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Old 03-03-21, 07:10 AM   #1
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Default Peer-To-Peer News - The Week In Review - March 6th, ’21

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March 6th, 2021

How a Chinese Website for Pirated TV Shows Became a Cultural Touchstone for Millennials
Nectar Gan

The website, also known as YYeTs.com, was how the 24-year-old film school student was able to watch hundreds of episodes of pirated American TV shows when he was growing up in northern China.

But the site — one of China's largest, longest-running and last-remaining destinations for pirated, subtitled foreign content — was shuttered on February 3 as part of a sweeping police clampdown on piracy. While the website is still live, none of its services work anymore.

"I was heartbroken when I found out," Liang told CNN Business. "I feel like there is one place fewer in China through which we can expand our horizons."

Police in Shanghai arrested 14 people they claim ran the website and app after a three-month investigation into suspected intellectual property infringement. At the time of its closure, Renren Yingshi had amassed over eight million registered users and was home to more than 20,000 pirated TV shows and movies. The site's operators made some 16 million yuan ($2.5 million) in the past couple of years from ads, subscription fees, and selling hard drives loaded with pirated content, according to police.

The crackdown was lauded by state media and intellectual property experts as a sign of China's resolve to enforce copyright protection — criticism over which has dogged Beijing for years.

But it also drew a wave of backlash from fans who, like Liang, had long relied on the site for uncensored foreign content.

An outpouring of support for Renren Yingshi dominated China's Twitter-like Weibo platform in the days after the crackdown. Some thanked the site for "opening a door for us to the world."

The public outcry came, at least in part, because of how tightly the Chinese government restricts access to foreign content. It is one of only four countries or regions, alongside North Korea, Syria and Crimea, that doesn't allow access to Netflix, the world's most-popular streaming platform, for example.

China also strictly limits how many foreign films can be screened in cinemas each year. And of the content that is allowed to air in the country, much is heavily censored.

For Chinese millennials, watching foreign shows and movies is not only a favorite pastime — it's an opportunity to learn about the world. And many of them say the roadblocks imposed by the Chinese government leave them with little choice but to turn to pirated websites, even though they are willing to pay for legitimate access to uncensored, foreign content.

While the demise of Renren Yingshi and the country's censorship crackdown suggests the status quo might not change, the reaction to its closure and the popularity of uncensored work shows that there remains a huge appetite for such content within China.

Founded in 2003 by a group of Chinese students in Canada, Renren Yingshi — a phrase that means "everyone's film and TV" — was born out of a desire to spread foreign TV shows and movies more widely within China.

Young, internet-savvy Chinese were drawn to foreign content as China reformed its economy and opened up to the world. They found that such films and shows offered an edgier, more diverse alternative to the heavily censored content produced at home — as well as a way to learn about other cultures and societies.

Getting access to that kind of content through legitimate means, though, is difficult in China.

Since the early 1990s, authorities have allowed just a few dozen foreign films to be screened in the country each year — only nine of the 26 Oscar best picture winners were screened publicly in China from 1994 to 2019, for example.

International streaming services, including Netflix, Hulu and Amazon Prime Video, have also been unable to crack the market. Netflix, for example, told shareholders in 2016 that the "regulatory environment for foreign digital content services" was "challenging" in China. A subsequent attempt to partner with a local company to distribute content failed.

The content that is allowed to air in China, meanwhile, needs to meet strict guidelines. Movies or shows with controversial themes — such as those that depict China in a bad light, portray taboo subjects like the 1989 Tiananmen Massacre, or feature LGBTQ storylines — are kept out entirely. And since China lacks a film rating system, any content approved by Chinese regulators is heavily edited to remove certain scenes, such as graphic sex or violence.

When the Oscar-winning Freddie Mercury biopic "Bohemian Rhapsody" was released in China in 2019, for example, any mention of the Queen singer's sexuality — as well as his AIDS diagnosis — was edited out.

And the American blockbuster fantasy drama "Game of Thrones," which built its popularity on graphic sex and violence, was censored so heavily on Chinese streaming giant Tencent Video that some viewers complained that it was turned into a staid "medieval European castle documentary."

"There were too many 'sensitive' scenes deleted that I could hardly understand the plot anymore -- it was so confusing," said a fan of the show who watched on Tencent Video. The fan asked to remain anonymous because she once helped translate shows for a website that featured pirated content, and she also spoke to CNN Business about that experience.

There's little indication that these rules may change. Under Chinese President Xi Jinping, tolerance for foreign ideas and values has declined drastically. Popular Western culture is seen by Beijing as a key risk for foreign infiltration that targets Chinese youth — making such content important for the government to control.

The sweeping restrictions have motivated fans of shows and movies that run afoul of censorship rules to subtitle them in Chinese and upload unauthorized copies online. They operate in loose networks of volunteer translators known as fansub groups.

Renren Yingshi was among the largest of these networks, exploding in popularity as American series like "Prison Break," "The Big Bang Theory" and "Gossip Girl" became smash hits in China.

Long before the latest crackdown, Renren Yingshi was running into trouble with authorities. In 2009, it was one of more than 100 Chinese websites shut down for "rectification" after the government issued rules that banned the dissemination of unapproved movies and TV shows on the Chinese internet.

At the time, Renren Yingshi vowed to give up its video downloading service, and in 2010 pivoted to translating open online courses offered by American universities. The strategy won the blessing of Chinese state media, which heralded the website as "a knowledge evangelist in the internet age."

That love-in didn't last. The website eventually resumed offering pirated shows, and its servers were shut down by Chinese regulators in 2014, not long after the Motion Picture Association of America included Renren Yingshi on a list of pirate sites. It eventually popped back up, and at one point even moved its servers to South Korea for a time as it continued to look for ways to stay operational.

Ultimately, Renren Yingshi's interest in making money might have led to its downfall. While it began as a volunteer endeavor, Renren Yingshi eventually started accepting advertisements on videos, and charged members to view its content.

"According to Chinese law, if copyright infringement was conducted for the purpose of making a profit, it is very easy to constitute a crime," said Xu Xinming, an intellectual property lawyer at Beijing Mingtai Law Firm.

Xu noted that in China, a business needs to make just a few thousand dollars in order to run afoul of copyright crime laws — well short of the millions police claim Renren Yingshi raked in.

It's not surprising, Xu says, that Beijing would want to go so hard against a platform with such a high profile. The government has worked harder over the last decade to address infringement, especially given Western accusations that copyright abuse runs rampant in the country.

In 2020 alone, Chinese authorities shut down more than 2,800 websites and apps offering pirated content and deleted 3.2 million links, according to the most recent data available from the National Copyright Administration of China.

'Using my love to generate power'

It's not clear when the case may be resolved, though copyright infringement results in a punishment of up to seven years in prison, depending on the severity of the violation. Police in Shanghai did not respond to a request from CNN Business for more information on the case.

No matter what happens to Renren Yingshi, though, it leaves behind a vast legacy of cultural exchange.

"Many friends around me have grown up watching American series. They gave us a lot of extra parameters in our way of thinking," said Lin, the Game of Thrones fan. She said she volunteered for a fansub group in high school called "Garden of Eden." "If you've had so much exposure to different cultures, races and people from different backgrounds since a young age ... it is easier for you to be able to see things from another perspective."

She said she was "using my love to generate power" — a phrase commonly cited by volunteers who want to emphasize that they are motivated by their passion for the shows, and not money.

"Every Friday, when the latest episode came out, the timer was on," said Lin, who translated episodes of the American supernatural teen drama "The Vampire Diaries," as well as sitcoms "The Big Bang Theory" and "Two Broke Girls."

Someone in the United States or Canada would record the show and send it along with English subtitles. Teams would then divide the episode into 10-minute segments and assign them to translators.

"There was a lot of stuff I needed to look up," said Lin, adding that it took her about two hours to translate 10 minutes of video. "Sometimes the characters would tell a joke that I couldn't get, and I had to search for it online."

"It was difficult because I had to use [Chinese search engine] Baidu within the Great Firewall," she said, referring to the government's sprawling internet censorship apparatus.

The work of fansub volunteers has effectively acted as a fourth wave of "translation activity that has had a huge impact on Chinese culture," wrote Yan Feng, a professor of Chinese language and literature at Fudan University in Shanghai, in a widely shared Weibo post on February 3. By comparison, Yan said the other three major waves included the translation of Buddhist texts in ancient China, the translation of Western literature and social science works during the late Qing dynasty, and the translation of modern works on humanities and social sciences after the Cultural Revolution.

For many Chinese millennials, fansub work is also a way to learn about the world. Many groups don't just do translation work — they also add footnotes explaining background and context for certain dialogue to help Chinese audiences better understand historic, political or cultural references.

"I think it's a good thing for a child to be exposed to different cultures and different ways of thinking growing up," said Joy Tian, a 23-year-old English teacher in Beijing. She said she was struck by the individualistic values at the center of many Western series and films, having grown up in a culture that emphasizes collectivism.

Xu, the Beijing-based lawyer, said it is up to the public to "do some self-reflection" following the crackdown on Renren Yingshi.

"There's no free lunch in this world, and they shouldn't download or stream pirate films and TV shows anymore," he said.

But Tian stressed that she'd be willing to pay for the shows if they were uncensored. After all, she has paid for licensed American shows on legitimate Chinese streaming sites before — but she couldn't get past all of the editing.

Even Xu said that Chinese fans will likely continue to be tempted to watch pirated shows. People who watch such content and don't profit off of it have not, traditionally, been punished in China. And if the government doesn't ease up on its rules on content, the demand won't go away.

"This is indeed a problem. And as the government steps up its crackdown on copyright infringement, this problem will only become more acute," Xu said. "With pirated access cut off, [the government and companies] should compensate by broadening legal access."

The Sinking City Dev Accuses Publisher of Pirating the Game and Tricking Steam into Uploading it

Long-running dispute gets even messier.
News by Wesley Yin-Poole

The developer of The Sinking City has accused its publisher of pirating the game and tricking Steam into uploading it for sale.

In the latest development in Frogwares' long-running dispute with Nacon, the Ukrainian studio issued a blog post outlining a raft of accusations against its French publisher.

Over the weekend, Frogwares recommended gamers do not download its H. P. Lovecraft-inspired horror adventure from Steam after it popped up on Valve's platform last month.

Frogwares has not created the version of @thesinkingcity that is today on sale on @Steam. We do not recommend the purchase of this version. More news soon.
— Frogwares (@Frogwares)
February 26, 2021

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Frogwares' dispute with Nacon dates back to 2019, when it filed a lawsuit alleging the company tried to claim copyright of The Sinking City after its release, withheld milestone payments, and owed the developer around €1m in unpaid royalties.

Then, in August 2020, Frogwares pulled The Sinking City from sale. In October 2020, the Paris Court of Appeal ruled Frogwares acted unlawfully in doing so, and ordered the developer to refrain from any further action that would affect its contract with Nacon until the dispute between the two parties was resolved.

This decision opened the door to The Sinking City's return to Steam, and last week Nacon published the game.

Now, Frogwares has accused Nacon of cracking, hacking and changing the game's code and content, and "illegally" uploading the game to Steam. Frogwares has now threatened new legal action against Nacon. Nacon has denied any wrongdoing.

"This last action was the straw that broke our backs," Frogwares said. "It's corporate bullying, and incompetent hacking, at its finest."

Frogwares also published a video outlining its complaint:

Frogwares said Nacon's lawyers had tried to force the developer to deliver a new master version of the game, but so far it hasn't budged.

According to Frogwares, Nacon bought a version of The Sinking City from digital retailer Gamesplanet, tinkered with it, and uploaded it to Steam. This, Frogware claimed, was a breach of contract.

Frogwares investigated the version currently on Steam, and found it had been altered compared to the original allegedly bought from Gamesplanet.

"In order to make changes Nacon had only one way: to decompile or hack the game using a secret key created by Frogwares since the totality of the game's content is archived with an Epic Unreal Engine encryption system," Frogwares said.

"To be clear this is hacking and when hacking has the purpose to steal a product and make money with it, it's called piracy or counterfeiting. In order to achieve this goal, programmers with serious skills need to be involved. This is not DIY work by inexperienced people, this is done by programmers who know Unreal engine well.

"The first step of Nacon was to obtain the key of encryption, then go through the config files and modify them (by the way, we are aware how they got their hands on the encryption key, and we are going to submit our findings to the court). Also add or change some files and then recompile the game like nothing happened and release it."

Frogwares goes on to accuse Nacon of stripping the game of identifiers, including watermarks, that would reveal its origin on Gamesplanet. Differences include the replacement of the Gamesplanet logo with the Nacon logo, the removal of the Gamesplanet logo from the loading screen, the removal of the advertisement of Sherlock Holmes Chapter One - another Frogwares game - from the lower left of the screen, the removal of the distribution platform watermark from the lower right, and the removal of the "more games" menu option.

"This way Nacon 'anonymised' the game master, making it impossible for the average person to know what was really inside and where it is coming from, but also to prevent any exploitation, lawful or not, to be tracked," Frogwares said.

"We believe Nacon did this to hide the fraudulent exploitation of the game on Steam but also on other portals which they may be planning to send the game to. Nacon wants Frogwares or anyone, including the French Justice, to never know the true scope of their exploitation of the game."

It didn't take long for players who bought The Sinking City from Steam last week to discover it was missing some features. Frogwares said this new version deleted achievements, "thus removing a key feature of the Steam community."

Frogwares also accused Nacon of taking content without permission.

"Nacon pirated the Deluxe version of the game," Frogwares said. "This version features content that was developed after the original release of The Sinking City by Frogwares. Nacon didn't pay for this content or even tried to discuss it with us. Nacon is therefore stealing additional content of our game that is outside the contract we had with them."

Nacon insisted the version of The Sinking City on Steam contains only the base game, without any additional content.

"Let it be made extremely clear here, that we still fully trust Steam and Gamesplanet," Frogwares continued.

"We believe that the Gamesplanet version was purchased legally by Nacon through the Gamesplanet site and then hacked. Nacon then submitted this version to Steam who were in no way informed of the game's pirated state. This version was then offered by Nacon to all the listed legitimate distribution sites without them being informed that this is a pirated version."

Frogwares even claimed to know who, exactly, was behind the "hacking" of its game: a member of staff at Neopica, the Belgian studio behind the Hunting Simulator games - and subsidiary of Nacon.

"Nacon has proved they are willing to do anything possible to serve their interest, including illegal actions," Frogwares concluded.

"Nacon ignored the decision of the Justice and bypassed them. Nacon pirated The Sinking City in order to deceive their partners, Steam in the first place."

The legal action continues, with no end in sight. And the fight over The Sinking City has affected consoles, too. The PlayStation 5 version, which was self-published by Frogwares on 19th February 2021, does not offer a platform upgrade for the PlayStation 4 version, which was published by Nacon, due to the legal battle.

"Communication on further legal matters will be provided at the appropriate time and through the appropriate channels," Frogwares told Eurogamer in a follow-up statement.

Nacon has tonight issued a statement in response to Frogwares' tweet, accusing the developer of "playing the victim".

Here's Nacon's statement:

"For the release of The Sinking City on Steam, published by Nacon, Frogwares posted on Twitter urging players not to buy it. We regret that Frogwares persists in disrupting the release of the Sinking City. It was Frogwares who came to Nacon to request financing for the development of the game, and to date, more than 10 million euros have been paid to Frogwares by Nacon. It was Frogwares that relied on our marketing and promotion teams, representing thousands of hours of work and several million euros worth of investment. Now that the game has been fully developed, and published, largely thanks to Nacon's money and work, Frogwares would like to revise the terms of the contract to their sole advantage. It's easy to play the victim, but all we seek is that Frogwares respect its commitments both in the contract and as demanded by the courts.

"In regards to feedback on the release of the Sinking City on Steam, this is an official and complete version. However, due to a lack of cooperation with Frogwares, we are unable to integrate Steam-specific features (cloud saving/achievements). Thus, this version contains only the base game, without any additional content. Despite this, we have organised the release so that fans on Steam can enjoy the game.

"We sincerely would have preferred that our relationship with Frogwares remain cooperative and respectful, as is the case with all of the studios whose titles we publish.

"We hope that many of you will continue to play The Sinking City, and may your adventures in Oakmont be a lot of fun."

India Introduces New Rules to Regulate Online Content
Sheikh Saaliq

India on Thursday rolled out new regulations for social media companies and digital streaming websites to make them more accountable for the online content shared on their platforms, giving the government more power to police it.

The Information Technology Ministry said the new regulations would require social media platforms like Facebook and Twitter to swiftly erase content authorities deem unlawful. The regulations include a strict oversight mechanism that would allow the government to ban content affecting “the sovereignty and integrity of India.”

The regulations would also require social media companies to assist investigations by India’s law enforcement agencies. They were announced as debate swirls over free speech and the suspension by Twitter of some Indian accounts linked to farmers’ protests after regulators ordered them to be blocked.

Information Technology Minister Ravi Shankar Prasad said the new regulations were a “soft touch progressive institutional mechanism” required for the “security and sovereignty of India, public order, and rape or any other sexually explicit material.”

They will require social media companies to remove illegal content as quickly as possible, but within no more than 36 hours after they receive a government or legal order.

The new rules also require social media platforms to appoint what the government calls chief compliance and grievance officers to handle complaints from law enforcement agencies. These officers should be Indian citizens and must send monthly compliance reports to the government.

“The government welcomes criticism of the government and the right to dissent, but it is very important that the users must be given a forum to raise their grievances against the abuse and misuse of social media,” Prasad said during a televised news conference.

Social media messaging sites must also disclose to the government the original source of any “mischievous information.” It was not immediately clear if this would mean messaging platforms like WhatsApp, Signal and others would have to break end-to-end encryption in India in order to comply.

Apar Gupta, executive director of India Freedom Foundation, a digital rights advocacy group, said the government asking social media platforms to give details about originators of information “undermines user rights and can lead to self-censorship if users fear that their conversations are no longer private.”

The new regulations are to take effect within three months. They also will apply to digital streaming platforms like Netflix and Amazon Prime, which will have to set a “classification rating” to describe the content on their platforms.

Twitter found itself in a standoff with the government earlier this month when it refused to fully comply with a government order to remove some accounts, including those of news organizations, journalists, activists and politicians, citing its “principles of defending protected speech and freedom of expression.”

The government said the accounts — unspecified in number — were using provocative hashtags to spread misinformation about massive farmer protests that have rattled Prime Minister Narendra Modi’s government.

Twitter’s actions appeared to irk Modi’s government, which over the years has sought to tighten its grip over social media, particularly Twitter and Facebook. It served Twitter a non-compliance notice and threatened its officials with a fine and imprisonment of up to seven years for violating the order.

Modi himself has an active Twitter account, @narendramodi, with more than 66 million followers.


Associated Press writer Krutika Pathi contributed to this report.

Europeans Get ‘Right to Repair’ for Some Electrical Goods
Frank Jordan

Companies that sell refrigerators, washers, hairdryers or TVs in the European Union will need to ensure those appliances can be repaired for up to 10 years, to help reduce the vast mountain of electrical waste that piles up each year on the continent.

The “right to repair,” as it is sometimes called, comes into force across the 27-nation bloc Monday. It is part of a broader effort to cut the environmental footprint of manufactured goods by making them more durable and energy efficient.

“This is a really big step in the right direction” said Daniel Affelt of the environmental group BUND-Berlin, which runs several “repair cafes” where people can bring in their broken appliances and get help fixing them up again.

Modern appliances are often glued or riveted together, he said. “If you need specialist tools or have to break open the device, then you can’t repair it.”

Lack of spare parts is another problem, campaigners say. Sometimes a single broken tooth on a tiny plastic sprocket can throw a proverbial wrench in the works.

“People want to repair their appliances,” Affelt said. “When you tell them that there are no spare parts for a device that’s only a couple of years old then they are obviously really frustrated by that.”

Under the new EU rules, manufacturers will have to ensure parts are available for up to a decade, though some will only be provided to professional repair companies to ensure they are installed correctly.

New devices will also have to come with repair manuals and be made in such a way that they can be dismantled using conventional tools when they really can’t be fixed anymore, to improve recycling.

Each year, Europeans produce more than 16 kilograms (35 pounds) of electrical waste per person. About half of that junk is due to broken household appliances, and the EU recycles only about 40% of it, leaving behind huge amounts of potentially hazardous material.

German Environment Minister Svenja Schulze said that in a next step, manufacturers should have to state how long a product is expected to work for and repair it if it breaks down earlier. This would encourage companies to build more durable products, she said.

“In the repair cafes we see a lot of devices that broke shortly after the warranty expired,” said Affelt — a phenomenon that has prompted some environmentalists to accuse manufacturers of designing their devices with planned obsolescence.

Knowing an appliance will really last for a decade might prompt consumers to choose products that are more durable or can be easily fixed, he said.

“For the vast majority of devices, repair is the right choice,” said Affelt, adding that the exception might be old, inefficient refrigerators that can contain powerful greenhouse gases which fuel climate change.

In a next step, environmentalists and consumer rights groups want the “right to repair” expanded to include smartphones, laptops and other small electrical devices.

Responding to growing demand, Apple last year announced it would start providing training and spare parts to certified independent repair stores fixing Mac computers, not just iPhones.

Right to repair bills have been introduced in several U.S. state legislatures, attracting bipartisan support, though as yet there is no nationwide measure in force.

Sweden has gone further than most of the EU, making repairs and spare parts subject to lower value-added tax.

The bloc’s ecological design directive — of which the right to repair requirement is a part — will also revise existing energy labels that describe how much electricity washers and other household devices consume. The new seven-step scale from A to G will be complemented by a QR code that provides consumers with further information, such as how loud the devices are.

A Quantum Computer Just Solved a Decades-Old Problem Three Million Times Faster than a Classical Computer

Using a method called quantum annealing, D-Wave's researchers demonstrated that a quantum computational advantage could be achieved over classical means.
Daphne Leprince-Ringuet

Scientists from quantum computing company D-Wave have demonstrated that, using a method called quantum annealing, they could simulate some materials up to three million times faster than it would take with corresponding classical methods.

Together with researchers from Google, the scientists set out to measure the speed of simulation in one of D-Wave's quantum annealing processors, and found that performance increased with both simulation size and problem difficulty, to reach a million-fold speedup over what could be achieved with a classical CPU.

The calculation that D-Wave and Google's teams tackled is a real-world problem; in fact, it has already been resolved by the 2016 winners of the Nobel Prize in Physics, Vadim Berezinskii, J. Michael Kosterlitz and David Thouless, who studied the behavior of so-called "exotic magnetism", which occurs in quantum magnetic systems.

The Nobel Prize winners used advanced mathematical methods to describe, in the 1970s, the properties of a two-dimensional quantum magnet, which shed light on the strange – or "exotic" – states that matter can take on.

Instead of proving quantum supremacy, which happens when a quantum computer runs a calculation that is impossible to resolve with classical means, D-Wave's latest research demonstrates that the company's quantum annealing processors can lead to a computational performance advantage.

"This work is the clearest evidence yet that quantum effects provide a computational advantage in D-Wave processors," said Andrew King, director of performance research at D-Wave.

D-Wave's processors are based on quantum annealing technology, which is a quantum computing technique used to find solutions to optimization problems. While some argue that the scope of the problems that can be resolved by the technology is limited, quantum annealing processors are easier to control and operate than their gate-based equivalents, which is why D-Wave's technology has already reached much higher numbers of qubits than can be found in the devices built by big players like IBM or Google.

To simulate exotic magnetism, King and his team used the D-Wave 2,000-qubit system, which was recently revised to reduce noise, to model a programmable quantum magnetic system, just like Berezinskii, Kosterlitz and Thouless did in the 1970s to observe the unusual states of matter. The researchers also programmed a standard classical algorithm for this kind of simulation, called a "path-integral Monte Carlo" (PIMC), to compare the quantum results with CPU-run calculations. As the numbers show, the quantum simulation outperformed classical methods by a margin.

"What we see is a huge benefit in absolute terms," said King. "This simulation is a real problem that scientists have already attacked using the algorithms we compared against, marking a significant milestone and an important foundation for future development. This wouldn't have been possible today without D-Wave's lower noise processor."

Equally as significant as the performance milestone, said D-Wave's team, is the fact that the quantum annealing processors were used to run a practical application, instead of a proof-of-concept or an engineered, synthetic problem with little real-world relevance. Until now, quantum methods have mostly been leveraged to prove that the technology has the potential to solve practical problems, and is yet to make tangible marks in the real world.

In contrast, D-Wave's latest experiment resolved a meaningful problem that scientists are interested in independent of quantum computing. The findings have already attracted the attention of scientists around the world.

"The search for quantum advantage in computations is becoming increasingly lively because there are special problems where genuine progress is being made. These problems may appear somewhat contrived even to physicists," said Gabriel Aeppli, professor of physics at ETH Zürich and EPF Lausanne.

"But in this paper from a collaboration between D-Wave Systems, Google, and Simon Fraser University, it appears that there is an advantage for quantum annealing using a special purpose processor over classical simulations for the more 'practical' problem of finding the equilibrium state of a particular quantum magnet."

D-Wave, however, stayed clear of claiming quantum advantage, which happens when a quantum processor can demonstrate superiority over all possible classical competition; King stressed that it is still possible to design highly specialized algorithms to simulate the model once the properties of the model are already known.

The real significance of the experiment lies in the proof that a computational advantage can already be achieved using existing quantum methods to solve a valuable materials science problem.

"These experiments are an important advance in the field, providing the best look yet at the inner workings of D-Wave computers, and showing a scaling advantage over its chief classical competition," said King. "All quantum computing platforms will have to pass this kind of checkpoint on the way to widespread adoption."

Although D-Wave's 2,000-qubit system was used for the research due to the technology's lower noise rates, the company recently released a 5,000-qubit quantum processor, which is already available for programmers to build quantum applications.

From improving the logistics of retail supply chains to simulating new proteins for therapeutic drugs, through optimizing vehicles' routes through busy city streets, D-Wave is currently counting 250 early quantum annealing applications from various different customers.

In Defense of Dumb TVs
Nirav Patel

Smart TV was once a term reserved for high end televisions with built-in streaming capabilities. The combination of massive reductions in panel costs, decreasing costs for embedded compute, and the ready availability of content platforms from Google, Roku, and others has made the term irrelevant. Almost every TV you can buy today has smarts built-in. There have been some fantastic outcomes of that, like breaking up the traditional channel bundle and increasing access to more personalized and niche content.

There have been some serious negatives too. Decreasing prices and decreasing margins on TVs combined with long replacement cycles have driven companies to take advantage of built-in smarts to enable a new revenue source: user data and advertising. As of Q2 2020, Vizio and HiSense are the only major brands making TVs that ship without advertising enabled in their UIs. Sony, Samsung, LG, and others have ads enabled by default, most of which can’t be disabled. All of the above brands have built capability to aggregate data on what content is being viewed, and again, not all of them have the option to disable that. TVs smart enough to help you are also smart enough to harm you. Incredibly, Samsung even recommends that you run virus and malware checking on your TV regularly.

An obvious way out of this as a consumer is to buy a TV without smarts built in (a “dumb TV”) and then add your own content source that is privacy focused like Apple TV or that you have full control over like Kodi. This is something we personally looked for when we were buying a display for the conference room at Framework’s headquarters. Amazingly enough though, we found that none of the major consumer TV brands make basic “dumb” displays anymore. There are options in the commercial space like NEC’s commercial displays, but they cost substantially more than the consumer-focused alternatives.

We nearly gave in and bought a typical smart TV, and then we stumbled on Sceptre’s TV lineup. You’ll notice that they have a range of extremely similar looking sets that have minor specification and weight differences. Our best guess is that they source LCDs from panel manufacturers that are either excess stock or fail the quality specifications set by other brands and build extremely minimal TVs around them. We haven’t noticed any quality issues on our Sceptre set, but for our use case of showing slides and spreadsheets, it wouldn’t have mattered anyway. The product was perfect for us: a dumb TV that as an added bonus reduces e-waste by using panels that would otherwise be scrapped.

It’s an interesting business model, and one that is consumer friendly, environmentally considerate, and economically sound. That is a powerful combination that we need to see across all of consumer electronics.

From Oct 2013

75 Years Ago, 'War Of The Worlds' Started A Panic. Or Did It?
Mark Memmott

We interrupt this blog to bring you a special bulletin:

Martians have invaded New Jersey!

OK, as far as we know that hasn't happened.

But we wanted to issue that faux alert because 75 years ago tonight, as our friend Korva Coleman pointed out on the NPR Newscast, Orson Welles and his troupe of radio actors interrupted the Columbia Broadcasting System's programming to "report" that our planet had been invaded.

Ever since then, it's been accepted as fact that the broadcast scared the dickens out of many Americans.

Morning Edition, for instance, reported in 2005 that "listeners panicked, thinking the story was real." Many supposedly jumped in their cars to flee the area of the "invasion."

Just this past weekend, our colleagues at Radiolab devoted their very first live hour to a "deep dive into one of the most controversial moments in broadcasting history: Orson Welles' 1938 radio play about Martians invading New Jersey."

According to Radiolab, about 12 million people were listening when Welles' broadcast came on the air and "about 1 in every 12 ... thought it was true and ... some percentage of that 1 million people ran out of their homes."

"That constitutes a major freakout," Radiolab says.

Well, Slate has a different opinion. "The supposed panic was so tiny as to be practically immeasurable on the night of the broadcast," it concludes. According to Slate:

"Far fewer people heard the broadcast — and fewer still panicked — than most people believe today. How do we know? The night the program aired, the C.E. Hooper ratings service telephoned 5,000 households for its national ratings survey. 'To what program are you listening?' the service asked respondents. Only 2 percent answered a radio 'play' or 'the Orson Welles program,' or something similar indicating CBS. None said a 'news broadcast,' according to a summary published in Broadcasting. In other words, 98 percent of those surveyed were listening to something else, or nothing at all, on Oct. 30, 1938. This miniscule rating is not surprising. Welles' program was scheduled against one of the most popular national programs at the time — ventriloquist Edgar Bergen's Chase and Sanborn Hour, a comedy-variety show."

Slate also argues that there's no data to support the idea that many radio listeners heard about the broadcast and tuned in during it. And it points out that "several important CBS affiliates (including Boston's WEEI) pre-empted Welles' broadcast in favor of local commercial programming, further shrinking its audience."

So how did the story of the "panic" grow over the years? Slate blames newspapers, which allegedly "seized the opportunity presented by Welles' program to discredit radio as a source of news. The newspaper industry sensationalized the panic to prove to advertisers, and regulators, that radio management was irresponsible and not to be trusted."

Radiolab isn't the only news outlet marking the 75th anniversary, of course. There's also this report from PBS-TV's American Experience, which says that "although most listeners understood that the program was a radio drama, the next day's headlines reported that thousands of others plunged into panic, convinced that America was under a deadly Martian attack."

So which was it, mass panic or hyped-up hysteria? Something in between? This blogger recalls his father saying the broadcast went mostly unnoticed in the quiet hills of Western New York State.

Any other first- or second-hand memories are welcome in the comments thread.

SpaceX Mars Prototype Rocket Nails Landing for the First Time, But Explodes on Pad
Jackie Wattles

A SpaceX rocket prototype, known as SN10, soared over South Texas during test flight Wednesday before swooping down to a pinpoint landing near its launch site. Approximately three minutes after landing, however, multiple independent video feeds showed the rocket exploding on its landing pad.

SpaceX's SN10, an early prototype of the company's Starship Mars rocket, took off around 5:15 pm CT and climbed about six miles over the coastal landscape, mimicking two previous test flights SpaceX has conducted that ended in an explosive crash. Wednesday marked the first successful landing for a Starship prototype.

"We've had a successful soft touch down on the landing pad," SpaceX engineer John Insprucker said during a livestream of the event. "That's capping a beautiful test flight of Starship 10."

It was unclear what caused the rocket to explode after landing, and the SpaceX livestream cut out before the conflagration.

He added that SpaceX has several other prototypes already in production and the next, SN11, will be ready to roll out for another test flight 'in the near future."

SpaceX's first launch attempt on Wednesday, around 3 pm CT, was aborted at the last tenth of a second. SpaceX CEO Elon Musk said in a tweet that the abort was triggered by pre-set standards around the rocket's thrust, which Musk described as "slightly conservative." He added that the company would increase the rocket's thrust limit, giving the rocket more wiggle room for getting a go-ahead for liftoff. The company then recycled the SN10's fuel ahead of the second, successful attempt.

Insprucker, who hosted the company's webcast of the launch on Wednesday, said that the primary goal of the test was to gather data on how the vehicle's flaps would control the Starship prototype as it plummets back to the Earth.

Musk first explained Starship's intended landing method during a September 2019 media event. He billed it as a unique maneuver that would see the rocket dive back through the air with its belly pointed toward the Earth as its four fins shift slightly to keep it steady. It's a maneuver that Musk said is intended to mimic how a skydiver would fall through the air, rather than the straight vertical descent to Earth that SpaceX's Falcon 9 rockets employ when they come in for landings.

Perfecting the belly-flop landing maneuver is essential to "enable a fully reusable transportation system designed to carry both crew and cargo on long-duration, interplanetary flights and help humanity return to the Moon, and travel to Mars and beyond," according to the company's website.

SpaceX intends to use Starship for a variety of purposes, including shuttling paying customers between cities at breakneck speeds, potentially aiding NASA's Moon landing efforts, and, eventually, launching cargo and human missions to Mars.

Starship is still in the early stages of development. A full-scale prototype has yet to be constructed. SpaceX has not yet begun publicly testing Super Heavy, a gargantuan rocket booster that will be needed to propel the Starship to Earth's orbit or beyond.

Musk said during a recent interview with podcast host Joe Rogan that he expects Starship will be conducting regular flights by 2023, and he hopes the vehicle will reach orbit by the end of this year. It's not clear if SpaceX will hit that deadline. The aerospace industry, and Musk in particular, is notorious for announcing projects that take far longer — and tally much higher expenses — than first anticipated.

SpaceX Launches 60 New Starlink Satellites, While Starship Moves Closer to Being Able to Launch up to 400 at a Time
Darrell Etherington

SpaceX has launched another batch of its Starlink satellites — the usual complement of 60 of the low Earth orbit spacecraft, which will join the more than 1,000 already making up the existing constellation. This is the fifth launch of Starlink satellites for SpaceX this year, and the twentieth overall.

Earlier this year, SpaceX opened up Starlink access to anyone in a current or planned service area via a pre-order reservation system with a refundable up-front deposit. The company aims to continue launches like this one apace throughout 2021 in order to get the constellation to the point where it can serve customers over a much larger portion of the globe. SpaceX COO and President Gwynne Shotwell has previously said that the company expects it should have coverage over much of the globe at a constellation size of around 1,200 satellites, but the company has plans to launch more than 30,000 to fully build out its network capacity and speed.

While SpaceX is making good progress on Starlink with its Falcon 9 launcher, it’s also looking ahead to Starship as a key driver of the constellation’s growth. Starship, SpaceX’s next-generation launch vehicle currently under development in South Texas, will be able to deliver to orbit 400 Starlink satellites at a time, and it’s also being designed with full reusability and fast turnaround in mind.

The ability to launch more than six times as many satellites per mission would help SpaceX a lot in terms of the speed with which they can deploy the Starlink network, as well as the overall cost of the endeavor — assuming their cost projections about Starlink’s general affordability are even close to accurate once it becomes a high-volume production rocket. That’s definitely still at least a few years off, but SpaceX did mark a milestone on Wednesday that bodes well for its chances of making that happen.

The company’s latest Starship prototype performed its most successful test launch to date on Wednesday, taking off from SpaceX’s Boca Chica, Texas development site and flying to around 32,000 feet before executing a “flop” maneuver and then reorienting itself for a soft vertical landing. The test rocket also blew up after sitting on the pad for just under 10 minutes, but despite that spectacular ending, the test proved out a lot of the basic engineering work that SpaceX needs to make Starship a reality.

Starlink is a huge, multi-year effort, so even if Starship is still a few years away from high-volume production and flight, it should still have a significant impact on the project overall. And Starlink, once operational and fully deployed, will require regular maintenance — individual satellites in the network are only really designed to be operational for up to five years max, with regular replacements required to keep things running smoothly.

Altice USA CEO Says Cable TV Will Die and Broadband and Wireless Companies Should Merge
Alex Sherman

Key Points

• Altice USA CEO Dexter Goei questions the future of cable providers providing bundles of video.
• Goei says T-Mobile would be a good candidate to merge with a U.S. cable provider.
• Goei says U.S. cable providers shouldn't be responsible for disinformation on networks.

When French telecommunications company Altice acquired U.S. cable companies Cablevision and Suddenlink, Chairman Patrick Drahi made a bold statement: Altice USA would rival Comcast and Charter in size, becoming one of the three dominant U.S. cable operators.

Fast forward nearly six years, and Altice USA has about 5 million customer relationships, compared with about 31 million each for Comcast and Charter. (Altice USA did announce a $310 million acquisition of Morris Broadband on Monday, which will give it about 36,000 more customers.)

CEO Dexter Goei explained to CNBC what prevented Altice USA's rapid expansion, why he thinks cable and wireless will eventually merge in the U.S., and why it's only a matter of time before cable TV becomes extinct.


(This interview has been lightly edited for length and clarity.)

Alex Sherman, CNBC: It's been more than five years since Altice completed its deal to buy two US cable companies: Suddenlink and Cablevision. Altice's Chairman, Patrick Drahi, said at the time, "The two leaders, Comcast and Charter, will not be able to buy anything because of their size. So we will have an open boulevard ahead of us. If I buy if I buy five small operators, I can be as big as Time Warner Cable," which, of course, doesn't exist anymore. How many customer relationships do you guys have now?

Dexter Goei, Altice USA CEO: We have just about five million.

About five million. So you're not as big as Time Warner Cable, which had about 12 million at the time. And I'm not sure that that comment about Charter and Comcast not being able to buy anything else is still correct. What happened between then and now? Did anything surprise you in the landscape that made Patrick's comments seem a little bit out in front of his skis?

The reality is there's been nobody selling, nobody of size — of any credible size. And so with all the goodwill that we have and the expertise and the things that we think we can do — probably slightly better than some of our peers in acquiring businesses — we haven't had the opportunity to show our stripes again of anything of meaningful size. The biggest transaction was something that that Cable One just acquired for a couple of billion. And that was very specific to to certain regions that we're not in.

Why did that stop? Because at the time it seemed like everyone was selling. Charter bought Bright House and Time Warner Cable and you guys bought Suddenlink and Cablevision, all within a couple years. And it just seemed like there was this machine toward consolidation and then seemingly everything stopped. Why did that happen?

I don't know, other than what's clear is most of the existing current owners of other assets out there that are not ourselves, Charter and Comcast, including Cox, by the way, are owned by families that have been in the cable business pretty much since the 70s, when cable franchises were being allocated and cable networks were being built.

And that's pretty much across the U.S. People have been owners for 10, 20, 30 years, more. And if you speak to a lot of these people they all say the same thing, which is, one, we like the business. Number two is we understand it's created a lot of value, and we don't need the money. And so we're just going to continue to do what we do. And I think they very much like being pioneers in their respective communities. Your cable operator, particularly some of the smaller cable operators, are really big mainstays of the business community. And so all of that makes sense if you really don't need the money and don't know what to do with the money. These businesses are generating a tremendous amount of free cash flow. And so, yes, you could probably sell at five billion. But if you're getting whatever, you know, three or four hundred million of dividends every year, it's not like it's not like there's anything else to do.

Did you not know that five years ago? The owners are the same.

We were able to unlock [Cablevision founder] Chuck Dolan. That was the asset that everyone had been trying to unlock for a very long time. And Time Warner was for sale, and we believe that if we had already cleared regulatory in the US, we would have won that asset, and then we bought Suddenlink. So we saw three sizable assets -- one mega asset and two other smaller ones -- come to market. So our belief was if everyone is selling, then we would see a follow through of a lot more families selling. But it all stopped. It literally just stopped there.

So what now? What's the path forward now? Because you made an offer to buy Atlantic Broadband out of Cogeco, and that was rejected. Along the theme you just described, it seemed like they were not all that interested. What's the path forward?

The path forward is very simple, which is we're focused on our organic operations. We are very focused on building out our footprint, more upgrading on fiber to the home, which we find to be a fantastic opportunity to drive revenues and stickiness among our customers, and we'll look for smaller M&A to the extent that there's not larger M&A available. In the absence of that, all of our free cash flow goes back to buying back our shares because we continue to trade at close to a 10% free cash flow yield when our debt complex trades in the 3s. So we've got kind of a six to seven hundred basis points difference between our cost of equity and our cost of debt. And so we'll continue to retire and invest in our shares to the extent that we can't buy other things. Cable aside, we've looked at wireless businesses as well. We've looked at ad tech businesses as well. So we'll continue to look at accretive things. The best use of our capital always is M&A, but we have to find things that are interesting to buy.

Let's talk about wireless. In Europe, Altice and other companies own both wireless and cable assets. While we've seen cable companies get into wireless using spectrum sharing agreements in this country —- you do this with Altice Mobile that uses what's now T-Mobile's network, used to be Sprint — we haven't seen a merger between a cable company and a wireless company in the U.S. Is that where we're ultimately heading?

I have been saying that for the last couple of years. It just doesn't make any sense not to, purely from an operational synergies, from a capital allocation synergies, from a branding synergies standpoint, and clients ultimately — when they do have more and more services from the same provider — the stickiness is better. It does have real churn benefits. That's the reason why cable has gone into into the mobile business.

But we all collectively have gone into a mobile business, which maybe has good churn benefits, but economically is not that attractive. Renting someone else's network fundamentally always is going to be reduced economics relative to owning and operating your own network. And so if it doesn't happen this year, that is clearly something that we expect to go forward.

Now, AT&T is focused on building out more fiber. Verizon is building out more fiber even for just their 5G aspirations. And then T-Mobile has as a great mid-band strategy on 5G that it would make sense for them to be probably a good partner for one of the large cable operators.

From a regulatory standpoint, do you feel like the United States is in the environment where one of those deals can get done? Does it have to be T-Mobile because they're the smallest of the three? Can you imagine a world where Comcast and Verizon would be allowed to merge?

Never say never, right? I think the last four years have taught us to no longer be in the M&A prediction business. So I'm not in the prediction business.

But what I can say is that strategic transactions where you have different services, I don't understand why that should not be something that should be allowed by the antitrust division. Obviously, you know, the Fios element of Verizon could be very problematic from an antitrust standpoint for Comcast in certain of its areas. But I'm sure there are there are buyers for that asset -- including ourselves, by the way, and probably Charter and other people.

I do believe that consolidation among fixed and wireless makes a lot of sense. There's consolidation in every other developed country in the world already, right? So it just doesn't make sense that we're the exception.

So outside of that, if you just took Verizon wireless and Comcast fixed, I don't know why that could not be something that the regulators would view as attractive. It could really drive better performance for consumers and better pricing.

One of the limitations on doing a wireless deal for Altice USA is you only have five million customer relationships. You're not a national player.

So, we like wireless in itself, and we think we're good wireless operators of infrastructure, but if we acquired a national wireless provider, that would be a separate investment thesis then trying to do a quad play with Altice USA.

We clearly would have some synergies, but the thesis of acquiring a mobile or trying to merge with mobile would be really based on the fact that we think we could do something better with the mobile business going forward.

OK, Got it. So it would be parent Altice that would be the acquirer.

Yeah. And maybe it's a stepping stone for greater consolidation, whether it's a T-Mobile, or it's a Verizon and AT&T with a fixed-line operator, so that we have more of a national footprint because one of our friends over at Comcast or Charter would like to be part of that equation as well.

You don't know how the chess pieces are eventually ever going to settle. But I do believe that consolidation among fixed and wireless makes a lot of sense. There's consolidation in every other developed country in the world already, right? So it just doesn't make sense that we're the exception.

For those that aren't as familiar with cable operations, can you explain what Altice's strategy has been within your cable footprint? I know you've spent a lot of money building out fiber, or at least a hybrid network, which effectively replaces traditional cable. Why is this a good investment for the company?

There is a regular — every two or three years — upgrade cycle of the DOCSIS (Data Over Cable Service Interface Specification) HFC (hybrid fiber-coaxial) network, whether it's on the DOCSIS software or it's on the actual network itself. This is done by dropping fiber deeper and by splitting the nodes. That is an ongoing, everlasting cycle. Everyone's waiting for the next upgrade cycle to be able to go faster than 1 GB or to get symmetric speeds on upload and download. You can't today on cable.

And we have been rolling out in our sister company throughout Europe — France, Portugal, Israel — fiber to the home everywhere, because ultimately that is the best technology that's out there in fixed line. It does provide the best upload and download speeds. It does have the best response rates. It has all of the physical and engineering traits that you would want for cable today, which you don't have in the U.S. because it's not fiber to the home.

Cable companies are often very much maligned among the consumer base. On the video side, prices continue to rise as content [prices rise], and so we have to pass through that, but we are the bad guy because people don't really understand that the MSNBCs of the world and other channels are out there pushing prices.

Wait a second, don't be blaming CNBC for your reputation here, please.

Ha, OK.

But at the end of the day, people are calling in not only for their bill issues, but they're also calling in because there are problems with the network, whether it's weather-related, whether it's usage-related, because the neighborhood all of a sudden has gotten very contentious and congested.

Whatever it is, the cable network is just not as good. And so, one of the big cost elements in the cable network is the amount of servicing that's required every time you call. You call to a call center when you've got a problem with the technical side, you get a service person to come in and repair it. Sometimes a service person has to come two or three times to come repair it. And additionally, the maintenance of that network is expensive on the cable side.

So why not build out a brand new network that provides speeds today that can go up to 10 gigs up and down, that has less service-related technical issues? So you'll have less people calling into the service center, less times having people coming with muddy boots into your house, and on top of that, save a lot of capital expenditure going forward on maintenance.

So that equation made the the financial investment ROI very attractive. We've got about 20% of our Optimum footprint (from Cablevision) that's already fiber to the home. We know that we can sell fiber to the home better than cable. It's a more attractive product. We can go to much higher speeds, a lot quicker — much more than one gig over HFC and DOCSIS. So fiber to the home is the technology. It's the best technology. And I think we'll be proven very right relative to the customer response — not only in terms of the product but to reduce our investment cycle going forward. You know, if you never had to call your cable company, you'd probably would love your cable company. We think it's going to really help on all of those fronts.

As you continue to upgrade the network, is there a trading multiple on pure-play cable companies you have in mind that you that you see as reasonable or fair so that you can properly judge all of these cable companies against each other? Because right now they're a little all over the map.

I think it's really driven by penetration levels. So obviously, lower penetration allows you to have a lot more upside. The competitive landscape of who you're competing against is meaningful. We compete in a big chunk of our footprint against Fios, which is a formidable competitor in itself, whereas a lot of operators have don't have Fios-like competitors across the board.

But by and large, you do believe that 90%-plus of your footprint is going to have a broadband connection. Today, they have a broadband connection that is maybe 60-70% penetrated with a fast broadband, 100 megabits-plus, and then you have the remainder 20% or 30% which is DSL or has never had a broadband connection there.

Given what we know and the appetite by consumers to continue to consume data bits heavily, this is something that's going to continue. Penetration levels are going to get higher and higher, which means that if the whole country is growing with household formation, there's going to be more and more broadband subscribers overall in the population. And then furthermore, people are upgrading regularly to higher and higher speeds. Don't tell me you didn't upgrade your speed since since you've been in the pandemic. I'm certain you somewhere in one of your households or in one of your family members, you guys have upgraded your speeds.

And so that's going to continue. You are going to require better and better connectivity. You're going to require your upload speeds to be better and better in order for us to be able to do these types of Zooms or for people in your household to be able to do Zooms very easily. And so the future continues to be extremely bright for broadband. We don't see any deceleration whatsoever.

Switching gears, there's been a recent movement to potentially hold cable companies accountable for misinformation on cable networks. I'm curious what you think about this concept.

I've got my personal views. I'll probably keep my personal views to the side. I think from a professional standpoint, our customers require and request a certain amount of content. Some of the names that were mentioned in this letter to us clearly are content and channels that our customers want. And so we're a provider of content for what our customers want. They have the choices to not want that content...

You're talking about Fox, Newsmax, OANN...

Yeah, the names that were were in this letter and that were broadly spoken about in the press. And for us, we want to make sure our customers are happy. And to the extent that they don't want that type of content or other channels, they can disconnect from us and do something skinnier, or just do a Netflix or an HBO Max or Peacock. So, this is not a battle that I believe is geared towards us. This is something that consumers are choosing to do with their own feet and their own wallets today. And to the extent that for whatever reason, somebody in government thinks otherwise, they should probably not be speaking to us, but they should be speaking to someone else.

Let's talk about the future of linear cable TV. Do you envision a day where Altice does not offer linear cable TV?

Yeah. Because the economics get worse and worse every year. As we've been speaking, since I've known you over the last five years, the story is still the same. Price levels for content continue to rise. Eyeballs for content over big bundles continue to fall.

This is an equation that continues to play out quarter over quarter in the public markets. Obviously, broadband continues to be the story and continues to make cable companies and fiber companies very attractive investment propositions because of broadband. But the pure video solution — there are truly two different types of subscribers.

There are those who have been subscribers to a video cable bundle for more than three years which are profitable. And then anyone that's been a subscriber for less than three years is unprofitable.

So as fewer people sign up and the attachment rates on gross adds continue to decline, which is what we're seeing, then how do you protect your long-term customers who really just enjoy still having the cable bundle? I am certain we will be able to figure out ways to work with our partners in the content world to make that transition smoothly to some type of an OTT format that's attractive — maybe where we don't have as much economic play in there. That way, we don't have to deal with the diminishing returns that we are doing regularly. But at the end of the day, most content, more and more, is being consumed over broadband. As people move away from the cable bundle, by definition, everything is going to the OTT world over broadband.

So, do I really need to be providing a bundle? I think there's a lot of people already out there providing bundles. So I think it's a question of time. I can't tell you when, where and how, but it's a question of time for cable operators in general to completely reevaluate whether or not they're going to be in the video business.

So let me ask that question in a slightly different way. Do you envision a day where cable TV, as we know it, simply no longer exists?

Yes. For sure. Everything is going to be IP-based, and then the question is because everything is IP based, and you have so many different choices...what the cable bundle is doing today is putting together everything that's available in the OTT world and providing it to you in a good format for you to be able to guide yourself through lots of different options in the way you watch television.

As technology and integration technology continues to get better and better, you're going to be able to aggregate that on your OTT platforms, your smart TV. Your Samsung TV today already has, say, 20 apps, 30, 40 apps already there. The pain of it is you're always clicking between the apps, all the time. Once you can get the whole aggregation together and make it look very similar to what you do in a cable environment, then that interactivity becomes second nature and doesn't really matter who's doing the bundle. It could just be your set-box provider, your smart TV provider.

So this idea that some media executives have that there's going to be a floor at 50 million subscribers, that's ultimately fantasy?

I think so, because name me one person under 30 years old who has a cable video connection.

I can't.

So it's just a question of time. People grow up in a certain way. I tell my kids all day long, how could you spend 10 hours a day on your iPhone? And they're like, "Daddy, that's our life. We didn't go out in the woods and build bricks and castles and stuff like you. That stuff is boring. My whole life is on my phone." So, there's an evolution of technology and habits and the way people consume content that's changed dramatically over the last ten years, and it's going to continue to change.

Do you feel like this transition to streaming is good for the industry? It seems to me there's a scenario where media companies, by and large, end up with worse financial results in a streaming world compared to the cable world.

Listen, I'm not running a media company today, but I do think there's some truth in what you say. When people start getting valued on an OTT subs basis, that are probably returning less money than affiliate fees coming from a cable operator to them, it doesn't psychologically make sense.

Maybe you can distribute a lot quicker through an OTT platform than you can today. But as you continue to slice and dice habits for what people watch on TV, I think people will start leaving a lot of some of the traditional content providers. People are going to say, listen, I don't need CBS All Access, or Peacock, or Discovery+, whatever it is. There will be a lot of people who do subscribe, but there will be people who'll just walk away from it completely. So, time will tell.

Markets are a little bit crazy for growth right now. But in a couple of years, as this all settles out. There's already starting to be some winners and losers. Already in my household, you know that people want Netflix and Disney+ because you have children. But do you need Hulu, HBO Max, Peacock and Discovery+? All of it? My kids don't want that.

My kids yell at me when I turn on HBO Max. Seriously. "No, not HBO Max!" They know I watch adult stuff there and their kids' programming isn't that good. They're not that into Sesame Street.

That's exactly right. Our children are going to be holding the wallet in 20 years, and they're going to have their preferences about how things are run.

The big three wireless operators in this country have championed their 5G products as true competitors to cable broadband. Do you feel 5G wireless is a real threat to your broadband dominance?

No. I mean, you'd expect me to say that, but I really don't. I believe it is complementary. People want better and better broadband connectivity inside and outside of the home.

At the end of the day, a wireless connection, no matter what technology, 5G, 10G, whatever you want to call it, it ultimately terminates on a fixed line. And it has to go through a fiber connection because the fiber connection ultimately takes it out to the World Wide Web and allows you to have connectivity.

If wireless has to connect through airwaves to ultimately a fixed line connection, that connectivity always is going to be less productive and robust than a full end-to-end fiber-to-the-home connectivity, not only from a performance standpoint and a bandwidth standpoint but purely from a price standpoint. The price per gig over wireless is more expensive than the price per gig over fixed because the marginal costs are de minimis over fixed where there are marginal costs on wireless.

If everyone was on an unlimited plan that was never throttled on wireless, and they were consuming 400 to 500 gigs of data like we see from our fixed line customers, the entire wireless infrastructure would explode.

So, you need both, and you do want good connectivity when you're outside the house, but when you're driving, you don't need necessarily to have the most amazing connectivity. 5G is going to allow smart cars. Your Apple carplay is going to work well. But you're not interacting when you're driving. You have shorter periods of time when you're going on the subway or a train to commute. And then when you're in the office, you're back on a fixed line network. So people will subscribe to 5G. Absolutely. Because they want better and better service from a wireless standpoint. But I don't believe it will replace in any shape or form nor be able to compete, broadly speaking, with fixed-line cable.

Some cable companies have dabbled in a couple of adjacent industries — home security, telehealth. I'm curious if you think there's a thus far unexplored or moderately explored business that could fit nicely with the cable industry?

When you think about the big technology companies, they've attacked your home through an app. Pretty much through search or through an app or through some type of service. When you think about wireless companies, they're attacking the consumer for all of their activity outside of the home or within the home connected to a Wi-Fi network.

When you talk about a cable company or a fixed line company, those companies are attacking the home from the household. You start from the TV. You own the broadband connection. What else can you do?

Everything is converging around smartness, right? Whether it's your refrigerator or your coffee machine that's talking to you, whether you're able to do telehealth seamlessly from your home, ultimately, everything deals with broadband connectivity.

And so, where we stand today, yes, telehealth is something that's there, home security is something that's there, but why are we not also in the consumer goods products, or the smartness of the consumer goods side? All of the 5G Internet of Things type of speak, why are we not playing in that as well?

I believe that's why everything is converging between technology companies -- traditional technology companies, wireless companies and fixed-line companies -- because everyone is attacking the subscriber at home and its behavior. And everyone has a different piece of that pie today. But there's no reason why you shouldn't be able to own more pieces of the pie.

Last question: Investors are going to be reading this and they're going to want to know how should I play cable? Outside of Altice, which of course you have the vested interest in, what would you tell them? Should they be investing in towers or the fiber providers or the operators themselves? Is there a smart way to play this from an investment standpoint?

Of course, I'm going to tell you what I think relative to my own book. But what's true and continues to be true and will be true for a very long time forward is broadband connectivity. Penetration is continuing to rise, and cable companies continue to be at the forefront of dominating market share, and people are going to continue to want to upgrade their speeds and get better and better technology.

I think you can say that in wireless as well. But there is a big difference, which is with wireless, you're also replacing your handset every two or three years. That's an expensive thousand dollar purchase, if you're buying the high end stuff. Secondly, the difference between 4G and 5G, or 3G and 4G, are not so cataclysmic that it warrants major price improvements in terms of what consumers are willing to pay. And I do think that competition in the wireless world is getting probably more competitive than less competitive, in general. So we're big believers in fixed-line infrastructure -- that fiber to the home continues to be the best technology out there, and that will continue to be dominant in terms of how consumers and enterprises and small businesses use them. We like that economic free cash flow yield that we think is very predictable and continues to grow.

That growth of free cash flow and predictability of free cash flow is something quite unique. And it's very much the cable story and the fixed line story today.

Comcast: Pandemic Drove Peak Internet Traffic Up 32% in 2020
Dean Takahashi

Comcast said peak internet traffic in the U.S. rose 32% in 2020 over pre-pandemic levels, with some markets rising 50% in March 2020.

Video streaming accounted for 71% of all downstream traffic, and it grew 70% over 2019 levels. Comcast said that the first four months of the pandemic resulted in about two years’ worth of expected network traffic growth.

As tens of millions of people transitioned to working and learning from home, the biggest surge occurred in March and April of last year.

Comcast Cable president Tony Werner said in a statement that years of strategic investment in the network have paid off. (The company invested $15 billion in network improvements from 2017 to 2020.)

Peak downstream traffic in 2020 increased 38% over 2019 levels, and peak upstream traffic increased 56% over 2019. Despite the growth in upstream traffic, traffic patterns remained highly asymmetrical, as downstream traffic volumes were 14 times higher than upstream traffic volumes throughout 2020.

Surprisingly, despite increases in videoconferencing activity, entertainment activities continued to dominate network traffic, with video streaming accounting for 71% of all downstream traffic and growing by 70% over 2019 levels.

Other key drivers of downstream traffic in 2020 were online gaming and the accompanying software downloads (10%), and web browsing (8%).

Despite experiencing growth, videoconferencing traffic still only accounted for less than 5% of overall network usage. For the first time, as Comcast customers surfed, streamed, and emailed more than ever before, they generated over a trillion internet requests (DNS lookups) each day.

Comcast said it delivered above-advertised speeds to customers across the country, including in areas most affected by COVID-19. From 2017 through 2020, the company built an additional 39,153 route miles of fiber into the network.

Comcast’s AI software platform, Octave, enabled the company to increase upstream capacity by up to 36% as traffic levels began to surge.

Senators Call on FCC to Quadruple Base High-Speed Internet Speeds

The Pai FCC decided to maintain the current standard
Makena Kelly

The federal government’s definition of high-speed broadband has remained stagnant over the last six years, sitting at 25Mbps down and 3Mbps up since 2015. But faced with pandemic-fueled network loads and a new push for infrastructure spending, lawmakers are getting ready to upgrade that definition. In a letter to government leaders Thursday, a bipartisan group of senators called for a quadrupling of base high-speed broadband delivery speeds making 100Mbps down and 100Mbps up the new base for high-speed broadband.

“Going forward, we should make every effort to spend limited federal dollars on broadband networks capable of providing sufficient download and upload speeds and quality,” Sens. Michael Bennet (D-CO), Joe Manchin (D-WV), Angus King (I-ME), and Rob Portman (R-OH) wrote to the FCC and other agencies. “There is no reason federal funding to rural areas should not support the type of speeds used by households in typical well-served urban and suburban areas.”

The letter calls on the FCC and other agencies to change their definitions of “high speed broadband” to anything above 100Mbps down and 100Mbps up — a shift that would prohibit the FCC from identifying an area as being served with broadband unless it met those speed criteria. It’s a complete change of pace from the FCC under former Chairman Ajit Pai’s leadership, which established the previous 25 / 3Mbps standard.

“We find that the current speed benchmark of 25/3 Mbps remains an appropriate measure by which to assess whether a fixed service is providing advanced telecommunications capability,” the FCC’s report said earlier this year.

The current base speeds for high-speed broadband aren’t nearly enough for a moderately sized family working from home. Zoom recommends 3.8Mbps upload speeds for just one 1080p video, and the shift to remote schooling and work has forced many families to run multiple simultaneous streams.

“Ask any senior who connects with their physician via telemedicine, any farmer hoping to unlock the benefits of precision agriculture, or any student who receives livestreamed instruction, or any family where both parents telework and multiple children are remote learning, and they will tell you that many networks fail to come close to ‘high speed’ in the year 2021,” the senators wrote.

Lawmaker to Reintroduce Net Neutrality Legislation Within Weeks

Supporters say giving the Federal Communications Commission greater authority over internet service providers is more important in the wake of the pandemic.
Mariam Baksh

Sen. Ed Markey plans to introduce legislation in the coming weeks to restore net neutrality rules put in place during the Obama administration.

With a shift in political dynamics following the 2020 election, lawmakers are renewing their push to police internet service providers under Title II of the Communications Act, and this time, the pandemic emphasizes a powerful point in the debate, the Massachusetts Democrat said.

Net neutrality sets forth that providers of broadband services should treat all internet traffic equally, not blocking, throttling or prioritizing any one set of content or data over another for commercial purposes.

“Today, broadband is the single most important service that Americans use to communicate with one another, and the COVID pandemic has highlighted what we already knew,” Markey said. “Broadband isn't a luxury: It is essential to everyone in our country.”

Markey spoke Tuesday along with Reps. Mike Doyle, D-Pa., and Yvette Clarke, D-N.Y., at an event hosted by Fight for the Future and other advocates of consumers’ digital rights.

“Once we have three Democrats in place at the [Federal Communications Commission], I'm going to strongly urge the commission to reverse the Trump FCC's wrongheaded decision and restore net neutrality and the FCC's authority over broadband,” Markey said. “And in the coming weeks, I'm also planning on reintroducing legislation to do the same by statute. Here's the bottom line: Whether it's in the halls of the FCC or in the halls of Congress, we will not stop working until net neutrality is the law of the land.”

The status of net neutrality at the federal level has shifted back and forth over the years based on which political party is in power. Democrats have generally favored giving the FCC more power to enforce net neutrality principles, while Republicans argue that’s unnecessarily restrictive and that the companies are meeting their obligations to provide widespread, non-discriminatory access to broadband services.

The pandemic has raised the stakes. During Tuesday’s event, Baltimore Councilmember Zeke Cohen said it was only after protests from students and others that Comcast increased the performance of its Internet Essentials program, its lowest grade offering that is available at $10 per month.

The program was “simply too slow to maintain programs like Google classrooms or Zoom” and was “the only game in town,” Cohen said, adding “an extra $10 a month can put someone over the edge” in cities like Baltimore. Cohen also shared concerns about the refusal of Comcast—which signed a franchise agreement with his city—to share data on the distribution of its services and the company’s willingness to impose arbitrary data caps at such a crucial time.

“To me, there's just a whole lack of transparency and data caps is the ultimate cynical example of an extractive large corporation, taking advantage of vulnerable people in a pandemic,” he said, noting that other cities are no doubt experiencing similar challenges.

Classifying broadband as a telecommunications service, as the FCC did under the Obama administration, would allow regulators to treat internet service providers as essential public utilities under Title II of the Communications Act and to have more control of and insight into the actions of ISPs, as they do with telephone services.

The FCC used this power to pass privacy and cybersecurity rules for ISPs. The rules would have required companies to gain opt-in consent of consumers in order to access their browsing data and other sensitive information for commercial purposes. They also would have required the ISPs to follow reasonable data security practices and to notify customers and law enforcement when they are breached.

Congress used the Congressional Review Act to undo the rules and to stop the FCC from implementing them again. But speaking at the event Tuesday, Harold Feld, senior vice president of Public Knowledge, said there’s now an opportunity to make them more robust.

“We had the incredibly strong privacy rules that were put in place at the end of the Obama administration,” Feld said. “The Republican Congress used a congressional resolution of disapproval to eliminate those rules but that's OK because once there is Title II it means we're clear to create even stronger and better rules for privacy on the internet, Americans have long expected that their phone calls are private, and they should be able to expect that their internet use is private.”

Markey noted that with a recent court ruling allowing California to enforce its own law, and net neutrality champions now holding the reins on Capitol Hill, “a new day has dawned in Washington and around our country.”

“We have a whole new era of net neutrality, which is just beginning,” he said.

Until next week,

- js.

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