Washington in Review - February 23, 2018

I’m excited to share PwC's take on what's been happening in Washington over the last two weeks, and highlight potential implications for the Technology, Media, and Telecom industries. Below you can read about what the FTC nominees think about the future of tech regulation, the European Commission’s plan to update its tax code, results of investigations into China’s trade practices, and much more. In our next edition, I'll share what to expect now that the Net Neutrality repeal is officially on the books, and we'll review Congress' long-awaited vote on SESTA. If there are other topics you'd like our Strategic Policy Advisers team to take a look at, let me know in the comments!

Federal Tech Commission? Nominees Take on Tech

At a recent Senate confirmation hearing, four Federal Trade Commission (FTC) nominees — Republicans Joseph Simons, Noah Phillips, and Christine Wilson; and Democrat Rohit Chopra — faced numerous questions related to tech issues that increasingly fall under FTC purview, particularly data privacy. Simons, nominated to be Chairman, answered cautiously by sticking to established antitrust and consumer protection principles, but promised to explore civil liability as a deterrent for cybersecurity breaches.

What does it mean? 

• The largest tech companies face increasing antitrust scrutiny, but the new FTC commissioners appeared unwilling to take a strong stance on breaking them up.
• Companies handling consumer data may face greater breach liabilities under the new FTC leadership.

EU Taxing Tech Titans

The European Commission (EC) is developing options to update international tax systems for the global digital economy. Taxation on digital advertising revenue and a broader range of digital transactions are likely to be considered as an interim measure, with Virtual Permanent Establishment – a higher threshold for determining tax liability – a part of its long-term reform effort.

What does it mean? 

• While European officials intend to create fairness and consistency among member states, online companies are concerned about the impact to their bottom line. As such, domestic industry groups are lobbying the US Treasury Department to engage the EC on their behalf.
• For additional analysis on digital taxation, check out this post from PwC’s Deputy Global Tax Policy Leader, Will Morris.

UK Unveils Online Extremism Blocker

The UK government unveiled an automated tool to identify and block extremist content online. The tool is designed to make content moderation less burdensome for smaller companies, but UK regulators have not ruled out applying the tool to more mature companies who have been trying to address the issue independently. 

What does it mean? 

• European and American governments are growing increasingly frustrated with online content platforms’ inability to effectively flag inappropriate or unsafe posts, so platform operators must make demonstrable progress to avoid a potential government mandate.

EU Countdown and Court Rulings on Privacy

Courts in Germany and Belgium have ruled against tech companies for their data privacy violations. With less than 100 days until the European Union’s General Data Protection Regulation (GDPR) takes effect, companies are updating their privacy policies to align with the omnibus regulation. GDPR broadens the definition of “personal data,” imposes stricter user consent standards, and adds new breach notification requirements.

What does it mean? 

• At a time of regulatory transition, companies must adapt to the new privacy regime applicable to any company in the world that processes personal data of EU residents.
• Businesses should also keep a watchful eye on court rulings as they add clarity to potential ambiguities in the regulatory language.

Space as a Service: NASA Proposes Privatization

The Trump administration’s budget, released on Feb. 12, included a NASA proposal to defund the International Space Station (ISS) by 2025 and a plan to privatize its operations. ISS privatization could be more complex than recent commercialization efforts for related industries such as space launches, due to agreements with the foreign governments who share the orbiting outpost with the US.

What does it mean? 

• While few companies may propose to operate the space station, businesses should further explore the administration’s privatization agenda to assess other facilities that strategically complement theirs, and engage agencies to determine if a privatization plan is beneficial and feasible.

Broadband Boost: New Funding for Rural Connectivity

The White House budget proposal, released on Feb. 12, included a request for $500 million in additional funding for the US Department of Agriculture (USDA) to facilitate a loan-and-grant program to deploy more broadband capacity and connectivity in rural America. This comes after a notable absence of broadband funding in President Trump’s infrastructure plan and a vocal desire from officials to bridge the “digital divide.”

What does it mean? 

• Studies show that 27% of Americans still do not have home broadband access, disproportionately leaving rural communities out of the digital economy. Bringing them online creates new markets for e-commerce and tech companies trying to expand beyond their urban and suburban markets.

Congress Starts to Get Smart on Artificial Intelligence

On Feb. 14, Congress kicked off a series of hearings on artificial intelligence (AI), where representatives asked industry leaders about algorithmic transparency to prevent bias or unintended consequences. This comes a day after the White House’s Deputy Chief Technology Officer announced that machine learning and autonomous systems were being prioritized for R&D funding, critical to the global technological arms race after China proposed its own initiatives to prioritize the capability.

What does it mean? 

• AI stakeholders should continue engaging with the Administration and Congress to help shape an AI policy strategy that includes plans for investment, research, workforce development, and commercialization.

US-China Trade Battle Heats Up

On Feb. 16, the US Department of Commerce concluded two investigations against China and recommended new tariffs. The Department is continuing a third investigation regarding Chinese IP practices and forced technology transfers. The EU, US, and Japan are considering raising these issues at the WTO; however, any efforts could be hampered by US-imposed tariffs that negatively impact other key trading partners.

What does it mean? 

• With protectionism on the rise and trade battles escalating between major economic powers, businesses may need to reassess their supply chain and market expansion strategies to address these evolving risks.

Backup Budget for Broadcasters

On Feb. 13, the Senate oversight committee for the Federal Communications Commission (FCC) released a reauthorization bill for the agency. The bill creates a supplemental fund for compensating TV broadcasters that were assigned new channels after the FCC’s “repacking” auction. The proposal did not specify a dollar amount, but industry groups told committee members that it could cost as much as $3 billion.

What does it mean? 

• Broadcasters affected by the repacking are still pushing for adequate compensation after taking new licenses that made more spectrum available for mobile service providers.

For past issues of Washington in Review and other commentary on risk and regulatory issues impacting Technology, Media and Telecommunications companies, click here for past issues.

Contributors: David Sapin, Brian Dunch, Jocelyn Aqua, Julie Riccio, Marc Mazzie, Rachel Blumenthal, Lenora Zimmerman, Chris Caulfield, Sohail Mathur, Antonio Sweet, Nicholas Hall, and Shanna Holako