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June 28, 2017

iPhone’s anniversary is a reminder that regulatory headwinds are ahead

This article was originally published on The Hill.

When the iPhone was released 10 years ago this week, it was a seminal moment in technology with news media reporting on the huge lines at Apple stores and the early adopters ready and willing to be among the first to purchase the prized gadget.

But like everything that was once shiny and new, over time it becomes just another part of our everyday lives even if it’s delivering something transformational.

That is something the technology industry will have to come to grips with, soon. Since the mass Internet era started in 1995 with the introduction of the browser, we’ve experienced two stages of technology.

The first was from 1995-2005 and was largely defined by desktop web browsing and corporate adoption. Think website storefronts and internal operations – and some interesting but ultimately mixed efforts at retail.

By 2005, that first stage of the Internet had run its course, with excitement replaced by indifference and even some skepticism.

Over the last ten years we’ve been in stage two of the Internet era, driven now by the introduction of devices such as the iPhone, which led to mobility, apps, and ultimately services geared more directly toward consumers that have constant access to the Internet. Even though there is so much more to do, you can already see the “excitement/indifference/concern” curve in motion.

When excitement gives way to indifference and concern, it emboldens regulators to try to control technology. Sometimes for legitimate reasons, such as how to protect consumers’ privacy in the age of ubiquitous hacking.

But in other instances, it’s based on fear of power. Media and regulators lead the way in raising concerns about the collective power of what is sometimes known as “FANG” (Facebook, Amazon, Netflix, Google) in the United States or “GAFA” (Google, Apple, Facebook, Amazon) in Europe.

There are legitimate concerns about the concentration of power, but lumping every large tech firm together is paying no attention to the details of how each company operates. The European Commission’s whopping $2.7 billion fine against Google for favoring its own products over rivals in search results is one example of that differentiation.

After 10 years of being a media darling and golden goose to policymakers, it seems that the worm is turning. Policymakers are increasingly scrutinizing tech companies, large and small.

The intense interest in Uber’s business practices and leadership reflect that change. So does the new attention on the perils of digital platforms, from the proliferation of so-called Fake News, the outrage over objectionable content, or how hackers use pirated movies and TV shows to infect computers.

This comes at a dangerous time for the small- and mid-sized tech firms trying to make the leap into the Fortune 500. Large firms have whole offices devoted to policymaking and regulatory issues. Legal and regulatory battles are often used as proxy wars against rivals.

But for many of the new app-based tech firms, the last few years have brought a startling revelation: lawmakers and regulators can turn their lights off. Pre-2007 tech didn’t have that same acute worry; policymakers had little to do with whether their company was successful.

But as we’ve become a digital platform and apps-based economy, tech is directly interacting with consumers at a faster pace. That is one reason why we saw many Obama officials flock to Silicon Valley pre- and post-election.

Consumer-focused tech companies, large and small, now need to bake in regulatory risk when assessing what can blunt their success. That often means focusing on public affairs at much earlier stage. Moreover, as the tech industry increasingly focuses on disrupting highly-regulated industries like energy, transportation, and healthcare the old approach is untenable. Just like investing in good legal advice and strategy is important, government now is, too.

And more often than not, it’s not just at the federal level.

While Washington is polarized, the states have become the battleground for car-sharing, home-sharing, drones and issues of privacy. States like New York have taken a hard line against sharing economy companies, forcing the creation of a guild for Uber and blocking other services from being available. That just hurts the citizens of a state.

Having been involved in technology and policy since 1998, I’ve seen how the intersection of technology, government and the economy is a precarious one. In those nearly twenty years, I’ve not seen the types of policy and regulatory challenges tech firms are about to face. I’ve watched smart tech companies get ahead of these challenges, and succeed. And other companies believe it was someone’s problem, and fail.

Time will tell how the technology industry withstands the ominous regulatory storm that is forming above us all.

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