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Government Regulation Could Stifle Technological Innovation

May 19, 2015 - Written By David Steele

Cloud computing is a broad sweeping term used to describe using a remote, or cloud, computer for part of whatever you are doing on your local machine. It can include things such as a Citrix or Terminal Server connection to a remote server or less obvious functions such as Google’s Auto-Awesome function built into Google+’s photo backup. The Google Chromebook is another example of a cloud computing device. And there are many reasons why cloud computing is taking off; it means the user can conduct their computing tasks on a relatively low powered, simple, cheap terminal. On a small scale, this means a cost saving for the customer but on a larger scale, it means a corporate can save many millions of dollars in direct costs (a Chromebook is cheaper to buy than a laptop) and indirect costs (a Chromebook uses less energy than a laptop).

Google are one of the world’s largest cloud computing providers and two of the men at the top, Urs H¶lzle and Vint Cerf, are managing the business against stiff competition such as Amazon, Microsoft and IBM. Google has something of a headstart compared with the competition but an article carried by a UK business website claims that these senior Google managers are being kept awake at night – but not by the competition catching up. No, they’re being kept up by the threat of Government regulation. The concern is that Governments around the world will force the cloud providers to apply different Internet and other standards and laws. It could result in a company needing to support many different subversions of the one platform, resulting in fragmentation. Urs said this on the matter, “My biggest worry is that regulation or national boundaries kind of fragment the cloud very early on. Imagine instead of Mac OS you have 100 different Mac OSs, one for every country. And then the whole ecosystem breaks down, because as an app developer, you have to qualify your app for every one of these hundred. The whole economy and the rate of innovation breaks down.”

Highlighting Urs’ use of the word “innovation”, this is what drives developments. And it is true that regulation can stifle innovation simply because companies come up with new ways to do old tasks, but these do not fit within the regulatory framework. Imagine if it were not permitted, through regulation, to transmit sound via data bits? We would not have had the mobile or cell phone revolution some fifteen or so years ago. Overly regulated markets will force businesses to design different products for these markets, which may or may not be compatible with one another. The more stakeholders in a project, the more decisions that must be taken and the more diverse the resulting products are. We have seen Google working hard over the last two years to reduce fragmentation within the Android sphere and it appears that they have another battle on their hands.

It’s not that Google has ever shied away from a fight: recently we’ve seen the European Union accusing the company of antitrust violations and has launched investigations into the business. The threat of government interference is very real, but it must be said that a certain framework is beneficial for both companies, competition and customers. Finding the balance between too heavy and too light a regulatory touch is something that all industries suffer, but with the technology and Internet sectors, the rate of change is so high that Governments all over the world are still scrambling with ways to deal with a twenty-year-old continuously new problem. Applying too heavy a regulatory hand could result in the Internet maturing into another segment of the global economy and seeing a serious slow down in innovation.