A Blog by Jonathan Low

 

Oct 29, 2018

Why the Global Tech Backlash Is Just Beginning

Growing familiarity breeds fear, if not contempt. And nation-states recognize that the global power of the internet means enhancing influence for their own domestic companies is just common sense. JL


Christopher Mims reports in the Wall Street Journal:

As people around the world become more familiar with the internet, their views tend to change from enthusiasm to caution. Most often, the backlash is directed at America’s tech giants, and how their ubiquity affects individuals and businesses. But resistance to Big Tech also includes China curbing the power of its tech companies, and India rejecting foreign monopolists in favor of homegrown players. In such a world, the internet remains mostly interconnected but, as with automobile manufacturers, a handful of companies, many domestic, dominate each market.
The biggest tech companies have tremendous power over the hearts and minds of people—as much as many of the governments in countries where they operate. All over the world, citizens, bureaucrats and politicians are now pushing back against that power.
Most often, the backlash is directed at America’s tech giants, such as Alphabet Inc.’s Google, Facebook Inc. and Amazon.com Inc., and how their ubiquity affects individuals and businesses. But resistance to Big Tech also includes China curbing the power of its own technology companies, and India rejecting foreign monopolists in favor of homegrown players.
The largest tech businesses reach more people than any other companies have in history, and by many metrics they have also grown at unprecedented speeds. The companies themselves argue tech is bringing great benefits to people and improving their lives, yet when they enter industries, they consolidate power and make competitors miserable in ways not seen since the Gilded Age.
As people around the world become more familiar with the internet, their views tend to change from enthusiasm to caution. A survey by the Centre for International Governance Innovation reveal that in Kenya, for example, people are singularly positive about the impact of tech, whereas in North America and Europe, people are more concerned about Big Tech’s overreach.
“Familiarity breeds contempt,” says Fen Hampson, director of global security and politics at CIGI, who conducted the survey.
As the backlash plays out, it has the potential to subdivide the internet, forcing the biggest players to create separate products and procedures for different regions. The results—following a costly, complicated and protracted transition—will be better for consumers in some cases, and significantly worse in others.
Europe and the U.S.
The global tech backlash starts in the West, where countries have been feeling the results of Big Tech’s growing power the longest.
In the European Union, efforts to rein in firms that abuse their monopoly power have resulted in a record $5 billion fine against Google. Amazon might be next, as the EU Competition Commissioner probes whether the giant unfairly uses data from retailers that sell on its platform.
Meanwhile, the sweeping General Data Protection Regulation is having a profound effect on the advertising and data-gathering ecosystem there. The law has yet to be tested in court, but under these regulations, Facebook could face a record $1.63 billion fine for its recently disclosed personal-data breach.
In the U.S., creating an “internet bill of rights” has become a signature issue of a handful of congressional Democrats. Meanwhile, some of their Republican colleagues are beginning to join in, threatening to rein in Big Tech in the wake of recent scandals.
It’s not yet clear whether legislation will ever reach the president’s desk, but the companies see the writing on the wall. California has already passed a sweeping data-privacy law, set to go into effect in 2020. In a Senate hearing in September, executives from Alphabet and Amazon said they agree on the need for privacy regulation; Facebook Chief Executive Mark Zuckerberghas said the same. Lobbying groups supported by both companies just proposed their own set of privacy regulations.
China and the ‘Two Internets’
The tech backlash looks different in China, where the attitude to privacy is different and foreign tech firms face prohibitive hurdles. Just as a few American companies gained dominance over the past decade, so have a handful of Chinese firms, including Alibaba , Tencent , Baidu and JD.com . Once content to champion these companies as long as they cooperated with censorship decrees, the Chinese government is now taking a more heavy-handed role in their everyday business. For example, it rejected a credit-scoring system by Alibaba’s affiliated payment company, Ant Financial, in favor of its own. And earlier this year, it delayed approvals of some Tencent videogames, causing it to lose $1.5 billion in sales.
The worst-case scenario in China, says Paul Triolo, a technology analyst at the Eurasia Group think tank, is if Beijing were to nationalize some of its tech giants. If a U.S.-China trade war deepens and China’s leaders feel they need to turn tech companies into instruments of the state, it’s possible, he says.
China’s so-called Great Firewall has effectively created two internets. Former Google CEO Eric Schmidt said recently he thinks that divide will only deepen.
Because they can’t move freely into China, U.S. companies must make their businesses work uniformly anywhere else they can, says Paul Twomey, former CEO of the nonprofit Internet Corporation for Assigned Names and Numbers, which manages the world-wide internet domain-name system.
Some tech giants are already doing this. Microsoft Corp. said it will apply GDPR rules across all its services throughout the world. Apple Inc. has for years positioned itself as the data-protection and privacy company, with CEO Tim Cook this week calling for a U.S. privacy law in line with Europe’s.
More data-dependent companies aren’t so eager. Google is fighting efforts to export those rules to other countries. Google’s official wishlist on “responsible” data-protection regulation includes a “flexible” definition of personal data and no restrictions on the geographical location of data storage.
Facebook has tried to make an end run around EU rules by giving users a stark choice: give up some rights or delete their accounts. Facebook didn’t respond to requests for comment.
Ultimately, that’s counterproductive, says Mr. Twomey, who after stepping down as Icann CEO co-founded data-security firm Stash. In part, this is because data-protection laws also apply to other businesses, such as banks, which are likely to push for globally harmonized regulations.
India and the Rest of the World
To see where the global tech backlash is going next, pay attention to India, says Mr. Twomey. When Facebook tried in 2016 to let users browse Facebook and some other services without paying for mobile data, a coalition of activists in India, and eventually India’s government itself, rallied together to ban the program. What Facebook saw as beneficence, Indians saw as neocolonialism.
In the biggest countries, that kind of pushback could benefit domestic actors—think of China’s enormous tech industry or India’s burgeoning e-commerce giant Flipkart. In such a world, the internet remains mostly interconnected but, as with automobile manufacturers, a handful of companies, many domestic, dominate each market, says Mr. Twomey.
Such reactions augur a future in which some countries—too small to match the services of American and Chinese tech giants—instead negotiate with them however they can. At times, the leverage to do so only comes after tragedy strikes. In Sri Lanka, Facebook failed to heed warnings from the government and activists about its platforms serving to incite violence against the country’s Muslim minority. After the country shut off access to Facebook services, the company pledged to start taking down problematic content.

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