AI in local business: Billings faces the hard questions behind the promise

On Grand Avenue, a half‑dozen coffee shops and boutiques have quietly begun using AI chatbots to handle customer service after hours. But last month, one of those systems wrongly accused a regular of theft, sparking a public row that has forced Billings to confront the underside of the technology it once celebrated.

Risks that don't show up in the sales pitch

The incident at The Roost on Grand isn't isolated. Across Billings, small businesses are racing to deploy AI tools, many of them free or cheap cloud services, without formal training or oversight. A survey conducted by the Billings Chamber of Commerce in May found that 42 percent of local retailers had adopted some form of AI in the past year, but fewer than one in five had any written policy governing its use.

“The hype cycle is real,” said Mira Chen, director of the Center for Digital Ethics at Billings State University. “Businesses hear ‘efficiency’ and ‘cost savings’ and sign up without asking who trains the model or what data it collects.” Chen's team recently audited five popular AI scheduling platforms used by local restaurants and found that three shared customer phone numbers with third‑party advertisers, a fact buried in terms of service agreements that average 14 pages.

The risks extend beyond privacy. In the Southside district, a property management firm that uses AI to screen rental applicants was sued last month after the algorithm systematically rejected applicants from two predominantly Hispanic zip codes. The firm, Billings Property Solutions, declined to comment, but the case is scheduled for a preliminary hearing on August 2 at Yellowstone County Courthouse.

Billings wrestles with the ethical price tag

The promise is real enough. At the Billings Tech Summit held in June at the Alberta Bair Theater, startup founders demoed AI tools that cut inventory errors by 60 percent and reduced energy use in commercial buildings by 22 percent. The city's economic development office estimates that AI adoption could add $180 million to Billings's gross domestic product by 2028, much of it from small and medium enterprises.

But the ethical questions are piling up faster than the revenue. Late last year, the Billings City Council created a temporary advisory panel on AI ethics, drawing members from the tech sector, the university, and the Montana chapter of the ACLU. The panel's draft recommendations, released last week, call for mandatory bias audits on any AI system that affects housing, employment, or law enforcement, and recommend that the city spend $750,000 on public education campaigns about the technology.

“We're trying to avoid a Seattle‑style crisis where a city is caught flat‑footed by a scandal,” said Alderman Paul Okonkwo, who chairs the panel. Okonkwo pointed to last year's Seattle school district lawsuit against several AI tutoring platforms that allegedly collected children's biometric data without consent. “That could happen here if we don't act.”

The panel's proposals face opposition from the Billings Business Alliance, which argues that additional regulations will drive startups to cheaper cities like Boise or Spokane. In a letter to the council, the Alliance warned that “overreach will kill the goose that lays the golden egg.”

Meanwhile, the grassroots organisation Tech Justice Billings is pushing for stricter rules. Last month, the group held a town hall at the Billings Public Library that drew more than 200 people, many of them small‑business owners who said they felt pressured to adopt AI without understanding the trade‑offs.

“I wanted the chatbot because I can't afford a night receptionist,” said Dani Alvarado, who runs the Magnolia Street gift shop Petals & Pages. “Now I'm wondering if I can afford the legal exposure.”

Alvarado's dilemma captures the central tension as Billings moves deeper into the AI era. The city council is expected to vote on the ethics panel's proposals in September. Until then, businesses are left navigating a landscape where the promises are slick and the pitfalls are finely printed.