Unplugging the Global Internet: Opportunity or Threat?
Autocratic countries, i.e. China, Iran and now Russia, have started a trend of partitioning, firewalling their internet from the WWW. What does this mean for the future?
T’was the night before Christmas ‘19, when all through the house
Not a creature was stirring, not even a mouse;
The internet was unplugged quietly with care,
In hopes that Putin would feel more in control there;
On Dec. 24th, 2019, slipped into the news among the anticipation of Christmas, Russia announced it had successfully tested a country-wide alternative to the global internet.
What is an Alternative to the Global Internet?
A country-wide intranet or “sovereign internet” restricts the points at which the domestic version of the net connects to its global counterpart, giving the government full control over what its citizens can access and view.
The most prominent global examples of this type of sovereign internet are the “Great Firewall of China”, which block access to selected foreign websites and to slow down cross-border internet traffic, and Iran’s National Information Network, which allows access to web services while policing all content on the network and limiting external information.
While many countries have used legislative actions and ISP agreements to censor certain parts of the internet, i.e. Turkey has blocked access to over 245,000 websites, according to the Istanbul Freedom of Expression association, making Turkey one of the world’s most restrictive countries for the internet, these restrictions can be bypassed via VPN (Virtual Private Network) services. Russia’s approach is to effectively create an alternative system, a walled-garden that cannot be circumvented via VPN.
While China, Iran and Russia, as similar heavy-handed, autocratic countries that have an invested interest in controlling public opinion and information flow in order to maintain power, being trend leaders on this front is not surprising, it is interesting to surmise whether this will become a growing trend. For example, will other autocratic-leaning countries such as Saudi Arabia, Turkey, or Kyrgyzstan want to establish similar systems? Will China, Iran or Russia start offering the sovereign internet as a SaaS product in the near future?
And if so, what does this mean for the future of the global internet?
Let’s take a look at both sides of the coin, opportunity and threat.
Unplugging the Global Internet: Opportunity
Distributing the Unicorns
The Great Firewall of China has been a massive boon to the growth of Chinese technology startups. As of Oct. 2019, there were more unicorn companies (privately-held companies valued at over $1 billion) based in China (206) than there were in the United States (203).
The Chinese firewall not only serves to block politically-offensive content and non-compliant tech companies from reaching China, it has also created a protected trade zone for which Chinese tech companies could thrive and serve a massive domestic audience. Initially, many of those Chinese tech companies were simply copycats of American ones (i.e. Baidu vs. Google or Weibo vs. Twitter or Zhihu vs. Quora), but given the time and resources to develop, they have become innovative regional giants in their own right, leading the way globally in areas such as e-commerce, electric car and healthcare industries.
On the other hand, Russia only has 4 internet unicorns (as of Feb. 2019).
Essentially, a multitude of sovereign internets has the ability to serve as virtual trade barrier for domestic tech companies, granting protection for growth to serve local markets and further diluting the power and draw of Silicon Valley and the United States.
As of May 2019, only 10% of the world’s unicorns came from outside the United States, China, the UK, India, Germany or South Korea. National and regional-based internet gardens would fundamentally change that.
For example, Russia’s handful of competitive global tech companies, specifically Yandex, Mail.ru and Avito, would be given increased protection and support via a sovereign internet system, while also leaving room for new Russian startups to create local alternatives to YouTube and Instagram. Overall, this will not only boost local economies and local companies, keeping internet-based revenues and jobs local, but also weaken the influence of the current internet cabal.
Dismantling the Internet Cabal
The internet has become the new landscape for a digital version of imperialism, a playground where prevailing internet companies disseminate their dominant ideology and culture, their brand of right from wrong, reaching beyond existing political, religious and cultural divides.
For example, everyone now believes in the “full accessibility of information” because that’s what Google believes in. Likewise, we have all bought into Google’s version of capitalism, where it is acceptable to support the oil industry to drill more oil while at the same preaching environmental sustainability.
This is due to network effect and economies of scale. The more users on the platform or aggregator, the greater the value of end product and the cheaper it becomes to deliver that product. Going back to Google, the more people that use Google and Google products, the more valuable it becomes for businesses to advertise on Google, and thus the more Google can spend on making their searches more accurate, etc. So at the end of the day, we all use Google and buy into Google’s Kool-Aid.
However, China remains the exception to the rule, where, as described above, a domestic Chinese alternative exists for each of the dominant players. And those alternatives play according to China’s rules, disseminating a separate government-approved version of internet culture and accessibility. Who is to argue which is better or worse?
Globally, if more countries adopt a similar strategy, this could breakup the stranglehold that global tech giants such as Microsoft, Apple, Google, Facebook and Amazon have over local economies. In fact, this may be the only way that the existing internet cabal can be dismantled.
As of the end of 2019, these five companies stood 5 of the largest 6 companies in the world, excluding Saudi Aramco, totaling almost 5 Trillion USD in market capitalization. Sitting at 7th and 9th are Alibaba and Tencent, respectively, representing the internet giants of China.
Since 2010, the European Union has launched three separate antitrust investigations into Google for violating the EU’s competition laws due to its dominant position in the market. The most recent 2.4B Euro antitrust case is due to be heard in Feb. 2020. However, these legal efforts have done nothing to break up Google’s power or global dominance, or fundamentally change its business model or approach in any way.
Unplugging the European market from the global internet will change that fact. A domestic firewall will lead to either a homegrown European alternative, or a more compliant Google Europe version, where jobs are local and taxes are paid locally.
Essentially, as trade barriers such as tariffs and quotas tend to do, a sovereign internet will provide short-term protection to the local tech economy and tech companies, boosting jobs and tax income while potentially leading to the rise of significant challengers to current monopolies in the internet sector.
Unplugging the Global Internet: Threat
While trade barriers have their benefits, economists generally agree that trade barriers are detrimental and decrease overall economic efficiency. However, the negative effects of a virtual trade barrier for the internet would reach beyond higher prices or lower quality products, it could lead to the collapse of global democracy, global trade, even the concept of the truth.
Eroding the Tide of Democracy
Democracy is about citizens who have the information and freedom of communication the need to govern themselves, and the internet has been a key driver in disseminating that information and making the tools of communication accessible to the masses. Proliferation of sovereign internet gardens would reverse this trend.
To understand the impact that a sovereign internet would have on democracy, one simply has to examine the case of Xinjiang vs. Hong Kong in 2019.
Xinjiang, an autonomous territory in northwest China, is home to many ethnic minority groups, specifically the Turkic Uyghur people. Meanwhile Hong Kong, a special administrative region in southern China with semi-independent rule, is home to primarily ethnically Chinese people who identify as a separate culture due to 150 years of British influence as a British colony until 1997.
In both of these regions, the past decade has been a time of democratic protests and violent unrest against China’s heavy-handed approach. However, news and information of these protests have only trickled out of Xinjiang, while Hong Kong’s marches was front-page news for the second half of 2019.
Xinjiang’s internet access falls under the umbrella of the “Great Firewall of China”; Hong Kong’s doesn’t… yet.
In Xinjian, the Chinese government has been accused of utilizing mass surveillance, increased arrests, and a system of “re-education camps”, estimated to hold over one million Uyghurs and members of other Muslim minority ethnic groups, in order to suppress local dissent. China denies these claims, and has utilized a broad marketing campaign to support those claims, even the face of damning evidence sourced from leaked files. The same type of misinformation campaign is less effective in Hong Kong where unfiltered news can be live-streamed and sent to the masses directly from the streets.
Leveraging a Virtual Wall to Block Physical Access
In addition to suppressing democracy, the sovereign internet can be used as a literal trade barrier, blocking brand access to their local markets against any company that falls on the wrong side of the State.
Going back to the case of China, the government has not only utilized the “Great Firewall” to give a competitive advantage to local tech companies, it has wielded it against foreign companies or institutions which have expressed views counter to the Chinese State. Consider the prominent recent examples of a tweet by Daryl Morey and social media post by Mesut Ozil regarding the situation in Hong Kong and Xinjiang respectively.
After Daryl Morey, the GM for the Houston Rockets of the NBA, tweeted his personal support for the Hong Kong protests, the Chinese backlash was swift, with Chinese leagues, streaming services, sponsors, and partners, have cut ties with the Rockets and the NBA, and having stopped showing NBA games or selling NBA merchandise throughout the country.
In the case of Ozil, after his inflammatory social media post, China cancelled the broadcast of Arsenal’s matches, several Chinese football fan sites have said they will stop posting news related to Özil, and a Chinese football simulation game said it would no longer produce Özil player roles or cards.
The enabling factor this heavy-handed approach to perceived slights is the “Great Firewall”, allowing China to not only monitor and manipulate public sentiment for or against specific issues, but also wielding it as a hammer to block access to their enormous domestic market from any organization that displeases them, i.e. blocking of streaming services that show sporting events, the hard stick of China’s soft power.
Blocking access to the Chinese market, or even just the threat of it, forced the NBA, the Houston Rockets, the EPL and Arsenal to quickly kowtow to China, expressed through profuse apologies for these personal statements from its members.
Changing the Truth
The greatest threat regarding the proliferation of the sovereign internet is the idea that there will no longer be a single Truth. The government who controls the internet will be able to tell their version of the truth, and everyone under their influence will have to believe it because there are no alternatives.
Currently “The Great Firewall of China” allows the Chinese government to change how and when facts are displayed, moreover sometimes change the facts themselves. For example, searches on Baidu in Chinese for “Tiananmen” or “tank man” yields no links to the pro-democracy protest in 1989, or the famous picture of the lone man who stood in front of the advancing tanks that signaled the end of those same protests.
In China’s version of the internet, those events simply do not exist; they never happened.
Now imagine a world where every country or region has their own version of the internet.
And these versions not only differ by language or cultural preference, but in the very nature of the truth. What is shown as a fact in one country, is a lie in another, and perhaps doesn’t even exist in a third… and within each of these versions there is no one who can dispute or counteract those facts, because those dissenting voices have been silenced, censored, wiped out. Sounds like an upcoming episode of Black Mirror?
While Russia still has a lot of hurdles to pass before their version of the “sovereign internet” becomes operational, the notion that they are so close should be terrifying in itself. The thought that they, or China or even Iran, could potentially export this technology in the proliferation of sovereign internets is truly dystopian.
That day will be the internet’s nuclear winter, and perhaps for us all as the end of a global society as we know it.
So while in the short-term, a sovereign internet would have a positive economic impact for countries and regions, the long-term costs to democracy, freedom and truth is simply too much to bear. Unplugging the global internet is a imminent threat about to burst.
Make Innovation Work
Core Strateji is a strategy consulting firm that specializes in supporting leading companies to transform into ambidextrous organizations. Are you ready to move your innovation activities forward?
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