By Patrick Waelbroeck | 16/04/2015, 8:27
Using Big data algorithms and smart, connected products generates three main risks to security, privacy and competition.
Private and public data now represent the resource that will deeply modify the way consumers and citizens daily interact with private and public services. Sensors, smart, connected objects, cameras and surveillance drones are everywhere and will blur the frontier between the online and the real world increasingly porous to create what Google already calls the “physical Web”. The economic benefits of data ecosystems are: improved quality of products and services, better management of energy resources and transportation systems, better forecasts, better matching between supply and demand (CRM and VRM), more effective management of healthcare systems, better self-knowledge, etc. However, there are risks and costs that have to be analyzed, so that the digital development does not come at the expense of a loss in the confidence that economic agents have towards each other.
Risks of security breaches are multiplied in connected infrastructures, made of sensors, servers and software. We have to think about the life cycle of personal data. Some experts even propose the “silence of chips” to express the idea that security issues should perhaps be integrated directly into the computer code that handles data transmission. The right economic incentives to key industry players should also be implemented to make them reduce as much as possible safety holes and prevent them from transforming our daily connected objects into “virus nests”. Therefore, responsibilities and property rights associated with data transmitted by smart, connected products should be clearly defined.
Sensors of smart, connected products threaten privacy. Even if customer identification contributes to better targeted advertising, there are risks that consumers will be left with fewer choices for two reasons. First, if a person who has a joint bank account wishes to make a purchase without the other co-holder’s approval, he/she will not use the associated credit card and will prefer an anonymous means of payment, such as payment in cash, prepaid cards, SMS payment. Anonymity can increase economic activity. Secondly, personal recommendation can lead to filter bubbles that prevent people from seeing all possible choices: they end up consuming always the same type of products.
Smart, connected products and Big data algorithms will change the nature of competition between firms traditionally organized in vertical silos relatively closed and independent. Companies may have strategic interests to make their data communication and processing systems incompatible with those of their competitors, or to filter data and publish biased information. The economic nature of data is such that the companies which are closest to the final consumer will also have a competitive advantage. Some form of neutrality of connected objects should be studied, which would allow data to freely flow on the Internet of Things. The economy of Big data and smart, connected products should bring innovations in a healthy competitive environment.
Patrick Waelbroeck earned a PhD in economics from the University of Paris 1 Panthéon-Sorbonne. He teaches industrial economics and econometrics at Télécom ParisTech. His research and teaching focus on the economics of innovation, the economics of intellectual property, Internet economics and the economics of personal data. Patrick Waelbroeck is also a founding member of the Chair “Valeurs et Politiques des Informations Personnelles” (Values and Policies of Personal Information), Institut Mines-Télécom, that addresses legal, economic, technical and philosophical issues related to personal data. He teaches Internet and data economics in the master Big Data at Télécom ParisTech.