The Fight over the Fate of the Internet: The Economic, Political, and Security Costs of China’s Digital Standards Strategy

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By Theo Lebryk

Yenching Academy of Peking University

 

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Three months into Biden’s presidency, the new administration has already started to reverse many of Trump’s high profile exits from international institutions. The Biden administration has rejoined the Paris global climate accord and World Health Organization and looks poised to rejoin the UN Human Rights Council when it becomes eligible. While regaining America’s international stature may take some time, the Trump administration’s “Withdrawal Doctrine” appears to be more of a temporary blip than an important historical phenomenon.

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However, there are important, albeit less flashy international arenas where the U.S. has lost ground to China, which transcend the Trump anomaly. Reversing China’s rise in these institutions cannot be accomplished with a simple executive pen stroke. Nowhere is this truer than the complicated world of digital standards and internet governance.

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It is easy to think of the internet as simply working, but a great deal of work gets put into the standards, protocols, and rules which keep the World Wide Web running. In part because these debates are highly technical and seemingly apolitical in nature, internet governance institutions and standards development organizations often fly under the radar. In reality, considering how virtually every sector is increasingly reliant on the internet, the rules and standards of the Web have wide-ranging economic, political, and security implications.

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The major digital innovations on the horizon – blockchain, 5G/6G, internet of things (IoT), AI – threaten to upend existing military, political, economic, and social paradigms. The direction of that impact is not predetermined. Blockchain, for instance, started with a promise of security, privacy, and independence, but has recently been put towards more Orwellian applications such as China’s social credit system. Internet governance institutions and standards organizations are becoming the battleground in determining how these digital technologies will be deployed and regulated.

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The coming four years in internet governance will focus heavily on Huawei’s pitch to redesign the Internet, which it calls “New IP.” Huawei justifies this top-down redesign of the internet by arguing it is necessary to support these looming innovations. However, the political overtones of New IP are undeniable: if U.S. influence has eroded to the point where the proposal passes, it could create security backdoors for the Chinese government to exploit and codify Chinese censorship norms worldwide.
 

THE FREE INTERNET VS. CYBERSOVEREIGNTY

Having “invented” what eventually became the internet, the U.S. had a head start in determining the direction of the Web up until now. The U.S. government has generally supported a free, open internet while opposing censorship and excessive government regulation of the Web. The U.S. prefers to keep internet governance in the hands of multistakeholder organizations, where representatives from industry, academia, civil society as well as national governments have a say in decision making. By contrast, China supports multilateralism (national government-led governance, which is personified by the UN’s telecommunication arm, the International Telecommunication Union) and a more tightly regulated, censored internet. China’s general stance is that a national government should be able to control its domestic internet, which it calls “cybersovereignty.”

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China has been pushing these norms for years, but only in recent years has it been able to pose a serious threat to U.S. interests. In recent years, America’s share of leadership and general participation in the ITU and ISO/IEC have dropped. In 2016, ICANN – the organization in charge of the Domain Name System (DNS) that therefore controls users’ ability to access URLs – left U.S. stewardship.

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China’s participation in every single one of these forums has steadily increased. This increase is no coincidence: China’s standards game is a concerted effort. China has a standardization law that calls for “civil-military fusion” to enhance standards development and an upcoming plan called “China Standards 2035,” which makes explicit its goal to leverage dominance in international standards bodies to increase its geostrategic might. Already, Beijing offers firms financial rewards for putting forward industrial standards.

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China is also using its influence to transfer power away from multistakeholder bodies and into the multilateral ITU.  Houlin Zhao, a Chinese representative, now holds the Secretary-General position at the ITU. As Secretary-General, Zhao has attempted to expand the ITU’s mandate to encompass all technology writ-large, when in fact the ITU is supposed to only deal with telecommunications. 

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ITU mission creep coincides with another worrying trend for the U.S.: the rise of digital authoritarianism worldwide. It is not just that China individually has gained power over the last four years. China’s calls for cybersovereignty have fallen on increasingly receptive ears. Internet freedom is on the decline worldwide, and even democratic governments are adopting forms of Chinese digital authoritarianism. In one-country, one-vote forums such as the ITU, developing countries hold substantial voting power. China has made substantial investments in courting these “digital deciders” via its Digital Silk Road.
 

5G: A CASE STUDY IN GROWING CHINESE DIGITAL INFLUENCE

China’s rise and the U.S.’s fall in internet governance influence came to a head in the 5G debates. Huawei was able to set more standards than any other company, leading to economic, security, and political costs for the U.S.

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Economically, a firm that sets a standard has a leg up on its competition in building and selling technology related to that standard. When a Huawei standard gets adopted, Huawei is all but guaranteed to win more contracts and earn substantial licensing fees. Indeed, Huawei has secured more 5G contracts than any other company. This comes at the expense of American businesses: Qualcomm relies on licensing fees for roughly $1 billion a year, one-fifth of its total revenue, which Huawei could eat away at over time. In other words, allowing China to dominate digital standards bodies could cost America billions of dollars.

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Once a Chinese firm wins contracts to build internet infrastructure, they gain a significant cybersecurity advantage. The debate over Huawei security concerns is well-documented. A 2018 U.S.-China Economic and Security Review Commission report concluded that Chinese influence over IoT standards will give it “unparalleled opportunities” to compromise trillions of IoT devices.

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Finally, China’s digital standards drive gives it the opportunity to perpetuate the CCP’s political vision for the internet. One of the major use cases Huawei touted for its 5G technology was smart cities. These smart cities are antithetical to American conceptions of individual liberty, as they afford governments sweeping surveillance powers. As of 2019, Huawei has helped spread this brand of digital authoritarianism to the tune of billions of dollars’ worth of deals with 75 countries, ranging from Germany to Mexico to Nigeria. ZTE and China Mobile have also passed an international smart street light standard, which paves the way for police worldwide to use street lights to monitor citizens (and of course buy ZTE technology).
 

NEW IP AND THE FUTURE OF THE INTERNET

Huawei is already looking towards 6G and has proposed a monumental redesign of the internet. Huawei’s New IP proposal makes the economic, security, and political dimensions of the 5G debates look pedestrian. The current internet operates as a permissionless, “dumb” network where there are no barriers to access the internet and routers merely passively forward packets. New IP calls for a permissioned, active network. Users would need to register to use the Web. Once online, network operators would be able to “shut off” users’ internet access at any time and give varied service to different connections (for example, guaranteeing faster internet for some packets).

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Economically, Huawei would have a massive head start in selling everything New IP related. Security-wise, Huawei’s calls for an active, intelligent network would create a cybersecurity nightmare. If routers are able to take commands and execute different operations on internet traffic, the potential for backdoors goes up exponentially. Politically, the power to issue “shutoff commands” to users whose traffic is deemed problematic builds censorship directly into the internet’s architecture. Furthermore, requiring users to register to use the internet has clear connections to China’s social credit system. 

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Perhaps even more alarming than the content of New IP is the process by which Huawei is promoting it. As many technical experts have noted, the proposal should have gone through the IETF, a multistakeholder forum. Instead, Huawei went straight to the ITU, where national politics and lack of industry input make it more amenable to the unseemly aspects of the proposal mentioned above. New IP represents the most aggressive play to date to wrest control over the internet from the multistakeholder institutions sympathetic to a free, open internet and put it in the arms of national governments.

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Pushing back on New IP will be a substantial challenge for the U.S. going forward. Even if the proposal does not pass, it has set the tone for the degree and direction of China’s ambitions in internet governance. It is impossible to provide a comprehensive strategy to combat rising Chinese influence in internet governance in the space of a conclusion, but a few high-level points are worth raising.
 

A (BRIEF) WAY FORWARD

To reiterate, the decline of U.S. digital hegemony and the rise of China are much more deeply rooted than any one president. Trump’s 2017 National Security Strategy called for the U.S. to actively advocate for its interests in ICANN, IGF, and ITU, yet the U.S.’s influence in these organizations continued to ebb. America is dealing with a Chinese digital economy that has no signs of slowing down and an international climate that is increasingly receptive to cybersovereignty.

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One reason America’s internet governance problems are so intractable is because they are rooted in American dogma. For too long, American internet governance strategy has rested on two assumptions which inhibit its ability to accurately perceive and address its declining influence.

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First is the belief that private enterprises and free markets always out-compete, out-innovate and out-maneuver public enterprises and central planning. America takes for granted that its internet giants will always triumph over their Chinese counterparts in the market, in laboratories, and in international internet governance bodies.

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Huawei catching up and even surpassing Qualcomm, Ericsson, and Nokia should prove that the U.S. cannot simply assume its private firms will always crush their Chinese competitors. The success of China’s unified, concerted efforts in standard setting bodies indicates that the U.S. government cannot continue its laissez-faire approach to internet governance. Figuring out the optimal set of carrots and sticks to incentivize engagement in international fora will likely require some trial and error, but the bottom line is that the American government needs to be more engaged in internet governance and digital standardization efforts than it has been previously.

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Second is the belief that a free internet is more appealing than a censored one. The reality, however, is that almost everyone has deep concerns about the United States’ loosely regulated, free-for-all vision for the internet. Foreign countries are seeing in real time how the American vision for the internet threatens to create a society rife with misinformation to the point of stoking insurrection. They are also seeing how loosely regulated internet giants take advantage of user data in frightening ways.

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America needs to clean up its domestic internet – from misinformation to user privacy to digital monopolies to cybersecurity – in the eyes of the world to gain back legitimacy. More controversially, the U.S. needs to come to terms with the failure of the internet freedom agenda worldwide. Whether that soul-searching leads to a revamp of the original agenda or an increased willingness to compromise on censorship and government involvement in the internet remains to be seen. At present, the first step is acknowledging that its current hardline, evangelical internet freedom agenda alienates countries that otherwise might be wary of a China-led internet. U.S. activity in internet governance forums especially needs to consider the motivations and incentives of “the digital deciders,” lest they fall into line with China’s cybersovereignty camp.

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In summary, setting digital standards gives China the power to export and institutionalize its vision for the internet. In the coming years, New IP and its corresponding standards look to be the major battlegrounds for the fight over the direction of the internet. The United States needs to take the success of China’s internet governance efforts and the appeal of cybersovereignty seriously and start to build coalitions to counteract China’s growing efforts in these forums. Failure to do so will allow China’s influence over the internet to continue to grow, which will have costly economic, security, and political effects.

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The views expressed herein are those of the individual author, and they do not represent the official positions of organizing and sponsoring institutions, including China Focus, 21st Century China Center, Fudan-UC Center on Contemporary China, and the 1990 Institute.