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The FTC vs Qualcomm: In Qualcomm We (anti)Trust–Futurum Tech Podcast Episode 046
by Fred McClimans | May 24, 2019

On this edition of FTP, the Futurum Tech Podcast, something is afoot at the Circle Koh, what Judge Koh’s bizarre decision in the FTC versus Qualcomm case actually means for the future of Qualcomm and the future of 5G, Amazon’s next healthcare wearable might be able to actually read moods, SpaceX’s broadband satellite moonshot gets a boost, Tesla autopilot gets trashed by Consumer Reports, trouble in Snapchat paradise. Those stories and more coming up on this episode of FTP.

Our Main Dive

Forget Qualcomm vs Apple – the real story is Qualcomm vs the US FTC and the surprise anti-trust ruling against Qualcomm that could disrupt the entire 5G industry. Is this legit? Is Qualcomm really running a monopoly racket? Well, yes, and no – it’s surprisingly uncomplicated.

Our Fast Five

We dig into the week’s interesting and noteworthy news:

Tech Bites

Have you ever heard of SnapLion? It’s a tool Snap created to allow law enforcement agencies to gather data on Snapchat users. It’s also a tool that some Snapchat employees have at their disposal, a tool that has allowed them to spy on the personal data and images of Snapchat users.

Crystal Ball: Future-um Predictions and Guesses

Will the ruling against Qualcomm stand the test of time, or is it destined to be overturned in record time?

Transcript: 

Fred McClimans: Welcome to today’s edition of FTP, the Futurum Tech Podcast. I’m Fred McClimans, your host for this edition. Joining me today, as always, my colleagues at Futurum Research, Daniel Newman and Olivier Blanchard. Gentlemen, welcome to today’s podcast.

Daniel Newman: Always good to be here.

Olivier Blanchard: Yep.

Fred McClimans: Always glad to have you here. I mean, given that we work together, we spend a lot of time talking about various events, about companies, about announcements, about news, about theories, about conspiracies, it’s good that we get a chance once a week to just kind of sit down and take all those random conversations and wrap them into one conversation, and that’s what we’re going to be doing here today.

We’ve got a really interesting show coming up. We’re going to be talking a bit about the surprise Qualcomm announcement. We’ll also be touching a bit on what Facebook is doing, what Elon Musk is up to with satellites, we’re going to talk a little bit about Snapchat and SnapLion, and also discuss a little bit about what Amazon is doing in the emotional space.

But before we get into any of this, I do want to remind our listeners that the Futurum Tech Podcast, FTP, as we like to call it, is for entertainment and informational purposes only. We are going to talk about a number of companies that are publicly traded companies, and we may even talk about their stock, but there is nothing that we say in this show that should be interpreted as investment advice for anybody, for any reason, ever.

So gentlemen, with that, when we talk about Qualcomm in the news for the last, I don’t know, probably 300 years, that conversation has revolved around Apple and Qualcomm and litigation. They recently settled their long-term litigation, to everybody’s surprise, in a very quick expeditious manner. No sooner have they done that than we heard this week that Qualcomm itself is being sued for monopolistic behavior.

Olivier, what is going on with the story here? Can you kind of frame what has transpired with Qualcomm and the FTC?

Olivier Blanchard: Right. So this is kind of like the what you’ve missed before an episode in a TV series, where you get like the quick recap.

So what’s happened is for the last few years Apple appeared to be engaged in a global campaign to try to undermine one of its suppliers, Qualcomm. Presumably to kind of strong-arm Qualcomm into giving Apple more favorable, quote-unquote, cheaper terms for some of their cellular modems and also for the pricing of the IP that Apple was buying from Qualcomm. And as part of this campaign, Apple filed a complaint with the Federal Trade Commission in the United States claiming that Qualcomm had abused its market power and forced some of its competitors, namely Intel, out of the 5G modem chip business, and all that Jazz.

Fred McClimans: Now, Olivier, was this filed after the lawsuit was settled, or was this during the lawsuit?

Olivier Blanchard: No, this was filed a year or two ago. This is actually a long suit that took a while. I think it was filed like in January of 2017, if memory serves, and the case kind of waited its turn, as things like this often do, and finally it went to trial earlier this year. And it was, instead of a jury trial, the FTC went for a bench trial, which would, on the one hand, expedite the trial and make it more likely for the FTC to get a win, because a single judge could make a decision as opposed to an entire jury. The price of going that route is that there would be no financial penalties against Qualcomm should Qualcomm lose.

So it was kind of a weird equation there. But the FTC was more concerned about winning the case than it was about exerting any kind of financial penalties against Qualcomm.

Fred McClimans: But Apple brought this suit originally, and the FTC has picked it up.

Olivier Blanchard: Actually, no. Apple complained to the FTC, and the FTC brought suit. And as it was gathering its case, it also reached out to Huawei, to Samsung, to basically every chip maker and every handset maker that mattered in the world to try to see if they would want to join them in trying to undermine Qualcomm, or in good faith, if you want to look at it that way, try to support the FTC’s claim that Qualcomm had acted in an anti-competitive behavior.

And what happened, so the trial was actually quite short, it happened earlier this year, and during this trial the FTC’s case was remarkably bad. It was really, really horrible. Actually, one of the lead witnesses in the case, there were only two, was a consultant for Huawei, so there’s obviously a conflict of interest there that was pretty glaring. There were all sorts of structural and procedural irregularities with the trial, where the judge, who seemed very hostile to Qualcomm from the onset, required… You know how in a trial usually the one party does a direct examination of a witness, and then the opposite party does a cross examination, you’ve seen this on Law and Order and pretty much every TV procedural, right? So one party asks questions-

Fred McClimans: I’ve never seen Law and Order. Seriously, I’ve never watch an episode of Law and Order.

Olivier Blanchard: Really? Okay, well you’ve probably seen crime dramas before, and so in the courtroom you have the prosecution asking questions, examining their own witness, and then the defense cross examines, and then they go back and forth. There’s a rebuttal, then a cross rebuttal, and usually they happen in sequence, right? They’re pretty much the same day or they are linear. In this particular instance, with some of the testimony, the judge imposed, I think it was, a two week gap between the initial examination of the FTC witness by the FTC and the cross examination of those witnesses by Qualcomm.

So the cross was out of context, it was out of sequence. A lot of things like that that didn’t make any sense. But more importantly, the FTC’s case was predicated on a very strange interpretation of anti-trust law. In short, in order for the case to be proven by the FTC, they had to show actual and substantial harm had been done by Qualcomm, on top of the fact that they had to prove that Qualcomm had misbehaved or abused its market power.

One, they failed to show in any way at all that Qualcomm had abused its market power, and on its face it is ridiculous to even suggest that a company like Qualcomm would have more market power than Apple and Samsung, and would play bully in this case. But even just factually, they weren’t able to show any evidence of that. And two, there was no harm done, and that was actually conceded by witnesses of the FTC.

But the judge applied a very strange standard to this that has nothing to do with case law, which is that instead of showing substantial existing measurable damage, she decided that her standard would be that Qualcomm’s behavior, or non-behavior, in this case, might someday, somehow, perhaps cause harm, and therefor they were guilty of a misdeed, which is completely absurd.

So she took a while to make a decision. In the meantime, Apple and Qualcomm settled globally, so this was the only outstanding case between that still existed from that period of warfare between Qualcomm and Apple. The FTC did not withdraw the case. They didn’t attempt to settle the case. Judge Koh didn’t throw it back out to them to suggest, or she couldn’t suggest that they drop it, but she could have asked the question, are you sure you guys want to continue with this? Have you come to some kind of agreement? She didn’t do that. Instead she dropped a hammer on Qualcomm and sided with the FTC’s very flawed moribund case instead of siding with the facts.

And so we have this weird situation now where even Apple doesn’t want this case to turn this way. Apple actually, before this this case was decided, settled, knowing that it would probably go their way, still entered into an agreement with Qualcomm that would leave no room for this decision, should it turn in their favor, to benefit them in any way. And so we are in this weird situation now where really nobody wants this, it doesn’t help anybody, and Qualcomm is now forced to defend itself through appeals, and obviously appeal this silly decision.

Daniel Newman: Let’s take a step back, Olivier, it does help. It helps Huawei. It helps Samsung. It helps basically anybody that’s not a U.S. based innovator because, and this is kind of metaphorically helping, right? Because right now we are in this extraordinarily time-sensitive point in the arms race that is 5G, and there’s essentially two camps.

And the most bizarre thing about Koh’s whole ruling is she makes it sound like this is going to open the door for hundreds of new companies to be able to make this technology, and it’s not that way. There’s basically two companies in the world that can do this right now, and it’s Qualcomm and Huawei. There’s other companies that can do piece of this, but the decision making was so obtuse, it was so off-kilter, I mean, it was almost like there was a much stronger political undermine in whatever Judge Koh was thinking.

Because even the, you didn’t mention this, Olivier, I’m sorry if I’m jumping on you in adding this, but think about the Department of Justice, right? Even the Justice Department in the United States issued a statement ahead of this ruling that said, basically, Judge Koh, if you are going to rule on this adversely, we want a chance to know what you are planning to do before you do it, because it would be so detrimental to our country’s leadership in 5G if you were to, for lack of better terms, de-weaponize and decrease capabilities of Qualcomm to do business as usual right now, right at the peak of 5G’s entry into the marketplace. It’s absurd.

Fred McClimans: Right. So Dan, let’s dig into that for a second here though. Competitors for Qualcomm, if you take 5G out of it, if you just look at their modem technology as it exists today, how many competitors do they realistically have in this marketplace? It’s got to be more than just Huawei.

Olivier Blanchard: Well, it’s, if I could just jump on that real quick, and then Dan can add a couple of details to it. Essentially, it’s not really just between Qualcomm and Huawei. There’s actually a fairly large ecosystem of chip makers and modem makers out there. Intel, up until recently, being one of them, right? Intel was developing a 5G modem for Apple, or attempting to anyway, and they, even currently, still have their 4G or LTE modem chips going into iPhones.

So there’s a rich ecosystem of chip makers who make cellular modems. The only difference between Qualcomm and the rest is that Qualcomm is just better at it, and this was one of the main issues of the case. The FTC was arguing that Qualcomm was number one, and had this leadership position in cellular modems, because it had undermined the rest of the market and blocked them from being able to catch up to them or overtake them.

And what actually happened in the trial, what the evidence showed, is that, A, Qualcomm, had not done anything of the sort, and that the reasons why companies like Intel and others weren’t quite as good as Qualcomm is that, A, there was some mismanagements of their modem business over the years where they might have decided not to focus as much on the development of cellular modems as Qualcomm had, and hadn’t assigned the same amount of resources and research to it, and the other thing is that those who had actually hadn’t been able to execute on it, most notably Intel. They are a great company, they make awesome modems for computers. Everything they’ve focused on, they do well. But in this particular area, they started too late. They didn’t assign the right resources to it in the right way, and they weren’t able to execute. They were having quality problems, they were having development problems, they couldn’t execute at pace.

And so what turned out to happen is the trial actually showed that Qualcomm had achieved its leadership through competitive means. It actually showed how competition works in the real world, even though the FTC was trying to show the exact opposite. And so it gave us, actually, a pretty good picture of where all of the other chip makers and cellular modem makers sit on that scale, and the fact that Qualcomm achieved its success completely legally and ethically.

Fred McClimans: Yeah, but there’s an interesting point there, though. Even if it’s legally and ethically done, one of the things that we have seen over the last few years is sort of an increasing tendency to think of companies that we would not necessarily think of as monopolies, as monopolies, simply because they are so successful, because they are so big. There may be alternatives out there, but the idea that somebody like a Facebook or a Qualcomm, in this situation here, is big enough and is dominating, even if it’s just because they did everything right, that well because they are that big, we have to take action to make sure that they don’t screw things up for everybody. By the way, since they are so big, we want to make it fair for the little guy, again, to have a second chance, in running into this. And that’s a tough one.

And Dan, I know you’ve got something to add on top of this. I read your piece in MarketWatch, by the way, Dan.

Excellent piece talking about the Qualcomm ruling here. So I’d like to get your thought on this idea of this being sort of a prescriptive action, and if you can kind of provide your take on the outcome. What happens down the road to this particular litigation? Does it have any impact on Qualcomm or not?

Daniel Newman: Well, the effects are immediate. They are supposed to start following this ruling right away. The challenges are it’s not just so simple as like these cellular device makers. Because, Olivier, when you talked about like a robust ecosystem of competitors in the modem space, I don’t that that’s actually accurate. I mean, I think at the low end of modems-

Olivier Blanchard: Well, yeah, that’s the thing. It’s not just the premium, right? There’s this whole-

Daniel Newman: You know, Mediatech and stuff like that.

Olivier Blanchard: Right.

Daniel Newman: At the bottom end, when you start talking about 5G modems that are going to go into what are essentially flip phones down the line. You know, but you are talking about what is it, like 3.25% of the retail list price of handset value of up to $400. So, you know, with Apple’s discounts it was about seven and a half bucks. With no discounts on a high-end premium device, you’re talking about around $13. On a $100 or $200 handset, it might be four, five, six bucks.

So, you know, the whole problem is is you are talking about a very small amount of money. The other thing we’re not really talking about yet here is the difference between what she ruled on, which are the standard essential patents and the non-standard essential patents, which when you are talking about system on chip, you’re often times talking about an integrated product, right? Very rarely are you talking about just the modem technology itself. So now you licensed the capability to build a modem, but all the other capabilities.

Because typically speaking, for about twice the price of what I just spoke to, Qualcomm licensed its entire portfolio of patents, which are what the premium system on chip comes down to, right? The Snapdragons, the technology that is powering the Samsung S10+, the technology that has long powered that iPhone, the technology that’s powering a lot of what we know as your top end premium phones, this was an all-in-one license and purchase agreement that you could license. And then again, the key was they made it simple because whoever was ultimately going to build your phone handled the licensing and sold you the components. It wasn’t so complicated.

So now what happens is you start splitting it up. So someone could come and say, yeah, we want to renegotiate our deal on this SEP, so they just want to just buy the access to use the license on one small piece of the total pie. And again, this goes down to Koh had very little fluency on the technology itself, or if she did, she certainly didn’t expose that in her ruling or in anything she had to say. But it’s not as simple. So if someone comes back to them and just licenses just the standard for 5G, for instance, that’s not multimode, that doesn’t support the ability to support 2G, 3G, 4G concurrently. You’d have to literally start piecemealing these things together.

What came to my mind is, Olivier, if you start selling these things at 11 cents, 15 cents, 19 cents, 22 cents, if you start adding it all together before you actually can build a system, these people are going to be paying more, even at a lower rate, because what Qualcomm had essentially done was simplify the licensing process where you’d license everything. And now it’s like, okay, fine, you know what, Judge Koh? We’re going to start licensing these things, we’ll drop the rate in half, and we’ll license every patent individually. Good luck with that.

Olivier Blanchard: Yeah, which is why I don’t think anybody is actually going to do this. The only company I could imagine trying to do this might be Huawei. If they are angry enough, and they want to commit enough resources to cherry picking every single SEP, and try to get 1/15th of a penny for every single license that they need just to bog down Qualcomm and force them to assign resources to that kind of project, and-

Daniel Newman: Excuse me. My last comment on that though, Olivier, is we can’t even sell to them! In 90 days Qualcomm won’t be able to sell to Huawei. So what I’m saying is this ruling was so absurd. I just really hope for some, you know, if Trump’s on the toilet tweeting right now, he could tweet out an executive order and get this overturned.

But all kidding aside, all I’m saying is I will respect this ruling a lot more if she can actually show any material harm. The fact that she left out Shapiro’s testament, the economist that was the basis of their entire testimony on the theory of economic harm, the fact that you don’t actually need to show harm, it’s just theoretically there, well she didn’t even theoretically show where harm is.

When you are selling these devices at the prices you are selling them at and at the margin they are selling at, how is Qualcomm causing harm, and how will one penny of what Koh’s ruling basically elicits, come down and end up back in consumer’s pocket. Because if you are protecting the consumer, then I would expect to see a tangibly lower price when I go off to buy my next premium device, and I’m pretty sure I’m not going to see any discounts passed along to me.

Fred McClimans: No, but what you may see is more activity, I think, on the other side or the smaller side, the non-massive, non-standard, non-big brand name handset of 5G and technology down the road. Because there are a lot of devices that we haven’t even thought of yet that are going to be using various components of modem technology in there, that they never get to the point of being a true handset or a true mobile phone. You know, it’s different.

Olivier Blanchard: Right, but here’s the thing, Fred. This was already happening. I mean, there was obviously no hindrance, economic or structural, blocking any company larger or small from entering this market. And you mentioned monopoly earlier, and we can talk about Google and Facebook as kind of quasi-monopolies, but in this case with Qualcomm, they have no monopoly.

As a matter of fact, in the amount of time that was being scrutinized for the purposes of the trial, so basically the timeframe that they were looking at in which Qualcomm was alleged to have acted inappropriately, the market share of Qualcomm had actually dropped a little bit, which is the opposite of what should have happened. A company acting with a monopoly, and acting with monopolistic intent and abusing its market power, should have at the very least retained the same market share, or at least increased it. And what we saw was the opposite, because it was licensing its technology to everybody at a really cheap price.

And so I just want to make sure that people don’t misunderstand that it is Qualcomm’s leadership, particularly in premium, like really high-end modems that go in your premium phones, is not a monopoly over the modem business. They just had better modems and people chose their better modems to go into their better phones. There’s also an entire slew of chips and IP, separately or together, that was going into the vast majority of phones that are not premium phones that Qualcomm had absolutely no negative impact against.

So I want to make sure that that’s clear, because at the heart of the FTC was this notion that Qualcomm was a monopoly of some kind, or attempting to be, when actually the opposite is completely true. Had they been a monopoly, Apple would not have been able to switch so easily to Intel modems when they did.
Anyway, what’s important though, as Dan mentioned, this ruling only applies to cellular SEPs. It doesn’t even apply to standard essential patents that touch on WIFI and Bluetooth, so a lot of the other kind of wireless communications that go into your phones and your devices.

So the next steps is Qualcomm is going to file for a stay with Judge Koh. They have to go through her first. It’s very likely that she will deny it.

Fred McClimans: Go figure.

Olivier Blanchard: Yeah, right. I will be very surprised if she agreed to it. So then they will go to the 9th Circuit and apply for a stay there, which will probably be granted by virtue of the fact that not granting it could actually cause harm not only to their business, but also to the entire ecosystem. It would be so disruptive to the mobile industry that it would be reckless for the 9th Circuit to not approve a stay.

That should take about two to three weeks, I think. And then the next step is the actual appeal, which will also be heard by the 9th Circuit. And that could take, you know, 15 to 18 months before we have a final decision to see if Judge Koh’s ruling is affirmed or modified or overturned. And those are the three options. One, it stays. Two, parts of it could stay, other parts could be modified. And then the third option, if I understand correctly, is it could be 100% completely overturned.

Fred McClimans: Well, we’re going to have to stick close on this, and it’s a saga. Qualcomm has turned into a saga of its own here.

But before we move off this and on to our Fast Five, I want to pose this to Dan and Olivier. Give me, other than Huawei, one company that you think benefits if this ruling stays, and one company that you think gets hit because of this ruling. And they can’t be Qualcomm or Huawei or Apple. Well, yeah, I guess you could choose Apple.
But Olivier, two companies. One that benefits, one that doesn’t.

Olivier Blanchard: Well, you know, Dan mentioned Samsung earlier, and there’s a pro and con to that. Samsung and Qualcomm just entered into an agreement as well a few months ago knowing full well that this was going to happen. So I don’t really see Samsung trying to capitalize on this any more than I see Apple trying to capitalize on this. If anything, Apple has more of an incentive to leverage this decision to try to gain better terms with Qualcomm.

So indirectly, yes, a weaker Qualcomm helps Samsung to some extent. But I don’t actually think this helps anybody. Honestly, even Apple doesn’t want this at this point. So if I can’t use Huawei, I guess some random Chinese chip makers? I don’t know. I honestly don’t see how this really helps anybody other than in the broader scope of China trying to undermine U.S. technology leadership, particularly in 5G.

So it’s not even a business advantage for one company over another, it’s a geo-strategic advantage between China and the United States.

Daniel Newman: Yeah, I would say maybe one company, because I can’t even give you another company that I think it’s really going to help. I think Nokia and Ericsson might be chuckling a little, as over the years they’ve definitely seen separation with their contributions to the standards and their contributions in terms of being core to any sort of device making. I agree with Olivier, I think you are really reaching to find anyone other than China that benefits from this.

Fred McClimans: Yeah, and I agree with you on that pretty squarely. I think that the biggest beneficiary of all of this has to be China simply because of the destabilization, the fragmentation, and the disruption that takes place within the U.S. marketplace. And that’s an unfortunate one, and I’m not sure that you can overturn something just based on those grounds there. But if it’s not overturned, if it sticks, it puts the U.S., and by default, anybody that’s not China or Russia, at a significant disadvantage.

Daniel Newman: I know you need to wrap this segment up here, but I just gotta ask a question just quick, Olivier, Koh is an Obama appointee?

Olivier Blanchard: Koh is, okay, yes. So, of course-

Daniel Newman: Okay, I don’t want to get into politics. [crosstalk] I just want to point out one thing, though. Here’s a conspiracy theory for you, right? Is it possible that just the disdain in actually giving a win like this to China actually puts pressure back on the executive branch? It’s a really long shot, but-

Olivier Blanchard: It does, but I don’t think that Judge Koh is thinking in those types of terms.

Daniel Newman: She shouldn’t be, by the way.

Olivier Blanchard: Then she shouldn’t be. I mean, her decision is such an outlier on every point, I don’t think it’s actually political. I think it’s a combination of bias on her part, not political bias, but a bias against Qualcomm for some reason. I think there’s a fundamental misunderstanding and misinterpretation of what antitrust actually is and how it works. And I think that she, I don’t know, I’m having a hard time wrapping my mind around how she could have possibly sided with the most poorly crafted and articulated antitrust case possibly in history.

But I do want to come back, one last point, to something you mentioned earlier about the Department of Justice. The DOJ has gotten involved in this on two fronts. One front is homeland security, right? They have a responsibility to ensure that the FTC doesn’t accidentally or negligently hinder the United States ability to protect itself from criminals, from dangers, from foes. So there’s a strategic national security interest that DOJ is charged with that has driven them to step into this case.

But there’s also another one. There are currently, for whatever reason in the United States, two agencies, two bodies, that enforce antitrust law, and they are the FTC, which answers to nobody and can go rogue at any moment, which is, I think, what we just witnessed, and the Department of Justice. And so there’s a turf war here between the DOJ and the FTC which the DOJ wants to win. And I think that it’s very likely that they will use this crazy case to step in and use that a lever against the FTC to assert the DOJ’s authority over the FTC and perhaps invalidate the FTC’s role in future proceedings of this kind.

So I would not be surprised if we started seeing an amicus brief, or a series of amicus briefs, being filed by the DOJ on behalf of Qualcomm in this case. So that’s something else to look forward to. Because if that happens, things will get very interesting.

Fred McClimans: Yeah, well you know, and that’s unfortunately a conversation that we’ll probably have to save for another show, but I like the direction that we are heading with that. It’s not just about what happened, it’s what are all the things that could possibly happen now, and how will people react, and how does this play out? Because I don’t think this ceases to be an issue tomorrow for whatever reason. This is going to fundamentally disrupt a number of different areas in tech and in politics.

So gentlemen, thank you very much. Good insights on this. And I do want to remind people, our listeners, that the piece I was referring to by Dan Newman is in MarketWatch, it is titled Opinion, well, it is an opinion piece, Investors Should Treat Court Ruling Against Qualcomm As Merely A Speed Bump. It’s a great read.

Daniel Newman: Got to love that title, right?

Fred McClimans: Gotta love it. Gotta love it. It’s a great read on Qualcomm, and we’ll make sure that link is in our show notes.

But gentlemen, let’s move on. Let’s dig into our Fast Five, and let’s see if we can actually make it a Fast Five today.

Dan, I’m going to start with you here. We’ve seen a lot in the market about cryptocurrency. We’ve seen a lot of companies do their ICO, their initial coin offerings. We’ve seen companies like Kodak have stock that jumps when they say, hey, we’re going to get into crypto. But somebody big is getting into crypto here. What’s going on with Facebook?

Daniel Newman: Yeah, a company we love to talk about. So apparently, and not for the first time in case people forget, because there was actually a Facebook Credit back in the day, but Facebook is finalizing its plans, according to Bloomberg, to launch its own cryptocurrency next year.

They are building a digital payment system and they want it to work in about a dozen countries by the first quarter of 2020, and they are testing it right now. Internally they are calling it GlobalCoin. More plans are going to come out on this, but essentially they want to create a digital currency that makes affordable, secure ways of making payments regardless of whether users have bank accounts. That’s their whole thing.

Essentially, Evil Corp want to have its own, and by the way, that’s a Mr. Robot reference in case you’ve never watched the show, wants to now also be your bank. So they don’t only want to read your messages and control how we emotionally respond to the world and what ads we see, they also want to make sure that all of our transaction are run through them.

Do I sound a little negative? Yes. I have to be honest with you, I really don’t know how, at the absolute of the trust barrel, the company thinks it is going to succeed in terms of being our financiers. However, I do think you are going to see a ton of this. I think you are going to see more and more companies that have marketplaces, I could see Amazon going down this road soon and several others, they want to basically control the transaction, right?

Eliminate the middle man. Increase trust, transparency, use a platform that’s growing acceptance and popularity.

However, because this is a Fast Five, I’ll basically leave it at this. I don’t buy it, but I’m interested in seeing what happens.

Fred McClimans: I’m there with you, Dan. The same thing. It looks like it has all the hallmarks of disaster written all over it, like the Facebook phone. But the way it plays out, and the impact it has, I think that’s the more interesting story.

So, Olivier, speaking of kind of this moonshot or space shot of Facebook into the crypto space, tell us a little bit about what SpaceX is doing in the space space.

Olivier Blanchard: Yeah, so SpaceX actually had a nice win this week. And by the way, SpaceX is the Elon Musk operation, not the Jeff Bezos operation. So SpaceX launched a Falcon 9 rocket into space this week and delivered 60 Starlink internet satellites into low orbit, and they’ll deploy, I think they are called, their krypton ion engines and kind of rise to a higher or more distant geostationary orbit.

So what these 60 satellites do is they are in theory supposed to provide high speed wireless internet to certain areas that they fly over. And the signal delay, in case you are interested, is about 20 milliseconds, which is very similar to wired broadband. So it’s not 5G or anything, but it’s pretty decent. It’s not what we would call ultra-low latency, but it’s decent for most applications. And this is kind of a test run for the thousand to two thousand, I’m sorry, eleven thousand additional satellites that Elon Musk wants to send into Earth’s orbit in order to provide wireless broadband internet to most of the globe.

So we will see if they actually work, and if they do we will start seeing a lot more launches like this. It’s basically, they’re planning, I think, 2000 or 3000 satellites being send up to space or into orbit every year.

Fred McClimans: Yeah, what a different concept between this, or just a comparison between what we see today with the small, the micro-satellites, versus the original Iridium network that came out in the ’80s and ’90s there. That was, what was it, 64 geostationary satellites? Incredibly low bandwidth. We were lucky if we had 2.4 kilobits per second, and I think it topped out around 9.6 kilobits per second. Nothing compared to what we see today.

But I guess this is novel, and this is actually Musk’s rockets sending Musk’s satellites up into space. Because we’ve seen other companies, Facebook, and Google, and others, have talked about building this global network based in space, but this is interesting. All we need now is for Tesla and SpaceX to merge into one, and then you can beam great sound into your car all over the place if it is a Tesla.

So, anyway, yeah. So moving on here, I’m going to take us into little bit of a different direction. Something really simple that I think has the potential to have a significant impact. Every home, every business, that has power has a circuit breaker inside the home. You’ve got this panel down in the basement of your house, all the electricity comes in, you’ve got a bunch of circuit breakers. If there is an overload or a problem, the circuit breaker trips and somebody grabs a flashlight, you walk downstairs, flick it back on. That’s the way it has been, that is the way it almost always has been. That is about to change.

There is a company out there, Atom Power, that has just brought to market, they just got certification, for the first digital circuit breaker. So imagine that panel in your home, or in your business, or your workplace, your factory, imagine that panel is 100% digital that you can now access remotely from your mobile phone, from your Alexa, or from the service provider of choice’s network.

What we essentially have here is a component of the smart grid, the ability to turn on and off power to devices in seconds, microseconds. So when power cuts over, there’s no gap, there’s no delay. That’s the kind of performance we get in a digital system versus, you know, you flip the switch with your finger system.

So this is hitting the market. I think the opportunity here to revolutionize the way we use power is huge, because you no longer have to say, I have this device plugged in, and it’s continuously draining power plugged into the system. You can now turn individual devices on and off through the circuit breaker system. You can also measure exactly what is happening, and you can be a lot more efficient about where power is allocated. Imagine putting some machine learning behind this type of system to capture data. It’s pretty significant out there.

Anyway, it is out there now. It has approval. Atom Power is the company. The Twitter handle, by the way, is AtomPowerInc. So check it out. It’s kind of sweet.

So Dan, I’m going to kick it back to you. We’re going to talk about our other favorite company to talk about here today, Amazon.

Daniel Newman: Yeah, I’m guilty of FANG. I’m an enterprise technology lover, but when it comes to news, the FANG companies always, they just never disappoint me. They always have good stuff. They always have the good dirt.

They’re always doing the really smart and the really dumb stuff, and so it just makes for really good reporting when we’re doing our Fast Five.

But yeah, so Amazon is working on a device that can basically read human emotion. So it’s a wrist-worn gadget. They going to consider it a health and wellness product. If you heard Bezos in his all-hands recently, he said, “We love healthcare.” So apparently Amazon is the next big healthcare company, right after Tim Cook and Apple. So who needs pharmaceuticals and hospitals, we will just have our Apple tell our Amazon wearable what we need, it will medicate us, and don’t worry about all those side effects. None of those side effects are actually a problem.

Anyhow, so it’s a wrist-worn gadget, it’s health and wellness, it’s a collaboration with a company called Lab126. It’s the hardware development group behind the Fire Phone, the Echo smart speaker, as well as partnering up with the Alexa software team. Now, I don’t think you should ever tell anyone you partnered with anything that the Amazon Fire Phone was involved with, because that, right there with the Facebook phone, are two of the biggest bombs in technology history.

It’s a patent right now. Nobody really seems to know how far along it is. What I do know is that apparently the patent is going to kind of be able to react to your voice, and the combination of that and maybe sensors on your skin to kind of be able to tell your mood and how you are feeling. So it’s going to be much more specific now, and it’s going to tie your emotional state to you, which will be something completely new, completely different, and pretty much feels like it’s something out of the movies.

Amazon’s not commenting on it. It’s a 2017 patent. It’s kind of under the radar right now. But it’s definitely something to keep an eye on as Amazon plays further into the healthcare and wellness space.

Fred McClimans: Yeah, you know, Dan, as I read through this, it almost seemed to me a bit like a hi-tech anger management course here. The ability to monitor your emotional state, what you’re doing, perhaps with other biosensors, and actually provide you feedback to say, hey, look, you’re getting a little hot under the collar here. Tone it down a little bit. Or you’re supposed to be funny and energetic, and you are dead as a doornail.

So I can’t believe I just used that phrase, dead as a doornail. There’s somebody out there, I know, that’s going to say, hey, what is a doornail? What does that actually mean? Y

Daniel Newman: What is a doornail?

Fred McClimans: Yeah.

Olivier Blanchard: That’s something old people say.

Fred McClimans: Exactly, exactly. So I kind of thought this was interesting. I’m wondering, too, if it couldn’t help individuals that have a hard time either controlling their emotions or interpreting the emotions of others, and there are well-known medical conditions.

Olivier Blanchard: I can see an application for autistic or Asperger’s on the spectrum, which is often the challenge, is how do you more quickly, more clearly interpret an emotion?

Fred McClimans: Yeah, it’s an interesting one. I’m hoping that we get a little bit more data coming out of this. But moving along here to our last Fast Five. Olivier, just bring it.

Olivier Blanchard: I’m coming back to Elon Musk, you know?

Fred McClimans: You are.

Olivier Blanchard: I’m not obsessed or anything, I swear. But something did catch my eye today.

I’m a big proponent of automotive automation and self-driving cars, autonomous vehicles. It’s just I’m also realistic enough to realize that we’re not quite there yet. We’re making amazing progress, and Tesla specifically is one of those companies that has really pushed the envelope and accelerated the entire industry’s ability to bring us closer to the dream, the ultimate goal, of having intelligent, safe autonomous vehicles.

However, I think that a lot of the capabilities of the Tesla Autopilot have been overplayed. On the one hand, a little bit by Elon Musk himself, and on the other hand, by Tesla owners and tech bros who seek validation of their own purchases and ideologies, as opposed to being necessarily 100% focused on the facts. But this week, Consumer Reports released a report on Tesla Autopilot that wasn’t exactly stellar, and kind of reinforces my view of the technology, which is very impressive, but not quite there yet. Or at least not quite there yet in terms of the level of safety that consumer and agencies that look at this stuff should be comfortable with.

For instance, one of the problems that Consumer Reports identified with Tesla’s Autopilot technology is that when cars pass or change lanes, the feature, quote, cuts off cars without leaving enough space, and it’s passed other cars in ways that violate state laws. So these are small details, but that can mean a lot. If your vehicle feels that it’s being very efficient in leaving a few feet between its rear bumper and the front bumper of the car that it is sliding in front of, in machine thinking that makes perfect sense.

If all machines are calibrated to the same kind of reactions and models of behavior, it’s not a problem. But human drivers are very different, and they might completely misinterpret that move as being too aggressive. They might hit their brakes. They might panic. They might be inattentive and only notice it at the last moment, and that can cause some problems.

So Tesla obviously is pushing back against this report, but the report does highlight, I think, some legitimate concerns, or pain points anyway, that Tesla and companies like Tesla should pay attention to and work into their programming to improve their products. That’s all.

Fred McClimans: You know, it’s interesting because when you talk about a car leaving a little bit less room than one might expect, and I know somebody out there is going to ding me for this, but all I can think of are Maryland drivers. Maybe Jersey drivers. Or even pick any big city, the cab drivers in New York City. I’m amazed at their ability to leave a fraction of an inch between their vehicle and the three vehicles that they are sandwiched in between here.

But very interesting point there when you talk about the idea that the car may be doing this, so the Tesla Autopilot may be doing this because it’s the most efficient thing to do, but that causes somebody else to react, and I think that reaction is called a road rage against the machine. And with that, we’re just going to kill this completely and we’re going to move on to our Crystal Ball for the day.

I’m sorry, not our crystal ball. We still have to do our Tech Bites segment.

Olivier Blanchard: Tech Bites, yeah.

Fred McClimans: Yeah. I don’t even want to go near this one. That’s the issue. Mentally, I’m just kind of skipping right over it. But yeah, Tech Bites this week… For our listeners out there that are new, every week we take some event that’s happened in the industry and we give it our unofficial Tech Bites award. That’s B-I-T-E-S, not B-Y-T-E-S. Usually it’s something that we kind of shake our head at and go, “What in the world were they thinking with this?”

This week it’s Snapchat that we’re elevating back to, I think, almost historic status. They’ve had a number of these in the past, these Tech Bite awards. So one of the challenges we have in building trust with digital companies, or in fact, just about any company, is that when you give that company your personal information that company respects that personal information and prevents others from viewing it.

As we know, anytime you gather a lot of information on people, there is somebody that is going to find a way to abuse it, and in this case it has come out that there was a tool that was originally used, I believe, for law enforcement purposes called SnapLion. Lion being a play on LEO, Law Enforcement Organizations. This tool essentially operated somewhat, I guess, to a god mode. It allowed people within Snapchat, employees, to access other users private information, including snaps that should have disappeared a long time ago.

It comes out now that apparently that has been taking place. And we have a couple of employees, it was reported through Motherboard, that employees had been accessing and abusing the personal information of others. Including things like their addresses, their phone numbers, their private email accounts, and all the naughty Snaps that they’ve been sending back and forth.

So guys, I got a look at this, and on the one hand, say, it’s not surprising that you would have an employee somewhere that would decide to do something that is just so horribly wrong, but they do it, it happens. You can’t hold Snapchat liable for this. On the other hand, Snapchat created the tool. It put the tool into the hands of individuals and didn’t properly supervise the kids. So I’m going to bring this back around again and say, look, this is a problem that Snapchat itself, that Snap, the company, needs to address, and I think needs to be held liable for.

Because when you start creating a technology and a culture that says, hey, it’s okay for this to, well… We don’t trust the kids, I think, is the way to say it. You just never trust the kids, and Snap did.

Dan, what’s your take on this?

Daniel Newman: Well, I think it is a little loose in the sense that the allegations of abuse are clearly there. The sources are mostly protected anonymous former employees. So you’ve got an issue of credibility with the disgruntled nature of potential past employees. Do I believe it happened? Absolutely. I’m not doubting this story.

What they don’t seem to be very clear on, though, is really what data was taken. What was exposed? How was it used? What sort of abuse? It’s not even really clear how much is accessible, meaning where they able to see their pictures and stuff? It sounded to me like it was more like the account holder’s information and stuff that maybe they’d saved. So it doesn’t necessarily sound to me like the disappearing messages were being accessed. But again, it was kind of like how I read it. It reads to me like right now this is early days.

But I think is just the commonplace now. There are humans behind the bulwark, right? So these applications have people that can access data. It’s happening at Facebook, it’s happening at everywhere. It’s happening at Amazon, people that were listening to the Echo conversations. Even though it was asynchronous and they were anonymized, it’s still sort of an eerie feeling. And I think we’re just going to hear more and more about this, and I’m really not quite sure at this point what is going to be done.

Fred McClimans: Yeah. Olivier, we had a quick conversation about this. Do you think this, as Dan says, this is something that just kind of happens, it’s there, we learn to accept it? And again, I’m not saying that you’re saying we learn to accept it, but yeah.

Olivier Blanchard: Right. I think we learn to accept it is different from saying that we have to learn to accept it.

Which is, this is part of the world we live in right now, and we’re still trying to figure out how to mitigate these risks. And so for this time period that we live in now, these are still kind of open doors, and very not well sealed seals that we need to do better with.

So for the foreseeable future, we have to expect that nothing is private, and that chats and content sent in private through platforms like Snapchat are not, in fact, private. They are more private than pushing it out on public feed on Facebook, but people can access them.

The way that I read this is that there’s a very good chance that what SnapLion was able to do was actually look at content, and capture content from individuals. And as a parent, and as a concerned adult, the risk that perhaps persons working for Snapchat, or even third party contractors with access to this kind of side door into Snapchat content, might have been able to use SnapLion to capture images and videos of very young female and male users, girls and boys, who might have been engaged in stuff that they probably shouldn’t be engaged with, but we know that this happens.

And so now we kind of bump into the specter of child porn, or accidental child porn, being kind of injected into this conversation, and that makes me very uncomfortable by the very nature of what Snapchat does, and how it’s being used by its users regardless of its terms of service. That’s of great concern to me.

Fred McClimans: You know, I think this highlights a couple of very important issues. Probably the most important in my mind is the idea that just because we have the ability to build this technology, and put it out there, and make it accessible to everybody, doesn’t mean that that’s always the best idea. And certainly in today’s world, there should be no illusions of privacy. You know, if it happens and it’s recorded, it’s going to get out there at some point. We live in glass houses. Everybody will see anything that you do online at some point, and we need to learn to instill that understand and, I guess, the significance of that in our kids, in our friends, in our parents, and even in our grandparents.

So yeah, this is a trouble one all around, all around.

So gentlemen, let us get to the endgame here. The ultimate thing that everybody has been waiting for today in today’s podcast, and that is the Crystal Ball. So as we do in the Futurum Tech Podcast, our Crystal Ball usually revolves around our main dive, and today, of course, that was Qualcomm and the FTC litigation and Judge Koh’s ruling.

So I’m going to ask each of you, put on your little Carnac the Magnificent capes and hats here, and yeah, I know somebody is going to say, who? Who is Carnac the Magnificent? But just give it a rest for a moment. And what I’d like to know from you is there are three options that I see coming out of the Qualcomm situation. The ruling can be upheld, it can be overturned, or it can be partially overturned. So what I’m looking for is which of those three do you think it will be, and I want you to give me the month that that’s going to occur. Olivier?

Olivier Blanchard: Oh, start with me. Put me on the spot. Okay, first of all I just want to preface this by saying that I don’t actually think that, even if it doesn’t get overturned, I don’t think that it actually poses a problem for anyone, because honestly it’s very unlikely that any business in their right minds would make a request pursuant to Judge Koh’s order regardless of whether it’s upheld or not.

In other words, Qualcomm doesn’t really have to change much of anything about its business model, it only has to make a available individual SEP licenses if and when requested. They don’t have to voluntarily do that or change anything.

So, to answer your question-

Fred McClimans: Okay, with that out of the way, outcome and date?

Olivier Blanchard: Yeah, with that out of the way, outcome and date. I think it gets partially overturned. I think that kind of like the individual SEP mandates gets overturned, and I think that the antitrust and harm aspects of this case get overturned. I don’t, however, see any reason why an appellate court would overturn the provisions that focus on Qualcomm not being able to interfere with one of its rivals communicating with the government, or any of the kind of normal logical aspects of this decision that kind of like are more random, and more general, and not necessarily specific to Qualcomm.

I do think that the one thing that does stay is the order for Qualcomm to submit itself to a seven-year supervision kind of time frame with the FTC or some affiliated body. I think that actually will remain in place. Everything else, I think, goes away.

As for the month, I think-

Fred McClimans: And since you’ve listed out a number of items here, when do you think all of those things are settled and we can all move on? What’s that like?

Olivier Blanchard: I think those things get settled and we can all move on in February or March of 2020.

Fred McClimans: Okay, I thought you were going to try and get by without giving me a year on that one.

Olivier Blanchard: You know, I want say, like the number that I keep hearing, is 18 months. I don’t think it’s going to take that long. I think a year from now we’ll have a decision.

Fred McClimans: Okay. So Dan, we have had this extensive explanation from Olivier. Give me yours.

Daniel Newman: So Olivier said a lot of smart things there that are worth pointing out. There was so much good stuff packed into such a short little statement, although it’s never really short when it comes from Olivier. You’ve just got to read his blog to know that.

I think it was important that he pointed out the partial overturn, because when I talk about overturn in my MarketWatch piece and in other comments I’ve made in different platforms, I’m really talking about overturning the parts that are most harmful to Qualcomm’s ability to continue operating and continue leading innovation in 5G and in the cellular space. There are parts as you mentioned, the monitoring. I mean, they’ve been monitored very closely for a very long time, and I don’t see that changing. This may be a more specific monitoring.

But to get to your answer, I’m going to be bold here. I’m going to say Koh is not going to grant their stay. They’re going to appeal to the court, and the appeal process will be in motion. As Olivier mentioned, that’s a 12 to 18 month process. I’m guessing somewhere around six months into this, something will come down from the executive branch or the Department of Justice that will actually stay the ruling or have some sort of pause, if not completely killing the ruling, because the United States’ concerns for security, which obviously we’ve seen so much of this going on around Huawei, and the United States’ desire to lead in this space, and the risks associated with weakening the only company capable right now of developing this technology.

So I actually see the resolution coming from outside of the tradition process. It’s a little bold, it’s possibly unlikely, but we saw what happened when Trump and the executive branch intervened with the Broadcom takeover, and I think this is equally as important. So I will be unsurprised if it happens, although many people may be.

Fred McClimans: So six months from now. That would be when?

Daniel Newman: Within six months. It could happen sooner.

Fred McClimans: Within six months. Okay. So you’ll put a cap on that?

Daniel Newman: I just think that right now with the tensions of what’s going with China, with our trade agreements, with 5G leadership, this is going to be swift, and our executive branch does not tend to take time to think about anything, and that is very visible through Twitter.

Fred McClimans: Yes, Action Jackson. So yeah. So, Dan, I tend to side with you on this a bit. I don’t think it makes it through a complete appeals process. I think the idea of this becoming sort of a very swift… Oh, what’s the way I’m trying to say this? I think there will be a very swift action here. I don’t think it even goes six months. I think that the idea of weakening Qualcomm, especially given everything that is going on with the trade negotiations, and hey, you can say what you want about there being security issues, but in my opinion, everything the government is doing right now, while they talk about security, it’s all about economics. You know, it’s not intellectual property, security, or stealth spying, I think it’s more economics, unfortunately. Because there are some serious issues that we need to think about with Huawei.

But yeah, in this case, I don’t even give it six months. I think this will become a very quick decision from somebody outside this particular case. The interesting thing is do they actually let portions of this stand in place, because there are some things that kind of make sense there. Yeah, it’s going to be an interesting one to watch.

All right, so we have end of November it’s wrapped up for you. For Olivier, it doesn’t wrap up until, what was it? February or March of 2020. So excellent. Gentlemen, thank you very much. Let’s see how our prognostication pans out.

And with that I want to thank you both for being part of this edition of FTP, the Futurum Tech Podcast. I would like to thank our loyal listeners. Thank you very much for being part of our community, and please let us know what you think about the show, about topics that you’d like to hear us talk about. You can follow us on Twitter @FuturumPodcast.

So for Olivier Blanchard and  Daniel Newman, I’m Fred McClimans, thanking you for listening to this edition of FTP, Futurum Tech Podcast. There will be plenty of more tech topics and tech conversations right here.  Please be sure to subscribe to us on iTunes.  Join us, become part of our community. We would love to hear from you. Check us out at futurumresearch.com. We’ll see you later.

Disclaimer: The Futurum Tech Podcast is for information and entertainment purposes only. Over the course of this podcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.

Fred McClimans