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European and Chinese Pressures are Squeezing Silicon Valley, Threatening a Global ‘Splinternet’

Heather Heimbach

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WASHINGTON, July 9, 2018 – The European Union’s General Data Protection Regulation is raising the danger of the “splinternet” syndrome, as top tech companies prioritize international standards over American ones, warned experts at a June 28 event of the Federalist Society.

Officials from Google, Microsoft, and cybersecurity company Endgame addressed growing cybersecurity concerns that international industries serve to America’s national security, and not that of Europe.

Additionally, tech companies have also been upset about a new California data protection law, signed June 28, that requires companies to allow consumers to opt out of data collection.

Panelists warned that the law has the potential to alter a company’s entire business model surrounding revenue from data collection. The legislation has many similarities to the GDPR, in effect since May 25, that imposes heavy regulations on user data collection of EU residents.

The worrisome prospect of a ‘splinternet’ to the global internet

Andrea Limbago, representative of cybersecurity company Endgame, warned that new international regulations like the GDPR are moving the internet “more towards the ‘splinternet’ versus the global internet.”

Countries’ different privacy demands makes the internet more fractured and causes problems for the tech industry, she said. GDPR mandates and the idea of cyber sovereignty for government access to data “are directly in conflict,” Limbago continued.

She instead touted “cyber sovereignty,” referring to the concept that a government should have control over internet usage, access, and services within their own country, from the technological side to political.

Because GDPR applies to not only EU companies, but to any company that engages with EU online users, rules established by the GDPR potentially interfere with another country’s ability to collect data on their online servers if that data belongs to an EU online user.

Which international norms are likely to prevail?

In America, outrage over how American companies store user data recently bubbled over the boiling point in Congress with additional revelations about whether Facebook allowed for the storage of consumer data on devices manufactured by the Chinese telecom equipment company Huawei.

Huawei has well-known ties to the Chinese Communist Party.

According to Limbago’s argument, while the GDPR pushes for protections of the individual, such as the right to be forgotten, other countries–such as China– could claim “cyber sovereignty” and enact laws that demand a company storing data on its land or of its people to provide that data regardless of an individual’s consent.

“If our tech or government in favor of democracy is not pushing forth these norms, others will push forward their own norms,” Limbago said, advocating for the U.S. government to enact firm, democratic rules of the road for the international cybersecurity space.

Google and Microsoft defend an increasingly beleaguered internationalism

When asked about how Microsoft and Google are responding to the flap over Facebook and Huawei, neither Google nor Microsoft expressed a desire to pull out of international agreements, despite legal complications that may arise.

Microsoft representative Angela McKay defended the practice of buying and partnering with other companies–including international companies–claiming it is good for competition in the marketplace. Managing Microsoft’s supply chain is a “way to use market forces to increase security over time,” McKay said.

Google representative David Lieber agreed with McKay. Lieber said that Google has many international partners within the supply chain, but looks to new methods of reducing the national security threat that supply chains can cause.

“One of the ways to reduce risk in a supply chain is to reduce complexity,” Lieber said.  Regarding data storage, he suggested examining the infrastructure that stores the data. For Google Cloud services, “The servers that reside in those data centers storing Google account data are custom designed. They have a stripped down operating system,” he said, which can reduce the risk of cybersecurity threats.

New international pressures on Silicon Valley could overcome tech companies’ resistance

However, former National Security Agency General Counsel Stewart Baker raised concerns over how the pressures Silicon Valley faces from international regulations could overpower pressures from the U.S. government.

According to Baker, European policies such as GDPR are imposing “massive fines and liability” on tech giants. Silicon Valley is pressured to comply with international regulations while resisting American regulations.

“Frankly, it’s just easier to regulate it if you don’t have an industry of your own,” Baker said. “[The Europeans] don’t and so they’re happy to beat up big tech from the United States.”

He explained tech giants must cooperate with laws in Russia and China or face being banned in the countries, whereas in the U.S., the companies gain leverage by hiring lobbyists and massive numbers of employees, and thus “don’t mind fighting the U.S. government.”

Rekindling fears of foreign interference in the political space, Baker accused Silicon Valley of allowing European hate speech laws to undermine the free speech of Trump supporters.

“When they are told to eliminate hate speech online by the Europeans,” Baker said, “they just don’t have any trouble agreeing that hate speech is pretty much anything that Trump voters say–and finding ways to disadvantage it in subtle and unsubtle ways.”

(Photo of the Federalist Society event by Heather Heimbach)

 

China

Loopholes Allowing Private Purchase Of Chinese Goods Must Be Closed: Commissioner Carr

Derek Shumway

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Screenshot taken from CSIS event

April 5, 2021 – Loopholes that allow U.S. companies to use private funds to purchase equipment from Chinese-based companies like Huawei and ZTE should be closed, Federal Communications C Commissioner Brendan Carr said Tuesday.

Carr said last week at a virtual event hosted by the Center for Strategic and International Studies that while the U.S. government has been able to prevent companies from spending federal dollars on Chinese telecom equipment, legal loopholes still persist that allow companies to use private funds to purchase such equipment, leaving agencies like the FCC helpless in preventing these transactions.

Communist China has made it clear it wants to dominate the global semiconductor and chip market, and it is not opposed to using forced labor to achieve that goals. Be it garage door openers or computers, nothing should be allowed if it has ties to Uighur-related forced labor, Carr said.

“The CCP is committing genocide—crimes against humanity—in Xinjiang,” he noted.

Carr spoke broadly about the continued threats Chinese telecom equipment poses to U.S. national security interests.

Secretary of State Antony Blinken outlined the new Biden administration’s strategic vision for U.S. foreign policy and identified China as the top geopolitical challenge facing the United States.

Commissioner Carr said there are bipartisan commitments to address threats from China, and that the FCC can continue to take steps to protect the U.S.’s 5G network infrastructure, including moving to block approval of devices that contain parts made from companies with ties to “Communist China,” or forced labor from places like Xinjiang.

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FCC February Meeting Targets 911 Fee Diversion and Replacing Foreign Telecommunications Equipment

Tim White

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February 17, 2021 – The Federal Communications Commission adopted two proposals in Wednesday’s meeting: Seeking comments on rule changes for 911 fee diversion, and also the secure and trusted network reimbursement program.

The first proposal seeks comment on a 911 fee diversion rule that would define what constitutes a diversion of those funds from their intended use. Part of the Consolidated Appropriations Act of 2021, passed in December 2020, requires the FCC to issue these rules. Fees from 911 are levied by state and local governments to help pay for the operating costs of emergency services, which consumers pay through their phone bills.

The rule change intends to prevent states from diverting some of those funds for purposes other than 911 operations.

“Both Congress and the commission have long recognized that 911 fees should serve 911 purposes and have worked to combat fee diversion,” said Commissioner Geoffrey Starks.

According to the FCC’s 2020 report, five states diverted over 200 million dollars from the 911 fees they collected. The vast majority of fee diversions occur in New York and New Jersey, according to National Emergency Number Association’s Brian Fontes.

The second proposal seeks comment on the secure and trusted network reimbursement program, which subsidizes funds to companies for replacing communications equipment due to national security concerns.

Several of the commissioners expressed concern about Chinese companies Huawei and ZTE technologies being used in the United States due to their ties to the Chinese government.

The Consolidated Appropriations Act of 2021 allocated $1.9 billion to “remove, replace, and dispose of communications equipment and services that pose a national security threat,” said the FCC’s news release.

Both proposals received 4-0 affirmative votes.

Also notable during Wednesday’s meeting was Acting Chairwoman Jessica Rosenworcel’s announcement of a new task force to address poor broadband mapping data. Jean Kiddoo was named chair of the task force.

During a press call following the meeting, Rosenworcel said that she supports spectrum sharing, which would allow providers to share space in certain areas of the radio wave spectrum. There are a lot of entities interested in the popular bands of the spectrum, and we need to be creative and efficient in how we use that space, she said.

Rosenworcel’s position conflicts with the Cellular Telecommunications Industry Association, a trade association comprised of many communication companies, which supports exclusive access to parts of the spectrum.

Wednesday’s meeting marks the first FCC meeting chaired by Rosenworcel in her new position as acting chairwoman. She can serve in that position until President Biden puts forward a candidate to serve as chairman or chairwoman, and that candidate is confirmed by the Senate. Because Rosenworcel was already confirmed as a commissioner, she can serve in that role until her term expires.

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China

FCC Chair Ajit Pai Says U.S. Sentiment Towards China Changed Under Trump

Jericho Casper

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Screenshot of Ajit Pai from his presentation

January 8, 2021 — Outgoing Federal Communications Commission Chairman Ajit Pai recalled a shift in American views towards China, which he says largely occurred over the course of his past four years in office, during an interview with the Center for Strategic and International Studies on Wednesday.

“The United States government’s orientation toward geopolitical threats and the FCC’s orientation toward national security were entirely different before I came into office,” said Pai.

The official position of the U.S. government during the previous Administration was that the United States “welcomes the rise of a China that is stable, prosperous and peaceful,” and that “our two great nations, if we work together, have an unmatched ability to shape the course of the century ahead.”

The Obama FCC issued a white paper on cybersecurity on January 18, 2017, two days before Inauguration Day, that didn’t mention China at all.

“Things are different now—much different,” said Pai, adding that Americans today hold increasingly negative views of China.

Pai referenced statistics, saying “In the U.S., the percentage of people with an unfavorable opinion of China increased from 60 percent to 73 percent over the past year.” He questioned where the sentiment came from.

The change may be a result of China ‘showing its hand’ over past years, as the People’s Republic of China aimed to have more of a stake in publicly-available technology. There is increasing recognition that the Chinese state government is using its growing influence over global commerce to become a leading international tech supplier.

In May 2015, China’s State Council issued Made in China 2025, a national strategic plan to further develop the manufacturing sector of the PRC, by upgrading the production capabilities of Chinese industries from labor-intensive workshops into more technology-intensive powerhouses.

To help achieve independence from foreign suppliers, the initiative encourages increased production in high-tech products and services, with its semiconductor industry central to the plan, partly because advances in chip technology may “lead to breakthroughs in other areas of technology, handing the advantage to whoever has the best chips.”

In response, in 2018, the Council on Foreign Relations, an American think tank, stated that MIC 2025 is a “threat to U.S. technological leadership.” In June 2018, the Trump administration imposed higher tariffs on Chinese goods, escalating trade tensions between China and the U.S. The tariffs primarily apply to the manufactured goods included in the MIC 2025 plan, such as those integral to IT and robotics industries.

Pai’s FCC has played a known role in promoting anti-China rhetoric. Over the past four years, the FCC has gone from essentially not acknowledging China to holding a bipartisan consensus that the PRC poses national security threats to U.S. communications infrastructure.

The Trump FCC has hyper-focused on issues related to larger, geopolitical U.S.-China altercations, such as Pai’s ‘Rip and Replace’ and ‘open radio access networks’ initiatives, promotion of rhetoric surrounding a ‘5G race’, signaled approval of blocking TikTok and WeChat, and more.

Under Pai, the FCC prompted and largely completed ‘Rip and Replace’ initiatives, which barred, and further ordered the removal, of telecommunications equipment from Chinese manufacturers, like Huawei and ZTE, in U.S. networks.

Pai’s FCC further prioritized streamlining 5G deployments, through pole citing and other infrastructure provisions, in what became the ‘race to 5G’ between the U.S. and China. Pai’s open RAN initiative, announced in September 2020, mirrors MIC 2025, in the sense that it attempts to reignite American tech manufacturers to lead in software and hardware development to support 5G.

“As part of the FCC’s 5G FAST Plan, the agency has taken many actions to promote American leadership in next generation wireless services,” said Pai. “To that end, we want the United States to lead the way in researching and developing innovative approaches to mobile network deployment.”

Pai says U.S. manufacturers are having a hard time competing with Huawei

“As this market has consolidated, Huawei is in a position of strength,” said Pai.

In conversation with CSIS President and CEO John Hamre, Pai compared American company’s attempting to compete with Huawei, which is directly subsidized by the Chinese government, to fighting with “one-hand tied behind your back.”

“China’s subsidizes Huawei which gives them a leg up,” said Pai, adding that Huawei wireless equipment is often 30 to 70 percent cheaper than technology from competitors Ericcson and Nokia.

“We’re trying to address things defensively, by taking Huawei equipment out,” said Pai, going on to detail the U.S. strategy for a strong offense.  “Given that we have an advantage in software, and given that open RAN technologies generally have shown great promise, why don’t we pursue that area as well to enable us to break that consolidation, which has given Huawei an advantage.”

Pai noted that in order to compete with Huawei, the U.S. must build at a certain scale, and continually invest in research and development.

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