Jul 7, 2020

Axios Login

Ina Fried

OK. We are having a debate with our friends. We say the Jelle's Marble Runs rock. Our friends disagree. Watch it for yourself and let me know who is right — ina@axios.com.

Situational awareness:

Today's Login is 1,220 words, a 5-minute read.

1 big thing: Tech's Hong Kong bind

Illustration: Sarah Grillo/Axios

The big U.S. tech companies are scrambling to figure out what China's imposition of a new national security law in Hong Kong means for their businesses there.

The big picture: Tech companies, like other multinationals, had long seen bases in Hong Kong as a way to operate close to China without being subject to many of that country's most stringent laws. Now they likely must choose between accepting onerous data-sharing and censorship requirements, or leaving Hong Kong.

Driving the news:

  • Under the new law, passed last week, companies doing business in Hong Kong are required to hand over a wide range of customer information and comply with censorship requests.
  • For now, many of the big tech companies said they have temporarily paused all responses to data requests from Hong Kong authorities as they seek to understand the law's implications.
  • Chinese-owned TikTok, meanwhile, said it would pull its app from the Hong Kong market as it seeks to maintain the distinctions between its popular international app and a similar service its parent company ByteDance runs inside China.
  • ByteDance has said that TikTok hasn't shared data with the Chinese government nor would it, a position it probably could not maintain were it to continue being made available in Hong Kong.

Yes, but: These pauses aren't seen as anything but a very short-term solution. In the long term, companies will likely face the choice of doing business in Hong Kong the way China wants, or picking up stakes and moving employees elsewhere in Asia.

Be smart: The big U.S. tech companies have taken different approaches when it comes to doing business in China.

  • Apple and Microsoft do significant business in China, while Facebook and Twitter don't.
  • Google at one time had operations in China, but very publicly pulled out in 2010. (Since 2018, there have been reports the company is weighing a reentry, though CEO Sundar Pichai has stressed there are no current plans to resume offering search in mainland China.)

Our thought bubble, via Axios China's Bethany Allen-Ebrahimian: The global future of digital free speech may hinge in part on what these companies decide over the coming weeks.

  • China's new national security law for Hong Kong states clearly that all of its provisions apply to every person in the world, and the new internet laws require individuals working at internet firms to hand over data and comply with censorship requests, or else face a year in jail and large fines.

What they’re saying: Google, Facebook, Microsoft, Twitter and Zoom have all paused their processing of user data requests from Hong Kong authorities and said they’re reviewing the details of the new law. Twitter in a statement said it has “grave concerns regarding both the developing process and the full intention of this law.”

What's next: Companies that have operations in Hong Kong could consider moving operations to Taiwan to stay close to China without being subject to the new Hong Kong law. Other companies may decide to locate regional operations elsewhere in Asia, while still others may choose to continue in Hong Kong and deal with the added restrictions.

2. Alphabet's Loon launches internet service in Kenya

Courtesy: Loon

Loon, the balloon-based telecom subsidiary from Google parent Alphabet, is working with Telkom Kenya to provide internet service over a 50,000-square-kilometer region in western and central Kenya, a region that has been hard to cover using traditional approaches given its terrain and low population density. 

The big picture: The project marks the first large-scale, non-emergency deployment of Loon's service anywhere, as well as the first use of Loon's technology in Africa. It will also serve as an early test of the Loon service's commercial viability.

Details:

  • Loon will deploy around three dozen separate flight vehicles that will remain in constant motion in the stratosphere above eastern Africa.
  • In field testing, Loon said the service was used for voice and video calling as well as for browsing, e-mail, messaging and YouTube, with an uplink speed of 4.74 Mpbs, a downlink speed of 18.9 Mbps, and latency of 19 milliseconds.
3. After purge, OTF gets new acting head

James M. Miles has been appointed interim CEO of the Open Technology Fund (OTF) by Michael Pack, the new CEO of the U.S. Agency for Global Media (USAGM), sources tell Axios' Sara Fischer, with an official announcement expected later Tuesday.

Why it matters: The appointment comes after Pack, who took over last month, removed leaders at OTF and other USAGM-affiliated organizations such as Voice of America. OTF helps provide tools for dissidents and journalists around the world to securely communicate.

Details: The appointment was made in a letter written to the OTF's general counsel Lauren Turner on Friday. The New York Times was the first to report on the letter.

Critics argued that Pack didn't have the legal authority to dismiss OTF leaders because it's an independent grantee of the USAGM.

Be smart: Miles is not well known within the internet freedom community, and sources have privately complained that he's unqualified for the role.

  • Miles had previously served as the South Carolina secretary of state of from 1991 to 2003, and is a founding partner of a law firm that specializes in labor relations law, according to a statement that will be released by the USAGM later today obtained by Axios.

Between the lines: OTF has chiefly funded open-source projects and has helped develop tools like Tor and Signal used around the world.

Go deeper: In media agency shakeup, conservative groups push for Falun Gong-backed internet tools

4. Startups galore on the PPP loan list

Illustration: Aïda Amer/Axios

Numerous tech startups took out loans in the spring via the Paycheck Protection Program (PPP), according to data the Small Business Administration and Treasury Department released on Monday, Axios' Kia Kokalitcheva reports.

The big picture: Whether venture-backed startups should take money from the program was hotly debated after PPP geared up.

  • Some in the startup world argued that any effort that saves jobs is justifiable, while others argued that startups likely had more access to capital than other businesses like mom-and-pop shops. 

Among the startups that received loans: 

  • Getaround ($5–10 million): The peer-to-peer car rental company, notably backed by SoftBank, told TechCrunch that the loan "helped reduce the otherwise severe impact on the health of our organization."
  • Turo ($5–10 million): Also a peer-to-peer car rental company, Turo told Protocol that the "PPP funds were a lifeline for our 244 employees."
  • SquareFoot ($1–2 million): The New York-based office real estate startup told The Information that it took a $1 million loan to avoid layoffs.

Yes, but: The program's hotly anticipated data release was marred by a number of inaccuracies — the extent of which is still unclear — that journalists discovered as they dug in. 

  • Venture capital firms Index Ventures and Foundation Capital and scooter rental company Bird, for example, appeared in the database, but all put out statements saying they had not even applied for the loans and they are investigating.

Go deeper: Why venture capital can't bail out startups during the coronavirus crisis

Note: Axios previously received and then returned a PPP loan.

5. Take Note

On Tap

Trading Places

  • FCC chairman Ajit Pai has named Ashley Boizelle as FCC acting general counsel while General Counsel Tom Johnson is out on paternity leave from July 13 through Sept. 4.
  • Embattled augmented-reality firm Magic Leap named Microsoft business development executive Peggy Johnson as its new CEO.

ICYMI

6. After you Login

Have you already finished watching everything you wanted to see on Netflix? Well, good news, you now have 15 episodes of Supermarket Sweep to keep you entertained.

Ina Fried