Vodafone Australia and TPG told to wait three months for merger decision

The final arguments have been presented to the Australian courts and now Vodafone Australia and TPG will have to wait until early 2020 for the decision on whether the $15 billion merger will be allowed.

This is a saga which has the potential to cause some long-term friction between the regulator and industry. Wherever you are around the world, best-case scenario would be collaboration between all elements of the ecosystem, but it does appear this is far from the case.

In a court case which has been on-going for just over three weeks, Justice John Middleton will now take into consideration all the arguments which have been presented. Unfortunately for those who are seeking a swift conclusion to the litigious chapter will be disappointed. Justice Middleton has said to expect a decision in January 2020, or potentially February.

Australian Competition and Consumer Commission (ACCC) took the decision to block the merger between Vodafone Australia and TPG on the grounds it would negatively impact competition in the future. The telcos are arguing this decision should be over-turned, suggesting it is the only way to ensure competition in a world which is quickly being defined by convergent operations.

This is a decision which will certainly disappoint someone. As patiently as Justice Middleton could look, there is no middle-ground between the feuding parties. The regulator is effectively accusing TPG of lying and the Vodafone/TPG representatives are suggesting the watchdog is not living in the realms of reality.

Looking at the perspective of the ACCC, the regulator believes the merger would prevent a fourth mobile player from emerging in the country. This is of course presuming TPG still has the appetite to deploy a network, and considering the telco has said it does not, the regulator is making a bold assertion.

Another interesting statement made by Michael Hodge QC, the lawyer representing the watchdog, is that its persistence to block the merger is based on “regulatory paternalism”. This is effectively a more acceptable way of saying ‘we know what better for you than you do’.

On the other side of the aisle, Vodafone and TPG are questioning whether the ACCC is looking at the same conundrum.

TPG did have an interest in diversifying revenues to enter into the mobile space, it was potentially going to do a ‘Jio Job’ to cause chaos, but the Huawei ban effectively put an end to this. Huawei was being touted as TPG’s main supplier of network infrastructure equipment, though the Australian ban for the vendor made financially unviable to pursue the network deployment, according to the telcos.

“Indeed, on the Commission’s evidence, TPG dodged a bullet that the network that they were rolling out would have been one of the great white elephants of Australian telecommunications history,” said Peter Brereton QC, representing Vodafone Australia at the trial.

If you believe the telcos, TPG is no-longer interested in building its own mobile network. It is not a financially attractive. Should the ACCC’s blockage of the merger stand, Australia will continue with three mobile network owners, though Vodafone will be in a weakened position to compete with the likes of Telstra and Optus.

This is the question which Justice Middleton needs to ponder. What is the best course of action for enhanced competition in the future? Three strengthened, converged telcos, or a fingers-crossed situation that TPG will be able to source CAPEX to fuel its own network deployment.

There are of course good and bad arguments on both sides of the aisle. The ACCC is potentially right to push for a disruptive fourth mobile provider, though is it reading the environment correctly? The telcos are of course correct to pursue a more comprehensive converged player, three top-tier telcos is certainly favourable than a duopoly, but there might be some nuanced language over the TPG appetite for network deployment moving forward.

The risk which could emerge is potential animosity. The UK’s connectivity landscape suffered due to friction between BT and regulator Ofcom, and there is potential for the same outcome here. Vodafone Australia and TPG only have one thing on their mind right now; a tie-up to challenge Optus and Telstra. The ACCC has taken somewhat of a patronising and stubborn stance, and seemingly does not want to consider the opportunity for increased competition with three converged operations.

Neither party is willing to budge, and it seems the loser will have to swallow a lot of pride to ensure a smooth relationship in the future.

Ren plays the nice guy with 5G license offer to one lucky US firm

Huawei founder Ren Zhengfei has dangled the opportunity to create a US competitor in-front of the faces of US officials seemingly in an effort to ease tensions.

At a panel session in the Huawei Shenzhen headquarters, Zhengfei has presented the US with an opportunity to fulfil an ambition it has had for years; to compete toe-to-toe with the network infrastructure vendors around the world. If Huawei was to sell an exclusive license for its 5G smarts to a US company, the competitive landscape could be due a very notable disruption.

“I think that we should give (an) exclusive license with one US company,” Zhengfei said during the session. “After getting a license, they will be able to take our technology to compete with markets around the world.”

A tier-one presence in the network infrastructure ecosystem is something which the US has been missing for years. Lucent was a US firm, though this disappeared thanks to the merger with Alcatel in 2006, and subsequently being purchased by Nokia. If you have a look at the vendor community for 5G networks, there is very little contribution from the US.

This is a very interesting ploy from Huawei and works well on a couple of different levels.

Firstly, should this bait be snapped up by the US Government, tensions would presumably ease. If a US company can benefit from the Huawei smarts, surely it would be in the interest of that organization to see scrutiny on Huawei eased. This a logical outcome, though little from this saga has been logical to date.

Secondly, it will allow Huawei to make money from a market where it has made little money before. The primary focus of a US company would presumably be the US market, therefore by paying a license fee to Huawei, the Chinese vendor is profiting from the US.

It might have to make sacrifices elsewhere, but should the US company be successful, arguably it would be Nokia and Ericsson who would feel the brunt of the pain. These are the two vendors who have profited most handsomely from the US telco market.

Although these are interesting comments from Zhengfei, we’ll wait to see developments before investing too much emotionally. Huawei has suggested here source code, hardware, software, verification, production, and manufacturing know-how could be included in the license, but nothing is confirmed until it is in writing.

Access to the source code and verification are two interesting elements here. In theory, should the US competitor want to improve security and resilience due to the potential threat of foreign intrusion, it could build on-top of the foundations the Huawei license offers. It could be a means to appease the security concerns of headline chasing politicians.

Aussie regulator not in the ‘real world’ over Vodafone and TPG

Lawyers representing Vodafone Australia and TPG have suggested the Australian competition watchdog is not living in reality as it continues quest to force in a fourth MNO.

Last year, Vodafone and TPG announced intentions to merge operations in pursuit of creating a business which can offer comprehensive services in both the mobile and fixed segments. The pair were searching for ‘synergies’, seemingly a play to compete in the world of convergence, but the Australian Competition and Consumer Commission disagreed, blocking the merger four months ago.

The ACCC rationale was relatively simple; if the pair are forced to continue to operate independently, they could potentially fund their own fixed and mobile networks, broadening competition across the country. Vodafone and TPG suggest this is not the case.

“What TPG wants is for this merger to go through but when you step back and look at the options and approach it had before August 2018… it is entirely commercially realistic that TPG will return to rolling out a mobile network,” said Michael Hodge, representing the ACCC in court.

However, the opposition hit back.

“There isn’t a real chance that TPG will pursue the rollout of a mobile network. There is not a real chance that TPG will become Australia’s fourth network,” said Inaki Berroeta, Vodafone Australia CEO.

The dispute here is simple. The ACCC wants four, independent MNOs across the country. TPG made some noise about deploying its own network prior to the merger announcement, though these ambitions were seemingly quashed by the ban on Huawei technology in the country.

“TPG did try to build it, but it was thwarted by community objections, by technical difficulties but ultimately by the federal government’s security guidance,” Ruth Higgins, the legal representative of TPG, said.

Vodafone and TPG do not believe they can compete with Optus and Telstra without a merger, though the ACCC is under the impression a fourth MNO will emerge organically.

TPG did announce in May 2018 it was planning to launch its own mobile network, learning from the success of Reliance Jio in India. The idea to attract subscribers was to offer six months of data and voice services for free, though this idea was killed off due to two developments.

The first development was the merger between Vodafone and TPG. Why would it build its own mobile network when it could dovetail with Vodafone, bringing its own fixed network to the party to complete the convergence dream.

The second development was the banning of Huawei technology in Australia.

“It is extremely disappointing that the clear strategy the company had to become a mobile network operator at the forefront of 5G has been undone by factors outside of TPG’s control,” TPG Executive Chairman David Teoh said at the time.

Following the decision, TPG decided against building its own mobile network as Huawei was the main supplier to the firm. This is an instance which backs up the Huawei claims it will improve competition in the 5G vendor ecosystem, bringing down the price of equipment investment and speed of deployment.

The decision to end TPG investment in a mobile network might have been enough to convince the ACCC the merger could be approved, but it seems the competition watchdog is clinging onto the hope it would do so on its own. TPG statements should be taken with a pinch of salt, it wouldn’t be the first-time executives changed their minds, but it does run the risk of negatively impacting competition.

One thing which is not healthy for any market is a tiered ranking system. If Vodafone cannot compete with Optus and Telstra without the converged business model the TPG assets offer, it might well fall further behind. If it dwindles to the point of irrelevance, the Australian telco market will be in a worse position than it is today, or with the combined Vodafone/TPG company offering increased competition. The risk the ACCC runs is effectively creating a duopoly.

Realistically, there is no right or wrong answer here. We do not have a crystal ball, and we cannot read the minds of TPG executives. It might well pursue the deployment of a mobile network if the prospect of a merger is killed off all together, but then again, it might just double-down on fixed line investments. It does currently have an MVNO, but that is a poor substitution for a fourth MNO to increase competition.

FTC Chair kicks off race to tackle big tech before it’s too late

A race seems to be heating up in the US. On one side, government officials are looking to tackle the influence of big tech, and on the other, Silicon Valley is trying to make it as difficult as possible.

Speaking to the Financial Times, Chairman of the FTC Joseph Simons has stated he believes efforts from Facebook CEO Mark Zuckerberg to more intrinsically integrate the different platforms could seriously complicate his own investigation. Back in July, it was unveiled the FTC was conducting a probe to understand whether competition has been negatively impacted by the social media giant.

However, Facebook has gone on the offensive and Simons is clearly not thrilled about it.

“If they’re maintaining separate business structures and infrastructure, it’s much easier to have a divestiture in that circumstance than in where they’re completely enmeshed, and all the eggs are scrambled,” said Simons.

This is the issue which the FTC is facing; Facebook is more closely integrating the separate brands. From a commercial perspective, this will allow the social media giant to cross-pollinate the platforms, potentially increasing revenues and enhancing the data-analytics machine, though it will also make divestments much more difficult to enforce.

Looking across the big names in Silicon Valley, this is a common business practice. The commercial benefits are of course very obvious, but it could be viewed as a defensive strategy in preparation for any snooping from government agencies.

At Google, with the benefit of hindsight, some regulators and politicians might have wanted to have block the acquisitions of Android, YouTube or artificial intelligence firm DeepMind. These acquisitions have led Google to become one of the most influential companies on the planet, though it does appear regulators at the time did not have the vision to understand the long-term impact. Now the services are so deeply embedded and inter-twined it is perhaps unfeasible to consider divestments.

Amazon is another company some of these politicians would love to tackle, but how do you go about breaking-up such a complex business, where the moving parts are becoming increasingly reliant on each-other?

Going back almost two decades, this is not the first-time regulators have attempted to tackle an overly influential player. Thanks to dominance in the PC arena, Microsoft was deemed to be negatively influencing competition when it came to software and applications. Despite Microsoft being forced to settle the case with the Department of Justice in 2001, the concessions stopped far short of a company break-up.

As part of the settlement, Microsoft agreed to make it easier competitors to get their software more closely integrated with the Windows OS, by breaking the company into two separate units, one to produce the operating system, and one to produce other software components. This was a tough pill for Microsoft to swallow, but it was a favourable outcome for the internet giant.

One view on this outcome is that Microsoft managed to structure its business in such a way it became almost impossible to split-up. If the technology giants of today can learn some lessons from Microsoft, they might well be able to circumnavigate any aggression from the US government.

Although the FTC is stealing the headlines here, it is not the only party looking to tackle the influence of Silicon Valley.

The House Judiciary Committee’s subcommittee that deals with antitrust has already summoned Apple, Amazon, Facebook and Google to testify. This investigation is also looking at the potential negative impact these monstrously large companies are having on competition. A couple of weeks later, the Department of Justice also opened its own probe.

Of course, there are also posturing politicians who are aiming to plug for PR points by slamming Silicon Valley. This is a very popular strategy, with the likes of Virginia Senator Mark Warner and Presidential hopeful Elizabeth Warren taking a firm stance. President Trump has rarely been a friend of Silicon Valley either.

Another interest element to consider are the lawyers. Reports have emerged this morning to suggest as many as 20 State Attorney Generals will also be launching their own investigation. The threat of legal action could be very worrying for Silicon Valley, with a number of the lawyers already suggesting they do not like the way the digital economy is evolving, with the concentration of power one of the biggest problems.

The US has generally tolerated monopolies or an unreasonable concentration of power in economic verticals to a point, generally until infrastructure has been sorted, though the pain threshold might be getting to close. This has been seen with a break-up of Standard Oil’s monopoly, as well as splitting the Bell System, a corporation which was a monopoly in some regions for more than a century, into the Baby Bells across North America in the 1980s.

The internet giants will never publicly state they are participating in strategies which in-effect act as a hindrance to government agencies, but it must be a pleasant by-product. First and foremost, the internet giants will want to integrate different products and services for commercial reasons, operational efficiencies or increased revenues for example, however one eye will be cast on these investigations.

It does appear there is an arms race emerging. Government agencies and ambitious politicians are collecting ammunition for an assault on Silicon Valley, and the internet giants are shoring up defences to ensure a continuation of the status quo. This is a battle for power, and its one the US Government could very feasibly lose.

FTC warns of break-up of big tech

The technology industry has often been a political punching bag over the last 18-24 months, and now the Federal Trade Commission (FTC) is adding to the misery.

In an interview with Bloomberg, FTC Chairman Joe Simons has suggested his agency would be prepared to break-up big tech, undoing previous acquisitions, should it prove to be the best means to prevent anti-competitive activities. This would be a monumental task, though it seems the tides of favour have turned against Silicon Valley.

This is not the first time the internet giants have faced criticism, and it won’t be the last, but what is worth noting is the industry has not endeared itself to friendly comments from political offices around the world. Recent events and scandals, as well as the exploitation of grey areas in the law, have hindered the relationship between Silicon Valley and ambitious politicians.

In this instance, the FTC is currently undertaking an investigation to understand the impact the internet giants are having on competition and the creation of new businesses. Let’s not forget, supporting the little man and small businesses is a key component of the political armoury, and with a Presidential Election around the corner, PR plugs will be popping up all over the place.

Looking at one of those plugs, Democrat candidate-hopeful Elizabeth Warren has already made this promise. Back in March, Warren launched her own Presidential ambitions with the promise to hold the internet giants accountable to the rules. Not only does this mean adding bills to the legislative chalkboard, but potentially breaking up those companies which are deemed ‘monopolistic’.

This has of course been an issue for years in Europe. The European Commission has stopped short of pushing for a break-up, though Google constantly seems to be in the antitrust spotlight for one reason or another. Whether it is default applications through Android or preferential treatment for shopping algorithms, it is under investigation. The latest investigation has seen job recruiters moaning over anti-competitive activities for job sites.

What is also worth noting is that the US has a habit of diluting the concentration of power in certain segments throughout its history. The US Government seems to be tolerant of monopolies while the industry is being normalised and infrastructure is being deployed, before opening-up the segment.

During the early 1910s, Standard Oil was being attacked as a monopoly, though this was only after it has finished establishing the rail network to efficiently transport products throughout the US. In the 1980s, the Bell System was broken-up into the regional ‘Baby Bells’ to increase competition throughout the US telco market.

The internet could be said to have reached this point also. A concentration of power might have been accepted as a necessary evil to ensure economy of scale, to accelerate the development and normalisation of the internet economy, though it might have reached the tipping point.

That said, despite the intentions of US politicians, this might be a task which is much more difficult to complete. It has been suggested Facebook has been restructuring its business and processes to make it more difficult to break-up. It also allegedly backed out of the acquisition of video-focused social network Houseparty for fears it would raise an antitrust red-flag and prompt deeper investigations.

You have to wonder whether the other internet giants are making the same efforts. For example, IBM’s Watson, its AI flagship, has been integrated throughout its entire portfolio, DeepMind has been equally entwined throughout Google, while the Amazon video business is heavily linked to the eCommerce platform. These companies could argue the removal of certain aspect would be overly damaging to the prospects of the business and also a bureaucratic nightmare to untangle.

The more deeply embedded some of these acquisitions are throughout all elements of the business, the more difficult it becomes to separate them. It creates a position where the internet giants can fight back against any new regulation, as these politicians would not want to harm the overarching global leadership position. Evening competition is one thing but sacrificing a global leadership position in the technology industry defending the consumer would be unthinkable.

This is where you have to take these claims from the FTC and ambitious politicians with a pinch-of-salt. These might be very intelligent people, but they will have other jobs aside from breaking-up big tech. The internet giants will have incredibly intelligent people who will have the sole-task of making it impossible to achieve these aims.

Why network slicing is the 5G differentiator telcos have been craving

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this article, John Lenns, VP Product Management at Oracle Communications, explores why network slicing could be the differentiator UK telcos are searching for in the 5G arms race.

When it comes to 5G, most UK telcos are still aggressively jostling for pole position. But, with EE the first out of the starting blocks at the end of May – closely followed by Vodafone rolling out its network to seven UK cities a few days later – the marker has well and truly been laid down.

Around five million Brits switch mobile provider each year, so establishing themselves as an efficient and reliable provider of 5G will be critical for telcos looking to both retain existing and attract new customers over the coming years.

Cutting through the noise with network slicing

One way providers can steal a march on competitors is through the emergence of network slicing, a technology that allows telcos to offer differentiated services with tailored connectivity and potentially specific applications for a specific enterprise segment. Service providers need to play more of a central role in smart ecosystems and digital marketplaces to grow revenues and profitability and compete with digital innovators. To that end they should also consider non-traditional business models such as new SaaS and managed service models to reduce costs and share risks/rewards. Network slicing is a key enabler towards this goal.

With 5G unlocking the potential to launch services and products previously unimaginable on 4G, performance and functionality requirements are bound to differ enormously. Network slicing essentially subverts the one-size-fits all approach, providing the opportunity for carriers to tailor connectivity services to the precise requirements of particular applications, users, or devices.

The concept of a dedicated core network is not new, first introduced in 4G as a DECOR feature. 5G, however, bakes network slicing into its core service and extends it to be end to end.

For telcos, the opportunities are limitless. Want to stream virtual reality at a sports event, or 3D video at a music concert? Before 5G, these experiences were tantalisingly out of reach, limited to stadiums and arenas with only the strongest WiFi connection. But network slicing will make them a mainstay of how people experience brands and events.

This freedom to launch and evolve custom-fit network slices rapidly – with lower capital and operating costs – will provide huge opportunities for telcos as they create increasingly sophisticated and lucrative digital services.

Telcos in pole position to take advantage

While we’re still scratching the surface of what 5G can deliver, it’s safe to say that telcos occupy one of the strongest market positions when it comes to exploiting this new network’s vast potential. Nearly every vertical imaginable relies on communications services to not only operate on a daily basis, but also accelerate innovation.

One such example is in the highly-competitive live-game streaming world, where pioneering platform Twitch boasts 3.3 million unique broadcasters per month and a staggering 560 billion minutes watched in 2018. There’s real potential here for providers to adopt greater integration into an ecosystem, with specific slices and integration into customer experience (CX) and applications meaning a specialised version of a game streaming platform could be offered under a telco’s very own brand.

In this scenario, telcos would provide much of the experience, including the basic portals for users and game providers, as well as own-branded monetisation for the latter. The service would operate from multiple cloud environments, with third parties supplying various aspects of the streaming platform, back office, CX, slicing, and edge. The mobile network operator would provide the access and other technologies.

This is just one of the many exciting opportunities for telcos to personalise network ‘slices’ to match the specific requirements of industry-vertical applications with customer segments. All service environments worth their salt will, at the very least, provide the basic ‘5G building blocks’ to help service providers move forward with both traditional mobile and enterprise services.

But the ultimate goal for telcos should be to add value to core services with good margins and operational efficiencies—something that will come with more automation in Cloud native technology and business practices, and with a willingness to explore outside comfort zones to tap into and capitalise on the expertise of people outside the industry. In other words, telcos must focus on creating exceptional experiences for their customers. 5G – along with network slicing – has the potential to make this a reality.

John LennsJohn Lenns, VP Product Management, Oracle Communications As VP of Product Management at Oracle Communications, John is responsible for leading product management, product marketing, business development and strategy teams that help telecoms companies develop and manage all aspects of their 4G and 5G networks, business operations and customer relationships. John joined Oracle Communications as part of the acquisition of Tekelec in 2013, having spent 15 years leading product, technical and business development teams for the company. Today, John is focused on helping telecoms companies make the most of the cloud to deliver 5G networks successfully and securely.

DoJ ready to greenlight Sprint/T-Mobile US merger – report

It has been one of the most protracted merger approval processes in recent memories, but source close to the US Department of Justice believe a positive decision is on the horizon for Sprint and T-Mobile US.

With Dish seemingly waiting in the wings to purchase Sprint’s prepaid brand Boost, the Department of Justice might well be on the verge of approving the $26 billion merger. According to the Wall Street Journal, a decision could be made public this week, though the budding duo would still have to face legal challenges from several State Attorney General’s before experiencing the merger euphoria.

After months of regulatory and antitrust objections to the deal, the Department of Justice might well be finally convinced. Aside from off-loading Boost to create a fourth nationwide player in the US, the duo would also have to commit to a three-year roadmap for 5G deployment as well as promising no tariff increases during the period.

Originally it did appear the Department of Justice did not share the enthusiasm as the FCC for the deal, though this report seemingly demonstrates somewhat of a U-turn. What is worth noting is all of these reports and rumours are nothing more than hearsay, though it will be welcome news from the T-Mobile US and Sprint executives who have been fighting against the tide for months.

That said, the deal with Dish appears to be central to this approval.

Earlier this week, it was suggested Dish had come to an agreement with Sprint to purchase the Boost brand for $5 billion. As part of the deal, Dish would become a connectivity customer of the newly merged business as it constructed its own network.

This would appear to be a very sensible report as Dish is under pressure to make use of the spectrum assets it has been collected over the last few years. Deadline day is quickly approaching for Dish to demonstrate it will make use of the licences otherwise it would be forced to hand back the valuable assets.

Hopefully the end of this saga is close as any further delays could start to have detrimental impacts on the 5G rollout plans of the two separate organizations. Both T-Mobile US and Sprint are keen to link up as this would create a more consolidated challenge to the leadership position of AT&T and Verizon in the mobile segment.

That said, objections from various parties have suggested reducing the number of nationwide MNOs from three to four would negatively impact competition, while others have also pointed to recent market trends.

In a joint lawsuit against the merger, several State Attorney Generals have pointed to decreasing prices for mobile contracts over the last few years, arguing that the system works. Some might suggest fixing something which isn’t broken is not the best path; if the current level of competition is benefitting the consumer, why should anyone consider changing it.

These reports are nothing more than rumour for the moment, and there are the lawsuits to consider, but it does appear this prolonged saga might be coming to a close sooner rather than later.

DoJ launches anti-competition investigation into leading online platforms

The US Department of Justice announced on Tuesday it is investigating if leading online platforms have undertaken anti-competition, anti-innovation, and other consumer harming practices.

Though the DoJ does not name the companies it will focus the investigation on, when it specifies “concerns that consumers, businesses, and entrepreneurs have expressed about search, social media, and some retail services online”, it would be fair to assume the targets are Google, Facebook, Twitter, Amazon, and when it comes to digital content distribution, Apple.

“Without the discipline of meaningful market-based competition, digital platforms may act in ways that are not responsive to consumer demands,” said Makan Delrahim, the Assistant Attorney General of the Department’s Antitrust Division. “The Department’s antitrust review will explore these important issues.”

The DoJ is seeking “information from the public, including industry participants who have direct insight into competition in online”. If found guilty, and this may including offences other than anti-competition, according to The Wall Street Journal sources, “the Department will proceed appropriately to seek redress.”

This is the latest of a series of actions taken by the US legislature and administrative authorities to rein in the power of the online platforms. In March the House Antitrust Subcommittee launched a probe into online market competition.

“The growth of monopoly power across our economy is one of the most pressing economic and political challenges we face today. Market power in digital markets presents a whole new set of dangers,” House Representative David N. Cicilline, Chairman of the Antitrust Subcommittee said at the time.

More recently companies including Google, Facebook, Amazon have been subjected to House Judiciary Committee enquiry into their practices related to market competition, amid reports that these companies have gained shares in their key markets. Facebook is on the eve of a settlement with the Federal Trade Commission that could run as high as $5 billion following the investigation of its privacy breach.

The most common measure used by the leading online companies to fend off competition is to buy the competition out. The most high-profile cases include Facebook’s acquisition of WhatsApp and Instagram, Google’s acquisition of Waze, Amazon’s acquisition of Twitch, and Apple’s acquisition of Shazam. In some cases, for example the acrimony between Spotify and Apple, some restrictive policy changes may be applied to limit the growth of a competition, especially if the competition relies on the platform. Tim Cook, CEO of Apple, however denied the company is a monopoly in a CBS interview in June, claiming Apple is not in a dominant position in any market.

The power wielded by the online platforms has not escaped the attention of the politicians, especially the presidential candidates. President Trump has repeatedly lambasted the alleged bias against conservatives by the social media giants, while Elizabeth Warren, one of the front-runner Democrat candidates, famously called for the breakup of the big internet companies. However the applicability of such proposed breakups is debatable. The most high-profile attempt to break up a company in recent history was the one targeted at Microsoft, the decision rescinded on appeal. Even if a breakup does happen, its long-term effectively may also be questioned. The last memorable breakup of a monopoly in the last 40 years was the geographical split of AT&T’s regional operations into seven Baby Bells. Four of them were later acquired by the current AT&T.

Europe takes another chunk out of Qualcomm profits

The European Commission has announced it will once again fine Qualcomm for market abuse, with the investigation this time focusing on 3G baseband chipsets.

It seems time does not heal all wounds as this investigation focused on market abuse between 2009 and 2011, and a concept known as ‘predatory pricing’. In short, Qualcomm used its dominant market position to sell products to strategically important customers, below cost price, to effectively kill off any competition before it had a chance to gain momentum.

“Baseband chipsets are key components so mobile devices can connect to the Internet,” said Margrethe Vestager, the Commissioner in charge of competition policy. “Qualcomm sold these products at a price below cost to key customers with the intention of eliminating a competitor.

“Qualcomm’s strategic behaviour prevented competition and innovation in this market and limited the choice available to consumers in a sector with a huge demand and potential for innovative technologies. Since this is illegal under EU antitrust rules, we have today fined Qualcomm €242 million.”

Although the European Commission affords the opportunity for companies to use market advantages to seek profits, but when it becomes anti-competitive the bureaucrats draw a line. This is what has happened in this instance.

At the time, Qualcomm controlled roughly 60% market share of the UMTS baseband chipset segment, three times as great as the nearest competitor, though this position was used to kill competition before it had a chance to emerge. Using its relationships with Huawei and ZTE, Qualcomm sold products at low enough prices no-one could compete.

This is the challenge with segments which have such high-barriers to entry, key customer accounts are critically important, such are the investments which need to be made in R&D. Qualcomm effectively created a loss leader of these products to stem the critical flow of funds into any competition which could develop from the smallest glimmer of hope. In this case, the firm in question was Icera, which was eventually acquired by Nvidia.

The fine in this case represents 1.27% of Qualcomm’s turnover in 2018 and will hopefully deter companies from engaging in anticompetitive activity in the future.

For Vestager, this is another parting shot as she wraps up her tenure in the competition policy office, a position she has held since 2014.

The Commissioner has built a reputation of taking on big tech who make a habit of practising in anti-competitive activities. Qualcomm has been a frequent combatant of Vestager, though she has got plenty of experience dealing with the likes of Google and Amazon also, the latter of which is the subject of the latest probe.

Assuming the tech giants will be happy to see the back of her would be very reasonable, though it remains to be seen who will replace the feisty and combative Vestager.

Samsung dropped in the deep-end for Aussie smartphone lies

The Australian Competition and Consumer Commission has opened up legal proceedings against Samsung suggesting it made false, misleading and deceptive claims over water resistance.

The claim from Samsung is a relatively simple one; S10 devices are IP68 water resistance, meaning the devices are good for up to 1.5 metres for a period of 30 minutes. Advertising for the S10 also depict a number of different scenarios from swimming pools to the beach, suggesting the device performs effectively in different environments.

The ACCC believes Samsung did not test or know of testing to substantiate these claims, and therefore mislead Australian consumers through more than 300 advertisements.

“The ACCC alleges Samsung’s advertisements falsely and misleadingly represented Galaxy phones would be suitable for use in, or for exposure to, all types of water, including in ocean water and swimming pools, and would not be affected by such exposure to water for the life of the phone, when this was not the case,” said ACCC Chair Rod Sims.

“Samsung itself has acknowledged that water resistance is an important factor influencing Australian consumer decisions when they choose what mobile phone to purchase.

“Samsung’s advertisements, we believe, denied consumers an informed choice and gave Samsung an unfair competitive advantage. Samsung showed the Galaxy phones used in situations they shouldn’t be to attract customers.”

Samsung Pool

Interestingly enough, Samsung seems to have dug itself into a whole with this one. Despite suggesting to the consumer on billboards, social media and TV advertising, a statement on its website confirms the images are misleading:

not advised for beach or pool use.

Interestingly enough, phones which had been advertised as water resistant were sold at a higher price. This is all well and good is you fancy taking your phone into the bath but don’t plan on living any form of Australian stereotype; no beaches and no pools for Samsung users.

Unfortunately for those who believe the advertising and don’t have the eagle eyes to spot small print on websites, Samsung also denied warranty claims for phones which were damaged when used in water.

Despite the fact Samsung has clearly misled consumers about the performance of S10 devices in non-fresh water, the firm is standing by its marketing and plans to fight the case. This is a slightly tricky area however, as there is some flexibility build into advertising rules. No-one expects to get a burger which matches the images on McDonald’s adverts, but this exaggeration is accepted.

Samsung might be able to squeeze out of this situation and consumers might continue to be lied to. That said, people should be able to put their phone down for a couple of minutes if they fancy a dip.

Samsung surfboard