The Rise of the “Sovereign Internet”
The original dream that guided the early days of the internet, a dream of a free space for communication and commerce, is slowly coming apart globally. The internet has shifted from a free space owned by users to one monopolized by giant technology corporations across communication, commerce and search. But even more worryingly, the dream of a “world wide web” is increasingly a distant dream. Ever since China first launched its “Great Firewall” in 1998, the dream of a single internet shared by the world has been under threat. In a 2010 whitepaper, the Chinese Communist Party made its position clear:
“Within Chinese territory the internet is under the jurisdiction of Chinese sovereignty. The internet sovereignty of China should be respected and protected.”
This notion of internet sovereignty — the right of a government to control and manage internet use in its territory — has spread across the world. Other authoritarian states such as Iran and North Korea have copied China’s firewall to great effect. In addition, data localization laws — laws that require companies to store data from nationals within their country — are increasingly being adopted across the globe. For example, the Reserve Bank of India mandated in 2018 that foreign payment companies store all transaction-data involving Indian customers on servers in India. Similarly, he European Union’s General Data Protection Regulation (GDPR) grants Europeans sovereignty over their own data and the regulation applies globally. Any tech company that serves a European customer anywhere on earth must comply with any GDPR requests from that customer.
The extension of sovereignty to the internet and to data threatens to fragment the internet into dozens of sovereign internets. Users in the United States, China, Nigeria, Germany and Saudi Arabia may all be using different internets in a decade or two from now — perverting the original vision of a world wide web. The balkanization of the internet threatens the core fabric of the internet and what makes it special — the ability for people to easily access information, goods and services and to connect openly and freely.
The Failure of Self-Governance
The alternative to internet sovereignty is self-governance, which a series of recent scandals involving tech companies has shown to be inadequate. Instead of sovereign governments controlling the internet, a few hundred people in Silicon Valley have controlled the internet for most of the last two decades. The laissez-faire approach to tech regulation has created tremendously dominant internet monopolies like Facebook, Amazon, Google and Apple. This has created a series of problems.
Tech companies have used their power as gatekeepers to systematically push out competitors, privilege their own services and thereby maximise their own revenue. Tech companies have been focused in the last decade on vertically integrating services in areas they predict they can capture market share. For example, if you search for a job or flight on Google today Google places its widget for Google Flights or Google Jobs above all other search results. This directs traffic away from travel websites like Expedia and Booking.com and jobs websites like Monster.com towards Google products. Google did the same thing in Europe by artificially promoting links to Google Shopping products over competitors and was fined heavily by the European Union for it.
Trade in the World of Atoms and Bits
Internet sovereignty and full self-governance are both inadaquate and unattractive options. The world needs a new framework for governing the global technology industry to stave off the risk of the internet fragmenting into dozens of sovereign internets. This framework needs to be global from day one. Internet companies are unique versus any other business because they are truly global from day one. These companies can be accessed from anywhere and can sell to customers anywhere. While some exceptions exist, such as ecommerce companies that only deliver in certain regions, as a whole internet companies are global from day one, especially software and consumer application businesses.
Being an internet company is therefore fundamentally different than any other business because of the scale of potential customers you can immediately serve is orders of magnitude higher than almost every “brick-and-mortar” business. Transacting globally on the internet is in a sense a form of trade but in the world of bits. In the world of atoms, global trade is a $19 trillion behemoth governed by a series of complex interlocking bilateral agreements, laws and regulations. Global trade is stewarded by the World Trade Organization (WTO) founded in 1995 as a global governing body for trade negotiations and disputes. The overriding objective of the WTO is to help trade flow smoothly, freely and fairly.
The WTO has overseen a significant drop in trade barriers globally in the last two decades and has powered rapid globalization and economic growth worldwide. While global trade is not a perfect system and there are some notable flaws, as a whole, it is an extremely well-coordinated and governed system.
Importantly, trade in the world of atoms is global and so is trade in the world of bits, but the world of bits has no equivalent to the WTO. The world of bits needs its own WTO — a World Data Organization (WDO). A few public figures have begun calling for something like a World Data Organization with US Presidential candidate Andrew Yang being the most high-profile supporter of the concept.
Outlining a World Data Organization
Global tech regulation is rapidly fragmenting. In many cases competing and conflicting regulations are coming into place in different parts of the world. Regulators globally are passing laws on everything from data localization to new taxes on internet companies. For example, Britain and France are both planning to levy special “tech taxes” on US technology companies, which has been met with a chilly response in Washington.
The need for a WDO has never been so pressing. The WTO provides a useful framework for outlining the function and goals of the WDO. The core goal of the WTO is trade access — enabling businesses globally to access other trade markets easily and without significant costs. The core goal of the WDO should be data access and market access.
Both data and market access are critical to enabling global competition and a relatively permissive innovation environment. Today, most major tech companies are “walled gardens” — they collect significant user data but don’t allow third-parties to easily access this data. Regulators have begun turning their attention to the problem of walled gardens. The ACCESS Act of 2019 currently making its way through the US Congress is focused on enabling data access in the United States.
The core principle of the Access Act is that data in itself is not valuable and useful but rather that the services and products built on top of and improved by data are what is valuable. Therefore, access to data is essential for creating valuable products for consumers and open access to data is crucial for a free and competitive technology market to create new products for consumers.
The World needs a global regulator of the global technology industry — a World Data Organization. A WDO can take ideas such as the French tech tax or the US Access Act and build a global framework around them. Otherwise, conflicting global regulations are going to increase the cost of doing business for tech companies with global ambitions. Similarly, firewalls like China’s are going to cut entire markets off to tech companies. Market access, just as in trade in the world of atoms, needs to be a core goal of the World Data Organization. Regulators, politicians, technologists and economists globally need to push for the creation of a WDO. Otherwise the dream of a world wide web is going to become yet another example of a dream never realized.
Originally published at https://ceterisparibus.substack.com.