Oct 11, 2019

Axios Login

By Ina Fried
Ina Fried

You made it! Well, you made it to Friday, but you still have a little reading to do. 1,354 words' worth, to be specific. Good news, it should only take you about 5 minutes.

1 big thing: Hong Kong tensions fray U.S.-China tech ties

Illustration: Rebecca Zisser/Axios

Recent controversies over free speech about the Hong Kong protests are highlighting the widening schism between the U.S. and China and creating a messy situation for tech companies with business ties to both countries.

Why it matters: As we've written about, both the U.S. and China aim to make their tech industries less interdependent, but the deep ties are tough to sever, and achieving that end would disrupt business on both sides of the Pacific.

Driving the news:

  • Blizzard faces an intensifying backlash from employees and customers after the company banned a player and rescinded his prize money for speaking out on behalf of Hong Kong protesters. China's Tencent owns a 4.9% stake in Activision Blizzard.
  • Apple has pulled apps from its store in recent days, seemingly at the behest of or to appease Chinese and Hong Kong authorities. Apple removed the HKmap.live app, yanked the Quartz news app in China, and removed the Taiwanese flag from its emoji keyboard for users in Hong Kong.
  • Google, meanwhile, pulled "The Revolution of Our Times," an app that let users take on the role of Hong Kong protesters. Google said the removal wasn't prompted by a government request but came as part of its own standard review process. The HKmap.live app remains available in the Google Play store for Android.
  • All this follows the firestorm between China and the NBA ignited after a Houston Rockets executive tweeted support for the Hong Kong protesters.

The big picture: The free speech issue is just the latest to fray the relationship between the U.S. and Chinese tech industries, which is already stressed by:

Our thought bubble: Doing business in and with China has always meant some level of compromise for U.S. firms. The Hong Kong protests have just crystallized these compromises into more dramatic and visible choices.

Yes, but: Many ties still bind the 2 countries' industries.

  • The U.S. depends on China to manufacture nearly all smartphones and many other consumer electronics. It's also a key market for Apple and U.S. chipmakers such as Intel and Micron.
  • In addition to chips, China depends on U.S.-made software to power even its domestic electronics market, and a number of Chinese tech firms also have a significant presence in U.S. and Europe.

What they're saying:

  • Apple CEO Tim Cook defended the company's moves in a memo to staff, saying that the HKmap.live app was used maliciously to target specific individuals.
  • Longtime Apple watcher John Gruber wrote that Cook's explanation "doesn't add up," pointing out that the app banned by Apple shows concentrations of police and not the locations of individual officers.
  • Matt Kern, who was a lead developer for Blizzard-owned "World of Warcraft," called for a boycott of Blizzard in a Twitter thread Thursday that details his own experiences as well as the influence of China on the global gaming industry.

Go deeper:

2. The latest on the T-Mobile-Sprint deal

Illustration: Rebecca Zisser/Axios

Opponents of the T-Mobile-Sprint merger are piling on the deal in the hopes of convincing a judge the Justice Department's settlement isn't good enough, as Margaret Harding McGill reports.

Why it matters: The DOJ's agreement with the wireless companies has to receive final sign-off from Judge Timothy J. Kelly of the D.C. District Court, and critics want to make it a tough decision.

Driving the news: The comment period is closing this week for the DOJ's deal, which will see the wireless companies sell assets to satellite TV company Dish so it can enter the wireless market.

  • But a group of economists — including Hal Singer, managing director at Econ One, and Nicholas Economides, an NYU economics professor — argue that this fix won't restore the competition that will be lost when nation's 3d and 4th largest carriers merge.
  • "The DOJ is going to have a hard time here defending this mess,” Singer said in an interview. "Even though this judge can't block the merger per se, he can conclude that the remedy is deficient. If that is the best remedy the DOJ can come up with, that would be tantamount to blocking the merger."

Yes, but: New York is leading a coalition of 16 states and Washington, D.C. in a separate lawsuit to block the merger. The states filed a brief with the D.C. court reviewing the settlement urging the judge to hold off on a decision until the states’ case plays out in New York. That case is set to go to trial in December.

  • T-Mobile and Sprint have agreed not to close their merger until the state litigation is resolved.
  • The Mississippi attorney general withdrew his opposition to the merger this week after negotiating commitments from the companies.

What's next: The DOJ is collecting the settlement comments and will file them with the court, along with a response.

  • "In almost every case, the court rubber stamps the consent decree," said Joel Mitnick, a partner at Cadwalader, Wickersham & Taft.

Go deeper: Margaret has more here.

3. Catching up with Waze's carpool app

Photo Illustration: Rafael Henrique/SOPA Images/LightRocket via Getty Images

Waze is best known for its navigation app, which crowdsources traffic information, but a few years ago the Google-owned mapping company ventured into a new line of business when it rolled out a carpooling app.

Today, the company says its U.S. carpool users complete more than 550,000 rides per month, and will reach the 1 million mark by the end of the year, Axios' Kia Kokalitcheva reports.

What they're saying: "We're not taking on Uber and Lyft," Waze co-founder and CEO Noam Bardin tells Axios. "We're focused on commutes 20 miles and up." Waze drivers also can't earn money beyond the cost of driving (per IRS guidance of $0.58 per mile).

  • "Our mission has always been about traffic — people have accepted traffic as a necessary evil, but it's not," he adds.
  • After initial pushback from cities, including attempts to regulate Waze's carpool offering like a ride-hailing app and even some cease-and-desist orders, they've come around. It's now available in the U.S., Mexico, and Brazil.

Lesson: "Once [users] take their first ride, they discover that humans are actually interesting," says Bardin. But to do that, they need to first trust the service and other users.

Biggest challenge: Density. In order to work, Waze's carpool service needs to have drivers and riders who live sufficiently close to each other and are heading in a similar direction.

4. Two deep dives on Amazon

If you want to read a lot about Amazon, you're in luck. Both The Atlantic and the New Yorker have lengthy pieces on the company, its business and culture.

Why it matters: The moves come as the company is under greater scrutiny from regulators for how it handles its third-party marketplace, among other issues.

  • "Is Amazon Unstoppable?" asks the New Yorker in a piece for its annual Money issue by Charles Duhigg. The piece looks at what Amazon is doing as well as the costs of its way of doing business. "Everything Jeff does is to stop a big-company mentality from taking hold, so that Amazon can continue behaving like a group of startups," former executive Ian Freed said.
  • Meanwhile, The Atlantic has a story on "Jeff Bezos's Master Plan" based on 5 months of reporting by Franklin Foer, who 5 years ago wrote a piece for the New Republic arguing "Amazon must be stopped." This time around, though, Foer said his view of Bezos had shifted. "Many of my assumptions about the man melted away; admiration jostled with continued unease."
  • Finally, Amazon itself published an "Our Positions" post outlining its public stances on everything from climate change and LGBTQ rights to fighting counterfeit goods and selling technology to the government.

The bottom line: Amazon gets fewer headlines than Facebook and Google, but its long-term impact on society might end up being even greater.

5. Take Note

On Tap

Trading Places

  • Bill McDermott is stepping down after 9 years as head of enterprise software firm SAP. Board members Jennifer Morgan and Christian Klein have been named co-CEOs.

ICYMI

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Ina Fried