Netflix doubles profit but Wall Street not very happy

Netflix has increased its annual revenues by 35% and doubled profits over the course of 2018, but that didn’t prevent a 3.8% share price drop in overnight trading.

Total revenue across the 12-month period stood at $15.7 billion, though growth does seem to be slowing. Year-on-year revenue increases for the final three months were 27.4%, with 21.4% for the first quarter of 2019, though this compares to 40.4%, 40.3% and 34% in Q1, Q2 and Q3 respectively. However, when you consider the size, scale and breadth of Netflix nowadays this should hardly be considered surprising.

“For 20 years, we’ve been trying to please our members and it’s really the same focus year-after-year,” said CEO Reed Hastings during the earnings call.

“We’ve got all these ways to try to figure out, which shows work best, which product features work best, we’re a learning organization and it’s the same virtuous cycle, improve the service for our members. We grow. That gives us more money to invest. So, it’s the same things we’ve always been doing at just greater scale.”

This is perhaps the reason Netflix has succeeded in such a glorious manner where others have succumbed to mediocrity or failure. Investments have been massive to build out the breadth of content, while the team has not been afraid to alter its business or invest in content which others might snub. Bird Box is a classic example of a movie some might dismiss, whereas we find it difficult many competitors would have given the greenlight to the original Stranger Things pitch.

On the content side of things, investments over the last twelve months totalled $7.5 billion and Hastings promises this will increase in 2019. Perhaps we will not see the same growth trajectory, as despite the ambitions of the team, another objective for Netflix pays homage to the investors on Wall Street. Operating margin increased to 10% during 2018, up from 4% a couple of years back, though the team plan on upping this to 13% across 2019.

Content is where Netflix has crowned itself king over the last few years, aggressively pursuing a varied and deep port-folio, though it will be pushing the envelope further with interactive story-telling.

“I would just say there’s been a few false starts on interactive storytelling in the last couple of decades,” said Chief Content Officer, Ted Sarandos. “And I would tell you that this one has got storyteller salivating about the possibilities.

“So we’ve been talking to a lot of folks about it and we’re trying to figure it out too meaning is it novel, does it fit so perfectly in the Black Mirror world that it doesn’t – it isn’t a great indicator for how to do it, but we’ve got a hunch that it works across all kinds of storytelling and some of the greatest storytellers in the world are excited to dig into it.”

The team are attempting to figure out what works and what doesn’t for the interactive-story segment, but this is one of the reasons why people are attracted to Netflix. The team are exploring what is capable, brushing the dust away from the niche corners and experimenting with experience. They aren’t afraid of doing something new, and the audience is reacting well the this.

Looking at the numbers, Netflix added 8.8 million paid subscribers over the final three months of 2018, 1.5 million in the US and 7.3 million internationally, taking the total number of net additions to 29 million across the year. This compares to 22 million across 2017, while the team exceeded all forecasts.

However, this is where the problem lies for Netflix; can it continue to succeed when it is not diversifying its revenues?

According to independent telco, tech and media Analyst Paolo Pescatore, the Netflix team need to consider new avenues if they are to continue the exciting growth which we have seen over the last couple of years. New ideas are needed, partnerships with telcos is one but we’ll come back to that in a minute, some of which might be branching out into new segments.

This is perhaps most apparent in the US market, as while there is still potentially room for growth, this is a space which is currently saturated with more offerings lurking on the horizon. Over the next couple of months, Disney and AT&T are going to launching new streaming services, while T-Mobile US have been promising its own version for what seems like years. If Netflix is to continue to grow revenues, it needs to appeal to additional users, while also adding bolt on services to the core platform.

What could these bolt-on services look like remains to be seen, though Pescatore thinks a sensible route for the firm to take would be into gaming and eSports. These are two blossoming segments, as you can see from the Entertainment Retailers Association statistics here, which lend themselves well to the Netflix platform and business model. Another area could be music streaming, though as this market is dominating by Spotify and iTunes, as well one with low margins, it might not be considered an attractive diversification.

The other area which might is proving to be a success for the business are partnerships with telcos.

“It’s sort of been this March from integration on devices and just makes that a point to engage with the service to doing things like billing, on behalf of or we do billing integration,” said Greg Peters, Chief Product Officer.

“And now the latest sort of iteration that we’re working with is, is bundling model, right. And so, we’re early on in that process, but I would say we’re quite excited by the results that we’re seeing.”

This is a relatively small acquisition channel in comparison to others, but it is opening up the brand to new markets in the international space, a key long-term objective, and allowing the team to engage previously unreachable customers. This is an area which we should expect to grow and flourish.

The partnerships side of the business is one which might also add to the revenue streams and depth of content. Pescatore feels this is another area where Netflix can generate more revenue, as the team could potentially offer additional third-party content, hosting on its platform for users to rent or purchase. Referral fees could be an interesting way to raise some cash and Netflix certainly has the relationships with the right people.

Netflix has long been the darling of Wall Street, but it might not be for much longer. The streaming video segment is becoming increasingly congested, while the astronomical growth Netflix has experienced might come to a glass ceiling over the next couple of years. The businesses revenues are reliant on how quickly the customer base grows; such a narrow focus is not healthy. Everyone else is driving towards diversification, and Netflix will need to make sure it considers it sooner rather than later.

Giesecke+Devrient lands Swatch contactless payment gig

Mobile security company Giesecke+Devrient is helping Swiss watch company Swatch with its own contactless payment technology.

Rather annoyingly called SwatchPAY!, the contactless platform was launched in China back in 2017 and is now available in Switzerland. It involves sticking an NFC chip in a watch, which you can then sync with your credit card. In that respect it’s pretty much a contactless card embedded in a watch.

Whether it functions just as easily is unclear, but Swatch seems to have partnered with all the right companies, including Mastercard, Credis Suisse, UBS and G+D. The latter is doing what it does best in providing the secure element for these watches, which also enables the activation of the contactless payment function in-store, when you buy one. Here’s how it works.

Swatchpay chart

“Continuous innovation is a key strand of the Swatch DNA,” said Carlo Giordanetti, Swatch Creative Director. “This latest advance, with the introduction of the fastest and simplest tokenization, makes it easier than ever to pay ‘forever’ – token up your Swatch, swipe it and you’re done. SwatchPAY! is simple, stylish and swatchy.”

“We are thrilled to be Swatch’s partner for this payment-enabled watch, which has been a huge success in China,” said Carsten Ahrens, CEO of Giesecke+Devrient Mobile Security. “The unique mix of iconic Swatch design and a payment functionality makes this a very appealing product, and we are proud to have contributed our extensive expertise in security, mobile payment and wearables technology.”

The Swiss watch industry has been in a flap about smart watches for a while, so it’s sensible to see one of them develop its own contactless payment platform. They’re fortunate that the killer use-case for smart watches hasn’t been found yet, but it presumably will be eventually. The key to this alternative being a success will be its ease of setup and use and it looks like they might have got that right.

Vodafone bags Big Blue as $550 million partner

Vodafone Business and IBM have signed-off on a new joint venture which will aim to develop systems to help data and applications flow freely around an organization.

The joint-venture, which will be operational in the first half of 2019, will aim to bring together the expertise of both the parties to solve one of the industry’s biggest challenges; multi-cloud interoperability and the removal of organizational siloes. On one side of the coin you have IBM’s cloud know-how while Vodafone will bring the IoT, 5G and edge computing smarts. A match made in digital transformational heaven.

“IBM has built industry-leading hybrid cloud, AI and security capabilities underpinned by deep industry expertise,” said IBM CEO Ginni Rometty. “Together, IBM and Vodafone will use the power of the hybrid cloud to securely integrate critical business applications, driving business innovation – from agriculture to next-generation retail.”

“Vodafone has successfully established its cloud business to help our customers succeed in a digital world,” said Vodafone CEO Nick Read. “This strategic venture with IBM allows us to focus on our strengths in fixed and mobile technologies, whilst leveraging IBM’s expertise in multi-cloud, AI and services. Through this new venture we’ll accelerate our growth and deepen engagement with our customers while driving radical simplification and efficiency in our business.”

The issue which many organizations are facing today, according to Vodafone, is the complexity of the digital business model. On average, 70% of organizations are operating in as many as 15 different cloud environments, leaning on the individuals USPs of each, but marrying these environments is a complex, but not new, issue.

Back in September, we had the chance to speak to Sachin Sony of Equinix about the emerging Data Transfer Project, an initiative to create interoperability and commonalities between the different cloud environments. The project is currently working to build a common framework with open-source code that can connect any two online service providers, enabling a seamless, direct, user-initiated portability of data between the two platforms This seems to be the same idea which the new IBM/Vodafone partnership is looking to tackle.

With this new joint-venture it’ll be interesting to figure out whether the team can build a proposition which will be any good. Vodafone has promised the new business will operate with a ‘start-up’ mentality, whatever that means when you take away the PR stench, under one roof. Hopefully the walk will be far enough away from each of the parent companies’ offices to ensure the neutral ground can foster genuine innovation.

This is a partnership which has potential. The pair have identified a genuine issue in the industry and are not attempting to solve it alone. Many people will bemoan the number of partnerships in the segment which seem to be nothing more than a feeble attempt to score PR points, but this is an example where expertise is being married to split the spoils.

US bolsters AI ambitions with Open Government Data Act

President Trump has signed the Open Government Data Act into law, potentially unleashing a tsunami of data for AI applications to be trained with.

The bill itself has been bouncing around Washington for some time now, though it has officially been signed into law. Within one year, all government agencies will have to ensure data sets are open and accessible to the general public and businesses, as well as being presented in a format that can be easily processed by a computer without human intervention. The act also hopes to make the data more accessible through smartphones.

“The government-wide law will transform the way the government collects, publishes, and uses non-sensitive public information,” said Sarah Joy Hays, Acting Executive Director of the Data Coalition, a public interest group which promotes transparency in government and business.

“Title II, the Open Government Data Act, which our organization has been working on for over three and a half years, sets a presumption that all government information should be open data by default: machine-readable and freely-reusable.”

For the digital ecosystem, such a bill should be welcomed with open arms. For any AI application to work effectively it needs to be trained. For years, many have claimed data is the new oil, although we suspect they did not mean in this manner. If the US is to create a leadership position in the developing AI ecosystem, its applications will need to be the best around and therefore will have to have the appropriate data sets to improve performance and accuracy.

Open data is of course not a new idea however. Back in September during Broadband World Forum in Berlin, we sat through several entertaining presentations from individual cities laying out their smart city ambitions. There was one common theme throughout the session; open data. These local governments realise the potential of empowering local digital ecosystems through open data, and the initiatives are proving to be successful.

This new law will force all federal agencies to make all non-sensitive data public in a machine-readable format and catalogue it online. New individuals must be appointed as Chief Data Officers to oversee the process, and new procedures will be introduced. While it seems incredibly obvious, when proposing new laws or regulations agencies will now have to justify the changes with supporting data. As it stands, only a handful of agencies are required to do this, the FCC is one of them, though this law ensures the validation and justification of new rules through data is rolled out across the board.

As with everything to do with data, there are of course privacy concerns. The text of the bill does seem to take this into account, one clause states any data released to the public will have to adhere to the Privacy Act of 1974, though there is bound to be a few blunders. Such a tangent should compound the importance of hiring a Chief Data Officer and a team of individuals who are appropriately trained. We suspect there will be few current employees in the agencies who could ensure compliance here.

Of course, this is not a law which will make an immediate impact. With any fundamental changes, such as this, procedures and systems will have to be updated. The procurement process is most likely, or at least we hope, underway and there will certainly be growing pains.

That said, if the US wants to make a meaningful dent on the AI world, the right tools and data need to be put in the hands of the right people. This is a step in the right direction.

UK mobile commerce is exploding – research

New research from price comparison site uSwitch.com reveals that the use of mobile devices to go shopping in the UK is growing rapidly.

They got market research firm Opinium to chat to 2,000 adult Brits about their mobile commerce habits and intentions. The survey concluded that we will blow £25 billion buying stuff with our phones and tablets this year, up from £15 billion last year. Furthermore they reckon 30 million of us will use our phone to shop this year, which will represent a 66% annual increase.

“With smartphone and tablet shopping now a £25 billion industry, it’s hardly surprising that  major retailers have long adopted a mobile-first approach to their websites and have even introduced their own apps to make the user experience as easy as possible,” said Ru Bhikha. “Cleaner user journeys and the ease of one-click purchasing will only add to the number of people shopping on their phones and tablets.”

The main appeal, unsurprisingly, is simple convenience, with the ability to shop at any time coming in a close second. Other prominent reasons given for shopping over your phone seem to apply to all e-commerce, including the ability to compare prices, greater choice and better prices.

The survey also asked questions about e-commerce habits in general. As you can see in the table below Amazon and eBay have a clear lead over the online manifestations of bricks-and-mortar retailers, although the latter seem to be doing a decent job of trying to keep up. Somewhat surprisingly clothes are by far the most bought type of product online, followed by books, groceries and cinema/theatre tickets. The living room is by far the most popular location for blowing all this cash.

Website % of shoppers to have used website last year
Amazon 89%
eBay 63%
Argos 41%
Tesco 35%
Marks and Spencer 25%
Asda 25%
Sainsbury’s 22%
John Lewis 20%
Currys PC World 17%

Source: uSwitch.com

Early mobile phone ownership could lead to academic deficiency – study

Recent research indicates those children who own mobile phones at an earlier age will go on to perform less well academically versus their peers who do not.

The Economic and Social Research Institute of Ireland research paper, titled “Later is better: Mobile phone ownership and child academic development, evidence from a longitudinal study” was published in the journal “Economics of Innovation and New Technology” on 20 December 2018. From the outset the project had two purposes: to examine “whether there is an association between early mobile phone ownership and academic outcomes and whether delaying mobile phone ownership benefits the development of children’s academic skills.”

It used the data of 8,500 nine-year-old students in Ireland, then followed their development till they reach 13-year-old. By this time, the researchers compared the academic performance of those who already owned mobile phones when the project started with that of those who owned mobile phones later. The results showed those had mobile phones earlier fell behind their peers in both maths and reading by about a 4 percentile scale.

Therefore, to answer the first question, the researcher believed there is a negative correlation between the students’ starting age of mobile phone ownership and their academic performance when they reach adolescence. The researchers did not give a definite yes or no answer to the second question, though the title of the published report suggests they are leaning towards the Yes side, i.e. delaying mobile phone ownership would benefit the children’s academic skill development.

However, if this indeed is what the researchers believed, here is a leap of faith. To start with, the researchers claimed that “the findings suggest that there may be significant educational costs arising from early mobile phone use by children.”  The existence of a correlation does not mean there is a causal relationship. The researchers admitted that other socio-economic factors are involved in the children’s development. These factors may have been “taken account of” in the analysis, they are very hard to be controlled and a causal relationship is very hard to establish.

The researchers then went on to suggest that “parents and policymakers should consider whether the benefits of phone availability for children are sufficiently large to justify such costs.” Here is another problem. Even if there were a causal relationship between an early mobile phone ownership and impaired academic advancement, it could not lead to the logical conclusion that delayed mobile phone ownership would improve the children’s academic performance.

Thanks to its near ubiquity and the reduced age of ownership, mobile phones have become an easy target for educators as well as politicians. The researchers commended the former Irish Minister for Education and Skills, Richard Bruton, when he “asked schools to consult with parents and students to make decisions on the place of smart phones and personal devices in school.” The French President Emmanuel Macron went much further and much faster: during the election campaign he pledged an outright ban on mobile phone use in all primary and secondary schools and was supported by the legislature after he assumed the presidency. He did not hesitate to blow his own trumpet:

On the other hand, most parents and schools in Estonia and Finland do not seem to have any problems with children already having mobile phones when they start primary school at the age of seven. Various reports have indicated that not only do the majority of first graders come to school with mobile phones, many of them are actually using low-end smartphones. Incidentally these two countries have consistently outperformed any other European countries in the OECD Programme for International Student Assessment (PISA) of 15-year-old students’ knowledge and skills in science, maths, and reading. So far, no researcher has attributed their strong academic performance to early mobile phone ownership.

Deloitte predicts 50k 5G smartphone in the UK by 2019-end

While the vast majority will have to wait some time before experiencing the euphoria of an extra ‘G’ Deloitte is predicting there will 50,000 early adopters in the UK.

After several years of slugging, the glorious 5G world is upon us. First in the US and South Korea, though pockets are starting to emerge everywhere else as well. San Marino is live while it won’t be long before countries like China and Japan start hitting the green button.

“The introduction of 5G handsets expected this year will look a lot like 2010, when 4G phones first entered the market,” said Dan Adams, Head of Telecommunications at Deloitte.

“There will be a lot of noise in the first year from vendors vying to be first to market, and relatively little action from consumers. We’re not talking about an overnight switch to faster connectivity with lower latency, we will see 5G used by consumers in hotspot locations in the next two to three years, with mass adoption by 2025.”

The first devices are likely to be with us in Q2, though this year’s Mobile World Congress will almost certainly be a shouting contest between the main smartphone manufacturers. It’s already rumoured Samsung will be launching a foldable-phone (albeit not 5G) prior to the event, while LG and Motorola are also in the running to produce a 5G compatible phone.

In total, Deloitte predicts roughly 20 handset brands will launch 5G-ready handsets across 2019, with shipments totalling one million. This is still a tiny fraction of the 1.5 billion smartphones which will be sold through the year, though 50,000 of them could be heading to the UK.

Looking at the networks, there might not be much to choose from across the UK. EE has confirmed it will launch 5G across 16 cities in 2019, though these will only be in the busiest locations. Vodafone will also launch this year, though it is being coy as to when. Three is telling the same story, while O2 has confirmed its customers will have to wait until 2020. One thing is clear, these will be incredibly limited deployments and it will be years until coverage reaches what the demanding user would consider adequate.

Whether this justifies the hype, or the extortionate amount handset manufacturers will inevitably charge the glory-seekers for the new devices, we’ll leave you to decide, but it will take years for the devices to be considered mainstream. Deloitte expects worldwide 5G smartphone sales to represent 1% of the total smartphone sales by the end of 2020, with 2-3 million Brits getting their hands on the devices. As Adams points out above, 2025 is when the team expect 5G devices to hit mass adoption.

Another interesting growth area the Deloitte team is keeping an eye on is the smart speakers segment.

“Smart speaker adoption has seen phenomenal growth in recent years,” said Paul Lee, Global Head of Research for TMT at Deloitte

“With improvements continuing to be made, demand for smart speakers could be in the many billions of units, possibly even higher than for smartphones. In the future, smart speakers have the potential to be installed in every room in a house, hotel, office, school and even beside every hospital bed.”

Smart speakers are the flashy product which will attract a lot of the consumer market, but the power of the virtual assistants is what could take the segment to the next level. We’ve long anticipated the breakthrough of artificial intelligence in the workplace, but perhaps the slightly sluggish resistance has been down to the delivery model of the applications.

Should smart speakers be adopted in hotel rooms, hospitals and offices in the way which Deloitte anticipates, the world is opened up for industry specific applications of virtual assistants. One area which might help this adoption is the price point.

While smart speakers were initially an expensive appliance for the home, the normalisation of the product in the eyes of the consumer has peaked the interest of traditional consumer electronics manufacturers. With more manufacturers, including those with the ability to produce goods at greater scale, entering the fray competition will increase, bringing prices down, while advertising will also grow, fuelling interest in the bellies of the consumer.

Deloitte anticipates the marker for internet-connected speakers with integrated digital assistants will be increase to £5.6 billion in 2019, selling 164 million units at an average selling price of £34. This would represent a 63% growth rate, making smart speakers the fastest-growing connected device category worldwide, leading to an installation base of more than 250 million units by the end of the year.

This is a price point which would make enterprise adoption of the devices more interesting, and as time moves on, it will get cheaper. The increased introduction of industry-specific virtual assistant and AI applications will certainly help this segment also.

After years of promises and false-dawns, 2019 might prove to be a blockbuster year after all. There’s still a lot which could go wrong, but here’s to hoping.

As Nielsen reports shift away from cable TV Netflix announces biggest price hike

A recent Nielsen report on the evolution of US TV viewing habits reveals a 48% increase in the number of households switching entirely to over the air access.

16 million US homes – 14% of households – are now OTA-only, up from just 9% of households 8 years ago. This constituency is split into older viewers (6.6m) looking to save a few bucks by settling for the good, old broadcast antenna option, and younger SVOD (subscription video on demand) subscribers (9.4m), who get everything they need from services like Netflix and therefore see no need to pay for cable.

A significant characteristic of this latter category is a move away from the traditional TV to viewing on mobile devices. These smaller screens tend to lend themselves to solitary viewing rather than the more communal TV experience, something that is greatly facilitated by the on-demand nature of these services.

Nielsen OTA chart

Coinciding with the publication of this report is the announcement from Netflix of its biggest ever price rise in the US. The SVOD giant has been investing more than ever on original programming and has such a massive installed base that it seems to have decided it’s time to start thinking about justifying its massive valuation.

“We change pricing from time to time as we continue investing in great entertainment and improving the overall Netflix experience for the benefit of our members,” a Netflix spokesperson said in a somewhat redundant statement to Light Reading.

“For many users, Netflix is an indispensable video services,” said Tech, Media & Telco Analyst Paolo Pescatore. “There will not be much backlash (for now). This is certainly one way to increase revenue significantly. It needs to focus on financials as well as subscriber growth. Netflix is following the traditional pay TV model of increasing prices annually. Expect other countries to increase prices over coming months.”

Anecdotally linear TV viewing seems to be a dying phenomenon. Even when families congregate around the living room TV they’re just as likely to watch a DVD or streamed box set and, if this correspondent’s experience is anything to go by, people prefer to do their own thing on tablets. Netflix is currently the boss of that sector so it’s probably free to keep raising prices for a while yet.

Huawei founder opened up to the press, or did he?

Ren Zhengfei, the founder of Huawei, once again dismissed the allegations that Huawei has been spying for the Chinese government in a rare meeting with the media.

Huawei’s normally reclusive founder told the Financial Times on Tuesday that he missed his daughter, who was arrested in Canada and faces extradition to the US. Ren also reiterated that Huawei has not spied for the Chinese government and has not been asked to do so. “No law in China requires any company to install mandatory backdoors,” Ren was quoted by the FT.

Ren also handed out an olive branch to President Trump, calling the latter “great” and recognising the positive results the American administration’ tax cuts had delivered to the American economy. But he also warned the isolationist route the current American government is pursuing. “The message to the US I want to communicate is: collaboration and shared success. In our world of high tech, it’s increasingly impossible for any single company or country to sustain or to support the world’s needs,” Ren said. Earlier President Trump said he ‘would intervene on Huawei CFO’s case to help China trade deal’.

When it comes to Huawei’s tactics to navigate the difficulties it faces in the western markets, Ren conceded “it’s always been the case, you can’t work with everyone . . . we’ll shift our focus to better serve countries that welcome Huawei,” he told the reporter.

By the founder’s own standard, this interview was a rare opportunity for the outside world to get more transparency of the company he set up 32 years ago. But we were not made much wiser on a few key questions.

Huawei’s CFO, and Ren’s daughter, was charged with misleading the American banks with false information on Huawei’s relationship with its subsidiary related to the company’s business in Iran, which resulted in the banks being handed multi-billion dollar fines. Ren’s interview did not shed new light on the case, despite expressing his parental feeling.

In the spirit of “presumed innocent until proved guilty”, we should believe that the Huawei founder was telling the truth when he claimed Huawei has not spied on behalf of the Chinese government. His words were also carefully chosen when he claimed, “no law in China requires any company to install mandatory backdoors”, which is true. Law enforcement agencies may require companies or private persons to assist their work. In some jurisdictions the companies or individuals have the legal right to refuse, as Apple did in 2015 when being asked by the FBI to unlock an iPhone used by the San Bernardino attackers.

In other jurisdictions companies and individuals are obliged to comply with such demands.

China’s Intelligence Law was passed by the National People’s Congress, China’s legislature, in June 2017 and entered into force the following day. Two articles of the law are of interest here:

Article 7: An organization or citizen shall support, assist in and cooperate in national intelligence work in accordance with the law and keep confidential the national intelligence work that it or he knows. (Translation by the Law School, Peking University)

Article 14: National intelligence work institutions, when carrying out intelligence work according to laws, may ask relevant institutions, organizations and citizens to provide necessary support, assistance and cooperation. (Translation by QUARTZ)

In plain language this means the intelligence agencies have the mandate to require any institutions or individuals to cooperate (Article 14) and the institutions or individuals must comply (Article 7).

Therefore Ren, who declared “I still love my country, I support the Communist party” to the FT journalist, is law-bound to say Huawei has “never received any request from any government to provide improper information”, no matter whether it has received requests of this kind or not. Hypothetically, if Huawei had received requests from the Chinese intelligence agencies to assist their tasks, it could not refuse, otherwise it would be violating the first half of Article 7. On the other hand, if Huawei, hypothetically, had carried out intelligence tasks as required, it could not tell anyone, otherwise it would be violating the second half of Article 7.

But, seriously, no one would have expected an alternative answer.

Judge says no to police forcing phone unlocks with face

A judge in the District Court for the Northern District of California has denied the police a warrant which would force suspects to open their phones through biometric authentication.

While it might seem like somewhat of an unusual scenario, we’re sure many of you are imagining a man pinned to the ground with a phone being waved in his face, it is important to set precedent in these matters. Just as law enforcement agencies cannot be granted a warrant forcing an individual to hand over his/her password, suspects or criminals cannot be forced to open devices through the biometric sensors according to the ruling.

The case itself focuses on two individuals, who are suspected of attempting to extort money from a third person through Facebook Messenger. The pair are threatening to release an embarrassing video of the third person should the funds not be transferred.

Northern California Federal District Judge Kandis Westmore ruled the authorities did not have probable cause for the warrant, perhaps due to the reason said messages and threats could be read through the third persons account, and the request was too broad. This is another example of authorities over reaching and not being specific, leaving too much room for potential abuse.

While this case might sound odd, the world should be prepared for more such rulings in the future.

“The challenge facing the courts is that technology is far outpacing the law,” the ruling from Judge Westmore states. “In recognition of this reality, the United States Supreme Court recently instructed courts to adopt rules that ‘take account of more sophisticated systems that are already in use or in development’.

“Courts have an obligation to safeguard constitutional rights and cannot permit those rights to be diminished due to the advancement of technology.”

In short, the rules and regulations of the land are not in fitting with today’s technology and society, but this does not mean law enforcement authorities can take advantage of the grey areas. This is perhaps an obvious statement to make, but it does hammer home the need for reform to ensure rules and regulations are contextually relevant.

While progress has been slow, there have been a few breakthroughs for privacy advocates in recent months. Last June, the US Supreme Court ruled in Carpenter versus US case that the collection of mobile location data on individuals without a warrant was a violation of data privacy and the Fourth Amendment of the US constitution.

The issue which many courts are facing is precedent. Lawyers are arguing for certain cases and warrants using precedent which is from another era. Theoretically, these rules can be applied, but when you consider the drastic and fundamental changes which have occurred in the communications world, you have to wonder whether anything from previous decades is relevant anymore.

As Judge Westmore points out, technology is vastly outpacing the pace of change in public sector institutions. This presents a massive risk of abuse, but slowing innovation is not a reasonable option. A tricky catch-22.