The Digital Silk Road
The Digital Silk Road is part of the China initiative to have technological independence and to dominate tomorrow’s market.
The Network Wars
If history is written by the victors, so are fantasies of the future. One such idea was that communication technology would inevitably promote liberty.
The fantasy that connectivity favors liberty has long faded. In its place, a much darker reality is unfolding. Democracy is retreating and digital authoritarianism is on the march.
China has become the biggest provider of communication technology. Two Chinese companies, Hikvision and Dahua, churn out nearly 40 percent of the world’s surveillance cameras. China has convinced 140 countries to sign onto the Belt and Road.
US has introduced defensive measures against Huawei. The stage is set for competition between the US and China. The Network Wars have begun.
Chinese officials masterfully dangled the prospect of access to China’s market, maximizing concessions as foreign companies willingly undercut each other to hand over their intellectual property and enter into partnership with Chinese firms. What made mistakes of westerners possible was not merely foreign greed and Chinese savvy but also a powerful and genuinely held belief in the liberalizing effects of communication technology.
Where Reagan, Kristof, and Barlow saw the unstoppable march of freedom, Chinese officials saw a struggle for power.
Chinese authorities were busy modifying foreign technology for their own ends. China was moving from copycat to innovator and winning a much bigger game. The global telecom competition had become a war of attrition, and overextended Western companies were retreating from the network hardware business.
China’s expanding digital infrastructure footprint across four layers: wireless networks, internet-connected devices, internet backbone and satellites. These areas enable AI, big data applications, and other strategic technologies.
Chinese surveillance technology is being used in more than eighty countries, on every continent except Australia and Antarctica.
China “Big Three” state-owned telecommunication firms – China Telecom, China Unicorn, and China Mobile.
Through the DSR, China is moving itself toward the center of global information networks at a time when information has never been more valuable. Tom Wheeler explained in his From Gutenberg to Google: “The capital asset of the nineteenth and twentieth centuries was industrial production facilitated by networks. The capital asset of the twenty-first century is information created by networks.
Chinese officials have long said that third-rate countries build things, second-rate countries design things, and first-rate countries set standards.
CCP’s paranoia presents perhaps the greatest challenge to China’s global network ambitions.
Almost a quarter of the world’s internet traffic flows through the US, including 63 % of international traffic destined for China.
CTRL + C
In 1994 Northern Telecom – NORTEL celebrated 100 years. Two decades later, little remained of Nortel, which marked its 115 anniversary in bankruptcy court.
NORTEL Chinese partners become their fiercest competitors. Chinese firms imported Western technology, partnered with Western firms through joint ventures in China, adopted their management practices, and hired their brightest minds. Few played the game as well as Huawei.
Nortel chairman Arthur MacDonald: “The Chinese are trading market access and share for technology transfer.”
The West saw massive commercial opportunities in China and manageable risks.
Reb Zhengfei founded Huawei in 1987. He joined CCP while serving in the military. In 1992 he won his first major contract with PLA. The government restricted foreign investment in the types of switches that Huawei produced. State also pushed for local buying and state banks financed Huawei.
Huawei learned by copying foreign equipment, through joint ventures with Western companies, and by spending heavily on Western management consultants.
Ren even established an R&D team dedicated to “copinism”, the legal copying of foreign technologies, an idea that Deng Xiaoping had popularized.
Huawei engaged IBM. Paying 680 USD per hour was a small price to get 30 years of knowledge. IBM stayed with Huawei for 17 years. They also work with Accenture, Mercer and other consultants.
Nortel chairman Frank Carlucci was among the most powerful voices for admitting China into the WTO.
Chinese leader Jiang Zemin was focused on closing the gap in technology to West. But he also believed that China’s tech industry should serve its military first and foremost.
While the West focused on the commercial aspects of selling technology, China was fixated on its military and national security implications.
In the event called Security China 2000 China’s Golden Shield was presented. It had six goals: a network connecting public security forces, a centralized database for Chinese police, standards to promote interagency information sharing, network safety and data integrity, capabilities to improve network performance, and finally, mechanism for monitoring real-time traffic and blocking undesirable content. Chinese officials still needed foreign technology to make Golden Shield a reality.
On Valentine’s Day in 2001, Huawei opened up its North America headquarters in Plano, Texas. The subsidiary, which it called Futurwei.
Blinded by ambition and greed, Western companies and governments create their own biggest competitor in a sector that would become even more strategically important in the years ahead (network equipment).
Wherever there are people
Ren Zhengfei directed Huawei to focus on markets that Western providers overlooked.
One idea was to go to the countryside. And Glasgow in US was such city. As author listened to Glasgow residents, a story emerged that reveals an uphill battle for U.S. officials warning against security risks without offering affordable alternatives.
Most users, whether in rural America or countries around the world, are less concerned about foreign threats than they are about simply avoiding a giant bill.
Huawei’s flexibility allowed it to thrive in dramatically different markets. In 1999, its first project in Africa was a cellular network in Kenya. As of 2019, Huawei had built an estimated 70 percent of Africa’s 4G networks.
In 2007, Huawei won 275 million USD contract to help build wireless network in Iraq. In 2017 they also rolled out first Afghanistan 4G LTE network.
In 1935, FDR created the Rural Electrification Administration (REA) to close the gap in access to electricity between urban and rural America. Fort Peck Dam, was one of the projects to do that.
Broadband has become the electricity of the twenty-first century according to Brad Smith from Microsoft. FCC will spend 20 billion to improve broadband access for rural. But they would need 80.
Open RAN networks could tilt the playing field in favor of US. By virtualizing parts of the network that are currently served by proprietary hardware, Open RAN allows operators to mix and match different network components from different vendors.
Even as European countries restrict Huawei’s access to their 5G networks, they are far from ready to fully disconnect from Chinese technology.
The reality of the 21st century is that many economic decisions are also national security decisions.
Five hundred billion eyes
By the end of 2020, China planned to install 626 million cameras, nearly one for every two people.
Hangzhou is the unofficial capital of China’s surveillance industrial complex. It is home to China’s three largest surveillance camera manufacturers: Dahua, Hikvision and Uniview. Hikvision and Dahua supply nearly 40 % of the world’s surveillance cameras.
In 2005 China introduced Skynet, an urban surveillance program “to fight crime and prevent possible disasters”.
China’s digital repression goes hand in hand with low-tech techniques for control.
China’s surveillance giants have also benefited from U.S. technology and investment. Hikvision has purchased programmable chips from Nvidia to train its AI algorithms.
Through mid-2020, Xiaomi had shipped more than thirteen million fitness bands, more than any other supplier in the world.
Connected homes are a convenience dream and a security nightmare.
The sales pitch of Chinese surveillance companies is attractive: next-generation technology delivered affordably today.
Temperature-sensing cameras can help identify people with fevers. Measuring traffic flows and enforcing driving laws can help improve congestion. Facial recognition and behavior analysis can identify wanted criminals and alert the polices to unusual behavior, such as running or wandering near restricted areas.
China’s wiring of the world’s cities has outpaced policymakers’ ability to respond. Chinese firms have exported “smart city” products and services to more than one hundred countries.
Pakistan spent 100 million US to outfit its capital of Islamabad with a Huawei Safe City system. The system’s actual performance has been less impressive.
Kenya is another proud host of Huawei system.
At home Alibaba and Hikvision partnered to provide the Hangzhou City with system that manage traffic lights, alert authorities and provide users with real-time traffic and travel routes recommendation.
All surveillance systems face a fundamental trade-off between precision and recall, explains political scientist Jennifer Pan. Systems that favor “precision” minimize false positives and systems that favor “recall” minimize false negatives.
A crease in the internet
It takes 230 milliseconds for data to travel from LA to Hangzhou, China’s surveillance camera-industry capital. Doug Madory found out that some data are routed to China.
Beijing wants greater control of global data flows. At home, China’s Great Firewall requires all incoming traffic to pass through its state-owned carriers. China Telecom, China Unicom and China Mobile are China’s network gatekeepers.
China is also growing its share of cables under sea.
Just as China keeps the “mass” in its surveillance model, it does the same with its censorship model. The government employs some two million internet censors.
80 % of China’s international traffic is passing through U.S. and European hands. To reduce this reliance on foreign carriers, China is building more subsea cables, which carry the vast majority of international data.
In 2009, Huawei Marine was created through a joint venture between Huawei and Global Marine, a U.K. company, that traces its heritage back to the British Eastern Telegraph Company.
Three flagship projects reveal China’s ambitions to connect continents. One was Tunisia-Italy. Next one was Trinidad and Tobago to Guyana with a branch to Surinam and the big one was bidding for Hibernia Networks project that would connect New Jersey, New York and London. Hibernia eventually dropped Huawei for security reasons. SAIL (the South Atlantic Intel Link) is another project connecting Brazil and Cameroon. The PEACE cable is the shortest connection between Asia and Africa. The Asian part lands in Pakistan. It connects Gwadar to Djibouti.
Chinese companies are looking to emerging markets in Asia, Africa, and Latin America for growth. They are building a new network periphery, one that uses Chinese technology in countries where China has greater influence.
China’s cloud ambitions in advanced markets face fierce competition and security concerns.
If the U.S. severs or blocks too many connections, global networks may adapt in ways that do not favor American interests. China is drawing a new map of the global internet because the current version overwhelmingly favors U.S.
The commanding heights
The Beidou is China’s alternative to GPS. It is the child of a marriage between China’s scientific and military communities.
Almost all the biggest tech companies from Amazon, Facebook to Google are looking to the sky.
Both the U.S. military and China’s PLA agree: space is the ultimate high ground.
Pakistan was the first to gain access to Beidou’s military capabilities. While Saudi Arabia and Iran have both signed cooperation agreements.
China is also carving out a niche as the go-to provider for developing countries that want own communication satellites. As of 2021 at least nine countries have bought satellites from China.
New generation of satellites will be LEO (low orbit earth). The LEO race may well become a marathon. China’s space industry is in the hand of state. Two main companies are CASC and CASIC.
Winning the network wars
China spending on R&D is growing faster than U.S. It will take a coalition to fight China. The coalition for this twenty-first-century challenge will be fundamentally different from those that confronted last century’s threats. Flexibility will be the key. Two bridges are especially critical to building this coalition. First stretches across the Atlantic. The second connects the core and the periphery.
The U.S., China and Europe are playing different games in global networks. U.S. is playing Monopoly. China is playing Risk and Europe is playing Red Light, Green Light.
India is the critical swing state. With India on board, the coalition would have eight of the world’s ten largest economies in 2030.
The U.S. must shit resources to support financing digital infrastructure. They also must be more supportive for foreign investment and better at pitching its solution to the world. For the countries in development affordability is still more important than security and risks.
The Network wars are not likely to be decided in a single winner-take-all confrontation. Once they myth that connectivity is purely “good” falls away, the breadth of the challenge become clearer.
