Where is the evidence of Huawei espionage?

Before we get carried too carried away with the recent arrest in Poland, let’s remember something; this is a Huawei employee accused of espionage, not Huawei.

Right now, Huawei is the world’s whipping boy. This is a company which is taking the punishment for the nefarious activities of the Chinese government. In Poland, a Huawei employee and another from Orange have been arrested, accused of espionage. But the condemnation should be directed towards the Chinese government and these individuals, not necessarily Huawei.

For the record, we are not suggesting Huawei is completely blameless. The company might be in bed with Beijing, but as it stands there is no concrete evidence to support this theory. The arrest in Poland is circumstantial, evidence that relies on an inference to connect it to a conclusion of fact. It most judicial systems, reasonable doubt is tied into circumstantial evidence meaning it can contribute to a verdict, but alone it is rarely enough to assign guilt.

Huawei could well be a puppet with strings attached to Beijing, but evidence needs to be produced to ensure ‘democratic’ nations are not presuming guilt, a contraction of their legal principals.

The prospects for Huawei are not currently looking good. Effectively banned from any meaningful work in the US, banned in Australia and Japan, under close watch in the UK, ignored in South Korea, condemned by the European Union and in a very suspect position in New Zealand. Eastern Europe was one area where it looked like business was safe, but now the Polish are talking about a ban as well.

With all this heart-ache and headaches for the Huawei executives you have to question how much evidence there has been of espionage. As far as we are aware, nothing of note.

This is of course not to say there isn’t any but look at the situation. The US government is trying to rally the world against Huawei and China on the whole, it has been for years now, and you have to think it would use evidence to turn the tides if it had any. Back in 2012, a House Intelligence Committee told the US government Huawei was a ‘National Security Threat’, but in the six years since this point no evidence has been produced to support this statement. Yet this report has been used as the foundation of all negative sentiment directed towards China and Huawei.

This report, which was the result of a yearlong investigation by the committee, came to the conclusion Huawei and ZTE were a national security threat because of their attempts to extract sensitive information from American companies and their loyalties to the Chinese government. The report stated it had obtained internal documents from former Huawei employees suggesting it supplied services to a ‘cyberwarfare’ unit in the People’s Liberation Army, but this evidence has never made it to the public domain.

For most, the sustained rhetoric of espionage could be viewed as politically and economically motivated. Chinese companies are making an impression on the world and Silicon Valley’s vice-like grip on the technology industry is loosening. This would be incredibly damaging for the US economy on the whole, which has partly relied on the dominance of this segment for success in recent years. In recent months it has been flexing its muscles and some are bending to its will. Deutsche Telekom is an excellent example.

Only last month, DT suggested it was reviewing its relationship with Huawei to ease concerns from the US government. It just so happens government agencies are reviewing its US businesses potential merger with Sprint. Breaking ties with the Chinese vendor would certainly gain favour with Washington, but is this culture of paranoia and finger-pointing something we should be encouraging?

Again, this is not to say there is no evidence to support the accusations. However, if the US government had the smoking gun, surely it would have shown it to the world. Some might suggest it had an obligation to inform its allies of such nefarious activities. Some even more sceptical individuals might also suggest that if there was classified evidence, it would have been leaked by someone over this period. In today’s world it is impossible to keep big secrets secret. Just look at Edward Snowdon’s revelations.

Over in Germany, the Federal Office for Information Security (BSI) has said it would take this very approach. Arne Schoenbohm, President of BSI, said that for his agency to consider banning Huawei from the country he would have to see evidence. This statement came at the same time a US delegation had been meeting with officials from the Foreign Ministry to discuss a ban. As no ban has emerged, it would appear the US delegation was unable to table any evidence.

Going back to the arrest in Poland, some might suggest this is enough evidence to ban Huawei from operating in the nation. However, governments have been catching spies for decades and punishing individuals. There is little (or any) precedent to ban the company than individual works for unless there is a direct link between the organization and the nefarious government. Over in the UAE, 31-year-old PhD student at Durham University has been arrest for espionage also, but the University has not been punished. MI5 and MI5 catch spies and potential terrorists every year, but the companies they work for are not accused of espionage.

We suspect the Chinese government is obtaining information through reprehensible means, but if the world is to hold China accountable, ‘western’ governments need to stand by their principles and not undermine the foundations of fair society. The principle which is being forgotten today is the assumption of innocence until a party has been proven guilty.

Two wrongs do not make a right, and we have to ask ourselves this question; are we any better than the oppressive governments if we forget this simple principle of a fair and reasoned judicial system; innocent until proven guilty.

Huawei R&D faces export ban in Silicon Valley

The US Commerce Department has refused to renew an export licence at a Huawei subsidy in Silicon Valley, meaning China cannot access new developments at the site.

According to the Wall Street Journal, Huawei R&D outfit Futurewei was informed over the summer that the US Department of Commerce would not be renewing the license meaning some of the technologies developed at the site, but not all, could not be exported back to China. It’s a new strategy in the conflict between the US and China, but it could prove to be an effective one.

Silicon Valley is not the hotspot of the technology world because of the favourable climate or the presence of helpful regulations, it has one of the most talented workforces around the world. There are of course challengers to this claim emerging, India or Eastern European for example, but companies flock to Silicon Valley to open up R&D offices to tap into this resource. Such a ban from the US Commerce Department means Huawei is going to miss out on some of these smarts.

The block will prove problematic to overcome as there does not appear to be any logical way to combat the move. The rationale behind the blockage is quite simple; national security. Seeing as Huawei is currently being trialled and punished without the burden of evidence, there seems to be little the vendor can do to combat such passive aggressive moves by the US.

This is of course just another stage is the incrementally escalating conflict between the US and China. The tension between the pair does seem to have escalated over the last few days following a minor hiatus at Christmas. Rumours are circling the Oval Office concerning an all-out ban on Huawei and ZTE technology in the US, while suspicions will only increase following the arrest of a Huawei employee in Poland on the grounds of espionage.

With all the drama before Christmas and the hullaballoo kicking off again now, perhaps we should expect some sort of retaliation from Beijing. The Chinese governments has not been anywhere near as confrontation as the US, though there might be a breaking point somewhere in the future.

InterDigital says Huawei is setting a dangerous precedent with patent lawsuit

Huawei has filed a lawsuit challenging the royalties it’s charged, but InterDigital CEO thinks the saga could have a much more damaging and wide-ranging impact on the industry.

Lawsuits in the telco industry are not uncommon, while they are pretty much part of the daily routine for anyone who deals with patents. According to InterDigital CEO Bill Merritt, the dispute is not the problem, it’s the way that Huawei is hoping to get a resolution, heading towards localised judicial systems as opposed to international, and standardised, arbitration.

“Standards have done a great job at breaking down national walls, creating a single playing field, and we think pricing should be the same,” said Merritt.

As it stands, Huawei has filed a lawsuit with the Shenzhen Intermediate People’s Court (January 2) accusing InterDigital of not licensing patents on fair and non-discriminatory terms. The lawsuit follows the expiration of a prior licensing agreement (December 31) with the pair not able to come to an agreement on future terms.

Long story short, Merritt pointed out Huawei wants to pay less for the patents. It’s a simple dispute, based on the success of Huawei smartphones and devices over the last year or so. As Huawei is shipping more units, it feels it should be offered a more competitive rate due to economies of scale. InterDigital however, feels it is offering a fair and reasonable price. The court case will decide royalty payments for the next four years (2019-23).

From Merritt’s perspective, the issue is not the dispute but the lawsuit itself. In the past, with Huawei and other customers, InterDigital has chosen to go down the route of arbitration, an option which Merritt feels is best in this situation as well. In most arbitration cases, each party selects a professional arbitrator, before the pair jointly select a third independent one. The idea is that the trio would assess all the information in the contract, look at market precedent as well as future developments, to decide a competitive and reasonable price for the transaction. It’s (in theory) an independent and neutral way to resolve conflict.

In this case, arbitration was offered as a possible resolution, but Huawei declined, instead electing to head to the regional court. This is where the danger lies; the Shenzhen Intermediate People’s Court is a localised institution which has influence in China. The risk is regionalised rate setting which would cause chaos considering how many jurisdictions there are around the world.

To compound the issue of regionalised rate setting, not only are you likely to have varied approaches and opinions, an international supply chain does not lend itself well to this scenario. The majority of devices and products which are sold today are manufactured in a variety of different countries and regions; the economy has been globalised. Merritt said if you are having to factor in several different regionalised rates for production of devices, the whole supply chain could turn into a disaster.

“The number of disputes could easily be reduced if parties committed to arbitration,” said Merritt.

Unfortunately for Merritt and InterDigital, the two technology powerhouses of the world are increasingly promoting more nationalised agendas and policies which encourage isolationist thinking. It seems we can’t go a day without referring to the trade conflict between the US and China, but the idea of regionalised rate setting, which this lawsuit encourages, is another step away from the international ecosystem, the healthiest option for a profitable and sustainable telecommunications industry.

This is a case which might be worth keeping an eye on over the coming months, it might just lead the patent segment down a worrying and complicated red-tape maze of regionalised price setting.

US starts to get twitchy over travel to China

The US Department of State has renewed its warning over citizens travelling to China over fears of retaliation following the arrest of Huawei’s CFO in Canada.

After Washington ordered the arrest of Huawei CFO Meng Wanzhou in Canada last month, China has seemingly retaliated with a spree of its own arrests. Reports suggest as many as 13 Canadians have been held in China, including former diplomat Michael Kovrig and consultant Michael Spavor. Reacting to the news, the US State Department has issued its own warning.

On the State Department website, the caution level has been raised to ‘Level Two’, suggesting citizens ‘exercise increased caution’ when visiting the country. ‘Level Three’ would see the government advising citizens to reconsider travel plans, while ‘Level Four’ suggests the country should be avoided.

“Exercise increased caution in China due to arbitrary enforcement of local laws as well as special restrictions on dual US-Chinese nationals,” the website states. “Chinese authorities have asserted broad authority to prohibit U.S. citizens from leaving China by using ‘exit bans,’ sometimes keeping US citizens in China for years.”

Despite the tension caused by the political conflict between Washington and Beijing, it does not appear to have affected the attitude of executives. Apple CEO Tim Cook has suggested he will not be revising his own plans to travel to China, though it would be tough to see the Chinese government holding Cook considering there are seemingly no grounds to do so. Apple is currently ignoring a ban on iPhone 7 and iPhone 8 sales in the country, thanks to the patent dispute with Qualcomm, but this seem like thin justification to arrest the CEO.

This international conflict is multi-faceted, but technology is one of the key components. Ultimately, the US wants to withstand the challenge the Chinese are making to Silicon Valley’s domination of the technology world and the benefits this brings the entire US economy. Despite these moves from the US State Department, experience suggests the Chinese will not make any drastic moves against the US; it has been much more measured and strategic in its approach to tackling the trade war to date than the White House has been.

That said, it would not surprise us if a couple of US citizens start appearing in jail cells either.

Apple points finger at China for financial woes

It seems the anti-China sentiment is pretty infectious as Apple pins the blame for the company’s shrinking bank account on the misery consumers hiding behind the Great Wall.

For years it seemed Apple was able to defy industry trends. Despite the fact global smartphone shipments were slowing, irrelevant to the fact there was little innovation emerging from the handset segment and in spite of charging a small fortune for the devices, Apple was still able to bleed the iCultists dry. However, now tt appears Apple’s immunity to the plague of normality is starting to wane.

Apple has revised its guidance for the first quarter of 2019, and there’s quite a bit missing. CEO Tim Cook explained the iLeader would only be bringing in roughly $84 billion across the three months which ended December 29, compared to the previous estimated range of $89-93 billion.

And China was of course to blame.

“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” said Cook. “In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.”

This was not the only reason of course. The launch of the iPhone was too late, putting too much pressure on the channels in the lead up to Christmas. The US dollar was subject to FX swings. Supply could not meet demand. And finally, more people were holding onto their older devices instead of upgrading to new ones. All of these factors combined, plus weak performance in the emerging markets, resulted in a $5-8 billion hole.

It might be easy to blame the external factors here, and they would have almost certainly played a notable role, but perhaps Cook and co should look a bit more inwards to explain the current conundrum; when was the last time Apple did something genuinely innovative?

If you consider what devices are being brought to the market today, there are simply features and gimmicks which are better than what users had before. The age of innovation for the smartphone has temporarily ceased. This has been the case at Apple for some time, though now it appears the brand credit-line has run out. There are still iLifers out there who will upgrade when Cook snaps his fingers, but not as many as there used to be, and it does appear the idea of Apple as a status-symbol in China has died.

Apple has been the master of brand advertising, driving loyalty and asset-bleeding over the years, but this quarter might suggest the power of the Apple brand is beginning to fade due to a lack of innovation and extortionately expensive products. In every segment, Apple of course charges a premium, but it doesn’t necessarily mean the product is actually better. Is the iPhone XS better than the Huawei Mate 20 Pro? Or do the Airpods perform better than Bose? Is the Homepod the best smart speaker out there? Does the product justify the cost? Has the age of holding iLifers to ransom come to an end?

Unfortunately for Apple, at a time when innovation is at a premium a supply-chain expert is in charge of the business. The company might be the smoothest running machine around, but innovation has certainly lacked without Steve Jobs at the top, though the big question is whether the great mind of Jobs could squeeze out any new ideas in these meagre times.

After Cook announced the firm would stop detailing shipment numbers in the financial reports we should have all seen this coming, but what we have learned here is that not even Apple is immune to global trends. It can’t charge more an offer no added values in exchange. Its customers are just as cash conscious as others. New products require innovation to work.

The biggest stories of 2018 all in one place

2018 has been an incredibly business year for all of us, and it might be easy to forget a couple of the shifts, curves, U-turns and dead-ends.

From crossing the 5G finish line, finger pointing from the intelligence community, the biggest data privacy scandal to date and a former giant finally turning its business around, we’ve summarised some of the biggest stories of 2018.

If you feel we’ve missed anything out, let us know in the comments section below.

Sanction, condemnation and extinction (almost)

ZTE. Three letters which rocked the world. A government-owned Chinese telecommunications vendor which can’t help but antagonise the US government.

It might seem like decades ago now but cast your mind back to April. A single signature from the US Department of Commerce’s Bureau of Industry and Security (BIS) almost sent ZTE, a company of 75,000 employees and revenues of $17 billion, to keep the dodo company.

This might have been another move in the prolonged technology trade war between the US and China, but ZTE was not innocent. The firm was caught red-handed trading with Iran, a country which sits very prominently on the US trade sanction list. Trading with Iran is not necessarily the issue, it’s the incorporation of US components and IP in the goods which were sent to the country. ZTE’s business essentially meant the US was indirectly helping a country which was attempting to punish.

The result was a ban, no US components or IP to feature in any ZTE products. A couple of weeks later manufacturing facilities lay motionless and the company faced the prospect of permanent closure, such was its reliance on the US. With a single move, the US brought one of China’s most prominent businesses to its knees.

Although this episode has been smoothed over, and ZTE is of course back in action, the US demonstrated what its economic dirty bombs were capable of. This was just a single chapter in the wider story; the US/China trade war is in full flow.

Tinker, tailor, Dim-sum, Spy

This conflict has been bubbling away for years, but the last few months is where the argument erupted.

Back in 2012, a report was tabled by Congressman Mike Rogers which initially investigated the threat posed by Chinese technology firms in general, and Huawei specifically. The report did not produce any concrete evidence, though it suggested what many people were thinking; China is a threat to Western governments and its government is using internationally successful companies to extend the eyes of its intelligence community.

This report has been used several times over the last 12 months to justify increasingly aggressive moves against China and its technology vendors. During the same period, President Trump also blocked Broadcom’s attempts to acquire Qualcomm on the grounds of national security, tariffs were imposed, ZTE was banned from using US technologies in its supply chain and Huawei’s CFO was arrested in Canada on the grounds of fraud. With each passing month of 2018, the trade war was being cranked up to a new level.

Part of the strategy now seems to be undermining China’s credibility around the world, promoting a campaign of suggestion. There is yet to be any evidence produced confirming the Chinese espionage accusations but that hasn’t stopped several nations snubbing Chinese vendors. The US was of course the first to block Huawei and ZTE from the 5G bonanza, but Australia and Japan followed. New Zealand seems to be heading the same way, while South Korean telcos decided against including the Chinese vendors on preferred supplier lists.

The bigger picture is the US’ efforts to hold onto its dominance in the technology arena. This has proved to be incredibly fruitful for the US economy, though China is threatening the vice-like grip Silicon Valley has on the world. The US has been trying to convince the world not to use Chinese vendors on the grounds of national security, but don’t be fooled by this rhetoric; this is just one component of a greater battle against China.

Breakaway pack cross the 5G finish line

We made it!

Aside from 5G, we’ve been talking about very little over the last few years. There might have been a few side conversations which dominate the headlines for a couple of weeks, but we’ve never been far away from another 5G ‘breakthrough’ or ‘first’. And the last few weeks of 2018 saw a few of the leading telcos cross the 5G finish line.

Verizon was first with a fixed wireless access proposition, AT&T soon followed in the US with a portable 5G hotspot. Telia has been making some promising moves in both Sweden and Estonia, with limited launches aiming to create innovation and research labs, while San Marino was the first state to have complete coverage, albeit San Marino is a very small nation.

These are of course very minor launches, with geographical coverage incredibly limited, but that should not take the shine off the achievement. This is a moment the telco and technology industry has been building towards for years, and it has now been achieved.

Now we can move onto the why. Everyone knows 5G will be incredibly important for relieving the pressure on the telco pipes and the creation of new services, but no-one knows what these new services will be. We can all make educated guesses, but the innovators and blue-sky thinkers will come up with some new ideas which will revolutionise society and the economy.

Only a few people could have conceived Uber as an idea before the 4G economy was in full flow, and we can’t wait to see what smarter-than-us people come up with once they have the right tools and environment.

Zuckerberg proves he’s not a good friend after all

This is the news story which rocked the world. Data privacy violations, international actors influencing US elections, cover ups, fines, special committees, empty chairs, silly questions, knowledge of wrong-doing and this is only what we know so far… the scandal probably goes deeper.

It all started with the Cambridge Analytica scandal, and a Russian American researcher called Aleksandr Kogan from the University of Cambridge. Kogan created a quiz on the Facebook platform which exposed a loop-hole in the platform’s policies allowing Kogan to scrape data not only from those who took the quiz, but also connections of that user. The result was a database containing information on 87 million people. This data was used by political consulting firm Cambridge Analytica during elections around the world, creating hyper-targeted adverts.

What followed was a circus. Facebook executives were hauled in-front of political special committees to answer questions. As weeks turned into months, more suspect practices emerged as politicians, journalists and busy-bodies probed deeper into the Facebook business model. Memos and internal emails have emerged suggesting executives knew they were potentially acting irresponsibly and unethically, but it didn’t seem to matter.

As it stands, Facebook is looking like a company which violated the trust of the consumer, has a much wider reaching influence than it would like to admit, and this is only the beginning. The only people who genuinely understand the expanding reach of Facebook are those who work for the company, but the curtain is slowly being pulled back on the data machine. And it is scaring people.

Big Blue back in the black

This might not have been a massive story for everyone in the industry, but with the severe fall from grace and rise back into the realms of relevance, we feel IBM deserves a mention.

Those who feature in the older generations will remember the dominance of IBM. It might seem unusual to say nowadays, but Big Blue was as dominant in the 70s as Microsoft was in the 90s and Google is today. This was a company which led the technology revolution and defined innovation. But it was not to be forever.

IBM missed a trick; personal computing. The idea that every home would have a PC was inconceivable to IBM, who had carved its dominant position through enterprise IT, but it made a bad choice. This tidal wave of cash which democratised computing for the masses went elsewhere, and IBM was left with its legacy business unit.

This was not a bad thing for years, as the cash cow continued to grow, but a lack of ambition in seeking new revenues soon took its toll. Eight years ago, IBM posted a decline in quarterly revenues and the trend continued for 23 consecutive periods. During this period cash was directed into a new division, the ‘strategic imperatives’ unit, which was intended to capitalise on a newly founded segment; intelligent computing.

In January this year, IBM proudly posted its first quarterly growth figures for seven years. Big Blue might not be the towering force it was decades ago, but it is heading in the right direction, with cloud computing and artificial intelligence as the key cogs.

Convergence, convergence, convergence

Convergence is one of those buzzwords which has been on the lips of every telco for a long time, but few have been able to realise the benefits.

There are a few glimmers of promise, Vodafone seem to be making promising moves in the UK broadband market, while Now TV offers an excellent converged proposition. On the other side of the Atlantic, AT&T efforts to move into the content world with the Time Warner acquisition is a puzzling one, while Verizon’s purchase of Yahoo’s content assets have proved to be nothing but a disaster.

Orange is a company which is taking convergence to the next level. We’re not just talking about connectivity either, how about IOT, cyber-security, banking or energy services. This is a company which is living the convergence dream. Tie as many services into the same organisation, making the bill payer so dependent on one company it becomes a nightmare to leave.

It’s the convergence dream as a reality.

Europe’s Great Tax Raid

This is one of the more recent events on the list, and while it might not be massive news now, we feel it justifies inclusion. This developing conversation could prove to be one of the biggest stories of 2019 not only because governments are tackling the nefarious accounting activities of Silicon Valley, but there could also be political consequences if the White House feels it is being victimised.

Tax havens are nothing new, but the extent which Silicon Valley is making use of them is unprecedented. Europe has had enough of the internet giants making a mockery of the bloc, not paying its fair share back to the state, and moves are being made by the individual states to make sure these monstrously profitable companies are held accountable.

The initial idea was a European-wide tax agenda which would be led by the European Commission. It would impose a sales tax on all revenues realised in the individual states. As ideas go, this is a good one. The internet giants will find it much more difficult to hide user’s IP addresses than shifting profits around. Unfortunately, the power of the European Union is also its downfall; for any meaningful changes to be implemented all 28 (soon to be 27) states would have to agree. And they don’t.

Certain states, Ireland, Sweden and Luxembourg, have a lot more to lose than other nations have to gain. These are economies which are built on the idea of buddying up to the internet economy. They might not pay much tax in these countries, but the presence of massive offices ensure society benefits through other means. Taxing Silicon Valley puts these beneficial relationships with the internet players in jeopardy.

But that isn’t good enough for the likes of the UK and France. In the absence of any pan-European regulations, these states are planning to move ahead with their own national tax regimes; France’s 3% sales tax on any revenues achieved in the country will kick into action on January 1, with the UK not far behind.

What makes this story much more interesting will be the influence of the White House. The US government might feel this is an attack on the prosperous US economy. There might be counter measures taken against the European Union. And when we say might, we suspect this is almost a certainty, such is the ego of President Donald Trump.

This is a story which will only grow over the next couple of months, and it could certainly cause friction on both sides of the Atlantic.

Que the moans… GDPR

GDPR. The General Data Protection Regulation. It was a pain for almost everyone involved and simply has to be discussed because of this distress.

Introduced in May, it seemingly came as a surprise. This is of course after companies were given 18 months to prepare for its implementation, but few seemed to appreciate the complexity of becoming, and remaining compliant. As a piece of regulation, it was much needed for the digital era. It heightened protections for the consumer and ensured companies operating in the digital economy acted more responsibly.

Perhaps one of the most important components of the regulation was the stick handed to regulators. With technology companies growing so rapidly over the last couple of years, the fines being handed out by watchdogs were no longer suitable. Instead of defining specific amounts, the new rules allow punishments to be dished out as a percentage of revenues. This allows regulators to hold the internet giants accountable, hitting them with a suitably large stick.

Change is always difficult, but it is necessary to ensure regulations are built for the era. Evolving the current rulebook simply wouldn’t work, such is the staggering advancement of technology in recent years. Despite the headaches which were experienced throughout the process, it was necessary, and we’ll be better off in the long-run.

Next on the regulatory agenda, the ePrivacy Regulation.

Jio piles the misery on competitors

Jio is not a new business anymore, neither did it really come to being in 2018, but this was the period where the telco really justified the hype and competitors felt the pinch.

After hitting the market properly in early 2016, the firm made an impression. But like every challenger brand, the wins were small in context. Collecting 100,000s of customers every month is very impressive, but don’t forget India has a population of 1.3 billion and some very firmly position incumbents.

2017 was another year where the firm rose to prominence, forcing several other telcos out of the market and two of the largest players into a merger to combat the threat. Jio changed the market in 2017; it democratised connectivity in a country which had promised a lot but delivered little.

This year was the sweeping dominance however. It might not be the number one telco in the market share rankings, but it will be before too long. Looking at the most recent subscription figures released by the Telecom Regulatory Authority of India (TRAI), Jio grew its subscription base by 13.02 million, but more importantly, it was the only telco which was in the positive. This has started to make an impact on the financial reports across the industry, Bharti Airtel is particularly under threat, and there might be worse to come.

For a long-time Jio has been hinting it wants to tackle the under-performing fixed broadband market. There have been a couple of acquisitions in recent months, Den Networks and Hathway Cable, which give it an entry point, and numerous other digital services initiatives to diversify the revenue streams.

The new business units are not making much money at the moment, though Jio is in the strongest position to test out the convergence waters in India. Offering a single revenue stream will ensure the financials hit a glass ceiling in the near future, but new products and aggressive infrastructure investment plans promise much more here.

We’re not too sure whether the Indian market is ready for mass market fixed broadband penetration, there are numerous other market factors involved, but many said the initial Jio battle plan would fail as well.

Convergent business models are certainly an interesting trend in the industry, and Jio is looking like it could force the Indian market into line.

Redundancies, redundancies, redundancies

Redundancy is a difficult topic to address, but it is one we cannot ignore. Despite what everyone promises, there will be more redundancies.

Looking at the typical telco business model, this is the were the majority have been seen and will continue to be seen. To survive in the digitally orientated world, telcos need to adapt. Sometimes this means re-training staff to capitalise on the new bounties, but unfortunately this doesn’t always work. Some can’t be retrained, some won’t want to; the only result here will be redundancies.

BT has been cutting jobs, including a 13,000-strong cull announced earlier this year, Deutsche Telekom is trimming its IT services business by 25%, the merger between T-Mobile and Sprint will certainly create overlaps and resulting redundancies, while Optus has been blaming automation for its own cuts.

Alongside the evolving landscape, automation is another area which will result in a headcount reduction. The telcos will tell you AI is only there to supplement human capabilities and allow staff to focus on higher value tasks, but don’t be fooled. There will be value-add gains, but there will also be accountants looking to save money on the spreadsheets. If you can buy software to do a simple job, why would you hire a couple of people to do it? We are the most expensive output for any business.

Unfortunately, we have to be honest with ourselves. For the telco to compete in the digital era, new skills and new business models are needed. This means new people, new approaches to software and new internal processes. Adaptation and evolution is never easy and often cruel to those who are not qualified. This trend has been witnessed in previous industrial revolutions, but the pace of change today means it will be felt more acutely.

Redundancy is not a nice topic, but it is not always avoidable.

US starts whispering to Germany about China ban

The anti-China road-trip has finally made it to Europe as representatives of the US government have met with German counterparts to argue the case to ban Chinese vendors from the 5G deployment.

The Trump administration has quickly been working away around the world to spread anti-China propaganda, and it has been successful. Australia was the first domino to fall, but New Zealand has seemingly followed, as has Japan. South Korea will evade China’s grasp for other reasons, and it looks like Taiwan’s public sector is off limits as well. Now the parade has entered Europe and Germany.

According to Bloomberg, a US delegation has been meeting with officials from the Foreign Ministry to discuss a ban. These talks will of course be very hushed, but whether any concrete evidence is going to be presented remains to be seen. Earlier this week, Germany stepped forward and said it would need to see evidence before any actions would be taken against China.

“For such serious decisions like a ban, you need proof,” said Arne Schoenbohm, President of Germany’s Federal Office for Information Security (BSI).

This is the big question. Has the Trump administration masterminded a campaign of hate in the interest of national security, or does it believe crippling the prospects of Huawei and ZTE will protect the US position of dominance as the 5G dawn breaks. We are slightly pessimistic about the intentions of the Oval Office and believe the national security element is a thinly veiled disguise to push China’s tech leaderships challenge off-course.

What is worth noting is this meeting has taken almost immediately after Deutsche Telekom’s decision to re-examine its use of Huawei equipment in its network. DT has gone big on Huawei in previous years, therefore any ban against Chinese companies could have potentially impacted the speed of 5G rollout across Germany, perhaps explaining why the government is slightly resistant to joining the anti-China gang. That said, with DT potentially shunning Huawei in pursuit of White House favour (the Sprint/T-Mobile merger is reaching a critical point), the pressure might be lifted from the government.

This is also a government which might be swayed to the anti-China gang under the right conditions. The government has been discussing new legislation which would impact the role of Chinese service providers in the country, while reports of someone tapping Chancellor Angela Merkel in by-gone years are still fresh. Espionage is a sensitive subject.

While we will not defend the Chinese government, and we strongly suspect there are some nefarious activities going on behind the Great Firewall to extend the government’s eyes internationally, no proof has been tabled. The countries which are condemning China are acting without proof and assuming guilt without trial, betraying one of the base foundations of a democratic society; innocent until proven guilty.

In fact, ‘innocent until proven guilty’ it is an international human right under the UN’s Universal Declaration of Human Rights, Article 11. Admittedly this is directed towards criminal law, however the same principles apply. If there is evidence, this needs to be presented to the world. If there is no evidence, some needs to be found. We suspect the US government does not have the evidence yet, but it is out there somewhere.

Banning countries and presuming guilt on suspicions and paranoia is a dangerous path to walk, and you have to question whether we are any better than the freedom-crushing Chinese government. Supposed Democratic nations are betraying their own values in pursuit of punishing the ‘enemy’; two wrongs do not make a right.

Google has apparently pulled the plug on its censored search engine for China

Google bowed to pressure by terminating its data analysis system that is vital to its planned re-entry into China with a censored search engine.

Dragonfly, the Google project to develop a search engine that would satisfy China’s censorship requirements relies on pre-empting the appearance of search results that the Chinese authorities may find offensive. To do so, Google has used 265.com, a Chinese internet portal based in Beijing it purchased in 2008, two years before it pulled out of China, to gather user behaviour data, mainly search habits. The Google team then compare what the users would see if the same search terms were used on the uncensored Google and eliminate those sites that are blocked by China’s Great Firewall. The data is then fed into the prototype Dragonfly search engine to produce results that would be acceptable to the Chinese censorship system.

According to a new report from the website The Intercept, Google has decided to shut down this data analysis system it has established with Baidu, which the search on 265.com is directed to, to harvest data. Instead the engineering team is using search queries by Chinese speaking users in other markets like the US or south-eastern Asian countries, which would be very different from what the users behind the Great Firewall would be generating and therefore defeating the very purpose of a censored search engine. Though this decision may not have explicitly spelt the death penalty for Dragonfly, it is a very close one.

A couple of factors must have played important parts in the decision-making process. Employee revolt is the first one. When Dragonfly was first exposed, an increasing number of employees have signed an internal petition to stop the project, reminiscing the company’s “Don’t Be Evil” manifesto. The very idea that Google would ponder creating a censored version for China may be a shock to most employees, but not unimaginable considering the different leaderships. Sergey Brin, who was at the helm of Google when the company shut down its China operation in 2010 as a protest, spent his childhood in the former Soviet Union, therefore had first-hand understanding of what censorship is about. Sundar Pichai, on the other hand, lacks similar sense and sensibility, having grown up in India, the largest democracy in the world.

Another source of internal pressure has come from the Privacy and Security teams. It has been reported by different media outlets that Scott Beaumont, Google’s head of China operation and the main architect behind Dragonfly, has deliberately kept the privacy and security teams in the dark as long as possible. For a company of Google’s nature, which lives on users’ trust in its willingness and capabilities to guard the security of their data, protests from these internal teams must have had the management ears. On the other hand, the fact that executives like Beaumont could carry on his secret project as long as it has must be a surprise to outside observers.

The strongest external pressure has come from the Congress. Pichai was grilled by the American law-makers last week when he was challenged by the Congressman David Cicilline (D-R.I). “It’s hard to imagine you could operate in the Chinese market under the current government framework and maintain a commitment to universal values, such as freedom of expression and personal privacy.” Pichai conceded that there was “no plans to launch a search service in China,” though he had declined to provide a positive confirmation to the Congress’ demand that Google should not launch “a tool for surveillance and censorship in China”.

With the latest decision to terminate data harvesting from 265.com, it seems Dragonfly or similar projects are put into a long hibernation.

T-Mobile/Sprint merger heads towards final two hurdles

With the CFIUS giving a green light on the $26 billion merger of TMUS and Sprint, attention can now be turned to the final hurdles presented by the Department of Justice (JoJ) and FCC.

According to the Wall Street Journal, the CFIUS (Committee on Foreign Investment in the US), which has been assessing the security implications of the deal, has given the go ahead. There has been no official statement made just yet, the CFIUS has abruptly pointed out it has no legal requirement to do so, though attention has most likely be focused on the last two potential problem areas for some time.

What is worth noting is that while there are opportunities for failure at every turn in the road, the CFIUS was unlikely ever to be a massive problem for T-Mobile or Sprint.

As a bit of background, the CFIUS is a multi-agency committee which assesses the impact of foreign investment on a number of different factors, most notably national security. Although a relatively unknown council, the Foreign Investment Risk Review Modernization Act (passed in August) vastly expanded the powers and influence of CFIUS, meaning it could probe into a wider variety of acquisitions, allow it to take longer and finally, charge for the pleasure of doing so.

Thankfully for T-Mobile and Sprint, the national security threat was low risk here. Firstly, you have to consider there isn’t any Huawei or ZTE kit in the pair’s networks right now, secondly, the Defense Authorization Act prohibits the use of any of their equipment or software in the future, and finally, the pair’s parent companies have said they would back away from Huawei for future investments.

It seems the direct threat to US national security, if you are in the camp of believing there is a genuine one, was minimal. The confirmation from non-domestic private businesses that they would pander to political paranoia looks like it was enough to ensure the CFIUS have no objections. All ties to Huawei and ZTE have been severed so it seems its mission accomplished for Trump.

Now it’s onto the tough jobs; the Department of Justice and the FCC.

The FCC is digging its heels in for the moment, extending the 180-day shot clock for approval, as it searches for justification for the deal. This is where the issue may lie for T-Mobile and Sprint, as while the FCC is looking to determine whether a proposed transaction will serve the public interest, convenience and necessity, the evidence and support seems to be stacking up against the pair.

The Department of Justice on the other hand will be looking to assess whether the proposed merger would have a material impact on competition. Too much of a sway in the negative and this deal will head straight to the bin. The four to three operators shift could create monopolies in certain localities which will not be viewed favourably.

The finish line is now in sight, but it is still unclear which direction this will go. While the signs have been positive, the FCC has proven to be a surprise package while there are certainly warranted competition concerns for the DoJ to ponder.

T-Mobile/Sprint edge towards finish line following Huawei snub

T-Mobile US and Sprint are reportedly rubbing regulators the right way, in the continued effort to get the prolonged merger approved, by overtly shunning Chinese kit vendor Huawei.

The statement should be viewed as more symbolic than anything else, as considering the clauses which have been inserted into the Defense Authorization Act during August, it would have been highly unlikely the pair would have considered Huawei for any meaningful work in US networks. What this could be viewed as is a PR move from the pair, allowing the US to demonstrate to the world how serious it is about the espionage claims.

According to Reuters, Deutsche Telekom and Softbank, parent companies of T-Mobile US and Sprint respectively, have confirmed they will not be working with Huawei moving forward. Neither US telco currently has any Huawei kit in its network, though it is hoped this statement from the international telcos will have the bureaucrats hand edging closer to the green button for the $26 billion merger.

For the US government, this is somewhat of a PR win. The Trump administration has been incredibly aggressive in making moves against the Chinese, and this could be viewed as a medal credited to the crusade. Not only can the US government effect change in its own telcos and other governments around the world, it can also influence non-domestic private firms. The long arm of the Oval Office is tickling opinion in places it really shouldn’t be able to.

Unfortunately for the US, each incremental step taken in the trade war against China seems to question how dearly the White House holds principles and values. All of these individual circumstances are starting to look like pawns in President Trump’s game of chess against Beijing. Trump is living up to his reputation as a deal-maker, with the promise of aiding the battle against the Chinese enough for the President to make concessions elsewhere.

The evidence being stacked up against the T-Mobile/Sprint merger was starting to climb pretty high, though perhaps this might be enough of a ‘concession’ to twist the White House’s perspective on the transaction. Trump has already shown he is capable of looking at the big picture, with the recent arrest of Huawei’s CFO another excellent example.

Having been arrested in Canada while in transit back to China, Trump promised to intervene in the court case should it help his pursuit of a more favourable trade relationship with China. This statement from Trump makes somewhat of a mockery of the whole arrest and demonstrates how little he thinks of the Canadian judicial system. If there is a benefit to the US economy, Trump can talk to the right people and make the whole saga disappear. It questions the validity of the arrest in the first place, but also the credibility of the Canadian courts; why does Trump believe they can be convinced to drop the case so easily?

Trump is starting to show his heritage; anything for the deal. This is a businessman in control of the White House, and his ability to ignore small print give the impression of a wheeler-dealer.