Washington in Review - February 15, 2019

On the heels of President Trump’s State of the Union address making a case for increased border security and other initiatives, federal agencies have been moving quickly on artificial intelligence, Internet of Things and robocall spoofing. Meanwhile, the EU and Japan have entered into an agreement on cross-border data flows, and India is taking action on investment in e-commerce. 

Want our Strategic Policy Advisory team to take a look at other topics? Let us know in the comments!

Federal action on artificial intelligence gets real

Earlier this week, President Trump signed the American AI Initiative, an Executive Order directing federal agencies to develop new AI R&D budgets, share resources with academia and industry, create educational programs to improve the AI talent pipeline, and develop regulatory guidances for AI implementation that balance innovation with civil liberties. The next day, the US Department of Defense released its AI Strategy report, outlining its approach to AI ethics and safety, decentralized experimentation, collaboration with external partners, and technical upskilling in order to fulfill the military’s core missions.

What does it mean?

• Following President Trump’s State of the Union reference to supporting “cutting edge industries of the future,” this is the strongest federal action to date towards positioning the US as a leader in AI and emerging technologies.
• Tech companies may be able to partner with federal agencies to mutually benefit from emerging private sector AI developments and new public sector resources, especially as regulatory guidelines around AI deployment mature.

EU and Japan green-light data flows

On January 23, the European Commission (EC) and Japan issued mutual adequacy decisions enabling personal data to flow freely between the two territories. This is the first adequacy decision to come from the EC since the GDPR went into full force in May 2018. Businesses are now able to transfer personal data between the European Economic Area and Japan absent any requirement to provide further additional safeguards for each transfer. According to the EC, the two economies’ mutual recognition effectively creates the world’s largest area of secure, free data flows.

What does it mean?

• The EU-Japan adequacy agreement is expected to reduce the cumbersome time commitments and documentation requirements that have previously impeded companies operating in both jurisdictions. 
• Since the EC has been deliberating with South Korea on the issue of establishing adequacy for nearly four years now, this step with Japan signals the EC’s willingness to engage with more Asian trading partners. 

NIST won’t leave IoT to its own devices

In an effort to address security challenges around rapidly growing investment in Internet of Things (IoT) technology by many industries, which is yet to be subject to comprehensive regulation, the National Institute for Standards in Technology (NIST) announced it is seeking input on IoT cybersecurity best practices. IoT presents unique privacy challenges related to the extent of linked personal and household data collected by wireless devices and corresponding apps. NIST will accept comments until March 18. NIST plans to release a security architecture to protect against wireless sensor vulnerabilities and is developing a comprehensive set of IoT policy guidelines. Read more about PwC’s IoT insights and capabilities.

What does it mean?

• NIST is seeking input from a range of stakeholders, presenting a significant opportunity for companies to make recommendations for regulating the rapidly evolving IoT industry, particularly how and when controls should be built into IoT devices.
• IoT innovations let companies set themselves apart from the competition. As a result, it is critical to create a workable regulatory framework under NIST, in which companies can be confident they are meeting evolving consumer privacy expectations.

India cracks down on foreign e-commerce funding

The Indian government recently changed its policy on Foreign Direct Investment (FDI) in e-commerce, allowing 100% FDI only in “marketplace models of e-commerce,” where platform owners only act as facilitators between buyers and sellers. Under the new policy, foreign companies are now prohibited from: a) owning or controlling inventory that will be sold, b) selling products from companies in which they have an equity stake, c) forming exclusive selling arrangements with sellers, and d) offering excessive discounts that might be deemed unfair by regulators. 

What does it mean?

• With these new regulations, companies need to reevaluate how best to enter this region and sector. Interested investors should explore strategic ownership or partnership models that comply with and engage the Indian e-commerce market, estimated to exceed $100 billion by 2022. 

Where in the world is caller identification?

The FCC has voted to advance a proposal that expands its scope of enforcement authority over phone number “spoofing” by callers outside the US who are targeting US call recipients. As victims of fraudulent robocalls know, fraudsters are now routinely using false or “spoofed” phone numbers in caller ID to trick people into picking up and engaging with the caller. As the vast majority of those calls come from outside the US, the FCC was previously incapable of penalizing foreign callers or carriers. In addition, The FCC proposed to expand this authority to text messages like MMS and SMS, but maintain its exceptions for IP-enabled messages like iMessage, WhatsApp, or Google Hangouts over which the FCC does not have authority.

What does it mean?

• Voice and text service providers are encouraged to quickly adopt caller authentication technology to increase both enterprise and consumer trust in services.
• Businesses that frequently get their numbers fraudulently spoofed may soon have a stronger enforcement ally in the FCC as it can better combat fraudulent numbers that may have harmed a company’s reputation among its customers.

Tariffs remain roadblock for USMCA ratification

Senator Chuck Grassley (R-IA) recently said that tariffs are preventing ratification of the USMCA trade deal to replace NAFTA. Canada has pressed for the elimination of a trade agreement provision letting the US impose steel and aluminum tariffs on Canada and Mexico. These tariffs remain a point of conflict between the three trading partners, as Canada and Mexico say they will not take up ratification of the deal until these tariffs are lifted.

What does it mean?

• Companies should engage the US Government to accelerate the elimination of these tariffs by making it clear that the impact of these will be felt by consumers in the US, not by the trade partners. 
• If the ratification of the deal is delayed, other provisions will also likely be delayed including new labor and environmental standards, improved intellectual property protections, and cross-border digital services provisions. 

For past issues of Washington in Review and other commentary on policy and regulatory issues impacting the Technology, Media, and Telecommunications industries, visit us on the web. 

Contributors: Jocelyn Aqua, Regina Barillas, Rosie Brinckerhoff, Jennie Cunningham, Brian Dunch, Arie Esquenazi, Haley Fine, Nick Hall, Josh Joseph, Dan Julian, Priya Kamdar, Julie Riccio, David Sapin, Antonio Sweet, and Lenora Zimmerman.