Tech Pick of the Week
EU (Member States, European Parliament and the Commission) Provisionally Agrees Digital Services Act
…Subject to approval by the European Council and the European Parliament.
Back in 2015, the European Commission announced the Digital Single Market which in a nutshell concerned taking the Single Market (free flow of people, capital, goods within the single market) concept, which mostly concerned offline activity, into the online world. Online barriers in eCommerce were tackled, and free flow of data, and pooling of data across the member states were facilitated (eg. consumers in Germany can get the same level protection whether it buys goods from Germany or other EU countries).
This latest proposed regulation, the Digital Services Act is similar in concept, in that it makes content (goods, services and information) which is illegal offline also illegal online. It will be applicable to all online intermediaries (social media / marketplaces / search engines / app stores / payment systems) providing services in the EU (that is, the company does not have to be located in the EU). Its objective is to ensure the EU digital space is safe for citizens and businesses. Further restrictive requirements apply to VLOPs (very large online platforms) and VLOSEs (very large online search engines) – these are services with more than 45 million monthly active users (approximately 10% of EU population).
Digital Services Act means online intermediaries (among other things):
- Must inform users about the ads / content / recommendations they see (transparency regarding parameters used to decide on which ads are shown / how content is moderated)
- Must enable users to flag illegal content (such as copyright infringing content on video sharing intermediaries) and deal with them.
- Must not carry out targeted advertising based on a minor’s personal data / ensure minors are protected with the online intermediaries know that the user is a minor.
But there is no obligation to monitor for illegal content.
VLOPs and VLOEs’ duty
- Analyse systemic risks they create (such as the following) and to carry out risk reduction analysis on an annual basis
- dissemination of illegal content
- adverse effects on fundamental rights
- manipulation of services which impact democratic processes and public security
- adverse effects on gender-based violence, minors, and impact on physical/ mental health of users
- Provide ways for users to receive recommended content not based on the service provider’s profiling (eg. chronological order)
There has been a lot of talk on how Twitter ought manage their content amid criticism from free speech proponent Elon Musk who considers that moderation is too heavy-handed. Musk has said, in the event he were able to take over, he would ensure that Twitter remains on the right side of the law. The Digital Services Act might mean Musk will not have the freedom to operate as he might have assumed. Although the core of what he wants with Twitter – making things open / transparent – chimes with the objectives of the Digital Services Act, a VLOP such as Twitter will have other added obligations such as ensuring adverse effects of fundamental rights of citizens are minimised. Furthermore, implementing measures to minimise the risk is likely not straightforward, both as a matter of striking a balance and also technically.
The Digital Services Act will tackle issues subject to the class action in Florida against Meta as mentioned below.
BigTech
Former US National Security officials say over-regulation of US Bigtech could weaken national security
…This is because of
- Cybersecurity threats from abroad
- Increase in disinformation
- Access to data of US persons
- IP theft
Some of the signatories sit on boards on major tech companies, or are legal advisors to them in the US. They have attacked the EU Commission’s Digital Markets Act on the grounds that it failed to consider national security issues.
Facebook agrees to fund fibre-optic cables installation across Nigeria – why it could be a clever move
…Facebook has invested in other African countries with looser legislation and regulation amid regulatory clamp downs in the west. Senior Government official of Nigeria says Facebook actually loses money on the project but it can gain it back on the user data they generate. This is, of course, the business case for Facebook. In Nigeria only just over half have access to the internet.
Here in the west we are vastly ahead of Africa in terms of economy, infrastructure, availability of medicines and general standards of living. However, as Africa catches up across these indices, they can expect to live longer and survive treatable diseases and be better educated (which will be part facilitated by better internet access). Furthermore, there is something to be said about being a late comer. Other countries have comfortably overtaken UK’s once prized rail network infrastructure – it was the first in the world and enabled the industrial revolution. Same here too. It’s cheaper to upgrade the existing copper networks than install a new fibre network – the former can be the option taken even in developed territories – whereas Africa can go in with the state of the art infrastructure at the outset. All of these facts, combined with the West’s less prolific increase in population are said to mean that it will be a matter of time (and not a long one) before the African economy takes over. The same can be said of India (and read on…). Ergo, Facebook’s investment may well be wise and reflects its long termist approach to building business a la the metaverse.
Note: Facebook/Meta may not be a cabling installation company, but it and other large tech companies, such as Google are into that business. In December 2021, it was recommended by US security regulators that the Federal Communications Commission clear Meta and Google to operate the Pacific Light Cable Network system to facilitate data flow among US, Taiwan and the Philipines while bypassing Hong Kong.
Amazon acquires GlowRoad, an Indian social commerce company
…The reasons are exactly the same as Facebook’s African investment as outlined above. GlowRoad sells products to consumers at wholesale price and helps them sell on social platforms such as Facebook. It also assists those consumers with the logistic side of things (shipping/ returns ie: similar to Shopify, and recently, Amazon has set out to compete with Shopify by allowing Buy with Prime merchants to sell through their own websites, not exclusively on Amazon). Amazon may well then get access to vast amounts of data from Indian consumers. However, India does have robust data localisation laws. Still, a wise investment when one thinks about the significant future potential for the Indian economy and, there is commission stacking opportunities through payment services, advertising, referrals as well as logistics services.
The environment for large tech companies, so called BigTech, to grow by acquisition is becoming increasingly restrictive. It is inevitable that they should seek to grow internationally.
Having made a tender offer directly to shareholders, the Twitter board agrees to cave into Musk’s buy bid
… Love me Tender, Musk had tweeted to foreshadow his bid.
Apparently, he managed to heavily leverage off his personal wealth (worth about $260 billion). The offer of the self-styled “free speech absolutist” was to buy the outstanding shares of common stock for $46.5 billion, declared directly to shareholders. This was designed to bypass the board of directors. The board of directors were then faced with one of three options:
- Find another buyer with a better price
- Take Musk’s offer
- Do neither (perhaps in an attempt to stay on the board) and risk being sued by investors for breach of fiduciary duty.
The first option was looking unlikely (though it’s still possible), and the third option was unpalatable. This probably led to the board who had earlier implemented the poison pill to accept. Well played.
Founder Jack Dorsey who was forced to stepped down as CEO last autumn had tweeted that the board had “consistently been the dysfunction of the company”. Dorsey will remain on the board until next month. Some say Musk’s bid was timed so that it came before Dorsey’s departure. Others speculate that Twitter could see a return of Dorsey.
Note it’s all subject to the financials and regulatory clearance. Once through, Twitter will become a private company, meaning Musk can develop Twitter based on long term strategies, devoid of pressures of having to generate positive quarterly results.
BigTech eats into TV Networks’ consumers’ engagement time and therefore ad revenues
…In a letter to the US Federal Communication Commission, TV Networks complain that they face strong headwinds amid BigTech’s ability to provide content more freely. The TV Networks say that compared to BigTech, they have less freedoms on the content they can deliver as they have duties to remain a trusted source of information (compliance with political advertising rules, disclosure requirements and record-keeping obligations).
Artists sue Meta for profiting on copyright infringing works in California
…Artists say that counterfeiters are copying images of artists’ protected work and selling them cheaply via ads placed on Facebook. Facebook then receive revenues from those infringing sales.
Following the Digital Services Act (which only applies in the EU, so not relevant here), Meta will have to see what it can do to minimise infringing activities though it is reported to say that it already pro-actively tries to minimise infringements.
Causes of action in the US claim are copyright infringement, breach of Visual Artists’ Rights Act, False designation of origin under the Lanham Act, Digital Millennium Copyright Act, Unfair competition.
Drones
Federal Communication Commission asked by software companies to implement new rules carefully
…The concern is that, if the FCC were to block certain equipment being sold in the US on the grounds that the drones are made by companies that are barred from participating in national programs owing to national security concerns, then it would hit the nascent drone industry hard as most small drones are made by such companies.
EV
England and Scotland Law Commission’s recommendations on Self Driving Cars
…Published in January (so this news has been a little delayed), the Law Commissions recommended a New Automated Vehicle Act. Here are the headline points. Interested readers should review the paper.
Self-Driving
The term “Self-Driving” to indicate a legal threshold
Should mean humans can relax and divert attention and be safe
Offence if you describe a vehicle as Self-Driving if it isn’t authorised as such
Legal accountability will change (ie: drivers on certified Self-Driving cars won’t be liable for not paying attention in certain circumstances)
Victims of traffic accidents do not need to prove fault.
Two types of “Self Driving”
Where you have to have a person in charge (“User in Charge” or UIC)
Immunity from prosecution from breaking traffic rules, dangerous or reckless driving
Limited duties such as arranging insurance, checking loads
Need to be able to take over in response to a “Transition Demand”
Vehicle therefore needs to be able to give a clear and timely Transition Demand.
Backed up by Authorised Self-Driving Entity (ASDE) – which could be a vehicle manufacturer, a software developer or a partnership of the two, or any other suitable entity, but whatever the case, must be involved in ensuring safety of the vehicle.
Where you don’t need a person in charge (“No User in Charge” or NUIC)
Occupants of vehicles are simply passengers [or nobody in the vehicle]
NUIC operator will be responsible.
How safe does Self-Driving cars have to be?
Options are:
Safer than humans?
Fixed percentage (say 5%) better than humans?
Must be acceptable by the public [but what percentage of the public?]
Ultimately a political question and so government should decide, not the law commission
This news segues nicely to…
Musk says it will launch a dedicated robotaxi without any steering wheels or pedals
…The robotaxi will start production in 2024, Musk declared, adding that it aims to be more cost effective than a subsidised bus ticket. Tesla has in fact had stonking financial results for Q1 – it seems to be blind to the supply chain issues many auto companies have been struggling with, as a result of the war in Ukraine (and on this read on below). Certainly it will help silence Musk critics who say the takeover bid controversy over Twitter will distract him. Part of the success is said to be the direct to customer dealership structure which Tesla has adopted. An increase in the price of the vehicles, directly lines the pockets of Tesla. The auto industry have been trying to follow Tesla’s business model. The other reason is said to be Tesla’s robust foothold in China; car manufacturing in China is more profitable than manufacturing elsewhere.
He is clearly the sort of person who likes to publicly announce a very high watermark to spur himself on to actually make that mark. I don’t think it matters to him whether he actually achieve his goal [he is famous for not making publicly announced deadlines], but it seems to me that he likes to shoot for the stars to make it to the moon – or rather in his case, shooting for mars to make it to the moon.
Tesla owner’s smart summon feature leads the driverless vehicle into a private jet…
…Those that don’t have easy access to Tesla may not know that some models have a smart summon features which enables the owner to hail his or her own Tesla from up to 200m away. An owner triggered the feature but failed to recognise a private jet. My guess is that there was not enough information to train the AI to identify a nearby plane. It would be a rather odd situation, certainly my non-Tesla car has never encountered planes on the ground before. Perhaps not if you are in the Tesla owner’s club though…
Group led by Second Largest EV battery maker LG Energy Solution to create mining –to manufacturing supply chain for batteries in Indonesia
…The investment will amount to $9billion. Why this investment in Indonesia of all places? For self-sufficiency, including reducing reliance on China. Indonesia is the largest producer of Nickel.
Note that the largest EV battery maker CATL (China) signed a $6billion deal with Indonesian companies to also produce batteries there.
Things are very bad for the auto industry right now, here’s why:
- Back in Autumn 2021, the industry was expecting around 4-6% increase in demand for new cars but now analysts expect a decrease in sales by about 2% for 2022 and 2023 (cuts in Europe around 9%).
- Owing to Ukraine/Russia conflict, and also the drive to reduce dependency on China
- Critical auto parts especially wire harnesses from Ukraine – bundles all wires to connect parts to other parts of the car, sending information and power. Bit like the blood vessel and the nervous system that drive our bodies (ie: absolutely essential).
- Labour intensive because it is an intricate process and can’t be automated.
- Wiring process usually close to production sites – meaning supply chains are built around the wire harness production sites
- There are about 22 auto companies that have invested in Ukraine (especially DE – BMW, Mercedes, VW), half of which entail wire harnessing.
- Fragility in supplies of platinum, palladium, steel, copper, aluminium and nickel – key materials to make cars
- Significant proportion of class 1 nickel (essential in EV battery) comes from Russia
- Elon Musk tweeted : Nickel is our biggest concern for scaling lithium ion cell production. That’s why we are shifting standard range cars to an iron cathode. Plenty of iron (and lithium)!
- Whopping 43% of Palladium comes from Russia (20% if you also account for recycling)
- Pig iron [to make steel] – comes from Ukraine
- Prices of these key materials are sky high – price of palladium is higher than gold
Fintech
Meta’s launch of Whatsapp payment system in Brazil experiences delay – here’s why
…Meta already has a p2p [peer to peer] payments after having cleared regulatory hurdles around competition, data privacy and efficiency.
Meta now wants to set up a p2m [peer to merchant] payment system. Clearly they have the technical infrastructure. The issues are the following:
Approval from central bank
Merchant acquirers [enables merchants to accept digital payments] consider that the fees are too low and legal responsibilities too burdensome.
Meta possibly in a weak position at the moment as they strive to make up for loss in ad revenue following the implementation of the new Apple privacy feature allowing users to block apps tracking them. The deal if it goes through, will allow Meta to gain first party data.
Life Sciences
Janssen to enter into arbitration over Alkermes’ NanoCrystal technology
…There are different types of NanoCrystal technologies, those that are used in solar panels and filtering crude oil. But this one relates to pharma. NanoCrystals are, as you might imagine, are tiny crystals (nanometer range) and in the pharma application, they are pure drug crystals which are stabilised or surrounded by a coating of a surfactant. It improves better absorption into the bloodstream.
The dispute arose because Janssen decided to terminate the licence agreement to use Alkermes’ intellectual property. Probably, Janssen thinks that the patents subject to the licence are invalid or they consider to have found a way to not infringe the patent. Alkermes say that Janssen’s lawsuit over its medications against Intas and Teva use Alkermes’ technology. Janssen has won its suit against Teva.
Space
SpaceX’s Starlink to provide internet services to Hawaiian Airlines
…Rejoice! Downloading films before a flight will become a thing of the past. Business persons may groan at the prospect of having no excuse to relax on flights.
Starlink satellites will deliver high speed internet to Hawaiian Airlines meaning passengers should have good WiFi access during the flights. Starlink already has a deal with private jet charter flights provider JSX, but a deal with a major airline is a first. Starlink terminals will be installed on the planes next year, and it will go live pending certification. Hawaiian Airlines said the services will be offered free to its passengers possibly increasing pressure on other airlines to do the same. No doubt this will not be the last of Starlink/Airline deals we will hear about.