The Internet Balkanization Fragmentation

Recent references to the dangers of “Internet balkanization” are all over the media. The term has been used to describe a variety of regulatory alternatives being considered or adopted by the International Telecommunication Union (ITU), Brazil, Russia, India, China, Iran, Turkey, Europe and others. The diversity of the group suggests they cannot be doing the same thing.

(In this guest blog, Sergio Alves Jr, explores the issues around the use of the term).

Some of these actors call for isolation of national content; some call for protection of data privacy and are reactions to U.S. mass surveillance; some enforce national laws which are not particularly related to the Internet; some call for increased international cooperation to ensure that national laws are respected (including data protection) and no one country has a dominant role in Internet governance. Regardless of the specifics of their actions, all these players have been invariably labeled as “balkanizers”.

Authors usually cite a metaphor for the geopolitical process of fragmentation of the Ottoman Empire into non-cooperative states to explain what Internet balkanization means. Although the reference to the history of the Balkans is pretty straightforward, it is very partial, to say the least. In the current context of Internet Governance negotiations, it would be more accurate to refer to the history of the United States as a federation, and the use of the expression “balkanization” by American academia and legal system, than to that of the Balkan Peninsula itself.

The term “balkanization” was coined in a New York Times interview with German politician Walther Rathenau, in 1918. As early as 1941, the U.S. Supreme Court was already employing the word “balkanization” to partially explain why the framers of the American Constitution unified the country in the 18^th century and relied on federal power and central authority to regulate interstate commerce (see Commerce Clause of the U.S. Constitution).

• Duckworth v. Arkansas, 314 U.S. 390 (1941)
• The case registers the first reference to “balkanization” by the Supreme Court: “The practical result [of local restraints that affect the conduct of interstate business] is that in default of action by us they will go on suffocating and retarding and Balkanizing American commerce, trade and industry.” (emphasis added)
• H. P. Hood & Sons v. Du Mond, 336 U.S. 525 (1949)
• It evoked the Duckworth decision and allocated the legal reasoning behind balkanization in the semantic field of libertarianism: “… fear that judicial toleration of any state regulations of local phases of commerce will bring about what they call ‘Balkanization’ of trade in the United States — trade barriers so high between the states that the stream of interstate commerce cannot flow over them. Other people believe in this philosophy because of an instinctive hostility to any governmental regulation of ‘free enterprise’; this group prefers a laissez faire economy. To them the spectre of ‘Bureaucracy’ is more frightening than ‘Balkanization’.” (emphasis added)
• Hughes v. Oklahoma, 441 U.S. 322 (1979)
• The Court held that an Oklahoma statute violated the Commerce Clause, and summarized a goal of the Constitution: “…in order to succeed, the new Union would have to avoid the tendencies toward economic Balkanization that had plagued relations among the Colonies and later among the States under the Articles of Confederation.” (emphasis added)

The U.S. Supreme Court expressed its concerns with “balkanization” in almost thirty cases since 1941. In most occasions, balkanization was essentially a matter of economic policy resulting from the dual sovereignty of American federalism.

In its modern connotation, some will cautiously allude to the ultimate importance of unity in the lower levels of the Internet architecture, but the technology literature is much richer than that and refers to “Internet balkanization” as (i) ways of segregating people online according to one’s preferences; (ii) different levels of infrastructure interconnection to the Internet; (iii) fragments resulting from regulatory and cultural forces; and (iv) a diplomatic agenda. In my research, I argue that it is also a matter of commerce and jurisdiction, issues that predate the Peace of Westphalia treaties from 1648, usually cited as a terrible and outdated reference for Internet regulation matters (something typically sidestepped from the international agendas of the American government and technology juggernauts).

Once one recognizes that conflicts of local, state, and federal regulations are absolutely normal in most federated states, “balkanization” as historically employed by U.S. courts does not sound all that awkward anymore. In fact, it is possible to make a point that innovative industries are experiencing a balkanized Internet service provision in the United States that resembles the constitutional “economic balkanization” debate, with states taking different approaches to the challenges imposed by new technologies and frustrating the idea of one flat Internet ecosystem within that one single country.

• Peer-to-Peer (P2P) lending
• Prosper and LendingClub are the two major for-profit peer-to-peer lending platforms that allow for lenders to choose and fund loans to borrowers whose profiles are published on their websites. Prosper is currently open to U.S. investors from 30 states and borrowers from 47 states; while LendingClub, to 26 and 45, respectively. This scenario is mainly caused by the varying rigidness of state laws, which take different approaches to the risks lenders and borrowers face in the P2P online model.
• Online gambling
• After the U.S. Department of Justice opinioned that the Interstate Wire Act of 1961 still applied to sports events but silenced about online gambling, Delaware, Nevada and New Jersey passed legislation authorizing online betting. The authorized websites offer restricted services for players physically present in those states only, usually with geolocation software checking for the accuracy of the information.
• Online direct sales of electric cars
• Tesla Motors faces strong regulatory burdens over its business model of autonomous showrooms and online sales, once several states have laws that restrict direct sales of cars to retail consumers without traditional dealerships. North Carolina almost took those restrictions to a whole new level, in 2013, when state senators proposed a bill (that was eventually dropped) to ban direct online sales of cars in that state, which, according to Tesla, would ultimately circumvent Internet-based communications with the company headquarters in California.

Similar arguments can be made about P2P ridesharing and P2P lodging, where companies like Uber, Lyft, Sidecar, and Airbnb face local regulations and fierce lobbying to limit or ban these companies from operating in various American cities. It all signals the sort of protective regulatory measure against the Internet that is considered by regions and corporations that are highly dependent on traditional business models. To some extent, the challenges of all these industries mimic the net neutrality format: the incumbent company of a highly regulated sector challenged by the disruptive entrant, with some sort of regulatory authority in the middle.

As leading representatives of the Internet industry begin to realize the inappropriateness of the term to describe a global issue (not exactly because of arguments raised here), they now try to advance an agenda concerned with “Internet fragmentation” (instead of referring to “Internet balkanization”), with significant initiatives devoted to framing what it actually means and how to address it. It certainly is a better approach, a strategy that will only eventually reveal what most prominently matters to an        Internet company: the wonders and magnitude of a network economy.

Building ways to fight censorship and promote trust in the distributed nature of the Internet should be premises of recent Internet governance developments. In order to contribute to this effort, the polysemous term “Internet balkanization” should not be employed as a mere rhetorical argument. If these tongue-twisters are not enough, one noble reason to abandon this expression in Internet governance negotiations: “balkanization” is a pejorative term, regardless of all derivative uses it has morphed into over the past century. Bulgarian historian Maria Todorova, from University of Illinois, is a specialist in the history of the Balkans and denounces why:

“Balkanization” not only had come to denote the parcelization of large and viable political units but also had become a synonym for a reversion to the tribal, the backward, the primitive, the barbarian. In its latest hypostasis, particularly in American academe, it has been completely decontextualized and paradigmatically related to a variety of problems. That the Balkans have been described as the “other” of Europe does not need special proof. What has been emphasized about the Balkans is that its inhabitants do not care to conform to the standards of behavior devised as normative by and for the civilized world. As with any generalization, this one is based on reductionism, but the reductionism and stereotyping of the Balkans has been of such degree and intensity that the discourse merits and requires special analysis. (emphasis added)

This is a guest blog by Sergio Alves Jr., 2014 Master of Laws (LL.M., Law & Technology) candidate at the University of California, Berkeley

* Please visit the following working papers for proper bibliography and reasoning.

o   Alves Jr., Sergio, Internet Governance 2.0.1.4: The Internet Balkanization Fragmentation (June 29, 2014). Available at SSRN: https://ssrn.com/abstract=2466222

o   Alves Jr., Sergio, The Internet Balkanization Discourse Backfires (September 19, 2014). Available at SSRN: https://ssrn.com/abstract=2498753