Monday 27 May 2019

Facebook, politics and rural broadband: the lessons that 2018 has in store for 2019

The tech industry shifted trillions during 2018. Adrian Weckler lists the big events

Under fire: Facebook CEO Mark Zuckerberg faced scrutiny in Washington. Photo: Reuters
Under fire: Facebook CEO Mark Zuckerberg faced scrutiny in Washington. Photo: Reuters

1: Can big tech stocks recover?

In early 2018, it seemed like big tech stocks would rise forever and ever. Apple even breached the $1trn trillionmark, with Amazon close behind.

But in late 2018, many of those companies fell heavily, mirroring a general downward turn for equities, especially US-based ones. Apple fell the most, resulting in Microsoft overtaking it in value over the last few weeks. At the time of writing, Microsoft has a market cap of $750bn, with Apple down to $718bn.

But others weren’t far behind, with Facebook falling from over $600bn to $380bn and IBM seeing a 30pc drop.

Can these tech stocks recover in early 2019? Probably, though it surely depends on the same mix of macro-economic factors as ever.

Some analysts argue that the markets have simply been on too much of a bull run and will naturally ease back for a period. Others say that tech stocks can be the exception because they still have bigger disruptive potential than many traditional equities. An example, they say, is Amazon — as big as it is, it could still get way larger thanks to the generally-accepted factor of online shopping still not being at a mature stage yet.

Huawei row: A TV image of Huawei Technologies’ CFO Meng Wanzhou as she exits the court registry following a bail hearing at British Columbia Superior Courts in Vancouver
Huawei row: A TV image of Huawei Technologies’ CFO Meng Wanzhou as she exits the court registry following a bail hearing at British Columbia Superior Courts in Vancouver

On the other hand, 2019 could also be a year of unprecedented regulatory activism against the biggest tech stocks. Tech companies, in the eyes of many, are simply getting too big and powerful. The so-called FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) now wield more control over critical areas of our lives than any other cabal of firms before.

This draws more scrutiny and a regular serving of outrage. It’s not just Facebook that gets slammed in the press and by parliaments; Google and Amazon are seeing increasing hostility too.

To this end, 2018 saw what was arguably the most impactful piece of regulation aimed at big internet firms — the GDPR privacy law. However, this mainly only has legal effect in the EU, even if the top tech firms are implementing some of its principles across their global operations. This could mean that GDPR-style regulatory action may officially extend to other major markets, which would be a threat to some of the biggest tech firms.

 

2: The toxic combination of politics and internet firms

2018This was the year when tech and politics became embroiled in ways that created problems for both sectors. Most attention fell on Facebook for a series of controversial political interventions carried out on its platform.

The biggest single incident was the Cambridge Analytica scandal. There, a British-owned political consultancy firm, Cambridge Analytica, sought to influence the 2016 US presidential election by mining the personal information of up to 50 million people in the US. The incident, first reported by The Observer, Guardian and Channel 4 News, led to Facebook coming under fire for not having stringent-enough controls over its platform.

Other Facebook-related political controversy permeated the year, with the platform constantly criticised for allowing malevolent actors to undermine elections and foment civic discourse.

Minister for Communications, Climate Action & Environment Denis Naughten.
Minister for Communications, Climate Action & Environment Denis Naughten.

In Ireland, tech firm’sfirms’ political importance came to the fore when some of the biggest internet firms took an unprecedented decision not to allow campaigning ads in the weeks preceding the country’s abortion referendum in May.

Google went furthest, blocking all ads on its search engine and on YouTube relating to the Eighth Amendment referendum. Twitter did the same. On the same issue, Facebook announced that it was blocking all ads related to the Eighth Amendment referendum that came from advertisers outside the jurisdiction.

However, it still allowed referendum-related ads that were paid for by organisations within Ireland.

The social networking firm said that it would implement the same rule for future elections in Ireland, disallowing any ads that do not come from registered entities in Ireland, Google has not yet said what it intends to do in the area of political ads here in future.

 

3: When Chinese tech firms ran into political trouble

Huawei is now Ireland’s third-largest smartphone manufacturer and second in the world after Samsung.

But 2018 was the year when it started to run into serious hurdles for political reasons, with 2019 promising more of the same.

Facebook also blocked ads relating to the Eighth Amendement campaign
Facebook also blocked ads relating to the Eighth Amendement campaign

Three countries — the US, Australia and New Zealand — hardened policies that militate against using Chinese tech infrastructure or devices.

The reason, they say, is that Huawei has close links to Chinese authorities. And as the US seems to be escalating its cyberwar with China, it has decreed that some Chinese companies can’t be used.

Huawei comes in for particular atttention because it’s such a big player in communications network infrastructure. It now has 28pc of the world’s networking market, overtaking Ericsson and Nokia to become the biggest company.

This means it is to the fore in the new generations of 5G mobile networks and core broadband infrastructure.

But it could get worse for Huawei. US President Donald Trump is considering an executive order to bar US companies from using telecommunications equipment made by Chinese tech firms, including Huawei and ZTE.

Will this spread to Europe? Earlier this month, Britain’s biggest telecoms operator was reported to be scaling back its use of Huawei equipment for security reasons.

British Telecom will now move Huawei kit away from “core” network functions in rolling out 5G infrastructure, the Financial Times reported.

Is this strategic decision from a big British company that is only limited to mobile networks? Or is it a general sea change in policy?

Here, BT Ireland uses

Huawei as its “core” high-speed network between Dublin and Belfast.

It recently bragged about increasing the speed and power of its underlying telecoms infrastructure between London and Dublin using Huawei’s technology.

But those investment decisions were taken a few years ago, before tension around Huawei’s ascension rose.

Apple has suffered from a tech stock downturn
Apple has suffered from a tech stock downturn

In early December, matters escalated further when Meng Wanzhou, the daughter of Huawei’s founder, was arrested and detained by police in Canada.

The Canadians were acting on a US extradition warrant. The apparent grounds for detention relate to contravening trade sanctions against Iran, which the Trump administration is pursuing almost single-handedly.

The Chinese government was outraged by the detention, interpreting it as a direct assault on Chinese interests.

 

4: The National Broadband Plan: so close, so far away

In 2018, the government’s long-suffering rural broadband rollout plan made some progress before running into controversy.

A series of previously undisclosed meetings between the Communications Ministerfor Communications Denis Naughten and the head of the tendering consortium, David McCourt, led to Mr Naughten’s resignation from the Government.

Despite insisting that the assessment process of the bid continued throughout, the Government failed to come to a conclusion before the end of December on whether it would proceed with the Granahan-McCourt bid.

Commenting publicly on the matter this month, Taoiseach Leo Varadkar said that a decision on the issue may not be made until February.

This might dash hopes for connections to rural homes by the end of 2019, something that had been on the cards until the controversy around Mr Naughten’s meetings blew up at the tail end of 2018. disruption.

However, the contract decision remains one of the biggest calls that this government will make in 2019.

If the State prefers to go back to the drawing board, it will likely be several years until non-urban Ireland gets the kind of basic internet infrastructure that currently enables city economies.

Outside the BationalNational Broadband Plan, 2019 will see some modest improvement in the availability of broadband in Ireland.

At the very least, the last 100,000 of the 330,000 rural fibre-to-the-home connections being built by Eir will be completed by June.

These are connections into areas that have never had any form of decent broadband availability, so it’s a net gain for the country.

However, it still leaves 540,000 homes and businesses ­— mostly in rural areas — without a proper connection.

Irish Independent

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