15 February 2022
US
US Companies need $4billion more than budgeted by the government to rip and replace Chinese network devices (mainly Huawei and ZTE) says the Federal Communications Commission
…Because it is much cheaper to replace network devices with Open RAN architecture which is a modular system, compared to what the network uses at present in which you have an integrated hardware and software structure (out of the non-Chinese companies, this is really the preserve of Nokia, Ericsson and Samsung), Open RAN adoption may see acceleration – though it probably will not be the only answer given that that too takes time to implement. Open RAN will open up competition in the network architectural infrastructure providers allowing especially BigTech companies to become involved.
Meanwhile, network operators (eg Deutsche Telecom, Orange, VodaFone) in the EU have written an open letter asking EU lawmakers to make BigTechs pay for having to stamp up heaps of cash to upgrade their infrastructure to be able to support the increase in traffic caused by their successful streaming services, despite the tight squeeze on margins [SK Telecom of South Korea even sued Netflix because they were compelled to upgrade the network owing to the very popular Squid Games viewing traffic].
The letter comes on the heels of the Commission’s statement “all market actors benefiting from the digital transformation . . . make a fair and proportionate contribution to the costs of public goods, services and infrastructures” in the declaration on digital rights last month. An FT commentator says it’ll be interesting to see what the BigTech sceptic French presidency of the EU Council might do.
As an aside FCC’s bleat will surely help Ericsson defend Apple’s claim before the ITC (International Trade Commission) asking for an import ban against Ericsson’s network devices which is said to be infringing Apple’s patents. The pair is fiercely battling out a licence dispute around the world. Indeed in Ericsson’s Public Interest Statement for the ITC case it explained that replacement of infrastructure is not a plug and play exercise, with the network operators needing to redesign networks, test and deploy, which would also lead to significant delay rolling out 5G network.
By the by, Ericsson is also trying to get Apple iPhones banned from importation into the US (iPhones are made in China). Apple is protesting, saying there is no alternative to an iPhone because only Apple sells iOS based goods. This statement could come back to haunt Apple in disputes concerning Apple’s allegedly monopolistic conduct.
US FTC threatens to sue companies which fail to sort out known software vulnerabilities
…The particular threat was in relation to a well known bug known as Log4j, but the principle would apply across all bugs. This is fair enough, as cyberhacks have been carried out by exploiting known flaws in the programming.
Apps
Peloton seeks buyer – Amazon, Nike and Apple rumoured to be interested but new CEO denies its up for sale
…Peloton failed to foresee the drop in demand as our lives go back to a more pre-pandemic pattern. It has a huge inventory of heavy, expensive products that they are finding it hard to sell off. Last month, it was reported that the firm planned to temporarily halt the production of its machines. 2800 jobs, or 20% of the workforce, will be lost. Ohio plant will be shuttered. They have a new CEO, Barry McCarthy who has an impressive CV: a CFO at Netflix and then Spotify, help managed to boost the companies to the successful companies they are today. Here’s a man good at taking charge of inventory. Sounds like a perfect fit.
Some of the following companies supposedly interested – here are some possible business cases:
Amazon – Peloton could be a portal to expand into healthcare. Many see that Amazon has an opportunity to bundle the Peloton offering with its Prime service, to keep Prime subscribers signed up and to grow. Possibly gives an opportunity to offer different levels of Prime services too.
Nike – it sells complementary products, can utilise Peloton’s fitness community. As I understand it, Peloton’s fitness community is rather hardcore (exercise wise).
Apple – experienced at hardware business. However, Apple hardly ever buys businesses, preferring to organically grow. The purchase of Beats headphones (which was really quite small in comparison to some of the buy outs we are seeing) has been the exception.
However McCarthy has denied that Peloton is up for sale.
Artificial Intelligence
Bill Gates-backed start up Kobold Metals uses AI to mine EV battery metals Lithium and Nickel
…Mining these metals are becoming more and more expensive because the low hanging fruits have already been mined. Clues for where it may be worth prospecting for these metals may be determined by analysing some 20 million pages of documents in the public domain, including “two centuries worth of mining rights’ agreements in countless jurisdictions”, collecting rock data and using a large metal detector with a helicopter. Kobold digitises them and uses AI to analyse. I’m sure this type of disruption will spill over to other industry areas.
Big Tech
UK Publishes Online Safety Bill to protect children from being exposed to harmful content
…The main feature seems to be that sites which contain adult content need to provide robust measures to stop underage persons from accessing them. What will follow is a valuable database of people that access pornography, ripe for hacking & blackmailing.
However, the UK Parliamentary Joint Select Committee has identified a number of issues (such as the need to focus on the design of the platforms not just the content), which makes it difficult to assess whether the bill could be passed within the year.
European Publishers Council lodges complaint with the EU Commission over Adtech
…The complaint is that Google has end-to-end control of the Adtech value chain, accounting for 90-100% in the chain, the complainant says. Google is both a buyer, seller and the intermediary of Adtech business.
Comparison site Price Runner (soon to be acquired by Klarna) sues Google for preferencing Google services over theirs in breach of competition law
…The suit appears to be a follow on damages claim filed in Sweden. Last November, Google failed to successfully appeal the 2017 decision of the EU Commission finding that it was in breach of competition law, as Google’s preferential treatment of its own price comparison shopping service gave Google an unfair advantage. This appeal decision itself is being appealed.
The suit follows Axel Springer’s suit in 2019, based on its comparison shopping service, Idealo.
Peter Thiel quits Meta Board
…This is a name worth bearing in mind. Thiel is a co-founder of Paypal with Elon Musk, and member of Facebook board since 2005. He had supervoting powers on Facebook together with Zuckerberg and Sandberg. One of the most prominent Trump allies, he has decided to step down to help back Republican candidates for the mid-term elections. You may see him appear in the Cabinet in the future.
Facebook is cleared to buy Kustomer, a customer service management provider, but on two conditions
…Germany and EU Commission gave the blessing on two conditions which were (i) that Facebook give non-discriminatory access, without charge to its publicly available APIs for its messaging channels to rival providers and (ii) any changes to the messaging services used by Kustomer customers must also be made available to Kustomer rivals on the same terms – for 10 years.
UK Competition Markets Authority OK’d without any conditions.
Is there a difference between the stringency of assessing impact on market competition between the UK and Europe? If so, is there a difference in the authorities’ attitudes? Alternatively, could the differences depend on the different market landscape?
Crypto
Coinbase Commercial proves a hit at Super Bowl
…Super Bowl is some sports event that swathes of Americans watch every year, attracting around 90 million viewers. Click on the link here and check out the low tech ad Crypto exchange company Coinbase released – an ad comprised of moving QR Codes which has scored a huge hit leading to (some say aptly) a crash. Coinbase now holds the number two position in the App Store rankings after Peacock, which was the App that streamed Super Bowl itself. At the same time it effectively educated and familiarised the nation about the use of QR Codes.
The take away points are:
- Crypto isn’t going away despite the low valuation at present. In fact a whole host of crypto companies (eToro, crypto.com, FTX) advertised on Super Bowl. Some say it smells a bit bubbly.
- QR Code is a powerful tool to enable companies behind it to get first party data.
$3.6bn crypto heist by a colourful married couple – now arrested
…$3.6 BILLION. It was said to have been stolen from the 2016 hack of HK based Bitfinex exchange.
It’s a colourful story, in particular, the wife is a part time Forbes contributor (which included the article “Expert Tips to Protect Your Business from Cybercriminals” – sadly no longer available) and rapper going under the name Razzlekhan (which included raps about ditching toxic friends like vacuum cleaners – sadly (?) no longer available too).
Search warrants were issued for the couple’s crypto wallets, and the US authorities somehow managed to trace the money to seize. They tried to launder the crypto by in part, chain-hopping, which means to jump between different cryptocurrencies (ie: different blockchains) very rapidly and using tokens that have higher cryptography built into them (who knew that different blockchain had different security standards)?
It appears that the couple did not do the actual hacking, but the hacker placed the stolen coins into their wallet.
Interesting point is that it appears you can track the people behind a crypto-wallet. And it has left the US authorities with a conundrum – the coins which were hacked in 2016 were only worth $70m or so. The Bitfinex exchange has settled claims with the victims already. So what will they do with it? In the US usually seized items (eg. art – but presumably not drugs or other illicit items such as weapons which I hope gets de-commissioned) get auctioned off – and presumably the authority gets to keep the proceeds?. How do you then auction off a $1 crypto currency? Do they just get to keep this? In the UK, in accordance with the Proceeds of Crime Act, Police force and the Home Office can keep proceeds of seizure half and half….which nicely segues to the next news item….
UK HMRC seizes NFT worth £1.4million
…Not the same level of magnitude as the US case mentioned above, but HMRC was successful in tracking down stolen NFTs and cryptocurrency as a part of a probe into tax fraud involving 250 or so companies. Quite how they got so many companies to agree to defraud is an interesting question in itself.
Again, it goes to show that you can track individuals down for perpetrating hacks, though it is undoubtedly is complicated. This case apparently involved pre-paid phone numbers, false addresses, stolen addresses and use of VPNs. It certainly highlights the drawbacks of NFTs. It only records the “ownership” of a particular file, by pointing to where that file can be found. It doesn’t protect the file itself, which could be compromised if the server it’s stored on is damaged, or the original uploader of the file deletes it.
In a U-turn, Russia decides to allow cryptocurrencies, but they will be regulated
…The government has had a re-think and decided it ought to keep its toe in the crypto water.
This is a huge reversal from the Russian central bank which had earlier considered crypto to be a threat. However, the banking system (SWIFT) is controlled by the west and sanctions have been issued to hurt Russia. One way to get round this is by using cryptocurrency, the most efficient monetary system. Therefore, rather than ban crypto trading, they have decided to recognise crypto as a form of currency.
It’s not a legal tender though (therefore stores will not have to accept it as form of payment cf for example. El Salvador where it is a legal tender) – but transactions of crypto in Russia will be regulated. Cryptocurrency purchases will be allowed only through locally registered and licensed companies so users can be verified and information about transactions can be made available to government authorities. All crypto transactions over a certain amount have to be reported to federal taxation services and failure to do so will be considered a felony. Banks can act as intermediaries between users and crypto exchanges even though that defeats the point of crypto currencies.
Fintech
Apple introduces Tap to Pay on iPhone
…US merchants will be able to use the features requiring users to tap iPhones together for one payment to transfer over to the other.
NFT
Nike Sues StockX, a marketplace for selling unauthorised Nike trainers’ NFTs
…StockX is a online marketplace, which resells garments including trainers, and verifies authenticity (ie: is this Gucci bag really Gucci?). It also offers NFTs linked to physical goods (Vault NFTs) which can be redeemed for physical items but can also be traded as digital goods. Vault NFTs are comprised of images of the product (eg trainers) with the TM on it. Nike complains that it looks like it has endorsed StockX, or that there is some economic connection. Nike considers that the offering is comprised of “inflated prices and murky terms of purchase and ownership” and thereby damages Nike’s reputation.
Patents
Google’s Nest thermostat feature infringes valid patent of EcoFactor says the jury of Western District of Texas
…Jury awarded EcoFactor $20m, shy by $9m of EcoFactor’s asks. EcoFactor failed to show infringement of the other patent. Both concerned thermostats.
Google has had to fight a few patent infringement cases of late:
- November 2021: Google/YouTube held to infringe a VideoShare’s Video Sharing patent
- October 2021: Google successfully defended an infringement case claiming that Nest was infringing Profectus’ picture frame patent.
US patent litigation fun fact: Judge Albright who oversaw this case decides 20% of US patent litigation. He also promises to get to trial faster than any other US court. The EcoFactor case took 2 years. Western District of Texas is also well known for juries giving huge damages awards since VSLI v Intel.
US Federal Court says patent licences should remain sealed
…In relation to the case Uniloc v. Apple, a third party, Electronic Frontier Foundation argued that relevant licences should be disclosed to the public because:
- The public has an interest in inspecting the valuation of the patent rights
- disclosure of patent licensing terms would facilitate ‘up-front cost evaluations of potentially infringing conduct
- inform reasonable royalties in other courts
Federal Court, overturning the District Court’s decision to unseal said:
- District Court failed to assess whether any of the third-party information was protectable as a trade secret or otherwise entitled to protection under the law
- It was an error of law in making a blanket ruling that the public has a broad right to licensing information relating to patents. The public’s interest in patents was to ensure that they are not procured by fraud or improper means.
- No rule of law or binding precedent says that the public is generally entitled to know what consideration a patentee receives for licensing its patent
- The parties agreed that licences should be sealed
Certainly, the UK Courts would agree with the Federal Court.
Semiconductors
EU decides to put up €43bn to set up semiconductor manufacturing in the region
…The pandemic has exposed a major fragility in today’s economy causing serious supply chain issues leading to shut down of factories for companies which have failed to manage its supply chains. This was especially prominent in the disruption of chip supply. Most of today’s the cutting edge chip manufacturing facilities are in Asia (specifically, TSMC and Samsung). To protect the EU economy from future chip supply chain issues, the Commission has decided to put up a €43bn fund. The US has done the same, advancing some $52bn, and China $33bn.
Ukraine/Russian tension spells tension in the semiconductor industry
…Key materials for semiconductor manufacturing, such as Neon and EU decides to put up €43bn to set up semiconductor manufacturing in the region
Palladium which come from Russia/Ukraine, could be blocked. Russia may prioritise other states, notably China, over other countries especially if they impose sanctions on them.
In the Spotlight
In a Power Move, Microsoft publishes Open App Store Principles
…Microsoft publishes “Open App Store Principles” on its Microsoft Store on Windows – to be incorporated into their gaming store it plans to build, ahead of Activision Blizzard deal. Essentially it’s promising it won’t do what Google and Apple have been accused of doing in the Epic trial (ie: allegedly acting exorbitantly by not allowing third party App Stores on their mobile phone operating systems (there are only two, iOS and Android), not allowing apps to use different payment systems, not allowing app developers to download app without going via the App Store run by the operating systems, charging 30% commission on all in-app purchases etc). They are:
Quality, Safety, Security & Privacy
Developers can access app store provided they have reasonable and transparent standards for quality and safety. [but this does mean effectively, that Microsoft has control]. Consumers can control how their data will be used.
Accountability [Echoes EU Commission’s proposed Digital Markets Act]]
Own apps will have the same standards, and non-public information or data from the app store won’t be used to compete with developers’ apps.
Fairness and Transparency [Echoes EU Commission’s proposed Digital Markets Act]]
Treat all apps equally, no preferencing or ranking of own apps or business partners’ apps over others. Being transparent about rules for promotion and marketing.
Developer Choice
- Developers don’t have to use Microsoft payment system to process in-app purchases. [So if this principle were to be applied across the board, you’d be able to use for example, Paypal, in a game downloaded from the Apple App Store]
- Developers aren’t required to provide more favourable terms in Microsoft app store than in other app stores.
- Not to disadvantage developers if they choose to use non Microsoft payment processing system
- Microsoft will not prevent developers from communicating directly with their customers through their apps for legitimate business purposes, such as pricing terms and product or service offerings.
It cleverly contains provisions similar to the proposed US Open App Markets Act, which is currently being considered for incorporation. That Act mainly targets Apple/Google duopoly over their app stores that are offered within the mobile ecosystem. Microsoft has also said the following:
- Its top games (especially ones purchased from Activision Blizzard) will remain available to SonyPlaystation, and support Nintendo as well [note that the promise isn’t forever]
- But, the Developer’s Choice principles do not apply to app stores on Xbox because the consoles are sold at a loss, and Microsoft requires additional revenues to make up for that loss. [Note that Open App Markets Act do not apply to gaming consoles]
Fun fact: Last December, Apple was fined € 5million / week by the Dutch Competition Authority for breaching its competition laws by preventing the Match App from allowing in-app purchases using third party payment system. Weirdly, the finding of breach only applies vis-a-vis the dating apps (Match was the complainant), not all App developers. It is reported that changes made by Apple was minimal because it is not simple to use an alternative payment method, and Apple still charges 27% commission (instead of 30%) on purchases made by alternative payment methods – supposedly a reduced rate that excludes value related to payment processing and related activities – with developers responsible for collection and remittance of taxes & VAT. Apple is appealing the decision, but meanwhile decided that it would be more beneficial for the bottomline to make minimum changes to the system and cope with the Authority’s decision that it is non-compliant and pay the €5 million/week! South Korea has also passed laws forcing platform owners (namely Apple and Google) to open up payment systems that could be used on their operating systems. Apple says there is operational costs for running the platform to ensure that it is safe from fraud, and to provide privacy protection (including features like parental control).