The internet was always supposed to take over the world. In the tech sector — unlike, say, textiles or petrochemicals — megalomania was from the start a feature, not a bug. Tech created titanic figures like Steve Jobs and Bill Gates, straddled continents and leapt across seas, unmade whole industries, eliminated diseases. No industry had ever gone from zero to global in such a short period of time. The ascent of tech helped give new meaning to the verb scale: “to grow immense, as quickly as possible.”
But in the U.S., private industry’s megalomania depended upon the American government’s dominance of the global playing field — a dominance that both industry and government unwisely took for granted. Meanwhile, at the turn of the century, China quietly embarked on a different game. Chinese companies, with state support, basically built the tech infrastructure for Latin America, Africa, the Middle East, Central Asia, South Asia, and much of Southeast Asia as well as parts of Europe. They also laid undersea fiber-optic cables for internet connectivity and a satellite system to compete with GPS (which is owned by the U.S. and administered by the U.S. Air Force). A protected, but internally quite competitive, market of well over a billion consumers provided a secure financial base for Chinese companies looking to expand internationally. Available evidence suggests that the Chinese government and Chinese companies assumed that this strategy would give them a decisive edge over non-Chinese companies in providing services to the telecoms-infrastructure markets they had largely created, which catered to roughly three-quarters of the global population.
So far, this assumption has proven wrong. Because the barriers to entry for many types of tech startups are relatively low (think food-delivery apps) and local knowledge is very valuable (think entertainment listings) — and above all, because no village, city, or nation really wants to be a distant outpost of a tech multinational, whether Chinese or American — local tech companies around the world have begun to flourish.
The Brazilian parable
Consider Brazil. It was Huawei’s first Latin American market, beginning in 1999. Chinese state-owned ZTE entered in 2001. Between them, the two companies built much of Brazil’s internet. Meanwhile, by 2009, China had overtaken the U.S. as Brazil’s largest trading partner. By 2011, Huawei had invested about $350 million in Brazil, had 4,000 in-country employees on its payroll, and was generating around $1.5 billion in revenue. That year alone, it committed an additional $350 million to Brazilian R & D centers.
Nonetheless, this didn’t mean that Chinese tech companies had an easy time of it. China’s Tencent failed to stir any interest in Brazil with its WeChat app, but it did invest $180 million in fintech startup Nubank. After watching Uber struggle against perceptions that it was an imperial multinational from the north, Didi Chuxing — China’s Uber — decided not to enter the market directly, instead buying shares in the local ride-sharing startup 99Taxis. Didi’s investment in 99Taxis gave it a path to beating Uber. It eventually bought out the other shareholders and made 99Taxis Brazil’s first unicorn. Baidu — China’s Google — and phone giant Xiaomi both tried and failed to make progress in Brazil.
In short, building Brazil’s tech infrastructure does not seem to have given any particular advantages to Chinese tech companies in the Brazilian market. It did, however, help generate a market for Brazilian entrepreneurs — and for Chinese and American investors in them. In 2019, Brazil had five new unicorns, as many as Germany. (Above them stood only China, with 22, and the U.S., with 78.) Brazilian venture capital funds are playing an ever-greater role in the local ecosystem. Venture funding in Brazil went from less than $100 million in 2011 to more than $2.3 billion in 2019, a period that also saw a relentless decline in Brazil’s GDP per capita. When growth returns, Brazil’s tech companies and VCs will have been primed to benefit.
Perhaps most bitterly for China, the U.S. is now pushing Chinese companies out of markets it played a significant role in setting up: After all, building tech infrastructure is not the same as owning it, which these companies don’t. In October, as part of its Clean Network initiative, the Trump administration promised Brazil a package of incentives adding up to $1 billion to induce Brazilian telcos not to award 5G build-out contracts to Huawei or ZTE. This was part of a broader effort by the U.S. to box Chinese companies out of telecommunications networks worldwide. Brazilian telcos were underwhelmed, but the Biden administration will likely continue trying to cordon off “techno-democracies” from Huawei and other Chinese tech companies.
So should we expect to soon have to adapt to a bifurcated internet? It’s possible. U.S. firms are still immensely successful. Moreover, the vision of a free, democratic American internet doing battle against an authoritarian Chinese one is as popular with Democratic policymakers as it is with Republicans.
And yet it’s more likely we’ll see multiple internets, each characterized by increasing local control over the ecosystem of investment and development. Like Brazil’s, India’s telecommunications infrastructure was also built up by Huawei and ZTE, and India welcomed substantial investment from Chinese tech companies. That money and expertise helped India produce its own national tech ecosystem. When tensions flared on the Sino-Indian border, Indian leaders told Chinese tech companies they had to go. India is now bent on constructing a tech sector with as local a basis as possible — and American tech companies are willing to invest heavily in it, sometimes alongside Chinese partners able to navigate the political winds.
Europe is similarly trying to find a path toward maximum autonomy from the U.S.-China duopoly. It is a feat that Japan, Taiwan, Singapore, and South Korea have artfully managed for many years, though so quietly that it often goes unnoticed outside Asia.
Ultimately, if you put Brazil, India, Europe, Japan, Taiwan, Singapore, and South Korea together, you have a significant portion of the world’s wealth and population, belonging to countries not at all interested in the economic subordination of their tech sectors to either the U.S. or China. These are all innovative economies in their own right. They want to remain so, as do their counterparts in Indonesia, Mexico, South Africa, Australia, and Nigeria. There is no economic or security reason why the U.S. should insist on the use of American companies abroad, nor can China enforce the use of Chinese technology in any but a handful of countries near its borders.
Land of many networks
As the global tech market continues to fragment — with American and Chinese poles, perhaps, but also with a great deal in between — the internet will become less universal, not just in terms of content but also the apps through which people access it. This is a process that has been going on since the 1990s, and the reason for it is partly technical: Most people — and increasingly, most smart objects — access the internet over radio waves, which are much slower than fiber-optic signals, so it is useful to have a cyber network’s central computing power as close to the radio networks as possible. Since proximity happens on land, data networks have gradually been returning to Earth, and since Earth is ruled by governments, states have been taking a larger role in controlling the internet. But leaving aside technical concerns, the U.S. and Europe have been expanding their control over internet content for years, mostly in the name of privacy, anti-terrorism, drug-law enforcement, and taxation. The same has been true in countries such as India, China, and Russia. The movement toward state control, which is inherently a de-universalizing force, could not be clearer.
What is more interesting — and more hopeful — is that economic trends now point toward an increase in virtual self-determination, particularly in Latin America, Africa, and South and Southeast Asia. It is probably more than a coincidence that these areas encompass much of the former colonial world. From a postcolonial point of view, the competitive expansion of today’s rival great powers across the internet looks somewhat familiar. The idea of “data colonialism” has not yet been fully articulated, but the reactions to it, and the emotions surrounding it, are solid. Perhaps the current fragmenting of the web along national lines is being driven in part by a lesson learned from the imperial past: namely, that self-determination is a process, not a condition. It’s a nice irony that this would work to the detriment of China, which has long insisted on “internet sovereignty” and is now seeing more and more states step up to protect their own, including from China. If these processes continue, the result will likely be a more fragmented and diffuse internet but also a more equitable one — and, perhaps, one that is even richer in content and services.