At the TiE Gobal Summit in Delhi, Travis Kalanick founder of California-based ride-share company Uber was asked why, of all places, he chose Pittsburg for the driverless car pilot. It’s after all, a city defined by an uneven topography with hills, rivers, bridges and ravines. He responded that among other factors a key one was that Pittsburg adopted a hands-off approach. It may be recalled that Bill Peduto, Pittsburgh’s Mayor, famously said that it’s not our role to throw up regulations or limit companies such as Uber.

In a seemingly unrelated example, Domino’s Pizza is testing out its drone delivery service first in New Zealand. The US-based fast food giant has tied up with drone delivery company Flirtey to land pizzas on the plates of customers in New Zealand. Next up it plans to offer this service in Australia. What has prompted two US-based companies to choose the Antipodes for their drone experiment?

The answer, quite simply, is favourable regulation. Over the last couple of years, innovation has been moving to places where there are fewer regulatory hurdles. This is quite a change from the days when innovation moved to where talent was.

One of the reasons that Silicon Valley grew to become such an influential powerhouse of digital creativity was because of the tech-centric brain pool crowded around there. But some of California’s recent regulatory curbs could put the brakes on developments such as driverless cars.

By contrast, Singapore has been welcoming innovation around driverless cars by making the country more smart transport friendly and allowing itself to become a test ground for commuting experiments.

Fragmented field

In his brilliant book Geography of Genius, A Search for the World’s Most Creative Places from Ancient Athens to Silicon Valley, Eric Weiner points out that nothing kills creativity faster than a wall. In this investigative travelogue where Weiner tries to figure out why certain places became superpowers of ideas, he notes that what is honoured in a country will be cultivated there.

And that’s exactly what is playing out in the world today. Startups are beginning to move to places where they are not reined in by regulations. Large corporations are testing out their innovative projects in the unlikeliest of places.

The new geography of innovation may well be determined by regulations and not by talent or culture or how well developed an economy it is. As for regulators, as newer disruptive technologies emerge, their challenge will be to make a call on which ones to govern and which ones to leave alone. These decisions could well have significant economic implications. Globally, it will create a heavily fragmented regulatory landscape.

As a result of this, we might soon see the rise of an alternate ecosystem for drone development, a testing ground for driverless transport, and so on, as start-ups begin moving to countries by the kind of stance they take towards regulations.

We are already beginning to see examples of this. For instance, genetic testing start up 23andMe which offers mail order personal genome testing kits to consumers launched in the UK after being repeatedly blocked by FDA regulations in the US. Innovators cannot be stymied by rules and will simply move regions to see their crazy ideas through.

Reined in by regulations

When it comes to digital disruptions, innovation has usually come about in a regulatory vacuum. This is what allowed firms like Airbnb and Uber to expand rapidly before rules could rein them in. In India, Uber did meet with an unexpected impediment thanks to the two factor authentication needed for payments in the country.

But it overcame that. Now, however, as countries wake up to these disruptions and start framing regulations, the tide is turning.

Specific countries are getting into specific regulations that may impact how the future of innovation in areas such as communication, transportation, e-commerce, payments, etc. pan out. In several nations ride-sharing rules are getting framed and tax laws coming into place posing challenges to firms like Uber and Airbnb.

Over-the-Top Services is another area where there has been some regulatory action recently. Whatsapp, Skype and Snapchat all emerged in an environment where there was a regulatory vacuum and have thrived much to the grief of telecom service providers and Internet Service Providers, who have had to had to contend with licences, and regulations around quality of service. Take for example, the recent case of call drops in India.

But today many countries, India included, are debating levelling the playing field by ring-fencing regulations around Over the Top (OTT) services. This is easier said than done as trying to regulate OTT services might lead regulators into contentious issues like net neutrality. But on the other hand, local telcos are the ones that have monetised voice and data and invested in networks and cables. As they start losing revenue, they will lose the incentive to invest in infrastructure. It’s a dilemma for regulators and already some countries such as France and Spain have blocked OTT providers that offer voice services connected over the public switched telephone network.

A new slogan

In India which is in the midst of multiple revolutions as the government tries to propel the nation on to a digital super highway, some tough calls need to be taken. Made in India and Start up India are great slogans but to turn Incredible India into Innovative India, favourable technological governance and deregulations may yield better results.

Paul Choudary is the author of Platform Scale and Platform Revolution and founder of Platformation Labs. Narayanan is Editorial Consultant

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