Balkanization of the Internet

US Innovation and Competition Act

As the digital economy and internet of things become increasingly ubiquitous in everyday life, this trend could intensify. The US Innovation and Competition Act (USICA) of 2021 contains provisions within it that are likely to further pull the internet apart. USICA will increase U.S. engagement in international standards-setting bodies (SSBs), encouraging the participation of the U.S. private sector in these bodies, and better understanding China’s growing influence in international organizations of all types. This ambition includes increased participation in technical standards as a matter of strategic importance.

The Chinese government is, meanwhile, creating a Chinese digital currency, controlled by the People’s Bank of China, which will add an increased layer of oversight over businesses’ operations in China.

Compounding the emerging siloes of various legal frameworks is the balkanization of the supporting infrastructure and equipment. The US has launched the Clean Network initiative, resulting in the US, the UK, the EU, and Australia all restricting products from Chinese companies, such as Huawei and ZTE, from their 5G infrastructure for security reasons. In retaliation, China is threatening to ban the Swedish company Ericsson’s operations in China in a move that may become representative of the future. Other countries and technology firms may be forced to choose between supplying Chinese or Western markets in what is becoming a mutually exclusive decision.

Young businessman sitting on cloud with mobile phone in hands

The introduction of 5G and the Internet of Things (IoT) that it engenders will add an additional layer of disintegration to this challenge that could have serious ramifications for the globalized nature of not only the internet, but swathes of finished goods. The interconnectedness of smart homes and smart cities makes their vulnerability in a cyber-attack, and thus, place in national security incompatible with sourcing from adversarial nations. This will likely necessitate strict sourcing standards for traditionally benign goods – fridges, watches, TVs, streetlamps, parking meters, for example - including the barring of certain manufacturing sources.

The implications for how businesses comply with this mix of different hardware and regulatory standards in future is likely to have far-reaching implications. From an efficiency perspective, it could eventually crush the economies of scale we have come to know in terms of technology development and the ease of doing business that it has engendered. A product currently requiring 2,000 engineers to scale to an international level may instead come to require 20,000 engineers developing the same product 10 different times to satisfy the varying regulations across different jurisdictions. Consequently, both the pace and cost of progressing the internet and its associated technologies may be compromised.

What this balkanized information ecosystem portends in practice is a citizenry that could potentially have access to completely different sets of information about current affairs and perhaps a very splintered worldview of reality. Countries with authoritarian governments are already creating environments where censorship is easier achieved and occurs with far greater frequency. Already a complex network of national laws and regulations, and centrally administered firewalls is facilitating the removal, by some governments, of access to disruptive material, silencing of dissidents, and crushing of free expression online. This is likely only to intensify as the internet balkanizes even more.

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How is the Internet Structured Today?

In its most simplistic sense, the internet is structured around internet protocols. Internet protocols are the function of the internet tasked with transporting a message from the source to its destination in an interpretable way to end users across different networks and operating systems. They act in a similar fashion to a digital postal system connecting the source and destination of information through an address unique to each side of the communication.

Internet Protocol version 6 (IPv6) is the most recent version. IPv4, the previous protocol, faces exhaustion of the finite number of addresses it was developed with. Because the original Internet architecture had fewer than 4.3 billion addresses available, depletion has been anticipated since the late 1980s, when the Internet started experiencing dramatic growth. This depletion is one reason for the development and deployment of its successor protocol, IPv6, which allows much higher theoretical limits on the number of IP addresses than IPv4.

At a more detailed level, there are a variety of inter-connected networks composed of four layers:

  1. the “link” layer that delivers local packets over different operating systems;
  2. the “network” layer that delivers global packets across different interconnected networks;
  3. the “application” layer, providing protocols that present the data as an interpretable presentation, for example, the webpage design; and
  4. the “transport” layer, providing reliable data transfer services to the other layers.

Additionally, the Domain Name Service (DNS) is the Internet's system for mapping alphabetic names to numeric Internet Protocol addresses.