Facebook bags former UK Deputy PM as lobbyist in chief

Former MP Sir Nick Clegg has joined Facebook to take over as VP of Global Affairs and Communications. In other words, it’s chief lobbyist.

The appointment is certainly an interesting one. Having led the Liberal Democrats (the political form of irrelevance) from 2007 to 2015, and served as Deputy Prime Minister in the coalition government under Prime Minister David Cameron, Clegg was defeated in his constituency of Sheffield Hallam by the Labour representative.

“Having spoken at length to Mark and Sheryl over the last few months, I have been struck by their recognition that the company is on a journey which brings new responsibilities not only to the users of Facebook’s apps but to society at large,” said Clegg in a Facebook post. “I hope I will be able to play a role in helping to navigate that journey.”

Based out of California, the hire could be an clever move for Facebook. Clegg, despite being as inspirational as scrambled eggs, has plenty of experience of the political ping pong, most crucially as a Member of the European Parliament for East Midlands between 1999 and 2004, and a position as a European Commission trade negotiator. Being one of the most stringent regulatory markets on the planet, having Clegg’s European experience is certainly a bonus.

The issue which Facebook might face in hiring Clegg is the weight which he carries. Being leader of the Liberal Democrats and Deputy Prime Minister might look good to US corporates on the CV, but the reality might be a bit different. The Liberal Democrats are a featherweight presence in British politics, and while Clegg did lead the party to the weighty presence of 57 seats in the House of Commons, he also led them off a cliff to eight in the following General Election during 2015. Clegg left politics rather sheepishly and without leaving any real legacy or memory.

Unfortunately for Facebook, the UK is one of the markets where Clegg will be most needed. With CEO Mark Zuckerberg under threat of a summons after repeatedly ignoring calls to appear before a Parliamentary Select Committee, someone needs to calm the UK waters. With the neither the Conservative or the Labour party holding in him in particularly high regard, it might be more of a beg mission than lobbying.

“Our company is on a critical journey,” Facebook COO Sheryl Sandberg wrote in a separate post. “The challenges we face are serious and clear and now more than ever we need new perspectives to help us though this time of change.

“The opportunities are clear too. Every day people use our apps to connect with family and friends and make a difference in their communities. If we can honor the trust they put in us and live up to our responsibilities, we can help more people use technology to do good. That’s what motivates our teams and from all my conversations with Nick, it’s clear that he believes in this as well. His experience and ability to work through complex issues will be invaluable in the years to come.”

Change is certainly on the horizon for Facebook. With numerous scandals plaguing the business, and the threat of a GDPR fine following the most recent data breach, the team will have to carefully manage the Gaggle of Red-tapers in Brussels. Europe already the most stringent data protection and privacy rules worldwide, and it would be no surprise to see those tightened further. Clegg certainly has an interesting couple of months ahead.

US Senators hit out at India’s pro-privacy and localisation laws

Two US Senators have signed a letter addressed to India’s Prime Minister Narendra Modi suggesting new rules to tighten up data practices in the country could lead to a weakened trade relationship with the US.

The US Government has already shown the damage which can be done when it starts throwing around economic sanction and hurdles, almost sending ZTE to join the Dodo on the extinction list, and it appears to be using the same tactics here. However, instead of punishing an organization which broke trade laws, it is attempting to bully a country into its own line of thinking and away from a pro-privacy stance.

“We see this (data localization) as a fundamental issue to the further development of digital trade and one that is crucial to our economic partnership,” the letter signed by Senators John Cornyn and Mark Warner states. The Senators serve as co-chairs of the Senate’s India caucus.

The letter, seen by Reuters, relates to new data protection, privacy and localisation rules which are set to come into play this week (October 15). The rules have been in the making for some time, and while there are some very suspect clauses, this is an attempt to tame the wild-west internet in the country, applying regulations which should be deemed more acceptable for the digital economy.

Back in July, the Indian Government unveiled a report which detailed its new approach to data regulations in the country. Included in the rules are restrictions on how data can be collected and utilised, setting out a similar stance to GDPR in Europe, while also including new approaches such as the right to be forgotten, explicit opt-in consent for certain categories of data (that which is deemed sensitive), and also data localisation. It is a much more stringent approach to the data economy, taking India closer to the European stance on privacy than the US’ views.

Aside from the data protection and privacy benefits of localisation, and not to mention greater influence for the Indian Government, such a strategy also stimulates the economy. Local jobs will have to be created and new data centres will have to be constructed to meet the rising demands of the increasingly digital Indian economy and society. These are clearly benefits for the country, though the threat of an impact on US trade will certainly be a worry for India.

Over the course of 2017, India exported $34.83 billion worth of goods and services to the US. This figure accounted for 16% of the total exports for the country, making the US the largest trading partner. The US Government certainly does have leverage to coerce India into its own way of thinking.

The letter from the Senators also happens to coincide with some pretty heavy lobbying from the likes of Visa, Mastercard and American Express. All would certainly find life simpler if there was no such thing as localisation, though it seems lobbying Senators to fight the cause has been more effective than efforts to persuade Indian officials to head a different direction. The new rules seem to have been influenced by Europe’s GDPR, though the US, both the Government and companies, have a different approach to data than the pro-privacy Europeans.

With India’s economy fast evolving from analogue to digital, there certainly will be profits to be made. Many US companies, most notably those in Silicon Valley, will be looking greedily at the country though such rules would make life more difficult. Not impossible, but not as simple. Perhaps the economic weight of the US Government can bully India into believing the ‘American Dream’.

White House looks to get ahead of AI

The White House is set to host a conference with Silicon Valley’s best and brightest to learn how laws and regulations should be adapted to fuel the growth of artificial intelligence in years to come.

Google, Amazon and Intel are among the big names to be invited to Washington as the US government tries to get ahead of the trends, according to the Huffington Post. While building a framework which grants flexibility for innovation, rigidness for accountability and protections for the livelihoods of citizens is a complicated task, the White House is follows trends from around the world as rule makers aim to prove themselves relevant.

Over in Europe numerous countries have been attempting to tackle the upcoming wave of algorithms and swell of data, as has the European Commission. While it is critical for governments and bureaucracies to ensure developments do not negatively impact the day-to-day lives of citizens, the White House might also be concerned with progress being made over in China.

For many industry commentators artificial intelligence might be the defining factor of the digital era. 5G is claiming the headlines for the moment, but this infrastructure is nothing more than the foundations; it gives companies and entrepreneurs the opportunity to be innovative and explore new ideas. One of these ideas is AI, which already promises to be an integral part of every technological breakthrough in the pipeline from personalised healthcare to autonomous vehicles, and the management of smart cities.

Looking across the Pacific to China, the US government might be seeing progress and investments made by the Chinese government as a worrying trend. The country has already produced some of the most powerful companies in the technology industry, and looks to be fuelling another horde with money continued to be directed at next-gen technologies. The US might be home to the technology leaders of today, but should the country not create a suitable environment for the development of AI it won’t be too long before China dominates the technology world.

AI will be a critical component of the digital economy, and the importance of this conference should not be underplayed. Executives heading across to Washington will have to do their best to encourage an update of laws and regulations, but also ensure the government is being kept at arm’s length; the red tape is being prepped.

Huawei gets US probe for suspected Iran naughtiness

Few will be surprised the US government is looking to weaken the already limited position of Huawei in the US, the emergence of a probe from the US Department of Justice is just another stepping stone in US/Chinese tensions.

According to the Wall Street Journal, the US Department of Justice has launched an investigation to see whether Huawei violated US sanctions against Iran, which will have numerous companies throughout the US as nervous as Huawei. The whole ZTE saga started with a similar investigation and escalated to a Denial Order effecting not only the firm’s ability to sell in the US, but also source products and services from the country. Suppliers to Huawei should be watching developments here very acutely.

Sources have stated the investigation follows administrative subpoenas on sanctions-related issues from both the Commerce Department and the Treasury Department’s Office of Foreign Assets Control, those a criminal investigation from the Department of Justice is on another level. Consequences could be very severe here.

This of course isn’t the first time Huawei has received attention from the US government. US Congressman Mike Conaway was looking to have both Huawei and ZTE banned in the US in January, political pressure on AT&T ended any prospect of selling devices through the carrier, while numerous committees and investigations have pointed the espionage finger at the vendor. It was only a matter of time before the tale escalated and higher offices were brought into the picture.

There have been no official confirmations of the investigation just yet, but is there really any need? The US government has had its eyes set on ridding both ZTE and Huawei from its shores for some time now, so it should come as little surprise to anyone. The US has been battling China for control of the digital economy, with the globalisation trend threatening Silicon Valley’s (as well as the US on the whole) dominant position at the top of the technology world.

The government has already effectively banned any public sector contracts with the giant, though this will be another step along the line. While we should expect a response from the Chinese government, the fact it hasn’t done anything drastic to date suggests it has an eye on the bigger picture. In banning ZTE from US shores, there has been substantial damage done to US companies. While it might sound like the US is winning the trade war, it is isolating its own economy from the global scene, with friendly-fire scattering everywhere. It does seem to be incredibly short-sighted, especially when you look at the dependence of some of the US’ largest companies dependence on Chinese manufacturing capabilities, most notably Apple.

It was only going to be a matter of time before such an investigation kicked off, and it will only be a matter of time before the Chinese government reacts as well. We’ve said this before, but it is worth reiterating, there will be no winners as a result of this trade war. Everyone involved will only be in a worse position than today if it continues to escalate.

Trump tax breaks start paying off for Google

Google has unveiled the numbers for the first quarter of 2018, which also happens to be the first period of 11% corporation tax, with the search giant pocketing profits of $9.4 billion, up from $5.4 billion in 2017.

Revenues in the advertising continue to surge, with this quarter growing 26% year-on-year, though Google is showing it isn’t simply a one trick pony. Looking at the ‘Other Revenues’ segment, which includes cloud, Play and hardware, revenues were up 36% to $4.354 billion. Even without the search advertising, Google would be a business generating roughly $17.5 billion a year; that is monstrous.

“We delivered ongoing strong revenue growth, up 26% year-on-year and up 23% in constant currency,” said Ruth Porat, CFO of Alphabet, parent company of Google. “The sustained outstanding performance in sites revenues, in particular, reflects the combined benefits of innovation and secular growth, with mobile search again leading the way. Robust growth in network revenues was again led by our programmatic business. Ongoing substantial growth in other revenues, namely cloud, hardware and Play, continues to highlight the growing contribution of our non-ads opportunities.”

The additional cash from alternative revenues, as well as the tax breaks from President Trump’s ploy to lure technology cash back into the US come will be welcomed by executives as reform lurks on the horizon. The Cambridge Analytica scandal might have been focused on Facebook as it stands, but it won’t be too long before the likes of Google and Twitter feel the collateral damage.

Facebook CEO Mark Zuckerberg has already pointed towards competitors in the digital economy to deflect the unwanted attention and it won’t be too long before regulators on both sides of the Atlantic start to make changes in the data economy. Europe is already rolling out GDPR which will add additional complexities to the monetization of data, though Google CEO Sundar Pichai believes the firm won’t be affected that significantly.

“We started working on GDPR compliance over 18 months ago and have been very, very engaged on it. It’s really important, and we care about getting it right,” said Pichai, before going onto state. “It’s important to understand that most of our ad business is Search, where we rely on very limited information, essentially what is in the keywords to show a relevant ad or product.”

These rules were gaining momentum long before the ugly head of Cambridge Analytica burst into the tech headlines, perhaps demonstrating how much more enlightened European regulators are than US counterparts, but the scandal will lead to an investigation. This is an incident which rocked the technology world and there will be repercussions for any and every organization which makes money out of insight. This scandal hasn’t impacted the wider community just yet, but it is only a matter of time.

Whether this impacts Google’s activities in the smart speaker world remain to be seen. As it stands, Google is losing the battle for the living room, but this is not for a lack of effort. Expenses over this quarter were up 27% year-on-year, while headcount was up almost 5,000. Winning the battle in the living room takes the search advertising business to pastures new. Google will be on your laptop, smartphone and your speaker. It will be collecting advertising and referral revenues everywhere.

Pichai also noted that the speakers are being used for a wider range of uses, such as using voice commands to make phone calls or control other smart home products. Perhaps this demonstrates the normalization of the voice interface, which would be another very positive development for Google. Using your voice to control other products is just a couple of steps away from vocal purchases and payments. Once this aspect of the smart speaker is normalized, buying pizza or ordering groceries for example, some very interesting revenue opportunities awaken.

However, these developments could also be impacted to a reform in how data can be monetized. The question is whether regulators will aim to address what is in front of them, or have the foresight and imagination to tackle how data will be used in the future. Rule makers have shown themselves incapable of keeping up with developments in the technology space, but a broad investigation should (if there is a basic level of competence present) address future uses of personal information, such as the smart home. We seriously doubt this aspect of the industry will be addressed, priming the world for another major privacy and data protection scandal in a few years’ time.

Investors might be nervous about the future of the internet firms, but the data scandal has seemingly had little impact here to date. Next quarter will be a more accurate representation, but all things are rosy at Google right now.

Regulators seem to be forgetting telcos are commercial organizations

Another letter to the European Commission from the major telcos has emerged today, raising the questions whether regulators believe telcos should be philanthropic organizations not money-making machines.

The letter, seen by the FT, is a complaint from the bosses of some of Europe’s most powerful communications organizations, bemoaning the direction of new rules governing the digital economy. According to the telcos and major kit vendors, changes to the Electronic Communications Code could disincentive organizations to invest in infrastructure to power the connected era.

This is not the first letter or complaint from the telco space over the direction of new rules. Changes do need to be made, but it is critical these changes are justifiable and create an appropriate environment for the industry. While it is easy to forget about the telcos when companies like Google and Amazon are tearing up trees all over the place, the telco sector will be the foundation of any and all success in the digital economy; we can live without Facebook or Spotify, but without the telcos the whole pyramid collapses.

The emergence of these letters and complaints suggests regulators are not appreciating what telcos are. The attitude of governments, regulators and bureaucratic bodies like the European Commission, seems to be the communications companies and their assets are servants of the nation. It appears the view is these organizations should serve the economy, the citizens and the organizations who build services on top. It looks like it has been forgotten the telcos are no longer nationalised bodies and the infrastructure is not a government owned asset. There are of course examples where governments have notable stakes, but the objective here is to make money for shareholders.

It is a difficult situation to manage. The importance of the digital economy to countries on the whole cannot be underappreciated. Emergency services are becoming increasingly reliant on the infrastructure, so are children’s education, as well as the majority of businesses. There is a need to make the telcos accountable, but the decision to privatise the industry was made and it was the right one. Rules and regulations need to reflect this, unfortunately it looks like public servants are taking the attitude the primary objective should be to bend to the will of the government and the people, not shareholders. Profit margins are being squeezed and new rules are focusing on everything which sits on top of communications infrastructure.

General feedback from the telco space is the status quo is looking preferable to the new rules, which many have described as a disincentive to investment in the sector, scaring away new investors. For years, the technology industry has been biting the hand that feeds it, with the OTTs collecting the lion’s share of profits and only allowing crumbs to fall to the bottom; new rules cannot fuel this trend. The more rule makers look at telcos as the servants of the economy, the worse the problem will become.

Building communications infrastructure is a very expensive business. Billions are spent every single year to improve mobile signal, download speeds and broadband connections, but this is viewed as something which the telcos should do because they have to, not because they are searching for new ways to make money. No other industry, or section of an ecosystem, is held in such disregard by the government. This indifference makes it even more dangerous that the telcos will define the next era.

The telcos love to complain, but there has to be some sympathy here. It seems some have just forgotten their mission is to make money not to act as a philanthropic provider of connectivity. Rules need to reflect this, otherwise we could be heading down a very worrying path.

Facebook drags tech competitors into privacy brawl

It was only going to be a matter of time before Facebook brought other technology firms into the privacy debacle, as it points the finger at Twitter, Pinterest, LinkedIn, Google and Amazon.

In yet another damage limitation log post, Product Management Director David Baser has outlined the various ways Facebook collects information on individuals, irrelevant as to whether they are active users or even have a Facebook account, but has also attempted to deflect attention away from the social media giant. It’s essentially a kick-in-the-spuds version of ‘One for all and all for one’.

“When you visit a site or app that uses our services, we receive information even if you’re logged out or don’t have a Facebook account. This is because other apps and sites don’t know who is using Facebook,” Baser highlighted.

“Many companies offer these types of services and, like Facebook, they also get information from the apps and sites that use them. Twitter, Pinterest and LinkedIn all have similar Like and Share buttons to help people share things on their services. Google has a popular analytics service. And Amazon, Google and Twitter all offer login features. These companies – and many others – also offer advertising services. In fact, most websites and apps send the same information to multiple companies each time you visit them.”

This is perhaps what many investors have been waiting for and fearing. Facebook’s share price might have been dealt the heftiest blow throughout this scandal, but there have been wobbles for the other technology giants such as Twitter and Google. The nervousness surrounding these wobbles most likely came with the knowledge there would be fallout. Facebook is under scrutiny for its data practices, but these are common throughout the industry.

The markets are holding steady for the moment, but it should only be a matter of time before the ripples from this pebble dropped into the technology ocean start to make uneasy sailing for everyone else. Politicians are not happy about the way Facebook has been acting over the last couple of years, which is likely to lead to an investigation and changes to regulations. These changes will not be directed at Facebook solely, they will directly impact the data economy and any company who operates with data as a value exchange for free services.

In terms of what Facebook is actually doing, Baser has said the team collects information on individuals for their own benefit. The data allows Facebook to make content and ads more engaging and relevant (because everyone lives for an engaging ad), with the information collecting through numerous ways including the Like and Share buttons, using Facebook as an authentication tool for other apps, analytics and ad measurement tools. Even if you are not a registered Facebook user, the information is collected as other websites do not know whether the user has a Facebook account or not. This seems to be perfectly justifiable for the social media giant.

For example, should a non-Facebook site include a social plug-in (Like or Share button), visitors to those sites are tracked. Facebook collects IP address, browser/operating system information, and the address of the website or app, irrelevant as to whether there is an associated Facebook account or not. Facebook consistently denied it was tracking non-users until 2015, and while this would not necessarily be deemed well-known, but it is of course for the benefit of the consumer to improve the experience.

Another area is the Facebook Pixel tool, which Baser describes data-gathering for advertisers. Companies who embed this tool on their site can track what users are doing or buying, allowing them to reach this user again through the ‘Custom Audience’ feature on Facebook. Again, this is not for the benefit of Facebook, but for the advertisers, though some might question how effective the tool is. How often have you made a one-time purchase only to be bombarded with ads for the same thing? How many plungers do you actually need? This tool is the reason.

That clears things up; Facebook isn’t violating your privacy and providing hazy explanations for its own benefit, it’s for everyone else. And if you don’t like it, well it’s your fault. There have been preference settings there the entire time, irrelevant as to how well hidden they are, why didn’t you use them? Bad user.

Share price plunges indicate who has the upper hand in US/China trade war

If ZTE has acted in violation of US trading regulations there is no question it should be punished, but investor reaction to the ZTE ban perhaps shows US companies depend more on China than vice-versa.

Yesterday the US Department of Commerce’s Bureau of Industry and Security (BIS) has imposed a denial of export privileges order against ZTE, meaning US companies cannot do business with ZTE for seven years. The result of this order will be felt by ZTE, which has been working itself into a useful position in the US for devices, but it could spell disaster for some US firms.

At the time of writing, the impact was quite notable for these firms:

  • Acacia Communications down 35.97%
  • Oclaro down 15.18%
  • Inphi down 5.96%
  • Lumentum Holdings down 9.06%
  • Finisar down 4.05%
  • NeoPhotonics down 3.98%
  • Qualcomm down 1.72%

All of the above firms are somewhat reliant on being a ZTE supplier, and as you can see from the numbers above, the impact is quite varied. Qualcomm counts ZTE as a customer, but the same could be said for pretty much every other mainstream smartphone manufacturer. Acacia Communications, which manufactures components for fibre optic networks, has a considerable amount of exposure, with 30% of its business attributable to ZTE over the course of 2017.

This is perhaps one of the most worrying aspects of President Trump’s trade war with the Chinese; we suspect US companies need the Chinese economy and its companies more for growth than the other way around. This is just one example, however if (or perhaps when) Chinese authorities react to US, restricting their ability to do business in the country, what impact will that have on the spreadsheets? We don’t think it will be a very positive one.

US technology companies are the powerhouses of the global economy. In pretty much every sub-sector, a US company will be at the top, or pretty close, of the rankings. The rapid growth and digitalisation of the US economy was the one of foundation blocks of this incredible rise in power, however the US is now a mature market. For future profits, these powerhouses have to look to the international markets, and when you look internationally, it usually means China.

Years ago we used to talk about the BRICs (Brazil, Russia, India and China) nations as the ones fuelling global economy, but owing to the rapid acceleration of China, and more recently India, the scope of ambition has been refined. China has a monumental population which is just awakening to the digital economy, while businesses are undergoing the digital transformation process experienced in the Western economies years ago. Some might point to the Chinese companies which are incredibly advanced, the likes of Alibaba or Huawei, but considering the sheer size of the country, there is still a huge amount of profit to be made.

ZTE is only one company, but the dip in share price above shows how dependent some companies have become on Chinese customers and the nation’s economy on the whole. If, or when, the Chinese government retaliates to Trumps tariffs on a much wider scale, making it harder for US companies to do business, we dread to think of the consequences spread throughout the US technology industry.

Europe tries New Deal for Consumers but faces industry worries

The European Commission has unveiled a new proposal, the New Deal for Consumers, which will aim to increase consumer protections and hold offending companies more accountable.

The move comes after months of the bureaucrats battling various different companies, most notably those in the tech and automotive space, who are bending (if not trampling on) rules in the bloc. Fines will be increased up to 4% of annual turnover for the guilty parties, while there will also be more room for collective action against the rulebreakers.

“Today’s New Deal is about delivering a fairer Single Market that benefits consumers and businesses,” said First Vice-President Franz Timmermans. “We introduce a European collective redress right for when groups of consumers have suffered harm, like we have seen in the recent past, with proper safeguards so there can be no misuse.

“Consumers will know who they are buying from online, and when sellers have paid to appear in search results. The majority of traders who play fair will see burdens lifted. The handful of traders who deliberately abuse European consumers’ trust will be sanctioned with tougher fines.”

“With stronger sanctions linked to the annual turnover of a company, consumer authorities will finally get teeth to punish the cheaters,” said Věra Jourová, Commissioner for Justice, Consumers and Gender Equality. “It cannot be cheap to cheat.”

This is one of the big issues for the European Commission and also the national regulatory watchdogs; the majority of fines which these monstrous companies are facing are barely making a dent in the spreadsheets. There have been some big fines recently, Google got slapped with a €2.42 billion bill last June, but you have to wonder how much money these companies are making before getting caught. Unless penalties are increased, there isn’t much discouragement to swindle when it can still be profitable.

One of the areas which the proposal will look to tackle is transparency in the digital economy. Online market places will have to inform the user whether they are buying products or services from a trader or from a private person, so they know whether they are protected by consumer rights, while there will also be greater transparency on search results on online platforms. Consumers will have to be clearly informed when a search result is being paid for by a trader, and the platforms will have to explain the main parameters determining the ranking of the results.

Another interesting development is the big data machine powering the digital economy. When paying for a digital service, consumers currently have 14 days to cancel their contract. This idea will now be extended to ‘free’ services, which see the user ‘pay’ for the services through personal information. This value exchange is common in the growing digital marketplace, however consumer protections are woeful. Companies who offer free digital services in exchange for personal information, such as Google for its email or cloud storage services, will have to offer the right to exit the contract, without their personal information being retained.

A very useful development out of this area in the proposal is the recognition of the new value exchange which has emerged in the digital economy. To date, there hasn’t really been any official or legislative recognition of data as a currency, but this sets the idea in stone, providing a more stable foundation for regulation, control and accountability.

And for those individuals who have been wronged by the multinational powerhouses, Europe is paving the way for collective, representative action. The proposal presents the idea of consumer groups seeking compensation, replacement or repair, on behalf of a group of consumers. This type of class action is not new in the US, though due to the complications in legal action across different jurisdictions is not as common in Europe.

It should be worth noting that only consumer groups, not law firms, would be responsible for these representative actions. In the US, a sub-sector has developed with law firms chasing wronged consumers to build cases against large organizations. The European Commission seems to want to prevent the emergence of such practices on the bloc.

Europe already has some of the strongest protections for consumers worldwide, though such proposals from the European Commission should only be viewed as a positive step forward. Some aspects of the digital economy are mournfully underregulated at the moment. The GSMA and ETNO have warned the bureaucrats of ensuring consistency across verticals, while also making sure penalties are proportionate, but these worries should be addressed over the coming months.

The proposal will now be discussed by the European Parliament and the Council, where we hope the details will be refined, but strengthening protections in the wild-west internet can only be a good thing.

Could net neutrality challenges lead to the end of the FCC?

Governor Kate Brown has signed House Bill 4155 making Oregon the latest US state to push back against FCC moves to repeal net neutrality laws, but are these challenges undermining premise of the FCC?

The whole situation is starting to get a bit messy for FCC Chairman Ajit Pai who has effectively turned almost half of the states against federal efforts to relegate net neutrality to the footnote. While the foundations of the challenges from the states are still a little bit shaky, the Communications Act has a clause which prevents states from passing laws which contradict federal ones, few would have predicted Pai’s actions would have caused such a tsunami of discontent.

In most examples of unpopular legislation or regulation there is compromise or the fad passes allowing politicians to find another banner to wave, but this is an issue which has persisted. In signing the bill into law, Brown is yet another who is challenging the status quo and also foundations of the communications industry. Should these laws be allowed to stand, in direct violation of clauses in the Communications Act, what will be the wider repercussions for federal regulations in the US communications industry?

That said, perhaps this is an unintended, but perfectly acceptable, outcome for Pai and his colleagues. It is no secret the Republicans in US Government lean more towards market freedoms, therefore the redundancy of a national regulatory body would maybe assist in creating a more acceptable market in their eyes.

The idea of a nationalised 5G network was rumoured, though the FCC did its best to distance itself. The agency has also been trying to reduce the influence of the federal Lifeline programme, an initiative which assists poorer families in accessing the digital world. At his first open meeting, Pai promised to “remove unnecessary or counterproductive regulations from the books”. One of his own advisors also wrote an opinion piece asking whether the US actually needs the FCC, suggesting the powers and responsibilities should be distributed among other agencies.

In each of these examples, Pai, or his colleagues, have made efforts or expressed desires to reduce the influence the FCC has on the national communications industry. Each move undermines the position of the FCC and moves the country towards a more hands-off regulatory environment, one which is controlled and influenced by business.

Brown has challenged the legitimacy of the new regulations (or lack thereof) and undermined the position of the FCC in the communications sector. And she is not alone. California State Senator Scott Weiner is introducing Senate Bill 822 which will reintroduce net neutrality while also banning zero-rating, House Bill 2282 has been signed into law in Washington by Governor Jay Inslee and there are numerous other challenges from Senators, Attorney Generals and consumer groups throughout the country.

All of these movement weaken the position of the Communications Act, and in turn the legitimacy of federal agencies and their ability to manage the industry on a national level. In trying to protect net neutrality rules, the Governors, Senators or Attorney Generals are making it more difficult to manage a consistent telecommunications industry.

We do not agree with the wild-west which Pai seems to be promoting, or with the strict regulatory regime former FCC Chairman Tom Wheeler created. The right answer will sit in the middle, but the rules need to be challenged at federal level, in Congress. Right now the states are creating a bureaucratic mess which questions the role of the FCC. Most Democrats in the US are pro-regulation and market controls, therefore we struggle to believe they would be happy to see the influence of such an agency dwindle. Even if they don’t agree with the current establishment, there is a longer-game to think about here.

Can national legislation or agencies survive when national policies are being undermined at a state level? Is this the first Jenga piece being removed at the base of the Communications Act?