Three internets

United States, EU, China

One of the most compelling predictions for the future of the internet comes from Eric Schmidt, the former Executive Chairman of Google. According to Schmidt, the internet is going to “bifurcate” into a US-led internet and a competing China-led internet. Schmidt also sees China’s “Belt and Road Initiative” as the beginning of a Chinese-led sphere of influence both in the physical- and digital worlds.

The European Union has also showed signs of wanting to create its own set of rules for anyone wanting to access its digital single market. In addition to GDPR, which was implemented last year, the EU is also in the process of passing a “Directive on copyright in the Digital Single Market”, which like GDPR would create a new legal environment with several ambiguities only to be clarified later in courts.

Rising tensions and willingness of regulators worldwide to control the internet have caused a series of developments counteracting the original idea of an open, decentralized internet. The reasons vary from legislation to another, but I argue that protectionist tendencies seem to be an overarching theme from Brussels to Beijing.

China

Early signs of divergence of the internet could be seen in China’s “Golden Shield Project”, which was deployed in 2003. A few years later, with the infamous “Great Firewall of China”, access to popular foreign websites started to get blocked. The background of Chinese willingness to curb online activity could stem from the late Chinese leader Deng Xiaoping, whose favorite sayings included: “If you open the window, both fresh air and flies will be blown in.”

China doesn’t only block access to popular Western sites, but also regulates server access in Mainland China. The high barriers to access Chinese internet users become clear to anyone using VPN:s in China to access blocked sites: when connected to a VPN the Chinese internet becomes nearly unusable, thus forcing users to choose “which internet” they want to be connected to at any point of time.

The consequence of Chinese internet regulation for the vast majority of major foreign internet companies has been that they have ceased operations in the country, only leaving a handful, such as LinkedIn and Bing, willing to follow a list of requirements in order to stay online.

The most interesting China efforts by foreign companies have probably been those of Google and Facebook, which both have recently chosen to take another look at the country and its 800 million internet users.

Google

Google was complying with Beijing by censoring its search results until 2010, when it announced it was pulling out of the country after a series of cyber attacks. After the announcement, its Chinese site google.cn started to display a link to Google Hong Kong, which also added support for Simplified Chinese. The move forced Chinese internet regulators to manually blacklist search terms. Only services not requiring censoring such as Maps and Translate are still online under the google.cn -domain.

After years of effectively ceasing operations in Mainland China, The Intercept reported in August 2018 that Google had revamped its efforts in China by planning to release a censored search engine with a project codenamed “Dragonfly”. The search engine would have forced users to register with a Chinese phone number, which are only obtainable with a Chinese ID or a passport, thus revealing users’ identities. The report started a sizable backlash both internally and externally against the company, forcing it to “effectively end” the project.

Facebook

Facebook was accessible to users in China, until it was blocked in the aftermath of protests in Xinjiang province in 2009, together with 1.3m other sites in the following year. Its founder Mark Zuckerberg’s fondness of getting back to China has not remained unnoticed. The latest developments of Facebook’s efforts of getting back to China has been the establishment of a subsidiary called Lianshu Science & Technology (Hangzhou) — Lianshu (脸书) being a literal translation of “face book”. However, Facebook’s plans seem to be far from being realized anytime in the near future.

Currently, it looks like the only strategy for Western organizations to have access to Chinese internet users is setting up a joint venture together with a Chinese technology company, walling Chinese users in a censored and integrated — or completely separated — bubble, and closely following orders from internet regulators in Beijing.

Only few Chinese companies have been able to expand globally. One of them, WeChat, spent years trying to expand to India, only to be defeated by WhatsApp. WeChat mostly remains used only by Chinese or people with connections to China. Maybe the first real breakthrough of a Chinese internet company worldwide was the app TikTok, owned by ByteDance. Interestingly enough, TikTok is a completely separate app from the Chinese version — DouYin (抖音), thus following the separate bubble strategy.

TikTok and DouYin

The question about whether or not to try to access the Chinese internet is a tough one, but it’s becoming clear that for any company the only way is going to be full compliance with Chinese officials. An interesting take on the issue comes from a Twitter user I found recently:

European Union

One of the European Union’s fundamental objectives since the days of the European Economic Community has been creating a European Single Market, with harmonized regulations and low market barriers between its member countries. In the online world it has meant that policymakers in Brussels have aimed to create an online business regulation framework called “Digital Single Market”.

via the European Commission

The Digital Single Market would, according to the European Commission, aim at improving:

  • Access: For example, making digital content available throughout the EU by eliminating regional restrictions for content
  • Environment: Creating a level playing field for online businesses
  • Economy & Society: Maximizing the growth potential of online businesses

In practice, the DSM strategy has meant a number of new directives and regulations (directives being a legal tool requiring member states to reach a goal stated in the directive with national legislation before a deadline, whereas regulations are automatically legally binding throughout the Union) moving the barriers from between the EU countries to the border of the Union.

ePrivacy — Cookie consent

The most noticeable of the directives regulating the online world came in 2011, when the so-called “ePrivacy Directive” was adopted by all EU countries in May 2011. One of its goals was to make users able to control their privacy when visiting websites, such as giving the option to opt out from cookies.

In practice, cookie banners have become a forced nuisance while browsing the web. Many websites have chosen to give their users the option to consent to cookies or the “option” to not consenting to cookies and leaving the site.

The ePrivacy Directive is planned to be replaced with ePrivacy Regulation in 2019 with clarifications on cookie consent and other rules.

GDPR

The General Data Protection Regulation came into power in May 2018, and constitutes a framework of privacy controls to European consumers. In practice, it meant tens of emails in the weeks and days preceding the deadline in May from companies not wanting to be liable to the massive fines the regulation imposes. The GDPR — as opposed to many of the other directives and regulations — was largely welcomed by EU citizens.

EU Copyright Directive

The most controversial part of EU’s DSM strategy has been the new copyright directive, more specifically its Articles 11 and 13.

In short, Article 11 would extend publishers’ copyright not only to the articles they produce as a whole, but also snippets and headlines used in news aggregators, such as Google News.

Article 13, in turn, would make for-profit online platforms responsible to remove works identified by rightsholders “expeditiously”, and demonstrate that “best efforts” have been made to “prevent their future availability”.

The articles have been seen as threatening online expression and access to news through aggregators by threatening online platforms with sizable fines for misconduct. The European Commission has responded to critics of the directive by reassuring that the new directive would not ban caricatures, memes or other reproductions of artistic works.

Implications

More interesting than the details of Chinese or European regulation of the internet, however, is the reasoning and implications of those actions. In China, harmony and stability have for long been key values of the leadership, and an unregulated internet is seen as a threat to the stability of the country.

A more cynical view is that as the share of digital economy of the economy as a whole is surging, regulating online businesses is a new effective and implicit way of imposing trade restrictions on foreign countries, more specifically, the United States. For instance, in China, the usual cycle of a new US online platform is as follows:

  1. Product launches in the US
  2. Gains traction in China
  3. Local competitor emerges
  4. Gets blocked in China
Side-by-side comparison of Renren (人人网) and Facebook in 2012 (via cctime.com)

The European perspective is somewhat different from the Chinese, with noble goals such as user privacy, the European Single Market, and fostering competition. However, to really understand the situation one should look at the list of largest internet companies, which paints a grim picture of European competitiveness in the internet era. Only 2 European companies are among the 20 largest companies by revenue, with the top positions being split between China and the United States exclusively.

The Copyright Directive was heavily lobbied by legacy media outlets such as the German media empire Axel Springer. To them, Facebook and Google are the main culprits of the deterioration of their business models, and need to be taxed in order to give back some of their lost power.

Also, the implementation of the European Digital Single Market has proven to be problematic. GDPR may have faced little criticism from consumers, but for emerging upstart online businesses it’s causing significant trouble. With fines, ranging from “up to €10 million or up to 2% of the annual worldwide turnover” for the last year — whichever is higher — for minor infringements, or “up to €20 million or up to 4% of the annual worldwide turnover” for major infringements, it’s clear that innovation will suffer as only major incumbents have the resources to comply with all of the rules. A similar problem faces small publishers with regards to Article 11 of the Copyright Directive: according to a study by VG Media — a German copyright collection group, Axel Springer would receive 64 percent of the revenue generated by the new directive, while small publishers would receive 1 percent.

In the United States, internet companies such as Facebook have been heavily criticized for the spread of misinformation, lack of competition and privacy issues among others, but much more attention should be paid to the implications of diverging internet bubbles. The CEO of Youtube, Susan Wojcicki warned that Article 13 could lead to EU residents simply being cut off of the service. Of course, coming from an industry representative, the blog post should be read as a lobbying effort, but if the industry leader in copyright infringement tools is worried about the future one can imagine what it means for smaller upstarts.

Some have proposed decentralization with peer-to-peer networks and VPN:s as an antidote to diverging internets and increasing lack of freedom online. If the European Union proceeds with its strategy which pays little attention to internet users or the changing business models of the media and the way global culture is created online, it might be the only solution.