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Trump’s Huawei ban also causing tech shocks in Europe

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The escalating U.S.-China trade war that’s seen Chinese tech giant Huawei slapped on a U.S. trade blacklist is causing ripples of shock across Europe too, as restrictions imposed on U.S. companies hit regional suppliers concerned they could face U.S. restrictions if they don’t ditch Huawei.

Reuters reports shares fell sharply today in three European chipmakers — Infineon Technologies, AMS and STMicroelectronics — after reports suggested some already had, or were about to, halt shipments to Huawei following the executive order barring U.S. firms from trading with the Chinese tech giant.

The interconnectedness of high-tech supply chains coupled with U.S. dominance of the sector and Huawei’s strong regional position as a supplier of cellular, IT and network kit in Europe suddenly makes political risk a fast-accelerating threat for EU technology companies, large and small.

On the small side is French startup Qwant, which competes with Google by offering a pro-privacy search engine. In recent months it has been hoping to leverage a European antitrust decision against Google  Android last year to get smartphones to market in Europe that preload its search engine, not Google’s.

Huawei was its intended first major partner for such devices. Though, prior to recent trade war developments, it was already facing difficulties related to price incentives Google included in reworked EU Android licensing terms.

Still, the U.S.-China trade war threatens to throw a far more existential spanner in European Commission efforts to reset the competitive planning field for smartphone services — certainly if Google’s response to Huawei’s blacklisting is to torch its supply of almost all Android-related services, per Reuters.

A key aim of the EU antitrust decision was intended to support the unbundling of popular Google services from Android so that device makers can try selling combinations that aren’t entirely Google-flavored — while still being able to offer enough “Google” to excite consumers (such as preloading the Play Store but with a different search and browser bundle instead of the usual Google + Chrome combo).

Yet if Google intends to limit Huawei’s access to such key services, there’s little chance of that.

(In a statement responding to the Reuters report Google suggested it’s still deciding how to proceed, with a spokesperson writing: “We are complying with the order and reviewing the implications. For users of our services, Google Play and the security protections from Google Play Protect will continue to function on existing Huawei devices.”)

Going on Google’s initial response, Qwant co-founder and CEO Eric Léandri told us he thinks Google has overreacted — even as he dubbed the U.S.-China trade war “world war III — economical war but it’s a world war for sure.”

“I really need to see exactly what President Trump has said about Huawei and how to work with them. Because I think maybe Google has overreacted. Because I haven’t [interpreted it] that way so I’m very surprised,” he told TechCrunch.

“If Huawei can be [blacklisted] what about the others?,” he added. “Because I would say 60% of the cell phone sales in Europe today are coming from China. Huawei or ZTE, OnePlus and the others — they are all under the same kind of risk.

“Even some of our European brands who are very small like Nokia… all of them are made in China, usually with partnership with these big cell phone manufacturers. So that means several things but one thing that I’m sure is we should not rely on one OS. It would be difficult to explain how the Play Store is not as important as the search in Android.”

Léandri also questioned whether Google’s response to the blacklisting will include instructing Huawei not to even use its search engine — a move that could impact its share of the smartphone search market.

“At the end of the day there is just one thing I can say because I’m just a search engine and a European one — I haven’t seen Google asking to not be by default in Huawei as search engine. If they can be in the Huawei by default as a search engine so I presume that everyone else can be there.”

Léandri said Qwant will be watching to see what Huawei’s next steps will be — such as whether it will decide to try offering devices with its own store baked in in Europe.

And indeed how China will react.

“We have to understand the result politically, globally, the European consequences. The European attitude. It’s not only American and China — the rest of the world exists,” he said.

“I have plan b, plan c, plan d, plan f. To be clear we are a startup — so we can have tonnes of plans, The only thing is right now is it’s too enormous.

“I know that they are the two giants in the tech field… but the rest of the world have some words today and let’s see how the European Commission will react, my government will react and some of us will react because it’s not only a small commercial problem right now. It’s a real political power demonstration and it’s global so I will not be more — I am nobody in all this. I do my job and I do my job well and I will use the maximum opportunity that I can find on the market.”

We’ve reached out to the Commission to ask how it intends to respond to escalating risks for European tech firms as Trump’s trade war steps up. Update: A Commission spokesperson for the Digital Single Market reiterated its prior statements around Huawei and cybersecurity, recommending Member States evaluate risks and strengthen risk mitigation measures. “EU Member States have the right to decide whether to exclude companies from their markets for national security reasons, if they do not comply with the country’s standards and legal framework,” the spokesperson added.

Also today, Reuters reports that the German Economy Minister is examining the impact of U.S. sanctions against Huawei on local companies.

But while a startup like Qwant waits to see what the next few months will bring — and how the landscape of the smartphone market might radically reconfigure in the face of sharply spiking political risk, a different European startup is hoping to catch some uplift: Finland-based Jolla steers development of a made-in-Europe Android alternative, called Sailfish OS.

It’s a very tiny player in a Google-dominated smartphone world. Yet could be positioned to make gains amid U.S. and Chinese tech clashes — which in turn risk making major platform pieces feel a whole lot less stable.

A made-in-Europe non-Google-led OS might gain more ground among risk averse governments and enterprises — as a sensible hedge against Trump-fueled global uncertainty.

“Sailfish OS, as a non-American, open-source based, secure mobile OS platform, is naturally an interesting option for different players — currently the interest is stronger among corporate and governmental customers and partners, as our product offering is clearly focused on this segment,” says Jolla co-founder and CEO Sami Pienimäki .

“Overall, there definitely has been increased interest towards Sailfish OS as a mobile OS platform in different parts of the world, partly triggered by the on-going political activity in many locations. We have also had clearly more discussions with e.g. Chinese device manufacturers, and Jolla has also recently started new corporate and governmental customer projects in Europe.”

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AT&T eats a $15.5 billion impairment charge as DirecTV debacle continues

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Enlarge / A man walks with an umbrella outside of AT&T corporate headquarters on March 13, 2020, in Dallas, Texas.

AT&T lost 617,000 customers from DirecTV and its other TV businesses in the final quarter of 2020, capping a year in which it lost nearly 3 million customers in the category, AT&T reported today.

AT&T today also informed the Securities and Exchange Commission that it has taken “noncash impairment charges of $15.5 billion” related to its ongoing DirecTV debacle. AT&T said the $15.5 billion charges reflect “changes in our management strategy and our evaluation of the domestic video business… including our decision to operate our video business separately from our broadband and legacy telephony operations.” This operational decision “required us to identify a separate Video reporting unit and to assess both the recoverability of its long-lived assets and any assigned goodwill for impairment,” AT&T said.

AT&T said it also logged “charges of approximately $780 million from the impairment of production and other content inventory at WarnerMedia, with $520 million resulting from the continued shutdown of theaters during the pandemic and the hybrid distribution model for our 2021 film slate.”

The charges were added to AT&T’s Q4 expenses. As a result, AT&T reported a $13.9 billion net loss in the quarter, compared to a net profit of $2.4 billion a year ago. Q4 revenue was $45.7 billion, down from $46.8 billion year over year. The Q4 net loss swung AT&T to a full-year net loss of $5.4 billion.

“Executives called the non-cash accounting charge a sign of the pay-TV unit’s aging status as the Dallas company promotes an Internet-streaming model that gives its content-production business a direct line to viewers,” The Wall Street Journal wrote today.

“Our biggest and single most important bet is HBO Max,” AT&T CEO John Stankey said.

Premium TV customers flee in droves

AT&T is down to 16.5 million customers in the Premium TV category that includes DirecTV satellite, U-verse wireline video, and the newer AT&T TV online service. That’s down from 17.1 million three months earlier and down from 19.5 million since the beginning of 2020.

AT&T has strung together several years of big TV-customer losses since early 2017, when it had over 25 million users in the category. The loss of nearly 3 million customers in 2020 was an improvement over 2019, when AT&T lost 3.4 million Premium TV customers in the calendar year.

These numbers do not include the streaming service formerly known as DirecTV Now, which AT&T just killed off this month. The service dropped from 1.86 million subscribers in Q3 2018 to 656,000 by year-end 2020. Existing customers can keep that service, but AT&T isn’t offering it to new users.

DirecTV and U-verse customers have been driven away by years of price increases and AT&T’s reduced use of promotional offers. This is reflected in AT&T’s average revenue per user (ARPU) in the Premium TV category, which jumped from $121.76 per month at year-end 2018 to $131 at year-end 2019 and $137.64 at the end of 2020.

AT&T attributed the 617,000-customer loss in Q4 to “competition, lower gross adds from the continued focus on adding higher value customers and a programming dispute, partially offset by lower churn.”

Video revenue down 11.2 percent

AT&T reported video revenue of $7.2 billion in Q4 2020, “down 11.2 percent year over year due to declines in premium and [online] subscribers, partially offset by higher premium TV ARPU and higher advertising revenues during the general election.” Operating expenses in the category were $7.1 billion, leaving AT&T with a profit of $98 million.

AT&T doesn’t report individual numbers for DirecTV, U-verse TV, and AT&T TV. But the company said gains in AT&T TV streaming subscribers last quarter helped offset losses in DirecTV and U-verse, meaning that DirecTV and U-verse together lost more than the 617,000 net-customer loss in the Premium TV category.

AT&T said it is encouraged by the progress of HBO Max, which costs $15 a month on its own but is also included in various bundles. “The release of Wonder Woman 1984 helped drive our domestic HBO Max and HBO subscribers to more than 41 million, a full two years faster than our initial forecast,” Stankey said.

Selling DirecTV at a loss

AT&T bought DirecTV for $49 billion in 2015 but has been trying to sell the beleaguered satellite division for the past few months. AT&T is reportedly close to a deal to sell a stake in DirecTV to TPG, a private-equity firm, but AT&T may maintain majority ownership of the company. Bids for DirecTV have reportedly valued the subsidiary at about $15 billion.

Fiber gains, DSL losses

AT&T’s broadband-subscriber base remained steady at 14.1 million in the quarter. The company boosted fiber-to-the-premises subscribers from 4.68 million to 4.95 million in Q4 2020, but it dropped from 8.98 million to 8.74 million in fiber-to-the-node and from 440,000 to 407,000 in its outdated DSL service. AT&T stopped accepting new DSL customers in October 2020.

AT&T said its Q4 broadband revenue was “$3.1 billion, down 1.4 percent year over year due to declines in legacy services partially offset by higher IP broadband ARPU resulting from an increase in high-speed fiber customers and pricing actions.” Operating expenses were $2.8 billion.

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SpaceX adds laser links to Starlink satellites to serve Earth’s polar areas

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Enlarge / Starlink logo imposed on stylized image of the Earth.

SpaceX has begun launching Starlink satellites with laser links that will help provide broadband coverage in polar regions. As SpaceX CEO Elon Musk wrote on Twitter on Sunday, these satellites “have laser links between the satellites, so no ground stations are needed over the poles.”

Starlink satellites prior to launch. The black circles in the middle are laser links.
Enlarge / Starlink satellites prior to launch. The black circles in the middle are laser links.

The laser links are included in 10 Starlink satellites just launched into polar orbits. The launch came two weeks after SpaceX received Federal Communications Commission approval to launch the 10 satellites into polar orbits at an altitude of 560km.

“All sats launched next year will have laser links,” Musk wrote in another tweet yesterday, indicating that the laser systems will become standard on Starlink satellites in 2022. For now, SpaceX is only including laser links on polar satellites. “Only our polar sats have lasers this year & are v0.9,” Musk wrote.

Alaskan residents will benefit from the polar satellites, SpaceX told the FCC in an application to change the orbit of some of its satellites in April 2020. The plan is to “ensure that all of the satellites in SpaceX’s system will provide the same low-latency services to all Americans, including those in places like Alaska that are served by satellites in polar orbits,” SpaceX said at the time. The satellites can serve both residential and US-government users “in otherwise impossible-to-reach polar areas,” SpaceX said.

Starlink satellites communicate with ground stations, of which about 20 are deployed in the United States so far. A SpaceNews article today described how the laser links reduce the need for ground stations and provide other benefits:

Inter-satellite links allow satellites to transfer communications from one satellite to another, either in the same orbital plane or an adjacent plane. Such links allow operators to minimize the number of ground stations, since a ground station no longer needs to be in the same satellite footprint as user terminals, and extend coverage to remote areas where ground stations are not available. They can also decrease latency, since the number of hops between satellites and ground stations are reduced.

The 10 satellites were originally authorized by the FCC for altitudes in the 1,100-1,300km range. The FCC approval allowing SpaceX to cut the altitude in half will help reduce latency.

With polar orbits, also known as Sun-synchronous orbits, satellites “travel past Earth from north to south rather than from west to east, passing roughly over Earth’s poles,” as the European Space Agency explains.

“Space lasers have exciting potential”

In December, during an interview with Ars’ Senior Space Editor Eric Berger, SpaceX President Gwynne Shotwell said that demonstrating laser communications in space was among the company’s most significant achievements in 2020.

SpaceX had revealed a few months earlier that it was testing space lasers for transferring data between satellites. Starlink engineers provided more detail in a Reddit AMA in November; here’s an excerpt from our coverage at the time:

“The speed of light is faster in vacuum than in fiber, so the space lasers have exciting potential for low latency links,” the Starlink team said on Reddit in response to a question about the space-laser testing. “They will also allow us to serve users where the satellites can’t see a terrestrial gateway antenna—for example, over the ocean and in regions badly connected by fiber.”

Space lasers won’t play a major role in Starlink any time soon, though. “We did have an exciting flight test earlier this year with prototype space lasers on two Starlink satellites that managed to transmit gigabytes of data,” the engineering team wrote. “But bringing down the cost of the space lasers and producing a lot of them fast is a really hard problem that the team is still working on.”

SpaceX seeks FCC OK for more polar satellites

In November 2020, SpaceX urged the FCC for an expedited approval “to facilitate deployment of 348 Starlink satellites into Sun-synchronous polar orbits at the lower altitude,” the FCC said in its decision to approve 10 satellites. The FCC approved only those 10 because it is evaluating interference concerns raised by other satellite companies.

“We find that partial grant of ten satellites will facilitate continued development and testing of SpaceX’s broadband service in high latitude geographic areas in the immediate term pending later action to address arguments in the record as to both grant of the modification as a whole and the full subset of polar orbit satellites,” the FCC order said.

Amazon’s Project Kuiper, Viasat, Kepler Communications, and Pacific Dataport urged the FCC to reject even the partial grant of 10 satellites because of the potential for increased interference with other non-geostationary satellite systems. But the FCC order said that SpaceX committed to “operate these satellites on a non-harmful interference basis with respect to other licensed spectrum users until the Commission has ruled on its modification in full.” A battle between SpaceX and Amazon is brewing, with Musk accusing Amazon of trying “to hamstring Starlink today for an Amazon satellite system that is at best several years away from operation.”

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North Korea hackers use social media to target security researchers

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Enlarge / Cyber threat from North Korea. North Korean hacker at the computer, on a background of binary code, the colors of the flag of the DPRK. DDoS attack

Dmitry Nogaev | Getty Images

Google has warned it has uncovered an “ongoing” state-backed hacking campaign run by North Korea targeting cyber security researchers.

The Silicon Valley group said its threat analysis team found that cyber attackers posing as researchers had created numerous fake social media profiles on platforms such as Twitter and LinkedIn. To gain credibility, they also had set up a fake blog for which they would get unwitting targets to write guest posts about actual software bugs.

After establishing communication with an actual researcher, the attackers would ask the target to work together on cyber vulnerability research and then share collaboration tools containing malicious code to install malware on the researcher’s systems.

In some cases, the attackers were able to create a backdoor to the victim’s computer even when their systems were running fully patched and up-to-date Windows 10 and Chrome browser versions, Google said.

The campaign would allow the hackers to glean insights into vulnerabilities the research community was studying to exploit them.

Several researchers wrote on Twitter in the wake of the Google statement that they had been contacted by the hackers but had not been compromised.

Google attributed the latest campaign to “a government-backed entity based in North Korea”—one of the biggest state sponsors of hacking alongside Russia, Iran and China.

North Korea is also among the countries that have been accused of carrying out cyber attacks to steal coronavirus vaccine-related research and data. The Wall Street Journal reported last year that Pyongyang had coordinated attacks on at least six vaccine developers including Johnson & Johnson and Novavax in the US, the UK’s AstraZeneca and several South Korean companies.

According to analysts, North Korea’s cyber army comprises thousands of expert hackers whose targets range from smaller-scale fraud and theft of cryptocurrencies to stealing nuclear secrets and weapons technology.

Belying perceptions of the country as a technological backwater, its hackers have a record of major cyber disruptions including hacking Sony Pictures in 2014 and the WannaCry malware attack in 2017. In 2019 a UN sanctions report estimated that $2 billion had been raised for Kim Jong Un’s weapons program via North Korean cyber actors.

The latest campaign comes as cyber security companies have found themselves a particular target of hacking campaigns.

In December, cyber security group FireEye as well as Microsoft reported that they had been victims of a sprawling cyber espionage campaign run by Russian state hackers that also targeted a number of US federal agencies and private sector groups.

Additional reporting by Edward White in Seoul.

© 2021 The Financial Times Ltd. All rights reserved Not to be redistributed, copied, or modified in any way.

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