Happy New Tech Year!

Technological innovations such as digitally managed deliveries and self-driving cars will all have legal ramifications

AS WE USHER in 2018 it’s worth stepping back from our day-to-day preoccupations with specific tech issues and look at the broader picture of where the market in innovation is going, what we can expect in the next year (and in the years thereafter), and the legal ramifications of those new technologies and business models.

Things are Tech-ing Up

Before turning to some particular trends, it is worth proposing that, in general, there is a widespread sense that the pace and reach of the tech revolution is increasing. This is important. And it’s not that IT has been unimportant over the past 30 years. Rather, it is that IT has morphed from important to critical.

Fairly recently, the CEO of a big American bank said something to the effect of “a bank is really just a technology company.” You may quibble with the veracity of this statement; frankly, I would add that a bank also employs some very smart marketing people who constantly have to develop new financial products. And a bank is also a culture of risk management. We saw in other jurisdictions just a decade ago what can happen when that dictum is forgotten.

But to the core point of the CEO’s statement — yes, I believe it is fundamentally accurate because today, the very system by which financial-services products are offered, and used, and audited and risk-managed, are principally through technology-enabled channels. Moreover, this same conclusion can be made of more and more businesses.

Consider grocery. The seminal breakthrough event of 2017 for that industry was the purchase of the physical chain Whole Foods by the e-commerce exemplar Amazon — how ironic that! But wait until you see what Amazon has in store for Whole Foods, including a checkout system that utilizes no cashier or counter — your bill gets made up electronically as you take items off the shelf, and when you’re done filling up your basket or cart, you just walk out (because the payment has already been made). Not a huge surprise, though, given that Amazon gave us the One-Click online checkout process that revolutionized buying over the internet, and helped cement Amazon’s place in the digital firmament.

Connecting Digitally to the Home

While we’re on grocery, the other big thing that will come of age in 2018 is remote ordering for groceries, coupled with home delivery. Yes, we’ve had this in North America since the earliest dot.com days, but really only as a rather niche business model serving a relatively small group of time-starved professionals and members of the digital illuminati. Watch this year (and over the next four to five years) as digital grocery product selection and related digitally managed home delivery services become mainstream, like e-banking.

In 2018 (as a test), and by 2020-2023 (in volume), digitally managed delivery will begin to make headway in many cities, as tests of the autonomous, self-driving vehicle come to a municipality near you. That's not surprising — nor a moment too soon — because driving a car in cities such as Montreal, Toronto or Vancouver has become a form of modern-day self-flagellation. It is, in a word, madness.

There are various regulatory, administrative and technical issues with self-driving cars, each accompanied by interesting legal questions. When I see a successful test of an autonomous vehicle in the desert in Nevada, I smile, and say to myself, “That’s fine, as far as it goes, but I’m curious how the test performs in an Eastern Canadian conurbation with a foot of snow on the road at 15 C below.” Well, we’ll start seeing some meaningful Canadian test results not too long from now. Presumably tort lawyers will also be dusting off their product liability texts, though expect a lot less of this legal work once we hit steady state (i.e., after the tests and once we have mass adoption) because the problematic human element centred around the fatigued, or frail, or distracted, or inexperienced driver will be taken out of the accident equation, resulting in much safer roads for all.

Self-Driving Trucks, and the Employment Debate

Another industry that will begin to be rocked by autonomous vehicles (AV) will be trucking. The workforce that drives long-haul trucks on the highways of North America is getting older, and younger drivers do not like the long-haul lifestyle, including many days from home, the cramped sleeping quarters in the cab, the monotony and the loneliness. Well, hurray for the AV trucking model where the human driver collects the load in the metropolitan area, but then leaves the truck at the edge of the city (let’s say Calgary). From there, the truck drives itself along the inter-city four-lane highway system to the outskirts of the final destination (let’s say Winnipeg), where a human driver again takes over in order to stickhandle the various deliveries and detours in the construction-plagued urban road network (where problem-free AV navigation is still a number of years away).

With this model, the number of truck drivers decreases, though the ones who remain are much happier. But what about the unemployment rate, driven by out-of-work truck drivers now made redundant by technology, and their counterparts in many similarly vulnerable industries? This is a big question, and a major policy challenge, that would require an entire column of its own or several of them to really do it justice. But here are some of my preliminary thoughts.

Yes, there will be some employment dislocation by the new technologies and business models. But I believe it won’t be as severe as some are predicting. You will still need truck drivers, but they will be deployed somewhat differently. And there will be demand for a new army of technical people who will design, build, implement and manage the new technologies. Indeed, the shortage of tech-skilled people is already slowing down the economy.

Currently there are some 550,000 openings for IT positions in North America. And the supply is not even close to keeping up. It will therefore be very interesting to watch where Amazon locates its second headquarters to (and from where it will then recruit the required 50,000 largely technological staff). Frankly, while some 200-plus cities have thrown their hats into this high-tech ring, realistically the number of urban communities that can accommodate Amazon’s needs are probably in the low single digits. And whoever wins this prize will be confronted with a number of challenges, particularly on the education and training front (which of course are good “problems” to have in 2018), but are challenges nonetheless.

Financial Industries Self-Disrupting

Another industry that will begin to see massive IT-related change in 2018 (though the past couple of years have been skewed this way as well) is financial services. Some fundamental technological shifts are already underway, such as the move from on-premises computing resources (essentially, the model where the bank or insurance company owns its own computer servers and other hardware and stores them in its offices, and runs licensed software on the proprietary IT infrastructure) to the cloud. Amazon and Microsoft are leading this charge, but a bunch of other players are participating as well, including Google, Accenture, IBM, CGI, and a range of more focused application providers such as Salesforce and Workday.

If this weren’t enough change for the financial institution sector, there is blockchain, a dramatically redesigned distributed ledger IT platform that could, if proven over the next few years, really mark a shift in how banking records are devised and used. In 2018 some key initial blockchain proof-of-concepts are coming to fruition, and you need to keep an eye on them.

And then along comes artificial intelligence (AI) and the dawning of the big data era ushered in by it. Massive digital datasets, including many containing customer information of all types, have been building up within financial institutions and others servicing the sector, and now the algorithms are being deployed that can unlock the valuable insights in them. And of course it’s not just the banking sector waking up to AI’s potential; every other organization touching consumers wants to benefit from the resulting mass customization era that will be starting in 2018. In Montréal, Toronto and Edmonton, universities and institutes have been investing in AI expertise for some time. In 2018, handling big data and AI with skill and adroitness will becomes a core competency for business. Miss this wave, and you will be playing catch-up for the next decade.

A New Privacy Protection Model

Legal issues raised by privacy concerns alone related to these new business models will be front and centre for the regulators, the courts and the legislatures. Last fall, the federal Office of the Privacy Commissioner released its annual report. It contained an important discussion about consent, which up until now has been a cornerstone of the data-protection regime in Canada. The OPC takes the view that the current consent regime as it applies to these new business developments is inadequate.

And in a few short months, European privacy law will take a dramatic turn with the coming into force of the European Union’s new General Data Protection Regulation. This is a hugely important development; and while it applies only to Europe it will have important ramifications for Canadian business, government and individuals. In the next issue of this column we will look at privacy law consent as well as the GDPR.

George Takach is a senior partner at McCarthy Tétrault LLP and the author of Computer Law.