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CM Research takes a considered view of the telco and tech policies that could emerge once the dust settles on the shock U.S. election result.
Like eating an entire wheel of cheese in one sitting, news of this week’s U.S. election result has caused considerable discomfort, left a pungent smell in the air, and will take quite a while to digest.
How a character like Donald Trump, who ran a campaign that played upon the worst human qualities, and one that seemed a dead cert to fail – much to the relief of everyone so tired of his invective – managed to win, is a question that people will turn over in their minds for a long time.
Anyone working for a polling company can probably kiss this year’s Christmas bonus goodbye. Some commentators have gone so far as to question the value of big data in the aftermath of Trump’s surprise victory.
"If big data is not that useful for predicting an election, then how much should we be relying on it for predicting civil uprisings in countries where we have an interest or predicting future terror attacks?" asked Patrick Tucker, a writer on predictive analytics, in an AP report on Friday.
As the world gives up on trying to work out the how of Trump’s triumph, it is left wondering, what happens next?
Insofar as technology and telecoms is concerned, CM Research on Friday took a look at how Trump’s policies might affect the industry, picking out potential winners and losers.
In short: "the biggest benefit to the U.S. tech sector will come from lower tax rates. The biggest risk is trade wars that result in higher tariffs and retaliation against the U.S. tech companies. The wild card is regulation: net neutrality rules – if relaxed – could shift the balance of power from Internet companies to telcos," the research firm said.
The caveat in all this of course is whether Trump will actually follow through with anything he pledged during his campaign.
Therefore I would advise anyone reading predictions about what might happen under Trump not to take them with a pinch of salt, because the required quantity of salt would probably prove fatal.
Starting with CM Research’s wild card, and it’s a biggie: regulation.
The research firm claims that Trump will likely consider net neutrality as a distortion of the market, and could therefore relax the rules. This would benefit telcos, which may jump at the chance to charge Internet companies as well as consumers for delivering their traffic.
Trump’s policy on data privacy has a lot of people justifiably worried.
"Trump has staked his reputation on being strong on national security and law and order. He may coerce technology companies to breach users’ privacy and hand over personal data to the government. This would weaken the position of U.S. tech companies as champions of personal freedoms and privacy," warns CM Research.
Something to look forward to.
AT&T and Time Warner may have cause to be concerned too. When they announced their $85.4 billion merger last month, Trump said that as president, he would not approve the deal, claiming that such tie-ups are bad for democracy.
Trump is an opportunist though, so doubtless AT&T and Time Warner will try their best to present Trump with an opportunity to profit – not necessarily materially, you understand – from the situation, and ta-da, as if by magic his resistance to the deal will soften. My prediction, not CM Research’s, by the way.
Moving on from regulation, and Trump’s position on tax – the tax others pay, not the amount of tax he pays, of course – could cause a stir in the tech sector.
He has indicated that he wants to lower the headline corporation tax rate to around 15% from 35% to discourage various forms of tax avoidance by U.S.-based companies, CM Research said. These include shifting intellectual property to low-tax jurisdictions like Ireland, and stashing cash in foreign tax havens.
To encourage companies to repatriate their often huge earnings, Trump has also indicated that he may lower the tax rate on repatriated earnings to encourage companies to reinvest profits in the U.S. or distribute them among shareholders.
Lower taxes will benefit the likes of Amazon, Google parent Alphabet, Apple, Cisco, Microsoft, IBM, and Facebook, among others, CM Research said. Meanwhile, foreign companies like Alibaba and Samsung "will have a competitive disadvantage if U.S. companies get to keep more of their profits."
A lot of Trump’s rhetoric this past 12 months has centred on the decline in U.S. manufacturing jobs.
"He has indicated he may penalise companies who move production overseas to lower wage regions. He has also suggested he might impose 45% tariffs on goods made in China," CM Research said. This risks retaliation, triggering a trade war, and that "many countries will see U.S. tech companies as legitimate targets."
In addition, Trump’s anti-immigration stance could cause problems for tech companies too, because plugging skills gaps by hiring foreign talent could become more difficult.
"Ironically, bringing manufacturing jobs back to the U.S. – one of Mr Trump’s key policy objectives – will almost certainly require a high number of immigrants with the required skill-sets to run the production facilities – skills that the U.S. has gradually lost as factories have shifted abroad," CM Research noted.
Furthermore, Trump is keen to stand up to China, which is keen to be in the vanguard of next-generation technology development. If he makes good on this particular pledge, Trump may block potential Chinese acquisitions of U.S. tech firms, and make it difficult for Chinese companies to set up shop in the U.S., CM Research suggested.
Indeed, the U.S. government is also likely to continue to argue that China’s involvement in the U.S. tech and telecoms sector poses a risk to national security. It’s an argument that the likes of Huawei and ZTE know only too well.
Meanwhile, CM Research predicts that cybersecurity stocks are likely to benefit from the likelihood of Trump offending a non-allied foreign government, attracting state-sponsored cyberattacks on U.S. interests. Offend a foreign power? Surely not, Mr Trump?!
Finally, in our post-fact world, Trump’s antics on Twitter and his subsequent winning of the election mean that companies will take social media more seriously.
"Most Americans were more interested in an emotional connection with their candidate through soundbites on Twitter than any kind of sound logical analysis or evidence-based reporting," said CM Research.
Well, that succinctly undermines the time and effort put into this week’s Friday Review. I think I’ll end it there, and do a Tweet-storm next time.
