A far-reaching online privacy bill that got next-to-no vetting or legislative debate was

Assembly Bill 375 – the California Consumer Privacy Act of 2018 – would change the playing field in the relationship between users of some online services and the companies that provide the services. It would allow users to ask companies to delete their personal information and to be informed what information about them that the companies were collecting and selling. It would also allow online consumers to sue over some unauthorized breaches of their information – but only for up to $750.

The San Francisco developer who reportedly spent more than $3 million to gather signatures for his ballot measure told the Sacramento Bee that AB375 – while not as far-reaching as his proposal – was more than good enough. Alastair Mactaggart said he was willing to compromise and gain “certainty” of online privacy reforms rather than take on tech giants in a heavy spending free-for-all in the fall election. He pulled his initiative after AB375 was signed by Gov. Jerry Brown on Thursday afternoon – just before the deadline for its possible withdrawal with the Secretary of State’s Office. Brown’s signing came after the bill won unanimous approval from both the Assembly and Senate.

The process under which a measure that qualified for the ballot could be pulled if proponents were satisfied with the Legislature’s alternative was established in a 2014 state law that was billed as an important refinement to the state’s system of direct democracy. The bill was championed by then-Senate President pro Tem Darrell Steinberg, D-Sacramento.

The most important differences between Mactaggart’s proposal and AB375 is that it gives tech companies more certainty of their own that there would be legal limits on their exposure to damage claims from those using their services.

The bill quickly made it to Brown’s desk despite warning from key players.

Tech lobbyist: At least ‘even worse’ measure is dead

The Internet Association, a lobbying group for tech firms with significant online presence, issued a statement decrying “many problematic provisions” in the bill and “the unprecedented lack of debate or full legislative process.” But the association said it would not “obstruct or block AB375 … because it prevents the even worse ballot initiative from becoming law in California.”

The state Senate Judiciary Committee, which approved AB375 on Tuesday, did so even though chairwoman Hannah-Beth Jackson, D-Santa Barbara, expressed “grave, grave concerns about this legislation” to the San Francisco Chronicle. But she also praised its consumer-friendly elements, which take effect in 2020.

While California, as the nation’s largest and wealthiest state, often finds its policies emulated by other states, it’s not clear if AB375 will be copied in other capitals. Companies like Google, Amazon, Comcast and AT&T have steadily increased lobbying and campaign contributions in many states and may try to get what they consider model online privacy legislation passed elsewhere – so it could in theory compete with California’s version.

However, Facebook voiced its support for the state bill. “While not perfect, we support AB375 and look forward to working with policymakers on an approach that protects consumers and promotes responsible innovation,” a Facebook official told the Sacramento Bee.

Now an effort is being launched to see whether “Big Data” might be able to reduce California’s often-awful urban gridlock. Fortune magazine has the details:

Los Angeles’ snarled, rage-inducing roads have been infamous for decades. And now, thanks to a tech industry-fueled population explosion, San Francisco is right behind L.A. in the title race for Worst Traffic in America.

 

AT&T, UC Berkeley and California’s state transportation authority are testing a new way to get a grip on the situation — by collecting and analyzing drivers’ cellphone location data. The study leads insist that users’ privacy is protected, and the information could revolutionize how we plan and manage highways and transit.

 

“The idea of using cellular data for mobility is not very new,” admits Alexei Pozdnukhov, assistant professor in UC Berkeley’s Smart Cities program. “What is new … is that our approach is much more detailed modeling. We can simulate very detailed scenarios, and answer questions.”

L.A. and Bay Area the initial focus

Traffic can be horrible in other parts of the state — San Diego and Sacramento freeways are often brutally clogged in the morning and evening rush hours, and the 75-mile section of the Interstate 15 corridor from Lake Elsinore to Hesperia is a common target of Sigalerts during daylight hours because of heavy commercial traffic. But the initial focus will be on the biggest population centers:

The new California projects — Connected Corridors in Los Angeles, and SmartBay in San Francisco — are something like Google Maps on steroids. They compile region-wide cell data into big portraits, not just of where traffic is most congested, but of overall daily patterns.

 

“[It shows] where people … work, where they go for shopping, where they go for leisure, and how they choose to get there,” says Pozdnukhov. Dr. Compin says that’s “the holy grail” of transit planning.

 

The data will help planners develop detailed responses to congestion events — Compin says there are a stunning 5,000 to 6,000 events per year on the I-210 corridor, making up about 50 percent of traffic delays. By working closely with local authorities and public transit providers, Caltrans hopes to make better decisions about how to re-route traffic onto parallel corridors and local roads, and communicate changes to commuters more smoothly. The San Francisco pilot is centered on Interstate 80, and among other things, says Pozdnukhov, hopes to determine the potential impact of increased development on the Treasure Island neighborhood the highway passes through.

Research can be basis of driverless-car grid

The effort depicted by the Fortune article could end up being as tantamount to a crucial first step toward establishing a grid for driverless cars. Such a grid could steer traffic in certain directions based on algorithms anticipating optimal vehicle flow. The theory is this could be done in a way that would dramatically reduce gridlock.

Studies also emphasize how an orderly computer-run traffic grid of autonomous cars could sharply reduce pollution, especially if the cars were hybrids or otherwise didn’t have internal combustion engines.

The first is because it will remind the public that Silicon Valley-based Apple, Google and Yahoo all have histories with U.S. spies that many find unnerving — even if they weren’t eagerly cooperating, as AT&T reportedly did. The second is because the AT&T leak illustrates yet again that the U.S. government isn’t good at keeping secrets — meaning past examples of corporate cooperation with mass invasions of privacy could come to light in the future.

But the third reason may be the most consequential: the potential fallout this could have for Silicon Valley’s designs on the constantly growing China market. Vinod Aggarwal, a UC Berkeley business and political science professor and the director of the Berkeley Asia Pacific Economic Cooperation Study Center, warns that revelations about ties between tech firms and U.S. spies could easily be used as a reason to keep U.S. products out of any foreign market — China in particular:

The fallout from the NSA scandal is already starting to crimp U.S. corporate expansion plans in Europe. Analysts had expected AT&T to acquire Vodafone Group, whose cellphone operations cover many EU states. Accusations that AT&T gives the NSA data on customers’ telephone calls is raising red flags in those European countries, like Germany, where privacy is taken seriously. Regulators and legislators are already making noises about this deal. If AT&T does go ahead – and even if it prevails and acquires Vodafone — there will be strings attached and much more oversight from European government agencies. Potential regulatory risk has suddenly soared for AT&T.

 

For many foreign companies and governments, there is a certain justice in AT&T paying a price for its links to the U.S. government. After all, it was Huawei’s apparent links to the Chinese military that so enraged one U.S. congressional committee that they recommended that no U.S. public agency or firm should buy Huawei’s telecoms equipment. That effectively shut Huawei out of the U.S. market.

That’s from an essay that Aggarwal co-authored in the Harvard Business Review in late 2013 after the first mass wave of leaks by former NSA contractor Edward Snowden, which included inflammatory revelations about AT&T that hinted at the company’s vast cooperation with the NSA that was reported this week.

Apple’s biggest market may be imperiled

This hostility toward Huawei could easily be invoked by Beijing to hamper Apple at any time. Given that the Cupertino-based company sees China as absolutely crucial to its future, it may consider taking Aggarwal’s advice that tech companies need to sell themselves as international brands, not American ones, so they’re not seen as “as an extension of a troubled hegemon.”

In April, Apple confirmed that China had passed the U.S. in iPhone sales. As Quartz magazine reported in June, Apple has deliberately cultivated the Chinese market.

When Apple first made the iPhone available in gold color — with the 5S in 2013 — smart observers identified it as a play for the Chinese consumer. And, Tim Cook says, the glitter has proved golden in the world’s largest smart-phone market.

 

In an interview with the the Hong Kong edition of Bloomberg Businessweek (available only in print), the Apple CEO points to the gold iPhone — subsequent generations of the phone and the iPad are available in that color — as but one example of how the company localized for the Chinese market.

 

“A big reason for why we released the gold iPhone as because many Chinese consumers like the color gold,” Cook told the publication. “To be clear, sales for the gold iPhones in China have far, far exceeded other markets.”

 

Cook also noted how the introduction of third-party keyboards in iOS 8 was partially inspired by requests from China’s iPhone owners. Typing in Chinese can be very tedious, and many of China’s most popular third-party keyboards had moved from PC to Android seamlessly but weren’t available on Apple phones.

China’s economy and stock market have had a rough few weeks. The Beijing regime is already accused of trying to distract the public from its economic headaches with saber-rattling in the South China Sea, building a military airstrip on a disputed island over the strong objections of the U.S. and Japan. Adopting policies that invoke economic nationalism to keep out or limit Silicon Valley firms in the world’s most populous nation would be an even bigger distraction.

Most private companies have switched to “defined contribution” pension plans, in which the employer pays a defined sum in to a fund, such as a 401(k), controlled by the employee/retiree. But some companies still use “defined payment” plans, in which the employee, upon retirement, is paid a certain sum regardless of how the underlying investments have performed, with the parent company picking up any difference.

Most California governments also have “defined payment” plans. Which is why it is instructive to see how AT&T, one of the decreasing number of companies with a “defined payment” plan, compares to the similar plans for public employees, specifically the California Public Employees’ Retirement System and the California State Teachers’ Retirement System.

Although it is one of the four top providers of the modern technology of cell phones, AT&T is an old company and still has pension obligations that more recent companies do not.

Pretax loss

In a Jan. 16 filing with the Securities and Exchange Commission, AT&T wrote:

“For the quarter ended December 31, 2014, we expect to record a noncash, pre-tax loss of approximately $7.9 billion related to actuarial gains and losses on pension and postemployment benefit plans. At December 31, 2014, we decreased our assumed discount rates used to measure our pension obligation to 4.3 percent and to 4.2 percent for our post-retirement obligation. These reductions resulted in an actuarial loss of approximately $7.9 billion.”

That is, the company itself is picking up the tab for the pension losses. Although the company is doing well, with its shares up 32 percent the past five years, that $7.9 billion will come as a hit to dividends.

The report added:

“Also contributing to the amount were losses due to updated mortality assumptions offset by asset gains in excess of our assumed rate of return as well as demographic changes and other assumptions. Actuarial gains and losses are managed on a total company basis and are, accordingly, reflected only in consolidated results.” 

In other words, Ma Bell’s retirees are living longer than previously projected and so are collecting retirement pay longer. As noted yesterday, CalPERS has made similar calculations, with the lifespan of men increasing by 2.1 years and of women by 1.6 years.

Rate of return

Let’s now look at AT&T’s actions. The California Constitution, by most readings, guarantees public pension payments, with taxpayers on the hook. But private pensions like AT&T’s remain solvent only so long as the company does. If it goes broke, so do the pensions, with some payments picked up by the federal Pension Benefit Guaranty Corp (that is, U.S. taxpayers).

AT&T just lowered the expected investment rate of return on its pension plan from 4.3 percent to 4.2 percent. The public pensions also have lowered their expected rates of return — but not by much. Last March, CalPERS cut its rate to 7.5 percent from 7.75 percent. That followed a move with the same numbers two years earlier by CalSTRS.

Both CalSTRS and CalPERS claim their higher rate of return is reasonable because of their historical track record. But if they are wrong, then California taxpayers will be the ones taking up the slack.

By contrast, if AT&T is wrong and its retirement fund underperforms, retirees would see sharp cuts in their pensions, and the fund managers could have problems with shareholder lawsuits. So it makes sense for a private fund to be less exuberant in its expectations.

By Katy Grimes

Click-click-click went lawmakers’ smart phones as they texted Monday while seeming to listen to four hours of hearings on expanding broadband Internet services to poor people. At the same hearing, representatives from AT&T, Verizon, and the California Cable and Telecommunications Association asked lawmakers for forward thinking, reasonable policies and workable regulations.

The companies pointed out that broadband now rapidly is moving to such wireless networks from expensive land-lines. And the hearings didn’t even touch on how rural Californians, even with no land-lines or WiFi service available, already can sign up for satellite broadband services.

“Bridging the digital divide in California: A foundation for a better way of life,” was the hearing’s name. It was held by the Assembly Utilities and Commerce Committee. The clincher of “bridging the divide” would be passage of AB 1299, by the committee chairman, Assemblyman Steven Bradford, D-Los Angeles. AB 1299 would allow the California Advanced Services Fund to spend more money on broadband in public-housing projects.

The mission of the fund is to “encourage deployment of high-quality advanced communications services to all Californians.” Bradford’s bill would add special instructions to the California Public Utilities Commission to “encourage deployment and adoption” in “publicly supported housing communities in urban regions.”

Digital divide

According to the committee analysis, the term “digital divide” refers to “the gap that prevents access to the Internet by individuals, businesses and geographic areas at different socio-economic levels.” If lawmakers had discussed satellites, they would have learned that the only places in California without broadband access are caves.

As to cities, big and small ones in California long have been outfitted for many years with broadband cable, fiberoptic and WiFi services. They usually cost $30 to $50 a month. And as anyone who lives in the state knows, the services keep getting better, and sometimes even cheaper.

The crux of the hearing centered on what the role of the communications industry is in closing the “digital divide,” and how much more money the Legislature can extract from them to pay for this. As with the controversial $2.2 billion federal “Obamaphone” subsidy for cell phones to the poor, the money actually would come from increased fees for current users.

“In a period when broadband has become essential for jobs, economic growth and democratic engagement, a vast number of Californians live in areas without broadband,” the analysis said. “Many of these residents are poor or live in urban or rural areas that will remain unserved or underserved unless state broadband policies spur investment to address this deficiency.” Investment would mean tax and fee increases on those already using the services, in particular on those in urban areas where housing costs much more than in rural areas.

What’s been done?

In 2002, the California Legislature ordered the PUC to develop a plan to spur more widespread broadband infrastructure in the state. During this process, the CPUC also was to identify barriers to the process, and help develop a plan for addressing these.

By 2005, the CPUC approved the merger of telecom companies: SBC with AT&T, and Verizon with MCI. With the approval, the CPUC required the newly merged companies to increase charitable contributions of broadband access to low-income areas and communities. The CPUC ordered a $60 million charitable contribution fund to be created by the companies.

This established the California Emerging Technology Fund. Issues on the table currently with the fund are best practices for local broadband policy, better use of broadband availability and mapping data, the role of wireless Internet service providers and public and private infrastructure funding.

The second component of the 2013 broadband legislation is by Senator Alex Padilla, D-San Fernando Valley. He authored SB740, which would add $100 million to the fund and allow five more years to collect it. SB740 would give the PUC the ability to give grants and loans to a broader spectrum of organizations, but with an eye on broadband infrastructure construction.

Robert Wullenjohn with the CPUC said if SB740 is passed, the federal government could provide more matching money — as much at $700 million total, with grants going to schools and libraries in underserved areas.

Failing technology leads the cause

The California Emerging Technology Fund was represented at the hearing by Sunne Wright McPeak. The CPUC website explains the fund was created “to achieve ubiquitous access to broadband and advanced services in California through the use of emerging technologies by the year 2010.”

The CPUC’s website said the CETF:

* Is not intended simply to be a “build it and they will come” approach. The CETF will work to expand broadband adoption and use.

* The CETF will focus a significant amount of its resources on the needs of underserved communities and bridging the Digital Divide.

* At least $5 million will be earmarked to fund telemedicine applications that serve California’s underserved communities, particularly rural areas and facilities with a large number of indigent patients.

Ironically, while I was writing this story, the website for the CETF, cetfund.org, was not available. One would think the emerging technology folks at least would have their own technology in working order.

However, at the hearing, McPeak handed out a slick, expensively printed annual report for 2012-13.

“This is going to be pivotal in California history in getting broadband to 200,000 people in public housing who don’t have access,” McPeak said.

McPeak explained that, with the $60 million committed by AT&T and Verizon, the CETF set a goal of 10 years to have of 98 percent of all households to have access, and 80 percent of Californians to have access at home.

McPeak said that in 2008 statewide broadband use at home was 55 percent. Today it is 73 percent, 7 percentage points ahead of the rest of the country, with gains in minority communities.

In 2009 the fund received two grants from the American Recovery and Reinvestment Act, President Obama’s economic stimulus program, totaling $14.3 million to increase broadband adoption in California.

It is unclear what the stimulus money was specifically used for. However, the CETF created another program, this one called the “Get Connected!” program, “a public awareness and education program, allowing the federal government to better leverage their funds for greater impact,” according to committee analysis.

This sounds like a government-funded program to nowhere.

McPeak said the original $60 million left very few resources to put into actual broadband structure, sounding as if the state demanded just enough to make it look as if they were doing something.

McPeak said the CETF had a focus on connecting public housing through a “smart housing” program. “CETF formulated a model policy for Smart Housing, briefed state and local government policymakers, and conducted workshops with stakeholders,” the annual report said. “CETF and the California Department of Housing and Community Development jointly requested that the U.S. Department of Housing and Urban Development amend federal policies and regulations to support and promote Smart Housing.”

In other words, no smart housing has been accomplished. This appears to be a program created as a landing place for federal funds.

McPeak admitted the bulk of public housing in California is not connected to the Internet. But she said they have the federal government finally paying attention to this — $74 million later. And again, any of these public housing units easily could set up satellite Internet access.

Get out of the way

The panel made up of communications companies had one message for legislators: Get out of the way.

Bill Devine of AT&T told the committee the rise in consumer demand of using wireless connections to go online means people are more likely to use mobile devices.

“Consumers from all economic backgrounds are demanding service,” Devine said. “Many of our customers are cutting the cord and using mobile devices for all Internet. And wireless broadband is allowing this.” The legislators’ own constant texting during the hearing was evidence of this.

Devine said AT&T invested $7 billion in 2010-12 in wireless services, and will invest another $14 billion over the next three years. “California will get a large part of that,” Devine said. “But we need regulatory policies in California that are forward looking, that promote capital investment.”

And he noted AT&T gave $45 million to the CETF.

Carolyn McIntyre with the California Cable and Telecommunications Association said private investment is more than $11 billion since 1996.

McIntyre said 15 million homes have broadband access, and $1.5 billion a year is spent on advancing this.

Expanding into public housing is a goal, according to McIntyre, “as long as we are granted right of access to the properties,” indicating a problem. But she never said what the access problem was.

McIntyre said they are working with Los Angeles to grant access to the necessary properties to increase wireless services and hot-spot areas.

She said her organization offers free broadband to schools and libraries, and is committed to a plan for more lower income communities.

Tim McCallion with Verizon said there is great need to streamlining permit process, especially for upgrades to cell towers.

What’s really going on?

While encouraging adoption of these two new bills could mean more computer classes, computer labs in community centers, and even subsidized cell and Internet service for low-income families, the track record so far is not impressive.  As worthy sounding as these benefits may be, adding them, at the expense of the communication companies, will merely take money away from necessary new broadband infrastructure investments that would benefit everyone, including the poor.

The hearing also seemed to be stuck thinking of technology in terms of the late-1990s. The lack of a discussion of satellite services was telling, even though satellites already bring broadband to most rural areas. Instead, the focus was on expanding expensive land-line services and putting up more cell towers.

Most likely, the money taken from ratepayers will be redirected to more subsidies, social programs, marketing campaigns and government Web sites.

By Joseph Perkins

Is one of every 186 cell phone users a criminal suspect?

One might think so in the wake of the revelation this week, in a congressional report,  that law enforcement requested data last year from Verizon, AT&T, Sprint, T-Mobile and other carriers on the calls, text messages and, perhaps most ominously, location of more  than 1.3 million of the nation’s 234 million cellular customers.

The growing threat to privacy rights posed by increased police use of secret and, in many cases, warrantless cell phone surveillance underscores the importance of legislation, the California Location Privacy Act, that would require law enforcement to secure a search warrant before accessing location information from any electronic device.

The measure, SB 1434, was approved last week by the Assembly Committee on Public Safety, which followed its approval back in May on the Senate floor. Particularly noteworthy is that the bill, authored by Sen. Mark Leno, the San Francisco liberal, won the support of not only his fellow Democrats, but also Republicans.

That may be attributable in part to questions that remain after the U.S. Supreme Court ruled this past January that law enforcement’s secret attachment of a GPS device on a vehicle constitutes a “search” and therefore requires a search warrant; but it left unsettled whether the same ruling applies to GPS location tracking by way of cell phone.

The U.S. Justice Department maintains that the high court’s ruling, United States v. Jones, does not apply to mobile devices “because there is no trespass or physical intrusion on a customer’s cell phone,” thus no need for law enforcement to obtain a warrant before asking wireless carriers to turn over customer data.

State action

Lawmakers in Sacramento see things differently. The majority believe that the constitutional protection against warrantless searches applies not only to cases of trespass or intrusion, but also to secret cell phone surveillance.

And they have codified that in the proposed California Location Privacy Act, which makes it clear to both “government entities” and wireless service providers that a probable cause warrant must be obtained before compromising a cell phone user’s privacy.

The measure would allow exceptions to be made in cases in which a cell phone user has requested emergency services or law enforcement reasonably believes there is immediate danger of death or serious injury to a person or persons.

The one major shortcoming of Leno’s otherwise laudable legislation is that imposes no requirement on cell phone carriers here in California to provide annual reports on the number of law enforcement requests the receive to spy on their cell phone customers.

CTIA-The Wireless Association, a trade group representing the wireless telecommunications industry, sent a letter to Leno this past April opposing such a requirement, arguing that it would “unduly burden wireless providers,” and that it was doubtful that compliance “would best serve wireless customers.”

Yet, the industry already keeps copious records on data requests for purposes of billing law enforcement for those requests. It could easily compile those records into an annual report to the state.

And as to what best serves wireless customers, reporting or not reporting annual law enforcement requests for cell phone records, most of us almost certainly would prefer transparency.

For while we understand that law enforcement needs certain latitude to apprehend criminals, including use of secret cell phone surveillance, safeguards must be in place to ensure that our privacy rights are not routinely trampled upon.