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Insight

PART 2 - The regulatory outlook for the Internet of Things

22/10/2014
In Part 1 of this piece I posed a question asking: the Internet of Things – what is it? I argued that even the concept of the Internet of Things ("IoT") itself is somewhat ill-defined making the point In Part 1 of this piece I posed a question asking: the Internet of Things – what is it? I argued that even the concept of the Internet of Things ("IoT") itself is somewhat ill-defined making the point there is no definition of IoT and, even if there were, that the definition will only change. What's more, IoT will mean different things to different people and talk to something new each year.

For all the commentary, there is not specific IoT law today (sorry there is no Internet of Things (Interconnectivity) Act in the UK (and nor will there be any time soon)). We are left applying a variety of existing laws across telecoms, intellectual property, competition, health and safety and data privacy / security. Equally, with a number of open questions about how the IoT will work, how devices will communicate and identify each other etc., there is also a lack of standards and industry wide co-operation around IoT.

Frequently based around data use and with potentially intrusive application in the consumer space (think wearables, intelligent vehicles and healthtech) there is no doubt that convergence around IoT will fan privacy questions and concerns.

An evolving landscape

This lack of definition, coupled with a nascent landscape of standards, interfaces, and protocols leaves many open questions about future regulation and the application of current laws. On the regulatory front there is little sign of actual law-making or which rules may evolve to influence our approach or analysis.

Across the US, UK and the rest of Europe some of the regulatory bodies with an interest in IoT are diverse with a range of regulatory mandates and sometimes with a defined role confined to specific sectors. Some of these regulators are waking up to potential issues posed by IoT and a few are reaching out to the industry as a whole to consult and stimulate discussion. We're more likely to see piecemeal regulation addressing specific issues than something all encompassing.

The challenge of new technology

Undoubtedly the Internet of Things will challenge law makers as well as those of us who construe the law. It's possible that in navigating these challenges and our current matrix of laws and principles that we may influence the regulatory position as a result. Some obvious examples of where these challenges may come from are:

  1. Adaptations to spectrum allocation. If more devices want to communicate, many of these will do so wirelessly (whether via short range or wide area comms or mobile). The key is that these exchanges don't interfere with each other and that there is sufficient capacity available within the allocated spectrum. This may need to be regulated;

  2. Equally, as demand increases, with a scarce resource what kind of spectrum allocation is "fair" and "optimal" and is some machine to machine traffic more important than other traffic? With echoes of the net neutrality debate the way this evolves will be interesting. Additionally, if market dominance emerges around one technology will there be competition/anti-trust concerns;

  3. The technologies surrounding the IoT will throw up intellectual property and licensing issues. The common standards and exchange and identification protocols themselves may be controlled by interested party or parties or released on an "open" basis. Regulation may need to step-in to promote economic advance via speedy adoption or simply act as an honest broker in a competitive world; and

  4. In some applications of IoT the concept of privacy will be challenged. In a decentralised world the thorny issues of consent and reaffirming consent will be challenging. This said, many IoT deployments will not involve personal information or identifiers. Plus, whatever the data, issues around security become more acute.


We have a good idea what issues may be posed, but we don't yet know which will impose themselves sufficiently to force regulation or market intervention.

Consultation - what IoT means for the policy agenda

There have been some opening shots in this potential regulatory debate because a continued interconnectivity between multiple devices raises potential issues.

In issuing a new Consultation: "Promoting investment and innovation in the Internet of Things", Ofcom (the UK’s communications regulator) kicked off its own learning exercise identify potential policy concerns around:

  1. spectrum allocation and providing for potential demand;

  2. understanding of the robustness and reliability issues placed upon networks which demand resilience and security. The corresponding issue of privacy is recognised also;

  3. a need for each connected device to have an assigned name or identifier and questioning just how those addresses should be determined and potentially how they would be assigned; and

  4. understanding their potential role as the UK's regulator in an area (connectivity) key to the evolution of IoT.


In a varied and quite penetrable paper, Ofcom's consultation recognises what many will be shouting, their published view "is that industry is best placed to drive the development, standardisation and commercialisation of new technology". However, it goes on to recognise that "given the potential for significant benefits from the development of the IoT across a range of industry sectors, ][Ofcom[ are interested in views on whether we should be more proactive; for example, in identifying and making available key frequency bands, or in helping to drive technical standards."

Europe muses while Working Party 29 wades in early warning about privacy

IoT adoption has been on Europe's "Digital Agenda" for some time and in 2013 it reported back on its own Conclusions of the Internet of Things public consultation. There is also the "Connected Continent" initiative chasing a single EU telecoms market for jobs and growth.   The usual dichotomy is playing out equating technology adoption with "growth" while Europe wrestles with an urge to protect consumers and markets.

In just one such fight with this urge, in the past month the Article 29 Working Party (comprising the data privacy regulators of Europe) published its own Opinion 8/2014 on the Recent Developments on the Internet of Things. Recognising that it's impossible to predict with any certainty the extent to which the IoT will develop the group also calls out that the development must "respect the many privacy and security challenges which can be associated with IoT".

Their Opinion focuses on three specific IoT developments:

  1. Wearable Computing;

  2. Quantified Self; and

  3. Domotics (home automation).


This Opinion doesn't even consider B2B applications and more global issues like “smart cities”, “smart transportations”, as well as M2M (“machine to machine”) developments. Yet, the principles and recommendations their Opinion may well apply outside its strict scope and cover these other developments in the IoT. It's one of our only guiding lights (and one which applies high standards of responsibility).

As one would expect, the Opinion identifies the "main data protection risks that lie within the ecosystem of the IoT before providing guidance on how the EU legal framework should be applied in this context". What's more the Working Party "supports the incorporation of the highest possible guarantees for individual users at the heart of the projects by relevant stakeholders. In particular, users must remain in complete control of their personal data throughout the product lifecycle, and when organisations rely on consent as a basis for processing, the consent should be fully informed, freely given and specific."

The Fieldfisher team will shortly publish its thoughts and explanation of this Opinion. As one may expect, the IoT can and will challenge the privacy notions of transparency and consent let alone proportionality and purpose limitation. This means that accommodating the EU's data privacy principles within the application of some IoT will not always be easy. Security poses another tricky concept and conversation. Typically these are issues to be tacked at the design stage and not as a legal afterthought. Step forward the concept of privacy by design (a concept recognised now around the globe).

In time, who knows, we may even see the EU Data Protection Regulation pass and face enhanced privacy obligations in Europe with new focus on "profiling" and legal responsibilities falling beyond the data processor exacting its own force over IoT.

The US is also alive to the potential needs of IoT

But Europe is not alone, with its focus on activity specific laws or laws regulating specific industries, even the US may be addressing particular IoT concerns with legislation. Take the "We Are Watching You Act" currently with Congress and the "Black Box Privacy Protection Act" with the House of Representatives. Each now apparently have a low chance of actually passing, but may regulate monitoring of surveillance by video devices in the home and force car manufacturers to disclose to consumers the presence of event data recorders, or 'black boxes', in new automobiles.

A wider US development possibly comes from the Federal Trade Commission who hosted public workshops in 2013, itself interested in privacy and security in the connected world and the growing connectivity of devices. In the FTC's own words: "[c]onnected devices can communicate with consumers, transmit data back to companies, and compile data for third parties such as researchers, health care providers, or even other consumers, who can measure how their product usage compares with that of their neighbors. The workshop brought together academics, business and industry representatives, and consumer advocacy groups to explore the security and privacy issues in this changing world. The workshop served to inform the Commission about the developments in this area." Though there are no concrete proposals yet, 2014 has seen a variety of continued commentary around "building trust" and "maximising consumer benefits through consumer control". With its first IoT enforcement action falling in 2013 (in respect of connected baby monitors from TRENDnet whose feeds were not secure) there's no doubt the evolution of IoT is on the FTC's radar.

FTC Chairwomen, Edith Ramirez commented that "The Internet of Things holds great promise for innovative consumer products and services. But consumer privacy and security must remain a priority as companies develop more devices that connect to the Internet".

No specific law, but plenty of applicable laws

My gut instinct to hold back on my IoT commentary had served me well enough. In the legal sense with little to say, perhaps even now I've spoken too soon?   What is clear is that we're immersing ourselves in IoT projects, wearable device launches, health monitoring apps, intelligent vehicles and all the related data sharing already. The application of law to the IoT needs some legal thought and, without specific legislation today, as for many other emerging technologies we must draw upon:

  1. Our insight into the existing law across and its current application across different legal fields; and

  2. Rather than applying a rule specific to IoT, we have to ask the right questions to build a picture of the technology, the way it communicates and figure out the commercial realities and relative risks posed by these interactions.


Whether the internet of customers, the internet of people, data, processes or even the internet of everything; applied legal analysis will get us far enough until we actually see some substantive law for the IoT. This is today's IoT challenge.

Mark Webber – Partner, Palo Alto California mark.webber@fieldfisher.com

 

 

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