Regulation can boost UK tech by striking the right balance

Debate around the proposed takeover of Activision Blizzard by Microsoft and AI safety dominated July’s headlines. What these two examples both have in common is tech regulation – and each situation requires a careful balancing act.

On the one hand, the tech sector must be free to drive innovation. On the other, consumer interests must be protected. Curbing monopolies keeps the market competitive, but can it be done while retaining investment from major tech players into the UK?

The role of government and regulators is to tread this tightrope and find a way for the tech sector to flourish while serving society as a whole.

Since Microsoft announced plans to acquire Activision for $68.7bn in 2022, there’s been an ongoing struggle between the tech giants and regulators, including the Federal Trade Commission (FTC) in the US and the UK’s Competition and Markets Authority (CMA). The CMA has expressed concern that the deal would damage competition and make Microsoft too powerful, particularly in the cloud gaming space.

To assuage these fears, Microsoft has sought to reassure regulators the popular Call of Duty game will still be available on Playstation, and offered 10-year free licences for cloud gaming competitors.

There is a bigger debate at play here, one about the potential power of incumbents to limit consumer choice or dominate specific tech verticals. Microsoft’s claim that the CMA’s decision to block the deal was “bad for Britain” was the latest in a long list of examples from business leaders warning that UK regulators are having a damaging impact.

These companies know that the UK government wants to position the country as a good place to do business – accusations are a way to put increasing pressure on the regulators.

Importantly though, the CMA is not specifically ‘targeting’ tech with this intervention. They are right to be cautious about the possibility of an overly dominant market player hindering innovation, particularly in a nascent competitor landscape like cloud gaming, which is set to become a multi-billion pound market.

Moving forwards, the correct strategy will be one that balances product innovation – particularly as technologies in the gaming sector like virtual reality and augmented reality have the potential for use in other sectors, including nursing – with regulation that enables companies to respond flexibly to market demands.  The Financial Conduct Authority (FCA) has won plaudits in the past for its use of innovation ‘sandboxes’ to get the balance right.

AI and regulation

Rapid developments in AI have also raised the question of whether the tech sector would be best served by trusting companies to self-police, or whether a more hands-on approach from the government is needed.

The last thing the tech industry wants is to stifle the innovation needed to address many of the great challenges of our time, including public services (as the Prime Minister highlighted in London Tech Week), improving healthcare (India is leading the way here), and fighting climate change.

But this must be balanced against the threats cited by AI experts, who have vociferously warned the technology presents risks to data security/privacy and has the potential to be used to run sophisticated scams, automate millions of jobs or even pose an existential risk to humanity.

Much is at stake, and a considered approach from regulators that stands up to large tech companies, protects public safety where necessary and keeps pace with the rate of technology development, is essential.  President Joe Biden recently convened a session with tech leaders in the US including Amazon, Google, Meta, Microsoft and OpenAI, to agree to a set of voluntary safeguards on AI development.

Indeed, this is a global issue requiring an international approach. Like the World Health Organisation or the World Trade Organisation, a vital step will be the formation of a global body with the power to implement frameworks that provide safeguards for AI and reassurance for investors, while also allowing both established and new players in the sector to continue to innovate.

This will not be an easy and straightforward undertaking, but it would go a long way towards supporting a global framework beneficial to most.

Tech regulation balancing act

One of the dangers of over-regulation is that companies become less agile to react to technological advances or changes in the tech landscape. Industry leaders understand their markets deeply, and all new products are robust enough to have withstood rigorous testing processes before they are brought to market.

To this end, it’s important for regulators to listen closely to companies and draw on their expertise to make effective decisions. But it’s also true that regulators will need to implement their independent judgment to uphold ethical and moral standards in order to mitigate any risks posed by fast-moving technologies.

Through working together to share expertise and establish nuances for different verticals, innovators and regulators can work towards outcomes which benefit both the tech sector and purposeful use cases in society as a whole.

Russ Shaw CBE is the founder of Tech London Advocates & Global Tech Advocates, and a regular UKTN columnist.