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UK gives Huawei an amber light to supply 5G
The U.K. government will allow Huawei to be a supplier for some non-core parts of the country’s 5G networks, despite concerns that the involvement of the Chinese telecoms vendor could pose a risk to national security. But it will be excluded from core parts of the networks, according to reports in national press.
The news of prime minister Theresa May’s decision made during a meeting of the National Security Council yesterday was reported earlier by The Telegraph. The newspaper said multiple ministers raised concerns about her approach — including the Home Secretary, Foreign Secretary, Defence Secretary, International Trade Secretary and International Development Secretary.
The FT reports that heavy constraints on Huawei’s involvement in U.K. 5G networks reflect the level of concern raised by ministers.
May’s decision to give an amber light to Huawei’s involvement in building next-gen 5G networks comes a month after a damning report by a U.K. oversight body set up to evaluate the Chinese company’s approach to security.
The fifth annual report by the Huawei Cyber Security Evaluation Centre Oversight Board blasted “serious and systematic defects” in its software engineering and cyber security competence.
Though the oversight board stopped short of calling for an outright ban — despite saying it could provide “only limited assurance that all risks to U.K. national security from Huawei’s involvement in the U.K.’s critical networks can be sufficiently mitigated long-term.”
But speaking at a cybersecurity conference in Brussels in February, Ciaran Martin, the CEO of the U.K.’s National Cyber Security Centre (NCSC), expressed confidence U.K. authorities can mitigate any risk posed by Huawei.
The NCSC is part of the domestic GCHQ signals intelligence agency.
Dr. Lukasz Olejnik, an independent cybersecurity advisor and research associate at the Center for Technology and Global Affairs at Oxford University, told TechCrunch he’s not surprised by the government’s decision to work with Huawei.
“It’s a message that was long-expected,” he said. “U.K. officials have been carefully sending signals in the previous months. In a sense, this makes us closer to the end of the 5G drama.”
“With proper management most risk can be mitigated. It all depends on the strategic planning,” he added.
“I believe the level of [security] responsibility at telecoms will remain similar to today’s. The main message expected by telecoms is clarity to enable them to move on with infrastructure.”
The heaviest international pressure to exclude the Chinese vendor from next-gen 5G networks has been coming from the U.S., where President Trump has been leaning on key intelligence-sharing allies to act on espionage fears and shut out Huawei — with some success.
Last year Australia and New Zealand both announced bans on Chinese kit vendors citing national security fears.
But in Europe governments appear to be leaning in another direction: toward managing and mitigating potential risks rather than shutting the door completely.
The European Commission has also eschewed pushing for a pan-EU ban — instead issuing recommendations encouraging member states to step up individual and collective attention on network security to mitigate potential risks.
It has warned too — and conversely — of the risk of fragmentation to its flagship “digital single market” project if member state governments decide to slam doors on their own. So, at the pan-EU level, security considerations are very clearly being weighed against strategic commercial imperatives and technology priorities.
Equally, individual European governments appear to have little appetite to throw a spanner in the 5G works, given the risk of being left lagging as cellular connectivity evolves and transforms — an upgrade that’s expected to fuel and underpin developments in artificial intelligence and big data analysis, among other myriad and much-hyped benefits.
In the U.K.’s case, national security concerns have been repeatedly brandished as justification for driving through domestic surveillance legislation so draconian that parts of it have later been unpicked by both U.K. and EU courts. Even if the same security concerns are here, where 5G networks are concerned, being deemed “manageable” — rather than grounds for a similarly draconian approach to technology procurement.
It’s not clear at this stage how extensively Huawei will be involved in supplying and building U.K. 5G networks.
The NCSC sent us the following statement in response to questions:
National Security Council discussions are confidential. Decisions from those meetings are made and announced at the appropriate time through the established processes.
The security and resilience of the UK’s telecoms networks is of paramount importance.
As part of our plans to provide world class digital connectivity, including 5G, we have conducted an evidence based review of the supply chain to ensure a diverse and secure supply base, now and into the future. This is a thorough review into a complex area and will report with its conclusions in due course.
“How ‘non-core’ will be defined is anyone’s guess but it would have to be clearly defined and publicly communicated,” Olejnik also told us. “I would assume this refers to government and military networks, but what about safety communication or industrial systems, such as that of power plants or railroad? That’s why we should expect more clarity.”
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Fleksy’s AI keyboard is getting a store to put mini apps at chatters’ fingertips
Remember Fleksy? The customizable Android keyboard app has a new trick up its sleeve: It’s adding a store where users can find and add lightweight third party apps to enhance their typing experience.
Right now it’s launched a taster, preloading a selection of ‘mini apps’ into the keyboard — some from very familiar brand names, some a little less so — so users can start to see how it works.
The first in-keyboard apps are Yelp (local services search); Skyscanner (flight search); Giphy (animated Gif search); GifNote (music Gifs; launching for U.S. users only for rights reasons); Vlipsy (reaction video clips); and Emogi (stickers) — with “many more” branded apps slated as coming in the next few months.
They’re not saying exactly what other brands are coming but there are plenty of familiar logos to be spotted in their press materials — from Spotify to Uber to JustEat to Tripadvisor to PayPal and more…
The full keyboard store itself — which will let users find and add and/or delete apps — will be launching at the end of this month.
The latest version of the Fleksy app can be downloaded for free via the Play Store.
Mini apps made for messaging
The core idea for these mini apps (aka Fleksyapps) is to offer lightweight additions designed to serve the messaging use case.
Say, for example, you’re chatting about where to eat and a friend suggests sushi. The Yelp Fleksyapp might pop up a contextual suggestion for a nearby Japanese restaurant that can be shared directly into the conversation — thereby saving time by doing away with the need for someone to cut out of the chat, switch apps, find some relevant info and cut and paste it back into the chat.
Fleksyapps are intended to be helpful shortcuts that keep the conversation flowing. They also of course put brands back into the conversation.
“We couldn’t be more excited to bring the power of the world’s popular songs with GIFs, videos and photos to the new Fleksyapps platform,” says Gifnote co-founder, John vanSuchtelen, in a supporting statement.
Fleksy’s mini apps appear above the Qwerty keyboard — in much the same space as a next-word prediction. The user can scroll through the app stack (each a tiny branded circle until tapped on to expand) and choose one to interact with. It’s similar to the micro apps lodged in Apple’s iMessage but on Android where iMessage isn’t… The team also plans for Fleksy to support a much wider range of branded apps — hence the Fleksyapps store.
In-keyboard apps is not a new concept for the dev team behind Fleksy; an earlier keyboard app of theirs (called ThingThing) offered micro apps they built themselves as a tool to extend its utility.
But now they’re hoping to garner backing and buy in from third party brands excited about the exposure and reach they could gain by being where users spend the most device time: The keyboard.
“Think of it a bit like the iMessage equivalent but on Android across any app. Or the WeChat mini program but inside the keyboard, available everywhere — not only in one app,” CEO Olivier Plante tells TechCrunch. “That’s a problem of messaging apps these days. All of them are verticals but the keyboard is horizontal. So that’s the benefit for those brands. And the user will have the ability to move them around, add some, to remove some, to explore, to discover.”
“The brands that want to join our platform they have the option of being preloaded by default. The analogy is that by default on the home screen of a phone you are by default in our keyboard. And moving forward you’ll be able to have a membership — you’re becoming a ‘brand member’ of the Fleksyapps platform, and you can have your brand inside the keyboard,” he adds.
The first clutch of Fleksyapps were developed jointly, with the team working with the brands in question. But Plante says they’re planning to launch a tool in future so brands will be able to put together their own apps — in as little as just a few hours.
“We’re opening this array of functionalities and there’s a lot of verticals possible,” he continues. “In the future months we will embed new capabilities for the platform — new type of apps. You can think about professional apps, or cloud apps. Accessing your files from different types of clouds. You have the weather vertical. You have ecommerce vertical. You have so many verticals.
“What you have on the app store today will be reflected into the Fleksyappstore. But really with the focus of messaging and being useful in messaging. So it’s not the full app that we want to bring in — it’s really the core functionality of this app.”
The Yelp Fleksyapp, for example, only includes the ability to see nearby places and search for and share places. So it’s intentionally stripped down. “The core benefit for the brand is it gives them the ability to extend their reach,” says Plante. “We don’t want to compete with the app, per se, we just want to bring these types of app providers inside the messenger on Android across any app.”
On the user side, the main advantage he touts is “it’s really, really fast — fleshing that out to: “It’s very lightweight, it’s very, very fast and we want to become the fastest access to content across any app.”
Users of Fleksyapps don’t need to have the full app installed because the keyboard plugs directly into the API of each branded service. So they get core functionality in bite-sized form without a requirement to download the full app. (Of course they can if they wish.)
So Plante also notes the approach has benefits vis-a-vis data consumption — which could be an advantage in emerging markets where smartphone users’ choices may be hard-ruled by the costs of data and/or connectivity limits.
“For those types of users it gives them an ability to access content but in a very light way — where the app itself, loading the app, loading all the content inside the app can be megabits. In Fleksy you’re talking about kilobits,” he says.
Privacy-sensitive next app suggestions
While baking a bunch of third party apps into a keyboard might sound like a privacy nightmare, the dev team behind Fleksy have been careful to make sure users remain in control.
To wit: Also on board is an AI keyboard assistant (called Fleksynext) — aka “a neural deep learning engine” — which Plante says can detect the context, intention and sentiment of conversations in order to offer “very useful” app suggestions as the chat flows.
The idea is the AI supports the substance of the chat by offering useful functionality from whatever pick and mix of apps are available. Plante refers to these AI-powered ‘next app’ suggestions as “pops”.
And — crucially, from a privacy point of view — the Fleksynext suggestion engine operates locally, on device.
That means no conversation data is sent out of the keyboard. Indeed, Plante says nothing the user types in the keyboard itself is shared with brands (including suggestions that pop up but get ignored). So there’s no risk — as with some other keyboard apps — of users being continually strip-mined for personal data to profile them as they type.
That said, if the user chooses to interact with a Fleksyapp (or its suggestive pop) they are then interacting with a third party’s API. So the usual tracking caveats apply.
“We interact with the web so there’s tracking everywhere,” admits Plante. “But, per se, there’s not specific sensitive data that is shared suddenly with someone. It is not related with the service itself — with the Fleksy app.”
The key point is that the keyboard user gets to choose which apps they want to use and which they don’t. So they can choose which third parties they want to share their plans and intentions with and which they don’t.
“We’re not interesting in making this an advertising platform where the advertiser decides everything,” emphasizes Plante. “We want this to be really close to the user. So the user decides. My intentions. My sentiment. What I type decides. And that is really our goal. The user is able to power it. He can tap on the suggestion or ignore it. And then if he taps on it it’s a very good quality conversion because the user really wants to access restaurants nearby or explore flights for escaping his daily routine… or transfer money. That could be another use-case for instance.”
They won’t be selling brands a guaranteed number of conversions, either.
That’s clearly very important because — to win over users — Fleksynext suggestions will need to feel telepathically useful, rather than irritating, misfired nag. Though the risk of that seems low given how Fleksy users can customize the keyboard apps to only see stuff that’s useful to them.
“In a sense we’re starting reshape a bit how advertising is seen by putting the user in the center,” suggests Plante. “And giving them a useful means of accessing content. This is the original vision and we’ve been very loyal to that — and we think it can reshape the landscape.”
“When you look into five years from now, the smartphone we have will be really, really powerful — so why process things in the cloud? When you can process things on the phone. That’s what we are betting on: Processing everything on the phone,” he adds.
When the full store launches users will be able to add and delete (any) apps — included preloads. So they will be in the driving seat. (We asked Plante to a confirm the user will be able to delete all apps, including any pre-loadeds and he said yes. So if you take him at his word Fleksy will not be cutting any deals with OEMs or carriers to indelibly preload certain Fleksyapps. Or, to put it another way, crapware baked into the keyboard is most definitely not plan.)
Depending on what other Fleksyapps launch in future a Fleksy keyboard user could choose to add, for example, a search service like DuckDuckGo or France’s Qwant to power a pro-privacy alternative to using Google search in the keyboard. Or they could choose Google.
Again the point is the choice is theirs.
Scaling a keyboard into a platform
The idea of keyboard-as-platform offers at least the possibility of reintroducing the choice and variety of smartphone app stores back before the cynical tricks of attention-harvesting tech giants used their network effects and platform power to throttle the app economy.
The Android keyboard space was also a fertile experiment ground in years past. But it’s now dominated by Google’s Gboard and Microsoft-acquired Swiftkey. Which makes Fleksy the plucky upstart gunning to scale an independent alternative that’s not owned by big tech and is open to any third party that wants to join its mini apps party.
“It will be Bing search for Swiftkey, it will be Google search for Gboard, it will be Google Music, it will be YouTube. But on our side we can have YouTube, we can also have… other services that exist for video. The same way with pictures and the same way for file-sharing and drive. So you have Google Drive but you have Dropbox, you have OneDrive, there’s a lot of services in the cloud. And we want to be the platform that has them all, basically,” says Plante.
The original founding team of the Fleksy keyboard was acqui-hired by Pinterest back in 2016, leaving the keyboard app itself to languish with minimal updates. Then two years ago Barcelona-based keyboard app maker, ThingThing, stepped in to take over development.
Plante confirms it’s since fully acquired the Fleksy keyboard technology itself — providing a solid foundation for the keyboard-as-platform business it’s now hoping to scale with the launch of Fleksyapps.
Talking of scale, he tells us the startup is in the process of raising a multi-million Series A — aiming to close this summer. (ThingThing last took in $800,000 via equity crowdfunding last fall.)
The team’s investor pitch is the keyboard offers perhaps the only viable conduit left on mobile to reset the playing field for brands by offering a route to cut through tech giant walled gardens and get where users are spending most of their time and attention: i.e. typing and sharing stuff with their friends in private one-to-one and group chats.
That means the keyboard-as-platform has the potential to get brands of all stripes back in front of users — by embedding innovative, entertaining and helpful bite-sized utility where it can prove its worth and amass social currency on the dominant messaging platforms people use.
The next step for the rebooted Fleksy team is of course building scale by acquiring users for a keyboard which, as of half a year ago, only had around 1M active users from pure downloads.
Its strategy on this front is to target Android device makers to preload Fleksy as the default keyboard.
ThingThing’s business model is a revenue share on any suggestions the keyboard converts, which it argues represent valuable leads for brands — given the level of contextual intention. It is also intending to charge brands that want to be preloaded on the Fleksy keyboard by default.
Again, though, a revenue share model requires substantial scale to work. Not least because brands will need to see evidence of scale to buy into the Fleksyapps’ vision.
Plante isn’t disclosing active users of the Fleksy keyboard right now. But says he’s confident they’re on track to hit 30M-35M active users this year — on account of around ten deals he says are in the pipeline with device makers to preload Fleksy’s keyboard. (Palm was an early example, as we reported last year.)
The carrot for OEMs to join the Fleksyapps party is they’re cutting them in on the revenue share from user interactions with branded keyboard apps — playing to device makers’ needs to find ways to boost famously tight hardware margins.
“The fact that the keyboard can monetize and provide value to the phone brands — this is really massive for them,” argues Plante. “The phone brands can expect revenue flowing in their bank account because we give the brands distribution and the handset manufacturer will make money and we will make money.”
It’s a smart approach, and one that’s essentially only possible because Google’s own Gboard keyboard doesn’t come preloaded on the majority of Android devices. (Exceptions include its own Pixel brand devices.) So — unusually for a core phone app on Android — there’s a bit of an open door where the keyboard sits, instead of the usual preloaded Google wares. And that’s an opportunity.
Markets wise, ThingThing is targeting OEMs in all global regions with its Fleksy pitch — barring China (which Plante readily admits it too complex for a small startup to sensibly try jumping at).
Apps vs tech giants
In its stamping ground of Europe there are warm regulatory winds blowing too: An European Commission antitrust intervention last year saw Google hit with a $5BN fine over anti-competitive practices attached to its Android platform — forcing the company to change local licensing terms.
That antirust decision means mobile makers finally have the chance to unbundle Google apps from devices they sell in the region.
Which translates into growing opportunities for OEMs to rethink their Android strategies. Even as Google remains under pressure not to get in the way by force feeding any more of its wares.
Really, a key component of this shift is that device makers are being told to think, to look around and see what else is out there. For the first time there looks to be a viable chance to profit off of Android without having to preload everything Google wants.
“For us it’s a super good sign,” says Plante of the Commission decision. “Every monopolistic situation is a problem. And the market needs to be fragmented. Because if not we’re just going to lose innovation. And right now Europe — and I see good progress for the US as well — are trying to dismantle the imposed power of those big guys. For the simple evolution of human being and technology and the future of us.”
“I think good things can happen,” he adds. “We’re in talks with handset manufacturers who are coming into Europe and they want to be the most respectful of the market. And with us they have this reassurance that you have a good partner that ensures there’s a revenue stream, there’s a business model behind it, there’s really a strong use-case for users.
“We can finally be where we always wanted to be: A choice, an alternative. But having Google imposing its way since start — and making sure that all the direct competition of Google is just a side, I think governments have now seen the problem. And we’re a winner of course because we’re a keyboard.”
But what about iOS? Plante says the team has plans to bring what they’re building with Fleksy to Apple’s mobile platform too, in time. But for now they’re fully focusing efforts on Android — to push for scale and execute on their vision of staking their claim to be the independent keyboard platform.
Apple has supported third party keyboards on iOS for years. Unfortunately, though, the experience isn’t great — with a flaky toggle to switch away from the default Apple keyboard, combined with heavy system warnings about the risks of using third party keyboards.
Meanwhile the default iOS keyboard ‘just works’ — and users have loads of extra features baked by default into Apple’s native messaging app, iMessage.
Clearly alternative keyboards have found it all but impossible to build any kind of scale in that iOS pincer.
“iOS is coming later because we need to focus on these distribution deals and we need to focus on the brands coming into the platform. And that’s why iOS right now we’re really focusing for later. What we can say is it will come later,” says Plante, adding: “Apple limits a lot keyboards. You can see it with other keyboard companies. It’s the same. The update cycle for iOS keyboard is really, really, really slow.”
Plus, of course, Fleksy being preloaded as a default keyboard on — the team hopes — millions of Android devices is a much more scalable proposition vs just being another downloadable app languishing invisibly on the side lines of another tech giant’s platform.
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Ahead of third antitrust ruling, Google announces fresh tweaks to Android in Europe
Google is widely expected to be handed a third antitrust fine in Europe this week, with reports suggesting the European Commission’s decision in its long-running investigation of AdSense could land later today.
Right on cue the search giant has PRed another Android product tweak — which it bills as “supporting choice and competition in Europe”.
In the coming months Google says it will start prompting users of existing and new Android devices in Europe to ask which browser and search apps they would like to use.
This follows licensing changes for Android in Europe which Google announced last fall, following the Commission’s $5BN antitrust fine for anti-competitive behavior related to how it operates the dominant smartphone OS.
tl;dr competition regulation can shift policy and product.
Albeit, the devil will be in the detail of Google’s self-imposed ‘remedy’ for Android browser and search apps.
Which means how exactly the user is prompted will be key — given tech giants are well-versed in the manipulative arts of dark pattern design, enabling them to create ‘consent’ flows that deliver their desired outcome.
A ‘choice’ designed in such a way — based on wording, button/text size and color, timing of prompt and so on — to promote Google’s preferred browser and search app choice by subtly encouraging Android users to stick with its default apps may not actually end up being much of a ‘choice’.
According to Reuters the prompt will surface to Android users via the Play Store. (Though the version of Google’s blog post we read did not include that detail.)
Using the Play Store for the prompt would require an Android device to have Google’s app store pre-loaded — and licensing tweaks made to the OS in Europe last year were supposedly intended to enable OEMs to choose to unbundle Google apps from Android forks. Ergo making only the Play Store the route for enabling choice would be rather contradictory. (As well as spotlighting Google’s continued grip on Android.)
Add to that Google has the advantage of massive brand dominance here, thanks to its kingpin position in search, browsers and smartphone platforms.
So again the consumer decision is weighted in its favor. Or, to put it another way: ‘This is Google; it can afford to offer a ‘choice’.’
In its blog post getting out ahead of the Commission’s looming AdSense ruling, Google’s SVP of global affairs, Kent Walker, writes that the company has been “listening carefully to the feedback we’re getting” vis-a-vis competition.
Though the search giant is actually appealing both antitrust decisions. (The other being a $2.7BN fine it got slapped with two years ago for promoting its own shopping comparison service and demoting rivals’.)
“After the Commission’s July 2018 decision, we changed the licensing model for the Google apps we build for use on Android phones, creating new, separate licenses for Google Play, the Google Chrome browser, and for Google Search,” Walker continues. “In doing so, we maintained the freedom for phone makers to install any alternative app alongside a Google app.”
Other opinions are available on those changes too.
Such as French pro-privacy Google search rival Qwant, which last year told us how those licensing changes still make it essentially impossible for smartphone makers to profit off of devices that don’t bake in Google apps by default. (More recently Qwant’s founder condensed the situation to “it’s a joke“.)
Qwant and another European startup Jolla, which leads development of an Android alternative smartphone platform called Sailfish — and is also a competition complainant against Google in Europe — want regulators to step in and do more.
The Commission has said it is closely monitoring changes made by Google to determine whether or not the company has complied with its orders to stop anti-competitive behavior.
So the jury is still out on whether any of its tweaks sum to compliance. (Google says so but that’s as you’d expect — and certainly doesn’t mean the Commission will agree.)
In its Android decision last summer the Commission judged that Google’s practices harmed competition and “further innovation” in the wider mobile space, i.e. beyond Internet search — because it prevented other mobile browsers from competing effectively with its pre-installed Chrome browser.
So browser choice is a key component here. And ‘effective competition’ is the bar Google’s homebrew ‘remedies’ will have to meet.
Still, the company will be hoping its latest Android tweaks steer off further Commission antitrust action. Or at least generate more fuzz and fuel for its long-game legal appeal.
Current EU competition commissioner, Margrethe Vestager, has flagged for years that the division is also fielding complaints about other Google products, including travel search, image search and maps. Which suggests Google could face fresh antitrust investigations in future, even as the last of the first batch is about to wrap up.
The FT reports that Android users in the European economic area last week started seeing links to rival websites appearing above Google’s answer box for searches for products, jobs or businesses — with the rival links appearing above paid results links to Google’s own services.
The newspaper points out that tweak is similar to a change promoted by Google in 2013, when it was trying to resolve EU antitrust concerns under the prior commissioner, Joaquín Almunia.
However rivals at the time complained the tweak was insufficient. The Commission subsequently agreed — and under Vestager’s tenure went on to hit Google with antitrust fines.
Walker doesn’t mention these any of additional antitrust complaints swirling around Google’s business in Europe, choosing to focus on highlighting changes it’s made in response to the two extant Commission antitrust rulings.
“After the Commission’s July 2018 decision, we changed the licensing model for the Google apps we build for use on Android phones, creating new, separate licenses for Google Play, the Google Chrome browser, and for Google Search. In doing so, we maintained the freedom for phone makers to install any alternative app alongside a Google app,” he writes.
Nor does he make mention of a recent change Google quietly made to the lists of default search engine choices in its Chrome browser — which expanded the “choice” he claims the company offers by surfacing more rivals. (The biggest beneficiary of that tweak is privacy search rival DuckDuckGo, which suddenly got added to the Chrome search engine lists in around 60 markets. Qwant also got added as a default choice in France.)
Talking about Android specifically Walker instead takes a subtle indirect swipe at iOS maker Apple — which now finds itself the target of competition complaints in Europe, via music streaming rival Spotify, and is potentially facing a Commission probe of its own (albeit, iOS’ marketshare in Europe is tiny vs Android). So top deflecting Google.
“On Android phones, you’ve always been able to install any search engine or browser you want, irrespective of what came pre-installed on the phone when you bought it. In fact, a typical Android phone user will usually install around 50 additional apps on their phone,” Walker writes, drawing attention to the fact that Apple does not offer iOS users as much of a literal choice as Google does.
“Now we’ll also do more to ensure that Android phone owners know about the wide choice of browsers and search engines available to download to their phones,” he adds, saying: “This will involve asking users of existing and new Android devices in Europe which browser and search apps they would like to use.”
We’ve reached out to Commission for comment, and to Google with questions about the design of its incoming browser and search app prompts for Android users in Europe and will update this report with any response.
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US threatens to reduce intelligence sharing if Germany doesn’t ban Huawei
The U.S. government is threatening to reduce the amount of intelligence it shares with Germany if Huawei wins a contract to build the country’s next-generation 5G network.
That’s the takeaway from a letter sent by the U.S. ambassador to Germany, Richard Grenell, to Germany’s economics minister Peter Altmaier, as reported by The Wall Street Journal. Grenell, appointed by President Trump last year, said the U.S. would not be able to continue sharing the same level or amount of classified intelligence over fears of Chinese spying.
It comes just days after Germany’s federal cybersecurity agency announced its 5G security requirements, but did not outright ban Huawei from the contract-bidding process.
It’s the latest move — if not a significant escalation — by the Trump administration to pressure its allies into dropping the Chinese networking gear maker over its links to the Chinese military.
The U.S.’ anti-Huawei cabal has so far seen Canada, Australia, New Zealand, Japan and most of Europe drop plans to use Huawei gear, which governments and phone networks have said is both cheap and reliable, but necessary for the anticipated explosion in 5G interest.
But Germany has — like the British — seen little conclusive evidence to show that Beijing is behind the scenes pulling the strings — only that the company could be compelled to spy in the future once use of the technology has been firmly established.
Korbinian Wagner, a spokesperson for the German ministry for economic affairs, confirmed the receipt of the letter but declined to comment on its contents.
The Department of State did not respond to requests for comment.
The U.S. and Germany have worked to try to repair their intelligence sharing relationship following the Edward Snowden disclosures after allegations that the National Security Agency was caught tapping into the phone of German chancellor Angela Merkel. Germany is one of dozens of countries that obtain classified signals intelligence from the U.S. intelligence community, as both a member of NATO and the so-called 14 Eyes alliance of European countries, which rely on the data sharing alliance for counterterrorism efforts. Germany suffered several terrorist attacks in the past two years, most of which inspired by Kurdish extremists and supporters of the so-called Islamic State.
The European Commission is set to rule on a potential bloc-wide ban of Huawei gear in the coming weeks, per reports.
Meanwhile, Germany is expected to launch its 5G spectrum as early as next week, sparking the beginning of the country’s first foray into the next-generation mobile network.
Updated with response from German government,
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5G phones are here but there’s no rush to upgrade
This year’s Mobile World Congress — the CES for Android device makers — was awash with 5G handsets.
The world’s No.1 smartphone seller by marketshare, Samsung, got out ahead with a standalone launch event in San Francisco, showing off two 5G devices, just before fast-following Android rivals popped out their own 5G phones at launch events across Barcelona this week.
We’ve rounded up all these 5G handset launches here. Prices range from an eye-popping $2,600 for Huawei’s foldable phabet-to-tablet Mate X — and an equally eye-watering $1,980 for Samsung’s Galaxy Fold; another 5G handset that bends — to a rather more reasonable $680 for Xiaomi’s Mi Mix 3 5G, albeit the device is otherwise mid-tier. Other prices for 5G phones announced this week remain tbc.
Android OEMs are clearly hoping the hype around next-gen mobile networks can work a little marketing magic and kick-start stalled smartphone growth. Especially with reports suggesting Apple won’t launch a 5G iPhone until at least next year. So 5G is a space Android OEMs alone get to own for a while.
Chipmaker Qualcomm, which is embroiled in a bitter patent battle with Apple, was also on stage in Barcelona to support Xiaomi’s 5G phone launch — loudly claiming the next-gen tech is coming fast and will enhance “everything”.
“We like to work with companies like Xiaomi to take risks,” lavished Qualcomm’s president Cristiano Amon upon his hosts, using 5G uptake to jibe at Apple by implication. “When we look at the opportunity ahead of us for 5G we see an opportunity to create winners.”
Despite the heavy hype, Xiaomi’s on stage demo — which it claimed was the first live 5G video call outside China — seemed oddly staged and was not exactly lacking in latency.
“Real 5G — not fake 5G!” finished Donovan Sung, the Chinese OEM’s director of product management. As a 5G sales pitch it was all very underwhelming. Much more ‘so what’ than ‘must have’.
Whether 5G marketing hype alone will convince consumers it’s past time to upgrade seems highly unlikely.
Phones sell on features rather than connectivity per se, and — whatever Qualcomm claims — 5G is being soft-launched into the market by cash-constrained carriers whose boom times lie behind them, i.e. before over-the-top players had gobbled their messaging revenues and monopolized consumer eyeballs.
All of which makes 5G an incremental consumer upgrade proposition in the near to medium term.
Use-cases for the next-gen network tech, which is touted as able to support speeds up to 100x faster than LTE and deliver latency of just a few milliseconds (as well as connecting many more devices per cell site), are also still being formulated, let alone apps and services created to leverage 5G.
But selling a network upgrade to consumers by claiming the killer apps are going to be amazing but you just can’t show them any yet is as tough as trying to make theatre out of a marginally less janky video call.
“5G could potentially help [spark smartphone growth] in a couple of years as price points lower, and availability expands, but even that might not see growth rates similar to the transition to 3G and 4G,” suggests Carolina Milanesi, principal analyst at Creative Strategies, writing in a blog post discussing Samsung’s strategy with its latest device launches.
“This is not because 5G is not important, but because it is incremental when it comes to phones and it will be other devices that will deliver on experiences, we did not even think were possible. Consumers might end up, therefore, sharing their budget more than they did during the rise of smartphones.”
The ‘problem’ for 5G — if we can call it that — is that 4G/LTE networks are capably delivering all the stuff consumers love right now: Games, apps and video. Which means that for the vast majority of consumers there’s simply no reason to rush to shell out for a ‘5G-ready’ handset. Not if 5G is all the innovation it’s got going for it.
LG V50 ThinQ 5G with a dual screen accessory for gaming
Use cases such as better AR/VR are also a tough sell given how weak consumer demand has generally been on those fronts (with the odd branded exception).
The barebones reality is that commercial 5G networks are as rare as hen’s teeth right now, outside a few limited geographical locations in the U.S. and Asia. And 5G will remain a very patchy patchwork for the foreseeable future.
Indeed, it may take a very long time indeed to achieve nationwide coverage in many countries, if 5G even ends up stretching right to all those edges. (Alternative technologies do also exist which could help fill in gaps where the ROI just isn’t there for 5G.)
So again consumers buying phones with the puffed up idea of being able to tap into 5G right here, right now (Qualcomm claimed 2019 is going to be “the year of 5G!”) will find themselves limited to just a handful of urban locations around the world.
Analysts are clear that 5G rollouts, while coming, are going to be measured and targeted as carriers approach what’s touted as a multi-industry-transforming wireless technology cautiously, with an eye on their capex and while simultaneously trying to figure out how best to restructure their businesses to engage with all the partners they’ll need to forge business relations with, across industries, in order to successfully sell 5G’s transformative potential to all sorts of enterprises — and lock onto “the sweep spot where 5G makes sense”.
Enterprise rollouts therefore look likely to be prioritized over consumer 5G — as was the case for 5G launches in South Korea at the back end of last year.
“4G was a lot more driven by the consumer side and there was an understanding that you were going for national coverage that was never really a question and you were delivering on the data promise that 3G never really delivered… so there was a gap of technology that needed to be filled. With 5G it’s much less clear,” says Gartner’s Sylvain Fabre, discussing the tech’s hype and the reality with TechCrunch ahead of MWC.
“4G’s very good, you have multiple networks that are Gbps or more and that’s continuing to increase on the downlink with multiple carrier aggregation… and other densification schemes. So 5G doesn’t… have as gap as big to fill. It’s great but again it’s applicability of where it’s uniquely positioned is kind of like a very narrow niche at the moment.”
“It’s such a step change that the real power of 5G is actually in creating new business models using network slicing — allocation of particular aspects of the network to a particular use-case,” Forrester analyst Dan Bieler also tells us. “All of this requires some rethinking of what connectivity means for an enterprise customer or for the consumer.
“And telco sales people, the telco go-to-market approach is not based on selling use-cases, mostly — it’s selling technologies. So this is a significant shift for the average telco distribution channel to go through. And I would believe this will hold back a lot of the 5G ambitions for the medium term.”
To be clear, carriers are now actively kicking the tyres of 5G, after years of lead-in hype, and grappling with technical challenges around how best to upgrade their existing networks to add in and build out 5G.
Many are running pilots and testing what works and what doesn’t, such as where to place antennas to get the most reliable signal and so on. And a few have put a toe in the water with commercial launches (globally there are 23 networks with “some form of live 5G in their commercial networks” at this point, according to Fabre.)
But at the same time 5G network standards are yet to be fully finalized so the core technology is not 100% fully baked. And with it being early days “there’s still a long way to go before we have a real significant impact of 5G type of services”, as Bieler puts it.
There’s also spectrum availability to factor in and the cost of acquiring the necessary spectrum. As well as the time required to clear and prepare it for commercial use. (On spectrum, government policy is critical to making things happen quickly (or not). So that’s yet another factor moderating how quickly 5G networks can be built out.)
And despite some wishful thinking industry noises at MWC this week — calling for governments to ‘support digitization at scale’ by handing out spectrum for free (uhhhh, yeah right) — that’s really just whistling into the wind.
Rolling out 5G networks is undoubtedly going to be very expensive, at a time when carriers’ businesses are already faced with rising costs (from increasing data consumption) and subdued revenue growth forecasts.
“The world now works on data” and telcos are “at core of this change”, as one carrier CEO — Singtel’s Chua Sock Koong — put it in an MWC keynote in which she delved into the opportunities and challenges for operators “as we go from traditional connectivity to a new age of intelligent connectivity”.
Chua argued it will be difficult for carriers to compete “on the basis of connectivity alone” — suggesting operators will have to pivot their businesses to build out standalone business offerings selling all sorts of b2b services to support the digital transformations of other industries as part of the 5G promise — and that’s clearly going to suck up a lot of their time and mind for the foreseeable future.
In Europe alone estimates for the cost of rolling out 5G range between €300BN and €500BN (~$340BN-$570BN), according to Bieler. Figures that underline why 5G is going to grow slowly, and networks be built out thoughtfully; in the b2b space this means essentially on a case-by-case basis.
Simply put carriers must make the economics stack up. Which means no “huge enormous gambles with 5G”. And omnipresent ROI pressure pushing them to try to eke out a premium.
“A lot of the network equipment vendors have turned down the hype quite a bit,” Bieler continues. “If you compare this to the hype around 3G many years ago or 4G a couple of years ago 5G definitely comes across as a soft launch. Sort of an evolutionary type of technology. I have not come across a network equipment vendors these days who will say there will be a complete change in everything by 2020.”
On the consumer pricing front, carriers have also only just started to grapple with 5G business models. One early example is TC parent Verizon’s 5G home service — which positions the next-gen wireless tech as an alternative to fixed line broadband with discounts if you opt for a wireless smartphone data plan as well as 5G broadband.
From the consumer point of view, the carrier 5G business model conundrum boils down to: What is my carrier going to charge me for 5G? And early adopters of any technology tend to get stung on that front.
Although, in mobile, price premiums rarely stick around for long as carriers inexorably find they must ditch premiums to unlock scale — via consumer-friendly ‘all you can eat’ price plans.
Still, in the short term, carriers look likely to experiment with 5G pricing and bundles — basically seeing what they can make early adopters pay. But it’s still far from clear that people will pay a premium for better connectivity alone. And that again necessitates caution.
5G bundled with exclusive content might be one way carriers try to extract a premium from consumers. But without huge and/or compelling branded content inventory that risks being a too niche proposition too. And the more carriers split their 5G offers the more consumers might feel they don’t need to bother, and end up sticking with 4G for longer.
It’ll also clearly take time for a 5G ‘killer app’ to emerge in the consumer space. And such an app would likely need to still be able to fallback on 4G, again to ensure scale. So the 5G experience will really need to be compellingly different in order for the tech to sell itself.
On the handset side, 5G chipset hardware is also still in its first wave. At MWC this week Qualcomm announced a next-gen 5G modem, stepping up from last year’s Snapdragon 855 chipset — which it heavily touted as architected for 5G (though it doesn’t natively support 5G).
If you’re intending to buy and hold on to a 5G handset for a few years there’s thus a risk of early adopter burn at the chipset level — i.e. if you end up with a device with a suckier battery life vs later iterations of 5G hardware where more performance kinks have been ironed out.
Intel has warned its 5G modems won’t be in phones until next year — so, again, that suggests no 5G iPhones before 2020. And Apple is of course a great bellwether for mainstream consumer tech; the company only jumps in when it believes a technology is ready for prime time, rarely sooner. And if Cupertino feels 5G can wait, that’s going to be equally true for most consumers.
Zooming out, the specter of network security (and potential regulation) now looms very large indeed where 5G is concerned, thanks to East-West trade tensions injecting a strange new world of geopolitical uncertainty into an industry that’s never really had to grapple with this kind of business risk before.
Chinese kit maker Huawei’s rotating chairman, Guo Ping, used the opportunity of an MWC keynote to defend the company and its 5G solutions against U.S. claims its network tech could be repurposed by the Chinese state as a high tech conduit to spy on the West — literally telling delegates: “We don’t do bad things” and appealing to them to plainly to: “Please choose Huawei!”
Huawei rotating resident, Guo Ping, defends the security of its network kit on stage at MWC 2019
When established technology vendors are having to use a high profile industry conference to plead for trust it’s strange and uncertain times indeed.
In Europe it’s possible carriers’ 5G network kit choices could soon be regulated as a result of security concerns attached to Chinese suppliers. The European Commission suggested as much this week, saying in another MWC keynote that it’s preparing to step in try to prevent security concerns at the EU Member State level from fragmenting 5G rollouts across the bloc.
In an on stage Q&A Orange’s chairman and CEO, Stéphane Richard, couched the risk of destabilization of the 5G global supply chain as a “big concern”, adding: “It’s the first time we have such an important risk in our industry.”
Geopolitical security is thus another issue carriers are having to factor in as they make decisions about how quickly to make the leap to 5G. And holding off on upgrades, while regulators and other standards bodies try to figure out a trusted way forward, might seem the more sensible thing to do — potentially stalling 5G upgrades in the meanwhile.
Given all the uncertainties there’s certainly no reason for consumers to rush in.
Smartphone upgrade cycles have slowed globally for a reason. Mobile hardware is mature because it’s serving consumers very well. Handsets are both powerful and capable enough to last for years.
And while there’s no doubt 5G will change things radically in future, including for consumers — enabling many more devices to be connected and feeding back data, with the potential to deliver on the (much hyped but also still pretty nascent) ‘smart home’ concept — the early 5G sales pitch for consumers essentially boils down to more of the same.
“Over the next ten years 4G will phase out. The question is how fast that happens in the meantime and again I think that will happen slower than in early times because [with 5G] you don’t come into a vacuum, you don’t fill a big gap,” suggests Gartner’s Fabre. “4G’s great, it’s getting better, wi’fi’s getting better… The story of let’s build a big national network to do 5G at scale [for all] that’s just not happening.”
“I think we’ll start very, very simple,” he adds of the 5G consumer proposition. “Things like caching data or simply doing more broadband faster. So more of the same.
“It’ll be great though. But you’ll still be watching Netflix and maybe there’ll be a couple of apps that come up… Maybe some more interactive collaboration or what have you. But we know these things are being used today by enterprises and consumers and they’ll continue to be used.”
So — in sum — the 5G mantra for the sensible consumer is really ‘wait and see’.
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Huawei: ‘The US security accusation of our 5G has no evidence. Nothing.’
Huawei’s rotating chairman Guo Ping kicked off a keynote speech this morning at the world’s biggest mobile industry tradeshow with a wry joke. “There has never been more interest in Huawei,” he told delegates at Mobile World Congress. “We must be doing something right!”
The Chinese company is seeking to dispel suspicion around the security of its 5G network equipment which has been accelerated by U.S. president Trump who has been urging U.S. allies not to buy kit or services from Huawei. (And some, including Australia, have banned carriers from using Huawei kit.)
Last week Trump also tweet-shamed U.S. companies — saying they needed to step up their efforts to rollout 5G networks or “get left behind”.
In an MWC keynote speech yesterday the European Commission’s digital commissioner Mariya Gabriel signalled the executive is prepared to step in and regulate to ensure a “common approach” on the issue of network security — to avoid the risk of EU member states taking individual actions that could delay 5G rollouts across Europe.
Huawei appeared to welcome the prospect today.
“Government and the mobile operators should work together to agree what this assurance testing and certification rating for Europe will be,” said Guo, suggesting that’s Huawei’s hope for any Commission action on 5G security.
“Let experts decide whether networks are safe or not,” he added, implying Trump is the opposite of an expert. “Huawei has a strong track record in security for three decades. Serving three billion people around the world. The U.S. security accusation of our 5G has no evidence. Nothing.”
Geopolitical tensions about network security have translated into the biggest headache for Huawei which has positioned itself as a key vendor for 5G kit right as carriers are preparing to upgrade their existing cellular networks to the next-gen flavor.
Guo claimed today that Huawei is “the first company who can deploy 5G networks at scale”, giving a pitch for what he described as “powerful, simple and intelligent” next-gen network kit, while clearly enjoying the opportunity of being able to agree with U.S. president Trump in public — that “the U.S. needs powerful, faster and smarter 5G”. 
But any competitive lead in next-gen network tech also puts the company in prime position for political blowback linked to espionage concerns related to the Chinese state’s access to data held or accessed by commercial companies.
Huawei’s strategy to counter this threat has been to come out fighting for its commercial business — and it had plenty more of that spirit on show this morning. As well as a bunch of in-jokes. Most notably a reference to NSA whistleblower Edward Snowden which drew a knowing ripple of laughter from the audience.
“We understand innovation is nothing without security,” said Guo, segwaying from making a sales pitch for Huawei’s 5G network solutions straight into the giant geopolitical security question looming over the conference.
“Prism, prism on the wall who is the most trustworthy of them all?” he said, throwing up a colorful slide to illustrate the joke. “It’s a very important question. And if you don’t ask them that you can go ask Edward Snowden.”
You can’t use “a crystal ball to manage cybersecurity”, Guo went on, dubbing it “a challenge we all share” and arguing that every player in the mobile industry has responsibility to defuse the network security issue — from kit vendors to carriers and standards bodies, as well as regulators.
“With 5G we have made a lot of progress over 4G and we can proudly say that 5G is safer than 4G. As a vendor we don’t operate carriers network, and we don’t all carry data. Our responsibility — what we promise — is that we don’t do anything bad,” he said. “We don’t do bad things.”
“Let me says this as clear as possible,” he went on, putting up another slide that literally underlined the point. “Huawei has not and will never plant backdoors. And we will never allow anyone to do so in our equipment.
“We take this responsibility very seriously.”
Guo’s pitch on network trust and security was to argue that where 5G networks are concerned security is a collective industry responsibility — which in turn means every player in the chain plays a monitoring role that allows for networks to be collectively trusted.
“Carriers are responsible for secure operations of their own networks. 5G networks are private networks. The boundary between different networks are clear. Carriers can prevent outside attacks with firewalls and security gateways. For internal threats carriers can manage, monitor and audit all vendors and partners to make sure their network elements are secure,” he said, going on to urge the industry to work together on standards which he described as “our shared responsibility”.
“To build safer networks we need to standardize cybersecurity requirements and these standards must be verifiable for all vendors and all carriers,” he said, adding that Huawei “fully supports” the work of industry standards and certification bodies the GSMA and 3GPP who he also claimed have “strong capabilities to verify 5G’s security”.
Huawei’s strategy to defuse geopolitical risk by appealing to the industry as a whole to get behind tackling the network trust issue is a smart one given the uncertainty generated by Trump’s attacks is hardly being welcomed by anyone in the mobile business.
Huawei’s headache might lead to the industry as a whole catching a cold — and no one at MWC wants that.
Later in the keynote Guo also pointed to the awkward “irony” of the U.S Cloud Act — given the legislation allows U.S. entities to “access data across borders”.
U.S. overreach on accessing the personal data of foreign citizens continues to cause major legal headaches in Europe as a result of the clash between its national security interest and EU citizens fundamental privacy rights. So Guo’s point there won’t have been lost on an MWC audience packed with European delegates attending the annual tradeshow.
“So for best technology and greater security choose Huawei. Please choose Huawei!” Guo finished, ending his keynote with a line that could very well make it as an upbeat marketing slogan writ large on one of the myriad tech-packed booths here at Fira Gran Via, Barcelona.
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Europe is prepared to rule over 5G cybersecurity
The European Commission’s digital commissioner has warned the mobile industry to expect it to act over security concerns attached to Chinese network equipment makers.
The Commission is considering a defacto ban on kit made by Chinese companies including Huawei in the face of security and espionage concerns, per Reuters.
Appearing on stage at the Mobile World Congress tradeshow in Barcelona today, Mariya Gabriel, European commissioner for digital economy and society, flagged network “cybersecurity” during her scheduled keynote, warning delegates it’s stating the obvious for her to say that “when 5G services become mission critical 5G networks need to be secure”.
Geopolitical concerns between the West and China are being accelerated and pushed to the fore as the era of 5G network upgrades approach, as well as by ongoing tensions between the U.S. and China over trade.
“I’m well away of the unrest among all of you key actors in the telecoms sectors caused by the ongoing discussions around the cybersecurity of 5G,” Gabriel continued, fleshing out the Commission’s current thinking. “Let me reassure you: The Commission takes your view very seriously. Because you need to run these systems everyday. Nobody is helped by premature decisions based on partial analysis of the facts.
“However it is also clear that Europe has to have a common approach to this challenge. And we need to bring it on the table soon. Otherwise there is a risk that fragmentation rises because of diverging decisions taken by Member States trying to protect themselves.”
“We all know that this fragmentation damages the digital single market. So therefore we are working on this important matter with priority. And to the Commission we will take steps soon,” she added.
The theme of this year’s show is “intelligent connectivity”; the notion that the incoming 5G networks will not only create links between people and (many, many more) things but understand the connections they’re making at a greater depth and resolution than has been possible before, leveraging the big data generated by many more connections to power automated decision-making in near real time, with low latency another touted 5G benefit (as well as many more connections per cell).
Futuristic scenarios being floated include connected cars neatly pulling to the sides of the road ahead of an ambulance rushing a patient to hospital — or indeed medical operations being aided and even directed remotely in real-time via 5G networks supporting high resolution real-time video streaming.
But for every touted benefit there are easy to envisage risks to network technology that’s being designed to connect everything all of the time — thereby creating a new and more powerful layer of critical infrastructure society will be relying upon.
Last fall the Australia government issued new security guidelines for 5G networks that essential block Chinese companies such as Huawei and ZTE from providing equipment to operators — justifying the move by saying that differences in the way 5G operates compared to previous network generations introduces new risks to national security.
New Zealand followed suit shortly after, saying kit from the Chinese companies posed a significant risk to national security.
While in the U.S. President Trump has made 5G network security a national security priority since 2017, and a bill was passed last fall banning Chinese companies from supplying certain components and services to government agencies.
The ban is due to take effect over two years but lawmakers have been pressuring to local carriers to drop 5G collaborations with companies such as Huawei.
In Europe the picture is so far more mixed. A UK government report last summer investigating Huawei’s broadband and mobile infrastructure raised further doubts, and last month Germany was reported to be mulling a 5G ban on the Chinese kit maker.
But more recently the two EU Member States have been reported to no longer be leaning towards a total ban — apparently believing any risk can be managed and mitigated by oversight and/or partial restrictions.
It remains to be seen how the Commission could step in to try to harmonize security actions taken by Member States around nascent 5G networks. But it appears prepared to set rules.
That said, Gabriel gave no hint of its thinking today, beyond repeating the Commission’s preferred position of less fragmentation, more harmonization to avoid collateral damage to its overarching Digital Single Market initiative — i.e. if Member States start fragmenting into a patchwork based on varying security concerns.
We’ve reached out to the Commission for further comment and will update this story with any additional context.
During the keynote she was careful to talk up the transformative potential of 5G connectivity while also saying innovation must work in lock-step with European “values”.
“Europe has to keep pace with other regions and early movers while making sure that its citizens and businesses benefit swiftly from the new infrastructures and the many applications that will be built on top of them,” she said.
“Digital is helping us and we need to reap its opportunities, mitigate its risks and make sure it is respectful of our values as much as driven by innovation. Innovation and values. Two key words. That is the vision we have delivered in terms of the defence for our citizens in Europe. Together we have decided to construct a Digital Single Market that reflects the values and principles upon which the European Union has been built.”
Her speech also focused on AI, with the commissioner highlighting various EC initiatives to invest in and support private sector investment in artificial intelligence — saying it’s targeting €20BN in “AI-directed investment” across the private and public sector by 2020, with the goal for the next decade being “to reach the same amount as an annual average” — and calling on the private sector to “contribute to ensure that Europe reaches the level of investment needed for it to become a world stage leader also in AI”.
But again she stressed the need for technology developments to be thoughtfully managed so they reflect the underlying society rather than negatively disrupting it. The goal should be what she dubbed “human-centric AI”.
“When we talk about AI and new technologies development for us Europeans it is not only about investing. It is mainly about shaping AI in a way that reflects our European values and principles. An ethical approach to AI is key to enable competitiveness — it will generate user trust and help facilitate its uptake,” she said.
“Trust is the key word. There is no other way. It is only by ensuring trustworthiness that Europe will position itself as a leader in cutting edge, secure and ethical AI. And that European citizens will enjoy AI’s benefits.”
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Google still claimed to be blocking search rivals on Android, despite Europe’s antitrust action
Mobile licensing changes made by Google this fall, when it tweaked terms for OEMs wanting to license its Android smartphone platform on devices destined for the European market, don’t appear to be offering succour to search rivals — despite being triggered by an antitrust ruling intended to reset the competitive playing field.
The European Commission found the search giant guilty of anti-competitive practices related to its Android platform this summer, slapping the company with a $5BN fine. The decision required Google cease practices judged to be illegally skewing the market and do so within 90 days.
It was the second such major EC antitrust finding against Google, after last year’s Google Shopping ruling, when the company was warned that having been found dominant in search it had a “special responsibility” to avoid breaching antitrust rules in any market it plays in.
Google disputes the Commission’s findings of competitive abuse in both cases, and has lodged legal appeals.
But the nature of competition law demands action in the meanwhile, given the threat of punitive penalties for any continued breach. So in October Google responded to the Commission’s Android ruling by updating its regional compatibility agreement to provide a route for OEMs to unbundle key services from the Android OS — rather than requiring its suite of Google apps be pre-loaded for devices to get the Play Store.
However it also incorporated licensing fees for some unbundled configurations (e.g. Android + Play Store). At the same time it said it would not charge any fee to include search or Chrome. And it said it was offering incentives for OEMs to place its eponymous, market dominating search engine (and/or browser) prominently on their devices — despite one of the behaviors the Commission judged illegal being payments Google had made to certain large manufacturers and mobile carriers to exclusively pre-install Google Search.
The Commission did not prescribe specific remedies for the anticompetitive behaviours it pegged to Android — saying it’s “Google’s sole responsibility to make sure that it changes its conduct in a way that brings the infringements to an effective end”.
Though it warned it would closely monitor the company’s conduct, noting that any finding of continued non-compliance would risk fresh fines — of up to 5% of the average daily turnover of Alphabet for each day of non-compliance.
The key word there is “effective” — in terms of what the Commission is watching for.
Meanwhile Google’s dominant position in search naturally makes it the smartphone consumer’s go-to choice — which in turn means there’s a natural incentive for device makers not to ditch Google as the search default. At least for mainstream devices.
But Google’s new European licensing terms for Android appear to be piling additional pressure on OEMs not to switch even for more experimental and/or regional device launches, according to privacy-focused search engine Qwant.
The suggestion is Google’s licensing changes have essentially blocked the launch of an Android device with Qwant search rather than Google as the default.
Pay to install
Its experience suggests Google’s initial ‘remedy’ — far from delivering an “effective end” to the competitive infringements the Commission found — is actively steering OEMs away from search alternatives and rival companies.
Qwant, a French startup, launched its non-tracking search offering back in 2013, and has been on a growth tear on its home turf in recent months — winning over high profile users in the public sector as concern has risen about Silicon Valley’s intrusive grip on user data.
The French National Assembly and the French Ministry of the Armed Forces Minister announced this fall they’d switch to Qwant instead of Google as their default.
Of course the startup is still a minnow compared to Google. But it’s growing: Qwant tracks queries rather than users (given it doesn’t track people), and it says it generated 2.6BN queries in 2016; which grew to 9BN last year; and is now on track to end this year with around 18BN queries.
“So if we think about it that means that last year we were three days of Google; this year six days of Google — not so bad!” says co-founder Eric Leandri.
“In France we have now more than 6% of the market,” he continues. “In Germany something like 2%. And we are still growing. We do growth of 20% by month for the last four months. The growth in our revenue is two digit too, by month.”
Earlier this year it had been hoping to make additional regional marketshare gains by securing a deal to be pre-loaded on Android smartphones destined for European markets. A spokesman tells us it has a framework agreement with Huawei. (The Chinese Android OEM is second only to Samsung in global marketshare terms, according to analysts.)
The Commission’s antitrust ruling opened the door to this possibility, given it banned Google from prohibiting OEMs from launching non-Google approved Android forks. So after the ruling things were looking good for Qwant, with the startup on the cusp of securing a device deal for a few European countries, as Leandri tells it.
He blames Google’s licensing changes for putting the kibosh on a launch they’d been expecting to be able to announce in November. Early that month the startup pinged us to trail forthcoming news — of “a major partnership that will allow us to accelerate in the smartphone market” — only to go silent.
A few weeks later it got in touch again to say it had had to postpone the announcement.
“We are very near to one or two deals to be by default or in the list of search engines in some Android cell phone made by a very large Asian manufacturer… Just for Europe, and just for some countries in Europe but we are talking about 10 million or 20 million of cell phones,” says Leandri now.
“And when we have won the bid against Google in October then Google start to say that in Europe you have to pay $40 for Android. So now if you install Qwant you have to pay $40 and if you install Google they give you some cash.”
“Before it was impossible to bid against Google because Google was blocking everything. Now you can — but now the solution of Google is you have to pay $40 if you don’t install Google by default with Chrome just on the bar. You know the bar that is fixed on Android. And this is again an abuse of their dominant position,” he adds.
“Because if I want, for example, 10 million smartphones, the guy has to pay $400M to Google. Do you really think they will pay $400M to Google just to install Qwant?”
Google’s rebuttal of the Commission’s antitrust finding for Android has focused on claims that its approach of free licensing combined with a bundle of Google services has generally enabled competition to thrive in the mobile app ecosystem, as well as claiming lower prices are a “classic hallmark… of robust competition”.
Yet Qwant’s experience offers a clear counterpoint, underlining how challenging it remains to try to compete with Google’s core search business when the same company also dominates the smartphone market and can just throw the levers of Android’s licensing terms to configure how much ‘appetite’ OEMs have for investing in alternative search defaults (given tiny hardware profit margins in the Android space).
After Qwant won over Huawei to building a device with its search engine in prime position, Leandri says it was Google’s changes to the licensing terms for Android that threw a spanner in the works.
“After that pressure then the manufacturer doesn’t know how to react now,” he says, confirming he believes there’s currently no chance for the device to be launched. Not without further changes to how Android operates in the market — i.e. further regulatory intervention.
“So we will work a lot with the European Commission to stop that,” he adds. “But again, again my question is why Google goes that way?”
We reached out to Google to ask about the fees it would charge an OEM wanting to launch an Android device with Google Play but without Google search as the default in Europe.
We also asked how charging a fee for Android if OEMs don’t also bundle Google services can help increase competition, per the Commission’s intention.
At the time of writing Google had not responded to our questions.
We also reached out to Huawei for comment and will update this story with any response.
Even if Qwant and Huawei get their way, and European buyers in a handful of countries are able to choose to buy an Android device with a little search localization as its differentiating out-of-the-box twist, Leandri isn’t under any illusions that a majority of consumers will still switch back to Google of their own accord — given its dominance of search.
He reckons those who’d stick with a non-Google search choice might be as low as a third or 40%.
But his point is that, as it stands, Qwant doesn’t even have the chance to try competing against the Google Goliath on its own terms. And he argues that’s simply not fair.
“Google has billions to make advertisement to ask people to switch, right. And they can even do advertisement on the Play Store for zero because they control the Play Store. Why they don’t come back to a normal market where we are all on the same line and they just compete with advertisement, with pushing their products, with a better proposition of value. It’s crazy, it’s crazy!” he says.
“They have 95% of the market, and on that market they expect that if they don’t have the search by default there then they don’t do money with the Play Store. This is bullshit. They do billions of euros with the app on the Play Store each year. With the 30% that they take on the apps. So this is not true. This is not true, sorry.
“So right now this is our goal and my main work actually is just to obtain the right to have a fair competition — a simple, fair competition.”
“I don’t want to dismantle Google. I don’t want Google to be fined 10BN. I don’t care. The only thing I want is to have the right to have a fair competition,” he adds.
We asked the European Commission to respond to Qwant’s experience, and for an update on its monitoring of Google’s compliance with the Android antitrust ruling.
A spokeswoman declined to comment on an individual case but we understand the Commission has been sending questionnaires to market players as part of its compliance monitoring.
It’s clear the regulator’s intention with the Android decision was to expand consumer choice by creating opportunities for competition that didn’t exist before — including for rival search and browser providers to be able to compete on the merits with Google when it comes to pre-loading their products on Android devices.
So if the Commission’s monitoring efforts confirm instances where competition is being blocked, as appears the case here with Qwant, further interventions will surely follow.
Leandri also points out that Google made much the same arguments vis-a-vis ‘fair competition’ more than a decade ago — when it called for the then computing incumbent, Microsoft, not to stand in the way of Internet upstarts by bundling MSN search into its Internet Explorer web browser.
“The market favors open choice for search, and companies should compete for users based on the quality of their search services,” said Marissa Mayer in 2006, then Google’s vice president for search products. “We don’t think it’s right for Microsoft to just set the default to MSN. We believe users should choose.”
“I totally agree with what they say in 2006! Just exchange Microsoft for Google and that’s it!” he says now, adding: “We have to fight because there is not a lot of other way. But I stop fighting tomorrow as soon as I have a fair competition.
“I’m not waiting for the Commission to make the competition. Right now the percentage of growth that I have in France it’s not based on the Commission who has won or not. It’s based on our value proposition.”
Leandri is also president of the Open Internet Project, a European organization whose members lobby for regulatory action to rein in what they view as Google’s abusive dominance of digital markets, and which was also involved in the Google Shopping complaints — though he points out that in the Android case three of the five complainants are American.
“We are the only European. So the problem is not only for a small startup in Europe. Who, y’know, complained because ‘Google is so cool’. And we are so dumb. And so ridiculous. But the problem is for Oracle, it’s for the Fair Search. It’s not for kids.”
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Google files appeal against Europe’s $5BN antitrust fine for Android
Google has lodged its legal appeal against the European Commission’s €4.34 billion (~$5BN) antitrust ruling against its Android mobile OS, according to Reuters — the first step in a process that could keep its lawyers busy for years to come.
“We have now filed our appeal of the EC’s Android decision at the General Court of the EU,” it told the news agency, via email.
We’ve reached out to Google for comment on the appeals process.
Rulings made by the EU’s General Court in Luxembourg can be appealed to the top court, the Court of Justice of the European Union, but only on points of law.
Europe’s competition commissioner, Margrethe Vestager, announced the record-breaking antitrust penalty for Android in July, following more than two years of investigation of the company’s practices around its smartphone operating system.
Vestager said Google had abused the regional dominance of its smartphone platform by requiring that manufacturers pre-install other Google apps as a condition for being able to license the Play Store.
She also found the company had made payments to some manufacturers and mobile network operators in exchange for them exclusively pre-installing Google Search on their devices, and used Google Play licensing to prevent manufacturers from selling devices based on Android forks — which would not have to include Google services and, in Vestager’s view, “could have provided a platform for rival search engines as well as other app developers to thrive”.
Google rejected the Commission’s findings and said it would appeal.
In a blog post at the time, Google CEO Sundar Pichai argued the contrary — claiming the Android ecosystem has “created more choice, not less” for consumers, and saying the Commission ruling “ignores the new breadth of choice and clear evidence about how people use their phones today”.
According to Reuters the company reiterated its earlier arguments in reference to the appeal.
A spokesperson for the EC told us simply: “The Commission will defend its decision in Court.”
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Europe updates its predatory pricing investigation against Qualcomm over UMTS baseband chips
On the heels of Google getting served a $5 billion fine by the EU over monopolistic practices related to its Android operating system, the European Commission today resurfaced another ongoing case in the world of large U.S. tech companies. The EC said that it has added to its investigation into Qualcomm and its predatory pricing of UMTS baseband chips. Specifically, today the Commission has sent more details relating to elements of the “price cost” test that it had applied to measure just how much below cost Qualcomm was selling UMTS baseband chips to edge out competitors.
If the case is decided against Qualcomm, the company could face an additional fine of up to 10 percent of its worldwide revenues. In 2009, these were $10.4 billion, while in 2017, global turnover was over $22 billion.
The original, 2015 case was based on a complaint filed by Icera — once a big player in baseband chips — and dates back to practices between 2009 and 2011 and alleged that Qualcomm used its market position to negotiate artificially low prices for UMTS chips — used in 3G phones — in order to oust out Icera. Others that made similar chips include Nvidia.
Qualcomm has wasted little time in responding to the notice posted by the EC.
“This investigation, now in its ninth year, alleges harm in 2009-2011, to a competitor who chose years later to exit the market for reasons unrelated to Qualcomm,” said Don Rosenberg, general counsel and executive vice president of Qualcomm in a statement. “While the investigation has been narrowed, we are disappointed to see it continues and will immediately begin preparing our response to this supplementary statement of objections. We belief that once the Commission has reviewed our response it will find that Qualcomm’s practices are pro-competitive and fully consistent with European competition rules.”
Qualcomm is already in the middle of appealing a $1.23 billion fine in the EU over LTE chip dominance in the iPhone, related to deals that were made with Apple at the expense of another big rival of Qualcomm’s, Intel. (Never mind that Apple and Qualcomm are also in the middle of a patent dispute.)
This older case, as Qualcomm points out, has been narrowed since it was first announced almost exactly three years ago. And while we don’t know what the exact details of the supplementary objections are and whether they have expanded them again (we have contacted the EC to try to find out), the Commission also notes in its short statement — printed in full below — that sending an update to its calculations doesn’t necessarily imply the outcome of this case.
Statement below.
The European Commission has sent a Supplementary Statement of Objections to Qualcomm Inc. This is a procedural step in the Commission’s ongoing investigation under EU antitrust rules looking into whether Qualcomm engaged in ‘predatory pricing’. The Commission sent a Statement of Objections to Qualcomm in December 2015 detailing its concerns. In particular, the Commission’s preliminary view is that between 2009 and 2011 Qualcomm sold certain UMTS baseband chipsets at prices below cost, with the intention of eliminating Icera, its main competitor in the leading edge segment of the market at that time. UMTS chipsets are key components of mobile devices. They enable both voice and data transmission in third generation (3G) cellular communication. The Supplementary Statement of Objections sent today focuses on certain elements of the “price-cost” test applied by the Commission to assess the extent to which UMTS baseband chipsets were sold by Qualcomm at prices below cost. The sending of a Supplementary Statement of Objections does not prejudge the outcome of the investigation. More information is available on the Commission’s competition website, in the public case register under the case number AT.39711.
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