Is it the end of the world wide web?

The splinternet could put globalisation into reverse, damage world trade and cut off technology companies from growth markets

The age of the global internet may be coming to an end as mistrust between East and West mounts. Rising protectionism, nationalism, and security fears could see the internet split into separate parts, so countries can control what they regard as its negative aspects. This potential outcome, which has become known as the splinternet, could put globalisation into reverse, damage world trade and cut off western technology companies from growth markets.

Eric Schmidt, the former Google chief executive, thinks such an outcome is not only possible but likely within the next 10 to 15 years. What will happen if he is right? The internet was developed by the West and private companies were allowed to develop new businesses without government interference. As well as unleashing a wave of creative destruction in industries from retail to print publishing to broadcasting, there are negative aspects that governments in other parts of the world are keen to control, be they political or religious.

Different countries have different priorities and a onesize-fits-all internet is having difficulty meeting this goal. One solution could be to pull the plug on the open, global internet and instead create a series of independent networks. Schmidt talks about a bifurcated internet — one US-led and one China-centric.

However, some think that a European-based network is also possible, as the continent appears keener on data protection and regulation that anyone based in Washington DC. Indeed, earlier this year, Europe introduced the General Data Protection Regulation (GDPR), which supports privacy in a world where companies can benefit significantly from using and misusing personal information harvested from individuals. This raises the possibility of a break-up of the world wide web into three separate internets.

The Balkanisation of the internet is already under way. The open, free-speech dominated Anglosphere model does not work for China. The internet is primarily built on technology and infrastructure made by US companies and controlled by US tech giants. The Made in China 2025 policy, a 10-year plan to update China’s manufacturing base by rapidly developing 10 hi-tech industries, is likely to see an upgrade of the country’s internet infrastructure that will put in place data centres and servers built in China.

Iran has already done this on a smaller scale. Dubbed the Halal Net, the country has a “walled-garden intranet” that allows the theocratic country to control what its citizens see and monitors their every online move. India has also introduced data localisation laws that require user information be stored on servers in India and India alone.

Businesses such as Amazon and Google could lose their global dominance as the major growth markets in Asia are moved out of their sphere of influence. It could lead to the segregation of supply chains, which is likely to increase business costs. It could result in less competition in segregated markets, which could push up prices for consumers. It is also likely to allow authoritarianism to prosper. It is unclear whether Schmidt’s vision of a digitally divided world will ultimately come to pass, but not insignificant steps in this direction are already being made. We may already be witnessing the end of the world wide web as the era of virtual borders dismantles its global reach. ■ Garry White is chief investment commentator at wealth manager Charles Stanley.