Smart speakers get new scrutiny ahead of UK government report

Smart speakers such as those made by Amazon.com Inc. are to come under new scrutiny by the UK government when it publishes the results of a consultation into the security features of connected consumer devices.

U.K. Digital Secretary Nicky Morgan said the results of the public inquiry, which concluded in June, will be released within the next "month or so" and contain proposals for mandatory industry requirements that could lead to potential new regulation.

"We need to go out and ask what requirements are needed when you're launching and operating these kinds of products so that people are safe," she said in an interview with Bloomberg on Wednesday. "What more do the companies need to build in for security?"

The publication will be broad and cover a wide range of so-called Internet of Things technologies, but comes as regulators and lawmakers in the US and Europe examine whether Google, Apple Inc. and Amazon violated privacy by employing human reviewers to listen to voice commands recorded by digital assistants.

Smart Speakers

"We want to be pro-innovation and pro-tech, and encourage people to innovate," Morgan said, "but recognize that we need to strike a balance, and help the public buying these devices to be aware of some of the concerns people have."

She said there was "massive potential" for connected devices in areas from health care to just turning lights on and off, but that the government has "an important role to play" in helping the public make sense of security questions being brought up.

Connected home devices surged in popularity last year and led to the inclusion of smart speakers in the virtual basket of products used by the Office for National Statistics to calculate U.K. inflation. Consulting firm Juniper Research Ltd. estimates that by 2023 the global annual market for smart speakers will reach $11 billion, and there will be about 7.4 billion voice-controlled devices.

Still, the rise in use of connected devices, combined with the advent of super fast 5G mobile networks, has sparked concerns among cybersecurity experts who worry bad actors will have even more options to hack into or target devices.

Amazon faces a lawsuit brought by a man who claims someone took control of a Ring video camera installed on his garage and spoke to his children, one among a set of similar incidents.

In a separate interview with Bloomberg, Morgan said the government will ensure Huawei Technologies Co. is not involved in "critical national infrastructure" as it weighs up whether the Chinese company can play a role in its 5G telecommunications networks.

UK Growth

Venture capital firms invested 9.2 billion pounds ($12 billion) in the UK last year, up 22% from a year earlier, according to a report from consultancy KPMG and PitchBook released on Wednesday. European funds are spending record amounts as the technology industry on the continent becomes more competitive with peers in the U.S. and Asia.

"We've got great digital skills, we've got obviously a very active, well-developed VC investment market, we've got a government that wants to support," innovation and further changes, Morgan said in an interview on Bloomberg Television. "There are a number of different reasons why people will set up in the U.K."

Morgan's comments came after Felix Capital, the London-based venture capital firm that backed Goop Inc., Farfetch Ltd. and Peloton Interactive Inc., closed its third round of funding, raising $300 million, the company said in a statement on Wednesday.

The round doubles the company's assets under management to more than $600 million, Felix said. The firm generally invests in technology companies targeting consumers with online services such as delivering high-end designer clothes and vegetarian meal boxes.

Europe as a whole is beginning to benefit from experience, having had a generation of successful startups to learn from, Felix founder Frederic Court said in an interview with Bloomberg TV.

Europe now has "the benefit of 10, 15, 20 years of having grown the likes of Spotify," Court said. That's led to "significant improvement of the quality of the management that entrepreneurs can access."

As the U.K. approaches a Jan. 31 deadline to leave the European Union trading bloc, the government is hoping that the tech sector continues to be a draw for new businesses and a growth engine for the economy. As long as talent continues to flow into the country, more certainty about the Brexit process could encourage venture capital investors to deploy more cash, KPMG said in its report.