[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]




 
                   DISRUPTER SERIES: WEARABLE DEVICES

=======================================================================

                                HEARING

                               BEFORE THE

           SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 3, 2016

                               __________

                           Serial No. 114-125
                           
                           
                           
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                           
                           


      Printed for the use of the Committee on Energy and Commerce

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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Chairman Emeritus                    Ranking Member
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
JOSEPH R. PITTS, Pennsylvania        ELIOT L. ENGEL, New York
GREG WALDEN, Oregon                  GENE GREEN, Texas
TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
  Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   KATHY CASTOR, Florida
GREGG HARPER, Mississippi            JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey            JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
PETE OLSON, Texas                    BEN RAY LUJAN, New Mexico
DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
MIKE POMPEO, Kansas                  JOHN A. YARMUTH, Kentucky
ADAM KINZINGER, Illinois             YVETTE D. CLARKE, New York
H. MORGAN GRIFFITH, Virginia         DAVID LOEBSACK, Iowa
GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
BILL JOHNSON, Ohio                   JOSEPH P. KENNEDY, III, 
BILLY LONG, Missouri                 Massachusetts
RENEE L. ELLMERS, North Carolina     TONY CARDENAS, California
LARRY BUCSHON, Indiana
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota

                                 _____

           Subcommittee on Commerce, Manufacturing, and Trade

                       MICHAEL C. BURGESS, Texas
                                 Chairman
                                     JANICE D. SCHAKOWSKY, Illinois
LEONARD LANCE, New Jersey              Ranking Member
  Vice Chairman                      YVETTE D. CLARKE, New York
MARSHA BLACKBURN, Tennessee          JOSEPH P. KENNEDY, III, 
GREGG HARPER, Mississippi                Massachusetts
BRETT GUTHRIE, Kentucky              TONY CARDENAS, California
PETE OLSON, Texas                    BOBBY L. RUSH, Illinois
MIKE POMPEO, Kansas                  G.K. BUTTERFIELD, North Carolina
ADAM KINZINGER, Illinois             PETER WELCH, Vermont
GUS M. BILIRAKIS, Florida            FRANK PALLONE, Jr., New Jersey (ex 
SUSAN W. BROOKS, Indiana                 officio)
MARKWAYNE MULLIN, Oklahoma
FRED UPTON, Michigan (ex officio)

                                  (ii)
                                  
                                  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     1
    Prepared statement...........................................     3
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     4
Hon. Janice D. Schakowsky, a Representative in Congress from the 
  State of Illinois, opening statement...........................     5

                               Witnesses

Thomas D. Bianculli, Vice President, Enterprise Technology 
  Office, Zebra Technologies.....................................     6
    Prepared statement...........................................     9
    Answers to submitted questions...............................    80
Meg Burich, Director of Commercial Development and Marketing, 
  Adidas Digital Sports..........................................    16
    Prepared statement...........................................    18
    Answers to submitted questions \1\...........................    86
Suresh Palliparambil, American Sales and Business Development 
  Director, NXP..................................................    21
    Prepared statement...........................................    24
    Answers to submitted questions...............................    87
Scott Peppet, Professor of Law, University of Colorado School of 
  Law............................................................    29
    Prepared statement...........................................    32
    Answers to submitted questions \1\...........................    91
Doug Webster, Vice President, Service Provider Marketing, Cisco..    43
    Prepared statement...........................................    45
    Answers to submitted questions...............................    92

                           Submitted Material

Letter of March 3, 2016, from Steven K. Berry, President and 
  Chief Executive Officer, Competitive Carriers Association, to 
  Mr. Burgess and Ms. Schakowsky, submitted by Mr. Burgess.......    58
Statement of Mercatus Center at George Mason University, by Adam 
  Thierer, Senior Research Fellow, Technology Policy Program, 
  March 3, 2016, submitted by Mr. Burgess........................    60

----------
\1\ Ms. Burich and Mr. Peppet did not answer submitted questions 
  for the record by the time of printing.


                   DISRUPTER SERIES: WEARABLE DEVICES

                              ----------                              


                        THURSDAY, MARCH 3, 2016

                  House of Representatives,
Subcommittee on Commerce, Manufacturing, and Trade,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:02 a.m., in 
room 2123, Rayburn House Office Building, Hon. Michael C. 
Burgess (chairman of the subcommittee) presiding.
    Members present: Representatives Burgess, Lance, Harper, 
Guthrie, Bilirakis, Brooks, Schakowsky, Kennedy, Welch, and 
Pallone (ex officio).
    Staff present: Leighton Brown, Deputy Press Secretary; 
Rebecca Card, Assistant Press Secretary; James Decker, Policy 
Coordinator, Commerce, Manufacturing, and Trade; Graham 
Dufault, Counsel, Commerce, Manufacturing, and Trade; Melissa 
Froelich, Counsel, Commerce, Manufacturing, and Trade; Giulia 
Giannangeli, Legislative Clerk, Commerce, Manufacturing, and 
Trade; Paul Nagle, Chief Counsel, Commerce, Manufacturing, and 
Trade; Olivia Trusty, Professional Staff Member, Commerce, 
Manufacturing, and Trade; Dylan Vorbach, Deputy Press 
Secretary; Michelle Ash, Democratic Chief Counsel, Commerce, 
Manufacturing, and Trade; Christine Brennan, Democratic Press 
Secretary; Elisa Goldman, Democratic Counsel, Commerce, 
Manufacturing, and Trade; Caroline Paris-Behr, Democratic 
Policy Analyst; Diana Rudd, Democratic Legal Fellow; and Matt 
Schumacher, Democratic Press Assistant.
    Mr. Burgess. The Subcommittee on Commerce, Manufacturing, 
and Trade will now come to order.
    I will recognize myself for 5 minutes for an opening 
statement.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    And I do want to welcome all of our witnesses here today 
and welcome everyone to another installment of our Disrupter 
Series hearings. Today, we will examine wearable technologies 
and how they are disrupting traditional business processes and 
transforming ways that consumers can engage in commerce.
    Last year, we held a hearing to examine the Internet of 
Things, a network of Internet-connected physical objects that 
gather information in realtime to predict circumstances, 
prevent problems, and create opportunities. That market has now 
matured, and wearable technologies have come to represent a 
growing segment within that digital ecosystem of interconnected 
devices and their applications and platforms.
    The defining characteristic of wearables is that they offer 
consumers and businesses access to realtime, highly 
personalized information through products and devices that are 
physically worn by the user. Many of us are familiar with 
fitness tracking bands on the market today. They gather 
information about an individual's physical activity, or lack 
thereof, and are intended to motivate users to improve their 
fitness, wellness, and health regimens.
    While inspiring better fitness habits is a positive use of 
wearable technology, the societal and economic benefits of 
these products extends far beyond those applications. We are 
just beginning to see the potential of wearable technology 
across multiple economic sectors and industries, such as 
energy, health care, transportation, retail, professional 
sports, manufacturing, education, and others.
    In manufacturing, for example, wearables can provide 
businesses with greater insight into the daily operations of 
their production practices, their workflows, their supply chain 
processes.
    In sports, coaches and athletic trainers can use wearables 
to better assess player recovery time and inform return-to-play 
considerations to reduce the risk of further injury. I just 
think back to my own brief high school sports career. The coach 
would know if I was dogging it realtime. He wouldn't have to 
accuse me; he would have the data.
    In the automotive sector, wearable technology can sense 
early signs of driver fatigue, prompting the wearable device or 
vehicle to send alerts or another type of warning to the 
driver.
    And in the retail industry, retailers can use wearable 
technology to customize product offerings and better meet 
consumer preferences and demand.
    The appeal of this technology is pervasive because of what 
it can offer in terms of operational efficiencies, public 
safety, improved performance, and cost savings for every 
business type and size. The potential for wearable technology 
is virtually limitless.
    Much of the excitement surrounding wearables is rooted in 
the promise to create new opportunities for economic growth, 
economic development, and job creation. Wearables create 
economic opportunities by providing insights into an 
individual's behavior and driving changes to that behavior to 
improve job performance and job execution. This can lead to 
increased productivity and efficiency, helping a business 
reduce waste and optimize resources.
    The technology also facilitates smarter decisionmaking, 
increased information-sharing, and augmented interactions 
amongst workers. The productivity gains achieved through these 
operational advances are fundamental to a stronger and more 
prosperous economy.
    As with all connected technologies, there are important 
privacy and security considerations that should be part of 
today's discussions. Unlike other connected things within the 
Internet of Things, such as connected thermostats, 
streetlights, and refrigerators, wearables are physically worn 
by users and capable of extracting highly personalized 
information about an individual's activities or whereabouts.
    In our examination of these issues, it will be important to 
understand how consumers are using these technologies and how 
they will be protected while preserving the flexibility and the 
ingenuity of the innovators that are driving this market 
forward.
    Once again, I want to thank our witnesses for taking the 
time to inform us about the applications and future potential.
    I recognize the gentleman from New Jersey, 5 minutes for an 
opening statement, please.
    [The prepared statement of Mr. Burgess follows:]

             Prepared statement of Hon. Michael C. Burgess

    Good morning and welcome to another installment of our 
Disrupter Series hearings. Today we will examine wearable 
technologies and how they are disrupting traditional business 
processes and transforming the ways that consumers engage in 
commerce.
    Last year we held a hearing to examine the Internet of 
Things--a network of Internet-connected physical objects that 
gather information in real-time to predict circumstances, 
prevent problems, and create opportunities. As that market has 
matured, wearable technologies, or ``wearables'', have come to 
represent a growing segment within that digital ecosystem of 
connected devices, applications, and platforms. The defining 
characteristic of wearables is that they offer consumers and 
businesses access to real-time, highly personalized information 
through products and devices that are physically worn by the 
user.
    Many of us are familiar with the fitness tracking bands on 
the market today. They glean information about an individual's 
physical activity habits, and are intended to motivate users to 
improve their fitness, wellness, and health regimens. While 
inspiring better fitness habits is a positive use of wearable 
technology, the societal and economic benefits of these 
products and devices extend far beyond those applications.
    We are just beginning to see the potential of wearable 
technology across multiple economic sectors in industries such 
as energy, health care, transportation, retail, professional 
sports, manufacturing, education, and many others.
    In manufacturing, for example, wearables can provide 
businesses with greater insight into the daily operations of 
their production practices, workflows, and supply chain 
processes. In sports, coaches and athletic trainers can use 
wearables to better assess player recovery time and inform 
return-to-play considerations to reducfacebooke the risk of 
further injury. In the automotive sector, wearable technology 
can sense early signs of driver fatigue, prompting the wearable 
device or vehicle to send alerts, haptic feedback, or another 
type of warning to the driver. And, in the retail industry, 
retailers can use wearable technology to customize product 
offerings and better meet consumer preferences and demand.
    The appeal of this technology is so pervasive because of 
what it can offer in terms of operational efficiencies, public 
safety, improved performance, and cost savings for every 
business type and size. The potential for wearable technology 
is virtually limitless.
    Much of the excitement surrounding wearables is rooted in 
their promise to create new opportunities for economic growth, 
development, and job creation. Wearables create 
economicopportunities by providing insights into an 
individual's behavior and driving changes to that behavior to 
improve job performance and execution. This can lead to 
increased productivity and efficiency, helping businesses 
reduce waste, optimize resources, and enhance communications. 
The technology also facilitates smarter decision-making, 
increased information sharing, and augmented interactions among 
workers. The productivity gains achieved through these 
operational advancements are fundamental to a stronger and more 
prosperous economy.
    As with all connected technologies however there are 
important privacy and security considerations that should be a 
part of today's discussion. Unlike other connected things 
within the Internet of Things ecosystem, such as connected 
thermostats, street lights, and refrigerators, wearables are 
physically worn by users, and capable of extracting highly 
personalized information about an individual's activities. In 
our examination of these issues, it will be important to 
understand how consumers using these technologies will be 
protected while preserving the flexibility and ingenuity of 
innovators that are driving this market forward.
    I thank the witnesses for taking the time to inform us 
about the applications and future potential of wearable 
technology. I look forward to a thoughtful and engaging 
discussion.

    Mr. Burgess. I recognize the gentleman from New Jersey, 5 
minutes for an opening statement, please.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman.
    Today's hearing gives us an opportunity to look at a 
diverse and quickly developing field. Wearable technology, part 
of the broader Internet of Things, provides consumers with 
capabilities that would have seemed more like science fiction 
than reality only a decade ago.
    Today, you can buy a wristband that measures UV exposure, 
helping you avoid sun damage, or a sensor that sticks to skin 
and teaches you how to stretch to alleviate back pain or smart 
shoes that give you directions through buzzes to their feet.
    Researchers from WINLAB, the Wireless Information Network 
Laboratory at Rutgers University in my district, collaborated 
to design a wearable that could replace passwords for head-worn 
devices by authenticating the user by measuring the unique 
movements of the head in response to audio stimulus. WINLAB 
reports that the device can accurately tell that the right 
person is wearing it at a rate of over 95 percent through tiny 
movements of the head alone.
    Many wearables measure biometric data, giving consumers 
access to a wealth of personal information. Not long ago, if 
someone wanted to know their heart rate, quality of sleep, and 
calories burned, they would have had to be hooked up to a 
roomful of equipment. Today, they can simply put on a small 
bracelet and have all of that information at their fingertips.
    And these are amazing advancements, but with these new 
innovations come new vulnerabilities. For example, when a 
doctor measures your heart rate, that information is protected 
from unauthorized disclosure. Those privacy protections do not 
apply to the same information collected through most wearable 
devices. And there are no standards for encryption or other 
security measures to protect the data wearables collect.
    Long and complicated user terms and agreements have further 
compounded the problem. Some include clauses saying that the 
data they collect belongs to the company, not to the user. Most 
of us do not read every online user agreement word for word, so 
many wearable users are surprised when they learn that they may 
not own their own data.
    Whether by sale or by data breach, the release of personal 
information from wearables can have serious implications. 
Employers, credit agencies, and health insurers can all use the 
data collected from wearables to draw inferences that may have 
a negative effect on the user.
    As with other Internet of Things products, by building in 
security from the beginning, manufacturers of wearables can 
more effectively prevent hackers from gaining access to a 
device or the data it collects. By building in privacy, 
consumers can have confidence in these products and buy them 
knowing that highly personal information will not be shared 
without their consent.
    So I look forward to discussing the many great innovations 
in wearable technology today, but with these innovations we 
must also devote serious attention to how we can better protect 
consumers and their personal information in this space. When 
privacy and security are made a priority, both businesses and 
consumers benefit.
    I yield back, Mr. Chairman.
    Mr. Burgess. The Chair thanks the gentleman. The gentleman 
yields back.
    The Chair would inquire of the gentlelady from Illinois if 
she wishes to make an opening statement.
    Ms. Schakowsky. I have a short statement.
    Mr. Burgess. You are recognized for 5 minutes.

       OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 
     REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

    Ms. Schakowsky. Thank you, Mr. Chairman. And I really 
apologize for being late. I thank you, and I thank our panel.
    So wearable devices have taken off in the last couple of 
years. I am sure there are a lot of people in this room who are 
wearing a Fitbit or some similar device. I happen to have lost 
mine. It fell off the first week I got it, and I haven't 
replaced it.
    Companies have developed numerous applications in medical 
testing and health monitoring. For consumers, wearables mean 
convenient collection of detailed data. There is clearly great 
potential here, but as I am sure has been said before--and I 
know Chairman Pallone did--we need to make sure the consumers 
fully understand what they are getting into.
    Let's talk about health applications. When a hospital 
collects your health information, that personal data is 
protected by HIPAA. Your healthcare provider is not allowed the 
share that information with marketers or send it to your 
employers without your consent. However, those privacy 
protections don't apply to most wearable devices.
    In addition, consumers have been surprised to find that 
they don't own the data collected through their devices. Last 
year, Lark, a company that created a sleep coaching wristband, 
stopped supporting its device and the related app. Lark's 
customers lost easy access to their data. At the same time, 
Lark's privacy policy stated that it could sell this personal 
information if it is acquired or goes bankrupt.
    This matters to consumers, because some of the data they 
collect through wearable devices is very valuable. Minute-by-
minute data from a fitness tracker can be enough to determine 
your gender, age, stress level. That is why it is vital for 
wearable device companies to adequately protect consumer 
information.
    Last year, the Federal Trade Commission issued a report 
concluding that companies making these devices must adopt 
reasonable security measures. The FTC also recommended that 
Congress enact baseline consumer privacy legislation for such 
devices. In today's hearing, I would like to delve deeper into 
these privacy concerns as we consider how today's laws must 
evolve to fit tomorrow's technology.
    Here are some basic principles that I think we should start 
from. Consumers should be able to expect that a company 
collecting their personal data is protecting this personal 
data. Consumers need to be informed what, how, and when data is 
shared. In addition, they need to know if they may lose access 
to information they have collected through a wearable device. 
Technology is developing rapidly. We need to ensure consumer 
protection keeps pace.
    With that in mind, I would like to welcome our panelists. 
Your testimony is important to informing this discussion.
    I yield back.
    Mr. Burgess. The Chair thanks the gentlelady. The 
gentlelady yields back.
    This concludes member opening statements. And the Chair 
would remind members that, pursuant to committee rules, all 
members' opening statements will be made part of the record.
    We do again want to thank our witnesses for being here, for 
taking their time to testify before the subcommittee.
    Today's witnesses will have the opportunity to give opening 
statements, followed by a round of questions from members. Our 
witness panel for today's hearing will include Mr. Thomas 
Bianculli, Vice President for Enterprise Technologies at Zebra 
Technologies--you guys got out of order--Meg Burich, Director 
of Commercial Development and Marketing for Adidas Digital 
Sports; Suresh--help me pronounce your last name.
    Mr. Palliparambil. Palliparambil.
    Mr. Burgess. Suresh, welcome to the hearing.
    Mr. Palliparambil. No problem.
    Mr. Burgess. The Director of Sales and Business Development 
for NXP; Mr. Scott Peppet, Professor of Law at the University 
of Colorado School of Law; and Mr. Doug Webster, Vice President 
for Service Provider Marketing at Cisco.
    We do appreciate you all being here with us today.
    We are in the middle of a vote on the floor, but, Mr. 
Bianculli, I think we have time if you would like to give your 
opening statement. Then we will take a brief recess and come 
back and resume.
    You are recognized for 5 minutes, please.

 STATEMENTS OF THOMAS D. BIANCULLI, VICE PRESIDENT, ENTERPRISE 
TECHNOLOGY OFFICE, ZEBRA TECHNOLOGIES; MEG BURICH, DIRECTOR OF 
 COMMERCIAL DEVELOPMENT AND MARKETING, ADIDAS DIGITAL SPORTS; 
 SURESH PALLIPARAMBIL, AMERICAN SALES AND BUSINESS DEVELOPMENT 
 DIRECTOR, NXP; SCOTT PEPPET, PROFESSOR OF LAW, UNIVERSITY OF 
   COLORADO SCHOOL OF LAW; AND DOUG WEBSTER, VICE PRESIDENT, 
               SERVICE PROVIDER MARKETING, CISCO

                STATEMENT OF THOMAS D. BIANCULLI

    Mr. Bianculli. Thank you, Chairman Burgess, Ranking Member 
Schakowsky, and members of the subcommittee, for the 
opportunity to testify before you today.
    I am the Vice President of the Emerging Technology Office 
at Zebra Technologies Corporation in Lincolnshire, Illinois. 
With nearly $4 billion in annual revenue, Zebra is a global 
market leader in a number of advanced technologies, including 
the Internet of Things and the related area of wearable 
technology.
    While many Americans may not recognize Zebra by name, they 
come into contact with our solutions every day. For example, 
the barcode labels that are prominently featured on airline bag 
tags, express delivery packages, and pharmaceutical 
prescription bottles are often generated by a Zebra barcode 
label printer and tracked and managed by Zebra scanners, mobile 
computers, and wireless infrastructure.
    Our pioneering technology vision and trusted enterprise 
solutions, particularly our wearables that are the focus of 
today's hearing, are dedicated to helping business, Government, 
and nonprofits make smarter decisions and take smarter actions 
by providing them with realtime visibility and mission-critical 
information in an ever-more-efficient manner.
    Zebra commends the subcommittee for hosting this series of 
hearings on technological disrupters. Mr. Chairman, I will 
stress five key points.
    First, let me begin with Zebra's role in the wearable 
market. Zebra's leadership in this market derives from our 
recreation of the overall wearables product category nearly 25 
years ago. With the launch of our wrist-mounted terminal and 
ring scanner in 1992, we invented the first handheld laser 
barcode scanner, the first barcode printer, and the first WiFi-
enabled mobile computer. We remain at the very forefront of 
breakthrough innovation as we continue to create wearables that 
go from the wrist and hand, as you see before me, to lanyards 
and heads-up computing solutions.
    Second, we commend the subcommittee for its recognition of 
the wearable category as a disrupter. Wearables earn this 
status because they empower workers with total hands-free 
mobility in a manner that also provides instant access to 
business-critical information.
    Instead of needing multiple devices that are all directed 
by hand, wearables enable new levels of productivity by 
providing employees with tools that marry natural language 
interaction with immediately available information, be it 
visual, verbal, or augmenting the user's physical reality.
    Imagine, Mr. Chairman, a simple verbal command that 
provides a worker with full access to data and subject matter 
expertise in realtime. Imagine, further, the same worker using 
another verbal command to respond back and transmit data or 
pictures to a main office, aremotely located colleague, or to 
another machine. Now imagine having that ability while 
suspended high above the ground repairing the electrical grid 
or working inside an aircraft, no hands required. Wearable 
technology makes it happen.
    Third, I would like to offer a quick look into the future. 
Awareness and acceptance of smartphone technology has grown at 
a tremendous pace and has built the foundation for wearable 
device adoption. Current technologies will continue to evolve 
and revolutionize the way people instinctively work with 
computers and intuitively interact with their virtual or 
augmented reality environments. It is not an overstatement to 
say that the possibilities of these devices are limitless.
    Over the next few years, they will get smaller with 
technological improvements in computing, analytics, power, and 
display optics. As part of this trend, we will continue to 
advance our portfolio of wearables. We are presently focused on 
developing an augmented reality wearable system for true hands-
free application, providing a future solutions approach for 
uninterrupted workflow and opening up the possibilities of what 
realtime, eye-level information can do.
    Fourth, the economic benefits of wearables come from its 
significant impact on productivity across virtually every 
industry and economic sector. This is because visual computing 
or the ability to work hands-free while receiving eye-level 
information will drive a major paradigm shift in how we, as 
humans, directly interface with computers. Visual or hands-free 
computing will enable this kind of frictionless, uninterrupted 
workflow. Even a small increase in the efficiency of 
manufacturing or warehouse workers through wearables could 
bring a profound economic benefit to our economy.
    Fifth and finally, we urge Congress and the administration 
to take a light touch where wearable technology is concerned, 
for the same reasons that many in industry as well as in 
Congress and the administration have advocated for a light 
regulatory approach to the Internet of Things.
    The primary challenge is to allow for the rapid 
development, deployment, and subsequent advancement of 
wearables in a manner that simultaneously addresses concerns 
over data, security, and encryption. The goal is to encourage 
technologies which provide enhanced, secure, and realtime 
visibility and access to information in a way that empowers 
workers to undertake more effective and timely decisions and 
actions.
    To this end, Mr. Chairman, Zebra stands ready work with the 
subcommittee inadvancing policies which keep the United States 
at the leading edge of this exciting technology. And I again 
thank you for the opportunity to provide our views on 
wearables, and I look forward to your questions.
    [The prepared statement of Mr. Bianculli follows:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
    
    
    
    Mr. Burgess. The Chair thanks the gentleman.
    Because of the vote, we are going to go into recess.
    Look, I want you all to know what you are up against with 
this congressional panel. Look at his notes, all stuck together 
and handwritten. You are down there with all of these fantastic 
technological devices, and we are kind of in the Stone Age.
    But thank you for your forbearance. We are going to go 
vote. We will reassemble as soon as the last vote is over.
    Mr. Bianculli. Thank you, Chairman.
    [Recess.]
    Mr. Burgess. I thank everyone for their forbearance. The 
subcommittee will resume.
    We will resume with the testimony of Ms. Meg Burich from 
Adidas Digital Sports.

                    STATEMENT OF MEG BURICH

    Ms. Burich. Good morning, Chairman and members of the 
subcommittee. Thank you for having me.
    Mr. Burgess. If I could just ask you if your microphone is 
on?
    Ms. Burich. It is on.
    Ms. Schakowsky. Pull it a little more closer.
    Ms. Burich. Yes. OK. I am Meg Burich here on behalf of 
Adidas Digital Sports, and I am Director of Marketing and 
Commercial Development.
    Adidas Digital Sports is the business unit within Adidas 
that drives the development of wearable technology. Our team 
consists of technology experts in the fields of data science, 
experience design, industrial design, algorithm development, 
software and hardware engineering. We have centers of 
excellence located in Portland, Oregon, Chadds Ford, PA, and 
Herzogenaurach, Germany where our headquarters is.
    We have been active in the wearable space for over 15 
years, with the first commercial launch of sensor-enabled 
footwear in 2001, and the introduction of real-time coaching 
under the Adidas miCoach brand in 2008. MiCoach offers real-
time coaching to users, enabling them to achieve their goals by 
training with heart rate, speed, and distance to run faster and 
further.
    Today, we are repositioning our wearables offering to 
address the growing opportunity for the larger population to 
benefit from this technology. All these products are enabled by 
companion software applications designed for mobile or desktop.
    I am going to go through three examples to demonstrate the 
range of applications for wearables in sports, fitness, and 
health, and the first one will be related to schools and school 
children.
    Adidas is partnering with Interactive Health Technologies 
to make fitness personal for kids in phys ed classes. Instead 
of competing with each other, kids can wear an Adidas heart 
rate monitor that uses simple color zones to guide them through 
a fitness challenge. Wearable technology gives every kid the 
chance to know the good feeling that comes from a successful 
workout.
    Next, I would like to cover the use of wearables in 
competitive and professional sports. We have a system. This is 
the jersey that athletes wear on the training field. Coaching 
software is coupled with this system, and coaches can see in 
real time what results are coming from the athletes on the 
field. So instead of just driving them to train as hard as they 
can, they are really trying to train them in a smarter way, and 
in professional sports, there is kind of a fine line between 
peak performance and injury, so you want to really have this 
data to help you tell when you are really stressing an athlete 
versus when you are coaching him to the level where he can 
perform better.
    Adidas uses in-depth experience with professional athletes 
and coaches to understand the cutting edge of performance. We 
also believe that all athletes and fitness participants deserve 
the best coaching, so we take what we learn working with the 
elite athletes, and then we translate that to smart systems for 
consumers, because consumers don't always have the option to 
hire a professional trainer. So we are making those consumer 
systems smart systems based on what we know about the cutting 
edge of coaching.
    The third use case that I am going to go into focuses on 
women, and this is kind of a pivot for us in terms of how we 
see the market and the opportunity. Today, we know that women 
are managing their own health, and they have multi-generational 
influence. They are supporting healthcare decisions of their 
families and of their parents sometimes, so they are really 
kind of that officer of health.
    These women are also the main users of fitness apps and 
devices. They are participating in digital social communities 
that help them stay engaged in their fitness routine. They may 
be going for a daily walk, getting ready for a 5K, or training 
for a marathon, but we have coaching solutions that will help 
them achieve their goal.
    We have been talking a lot to women and researching their 
needs to understand what they are looking for, and basically, 
women are saying step counting is not enough. When they have a 
step counter, they either lose it or they drop it within 3 to 6 
months. In fact, nearly 40 percent stop using it after 6 
months. So we know they are looking for insights beyond how 
many steps they took. They really want the picture of their 
whole health, and managing it in a proactive way is important 
to them, so they are looking for tips on nutrition, they are 
looking for exercise tips, they are looking for guidance for 
how much to move during the day, how much they should sleep, 
and how that connects to their whole health and wellness.
    So we know it is hard to stick to an exercise routine, and 
we are looking at how we can help women through digital 
wearables and digital experiences to stick with their exercise 
routine throughout their life, because we know that has an 
overall impact on health, disease prevention, and keeping 
people well. So we really believe that wearables is in its 
infancy, and wearables 2.0 is where we need to go, connecting 
consumers to health care and keeping them kind of on the 
wellness side. Thank you.
    [The prepared statement of Ms. Burich follows:]
    
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    Mr. Burgess. The Chair thanks the gentlelady, and the Chair 
now recognizes Mr.--try again, Palliparambil.
    Mr. Palliparambil. You got it.
    Mr. Burgess. Five minutes.
    Mr. Palliparambil. Thank you.
    Mr. Burgess. Plus the 1 minute it took me to pronounce your 
name.

               STATEMENT OF SURESH PALLIPARAMBIL

    Mr. Palliparambil. Thank you. Good morning, Chairman, and 
members of the committee. Thank you for holding this important 
hearing on wearable technologies today. My name is Suresh 
Palliparambil, and I am the America's Director of Sales and 
Business Development for NXP's secure identification solutions 
business line.
    NXP helps to make today's ideas into tomorrow's exciting 
reality as the supplier of end-to-end solutions that range from 
semiconductor ICs to infrastructure components and secure 
applications.
    We are the inventor of MIFARE and the co-inventor of NFC, 
the wireless proximity technology bringing new levels of 
simplicity and security to interactions of all kinds. NXP 
powers and enriches the IoT as a high-level contributor to 
standards bodies, including the FIDO Alliance, whose work 
promises to usher in a new era of online security, making the 
need to remember complex passwords a thing of the past.
    As a proud employer of nearly 7,000 staff members in the 
U.S., NXP is committed to security leading-edge design and 
bringing products to the domestic market that have a 
substantial share of domestically built content and local value 
add to end products in which NXP plays a role.
    Our company is dedicated to leveraging all of those 
resources and partnering with America's leaders to invest in 
the country's future and safer, more convenient lives for its 
citizens. From rockets in the air, to cars on the road, and 
cards in your wallet, our innovation at NXP has been integral 
to America's past and the success it enjoys today. As an 
important legacy as that is, we at NXP are looking to the 
future in building a better, easier, and safer tomorrow with 
exciting leading-edge technologies of utmost quality.
    This is no small task. The rapid expansion of public and 
private data networks, the rise of social media, and the mass 
deployment of smart objects across the Internet of Things, IoT, 
have connected us in ways we didn't think possible two decades 
ago. They have also left us open, vulnerable, and exposed.
    To counteract these vulnerabilities, NXP is focused on, 
one, avoiding unauthorized access in public and private areas 
of the IoT, developing tamper-resistant secure element devices, 
and perfecting the end-to-end solution that power the new, 
often wearable technologies will use to improve and simplify 
health care, entertainment, transportation, and the rest of our 
everyday lives
    Online security can mean different things to different 
people, but the task of keeping data private and ensuring cyber 
safety essentially comes down to one thing, access.
    NXP has made authentication a top priority for more than 20 
years and has continually reached new levels of performance by 
making algorithms more resilient, and by increasing the 
robustness of secure elements. We are recognized as leaders in 
authentication, known for our ability to deliver trusted 
security in many of the world's most high-profile applications.
    NXP produces chips that have their own unique fingerprint 
based upon their crystalline structure, so no two chips are 
alike, preventing cloning. NXP's strength in authentication is 
closely tied to eGovernment and banking. With roughly 80 
percent market share of the electronic passport market, our 
technology is trusted by more national governments to increase 
security while reducing wait times at international borders. We 
are helping governments expand the use of electronic documents, 
and our repeated success with large-scale implementations of 
electronic IDs, public transportation, and multi-application 
cards, which combine payment, transportation, identification, 
and other services on a single card make a trusted partner to 
municipalities, transit authorities, and banking and payment 
organizations worldwide.
    NXP brings a comprehensive set of skills to each 
authentication challenge and leverage outstanding relationship 
with broad spectrum of security leaders to develop and deliver 
tailored solutions that address needs in the market. The 
evolution in wearable technology is all about enhancing users' 
lives and making everyday functions simpler and easier so we 
can concentrate on the things that matter.
    NXP creates the security, connectivity, and circuitry 
solutions that enable these wearable devices their convenient 
applications in today's society and the innovative ways they 
could be used in the future.
    Many applications for wrist-based wearables are in place 
through entertainment venues and in the healthcare industry. 
The most popular example include keyless entry, smartwatches 
for luxury cars, Disney's RFID wristband, the MagicBand, an 
all-in-one device that serves as a room key, a park ticket to 
get in line, and also the payment, too.
    There are already many existing areas where smartwatches 
could improve users' lives. Today's keyless entry for vehicles 
will probably move to a wearable platform, and in the future, 
watches will act as the key for an entire car. In fact, most 
luxury car makers already offer their own wristwatches. It is a 
great channel to help build their brand recognition.
    In the home environment, smartwatches will interact with 
communication protocols such as ZigBee and Bluetooth, allowing 
users to control the home environment. Heating, lighting, AV 
equipment and more, will all be controlled by simply making a 
gesture with an arm or using apps installed on the watch. Soon, 
the smartwatch will be the only key anyone needs, the 
technology passport that gives access and control to your 
entire life.
    NXP is working hard to simplify lives of citizens to secure 
transactions in the connected world, and we currently have the 
following tools and accomplishments in place to securely 
connect the next generation devices. We have a smart 
microcontroller platform; we have MIFARE, the world's leading 
contactless technology platform; Near Field Communications, 
which is a wireless proximity and contactless technology; and 
then high-level contributions to standards bodies, including 
the FIDO Alliance for online security.
    Thank you for the opportunity to participate in today's 
hearing. Thank you very much.
    [The prepared statement of Mr. Palliparambil follows:]
    
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    Mr. Burgess. The Chair thanks the gentleman. Mr. Peppet, 
Professor Peppet, you are recognized for 5 minutes for your 
opening statement, please.

                   STATEMENT OF SCOTT PEPPET

    Mr. Peppet. Chairman Burgess, Ranking Member Schakowsky, 
members of the subcommittee, I appreciate the opportunity to 
talk to you about wearables. I am a Professor of Law at the 
University of Colorado Law School in Boulder, where I work on 
markets, technology, and privacy. I should say I am also a 
member of the board of directors of Anixter International, an 
Illinois-headquartered company, so my remarks today are in my 
own capacity, and in no way represent Anixter or anyone else
    I also want to say I am involved with four entrepreneurship 
and innovation centers: one in Colorado, one at Kellogg in 
Illinois, and one at the University of Michigan, and one 
actually in Israel at a university called IDC. And in that, in 
those roles, I have worked with student teams creating 
startups, many of whom are interested in or working in the 
wearable space. So I sort of got various perspectives on this 
set of issues.
    These are exciting technologies, and I agree with my fellow 
witnesses who have said how much innovation is happening in 
this space, and I agree with all of that and just want to focus 
on three things in terms of privacy and security that I think 
deserve attention.
    The first is one that you have already mentioned, which is 
data security, and I think there are two issues in data 
security. The first is, is the device itself secure? And that 
is a technical matter. Mostly, we know from research, that many 
of these devices have not been secured in the first wave of 
consumer devices, for example, and the reason is obvious: They 
are small, they are generally designed to be relatively 
inexpensive. It is hard to pack data security measures into a 
thing with a small processor, very limited connectivity, they 
are hard to update because they don't talk to the Internet that 
frequently.
    And so it has been a challenge, and the FTC has worked with 
companies, continues to work to try to push companies in that 
space, or in the security issue, and I think we will see more 
innovation there to try to resolve some of those questions.
    The second data security issue is actually not about the 
device, it is about the data. What happens to these data once 
they are off the device, they are stored in a company's cloud 
server somewhere, and someone hacks into that server. At the 
moment, if your credit card information is stolen from Target, 
for example, as you have all heard about that example, Target 
has to say, Hey, we were hacked, and they have to notify the 
public. That is our market-based response to data security in 
this country is to say, Listen, give consumers information, 
they will then choose with their dollars or their feet whether 
they want to go back to that store.
    In all but one State, and Mr. Chairman, it is the great 
State of Texas, only Texas' data breach notification statute 
would actually apply to biometric data coming off of most of 
the wearables that we are talking about in the consumer space. 
The rest of the States really have not yet seen the risk that 
these incredibly sensitive data, as you said, pose if they were 
to be hacked, which I think is an odd and sort of unfortunate 
anomaly.
    To the extent that Congress ventures into the data breach 
notification area, that is something that it should consider. 
So that is security.
    The second thing I will talk about is use, and I will just 
give a very simple example. There are lots of different devices 
at the moment being used in hospitals that keep track of 
whether a hospital worker washes his or her hands when they use 
the restroom. What they do is they have a lanyard on, you know, 
or some kind of ID badge, and there is a device at the sink and 
it literally just says how long did they spend standing in 
front of the sink? And then if they approach a hospital bed and 
they haven't washed their hands properly, their lanyard starts 
to buzz and say, hey, wait a minute, and it records that they 
have done that, and that is not a good thing.
    That is a great idea, right? I think that is a terrific 
idea. I hope that every hospital I ever use has that, and 
employees, consumers, whoever we are talking about, need to 
know what those kinds of data are being used for. So for 
example, there might be no issue at all for a hospital or an 
employer using the data coming off a wearable for the obvious 
use that it was designed for, but I would guess that if one of 
the hospital employees discovered that their hand-washing 
habits had leaked out into data brokerages and was being used 
in credit decisions or insurance decisions or any other kind of 
decisions in the economy, they would be both surprised and 
unhappy. So the use issue is a very complicated one.
    And the last one I will say something about is consent. 
Consent is hard, particularly in the consumer space, for these 
little devices. A study that I did, I brought 20 of these very 
popular devices, I opened all the boxes, and I looked inside. 
There is almost never any privacy information. I didn't test 
Adidas', but there is almost never privacy information in the 
box. Sometimes you get the privacy information when you 
download the app that pairs with the device. Often, you are 
sent to the Web site or you have to go to Web site of the firm, 
and often, when you get there and you read their privacy 
policy, it doesn't apply to the data coming off the device. It 
applies to the use of the Web site.
    So at the moment, we are in a bit of a backward situation 
on how to give users and consumers, in particular, good 
information about these devices. Is the device information 
protected? Who owns the data? Can users go in and delete their 
data? Many have discovered that they can't, so their fitness 
data is being stored in the cloud somewhere and they say, I 
don't want to use this device anymore. They didn't just lose 
it. They affirmatively decided they don't like it anymore, and 
they say, I want to get my data back. I don't want you to have 
it anymore.
    Many companies actually will not permit that or permit 
editing of this data. And most important, who is the data being 
shared with? Can it be sold in a bankruptcy, in an acquisition, 
or just in general?
    So again, the FTC has been working with industry to try to 
come up with some guidance on those issues, but those consent 
questions are very difficult at the moment.
    I will stop there. Thank you for allowing me to testify.
    [The statement of Mr. Peppet follows:]
    
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    Mr. Burgess. The Chair thanks the gentleman. Mr. Webster is 
recognized for 5 minutes for your testimony, please.

                   STATEMENT OF DOUG WEBSTER

    Mr. Webster. Thank you, Mr. Chairman and members of 
subcommittee. The Internet has revolutionized the world around 
us, transforming the way we use and share data to communicate, 
to collaborate, and consume entertainment and information. Yet, 
the next wave of technology isn't about moving data from one 
place to another, it is about connecting physical objects to 
the Internet on an unprecedented scale.
    Now, increasingly, the things connected are the shirts on 
our backs, the glasses on our foreheads, the watches on our 
wrists, and the jewelry around our necks, and collectively, 
these emerging devices are referred to as wearables.
    To be sure, some wearables are mere novelties. However, 
many others, like the Fitbit or Apple watch, are improving our 
health and wellness by tracking our daily activities, and the 
most advanced wearables have the power to save lives and 
improve patient outcomes. For example, there is an FDA-approved 
heart rate monitor that provides precise information from 
cardiac patients to their physicians between visits to the 
doctor's office.
    Another device looks like a typical smartwatch, but in 
reality, it helps epileptic patients manage their stress and 
alert family members and physicians when a convulsive seizure 
happens.
    And a third, a prototype in development, is a glucose-
monitoring contact lens that allows diabetics to monitor their 
blood sugar continuously, and the possibilities are endless 
here. I mean, virtual reality goggles that provide for 
immersive education, connected football helmets to alert the 
team physical to a possible concussion, GPS-enabled slippers to 
make sure an elderly relative is getting out of bed and doesn't 
wander off, and accessories that make mobile payments faster 
and easier.
    Now, the one feature that unites these devices is their 
wireless connectivity to the Internet. Each contains a tiny 
radio transmitter that sends data to a receiving device, such 
as a WiFi router or a smartphone, and then the data is 
transmitted over an IP network to a server or data storage 
facility.
    Now, once online, software allows you to visualize and 
analyze the data to help improve decisionmaking, whether it is 
information about your daily run, your average number of steps 
per day that gauge your fitness progress, or simply storing 
videos so you can decide whether to post it at a later date.
    Now, at Cisco, we have been monitoring the growth of 
wearables for 3 years, and it is fair to say that these devices 
are poised to take off. Here is the forecast from our most 
recent Cisco mobile visual and networking index report. By 
2020, we forecast approximately 600 million wearable devices 
globally, up from 97 million in 2015.
    Now, fewer than 15 percent of these devices are expected to 
be directly capable of transmitting on a cellular network. 
Most, instead, will use WiFi or Bluetooth to connect to the 
Internet. Now, the data generated by wearables represents a 
tiny trickle in the larger stream of mobile data, mostly 
because only a few of these devices are being used to transmit 
video.
    Traffic from wearables is forecast to account for only 1 
percent of total mobile data traffic by 2020, even as the 
amount of data generated by each device is expected to grow.
    Now, North America has a 40 percent share of global 
connections today, and it is because we are early adopters, but 
that falls to 30 percent by 2020 as Europe and Asia catch up 
with us. By 2020, there are forecasts to be over 180 million 
wearable devices in use in North America, compared to about 40 
million today, representing a 4 \1/2\-fold increase in just 5 
years.
    Now, given this growth, it is important for policymakers to 
understand the issues affecting wearables. We need to ensure 
that radio spectrum is available with the right set of rules to 
make sure these devices can connect to the network, to 
encourage policy that support investment in the service 
provider networks that are needed to transport data to the 
Internet.
    We need policies that encourage startups and small 
companies by ensuring access to venture capital to tax policies 
that support research and development, as well as encouraging 
more young people to enter careers in science, technology, 
engineering, and math, also known as STEM. And we need to 
ensure that device manufacturers and applications developers 
understand privacy and security threats and take the steps to 
protect their devices and the personal information of 
consumers.
    Here is the bottom line: Wearables represent a measurable 
component of the mobile landscape, and they are projected to 
continue to grow. They hold incredible promise to improve our 
lives. Public policies that encourage the development of this 
category should be supported so that the United States can 
continue to be a leader in this next chapter of the Internet.
    Thank you for your attention, and I look forward to 
answering your questions.
    [The statement of Mr. Webster follows:]
    
    
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    Mr. Burgess. The Chair thanks the gentleman. Thanks to all 
of our witnesses for your testimony. We will move into the 
question-and-answer portion of the hearing.
    I would begin the questioning this morning by recognizing 
Mrs. Brooks from Indiana for 5 minutes for questions.
    Mrs. Brooks. Thank you, Mr. Chairman. Thanks for holding 
this hearing. I happen to be one of those brand new users, just 
acquired a couple of weeks ago. I kind of wish I had been a 
part of this hearing before I bought this. However, I am 
excited to be part of the wearable technology consumer base, 
and, in fact, bought several of these for my parents and in-
laws for the holidays.
    And so we often think about fitness trackers when we hear 
wearable technology, and so we are certainly learning a lot, 
and when, in preparing for this hearing, learning about 
innovations in manufacturing. In Indiana where I am from, is a 
heavy manufacturing State, one of the top manufacturing States 
in the country.
    And so, Mr. Bianculli--I am not sure I caught----
    Mr. Bianculli. Bianculli, yes.
    Mrs. Brooks [continuing]. Bianculli, what kind of cost 
savings--can you talk a little bit more about wearables with 
respect to manufacturing?
    Mr. Bianculli. Sure.
    Mrs. Brooks. What kind of cost savings can be expected in 
this area, and how do we achieve this in the manufacturing 
sector?
    Mr. Bianculli. Yes. Absolutely. Thank you, Congressman.
    Looking in the manufacturing sector and breaking it down 
really into kind of three major components: raw materials 
coming into a manufacturing facility, those raw materials being 
processed in the outbound side of that where the goods are 
sorted, picked, packed, loaded, and then transported down the 
supply chain. Some of the early adoption we are seeing for the 
kinds of wearables I spoke about, which is basically being able 
to capture and get the right information in front of a worker 
in real time have been on the third category, picking, packing, 
sorting.
    Think about an eCommerce order that is being built, think 
about an order that is coming from a manufacturer to a 
distribution center, being able to sort the goods, load those 
goods, be able to optimize the volumetric efficiency of those 
goods onto a trailer or onto a pallet for distribution. A lot 
of these cases, we are starting to see be adopted or using 
wearables to seamlessly present information in front of the 
user as they are going through their workflow to be able to get 
the right goods in the right place, to be able to optimize the 
way they are loaded onto vehicles, and to be able to get them 
down and through the supply chain faster than they have 
previously.
    So it is really about worker productivity. I use the word 
in my testimony about frictionless workflow, so think about it 
as taking the--literally taking the friction out of the 
workflow and allowing workers to simply get their job done and 
let the technology take a back seat and just augment their 
capabilities
    Mrs. Brooks. Thank you. Ms. Burich. So my daughter was a 
college athlete and--but many--several years ago, and so none 
of this technology. In fact, when she was in youth soccer, that 
is when Under Armour came to be, OK. So just talking about that 
type of advancement during this time period and now all of this 
wearable technology. What do you anticipate--how do you 
anticipate it being used from the youth--the youth sector all 
the way up to the professional athlete sector?
    Ms. Burich. Yes. We look at the market in terms of like 
team sports and individual sports or individual----
    Mrs. Brooks. Can you turn your mike on, please.
    Ms. Burich. We look at the market in terms of like team 
sports, organized sports, which is what you are referring to, 
and then individual use for fitness, so where we have our elite 
system, it is very sophisticated, and there is definitely an 
opportunity to translate it for youth sports, and I would say 
recreational team sports to high school, even colleges who 
can't afford the solution today. So that is a development and 
an opportunity for growth, and again, it is something that the 
technology and capability is there and it should be accessible 
to more--to broader population.
    And then, I think, just connecting that down, there is 
probably--it turns into more of the individual use case where 
you want kids in phys ed to be using technology so that it is--
they are not--so that you are giving them the right amount of 
exercise for their fitness condition, and you are not 
overstressing them.
    Mrs. Brooks. And these kids at all ages are so tech savvy 
from a very, very young age----
    Ms. Burich. They like it.
    Mrs. Brooks. --so they are going to love this.
    Mr. Webster, just shifting gears very briefly, you talked 
about the spectrum. Are most wearable devices operating on 
unlicensed spectrum or licensed spectrum, if you know, and 
could the spectrum be an obstacle hindering widespread adoption 
of these devices? We are getting ready to have an auction with 
respect to the spectrum. Can you just talk a little bit more 
about the spectrum issues?
    Mr. Webster. Yes, ma'am. Our forecast indicates about 15 
percent of all wearables will directly be connected to the 
Internet that would be using a license spectrum. The vast 
majority or 85 percent of them will be connected via unlicensed 
spectrum to the respective Internet-connected device.
    Now, it is important to know that wearables is just one 
small part of an even larger Internet of Things----
    Mrs. Brooks. Right.
    Mr. Webster [continuing]. Initiative, and so when you take 
that all en masse, then absolutely, the importance of 
continuing to increase the amount of license and unlicensed 
spectrum will be key to help really make this industry segment 
that is so beneficial to so many continue to prosper.
    Mrs. Brooks. Thank you. Thank you all for your testimony. I 
yield back.
    Mr. Burgess. The gentlelady yields back. The Chair thanks 
the gentlelady. The Chair recognizes the gentlelady from 
Illinois, 5 minutes for questions, please.
    Ms. Schakowsky. Mr. Peppet, I am going to ask you some 
questions, but I wanted to first--this idea of kids. To me, I 
am a little concerned about that. Is this going to be more 
anxiety-provoking, now we are measuring and another way that 
you have to look at an electronic device.
    I am just wondering if Adidas, in marketing to children, 
has talked to child psychologists, to educators on whether or 
not, as you say, that forget the awkward, social situation, et 
cetera, I mean, that could be a positive. But I feel like now 
encouraging kids to measure their every step or their heart 
rate or something, I am just wondering if you have done the 
kind of research I think would be important before we really 
market this to grammar school kids, or middle school kids.
    Ms. Burich. I would say in that space, we are providing a 
piece of a system that our partners are providing them to the 
schools. I don't know how much research they have done in that 
area. I know they have done research and they have positive 
findings from the use of technology related to attendance and 
kids' grades and other things that this is impacting.
    Ms. Schakowsky. There is also, you know, a real pushback on 
all the testing that is going on. I kind of feel like this may 
be in that category. I just wanted to raise that. I don't 
immediately accept that this is a great thing to push to kids.
    But anyway, let me just raise that and go on to Mr. Peppet, 
who actually--and you have a quote at the beginning of your 
testimony: Very soon we will see inside ourselves like never 
before with wearable, even internal sensors that monitor even 
our most intimate biological processes. It is likely to happen 
even before we figure out the etiquette and laws around sharing 
this knowledge.
    In a way, I think I am getting at that with that earlier 
question, but here is what I want to get more specific.
    In January of last year, the Federal Trade Commission 
released a report entitled ``Internet of Things: Privacy and 
Security in a Connected World.'' In the report, the FTC states 
that there is, quote, a ``need for substantive data security 
and breach notification legislation at the Federal level'' and 
that such legislation should, quote, ``protect against 
unauthorized access to both personal information and device 
functionality.''
    So in your testimony, Professor Peppet, you say that small 
sensor-based connected devices like wearables are inherently 
prone to security problems. Can you explain what you mean by 
that? What are some of the vulnerabilities specific to wearable 
devices?
    Mr. Peppet. Sure. Thank you for the question. As I said, 
the devices tend to be small, they tend to be designed for a 
low price point, and they tend to have very limited computing 
and even communication power, and that presents a whole set of 
security challenges.
    When the first wave of fitness trackers came out, computer 
science, you know, security folks discovered very quickly how 
easy it was to hack into them, largely because they hadn't 
secured whether it was the Bluetooth connectivity or the WiFi 
connectivity, whatever they were using, they hadn't secured 
those connections. And you know, that was several years ago, 
some of those studies were done.
    A study came out, I think, three weeks ago, testing some of 
the most current and most popular versions of those devices and 
found, essentially, the same set of results. So when I talk 
with computer scientists, this is a real technical problem 
because they are small, and it is very hard to design security 
in a comprehensive way.
    It will happen, but the FTC, for example, has really been 
pushing companies to try harder.
    Ms. Schakowsky. So would you say the biggest barrier is 
that there are technical issues, or are these wearable 
manufacturers taking into account security sufficiently, or 
even thinking about it?
    Mr. Peppet. I think it is both. Excuse me. I think it is 
both on the technical side, as I already described. On the are-
they-trying-hard-enough side, there is at least two problems. 
One is a lot of these devices originally have been coming up as 
start-ups, and start-ups often, you know, are rushing to market 
with a product, may not spend enough time on data security.
    The converse problem is interesting, too, which is some of 
these devices have come out of very big companies, very 
established companies that don't have much experience with the 
data stack. They are not IT companies. They are some other sort 
of firm, and so when they venture into the tech space--and we 
have seen examples of this--they may not have the either 
expertise or the depth to build that kind of security.
    Ms. Schakowsky. Well, let me ask you this: Get to the 
regulatory part. You pointed out Texas. I actually have a bill, 
too, that would require breaches to be--also this biometric 
stuff and to be--consumers to be reported. Should we follow 
Texas' lead in requiring that notification as well?
    Mr. Peppet. I think we should. Whether States do it or 
Congress does it, I think that consumers should know if their 
biometric data or other sensor-based biologic data has been 
hacked. I think you would choose between fitness--you know, the 
two of you each had fitness devices. I think you might choose 
which one you wanted if you knew that one of them, the data had 
been stolen. So yes, I think that is something that we should 
do for consumer----
    Ms. Schakowsky. I am going to submit the rest of my 
questions for the record, and I really appreciate all of you. 
Thank you. I yield back.
    Mr. Burgess. The gentlelady yields back. The Chair thanks 
the gentlelady. The Chair recognizes the gentleman from New 
Jersey, Mr. Lance, 5 minutes for questions.
    Mr. Lance. Thank you. Mr. Webster, we have heard a lot 
about the benefits of this technology. Why is it more advanced, 
for example, than the smartphone?
    Mr. Webster. Well, Congressman, I believe that it is one 
part of the broader ecosystem. The sensors can be in a number 
of different places and across all different industry verticals 
and aspects of our lives. Oftentimes, they will pair it with a 
smartphone or another Internet-connected device, and then that 
data then will go back to a cloud area or data center where 
analytics can be done. So while, oftentimes, the focus on these 
types of discussion is on the sensor itself, the reality is it 
is the full ecosystem and how they are all interrelated.
    And that is why we believe, at Cisco, it is very important 
that there is security by design and privacy by design in each 
and every one of those parts so that you are able to look at it 
in aggregate as opposed to just looking down on one aspect of 
the broader ecosystem.
    Mr. Lance. Thank you. My son got a--would it be called a 
smartwatch?--for Christmas. I don't have one yet, but I am sure 
he will inform me about all of this as he does on so much of 
the technology, and thank you for the testimony of the entire 
panel. It is certainly the wave of the future, and I am pleased 
that the chairman and the ranking member have chosen to hold 
this hearing, and I yield back the balance of my time.
    Mr. Burgess. The Chair thanks the gentleman. The Chair 
would note that there are votes on. Mr. Harper, I will 
recognize you for 5 minutes for questions, but I do want to 
point out to you the Chair has not taken his time for questions 
yet, so govern yourself accordingly.
    Mr. Harper. With that, I will be brief and respect my 
chairman.
    Thank you all for being here. Mr. Webster, if I could ask 
what types of economic and workplace problems do wearables 
solve for business?
    Mr. Webster. Congressman, wearables can solve a number of 
different problems. We discussed a little bit about the medical 
benefits that could be coming about and how it pertains to 
workers in hospitals. There is a great example about assembly 
line workers that were going through, and because they have 
wearables that are giving them step-by-step instructions when 
they are doing their quality checks, there is measurably less 
defects, and a much greater quality of the products that are 
served, and especially as you start going into more complex 
maintenance areas, especially safe for remote workers. They are 
going to be able to go and create a much higher quality of 
step-by-step instructions,
    Mr. Harper. Mr. Bianculli, can you comment on that as well?
    Mr. Bianculli. Certainly. Yes, we are seeing a host of 
opportunities. Something I would call--the movement in the 
consumer space has really been around Fitbit and these other--
Adidas as well--around something called quantified self. So 
quantifying my behaviors, and what we are seeing in the 
enterprise markets is quantifying environments, quantifying 
workflow, you fundamentally can't improve what you can't 
measure. And so the use cases we are seeing are capturing those 
trapped inefficiencies that are there because we are not able 
to quantify what is happening in a given workflow, and 
basically, you could think about it as, you know, in a large 
tier 1 transportation company who might employ, or large 
retailer who might employ 300,000 people to restock shelves 
every evening in a retail store, understanding the workflow of 
each one of those 300,000 workers, which ones are performing in 
the best ways possible, and then helping the others to be able 
to achieve that level of performance by quantifying the 
environment.
    Mr. Harper. All right. Thank you very much.
    Mr. Bianculli. So lots of opportunities around quantifying 
the workflow.
    Mr. Harper. Thank you. Mr. Palliparambil, given NXP's 
presence in many of the wearable devices on the market today, 
do we currently have the infrastructure to support the rapidly 
growing wearables market and accommodate multiple users?
    Mr. Palliparambil. Yes, sir. Thank you for the question. 
Yes, we do, and as you pointed out, the Adidas products and 
some of the products from Zebra, so we have the sensors, we 
have the micro controllers and the security element that I 
talked about in my testimony, which allows to provide that 
level of security and often preferences for the consumer is 
available today. The technology is available. It is just a 
matter of choosing to use it.
    Mr. Harper. Thank you.
    Mr. Palliparambil. Thank you
    Mr. Harper. In the interest of time, I am going to yield 
back. The chairman may want to talk. Thank you.
    Mr. Burgess. The Chair thanks the chairman. We have been 
joined by Mr. Bilirakis of Florida. Mr. Bilirakis, I will 
recognize you for questions. You know we have votes on. The 
Chair has generously allowed members to go before the 
chairman's time, so do bear in mind both you and I have to ask 
questions.
    Mr. Bilirakis. OK.
    Mr. Burgess. I will recognize you for 5 minutes and hope 
that you don't----
    Mr. Bilirakis. Well, I will yield.
    Mr. Burgess. I hope that you don't use all of it.
    Mr. Bilirakis. I yield to the chairman.
    Mr. Burgess. No, no. I want you to go ahead.
    Mr. Bilirakis. OK. All right. I won't use all of it, 
promise you.
    For the whole panel, what are the incentives for business 
and consumers who are not using wearables to start utilizing 
wearables and this kind of technology now? And this is for the 
whole panel.
    Ms. Burich. I can take it.
    Incentive. I think there is a lot of data that shows that 
when you use a wearable, it can really help you stay on your 
fitness journey longer. I mean, there is also data that shows 
the more active and fit you are, it prevents disease, it keeps 
you out of the healthcare system. So it is a proactive way to 
manage your health.
    Mr. Bilirakis. Very good.
    Anyone else.
    Mr. Palliparambil. Sure. So for a regular consumer, beyond 
fitness tracking and health, using a wearable for multiple 
applications, like payments, transit, and access into 
buildings, so logical and physical access. So the same wearable 
can, today's technology, allows you to use it for multiple 
applications, so beyond life and fitness. And that is the big 
advantage that I see, where you can have frictionless movement. 
So you have convenience, but you have the security to 
conveniently use this in your everyday life.
    Mr. Bilirakis. Thank you.
    Anyone else.
    Mr. Webster. Congressman, the benefits of wearables that I 
have seen, in general, really it comes down to a competitive 
issue. It is allowing people to be more productive, businesses 
to gain more productivity. It is going to help empower those 
that are using this is a way that can't be matched in other 
ways.
    So it is very much a competitive issue, and I think it is 
very important that policymakers take the steps to really help 
propel this industry forward with the appropriate safeguards 
that we can maintain appropriate competitive positioning.
    Mr. Bilirakis. Very good. Thank you.
    Anyone else?
    Mr. Bianculli. Congressman.
    Mr. Bilirakis. Yes, please.
    Mr. Bianculli. Congressman Bilirakis, I would say we break 
this down to two components. One is the input side of 
wearables, so being able to collect information about a 
particular workflow or what is happening in a given 
environment. So that is the input side. Think of that as 
Internet of Things sensor connectivity.
    And then the wearable instructive part of this, which is 
being able to aim somebody in the right direction, being able 
to give them information on their wrist or a heads-up 
presentation of information while they are going through a 
workflow.
    So think about the input side as being the Internet of 
Things of wearables, and think about the output side as being 
an efficient mechanism for being able to consume the data that 
is generated by the Internet of Things sensing technology.
    Mr. Bilirakis. Very good. Thank you.
    Anyone else?
    Mr. Peppet. And then just very briefly, another incentive 
is that consumers in some contexts are being paid to use these 
devices. So many consumers, for example, myself, my healthcare 
plan at my employer gives me discounts if I use a wearable and 
track my fitness. We have also seen a life insurance company 
that has now issued a life insurance policy that gives you a 
discount on your premiums if you track your fitness using a 
wearable. So there are all sorts of actual direct incentives 
being used as well.
    Mr. Bilirakis. Very good. Thank you.
    And I will yield back, Mr. Chairman. Thanks for the 
opportunity.
    Mr. Burgess. The gentleman yields back. The Chair thanks 
the gentleman.
    I will now recognize myself for questions.
    And I do, again, want to thank you. This has been a 
fascinating hearing. Again, we do have a vote on, but let me 
see what I can get through.
    Mr. Peppet, you brought up something that actually I am 
very interested in.
    And, Mr. Webster, obviously, some of the work you do in the 
healthcare space. The Affordable Care Act has brought us 
insurance with deductibles unlike anything anyone has ever 
seen.
    But I guess what I am interested in is your comments, Mr. 
Peppet, on the monetization of the wearable or the monetization 
of the data and the ability to, perhaps, forgive a portion of 
the deductible to get the patient's buy-in to the continuation 
of the monitoring. So unlike Ms. Burich's population, people 
won't drop out of the monitoring, they will continue because 
they are getting something positive.
    Could either of you speak to that?
    Mr. Peppet. That is a very interesting question, and it is 
a very interesting domain, because you are exactly right that 
ongoing compliance with whatever the medical prescription is 
difficult for doctors to get patients to follow through. And 
both wearables and other Internet of Things devices, there is a 
smart pill bottle that every time you unscrew the cap, it is 
connected to WiFi and sends a message to your doctor saying: 
They took their pills today.
    Those sorts of devices do allow a medical facility, 
whatever it is, to extend their reach out to their patients in 
all sorts of environments, and that is a potential huge 
benefit.
    Now, in terms of, I think your question precisely was about 
payment or how premiums----
    Mr. Burgess. To actually monetize the participation in the 
use of a wearable.
    Mr. Peppet. Yes, I am not sure I know enough yet to know 
how that is going to play out.
    Mr. Burgess. But you are experiencing it as a consumer in 
your insurance policy. Is that correct?
    Mr. Peppet. Yes, you are seeing it in the insurance space, 
that is right. And I think what we are seeing is a huge number 
of consumers are being introduced to wearables for the first 
time in those wellness programs, through that insurance 
vehicle.
    Now, again, I am actually relatively in favor of that kind 
of incentive. The one concern I would express is, for example, 
in my own experience with the program that I am involved with, 
it was very hard to figure out or to get information about the 
use that the data would be put to. So when an employee or a 
consumer signs up for that kind of incentive, you want to make 
sure they know what they are signing up for.
    Mr. Burgess. Mr. Webster, just in general, is there a way 
to quantify the benefit from the use of some of these wearables 
in the healthcare space?
    Mr. Webster. Congressman, I don't claim to be an expert 
into the healthcare industry, but, no question, it is a major 
vertical where IoT is being leveraged. I think if we start 
looking at the quality of care that is able to be delivered, to 
the extent of the medical reach, as was mentioned, and also 
just, I think, to the well-being, knowing that an elderly 
relative is active, for example, or being able to track them 
down should they wander off, say, an Alzheimer's patient, I 
think there are a lot of benefits there that I think could be 
challenging to quantify from a monetary benefit, but all 
recognize that it is good from a social benefit as well.
    Mr. Burgess. Thank you.
    Mr. Bianculli and Ms. Burich, you both have stuff that you 
brought with you. Would you spend just a minute and tell us 
what you have brought?
    Let's start you, Mr. Bianculli.
    Mr. Bianculli. Yes, certainly. We had mentioned in the 
testimony that we developed wearable categories in the early 
1990s actually, particularly for warehouse workers. And that 
has evolved over the last 25 years. And so one of the 
capabilities we have today is a wrist-mount mobile computer 
that is worn on the wrist of a user inside of a warehouse or a 
distribution center-type facility; a ring scanner that is able 
to image, take images, and also read machine-readable codes, 
like bar codes, inside of a warehouse-type environment.
    And so a user as they are, for instance, loading a vehicle 
with goods that are coming from, say, an e-commerce order 
online, they are scanning those packages with that scanner that 
is mounted to their hand, loading them into the vehicle. Their 
hands are staying free--again, back to the frictionless notion 
before--allowing them to get their work done without having the 
technology get in the way.
    And so this is a probably very early example of application 
of wearable inside the enterprise space. We have got the 
Bluetooth ring scanner connected to a mobile computer on the 
wrist. That mobile computer on the wrist is connected over a 
WiFi network back to the IT systems of some of these major 
carriers.
    The second example, and a more recent one, and one that we 
continue to invest in and we are going to see more of over the 
next 3 to 5 years, is this notion of eye-level information. So 
being able to have a device, as I am showing here, be worn on 
the head and then present through a screen which, if you look 
at the screen just a couple inches from your eye, it is going 
to look like a 15-inch laptop screen floating right in front of 
you.
    So if you think about working on an aircraft, where you may 
have several hundred thousand pages of schematic drawings about 
that aircraft, being able to bring up just the right drawing at 
the right moment that tells me what procedure I should do. 
Similarly, in battlefield and Government applications, where 
you might be working on a tank or a piece of heavy machinery 
out in the field, not having to deal with multiple devices, 
laptops competing with the sun and everything else that can get 
in the way, simply be able to pull that information up on the 
screen; or be able to, via the camera that is mounted on this, 
send the video that I am seeing, the particular piece of 
apparatus that I am looking at, back to a remote expert who can 
then talk me through a scenario for repair.
    Thank you.
    Mr. Burgess. Thank you. And thanks for bringing the 
peripherals today.
    Ms. Burich, can you do the same with your----
    Ms. Burich. Yes, sure. And I think our coaches could wear 
that while their players are wearing this.
    Mr. Burgess. There you go.
    Ms. Burich. This the Elite jersey that professional 
athletes wear on the field that contains some sophisticated 
sensors in this pod that goes in the back of a shirt. And then 
there is integrated heart rate sensing.
    So in terms of compliance, it is important to put it all 
into one wearable that they can put on and not worry about, 
that goes through consumer laundry or laundry without any 
special care. So that is the Elite.
    Mr. Burgess. Wait, wait, wait. You can put that through the 
laundry?
    Ms. Burich. Without this.
    Mr. Burgess. Oh, without that. OK.
    Ms. Burich. You can put this through the laundry.
    Mr. Burgess. Just in case anyone was wondering, we do have 
a vote on. And I have a voting card that I will go put in. I 
have actually laundered it twice and it seems to still work. So 
maybe you can work on that same kind of technology.
    Ms. Burich. Yes. And then these are some of our hardware 
devices for the consumer market, a high-end running watch and 
kind of a mainstream fitness device that also has step counting 
on there. And I think that is the critical thing, is that 
throughout the day you need to be getting intensity, frequency, 
and volume in terms of your exercise. So we are learning that 
it is not just about your workout, it is about what you are 
doing all day.
    And then these garments are the translation of the Elite 
for consumers. So you can, again, just snap in a heart rate 
monitor. It is directly reading your heart rate off your chest. 
These are FDA approved in terms of the sensors, so wearable for 
consumer population as well.
    Mr. Burgess. Very good. Well, thank you. Thank you for 
that.
    I will tell you this was a fascinating hearing. And I 
apologize that we have had votes that have kind of disrupted 
things. This is a disrupter series, after all. But there is a 
lot that has been shared today.
    One of the things that we hear a lot about is on the issue 
of encryption. We are hearing questions about privacy and 
security of data. Encryption seems to be one of those ways. But 
there also seems to be some problems with encryption.
    So I am actually going to ask each of you to respond, I 
realize we are really out of time and I have to go vote, but I 
would like a response to or at least your thoughts on that. As 
we develop our policies going forward, how do you balance this 
privacy question? Is encryption the way to go?
    And then, as we know, we have got the FBI concerned about 
the makers' ability to encrypt and whether or not that is a 
good thing from a law enforcement standpoint.
    So that is one of the questions that actually may end up 
before this very subcommittee when it comes down to a 
legislative product.
    But I can't thank you all enough for being here. Wait a 
minute, I have got to do this. Seeing that there are no further 
members wishing to ask questions or for any other purpose, I 
would like to thank all of our witnesses for being here.
    Before we conclude, I would like to submit the following 
documents for the record by unanimous consent: a letter from 
the Competitive Carriers Association, a letter from the 
Mercatus Center at George Mason University. Without objection, 
so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Burgess. And pursuant to committee rules, I remind 
members they have 10 business days to submit additional 
questions for the record, and I ask the witnesses to submit 
their responses within 10 business days upon receipt of the 
questions.
     So without objection, and thanking everyone once again, 
the subcommittee is adjourned.
    [Whereupon, at 11:40a.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
    
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