Brunswick Review Issue 9

The rise of the “Splinternet”

The backlash from privacy breaches could change the internet as we know it, says Brunswick’s Robert Moran

When the Berlin Wall fell in 1989, the well-respected forecasting firm Global Business Network was asked to develop scenarios for the emerging world order. GBN offered three. The first was Change Without Progress, a kind of high-tech gangster capitalism familiar to some oligarchs today. Second, New Empires outlined a nationalist or regional neo-mercantilism. The third, Market World, anticipated a fast-paced, globally integrated finance capitalism.

History has unfolded according to the third option. We are living in a global marketplace where investments and information flow more or less freely across national borders. The globalization of data along with open internet access has increasingly provided a common highway for this Market World. But national interests and the defense of citizens’ privacy are now pushing hard to roll back that scenario toward something closer to the New Empires by curbing the free flow of information across borders. Again, as in 1989, the world is changing – only this time, walls are going up.

Since the revelatory US government leaks by Edward Snowden, countries including Brazil, Germany and India have publicly discussed their desire for greater data protection and national, protected internets. The idea of the global internet devolving into a constellation of national networks has been called the “splinternet.”

American Ambassador Michael Froman, head of the Office of the US Trade Representative, describes this trend as “an accelerated rise of ‘data nationalism’ and a digital world that begins to erect barriers rather than transcend them.” German Chancellor Angela Merkel recently promised, “We’ll talk about European providers that offer security for our citizens, so that one shouldn’t have to send emails and other information across the Atlantic.” The EU and Brazil have already announced their intention to install a $185 million underwater fiber-optic cable that bypasses the US. Splinternet 1.0 may have arrived.

How any of this could work in practice is anyone’s guess, given the unstoppable, exponential increase in data from internet-connected devices, products and services. But the splintering trend is likely to grow, complicating the international business landscape.

Data is a hot commodity. To the individual, consumer data is either a resource or a part of their person, a kind of third skin, after the dermis and clothing. An Ipsos Global Trends survey of 20 countries found that 60 percent of people are concerned about how their data is being used. Reflecting that concern, governments are examining how the privacy rights of their citizens can be better protected.

However, data can also be viewed as a natural resource, like oil. For nations, this means data collection and analytics, servers and transmission lines are as integral to economic interests as offshore wells, refineries and tankers. Sir Walter Raleigh famously asserted, “Whosoever commands the sea commands the trade; whosoever commands the trade of the world commands the riches of the world and consequently the world itself.” The control of data delivery systems is the modern equivalent.

Andrew Marshall, the influential 93-year-old military futurist often referred to as “Yoda” in American defense circles, espouses a theory known as Revolution in Military Affairs, the modern corollary to Sir Walter Raleigh’s view. The theory holds that each weaponized technology leads to a new kind of warfare. The first to master the technology gains the upper hand. Chariots, iron, gunpowder, steam power, rifling, air power, atomic weapons, precision munitions and robotics each reinforced the dominance of the wielding parties.

If data and information transmission are the next leap, the first-mover advantage would lie in cyberwarfare and computer viruses such as Stuxnet, a software worm said to have severely damaged Iran’s nuclear program in 2011. Recognizing this, former National Security Agency and CIA director Michael Hayden likened America’s policy toward the internet to the Roman roads that supported both an explosion of trade in the ancient world and the mobility of the Roman army. Rome built the roads and also patrolled them, making them safe for commerce while expanding the empire’s authority. Similarly, the US protects American interests through data channels, prompting Hayden’s observation that the US “could be fairly charged with the militarization of the World Wide Web.”

Data nationalism is a natural outgrowth of that thinking and is already coloring relations between countries and regions. In Brunswick’s polling among Washington elites, “data privacy” was flagged along with “food safety” as one of the top two issues that could be difficult for the US and the EU to reach an agreement over in trade negotiations. Could data nationalism slow growth in the global trade of digital goods and services as well as knowledge exchange?

Common sense suggests it could.

The issue of national identity alone could prove an obstacle. Governments will likely favor locally based corporations and form policies that will tilt the playing field to their advantage. But such measures are a double-edged sword, making international competition more complicated. Governments are also more likely to expect special favors from those domestically rooted companies.

As more corporations globalize and virtually every one becomes a data company, they will be navigating a world where data nationalism guides policies, and requires the development of nation-specific strategies. Here are some ways that this new breed of nationalism will impact your business:

  • Competing policy views between nations over the rights to use consumer data will force the development of many alternative ways of collecting and handling data.
  • Compliance handling will grow much more complex and expensive.
  • National affiliations will play a much larger role, for better and worse. Businesses may benefit from the policies of their home governments, but also be expected to support domestic interests.
  • Some companies may benefit from the rise of data nationalism, supported by national or regional barriers that put stronger international competitors at a disadvantage.
  • Communications will be even more critical, as all stakeholders in all markets will want to know a corporation’s data strategy. Businesses will need to show how their policies are a win for shareholders, customers and governments in each and every country in which they do business.

This article is also available in Chinese. Click here to download the PDF.

Robert Moran leads Brunswick Insight, the group’s global public opinion research function, and is a Partner in the Washington, DC office. 

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