5
The Impact of the Internet on the Economy

As information plays such a large role in our society, the Internet influences the entire economy as it affects a great number of activities. Network operators, the press, universities, the economy and politics must all take this new medium into account. Several common schools of thought on this topic are summarized here.

5.1. Network operators and the new economic order

5.1.1. Governance and regulations

5.1.1.1. Arpanet, forebear of the Internet

At the end of the 1960s, the Arpanet research project was launched to allow remote access to computerized documentary resources in the fields of science and technology. Following on from this, after other network experiments, the Internet was constructed around the idea that the network itself must be made only as intelligent as required to concentrate on point-to-point data transfer. Other concerns that were considered secondary at the time, such as security aspects, must be resolved through solutions linked to network access and terminals (computers, smartphones and tablets). It is actually easy to improve the periphery of the network, but it is very difficult to modify the heart of the network itself. Several proposals for international data networks were made before a definition of the Internet was reached. Since its public opening, the Internet has continually been developed as a test-bed network and provides users with new applications.

5.1.1.2. The Internet, a scalable network testbed

Several experimental networks have been built since Arpanet, with each having been designed for a specific purpose. In these subsequent experiments, it was found that the essential networks connected to scientific or technical databases were expensive, and that the unsatisfied demands of commercial traffic and the general public could be related. The Internet thereby found its vocation. It has also gradually opened up to high-speed multimedia services. The merger carried out through the IMS platform, connecting fixed-line networks to new mobile networks at increasingly high speeds, has ensured the success of the Internet in NGN, while simultaneously destroying old PSTN network structures.

At the moment, the Internet can seem inadequate (Appendix 12), but, gradually, initiatives to modify some of these aspects are appearing and new questions are being asked. In particular, the combination of the Internet alongside decreasing numbers of circuit-switched telephone networks in NGN raises questions of updating the principles of universal and public service (see section 4.2.2). Moreover, Internet usage challenges intellectual property, specifically copyright, unwanted content, unsolicited advertising and financial transactions outside State control. It is a long list and the fields of communication and related services happily overlap, sometimes calling the legal framework into question. On the Internet, multimedia, which, by definition, incorporates various audio, visual, textual and televisual means of expression can relate to several different regulatory bodies (ARCEP, CSA and SACEM for France). Texts relating to copyright, advertising and unwanted content must therefore be redesigned to be compatible with this new situation in the framework of the Information Society.

The Internet, taking its cue from governments and societies, follows a changing process rather than a static one. The Internet is used to respond to our needs and it improves as required. In the future, technical development will be necessary to support the growth in customers and connected devices, but it will also be necessary to change on an institutional level to respond to the needs and desires of States, which are still underrepresented in discussions on the development and governance of the Internet.

5.1.1.3. The Internet, the network of cultural globalization

Living without the Internet is today as unthinkable as living without electricity. In his novel “Ashes, ashes”, René Barjavel imagines a situation where, devastated by the suddenness of society’s break with technological abundance, citizens fall into social chaos, deprived of shared utilities and the most up-to-date information systems. In 30 years, the Internet has changed the way in which humanity communicates and interacts. Its gradual development has not followed any planned program in detail and the interruption of its operations caused a significant amount of public and private activity. In 2016, the advantages offered by the Internet are accompanied by new concerns about the balance of powers, equal access, centralization, respect for intellectual property and the security and global surveillance of the network in terms of materials and content.

Among the most urgent measures, it appears that Internet access must take into account the age and cultural sensibilities of Internet users. It does not seem acceptable that extracts from works as controversial as, for example, Adolf Hitler’s “Mein Kampf” are put online. On the contrary, the development of the Internet should be steered toward the constructive advantages that this global network can offer humanity, such as for sustainable development, ecology, sustainable resources or saving bees.

5.1.1.4. The neutrality of the Internet network

First stated in 2003, the principle of “Internet neutrality” is that “anyone may access, without limitation, all of the available information and trade resources on the Internet”. Despite (or because of) its naivety, this idea was behind a number of successful technical developments, related to several ethical, financial or regulatory problems, which continue to be unresolved. While Net Neutrality could support the traditional principles of public and universal service, conversely, it could also, nonetheless, collide with technological and economic constraints.

Mobile broadband, due to its own challenges linked to the necessary level of quality of service, requires a more complicated and aggressive network management than fixed-line networks. A 3 or 4G antenna divides the downstream speed between all users in the cell, which, for some of them, can at times damage some vulnerable applications. It is therefore necessary to restrict, upon entry to the network, some flows that could disrupt others by occurring simultaneously. On the other hand, Internet service providers and content providers must be able to balance their budgets and while some can profit from advertising, others do not have this opportunity.

Regulations must take into account the different technical and economic imperatives linked to the operation of the Internet. The European Commission is preparing a compromise text on the end of mobile roaming, which will come into force in summer 2017, and a new definition of “Internet Neutrality”.

5.1.1.5. Internet governance

The transition of Internet governance from the American government to an international committee is the subject of a project available for public consultation, which was presented to the American Congress at the end of 2015. On July 31, 2015, the IANA Stewardship Transition Coordination Group (ICG) published its proposal that the role of supervising Internet addressing operations should be transferred to the global community. Since the 1990s, this has been taken care of by a body directly dependent on the United States government, the Internet Assigned Numbers Authority (IANA). The proposal made combines elements linked to the three categories of IANA operations – domain names, Internet number resources and protocol parameters. It anticipates that IANA’s responsibilities will be entrusted to a new body dependent on ICANN, while a surveillance committee known as the Customer Standing Committee, which will have representation from various international players in the areas of industry, academia and regulation, will also be established. One of the objectives is to avoid a government being able to wield too much influence in this body. The new Governance should take into account the topics of health security (monitoring large epidemics, for example), guaranteeing security, respect for private data (not using big data) and combatting crime.

Traditionally, recognized network operators (RPOAs) bring together private actors and public administrations. During the 1990s, this shared interest group, introduced internationally in the 1950s, was supplemented by what have come to be called “high-level actors” (OTT), some of which are still not represented at the ITU. They provide original applications, both for a price and for free, and with or without advertising (Google, Facebook, YouTube, WhatsApp, etc.). OTT activity continues to avoid international and national regulation, and therefore also the taxation system to which national operators are regularly subjected. This asymmetry between new major communications service providers and traditional players in the life of the network will require international and European rules to be adjusted. Network operators would particularly like not to be obliged to provide OTT with fixed broadband connections at low prices, with the arguments thus far used in favor of investment in fact serving to conceal the creation of a competition, which has become unfair.

A single Internet, governed by numerous bodies and not only by the United States, must respond to everyone’s desires. The governance of ICANN should remain transparent, open to all, and for this it should be entrusted to a large community, which brings together many actors from numerous countries. Faced with ICANN, the work of NETmundial is testament to the balance of power in Internet governance, in an environment scarred by the Snowden revelations.

Everything involving the client–server mode of operation on the Internet is the responsibility of the application provider, with the legal framework remaining within the area of Internet governance (therefore, in principle, to be split between ICANN and ISOC).

The majority of applications relating to P2P operation are covered by a legal loophole, subject to determining the responsibility of the author of the specific P2P software downloaded onto users’ computers. In this way, transferring currencies in Bitcoin or securities in Blockchain should, in principle, fall within the criminal liability of the organizers of these applications. On the other hand, if this activity cannot be fiscally controlled by States, it cannot be prohibited. The situation is the same for the Deep web.

However, stricter regulations on the Internet could be gradually implemented following the agreements negotiated within international authorities (World Summit on the Information Society, or ICANN and IETF meetings). Even if the practical applications are slow to become effective, there are development channels worth considering in order to avoid the possible gradual fragmentation of the Internet, which would be damaging to everyone.

In principle, all inaccessible information on the Internet should produce an explanatory server response such as “HTTP 451 Unavailable for Legal Reasons”. Following decisions taken jointly by the IESG and the IETF in December 2015, this response will henceforth be transmitted to the Internet user as “Error 451”. In particular, when a site is blocked or censored by a government body, all requests made to this site will receive the response “Error 451”, or in some cases “Error 404”. The IETF anticipates that the government behind this censorship could accompany the error message with an explanation of the reasons for blocking access.

Sovereignty and security should dictate the Internet’s fundamental rules. A report by the American NGO Freedom House indicated that, of 65 countries studied, China has one of the most restrictive Internet policies, ahead of Iran and Syria. It censors online content and blocks some Western sites, including Facebook, Twitter and Google. It believes that censorship is necessary to preserve the freedom of Internet users. “Freedom is the purpose of order and order is the guarantee of freedom. We must respect the rights of each country to govern their own cyberspace”, the Chinese President emphasized, explaining that “no country should target online hegemony or interfere in the internal affairs of other countries”.

5.1.1.6. The French “Digital Republic” Act

Following statements from the Council of State (Conseil d’Etat, www.republique-numerique.fr) and the French Competition Authority (ADLC), legal decisions will be taken in France in 2016. During the preliminary inquiry that proceeded voting on this act in January 2016, it was acknowledged that “the flow of data and knowledge” and “data of general interest (articles 10–12) could cause innovative services to be developed while contributing to the quality of existing services”. The National Council for Digital Technology (Conseil National du Numérique) believed that public data service (article 9) would open up the possibility of “new social and economic opportunities”. As for the second instance, on protecting rights in the digital society, the Council of State approved the insertion of the Neutrality principle (articles 19 and 20). A new legal framework for the Internet should therefore be implemented gradually in France and, indeed, in all countries, which would lead to some optimism for the future of the Internet.

5.1.2. Advertising revenue

In 2015, the economic model of Internet sites was still based on funding through advertising. This is at once a vulnerable, impenetrable and unbalanced model, as it is largely reserved for the benefit of OTT and providers of browser software.

Advertising is harmful to mobile Internet traffic as the displays are too large to be easily readable on smaller screens. Furthermore, to block invasive advertising, Internet users have the possibility of downloading specific software (for a price or for free), which deletes adverts from Internet page displays, unless they already have a browser that implements this function (Adblock Plus, being one of the most widespread). Reading information is easier and the privacy of the Internet user is a little better protected. For advertising professionals, such “ad blocking” could lead to a loss of around 40 billion dollars in 2016, which tacitly implies that, going forward, there will be a new organization in the financing model of all applications available on the Internet.

5.1.3. Taxing the Internet

The various Internet actors maximize their taxation systems in order to reduce the taxes that they could owe. The field’s major players are in fact able to reduce the amount of tax to be paid to 35%. In this way, they benefit from the existing range of tax systems worldwide and from government apathy.

As an example, the amount of online advertising billed from a computerized platform in Ireland leads to a reduction in the consulting services provided to the parent company as well as the costs (salaries, social security charges, etc.). Ultimately, activity of close to 2 billion Euros does not lead to a tax of 17 million Euros. In Les Echos on November 24, 2015, Etienne Lefebvre pointed out that American multinationals use preferential international agreements to avoid tax burdens in Europe and repatriate their profit to the United States, thereby accumulating sums of over 2,100 billion dollars for strategic acquisitions from their competitors. In 2014, the GAFA companies saved some 170 billion Euros in this way, of which 600 million were at the expense of French finances. The international structures and agreements described in Chapters 2 and 3 serve large international companies more than they assist States.

Globalization enables this kind of activity and there are French network operators and actors in the Internet sector, which have moved their headquarters to Ireland or Guernsey. This behavior is not illegal as it does not contravene any international agreements, even if its facilities have only a marginal relevance to the economic and cultural expansion desirable for ensuring peace and prosperity in the world. It should be noted that the global regulatory “logic”, which has led to the administrations operating national networks becoming private commercial law firms, has stripped States of revenue likely to help them fund their R&D activities relating to networks and communications services.

Faced with this situation, the OECD has begun the base erosion and profit shifting (BEPS) project (OECD/G20 Project) devoted to combatting BEPS. Solutions carried out through around fifteen different actions have been proposed by the G20 and the OECD to eliminate the loopholes that still exist in current international tax rules. The option of playing with “banking secrecy” and “tax havens” should be gradually reduced.

5.1.4. Difficulties encountered by operators

5.1.4.1. Financial vulnerability

Today, network operators are private companies and, as such, they can be the object of public takeover bids or be victims of bankruptcy. The versatility of the stock market and the possibility of obtaining significant loans offer high hopes to all those wishing to build large-scale economic empires. In June 2015, the Japanese billionaire Masayoshi Son tried to take control of the American operator Sprint in order to connect it to T-Mobile US, the third largest American mobile network, and thereby destabilize Verizon and AT&T, obliging them to respond to the financial market instead of investing for the benefit of their customers. However, this major operation unraveled due to the intervention of the FCC, the American regulatory authority. Nonetheless, this remains a risk for all actors and requires enough financial resources to be amassed to be able to face any potential danger.

5.1.4.2. Operators and counterfeiting

At the telecommunications network security workshop that took place in Geneva on September 15 and 16, 2014 at the ITU-T (ITU Workshop on “ICT Security Standardization for Developing Countries”), the delegate from Zambia explained the difficulties facing his country. Indeed, developing countries are punished by targeted attacks due to the shortcomings of their organization, the absence of a suitable legal framework for information technologies and the lack of technical expertise. The opening of Internet sites in Zambia has been immediately followed by attacks from hackers who have deleted the pages of websites, provoked by denial of service and spread through cloned SIM cards operating on mobile networks before being opened commercially. This was followed by significant financial losses for the three companies operating mobile networks and new web applications have been thrown into disrepute. Investments from State and network operators have therefore not provided the development expected in economic activities, mainly because the needs of cyber security were underestimated on the legislative, regulatory and technical levels.

The Round Table at this Workshop showed that Zambia’s case was not an isolated one and that the criminal industry, informed very early on of the value of the allotted radio frequencies in each country, is capable of quickly setting up large quantities of counterfeit terminals that do not have SIM cards and are therefore free to operate. To solve this problem, network operators are therefore obliged to pay for cloned terminals in order to be able to comfortably manage their networks [ITU 11].

5.1.4.3. Unfair competition

Alongside authorized network operators, in some States there are actors who offer the public illegal Internet access, which can also be network infiltration for espionage purposes. In Lebanon, a dozen countries have recently been identified as operating illegally in Beirut and its suburbs, through sensors placed in mountainous areas and pointed toward Turkey or Cyprus. The illegal Internet constitutes around 30% of Lebanon’s Internet market. This unfair competition provides poor quality connections that are available throughout the country and are harmful to authorized operators.

5.1.5. The slowdown of the electronics market

The semiconductor market is a highly sensitive sector within today’s globalized economy as, in recent times, it has defined the future of its own market. In practice, the microelectronic components industry is a private monopoly that fixes its own prices. Furthermore, it supports the existence of R&D in the scientific and military research sector [MUL 14].

The electronic components market seems to have been losing the dynamic that it had encouraged over the last 50 years and this change of pace is concerning analysts (see section 5.4.4).

5.1.6. The four faces of hacking

As total security is not the Internet’s greatest strength, there are four feasible methods of fraudulent activity. The first category and its well-known variants, which allow everyone to spy on someone close or send them a virus they will barely be able to get rid of, can be skipped over.

The second mode of hacking consists of visiting unauthorized sites in order to be able to fraudulently watch and avoid paying for television shows (streaming). Close to 400 successful sites have been identified by the ALPA (the French Anti-Audiovisual Piracy Association), including those with limited audiences and legal platforms, such as YouTube, which can sometimes host illicit content. Some sites, such as “Zone Telechargement”, with 3.4 million unique visitors, surpass the audience of French daily newspaper Les Echos.

Despite the risks involved, the third type of fraud consists of disrupting hackers identified by the grapevine. For example, Internet users aligning themselves with Anonymous have demanded the removal of almost 4,000 Twitter accounts “thought to belong to Jihadists” or connected to Daesh. The information may be surprising but it has not yet been refuted. Could Internet users be left to impose their own sanctions according to their own criteria without supervision?

The last option for carrying out fraud-related actions is provided by P2P Internet operation (see section 4.2). Besides sharing unauthorized music or video multimedia files, P2P opens up significant possibilities within Blockchain technology. Lastly, the Darknet, where Internet pages are not accessible through search engines and traditional browsers, provides the anonymity dreamed of by all potential wrongdoers (section 2.5.1.5).

The absence of an active administrator on the Internet network opens the way to multiple acts of fraud and many users reduce the number and duration of their connections for fear of potential hacking. The active and permanent presence of a “regional Internet watchdog” seems to be necessary.

5.2. The Internet’s original provisions

5.2.1. Communications packages

With television output running out of steam, citizens seem to be turning toward a more useful and more constructive instrument that allows a greater cultural expansion and is available at all times of day. This connected tool allows users to escape, stay informed, improve their minds, educate themselves and amuse themselves a little at random at any time at the click of a mouse. The maximum amount of information from many sources is accessible in a minimum amount of time. In this meeting of Internet users and news sites, it is not strictly a matter of negotiations responding to the classic “supply and demand” model, but of a journey across the network responding to discerning or refined searches. This serendipity, or “finding something other than what was looked for”, can also open the way to all kinds of risks.

For all network operators, established actors or new businesses, IP networks allow the expansion of all kinds of communications services in all countries, from voice systems to image services or 3D services, such as television or gaming. However, maintaining a network’s financial balance remains, for the operator, a volatile and sensitive exercise.

5.2.1.1. Specialized research networks

Some scientific and technical information networks, whose existence is essential to university research and businesses, are described briefly below, as well others whose activity can be considered more or less legal.

5.2.1.1.1. RENATER

RENATER (Réseau national de télécommunications pour la technologie, l’enseignement et la recherche – National Telecommunication Network for Technology, Education and Research) is both a public information group and a French computer network. Since 1993, Renater has connected universities and several large research centers. With more than a thousand sites connected to its broadband links, the pan-European GÉANT2 network and the Internet, Renater facilitates collaborative work between French researchers and their colleagues through multiple applications. Its infrastructure is continually updated to respond to user needs (www.renater.fr/).

5.2.1.1.2. GÉANT

The European Commission is developing connectivity in the countries in its Eastern Partnership, with a high-speed Internet network dedicated to research and education (R&E) through Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine. This will allow the interconnection of national research and education networks (NREN) to integrate them in the pan-European GÉANT network and allow researchers and students to fully participate in the digital economy. Two million scientists, academics and students belonging to over 700 institutions in this part of the world should benefit from this “helping hand” connectivity. Created over a decade ago, the GÉANT network (30 million users spread over more than 3,500 universities) has played a key role in assisting European research projects in fields as varied as climate change, environmental monitoring, energy supply, particle physics, radio astronomy, medicine and bioinformatics (http://europa.eu/).

5.2.1.1.3. Geonet project

According to the World Bank and the Oxford Internet Institute, in 2013 around thirty African countries had an Internet connection rate lower than 10%. The “Archipelago of Disconnection” covers three highly populous countries – Ethiopia, the Democratic Republic of Congo and Tanzania – where it is difficult for citizens to access information and culture. The Geonet project concerns the study of the knowledge economy in sub-Saharan Africa. More specifically, studies have been carried out to understand how communications technologies could transform the economies and the lives of working people in sub-Saharan Africa (http://geonet.oii.ox.ac.uk/).

5.2.1.2. Hornet, the anonymous Internet

The Hornet network, a joint project of the Federal Institute of Technology in Zurich and University College London, promises anonymous and secure navigation that is faster than the Internet. Currently, by downloading the Tor browser, it is possible to surf the Internet without fear of being monitored (see section 2.5.1.5 – Darknet and the Deepweb). But while the Tor connection covers a user’s tracks, its browser makes the loading of webpages slower. Hornet, which improves Tor’s operational principle, was used in 2015 by 2 million Internet users and is accessible securely through Facebook (http://arxiv.org/).

5.2.1.3. The submarine network goldmine

The global network of submarine cables plays a strategic role in Internet operation and therefore in the world economy. It is a particularly sought after boon for islands around the world due to the financial compensation linked to establishing GIX. Over half of the exits of the world’s submarine cables are located on islands. Among the most fortunate are insular nations (Japan and Indonesia), the cities of Hong Kong and Abu Dhabi and the transportation hubs of Long Island, the origin of a large part of New York’s land traffic. Hong Kong and Taiwan each have more cable entrances than all of continental China. By the same token, three times more cables arrive in Sicily than in Italy. In the Pacific, it is Guam that leads the way with 10 cable entrances.

In this regard, Nicole Starosielski, Assistant Professor of Media, Culture and Communication of New York University, underlines the digital potential of Polynesia on the global playing field. Today, the islands, which are politically and economically stable, are very attractive points for interconnection between continents. Some of these islands can thereby improve employment, and gain the subsequent economic resources and a privileged access to the global network. In Tahiti, the Honotua cable, laid in 2009, is underutilized, with 7 Gbps used out of the potential 640 Gbps, due to the high access costs, believed to be between 70 and 180 dollars per month, and because of the “digital cul-de-sac” effect caused by the absence of a second cable in the Asia-Pacific region positioned toward Latin America. A whole technological industry could emerge in this way, for example with a diversification of the investments geared toward China. However, the old balance of power established in the global computer network is, without a doubt, still not ready for such a change in strategy1. [STA 15].

5.2.1.4. The Internet and cultural diversity

At the start of data networks, around 1979, experts believed that the profitability of the infrastructure of networks, including Tymnet, Medline and Francis, would lead to them only being used by international research centers specializing in scientific and technical information, for the benefit of media houses, universities or financial management centers, such as Eurex. It was not until 1984 that the commercial opening of the Euronet network showed the interest of third party traffic (“third party” in the sense of “non-scientific or technical” traffic) on billable data networks.

In 2016, an Internet user with free time can access all available information (at times incorrect or out-of-date) and, based on their own knowledge and according to their tastes and concerns, form opinions for a modest price. The Internet is no longer just in the hands of engineers and nowadays everybody wins in terms of access, due to the power and availability of browser software and Wiki-style sites. The Web is full of pages that are as vulnerable as the works of great libraries would be in the face of fires, the devastation of war or unreferenced changes in content. In all cases, pages that have been bookmarked disappear over time, followed by reorganizations that can seem senseless. Nothing is set in stone. The most elementary rules for establishing contact, the dates of updates and referencing on the site and the identity of the site owner, are often forgotten. On the other hand, while the Web makes reference to the major classics of French and world literature, these irreplaceable pages are also juxtaposed with the outpourings of self-proclaimed Internet users, the authors of overly verbose texts and videos of varying quality. This digital cohabitation means that the participation of the smallest common denominator is inseparable from Web access and culture clash is therefore unavoidable. The laws of Kao and Odlyzko on the value of networks take on new meanings in this regard (see sections 1.7.2 and 1.7.3).

Social networks remind us, if proof were necessary, that people remain the same, despite these new means of getting in contact. They can free themselves from the constraints of distance to communicate even with strangers, and it is also possible to be in Paris and read the pages of Korean daily newspaper in French with the assistance of a free online translation service. Everyone can reap the cultural benefits according to their tastes, their available free time and their means.

5.2.2. The press and information

Well before 1980, the press called for a preferential tariff for their long distance communications from the Postal and Telecommunications Administrations. Regarding long distance communications, the press has long wanted the particular nature of their work, connected to the acquisition and dissemination of information, to be recognized. Their representatives expressed their desire for a significant discount, not only on postal tariffs, but also on the rental prices of leased lines, taking into account the need to have access to a dedicated network also designed for cultural and educational needs.

In the 1980s, a global network project especially designed for these needs was in fact planned, with its management to be shared between UNESCO and the Internet society [BAT 84]. Following numerous studies, this network project materialized in the form of the Internet in 1984. It is now available in most of the world’s countries. The Internet provides, for a modest price, multilingual access to almost all sources of information, be it in alphanumeric mode, streaming media or on television, according to the subscription taken out or the data rate available. The paradox of this development is that this network, which was so ardently desired by the press, is leading silently to the destruction of its creators by reducing the number of their subscribers and advertising contributors.

The Internet, in fact, acts with the press, as it does with the creators of various artistic (music, films, video) or informational treasures. The pluralism of this output is therefore threatened by competition between the paper and digital versions, and, while users are delighted with the ease of accessing information, the number of jobs in newsrooms continues to decrease and media production is becoming concentrated in the hands of an ever smaller number of managers. In the United States, half of books are sold in a digital format and the proposed pricing level encourages this approach.

In 2015, the press still benefited from a special tariff for posting letters in bulk and sent within French territory. The press’s conversion to digital technology could allow it to reduce costs and retain its independence. However, this transformation encounters two difficulties that are highly typical of this transition. Firstly, it requires expensive development as two operations, paper and Internet, must be managed simultaneously, while customers should gradually agree to migrate from one to the other. It must then develop a digital option acceptable for an occasional mobile Internet user and that can be used on different terminals (computer, tablet, smartphone or owner-operated e-reader), all while partially disguising some elements of the newspaper to attract new paying readers.

The different options that have been tried in North America and Europe (the Financial Times and the New York Times) show that the balance is quite difficult to achieve, even if the bold strategies are guaranteed to have the support of patient and understanding financiers. After 4 years of effort, the New York Times has managed to balance the budget of its double edition (paper and digital), bringing it a total of 4 million readers. Its management admitted that it had reduced operating costs, while the revenue brought in from newspaper sales had increased, although without succeeding in offsetting the decrease in advertising revenue. Newspapers are working on strengthening their digital presence, while the circulation of paper copies and advertising revenue continue to decrease.

Publishing paper copies of magazines is an activity with very high fixed costs that can reach, for example, 67% for a monthly title with a circulation of 100,000. The printing and transport costs are not directly related to the number of copies sold. For want of a secure payments system designed for small amounts and multiple recipients, the online press, weakened by strong competition from social networks, had not managed to exceed the 5% revenue of the written press. Uniquely, the regional and local press continues to exist due to their proximity to their readership. The written press therefore continues to receive State subsidies, even though its wish for easy access to a global network has been granted.

Online journalism is a new form of journalism that uses the Internet as its medium. The online publication of journalists’ articles has sparked controversies relating to the copyright of these works. Online journalism takes the form of written texts, or texts presented in audio or video form on digital platforms. Digital journalism enables discussion and spontaneous commentary on current affairs at very varied levels, following the intervention of a more or less active and neutral moderator. It opens up the possibility of an “adjustable” kind of public expression.

While non-democratic regimes that do not respect freedom of expression present challenges for online journalism, a certain level of vetting should be exercised, although only to avoid anti-social behavior online. The status of an online editor is a long way from being defined internationally. Some experts believe that, because of the Internet, democracies risk losing their sources and their flows of information, as well as the plurality of their cultures [CAG 16].

5.2.3. Adapting professions to digital technology

5.2.3.1. Digital technology involves entire businesses

For some years, businesses have understood that the digital transition had a specific character and would take a long time to implement. The majority of them have already considered this topic or taken action. There is a multitude of ways to bring digital technology to a business. The IoT will be part of their revenge, as the battle will be played out in favor of information (data) and customer relations. The traditional players have a good command of the service equipment and the role of digital intermediaries is a transactional one. The whole issue consists of increasing the value of this information, to use it at the right time and in the right medium.

With online digital services, the commercial strategy is based on the principle of advertising paid for by good quality funds. One satisfied customer will bring in another. The curve of the level of satisfaction generally takes the shape of an inverse Gaussian distribution: few neutral customers and many satisfied and dissatisfied ones. Word-of-mouth on social networks is faster and more effective than large budgets dedicated to advertising spots on television. The reactions of the public are very fast and it is necessary to follow them with the appropriate technology. Connections between platforms open up vast opportunities, the consequences of which cannot be foreseen.

Digital technology is breaking up some professions as it leads to the establishment of new practices. As such, a kind of digital capitalism can be invoked, despite a continuing inability to determine its boundaries and aims. Music, the press, health, education, finance and real estate are areas that are already being transformed. Users are attracted by the availability and speed of access to services and, at the same time, they benefit from a large reduction in delivery costs and tariffs, even though the hacking of personal information remains a constant worry [ESC 15].

With smartphones and soon with connected objects and vehicles, physical actors are moving closer to value-added information and it is possible to build on this advantage in future economic models. It is essential to be able to respond to the following three main issues:

  • – managing the paces of different businesses as only one part of the model can be digitized;
  • – being able to integrate the best concealed innovations and skills as quickly as possible;
  • – integrating digital culture within the business, beginning with convincing the management, the CEO, its executive board and its Director of Computer Services.

Converting a business to digital is no small task. After several months spent digitizing individual processes, layers of interaction and validation must be added for a secure computing process. Only then does it become clear that the business requires a more fundamental change. This process is repeated time and again: one part of a task is digitized, but behind the scenes, the processes leading to it cannot be modified for reasons beyond the business’s control. The advantages of digital provision in terms of cost reduction, operational efficiency and personalized customer service cannot be achieved. In practice, it is necessary to keep up with the latest technological trends, and the temptation to adopt them immediately must be resisted. It is important to innovate at a pace that suits the business, its market and its clients. It is equally important to take into account the modifications, which will need to be introduced, given the development of the field.

5.2.3.2. The acknowledged pioneers of digital technology

Digital technologies allow direct interaction with customers to take place in a faster and more transparent fashion, without only depending on intermediaries. Thanks to social networks, it is possible to know the impact of launches immediately, without having to wait for a report from a communications agency.

Digital action is based on strategic pillars. The first is the use of consumer data to measure the health of products and understand why the related talk is positive or negative. It is thereby possible to anticipate the peak consumption or suggest consumer sale points through geolocation. Subtler and more specialized forms of targeting are possible in digital technology than the traditional methods of market forecasting. The skills of individuals and of the management are also a major issue. All businesses are converting to digital and early adopters are rewarded.

5.2.3.3. Innovations and productivity

Digital technology improves certain aspects of productivity in industrial and commercial activity. However, in reality, the digitization of our economic and social lives has a highly overestimated impact on our capacity to improve production. Innovations are often closer to gadgets than significant technical advances. As described below, the progress of digital technology can only be compared with its own instruments or its own uses (see sections 1.8.1 and 1.8.2).

The digital revolution aims to replace workers with software. Digital technology allows knowledge to be better organized and networks enable knowledge to be spread more widely than in the past. The diversity of cultures and standards is at once enriching and a source of potential conflicts. According to the Solow paradox, the introduction of computers to the economy does not always translate into a massive increase in productivity. In reality, computer systems are complicated and require expenditure on maintenance and technical support [SOL 00].

The Gartner Group recently recalled that every dollar spent on “hardware”, can require 2.3 dollars to be spent on advice, server maintenance or computer security. This proportion of additional expenditure has increased due to the technical complexity of the related equipment (accessories, robots, automatic guided vehicles, etc.). As well as these technical costs, there are geographically dispersed production costs and expenses linked to management technique, interactions and overall coordination.

“On the one hand, management software packages lower the costs of accessing and sharing information. On the other hand, communications technologies reduce the decision-making autonomy of employees and managers by strengthening centralization. The introduction of ICT produces operational repercussions in the division of labor and the distribution of income. The freezing of productivity gains shows the limitations of interconnected technical systems. The negative externalities of the wave of ICT innovation explain, in part, the lack of synchronicity between the economic and social transformations and their interpretation in politics which can no longer guarantee the legal regulation of speculation and debt” [BER 12].

5.2.3.4. Preventative detection of faults

Car manufacturers currently use the Internet through ten fault alerts affecting cars already in circulation, which reduces intervention costs and improves the company’s image. In fact, today’s new models are complex and the “zero defect” standard is difficult to achieve in the factory. It is only when the vehicle is in service that the recurring defects appear.

5.2.3.5. Digital technology improves lives

The acceleration of international exchanges has made the innovation and expansion of digital techniques easier while guaranteeing relative world peace. The ITU recalls that these exchanges contributed to a reduction in the price of goods and services in the range of 30% between 2008 and 2011, allowing households in the third world to become better equipped. Following the invasion of data, the promises of digital technology are aimed at a better standard of living and more reliable health and hygiene using the tools and sensors of electronic health (e-health). The rods connected detect contaminated foodstuffs, while the scanner decrypts the molecular composition of an item of food or drink. The patient is reassured by the body energy sensor connected to the smartphone (quantified health). Medical information (or e-medicine) is available to all, with the advantages and risks that this can bring.

The performance monitoring carried out in businesses to manage staff and adapt them to their functions no longer has any meaning today. Continuous performance monitoring through IT allows precious time to be saved and mountains of paper to be avoided by quickly and completely transparently verifying the efficiency of employees through the tangible results obtained from their workstations. At worst, surveillance at the click of a button will be entrusted to Big Brother, but we can hope for the best. Who, in the hierarchy, would indeed dare to do away with contact with agents on the ground and thereby lose information essential to improving the company’s organization? In order to succeed, digital technology must reduce the number of levels in the hierarchy.

5.2.3.6. Self-driving vehicles

Future driver-less vehicles are worrying the American police. This is because automatically driven vehicles, for better or worse uniting the IoT and artificial intelligence, can allow shadowing to be carried out at a distance and criminals could also use them to shake off law enforcement or “target” the police authorities. It must also determine where responsibility would reside in the event of an accident – with the driving assistance software or a fault in the vehicle’s maintenance? On the other hand, farmers would be thrilled to be able to have driver-less vehicles connected to satellite surveillance robots to ensure the well-being of their herds located in Brazil or Africa. However, determining the cost price of this supervision would require careful research.

5.2.3.7. Difficulties for some companies

The adaptation of businesses to digital technology cannot be taken for granted and serious mistakes can be made, involving significant investments, because the company’s management did not foresee all aspects of this conversion, having instead imagined that the software would guarantee all necessary functions and resolve all difficulties connected to the new organization of services. Confusion also occurs when the management speaks of customer “needs” instead of a “desirable accomplishment”. Changing the environment too quickly surprises both the customers and the staff responsible for sales with attitudes that the implementation plan may not have included in its assumptions.

Half of the businesses surveyed on this subject spoke of resistance to change regarding the transition to a digital style of management. However, the companies further on in the digital transition had a growth rate six times higher than companies lagging behind. The most stubborn companies can take inspiration from the aviation sector and the success of its BoostAeroSpace provision platform, which standardizes tools for collaboration between customers and providers. Bringing about the digital transformation of the economy is a requirement. It appears that this change is simpler when it relates to large companies that have had the opportunity to develop a project over a longer period of time than SMEs.

5.2.3.8. Adapting the public sector

Digitizing the public sector should improve the lives of citizens by simplifying procedures, avoiding duplication, improving the productivity of officials and saving the time of the two parties involved. If everyone is convinced by such a project, the transition of administration to digital action is not that simple, and from the very first step, all eventualities must be anticipated in order to avoid restarting the identification procedure during a citizen’s second application. The “perfect” digital government must therefore predict all of the sectors, which would have need of citizens’ cooperation in their administrative and fiscal management.

The British government has had several unsuccessful experiences with digitization (BBC programming, management of the National Health Service, pension services), which make it hesitate to launch a new project, despite having very quickly upgraded the national network for superfast broadband provision. The Digital Britain project, ironically dubbed “digital by default” by the British press2, should be able to improve the lives of citizens and generate over 7 billion pounds worth of savings, but it largely encounters a lack of participation from British citizens and an overly slow digitization of public services.

France is ranked fourth globally in terms of digital administration. While it holds on to its place for use of its online services, the interministerial culture has difficulty following this development. Constructing a State platform is very ambitious. On this subject, Esther Duflo, a French economist, MIT professor and member of the Académie des technologies, recommends that a continuous trial suited to public policies take place in order to obtain assessments with concrete results. Digital technology provides extraordinary means to access the data that enables these assessments [BAN 12].

5.2.4. The Internet and society

5.2.4.1. Social media

Nothing has changed since Aesop, and “language is (still) the best and worst of things”. Social networks are in this mold and their messages and videos amuse or irritate us in turn. The best rubs shoulders with the worst without it being possible to appeal to the reason or simple common sense of the thoughtless gossipmongers who freely throw around incivilities. The murderer proclaims his hate before setting himself alight in an attack and his message may be picked up during an incitement for compassion and world peace. The “global village” of social networks allows citizens to become closer to one another. However, as there is no filter upon entry, and culture shock can surprise at any moment.

At any given minute, social media is keeping all current subscribers to the Internet awake. However, a lack of respect for the minimum rules of decency has resulted in applications, celebrated upon their creation by an idealistic public, being thrown into disrepute. Following excessive enthusiasm, prudence and moderation are finally arriving.

5.2.4.2. Digital technology and democracy

At a conference organized on the idea that “the barbarians are attacking democracy”, Nicolas Colin expressed his fear of an imminent systemic crisis [NIC 12]. Digital technology is attacking democracy, he says, because, by putting people in a network and giving them a means of direct expression, it gives the power to a chosen few who are difficult to govern, even though democracies are founded in principle on the concept of an “indivisible people”. In France, digital technology, he says, allows particular interests to dominate public opinion. American democracy is, by its nature, based on a permanent balance of power between the interests of groups. While digital entrepreneurs are the first investors in electoral campaigns, the circle is complete, it seems. “The digital revolution facilitates communication in the public domain and aims to bypass institutions with pyramid structures through network organization”. Some sarcastic tweets targeting jargon-heavy political messages enable the success of movements based on original opinions. The ability to react increases subscription to the applications that are closest to citizens, less expensive and better managed.

Cultural reactions still remain impervious to Internet standards and vice versa. It is indeed within this duality that problems with the Internet could appear if it seeks to unify the cultural reactions of all Internet users from a distance.

5.2.4.3. The Internet and pornography

It is impossible to ignore one of the Internet’s most profitable activities, pornography. On this subject, information is not skewed by hypocrisy or modesty. While the stated figures are stunning, they are almost all unverifiable. It is therefore generally agreed that a third of the Internet’s daily traffic is made up of pornographic images, emanating from almost 12% of sites connected to the Web (being some 5 million sites, or more, probably). This traffic should constitute around 25% of search requests on the Internet. Of course, though the visitation records are not available in France, they are in distant countries where there is social censorship, the French public having been largely oversaturated since the creation of this technology through the erotic messaging service offered on Minitel (information which is also unverifiable). The revenue from this activity comes from remote sales of related products, particularly DVDs, as well as the hidden trade in address files. Everywhere that censorship is practiced (Asia, Arab countries), the State’s turnover surpasses what which would be considered reasonable (between 50 and 100 billion dollars per year and per country).

Some approaches undertaken in support of global economic liberalism have had unexpected consequences that have, understandably, aroused the indignation of the writer Michel Houellebecq, who wrote that “liberal capitalism has extended its influence over consciousness; going hand in hand with it are commercialism, advertising, the absurd and snickering cult of economic efficiency, and the all-encompassing and unrestrained appetite for material wealth. Worse still, liberalism has spread from economic matters to sexual ones” [HOU 91].

In 2015, the Indian journalist Palash Krishna Mehrotra, shocked by the existence of almost 900 pornographic sites in India and wishing to defend women and children, wrote on the subject in DailyO, a New Delhi newspaper: “Human beings are the same everywhere, but open societies tolerate differences while others sweep everything under the carpet. The Internet allows us to look at information and fantasy in turn. Sexual curiosity exerts a great influence on culture, but it remains unexpressed. If the Internet responds to this curiosity, it does so as a safety valve, or as a private means of sanctioned release. The opening of this blockage brings in billions of dollars in very different forms, never mentioned in economic cybersociological studies” [DAI 15].

The American non-profit organization “Enough is Enough”, which is committed to making the Internet more acceptable for children and families, provides a wealth of relevant information on its website regarding pornography and pedophilia on the Internet, which is considered a pandemic (http://www.enough.org/).

Intended for readers wondering about the funding mechanism of free sites that bring in revenue, it should be noted that this financial paradox is based on a complex sector. This is guaranteed through a chain of intermediaries and brokers who compare people with different activities, from taking photos or making films to those that receive traffic because they have meaningful domain names and agree to monetize them by levying their contribution. The French computer expert at the source of this information points out that this chain of technicians is characterized by a comparative lack of ethics on the part of contributors. Indeed, a significant proportion of these websites spread “tacit malware” slightly “inadvertently”, but it is possible to confirm that this function comes from a decision made by the site’s manager. Furthermore, “as pornographic sites receive a lot of traffic, they are quite often hacked by unscrupulous computer technicians who install malicious codes and unmonitored rerouting systems. Various multiplication systems also enable the same ‘click’ to be sold to various brokers, in both directions. The IT associated with this activity enables the machines of customers to be analyzed, which increases interest in these connections as the results are communicated to other backers who are just as dubious as the first ones”.

It should be noted that the highest resale price of a generic top-level domain (gTLD) name was “.sex”, which brought in 13 million dollars in 2010.

5.3. The new economy

5.3.1. Industrial and commercial cycles

5.3.1.1. Acceleration of the pace of innovation

Digital technologies contribute to developing the end-to-end transfer of information. They support interconnection and interoperability and facilitate interdependence. They improve the coordination of economies, and the organization of businesses and markets. The Internet’s calling is to be able to address a targeted public that is spread over a vast area. If it is a question of gathering together members of an association of boules players who are, moreover, poorly trained in typing on a keyboard, a simple notice in the village bakery will suffice. Conversely, if you are looking to bring together the parents of children afflicted by a rare illness, the Internet must be used. The technical progress made over the last 30 years has provided price reductions for all necessary commodities, including housing, healthcare and education. This craving for the best prices while retaining the level of quality of service, regardless of the location in question, still aims to accelerate progress. Social protection must become less expensive and the door is open to competition in activities based on digital media.

Throughout the history of capitalism, the traditional laws of the market have favored limiting innovation to ensure the income of the entire existing sector. Therefore, between 1950 and 1980, an industrial product lasted around 10 years, a period during which the company could carry out a production follow-up, maintenance, monitoring of patents in industrial property and an after-sales service. However, the economic paradigm has changed and the market changes faster today than previously due to globalization and the speed of exchanges between consumers.

In 2016, the tastes of the public are fixed around a commercial cycle lasting 3 years in principle. This irregular development should be taken into account by businesses as offers of services must be assessed for a shorter period and in a revisable way. The digital revolution is remodeling all sectors of the economy and redefining occupations. It is not a question of “creative destruction”, one of the features of capitalism, but of an economic repositioning of the strengths of innovation in the face of means of communication, the main drivers of economic progress [SCH 74].

5.3.1.2. Possible causes of this acceleration

The acceleration in the pace of innovation was perhaps implicitly written into its DNA and it falls to experts and historians to explain why. In this respect, two examples from real networks may provide avenues for research.

Between 1920 and 1970, the driving principle behind telegraphic transmission were modulations (of position or amplitude) on analog telephone circuits, on the basis of a telephone circuit carrying 24 wire channels at a rate of 50 symbols per second. In general, every country had its own system and its own provider. On the border, the modulation in amplitude of the Belgian telegraph systems, for example, was converted into frequency modulation to enter France. There were no other original or uncomplicated technical solutions to propose and all parties stuck to their respective decisions, as validated by the ITU-T. However, this situation was a major disadvantage regarding the distortion accumulated depending on distance, with modems and switches each playing their part dangerously and threatening the correct functioning of the end teleprinter. The idea of an acceptable limited margin consequently led to the construction of the longest possible circuit carriers which were also, naturally, the least profitable as they cannot carry enough telegraph circuits.

In 1971 and 1972, digital telegraphy entered international standards, on the initiative of a small American company with relatively little instruction in the international field of transmission. Faced with this development, Japanese, French and British manufacturers presented their own proposals, although they had to admit the merits of the original plan and accept the legitimacy of the proposal. However, the young company ignored the meaning given to the polarities of connecting to the global network and had a case of bad luck, reversing the positive and negative voltages in its regulation. In the end, the principle of digital telegraphy was adopted and management of telegraph distortion is no longer a concern. Two similar standards coexist, of which only the second is used due to its compatibility with the international network. This standard has been written by traditional manufacturers (with the relevant patent rights). The innovation therefore entered into telegraph history sooner than anticipated because it was driven by a young, dynamic company that was not responsible for winding manufacturing plants and wanted to enter the world of networks.

A change of provision could benefit innovation. At the end of the 1960s, the first annual business directories appeared (Kompass), listing all businesses in France, both large and small, according to profession or domain. At this time, the first modems were available and an entire system of low speed (2.4 and 4.8 kbps) intercity information and telecommunications connections were set up to give structure to intercompany relations. The opening of the first large surfaces dates to this time and is explained by the expansion of the communications network and the progressive ease of exchanges between producers, packagers, transporters and merchants. The shift of the distribution sector’s concentration, initiated by a grocer from the small French city of Landerneau, changed the habits of customers and distribution channels, and slowly brought about the disappearance of all small stores in the all villages, regardless of their expertise. The same movement continues today, although undoubtedly on an even larger scale, both nationally and internationally.

Progress begets progress and digital technologies are not solely responsible for the phenomenon of job destruction. As an example, the availability of light rechargeable batteries gave inventors the idea of developing small electric clippers for male hairdressing that are very easy to handle. This primarily simplified the lives of barbers, before contributing to the closure of barbershops. Unexpectedly, the tool changed hands and the sales of clippers increased. The ergonomics of the instrument led to its success.

5.3.2. New economic paradigm

Digital technology provides an opportunity to accelerate the shift created by monopolies in the economic world (see section 4.5). It is enough to have a computer platform connected to the Internet and equipped with robust client–server software and suitable memory to communicate with the entire world and offer low cost services, thanks to small free commercials and generous advertising sponsors. The new economy, associated with digital technologies, is rapidly transforming social and professional activity through the brutal competition it practices and the social disruption it creates. Everyone promotes their own agendas on the social economy that can be tinged with idealism. Well-known topics are recalled here and some of them are quite closely related to other subjects, such as peer-to-peer economies, sharing, innovation or “Uberization”.

According to philosopher Bernard Stiegler, transitioning to a “peer to peer” economy could become unavoidable and the market should finally fall in line with the logic of the sharing economy. This economic theory is based on the principles evoked by the strength of open intellectual property systems compared to closed systems. “Peer production is sustainable collectively, but not individually. Unpaid contributions are not enough for a person to live on. Peer production should join forces with capital in one way or another, at least until an alternative system appears”.

The Harvard University economist Dani Rodrik believes that free trade, however lauded it might be by economic theories and recommended in what is known as the “Washington consensus”, is not necessarily the fundamental factor required for growth as experience shows that alternative policies could prove more efficient. In particular, the aims of national sovereignty and democracy should not be overlooked [ROD 07].

Mobile terminals with Internet access call into question the assumptions of 20th Century capitalism. There is no need for offices, employees, an excessive hierarchy or unions said to be “representative”. The qualifications of teams must adapt to the tasks proposed. A sharing economy, with freely agreed human resources, is being organized in requested environments, although its demarcation system is yet to be defined. The financial return is modest in itself, but it is sufficiently large to destabilize the traditional cumbersome systems already in place. Such sharing economies are only set up incidentally in service areas where the inherited margins are comfortable and where externalizing mobile computing can make the best use of all its resources, without traditional quality control procedures becoming obstacles. This economy is making particular progress in activities where managers have not taken the initiative to digitize their services. A way to simplify tasks was on their doorstep, but the hare left the initiative to the tortoise that benefited from the availability of funds loaned cheaply.

Clayton M. Christensen, a professor at Harvard Business School, has studied the consequences of innovations in commercial businesses and in society [BUS 97]. Peer-to-peer enables the creation of intellectual value, such as the encyclopedia Wikipedia or the development of Open Source software, and also of material goods such as vehicles (Sensorica, Wikispeed and Local Motors), provided that they promote a balanced system of exchange between givers and receivers.

It is no longer a question of an owned and centralized Télétel system, connected to the national Minitel system, but of extending this architecture to a borderless communications system. The digital economy is designed for a central site gathering technical and commercial intelligence for millions of loyal customers through the ergonomic simplicity of its communications interface, associated with a reduced regulatory framework.

5.3.3. The typical actors in the digital economy

5.3.3.1. TheFamily

TheFamily, a company established in 2013, is a European investor which assists and supports around one hundred young dynamic companies each year by offering them training and access to capital to develop activities relating to the “new economy”. The founders of TheFamily, Nicolas Colin, a tax inspector, and Oussama Amma, develop the philosophy of this commercial approach on their blog. Instructors show new entrepreneurs how digital technology can quickly make traditional activities competitive. Even failures are valued by the team at TheFamily as a way of enriching group culture and being able to share a positive experience. In 2014, TheFamily, with the participation of the Caisse des Dépôts (the French Deposits Fund) and the Groupe la Poste (the French post office group), published a study entitled “The digital transition at the heart of business strategy” (“La transition numérique au cœur de la stratégie d’entreprise”) [COL 15].

5.3.3.2. The Barbarians

These new economic players do not seem to shrink away from any process respectful of the values of the past and, for this reason are considered “Barbarians” by the literary and artistic world. In his work dedicated to this phenomenon, Alessandro Baricco analyzed the following strategy [BAR 14]. According to Baricco, the Barbarians use new technologies to popularize new uses for ergonomic software which captivates and appeals to customers, even when the overall quality of the services proposed is far from perfect. The contact is direct and without constraint. They make the novelty more accessible by meeting the standards of all social classes. “What does the network matter as long as the information or service requested is available”. In the same vein, the American journalist Bryan Burrough referred to the tragedy associated with the takeover of Nabisco [BUR 07].

The Barbarian economy connects individuals, Internet users, contract workers available to carry out the services associated with an insignificant level of social protection and some freedom in organizing use of time. Blablacar, the international carpool company, and Helpling, a German platform for organizing domestic help online, are developing services based on these same principles.

5.3.3.3. Rocket Internet

Rocket Internet is a technology company, which is able to reproduce application models for taxi services such as Uber in other areas. It does not have magic algorithms, but rather specialists in incubators capable of cloning technological layouts for the benefit of young, dynamic companies. Indisputably, Rocket Internet is the most important Internet platform for creating digital businesses outside China and the United States. Even though the loss of its hundreds of subsidiary companies remains important, it is making enormous investments, particularly in e-commerce. In 2015, it employed over 30,000 people in 100 countries and was prepared to respond to the demands of over 5.4 million mobile customers. Well supported financially, the holding can survive with around ten of its largest and most dynamic companies. While increases in capital continue to come in, Rocket’s engineers are perfecting the management and training software given to its affiliated companies. In two or 3 years, the group is sure to be in a position to repay its debts and distribute dividends to its shareholders. Currently, in 2016, in a “normal” world, the public would have cause to worry about the figures, but are we not now in the digital age?

5.3.3.4. GAFA companies

The oft-used acronym GAFA refers to the group of companies made up of Google, Amazon, Facebook and Apple, which are the Internet’s most active and productive OTT bodies with an overall market capitalization between 200 and 760 billion dollars each as of April 2015. Large companies fear that these GAFA companies are developing direct links with consumers, bringing them down to the rank of mere providers with highly reduced margins.

With 1.4 billion users worldwide, including 29 million in France, the social network Facebook has information on its users and the events that they have spontaneously put online. The profiles of users are irreplaceable tools for Facebook’s marketing service. The data collected can be used by Facebook directly or resold to other actors. Facebook draws around three quarters of its revenue from mobile advertising.

Facebook wishes to push the popularity of its Messenger messaging service, which has surpassed 600 million users worldwide, even further. Facebook has also opened the use of Messenger to merchants through a tool allowing them to make their client relationships more fluid: order confirmations can be sent with the messaging service rather than by email. They can also communicate via this channel to tell their customers when their package has been sent, when it will arrive safe and sound, and so on. If there is a need, buyers can contact customer service through this intermediary.

5.3.3.5. The role of OTT

OTT (see Glossary) are actors, which participate in an alternative Internet multimedia provision service by bypassing network operators. The service provider is not able to control the content displayed or ensure respect for copyright. The service can deal with voice, SMS or video carrying via streaming through a social network (Facebook, for example).

Young companies with limited experience of operating a network are not the only ones to take advantage of the alliance of digital network resources combined with shared computing intelligence. Expertise-based alliances are also conceivable. In February 2016, a group of network operators and industrial partners was formed as the Partnering Operator Alliance, with the aim of sharing knowledge on “future digital services and trends” in order to succeed in marketing new applications in the wake of OTT.

A group of European countries, including the United Kingdom, has publicly stated its opposition to overly protectionist legislation on OTT, which France and Germany would like to put in place. The sales pitch put forward is based on the fact that “the single digital market can only become a success if it works harmoniously with innovation, investment and entrepreneurship. Regulations should only be implemented if there is a clear need”. The European Commission should rule on this issue and developing countries are currently looking for solutions with the assistance of the ITU-T. It should be noted that, in February 2016, around twenty OTT were represented at ITU-T Study Group 3, which has seen some development.

5.3.4. Factors for success provided by NGN

The new digital economy is developing on the Internet due to the emergence of several convergent factors. On the one hand, communications tools are now readily available and, despite the variety of their operating systems and the diversity of the mobile display systems of terminals, NGN ensures, in both fixed-line and mobile services, the compatibility of transactions through platforms connected to the Internet with global coverage. The significant increase in the number of multifunctional mobile devices (smartphones) is an important factor in the success of NGN, as it is for applications offered by the Internet.

The fabric of connections established through the different layers of the Internet (the surface visible to the general public and the Deep web for insiders, as well as for hackers) enables an extraordinary sharing of knowledge and exchange of ideas, with the best at times rubbing shoulders with the worst. Innovation emerges from these chance encounters between young discoverers and daring investors, fearless and indifferent to disapproval. Low interest rates and cheap loans are encouraging the launch of products and services, which would have been unthinkable in the past. The Internet is also a sector for exploring sentimental and commercial urges, in spite of cultural differences and the continuously disputed regulations put in place. As the pace of creativity increases, the political classes are concerned by social changes, increasing unemployment and the lack of certainties in this development. Like Pandora’s Box, the spread of new information technologies has become part of all societies and has prompted an entire range of reactions. The tragedies caused by Daesh can probably also be considered signs of rejection in the face of the technological progress following on from the international trade liberalization measures organized by the United Nations. Traditionally, the filter of history will certainly only remember the best of this progress.

There should be neither dreaming nor complaining. The sharing economy has known limitations as it has its own limitations as a medium. The Barbarians have only attacked parts of limited markets, and which raise financial and social questions. In the United States, in 2014, self-employed people with no employees only made up 8% of total employment (a proportion which remains stable). Big business has understood the lesson and is pondering its response.

5.4. Longevity of network services

5.4.1. Political and regulatory variables

Networks worldwide are currently positioning themselves toward building NGN which bring together the Internet, IP protocols and fixed-line and mobile networks. De facto governance of the Internet presently resides with ICANN and the international group of financial and regulatory bodies described in section 3.1. As all States accept this situation, the principles held by this technology serve as a framework for the services and applications of 70,000 Internet networks, as of April 2015. Even though some isolated Internet networks can be set up, it seems difficult to imagine a State which refuses to connect to the global Internet.

However, amendments to NGN are possible on the regulatory and technical levels and some countries have attempted their own, limited, experiments on this issue. Regarding security and the confidentiality of personal information, the European Union could certainly have acted in a more vigorous and tangible way than it did in the wake of the PRISM scandal. Within technical standardization circles, several delegations are expressing their desires for a development more in line with the needs of their populations. Indeed, NGN which, as indicated, at once comprise traditional telephone networks, fixed-line and mobile networks and the Internet, are rich in potential services, although the diversity of uses makes it difficult to have a single “governance” applicable to a wide variety of audiences. On the other hand, the continuous development of the Internet is surprising decision makers through the unpredictable direction of the uses it can support. This explains the delay observed in regulatory decisions which at once affect both network operators, through penalties imposed retrospectively, and, indirectly, users. Because of technological developments and the emergence of new practices, the regulation of digital communications must evolve, although it can only do this late and by adding new considerations to an already complicated situation.

5.4.2. Technological risks

5.4.2.1. Shortage of rare metals

Computer equipment, just like devices for mobile telephony, use components made up of around sixty chemical elements and rare metals. These include critical non-renewable substances, such as antimony and tantalum, which will become difficult to procure by 2020 and 2090, respectively. So-called “blood minerals” (tin, tantalum, tungsten, gold) are extracted under very difficult conditions and are sometimes a source of funding for armed groups in African conflict zones. Mining resources are limited by the energy cost of operating them, and by pollution and its social impact [BAR 15].

In 2010, the Dodd-Frank Act made it necessary for American companies to reveal whether their production lines involved the use of “blood minerals”. From 2016, this act will be strengthened in order to oblige businesses to provide more specific reports about the origin of their supply of provision. The European Parliament recently adopted an equivalent measure. As a result, an increase in the cost of terminals and computer equipment is to be expected. Modifications to current technological sectors and greater durability of terminals are also part of potential scenarios.

5.4.2.2. Miniaturization of components

The components industry is increasingly approaching the physical limits of microelectronics, referred to by the term “the Wall”, at which point transistors would consist of nothing more than some atoms and insulation. It is already necessary to develop new methods in order to reduce consumption of computer equipment (Climate Savers Computing Initiative, a study evaluating performance in FLOPS per Watt). For instance, there are plans to store three-dimensional transistors, and to use nanotubes in molecular transistors, DNA computers, photolithography in the X-ray frequency band, and quantum computing, that is computing using “nano-computing” technologies. Tomorrow’s microelectronics could move away from silicon in favor of new materials, with new materials for chips.

The profitability of new generations of machines depends on a future which is, at the very least, uncertain and it is conceivable that, under these conditions, it could be an economic decision and not a physical blockage that puts an end to the rate of development seen over the last 50 years in the components industry.

The limit of profitability of manufacturing new generations of components seems to be linked to the acceptable noise level and energy consumption, which leads to a freeze in the level of performance, in order to ensure the market profitability of more varied microelectronics and to reduce the volume of waste produced by the incessant renewal of generations of equipment.

5.4.3. The Moore Conjecture

In 1965, Gordon Moore, Director of Fairchild Semiconductor, stated that the density of electronic chips doubles every year and this trend could continue in the future, using the economic promises of electronic integration and bringing about, stage by stage, the development of all consumer electronics [MOO 65]. In reality, manufacturing the first Fairchild integrated circuits was much more expensive that the traditional methods of assembling separate elements mounted on a circuit board. Mass production justified dynamic manufacturing technology and, conversely, this allowed production to be carried out at a low unit price (Figure 5.1).

Gordon Moore pushed the investigation further and determined the economic optimum for manufacturing components in accordance with their number over a substratum, with this parameter enabling assessment of the profitability per unit of manufacturing components for the next generation achieved through photolithography. In reality, for reasons of competition between companies, Fairchild positioned the developments of a generation of components on three concurrent axes: correcting the faults of the previous generation, doubling the capability within the allotted space and improving performance (all for a sales price barely higher than for the previous generation). Indeed, it appears that the cost of an industrial product decreases between 25 and 30% every time that the cumulative quantity produced doubles.

image

Figure 5.1. Economics of producing integrated circuits, according to G. Moore (On the x-axis, the number of circuits per integrated circuit. On the y-axis, the relative costs of manufacturing components)

This arrangement thereby allowed more components to be added in the same space, as well as reducing the volume of even more efficient components, correcting the omissions and mistakes in the previous versions and, lastly, making the numerous pieces of equipment used by manufacturers and laboratories much less expensive [IEE 15].

This “Moore Conjecture” (as opposed to “Moore’s Law”) has provided a very useful framework for prospective development studies for other sectors of activity (petrochemistry, medicine, telecommunications, engineering, etc.) for 50 years. It serves as a basis for financial regulations for investing in components as it brings an economic advantage to an industry supported by a solvent market with high demand. Figure 5.2 shows that the revenues from the global semiconductor industry have indeed regularly developed at a ratio close to 100 between 1968 and 2004.

image

Figure 5.2. Revenue of the semiconductor industry between 1968 and 2004

In 2015, the Moore conjecture seems to have switched to a rate of two and a half years unless it is completed, due to lithography costs having become prohibitive, the heat released, the physical limitations of components and overly large leakage currents. However, it would be daring to connect the economy to technology and claim that global GDP would be able to maintain a mathematical relationship with the Moore conjecture, given the numerous factors likely to arise.

5.4.4. The crisis of the components industry

5.4.4.1. Decreasing demand

Since their inception, semiconductor factories have continuously operated 24 hours a day in order to respond to growing public demand and to attempt to make production profitable at the lowest possible cost over many years. Since 2008, consumer demand for silicon has started to decrease due to the reduction of salaries, which are no longer in line with productivity. This downturn has led to a reduction in investments from semiconductor heavyweights in silicon wafers 450 mm in diameter, which provide the most potential revenue for the industry. At the end of 2015, it seemed that the growth of the global semiconductor industry could not make progress in producing 450 mm silicon wafers due to low consumer demand. Lacking customers, monopolistic capitalism dictated that development had slowed by itself.

The growth of the economy is dependent on its capability to produce materials in the largest possible quantities and to take advantage of more and more salaried consumers. Yet the pace of overall productivity in Europe is only slowing down. Today, the field of consumer electronics is dominated by American and Asian companies. The relocation of this industry from the United States to Asia has opened up a significant rift in the American commercial balance and led to a subsequent depletion of employees in the electronics sector.

R&D in semiconductors and pharmaceutical products is investing increasing amounts without producing innovative results. Twice the amount of capital is required to produce the same amount of goods as 50 years ago and, while these services make life easier, their role in economic productivity is almost non-existent. Demand is still insufficient for stimulating fruitful investment. Big Data and Cloud Computing technologies provide information that is admittedly interesting, but whose consequences are limited with regard to productivity [ART 15].

The increasing cost of production lines is driving manufacturers of microelectronics to consolidate their investments. The inflation in the costs of product development also favors these transactions, which enable businesses to grow more quickly. In 2015, almost 70 mergers and acquisitions in the components sector reached a hereto unheard of level of frenzy with the total value of buyouts exceeding 127 billion dollars, and the phenomenon of outbidding the competition could increase further in 2016. With costs rising faster than revenue, manufacturers are called upon to invest further in designing chips, developing manufacturing processes and production equipment. The transition to sharper burning is increasing the costs of developing chips and the manufacturing processes are growing 30 to 35% with each new generation of technology, while the revenue of the semiconductor industry has been increasing by less than 5% per year on average since 2010 and threatens to decrease by 2% in 2016.

5.4.4.2. The 10 nano sector

Intel, like the Korean Samsung and the Taiwanese TSMC, is obliged to postpone the release of the generation of 10 nanometer chips until the end of 2017. This delay will push back the arrival of the next generation of 7 nm burnings, previously planned for 2018, but which will now probably not appear before 2020. The 10 nm semiconductor technology is associated with the introduction of extreme ultraviolet radiation into laser lithography.

5.4.4.3. The end of the Japanese miracle

Professor Yotaro Hatamura of Tokyo University maintains that his country’s industry fell victim to the sin of pride in giving itself the title of “permanent technological powerhouse” in the 1970s. However, while Japan’s economic development over this period has been obvious, the quality of the technology in Japanese products has been associated with very high prices. Japan is being rapidly surpassed by low cost and medium quality Chinese and South Korean manufacturing. For instance, with regard to components, in Japan, the manufacturing of semiconductors only tolerated a coefficient of 5% in defective items, whereas for the Korean Samsung, the rejection rate could reach 30–40%. However, in cornering the global market through very low prices, the Koreans have been able to gradually improve quality and subsequently move up to first place in innovation.

5.4.4.4. The Chinese strategy

China occupied 56% of the global semiconductor market in 2014 and recently toughened its policy on buying foreign digital equipment. Some American providers are excluded outright. China’s ambition is in fact to strengthen its semiconductor industry in order to reduce its dependence on imports. “Made in China 2025” aims to move toward 40% self-sufficiency in integrated circuits by 2020, then to 70% in 2025, which can only contribute to destabilizing the global market.

5.4.4.5. The Indian market

The current equilibrium is precarious as India, tired of living with a significant unemployment rate, decided to move into manufacturing electronic products in its “Made in India” program in order to improve its trade balance and reduce the poverty rate. The Indian approach will undoubtedly provoke a reaction from China and probably a change of political strategy in its relations with the United States. At the same time, industrial plants which currently participate in the inexpensive manufacturing of counterfeit or poor quality products will turn toward honest production as it is paid on a more solid footing [BAT 13].

One possible path for Asia would be to invest in government-sponsored semiconductor manufacturing plants, with agreed investments receiving guarantees in sustainable capital financed by external and internal funds with a view to an open international market for developing countries.

5.4.4.6. The market of the IoT

The expected El Dorado of the market of the IoT also compels providers to complete their product portfolio as quickly as possible. The components of the IoT are a specific technology related to producing fully depleted silicon-on-insulator, with lower power and at a much lower cost price. The IoT should amount to a potential market of 7,000 billion dollars in 2020, on the assumption of 50 billion connected objects, although the market of standalone microcontrollers for the IoT barely surpassed 400 million dollars in 2015 which still does not really constitute a growth catalyst able to cope with the downturn in the components sector. Furthermore, the anticipated jackpot should be shared between several competing transmission systems (see section 2.7.12).

On the other hand, the energy requirements associated with the IoT pose an environmental problem. Moreover, there is a risk of conflicting radio messages in the IoT, which could cause network saturation. The dangers of radioelectric emissions to human health have still not been conclusively proven (Appendix 4).

The energy consumed can be produced through carbon-free sources, but a means of storage without environmental damage must be found and thermal dissipation should also be researched. Low-energy Bluetooth enables battery use to be reduced. Objects with positive energy are worth considering with reclamation of all energy microsources (movement, light, heat), subject to profitability.

According to ABI Research, the global market of the IoT should reach 5.4 billion connections in 2020, higher than the 1.2 billion devices connected today. Every business, every house and every school should therefore have its own local network connected to a larger network, all matched to routing, protection and addressing systems that the global components industry will find difficult to finance without significant funding. It is no longer the Moore connection that clearly shows the outrageousness of the IoT project, but the banking network which is questioning its financing. Would the rival World Bank established in China be able to refuse loans without the caution proposed by the United States?

5.4.4.7. The prospects of the components industry

Over the last 50 years, the integrated circuits industry, which is related to electronic activity, has been the information age’s development engine. In 2016, it appears that the era of the personal computer, the driver of the semiconductor industry, has come to an end. The smartphone has picked up the baton, being responsible for 27% of electronic component sales, even though this market is in decline. Vertical integration allows the margin payed to chip providers to be maintained internally and the design of its terminals to be better controlled. For IC Insights, these operations show that buyers are suffering from a lack of growth in their traditional markets, which is pushing them to expand the scope of their activity through acquisitions in order to continue satisfying investors. According to ABI Research, vertical integration could affect half of the smartphones sold worldwide from 2020. R&D costs are increasing by 35% at every stage and financing for university research is decreasing. Asian and European R&D is increasing its efforts while the United States is falling slightly behind.

Demand among American consumers has not been greatly stimulated by the financial measures taken under the guise of “quantitative easing” in 2008 and, for want of anything else, financial institutions have lowered interest rates, which has contributed to speculation and exacerbated unemployment in developed countries in Europe and in the United States. The change in the interest rate should reassert the value of the dollar to the detriment of other currencies. The monetary policy of the United States should therefore be reviewed in order to revitalize internal demand and consequently increase employment. The global components industry prepared a roadmap for 2015–2030 within the ITRS framework (International Technology Roadmap for Semiconductors) and it is to be hoped that the decisions taken fit into the framework of intelligent macroeconomic policies. The transition to silicon wafers 450 mm in diameter is essential to improving the profitability of mass production and to be able to confront the global economic downturn. Without immediate reforms in this area, a resurgence seems impossible and the significant slowdown in components activity will push the American economy toward an inevitable depression (http://apekmulay.com/)

5.5. The Internet and politics

5.5.1. Monetary policy in 2016

The state of current affairs confirms that, in 2016, the economy had weak growth and low inflation. The consequence of this is seen in the always highly accommodating nature of global monetary policy. This situation is increasingly leading to significant economic and financial irrationalities [SOW 06]:

  • – boosting financial assets often disconnected from their fundamental elements;
  • – monetary creation that does not correspond to credit;
  • – negative interest rates in the short sections of some rate curves;
  • – unjustified very long-term investment on the economic and financial levels;
  • – overvaluation of financial assets over a globalized geographical area;
  • – asymmetry of responsibilities in a system mischaracterized as liberal.

In order to govern according to its tastes or the current real or presumed needs, political authorities always use the resources provided by the economy. The acceleration of the pace of growth has endangered the future of our society, and a new economic strategy which complies with the minimum moral values seems indispensable. Past economic theories only partially responded to their era’s most noticeable problems. We have the advantage of being able to make the most objective possible critical reading, without giving in to passion or despair.

It is to be regretted, as the philosopher Jean-Pierre Dupuy said, that economists do not have an overview of the wider world in its entirety [DUP 12]. “It is an understandable human concern to seek to push oneself ever further, but it seems to support dangerous myths. Should the artificial intelligence of our most up-to-date computers be called upon, paradoxically, to assist political authorities in resolving the problems posed by management of the global economy?”

5.5.2. The Internet, an instrument of capitalism

All telecommunications activities are, to some extent, placed under the control of the institutions described in section 3.1 whose operation seems directed more in favor of developed countries and the companies dominating the Internet market (see sections 5.3.3.4 and 5.3.3.5). In order to respond to China’s repeated demands, the IMF introduced the Chinese currency into the SDR (a unit of account), a symbolic status, but one which will have obligations for the transparency of the Chinese financial markets from the end of 2016 (section 4.3.1.2).

Some experts believe that the IoT should promote the emergence of a sharing economy, no longer based on capital but on the exchange of goods and services, which would change the direction of capitalism. Furthermore, with the IoT, the effectiveness of people and of systems should be increased and a “society with zero marginal cost” should appear, thereby resolving all of the planet’s resource problems, including climate change. Such is the enticingly naive Épinal image which, it is to be hoped, contains some element of truth.

For others, contrarily, democracy is threatened by the Internet. Industries will continue to be dominated by it for a long time and the IoT is close to a technological myth. Capitalism is built on the concept of scarcity and, very fortunately, progress has been able to push its boundaries. The Internet is not killing capitalism as it possesses data, and this is maintaining its power.

A new topic of concern is taking shape with the announcement of the TTIP (Transatlantic Trade and Investment Partnership between the European Union and the United States) and CEFTA (free trade agreement between Canada and the United States) international treaty projects. These two documents (still being drafted) aim to fundamentally change the content and processes of developing public standards, by broadly integrating the interests of multinationals to the detriment of general interests and conflicting with democratic choices. Particularly affected by these treaties are new public services yet to be defined, the definition of common standards on services, the data protection environment, the protection of intellectual property, the dispute resolution procedure between the state and businesses and the creation of a new private supranational jurisdiction, which bypasses national and federal public jurisdictions through private arbitration tribunals, or ISDS (Investor-State-Dispute Settlement). Paradoxically, this issue brings together highly concerning legal texts and relatively low economic gains (less than 0.4–0.5% of GDP). The mystery surrounding these draft regulatory developments should, in principle, be resolved through diplomatic meetings which should take place after several presidential elections:

“The stakes concern the survival of democracy if the market is global, but democracy is not. The rules of the market prevail over the rule of law, and regulatory bodies do not take unemployment or deflation into account. However, education, security and health fall within the duties of states and democracies are not able to impose their rules”, suggests Jacques Attali, on a different note.

5.5.3. The Internet, an instrument for domination

The Internet’s first decade supported the idea of a participatory system that would encourage the primacy of representatives to the detriment of all pyramid-shaped forms of authority. A “junior Internet”, made up of young students, foreshadows the authorities being called into question by self-organized, supplied and independent groups. However, public intelligence has not been able to take charge of the network, undoubtedly because of the awkwardness of the technology, and the movement and abundance of actors. While the Internet enables the development of some collective intelligence, limitations eventually appear as soon as it becomes a question of the practices of the greatest possible number of people. Wikipedia does not meet all the criteria set out at its establishment and many collaborative projects remain exceptions. In order to last, collaborative forms are based on relatively strict arranged processes. The Internet should therefore proceed according to the indicator that its Governance Forum will give it every year.

Cyberspace at once concerns both the public and private domains, all while being subject to the actions of economic actors, including those associated with the Barbarians, the GAFA companies and OTT with multiple resources, strongly supported by the United States government. These large bodies contribute to the economic standing of the United States and they use the weakness of Internet regulations to their advantage, while European countries have still not defined a common digital policy.

Commercial domination is primarily practiced through the software required by large actors. One of the strategic strengths of Google is its Android mobile operating system (in Open Source), which was used by the majority of mobile devices and tablets in service in 2015, and which is found in television sets (Android TV), computers (Android-x86) and connected objects (Android Wear). Google’s omnipresence is mimicked by Apple, with its iPhone terminals, the ApplePay mobile payment system and in its Watch devices.

At the end of 2015, the Internet connected over 3 billion users around the world. Its technical expansion also focused on developing its governance. Social groups or cross border communities participate in trade, placing the international network with no designated owner in competition with the national networks of states. The regulation of the Internet is at once based on both technical aspects (who takes decisions on expansion, who maintains the network, who receives and redistributes money?) and on content (pedophilia, pornography, personal security, counter-terrorism, intellectual property rights, respect for personal data). The content and uses of the Internet are largely unregulated and, consequently, there is a willing tendency to move toward state regulation, which remains controversial.

India intends to build its digital applications itself and it does not wish to freely squander the personal data of its own Internet users. The Indian regulatory authority, TRAI, refused to allow Facebook to set up a package of applications (Free Basics) on a social network tailored to the Indian market. The dishonest paternalism of Internet heavyweights is intolerable for developing countries and especially for Asian countries that, through their own culture, have a different concept of the principle of Internet Neutrality.

The Internet Governance Forum is the group that is responsible for establishing common goals each year, in order to implement them according to the regulations of every state and the international agreements that have been signed [FRE 12]:

“Who currently dominates the Internet?” Quite clearly, those who take part in ICANN meetings and the Internet Governance Forum may reply. While the United States has accepted some compliance with these bodies, they have eloquently expressed the idea that they would remain the only state to sit in on these decision-making groups in order to enable decisions to be taken quickly. The United States sits alongside universities, research centers and all bodies able to provide elements to make technical progress in the network and to enable the services most useful to all of humanity to flourish. The ascent of emerging countries (Brazil, China, India, Japan and Russia), faced with the economic downturn of the United States, is subject to comments on the inflexibility of these states. Indeed, China represents 13% of global GDP and 30% of the GDP of the developing world by itself. The concept of “regulation”, necessary for proper management of the Internet, still needs to be defined by all participating states and, subject to a faithful translation, be accessible to all human cultures.

5.5.4. The dangers of the American economy

The United States represents 23% of global GDP and 12% of trade in goods, yet around 60% of global production lies in the dollar area. The part of the stock of international investments belonging to American companies has decreased, currently reaching 24%. Today, the managers of American funds on Wall Street manage 55% of the world’s assets. The growing gap between the economic and financial power of the United States is creating difficulties for other countries and the costs of the dollar’s domination are beginning to win out over its advantages. Other countries put up with the risks of the New York Stock Exchange and have no protection in this area. The United States is extending its financial influence ever further to complement its political actions. The Euro and the Chinese currency (the Yuan or Renminbi) are still not in a position to rival the dollar, but the American monetary system seems to have reached its limit and its collapse would have global consequences.

5.5.5. The worries of the West

The slowdown of the Chinese economy is restricting international trade and putting the economies of emerging countries at a disadvantage. On the other hand, the rise of an aggressive form of radical Islam is surprising and terrifying the West. “After the fall of the Soviet bloc, the Western world appears incapable of establishing a safe international environment which is favorable to the longevity of its values and way of life. The emergence of Islamic terrorism is accompanied by the collapse of structures in the countries these terrorists have come from. The Islamic world, made up of 1.6 billion people, or 23% of the world’s population, formerly the most peaceful possible area, has become one of the most violent and this violence is expressed, through the arrival of refugees, in the heart of Europe and even threatens the prospects for the recovery of the global economy. Commercial expansion is currently falling behind and the political order favorable to globalization is gradually wearing away” (free translation of a text by Robert Skidelsky, professor of political economy at the University of Warwick).

5.6. Experts faced with the future of the Internet

The IMF regularly readjusts its growth predictions for different parts of the world and pronounces a set of recommendations. It indicates that, for 2016 and 2017, “global growth could decrease if important transitions in the world economy are not well managed” [EMI 16].

As the conclusion of this essay on the economics of networks approaches, it would have been desirable to provide a vision of the future, reassuring if possible and supported by the logic of the facts presented in the preceding pages. However, overall predictions seem quite uncertain. The opinions of the experts consulted on this topic are scattered between a generous and poetic idealism and slightly surprising visions of an apocalypse. The truth probably sits in between these viewpoints, by maintaining our trust in a gradual adjustment of networks in response to the needs of their users.

5.6.1. The sharing economy

5.6.1.1. Resourcefulness

Summing up, Monique Dagnaud, a sociologist and founder of the application OuiShare, said that “the so-called ‘collaborative’ economy seems an economy of resourcefulness”. The collaborative economy is focused on the sharing of goods and services (renting rooms, carpooling, computer training, zero-rate loans, organizing local events, intellectual output (studies, publications), accelerating projects, training, sharing Internet access), by ignoring social protection and political conservatism. Its trade is balanced in theory in peer-to-peer social relations, due to the decrease in buying power and according to the resources developed by different generational profiles [DAG 13, FIL XX].

5.6.1.2. The associative framework

However, the different experiments that have been attempted could only be a passing phase in the development of our society. Declared associations aligning themselves with the French 1901 Act (Loi de 1901) or “social cooperatives” are at once in competition with and the saviors of this sharing economy, particularly with regard to families in need and people with disabilities. Family associations were already very active between 1945 and 1980, despite highly reduced means in the framework of mutual assistance, in organizing useful pastimes for young people and renting knitting machines, but they have been transformed by the Internet, expanding their audience and adjusting to the new needs of households. Today, family structures are splintered and the motivations for action are organized around more targeted and individual goals, which, despite the distance between partners, the Internet is able to respond to even when its users are scattered.

5.6.1.3. The “Uberization” of the economy

“Uberization” refers to the adoption of the trading model described in previous paragraphs, consisting of, in the short term, making resources available to customers through their smartphones, the availability of the Internet and geolocation resources in every pocket. The Uberization of work was already the subject of research in 1995 (including the Boissonat report and the work of legal expert Alain Supiot on social drawing rights). It also inspired the draft law on creating a personal activity account, which should enter into force in France in 2017. Under the cover of responding to the still hazy goals of the so-called “collaborative” economy, client–server platforms are raking in profits that are energizing the brokers at the Stock Exchange, attributing a stock market value of 40 billion dollars to the global taxi firm Uber in 2015, nearly as much as network operator Orange. However, in reality, as Henry Curty observed, “with Uber, Airbnb, Ouishare, Ouicar, the Hive that says yes, it is not a question of a collaborative economy. These companies have a transitory nature and do not have assets. These are elements of neoliberal capitalism at its most raw” (http://thierrycurty.fr/).

New players arrive through customers, where the barrier to entry is weak and in a line of business where innovation is reduced. Digital businesses are inventing a new customer experience, which is rapidly snowballing through the network effect and the management of Big Data. Among the victims are libraries, travel agencies and dealerships. Digital technology is thereby causing companies to tip into hyperconcentration: the big get bigger and the weak fall by the wayside. The world of decreasing returns has given way to one of increasing returns. Customers bring in ever more other customers. In this context, economists and politicians believe that it would be appropriate to define a regulation fitting “digital workers”, with suitable social and fiscal provisions. As the Uber phenomenon is sustained by unemployment and the reduction in the revenue of average households, these factors encourage the kind of part-time work associated with the flexibility provided by the Internet.

5.6.2. The social justification of the Internet

Apek Mulay, an economic expert, notes that it took 45 years for the telephone network to make its way into the majority of American homes and that, while the Internet has been three times as fast, there are still 4.4 billion people worldwide with no connection. The price to be paid for transporting voice signals has been very high since networks were created, and today, the expected prospects of the IoT raise many questions. Will the progress promised by these new technologies be geared toward the profit of the large industrial and banking groups that rule the world or will it rather be designed to further increase the charges imposed on citizens? Innovations, which often come from small dynamic companies, will increase the profits of large international groups. The question naturally arises of how to know whether there is reason to extend the debt financing of a global economic system, which is not designed for the benefit of those who take part in it and which, on the other hand, exacerbates the unemployment rates of all countries. The globalization of the economy should transform it into a collaborative form of capitalism where the ecosystem would distribute profits to all instead of gifting its fruits to a select few [MUL 15].

5.6.3. An economy of inequalities

For Thomas Piketty, a social science researcher, wealth accumulation is growing even faster than earnings, and income inequalities are largely based on land, real estate and professional capital. The price of land and accommodation is increasing specifically because of progress in ICT, with limited quantities of physical goods more valuable than “digital goods”, products that are available in large quantities at decreasing prices: ideas, knowledge, software pictures, games, videos, and so on. The financial system feeds into speculative debt by channeling investors toward high-yield assets. ICT development allows markets and financial centers to interconnect and investors have the opportunity to borrow funds quickly. As a result, inequalities are growing [PIK 13].

5.6.4. The ebb and flow of capital

The global economy depends largely on massive movements of capital and, in particular, those of the reserve formed of excess global savings, a large nest egg set aside by some economies. “The reversals of trends”, says Hélène Rey, an economist in international macroeconomics and professor at London Business School, “are often linked to decisions made by the American Federal Reserve (Fed), due to the dollar’s dominance of the global economy. The risk return and the price of assets changes with the markets as soon as the Fed makes so much as the slightest decision, to the extent that a “currency war” is sometimes referred to, with the weakest economies paying the price for the consequences of these abrupt fluctuations”. Indeed, in opening up their capital markets to finance their economic growth, some countries are losing control of their economies [REY 15].

5.6.5. A financial catastrophe in the making

Ravi Batra, an American of Indian descent, is an associate professor of economics. In several of his books on the topic of financial capitalism, he has explained the global financial and economic crises, which have occurred since 1750. On the basis of this historical analysis of capitalism, Ravi Batra shows that humanity goes through cycles lasting an average of 35 years, with inequality generating economic performances and social changes. Each cycle thereby sees successive movements of anarchy with the predators of the financial circuits, the reestablishment of authority through the military, democracy with intellectuals and universities, and then the arrival of power in the hands of corrupt individuals, which gives way to a new predatory anarchy. This cyclical view of history in four periods is enlivened by comments explaining the occasional doubling of the length of the cycles (the communist regime that lasted 70 years) and the shift of global economic centers from London to New York.

Over the last 40 years, Ravi Batra has made several economic predictions, 95% of which have become reality within a few years (the fall of communism, the Iran-Iraq war, the 1980s stock market crash, and so on) [BAT 78]. He believes that capitalism will self-destruct due to its following a path with no purpose other than to obtain ever more money, regardless of the crises and collapses, while the number of poor people only continues to increase [BAT 07]. He has proclaimed a “rapid and superb” recovery of the American ideas based on democratic principles that should spread around the world, allowing poverty, unemployment and income inequality to be eradicated and finally bringing about the “golden age” that has so often been heralded. His most spectacular declarations include:

“Employment finds its source in monopolistic capitalism, which allows there to be an industrial and commercial gigantism at exorbitant costs, creating enormous profits and limited rewards”.

“Truth always prevails” and “honesty, integrity and ethics are the real jewels of every individual, rather than money”.

“Large macroeconomic changes are to come in 2016 and the semiconductor industry must be ready for such changes. Businesses that could not adjust to changes in the manufacture of semiconductors are doomed to disappear” (http://apekmulay.com/).

Since 1981, the trade deficits of the United States have gradually weakened its industry, particularly the semiconductor and high-tech sectors. Ravi Batra pointed out that, while the United States practices a policy of free trade, Japan and China do not play along and prefer to intervene in the exchange market in order to reduce the cost of their currencies in relation to the dollar [BAT 15].

Since 2008, the present economic crisis has moved toward reducing trade. Workers see their resources deteriorating while deficits increase. The question arises as to how to reduce the social burdens of companies in an era where computing and communications systems allow there to be reductions in the time taken to adjust or to distribute new products and services. The response given to this question is to abandon the traditional regulatory framework and place the business into a new framework, bringing less restrictive regulations into play and thereby reducing the costs of producing and distributing services using computer platforms for mass distribution, to the detriment of workers’ rights. In the United States, this “proletarian army 2.0” represents 5 million workers, programmers, content editors, editors, graphic designers and video effects specialists. These repetitive and alienating tasks have not been included in the labor code [GAL 83, ACE 13].

5.6.6. The economic cycles of electronics

Nikolai Kondratiev (1892–1938) was a Russian economist who launched the theory of economic cycles that supports the idea of the world economy undergoing alternative periods of growth (improvement and prosperity), followed by periods of recession and depression. These macroeconomic cycles could be explained by the inertia inherent in the awareness of the need to invest in order to restart consumer demand after a period of depression [KON 26]. On the other hand, creating money restarts demand, but an excess of it can cause financial crises later [DEN 66]. Recently taken up again by Indian and American economists, this theory has been expanded with examples of economic cycles linked to the steam engine and the cotton industry (1800), steel and railways (1850), the electrical and chemical industries (1900), the petrochemical and automotive industries (1950) and, more recently, information technologies (2000).

Detailed analysis of the global semiconductor market in 2015 revealed the existence of difficult situation, which risks becoming exacerbated further. The discrepancy between excessive production of semiconductors worldwide and the overly low wage incomes in the United States is likely to cause a recession, especially since China and India are getting ready to take on some independence in this area (see section 5.4.4.7).

5.6.7. Moving toward an economic “third age”

Between 1994 and 2007, several countries experienced severe financial crises that worsened the situations of millions of people. Decision makers and economists have questioned the pace and sequence of deregulation and liberalization measures. International financial bodies have therefore altered their practices. The “Washington consensus” (2008), regarding the adjustment of measures taken in favor of globalization, has not been universally popular among economists or Nobel Prize winners in economics. It has been roundly condemned by anti-globalists. The need for a strong state and for state intervention to reduce poverty have been recognized by the World Bank. The IMF has tacitly authorized states to use their budget to increase their social budgets, including by opening up a deficit in order to avoid a depression. The IMF recognized that free movement of capital endangers the economy, requiring a certain level of regulation and, if required, of taxation.

For the Canadian economic and scientific essay writer Jeremy Rifkin, the economy is based on three pillars: transport (or logistics), communications and energy. With the Internet and digital technology, producing goods and services no longer costs anything, apart from the initial cost. Even then, this zero marginal cost concerns cultural goods (music, books, etc.) rather than renewable energies and physical products, which are assisted by 3D printing and distance learning. This zero marginal cost economy could sound the death knell of capitalism. The Internet of communications, the Internet of energy (with smart grids) and the Internet of logistics are coming together within the intelligent infrastructure of the IoT. That this system is free harms the profits of businesses and property rights, as an economy of shortages replaces the economy of plenty, which has sustained us. In short, the IoT could lead us to a planning movement in the framework of a third industrial revolution, as hoped for in northern France, with the advent of an ecological world in the COP21 mold, by reducing the length of the working week to 30 hours and with a social contract connecting the highly skilled jobs of less than 20% of the population and other low skilled and low paid jobs. These proposals could find a place in a Third Age of humanity by developing the IoT, cooperative businesses and empathy through social communicators [RIF 14].

This new industrial revolution is the product of the eventful association of various technological advances, including artificial intelligence, robotics, the IoT, self-driving vehicles, 3D printing and biotechnologies. Large businesses will organize themselves in a more decentralized and horizontal manner by creating platforms, flexible networks and small independent bodies. This revolution is destroying jobs in intermediate transaction functions. Considerable social tensions are at risk of appearing, transforming the economy and overwhelming the traditional concepts of democracy.

5.6.8. The end of the world and the death of the Internet

On several levels (political, agricultural, industrial, energetics, social, environmental), our society must confront significant problems, which have no logical solutions. History tells us that, in similar cases, regardless of the initial cause, people rise up against institutions and blindly destroy all that they believe to be responsible for their distress, before starting over. However, for the first time in history, the crisis is not restricted to a single country but is global. For want of the power to imagine the details of the impending future revolution, three strands of thought are taking shape to predict that which we know to be impossible – the end of the Internet.

5.6.8.1. Moving toward the collapse of the financial world

Banks and markets are collapsing. The global economy is threatening to fall into recession. Banking supervisory authorities are multiplying. They have dispensed with ready cash without taking the potential risks to the economy into account. Accounting standards are continually being revised. The role of rating agencies has not been clarified. The consequences of the massive creation of currency have not been analyzed. A currency war is brewing within the great global economic imbalances. A new Bretton Woods-style international agreement is becoming necessary, with unambiguously worded goals for a new period of at least 70 years.

Some experts have taken the decision, and the risk, of alerting us as the global collapse of the economy is now accelerating and the end of the world is, it seems, near. The mythical figure of Singapore trader Gordon Gekko is evoked to remind us that global stocks are overvalued, that debt is reaching its apex and that financial reserves have disappeared. In short, as the charts provided in support of this thesis seem to confirm, we have been on the brink of a global financial catastrophe since the beginning of 2016 (see http://kingworldnews.com/).

5.6.8.2. The end of the Internet in 2023

Another pessimistic point of view has been put forward by Andrew Ellis, a professor at Aston University in Birmingham, which is based on observations of the Internet’s real traffic. The continuous development of data exchanges is not without risks, as it could produce an irreversible flooding, causing a breakdown in the functioning of the Internet (“Broadband Capacity Crunch”). Sooner or later, the demand for broadband will catch up with the feasible supply of global network routers, even in PON-OLT fiber-optics. Professor Andrew Ellis has announced the date of the Internet’s ultimate collapse as 2023. He concludes by hoping that the political classes decide to increase Internet access costs to reduce demand, or to reduce the access time and data rate per user.

5.6.8.3. Power failure

“Wrong!” cries another expert, a specialist in microelectronics. “The Internet will break down by 2020 anyway for want of sufficient electrical power”. With consumption growing at a pace of 40% per year, Internet demand for electrical power could indeed soon catch up with global production capacity. The electronics components expert Bernd Hoefflinger describes a series of scenarios that would allow the breakdown of the Internet by 2020 to be avoided and guarantee that the sustained growth of nanoelectronics continued beyond 2030. Indeed, the world needs to take up many radical changes in the future and some of them deserve to be taken into consideration now [HOE 16].

For each of these aspects, the easiest conclusion to present to the reader is to reference a cataclysmic scenario that no one could possibly believe. Admittedly, many factors emphasize the difficulty of changing the world of electronics and computing. Human society has always managed to cope with the challenges of the new proposals and technical adjustments made possible by science. We have never been able to predict how the world will change but, whatever the future brings, we will once again be able to adapt to any problems.

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