Western-dominated Internet governance harms Southern economies

Modern digital information and communication technologies hold great promise. Unfortunately, the Western dominance of Internet governance threatens to destroy a great part of the potential benefits, specifically for the economies of developing countries, warns Norbert Bollow.

MODERN technologies and the Internet can benefit everyone. However, it is wrong to assume that all economies would benefit in exactly the same way.

Imagine first a country or other geographic area where a large part of the population participates in the economy with well-developed professional skills and correspondingly earns good income. In this context, the main economic effect of the digital communication revolution is to increase the efficiency of business processes. The number of knowledge workers increases, while repetitive manual labour decreases. Wealth creation per worker increases, and everyone benefits if the increased productivity per worker leads to a fair corresponding increase in salaries. The costs of increased use of digital communication by consumers are generally not a problem at the individual level, and they are certainly not a problem in the aggregate at the national level. If (as is the case for most countries) more information and communication technology (ICT) equipment is imported than exported, the corresponding costs are easily compensated by the increase in value creation in the economy.

Now consider the typical situation of a developing-country economy where, for a variety of reasons, only a very small part of the population has the opportunity to acquire professional skills at a good level and then to use these skills to earn good income. In such a context, replacing manual labour with knowledge workers will not necessarily benefit the local or the national economy. For example, if the increase in efficiency does not lead to increased exports (because the export products are not becoming more competitive on the world market - after all, the competitors are also adopting modern ICTs) but the increase in ICT use leads to increased imports of ICT hardware, software and services, the country's overall situation will become worse. As the percentage of the country's exports which is used to pay for ICTs increases, the percentage which can be used to finance other essential imports decreases. Worse, it is possible that services within the country based on manual labour will be unable to compete with automated processes created by knowledge workers outside the country. For example, when global companies like Google or Facebook succeed in selling advertisements for business transactions which take place within a developing country, that increases the ICT-related flow of money out of the country so that even less revenue from exports is available for what were previously the important imports.

From the perspective of this economic analysis, it would not help in any significant way to insist that advertisements should be bought from a company within the developing country, such as a local subsidiary of Google or Facebook: that would not change the situation of money flowing out of the country (to pay for development work abroad and for profits that ultimately go into the pockets of the shareholders). And in view of how such companies generally organise their accounting across international subsidiaries so as to minimise the payment of taxes, taxation of such subsidiaries generally does not work very well. So when marketing services are provided by international Internet companies (either through their local subsidiaries or in any other way) rather than by local businesses, that will typically also imply a loss of tax revenue for the developing country, making the overall situation still worse.

Also, in regard to how infrastructure investments in developing countries can be funded, the Internet age is quite different from the age of telephony, because the international charging scheme for telephone calls generated funds for developing countries that could be used for infrastructure investments. That is, economically weak countries received revenues from phone calls originating in economically stronger countries, and these revenues could be used to guarantee investment loans and pay them off.

The task of creating promising development strategies for and using the Internet may not be trivial, therefore, but it is not hard to see that important steps forward are possible, and should be pursued urgently.

Take, for example, the realisation that, in developing economies, the adoption of ICTs and the Internet in particular needs to be pursued in a way that does not reduce the ability to make other essential imports. The obvious solution to this dilemma would be to ensure that the adoption of ICTs and the Internet happens in a way that increases exports by more than the cost of the corresponding imports. But to what extent so far have the peoples of the Global South, through the use of ICTs, become empowered to participate in the world market in new ways, producing exports at a good price which they were previously unable to do, so that their economies will truly benefit? In fact, increasing the percentage of people who have such opportunities is one way in which the objective of 'development' can be described.

As the Internet is increasingly becoming a global marketplace, it is immediately plausible to pursue the idea that some exports could be in the form of sales made over the Internet by merchants based in developing countries. In regard to physical goods, there are of course challenges related to logistics. In regard to information goods and knowledge work, the matter of logistics should be easily resolved using the Internet. However, this still runs into an obstacle: the payment systems which are in use on the Internet today seriously discriminate against merchants in developing countries. Global public policy action is urgently needed to create global regulation of such payment systems that ends this discrimination. Developing countries should of course combine their engagement for such regulation with the framing of national development strategies aimed at empowering entrepreneurs in their country to make good use of the resulting opportunities.

Promising avenues for public policy action are also available in regard to addressing the risks to national economies posed by the strength of global Internet companies which threaten to capture an unreasonably large share of the global and local advertising markets. Economies of scale and network effects are the main reason why it is currently often difficult, if not impossible, for local Internet businesses to compete with the global giants. An Internet company with a large market is able to invest much more in developing and continually improving its software and services than a competitor with a small market.

This problem can be solved by means of public subsidies for the development of competitive software systems based on Free and Open Source Software (FOSS) and open standards. These subsidies should be financed by a tax on the use of Internet-based advertisements and other Internet-based marketing services. The tax can be independent of whether the company that provides the marketing services is local or international, but at least in developing countries there must be a strict rule that the subsidies can only be used to support the work of software developers within the country levying the tax. This would ensure that, as the emergence of ICTs leads to manual jobs being replaced by knowledge workers, corresponding expertise is built up within the developing country.

Once Free and Open Source Software is developed that enables competition with the Internet giants, it can be used competitively even by small companies, in particular by companies in developing countries aiming to address relatively small local markets. Such small companies can of course more easily acquire a better understanding of local markets than can the global Internet giants, which have a much less focused interest.

Therefore it is clearly possible to advance the economic development interests of the Global South through appropriate public policy action related to the Internet. However, it must be kept in mind that making use of the opportunities depends also on other factors in addition to technical infrastructure and cost of access (the problem of discrimination against merchants in developing countries was mentioned above), and that there are also economic risks that need to be managed and mitigated.

In 2005, at the World Summit on the Information Society (WSIS), the following was noted as a working definition of Internet governance: 'the development and application by governments, the private sector and civil society, in their respective roles, of shared principles, norms, rules, decision-making procedures, and programmes that shape the evolution and use of the Internet'.

Figuring out strategies to make the Internet truly empower development, and then implementing those strategies, is clearly something that would contribute to shaping the evolution and use of the Internet. It is therefore clearly part of the scope of Internet governance in the sense of this internationally recognised working definition. And it is also clear and indisputable that this is an objective that should be pursued as a priority.

Since WSIS there has been no shortage of opportunities to pursue this objective of 'Internet governance for development', with the 'development' discussions often centring around various aspects related to the cost of Internet access. Clearly a high cost of access can prevent the Internet being used to its full benefit. The price of connectivity to the Internet is much higher, in relative terms, in developing countries than it is in developed countries, usually by factors well over 10.  There are many reasons for this, including the fact that, in the international billing scheme for Internet connectivity, developing countries must pay for the full cost of connectivity, including the cost of receiving spam, web-based advertising and so forth. Developing countries need hard currency in order to purchase the equipment needed to expand Internet usage, but have no way to obtain that currency from Internet use: on the contrary, the more they use the Internet, the more money flows out of the country.

WSIS acknowledged already in 2005 that the charges for international Internet connectivity should be better balanced to enhance access and called for the development of strategies for increasing affordable global connectivity, thereby facilitating improved and equitable access for all. But there has been no meaningful action to make this happen. On the contrary, developed countries, at the urging of their industry players, drag out discussions in fora such as the International Telecommunication Union (ITU) and prevent meaningful decisions from being taken. They went so far as to block proposals at the World Conference on International Telecommunications (WCIT) to make transparency a general principle that should apply to all international telecommunications charging; lack of transparency means that it is impossible to know if major developed-country players are abusing their dominant position to overcharge customers in developing countries. 

Another outcome of WSIS has been the creation of the UN's yearly Internet Governance Forum (IGF), but unfortunately this has failed to address the above-described issues of economic development in a meaningful way. Since 2006, the IGF has regularly hosted a significant part of the international discourse on Internet governance. A cursory look at what had been announced as the 'overall theme' for each of the IGFs from 2006 until last year's edition in Bali gives the impression that development, in the sense of the needs of the peoples of the Global South, is a primary objective of the Internet governance discourse. For example, the theme for 2012 was 'Internet Governance for Sustainable Human, Economic and Social Development', while the 2013 theme was 'Building Bridges - Enhancing Multistakeholder Cooperation for Growth and Sustainable Development'. Hence the IGFs should really have been a venue to address the various 'Internet governance for development' aspects that go beyond the issues related to the cost of Internet access.

Of course, it was quite intentional on the part of the organisers to give this impression to those who do not look far beyond the nice-sounding overall theme. The substantive discourse which takes place at these conferences is unfortunately riddled with acronyms and very often difficult if not impossible to understand for anyone besides Internet experts. But the vast majority of Internet governance experts have little or no understanding of the complex socioeconomic challenges of developing countries, nor apparently any significant interest in learning how these matters relate to the Internet and its use.

In fact there is a very Western economic ideology which drives much of the Internet governance discussions, and proposed workshop themes which don't fit into that way of thinking get rejected on the grounds of being 'unrelated to Internet governance', although in reality they are only outside the comfort zone of the career Internet governance specialists who evaluate the workshop proposals. Examples of workshop themes which were rejected in this way in 2013 included 'regulating global Internet businesses - need for global frameworks' and 'the roles of the Internet in anti-poverty strategies'. Actual in-depth discussion of development concerns and of how Internet governance can help hasn't happened at IGFs even when precisely that had officially been declared to be one of the main objectives!

The theme of the 2014 IGF is much more honest: the pretense of an emphasis on development aspects has been dropped, and the IGF theme now speaks about the actual objectives of those who largely dominate this discourse. This year's theme is 'Connecting Continents for Enhanced Multistakeholder Internet Governance'. Now 'development' is mentioned in only one of the eight subthemes (again together with 'growth').

Still more striking than the trend of reducing the emphasis on development is how the status of 'multistakeholder cooperation' or 'multistakeholder governance' is receiving increased attention. That topic was not mentioned at all in any IGF overall theme in any of the years from 2006 until 2012. In 2013 it was emphasised as ostensibly being a key means towards achieving the ultimate objectives of 'growth' and 'sustainable development'. Now 'enhanced' multistakeholder governance has been officially declared the IGF's overall goal, and the IGF is openly proclaimed as being intended to 'connect continents' with the objective of achieving that goal!

We must ask whether such 'enhanced multistakeholder Internet governance' is good or bad from the perspective of the development needs and interests of the peoples of the Global South. The question is not whether multistakeholder processes can be used to inform and guide governance actions that have a well-chosen development goal. No, the question is whether development interests will be served well or badly when 'enhanced multistakeholder Internet governance' is implemented in the absence of a clear and enforceable development-oriented goal framework, and with largely the current kind of composition of participants in Internet governance multistakeholder processes, where hardly anyone participates who has true expertise (in the sense of practical experience that goes beyond purely technical matters) in the field of ICT For Development. This is of course related to the question of who gets funded for travelling to Internet governance conferences and for participation in related discourse processes.

'Naive', 'equal-footing' multistakeholderism

While it would of course be possible to implement multistakeholder processes in a reasonable democratic framework (where ultimately decisions are taken by explicitly democratic bodies, such as national parliaments), the current craze of multistakeholderism is to get rid of any kind of decision-making entity with explicit democratic accountability. It is an ideology which insists that no public policy decisions may be made in the area of Internet governance except through multistakeholder consensus processes. This is the most extreme form of deregulation: this ideology even tries to remove the possibility of thinking that public-interest-oriented regulation might be possible. Of course in the short run at least, it will be primarily US companies and the US surveillance-industrial complex that benefit from such extreme deregulation.

When (as is currently the aspiration of the US and its allies) multistakeholder governance is constituted without explicit and enforceable measures to ensure democratic accountability and in particular to ensure that the needs of the people of the Global South are appropriately taken into consideration, it may be referred to as 'naive' or 'equal-footing' multistakeholderism. This form of multistakeholderism is naive because it is based on a naive ideological assumption that whatever 'the global Internet community' thinks is good will in fact be good for the world. Most of the adherents of this ideology seem to have adopted it in a politically rather naive manner, but of course among the proponents of this ideology there are those who know exactly what geo-political objectives it serves.

The attribute 'equal-footing' refers to the ideological demand that all stakeholders must have an equal say in the public policy discourse. This effectively gives global Internet companies the power to veto any kind of regulation that is not in their interest. Of course, any and all regulation that is needed to curb the powers of these global businesses in order to make the emerging Internet economy beneficial to developing countries would be among the victims of this veto power. It is the equivalent of allowing pharmaceutical companies to veto drug safety and effectiveness standards or price caps.

Developing-country governments need to step up their engagement on Internet governance matters at this point, both in regard to global fora like the IGF and in regard to increased coordination among each other. Otherwise the ideology of naive, equal-footing multistakeholderism will rule the day, with disastrous consequences for developing-country economies.                             

Norbert Bollow is an independent consultant with expertise in mathematics, physics, informatics, open standards, and the use of logic trees for business strategy development. He is careful to avoid conflicts of interest between his business activities and civil society engagement on behalf of the Swiss Open Systems User Group /ch/open (a leading organisation in Switzerland for Free and Open Source Software and related topics), (a faith-based civil society organisation) and the Just Net Coalition (an international civil society coalition for a just and equitable Internet).

*Third World Resurgence No. 287/288, July/August 2014, pp 36-39