Trump’s tariff belligerence pays off once more as France capitulates over tech tax

After France unveiled plans to raise taxes on internet companies the US threatened to slap tariffs on French food. Now France is putting the new tax on hold.

Reuters reports that French President Macron had a great chat with his US counterpart Trump, at the end of which Macron offered to suspend the charge while negotiations continue at the OECD over an international taxation system for internet giants such as Google and Facebook. Having caved in less than two months after Trump threatened the tariffs, the smart money has to be on Macron quietly binning his tax and hoping everyone forgets all about it.

Apparently the French have always said anything agreed by the OECD would automatically supersede its own little tax, which makes you wonder why they bothered with it in the first place. If the aim was to show how big and tough Macron is by standing up to Trump you’d have to say it that has backfired somewhat.

Furthermore Macron can’t have been surprised by Trumps retaliation, since that what he does. If we choose to give Macron the benefit of the doubt we could guess that he was trying to play Trump at his own game by getting his retaliation in first and giving himself additional negotiating chips ahead of the OECD process. Maybe it will pay off but it’s a big gamble since he has now made it clear that he will fold before a show of strength.

France fines Google another €150 million

The French antitrust authority has fined Google €150 million for applying opaque and difficult to understand rules in an inconsistent manner.

The Autorité de la Concurrence is now pressing the internet giant to clarify the rules and working of Google Ads, as well as the accounts suspension procedure. Google has said it will appeal the decision in the country where it has faced regular criticism and fire.

“The way the rules are applied give Google a power of life or death over some small businesses that live only on this kind of service,” said Isabelle de Silva, President of the watchdog.

While Google has a significant market share position in the country, in the region of 90%, it seems there is not much the search giant can take away from this decision aside from wide-sweeping changes.

Not only are the rules being challenged in terms of the complexity and accessibility, but the operations of the company are also being heavily criticised. Strict and complex rules are not necessarily a bad thing, assuming they are applied in a consistent and predictable manner. This does not seem to be the case here, which will perhaps be the most frustrating area for French businesses who just want to make money.

Although this is news today, what should be noted is that the investigation was launched four years ago. Gibmedia, a company which operates a range of websites including weather forecasts, challenged the rules after Google suspended its account immediately and without explanation. This might be seen as a win for Gibmedia, though the fact it took four years for French authorities to come this conclusion is nothing short of embarrassing.

US unveils retaliation for French Digital Sales Tax

The US Trade Representative (USTR) has begun the process of targeting French cheese and fashion for trade tariffs in retaliation for Digital Sales Tax imposed by France.

While the vast majority of countries around the world feel a fair and reasonable taxation regime against technology companies would be a rational approach, the US Government has decided this is an attack on the US economy. Ironically, the US is accusing Europe of protectionism when US policies over the last few years have been the perfect example of how to define the term.

Looking at these tariffs, cheese and other diary products are the main focus of the 63-strong list, although French fashion businesses have also been targeted. Interestingly enough, sparkling wine has been included on the list, but no other types of wine.

Although such imports are daunting for the moment, this is a public consultation. Official action will take place, should the US continue down this path, over the coming months. The USTR has argued the Digital Sales Tax unfairly targets US companies.

“USTR’s decision today sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on US companies,” said Ambassador Robert Lighthizer.

“Indeed, USTR is exploring whether to open Section 301 investigations into the digital services taxes of Austria, Italy, and Turkey. The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets US companies, whether through digital services taxes or other efforts that target leading US digital services companies.”

The key difference between the policies of France and the US seem to have been completely missed by Lighthizer, and perhaps it is worth revisiting the definition of ‘protectionism’.

Protectionism (noun) the theory or practice of shielding a country’s domestic industries from foreign competition by taxing imports

France is not protecting its own domestic economy through the introduction of the Digital Sales Tax, it is attempting to make its own taxation rules fit for the digital era. These regulations were written in previous decades, where the idea of digital was only a glint in Bill Gates’ eye. These policies are designed so digital companies, all digital companies not just US ones, are not able to shift profits to tax havens to avoid paying a fair and reasonable rate back to the societies who are fuelling the monstrous growth.

On the other hand, President Trump has been actively engaging in protectionist policies against the Chinese, Canada and Mexico. This is the latest effort, though it has been suggested here that Austria, Italy, and Turkey are also in the firing line. One would suspect the UK, with its own approach to digital tax, is also being discussed behind closed doors, while the Czech Republic has also been making similar noises.

What is worth being noted is that the US internet firms will feel the greatest impact from the French Digital Sales Tax, which will only apply to companies with sales in excess of €25 million in France and €750 million globally. There are other companies which will fall into this category, Sweden’s Spotify for example, though this is not targeting the US, it just so happens US companies are the biggest proponents of creative tax strategies which bleed value out of a society, offering nothing in return.

Some sceptics might also suggest this has the right ingredients to create a new trade war. As the French Government believes it is being reasonable with its evolutionary digital tax regime, might we see retaliation for these import tariffs? This is exactly how the Chinese trade war began, though one would hope there is a more reasoned approach this time.

Ultimately this aggressive approach to international relations from the US Government will only end up as a net-loss. The world is heading towards a globalised economy, and the US is fighting back with Trump’s isolationist policies. Should these tariffs stay, good will only be more expensive for the consumer. Steel is an excellent example of this.

When Trump announced tariffs on imported washing machines, Whirlpool CEO Marc Bitzer was buoyed by the news. Six months later, the firm slashed its earnings outlook blaming tariffs placed on steel imports. Bitzer suggested steel in the US was now 60% higher than the rest of the world, impacting Whirlpool’s ability to offer cost effective goods to US consumers.

The White House might suggest that import taxes would force consumers to buy US products, but these products will be more expensive as soon supply chains and raw materials will be hit by the tariffs. You also have to take into account more stringent labour laws in the US, which will once again increase the price of goods.

Tariffs and protectionist policies do not create wealth and prosperity for the consumers of the aggressor. Trump doesn’t seem to understand the fundamentals of diplomacy, instead taking the aggressive and brash Wall Street approach to doing business to the Oval Office. The US is isolating itself and with Lighthizer promising further 301 investigations, it could be a sticky situation for the US consumer before too long.

Germany wants to dictate EU policy on 5G and China

German Chancellor Merkel has surprised nobody by calling for all member states to do what the EU tells them when it comes to 5G policy.

“One of the biggest dangers… is that individual countries in Europe will have their own policies towards China and then mixed signals will be sent out,” said Merkel in the German parliament, according to a Reuters report. “That would be disastrous not for China but for us in Europe.”

OK Angela, we hear you. It’s not called the European Union for nothing, right? What kind of a union would it be if everyone went around thinking for themselves eh? So the next step should be to get all the member states together to thrash out a common position, perhaps in European parliament, which seems tailor-made for the job.

Sadly not. It looks like Merkel would rather it was left to Germany and France to decide on the policy, which could then be rubber-stamped by the European parliament and become a directive for everyone else. It’s actually quite refreshing to see such an open admission that the EU is essentially a Franco-German project that the other member states should feel grateful to be allowed to participate in.

Since Germany and France have already decided not to ban Chinese vendors from their 5G networks, Merkel is essentially saying she doesn’t want any other countries upsetting the Chinese by excluding them. She doesn’t seem to say why it would be disastrous for Europe not to do what Germany tells it, but since that’s implicit in the whole concept of the EU she presumably thought it redundant.

SFR FTTH buys fibre wholesaler Covage for a billion euros

The French fibre sector is undergoing a spot of consolidation with the news that Altice-owned SFR is acquiring the country’s fourth largest fibre wholesaler.

Covage is currently owned by hedge fund Cube Infrastructure, which has apparently decided its time to liquidate its position. It currently serves 800,000 homes with fibre, with another 1.6 million in the pipeline. This acquisition will give SFR FTTH current coverage of 2.5 million homes and 5.5 million on the way.

“I am very pleased that we are further expanding the leading FTTH wholesaler in Europe,” said Patrick Drahi, Altice founder. “We are extremely proud to integrate Covage, a great company, with a portfolio of areas in France complementary to ours. With this transaction we also bring onboard excellent local relationships.

“We continue to be focused on deleveraging Altice Europe notably thanks to growing revenues and EBITDA which will be supplemented with disposal proceeds. As I have explained previously, we are in advanced discussions with several parties in relation to our Portuguese fibre asset. This process is supported by the significant appetite for fibre in Europe clearly demonstrated by the present transaction which has been strongly supported by our financial partners in SFR FTTH.”

Dropping a cool billion on an acquisition is a funny way of deleveraging, but who are we to argue with a telecoms tycoon? SFR is the main competitor to Orange in the French fibre market, with both of them acting as wholesalers in what seems to be a fairly competitive environment. Further consolidation wouldn’t come as a surprise, especially with the help of a bit of creative accounting.

France won’t block Huawei from its 5G network

One by one, members of the European Union are announcing they won’t follow the United States’ lead on banning Huawei from their 5G networks.

The largest, Germany, revealed it had no problem with Huawei last month and the only surprise is that it took France so long to get in line behind it. French Junior Economy Minister Agnes Pannier-Runacher was chatting to French TV when she casually revealed this major geopolitical development, according to a Reuters report.

“We do not target one equipment maker,” said Pannier-Runacher. “There is no exclusion. There are three equipment makers active in France. Huawei has a 25% market share, there is also Nokia and Ericsson. Samsung is not active yet in France but is interested by 5G. The government will not exclude anyone. We are not following the position of the United States. We will proceed on a case by case basis.”

Since the EU is being increasingly open about positioning it as a collective superpower to take on the US and China, you can see why it’s reluctant to overtly pick a team in that fight. In fact Huawei now seems t think the French should do more to protect its reputation. The UK, however, has yet to announce its position and the next government may yet decide that staying on the good side of the US may trump all other concerns.

Meanwhile Reuters also reports that the French government has set a higher minimum price for the next 5G spectrum auction than recently recommended by the regulator, ARCEP. The recommended level of €1.5 billion has been raised to €2.17 billion because the French government fancies the extra cash. It’s refreshing to see a government be so open about viewing spectrum auctions as just another form of taxation.

Huawei files defamation lawsuits in France

Huawei has filed defamation lawsuits against two individuals in France after claims that the business is controlled by the Chinese Government were aired on national television.

While these lawsuits are only coming to light now, the lawsuits were filed back in March, following interviews on television. The two individuals in question, who are remaining anonymous until the courts decide otherwise, suggested Huawei is a puppet of the Chinese Government, relating to the ownership structure and the history of founder Ren Zhengfei, who was a member of the engineering corps of the People’s Liberation Army.

Although defamation lawsuits are a very rare occurrence in the technology segment, Huawei has been taking an increasingly aggressive stance against its critics in recent months. In previous years, Huawei might have been happy to sit back, letting the hot air pass by, however 2019 has certainly seen a different strategy.

Perhaps the most notable example of this shift is the public presence of founder Ren Zhengfei. Ren has traditionally avoided the limelight though the ‘Coffee with Ren’ segments to discuss various issues and accusations directed at the firm has been regularly hitting the airwaves over the course of the year.

Alongside the more public presence of Ren, Huawei also filed a lawsuit against the US Government, suggesting it was an unconstitutional as Congress is not permitted to pass laws targeting individuals or specific companies. Although Congress did not word the National Defense Authorization Act (NDAA) to enforce a complete ban, the nuanced language made it effectively impossible for either Huawei or ZTE to do any meaningful work in the US.

There are various other examples, but it is a much more proactive defence of the business than has been seen in previous years.

Looking at the French situation, Huawei does need to be very careful. The French Government has already created a law which allows it to veto the introduction of components or products in communications infrastructure which are deemed to compromise national security. This is not a ban, Huawei is still permitted to bid for projects, though once again nuanced language has been introduced to potentially allow a ban with little/no evidence.

While the damage to Huawei’s business has been limited for the moment, it is far from in a healthy position. Many of the major European markets are yet to make a formal, and long-term, decision on Huawei’s presence in the market. France is an influential voice across the bloc, with decisions and opinions creating ripples in other European nations.

Huawei statement:

“Huawei has filed 3 complaints alleging public defamation of the company in March 2019. The complaints relate to claims that Huawei is a Chinese company controlled by state and Chinese Communist Party; that it is led by a former “counter-intelligence” member and that it uses its technological expertise in telecom networks to commit acts of espionage to the detriment of the Western world.

“Huawei believes these statements are seriously defamatory. Huawei is a private company, 100% owned by its employees. For the last 30 years since it was founded, there has never been a serious cyber-security issue with Huawei products.

“These complaints are directed against the authors of the comments and not to the media that report them. Huawei respects the independence of the media and the freedom of the press.”

French watchdog outlines mid-band spectrum auction rules

French regulator Arcep has unveiled its plans for the 3.4-3.8 GHz spectrum auction with some pretty ambitious coverage obligations.

Although the telcos will have to wait until at least March 2020 to begin the bidding process, Arcep has shown it does pay attention to the wants and needs of private industry, including a couple of amendments from the consultation documents released in July. The main change was to increase the blocks of spectrum available in each allocation to 50 MHz.

The only piece of the puzzle which is now missing, hence the delay, are reserve prices. This is a Government decision, though many of the telcos will have fingers crossed the aggressive increase in spectrum prices is not carried through to this auction with high reserve prices.

Moving onto the coverage obligations, this is what the telcos will keeping a keen eye on. First and foremost, each telco assigned spectrum in the ‘innovation band’ will have to launch 5G in two cities by the end of 2020. Following this launch, Arcep is imposing stern demands on the number of cell sites which would have to be upgraded for these spectrum assets:

  • 3,000 by 2022
  • 8,000 by 2024
  • 10,500 by 2025

Although these targets would not get close to 100% geographical coverage, it would guarantee a pretty aggressive expansion of the 5G footprint over the next few years. On top of these coverage obligations, 25% of the cell site upgrades in the final two phases much be in ‘sparsely populated regions’ to ensure a digital divide is not created.

These coverage commitments are also extended to the road and rail infrastructure, while minimum speeds of 240 Mbps will have to be delivered on 75% of the sites by 2022. Another obligation which will be placed on the telco focuses on network slicing.

Network slicing is a key topic of discussion for all 5G enthusiasts, though rarely do the regulators include such concepts in spectrum auction obligations. Arcep has said the telcos will have to be able to offer tiered services to customers by 2023 at the latest.

While telcos rarely like being told what to do, this seems to be one of the more reasonable approaches to a spectrum auction. The reserve prices are still an unknown, but the coverage commitments are unlikely to scare any of the telcos. All eyes now turn to 2020, and the exciting part of the auction process, before Arcep moves onto the 26 GHz spectrum.

France pushes forward with trials of much-hyped mmWave airwaves

Much has been spoken about the promise of mmWave spectrum bands, and France has announced 11 trials to separate the wheat from the chaff in 26 GHz.

Launched by Agnès Pannier-Runacher, France’s Secretary of State to the Minister for the Economy and Finance, and Sébastien Soriano, Chair of the Electronic Communications and Postal Regulatory Authority (Arcep), the trials will sweep the country, covering a handy number of different usecases, while also bringing in an attractive number of different technology companies.

It’s a comprehensive approach few other countries could match-up to. Interestingly enough, several of the projects are being led by enterprise companies, or organizations that do not specialise in telecommunications. To some, it might not sound like the most sensible approach, though it will ensure business demands are priority number one; the problem with telcos is that they specialise in telecommunications and very little else.

The first project will be led by Universcience, at the Cité des Sciences et de l’Industrie, and will focus on public engagement. The La Cité des sciences et de l’industrie 5G trial platform will showcase use cases to the public, through open events, as well as temporary and permanent exhibitions.

Although many in the general public would claim to have heard of 5G, few will actually understand what it is. Education programmes are critical not only to ensure the public is made aware of progress, but also to encourage the next generation into the STEM subjects. For any nation to capitalise on the opportunities presented by the 5G era, the skills gaps will have to be closed.

The second, at the Vélodrome National, will bring together Nokia, Qualcomm, Airbus and France Television to understand how 5G can aid sports media. Low latency and increased bandwidth will be key topics here, as will the integration of artificial intelligence for operational efficiency and augmented reality to improve consumer experience.

The third trial will pair Bordeaux Métropole, the local authority, with Bouygues Telecom and will aim to capitalise on public lighting networks to deploy new infrastructures.

The Port of Le Havre will lead the fourth trial alongside the Le Havre Seine Métropole urban community, Siemens, EDF and Nokia. This initiative will explore 5G applications in a port and industry-related environments, with use-cases such as operating smart grids and recharging electric vehicles.

At the Nokia Paris-Saclay campus, trials will be conducted in a real-world environment, both indoors and outdoors, thanks to Nokia 5G antennae installed at different heights on the rooftops, and in work areas. This project also includes a start-up incubator programme.

The Paris La Défense planning development agency and its partners have submitted another interesting usecase. With 5G CAPEX budget strained already, the Government department will test the feasibility and viability of owning infrastructure and selling turnkey access to operators. This might erode coverage advantages which some telcos might seek, though in assuming ownership (and the cost) of network deployment, the 5G journey might well be a bit smoother in France.

The seventh trial will pair Bouygues Telecom with France’s national rail company, SNCF, at the Lyon Part-Dieu train station. Tests will focus on consumer applications, such as VR and AR, as well as how transportation companies can make best use of data and connectivity to enhance operations. The eighth trial will also be led by Bouygues Telecom, focusing on industrial IOT in the city of Saint-Priest.

Orange will oversee two trials at part of the wider scheme, with the first taking place in Rennes railway station with SNCF and Nokia. Once again, part of this trial will focus on consumer applications, making waiting a ‘more pleasant experience’, with the rest focusing on industrial applications such as remote maintenance using augmented reality.

The second Orange trial will focus on various 5G use cases in heavily trafficked areas, such as enhanced multimedia experiences for people on the move and cloud gaming. This trial is supposed to be generic, and another opportunity for start-ups to pitch and validate their ideas in a live lab.

“The 26GHz spectrum band will allow us to explore new services based on 5G,” said Mari-Noëlle Jégo-Laveissière, Chief Technology and Innovation Officer of Orange. “We are aiming to set-up experimental platforms that will stimulate collaboration on these new use-cases across all economic sectors.”

With the spectrum licenses live from October 7, the trials are now officially up-and-running. Each of the projects must have a live network operational by January 2021 at the latest and have to make it available to third parties to perform their own 5G trials.

This is perhaps one of the most interesting schemes worldwide not only because of the breadth and depth of the usecases being discussed, but the variety of companies which are being brought into the fray. Although the telco industry does constantly discuss the broadening of the ecosystem, realistically the power resides with a small number of very influential vendors.

This is a complaint which does seem to be attracting more headlines at the moment. If you look at the Telecom Infra Project (TIP) being championed by Facebook, the aim is to commoditise the hardware components in the network, while decoupling them from software. Ultimately, the project is driving towards a more open and accessible ecosystem.

France’s initiative here could have the same impact. By designating enterprise companies and local municipalities as leaders in the projects, instead of the same old telcos and vendors, new ideas and new models have the potential to flourish. This looks like a very positive step forward for the French digital economy.

France told to stay in its lane over ‘right to be forgotten’

Google has won a landmark case against French regulator Commission nationale de L’informatique et des libertés (CNIL) over the ‘right to be forgotten’ rules.

After being fined €100,000 for refusing to de-reference certain references in markets outside of the CNIL jurisdiction, Google took the regulator to the Court of Justice of the European Union. And Europe’s top court agreed with the search giant.

“The operator of a search engine is not required to carry out a de-referencing on all versions of its search engine,” the court ruling states.

“It is, however, required to carry out that de-referencing on the versions corresponding to all the Member States and to put in place measures discouraging internet users from gaining access, from one of the Member States, to the links in question which appear on versions of that search engine outside the EU.”

In short, Google must de-reference inside the European Union, while also preventing internet users inside the bloc from accessing de-referenced content which is hosted elsewhere. Preventing those inside the European Union from seeing de-referenced content on versions of the search engine outside of the bloc will be complicated, there is always a workaround if you know what you are doing, however it is a win for Google.

For the CNIL, this is a humbling ruling however. The regulator has effectively been told to stick to its job and not try to force its will upon companies where it has no right to. And we whole-heartedly agree.

The French regulator has no right to impose its own rules on Google when it is operating in other sovereign nation states.

This case dates back to 2015 when the idea of ‘right to be forgotten’ was forced upon Google. In France, and generally across Europe, an individual or company can request Google de-reference search results which are damaging or false. This does not give individuals freedom to remove any reference to them which they don’t like, but it does allow for the removal of false information. These are reasonable rules.

In reaction to the rules, Google geo-fenced internet users in the European Union, but refused to de-reference information on versions of the search engine outside the bloc. This is a reasonable response and course of action.

This is what the French regulator had an issue with, though it has quite rightly been told to stay within its remit. This is a reasonable judgement.

What the French regulator was trying to do was wrong and would have set a damaging precedent. No government or regulator should be allowed to apply its own rules outside its border. The European Union is a tricky situation, as rules can be extended to member states, though there is a hard border at the edge of the bloc.

Thankfully the Court of Justice of the European Union has applied logic to the situation.