Policy snapshot: Technology, media and telecom
by RSM US LLP
INSIGHT ARTICLE |
Joe Biden is the projected winner of the presidential election, while control of the Senate will be won only by a slim margin following runoff elections for Georgia’s two seats in January. What does a divided government mean for the middle market? RSM is looking at the policy implications and key issues for various industries. This is one in our series of industry-focused outlooks for a Biden administration.
According to Joe Biden’s plan:
We expect the Biden administration will bring heightened oversight of anti-competitive behaviors as well as a renewed focus on the privacy and security of user data. This issue is already at the fore among many lawmakers: An in-depth U.S. House Judiciary Committee report from early October investigated competition in digital markets and offered recommendations on how lawmakers can “address the rise and abuse of market power in the digital economy” and strengthen antitrust laws. Biden has said he will support stricter antitrust oversight and online privacy rules.
We expect continued calls for reform regarding Section 230 of the Communications Decency Act, which provides internet companies with liability protection for content created or posted by users. Members of both political parties have called for the repeal of Section 230, and Biden has stated that Section 230 “should be revoked.”
What a closely divided Senate means for tech, media and telecom:
The antitrust lawsuit that President Trump’s Department of Justice recently filed against Google will continue to be a major focus for the industry, regardless of its outcome under the Biden administration. We expect a divided Senate may present hurdles to and decrease the likelihood of any efforts from the Biden administration to impose new regulations on Big Tech companies.
We expect the race among Big Tech companies vying to become market leaders will continue to intensify as data becomes increasingly valuable, and that Biden’s administration will seek to address antitrust issues that accompany that race. Data protection and security will continue as top concerns for U.S. regulators once Biden takes office, though we expect a divided Senate would decrease the likelihood of regulation in this area. The industry may also undergo policy shifts that don’t require legislative action, such as potential changes to net neutrality rules; Biden’s administration would likely reinstate the rules that Trump’s Federal Communications Commission repealed in 2017.
In recent years, finding talent has been a major challenge for technology companies, and restrictive immigration rules put in place by executive order during the Trump administration have amplified this challenge. Biden would be able to reverse such policies through executive orders; his campaign website notes that he “will work with Congress to increase the number of visas awarded for permanent, employment-based immigration,” but a Republican-led or 50-50 Senate would likely present hurdles.
What room for growth or evolution exists in tech, media and telecom?
Depending on what happens with antitrust and diplomatic negotiations, tech firms may find themselves in regulatory crosshairs, requiring them to pivot quickly to remain compliant. Businesses should review their forecast growth plans and data security practices to prepare for changes that may ensue. We expect the Biden administration will likely reverse tax guidance requiring expenditures associated with research and development activities to be capitalized post-2021. A return to an allowed deduction would benefit tech firms across the board, from startups to mature firms. These companies will likely face higher tax rates, so the ability to deduct these expenses will be an incentive to continue R&D efforts.
Media companies will need to continue adapting to an environment in which consumers’ entertainment consumption habits have rapidly evolved in the face of stay-at-home orders, especially if the latest pandemic surge continues. Technology and telecom companies will continue to be critical in supporting the explosive growth of the remote workforce over the last year. Also of note, Biden has expressed interest in investing upwards of $20 billion to enhance broadband infrastructure across more rural parts of the country.
While tensions between the United States and China may improve under a Biden administration, it is likely that U.S. technology companies will continue to have to consider the impact of tariffs on their global supply chains.
Questions that frame the path forward:
- What will the new administration mean for data security and privacy regulations?
- Will the next four years bring any changes related to net neutrality rules?
- How will the pandemic continue to shape the media industry and the way people consume entertainment?
- How will tech and media companies that advertise on Big Tech platforms adapt if Big Tech companies get broken up or face other changes as a result of antitrust issues?
- Will the new administration take a different approach toward China and seek to work more collaboratively on the concerns of government oversight of tech companies? Or will current questions about the national security risks posed by tech companies remain and continue to affect the entire tech ecosystem?
- If acquisitions by major tech companies continue to attract the attention of federal regulators for antitrust concerns, the exit strategies for venture- and private equity-backed technology firms will need to adapt. If acquisition by one of these large companies is less likely, what other exit strategies will tech firms need to consider?
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This article was written by Kurt Shenk, Victor Kao, Davis Nordell, David Stuart and originally appeared on 2020-11-23.
2020 RSM US LLP. All rights reserved.
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