Government

Trump just noticed Europe’s $5BN antitrust fine for Google

Posted by | Android, antitrust, eCommerce, Europe, Google, Government, Margrethe Vestager, Mobile, tax, trump, Twitter | No Comments

In other news bears shit in the woods. In today’s second-day President Trump news: ‘The Donald’ has seized, belatedly, on the European Commission’s announcement yesterday that Google is guilty of three types of illegal antitrust behavior — with its Android OS, since 2011 — and that it is fining the company $5 billion; a record-breaking penalty which the Commission’s antitrust chief, Margrethe Vestager, said reflects the length and gravity of the company’s competition infringements.

Trump is not! at all! convinced! though!

“I told you so!” he has tweeted triumphantly just now. “The European Union just slapped a Five Billion Dollar fine on one of our great companies, Google . They truly have taken advantage of the U.S., but not for long!”

I told you so! The European Union just slapped a Five Billion Dollar fine on one of our great companies, Google. They truly have taken advantage of the U.S., but not for long!

— Donald J. Trump (@realDonaldTrump) July 19, 2018

Also not so very long ago, Trump was the one grumbling about U.S. tech giants. Though Amazon is his most frequent target in tech, while Google has been spared the usual tweet lashings. Albeit, on the average day he may not necessarily be able to tell one tech giant from another.

Vestager can though, and she cited Amazon as one of the companies that had suffered as a direct result of contractual conditions Google imposed on device makers using its Android OS — squeezing the ecommerce giant’s potential to build a competing Android ecosystem, with its Fire OS.

Presumably, for Trump, Amazon is not ‘one of our great companies’ though.

At least it’s only Google that gets his full Twitter attention — and a special Trumpian MAGA badge of honor call-out as “one of our great companies” — in the tweet.

Presumably, he hasn’t had this pointed out to him yet though. So, uh, awkward.

Safe to say, Trump is seizing on Google’s antitrust penalty as a stick to beat the EU, set against a backdrop of Trump already having slapped a series of tariffs on EU goods, and Trump recently threatening the EU with tariffs on cars — in what is fast looking like a full blown trade war.

Even so, Trump’s tweet probably wasn’t the kind of support Google was hoping to solicit via its own Twitter missive yesterday…

.@Android has created more choice for everyone, not less. #AndroidWorks pic.twitter.com/FAWpvnpj2G

— Google Europe (@googleeurope) July 18, 2018

#AndroidWorksButTradeWarsDon’t doesn’t make for the most elegant hashtag.

But here’s the thing: Vestager has already responded to Trump’s attack on the Android decision — even though it’s taking place a day late. Because the EU’s “tax lady”, as Trump has been known to vaguely refer to her, is both lit and onit.

During yesterday’s press conference she was specifically asked to anticipate Trump’s tantrum response on hearing the EU antitrust decision against Google, and whether she wasn’t afraid it might affect next week’s meeting between the US president and the European Commission’s president, Jean-Claude Juncker.

“As I know my US colleagues want fair competition just as well as we do,” she responded. “There is a respect that we do our job. We have this very simple mission to make sure that companies play by the rulebook for the market to serve consumers. And this is also my impression that this is what they want in the US.”

Pressed again on political context, given the worsening trade relationship between the US and the EU, Vestager was asked how she would explain that her finding against Google is not part of an overarching anti-US narrative — and how would she answer Trump’s contention that the EU’s “tax lady… really hates the US”.

“Well I’ve done my own fact checking on the first part of that sentence. I do work with tax and I am a woman. So this is 100% correct,” she replied. “It is not correct for the latter part of the sentence though. Because I very much like the US. And I think that would also be what you think because I am from Denmark and that tends to be what we do. We like the U.S. The culture, the people, our friends, traveling. But the fact is that this [finding against Google] has nothing to do with how I feel. Nothing whatsoever. Just as well as enforcing competition law — well, we do it in the world but we don’t do it in a political context. Because then there would never, ever be a right timing.

“The mission is very simple. We have to protect consumers and competition to make sure that consumers get the best of fair competition — choice, innovation, best possible prices. This is what we do. It has been done before, we will continue to do it — no matter the political context.”

Maybe Trump will be able to learn the name of the EU’s “tax lady” if Vestager ends up EU president next year.

Or, well, maybe not. We can only hope so.

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Google gets slapped with $5BN EU fine for Android antitrust abuse

Posted by | Advertising Tech, Android, antitrust, Apps, competition commission, eu, Europe, fairsearch, Google, Government, Margrethe Vestager, Mobile, TC | No Comments

Google has been fined a record breaking €4.34 billion (~$5BN) by European antitrust regulators for abusing the dominance of its Android mobile operating system.

Competition commissioner Margrethe Vestager has tweeted to confirm the penalty ahead of a press conference about to take place. Stay tuned for more details as we get them.

Fine of €4,34 bn to @Google for 3 types of illegal restrictions on the use of Android. In this way it has cemented the dominance of its search engine. Denying rivals a chance to innovate and compete on the merits. It’s illegal under EU antitrust rules. @Google now has to stop it

— Margrethe Vestager (@vestager) July 18, 2018

In a longer statement about the decision, Vestager said:

Today, mobile internet makes up more than half of global internet traffic. It has changed the lives of millions of Europeans. Our case is about three types of restrictions that Google has imposed on Android device manufacturers and network operators to ensure that traffic on Android devices goes to the Google search engine. In this way, Google has used Android as a vehicle to cement the dominance of its search engine. These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere. This is illegal under EU antitrust rules.

In particular, the EC has decided that Google:

  • has required manufacturers to pre-install the Google Search app and browser app (Chrome), as a condition for licensing Google’s app store (the Play Store);
  • made payments to certain large manufacturers and mobile network operators on condition that they exclusively pre-installed the Google Search app on their devices; and
  • has prevented manufacturers wishing to pre-install Google apps from selling even a single smart mobile device running on alternative versions of Android that were not approved by Google (so-called “Android forks”).

The decision also concludes that Google is dominant in the markets for general internet search services; licensable smart mobile operating systems; and app stores for the Android mobile operating system.

During the press conference Vestager said the Commission had determined that Google had breached its competition rules with Android since 2011. (Although its press release also notes that during 2013, after being called out by the Commission, Google gradually stopped making illegal payments to device manufacturers to exclusively pre-install Google Search. “The illegal practice effectively ceased as of 2014,” it adds.)

“The decision today concludes that the restrictions Google imposed on manufacturers and network operators using Android have breached [EU] rules since 2011,” said Vestager. “First that’s because Google’s practices have denied rival search engines the possibility to compete on their merits. They made sure that Google search engine is pre-installed on practically all Android devices, which is an advantage that cannot be matched.

“And by making payments to major manufacturers and network operators on condition that no other search app or search engine was pre-installed — well, then rivals were excluded from this opportunity.”

“Google’s practices also harmed competition and further innovation in the wider mobile space, beyond just Internet search — and that’s because they prevented other mobile browsers from competing effectively with the pre-installed Google Chrome browser.

“Finally they obstructed the development of Android forks. This could have provided a platform for rival search engines as well as other app developers to thrive.”

She raised the example of Amazon’s Android fork, Fire OS, as a rival Android platform that has suffered from Google’s contractual arrangements with device manufacturers.

“In 2012 and 2013 Amazon tried to license to device manufacturers its Android fork, called Fire OS. It wanted to co-operate with manufacturers to increase its chances of commercial success. And manufacturers were interested but due to Google’s restrictions, manufacturers could not launch Fire OS on even a single device,” she said.

“They would have lost the right to sell any Android phone with key Google apps. Nowadays, very few devices run with Fire OS. Namely only those manufactured by Amazon themselves. And this is not a proportionate outcome. Google is entitled to set technical requirements to ensure that functionality and apps within its own Android ecosystem runs smoothly. But these technical requirements cannot serve as a smokescreen to prevent the development of competing Android ecosystems.

“Google cannot have its cake and eat it.”

Vestager also made a point of characterizing Google’s actions as monopolistic towards data, saying that by blocking rival apps and services it “also denied rivals access to valuable data from increased user traffic which in turn could have allowed rivals to improve their products”.

What about breaking Google up?

During the press conference she was asked several times about whether breaking up Google might not be a more effective remedy than the cease & desist decision the Commission has reached today — which hands responsibility for Google to come up with a compliance remedy for its illegal behavior with Android (albeit, subject to ongoing monitoring by the Commission).

She replied that she wasn’t sure that breaking up Google would make for an effective competition remedy, arguing there are “no silver bullets” to ensuring competitive markets.

“Here we have a decision that is very clear, which will allow mobile device producers to have a choice — that will us, as consumers, to have a choice as well. That’s what competition is about. And I think that is much more important than a discussion of whether or not breaking up a company would do that,” she said, when asked whether she would exclude the possibility of breaking up Google — so she was sidestepping a direct answer to that.

“I think what will serve competition is for more players to have a real go, to be able to reach consumers so that we can use our choice to find what suits us the best,” she added. “Test out new search engines, new browsers, have maybe a phone that works in a slightly different way [via an Android fork]… maybe the totality of the phone, in the way it was presented, that would work to allow others to compete on the merits, to show consumers what can we do, what have we invented, this is where we put our efforts, this is the that innovation we want to present for you. This I think would enable competition.”

She also emphasized the importance of passing proposed EU legislation related to transparency and fairness for businesses that are reliant on online platforms.

“I think there is a very important discussion which is to discuss how to pass the legislation that my colleagues have tabled — legislation that will ensure that you have transparency and fairness in the business to platform relationship,” she said.

“So that if you’re a business and you find that ‘oh, my traffic has stopped’, that you know why it happened, when it happened and what to do to get your traffic back…. Because this will change the marketplace, and it will change the way we are protected as consumers but also as businesses.”

Google has tweeted an initial reaction to the decision, claiming Android has created “a vibrant ecosystem, rapid innovation and lower prices”.

.@Android has created more choice for everyone, not less. #AndroidWorks pic.twitter.com/FAWpvnpj2G

— Google Europe (@googleeurope) July 18, 2018

A company spokesperson confirmed to us that it will appeal the Commission’s decision.

In a lengthy blog post response, CEO Sundar Pichai expands on the company’s argument that the Android ecosystem has “created more choice, not less” — writing for example:

Today, because of Android, there are more than 24,000 devices, at every price point, from more than 1,300 different brands,including DutchFinnishFrenchGermanHungarianItalianLatvianPolishRomanianSpanish and Swedish
phone makers.

The phones made by these companies are all different, but have one thing in common — the ability to run the same applications. This is possible thanks to simple rules that ensure technical compatibility, no matter what the size or shape of the device. No phone maker is even obliged to sign up to these rules — they can use or modify Android in any way they want, just as Amazon has done with its Fire tablets and TV sticks.

He also has a veiled warning about the consequences should Google’s “free distribution” model for Android come unstuck, writing:

The free distribution of the Android platform, and of Google’s suite of applications, is not only efficient for phone makers and operators—it’s of huge benefit for developers and consumers. If phone makers and mobile network operators couldn’t include our apps on their wide range of devices, it would upset the balance of the Android ecosystem. So far, the Android business model has meant that we haven’t had to charge phone makers for our technology, or depend on a tightly controlled distribution model.

The fine is the second major penalty for the ad tech giant for breaching EU competition rules in just over a year — and the highest ever issued by the Commission for abuse of a dominant market position.

In June 2017 Google was hit with a then-record €2.4BN (~$2.7BN) antitrust penalty related to another of its products, search comparison service, Google Shopping. The company has since made changes to how it displays search results for products in Europe.

According to the bloc’s rules, companies can be fined 10 per cent of their global revenue if they are deemed to have breached European competition law.

Google’s parent entity Alphabet reported full year revenue of $110.9 billion in 2017. So the $5BN fine is around half of what the company could have been on the hook for if EU regulators had levied the maximum penalty possible.

“It’s a very serious illegal behavior”

The Commission said the size of the fine takes into account “the duration and gravity of the infringement”.

It also specified it had been calculated on the basis of the value of Google’s revenue from search advertising services on Android devices in the European Economic Area (per its own guidelines on fines).

Pressed during the press conference on how the Commission had determined the size of the penalty, which is double the penalty it issued in the Google Shopping case, Vestager emphasized the time period over which it had been going on, the fact of it having three components, and the effect of it, combined with Google’s rising turnover — adding finally for emphasis: “It’s a very serious infringement. It’s a very serious illegal behavior.”

Google will have three months to pay the fine but has confirmed it will appeal the decision — and legal wrangling could drag the process out for many years.

Vestager confirmed that while antitrust fines must technically be paid to the EU within the three month deadline they are placed in a closed account until the end of any appeals process — meaning the money cannot be used in the meanwhile.

So, in the Android case, the $5BN will likely be locked up until the late 2020s — assuming Google’s appeals aren’t successful. Should Google fail to overturn the Commission’s decision in the courts, Vestager said the money would be returned to EU Member States “using the same key as the contribution to the European budget”.

“You can impose a fine if someone has done someone wrong, you cannot impose a fine because you need the money. That would be wrong,” she added. “This of course means that it will take quite some time… if we win in court — and I can assure you we have done our best to make that possible — then, eventually, the money will come back to Member States to serve European citizens.”

Prior to the Commission’s record pair of fines for Google products, its next highest antitrust penalty is a €1.06BN antitrust fine for chipmaker Intel all the way back in 2009.

Yet only last year Europe’s top court ruled that the case against Intel — which focused on it offering rebates to high-volume buyers — should be sent back to a lower court to be re-examined, nearly a decade after the original antitrust decision. So Google’s lawyers are likely to have a spring in their step going into this next European antitrust battle.

The latest EU fine for Android has been on the cards for more than two years, given the Commission’s preliminary findings and consistently prescriptive remarks from Vestager during the course of what has been a multi-year investigation process.

And, indeed, given multiple EU antitrust investigations into Google businesses and business practices (the EU has also been probing Google’s AdSense advertising service — a separate investigation that Vestager today confirmed remains ongoing).

The Commission’s prior finding that Google is a dominant company in Internet search — a judgement reached at the culmination of its Google Shopping investigation last year — is also important, making the final judgement in the Android case more likely because the status places the onus on Google not to abuse its dominant position in other markets, adjacent or otherwise.

Announcing the Google Shopping penalty last summer, Vestager made a point of emphasizing that dominant companies “need to be more vigilant” — saying they have a “special responsibility” to ensure they are not in breach of antitrust rules, and also specifying this applies “in the market where it’s dominant” and “in any other market”. So that means — as here in the Android case — in mobile services too.

While a one-off financial penalty — even one that runs to so many billions of dollars — cannot cause lasting damage to a company as wealthy as Alphabet, of greater risk to its business are changes the regulators can require to how it operates Android which could have a sustained impact on Google if they end up reshaping the competitive landscape for mobile services.

In search of a remedy

At least that’s the Commission’s intention: To reset what has been judged an unfair competitive advantage for Google via Android, and foster competitive innovation because rival products get a fairer chance to impress consumers. Although it is avoiding prescribing any specific remedies — beyond telling Google to stop it.

For instance Vestager was asked whether the Commission might want Google to send push notifications to existing Android users to highlight alternatives, and thereby offer a remedy to consumers who had already been impacted by the choice constraints it placed on device makers and carriers.

“It is for Google to figure out how to lift this responsibility,” she told reporters. “It’s for them to do this… Google may make that kind of choice [i.e. sending push notifications] — on that we have taken no position.”

However the popularity and profile of Google services suggests that even if Android users are offered a choice as a result of an EU antitrust remedy — such as of which search engine, maps service, mobile browser or even app store to use — most will likely pick the Google-branded offering they’re most familiar with.

That said, the antitrust remedy could have the chance to shift consumers’ habits over time — if, for instance, OEMs start offering Android devices that come preloaded with alternative mobile services, thereby raising the visibility of non-Google apps and services. Which is clearly the Commission’s hope.

Interestingly, Google has been striking deals with Chinese OEMs in recent months — to brings its ARCore technology to markets where its core services are censored and its Play Store is restricted. And its strategy to workaround regional restrictions in China by working more closely with device makers may also be part of a plan to hedge against fresh regulatory restrictions being placed on Android elsewhere. 

Complainants in the EU’s earlier Google Shopping antitrust case continue to express displeasure with the outcome of the remedies Google has come up with on that front. And in a pointed statement responding to news that another EU antitrust penalty was incoming for Android, Shivaun Raff, CEO of Foundem, the lead complainant in Google Shopping case, said: “Fines make headlines. Effective remedies make a difference.”

So the devil will be in the detail of the Android remedies that Google comes up with.

“The decision requires Google to bring its illegal conduct to an end within 90 days in an effective manner,” said Vestager today. “At a minimum, our decision requires Google to stop and not to re-engage in the three types of restrictions that I have described. In other words our decision stops Google from controlling which search and browser apps manufacturers can pre-install on Android devices, or which Android operating system they can adopt. But it is Google’s sole responsibility to make sure that it changes its conduct in a way that brings the infringements to an effective end.”

“We will monitor this very closely,” she added, warning that failure to comply would invite further penalty payments — of up to 5% of the average daily turnover of Alphabet for each day of non-compliance, back dated to when the non-compliance started. “Our decision requires Google to change the way it operates and face the consequences of its action.”

Aptoide, one of the original app store complainants — which filed an antitrust complaint with the European Commission in 2014 complaining that Google’s policies did not allow any alternative app stores which competed with the Play Store to be valid content — welcomed today’s decision, albeit cautiously, as a “positive first step”. So there’s a lot of ‘wait and see’ in the air.

CEO Paulo Trezentos told us: “The EU’s ruling justifying our antitrust arguments is a positive first step forward, for a market more open, more competitive and better tailored for the users. It is these types of decisions that push industries to bigger levels and we hope that this will help everyone evolve.”

On the Google Shopping compliance front, Vestager had some additional words of warning for Google — saying: “We have not yet taken a position on whether Google has complied with the decision. And since we haven’t done so this remains very much an open question.”

She also said the Commission is continuing to investigate other elements of Google’s business practices related to other vertical search services.

“I cannot prejudge the outcome of these ongoing investigations,” she said, also citing the ongoing AdSense probe, and adding that they continue to be “a top priority for us”.

Android as an antitrust ‘Trojan horse’

The European Commission announced its formal in-depth probe of Android in April 2015, saying then that it was investigating complaints Google was “requiring and incentivizing” OEMs to exclusively install its own services on devices on Android devices, and also examining whether Google was hindering the ability of smartphone and tablet makers to use and develop other OS versions of Android (i.e. by forking the open source platform).

Rivals — banding together under the banner ‘FairSearch‘ — complained Google was essentially using the platform as a ‘Trojan horse’ to unfairly dominate the mobile web. The lobby group’s listing on the EU’s transparency register describes its intent as promoting “innovation and choice across the Internet ecosystem by fostering and defending competition in online and mobile search within the European Union”, and names its member organizations as: Buscapé, Cepic, Foundem, Naspers, Nokia, Oracle, TripAdvisor and Yroo.

On average, Android has around a 70-75% smartphone marketshare across Europe. But in some European countries the OS accounts for an even higher proportion of usage. In Spain, for example, Android took an 86.1% marketshare as of March, according to market data collected by Kantar Worldpanel.

In recent years Android has carved an even greater market share in some European countries, while Google’s Internet search product also has around a 90% share of the European market, and competition concerns about its mobile OS have been sounded for years.

Last year Google reached a $7.8M settlement with Russian antitrust authorities over Android — which required the company to no longer demand exclusivity of its applications on Android devices in Russia; could not restrict the pre-installation of any competing search engines and apps, including on the home screen; could no longer require Google Search to be the only general search engine pre-installed.

Google also agreed with Russian antitrust authorities that it would no longer enforce its prior agreements where handset makers had agreed to any of these terms. Additionally, as part of the settlement, Google was required to allow third parties to include their own search engines into a choice window, and to allowing users to pick their preferred default search engine from a choice window displayed in Google’s Chrome browser. The company was also required to develop a new Chrome widget for Android devices already being used in Russia, to replace the standard Google search widget on the home screen so they would be offered a choice when it launched.

A year after Vestager’s public announcement of the EU’s antitrust probe of Android, she issued a formal Statement of Objections, saying the Commission believed Google has “implemented a strategy on mobile devices to preserve and strengthen its dominance in general Internet search”; and flagging as problematic the difficulty for Android users whose devices come pre-loaded with the Google Play store to use other app stores (which cannot be downloaded from Google Play).

She also raised concerns over Google providing financial incentives to manufacturers and mobile carriers on condition that Google search be pre-installed as the exclusive search provider. “In our opinion, as we see it right now, it is preventing competition from happening because of the strength of the financial incentive,” Vestager said in April 2016.

Google was given several months to respond officially to the antitrust charges against Android — which it finally did in November 2016, having been granted an extension to the Commission’s original deadline.

Thriving competition?

In its rebuttal then, Google argued that, contrary to antitrust complaints, Android had created a thriving and competitive mobile app ecosystem. It further claimed the EU was ignoring relevant competition in the form of Apple’s rival iOS platform — although iOS does not hold a dominant marketshare in Europe, nor Apple have a status as a dominant company in any EU markets.

Google also argued that its “voluntary compatibility agreements” for Android OEMs are a necessary mechanism for avoiding platform fragmentation — which it said would make life harder for app developers — as well as saying its requirement for Android OEMs to use Google search by default is effectively its payment for providing the suite for free to device makers (given there is no formal licensing fee for Android).

It also couched “free distribution is an efficient solution for everyone” — arguing it lowers prices for phone makers and consumers, while “still letting us sustain our substantial investment in Android and Play”.

In addition, Google sought to characterize open source platforms as “fragile” — arguing the Commission’s approach risked upsetting the “balance of needs” between users and developers, and suggesting their action could signal they favor “closed over open platforms”.

During today’s press conference, Vestager was asked whether she has concerns that the costs of handsets might rise should Google respond to the antitrust remedy by deciding to charge a licensing fee for OEMs to use Android, instead of distributing it for free.

She pointed to the revenue Google generates via the Play Store. “The revenue made from that is quite substantial so I think there is still a possibility for Google to recoup the investment made in developing the Android operating system,” she suggested.

“I think a number of different choices can be made by Google and it is for Google to make these choices,” she added. “What we see in general is that competition makes prices come down, gives you better choices. So you can have a theory that prices will come up, it is as likely that prices will come down because of more competition. The thing is now it’s open — there can be competition as to how this should work. And that’s the very point of the decision.”

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Court victory legalizes 3D-printable gun blueprints

Posted by | 3d printing, defense distributed, Gadgets, Government, guns, lawsuit, Security | No Comments

A multi-year legal battle over the ability to distribute computer models of gun parts and replicate them in 3D printers has ended in defeat for government authorities who sought to prevent the practice. Cody Wilson, the gunmaker and free speech advocate behind the lawsuit, now intends to expand his operations, providing printable gun blueprints to all who desire them.

The longer story of the lawsuit is well told by Andy Greenberg over at Wired, but the decision is eloquent on its own. The fundamental question is whether making 3D models of gun components available online is covered by the free speech rights granted by the First Amendment.

This is a timely but complex conflict because it touches on two themes that happen to be, for many, ethically contradictory. Arguments for tighter restrictions on firearms are, in this case, directly opposed to arguments for the unfettered exchange of information on the internet. It’s hard to advocate for both here: restricting firearms and restricting free speech are one and the same.

That at least seems to be conclusion of the government lawyers, who settled Wilson’s lawsuit after years of court battles. In a copy of the settlement provided to me by Wilson, the U.S. government agrees to exempt “the technical data that is the subject of the Action” from legal restriction. The modified rules should appear in the Federal Register soon.

What does this mean? It means that a 3D model that can be used to print the components of a working firearm is legal to own and legal to distribute. You can likely even print it and use the product — you just can’t sell it. There are technicalities to the law here (certain parts are restricted, but can be sold in an incomplete state, etc.), but the implications as regards the files themselves seems clear.

Wilson’s original vision, which he is now pursuing free of legal obstacles, is a repository of gun models, called DEFCAD, much like any other collection of data on the web, though naturally considerably more dangerous and controversial.

“I currently have no national legal barriers to continue or expand DEFCAD,” he wrote in an email to TechCrunch. “This legal victory is the formal beginning to the era of downloadable guns. Guns are as downloadable as music. There will be streaming services for semi-automatics.”

The concepts don’t map perfectly, no doubt, but it’s hard to deny that with the success of this lawsuit, there are few legal restrictions to speak of on the digital distribution of firearms. Before it even, there were few technical restrictions: certainly just as you could download MP3s on Napster in 2002, you can download a gun file today.

Gun control advocates will no doubt argue that greater availability of lethal weaponry is the opposite of what is needed in this country. But others will point out that in a way this is a powerful example of how liberally free speech can be defined. It’s important to note that both of these things can be true.

This court victory settles one case, but marks the beginnings of many another. “I have promoted my values for years with great care and diligence,” Wilson wrote. It’s hard to disagree with that. Those whose values differ are free to pursue them in their own way; perhaps they too will be awarded victories of this scale.

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Verizon and others call a conditional halt on sharing location with data brokers

Posted by | Government, locationsmart, Mobile, privacy, Security, Verizon | No Comments

Verizon is cutting off access to its mobile customers’ real-time locations to two third-party data brokers “to prevent misuse of that information going forward.” The company announced the decision in a letter sent to Senator Ron Wyden (D-OR), who along with others helped reveal improper usage and poor security at these location brokers. It is not, however, getting out of the location-sharing business altogether.

(Update: AT&T and Sprint have also begun the process of ending their location aggregation services — with a caveat, of which below.)

Verizon sold bulk access to its customers’ locations to the brokers in question, LocationSmart and Zumigo, which then turned around and resold that data to dozens of other companies. This isn’t necessarily bad — there are tons of times when location is necessary to provide a service the customer asks for, and supposedly that customer would have to okay the sharing of that data. (Disclosure: Verizon owns Oath, which owns TechCrunch. This does not affect our coverage.)

That doesn’t seem to have been the case at LocationSmart customer Securus, which was selling its data directly to law enforcement so they could find mobile customers quickly and without all that fuss about paperwork and warrants. And then it was found that LocationSmart had exposed an API that allowed anyone to request mobile locations freely and anonymously, and without collecting consent.

When these facts were revealed by security researchers and Sen. Wyden, Verizon immediately looked into it, they reported in a letter sent to the Senator.

“We conducted a comprehensive review of our location aggregator program,” wrote Verizon CTO Karen Zacharia. “As a result of this review, we are initiating a process to terminate our existing agreements for the location aggregator program.”

“We will not enter into new location aggregation arrangements unless and until we are comfortable that we can adequately protect our customers’ location data through technological advancements and/or other practices,” she wrote later in the letter. In other words, the program is on ice until it can be secured.

Although Verizon claims to have “girded” the system with “mechanisms designed to protect against misuse of our customers’ location data,” the abuses in question clearly slipped through the cracks. Perhaps most notable is the simple fact that Verizon itself does not seem to need to be informed whether a customer has consented to having their location polled. That collection is the responsibility of “the aggregator or corporate customer.”

In other words, Verizon doesn’t need to ask the customer, and the company it sells the data to wholesale doesn’t need to ask the customer — the requirement devolves to the company buying access from the wholesaler. In Securus’s case, it had abstracted things one step further, allowing law enforcement full access when it said it had authority to do so, but apparently without checking, AT&T wrote in its own letter to Sen. Wyden.

And there were 75 other corporate customers. Don’t worry, someone is keeping track of them. Right?

These processes are audited, Verizon wrote, but apparently not an audit that finds things like the abuse by Securus or a poorly secured API. Perhaps how this happened is among the “number of internal questions” raised by the review.

When asked for comment, a Verizon representative offered the following statement:

When these issues were brought to our attention, we took immediate steps to stop it. Customer privacy and security remain a top priority for our customers and our company. We stand-by that commitment to our customers.

And indeed while the program itself appears to have been run with a laxity that should be alarming to all those customers for whom Verizon claims to be so concerned, some of the company’s competitors have yet to take similar action. AT&T, T-Mobile and Sprint were also named by LocationSmart as partners. Their own letters to Sen. Wyden stressed that their systems were similar to the others, with similar safeguards (that were similarly eluded).

In a press release announcing that his pressure on Verizon had borne fruit, Sen. Wyden called on the others to step up:

Verizon deserves credit for taking quick action to protect its customers’ privacy and security. After my investigation and follow-up reports revealed that middlemen are selling Americans’ location to the highest bidder without their consent, or making it available on insecure web portals, Verizon did the responsible thing and promptly announced it was cutting these companies off. In contrast, AT&T, T-Mobile, and Sprint seem content to continuing to sell their customers’ private information to these shady middle men, Americans’ privacy be damned.

AT&T actually announced that it is ending its agreements as well, after Sen. Wyden’s call to action was published, and Sprint followed shortly afterwards. AT&T said it “will be ending [its] work with these aggregators for these services as soon as is practical in a way that preserves important, potential lifesaving services like emergency roadside assistance.” Sprint stopped working with LocationSmart last month and is now “beginning the process of terminating its current contracts with data aggregators to whom we provide location data.”

What’s missing from these statements? Among other things: what and how many companies they’re working with, whether they’ll pursue future contracts, and what real changes will be made to prevent future problems like this. Since they’ve been at this for a long time and have had a month to ponder their next course of actions, I don’t think it’s unreasonable to expect more than a carefully worded statement about “these aggregators for these services.”

T-Mobile CEO John Legere tweeted that the company “will not sell customer location data to shady middlemen.” Of course, that doesn’t really mean anything. I await substantive promises from the company pertaining to this “pledge.”

The FCC, meanwhile, has announced that it is looking into the issue — with the considerable handicap that Chairman Ajit Pai represented Securus back in 2012 when he was working as a lawyer. Sen. Wyden has called on him to recuse himself, but that has yet to happen.

I’ve asked Verizon for further clarification on its arrangements and plans, specifically whether it has any other location-sharing agreements in place with other companies. These aren’t, after all, the only players in the game.

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Xiaomi CDRs, SoftBank’s successors and China’s Samsung investigation

Posted by | Asia, Government, Mobile, Qualcomm, Samsung, Softbank, sprint, TC, Xiaomi | No Comments

The weekend provided no rest to news-wary reporters, with major announcements coming from Xiaomi, SoftBank and the Chinese government the past few days that will continue to change the global tech landscape.

Xiaomi Chinese Depository Receipts

One of the most important yet underreported stories of 2018 has been the development of Chinese Depository Receipts (known as CDRs). I wrote a comprehensive primer on the investment mechanism a few weeks ago, but the summary is that CDRs will give mainland Chinese investors access to overseas-listed stocks that set up the right custodian accounts. Due to domestic capital controls and relatively weak stock exchange rules in China, many Chinese tech giants are listed on overseas stock exchanges in New York and Hong Kong.

Beijing-based Xiaomi, which produces a line of phones and offers mobile software services, is launching one of the most anticipated IPOs of the year, with a valuation expected to top tens of billions of dollars. In its official filing, the company targeted a fundraise of $10 billion. While Xiaomi is a sterling example of the potential success of Chinese entrepreneurs, local retail buyers would likely have had no access to buy the stock, which will be listed in Hong Kong.

Fiona Lau and Julie Zhu at Reuters are now reporting that Xiaomi could be one of the first companies to take advantage of the new CDR mechanism, potentially reserving 30 percent of its new issue for CDR buyers. That would be about $3 billion if the assumptions of the fundraise play out.

If the CDR mechanism works as expected, Chinese companies and potentially many others could suddenly tap a vast new pool of capital, either in the IPO process or more generally. That could push valuations for many of these issues higher than they might otherwise go, since Chinese mainland investors have limited ability to invest in overseas stocks due to capital controls. A valuation that might cause a New York-based money manager to flee might be more than palatable to a Chinese investor.

While Chinese tech giants are likely to quickly offer CDR options to take advantage of their local brand power and increase upward pressure on their stock prices, the bigger question in my mind is how long it will take overseas companies to offer similar measures and get access to this capital market. While companies like Facebook and Google are blocked or mostly blocked from mainland China, other companies like Apple have strong brand presence in the country, and could theoretically offer a CDR as it strives for a $1 trillion valuation. There are huge legal and policy roadblocks to overcome of course, but such a debut would be a major milestone in China’s financial development.

SoftBank executive changes

Japan’s SoftBank Group, which owns a set of major tech and finance companies, announced a new group of senior execs late on Friday that sets up something of a leadership contest to succeed the group’s founder, Masayoshi Son.

Several years ago, Son had indicated that Nikesh Arora, who had spent a decade at Google and eventually rose to be the company’s chief business officer, would succeed him. Arora became president and chief operating officer of SoftBank, but would last less than two years before heading out from the role. As a sort of coda to that chapter, we learned late last week that Arora has joined Palo Alto Networks as its CEO.

Now, SoftBank has announced that three people will take leadership roles in the company, and all three will join its board of directors. Rajeev Misra, who runs the $100 billion SoftBank Vision Fund, will become an executive vice president (EVP) while maintaining his duties to the fund.

Katsunori Sago, who until recently was the chief investment officer of Japan Post, Japan’s largest savings bank with a $1.9 trillion portfolio, will join SoftBank as an EVP and chief strategy officer. Sago had been rumored to be considering leaving Japan Post just a few weeks ago. Finally, former Sprint CEO Marcelo Claure was named an EVP and SoftBank’s new chief operating officer. Claure was elevated to executive chairman of Sprint last month, while stepping down as CEO.

Each of the three are positioned around the key tentpoles of SoftBank. SoftBank’s core business remains telecom, on which Claure will presumably spend significant time. The group’s financial interests, which includes a 100 percent stake in Fortress Investment Group, will likely get significant attention from Sago. And the SoftBank Vision Fund, which has received splashy headlines with its massive investments in global unicorn startups, is obviously a key future pillar of the company, giving Misra a powerful perch in the group.

Masayoshi Son is 60 years old today. While retirement seems to be the least likely course of action for the energetic entrepreneur, clearly he is starting to think through succession in a more robust way than he did before with Arora. That should make SoftBank investors far more content, and also provide a little bit of a competitive dynamic at the top of the organization to drive the group’s results in the years to come.

China initiates investigation into Samsung and other chip companies

The chip wars between China and the rest of the world continue to heat up. Now, it looks like Samsung, the world’s largest chipmaker, is in the crosshairs of Beijing, according to a Wall Street Journal report by Yoko Kubota. In addition to Samsung, Micron and SK Hynix were also ensnared in the investigation.

China has made building a strong indigenous chip industry a core pillar of its economic development strategy. In addition to a comprehensive plan known as Made in China 2025, the country has also been attempting to put together the world’s largest semiconductor venture capital investment fund, which in aggregate could have tens of billions of dollars in capital at its disposal.

The investigations against Samsung and the two chipmakers comes at the same time that China has also once again delayed the close of Qualcomm’s acquisition of NXP Semiconductors. Qualcomm has been waiting for months to get Beijing’s approval on that deal, which would provide the company a fresh source of revenue and a renewed product mix in strategic areas like automotive.

The use of economic investigations to help and hurt Chinese companies and their competitors is starting to become a mainstay. The United States used the negative conclusions of its investigation into Chinese telecommunications company ZTE in order to cut off its export licenses, practically killing the company. While the U.S. has now started to walk back that threat by floating the option of a large fine, it is clear that these sorts of tit-for-tat investigations are going to continue into the future.

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Here’s Mary Meeker’s essential 2018 Internet Trends report

Posted by | Advertising Tech, Apps, automotive, Collaborative Consumption, cryptocurrency, eCommerce, Education, Enterprise, Finance, Government, Health, internet trends, Mary Meeker, Media, Mobile, Social, Startups, TC, Transportation, Venture Capital | No Comments

Want to understand all the most important tech stats and trends? Legendary venture capitalist Mary Meeker has just released the 2018 version of her famous Internet Trends report. It covers everything from mobile to commerce to the competition between tech giants. Check out the full report below, and we’ll add some highlights soon. Then come back for our slide-by-slide analysis of the most important parts of the 294 page report.

  • Internet adoption: As of 2018, half the world population, or about 3.6 billion people, will be on the internet. That’s thanks in large part to cheaper Android phones and Wifi becoming more available, though individual services will have a tougher time adding new users as the web hits saturation.
  • Mobile usage: While smartphone shipments are flat and internet user growth is slowing, U.S. adults are spending more time online thanks to mobile, clocking 5.9 hours per day in 2017 versus 5.6 hours in 2016.
  • Mobile ads: People are shifting their time to mobile faster than ad dollars are following, creating a $7 billion mobile ad opportunity, though platforms are increasingly responsible for providing safe content to host those ads.
  • Crypto: Interest in cryptocurrency is exploding as Coinbase’s user count has nearly quadrupled since January 2017
  • Voice: Voice technology is at an inflection point due to speech recognition hitting 95% accuracy and the sales explosion for Amazon Echo which went from over 10 million to over 30 million sold in total by the end of 2017.
  • Daily usage – Revenue gains for services like Facebook are tightly coupled with daily user growth, showing how profitable it is to become a regular habit.
  • Tech investment: We’re at an all-time high for public and private investment in technology, while the top six public R&D + capex spenders are all technology companies.

Mary Meeker, analyst with Morgan Stanley, speaks during the Web 2.0 Summit in San Francisco, California, U.S., on Tuesday, Nov. 16, 2010. This year’s conference, which runs through Nov. 17, is titled “Points of Control: The Battle for the Network Economy.” Photographer: Tony Avelar/Bloomberg via Getty Images

  • Ecommerce vs Brick & Mortar: Ecommerce growth quickens as now 13% of all retail purchases happen online and parcel shipments are rising swiftly, signaling big opportunities for new shopping apps.
  • Amazon: More people start product searches on Amazon than search engines now, but Jeff Bezos still relies on other surfaces like Facebook and YouTube to inspire people to want things.
  • Subscription services: They’re seeing massive adoption, with Netflix up 25%, The New York Times up 43%, and Spotify up 48% year-over-year in 2017. A free tier accelerates conversion rates.
  • Education: Employees seek retraining and education from YouTube and online courses to keep up with new job requirements and pay off skyrocketing student loan debt.
  • Freelancing: Employees crave scheduling and work-from-home flexibility, and internet discovery of freelance work led it to grow 3X faster than total workforce growth. The on-demand workforce grew 23% in 2017 driven by Uber, Airbnb, Etsy, Upwork, and Doordash.
  • Transportation: People are buying fewer cars, keeping them longer, and shifting transportation spend to rideshare, which saw rides double in 2017.
  • Enterprise: Consumerization of the enterprise through better interfaces is spurring growth for companies like Dropbox and Slack.
  • China: Alibaba is expanding beyond China with strong gross merchandise volume, though Amazon still rules in revenue.
  • Privacy: China has a big opportunity as users there are much more willing to trade their personal data for product benefits than U.S. users, and China is claiming more spots on the top 20 internet company list while making big investments in AI.
  • Immigration: It is critical to a strong economy, as 56% of top U.S. companies were founded by a first- or second-generation immigrant.

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Google’s Duo and Cisco’s Webex Teams among the VoIP apps pulled from the China App Store

Posted by | app-store, Apple, Apps, China, Government, Mobile, voip | No Comments

Earlier this week, it came to light that Apple had removed a number of VoIP-based calling apps from the App Store, at the request of the Chinese government. The apps had been using CallKit, Apple’s new developer toolset that provides the calling interface for VoIP apps, freeing up developers to handle the backend communications. China’s government asked developers, by way of Apple, to remove CallKit from their apps sold on the China App Store, or they can remove their apps entirely.

Notices Apple sent out to the developers were first spotted by 9to5Mac, who shared a snippet from of one of the emails.

The email states that the Chinese Ministry of Industry and Information Technology (MIIT) “requested that CallKit be deactivated in app apps available on the China App Store,” and informed the developer they would need to comply with this regulation in order to have their app approved.

The regulation only impacts apps distributed in the China App Store.

We understand that the apps can still use CallKit and be sold in other markets outside the region.

Apple is not publicly commenting on the matter.

The pushback against CallKit is another means of discouraging people from developing or using VoIP services in China, without having to go so far as to ban the apps directly. It wouldn’t be the first time China has cracked down in this area. In November, Microsoft’s Skype was also pulled from the Apple and Android app stores.

The government also last year ordered VPN apps, which help users route around the Great Firewall, to be pulled from app stores – another order with which Apple complied.

Other social media apps, like WhatsApp and Facebook, are also disrupted at times, and newspapers’ apps like those from The NYT and WSJ are blocked, too.

According to data pulled by app store intelligence firm Sensor Tower, two dozen apps with CallKit had been removed during the week prior to the news reports.

That list, along with the date removed and publisher name, is below:

Sensor Tower notes it’s possible that there are other apps removed from additional stores, but doesn’t have that data.

In addition, this list only includes those apps that have been downloaded enough times to rank in the top 1,500 of an app category at some point – beyond that Sensor Tower wouldn’t pick it up. But an app that wasn’t ranked would have had so few downloads that the impact of its removal would be minimal.

Nevertheless, you can see list includes a few well-known names, including Cisco’s Webex Teams and Google’s Duo video calling app, among those from other operators and VoIP calling providers.

The full text of Apple’s email is below:

From Apple
5. Legal: Preamble
Guideline 5.0 – Legal

Recently, the Chinese Ministry of Industry and Information Technology (MIIT) requested that CallKit functionality be deactivated in all apps available on the China App Store. During our review, we found that your app currently includes CallKit functionality and has China listed as an available territory in iTunes Connect.

Next Steps

This app cannot be approved with CallKit functionality active in China. Please make the appropriate changes and resubmit this app for review. If you have already ensured that CallKit functionality is not active in China, you may reply to this message in Resolution Center to confirm. Voice over Internet Protocol (VoIP) call functionality continues to be allowed but can no longer take advantage of CallKit’s intuitive look and feel. CallKit can continue to be used in apps outside of China.

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Meet the speakers at The Europas, and get your ticket free (July 3, London)

Posted by | accelerator, Advertising Tech, Apps, artificial intelligence, Asia, augmented reality, automotive, Banking, biotech, blockchain, Book Review, brazil, Built In, cannabis, Cloud, Collaborative Consumption, Community, Crowdfunding, cryptocurrency, Developer, Distributed Ledger, Diversity, Earnings, eCommerce, Education, Enterprise, Entertainment, Europe, events, Finance, food, funding, Fundings & Exits, Gadgets, Gaming, Government, GreenTech, Hack, hardware, Health, Hiring, Mobile, Social, Startups, TC | No Comments

Excited to announce that this year’s The Europas Unconference & Awards is shaping up! Our half day Unconference kicks off on 3 July, 2018 at The Brewery in the heart of London’s “Tech City” area, followed by our startup awards dinner and fantastic party and celebration of European startups!

The event is run in partnership with TechCrunch, the official media partner. Attendees, nominees and winners will get deep discounts to TechCrunch Disrupt in Berlin, later this year.
The Europas Awards are based on voting by expert judges and the industry itself. But key to the daytime is all the speakers and invited guests. There’s no “off-limits speaker room” at The Europas, so attendees can mingle easily with VIPs and speakers.

What exactly is an Unconference? We’re dispensing with the lectures and going straight to the deep-dives, where you’ll get a front row seat with Europe’s leading investors, founders and thought leaders to discuss and debate the most urgent issues, challenges and opportunities. Up close and personal! And, crucially, a few feet away from handing over a business card. The Unconference is focused into zones including AI, Fintech, Mobility, Startups, Society, and Enterprise and Crypto / Blockchain.

We’ve confirmed 10 new speakers including:


Eileen Burbidge, Passion Capital


Carlos Eduardo Espinal, Seedcamp


Richard Muirhead, Fabric Ventures


Sitar Teli, Connect Ventures


Nancy Fechnay, Blockchain Technologist + Angel


George McDonaugh, KR1


Candice Lo, Blossom Capital


Scott Sage, Crane Venture Partners


Andrei Brasoveanu, Accel


Tina Baker, Jag Shaw Baker

How To Get Your Ticket For FREE

We’d love for you to ask your friends to join us at The Europas – and we’ve got a special way to thank you for sharing.

Your friend will enjoy a 15% discount off the price of their ticket with your code, and you’ll get 15% off the price of YOUR ticket.

That’s right, we will refund you 15% off the cost of your ticket automatically when your friend purchases a Europas ticket.

So you can grab tickets here.

Vote for your Favourite Startups

Public Voting is still humming along. Please remember to vote for your favourite startups!

Awards by category:

Hottest Media/Entertainment Startup

Hottest E-commerce/Retail Startup

Hottest Education Startup

Hottest Startup Accelerator

Hottest Marketing/AdTech Startup

Hottest Games Startup

Hottest Mobile Startup

Hottest FinTech Startup

Hottest Enterprise, SaaS or B2B Startup

Hottest Hardware Startup

Hottest Platform Economy / Marketplace

Hottest Health Startup

Hottest Cyber Security Startup

Hottest Travel Startup

Hottest Internet of Things Startup

Hottest Technology Innovation

Hottest FashionTech Startup

Hottest Tech For Good

Hottest A.I. Startup

Fastest Rising Startup Of The Year

Hottest GreenTech Startup of The Year

Hottest Startup Founders

Hottest CEO of the Year

Best Angel/Seed Investor of the Year

Hottest VC Investor of the Year

Hottest Blockchain/Crypto Startup Founder(s)

Hottest Blockchain Protocol Project

Hottest Blockchain DApp

Hottest Corporate Blockchain Project

Hottest Blockchain Investor

Hottest Blockchain ICO (Europe)

Hottest Financial Crypto Project

Hottest Blockchain for Good Project

Hottest Blockchain Identity Project

Hall Of Fame Award – Awarded to a long-term player in Europe

The Europas Grand Prix Award (to be decided from winners)

The Awards celebrates the most forward thinking and innovative tech & blockchain startups across over some 30+ categories.

Startups can apply for an award or be nominated by anyone, including our judges. It is free to enter or be nominated.

What is The Europas?

Instead of thousands and thousands of people, think of a great summer event with 1,000 of the most interesting and useful people in the industry, including key investors and leading entrepreneurs.

• No secret VIP rooms, which means you get to interact with the Speakers

• Key Founders and investors speaking; featured attendees invited to just network

• Expert speeches, discussions, and Q&A directly from the main stage

• Intimate “breakout” sessions with key players on vertical topics

• The opportunity to meet almost everyone in those small groups, super-charging your networking

• Journalists from major tech titles, newspapers and business broadcasters

• A parallel Founders-only track geared towards fund-raising and hyper-networking

• A stunning awards dinner and party which honors both the hottest startups and the leading lights in the European startup scene

• All on one day to maximise your time in London. And it’s PROBABLY sunny!

europas8

That’s just the beginning. There’s more to come…

europas13

Interested in sponsoring the Europas or hosting a table at the awards? Or purchasing a table for 10 or 12 guest or a half table for 5 guests? Get in touch with:
Petra Johansson
Petra@theeuropas.com
Phone: +44 (0) 20 3239 9325

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FBI reportedly overestimated inaccessible encrypted phones by thousands

Posted by | encryption, FBI, Gadgets, Government, Mobile, privacy, Security | No Comments

The FBI seems to have been caught fibbing again on the topic of encrypted phones. FBI director Christopher Wray estimated in December that it had almost 7,800 phones from 2017 alone that investigators were unable to access. The real number is likely less than a quarter of that, The Washington Post reports.

Internal records cited by sources put the actual number of encrypted phones at perhaps 1,200 but perhaps as many as 2,000, and the FBI told the paper in a statement that “initial assessment is that programming errors resulted in significant over-counting of mobile devices reported.” Supposedly having three databases tracking the phones led to devices being counted multiple times.

Such a mistake would be so elementary that it’s hard to conceive of how it would be possible. These aren’t court notes, memos or unimportant random pieces of evidence, they’re physical devices with serial numbers and names attached. The idea that no one thought to check for duplicates before giving a number to the director for testimony in Congress suggests either conspiracy or gross incompetence.

The latter seems more likely after a report by the Office of the Inspector General that found the FBI had failed to utilize its own resources to access locked phones, instead suing Apple and then hastily withdrawing the case when its basis (a locked phone from a terror attack) was removed. It seems to have chosen to downplay or ignore its own capabilities in order to pursue the narrative that widespread encryption is dangerous without a backdoor for law enforcement.

An audit is underway at the Bureau to figure out just how many phones it actually has that it can’t access, and hopefully how this all happened.

It is unmistakably among the FBI’s goals to emphasize the problem of devices being fully encrypted and inaccessible to authorities, a trend known as “going dark.” That much it has said publicly, and it is a serious problem for law enforcement. But it seems equally unmistakable that the Bureau is happy to be sloppy, deceptive or both in its advancement of a tailored narrative.

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Does Google’s Duplex violate two-party consent laws?

Posted by | artificial intelligence, california, Google, Google Duplex, Government, Mobile, privacy, TC, voice recognition | No Comments

Google’s Duplex, which calls businesses on your behalf and imitates a real human, ums and ahs included, has sparked a bit of controversy among privacy advocates. Doesn’t Google recording a person’s voice and sending it to a data center for analysis violate two-party consent law, which requires everyone in a conversation to agree to being recorded? The answer isn’t immediately clear, and Google’s silence isn’t helping.

Let’s take California’s law as the example, since that’s the state where Google is based and where it used the system. Penal Code section 632 forbids recording any “confidential communication” (defined more or less as any non-public conversation) without the consent of all parties. (The Reporters Committee for the Freedom of the Press has a good state-by-state guide to these laws.)

Google has provided very little in the way of details about how Duplex actually works, so attempting to answer this question involves a certain amount of informed speculation.

To begin with I’m going to consider all phone calls as “confidential” for the purposes of the law. What constitutes a reasonable expectation of privacy is far from settled, and some will have it that you there isn’t such an expectation when making an appointment with a salon. But what about a doctor’s office, or if you need to give personal details over the phone? Though some edge cases may qualify as public, it’s simpler and safer (for us and for Google) to treat all phone conversations as confidential.

As a second assumption, it seems clear that, like most Google services, Duplex’s work takes place in a data center somewhere, not locally on your device. So fundamentally there is a requirement in the system that the other party’s audio will be recorded and sent in some form to that data center for processing, at which point a response is formulated and spoken.

On its face it sounds bad for Google. There’s no way the system is getting consent from whomever picks up the phone. That would spoil the whole interaction — “This call is being conducted by a Google system using speech recognition and synthesis; your voice will be analyzed at Google data centers. Press 1 or say ‘I consent’ to consent.” I would have hung up after about two words. The whole idea is to mask the fact that it’s an AI system at all, so getting consent that way won’t work.

But there’s wiggle room as far as the consent requirement in how the audio is recorded, transmitted and stored. After all, there are systems out there that may have to temporarily store a recording of a person’s voice without their consent — think of a VoIP call that caches audio for a fraction of a second in case of packet loss. There’s even a specific cutout in the law for hearing aids, which if you think about it do in fact do “record” private conversations. Temporary copies produced as part of a legal, beneficial service aren’t the target of this law.

This is partly because the law is about preventing eavesdropping and wiretapping, not preventing any recorded representation of conversation whatsoever that isn’t explicitly authorized. Legislative intent is important.

“There’s a little legal uncertainty there, in the sense of what degree of permanence is required to constitute eavesdropping,” said Mason Kortz, of Harvard’s Berkman Klein Center for Internet & Society. “The big question is what is being sent to the data center and how is it being retained. If it’s retained in the condition that the original conversation is understandable, that’s a violation.”

For instance, Google could conceivably keep a recording of the call, perhaps for AI training purposes, perhaps for quality assurance, perhaps for users’ own records (in case of time slot dispute at the salon, for example). They do retain other data along these lines.

But it would be foolish. Google has an army of lawyers and consent would have been one of the first things they tackled in the deployment of Duplex. For the onstage demos it would be simple enough to collect proactive consent from the businesses they were going to contact. But for actual use by consumers the system needs to engineered with the law in mind.

What would a functioning but legal Duplex look like? The conversation would likely have to be deconstructed and permanently discarded immediately after intake, the way audio is cached in a device like a hearing aid or a service like digital voice transmission.

A closer example of this is Amazon, which might have found itself in violation of COPPA, a law protecting children’s data, whenever a kid asked an Echo to play a Raffi song or do long division. The FTC decided that as long as Amazon and companies in that position immediately turn the data into text and then delete it afterwards, no harm and, therefore, no violation. That’s not an exact analogue to Google’s system, but it is nonetheless instructive.

“It may be possible with careful design to extract the features you need without keeping the original, in a way where it’s mathematically impossible to recreate the recording,” Kortz said.

If that process is verifiable and there’s no possibility of eavesdropping — no chance any Google employee, law enforcement officer or hacker could get into the system and intercept or collect that data — then potentially Duplex could be deemed benign, transitory recording in the eye of the law.

That assumes a lot, though. Frustratingly, Google could clear this up with a sentence or two. It’s suspicious that the company didn’t address this obvious question with even a single phrase, like Sundar Pichai adding during the presentation that “yes, we are compliant with recording consent laws.” Instead of people wondering if, they’d be wondering how. And of course we’d all still be wondering why.

We’ve reached out to Google multiple times on various aspects of this story, but for a company with such talkative products, they sure clammed up fast.

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