Apple draws level with Qualcomm after Germany win

A German court has dismissed Qualcomm’s efforts to block iPhone sales in the country as ‘groundless’ as Apple hit back in the on-going global patent dispute.

According to Reuters, the regional court in the city of Mannheim threw out the case stating the patent in question was not violated by Apple’s installation of Qualcomm chips in its smartphones. Qualcomm has already said it will appeal the decision, as the pair trade blows in various courts throughout across the world.

This case focuses on the use of Intel-chips in certain Apple devices, with Qualcomm suggesting one of its patents had been infringed. The patent in question relates to power management.

Back in September, Qualcomm effectively accused Apple of corporate espionage, questioning how the gulf in performance when measuring its own chips against Intel’s could have been bridged so quickly. However, this argument clearly wasn’t enough to convince the Mannheim judge of wrong-doing.

Having already secured an order to block the sale of certain iPhones through a ruling in Munich, as well as a similar decision in China, Apple needed a win to halt the Qualcomm momentum. The pair have been trading blows over patents and royalties for years now, though the on-going case in the US could prove to be the most significant battle of the dispute.

The chipmaker is currently facing a FTC antitrust investigation, which has escalated to trial, currently being heard in the US District Court in San Jose, California. As you can imagine, Apple, Intel and various others have been playing the part of very proactive cheerleaders, urging on the FTC from the side-lines.

This trial has now concluded for the sixth day, with the FTC calling various witnesses from tech companies such as Apple, Samsung and Ericsson, as well as IP experts from consultancies and universities. The aim is to prove Qualcomm is effectively a monopoly, abusing this prominent position through excessive royalty payments and unreasonable licensing agreements for years.

With the FTC now taking a seat, the next couple of days will see the Qualcomm lawyers preach their case. Here, the team will aim to prove the royalty payments are justified, such is leadership position Qualcomm has worked up in the segment, and the licensing arrangement is the most beneficial and simplistic way to do business. The Qualcomm lawyers are certainly well practised in the art of arguing against antitrust accusations, so it will be interesting to see which way this trial heads.

While the win in Germany is certainly a positive for Apple, which has been on the losing side of a few of the recent skirmishes, the FTC trial is the big one for both parties.

German regulator effectively confirms IBM/T-Systems talks

As it does from time-to-time, German regulator Bundeskartellamt has published a list of mergers and acquisitions which is evaluating. IBM and T-Systems are lucky enough to make the list.

Reports of the discussions emerged over the weekend, with IBM rumoured to be considering taking the mainframe service business unit off the hands of the struggling T-Systems. Although the specifics of the deal are not completely clear right now, it would hardly be a surprise to learn T-Systems is attempting to slim the business down.

On the Bundeskartellamt website, there is a page which lists some of the main transactions which the regulator is considering in its role as merger overseer. These are mainly deals which are in the ‘first phase’ and usually passed unless there are any competition concerns. Although the description is not detailed, it lists IBM will be acquiring certain assets from T-Systems.

The news was initially broken by German-language newspaper Handelsblatt, quoting an internal email which suggested 400 employees would be transferred to the IBM business in May. Subsequently IT-Zoom has suggested IBM will be paying €860 million for the business unit.

The origins of such a deal can only lead back to one place; the office of T-Systems CEO Adel Al-Saleh. Al-Saleh was initially brought to the firm, having previously worked at IBM for almost two decades, to trim costs and salvage a business unit which, recently, has been nothing but bad news for parent company Deutsche Telekom. Aside from this saga, job cuts of roughly 10,000 have been announced since Al-Saleh’s appointment.

Confirmed back in June, the 10,000 job cuts were a result of a long-time losing battle to the more agile and innovative players such as AWS and Microsoft. Al-Saleh’s objective was to trim the fat, focusing on the more lucrative contracts, as well as more profitable, emerging segments of the IT and telco world.

While T-Systems and IBM do already have an established relationship, it seems options are running thin to make this business work effectively. With headcount going down from 37,000 to 27,000, its footprint dropping from 100 cities to 10 and this deal working through the cogs as we speak, Deutsche Telekom employees will hope this is the last of the bad news. Whether Al-Saleh feels this is enough restructuring to make the business work remains to be seen.

Qualcomm pays $1.5bn to ban some iPhone sales in Germany

Qualcomm has elected to post $1.5 billion as a security bond to enable the enforcement of remedies ordered by the Munich District Court blocking the sale of iPhone 7 and iPhone 8 models in Germany.

The ban comes as the latest chapter of the long-running Qualcomm-Apple legal saga, with the chipmaker finding success in its copyright infringement claim in Germany. On December 20 the District Court of Munich decided Apple had in fact infringed Qualcomm’s technology for power savings in the older models and ordered the company to halt all sales in Germany.

Although the ruling was make a couple of weeks ago, the bond itself makes the ban official, allowing the court to pay Apple for any damages incurred should it be able to successfully appeal against the ruling. Apple has already stated it will appeal the ban and will also stop selling the devices at its 15 retail locations across the country.

But this doesn’t seem to be good enough for Qualcomm.

“Apple was ordered to cease the sale, offer for sale and importation for sale of all infringing iPhones in Germany,” Qualcomm said in a statement. “The Court also ordered Apple to recall infringing iPhones from third party resellers in Germany.”

This is one of the elements of interpretation in the case. Apple will continue to ship devices to third-parties to sell, only ceasing sales at its own retail locations. Qualcomm lawyers read the ruling differently however, suggesting this is a blanket ban on all iPhone 7 and iPhone 8 devices across the country, third-party retailers included.

For Apple, this is just a bad end to a bad week. Having just reduced its guidance for what traditionally is its strongest quarter in the year, a sales ban in a large, developed market is not ideal. Some suggest it has nothing to worry about considering these are older models, though cash conscious consumers are more alert to bargains than ever before and the iLeader seemingly pushed the pricing boat too far with the ridiculously priced iPhone X.

For Qualcomm, assuming it can fight to have the ruling upheld, this is a massive win. Precedent is a very powerful concept in the legal world and this might well be an order which it can use as evidence for additional ruling in other markets. The legal battle between the two has certainly been a long one, but this ruling has handed the Qualcomm team a bit of additional incentive.

Looking at the wider patent dispute, a similar case has been heard in China, were Apple has been told to stop importing the infringing models while Qualcomm is also pushing the case in the US. Qualcomm has the better of the early exchanges, though it will be the US ruling which will dictate the winner of this battle ultimately.

German Gov told to sell DT stake

The Chief of the Monopolies Commission in Germany has suggested the German government should sell its stake in Deutsche Telekom over conflict of interest fears.

Achim Wamback, the President of the Monopolies Commission, has made the call on the grounds the German government is currently sitting in a suspect position on both sides of the fence, according to local newspaper Wirtschafts Woche. Although there is no suggestion this position is currently being abused, owning a notable share of a major telco, while simultaneously exercising regulatory power over the industry could lead to market abuse. With the 5G auction set to take place in the immediate future, Wamback’s call will make for awkward reading in the Bundestag.

As it stands, the German government owns roughly 31% of DT, the profits of which will contribute to national coffers, meaning there is less of an emphasis on taxing the general public to raise funds. This will only be a minor impact on the taxation strategies, but every little helps for a governing party which has struggled to maintain power and influence in recent years.

If you try to take a purely impartial approach to the situation, you can see Wamback’s point; this is a conflict of interest. Nationalised businesses are always a talking point for the more left-leaning members of society, but they are deeply unpopular when things are going well in the economy.

This is not the first time the German government’s position in DT has been called into question however. During 2017, when Chancellor Angela Merkel’s grip on government was starting to loosen following federal elections, two potential coalition partners pushed for the sale as well. The Freedom Party and the Greens were unsuccessful with their ambition then, though the idea was never quashed.

Part or fully state-owned telcos are certainly not an unusual fixture on the global telco scene, though you have to question whether it aligns with the pro-competition sensitivities of the European Union.

US starts whispering to Germany about China ban

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

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

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

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

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

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

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

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

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

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

Germany takes an innocent until proven guilty approach to Huawei

Germany’s Federal Office for Information Security (BSI) has made a bold statement, bucking global trends, saying it will not ban Huawei from its borders unless someone can table some evidence of espionage.

With the world turning against Huawei, and China on the whole for that matter, the statement is surprising, unsurprising and somewhat reassuring as well.

Western governments tend to follow each other in terms of regulation and legislation, therefore this stance from Germany might sound surprising. However, when you consider German telcos are somewhat dependent on Huawei kit, an explanation might be found. On the reassuring side, we appreciate this might be somewhat of a controversial statement, though it does make us feel a little bit better that at least one country is taking the ‘innocent until proven guilty’ approach to judgement.

This is not to say China is not up to no good, making use of its influence over industry to forward its own nefarious agenda. We suspect there are some very disturbing activities taking place in Beijing, which would validate the anti-China sentiment, but taking the guilty-first, find evidence later approach as many governments seem to be, undermines the reasoned foundations on which these countries are built. We’re yet to see any concrete evidence which justifies the reprehensible claims being made against Huawei.

“For such serious decisions like a ban, you need proof,” Arne Schoenbohm, President of BSI, told German daily Spiegel.

Having just opened a new research centre in Bonn, Germany looks to be a safe market for the battered and bruised Huawei. This lab will serve a number of different purposes in the country, including due diligence. Customers, or potential customers, will be able to check the source code of various products, just to make sure all is above board.

As it stands, Schoenbohm and his team are yet to see any credible evidence which would suggest working with Huawei or other Chinese companies would present a risk to industry or Germany as a nation. Until this evidence has been presented, Huawei will be allowed to operate as it has for years. What impact this statement will have on other countries assessing the risk of Chinese vendors remains to be seen.

The US is still taking the stick approach to dealing with China and the threat it poses to the US dominance in the global economy. It isn’t difficult to imagine US diplomats and representatives leaning in to whisper in the ears of powerful people conveying a message of fear and aggression. Numerous countries have already handed out their own bans, Japan and Australia are two who have made it official through legislation, though there does seem to be numerous other governments heading the same direction.

What is worth noting is that just because evidence has not been presented to the public does not mean it is there. It might of course be classified, though this would surely have been leaked by now, or it might not have been found yet. That said, Germany is taking the right approach to the saga. It is relying on the values which have served democratic nations well for centuries; innocent until proven guilty.

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

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

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

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

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

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

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

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

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

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

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

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

Germany green lights 5G plans despite industry protest

German regulator Bundesnetzagentur has said it will move ahead with the proposed 5G auction plan, despite German telcos and industry lobby group GSMA slamming the plans as a commercial nightmare.

The auction, which will take place in early 2019, requires minimum data rates of 100 Mbps available by the end of 2022 in 98% of households in each state as well as along all major transport paths. Each of the telcos must also install 1000 5G base stations and 500 other base stations, and by 2024, the data coverage must be extended to seaports, main waterways and other minor roads.

While data rates for the longer-term targets will be lower, this is still a big ask for a country which currently does not meet the standard for 4G coverage. For the GSMA, the conditions placed on the spectrum are unreasonable and not commercially viable for the telcos. The risk is Germany will be left behind as the rest of the world progresses into the 5G economy.

“The mobile industry is essential to delivering on Germany’s vision for 5G leadership,” said said Mats Granryd, Director General of the GSMA. “We are alarmed that – despite real and substantial concerns raised by the mobile industry on the original proposals – the proposed terms make the situation worse by doubling down on unrealistic conditions that puts Germany’s 5G future at risk.

“Operators in Germany have invested billions in the country’s networks and have proven through history that they are committed to investing and providing innovative services. German consumers and businesses will be the ones to lose out from unreasonable obligations that make investment in 5G rollout uneconomical.”

One of the concerns surrounds the 3.6 GHz band, which can deliver on the high capacity demands though it does not offer the same advantages for coverage. To meet the 98% coverage conditions, the economics do not match, especially when you take the huge transport network into account. The GSMA also considers the roaming and wholesale obligations attached to the 3.4 to 3.7 GHz band as suspect, perhaps creating a critical level of legal uncertainty and will could deter investment in 5G networks. This is also where some of the telcos have found complaint.

“Our decision sets vital preconditions for the digital transformation of industry and society,” said Bundesnetzagentur President Jochen Homann. “Through the award of frequencies, we are creating planning and investment certainty, and contributing to a fast, needs-based rollout of the mobile radio network in Germany.”

Another issue with the auction requirements, which will certainly have the incumbent players up in arms, are the lighter conditions placed on new market entrants. As it stands, new comers could pick and choose their markets, as national roaming requirements could be negotiated with the regulator. It is creating a unfair environment, with the incumbents forced to provide coverage in the less commercially attractive regions while new comers could focus resources on the more profitable urban environments.

While telco moaning is usually taken with a pinch of salt, in this case you have to have a bit of sympathy for the established players. The German regulator seems determined to create an environment which increases the number of telcos in the country, and potentially builds the prospect of furthering the digital divide between urban and rural environments. Not only does this favouritism go against a lot of the independent values supposedly in place at government level, but risks the spread of wealth. This in turn will decrease a telcos ability to invest. Just as the industry is craving consolidation, the German regulator seems to be shooting off in the other direction.

The plans seems incredibly short-sighted, though it reeks of bureaucrats who wanted to clock out on time for the 4pm happy hour stein and bagel.

Germany frees up the whole of C-Band for 5G and the GSMA approves, sort of

The German government has decided to make the entire 3.4-3.8 GHz band available for 5G use, which is a good idea.

For 5G to do its thing, it needs big chunks of continuous spectrum to ‘fatten the pipe’. Piecemeal auctions of 3.4-3.8 GHz spectrum (otherwise known as C-Band) such as we had in the UK earlier this year, are not as useful as offering up the whole lot in one go. The eventual outcome may end up being the same, but the whole process is a lot more complicated.

This decision has been met with approval by the mobile industry trade association, the GSMA. “The C-Band is the most vital frequency band for 5G,” said Mats Granryd, Director General of the GSMA. “Germany is demonstrating 5G leadership in the timely release of this vital spectrum, but risks undercutting its 5G future with unnecessary obligations. Spectrum is a limited resource and it must be used and managed as efficiently as possible to ensure a 5G future that will benefit all.”

Among the GSMA’s regulatory gripes are proposed coverage obligations for 3.6 GHz spectrum, which it says disregard the laws of physics. Since the time of Isaac Newton this had been frowned on by polite society and the GSMA has chosen to use this emotive concept to point out what short range these high frequencies have.

They do seem to have a point here. 5G is all about capacity and surely coverage obligations can be left to earlier generations in the short term and 5G over lower frequencies in the long term. As characterized by the GSMA this stipulation seems to be gratuitous, counter-productive and a classic example of regulation for the hell of it.

Other than that there are some inevitable whinges about roaming obligations and high reserve prices for the auction. In the latter case we have sympathy for the GSMA position as any attempt by the German government to push up the price of spectrum is a blatant cash grab and an indirect tax on mobile subscribers.

Germany reportedly mulls Chinese kit vendor ban for 5G

Germany is the latest ‘western’ country rumoured to be thinking of prohibiting Huawei and ZTE from its participating in its 5G infrastructure.

This is according to a report from Reuters, which claims to have spoken to senior German officials who are planning a last-ditch drive to persuade the government to ban Chinese firms from getting involved in its 5G roll out on national security grounds. The report sounds slightly sceptical that any such efforts will succeed, but the mere fact that they’re giving it a go must be of grave concern to Huawei et al.

“There is serious concern,” one of these anonymous senior German officials told Reuters. “If it were up to me we would do what the Australians are doing.” They are, of course, referring to the decision made by the Australian government back in August to rule out any foreign vendors it thinks might be subject to governmental interference – a clear reference to China.

This seems to be part of a broader drive to have more of a conversation around 5G security in Germany than is currently taking place. Huawei, of course, has insisted that nothing is more important to it than security, but it must be pretty concerned that these stories keep coming up. Even if no ban takes place this sort of thing must compromise the trading environment for Chinese vendors, who will presumably have to go to greater lengths to prove themselves than the likes of Nokia and Ericsson.