Walking the fine line between innovation and accountability

Almost everyone will agree the technology industry needs to be held accountable through regulation, but we are starting to wonder whether the sticky fingers of bureaucracy are getting too involved.

In today’s world, regulators and governments can’t do much right. Industry has proven it cannot be trusted in the light-touch regulatory environment of yesteryear, while the red-tape mazes woven by bureaucrats have often create significant challenges of their own. It is an equation which walks the tightest of tight-ropes, and we wonder whether civil servants are starting to over-compensate.

The latest example involves Facebook and the creation of its own cryptocurrency. In a letter from the House Subcommittee on Financial Services, Congresswoman Maxine Waters, who acts as the subcommittees Chairwomen, has asked Facebook CEO Mark Zuckerberg to pause developments on Libra until appropriate investigations have been concluded.

“Because Facebook is already in the hands of over a quarter of the world’s population, it is imperative that Facebook and its partners immediately cease implementation plans until regulators and Congress have an opportunity to examine these issues and take action,” Waters stated.

“During this moratorium, we intend to hold public hearings on the risks and benefits of cryptocurrency-based activities and explore legislative solutions. Failure to cease implementation before we can do so, risks a new Swiss-based financial system that is too big to fail.”

Some might suggest this is a sensible move to protect consumers while others will point to an already bolted horse; cryptocurrencies have been operating for some time now. This is not necessarily a reason not to investigations but asking a single company to pause its R&D plans, as opposed to the segment on the whole, seems rather heavy-handed.

Of course, what is worth noting is that Facebook is a company which should be under the scope of scrutiny more than others. Numerous scandals over the last two years have demonstrated this is not a company which can be trusted to play nice in the light-touch regulatory environment.

But you have to wonder, are the politicians over-compensating for a poor approach to technology regulation? Politicians, especially in the US, are becoming increasingly involved in the technology industry. What impact will this have on innovation, exploration and the creation of new services?

The technology, or the internet-based technology industry to be more specific, is a young one. Facebook was founded in 2004, Amazon in 1994, Twitter in 2006, Google in 1998 and Uber in 2009. In fact, the modern internet as we know it today is only 25 years old. Realistically, this is an embryonic industry with so much left to explore.

However, it always worth exploring the other side of the argument. With so much left to explore, who knows what dangers lurk in the dark corners. We’ve barely scratched the surface of the potential of the internet and look at the number of privacy scandals which have emerged. Cambridge Analytica grabbed all the headlines, but numerous companies have been operating under a cloud of obscurity when it comes to monetizing personal data and monitoring the movements of users.

There certainly is evidence the technology industry needs to be held to higher standards of accountability, but this is where the conundrum presents itself; where should the line be drawn?

The technology industry has thrived in recent years mainly because the innovators of Silicon Valley have largely been left to themselves. This light-touch regulatory environment has led to the emergence of the fail-fast business model and numerous breakthroughs which have arguably made our lives better. Some might argue against this point, but we have faith in technology.

However, the fail-fast business model solely relies on the concept of exploration. Technologists are testing ideas which have not been conceived before and therefore are not under the restraints of regulation. Ideas have been tested and the good ones are taken forward. But it is the freedoms granted to innovators which has led to the success.

If the technology industry is being tied up in more red-tape, will this progress continue? Would internet banking have emerged if lawmakers had been paying more attention? Would Google Maps be the success it is today? Would Uber have revolutionised the way we get home from the pub?

We are not suggesting the technology industry should be offered free-reign to do whatever it wants, but where should the line be drawn? How much freedom should be offered and how much involvement should regulators have in the development of embryonic ideas?

An excellent example of this point can be taken from the grilling Facebook CEO Mark Zuckerberg testimony to Congress in the wake of the Cambridge Analytica scandal. Facebook and Zuckerberg were rightly held accountable for actions during this period, though on the other side of the interrogation, politicians demonstrated they were not up to speed when it comes to technological developments.

If the House Committee on Financial Services wants to hold an investigation to understand cryptocurrency, how long will it be before it arrives at a conclusion? Weeks? Months? Years?! And should Facebook be singled out? Should this investigation not be industry-wide, otherwise you are only preventing a single company from being competitive.

This is an incredibly complex equation to balance, and we wonder whether bureaucrats are over-compensating for perceived inaction during yesteryear, or if ill-prepared politicians are attempting to secure PR points by wading into a contextually relevant debate.

If the spooks can’t hack it, the US might ban it – report

A worrying report emerging from the US concerns the future of end-to-end encryption and the on-going security of consumers; if the intelligence community can’t break it, tech firms won’t be allowed to use it.

Hypocrisy and contradiction seem to be languages on the syllabus for every politician in today’s society. This might have been the case for decades, but it seems to be very prevalent in the legislative halls around the globe currently. Today’s example concerns cybersecurity.

According to Politico, there has recently been a secret meeting with all the no.2’s from US intelligence agencies to discuss the possibility of banning end-to-end encryption. The logic is relatively simple; removing the end-to-end encryption barrier would help these agencies catch more terrorists. But then again, the contradiction is also glaringly obvious.

In the pursuit of increased security, the intelligence agencies are suggesting less security. The removal of end-to-end encryption might help these agencies catch more terrorists, but it would also expose the consumer to considerable risks such as fraud or blackmail, while also making it easier for foreign states or criminals to spy on anyone and everyone, including governments.

Fixing one problem by making several problems should not be considered a sensible or logical approach to managing national security. It’s incredibly ill-advised and quite frankly we are surprised this debate rages on.

What is worth noting is this is not a dispute which is limited to the shores of the US; there are short-sighted and dim-witted politicians trying to kill end-to-end encryption all around the world.

Australia passed a law in December to compel technology companies into creating backdoors for security services to make use of, while in the UK, GCHQ directors suggested a similar mechanism called ‘Ghost Protocol’ which received a scathing reception. During 2017, then Home Secretary Amber Rudd attempted to rid the UK of encryption, while the infamous ‘Snoopers Charter’ was a disaster waiting to happen. In France, Article L.871-1 of the Internal Security Code requires technology companies to provide access to data within 72 hours of a request.

There are other approaches as well, which pay a much-needed nod to the importance of end-to-end encryption. In Finland for example, Section 23 of Chapter 8 of the Law on Coercive Measures Act compels persons/companies other than suspects/accused persons to hand over passwords and decryption keys if it is necessary to conduct a search of data contained in a device. This approach is not perfect, but it maintains the integrity of security protocols and the resilience of end-to-end encryption.

Although these agencies might think creating backdoors and the accountability mechanisms to use them is a sensible strategy, it clearly isn’t. If there is a vulnerability created in the security perimeter, the dark web will find out about it and will go searching for it. It will only be a matter of time before someone finds it, either through perseverance or accident, and it will be monetized by nefarious characters.

What is an important factor of the digital economy is the desire and requirements of technology providers to build security into products and services. This desire to build in backdoors undermines any work which is being done. Governments are pressing for increased security, but then insisting it must be weakened. The technology industry is caught between a rock and a hard place.

Four more States stand in the way of Sprint/T-Mobile merger

With each week that passes, it seems to be getting more and more difficult for Sprint and T-Mobile US. Now, four State Attorney Generals have attempted to block the move.

Officially, the 180-day stop-clock which the FCC gives itself to approve any industry transactions has hit 202, and that doesn’t include the ‘pause’ it gave itself. And while the FCC might be taking things at a leisurely pace, it seems the Attorney General Offices around the US are building up a head-of-steam.

Two weeks ago, New York Attorney General Letitia James launched her campaign against the merger, questioning the logic and evidence used to promote the promises of increased competition, a faster 5G rollout or cheaper tariffs across the country. And she seems to have stuck a chord with counterparts in numerous other states.

Initially, James had the support of nine states, but with Hawaii, Massachusetts, Minnesota, and Nevada adding themselves to the suit, the total number of states as plaintiffs is now fourteen.

“The merger of T-Mobile and Sprint would stifle competition, cut jobs, and harm vulnerable consumers from across the country, so unity among the states will be key in defending our citizens against this power-hungry corporate union,” James said.

“We welcome the support from these four additional states, which should serve as a reminder that, all throughout the nation, we have much to lose if we do not take action to protect our people from this megamerger.”

And while this might look bad enough for Sprint and T-Mobile executives, it could get a lot worse. Over the last couple of weeks, letters have been submitted from an additional six Attorney Generals, telling the FCC investigations have begun to check the legality of the merger. Those states yet to declare are Pennsylvania (letter submitted June 5), Arizona (June 5), Delaware (June 18), Nebraska (June 18), Indiana (June 20) and Texas (June 21).

What is worth noting is that there does seem to be somewhat of a political split in in terms of objections here. All of the 14 Attorney Generals who have joined the suit so far are sitting in the Democrat camp. Of the six who are currently conducting investigations, two more are Democrat (Delaware and Pennsylvania) while four sit in the opposing Republican party (Texas, Indiana, Nebraska and Arizona).

Massachusetts Attorney General Maura Healey is objecting on the grounds of reduced competition, Minnesota AG Keith Ellison is attempting to protect jobs and lower prices, Hawaii’s AG Clare Connors didn’t say anything, and Nevada AG Aaron Ford simply said nothing of genuine value.

The most common theme with these objections seems to be focused on the idea of competition. Although T-Mobile and Sprint argue there is a need for more competition in the market, the AGs don’t seem to think so, or at least this isn’t the way to go about it. T-Mobile CEO John Legere might condemn the ‘duopoly’ which has formed at the head of the telco rankings, however the numbers do not lie.

Coverage is increasing, ARPU is coming down and the US should have all four of the major MNOs in the 5G world before the vast majority of other nations around the world. Things could be better in this market of course, but the trends seem to be heading in the right direction. This is a point which has been raised by the AGs; if it isn’t broken, don’t try and fix it.

Unfortunately for Sprint and T-Mobile, the argument of decreasing the number of telcos to increase competition flies in the face of logic, especially when you are removing the two cheapest options from the market. Of course, telecommunications is a capital-intensive segment to operate in, scale is very important, as is access to more valuable spectrum. But, the general consensus in the telco world is more providers is a better approach not less.

There will of course be incredibly loud voices on both sides of the argument, but logic lies with the AGs here. This is not to say the FCC will agree, but overarching trends argue against the need for Sprint and T-Mobile to merge.

US Senators want public disclosures on the value of personal data

Two US Senators have suggested an interesting, if currently very currently ill-defined, idea for companies in the digital economy: list the value of data on the financial spread sheets during earning season.

Senators Mark Warner and Josh Hawley are reportedly readying themselves to introduce the Designing Accounting Safeguards to Help Broaden Oversight and Regulations on Data Act, or DASHBOARD for short. This bill will attempt to force companies into disclosing the financial value of the data which they collect, analyse and action, to the SEC once a quarter.

Although this is an incredibly wide net to cast, the rules would only apply to companies that generate a material impact on revenues from the data and have more than 100 million users. This would also include data which is bundled in through relationships with third-parties.

“…I think we need debates there and enhanced privacy, but we also need a lot more transparency, because if it defaults then to status prerogatives based on how much data is worth, that may spur another debate,” Warner said on ‘Axios on HBO’ this weekend. “But we don’t know any of that right now.”

That is the big issue which Warner is addressing during his prolonged crusade against the tech giant of Silicon Valley; there are still far too many unknowns.

It appears the objective of Warner and Hawley is to create greater understanding of how the digital economy, based on the concept of sharing data, functions. Consumers are seemingly happy to trade away their personal information, but you have to wonder how much of an informed decision this is today.

This is the challenge in addressing a rapidly growing and evolving segment. Not only are we as consumers dealing with challenges for the first time, but so are the regulators and legislators. Rules need to be created which are contextually relevant. Today, the regulatory and legislative landscape is dated, but this looks like one step in the right direction.

Warner and Hawley are seemingly trying to address two issues; firstly, raising awareness and creating a greater understanding of how much information is collected on individuals. And secondly, some more clarity on how much data is actually worth.

The second issue is an interesting one, as there does not seem to be a great level of consistency when it comes to the commercial value of data to an organization. Some might suggest value is more of a nuanced term, with these companies using data sets to improve products, but others have a more direct link. Facebook is a company which directly monetizes user data, suggesting it is worth in the region of $20 a month per user.

As part of the Bill, the SEC will be instructed to develop models to identify the value of the data. There would be several different models, each accounting for different use cases, business models and the vertical segments in which the businesses operate. This might prove to be a difficult aspect of the Bill, as the SEC would have to go on a recruitment drive to hire people capable of understanding the nuances and complexities of the digital economy.

Of course, with every step made with legislation and regulation, you have to take into account the rule of unintended consequences. Once users know the value of their data, they might ask to be compensated for it. This is not what the Bill is intended to do, and the Senators will have to be sure to put concrete protections in place to ensure business models are not undermined.

Although identifying the value of personal information will most likely, and quite rightly, inspire future public debate, lawyers should not be able to hold the companies who monetize personal information to ransom. If users are not happy about the situation, they can close their accounts and ask for personal information to be deleted. You wouldn’t ask for a refund on an umbrella because you found out the manufacturer was making more money than you originally thought using cheaper materials.

Some users might be upset or angered by the fact these companies are making money off their personal information, but they should always remember they are being offered a service for ‘free’. How many people would pay for subscriptions to Facebook or Twitter, or a one-off rate for any of the currently free apps which are being downloaded today? If you remove the commercial incentive for these companies, some (if not the majority) will cease to exist.

And while there should be protections for these companies, the two Senators are perfectly justified in suggesting this Bill. The user should be sufficiently educated in the ways and means of the digital economy to make an informed decision before entering into a contract with any service, product or platform, and irrelevant whether it is ‘free’ or not, normal rules should apply. Users need to have all the information available and this include the commercial value of their personal data.

Ultimately this is a Bill which is littered with potential pitfalls and hurdles for the digital economy. Warner and Hawley will have to be incredibly careful they do not stutter the promising progress of this segment. Transparency and privacy are two ideals which should be enhanced, but this should be done in a way which also encourages businesses to thrive, or at the very least, does not inhibit valid operations.

US rumoured to begin posturing at India

The Trump administration is certainly an ‘enthusiastic’ one, and now it appears it might be turning its attention to India.

According to Reuters, the US is set to start beating its chest in front of the Indian Government, suggesting it will limit H-1B work visas for nations who force foreign firms to store data locally. US Secretary of State Mike Pompeo is currently readying his forces for an Indian excursion, and it would appear he is not in a friendly mood.

The H-1B work visas are popular with many US businesses and individuals around the world. The visa allows an individual to enter the US to temporarily work at an employer in a specialty occupation. Considering the foundations of Silicon Valley were built on its ability to attract the best talent from around the world, this has been a very beneficial programme for the US economy and those specialised workers who want to maximise their earnings.

Although there are no official quotas, it is believed that Indian citizens account for 70% of the H-1B visas which are issued each year. One outcome which is being suggested is that the country and its citizens would be limited to 15% of the annual total.

However, should the rumours prove to be true, it could widen an already strained relationship between the US and India. The US might be the most powerful and influential nation worldwide, but it is proving to be more of a bully than an ally at the moment.

Interestingly enough, this move could also put the US at odds with numerous other nations; India is not the only one which places data localisation requirements on foreign countries.

Russia and China are two countries which have very strict data localisation laws, though it will surprise few that the US does not have an issue in upsetting these governments. The European Union is another however. There are currently laws in place in Europe which make it difficult to transfer large volumes of data outside of the bloc, effectively acting as localisation requirements.

One of the best examples of how difficult the European laws can be to navigate is a battle between the US Government and Microsoft which ended last year. In this saga, the Department of Justice wanted access to emails stored on one of Microsoft’s Irish servers. Due to localisation complications, Microsoft argued the US had no jurisdiction and should not be granted access to the content. This battle continued for five years, with the passing of the CLOUD Act effectively ending the debate. It is still controversial, but this chapter has been closed.

Protection of a nations citizens and jurisdiction are two of the reasons sovereign nations are keen to implement data localisation laws, as well as the fact it provides a handy boost to the local economies. We suspect there will be objections if the US attempts to bully its way to eradicating these requirements.

Should the reports be true, another data privacy and protection debate could be on the horizon.

Ofcom adds some colour to ‘fairness’ campaign

It might sound like a political punchline, but the ‘Fairness Framework’ from Ofcom is starting to take shape, though whether it forces telco transparency remains to be seen.

The Fairness Framework is effectively incremental progress to address what some would suggest is an unfair dynamic between buyer and seller in the wider communications industry. While there is a gluttony of comparison websites which bill themselves as a means to cut-through the white-noise generated by the telcos, it is still an arduous campaign to find the best deal available, and then subsequently get out of current contracts.

Most would consider themselves above the risks and pitfalls of suspect and nefarious contracts, though campaigners believe this is not the case. In September last year, the UK Citizens Advice Bureau (CAB) launched a super-complaint with the Competition and Markets Authority (CMA) suggesting service providers over-charging renewing customers to bring in an extra £4.1 billion a year.

In today’s announcement, Ofcom has provided more detail on the ‘Fairness Framework’.

Firstly, Ofcom has be conducting a review as to how to create a mechanism to ensure clearer, fairer deals for people who pay for mobile services and handsets together. Final proposals will be made public over the next couple of weeks.

Secondly, the team is currently reviewing broadband pricing practices, attempting to understand why some pay more than others for similar or exactly the same services. Vulnerable members of society are the ones who at the greatest risk here. Another initiative ties into this area, attempting to force the telcos to provide clear, honest information for broadband shoppers. Ofcom is also attempting to introduce rules which will compel service providers to be more transparent when their initial contract is up and explain their best available deal.

Another initiative will allow mobile phone customers to switch provider with a text message, while there are plans underway to introduce a new compensation scheme to provide money back for broadband and landline customers when things go wrong.

For the moment, the majority of this announcement should be attributed to the ‘work in progress’ column. Some of these initiatives will be written into regulation sooner rather than later, though most will still have to be cast out for public consultation. This is a mid-year report card more than anything else.

That said, it’s not a bad thing. In opposition to the stance of the telcos, Ofcom is attempting to be as transparent as possible with its work.

This is the objective of Ofcom here; transparency. For years, the telcos have operated partly behind a curtain of obscurity. Contracts were complicated due to a lack of transparency, and this is what Ofcom is looking to tackle. It is nice to see progress is being made, but we’re not quite there yet.

Industry quietly lobbies against Trump’s anti-globalisation agenda

Slowing down the progress made by Huawei on the global stage might be a win for the White House, but US firms are not seeing the benefits as some are reportedly lobbying against the infamous ban.

In a televised interview this morning, Huawei Founder Ren Zhengfei suggested sales forecasts will be negatively hit by the firms debut onto the US ‘Entity List’, taking two years to get back onto the 2018 trajectory. For the White House, this might be vindication of its aggressive anti-Huawei agenda, but not everyone is happy about how events are unfolding.

According to Reuters, US semiconductor firms are quietly lobbying the US Department of Commerce in an attempt to limit the negative impact of the ban. Let’s no forget that while the White House might seem against globalisation trends right now, the success of these firms is largely based on the idea of free-trade and capitalising on the rapid evolution of international markets.

The issue which these firms face is one of commercial loss and gain. Huawei is one of the industry’s biggest consumers of semiconductor products, with the firm rumoured to spend roughly $20 billion a year on such products. When you look at the impact on some firms, you can see why the semiconductor industry is getting a bit twitchy.

Last week, Broadcom lowered its sales forecast for the year by $2 billion, pointing towards one of its customers being caught up in an international trade-war. Although Broadcom has not explicitly stated how much of the total revenues are attributable to Huawei, firms are only compelled to do so when it is more than 10% of the total, the numbers would suggest it is not far off that percentage.

And Broadcom is not alone on relying on Huawei as a customer. Qorvo depends on Huawei for 11% of its total revenues, while Lumentum has said Huawei accounted for 18% of all shipments during the last quarter. As a result, Lumentum’s sales forecast is now $30-35 million less for the year. Xilinx is another chipmaker which has been impacted by the ban on selling components to Huawei, and there are others as well including Intel and Qualcomm.

As a result, numerous lobbying efforts are reportedly being held behind closed doors to mitigate the impact. This might be exemptions or the creation of loopholes, but the friendly-fire is quite notable in this segment.

What is worth noting is that there are other lobby efforts going on also. Google is rumoured to be in active conversations, suggesting its operating system Android should be exempt from the ban on the grounds of national security. Google is arguing that should it be banned from working with Huawei, it would not be able to provide timely security updates which could make the devices vulnerable to hacking and data breaches.

However, there is a commercial angle to all of these arguments which might gain more traction in the minds of the government puppeteers.

At Google, the firm has a dominant position in the OS market. Huawei’s alternative OS might not be able to dislodge this position, but it does have a significant domestic market to drive user adoption. If a suitable alternative to Android emerges from the Chinese telco flagbearer, it would not be unimaginable to see mass adoption in the Chinese market. Once it has domestic domination, it would not be unusual to see international expansion to the China-friendly nations. This would potentially erode Google’s influence on the world.

In the semiconductor space, the risk is of the emergence of a homegrown Chinese-semiconductor industry.

This is not to say China does not already have a presence in the semiconductor space but forcing Huawei away from the US could be the catalyst the slumbering sector needs. Companies like Shenzhen Fastprint Circuit Technologies and Jiangsu Changjiang Electronics Technologies have been making financial gains in recent months, both in terms of revenues and share price, while Huawei’s HiSilicon has also been ramping up.

The US is dominant in the semiconductor market and will probably continue to be. There is a gap in competence for core technologies in the Chinese segments to eclipse this position, though the risk is erosion of profits. The more competitors there are on the market, the lesser the market share for US firms. This assumption might well be exaggerated when you consider the preference of Chinese firms for a homegrown supply chain.

For the semiconductor industry, this should be seen as a red-flag. The Semiconductor Industry Association (SIA) has already suggested the industry is in a bit of a slump at the moment, with sales for April down 14.6% year-on-year. The SIA does have international members, though its biggest role is to represent the interests of US manufacturers. The last thing these firms need right now is more bad news when the market is already dampening.

The result of this friendly-fire is conversations behind closed-doors. The Trump administration is seemingly trying to dilute the influence of China on the rest of the world, though it appears to be having the same impact on some US firms. We’ve said this before, but the result of this trade-war seems to be nothing by a net-loss globally right now; no-one is winning, and it seems to be a matter of damage limitation.

What the White House should be wary of is whether this anti-China agenda is starting to look like a personal vendetta for the President. If there is notable damage to US firms as well as Chinese, the White House must question whether the current strategy is the most effective.

Is ‘Make America Great Again’ is the motto of the White House, it would be useful for the rest of us to understand how much friendly-fire will be tolerated in the quest to destroy the Silk Road.

G20 gets tough on tech tax as trade war gets agenda nod

20 bean-counters walk into a bar and ask for a tonic water. The barman asks who picking up the bill, and all fingers are pointed towards Silicon Valley.

In southern Japan, finance ministers and representatives of the central banking organizations have gathered to discuss the world of international and domestic finance. Of course, G20 is about much more than spreadsheets and calculators, but this weekend saw the accountants gather, while in the next room, ministers for trade and the digital economy were setting the world to rights.

Starting with the accountants, Silicon Valley is to remain the political punching bag of 2019.

“Specifically, in the area of international taxation, we will continue to have discussions on a review of the existing tax framework triggered by digitalization, in addition to fighting against tax avoidance and evasion,” Japanese Finance Minister Taro Aso said in a statement.

Of course, these politicians are savvy enough not to target a specific segment or highlight companies who are abusing the grey areas in the system. There are numerous different organizations outside of the tech sector who are mistreating globalisation trends for tax benefits, though the tech giants are the ones in the limelight right now.

In the G20 Finance Ministers and Central Bank Governors meeting, new ideas have been tabled suggesting governments around the world will be cracking down on the creative accounting techniques which are becoming ever-so-more common.

According to a communique seen by Reuters, the newly proposed rules would not only make it more difficult for the tech giants to make use of low-tax countries for their benefit, it would also work the other direction. Countries like Ireland, who have benefitted from offering loopholes to the tech giants, would have their freedoms curbed in the pursuit of fairness and a more level global approach.

The new rules would propose two different approaches to taxation. Firstly, companies would have to pay fair tax on the revenues which are derived in the country, and secondly, should the accountants find a way around these rules, a global minimum tax rate could also be introduced. It is the tax version of the Swiss Cheese model; the more layers which are incorporated, the more difficult it is to effectively create a tax evasion model for these organizations to follow.

For countries like the UK and France, this is a win, though the likes of Ireland, Luxembourg and the US will find the outcome frustrating. While the UK and France have been pushing for more stringent tax rules, Ireland and Luxembourg are attempting to protect the light-touch regulatory environments which benefits their own societies but screws everyone else.

The US has suggested any change to taxes was discriminatory to its own companies, effectively a raid on the US economy. Although US Treasury Secretary Steven Mnuchin has seemed relatively cordial in reaction to developments, it remains to see whether any further strain is placed on international relationships. The US is already struggling to maintain strong links with certain governments, and this presents another risk to stress relationships.

Mnuchin has also found himself in the news regarding the Huawei conundrum.

The US finance chief has said in Fukuoka that a trade deal between the US and China could ease the firm stance which is threatening to provide collateral damage all around the world. The statement quotes President Donald Trump, who made the suggestion over Twitter a few months back.

For those firms impacted by the ban, the reiteration of this statement might come as some relief, though critics will become increasingly frustrated. It seems the White House has little concern for collateral damage as long as its own ambitions are fulfilled. For the firms who supply products to Huawei or investors who have been left short by such a ban, the ease in which their livelihoods can be used by the White House as a disposable bargaining chip must be incredibly worrying.

This of course was a topic of conversation at the Ministerial Meeting on Trade and Digital Economy also.

“We continued our dialogue to mitigate risks and enhance confidence among exporters and investors, as we committed to do in Mar del Plata last year,” a briefing document states. “We affirmed the need to handle trade tensions and to foster mutually beneficial trade relations.”

While it might seem like a throw-away comment, perhaps we should appreciate the significance of recognising the situation. In most circumstances, governments would steer clear and allow the bickering duo to continue their chest-beating, however in recognising the circumstances perhaps we are closer to someone stepping in and de-escalating the situation.

Clearly neither the US or China can be trusted to be mature and manage the saga for a net-gain, so it might need a third-party to step in. As it stands, no-one is benefiting, and everyone is losing. The winner of this trade war will be the one which can be the least negatively impacted; that should not be considered an effective way to manage international relations.

Maine gets tough on telcos over data economy

Maine Governor Janet Mills has signed new privacy rules into law, demanding more proactive engagement from broadband providers in the data-sharing economy.

While the rules are tightening up an area of the digital world which is under-appreciated at the moment, it will have its critics. The law itself is targeting those companies who delivering connectivity solutions to customers, the telcos, not the biggest culprits of data protection and privacy rights, the OTTs and app developers.

The rules are applicable to broadband providers in the state, both mobile and fixed, and force a more proactive approach in seeking consent. Telcos will now be compelled to seek affirmative consent from customers before being allowed to use, disclose, sell or permit access to customer personal information, except in a few circumstances.

As is on-trend with privacy rules, the ‘opt-out’ route, used by many to ensure the lazy and negligent are caught into the data net, has been ruled out.

There are also two clauses included in the legislation which block off any potential coercing behaviour from the telcos also:

  • Providers will not be allowed to refuse service to a customer who does not provide consent
  • Customers cannot be penalised or offered a discount based on that customer’s decision to provide or not provide consent

This is quite an interesting inclusion in the legislation. Other states, California for example, are building rules which will offer freedoms to those participating in the data-sharing economy if the spoils are shared with those providing the data (i.e. the customer), though the second clause removes the opportunity to offer financial incentives or penalties based on consent.

This is not to say rewards will not be offered however. There is wiggle room here, zero-rating offers on in-house services or third-party products for example, which does undermine the rules somewhat.

It is also worth noting that these rules only pertain to what the State deems as personal data. Telcos can continue to monetize data which is not considered personal without seeking affirmative consent, unless the customer has written to the telco to deny it this luxury. Personal data is deemed as the following categories:

  • Web browsing history
  • Application usage history
  • Geolocation
  • Financial
  • Health
  • Device identifiers
  • IP Address
  • Origin and destination of internet access service
  • Content of customer’s communications

What is worth noting is this is a solution to a problem, but perhaps not the problem which many were hoping would be addressed.

Firstly, the telcos are already heavily regulated, with some suggesting already too much so. There are areas which need to be tightened up, but this is not necessarily the problem child of the digital era. The second point is the issue which we are finding hard to look past; what about the OTTs, social media giants and app community?

The communications providers do need to be addressed, though the biggest gulf in regulation is concerning the OTTs and app developers. These are companies which are operating in a relative light-touch regulatory environment and benefiting considerably from it. There are also numerous examples of incidents which indicate they are not able to operate in such a regulatory landscape.

Although it is certainly a lot more challenging to put more constraints on these slippery digital gurus, these companies are perhaps the biggest problem with the data-sharing economy. Maine might grab the headlines here with new privacy rules, which are suitably strict in fairness, but the rule-makers seem to have completely overlooked the biggest problem.

These rules do not add any legislative or regulator restraints on the OTTs or app developers, therefore anyone who believes Maine is taking a notable step in addressing the challenges of the data-sharing economy is fooling themselves. This is a solution, but not to the question which many are asking.

US attempts first step towards breaking up big tech

The US House Antitrust Subcommittee has formed a bipartisan investigation into competition in digital markets, potentially offering a threat to solid foundation of the technology giants.

While the technology giants have increasingly become political punching bags over the last few years, the industry has been pretty effective at dodging any material impact. Many politicians have taken aim, but few have landed a shot. This approach, taking in voices from both sides of the US political spectrum might offer more of a challenge.

“The growth of monopoly power across our economy is one of the most pressing economic and political challenges we face today,” said Antitrust Subcommittee Chairman David Cicilline. “Market power in digital markets presents a whole new set of dangers.

“After four decades of weak antitrust enforcement and judicial hostility to antitrust cases, it is critical that Congress step in to determine whether existing laws are adequate to tackle abusive conduct by platform gatekeepers or whether we need new legislation to respond to this challenge.”

To date, the technology giants have operated with relative regulatory freedom, though the shackles are being dragged towards Silicon Valley. This is not an unusual situation; embryonic industries are often given room to growth and prosper before being tied back with red tape when the influence starts to become notable.

For the tech space, the calls for regulation have been getting lounder month-on-month. GDPR was one of the first major pieces of legislation, while the constant inability of the industry to demonstrate its ability to self-regulate have been forcing the hand of politicians who often do not like to get involved in things they do not understand.

“Big Tech plays a huge role in our economy and our world,” said Congressman Doug Collins. “As tech has expanded its market share, more and more questions have arisen about whether the market remains competitive.

“Our bipartisan look at competition in the digital markets gives us the chance to answer these questions and, if necessary, to take action. I appreciate the partnership of Chairman Nadler, Subcommittee Chairman Cicilline and Subcommittee Ranking Member Sensenbrenner on these important issues.”

Despite negative connotations, monopolies do offer significant benefits to a country, and it seems the US has traditionally been very effective at judging when it is happy to stand-off and when to step-in.

In 1890, the Sherman Antitrust Act was passed into US law. This act banned trusts and monopolistic combinations that lessened or otherwise hampered interstate and international trade. Although it was not necessarily the most successful of Acts to start with, it soon began to swing into motion.

One of the first monopolies to be attacked by politicians was Standard Oil in 1911. At the time, Standard Oil had cornered 90% of the oil market across the country but was allowed to thrive. It was only broken up, coincidentally, once the firm had finished construction of nationwide train infrastructure, dramatically decreasing the cost of operations. At this point, the Sherman Antitrust Act was used to open up the industry.

There has been a lot more regulation passed in the intervening years since 1890, the Clayton Act was introduced in 1914 to add more clarity to the definition of when a monopoly causes more damage than good, and more industries have been carved up. From sugar and tobacco to meat packaging and, more recently, telecommunications. The trend seems to be the same.

Every time monopolies have been challenged by US politicians there seems to be a watershed moment reached. They might be a few years late with the technology industry, but the same could be said here.

The fact is monopolies offer a concentration of wealth and scale opportunities. A few might be collecting all the riches, but operational efficiencies allow for more rapid growth and expansion. It makes sense to ‘dance with the devil’ for a short period in pursuit of the greater good.

Almost every aspect of the digital economy has now been normalised in the eyes of the mass market, and those areas which haven’t are increasingly becoming standard practice (AI for example). The likes of Facebook, Google, Amazon, Netflix, Uber, AirBnB and Microsoft can largely be thanked for that, but now the mission is complete, consumers are open to a new way of spending and ecosystems have the potential to flourish. It seems the benefits of having tech monopolies has passed and the wealth needs to be spread more evenly.

This is of course not to say the tech giants will disappear, or that the House will be successful in their pursuit of increased competition, diversity and evenly dispersed profits.

What the tech giants have become very good at in recent years is lobbying and challenging legislation. One is the subtle art of influence, a shady practise often conducted over dinner or behind closed doors, the other is the heavy hammer of legal expertise, hitting back at new rules with expensive lawyers, fuelled by the profits of market dominance.

The likes of Facebook and Amazon will not take this challenge lying down. Executives make too much money, investors have too much skin in the game and egos are too great to have empires carved apart. These companies have absorbed the blood, sweat and tears of many of these executives, with countless sleepless nights directed towards the pursuit of billions. These executives are dedicated hunters, and they will not let their prey out of their sights without a bloody fight.

One example of the industry winning is Microsoft. In the 90s, Microsoft was challenged on whether it was abusing its position as essentially a non-coercive monopoly. It might have lost the case and has been the focal point of other antitrust cases since, but the red tapers were not successful in breaking up the behemoth.

Other examples of less successful ventures from the politicians focus on the utilities space. In some regions, monopolies are allowed to exist, though strict pricing regulations prevent any, in theory anyway, market abuses. This has stemmed the prospect of flourishing spreadsheets, which would be just as bad an outcome for the tech giants and investors.

Another factor to consider is that of competence. If the politicians are going to be effective in breaking up big tech, they first have to understand how it works today and what the risks of tomorrow are.

There are two problems here. Firstly, the best talent (engineering, accountancy or legal for example) are drafting into the ranks of the technology giants. And secondly, career politicians are more common than not. These are people that specialise in the celebritised-practice which politics has become, they are not leaders of industry as they were in previous generations. This gulf in competence could prove to be a major problem for the Subcommittee.

Monopolies have their place in the economy, at least for a short period of time, and this investigation from the House  Antitrust Subcommittee will aim to figure out whether this time has been reached. First, the politicians have to prove there is evidence of monopolistic abuses, or serious potential, and then comes the difficult job; squaring up to the technology giants, industry experts and the mountains of cash fuelling them.