Monthly Archives: February 2021

Innovation can be instrumental to the success of economies, at macro and micro scales. While investment provides powerful fuel for innovationthe relationship isnt always straightforward.

The 2020 ranking from the World Intellectual Property Organization (WIPO) reveals just that.

The above map breaks down the most innovative countries in each World Bank income group, based on data from WIPOs Global Innovation Index (GII), which evaluates nations across 80 innovation indicators like research and development (R&D), venture capital, and high-tech production.

While wealthier nations continue to lead global innovation, the GII also shows that middle-income countriesparticularly in Asiaare making impressive strides.

The economic and regulatory spheres within countries can have an enormous impact on their level of innovationand vice versa, as innovation in turn becomes an economic driver, stimulating further investment.

The positive feedback loop between investment and innovation results in the success of some of the top countries in the table below, which shows the three most innovative countries in each income group.

Switzerland, Sweden, and the U.S. are the top three in the high-income group. Considering that Switzerland has the second-highest GDP per capita globally, it is not a surprise leader on this list.

Upper middle-income countries are led by China, Malaysia, and Bulgaria. Note that China far surpasses other nations in the upper-middle-income group ranking, reaching 14th spot overall in 2020. Others in the income group only appear in the overall ranking after 30th place.

Below are several income group leaders, and some of their key areas of output:

Since 2011, Switzerland has led the world in innovation according to this index, and the top five countries have seen few changes in recent years.

Sweden regained second place in 2019 and the U.S. moved into thirdpositions they maintain in 2020. The Netherlands entered the top two in 2018 and now sits at fifth.

Heres how the overall ranking shakes out:

Nordic countries like Sweden, Denmark, and Finland continue their strong showing across innovation factorslike Knowledge Creation, Global Brand Value, Environmental Performance, and Intellectual Property Receiptsleading to their continued presence atop global innovators.

But the nations making the biggest moves in GII ranking are found in Asia.

China, Vietnam, India, and the Philippines have risen the most of all countries, with all four now in the top 50. China broke into the top 15 in 2019 and remains the only middle-income economy in the top 30.

In 2020, South Korea became the second Asian economy to enter the top 10, after Singapore. As the first Asian country to move into the global top five, Singapore joined the leaders in 2018, and now sits at 8th place.

In another first for 2020, India has now broken into the top 50.

While annual rankings like these confirm the importance of a robust economy and innovation investment, variations in the relationship between input and output are not uncommon.

The correlation between wealth and innovation isnt always straightforward, and neither is the connection between innovation input and output.

Below is an overview of the GII inputs and outputs, as well as several of the worlds overall leaders in each pillar.

Input variables can be characterized as factors that foster innovationeverything from the quality of a countrys university institutions to its levels of ecological sustainability.

Output factors include innovation indicators like the creation of new businesses, and even the number of Wikipedia edits made per million people.

Countries with impressive innovation outputs compared to input levels include:

Although financial markets have ignited, the economy as a whole has not fared well since lockdowns began. This begs the question of whether a steep decline in innovation capital will follow.

In response to the 2020 pandemic, will spending on R&D echo the 2009 recession and aftermath of 9/11? Will venture capital flows continue to decline more than they have since 2018?

Because innovation is so entwined with the economic growth strategies of companies and nations alike, the WIPO notes that the potential decline may not be as severe as historical trends might suggest.

Thankfully, innovation opportunities are not solely contingent on the level of capital infused during any given year. Instead, the cumulative results of continuous innovation stimuli may be enough to maintain growth, while strategic cash reserves are put to use.

What the GII ranking shows is that inputs dont always equal outputsand that innovative strides can be made with even modest levels of capital flow.

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Infographic: How the Tech Giants Make Their Billions

Innovation can be instrumental to the success of economies, at macro and micro scales. While investment provides powerful fuel for innovationthe relationship isnt always straightforward.

The 2020 ranking from the World Intellectual Property Organization (WIPO) reveals just that.

The above map breaks down the most innovative countries in each World Bank income group, based on data from WIPOs Global Innovation Index (GII), which evaluates nations across 80 innovation indicators like research and development (R&D), venture capital, and high-tech production.

While wealthier nations continue to lead global innovation, the GII also shows that middle-income countriesparticularly in Asiaare making impressive strides.

The economic and regulatory spheres within countries can have an enormous impact on their level of innovationand vice versa, as innovation in turn becomes an economic driver, stimulating further investment.

The positive feedback loop between investment and innovation results in the success of some of the top countries in the table below, which shows the three most innovative countries in each income group.

Switzerland, Sweden, and the U.S. are the top three in the high-income group. Considering that Switzerland has the second-highest GDP per capita globally, it is not a surprise leader on this list.

Upper middle-income countries are led by China, Malaysia, and Bulgaria. Note that China far surpasses other nations in the upper-middle-income group ranking, reaching 14th spot overall in 2020. Others in the income group only appear in the overall ranking after 30th place.

Below are several income group leaders, and some of their key areas of output:

Since 2011, Switzerland has led the world in innovation according to this index, and the top five countries have seen few changes in recent years.

Sweden regained second place in 2019 and the U.S. moved into thirdpositions they maintain in 2020. The Netherlands entered the top two in 2018 and now sits at fifth.

Heres how the overall ranking shakes out:

Nordic countries like Sweden, Denmark, and Finland continue their strong showing across innovation factorslike Knowledge Creation, Global Brand Value, Environmental Performance, and Intellectual Property Receiptsleading to their continued presence atop global innovators.

But the nations making the biggest moves in GII ranking are found in Asia.

China, Vietnam, India, and the Philippines have risen the most of all countries, with all four now in the top 50. China broke into the top 15 in 2019 and remains the only middle-income economy in the top 30.

In 2020, South Korea became the second Asian economy to enter the top 10, after Singapore. As the first Asian country to move into the global top five, Singapore joined the leaders in 2018, and now sits at 8th place.

In another first for 2020, India has now broken into the top 50.

While annual rankings like these confirm the importance of a robust economy and innovation investment, variations in the relationship between input and output are not uncommon.

The correlation between wealth and innovation isnt always straightforward, and neither is the connection between innovation input and output.

Below is an overview of the GII inputs and outputs, as well as several of the worlds overall leaders in each pillar.

Input variables can be characterized as factors that foster innovationeverything from the quality of a countrys university institutions to its levels of ecological sustainability.

Output factors include innovation indicators like the creation of new businesses, and even the number of Wikipedia edits made per million people.

Countries with impressive innovation outputs compared to input levels include:

Although financial markets have ignited, the economy as a whole has not fared well since lockdowns began. This begs the question of whether a steep decline in innovation capital will follow.

In response to the 2020 pandemic, will spending on R&D echo the 2009 recession and aftermath of 9/11? Will venture capital flows continue to decline more than they have since 2018?

Because innovation is so entwined with the economic growth strategies of companies and nations alike, the WIPO notes that the potential decline may not be as severe as historical trends might suggest.

Thankfully, innovation opportunities are not solely contingent on the level of capital infused during any given year. Instead, the cumulative results of continuous innovation stimuli may be enough to maintain growth, while strategic cash reserves are put to use.

What the GII ranking shows is that inputs dont always equal outputsand that innovative strides can be made with even modest levels of capital flow.

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Chart: Visualizing The World's 20 Largest Tech Giants

Updated: Jan. 12, 2021, 7:40 p.m.

The technology sector is vast, comprising gadget makers, software developers, wireless providers, streaming services, semiconductor companies, and cloud computing providers, to name a few. Any company that sells a product or service heavily infused with technology likely belongs to the tech sector.

Software companies are increasingly moving to a software-as-a-service model, wherein customers buy a subscription to a program instead of a one-time license. This generates recurring revenue for the software company.

Powering all that hardware are semiconductor chips. Semiconductor companies design and/or manufacture central processing units, graphics processing units, memory chips, and a wide variety of other chips that find their way into todays devices.

Telecom companies that provide wireless services are part of the tech sector. So are the video streaming companies that provide easy access to high-quality content; and so are the cloud computing providers that power those streaming services.

These design and build devices such as:

These design the software that runs on hardware, such as.

Many of the most valuable companies in the world are technology companies. These are some of the most dominant and impressive tech stocks.

Facebook, Amazon, Apple, Netflix, and Alphabet (Google) are sometimes grouped together as the FAANG stocks. These companies dominate their industries, and their stocks have produced impressive returns over the past few years.

The five tech giants that make up a significant amount of the S&P 500 Index.

More companies are using artificial intelligence technology to leverage computers' ability to mimic human learning.

The Internet of Things is the growing collection of everyday objects connected to the internet.

The companies that design and manufacture computer chips along with other core tech components.

The pandemic has been a mixed bag for the tech industry. Amazon has thrived as consumers have shifted hard toward e-commerce, with higher sales easily offsetting additional pandemic-related costs. Microsoft has also done well, buoyed by demand for collaboration software, devices, gaming, and cloud computing services as people spend more time at home.

Apple held its own during the early days of this crisis, partly thanks to economic stimulus measures passed by Congress and partly thanks to the launch of the affordable iPhone SE. Apples pricey devices were in demand early in the pandemic despite a highly uncertain economic environment, although the delayed launch of the iPhone 12 family due to supply chain disruptions eventually hurt iPhone sales. The iPhone 12 features 5G technology, but a weak economy could hamper sales as the pandemic drags on.

High demand for devices has helped Intel as well, with sales of laptops surging as people work from home. Intels data center business is another beneficiary, with customers snapping up powerful server chips to support cloud services. Semiconductor stocks have done well during the pandemic as demand has soared for various types of chips.

Intel rival Advanced Micro Devices (NASDAQ:AMD) has also been thriving. AMDs latest Ryzen 5000 PC chips outclass comparable chips from Intel across nearly every metric, which will almost certainly lead to more market share losses for Intel.

Cisco hasnt been so lucky. While the companys videoconferencing business is booming, the core networking hardware business has suffered as customers pull back on spending. While the pandemic is hurting Cisco in the short term, the shifts toward e-commerce and working from home could ultimately boost demand for networking equipment in the long run. The internet of things should also be a long-term growth driver for Cisco as an increasing number of objects and devices are connected to the internet.

Netflix has seen its user base grow rapidly during the pandemic as people stay home. The company had to temporarily pause production of all shows, but that didnt stop people from signing up for the service. While the pandemic has helped Netflix, it also drove incredible growth for Disneys (NYSE:DIS) Disney+ streaming service. Disney+ attracted more than 86 million subscribers in only its first year of operation, and the company could eventually overtake Netflix thanks to its vast catalog of content and its new streaming-centric strategy.

Both Facebook and Alphabet depend on advertising sales, so the steep decline in advertising from hard-hit industries like travel hurt both companies. Facebook held up better, managing to grow advertising sales during the worst of the pandemic. Alphabet suffered a small revenue decline, the first in its history.

Both Facebook and Alphabet are now facing antitrust lawsuits in the U.S. The Justice Department along with 11 state attorneys general sued Alphabets Google in October, accusing the company of anticompetitive behavior related to its search advertising business.

Facebook was sued in December by both the Federal Trade Commission and 46 state attorneys general. The suits allege that the social media giant used acquisitions to eliminate competitive threats. The FTC is looking to force Facebook to divest Instagram and WhatsApp.

Only time will tell how the long-term trajectories of these major tech companies have been altered by the pandemic, as well as by increasing antitrust scrutiny from the U.S. government.

For mature tech companies that produce profits, the price-to-earnings ratio is a useful metric. Divide stock price by per-share earnings and you get a multiple that tells you how highly the market values the companys current earnings. The higher the multiple, the more value the market is placing on future earnings growth.

Many tech companies arent profitable; the price-to-earnings ratio cant evaluate them. Revenue growth matters more for these younger companies if youre investing in something unproven, you want to make sure it has solid growth prospects.

For unprofitable tech companies, its also important that the bottom line be moving from losses toward profits. As a company grows, it should become more efficient, especially when it comes to the sales and marketing spending necessary to close deals. If its not, or if spending is growing as a percentage of revenue, that could indicate that something is wrong.

Ultimately, a good tech stock is one that trades at a reasonable valuation given its growth prospects. Accurately figuring out those growth prospects is the hard part. If you expect earnings to skyrocket in the coming years, paying a premium for the stock can make sense. But if youre wrong about those growth prospects, your investment may not work out.

Investing in tech stocks can be risky, but you can reduce your risk by investing only when you feel confident that their growth prospects justify their valuations.

DISCA earnings call for the period ending December 31, 2020.

Motley Fool Transcribers | Feb 22, 2021

Investors are questioning if these companies can maintain their growth rates in a post-pandemic world.

Evan Niu, CFA | Feb 22, 2021

The cybersecurity specialist gets a vote of confidence from JMP Securities, but tech stocks are under pressure.

Evan Niu, CFA | Feb 22, 2021

The sudden departure of its Chief Revenue Officer fueled doubts about the cloud stock.

Jeremy Bowman | Feb 22, 2021

There are still years to go before the next generation of wireless communication technology arrives.

Rich Duprey | Feb 22, 2021

SPAC fever has swept the market. Before you buy, there are a few things you need to know.

Nicholas Rossolillo | Feb 22, 2021

The latest iPhone family is a big hit, and tailwinds from 5G are just getting started.

Keith Noonan | Feb 22, 2021

The gaming-platform maker's public offering has been delayed twice and reshaped from an IPO to a direct sale.

Anders Bylund | Feb 22, 2021

The "Netflix of China" is facing headwinds in scaling its business.

Lawrence Nga | Feb 22, 2021

Finding quality stocks trading for less than a Happy Meal isn't easy, but it's worth the exercise for risk-tolerant investors right now.

Rick Munarriz | Feb 22, 2021

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Best Tech Stocks to Buy in 2021 | The Motley Fool

Parler interim CEO Mark Parler Interim CEO Mark Meckle expects to be back in the App Store pretty shortly after being offline for more than a month.

Billionaire Elon Musk tweeted Friday in support of the successful landing of NASA's Perseverance Mars rover.

Facebook announced on Thursday that it would ramp up its efforts to counter misinformation about climate change.

Two child trafficking survivors have filed a lawsuit against porn company MindGeek and its popular adult video-sharing website, Pornhub.

For two decades, global news outlets have complained internet companies are getting rich at their expense, selling advertising linked to their reports without sharing revenue.

The White House has also tasked U.S. embassies to identify how foreign countries and companies that produce chips can help resolve the global shortage

Facebook Inc. said it would restrict publishers and users in Australia from viewing or sharing news articles, ramping up a standoff with the government there over a proposal that would force tech companies to pay newspapers for content.

News Corp announced Wednesday that it has agreed to a multi-year partnership with Google a move the company said would yield substantial benefits for journalism and society.

Fortnite creator Epic Gameshas taken its fight against Appleto European Union antitrust regulators, ramping up its dispute with the iPhone maker over its App Store payment system and control over app downloads.

Oracle is asking the Supreme Court to take another look at its challenge of the massive, controversial Pentagon war cloud contract, which was awarded to Microsoft in 2019 amid much fanfare.

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Technology | Fox Business

(Jacquelyn Martin | AP file photo) Then-Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights Chair Sen. Mike Lee, R-Utah, speaks during a hearing to examine whether Google harmed competition in online advertising on Sept. 15, 2020.

| Feb. 16, 2021, 7:31 p.m.

We now see forming before our very eyes a world in which the massive tech companies that facilitate so much of our daily lives are no longer content simply to profit off of us, he said. They want also to control what information we are allowed to access.

That was part of a statement he issued Tuesday as he became the ranking Republican of the Senate Judiciary Antitrust Committee, a step down from his past role as chairman when Republicans controlled the Senate. His party lost control after the last election.

However, Lee said that with a current 50-50 split in the Senate with Vice President Kamala Harris breaking any tie votes any effort to reform or update our antitrust laws will need to be a bipartisan effort with buy-in from both sides.

So, he said he foresees himself still playing a leading role as antitrust law and policy continues to grab headlines and there appears to be a broad consensus that the status quo isnt working.

And with that power, he says he will continue to target big tech.

He asserted that the actions of Big Tech continue to divide the nation, undermine fundamental liberties, and distort the market. The Silicon Valley fairy tale of innovation and technological progress sold to Americans has turned into a corporatist nightmare of censorship and hypocrisy.

The responses received from the tech companies about bias against conservatives at their firms were completely unpersuasive, Lee said at the time. I continue to be concerned about the ideological discrimination going on at these firms and I believe further oversight will be necessary in order to obtain the facts and answers that the American people deserve.

Still, Lee said on Tuesday he remains worried about what he calls the soft totalitarianism of a corporate state.

He said, It is not the governments monopoly on force that todays left uses to punish wrong think, but the economic monopolies of multinational corporations.

Lee asserted that antitrust enforcers were asleep at the wheel while Silicon Valley transformed from a center of innovation into a center of acquisition. Instead of competing to be the next Google, Apple, Facebook or Amazon, todays tech startups are pushed by their private-equity backers to sell out to Google, Apple, Facebook or Amazon.

He called for Congress to use its investigative and oversight functions to examine that and look at the health of competition throughout the economy.

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Sen. Mike Lee renews vow to target tech giants he says are biased against concervatives. - Salt Lake Tribune

GeekWire Illustration

When Jeff Bezos named e-commerce software company Shopify as an example of Amazons growing competition in his testimony to a U.S. House antitrust subcommittee last year, e-commerce consultant and former Amazon seller Jason Boyce wasnt buying it. It struck Boyce then as a calculated claim, a false equivalency to get regulators to back off by overstating Amazons competitive threats.

When he brought it up, Im like, this is a joke, Boyce recalls. Shopify doesnt have a front door. Theyre not a marketplace. They have a small percentage of the total online market.

This weeks news convinced him otherwise.

Amazons acquisition of Selz, a 7-year-old startup that helps entrepreneurs sell products online, signals its ambitions to go beyond its own e-commerce platform to help power standalone third-party retail sites, moving into a new area of online commerce and going head-to-head with the likes of Shopify and BigCommerce.

The implications for Amazon and the broader retail economy are immense.

They want to capture a greater and greater share of the internet itself, Boyce says. They are moving full-steam ahead towards further and greater world domination. Thats what we can read into this latest headline.

Boyce is our guest commentator on this episode of the GeekWire Podcast. Hes the co-founder and CEO of Avenue7Media, and the co-author of The Amazon Jungle: The Sellers Survival Guide for Thriving on the Worlds Most Perilous E-Commerce Marketplace. A former U.S. Marine, he was an Amazon seller for 17 years, before finally giving up after Amazon repeatedly launched products that competed with his, as detailed in the House Judiciary Committees antitrust subcommittee report last year (page 279).

Listen to the episode above, or subscribe to GeekWire in any podcast app, and continue reading for key takeaways.

How Amazon and Shopify stacked up historically: Up to this point, it was hard a stretch to Shopify and Amazon as direct competitors.

Whats different now:Shopifys growth and Amazons ambitions are putting the companies on a collision course.

Amazon tech in physical retail stores: Amazon isnt just involved in online commerce; the company operates its own physical stores. Shopifys platform already extends to point-of-sale terminals for merchants with physical stores. Its not a stretch to imagine Amazon ultimately extending its own technology into third-party physical retail stores, perhaps with a more comprehensive solution, including the technology that powers its Amazon Go cashier-less grocery and convenience stores

What this means for retailers: The ability to run a standalone e-commerce site, while leveraging Amazons fulfillment infrastructure and advertising infrastructure, will no doubt be enticing to many retailers. But its a double-edged sword. Amazon maintains that it doesnt use individual seller data to inform its own product decisions, but based on his own experience as a seller, Boyce advises caution in giving the company even more data, competitive insights, and market power.

Big picture: Amazon has put themselves into this position of judge, jury and executioner for literally the livelihood of millions of small businesses, and it needs to be held accountable, especially as it extends its reach, Boyce says.

Amazon wouldnt be what it is today without the hard work, the grit, the capital, the product knowledge of the third party seller, of which there are millions, and there will be millions more, he says. The sellers deserve a seat at the table.

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Amazon vs. Shopify: What the tech giants latest deal says about its larger retail ambitions - GeekWire

Big tech companies have a lot of potential to change the messy healthcare industry, and they're trying.

Whether it's funding startups, building wearables, or powering research on the cloud, giants like Amazon, Google, and Microsoft are already making their mark. And the coronavirus pandemic has made digital tools more important than ever before.

But this group of companies, for all its cash and resources, has seen a lot of mishaps and failures while establishing meaningful businesses in the industry they'd like to disrupt.

Most recently, Haven, a joint health venture between Amazon, JPMorgan, and Berkshire Hathaway, disbanded after just three years of largely aimless projects. Alphabet's Verily has been known to butt heads with Google Health. Amazon's primary care business is being pressured internally to scale nationally in 2021.

Insider spoke to more than a dozen tech employees, healthcare executives, analysts, and investors to find out why these otherwise well-oiled machines can come up short in this particular industry. They pointed to common, internal problems in the way big tech sets up and funds healthcare bets.

For one, the healthcare teams have to maintain corporate goodwill even while their projects can bring scrutiny to the mothership.

All the while they're racing the clock to prove they can generate revenue and coordinate resources across a company that's not primarily designed to solve healthcare problems.

Subscribe to Insider to read the full story:

Are you a tech insider with more to share?Contact Blake Dodge via encrypted email (dodgeblake@protonmail.com) or on the encrypted messaging app Signal (1-252-241-3117).

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Big tech is struggling to upend healthcare. The wounds are usually self-inflicted. - Business Insider

The COVID-19 pandemic has demonstrated the extent to which we all rely on the internet in our day-to-day lives. Its also highlighted the unfortunate fact that many Canadians in remote northern communities cannot depend on reliable internet for essential tasks such as downloading homework or conducting business meetings by video, or for leisure activities like watching Netflix and keeping up with friends on Facebook.

There is, in short, a deep digital divide between remote communities and the rest of the country.

Historically, network service providers have been the primary stakeholders tasked with ensuring that Canadians are well-connected. However, service providers have so far struggled to provide adequate internet service to remote communities, and it is only getting more difficult with the increasing requirements and complexities of modern web content and applications.

To solve this problem, we argue that other technical stakeholders, including major content providers and application developers like Netflix, YouTube and Facebook, must now lend a hand as well.

To understand why remote communities pose a unique challenge to network service providers, its important to understand how these communities get online. Due to their isolation, remote communities depend on satellite to access the internet and other telecommunication services. In most of the country, network links are largely built alongside pre-existing, wired TV and telephone infrastructure.

Satellite-based internet connections have several challenges that limit their performance relative to wired connections.

First, satellite connections have very high latency (the time it takes for an individual data packet to travel between the two end points of a connection) due to the distance at which a satellite orbits the Earth.

Next, due to costs, they have limited bandwidth, restricting the amount of data that can be sent over a given instance.

Lastly, the bandwidth must be shared by all users served by the same satellite. These limitations result in slow website load times and low quality video streams, making for an overall inconsistent and frustrating online experience.

Bridging the digital divide is about providing remote users with the same quality of experience as users elsewhere, despite satellite limitations.

To accomplish this, service providers can try to add more bandwidth to the satellite link, but bandwidth is very costly and limited. They can also use shared web caches so that when users download content it can be saved in the community, allowing future users who request the same content to access it locally instead of via the satellite link.

Read more: Building back better, during and after COVID-19, with faster broadband

Additionally, service providers can use specific protocols on the satellite link to better manage latency and data rates.

Why, then, are large content providers and app developers needed to help?

First, there is a trend towards richer web content and more complex applications, such as high-resolution multimedia and advertisements, which demand more and more bandwidth. Second, websites and apps are increasingly adopting deeper levels of encryption to hide not only private user data, but connection-related data as well, making it impossible for service providers to use caches and specific protocols on the satellite link.

That all means major content providers and app developers, which dominate internet traffic today, have direct influence over how successfully service providers can manage their networks and improve service to remote users.

If the digital divide is to be successfully bridged, content providers and application developers must deliver content to remote communities differently than they do elsewhere.

They should continue providing rich content to users as long as its useful, but make connections lighter weight by foregoing unnecessary data that wastes bandwidth. This includes a lot of advertisements, which have questionable relevance to individuals in hard-to-reach locations.

They should also scale back deep encryption that prevents service providers from employing caches and specific protocols. Encryption is still necessary to protect users, but it must not be too deep for service providers to continue relying on the tools theyve conventionally used to efficiently manage the satellite link.

Some content and application providers may be motivated to adopt this approach out of goodwill indeed, both YouTube and Facebook have previously adopted lightweight approaches in some developing regions of the world. Nonetheless, we cannot rely on their good will alone since it may conflict with their business interests.

For this reason, its time to create a special remote status for communities with unique connectivity challenges. This status could be controlled by the United Nations International Telecommunication Union, and content providers and application developers could be mandated by governments to recognize remote communities and help them accordingly. The UN, after all, declared internet access a human right five years ago.

Its realistic to expect that large content providers and application developers would be receptive to this proposal. Theyve willingly helped developing regions in the past, and they would only have to change their practices for the most disadvantaged communities meaning its a win-win for both big tech giants and citizens alike.

Here is the original post:

Tech giants need to step up to help close Canada's digital divide - The Conversation CA

Britain's regulatory response to the digital economy needs to focus on network monopolies, which charge nothing upfront, but harvest and use customer data to make money instead. That's the view of John Penrose MP, who was invited by the government in September 2020 to conduct an independent review of UK competition policy and has today published his findings.

Penrose's report - entitled Power to the people' - warns that the UK's new regulatory digital unit should have its powers ring-fenced tightly, so as to prevent regulatory creep, which could impact every digital sector of the economy.

It is advising that the the new unit, which is set to sit within the Competition and Markets Authority (CMA), be called the Network & Data Monopolies Unit (NDMU) and only apply to individual firms that own and run new network and data mopolies, rather than the rest of the sector in which they work.

The government said that it will respond to the report's recommendations, with Business Secretary Kwasi Kwarteng stating:

The UK's competition laws and institutions are highly regarded across the globe, however as we build back better from the pandemic and start life as an independent trading nation, we have a golden opportunity to strengthen that reputation.

I want to thank John Penrose for his hard work on this independent report, which considers how the UK's competition regime can promote productivity, reward and encourage innovation and, most importantly, get consumers a better deal.

We will consider John's recommendations and respond in due course.

The discourse around monopolies forming online is well known. The opportunity for technology giants - such as Apple, Google, Facebook - to create network effects (where people gravitate towards a platform that is used by everyone else) and then use data to build dominant positions, has been discussed for the best part of a decade.

This is coupled with the fact that these platforms typically have high fixed costs and low marginal costs, giving them huge economies of scale, making them far more profitable than their smaller rivals. Development times are much quicker as a result, as is the ability to acquire any smaller competition.

All of this equates to a harsh environment for new entrants.

Penrose highlights a couple of examples of how these problems can erode competition and consumer power too. They include:

How Google paid Apple approximately 1.2 billion in 2019 to be the default search engine in Safari in the UK alone, as holding this default buys it significant market share.

Limiting interoperability between market-leading incumbent firms or products and their rivals (for example Android and Apple) makes it harder or more expensive for customers to switch easily between rivals, or for challenger firms to make their products and services easily accessible for many customers either.

The report outlines how these restrictions have a real and detrimental effect on consumers. For example, free' products and services offered by these monopolies' typically come with a price of some form, usually in the form of consumers exchanging their data. Penrose notes that it is impossible for anyone to know the price we are paying for these products, if we don't know the value of the data we're signing away.

This means that it's impossible to know if we are being ripped off or getting a bargain, or to compare it to a rival offer which might be better.

Switching is also harder for consumers if services are less interoperable. This could also mean that firms take their users for granted, because they know it will be hard to move profiles and data to a new or rival service.

The result? A distinct lack of competition and choice. The report states:

The monopolies and barriers to entry mean innovative new companies can't get a look in. While the early years of the internet saw dynamic competition with new and better products and services launching all the time, things are now much slower.

The major players have remained largely the same for the last decade, and their products have changed at a much lower pace. Potentially-exciting new challenger products and services are being blocked or throttled, so consumers have less choice than in the past.

As noted above, Britain is creating a new digital markets unit that will be created within the CMA, with powers to create extra-strong upfront regulations to deal with competition in digital markets. Penrose argues that this is "exactly the right thing to do", as every sector is digitising and new entrepreneurial firms could emerge to create new digital network monopolies at any time.

However, the new unit also poses a threat that needs to be avoided too, he adds. Penrose writes:

It will have modern versions of the same extra-strong upfront powers as long-established sector regulators like Ofwat, Ofcom and Ofgem. Because these upfront powers are so strong, and usually quicker and easier to use than normal competition and consumer laws as well, the temptation for any regulator is to use them more and more, and the workaday competition and consumer ones less and less.

So upfront powers are a headily-addictive drug for regulators to use, but they come with a high cost because they add far more red tape costs and regulatory burdens than traditional competition and consumer powers too. As a result, upfront powers create a high risk of regulatory creep' which adds red tape costs steadily over time; the huge growth in cost, time and complexity of price control decisions in the long-established sector regulators over the last 30 years shows what can happen.

As such, the new digital unit - which Penrose argues should be dubbed the NDMU, as highlighted above - should have its extra-strong upfront powers tightly ring-fenced, in order to prevent this regulatory creed. Otherwise there is a risk that they could spread to cover every digital sector of the economy.

NDMU should focus on individual firms that own and run network and data monopolies, rather than to the rest of the sector in which they work, and only apply to problems which CMA's existing competition and consumer powers can't solve already.

It's an important time for the UK to be considering this work. The pandemic and Brexit have created a distinctly challenging environment for the British economy. Balancing the desire to have these internet monopolies invest in the UK, whilst creating a competitive environment that allows for British entrants to thrive is not easy. However, there are standards that Penrose addresses that can help consumers. For example, helping consumers understand where their data is and what it is worth to these companies, for starters. Equally, regulating for the interoperability of these services, to allow for easy switching (as has been done with banking), should bolster competition in the market. None of this will be a quick fix, however, and there will be an ongoing battle of wills (and power) for years to come.

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UKs digital competition unit should focus on tech giants that own and run network and data monopolies - Diginomica