1 big thing: New push to make Big Tech pay for broadband

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Tech Policy

Tech Policy Thought Bubble

1 big thing: Congress plots next steps post-TikTok hearing

2. For your radar: Aides propelling tech policy 

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Happy Thursday! It’s been a busy day in tech, but we’re here to help break down what really matters from today’s TikTok hearing.

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1 big thing: Tech antitrust's uphill climb

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2. Exclusive: Americans look to Congress on digital divide, survey finds

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National

TikTok's CEO Shou Zi Chew defended the company Thursday from charges that it poses a national security threat in a hearing before lawmakers who fiercely advocated for banning the popular short-video app.

Why it matters: The White House and TikTok's critics in Congress say the app, which has 150 million U.S. users, puts their data at risk because TikTok is owned by ByteDance, a Chinese company.

The big picture: The House Committee on Energy and Commerce members made it unequivocally clear they view TikTok as a dangerous social media app and a national security threat. Rep. Tony Cárdenas (D-Ca.) at one point cited "life and death" issues connected to the app.

Chew repeatedly downplayed its connections to China and referenced TikTok's "unprecedented" data security practices compared to unnamed social media competitors. The committee didn't care.

Without much goodwill in Washington, TikTok will have to navigate a tenuous path forward to avoid serious consequences from Congress.

In a statement after the hearing, TikTok spokesperson Brooke Oberwetter said: "Shou came prepared to answer questions from Congress, but, unfortunately, the day was dominated by political grandstanding that failed to acknowledge the real solutions already underway."  

She criticized lawmakers who support a ban for not mentioning the businesses using the app or the First Amendment implications.

Throughout the hearing, members came out in support of a full ban of the app in the U.S. 

Rep. Cathy McMorris Rodgers (R-Wash.), chair of the committee, said at the hearing's outset: "ByteDance is beholden to the CCP, and ByteDance and TikTok are one and the same." 

She accused the platform of lying about ties to the Chinese government.

Chew argued in his opening remarks that Bytedance is a private company, beholden to shareholders and its board, not the Chinese government. He repeatedly categorized TikTok as a global enterprise when asked about whether it's a Chinese company.

Chew said he had not spoken to any representatives of the Chinese Communist Party since taking his leadership role at TikTok.

Rep. Anna Eshoo (D-Calif.) brought up China's National Security Law, which compels companies to share information with the government. "How do you convince the Congress of the United States that there can be a clean break?" she asked.

"Our plan is to move American data to be moved to American soil," Chew said. "I have seen no evidence that the Chinese government has access to [U.S. user] data."

Lawmakers challenged Chew on the same issues that plague all social media platforms, including privacy, impact on children's mental health and addiction.

Chew repeatedly said the app is no threat to Americans, declining to answer questions about his compensation and the company's revenue. 

He often told lawmakers he'd get back soon with specifics and that he "didn't believe" TikTok sells user data. He also said the app doesn't collect any more information on users than any other industry competitor.

Oberwetter emailed reporters to clarify two points brought up in the hearing, saying that TikTok does not sell data and the CEO of ByteDance, Liang Rubo, is not a member of the CCP.

Lawmakers noted dangerous viral trends on TikTok that have been associated with the deaths of younger users, such as the "blackout" choking challenge and content they said could encourage people to commit suicide.

Congress has been wanting to address such issues for years with a national privacy law and another that would boost protections for children and teens online; it has failed to do so.

One high-stakes moment occurred when TikTok took down a video inciting violence down a video in real-time after being flagged by the panel.

On the eve of Chew's first-ever testimony before Congress, the Biden administration indicated it would prefer to see a sale or spin-out of TikTok over a threatened ban of the app.

The Chinese government says it "resolutely opposes" a forced sale.

Catch up quick: TikTok's fate in the U.S. has been clouded since former president Donald Trump tried to force its sale in 2020. 

Negotiations at the Committee on Foreign Investments in the U.S. (CFIUS) have dragged on for years without offering a resolution.

TikTok says its plan to host all U.S. data with Oracle, firewalled from overseas access, will keep the app safe.

But critics, including U.S. intelligence officials, say Chinese law means any company would be required to share data with the government.

This story has been updated with additional developments and background.

Lawmakers blast TikTok in hearing with CEO, citing "life and death" issues

Shou Zi Chew will be grilled by members of Congress as pressure mounts on TikTok's owners.

TikTok CEO Shou Zi Chew testifies before the House Energy and Commerce Committee on Capitol Hill, March 23, 2023, in Washington, DC. Photo by Jim Watson/AFP via Getty Images

TikTok

Technology

President Biden has made the COVID-19 crisis and a post-Trump return to national unity and traditional democratic ideals his top priorities. From vaccinations to stimulus to schools, Biden is seeking bipartisan compromise while showing a willingness to use executive authority and bare Democratic majorities in the U.S. House and Senate to implement his policies. Republican leaders are navigating deep party divisions over if and how to move beyond former President Trump.

Politics & Policy

A bipartisan group of senators will reintroduce a bill Thursday directing the FCC to study the feasibility of collecting contributions for internet service from platforms like YouTube, Netflix and Google, Sen. Roger Wicker's office told Axios exclusively.

Why it matters: Congress hasn't given up on trying to find new ways to tax the companies that rely on internet service to reach consumers as the idea picks up steam abroad and sentiment against Big Tech remains high.

Wicker is a former Senate Commerce Committee chair, and Sen. Ben Ray Luján, the FAIR Contributions Act Democratic co-sponsor, chairs the Communications, Media and Broadband Subcommittee.

The big picture: Members of the Senate Commerce Committee tried a similar push last spring, voting the FAIR Contributions Act out of committee.

The European Commission is looking into its own potential program that would have Big Tech help foot the bill for investments in Europe's telecommunications network, something telecom operators have been pushing both there and in the U.S.

What they're saying: "It is important to ensure the costs of expanding broadband are distributed equitably and that all companies are held accountable for their role in shaping our digital future," Wicker said in a statement to Axios.

"This report will examine how the largest tech companies can pay their fair share. The future is online, and it’s critical that essential broadband programs receive robust funding," Luján said.

Flashback: The idea to tax Big Tech to underwrite the FCC's broadband fund, which supports internet service in rural areas, schools, libraries and hospitals, first picked up steam among Republicans in 2021.

A fee on phone bills pays for the Universal Service Fund, but that revenue base is decreasing.

Tech companies have fought hard against the idea that they're responsible for such contributions, with some arguing fees would inevitably be passed down to consumers.

Details: The FAIR Contributions Act, to be reintroduced by Wicker along with Sens. Todd Young, Mark Kelly and Luján, would direct the FCC to issue a report on "the feasibility of collecting USF contributions from internet edge providers."

In the report to Congress, the FCC would also be compelled to pinpoint sources of potential revenue from the companies, as well as any changes to current law that might be needed to get Big Tech to pay into the fund.

First look: New push to make Big Tech pay for broadband

Congress still wants Big Tech to help pay for broadband services.

Congress

A bipartisan group of senators will reintroduce a bill Thursday directing the FCC to study the feasibility of collecting contributions for internet service from platforms like YouTube, Netflix and Google, Sen. Roger Wicker&#x27;s office told Axios exclusively.Why it matters: Congress hasn&#x27;t given up on trying to find new ways to tax the companies that rely on internet service to reach consumers as the idea picks up steam abroad and sentiment against Big Tech remains high.

There was pretty much nothing Shou Zi Chew could have said to convince lawmakers that TikTok is safe. But Thursday's highly anticipated hearing with the TikTok CEO served another purpose: thrusting bipartisan legislative proposals into the limelight.

Why it matters: Companies and consumers alike have been begging for a national privacy standard since long before the TikTok controversy. But the alarm surrounding the hugely popular app is creating new impetus to pass a bill, namely the American Data Privacy and Protection Act.

Although an outright ban on the app is seen as a targeted approach to a more immediate national security threat, lawmakers recognize that a long-term solution to the risks all apps run is more meaningful.

The ADPPA, once reintroduced, will be the starting point for bipartisan privacy negotiations that hit promising momentum in the last Congress.

Bill proponents say language on data transfers, algorithmic transparency and kids’ protections would address issues related not only to TikTok but also to other U.S. apps that are vulnerable to foreign adversaries.

The big picture: Although E&C leaders agree TikTok is concerning, Chair Cathy McMorris Rodgers is more bullish on a two-pronged approach that includes an outright ban and comprehensive privacy legislation.

Ranking member Frank Pallone is open to a ban but is more focused on how a privacy law can address the issues that plague all social media platforms.

What they’re saying: Chew told lawmakers he supports updating the Children’s Online Privacy Protection Act, an idea being pursued by Sen. Ed Markey in his COPPA 2.0.

Efforts to pass online protections for kids last year failed in large part because the two chambers could not agree on passing kid-specific bills like COPPA 2.0 or a comprehensive approach like the ADPPA.

Chew’s assertion to lawmakers that he supports a comprehensive privacy bill was also met with skepticism as lawmakers view it as mere posturing. Even if the ADPPA were enacted, some lawmakers would still be pursuing a ban on the app, a committee aide said.

Rep. Yvette Clarke told Axios she would reintroduce her Algorithmic Accountability Act in June. The bill, which she touted during the hearing, would address content moderation concerns, including programming bias that perpetuates race-based discrimination.

The ADPPA has language on civil rights and algorithms, but Clarke said it’s only a “good start.”

Clarke said she’s waiting until June to account for rapidly developing technology: “We realize that the technology is evolving really quickly, especially around AI, and we want to make sure the implications around discrimination are not dated.”

State of play: McMorris Rodgers is strategizing with House Speaker Kevin McCarthy and Senate leaders to pass a federal privacy bill, according to a committee aide.

Regarding a targeted ban on the app, McMorris Rodgers has not backed any particular bill but does not want to leave too much discretion to any administration.

Sen. Mark Warner’s bipartisan RESTRICT Act would empower the Commerce Department to deal with tech products that foreign adversaries have an interest in.

Rep. Bob Latta and others brought up Section 230 protection of platforms like TikTok, and suggested it should be amended to not cover algorithmic suggestion of content.

The bottom line: Although Chew’s appearance sparked a rare show of bipartisanship on the Hill, the ADPPA still faces an uphill battle. 

The same sticking points from last year remain, namely California lawmakers. Rep. Anna Eshoo told Axios she still has issues with the bill, as California concerns with a federal law weakening their state measure remain.  

Congress plots next steps post-TikTok hearing

The alarm surrounding the hugely popular app is creating new impetus to pass the American Data Privacy and Protection Act.

Cathy McMorris Rodgers makes an opening statement before TikTok CEO Shou Zi Chew testified Thursday. Photo: Tom Williams/CQ-Roll Call Inc. via Getty Images

There was pretty much nothing Shou Zi Chew could have said to convince lawmakers that TikTok is safe. But Thursday&#x27;s highly anticipated <a class="gtmContentClick" data-vars-link-text="hearing" data-vars-click-url="https://www.axios.com/2023/03/23/tiktok-ceo-shou-zi-chew-hearing-congress" data-vars-content-id="85d6bcc6-f73c-40a4-bb1e-2c493b993693" data-vars-headline="Congress plots next steps post-TikTok hearing" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/03/23/tiktok-ceo-shou-zi-chew-hearing-congress" target="_self">hearing</a> with the TikTok CEO served another purpose: thrusting bipartisan legislative proposals into the limelight.Why it matters: Companies and consumers alike have been begging for a national privacy standard since long before the TikTok controversy. But the alarm surrounding the hugely popular app is creating new impetus to pass a bill, namely the American Data Privacy and Protection Act.

Media Trends

Axios Media Trends

The Biden Administration has warned TikTok that it faces a ban in the U.S. if its Chinese parent company, ByteDance, does not sell its stake in the U.S. version of the app, a source confirmed to Axios. 

Why it matters: TikTok has become one of the most popular mobile apps in the country, amassing over 100 million U.S. users. Banning it would have an immediate impact on millions of everyday Americans, and would mark a significant escalation of tensions between China and the U.S.

Details: The Committee on Foreign Investment in the United States (CFIUS), a regulatory arm that reviews foreign investments in the U.S., told TikTok that the government planned to ban the app in the U.S. if its owners didn't sell it, according to a TikTok source familiar with the situation. 

Their outreach included a broad outline of what a proposal for TikTok to remain in the U.S. would look like to satisfy the government's national security concerns.

Yes, but: It isn't clear to TikTok what CFIUS means by having its owners divest their stake, given that a large percentage of ByteDance's shares are owned by global investment firms, the TikTok source noted, adding that CFIUS did not provide details or a written order.

The source said the company wants to resolve these questions and will continue to invest in data security efforts, like Project Texas, a series of steps TikTok is taking alongside U.S. software giant Oracle to separate its U.S. operations' backend functions and code from its Chinese arm. 

What they're saying: TikTok argues divestiture wouldn't address the government‘s national security concerns. 

"If protecting national security is the objective, divestment doesn't solve the problem: a change in ownership would not impose any new restrictions on data flows or access," it said in a statement.

"The best way to address concerns about national security is with the transparent, U.S.-based protection of U.S. user data and systems, with robust third-party monitoring, vetting, and verification, which we are already implementing."

The other side: TikTok's critics say that Chinese laws require Chinese-owned companies to share data with the Chinese government and argue that as long as the company is controlled by Chinese owners, the U.S. can't be certain American users' data is safe. 

How we got here: The Trump Administration threatened to ban TikTok in 2020 if it didn't sell to a U.S. company, citing national security concerns. 

At the time, TikTok was the fastest-growing app in the U.S., thanks to the pandemic-driven lockdowns coupled with billions of dollars in paid marketing.

The Biden Administration has been privately working to negotiate a deal with TikTok that would address its national security concerns ever since.

TikTok's Project Texas proposal involves working with U.S. software giant Oracle to store all U.S. user data in the U.S., and giving Oracle access to audit its algorithms and content moderation policies. 

The big picture: The Biden administration and members of Congress have ramped up criticism of TikTok and Chinese technology firms broadly in recent weeks.

Last week, a bipartisan group of 12 senators introduced legislation that would empower the Commerce Department to ban any Chinese technology that was deemed an immediate national security concern. 

Last December, the Senate passed a bill to ban TikTok on government devices. 

The Wall Street Journal first reported the news that CFIUS contacted TikTok about the possible ban.

Be smart: Those efforts have made it appear less likely that TikTok's desired data security deal, which has been under review for more than two years, will be considered sufficient to satisfy the government's concerns.

TikTok, meanwhile, has been making the rounds from Washington to the South by Southwest Festival to tout the Project Texas initiative.

What to watch: Shou Zi Chew, TikTok's chief executive, is set to testify in Congress next week.

U.S. tells TikTok owners to sell app or face a ban

The video app needs to be sold to protect U.S. user data, the Biden administration told the company.

Illustration of an anvil swaying back and forth above the tiktok app icon

The Biden Administration has warned TikTok that it faces a ban in the U.S. if its <a class="gtmContentClick" data-vars-link-text="Chinese" data-vars-click-url="https://www.axios.com/world/china" data-vars-content-id="b0b25023-0896-4a72-bd24-95926bcb83fe" data-vars-headline="U.S. tells TikTok owners to sell app or face a ban" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/world/china" target="_self">Chinese</a> parent company, ByteDance, does not sell its stake in the U.S. version of the app, a source confirmed to Axios. Why it matters: TikTok has become one of the most popular mobile apps in the country, amassing over 100 million U.S. users. Banning it would have an immediate impact on millions of everyday Americans, and would mark a significant escalation of tensions between China and the U.S.

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

China is becoming the most formidable rival America has faced, and the risk of confrontation with Russia, North Korea or Iran still looms. Authoritarians are rising, the chaotic Afghanistan exit revealed the limits of U.S. power, and the pandemic, climate change and other critical challenges continue to pose grave threats.

World

The Federal Trade Commission is proposing amending a federal rule so consumers can more easily cancel recurring subscriptions, the agency announced Thursday. 

Why it matters: The proposal, which the agency says aims to cover "everything from cosmetics to newspapers to gym memberships," is another move by FTC chair Lina Khan to try to protect consumers in a digital economy.

Stricter rules from the FTC around subscriptions may draw the ire of the business community, who is already battling with the agency over what they think are unfair and overreaching policies.

The agency wants a "click to cancel" provision, requiring sellers to make cancelling as easy as signing up for a service. 

What they're saying: "Companies should not be able to manipulate consumers into paying for subscriptions they don't want," Khan said on a call with reporters ahead of the release of the proposed rule. "This is a semi-universal experience for American consumers, and we have the legal authority to do this."

"We've seen companies deploying dark patterns and manipulative design tactics... we want to make sure companies aren't tricking consumers into signing up in the first place," she said. "It should be as easy to cancel as it is to sign up."

Such a provision would help rescue consumers "from seemingly never-ending struggles to cancel unwanted subscription payment plans," an agency release reads.

How it works: The FTC proposes amending the Negative Option Rule, established in 1973 to fight against unfair or deceptive practices around subscriptions or memberships.

The proposed amendment would "prohibit misrepresentations, give people important information in clear ways, make sure people know what they're agreeing to" and "let people cancel simply and easily," per an agency fact sheet.

Such a proposed rule would apply to all subscription features across all media with the aim of letting people cancel "without jumping through lots of hoops."

Violations of the proposed rule would carry a $50,000 fine per day of noncompliance, Khan said.

Details: The FTC says it receives thousands of consumer complaints yearly about practices such as making people cancel services in person or keeping them on hold with customer service before cancelling. 

An amended rule would require "a simple cancellation mechanism," stipulations around what sellers can do to keep customers paying and requirements to remind consumers before automatic renewal.

The FTC voted 3-1 on publishing the notice of proposed rule-making, with outgoing Republican commissioner Christine Wilson dissenting.

What to watch: Khan said on the call she's not worried about pushback: "We're just doing our job... this type of intervention is an unobjectionable as they come." She said the proposed rule "is not expanding our authority in any way."

Khan said a dramatic growth in subscription-based business models, like the proliferation of streaming services, increases the urgency for the FTC to make such a move.

Next, the agency will receive public comments on the proposal before anything becomes final.

outgoing Republican commissioner Christine Wilson

FTC wants to make it easier to cancel subscriptions

The agency says the proposal covers "everything from cosmetics to newspapers to gym memberships."

Illustration of a hand cursor holding four credit cards.

Federal Trade Commission (FTC)

The Federal Trade Commission is proposing amending a federal rule so consumers can more easily cancel recurring subscriptions, the agency announced Thursday. Why it matters: The proposal, which the agency says aims to cover &quot;everything from cosmetics to newspapers to gym memberships,&quot; is another move by FTC chair Lina Khan to try to protect consumers in a digital economy.

Ashley Gold

Stories

Lawmakers blast TikTok in hearing with CEO, citing "life and death" issues

Congress plots next steps post-TikTok hearing

FTC wants to make it easier to cancel subscriptions

First look: New push to make Big Tech pay for broadband

U.S. tells TikTok owners to sell app or face a ban

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