All data-roads lead to Tokyo after EU’s thumbs up

The European Commission has given its nod of approval for data protection rules drawn up in Japan, effectively extending GDPR protections for European citizens to the Asian country.

On top of the current data protection regulations in Japan, an additional set of rules have been created adding safeguards to guarantee that data transferred from the EU will be subject to the same protection as European standards. The supplementary rules will be binding on Japanese companies importing data from the EU and enforceable by the Japanese regulator and courts.

“This adequacy decision creates the world’s largest area of safe data flows,” said Věra Jourová, Commissioner for Justice, Consumers and Gender Equality.

“Europeans’ data will benefit from high privacy standards when their data is transferred to Japan. Our companies will also benefit from a privileged access to a 127 million consumers’ market. Investing in privacy pays off; this arrangement will serve as an example for future partnerships in this key area and help setting global standards.”

Starting with the rules, new conditions will be set into play regarding the protection of data, the rights of European citizens to request further information on usage, as well as further requirements dictating what data can be transferred out of Japan to other nations. Protections have also been put in place with regard to how intelligence and law enforcement agencies can use or retain data, while a complaint-handling mechanism has also been introduced.

With these new rules the road to Tokyo is now open, allowing data to freely transfer between Japan and all members of the European Economic Area (EEA), Iceland, Liechtenstein and Norway. It’s a win for the bureaucrats which have been looking to develop deeper relationships, creating a trading bloc which can provide more competition for the likes of the US and China.

“This is the first time that such a recognition takes place under the GDPR and in a reciprocal manner. As of today, Japan has adopted an equivalent decision for data transferred to the EEA,” said Tanguy Van Overstraeten, TMT Partner and Global Head of Data Protection at law firm Linklaters.

“This major milestone puts both Japan and the EU in a unique position, strengthening the recently adopted Economic Partnership Agreement (EPA) between the EU and Japan. The EPA will enter into effect on 1 February 2019, creating an open trading area covering over 600 million people and almost one third of the world’s GDP.”

For Japan enthusiasts, this announcement will come as great news, especially ahead of the EU-Japan trade agreement which is set to come into force next month. This tie up will create an open trading zone covering 635 million people and almost one third of the world’s total GDP, and the first ever bilateral framework agreement between the two parties.

As part of the new relationship the vast majority of the €1 billion of duties paid annually by EU companies exporting to Japan will be removed, as well as regulatory barriers inhibiting some trade, for example on car exports.

The European Commission might have its critics throughout the world, but this doesn’t look like anything aside from a good bit of business.

Europe struggles to get support for Article 13 digital copyright laws

The most controversial part of the EU Copyright Directive, known as Article 13, is struggling to pass through Europe’s Byzantine bureaucracy.

German MEP Julia Reda recently reported that the process of passing Article 13, which seeks to block the uploaded of content that may infringe copyright, as well as Article 11, which seeks to make people pay when they even share a link, had stalled.

This roadblock was thrown up by the European Council, in which several countries rejected a compromise recently proposed to the wording of all this stuff. Last September the directive was approved by the European Parliament, having previously been rejected. It also looks like pretty much everyone else hates it too, including the content producers it claims to be trying to protect.

“This surprising turn of events does not mean the end of Link Tax or censorship machines, but it does make an adoption of the copyright directive before the European elections in May less likely,” wrote Reda. “The Romanian Council presidency will have the chance to come up with a new text to try to find a qualified majority, but with opposition mounting on both sides of the debate, this is going to be a difficult task indeed.

“The outcome of today’s Council vote also shows that public attention to the copyright reform is having an effect. Keeping up the pressure in the coming weeks will be more important than ever to make sure that the most dangerous elements of the new copyright proposal will be rejected.”

Reda is quite rightly anticipating the standard MO of the EU, which is to keep putting decisions to the vote until it gets the result it wanted from the beginning. Usually there is presumably some degree of horse-trading behind the scenes followed by just enough of a cosmetic tweak to the issue to allow those who change their mind to save face. Let’s see if it’s any different this time.

Europe launches new AI initiative to begin catch-up mission

This month has seen the launch of the European Commission’s AI4EU project, an initiative to create an AI-on-demand platform for Europe and challenge for leadership in this blossoming segment.

Having been agreed during December, the AI4EU project already has 79 partners in 21 countries across the bloc, firstly focusing on developing eight industry-driven AI pilots which will demonstrate the value of the AI-on-demand platform as a technological innovation tool. Led by Thales, the group will receive €20 million in funding to begin with.

“The European Commission has published its coordinated plan on artificial intelligence, as well as new guidelines on how to deal with the ethical issues relating to AI,” said Roberto Viola, the Director General of DG Connect at the European Commission, in a recent blog post. “Both put humans firmly at the centre of this key technology that has the potential to revolutionise all our lives.”

Looking at the specific work-groups, the first eight will focus on the European citizen, robotics, industry, healthcare, media, agriculture, IOT and cybersecurity, with the work being built on the idea of ‘human centred AI’. As part of AI4EU, an Ethics Observatory will be established to ensure the respect of human centred AI values.

The power and potential of artificial intelligence has certainly been a talking point over recent months, as dreams become reality and new products emerge. Every region around the world is attempting to plant its flag and dominate the area, with AI4EU as the European effort. While the initiative will aim to encourage industry collaboration, it will also draw out a strategic agenda and also aim to fill technology gaps which might emerge should a fragmented approach to development arise.

While this is certainly a good start, the European Commission certainly has some work to do to make sure the bloc isn’t left behind as Silicon Valley and China charge ahead. That said, it does look like AI will get the rightful attention it deserves over the coming years.

“The EU has been supporting artificial intelligence for many years, and for the next seven-year EU budget period, which is due to start in 2021, AI and the wider digital economy will play an even more central role: a new funding programme, Digital Europe, has been proposed, with €9.2 billion potentially available to support the further development of the EU’s digital single market, including €2.5 billion specifically to support AI,” said Viola.

“For all its ambition, the EU is still lagging behind other parts of the world when it comes to investing in AI. This is why the European Commission has already agreed to increase EU research funding for AI to €1.5 billion between now and 2020.”

Investment bank thinks Vodafone could be in trouble

RBC Capital Markets has released an investor note warning Vodafone might be in a spot of bother following years of restructuring, M&A, as well as the risk associated with up-coming spectrum auctions.

RBC Capital Markets, the investment bank arm of Royal Bank of Canada, has suggested Vodafone might be in a suspect position, with very little financial headroom despite synergies and cost cutting strategies over the last few years. The telco might be offering investors a strong dividend right now, though RBC believes this position is ‘unsustainable’ when you look at the bigger picture.

“Vodafone’s frenetic portfolio restructuring has left the company more European and converged, but also vulnerable,” RBC stated in the note. “Its underlying markets remain ‘challenging’ and it has very little financial headroom despite synergies and cost cutting. Vodafone has options with its towers but faces a threat from 5G spectrum. The dividend is unsustainable even before we consider a macro downturn. Downgrade to Underperform with 125p PT (was 260p).”

The last couple of years have been an interesting time for Vodafone, as while former CEO Vittorio Colao certainly shook up the business during his tenure he left at a time where Vodafone is sitting on a knife’s edge. There are certainly some success stories across the group, though the potential for disaster is just as prominent.

On the positive side, the UK business is returning to the position of strength under UK CEO Nick Jeffrey. You don’t have to look too far into the past to discover Vodafone used to be the number one player in the UK, though time and sloppy management eroded this position. The last couple of years have seen a turnaround in the mobile business, while the introduction of a fixed line offering certainly creates the opportunity to grow revenues through the much-desired convergence play.

As RBC notes, with no legacy business to protect and a strong partnership with CityFibre, the fixed line potential is certainly noteworthy. Digitisation strategies also seem to be paying off, while its tower business also gives it at opportunity to raise more funds through a divestment if necessary. This is a strategic asset Vodafone would not want to get rid of completely, though a minority sale could raise between €3 billion and €5.5 billion, offering suitable security should it be needed. With the Liberty Global deal set to complete in a couple of months’ time, there is potential for further convergence wins in Eastern Europe also.

Of course, there are substantial risks as well. Competition in the Italian, Spanish and German markets are ramping up, with new entrants such as Iliad and United-Drillisch causing all sorts of problems, while national expansion of Euskaltel in Spain will not be welcomed. These are markets where Vodafone has a notable presence and disruption is rife.

And then you have the spectrum auctions. Vodafone might have already participated in some, but there are still many on the horizon. In Germany, the pre-conditions set on established players look to be commercially unreasonable, and that is even before the auction has taken place. The prices being discussed at each auction are increasing each time and RBC estimates the remaining licences could cost Vodafone between €4.5 billion and €12 billion. Some might suggest the Italian auction was inaccurately inflated, though the premiums paid in Australia and Sweden also confirm the auctions are going to be expensive business moving forward.

Finally, you have India. Vodafone currently owns 45% of the newly created Vodafone Idea telco, the teams answer to the Reliance Jio disruption, though what this is actually worth is unknown for the moment. None of the strategies used to tackle Jio have actually worked yet and it is unknown whether Vodafone Idea will be able to slow the momentum behind the upstart. This market could be great for Vodafone, or it could be a disaster; no-one knows for sure.

As it stands, there are certainly possibilities for the telco moving forward, but the risks and dangers in certain markets are huge. Vodafone has shown itself to be a pretty sound business in recent years with the digitisation and convergence shifts, but RBC doesn’t feel it is in a particularly strong position.

Privacy International points GDPR finger at Facebook

An investigation from privacy advocacy group Privacy International on the flow of personal information has questioned whether Facebook and its advertisers are violating Europe’s GDPR.

To date there have not been any major challenges using the data privacy regulation. There have of course been numerous violations of user privacy, but as these incidents occurred prior to the implementation of GDPR, the old-version of the rules and punishments were used. This investigation from Privacy International could prove to be a landmark.

The investigation itself questions whether Facebook and the app-developers which use its platform for data collection and user identification is acting responsibly and legally. Using the Facebook Software Development Kit (SDK), data is automatically sent back to the social media giant, irrelevant as to whether consent has been collected, or even if the user has a Facebook book account.

“Facebook routinely tracks users, non-users and logged-out users outside its platform through Facebook Business Tools,” Privacy International states on its website.

“App developers share data with Facebook through the Facebook Software Development Kit (SDK), a set of software development tools that help developers build apps for a specific operating system. Using the free and open source software tool called ‘mitmproxy’, an interactive HTTPS proxy, Privacy International has analysed the data that a number of Android apps transmit to Facebook through the Facebook SDK.”

After testing dozens of different apps, Privacy International claims 61% automatically transfer data to Facebook the moment a user opens the app, while others routinely send Facebook data that is incredibly detailed. Some of these users may be logged out of the platform or might not even have a Facebook account in the first place. Developers tested include travel comparison app Kayak, job search company Indeed and crowd-sourced search service Yelp.

Looking at the Kayak example, not only was information transferred back to Facebook once the app was opened and closed, but also during each stage of the search process. In the example Privacy International gives, the user selected a flight from London Gatwick to Tokyo between December 2 and 5, Narita Airport was then selected, before another search was conducted searching for hotels for two adults in the city. All of this information was sent to Facebook without prompt, despite Kayak claiming, ‘don’t worry, we’ll never share anything without your permission’, when the user signs in.

Alone this information is useful, but not incredibly so. However, when you consider the huge number of apps which will be sending information back to Facebook, an incredibly detailed picture of the user can be built. Using the other apps tested in this investigation, Facebook could also learn or make assumptions about the user’s religion (Muslim Pro), music interests (Shazam), salary and disposable income (Indeed Job Search) and interest in physical activities (MyFitnessPal). All of this information could be used to feed incredibly personalised advertisements to the user.

The big question which remains is whether this could be perceived as a violation of GDPR. Facebook has stated it released an update to the SDK which allowed developers to suspend the automatic data transfers, though this was only for version 4.34 and later. With the Opt-out section (the Google advertising ID) automatically turned off, some might suggest the user is being led as opposed to asked.

Another factor which could work against Facebook is the collection of data on users who do not have Facebook accounts; this is much more suspect. As per GDPR, a company has to have a specific and justified reason to collect personal information. It does appear Facebook is collecting information on users despite having no purpose or valid reason to do so.

With fines for violating GDPR up to 3% of annual turnover, the stakes are very high. This could prove to be one of the first tests of the rules, designed to protect the privacy of the general public, and few will be surprised Facebook is a central character in the story. With the social media giant seemingly antagonising many governments around the world, we suspect there will be a queue forming to have a swing with the sharp GDPR stick.

Telia extends 5G reach to Estonia

Just a few weeks after lighting up a 5G network in Sweden, Telia has taken the connectivity euphoria across the Baltic Sea to Estonia.

In partnership with TalTech University, Telia has turned on Estonia’s first 5G network as a test bed for the university, as well as local companies and start-ups. The 5G network is a permanent installation using standardized and commercial 5G products.

“We hope to see new and exciting future services and business models built upon 5G,” said Kirke Saar, CTO at Telia Estonia. “Thus, different stakeholders are welcome to test the possibilities of the new technology at the TalTech University. It is the perfect place for this, combining technical knowledge, smart people and cooperation experiences with very different partners. Additionally, 5G technology supports our newly opened NB-IoT network which now has its first commercial user.”

“It´ll open limitless opportunities for communication in virtual world,” said Rector of TalTech Jaak Aaviksoo. “TalTech, Telia and Ericsson take this step together because we believe in the creativity of both scientists and students in using this platform and generating new ideas. 5G means a thousand steps into the future for the whole Estonia.”

This is of course not Telia’s first venture into the 5G world, having opened up the network at KTH the Royal Institute of Technology in Stockholm, earlier this month. This network has been poised as the first building block for 5G in Sweden.

The first task for the TalTech network will be a 4K live stream on the university campus of the network opening party from the Tallinn Old Town Christmas Market, which was recently voted the best in Europe.

The partnership will not limit the ambitions of those wishing to play around with the 5G network, though one of the first initiatives will focus on autonomous driving. TalTech´s self-driving car made its first official journey in September, though progress will surely be accelerated with the 5G input.

The next stage of the autonomous initiative will be establishing a vehicle-to-vehicle communication platform with Telia, while also optimising the vehicle structure with Silberauto, one of the biggest automotive companies in the Baltics.

US starts whispering to Germany about China ban

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

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

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

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

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

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

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

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

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

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

France goes solo in quest to hold Silicon Valley accountable

With some European nations unable to summon up the courage to tackle the infamous creative tax strategies of the internet giants, France has decided to write its own rules.

The topic of a digital tax which would span the length and breadth of the European continent was initially a popular one. Perhaps it was the camaraderie which swept the states into the tides of change, or maybe there as a brief window to score political PR points, though the momentum has not carried through. Initial plans were abandoned, water-down ones vetoed by self-interested nations, and France has had enough.

Announced on French national television, Economy and Finance Minister Bruno Le Maire laid out the new tax plans which will come into play on January 1. Over the course of the next twelve months, Le Maire believes the new structure will generate €500 million for the state.

“The digital giants are the ones who have the money,” said Le Maire. “[the internet players] make considerable profits thanks to French consumers, thanks to the French market, and they pay 14 percentage points of tax less than other businesses.”

It might not be the collective-push back against Silicon Valley which was initially proposed, but it is progress. Waiting for all 28 (soon to be 27) states to agree on a co-ordinated approach would have taken years, such is the bureaucratic struggle and the lobby power of the internet players, so it is quite refreshing for the French to say enough is enough and take a prominent stance against those who have been obviously and unashamedly abusing tax loopholes.

While many would point to the beauty of the European Union, offering scale to negotiate more effective trade deals, the beast has emerged from the shadows in this saga. For any meaningful changes to be implemented, all states would have to agree. This was always going to be a stumbling block. Sweden voiced concerns, unsurprising as Spotify was one of those firms in the crosshair, while Ireland vetoed on the grounds it would potentially damage trade relationships with the US.

Thankfully the French are not scared of said repercussions. Or perhaps we should be more accurate. There might be fear, but that does not mean the French are going to allow the internet players to run wild. The White House might suggest this is a tax aimed at the US economy, but that is irrelevant as far as we are concerned. This is a tax reform which is overdue.

Whether this inspires the other nations to move in the right direction remains to be seen, though the UK might not wait around either. Chancellor of the Exchequer Phillip Hammond has previously stated he, or the UK government, would not wait for the rest of Europe to hold Silicon Valley accountable.

Unfortunately, the most likely outcome is a fractured tax landscape, with some pushing forward more stringent rules and others getting bullied by the expensive lobbyists. This of course undermines the concept of the European Union, but also opens the door a crack for abuse.

The bureaucrats might attempt to colour in all grey areas, but very expensive lawyers in California will be pouring over any new rules attempting to find the weak spot. And in a fractured tax landscape, there is bound to be a few if you look hard enough.

France and Germany give OTTs early Xmas gift in digital tax saga

Europe ambitious plans to hold the internet giants accountable to fair and reasonable taxation have been temporarily scuppered after resistance from several nations, most notably France and Germany.

While Silicon Valley is still not in the clear, the internet giants will be breathing a deep sigh of relief as their hard-working lobbyists are given another couple of months to influence the plans. France and Germany seem to be the main opponents of the aggressive tax assault, drawing up their own suggestions at the G20 Summit which would allow many of the biggest players to continue to dodge the tax man.

The initial plan was relatively simple; hold the internet players accountable to fair and reasonable conditions by implementing a 3% tax on digital revenues realised in EU member states. This would have placed all the current tax dodgers on the block. The Franco-German joint declaration was supposed to be a compromise, answering the initial opposition, but it seems this watered-down version is not going far enough.

While the Franco-German version of the digital tax certainly is much diluted compared to the initial proposals, it has still been resisted by other players who are protecting their own interests. It seems the ‘all for one and one for all’ theoretical attitude of the European Union does not translate directly into Irish or Norwegian.

“Following a thorough analysis of all technical issues, the presidency put forward a compromise text containing the elements that have the most support from member states,” a statement from The European Council reads. “However, at this stage a number of delegations cannot accept the text for political reasons as a matter of principle, while a few others are not satisfied yet with some specific points in the text. That text did not gain the necessary support and was not discussed in detail.”

Unfortunately for the European Union, this is the issue with any material changes made to rules and regulations. A collection of 27 member states certainly creates influence on the global and political stage, though it only takes one detractor to spoil any plans.

Looking at the suggested middle ground, a Franco-German joint declaration made a point which will please some more than others. The objection here is down to the wording of the proposal with France and Germany believing advertising revenues should be targeted, pushing Facebook and Google into the line of fire, as opposed to digital revenues as a generic term.

In France and Germany, some of the world’s largest internet-based businesses would gain a reprieve. Should the new rules target digital advertising revenues specifically, while subscription services, hardware and online marketplaces would escape. The likes of Amazon, Apple and Spotify would be free to continue practising their suspect taxation strategies.

The pattern of affairs here is something which should be pleasing for the internet giants, or at least most of them. What started as an assault on the internet players is starting to look like a very different battle nowadays, leaning much more towards Google and Facebook specifically.

These two might feel a bit victimised, but the ways things are heading it looks like a deal which is accepted by every member state would not be the victory the Brussels bureaucrats originally envisioned. With bureaucrats under pressure to produce a plan, accepted by all member states by March 2019, a lighter touch approach will be needed. We suspect such a plan will be put together, championed as a revolutionary position, though the internet players will be given enough wiggle room to ensure there is no meaningful victory.

What will help internet players sleep at night is the knowledge they only need to get one member state on side to veto the battle plan. Rev up the lobby machine!

Europe is missing the tech trick

Technology is constantly being billed as the saviour of sluggish economies, but as the industry continues to grow Europe appears to be struggling to evolve.

The claim comes in the form of Atomico’s latest report, The State of European Tech. The venture capitalist firm has been producing the report for a number of years now, though with the 5G bonanza creeping closer and closer, the importance of this edition is perhaps compounded. Companies and governments need to have a technology-first mentality to realise the potential, though it appears Europe is slow off the mark.

The research itself is very in-depth, and we would encourage those with a bit of spare time to have a proper investigation, as we are only going to focus on a couple of key data points. The two images below set the scene for us quite effectively:

Graph One

Graph Two

As you can see, growth in the technology industry is outpacing traditional industries, though economies on the whole around Europe are still heavily dependent on more traditional segments. This might not necessarily be the worst landscape, though as you can see from the image below, the reliance is being placed on the industries which are slumping at best, and declining at worst. Unfortunately, the telcos are some of the worst hit, owing to the disruption poured all over the industry by the OTTs in recent years.

Graph Three

There will of course be numerous reasons for the failure to capitalise on the opportunities which are being laid out in front of us, the skills gap is one, digital divide another and perhaps government policy should shoulder some of the blame, though the situation isn’t as bad as some would think. There are shoots of potential emerging across the continent.

Starting on the investment side, Atomico points to the depth of investments being made across the continent in technology businesses. So far in 2018, $23 billion has been invested in Europe’s technology ecosystem, a $5 billion boost compared to 2013.

Looking at the workforce, Atomico claims there are now 5.7 million professional developers in Europe, up by 200,000 on 2017. What might surprise some is this number easily surpasses the 4.4m in the US, a number that stayed flat year on year. With the US the historical leader of the technology world, but facing a challenge from China, the workforce is certainly there for Europe to make a dent in this increasingly profitable bonanza.

Both of these facts will perhaps create more opportunity than is evident on the surface. Being heavily reliant on traditional industries is not a perfect position, though should there be an ambitious attitude the burgeoning technology world can of course enhance these businesses. This does depend on what most would consider risk-adverse managers, business leaders and policy makers spreading their wings, but the potential for disruption, evolution and growth is certainly there.