Apple – Strategic Culture Foundation

Korea Fires First Shots in War Against Tech Titans

A A — Mon, 27 Sep 2021 14:00:18 +0000

Seoul has led the global regulatory charge against Google and Apple and has local champ Kakao in its sights

By Andrew SALMON

Daniel Tudor is a cheerful man and he has every reason to be: The South Korean government has, simply by passing a piece of legislation, made him 15% richer.

“Of course, I am happy,” said Tudor, a Seoul-based British expatriate entrepreneur as he discussed the recent enactment of Seoul’s so-called Anti-Google Law. “It will benefit my company.”

Tudor is the CEO and co-founder of Kokkiri (“Elephant”) a meditation app firm that boasts 400,000 users. Prior to the passage of the new law – in fact, a revision to an existing act – his firm, like all other app developers, was required to pay 15% of sales in commission to Apple and Google.

No more. App developers in South Korea, even if they run on Apple’s iOS or Google’s Android, can henceforth use their own, or third-party payment systems. That means no more commissions to the big boys, and bigger margins for the little guys.

The National Assembly’s action has been happily received by Tudor and his ilk – the wave of start-up entrepreneurs that the last two Seoul governments have enthusiastically boosted with multiple policies, including freed-up finance, eased loan conditions, incubation assistance and consulting.

And as the first major economy to take such action against the two global platform giants, South Korea’s action has no doubt provided food for thought for lawmakers and regulators in other parts of the world.

Asia vs. platforms?

But Seoul has not confined its assault on big tech to Google and Apple.

One week after the legislation was passed, the country’s star homegrown platform – KakaoCorp, which started as a free messaging service and has since branched out into everything from taxi hailing to online banking – found its dominant position in multiple sectors under discussion by lawmakers. That ignited a stock rout. A week later, it was in regulators’ gunsights.

The company is deep on the defensive.

With its share price having plunging from 154,000 won ($130) on September 7, when lawmakers first spoke up, to 116,500 won on Friday, Kakao announced this week that it was delaying the planned September 29 IPO of its payment service, KakaoPay.

Meanwhile, Kakao’s chairman has reportedly been summoned to attend a National Assembly hearing next month amid the end-of-year parliamentary audit.

While the move against the global big boys had been long brewing, the new focus on local champ Kakao has surprised the market.

It could mark a hardened stance by East Asian governments – home to powerful metal bashing economies, but weaker service sectors – toward digital platforms owned by big tech firms.

Platform companies, such as Google, YouTube, Airbnb and Alipay ease business by enabling interactions between two or more parties. The model, beloved of Silicon Valley, generates value by building up huge networks, but does not actually make stuff.

To Seoul’s west, Beijing has been making global headlines since February with its crackdowns on platforms including AliPay, Didi and Tencent. However, it has kept its hands off tech manufacturing powerhouses like Huawei and SIMIC.

While there is no indication of policy coordination between Seoul and Beijing, Korea’s strategy looks – coincidentally – similar, as it is not just Google, Apple and Kakao. Senior executives from multiple domestic platforms face an upcoming grilling at the National Assembly.

Meanwhile, another senior tech business figure has been enjoying rather different treatment. On August 14, Lee Jae-young, the de facto chief of Korea’s national flagship Samsung, was released from jail, despite not completing his sentence on a white-collar rap.

Lee’s freedom came courtesy of a controversial parole. However, in defiance of the terms of that parole, which bans him from management for five years, he is back in the corporate driving seat, and on September 14 announced a four-year, 40,000-job-creation plan.

His announcement – Lee’s first public appearance since leaving prison – was made in the company of Prime Minister Kim Boo-kyum.

There is abundant clear space between the governance of communist China and democratic South Korea. Even so, the foregoing suggests that it may be Asian governments – which are more comfortable regulating manufacturing sectors, and which hold generally more dirigiste instincts – rather than European or North Americans administrations that will lead the regulation of the platform economy.

“No government is really comfortable dealing with these platform companies as they are new, the services they offer are new, and they span corporate and geographical boundaries,” said Matt Weigand, a Seoul-based PR executive with a tech background. “It looks like the East is taking the ball on this one and running with it.”

Korea’s ‘Anti-Google law’

On August 31, South Korea’s National Assembly passed a revision to the Telecommunications Business Act, imposing curbs on the payment policies of Google and Apple. Those policies require app developers to use only the tech giants’ proprietary payment systems on their mobile operating systems – respectively, Android and iOS.

Apple and Google require developers to pay commissions on these systems. The bill allows developers to use other payment options.

Pressure had been building internationally with regulators in multiple countries scrutinizing the two companies which dominate the mobile OS space globally.

In response, last November, Apple said it would cut its payment commission for small developers with income of less than $1 million in annual sales from 30% to 15%. This March, Google followed suit, also slicing its commission from 30% to 15%.

Korea is the first major economy to take the plunge and legislate against the tech behemoths. Given that the country has customarily benchmarked overseas regulatory models rather than innovating them, this suggests a bold new anti-trust appetite within the ruling Democratic Party of Korea, which holds a super majority in the National Assembly.

“I am a bit surprised as I did not think Korea would be the first country to move on this, though I thought it would happen eventually since regulators all over the world have been looking into it for a while,” Tudor said. “I was thinking this would be something that would first happen in Europe and then other countries would act later.”

The revision, which took effect 15 days after its passage in the Assembly, is designed to prevent the two mobile giants from “unfairly using their market position to force a certain manner of payment” upon businesses. Violators can be fined up to 3% of their annual sales, or up to 300 million Korean won ($257,000) in sanctions.

The move has been informally dubbed the “Anti-Google law” in Korea – possibly because the best-selling smartphones in the country, those produced by Samsung, use the Google operating system, Android, which is applied in 73%-80% of smartphones globally, rather than Apple’s iOS.

Samsung, despite its dominance in IT hardware – it is the world’s leading seller of both smartphones and memory chips – has been unsuccessful in promoting its OS, Bada, or in the broader platform space.

In a subsequent but related development on September 14, South Korea’s Fair Trade Commission announced a 207 billion won ($177 million) fine against Google for hampering competition in the smartphone market by prohibiting smartphone makers from loading modifications of Android, or other operating systems, on to their phones.

Google has appealed.

But by then, Seoul’s crackdown had shifted focus. On September 13, Kakao found itself under regulatory investigation.

A kicking for Kakao

That came as a surprise to many. While it may not – yet – be a global brand name, Kakao is one of the country’s biggest success stories of recent years.

South Korea’s first industrial revolution took place under authoritarian governance in the 1960s and 70s, giving birth to the heavy industrial conglomerates, such as Samsung, Hyundai and LG, that would become the country’s economic locomotives.

Swift and widespread embedding of broadband Internet in the late 1990s helped Korea exit the Asian financial crisis and ignited its second industrial revolution, based around digital technologies. Surviving the dotcom bust, a wave of new firms, such as Internet portal Naver, gaming firm Nexon and the entertainment companies that now disseminate K-pop, rose to prominence.

The mobile-based third industrial revolution saw the advent of platform firms such as on-demand delivery players Coupang and Woowa Brothers. But the big gorilla in the space is KakaoCorp.

In 2010, Kakao launched its free messaging service. Boasting a first-class, fun and user-friendly interface, KakaoTalk became the mobile communications app of choice for high-tech South Koreans. Having won trust, affection – and a reported user base of 46 million, among a national population of 52 million – Kakao expanded in every direction.

It runs payment service KakaoPay, digital finance firm KakaoBank, and leading music streaming app Melon. It publishes games, videos and webtoons. So widespread are its operations, visitors to Korea might be mistaken for believing Kakao is an official service.

After ride-sharing firm Uber was banned in the country due to furious political pressure from the taxi lobby, Kakao stepped into the vacuum and helped out authorities by assuaging public anger at the unpopular move via a free hailing app for taxis. How about a bus? If you need to know routes and times, Kakao has your back.

The leading mobile QR code adopted in the Covid-19 era for entry to buildings and businesses is supplied by Kakao. Even the presidential Blue House uses Kakao’s messenger service as its communications channel with foreign reporters.

Yet over the last month, Kakao has been riding a rollercoaster of soaring bad news and plummeting stocks.

On September 7, ruling party lawmakers warned about its expansive tendencies and dominant position, sending Kakao stock into a downward spiral. The tough talk from lawmakers continued the following day. Subsequently, both the Fair Trade Commission and the Financial Supervisory Commission launched probes.

The FTC found flaws in public disclosures, and required Kakao to submit a detailed map of their affiliate structure. The probe focused in on a company owned by chairman Kim, K Cube Holdings, that appears to have switched roles – from a software and consulting company to a financial investment company. This should not hold voting rights in affiliates.

“I think that is a violation of the Fair Trade Act,” Park Sang-in, an anti-trust specialist at the elite Seoul National University, told Asia Times. He considers such a move “serious,” but admits that considerable opacity still surrounds the probe: “That is my guess,” he stressed.

The FSC has been probing regulatory discrepancies related to KakaoPay – notably whether it was appropriately licensed to act as a financial intermediary, Park said, citing complaints from insurers and other traditional finance players.

In a country known for policy initiatives that favor major businesses, what has driven this offensive against a rising national champion?

Behind the scenes

With Moon Jae-in now in his presidential twilight – an election is set for March 2022 – conspiracy theories are rife. A Korean investor, who requested anonymity due to the sensitivity of the matter, summed them up.

“There is something going on, as this government has been supporting platforms – Kakao got a lot of business support – then, all of a sudden, pretty much at the time they are finishing their term, they are starting to press Kakao,” he told Asia Times. “It looks like a political move.”

Even though Kakao’s current rout was sparked by lawmakers’ comments, not all agree.

“I don’t know if this is a coordinated action by the government as a whole,” Park cautioned, suggesting that regulators appear to have sound grounds for their investigations.

Park also did not see a link between Seoul’s maneuvers against Apple and Google, on the one hand, and against Kakao, on the other.

Even so, the team Moon entered office with in 2017 is not what it used to be. After multiple personnel reshuffles over the last four and a half years, policy priorities may have shifted.

“The Moon administration advocated the growth of big tech like Kakao and Naver,” Park said. “But I would guess that drive has been weakened by the changes of staff in the Blue House.”

Especially notable are changes in the leadership of the economic and financial regulatory teams, Park said, though he remains unsure if current policy is “explicit or consensual.”

Even so, within the ruling party, there is clear interest in trammeling the expanding power of platforms.

“The recent controversy regarding Kakao illustrates the government’s plan to crack down on platform-based tech firms that face allegations of misusing their market power,” a ruling party lawmaker said this week according to reports.

“Anti-trust regulators and politicians don’t want to see a complete exit of big tech companies. What they want is to see how the rising big tech companies can provide specific plans for co-existence.”

Joining Kakao’s Kim at the National Assembly interrogation next month will be senior executives from Coupang, Nexon, on-demand service provider Woowa Brothers/Baemin and online travel/accommodation player Yanolja.

It looks increasingly like a turning point for platforms in Korea.

“This all shows how entrenched apps and the mobile economy are. The app environment is now considered something like a utility,” said Tudor.

“Platformization is something that worries me. The very essence of the platform model is oligopoly, ginormous margins, and one-sided relationships between the platform and the guy delivering your pizza, etcetera. In general, I think they should be heavily regulated.”

Still when it comes to regulation, while the means of different Asian governments may appear similar, their desired ends are different, Weigand said.

“I understand that the motivation of the Chinese government is because the platforms have been launching IPOs on the US stock market, so are getting out from under the thumb of the Chinese government,” he said. “I think that the Korean government is more in line with what the EU is doing in trying to break up these monopolies – these eco-systems in their walled gardens – and open things up.”

asiatimes.com

Apple’s Quiet War on Independent Repairmen

A A — Sat, 10 Apr 2021 19:00:03 +0000

By Napoleon LINARTHATOS

In the past, a Goliath’s strength would be gauged in height measured in cubits, the brass of the helmet, the coat of mail with a weight in thousands of shekels in bronze and a spear’s head weighed in hundreds of shekels of iron. Nowadays, a Goliath corporation can just hire another Goliath, such as the law firm Kilpatrick Townsend, with its 650 lawyers and 19 offices in North America, Europe, and Asia. The firm boasts that “5 of the 10 world’s most valuable brands turn to Kilpatrick Townsend to grow and defend the value of their products and businesses.” One of those “5 of the 10 world’s most valuable brands” was interested in a video made by YouTuber Louis Rossmann.

When Rossmann was contacted by Kilpatrick Townsend on behalf of Apple he felt as if the grim reaper was knocking at his door. An owner of a small business, an Apple devices repair store, a few years back Rossman had started a YouTube channel to cover all things that interested him: Apple device repairs, business advice, personal advice, and occasionally, though more so of late, social or political commentary. The video that had gotten the attention of Apple was one in which Rossmann had showed a schematic of an Apple device and proceeded to show his viewers how they could fix their own device if they faced the same issue. For Apple, the act of showing the schematic on YouTube was a violation of its intellectual copyright. They wanted Rossmann to quietly make the video disappear. Rossmann hired a lawyer, and the lawyer advised that the request was sensible, there was no lawsuit, and thus the reasonable thing was to comply; besides, a genuine effort had been made to butter up Rossmann—the word came that both Kilpatrick Townsend and Apple liked his work. Rossmann thought about the option that he was given. Then he fired his lawyer.

The arrival of Kilpatrick Townsend gave Rossmann another push to get more involved in the Right to Repair movement. Right to Repair is a nationwide effort that aims to use legislation to return to consumers the choice of where and how to fix devices they own. Rossmann argues that what is going on now would be unthinkable just a few decades back. Corporations back then respected the consumers’ right to fix their stuff. Schematics were widely available, you could buy them at the local electronics store, or contact the manufacturer to send them to you. Appliances, like refrigerators, often came with a set of schematics and instructions for how to fix them.

Apple tries to inculcate in the minds of its customers an assumption that devices should only be repaired by the corporation and its controlled network of authorized repair stores. The controlled networks of the authorized repair stores are used to create the illusion of consumer choice while they act in a way of reinforcing and consolidating the corporation’s monopoly over the repair process. Jessa Jones, owner of an independent repair service who lobbies for Right to Repair, testified in Boston that her group up to that point had fixed 30,000 devices, “less than 5 percent” of which “would be considered fixable by authorized repairs.”

Rossmann does not like Apple. Many of his videos are about how the company is screwing, ripping off, torturing, and generally abusing its customers. There are videos where he explains why owning Apple products is a daft idea, or declares that the newest operating system “delivers big kick in the balls to Apple users.” Rossmann has a genuine, deep and merciless view of Apple.

Even knowing that, when I show up to Rossmann’s office for an interview I place an iPhone next to him to record our conversation. Then I pull out an iPad with my questions and an Apple pencil to jot things down. I raise my arm, pull up my sleeve, and look at an Apple watch, saying “we are on time.” I was looking for a reaction, but Rossmann remains calm, cool, and collected. There is a slight smirk forming in his face and that’s all I am going to get.

To explain how he makes a living off Apple repairs while at the same time he strongly dislikes the company and its products Rossmann tells me, “Oncologists don’t like cancer very much, they still try to help people with it.” What drives him nuts, he says, is when people pay for a device with a design flaw and are told at Apple’s Genius Bar that the problem is how they use that device. “Six months later a recall program would come out and they [customers] would bring it up [to Apple] and say can you fix this, sorry can’t. People would get screwed over and over again and still buy it.”

There are also problems that seem never to be fixed. Rossmann talks of a four-year-old design flaw in a 2016 Mac where a “52 volts of the line for the screen power is right next to the image line that’s one volt” creating serious problems for the owners. Often, it takes a long time for Apple to acknowledge such issues and sometimes it never does. A couple of days after our interview a U.S. District Judge sided with the plaintiffs against Apple saying that “Apple knowingly sold 2016-17 MacBook Pro models with ‘Flexgate’ display defect.”

Talking about the abuses of Apple is one of the reasons that Rossmann’s YouTube channel has been successful, with now more than 1.5 million subscribers. If Apple wants a video down Rossmann would like them to file a copyright claim. In doing so Apple would have to make its reasons public. “They would have to say ‘We object to Louis showing where the fuse is’,” he said.“I want you to publicly state on the record you don’t want your customers to know where the keyboard fuse is.”

A study from 2011 found “that customers who used independent auto repair shops spent about 24 percent less on repairs each year.” That very important price differential was achieved while the small repair shops faced substantial artificial barriers in doing business. In the tech realm, Apple uses its enormous financial heft as a purchaser of parts in order to force its suppliers in contracts that prohibit them from selling parts to independent repair stores. Rossmann has to get on Skype with people around the globe that specialize in part dumpster dives in order to find parts that suppliers are not permitted to sell him. At other times he has to buy a whole device only to retrieve a single chip out of it. One can only imagine the savings for the consumers if an open market were allowed to operate when it comes to parts, schematics, and diagrams.

A 2018 show by CBC, the Canadian public broadcast service, highlighted Apple’s predatory practices. A MacBook is taken to an Apple store for repair as CBC wanted to test the pervasive perception that Apple’s customers are “wildly overcharged.” The Apple store employee informs the undercover journalist that fixing the computer will cost 1,200 Canadian dollars. They might as well get a new computer. Then CBC takes the same computer with the same problem to Rossmann in New York.

It takes a couple of seconds for Rossmann to figure out the problem and about a minute and a half to fix it. There is “a pin that is sticking out.” The pin is put in place and the connector is plugged in. Problem solved and zero charge. The show goes on to show the many ways that Apple impedes repairs. Special-made non-standard screws so the devices cannot be easily opened, gluing batteries that do not need to be glued in, and so on. Then there is the issue of planned obsolescence, where older iPhones become significantly slower after a system update. All to make independent repairs much more difficult; all to make the purchase of a new device the more practical option.

The size of a corporation like Apple allows it to shield itself from the consequences of the policies it advocates. Backing leftist policies at home while stashing the cash abroad allows for virtue signaling at the best possible side of the profit margin. Apple’s tiny competitors on the device repair space don’t have those options. They cannot do their work in a cheap sweatshop abroad; they cannot direct their profits to a bank account in Ireland.

Apple’s predatory practices of today become the industry standard of tomorrow. At least up to 2019, Apple captured 66 percent of all profits of the mobile phone industry globally. The corporation that makes the most profit as it sells you a new device goes out of its way to restrict and squeeze every possible penny out of the repair process. How can any other corporation competing in the same space, making much less money than Apple with the sale of new devices, justify to its board and shareholders selling devices that can be repaired easily and cheaply? The mobile phone business is a tough one, with Samsung getting just 17 percent of profits, and everybody else straggling with what’s left. On April 5 LG announced that it was exiting “the incredibly competitive mobile phone sector.”

Apple uses acquisitions to eliminate competition, acquiring future competitors or acquiring technology that could have been available to its present competitors. GlobalData, an information services company, found that Apple “bought more AI companies than anyone else between 2016 and 2020.” When it comes to independent repair stores, Apple employs a different strategy. It tries to cancel them as an idea, as a way of doing business, as a legitimate consumer choice. Planned obsolescence is coming to the independent repair store. It is interesting how Apple responded to the aforementioned news report by CBC. What it chose to say in its own defense was that “their customers are best served by Apple’s certified experts using genuine parts.” Apparently, the contractual restrictions Apple has imposed on its suppliers are what makes it better at this.

In the past few years Right to Repair supporters have gathered in state legislatures across America trying to establish a competitive marketplace for repairs. Some of Rossmann’s videos take us to these initiatives. The Right to Repair crew don’t seem to fit in the halls of power, in their jeans, t-shirts, and hoodies, a congregation of misfits. How unaccustomed we have become to the visual of ordinary people trying to persuade their representatives. There are legislators in the building, corporate lobbyists and then these people. These people are the only ones losing money by being there. As Rossmann goes around with his microphone we meet the guy with the repair store in the middle of nowhere; we meet Jessa Jones, the stay-at-home mom with a Ph.D. in molecular genetics, who started fixing devices after her toddler twins had flushed her brand new iPhone down the toilet; we meet the guy who was stocking shelves at Walmart in the early hours of the morning and just made it in.

On the other side, the corporate lobbying side, all is proper and posh. The right shoes, the right ties, shirts, and suits. The proud cogs of the machine. At the legislatures they feel right at home and it shows. They know they can kill the Right to Repair bill in committee. Nothing much to worry about. Their statements are generic, formulaic, vehemently nonspecific, and boring to the point of suicide. Rossmann is trying now to go directly to the people with a GoFundMe that has raised hundreds of thousands in a matter of days. Nevertheless, the future of the Right to Repair movement and the independent repair shop seems uncertain.

What is not uncertain is what it is all about: The right to repair is nothing more than the effort to reinstate the individual’s rights of ownership. It is a movement so contrary to the new subscription model of life, where you are always one payment away from losing it all. An environment of centralized control, where everything is always supervised, curated and monitored by a managerial class increasingly skeptical of the individual will. We are being conditioned to a state of digital serfdom, as if it has been algorithmically dictated that individual choice and individuality are no more. The Right to Repair is the glitch to the propertyless future before us.

theamericanconservative.com