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January 15, 2010

Google in China - What Business are you Really In?


By Principal, J Arnold & Associates



It seems like there’s a different headline story about Google every day lately, and there’s a lot here to which service providers should pay attention.

 
The launch of Nexus One just before CES earlier this month is especially important for all mobile operators -- as well as the handset vendors partnering with them. A few days later, we started hearing noise about Google Energy. While they have said little about this publicly, it has been a hot topic in utility circles, and I wrote about it last week wearing my Smart Grid hat on our portal.
 
Like the Internet, Google has become such a fluid company that it can find an entry point into practically any market, and maybe it’s just trying to live up to the spirit of its name with all these seemingly unrelated ventures. I’m going to focus here the China story, which has been a global topic this week for a variety of reasons, and I’ll touch on the most carrier-centric ones here.
 
As we all know, Google is standing up to China, and threatening to pull out of that market on principle over the issue of Internet censorship. This is a very interesting showdown, and for once, it’s not about money. Early on, Google – and others like Yahoo! - acquiesced to China’s demands, allowing monitoring of Google activity in exchange for entry into this huge market. Well, Google has had enough, and we’ve got a digital Cold War brewing.
 
This brings me around to the title of this article – what business are you really in? I think it’s a legitimate question for service providers to be asking these days. Am sure you know the classic example – McDonald’s. When Ray Kroc asked this question to business students, they didn’t hesitate to say it was the hamburger business. He quickly corrected them, explaining he certainly sells lots of those, but he’s really in the real estate business.
 
Most people would say the U.S. Postal Service is in the business of delivering mail. Again, that is true, but I would argue they’re really in the privacy business. It may seem quirky in this day and age, but there’s still something sacrosanct about the mail.
 
We open anything addressed to us in a heartbeat (well, the bills can wait), but you never open other’s people’s mail, right? You just don’t do it on principle. If given a choice between keeping our mail totally private and getting it a few days slower, instead of faster service but possibly compromised for privacy, we’d all prefer the former hands-down.
 
Well, there’s a lot of that going on in China right now, and I think the stakes are pretty high. We all know the Beijing Olympics were a big mirage, and China may be more open than in the past, but it’s still home to a highly controlled society. The Chinese would argue that their brand of state-run capitalism is more stable than our Wild West model, and there’s some merit to this, but let’s stay on message.
 
I could go down road a long way, but not here.
 
Openness is a bedrock principle of the Internet, and as desirable as this may sound, it does come with tradeoffs. We all know that the Web is used for evil as much as for good, and China has had its share of both. Their differences with Google are important, but the Internet’s dark side has had other chapters coming from China, and I don’t think we’ve seen the last of them. Do you remember Project GhostNet from last March? It was an incredible story, and lucky for me, it was exposed by a team of researchers here in Toronto. If you’ve forgotten or if this is news to you, I suggest you start with my blog post and connect the dots for yourself back to what’s happening now with Google. Better yet, Google the term GhostNet – that will keep you busy for a while.
 
 All of this is leading to my main point that privacy and the Internet are going in different directions. Some of this is a generational thing, as younger people are more willing to give up some privacy – or a lot of it – to stay connected with their world. Being connected today is more virtual than real, but that’s reality.
 
I believe that service providers will increasingly need to manage privacy expectations for subscribers, and the Google/China issue is really drawing this into focus right now. The original Internet vision was global, with all of us interconnected under one cloud, so to speak. I suspect that China will not back down, and if Google walks, Baidu will totally own their domestic search market. Compared to what we’re used to, China would then become a pretty closed market, and could well open the way for other like-minded countries such as Iran to follow this model. In that scenario, the Internet devolves into parallel universes, seriously diluting the intended concept. So much for the global village.
This sure sounds like the “islands of VoIP” scenario that exists in the enterprise space, and it’s really not a good thing. The Internet is at its best when it’s open, and for everyone to benefit, service providers have an important role to play in creating a balance between openness and meaningful privacy. As we’re seeing in China, this is easier said than done, and in my mind, it’s a wake-up call for the West, where freedom is of the utmost importance.
 
I’m going steer clear of the Net Neutrality debate, but I have no doubt these current events will lead many subscribers in the West to ask questions about how much privacy they really do have, and how much they can really trust their service provider. Data mining techniques have become very sophisticated, and if used in the wrong way are really no different than the censorship policies we’re hearing about in China. Many questions here, and to me, it’s a pivotal opportunity for service provider to think a little harder about the business they really are in.

Jon Arnold, Principal at J Arnold & Associates, writes the Service Provider Views column for TMCnet. To read more of Jon’s articles, please visit his columnist page.

Edited by Marisa Torrieri