Jul 23, 2019

Axios Login

By Ina Fried
Ina Fried

Here are the two words I know you are longing to hear: Happy Friday. Unfortunately, it's only Tuesday. As small consolation, here are 1,316 more words on the world of tech.

1 big thing: Huawei rules remain murky despite talks

Photo: Ina Fried/Axios

After a high-level White House meeting Monday between administration economic officials and key executives, major American producers of tech hardware still don't know what they can and can't sell to Huawei, China's controversial telecom giant.

Why it matters: Huawei has become a flashpoint for trade tensions and security concerns between China and the U.S., and the tech companies that do business with it have had to navigate a policy maze.

  • The meeting comes amid continued trade negotiations with China, in which Huawei appears to be a key discussion point, as well as fresh allegations that Huawei helped build North Korea's cellular network, potentially violating U.S. trade sanctions.
  • While much of the concern expressed over Huawei surrounds its network equipment business, the U.S. ban on component sales to Huawei threatens to have a decimating impact on Huawei's device business, which relies on U.S.-made software and chips.
  • It's bad news for those U.S. companies that do a good chunk of business with Huawei, too.

The timeline: The Trump administration issued a near-total ban on business with Huawei back in May.

  • It then offered a brief reprieve to allow for component sales, but only to support products already on the market.
  • More recently, President Trump indicated an openness to allowing some additional sales, provided they don't raise national security issues. Companies, especially those whose leaders were at the White House on Monday, have been trying to get a sense of just what will and won't be allowed.
  • Monday's meeting brought together the CEOs of Intel, Google, Broadcom, Western Digital, Micron, Qualcomm and Cisco. Trump attended, along with economic adviser Larry Kudlow, Commerce Secretary Wilbur Ross and Treasury Secretary Steve Mnuchin.

The White House said, per a statement:

  • The meeting was "a constructive discussion on a range of economic issues, including the booming United States job market, unfair international trade practices, and 5G technology."
  • "The CEOs expressed strong support of the President’s policies, including national security restrictions on United States telecom equipment purchases and sales to Huawei."
  • The companies also "requested timely licensing decisions from the Department of Commerce, and the President agreed."

Intel and Micron also issued statements praising the meeting, without offering details.

The bottom line: The Huawei situation remains thorny, with national security experts fearing their concerns will be sold out at the bargaining table, while industry insiders worry that anti-Chinese sentiment will scuttle a vital trade relationship and harm both side's economies.

2. Apple in talks (again) to buy Intel's modem biz

Apple is reportedly once again in talks with Intel to buy the company's troubled cellular modem business for around $1 billion.

  • The Wall Street Journal reported on Monday that the talks are advanced and a deal could come this week.
  • Such a transaction could give Apple access to both patents and the specialized workers needed to eventually design its own modem chips for the iPhone.

Why it matters: Although Apple recently settled its legal dispute with Qualcomm, the company is widely believed to be interested in developing its own modem capabilities internally and has already hired people from both chipmakers, including at a new office in San Diego.

Between the lines: Intel is in something of a bind. Apple is really the only big customer for standalone cellular modems, but its deal with Qualcomm likely means Intel's business will dry up.

  • That helps explain why, the day Apple and Qualcomm announced their settlement, Intel said it would cancel planned 5G modem chips and re-evaluate the business.

Our thought bubble: It's hard to imagine anyone other than Apple being interested in acquiring the business. The only other likely outcome — Intel shutting the unit — would have downsides for both companies.

  • Intel, of course, would get no return on its expensive investment. Apple could still hire people, but it would have to do so one by one, and it wouldn't get Intel's patents.
3. The average U.S. data breach costs $8 million

Photo: Dave Whitney/Getty Images

All told, the average data breach costs a U.S. company around $8.19 million, according to a new study from IBM and the Ponemon Institute, Axios' Joe Uchill reports.

The big picture: It's not cheap to be breached. But the same study shows that a little foresight can save a large chunk of damages.

Background: The IBM study bases its statistical models on a wide variety of direct and indirect costs, ranging from the price of remediating a breach and paying for customer credit protection to IT downtime and reputational damage.

By the numbers: The average cost in the U.S. was more than twice the global cost of a breach ($3.92 million).

  • Small firms take proportionally much greater damage. Globally, a firm of 500–1,000 employees lost $3,500 per employee per breach. A firm of more than 25,000 lost $204 per employee.
  • The most expensive breaches were in the health care sector, where the average cost per record stolen is more than twice as high as in any other field.
  • The costs take some time to materialize. Only 67% of the costs came in the first year — 22% came in year 2, and 11% in year 3 and beyond.

The other side: Companies with an incident response team and a well-tested plan in place saved $1.23 million during a breach.

  • But a plan can be relative to the size of a business.
  • “Small businesses think plans need to be something complex,” said Wendi Whitmore, global lead for IBM X-Force incident response and intelligence services. “But it can just be as simple as having a list of numbers to call."
4. 2019 sees record number of TV blackouts
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Data: Kagan, a media research group within S&P Global Market Intelligence, and The American Television Alliance; Chart: Andrew Witherspoon/Axios

With 5 months left in the year, 2019 has already set the record for the highest number of television blackouts in history, Axios' Sara Fischer reports, citing new data from the American Television Alliance.

Why it matters: The programming blackouts are happening as a result of an increase in disputes between TV networks and their distributors — mainly cable and satellite companies — over how much networks should charge distributors for the right to air their content.

Driving the news: CBS said Saturday that AT&T dropped CBS-owned television networks from the channel lineups of millions of AT&T customers, including DirecTV, DirecTV NOW and AT&T U-verse TV customers, in markets all over the country.

  • CBS says that it has made every effort to avoid the blackout, but it that won't agree to terms that it says undervalues its programming.
  • Axios reported last month that AT&T was planning to lodge a formal complaint with regulators against television station owners that, the company says, are refusing to negotiate terms for channels to be carried by its subsidiary DirecTV, resulting in blackouts for viewers.

The big picture: These disputes, driven by a shrinking traditional TV market, are leading to more programming blackouts for consumers, and they are forcing some smaller, niche cable channels out of business altogether.

  • Some disputes last for months. Others never get resolved.
  • HBO and Cinemax, for example, haven't been available to Dish or Dish-owned Sling TV customers since late last year.
  • Dish and Disney nearly faced a big blackout this weekend, but the two parties were able to come to a last-minute agreement, preventing several Disney-owned networks, like FX and National Geographic, from going dark.
  • AT&T almost blacked out Viacom channels earlier this year, before the two companies settled their dispute.

What's next: Expect more blackouts as major programmers weigh whether to renew distribution deals.

  • Local broadcaster Nexstar stations have been dark on AT&T properties since July 4, when the two companies announced they were unable to reach an agreement.
  • Last week, 17 local broadcast stations in 12 markets owned by Meredith went dark for Dish customers.

Be smart: Regulators rarely intervene in these fights, even when they're asked to, because they believe such conflicts are best left to the market to handle.

The bottom line: Distribution fights that limit viewer access are becoming much more frequent as the traditional television industry becomes upended by technology.

5. Take Note

On tap

  • Snapchat parent Snap Inc. reports earnings after the close today. (Really. In yesterday's Login, I had it down incorrectly as happening Monday.)

Trading places

  • Apple has hired former Tesla VP Steve MacManus, who specialized on car design, as a senior director, Bloomberg reported.


  • A flaw in Facebook's Messenger Kids app allowed group chats to include people not directly approved by each participant's parents. (The Verge)
  • Starbucks is investing in Brightloom, the restaurant tech firm formerly known as Eatsa, and will also license key pieces of its mobile technology. (Axios)
  • Microsoft is investing $1 billion in OpenAI. (Microsoft)
6. After you Login

I guess you would call this mass micro-transit.

Ina Fried