The following article is from the Central European Business Review by Hu Yong
In 2016, in the midst of the rapid development of China's Internet, I wrote about the hidden worries in the development of China's Internet, one of which is the hidden worry of enterprise innovation caused by monopoly.
"The Internet age calls for openness, inclusiveness, and free competition, and the Internet should also be a platform for collaboration and sharing," I wrote. However, contrary to the monopoly logic of wanting a monopoly, it has gradually emerged in the competition of Chinese Internet companies, and it has become more and more intense. ”
At the time, it was more accurate to say that China's Internet was not one monopoly, but BAT (Baidu, Alibaba and Tencent). They engage in many acts of unfair competition with each other, resulting in the inability of the Internet in China to be fully interconnected. Alibaba "cuts out all WeChat sources from the data interface"; Sina Weibo prohibits WeChat public account promotion; WeChat blocks sharing links and fast red envelopes, and Tencent is accused of being "selectively open"; Taobao not only blocks WeChat link jumps, but also excludes other shopping guide external links, while also blocking Baidu's crawling. In the process, blocking has even become the tacit consensus of these Internet companies. This side shields the other side because it is unwilling to contribute traffic, and the other side that blocks this side is to achieve its own "entrance" scale - in the final analysis, it is all for its own interests. However, in these sniper attacks, what are the interests of users?
Ironically, users are not only completely powerless against these platform behaviors that harm their own interests, but also see similar blocking, all under the banner of better serving users, and with the continuous development of Internet applications, gradually increase and upgrade. For example, in 2018, when ByteDance's short video platform Douyin became popular, many users realized that they couldn't directly click into the Douyin link shared on WeChat. Consumers also can't smoothly open links to Alibaba's e-commerce platforms, such as Taobao and Tmall, from within WeChat. The result of all this is that users have no way to swim freely in the digital ocean, but can only learn to jump between digital islands.
Although consumer dissatisfaction accumulates, and platforms sue each other on suspicion of monopoly, the obstacles to interconnection are always in front of each other and are difficult to remove. In the end, this chronic disease that has affected China's Internet for a long time has begun to be cured by relying on the strong intervention of regulators.
On April 13, 2021, the State Administration for Market Regulation first mentioned statements such as "strictly preventing system closure and ensuring ecological openness and sharing", pointing to the ecological monopoly behind the single monopoly behavior of Internet platforms and the deeper platform governance problems. On September 9, the relevant business departments of the Ministry of Industry and Information Technology held an "Administrative Guidance Meeting on the Issue of Blocking URL Links", requiring that each platform must be unblocked according to the standard within the time limit, otherwise it will take disposal measures according to law. Multi-sectoral supervision of platform ecological monopolies has become stricter.
On the evening of September 17, Tencent issued a statement of adjustment to the "WeChat External Link Content Management Specification", saying that it would allow users to access external links in The WeChat "one-on-one chat scene" on the basis of the "safety bottom line". The WeChat group is not in the open scope for the time being, and the follow-up will develop functions to provide access options. Tencent said that WeChat will also promote a "phased and step-by-step" interconnection plan, and will also actively cooperate with other Internet platforms to explore the technical possibilities of smooth use of WeChat services across platforms to achieve further interconnection.
Excerpt from "WeChat External Link Content Management Specification"
Interconnection is the proper meaning of the Internet. The interconnection and interoperability problems of China's Internet are difficult to return, both data security issues and privacy protection issues, both data sharing issues and traffic competition issues, complex issues are intertwined, like chaos, we must first find a clue.
The Ministry of Industry and Information Technology has taken the external link management of major platforms as a starting point and grasped a major pain point for Chinese network users. Restricting the identification, analysis and normal access of URL links without legitimate reasons has many drawbacks, which not only affect the user's experience, damage the rights and interests of users, but also disrupt the market order and undermine the development of the entire Internet ecology. It is imperative to rectify this.
However, the interconnection of the Internet in China is not as simple as opening up the url link.
The most basic interconnection
The most basic interconnection depends on what the regulatory policies for routing and interconnection are, as well as the amount of autonomy of operators, and how it will affect the networking mode of the Internet.
We can see that in some countries, there is a growing trend to regulate how Internet operators manage network interconnections and routing. Interconnect and routing are key decisions made for local and operational reasons to ensure the adaptability of the network and optimal traffic. If a country's network continues to diminish in autonomy in interconnection and routing, it will undermine two key attributes of the Internet: an open and accessible infrastructure with common protocols, and decentralized management and distributed routing.
Specifically, the first key attribute indicates that the only fundamental condition for a network or individual node to access the Internet is to use its common protocols, including the TCP/IP protocol. This "permissionless" minimum technical entry threshold forms the basis for the rapid growth and global reach of the Internet.
The second key attribute means that each network can independently decide how to route traffic to other places based on its own needs, business model, and local requirements. Here, crucially, there is no centralized control or coordination, but rather each operator making its own decisions and working freely with the operator of its choice.
The closer the Internet comes to operating in a way that meets these two key attributes, the more open and flexible it will be, favoring future innovation and broader benefits such as collaboration, global reach, and economic growth. The farther the Internet is from the networking methods described above, the less it will resemble the global Internet and will move towards what is known as the "Splinternet."
For example, the ongoing trend of centralized control of Russia's "Sovereign Internet" has greatly reduced the autonomy and flexibility of Internet service providers, making networks less resilient just when they need more flexibility. Under Russian law, operators may not be able to control their own routes in the event that regulators deem there is a threat from abroad. Some interconnection decisions will be restricted, while others will need to be based on decisions made by the authorities. Operators' autonomy and ability to reflect local conditions and their own operational and business needs have been greatly weakened.
On April 22, 2019, the Commission of the Russian Federation approved the < of the > of the Act of the Russian Federation on Communications and < amendments to the Law of the Russian Federation on information, information technology and information protection >. The amendment, which allows Russia to create an autonomous Internet designed to ensure that the Russian Internet can operate stably when threatened from abroad, such as disconnecting from a root server, is therefore also known as the Stable Runet Act or the Sovereignty Internet Law.
The five new efforts of the U.S. Clean Network initiative involve all levels of the Internet ecosystem, from physical infrastructure (cables) and network interconnection (telecom operators) to cloud systems and applications (app stores and applications), hindering the interconnection between networks and hindering the development of Internet communication infrastructure, and the services and opportunities that come with it.
As Ted Hardie's critique of the proposed measure put it: "The interconnection of different networks is the physical foundation on which the Internet and all its services and opportunities are built." Hindering this interconnecting strikes at the heart of the Internet as a business. It also puts the internet at risk and will have some unexpected harmful effects. ”
U.S. Clean Network Program
In the case of China, the three major operators of China Telecom, China Unicom and China Mobile are the leading Internet service providers in China, with the most extensive national infrastructure. They serve about 70 percent of China's home broadband Internet subscribers and provide most of the backbone networks for small access providers. The three companies also control international connectivity, operating gateways in Beijing, Shanghai and Guangzhou, and transporting all Internet traffic within and outside Of China.
In addition to the monopoly of international gateways, the dominance of several companies in the national market is not unique to China. However, the interconnection system between China's three major operators, and between them and other Chinese access providers, has created an unusual hierarchical network topology that undermines decentralized management and distributed routing. This extreme hierarchical topology of The Chinese network and the strict restrictions on a very small number of centrally controlled international gateways mean that China has not experienced the global Internet, but only a subset of it.
Operators in China must work with centralized management and centralized routing, which is the opposite of the flexible, resilient and scalable nature of the Internet. As a result, they cannot optimize connectivity, choose network partners for free cooperation, provide users with true global coverage, and seemingly fail to provide the best quality of service.
The "Walled Garden" brought by the mobile Internet
In addition to infrastructure, the Internet has turned its back on the original intention of interconnection, for other complex reasons.
The first is the rise of digital platforms, which has rapidly turned the Internet into a platform controller, which is beyond the imagination of many Internet users, because decentralization was widely considered a sign of the Internet.
The reality is that a decade ago, people had an open cyber utopia, and today, they are confronted with a cyberspace controlled by several Internet giants working together to have many of the world's most valuable "platforms" — the basic building blocks on which every other business, and even competitor, depends.
Digital platforms have become a truly viable alternative to vertically integrated businesses and represent a mechanism for coordinating economic activities that is significantly different from more typical market structures. These platforms are impossible to dodge; you can choose to exit one or both of them, but together they form a gilded net that covers the entire economy.
And as their data-driven business models begin to be questioned, as they become economic masters with huge profits and blame for monopolies, and as people fear that their political opinions, intellectual habits, and consumption patterns may all be manipulated by algorithms, these platforms are now forced to self-reflect.
The industrial map of Alibaba, Baidu and Tencent
Another major change that hindered connectivity was the invention of the central app store by Apple, which in turn spawned a flood of new economic activity that forced everyone to do business in apps. The Internet, with the World Wide Web at its core, is open, connected, transparent, and accessible; in contrast, the mobile Internet is closed, especially apple's strategy in the mobile space has been described as aiming to create a "fully integrated closed system" in which the company "maintains a high degree of control over the entire product ecosystem."
These differences in openness are reflected in the re-emergence of the "walled garden" model in mobile Internet access. The metaphor of a "walled garden" comes from the early days of dial-up Internet access, when Internet service providers tried to confine users to their own proprietary content, rather than positioning their businesses as gateways to the entire network. This early "walled garden" gradually came to an end, but in the context of the mobile internet, the "walled garden" model has made a comeback, reinforced by the explosion of mobile applications bypassing the World Wide Web.
The application is designed in part to compensate for the various flaws based on mobile network access. While it can provide an efficient and user-friendly experience, the mobile app model represents an internet ecosystem that is even less open than the World Wide Web. For example, major app stores (whether it's the iTunes App Store or Google Play) play a powerful gatekeeper role, while content and apps on the World Wide Web bypass intermediaries. This is a fundamental change in the dissemination of content and applications.
Some critics argue that limiting the range of available content sources and applications could stifle innovation. For example, apps are often only available through proprietary app stores that control the openness of their platforms to developers and restrict users from switching and linking between different apps. Developers are forced to customize their applications for each platform, which leads to additional costs. Once an app is approved by the app store, it is affected by rankings and feature lists, which makes it particularly difficult for new apps to gain visibility and win over the competition.
Those who praised apps used the booming app economy as an example, pointing out that app innovations provide users with new ways to receive services at home, interact with doctors, conduct financial transactions, manage employee work, and even secure parking permits. In any case, it is hard to deny that although huge end-user benefits are generated in the process of migrating to mobile applications, significant disadvantages have also been created.
In the case of media apps, in this "walled garden", readers cannot make interactive comments. Jason Ponting, publisher and editor of MIT Technology Review, said poignantly about the magazine's APP experiment: "APP seeks to impose the old-fashioned, closed print media temperament on a new, open digital space. "Media apps and users' information acquisition habits on the Internet conflict: readers expect apps to have Internet-style links and are free to comment on them. If a news app isn't compatible with other digital media, no matter how beautiful and novel the app is, the frustration of the reader can't be dispelled.
The terminal devices of the mobile Internet themselves are also fundamentally different in terms of openness. Mobile handheld devices, including tablets, are far less open than personal computers. Unlike personal computers, mobile phones are mainly closed, proprietary technologies that make it difficult to adapt and program for different purposes. Users who access the Internet through more closed, more difficult-to-program devices do not have the ability to improve network services or benefit accordingly.
As a result of the "walled garden" platform, today's Internet is cut into several huge "electronic concentration camps", each with a huge monster crouching at the door, and people are locked in electronic concentration camps, thinking that it is a fragrant garden everywhere.
And these platforms all regard data as a gold mine, take traffic as life, and hinder the transfer of data across platforms by setting up technical barriers, resulting in high walls on the Internet, and the strange phenomenon of platforms "kidnapping users" through data.
User data collected by internet platforms Source: TruePeopleSearch
The big loop of the platform is better than the small loop of the single platform
It follows that a key step for China's Internet to be interconnected is to open up channels between applications, as preventing app users from accessing rival services from the apps they use has become a common practice among China's large tech companies over the past decade.
At the end of the day, this means that the interoperability of the platform must be implemented. This is a much-anticipated direction, but don't expect it to happen overnight. The reality is that even if the garden within the walls were to be opened, it must be in a fairly controlled way. The platform companies involved are all making a carefully planned gamble on how they can gain each other's user base and advantage without devouring their own users too much.
Each platform has different gains and losses, so there is an extremely delicate relationship behind it. If the pressure of opening up extends to the user time war between Douyin and WeChat, we may see Tencent's short video ambitions being curtailed, while Douyin may generate new growth space by accessing WeChat. Kuaishou will also be affected as a result.
Alibaba doesn't have any valuable traffic portals like WeChat or Douyin, so while its online shopping platforms, Taobao or Tmall, are users' main destinations, it has to spend a lot of money to get users in. It is reported that Taobao and Douyin signed an annual framework agreement of about 20 billion yuan in 2020, including advertising and e-commerce, which is equivalent to the traffic fee paid by Alibaba for Douyin.
Therefore, the opening of WeChat to Alibaba will be a great benefit to the latter, and Alibaba can stimulate new growth through social traffic. Using mini programs to enter WeChat can increase the number of Alibaba users and conversion rates, although it is unclear how many.
At present, no core e-commerce transactions have entered Alibaba's platform through WeChat Mini Programs. This is likely to grow rapidly after breaking the solid ice of interconnection. We all know that the mini programs of other e-commerce companies have delivered a large amount of business through WeChat, whether it is the food delivery service provider Meituan or the group purchase service provider Pinduoduo. Now, Pinduoduo may be the most worrying, with slower user growth and a sudden competitive pressure on a large amount of traffic from WeChat. Meituan's local service super application is also inevitably required to be more open.
There are many consequences that are still difficult to predict. For example, if Ali's merchants get a lot of free traffic on WeChat, will it have an impact on Ali's inherent business model? Its core advertising business may be affected, as merchants can now market products directly to users in WeChat. Tencent's advertising fees are likely to increase, and there will be a large number of new orders flowing through the WeChat platform. At the same time, at the end of September, Ali's multiple apps, including Hungry, Youku, etc., announced access to WeChat Pay, but Taobao Tmall was the highlight. If Taobao Tmall also opens WeChat Pay, how will the mobile payment market be rewritten?
On August 3, 2021, Alibaba Chairman and CEO Daniel Zhang said at an analyst meeting that Alibaba will open up the ecosystem with Tencent according to government requirements. Daniel Zhang said: "The social value that the large cycle between platforms can produce must be far greater than the small cycle within a single platform." If the platforms can be interconnected, it will definitely bring new reform dividends. Having said that, a more comprehensive settlement between the two companies, Tencent and Alibaba, would be a double-edged sword. They will each open up part of their business to gain the power of the other, but it also means abandoning the idea of creating their own version for those open businesses. For example, Tencent will not build a Taobao again, and Ali will reduce its attempts to develop its own Mini Program business.
This may not be a bad thing. For years, Alibaba and Tencent have been making second-rate products that mimic each other's ecosystems, and if they open up, they will reduce replication: both sides can live on their own real competitive advantage. If there is a meaningful opening up between the two giants, it could reverberate in a range of areas.
The long-standing "walled garden" of China's internet has been pried open, potentially rewriting China's digital advertising and e-commerce landscape. For example, since each app is closed, the search has become the internal search of the APP, and then, if each platform is open to search engines, then the importance of search engines may be highlighted again. Services like Google Shopping allow users to search for products on online shopping platforms and make price comparisons between different suppliers. For consumers, this leads to a better shopping experience.
Another prospect that can be expected is that mini-programs will flourish even more on the WeChat platform, an increasingly popular way to get online services without downloading entirely new apps. WeChat Mini Program is a breakthrough innovation in brand marketing and commercial consumption. Mini Programs are owned by brands but run on the WeChat platform. They combine the look and feel of mobile apps with consumers' on-demand access to products and services. Brands can build WeChat Mini Programs to provide services in the WeChat ecosystem, such as business transactions, loyalty programs, and customer service. Of course, brand-controlled mini-programs are now starting to appear in other apps, such as JD.com and Little Red Book. This could lead to other platforms turning into aggressive competitors to Alibaba. If WeChat Mini Programs continue to expand into other "walls", they may even become the new standard for mobile Internet.
On top of that, openness is part of a broader internet reform that China is taking: Consumers and merchants will see more benefits as artificial competition restrictions are removed. We can expect that with the further realization of interconnection, the connection between the products and services of China's Internet companies will inevitably become closer, and the flow of users between platforms will also increase, the entrepreneurial enthusiasm of small and medium-sized enterprises will be protected, and the openness, inclusiveness and free competition of the Internet will be realized.
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