The Big Story: Congress returns, plans to hit the ground running on AI
As they return from the August break, policymakers are gearing up for a legislative effort around Artificial Intelligence, with several hearings and a novel ‘insight forum’ this week and next to dive into the technology. Senate committees are holding hearings on AI development, oversight, and transparency, while Senate Majority Leader Chuck Schumer (D-N.Y.) is organizing a six-hour closed-door AI insight forum he says will supercharge the committee process. The events come on the heels of a letter Schumer sent to colleagues outlining the ultimate goal of developing a comprehensive framework on AI. As policymakers move forward with potential AI-focused legislation, Engine has a new deep dive out this week exploring how policymakers can mitigate risks, seize opportunities, and promote startup innovation.
AI has dominated the imagination of policymakers and the public alike in recent months, following quick advancements in the technology. Many see clear benefits of the technology, but worry about myriad potential risks associated with AI, in addition to impacts on intellectual property, the workforce, and privacy. As policymakers explore policy responses it is critical they understand the interplay of existing law, have a grasp of the technology, and keep innovation as the ‘North Star’ of any legislative efforts.
Much of the conversations around AI are dominated by large industry incumbents, and they make up the majority of witnesses at congressional hearings and the first AI insight forum slated for next week. Startups are innovating in AI, using the technology to solve longstanding problems in healthcare, lending, employment, and agriculture, in addition to helping us learn new games, find events we’re interested in, and take better vacations. Engine earlier joined other small businesses and technology stakeholders in calling on Congress to ensure startups have a seat at the table as policymakers explore changing legal and regulatory frameworks in response to AI. Considering the whole ecosystem is critical to preserve the ability of startups to innovate with AI, grow, and succeed.
Policy Roundup:
Senate confirms telecom nominee, giving agency 3-2 Dem majority. The Senate voted to confirm Federal Communications Commission nominee Anna Gomez this week, creating a 3-2 Democratic majority after years of a 2-2 deadlock. The Democratic majority should allow the agency to aggressively pursue several policy issues critical to startups, including making broadband more accessible and affordable and keeping the Internet a level playing field for small companies by restoring net neutrality protections. If the Senate does not confirm FCC Democratic Commissioner Geoffrey Starks before the end of the year, Starks’ tenure at the agency will end and the FCC will go back to a 2-2 split.
British online content bill threatens encryption. The UK’s sprawling legislation to govern content online, the Online Safety Bill, passed the House of Lords this week, resurfacing concerns about the bill’s impact on end-to-end encryption. The bill enables the UK’s communications regulator to require services to proactively scan user content, which the regulator admitted this week wouldn’t be technically feasible for encrypted services without breaking encryption and undermining user privacy. The bill’s impact on encryption is only a small part of how the law could remake the Internet, with widespread age verification and new content moderation requirements for companies. It now returns to the House of Commons and is expected to be finalized this fall.
Arkansas, Texas online age verification laws blocked by courts. Federal judges recently enjoined two state laws—one in Texas and one in Arkansas—that would have required certain Internet companies to verify the ages of their users, citing concerns about the impact the laws will have on free speech. The Texas law would require adult websites to verify users’ ages to ensure minors do not access sexually explicit material and would open up adult websites to hundreds of thousands of dollars in fines. The Arkansas law would require social media websites to verify users’ ages and obtain parental consent for minors to create accounts. The two enjoined laws are part of a larger trend—both across state legislatures, where other states have passed similar laws, and in Congress, where lawmakers have proposed similar measures—to push Internet companies to verify the ages of their users and limit the kinds of content young users see online, most of which raise free expression concerns as well as practical concerns about the kinds of personal data companies must collect and store to verify users’ ages.
Engine submits feedback to Canada on planned digital services tax. This week Engine shared feedback as the Canadian government closed its consultation on a number of budget measures, including the imposition of a digital services tax (DST) that will go into effect in January 2024. Most OECD countries have agreed to continue postponing the imposition of new DSTs, but the Canadian government is moving ahead with the 3 percent levy as OECD negotiations continue, threatening to splinter the deal. Canada’s tax applies retroactively and targets large, mostly American companies, but the incidence of tax is likely to ultimately be borne by end customers like startups in the form of increased prices for services on which startups rely to do business. Any increase in costs for a cash-strapped startup could hinder innovation globally and slow startup growth.
Coalition calls for guidance around business transparency requirements. Last week, a coalition of business advisors and startup investors sent a letter to the Financial Crimes Enforcement Network (FinCEN), urging the body to provide clarity on how the law will be implemented given small businesses, including startups, will predominantly be affected. The Corporate Transparency Act goes into effect in January of 2024 and requires FinCen to collect information like the name, birthdate, address, and ID of all “beneficial owners”—anyone with substantial control—of most companies in the U.S. Most startups and small businesses will be subject to reporting anew, while many larger companies are exempt because they are already subject to other reporting requirements. While the point of the effort is to target money laundering and financial crime, policymakers should be wary of imposing onerous regulations, including reporting requirements that can burden startups, dissuade investors, and undermine privacy.
Startup Roundup:
#StartupsEverywhere: Philadelphia, Pennsylvania. Tiffanie Stanard, the Founder and CEO of Stimulus, brings a wealth of experience from her corporate background in vendor management and diverse purchasing then becoming a consultant in the same industry before founding Stimulus. Having worked with companies like Sunoco, McDonald's, Paramount Pictures, Salesforce, and Comcast/NBCUniversal, she recognized the importance of strong supplier relationships as a competitive advantage for businesses. We sat down with her for a conversation about her success and challenges securing funding for her company and how policymakers can better fuel supplier diversity.
