Policy & Innovation in the Internet of Things: Findings from Europe and China

Mailyn Fidler is a student at Stanford University.

The “Internet of Things” (IoT) connects objects to each other and the Internet, transmitting data about their environments. Current examples include Internet-connected diabetes pumps and sensors for energy monitoring systems in buildings. In 2008, the number of things connected to the Internet exceeded the number of people on Earth. Cisco predicts that by 2020, 50 billion things will be using the Internet to connect and monitor the world around us.

In the IoT, China sees an opportunity to increase its visibility as an international technology innovator. In 2008, China identified the IoT as a strategic industry and plans to invest $800 million USD in IoT by 2015. The European Union also sees economic potential in the IoT, especially for small and medium enterprises. Even with European recessions, interest and funding in IoT enterprises has not slowed, and the EU has invested 70 million Euros in at least 50 research projects since 2008.

The way these regions regulate IoT will influence IoT’s ability to meet high economic expectations, and I set out to analyze the strengths and weaknesses of the choices the countries are making. Over the last six months, I conducted 24 interviews in Europe and 11 in China with representatives from government, industry, and academia.

In Europe, the government must balance perceived privacy risks with encouraging IoT innovation. Overall, IoT governance in Europe so far has been patchwork. Privacy approaches towards IoT range from technology-specific recommendations to broader legislation like the Data Protection Directive. This fragmentation creates unclear guidance, particularly for small companies, where uncertainty about the law may hinder innovation.

Meanwhile, security receives much attention from lawmakers, who call for better security technologies for IoT such as light cryptography. Lawmakers have struggled, however, to create incentives for real progress. For example, in the 2010 Cluster of European Research Projects on IoT, only 1 of the 33 funded projects explicitly investigated security. In a 2010 EU study on IoT standards, only 2 of 175 dealt with security.

EU lawmakers emphasize privacy and security more than technical issues such as standardization. Currently, there are no accepted standards for the IoT in Europe. Although any standards-making process is slow, the IoT standards story is more complicated. Two additional barriers with IoT include Europe’s prioritization of social IoT aspects and its hesitation to push for standardization until it can be sure that the IoT will be standardized to its advantage. The global standards bodies the EU relies on often involve multiple stakeholders across borders, limiting the EU’s influence. But without greater progress in these forums, the EU may find itself with silos of IoT, diminishing its economic benefits.

China provides a set of contrasting governance choices. China prioritizes standards over privacy and security regulations. The nation is pursuing its own standards regime that is slated to contain 150-200 usable standards by 2015. The number of standards does not translate to use or quality, but China is attempting to influence global adoption.

With considerable economic gains desired, the EU must critically analyze the strengths and weaknesses of its IoT governance approach against those of its competitors, particularly China and the U.S., next on my research agenda.

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