Technology’s Coming of Age: Part II

The last column discussed the technology industry on the cusp of a new defining period of growth. As an industry matures, the “reward” is often to become a target for regulation: with the internet, when an industry becomes so pervasive to touch upon almost every area of the economy, it becomes subject to laws that address the old and are interpreted to the new. Laws regulating horse and buggy transportation could cause quite a traffic jam if applied to modern driving. Without a good navigation system, technology companies may find their fate as much determined by Washington as their own good fortune in this new age.

Many issues such as copyright law, privacy and taxation that face the technology industry have been examined in the past, but now need to be applied to a new medium. The internet is still in its early stages of growth and, with this growth, will come increased economic rewards from consumer services and global platforms for commerce and communications. Opportunities such as digital music hit roadblocks on the road less traveled while other areas such as ecommerce had clearer paths. For example:

– Digital music, debated in Congress since 2000, represents a large opportunity to deliver interactive content and create new revenue streams for the music and technology industries. However, digital music companies have struggled for legitimacy against outdated copyright law and the recording industry. If Ms. Tech CEO started a digital music company in 2000, she would find herself up to her neck in licensing rights and never get a date after spending day and night in court or an occasional Congressional hearing to no avail.

– Ecommerce experienced less interference and flourished to a $78B industry last year. Issues such as SPAM, taxes, privacy concerns and self- regulatory systems like ebay were left unfettered. If Ms. Tech CEO chose ecommerce instead, she would focus on her business while occasionally having a nightmare that states will create a tax crossword puzzle when a product goes from New York to Virginia.

We have to wonder if new innovation may face greater hurdles than the past as areas such as these and others come up against industry heavyweights, lobbyists and activist groups. One difference between digital media and ecommerce is that the former faced the entrenched recording industry, and the latter required disaggregated groups of consumers to lobby. Ultimately, policy makers’ decisions – action and inaction – may determine the degree and timing of innovation in the future. Without being open to new influences (DC and non-technology industries too), Ms. Technology CEO may very well make a mistake and miss her fate. Likewise, if Mr. Washington POL is not open to understanding technology, he may miss the call of what he is supposed to do under the intent of our American system and leave it to courts or local governments to decide.

A hedge fund manager told me last year that technology CEOs “can no longer look from the mountain to the sea.” The Bay Area view is nice, but maybe these CEOs need to turn their heads towards Washington as Intel, Cisco, AOL and others have done. In the next decade, it is likely that we will see the technology industry make its mark on Washington and vice-versa. How technology policy issues are addressed in Washington will have broad implications for the economy, pace of new services offered to consumers and America’s continued leadership. If we accept that the technology industry will continue to grow and bring new opportunities, the dilemma we face is how to protect the industry from burdensome regulations while maintaining our core values and entrepreneurial innovation. If we succeed, we have a great match. Alternatively, I doubt we would want to see the technology industry follow the path of telecommunications or the cable industry – where these industries became so regulated that they have to be deregulated to inject free market principles back into them. Policymakers can no longer act reactively but think proactively. In order to do this, policymakers must understand the technology industry, look at the policy decisions in the past, and pave a way for future harvests of companies, innovation and entrepreneurs.


This is a column dedicated to policy issues facing the technology industry. The focus of the next couple of columns will be on the return of Adam Smith for the digital media industry and issues with copyright law. Please email comments or feedback to diuliano@empower.org.