French parliament passes “Huawei Law” to govern 5G security

Both houses of the French parliament have voted in favour of the new law, dubbed the “Huawei Law”, to give the government the power to security vet 5G rollouts in the country.

The legislation process started when France, being pressured by the US to exclude Huawei from the country’s 5G networks, decided to keep the decision-making power in its own hands, hence the nickname. An earlier draft of the legislation was met with protests from the parliament as being too “open-ended” which would give the government too much power.

The final stage of the legislation process started three weeks ago, when a joint group of 14 parliamentarians (la commission mixte paritaire, or CMP) from the Senate and the National Assembly started putting the final touches to the draft. According to the announcement from the Senate when the final stage started, Senator Catherine Procaccia stressed that the Senate’s amendments have excluded the ongoing 4G rollout from the upcoming law, and demanded the authorisation process be simplified from two-stage to one-stage. Sophie Primas, the chairperson of the economic affairs committee, also believed that the amended version was more balanced than the initial proposal.

The AFP reported that, after an ultimate vote on the Senate floor, the parliament has given its final approval to the comprised text, which it is now ready for President Macron to sign into law. When it becomes effective, the Prime Minister will have the power to approve or reject the telecom operators’ plans to roll out 5G networks, considering the implications on national security. The PM’s decision needs to be made within two months of the application.

Agnès Pannier-Runacher, Secretary of State for Economy and Finance, told the AFP that the new law will establish a stable, simple, and protective legal framework without delaying France’s deployment of 5G, and the government is already in the process of finalising the implementation details. She also stressed that there will not be a city 5G and a rural 5G in France. Each operator should have 12,000 sites equipped with 5G by 2025, a quarter of which should be in the rural areas, she told the news agency.

This piece of legislation is made at a time when the European Union is developing a pan-EU framework to assess 5G risks. Although it is one of the two most powerful driving forces in the EU (the other being Germany), France has a tradition of going its own way without waiting for the EU legislations to catch up. A recent example is the decision to go ahead with the 3% sales tax on the internet heavyweights without waiting for a European-wide single digital market regulation.

France next on the list to be teased with Trump’s tariffs

The United States Trade Representative (USTR) has opened an investigation into France’s digital sales tax, a move which could lead to the European nation facing trade tariffs.

The digital sales tax in France has been viewed as a means to force internet companies to play fair. The creative accounting practices of these companies has ensured nominal tax has been paid to various European states, and France has had enough. The proposed tax has passed through the lower parliamentary house, the National Assembly, and is expected to get the final thumbs-up today from the Senate.

As a result, US Trade Representative Robert Lighthizer has announced the launch of an investigation under Section 301 of the Trade Act of 1974 of the Digital Services Tax (DST) into the French government. This is the very same tool used by the Trump administration to justify the introduction of tariffs against China due to the alleged theft of IP.

“The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies,” said Lighthizer.

“The President has directed that we investigate the effects of this legislation and determine whether it is discriminatory or unreasonable and burdens or restricts United States commerce.”

What is worth noting is that while many US companies might find themselves paying more tax, this is not necessarily a move to raid the US economy. This tax has been directed towards all digital companies who abuse the international tax system to the detriment of the French government and society irrelevant as to their nationality, it just so happens the US dominates the internet industry.

Many will view the French move as a gallant effort to hold the internet economy accountable, though it seems the US does not feel the same way; its own economy and society does of course benefit from the tax skulduggery.

The suggestion of the US imposing tariffs on the US comes two days after President Trump declared Indian tariffs on US goods should be a thing of the past.

The tax itself has been in the pipeline for some time, as European nations have become increasingly frustrated by the taxation strategies of the digital economy. Companies such as Google, Facebook and Amazon have been shifting profits freely throughout the world to ensure lower taxation rates are paid. This move from France, to impose a 3% sales tax on revenues realised within its borders, seems like an effective counter-punch.

What is worth noting is it is not just the US firms who are abusing this taxation system. Sweden’s Spotify is another which has played the system well. In the UK, as an example, the company reported revenues of £444 million over the course of 2017 but paid £891,425 in tax as it only reported advertising revenues in the country. Revenues associated with the ‘Premium’ subscription product were moved to Sweden where it could pay less tax.

France is not alone with its frustrations either. The UK is another nation which is considering its own digital tax reforms, while the European Commission attempted to pass bloc-wide rules recently. These rules were blocked by the likes of Ireland and Luxembourg, two countries who benefit significantly from the fleecing of other nations.

Now onto the US response. Section 301 and related provisions of the Trade Act offer the USTR the opportunity to investigate what it or the White House deem as a foreign country’s unfair trade practices. There will be a public consultation and lobby efforts from Silicon Valley and should the USTR conclude France is unfairly persecuting US business, tariffs could be directed towards imported cheese and garlic.

Tariffs are a popular weapon for Trump and the White House hacketmen on the international trade scene, as it is becoming increasingly common for US diplomats to huff and puff, while banging their chest and showing off their biceps when things don’t go their way.

Unfortunately, the US doesn’t really have a leg to stand on here, though the presence of logic will not persuade the hawks from their flightpath. Internet companies, all over the world for that matter, are taking advantage of a dated taxation system which allows them to grow bank accounts without recontributing to the country which has fuelled this prosperity. There is little which can be said to counter this position.

Interestingly enough, the move could spark wider tensions. The relationship between the White House and the European Union is already stressed and targeting a single member state might not be received well by the bloc. The US feels targeting a single member state is legitimate, though there might well be a bigger conversation to be had in Brussels.

With the clouds of tariffs already lurking above the European automotive industry, the US might find itself with another trade disagreement on its hands before too long.

Orange CEO cleared of fraud

The interminable Tapie saga, which threatened to topple Orange CEO Stéphane Richard, has finally concluded with everyone acquitted of wrongdoing.

Richard (pictured) was accused of complicity in a fraud that involved the French state handing over €404 million to French businessman Bernard Tapie back in 2008. At that time Richard was Chief of Staff for Finance Minister Christine Lagarde, who was eventually found guilty of negligence in creating the circumstances for the payout and then not challenging it.

Part of Lagarde’s defence when she was put on trial back in 2016 was that she didn’t really know what she was doing because Richard didn’t furnish her with sufficient information. This led to the current trial, which investigated the role Richard and a few others played in the whole affair.

The reason for the payout was a claim from Tapie that he got ripped off when he sold his stake sportsware company Adidas to Credit Lyonnais, which is partly state-owned, in order to avoid a conflict of interest when he became a government minister back in 1992. The bank subsequently sold on the stake at a profit, leading Tapie to allege that it had deliberately undervalued it previously.

Tapie sued Credit Lyonnais and eventually Lagarde pushed the case to a closed arbitration panel which made the €404 million award. Not only was the matter deemed to be badly handled by Lagarde and her team, but the award was eventually reversed amid suspicions of fraud. This case seems to reverse that decision once more, so it looks like Tapie will get to keep the cash after all.

This is obviously good news for Orange, which had no involvement in any of it but has had Richard at the helm for eight years, during which he seems to have done a decent job. The whole thing still stinks of an establishment stitch-up, however, with French taxpayers handing over an enormous amount of cash to a rich former politician to compensate him for a botched business deal.  Richard will obviously be relieved too, but s Lagarde’s recent appointment to head the ECB indicates, he may have escaped any negative consequences even if he had been found guilty.

Orange gears up for the Tour de France but no mention of 5G

This weekend will see the Tour de France begin in Belgium and while it might be a chance for some to enjoy a tipple in the sun, for Orange it is a monstrous task. But it does seem to have forgotten to plug 5G.

Delivering a connectivity solution for this spectacle is somewhat of a difficult task. The race covers 3,460km over 21 stages, starting in Brussels, winding through 219 municipalities in France before ending in Paris. Four stages will be held in the Pyrenees and another four in the Alps, while numerous see the race snake through rural France. These are not necessarily the easiest environments to provide connectivity in.

The other factor you have to take into account is this is not necessarily a ‘build once’ concept for network infrastructure; the tour route changes every year, making permanent infrastructure redundant in numerous areas. That said, it does provide the commercial drive to bridge the digital divide in some rural environments.

In some places, it makes just as much commercial sense to rollout permanent infrastructure to the small towns as it does to make it temporary in the more secluded areas. This year, 11 locations will benefit from a permanent fibre installation, while 37 municipalities visited by the Tour and 182 municipalities located within 10km of race will also benefit from 4G upgrades.

This is not to say Orange should wait for the Tour de France to pass through a village to address the digital divide, but it is a nice by-product for some communities.

One massive omission from any of the materials is 5G. With 5G buzzing in almost every corner of the connectivity world, it would be a fair assumption it would be here as well. In other sponsorship properties Orange owns, Roland Garros for example, 5G has been the focal point of communications, but it has been missed out here.

Admittedly, this is a different and more complicated environment to deliver the super-fast ‘G’, but it does seem to an oversight; there are various different usecases which could be plugged by the telco here. This is not to say Orange should wait for the Tour de France to pass through a village to address the digital divide, but it is a nice by-product for some communities.

In 2017, we had a behind-the-scenes tour of the event, with Orange offering some insight into the efforts made to deliver connectivity. And its not as easy as it sounds. Alongside the Orange technical team which has to move with every stage of the tour, the telco has to provide connectivity for roughly 120 trucks housing various broadcasters, shifting 20km of fibre and 65km of power cables each day.

The figures quoted above were accurate two years ago, now you have to take into account consumers are more digitally defined, using a broader range of apps and digesting more data on a daily basis. Here’s a bit of a taste of the complications Orange faces this year:

  • 7,000 hours broadcast by 190 countries worldwide
  • 10 to 12 million spectators on the roadside
  • 8 million unique visitors to the website
  • 32 km of cables deployed at the finish line during the event
  • 350 temporary phone lines
  • 32 mobile 3G/4G mobile relays to strengthen mobile network coverage
  • 250 km of specifically deployed optical cables

In the ‘village’ at each stage of the Tour, Orange has said it will deploy eight separate wifi networks, with an equivalent rate of 200 Mbps and able to handle more than 10,000 simultaneous connections. This is the easy part, the village doesn’t move all day, but providing continuous connectivity while the race is progressing is a different challenge.

This is a marketing opportunity for Orange, it gets to show how wonderful it is at solving complicated problems, but there is certainly an upside for some in the rural communities who could see a connectivity boost. Assuming the race passes through your quaint village of course.

US influence on Europe failing as France resists Huawei ban

The White House might have felt banning Huawei was an appropriate measure for national security, but France does not agree with the drastic action.

Speaking at a conference in Paris, French President Emmanuel Macron has confirmed the country will not ban Huawei. This is not to say it won’t in the future, but it appears Europe is remaining resolute against the demands of the US. The burden of proof might be a concept easily ignored in the US, but Europe stands for more.

“Our perspective is not to block Huawei or any company,” Macron said. “France and Europe are pragmatic and realistic. We do believe in cooperation and multilateralism. At the same time, we are extremely careful about access to good technology and to preserve our national security and all the safety rules.”

President Donald Trump is most likely a man who is used to getting his own way, and upon assuming office as head of the most powerful government worldwide, he might have thought this position of privilege would continue. However, Europe is being anything but compliant.

In direct contradiction to the Executive Order banning Huawei from supplying any components, products and services to US communications networks, Macron has declared France open is for business. France won’t use the excuse of national security to beat back the progress of China but will presumably introduce mechanisms to mitigate risk.

Germany has taken this approach, increasing the barrier to entry for all companies, not just Huawei. Vendors will have to pass more stringent security tests before any components or products can be introduced to networks, though Chancellor Angela Merkel has also made it clear she intents to steer clear of political ties to the decision.

“There are two things I don’t believe in,” Merkel said in March. “First, to discuss these very sensitive security questions publicly, and second, to exclude a company simply because it’s from a certain country.”

The UK is seemingly heading down a similar route. Alongside the Huawei Cyber Security Evaluation Centre (HCSEC), run by GCHQ with the objective of ensuring security and privacy credentials are maintained, the long-awaited supply chain review is reportedly going to place higher scrutiny but stop short of any sort of ban. The official position will be revealed in a few weeks, but this position would be consistent with the UK political rhetoric.

Over in Eastern Europe, governments also appear to be resisting calls to ban the company, while Italy seems to be taking the risk mitigation approach. Even at the highest bureaucratic level, the European Commission has asked member states to conduct an assessment for security assessments. Unless some drastic opinions come back in October, we suspect the official position of the European Union will be to create higher security mechanisms which offer competitive opportunity for all vendors in the market.

For the moment at least, it appears the Europeans are immune to the huffing and puffing making its way across the Atlantic. That said, the trade war with China is set to escalate once again and it would be fair to assume more US delegations will be attempting to whisper in the ears of influential Europeans. At some point, the US will get tougher on Europe, but it does appear those pesky Europeans are stubborn enough to resist White House propaganda and pressure.

Iliad flogs a bunch of towers to reduce debt pile

French telecoms conglomerate Iliad is selling most of its tower assets in France and Italy to Cellnex for €2 billion.

Iliad has debts in excess of €4 billion and seems to think paying some of them off might be an idea. Fellow French giant Altice has recently had to do a bunch of debt refinancing but it apparently had to pay a premium to do so. European telcos are increasingly inclined to sell and lease back assets like towers to free up cash for 5G investments and that sort of thing.

In France Iliad will be selling 70% of the company that manages 5,700 cell sites to Spanish infrastructure specialist Cellnex, while in Italy it’s offloading the whole company that takes care of 2,200 sites. Right now the whole process is at the ‘exclusive negotiations’ stage but that seems like a formality.

“This transaction is part of a long term industrial strategy allowing us to accelerate rollout of our 4G and 5G networks and to increase Iliad’s investment leeway,” said Thomas Reynaud, Iliad’s CEO. “This transaction supports the group’s new growth and innovation cycle. It enables more efficient infrastructure roll-outs in the future while meeting the challenges of further increasing territory coverage.”

On top of this Cellnext is acquiring 90% of the company that owns 2,800 sites in Switzerland from Salt.

“[These deals] allow us not only to reinforce our position as the main independent infrastructure operator in France, but also to decisively strengthen our platform in Italy, a key a strategic market, and significantly expand our foothold in Switzerland,” said Cellnex CEO Tobias Martinez.

“Furthermore, Cellnex strengthens its role as a neutral host by having two major anchor tenants within its sites network. The combined effect of these agreements is an increase of our current  portfolio across six European countries by more than 50% –to 45,000 sites in total. The latter allows us to properly assess the very quantum leap nature of these deals.

“A greater density and capillarity of our sites networks means a differential added value that enhances Cellnex’s role as a natural partner for all mobile operators in Europe, meeting their densification needs in the current 4G roll-out while accelerating that of 5G.”

French council gets sick of waiting for MNOs so goes it alone

The local government in Eure-et-Loir has seemingly got tired of waiting for the MNOs to end not-spots in the countryside, deciding to construct its own masts in the region.

Announced via Twitter, the local authority approved funding for the ‘Eure-et-Loir Mobile Networks’ project in an effort to bridge the digital divide. The scheme will create a new company, which will have a budget of €10 million and aim for 100% geographical 4G coverage, through building its own mobile infrastructure.

“The @eurelien department is the first in France to create a project company to accelerate the deployment of the #4G throughout its territory, for 2021,” Eure-et-Loir Department Advisor Remi Martial said on Twitter.

In claiming to be the first Department in France to take such action, with the move somewhat undermining government plans to tackle the rural connectivity problem. Announced back in January 2018, the ‘New Deal Programme’ was designed to tackle not-spots across the country, though it appears the Eure-et-Loir local authority has little confidence in the scheme.

Two firms bid to be part of the project, with ATC winning. ATC will now enter into a public-private-investment scheme with the Eure-et-Loir authority to improve mobile coverage. Reports have previously suggested the region is short of 100 mobile masts to provide adequate 4G coverage.

When you consider the environment, it starts to make sense why the Eure-et-Loir region is not necessarily a priority for the MNOs. With a population of 432,967 (2013) it is the 55th largest region across France, with a population density of 74 citizens per km2. Compared to Paris, 21,234 per km2 or Hauts-de-Seine, 9,042 per km2 the business case is less convincing.

That said, should the hard work be done for the MNOs, renting space to place mobile equipment is a small price to pay for meeting government demands and improving coverage. With the vast majority of capital being allocated into civil engineering aspects of the project, few will complain, even if it does give the impression of mediocrity.

 

France and Britain are embracing state control of the internet

France has appointed a new minister for digital, while the UK wants to set up a new regulator for the internet. Both governments want to play more active roles in controlling the online world.

Emmanuel Macron, the French President, nominated his political advisor Cédric O to the position of Secretary of State for the Digital (Secrétaire d’État chargé du Numérique), a post vacated when the predecessor quit to prepare for next year’s municipal election. O has been instrumental in running the president’s agenda to engage the digital heavyweights, including arranging the meeting for Zuckerberg, and organising the French senior civil servants to observe in Facebook’s headquarters.

O opened his story to the journalists from AFP and L’Express by claiming that he was in “100% agreement” with Zuckerberg regarding the stronger role the states should play in regulating the internet. “There is the demand from citizens, ‘please guarantee that when I’m on the Internet, my right is respected’. But the right should not be defined by the platforms (e.g. Facebook, Google, etc.), ” O said. The government will also update laws to give it the legal foundation to play such a role, including bringing the current regulations on audio-visual sectors to the digital age, O told the interviewers.

The French government has recently revived the traditional measures to play a more assertive role in the economy, and has extended the approach into the digital domains in particular. Recently it decided to go ahead with the 3% tax on the internet heavyweights, the nicknamed “GAFA tax”, without waiting for the EU to reach consensus on the common digital market.

On the other side of the Channel, the British government, already having a department overseeing digital as its portfolio, is mulling over the set-up of a new regulator, either being part of the existing government structure or a new government body altogether.

This is necessary to consider the current problems surrounding the internet giants. On one hand, these companies have not been regulated properly either as a platform or content publisher. On the other hand, these platforms have been used to facilitate crimes including terrorist attacks. However, there is also the danger that the government is overstepping the lines to become a moral arbiter. The first “problem” of internet identified in the “Online Harms White Paper”, jointly endorsed by the Digital Secretary and the Home Secretary, states that “illegal and unacceptable content and activity is widespread online”. While “illegal” can be properly defined, “unacceptable” is a subjective judgment and a judgment that should not made by the government.

To couple such subjective assessments with the government’s demand that ISPs and ICPs should have the obligation to block content or face heavy fines smells similar to the measures adopted by the censorship regimes of China, Russia, Iran, and a few other countries. A side effect of such assertive measures could be driving some internet users down the route to evading government monitoring, for example this could be a boost for the VPN business.

As we said when Zuckerberg asked the governments to share his burden and blame, having governments control internet content, be it French or Chinese, would be a double-edged sword, and one edge would run against the internet’s spirit of liberating access to information and freedom of expression, and against what Sir Tim Berners-Lee demanded that governments should “keep all of the internet available, all of the time; and respect people’s fundamental right to privacy.”

This almost rolls back the years to what the late Christopher Hitchens once called “an all-out confrontation between the ironic and the literal mind: between every kind of commissar and inquisitor and bureaucrat and those who know that, whatever the role of social and political forces, idea and books have to be formulated and written by individuals.” (“Siding with Rushdie”, 1989) It would be the biggest irony of internet’s brief history if, after beleaguering the Chinese government for its heavy-handed approach towards internet, the western governments are all going down the China route, albeit 20 years later.

Could Orange’s CEO end up in prison?

Orange CEO Stephane Richard is widely respected throughout the telco industry, but he is also currently embroiled in a legal battle which could land him behind bars.

For his alleged role in the misuse of public funds while he was working for the Finance Ministry, French prosecutors have called for Richard to be sentenced to three years in jail. He would only spend half this time in prison, but this would be 18 months too long for almost everyone you ask.

The trial itself is drawing to a close, but this is hardly news, dating back to the 90s and the financial affairs of businessman Bernard Tapie. After making millions and eventually an 80% stake in German sports brand Adidas, Tapie faced debts and instructed state-owned Crédit Lyonnais to sell his stake. After the sale, Tapie was unable to settle said debts and challenged Crédit Lyonnais, suggesting the bank sold shares at a depressed rate.

This is where Richard steps into the fray. Tapie backed Nicolas Sarkozy in the presidential election, which he went onto win. After this victory, the Sarkozy Government set up an independent arbitration panel to settle the case between Tapie and Crédit Lyonnais, instead of challenging the legal case brought against the bank which was the previous rhetoric.

After Tapie was awarded €403 million by the panel, the French Finance Ministry came under extreme criticism. At this point, Richard was serving as Chief of Staff for Christine Lagarde, Finance Minister at the time and now the head of the International Monetary Fund.

The players in this game are accused of creating this panel, and the subsequent settlement, as a convert reward for the support Tapie gave Sarkozy during the election campaign. This is the gloomy side of politics which causes so many to groan at the moral fibre of today’s politicians; there is always someone to thank one way or another. Since this point, a Paris court annulled the panel’s decision and ordered Tapie to repay the funds.

It’s all very nefarious, grimy and complicated, however Richard is tied up due to his position and alleged action during the latter stages of the affair.

What is clear, however, is that Richard is potentially facing prison time for his role.

As we understand it, Richard’s team is confident he will not end up on the losing side, though there is always a chance one of Europe’s leading telcos could be thrown into disaster as its CEO is locked up. Aside from a prison sentence, prosecutors are also pursuing a €100,000 fine and a ban from working for any organization where the French Government has a stake for five years. Currently, the Government owns around 13% of Orange.

Orange has no comment on the saga at this point, as this is a personal issue for Richard not the telco’s business. However, we suspect there must have been some whispered conversations behind closed doors discussing contingency plans; it would be irresponsible of the Orange management team if they were not.

The trial will likely conclude this week, though this does not mean we will be any closer to a decision. Richard will be left on the edge of his seat for the next couple of months, with a decision expected after the summer.