Daily Digest 5/16/2018 (Net Neutrality Vote Today)

Google has released little public information about the Atlanta rollout delays. But it’s possible that, in the time it has taken Google Fiber to figure out how to travel the last mile to people’s homes, fiber optic technology may no longer be the best way to get there. Atlanta isn’t the only city to see Google Fiber falter. In Nashville, big telecom operators sued and all but blocked Google Fiber from tapping half of the city’s 88,000 utility poles — essential for completing the backbone of its last-mile delivery. Nearly four years after the company announced it was coming to Nashville, Google Fiber finally reached 10 Nashville neighborhoods late last year. Google Fiber didn’t face as many obstacles here, although its Atlanta build-out has been anything but a textbook case. One thing is indisputable: most who were once gaga over Google are now fed up with its failed fiber promise.

A mere 72 hours after the Chinese government agreed to put a half-billion dollars into an Indonesian project that will personally enrich President Donald Trump, he ordered a bailout for a Chinese-government-owned cellphone maker ZTE.  “President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast,” President Trump announced on Twitter on May 13. “Too many jobs in China lost. Commerce Department has been instructed to get it done!” President Trump did not mention in that tweet or its follow-ups that on May 10, the developer of a theme park resort outside of Jakarta had signed a deal to receive as much as $500 million in Chinese government loans, as well as another $500 million from Chinese banks. Trump’s family business, the Trump Organization, has a deal to license the Trump name to the resort, which includes a golf course and hotels. President Trump, despite his promises to do so during the campaign, has not divested himself of his businesses, and continues to profit from them. “You do a good deal for him, he does a good deal for you. Quid pro quo,” said Richard Painter, the White House ethics lawyer for former President George W. Bush.

The Justice Department and the FBI are investigating Cambridge Analytica, the now-defunct political data firm, and have sought to question former employees and banks that handled its business. Prosecutors have questioned potential witnesses in recent weeks, telling them that there is an open investigation into Cambridge Analytica — which worked on President Trump’s election and other Republican campaigns in 2016 — and “associated U.S. persons.” But the prosecutors provided few other details, and the inquiry appears to be in its early stages, with investigators seeking an overview of the company and its business practices. The investigation appears to focus on the company’s financial dealings — investigators have reached out to the company’s banks, for instance — and how it acquired and used personal data pulled from Facebook and other sources. In a sign of the inquiry’s scope, one of the prosecutors involved is the assistant chief of the Justice Department’s securities and financial fraud division, Brian Kidd. The effort is being assisted by at least one agent who investigates cybercrime for the FBI.

[Commentary] Bruce Henderson hypothesizes that a stable, competitive industry will never have more than three significant competitors and that the industry will find equilibrium when the market shares of the three competitors reach a ratio of 4:2:1. Taking a closer look at the wireless businesses of the four major operators in the U.S., the market share in revenue terms at the end of 2017 was: Verizon (38%); AT&T (31%); T-Mobile (17%); and, Sprint (14%). In terms of profitability as measured in operating income before depreciation and amortization (OIBDA), the relative differentials were even greater: Verizon (44%); AT&T (32%); T-Mobile (12%); and Sprint (12%). While it is highly debatable whether we can apply this hypothetical rule to the dynamic wireless industry in the US, I would argue that the general directionality of the “Rule of Three and Four” applies here. Further network investments in LTE-Advanced and 5G will require higher capital expenditure, and Sprint is certainly not in a good competitive standing to keep up the investment required. Outside of the top three, Sprint is attempting to improve its position through the consolidation with T-Mobile. So, is the T-Mobile/Sprint merger a big deal in the path towards network convergence and consolidation? For the near term, the answer is “no,” especially considering that the deal will take a year to complete. In the longer term, this deal will make a serious investment in 5G more possible, possibly forcing Verizon and AT&T to invest more as well.

[Kyung Mun is a senior analyst at Mobile Experts LLC]

[Commentary] It is clear the questions surrounding online consumer protection and data privacy go well beyond Facebook. My committee and the American people need to hear directly from the major players in the tech industry. Consumers deserve a deliberative and exhaustive examination of the digital ecosystem that has become a part of our lives. The House Commerce Committee extends an open invitation to Silicon Valley CEOs. Come and testify before our committee, explain your business model, and enlighten consumers about how your industry affects their daily lives. I strongly encourage the best and brightest of the tech world to accept this invitation. Trust me, it’s much easier to testify at a congressional hearing before your company gets caught up in a scandal. Mistakes, abuse and breaches of trust, however, all have real-world implications for hundreds of millions of Americans, and billions of people worldwide. Congress will need the help of the best and brightest in tech to help us strike the right balance to protect consumers while also encouraging innovation and competition. I look forward to welcoming more Silicon Valley CEOs to the Commerce Committee.

[Rep. Greg Walden (R-OR) is chairman of the House Commerce Committee]

In December 2014, Congress gave government chief information officers (CIOs) new powers and authority to manage the IT enterprise at their departments and component agencies under the Federal Information Technology Acquisition Reform Act (FITARA). Three and a half years later, CIOs don’t have the authority they need, administration officials said. President Trump signed an executive order giving presidential weight to mandates of FITARA, specifically the parts that give department CIOs authority over hiring, budgets and setting the IT agenda for the entire department enterprise. The administration has a three-pronged plan to modernize federal IT: institutional change, placing people in key positions and achieving early wins to gain momentum, said a senior White House official, speaking on background ahead of the signing. The executive order focuses on the first of those efforts.

AT&T apologized for for its “serious misjudgment” in hiring President Donald Trump’s personal attorney Michael Cohen to provide “insights” into how the new administration would handle issues like net neutrality and AT&T’s proposed merger with Time Warner Cable. Although Federal Communications Commission Chairman Ajit Pai denied hearing from Cohen, new scheduling documents obtained through FOIA by corruption watchdog American Oversight show Chairman Pai met with with top AT&T executives at a private dinner in Barcelona a month after the company began paying Cohen. One of the top AT&T representatives present at this meeting was Bob Quinn, who hired Cohen and has since stepped down over the controversy.

One of the largest contributions to President Donald Trump’s inaugural committee in 2016 appears to have been orchestrated by a set of powerful conservative legal activists who have since been put in the driver’s seat of the administration’s push to select and nominate federal judges. The $1 million inaugural gift came from a Northern Virginia company called BH Group, LLC. Unlike other generous corporate inaugural donors -- like Bank of America and Dow Chemical -- though, BH Group was a cipher, and likely was set up solely to prevent disclosure of the actual donor's name. Almost nothing is known about the company, including who runs it or its reason for being beyond writing a seven-figure check on Dec. 22, 2016, almost a month before President Trump was sworn in. While the source of the money used to make the gift was masked from the public, a trail of clues puts the contribution at the doorstep of some of the same actors — most notably Leonard Leo, an executive vice president at the conservative Federalist Society — who have helped promote Trump’s mission, and that of his White House counsel, Don McGahn, to fill judicial vacancies as quickly as he can with staunchly conservative, preferably young jurists.