T-Mobile and Sprint: Everybody Likes a Last-Minute Play

T-Mobile is making hail-Mary efforts to get public and government approval of the company’s merger with Sprint. T-Mobile executives say the $26.8 billion deal will lead to $6 billion in cost reductions and an overall better product for customers. Two weeks ago, Chief Executive John Legere told the U.S. Federal Communications Commission that T-Mobile will ensure “the same or better rate plans” for services up to three years post-merger.

Legere’s pledge responds to fears that the merger will lead to higher prices for low-income customers who currently benefit from the prepaid plans offered by the two carriers. Sprint and T-Mobile have long battled over the lower income customer base, and combining the two prepaid services will likely result in higher prepaid fees.

Last April, CNNMoney discussed the probable implications of the T-Mobile-Sprint deal for wireless prices. Following the merger, there will only be three major wireless service providers in the United States — Verizon, AT&T, and T-Mobile. As former FCC commissioner Michael Copps said, less competition almost always means less focus on customer needs. Additionally, T-Mobile has boasted about the company’s ability to deliver 5G to customers post-merger. However, the company’s delivery of 5G may entail updating current operations and playing catch-up with AT&T and Verizon.

One thing is for certain: Switching from 4G to 5G will indeed improve efficiency and welcome T-Mobile — and its customer base — to the era of rapid fast speed and massive capacity on a single device. Many agree that more options, beyond AT&T and Verizon, would be refreshing. However, we are in the era of an unpredictable President Trump, who pivoted from his business-friendly stance and surprised many by suing to block the $85 billion deal between AT&T and Time Warner last year. A national security panel headed by the Treasury Department has already signed-off on T-Mobile’s ambitions to acquire Sprint, but the Justice Department and FCC remain undecided.

For a deal that will likely take three years to merge customers, a three year promise to keep prices the same or better does not seem to be a lofty pledge. But, it may be a convenient one. Here’s hoping the Justice Department doesn’t do the math.

T-Mobile and Sprint- Everybody Likes a Last-Minute Play

Amazon Cancels Plans for a Second Headquarters in New York City

Amazon has cancelled all its prospective plans to establish a second headquarters in New York City. The internet behemoth cited push-back from local leaders upset by the nearly $3 billion dollars in incentives offered by state politicians as the rationale behind the cancellation of its plans.

Amazon’s sudden withdrawal from its plans to establish 25,000 new jobs in New York comes in response to a year-long highly publicized search for a secondary headquarters for the online retailer. The company has indicated that it will not continue to pursue a new location for secondary headquarters. Instead it will focus its attention on fostering growth in its existing and planned offices.

Major proponents of establishing the deal included both New York Governor Andrew Cuomo and New York City Mayor Bill de Blasio. Both men insisted that the $2.8 billion dollars in incentives offered to lure Amazon into establishing its secondary headquarters in New York would easily be repaid by tax revenues brought by the deal.

In a statement Thursday Cuomo blamed the failure of the deal on a “small group” of “politicians” who were focused on “their own narrow political interests” and held them “accountable” for losing out on a major “economic opportunity.” However, Mayor de Blasio was quicker to blame Amazon for its failure to “work with the community” to address concerns behind the project.

In an early press release Thursday morning, Mayor de Blasio stated that Amazon “had thrown away” an “opportunity to be a good neighbor and do business in the greatest city in the world.” In the same statement, de Blasio indicated that if Amazon couldn’t recognize the worth of being headquartered in New York, “it’s competitors” would.

Other New York representatives greeted Amazon’s pull-out more enthusiastically. During the formulation of the deal many local politicians expressed frustration at the seemingly closed nature of the negotiations with Amazon. New York City Council Speaker Corey Johnson shared in this sentiment. He stated that he hopes Amazon’s withdrawal from its plans will lead to other companies, that are contemplating a move to New York, being more open in their planning and engaging further with the community in the future.

The need for greater transparency and oversight in dealing with Amazon was echoed by Representative Alexandria Ocasio-Cortez, whose district’s include Long Island City, months before she had officially taken her seat in Congress.

While Amazon suggested that “nearly 70% of New Yorkers” supported its “plans and investments.” Other individuals like Nathan Lents, a Queens resident and professor at John jay College, felt the manner in which Amazon left the deal was emblematic of the one-sided natures of its investment.

In a tweet Lents said, “Don’t forget how this actually went down. The great [Sen.] Gianaris was simply insisting for transparency and oversight and that made Amazon balk. This shows their plan all along was to bully and weasel out of their end of an already one-sided deal.”

Amazon Cancels Plans for a Second Headquarters in New York City

Spotify Acquires Gimlet and Anchor, Signaling Broader Ambitions

Music streaming behemoth Spotify has acquired two leading podcast firms, Gimlet and Anchor, in an attempt to branch out for new growth opportunities. Though the Swedish company had over 96 million active subscribers at the close of 2018, operating a music streaming platform has long been a low-margin business with heavy market competition by mainstays such as Apple Music, Tidal, and Amazon Music. Similar to the recent revival of the record player by modern audiophiles, Spotify is betting on the reinvention of radio as a means to further personalize the ad experience. The exact numbers remain undisclosed, but sources estimate that the Gimlet deal was worth in excess of $230 million.

Spotify has dominated the music streaming platform ever since its inception, currently holding roughly 36% market share compared to the 19% of its leading competitor, Apple Music. While the numbers have remained relatively stagnant, head of Spotify Studios Courtney Holt found that there seemed to be an untapped synergy between podcasts and music—those who listened to podcasts consumed more of Spotify, including music. Therefore, increasing the company’s podcast catalog will allow for users to enjoy a more tailored and streamlined experience, matching their music tastes to podcasts that resonate with like-minded communities.

As young professionals flock into cities and their congested highways, this younger generation will undoubtedly demand more from their daily commutes than music alone. Podcasts offer a unique product to fill such a gap: long-form passive engagement for listening while tending to other tasks—driving, exercising, cooking—when there’s no time to waste. Listening and learning through podcasts give listeners and advertisers an opportunity to kill two birds with one stone.

With this in mind, these acquisitions are just the beginning, according to chief executive Daniel Ek. While Spotify posted its first ever quarterly profit, the company expects to slip back into the red as it doubles down on ventures outside of its core business. Further, the company has announced that it anticipates spending an additional $400-$500 million throughout the year to expand its podcast catalog. Investors seem unfazed, however. Even though the company is poised to be in the red for the foreseeable future, subscriber numbers are expected to continue rising. The company saw a jump in subscriber numbers at an annualized rate of 36%, and in an era where garnering the attention of every eye and every ear is becoming increasingly difficult, Spotify seems to be laying the groundwork for doing just that.

Even with its foray into podcasts, Spotify isn’t willing to rest on its laurels. The company has recently announced that it will begin offering news and political coverage to battle similar offerings from competitor Apple Music. Called Spotlight, the new initiative has signed on eight companies, including BuzzFeed and Refinery29, to create unique programming that caters to young listeners. Whether the initiative succeeds is yet to be seen, but one thing is certain: the spotlight’s on Spotify—let’s hope they deliver.

Spotify Acquires Gimlet and Anchor, Signaling Broader Ambitions

Johnson and Johnson Seeks Deal on Hip Implant Lawsuits

Johnson and Johnson and individual plaintiffs were described as “close” to reaching a deal to settle claims regarding defective implants, Bloomberg reported this week. The lawsuits relate to J&J’s Pinnacle metal-on-metal hip implants, which have faced accusations of causing several side effects, including bone erosion and tissue death. J&J has been subject to lawsuits around the country, including roughly 10,000 individual claims in Texas, of which 3,300 were announced as “close” this week to reaching a settlement. The announcement comes after J&J settled for $120 million on deceptive marketing claims.

J&J has been under significant scrutiny in the past few years, being described as a “litigation magnet.” For example, in 2013, J&J settled claims for its ASR line of hip replacements for $2.5 billion—a settlement that does not cover Pinnacle metal-on-metal hip replacements. It recently saw all of its patents invalidated in a patent infringement suit regarding Zytiga, a lucrative chemotherapy drug; the company is planning to appeal the decision. Most dramatically, last summer J&J was ordered to pay $4.7 billion in a talcum powder case claiming that it hid asbestos in its talc products, a claim J&J vehemently denies. A Reuters report claiming J&J had been aware of the asbestos for decades caused J&J’s stock to fall more than 10% in a single day.

Pinnacle hip implants are still being sold with different material combinations.

Johnson and Johnson Seeks Deal on Hip Implant Lawsuits

Tech Companies Profiting Amid PR Scandals

In the last few years, the tech world has been shaken by privacy breaches including Russia’s usage of Facebook to sway the 2016 presidential election, Wells Fargo’s major breach in customer accounts, and a recent case in which customer’s discovered a bug in Apple’s FaceTime app which allowed users to listen and view live video through recipients’ camera and microphone without them accepting the call. Further, in the last few months of 2018, Google was caught in the storm of criticism. As Google CEO was “grilled” before Congress about data privacy, he disclosed a security bug was found in their social network, Google Plus, and they faced intercompany turmoil over sexual harassment scandals.

Despite the plethora of negative news coverage, incessant scandals, and twitter outrage, many of these same companies are not taking a hit in their earnings. For example, in mid-January, Facebook beat their earnings and revenue projections, as their earnings per share went up 65% from the same period a year ago. Google’s parent company, Alphabet, released a report on February 4th, which stated that despite the growing scrutiny over data privacy concerns, their revenue over the final three months of 2018 was up 22% compared with the same period last year. The growth stemmed from their advertising business which has continued to expand as a major revenue stream for Google.

The question which arises from these statistics is how consumers can expect a company like Facebook to curb data privacy breaches, when their revenue, shares, and subscribers seem to simultaneously rise. The first sentence in a recent New York Times article put it best, stating, “Facebook’s worst year ever was its best year ever when it came to its business.” One reason for this dichotomy may stem from a shift in the way major companies like Facebook and Google are both using and marketing their platforms. Facebook has shifted away from their main social networking purpose and has successfully placed their focus on creating “one overarching network” including Facebook Messenger, and acquired apps, such as WhatsApp and Instagram.

Google, on the other hand, has found a major increase in ad revenue, while they also have invested almost $1 billion more into its ad business compared to what was seen last year. As these major tech companies continue to prosper while enduring public relations disasters, it remains to be seen if our society’s desire for social networking, connection, and access will continue to outpace our desire for privacy and security. As the scandals continue to pour in at a high rate, we may not need to wait very long to find out.

Tech Companies Profiting Amid PR Scandals

Millions Trapped in Cryptocurrency Purgatory

For the cryptocurrency industry, the events of the past week days may seriously upend consumer confidence. Quadriga, a major Canadian cryptocurrency exchange company filed an affidavit with the Novia Scotia Supreme Court seeking creditor protection. The company owes its customers upwards of $190 Million, and technically has the capital, but can’t pay them back. Why? Because CEO Gerry Cotton, the only person who knew the cryptographic key to access offline storage, unexpectedly died.

Cryptocurrencies, like bitcoin, are created from and operate within a system of decentralization. That is what made digital-cash so appealing and transformative in the first place. It replaced trust in centralized institutions with trust in a “peer-to-peer” decentralized system of math. In this unregulated system, once hackers take your coin, you can’t get it back. Thus, trendy consumers store, sell, and trade cryptocurrency, whatever it may be, on more “secure” exchange platforms. These crypto-custodians use a system of “hot” and “cold” storage to mitigate hacker risk. Funds are allocated to active “hot” wallets for day-to day-transactions or safer offline “cold” storage, with more kept in the latter. While most companies require multiple people with different keys to access this offline storage, unfortunately, Quadriga did not. Now millions of dollars’ worth of cryptocurrencies are trapped in cyber purgatory due to consolidated human error.

While Quadriga hired hackers to hack the un-hackable, customers have voiced their outrage, disbelief, and even suspicion that Cotton faked his own death. But as the affidavit states, “there is no governing body that provides oversight to the industry.” Legal recourse for economic loss arising from mismanaged cryptocurrency is still uncharted territory.

The turn of events, while ironic, is not surprising. Cryptocurrencies users are quick to distrust regulation and instead rely on reputation. They don’t want to bank on the banks, but they will trade where their peers do. Caught up in the hype of cool money, people don’t think through the implications of irreversible transactions and unregulated storage. But it is a serious dilemma for companies, governments, and legal systems.

It will be noteworthy to see how this latest industry mishap plays out. Wronged consumers usually struggle for regulatory solutions. But how can cryptocurrency owners expect institutional protection when they facilitate a system that fundamentally values the opposite? Some experts believe that customer values will shift back towards trusting institutions. Recently, Bruce Scheiercryptographer and fellow at the Berkman Center for Internet & Society at Harvard, wrote, “would you rather trust a human legal system or the details of some computer code you don’t have the expertise to audit?”

This latest case goes to show that trust doesn’t even matter. The decentralized system that creates cryptocurrency ultimately relies on centralized systems to trade it. So, whether customers trust institutions or math, at the end of the day, there will be human error. And human error leads to uncertainty. And uncertainty leads to law. It’s just a matter of time before the cryptocurrency industry faces their ultimatum: extinction or regulation?

Millions Trapped in Cryptocurrency Purgatory

Apple’s FaceTime Bug Underscores Questions of Privacy Protection

An alarming FaceTime video-chat service vulnerability raises questions about Apple’s public commitment to security and consumer privacy. A fourteen year old from Arizona discovered the security flaw, which allowed iPhone users to call other users via FaceTime and listen in on conversations, even if the recipient did not answer. In certain instances, the caller was even able to see video of the non-responsive recipient. While Apple regularly boasts about the safety of its products, such security violations go beyond surface level mistakes into the territory of personal privacy, data protection, and even national security.

For many years prior, Apple allowed outside app developers to access, store, share and sell users’ contact data, often without consent. In July of 2018, Apple closed that loophole by banning the storage and sale of such data and stepped its data security by offering bounties to hackers that flag bugs to the company. What’s more, Apple’s reputation as a privacy protector was cemented in the minds of users when the company refused to compromise its stance on iOS security in the face of FBI scrutiny.

But others, including House Democrats and the House Energy and Commerce Committee, are not so easily convinced. While collecting less of our data and de-identifying who it comes from is a good start, leaving consumer data in the hands of independent developers with direct access to iPhone users who are not incentivized to collect and use our data responsibly eats away at those protection headways. Consumer privacy and protection must take serious the need for a system that gives customers more direct control over who has their information.

For a company that has made it a point of heralding as the privacy conscious adult among the other tech giants, Apple might do more to pre-empt security attacks and protect user privacy. Lessons from Facebook’s responsibility for the actions of Cambridge Analytica tell us that the company should be more proactive in limiting how developers use iPhone users’ data. The proliferation of bugs like the FaceTime glitch could lead to serious privacy breach issues, not to mention the danger of the data landing in the hands of people that commit attacks on our nation. If privacy is indeed the fundamental human right that Apple CEO Tim Cook says it is, more work is needed to ensure that useful tools like our iPhones don’t become spying machines for perverse use.

Apple’s FaceTime Bug Underscores Questions of Privacy Protection

Negotiating New WTO Rules to Uproot China’s “Mercantilist” Trade Practices

In 2018, President Trump began to aggressively punish countries for engaging in what he deemed unfair trade practices, the start of the trade war. Trump points to the current US trade deficit, the value of what a country imports exceeds what it exports. To reduce this, Trump has enforced or threatened tariffs on nearly all products from China. China’s response, however, was to place taxes on most US goods entering China. The US hopes that negotiating new World Trade Organization rules will dismantle China’s “mercantilist” trade practices that cause the US deficit. Such methods come from China’s economic policy of maximizing exports. China relies on its undervalued currency, cheap labor, and foreign investors to continue these trade practices.

To better understand this situation, it is helpful to understand what the World Trade Organization (WTO) is. The WTO is essentially a place where member governments go to negotiate or settle trade problems. Everything established or decided at WTO comes from negotiations. The WTO agreements are basically contracts that governments join that maintain the legal ground-rules for international commerce. These rules assist trade in different ways, mainly by either liberalizing trade or maintaining trade barriers.

The Trump administration’s public justification for negotiating new WTO rules, to uproot China’s “mercantilist” trade practices, is to protect US workers, farmers, and businesses. While some US allies have already commenced discussing possible changes to the WTO rules, the pressures of China’s economic policies make any success in negotiating new rules unlikely. For such changes to take place, all 164 government members must agree. The Office of the United States Trade Representative commented that while “China retains its non-market economic structure and its state-led, mercantilist approach to trade, to the detriment of its trading partners” the US, regardless, plans to hold China accountable.

Tim Wu’s February 4 opinion in the New York Times made an important point by directing attention to China’s internet censorship. If the Trump administration intends to aid US businesses, it should also focus on the global internet economy, which is worth at least $8 trillion currently. China’s censorship is, therefore, a severe economic barrier by obstructing nearly all substantial online foreign competitors like Google, Facebook, and the New York Times. The US is the world’s most significant internet sector and should negotiate through this advantage.

Another crucial and overlooked factor is US consumers that continue to favor minimal prices for Chinese goods as opposed to US-made products. Rather than attempting to change a fixed economic system, why not increase efforts to educate US consumers on locally made products?

Negotiating New WTO Rules to Uproot China’s “Mercantilist” Trade Practices

Tesla Acquires Maxwell Technologies – A Strategic Move Towards Broadening Its Consumer Base Amidst Rising Competition

Tesla, founded in 2003, continues to be a powerful force amidst international efforts to reduce carbon emissions and move towards sustainable energy. In an effort to further its mission, Tesla has remained innovative and agile when it comes to reaching a broader consumer base. Most recently, Tesla acquired Maxwell Technologies, a company specializing in energy storage technology that can increase the efficiency of Tesla’s electric vehicle (“EV”) batteries and, ultimately, decrease the cost of Tesla’s EVs. This recent acquisition, however, is just one of Tesla’s deliberate steps toward making its EVs more efficient, affordable, and sustainable.

This $218 Million acquisition is a noticeable departure from Tesla’s traditional emphasis on producing EV batteries in-house. Maxwell Technologies specializes in dry electrode technology, which can be employed to develop ultracapacitors. This technology, when applied to EV batteries, has the ability to dramatically increase the efficiency of Tesla’s vehicle but will also help Tesla decrease the cost of its vehicles in the long run. This sudden shift from in-house EV battery development is likely attributed to Tesla’s rapidly growing list of competitors. Audi, for example, just recently announced its new Audi e-tron all-electric SUV which rivals Tesla’s Model X. However, Tesla and Audi are not the only EV players in the game. Chevrolet, Nissan, Volkswagen, BMW, Kia, and Hyundai have all come out with successful electric vehicles. Moreover, Tesla’s competitors have not only entered the luxury EV market, they are producing less expensive models in order to reach more consumers. While Tesla has made strides towards offering less expensive models, it has yet to offer a model that is financially comparable to that of its competitors.

Thus, this most recent acquisition is a significant stride towards remaining competitive in an increasingly diverse EV industry, broadening its consumer base, and furthering its core mission. However, it is still uncertain how quickly and effectively this acquisition will achieve those same goals. The most recent reduction in the Model 3 price, for example, was accompanied by cuts in Tesla’s workforce. As a result, 7% of Tesla’s full-time workforce was cut earlier this year while the Model 3, Tesla’s cheapest model, has yet to break the $40,000 threshold despite the most recent price reduction. This begs the question: how far is Tesla willing to go in its efforts to produce a more accessible electric vehicle? While this remains to be seen, what can be said for certain is that the strategic acquisition of Maxwell Technologies is an effective stride towards lowering Tesla’s EV prices and enhancing EV battery efficiency.

Tesla Acquires Maxwell Technologies – A Strategic Move Towards Broadening Its Consumer Base Amidst Rising Competition

AMI’s Alleged Extortion of Amazon’s Jeff Bezos

On January 9, Jeff and MacKenzie Bezos announced their divorce on Twitter. The next day, the National Enquirer published a story detailing the Amazon CEO’s extramarital affair with Lauren Sánchez. On February 6, the National Enquirer then sent an email to Mr. Bezos, allegedly extorting him by threatening to publish several private photographs they had acquired if Mr. Bezos did not publicly state that he had “no knowledge or basis for suggesting that AMI’s coverage was politically motivated or influenced by political forces.” In an astonishing move, Mr. Bezos then revealed both the existence of the photos and the alleged extortion in a personal blog post, discrediting AMI’s value proposition that investors would question Bezos’ judgment as a result of the photos’ existence.

Prosecutors are currently investigating the alleged extortion, which complicates matters for American Media, Inc., which owns the National Enquirer and is owned by David Pecker. During the 2016 election cycle, Pecker became infamous for using “catch and kill” techniques to buy and bury stories alleging everything from sexual misconduct to illicit affairs between President Trump and a number of women, at least once at the direction of Michael Cohen.

After determining that such payments by AMI violated campaign finance regulations, Federal Prosecutors for the Southern District of New York and AMI reached a non-prosecution agreement this past September, which required AMI to admit that it had made the payments to “influence the election” in exchange for non-prosecution so long as AMI committed “no crimes whatsoever” for three years.

The question now is whether the Federal Prosecutors for the Southern District of New York require ongoing cooperation from AMI, or if they have enough already that they are willing to pursue prosecution. If so, instead of Jeff Bezos and Amazon, it may be David Pecker and the Enquirer who have to answer to investors for poor judgment.

AMI’s Alleged Extortion of Amazon’s Jeff Bezos