big tech

european-leadership-change-means-new-adversaries-for-big-tech

European leadership change means new adversaries for Big Tech

A new sheriff in town —

“Legislation has been adopted and now needs to be enforced.”

European leadership change means new adversaries for Big Tech

If the past five years of EU tech rules could take human form, they would embody Thierry Breton. The bombastic commissioner, with his swoop of white hair, became the public face of Brussels’ irritation with American tech giants, touring Silicon Valley last summer to personally remind the industry of looming regulatory deadlines.

Combative and outspoken, Breton warned that Apple had spent too long “squeezing” other companies out of the market. In a case against TikTok, he emphasized, “our children are not guinea pigs for social media.”  

His confrontational attitude to the CEOs themselves was visible in his posts on X. In the lead-up to Musk’s interview with Donald Trump, Breton posted a vague but threatening letter on his account reminding Musk there would be consequences if he used his platform to amplify “harmful content.” Last year, he published a photo with Mark Zuckerberg, declaring a new EU motto of “move fast to fix things”—a jibe at the notorious early Facebook slogan. And in a 2023 meeting with Google CEO Sundar Pichai, Breton reportedly got him to agree to an “AI pact” on the spot, before tweeting the agreement, making it difficult for Pichai to back out.

Yet in this week’s reshuffle of top EU jobs, Breton resigned—a decision he alleged was due to backroom dealing between EU Commission president Ursula von der Leyen and French president Emmanuel Macron.

“I’m sure [the tech giants are] happy Mr. Breton will go, because he understood you have to hit shareholders’ pockets when it comes to fines,” says Umberto Gambini, a former adviser at the EU Parliament and now a partner at consultancy Forward Global.

Breton is to be effectively replaced by the Finnish politician Henna Virkkunen, from the center-right EPP Group, who has previously worked on the Digital Services Act.

“Her style will surely be less brutal and maybe less visible on X than Breton,” says Gambini. “It could be an opportunity to restart and reboot the relations.”

Little is known about Virkkunen’s attitude to Big Tech’s role in Europe’s economy. But her role has been reshaped to fit von der Leyen’s priorities for her next five-year term. While Breton was the commissioner for the internal market, Virkkunen will work with the same team but operate under the upgraded title of executive vice president for tech sovereignty, security and democracy, meaning she reports directly to von der Leyen.

The 27 commissioners, who form von der Leyen’s new team and are each tasked with a different area of focus, still have to be approved by the European Parliament—a process that could take weeks.

“[Previously], it was very, very clear that the commission was ambitious when it came to thinking about and proposing new legislation to counter all these different threats that they had perceived, especially those posed by big technology platforms,” says Mathias Vermeulen, public policy director at Brussels-based consultancy AWO. “That is not a political priority anymore, in the sense that legislation has been adopted and now has to be enforced.”

Instead Virkkunen’s title implies the focus has shifted to technology’s role in European security and the bloc’s dependency on other countries for critical technologies like chips. “There’s this realization that you now need somebody who can really connect the dots between geopolitics, security policy, industrial policy, and then the enforcement of all the digital laws,” he adds. Earlier in September, a much anticipated report by economist and former Italian prime minister Mario Draghi warned that Europe would risk becoming “vulnerable to coercion” on the world stage if it did not jump-start growth. “We must have more secure supply chains for critical raw materials and technologies,” he said.

Breton is not the only prolific Big Tech adversary to be replaced this week—in a planned exit. Gone, too, is Margrethe Vestager, who had garnered a reputation as one of the world’s most powerful antitrust regulators after 10 years in the post. Last week, Vestager celebrated a victory in a case forcing Apple to pay $14.4 billion in back taxes to Ireland, a case once referred to by Apple CEO Tim Cook as “total political crap”.

Vestager—who vied with Breton for the reputation of lead digital enforcer (technically she was his superior)—will now be replaced by the Spanish socialist Teresa Ribera, whose role will encompass competition as well as Europe’s green transition. Her official title will be executive vice-president-designate for a clean, just and competitive transition, making it likely Big Tech will slip down the list of priorities. “[Ribera’s] most immediate political priority is really about setting up this clean industrial deal,” says Vermuelen.

Political priorities might be shifting, but the frenzy of new rules introduced over the past five years will still need to be enforced. There is an ongoing legal battle over Google’s $1.7 billion antitrust fine. Apple, Google, and Meta are under investigation for breaches of the Digital Markets Act. Under the Digital Services Act, TikTok, Meta, AliExpress, as well as Elon Musk’s X are also subject to probes. “It is too soon for Elon Musk to breathe a sigh of relief,” says J. Scott Marcus, senior fellow at think tank Bruegel. He claims that Musk’s alleged practices at X are likely to run afoul of the Digital Services Act (DSA) no matter who the commissioner is.

“The tone of the confrontation might become a bit more civil, but the issues are unlikely to go away.”

This story originally appeared on wired.com.

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ISPs ask FCC for tax on Big Tech to fund broadband networks and discounts

Illustration of $100-dollar bills being sucked into a broadband network.

Internet service providers are again urging the Federal Communications Commission to impose new fees on Big Tech firms and use the money to subsidize broadband network deployment and affordability programs. If approved, the request would force Big Tech firms to pay into the FCC’s Universal Service Fund (USF), which in turn distributes money to broadband providers.

The request was made on June 6 by USTelecom, a lobby group for AT&T, Verizon, CenturyLink/Lumen, and smaller telcos. USTelecom has made similar arguments before, but its latest request to the FCC argues that the recent death of a broadband discount program should spur the FCC to start extracting money from Big Tech.

“Through focusing on the Big Tech companies who benefit most from broadband connectivity, the Commission will fairly allocate the burden of sustaining USF,” USTelecom wrote in the FCC filing last week.

The USF spends about $8 billion a year. Phone companies must pay a percentage of their revenue into the fund, and telcos generally pass those fees on to consumers with a “Universal Service” line item on telephone bills.

The money is directed back to the telco industry with programs like the Connect America Fund and Rural Digital Opportunity Fund, which subsidize network construction in unserved and underserved areas. The USF also funds Lifeline program discounts for people with low incomes.

USTelecom cites death of discount program

FCC Chairwoman Jessica Rosenworcel hasn’t stated any intention to expand USF contributions to Big Tech. Separately, she rejected calls to impose Universal Service fees on broadband, leaving phone service as the only source of USF revenue.

The USTelecom filing came in response to the FCC asking for input on its latest analysis of competition in the communications marketplace. USTelecom says the USF is relevant to the proceeding because “the Universal Service Fund is critical for maintaining a competitive marketplace and an expanded contributions base is necessary to sustain the fund.” No changes to the USF would be made in this proceeding, though USTelecom’s comments could be addressed in the FCC’s final report.

Some people have called for the USF to be expanded in order to revive the Affordable Connectivity Program (ACP), which provided $30 monthly discounts until Congress allowed funding to lapse. That program reduced the price of broadband for people with low incomes while providing more revenue to ISPs. USTelecom’s request for payments from Big Tech argues that the ACP’s lapse is a reason to impose fees on Big Tech.

“Expanding the contributions base to include Big Tech would not only sustain the current USF programs, but would also fund affordability efforts like the ACP long term,” USTelecom wrote. Payments from Big Tech could “enable a permanent Affordable Connectivity Program,” the group said.

In other news related to the Universal Service Fund, the US Supreme Court today rejected a challenge to the fund’s legality that was brought by the conservative Consumers’ Research group. The group challenged the FCC’s authority to raise revenue for the fund but previously lost at the appeals court level, and the Supreme Court declined a petition to take up the case.

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Outcry from big AI firms over California AI “kill switch” bill

A finger poised over an electrical switch.

Artificial intelligence heavyweights in California are protesting against a state bill that would force technology companies to adhere to a strict safety framework including creating a “kill switch” to turn off their powerful AI models, in a growing battle over regulatory control of the cutting-edge technology.

The California Legislature is considering proposals that would introduce new restrictions on tech companies operating in the state, including the three largest AI start-ups OpenAI, Anthropic, and Cohere as well as large language models run by Big Tech companies such as Meta.

The bill, passed by the state’s Senate last month and set for a vote from its general assembly in August, requires AI groups in California to guarantee to a newly created state body that they will not develop models with “a hazardous capability,” such as creating biological or nuclear weapons or aiding cyber security attacks.

Developers would be required to report on their safety testing and introduce a so-called kill switch to shut down their models, according to the proposed Safe and Secure Innovation for Frontier Artificial Intelligence Systems Act.

But the law has become the focus of a backlash from many in Silicon Valley because of claims it will force AI start-ups to leave the state and prevent platforms such as Meta from operating open source models.

“If someone wanted to come up with regulations to stifle innovation, one could hardly do better,” said Andrew Ng, a renowned computer scientist who led AI projects at Alphabet’s Google and China’s Baidu, and who sits on Amazon’s board. “It creates massive liabilities for science-fiction risks, and so stokes fear in anyone daring to innovate.”

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2024 may be a year of reckoning for Apple’s $85 billion services business

scrutinized —

US court cases and tougher EU regulation will pose challenges to Apple’s bottom line.

2024 may be a year of reckoning for Apple’s $85 billion services business

Apple faces a legal reckoning in 2024, with a series of regulatory decisions by US and EU authorities over the coming months set to determine the future of its $85 billion-a-year services business.

The biggest hit to the iPhone maker could come from a US antitrust trial against Google, where it emerged that the fellow tech giant had paid more than $26 billion in 2021 to make its search engine the default on Apple devices and other smartphones and browsers.

Should Google lose the case, it could be forced to stop making regular payments to Apple, which Eric Seufert, an independent analyst, estimates as being worth a quarter of annual revenues earned by Apple’s services arm.

Meanwhile, Apple and other tech giants face increasing scrutiny from the Biden administration over concerns about the dominance of its App Store, which it is already being forced to change in the EU due to legislation designed to rein in the power of Big Tech.

Together, the legal and regulatory actions spanning two of Apple’s biggest markets represent the biggest threat to the company’s business in years.

Its services arm, which includes income from the App Store, video streaming arm, and Apple Music, has steadily increased as a proportion of the company’s total revenues, which is still dominated by sales of devices such as the iPhone.

The Google trial, seen as the most significant antitrust monopoly trial in more than 25 years in Washington, will hear closing arguments in May. Should Google lose, it will almost certainly file an appeal, but such a decision would raise questions about how the two tech giants work with one another into the future.

“I think the judge was intrigued with that issue during the trial,” said Bill Kovacic, a former Federal Trade Commission chair and competition professor of law and policy at George Washington University Law School. “The question in the background was: ‘if Apple is going to have an auction for that prime placement, what should Google have done?’”

The White House is at the same time intensifying its efforts to tackle what it regards as excessive corporate power. Jonathan Kanter, head of the Department of Justice’s antitrust unit since November 2021, has made no secret of his ambition to bring cases against the biggest US companies.

His department has been probing Apple’s App Store policies for years and is now, according to Kanter, “firing on all cylinders.” The window for him to bring a case is closing, however, as the US presidential election and a potential change in administration loom. The DoJ did not respond to a request for comment on the Apple probe.

Regulators, businesses, and enforcers have for years been seeking to pry apart Apple’s iOS ecosystem, a move the tech giant has always insisted would undermine the mobile operating software’s security.

Apple, however, acknowledged recently in a filing to the Securities and Exchange Commission that it would have to make changes to its App Store in the EU, due to the bloc’s new Digital Markets Act, which has a March deadline for legal compliance from tech companies.

In the EU, Apple is preparing to allow “sideloading,” which enables iPhone users to bypass its store and download apps from elsewhere.

This will breach, for the first time, the walled-off ecosystem that the company has protected since Steve Jobs unveiled the iPhone in 2007. Apple has dragged its feet on this issue, since it maintains the practice will create security risks to its system.

Sideloading could have an impact on the App Store, where Apple charges developers as much as a 30 percent fee on digital purchases. Games account for more than half of that revenue. Google’s Play Store, which charges a similar fee, is also in the spotlight after it lost a landmark trial against Epic Games in California in December.

Apple draws between $6 billion and $7 billion in commission fees from the App Store globally each quarter, according to Sensor Tower estimates.

Competitors are pushing to earn some of that share and launch rival app stores and payment methods on Apple devices. Microsoft is talking to partners about launching its own mobile store.

Fortnite maker Epic Games, a longtime Apple foe, wants its store on iOS devices and points to its lower 12 percent fee as an incentive for consumers to switch to its platform.

While Epic broadly lost a lower court judgment into its claims against Apple in 2021, a California judge ordered Apple to put an end to App Store rules that prevent developers from steering customers outside of the store to make purchases. The appeals court upheld that injunction earlier this year. The US Supreme Court will review the case next year.

For investors, gauging the ultimate risk from the raft of regulatory and legal actions across the world is difficult. “I think there’s just a belief that there’s all this noise in the background, and ‘don’t worry about it,’” said Gene Munster, managing partner at Deepwater Asset Management.

Investors, he said, had been “lulled to sleep” by Apple’s initial wins against Epic in particular. “But I think investors should take it seriously.”

Apple declined to comment.

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