The technology industry may not be broadly supportive of President Donald Trump — and many tech leaders actively opposed his recent travel ban — but tech companies may actually benefit from several of the new deregulation policies Trump is backing.
At a combative White House press conference yesterday, Trump repeated his commitment to his particular brand of deregulation.
“We’ve imposed a temporary moratorium on new federal regulations,” he said. “We’ve issued a game-changing new rule that says for each one new regulation, two old regulations must be eliminated. Makes sense. Nobody has ever seen regulations like we have. If you go to other countries and you look at industries they have, and you say, let me see your regulations, and they’re a fraction, just a tiny fraction of what we have.”
The president also reiterated that commitment this week during a “listening session” with the retail sector. “Over-regulation costs our economy an estimated $2 trillion a year, which is incredible — $2 trillion — and it costs your businesses a lot of money, tremendous amounts of money and time,” he claimed. “We’re cutting regulations big league. We are really cutting them by massive amounts.”
It has not gone unnoticed by some in the tech industry. Only last week, Intel CEO Brian Krzanich joined Trump to announce that Intel is making a $7 billion investment in a new factory — Fab 42 — in Chandler, Arizona. And he credited Trump’s policies with the decision to go ahead with the factory, despite having worked on plans for it for several years.
“We held off actually doing this investment until now,” Krzanich said at a briefing announcing the new factory. “It’s really in support of the tax and regulatory policies that we see the administration pushing forward that really make it advantageous to do manufacturing in the U.S.”
Trump also spoke about the Intel deal in his weekly address.
Will Corporate Tax Cuts Bring Tech Money Home?
Of course, many of those policies have yet to be revealed yet – except in the broadest terms. During last year’s bruising campaign, then candidate-Trump promised to bring corporate tax rates down to 15 percent from its current top level rate of 35 percent. While that corporate tax rate reduction alone would be cause for some rejoicing in the boardrooms of tech companies, it also paves the way to untangle so of the many complex global tax issues that companies like Apple have suffered from in recent years.
Apple, like many large companies in US tech industry, has been choosing to leave large amounts of its international revenue overseas – so that it doesn’t have to pay the US current top-level tax rate on those revenues. But that strategy started to unravel in late August of last year when Apple was issued with a massive $14.6 billion retroactive tax bill from the European Commission for alleged unpaid taxes in Ireland.
At the time, Senate Finance Committee Chairman Orrin Hatch (R-Utah) met with European Commissioner for Competition Margrethe Vestager to discuss the issue – and came away suggesting the kind of tax reform that should be music to Apple’s ears.
“We must do our part to address the anti-competitive nature of the U.S. tax code and the impact it has had on our domestic job-creators both here and abroad,” he said then. “Lowering the corporate tax burden and shifting to a territorial regime with base erosion protections will help shift our economic landscape and produce fertile ground for more businesses to invest here at home. It’s an achievable, bipartisan goal that holds great promise, should we get a willing partner in the White House.”
Good news, bad news at the FCC
The new administration is also committed to big changes at the Federal Communications Commission – and some of those changes may benefit some tech and telecoms companies. But it may also make life harder for start-ups and newer large competitors.
Take the streaming video business as an example. Newly-appointed FCC Chairman Ajit Pai let it be known in his first month that he wasn’t going to stand in the way of entrenched market leaders using vertical integration to offer cheaper deals to consumers that, in doing so, made life harder for competitors.
On Feb. 3, the FCC notified AT&T Mobility, T-Mobile, and Verizon Wireless that it would be closing its inquiries into each company’s “sponsored data and zero-rating offerings.” This means that AT&T (which owns DirectTV), for example, will be continue to be allowed to offer preferential deals to DirectTV subscribers so that streaming DirectTV content doesn’t “count” against monthly data plan limits.
So that’s great news if you are one of the big wireless carriers. But if you’re Amazon Prime Video, NetFlix or Hulu, it’s not such great news as it means that customers now have a strong incentive to stream video content using the DirectTV app and service on their phones, rather than competitive services.
The industry may, however, get broader benefit from the new FCC chairman’s commitment to further national rollout of broadband internet access. Pai outlined some of his work on expanding broadband in a blog post at the beginning of February.
“I worked with New York Governor Andrew Cuomo, Senator Charles Schumer, Representative Chris Collins, and other officials to direct $170 million in federal funding to build out broadband in upstate New York to places that are currently unserved,” he said. “I (have) shared with my colleagues and set votes for February 23 on two detailed proposals for closing the digital divide. One of them would direct billions of dollars — with a “b” — over a decade toward making sure that all parts of this country have 4G LTE coverage. (Currently, there are too many gaps where your phone displays “No Service” — as I saw for myself during a recent drive from Wichita, Kansas to Des Moines, Iowa.) The other would allocate nearly $2 billion — again with a “b” — for advancing fixed broadband service across the country.”
Pai also talked in his post about a proposal he’s working members of Congress for “Gigabit Opportunity Zones” – which he says would use tax incentives to encourage the deployment of ultra-fast broadband in lower-income areas.
So there is clearly an argument to suggest that many tech companies – and particularly those with businesses in the cloud – will benefit significantly from national broadband expansion. Cynics, however, may suggest that expanding broadband access is the “motherhood and apple pie” issue of the 21st century.