Are we facing the balkanisation of the Internet?

The votes are in and we have a winner of our first 7 links in 7 days poll. You’ve told me that you want to hear more about The Economist’s article – The future of the Internet: A virtual counter-revolution. To sum it up in a single sentence, the article posits that three major stakeholders – major network owners, IT companies and governments will build barriers that will essentially ‘close the Internet’.

What does the term ‘close the Internet’ actually mean. Essentially it means that unfettered access will no longer exist. Barriers to access will be raised that limits what users can do. Elements of this already exist. Hulu, for example allow only people in America to access the site as they have not received international streaming rights.  Over time these restrictions have grown. An Australian ISP could theoretically purchase the exclusive International streaming rights to a particular program or channel in an attempt to gain a competitive advantage over other ISP’s. If that program or channel is desired by a particular segment then this could attract a sizeable customer base. A good example of this is Bigpond offering free AFL, NRL & Horse Racing coverage. This however is not a sustainable competitive advantage as there are ways around this. Torrenting sites and live streams mean that this content is not unique to a particular ISP.

The article also suggests that ISP’s could desire the ability to manipulate the speeds of packets of data. This would essentially create seperate classes of Internet users as packages would be sold based on the delivery of data. I seriously question whether this would be an effective way to differentiate your service offering in a market with established Internet usage such as Australia. Users demand surety that when they send an email it will be delivered almost immediately, regardless of where it is being sent. Any segmentation strategy that slows the delivery of data packets would be unlikely to be demanded as the market is currently moving toward faster and faster Internet speeds. Slowing service would create a disconnect and would likely only attract a niche market in Australia.

Government is a key stakeholder in this process, efforts to end Open Internet in Australia have been seen with the Australian Labor Party’s Mandatory Filter policy. The proposal will see a blacklist of websites formed that will be banned and subsequently filtered out. In principle it can be argued that this is a good idea as the proposal would filter sites such as Child Pornography. The problem associated with this is that it is difficult to instigate politically. Any blacklist that is not made publically available would raise trust issues with the electorate. Just what is defined as offensive content?  Could it include policies from a competing political party? and what is the opportunity for appeal if your site is found to be in breach? The Liberal and Green parties have announced that they will not support the filter and for all intents and purposes it is dead for the next 6 years as the Labor party faces a hostile Senate on the issue. This does not mean that all government regulation is stymied, it just means that this particular issue is.

Where I can see the Internet becoming more closed is through discrete network systems. Apple are the Masters of this tying iPods to iTunes and Internet access on iPads limited to applications accessed or purchased through the Apple App Store. What this means is that content is controlled. Apple decide what apps can be accessed on their products. In this case the Internet ceases to be open. Application developers must meet Apple’s terms of service in order to sell their product. This has the effect of hindering innovation, a key disadvantage of the closed network. Apple’s power comes in the form of their market share. As this is large, the impact of the closed network is felt much more broadly. As different companies develop market leadership over time,  they too have the potential to slow the diffusion of innovation as users and designers are forced to use distinct systems.

So what does all this mean? Are we facing the balkinisation of the Internet? I would have to agree that yes we are. In pure definitional terms, the days of an ‘open Internet’ are gone. The three aforementioned stakeholders will slowly exert their power, over time creating barriers to development. This does not mean that innovation will stop. Rather the rate of innovation will simply be slowed as tomorrow’s innovators find ways to work within (and outside) the new system.

What do you think? Do you believe that the open Internet is dead? and which of the above stakeholders will exert the most power in this brave new world? Finally do you believe there is a market for a service that sees emails delayed?