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The Morning Download: Missouri AG Investigates Google as Global Tech Backlash Grows

By Steve Rosenbush

Good morning. The relationship between the tech sector and the global public sector is being redefined, with a rising level of regulation on ever-more powerful companies asserting itself against the traditional free-market ethos of Silicon Valley. “Google is facing a new front in its regulatory battles after Missouri’s attorney general launched a broad investigation into whether the internet giant’s business practices violate the state’s consumer-protection and antitrust laws,” the Journal’s Jack Nicas reports. “Missouri Attorney General Josh Hawley on Monday said he issued an investigative subpoena to probe Google’s collection of user data, its use of other sites’ content, and its alleged manipulation of search results to favor its own services.”

The global tech backlash grows. Alphabet Inc.’s Google unit already faces multiple cases in Europe and a $2.7 billion fine for allegedly favoring its ads in search results. “We’re concerned they’re engaged in a similar pattern of behavior in the United States,” Mr. Hawley told reporters. Google disputes the European charges. Airbnb Inc. said Tuesday it would start automatically capping the number of days a year that hosts can rent out dwellings in parts of central Paris, the Journal’s Sam Schechner reports. (More on that below.)

States’ rights. Mr. Hawley, a 37-year-old Republican with plans to run for the Senate, said the Federal Trade Commission went too easy on Google. “That seemed to me to be short even of a slap on the wrist. Now this is why I think there needs to be a fuller inquiry,” he said in an interview. “I don’t see a lot of action coming out of Washington.” The FTC ended an antitrust investigation into Google in 2013 after the company agreed to make changes to its business practices for five year, a period that is about to expire, the Journal reports. Some U.S. lawmakers such as Sen. Al Franken (D., Minn.) have called for new probes into the company’s power, and Congressional committees are also investigating how Russian agents allegedly used Google, Facebook Inc. and Twitter Inc. to try to influence last year’s election, as the Journal notes. Limits and accountability are rising as tech platforms become large enough to shape the outside world in a significant way.

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DOWNLOAD EXTRA: FORMER TECH EXECS SHARE ACCESS, SALES TIPS WITH VENDORS

Nick James, a former global engineering leader in General Electric Co.’s energy division, is giving vendor sales teams the inside track on doing business with GE. Mr. James, who left the company about two years ago, has taken part-time work with Emissary, which bills itself as a “sales intelligence network.” Emissary says it has signed up 5,000 former corporate marketing and IT employees whom it matches with sales agents from vendors trying to make deals with specific companies.

When you lead IT groups, Mr. James tells CIO Journal, interactions with vendors “can be downright painful,” with vague pitches that dwell too long on information tangential to making a buying decision. Often there is too much background information about how the vendor was established and not enough on how the product can help a specific problem, he says.

Recently, he advised sales staff from a software company looking for an in at GE. The company, which he and Emissary declined to name, offers a product to help developers manage change requests. He told the sales people how to tailor a pitch, given his insider knowledge about a monthly meeting GE holds to review software development projects against specific metrics. “The change I suggested was to say, ‘You know those operational reviews you have once a month and how painful it is [to report] a red flag status on a project? Look at how our feature can help you with one of the most pressurized and painful parts of the working life of a GE manager,’” he says.

Mr. James, who gets paid by the assignment by Emissary, says his knowledge about how GE works won’t soon become outdated, even as the company restructures under a new chief executive. “I can speak to the culture and values of GE,” he says. “Culture and values don’t shift that fast.” -- By Kim S. Nash

EUROPE

The area in Paris Airbnb is subjecting to the rental cap includes tourist-filled neighborhoods near Louvre Museum. LANGSDO/EPA-EFE/REX/SHUTTERSTOCK/EPA/SHUTTERSTOCK

Airbnb works with Paris. To placate regulators, Airbnb said Tuesday it will start automatically capping the number days a year that hosts can rent out dwellings in parts of central Paris--the company's largest market by listings, with 65,000. That will effectively force hosts to comply with the city’s legal limit on short-term rentals of homes of 120 days a year, says the Journal's Sam Schechner.

Making-nice-with-the-locals tour rolls through Europe.  Airbnb’s decision to enforce a Paris cap is the first expansion of a measure the firm rolled out last year in London and Amsterdam, establishing it as a template in the company’s efforts to calm activists and regulators world-wide. Many cities argue that the firm’s short-term rentals make it more lucrative for property owners to cater to tourists than to rent out homes to long-term residents, and sought to limit them.

EMERGING TECHNOLOGY

Otsuka embedded a chip in one of its drugs, using technology developed by Proteus Digital Health. PROTEUS DIGITAL HEALTH

FDA approves digital drug. The Federal Drug Administration Tuesday approved an antipsychotic pill, billed as the world’s first digital drug because it signals smartphones once it reaches the gut so doctors can track whether patients are taking their medication, reports Preetika Rana in the WSJ. The drug’s maker, Otsuka Pharmaceutical Co. in Japan, can implant a chip containing minerals like silicon and magnesium inside tablets of Abilify, which is used to treat mental illnesses.

What then? Once swallowed, the chip mixes with stomach acids and sends a heartbeat-like signal to an adhesive patch worn on a patient’s torso. The patch records the dosage and time of ingestion and relays this to a smartphone app for patients to monitor and share with doctors and caretakers. The chip passes through the digestive tract normally.

Introducing Schoelkopf’s Law.  The man behind big tech’s race for qubits is a Yale professor who over the past two decades has worked with other physicists to figure out how to lengthen “coherence time,” the amount of time information can be stored in a quantum system.  Their technique using superconducting circuits has been found to improve coherence times by a factor of 10 every three years of so, the New York Times reports. Now Robert Schoelkopf has started his own quantum technology company, Quantum Circuits.

CLOUD

Amazon Web Services is selling computing equipment used for its cloud services in China for as much as $300.8 million. CHRIS HELGREN/REUTERS

AWS bows to China’s cloud laws. Citing law that limits non-Chinese companies involvement in providing cloud services, Amazon.com Inc. said it would sell its cloud computing equipment used in China to local partner, Beijing Sinnet Technology, the Journal’s Yang Jie and Liza Lin report.

China’s control is cloud-high. In July, Apple Inc. said it would begin storing cloud data for its Chinese customers on a server run by a government-owned company, to comply with Chinese law. In August, AWS was caught up in a Chinese government clampdown on tools that allow internet users to circumvent the country’s vast system of internet filters.

The competition. Local faves Alibaba Group Holding Ltd. holds 40% of the infrastructure-as-a-service market, the bulk of the public cloud offering in China, according to International Data Corp. research. Microsoft Corp., the largest foreign provider in China, had 5%, AWS has 3.8%.

Reporter huddles with secret cloud documents. A BBC reporter using office collaboration software from Huddle said during one session he was inexplicably granted access to a KPMG account, with full access to secret financial documents. The company said in a statement that it has fixed a bug that affected "six individual user sessions between March and November this year."

LEADERSHIP

Michael Kratsios, the U.S. deputy chief technology officer, announces the launch of a drone pilot program earlier this month. OFFICE OF SCIENCE AND TECHNOLOGY

White House faces smart people challenge. Michael Kratsios, White House deputy chief technology officer, is developing a high-tech policy agenda that he says will spur innovation in emerging technologies. “It’s just a question of putting smart people around a table and trying to come up with an innovative approach to regulating” new technologies, he tells the Journal’s Douglas MacMillan. The challenge, notes Mr. MacMillan, is that the “smart people”--leading scientists and tech executives--have abandoned White House advisory councils and complained that certain presidential policies threaten to reverse years of economic and social progress.

No Nobel Prize party. The White House won’t be holding an event for this year’s U.S. Nobel Prize winners. The event has been customary since at least the Clinton Administration, the Washington Post reports.

INFRASTRUCTURE

AGENCE FRANCE-PRESSE/GETTY IMAGES

Father of the web confronts his creation in the era of fake news. Tim Berners-Lee, founder of the World Wide Web, tells Bloomberg that the tech industry, needs to do a better job in looking “out for unintended consequences,” as they roll out new services. As an example Mr. Berners-Lee cited the rise of fake news, powered in part by advertising programs that unintentionally incentivized the creation of outlandish “news” content.

Data is not the new oil.  Says Mr. Berners-Lee: “Personally, I think it’s like nuclear fuel. It’s becoming toxic. Two years ago, the question from the board was, ‘How are we monetizing the data?’ Now the question is, “How are we protecting ourselves from the damage of this getting out?’”

MORE TECHNOLOGY NEWS

MIKE BLAKE/REUTERS

Qualcomm rejects Broadcom’s acquisition deal. Qualcomm Inc. rejected Broadcom Ltd.’s unsolicited $105 billion offer, setting up a potentially hostile showdown between two giants of the chip industry over what would be the biggest technology takeover ever, reports the Journal’s Ted Greenwald. Monday, Qualcomm’s board said the offer, which Broadcom submitted last week, dramatically undervalues the company and comes with significant regulatory uncertainty. Broadcom said it will stay in pursuit.

Self-driving tech is already truckin’. For over a month self-driving trucks from startup Embark have been hauling Frigidaire refrigerators on the interstates, from Texas to California. While a human passenger sits in the cab, their primary job during the pilot program is to monitor the truck’s computer.  Wired reports that  the American Trucking Association embraces the technology, saying that it could make trucking safer. The Teamsters? Not so much.

Apple wants to improve AR. Apple Inc. is said to be working on a rear-facing sensor system for its iPhones, to improve its augmented-reality capabilities, Bloomberg reports.

Why mobile payments are still so hard for J.P. Morgan. The WSJ’s Emily Glazer sees two factors at play: competitors have moved quickly while potential customers have moved slowly. Most Americans still prefer using their cards, along with cash and checks. A May survey from Bernstein Research ranked it 9th among U.S. mobile wallets with only 6% of online shoppers saying they’d used it in the previous year, a fraction of the 61% who said they used PayPal. The bank so far has spent $100 million on Chase Pay.

Surge pricing doesn’t mean a surging payday. Drivers for Uber Technologies Inc. take home about the same earnings over time, even considering surge pricing during high demand, the company found in a study it did with a New York University professor. When there is a fare cut, drivers’ pay per trip falls but riders flood the service, offering more business. A price hike eventually lures more drivers than Uber needs and scares away riders. The changes are short-lived as an equilibrium is reached after about eight weeks, and drivers’ average pay comes out the same, reports the Journal’s Greg Bensinger. To entice drivers, Uber must rely on pricey incentive payments—cash for completing a certain number of rides a week, say—to bring driver earnings above what typically amounts to around minimum wage, the study finds.

Look like Kiss's Ace Frehly! Music streaming service Spotify Ltd. is laying the groundwork to diversify its platform beyond basic streaming in preparation for a potential initial public offering, reports TechCrunch. The company will allow fans to “shop the look” of a particular artist and buy beauty products. TechCrunch reports that this is not a new revenue stream for Spotify, rather, it’s an attempt to sweeten the deal for artists and give them more opportunities to make money beyond streaming.

Kubernetes komics. Readers of the Download know Kubernetes, the Google tool for orchestrating and managing containers. For those unfamiliar with the topic, Bloomberg on Monday “containerized” the service’s history in a web comic.

NYC considers taking on big cable. New York City Mayor Bill de Blasio is looking for companies interested in helping the city expand broadband internet access, an action that could challenge cable giant Charter Communications Inc.’s market dominance, the WSJ’s Mara Gay reports. One in five New Yorkers doesn’t have internet access at home, city officials said. Those who do complain about it more than they do the subway.

Light a candle. The last CompuServe forum dies next month, Fast Company reports, which is news to the 99.9% who thought the company, acquired by AOL in 1998, died back when Pearl Jam released Ten.

EVERYTHING ELSE YOU NEED TO KNOW

Treasury Secretary Steven Mnuchin says President Trump won’t bend on 20% tax rate for corporations. (WSJ)

The number of dollar-based millionaires around the world rose in the year through mid-2017 by 2.3 million, with nearly half of them residing in the U.S., report finds. (WSJ)

Wall Street fines fell 15.5% last year to about $3.5 billion, the lowest total since 2013, while cases dropped 17%. (WSJ)

The U.S. ran a $63 billion budget deficit in October, contributing to a widening federal deficit that makes 2017 the sixth highest on record. (WSJ)

LATEST TECHNOLOGY NEWS

The Morning Download is edited by Kim S. Nash and Tom Loftus and cues up the most important news in business technology every weekday morning. You can get The Morning Download emailed to you each weekday morning by clicking http://wsj.com/TheMorningDownload.

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