SMART REGULATION IN THE AGEOF DISRUPTIVE TECHNOLOGIES

Andrea RendaCEPS, Duke, College of Europe

13 March 2018

A New Wave of Regulatory Governance?

• First wave: structural reforms (1970s-1980s)• Privatizations, liberalizations

• Second wave: regulatory reform (1980s-1990s)• Ex ante filters + “Less is more”

• Third wave: regulatory governance/management (2000s)• Policy cycle concept + importance of oversight• Better is more? Alternatives to regulation, nudges, etc.

• Fourth wave: coping with disruptive technologies? (2010s)

Digital Technology as “enabler”

Competition Collusion Access Discrimination

Jobs Unemployment Enforcement Infringement

Key emerging challenges

• From national/EU to global governance• From ex post to ex ante/continuous market monitoring (a new approach to the

regulatory governance cycle)• Need for new forms of structured scientific input (a new approach to the innovation

principle, and to innovation deals)• From regulation “of” technology to regulation “by” technology• A whole new set of alternative policy options• Away from neoclassical economic analysis, towards multi-criteria analysis and

enhance risk assessment/management/evaluation

Riskassessment,dose-response

Problemdefinition Alternativeoptions&ImpactAnalysis Regulatorycycle

Riskmanagement Evaluation

Emerging,disruptivetechnology

Policystrategyandexperimentation Learning

• Scientificinputandforecast• Mission-ledassessment• Long-termpathways

• Ongoingevaluation• Pathwayupdates

• Mission-orientedoptions• Pilots,sprints,sandboxes,tech-

enabledregulation

“Laws that learn”

ALTERNATIVE POLICY OPTIONS• Regulatingbehaviour

– Needtofullyaccountforbehaviouralbiasesinindividuals– Stopprotectingconsumers,startempoweringusers– “Nudge”mostcontroversialwhenitcomestoemergingtechnologies?(Yeung2017)

• Regulatingtechnology– Code,notlaw,defineswhat’spossible(Lessig 1996;1999)– Design-basedrules:embeddingethicalprinciples/normativegoalsincode?

• Regulating“with”technology– Constantsurveillance– Distributedledgers– “GuardianAI”:algorithmsthatmonitoralgorithms

“Regulatoryengineering”• Newscreens

– Openness/neutrality

– Interoperability

– Scalability

– Contestability

– Resilience

– Enforceability

• Newexperiments– RCTs

– (Virtual)sandboxes

– IdeationSprints

– Rapidprototyping

– Regulationvia“extensions”

– Co-regulatoryschemes

Taxonomyofalgorithmicapproaches(Yeung2017)

Source:Mittelstadt etal(2016)

Actionableinsights?

Transparency

Garbagein,garbageout

Discriminatoryactions

Profilingandreorganising reality

Responsibility

EUSDGIndicatorSet

Frontier2030(Europe)

EU

MS

Spending(MFF)

Sectoralpolicies

Horizontalpolicy

Semester/Cohesionfunds

NationalSDpathways

Missioninnovation

Mission1 Mission2 MissionX

Governance

Tools

Progress/evaluation

OverallEUSDGgoals Mission-orientedpolicy Mission-orientedinnovationpolicy

Regulation&MOIP:keychallenges• Embeddinginnovationincoherentbaselinescenarios

• Embeddingdifferenttechnologymixesandbusinessmodelsinthechoiceofpolicyalternatives

• Linkingtheevaluationcyclewithupdatesinthetechnologyroadmaps

• Experimentation,datamanagementandcollectioninbothMOIPandpolicy

Mobility

Shelter

Jobs

Energy

Health

Security

Climate

Mission-ledplatforms

RTD RSB

PoliticalvalidationFirstVP

LeadDG

ExanteIA

NewIAguidelines

EPRS

Coherencecheck+Motivationofamendments

STOAUnit

Council

Coherencecheck+Motivationofamendments

1

3

BaselineOptions

2 4 5 6

Adoption

Monitoringandexpostevaluation

Regulation&MOIP:keychallenges

SMART REGULATION IN THE AGEOF DISRUPTIVE TECHNOLOGIES

Andrea RendaCEPS, Duke, College of Europe

13 March 2018

Example1:Whydidwewantnetneutrality?

• Anonymity

• Competitionandfairbusinesspractices

• Innovation

• Userchoice

• Openness

• Freedomofexpression/Pluralism

Example2:Gridneutrality?• “Theelectricgriddoesnotcareifyoupluginatoaster,aniron,oracomputer…[It’s]amodelofaneutral,innovation-drivingnetwork”(TimWu,2002)• Stilltrue?• Gridneutralitywouldhaveeffectsoncompetition,investment,distributional,andindustrialpolicy• Gridneutralitywouldnotmakethegridneutral• Itwouldclashwiththetrendtowardsresponsiblecooperationwithplatforms• Anyalternativeisproblematicintermsofenforcement:butthisisadebatethatisnowhereonthemap,inallICT-permeatedsectors

EXAMPLE 3:COPYRIGHT ENFORCEMENT

• Earlyyears(1996-2001):beliefthatISPsshouldnotinspectcontent

• 2001-2010:beliefthatDRMswoulddominatethemarket,allowingfor“easy”enforcement(notwithoutshortcomings)

• 2010onwards:theageofinspectionandintermediaryliability• Needtoreviewtheproblemdefinition

• Policylearning:needtomonitoremergingtechnologiesandverifypossibleavoidancestrategies(e.g.TOR,OnionRouting,etc.)

Achillesandtheturtle

n Mp3.com (2000)¨ One-way downloads¨ No sharing¨ Space-shifting¨ Not fault-tolerant¨ Not extensible¨ Not lawsuit-proof

n Napster (2000)¨ Centralized¨ Static¨ Manageable¨ Not extensible¨ Not fault-tolerant¨ Not lawsuit-proof

Achillesandtheturtle

n Morpheus (2003)¨ Decentralized¨ Dynamic¨ Difficult to manage¨ Extensible¨ Fault-tolerant¨ Lawsuit-proof

n Grokster (2003)¨ Decentralized¨ Dynamic¨ Manageable¨ Extensible¨ Fault-tolerant¨ Lawsuit-proof

p2pboom!

SearchiusSendLinkShareaza

ShareDirectShareGear

ShareItSoulseek

Streamjack MusicThe Circle

Torrent SearcherTorrentopiaTribalWebTrustyFiles

Web file manager HTTP Commander

WinMP3LocatorWWW File Share Pro

XBTXoloxYaCy

ZipTorrentZultrax

2 Find MP3ABC

AcquisitionAdagio

Amini p2p SoftwareaMule Project

ANts p2pAnywhere Explorer

ApollonApplejuice

AresAres p2p

Arliweb FoldersAudioGalaxy Rhapsody

AudioGnomeAxbar

AzureusBadBlueBCDC++

BearShare

BitCometBitComet Accelerator

BitLordBitSpirit

BitTorrentBitTorrent Absolute Downloader

BitTorrent LiteBlack Pirate FS

BlubsterBT2Net

Bt2Net Jet-speed DownloaderBTGetit

CarrachoConnect Storm

CrazaaDC++

Deepnet ExplorerDiet K

Digital Media ServerDIYP2P / Paranoia

DriveHQ

Easy File Sharing Web ServereDonkey 2000

eDonkey AcceleratoreFileGoEinsteinEmule

eMule PluseXeem

FilePipeFiletopiaFreenet

GnucleusGroksterGrouper

Haxial KDXiMesh

iMesh LightiMesh Revolution

InfocuSoft Photo ShareK-LiteGold

KastKaZaa

Kazaa All-in-OneKazaa Lite Resurrection

KazaaHttpKnutell

LimeWireLphant peer to peer

MagicVortexMediaGrab!

Mercora IMRadioMextractorMLdonkeyMorpheusMP3-Wolf

MysterNetwork Sunshine

NodescanNoxx

P2P ShareSpyPeer2Mail

PeerFoldersPeerFTP

Personal File ServerPiolet

PixVillagePruneBaby!PySoulSeek

Qnext

Technologywinsagain…

Technologywinsagain…

Example4:Algo trading

“Flashcrashof2.45”

- 9.2%!

Who is responsible?

Themakingofafly..

$23million!!

Who is responsible?

Collective(ir)responsibility?

BlockChain

EXAMPLE 5:FILTER BUBBLES

• The“Dailyme”:ongoingpolarizationofpoliticalopinions

• Alternativepolicyoptions?• Self-regulation(corporatecodesofconducts,industry-wideagreements)• Co-regulation(e.g.extensionssuchasBalancer,PolitEcho,Bobble,ThisisFake,Considerit,FlipFeed,EscapeYourBubble)• Generalprinciplesofaccountabilityforpluralismandpoliticalbalancetomajorplatformsandsocialmedia• Developmentofpubliclyfundedthird-party,interoperableextensionsonmajorplatforms(e.g.useofinnovationprizes?)• Outcome-basedpolicyintheformofKPIsthatmeasurethepoliticalbalanceintheflowofinformationexchangedbyindividualendusers.

Example 6:automated driving

Making decisions…

Example7:the“digitalpanopticon”

SMART REGULATION IN THE AGEOF DISRUPTIVE TECHNOLOGIES

Andrea RendaCEPS, Duke, College of Europe

13 March 2018