Here's why Big Tech is winning the war against the government
The U.S. government has never been a model of consistency—these are the folks who brought us ‘military intelligence’ after all—but maybe that makes sense. With something as big as the federal government, there’s bound to be some conflicting interests. (And we all remember our Emerson, right? “A foolish consistency is the hobgoblin of little minds…”)
But lately the inconsistencies—foolish and otherwise—emerging from Washington directed at the tech industry have become truly mind-blowing.
“Some chaos is normal, [but I’ve] never seen an administration this unpredictable,” says Larry Downes, an author and fellow at the Georgetown University Center for Business and Public Policy.
Spot on Larry, though I have to add, it’s getting worse.
In fact this week has been particularly insane. Enough to make a fair mind fairly reel.
Chapter One.
Let’s start with the most jaw-dropping development, the U.S. government charging Chinese telecom giant Huawei with violating the RICO or Racketeer Influenced and Corrupt Organizations Act, which is usually reserved for prosecuting the mafia. I say usually because while the Feds tapped RICO to go after the Gambino, Lucchese and Bonanno families in New York, it’s also been employed against the likes of the Hells Angels and Michael Milken, as well as Major League Baseball, the LAPD, oh and don’t forget, Donald Trump (in the Trump University case). Where RICO hasn’t been used is against a major corporation, never mind a foreign one.
DOJ alleges Huawei was acting as a criminal enterprise by conspiring to steal secrets from a number of unnamed U.S. companies, including perhaps the likes of Cisco and Yahoo’s parent company Verizon. (Huawei is also suing Verizon over alleged patent violations.)
Does it make sense to use the same statute against Huawei that was used against John Gotti and Donald Trump? Who knows.
There’s more news on the Huawei v. U.S. government front to consider though.
On Wednesday the Wall Street Journal reported that “U.S. officials say Huawei Technologies Co. can covertly access mobile-phone networks around the world through ‘back doors’ designed for use by law enforcement, as Washington tries to persuade allies to exclude the Chinese company from their networks.” Huawei denied the allegations and those ‘U.S. officials’ didn’t provide much evidence, though they could well be right.
“Huawei of course has the capability [to spy and steal secrets] but Huawei can say with a straight face that there’s no evidence of them having used the capability,” says Nicholas Weaver, staff researcher at the International Computer Science Institute, University of California, Berkeley. “Countries with 5G have a choice: Go with Huawei and let China have an easy mode [to access telco networks.] Or go with European competitors and spend more money.”
Of course the Snowden leaks showed that our very own U.S. government has been accessing telco networks to spy on foreign governments, a point which Huawei made this week.
Also this week came a blockbuster story from the Washington Post which revealed that the CIA—through an encryption company it owned named Crypto—had been reading the secret communications of foreign countries, some of them allies, for decades.
A contradiction, yes, but maybe all’s fair in the world of spycraft, just understand we wear no halo.
Also remember that the Justice Department, led by Attorney General Barr himself, has recently been urging Apple to create a back door for the iPhone to help in its investigation of the Navy base shooting in Pensacola last year. Apple has pointed out that if it creates such a back door, inquiring minds from around the globe—including the People's Liberation Army—will look to crack iPhones too.
Chapter Two.
A federal judge ordered that Microsoft cease work on the $10 billion cloud-computing Jedi contract for the Pentagon, a victory for Amazon, which had challenged the awarding of the contract. Naturally the contract had been awarded previously to Microsoft by another branch of the federal government, the Department of Defense. That the contract was not awarded to Amazon, but to its crosstown-Seattle-rival Microsoft, came as a shock to those following the bidding, until one considers President Trump’s state of mind.
Amazon’s 103-page suit alleges the contract was awarded to Microsoft, because of “improper pressure from President Donald J. Trump, who launched repeated public and behind-the-scenes attacks to steer the JEDI Contract away from AWS [Amazon Web Services] to harm his perceived political enemy-Jeffrey P. Bezos, founder and CEO of AWS's parent company, Amazon.com, Inc. ("Amazon"), and owner of the Washington Post.”
At some point this will get sorted out and either Amazon or Microsoft will be running the $10 billion contract, but consider what this litigious maw is doing to the competitive position of the United States in the meantime.
Wait, I know! It’s detracting from that!
Please note that President Trump doesn’t always hate on Amazon. This week POTUS delighted in pointing out that the first four letters of the trillion-dollar-market-cap tech giants’ names; Microsoft, Apple, Google, and Amazon, spell MAGA. (Sorry Facebook.)
Chapter Three.
Also this week the Federal Trade Commission announced that it would begin investigating all manner of acquisitions made by Facebook, Google, Amazon, Apple and Microsoft. The point here is the FTC is concerned tech giants have been acting anti-competitively by buying up small companies and start-ups (the Feds typically review only deals over $90 million) to squelch potential threats to their businesses. It’s a point I made last year when I noted that FB, GOOGL, AMZN and AAPL had bought some 500 companies over the past two decades with much of that buying over the past five years.
Chapter Four.
While it’s nice to hear that the government is getting tough on antitrust, except that also this week a federal judge approved the takeover of Sprint by T-Mobile, clearing the way for a merger that had been in the works almost since the days of the princess phone.
Is the Sprint/T-Mobile deal different from Facebook buying British AI start-up Scape Technologies, which TechCrunch reported it did for $40 million late last week? Sure. Is the Sprint/T-Mobile deal better or worse for consumers than the Facebook-Scape deal? I have no idea. Bet you $40 million Washington has no idea either.
Of course a federal judge approved another big telco deal not that long ago—the AT&T-Time Warner merger—but did so over the objections of the Department of Justice, which to my mind and others’ was acting at the behest of President Trump because of his dislike of TimeWarner’s CNN. (See a trend here?)
For a moment I thought I saw some kind of logic or pattern to the greenlighting, blocking or investigating of these tech, media and telco deals. Then I realized it was just my hobgoblin acting up again.
Chapter Five.
This one may be the strangest yet if you can imagine. Are you up to speed on chipmaker Qualcomm and its bizarro legal battle which played out in a San Francisco courtroom this week? The twists and turns of this case will make your head spin, but the bottom line is that the Federal Trade Commission has accused QCOM of monopolistic behavior in the smartphone chip business. But get this, taking the side of Qualcomm and fighting the FCC is none other than the Department of Justice! That’s right. The DOJ is arguing that the FTC’s actions against Qualcomm “threaten competition, innovation and national security.”
Unbelievable right?
Yes, it is unprecedented.
Yes, it is your tax dollars at work.
I know what you might be thinking. That Donald Trump is a disrupter. That he’s shaking things up that needed shaking. Maybe. But that’s not what I see. What I see when it comes to oversight of tech, media and telecom companies is policy driven by personal vendettas and conflicting agendas.
“What have we done,” asks Downes of Georgetown University. “Nothing. Has Congress passed laws? None. [Any] court cases? Zero. A lot of sound and fury, noise. From a concrete standpoint, nothing.”
In January 2017 Denmark appointed the world’s first ambassador to the tech industry. It’s a new twist in the history of diplomacy and a bit of a gimmick, but Denmark understands that American tech companies are a force unprecedented in scale and scope. “These companies have become a type of new nations and we need to confront that,” said Denmark’s Foreign Minister Anders Samuelsen. I bet Metternich would approve.
As for U.S. lawmakers, they 1) don’t understand the power of these companies, 2) are in complete disarray and 3) are using metrics and analytics from pre-digital times.
But wait, didn’t the government do something this week?
Chapter Six.
Two U.S. senators introduced plans (again, it was quite the week) to reign in big tech. Senator (and former presidential candidate) Kirsten Gillibrand (D-NY) proposed the creation of a new independent government entity, Data Protection Agency (DPA), to oversee Silicon Valley et al. “The tech giants — Google and Facebook among them—have been the clear winners of our transition to the digital age,” Gillibrand said in her blog post outlining the measure. Will anything come of it? Probably not. “Congress has been skeptical about the establishment of a brand-new agency for data protection,” the Verge writes.
Senator Josh Hawley (R-Mo.) has another idea. He put forth a plan to roll up the FTC, which he said “is in no shape to ensure competition in today’s markets, let alone tomorrow’s,” into guess where, the Department of Justice. Remember this is the same DOJ that’s snuggled up with Qualcomm and carried President Trump’s water trying to block the AT&T/Time Warner merger.
Sigh.
Is there a plan here, or any consistency at all? No and not a single iota.
This article was featured in a Saturday edition of the Morning Brief on February 15, 2020. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe
Andy Serwer is editor-in-chief of Yahoo Finance. Follow him on Twitter: @serwer.
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