Executive Briefing March 30, 2018

TOP STORIES — The Changing Perception of Tech

This week features a series of articles critical of the technology industry highlighted by Facebook’s privacy issues, President Trump comments on the impact of Amazon’s business model and Uber’s self-driving car crash that resulted in a fatality.  The two highlighted articles sum up the challenges moving forward for the industry.  I have also included additional articles below on these topics as well.

The Hill With the bloom off the rose, it’s time to regulate big tech

Things are changing for “big tech.” Rattled by proven cases of gender and racial discrimination, sinister privacy practices, rapacious competition, and rampant disregard for consumers, Facebook, Google, Twitter, Apple and Uber, among others, are no longer the centerpiece of progress. With the bloom off the rose, it is time to regulate the technology sector.

WSJ In Politics vs. Tech Profits, Investors Are the Losers (subscription required)

Instead, the market is waking up to an even broader threat: politics. It might also be sniffing another danger, from economics. The political risk is obvious for Facebook, which stands at the unpleasant intersection of privacy fears and fake news. Facebook is accused of unwittingly aiding the manipulation of the U.S. election by Russian agents, of helping swing the Brexit referendum and, linked to both cases, failing to notice that the personal details of 50 million users had been snatched.

TOP QUOTES

  • “Regulating tech will require Congress to balance many competing interests without sacrificing the investment and innovation which characterizes the industry. It is a daunting task to be sure, but there is never a wrong time to do the right thing and the time is now.”

– Adonis Hoffman, chairman of Business in the Public Interest

  • “Instead, the market is waking up to an even broader threat: politics…expect lots of contrition from tech company CEOs as they try to head off political pressure on the bottom line.”

– James Mackintosh

HILL UPDATE

CLOUD ACT Passage—continuing coverage

NYT Facebook’s Zuckerberg Said to Agree to Testify Before Congress Over Data Privacy

WASHINGTON — For 10 days, Mark Zuckerberg, Facebook’s chief executive, has been under increasing pressure from lawmakers and regulators to answer questions about the improper harvesting of data of 50 million Facebook users by a British political consulting firm, Cambridge Analytica. Now Mr. Zuckerberg plans to go to Washington to explain himself. The chief executive has agreed to testify in at least one congressional hearing over the social network’s handling of customer data, according to people familiar with the decision. Specifically, he plans to appear next month before the House Energy and Commerce Committee, said the people, who asked not to be identified because the arrangements were not public. Mr. Zuckerberg may make other appearances; he has also been asked to testify before the Senate and House Judiciary and Commerce Committees.

The Hill Congress muddles on H-1B reform to the detriment of US workers

When President Obama’s Department of Homeland Security (DHS) in 2015 began handing out work-permits to the spouses of H-1B guestworkers applying to permanently immigrate, we took the agency to court. On behalf of a group of displaced and out-of-work U.S. tech workers, we claimed that the hundreds of thousands of work permits due to hit the tech-labor market as a result of the new rule (according to DHS’s own estimates), violated our plaintiffs’ labor rights, was designed to circumvent the H-1B visa-cap, and represented a corruptive hand-out to the Obama administration’s tech-industry allies. Thankfully, President Trump agreed, and when his own DHS was installed one of its first orders of business was to draft a rescission-rulemaking taking us back to the pre-2015 status quo.

NBC News Sen. Warner: Facebook has not been fully forthcoming with Congress

WASHINGTON — Facebook has not been fully transparent with Congress about its recently revealed data leak, said Sen. Mark Warner, the top Democrat on the Senate Intelligence Committee, warning that government regulation of the social media giant may be in sight. “I don’t think Facebook has been fully forthcoming,” Warner, D-Va., said Sunday on “Meet The Press.” “I called out Facebook back in December of ‘16. In the Spring of ’17 I questioned micro-targeting and the use of this really sketchy firm Cambridge Analytica. Early on for most of 2017 they blew that off.”

ARTICLE SUMMARY

CNBC Everything you need to know about a new EU data law that could shake up big US tech

You may have heard of the General Data Protection Regulation (GDPR). But most likely you haven’t because it sounds boring, but it’s really important and CNBC has a guide to help you understand it. It’s a piece of European Union (EU) legislation that could have a far-reaching impact on some of the biggest technology firms in the world including Facebook and Google.

CNBC Amazon shares slump as Trump goes after the retail giant: ‘They pay little or no taxes to state & local governments’

President Donald Trump lashed out at Amazon in a tweet Thursday, a day after its stock tanked following a report said he wants to “go after” the e-commerce giant for alleged antitrust violations. “Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!” Trump wrote on Twitter.

ZDNet Apple’s Tim Cook: Facebook’s privacy blunder ‘so dire’ we need regulations

Apple CEO Tim Cook has approved of the idea of Silicon Valley tech firms facing more privacy regulations in the wake of Facebook’s controversy over Cambridge Analytica. At a Beijing China Development Forum on Saturday, Cook said he supported “well-crafted regulation” when asked if the Facebook incident warranted tighter restrictions on data use, Bloomberg reports. “This certain situation is so dire and has become so large that probably some well-crafted regulation is necessary,” Cook said. “The ability of anyone to know what you’ve been browsing about for years, who your contacts are, who their contacts are, things you like and dislike, and every intimate detail of your life — from my own point of view, it shouldn’t exist.”

TV Technology NAB Urges FCC To Protect In-Band Channels To Ease Next-Gen Transition

NAB has asked the FCC to reject requests from Microsoft and other TV white space device advocates to guarantee spectrum access rights for unlicensed TV-band white space devices that would block broadcasters from using unoccupied in-band TV channels. The NAB request was made March 20 in Reply Comments and the news has been covered by Radio & Television Business Report and Rapid TV News. Relatedly, Politico Morning Tech reported that FCC Chairman Ajit Pai and Commissioners Mike O’Rielly, Jessica Rosenworcel and Brendan Carr will attend the National Association of Broadcasters’ annual show in Las Vegas next month.

Bloomberg Uber Isolated by Partners and Competitors in Aftermath of Crash

Uber Technologies Inc. has found itself isolated a little more than a week after one of its self-driving SUVs hit and killed a pedestrian in Arizona. Uber suppliers, competitors and even formerly supportive government officials have been quick to criticize or distance themselves from the ride-hailing giant, whose human and technological safeguards apparently failed to detect a woman crossing the street with a bicycle on a clear night.

CNN A long awaited privacy awakening is here

For nearly as long as the current crop of internet giants have existed, there has been scrutiny over how much data they collect and how it’s used. And yet we’ve only continued to hand over more and more of our personal information to these businesses as they’ve become more embedded in our daily lives.

NBC News Is President Trump right about Amazon? Here’s a reality check

President Donald Trump stepped up his attack on Amazon on Thursday, firing off a tweet that accused the internet retail giant of having a detrimental effect on the U.S. economy. Trump claimed the retailer was not paying its share of state and local taxes, was putting retailers out of business and was sucking much-needed resources from the United States Postal Service. Amazon declined NBC News’ request to comment on the tweet.

RealClearPolitics It’s a Terrible Time to Regulate Big Tech

A new Rasmussen poll finds half of Facebook’s users say they might bail out of that social media site because of privacy concerns. For Facebook’s detractors, there’s surely some schadenfreude. And its competitors sitting on the sidelines are doubtless salivating over the prospect of nabbing customers.  At stake here, however, is much more than the site’s sloppiness or lack of transparency in using customer data. The existential threat that should worry us is the prospect of overreaction to revelations that an outfit called Cambridge Analytica manipulated Facebook’s loose rules of the road — following a playbook pioneered by Barak Obama’s supporters — in an effort to help Donald Trump win the White House. There’s a lot not to like about that “technique.” But what will be worse is if these would-be reformers pressure Congress to “do something” not just about Facebook in particular but about Big Tech in general.

Bloomberg It’s Amazon’s Turn in the Tech Hot Seat

Amazon’s stock price fell 4.4 percent on Wednesday after Axios reported that President Donald Trump is “obsessed” with the e-commerce titan and imagines ways to curtail its power. In a tweet on Thursday, Trump confirmed that he’s concerned about Amazon’s impact on cities and states, the U.S. Postal Service and smaller retailers. In response, Amazon shares are falling in early trading.

TIME Why Classrooms Are Apple, Google and Microsoft’s Next Big Battleground

Among the reasons tech giants are scrambling to get their gadgets into schools: It’s a big business opportunity. The education technology market is expected to reach $252 billion by 2020, according to a report published by education-focused technology conference host EdTechXGlobal and advisory firm IBIS Capital. But there’s potential upside even after students leave the classroom and turn into fully-fledged consumers, too. “It gets people using your technology young,” says Avi Greengart, research director for consumer platforms and devices for GlobalData. “The hope is that they stick with it.”

CNN An immigration bill you’ve never heard of will solve US’s labor shortage

We are facing a critical shortage of skilled labor in America. According to the Labor Department’s latest jobs report, we’re in the strongest labor market in decades. But that has left the country with a severe shortage of skilled workers. In some Rust Belt states, there are as many as 15 science, tech, engineering and math-related job postings for every unemployed STEM worker, according to a new report by New American Economy, a coalition of business leaders and mayors working toward immigration reform.

GeekWire Can Congress figure out tech and trade policy? Amazon, Microsoft and political leaders call for reform

Some of the most important U.S. laws that govern global trade and the flow of information across borders are outdated. Not disrupted by cutting-edge tech that has come out in the last few years outdated, but enacted before Amazon was even a company outdated. Leaders from Amazon and Microsoft as well as congressional representatives from Washington state gathered at Amazon HQ Monday for Washington Council on International Trade’s trade summit. In the same room where Amazon welcomes 500 new employees every week from around the world, speaker after speaker advocated committing to trade agreements and updating existing pacts, while acknowledging the complications of doing so to reflect today’s technology.

THINK TANK/TECH TRADE ASSOCIATION HIGHLIGHTS

Brookings Institution

BSA | The Software Alliance

  • Financial Times quote on the CLOUD Act: President and CEO Victoria Espinel told the Financial Times, “Data is moving all over the world, it’s stored all over the world, and we don’t have an international consensus on how that data is treated.” She added, “The new US law would be one part of the international legal framework that is needed, though privacy rules will also need to be adapted.” (FINANCIAL TIMES – “US Legislation Opens Door to Overseas Data Access,” By Richard Waters, March 25, 2018)

Competitive Enterprise Institute (CEI)

  • Blog addressing Facebook and data privacy: “As with Facebook and many companies before it, we’re watching in real-time as market forces correct a problem with how a company manages their users’ data,” wrote director of digital marketing Scooter Schaefer. He argued, “The last thing we need is a European-style regulatory overreach that prevents a new Apple, Uber, or Facebook from becoming the next great American success story.” (CEI BLOG – European-Style Tech Regulation Not the Answer to Facebook Privacy Concerns, By Scooter Schaefer, March 28, 2018)

Information Technology & Innovation Foundation (ITIF)

  • Report on artificial intelligence: Senior policy analyst Nick Wallace and vice president Daniel Castro wrote, “Despite different jurisdictions having different goals when it comes to privacy, policymakers and citizens in the EU should understand that GDPR will come at a significant cost in terms of innovation and productivity.” They added, “The GDPR is the wrong framework for AI and the digital economy—both in Europe and everywhere else. The regulation in its current form will make it very difficult for the EU to compete with other regions in which businesses have a freer hand in the development and use of AI.” (ITIF REPORT – The Impact of the EU’s New Data Protection Regulation on AI, By Nick Wallace and Daniel Castro, March 26, 2018) (Additional: Press Release)

Internet Association

  • Statement on trade: In response to the Trump administration’s trade actions on China, global government affairs senior vice president Melika Carroll stated, “The internet industry has serious concerns with the impact of these tariffs – and potential retaliatory actions – on American jobs, consumers, and the digital economy.” Additionally, “There’s no doubt the U.S. government can and should address China’s trade practices, but consumers and American job creators should not be caught in the crossfire. The internet sector represents 3 million jobs and 6 percent of GDP, and these tariffs will leave our customers worse off, stifle growth, and make it harder for the digital economy to succeed.”

Mercatus Center

  • Op-ed on trade: Senior fellow Donald J. Boudreaux wrote, “Fears of losing jobs to trade are inconsistent with our larger embrace of innovation and competition.” He added, “More ominously, given that trade-induced job losses are a tiny portion of all job losses, such fears are wildly overblown — so much so that they now have America and the world on the brink of a potentially calamitous trade war.” (THE NEW YORK TIMES – Trade Is Not a Job Killer, By Donald J. Boudreaux, March 28, 2018)

National Taxpayers Union (NTU)

  • Blog post on trade: “Weaponizing U.S. consumers in a new trade war on China is misguided,” argued director Bryan Riley. He added that “Control of individuals’ trade and investment decisions by the central government is a trait of communist governments like China’s, not market-oriented governments like America’s.” (NTU BLOG – Trump’s New Trade Sanctions Make Us More Like China, By Bryan Riley, March 26, 2018)

New America

  • Op-ed on the CLOUD Act: “While the bill sponsors did try to address some of the concerns that have been raised, the improvements are not enough to shift the balance so that the CLOUD Act will be a boon, rather than a threat, to privacy and human rights,” policy counsel and government affairs lead Robyn Greene wrote. She added, “it is up to the Department of Justice and Congress to ensure that only countries with the strongest records on human rights get certified and that the underlying executive agreements are narrowly tailored, and up to U.S. companies to be vigilant about protecting their users’ rights.” (JUST SECURITY – Somewhat Improved, the CLOUD Act Still Poses a Threat to Privacy and Human Rights, By Robyn Greene, March 23, 2018)
  • Op-ed on broadband: Policy counsel Eric Null noted, “if you visit the website of the National Broadband Map, you will find this notice: ‘National Broadband Map data is from June 30, 2014 and is not being updated.’” He added, “It’s nice that the FCC spent the time to create a map. Unfortunately, without improving data collection, it’s likely to be more of the same: ISP-reported data that paints a rosy picture of broadband availability and competition in the United States. But most of you know what the FCC apparently doesn’t—the ISP market is very consolidated, with few Americans having real choices.” (SLATE – Why Can’t the U.S. Government Make a Decent Broadband Map?, By Eric Null, March 28, 2018)

U.S. Chamber of Commerce

NOTABLE QUOTES

  • “The future of the Microsoft Ireland case is obviously a question for the Court and the parties, but my understanding is that the CLOUD Act resolves the issue at the center of the case.”

– Ally Riding, spokesperson for Sen. Orrin Hatch

  • “Part of the reason Congress wanted to act in this area is so the Supreme Court wouldn’t have to make a substantive decision on this issue. [The DOJ letter] signals that it would like the Supreme Court to put the case on hold.”

– Graham Dufault, director of government affairs, ACT | The App Association

  • “The United States is currently determining whether, and if so, to what extent the passage of the CLOUD Act affects the Court’s disposition of this case. It intends to file a supplemental filing addressing the question as promptly as possible.”

– letter by the Department of Justice to the Supreme Court

  • “It’s been a tough area because many legislators don’t understand a lot about digital technology — how it’s working; where it’s headed — not just with respect to trade but more generally. So people are hesitant to put policy in place, which is why we still don’t have a warrant standard for accessing information in your email that may be sitting in the cloud.”

– Rep. Suzan DelBene

  • “The choice is the CLOUD Act or weaker safeguards down the line.”

– Peter Swire, professor, Georgia Tech

  • “The FBI’s leadership went straight to the nuclear option – attempting to force Apple to circumvent its encryption – before attempting to see if their in-house hackers or trusted outside suppliers had the technical capability to break into the San Bernardino terrorist’s iPhone. It’s clear now that the FBI was far more interested in using this horrific terrorist attack to establish a powerful legal precedent than they were in promptly gaining access to the terrorist’s phone.”

– Sen. Ron Wyden

  • “I do think in that sense it is a less-stringent requirement than you would have for a treaty. But I guess, in a sense, that since Congress enacted the [CLOUD Act], it took that into account and came to a judgment that they were OK with this level of review.”

– Sophia Brill, associate, Morrison & Foerster

  • “In the digital age, it is not clear that the public is well-served by imposing the sort of territorial limitations that govern traditional search warrants on computer search warrants…. Until Congress approves broader amendments to Rule 41, however, both prosecutors and defense counsel should be alert to the contours of the laws Congress has put in place to govern digital warrants, and should take care to analyze computer search warrants for whether they truly fall within the patchwork of jurisdictional provisions currently on the books.”

– Brian Jacobs, former Assistant U.S. Attorney, Southern District of New York

  • “It’s understandable that the government would prefer that technology companies come up with the solutions, but Washington now has an important opportunity to drive a pragmatic, research-based process… The larger point is that after years of bitter stalemate, the debate over law-enforcement access to encrypted systems may finally be making real progress. And to track this progress, we should focus less on the war of words between the government and certain parts of the information-security community and instead focus on those security researchers—whether in academia or industry—who are working to discover whether secure third-party access really is a contradiction in terms.”

– Alan Rozenshtein, visiting assistant professor of law, University of Minnesota

SOCIAL MEDIA HIGHLIGHTS