Strike

After nine months of frustrated bargaining, 39,000 workers from Virginia to Massachusetts called a strike against Verizon on 13 April. Represented by the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW), these telecom workers are pushing back. Their goal is to preserve job quality and security. They want to prevent further off-shoring and out-sourcing of jobs and additional call-center closures; and they want to make Verizon stop transferring technicians to work sites far from home, for up to two months at a stretch.[1] The walkout is about preserving the kinds of high-pay, high-skill jobs that used to be held by millions of working-class Americans.

This is the biggest U.S. strike in five years – in fact, since CWA last took action in 2011.  This is telling, because it shows that the telecommunications sector remains a bastion of organized labor’s strength – in a country where just 6.7% of the private sector is unionized.[2] Right away, despite the company’s use of ten thousand non-union Verizon employees as scabs,[3] the strike began to slow new installations of Internet and television service.[4] If the past is a guide, soon it will hit at corporate users’ more complex and sensitive telecom needs.

However, labor’s strength is concentrated on just one side of the networking industry: CWA and IBEW represent workers in Verizon’s wireline business.  Services delivered over copper wires and optical fibers accounted for just three-tenths of the company’s revenue and a mere 7 percent of its operating income in 2015.[5]  In the face of mounting competitive pressures in its wireline business,[6] furthermore, Verizon is revising its profit strategy.  On one hand, it has invested a couple of hundred billion dollars in wireless systems and in what it calls FiOS – a bundled service of internet, telephone and television run over a fiber-optic communications network built and maintained by unionized workers.  On the other, hoping both to increase the profitability of this gargantuan network investment and to steal a march on new “over-the-top” competitors such as Netflix, Verizon has been purchasing digital content and advertising services,[7] and selectively pruning its wireline assets.  Last year, notably, it sold its copper-wire and FiOS West networks to Frontier Communications despite heavy opposition from telecom workers, who demanded unsuccessfully that the Federal Communications Commission block the deal.[8]

The proceeds from this sale to Frontier helped Verizon to pay for additional spectrum with which to expand its wireless services.[9] The company’s 112 million wireless subscribers account for the majority of its outsized profits – not surprisingly, given that the wages and benefits drawn by its wireless workers are lower than those of their peers in its wireline segment.

This disparate working environment, as CWA posted on its website, results from the fact that “Collective bargaining rights and the right to organize have been under corporate assault for three decades”[10] – and telecommunications workers have been directly in the line of fire.  As recently as 2005, Verizon’s workers were nearly 70 percent unionized; today it’s about 27 percent.[11] Verizon was only able to introduce and expand mobile systems and services as a union-free zone, however, because of pro-corporate government policy changes. Market liberalization and deregulation were, as we’ve explained in a previous post, code words under which to attack working-class living standards and self-organization in telecommunications.

This, finally, is why the high-level political attention drawn by the Verizon strike is important.  Both Bernie Sanders and Hillary Clinton (probably reluctantly) have offered words of support to the strikers; Sanders marched with the CWA members whose union had endorsed his candidacy.[12] It’s too soon to suggest that the political pendulum may begin to swing in a different direction.  However, the Verizon strike adds momentum to a gathering trend.  The Chicago Teachers’ Union is standing up, both to the city’s mayor and the state’s terroristic governor,[12] while movements are building nationwide to organize fast-food and Wal-mart employees and to introduce a higher minimum wage.  Change is in the air.

[1] Standing Up to Verizon’s War on Unions, Socialist Project • E-Bulletin No. 1250, April 22, 2016

[2] Bureau of Labor Statistics, Union Members 2015

[3] Ryan Knutson, “Verizon Turns To Shadow Workforce Amid Strike,” Wall Street Journal, April 19, 2016

[4] Reuters, “The Verizon Strike Is Already Hitting New Customer Installations,” Fortune, April 15, 2016

[5] Noam Scheiber and Brian X. Chen, “In Verizon Strike, Blue-Collar Stress Hits Sidewalks,” New York Times, April 14, 2016

[6] The Lex Column, “Verizon: Cutting the Cords,” Financial Times,  April 19, 2016

[7] Hassan Ali, “Verizon Communications Inc and Hearst To Jointly Acquire Complex Media,” Bidness, April 19, 2016.

[8] Andrew Stewart, The Verizon Standoff and the Future of Labor, Communication and Privacy, counterpunch, September 15, 2015; “CWA, IBEW Protest Proposed Verizon-Frontier Communications Deal,” Maritime Trade Department, AFL-CIO, April 10, 2010

[9] Kevin Rizzo, “What’s Going on with the Verizon Strike?” Law Street, April 16, 2016

[10]Collective Bargaining,” Communications Workers

[11] Mackenzie Baris, “Five Reasons to care about the Verizon Strike,” Jobs with Justice, April 11, 2016

[12] Mike Snider, “Sanders, Verizon Spar Over Striking Workers,” USA Today, April 15, 2016 ; Sean O’Kane, “Verizon Workers Take Over Mid-Town Manhattan in the Second Week of Their Strike,” The Verge, April 18, 2016

[13] Juan Perez, Jr., Monique Garcia, and Celeste Bott, “CTU’s Lewis Calls Rauner ‘the new ISIS recruit,’” Chicago Tribune, April 21, 2016

Now it is official

Last November, we wrote on how US tech firms with support from the US government, were moving into Cuba, occupying the country’s information sector ahead of any political détente with the US and threatening Cuba’s national sovereignty.[1] This week, US President Barack Obama made a three-day state visit to Cuba, the first US president to visit since President Calvin Coolidge in 1928.  On this “historic trip,” the US president didn’t go alone. Along with his family, Obama was accompanied by a phalanx of executives from US firms including Google, Xerox, Airbnb, Priceline Group, PayPal, Xerox, Stripe, and Kiva[2] – as well as nearly 40 members of Congress.[3]

Obama’s visit of course was not a spontaneous occurrence but, rather, a result of long  preparations by the US government and US industries, whose shared aim is to reintegrate Cuba into the US-led global capitalist economy.  Predictably, the president deployed the language of “universal human rights” and “democracy” in his address to the Cuban people[4]; however, the U.S. president actually was there to green-light US capital’s self-interested program.

The U.S. strategy, it is evident, is to exploit the promise of modernizing Cuba’s information and communication infrastructure, in order to re-annex chunks of the country’s economy.  Under the pretence of freeing the flow of information (obligingly symbolized by the superficially defiant Rolling Stones) it is actually U.S. capital that is to be set free, to work its will upon a small country that has stood up against the full measure of US power since 1959.  Obama sought to entice the Cuban people by stating that, “The Internet should be available across the island so that Cubans can connect to the wider world and to one of the greatest engines of growth in human history.”[5]  In reality, these are at most secondary considerations:  Obama was fronting for US business interests.  The US President thus brazenly announced that “Google has a deal to start setting up more WiFi and broadband access on the island.”[6] In actuality, Google is doing more than this; the search giant also is establishing a technology center equipped with glittering new capabilities, where Cubans will be able to gain access to the “free” Internet. Obama thus offered a tantalizing taste of a modernized high-tech US capitalism, hoping that this may go down better than military force ever did to bring Cuba back into the US orbit.

Assuredly, further flashpoints of conflict will need to be addressed.  The US Congress has not given any sign of curtailing the economic blockade of Cuba that was imposed in 1962.  On the other hand, the Cuban government has insisted on an end to the US occupation of Guantanamo – a transgression on national sovereignty that has persisted since the “Spanish”-American War.  We may hope that Cuba’s leaders still possess sufficient bargaining strength to put in place safeguards and restraints against this new attempt at what, in an earlier manifestation, was called “coca-colonization.”

[1] Dan Schiller and ShinJoung Yeo, “Uncharted Territory: Cuba’s information sovereignty & US digital capital,” Information Observatory, November 19, 2015.

[2] Todd Weiss, “More U.S. Companies Line Up to Seek Sales in Cuba After Obama’s Visit,” eWeek, March 23, 2016

[3]An American Invasion,” Economist, March 26, 2016

[4] “Remarks by President Obama to the People of Cuba,” Office of the Press Secretary, March 22, 2016.

[5] ibid.

[6]Google set to expand Wifi, broadband access in Cuba, Obama tells ABC,” Reuter, March 21, 2016

 

Apple’s Public Battle

Apple is in the spotlight for having kicked off a battle against the Federal Bureau of Investigation (FBI), after the FBI demanded that Apple unlock the encrypted iPhone belonging to San Bernardino, California shooter Syed Rizwan Farook. An encrypted iPhone means that nobody is supposed to be able to have access to the data on the device – including contacts, photos, emails etc. – unless the passcode is entered. The FBI is using a 227-year-old law, the All Writs Act of 1789, as legal justification for its request. By refusing the FBI’s demand that it make available a backdoor to get around its encryption, Apple’s CEO Tim Cook picked up the torch for privacy rights. Tech industry executives and privacy advocates rallied behind him; and the U.N. High Commissioner for Human Rights, Zeid Ra’ad Al Hussein, declared that Apple should be supported for acting as a beacon for privacy and freedom of expression.[1] The case then escalated further as the FBI’s parent agency, the US Justice Department, considered whether to bring a court case against the encryption used by Facebook’s WhatsApp – the world’s largest mobile messaging service.[2]

Is the tech industry’s stand a crusade based on political principle – a relinquishment of commercial self-interest by companies that are fired with public purpose?  How may we untangle the economic and political elements that are being expressed in this legal drama?[3]

Market-Driven Privacy Right

“At Apple, your trust means everything to us,”[4] proclaims the company in its privacy statement.  By showcasing that its products are secure from government’s hands, Apple has all but stolen the motto of one of its foremost rivals: “Don’t Be Evil.”  And in fact, through the FBI case, Tim Cook is attempting to differentiate Apple’s business model from that of Google and other competitors. On several occasions, Cook has reiterated that “our business model is very straightforward: We sell great products. We don’t build a profile based on your email content or web browsing habits to sell to advertisers.”[5] While he didn’t name-check Google, his statement was unmistakably aimed at the king of search, whose business is to sell ads predicated on user data.

Google, for its part, requires full encryption for Android phones and promotes end-to-end encryption in Gmail, ads platforms and other products; and Google also retains access to copious quantities of user data to exploit for its profit making.[6] Vint Cerf, Google’s Chief Internet Evangelist, confessed that:

We couldn’t run our system if everything in it were encrypted because then we wouldn’t know which ads to show you. So this is a system that was designed around a particular business model.[7]

Yet Google, like Microsoft and several other big tech companies, had little choice after Apple took on the FBI but to join Apple’s side.[8]  Though they are exposed, because the rely so heavily on user data, the risk of appearing to be a stooge of the US government was too great.

Cook tries to emphasize that, because Apple generates a majority of its profits by selling devices, not selling ads like Google, its economic interests align the company with privacy rights. This is, however, a convenient fiction. Apple not only collects lots of personal data through its App Store, but also has acquired Twitter’s fire hose of tweets to gain commercial access to particular types of behavior- and language data. Apple also has experimented with building its own ad-based businesses, attempting to figure out ways to tap into the gigantic and lucrative ads market. It was only after a five-year effort to monetize apps and challenge Google on the mobile ads front that Apple abandoned this business.

This said, it is in Apple’s commercial self-interest to proclaim its support for privacy rights. In 2014, Apple generated more than $130 billion from the sale of its iPhones and iPads, compared to $11.8 billion for Google’s mobile search revenue during the same year. In light of this, Apple’s strategy was refocused. For both offensive and defensive purposes, it began to promote ads-blocking apps on its devices.[9] Well before the current face-off, in other words, Apple began to sell privacy as a marketing feature – exactly as the US Government has recently charged.[10] Privacy is a business strategy rather than a political principle.

That Apple is not in fact acceding to principle is evident from developments touching a different corner of its global business. At the same time that it is loudly challenging the US government, Apple is willing to dance around to please the Chinese state by agreeing to comply with government security checks on all Apple products sold in China.[11] In 2014, after being criticized for iPhone’s national security risk by the Chinese media, likewise, Apple moved its Chinese consumer data to a Chinese facility operated by state-run China Telecom.[12] But the Apple-FBI drama possesses ramifications that go beyond all of this.

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What is CFIUS?

Comes now, the news that Tsinghua, a Chinese tech company, has abandoned its $3.8 billion plan to become the largest shareholder in the U.S. data storage group, Western Digital.[1] Two months into 2016, this marks already the second time this year that a planned Chinese investment in a tech company has collapsed.[2]  In both cases, the precipitant has been the threat of action by the Committee on Foreign Investment in the United States (CFIUS).[3]

CFIUS, created by an Executive Order issued by President Ford in 1975, operates, according to a legislative report, “in relative obscurity.”[4]  Yet it is charged with a vital purpose:  to review transactions that might confer control of an existing company by a foreign interest – purportedly, to determine the prospective effect of such deals “on the national security of the United States.”[5] CFIUS was initially established in response to concern about increasing investment in American portfolio assets (Treasury securities, corporate stocks and bonds) by the Organization of Petroleum Exporting Countries (OPEC) countries.[6]

Chaired by a representative of the US Treasury and based in that Department, CFIUS is composed entirely of delegates selected from the Executive Branch.[7] It operates within the military-corporate nexus. The U.S. Department of Treasury states that “if CFIUS finds that a covered transaction presents national security risks and that other provisions of law do not provide adequate authority to address the risks, then CFIUS may enter into an agreement with, or impose conditions on, parties to mitigate such risks or may refer the case to the President for action.”[8] The mere threat of a CFIUS review often has been sufficient to put an end to an intended investment.

Which are the criteria that CFIUS relies upon to render its determinations?  What sorts of documentation does it deem to be dispositive? Does it adhere to due process procedures and norms of democratic accountability?  What conception of “security” does it follow? [9]   Why, in short, does CFIUS exist?  In the absence of answers to these basic questions, we are forced to rely on accessible documentation.

CFIUS is obligated to report to Congress annually.  However, full discussion of its activities remains secret:  only redacted versions are available to the public, and these are substantially belated.  From its most recent report, filed in 2015[10] but detailing its activities between 2009 and 2013, we glean that companies filed 480 notices of transactions that CFIUS determined were covered by its mandate. Among these, CFIUS investigated forty percent of the deals that entered its system – 193 transactions.  Its targets came from a range of industries.  More than one-third of them involved manufacturing; and an additional one-third covered companies based in finance, information, or services.  The computer and electronics subsector made up the largest portion of manufacturing notices; and the bulk of finance, information and services notices (over two-thirds of them) originated in professional, scientific and technical services – notably, computer system design; telecommunications; publishing; and data processing.  Acquisitions by investors from China accounted for the largest single share of CFIUS notices – though its attention was also drawn to transactions involving investors based in Britain, Japan, France, Canada, and Germany. Telecommunications, software, and technology transactions were among those sectors for which CFIUS’s review resulted in legally binding mitigation measures in 2013.[11]

What may we conclude?  Demonstrably, CFIUS is a major U.S. policymaker – meriting far more critical scrutiny than it has obtained.  Equally certain, CFIUS has granted a high priority to deal-making within the international information industry.  As those who keep up with the Information Observatory will recognize, information constitutes a rare growth pole in today’s depressed world economy; and CFIUS’s job has seemingly come to involve an effort to ensure that U.S. business interests retain a pole position with respect to this industry within the U.S. market.  No less evident, finally, CFIUS has been targeting China.  Going forward, the global contest to appropriate profits from information is all but certain to involve China more and more – and, again, CFIUS intends that the U.S. should retain its advantages.  CFIUS actually has played a significant background role in US tech policy for years.  The Internet equipment maker Huawei’s repeated unsuccessful attempts to penetrate the US market for network gear testify to its effectiveness.

A Committee on U.S. Foreign Investment, that is, on U.S. companies’ own deal-making outside the United States, might possess much greater relevance for the actual security of the U.S. populace than CFIUS. Under present political circumstances, of course, the establishment of such an agency seems unthinkable.  Circumstances, however, may change.

[1] Arash Massoudi, James Fontanella-Khan and Shawn Donnan, “Tsingua Pulls Western Digital Deal over US Scrutiny Fears,” Financial Times,  February 24, 2016.

[2]  See Don Weinland, Arash Massoudi and James Fontanella-Khan, “China deals collapse amid regulatory fears,” Financial Times, February 17, 2016,

[3] See James K. Jackson, The Committee on Foreign Investment in the United States (CIFUS), Congressional Research Services, February 19, 2016.

[4] Ibid.

[5] U.S. Department of the Treasury, “The Committee on Foreign Investment in the United States (CFIUS).”

[6] Jackson, “The Committee on Foreign Investment.”

[7] Consists of nine members: the Secretaries of State, Treasury, Defense, Homeland Security, Commerce, and Energy, the Attorney General, the United States Trade Representative, and the Director of the Office of Science and Technology Policy.

[8] Treasury Department, “Process Overview.”

[9] According to one legal scholar, “Neither the statute nor the implementing regulations provide a definition of “national security,” but they do contain a non-exhaustive list of factors that may be considered when determining whether a threat to national security exists. These factors include domestic production needed for projected national defense requirements, the capability and capacity of domestic industries to meet national defense requirements, the control of domestic industries and commercial activity by foreign citizens as it affects the capability and capacity of the United States to meet national security requirements, the potential effects of an acquisition on sales of military goods, equipment, or technology to countries supporting terrorism or raising proliferation concerns, and the potential effects on U.S. technological leadership in areas affecting national security.”  See George Stephanov Georgiev, “The Reformed CFIUS Regulatory Framework: Mediating Between Continued Openness to Foreign Investment and National Security,” Yale Journal on Regulation (25), 2008: 127-28.

[10] Committee on Foreign Investment in the United States, “Foreign Investment in the United States: Annual Report to Congress,” Issued February 2015.

[11] Ibid.

Cause for celebration on the 20th anniversary of the Telecom Act?

This week marks the 20th anniversary of the U.S. Telecommunications Act of 1996.  Celebrations have been sighted in and around Washington, D.C.[1]

Helpful clarification of the substance of the Telecommunications Act of 1996 was provided by Patricia Aufderheide in 1999.[2]  Ostensibly passed to support and strengthen market forces in networking, and signed into law at the height of the competition fever that had gripped the citadels of American power, the legislation was part of a more encompassing structural transition.  The early 1990s, when about ten giant local- and long distance carriers ruled U.S. networking, turned out to be the last gasp of a tightly bounded industrial giantism.  This circumscribed mode of ownership and control was, however, now rapidly supplanted. A much wider range of participants together constituted the giantism that followed:  proprietary intranets, operated by big companies based in every economic sector; content delivery networks, operated by the likes of Amazon, Google, Facebook, and Microsoft; and a scattering of huge backbone Internet providers.  One might say that capitalism in communications had been opened to capital at large.

There is little cause for celebration about this, as a quick review of the events occurring this week makes plain. Lawyers, engineers, executives and policy wonks:  these were the chief participants. Ordinary folk are as removed from these lackluster events as they were from the legislation itself.  On the dreary occasion of Congress’s vote on Public Law 104-104, if memory serves, the only praiseworthy statement came from Congressman John Conyers, a trenchant opponent.  Notable was the exceptionally strong bipartisan backing for the measure; and this was attributable to the extensive support that it gained from corporate America.  Less interesting was the parade of self-congratulatory speeches that ensued, in which legislators, lobbyists, and academic parrots declaimed on the virtues of competition.  Gas-baggery ruled.

Today’s party-ers are cast from the same mold.  They don’t seem to include many working people, let alone any trade unionists.  That’s not accidental:  these are the people whose interests were further marginalized by the Telecom Act of 1996. However, the revolving door between industry and government is spinning as fast as ever, as regulators and lobbyists exchange places.  The Center for Responsive Politics lists literally dozens of individuals who have moved between the Federal Communications Commission (FCC) and industry.[3

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U.S. Dominance Over International Communications: A Status Report

Two stories jump out this week. One concerns the Internet’s coordinating mechanism, the other the pact that enables European data to be sent to the United States.  Seemingly discrete, at a deeper level they are organically connected. The underlying issue is whether challenges to U.S. power over the system of international communications will intensify – or be shunted aside.

We have written before about the “Safe Harbor” agreement, which had governed data- transfers between Europe and the U.S. and which was struck down by the European Court of Justice three months ago because it did not offer sufficient guarantees that Europeans’ personal data were protected from eavesdropping by U.S. intelligence agencies.  Would a new pact be devised, incorporating Europeans’ demands to strengthen privacy protections? What kinds of guarantees would be supplied?

An answer is now at hand. Although the prescribed negotiating deadline passed without agreement, two days late a deal was announced.[1] The US firms escaped the obligation to store their data in European lands; while, a new “EU-US Privacy Shield,” the European Commission declared, “will provide stronger obligations on companies in the U.S. to protect the personal data of Europeans.” U.S. companies wishing to import personal data from Europe “will need to commit to robust obligations on how personal data is processed and individual rights are guaranteed.” The U.S. Department of Commerce will monitor that companies publish their commitments, which makes them enforceable under U.S. law by the US Federal Trade Commission. In addition, “any company handling human resources data from Europe has to commit to comply with decisions by European Data Protection Administrations.” E.U. citizens will have access to an ombudsman located in the United States. And, “for the first time, the US has given the EU written assurances that the access of public authorities for law enforcement and national security will be subject to clear limitations, safeguards and oversight mechanisms. These exceptions must be used only to the extent necessary and proportionate. The U.S. has ruled out indiscriminate mass surveillance on the personal data transferred to the US under the new arrangement.”[2]

We will need to see during the months ahead just what level of protection the “Privacy Shield” actually offers. What’s interesting, though, is that considerable effort needed to be expended to reach even such a seemingly minimal agreement as this.  Intense negotiations were conducted at the World Economic Forum in Davos, involving both governmental functionaries and trade groups. Satya Nadella, the CEO of Microsoft, editorialized that the Safe Harbor agreement – with its guarantee that corporations may transmit personal data from jurisdiction to jurisdiction – must be supplemented with “additional agreements, that enable privacy rights to follow data around the world.”[3]  Google, by appointing as head of its global policy unit a onetime Obama Administration negotiator known for her calm, conciliatory style, reportedly was “burying its confrontational stance” in favor of more moderate international diplomacy.[4]  Facebook publicized a report that it had commissioned, to emphasize disingenuously that the U.S. had actually become more “privacy friendly” than Europe.[5]  Transatlantic data flows are simply too important to be left to the lower echelons.

Still, the data-hogging transnationals are not yet in the clear.  Europe’s national privacy regulators are slated to release their own decision tomorrow, February 3d, on how data should be moved between the two regions. And a clamor that the EC had sold out 500 million Europeans is already audible. It is possible that some nations’ data protection authorities will prove more vigilant than their colleagues in the Commission.  Thousands of U.S. companies, rooted in every sector, will be watching – eagle-eyed, we might say. No matter which way tomorrow’s decision goes, transborder data flows will still continue to constitute a crucial point of vulnerability for corporate capital.

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