We should be regulating AI, but no-one really knows how

A conundrum which has existed throughout the life of the technology and telco industry around the perfect balance between innovation and regulation.

From a technologists perspective, the question is a simple one to answer; don’t pin us back with red-tape, allow us to explore new ideas with complete and utter freedom. However, with technology becoming increasingly invasive, most sensible people would suggest there is a need to build a rulebook.

One of the main issues with regulation is the strength and depth. Striking the right balance between freedom and guidelines is an incredibly difficult task. Where the lines should be drawn is an answer which will vary dependent on who you speak to, as will the flexibility of these lines. And then of course you have the pace of change. Technology is constantly years ahead of regulation, so is it even a reasonable objective to attempt to achieve.

And then you have artificial intelligence. A technology which has great promise and is advancing faster than anything before it, but risks stripping people of their livelihoods, invading individuals privacy and compounding inherent human bias because written code. This is an incredibly complicated field, and when asked the question whether AI should be regulated, lawyers from Webber Wentzel gave a resounding yes.

Speaking to Webber Wentzel CIO Warren Hero after his presentation at AfricaCom, the issue with regulating AI is simply down to a lack of understanding and a non-existent conversation between the stakeholders in the industry. To build a reasonable legislative and regulatory foundation for AI, technologists, governments and consumer-interest representatives should all be sat around a table and contributing, but they simply aren’t.

Part of this is down to the on-going conflict between industry and red-tapers, but another factor to consider is understanding the technology itself.

“The ability to make a decision is based on the understanding of a concept,” said Hero. “Not enough people understand AI.”

Hero is 100% correct. Such a miniscule proportion of the population understand AI to the degree needed to make any decisions on the future of the technology making it is an almost impossible task. For AI to succeed, there will of course need to be rules to ensure responsible development, though there will also have to be freedoms granted. As we mentioned before, finding this balance is not simple and will require a deep understanding of the technology itself.

The issue which many governments are facing, according to Hero, is attempting to legislate and regulate in the same way governments have for generations. This might not sound terrible, but the digital economy is unlike anything which has come before, and AI presents a completely different dynamic.

Looking at the digital economy first and foremost, this is an area where technologies can continue to scale constantly. The virtual world offers no barriers, just take a look at the cloud computing segment. These companies are already incredibly influential, but how many of the worlds processes have been moved to the cloud. 10%? 5%? Less? The room for growth is exceptional, and should be treated differently to business segments of the past.

Now onto the AI arena specifically. While there are countless companies around the world who consider themselves experts in the AI world, in reality there are only a handful who dominate the space and have the scale to enforce genuine change. The likes of Google, Amazon and Microsoft has created such a strong position at the top of the ecosystem, it will be almost impossible to break the vice-like grip. This concentration, and inevitable continuation, of power is unlike anything which has been seen before.

For both of these reasons, AI (and digital in general) has to be regulated in a different manner. The trend of building new regulations and legislation on top of existing foundations will not create an environment which is healthy for the industry or the consumer.

In short, yes, AI needs to be regulated, but at the moment, there isn’t the breadth and depth of brainpower capable of doing it.

Net neutrality’s last life kept intact by Supreme Court

The Supreme Court has rejected attempts by the telco industry and the Trump administration to completely erase net neutrality rules from the lawbooks.

With petitions filed by AT&T and various industry lobby groups to quash a ruling made in favour of the Obama-era net neutrality rules in 2015, a ruling which is the only glimmer of hope for net neutrality’s survival, the Supreme Court offered a lifeline. It seems rolling back net neutrality is not enough for FCC Chairman Ajit Pai, as the Republican is seemingly attempting to destroy any future attempts to reinstate the rules, which the 2015 District Court ruling holds.

While Pai and his cronies have effected taken the US back to the light-touch regulatory playing field of 2015, moves made by his predecessor Tom Wheeler to reclassify the internet service providers still stood. In passing net neutrality rules, Wheeler classified ISPs in the same league as telephony providers, and therefore under stricter regulation. This decision was upheld by the US Court of Appeals for the District of Columbia Circuit, which AT&T, NCTA, CTIA, USTelecom, and the American Cable Association were challenging here.

The presence of this case might not have any impact on the telcos today, though it would offer any future administration, who might be pro-net neutrality, a foundation to rebuilt the walls of regulation. Pai doesn’t just want to remove the rules, he wants to drive the concept of net neutrality to extinction with no prospect of return.

This ruling however, is a win for the net neutrality camp, a rare one which just might add enough momentum to sustain life until a change in administration.

“This is good news for net neutrality supporters,” said John Bergmayer, Senior Counsel at Public Knowledge, a pro-net neutrality lobby group which is also suing the FCC for the initial roll back. “The DC Circuit’s previous decision upholding both the FCC’s classification of broadband as a telecommunications service, and its rules prohibiting broadband providers from blocking or degrading internet content, remains in place.

“While the current FCC has repealed those rules – a decision Public Knowledge is currently challenging in court – this means that the previous decision is binding on the current FCC, and on the DC Circuit panel that hears the current challenge. Much of the current FCC’s argument depends on ignoring or contradicting the D.C. Circuit’s earlier findings, but now that these are firmly established as binding law, the Pai FCC’s case is on even weaker ground than before.”

The NCTA, the Internet and Television Association, is unsurprisingly miffed with the decision.

“It is not surprising that the Supreme Court declined to hear this case dealing with the Wheeler FCC’s 2015 Order,” the NCTA said in a statement. “Once the current FCC repealed the 2015 Order, almost all parties – including NCTA – agreed that the case was moot. Today’s decision is not an indication of the Court’s views on the merits but simply reflects the fact that there was nothing left for the Court to rule on.”

It seems the absence of two Republican Supreme Court judges was the deciding factor here. The newly, and controversially, appointed Justice Brett Kavanaugh removed himself from the process, having participated in the judgement of the original appeal, while Chief Justice John Roberts supposedly owns shares in AT&T.

For the pro-net neutrality supporters this was a critical win in the courts. Firstly, for the rules to be reinstated the classification as telcos as common providers is a must, though momentum was gathering for Pai and his cronies in the blood-thirsty mission.

This is not to say net neutrality camp is not without its support, but with President Trump adding his weight to the hunting trip, the pressure was starting to build. Another factor is precedent. The legal community use decisions made elsewhere in the industry for guidance, and there were a lot of decisions going against net neutrality over the last few months. Momentum was building and the issue is becoming increasingly politicised. The light was fading, though the 2015 decision being upheld is a win.

Whether this decision acts as a catalyst for net neutrality momentum and support remains to be seen, though California’s challenge to the FCC is still hanging in the balance. After signing its own net neutrality rules in State Law, despite contradictions with federal agency positions, California has decided to put the implementation of the rules on-hold until it has resolved its own lawsuit with the Department of Justice which argues the state has acted unconstitutionally.

Elsewhere around the US, various states are lining up their own, local, net neutrality rules. Washington State has already signed its own into law, while states such as Hawaii and New York are seemingly waiting for various rulings. While the approach might be broadly similar, there will be differences in each state. This patch-work of regulatory environment is something the US government is very keen to avoid, and it would turn into an operational disaster for the telcos.

In a separate lawsuit, 23 Attorney Generals throughout the US, including Maine, North Carolina, Rhode Island and Delaware, led by New York Attorney General Eric Schneiderman, are challenging the original 3-2 decision made by the FCC to roll back the net neutrality rules. The criss-cross of lawsuits, each of which relies somewhat on another decision and precedent, is starting to become complicated.

The dominos are certainly lining up across the US, each decision may send the entire stack into freefall. The weight of each ruling is getting heavier and heavier.

Apple reportedly plans to use Intel 5G modem in 2020, but will it be any good?

Apple has boxed itself into a corner by going to war with Qualcomm, so a lot rides on the competitiveness of Intel’s 5G modem.

Fast Company has reported that Apple intends to use the Intel 8161 5G modem in its 2020 iPhones as part of its already-known strategy of switching to Intel as its sole provider of modems. This move seems to be largely driven by Apple’s dispute with Qualcomm over how much it charges for its chips.

When large companies declare legal war on each other the dispute usually metastasises as their respective legal teams search for further dirt they can use as leverage in the ongoing negotiations. These things usually conclude in an out-of-court settlement, the terms of which are largely determined by the relative legal strength of the respective positions.

The more likely one party is to win a court case, the stronger its position in the pre-case negotiation, which is why Qualcomm has been so keen to prove that Apple committed industrial espionage in sharing Qualcomm trade secrets with Intel in order to help it produce better modems.

While Qualcomm’s most recent court filing broadly outlines fresh allegations resulting from the discovery process, conversations we had at its recent event in Hong Kong suggested Qualcomm has got hold of emails that prove the alleged passing on of protected intellectual property took place.

If Apple did indeed offer Intel a helping hand, something that Intel denies, then the clear inference is that Intel’s modems were of insufficient quality without cheating. A worst case scenario might be that the 5G modems Apple apparently intends to use would be declared illegal, but even if that doesn’t happen there will be questions over the 5G performance of those iPhones versus phones running Qualcomm modems.

So, assuming this rumour is accurate, a hell of a lot is riding on those first Intel 5G modems. If they’re rubbish then not only will that be a direct competitive win for Qualcomm, but the sales and reputation of the iPhone are likely to suffer too. In its desire to dominate its suppliers Apple is forcing itself to make some technology choices that may be far more costly than any money saved on components.

Google just about manages to avoid another massive fine

The High Court in the UK has quashed an attempted class-action lawsuit against Google for the illegal collection of iPhone user’s data during 2011-2012.

The case, which was first heard in May, was brought forward by a group called ‘Google You Owe Us’, headed up by Richard Lloyd, a former Executive Director at Which. Lloyd believes in acting illegally, Google should financially compensate the iPhone users who were affected. The number of affected users has been estimated at 4.4 million, meaning Google would have been liable for damages between £1 and £3 billion. As it stands, the class-action suit can no longer proceed as it would be impossible to accurately calculate the number of iPhone users who have been impacted sufficiently.

Google, which has already admitted to wrong-doing, used a practise now known as the ‘Safari Workaround’ to obtain sensitive information without obtaining permission from the user. As a data controller in this instance, Google has breached its responsibilities under the Data Protection Act, though this case is not to punish illegal activity, but to seek compensation for users as a result of the illegal activity.

For those who are familiar with legal jargon, Justice Mark Warby concluded:

“In my judgment the facts alleged in the Particulars of Claim do not support the contention that the Representative Claimant or any of those whom he represents have suffered ‘damage’ within the meaning of DPA s 13. If that was wrong, the Court would inevitably refuse to allow the  claim to continue as a representative action because members of the Class do not have the ‘same interest’ within the meaning of CPR 19.6(1) and/or it is impossible reliably to ascertain the members of the represented Class.”

Section 13 of the Data Protection Act states individuals who suffer ‘damage’ by reason of any contravention by a data controller (in this case, Google) are entitled to compensation. Civil Procedure Rules (CPR) section 19.6(1) states each individual in the class would have to have the same ‘damage’, though as there has been only one case brought forward in the last six years, the damage cannot be logically concluded or attributed.

The case was brought to the courts in 2017. Lloyd claims Google profited from illegally collecting and processing information on iPhone users, which was then used in the ‘DoubleClick’ advertising business to create a hyper-targeted advertising service.

In the simplest of terms, Google managed to find a way of collecting information about users without going through the accepted opt-in route. Google wrote code which bypassed the opt-in on the Safari browser, and placed a third-party cookie onto the iPhones. This practise, known now as the ‘Safari Workaround’, essentially allowed Google to track iPhone users, collecting information without seeking the appropriate opt-in.

Through the collection of sensitive information including race, social class, location data and interests, Google was able to build a detailed profile of individuals and organize the users into categories such as ‘football fans’. This categorization is critical to advertisers, who want to make sure ROI is as high as possible for every pound spent. At the time of the incident, 2011-12, such hyper-targeted would have been a relatively new concept, with Google pushing the boundaries of what would be considered acceptable.

Google has already admitted to wrong-doing, and has been punished by the relevant authorities in the US, paying out multi-million sums. In the UK, such investigations would fall into the jurisdiction of the Information Commissioner’s Office, though it has not taken any action to date. What is worth noting is that this ruling against Lloyd should not restrict any action from the ICO, as it is related to class-action suits against Google compensating victims of the wrong-doing, not the wrong-doing itself. It’s a nuance, but worth noting, as the ICO could in theory take action.

For Google, this ruling will certainly come as a relief. Not only does it save the accountants from having to sign another multi-billion pound cheque, but it sets precedent. In stating it would not be possible for Lloyd to understand and identify the ‘damage’ done to each of the individual users, Justice Warby has made it more difficult for consumer groups to organize class action suits against major organizations.

The ripples of this ruling go further than the technology world. Consumer groups throughout the UK would have been watching this saga with interest; the ruling would have set precedent as to whether class-action suits are a realistic possibility in the UK. Justice Warby has not ruled out class-action suits, though he has simply stated Lloyd was not able to attribute an appropriate amount to the ‘damage’ column. More work on the foundations will be needed on the future for such class-actions suits to progress in the future.

Telco industry accuses California of violating US Constitution

It was only going to be a matter of time, but the telco industry is taking California to court over the decision to reinstate net neutrality rules.

While the rules prevent the telcos from making additional revenue through the creation of a two-lane communications highway, there is something bigger at stake here. In reinstating the net neutrality rules, California is not only questioning the validity of the Communications Act, the bedrock of regulations in the telco industry, but according to the coalition of associations suing the state, it is contradicting and undermining the US Constitution.

The American Cable Association (ACA), The Wireless Association (CTIA), The Internet & Television Association (NCTA) and USTelecom are the plaintiffs in the case, with California Attorney General Xavier Becerra is named as the defendant.

“This case presents a classic example of unconstitutional state regulation,” the filing reads. “The State of California has enacted SB-822, entitled the ‘California Internet Consumer Protection and Net Neutrality Act of 2018’, directly regulating the provision of broadband Internet access services (BIAS).

“This statute was purposefully intended to countermand and undermine federal law by imposing on BIAS the very same regulations that the Federal Communications Commission (FCC) expressly repealed in its 2018 Restoring Internet Freedom Order (and by adopting even more restrictive regulations), despite the fact that both the FCC decision and the federal Communications Act of 1934, as amended (Communications Act), prohibit states from taking such action with respect to jurisdictionally interstate services like BIAS.”

According to the lawsuit, the State of California is not only violating the FCC’s 2018 Order, it is ignoring clauses in the Communications Act, which declare states cannot pass local regulations which contradict FCC rules, and also two important aspects of the US Constitution. Firstly,  article VI, clause 2, the Supremacy Clause which states the Constitution, federal laws made pursuant to it, and treaties made under its authority, dictate the supreme law of the US.

Secondly, the Commerce Clause declares no state can regulate conduct occurring outside of its borders. As California (or anyone for that matter) fully dissect what traffic originates, traverses and terminates in the state exclusively, California is indirectly imposing its own rules on other states, and potentially other countries.

In signing net neutrality back into the regulatory rulebook, Governor Jerry Brown has opened up a whirlwind of complications and consequences. As Chairman of the FCC, Ajit Pai has the authority to dictate the future of the telecommunications industry. This has been formalised in both the Communications Act and the US Constitution.

In splintering the rulebook, California is undermining the concept of US law and regulatory policy. Should the net neutrality rules be allowed to stand in California, the whole rule book and regulatory landscape could be shaken up; California would have set precedent in contradicting both the Communications Act and the US Constitution. This is of course dependent on whether you agree with the coalition’s interpretation of the documentation, but could this be the beginning of a constitutional crisis?

Of course, as we are in a time of incredibly combative politics in the US, the two parties could not be further apart. Pai is pushing for an internet which would be the digital equivalent of the wild-west, while California is promoting heavy handed regulation. The answer lies somewhere in the middle.

The telcos, remaining at arms-length from the conflict, are at the centre of this debate. Net neutrality prohibits the telcos from making money through prioritised traffic, and while we do not necessarily agree with this strategy, these are organizations which do need to be afforded the opportunity to make money. Regulating the industry as a utility won’t work, but neither will the hands-off regulatory position.

On one side, these are not utilities. Pricing regulations and strict practises can be imposed on other verticals, such as energy companies, because the vast majority of infrastructure has already been deployed. The world is expecting the telcos to spend billions deploying new infrastructure to enable the digital economy, though there are few opportunities to secure additional revenues outside of connectivity. The OTTs have destroyed revenue generators such as SMS and voice, but then lobbies government to block other means of making money. The balance of this ecosystem is not centred and it is only a matter of time before it cannibalises itself. How long will it be before the ability to rollout future-proof infrastructure gets scaled back due to a lack of revenue generation and profitability at the telcos?

However, the telcos are not exactly trust-worthy organizations. There are numerous examples were a lack of regulation or competition has led to higher prices for customers or monopolistic tendencies. These are companies which are under shareholder pressure to deliver on the promises of 5G and recapture the fortunes of yesteryear; the situation needs to be carefully managed to ensure the balance of power remains fair. Regulation is absolutely necessary in this industry.

Net neutrality over regulates the industry, while the Pai approach is not interventionist enough. There needs to be a middle ground, but it hasn’t been found yet. One thing is clear, the current climate of contradiction, undermining regulations and conflict is not healthy for the consumer in the US, or the US on the global stage.

Virgin Media legal win sets precedent in battle over disproportionate access charges

Virgin Media and Durham County Council have agreed an out of court settlement which will see the telco pay a nominal £1 sum to access land owned by the local authority to lay new ultrafast broadband cables.

The case is the first test of the updated Electronic Communications Code, which was amended in 2017, legislation designed to simplify the process of rolling out future-proof communications infrastructure. Gaining access to existing infrastructure for upgrades is an issue which has plagued the industry for years, with telcos claiming land owners charge disproportionate fees, as well as taking the opportunity to increase rent due to a change in the inventory of the assets.

With the out of court settlement creating more favourable terms for Virgin Media, the hope is precedent will be set throughout the industry, removing an administrative barrier to deployment which has proved expensive.

“This agreement with Durham sets a much needed precedent which will speed up broadband rollout and encourage investment,” said Tom Mockridge, CEO of Virgin Media. “We hope that other local authorities and landowners now follow Durham’s example.

“Most importantly, this is fantastic news for the residents and businesses of Durham as we can now continue the good work we started with Durham Country Council and bring a real broadband boost to local communities across the county.”

“Following the reforms it was important that, as a local authority, we were able to test and understand the implications of the new code,” said Durham County Council’s Head of Planning and Assets, Stuart Timmiss. “Working closely with Virgin Media and our legal team we are happy to be able to move forward in ensuring our businesses and communities can benefit from superfast broadband.”

The case first emerged back in June, with Virgin Media hoping to expand its fibre network to 16,000 properties by the end of 2019 as part of Project Lightening, though with the council charging what the telco described as a ‘hefty’ per-metre levy progress slowed. Other telcos in the UK will likely look at this development with excitement, and hope other administrative hurdles can now be addressed.

EE is another telco which is currently taking the legal route to address one of these hurdles. Tom Bennett and Howard Jones highlighted to us a couple of months ago, EE is challenging a currently unnamed entity in the courts over rent re-negotiations land owners are forcing on telcos when inventories change in existing assets ahead of necessary upgrades. Land owners, or more commonly the agents, are using the opportunity to increase rent knowing the telcos have little choice in the matter.

“The benefits of bringing 4G and high speed broadband to an area are in improved connectivity and the innovation opportunities they can bring to businesses, local authorities and the wider community – not in any landowner opportunistically charging more money in rent,” said an EE spokesperson.

“This settlement is a positive step forward for enforcing operators’ new Code rights.”

Vodafone UK General Counsel and External Affairs Director Helen Lamprell is another who has found issue with the legislative and regulatory landscape of the UK, stating it is the most difficult region she has had to work in.

“The regulatory environment in the UK is not conducive to infrastructure investment,” said Lamprell, during a briefing in June. “The right balance has not been found yet.”

Vodafone’s issues are not only focused on access charges and ransom rent, but also the height of masts. As it stands, the tallest cellular masts in the UK are less than half the height of the same structures in Germany, a critical component when attempting to increase coverage; for every ten metres you go up, the coverage roughly doubles. Vodafone is not suggesting it wants to pepper the landscape with these monstrous structures, but by increasing the height of the masts the less sites you actually need.

While certain aspects of the UK’s legislative environment seem contradictory to government ambitions to increase connectivity quality and coverage, the success of the Virgin Media legal team demonstrates the updated Electronic Communications Code is doing its job. Perhaps the other hurdles can now be addressed.

Qualcomm finally gets a legal win in Taiwan

The Qualcomm lawyers are building a reputation as the hardest working in the industry, though at least they no-longer have to battle the Taiwanese Fair Trade Commission.

The resolution of the dispute will come as a welcome relief, allowing the team to focus on other fronts against Apple, the European Commission and various, and the legal team have even saved Qualcomm quite a bit of cash. The deal reverses most of the $773 million fine, though it has agreed to up research commitments in the country.

“We are pleased to have reached a mutually beneficial resolution with the TFTC that puts the litigation behind us,” said Alex Rogers, President of Qualcomm Technology Licensing. “This settlement directly addresses concerns raised by the TFTC, regardless of disputed positions, and builds on our foundation of collaborative, long-term business relationships in Taiwan.

“We are happy to reaffirm our commitment to licensing our valuable intellectual property under principles of fairness and good faith. With the uncertainty removed, we can now focus on expanding our relationships that support the Taiwanese wireless industry and rapid adoption of 5G technology.”

As part of the agreement, Qualcomm will increase its research footprint in the country and has committed to spending $700 million over the next five years. In exchange, Qualcomm will stop getting fined and can continue to charge manufacturers royalties on its technology. The FTC will keep the $89 million Qualcomm has already paid, but will forget about the rest.

It will cost the chip giant cash in the long-term, but this is a minor price to pay in securing a future for its threatened licensing business. This was the major worry for investors, as it is a cash-cow, generating the majority of profits which few would want to see run dry. With Apple recruiting governments around the world in its battle against the licensing business model, this is a certainly a win for Qualcomm.

Qualcomm still faces various antitrust investigations around the world, building an expensive legal bill, but with Taiwan concluding the activities are not monopolistic or abusing market position, it is precedent which Qualcomm can point to.

ZTE shares spike after it’s officially let off the hook – for now

Embattled Chinese kit vendor ZTE has announced its US export ban has been lifted, which prompted a 16% jump in its share price.

Last week the US Department of Commerce tweeted that it would lift the ‘denial order’ on ZTE once it had handed over $400 million to be kept aside to deter it from getting up to its old tricks. This announcement indicates ZTE has managed to scrape together the cash and has now jumped through sufficient hoops to get off the hook – for now.

“Pursuant to an order issued on 13 July 2018 (U.S. time), BIS has terminated the 15 April 2018 Denial Order and removed ZTE from the Denied Persons List, effective immediately,” said the short, legalese investor announcement from new Chairman Li Zixue.

So that would appear to be that. So long as ZTE is squeaky clean for a few years it will eventually get the 400 mil back and it’s now free to start trying to repair the colossal damage this whole episode has caused. There’s still the matter of the dissenting senators, but this seems to be a fait accompli.

The 16% share price spike points to limited optimism from investors that it will be able to do that, and its preliminary results for the first half of this year anticipate a loss of around RMB8 billion (over $1 billion) – a 450% year-on-year decrease – so it might not be time to break out the bubbly at ZTE towers just yet.

US government loses court case to block AT&T acquisition of Time Warner

A US Judge has ruled that a case brought by the US government to block AT&T’s acquisition is without merit, so the deal can go ahead.

“We are pleased that, after conducting a full and fair trial on the merits, the Court has categorically rejected the government’s lawsuit to block our merger with Time Warner,” said David McAtee, AT&T General Counsel. We thank the Court for its thorough and timely examination of the evidence, and we compliment our colleagues at the Department of Justice on their dedicated representation of the government. We look forward to closing the merger on or before June 20 so we can begin to give consumers video entertainment that is more affordable, mobile, and innovative.”

So that seems to be that. AT&T can go ahead and buy the company that owns Warner, HBO, etc, for $85 billion, and immediately make itself one of the world’s leading content producers. The main reason behind the US government action was concern about both the content and the means for its delivery being owned by the same company, thus creating the potential for consumers being held to ransom by making access to one conditional on paying for the other.

U.S. District Court Judge Richard Leon decided the US government had failed to prove the acquisition would harm competition and you can read his lengthy reasoning below. But that doesn’t mean there won’t be plenty of opportunities for AT&T to abuse the dominant position this acquisition will put it in. Regulators will need keep a close eye on the situation to make sure that people aren’t obliged to buy massive AT&T bundles just to get hold of Game of Thrones.

There are also broader implications for industry consolidation. Now that the legal precedent has been set, expect other communications and media giants to start casting sidelong glances at each other. “Judge Leon’s decision in AT&T/Time Warner, which forcefully rejects all of DOJ’s proposed theories of vertical harm, makes it much more difficult for the government to challenge future significant vertical mergers,” said Logan Breed, Partner in the Hogan Lovells antitrust team. “This will have an effect on potential future combinations of content providers and content creators, as well as pending mergers in other industries, such as CVS/Aetna.” Light Reading has some more analysis on that side of things here.

 

U.S. District Court Opinion on AT&T by CNBC.com on Scribd

Virgin Media takes local council to court over ‘hefty’ access charges

Virgin Media has said it will be putting new clauses in the updated Electronic Communications Code (ECC) to the test as it takes Durham County Council to court over land access difficulties.

The disagreement between Virgin Media and Durham County Council surrounds the decision to expand the telco’s fibre network to 16,000 properties by the end of 2019. While there was support in the early stages of the project, the council is charging what Virgin Media describes as a ‘hefty’ per-metre levy, despite BT and other utility providers already having their pipes and cables installed in grass verges the Highways Department in Durham recommended as the build option to minimise disruption.

“We are disappointed to be taking this action against a Council with whom we initially had a good working relationship,” said Tom Mockridge, CEO of Virgin Media. “By demanding money for land access Durham County Council is now putting up a broadband blockade to thousands of homes and businesses across the county.

“This issue goes wider than the city of Durham. Haggling over land access when we build in a new area slows down broadband rollout and deters investment. It is also an impediment to Government and Ofcom’s ambition for increased fibre rollout and network competition to BT. It’s time rhetoric was put into action to truly break down the barriers to building broadband.”

The issue which is being corrected in the updated ECC is that of ransom rents, a plague to the telecoms industry. As a substantial number of fixed and mobile assets have to be built and maintained on privately owned land, complicated leasing documents are needed. As most of the landowners realise they are in the position of power, telcos are overcharged for access, both to build the asset in the first place, and each time maintenance needs to be carried out. It is an expensive aspect of the business for telcos.

Another worrying trend which was pointed out to us by EE a couple of weeks back is the renegotiation of terms. As most of the leases contain a list of assets on the rented ground, upgrades mean a renegotiation of the terms as introducing new equipment alters the agreement, which gives the landowner the opportunity to charge more as the telco is left with little or no choice. EE is trying to set precedent against this trend with its own lawsuit, but the ECC is supposed to be addressing this unreasonable balance of power.

The main issue is telcos are not currently viewed as a utility and therefore do not have the same rights to access. Due to the critical importance of utilities such as water, gas and electricity, engineers are able to access assets without consent from landowners and do not have to worry about being overcharged in leasing agreements. Telcos want the same access rights as the utilities, but do not want to be regulated as utilities, which is one of the causes of the whole issue. The telcos are not willing to make the necessarily regulatory concessions to ensure the government can protect their interests and offer them more freedoms for the rollout of future-proof infrastructure.

The root cause of this problem is one we are familiar with; rigid and inflexible telcos, stubbornly targeting a protectionist set-up with the government without giving anything in return. Landowners should not be able to hold telcos to ransom, but some concessions will have to be made to ensure progress towards the digital dream can be made.