The behaviour of the default activity is different depending from where the activity is being created.
If going to C360 → Create →Activity, the 1st choice is set as default
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If going to C360 → Timeline → Add activity it doesn't
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It make no sense that they behave differently, especially considering that most of the time end users use the latter.
I submitted a support ticket and was told that the PM team confirmed they will be proceeding as an enhancement request and standardize the functionality across Timeline pages for productization.
As suggested, here I am submitting the idea.
Thank you,