Explanatory text: Members of the US House of Representatives , which will allow employees of government agencies of the country to use the TikTok application. According to congressmen, the Chinese application TikTok may "pose a threat" to the national security of the country - in particular, to collect data from American citizens in order to carry out cyber attacks on the United States in the future.
One of the most pernicious mistakes surrounding , is that its ban could potentially lead to a split in the Internet. Such an opinion erases the history of the Great Firewall of China, raised 23 years ago, and, in fact, cut off China from most Western services. The fact that the United States is finally able to give a mirror answer to this is only a reflection of the existing reality, and not the creation of a new one.
Among the real news, one can note the split of the non-Chinese Internet: for most of the world, the American model serves as the basis, but the European Union and India are increasingly turning on their paths.
American model
The American model of the Internet is built on hands-off, and its effectiveness is hard to argue with. The tech sector has been the biggest driver of US economic growth for many years now, and US internet companies dominate much of the world, bringing with it US soft power β sort of like McDonaldβs with Hollywood on steroids. This approach has obvious disadvantages: leads to the creation dominating markets and the emergence of communities, both good and bad.
However, this article mainly discusses economics and politics, and in this sense, the following participants have won and lost the most from the American approach:
The winners are:
- Large American tech companies operating freely in the US, which gives them a large and profitable user base that finances expansion beyond the borders of the country.
- New tech companies in the US have a relatively low barrier to entry, especially in the areas of regulation and data collection.
- The US government collects most of the taxes from these American companies, including their foreign profits, and also exports its worldview through them, while receiving data on citizens of other countries.
- US citizens enjoy more freedom online, although there are minimal restrictions on the collection of their data by private companies and the US government.
- Companies outside the United States operate freely without restrictions in the United States and other countries with an American approach.
Losers:
- Other governments have limited: control over American tech companies, access to their profits, control over the dissemination of information.
My bias is clear: I definitely think the US approach is the best. Many, of course, will argue over how this all affects new companies, given that large aggregators dominate their markets, while others will focus on the issue of data collection. I'm also concerned that turn out to be worse which they must decide, in particular with regard to the benefits users receive from using . But how , I find convincing the statements of the EU Supreme Court that the US government's collection of data on citizens of other countries is a serious privacy problem.
However, these disputes underscore a point that I think we can all agree with: that other governments have good reason to complain about the hegemony of American tech companies.
Chinese model
The driving force behind the Chinese model is primarily information control. This is evidenced not only by the fact that China controls access to Western services at the network level, but also by the fact that a huge number of censors work for the Chinese government, and that the government expects Chinese Internet companies like Tencent or ByteDance to have thousands of their own censors.
At the same time, the economic benefits of the Chinese approach cannot be denied. China is the only country that can compete with the US in terms of the size and breadth of internet companies thanks to its huge market and lack of competition. What's more, this situation is leading to various innovations, as China immediately switched to the mobile Internet, bypassing the baggage of PC preferences that still burdens some American companies.
With all this in mind, it is still not superfluous to ask the question of how reproducible the Chinese model is. Smaller countries like Iran control US tech companies in a similar way, but in the absence of a market comparable to China, it is much more difficult for them to reap the same economic benefits from the Great Firewall. It is also worth noting that the Chinese model has many losers, including Chinese citizens.
European model
Europe, armed with norms such as , , as well as a court decision from last week that canceled "" (and the previous decision that canceled in 2015 ""), breaks off and goes to its own Internet.
However, such an Internet seems to be the worst of all possible options. On the one hand, big US tech companies are winning, at least relative to others: yes, all these regulatory bans increase costs (and reduce targeted advertising revenues), but they have a stronger effect on potential competitors. Figuratively speaking, the European Union limits the size of the castle by greatly increasing the width of the moat.
Meanwhile, EU citizens will see their data increasingly protected from US government encroachment, which is good for them. Other defenses are unlikely to be as effective, or outweigh the general discontent and loss of importance that comes from endless discussions about permissions and inappropriate content. Moreover, the number of alternatives to established leaders is likely to decrease, especially compared to the US.
It is also unlikely that European competitors will be able to fill this niche. Any company that wants to achieve large scale must first achieve it in its own market and only then go abroad, however, it seems more likely that Europe will become rather the second most important market for companies that have done the dirty work of data processing and embedded into markets that are more open to experimentation and less burdened by restrictions. Higher value means more drive to succeed, so a proven model will have an edge over a speculative one.
Worst of all, at least from the European Union's point of view, this approach has no advantages for European governments. This is the problem with normative management - without focusing on growth, it is difficult to create situations in which everyone can win.
Indian model
The Indian market has always been somewhat unique: while foreign companies have been relatively loose in the field of digital goods, resulting in a huge number of users of US companies such as Google and Facebook and Chinese companies such as TikTok, India has been much stricter in its approach to issues related to the physical level of technology. This includes both heavy duties on electronics and a ban on foreign investment in areas such as e-commerce. In addition, India has always been one of the most challenging markets in terms of internet access and logistics.
At the same time, the Indian market is the most tempting in the world, for both American and Chinese tech companies, which have already largely saturated domestic markets. This leads to constant clashes between foreign tech companies and Indian regulators - be it Facebook to introduce the Free Basics application [access to social network resources without paying for Internet traffic / approx. transl.] or payments via WhatsApp, or via the Internet by Amazon and Flipkart, or, as of late, frankly for reasons of national security.
However, over the past few months, American tech companies have begun to understand how to cope with this impossible mission, and this heralds the emergence of a fourth Internet: you need to invest in Jio Platforms.
Bet on Jio
is the dominant telecommunications provider in India, one of the clearest examples of the avalanche of profits made from betting on technology-enhanced market penetration [Reliance Jio Infocomm Limited, a division of Jio Platforms, which is part of Reliance Industries Limited / note transl.]. The economy of this bet made by the richest man in India, , I described in one of my :
The key to understanding Ambani's bet is that if all the other established mobile operators in India, like mobile operators around the world, built their services on the technical basis of voice calls, which was then superimposed on data transmission, then Jio was originally built directly on the data network - Specifically, 4G.
- 4G, unlike 2G and 3G, does not support traditional telephone switches. Voice calls are processed in the same way as other data.
- Because everything on the network is data, 4G networks can be built with common commercially available hardware, which is not the case with 2G and 3G networks.
- Since Jio provides a data network, voice calls, which take up a relatively small part of the bandwidth of the channels, were the cheapest of all services provided, and their volume was practically unlimited.
In other words, the bet on Jio was a bet on zero costs - or at least costs much less serious than those of competitors. Therefore, the optimal strategy for its development was to spend a huge amount of money at the start, and then try to serve the largest number of consumers in order to get the maximum return on the initial investment.
This is exactly what Jio pulled off: it spent $32 billion to build a network that covered all of India, launched services offering free data and free calls for the first three months, and after that voice calls remained free and data was asked for everything. a couple of bucks per gigabyte. It was a classic Silicon Valley bet: spend money up front and then capitalize on scale, thanks to a superior structure built from low-cost technology.
What makes this story compelling is its contrast with how Facebook justifies the Free Basics scheme:
In the end, this is what Zuckerberg thinks needs to be done: get hundreds of millions of Indians, a vast majority of them in the poorest parts of the country, connected to the internet. But unlike Free Basics, they connected to all Internet resources.
And this is not even the most convincing description of how much better Jio is for Indians than anything Free Basics could offer: Zuckerberg has no plans to change the old order of mobile communication in India, where operators concentrate on investments in the largest cities and focus on the richest part of society, while asking for services so much that in all seriousness said that it even violates moral standards. In such a world, even if Facebook accessibility increased for poor Indians, it would not be much, since there would be no reason to invest in companies that do not support Free Basics. Instead, they now not only have the entire Internet, but companies from India and China to the US compete to serve them.
I wrote an article about how Facebook bought a 5,7% stake in Jio Platforms for $10 billion; it turned out that this was the first of many investments in Jio:
- In May, Silver Lake Partners bought a 790% stake for $1,15 million, General Atlantic bought a 930% stake for $1,34 million, and KKR bought a 2,32% stake for $1,6 billion.
- In June, the independent funds Mubadala and Adia from the UAE and the independent fund of Saudi Arabia bought 1,85% of the shares for $1,3 billion, 1,16% of the shares for $800 million and 2,32% for $1,6 billion, respectively. Silver Lake Partners invested another $640 million, acquiring a 2,08% stake, TPG invested $640 million, acquiring a 0.93% stake, and Catterton invested $270 million, acquiring 0.39%. In addition, Intel invested $253 million, receiving 0.39%.
- In July, Qualcomm invested $97 million, taking a 0,15% stake, while Google invested $4,7 billion, taking a 7,7% stake.
This whole avalanche of investments in Reliance fully paid off the billions of dollars that it borrowed to create Jio. And it is becoming clearer and clearer that the company's ambitions extend far beyond simple telecommunications services.
Jio plans for the future
Last Wednesday, after announcing Google's investment in Jio Platforms at Reliance Industries' annual meeting, Ambani said:
First, I would like to share with you the philosophy behind Jio's current and future initiatives. The digital revolution has been the biggest transformation in human history, matched only by the advent of intelligent human beings some 50 years ago. You can compare them because today people are beginning to introduce an almost limitless intelligence into the world around them.
Today we are taking the first steps in the evolution of an intelligent planet. And unlike what happened in the past, this evolution is proceeding at a revolutionary pace. In the eight remaining decades of the 20st century alone, our world will change more than it has in the last XNUMX centuries. For the first time in human history, we have the opportunity to solve the biggest problems we have inherited from the past. There will be a world of prosperity, beauty and happiness for all people. India must be at the forefront of change for a better world. To do this, all of our people and businesses must have access to the necessary technological infrastructure and capabilities. This is the purpose of Jio. This is Jio's ambition.
My friends, Jio is today the undisputed leader in India with the largest user base, the largest share of data and voice traffic, and a next-generation, world-class broadband network covering our entire country in length and breadth. Jio's plans rest on two solid pillars. One is digital connectivity and the other is digital platforms.
Simply put, Jio is set to achieve a dream long eluded by telecommunications providers in other countries: move from fixed-cost infrastructure to high-margin services. Ambani's plans look all-encompassing:
Media, finance, commerce, education, healthcare, agriculture, smart cities, smart manufacturing and mobility
Jio has a chance to implement them due to three important differences from the actions of telecoms in other markets:
- Jio has created a huge part of the market in which it can operate. If Verizon in the US or NTT DoCoMo in Japan offer services in a competitive telecommunications market, Jio is the only option for a huge number of Indians (and for those who have options, Jio is much cheaper because of the IP-based network that can afford additional load).
- Instead of kicking out companies like Facebook or Google that have a large market share in India, Jio is cooperating with them.
- Jio positions itself as the Indian champion and as the company behind the entire Indian model.
Note how Ambani presented Jio's plans for 5G:
Jio's massive 4G network and fiber optic network is powered by several key software technologies and components developed by the company's young engineers right here in India. These capabilities and the know-how the company has acquired puts Jio at the forefront of another exciting frontier: 5G.
Today friends, I am very proud to announce that Jio has designed and developed a complete 5G network solution from the ground up. This will allow us to launch world-class 5G services in India using 100% local technologies and solutions. These solutions, built in India, will be ready as soon as 5G spectrum permits are received, and will be deployed as early as next year. And since Jio's entire architecture is based on IP networks, we will easily upgrade our 4G network to 5G.
Once Jio's solutions prove viable across India, the company's platforms will be in an excellent position to export 5G solutions to other telecom operators around the world as a fully supported service. I dedicate Jio's 5G solutions to our prime minister's inspiring future plans ""[in fact, on import substitution and self-sufficiency of the country with everything necessary / approx.transl.].
My friends, Jio Platform was created with the aim of developing intellectual property with which we could demonstrate the transformative power of technology in various industrial ecosystems, in order to use them first in India, and then with confidence to offer Indian solutions around the world.
Don't think that Jio's network and its years-long work on 5G was really motivated by Prime Minister Modi's announcement two months ago. Ambani's determination gives an idea of ββthe role that Jio will play in the opinion of its investors such as Facebook and Google:
- Jio is using this investment to become the monopoly telecom service provider in India.
- Jio is the only lever by which the government can control the Internet and collect its share of the profits.
- Jio becomes a reliable intermediary for foreign companies to invest in the Indian market; yes, they will have to share profits with Jio, but in return the company will smooth out all the regulatory and infrastructure obstacles that many have already stumbled over.
The interesting thing about this approach is that the lists of winners and losers blur very quickly. On the one hand, Jio has brought the internet to hundreds of millions of Indians who would not otherwise have access to it, and the benefits of this investment will only increase as Jio's services and partnerships mature. On the other hand, the disadvantage is the presence of a monopolist, especially in the context of having a government that has expressed a desire to increase control over the flow of information.
The economic bottom line is also blurry. Monopolies have always been inefficient in the economy. On the other hand, if market efficiency means that all profits will flow to Silicon Valley, why should India be concerned about efficiency? In a Jio-driven market, American tech companies will earn less than they could, while India not only collects more taxes, but can also reap huge benefits from the national champion Jio going abroad in the long run.
Indian counterweight
It is becoming increasingly less realistic - or at least irresponsible - to evaluate the tech industry, especially its major players, without considering the existing geopolitical problems. Considering them, I applaud Jio's plans. It would be unwise and disrespectful on the part of the United States to treat India as some kind of subordinate country from a technological point of view. Moreover, it would be good for the states to have a counterbalance to China, both geographically and in general among all developing countries. Jio is looking at goals that are often overlooked by US tech companies, and that matters not just for India but for much of the rest of the world.
But in doing so, Facebook, Google, Intel, Qualcomm, and the rest must proceed with caution. For a company and a country with its own path, they are just a means to an end. I'm not saying this investment is a bad idea (I think it's a good one) - but the Indian way seems more populist and nationalist than Americans might like. However, it is still not as antagonistic to Western liberalism as the Chinese Communist Party and is an important counterbalance.
The only question that remains is where Europe will go β and the overall picture of the situation turns out to be rather ugly:
The European Internet, unlike the American, Chinese or Indian, lacks plans for the future. Doing nothing and just saying no is a pathetic replica of the status quo in which money matters more than innovation.
Source: habr.com