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Let the data wars begin!

“Data is the new oil,” the cliché goes. The last several decades have seen wars over the fossil fuel, the next few are likely to see conflicts over the ‘new oil’.

Over the last few years, governments world over have suddenly woken up to data, some in a dramatic fashion. Why this sudden rush after years of doing precious little?

-Data nationalism-
I remember on a trip a couple of years ago (when international travel was still more common than a trip to outer space) to China, my colleague and I wanted to have a cup of coffee and realised we couldn’t buy one at any coffee shop we went to unless we had an Alipay or a WeChat account.

It’s no exaggeration of how ubiquitous these apps have become in China.

While it’s a sign of progress and part of an evolution to a cashless economy, it also amounts to mass, unregulated, collection of personal data.

Governments usually wake up late to technological advancements. But when they do, they often take drastic steps akin to trying to burn boats after forgetting to stop them at the harbour.

China has been taking the lead in burning boats.

The government has come down heavily on home-grown tech giants like Alibaba, Tencent, Didi, and others, accusing them of abusing their market power and misusing the vast amounts of consumer data they have accumulated over the years.

As I write this piece, China’s top legislative body just passed stringent data and personal information laws, which will limit the amount of data big tech companies can collect.

Of course, the government will be exempt from it as it invests heavily into building large data collecting infrastructure. The idea is to turn data into a “national resource.”

This has broad public support within China where data theft and fraud are rampant and every daily transaction now takes place on platforms controlled by tech giants.

Just in the last two months, regulators there have fined Alibaba $2.5 billion, virtually pulled the rug off Didi’s IPO listing in the U.S, took exclusive rights for global music off the table for Tencent’s music business, and—just a few days ago—warned Tencent about its gaming business.

More than a trillion dollars of value has been wiped off Chinese tech stocks in that time.

But China isn’t the only one. China itself is modeling its new data laws on the pioneering European General Data Protection Regulation or GDPR. E-commerce giant Amazon was recently fined $880 million in Europe for breaching the regulation.

While Amazon is appealing the decision by the tiny tax haven of Luxembourg, this is unlikely to be the last such GDPR ruling or fine. Almost all the tech giants have been fined at some point or the other.

In the United States too, the Biden administration is trying to put regulations in place that will eventually lead to reining in the tech giants.

In India, the government has put in place stringent IT rules that compel the tech giants to give the government access to specific information when they demand it.

While it’s been designed to ostensibly control the illegal or antinational content, critics say the real purpose is to control the narrative on social media and digital news platforms. And at the core of it is access to data.

The rules demand that even an encrypted platform like WhatsApp records and provide data of the “first originator” of messages to the government.

The irony is that this comes at a time when the government itself is being accused of using an Israeli surveillance software, Pegasus, to hack phones of members of the opposition, judiciary, and activists critical of them.

The government is also trying to push a diluted Personal Data Protection Bill that is meant to offer data protection to individuals but conveniently exempts agencies of the central government. from needing to comply with it.

There lies the problem.

While the U.S. and Europe are broadly trying to regulate to protect the individual and break market monopolies, many countries in the developing world are trying to use them to shift the control of data from tech companies to the state.

-The devil and the deep sea-
So, it boils down to who you think your data is safer with. Do you trust your data with the government or with the large global tech giants?

The answer is a tough one.

On the one hand, the tech giants slice and dice our data, they get hacked more often than they should, they are monopolistic.

They know all your consumer habits and push products and services incessantly onto you. But they also give you unfettered access to information – good or bad.

Data collected will ensure that you get fed more of the information you want and resonate with, resulting in an increasingly polarised society.

However, despite this, it’s fair to say these large tech giants also don’t own the state machinery as governments do.

The same data in the hands of an autocratic government can and is being increasingly used to control dissent, stifle freedom of speech and control the narrative on digital platforms.

Most of this is in the guise of protecting data, making sure it isn’t used by foreign forces, or countering ‘data imperialism’.

Data nationalism has wide ramifications for the future of technology companies everywhere.

The U.S. had proposed bans of some Chinese apps like Tik Tok and WeChat saying they are Chinese state-controlled and the data they collect could be dangerous to U.S. interests.

China already blacks out most of the popular western apps for exactly the same reason. India banned Tik Tok and several Chinese apps after the conflict on the border.

Even in the world of finance, India recently banned Mastercard from issuing new cards unless its servers are based in India. Only Visa has managed to comply with the data localisation rules.

It’s also shaking the global stock markets. The Chinese are already indicating to its tech companies the perils of listing anywhere other than in China.

They are clear that even if they do, the data they have accumulated stays in China. The U.S. is increasingly uncomfortable with Chinese companies listing on its stock exchanges without revealing their books.

-Nation webs-
What this is leading to is the World Wide Web itself splintering into various Nation Webs. They even have a term for it – splinternet!

This flowing over of political nationalism over to data threatens the openness of the internet and has dangerous consequences for democracies and globalisation as a whole.

It will be a big test for the global tech giants as to how they adapt to this. In India, Twitter was compelled to submit to the new internet rules. What this has shown is that tech companies can be coerced into complying with local data rules, however unreasonable, if the market is big and lucrative enough.

Controlling the data of these tech companies today means you also control everything from social interactions to transaction data and news media, which now relies heavily on social media platforms for distribution.

This nationalisation will have long-term repercussions for innovation and is likely to lead to further consolidation as fewer companies will venture to expand globally.

You can’t rely on tech companies to be the protectors of democracy.
And don’t get me wrong, social media companies need regulations that take away the toxicity and the vast amount of misinformation that floats seamlessly on their platforms.

There have to be rules around what data they can collect and use and there needs to be clear accountability. Some of the new laws and regulations being passed in different parts of the world do just that.

But the solution also isn’t to nationalise data or to hand over the keys to governments who are as likely to use it for control, as tech companies do for commerce. We need to find a balance because this will define the next few decades – and unlike oil, the product, in this case, is us! BloombergQuint

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