DT, Orange prove Europe remains hostage to US, Chinese tech
Timotheus Höttges, Deutsche Telekom's energetic, spidery-limbed boss, wants Europeans to get angry about US and Chinese tech dominance, and worried that US and Chinese companies hold the keys to their data.
Making a guest appearance at an Orange (NYSE: FTE) event in Paris on December 12, he struck an indignant tone before an audience of like-minded industry executives. "Today, only 4% of the world's data is stored in Europe on European companies' clouds," he said alongside Stephane Richard, his counterpart at Orange. "Meanwhile, the global tech guys have access to all this data, and the more they get the better their services get. We have to do something about that." (See Djingo Unchained: Orange, DT Take AI Fight to US Tech Giants.)
This may seem like an auspicious time for European indignation. Edward Snowden and revelations about the Facebook Cambridge Analytica affair have shown that US authorities and tech giants cannot be trusted on European soil. The introduction this year of the US CLOUD Act (CLOUD standing for Clarifying Lawful Overseas Use of Data) has heightened concern that US authorities can barge into any US company's data center, anywhere on the planet, in the interests of national security (although the reality is far more nuanced). (See Facebook: The Sick Man of Silicon Valley.)
In the meantime, China's Huawei Technologies Co. Ltd. risks becoming 5G vendor non grata in Europe after the most turbulent few months in its history. Unlike the US National Security Agency and Facebook, it has never been shown to have spied on European citizens or abused customer data. But the mere possibility is enough for US authorities -- with their own nervousness about Chinese tech dominance -- to complain about it to Europeans. A desperate Vincent Peng, the president of Huawei's business in Western Europe, told the Financial Times (subscription required) that Huawei would do "anything" to restore confidence. Unfortunately, it cannot stop being Chinese. (See Orange Rules Out Huawei for 5G in France and How the West Can Hurt Huawei.)
Caught in the crossfire of this tech battle between the US and China, Europe sometimes appears like fodder for either. Its heavily regulated telecom markets are too crowded, say critics, and they already lag international rivals in the race to build economically vital 5G networks. Ericsson AB (Nasdaq: ERIC) and Nokia Corp. (NYSE: NOK), its most successful tech companies, are more than a century old and under threat from baby-faced software developers. European indifference is no help, either: Just 51% of companies in Germany believe in the potential of artificial intelligence, according to Höttges, compared with 91% in China and 97% in the US.
To Höttges and Richard, Europe is a colossal underachiever, weighed down by apathy and regulation like Superman with kryptonite in his boots. It produces many of the world's best engineers and features some of its most prestigious universities, said Richard. Technology startups from the region have produced some of the world's most groundbreaking innovations. Think of Luxembourg's Skype, now a part of the Microsoft Corp. (Nasdaq: MSFT) empire, or the UK's DeepMind, a pioneer in artificial intelligence that Google (Nasdaq: GOOG) bought in 2014.
But the takeover of these two companies by US Big Tech points to the most uncomfortable truth about Europe: Its sheer dependence on the US and China. That laid bare a few absurdities at Orange's event in Paris this month. Even as they were castigating the "global tech guys," and championing their own digital assistant as a European alternative, Höttges and Richard were announcing a partnership with Amazon.com Inc. (Nasdaq: AMZN). Customers who buy one of the forthcoming smart speakers from Orange or Deutsche Telekom AG (NYSE: DT) will be able to choose between the telcos' digital assistant and Amazon's Alexa. Amazon's interest in featuring an Alexa rival on its own hardware remains unclear.
When it comes to the telcos' strategy, blocking access to the Internet giants would be counterproductive, and smack of the "walled garden" approach that proved such a disastrous failure after the dotcom boom. Yet analysts are skeptical that European nationalism or privacy fears will prompt consumers to pick Djingo, Orange's name for its digital assistant, over Alexa. Despite widespread coverage of the Cambridge Analytica scandal, and reports that Russia used Facebook to influence the outcome of the 2016 US presidential election, there has been no European exodus from the US social network.
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