Originally Published by the American Enterprise Institute

 | AEIdeas

Eric Jillard, head of automotive industry at the World Economic Forum, recently observed that delays may occur in the commercial deployment of autonomous vehicles due to an ongoing standards debate raging among automakers. At issue is the choice of the “right” technology standard to adopt to achieve the vehicle-to-everything (V2X) connectivity necessary for autonomous vehicles to communicate with each other, as well as other moving obstacles, and thereby avoid collisions. Unless a standard can be agreed on, scaling up will be impossible.

Unlike the famous video cassette recorder “battle of the standards” between Sony’s Betamax and JVC’s VHS, or the war between CDMA and GSM cellular phone technologies, the current impasse cannot be easily resolved by allowing the two standards to compete with each other in the market. I for one do not want to be riding along in a car communicating with roadside unit infrastructure via Dedicated Short Range Communication (DSRC) — essentially a sort of Wi-Fi — while there is any chance that at least one other car is cruising around under control of the newer, but incompatible, cellular vehicle-to-everything (C-V2X) communications system.

The industry knows best?

For the most part, industry participants in the communications sector have been good at collectively agreeing to standards, enabling widespread use of specific new technologies. For example, industry agreements enabled Transmission Control Protocol and Internet Protocol to become the dominant protocols for internet-based communications. Similar agreements governed the allocation of web addresses using the Domain Name System. The arrangement typically involves industry participants collectively delegating responsibility to an authoritative committee to establish the standards. Following ratification of the committee’s recommendations, all members agree to abide by the chosen rules.

These agreements have largely been achieved, even in international contexts, without recourse to the use of force (regulation) by any single government or pan-government agency. Of course, sometimes discussions are facilitated by international organizations such as the International Telecommunication Union. One notable regulatory exception was the EU’s preemptive mandate of solely GSM cellular technology within its territory.

Why (or when to) regulate?

However, a risk exists that if a government preempts industry by moving to mandate one specific standard, it locks out the potential benefits available from the use of other or subsequent improved standards. When the technology is new, it may take time to understand which standard will serve industry and society best, not just currently but also into the future. For the most part, those closest to the issue — the industry concerned — are generally better placed to evaluate the pros and cons than an arm’s-length government regulator. This supports the historic reliance on industry-driven standards in the communications industry.

Yet, with autonomous vehicles, governments may prefer to take a more active role in communications standards-setting because they promise to assist in delivering safer transport systems — something that has been at the core of government regulatory activity for time immemorial. This cuts to the core of the current debate between DSRC and C-V2X and pressure for government intervention.

Two standards, multiple stakeholders

Back in 1999, the federal government set aside part of the communications spectrum in the 5.9 GHz band for communication dedicated to improving vehicle safety. This enabled auto manufacturers and city and state administrators to begin implementing DSRC. This technology requires vehicles to communicate with roadside infrastructure, in which their movements are coordinated and instructions are communicated back. Early adopters of DSRC — including both municipal and state governments and auto manufacturers — have invested considerable sums in building the requisite infrastructure.

For a long time, DSRC was the only available V2X technology. However, the recent emergence of C-V2X, which uses cellular networks — meaning it doesn’t require the large infrastructure investments of DSRC — poses a real threat, although it has yet to be proven in operating at large scale. The early DSRC investors have a stake in their technology winning the standards battle. If a new standard such as C-V2X is adopted, their existing sunk investments will become stranded. However, later entrants favor the less capital-intensive C-V2X technology. As more manufacturers enter the autonomous vehicle industry and better cellular technologies become available, advocacy for C-V2X to become the standard is increasing. So too is pressure by early adopters on the US government to mandate DSRC. European indicators suggest regulators there prefer DRSC.

Avoiding the “bad news” principle

So far, the US government has refrained from interfering. If, in the long run, C-V2X proves to be both superior to DRSC and cheaper to deploy at scale, then holding off until more information is available or letting the industry decide upon the preferred standard appears to be a prudent (or at least risk-averse) strategy. Foreclosing C-V2X deployment by prematurely mandating DRSC would prove to be a costly mistake. But if C-V2X does not live up to the hopes held for it, then it will not be too late to mandate DRSC. Of course, some costs will come from the lost opportunity of not having deployed it earlier, but these are probably less than the costs of making the opposite mistake — invoking the “bad news” principle of decision-making under uncertainty of mandating the wrong standard when waiting for more information would have been a better strategy.

So Jillard’s warnings of delays in determining a communication standard for autonomous vehicles may not be as big a problem in the long run as some might think. Only time will tell.