A weak France overshadowed Orange’s Q1

The telecom operator Orange reported a flat Q1, with a weak performance in its home market partially compensated by the strength in Africa and the Middle East.

Orange reported a set of stable top line numbers in its first quarter results. On Group level, the total revenue of €10.185 billion was largely flat from a year ago (-0.1%), and the EBITDAaL (earnings before interest, tax, depreciation and amortisation after lease) improved by 0.7% to reach €2.583. Due to the 8% increase in eCAPEX (“economic” CAPEX), the total operating cash flow decline by 10.2% to €951 million.

Orange 2019Q1 Group level numbers.pdf

Commenting on the results, Stéphane Richard, Chairman and CEO of the Orange Group, said that “the Group succeeded in maintaining its high quality commercial performance in spite of a particularly challenging competitive context notably in our two principal countries of France and Spain. Our strategy is paying off since EBITDAal is continuing to grow while revenues remain stable, allo wing us to reaffirm our 2019 objectives”

On geography level, France, its home and biggest market is going through a weak period. Despite registering net gain in the number of customers, the total income dropped by 1.8% to €4.408 billion, the first quarterly decline in two years. The company blamed competition, a one-off promotion of digital reading offer towards the end of the quarter, and “a weaker performance on high-end equipment sales in the 1st quarter of this year”. The move to “Convergence” was positive, but not fast enough to offset the lose in narrowband customers. The competition pressure is still visible. The Sosh package (home broadband + mobile) Orange rolled out to combat Free is gaining weight among its broadband customers, which resulted in a decline of revenues despite the growth in customer base.

Orange’s European markets, including Spain and the rest of Europe, reported modest growth, with strength in Poland (+2.6%) and Belgium & Luxembourg (+3.8%) offset by a weaker Central Europe (-1.9%). The bright spot was Africa and Middle East, which registered a 5.3% growth to reach €1.349 billion revenue, taking the market’s total revenue above Spain and just marginally behind the rest of Europe. The company’s drive to extend its 4G coverage in Africa is paying off, with mobile data service contributing to 2/3 of its mobile growth. Orange Money also saw strong enthusiasm, with the revenue up by 29% and total number of monthly active users totalling 15.5 million.

Both the Q1 results and outlook to the rest of the year spelled mixed messages for the wider telecom market and Orange’s suppliers, but negatives look to outweigh positives. On the consumer market side, the slowdown of high-end smartphone sales and prolonged replacement cycle has once again been demonstrated in the weak numbers in France. On the network market side, Orange predicts more efficiency. This includes both the network sharing deal signed with Vodafone Spain, which is expected to deliver €800 million savings over ten years, and an overall reduction in CAPEX this year.

As the CEO said, “while the level of eCapex for this quarter is higher, it should reduce slightly for 2019 as a whole, as predicted, excluding the effect of the network sharing agreement with Vodafone in Spain announced on 25 April.” This means, to achieve the annual target of reduced CAPEX, the spending will drop much faster in the rest of year. There is no timetable to start 5G auction in France yet, but it will be safe to say that any expectations of 5G spending extravaganza will be misplaced.

On the positive side, Orange has seen its efforts to diversify its business gaining traction, especially in IoT and smart homes. But these areas, fast as the growth may be, only make a small portion of Orange’s total business.

If 52% don’t understand data-sharing economy, is opt-in redundant?

Nieman Lab has unveiled the results of research suggesting more than half of adults do not realise Google is collecting and storing personal data through usage of its platforms.

The research itself is quite shocking and outlines a serious issue as we stride deeper into the digital economy. If the general population does not understand the basic principles behind the data-sharing economy, how are they possibly going to protect themselves against the nefarious intentions from the darker corners of the virtual world?

You also have to question whether there is any point in the internet players seeking consent if the user does not understand what he/she is signing up for.

According to the research, 52% of the survey respondents do not expect Google to collect data about a person’s activities when using its platforms, such as search engines or YouTube, while 57% do not believe Google is tracking their web activity in order to create more tailored advertisements.

While most working in the TMT industry would assume the business models of the Google and the other internet are common knowledge, the data here suggests otherwise.

66% also do not realise Google will have access to personal data when using non-Google apps, while 64% are unaware third-party information will be used to enhance the accuracy of adverts served on the Google platforms. Surprisingly, only 57% of the survey respondents realise Google will merge the data collected on each of its own platforms to create profiles of users.

Although this survey has been focused on Google, it would be fair to assume the same respondents do not appreciate this is how many newly emerging companies are fuelling their spreadsheets. The data-sharing economy is the very reason many of the services we enjoy today are free, though if users are not aware of how this segment functions, you have to question whether Google and the other internet giants are doing their jobs.

The ideas of opt-in and consent are critically important nowadays. New rules in the European Union, GDPR, set about significant changes to dictate how companies collect, store and use personal information collected by the service providers. These rules were supposed to enforce transparency and encourage the user to be in control of their personal information, though this research does not offer much encouragement.

If the research suggests more than half of adults do not understand how Google collects personal information or uses it to enhance its own advertising capabilities, what is the point of the opt-in process in the first place?

Reports like this suggest the opt-in process is largely meaningless as users do not understand what they are giving the likes of Google permission to do. The blame for this lack of education is split between the internet giants, who have become experts at muddying the waters, and the users themselves.

Those who use the services for free but do not question the continued existence of ‘free’ platforms should forgo the right to be annoyed when scandals emerge. Not taking the time to understand, or at least attempt to, the intricacies of the data-sharing economy is the reason many of these scandals emerge in the first place; users have been blindly handing power to the internet giants.

The internet players need to do more to educate the world on their business models, however the user does have to take some of the responsibility. We’re not suggesting everyone becomes an internet economy expert, but gaining a basic understanding is not incredibly difficult. However, it does seem ignorance is bliss.

Facebook calls on governments to help control content on the Internet

Facebook founder and CEO Mark Zuckerberg has governments and regulators to play a more active role in developing new rules for the internet.

In an op-ed for the Washington Post, Zuck claimed that the current rules of the internet have served his generation of entrepreneurs well, but “it’s time to update these rules to define clear responsibilities for people, companies and governments going forward.” He argued that companies like Facebook should not make daily judgments on the nature of all the content going through its platform just by themselves. “I believe we need a more active role for governments and regulators,” Zuckerberg said. For what he called the new rules for the internet, Zuckerberg proposed that the parties involved in the governance of the internet should focus on four areas.

“Harmful content” came on top of his list. Zuckerberg conceded that Facebook is having too much power over speech, and believed there is a need for an independent oversight body, dubbed by some media as a “Facebook Supreme Court”, which the company is building up. “First, it will prevent the concentration of too much decision-making within our teams. Second, it will create accountability and oversight. Third, it will provide assurance that these decisions are made in the best interests of our community and not for commercial reasons,” Zuckerberg explained the rationale when the content governance and enforcement plan was published last November.

Zuckerberg also cited the example of the company’s collaboration with the French government to highlight the Facebook’s willingness to work with regulators. Starting from January Facebook has hosted a group of French senior civil servants including those from the telecom regulator l’Arcep (Autorité de régulation des communications électroniques et des Postes) or the Ministry of Justice, whereby they can identify Facebook’s good practice that the delegation can approve. Incidentally, France raised nearly 38,000 requests for Facebook pages to be taken down in 2015, by far the highest number of all countries, according to a stat by Statista from a few years back, cited by the French media outlet Le Journal du Net (JDN) (pictured).

Second on Zuckerberg’s list is “election integrity”. Recognising the significant role Facebook data, and the misuse of it, has played in recent political campaigns, the company is implementing new rules related to political ads, in the run-up to the European Parliamentary election in May. Users are able to search who is behind a certain ad, how much is paid, the number of times the ad has been viewed, as well as the demographics of those that have viewed it. The “Ads Library” will be stored by Facebook for seven years.

However, Zuckerberg also recognised both the difficulty of identifying political ads (“deciding whether an ad is political isn’t always straightforward”), and the inadequacy of the current rules on political campaigns including online political advertising. Therefore, he was calling for both common standards for verifying political actors, and for updates on the laws to keep up with the fast-changing online realities. At about the same time, Facebook published a post to explain how “Why am I seeing this post?” and “Why am I seeing this ad?” work, to further its efforts to be more transparent.

“Privacy” is the next on Zuckerberg’s list. He focused on the topic of privacy in a long post recently, so he did not spell out the measures Facebook is taking. Instead, Zuckerberg was calling on governments and regulators from all countries to develop a common global framework modelled on the GDPR regime in the EU.

Last on the list is “data portability”, i.e. users should be able to seamlessly and securely move their data from one platform to another. This is centred on the Data Transfer Project (DTP) that Facebook is contributing to, together with Google, Microsoft, and Twitter, and is not directly related to governments or regulators. The project aims to build “a common framework with open-source code that can connect any two online service providers”. When the user initiates a data transfer request, DTP will use the “services’ existing APIs and authorization mechanisms to access data. It then uses service specific adapters to transfer that data into a common format, and then back into the new service’s API.”

Zuckerberg has extended plenty of goodwill recently, and there is no reason to question his sincerity. However, in addition to the lack of implementation details in his proposal, his call for actively working with governments and regulators can be a double-edged sword. On one hand, a global oversight body could be able to define a set of common rules that all internet companies can be regulated by and assessed on. On the other hand, how to avoid being dictated by the agenda of individual governments, especially in countries where the demarcation between politicians and professional, supposedly neutral civil servants is less clear, is a hard question to answer. For example, how fundamentally different is Facebook’s collaboration with the French government from Google’s clandestine efforts to satisfy the Chinese government’s censorship requests?

Nokia-branded phones sent personal data from Norway to China

Norwegian media is reporting that private data of Nokia 7 Plus users may have been sent to a server in China for months. Finland’s data protection ombudsman will investigate and may escalate the case to the EU.

Henrik Austad, a Nokia 7 Plus user in Norway, alerted the Norwegian public media group NRK in February when he noticed every time he powered on his phone it would ping a server in China and batches of data would be sent. The data included the phone’s IMEI numbers, SIM card numbers, the cell ID of the base station the phone is connected to, and its network address (the MAC address), and they have been sent unencrypted. Investigation by NRK discovered that the recipient of the data is a domain (“http://zzhc.vnet.cn”) belonging to China Telecom.

Nokia 7 Plus pinging China server

Because HMD Global, the company behind the Nokia-branded phones that was set up by former Nokia executives and has licensed the Nokia brand, is a Finland-registered company, the news was quickly brought to the attention of Reijo Aarnio, Finland’s data protection ombudsman . “We started the investigation after receiving the news from the Norwegian Broadcasting Company (NRK) and I also consulted our IT experts. The findings showed this looks rather bad,” Aarnio said.

When talking to the Finnish state broadcaster YLE and the country’s biggest broadsheet newspaper Helsingin Sanomat (HS), the ombudsman also raised a couple of serious concerns he said he would seek clarifications from HMD Global early next week:

  • Are the users aware that their personal data are being transferred to China?
  • On what legal ground, if any, are personal data transferred outside of the EU?
  • Have corrective actions been taken to prevent similar cases from happening again?

Earlier when writing to NRK, Aarnio said his first thought was this could be a breach of GDPR, and, if true, the case would be brought in front of the European Union. (Although Norway is not a EU member state, Iceland, Liechtenstein, and Norway, the three EEA countries which are not part of the EU, agreed to accept GDPR two months after it came into effect in the EU.)

Replying to Telecoms.com’s enquiry, HMD Global, through its PR agency, sent this statement:

We can confirm that no personally identifiable information has been shared with any third party. We have analysed the case at hand and have found that our device activation client meant for another country was mistakenly included in the software package of a single batch of Nokia 7 Plus. Due to this mistake, these devices were erroneously trying to send device activation data to a third party server. However, such data was never processed and no person could have been identified based on this data. This error has already been identified and fixed in February 2019 by switching the client to the right country variant. All affected devices have received this fix and nearly all devices have already installed it.

Collecting one-time device activation data when the phone is taken first time into use is an industry practice and allows manufacturers to activate phone warranty. HMD Global takes the security and privacy of its consumers seriously.

Jarkko Saarimäki, Director Finland’s National Cyber Security Centre (Kyberturvallisuuskeskus), which offered to support the ombudsman if needed, raised another point while talking to YLE, “In cases of this kind, the company should report the case to the Office of the Data Protection Ombudsman (tietosuojavaltuutetun toimisto) and inform the customers of the data security risk.” It looks what HMD Global has done is exactly the opposite: it quietly fixed the issue with a software update.

What exactly happened remains unclear, but the investigation from NRK may shed some light. Further research into the data transfer took NRK investigators to GitHub, where they discovered a set of code that would generate data transmission similar to that on the Nokia 7 Plus in question, and to the same destination. This code resides in a subfolder called “China Telecom”. On the same level there are also subfolders for China Mobile, China Unicom as well as other folders for different purposes. Henrik Lied, the NRK journalist who first reported the case, shared with Telecoms.com this subfolder structure that he captured on GitHub:

GitHub snapshot

Closer analyses of the code in question on GitHub by Telecoms.com seem to have given us a bit more insight. This is what we assume has happened: HMD Global or its ODM partner sourced the code from a developer by the GitHub username of “bcyj” to transfer user data when a phone on China Telecom network is started. But, by mistake, HMD Global has loaded this set of code on a number of Nokia 7 Plus meant for Norway (“our device activation client meant for another country was mistakenly included in the software package of a single batch of Nokia 7 Plus”). When it realised the mistake by whatever means HMD Global released a software update to overwrite this code.

Incidentally it looks the code was originally written for a Chinese OEM LeEco (which is largely defunct now) whose product, e.g. the Le Max 2, was running on the Snapdragon 820 platform with the MSM8996 modem. The modem was later incorporated in the mid-tier platform Snapdragon 660 which powers the Nokia 7 Plus.

There are still quite a few questions HMD Global’s statement does not answer.

  • How many users have been affected? And in what countries? The award-winning Nokia 7 Plus is one of the more popular models from HMD Global, and it is highly unlikely a batch of products were specifically made for the Norwegian market with its limited size. Could the same products have been shipped to other Northern European markets too?
  • Is China Telecom the only operator in China that requires phones on its network to be equipped with a software that regularly sends personal data? We do not find similar programmes under the China Mobile or China Unicom subfolders on the same GitHub location.
  • Is HMD Global the only culprit? Or other OEMs’ products on China Telecom network and on the same Qualcomm modem are also running the same script every time the phone is powered on, but they have not made the same mistake by mixing up regional variants as HMD Global did?
  • On what ground could HMD Global claim that the recipients of the data or any other parties who have access to the data (as they are sent unencrypted), will not be able to identify the individuals (“no person could have been identified based on this data”)? To defend itself, in its statement to NRK, HMD Global referred to the Patrick Breyer vs Bundesrepublik Deutschland case when the Court of Justice of the European Union (CJEU) ruled that whether a certain type of data would qualify as “personal data” should generally need to be assessed based on a “subjective / relative approach”. In the present case HMD Global seems to be arguing that the recipients of the data sent from the phones are not able to establish the identities of the users. It may have its point as China Telecom (or other identities in China that receive the data) does not have the identity information of the users. However, this is a weak defence. The CJEU sided with the German Federal Court of Justice because the point of dispute was dynamic IP only, and the court deemed “that dynamic IP addresses collected by an online media service provider only constitute personal data if the possibility to combine the address with data necessary to identify the user of a website held by a third party (i.e. user’s internet service provider) constitutes a mean “likely reasonably to be used to identify” the individual”, as was summarised by the legal experts Fabian Niemann and Lennart Schüßler. In the HMD Global case, however, a full set of private data were transmitted, not to mention transmitted unencrypted.
  • On what evidence did HMD Global claim that the data transmitted has not been processed or shared with third parties?

To be fair to HMD Global, this is not the first, and by no means the biggest data leaking incident by communication products. For example the IT and communication system at the African Union headquarters, supplied and installed by Huawei, was sending data every night from Addis Ababa to Shanghai for over four years before it was uncovered by accident. Huawei’s founder later claimed that the data leaking “had nothing to do with Huawei”, though it was not clear whether he was denying that Huawei was aware of it or claiming Huawei was not playing an active role in it.

EE takes step towards content aggregator model

Content is a tricky topic to discuss around EE and BT, such is the scale of the disaster over the last few years, but a tie up with Amazon Prime and MTV Play is a step in the right direction.

The new content offer will see EE customers receive six-month memberships to both Amazon’s Prime Video service and MTV Play. The news starts to make a more comprehensive content platform for the MNO, with customers already able to access Apple Music and BT Sport, all of which is covered under the EE Video Data Pass, a zero-rating initiative available to all customers.

“It’s our ambition to offer our customers unrivalled choice, with the best content, smartest devices, and the latest technology through working with the world’s best content providers,” said Marc Allera, CEO of BT’s Consumer division.

“In offering all EE pay monthly mobile customers Prime Video and MTV Play access, in addition to BT Sport and Apple Music – we’re providing them with a wealth of great entertainment they can experience in more places thanks to our superfast 4G network, and soon to be launched 5G service. So, if they want music on a Monday, telly on a Tuesday, films on a Friday or sport on a Saturday, we’ve got something for them.”

While the content play over the last couple of years have been pretty dismal this is an approach to content and diversification which we like. It allows the telco to leverage the scale of their customer bases, while also adding value to the existing relationship with said customers.

Content fragmentation is an irk for many customers, not only because of the various apps which need to be installed, but also the number of different bills. EE doesn’t seem to be addressing the first issue but consolidating bills to a single provider might well be of interest to some customers. It also has the advantage of making EE a ‘stickier’ provider, perhaps having a positive impact on churn.

“Content is a key differentiator for telcos,” said Paolo Pescatore of PP Foresight. “However, consumers are now spoilt for choice resulting in too much fragmentation. Telcos are very well placed to aggregate content, integrate billing and provide universal search. Whoever achieves this first will have a significant advantage over their rivals.”

Sky is one of the companies which has had a good crack at addressing the fragmentation challenge, Sky and Netflix content is available on the same platform and through the same universal search function, though EE’s push on the mobile side would certainly attract attention. Consumers no-longer consider entertainment as simply for the living room, new trends show more preference for on-the-go content.

While this is a step in the right direction for EE, this is only one step. The content options need to offer more depth to meet the demands of the user, while streamlining all the content into a single app would be a strong step forward. It would certainly be difficult to convince partners to hand over customer experience to a third-party, Netflix has shown much resistance to this idea making the Sky tie-up all the more impressive, though whoever nails this aspect of the aggregator model would certainly leap to the front.

Nick Clegg defends Facebook’s business model from EU’s privacy regulation

Facebook’s head of PR reportedly had a series of meetings with EU and UK officials aiming to safeguard the social network’s business model heavily relying on targeted advertising.

Sir Nick Clegg, the former UK Deputy Prime Minister, now Facebook’s VP for Global Affairs and Communications, met three EU commissioners during the World Economic Forum in Davos and shortly after the event in Brussels, according to a report by the Telegraph. These commissioners’ portfolios include Digital Single Market (Andrus Ansip), Justice, Consumers and Gender Equality (Věra Jourová), and Research, Science and Innovation (Carlos Moedas). Clegg’s mission, according to the Telegraph report, was to present Facebook’s case to defend its ads-based business model in the face of new EU legislation related to consumer privacy.

According to a meeting minutes from the Ansip meeting, seen by the Telegraph, “Nick Clegg stated as main Facebook’s concern the fact that the said rules are considered to call into question the Facebook business model, which should not be ‘outlawed’ (e.g. Facebook would like to measure the effectiveness of its ads, which requires data processing). He stated that the General Data Protection Regulation is more flexible (by providing more grounds for processing).”

In response, Ansip defended the proposed ePrivacy Regulation as a complement to GDPR and it is primarily about protecting the confidentiality of consumers’ communications. In addition, the ePrivacy Regulation will be more up to date and will provide more clarity and certainty, compared with the current ePrivacy Directive, which originated in 2002 and last updated in 2009. Member states could interprete and implement the current Directive more restrictively, Ansip warned.

Facebook’s current security setup makes it possible to access users’ communication and able to target them with advertisements based on the communications. Under the proposed Regulation, platforms like Facebook need to get explicit consent from account holders to access the content of their communications, for either advertisement serving, or effectiveness measuring.

There are two issues with Facebook’s case. The first one is, as Ansip put it, companies like Facebook would still be able to monetise data after obtaining the consent of users. They just need to do it in a way more respectful of users’ privacy, which 92% of EU consumers think important, according to the findings of Eurobarometer, a bi-annual EU wide survey.

Another is Facebook’s own strategy announced by Zuckerberg recently. The new plan will make it impossible for Facebook to read users’ private communications with its end-to-end WhatsApp-like encryption. This means, even if consumers are asked and do grant consent, Facebook in the future will not be able to access the content for targeted advertising. Zuckerberg repeatedly talked about trade-offs in his message. This would be one of them.

On the other hand, last November the EU member states’ telecom ministers agreed to delay the vote on ePrivacy Regulations, which means it will be highly unlikely that the bill will be passed and come into effect before the next European Parliament election in May.

The office of Jeremy Wright, the UK’s Secretary of State for Digital, Culture, Media and Sport, did not release much detail related to the meeting with Clegg, other than claiming “We are at a crucial stage in the formulation of our internet safety strategy and as a result we are engaging with many stakeholders to discuss issues pertinent to the policy. This includes discussions with social media companies such as Facebook. It is in these crucial times that ministers, officials and external parties need space in which to develop their thinking and explore different options in a free and frank manner.”

The Telegraph believed Clegg’s objective was to minimise Facebook’s exposure to risks from the impending government proposals that could “place social media firms under a statutory duty of care, which could see them fined or prosecuted” if they fail to protect users, especially children, from online harms.

It is also highly conceivable that the meeting with the UK officials was related to influence post-Brexit regulatory setup in the country, when it will not longer be governed by EU laws. Facebook may want to have its voice heard before the UK starts to make its own privacy and online regulations.

Data survey suggests UK consumers should be more price savvy

Cable.co.uk has released data which suggests the UK is 136th in the world for affordability when it comes to mobile data plans.

Data is increasingly running our lives and while many might feel they have struck the right balance between quantity and affordability this survey suggests otherwise. After comparing 6,313 mobile data plans in 230 countries, the UK ranks at 136 worldwide, and in the bottom half of the table for Europe.

“When looking at the UK compared to our European and EU counterparts, it’s disappointing to see the UK among the most expensive countries for mobile data,” said Dan Howdle of Cable.co.uk.

“Despite a healthy UK marketplace, our study has uncovered that EU nations such as Finland, Poland, Denmark, Italy, Austria and France pay a fraction of what we pay in the UK for similar data usage. It will be interesting to see how our position is affected post-Brexit.”

On average, UK consumers are currently paying £4.97 per GB a month ($6.42), with the lowest being £0.7 and the most expensive as high as £32 per GB a month. What is worth taking into account is the survey only measured SIM-only plans, excluding the complicated task of factoring in the price of a subsidized device. But how does this compare to other countries?

India was the cheapest worldwide, with a GB costing only $0.26 per month, though all of the telcos are struggling to remain profitable. Asian countries take up 50% of the top 20 in fact. Finland was the cheapest in Europe, $1.16 per GB a month, while across the pond, US consumers are paying $12.37 per GB a month and the Canadians came out at $12.02. The global average was $8.53.

As there haven’t been riots on the streets, it does seem most consumers are relatively content with the price they are paying. Admittedly in some cases it is extortionately expensive, something which should be addressed, but many of the markets are pricing plans in-line with the relative wealth of the nation.

That said, there is a wide chasm between the most and least expensive plans more often than not. This suggests consumers are not being savvy enough when purchasing mobile contracts in the first place, are not aware of other deals which are available or do not believe there is value in changing provider. It may be easy to blame the telcos for the high-price of data, but this can be a lazy route to take.

Cable.co.uk and other consumer groups might use this data to punish telcos, we suspect the increased price in the UK is more to do with consumers not being savvy enough. After years as a Vodafone customer, your correspondent switched to Giffgaff and a data plan which was much more generous. Admittedly a subsidized phone is not included in the deal, but in paying £1.33 per GB ($1.75), the monthly bill is substantially lower than what Vodafone was offering, or what Cable.co.uk have identified as the monthly average in the UK.

We believe the consumer is not blameless. For example, a now-available Vodafone 24-month contract with a Huawei Mate 20 Pro would cost £38 per month. Adding in the upfront cost of £179, the total would be £3.03 per GB a month. This is still below the average quoted by Cable.co.uk and would still be lower if the cost of the handset was factored into the equation.

Cable.co.uk has only taken into account tariffs which are currently available to consumers, therefore removing data points from legacy and on-going tariffs which might have thrown the averages, but the availability of cheaper contracts suggests some of the blame has to be taken by the consumer.

The price of tariffs are generally relative to the market which they are in. In the UK, we are relatively lucky due to competition keeping the price of data down (in comparison to the geographically vast markets such as the US) but squeeze too tight and the telcos don’t have enough to invest in networks in a commercially viable fashion, or they prioritise markets which are more profitable. Both would impact experience and the latter would create a digital divide.

While your correspondent cannot comment on other markets, being based in the UK, the outcome of this survey seems to be relatively clear. If you’re not happy with the price of your tariff, move, as there are cheaper options on the market.

California data dividend sounds nice but shows digital economy ignorance

The State of California might be making friends in Silicon Valley with its defence of net neutrality rules, but in proposing a ‘data dividend’ on the digital economy, these kinships might turn sour very quickly.

In his ‘State of the State’ speech this week, California Governor Gavin Newsom proposed a new ‘data dividend’ which would see internet players who monetise user’s personal information have to pay those users for the privilege, according to CNBC. This might sound like a lovely idea to share the wealth, but you can guarantee Silicon Valley is going to throw a temper tantrum about this.

“California’s consumers should also be able to share in the wealth that is created from their data,” said Newsom.

Aside from the revolt from the likes of Google and Facebook which is bound to be on the horizon, Newsom has joined the long list of politicians who are demonstrating they don’t understand how the digital economy functions. Social media platforms or video hosting websites are offered for free to the consumer because data is taken as payment. The value exchange is a free service for the permission to monetise personal data.

While this might sound like an excellent way for Newsom to score political points with the voters of California, you have to wonder how the internet players are going to react. There will of course be intense lobbying, but should the proposal make it into the rulebook, will services continue to be offered for free? Perhaps the internet players will replace lost revenues created by the digital dividend with a paywall?

Some politicians appear to be very anti-profit when it comes to the internet players, seemingly believing platforms like Facebook and Twitter are a public service not private corporations with shareholders to keep happy. These are companies which should of course be held accountable when it comes to data privacy and protection standards, but the value exchange in the digital economy has been accepted as a business model which benefits both sides of the equation.

This is not the first time such an idea has been aired, though rarely has it floated out of such senior political offices. The profits which flow into Silicon Valley are being attacked from numerous sides currently, but you also have to ask what others impacts there will be on the development of the digital economy.

One of the reasons the technology industry has been advancing so quickly in recent years is the aggressive investments which have been made in R&D by Silicon Valley. The likes of Amazon and Google are certainly not shy about searching for the next big idea, fully embracing the concept of fail-fast, but the confidence in these investments exists partly because of the commercial successes of the core business models. Sustained erosion of these revenue channels might well result in smaller R&D operations.

Not only will this slow down improvements to customer experience, it could also place speed bumps in-front of momentum. The US technology industry is advancing very quickly, with some truly wonderful and ludicrous ideas being explored (See Google’s Loon), but this progress could stutter when you attack the ways these companies make money.

The battle between Silicon Valley and rule makers is raging for several reasons. The internet companies have been caught with their pants down in the data protection and privacy realms, though their resistance to collaboration is antagonising politicians. Silicon Valley is desperately trying to side-road and resist any new rules to govern the digital economy, as any major corporation would, but these rules are of course critical for positive societal development. The more Silicon Valley resists, the more aggressive proposals will be put forward.

We strongly agree with the calls to increase regulation on the digital economy, but you have to pick your battles. What would be the benefit to the user with these rules? A couple of dollars a year, nothing which will turn heads, but what will be the consequences?

Hold the internet players to more stringent data protection rules. Enforce more consent regulations. Ensure these companies pay fair and reasonable tax. But destroying a generally accepted way to make money will probably not end well. We suspect this might be a net loss in the long-run.

Give control back to your users, scholars tell Facebook

In a new position paper, scholars from Oxford and Stanford recommended nine measures Facebook should take to make itself a better forum for free speech and democracy.

The report, titled “GLASNOST! Nine ways Facebook can make itself a better forum for free speech and democracy”, was jointly published by the Reuters Institute for the Study of Journalism and the Oxford University. The scholars, headlined by the historian Timothy Garton Ash, recommended Facebook take concrete steps related to three key aspects of the social network’s operation: content policy and moderation practices, news feed, and governance.

The starting premise of the report is that, with over 2.2 billion active users and being in the centre of past and present controversies and conversations, Facebook has gone beyond the stage where it could choose “between self-regulation and no regulation”. Decisions made inside Facebook could have strong political, social, and cultural impact on the world outside of it. “A single small change to the News Feed algorithm, or to content policy, can have an impact that is both faster and wider than that of any single piece of national (or even EU-wide) legislation,” the report says.

Instead, the authors argued, Facebook needs to make itself more transparent with both its policies and the interpretation and implementation mechanisms of these policies to the outside world including both its users, its customers, and other institutions, and engage more with regulators and the civil society, academia, and NGOs.

The authors recognised that Facebook has made efforts in all the three aspects over the past few years, especially after the Cambridge Analytica case was uncovered. They argued however that more should be done. Specifically the authors suggested the following:

Regarding “content policy and the moderation of political speech”, Facebook should

  • Tighten community standards wording on hate speech
  • Hire more and contextually expert content reviewers
  • Increase ‘decisional transparency’
  • Expand and improve the appeals process

Targeting at “News Feed”, the authors suggested that in order to move “towards more diverse, trustworthy political information”, Facebook should

  • Provide meaningful News Feed controls for users
  • Expand context and fact-checking facilities

When it comes to the company’s “governance”, the report recognises that Facebook has adopted “cautious glasnost” recently but in order to grow “from Transparency to Accountability” the company should

  • Establish regular auditing mechanisms
  • Create an external content policy advisory group
  • Establish an external appeals body

Admittedly, Facebook is far from being the only culprit. The authors also agreed that “many of the problems identified here are also found on other platforms, such as YouTube and Twitter.” Additionally, Facebook does have policies related to content and its moderation, though their interpretation or implementation could be called into question. Platforms like Twitter on the other hand, barely have a policy or standard practice in place.

Despite the authors’ claim that the “goal of this report is to focus on areas that Facebook itself can feasibly improve now”, it would require radical changes on Facebook’s side to put any of these recommendations into practice, both how the company is run, and how it is judged. The authors argued that “ideally, the user interface and experience on Facebook should be designed to promote active, informed citizenship, and not merely clickbait addiction for the commercial benefit of Facebook, the corporation.” However, commercial benefit is the most important index how a business is evaluated. In addition to stressing the company’s responsibilities beyond business returns, the authors could also remind it of the commercial damage from not acting in a responsible way. For example, advertisers would run away from the platform if a Cambridge Analytica type of scandal were to happen again.

The changes needed, as the authors also agreed, are easier said than done. Some suggestions are reasonable. For example, the report suggested Facebook, and other social platforms, consider industry wide self-regulating mechanisms following the model of the Financial Industry Regulatory Authority (FINRA), which oversees brokerage firms and the securities industry in the US. But it also agrees that it is hard to define the “industry” for the social networks. Other suggestions are much harder for Facebook and others to take. For example the report requests Facebook to open its data and, more importantly, its algorithms, which are the most guarded secrets in all internet companies.

The choice of the report’s title is also interesting. “Glasnost” is Russian for “openness, transparency”. Together with “perestroika”, Russian for “reform”, the concepts were popularised by the last Soviet leader Mikhail Gorbachev. The report suggested that, to achieve real change instead of merely glorified PR, “beyond glasnost, we need perestroika” from Facebook, a line almost surely from Professor Garton Ash, a leading scholar in Central and Eastern European history. If the young executives at Menlo Park are unaware of the historical connotation of these concepts, they may want to know that by embracing Glasnost and Perestroika, Gorbachev brought the Soviet empire to its demise.