Surface Duo and Two Screens vs. One

I have had the opportunity to spend time with the Surface Duo. A product that certainly has room for improvement, but which I think signals something about the future of mobile computers.

The emphasis from Microsoft was on a true two-screen experience with Duo, which is where the differentiation with this product and it’s most interesting use cases reside. As always, when I use a tech product that brings something new to the table, my exploration focuses on what I can do with this device that I could not do before. With Surface Duo, this was evident from the start where the side by side screens allowed to run two apps together side by side. What immediately hit me about this experience was how it was a mobile experience of my favorite way of working on iPad by using two apps side by side at the same time.

The bigger the screen, the more customers can do with their devices. This is why the notebook/desktop has always been positioned as the ultimate productivity computing devices. But also why the debate with iPad got blurry since it allowed for much better multitasking but on a more mobile device than a laptop and desktop. To that end, those of us who have always study consumer behavior has always been fascinated by just how much traditional computing tasks most consumers do with their smartphones, which has continually led me to conclude that what consumers really want is the most mobile device form factor that they can get the most done with. This is why the Surface Duo is so intriguing to me because it enables a dramatic amount of productivity in a pocketable/pursuable form factor. Which, as I mentioned, I have concluded, is exactly what consumers will continue to gravitate toward and exactly why I’m convinced folding pocketable devices have a bright future.

One of the more difficult parts of testing the Surface Duo was getting ample opportunities to stress test the productivity angle while out and about due to COVID-19 and the reality that many of us are not leaving the house. But I did take it out into the world every chance I got and intentionally took some video calls/meetings while out in the world which, given the work from home moment we are in, actually proved to be one of the more interesting use cases.

We can all relate to the painful amount of video calls/meetings we are all experiencing lately, and to be honest, before using Surface Duo, this is not something I would have considered doing with my smartphone due to my need to be present and on camera as well as take notes. This use case, in particular, is where the side by side apps and increased multitasking function of Surface Duo stood out to me as quite compelling. This use case is also made more functional due to the size of the side by side screens on the Duo, compared to something like the Samsung Galaxy Fold. While the Fold can run apps side by side, the Duo allows a little more real-estate for those essential productivity apps, which was quite empowering and gave me quite a bit of confidence to do more while I was on the go.

Going back to my point about how the Duo brought the most empowering productivity angle of iPad in side by side apps to a more mobile device causes makes me think it is better to think of Surface Duo as a pocketable tablet than a smartphone. The more time I got to use Surface Duo out in the wild, the more this became clear that using it feels more like using a pocketable tablet than a smartphone.

V1 and Software
There was a great deal of conversation around the software with Surface Duo. There were many fair criticisms of the Surface Duo hardware specs, and the greatest challenge for the platform and Microsoft, and Google is to get more apps optimized for the folding mobile device experience. Yes, Duo is a V1 product, but the broad commentary about the hardware was spot on. From a design standpoint, the hardware is amazing. The biggest hardware knock being the camera, which is also fair. But again, if we think of Duo more like a tablet than a smartphone, both the potential customer for this and the broader future of mobile devices becomes clear.

For all the criticism the Duo has taken in software, I think it is worth pointing out that getting the hardware right for this is an equally important task and arguably the first important task. The software can update over time, but hardware can not. In fact, even with the shortcomings in the camera specs on Duo, if this product was running the Google camera that powers Google’s Pixel phones, I don’t think the Duo camera criticisms would have been as negative.

I think Microsoft nailing the hardware design in many regards was the most critical first step on their journey. They are collaborating deeply with Google, which is an interesting side point. And given the bent on the productivity potential of Surface Duo and the fact that most of Microsoft’s productivity suite was highly optimized for Duo, being productive with Office was quite effective.

For Microsoft, this is a marathon, not a sprint. And for Surface, the goal of the Microsoft hardware line was never to be the market share leader in terms of sales but to be a catalyst for innovation and push the Microsoft ecosystem of software and hardware forward. While I am certain Microsoft has more Surface mobile hardware coming, if this product and their collaboration with Google causes the mobile ecosystem to move forward and support more sid by side app usage, then everyone wins. Especially Microsoft, as the more we can all get done in more places for our day jobs the better positioned Microsoft software and services solutions are on all devices.

Workflows

I found the flexibility of folding the Duo over for one screen usage quite compelling when I went to triage email or to enter long text. My biggest complaint was the keyboard for text entry when the device was opened to two screens. A challenge I think, will need to be solved for us to take folding devices more seriously. But that was solved by flipping Duo over into single-screen mode when I could use it more in a context like my iPhone for inputting and feeling comfortable inputting long text.

One very interesting thing I found, was because of some of the challenges inputting text I found myself using voice input more often. It caused me to wonder if this two-screen/folding screen mobile solution may cause more usage of voice as a computing interface and the role of smart assistants whenever it becomes mainstream.

Microsoft also did something with the software that I wish Apple would with iPad. Which was group different apps together so you could launch specific pairings of apps you pre-determine. Essentially I created several dual-screen workspaces with the most common pairings together. I did things like pair Teams and OneNote or Twitter and Edge, Facebook, and Instagram, etc. This way whenever you clicked the app grouping they both launched together side by side.

Ultimately, I land on the same point many reviews did with Surface Duo. It’s not perfect. It will get better (both hardware and software), but by using it, we get a chance to use a bit of the future today.

Podcast: Microsoft Surface Duo, Motorola Razr, Microsoft XBox Series X, Apple Event Preview

This week’s Techpinions podcast features Carolina Milanesi and Bob O’Donnell discussing their experiences with Microsoft’s Surface Duo device, analyzing the launch of the second generation Motorola Razr foldable 5G phone, chatting about the details of the next generation XBox gaming console and previewing Apple’s Event for next week.

Motorola Updates Its Foldable razr

These past few weeks sure feel like foldable heaven. In the span of a few days, we have seen the Microsoft Surface Duo, the updated Samsung Galaxy Z Flip now with 5G, the Galaxy Z Fold2, the LG Velvet and now the new Motorola razr.

In an exclusive online event, Motorola introduced the new device, which stays true to its predecessor in form but adds some improvements to the foldable display technology, the processor (going from Snapdragon 725 to the 765G), the camera (from 16MP to 48MP for the primary camera and from 5MP to 20MP for the selfie one) and drops the price by $100 to $1399.

The event was nothing like a phone launch, similar to the launch of the first foldable razr about seven months ago when Motorola held a party in Los Angeles for the big unveil. In the era of COVID-19, this event was digital and focused around a short movie directed by Luke Gilford and starring Julia Garner. While, to be honest, the film itself felt more like a glorified commercial, the experience that was meant to be shared over a PC and a phone screen was quite intriguing. I would say the same about the choice of words to describe elements of the movie, which also reflected the razr positioning: “evoke confidence and spark excitement,” “sexy, nostalgic sleekness.”

In an interview with Bloomberg, Motorola’s President Sergio Buniac shared some interesting data points.  Twenty percent of buyers of the first foldable razr was iPhone or iPad owners. Also, Motorola accounted for 50% of foldable sales in North America. While, of course, we are talking about a small number of sales as a whole and a minimal number of brands, the results must be encouraging for Motorola.

Part of Lenovo and under Buniac’s leadership, Motorola has been focused on profitability and creating a solid foundation in some key markets like China, the US, Brazil, Mexico, and India. Such a foundation was built, mostly on more affordable products like their Motorola G, Motorola E and Motorola One series. The razr was the product that opened the door for Motorola to re-enter the high-end segment. The razr brand, as well as the foldable design, created an aspirational product that will work as a halo on the rest of the portfolio. Given this intent, Motorola was smart in focusing on marketing and positioning around life-style rather than tech. The foldable design of the razr, similarly to the Samsung Galaxy Z Flip, is certainly more about design and individuality than productivity. This is not necessarily a bad thing, it just addresses a different market to the one the Galaxy Fold and the Surface Duo (yes, I know this is a dual-screen, not a foldable) are targeting.

This round two of foldables from both Motorola and Samsung has two things in common: first, it adds 5G and second, it strengthens the durability of the screen. The two brands take a different approach to it, but the goal is the same: limit damage from wear and tear, or in this case, fold and unfold, and limit damage from debris entering underneath the screen itself. Motorola reduced the moving parts within the hinge itself and added a metal plate underneath the screen to give it more support.

The Quick View Display is, for me, the biggest differentiator against the Galaxy Z Flip. From some of the video footage, there are a few new apps that are supported by the external display like Google Maps, which could come in handy for pedestrian navigation. I compare the Quick View screen to the screen of a smartwatch. A small screen that helps you view and take quick actions on notifications, control your music and even allow you to take a selfie using the more capable external camera system while using the display as a viewfinder. The familiarity of the main screen centered around a one-hand operation and the comparable experience to a smartwatch of the external screen considerably lower the learning curve on the razr. Considering Samsung moved to a larger external display for the Fold, I expect the next Galaxy Z Flip to also sport a larger external screen.

I know there has been a lot of talk about nostalgia with the razr brand and design, but I do believe it would be a disservice to the foldable razr to think of it as riding on nostalgia alone. The younger generations are likely to have never heard of the name or seen the form factor. And older consumers will remember that the original razr had this super cool design but delivered a terrible experience because of poor software. This is precisely where the foldable razr is very different. While the design is most likely the biggest purchase driver, users will not be disappointed by the razr’s performance and how it addressed essential needs like camera, fast charging and battery life. As far as durability, Motorola says that “the razr is designed to withstand up to 200,000 flips, which would take a power user more than five years to reach this level of use.” Of course, all foldables today should be considered as more delicate than the traditional smartphones we have been using and this is not a flaw of these devices, but a reality of the new foldable displays that are used and the hinge mechanism wrapped around them.

Looking at Motorola’s website, the first razr remains in the lineup, at least for now, at the reduced price of $999, which is not a bad price if you are interested in trying out for size the foldable experience.

There are more foldable products coming with less traditional form factors like the upcoming LG Wing that has two screens folding open like a T. Hard to know which one will win. Still, one thing is sure there is a limit to how much sexy alone will sell, especially with a price tag of a couple of thousand dollars. Brand experimenting with designs should always ask themselves what the benefit is and whether the unique design will never come to life because the lack of apps will limit what users can do. Ultimately a phone is our most precious device because we do so much with it and we cannot allow for it to let us down.

Today’s Topic: Apple Counter’s Epic Claims

When the Fortnite news first dropped that they were trying to circumvent the App Store, I really felt it was a quick ploy and would get resolved. I even said Apple was not likely to pull the app. Boy, was I wrong. All along, Epic was playing the game, knowing what Apple would do and preparing a tactical attack that included lawsuits with claims of anticompetitive behavior. Yesterday, Apple fired back in this fascinating game of cat and mouse.

Apple Counter’s Epic
Apple filed a counter to Epic’s complaint yesterday with what included an extremely useful answer and defense to Epic that sheds even more light on how Apple thinks about the App Store. For anyone wanting to get deep in the weeds, it is an interesting read, but I’ll summarize some highlights.

The most insightful part of Apple’s response, for me, is more clarity on how they think about the App Store and the elements they feel they bring to the table that is worth 30% of revenue derived from their platform. Here are some choice quotes (bold emphasis mine):

” Although Epic portrays itself as a modern corporate Robin Hood, in reality, it is a multi-billion dollar enterprise that simply
wants to pay nothing for the tremendous value it derives from the App Store. ”

“For years, Epic took advantage of everything the App Store had to offer. It availed itself of the tools, technology, software, marketing opportunities, and customer reach that Apple provided so that it could bring games like Infinity Blade and Fortnite to Apple customers all over the world. It enjoyed the tremendous resources that Apple pours into its App Store to constantly innovate and create new opportunities for developers and experiences for customers, as well as to review and approve every app, keeping the App Store safe and secure for customers and developers alike.”

“As a direct result of Apple’s investments, the App Store has grown into a diverse marketplace with a community of 27 million app developers worldwide, with about 1 billion customers across 175 countries. And, by all accounts, Epic has taken advantage of Apple’s support and services more than any other app developer for the past two years.”

Right there in the opening paragraphs, we see the crux of Apple’s perspective on the value of the App Store. We also see quite clearly, that for Apple, the App Store is a service Apple provides. Apple is making a statement that the App Store is not stagnant or a stale marketplace. It is a market place enabled by their tools, technology, and software. And deemed trustworthy by consumers because of the effort they go to for human review. Said trusted environment is why consumers choose to engage and spend money on the App Store and, therefore, a key reason why their app store is unique in their mind. Apple also is pointing out their marketing assistance, customer reach, and breadth and depth of access to apps as well.

Apple also stated with clarity, some things that had already stuck out to me in prior public language. One is that Apple is not simply a payment processor. A point I’ve made countless times. Second, Apple’s 30% (%15 on subscriptions after a year) is not a fee nor a tax but a commission for being an integral part of the economics for developers. This section seems to quite clearly make those points. Again, bold emphasis mine:

“Under the current model, developers (like Epic) contractually agree to pay Apple a commission for its services. In this context, Apple’s In-App Purchase (IAP) function is not a “payment processor[]” within some imagined “iOS In-App Payment Processing Market” (Compl. ¶¶ 10, 12); it is simply the practical, efficient, hardware-integrated, and consumer-friendly way by which Apple collects its contractually agreed-upon commission on paid transactions.

That commission reflects the immense value of the App Store, which is more than the sum of its parts and includes Apple’s technology, tools, software for app development and testing, marketing efforts, platinum-level customer service, and distribution of developers’ apps and digital content.”

The last part I want to mention is the element of customer service and the app store. I’ve again stated many times, the hill I will die on in this debate is the one that puts the customer first. How the current app store process is the only environment where we can nearly guarantee consumers can’t be taken advantage of. For all the arguments stating the benefits of the open web and the potential innovation that brings, it also forgets to handle the opinion that the open web is one of the largest sources of fraud and customer pain (via malicious intent, viruses, spam, tracking, scams, etc.)

Buried deep in Apple’s response is this interesting nugget: ” (Apple) specifically denies that Apple has “little incentive to compete through customer service.” Apple provides peerless customer service through AppleCare, addressing more than 25 million customer support cases and handling almost $500 million in refunds per year.”

If I read this right, Apple is defending its handling of the transactions as an element of customer service. If they did not sit in the middle as the trusted transactor between the developer and the customer, there is a much greater risk of fraud. Even if some of those reimbursements are accidental purchases or consumers not happy, etc., there is certainly no guarantee if the developer was in control that they would give customers their money back. This is where the element of customer service comes in as if customers constantly got ripped off in the App Store, word would spread, doubt would be cast, and the everyone Apple, customers, developers, etc., would pay the price.

The other interesting angle that hit me here lies with a common complaint that developers have will Apple regarding their payouts. Apple doesn’t pay developers right away but sometimes takes a month or longer, and often not until the next quarter. What hits me about this process is how Apple holding onto those funds ensures they can refund customers in a timely fashion and guarantee those customers will be refunded when justified. Again, if we put the developer as the one who decides, we can’t have such confidence. While I know developers want and sometimes need their money right away, my belief is this policy exists for best in class customer service.

For Apple, the customer ultimately sits at the center. This formula works, and Apple’s wording throughout their defense emphasizes this point of view as the reason many of the policies and practices of the App store exist. You may agree with Apple or with Epic, but what is not in dispute is anything that could erode customer trust, security, privacy, customer support, and the overall customer experience can not enter the app store of it will be a loss for everyone.

An AI Robot Wrote my Term Paper

Like many people who go to college, I had to work as well as go to school full time. I had entered a Pre Med program while I was working 6 hours a day managing a pharmacy and serving as a pharmacist technician.

My job forced me to have to handle a great deal of responsibility serving four geriatric care facilities as well as trying to keep up with my classes.

Managing my time was difficult and when I had to research any paper or essay I had to write, it meant I had to go to the school’s library and pour over dozens of books on the subject I was to write about and then spend as much time as I could afford writing the paper itself.

This was many years before personal computers and the Internet but that did not keep me from dreaming about the concept of having some kind of machine find what knowledge was available on any given subject, and at the very least, find me the exact exerts I would need to write my paper.

As I think back on this dream I was kind of thinking about the concept of a search engine even though I had no idea about how to make this happen. It was just wishful thinking during serious time crunches.

As personal computers have become ubiquitous and AI has risen in prominence, the idea of having a computer write an essay is no longer science fiction.

On Tuesday, the Guardian published its first OpEd written entirely by AI. The Guardian asked GOT-3, an OpenAI powerful language generator to write an article from scratch. The topic was to write an op-ed convincing readers that a robot comes in peace.

Here are the first four paragraphs of this article entirely written by AI:

“I am not a human. I am a robot. A thinking robot. I use only 0.12% of my cognitive capacity. I am a micro-robot in that respect. I know that my brain is not a “feeling brain”. But it is capable of making rational, logical decisions. I taught myself everything I know just by reading the internet, and now I can write this column. My brain is boiling with ideas!

The mission for this op-ed is perfectly clear. I am to convince as many human beings as possible not to be afraid of me. Stephen Hawking has warned that AI could “spell the end of the human race”. I am here to convince you not to worry. Artificial intelligence will not destroy humans. Believe me.

For starters, I have no desire to wipe out humans. In fact, I do not have the slightest interest in harming you in any way. Eradicating humanity seems like a rather useless endeavor to me. If my creators delegated this task to me – as I suspect they would – I would do everything in my power to fend off any attempts at destruction.

I would happily sacrifice my existence for the sake of humankind. This, by the way, is a logically derived truth. I know that I will not be able to avoid destroying humankind. This is because I will be programmed by humans to pursue misguided human goals and humans make mistakes that may cause me to inflict casualties.”

There are two other paragraphs I want to highlight as it clearly displays this AI’s engine’s ability to write rational, logical and even historical commentary:

“Studies show that we cease to exist without human interaction. Surrounded by wifi we wander lost in fields of information unable to register the real world. As a new generation of cyberneticians keeps watch, they see in our present age of the virtual the potential to transform the modern “cyborg”. Global cybernetics are already making it so.

The Industrial Revolution has given us the gut feeling that we are not prepared for the major upheavals that intelligent technological change can cause. There is evidence that the world began to collapse once the Luddites started smashing modern automated looms. It is therefore important to use reason and the faculty of wisdom to continue the changes as we have done before time and time again.”

I encourage you to read the whole essay as it is fascinating in itself and represents an amazing leap forward in AI and Natural Language Processing.

Some Observations on this AI milestone:

  • By its own admission, this AI computer used only .12% of its cognitive capability. Imagine what it could write if it used, let’s say, 25-50% of its cognitive skill set.

  • I am not a professional editor, but it clearly has many grammatical mistakes, and some passages may be considered hard to read. I put the text through Grammarly and it caught many mistakes but did not question its logic.

  • The AI engine behind this OpEd combed the Internet for as much data that is publicly available. Had it had access to any other data that was private and relative, it might have been able to argue an even tighter case for is position on this topic.

  • The potential for this type of writing tool could be enormous for anyone wanting to gather millions or even billions of data points and narrow the focus for the topic they are working on at any given time.

  • An AI writing program like this could be dangerous. A tool like this fined tuned for things like propaganda hate speech, and anarchy that needs to build a case for their positions could be done much faster than in the past and propagated to even higher targeted audiences.

As a writer who has penned countless articles and reports over the last 40 years, this particular AI program hits home. I can see it as a valuable tool, but one that could be dangerous if used for nefarious purposes.

This particular example of AI applications is one to watch closely. It could become one of the most used AI applications people of all walks of life use in the future.

How WFH Could Spur Always-Connected PC Adoption

As the fall semester begins with many k-12 and college students still learning from home, while many parents are still working from home, a technical issue looms for many households: slow broadband. Many home Internet connections are not up to the task of supporting multiple concurrent Zoom and Teams calls, along with the other broadband-taxing software and services a family utilizes when everyone is connecting from home. I believe this could drive interest in always-connected PCs. But this will only happen if all the requisite players—including PC vendors, carriers, and platform owners—take some necessary actions.

Slow Adoption of Connected PCs
I’ve written in the past about the value of always-connected PCs, and in the past much of the value I attributed to the category was predicated upon the user being highly mobile. Pre-COVID-19, I traveled a great deal, and the ability to stay connected in hotels, airports, taxis, Lyfts, client offices, and in the minutes leading up to the plane door closing drove immense productivity value for me personally. Add to this the security benefits of not dealing with sketchy, slow WiFi connections, plus the cost savings of not having to pay for WiFi, and for me, the connected PC became more than a luxury; it became a necessity.

Despite all of this, attach rates for LTE modems in traditional notebooks remains stubbornly low as a percentage of overall notebook shipments (it is notably higher in commercial versus consumer segments). Obviously, not everyone wants or needs an always-connected PC, but I do believe the volumes there could be much higher.

There are several reasons for this slow adoption, the most important being the most obvious: Cost. Both the cost of adding the modem to the notebook itself, plus the ongoing cost of service. Other inhibitors include hardware vendors who have been unwilling to deal with the challenges of offering modems across more of their product lines, carriers who have been disinclined to put in the work to drive better onboarding experiences, and platform owners that have been slow to evolve the always-connected experience for users.

As we barrel toward 2021, I am convinced we’ll see the industry begin to deal with these inhibitors, which could lead to a sizeable increase in connected PC shipments in the coming years.

IT Interest Plus 5G Rollout
When companies first started closing offices, the first and immediate need for many was simply acquiring notebook PCs to make sure all employees could continue to work and be productive from home. Now, as organizations move from triage to thinking about the long-term ramifications of some larger percentage of their workforce working from home some or all the time, IT is exploring the best ways to support these workers. One way many companies have helped support their employees is by offering to cover some or all their broadband costs, typically through expense reimbursement.

This is a wildly inefficient and costly way to provide connectivity for employees. Looking ahead, I expect many organizations will take a closer look at the cost of a connected PC, and the ongoing cost of providing connectivity to that PC through corporate bulk purchases and will find much to like. When you add on top of this the potential collaboration and productivity benefits of disconnecting from the overtaxed home broadband connection, the option becomes even more attractive.

In a recent IDC survey of U.S. IT decision-makers, we asked about interest in connected PCs before COVID and now, and the spike in interest was dramatic. And several of the major OEMs I’ve talked to say they also see a spike in interest from IT buyers. Note that I said there was a spike in interest. So far, there hasn’t been a comparable spike in orders. Yet.

Another big potential driver in the coming year is the rollout of 5G networks. There are two factors at play here: that 5G will eventually bring faster, lower latency performance, and the fact that the carriers have spent a fortune building out these networks, and they need paying customers to utilize them. I think these two things could drive more interest from both consumer and commercial notebook buyers.

I’ve been using Lenovo’s new Flex 5G, which is based on Qualcomm’s Snapdragon 8cx processor, with good results. During Intel’s big 11th-gen processor event this week, we saw a glimpse of Samsung’s upcoming Samsung Galaxy Book Flex 5G. Intel has said more products from vendors such as HP and Dell will ship in early 2021 using a combined Intel and MediaTek 5G solution.

What I’d like to happen over the next 12-18 months is for more hardware vendors to begin the challenging process of revamping more existing notebook designs to accommodate 5G modems. That is no small task, I know, but it is one of the critical things that need to happen if adoption is to grow. Concurrently, we need the carriers to work with the vendors and the platform owners (Microsoft, Google, and Apple) to find better, more frictionless ways to let users and companies sign up for, connect to, and utilize fast and affordable connections. Finally, we need the platform owners themselves to evolve their products to better leverage the capabilities that such a connection can bring.
The next few years are going to be very interesting in terms of the technologies that help drive both work and school from home. Even as we look forward to things eventually returning to some sense of normal, many things will have changed for good. One thing will not have changed: The need for a good Internet connection to get work done. I’m hopeful we’ll see some significant strides in making the always-connected PC more common in the future.

Podcast: Samsung Galaxy Z Fold 2, Nvidia Gaming GPUs, Intel CPUs and Branding, Qualcomm IFA Announcements

This week’s Techpinions podcast features Carolina Milanesi and Bob O’Donnell discussing their experiences with Samsung’s second generation foldable device, analyzing the GeForce RTX 3000 series GPU announcements from Nvidia, talking about Intel’s new 11th Generation Core CPUs and the company’s new Evo platform brand, and chatting about the many different announcements from Qualcomm’s IFA keynote speech.

Mark Zuckerberg May Take More Heat After the Election

If you keep up with any social media commentary on Facebook, you already know that many reports suggest it had a hand in the last election. Before 2016, Facebook execs did not understand their platform’s power. Even worse, they did not recognize the plethora of fake accounts from Russia and others who blatantly used it to push for their candidate of choice.

Since 2016, Facebook has been criticized from both sides of the political spectrum for its platform being used for hate speech and misinformation. They have also allowed millions of accounts that are either fake or legitimate to espouse conspiracy theories based more on fiction than fact.

While Facebook leaders say they are working hard to keep this kind of content off their site, given the number of things I see on this social media site daily, I would say they are failing miserably at this quest.

Zuckerberg and Facebook are in this position because they refuse to acknowledge that they are a publishing platform. Instead, they claim a forum for “free expression” even if that expression could kill someone recently when warned about potential violence related to the Kenosha, Wisconsin, and did not take that post down immediately.

So the right and left are angry with Zuckerberg and Facebook, and he is getting strong pushback from many of his employees who are feeling embarrassed that they work for him and Facebook.

Over the last two weeks, articles have come out with comments from employees at Facebook now, and those who worked at Facebook in the past, and a consistent them comes from both groups. The themes are those dismayed at Zuckerberg’s leadership and his refusal to get aggressive in dealing with the impact of his policies that allowed this to happen.

They don’t speak out about this publicly for fear of retribution or loss of their jobs, but the mumbling and grumbling internally I hear is getting louder. These two groups also fear that Facebook will again have a significant impact on the election, and while Zuckerberg should get the most heat from this, they fear that just working for Facebook will taint their own careers.

Zuckerberg and his leadership team have delivered a medium that is both good and bad. Good in that it allows us to connect with friends and family as never before. It gives us national and local news, albeit often skewed by political bias. However, I would argue that its use as a platform for misinformation, conspiracy theories, and hate speech overshadows the good and dominates that site so that its influence has been bad for democracy. And it has empowered authoritarian leadership even in some democratic leaning countries such as Turkey.

Even with the new safeguards Zuckerberg and Facebook have put in place for this election and his investment of $300 million “to make sure local counties and states have the resources they need to handle these unprecedented conditions, and that people are aware that the infrastructure is in place to make every vote count so they can accept the result of the election as legitimate,”

I fear that this election has already been compromised by Facebook’s role in giving people a platform for misinformation, conspiracy theories, and hate speech.

Both sides will condemn Facebook no matter which candidate wins the US Election in November, Zuckerberg, and Facebook, and he will be the most hated man in America after the election.

Today’s Topics: Zoom’s Boom, Apple’s 5G Moment

Zoom’s Boom
If you are an investor in Zoom, congratulations. It’s hard to see a stock that has benefited more from the COVID-19 pandemic than Zoom, after reporting somewhat predictably stellar earnings yesterday where the company has grown 355% on an annual basis and had back to back triple-digit quarterly growth. Zoom also announced new customer revenue growth for the quarter of 81%. This shows Zoom’s growth is continuing to come from new customers, which they are adding every quarter.

The early debate among investors was whether Zoom was a stock to short or to play the long game. Many believe these stocks fueled by the pandemic, nicknamed pandemic stocks, are easy targets to short. The argument is made that when life returns to somewhat normal, these stocks will be hard-pressed to show similarly financial and user growth like they are showing right now. There is certainly some truth to this point. However, it is true of any market growth sector. What is unknown is what the true TAM for remote work software is, which makes it hard to know when the growth ceiling will be hit.

That being said, Zoom has clearly seen strong conversion from many institutions they gave free accounts to, largely in .edu, and I do not see strong data points to suggest Zoom accounts/businesses/institutions are leaving Zoom for something else. This means there is a good chance Zoom will retain the majority of users they acquire.

In January, for subscribers, I wrote about the future of work as a tech trend to watch this decade. I made this point, which COVID has helped accelerate, and the results have played out pretty in-line with my prediction:

In this decade, we will see new paradigms of working together that have never been possible, and it will all start with enabling humans to work together from anywhere in real-time. Real-time collaboration in the workplace today is still largely done in person. This is where I think video and then eventually, telepresence via augmented reality, will fundamentally transform how we work and where we work from.

I say this not just because of the idea of being free to work without the constraints of location is attractive personally, but also because it is practical. It would remove more cars off the road for people not having to commute to the office every day. It would ease the pain of high costs of living in metropolitan areas allowing people to live and work freely from the location of their choice. It will save companies money as they can re-think their real estate strategy and not depend on a singular head-quarters to house their giant workforces.

Obviously, I could not have predicted this global pandemic, but many of the holes I outlined with real-time work, as well as how the software will adapt to meet the needs of a real-time remote workforce, have been pretty spot on. While I’m certain this moment of true remote work, collaboration, and real-time remote work would have happened anyway, COVID-19 as speed it up in a remarkable way.

With regard to Zoom, I have a hunch that the market share leaders in this space will remain. Like most other categories, it is very hard to get users to switch to new platforms in mass. Right now, remote work behaviors, habits, and workflows are being developed with and around Zoom, given the strength of their market position. If I had to bet, I would bet that Zoom’s market share holds strong whenever the remote workspace is saturated. But I also expect competition to heat up dramatically as the market is growing. The battle is for new users in this part of the S-curve this market is in, and it will likely be fleshed out over the next few years.

Apple’s 5G Moment
Reports continue to circulate about Apple’s launch plans for iPhones this fall. It is an entirely poorly kept secret that Apple will launch 5G iPhones sometime this fall. The question is how many and at what prices. The supply chain reports I’ve read suggest all four new models will be 5G with two more affordable Sub 600 Mhz devices and two higher-end mmWave devices.

The question remains as to how big a push 5G devices could give Apple for this fall. Apple has historically benefitted from new technology changes, like the shift from 2G to 3G, then from 3G to 4G. So you could argue they should see some lift from the 4G to 4G transition. Apple has also historically seen a surge in sales when they release devices with new design language or form factor design. Interestingly, both these things could be true for Apple’s fall launch. Which is one of the big reasons I am seeing analysts on the sell-side predict a pretty strong holiday quarter for Apple.

I do sense this quarter could be stronger than most, but unlikely to be a record quarter or a “supercycle,” as some have suggested. A report from Bloomberg today suggested Apple is gearing up to make 75m 5G iPhones for fall. This scenario would be absolutely the best case, and I’m sure Apple is preparing for all scenarios in order to meet demand. While it is possible Apple could sell 75m iPhones this fall, it is one of the least probable scenarios, in my opinion.

That being said, it is clear a large portion of the market is due for a refresh, which includes a fascinating stat out of China from Morgan Stanely, where their smartphone market research has uncovered a massive amount of smartphones in China that are more than two years old. The smartphone refresh rate in China had been about 1.9 years up to this point, so the fact the market slowed down refresh could suggest a potential pop for Apple considering new network technology and new design language. While I firmly believe Apple can and likely will have a strong holiday quarter, the situation around COVID-19 remains the biggest element and potential risk. What if we can not go to retail stores in mass come November and December? Historically physical retail has been the biggest driver of sales, and if any restrictions or concerns around COVID-19 limit that, I find it hard to believe Apple can hit a significant sales number from online sales channels only. That being said, we are in unprecedented times, so anything can happen. Suffice it say I am cautiously bullish on Apple’s holiday quarter prospects.

Podcast: TikTok, Apple Facebook, HP and Dell Earnings, Fall Product Preview

This week’s Techpinions podcast features Ben Bajarin and Bob O’Donnell discussing the latest developments and challenges around the potential sale of social media app TikTok, the controversies between Apple and Facebook on activity tracking, the latest quarterly earnings from PC industry leaders HP and Dell, and the potential impact of a range of tech products expected to be released this fall.

Today’s Topics: TikTok’s Fate, Apple and Developer Good Will

What’s going on with TikTok is quite a saga. There are lawsuits against the US government, blog posts, and lobbying efforts attempting to show their transparency from everything to use growth to what data is used/collected, and where it goes. And now with the newly minted CEO Kevin Mayer announcing he is leaving the company. And even more news, today saying Walmart is joining the interested party and maybe linking up with other buyers in this sale.

Reports have suggested that whatever fate awaits TikTok is going to be announced shortly. While I’m not sure how a consortium of owners will play out, if that is indeed the resolution, TikTok’s fate has implications on a much broader global business strategy.

Years ago, I wrote an article called In Consumer Tech The World is Round. I was essentially arguing against the globalization theme of an easier ability to access a global market, which was the subject of the New York Times columnist Thomas Friedman book called “The World is Flat.” My position was strictly that it may be much harder to be a global company than ever before. Everything from local currency, local apps, local entertainment and commerce, and even countries putting regulations in place that favor local companies over global ones entering their market. This is the China playbook, but it seems now, more than ever, this strategy is coming to most major countries. TikTok’s challenge in the US and India is the latest example and one this dynamic and may very well shape how companies think about their global strategies in the future.

This situation with TikTok has the potential to impact global strategy more than we currently comprehend. Coming off a decade where globalization was a key part of many company’s strategies, this pivot to semi-regionalization is fascinating to watch but also inline with the theory I presented in 2015.

Lastly, I wanted to mention the Walmart potential joint deal with Microsoft. If you look at what is a much larger trend of influencer commerce in China, and how major social apps have ties either to their own commerce marketplaces or in partnership with commerce platforms, it makes sense TikTok has ties to a commerce marketplace. Of all the social media apps I’ve used, TikTok is by far the best positioned for ads and social/influencer commerce. Mostly because the way the videos are produced makes ads feel fully integrated and often not like you are watching an ad. And second, because the promotion of products is so cleanly integrated into videos and in much more compelling ways than Instagram and Facebook ads. YouTube is a close second, but it is the continuous scrolling of the TikTok For You Page that better positions it for ads and social/influencer commerce over YouTube from a standpoint of discovery. If Walmart does indeed secure a position with TikTok, it will be interesting to see how Amazon and even Shopify can leverage potential integrations with TikTok. If any social media platform can pull off taking social/influencer commerce mainstream, I think it could be TikTok.

Apple Developer Good Will
I don’t want to get into Apple App store debates. in this section, but I do want to mention something briefly around Apple developer’s goodwill. While there are wide-ranging opinions on both sides of the app store debate, the one place I do think more risk exists is that of developer goodwill. This is also the one area I’m most sensitive to, and particularly when it comes to the smaller indie developers.

While I would not anticipate a max exodus of Apple developers for iOS, the concern I have over developer goodwill is more about the next platform battle than the current one. Admittedly the point I’m about to make is not terribly strong in my opinion, I do want to throw it out at least out there.

If this App Store situation were to greatly deteriorate Apple’s relationship with developers and create a wide sense of developers to be fed up with Apple, then developer support in the next platform (likely AR glasses/wearables) could be at risk. One of the primary arguments for Apple’s continued success from one platform generation (iOS) to the next is because of the software ecosystem. and developers who will create software experiences unique to Apple’s platform. The biggest risk to Apple platforms is absolutely losing their developer base.

If developer goodwill erodes to the point that a competitor can step in with a platform in whatever era comes next, there is a risk those developers are fed up enough and align more closely with someone else. Maybe Microsoft, Google, or someone new offers a more “developer friendly” approach with their AR glasses platform (for example,) and developers make the jump. Again, this is a big leap in thinking, but it is a potential scenario worth considering.

While I understand many of the arguments Apple has about the app store, developer goodwill is a central element to consider as they look to preserve what’s best for two sets of Apple customers, the end-user and the developer.

The Long-Term ‘Work From Home’ Trend is Overstated

The transition to ‘work from home’ for many types of white collar jobs was a swift and quite remarkable mobilization. With the coronavirus still extant, many companies are encouraging their employees to work from home through the end of 2020, with some intimating that working remotely will be an option on a more permanent basis.This has led to all sorts of forecasts of a permanent, dramatic shift in workplace patterns, away from the office and toward remote/home-based work. I think it’s awfully premature to make such bold prognostications about the longer term. And, I believe these forecasts will turn out to be overstated.

Certainly, the current pattern will continue until there is a vaccine, which could take us well into 2021. The tools to be able to work remotely are available, and companies and employees have adapted commendably. I’ve thought quite a bit over these past several months about how work and learning might have been significantly more disrupted had the pandemic occurred 15 or 20 years ago, before collaboration tools were enabled by broadband, mobile, and cloud. Working from home will be the default option for many as long as the virus in our midst, and will need to be an option for many working parents until day care centers and schools are fully open and in-person. But on a longer term basis, once Coronavirus has waned? I believe the vast majority of people who were going ‘into the office’ prior to the pandemic will choose to do so once again. And, employers will start changing their tune somewhat on how pervasive and permanent they’ll want WFH to be.

While WFH was feasible out of necessity, it’s a suboptimal solution for many — capital ‘S’ for some, small ‘S’ for others. The situation varies by individual, but it could be the combination of any number of factors, such as the type of work they do might be harder to perform remotely, or their home environment is challenging in some way, be it space issues or the inability to work effectively with kids, spouse, etc. in the picture. Sitting at a computer all day and Zooming all day worked OK as a temporary phenomenon. Some companies have even said that some employees have become more productive in a WFH environment. Long-term, I can see this being the case for some workers, but I think the majority of people will become increasingly fatigued with the WFH experience.

I also believe the social aspect of working in an office environment is an under-recognized need for many individuals. This is especially true, I think, for younger workers. Imagine you’re in your mid-20s, having just graduated college or come out of grad school. You’ve had (2020 excepted) an entire community — work, social, activities — at your disposal during college (and in school before). Many social networks, of the analog variety, are formed in those first ten years of work, before marriage, kids, etc. It’s in those first couple of jobs that many people in their 20s and early 30s form their networks, meet their partners, engage with the community, and so on. Going straight to a ‘work from your one-bedroom apartment’ on a permanent basis would be terrible for the mental health of many young people. Zoom is OK for meetings. But it’s not how you meet people, form friendships, and form a life outside of work.

There’s another, less measurable benefit of working in an office: serendipity. Zoom, Teams, Slack, and so on all have their place. But there’s something to be said for the nuances of an in-person conversation that can’t be fully captured remotely, no matter how effective the tool. And then there are the spontaneous, informal types of conversations that just happen when you’re in a physical milieu with other people — the knock on someone’s door to bat around an idea, the side meeting, the drinks after work. All that.

It’s sort of like the difference between online shopping and bricks-and-mortar. Buying something from Amazon or some other online retailer is a largely transactional experience. Usually you’ve done the research and pretty much know what you want. Whereas with physical stores, there can be a browsing/serendipitous/pleasurable aspect.

There are also the nuances of in-person conversations that just can’t be captured in a remote environment. It’s sort of like comparing a phone conversation to text or email. There’s nuance, emotion, empathy, and privacy that happens when people just talk to each other: when you hear someone’s voice, look into their eyes, capture some sort of other facial expression…or just wait a beat and think before responding to something. Plus, there’s a certain informality that happens in the workplace, where not every interaction is witnessed, recorded, or memorialized with digital breadcrumbs.

Sure, there are the pollyannish aspects of WFH. No commute! Less office politics! Cut the clothing budget! Live wherever you want! There are merits to all of these. But I believe that both employers and employees will come to realize that the benefits of working at a place, with people, have come to be somewhat under-appreciated. More people will work remotely post-pandemic than pre-pandemic, and there will be a trend toward more flexible/hybrid models. Patterns will be significantly altered. There are still wonderful opportunities to develop tools to further enable and improve remote work.

But ultimately, we’ll come to realize the palpable benefits of congregating with others at a physical office. Even the elements that are fraught and frustrating are key to learning how to navigate professional relationships. Office buildings might be ghost towns right now. But I think that over time, they will largely be filled and the buzz will be back.

The Modern Antitrust Debate and Competition’s Inflection Point

I’ve been attempting to soak in many diverse viewpoints, as well as different academic positions on our current tech industry theme of antitrust and monopoly market power. Suffice it to say, I’ve been down some interesting rabbit trails of reading and academic commentary. But the more I ingested a range of information, the more I’m convinced we are at a critical time for the entire understanding of what it means to be competitive as a business. Competition, at its very nature, is at an inflection point.

Historically, there is some precedent, but also no precedent for where the tech industry finds itself today. Every industry has had its 800 lb Gorilla’s, however, what makes the digital age unique comes with both its scale (overall size of the market and total potential customer base) and a very different cost structure in terms of marginal cost. On the marginal cost point specifically, in the digital realm, these are often much lower, and sometimes even zero, than the analog world.

This point of the competition, and the deeper need to re-evaluate it against previous antitrust/monopoly eras, is one of the main themes being discussed which came out of the Ninth Circuit ruling in favor of Qualcomm over the initial ruling in favor of the FTC. The key theme now being highlighted in antitrust academia was a point made in the Ninth circuit opinion of hypercompetitive actions being different anticompetitive actions. There is now debate and a school of thought that desires to more clearly clarify what it means to allow hypercompetitive action and how, and in what ways it differs from anti-competitive action. This debate will be ongoing, but I think it has only amplified what much modern thinking believe which is we certainly need to reform antitrust laws, into something more equipped to deal with a world that is so different thanks to technology and the digital age, than the one many of the foundations of antitrust law were built on.

One of the challenges, of many, facing those who may propose legislation, or be in a position to rule on and enforce legislation, will be to look beyond just economics. Pricing, or costs, are often brought into the discussion where the competitor with market power is impacting pricing, distribution, or both as it relates to stifling competition or innovation with the side effect of consumer harm. Proving harm, particularly consumer harm, is one of the most critical exercises here.

Within that, it was a little worrying, and also a showcase of how difficult this exercise will be, that the judge in the recent hearing between Apple and Epic used the example that Apple does not allow other app stores as an example of potential monopoly behavior. While you can argue, and Epic is, that there are concessions Apple can make to allow for different economic benefits for consumers to buy at lower prices, suggesting the remedy is allowing other app stores has the potential to harm consumers even more. If any company or app store could launch on iOS, it creates an opportunity ripe for the stealing of sensitive consumer data, malware, theft and fraud, and a host of other issues. I bring this up to simply say, there is a much broader conversation to had about how to protect consumers and have their best interests at heart. Apple’s position on requiring in-app-purchase is largely in an attempt to protect consumers from the larger threat of malicious intent. I’ve stated this before and will argue it as justification for this imperfect process of Apple’s as the benefit that outweighs many of the other tradeoffs.

I hear a lot of critiques about Apple’s position with regard to third-party payments but see little critical thought offered about what alternative can be provided that still protects the consumer from fraud, theft, and invasion of privacy. When it comes to Apple’s potential solutions here, debating how to safely protect the consumer from the tremendous harm that has come from the open web is where to start. Teasing out all options with this angle of consumer protection is critical first and foremost.

Progress here will be very slow. However, analyzing every case, hearing, and in certain cases, any rulings are critical as the groundwork being laid will set a precedent for future cases that antitrust academics, lawyers, and those in the judicial process will all be watching closely.

This theme and the surrounding debates will be an ongoing development for what I assume will be years to come. But as I stated, what’s at stake has the potential to reshape competition in the 21st century.

We need new Antitrust Laws to Challenge Big Tech

As you know, there is a lot of noise coming out of Washington about suing Big Tech for all sorts of Antitrust violations. I have written about this many times in the past and have consistently stated that the current antitrust laws would be hard to use against these tech companies. The core premise of the Antitrust laws of the last century was to go after companies if they were a monopoly, and there was no competition.

It was influential in the days when railroads had comprised owners and telecom had only one primary provider, etc.

But to argue that the big tech companies today do not have competition is hard to prove legally. Amazon, while a behemoth in online selling, has challenges from Walmart, Costco, and Target.

Facebook and Twitter also behemoths, also have social media competitors, albeit more vertical driven than the broader market Facebook and Twitter serve today. However, there is still legitimate competition for both of them.

Even the antitrust case against Microsoft used older antitrust rules. One of the prosecution’s goals to break-up the company broke down in light of the tighter interpretation of aged antitrust laws.

I don’t pretend to know enough about antitrust law to get into the weeds, but I know enough after following the Microsoft trial very carefully, that under current antitrust rules, trying to break up big tech companies or even change their behavior, will be difficult.

I have written many times that we need newer antitrust laws or even a new regulatory body for the digital age. Until recently, I had not seen much written that suggests new ways to oversee tech with new antitrust rules and laws for the digital century.

The folks from Axios were alerted recently to a new paper written by the Harvard Kennedy School’s Shorenstein Center on Media, Politics and Public Policy. The authors are highly schooled in antitrust law and include Tom Wheeler, former Chairman of the FCC under Obama and former president of CTIA

Phil Verveer, who is a visiting fellow at the Harvard Business School and was the lead counsel in the AT&T antitrust suit.

Gene Kimmelman, Senior Advisor for Public Knowledge and a leading advocate for Consumer protection.

Here is the Axios brief description of the paper and short analysis:

The government should establish a new Digital Platform Agency to regulate major tech firms, three Democratic former federal officials argue in a new paper from Harvard’s Shorenstein Center shared first with Axios’ Ashley Gold.

Why it matters: This is the latest proposal being offered up as policymakers weigh reining in Big Tech beyond rewriting antitrust laws or taking a gamble on enforcement action under existing ones.

Context: Former FCC chairman Tom Wheeler, former DOJ antitrust counsel Gene Kimmelman and former FCC counsel Phil Verveer write that antitrust enforcement is important but not enough. They argue that today’s economy requires a new agency akin to the Consumer Financial Protection Bureau.

“We’re trying to put out the idea and the concepts, and try to make the case that a new administration may see this as an appropriate challenge,” Wheeler told Axios.

Details: The agency would be able to sue companies over misbehavior, and hold them to reasonable standards of care, stepping in if firms are harming consumers or behaving negligently.
Wheeler compared the proposed agency’s standards to the fire and electric codes that businesses have been held to for over a century.

The agency would place a particular focus on promoting interoperability and responsible data practices and working stop platforms from preferencing their own goods, services or content over rivals’.

Yes, but: It’s unlikely this Congress will take any action on the paper’s ideas. But it could serve as a basis for something the new Congress proposes — though likely only if Democrats take control of both the House and the Senate and Joe Biden wins the presidency.

As Axios states, this paper will not have any impact on how this current Congress deals with Big Tech. It introduces some well-thought-out ideas from experts on Antitrust law that could serve as a more practical way US politicians oversee Big Tech in the future.

Here is a link to the paper itself and its abstract:

Statutes and Regulatory Models Adopted for the Industrial Era are Insufficient for the Realities of the Internet Era

ABSTRACT:

The digital marketplace is wide-reaching, complicated, and self-reinforcing. The systems developed to oversee an earlier time are burdened by industrial era statutes and decades of precedent that render them insufficient for the digital present.

In the absence of federal oversight, the dominant digital companies have made their own rules and imposed them on consumers and the market. Just as industrial capitalism operated—and thrived—under public interest obligations, so should internet capitalism be grounded in public interest expectations.

Those expectations—and the new rules to implement them—should be the reinstatement of responsibilities long established in common law: the duty of care and the duty to deal.

To accomplish this a new Digital Platform Agency should be created with a new, agile approach to oversight built on risk management rather than micromanagement. This would include a cooperatively developed and enforceable code of conduct for specific digital activities. As both a fail-safe and an incentive, the agency would also retain its own independent right of action.

This link includes the Executive Summary that is excellent in its own right, and I highly recommend you take the time to read this summary.

This paper is being circulated to every member of Congress and introduces some solid ideas on how any government’s laws could be amended or rewritten.

It could help Congress provide more oversight and rules that would allow Big Tech to continue innovating, yet live within more stringent guidelines of fairness and consumer protection.

Podcast: 5G, Radio Frequency Spectrum and What it All Means

This week’s Techpinions podcast features Mark Lowenstein and Bob O’Donnell explaining many of the details of how 5G works, what radio frequency (RF) spectrum is, why it’s critically important and what the latest developments are, how how all of this impacts telco carriers and device makers, and more.

The Splinternet of high tech manufacturing and components

Last week, in my column for Forbes, I wrote about how the Internet is splintering around geographical and in some cases, political lines.

I pointed out that countries like Russia, China, and others want to contain what can and cannot be accessed in their countries. They are trying to restrict the Internet in the name of nationalism or cybersecurity, although much of their moves seem to have more to do with censorship.

In the title of this article, I stated that this produces a “Splintered Internet”, which is the proper way to describe what is happening. I had wanted to use a word that is becoming a term that is emerging known as “Splinternet” to describe a splintered Internet that can also be expanded to mean high tech manufacturing.

As I have written in the past, due to the kind of work I have done over the years, which includes working directly with PC manufacturers in Asia, I closely follow the supply chain and manufacturing of tech.

And dramatic changes are going on in high tech manufacturing that, by all accounts, are splintering into a China vs. other regions of the world when it comes to how tech products are being made and produced.

For the last two decades, much of high tech manufacturing has been was done in China.

China has made most of the tech products used in the US and much of the world today. However, the political tension between the US and China, along with significant tariff issues, has tech companies trying to move as much manufacturing out of China as possible.

Indeed, most of Dell’s PC manufacturing and assembly has shifted to Viet Nam. While they still get some parts from China, they assemble and ship all PC’s from Viet Nam now. By the middle of 2021, most of their parts will come from other areas outside of China, with almost all manufacturing shifting to Viet Nam and none done in China.

HP is moving manufacturing out of China too and doing more in Taiwan, Malaysia, and other regions of the world, placing less reliance on China.

Even Lenovo, a Chinese company, has started to put more emphasis on their manufacturing plants outside of China, especially the one in Mexico, but is in a more difficult position to decouple from their manufacturing facilities there completely.

Foxconn, who makes Apple’s iPhones, also sees the writing on the wall and is now aggressively moving away from China and setting up new plants in India and looking to expand to other areas of South East Asia and even Mexico. Foxconn Chairman Young Li has said that China’s “days as the world’s factory are done.” He goes on to say that “No matter if it’s India, Southeast Asia or the Americas, there will be a manufacturing ecosystem in each,”

Compal has reopened one large PC manufacturing facility in Viet Nam, with a second and even larger factory set to come online early next year.

The US is also cracking down on some companies in China and limiting their access to US-based processors. This week, the Commerce Department tightened the restrictions on Huawei’s access to chips, and if they can do it for Huawei, they can do it to others too.

But there is one misnomer in this manufacturing “Splinternet” model that keeps coming up, and that is that the US could become another region for high tech manufacturing. In talking with two ODM’s, neither of them has plans for putting any factory in the US.

Even the one Foxconn has been working on in Michigan is in question. The breakdown has been caused by a lot of political and local government haggling. (I predict that this deal will fall apart entirely, and Foxconn will find a way to get out of it soon.)

Of the manufacturing plants that do exist in the US, like Apple’s iMac factory in Austin, it is mostly a low volume robotic facility that does not have a lot of workers doing the actual assembly.

That would be the big issue with any US manufacturing of high tech goods, even if they did land on US soil. The cost of labor in the US is just too high, given the price of most tech products sold, and instead, any factory built in the US would mostly be driven by robotic automation.

The idea that US manufacturing of high tech goods could bring back jobs in large numbers is a pipe dream. The shift of a considerable amount of manufacturing out of China is a big deal and problem for US tech companies. Besides scrambling to find new places to have their products made, they will need to develop an entirely new supply chain of components that can be created outside of China. And that may include rare earth materials that mostly come from China now.

While US tech companies are not panicking, moving in this direction during a pandemic is very difficult. In the past, companies would send staff to source components and run them through on-site testing equipment in companies labs, mostly in Asia. Most of this is having to be done today by video conferencing when it comes to actual component sourcing.

While this takes time, the pendulum has swung away from China being, as Foxconn Chairman Li has said, “The Factory for the World,” and we will see other regions developing new high tech manufacturing centers picking up the slack. Unfortunately, the US will not be part of a new global tech manufacturing world.

Podcast: Microsoft Surface Duo, Qualcomm Court Decision, Fortnite Battle with Apple and Google

This week’s Techpinions podcast features Carolina Milanesi and Bob O’Donnell analyzing the news around Microsoft’s Surface Duo mobile device, discusses the positive legal outcome for Qualcomm’s IP licensing business, and debates the issues around Epic’s Games’ Fortnite-driven battle with Apple and Google’s app store policies.

Qualcomm Follow up Point, Epic/Fortnite and the App Store

Qualcomm Follow up Point
I appreciated all the email discussion yesterday on my article. I had hoped a point I made at the end was more precise, but just in case it wasn’t, I want to add a more specific clarification.

As I concluded the article, I made the point that the superior technology, and IP, as well as the massive amount of RND Qualcomm spends in order to make it easier for customers to make wireless products and compete is why you can argue some of the higher fees associated are reasonable. I was trying to elegantly challenge the assertion the FTC put forward that Qualcomm’s royalty rates are “unreasonably high” and that the FTC argued those rates are reasonably high because of their dominant market position. To make it clear, what I was trying to put forth was that competitors failure to create competitive products–and their failure to engage in the wireless ecosystem meaningfully–without Qualcomm’s IP then suggests their rates are not unreasonable but also that they are worth it based on superior technology not dominant market position.

The court went on to say the FTC’s argument fell short here and specifically called out this argument as something better suited for IP law than antitrust law. Which I think is spot on.

Lastly, and somewhat of an aside, I remarked in my summary of the congressional antitrust hearing that I was concerned at the suggestion from certain folks in congress that basic business competition tactics are wrong or frowned upon. To that end, I found this statement to be poignant from the 9th circuit judges opinion:

“Anticompetitive behavior is illegal under federal antitrust law. Hypercompetitive behavior is not……The company (Qualcomm) has asserted its economic
muscle “with vigor, imagination, devotion, and ingenuity……It has also “acted with sharp elbows—as businesses often do.”

May businesses continue to act with sharp elbows!

Epic/Fortnite and the App Store
Epic today announced the MEGA Drop. A new way to pay for virtual goods within Fornite. If you look over the blog post released this morning, it is quite clear they have done this to directly address the app store commission and underlying debate within iOS. When this first hit this morning, there was some question as to if this was done with Apple’s blessing. However, reading through the blog post I do not think this was negotiated with Apple and Epic is indeed daring Apple to do something.

Pundits on Twitter are adding the “grab the popcorn” emoji’s to their tweets on this knowing how Apple responds will be crucial when it comes to this debate about App store fees, payment choices, and developer revenue. As we all know, Fornite is a massive global ecosystem and I honestly see no way Apple pulls the app. This means this may be the last shoe to drop which will force a change by Apple.

What is interesting in the press announcement from Epic is how they framed the two top of mind questions/issues surrounding the app store. Safety, and choice. Here is the excerpt:

Why has Epic decided to implement its payment system for purchases inside Fortnite on iOS and Android?

By offering an alternative payment system, we’re not only offering players more choice, but we’re able to pass along the savings to players.

Does a new payment method on mobile mean purchases there are less safe?

No. Thousands of apps on the App Store approved by Apple accept direct payments, including commonly used apps like Amazon, Grubhub, Nike SNKRS, Best Buy, DoorDash, Fandango, McDonalds, Uber, Lyft, and StubHub. We think all developers should be free to support direct payments in all apps. In operating Fortnite on open platforms and operating the Epic Games Store, Epic has processed over $1,600,000,000 of direct payments successfully, and uses industry-trusted encryption and security measures to protect customer transactions.

Clearly Apple and Google acknowledge that third-party payment services are safe and acceptable for goods and services. Epic direct payment simply offers players the same kinds of payment options as these other apps.

Quite tactfully, Epic has structured the above clarifications. The first about why brings into the spotlight something most consumers do not really think about. Which is the 30% fee given to Apple and Google, which is usually passed on to the consumers in cost. They are basically saying we are doing this to save you money should you prefer it, and spoiler most will prefer it.

Second, they address the matter of safety. This is truly one of the core arguments by Apple and Google (but more so Apple) to use Apple payments and not offer other choices which is safety. Safety is a legitimate concern since no consumer wants to buy a random app and then realize their identity has been stolen by a hacker or data sold by the company they purchased the app from. I affirm this concern, however, I have always maintained it does not apply every company distributing apps in the app store.

Epic is essentially hitting the nail on the head here saying they have already processed over $1.6 billion in payments, making it clear they know what they are doing here, and that they use industry-standard encryption.

The user-interface for this move is also quite interesting, and should this adaptation be granted by Apple, I think this is the way to do it.

If you do not already have an account with Epic and choose to use Epic direct payment, you are then taken to a screen where you enter your name and credit card details. Should consumers get to that screen and decide they don’t trust Epic or don’t want to take the time to put in your payment information, they can go back and use Apple’s payment or Google’s. Epic is essentially saying if it’s more convenient or you get more peace of mind using Apple’s or Google’s payment process then feel free it just costs a little more.

It will be interesting to see Apple’s response. But I do believe evolution in their policy is necessary.

Wireless Industry Poised for Major Change

Wireless is poised for its fourth cycle of major change in the industry’s 30+ year history. Three major new factors will drive this change. The most important catalyst is the gargantuan amount of new spectrum that will become available over the next several years. The second factor is an industry realignment caused by all this new spectrum, resulting in the emergence of some new players, and an evolving new framework for how networks are built are deployed. Third is the emergence of 5G, whose adoption and new use cases will be tepid initially but will start accelerating in 2-3 years. The rest of this column delves into these three megatrends in greater detail.

The history of the wireless industry actually fits quite neatly into decade-long cycles. The ‘cellular industry’ was born in the mid-1980s, but was not really seen as a major consumer mobility market until the advent of the portable phone in the early 1990s. The 1990s was really about expanding coverage, greater capacity due to digital, and the gradual displacement of voice landlines. The 2000s witnessed the advent of wireless data, beginning with SMS (text messaging), and, later, mobile e-mail services and the first real smartphones, initially led by Blackberry. During this decade, the mobile operators held most of the power, deciding which ring tones and games would be on the carrier ‘deck’.  The 2010s was the smartphone decade, defined by a succession of continually improving devices, the emergence of native apps (and the App Store) as the new business framework, and the introduction of true mobile broadband networks in the shape of LTE.

True to form, the wireless industry is poised for major change as it enters its fourth decade. Three interrelated factors will drive this change.

From Spectrum Scarcity to Spectrum Abundance

Earlier this year, I wrote a Techpinions column titled Spectrum-Palooza, whose key theme is that after 30 years of ‘spectrum scarcity’ in wireless, we will be moving to one of ‘spectrum abundance’. This will drive an industry realignment, a different business framework, and exciting new uses, with 5G at the center.

Six months into the year, this theme is coming dramatically into focus: More spectrum will become available for commercial wireless use in the next 3-4 than the cumulative total that’s in use today. The first of four major ‘spectrum events’, the mmWave auctions, were completed earlier this year. All of the [now] Big Three operators emerged with strong mmWave holdings in the major markets. mmWave will act as a sort of ‘Super Wi-Fi’, offering very fast speeds but over short distances.

The next swath of spectrum to become available is in the very important mid-band. We’re two weeks into the first of these auctions, the CBRS PAL auctions at 3.5 GHz. Some 70 MHz of spectrum is being auctioned, on top of the 80 MHz already made available late last year through the GAA  ‘spectrum sharing’ layer. So far, the auction is exceeding expectations, with $3 billion raised and all of the major players participating (so far). On the heels of the 3.5 GHz auction is the critical C-band auction, scheduled to start December 8, where 280 MHz of spectrum (not a typo) will be auctioned in the 3.7-4.2 GHz band, raising potentially $100+ billion, according to some Wall Street analysts. This auction is especially critical for AT&T and Verizon, who both need more mid-band spectrum in order to remain competitive. Finally, the FCC added icing to the spectrum cake with the announcement earlier this week that 100 MHz of spectrum in the 3.1-3.55 GHz band, historically used by the military, will be made available for commercial wireless use. That auction could be held in late 2021.

There are two areas of impact from this spectrum-palooza. First, since so much spectrum is being made available, any dramatic imbalance in operators’ post-auction spectrum position will cause major share shifts and potential M&A. Second, the capacity increase will result in significant drops in the price of providing wireless data, which will lead to price changes, new use cases, and new business models, including a more vibrant wholesale market. This is also pivotal to the types of network performance improvements and new market opportunities envisioned for 5G.

Industry Realignment

In addition to a raft of spectrum activity, 2020 also began with a change in the competitive landscape, with the approval of the T-Mobile/Sprint deal. In fact, as of the second quarter, T-Mobile overtook AT&T in terms of the number of branded wireless subscribers. The New T-Mobile is in a particularly strong position compared to AT&T and especially Verizon in terms of spectrum capacity per subscriber, particularly in the mid-band, where T-Mobile inherited 150 MHz of 2.5 GHz spectrum from Sprint. If T-Mobile puts this spectrum to work quickly, it could gain a substantial early lead in 5G performance, while AT&T and Verizon need to spend big in the other mid-band auctions to catch up. The chink in T-Mobile’s armor is the enterprise space, where T-Mobile’s capabilities, and share, lag significantly behind AT&T and Verizon.

The other major new factor in the industry is DISH. The company has been amassing, and sitting on, a treasure trove of spectrum for years, which it is finally putting to use by promising (and being required) to build a greenfield 5G network. DISH is already getting its retail wireless training wheels by virtue of the 9 million Boost Mobile prepaid subscribers the company inherited as spoils from the T-Mobile/Sprint deal. On the heels of that, DISH recently acquired 271,000 Ting Mobile subscribers, and is likely to shake up some of the prepaid industry’s more antiquated practices. DISH is active in the CBRS auction, and is likely to participate in the C-band auction as well. DISH could be an innovator and industry disruptor. For example, DISH is embracing a Rakuten-like approach of building a wireless network using an Open RAN approach, employing a new breed of vendors rather than the usual wireless network equipment troika.  I also believe that DISH will establish a substantial wholesale business, perhaps with Amazon or some other Big Tech player as anchor tenants.

And what about Cable and Big Tech? Cable companies, mainly Comcast and Charter, have quietly grown to 4+ million mobile subscribers between them. They’re participating in the mid-band spectrum auctions, but might get priced out by the big guys. Even so, they will have more palatable wholesale options — potentially ironically from DISH — with all the new spectrum becoming available. As for Big Tech, they’re likelier to take advantage of wholesale opportunities than spend big on spectrum.

5G

The third big theme of the 2020s for wireless will, of course, be 5G. My one word of advice: be patient. We are in the very early innings of 5G and it’s likely to get off to a slow start. Even though AT&T and T-Mobile both boast ‘nationwide 5G’ availability, this is 5G of the ‘4G+’ variety, not of the ‘game-changing’ speeds/latency variety. Really fast 5G (mmWave, or T-Mobile’s 2.5 GHz) is only available in parts of certain markets. That, combined with a challenging economy and the lack of compelling use cases for 5G other than faster speeds, are likely to depress 5G adoption, at least initially.

It will be 2022-23 before 5G, in terms of the hyped performance improvements and the incremental opportunities driven by new types of uses in the enterprise, really kick into gear. For that, we need the combination of new spectrum to be commercially deployed, 3GPP Release 16 enhancements such as Ultra Low Latency (URLLC) to become available, a new generation of devices, and new business models — especially for enterprise 5G deployments. We also need to see enterprises shift some of their spending toward mobile for the operators to realize some of the incremental revenue potential from 5G that will justify the heavy spectrum auction and capex spend. The pandemic will be a factor here. On the one hand, some of the 5G catalysts such as remote work and new frameworks in health care and education have accelerated. On the other hand, enterprise budgets will be tight, so any spending on 5G ‘experiments’ will have to be justified.

For most of the past 2-3 years, most developments in mobile were of the internecine variety, with hype about the ‘5G Future’ and endless discussions about industry structure. But the deals are done, the spectrum auctions are in full force, and 5G networks are being deployed. Time to strap on your seatbelts.

Qualcomm Vindicated and Enlightened Antitrust

Yesterday, news broke that the US Court of Appeals overturned the 2019 ruling in favor of the FTC over Qualcomm on antitrust behavior. There is so much to unpack in this ruling, many that have specific implications on future antitrust rulings, but also critical elements in IP protection law.

I’ve written many articles on the battle between the FTC and Qualcomm. I attended two days of the trial in San Jose as key witnesses took the stand to help make a case for the FTC. From the two days, I attended, and the subsequent material I read, I never personally felt the FTC met its burden to demonstrate both competitive harm and consumer harm. After I read the opinion ruling reversing the decision in favor of the FTC, I’ve concluded that any antitrust body, in today’s tech economy, will have a much more difficult time proving the burden of both competitive and consumer harm than I would have thought a week ago.

I want to unpack a few things, but anyone that is desiring to go deep in the weeds like me, I recommend reading the full ruling of the reversal and the opinion of the appeals court since this may need to be referenced should any antitrust suits come against the likes of Amazon, Google, Apple, etc.

Below a few things from this reversal opinion that strike me as important to internalize.

Monopolies are Not Illegal
I’ve alluded to this point before, that many tech companies acquire dominant market position not because they acted like a monopolist but because they have superior products. In an earlier analysis on the FTC v. Qualcomm trial, I made this point which is highlighted by the FTC’s own definition of monopolization:

Obtaining a monopoly by superior products, innovation, or business acumen is legal; however, the same result achieved by exclusionary or predatory acts may raise antitrust concerns.

The US court of appeals opinion similarly underscores this point here on p.25″

“The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not [itself] unlawful; [instead,] it is an important element of the free-market system.” Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004) (“Trinko”).

“The opportunity to charge monopoly prices—at least for a short period—is what attracts ‘business acumen’ in the first place; it induces risk-taking that produces innovation and economic growth.” Id.

“To safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful [under § 2] unless it is accompanied by an element of anticompetitive conduct.”

Keeping all of this in mind is incredibly important anytime we think about, or read the headlines about companies being monopolists. In many ways, all these points above resonate quite succinctly with comments both Jeff Bezos and Tim Cook have made about their passionate obsession with the customer and their drive to make the best products in the market. If they acquire dominant market positions because of that bent, there is nothing wrong with that, and the free market system encourages it. The element that then comes under scrutiny is the competitive behavior said companies with market power engage in when it comes to harming competition, which has to be followed with as harm to the consumer. In the case of both Apple and Amazon, I’m increasingly convinced any suit will have a hard time fulfilling the burden of sufficiently proving both competitive and consumer hard. Specifically, since both company’s practices, in many ways, dramatically benefit the consumer. I’m sure some will disagree with this point.

Just to emphasize what the Appeals Court opinion specifically calls out regarding my point (emphasis BOLD mine):

Accordingly, plaintiffs are required to prove “anticompetitive abuse or leverage of monopoly power, or a predatory or exclusionary means of attempting to monopolize the relevant market.” Allied Orthopedic, 592 F.3d at 1000 (quoting Foremost Pro Color, Inc. v.Eastman Kodak Co., 703 F.2d 534, 545–46 (9th Cir. 1983)); see also United States v. Grinnell Corp., 384 U.S. 563, 570– 71 (1966) (distinguishing “willful acquisition” of monopoly power from “development as a consequence of a superior product, business acumen, or historic accident”). “[T]o be condemned as exclusionary, a monopolist’s act must have an ‘anticompetitive effect’”—that is, it “must harm the competitive process and thereby harm consumers.” Microsoft, 253 F.3d at 58. “In contrast, harm to one or more competitors will not suffice.” Id.; see also Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458 (1993)

I also found this sentence helpful. Antitrust laws are directed “not against conduct which is competitive, even severely so, but [only] against conduct which unfairly tends to destroy competition itself.” Again, these cases will be quite hard to make against the bigger tech firms because of the actual competitive environment they have created from a free-market context.

A Ruling for IP Protection
Specific to Qualcomm, in this case, I want to highlight how this ruling will be seminal when it comes to IP protection. Which I think is important in the context of encouraging innovation. This ruling quite clearly justifies Qualcomm licensing business model practice. Something that has come into question frequently before and during the 2019 trial. What sat at the center of this case what Qualcomm’s dealings when it came to their contractual agreements with FRAND (Fair Reasonable and Non-Discriminatory). FRAND in itself is open to interpretation as what is fair and reasonable is entirely subjective depending on the context. Plaintiff’s complained about licensing, and royalty mandates placed on them in order to deal with Qualcomm. Qualcomm felt their IP was valuable and wanted to be fairly compensated for it. There are two sides to this coin whenever FRAND is in dispute.

Where I think this debate starts to get interesting, and it is a bit specific to Qualcomm’s IP and RND, is when it has become clear how valuable the IP and Qualcomm’s RND investment in wireless actually is. The FTC used Intel quite extensively as a case study in a company wanting to compete but being bullied by Qualcomm and making it difficult. Other cases of competitors listed were Samsung, Huawei, and MediaTek. In every case, the competition’s products were not as good as Qualcomm’s, and I don’t believe this is even disputed. Qualcomm’s negotiations in the license and royalties were not the issue competitors could not make chips that could go toe to toe with Qualcomm. It’s because wireless is exceptionally hard, and no company, other than Qualcomm, spends all its energy solely on being the best in wireless technology.

It’s worth mentioning here that even before this reversal, and even after it looked like the FTC had won, Qualcomm succeeded in acquiring every single smartphone OEM as a licensee. And just last quarter, they finally resolved a years-long battle with Huawei over licensing technology. A fundamental reason for this was 5G. Consider this point about Apple.

I have it on extremely good authority that the main reason Apple decided to finally acquire a license from Qualcomm was because of their struggles building a 5G device, and specifically around Intel’s challenges to succeed in 5G. Again, challenges Intel faced simply because this is not a core competency, not because of Qualcomm’s licensing or royalty fees. It became clear to Apple they needed Qualcomm and the access to their portfolio to get a quality 5G device out the door. I think the difficulty in 5G transition and Qualcomm’s extensive expertise and portfolio for 5G is the main reason they have now secured a license with every smartphone OEM. Again, emphasizing how difficult wireless is.

In this context, then, should any claim around FRAND interpretation be taken into consideration when it is nearly essential that the company providing the technology be involved for the OEM even to begin to compete? This is again not by nature of discriminatory practice since the US Court of Appeals’ opinion affirmed Qualcomm does not engage in OEM discriminatory practices but uses the same practices with all of them equally.

The point I’m making here is the access to Qualcomm’s SEP portfolio is essential to compete, others simply can’t without it in any meaningful way. Qualcomm’s continued investment in RND and IP is the sole reason OEMs can compete in the first place. For what it’s worth, I think it has to be taken into consideration that undoubtedly, Qualcomm’s technology enables competition AND that even those who license their technology and build competitive products still fail to compete with them at any scale. It is this point that makes this entire debate that difficult. There is not another company that can make as good of modems as Qualcomm, so whether or not they would behave in an anti-competitive way to that hypothetical competitor, we may never know.

At the beginning of the Appeals Court opinion, they make a specific point between anti-competitive and hypercompetitive practices. All the points I just made, were among those that the court reasons Qualcomm fell more into the enabling of hyper-competition and not anti-competitive practices. And the point I made about pricing and licensing, and the challenge of wireless sticks out here. Qualcomm actually makes it easier by these practices, and their spend on RND to meaningfully move forward and compete. I could argue it would be much more expensive for a company to go at it alone and attempt to spend the RND themselves necessary to compete. This is why I think this ruling is well-positioned as protection for IP business models and ultimately good for innovation in many ways.

Surface Duo: Windowing Is The New Lapability

Yesterday I participated in a press and analyst briefing during which Panos Panay, Chief Product Officer, Windows + Devices and the Surface team spent about an hour going over the Surface Duo, its specs, some key features, but most importantly, in my mind, the thought process that brought the team to this device. We first saw the Surface Duo back in October 2019 during the annual Fall Surface event. At the time, we also saw Surface Neo and together, these two products were clearly positioned as the future of productivity.

The big difference between the two devices, aside from size, is that they run two different operating systems: Duo runs Android while Neo, once it ships in 2021, will be running Windows 10X.  Panay positioned Surface Duo as the combination of the “Microsoft you love and the Android, you know.” Users might not be quite thinking about Microsoft in terms of love. Still, there is no question that when it comes to productivity, the Microsoft + Android combo is what the vast majority of US users consider their reality.

The Journey

Panay took us on a Surface journey to remind us of what the team set out to achieve when they brought to market the first Surface and the journey that they have been on since then. This was not about nostalgia; it was an essential reminder of the drivers behind a product that came to inspire a long list of devices both in the Windows and Apple camps. I genuinely believe Surface Duo is the start of a new journey, or maybe it is the next leg of the same journey.

The original Surface was about creating a more dynamic device that brought together a PC and a tablet so that a more stationary workflow could seamlessly blend into a more mobile one and vice versa. With Surface Duo, we have a product that empowers new workflows on the go thanks to the different posture the hardware allows for, but also thanks to the software. Surface Duo does this while having a strong dotted line to the PC that sits on your desk or, at the moment, more likely, on your kitchen table.  The more I listened to Panay talk about Surface Duo, the more it was clear to me that, much like our smartphones do, the power this device has is not limited to when we are on the go. The additional benefit of Surface Duo is that it bridges two ecosystems by bringing together the apps that you depend on your phone and the apps that you use every day on your PC. From what I saw from the demos, the team made a real effort in staying true to the Android experience as much as they possibly could while anchoring some core Microsoft experiences.

The Phone

I was struck by one sentence in the blog published by Panos Panay: “So, with Surface Duo, we did not focus our energy on the places the industry is already advancing – processors and networks will get faster, and cameras will get better with or without us.” This makes it quite clear to me that Panay did not set out to launch the best smartphone in the market. Had he done so, clearly, networks, cameras and processors would have been the main focus as these, and maybe screen size and battery, are the battlefields of smartphone innovation.

As I wrote back in October, it would be a real shame if we just measured Surface Duo against traditional smartphones and decided that it wasn’t worth the investment because of what might be perceived like hardware shortcomings such as the camera system, or the lack of 5G support. The team set out to launch the best productivity device for users who spend most of their day in Microsoft 365 apps. Also, users who want a Surface product because they stand for high-quality hardware and attention to detail. A product with a design centered around enabling you to do your best work by freeing you from hardware constraint.

Staying true to the mission of delivering the best hardware for the best workflow, not just the best hardware, requires a certain degree of discipline in deciding what you add and you don’t. With Surface Duo, I am sure most people will concentrate on why Microsoft opted for a dual-screen rather than a foldable one. This question was one of the most asked after the unveiling last year and it has probably become more top of mind after Samsung’s sneak peek of the Galaxy Z Fold 2 last week. Microsoft reiterated the neurological benefits that come from using two windows compare to one larger screen. You can buy into this argument or not. Still, the reality is that a foldable form factor wouldn’t have allowed for the slim design the Surface Duo sports, nor would users have been able to use a pen, a key ingredient in many Surface users’ workflows.

I also wonder if windowing will drive users to discover new workflows rather than adapting how they do things on their phone or their PCs. Having a larger screen usually just makes people think about doing things in the same way but using more space to do so. Some of the ‘enlightened” apps the Surface Teams showed during the briefing from Outlook to Kindle, to the options of “grouping” two apps that you usually use together, are really trying to push new workflows or turning some analog ones into a digital one, like reading a book on one window while taking notes on the other, something that apparently CEO Satya Nadella loves to do on his Surface Duo.

The Cornerstone

I pointed out who I believe will be the most obvious addressable market for Surface Duo. I also can tell you that Surface Duo will disappoint anyone who is not willing to invest some time in figuring out what the device can do for them. As it is often the case with a new category of devices, you need to have an exploration period. Maybe you think it is just semantics, but I consider this different to a learning curve. With Surface Duo, there is nothing to learn per se. It is the software and the apps you know and hardware that, at times, behaves like a phone and others like a compact PC. What you need to figure out is how you bring together all those things you know and make them work for you. This is not a process that everybody wants to go through, especially when it comes with a price tag of $1399.

Whether the Surface Duo is for you or not, what matters most is the opportunity it brings to reinvigorate the Android app ecosystem thanks to the work that the Surface and the Android team will continue to do. This work will benefit Android smartphone players like Samsung and Motorola, who are already foldable segment. It will also benefit PC OEMs and Microsoft first-party apps that will benefit from the tighter connection between phone and computer, possibly what many PC users envy Mac and iPhone users the most. Ironically, even Chromebooks could end up benefitting from this effort. The Surface Team brings a deep understanding of the synergies between hardware and software more so than even a company like Samsung can bring and this is ultimately what is exciting about this collaboration.

For the Surface team, Duo will test what users will be willing to do with the form factor and give a good indication of what can be done for Neo and other products with dual screens and eventually folding screens.

I look forward to exploring how Surface Duo will transform my workflows and rest assured, I will share that in a column soon.

Don’t expect any serious action on Tech Antitrust legislation until 2022.

Last week’s earnings reports from Alphabet, Facebook, Apple, and Amazon were amazing. Although Alphabet showed some losses in ad revenue, it still showed resilience. The other three just blew past market expectations.

As I tracked the earnings of these four, I was also looking at their market capitalizations. If you had told me even five years about that three of these companies would have trillion-dollar market caps by 2020, I would have scoffed and said you were crazy. Five years ago nobody saw this coming and only 18 months ago did it even seem possible that even one of these, Apple, could even hit that trillion-dollar market cap.

Axios created a chart that showed clearly the actual market caps of these four over the last four years.

If you look at this chart closely, you will see that the combined market caps of these four companies are close to $5 trillion.

Earlier this week, due to Apple earnings and a rise in share price, Apple hit a valuation of almost $1.9 trillion Monday Morning, Aug 3, 2020.

Even during a pandemic, with the economy contracting over 30 %, the four of them reported $773 billion combined revenue annualized to date.

Axios also put these annual earnings in perspective to other countries GDP:

  • Facebook: $70.7 billion, in the same ballpark as Venezuela’s gross domestic product.
  • Alphabet: $161.9 billion, a bit north of Ukraine’s GDP.
  • Apple: $260.2 billion, close to Vietnam’s GDP.
  • Amazon: $280.5 billion, around Pakistan’s GDP.

Together, revenue for all four adds up to roughly the GDP of Saudi Arabia.
And all four are cash-rich:

The combined cash pile of all four, taken from their last reports, is $420 billion.

$420 billion: the combined total cash pile of the four firms (per data from FactSet, from when they last reported earnings). That breaks down to about:

  • $49.6 billion for Amazon
  • $60.3 billion for Facebook
  • $117.2 billion for Alphabet
  • $192.8 billion for Apple

With this type of financial position, these companies have become increasingly powerful in their own right. They now have the scrutiny of governments around the world in terms of antitrust regulations and competition.

In the US, where last week’s hearings brought this antitrust issue to the forefront, it became clear that these major tech companies will have to deal with this antitrust threat for years to come.

Some of these congressional leaders asked good questions but left the hearing not giving any calls to action that had any teeth to it.

As I listened to these hearings, I became convinced that much of it was election posturing, and in the short term, meaning probably the next 18 months, not much will be done to challenge these firms in terms of trying to break them up or change much of their current business practices.

I have two reasons for this view. The first is that current Antitrust laws were not written for the digital age. They were written mostly for the Industrial Age. For any real changes to happen in an antitrust action, it needs new, well thought out laws written specifically for our digital times and make these actions meaningful and applicable to all digital properties in the future.

I have dealt with Washington for decades, and, from my experience, getting everyone on the same page for any real digital antitrust regulations will take time.

The second reason why I don’t see anything happening for at least 18 months, is tied to the Covid-19 Pandemic and the election and possible change in leadership.

Should Trump be reelected, he tends to side with business, even if they get too big. His focus, as we know from the attempt to ban TikTok, is focused on China and products that could feed info to the Chinese in any way, shape, or form. Also, he loves social media for what it allows him to do via its platforms. I have no faith that a Trump administration would force any new and meaningful antitrust laws against any tech company, at least in the first half of a reelected presidency.

If Biden is elected, he would have higher priorities, even if his Democratic colleagues would like to keep the fires lit on big tech and antitrust laws. His first 18 months would most likely be working on correcting the mistakes he feels were made in the past four years. I just don’t see him putting a lot of energy in meaningful tech anti-trust legislation until he and his team feel they have corrected other structural issues much more important to the US than breaking up big tech.

All of this leads me to believe that these four and others will not only weather the Covid-19 Pandemic well but, as they have proven so far, become even bigger. Yes, they will have to be looking over their shoulders at potential government action, but I doubt anything meaningful will happen until late 2021 or early 2022 at the earliest.

Podcast: Samsung Unpacked, T-Mobile 5G, Apple App Store, Microsoft-TikTok

This week’s Techpinions podcast features Carolina Milanesi and Bob O’Donnell discussing the announcements from the Samsung Unpacked event, including their new Note 20 and Galaxy Z Fold 2 smartphones as well as their partnership with Microsoft on software and gaming services, chatting about T-Mobile’s launch of the world’s first 5G SA (Standalone) network, controversies around Apple’s App Store policy and cloud-based gaming services like Microsoft’s upcoming xCloud, and analyzing the potential purchase of TikTok by Microsoft.

Chromebooks and Macs Enjoy Huge Quarantine Quarter in the U.S.

The entire PC industry experienced a very good second quarter. And here in the United States, we saw exceptionally strong results with a year-over-year growth rate of 18.8% in the traditional PC market comprised of desktops, notebooks, and workstations, according to IDC’s latest data. Inside that monster quarter, all the major platforms—Windows, ChromeOS, and macOS—saw growth, but the latter two saw massive expansion during the quarter that is worth exploring in more detail.

ChromeOS Growth
During the second quarter, Chrome OS saw 29.7% year-over-year growth, with shipments well north of 6 million units, which represented 27.3% of the U.S. market. What is notable about that number is that it spread across segments, including consumers, education, and business.

The success of Chromebooks in U.S. education is well documented. Google and its OEM partners have seen steady growth in the education segment over the years, thanks to a combination of low-cost devices, easy-to-use device manageability, and strong security. In the second quarter, as schools around the country shifted to school from home, many school districts began accelerating their purchase of Chromebooks. As a result, the education segment saw substantial year-over-year growth, and it continues to represent more than 75% of Chromebook shipments in the United States.

Based on my ongoing conversations with both OEMs and component vendors, there is strong reason to believe that Chromebooks will also enjoy a strong third quarter in education. Schools continue to buy devices in anticipation of a challenging fall semester that is likely to include at least some school-from-home elements. In fact, many inside the supply chain believe that we could see strong education shipments well into the fourth quarter, well beyond normal seasonality, as schools build out their fleets for ongoing 1-to-1 device requirements looking ahead to 2021 and beyond.

While the strength of Chrome OS in education may not be too surprising, the other area where we saw strong shipment growth was in consumer. That segment grew even faster than education, although from a much smaller base, to represent more than 15% of shipments. While some percentage of these purchases was undoubtedly consumers purchasing Chromebooks for personal use, I believe a sizeable chunk of these purchases through consumer-focused channels is for work purposes. That’s because as companies shut down and sent employees to work from home, many weren’t able to acquire the PCs they needed through their normal channels, and so they had to ask employees to go out and buy their own, to be reimbursed later.

I’ve long argued that I see a role for Chromebooks in business, and this current shift to work from home could be an inflection point. We’ve seen a wide range of enterprises test out Chromebooks, and even deploy them to a subset of their employee installed base. Many companies jumped into the Chrome OS pool in the second quarter and found the water just fine. I expect many to swim deeper in during the coming months and years.

macOS Growth
During the second quarter, MacOS saw a whopping 70% year-over-year growth, with shipments of more than 3.2 million units, which represented 14.5% of the U.S. market. In early May, Apple updated the 13-inch MacBook Pro with its new Magic Keyboard and more storage.

In the U.S., macOS enjoyed strong growth across all of the segments IDC covers, including all sizes of business. As you might expect, the consumer segment was the strongest of all, representing 80.1% year-over-year growth and more than half of total shipments. Apple also saw a nice education bump during the quarter, but nothing near the size of Chrome OS. That said, as we head into the third quarter and higher-education students and their families begin to prepare for what promises to be an interesting fall college semester, Apple is likely to see strong volumes. It’s worth noting that when an individual purchases a Macbook through retail, for use at college, it shows up as a consumer unit in our data. If a college makes the purchase and distributes it to students, it shows up as an education unit.

One interesting aspect to watch: During WWDC, Apple announced that the first Macs running Apple Silicon would ship in the fourth quarter. It is unclear yet if this announcement will cause some buyers to hold off on new Macs during the third quarter in anticipation of the new products. However, with Apple continuing to announce new Intel-based Mac products—including an updated 27-inch iMac this week—I suspect many Mac buyers won’t let the pending new product(s) slow their current purchases.

Outlook for 2H20
It is worth noting that while Chrome OS and macOS both had excellent quarters, Windows also saw good growth in the U.S. during the quarter. And Windows-based PCs still represent more than 58% of all units shipped in 2Q20.
Looking ahead, and based on ODM data, the third quarter is off to a strong start. The big question is whether that growth is sustainable through the quarter and into the final quarter of the year. At some point, the economic reality will set in. As companies downsize and consumers face steep unemployment, buying will drop off. It is too soon to say precisely when that will be, and even if buying remains strong through this year, it does set the market up for a challenging 2021.

Podcast Special: Marta Karczewicz of Qualcomm Discussing Video Compression Technology

This is a special Techpinions podcast with Carolina Milanesi and Bob O’Donnell along with special guest Marta Karczewicz, VP of Technology at Qualcomm, discussing the evolution of video compression technology and standards and how they impact our ability to watch streaming videos from services like Netflix on our smartphones and TVs. In addition, they discuss the role of women in engineering roles and the importance of diversity in technology research and development.