Tech Brew Ride Home - Mon. 06/24 – Apple The First To Run Afoul Of The DMA

Episode Date: June 24, 2024

Could Apple soon owe Europe a ton of money as they are the first to run afoul of the DMA? Could Meta soon join OpenAI as part of Apple Intelligence. Why food delivery apps are seeing plunging usage in NYC and Seattle. And a big new AI focused bill in California that AI startups are worried about. Sponsors: 1password.com/ride WashingtonPost.com/ride Links: Brussels accuses Apple of breaking EU ‘gatekeeper’ rules (FT) Apple is first company charged with violating EU’s DMA rules (The Verge) Apple Won’t Roll Out AI Tech In EU Market Over Regulatory Concerns (Bloomberg) Apple, Meta Have Discussed an AI Partnership (WSJ) Delivery Drivers Got Higher Wages. Now They’re Getting Fewer Orders. (WSJ) AI Doesn’t Kill Jobs? Tell That to Freelancers (WSJ) ‘Little Tech’ brings a big flex to Sacramento (Politico) Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the tech meme right home from Monday, June 24th, 2024. I'm Brian McCullough today. Could Apple soon owe Europe a ton of money as they are the first to run afoul of the DMA? Could Meta soon join OpenAI as part of Apple Intelligence, why food delivery apps are seeing plunging usage in New York City and Seattle, at a big new AI focus bill in California that AI startups are worried about. Here's what you miss today in the world of tech. Apple has become the first big tech company to be charged under Europe's D&EAWRUPS. DMA rules, and could be fined up to 10% of its annual global revenue, or $38 billion, at least based on 2023 numbers. This comes as in preliminary findings. The EU says Apple's anti-steering rules for

developers breached the DMA. The EU is also probing if Apple's developer fees comply with EU rules, quoting the FT. If found guilty, the iPhone maker faces a penalty of up to 10% of its global annual revenue, meaning any fine could run into the tens of billions of dollars. The fines can rise to 20% in the event the offense is repeated, the EU said. Apple said it was, quote, confident in its compliance. Speaking at a conference on the DMA in Amsterdam on Monday, Margaret Vestager, the EU's Executive Vice President in charge of digital policy, said, quote, we are dealing with the biggest and most valuable companies on the planet.

The DMA is not an excessive ask. It is plain vanilla to ask for a fair, open, and contestable marketplace. She added, I find that it is surprising that. some of the most valuable, respected big companies on this planet do not take compliance as a badge of honor, end quote. The commission's preliminary findings have to be finalized within one year from the start of its official investigation in March. The commission, the Block's executive arm, also announced on Monday that it was investigating whether Apple's developer fees breached the EU's rules. The fees include a charge of 50 cents per download that

companies have to pay if their app is used by more than one million people. As part of the new probe into developer fees, Brussels said it was looking at whether Apple was imposing too many restrictions for users to download and install alternative app stores. Apple said it had, quote, made a number of changes to comply with the DMA in response to feedback from developers and the European Commission. We are confident our plan complies with the law and estimate that more than 99% of developers would pay the same or less in fees to Apple under the new business terms we created, the company said, end quote. Quoting the verge. Under the DMA, Apple and other so-called gatekeepers, must allow app developers to steer consumers to offers outside their app stores free of charge.

Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft are the six gatekeepers who had to be fully compliant with rules as of March 2024, end quote. Now, this comes after late Friday and over the weekend, news that Apple will withhold the release of Apple Intelligence, also iPhone mirroring, and more of its recent features in the EU this year, citing concerns about DMA's interoperability requirements, quoting Bloomberg. We are concerned that the interoperability requirements of the DMA could force us to compromise the integrity of our products in ways that risk user privacy and data security, Apple said in a statement, the EU's DMA forces dominant technology platforms to abide by a long list of

dues and don'ts. Tech services are prohibited from favoring their own offerings over those of rivals. They're barred from combining personal data across their different services, blocked from using information they collect from third-party merchants to compete against them and have to allow users to download apps from rival platforms. Apple's decision to halt the rollout in the EU will mean consumers in all 27 of the bloc's nations, including the likes of France, Germany, Spain, and Italy won't have access to the company's ambitious new AI technologies for now. The software is due to launch elsewhere this fall, but will only work on a subset of Apple's

devices and just in American English. as part of the move. iPhone mirroring and SharePlay screen sharing will also be held back. The mirroring feature lets you use your device virtually on your Mac display and have full control over it. The Shareplay capability, meanwhile, lets you screen share from an iPad or iPhone to another device and control it remotely for technical support. It's not clear how the features might violate the DMA, but withholding the technology threatens to irk consumers in the region, who might potentially put pressure on regulators, end quote. Yeah, that's why the timing here is interesting, as far as I understand it, as mentioned just there. A lot of the AI features aren't yet ready for languages beyond English anyway, and we've heard

these features will be slowly rolling out over time anyway as well, with the full slate of features probably not available until next year. So is it being too cynical of me to think, hey, you know, Apple is getting some free leverage here to drum up pressure on EU regulators by saying to Europeans, they won't let us give you our cool new features, even as those features probably were a down-the-road sort of thing anyway. Probably more where that came from, though, sources are telling the Financial Times that the EU also plans to charge Microsoft this week for bundling teams with its other software to the detriment of rivals. Meanwhile, back on the AI front, sources are telling the journal

that Meta has held discussions with Apple to integrate its AI models inside of Apple intelligence, anthropic and perplexity have also apparently discussed integrations with Apple. Quote, meta and other companies developing generative AI are hoping to take advantage of Apple's massive distribution through its iPhones, similar to what Apple offers with its app store on the iPhone. We wanted to start with the best, said Apple software leader Craig Federigi, noting that chat GPT, quote, represents the best choice for our users today. He also said Apple wanted to integrate Google's Gemini as well. If Apple strikes deals with partners beyond OpenAI, Apple said customers could choose which external AI models they want to use in addition to Apple's

internal systems. The discussions with Meta highlight the unlikely alliances that are being formed between major technology companies in the artificial intelligence era. OpenAI's tech is set to be embedded in Microsoft and Apple devices, and an Apple and meta deal would be noteworthy given how much the two companies have been at loggerheads over other emerging tech issues. In its talks with other AI companies, Apple hasn't sought for either party to pay the other, the people said. Instead, the AI companies can sell premium subscriptions to their services through Apple Intelligence. As it does on its app store, the iPhone maker would keep a cut of subscription revenue from its devices. The discussions haven't been finalized and could fall through.

Even though deals with Apple would help AI companies obtain massive distribution of their products, it's unclear how much of a financial windfall it would be. OpenAI will be offering a free version of chat GPT through Apple Intelligence, but users can also link to a premium chat GPT account on their Apple device. While chat GPT usage is expected to double with the Apple partnership, OpenAI's infrastructure costs are expected to grow 30 to 40 percent, said Gene Munster, a longtime Apple analyst and managing partner at Deepwater Asset Management. Munster expects 10 to 20 percent of Apple users will opt into paying for a premium AI subscription to a product like ChatGPT. That could mean billions of dollars for AI companies that integrate successfully with Apple's new platform. Distribution is hard to get, Munster said.

The beauty of what Apple has built is that you've got this engaged distribution at scale. end quote. Food delivery apps are apparently contending with plunging orders and frustrated drivers after raising fees in New York City and Seattle due to wage-increased laws for gig workers. Quoting the journal, lawmakers in New York City, one of the cities where pay increases for delivery drivers recently were adopted, say that their changes have worked well for workers. Seattle, which implemented similar rules this year, is planning to roll them back because of, quote, outcry from drivers and restaurants over its devastating impact. Seattle City Council President Sarah Nelson said, the delivery companies whose businesses are built on gig workers,

they don't employ full-time, say they can only afford to pay so many workers under the two city's latest pay standards. The cities want the companies to pay couriers a minimum hourly wage based on the time they spend delivering orders and reward the most efficient workers. New York City now requires that the company's pay couriers at least $19.56 per hour before tips, up from an average of $5.39 per hour before the rule. went into effect in December. Uber Eats's orders in Seattle fell 45% last quarter from the same period a year earlier after the company imposed a $499 fee on each order to cover the city's new pay requirements. Demand also cooled in New York City, Uber and DoorDash said. The two cities

make up a small slice of the app's business. DoorDash said the new laws collectively led to a reduction of some 1% of its overall orders in the first quarter. analysts say the bigger concern is a wave of similar legislation rolling through more cities and states. Note that the new rules in Seattle and New York City apply to food delivery couriers, ride-hailing drivers aren't covered. Uber and DoorDash say they can afford to pay a limited number of workers under the new laws. To make the math work in New York City, Uber says it has to slot delivery drivers into shifts. The move has angered some drivers who want the flexibility to work when they want, end quote. Meanwhile, a job story from the AI side of things, according to new research, the number of freelance jobs on

platforms like Upwork, in areas where generative AI currently excels, have dropped by as much as 21% since ChatGPT's debut, quoting the journal, who is all over the place today. Freelance jobs that require basic writing, coding, or translation are disappearing across postings on Job Board Upwork, said Kelly Monaghan, managing director of the company's Research Institute. Her findings echo those of more than a dozen other researchers at institutions, including Harvard Business School, Washington University in St. Louis, and the University of Hong Kong. They have found that since the debut of ChatGPT and other generative AI models, the number of freelance jobs posted on Upwork, Fiverr, and related platforms in the areas in which generative AI excels have dropped

by as much as 21%. Economists are fond of saying that AI will automate away some tasks, but is unlikely to eliminate many jobs, since most jobs are much broader and more demanding than the parts that can be handled by AI. But freelancers represent an increasing proportion of the workforce. One study by Upwork found 38% of Americans did some kind of freelance work in 2022. For this type of work, it's sometimes the case that the bulk of a person's job is doing precisely the tasks that can be automated, and that can put their entire livelihood at risk. Reed Southern is a concept artist for TV and movies, including ones you've probably heard of, including Blue Beetle and the Matrix Resurrections. His income in 2023 was less than half of what he would make in a typical

year, he says. That's even worse than 2020 when the entire film and TV industry effectively shut down. Southern's work typically happens in the early stages of a project when producers need detailed sketches to help them establish the look of a film or show. This kind of behind-the-scenes work is being handed to AI faster than any other part of the film and TV business, as producers seek to cut costs in the face of a broader slowdown in their industry. Much of it is being handled by mid-jurney, the image generation AI, which by late 2022 was capable of producing photorealistic images from nothing but a short text prompt. If concept artists are brought in at all, it's to tweak the image already generated by AI, Southern says. Southern's experience has been echoed by others in the field

across social media and in the whisper networks that artists like him rely on. You can talk to any artists at this point, and they have a story about how they were given AI reference material to work from or lost a job, says Southern. In addition to fewer projects, studios and production companies are cutting the amount of time for which they typically hire artists. What was once a three to six-month project is now perhaps a few weeks and often pays rates far below what is typical, says Southern. He was recently offered a job that included a lot of AI-generated art in its pitch deck already, and the producers offered him half his usual rate to create more. As in other periods of rapid adoption of automation, there are those who will benefit from the shift,

freelancers who become more productive when using AI, but can't yet be replaced by it, such as data science and IT, earn on average 40% more, says a spokeswoman for Upwork, end quote. Finally today, something to put on your radar, which also involves jobs in a roundabout way, there's an AI safety bill being considered in California, and Y Combinator and 140 AI startups have signed a letter opposing it, saying the bill could harm California's ability to retain its AI talent. Quoting Politico, Y Combinator, the venture capitalist firm, that brought us Airbnb, Dropbox, and DoorDash, today issued its opening salvo against a bill by state Senator Scott Wiener that would require large AI models to undergo safety testing.

It's the first time the startup incubator led by prominent San Francisco Tech Denison Gary Tan has publicly weighed in on the bill. They argue it could hurt the many fledgling companies Y Combinator supports, about half of which are now AI-related. While Weiner's bill explicitly targets the biggest AI models, Y Combinator is leaning into the argument. that it will hurt the little guys. This grassroots letter, which bubbled up from our community of founders in less than 48 hours, represents the voice of Little Tech in California, Luther Lowe, White Combinator's head of public policy said in a statement. Weiner's Senate Bill 1047 has been a target of regulation-wary tech company since its inception in February, but it managed to

glide through its House of Origin without major resistance. Now it's getting hit hard in the assembly, where opponents have been ramping up the pressure to knock down a measure. They say would stifle the homegrown industry. The bill would require developers of the biggest AI frontier models that cost $100 million or more to train to conduct risk assessments of those systems with the goal of preventing catastrophic harm. Weiner has long characterized the requirements as reasonable. Earlier this week, he said the bill had a light touch. Many companies disagree. In its letter to Assembly Judiciary Committee Chair Ash Kalra and Privacy Chair Rebecca Bauer-Kahan, why Combinators said the bill could, quote, threaten the vibrancy of California's technology

economy and undermine competition. The startups raise concerns about the liability tech companies could face for misuse of their models and say vague language could lead to an inadvertent crackdown on their industry. California is at the center of this revolution. AI is powering our post-COVID recovery, the letter says. They also argued that because developers are required to certify their compliance with the safety standards every year under penalty of perjury, any misuse of their software could send them to jail. An argument that is been parroted across the internet. Weiner emphatically disputes that claim. This is not a bill that's going to send anyone to prison, he said. I think it's really unfortunate to convey to these startup

founders that there's a risk they're going to go to prison. That's completely and utterly untrue, end quote. Proponents of the bills say public support is on their side. A large majority of likely voters, 77% support SB 1047, according to a recent poll conducted by David Binder, research for the center of AI safety, the sponsor of Wiener's bill, end quote. Nothing more for you today. Talk to you tomorrow.