Apple in talks with Comcast to allow 'special treatment' for streaming-TV

Comcast in talks to acquire Time Warner Cable for more than $45bn Photograph: Justin Sullivan/Getty Images

Consumer groups reacted angrily Monday to news that Apple is reportedly in talks with cable giant Comcast to launch a streaming-television service that would give Apple special treatment and bypass congestion on the web.

The discussions, first reported by the Wall Street Journal, are in early stages, and many hurdles remain. If a deal is struck, it would be the second time this year that Comcast has made special arrangements for a tech company after February’s announcement of a special deal with Netflix, the largest video streaming service.

According to the Journal, Apple’s intention is to allow users to stream live and on-demand TV programming using Comcast’s own network rather than the public internet.

The newspaper reported that Apple has asked for a separate “flow” for its traffic. It has not asked for its service to be prioritized over any other service, a situation that would challenge “net neutrality” – the concept that everyone should have open and equal access on the web. But consumer groups charged that Comcast was using a loophole to circumvent the open access rules.

Derek Turner, research director at internet rights lobby group Free Press, said: “This is very concerning. This is what happens when you have one major company that is effectively the owner of the internet and a major player in pay TV. This deal and the one with Netflix suggest that Comcast is going to make its own competition pay the quality of service they want for their services.”

“The promise of the internet is competition,” he said. “If you are not already a major player, it’s going to be very hard raising money to compete in the pay TV business. And for the major players, their costs are about to rise and will be passed on to their customers.”

Michael Weinberg, vice-president of consumer rights group Public Knowledge, said the deal was clearly in its early stages but it still presented a “huge problem for an open internet.”

“The idea that a company that wants to launch a service that competes with Comcast needs Comcast’s approval is worrying,” he said.

Apple chief executive Tim Cook has long made clear he has grand ambitions for TV. So far the company’s TV efforts have been disappointing, but earlier this year he told shareholders that Apple TV, its set-top box business, had sales of $1bn in 2013 and was no longer a “hobby”.

Streaming services using the public internet can suffer over the "last mile" – the portion of a cable network that connects to customers' homes – when too many people access too much bandwidth at the same time.

Comcast was ordered to uphold net neutrality until 2018 after its takeover of NBC Universal. The largest cable provider is also in takeover talks with Time Warner, the second largest cable provider, and consumer groups are already up in arms about the likely impact on competition.

The Federal Communications Commissions’ (FCC) conditions have an opt out for “managed” services that could allow Comcast to circumvent the net neutrality issue.

The US court of appeals threw out an earlier set of net neutrality regulations the FCC had in place in January, ruling that Comcast. Verizon and others were entitled to make deals with Netflix, Amazon and others to pay for faster services.

FCC chairman Tom Wheeler has expressed concern that tiered access to the web could mean entrepreneurs are “unfairly prevented from harnessing the full power of the internet.” The regulator is currently drafting new rules aimed at blocking internet service providers from slowing services for content providers that don't pay a toll.

Turner said the Netflix deal and the emerging terms of any Apple agreement suggested that Comcast had found “very large holes” in the FCC’s net neutrality ruling. He said the FCC should reassess its rules on open internet access in the light of Comcast’s latest moves.

“The FCC should be encouraging abundance rather than increased profits through the creation of artificial scarcity, he said.

JP Morgan China chief executive leaves as US investigation continues

The headquarters of JP Morgan Chase & Co in New York. Photograph: Mike Segar/Reuters

The chief executive of JP Morgan Chase’s China investment banking arm is leaving, according to an internal memo disclosed on Monday. His departure comes amid a US investigation of the bank’s hiring practices in Asia.

Fang Fang, 48, a Chinese citizen who has been with JP Morgan for more than a decade, is a key figure in an ongoing investigation into the bank’s hiring of the sons and daughters of prominent Chinese officials. He had strong ties to the Chinese government and served a five-year term with the Chinese People's Political Consultative Conference, from 2008 to 2013.

The US Justice Department is investigating JP Morgan under the foreign corrupt practices act (FCPA), which bars American companies from giving money or other valuable items to foreign officials in order to win business.

The bank did not disclose the reason for his decision to leave. “Fang Fang has informed us of his desire to retire,” Therese Esperdy, co-head of Asia-Pacific corporate and investment banking, said in the memo. Fang is expected to leave immediately.

Fang’s deputy, Frank Gong, will be promoted to chairman from vice-chairman, according to the memo, which was obtained by Reuters on Monday. Brian Gu and Jing Zhao will become co-heads of investment banking for China.

US authorities are examining a programme, originally called “sons and daughters”, that was supposed to give the bank key advantages as it built its business in China. The scheme allegedly favoured applicants from prominent Chinese families over other potential hires, which if proved would likely be a violation of the FCPA.

JP Morgan's hiring of the son of China Everbright Group chairman Tang Shuangning was among the problematic hires now being investigated by the US authorities, according to the Wall Street Journal. China Everbright is a state-owned financial services group. According to the Journal, JP Morgan has provided US prosecutors with emails from Fang discussing the hire.

Last November the bank withdrew from underwriting the initial public offering of China Everbright Bank on the Hong Kong stock exchange. It has also pulled out the IPO of a Chinese chemical company and did not seek a role in the sale of a Chinese state-owned train maker, as a result of the sons and daughters investigation.

JP Morgan is not the only bank under investigation over its Asia hiring practices. Other firms under scrutiny include Citigroup, Goldman Sachs and Morgan Stanley and UBS.

Energy watchdog Ofgem fails to challenge Big Six suppliers' dominance

Caroline Flint has called for robust action to rebalance market in consumers' favour. Photograph: David Gadd/Allstar/Sportsphoto Ltd./Allstar

Ofgem, the energy watchdog, has failed to make inroads into the market dominance of the Big Six suppliers over the last five years – an omission that many believe is responsible for soaring domestic power bills – figures published today show.

The numbers from the Department of Energy and Climate Change (Decc) come alongside an appeal from the consumer champion Which? and the Federation of Small Businesses for a full competition inquiry into what they describe as a "broken" energy market.

A preliminary review by Ofgem and other City regulators into the dominance of firms such as SSE, E.ON and British Gas is expected to be published on Thursday and recommend a deeper probe by the Competition and Markets Authority (CMA). Caroline Flint, the shadow energy and climate change secretary, warned that such a probe would have the confidence of consumers only if it came up with robust action to rebalance the market in their favour.

The Decc numbers, provided to and published by Flint after a written question in parliament earlier this year, show a market that is next to static. SSE, E.ON and RWE npower hold exactly the same market share in gas now as over five years ago, 15%, 13% and 12% respectively. British Gas, by far the largest of the Big Six suppliers, held 44% of the gas market in December 2007 and still held 40% by December 2012, while EDF saw its share rise from 7% to 9%.

The electricity picture is similar, with British Gas increasing its share of the market from 22% to 25% over the five-year period, while E.ON dropped 1% and EDF and Scottish Power held their shares steady at 13% and 12%.

In both gas and electricity markets, the Big Six control 99% of the business, although that figure should have dropped since as the November price rises highlighted the benefits of moving to smaller independent companies.

First Utility, Ovo, Ecotricity and other new suppliers have repeatedly argued their ability to grow their market share is being thwarted by the dominance of the Big Six and the anti-competitive nature of the market.

Flint, who has promised a radical shake-up if Labour return to power in 2015, said consumers needed to be given new confidence that the prices they pay are fair. "Anything that can help shine a light on the workings of the energy market is welcome. But consumers will be rightly disappointed if the government uses this review as an excuse to kick the problem of rip-off energy bills into the long grass. We have hardly been short of reviews of the energy market in recent years – but what has been missing is decisive action to protect consumers.

"Our plans will break up the big energy companies, put an end to their secret deals and make tariffs simpler and fairer. And until these reforms kick in, we will put a stop to unfair price rises by freezing energy bills until 2017, saving the average household £120."

Richard Lloyd, executive director of Which?, and Mike Cherry, national policy chairman at the Federation of Small Businesses, urged Ofgem, the CMA and the Office of Fair Trading to refer the energy market for further assessment, claiming that nine out of 10 consumers would support this.

In joint letters to the three watchdogs to be sent out on Monday, they say: "Top of our concerns is the need to increase competition and make trading transparent. For too long the lack of competition in the energy market has not been addressed. It is now time for radical changes that deliver an effective, competitive market that delivers for everyone, before the scale of this crisis grows."

Russian spending in London down 17% since Ukraine crisis, survey says

Wealthy Russians shop in Knightsbridge. Photograph: Gary Calton/Network Photographer

Russian spending in British shops and hotels has dropped by 17% since the political crisis in Ukraine began and the value of the rouble started sliding, figures show.

Visitors from Russia remain one of the biggest-spending groups among foreign shoppers, splashing out an average of £669 in each transaction, according to a survey by the shopping and tourism company Global Blue.

But the fall in spending in the UK in February, compared with the same month in 2013, saw them drop to fourth place among non-EU shoppers, behind Nigeria.

Gordon Clark, UK manager of Global Blue, said: "The unstable situation in Russia has shown its effect on tourism spend this year as the weakening economy leaves shoppers disinclined to travel."

But he added that wealthy Russians continued to be drawn to British luxury brands.

The high-end shops of Bond Street and Kensington are unlikely to feel the pinch: foreign tourists from the Middle East, the largest-spending group, spent 31% more than last year, while Chinese tourists increased their spend by 23%.

Global Blue said growth in Russian tourism could slow in the near future but the long-term forecast was positive.

Meanwhile, the Open Europe thinktank argues that Russia's importance to the City of London has been overstated. Analysis from Open Europeindicates that Russian investment in London is worth £27bn, representing just 0.5% of total assets invested in London. Only 1% of the UK's financial services are exported to Russia, compared with 6% exported to Switzerland and 28% to the EU.

Around 70 Russian companies are listed on the London Stock Exchange, but these account for only 4% of all listings. The thinktank said severing credit lines for Russia's state-owned companies and banks could be an effective way to put pressure on Moscow.

How F1 and champagne might help us solve global warming

David Coulthard of McLaren and Eddie Irvine of Ferrari celebrate coming first and second at Silverstone in 1999. Photograph: Dave Caulkin/AP

Pension saving is on the increase in Britain. The rise has nothing to do with George Osborne's budget last week but is the result of employees being automatically enrolled in company schemes if they are over 22 and earn more than £9,440 a year.

Previously, employees had to opt-in to workplace schemes, so fewer did. Millions more will save for their retirement as a result of this relatively small change.

The former cabinet secretary Gus O'Donnell is a strong believer in behavioural economics. He says, for example, that the Treasury could vastly increase its tax take with a small change to the self-assessment forms sent out by Revenue and Customs.

At present, an individual fills in the form and on completion signs the form. Lord O'Donnell says the warning that false declarations can lead to prosecution should be put in big block capitals at the top of page 1. That would immediately alert people to the risks involved in trying to cheat the taxman and lead to billions of pounds of extra revenue.

This is an example of "nudge" economics. A shove in a certain direction can often have dramatic results. Humans are complex and don't always behave in the way economic textbooks say they should. Sometimes they override the rules of supply and demand. Sometimes they have to be persuaded by outside agencies to act in a certain way.

In France, there are around 15,000 growers of grapes for 66 champagne houses. The industry is geographically concentrated and the grapes vary little in quality. With this sort of homogenous product, you would expect each of the 66 houses to pay the same market price for its grapes.

Not so, according to a paper by Amandine Ody-Brasier of the Yale management school and Freek Vermeulen, of the London business school. The grape sellers have a certain idea of what a champagne house should look like, and are prepared to punish those that don't match up to expectations with higher prices for their raw materials.

What the growers like are houses run by a descendent of the founder, those located in one of the traditional champagne villages with a long history of producing bubbly. What they don't like are newcomers to the industry, those houses owned by a corporate group, those that supply supermarket brands, those that operate winemaking subsidiaries abroad, or those that try to buy their own vineyards. Moët & Chandon can expect to pay more for its grapes than Pol Roger because it is owned by the luxury brand conglomerate LMVH.

One grower quoted in the paper sums up the distaste for the arriviste houses. "Some of these firms, they come and go. Who knows for how long they're here, where they'll be in 5 or 10 years? They would leave tomorrow if they stopped making money. They don't care about champagne."

The paper shows that the price differences paid by champagne houses are quite substantial, with a gap of several euros at an average price of €9 (£7.5) per kilogram. Now, it could be argued that champagne is a special case. Global demand is rising and it can only be supplied from one area of France. Growers make tidy profit margins and can therefore afford to behave with Gallic disdain toward those for whom they do not care. But economics theory suggests that the growers will be seeking to maximise their profits rather than offering discounted prices to Krug simply because the house was founded in 1843. This is not the case, and it is the result of market forces being tempered by social norms rather than by a cartel. As the paper notes, "the prices different organisations are charged for their purchases depend substantially on whether they meet local expectations for who they are and what they do. Our qualitative evidence confirms that this differential pricing by growers occurs not through collusion but through a spontaneous bottom-up process."

For some reason, a Formula 1 grand prix ends up with the winner being drenched in champagne and it is the motor racing industry that provides the second example of how economics works. This time, though, the lesson (provided courtesy of John Llewellyn of Llewellyn Consulting) is about how regulation can prompt innovation.

Three years ago, the F1 authorities announced big changes to the rules governing engine size and fuel capacity. By this year, 2.4 litre normally aspirated V8 engines had to be replaced by 1.6 litre turbo-charged engines – a one-third cut in capacity. Simultaneously, fuel consumption – hitherto unlimited but averaging 160kg per race – had to be reduced to 100kg.

Lots of smart technologists and engineers work for the F1 industry and the new regulations forced them to find ways of making cars more fuel efficient without loss of power. They recognised that in an internal combustion engine only around one third of the fuel used actually propels the car, and went about recovering some of the lost energy.

As a result, this year's F1 cars have two new energy-recovery systems: kinetic energy released when Sebastian Vettel slams on the brakes is converted into electrical energy; and energy formerly lost through the exhaust is turned into electrical energy.

As Llewellyn notes, the boffins have done an amazing job. The old V8 engines produced more than 750 brake horsepower, but the one-third smaller V6 engines produce 600 bhp (only 20% less). In addition, the energy recovery systems are designed to provide an additional 160bhp for 33 seconds every lap. So the new engines will produce as much power as the old engines, using 40% less fuel.

This is not just a matter that should interest petrol heads. Llewellyn says applying this technology to everyday motor vehicles could cut global oil consumption by 2% or more a year. "But this F1 experience has a deeper significance: it shows what clever people can do when motivated."

Sometimes the motivation is money. Sometimes it is just plain curiosity. But quite often, clever people have to be pointed in the right direction. "This typically requires that government be involved: to identify the problem; specify it; corral key people; offer the prize; provide funding. Witness the second world war, which on that basis produced radar, radio navigation, the jet engine, rocketry and nuclear energy," Llewellyn says.

Could the same approach help in the fight against global warming? Yes, of course, but only under certain conditions. Governments have to be fully committed – as they are under war conditions and sometimes (the space race) in peace time too. They need to learn the lessons of auto enrolment, the champagne industry and F1. And be prepared to shove as well as nudge.

Chinese manufacturing slows again – but markets up on stimulus hopes

Activity in China's factories slowed for a fifth straight month in March, a survey by HSBC showed on Monday. Photograph: William Hong/Reuters

Chinese manufacturing activity slowed again in March to its weakest rate in eight months, data showed Monday, the latest indication of slackening growth in the world's number two economy.

The data is the latest in a string of weak indicators out of Beijing, with analysts suggesting the government could announce a series of measures to inject life back into the Asian powerhouse.

Shares in Hong Kong and China rose on the hope of more stimulus. The Hang Seng Index was up 1.1% at 21,673.21 points, its highest since March 13 while the Shanghai Composite Index was up 0.5% at 2,057.70 points.

Australia's ASX share index was also up and the Australian dollar, seen as a proxy for the Chinese economy because of the two countries' close trading ties, dipped before recovering as investors shrugged off the news.

"It (the flash PMI) was another bad sign the Chinese economy is softening. It was pretty much expected, so a lot of investors are looking for the Chinese government to roll out some meaningful stimulus on infrastructure or urbanisation themes," said Jackson Wong of Tanrich Securities in Hong Kong.

HSBC's preliminary purchasing managers' index (PMI), which tracks manufacturing activity in China's factories and workshops, fell to 48.1 from a final reading of 48.5 in February, the British bank said in a statement.

The figure is down from 49.5 in January and was the worst result since July's 47.7, according to the bank. The final figure is due out on April 1.

The index is a closely watched gauge of the health of the Asian economic powerhouse and key driver of global growth. A reading above 50 indicates growth, while anything below signals contraction.

China's National Bureau of Statistics said earlier this month that its own official PMI reading fell to an eight-month low of 50.2 in February.

The latest figure "suggests that China's growth momentum continued to slow down" in March, Qu Hongbin, HSBC's Hong Kong-based chief China economist, said in the statement.

"Weakness is broadly based with domestic demand softening further," he added.

HSBC expects Chinese authorities to take policy steps to stabilise the economy, with actions including easing barriers to private investment, spending on urban railways, public housing and fighting air pollution, as well as "guiding lending rates lower", Qu said.

Other economists also expressed concerns, pointing out that the March figure usually benefits from a cyclical boost.

"The weakness appears even more pronounced given that there is usually a seasonal rebound after the Chinese New Year holiday," Capital Economics Asia economist Julian Evans-Pritchard said in research note.

China's annual lunar new year holiday fell in February this year.

The HSBC result came as concerns have been rising over the outlook for China's economy this year on the back of a series of soft announcements.

This month the government said industrial production for January-February rose at its slowest pace since 2009, while retail sales grew at their weakest rate in three years.

A snap AFP poll of economists earlier this month saw a median forecast of 7.4 percent economic growth in China this year.

The government this month set its annual growth target at 7.5 percent, the same as that set last year. If the actual result comes in below it would be the first time in 16 years that the objective had not been reached.

Premier Li Keqiang said at his annual press conference this month that the economy was set to "confront serious challenges this year".

The economy grew 7.7 percent in 2013, the same as in 2012 - which was the slowest rate since 1999.

"The government needs to take quick action in view of its growth target of about 7.5 percent," Barclays Capital said in an analysis of the PMI data.

Zhang Zhiwei, economist at Nomura International in Hong Kong, expects leaders to cut the amount of funds banks must keep in reserve in the second half of the year - a step they have used in the past to boost liquidity.

He also expects fiscal policy to turn "expansionary" in the second quarter to prevent gross domestic product growth from falling below 7.0 percent.

Evans-Pritchard of Capital Economics, however, said authorities were unlikely to take significant stimulatory action.

"Today's weak PMI reading is the latest sign that slowing credit and investment growth are weighing on domestic demand," he wrote.

"That said, with no sign of stress in the labour market, the slowdown does not yet appear to warrant a significant stimulus response."

Li emphasised at his news conference Beijing has a flexible view of the annual target, saying growth "needs to ensure fairly full employment and needs to help increase people's income".

Independent Scotland's finances at risk from oil slump, say economists

A BP oil platform off Aberdeen. North Sea oil revenues are forecast to fall to £5bn this year. Photograph: Andy Buchanan/AFP/Getty Images

Alex Salmond has been warned by economists that an independent Scotland's finances are likely to be significantly worse than the UK's after a slump in North Sea oil production.

Economists at the University of Glasgow said the latest oil tax forecasts from the Office for Budget Responsibility (OBR) in London suggested that Scotland's public spending deficit would probably be about £1,000 worse per person each year than the UK's until 2018.

In a new report, the university's Centre for Public Policy for Regions (CPPR) said the Scottish government needed to publish its own updated forecasts to set out the implications of that decline for future spending – a request the Scottish government did not respond to on Sunday.

An ICM opinion poll for the Scotland on Sunday newspaper confirmed that support for independence has increased in recent months, just as the Scottish Labour party ended its three-day spring conference in Perth.

John MacLaren, one of the CPPR report's authors, said Scotland's financial advantage after several years of buoyant oil revenues was beginning to disappear after two successive years of far lower oil tax receipts.

With this year's oil revenues expected to be less than £5bn – compared with £11bn two years ago – and due to continue to decline, Scotland's far larger spending and tax deficit from the onshore economy was becoming a more significant issue, MacLaren said.

Over the next five years, the onshore deficit would exceed the UK's by about £1,500 per capita each year until 2018‑19 because of higher per capita public spending. Based on those calculations, spending would need to be cut, or taxes and borrowing would need to rise.

"The Scottish government's fiscal commission said we should be aiming for an onshore fiscal balance, so we can use the oil for an oil fund," MacLaren said.

"Unfortunately income from the North Sea is needed just to pay for what's currently being spent. But as the OBR figures show, going forward that won't always be the case."

The Scottish government said oil production was expected to increase from 1.4m barrels a day to 1.7m in 2017. "We expect that record North Sea investment will lead to an increase in revenues in coming years," a spokeswoman said.

Mirroring increases in the yes vote from a majority of recent polls, the latest ICM survey found that the gap between yes and no, excluding don't knows, had closed by four points to 45% in favour of leaving the UK to 55% against.

It also found there was significant scepticism that a no vote would lead to more significant power for Holyrood, with only 39% of voters certain that would happen, while 10% of no voters would switch to yes if they believed Holyrood would not get further powers.

That suggests voters are unimpressed by Scottish Labour's new proposals, published just as the polling was being carried out, to increase the Holyrood parliament's control over income tax and give Scotland control over housing benefit.

Buoyed by the rise in support, Nicola Sturgeon, the deputy first minister, is due to tell an audience in Cardiff on Monday that a yes vote would allow Scotland to rectify a democratic deficit by drafting a written constitution that would "energise and inspire people across the country".

In a speech to mark two years until the Scottish National party's proposed independence day in 2016, Sturgeon will add: "Independence is not a historical argument, it is the opposite: a live and vital opportunity to chart our own course, to give us the power to determine our own future and build the kind of country we can all be proud of."

The no camp was meanwhile boosted by new interventions against independence from the US-owned investment company BlackRock and from Archie Norman, the former Tory minister who is now chairman of the investment bank Lazard UK and chairman of ITV.

Dismissing the SNP's case for independence as "a few windmills and hydropower", Norman said businesses in both Scotland and England had "a huge vested interest in the UK staying together", in an article for the Sunday Telegraph.

"Wherever business people stand personally on the issue, a separate Scotland would almost certainly result in more complexity, more regulation and greater uncertainty," he said. "So, business leaders need to express a view and so long before panic sets in."

BlackRock, which employs about 530 people in Edinburgh, said a currency union between the UK and an independent Scotland would be "infeasible", while interest rates would rise, financial institutions would head south to England and savers would move deposits to UK banks.

The Treasury's insistence that a currency union would be damaging to the UK's interests were dismissed as dishonest and full of "errors of logic" by Professor Leslie Young, an economist at Cheung Kong business school in Beijing.

In an analysis for the Scottish businessman Sir Tom Hunter, Young said a currency union could easily be made to work, in part because Scotland's large banks and finance houses were likely to move to London after independence, greatly lessening the risks that Scotland could be bankrupted by a future financial crisis.