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Yoni Mazor: Three Amazon and Supply Chain Predictions for 2022

The omicron variant could spell trouble for the supply chain in 2022.

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The author of this Expert Opinion is Yoni Mazor, chief growth officer of GETIDA

With a hectic 2021 over, it’s a good opportunity to explore 3 Amazon and supply chain predictions for 2022.

Heading into 2022, the world will also be marking the entrance to the third year of recovering from COVID-19 and its effects. At the beginning of 2020, the world was shaken up by the eruption of the pandemic and its spread from Asia all over the world. The challenges of the pandemic for the global economy have been significant; here are 3 predictions for how things might look in 2022.

1. Global supply chain

The global economy will probably continue to struggle due to the challenges of constant interruptions in the global supply chain. The new omicron variant, which proves to be highly contagious as it spreads at record-breaking speed, has already placed numerous countries around the world under travel, work and movement restrictions.

The limitations that omicron has imposed on these countries will add another layer of complexity to the interruptions to the global supply chain during the first quarter. It will be compounded by the strain that omicron will place on the workforce itself.

The costs of shipping inventory and supplies around the world rose sharply during 2021 and are currently cooling off a bit from the surge. Until the appearance of the new omicron variant, it was expected that costs would continue to cool down during the year at a moderate pace, however, such predictions are volatile as omicron is causing the same type of interruptions and price spikes that caused the whole global supply chain to reach this point.

Some of the main strains on the global supply chain that are expected to continue into 2022 are semiconductor supply shortages, shortages in container shipping, and shortages in professional labor for transportation carriers and at seaports. The rising costs of transportation, labor, and energy are challenging the global supply chain while also impacting financial institutions and governments all over the world. The reason: rising costs are another way to describe the next point of our predictions, inflation.

2. Inflation

Most of the current generation in the United States are not familiar with the meaning and challenges of inflation. The last era of significant inflation was in the early 80s when Ronald Reagan was president. Many economists describe inflation as a wild beast that is very hard to tame, capture and place back in its cage once it breaks loose. Another way to describe inflation is like a pendulum that keeps swinging and raising costs in one direction, that later raises costs in another direction, in an unexpected and disruptive way, and on and on it swings.

The Federal Reserve has kept a low-interest-rate environment for the past decade, and usually during inflationary periods, as prices of everything are rising, the Fed is expected to raise interest rates to help people get more interest on their savings and protect the purchasing power of most households. Nevertheless, inflation during 2021 has already crossed the 6% mark, which is about three times higher than the target of 2% per year usually aimed for by the Fed. Despite that, the Fed has kept interest rates low, and by doing so, it has yet to apply this key tool of raising interest to combat inflation.

There is a bit of challenge for many economists and the Fed to try to distinguish between real inflation of the economy or transitional inflation in the economy due to the effects of the pandemic and the global supply chain challenges. This might explain why the Fed has focused on keeping a low-interest-rate environment, as it is more concerned with battling the pandemic and global supply chain strains than with real inflation striking the economy.

It is not clear how long the Fed will be able to keep its current position if real inflation keeps its momentum and does not slow down. If the effects of the global supply challenges and its inflationary triggers do appear to be cooling off, and real inflation is causing havoc, we can expect the Fed to begin increasing interest rates. The Fed might raise interest rates during the first quarter of the year, or might even stretch into second or third quarters if omicron places further significant strains on the US economy.

3. Amazon

The global pandemic benefited the e-commerce industry and Amazon, the industry juggernaut, when it broke out in early 2020. It accelerated the adoption of shopping online by many consumers in the U.S. by a few good years, as consumers stranded at home could only shop for products they needed online. During 2021 Amazon’s financial results continued to grow at a rate of about 18% year on year, however not as dramatically as the 37% YOY rate in 2020.

As the largest online marketplace in the U.S., Amazon very much reflects the U.S. economy. It likewise gets heavily affected by global supply chain disruptions and inflationary pressures. If such challenges continue to affect Amazon’s marketplace and its stakeholders, the year 2022 might prove itself as the most challenging yet for Amazon. To add to that, it will be the first full year of not having its founder, Jeff Bezos, as CEO of the company. Andy Jassy took over the role on July 5th, 2021.

Amazon will be facing challenges in the upcoming years from a few main friction points. The first is the U.S. government cracking down on Amazon’s perceived marketplace dominance. The U.S. government will continue to challenge Amazon to oversee that company’s power is neither abusive nor destructive to the economy.

The global supply chain interruptions have challenged Amazon’s sourcing capabilities as well as many of its third-party sellers during 2021. They have all struggled to keep their products in stock on the platform. These supply constraints limit the depth and variety of products on Amazon’s platform with which most consumers are familiar. This trend, in turn, could cause consumers to look for alternatives in other marketplaces if it continues into 2022. One thing is clear about this prediction: third-party Amazon sellers will have to learn the art of Amazon business negotiation to keep their inventory levels in good shape, along with having their cost structures in check.

Another friction point is how inflation is affecting the competitiveness of the products offered on Amazon. It is important to remember that about 60% of Amazon’s marketplace revenue comes from third-party sellers. Most of these third-party sellers are not familiar with, nor equipped to battle inflation. Thus if they raise their prices on the platform during 2022 to adjust to the cost inflation and prices become too expensive compared with other traditional and established retailers, it will affect Amazon’s ability to stay competitive and maintain its growth momentum over other competitors.

Signs of weakness and volatility

The global economy is a marvelous and complex system that connects dots and lines in many unexpected ways. In the past few decades, this system has provided great prosperity to many countries. However, its complexity during a global pandemic is showing signs of weakness and volatility. By examining the status of the global supply, inflation and Amazon in the past year of 2021, we can see how they are all interconnected and affect each other in various ways.

This interconnectivity will determine much of where things are heading for us all during 2022. There is no attempt here to predict the future, but an attempt to examine past events and their effects, and try to assess where it might be all going next.

Yoni Mazor is the chief growth officer and co-founder of GETIDA. He began developing GETIDA after successfully operating a $20 million yearly Amazon business, selling fashion brands internationally. GETIDA specializes in Amazon discrepancy analytics and consulting. By utilizing data visibility technology, GETIDA focuses on discovering and managing financial and inventory-related discrepancies with billions of dollars of transactions managed daily. He previously served in special Navy intelligence. This Expert Opinion is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

 

Broadband Breakfast is a decade-old news organization based in Washington that is building a community of interest around broadband policy and internet technology, with a particular focus on better broadband infrastructure, the politics of privacy and the regulation of social media. Learn more about Broadband Breakfast.

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Dae-Keun Cho: Demystifying Interconnection and Cost Recovery in South Korea

South Korean courts have rejected attempts to mix net neutrality arguments into payment disputes.

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The author of this Expert Opinion is Advisor in Dae-Keun Cho, a member of the telecom, media and technology practice team at Lee & Ko.

South Korea is recognized as a leading broadband nation for network access, use and skills by the International Telecommunications Union and the Organisation for Economic Co-operation and Development.

South Korea exports content and produces platforms which compete with leading tech platforms from the US and China. Yet few know and understand the important elements of South Korean broadband policy, particularly its unique interconnection and cost recovery regime.

For example, most Western observers mischaracterize the relationship between broadband providers and content providers as a termination regime. There is no such concept in the South Korean broadband market. Content providers which want to connect to a broadband network pay an “access fee” like any other user.

International policy observers are paying attention to the IP interconnection system of IP powerhouse Korea and the lawsuit between SK Broadband (SKB) and Netflix. There are two important subjects. The first is the history and major regulations relating to internet protocol interconnection in South Korea. Regulating IP interconnection between internet service providers is considered a rare case overseas, and I explain why the Korean government adopted such a policy and how the policy has been developed and what it has accomplished.

The second subject is the issues over network usage fees between ISPs and content providers and the pros and cons. The author discusses issues that came to the surface during the legal proceedings between SKB and Netflix in the form of questions and answers. The following issues were identified during the process.

First, what Korean ISPs demand from global big tech companies is an access fee, not a termination fee. The termination fee does not exist in the broadband market, only in the market between ISPs.

In South Korea, content providers only pay for access, not termination

For example, Netflix’s Open Connect Appliance is a content delivery network. To deliver its content to end users in Korea, Netflix must purchase connectivity from a Korean ISP. The dispute arises because Netflix refuses to pay this connectivity fee. Charging CPs in the sending party network pay method, as discussed in Europe, suggests that the CPs already paid access fees to the originating ISPs and should thus pay the termination fee for their traffic delivery to the terminating ISPs. However in Korea, it is only access fees that CPs (also CDNs) pay ISPs.

In South Korea, IP interconnection between content providers and internet service providers is subject to negotiation

Second, although the IP interconnection between Korean ISPs is included in regulations, transactions between CPs and ISPs are still subject to negotiation. In Korea, a CP (including CDN) is a purchaser which pays a fee to a telecommunications service provider called an ISP and purchases a public internet network connection service, because the CP’s legal status is a “user” under the Telecommunications Business Act. Currently, a CP negotiates with an ISP and signs a contract setting out connection conditions and rates.

Access fees do not violate net neutrality

South Korean courts have rejected attempts to mix net neutrality arguments into payment disputes. The principle of net neutrality applies between the ISP and the consumer, e.g. the practice of blocking, throttling and paid prioritization (fast lane).

In South Korea, ISPs do not prioritize a specific CP’s traffic over other CP’s because they receive fees from the specific CP. To comply with the net neutrality principle, all ISPs in South Korea act on a first-in, first-out basis. That is, the ISP does not perform traffic management for specific CP traffic for various reasons (such as competition, money etc.). The Korean court did not accept the Netflix’s argument about net neutrality because SKB did not engage in traffic management.

There is no violation of net neutrality in the transaction between Netflix and SKB. There is no action by SKB to block or throttle the CP’s traffic (in this case, Netflix). In addition, SKB does not undertake any traffic management action to deliver the traffic of Netflix to the end user faster than other CPs in exchange for an additional fee from Netflix.

Therefore, the access fee that Korean ISPs request from CPs does not create a net neutrality problem.

Why the Korean model is not double billing

Korean law allows for access to broadband networks for all parties provided an access fee is paid. Foreign content providers incorrectly describe this as a double payment. That would mean that an end user is paying for the access of another party. There is no such notion. Each party pays for the requisite connectivity of the individual connection, nothing more. Each user pays for its own purpose, whether it is a human subscriber, a CP, or a CDN. No one user pays for the connectivity of another.

Dae-Keun Cho, PhD is is a member of the Telecom, Media and Technology practice team at Lee & Ko. He is a regulatory policy expert with more than 20 years of experience in telecommunications and ICT regulatory policies who also advises clients on online platform regulation policies, telecommunications competition policies, ICT user protection policies, and personal information protection. He earned a Ph.D. in Public Administration from the Graduate School of Public Administration in Seoul National University. This piece is reprinted with permission.

Request the FREE 58 page English language summary of Dr. Dae-Keun Cho’s book Nothing Is Free: An In-depth report to understand network usage disputes with Google and Netflix. Additionally see Strand Consult’s library of reports and research notes on the South Korea.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Luke Lintz: The Dark Side of Banning TikTok on College Campuses

Campus TikTok bans could have negative consequences for students.

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The author of this expert opinion is Luke Lintz, co-owner of HighKey Enterprises LLC

In recent months, there have been growing concerns about the security of data shared on the popular social media app TikTok. As a result, a number of colleges and universities have decided to ban the app from their campuses.

While these bans may have been implemented with the intention of protecting students’ data, they could also have a number of negative consequences.

Banning TikTok on college campuses could also have a negative impact on the inter-accessibility of the student body. Many students use the app to connect with others who share their interests or come from similar backgrounds. For example, international students may use the app to connect with other students from their home countries, or students from underrepresented groups may use the app to connect with others who share similar experiences.

By denying them access to TikTok, colleges may be inadvertently limiting their students’ ability to form diverse and supportive communities. This can have a detrimental effect on the student experience, as students may feel isolated and disconnected from their peers. Additionally, it can also have a negative impact on the wider college community, as the ban may make it more difficult for students from different backgrounds to come together and collaborate.

Furthermore, by banning TikTok, colleges may also be missing out on the opportunity to promote diverse events on their campuses. The app is often used by students to share information about events, clubs and other activities that promote diversity and inclusivity. Without this platform, it may be more difficult for students to learn about these initiatives and for organizations to reach a wide audience.

Lastly, it’s important to note that banning TikTok on college campuses could also have a negative impact on the ability of college administrators to communicate with students. Many colleges and universities have started to use TikTok as a way to connect with students and share important information and updates. The popularity of TikTok makes it the perfect app for students to use to reach large, campus-wide audiences.

TikTok also offers a unique way for college administrators to connect with students in a more informal and engaging way. TikTok allows administrators to create videos that are fun, creative and relatable, which can help to build trust and to heighten interaction with students. Without this platform, it may be more difficult for administrators to establish this type of connection with students.

Banning TikTok from college campuses could have a number of negative consequences for students, including limiting their ability to form diverse and supportive communities, missing out on future opportunities and staying informed about what’s happening on campus. College administrators should consider the potential consequences before making a decision about banning TikTok from their campuses.

Luke Lintz is a successful businessman, entrepreneur and social media personality. Today, he is the co-owner of HighKey Enterprises LLC, which aims to revolutionize social media marketing. HighKey Enterprises is a highly rated company that has molded its global reputation by servicing high-profile clients that range from A-listers in the entertainment industry to the most successful one percent across the globe. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Jessica Dine: Broadband Networks Are Doing Well, Time to Shift to Adoption Gap

There is a perennial policy debate over why the digital divide exists and what to do about it.

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The author of this Expert Opinion is Jessica Dine, a research assistant for broadband policy at the ITIF

It turns out there are two digital divides in America. The first one is the familiar divide between those who have Internet subscriptions and those who don’t. Everyone agrees this is a persistent concern, with about 10 percent of the public lacking subscriptions at last count. But then we come to the second divide: There is a perennial policy debate over why the digital divide exists and what to do about it.

This second digital divide is once again on full display around the latest edition of the biennial Communications Marketplace Report from the Federal Communications Commission. Those who think that broadband should fundamentally be in the hands of the government will no doubt claim it shows America’s private-sector broadband system is a failure; we are a backward nation with inadequate service offerings that are too expensive for consumers and too profitable for providers. The solution to this, advocates say, is to weaken corporate providers and strengthen non-corporate alternatives, including government-run networks.

But the empirical evidence belies their claims. An evenhanded look at broadband data show that U.S. broadband infrastructure is not the problem; it’s a lack of adoption that’s causing the digital divide to persist.

Comprehensive data reveal that almost everyone in the United States is passed by fixed broadband matching the FCC’s 25 Megabits per second (Mbps) download and 3 Mbps upload speed requirement. And the expansive coverage doesn’t end there — 94 percent of people are passed by networks at speeds of 100/10, and the majority of Americans have multiple providers at broadband speeds or higher. 4G wireless coverage is almost everywhere; 5G, still in its early stages, already covers the majority of the U.S. population at 93 percent and reaches competitively high speeds for most of the country. The first iteration of the long-awaited National Broadband Map confirms that deployment is strong. Modern broadband deployment in the United States outpaces coverage in the European Union and is competitive at the international level. And with the use of fixed-wireless and low-earth-orbit satellites continuing to grow, it’s only getting better.

As for prices, U.S. broadband has been shown to be relatively affordable. The ITU finds U.S. fixed broadband prices are just one percent of an average person’s income, proportionately lower than the prices charged in Japan and South Korea. While U.S. mobile prices are relatively higher in the rankings, they’re still significantly lower than one percent of the average income per person. Moreover, Americans are paying for high-speed, high-quality networks, as evidenced by the Ookla’s latest Speedtest Global Index, which put U.S. fixed network speeds in 6th place globally, above even digital frontrunners like South Korea and Denmark. By October 2022, U.S. fixed median download and upload speeds were each roughly seven times the FCC broadband benchmark.

Time to focus on what’s causing the digital divide to persist: Broadband adoption

But even though broadband deployment is already strong, the government has packaged billions of dollars for more to take place. It’s time to stop throwing money at deployment. It’s time to focus on what’s really causing the digital divide to persist, and that’s broadband adoption.

It’s one thing to have access to broadband service but another to “adopt” — to sign up for and purchase — that service. The United States has room for improvement when it comes to adoption. Ninety percent of households subscribe to some form of Internet connection — for context, that’s similar to broadband adoption in 10 EU countries according to Eurostat, and it’s nine percentage points behind the leader. Though U.S. adoption rates are not appallingly low, they still lag behind the country’s performance in deployment. In other words, a substantial percentage of Americans, given the opportunity to connect to the Internet, simply chooses not to.

While a simplistic policy solution would throw money at the problem to lower prices, that likely wouldn’t make a significant dent in the adoption rate. The U.S. Commerce Department’s Internet Use Survey finds, instead, that the main barrier to connectivity is a lack of interest, with 58 percent of respondents stating so. Meanwhile, price comes in distant second, with only 18 percent of respondents putting it down as their answer.

No matter how much money and effort policy makers put into closing the digital divide, they will never close it if they fail to target the true root cause. Pouring money into deployment under the misimpression that U.S. networks themselves are lacking or designing policies to regulate allegedly high U.S. prices and ramp up slow speeds — these are tactics that take scarce funds away from the more pressing challenge of adoption.

Jessica Dine is a research assistant for broadband policy at the Information Technology and Innovation Foundation. She has conducted research and written on closing the digital divide, the state of U.S. broadband, and how 5G can play a role in reducing environmental harm. She holds a B.A. in economics and philosophy from Grinnell College. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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