smart capabilities like connecting to 

Skype or the web, but their TV is a platform for them to access others’ content— 

it is not a destination in itself. A users’ smart phone could have its microphone and 

camera transmitting 24 hours a day, seven days a week (setting aside battery and 

bandwidth issues)—it could collect significant amounts of interesting information in 

the name of ‘‘Big Data’’ but such data collection would go well beyond consumers’ 

reasonable privacy expectations. 

This precise scenario arose last week in fact, when it was revealed that Samsung’s 

privacy policy appeared to reserve the right to collect any voice communications in 

proximity to its Smart TVs and send that information to an unnamed voice recognition service provider.23 Samsung’s actual practices are not easily discernable: perhaps Samsung is only collecting and transferring voice data for the limited times 

when a consumer is trying to use certain voice recognition commands. This might 

be consistent with reasonable consumer desires and expectations. Or perhaps 

Samsung wants to collect and process all dialogue in proximity to its televisions in 

order to refine its (or its partner’s) voice recognition software. There certainly would 

be a benefit—to Samsung and the consumer—from that collection and processing, 

but query whether most consumers would find the benefit worth the persistent collection of all conversations in a living room or bedroom by an unknown third party. 

Ultimately, consumers must be empowered to make the determination about what 

data is collected and why. 

We believe that the United States should enact a comprehensive privacy law regarding the collection and use of personal information. Companies should be required to offer consumers reasonable transparency and control over how their data 

is collected; today, the U.S. is one of the few developed nations not to have such 

consumer protections in place. The purpose of such a law wouldn’t be to ban or prevent particular practices, but should require actionable information and an ability 

to express real preferences in order for a market to develop for personal information. 

Today, absent such requirements, too much data collection is opaque and unaccountable; consumers have a vague sense that their privacy is being violated, but don’t 

have the information or tools available to make decisions about their personal information. 

With or without a law, companies should set reasonable defaults for data collection and use based on consumer expectations. Some data may require clear opt-in 

because it’s sensitive or the collection or use would be surprising to a user; other 

122 

24Keurig 2.0 K350 Brewing System—Black, AMAZON.COM, http://www.amazon.com/Keurig-2- 

0-K350-Brewing-System/dp/B00KYWL34Q/ref=srl1l1?ie=UTF8&qid 

=1423266957&sr=8-1&keywords=keurig+2.0 (last visited Feb. 9, 2015). 25 Josh Dzeiza, Keurig’s attempt to ‘‘DRM’’ its coffee cups totally backfired, THE VERGE 

(Feb. 5, 2015), http://www.theverge.com/2015/2/5/7986327/keurigs-attempt-to-drm-its-coffeecups-totally-backfired. 26Mass. lawmakers approve ‘‘Right to Repair’’ bill, FOXNEWS, (August 1, 2012), http:// 

www.foxnews.com/leisure/2012/08/01/mass-lawmakers-approve-right-to-repair-bill/. 

information may be collected automatically but consumers should have the ability 

to opt out of secondary data use, retention, or transfer; and some data consumers 

shouldn’t have control over because it is fundamentally necessary for operation of 

the device. However, consumers must generally be empowered to make decisions 

about how their devices work (and what data is collected and shared with other entities). IoT should work for the consumer—the person who bought the product; the 

Internet of Things shouldn’t be something that happens to a begrudging populace. 

IV. Device connectivity and intelligence could diminish user autonomy 

over the devices they buy 

Adding sensors and connectivity to IoT devices has the potential to make them 

much more useful for consumers. On the other hand, these features could also be 

abused to deprive consumers of continuing services, expected interoperability, or 

control over their own devices. 

Objects included in the ‘‘Internet of Things’’ consist of two basic components: the 

physical object and the software that connects it to the network. Traditionally, when 

you buy something, it is yours and you are free to do with it whatever you’d like 

including altering, repairing, or re-selling it. However, objects within the Internet 

of Things do not fit into our traditional understanding of ownership. While you still 

take possession of the physical object, the software is typically licensed to you under 

an End-User License Agreement (EULA). The implications of this vary with how integral the software is to the functioning of the device—in some cases, like a washing 

machine that you can monitor/control from your phone, losing access to this feature 

wouldn’t affect the core functionality and value of the machine very much. In other 

cases, the object itself is essentially useless without the software controlled by licensing agreements, or can quickly become obsolete without updates. For example, 

imagine a thermostat that only works if you can program the software. In this case, 

a lapse in software updates could render the physical object useless even if the 

physical mechanism were still in good repair. 

Last year, Keurig—the popular single cup coffee maker—put software controls on 

its coffee maker to prevent users from using non-Keurig approved coffee pods in 

their machines. Though this functionality did not rely upon Internet connectivity, 

it did take advantage of increasingly cheap and sophisticated sensors to allow the 

Keurig machine to detect proprietary codes on approved coffee pods. As result of this 

technology, consumers were prevented from brewing their preferred brand of coffee 

in the devices they bought and paid for. In this case, Keurig’s decision appears to 

have backfired: featured reviews for Keurig’s new line of coffee makers on Amazon 

prominently criticize this design feature,24 and sales fell 12 percent last quarter.25

In other cases, policymakers have intervened to mitigate potential monopolistic effects of proprietary software. One example is the repair codes used by automobile 

manufacturers. Cars include systems that provide a specific diagnostic code that explains, for example, the cause of a ‘‘check engine’’ light. Originally, the guide that 

explains these codes was withheld from consumers and the majority of auto repair 

shops, forcing drivers to use specific repair shops for their vehicles. However, some 

states now require that the explanations for the codes be widely available.26 In another example, the Librarian of Congress, in consultation with the Copyright Office, 

eliminated an exemption to laws prohibiting circumvention of digital rights management for users seeking to unlock their mobile phones and change wireless providers. 

Mobile phone unlocking had been an entirely legal and common practice for years 

before the Librarian eliminated the exemption. More than 114,000 Americans petitioned the White House to overturn the ban and, after both the Federal Communications Commission and the White House recommended doing so, Congress ultimately 

enacted legislation restoring consumers’ right to unlock their own phones. Unfortunately, the exemption applies only to mobile phones and is examined de novo every 

three years. 

In the Internet of Things, digital rights management affects intellectual property 

accessed through networked devices as much as the devices themselves. For example, users do not own the content they purchase for their e-readers (Kindle, Nook, 

etc.). The physical tool allows readers to buy rights to access the content of their 

choice, but readers do not own the book. Additionally, this access is restricted in 

123 

27Michael Corkery & Jessica Silver-Greenberg, Miss a Payment? Good Luck Moving That Car, 

THE NEW YORK TIMES (Sept. 24, 2014), http://dealbook.nytimes.com/2014/09/24/miss-apayment-good-luck-moving-that-car/. 28 CTR. FOR DEMOCRACY & TECH. & ELEC. FRONTIER FOUND., ‘‘Proposed Smart Grid Privacy 

Policies and Procedures,’’ before The Public Utilities Commission of the State of California (December 18, 2008), available at https://cdt.org/files/pdfs/CDTlEFFlPoliciesandProcedures 

l15Oct2010lOpeningCommentl1.pdf. 

many users may not fully understand because the relationship is so different from 

the physical world. For example, there are typically restrictions on lending the book 

to a friend. In this case, if the licensing agreements for that content were revoked 

because of a perceived or alleged violation of the license, the object itself would be 

useless to the average consumer who would have no way to load content. 

Additionally, connectivity can allow other entities to access and control the device 

in ways not possible in an un-networked world. One prominent example is lenders 

who use technology in connected cars to punish those who are late in making payments by disabling the vehicle. In a case reported by the New York Times,27

subprime borrowers were allowed to lease vehicles provided they gave permission 

for the lender to remotely disable the ignition in the event of a late payment or default. Some argue this technology allows the lender to provide credit to a broader 

audience than would otherwise be possible; others argue that it is unethical and 

perilous to put people in a situation where they may have an emergency and cannot 

access their vehicle, as was the case for the woman in the article who needed to 

use her car to take an asthmatic child to the doctor. Moreover, vulnerable borrowers 

might be subject to egregious reconnection fees that had been disclosed only in inscrutable contracts. Regardless of what you believe, it is undeniable that this technology shifts the balance of power from the user to the company or institution that 

controls the software. 

V. Our government access and intelligence laws must be reformed 

Finally, the default of IoT devices to phone home by reporting data to a company 

rather than storing it locally on the device raise concerns about government surveillance as well. Many of the same concerns that apply to in-the-home monitoring devices like smart grid technologies 28 apply to objects in the Internet of Things. IoT 

systems will, in most cases, be sensing platforms augmenting devices and objects 

in the home or in businesses. Light sensors can tell how often certain rooms are 

occupied at night or how often the refrigerator is opened. Temperature sensors may 

be able to tell when one bathes, exercises, or leaves the home entirely. Microphones 

can easily pick up the content of conversations in the home and, with enough fidelity, can identify who is speaking. In essence, the privacy and security concerns highlighted by the revelation that law enforcement has access to data stored by private 

companies are elevated exponentially in a future with increased connectivity and 

automated collection. 

Government access without robust due process protection is already arguably the 

most significant threat posed by the collection of personal information. As the recent 

NSA revelations aptly demonstrate, much of the data that governments collect 

about us derives not from direct observation, but from access to commercial stores 

of data. Even in the United States and Europe, that data is often obtained without 

transparent process, and without a particularized showing of suspicion—let alone 

probable cause as determined by an independent judge. Unfortunately, there is almost nothing that consumers can do to guard against such access or in many cases 

even know when it occurs. 

The revelation that commercial data is tied to government surveillance has the 

potential to fundamentally change the conversation about IoT. For the vast majority 

of consumers, unwanted surveillance—quite apart from practical effects of such surveillance—is the harm they’re seeking to avoid. Therefore, considerations of risks 

associated with IoT must address harms from government surveillance as well as 

private sector risks. 

This loss of consumer confidence has a quantifiable impact on corporate bottom 

lines and hence the development of these useful new technologies. For example, according to Forrester Research the losses to U.S. technology companies from revelation of the PRISM program (detailing once facet of U.S. surveillance practices) could 

result in, ‘‘a net loss for the service provider space of about $180 billion by 2016 

which would be roughly a 25 percent decline in the overall IT services market by 

124 

29 James Staten, ‘‘The Cost of PRISM Will Be Larger Than ITIF Projects,’’ FORRESTER, August 14, 2013, http://blogs.forrester.com/jameslstaten/13-08-14-thelcostloflprismlwilll bellargerlthanlitiflprojects 30 EXECUTIVE OFFICE OF THE PRESIDENT, REPORT TO THE PRESIDENT, BIG DATA 

AND PRIVACY: A TECHNOLOGICAL PERSPECTIVE (2014). http://www.whitehouse.gov/ 

sites/default/files/microsites/ostp/PCAST/pcastlbigldatalandlprivacyl-lmayl2014.pdf 

?utmlcontent=buffer06b57&utmlmedium=social&utmlsource=twitter.com&utmlcampaign 

=buffer. 31 JUSTIN BROOKMAN & G.S. HANS, WHY COLLECTION MATTERS: SURVEILLANCE 

AS A DE FACTO PRIVACY HARM (2013), http://www.futureofprivacy.org/wp-content/uploads 

/Brookman-Why-Collection-Matters.pdf. 

that final year.’’ These costs demonstrate the market value of business practices and 

government policies that respect privacy.29

Nor is the point in sighting this figure to single out the NSA and U.S. surveillance. As CDT has noted repeatedly, all governments are interested in data collection and have extensive legal tools to access that information. In an Internet connected future it is not only the U.S. government but also the governments around 

the world that may be interested in IoT and the information it reveals. For more 

on legal tools that governments possess to access personal information please see: 

http://govaccess.cdt.info/. 

Government surveillance reform is a much broader topic than the IoT and this 

committee’s hearing today. However, the continuing access by government to commercial information highlights the need to build systems that minimize the amount 

of information they share and also give consumers control over what information 

their devices collect. 

The potential benefits of the IoT are exciting and profound. It is incumbent upon 

manufactures of these devices and governments to make sure that those benefits are 

fully realized while protecting the privacy of consumers. 

Conclusion 

Recognition of the threats to collected personal information is particularly important because in recent years, some have argued for a new definition of privacy 

where there are no limits on what information companies (and governments) can 

collect about us or how long they retain it. Privacy is in effect redefined to only prohibit certain harmful uses of personal information. For example, President Obama’s 

Council of Advisors on Science and Technology last year released a report on Big 

Data making precisely this point: because of the potentially awesome power of personal information, we shouldn’t put limitations on what information is collected; instead, we should just make sure that that data is not subsequently misused.30

This view, however, presumes a perfect world of unbreakable security, where consumer and company expectations are fully aligned, and where due process protections fully assure there is no potential for government abuse.31 Obviously, these conditions are not met today, and likely will never fully be realized. As such, consumers 

have a rational interest in exercising control over how their data is collected and 

retained. Without affording consumers meaningful control over their own devices, 

IoT adoption is seriously threatened. Today, the highly sensitive data collected by 

IoT devices is exposed to a variety of threats, and designers must keep these threats 

in mind when developing their products for market. Consumers would benefit tremendously from a full-fledged, user-centric Internet of Things. Developers must 

keep personal privacy and empowerment in the front of their minds in creating 

these products. 

The CHAIRMAN. Thank you, Mr. Brookman. 

We will go 5-minute rounds. I may have to duck out of here for 

a little while to do a Finance Committee markup, but I hope to give 

everybody a chance to ask questions, and we will see where it goes. 

I will start by asking you, Mr. Donny. You mentioned in your 

testimony the challenge of taking advantage of the Internet of 

Things on farms due to the lack of reliable broadband access and 

cellular coverage. I would like you to elaborate on the recommendation you made that we accelerate the availability of low-cost, longrange communication technology to ensure that we can move data 

from the field to the cloud on every farm. Would you please talk 

a little bit about that and then maybe elaborate on what you see 

as some of the policy impediments to that. 

125 

Mr. DONNY. Thank you, Senator Thune, for the question. 

So let me actually elaborate on the challenge as well. The challenge in agriculture specifically for connecting devices is that the 

farm—both the topography of the farm, the rolling hills, as well as 

the trees and plants and corn stalks themselves are a lousy place 

for our cellular and RF signals. The plants and so forth consume 

a lot of that energy that comes out of those devices. So it makes 

it difficult to move data from a device in the field, unless you have 

a really tall antenna, out to a collector device. And so the traditional technology today that has been used is satellite 2.4 

gigahertz, 900 megahertz RF signals, and cellular. And the challenge is, if you are in a rural area, you oftentimes do not have good 

cellular coverage. We have all experienced that. 

And so the opportunity that we see that in particular I am interested in is the white space in which we have unused now white 

space channels that were used by televisions that provide the opportunity to move data around the farm very long distances at almost no cost. So I know the FTC is looking into that and reviewing 

that. 

There are companies globally that are developing hardware in 

which to take advantage of that white space. So in the case of those 

channels, we can now move data from a sensor in the field that is 

no bigger than the size of your cell phone several miles, 5, 6, 7 

miles in our experience—we have tested some of these earlier models—out to a device. And so for a farmer, instead of having to 

spend $7 or $8 or $10 a month on a cellular data communication 

charge per device, we can move data for free from the device to the 

backhaul system to get data at a central data point. 

So if you are looking at farm adoption and how do we enable 

communication methods to improve what farmers are doing, density of data is extremely important in that analysis. So the lower 

we can reduce the cost of the device in the field vis-a`-vis the communication channel, vis-a`-vis the device, the more data we will 

have, the more enabled that farmer will be to make a better decision. So specifically we are interested in how do we use what we 

know today, the white space and other RF signals, to enable the 

industry to go out and innovate, go figure out how we are going to 

move data around 5, 6, 7 miles at no cost and enable those companies to go out and do that today. 

The CHAIRMAN. Mr. Thierer or Mr. Brookman, do you have any 

ideas, any thoughts on how to ensure that we have sufficient wireless capacity to power the Internet of Things? 

Mr. THIERER. Well, I will make a brief comment on that. It is not 

the primary focus of my own research, but generally speaking, we 

need to get a better process in place at the Federal Communications Commission. Freeing up a lot more spectrum is something I 

think everybody on this committee and many policy circles agrees 

on. It is a question of where do we get it. Creating more and better 

incentives to do that is going to be essential because these devices 

are going to be eating up a lot of it in a short time. 

Mr. BROOKMAN. And I am not remotely a spectrum expert. So I 

am not going to weigh in on that. 

The CHAIRMAN. How about on the issue of interoperability? We 

have all these devices, Do we have to have standards for these deVerDate Nov 24 2008 11:45 Apr 20, 2016 Jkt 075679 PO 00000 Frm 00129 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\99818.TXT JACKIE
126 

vices, and if there are standards, who creates them? Does anybody 

want to take a stab at that? 

Mr. THIERER. I will just make a brief comment that we all have 

devices we are carrying with us here today that have numerous 

standards in them and have a lot of complex interoperability problems. But somehow we figured it out for this. I think we can figure 

it out for the Internet of Things space as well. 

The CHAIRMAN. Anybody else? 

Mr. DONNY. The industry and agriculture are actually trying to 

tackle this interoperability challenge, and it is a mixed bag. So you 

can try to focus on a standard, but the problem with standards are 

there are 16 other standards you are trying to displace to begin 

with and another standard necessarily does not fix that. 

Modern data in general—you tend to publish how that data looks 

and is used, and then companies that need that data then build 

systems around consuming that. So lots of other devices have 

solved that problem without creating huge standards in the space. 

Mr. ABBOTT. I think along those lines that if we go back in time 

to just networking that the same challenges around interoperability existed then, and over time we saw certain winners emerge. 

And I think at that point in time, it would make sense to have 

some national or even actually ideally global kind of standard 

around that particular protocol. So in the case of the Internet, a 

standard Internet protocol emerged, and I think we would anticipate something along those lines. 

One interesting thing to note is that as we are in this early 

phase of IoT, which challenges interoperability, that as we become 

more homogenous from that heterogeneous world, it is likely that 

the security issues will actually increase because actually by having more heterogeneity is actually decreasing the security exposure 

today. 

The CHAIRMAN. Thank you all. 

Senator Nelson? 

Senator NELSON. The allocation of additional spectrum, Mr. 

Chairman, is a subject that we need to get into. It has been raised 

here, and it is a very important one. 

Before you and I have to go off and vote in the Finance Committee, I want to get back to this question of security, Samsung, 

and the Smart TV. According to its privacy policy, the television 

records your conversations when you activate the microphone and 

sends those recordings to a third party. Do you want to tell me yes 

or no? Should consumers be given adequate notice of such a practice? Let us start. Just go down. Yes or no. 

Mr. ABBOTT. I think that actually consumers should have the 

ability to opt out, and it should be very clearly communicated what 

data is being collected by that particular device or that service. 

Senator NELSON. We are going to run out of time. So opt out is 

your answer instead of opt in. 

Mr. ABBOTT. Correct. 

Senator NELSON. How about it, Mr. Davis? 

Mr. DAVIS. Well, I certainly think we need to be able to balance 

privacy and innovation. As the developers of these products, we 

need to be stewards of that privacy. 

Senator NELSON. Yes or no. Opt out or opt in? 

127 

Mr. DAVIS. I think consumers ought to be able to opt in. 

Senator NELSON. Opt in? 

Mr. DAVIS. Yes. 

Senator NELSON. OK. 

Mr. Donny? 

Mr. DONNY. Thank you, Senator. 

I think they need to affirmatively agree to that policy. 

Senator NELSON. So you are saying opt in. 

Mr. DONNY. Correct. 

Mr. THIERER. They can opt out and they do not have to buy the 

TV in the first place. 

Senator NELSON. So when they buy the TV, and there is the privacy policy, should they opt out or opt in? 

Mr. THIERER. They should opt out. 

Senator NELSON. Opt out. 

Mr. THIERER. Yes. 

Mr. BROOKMAN. If you are using voice recognition, it is kind of 

clear what is going on ephemerally. If it is collecting data all the 

time, there is an obligation to go out of their way to explain that 

to folks. 

Senator NELSON. What does that mean? Opt out or opt in? 

[Laughter.] 

Mr. BROOKMAN. I will say opt in then. 

Senator NELSON. Opt in. 

OK. Three opt ins and two opt outs. 

Is there a role for the Congress to play here? How do we make 

companies accountable, or is this something the FTC should do? 

Mr. THIERER. Well, Senator, as I already stressed, the FTC is already very active on this front, and has already pursued security 

cases against many major Internet giants. There is something like 

over 50 data security consent decrees that have been out there. 

Major fines have been levied. Twenty-year privacy audits have 

been imposed. So there is a very aggressive enforcement regime already in place using the unfair and deceptive practices at the FTC. 

And I think that will and should continue. 

Mr. BROOKMAN. Yes. I think that existing law arguably already 

requires reasonable security. I think it would be useful to have a 

statute saying that. 

On privacy, I would like to see flexible requirements. Requiring 

some level of transparency is better today. A lot of these practices 

today are very opaque. So I think just giving companies an obligation to actually say what they are doing I think would create a better market for these products. 

Senator NELSON. Take my refrigerator example, which is not an 

extreme example. A smart refrigerator tells me I need milk. What 

about the refrigerator telling the local grocery store that I need 

milk? Should that be done opt out or opt in? 

Mr. ABBOTT. That is absolutely enabling the consumer to go select that service provider to share that data. 

And just to expand, Senator, on my prior answer, opt out works 

when there is a very clear communication to the consumer, what 

data is being collected, why it is, and if you want to actually not 

have that data collected, how that consumer can actually select 

that. 

128 

Senator NELSON. You know why I asked that question? Because 

we have got a real-life example. Verizon had implanted these super 

cookies, codes, and then that data was transmitted to third parties 

selling that information in order for the consumer on that Verizon 

smart phone to start getting all kinds of information that was recorded because of that super cookie. 

Now, AT&T tried it and pulled back because of the privacy implications, but Verizon today is still studying what they have done 

even though we have called this out. 

And if you have been the recipient of unwanted advertisements 

because you happen to go to a certain place or buy from a certain 

store, you can start to see how the privacy is beginning to be invaded. 

Thank you, Mr. Chairman. 

The CHAIRMAN. And I used to like super cookies. 

[Laughter.] 

The CHAIRMAN. Senator Ayotte? 

STATEMENT OF HON. KELLY AYOTTE, 

U.S. SENATOR FROM NEW HAMPSHIRE 

Senator AYOTTE. I am just thinking about the milk the refrigerator could tell me to have with my super cookie. 

[Laughter.] 

Senator AYOTTE. I wanted to follow up on a couple of different 

things. You know, as we look at something that has been a consistent challenge for us—and that is data breaches. As we see more 

homogeneity in the consolidation of data, I think this becomes a 

bigger issue. This is something that we have had numerous discussions on legislating on. 

I will give you an example. Recently the big Anthem breach. 22 

percent of my state got hit by that. 80 million people in the country 

got hit. 

So I wanted to hear—I think it is probably best to direct it to 

Mr. Davis and Mr. Thierer—about what your thoughts are and 

what we should be doing on data breach legislation. I certainly 

want to make sure we do not do things that hurt innovation and 

thwart new technologies, but this seems to be a repetitive issue 

that we need to address. Your thoughts. 

Mr. DAVIS. Thank you for the question. 

You know, certainly from an Intel perspective, we think you have 

to design security into these implementations from the beginning 

not only on the endpoint device but throughout that end-to-end implementation. There are multiple levels of security in terms of how 

the device powers up and behaves when it is first powered, the 

kinds of applications it is allowed to run when it begins to run applications, and the ability to limit the types of things that can be 

launched on that particular device at any point in time, and then 

be able to manage that data through the network such that the information they are receiving from that data is trusted information. 

You are getting what you would expect to be getting out of that device. 

At the same time, I think we have to be a bit careful in terms 

of how we create legislation or policy around that in terms of enabling the industry to innovate as well. So I think certainly as we 

129 

talk to customers, as we talk to others in the industry, security is 

the number one concern, and we believe we can build that into the 

technologies that these products are being developed around. 

Mr. THIERER. Well, Senator, many states already pursue data 

breach notification requirements, and there is a case to be made for 

it. But I would just remind the Committee that you already have 

many other legal enforcement mechanisms to deal with these 

things. The Federal Trade Commission has gone after many companies who have had breaches like this. You have State attorneys 

general who have been very active on this front. 

Senator AYOTTE. So I was a State AG, and I pursued some of 

these cases. Now, sitting with this hat on in the U.S. Senate, what 

are your thoughts on a national standard in terms of notification? 

Mr. THIERER. Eventually I think we are probably going to get 

there. I think there is probably a case to be made for some uniformity in this case because many states pursuing it or others do 

not have any at all. 

Senator AYOTTE. I appreciate it. 

I also wanted to follow up with you. You talked about the ability 

under the FTC to determine unfair and deceptive practices in this 

realm. So the FTC is pursuing those cases. 

But if you look at it from the perspective of innovation and having a larger plan in terms of the Internet of Things, isn’t one of 

the challenges we face that people do not really fully understand? 

There has not been a full definition under section 5 of what is an 

unfair and deceptive practice, and so therefore, that lack of certainty to businesses can create some ambiguity about what is acceptable and what is not. So I wanted to get everyone’s thoughts 

on that. 

Mr. THIERER. I think that is a fair point, Senator, but I would 

also say that this is an issue we have had for many decades. Unfair 

and deceptive practices go back over a century, and so we are going 

to continue to see the evolution of that standard. But you are right. 

We have to be careful that it is not overzealously enforced. 

Senator AYOTTE. Do you think that the FTC needs to provide further guidance on what they believe is unfair and deceptive under 

section 5? 

Mr. THIERER. I think that is evolving out of the body of decisions 

that they have been handing down on data security and privacy. 

Senator AYOTTE. Mr. Davis, I was very curious. In your testimony, you talked about what other countries are doing to really 

look at making sure the infrastructure is there, national Internet 

of Things plans. So what is it you would like to see us do here in 

a way that would be a productive role for Congress and not one 

that thwarts innovation? 

Mr. DAVIS. Well, certainly one of the recommendations that we 

are making is that we support public-private partnerships so that 

we go out and identify areas in, say, transportation, in manufacturing, and some of these industrial areas where we can innovate. 

We can spur these industries to go implement new technologies 

and drive the productivity services and new product benefits. So 

certainly public-private partnerships are a key area that we are 

recommending. 

130 

Senator AYOTTE. And, Mr. Abbott, from the financing end, what 

are your thoughts? You are the ones allowing for investment. You 

are looking at new companies. What is your thought on that? 

Mr. ABBOTT. Well, I think there needs to be more coordination, 

I think, through the public and the private sector especially on 

these issues. We are, obviously, very, very focused on looking at 

how we can help these early stage companies, much smaller than 

Intel, not be stifled and so they can actually kind of grow and expand. 

Senator AYOTTE. Thank you all. 

The CHAIRMAN. Thank you, Senator Ayotte. 

Senator Peters? 

STATEMENT OF HON. GARY PETERS, 

U.S. SENATOR FROM MICHIGAN 

Senator PETERS. Thank you, Mr. Chairman. 

And, panelists, thank you for your testimony here today. 

As the Senator from Michigan, you can imagine the auto industry is very important to me. And the auto industry is certainly 

much more than just horsepower and torque, although those are 

the two things that I like best about the auto industry. But it is, 

as you know, very complex, sophisticated, and very tech heavy with 

some of the best minds working to develop some new safety technologies, as well as environmental technologies using the Internet 

of Things. Advanced technology in vehicles today have fewer crashes. They have significantly reduced injuries and fatalities, lowered 

emission levels, and have increased fuel economy dramatically. 

In recent years, automakers have delivered advanced safety features such as lane departure warning devices, adaptive cruise control, and crash-imminent braking, features that were made possible 

through the use of sensors, actuators, artificial intelligence systems, and increasingly wireless connectivity that will enable these 

vehicles to basically have their own situational awareness and the 

ability to perceive and react to the environment to avoid harm. 

So what comes next I think is very significant. It will save lives 

as the Government and industry will deploy the vehicle-to-vehicle 

communications system and infrastructure communication networks. The National Highway Traffic Safety Administration estimates that V2V technology has the potential to mitigate or eliminate 80 percent of the accidents that are involved in non-impaired 

drivers. That is significant. 80 percent of accidents could be avoided. 

But in order to implement this V2V technology and in a sense 

then save lives, the 5 gigahertz band of spectrum will need to be 

preserved for its use. And I know that some of my colleagues on 

this committee have actually expressed an interest in opening up 

this band of spectrum for WiFi use, but I would caution that this 

should only be done after full interference testing has been completed and it is ensured that intelligent transportation technologies 

operating on this band, which have the potential to save lives, as 

I mentioned, are fully protected. 

I think it is also important that the benefits made possible by advanced technologies are delivered to consumers in a transparent 

way that respects consumer privacy. As auto companies continue to 

131 

develop these technologies, automakers must address data privacy 

and cybersecurity issues head on. And that is why, in November 

of last year, the auto industry agreed to set a set of privacy principles and practices that is currently working to establish an auto 

ISAC, information sharing and analysis center, to enable these 

companies to share information in real time about cyber threats. 

And I certainly look forward to seeing the auto industry’s continued 

leadership in this area. 

And I know the Chairman has gone, but on behalf of the Committee, I would like to ask for unanimous consent to enter into the 

record the consumer privacy protection principles put together by 

the industry. 

Senator MORAN [presiding]. Without objection. 

[The information referred to follows:] 

ALLIANCE OF AUTOMOBILE MANUFACTURERS, INC. 

ASSOCIATION OF GLOBAL AUTOMAKERS, INC. 

Consumer Privacy Protection Principles 

Privacy Principles for Vehicle Technologies and Services—November 12, 2014 

I. Introduction 

The automotive industry is developing innovative technologies and services that 

promise to deliver substantial benefits and enhance the driving experience. These 

technologies and services may assist in enhancing safety, reducing the environmental impacts of vehicles, diagnosing vehicle malfunctions, calling for emergency 

assistance, detecting and preventing vehicle theft, reducing traffic congestion, improving vehicle efficiency and performance, delivering navigation services, providing 

valuable information services, and more. The Alliance of Automobile Manufacturers, 

the Association of Global Automakers, and their members are excited about the benefits offered by today’s vehicle technologies and services and look forward to expanding the array of innovative technologies and services offered to consumers. 

Many of these technologies and services are based upon information obtained from 

a variety of vehicle systems and involve the collection of information about a vehicle’s location or a driver’s use of a vehicle. Consumer trust is essential to the success 

of vehicle technologies and services. The Alliance, Global Automakers, and their 

members understand that consumers want to know how these vehicle technologies 

and services can deliver benefits to them while respecting their privacy. 

Privacy is important to consumers, and it is important to us. That is why the Alliance and Global Automakers have issued these Privacy Principles (‘‘Principles’’). 

The Principles provide an approach to customer privacy that members can choose 

to adopt when offering innovative vehicle technologies and services. Each member 

has made an independent decision about whether to adopt the Principles, and other 

companies may choose to adopt them as well. We provide a list of those companies 

that have adopted the Principles in the Appendix, and they are referred to as ‘‘Participating Members.’’ 

The Principles apply to the collection, use, and sharing of Covered Information in 

association with Vehicle Technologies and Services available on cars and light trucks 

sold or leased to individual consumers for personal use in the United States. 

The Principles are subject to change over time. When they do change, the Alliance 

and Global Automakers will post the updated Principles at www.automotive 

privacy.com and llllllll. The Principles are not intended to replace inconsistent or conflicting applicable laws and regulations, where they exist. So, the Principles should be interpreted as subject to and superseded by applicable laws and 

regulations. 

Participating Members may implement the Principles in different ways, reflecting 

differences in technologies and other factors. And Participating Members may 

choose to incorporate into their privacy programs elements that are not addressed 

in the Principles and are free to take additional privacy steps. But regardless of how 

Participating Members design their privacy programs and implement the Principles, 

Participating Members affirm the following fundamentals, as detailed in the relevant sections that follow: 

132 

• Transparency: Participating Members commit to providing Owners and Registered Users with ready access to clear, meaningful notices about the Participating Member’s collection, use, and sharing of Covered Information. 

• Choice: Participating Members commit to offering Owners and Registered Users 

with certain choices regarding the collection, use, and sharing of Covered Information. 

• Respect for Context: Participating Members commit to using and sharing 

Covered Information in ways that are consistent with the context in which the 

Covered Information was collected, taking account of the likely impact on Owners and Registered Users. 

• Data Minimization, De-Identification & Retention: Participating Members 

commit to collecting Covered Information only as needed for legitimate business 

purposes. Participating Members commit to retaining Covered Information no 

longer than they determine necessary for legitimate business purposes. 

• Data Security: Participating Members commit to implementing reasonable 

measures to protect Covered Information against loss and unauthorized access 

or use. 

• Integrity & Access: Participating Members commit to implementing reasonable measures to maintain the accuracy of Covered Information and commit to 

giving Owners and Registered Users reasonable means to review and correct 

Personal Subscription Information. 

• Accountability: Participating Members commit to taking reasonable steps to 

ensure that they and other entities that receive Covered Information adhere to 

the Principles. 

The application of these fundamental principles is described in more detail in the 

sections that follow. 

II. Applicability 

The Principles apply to the collection, use, and sharing of Covered Information in 

association with Vehicle Technologies and Services available on cars and light trucks 

sold or leased to individual consumers for personal use in the United States. 

Participating Members are listed in the Appendix. 

Each Participating Member commits to complying with the Principles for new vehicles manufactured no later than Model Year 2017 (which may begin as early as 

January 2, 2016) and for Vehicle Technologies and Services subscriptions that are 

initiated or renewed on or after January 2, 2016. To the extent practicable, each 

Participating Member commits to implementing the Principles for Covered Information collected from vehicles manufactured before January 2, 2016. If compliance 

with the Principles involves a vehicle engineering change, each Participating Member commits to complying with the Principles as soon as practicable, but by no later 

than vehicle Model Year 2018. 

Some Participating Members may work with Third-party Service Providers to provide some or all of their Vehicle Technologies and Services. When doing so, Participating Members commit to taking reasonable steps to ensure that Third-party Service Providers adhere to the Principles in providing Vehicle Technologies and Services 

that involve the collection, use, or sharing of Covered Information. Businesses other 

than Third-party Service Providers may provide Owners and Registered Users with 

apps or other offerings that involve the collection of information from vehicles. Participating Members will encourage those businesses to respect the privacy of Owners 

and Registered Users and will take reasonable steps to provide those businesses 

with an opportunity to provide Owners and Registered Users with information about 

the businesses’ privacy practices. 

However, the Principles directly apply only to Participating Members. The Principles do not apply directly to vehicle dealerships that are not owned by Participating Members. 

III. Scope of the Principles and Definitions 

The Principles provide a framework for Participating Members to embrace when 

collecting, using, and sharing Covered Information. The following defined terms are 

used in the Principles. Together, the definitions describe the scope of the Principles. 

Affirmative Consent: An Owner’s or Registered User’s clear action performed in 

response to a clear, meaningful, and prominent notice disclosing the collection, use, 

and sharing of Covered Information. 

Biometrics: Covered Information about an Owner’s or Registered User’s physical or biological characteristics that serves to identify the person. 

133 

Covered Information: (1) Identifiable Information that vehicles collect, generate, record, or store in an electronic form that is retrieved from the vehicles by 

or on behalf of a Participating Member in connection with Vehicle Technologies and 

Services; or (2) Personal Subscription Information provided by individuals subscribing or registering for Vehicle Technologies and Services. 

Exclusion from Covered Information: If Participating Members collect Covered Information and then alter or combine the information so that the information can no longer reasonably be linked to the vehicle from which the information was retrieved, the Owner of that vehicle, or any other individual, the information is no longer Covered Information. If Participating Members attempt to 

link the information to specific, identified individuals or vehicles or share the 

information without prohibiting the recipients from attempting such linking, 

the information becomes Covered Information. 

Driver Behavior Information: Covered Information about how a person drives 

a vehicle. Examples are vehicle speed, seat belt use, and information about braking 

habits. This does not include information that is used only for safety, diagnostics, 

warranty, maintenance, or compliance purposes. 

Geolocation Information: Covered Information about the precise geographic location of a vehicle. 

Identifiable Information: Information that is linked or reasonably linkable to 

(i) the vehicle from which the information was retrieved, (ii) the Owner of that vehicle, or (iii) the Registered User using Vehicle Technologies and Services associated 

with the vehicle from which the information was retrieved. 

Owners: Those individuals who have legal title to a vehicle that receives or is 

equipped with Vehicle Technologies and Services that use Covered Information; 

those entitled to possession of such a vehicle, like purchasers under an agreement 

(for example, a vehicle loan where the vehicle is collateral); and those entitled to 

possession of such a vehicle as lessees pursuant to a written lease agreement that, 

at its inception, is for a period of more than three months. The term ‘‘Owners’’ does 

not include lienholders and lenders. 

Personal Subscription Information: Information that individuals provide during the subscription or registration process that on its own or in combination with 

other information can identify a person, such as a name, address, credit card number, telephone number, or e-mail address. 

Registered User: An individual other than an Owner who registers with, and 

provides Personal Subscription Information to, a Participating Member in order to 

receive Vehicle Technologies and Services that use Covered Information. 

Third-party Service Providers: Companies unaffiliated with Participating 

Members that receive Covered Information when conducting business on behalf of 

a Participating Member. 

Vehicle Technologies and Services: Technologies and services provided by, 

made available through, or offered on behalf of Participating Members that involve 

the collection, use, or sharing of information that is collected, generated, recorded, 

or stored by a vehicle. 

IV. Specific Principles 

1. Transparency 

Participating Members commit to providing Owners and Registered Users with 

ready access to clear, meaningful notices about the Participating Member’s collection, 

use, and sharing of Covered Information. 

Participating Members commit to providing notices in a manner that enables 

Owners and Registered Users to make informed decisions. 

How Participating Members may provide notices: Participating Members 

may make notices available in a variety of ways. Depending on the nature of the 

Vehicle Technologies and Services and the circumstances in which they are offered, 

different mechanisms may be reasonable to provide Owners and Registered Users 

with ready access to clear, meaningful notices about the Covered Information that 

Participating Members collect, use, and share. 

There is no one-size-fits-all approach. Among the various ways Participating 

Members may choose to provide notices are in owners’ manuals, on paper or electronic registration forms and user agreements, or on in-vehicle displays. At a minimum, Participating Members commit to making information regarding the collection, use, and sharing of Covered Information publicly available via online web portals. 

When Participating Members may provide notices: Participating Members 

commit to taking reasonable steps to provide Owners and Registered Users with 

134 

ready access to clear, meaningful notices prior to initial collections of Covered Information. Notices need not be provided prior to every instance of collection where addressed by prior notices. 

Content of notices: Participating Members commit to designing the notices so 

that they provide Owners and Registered Users with clear, meaningful information 

about the following: 

• the types of Covered Information that will be collected; 

• the purposes for which that Covered Information is collected; 

• the types of entities with which the Covered Information may be shared; 

• the deletion or de-identification of Covered Information; 

• the choices Owners and Registered Users may have regarding Covered Information; 

• whether and how Owners and Registered Users may access any Covered Information; and 

• where Owners and Registered Users may direct questions about the collection, 

use, and sharing of Covered Information. 

Notices regarding the collection of Geolocation Information, Biometrics, and 

Driver Behavior Information: When Participating Members collect, use, or share 

Geolocation Information, Biometrics, or Driver Behavior Information, Participating 

Members commit to providing clear, meaningful, and prominent notices about the 

collection of such information, the purposes for which it is collected, and the types 

of entities with which the information may be shared. Please see the Choice section 

below for information about the Principles’ Affirmative Consent conditions if Participating Members use Geolocation Information, Biometrics, or Driver Behavior Information as a basis for marketing or share such information with unaffiliated third 

parties for their own purposes. 

Changing notices: Participating Members commit to taking reasonable steps to 

alert Owners and Registered Users prior to changing the collection, use, or sharing 

practices associated with Covered Information in ways that have a material impact on Owners or Registered Users. If the new practices involve using Covered Information in a materially different manner than claimed when the Covered Information 

was collected, Participating Members commit to obtaining Affirmative Consent from 

Owners and Registered Users to the new practices. 

2. Choice 

Participating Members commit to offering Owners and Registered Users with 

certain choices regarding the collection, use, and sharing of Covered Information. 

Certain safety, operations, compliance, and warranty information may be collected 

by necessity without choice. 

When Participating Members provide notices consistent with the Transparency 

principle, an Owner’s or Registered User’s acceptance and use of Vehicle Technologies and Services constitutes consent to the associated information practices, 

subject to the Affirmative Consent provisions below. 

Participating Members understand that the sharing and use of Geolocation Information, Biometrics, and Driver Behavior Information can raise concerns in some situations, therefore Participating Members also commit to obtaining Affirmative Consent expeditiously for the following practices: 

• using Geolocation Information, Biometrics, or Driver Behavior Information as a 

basis for marketing; and 

• sharing Geolocation Information, Biometrics, or Driver Behavior Information 

with unaffiliated third parties for their own purposes, including marketing. 

Affirmative Consent is not required, however, when Geolocation Information, Biometrics, or Driver Behavior Information is used or shared 

• as reasonably necessary to protect the safety, property, or rights of Participating Members, Owners, Registered Users, drivers, passengers, or others (this 

includes sharing information with emergency service providers); 

• only for safety, operations, compliance, or warranty purposes; 

• for internal research or product development; 

• as reasonably necessary to facilitate a corporate merger, acquisition, or sale involving a Participating Member’s business; 

• as reasonably necessary to comply with a lawful government request, regulatory 

requirement, legal order, or similar obligation, which, in the case of requests or 

135 

demands from governmental entities for Geolocation Information, must be in 

the form of a warrant or court order, absent exigent circumstances or applicable 

statutory authority; and 

• to assist in the location or recovery of a vehicle reasonably identified as stolen. 

Participating Members also need not obtain Affirmative Consent when sharing 

Geolocation Information, Biometrics, or Driver Behavior Information with Thirdparty Service Providers that assist in providing Vehicle Technologies and Services if 

those parties are not permitted to use that information for their independent use 

and the sharing is consistent with the notices that Participating Members have provided. 

Participating Members may obtain Affirmative Consent at the time of vehicle purchase or lease, when registering for a service, or at another time. 

3. Respect for Context 

Participating Members commit to using and sharing Covered Information in 

ways that are consistent with the context in which the Covered Information was 

collected, taking account of the likely impact on Owners and Registered Users. 

The context of collection: Various factors will determine the context of collection, including the notices offered to Owners and Registered Users, the permissions 

that they have provided, their reasonable expectations, and how the use or sharing 

will likely impact them. 

• When Participating Members present clear, meaningful notices about how Covered Information will be used and shared, that use and sharing is consistent 

with the context of collection. 

• Participating Members commit to making reasonable and responsible use of 

Covered Information and may share that information as reasonable for those 

uses. Reasonable and responsible practices may vary over time as business 

practices and consumer expectations evolve. 

The following examples illustrate some of the reasonable and responsible ways in 

which Participating Members may use or share Covered Information consistent with 

the context of collecting that information, taking into account the likely impact on 

Owners and Registered Users The list is not meant to be exhaustive. 

• Using or sharing Covered Information as reasonably necessary to provide requested or subscribed services; 

• Using or sharing Covered Information to respond to a possible emergency or 

other situation requiring urgent attention; 

• Using or sharing Covered Information to conduct research or analysis for vehicles or Vehicle Technologies and Services; 

• Using or sharing Covered Information to diagnose or troubleshoot vehicle systems; 

• Using or sharing Covered Information as reasonably necessary to facilitate a 

corporate merger, acquisition, or sale involving a Participating Member’s business; 

• Sharing Covered Information for operational purposes with affiliated companies 

that are clearly associated with the Participating Member or with the Vehicle 

Technologies and Services from which the Covered Information was collected or 

derived; 

• Using or sharing Covered Information to prevent fraud and criminal activity, 

or to safeguard Covered Information associated with Owners or their vehicles; 

• Using or sharing Covered Information to improve products and services or develop new offerings associated with Vehicle Technologies and Services, vehicles, 

vehicle safety, security, or transportation infrastructure; 

• Using Covered Information to provide Owners or Registered Users with information about goods and services that may be of interest to them; 

• Sharing Covered Information as reasonably necessary to comply with a lawful 

government request, regulatory requirement, legal order, or similar obligation, 

which in the case of requests or demands from governmental entities for 

Geolocation Information, must be in the form of a warrant or court order, absent exigent circumstances or applicable statutory authority; and 

• Using or sharing Covered Information to protect the safety, property, or rights 

of Owners, Participating Members, or others. 

136 

4. Data Minimization, De-Identification & Retention 

Participating Members commit to collecting Covered Information only as needed 

for legitimate business purposes. Participating Members commit to retaining Covered Information no longer than they determine necessary for legitimate business 

purposes. 

5. Data Security 

Participating Members commit to implementing reasonable measures to protect 

Covered Information against loss and unauthorized access or use. 

Reasonable measures to protect Covered Information: Reasonable measures 

include standard industry practices. Those practices evolve over time and in reaction to evolving threats and identified vulnerabilities. 

6. Integrity & Access 

Participating Members commit to implementing reasonable measures to maintain 

the accuracy of Covered Information and commit to offering Owners and Registered Users reasonable means to review and correct Personal Subscription Information. 

Participating Members may provide the means to review and correct Personal 

Subscription Information in a variety of ways, including but not limited to web portals, mobile applications, or in-vehicle tools. 

Participating Members commit to exploring additional means of providing Owners 

and Registered Users with reasonable access to Covered Information, taking into account potential security and privacy issues. 

7. Accountability: 

• Participating Members commit to taking reasonable steps to ensure that they 

and other entities that receive Covered Information adhere to the Principles. 

Accountability mechanisms that Participating Members may implement: 

Participating Members commit to implementing reasonable policies, procedures, and 

practices to help ensure adherence to the Principles. Participating Members may implement training programs for employees and other personnel that handle Covered 

Information. Participating Members may consider creating internal privacy review 

boards to evaluate and approve new technologies and services involving Covered Information. Participating Members should make available reporting mechanisms for 

consumers to report concerns to Participating Members. Participating Members also 

commit to taking reasonable steps to ensure that Third-party Service Providers adhere to the Principles in providing Vehicle Technologies and Services that involve 

the collection, use, or sharing of Covered Information. 

V. Contact Information 

Alliance of Automobile Manufacturers 

803 7th Street, N.W., Suite 300 

Washington, DC 20001 

Tel: (202) 326–5500 

Global Automakers 

1050 K St., NW Suite 650 

Washington, DC 20001 

Tel: (202) 650–5555 

APPENDIX PARTICIPATING MEMBERS

BMW of North America, LLC 

Chrysler Group LLC 

Ford Motor Company 

General Motors LLC 

Mazda North American Operations 

Mercedes-Benz USA, LLC 

Mitsubishi Motors North America, Inc. 

Porsche Cars North America 

Toyota Motor Sales, USA 

Volkswagen Group Of America, Inc. 

Volvo Car Group 

Senator PETERS. Thank you. 

Having said that, Mr. Brookman, the problems of privacy and security certainly are widespread in the context and not limited to 

137 

the Internet of Things, as we have been hearing about today. But 

having said that, with the auto industry being very proactive with 

their set of principles that they just recently put together to protect 

consumer privacy and personal information from cyber threats, do 

you agree that this is a step in the right direction? What are some 

of your thoughts about the industry’s efforts? 

Mr. BROOKMAN. Yes, I think it is really great to see them being 

proactive on this issue, recognizing they take privacy very seriously 

especially with their cars. Cars are incredibly personal devices. So 

I think those principles are a very good first step. 

I would probably want to see a little more control over whether 

your car company always knows your location. In those principles, 

that is not an element. I know that the CEO of Ford was embarrassed last year at one point when he said, ‘‘well, we always know 

where you are.’’ There was kind of an uproar around that because 

I am out driving on the road. I want to be alone. I do not necessarily want Ford to know every place I go. And he had to kind 

of dial back those remarks. So I think we have smart car technologies that can be deployed in ways that are very privacy-preserving. Vehicle-to-vehicle, vehicle infrastructure communications 

do not need to have a lot of personal information in there. As a car 

company, I do not need to know that it is Adam’s black SUV. I just 

need to know that it is a big, 6,000-pound vehicle. So they can be 

deployed in really privacy-preserving ways. 

I want to make sure that whatever principle is going to be adopted, the fundamental idea of user autonomy is really important, 

that I am in control of my car. I paid $30,000 for this thing. It 

should work for me. And, you know, maybe I am totally happy having Ford give me turn-by-turn instructions, but it should be a question of user choice. 

Senator PETERS. Great. Thank you. 

And, Mr. Davis, in your testimony you mentioned the integration 

of Intel into the Internet of Things with sensors, and you talked 

about heating and air conditioning which allows the operator to 

identify opportunities in real time to reduce power usage. 

I am sure you are doing a number of things in the manufacturing 

sector, which of course has major ramifications. You mentioned it 

briefly in some of your answers. Could you tell us a little bit more 

about what Intel is doing in manufacturing and how that is going 

to transform that industry? 

Mr. DAVIS. Certainly from an Intel manufacturing perspective, I 

think we are one of the most sophisticated manufacturers in the 

world. We certainly create the most complex devices on the planet. 

And our factories today are really already kind of models of the 

Internet of Things. And what we are learning, as we go further 

along in the implementation of these kinds of technologies, we are 

learning even more as we can gain more access to data inside our 

factories. And it is allowing us to have better insights into how our 

products perform. 

We can improve the overall output of the factory. We can also 

make the operations much more efficient by using technologies like 

predictive analytics to be able to identify equipment that is nearing 

a point of failure and being able to take it offline in a proactive 

manner, in a scheduled kind of downtime, saves us a tremendous 

138 

amount in terms of factory interruption and improves the overall 

productivity. 

And these are the kinds of technologies that we are putting into 

our own factories. We are learning as we do these and then offering 

those kinds of technologies and learnings to other industries as 

well. Things like motors and pumps and compressors, any kind of 

piece of equipment like that can benefit from the basic physics of 

understanding how that device operates, being able to apply data 

analytics and predict when it might fail, and avoid that failure in 

a manner that we can anticipate and even get to a point of machines being able to acknowledge with each other that something 

is going awry. 

Senator PETERS. We have a question to go down the panel in the 

remaining minute here. We are seeing self-driving cars. We are 

seeing crockpots that are enabled by Internet technology as well, 

the full gamut of things. So some industries are embracing this. 

Others not so much. 

What would be your view of what industries are really on the 

cutting edge right now? Maybe we can just start with Mr. Abbott, 

if you were to pick one industry that is just really leading the way. 

Mr. ABBOTT. I think particularly in the enterprise phase, like 

manufacturing and logistics. 

Mr. DAVIS. We would say that retail is one of the industries really most poised to take advantage. Manufacturing would be close behind that. 

Mr. DONNY. I agree. Industrial applications of sensors are probably the driver for most of the Internet of Things. 

Mr. THIERER. At the consumer level, I would just add that health 

and fitness for wearables is exploding, and there are probably 

many people in this committee room who are wearing a wearable 

fitness device on their wrists and used it like me to lose 30 pounds. 

Mr. BROOKMAN. And I would say in the consumer space the area 

that I am most excited about is actually cars due to the incredible 

safety benefits and convenience benefits you are talking about. 

Senator PETERS. Right. Thank you. 

I yield back. 

Senator MORAN. Senator Schatz? 

STATEMENT OF HON. BRIAN SCHATZ, 

U.S. SENATOR FROM HAWAII 

Senator SCHATZ. Thank you. 

Mr. Davis, you mentioned that China and Brazil are ahead of the 

United States in developing a plan. And I guess my question is, are 

they only ahead in terms of having developed a plan on paper, or 

are they actually ahead of us in terms of developing and taking advantage of the Internet of Things? 

Mr. DAVIS. It is really both. It is having that plan that is a national plan and then aligning the implementation around it. So we 

are actually seeing both in the examples that we cited. 

Senator SCHATZ. And I assume in the examples that you cited, 

that these were government-driven plans more so than any of us 

would be comfortable with in the American democracy system? 

Mr. DAVIS. You know, the level of comfort, I guess—we will have 

to assess that. 

139 

But certainly I think there are opportunities to encourage innovation, to drive public-private partnerships. 

Senator SCHATZ. So my question is, if we are going to develop a 

national Internet of Things plan that is in the context of a free 

market and the context of a democracy, how do we strike the right 

balance in terms of it being private sector-driven, which I think we 

all agree on, and having a light touch and not getting into regulating right away? So that is one question. 

The other concern I have is simply time. In order to develop a 

plan in an American-style democracy, it may be a couple of years 

before we are able to render one. And I feel like we do not have 

enough time for that. 

So I would like you to address both questions, the public and private balance and how do we do this efficiently enough to have a 

plan that is meaningful. 

Mr. DAVIS. I certainly agree. I think trying to regulate it or legislate it, given the pace of technology and the pace of innovation, it 

will be tough to keep up. 

I think there are things we can do that help lead the way, again 

working with different industries to understand barriers and freeing those barriers, encouraging them to innovate in very specific 

areas, and also driving research. 

A great example would be data analytics. As we look for data scientists who can extract the information from the 44 zettabytes of 

data that is coming our way by the year 2020, certainly encouraging the education of the next wave of engineers and scientists to 

be able to support that I think is a good area. 

Then the last I would cite is there are some industry consortiums 

that are moving fast in the U.S. There is the Industrial Internet 

Consortium. You know, five U.S. companies founded that. It is over 

100 companies I believe today globally. It is intended to define 

areas of innovation that the industries need to align around, creating workgroups to actually go implement these recommendations, 

and then also making recommendations to standards bodies to 

evolve the standards as necessary. So I think there are things that 

we can do to use those consortiums to lead the way. 

Senator SCHATZ. I have to move on to the next question. There 

was a mention of encryption but it was brief. And I am a little surprised that we have not kind of dug deeper into the question of 

encryption because it seems to me that a combination of empowering consumers, some light but not zero touch on the regulatory 

side, and increased and improved encryption technology is going to 

be what addresses a lot of the concerns expressed by my ranking 

member and others about the Internet of Things. And so if we 

could just go down the line and if you could just talk briefly, each 

of you, about the potential for encryption to resolve and solve some 

of these data security and personal privacy issues. 

Mr. ABBOTT. Thank you, Senator. 

So encryption will be helpful. It will not be the panacea. And I 

think one way to look at this is if you looked at how e-commerce 

emerged on the Internet. Initially there were websites that did 

transact—that were not necessarily over an encrypted piece, and 

there were attacks. And I think in the same way that over time 

140 

best practices were adopted by engineering teams, the same will 

actually occur with IoT and is occurring today. 

Mr. DAVIS. So we think the use of encryption is important in how 

data traverses networks. We need to make sure that the data that 

we are receiving from that device is data we can trust. So trust is 

essential, I think, to the evolution of the Internet of Things. 

But encryption alone I do not think solves the problem. Again, 

I think there are some best practices that we are learning and 

evolving and we can do so through these consortiums to implement 

those effectively. 

Senator SCHATZ. I am almost out of time, so I am going to call 

an audible and not go down the line because I have a feeling you 

are all going to be for encryption and find the potential there. 

But it does seem to me that one of the challenges is to empower 

consumers to know whether there can be some kind of Good Housekeeping Seal of Approval so that a consumer can know whether 

this is an IoT device that they ought to feel safe about, that they 

ought to feel comfortable with, and whether it is opt in or opt out, 

I think those are important policy and consumer choices to be 

made. But on a very basic level, consumers have to know whether 

someone is meeting some basic standards, and I think that is one 

of the challenges right now. 

Thank you. 

Senator MORAN. Thank you, Senator. 

The Senator from Montana, Senator Daines? 

STATEMENT OF HON. STEVE DAINES, 

U.S. SENATOR FROM MONTANA 

Senator DAINES. So I get to represent the great state of Montana, 

and one of the things I will hear is when a bureaucrat flies into 

Montana from D.C. and they say they are there to help, we get 

really scared about that. 

So I have a question regarding—and I say this in the context of 

someone who was part of a cloud computing startup we took public. 

We had an office just north of you there from Kleiner Perkins in 

Menlo Park. We were up in San Mateo, had 17 offices around the 

world, 33 languages, and our product is a cloud computing CRM 

map called RightNow Technologies that Oracle acquired a couple of 

years ago. 

And I do have concerns as a consumer, as a parent about privacy 

and security, but I have also a great concern about the ability for 

technology innovation to move quickly. Somebody asked what made 

your company successful. Our CEO said we can run faster than 

anybody else, and that was our competitive differentiator. 

Unlike the glacial speed of D.C., you all are living in a very different world than the Beltway here in Washington. You move at 

the speed of electrons and we move at the speed of glaciers here. 

So a top-level question is, can the Federal Government be helpful 

in regulating something I do not think they even understand? Who 

would like to take that question? 

Mr. THIERER. Well, I think they are going to have a really hard 

time regulating the Internet of Things. I mean, the Internet of 

Things, as you suggested, Senator, moves the pace of Moore’s Law 

and is doubling every 18 months just like processors do. So that 

141 

sort of speed is going to be hard for us to set in stone any sort of 

rules that basically can govern that kind of innovation. 

What policymakers can do, beyond establishing a clear vision for 

how the Internet of Things can be fostered, is to suggest efforts to 

educate consumers and make them aware of potential security and 

privacy risks and vulnerabilities. Our government has a long track 

record of doing an excellent job of this in other contexts. I would 

just commend the Federal Trade Commission and many other Federal agencies who have OnGuard Online, which is a wonderful online portal for consumers to find great information about privacy 

and security best practices. 

Mr. BROOKMAN. Yes. I mean, to some extent, the Federal Trade 

Commission is already active in this area. Mr. Thierer mentioned 

50-some data security cases, which I think most people recognize 

is probably a good idea. You should be using reasonable data security requirements. 

On the privacy side, we are primarily just asking for better 

transparency. Right now I have a device. It is really hard to figure 

out what it does. At the very least, it should be written down somewhere what the company does. If you cannot explain it in a statement, maybe you do not really understand what it is doing, and 

that poses some privacy and security risks. 

Senator DAINES. All right. Thank you. 

And I think that whole opt in/opt out was an interesting discussion. I look at that—because I am running around with my devices. 

As someone who is a father of four children, they will say, Dad, you 

are so January 2015 already. You know, I mean, it is already outdated 2 weeks into February. 

But I think information does become currency, and so when I opt 

in to one of my apps—perhaps it is my airline when it knows I arrive in a certain city—it performs at a high level. It becomes currency with that information as the consumer makes that choice ultimately. 

And I guess I also have great faith in the power of crowdsourcing 

and what happened—the example you had in the K cups there of 

the reviews on Amazon. The consumers are not—I think they control the world. The horse left the barn a long time ago in terms of 

the consumer having the ultimate voice oftentimes in these debates 

in the free markets. 

I do believe, though, that national infrastructure and fin services 

perhaps and maybe others should be held to a higher standard and 

more strict standards as we look at the risk management. As you 

think about any kind of regulatory touch, how would you differentiate perhaps the Internet of Things from fin services infrastructure and so forth? Mr. Davis? 

Mr. DAVIS. I am clearly not the expert on financial services. So 

I will say that up front. 

But as we look at this breadth of Internet of Things, given the 

breadth of it, yes, I believe there will be different expectations for 

different industries and different market sectors. What happens in 

the consumer space I think is certainly critical in terms of both security and privacy. In the industrial space, there are many opportunities where we can open up and look at data from different data 

types and different sources that will enable us to derive the value 

142 

of the Internet of Things, new services, new products. So I think 

we are going to see different requirements, different needs across 

different industries, and to your point, financial services could certainly be that example. 

Senator DAINES. I am running out of time. I wanted to make 

sure I asked this question, though, and this is as a father of four 

children. With digital natives now running everywhere in America 

as they are growing up here, believe me, everything opens up with 

a swipe of the finger. Are there appropriate security measures and 

parental disclosures we should be thinking about to protect our 

children from the dangers of online security and privacy? 

Mr. THIERER. Well, Senator, I have testified in front of this committee many times on online child safety issues and have written 

books on parental controls and online safety technologies. And I 

can tell you this is a never-ending battle with myself as a father 

of two young children who are digital natives as well, and they are 

sometimes ahead of us as parents in terms of their capabilities. 

That being said, it is a constant educational process, and there is 

never any end to it. 

What the government can do is get more serious about media literacy and technological literacy efforts in what is called digital citizenship programs to try to make children more aware of appropriate uses and inappropriate uses of their technologies. 

Senator DAINES. Yes. I am out of time. But this is a case where 

our kids are faster and more quickly adopting this technology oftentimes than parents are. It is a profound issue we have to deal 

with here I think as a country as parents around how do we protect 

our children in this evolution. 

Senator MORAN. The Senator from Nevada, Senator Heller. 

STATEMENT OF HON. DEAN HELLER, 

U.S. SENATOR FROM NEVADA 

Senator HELLER. Chairman, thank you. Thanks for holding this 

hearing. It is an unusual topic, to say the least, but one I think 

just as important as it is odd. 

I want to thank all the witnesses for being here taking time out 

of your day to help us better understand where we are trying to 

go on this. 

I have a Microsoft Fit-band—now, whether it is mine or a member of my staff’s sitting behind me, I am not going to tell you. But, 

you know there is tremendous amount of information you get out 

of this Fit-band. I am looking at downloading how many steps. I 

am downloading sleeping habits. I can tell how many hours slept, 

how many times you woke during the night, what the efficiency of 

the sleep was—and I do not even know what that means—how 

many calories burned while you are sleeping for those 8 hours. It 

is incredible the amount of information that you get out of one of 

these Fit-bands. 

But just as this information is available to me, I guess the question we are trying to ask here on this committee is who else has 

this information. Where does all this information go? 

There is another app on calories. It tells you what you ate, links 

the two programs together. It tells you how much you are exercising, how much you are eating at the end of the day. At the end 

143 

of the day, you are, I guess, figuring out whether you are making 

progress or not. 

And I guess we are trying to decide whether you know that or 

does the rest of the world have access to that kind of information. 

Is that not in essence what we are dealing with? Is this not what 

we are trying to figure out? 

The amount of information that is out there—I read a number. 

Let us see if I can find it. The amount of information that is available to us. Here it is. We are producing multiple ziggabytes each 

year, a number that I do not quite understand. I do know it is 21 

zeros behind a 1 or a trillion a million times. That is the kind of 

information that is out there. 

I may not be the only one that is wearing a Fit-band. There is 

probably multiple people here in this room that are also wearing 

these Fit-bands. 

I guess the question is, is there a way—and, Mr. Thierer, maybe 

I can ask you first. Can we identify ways in which this data can 

be protected without doing harm? 

Mr. THIERER. Yes, Senator, I think we can. I think, obviously, 

consumers are going to be concerned about certain types of personal information, specifically sensitive health information, being 

shared too broadly, and that is going to necessitate different types 

of approaches and policies for that sort of information. But a lot of 

the information that is being collected by these devices and the information, the data that we are shedding, sort of what is called our 

data exhaust, is going to be more easily shared and probably a lot 

of consumers want it to be more easily shared. The complaints that 

a lot of app developers get is that it is not easy enough to share 

some of this data with some friends and other people or maybe 

your doctor because of existing policies or laws. 

Senator HELLER. Is that not where we are going? This information is going to be linked to your personal physician? 

Mr. THIERER. I think so, but of course we have to deal with 

things like HIPAA and other types of laws that make that potentially difficult. And I think there are going to remain some policies 

in place to deal with very sensitive forms of information like 

health, financial information, and so on. But I think for the most 

part there is a really delicate balance here because a lot of consumers are going to want to have more personalization and 

customization in their devices so they can learn and share even 

more about themselves with friends, colleagues, physicians, and 

others. So that is the balance we have to walk. 

Senator HELLER. Mr. Brookman, how does this happen? How do 

we make this happen without harming innovation? 

Mr. BROOKMAN. Yes. I think Fitbit is actually a really good example. You are creating a lot of really personal and interesting information, but you kind of want to have control over it. You do not 

necessarily want the world to know what your heart rate is. And 

people might be able to do really interesting research on it, but you 

do not want to necessarily be everyone’s guinea pig. 

I think Fitbit actually understands that. They actually have a 

really good rule in their privacy policy. You are creating really a 

lot of information, but it is yours. You are in control over it. We 

144 

are not going to sell it to data brokers. And I think that should 

probably be the default especially for really sensitive stuff like this. 

If you want to sell it to somebody or make it available to researchers, just get my permission for it. If you want to sell it to 

data brokers and, say, we will give you $5 off your Fitbit, that is 

fine. Make a value proposition for it. And so I think for things that 

would be surprising or confusing to a consumer, I think there 

should be a little more obligation to say, OK, here is what you are 

going to do. It is your device. You paid for it. You make the decision about what you want to do. 

Senator HELLER. Yes. Thank you very much for your comments. 

Again, I want to thank the panel for being here. 

Chairman, I support where Chairman Thune is coming from on 

this particular issue, trying not to do harm without harming innovation as we wrestle with the very issues that the panel and I discussed today. 

Thank you. 

Senator MORAN. Thank you, Senator Heller. 

The Senator from New Jersey, Senator Booker. 

STATEMENT OF HON. CORY BOOKER, 

U.S. SENATOR FROM NEW JERSEY 

Senator BOOKER. Thank you very much, Mr. Acting Chairman. 

You know, I just want to pick up on it. This is a phenomenal opportunity for a bipartisan, profoundly patriotic approach to an 

issue that can explode our economy. I think there are trillions of 

dollars, creating countless jobs, improving quality of life, democratizing our society in ways that gives advantages to people who are 

being marginalized on the edges, breaking down barriers of race 

and class. We cannot even imagine the future that this portends 

of, and we should be embracing that. America right now is the net 

exporter of technology innovation in the globe, and we cannot lose 

that advantage. It to me is something that we should continue to 

be: the global innovators on these areas. 

And so a lot of my concerns are really what my Republican colleagues also echoed, which is we should be doing everything possible to encourage this and do nothing to restrict it. And there are 

a lot of legitimate fears, but in the same way of every technological 

era, there must have been incredible fears starting with the airline 

industry, just human beings taking flight, had tremendous fears. 

But for us to do anything to inhibit that leap in humanity to me 

seems unfortunate. 

And so from copyright issues, security issues, privacy issues, all 

of these things are worthy of us wrestling and grappling with, but 

to me we cannot stop human innovation and we cannot give advantages in human innovation to other nations that we do not have. 

America should continue to lead. 

And I also believe that this has got to be a public-private partnership, that we all have a role. The very Internet itself is the result of a public-private partnership, investments made by the public space, by the civic space that innovators and entrepreneurs have 

made, again, beyond the imagination people had just 20–30 years 

ago. 

145 

So I want to jump in on two things, and I imagine there might 

be another round, but the first issue is spectrum. I have a bias. I 

think government hoards too much spectrum, and I think that 

there is a need for more spectrum out there. Everything we are 

talking about—and I think the word was used, an ‘‘obesity’’ of 

usage and needs going out there—is going to necessitate more spectrum. And so for me, yesterday Senator Rubio and I, again in a bipartisan way, reintroduced the WiFi Innovation Act which aims to 

address this need by encouraging more spectrum sharing and freeing up more spectrum. 

And so I just want to highlight the importance of these sharing 

agreements and increased spectrum availability is going to be in 

this just for the record. And let us just do it really quick. Anybody 

who wants to jump in on that. 

Mr. DONNY. I will lean in and weigh my support. In agriculture 

we have very unique challenges in moving data. You do not have 

a building, your home in which your Fitbit when you walk in the 

door, syncs up with the WiFi that you have got available. On the 

farm, you do not have broadband. You do not have WiFi available 

to you. So if we want to lead the world, continue to lead the world 

in agriculture—and it will be through technology—we have to 

solve—this is a fundamental problem that I think a public-private 

partnership is perfect for. 

Senator BOOKER. Right. And so do not get me started about 

states that are banning broadband innovation by municipalities. Do 

not get me started on that. But you agree that we have to solve 

these problems. We have to create more spectrum availability. And 

the fact that countries like South Korea and others have more 

broadband penetration than the United States of America is absurd, and we need to solve these problems. 

But I want to stick with you being that you are the courageous 

one. And another thing that is an issue for me, where this issue 

of fear and legitimate concerns undermine American leadership, is 

the issue of drones. It is one of those issues that strikes fear in 

Americans’ concerns. But the potential and possibility for drone 

technology to alleviate burdens of our infrastructure, to empower 

commerce, innovation, jobs, to really open up unlimited opportunities in this country is pretty incredible to me. And in your area of 

agriculture, as I watch our government go slow in promulgating 

rules, holding back American innovation, what has happened as a 

result of that is innovation has spread in other countries that do 

not have these rules, have put in sensible regulations, but now we 

are seeing innovation and technology export from America and 

going other places. 

In the agricultural context, as my time runs out, could you just 

give us a picture? Because I see mine surveys, agricultural uses 

abroad that are not being done here. Could you just comment on 

that real quick? 

Mr. DONNY. Thank you, Senator. It is a great topic. Agriculture 

is a wonderful use case for drones. There are wide open areas, lots 

of land to survey and crop scout. We can use drones to improve productivity. So instead of sending someone out to look at the field to 

go look for disease and pests, you can send a drone out that identifies those unique challenges, and then when you identify that 

146 

space, you can be more effective with pesticide applications, with 

use of resources. And it is a wonderful use case. We should be leading this. And the industry is spending hundreds of millions of dollars in drones, and agriculture is waiting for this to happen. 

Mr. ABBOTT. I can comment, Senator, from the investment side. 

This is an area that in particular we have been focused in and 

have made investments and plan to continue additional investments in because we do see that we are at a very early stage of 

a massive disruption in a lot of these commercial opportunities. 

Senator BOOKER. My friends at Kleiner have told me basically a 

lot of the innovations now are not happening in the United States. 

A lot of the research and investments are happening overseas because of Government policy that is restricting that here. Is that 

correct? 

Mr. ABBOTT. It is correct that there are countries outside the 

U.S. that are further along on the regulatory side that we should 

try to learn from. 

Mr. THIERER. Senator, I would just add that we need to be thinking of the drone opportunity as creating airspaces of platform for 

innovation the same way the Internet created a platform for new 

innovation. And the way we counter the fear that you correctly 

identified that is out there is to counter it by talking about the lifeenriching and lifesaving opportunities of these and other Internet 

of Things devices. 

Senator BOOKER. I am now really over on my time. We have people that get injured every year, and other countries like France are 

using drones to fix poles, not putting human beings in danger, 

doing it at a fraction of the cost and a fraction of the time. Forgive 

me. 

Mr. DAVIS. Senator Booker, if I could just add on to that. I think 

you made two really great points around efficient use of spectrum. 

As we think about 50 billion devices, I think that is a really key 

topic. 

The other is around the distinction between consumer applications. Drones are a great example. A lot of the attention is around 

consumer applications. But around the Internet of Things, we are 

going to see the economic benefit in the commercial and industrial 

applications. Drones are a great example. There are many others. 

Senator BOOKER. Thank you. 

Senator MORAN. Senator, thank you. 

The Senator from Nebraska, Senator Fischer. 

STATEMENT OF HON. DEB FISCHER, 

U.S. SENATOR FROM NEBRASKA 

Senator FISCHER. Thank you, Senator Moran. 

I loved Senator Booker’s enthusiasm on this, and we are working 

on the Internet of Things with Senator Ayotte and Senator Schatz 

and trying to move forward. 

I think I am past the basic question on what is the Internet of 

Things. That is always a good first start here. 

But there are, I believe, huge benefits out there. I would like to 

ask you, Mr. Abbott, what do you see as truly the benefits of the 

Internet of Things? And do you think, as we move forward, this 

space is going to be dominated by established companies or is there 

147 

going to be room for those small startups? Where are we on that? 

And how can we continue to be a force for innovation instead of 

stomping down that entrepreneurial spirit? 

Mr. ABBOTT. Thank you for the question, Senator. And I will actually come back also to reiterate some of the comments I made to 

Senator Booker. 

Senator FISCHER. Well, his time is done. 

[Laughter.] 

Mr. ABBOTT. We are particularly excited with the commercial applications in the drone space, whether it be mining, inspection, precision agriculture, or just pure safety. And there are a couple examples there with companies we are working with and we are really 

excited about. 

We tend to believe, certainly, that it is going to be these small 

companies that disrupt the large companies in this space. And I 

think we are seeing this at the early days for some of these contractors on the Government side realizing that drones can be built 

by these small companies for much lower costs in much more innovative ways, realizing at the same time that we do need some guidance on the policy side, which I know the FAA is working on. 

Senator FISCHER. And, Mr. Thierer, when you were giving your 

opening statement, it reminded me that 9 out of the 10 top innovative companies in the world in 2013 are American. Is that going to 

continue? What kind of policies are we going to need as we address 

the Internet of Things? I guess I am really concerned about Government getting in the way and getting in the way of that innovation, whether it is a large company or a small startup. Sure, there 

are concerns out there, but I do not want to see all the excitement 

that is with the Internet of Things move overseas. So what can we 

do with that? 

Mr. THIERER. Well, absolutely, Senator. And I want to commend 

you on your recent speeches on this issue and your leadership on 

it because you have identified that we got policy right when it came 

to the Internet more broadly, and we now need to get it right for 

the Internet of Things. 

In essence, America found the sort of secret sauce of modern innovation. We figured out how to get the right policy prerequisites 

in place starting with essentially a light touch vision instead of a 

plan. Senator Schatz pointed out earlier, do we need a plan? I 

think we need a vision more than we need a plan. And the vision 

we had, led by Congress and the Clinton administration in a nonpartisan fashion, was that sort of light touch, market-driven approach that addressed harms as they developed instead of trying 

to preemptively anticipate every one of those problems like some of 

our competitors did overseas and say we need to preemptively figure out how to solve every problem before we allow technology and 

innovation to go forward. Well, there is a reason that the household 

names in Europe on technology are American companies. Meanwhile, it is hard to name any European innovators here in the 

states. 

Senator FISCHER. Well, I know I am working with my colleagues, 

Senators Booker and Schatz and Ayotte. Hopefully, we are going to 

present a vision as we work on a resolution that we will get before 

148 

Congress. I think that is very, very important that we have that 

vision and that light touch. 

I would like to just touch on something that, Mr. Brookman, you 

and also Mr. Davis said earlier about security is an afterthought 

and when new products are built, that is when the security needs 

to be designed and put in them. 

We had a hearing earlier about data security, and I have deep 

concerns about cybersecurity in this country. And at that hearing, 

we heard about businesses that may be getting pressured by foreign governments to give up their software in order to get a bigger 

market share in another country. 

What do you feel about that? And what do you think should be 

a response by our government by this Congress because of the 

interrelationship that we see with much of the software and what 

we have seen with nation states creating mischief with companies? 

Mr. BROOKMAN. Yes. I certainly do not want to see any mandated 

vulnerabilities in encryption technologies, including backdoors. Unfortunately, it is something that the U.S. Government has asked 

for, which I think sets a really bad precedent for the rest of the 

world, saying that we need to have mandated vulnerabilities into 

data security. So I think the best thing we can do is not doing it 

ourselves. Therefore, we would have some high ground to stand on 

to say, no, other countries should not be doing it either. 

Senator FISCHER. But other countries are doing it. So what steps 

do we need to take, or do we need to take anything? How would 

you prohibit this or would you? 

Mr. BROOKMAN. It is a really good question. It is one I have not 

put a lot of thought into. My hope is that companies doing business 

overseas will resist those sorts of requests. It is a tough issue for 

companies that are spread out all over the globe. When do you censor speech? When do you take down information in response to the 

right to be forgotten? Companies have a really delicate balancing 

act. I have never heard the best answer as far as how do you take 

inconsistent legal obligations when you are spread out all over the 

globe. 

Mr. THIERER. And I would just add, Senator, that this is exactly 

where our Government needs to be standing side by side with companies when they have these problems internationally and defending them when they bake in better encryption and security by design instead of, as Mr. Brookman suggested, undermining them 

and saying, well, maybe you need to have some backdoors for us 

instead. That is not going to be a consistent principal message to 

take out globally. 

Senator FISCHER. Mr. Davis? 

Mr. DAVIS. Senator Fischer, I think you made a great comment 

in terms of the legacy devices that exist today as opposed to security being an afterthought. Really, I think part of the challenge 

today is about 85 percent of the billions of devices that exist today 

that have integrated computing are not connected to each other or 

the Internet. That is an opportunity. We can connect to those devices. We can start finding data that we did not have before. I gave 

the manufacturing example earlier. The ability to extract data that 

we have had access to in the past is one of the promises of the 

Internet of Things to drive greater efficiency. But we can do so in 

149 

a way that we can connect those securely. There are technologies 

that allow us to even connect those older legacy devices, be able to 

feed that data up into a data center or cloud to do the kinds of big 

data analytics that are going to be so valuable in addition to building it in from the beginning with a broad end-to-end security technology strategy in mind to begin with. 

Senator FISCHER. Thank you so much. 

Thank you, Mr. Chairman. 

The CHAIRMAN [presiding]. Thank you, Senator Fischer. 

I understand Senator Moran has done a brilliant job of presiding. 

So thank you. 

Next up is Senator Gardner. 

STATEMENT OF HON. CORY GARDNER, 

U.S. SENATOR FROM COLORADO 

Senator GARDNER. Thank you, Mr. Chairman. 

And thanks to the witnesses for being here today. 

Where else in Congress, I guess, do you discuss super cookies, 

milk, and drones in the same committee hearing? 

[Laughter.] 

Senator GARDNER. This has been fascinating to hear, but it is exciting to talk about the future of technology and where we have 

been and where we are heading. 

So it was 1997, I believe, when our farm equipment dealership 

sold our first GPS satellite system, advanced farming system. And 

we sold it to a gentleman who was right around 65 or 70 years old 

and it had the PC MCA card, the pin card that you put in to 

download the data. And I think at that point there were three data 

points that we were measuring off of the combine. It was probably 

some kind of a protein count, moisture count, and of course your 

yield. And so those were the three things that we did. 

And over the past 20 years, of course, now we have seen layer 

after layer of data, whether it is moisture data, whether it is—you 

know, information that you can plug into your seed application, 

your seed rate, your flow rates on fertilizers and things like that. 

And of course, we have been using phones to turn on and off the 

sprinkler for decades in agriculture. And so all a part of prescription farming and how we can do a better job of providing food, fiber 

for the world. 

The same thing we can do in the supply chain with manufacturing in industry, whether it is the vehicles or furniture. We can 

do the same kind of approach with the new technology. 

But so much of this is tied together with how we are going to 

approach spectrum, getting back to Senator Booker’s point, and 

how we are going to approach availability to innovate. 

So keeping in mind the farm model, you have a combine—say 

you have a tractor going through the field with a cultivator. You 

have a sprinkler in the field that has—maybe it has got valves on 

it that are each individually controlled through the Internet, WiFi, 

perhaps from the tractor itself or the farm or your phone, wherever 

you are to apply a different percentage of fertilizer as your 

chemigation system is working. You have a drone flying over the 

field that is taking a picture of it to see where you may need a litVerDate Nov 24 2008 11:45 Apr 20, 2016 Jkt 075679 PO 00000 Frm 00153 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\99818.TXT JACKIE
150 

tle bit more or less nitrogen. All this, I am assuming, is going to 

be with unlicensed spectrum. 

There was a situation in Congress just over the past year 

where—many of us do not even know it—in our offices there was 

an unlicensed spectrum issue that came up in our offices here on 

Capitol Hill. And it was an unlicensed spectrum issue where the 

FCC had sort of said, yes, go ahead, and then a license came in 

to take this spectrum. 

How are we going to handle the Internet of Things? How are we 

going to handle and approach these issues when you have conflicts 

of more need for spectrum, issues of unlicensed spectrum, issues of 

people coming in and getting licenses for an area that may already 

have a campsite in it, so to speak? 

Mr. Abbott, I do not know. That is a very open-ended question. 

Do we have policies in place, I guess, to address the balance—growing the Internet of Things, growing device application, growing utilities that we can be more productive with without a better definition of how we are going to handle unlicensed spectrum issues? 

Mr. ABBOTT. Thanks for the question, Senator. 

I do think that we do need to provide more licensed spectrum for 

innovation. I think today, while it is not a constraint we are seeing 

in early stage companies, it soon will be as more and more of these 

services and applications get deployed in the enterprise and in the 

consumer space. 

Senator GARDNER. Mr. Davis? 

Mr. DAVIS. Well, we certainly see there is an important need for 

licensed spectrum and unlicensed spectrum. And my comments to 

Senator Booker earlier—you know, what we are really looking at 

is how do we most efficiently use that spectrum that is available? 

Because as we think about connecting 50 billion devices, it is really 

how to most efficiently provide that to the different kinds of uses 

and applications. 

Senator GARDNER. Mr. Donny, I do not know if you want to address that or not. 

Mr. DONNY. I think I have addressed it several times. Both licensed and unlicensed, as you know, is used in agriculture and we 

need all we can eat really. 

Senator GARDNER. Mr. Thierer? 

Mr. THIERER. Yes, we all agree on this one. And I think what you 

and Senator Booker raise is a valid point. I think the problem is 

a political problem of when you have incumbent constituencies who 

already hold or hoard a lot of this spectrum, shaking some of that 

loose, you are going to have to create better incentives for them. 

And we are going to have to counter the narrative that only they 

have sort of lifesaving or life-enriching applications. We do too on 

this side, and we need more spectrum for it. 

Senator GARDNER. And as Mr. Donny said, though, at the same 

time in rural America, we do have a separate challenge of making 

sure that we have enough mobile broadband to supply cell phone 

signals and everything else. So you do have this kind of a challenge 

particularly in rural areas where you have a conflict even within 

itself that needs to be addressed. 

151 

I guess I have a lot of questions. I would love to just have this 

conversation all day, but at this point, Mr. Chairman, I will yield 

back. 

The CHAIRMAN. Thank you, Senator Gardner. 

Senator Moran? 

STATEMENT OF HON. JERRY MORAN, 

U.S. SENATOR FROM KANSAS 

Senator MORAN. Mr. Chairman, thank you very much. 

Last week, a subcommittee held a hearing on data breach security, data security. We talked about breach. We talked about the 

standard of what a breach is. We talked about whether there ought 

to be preemption. In the kind of, I think, data breaches that we 

have been considering, what we are worried about is a consumer’s 

personal information is obtained by those who should not have it, 

financial information, Social Security number, and how that information can be used to the consumer’s detriment. 

And certainly here there are security issues. Part of it is related, 

as we have heard, to privacy. But what is different about the Internet of Things? What kind of data breach should we be worried 

about? So somebody learns that your milk needs to be replaced in 

the refrigerator, are the data breach security consequences—let me 

say it differently. Is the data breach, the consequences of that 

breach, something different than what we normally think about 

when we talk about data security? And if so, what should we be 

thinking about as we try to solve the issue of the breach and the 

consequences? 

Mr. ABBOTT. So I do think that it is somewhat relative to the domain and the application in regards to the severity of a data 

breach, indeed. 

Senator MORAN. What would be the spectrum within the Internet of Things? 

Mr. ABBOTT. So at one end of the spectrum, you have a sensor 

just emitting temperature. On the other end, a sensor in the medical world that is emitting some type of physiological response that 

has control. Because there are sensors that are just emitting data, 

and there are sensors that actually can control. So we have this 

spectrum of, we will say, criticality, if you will. And so I do not 

think there is a one-size-fits-all data breach definition. And it is the 

same way that I do not think it would be appropriate to have a single policy for security across that spectrum. 

And I think it also relates to data sharing. If you look at temperature, that might be actually a great sensor to share widely, 

whereas you go to the more personal data, maybe that should be 

shared locally, just that individual, and have a very clear ability 

to opt out if the user does not understand the benefit that he or 

she is getting by sharing that data. 

Senator MORAN. Mr. Abbott, let me ask you. I will come back, 

Mr. Brookman. Mr. Abbott, let me ask you in particular. When you 

are looking for investors in companies or you, Mr. Donny, when you 

are finding somebody who wants to invest in a company involved 

in the Internet of Things, do they consider their investment risk 

based upon the potential of security/privacy breaches? Is that built 

into the investment? 

152 

Mr. ABBOTT. It typically is, and I think it is more a function of 

the team that is involved that is actually building the company and 

building that product. So if we look at a company like NEST that 

we are investors in, certainly that was a consideration. 

Senator MORAN. Is there any private insurance that is developing to protect your companies and the investors in those companies from the consequences of a breach? Can you become insured 

in a private sector way? 

Mr. ABBOTT. There may be but I am not aware of them. 

Senator MORAN. Mr. Brookman, you wanted to respond earlier. 

Mr. BROOKMAN. Yes. So I know traditionally data breach notification has been about financial information, but I think we are increasingly recognizing that you can lose other personal information 

as well. Think about the iCloud celebrity hack. I mean, we have a 

personal interest in that. If my pictures were hacked, I would want 

to know about it. The Sony case, for example. If my e-mails get 

hacked, I would want to know about it. So we are actually seeing 

some states pass some broader breach notification laws, saying if 

your online accounts get hacked, well, of course, you should tell 

them about it. So I think any Federal standard should consider 

that as well or at the very least not preempt those states from 

passing breach notification laws that extend to new categories of 

data that are not addressed by a relatively narrow financial data 

bill. 

Senator MORAN. Mr. Chairman, thank you. 

The CHAIRMAN. Thank you, Senator Moran. 

Senator Klobuchar? 

STATEMENT OF HON. AMY KLOBUCHAR, 

U.S. SENATOR FROM MINNESOTA 

Senator KLOBUCHAR. Thank you very much, Mr. Chairman. I 

think I have a worse cold than you. So this will not be one of these 

filibustering-by-the-Senator moments. I will let you guys answer as 

long as you want. 

[Laughter.] 

Senator KLOBUCHAR. This is a very important issue, of course, 

the future of connected technologies. This year at the consumer 

electronics show in Las Vegas, companies from around the world 

showed off their newest technologies, 900 of which were connected 

devices. So it is a pretty exciting time but also, as we know and 

have discussed, a time of making sure that consumers are protected as well. 

Senator Hoeven and I—maybe you are aware of this—last year 

introduced the Data Privacy Act, and we plan on reintroducing it 

again. 

An event data recorder, as I think many of you know, is a device 

that records about 5 seconds of technical safety data when a crash 

occurs. EDR’s can be the only resource available to determine the 

cause of a crash by providing information about what a driver was 

doing in the seconds leading up to the crash. 

Starting in September 2014 all new vehicles will have an EDR, 

and NHTSA does not have the authority to determine who owns 

the EDR data, which is why we introduced this Data Privacy Act 

bill. Our bill makes clear that the owner of the vehicle is the rightVerDate Nov 24 2008 11:45 Apr 20, 2016 Jkt 075679 PO 00000 Frm 00156 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\99818.TXT JACKIE
153 

ful owner of the data collected by that vehicle’s EDR and may only 

be accessed under rare circumstances. 

Mr. Brookman, do you agree that empowering consumers to have 

ownership of their data is important, similar to what we have outlined in the Data Privacy Act? 

Mr. BROOKMAN. So I have not looked at that bill in some time. 

So forgive me for not supporting it right now. 

My recollection of it is I think I very much agree with the general principles of it. This is my car. I paid a lot of money for it. 

I should have control in most situations of when that data is 

accessed. Obviously, in an accident, there will be a process for accessing that information, but fundamentally you should not be 

sending it off in other circumstances without my control. 

So I want to look at the bill specifically, but I think that I very 

much agree with the general tenor of your statement. 

Senator KLOBUCHAR. OK, very good. Thank you. I just want everyone to be aware of that bill. 

One of the concepts that the FTC recommends for business dealing with consumer data is to design privacy and security into each 

product. It is oftentimes more difficult to retrofit a device with new 

technology to combat threats or to patch privacy controls than it 

is to design or install it to begin with. 

Mr. Davis, if businesses and innovators keep consumer data privacy control in mind throughout the development process at the 

get-go, do you believe they will continue to have the flexibility 

needed to innovate while also protecting consumers? 

Mr. DAVIS. Certainly there is a balance. Thank you for the question. Certainly there is a balance between security and privacy. Security I think we often think of as the technical implementation of 

the product in such a way that we can provide the level of privacy 

that consumers would expect. And so certainly I think as we develop the kinds of products that we are developing, with both in 

mind. So we have a set of requirements around both that our developers need to meet. And we have part of our organization who 

is looking at those implementations and making sure that our engineers and developers are adhering to those requirements. 

And so I think from a higher level, being able to define what the 

end looks like in terms of where we need to get to as industries 

in the objectives that we are trying to accomplish is a way to implement these kinds of things into a national IoT plan that has longreaching objectives without limiting the short-term innovations 

that are possible. 

Senator KLOBUCHAR. OK, very good. Thank you. 

One of the issues I have been working on since I got here has 

been cell phone unlocking. You mentioned it, Mr. Bookman, I think 

in your testimony. In fact, it was one of the first bills I introduced, 

The Cell Phone Bill of Rights. As you know, there have been 

changes, and today is the anniversary of carriers’ voluntary agreement with the FCC to increase transparency for their unlocking 

policies. 

Yesterday I sent a letter to the FCC and the CTIA for an update 

on that agreement. 

Mr. Brookman, you mentioned in your written testimony that 

cell phone unlocking was an example of why policies need to be in 

154 

place in order to ensure there is competition for connected devices. 

Can you expand on that from your written testimony? You should 

also know I am the ranking on the antitrust committee in Judiciary, and so we also do a lot of work with telecom. 

Mr. BROOKMAN. Yes. I think it is just normal consumer expectations where they have a device. They do not necessarily expect it 

to be locked down to certain carriers. If it has the technological 

ability to communicate with other Verizon or AT&T, of course, I 

should have the ability to do that. And unfortunately, it should not 

be incumbent upon the Library of Congress to have to pass an exception every 3 years. 

You know, Samsung makes a device. It has the ability to connect 

to whoever it wants to. We should have that right. I mentioned the 

example of coffeemakers trying to lock down what coffee you can 

use. These products really need to be designed, you know, as a 

service to the consumer who is paying money for them. I own it. 

I bought it. It should be trying to act in a way that is consistent 

with my reasonable desires. 

Senator KLOBUCHAR. OK. 

Anyone else want to pitch in on that? OK, thank you very much. 

The CHAIRMAN. Thank you, Senator Klobuchar. And I know that 

you and I are both hoping that the Internet of Things will lead to 

a cure for the head virus right now. 

Senator KLOBUCHAR. It is a Midwestern problem. 

[Laughter.] 

The CHAIRMAN. I have in this order, Senators Manchin, Markey, 

and Cantwell. And I have to step out for just a minute. So Senators 

Manchin, Markey, and Cantwell. 

STATEMENT OF HON. JOE MANCHIN, 

U.S. SENATOR FROM WEST VIRGINIA 

Senator MANCHIN. Thank you, Mr. Chairman. 

I had to miss part of this meeting because I had another Armed 

Services meeting. So I am very sorry that I did not get the first 

of it. 

Senator BOOKER. We know that because we had an Internet of 

Things LoJack on you. 

[Laughter.] 

Senator BOOKER. We are tracking your movements. 

Senator MANCHIN. I do not think there is anybody who wants to 

stymie innovation and entrepreneurship. I do not know if 535 

Members of Congress would. And we know that we are all connected because you just look out and everybody’s head is down. 

They are working on their phones. They are working on the iPads 

and they do not even know we are talking. 

[Laughter.] 

Senator MANCHIN. So with that being said, we are moving forward. 

I have a hard time believing that you are concerned that if we 

do a privacy bill, that you might not have access for the latest, 

greatest innovation in technology. If that would be the case, 

Facebook would have a serious problem because there are many 

millions and millions of people who want to share every little asVerDate Nov 24 2008 11:45 Apr 20, 2016 Jkt 075679 PO 00000 Frm 00158 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\99818.TXT JACKIE
155 

pect of their life. So I do not think you are going to have a problem 

with people sharing with you. 

But I think some of us have a problem if we do not want our information shared. Is there a middle ground here? 

I know with the phones, when I was Governor, people would 

just—they wanted privacy. They said I am getting tired of all these 

telemarketers calling me all the time and get these unlisted phone 

numbers so they could block them. And they were able to block. It 

did not stop any innovation and creation. Nobody’s business got 

hurt. 

And I will have to be the cynic. How much money do companies 

make off the sharing of information right now? You all have seen 

it. Now come on. It is over $600 billion. So being the cynic that we 

might be at times, I can understand why companies do not want 

any type of a privacy thing because it is a big moneymaker. Correct? Anybody want to speak to that? 

Mr. ABBOTT. Senator, I think one thing to keep in mind too is 

that by sharing that data, oftentimes it improves the consumer experience. There are many examples of products that—— 

Senator MANCHIN. I am saying if it improves it, do you not make 

it from the product itself? You are making it from selling that. 

Mr. ABBOTT. And the user actually gets a reward for the sharing 

of that information. Let us say as an example if I am sharing data 

from my thermostat back to a cloud service and that collectively 

improves the product for the population of those users—they have 

already purchased the product—that is a great experience. 

Senator MANCHIN. Where does this $600 billion of the economy 

come from? Where does it go? You are selling it and you are getting 

something for that, not just you are giving me more efficient service. You are selling that information to somebody else. The IoT basically is $600-plus billion growing very rapidly. So for those of us 

who want a little bit of privacy, we think you are doing pretty 

darned good. 

Mr. THIERER. But, Senator, the question of where the value is 

going, a lot of it is going to the consumer in the form of cheap or 

zero prices. I mean, the fact that we do not have to spend $20 a 

month for Facebook or pay for every search we do on a search engine, that is value to consumers. That is an improvement in our 

quality of life. And if you ask most consumers how much would you 

pay for these services, the answer is usually very little or nothing. 

They like that cost. Free is a good number. 

The question is what would regulation do to alter that balance 

and if it raised prices, would consumers appreciate it and understand why it happened. I am not so sure. 

Senator MANCHIN. You are not opposed to the privacy and us 

being able to block. You all do it, Mr. Donny, do you not? 

Mr. DONNY. We believe in the agriculture data that is owned by 

the farmer. That is very clear. Our objective is how do we work 

with the farmer to enable them to use data to make better decisions. Sometimes that is a relationship in which we are looking at 

data—— 

Senator MANCHIN. It would be a volunteer relationship. 

Mr. DONNY. That is right to help that relationship. 

156 

Senator MANCHIN. So you believe in the privacy that we should 

have—— 

Mr. DONNY. I am very straightforward. I think that data privacy 

is important, but it is truly dependent on what data you are looking at. In ag, I think that is a very important set of information. 

It derives commodity prices. It could be used for regulatory purposes because there is a lot of tail end of that data use. And so we 

want to make sure that the grower owns their data. 

Senator MANCHIN. I can understand where you all are coming 

from because you are afraid we might go too far. I understand. And 

with that being said, we have a hard time understanding that you 

do not believe you have enough information now because I am sure 

there is an awful lot of information that you do have because the 

financials show that. And we are just trying to find that balance 

I believe, and if you could help us do that—Mr. Davis, I think you 

want to comment on that. 

Mr. DAVIS. Senator, I think your point is really important in 

terms of the relevance of security in everything that we are talking 

about with the Internet of Things. As we talk to our customers, as 

we talk to analysts in the industry, the number one topic—and it 

is foundational, the five tenets that we described—is security. And 

so the ability to integrate security knowing that a device that is 

added to my network is a device that is supposed to be on the network and the information I am getting from it is what I would expect to be getting—it is valid information—those are foundational 

to the Internet of Things. 

In terms of privacy, you are absolutely right. We are stewards of 

that information in terms of balancing the value that I think has 

been described from having access to some of that data and the importance of protecting it and being stewards of that data in terms 

of the consumer. There is a balance and it is something that will 

continue to evolve industry by industry. 

Senator MANCHIN. Thank you. 

Senator Markey? 

STATEMENT OF HON. EDWARD MARKEY, 

U.S. SENATOR FROM MASSACHUSETTS 

Senator MARKEY. I am Chairman again. 

[Laughter.] 

Senator MARKEY. By unanimous consent, I recognize myself. 

[Laughter.] 

Senator MARKEY. So cars are a major part of the Internet of 

Things, and every year new cars are more connected than ever before. One reason that cars are such an important example of connected devices is that they are so dangerous. A small vulnerability 

or error in coding can lead to a catastrophic consequence for drivers, passengers, and pedestrians. 

On Monday, I released a report on our connected automobiles, 

the Internet of Things, which describes how new cars are really no 

longer just internal combustion engines. They are computers on 

wheels. 

I ask unanimous consent to submit my report for the record. 

[The information referred to follows:] 

157 

TRACKING & HACKING: SECURITY & PRIVACY GAPS PUT AMERICAN DRIVERS AT RISK

A report written by the staff of Senator Edward J. Markey 


0211MARK1.eps
158 


0211MARK2.eps
159 


0211MARK3.eps
160 


0211MARK4.eps
161 


0211MARK5.eps
162 


0211MARK6.eps
163 


0211MARK7.eps
164 


0211MARK8.eps
165 


0211MARK9.eps
166 


0211MARK10.eps
167 


0211MARK11.eps
168 


0211MARK12.eps
169 


0211MARK13.eps
170 

Senator MARKEY. I asked 20 automakers what they are doing to 

protect these computers on wheels, and what I found is that they 

are not doing enough. Cars today are highly connected. Every new 

car has some wireless technologies built into it. The problem is that 

there are massive holes in how car companies are securing these 

features against hackers. Only two of the 16 car companies who responded have developed any capability to detect and respond to a 

hacking attack in real time. Thieves no longer need a crowbar to 

break into your car. They just need a smart phone. And they can 

do much worse than open the doors. It is possible for wireless hackers to honk the horn, control the steering, and even cut the brakes. 

Today’s cars are also collecting tremendous amounts of personal 

driving information. Cars know where you are, where you have 

been, how fast or slow you drive, and even the mileage since your 

last oil change. This information can be used to help drivers find 

their destinations, get more miles per gallon, and drive more safely. But it can also jeopardize the security and privacy of drivers, 

of families across our country because there are currently no rules 

of the road to protect driver privacy and security. There are currently no rules for how to protect this data as it is being gathered, 

and most customers do not even know that their information is 

being gathered as they drive and that that information is being 

sent to third parties who the drivers do not even know about. 

And that is why in the coming weeks, I plan to introduce legislation that directs the National Highway Traffic Safety Administration and the Federal Trade Commission to establish Federal standards to secure our cars and protect our drivers’ privacy. We need 

the electronic equivalent of seatbelts and airbags to keep drivers 

and their information safe. We have stickers on cars for safety. We 

have stickers on cars for fuel economy standards. Well, we need a 

new set of minimum standards to protect driver security and privacy in new vehicles that the customer will know that the company 

built into that car or did not build in. If they want a zero on the 

sticker, they can have a zero. They can say it is too expensive. 

They can use the same argument the auto industry used in this 

committee opposing seatbelts and airbags, saying it is too expensive for the auto industry. They can make that argument, but there 

will be a zero on the dashboard so that people can see it. 

These security performance standards should include a requirement that all wireless access points in the car are protected against 

hacking attacks, evaluated using penetration testing, requirements 

that all collected information is appropriately secured and 

encrypted to prevent unwanted access, and a requirement that the 

manufacturers or third party feature provider be able to detect, report, and respond to real-time hacking events. 

And the privacy standards should include transparency requirements so drivers are made explicitly aware of data collection, transmission, and use of driving information; consumer control over that 

data; and a prohibition on the use of the personal driving information for advertising or marketing purposes unless you get permission from the driver. 

New cars will also be evaluated by a rating system, a cyber dashboard that informs customers about how well the vehicle protects 

drivers beyond those minimum standards. This information will be 

171 

displayed on the label of all new vehicles just as fuel economy is 

today. 

Mr. Brookman, do you believe that every car should be protected 

against hackers who can remotely access and take control of your 

car? 

Mr. BROOKMAN. Yes. 

Senator MARKEY. If a car does get hacked, Mr. Brookman, do you 

think it would be good for there to be a system to detect and alert 

the automaker or authorities that something is happening? 

Mr. BROOKMAN. I do. 

Senator MARKEY. Do you believe customers should be made 

aware of the personal information their car is collecting about 

them? 

Mr. BROOKMAN. Absolutely. 

Senator MARKEY. Do you think that drivers should be given control over their personal information and be allowed to choose 

whether the data is collected about them or sold to third parties? 

Mr. BROOKMAN. In most cases, yes. 

Senator MARKEY. Do you believe that car companies should be allowed to sell an owner-sensitive driving history to insurance companies, data brokers, or anyone else? 

Mr. BROOKMAN. The consumers could obviously consent to that, 

as they do today, but absent user control, no. 

Senator MARKEY. Thank you. 

So that is the point. A software that can be built in that makes 

all these wonderful things possible by companies should have the 

same geniuses in those companies with the capability to build in 

a protection for security and privacy. All of a sudden, they cannot 

figure out how to do that? All of a sudden, they cannot figure out 

how to protect the consumer, their privacy, their security? No. If 

you can figure out an algorithm that sends information around the 

world in a blink of an eye, you should be able to figure out an algorithm that also provides consumers with the privacy and security 

which they need as they are driving their vehicles. 

I thank you, and I yield back the balance of my time. 

Senator CANTWELL. I am not sure there is any balance left. But 

thank you. 

[Laughter.] 

Senator MARKEY. I am talking to the ether here. 

Senator KLOBUCHAR. That was a very generous offer. 

[Laughter.] 

Senator MARKEY. Thank you. 

STATEMENT OF HON. MARIA CANTWELL, 

U.S. SENATOR FROM WASHINGTON 

Senator CANTWELL. Thank you. 

Well, gentlemen, I want to maybe come with a little bit broader 

perspective. And I apologize too. We were in a Finance markup. 

One, I want to hear about some of the applications that you 

think might actually financially benefit consumers in the future. I 

mean, obviously, one of the issues here is, you know, you go to the 

grocery store, the soup deli, and you get a little punch. You buy so 

many soups or so many coffees. You get a reward. So what is the 

172 

reward going to be here? What are the applications for loyalty or 

sharing non-personal data that might benefit consumers? 

Second, we are talking about applications for privacy today on 

these devices just as we did for banking and health care and other 

applications 15–20 years ago. So are we going to continue to go by 

device, by sector on privacy laws, or do you think we will get to 

a point where we need a brighter Larry Lessig kind of privacy right 

issue? Do you see that happening? 

And third, if you could comment on the importance of net neutrality and the open Internet for keeping the application and device 

economy going? Mr. Abbott? 

Mr. ABBOTT. Sure. I will begin. Thank you, Senator. 

So on your first topic, in terms of an example, I think one clear 

benefit in one scenario is around thermostats and energy conservation in the home, saving both cost to the consumer in terms of the 

money spent on heating his or her home. And oftentimes there are 

examples where the tuning of that algorithm for heating your home 

on and off when you are away is actually built from a population 

of users. So you are looking at personalization but driven off a population that is de-identified. It is really, really important. 

Senator CANTWELL. I think now because so many people look at 

what is happening now in the identifiers or, like you were talking 

about, precision agriculture and the data that has been mined by 

the big companies, what individual consumers want to know—I am 

a big hiker. I want to know, OK, I will tell everybody I am a big 

hiker, but then I want you, if you are going to be sending me these 

ads, whether it is REI or someone else—I want a discount because 

I told you that. Because what is happening now is everybody is figuring that out by somebody else’s mechanism and making benefit 

off of that. But I am saying I am willing to share some of that, but 

I want to know what my discount is going to be as part of that 

process and if there are applications out there that are like that. 

So I get the energy thing, and it is very, very important. But I 

guess I am thinking a more up-front dialogue with the consumer 

about this data. 

Mr. ABBOTT. I think, Senator, we talked a couple times before 

around the transparency need in this environment, and I think 

that is particularly important because people immediately oftentimes, when they think of data sharing, they are thinking immediately of advertising. And in those cases, at least my view is that 

user should be able to opt out based on a very clear communication 

of how that data is being used. 

In the same case, that user may opt out of sharing that data 

around their thermostat in their home as well, but I would imagine 

a lot of consumers, if they understand the benefit of sharing, let us 

say, that data for their usage, we tend to believe that that actually 

will be collectively in the best interest of the consumer. 

On the second question you had, in terms of sectors, we certainly 

see that there is going to be likely policies around privacy that vary 

by the use case. So certainly very different in medical with, let us 

say, HIPAA compliance versus, let us say, the Internet of Things 

of watering a lawn and actually addressing, let us say, outdoor 

landscape issues. 

Mr. DAVIS. Thank you, Senator. I think a great set of questions. 

173 

We have seen so many examples over the past 12 to 18 months 

of companies delivering either significant economic value or new 

products and services as a result of the Internet of Things. You 

know, you are asking for examples that are close to consumers. You 

see companies that are taking smart city information, so traffic information, air quality information, and combining it with the availability of open parking spaces. And those cities then are starting 

to look at ways in which they can alter traffic flows during certain 

times of the day, making that information available to us as consumers to say I am not going to circle the block three times to find 

a parking space. I am going to go where I know no one is currently 

available. So I think there are a number of instances we are already starting to see that will see benefit in addition to productivity and greater efficiency in how the infrastructure around this 

operates. 

I would agree with Mr. Abbott. I think from a privacy perspective, we are going to see differences by market sector. There may 

be some areas again around city infrastructure where we as consumers want to be able to have rich access to data, and as that innovation evolves, it will offer new products and services contrasted 

against health care or financial services kinds of industry. 

And then on your last point, I think we have seen the cost of 

connectivity come down about 40X in the past 10 years, and that 

is even without considering some of the new technologies that are 

moving into the network infrastructure today that I think will dramatically transform it over the next 10 years. That availability of 

connectivity cost effectively is an essential tenet to the Internet of 

Things. 

Senator CANTWELL. Thank you. 

The CHAIRMAN. Thank you, Senator Cantwell. 

Senator Blumenthal? 

STATEMENT OF HON. RICHARD BLUMENTHAL, 

U.S. SENATOR FROM CONNECTICUT 

Senator BLUMENTHAL. Thank you, Mr. Chairman, and thank you 

for having this hearing on this profoundly important topic. 

I have been in and out, and I apologize. I have not heard all the 

testimony. 

But I am very interested in the security issues, some of them 

raised by Senator Markey so far as automobiles are concerned, and 

I feel those same potential security threats exist with regard to a 

wide variety of devices and appliances that Americans use every 

day. And we have heard a lot about the coming wave of connected 

devices. The FTC report estimates that there will be 25 billion connected devices by the end of the year and 50 billion by the end of 

2020. And each of them presents a potential attack surface for 

hackers and thieves. Essentially as every one of us brings a new 

device into our home, we create a vulnerability to those hackers 

and thieves to use portals that cyber criminals can attempt to access for very sensitive and confidential information. 

So let me begin by asking Mr. Brookman, right now, the majority 

of devices have no encryption. 70 percent of these devices have no 

encryption on communications. The average is, I think, 60 percent 

174 

have insecure Web interfaces and 60 percent have insecure software. What is the answer? 

Senator Markey very eloquently indicated that if we can do the 

algorithms that send messages around the world, we can have algorithms that protect us. And it is not just automobiles but every one 

of these devices. Is encryption the answer? What would you advise? 

And I will open the same question to the others. 

Mr. BROOKMAN. It is a really important question. It is a hard 

question. 

I think what Congress can do is I think they can pass an affirmative data security requirement law. Already the Federal Trade 

Commission thinks they can enforce reasonable security requirements on companies under section 5. That authority is being attacked in court by a few companies. I know Wyndham Hotels is 

challenging the FTC. FTC says the unfairness law requires you to 

use reasonable security. Wyndham Hotels says no. It actually does 

not. So having that written down in law I think would be useful. 

I think having a process requirement for companies that collect 

this sort of information should have to think about in advance. I 

think institutions and people in general are really bad at considering the very small chance of a very bad thing happening. So having a process in place to think about that I think would be really 

good because right now security is often thought of as a cost. I am 

not going to get any profit from it. But when it goes bad, it goes 

really bad. 

I also think we probably need better breach notification laws. 

You know, 47 states have it covering financial information. I think 

we should expand those laws to include online accounts like things 

that were compromised in the iCloud incident, in the Sony incident. 

This is personal information that people care a lot about. Internet 

of Things devices reveal really sensitive stuff about us, and if my 

Smart TV there has a camera and the microphone and my 

Samsung account gets compromised, I want to know about it. Because there are websites you can go to now where you can find 

thousands and thousands, like 100,000 different webcams you can 

find online. Just watch the live feed. Right? And I think if a company knows they get compromised, they have an obligation to tell 

you about it. 

Senator BLUMENTHAL. And notification is kind of a basic minimum common denominator of what all of us should favor. If somebody knows about a breach, there ought to be notification to the 

person who is threatened by it. 

Mr. BROOKMAN. Absolutely, but I think that level of notification, 

like if your e-mail account gets breached, is only required—I think 

notification is only required in two states today, Florida and California. 

Senator BLUMENTHAL. And imposing the costs of a breach on the 

one responsible, the one who can do something about it, also seems 

pretty basic. 

Mr. BROOKMAN. Yes, absolutely. I think that has been an incredibly important thing for credit card fraud. It is not the consumers 

who bear the cost of that. It is actually split between the merchants and the banks. And I think because of that, they have really 

strong incentives to get security right. 

175 

Senator BLUMENTHAL. Any of the other members of the panel? 

Mr. THIERER. Senator, briefly on the concerns you have raised 

about security and those raised by Senator Markey as well. Let us 

keep in mind a couple of general things. 

First and foremost, no consumer is going to want to buy or use 

a device, especially a car, that is fundamentally insecure. 

Second of all, if firms do sell these sorts of devices that are fundamentally insecure to the public, class action lawsuits will fly and 

State AG’s will be very active, as you know. 

Senator BLUMENTHAL. We are going to have to have a law on 

which to sue. 

Mr. THIERER. There are consumer protection laws already on 

these things, and of course, there are other general torts—— 

Senator BLUMENTHAL. And that goes back to Mr. Brookman’s 

point about establishing some legal standard that provides a cause 

of action. 

Mr. THIERER. But firms are already being sued under existing 

causes of action, and firms understand that they are never going 

to make any money if they sell devices that are fundamentally insecure and do not protect—— 

Senator BLUMENTHAL. If consumers know, number one, and 

number two, if they can make informed decisions among products 

that actually offer this kind of protection. The fact that protection 

is offered as one of the features of a device or automobile or appliance may not be decisive for a consumer who is looking at a bunch 

of other features and colors and attractions that may be part of the 

vehicle. 

Any other members of the panel? 

[No response.] 

Senator BLUMENTHAL. Thank you. 

The CHAIRMAN. Thank you, Senator Blumenthal. 

I think we are ready to wrap it up. I have got a couple of letters 

I would like to put in the record, one from the Consumer Electronics Association, the other from the Telecommunications Industry Association and their report on this subject, the Internet of 

Things. 

[The information referred to follows:] 

CONSUMER ELECTRONICS ASSOCIATION

Arlington, VA, February 10, 2015 

Chairman JOHN THUNE and Ranking Member BILL NELSON, 

U.S. Senate Committee on Commerce, Science, and Transportation 

Washington, DC. 

Dear Chairman Thune and Ranking Member Nelson: 

On behalf of the Consumer Electronics Association (CEA)® please accept our 

views on the role of government and industry in the next shift in innovation, the 

Internet of a Things (IoT). 

CEA is the trade association representing the $223 billion U.S. consumer technology industry. Every day, our more than 2,000 member companies are busy innovating; introducing extraordinary products and services and creating American jobs. 

At CEA, we work to advance government policies that encourage innovation and job 

and business creation. 

CEA members are driving the growth of the IoT. Over 900 exhibitors displayed 

IoT devices at the 2015 International CES. The convergence of connected devices, 

cloud computing services, and powerful data analytics will help drive near to midterm economic growth. 

176 

While businesses have been using connected devices, the IoT is new to the consumer market. Consumers are realizing its benefits, and our interactions with these 

devices will become so routine that they will go almost unnoticed. The IoT has profound potential to improve the lives of our citizens. Within a few years, Americans 

will be able to connect with their doctors remotely, share their health data and information and better manage their diseases. Home automation systems will enable 

consumers to manage their security systems, turn on appliances, and maximize 

their home’s energy efficiency, all from a smart phone. Connected cars will eventually avoid collisions, but before then will notify first responders of an accident immediately, saving time and lives. 

As this transition takes place, manufacturers and service providers will be focused 

on making good decisions about the privacy and security of information that devices 

collect and share. It is not only important to their customers; it is vital for them 

as well, because consumer adoption hinges on building trust. Devices that do not 

meet consumer privacy and security expectations will fail. 

Along with the new capabilities that emerging technologies create also come questions about how to best protect users and promote consumer practices. CEA and others are exploring these issues and how best to ensure consumer privacy and security 

while enabling new technologies to develop. We believe that industry-driven solutions are the best way to promote innovation while protecting consumers. 

We are just beginning to understand the benefits and challenges of the IoT. In 

this dynamic and rapidly changing environment, governments should exercise regulatory restraint. Overly prescriptive mandates or technologically biased standards 

will stymie growth and become outdated. If governments must act, such actions 

should be narrowly tailored to address tangible harms without creating roadblocks 

for future innovation. 

Please recognize that the evolution of things comprise only part of the value of 

the entire IoT ecosystem. Analytics software extracts value and finds useful patterns in data collected by IoT devices. Data analytics are a vital tool in understanding consumers’ needs and uses for products and allow companies to both improve current products and create new ones that meet consumers’ needs and desires. The Internet runs on data. Restrictions on data collection may hurt new services which provide personal and societal benefits. We ask policymakers to tread 

carefully as they explore the potential and growth of the IoT. 

The connected world of tomorrow will improve people’s lives. CEA is proud to represent the companies whose products and services largely comprise the Internet of 

Things, and we look forward to working with the Committee to ensure the government supports growth and innovation through thoughtful policies. 

Sincerely, 

GARY SHAPIRO, 

President and CEO. 

CC: Members of the U.S. Senate Committee on Commerce, 

Science, and Transportation 

TELECOMMUNICATIONS INDUSTRY ASSOCIATION

Arlington, VA, February 11, 2015 

Hon. JOHN THUNE, 

Chairman, 

Committee on Commerce, Science, and 

Transportation, 

United States Senate, 

Washington, DC. 

Hon. BILL NELSON, 

Ranking Member 

Committee on Commerce, Science, and 

Transportation 

United States Senate 

Washington, DC. 

Dear Chairman Thune and Ranking Member Nelson: 

The Telecommunications Industry Association (TIA), the leading trade association 

for global manufacturers, vendors, and suppliers of information and communications 

technology (ICT), writes to communicate our support for your holding of a hearing 

this week to examine how devices will be made smarter and more dynamic through 

Internet technologies, and related policy implications. TIA and its member companies believes that this increasingly connected world—commonly referred to as an 

‘‘Internet of Things’’ (IoT)—holds immense promise for investment and innovation 

that will translate to wide societal benefit and improvements in countless aspects 

of American consumers’ everyday lives. 

At its most basic, the IoT is a label for an increasingly connected future in which 

regular, everyday items—from household appliances to cars to medical devices—are 

177 

outfitted with sensors and connected to the Internet to share their data. Viewed 

more broadly, the Internet of Things will give rise to an entire ecosystem for interconnected devices, objects, systems, and data all working together. In this new 

world, most communications will be machine-to-machine (M2M), and there will be 

a continuous exchange of information between devices, sensors, computers, and networks. 

While the potential for benefits in an IoT world are widely recognized, there are 

a number of horizontal policy issues that impact the IoT across markets and use 

cases, such as interoperability, privacy, security, and spectrum availability, among 

others. With these common threads running across IoT applications and use cases, 

a significant danger exists that vertical regulations imposed in one market will be 

inappropriate for another, which could lead to a balkanized regulatory approach, stifling innovation and delaying or degrading the economic and social potential of the 

IoT. To avoid this scenario, IoT policy discussions should begin with a common horizontal framework whenever possible, followed by tailoring for specific vertical applications only as necessary. 

TIA has developed Realizing the Potential of the Internet of Things: Recommendations to Policy Makers, a white paper offering a general framework for these IoT policy discussions, which is appended to this letter. The recommendations in this white 

paper are applicable across market sectors, and will help ensure that the full economic, societal, and technological potential of the Internet of Things is ultimately 

realized. In your February 11, 2015, hearing, we urge you and other members of 

the Senate Committee on Commerce, Science, and Transportation to consider the industry consensus recommendations in this white paper, which include: 

• Ensure Competitive-and Technology-Neutrality: The IoT will be driven by the 

convergence of exponentially-increasing availability of connected devices in both 

the public and private spheres, across markets. The ICT industry is continuing 

to work towards realizing this continuum of connectivity, and we urge policymakers to ensure a competitive-and technology-neutral approach is taken to any 

activity that may impact the deployment of the IoT. 

• The Role of Global, Open, Voluntary, and Consensus-Based Standards: We urge 

for recognition of the importance of the use of global voluntary, open, and consensus-based standards in the IoT which will drive interoperability. These 

standards are under development in a number of fora, including TIA, with 

adoption being mainly driven through competition. Reliance on these standardization efforts ensures that scientific expertise from implementers in the private 

and public sectors is reflected in approaches to the IoT. TIA further strongly 

encourages recognition of the global consensus that ‘‘open’’ standards are market-driven and allow for the inclusion of patented technologies, which are addressed through the use of fair, reasonable, and non-discriminatory patent policies. 

• A Spectrum Policy that Enables the IoT: For the IoT to succeed, the United 

States must employ a spectrum policy that enables the wide range of products 

and services falling under this concept. Such a spectrum policy prioritizes predictability, flexibility, efficiency, and priority for superior rights from harmful 

interference. Reallocation and sharing efforts in the United States are crucial 

to the IoT’s success, and will also serve as a helpful use case for regulators 

around the globe. 

• Utilize a Voluntary, Flexible, and Collaborative Approach to Data Security 

Based on International Standards: When addressing data security and resilience, TIA urges for policymakers to ensure respect for competitive differentiation as a primary driver of enhanced security solutions, rely on international 

standards and best practices, fully leverage the public-private partnership 

model, and to prioritize end-user awareness and education. 

• Ensure Feasibility and Flexibility in Addressing Data Privacy: The ICT industry 

prioritizes data privacy, and policymakers should ensure that their activities 

are technically feasible and do not impose barriers that would discourage the 

use of existing and developing voluntary solutions that typically emerge from 

standardization and best practice development fora, as well as public-private 

partnerships. Further, government should partner with the industry on efforts 

to ensure informed uses of products and services by consumers. 

178 

Thank you for your work to realize the potential of the IoT, and TIA looks forward 

to working with you moving forward. For more information, please contact Danielle 

Coffey at (703)-907–7734 or by e-mail at dcoffey@tiaonline.org. 

Sincerely, 

SCOTT BELCHER, 

President, 

Telecommunications Industry Association. 

Attached: TIA’s Realizing the Potential of the Internet of Things: Recommendations 

to Policy Makers 

ATTACHMENT

REALIZING THE POTENTIAL OF THE INTERNET OF THINGS

Recommendations to Policy Makers 

The Internet of Things (IoT)—the term that has come to represent an envisioned 

ecosystem of interconnected objects, people, systems, and information assets working in concert with intelligent services to allow them to process information of the 

physical and the virtual world and react—represents an enormous market segment 

for information and communications technology (ICT) manufacturers, vendors, and 

suppliers that promises great societal benefit. Across segments impacted by the IoT, 

policymakers are becoming increasingly interested in the impact of the IoT as laws 

and regulations attempt to keep pace with innovation. Below, the Telecommunications Industry Association (TIA) provides an overview of the IoT’s potential benefits and key recommendations for policymakers that the ICT industry believes will 

ensure the realization of the full benefits of the IoT. 

The Potential for the Internet of Things 

The ‘‘Internet of Things’’ is a broad label for the idea of an increasingly connected 

future where regular, everyday items will be fitted with sensors and the ability to 

connect to networks and transmit data. Machine-to-machine (M2M) communications 

is a networking term that describes the technology that enables devices to communicate with each other. M2M is the key to the IoT because it encompasses the technologies that are necessary to enable a successful IoT environment. In the new 

M2M-driven world, there will be a continuous exchange of information between sensors attached to connected, everyday items or infrastructure, computers, and the 

networks. For the future, to work as envisioned, the IoT must be designed to handle 

the transmission, receipt, and processing of exponential amounts of data. 

The penetration of Internet adoption, faster mobile connections, and the availability of advanced computing capability in the form of cheaper, smaller devices 

with significant processing power has facilitated the growth of the IoT. The key element driving this market is the ability to install inexpensive sensors in machines 

and devices due to advances in sensor technology that have dramatically reduced 

the cost, and may rely on geo-location technology, RFID, and many other technologies. The increased availability of low-cost sensors will expand the potential 

market for M2M, as cost issues in installing sensors in devices are not expected to 

be significant. These sensors collect real-time data and transmit it via the Internet 


0211IOT1.eps
179 

1http://share.cisco.com/internet-of-things.html. 

2http://www.idc.com/getdoc.jsp?containerId=prUS24366813. 

3 Engineering Committee TR–50 M2M (Smart Device Communications) is responsible for the 

development and maintenance of access agnostic interface standards for the monitoring and bidirectional communication of events and information between machine-to-machine (M2M) systems and smart devices, applications or networks. These standards development efforts pertain 

to but are not limited to the functional areas as noted: Reference Architecture, Informational 

Models and Standard Objects, Protocol Aspects, Software Aspects, Conformance and Testing, 

and Security. 

or wireless networks to computers, other machines, or to people. At the receiving 

end, application software converts data to useful information. This ability to collect 

and analyze significant amounts of data is the aspect of the IoT that will be truly 

transformative. With low-cost sensors allowing virtually any device to become M2Mcapable, this new data-centric information, consumers and businesses can make decisions that are more efficient, allowing them to maximize time and cost. 

In 2012, an estimated 8.7 billion things were connected worldwide and projections 

show that with the new technological capabilities this could grow to 50 billion by 

tehe year 2020,1 generating global revenues $8.9 trillion by 2020.2 TIA projects the 

IoT will provide significant impacts across service sectors, representing an emerging 

market that is both unique and enormous. IoT will have a transformative impact 

in a host of market sectors such as healthcare, transportation, and energy, manufacturing, defense, and emergency services, such as: 

Recommendation: Policymakers’ Approach to the Internet of Things Should Adhere 

to Competitive-and Technology-Neutrality Principles 

As ICT manufacturers and vendors work to meet the needs of their customers, 

competition will ultimately determine which products and services succeed and fail 

in the market thereby fueling further innovation. As businesses increasingly make 

investments in the IoT, an utmost concern for policymakers should be to take a competitive-and technology-neutral approach that respects the need for specific sectors 

to utilize creative solutions, and for innovators to address the needs of market segments. Policy makers should be wary of taking any action that locks the market to 

a limited set of solutions when new innovations are constantly being rolled out, 

some of which cannot be predicted. No industry illustrates the need for flexibility 

and technology neutrality more than the dynamic ICT industry. 

Policymakers should also avoid any situation that would put a government actor 

in a position to determine the future design and development of technology. To do 

otherwise would set a precedent of interference with the core innovation engine of 

the ICT sector, negatively impacting the interoperability and standards that are 

needed for IoT proliferation. Should a well-developed public policy case based on the 

consensus of stakeholders find that regulatory action by is needed, we strongly encourage policymakers to promote the competitive dynamic by adopting regulations 

that are outcome-based, allowing innovation to thrive while still achieving the regulatory requirement. 

Recommendation: Policymakers Should Encourage and Leverage Voluntary, Open, 

and Consensus-Based Standards 

A major driver of the IoT will be the development of open, voluntary, and consensus-based standards. Ongoing and future standardization efforts that enable the 

success of the IoT will cut across market segments, and will range from overarching 

guidelines to specific technical criteria, ensuring increasing interoperability as well 

as backwards-compatibility. Importantly, these standards are able to dynamically 

adapt to needed changes based on the expertise across stakeholders. These standards also reduce costs because manufacturers and software developers can produce 

for multiple applications and multiple end uses allowing for the benefits of economies of scale. TIA expects the development of IoT to be driven by a global—not regional—approach that is based on the development of open, voluntary, and consensus-driven standards. 

Numerous existing standardization efforts, as well as future efforts, to address industry-consensus needs, will define and contribute to the development of an interoperable IoT. TIA broadly supports the ‘‘multiple paths’’ approach to the development of international standards whereby healthy competition amongst the different 

efforts will result in market-driven solutions that provide customers with the best 

options. TIA houses such standardization efforts, such as its Engineering Committee 

TR–50 M2M (Smart Device Communications).3 Another example of such standardization activities include oneM2M, an international partnership that is working to 

develop technical specifications which address the need for a common M2M Service 

180 

Layer that can be readily embedded within various hardware and software, among 

many others. 

Standardization is a form of economic self-regulation that can relieve the government of the responsibility for developing detailed technical specifications while ensuring that voluntary, consensus standards serve the public interest, saving resources that can be used to serve the public interest in other ways. TIA urges policymakers to defer to these standards as they are developed and come to define the 

IoT. By taking this approach, policymakers can use these standards as valuable 

sources of scientific and technical information developed with the assistance of private sector experts, allowing for agencies to use standards as a resource for advanced technical information without first-hand independent knowledge of research 

in the area. 

Policymakers should avoid any approaches that would redefine ‘‘open standards’’ 

in a way that equates patented technology with ‘‘free’’ (as in without payment) or 

‘‘free to use freely’’ (as in without payment and without any restrictions). These 

kinds of redefinitions would undermine the rights of those who have invested in the 

development of standardized technologies that enable the functioning of countless 

sectors of the economy. Technological capabilities and innovations most often result 

from substantial investments in research and development thus, if patent holders 

in standards-setting activities are expected to give away or waive their patent rights 

there are likely to be significant adverse results, including that technology leaders 

will reduce or cease participation in voluntary standards-related activities; or that 

individuals and organizations will not invest in the development of next-generation 

technology in the technical areas subject to standardization, creating innovation 

‘‘dead zones’’ in those areas. 

Recommendation: Policymakers Should Employ Regulatory Approval Approaches 

That Are Globally Harmonized, Transparent, and Streamlined 

The ICT industry is one of the most far-reaching and competitive global ICT segments of the global economy. Across jurisdictions, the varying requirements that a 

ICT and presents unique challenges to ensuring governments, consumers, and other 

stakeholders in a diverse marketplace have the ability to readily determine whether 

a device has been properly certified, and to obtain additional information about a 

device as efficiently as possible. With the drastic increase in the amount of connected things in the IoT, it will be very important for policymakers to work to ensure that regulatory approval processes are transparent and efficient. We urge policymakers to methodically examine their regulatory device approval mechanisms to 

ensure that these systems are as globally-harmonized, predictable, transparent, and 

reliable as possible. This will promote the ‘‘build once, sell anywhere’’ principle 

which drastically reduces regulatory costs, time-to-market, and cost to end users 

throughout the business and consumer markets. 

For example, policymakers are strongly urged to consider permitting the use of 

Supplier Declarations of Conformity (SDoCs) for trusted classes of products as an 

alternative means by which an ICT manufacturer may demonstrate compliance with 

regulatory rules to streamline the process ICT manufacturers must go through to 

get products to market. The benefits of such an allowance include flexibility and objective treatment for manufacturers in where to have their products tested, high 

compliance levels, and lower administrative costs. The appropriate allowance of 

SDoCs would also lend to the mutual recognition agreements (MRAs) among trading 

partners and widespread recognition of another country’s conformity assessments, 

further reducing associated costs. Based on a long-standing record of compliance, 

many technologies have proven to hold very low risk exists for violating the technical rules primarily because they are built to meet consensus technical standards, 

allowing the policymakers to be assured that they can take this step to allow for 

more rapid availability of products into the marketplace at reduced cost to stakeholders, including consumers. 

As a further example, the use of physical markings or labels have played a key 

role in providing this important information, but the continuous evolution of industrial design and multiple regulatory environments has led to increased costs and difficulty in ensuring all relevant markings or labels are affixed in an efficient and 

convenient manner for the user of the device. An effective solution to this problem 

is the non-exclusive use of electronic labeling, which allows consumers and other 

users access to easily readable and prominently displayed information about each 

device. This information should include required regulatory markings and other important information including proper device care, electronic recycling programs, and 

warranties. Already, through close work with TIA, several key jurisdictions have allowed this approach. 

181 

4Globally harmonized spectrum is essential to ensure the economies of scale that will facilitate the large-scale deployments necessary to fully utilize the promise of new technologies. Global harmonization also facilitates roaming, which is an important part of creating the ‘‘continuity 

of connectivity’’ required for the Internet of Things. 

Recommendation: Utilize a Spectrum Policy that Maximizes a Continuity of 

Connectivity 

The IoT will rely significantly upon maximizing continuity of connectivity. With 

the world rapidly becoming wireless, establishing an appropriate spectrum policy is 

therefore essential to ensure that the IoT will be successful. In commercial communications networks, mobile data use is exploding as consumers embrace 

smartphones, tablets and other devices. Wireless connectivity is becoming the way 

in which consumers access the Internet from technologies such as LTE, Wi-Fi and 

satellite. Governments worldwide also have a significant dependency on spectrum 

for both communications and non-communications purposes. 

Meanwhile, radio technologies themselves are changing, placing new demands on 

spectrum allocations, and raising new operational and regulatory challenges. At the 

moment, there are several new or emerging technologies which are competing in the 

marketplace to serve the Internet of Things. These include Near Field Communication (‘‘NFC’’), a standards-based short-range wireless technology widely linked with 

mobile payments. More recently, Bluetooth Low Energy (‘‘Bluetooth LE’’ or ‘‘BLE’’) 

has been built specifically to consume small amounts of energy; it is also viewed as 

a good candidate for small data packets sent from wearable computing such as 

smart watches and fitness trackers. Traditional Wi-Fi is also expected to play a key 

role due to its low cost and ubiquity in the marketplace. Indeed, the future Internet 

of Things will likely be based on heterogeneous networks whereby devices can sequentially or simultaneously use different network technologies. 

As a result of these dynamic changes, spectrum allocations and uses that may 

have sufficed during the 20th century are increasingly under stress. Unfortunately, 

policymakers are no longer writing spectrum policy on a blank sheet of paper, and 

virtually all spectrum suitable for mobile service has been allocated. For that reason, TIA believes that any spectrum policy must reflect the following principles to 

allow the use of radio spectrum to evolve to meet changing demand and promote 

innovation: 

• Predictability. Spectrum allocations need to be predictable. Identifying demand 

and changes in demand, understanding the pace of radio technology development by platform, and long term planning are all essential parts of a spectrum 

policy that can provide predictability for both commercial and government 

users. 

• Flexibility. For commercial allocations, flexible use policies consistent with baseline technical rules that are technology-neutral have proven to be the best approach. Any government allocations of spectrum should be managed to ensure 

better usage of scarce spectrum resources for all users. 

• Efficiency. Policies should encourage more efficient use of spectrum where technically and economically feasible. In particular, policies should prioritize global 

harmonization and coordination or spectrum allocations;4 protection from harmful interference for licensed uses; adjacency to similar services; and allocations 

of wide, contiguous blocks of spectrum. Cleared, exclusively licensed spectrum 

allows for the most efficient and dependable use of spectrum for commercial mobile broadband deployment. 

• Priority. In cases where spectrum sharing is technically and economically possible, policies must advance good engineering practice to best support an environment that protects those with superior spectrum rights from harmful interference. 

Furthermore, spectrum sharing represents a means for increasing the efficient 

use of spectrum and to help alleviate challenges in spectrum scarcity, and could 

eventually prove critical towards enabling the continuity of connectivity that is so 

critical for the Internet of Things. In addition to ongoing efforts underway to realize 

successful sharing regimes, other promising efforts include the deployment of Authorized Shared Access (ASA)/Licensed Shared Access (LSA) approaches, a ‘‘third 

way’’ spectrum management system that combines elements of traditional ‘‘command and control’’ spectrum management with geolocation technology, e.g., by providing users with a ‘‘token’’ to use spectrum at certain times/places. ASA/LSA approaches show great promise as they provide a means to ensure ongoing viability 

of incumbent uses by creating a policy environment that enables compatible operations with new uses while also providing secondary users a means to gain access 

182 

5http://www.gartner.com/newsroom/id/2828722. 

to spectrum that is already licensed to one or more primary users, but may be 

under-utilized or capable of supporting multiple uses. 

IEEE P2413—group recently formed, designed to aggregate technical standards 

from various other IEEE efforts. 

IEEE 802.3 working group (Ethernet)—two efforts to look at reduced twisted pair. 

High data rate, includes power for applications where batteries are difficult, lower 

cost vs. older 4-pair technologies (e.g., Cat 5 cabling). This would be useful for industrial applications, deploying lots of parking space sensors, etc.—a smarter replacement for low-voltage wiring. There are two efforts underway—one using 100MHz, 

one using 1GHz—over single twisted pair. 

Mesh networks—Zigbee isn’t just used for home standards, but also industrial applications. There are also several other mesh network protocols that could/should be 

mentioned in the paper. 

Recommendation: Utilize a Voluntary, Flexible, and Collaborative Approach to Data 

Security based on International Standards 

With the IoT naturally involves an ever-increasing number of ‘‘things’’ being connected throughout society, new and evolving security issues will emerge as challenges. Already, ICT members consider security issues throughout the design process, and this approach will continue to be employed to mitigate threats in the IoT. 

TIA urges policymakers to regard the IoT as an opportunity for greater security, 

since using a network approach that is paired with proper risk management techniques, IoT devices can be made to work together to produce comprehensive, actionable security intelligence in near real-time. These approaches and risk management 

techniques are by and large driven by market demands, typically manifested 

through industry-driven best practices and standards developed in open, voluntary, 

and consensus-based fora. 

To support high levels of security and resilience in the IoT, TIA urges policymakers to be guided by the following principles: 

Respect competitive differentiation and business continuity. As ICT manufacturers 

and vendors work to meet the needs of their customers, less secure products that 

are more vulnerable to cyber attacks will naturally be less attractive in the market. 

Today, this drives ICT manufacturers and vendors to strive to make their products 

and services less susceptible to cyber attacks, and this is expected to increase dramatically.5 The degree to which an organization’s performance goals are used to ensure their ability to provide essential services while managing cybersecurity risk 

will be dependent upon the specific needs of their sector and organization. However, 

in the ICT sector, manufacturers work with the range of organizations they supply 

to ensure that performance goals of those organizations are reflected in the ICT they 

purchase. The flexibility to innovate and the use of voluntary, consensus-based 

standards are both key enablers of this capability. There is no ‘‘one size fits all’’ solution to securing the IoT. The reach of the IoT across segments of the economy that 

will have varied levels of risk illustrates this. 

Rely on international standards. Numerous standards, guidelines, best practices, 

and tools are used by ICT manufacturers and the owners & operators of telecommunications networks to understand, measure, and manage risk at the management, operational, and technical levels. TIA urges policymakers to ensure that their 

approaches to the IoT reflect the priority for the development of internationally-used 

standards and best practices. The global nature of the ICT industry necessarily requires a global approach to address cybersecurity concerns, and a global supply 

chain can only be secured through an industry-driven adoption of best practices and 

global standards. Country-specific standards should be avoided, as they would ignore the benefits of global harmonization, restricting trade in telecommunications 

equipment imported to, or exported from, other countries that are part of the global 

trading system. 

Utilize the successful public-private partnership model. Public-private partnerships 

are an effective tool for collaboration on addressing current and emerging threats, 

and will serve as a key incentive to encourage businesses to make investments in 

cybersecurity that are appropriate for the risks that they face. The voluntary, public-private model is also able toevolve in response to changes in threats and the risk 

environment. As both the complexity and number of attacks grow, it will be critical 

that policymakers leverage and augment, or create where necessary, public-private 

partnerships. 

Increase end-user education. This is a crucial aspect to improving cybersecurity in 

the IoT, as many cyber vulnerabilities are already known and related attacks are 

relatively easily preventable. Policymakers should lend focus to efforts which inform 

183 

end users across the business and consumer communities of proper steps to take 

to ensure that proper cyber ‘‘hygiene’’ is impressed. 

Recommendation: Ensure Flexibility and Feasibility in Addressing Data Privacy 

The ICT industry recognizes privacy as a priority in the success of the IoT, and 

understands the wide range of related concerns held by policymakers. Industry believes that IoT services must adopt principles similar to those that have worked successfully on the Internet to enable informed consumer choice: transparency about 

what data will be collected, how it will be used, and who will have access. We urge 

regulators not to adopt privacy regulations that would make it impossible for IoT 

systems to flourish, as full consumer benefits will require that data be retained and 

used in ways not currently contemplated, even by IoT innovators themselves. Instead, industry should be allowed to adopt best practices which can be responsive 

to fast-paced developments and that allow individual users to manage their level of 

data sharing. Policymakers are encouraged to ensure that their activities do not impose barriers that discourage the use of the use of existing and developing voluntary 

efforts to address privacy concerns that are developed through standardization, best 

practice activities, and public-private partnerships. Internationally, policymakers 

should work towards interoperable privacy systems to avoid unnecessary impediments to the cross-border flow of information, which will be critical to the growth 

and functionality of the IoT. 

Policymakers should avoid implementing privacy obligations which are ambiguous, overly burdensome, or technically infeasible. The effect of adopting such policies would be to decrease industry’s incentive to invest in IoT opportunities due to 

resulting regulatory uncertainty and unnecessarily higher risk. Industry members 

exploring IoT opportunities should have certainty and the ability to determine the 

most appropriate method to meet any regulatory requirements. This approach would 

best promote the development of the IoT as it is a fluid and quickly evolving market 

opportunity. 

In addition, policymakers may serve an important role in ensuring IoT data privacy through public awareness efforts. Through ‘‘cyber hygiene’’ education efforts, 

many breaches that would result in a loss of data privacy can be avoided. In addition, a more informed end-user is less likely to make voluntary decisions with IoT 

devices and services that allow data usage beyond their individual comfort. 

Conclusion 

The IoT represents an immense opportunity for the improvement of the lives of 

citizens around the globe, across use cases. By ensuring that the path taken forward 

is collaborative and pro-innovation consistent with the above, TIA believes that policymakers can help these benefits materialize rapidly. 

ABOUT TIA 

The Telecommunications Industry Association (TIA) represents manufacturers 

and suppliers of global communications networks through standards development, 

policy and advocacy, business opportunities, market intelligence, and events and 

networking. TIA enhances the business environment for broadband, mobile wireless, 

information technology, networks, cable, satellite and unified communications. Members’ products and services empower communications in every industry and market, 

including healthcare, education, security, public safety, transportation, government, 

the military, the environment, and entertainment. Visit tiaonline.org for more details. 

TIA is accredited by the American National Standards Institute (ANSI) and is a 

proud sponsor of ANSI’s Standards Boost Business campaign. Visit www.standards 

boostbusiness.org for details. 

TIA Policy Committees & Divisions 

TIA conducts its policy and government affairs Innovation Agenda through membership committees. A TIA Board Member serves as TIA’s Policy Chair and represents TIA’s Government Affairs activities on the TIA Board of Directors. 

TIA’s Communications Research Division, User Premises Equipment Division, and 

Wireless Communications Division are also represented on the TIA Board of Directors. The Chairs and TIA Staff for each committee, working group and division can 

be found at http://www.tiaonline.org/policy/tia-policy-committees-divisions. 

For more information on TIA’s Government Affairs activities, please contact 

James Reid, Senior VP of Government Affairs, at jreid@tiaonline.org. 

184 

The CHAIRMAN. We will keep the hearing record open for a couple of weeks. 

Senator BOOKER. Mr. Chairman? 

The CHAIRMAN. Yes, sir. 

Senator BOOKER. Along with Senator Rubio’s staff, we would like 

to—and while you were out, I was talking about the spectrum 

availability and how that potentially could be constricting to American innovation if we do not find ways to meet the growing demands that innovation is going to bring about, not to mention the 

millions of people globally every month that are coming online. 

So I would like to submit for the record a series of statements 

in support of Senator Rubio and my WiFi Innovation Act, which 

aims to make more spectrum available. I would love to encourage 

you to potentially hold a hearing just on that issue that they 

brought up as something to be of concern. 

The CHAIRMAN. We will certainly make that a part of the record 

and look forward to having a hearing on the subject, which is an 

important one for all the reasons that have been mentioned today. 

[The information referred to follows:] 

For Immediate Release 

CEA Praises Bipartisan, Bicameral Congressional Effort to Expand Wi-Fi 

Arlington, Va., February 10, 2015—The following statement is attributed to Gary 

Shapiro, president and CEO of the Consumer Electronics Association (CEA)®, regarding today’s introduction of the House and Senate Wi-Fi Innovation Act by Senators Marco Rubio (R–Fla.), Cory Booker (D–N.J.) and Representatives Bob Latta 

(R–Ohio), Anna Eshoo (D–Calif.), Darrell Issa (R–Calif.), Doris Matsui (D–Calif.) 

and Suzan DelBene (D–Wash.): 

‘‘We enthusiastically applaud congressional members for taking a bipartisan 

and bicameral approach toward increasing speeds and easing congestion for WiFi by identifying new spectrum for unlicensed uses. 

‘‘Unlicensed spectrum is a catalyst for innovation, how we get online through 

Wi-Fi and how our wireless carriers manage the ever-growing traffic on their 

networks. And unlicensed spectrum is a boon to the U.S. economy, generating 

$62 billion a year. 

‘‘A look around the show floor at the 2015 International CES® confirmed: from 

smart homes and unmanned systems to streaming content and wearables, many 

of today’s consumer technology innovations are mobile-first, connected to the 

Web and to one another. 

‘‘The Federal Communications Commission has already committed to freeing up 

underutilized high-frequency spectrum in the lower 5 GHz band for Wi-Fi. And 

the study initiated by this legislation should empower the FCC to explore putting even more of this spectrum to use for faster Wi-Fi.’’ 

Need help imagining life without unlicensed spectrum? Click here for a look at 

A Day Without Unlicensed Spectrum, an animated video produced by CEA. 

About CEA: The Consumer Electronics Association (CEA) is the technology trade 

association representing the $223 billion U.S. consumer electronics industry. More 

than 2,000 companies enjoy the benefits of CEA membership, including legislative 

and regulatory advocacy, market research, technical training and education, industry promotion, standards development and the fostering of business and strategic 

relationships. CEA also owns and produces the International CES—The Global 

Stage for Innovation. All profits from CES are reinvested into CEA’s industry services. Find CEA online at CE.org, DeclareInnovation.com and through social media. 

185 

CTIA-The Wireless Association® Statement on the Reintroduction of the WiFi Innovation Act in the Senate 

WASHINGTON, February 10, 2015—The following statement should be attributed 

to CTIA-The Wireless Association® Vice President of Government Affairs Jot Carpenter: 

‘‘CTIA appreciates Senator Rubio’s and Senator Booker’s leadership in pushing to 

make additional spectrum available for unlicensed use. Freeing additional spectrum 

in the 5 gigahertz band will help meet Americans’ increasing demand for mobile 

Internet access and support the growth of the Internet of Things.’’ 

CTIA-The Wireless Association® (www.ctia.org) is an international organization 

representing the wireless communications industry. Membership in the association 

includes wireless carriers and their suppliers, as well as providers and manufacturers of wireless data services and products. CTIA advocates on behalf of its members 

at all levels of government. The association also coordinates the industry’s voluntary 

best practices and initiatives, and sponsors the industry’s leading wireless 

tradeshow. CTIA was founded in 1984 and is based in Washington, D.C. 

Twitter: @ctia—Blog: http://ctia.it/Na6erv—Facebook: http://ctia.it/LCm4Nn 

LinkedIn Group: http://ctia.it/Na6cA2—Google+: http://ctia.it/12PfCrO 

Press Contact: Amy Storey, astorey@ctia.org, 

HIGH TECH SPECTRUM COALITION

FOR IMMEDIATE RELEASE 

Contact: Jared Weaver 

(202) 548–2308 

jweaver@alpinegroup.com 

www.hightechspectrumcoalition.org 

High Tech Spectrum Coalition (HTSC) Commends Introduction of the 

Wi-Fi Innovation Act 

Washington, D.C. February 10, 2015—The members of the High Tech Spectrum 

Coalition (HTSC) commend Senators Rubio and Booker and Representatives Latta, 

Eshoo, Issa and Matsui for reintroducing the Wi-Fi Innovation Act. This important 

bill will continue the expansion of unlicensed spectrum use in the 5 GHz band. We 

are optimistic that sharing at 5.9 GHz will be successful and lead to greater and 

more efficient use of the band. As the need for more spectrum is ever more evident, 

it is imperative that we continue to explore new spectrum bands to help satisfy consumer demand for mobile broadband. We appreciate their recognition of the need 

to maximize this finite resource. Spectrum is the single most critical element for the 

continued growth of our Nation’s Internet economy. We look forward to working 

with Congress to find additional bands of spectrum for wireless broadband use in 

order for consumers to continue to see the benefits of innovation and connectivity. 

BIPARTISAN WI-FI INNOVATION ACT INTRODUCED IN THE HOUSE AND SENATE

By Vince Jesaitis (ITI) 

Spectrum may not be a household word, but we rely on it every day for the connected devices like smartphones and portable devices that are a central part of our 

lives. Spectrum is a term used to describe the radio frequencies that all wireless 

communications use. And, as there are only so many radio frequencies, spectrum is 

a limited and valuable resource. As the Internet of Things (IoT) connects everyday 

devices from household appliances and our cars, to industrial systems and commercial transportation fleets, more spectrum will be required and spectrum will become 

an even more important issue for connectivity and future innovations. ITI has long 

held the view that we must make efficient use of all spectrum to meet our Nation’s 

growing demand. 

The bipartisan Wi-Fi Innovation Act bills introduced today in the Senate by Sens. 

Cory Booker (D–NJ) and Marco Rubio (R–FL); and in the House of Representatives 

by Reps. Bob Latta (R–OH), Anna G. Eshoo (D–CA), Darrell Issa (R–CA), Doris 

Matsui (D–CA), and Suzan DelBene (D–CA); would help utilize and manage the 

upper 5GHz band of spectrum more efficiently to meet the growing demand for 

bandwidth from connected vehicles and next generation Wi-Fi. 

186 

The Wi-Fi innovation Act would direct the Federal Communications Commission 

(FCC) to facilitate technical and engineering analysis to determine how unlicensed 

Wi-Fi use can coexist with connected vehicle technology without jeopardizing safety. 

Moreover, with this bill, we are optimistic that if the significant technical expertise 

and input from many of our member companies is included to advance the technical 

process, successful sharing of the upper 5 GHz band is feasible. 

The 5 GHz band offers tremendous opportunity to expand unlicensed Wi-Fi use 

and features, building on the benefits tens of millions of Americans already use to 

connect in their homes, at work, and in public spaces across the country. We commend these lawmakers for working together in a bipartisan fashion to introduce this 

proposal, and look forward to working with them to encourage their colleagues to 

support these bills to benefit the American public and our economy. 

About ITI. The Information Technology Industry Council (ITI) is the global voice 

of the tech sector. As the premier advocacy and policy organization for the world’s 

leading innovation companies, ITI navigates the relationships between policymakers, companies, and non-governmental organizations, providing creative solutions that advance the development and use of technology around the world. Visit 

www.itic.org to learn more. Follow us on Twitter for the latest ITI news 

@ITIlTechTweets. 

DUNCAN NEASHAM, 

Director of Communications, 

Information Technology Industry Council (ITI). 

www.itic.org 

Follow ITI on TWITTER: @ITIlTechTweets 

http://www.pcia.com/pcia-press-releases/700-pcia-commends-senators-rubio-bookerfor-introducing-wi-fi-innovation-act/ 

PCIA Press Releases 

PCIA COMMENDS SENATORS RUBIO, BOOKER FOR INTRODUCING

WI-FI INNOVATION ACT

February 10, 2015/Alexandria, Virginia, The head of PCIA—The Wireless Infrastructure Association today commended Senators Marco Rubio (R–FL) and Cory 

Booker (D–NJ) for introducing bipartisan legislation aimed at allocating greater 

spectrum use for wireless broadband and bringing leading-edge wireless service to 

low-income neighborhoods. 

‘‘Senators Rubio and Booker should be commended for recognizing that the U.S. 

faces both an unprecedented ‘wireless data crunch’ and a ‘digital divide’ that puts 

lower-income Americans at a disadvantage,’’ said Jonathan Adelstein, PCIA’s President and CEO. ‘‘Their Wi-Fi Innovation Act would allocate more spectrum use for 

the rapidly growing wireless industry while also eliminating barriers to and creating 

incentives for Wi-Fi deployment in low-income neighborhoods. Senators Rubio and 

Booker are taking a crucial bipartisan step toward the adoption of policies that will 

ease the wireless data crunch and help bridge the digital divide,’’ Adelstein said. 

The Rubio-Booker bill directs the FCC to conduct testing to gauge the feasibility 

of opening the 5850–5925 MHz band to unlicensed use. It also urges that the 5 GHz 

band be explored for Intelligent Transportation and other ‘‘shared’’ purposes. Finally, it establishes a study aimed at reducing the barriers to Wi-Fi deployment in 

low-income rural and urban areas and encourages the FCC to evaluate incentives 

and policies that could enhance wireless adoption. 

‘‘The demand for wireless mobile data is continuing to explode. Yes, we need to 

allocate more spectrum—but that only addresses a fraction of what we need to be 

doing to spur greater wireless infrastructure deployment. PCIA will continue to 

work hand-in-glove with Congress, the FCC, and other federal, state, and local policymakers to embrace policies that facilitate the construction and upkeep of a worldclass wireless broadband network,’’ Adelstein said. 

PCIA—The Wireless Infrastructure Association is the principal organization representing the companies that build, design, own and manage telecommunications facilities throughout the world. Its over 200 members include carriers, infrastructure 

providers, and professional services firms. 

187 

For Immediate Release 

February 10, 2015 

Public Knowledge Applauds Congress for Introducing Wi-Fi Innovation Act 

Today, Members of Congress introduced bipartisan, bicameral spectrum legislation that seeks to expand the availability of unlicensed spectrum. Senators Marco 

Rubio (R-FL) and Cory Booker (D–NJ) reintroduced the Wi-Fi Innovation Act, while 

Representatives Robert Latta (R–OH), Anna Eshoo (D–CA), Darrell Issa (R–CA), 

and Doris Matsui (D–CA) introduced companion legislation in the House. 

The Wi-Fi Innovation Act directs the Federal Communications Commission to investigate ways to open the 5GHz band to unlicensed use and recognizes the need 

to balance the importance of developing Intelligent Transportation and incumbent 

licenses in the 5GHz band. The legislation also seeks to increase innovation and economic progress by establishing a study to examine Wi-Fi deployment in low-income 

communities. 

The following can be attributed to Martyn Griffen, Government Affairs Associate 

of Public Knowledge: 

‘‘The Wi-Fi Innovation Act legislation provides an excellent example of how bipartisan legislation on spectrum issues can work. Public Knowledge supported 

the Rubio-Booker language when it was introduced in the 113 Congress and we 

are pleased to see it reintroduced in the 114 Congress. This bill provides a road 

map for agencies that respects both the need for wireless capacity for safer 

smart cars and the need for more open spectrum for the Internet of Things. 

‘‘Furthermore, we are pleased that this legislation addresses broadband access 

in underserved areas by establishing an FCC study to examine Wi-Fi deployment in low-income communities and the barriers preventing deployment of 

wireless networks in low-income neighborhoods. As Americans become increasingly more connected through mobile devices and the Internet of Things, our 

wireless spectrum demands increase. 

‘‘We applaud Senator Booker, Senator Rubio, Congresswoman Eshoo and other 

co-sponsors for taking steps toward addressing this growing concern, while 

working to expand Internet access to those in underserved areas.’’ 

You may view our full release here. 

Public Knowledge is a Washington D.C.-based public interest group working to defend consumer rights in the emerging digital culture. More information is available 

at http://www.publicknowledge.org 

NATIONAL CABLE & TELECOMMUNICATIONS ASSOCIATION

FOR IMMEDIATE RELEASE 

February 10, 2015 

CONTACT: Brian Dietz/Joy Sims 

202-222-2350 

Statement of NCTA Regarding Introduction of the Wi-Fi Innovation Act 

‘‘We congratulate Senators Rubio and Booker on the introduction of Wi-Fi Innovation Act which would secure more unlicensed spectrum in the 5 Ghz band. With 

more and more Wi-Fi-enabled devices coming to market everyday, consumers will 

continue to need additional spectrum to use these tools. This bipartisan legislation 

provides a clear path forward for properly allocating a finite and increasingly necessary public resource and continues to establish the U.S. as a global leader in public Wi-Fi availability, speed, and scale.’’ 

NCTA is the principal trade association for the U.S. cable industry, representing 

cable operators serving more than 90 percent of the Nation’s cable television households and more than 200 cable program networks. The cable industry is the Nation’s 

largest broadband provider of high-speed Internet access, serving more than 54 million customers, after investing $230 billion since 1996 to build two-way interactive 

networks with fiber optic technology. Cable companies also provide state-of-the-art 

digital telephone service to more than 28 million American consumers. 

188 

FOR IMMEDIATE RELEASE 

CONTACT: Farrah Kim, FarrahKim@Rational360.com 

TIA APPLAUDS THE RE-INTRODUCTION OF THE WI-FI INNOVATION ACT

Arlington, Va. (February 10, 2015)—The Telecommunications Industry Association 

(TIA), the leading association representing the manufacturers and suppliers of hightech communications networks, today applauded Sens. Rubio (R–FL) and Booker 

(D–NJ) for re-introducing the bipartisan Wi-Fi Innovation Act. 

The Wi-Fi Innovation Act would require the Federal Communications Commission 

(FCC) to move forward on testing for unlicensed operations in the 5.9 GHZ band. 

As the sponsors noted, the Wi-Fi Innovation Act aims to provide more unlicensed 

spectrum use in order to bolster innovation, spur economic development, and increase connectivity. 

TIA CEO Scott Belcher commented, ‘‘The U.S. is in vital need of more spectrum 

in order to meet unprecedented and growing demand for video, data, Wi-Fi 

connectivity and more. The Innovation Act identifies meaningful steps to help alleviate the spectrum crunch that threatens the advancement of global communications. 

TIA supports efforts to work towards a workable spectrum sharing solution for the 

5.9 GHz band, and agrees that sharing proposals need to be thoroughly tested, leading to the creation of a record that can be the basis for regulatory action. We thank 

Senators Rubio and Booker for their sponsorship of the Wi-Fi Innovation Act and 

look forward to working with them on this important legislation.’’ 

Follow TIA on Facebook, LinkedIn, Twitter, YouTube, TIA NOW and Google+ for 

the latest updates. 

About TIA 

The Telecommunications Industry Association (TIA) represents manufacturers 

and suppliers of global communications networks through standards development, 

policy and advocacy, business opportunities, market intelligence, and events and 

networking. TIA enhances the business environment for broadband, mobile wireless, 

information technology, networks, cable, satellite and unified communications. Members’ products and services empower communications in every industry and market, 

including healthcare, education, security, public safety, transportation, government, 

the military, the environment, and entertainment. Visit tiaonline.org for more details. 

TIA is accredited by the American National Standards Institute (ANSI), and is 

a proud sponsor of ANSI’s Standards Boost Business campaign. Visit 

www.standardsboostbusiness.org for details. 

FARRAH KIM, 

Rational 360. 

Wi-Fi Alliance® welcomes introduction of Wi-Fi Innovation Act 

Austin, Texas, February 10, 2015—Today in the United States Congress, Senators 

Rubio (R–FL) and Booker (D–NJ) introduced the Wi-Fi Innovation Act, with a House 

companion measure co-sponsored by Representatives Latta (R–OH) and Eshoo (D– 

CA). The bill directs the U.S. Federal Communications Commission (FCC) to work 

with the U.S. Department of Transportation (DoT) and National Telecommunications and Information Administration (NTIA) to closely study the impact of opening the 5.9 GHz spectrum band for use by a wide array of devices. 

Wi-Fi Alliance® welcomes the proposed U.S. legislation and urges lawmakers to 

take action swiftly to advance innovation in unlicensed spectrum. 

‘‘We applaud this group of Senators and Representatives for their recognition of 

the value of unlicensed spectrum in enabling innovation and economic benefits 

today,’’ said Edgar Figueroa, president and CEO of Wi-Fi Alliance. ‘‘It’s well understood that more unlicensed spectrum is critical to meet our society’s ongoing requirements for connectivity.’’ 

Unlicensed spectrum has created significant economic opportunities in the U.S. 

and worldwide. Recent studies assess the worldwide economic value of Wi-Fi® to 

have been well above $200 billion in 2013, and with growth in Wi-Fi offloading, 

sales of Wi-Fi equipment, and other drivers of economic activity related to unlicensed spectrum usage, the economic benefit is predicted to exceed $500 billion in 

2017. 

The proposed legislation would require the FCC to develop spectrum-sharing tests 

to examine how devices may use the 5.9 GHz spectrum band in the U.S. without 

189 

negative impact to other users, and to open the spectrum to Wi-Fi devices, unless 

it identifies a compelling reason not to do so. 

‘‘Although this spectrum was allocated fifteen years ago for future use in vehicular communications, it remains underutilized today,’’ continued Figueroa. ‘‘Wi-Fi 

includes a number of proven mechanisms that make it capable of sharing spectrum 

with other technologies, and these mechanisms can be adapted to enable shared use 

of the 5.9GHz band. We are eager to work closely with the FCC, DoT and NTIA 

to provide technical expertise and industry feedback during their examination of the 

issue.’’ 

Please visit www.wi-fi.org for more information on the various Wi-Fi Alliance 

technologies and certification programs available today and in development. 

About Wi-Fi Alliance®

www.wi-fi.org 

Wi-Fi Alliance® is a global non-profit industry association—our members are the 

worldwide network of companies that brings you Wi-Fi®. The members of our collaboration forum come from across the Wi-Fi ecosystem and share a common vision 

of connecting everyone and everything, everywhere. Since 2000, the Wi-Fi CERTIFIED TM seal of approval designates products with proven interoperability, industry-standard security protections, and the latest technology. Wi-Fi Alliance has certified more than 23,000 products, delivering the best user experience and encouraging the expanded use of Wi-Fi products and services in new and established markets. Today, billions of Wi-Fi products carry a significant portion of the world’s data 

traffic in an ever-expanding variety of applications. 

Senator BOOKER. Thank you, sir. 

The CHAIRMAN. And thank you and Senator Rubio for your work 

on it. 

All right. If there is nothing else, we will keep the record open, 

and witnesses are requested to submit written answers to the Committee as soon as possible to questions for the record. 

I want to thank the witnesses today. It has been a great panel, 

a lot of good discussion and back-and-forth on a subject of just 

enormous importance to our economy. We want to make sure that 

when we approach this issue, we get it right from a public policy 

standpoint. So thank you for your very thoughtful suggestions in 

that regard. 

This hearing is adjourned. 

[Whereupon, at 12 p.m., the hearing was adjourned.] 

(191) 

A P P E N D I X 

February 9, 2015 

Hon. FRED UPTON, Chair, 

Committee on Energy and Commerce. 

Hon. FRANK PALLONE, Ranking Member, 

Committee on Energy and Commerce. 

Hon. JOHN THUNE, Chair, 

Committee on Commerce, Science, and Transportation, 

Hon. BILL NELSON, Ranking Member, 

Committee on Commerce, Science, and Transportation. 

We the undersigned associations, representing automobile manufacturers, motorists, state highway and transportation officials and the intelligent transportation 

community, write to you today to respectfully request your opposition to the Wi-Fi 

Innovation Act. Introduced last Congress, this bill would open up previously dedicated auto safety spectrum to unlicensed Wi-Fi users and jeopardize the implementation of a safety critical crash avoidance system that has the potential to significantly reduce traffic crashes and assist in reducing greenhouse gas emissions. While 

this legislation currently does not have a bill number, we anticipate its re-introduction soon. 

Over the past two decades the auto industry, the U.S. Department of Transportation (USDOT), the American Association of State Highway and Transportation Officials (AASHTO), the Intelligent Transportation Society of America (ITS America) 

and its member companies and university research centers such as the University 

of Michigan Transportation Research Institute (UMTRI), have invested significant 

resources and over a billion dollars researching, developing and testing a vehicleto-vehicle (V2V) and vehicle-to-infrastructure (V2I) communication system collectively referred to as V2X. 

The V2X communication system is comprised of seven safety channels utilizing 75 

MHz of spectrum located in the upper 5.8 GHz and lower 5.9 GHz band. This system enables vehicles to communicate with each other and with the world around 

them (traffic signals, bicycles, pedestrians, buses, trucks and even mobile phones) 

providing real-time 360 degree high-speed situational safety warnings allowing drivers to respond or in some cases the vehicle to respond for them. Happening ten 

times per second, these communications must be free of any signal interference. One 

miscommunication or blocked signal could cause a crash and, possibly, serious injuries or deaths. 

The Wi-Fi Innovation Act would require the Federal Communications Commission 

(FCC) to open up the reserved 75 MHz of spectrum to unlicensed Wi-Fi use and 

eliminate the proper safety mechanisms provided to the FCC to ensure the protection of the V2X communication system. The opening of this spectrum without proper 

interference testing would reverse decades of efforts. It would also negate the ongoing efforts of the various constituencies who are exploring whether a technical solution exists to allow sharing of the spectrum. These wide ranging constituencies include automakers, the Wi-Fi community, the FCC, the U.S. DOT and innovators 

from across the transportation, technology and research communities. This collaborative process should proceed without pre-emptive legislation that sets arbitrary 

deadlines and restrictive parameters. 

Connected vehicle technology may significantly impact the future of auto safety 

and must be protected. In fact, the National Highway Traffic Safety Administration 

(NHTSA) has initiated a rulemaking to establish standards for this technology to 

operate in unison in all vehicles. They estimate that at full penetration, V2X technology could prevent or mitigate up to 80 percent of the annual unimpaired vehicle 

192 

crashes saving thousands of lives and reducing the $871 billion cost to our Nation’s 

economy each year. ‘Talking cars’ that avoid crashes and reduce traffic congestion 

and pollution are being deployed today as tests continue. That is why we ask for 

you to oppose any legislation, such as the Wi-Fi Innovation Act, that could set the 

program back and risk the implementation of this life saving technology and safety 

system. 

Thank you for your consideration of our views. Please do not hesitate to reach out 

to us for further information or to answer any questions. 

Sincerely, 

Thomas E. Kern 

Interim President and CEO 

Intelligent Transportation Society of 

America 

(ITS America) 

Mitch Bainwol 

President and CEO 

Alliance of Automobile Manufacturers 

Michael P. Melaniphy 

President and Chief Executive Officer 

American Public Transportation 

Association 

Jill Ingrassia 

Managing Director, Government 

Relations 

and Traffic Safety Advocacy 

AAA 

Roger A. Wentz, CAE 

President and CEO 

American Traffic Safety Services 

Association 

Frederick ‘‘Bud’’ Wright 

Executive Director 

American Association of State Highway 

and Transportation Officials (AASHTO) 

John Bozzella 

President & CEO 

Association of Global Automakers, Inc. 

Greg Cohen 

President & CEO 

American Highway Users Alliance 

Brian Pallasch 

Managing Director of Government 

Relations 

and Infrastructure Initiatives 

American Society of Civil Engineers 

cc: Members of the House and Senate 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. JOHN THUNE TO

MICHAEL ABBOTT

Question 1. Mr. Abbott, as an investor, you have finite resources and need to pick 

and choose between great ideas. What is it about the Internet of Things that has 

you and your firm excited? What concerns do you see on the horizon that may temper that enthusiasm? 

Answer. We are excited because of the incredible wave of innovation that we see 

coming in this space. Analysts today are projecting anywhere from 20 to 50 billion 

new sensors within the next five years. Those sensors will be deployed across consumer, industrial, and enterprise sectors. Some sensors will replace existing processes, enabling better products and services at a lower cost. Others will create entirely new capabilities, whether they are autonomous vehicles or sensor-equipped industrial machinery or delivery drones. 

Beyond the developments that get headlines, there are others that are just as important. When we deploy sensors at this scale, we have new tools for quality control, 

moving from a timed approach to maintenance—checking the crane or the elevator 

or the brakes every set number of months—to knowing immediately when a product 

is overheating. This needs-based approach improves quality, improves durability, 

improves productivity, and—perhaps most important—improves workplace safety. 

This is just another example of how the Internet of Things will change the way we 

live and work. And as the best engineers in Silicon Valley focus on this area, whether in manufacturing and logistics or in other functions that make a difference for 

the enterprise, the possibilities will continue to increase—and the costs, for consumers, will continue to fall. 

Some of the creation and deployment of these new technologies will come from 

existing companies. But others will come from resourceful entrepreneurs who draw 

on their own creativity and expertise to build meaningful standalone businesses. 

Our firm exists to find and back those entrepreneurs and help them build great 

companies. 

Our main concern is not with the state of technology but with the prospect of illdesigned regulation. We know that there are legitimate concerns about how the data 

193 

collected by new sensors will be used, and we support clear transparency about 

what data is being collected and how it is being used. But we also know that the 

new sensors, if they are to unlock the power of this technology to improve the lives 

of consumers, require sufficient data. The technology is young—We are still learning 

what data is most useful and why, and we are still learning how to use data more 

efficiently. Our hope is that policymakers will recognize that the ability to use big 

data, so long as the consumer has not opted out, is essential to innovation in this 

space. 

Question 2. Mr. Abbott, in your testimony, you urged regulators and legislators 

to proceed with caution when considering regulation regarding the Internet of 

Things. As you note in your testimony, the FTC recently released a staff level report 

on the Internet of Things which makes ‘‘best practice’’ recommendations on privacy, 

security, and data minimization. I understand many IoT companies are concerned 

about whether today’s best practices may tomorrow become ‘‘reasonable’’ practices 

subject to enforcement by the FTC. This could lead to a great deal of uncertainty 

in the marketplace for startups. How do questions about the FTC’s reach affect investors like yourself? 

Answer. Starting a successful company, even in a space with as much opportunity 

as the Internet of Things, is never easy. If the FTC’s reach began to factor more 

significantly into our calculations as we considered whether and how a startup 

would succeed, the decision to back an IoT entrepreneur would become more difficult. 

This is especially true because early-stage companies, unlike large tech firms, 

generally do not have existing data to draw on. Their ability to innovate depends 

on their ability to learn from the data generated by users. If they faced restrictions 

in doing this, they would have a harder time getting off the ground, as so many 

startups fail to do. As investors, we would be more skeptical of the prospects for 

success when the market is constrained, and we might instead turn our attention 

to other markets—and perhaps look for opportunities abroad if the regulatory environment there were more favorable for entrepreneurs. 

We fully support clear transparency around data collection practices and believe 

that the consumer should know what is being collected as a user of the product. We 

simply hope that the legitimate need for transparency will not turn into regulatory 

practices that stifle innovation in this space at such an important time. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. JOHN THUNE TO

DOUGLAS DAVIS

Question 1. Mr. Davis, Intel is opposed to FCC reclassification of broadband service under Title II of the Communications Act, a view that I share. Do you think 

that reclassification could harm growth of the Internet of Things? If so, how? 

Answer. As a world leader in computing and communications technologies, Intel 

wants net neutrality rules that foster an open, accessible Internet and affordable, 

high quality broadband. Therefore, we support FCC rules regarding disclosure, 

blocking and discrimination. We filed Reply Comments in the FCC’s Open Access 

proceeding opposing reclassification of broadband providers as utilities under 

Title II, because we believe it is not necessary and could discourage expensive and 

risky ‘‘last mile’’ broadband investment. Specifically, as to IoT, Intel wants both 

open and high-quality connectivity for all. With a projected 50 billion connected devices by 2020, investment in ubiquitous, faster and more affordable Internet 

connectivity will be even more critical. In that regard, we generally believe that 

‘‘light touch’’ regulation promotes more broadband investment while still protecting 

open access, and thus we encourage the FCC to implement its Title II authority in 

a light touch manner. 

Question 2. Mr. Davis, these days, hacking and security concerns are seemingly 

always on the front pages. Data breaches have affected many millions of consumers 

and some of the largest corporations in this country. Consumers are right to be excited about the benefits of the Internet of Things to their lives, but it is reasonable 

to be concerned about whether IoT opens consumers up to potential harm by cyber 

criminals. What steps is the technology industry generally, and Intel specifically, 

taking to secure IoT devices? 

Answer. Security must be a foundational building block for IoT in order to establish consumer trust—whether that consumer is a business, government, or an individual. Intel believes we can provide robust consumer protections, while enabling 

IoT investment and innovation that will improve the economy and GDP. (Of note, 

primary economic drivers of IoT will be commercial and industrial use cases, not 

consumer-facing applications.) For trusted data exchange in an IoT ecosystem, data 

194 

generated by devices and existing infrastructure must be able to be shared between 

the cloud, the network, and intelligent devices for analysis—enabling users to aggregate, filter, and share data from the edge to the cloud with robust protection. For 

this reason, security is fundamental to Intel’s IoT roadmap. 

As discussed in my Prepared Statement for the Record (pp. 4–6), Intel believes 

that it is critical to integrate security into hardware and software from the smallest 

devices at the edge of the network to the most advanced server in the cloud and 

all gateways and devices in between. These multi-level security capabilities create 

redundancies which prevent intrusions and enable a robust, secure, trusted end-toend IoT solution. Intel’s hardware will provide transistor-level security on the actual 

compute device itself at the outset (rather than layering it on top at latter point 

in design cycle with other, less secure external features). This means each compute 

device can have an irremovable identification which prevents any non-approved device from accessing the network. Intel’s IoT solutions also will employ advanced 

hardware level capabilities—‘‘whitelisting’’ (prevents harmful apps from being activated) and ‘‘blacklisting’’ (blocks list of known malware from entering device or network). Intel Security also integrates advanced software level security capabilities 

which enables the software to identify threats and proactively notify users and/or 

automatically quarantines devices that could be at risk. With this combination of 

transistor-level security, plus advanced hardware and software level security, Intel 

will protect IoT assets and data in ways few others can. 

With respect to the technology industry generally, Intel and other technology companies collaborate with government, non-governmental organizations, and other private industry stakeholders to improve cybersecurity in a way that promotes innovation, protects citizens’ privacy and civil liberties, and preserves the promise of the 

Internet as a driver of global economic development and social interaction. A recent 

example of such collaboration is the Cybersecurity Framework led by the National 

Institute of Standards and Technology (NIST). Executive Order 13636 (issued in 

February 2013) directed NIST to work with stakeholders to develop a voluntary 

framework—based on existing standards, guidelines, and practices—for reducing 

cyber risks to critical infrastructure. Intel and other technology companies worked 

collaboratively with other private industries and U.S. government partners to develop the Framework. Intel then took it a step further by creating, implementing 

and publishing a case study that encourages use of the Framework as a process and 

risk management tool. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. JOHN THUNE TO

LANCE DONNY

Question 1. Mr. Donny, you stated the Internet of Things technology can often be 

cost prohibitive for farmers. One reason we’ve seen IoT proliferate is huge cost reductions for bandwidth, processing, and sensors. Are these trends helping to drive 

IoT adoption on the farm? What is needed to bring the cost of technology down for 

farmers? 

Answer. Yes, generally these trends help farmers adopt technology in greater 

numbers and this is evidenced by the price of cellular data transmission falling 

slightly over the last several years. We expect to see this trend continue, and 

through better wireless technology, the ability to move greater amounts of data over 

fewer discrete cellular bands; further driving data transmission costs down. 

Question 2. Mr. Donny, in your testimony, you talked about the drought in California and how challenging that has been. Would you please elaborate on how the 

Internet of Things is helping farmers deal with a lack of water? 

Answer. Farmers in California have been devastated by what now is a four-year 

drought. Farmers have begun to deploy a greater number of soil moisture sensors 

to increase the understanding of the amount of available water they do have. Technology like moisture sensors provide accurate management tools that take the guess 

work out of irrigation. We see farmers save from 5–25 percent of their overall water 

though these methods. 

195 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. ROY BLUNT TO

LANCE DONNY

Question 1. As the ‘‘Internet of Things’’ includes modems talking to each other, 

and machines talking to each other, how reliable is wireless connectivity in remote 

areas today? 

Answer. Wireless connectivity varies based on a number of factors but are most 

impacted by topography, crop canopy density, and antenna height. We’ve seen poor 

connectivity outcomes where both factors are challenging, in some cases a few hundred feet of range to ranges of 10-miles where we have ideal conditions. While we 

don’t need to see every installation achieve 10-mile range, we need reliably to cover 

a full section (640 acres) in most cases. 

Question 2. What broadband capacity is needed and how soon will it be available 

for the potential of the ‘‘Internet of Things’’ to be realized in agriculture—particularly for precision agriculture? 

Answer. The bandwidth demand in agriculture is not as significant as other demands such as online learning or telemedicine. We can reliably move most data (excluding large image files) over relatively low bandwidth speeds, less then 10mbps. 

More importantly is the coverage area. If large agriculture areas go uncovered, the 

industry will continue to rely on cellular and satellite for communication, which is 

costly and less then reliable. 

Question 3. A number of colleagues from this committee and myself recently wrote 

the Federal Communications Commission to emphasize that ‘‘rural households and 

businesses stand to benefit’’ from the Mobility Fund for wireless broadband in rural 

areas, and the Connect America Fund for fiber broadband in rural areas. 

Today’s hearing underscores that need, as the ‘‘Internet of Things’’ is dependent 

on broadband connectivity—both wireline and wireless. 

What is your opinion of the Federal Communications Commission’s attempt so far 

to reform the Mobility Fund for rural wireless, and the Connect America Fund for 

fiber to unserved rural areas? 

Answer. In all fairness, I am not fully versed on the Mobility Fund. In my opinion 

the changes to increase 4G services with Phase II funding must not inadvertently 

allow whatever level of data service, which support IoT, in rural markets to deteriorate. In addition, in order to ensure IoT data services don’t diminish over time the 

FCC should consider grouping areas that lack 2G coverage in an auction separate 

and apart from those areas in which carriers are seeking to upgrade from 2G, 2.5G 

and 3G services to 4G services. This, in my opinion, will enable lower cost carriers 

a means to support the vast amount of connected devices in rural markets. 

Question 4. In your testimony, you cite the American Farm Bureau’s Privacy and 

Security Principles. These principles cover a wide range of issues including education about rights and responsibilities, ownership of data, the collection and use 

of data, notice, transparency, and choice for consumers. 

Did the American Farm Bureau need a government agency to instruct them in 

developing these principles, or were they able to come up with them on their own? 

If the American Farm Bureau can establish a set of principles regarding expectations of rights and responsibilities for the ‘‘Internet of Things,’’ can other sectors of 

the economy do the same? 

Answer. The American Farm Bureau, given it’s breath of farm knowledge, 6 million members, industry relations, and capacity to engage farmers in dialog regarding 

their concerns and needs was able to develop these principles without government 

agency support. 

While I’m not an expert on other sectors their make up or challenges, I firmly 

believe in the power of collaboration. The most efficient and realistic method of developing principles is for industry and it’s customers to work together. In this way 

needs, fears, opportunities, and challenges can be discussed and solutions can be 

agreed upon that will achieve actual success once implemented. 

196 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. JOHN THUNE TO

ADAM D. THIERER

Question 1. Mr. Thierer, in comments to the FTC, you argued that policymakers 

should exercise regulatory humility in the face of uncertain technological change 

and address harms only after conducting a cost-benefit analysis of various remedies. 

FTC Commissioner Wright raised similar concerns about the FTC’s recent staff report on the Internet of Things. What are the dangers of not doing a cost benefit 

analysis before moving forward with policymaking in this space? 

Answer. Although benefit-cost analysis is extremely challenging in the field of digital privacy policy, it is essential that analysts and policymakers attempt to conduct 

such reviews of any regulatory proposals aimed at curbing private sector data collection. While we will never be able to perfectly determine either the benefits or costs 

of data controls, the very act of conducting a regulatory impact analysis will help 

us to better understand the trade-offs associated with various regulatory proposals. 

In this case, benefit-cost analysis would help us determine the impact of new data 

regulation on technological innovation, consumer choice, entrepreneurialism, economic growth and the competitiveness of America’s digital economy. And because 

data has powered the Information Revolution and brought consumers a cornucopia 

of new choices, it is essential that we carefully evaluate any new rules for their impact on the economy. 

Question 2. Mr. Thierer, in a submission to the FTC you wrote that, ‘‘It is likely 

that citizen attitudes about IoT technologies will follow a familiar cycle we have 

seen play out in other contexts: initial resistance, gradual adaptation, and then 

eventual assimilation of that new technology into society.’’ Where are we today on 

the spectrum of Internet of Things adoption? 

Answer. We are still in the very early stages of Internet of Things adoption and, 

at least thus far, we’ve not seen as the same sort of initial resistance to IoT technologies that we witnessed with many previous technologies. While some privacy 

and security concerns have, perhaps, held back some consumer adoption at the margin, it appears that the public is quickly moving into the ‘‘gradual adaption’’ phase 

and embracing these technologies. It could be the case that the public’s remarkably 

rapid assimilation of smartphone technology into their lives since 2007 has acclimated consumers to IoT technologies and made their adoption less jarring. 

Æ 

197 

This page intentionally left blank. 

198 

This page intentionally left blank. 

199 

This page intentionally left blank.