When disruption meets regulation

The rapid growth of new digital innovations like Netflix, Uber and AirBnB offer benefits for Canadians and others around the world, but they also pose novel regulatory challenges for governments and, potentially, regulatory bodies like PEO. Here, we review a recent report from the University of Toronto’s Mowat Centre on the challenges disruptive technology and its accompanying industries pose on traditional regulation.

The Mowat Centre at the University of Toronto’s School of Public Policy and Governance recently published the report Regulating Disruption: Governing in an era of rapid technological change. It examines the challenges that disruptive technology—an innovation that creates a completely new industry or displaces an established technology—and the innovators who make use of it, create for government and regulators. The report highlights several examples in disruptive technology, including video streaming (Netflix), crowdsourcing (Uber), autonomous vehicles, and blockchain technology (the encryption scheme backing bitcoin), and shows how they avoid or challenge existing regulatory regimes.

CHALLENGES AND STRATEGIES

The report details three main challenges for government regulators when working with disruptive technology: the structure of the government, the way governments engage with stakeholders, and the skills and competencies of government regulatory staff. Government structure can present a problem when coordination from multiple levels of government are needed to properly regulate a new technology—for example, provincial, federal and municipal governments would all need to co-operate to properly regulate autonomous vehicles. Another structural problem is that government regulators traditionally operate in areas where the risk to the public is very high (health care, engineering, etc.). The methods and structures developed for these situations may be too restrictive when applied to new technologies and innovative companies that do not pose a substantial risk to the public. The second major challenge to governments and regulators is how they interact with stakeholders. The timing of engaging stakeholders in the regulatory process can be tricky; too early and the regulator can be unprepared and vulnerable to resistance from the innovator, too late and the lack of input might lead to regulations that don’t reflect the real world. Regulators need to make efforts to actively engage and consult with stakeholders. The final major challenge for government is a dearth of staff with the skills and competencies necessary to understand disruptive technologies.

The Mowat report presents four strategies for dealing with these challenges: bringing design thinking into government, building government capacity, reducing regulatory burden and encouraging strong market competition. Design thinking is a way of approaching problems with an experimental mind and from an end-user perspective. We have already begun using it at PEO and, according to the report, other regulatory bodies such as the Toronto Planning Review Panel have had great success adopting this methodology. Building government capacity would directly address the shortage of technically-skilled staff, and the report presents several options for doing this, including bringing outside experts in for government “tours of duty.” Reducing the burden of regulations can result in long-term economic benefits, and is something the Ontario government takes very seriously—PEO has recently contributed comments to the government’s Red Tape Reduction Challenge regarding the Mining Act. Finally, encouraging strong competitive markets can help prevalent regulatory capture, a strong threat to disruptive industries and they often do not have the resources to lobby “captured” regulators.

The final section of the report provides specific action items for solving the three challenges. Most of these suggestions are directed at governments, but there are a few for regulatory bodies:

  • greater emphasis on life-long learning for regulatory staff;
  • expand formal pathways for regulators at different levels of government;
  • streamline inspections and enforcement inspections;
  • rethink consultation approaches to become more user-friendly; and
  • sunset clauses and regulatory reviews.

WHAT COULD THIS MEAN FOR PEO?

Overall, this report examines the challenges that disruptive technology and its accompanying industries pose to traditional regulation. As a profession regulator, we can ourselves take advantage of disruptive technology to better regulate our licence holders. For example, PEO may want to investigate if blockchain technology can be used to create a workable electronic seal. Artificial intelligence might be useful to identify potential design or practice risks, or even to produce engineering designs autonomously. PEO might also be interested in disruptive technology since it is often our licence holders who are doing the “disrupting,” and emerging engineering disciplines and hybridized disciplines require understanding new technologies and perhaps models of regulation. Disruptive business models may also create different forms or types of engineering practice. For example, the subcontracting of local engineering work to foreign companies and engineers (often via the Internet) can make it difficult for local governments to monitor and regulate engineering that impacts the public to which they are responsible. 


Andrew Tapp is PEO’s policy analyst.

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