How the Internet Affects National Sovereignty

Interesting paper by Melissa Hathaway: “Connected Choices: How the Internet Is Challenging Sovereign Decisions.”

Abstract: Modern societies are in the middle of a strategic, multidimensional competition for money, power, and control over all aspects of the Internet and the Internet economy. This article discusses the increasing pace of discord and the competing interests that are unfolding in the current debate concerning the control and governance of the Internet and its infrastructure. Some countries are more prepared for and committed to winning tactical battles than are others on the road to asserting themselves as an Internet power. Some are acutely aware of what is at stake; the question is whether they will be the master or the victim of these multilayered power struggles as subtle and not-so-subtle connected choices are being made. Understanding this debate requires an appreciation of the entangled economic, technical, regulatory, political, and social interests implicated by the Internet. Those states that are prepared for and understand the many facets of the Internet will likely end up on top.

Posted on November 6, 2014 at 6:46 AM10 Comments


SoWhatDidYouExpect November 6, 2014 7:20 AM

I have 50 years of experience with computers. Back in the (main frame) day, when these computer networks were entirely closed affairs (VTAM, SNA, proprietary everything), one would have been fired from their job to even think about opening access to the public much less other nations (actually doing it would have raised criminal suspicion and/or jail time).

Yet, when the internet (whatever that is these days) was born, and made available everywhere, it seems we have been in a rush to expose ourseleves to the world and seemingly not caring about the downsides. Not only have governments accepted this but also the big businesses (all combined = ‘big brother’), who seem to have more to gain than to lose. The only time big business makes rapid change is when they want it for their gain, yet they make little or no change to their own intentions or methodology.

The game at hand is one sided. The consumer and those not in control of wealth & power, lose ground while the perpetrators of influence, intimidation & control, make greater gains, such that we begin to look like the countries that resist such overtures (what we are trying to do threatens what they already have).

The internet is the classic example of Skinner’s Box, or the Lord of The Rings trilogy offshoot…”one network to rule them all”. In this case, Mordor wins and Middle Earth loses.

chuck b November 6, 2014 1:02 PM

The overall conclusion (“Those states that are prepared for and understand the many facets of the Internet will likely end up on top”) may be right. But is is a non-sequitar when she has some essential facts wrong and inapropriately concatenates variously issues.

Bob S. November 6, 2014 1:26 PM

Conclusion, we need a,

“A thorough action plan
that brings together a broad set of countries and part-
icipants to work toward this vision, jointly and across
borders, and in partnership with government and
non-state actors, is the way forward…”

Seems a bit thin to me.

Horspool November 6, 2014 4:56 PM

The chief interest of Melissa Hathaway’s paper is how eagerly she justifies oppressive regulatory and tax regimes to increase the power of incumbent politicians and their cronies (in particular, legacy telcos which are crony concessions or SOE’s in most countries).

In her Conclusion, speaking of Internet governance and regulation, Hathaway writes that the USA cannot “maintain its position of influence [with respect to Internet governance] unless it develops and delivers a new message focused on economic competitiveness and business opportunity that respects the rights of individuals in their liberty, thoughts, and possessions.” That sounds like motherhood and apple-pie with which we can all agree but it contradicts many of her preceding remarks so it might be mere cant aimed at the TL;DR crowd. However, based on the text leading up to that passage, one suspects that Hathaway is really writing in an esoteric code which signifies “crony capitalism” by “economic competitiveness” and “systematic oppression” by “respect [for] rights of individuals.”

Before offering two lines praising respect for individual rights, economic competitiveness, and business opportunity, Hathaway delivers hundreds of lines extolling the opposite. For example, in her Regulatory Interests section, Hathaway explains that drafting oppressive International Telecommunications Regulations was the “perfect venue for countries seeking to assert more control over many aspects of the Internet, including facilitating an accounting mechanism to compensate for the infrastructure improvements needed to carry the ever-growing Internet (voice, data, and video) traffic and to initiate security requirements for key facilities and networks.” Indeed, and what was the role of the USA? According to Hathaway, the “United State[s] led the dissenting block… and has been criticized for its position ever since.”

Now, Hathaway earlier gives special definitions for the phrases “accounting mechanism to compensate for infrastructure improvements” and “security requirements.” In Hathaway-speak, those mean respectively “heavily taxing communications between the USA and other countries,” and “government censorship.” So by leading the dissenting block, the USA was in fact advocating for “respecting the rights of individuals” and “economic competitiveness.”

It seems Hathaway recommends the USA to develop and deliver a new message which will be “acceptable” when it supports state oppression of Internet users!

For those new to Hathaway’s intellectual world, let me point out how she builds up her case for oppression.

In her first topical section “Economic Interests,” after eulogizing the former practice of third-world telco monopolies taxing international calls (especially from the USA) with absurdly high “settlement charges”,[1] Hathaway writes that today ISP’s just pay for what they use “thus bypassing the payment scheme previously imposed.” How horrible! Think of each crony telco executive forced to go two or even three years without a new Mercedes-Benz!

But Hathaway has bigger fish to fry. Next she writes:

Content providers that offer their services via the networks of infrastructure operators using an over-the-top (OTT) model pose further challenges to this model. OTT content and services providers include Google, Facebook, PayPal, Amazon, Skype, and others. These OTT providers consume bandwidth through their delivery of volumes of information to users transiting the infrastructure—usually for free. Some-times these services can degrade the quality of the infrastructure operators’ own telecommunication services, including core services, because they are using more than their ‘‘fair share’’ of bandwidth. Infrastructure operators are thus forced to make additional investments to ensure that they can provide their customers with the low-latency, high-quality experience that they demand 24 hours a day, 7 days a week. To further complicate matters, the majority of the OTT companies are headquartered in the United States.

Hathaway recapitulates a lie emitted by American ISP’s like Comcast who also want to charge “content providers” for access to ISP subscribers. The lie is that content-providers “consume bandwidth for free.” In fact, small Internet subscribers pay for Internet service in order to send and receive “content.” When an individual shells out $75/month for “24Mbit/sec down + 3Mbit/sec up” “home broadband service” he specifically pays for the capacity to retrieve the bits he finds interesting from “content providers” on the Internet– that’s what the “24Mbit/sec down” part of his subscription is for. And like other Internet participants, content providers pay for ISP links (and in many cases for CDN’s to minimize latency and long-haul bandwidth consumption). What each carrier really wants– something Hathaway supports– is to convert its monopolist technical gatekeeper position into a tollbooth by which it will extort most of the value from unrelated business conducted across the Internet.

Hathaway writes that people using OTT “services can degrade the quality of the infrastructure operators’ own telecommunication services, including core services, because they are using more than their ‘‘fair share’’ of bandwidth.” That is artfully-phrased nonsense. The Internet is the “core service” of a modern telecommunications carrier. Legacy services which were formerly “core” such as voice or teletype are now just (very minor) Internet bitstreams.[2] And no one can use more than his “fair share” of bandwidth since ISP subscribers pay for whatever bandwidth they propose to consume.

Hathaway continues: “Infrastructure operators are thus forced to make additional investments to ensure that they can provide their customers with the low-latency, high-quality experience that they demand 24 hours a day, 7 days a week.” What is “additional” about carriers’ routine investments in plant to enable the services they sell?

Oh, writes Hathaway: “To further complicate matters, the majority of the OTT companies are headquartered in the United States.”

Well, there you have it! Many “OTT companies” are in the USA! So we should compensate crony monopoly telcos in other countries, wounded nearly to death by the loss of “settlement charges,” by helping them tax American firms who dare to “provide content” to those wicked Internet subscribers who have already paid (and continue to pay monthly) for the speedy delivery of the aforesaid “content.” Like all monopolists (this is textbook stuff, friends) carriers want to maximize profits by increasing prices and reducing output– except that carriers don’t have a monopoly on “content,” so they wish to leverage the monopoly they do have– on “access”– to extort all the profits from otherwise competitive “content providers.”

In her next section on Technical Interests, Hathaway explains that crony carrier monopolies must be protected because that “enables the government to assert control over those who are trying to evade regulation and payment schemas.” Meaning, of course, censorship and rakeoffs from monopolistic overcharging.

One tires of analyzing Hathaway line-by-line. She blithers on about “security” in such a meandering fashion, peppered with references to justly reviled incidents of state censorship or spying, that it takes a sharp eye to tease out her bottom line that the Internet should be “governed” to facilitate oppression.

Hathaway writes “Security arguments are being used to empower governments to advance their economic, political, and military interests in the operational implementation and architecture of the Internet. This weakens multistakeholder processes and venues and, at the same time, boosts market access, disrupts the power and control over Internet governance, and positions states for standards leadership.” That contradictory farrago (e.g., government interference does not “boost” but rather suppresses market access) leads eventually, per Hathaway, to the problem that “The main challenge lies in the fact that the private sector designs, builds, operates, maintains, and restores the very systems that process, transmit, and operate the country’s most important information and most vital infrastructures, while governments remain the ultimate guarantor of their citizens’ safety and well-being.”

“It is thus the responsibility,” writes Hathaway, “of governments to facilitate the market to meet the economic and national security interests of their citizens… Now that the Internet affects these and other citizen-essential services, governments are evaluating whether the Internet is in need of some sort of market corrections.”

By “market correction” Hathaway means “heavy taxation and regulatory interference.”

Hathaway continues “Each country is using different market levers, in the form of legislation and regulations, to assert control, manage risk, build security back into the infrastructure, and maintain political stability.”

There is the key to understanding Hathaway. When she writes “market levers” she means state interference. Legislation and regulations are not market processes, they are political impositions and are intended to redistribute risks and rewards in favor of those Hathaway calls “political actors” and their cronies. The missing “security” Hathaway wants to build “back” into the infrastructure is the censorship which was so much easier in the days of analog voice and teletype communications, and “maintaining political stability” is code for “suppressing popular unrest.”

I agree with Hathaway that the US should deliver a “new message” that “respects the rights of individuals in their liberty, thoughts, and possessions” to maintain influence over Internet governance. The proper way to deliver that message is for the US to desist from all indiscriminate spying and related sabotage (whether of standards or of computers and network gear) at home and abroad. The US should lead by example so its “new message” will be credible. Hathaway should deliver a “new message” as well: she should repudiate her mealy-mouthed defenses of discriminatory taxes, crony monopoly rakeoffs, and state censorship of the Internet and advocate clearly and directly for an open, competitive ordering which will deliver the maximum benefit to individuals rather than “political actors” world-wide.

[1] High settlement charges were a classic example of an economically inefficient but politically-favored tax. In order to extract revenue from a few callers with very low elasticities of demand, third-world despots imposed gigantic deadweight losses. Of course, since high settlement charges discouraged economic development (and pre-revolutionary coordination between residents and exiles) those despots were pleased– they did (and still do) prefer to rule in Hell than serve in Heaven.

[2] Even in LDC’s.

Horspool November 6, 2014 5:47 PM

Hathaway specifically claims that developing countries need to tax Internet communications with the USA to finance Internet infrastructure just as they taxed telephone communications with the USA in the past to (allegedly) finance telecom infrastructure. Hathaway also claims such taxation will improve non-US citizens’ access to Internet resources based in the USA.

Her claim is contradicted by actual experience of the old telephone taxation regime (called “settlement charges”).

An empirical paper titled Telecom Traffic and Investment in Developing Countries: The Effects of International Settlement Rate Reductions by Scott J. Wallsten for the Stanford Institute for Economic Policy Research and The World Bank showed (using data from 179 countries for 13 years preceding US-FCC action to reform the system) that “telecom traffic is sensitive to settlement rates. Reduced settlement rates lead to increased telecom traffic, and the biggest price effects occur in the poorest countries. That is, the poorest countries are likely to see the largest increase in telecom traffic as a result of decreases in the settlement rate. I [Wallsten] also find no evidence that settlement payments are used to fund telecom investment. Settlement payments, while significantly correlated with telecom revenues, have no effect on mainline growth or imports of telecommunications equipment. In short, the data suggest that, contrary to conventional wisdom, settlement payments have not been invested in domestic telecom networks in developing countries.

Wallsten showed that crony monopoly telcos outside the US restricted communications to obtain excess profits which they diverted to other uses than expanding telecom networks. The whole regime harmed the poorest the most.

We can be virtually certain that Hathaway’s plan to reinstate “settlement charges,” partly as surcharges on “US OTT Internet businesses,” would equally harm poor people around the world while equally failing to fund any expansion of Internet availability.

It is impossible to accord Hathaway any intellectual respect.

Casual Friday November 6, 2014 8:07 PM

The day other nations got their own TLDs, the argument that the US controls the internet lost merit. If other parts of the world rely heavily on US resources, it’s either because they didn’t build their own, or their citizens just happen to choose to play in our sandbox. The regulatory bodies of the internet have done an overall fantastic job of fairness and objectivity. Considering what a thankless job that is they have done well.

Clive Robinson November 7, 2014 4:19 AM

@ Casual Friday,


blockquote>The day other nations got their own TLDs, the argument that the US controls the internet lost merit.



Oh dear the old chestnut of domain names over physical architecture.

The domain name system is nothing more than a distributed lookup table, it simply maps an easily memorable name to a much less memorable IP address number.

But again the IP address number is another mapping as there is no physical constraint on where a host with any given IP address can be within the network.

The underlying physical network is very difficult to change, which is why wresting physical control of the network away from the US will take as long again as it did to get where it currently is, if and only if the will and determination remains to over come all the bribes and barriers the US will put in place one way or another to stop the loss of control they currently have. To think otherwise is a pipe dream verging on delusional behaviour.

It’s why I keep telling people to look up a real physical map of the internet and see where the physical nodes / choke points are and more importantly the relationship of these points to the Five Eyes nations and other slightly broader Intelegence Community.

Kale November 7, 2014 3:49 PM

BlackEnergy crimeware tool threatens Linux as well as Windows

According to a report published Monday by security firm Kaspersky Labs, the breadth of BlackEnergy goes even further. A host of extensions customized for both Windows and Linux systems contain commands for carrying out DoS attacks, stealing passwords, scanning ports, logging IP sources, covertly taking screenshots, gaining persistent access to command and control channels, and destroying hard drives. Researchers Kurt Baumgartner and Maria Garnaeva also acquired a version that works on ARM- and MIPS-based systems and uncovered evidence BlackEnergy has infected networking devices manufactured by Cisco Systems.

They are unsure precisely what the purpose is for some plugins, including one that gathers device instance IDs and other information on connected USB drives and another that collects details on the BIOS, motherboard, and processor of infected systems.

Bauke Jan Douma November 7, 2014 6:16 PM

The whole neurotic preoccupation with the internet by those seeking to gain or consolidate control has much (not all, but much) in common with that guy that lost his keys one evening and started looking under lamp posts, because that’s where the light enabled him to see things.

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