Ted Budd Questions Experts On Whether There Is A 'Healthy Amount Of Competition' In AI Industry

4 months ago

During a Senate Commerce Committee hearing prior to the Congressional recess, Sen. Ted Budd (R-NC) spoke about competitiveness of the AI industry.

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Transcript

00:00Bud. Thank you, Chairman. So, thank you all for being here. Technological leadership is foundational

00:07to American dominance in the 21st century. You know, in this country, we innovate, create products

00:13and services that consumers want, which increase productivity and it sharpens competition.

00:19This spurs a positive cycle of further innovation. You know, the Internet is a perfect example of

00:24that. And one of the factors that differentiates America, it's a regulatory environment that

00:30protects public interest and safety, while at the same time giving talented entrepreneurs and

00:34specialists the space to try new things. I think that AI should follow this tried and true path.

00:41Mr. Reid, thanks again to all of you for being here. Mr. Reid, thank you for your opening example

00:46a few moments back in your opening comments about hog farms. Being from North Carolina,

00:52I really appreciate that and it makes me only wish I'd had a little more bacon for breakfast.

00:58Always a good call. That's right. Well, you know, in your testimony, you talked about the

01:02different ways that app association members are creating and deploying AI tools. In fact, you said

01:08that 75 percent of surveyed members report using generative AI. Do you believe that there is

01:14currently a healthy amount of competition in this space? Well, I think what's been most amazing is

01:20the level of competition against bigger players is profound. The news is always covering Microsoft's

01:28moves and Meta's moves and other players' moves, but I'm telling you right now that we're seeing

01:34more moves by small and medium-sized companies to use AI in important ways. And one quick and

01:40critical example, if you've got a small construction business in a town, right now to bid on an RFP

01:46that gets let, it's a lot of nights of coffee and desperate typing on your computer to try to get

01:50one RFP out. But if I can look at all of your RFPs with AI, look at what you do best, what you

01:56claim you do best, and help you write that RFP so that instead of filing one, you file 10. Maybe you

02:02win two bids. Now you hire three people. I used your own data. A lot of my panelists are talking

02:08about using consumer data and sucking in consumer data. What my members are doing with a lot of this

02:14is actually using your private data stores to look at what you're doing well and help you improve

02:20upon it. And I think when we talk about AI and privacy, we have to remember that the ability to

02:25do something like that, simply help you write 10 RFPs, is a huge advantage that AI provides. And

02:31it's something, frankly, small businesses are doing better than the large businesses right now.

02:35I appreciate that example, especially the advantages for small businesses.

02:39I read about four newsletters a day on this very topic, so I'm fascinated with it.

02:46The question, Mr. Reed, is about the FTC's antitrust policy that seems to be focused

02:52against vertical integration. And we think it might have a chilling effect on your members'

02:57ability to develop and roll out new and better AI services. You know, even with some of the bigs,

03:01we see, like with open AI, of course, people read news about that every day, but Microsoft and Apple

03:06not even having a board presence there. I don't know if that's fear against antitrust legislation

03:12or what, but we see that there's potentially a chilling effect. Do you have any thoughts on that?

03:17Yes. Unfortunately, the Federal Trade Commission's proposed rule on Hart-Scott-Rodino is

03:23terrible. It's just, I probably should use better words here in the committee,

03:27but it really puts small businesses at a huge disadvantage because it essentially establishes

03:33a floor for the potential for an acquisition. And what that does for small AI companies that

03:39are trying to figure out how to make their way in the world is to seek venture capital. Venture

03:43capitals, venture capital or even your parents, they have to believe in your dream. And part of

03:48that dream is that you can have a huge success. When venture capitalists are putting money in,

03:53they're looking at a portfolio, and they know nine out of ten are going to fail.

03:57But if the FTC is essentially saying that they're capping at $119 million,

04:01anybody's success level, then that tells the venture capitalists to change the nine companies

04:06they're investing in because they can't dream bigger than $119 million. We also think that the

04:12Hart-Scott-Rodino proposal as put forth violates the REGFLEX Act because they actually didn't take

04:18into consideration the impact on small and medium-sized businesses. So yes, it has a huge

04:22impact on competition for small new AI startups, and we're incredibly disappointed, and we look

04:28forward to seeing if we can convince the FTC to do the right thing and change their way.

04:33I appreciate your thoughts on that. Back to your comments on small business. I don't know if that

04:37weighs into your answer on the next question, Mr. Reed, but how should this committee weigh the

04:42need for firms to be able to use responsibly collected consumer data with the serious

04:48concerns that consumers have about the fact that their sensitive data may be breached or

04:53improperly used? How should we look at that as a committee? Well, as a committee, the first thing

04:58to do, which you've heard from everyone about two dozen times, is pass comprehensive privacy reform

05:02in a bipartisan way because that gives businesses the rules of the road on how to behave with

05:07with consumer data. And figuring out how we balance data hygiene, data minimization, and all those

05:13questions are going to be part of the hard work that the Senate has to do on this topic. But overall,

05:18I would anchor it in the concept of harms. What harm is being done? What's the demonstrable harm?

05:23And how do you use the existing law enforcement mechanisms to go after those specific harms?

05:29I think it's a lot easier to empower existing law enforcement action than it is to try to create a

05:36new one out of whole cloth and hope it works. I appreciate your thoughts. Thank the panel for

05:41being here. Chairwoman, I yield back. Thank you so much. Senator Klobuchar.

Ted Budd Questions Experts On Whether There Is A 'Healthy Amount Of Competition' In AI Industry

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