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POLITICO Pro Morning Tech: London catch-up — Privacy stop — Regulate AI

By Laurens Cerulus, with help from Mark Scott and Janosch Delcker | Send tips to ccontiguglia@politico.eu, lcerulus@politico.eu, jplucinska@politico.eu and mscott@politico.eu | View in your browser

MARK ON MONDAY: POLITICOs Chief Technology Correspondent Mark Scott brings you his insights on technology.

As someone who lives in London, I try to steer clear of too much tech coming out of Britain — always careful not to play up my home field advantage when theres a whole wide world out there. But this week, its hard to ignore London Tech Week, a marketing ploy and/or celebration of all the tech prowess thats on show in the British capital.

To be fair, theres lot to crow about. The U.K. (yes, theres life outside the M25) pocketed a EU-high €7.3 billion in tech investment last year, according to Dealroom, a data provider. And when it comes to the number of high-class venture capitalists, so-called tech startup unicorns, or some of the worlds best tech talent, its London that still is first among equals among Europes tech hubs.

And yet, not everything is so optimistic. Behind the high-profile statistics, the U.K. doesnt do as well when you scratch the surface. Sure, it garnered the most amount of tech investment last year in Europe. But when you look at it on a per capita basis, its Israel and Sweden — not exactly shabby in the tech department themselves — that are miles ahead of Britain, according to the same Dealroom figures.

London also faces growing competition from Paris where Emmanuel Macron has rolled out the red carpet for startups and some of Silicon Valleys biggest names, wooing them with reforms and threats of regulatory clampdowns in a one-two punch that has seen the impetus in the European tech world shift across the Channel from the U.K. to France.

Last, but not least, is Brexit — the one topic that you just cant escape when tackling anything to do with the U.K. So far, its been pretty clear sailing for the British tech sector, mostly because few things have been settled in terms of leaving the European Union. But when I talk to investors, coders and tech executives in other places on the Continent, theyre focused on getting on with business. In contrast, Brexit is on the minds of everyone in London, and few see it as a potential success story — no matter the bluster often coming from local officials.

So if youre in London this week, enjoy the show — and email me if you want to meet up. But the tide is starting to turn against the U.K. with other EU hubs rising to take the talent, resources and capital that once had been earmarked for Britain. To be fair, thats not a bad thing, and its not a zero-sum game. But take many of London Tech Weeks announcements (some would say hysteria) with a pinch of salt. All is not as rosy as it might appear.

HAPPY MONDAY and welcome to Morning Tech. So this week is London Tech Week, which will include speakers like former WPP CEO Martin Sorrell, Wikipedias Jimmy Wales and SNAP VP Claire Valoti. Also in London, the CogX festival is taking place today and tomorrow, where folks will discuss artificial intelligence and other kinds of groundbreaking tech. Heres the long speakers list — its worth a visit if your in town.

In Strasbourg, its also Parliament plenary week and well be looking forward to the discussion on the Foreign Affairs committees report on cyber defense. More on that below. This evening MEPs in the Civil Liberties committee will vote on a report on the EU-U.S. data transfer deal “privacy shield.”

FACEBOOK — PRIVACY PROBLEM GROWS: Facebook made deals to give some firms special access to user data after the point in 2015 when the company says it stopped sharing that information, according to the Wall Street Journal. The tech giant made special data-sharing agreements called “whitelists” that gave companies access to information about friends of users, such as phone numbers, after it said it switched over to a more restrictive data access policy, the Journal reported, citing court documents, Facebook officials and other sources.

Facebooks reaction: Vice President of product partnerships Ime Archibong said the deals were struck with companies who asked for short extensions after Facebook switched its policy for developers. Archibong said the extensions were given to companies like Nissan and RBC, and that they ended “several years ago.”

REGULATING AI: Artificial intelligence will be the most pressing regulatory issue during the European Parliaments next term between 2019 and 2024. Thats the key finding of an analysis by Brussels-based consultancy BOLDT, published today.

“Its applicability across all economic sectors is likely to have a transformative effect on industry, workers and consumers, as well as on key societal functions such as education and healthcare,” the company writes, warning that “this will lead to conflicting pressures on regulators, who will need to balance industrys ability and desire to innovate with the need to secure jobs, guarantee citizens rights and maintain public safety.”

TECH NATION — FRANCE VS. UK: Britain is facing a growing threat from France as the go-to place for European tech, according to tech executives, startups and government insiders on both sides of the Channel. Much of this changing of the digital guard is down to one thing: Brexit. While the U.K. is still figuring out what its plans are after leaving the EU, France is doubling down to knock Britain off its perch as Europes largest tech nation, according to a report by Mark, Annabelle and Cat. Read their story here or below.

BY THE NUMBERS — BIG TECH INVESTS: TechCrunch breaks down the largest acquisitions of Big Tech companies Amazon, Apple, Facebook, Googles Alphabet and Microsoft.

E-PRIVACY — GRINDING TO A HALT: Strong efforts by the European Commission and Bulgarian presidency of the EU Council couldnt change the hard political reality: Its looking highly unlikely the e-Privacy Regulation will go into three-way negotiation anytime soon.

Ministers responsible for telecom legislation gathered for a Council meeting in Luxembourg Friday, debating the draft e-Privacy Regulation, which the Commission had hoped would push the discussion over the hump. Countries holding the key to the next stage in negotiations include Germany, France and other capitals in a blocking minority. Heres what we heard from the discussion:

— Germany presented its (long-awaited) position on the two outstanding issues. On metadata, the country wants a clearer distinction between when GDPR affects data and when e-Privacy is valid. On cookies, Berlin wants more clarifications as to how companies could be allowed to use them. Finally, the country also wants a transitional period of two years, which would give companies more time — and would arguably help regulators clarify the law too.

— Some capitals including Portugal and the Czech Republic said the file was “not mature” enough to wrap up. Overall, the majority of countries acknowledged work needs to continue, either to finish the discussions “as soon as possible” (see Romania and Sweden) or at least under the Austrian presidency (see Estonia and Poland).

Taking into account intense lobbying by industries ranging from publishers to tech companies to telecoms and car makers, its looking tough for the Bulgarian presidency to come up with a next text that solves all (or most) of these issues raised across the table. Their deadline: a Coreper meeting end of this month. Dont hold your breath: The Bulgarian presidency closed the discussion saying the ministers “gave us and our Austrian colleagues precious guidelines.”

CALL IN UK FOR SOCIAL MEDIA AND TECH FIRMS TO HAVE MORE RESPONSIBILITY: “Social media and online gaming firms should have a statutory duty of care to protect children from mental ill health, abuse and addictive behaviour, a coalition of the countrys leading experts demands today,” the Telegraph reports this morning. “Data amassed by charities, academics and doctors links childrens use of social media and gaming to a range of serious and lasting harms, many of which build gradually over time and go undetected by parents or teachers.”

DATA PRIVACY SHOULD BE SACRED: The British and Foreign Bible Society was fined £100,000 by the U.K. Information Commissioners Office, after its computer network was compromised as the result of a 2016 cyberattack. Between November and December 2016, intruders exploited a weakness in the Societys network to access the personal data of 417,000 of supporters. For some, payment card and bank account details were placed at risk.

CYBER — CHINA HACKS SUBMARINE: “Chinese government hackers breached the files of a U.S. Navy contractor to steal submarine warfare secrets earlier this year,” the Huffington Post wrote about a story in the Washington Post.

AMAZON — REPORT ON FACTORY CONDITIONS: Workers in China tasked with building Amazons Echo speakers and Kindle e-readers are exposed to bad work environments and conditions that often are in violation of Chinese law. Thats according to a recent report by China Labor Watch (PDF). More on Gizmodo.

ICYMI — KASPERSKY UNDER FIRE: The European Parliament is taking take aim at Russian cybersecurity giant Kaspersky Lab, with a new report urging the EU to stop using software by the firm because it has been “confirmed as malicious.” It is the latest headache for a company fighting to dispel suspicion that its helping the Russian state to hack foreign governments via its software. Read more in my story here or below.

IN OTHER NEWS: Rob Wainwright, former Europol chief that took the helm of the agency as it increased its clout on fighting cybercrime, got knighted by the queen.

Morning Tech wouldnt be possible without Nicholas Vinocur and Zoya Sheftalovich.

*** POLITICO Pro Articles ***

France battles to topple Britain as Europes top tech nation

— By Mark Scott, Annabelle Dickson and Cat Contiguglia | Read online

LONDON — Move over Britain, theres a new European tech champion in town.

Amid concerns that Brexit may hobble the United Kingdoms digital ambitions, France is gambling that it can knock Britain off its perch as Europes largest — and most prominent — tech nation.

Central to this changing of the digital guard are contrasting strategies by London and Paris in their dealings with startups, venture capitalists and some of Silicon Valleys biggest names, according to industry insiders, senior policymakers and tech executives, many of whom spoke to POLITICO on the condition of anonymity because they were not authorized to speak publicly.

In Britain, the governments central focus on leaving the European Union has seen many of its ties to the local tech sector downgraded, with reduced access to Theresa May and senior officials, as well as vocal efforts by U.K. policymakers to clamp down on the perceived wrongdoings of tech giants such as Google and Facebook.

Yet in France, Emmanuel Macron, the countrys popular — and English-speaking — president, has led a one-two regulatory punch that involves rewriting onerous domestic legislation, including its local labor laws, and making demands, often behind closed doors in one-on-one meetings, that multinational tech companies pay more tax into national coffers.

This carrot-and-stick approach has led many U.S. tech moguls, including Facebooks Mark Zuckerberg and Amazons Jeff Bezos, to visit Paris in efforts to woo Macron, including via announcements for new research centers and tech jobs across France. The VivaTech gathering in Paris earlier this month drew more than 50 tech bosses, to whom Macron informed they would be receiving “no free lunch” while in France.

In contrast, many of these same executives now skip similar lobbying trips to London as the countrys power to alter the EU tech landscape wanes ahead of the U.K.s departure from the bloc early next year. Their absence will be most acute during London Tech Week, a series of events starting Monday aimed at promoting the British capitals digital prowess.

“In the past 10 years, theres been amazing work done to make London the center of the European tech ecosystem, but with Brexit, that has stopped,” said Frédéric Court, a French venture capitalist who has spent much of his working life in London.

“The momentum has shifted to Paris,” added Court, who as a partner at Felix Capital, invested in billion-euro EU startups like Deliveroo, an online food ordering service, and FarFetch, a high-end digital fashion retailer. “Theres now more pace there than in London. That was unthinkable even two years ago.”

The digital winds may have shifted toward France, but tech executives and even some of the countrys own officials acknowledge theres still work to be done before Paris outmuscles London as the first among equals within Europes tech hubs.

Last year, for instance, French venture capitalists raised a record €2.7 billion, the first time the country bested similar figures for the U.K., whose local funds pocketed €2.5 billion in 2017, according to Dealroom, a data provider. Much of that capital in France came from local multinationals eager to understand how tech may eventually upend their industries.

This tidal wave of new French cash, though, was not matched with similar levels of investment. Despite the uncertainty of Brexit, international backers plowed a record €7.3 billion into the British tech sector last year — roughly three times the amount earmarked for French competitors, according to Dealroom.

“When companies want to raise more than €30 million, they still have to leave France,” conceded Roxanne Varza, director of Station F, a sprawling startup incubator in central Paris, which has partnered with the likes of Facebook and BNP Paribas, the French bank, and was created by local billionaire Xavier Niel.

And then came Brexit

Frances emergence as a potential contender to dethrone the U.K. in all things tech coincided with one crucial event: Brexit.

In the wake of Britains decision in 2016 to leave the European Union, including Theresa Mays promotion to prime minister, tech industry insiders said their access to the corridors of power in Britain was shut off, almost overnight.

Where David Cameron, the countrys former leader, held monthly breakfasts with local startups and venture houses to gauge their opinions, these get-togethers have become a rarity under May. Tech companies — most of whom had overwhelmingly supported staying inside the EU — also were held at arms length and viewed initially with increased suspicion under her administration, according to several executives who spoke to POLITICO.

That included difficulties in securing government meetings to address key concerns over Brexit, such as continued access to European tech workers and EU research and investment funds. Some executives added they were dismissed as part of a cosmopolitan global elite, something that May worked actively to distance herself from during her initial months in Downing Street.

“What has changed is there is a lack of special treatment for tech,” acknowledged Will Tanner, former deputy head of Mays policy unit, who left No. 10 following last years snap general election. “The government is concentrating on lots of different sectors in the economy.”

A British government spokesperson did not address these claims, but added the country was still central to Europes tech industry.

France takes center stage

Sensing an opening, Macron — always eager to portray a more outward-looking picture of France — moved fast after winning the countrys presidency in May 2017.

Last June, he unveiled a series of tech programsaimed at enticing international companies and talent to Paris and other French cities, many of which have existing talent pools of coders and programmers that previously had to look outside the country for well-paying jobs.

Macron created a fast-tracked international tech visa system, announced a €10 billion national innovation fund and outlined plans to streamline the countrys corporate tax and labor laws to make it easier for companies to hire staff and issue stock options to new employees.

“Not many heads of state have put digital issues at the heart of their action,” said Gilles Babinet, the French governments so-called digital champion at the European Commission. “Macron is out there selling France as a hub for artificial intelligence. Every time he goes to a foreign country, hes making the pitch personally.”

The French president also positioned himself as the main instigator behind Europes renewed push against Silicon Valley at a time when public opinion worldwide began to shift against the likes of Facebook and Amazon. That included efforts, so far unsuccessful, by Paris to force tech giants to pay taxes on revenues, not profits, generated within the EU — a potential major shift in how taxes are paid worldwide.

“It is not possible to have free-riding on one side, even when you make a good business,” Macron told tech bosses at the VivaTech conference in Paris last month.

Frances double-headed strategy began to pay off with the likes of Google announcing an artificial intelligence research center in Paris and Amazon saying it would increase its local workforce by 50 percent, to 7,500 workers, by the end of 2018. Industry executives said such investments would likely have happened without Macrons clampdown on tech, though the timing of the announcements, many conceded, was aimed at soothing Paris regulatory ire.

Britain tries to regain momentum

Frances government-backed tech push did not go unnoticed in Britain. Facing renewed competition, British politicians last summer started to rethink their hands-off strategy to the countrys digital sector.

With questions swirling about the U.K.s future after Brexit, the shift by local policymakers was also aimed at positioning the countrys successful tech industry — arguably the largest in Europe — as a potential engine for growth after Britain leaves the bloc, according to government insiders and tech executives.

These renewed efforts to reach out to the British digital sector included announcing a doubling of the number of visas available for the tech and creative industries to 2,000 per year, a multimillion-pound investment to jumpstart artificial intelligence research in the U.K. and an industry gathering in Downing Street in November where May reaffirmed her commitment to tech. Government officials say more events are now planned.

The U.K. governments relationship with industry “started a bit cooler in the early stages,” said Antony Walker, deputy chief executive of techUK, a trade group. But, he added, “theres a growing recognition and understanding of the importance of having a strong digital sector.”

While the rivalry between France and Britain dates back centuries, officials on both sides of the Channel have tried to play down a winner-take-all view on Paris recent emergence as a competitor to London. They suggest that both countries can mutually benefit from increased EU-wide tech investment — a key component if Europe is to keep pace with the likes of the United States and China, which remain the undisputed leaders in the global tech race.

“It isnt a zero-sum game,” said Matt Hancock, the British secretary of state for digital, culture, media and sport. “A strong France leads to a strong U.K. when it comes to tech investment.”

Nicholas Vinocur contributed reporting.

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Kaspersky Lab resists fresh calls for a ban in Europe

— By Laurens Cerulus | Read online

The European Parliament is taking take aim at Russian cybersecurity giant Kaspersky Lab, with a new report urging the EU to stop using software by the firm because it has been “confirmed as malicious.”

The non-binding report, which singles out Kaspersky Lab to be banned, is the latest headache for a company fighting to dispel suspicion that its helping the Russian state to hack foreign governments via its software.

The swipe at Kaspersky comes from Polish Conservative MEP Anna Fotyga, who drafted an amendment to a text citing the firm that was approved by her colleagues in the Foreign Affairs committee earlier this month. The report will be debated in Parliaments plenary session Tuesday.

“Our concerns were based on repeated allegations of interconnections with Russian state and intelligence infrastructure,” Fotyga wrote in an email. “Moreover, many private companies came to the conclusion that this software can be dangerous and decided to stop using and promoting it.”

Kaspersky Lab rejected the allegations in the report as being politically motivated.

“I believe this is a political amendment. In reality there are no wrongdoings,” said Anton Shingarev, the companys vice president of public affairs. He stressed that no intelligence agency had so far provided evidence of leaks or backdoors built into the firms software products.

Kaspersky is now asking Fotyga to present evidence publicly to support her claims that the products are “malicious.”

The companys protest is part of a wider effort to dispel suspicion as U.S. and European lawmakers increasingly voice concerns about hacking and surveillance via foreign-owned companies ranging from Kaspersky to, most recently, Chinese-owned telecom equipment makers Huawei and ZTE.

The fears are based on warnings from intelligence officials, especially in the U.S., who argue Kasperskys historical links to the Russian government constitute a security risk. The firms founder, Eugene Kaspersky, is a former Russian intelligence officer.

In September, the U.S. Department of Homeland Security banned government agencies from using Kasperskys products. That move came after accusations that its software was helping Russia steal American state secrets. Kaspersky is fighting back in court.

European governments, especially those with close ties to U.S. intelligence, are now following suit. Last month, the Dutch government said it was banning Kaspersky software from its computers. And the U.K. last year banned the use of the anti-virus software from computers in a range of departments dealing with national security and sensitive information.

Now, Fotyga is asking all EU institutions, including the European Commission, Council and cybersecurity units within police agency Europol, as well as other cyber-focused agencies like ENISA, to cease using all Kaspersky software, too.

“In view of numerous attempts to hack EU and member states infrastructure, we need to start with the basics, which also means checking our hardware and software that we use in the EU institutions,” Fotyga said.

However, others in Europe are not convinced that Kaspersky poses a security threat.

The German intelligence agency BSI, in particular, responded to the recent U.S. ban by saying it did not possess evidence of wrongdoing by the Russian company. And a recent Commission statement said the institution “has no indication for any danger associated” with Kasperskys anti-virus software.

“The European approach is more correct. It was always based on facts, on evidence,” Shingarev said.

The companys official line has long been that it does not assist Russian authorities in hacking other countries and governments. In the past few months, Kaspersky has ramped up its efforts to convince EU politicians of its bona fides, launching “bug bounty” programs allowing security researchers to scrutinize the source code of their products and stressing its willingness to have European intelligence officials audit its software.

In May, the company announced it is building a data center in Zurich, Switzerland, that would become operational end of 2019 and where data from customers in Europe, North America, Singapore, Australia, Japan and South Korea would be stored. The move aims to reassure clients in these countries that the Russian government will not have direct access to their data.

The Swiss data center is “our reply” to the concerns security concerns, Shingarev said.

“Were here to talk. Were willing to change.”

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