Business July/August 2014

The End of the Internet?

How regional networks may replace the World Wide Web
Matt Chase

The World Wide Web celebrated its 25th birthday recently. Today the global network serves almost 3 billion people, and hundreds of thousands more join each day. If the Internet were a country, its economy would be among the five largest in the world.

In 2011, according to the World Economic Forum, growth in the digital economy created 6 million new jobs. The McKinsey Global Institute estimates that transborder online traffic grew 18-fold between 2005 and 2012 and that the global flow of goods, services, and investments—which reached $26 trillion in 2012—could more than triple by 2025. Facebook has launched a major initiative, in partnership with tech giants including Samsung and Qualcomm, dedicated to making the Internet available to the approximately two-thirds of the world’s population not yet connected. Cisco forecasts that between 2013 and 2022, the so-called Internet of Things will generate $14.4 trillion in value for global enterprises.

Yet all of this growth and increasing connectedness, which can seem both effortless and unstoppable, is now creating enormous friction, as yet largely invisible to the average surfer. It might not remain that way for much longer. Fierce and rising geopolitical conflict over control of the global network threatens to create a balkanized system—what some technorati, including Google’s executive chairman, Eric Schmidt, have called “the splinternet.” “I’m the most optimistic person I know on almost every topic,” the Internet entrepreneur Marc Andreessen recently said in a public interview, and “I’m incredibly concerned.” Andreessen said it is an “open question” whether the Internet five years from now “will still work the way that it does today.”

If the long history of international commerce tells us anything, it is this: free trade is neither a natural nor an inevitable condition. Typically, trade has flourished when a single, dominant country has provided the security and will to sustain it. In the absence of a strong liberal ethos, promoted and enforced by a global leader, states seem drawn, as if by some spell, toward a variety of machinations (tariffs, quotas, arcane product requirements) that provide immediate advantages to a few domestic companies or industries—and that lead to collective immiseration over time.

The U.S. has played a special role in the development of the Internet. The Department of Defense fostered ARPANET, the precursor to the Internet. As the network evolved, American companies were quick to exploit its growth, gaining a first-mover advantage that has in many cases grown into global dominance. A vast proportion of the world’s Web traffic passes through American servers.

Laura DeNardis, a scholar of Internet governance at American University, argues that the Internet’s character is inherently commercial and private today. “The Internet is a collection of independent systems,” she writes, “operated by mostly private companies,” including large telecommunications providers like AT&T and giant content companies such as Google and Facebook. All of these players make the Internet function through private economic agreements governing the transmission of data among their respective networks. While the U.S. government plays a role—the world’s central repository for domain names, for instance, is a private nonprofit organization created at the United States’ urging in 1998, and operating under a contract administered by the Department of Commerce—it has applied a light touch. And why wouldn’t it? The Web’s growth has been broadly congenial to American interests, and a large boon to the American economy.

That brings us to Edward Snowden and the U.S. National Security Agency. Snowden’s disclosures of the NSA’s surveillance of international Web traffic have provoked worldwide outrage and a growing counterreaction. Brazil and the European Union recently announced plans to lay a $185 million undersea fiber-optic communications cable between them to thwart U.S. surveillance. In February, German Chancellor Angela Merkel called for the European Union to create its own regional Internet, walled off from the United States. “We’ll talk to France about how we can maintain a high level of data protection,” Merkel said. “Above all, we’ll talk about European providers that offer security for our citizens, so that one shouldn’t have to send e-mails and other information across the Atlantic.”

Merkel’s exploration of a closed, pan-European cloud-computing network is simply the latest example of what the analyst Daniel Castro of the Information Technology and Innovation Foundation calls “data nationalism,” a phenomenon gathering momentum whereby countries require that certain types of information be stored on servers within a state’s physical borders. The nations that have already implemented a patchwork of data-localization requirements range from Australia, France, South Korea, and India to Indonesia, Kazakhstan, Malaysia, and Vietnam, according to Anupam Chander and Uyen P. Le, two legal scholars at the University of California at Davis. “Anxieties over surveillance … are justifying governmental measures that break apart the World Wide Web,” they wrote in a recent white paper. As a result, “the era of a global Internet may be passing.”

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