Navigating Tomorrow: Unraveling the Impact of Artificial Intelligence Regulation on Tech Monopoly Dynamics

The final draft of the “AI Act'' regarding the use of artificial intelligence in the European Union will be produced at the beginning of February 2024, just in time, with EU elections scheduled for June 2024. The law of AI should protect fundamental rights, ensuring democracy, the rule of law and environmental sustainability, while fostering innovation. “The pre-requisite of artificial intelligence should be a human-centric technology. It should serve as a tool for people, with the ultimate aim of increasing human well-being.”

When it comes to certain elements specific to each and everyone’s public or private life in the light of improving one's standards of living, the EU act stipulates, that “if AI systems are used for determining whether healthcare services, social security, social services or different types of benefits and services should be granted, denied, reduced, revoked or reclaimed by authorities, including whether beneficiaries are legitimately entitled to such benefits or services, those systems may have a significant impact on persons’ livelihood and may infringe their fundamental rights. Nevertheless, “this regulation should not interfere with the use of innovative approaches in the public administration.”

The regulation is applicable in the energy sector, with reference to elements such as “assessing and minimizing the impact of AI systems on environmental sustainability, including as regards energy-efficient programming and techniques for efficient design, training and use of AI; assessing and preventing the negative impact of AI systems on vulnerable persons or groups of persons, including as regards accessibility for persons with a disability.”

The use of artificial intelligence can provide strategic and competitive advantages to companies and support socially and environmentally beneficial outcomes, for example in resource and energy efficiency, environmental monitoring, infrastructure, transport, logistics, public services, security, the conservation and restoration of biodiversity and ecosystems, and climate change mitigation.  The AI systems may be provided as intermediary services and the regulation of AI in the EU should be interpreted in a technology-neutral manner.

Considering the major impact that artificial intelligence can have on society and depending on how AI is being used, it might also generate risks and cause harm to fundamental rights that are protected by Union law. Therefore, the primary purpose of the use of AI should be the increasing societal and environmental well-being.

In the design and use of AI models, companies or providers should integrate the principle of societal and environmental well-being, meaning that “AI systems are developed and used in a sustainable and environmentally friendly manner as well as in a way to benefit all human beings, while monitoring and assessing the long-term impacts on the individual, society and democracy”.[1]

Considering the potential effects of different features of AI regulations:

Are policymakers interested in breaking up AI monopolies and keeping a lively digital ecosystem? How to ensure fair play in the AI arena and balance the power of the tech giants?

With the AI Regulation coming into force this year in 2024, the concern right now is whether the regulation will influence the monopoly of AI giants. The main argument is that the whole digital ecosystem is dependent on a few big players at the top. For smaller companies it is very expensive to start from scratch and to train a new AI system. As the AI arena relies entirely on huge amounts of data and only a few companies, mainly the world’s tech giants have access to big data to operate well on the market. Corporations are accumulating tremendous power, in terms of money, but especially data. Their strategic advantage, compared to the rest of the world, is high-quality data and how they can leverage it in the market. Monopolistic tendencies are already in the markets for the advanced chips and cloud infrastructure that power advanced AI.

Given the political ramifications of artificial intelligence, different variations of AI regulations are expected to influence industry standards in other regions of the world. For instance there are assumptions that the United Kingdom, India, and Japan are expected to take a laissez-faire approach, while the African Union might institute an different model of AI policy this year.

Another concern is regarding inconsistency regulation. In the United States there is no national legislation from Congress; states are making their own AI regulations. While some states regulate AI-aided manipulated content, for instance, South Carolina is considering legislation to ban deep fakes of candidates within 90 days of an election and Washington, Minnesota, and Michigan are advancing similar election-related AI bills.``[2]

The effect that these variations in regulation will have on smaller companies would be of a disadvantage, due to their lack of resources and legal support to comply with multiple laws. The burdens increase by considering the global landscape.

What does it take to put AI systems into service?

There are specific obligations for providers of general purpose AI models, meaning that it requires AI providers to undergo a conformity assessment and the authorization of the market surveillance authority. High-risk AI systems require rigorous testing and validation to ensure the reliability and efficiency of AI systems. Regulatory sandboxes could be established in testing in real world conditions, digital or hybrid form and may accommodate physical as well as digital products, in accordance with the requirements from the AI Regulation. Small companies might lack the needed resources to undergo all the needed requirements for the validation and testing of their AI systems.

Compliance

Considering the dynamics of technology and adoption of AI models, there are certain obligations for providers of general purpose AI models that should apply within 12 months from the date of entry into force. The provider of AI systems has the obligation to comply with the requirements of the AI Regulation and to develop Codes of Practice at the latest 3 months before the entry into application of the relevant provisions, to enable providers to demonstrate compliance in time. Non-compliance with the prohibition of the artificial intelligence practices referred to the Regulation shall be subject to administrative fines.

According to the analysis from the Center for Data Innovation, a U.S. tech think tank, had calculated that “small and medium enterprises could incur compliance costs as high as 400,000 euros (about $435,000) by using some of the higher-risk AI models proposed by the European Union.”[3] Therefore, the primary concern is that AI policymakers add costs that disproportionately burden smaller firms, potentially acting as a barrier to entry in the market.

In conclusion, the regulation of artificial intelligence stands as a pivotal milestone in shaping the future of technology. As we navigate towards a sustainable future, striking the right balance between fostering innovation and safeguarding ethical considerations is paramount. The use of artificial intelligence and innovative technologies has transformed the energy sector. AI’s capacity to optimize operations, enhance efficiency and unlock unprecedented insights has proven invaluable. The synergy between cutting-edge technology and the energy industry not only propels us towards cleaner and more efficient solutions, but also signifies a paradigm shift in our approach to resource management. The use of innovative technologies may be crucial for the protection of the environment, climate change and for society per se.

[1] The EU AI Act, https://artificialintelligenceact.eu/the-act/, accessed on 27.01.2024

[2] Foreign Policy, “What if Regulation Makes the AI Monopoly Worse?”, https://foreignpolicy.com/2024/01/25/ai-regulation-monopoly-chatgpt/, accessed on 27.01.2024

[3] Center for Data Innovation, “AI Act Would Cost the EU Economy €31 Billion Over 5 Years, and Reduce AI Investments by Almost 20 Percent, New Report Finds”, link: http://tinyurl.com/4prtdrvx