Kim Hart

Trump: AT&T merger "not good for the country"

Photo: Manuel Balce Ceneta / AP

President Trump reiterated his stance against AT&T's merger with Time Warner on Tuesday, the day after the Justice Department sued to block the deal. While he didn't wade into litigation, he added, "personally, I've always felt that that was a deal that's not good for the country."

What's next: AT&T is expected to request an expedited trial to fight the Justice Department's lawsuit. The case has been assigned to Judge Richard Leon, a senior judge on the District of Columbia District Court, who was appointed by President George W. Bush, Reuters reports. Some observers see that as a good sign for the deal, as Republican-appointed judges are typically more business-friendly.


Students worked illegal overtime to assemble iPhoneX in China

Staff members work on the production line at the Foxconn complex in the southern Chinese city of Shenzhen, southern China, in 2012. Photo: Kin Cheung / AP

Students have been working illegal overtime hours to assemble the iPhoneX at Apple's main supplier in Asia, the Financial Times reports. Six high school students told the FT they often work 11-hour days in a Foxconn factory, where they were told they must get "work experience" in order to graduate.

Why it matters: Apple dealt with iPhoneX production issues that delayed its launch. Providing flexible student labor is one of the incentives that China's Henan province offers to keep Foxconn there, the FT said. Foxconn said it offers the internship program in cooperation with local governments and schools.

What the companies said: Apple and Foxconn acknowledged they were aware of cases of interns working overtime and were addressing the issue. The companies said the students were compensated and working voluntarily at the factory, but Apple said the students "should not have been allowed to work overtime."


The ripple effect of the AT&T merger lawsuit

Assistant Attorney General nominee Makan Delrahim testifies before the Senate Judiciary Committee's hearing on his nomination in May 2017. Cliff Owens / AP

The Justice Department's move to block AT&T's proposed $85 billion bid for Time Warner puts on hold a slew of media and telecom transactions that may have been in the works. And it could upend the antitrust precedent that has created some of today's biggest media companies.

Why it matters: The lawsuit is not only a blow to AT&T, but also to other companies hoping that similarly structured deals that combine content producers and distributors have a shot with the current administration. It could also bring new scrutiny to the size and power of Google and Facebook, which have become media powerhouses in their own right.

The lawsuit is also a surprise. Despite President Trump's campaign-trail criticism of the deal, it was widely expected to win government approval from a Republican Justice Department. Rumblings that regulators had serious concerns about the deal only surfaced in the past couple of weeks.

"It creates vast uncertainty," said former FTC policy director and antitrust expert David Balto, who doesn't think the DoJ will win its case in court. "You have to go back half a century to find a DoJ victory in this area."

Why DoJ's move came as a shock to AT&T:

  • "Vertical" mergers that combine companies in two different industries (AT&T is considered a telecom company and Time Warner is a content provider) are seen as less of an antitrust threat than "horizontal" mergers that combine two competing companies (such as AT&T's unsuccessful attempt to purchase T-Mobile).
  • Before joining the administration, DoJ Antitrust chief Makan Delrahim had said he didn't see problems with the proposed merger. He also said at his confirmation hearing that he would not allow political interference in merger reviews.
  • In a similarly structured deal, Comcast was allowed to buy NBCUniversal in 2011, albeit with conditions designed to prevent Comcast from using its market leverage to hamstring competitors.

The big picture: A number of telecom providers want to deploy their own streaming services with original programming to keep up with the likes of Netflix and Amazon. To do that, many are exploring entertainment acquisitions to keep up in the cutthroat race for content. AT&T's bid for Time Warner was a litmus test for others who are also eyeing deals.

  • For example, Verizon and Comcast have both expressed interest in 21st Century Fox's entertainment business. This mirrors AT&T's bid, because it would involve the acquisition of studio businesses as well as cable channels.

What to watch: The Justice Department said the combined company "would have the incentive and ability to charge more for Time Warner's popular networks" and that it could keep others out of the streaming video market.

  • A deal may still be on the table if the companies are willing to sell off some assets to address antitrust concerns, according to Justice officials, who also stressed that its move to block this particular merger does not mean others won't pass muster.
  • AT&T plans to fight it court, saying its conclusion is a "radical and inexplicable departure from decades of antitrust precedent."
  • AT&T's Randall Stephenson will continue to raise the possibility of White House interference in the case, given the "abrupt change in the application of antitrust law here."

The impact: If DoJ loses the case, it could spur a flood of consolidation. If it wins, it could set a new precedent that changes the conventional wisdom about the competitive impact of vertical mergers.

The legal fight may also bring a new focus on the question of media competition and the size of the most powerful players — notably Google and Facebook.

  • AT&T and Time Warner execs originally pitched the deal as a way to build a stronger rival to the major platforms companies like Google, Facebook and Amazon, which are gobbling up a growing share of programming and have drastically altered distribution models.
  • Stephenson noted that these companies, in addition to Netflix, are also creating original content yet have so far been unchallenged by antitrust cops.
  • Mark Cuban, who testified in favor of the deal at a congressional hearing last year, tweeted that Facebook and Google will be the big losers of DoJ's suit to block the deal. "Their media advertising, content and distribution dominance will be a defense at trial. That could create bigger issues for them."

The bottom line: Despite the intrigue about White House influence, the antitrust case will rest solely on the competitive effects of the deal, said Gene Kimmelman, CEO of Public Knowledge and a former DoJ antitrust official.

"In the end, this is about law enforcement," he said. "Regardless of speculation about political environment surrounding the transaction, the only thing the court will care about is whether the merger is a violation of the Clayton Act."


Microsoft uses "TV white space" to provide internet in Puerto Rico

A brigade from the Electric Power Authority repairs distribution lines damaged by Hurricane Maria in the Cantera community of San Juan, Puerto Rico. Photo: Carlos Guisti / AP.

Microsoft is using vacant airwaves between TV stations to power broadband connections in Puerto Rico and the U.S. Virgin Islands that were severely damaged by hurricanes.

Why it matters: Almost 40% of cell sites are still down in the areas hit by the storms, which are still dealing with widespread power outages. Microsoft is also hoping to expand its white space technology in hard-to-reach areas of the U.S., so Puerto Rico and the Virgin Islands serve as useful testing grounds.

Details: Microsoft partnered with community organizations and local internet companies and broadcasters to deploy the so-called "TV White Space" connectivity and internet hot-spots at a food distribution site, a health clinic and the University of Puerto Rico, the company said in a blog post Monday.

Other efforts: Several tech companies have deployed experimental technologies to bring internet service to the hurricane-ravaged areas. Alphabet (Google's parent company) rolled wireless service through a network of balloons, known as Project Loon.


Report: Trump administration plans to halt work permits for H-1B spouses

Computer information specialist and immigrant from India, Santosh Pala, right, carries his three-month-old son Hemang during a prayer procession at the Karya Siddhi Hanuman Temple in Frisco, Texas, in 2015. Photo: LM Otero / AP.

The Trump administration plans to halt work permits for the spouses of H-1B visa holders, which would discourage H-1B visa applicants from staying in the country and would revoke the ability to work for thousands of visa holders' spouses, the San Francisco Chronicle reports.

Why it matters: It's another move by the Trump administration to make it more difficult for foreign workers to come to America in its larger effort to safeguard American jobs.

  • Approximately 100,000 spouses and children of H-1B visa holders come to the U.S. every year on a visa known as H-4.
  • These workers were not able to work in the U.S. before 2015, when President Barack Obama created a work permit for some H-4 holders.
  • Silicon Valley will be disproportionately affected, since many high-tech employers employ H-1B workers. Because of the region's high cost of living, It is difficult for a family to survive on one salary and, as a result, may not be able to stay in the country.
  • A decision on the H-4 work authorization will likely come soon, immigration attorneys told The Chronicle.

Other efforts: Earlier this week, a House committee advanced Rep. Darrell Issa's bill to increase restrictions on how "H-1B dependent" companies can obtain the work permits for employees. Find details of Issa's bill here, and the Indian firms' lobbying efforts against crack downs on H-1B visas here.


Antitrust chief's comments sound ominous for AT&T-Time Warner

Assistant Attorney General, Antitrust Division nominee Makan Delrahim testifies before the Senate Judiciary Committee's hearing on his nomination in May 2017. Cliff Owens / AP

The Justice Department's top antitrust cop laid out some clues about his merger philosophy — and it doesn't bode well for AT&T's proposed $85 billion takeover of Time Warner.

Both companies have pushed for "behavioral remedies" — in other words, conditions to prevent specific anticompetitive behaviors by merging companies — to address antitrust concerns.

Don't hold your breath: In a speech yesterday DOJ antitrust chief Makan Delrahim said such fixes are more like temporary band-aids and hard to enforce. He was critical of specific deals approved with behavioral conditions, like Comcast/NBCU, Google/ITA and LiveNation/TicketMaster.

"I believe the [DOJ] should fairly review offers to settle but also be skeptical of those consisting of behavioral remedies or divestitures that only partially remedy the likely harm," he said.

Instead: He made it clear he prefers "structural" solutions, which would usually involve selling off major assets.

"Behavioral remedies often require companies to make daily decisions contrary to their profit-maximizing incentives, and they demand ongoing monitoring and enforcement to do that effectively," he said. "It is the wolf of regulation dressed in the sheep's clothing of a behavioral decree."

Between the lines: In this case, a structural fix could involve divestitures of Turner (the owner of CNN) or DirectTV, which has been floated in press reports. Both those assets are key to AT&T's plan for a content and delivery powerhouse.


Issa's bills take aim at outsourcing firms dependent on H-1B visas

Rep. Issa's bill on H-1B visas goes to committee vote today. Photo: Molly Riley / AP

California Rep. Darrell Issa's bill on H-1B visa allocations heads to its first committee vote Wednesday morning. The bill would make it more difficult for so-called "H-1B dependent" companies to obtain the work permits. Currently, companies with 15% or more employees using the visas are labeled as H-1B dependent.

Why it matters: The Trump administration has already taken aim at H-1B dependent companies that it sees as abusing the H-1B visa program, which currently allocates 85,000 visas annually for high-skilled workers. Issa's bill would be the first legislative step toward reforming visa eligibility — a move that India-based IT services firms say unfairly targets them.

The politics: In 2015, utility company Southern California Edison (in Issa's district) laid off nearly 500 IT workers after hiring two H-1B dependent outsourcing firms. Some laid-off workers said they had to train their visa-holding replacements — an anecdote that President Trump used on the campaign trail.

"We are happy to have additional workers brought in to fill gaps," Issa said. "What we don't want is where they clearly displace American workers for less money."

He added that India-based outsourcing firms would need to meet the new standards laid out in the "Protect and Grow American Jobs Act," including guaranteeing their hiring will not result in American layoffs.

The gritty details: In a deal struck with California Rep. Zoe Lofgren, the bill heading to a markup today includes a number of provisions for H-1B dependent firms. While the new bill would change the threshold for defining H-1B dependent employers — to those with at least 20% of their workforce using the visas from its current 15% — the proposal would also eliminate several other exemptions so the net impact would be broader.

Other provisions of the bill would:

  • Eliminate the exemption for H-1B workers with advanced degrees and increases the $60,000 minimum salary for an H-1B visa holder to $90,000 annually (and possibly more depending on a new formula accounting for the job classification and region).
  • Require certain H-1B employers to attest that they will not displace a U.S. worker during their entire employment, including employment with a third party (or consulting firm). Current law requires that attestation only 90 days prior and 90 days after the filing of an H-1B petition.
  • Require H-1B employers to submit a report summarizing the good faith efforts taken to recruit U.S. workers, the number of U.S. workers that applied for the job, and reasons why jobs were not offered to those candidates.
  • Require H-1B dependent employers to pay workers at least the average wage paid to other workers in the same occupational classification in the same area of employment.
  • Authorize the Labor Department to conduct at least five random investigations of H-1B dependent employers annually. H-1B dependent companies would be charged a new $495 fee to pay for the investigations.

The other side: India-based IT firms, most of which are classified as H-1B dependent firms, say the bill discriminates against them. "If you're looking at protecting American workers, we don't have a problem with these provisions applying to all companies," said NASSCOM president R. Chandrashekhar. "But these provisions are applicable only to a subset of companies and applicable in such a way that targets Indian companies"

Go deeper: Indian firms fight proposals to slash H-1B visas.

Watch today: The markup will be live-streamed here at 1pm ET.


Indian firms fight proposals to slash H-1B visas

Infosys Technologies employees move through the headquarters during a break in Bangalore, India. Photo: Aijaz Rahi / AP

The chief representative of India-based IT consulting companies is firing back at federal efforts to crack down on H-1B visas, saying Indian technology workers are being unfairly singled out by the Trump administration's policies.

Why it matters: Republicans want to curb the number of foreign workers coming to the U.S. on high-skilled visas that many companies use to find talent for hard-to-fill specialized roles. Many proposals, including a bill by Rep. Darrell Issa that heads to a committee vote today, focus on heavy users of H-1B visas, many of which are India-based IT companies.

Fighting back: India says those provisions put its IT sector at a big competitive disadvantage. The National Association of Software & Service Companies (NASSCOM), the group representing those companies in India, visited policymakers this week to warn of the economic domino effects of targeting Indian visa holders.

Decoding: A firm that has 15% or more of its employees on H-1B visas is categorized as "H-1B dependent" by law, and most of those firms are based in India, such as Wipro, Infosys and Cognizant. IT services firms with large U.S. workforces, such as IBM, Accenture and Deloitte, for example, use H-1B workers but aren't subject to H-1B dependent rules because the visa workers make up less than 15% of their workforces.

"We don't have a problem with new provisions applying to all companies," NASSCOM president R. Chandrashekhar told Axios in an interview. "But a discriminatory approach that says these provisions are only applicable to a certain type of company does not actually help American workers. That's just an illusion of protection."

The point of view from India:

  • Misperception about Indian outsourcing companies: "I think the biggest misperception is the belief that these companies are not actually adding any value, and they are bringing low-skilled workers to replace high-skilled American workers at a lower cost." He says Indian companies have been hiring more and more U.S. talent to complement Indian workers as the consulting business expands beyond just IT jobs.
  • Not a zero-sum game: "The industry in India plays a significant part in enabling American businesses to be as successful as they are and to continue to grow," he said. "The multiplier effect has to be kept in mind."
  • Tech worker shortage: U.S. companies are facing a shortage of technology talent. Making it harder for Indian skilled workers to come to the U.S. will encourage companies to find workers in other countries, he said.
  • Strain on India-U.S. relationship: "I would not say it's already damaged it substantially, but it's become a very major concern in the relationship. It's difficult to see a strong and strategic relationship continuing to grow while this issue continues to fester and get exacerbated."
  • Two-way street: He noted that India's government has allowed unfettered access to American tech companies wanting to operate in the country. The largest number of Facebook and WhatsApp users are in India, and a significant percentage of Google users are there. "We genuinely believe this policy of openness is in our best interests. But how do we argue that case when there is no reciprocity?"
What's next: Issa's bill heads to a markup today after reaching a compromise with California Rep. Zoe Lofgren.

Go deeper: Issa's bill take aim at H-1B visa-dependent outsourcing firms.


Reddit CEO sets sights on IPO

Reddit CEO Steve Huffman speaks with CNBC's Julia Boorstin at the Internet Association's event in San Francisco. Photo: Ina Fried / Axios

Reddit CEO Steve Huffman said the media site is planning to go public. While the timing uncertain, an IPO is the responsible course of action for a tech company to pursue, Huffman said while speaking at an Internet Association event in San Francisco.

More from Huffman:

  • Competition: When asked if Reddit's biggest competition is Facebook, Google or traditional media, Huffman said his rivals are free time and office productivity. "We probably suck more hours out of work than any other company."
  • Advertising business is doing well, with revenue increasing five-fold in last couple of years, Huffman said.
  • On political advertising: Reddit doesn't allow ads from Russia or Syria. Huffman said he's in favor of more transparency, but "the devil is in the details."
  • On hate speech: He's considered implementing a hate speech policy, but prefers to let ugly speech be "drowned out" by other speech. "It's important to let these things play out," he said. "When you outlaw it, it turns people into martyrs."

White House didn't give Elon Musk "verbal approval" for tunnel project

Elon Musk. Photo: Francois Mori / AP

White House Advisor Reed Cordish said today he wasn't actually offering government approval to Elon Musk when they discussed Boring Company plans to connect New York and Washington, D.C. with an underground Hyperloop tunnel.

Musk made waves when he tweeted that he'd received "verbal approval." "I think what you heard was verbal government excitement," Cordish said he told Musk, as he recounted while speaking at an Internet Association event in San Francisco.

Why it matters: Regardless of whether Musk overstated the government's commitment to his project, Cordish said the Trump administration is talking with Musk and his company. "That's innovation...if we could tunnel from Washington D.C. or New York or even Boston," he said. "We'll all work together for actual government approval."

Also: Cordish said the Trump administration's relationship with tech companies isn't as strained as it seems.