A post-Brexit Ofcom worries us – Vodafone

With the anti-China rhetoric dominating the headlines in recent months, Brexit chatter has become unfashionable. But with the deadline fast approaching, what will Ofcom look like in the future?

Speaking at a breakfast briefing in London, Vodafone UK Chief Counsel and External Affairs Director Helen Lamprell let loose on the UK regulator. Cell tower height, rural roaming, potential reintroduction of international roaming charges, dark fibre and auction dilemmas, there seemed to be a lot of venting going on.

“The UK remains a challenging environment [regulatory], one of the most challenging in the world,” said Lamprell. “But we are seeing positive change.”

The issue which Vodafone is keeping an eye-on is Brexit. According to Lamprell, Ofcom is one of the most conservative regulators throughout the bloc, though when it is freed from the tethers of the Body of European Regulators for Electronic Communications (BEREC), there is a risk it could become even more so.

There isn’t necessarily one massive bugbear from the telco, but several little aggravations which all combine to a much larger nuisance. Let’s have a look at mast height to start with.

Everyone wants signal, but no-one wants towers

As it stands, UK cell towers are limited to 25 metres in height. This obviously doesn’t take into account those masts which are placed on the top of buildings, just the actual structure itself. In most cases, this doesn’t have a massive material impact on operations, such is the population density of the UK, but when you look at countryside locations it becomes a much larger discussion.

Part of the up-coming 5G spectrum auctions will place coverage obligations on telcos. This is a reasonable request by the government, as telcos have shown they will not bridge the digital divide on their own, though as it stands 99% of the UK population is currently covered. Geographical coverage is no-where near this figure, though as there is little commercial gain from providing coverage to these remote locations, reaching the 90% objective is difficult.

One way which this could be done is by providing exemptions to the 25-metre limit in certain situations, such as the countryside, as CTO Scott Petty pointed out, for every 10-metres you go up the coverage ring is doubled.

All four of the major UK MNOs (EE, O2, Vodafone and Three) are meeting with the Department of Digital, Culture, Media and Sport (DCMS) this afternoon, and this will be a point on the agenda. Should these exemptions be granted, it opens the door for shared infrastructure also, as the main cost of these structures is civil engineering and construction, not the equipment on the tower. Both of these developments combined would aid the telcos in reaching the geographical coverage objectives.

This brings us onto another interesting point raised by Lamprell, rural roaming.

My restless, roaming spirit would not allow me to remain at home very long

“Rural roaming takes away our incentive to invest,” Lamprell said. “It’s a really, really dumb idea.”

Three are one of the companies pushing for rural roaming, but as the Vodafone team points out, it is the only MNO which hasn’t built out its rural infrastructure. However, should rural roaming be introduced it would cause a stalemate for investment.

As Petty points out, why would any MNO invest in its own infrastructure when it could force its way onto a competitor’s? All the telcos would be sitting on the starting line, waiting for another to twitch first, such is the pressure on the CAPEX spreadsheet column when investing in future-proofed infrastructure.

Moving onto the international roaming question, Vodafone is staying pretty agile right now. As it stands, the status quo will be maintained, though the team will react to the commercial realities of a post-Brexit landscape. Currently, as a member of the European Union, Vodafone is protected from surcharges when it comes to termination charges, though those protections will end with Brexit.

Vodafone has quite a significant European footprint, in most cases there is little to worry about, but for those territories which fall outside the Vodafone stomp, negotiations will have to take place.

There are several countries, Estonia is an example, which has higher termination rates than the UK. If the reality of a post-Brexit world is Vodafone is swallowing up too many charges from international calls/SMS/data, roaming charges might have to re-introduced in certain markets. This is all very theoretical currently however Ofcom will prevent Vodafone from replicating these charges from the European nations. Vodafone is sitting and waiting for the realities of Brexit right now, though it will not be a broad-brush approach.

“Our position today is to maintain the position we are in, but we will have to evaluate the situation at the time,” said Lamprell.

Ignore Luke, the Dark Side is great

Dark fibre. It used to be a popular conversation, but everyone seems to have forgotten about it recently.

Not Lamprell.

The focus of Ofcom over the last 12 months or so has been on opening-up ducts and poles, and while this certainly is progress, it only addresses part of the problem. Dark fibre is an aspect of the regulatory landscape which could add significant benefits to the industry but has seemingly become unfashionable.

Dark fibre, fibre cabling which is not currently being utilised by Openreach, could answer the backhaul demands of the increasingly congested networks quickly and efficiently. Mainly as it is already there. There is no need to dig up roads, apply for planning permission or procure new materials, it could be as simple as flicking a switch.

Openreach resistance and Ofcom’s aggressive focus on ducts and poles is perhaps missing a trick.

Going, going, maybe not yet

The UK is currently in somewhat of an unusual and unprecedented situation. It is one of the nations leading the world into the 5G. This is not to say it is in a podium position, but compared to the 4G era, the UK is sitting pretty.

Part of the reason for this has been early auctions to divvy up spectrum assets, however, moving forward there are some irregularities which is causing some head-scratching.

Later this year, Ofcom will kick-start another auction which will see 120 Mhz of spectrum in the 3.6-3.8 GHz bands, as well as 80 MHz in the 700 MHz band go up for sale. For both Lamprell and Petty, this auction doesn’t make sense. These are two bands which will be used for different purposes (coverage and speed) so why auction them off together.

If Vodafone had known this was going to happen back in April 2018, during the first spectrum auction, it might have altered its strategy.

“We could end up with a very fragmented spectrum situation,” said Petty.

From the team’s perspective, it seems Ofcom has only just woken up to the coverage demands of the UK government, and is using this auction as a blunt tool to meet the objectives. From an engineering perspective it doesn’t seem to make much sense to Vodafone.

“We are not happy with the rules,” said Lamprell. “But it’s rare for us all [MNOs] to be happy.”

Looking good but looking suspect

The UK is currently in a good position ahead of the 5G bonanza from an engineering perspective. With test hubs being set up around the country and telcos who are acting proactively, the UK looks like an attractive environment to invest in for R&D. It is by no-means leading the global 5G race, but it is in a healthy position.

However, political and regulatory uncertainty are a threat to this perception. The activities and culture of both DCMS and Ofcom over the next couple of months will has a significant impact on the 5G fortunes of the UK, as well as the ability to attract new talent, companies and investment.

“No way US can crush us” – Huawei founder hits back

The usually publicity-shy Huawei founder Ren Zhengfei has hit back at what he perceives as a politically motivated attack, declaring if “the lights go out in the West, the East will shine”.

Although the US government has sustained the anti-China rhetoric over the last couple of months, with Huawei being the focal point of any aggression, the firm is holding strong. That is the message from Zhengfei, a usually media-adverse individual who is currently being carted around Europe in a show of strength against the White House. The aim for Huawei is to demonstrate transparency, and it does seem to be working in Europe.

“There’s no way the world can crush us,” said Zhengfei, in an interview with the BBC. “The world needs Huawei because we are more advanced. Even if they persuade more countries not to use us temporarily, we could just scale things down a bit. And because the US keeps targeting us and finding fault with us, it has forced us to improve our products and services.

“If the lights go out in the West, the East will shine. And if the North goes dark, there is still the South. America does not represent the world.”

While these comments are unusually aggressive for a man who does not like the limelight, they could prove as the perfect antagonistic weapon against President Trump. Zhengfei is sending a simple message across the Atlantic in this interview; the world is not siding with you in this quest.

Huawei has become a proxy in the overarching conflict between the US and China, though it is certainly faring better now than it did a couple of months back. During the initial exchanges, there was a considerable amount of collateral damage heading Huawei’s direction. Banned from providing equipment in Australia, New Zealand and Japan, plus other omissions in countries such as South Korea, it was an ominous sign. But Europe is seemingly not agreeing with Trump.

In the wider US/China dispute, Europe is a critical battle ground. As a bloc, the European Union is the second largest economy in the world. For both China and the US, winning favour would go a long-way to establishing political and economic dominance over the other. And Europe does not seem to share the same deep-rooted distaste for China as the US is currently harbouring.

Many European economies have established trade relationships with the Chinese, and while there are long-standing partnerships with the US also, none of these countries seem to want to readily shun the Chinese. This is the advantage which Huawei has in Europe, these are not nations which will so easily bow to the outside influence of the US.

In the UK, for instance, China is the 5th largest trade partner, as it is also in Germany. Its down in 7th for France, but still accounts for 4.3% of total trade, as it is in Italy for 3% of the total. For Belgium, China is the third largest partner outside of the European Union, while it is the second largest outside the bloc for the Netherlands. Trade with China is too important for the member states to consider siding with the US in the larger international conflict.

Of course, what you have to bear in mind is the over-arching European Commission supposedly considering ways to ban Chinese companies from contributing to critical infrastructure programmes. US Vice President Mike Pence has been touring Europe to talk up the importance of making a stance against China, and also dropping hints other European nations should ditch the Union, but success with the individual member states is looking far more limited.

With Germany and the UK seemingly favouring an approach which would heighten security protocols but still allow Huawei to operate, the Chinese firm is seemingly winning on the continent. With the US throwing political heavyweights at the nation states, Secretary of State Mike Pompeo was another to join the crusade of fear-mongering, the US might soon become quite agitated. Huawei’s resistance might infuriate the Oval Office, but the inability to bend Europe into its own image of perfection might will frustrate.

Europe was supposed to be a political boost for the US ambitions against China. This is of course the bloc which the US saved from the ravages of World War II and also a steadfast set of allies over the last few decades. Whatever the US has done, Europe has generally agreed to. But it seems the brash and aggressive style is not palatable to the conscientious and risk-adverse Europeans.

For Huawei, this is a massive battle. Europe as a whole is the largest market outside of China for Huawei, representing billions of dollars’ worth of business. However, its not just the network infrastructure ambitions at risk her, let’s not forget the consumer business has been making considerable progress across the bloc as well. The fact Huawei is wheeling Zhengfei around demonstrates how important this region is to the company.

President Trump sees himself as one of life’s winners. As the self-proclaimed ‘deal marker’, this is a man who is used to getting his way. With the power of the White House and US economy behind him, this is not an outcome he would have imagined. The stubbornness of the Europeans might force the White House into more drastic action before too long.

Europe has not been great at net neutrality – report

Nearly three years after the EU net neutrality regulations came into effect, neither service providers nor national regulators have been role models in following the rules, a new report concluded.

The Vienna-based non-profit organisation Epicenter.works recently published a report to present its multi-year research into how the EU’s net neutrality regulation has been implemented. The report, titled “The Net Neutrality Situation in the EU: Evaluation of the First Two Years of Enforcement”, examined how the regulation was interpreted differently by the regulators and how the service providers have taken it into their own hands to decide what to implement, or not implement in the 28 EU member states as well as the three EEA nations ((Norway, Iceland and Liechtenstein). The results were not the most encouraging reading.

The EU regulation on net neutrality came into effect on 30 April 2016. The Body of European Regulators for Electronic Communication (BEREC) was mandated to lay down guidelines on the implementation for the national regulators. However, unlike other laws like GDPR, the net neutrality rules give member states the authority to decide the level of penalties if the rules are broken.  “This has lead (sic.) to a situation where some member states have not laid down rules for violations of net neutrality protections two years after the regulation entered into force,” the report says.

More specifically, 17 out of the 31 countries examined have not defined “effective and dissuasive penalties”, while in those countries that have defined monetary penalties, the amounts varied from a symbolic €9,600 in Estonia, to up to 10% of relevant turnover in the Netherlands or the UK. The report finds that, as a result of the less than strict implementation, “the largest telecom companies in Europe can choose not to comply with the law because it is financially advantageous for them.”

The area that the most offences were committed was differential pricing practices, in particular zero-rating data for selected applications and services. Although only Bulgaria and Germany have excluded “illegal commercial practices” (price discrimination when providing access to specific applications and services, in this case, zero-rating certain apps or services) from their penalty provisions, a total of 186 differential pricing products are being offered in all but three member states (Finland, Slovenia, Bulgaria), the majority (144 offerings) of them zero-rating (the rest are application-specific data volume). 17 countries’ regulators have started formal assessment processes into the differential pricing products offered by the service providers in their countries since the regulation came into effect, while the other 14 have not.

The report went on to analyse the impact of zero-rating offers on the consumer data price, and discovered that over a two-year period, the average data price (€/Gb) in countries with zero-rating offers largely held or slightly rose while the comparable price in those countries without zero-rating products went down by about 10%.

net neutrality data price

The reason for the steady price can be attributed to competition dynamics created by zero-rating, according to the report. Since the large service providers (e.g. Deutcshe Telokom) often have the biggest sway in partnering with content and application providers, the authors reckon, they create a “unique selling proposition” to attract consumers and no longer need to compete on the data package size or prize, which MVNOs and smaller operators can match their offers. This in effect has led to a slow-down in the growth of data package sizes or drop in prices in these markets.

It is not only the consumers that have been denied benefits by zero-rating, the authors find, there is also cost on the content and apps providers. In most zero-rating deals, the content and app providers will pay the fee for the traffic to the service providers (according to a report published by the Polish regulator UKE), which will then offer it to consumers at zero-rating. In this case, zero-rated data is actually sponsored data.

On top of the fees, in order for the billing to be correctly done, operators would require the content and app providers to make special data transport setup for the partnerships, e.g. change CDN contracts. This will also add operational cost to the content providers. In a high-profile case, when Vimeo did not participate in Deutsche Telekom’s “StreamOn” programme, it stated in an open letter to the German regulator that, although they are a 200 employee strong company, they cannot sustain co-operations with all the service providers whose customers they want to reach with their service through special programmes like this.

Two knock-on effects also come out of such partnerships. Due to the demand on fees and increased operational cost, most app and content providers can only afford to enter into limited deals. By the authors’ count, the large majority of app and content providers entered no more than three pricing programmes.

net neutrality number of programs

On the other hand, more often it would only be the Silicon Valley heavyweights that could afford to tie multiple partnerships with different operators in different markets, they occupy most of the spots on the leader table of differentially priced services being offered. “Among the top 20 zero-rated applications only three are from the EEA,” the report calculated.

net neutrality Silicon Valley heavy

The findings by the organisation has caught some attention. The Austrian regulator RTR will conduct its own research into the impact of zero-rating on data prices into more recent years and on operator level. The European Commission will also provide an evaluation report of the net neutrality provisions of the regulation by 30 April 2019, three years after the regulation came into effect.

France takes on Apple in tax dispute… and wins

The French government has bagged a win in its quest to hold Silicon Valley accountable to fair and reasonable taxation rules with €500 million secured from Apple.

Apple has confirmed to Reuters it has settled a dispute over taxes due to the French purses over a 10-year period, though local newspapers are suggesting the figure is roughly €500 million. France is leaking the European battle against the slippery accountants of the internet giants, though whether this has any knock-on effect across the rest of the bloc remains to be seen. We suspect there will be a mixed reaction.

“As a multinational company, Apple is regularly audited by fiscal authorities around the world,” Apple France said in a statement to Reuters. “The French tax administration recently concluded a multi-year audit on the company’s French accounts, and those details will be published in our public accounts.”

The taxation strategies of the internet giants have become infamous over the years, as many feel the frat-boys of the technology industry are taking advantage. With such incredible revenues, governments will be keen to hold these companies accountable and France is showing that it can actually be done.

Over the last few months, the European Commission has been tabling various different ideas to ensure the internet giants pay a fair and reasonable tax rate. A 3% sales tax on all revenues generated in the specific territories looked to be the best option moving forward, but the power of the bloc proved to be its downfall; getting 28 nations to agree to the same idea was never going to be easy.

With countries like Ireland and Luxembourg building successful economies around enabling tax havens, and other countries such as Sweden giving birth to companies which benefit from the rules, some were always going to offer opposition. Why would these countries want to be the architect of their own downfall?

What this victory for France shows the rest of the bloc is that results can be achieved by going alone. Some of the other critics of the creative taxation strategies of the internet giants, such as the UK and Germany, may well move forward aggressively.

The residents of Silicon Valley, and some in Washington DC, might suggest US companies are victims of sticky-fingered bureaucrats, though it is difficult to have sympathy for companies which have become experts at finding and widening gaps in regulations.

The big question is who is next on France’s hit list.

China 5G ambitions might hit a Brussels speed bump

The boresome bureaucrats of Brussels have finally gotten back from lunch and there might just be a 5G ban for Chinese companies on the menu before too long.

According to Reuters, the EU officials are considering drawing up new rules which would effectively ban any participation from Chinese companies in the up-coming 5G bonanza. Although there have certainly been some dissenting voices across the bloc over the last couple of months, a bloc-wide ban would be scaling up the anti-China rhetoric more than a few incremental steps.

Officials would almost certainly state any changes would be made for the greater good and are not targeted at a single nation, but that statement is increasingly difficult to swallow. There are a couple of different strategies to achieve the anti-China goal, but the Brussels brunch brigade will certainly have to get a move on if they are to make an impact.

5G is just around the corner and the groundwork is being laid for the lean, mean networks. Purchases will be made in the near future, but with this air of uncertainty flowing out of the Brussels waffle shops, some telcos might be hesitant to charge forward. What’s the point in potential purchasing and deploying equipment if the rosy-cheeks regulators are going to make you tear it out of the network?

The European Commission wants Europe to lead in the digital economy, but for this to happen the connectivity infrastructure needs to be up to scratch. The telcos need consistency and certainty when it comes to policies if they are to spend billions. The Flemish food fanatics are hardly known for their agility but for the European digital economy to remain on-track any significant changes to the regulatory landscape will have to be set in stone sharpish.

Now you start to get a feel for the problem. Who knows what conditions will be put into place with new policies, especially if the public service ponderers want the wording to appear generic enough so China cannot accuse the bloc of targeting it specifically. The gluttonous government officials will have to skip a few free lunches and get a move on.

But how could the covetous civil servants ban Huawei sorry China sorry nefarious bodies from contaminating the 5G goldmine?

The first suggestion is rumoured to be an amendment to a 2016 cybersecurity law to heighten the security requirements for any company which wants to contribute to critical infrastructure. Germany is reportedly making similar amendments to heighten requirements, but to protect itself and also allow Chinese companies to participate. You can only assume any altercations at a European level would not be as welcoming, targeting companies who could potentially be influenced (irrelevant of any concrete evidence) by a nefarious government.

A second suggestion would be more related to procurement processes, though the gaggle of red-tapers will have to be careful here. Whenever regulators and legislators attempt to influence commercial processes too much there is often resistance from the private sector.

The revelation will certainly be of interest to the US, which has done its best to turn the world against the country which is challenging the Land of the Free for global supremacy. While government intervention might sound like a bit of a contradiction for a country which so proudly promotes the concepts of market freedoms and capitalism, we have stopped keeping check on how mental the US is becoming.

But perhaps this was the long-game from the US all along. It bans Chinese companies sharpish and then moves onto plant the seeds of doubt elsewhere knowing other countries would take a more considered and evidence-based approach to such a massive decision. With the Europeans dithering, the US can race ahead with 5G deployment, attract the most innovative companies to establish R&D sites within its own border and all of a sudden it dominates the 5G economy just like it dominates 4G now.

Whatever the outcome, uncertainty is the enemy of progress. If they ban Chinese companies or if they don’t, the bureaucrats need to decide quickly. Regulations need to be set in stone to allow the telcos to consider all the implications and make commercial decisions. Uncertainty is only going to stutter rollouts and damage the influence of Europe on the digital economy.

And for Huawei, 2019 seems to be going from bad to worse.

Finland’s AI ambitions demonstrate real intelligence

Training 1% of the population is just one part of Finland’s push for AI. The business world and public sector are also fully leaning in.

Recently a story on Finland’s plan to train 1% of its population in Artificial Intelligence has been making the rounds. Starting as a private initiative jointly promoted by the University of Helsinki and the consulting firm Reaktor, an open, free online course, “Elements of AI” was made available to anyone who would be interested in understanding the basics of AI. The initiative was then embraced by the government and has been integrated into a national AI strategy.

By the end of 2018, half a year after the initiative started, more than 40,000 people had started taking the online training, more than 10,000 of them already completed the course. The 1% target implies a total of 55,000 will receive the training, but the number is set be surpassed very soon following the University’s recent release of the Finnish version of the course (earlier the content was only available in English). The University promises “Other language versions are on the way!”

But this is just a part of the Nordic country’s ambition for the so-called “data economy”. Outi Keski-Äijö, the Head of AI Business program at Business Finland, outlined for Telecoms.com the major steps the agency and other institutions have taken as well as their the near-term plans. Her public sector agency is tasked to both support enterprises inside Finland and promote Finnish business interest outside of the country. Over the past two years, the AI-focused team she leads has been working with start-ups and small and medium sized enterprises (SMEs), to drive innovation through funding as well as helping bridge them with business implementation.

On the funding side, Business Finland would invest up to €50,000 in promising projects that are focused on solving concrete problems. Finland’s total public-sector funding over a four-year period will be no less than €20 million, including €6 million in the first year. Business Finland is responsible for over half of the total budget.

When it comes to connecting innovations from start-ups and SMEs to implementation, many innovations have found their way to both the emerging sectors like smart transport management, and traditional industries like ship-building. The innovations in AI have also attracted international attention, hence the success of the second part of the agency’s mission. Companies in Asia and North America have already shown interest in taking on board some of the new output.

When asked how Finns see privacy protection vs. progress in AI, Keski-Äijö and her team introduced us to the work done by one of its sister organisations, the Finnish Innovation Fund (Suomen itsenäisyyden juhlarahasto, Sitra). Sitra is an independent fund overseen directly by the Finnish Parliament. One of its key programs now is to develop the principles, framework, and key components of what it calls “Fair Data Economy”, under the brand IHAN (Ihmislähtöinen datatalous-avainaluetta, literally means “people-centric data economy”).

With GDPR in place, theoretically consumers now have control over their data and can demand to know how their data is being stored and used by any companies. In practice however, it is hardly possible for an individual to chase every single service she uses. Also, as Sitra put it, “GDPR does not define the format, governance or method for consent-based personal data sharing.” As a result a consumer’s data is being managed and analysed in silos, and services provided to her are not necessarily optimised.

What IHAN aims to achieve is to provide a stamp of approval. Services certified by IHAN would be trustworthy for consumers to handle their private data. When enough services are certified the data shared between them will be able to deliver personalisation without comprising privacy. Here Finland’s big ambition kicks in. Sitra is looking to use IHAN as a model to drive EU-wide AI and data economy to a more competitive level. With Finland taking over the EU presidency in the second half of 2019, Sitra is set to promote IHAN more vocally beyond the Finnish borders.

There is nothing wrong with the thinking, but Sitra may find the idea not going down as well in other European countries. The anchor point of the IHAN concept is trust. The Finns, rightly or wrongly, put very high level of trust in the public and social institutions. For example, according to a poll done by TNS Gallup for Sitra in 2016, nearly 80% of Finns trust the police, two-thirds trust in the registration and statistical authorities, but only 14% trust the internet companies. The low level of trust in the internet companies may be indicative broadly across many countries, the high level of trust in the authorities may not.

Finns trust in public sector

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 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.”

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.

Facebook bags former UK Deputy PM as lobbyist in chief

Former MP Sir Nick Clegg has joined Facebook to take over as VP of Global Affairs and Communications. In other words, it’s chief lobbyist.

The appointment is certainly an interesting one. Having led the Liberal Democrats (the political form of irrelevance) from 2007 to 2015, and served as Deputy Prime Minister in the coalition government under Prime Minister David Cameron, Clegg was defeated in his constituency of Sheffield Hallam by the Labour representative.

“Having spoken at length to Mark and Sheryl over the last few months, I have been struck by their recognition that the company is on a journey which brings new responsibilities not only to the users of Facebook’s apps but to society at large,” said Clegg in a Facebook post. “I hope I will be able to play a role in helping to navigate that journey.”

Based out of California, the hire could be an clever move for Facebook. Clegg, despite being as inspirational as scrambled eggs, has plenty of experience of the political ping pong, most crucially as a Member of the European Parliament for East Midlands between 1999 and 2004, and a position as a European Commission trade negotiator. Being one of the most stringent regulatory markets on the planet, having Clegg’s European experience is certainly a bonus.

The issue which Facebook might face in hiring Clegg is the weight which he carries. Being leader of the Liberal Democrats and Deputy Prime Minister might look good to US corporates on the CV, but the reality might be a bit different. The Liberal Democrats are a featherweight presence in British politics, and while Clegg did lead the party to the weighty presence of 57 seats in the House of Commons, he also led them off a cliff to eight in the following General Election during 2015. Clegg left politics rather sheepishly and without leaving any real legacy or memory.

Unfortunately for Facebook, the UK is one of the markets where Clegg will be most needed. With CEO Mark Zuckerberg under threat of a summons after repeatedly ignoring calls to appear before a Parliamentary Select Committee, someone needs to calm the UK waters. With the neither the Conservative or the Labour party holding in him in particularly high regard, it might be more of a beg mission than lobbying.

“Our company is on a critical journey,” Facebook COO Sheryl Sandberg wrote in a separate post. “The challenges we face are serious and clear and now more than ever we need new perspectives to help us though this time of change.

“The opportunities are clear too. Every day people use our apps to connect with family and friends and make a difference in their communities. If we can honor the trust they put in us and live up to our responsibilities, we can help more people use technology to do good. That’s what motivates our teams and from all my conversations with Nick, it’s clear that he believes in this as well. His experience and ability to work through complex issues will be invaluable in the years to come.”

Change is certainly on the horizon for Facebook. With numerous scandals plaguing the business, and the threat of a GDPR fine following the most recent data breach, the team will have to carefully manage the Gaggle of Red-tapers in Brussels. Europe already the most stringent data protection and privacy rules worldwide, and it would be no surprise to see those tightened further. Clegg certainly has an interesting couple of months ahead.