FTI Consulting News Bytes – 11th March 2022

This week’s news

Russia’s digital iron curtain

This week, US-based essential internet services provider, Lumen, pulled out of Russia following its invasion of Ukraine, saying: “We took this move to ensure the security of our and our customers’ networks, as well as the ongoing integrity of the global Internet.” This followed a similar response from competitor Cogent the week before. The Verge comments these actions indicate “a ‘digital Iron Curtain’ growing between Russia and the West”.  With Russia restricting or even blocking access to the likes of Twitter and Facebook, it is becoming increasingly isolated from internet services in the West. The Telegraph writes that this is part of a wider phenomenon termed the “splinternet” where conflicting national interests have divided access to the internet. It goes on to say that “preparations for a digital iron curtain have been years in the making” following Putin’s sovereign internet law in 2019 where legislative updates were made to make Russia’s internet “effectively self-sufficient.”

Huawei’s revenues tumble

Huawei revealed its biggest-ever decline in revenue in the first half of 2021 as revenues fell by almost 30% to Rmb320 billion (£35.5 billion). BBC News also reported that the Company sold part of its mobile phone business following US sanctions, which analysts say contributed to the drop as the sanctions made it more difficult for Huawei to buy components and software using US technology. Furthermore, the sanctions have also effectively prevented Huawei devices from working fully with Google’s Android Operating system, prompting the firm to expand the use of its own Harmony OS. Elsewhere, revenue from Huawei’s consumer electronics arm, which includes phones, fell by 47%, whilst the organisation also cited the effect of the chip shortage on its business. While China’s Huawei Technologies Co. has seen its 5G business suffer because of restrictions imposed by the U.S. and other countries, its booming software business has thrown the telecom giant a lifeline. News of Huawei’s revenue decline comes in the same week it was reported by the BBC that Sir Andrew Cahn and Sir Ken Olisa, two non-executive directors of Huawei UK, resigned over the Company’s stance on the conflict in Ukraine. Both individuals felt the firm’s failure to quickly condemn the Russian invasion had made their positions untenable.

UK strengthens Online Safety reforms

According to the FT, the UK is set to clamp down on online scams and “unlicensed financial promotions” as it expands plans to restrict what people can post on the internet. Under a widened scope of the forthcoming Online Safety Bill, social media sites and search engines would be forced to prevent and remove fraudulent advertisements, including “catfishing” romance scams and “fake” stock market tips, the government said on Tuesday. Ofcom, the media regulator, is set to announce further details on how platforms might comply with the proposed rules. The government said these could include measures such as verifying the identity of individuals who place online adverts or ensuring that only businesses authorised by the Financial Conduct Authority, the financial regulator, can pay for “financial promotions”.

Digital assets – a risky business?

On Wednesday, President Joe Biden signed an executive order on the US government’s oversight of cryptocurrency, calling for an examination into its impact on national security and economic stability, and whether the central bank should create its own digital currency. The announcement, widely positively received by digital currency backers, initially saw most large coins bounce in value, before a considerable crash on Thursday. Top US economic advisors Brian Deese and Jake Sullivan said the order will enable the US to maintain a leading role in governing and innovating in the global digital asset ecosystem “in a way that protects consumers, is consistent with our democratic values and advances US global competitiveness.” The regulatory action comes as many point out that Russians may be using cryptocurrency to avoid the worst impacts of sanctions.

Musk in tussle for free speech

Billionaire Elon Musk is trying to break free from a deal made in 2018 with the US Securities and Exchange Commission (SEC) meaning any tweets about Tesla must be pre-approved by a lawyer. Musk says he was forced into signing the agreement due to “SEC’s unrelenting regulatory pressure” following his claim that he’d secured $420 in funding to take Tesla private, which sent the company’s stock soaring. Shares in Tesla have risen sharply from $90 in January 2020 to over $800 today. Lawyers for the CEO said Tesla was “a less mature company” at the time and that the “SEC’s outsized efforts seem calculated,”, curbing his right to free speech.

Top Tweets of the Week

• Peter Elstrom, Executive Editor at Bloomberg, Tweets “Stunning sign the troubles for Didi aren’t over. Ride-hailing giant has suspended preparations for a listing in Hong Kong listing because Chinese regulators aren’t yet convinced it can prevent data and security leaks”. Scoop via @ClaireYChe @cocojournalist
• Business Week, Tweets “Everyone from Microsoft and Meta to Apple and Google is about to battle it out in the metaverse”
• VR & AR Technology, Tweets “Over the years, China gradually increased the R&D expenditure and closed the gap with other nations. Chinese tech giant @Huawei invested 131.7 billion yuan ($19.3 billion) in research and development in 2019. [Infographic] @StatistaCharts thx @lindagrass0 #Innovation #Tech”

Number of the Week

2,500 – The average selling price in US$ of an NFT over the past two weeks, having dropped 48% since November 2021 (according to NonFungible)

What’s happening next week?

• 11-20 March – SXSW Conference, Austin, Texas
• 16 March – Financial Times’ Future of Work: Reimagining Work Spaces, Virtual

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