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Why China's new cybersecurity law is a threat to international businesses and innovation

posted Friday Nov 25, 2016 by Guest Blogger

George Haour on China and cybersecurity

China has the world's largest market for digital shopping, mobile payments, and Internet-enabled financial services. Close to 400 million people in China do most of their payments using their smartphones. China's overall business in information technology is a market of well above USD $300 billion, and it is estimated that more than 700 million Chinese have access to Internet. So any law impacting the online space-cybersecurity included-will make ripples in the way China does business.

That's why its new cybersecurity law-due to take effect in June of next year-is particularly alarming. It is part of an ongoing government program to reinforce China's cybersecurity, and arguably targets non-Chinese hackers. But it comes amidst continuous tensions between the U.S. and China, not just in terms of cybersecurity (each country has accused the other of hacking), but with trade, the economy, and, of course, the U.S. election, which will inevitably change how business is done between the two nations. The law appears to be counterproductive in several ways.

First, as the law sets forward, important network equipment and software will have to receive government certifications. This means that specific pieces of intellectual property or technical features will have to be divulged, which could easily be passed on to Chinese companies by the regulators behind cybersecurity. It shouldn't be forgotten that the state in China has tremendous power and plays a critical role in economic plans. Government interference is much more prevalent than in Western nations. And under the veil of cybersecurity, regulators will have access to proprietary information that could benefit Chinese firms at the expense of foreign business.

The type of businesses most at risk will be those with special hardware and systems for network management. But it could even include data from and for ATMs. New generation ATMs have a much higher level of connectivity with mobile integration and face recognition. This makes them more vulnerable to hacking and means confidential devices and information will have to be used for protection. And under this law, that creates a big entry place for government snooping.

This law is also counterproductive because companies gathering data in so-called "critical areas" will have to store that data inside China. At this stage, the definition of "critical" is worryingly broad. Complying with this requirement will force international firms to make expensive investments to build duplicate facilities within China. This is in total contradiction with the free flow of data, expected to swell in 2020 after the introduction of 5G.

International companies will have to weigh this risk against the opportunity to do business in China. China has had a long reputation for 'copying' without getting insider access, and this law could only open the ease to which China's business sector can review competition. For international companies there is no easy way forward as the choice is black or white. Either foreign companies will comply, knowing China has a way to peek into what previously was private, or they will chose to stand by principles of privacy at the risk of being excluded from the Chinese market. Despite the challenging dilemma, companies are likely to comply and give in to China's demands. The market is too huge and far too ripe for future growth, especially when compared to more stagnant outlooks in Europe and the U.S.

In addition to creating barriers for international business in China, this kind of legislative move goes completely against innovation. It could well be considered to be part of what is called "indigenous innovation" in China. This consists in favoring Chinese firms by establishing non-tariff barriers, such as specific standards or regulations on products, in order to prevent non-Chinese firms the access to China's large and dynamic market. And the impact would be wide-ranging, from consumer electronics to products such as equipment to produce renewable energy, including windmills and solar panels.

Innovation involves a complex process, but it requires a society to be as open as possible and to allow vibrant exchanges between people. While cybersecurity is important, this law will wrap around the free market as it grips security. Within China, entrepreneurs are, by and large, not bothered by their government's management of the Internet, called the "great firewall". However, this new law is a new step to tighten the government's grip on the Internet. Furthermore, far from favoring China's champions in this very dynamic area, such as Huawei, Lenovo, or Tencent, this law will handicap them in the long term. Maybe the hope is that these companies themselves will fight to alter the law and mitigate the negative implications for China's Internet landscape.

U.S. companies have already began to strongly lobby against the law, as well as China's position that the Internet must be managed by authorities. But despite the efforts of any company, Chinese or other, the cybersecurity law is just a piece in a larger ongoing political puzzle that companies will have to deal with. Trump's stance on trade and is equally, if not more, alarming for business. In the end, agility will be key for companies to succeed in the tense political environment.

IMD Professor Georges Haour is a Professor of Technology and Innovation Management at IMD business school and co-author of the new book - Created in China: How China is Becoming a Global Innovator (Bloomsbury, London, 2016).

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Pokémon GO Players Get a Nice Treat This Thanksgiving

posted Thursday Nov 24, 2016 by Michele Mendez

Pokémon GO Players Get a Nice Treat This Thanksgiving

Pokémon GO updates tend to create an air of celebration among players and this most recent update is no exception. Niantic has been particularly giving this go around by including a fun event for Thanksgiving week.

For the main course - the update includes Combat Power changes for nearly every Pokémon. Not all adjustments consist of an increase... for some of them, the CP went down. This change is meant to help provide a more balanced and consistent battling and training experience. For example, some like Beedrill and Snorlax scored seconds, Chansey and Sandslash scoring thirds, while others like Lickitung and Wigglytuff were nerfed and sent to the kid's table.

As for the tempting sides - there's an exciting XP event. So devil up those Lucky Eggs which are getting a nice boost during the Poké-feast. 4 times the XP to be exact because all XP is doubled. And let's not forget the sweets... a nice slice of additional stardust always hits the spot. All in all, the update will help pass the time during all phases of your Thanksgiving festivities... not only a nice distraction from shopping and meal prep but also getting you through the awkward political conversations after dinner. While friends and family are napping or catching up on football scores, you'll have extra incentive to hit the streets and catch 'em all.

Although, as usual, we do not know the exact duration of the XP event (speculation is that it will last at least through Sunday Nov 27th and maybe through the 30th), Niantic did share the following start times:

  • November 23rd, 9:00 AM for Japan
  • November 23rd, 0:00 AM for UTC
  • November 22nd, 7:00 PM Eastern
  • November 22nd, 6:00 PM Central
  • November 22nd, 5:00 PM Mountain
  • November 22nd, 4:00 PM Pacific

One thing we can count on from Niantic and Pokémon GO is change. You can rest assured that this update will not be the last. We look forward to upcoming changes as they work on updating things like trading, gym training street battles and more.

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AT&T's Mixed Reality with Video Streaming

posted Saturday Nov 12, 2016 by Scott Ertz

AT&T's Mixed Reality with Video Streaming

There is nothing in the mobile world that uses data faster that streaming video. If you are on a limited data plan, streaming video over cellular can eat up your data allotment with just a single episode of a television show. The wireless carriers have tried to come up with solutions to this problem and this week AT&T is working with both of the popular choices.

Limited

If you are using an AT&T phone, no matter what your data plan, you will soon be enrolled in AT&T's new program: Stream Saver. Following the moves of Sprint and T-Mobile, AT&T will begin limiting the quality of video streamed on its network. Rather than receiving video at 1080 or above, all video will default to 480 instead.

The company is implementing this restriction in an attempt to save you from their other restriction: limited data. By limiting the video quality, you will be able to stream move video without exceeding you data allotment. Unfortunately, the restriction also applies to users who have an unlimited data plan, though technically speaking, unlimited plans can be throttled after 22GB of usage.

Luckily, Stream Saver is completely configurable. Users are capable of disabling the feature at will. If you are more interested in video quality than saving data, simply turn the feature off in your myATT account. Unlike with T-Mobile, disabling this feature does not cost anything additional.

Unlimited

All video streaming services are affected by Stream Saver, except possibly one: DirecTV. If you are a subscriber of both AT&T's mobile and television service, you can stream the DirecTV video unrestricted. Video from their own provider will not affect your data cap at all, making Stream Saver a needless feature. This feature, named Sponsored Data, seems very similar to T-Mobile's Binge On feature, where partners' content does not count against a customer's usage.

The FCC does not seem to see these features as related, simply because DirecTV is owned by AT&T. In fact, Jon Wilkins from the FCC wrote a letter to Bob Quinn, AT&T's external and legislative affairs head, complaining about the new feature. In the letter, Wilkins claims that the new feature might violate some rules. In response, Quinn said,

With our Data Free TV offer, DirecTV picks up the tab for our Mobility customers' data use when they're streaming content. For example, consumers can watch DirecTV content - such as NBC, Fox News, CBS, CNN, ESPN - all on their AT&T mobile devices without incurring any data changes. While we welcome additional questions, we hope the FCC will consider the enormous value consumers find in obtaining free data or free streaming where someone else is footing the bill for their data.

This move by the FCC is a little surprising, for a couple of reasons. First, the "Net Neutrality" rules that were implemented do not fully apply to wireless, only wireline. As evidence of this is Binge On - essentially the same service. Second is the FCC's relative ineffectiveness. Most of the upper management of the FCC are on the chopping block with the new administration taking over in January, so any move they make today is likely to be reconsidered in a mere 2 months. It seems like a hollow gesture to make this move now.

Likely, this move has to do with shining a spotlight on AT&T at a time when they are looking to add Time Warner to their previous DirecTV purchase. The FCC has been against AT&T purchases in the past, including their failed T-Mobile purchase.

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Amidst Troubles, Twitter COO Steps Away

posted Saturday Nov 12, 2016 by Scott Ertz

Amidst Troubles, Twitter COO Steps Away

Twitter has been in a bit of a freefall as of late. Poor earnings, layoffs and shutdowns have plagued the company, following an unsuccessful attempt to find a new owner for the company. This comes within a year in which executives have been leaving, including product head Kevin Weil, who left earlier this year.

Following Weil, this week Chief Operating Officer Adam Bain has left the company, effective immediately. Replacing him is Chief Financial Officer Anthony Noto, who has already stepped into the role. The departure comes at a difficult time for the company, which could either be made better by the departure or indicate a continued slide. Bain tweeted about his departure saying,

After 6 years and a once-in-a-lifetime run, I let Jack know that I am ready to change gears and do something new outside the company.

It will be interesting to see if this change in leadership will coincide with a change in direction. The immediate future could indicate whether Bain left the company because he disagreed with the direction the company is taking or because his direction was not the one the company wanted to follow.

Either way, whatever direction Twitter decides to go, hopefully it will work out for the company. It is time that Twitter understood who they are and where they are going, with a plan to become a profitable company - a goal that seems out of their grasp at this moment.

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Nintendo Releases NES Classic Edition, Discontinues Wii U

posted Saturday Nov 12, 2016 by Scott Ertz

Nintendo Releases NES Classic Edition, Discontinues Wii U

This has been an interesting month for Nintendo. It was just a few weeks ago that the company let the lid off of the Nintendo Switch, the production name of their next console. The console has added a new twist to their current hardware, combining the Wii U and 3DS into a unique single device. This week, however, Nintendo both added and removed a product from their lineup.

The New

Earlier in the year, Nintendo announced a revival of their original home console, the Nintendo Entertainment System. The new device, the NES Classic Edition, looks a lot like the original console with similar controllers. It comes pre-loaded with a number of classic games and is perfect for gamers who do not own the original hardware itself.

This week, the retro console was released to much success. In fact, the device, which retails for $60, has sold so well that Amazon, Best Buy, GameStop and more are completely sold out. Because of the demand, consoles purchased early have been selling on eBay for as much as $300 each. For that price, you could go to a used game store and purchase an actual NES with most of the games included and get the real NES experience.

The Old

In preparation of the Nintendo Switch, Nintendo has confirmed that the Wii U generation is coming to a close. While we all expected that production of the Wii U would be coming to a close, we did not know what timeline the company might be planning. According to the company's Japanese website, the two remaining hardware bundles are both ending production. A Nintendo rep confirmed to Ars Technica,

As recently posted by Nintendo on the Wii U website in Japan, Wii U production will end in the near future for the Japanese domestic market.

We can confirm that as of today, all Wii U hardware that will be made available in the North American market for this fiscal year has already been shipped to our retail partners. We encourage anyone who wants Wii U to communicate with their preferred retail outlet to monitor availability.

While the wording of this quote does suggest that new hardware could be made available next year, it is certainly not encouraging. The only chance of new manufacturing, in all reality, is if sales pick up for the holidays, which is not terribly likely. So, with that, the Wii U generation has come to a close, leaving the world with the same whimper in which it entered.

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Google in Trouble in EU Over Android Requirements, Google Disagrees

posted Saturday Nov 12, 2016 by Scott Ertz

Google in Trouble in EU Over Android Requirements, Google Disagrees

Over the past few years, Google has changed their policies on how OEMs can interact with Android. The most notable policy change came in 2014, when they limited access to the Play Store for OEMs that don't give preferential treatment to Google services.

This requirement, among a few others, has raised concern among governments the world over. In the US, the Federal Trade Commission has investigated the move. In Europe, the EU itself has investigated, and continues to investigate the policy. The EU considers it to be anti-competitive, and has done a lot of work to prove their beliefs.

The European Commission conducted a market survey which they cite often in their complaints, despite seemingly not understanding the results of the survey. For example, in their Statement of Objections, released in April, the primary basis for their complaint is that Android is alone in the marketplace. Obviously, that is nonsense, as Apple's iOS and Microsoft's Windows 10 mobile both compete in that market, as well. According to Google's public response, published this week,

In fact, 89% of respondents to the Commission's own market survey confirmed that Android and Apple compete. To ignore competition with Apple is to miss the defining feature of today's competitive smartphone landscape.

These are the same types of complaints that were once made against Microsoft. While the EU is today complaining about Google Search and Chrome are being bundled with Android, they once complained about Internet Explorer being bundled with Windows. The argument is primitive and uneducated, indicating a complete misunderstanding of software, operating systems and how companies work with OEMs.

For example, in Windows' case, OEMs have always been allowed to preinstall competing software, including Google's Chrome browser. In fact, those OEMs are allowed to override the default browser without penalty (except in the case of Windows 8 with Bing). Android has many of those same capabilities. In addition to Chrome, OEMs are welcome to install additional browsers into Android. In addition to Google Search, OEMs are welcome to install Bing as well. The only difference is that these services cannot be set as default out of the box.

Google points out the similar behavior between Android, iOS and Windows. On a Lumia 550, 39 of the 47 included apps are made by Microsoft. Almost every included app is removable and replaceable by the manufacturer or users. On iOS 10, 39 out of 39 apps are made by Apple, and few of the apps can be removed, and carriers and users cannot replace many of them. With Android, however, only about 10 of the apps come from Google, and most of them are replaceable by the user later.

While it is unusual for me to take the side of Google in an argument, I can say that, as a developer, it is nice to know that certain things will be available to me. If Android was to continue to fragment, like it was in the beginning, software would have to be built for every device individually, completely killing the environment. For example, look at Android's Fire tablets, built on Android, but not being able to access Play Store, requiring developers to rebuild their apps if they want them available on the platform.

All in, the idea of a government trying to regulate an industry which they do not understand is never a great idea.

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