Cisco underpins China’s Internet censorship

Cisco Systems Inc is the latest IT company forced to deny it has assisted China censor the internet. Last month an official with the Global Internet Freedom Consortium told a Senate Judiciary Committee hearing that Cisco engineer had offered had offered to teach Chinese authorities how to use its equipment to crack down on Internet sites it wanted banned such as those belonging to Falun Gong. Legal counsel for the Silicon Valley networking and communications giant said “we disavow the implication that this reflects in any way Cisco's views or objectives,” but did not deny it made the presentation to Chinese officials.

Global Internet Freedom Consortium deputy director Shiyu Zhou said the fight against Internet censorship "has been a lonely battle thus far and we are tired of having to fight our fellow American companies." Cisco are not the first and unlikely to be the last US company prepared to lower its standards to access the lucrative Chinese market. Yahoo started the rot in 2002 when it signed a document called the “Public Pledge on Self-Discipline for the Chinese Internet Industry”. The document promised to “inspect and monitor the information on domestic and foreign websites” and refuse access to those that “disseminate harmful information”.

Today, Yahoo not only provides China a full suite of censored products but also assists them with identifying senders of seditious emails from Chinese addresses. Yahoo has rightfully been labelled as a “Chinese police auxiliary”. Yet Yahoo put up with this opprobrium because they know China is a massive market.

The country now has 390 million mobile phone subscribers, over 111 million Internet users, and four million bloggers all with unprecedented access to information not sanctioned by authorities. This large user base (only the US has more Internet subscribers) are watched by 30,000 Internet police drawn from the Information, Security and State Secrets Ministries who manage a sophisticated communications monitoring and filtering regime. Legal and regulatory polices back the technology which block access to foreign sites such as the BBC and Voice of America and filter out search phrases such as “human rights”, “Taiwan”, “Tibetan independence” or “Falun Gong”.

China claims their Internet controls merely follow international practice of blocking “harmful” content related to pornography and terrorism. However the Centre for Strategic and International Studies claim that there are almost 50 cyberdissidents and 32 journalists in detention for posting Internet information critical of the Communist Party. But the government does not try and control everything. It is trying to create an Internet that is free enough to support the world’s fastest growing economy and yet regimented enough to squeeze out political threats to its monopoly on power.

Authors Jack Goldsmith and Tim Wu say that because of this monitoring allied to linguistic and cultural differences, China’s Internet is pulling away from the rest of the world. In their thought-provoking book “Who Controls the Internet?" Goldsmith and Wu’s book questions the popular wisdom that the Internet is rendering national borders irrelevant. They quote a landmark 1998 speech Jiang Zemin which concentrated on the necessity of absolute information control. To thunderous applause, Zemin promised to uphold China’s political system saying “we must be vigilant against infiltration, subversive activities, and separatist activities of international and domestic forces”. Zemin’s conclusion was blatant: “the Western mode of political systems must never be copied.”

Government Internet policy has been selective imprisonment of high profile cases; a strategy best expressed by the Chinese proverb “killing chickens to scare monkeys”. This is backed up with a sophisticated information barrier, what Goldsmith and Wu call a “semipermeable membrane that lets in what the government wants and blocks what it doesn’t”. This is the famous Great Firewall of China. But this firewall is built with American bricks. To take this article full circle, it was built primarily by Cisco, ironically for its American consumers. The technology was developed in the 1990s for US companies that wanted the Internet but didn’t want their employees wasting their day on sports or sex sites.

The barrier works because Internet data enters and leaves China at a limited number of chokepoints. At each point, Chinese ISPs such as China Telecom deploy Cisco routers to drop information it does not want to get into the country. The government provides a constantly updated access control list to China Telecom which identifies banned sites by their IP address and URL. Any messages from these forbidden addresses are simply dropped by the router and never reach their target. End users get a message saying “site not found” or any one of a number of HTTP error codes, and can never be certain their search was censored. In short,China's Internet filtering regime is the most sophisticated effort of its kind in the world. According to OpenNet Initiative “Cisco Systems in particular has been integral to China's Internet development. The core of China's Internet relies on Cisco technology.” For its lawyers to say this doesn’t reflect Cisco's views or objectives is unspeakable hypocrisy.

Google weighs in on Microsoft-Yahoo bid

Google announced yesterday it finds Microsoft’s $45 billion bid for Yahoo “troubling” and also stated the move threatens the “openness and innovation” of the Internet. Senior Vice President David Drummond said the acquisition could allow Microsoft to extend unfair practices from browsers and operating systems into the Internet. He also question whether a Microsoft-Yahoo combination would take advantage of a software monopoly to unfairly limit free access to competitors' email, IM, and web-based services. “Policymakers around the world need to ask these questions,” he said. “And consumers deserve satisfying answers.”

CEO Steve Ballmer said that Microsoft had been talking with Yahoo for 18 months and called Yahoo co-founder and CEO Jerry Yang last week to make the proposal. In their statement to the market, Microsoft admitted Google was a major factor in the bid. Ballmer openly admitted that the market “is increasingly dominated by one player.” He believes that the merged entity could “offer a competitive choice while better fulfilling the needs of customers and partners”.

Nevertheless, Google has 65 per cent of the US search market and would still dwarf the combined entity which would account for between 25 and 35 per cent of the market. The $44.6 billion bid is a mixture of cash and stock, based on a total of $31 per share. The price is 62 percent greater than Yahoo's Thursday closing price of $19.18. Yahoo recently announced plans to lay off 1,000 workers and their 2008 earnings forecast has not caused great joy in Wall St. Nor is the market happy about Microsoft whose shares had their worst fall in 21 months falling over six per cent to $30.45 on Friday night. The merger is a risky move, as combining two companies that are losing market share offers no guarantees that the trend will be reversed.

In any case, the deal is a long way from consummation. Not only must Yahoo’s shareholders approve, US and European anti-trust regulators must also signoff. Getting Europe onside may prove difficult given the bad blood that exists between the European Commission and Microsoft following last year’s court battle that forced the software giant to comply with a landmark 2004 EU antitrust decision. The EU will need to weigh up issues relating to competition and privacy when making their decision. Following on from the anti-trust suit, the EU is likely to insist Yahoo's portal services should not be bundled up with Microsoft's Windows operating system on personal computers.

Despite its dominance in the PC domain, Microsoft’s move is based on their continuing failure to make a significant impression in the Internet. Blue chip Microsoft will be looking to tap in to Yahoo’s Silicon Valley undergraduate culture. Some analysts say the culture clash between Microsoft and Yahoo is not as big as it might seem. According to Charlene Li, an analyst at Forrester Research, the companies are surprisingly similar in outlook. ”Yahoo is not the sort of strapping startup it was 10 years ago,” she said. “It's a corporate organisation with its own bureaucracies.”

Writing in ReadWriteWeb, Marshall Kirkpatrick believes the acquisition will be positive from a cultural perspective. He focuses on the synergies that Yahoo will bring such as content and online innovation. He says the major threat Google poses to Microsoft is that they are shifting the software world online. To combat this, the merged entity would have to put more muscle into services such as Flickr and Del.icio.us and innovative content sites like Yahoo Sports and Finance. “All of that will be good for Microsoft,” he said. “And it will be good for those of us who find those sites and services inspiring.”

The size of the bid shows how many Internet companies have grown to be even larger than the traditional media players. Yahoo’s market capitalisation is larger than CBS’s. The dynamism of the newer media also leaves the older players for dead. The trend for acquisition has accelerated in the last five years. Since 2002 Google have bought 27 web services, Yahoo have bought 25 and Microsoft have bought 24. In 2006 alone Yahoo acquired Bix, an advertising/contest service, MyBlogLog, a blogging aggregation tool and Kenetworks, a cellphone service. A merged entity is not just a threat to Google; it will pose a serious threat to News Corporation, Disney, Time Warner and the other traditional telecommunications and media companies.