May 2013

Vodafone Earnings: Verizon Funds to Be Spent in Europe

Vodafone Group said that it will keep the $3.15 billion dividend payment it will receive from Verizon Wireless and plow it into its flagging operations in Europe, which weighed heavily on the mobile operator's full-year profit.

With its extensive operations in troubled Europe under siege from intense competition and regulatory changes, Vodafone is in need of a reboot to keep pace with rivals whose popular bundled offers of mobile, fixed-line, television and Internet services are leaving the U.K.-based company isolated as a mobile-only competitor. Cash flows at the businesses Vodafone controls are clearly under pressure. Emerging markets and services for business customers aren't enough to offset troubles in Southern Europe. Vodafone's investment demands are also rising as it transforms itself from a Europe-heavy wireless operator to a more balanced telecommunications group with a bigger fixed-line business.

Apple Tax Bill Overstated to Investors

Apple's real tax bill isn't as big as the one it reports to its investors. Among the findings of an investigation by the Senate's Permanent Subcommittee on Investigations are figures that show Apple's reported taxes substantially exceed the sum it actually pays the U.S. Treasury.

One factor: Apple uses a conservative approach to accounting for taxes on its overseas earnings. It has been setting aside billions of dollars a year in provisions against possible taxes on income that it earned abroad. But those taxes wouldn't be due until Apple brought the funds home to the U.S., something Chief Executive Tim Cook said he has no intention of doing. Thus, the provisions have the effect of making the tax liabilities that Apple discloses to investors look bigger than what it is likely to pay, said a person familiar with the Senate probe.

Apple is shifting its tax burden

[Commentary] Apple is in hot water with Congress now because of something it has not done: regularly paid the top U.S. corporate income tax rate of 35 percent on every dollar it earns around the world.

From 2009 to 2012, in fact, Apple managed to avoid taxes on nearly a third of its worldwide net profits, some $30 billion, which were booked to its Irish subsidiaries, according to a report by the U.S. Senate Permanent Subcommittee on Investigations. Apple’s actions “undermine the fairness of the U.S. tax code,” the report says. We would say rather that Apple’s actions demonstrate the unfairness of the tax code — or at least its hopeless complexity. As a tax-law expert witness explained to the subcommittee, everything the company did was arguably legal under U.S. and Irish tax law. Apple’s Irish subsidiary was not registered in the United States, so it owed no tax on this side of the Atlantic; but, under Irish law, Apple was not liable for taxation in Ireland either, since it is not managed and controlled in that country. Actually, most of the money wasn’t taxed anywhere. The Apple case illustrates, seemingly for the millionth time, the need for corporate tax reform, a need already recognized by everyone from the Obama administration’s Treasury Department to the Republican chairman of the House tax-writing committee. There is also broad consensus that reform should consist of closing loopholes in return for lower rates.

Apple CEO Tim Cook strongly defends tax policy at Senate hearing

Apple Chief Executive Tim Cook strongly defended the company's tax practices at a Senate hearing highlighting the technology giant's use of Irish subsidiaries to shelter billions of dollars in income from U.S. taxes.

"We pay all the taxes we owe — every single dollar," Cook told the Senate's Permanent Subcommittee on Investigations. "We not only comply with the laws but we comply with the spirit of the laws," he said. "We don't depend on tax gimmicks." Cook said the tax code "has not kept up with the digital age" and restricts the free movement of capital in comparison to the codes of other countries. He called for a "dramatic simplification of the corporate tax code," including lower tax rates and a "reasonable tax on foreign earnings." He said Apple was "deeply committed to our country's welfare." "Apple executives want the public to focus on the U.S. taxes the company has paid, but the real issue is the billions in taxes it has not paid, thanks to offshore tax strategies whose purpose is tax avoidance, pure and simple," said Subcommittee Chairman Carl Levin (D-MI). Chairman Levin said Apple "is exploiting an absurdity" that allows three of its subsidiaries in Ireland to claim they have no responsibility to pay taxes to any country.

America Movil’s Online Video Needs Urgent Review, Regulators Say

America Movil SAB’s online-video service in Mexico needs an urgent review to determine whether it violates the terms of its phone license, three commissioners of the nation’s telecommunications agency said.

America Movil is banned from offering television under its license, so the matter should be examined swiftly, the regulators said in a letter obtained by Bloomberg News. It was signed by commissioners Gonzalo Martinez Pous, Jose Luis Peralta and Alexis Milo, who didn’t indicate what position they took on the legal question. “We request that these subjects be incorporated into the agenda at the commission’s next board meeting,” the commissioners said in the letter.

Few utilities complying with voluntary anti-Stuxnet measures

Few electric utilities are complying with voluntary measures to protect against the Stuxnet virus, according to a survey sent by two lawmakers to 150 firms.

The report found that less than a quarter of investor-owned utilities and less than half of municipal and cooperation-owned utilities followed through with voluntary standards issued by the Federal Energy Regulatory Commission after the Stuxnet worm struck in 2010. It found that the electric grid is the target of daily cyberattacks, with one utility reporting that it was the target of approximately 10,000 attempted cyberattacks each month. No utilities reported any damage from the attacks. Rep. Henry Waxman (D-CA), who with Rep. Edward Markey (D-MA) released the study, called the findings “sobering.”

Committee Holds Doubleheader Cybersecurity Hearings to Examine Threats and Solutions

The House Commerce Committee and its Communications and Technology Subcommittee held back-to-back hearings examining cyber threats and security solutions in an ever-evolving technological landscape.

The full committee hearing focused on steps the federal government and the private sector are taking to bolster the security of our nation’s critical infrastructure and mitigate exposure to cyberattacks. Members discussed the president’s Executive Order to improve critical infrastructure cybersecurity, including the latest on the order’s implementation and the administration’s development of a voluntary cybersecurity framework. The committee also examined security solutions to better protect against cyber threats, including enhanced information sharing, public-private partnerships, and greater industry collaboration.

The Subcommittee on Communications and Technology hearing examined how to secure the communications network supply chain, focusing on potential vulnerabilities and the wide-ranging impacts on national security and the economy.

Subcommittee Chairman Greg Walden (R-OR) launched a bipartisan supply chain working group to discuss securing our nation’s communications supply chain. The working group will examine the security of the communications supply chain, the vulnerabilities, the effectiveness of public-private partnerships and the role of the federal government. Rep. Mike Rogers (R-MI) and Ranking Member Anna Eshoo (D-CA) will serve as the group’s co-chairs. The members include Reps. Bob Latta (R-OH), Mike Doyle (D-PA), Lee Terry (R-NE), Ben Ray Lujan (D-NM), Adam Kinzinger (R-IL), and Jim Matheson (D-UT).

AT&T Will Eventually Do the Minimum Users Expect

[Commentary] AT&T put out a statement that clarifies some things while confusing others.

First, it really does appear that AT&T defines Hangouts for Android as "pre-loaded." Even though it hasn't actually been pre-loaded on any phones yet, an app by the OS developer appears to count.

Second, it also appears that handset manufacturers, not app developers per se, are the ones who have to call an AT&T hotline to figure out how to make "pre-loaded" apps work. AT&T points out that BlackBerry, Apple, and Samsung have done this. But since none of these companies developed Hangouts it's not surprising that none of them have done whatever it takes to make it work. Presumably Google's subsidiary Motorola could have called up AT&T and figured this out, but this wouldn't have been much help to users with other handsets (by HTC, LG, Pantech, etc).

But there's sort-of good news. Somewhat in keeping with what AT&T said when Public Knowledge and others agreed not to file an Open Internet complaint over its blocking of FaceTime last year, AT&T has re-iterated that Real Soon Now, it's not going to distinguish between price plans or category of app. Data caps might still be in place—and that's another issue—but what customers do with their data is up to them. That's good news. It's also the minimum that users should expect.

The Justice Department and Fox News’s Phone Records

The Justice Department has seized the phone records of numbers that are associated with White House staffers and, apparently, with Fox News reporters, according to a document filed in the case of Stephen Jin-Woo Kim, on October 13, 2011.

Kim is a former State Department contractor accused of violating the Espionage Act for allegedly leaking classified information to James Rosen, a Fox News reporter. Ronald C. Machen, Jr., the U.S. Attorney for the District of Columbia, who is prosecuting the case, has seized records associated with two phone numbers at the White House, at least five numbers associated with Fox News, and one that has the same area code and exchange as Rosen’s personal-cell-phone number (the last four numbers are redacted).

Acting FCC Chair: Regulate With a Light Touch, but Touch When Necessary

Mignon Clyburn, the acting head of the Federal Communications Commission, said that she wants to work to protect rural carriers and consumers while making sure that efforts to increase available spectrum remain on track.

Chairwoman Clyburn said healthy competition is key to continued innovation. “We have taken a light regulatory approach, but have touched when necessary,” Chairwoman Mignon said, speaking at the opening of the CTIA 2013 show in Las Vegas. She praised smaller, regional carriers that she said provide excellent customer service and help connect rural America. Chairman Clyburn said that an incentive spectrum auction remains on track, with rules to be issued this year and the bidding itself to take place next year.

Benton

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