Good afternoon, Data Sheet readers. Just as we were putting the finishing touches on today’s edition, the Federal Trade Commission announced it’s suing to stop Microsoft’s $68.7 billion acquisition of video game developer Activision Blizzard.
We’ll have more on this major development tomorrow, as details of the FTC’s case emerge and reaction comes in from across the industry. For now, you can read the first draft of today’s news here, and yesterday’s issue of Data Sheet examining how Microsoft tried to avoid this outcome.
Apple further burnished its reputation Wednesday as a personal privacy pioneer—and, in doing so, invited even more scrutiny from policymakers around the world.
The iPhone maker announced plans to immediately begin rolling out end-to-end encryption optionality on most data stored in its iCloud, including photos, backup files, and content entered into the Notes app. The company already offers end-to-end encryption on iMessages sent between Apple devices.
The new feature, dubbed Advanced Data Protection, will be available to U.S. users by the end of the month, with global customers gaining access in early 2023. Apple’s Mail, Contacts, and Calendar apps will not be included in Advanced Data Protection because they aren’t technologically compatible.
Apple’s latest development allows privacy advocates and government authorities to rehash long-standing claims about the merits of end-to-end encryption. The security feature ensures that only device users and the recipients of messages and files sent by the user can access the data.
Privacy proponents believe end-to-end encryption delivers unparalleled protection from hackers, spies, and government snoops—a value that outweighs the benefits of law enforcement officials having the ability to access personal data. Many police agencies and some politicians, however, respond that end-to-end encryption hampers law enforcement authorities in their efforts to stop child sex abuse, drug trafficking, terrorism, and other crimes.
What’s most interesting about Apple’s announcement is the timing. The expansion of end-to-end encryption arrives amid a global debate over the government’s role in allowing or restricting the security feature.
The discussion hasn’t risen above a din in the U.S., where law enforcement cannot order tech companies to decrypt messages or files. Four Republican members of Congress sponsored separate bills in the House and Senate that would force tech firms to decode encrypted information in response to a court order, but neither piece of legislation went anywhere.
Lawmakers in Australia and Europe, however, have held vigorous deliberations in recent years about similar proposals targeting tech companies.
Legislators in the land Down Under, where citizens are more deferential to the government than in the U.S., passed a controversial bill in 2018 that allows law enforcement to gain access to previously encrypted communications. Critics of the legislation argued it was ill-advised and hastily drawn, though a committee composed of Australian lawmakers and intelligence officials largely backed the law following a review of its impact in late 2021.
“Agencies have made the case that these powers remain necessary to combat serious national security threats, and some of the worst fears held by industry at the time of passage have not been realized,” committee chair James Paterson said following the review.
Policymakers in the European Union and U.K. haven’t gone as far as their Australian counterparts, though they’ve spent the past few years steeped in similar debates.
A spate of terrorist attacks and the reported rise of child pornography crimes in Europe have heightened calls for a crackdown on encryption. At the same time, European officials have aggressively pursued policies designed to increase user privacy and undercut the powers of large tech companies.
The European Union has not enacted sweeping decryption laws, though member-states have various rules related to law enforcement and encryption on their books. U.K. legislators are debating the role of encryption in their landmark Online Safety Bill, which is still undergoing revisions following its introduction in mid-2021.
“On the face of it, existing legislation in Australia and looming legislation in the U.K. would seem to give those governments the power to tell Apple in those countries effectively not to do this,” Ciaran Martin, former chief of the U.K.’s National Cyber Security Centre, told the Wall Street Journal.
Understandably, Apple isn’t waiting around for lawmakers to settle their squabbles over encryption. As the democratic process plays out, Apple is once again delivering on its promise of privacy for customers, a key pillar in its ascendance to the world’s most valuable company.
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Sharing the wealth. The Pentagon awarded a $9 billion cloud computing contract to Amazon, Google, Microsoft, and Oracle, ending a protracted and contentious fight for the federal government’s business, the Associated Press reported Wednesday. The four companies will each complete parts of the Joint Warfighting Cloud Capability project, a yearslong undertaking to modernize the Pentagon’s military operations. Federal officials had awarded the entire contract to Microsoft during then-President Donald Trump’s administration, but the Pentagon canceled the award and rebid the project last year, citing a change in technological needs.
Even more problems for SBF. Federal authorities are investigating whether former FTX CEO Sam Bankman-Fried manipulated the market for TerraUSD and Luna, the linked cryptocurrencies that collapsed earlier this year, the New York Times reported Wednesday. Prosecutors in Manhattan are in the early stages of a probe examining whether Bankman-Fried’s large number of sell orders on TerraUSD was designed to boost a separate bet on the price of Luna falling, a source with knowledge of the matter told the Times. TerraUSD and Luna subsequently became worthless, triggering a broader selloff of cryptocurrencies that hastened the demise of FTX last month.
Sunny gets a baker’s dozen. Former Theranos executive Ramesh “Sunny” Balwani received 13 years in prison Wednesday for his role in defrauding the blood-testing company’s investors and patients, the Associated Press reported. The sentence is slightly longer than the 11-year prison term handed down last month to Balwani’s former business and romantic partner, Theranos founder Elizabeth Holmes. Prosecutors asked for a 15-year prison sentence, while Balwani’s lawyers sought a term of confinement of less than a year.
It’s half bad. Coinbase CEO Brian Armstrong expects his cryptocurrency exchange’s revenue will fall by 50% or more year over year in 2022 following a broad selloff of digital assets in recent months, Bloomberg reported. Armstrong had not previously provided a year-end outlook for the company, though his comments in an interview with Bloomberg suggested Coinbase’s 2022 revenue will come close to analyst estimates of about $3.2 billion. Coinbase shares are down 83% year to date.
FOOD FOR THOUGHT
Of two minds. As Fortune’s Lila MacLellan wrote last week, it’s not easy to make the co-CEO arrangement work at major corporations. Salesforce looked like it was navigating that tricky terrain with Marc Benioff and Bret Taylor sharing the top job, but the Wall Street Journal reported Wednesday that all was not well behind the scenes. In the months leading up to Taylor’s announcement last week of his imminent departure, the two executives increasingly butted heads over time management and the division of personnel oversight, sources told the Journal. The relationship was further complicated by Taylor’s position as chair of Twitter’s board, a role that required a larger-than-expected time commitment amid Elon Musk’s protracted takeover of the company.
From the article:
Mr. Benioff, who is also cofounder, became frustrated about how Mr. Taylor was spending his time, the people said. Among his concerns were whether Mr. Taylor was spending too much time in a new role as Twitter Inc.’s chairman, too much time with other CEOs and customers, and not enough time on Salesforce product and engineering, the people said.
While the two had worked well together, cracks started forming in recent months that created friction between the men, the people familiar with the matter said.
IN CASE YOU MISSED IT
A.I. luminaries expressed awe, and caution, at the technology’s breakthrough moment, by Alexei Oreskovic
Senate Banking Committee: Sam Bankman-Fried will be subpoenaed if he doesn’t agree to attend FTX hearing, by Leo Schwartz
‘If you’re in tech, buckle up—it’s gonna be a tough ride’: The analyst who says Big Tech’s layoffs show ‘a new reality’ sees ‘more cuts’ ahead, by Alena Botros
Lina Khan’s aggressive campaign against Meta is heading to trial—and Zuckerberg is expected to testify, by Barbara Ortutay and the Associated Press
Wordle dominates Google searches in 2022, by Chris Morris
I am an expert on diversity in mainstream media. Here’s why leaving Twitter helps the racists, by Marcus Ryder
BEFORE YOU GO
A question for the ages. Redditors really want to know if they’re the asshole. Fortune’s Chris Morris reported Friday that more Reddit users flocked this year to the hugely popular r/amitheasshole subreddit than any other community on the platform, according to company-produced data. The subreddit, billed as a “catharsis for the frustrated moral philosopher in all of us,” allows users to debate who’s in the wrong when everyday quandaries arise. The r/askreddit and r/worldnews subreddits trailed in second and third, respectively, while topics related to outer space and climate change saw huge jumps in interest, company officials said. In total, Reddit saw a 14% year-over-year increase in posts and 7% rise in comments.
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