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Wall Street is unfazed by Facebook’s announcement that it is expecting an unprecedented fine from the Federal Trade Commission.

Facebook’s stock rose about 8 percent in after-hours trading following the company's earnings report that said it set aside $3 billion as it negotiates a settlement with the FTC in its privacy probe. The social network said the fine could be as high as $5 billion, dwarfing the agency’s previous record privacy civil penalty of a $22.5 million.

Investors appeared to accept the fine as a one-time cost of doing business as the company reported otherwise better-than-expected financial results. Both its quarterly revenue and total number of global users increased year-over-year -- even in the face of mounting scrutiny from policymakers around the world.

“The stock is up largely because the intrinsic performance of the business was better than anticipated,” said Youssef Squali, head of Internet and Digital Media Research Group at SunTrust.

By preempting the FTC and announcing an estimate of the fine, Facebook could be trying to put more than a year of privacy scandals behind it, Squali said.

Facebook is facing a fine as it negotiates a settlement with the FTC that would conclude its year-long investigation into whether the company violated a previous privacy agreement with the agency. The FTC opened the probe following the Cambridge Analytica scandal last year, and in that time, the company has had repeated privacy transgressions, -- ranging from data breaches to failing to securely store users' passwords. At this time, the exact contours of the FTC probe remain unclear.

But Big Tech’s critics saw the Wall Street rally as an indication that even a record-setting fine would do little to draw blood from the social networking giant. The company’s projection reignited concerns the Washington agency is not equipped to police one of the world’s most valuable companies -- and prompted policymakers and advocates to call for antitrust action or other penalties beyond fines.

As many observers noted, even at the high end of the range Facebook estimated, the fine would only be a fraction of the nearly $56 billion in annual revenue Facebook reported in 2018.

Sen. Elizabeth Warren (D-Mass.), rekindled her calls to break up the company. (You can read our previous Technology 202 newsletter about Warren's plan to break up Big Tech here).

Rep. David Cicilline, who heads the House Judiciary antitrust subcommittee, said Congress may need to step in if the FTC’s action amounts to a “slap on the wrist.” The Rhode Island Democrat previously called for the agency to investigate Facebook for antitrust violations. From his Twitter feed:

Sen. Richard Blumenthal (D-Conn.) said the predicted fine would be “paltry” in comparison to Facebook’s profits last quarter, and he called for broad changes within the business:

Tim Wu, the author of “The Curse of Bigness: Antitrust in the New Guilded Age,” said the fine should just be the beginning. He suggested the company should be required to sell off one of its major subsidiaries, WhatsApp.

To be sure, it was an unusual step for Facebook to preempt the FTC and announce the fine while negotiations with the agency are still ongoing. Facebook itself acknowledge the matter is “unresolved and there can be no assurance as to the timing or the terms of any final outcome.”

It’s also very possible that any settlement will come with the kinds of structural remedies that Blumenthal is calling for. My colleague Tony Romm reported last week that the federal regulators could seek new, heightened oversight of Facebook chief executive Mark Zuckerberg. One idea that has been floated could require him or other executives to certify the company’s privacy practices periodically to the board of directors.

Ashkan Soltani, a former chief technologist at the FTC, told the New York Times yesterday that any regulatory mandates -- curbing the company's ability to share information with business partners or require it to disclose more information to consumers about how it collects data -- could pack a bigger punch than fines.

“Those will have the most lasting impact on consumers’ privacy,” Soltani said.


BITS: The National Security Agency recommended the White House terminate a controversial surveillance program that collects data about Americans' phone calls and text messages, according to the Wall Street Journal's Dustin Volz and Warren P. Strobel. The program, which started after the 9/11 attacks, ran into compliance challenges in recent years, and the legal and logistical costs of maintaining it may outweigh its benefits. 

"The recommendation against seeking the renewal of the once-secret spying program amounts to an about-face by the agency, which had long argued in public and to congressional overseers that the program was vital to the task of finding and disrupting terrorism plots against the U.S.," the Wall Street Journal reported. "The latest view is rooted in a growing belief among senior intelligence officials that the spying program provides limited value to national security and has become a logistical headache."

The legal compliance challenges forced the agency to halt use of the program earlier this year, and its legal authority will sunset in December without congressional action. 

The program started during the Bush administration, but the public became aware of it after former government contractor Edward Snowden leaked documents that exposed its existence to journalists nearly six years ago. That revelation, and others, ignited global backlash to American spying practices. 

NIBBLES: An Amazon team responsible for auditing Alexa has access to users' location data, and in some instances, can find a user's home address, according to Bloomberg's Matt Day, Giles Turner and Natalia Drozdiak. Bloomberg spoke with five employees familiar with the program. 

"Team members with access to Alexa users’ geographic coordinates can easily type them into third-party mapping software and find home residences, according to the employees, who signed nondisclosure agreements barring them from speaking publicly about the program," Bloomberg reported. "While there’s no indication Amazon employees with access to the data have attempted to track down individual users, two members of the Alexa team expressed concern to Bloomberg that Amazon was granting unnecessarily broad access to customer data that would make it easy to identify a device’s owner."

Bloomberg's revelations follow its earlier report that Amazon employs thousands of people around the world to listen to voice recordings captured in Alexa devices in order to improve the digital assistant. Their efforts are intended to eliminate gaps in Alexa's understanding of speech and help it better respond to commands.  At the time of that report, an Amazon spokesperson said “employees do not have direct access to information that can identify the person or account as part of this workflow.”

Amazon issued a new statement responding to the location data revelations, saying “access to internal tools is highly controlled, and is only granted to a limited number of employees who require these tools to train and improve the service by processing an extremely small sample of interactions. Our policies strictly prohibit employee access to or use of customer data for any other reason, and we have a zero tolerance policy for abuse of our systems. We regularly audit employee access to internal tools and limit access whenever and wherever possible.”

BYTES: Twitter sells itself as the digital public square. But a new study shows that in the United States, its users diverge from the general population -- they're statistically younger, better-educated, richer and Democrat-leaning.

The Pew Research study, which surveyed nearly 3,000 adult U.S. Twitter users, also found that 10 percent of Twitter users produce 80 percent of the tweets. The top 10 percent send a median of 138 tweets a months, have 387 followers and follow 456. They're more than three times as likely to have tweeted about politics in the last 30 days, as compared to the bottom 90 percent. 

While most analysis of Twitter use is largely done by analyzing publicly available data, the Pew researchers required participants to both complete a survey and provide them with their Twitter handle. 

The data provides significant insight into how Americans are using Twitter as the service is driving much of the political conversation and news cycle, especially as President Trump leverages the service from the Oval Office in unprecedented ways. The study's authors, Stefan Wojcik and Adam Hughes, tell me it's important to highlight the delta between reality and what's happening on Twitter. 

“The conversation that’s happening on Twitter might not be the same one that’s happening across America,” Hughes said. 


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— Tech news from the public sector:

Facebook Inc. said it struggled to identify the video of the New Zealand mosque shootings because of the use of a head-mounted camera by the gunman, which made it harder for its systems to automatically detect the nature of the video.
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The GDPR is the world's toughest standard for data privacy. But nearly a year later, its chief enforcer has yet to take a single action against major tech firms like Facebook and Google.
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— Tech news generating buzz online:

The organization issued new guidelines for kids under five on how they should interact -- or avoid -- electronic screens.
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Hollywood studios that licensed old TV shows to Netflix are getting into streaming and want their hits back. It’s a threat to Netflix because its viewers spend much of their time watching reruns.
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