Start Up: ZTE counts the cost, cutting the wrong red tape, the Apple news ecosystem, Uber drives out of Arizona, and more


Hey mum, why is your smartphone more interesting than me? Photo by Marco Djallo on Flickr.

A selection of 11 links for you. Not in binary. I’m @charlesarthur on Twitter. Observations and links welcome. But first this message!


Cyberwars small A reminder: you can buy my book Cyber Wars, published in the UK and due out in the US later this week. It investigates hacking incidents such as the Sony Pictures hack, the TalkTalk hack, ransomware, the Mirai IoT botnet, the TJX hack, and more. It looks at how the people in those organisations responded to the hacks – and takes a look at what future hacks might look like.

“A terrifying analysis of the dark cyber underworld.” – Aleks Krotoski


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ZTE estimates at least $3bn in losses from US ban • Bloomberg

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ZTE Corp. is estimating losses of at least 20bn yuan ($3.1bn) from a US technology ban that’s halted major operations as clients pull out of deals and expenses mount, people familiar with the matter said.

The telecoms gear and smartphone maker however is hopeful of striking a deal soon and already has a plan in place – dubbed “T0” – to swing idled factories into action within hours once Washington agrees to lift its seven-year moratorium on purchases of American chips and components, said the people, who asked not to be identified talking about private negotiations. The company declined to comment.

Shenzhen, China-based ZTE depends on US components, such as chips from Qualcomm, to build its smartphones and networking gear. The ban, for breaching terms of a settlement over sanction-breaking sales to Iran, has all but mothballed China’s second-largest telecoms gear maker and become entangled in a trade dispute between the world’s two largest economies. On Tuesday, President Donald Trump said he’s reconsidering US penalties as a favor to Chinese President Xi Jinping and may instead fine the company more than $1bn.

The US action has spooked potential clients during the crucial first-half IT spending season and even prompted some to renege on agreed deals, the people said. ZTE’s shelling out an estimated 80m to 100m yuan in daily operational expenses alone while most of its 75,000 employees sit idle, the people said.

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Meanwhile, the US Congress has blocked any move to let ZTE back in. The limbo continues; the losses so far wipe out ZTE’s net income over the past 12 years.

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Republicans can’t even cut red tape correctly • The New York Times

Brink Lindsey and Steven Teles:

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there are huge opportunities for growth that are being hamstrung by rules that protect existing companies at the expense of new ones. A bonfire of regulations like this would be entirely wholesome for the American economy and also help to eat away at some of the hyper-inequality that is generated by these forms of crony capitalism.

Unfortunately, this is not the kind of regulation that the Trump administration has been attacking. Instead, it has been sharpening its knives for precisely the kinds of regulation that, far from distorting markets, help to improve them. In particular, regulation is often necessary to a properly functioning market when, in its absence, businesses can make a profit by pushing costs onto others, in effect forcing others to subsidize their bottom line. In two areas, the environment and finance, these are exactly the sorts of market-improving regulation that the administration has put in its cross hairs, with the effect of increasing profits via freeloading.

The classical justification for environmental regulation is that without properly designed rules, businesses do not have to pay the true costs of their economic activity (what economists call “externalities”). If a company was making money by parking vehicles in all our driveways without paying, it would be obvious, and individuals would have a remedy in the form of trespass laws. But the costs that companies generate through pollution are widespread and hard to trace. Environmental regulations, by making companies absorb the costs they would otherwise impose on the rest of us, reduce market-distorting subsidies to polluters.

One recent example of wrongheaded deregulation is the Bureau of Land Management’s proposed loosening of Obama-era rules on methane leaks from oil pipelines. Methane is a particularly nasty contributor to global warming, but pipeline companies have insufficient incentives to prevent leaks adequately. Without regulation, their profitable move is to pad their bottom lines at the expense of the global climate. In this case, deregulation is just another word for the protection of ill-gotten gains.

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This has been the Trump admin all over: protect existing companies and strip the wrong regulations away. Coal, environment, solar – the moves have all been retrograde.
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I wish mum’s phone was never invented • BBC News

Georgina Rannard:

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What if children told you exactly how your WhatsApping, Instagramming, emailing and news-reading makes them feel?

“I hate my mum’s phone and I wish she never had one,” is what one primary school child wrote in a class assignment.

American school teacher Jen Adams Beason posted the comment on Facebook, and revealed that four out of 21 of her students said they wished mobile phones had never been invented…

…”I would say that I don’t like the phone,” one child wrote.

“I don’t like the phone because my parents are on their phone every day. A phone is sometimes a really bad habit.” The student completed the work with a drawing of a mobile phone with a cross through it and a large sad face saying “I hate it”.

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I often wonder what babies think of their mothers’ indifference as they are being walked around in prams or in shops or anywhere. There’s a whole generation growing up being ignored.
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‘A fun adventure, not a business’: The Weather Channel stopped publishing video on Facebook • Digiday

Sahil Patel:

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The Weather Channel is no longer publishing videos to Facebook.

“[Facebook video] hasn’t been beneficial,” said Neil Katz, global head of content and engagement at The Weather Channel, during a speech at the Digiday Video Summit in Scottsdale, Arizona. “It has been good for Facebook, but it hasn’t been good for us.”

Over the past few years, The Weather Channel built up a network of six pages on Facebook that grew to 500 million video views per month by last May, according to Katz. (For comparison, The Weather Channel’s main page was down to 1.8 million views on Facebook in April, according to Tubular Labs.) The Weather Channel’s Facebook presence included its main page as well as “weather-adjacent” science, nature and travel verticals such as Rockets Are Cool, Crazimals and United States of Awesome.

“We went along for the ride every single step of the way,” Katz said. “But we noticed, over the course of two years, that we were being paid in all types of currencies — followers, shares, views — that did not feel like money.”

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Such old thinking. Then again, looks like it’s time for the pivot away from video. Where now?
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Hackers infect over 500,000 routers with potential to cut off internet • CNET

Alfred Ng:

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More than half a million routers and network devices in 54 countries have been infected with sophisticated malware, researchers from Cisco’s Talos Intelligence Group warn.

The malware, which the security researchers are calling VPNFilter, contains a killswitch for routers, can steal logins and passwords and can monitor industrial control systems. 

An attack would have the potential to cut off internet access for all the devices, William Largent, a researcher with Talos, said Wednesday in a blog post

Attacks on routers hit a sensitive spot not only because they can halt internet access, but because hackers can use the malware to monitor web activity, including password use. In April, US and UK officials warned about Russian hackers targeting millions of routers around the world, with plans to carry out massive attacks leveraging the devices. In that announcement, the FBI called routers a “tremendous weapon in the hands of an adversary.”

“Quite anything is possible, this attack basically sets up a hidden network to allow an actor to attack the world from a stance that makes attribution quite difficult,” Craig Williams, Talos’ director, said in an email.  

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At any given time, there are huge botnets built around devices which people don’t normally interact with directly. Routers sometimes, video recorders others. Even heat pumps.
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The Apple Watch has found a surprisingly useful home with everyone that works on their feet • Quartz

Mike Murphy:

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You might’ve noticed that the person who took your order at the bar, brought you the shoes you wanted to try on, or perhaps even patted you down at the airport security line, is sporting an Apple Watch, which starts at $329 for the newest Series 3 watch. And there’s a pretty simple explanation: Many service-industry jobs where employees have to be on their feet all day don’t allow workers to check their phones while they’re on the clock. But that rule doesn’t necessarily apply to a piece of unobtrusive jewelry that happens to let you text your friends and check the weather.

Quartz spoke with airline attendants, bartenders, waiters, baristas, shop owners, and (very politely) TSA employees who all said the same thing: The Apple Watch keeps them in touch when they can’t be on their phones at work. Apple has increasingly been pushing the watch as a health device, and seems to have moved away from marketing it as one that offers more basic utility, as Apple continues do with the iPhone. But given that roughly 23% of the US labor force works in wholesale or retail operations, perhaps it’s a market Apple should reconsider.

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I don’t think Apple is “not considering” the market of people who aren’t meant to be standing around looking at their phones. Though it might consider some adverts targeting them.
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Uber to close self-driving operations in Arizona after fatal crash • AZ Central

Ryan Randazzo:

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Uber is shutting down its self-driving car tests in Arizona, where one of the cars was involved in a fatal crash with a pedestrian in March, the company said Wednesday.

The company notified about 300 Arizona workers in the self-driving program that they were being terminated just before 9a.m. Wednesday. The shutdown should take several weeks.

Test drivers for the autonomous cars have not worked since the accident in Tempe, but Uber said they continued to be paid. The company’s self-driving trucks have also been shelved since the accident.

Uber plans to restart testing self-driving cars in Pittsburgh once federal investigators conclude their inquiry into the Tempe crash. The company also said it is having discussions with California leaders to restart testing.

Uber has engineering hubs in Pittsburgh and San Francisco, and the company said it is easier to test vehicles near those workers. Engineers from those hubs frequently traveled to Arizona to work on the testing project here.

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That’s pretty harsh on the 300 workers. Here one day, gone the next.
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Above Avalon subscriptions turn three • Above Avalon

Neil Cybart, whose $100/year 4x/week newsletter is entering its fourth year, looks at what is changing in the Apple coverage space:

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Apple rumor / scoop industry has dried up and consolidated. Ten years ago, there were a number of news publications that were in a legitimate position to break the next Apple scoop (some of which were likely controlled leaks from Apple). Today, there are only two or three sites that even publish Apple scoops. The consolidation in Apple scoops has been driven by Apple ramping up the amount of secrecy regarding unannounced projects. In addition, Apple “scoops” have increasingly come from research firms paying for confidential information coming out of Apple’s supply chain. One byproduct of this rumor consolidation has been a relatively high degree of turnover among Apple reporters.

Ad-supported business models are struggling. It is becoming more difficult to find ad-supported business models on the web. While there are likely a few reasons for this change, one includes ad dollars being funneled away from blogs and into podcasts and videos. This explains what appears to be an exodus of resources away from written blogs and into podcasts and video-focused efforts. Unfortunately, my suspicion is this won’t end well for many as increased competition in the podcast and video space will tend to push sponsors to those with the largest followings. Such an environment would make it increasingly difficult for independent ventures to find sustainability by chasing scale.

Paid news sites boost independents. Most news publications have embraced paid subscriptions as another way of boosting revenues. While a paid subscription to a multinational news organization may make sense for many readers, the value / price tradeoff becomes murky for readers interested in specific topics and niches. For example, the average news publications will only write about Apple once a week (if that much). This environment provides an even greater amount of oxygen to independent sites that can give the time and attention to niche subjects.

Donation / support route isn’t promising. The transition from ad-supported business models to subscription-based models hasn’t been easy for many independent sites. Going from a scenario in which all content was public to one in which only a fraction of content is public can be jarring. Most sites have handled this transition by keeping content free and instead giving paid subscribers a very marginal amount of exclusive content. In essence, sites are treating subscriptions and memberships like donations. This is not sustainable for, or attractive to, subscription-based models.

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That point about ad-supported models is one to note. If GDPR does scare away ad-tech companies in Europe, that is going to lead to some substantial concentration.
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YouTube Music is great for record labels, but bad for music lovers • WIRED UK

Katia Moskvitch:

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Facebook doesn’t have a good enforcement technology yet, he adds, but “is about to become a major player”. Apple Music and Spotify together count 125 million subscribers – although they are mere bit players considering the success of YouTube. Google’s baby now sports more than 1.8 billion users every month, not least thanks to the fact that it is free – not just for consumers, but also the artists themselves. “It’s the number one place where artists get discovered and hits are made,” says [MIDiA Research analyst Mark] Mulligan, and “that’s true for every single market”.

The success, however, does not translate into massive payments to the music industry. YouTube labels itself as a platform, not a music distributor, and as a result gets away with sharing less of its profits. Because of its dominance, YouTube pushes down the profits for the music industry as a whole, claims a recent study commissioned by the International Confederation of Authors and Composers Societies (CISAC), a body representing royalty-collecting societies around the world.

The launch of YouTube Music will not be a game changer, though. Mulligan believes that the subscription-based service is “not quite a sop to the record labels, but it’s not far off”. Google simply wants to show “that it’s a good partner to the record labels… rather than needing to be in the premium business”.

Profit margins are further under pressure because of the deep fragmentation of the distribution end of the music industry. Spotify, YouTube and Apple may be digital giants, but they are jostling for space with many smaller local music streaming services around the world, plus thousands of terrestrial and digital radio and TV networks.

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Google beats Amazon to first place in smart speaker market • Canalys

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Smart speakers continue to be the world’s fastest-growing consumer technology segment, with year-on-year growth in Q1 2018 of 210% as shipments reached 9m units. Google took the top spot, beating Amazon for the first time, shipping 3.2m of its Google Home and Home Mini devices, against the 2.5m Echo devices shipped by Amazon. The US market share fell below 50% for the first time, partly due to Google and Amazon’s focus on expanding beyond their home markets, but also because of the increased traction that the technology is seeing with new vendors in markets such as China and South Korea.

Vendors shipped 1.8m smart speakers into the channel in Q1 2018 in China, while Korea overtook the UK to become the third largest market with 730,000 shipments.

Alibaba finished third overall and retained its number one position in China with 1.1 million Tmall Genie speaker shipments in Q1 2018… China’s smart speaker market is growing, with shipments up sequentially by more than 60%. Xiaomi, whose main business is selling smartphones, shipped over 600,000 of its Xiao AI speakers to China in Q1, coming a distant second after Alibaba’s Tmall Genie. “Awareness of smart speakers and their uses is growing steadily among Chinese consumers. But competition is building quickly for Alibaba, as IPO-hopeful Xiaomi takes to the smart speaker segment with much vigor in 2018.”

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Apple’s HomePod went on sale in February; doesn’t make the top five on Canalys’s reckoning. Strategy Analytics, another research company, has its own analysis which gives Amazon 4m, Google. 2.4m, Alibaba 0.7m and Apple 0.6m. Neil Cybart, of Above Avalon, reckons Apple sold between 0.5m and 1.0m HomePods.

So one has Google on top and Apple nowhere, another has Amazon on top and Apple somewhere. Be lovely if these companies provided some clear figures sometime.
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Environmentalists criticize Xiaomi ahead of billion-dollar IPO • Sixth Tone

Sixth Tone:

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Two environmental groups are accusing Xiaomi of poor oversight of its supply chain after the Chinese tech giant earlier this month filed for an IPO with the Hong Kong Stock Exchange, according to a joint report released Tuesday.

On May 12, the environmentalists found that a Jiangsu factory which manufactures components for Xiaomi was discharging copper-contaminated wastewater into a nearby river. According to the report, coauthored by the Institute of Public and Environmental Affairs (IPE) and the Lüse Jiangnan Public Environment Concerned Center (PECC), tests conducted on May 12 confirmed the contamination.

The factory, owned by Taiwan-headquartered Ichia Technologies, had previously been fined 117,000 yuan ($18,000) by the provincial environmental bureau in March for the same offense. Sixth Tone’s calls to the factory went unanswered on Tuesday.

The report also accuses four other companies said to manufacture screens, casings, and other parts for Xiaomi cellphones of having past environmental violations.

On May 3, Xiaomi filed for an IPO on the Hong Kong Stock Exchange, aiming for a $100 billion valuation that would make it the largest listing of the year. But the environmental groups say that the tech company did not disclose the supply chain environmental lapses in its prospectus — contravening the exchange’s full disclosure requirement.

When reached by phone on Tuesday, a Xiaomi PR representative told Sixth Tone that he was not at liberty to comment, as the company was still ascertaining the situation.

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By “still ascertaining the situation” the spokesman meant “still ignoring the situation, which has been brought to Xiaomi’s notice multiple times over multiple suppliers in the past four years”.

But nobody much cares about environmental responsibility, unless it offers a chance to bash Apple.
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Errata, corrigenda and ai no corrida: none notified

3 thoughts on “Start Up: ZTE counts the cost, cutting the wrong red tape, the Apple news ecosystem, Uber drives out of Arizona, and more

  1. “Such old thinking. Then again, looks like it’s time for the pivot away from video. Where now?”

    Easy: AI and VR ! That’ll keep them busy for at least a couple of years ! Let’s make an Oculus app and an Alexa skill !

    • Just good old classic content — some text, some pictures, some video. Problem is not in a content format, but in chasing platforms’ manipulations that trick publishers into giving away for free not only its audience but also its content for said platforms to monetize it single-handedly effectively reducing publishers to commodity garbage.

  2. “But nobody much cares about environmental responsibility, unless it offers a chance to bash Apple.”

    That’s the other way around: no OEM is crass enough to pretend that they’re eco-friendly. Except Apple, which rightfully gets called out for their hypocrisy.

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