In 2001, Amazon founder Jeff Bezos — whose company had yet to turn a quarterly profit — said in an interview, "I very much believe the internet is indeed all it is cracked up to be." Now, 18 years later, the emphasis should be placed on how "cracked up" the internet could become. The concept of a "splinternet" or the "balkanization of the internet" — in which the global digital information network would be sectioned off into smaller internets by a growing series of rules and regulations — has existed for years. But we're now barreling toward a point where concept will become reality.
The first three decades of the internet's development will be remembered as the period of a largely open internet, with few regulations beyond unique cases like China. But that narrative is ending. Countries and companies are erecting new digital walls on the internet every day. That concept has been given many names — splinternet, the balkanization of the internet and the fragmentation of the internet — but regardless of the nomenclature, the concept is here to stay. And accelerate.
The Wild West days of an open internet are gone for good, and the implications of an increasingly fragmented internet will be profound. It will result in a regulatory minefield that will present new challenges to the current dominance of large U.S. multinational internet companies, like Amazon, and consequently has the potential to leave the United States with less ability to exert "soft power" through its corporate giants.
The Open Internet Rests in Peace
The internet developed in tandem with the United States' rise as the world's sole superpower; once the Cold War ended, it became a key hallmark of U.S. dominance. The internet began as something called ARPANET, a creation of the U.S. Defense Department, before going public in the 1990s. But although the internet became global, the United States still maintained its role as its primary manager through the Internet Corporation for Assigned Names and Numbers' (ICANN) contract with the U.S. government. ICANN plays a key role in managing the domain name system (DNS), a set of databases in root servers that make the internet functional.
The U.S. policy that information and data are human rights that should flow freely among countries, companies and individuals, combined with the country's internet managerial role, has helped facilitate the current U.S. dominance in the global internet sector. The largest U.S. internet companies — Amazon, Google, Facebook, Netflix and others — have been able to extend their dominance over most of the world relatively unencumbered by drastically different regulations or viable local competitors. The dominance of U.S. corporations has meant that U.S. companies also primarily control the 21st century's equivalent of oil (aka the most prized resource of the time): data. And they can spin it to their advantage. The omnipresence of U.S. companies in some countries has become akin to digital colonialism, exemplified by Facebook's control over mobile experiences in dozens of countries through its Free Basics program and Google's control over advertising. Moreover, as the Edward Snowden revelations in 2013 showed, U.S. intelligence services and law enforcement branches have more freedom than other countries to access data — legally or illegally — since it lives on U.S.-based servers.
Those dual realities — U.S. corporate dominance of the internet and its incomparable access to data — have fueled a backlash against the open internet model. At the same time, companies and countries have developed new tools that make it less expensive for authoritarian states to limit and stifle the free movement of information internally, as well as more easily use bots on social media to try to spin a narrative in their favor. Backlash against the open internet comes from multiple directions, and it's not going away.
A Divided Internet as an Authoritarian Tool
U.S. rivals are increasingly taking steps to compartmentalize the internet, creating global and domestic spheres. Most well-known is China, which for years has controlled the movement of information between global cyberspace and domestic cyberspace through its Great Firewall, which controls domestic access to the web, for instance restricting access to specific foreign sites. But Russia and Iran are taking notes from China and going one step further: creating domestic internets that can be cut off from the global internet if necessary while remaining internally intact and functional. Iran's National Information Network is now fully operational, and the country has been trying to force its netizens to set up websites and Iranian-made competitors to Western apps on Iran's domestic internet rather than the World Wide Web. Russia has done the same, although it's unclear whether a purported test to cut off all access to the global internet it had planned to carry out at some point before April 1 was actually conducted.
The U.S. corporate dominance of the internet and its incomparable access to data have fueled a backlash against the open internet model.
Russia, Iran and China setting up their own networks out of concern over meddling from Western countries may only be the tip of the iceberg of authoritarian governments developing robust internal networks to control information. As the price of internet control tools declines, they will be increasingly accessible to smaller and less developed countries. Obvious candidates for setting up domestic internets or employing robust internet filtering systems include Egypt, Saudi Arabia, Turkey and Brazil. (The latter has floated the possibility of increasing internet regulations in the past.) Russia has even proposed a smaller internet exclusive to BRICS countries (Brazil, Russia, India, China and South Africa) as a means of breaking free from U.S. digital hegemony.
Nationalism and the Push for More Data Privacy
It's not just authoritarian countries that are taking notice of U.S. internet hegemony. At the opposite end of the spectrum, data privacy, data nationalism and economic nationalism are driving internet regulations and controls. This is perhaps most true in Europe. Despite being as wealthy as the United States, Europe has struggled to create internet companies that can compete with U.S. counterparts. There is no European equivalent to Facebook, Google or Amazon. And individual European nations are too small for country-focused companies to compete with the financial firepower that U.S. competitors can wield in investments. Perhaps unsurprisingly, as nationalism has increased across Europe, so has a desire to lessen the United States' internet dominance. Examples so far include antitrust and monopoly investigations against Google, as well as increased regulations requiring data localization and calls for higher taxes.
Data privacy has been a crucial component of European reactions to U.S. internet control, particularly the European Union's deeply impactful May 2018 introduction of General Data Protection Regulation (GDPR). The regulatory scheme forced new compliance rules on data privacy, including how data can be used, where it is stored and how people can give consent on data issues. GDPR was driven in part by Snowden's revelations that the National Security Agency and the so-called "Five Eyes" intelligence-sharing alliance were accessing data globally. It introduced an enormous set of regulations, which require companies to uniquely navigate each European country's jurisdiction. And while this does not exactly equate to a wholly separate, physically divided internet like the Russian and Iranian proposals, it has a similar effect of increasing regulations and decreasing the global all-access quality of the internet.
Even in the United States, movements to increase internet fragmentation are emerging. Proponents aim to reduce the hegemony of large companies and their unparalleled control of data, and they also want to increase personal data protections, perhaps by introducing GDPR-like mechanisms in certain states.
And companies are also increasingly interested in slicing up the internet in different ways, as ecosystems start to emerge around certain platforms. Apple's business model has drawn in and locked down users to the Apple and iOS ecosystem. Amazon and Google have done the same with their offerings, as have China's Alibaba and Tencent, increasingly. As concrete, country-led internet fragmentation occurs, these company-specific ecosystem approaches could come to dominate certain sets of affiliated countries or regions, further fomenting new digital boundaries.
Divided Opinions About Dividing the Internet
The last two years have highlighted the extremely divided international viewpoints about how the internet should be governed. On five different occasions, the United Nations has tasked a group of government experts with establishing rules and norms for global digital governance. After the fifth group failed to do so in July 2017, no sixth group has been created. In November 2018, French President Emmanuel Macron announced the Paris Call for Trust and Security in Cyberspace, a new initiative to establish international norms that was signed by more than 50 nations, 90 nonprofit groups and universities and 130 private corporations including Facebook and Google.
But the United States, China and Russia did not sign the Paris Call initiative, and those three countries also blocked each of the U.N. efforts. After all, the great power competition heating up among the United States, China and Russia extends to cyberspace. The United States has been able to exert enormous amounts of soft power through the internet, and China's rise is now becoming a more important geopolitical threat to the United States in all ways, including digitally. Washington has recently focused heavily on ensuring that international agreements about cyberspace do not introduce the added challenge of making it harder for the United States to compete with its Chinese adversary.
The great power competition heating up among the United States, China and Russia extends to cyberspace.
Countries' domestic laws and national regulations reign supreme due to the physical requirements of the current internet, so the United States, China, Russia and others truly can go their own way in cyberspace. That means that global internet governance issues are likely to remain stalled while regional or affinity groups, or extremely nationalistic countries, introduce their own localized regulations, firewalls and, in some cases, domestic internets with a limited connection to the outside world.
A Complex Future Is Already Here
China provides a good case study of how this domestic internet control can affect the dominance of U.S. companies when taken to the extreme. China's Great Firewall and extremely tech-nationalist rules have essentially made it impossible for U.S. companies to operate in the country. The government explicitly bans some companies, while others are subject to so much censorship and surveillance that they simply choose not to pursue the Chinese market. This situation has allowed Chinese companies to dominate inside China, evolving and catering to the domestic market. Even when U.S. companies have tried to compete, they've failed. In the future, this type of domestic dominance may likely emerge in other countries with extreme nationalist internet policies, such as Iran.
Globally this means that businesses — purely internet-based and otherwise — should be prepared to navigate an increasingly complicated minefield of different internet regulations. In the 21st century, almost every sector of the world economy is deeply dependent on quick, seamless connectivity to the internet and data flow, and increasing regulations will slow and disrupt operations in many ways, no matter how large or small a business may be. Indeed, in many niches of the tech sphere, national competitors to formerly dominant international behemoths will emerge. But small companies will also be put at a large disadvantage when trying to expand beyond one or two countries because of the overhead costs of having to comply with different rules and regulations that can vary vastly.
U.S. tech companies will struggle to maintain their global influence in a world of internet fragmentation where national sovereignty reigns supreme.
Ironically, the major U.S. and Chinese companies can most easily afford to comply if they choose to. Yet, this will only reinforce concerns of digital colonialism and privacy — eventually likely provoking an even stronger backlash against large U.S. companies. In the West, this opposition will focus on data privacy and how to treat data, particularly as artificial intelligence and the Internet of Things create even more personal data from our lives.
U.S. tech companies will struggle to maintain their global influence in a world of internet fragmentation where national sovereignty reigns supreme. For China, on the other hand, that scenario is preferable. Its nurtured giants Tencent and Alibaba, for example, are beginning to export the ecosystems that they've built in China to some of China's neighbors, eating into markets that have traditionally been dominated by U.S. companies. This may drive some backlash against Chinese digital colonization, but since China is new to that particular game, it will still be making progress in its power competition with the United States even if it faces limits and opposition.
The end result is that the next 25 years of internet regulation and changing guidelines about how information flows across boundaries will be far more complicated than the previous 25. The extreme version of the splinternet, in which every country creates its own internet with limited connections to the global internet, is unlikely to come to pass. The requirements of a modern economy simply won't allow that eventuality. Instead, companies will be required to jump through increasingly more hoops, and domestic demands for local ownership or data regulation will grow steadily. Corporate America will still demand an open internet for all — even making massive investments in satellite technology to try to do so — but it will not be able to prevent the inevitable.
The age of the splinternet is at hand.