Among my favourite conspiracy theories is the one that says the only reason the US won’t allow Chinese telecom gear to be sold on its soil is because it knows about the back doors built into the US-designed and US-built telecoms equipment that has been sold around the world for the last 40 years. 

 

A few years ago on these pages I wrote about the likely emergence of regional and federated clouds being driven by different data protection laws. At the time I was thinking that perhaps these clouds might be built geographically on a country-by-country basis and extended to friendly neighbours, or built around trading blocs. (Say for example, an EU cloud or an ASEAN AFTA or NAFTA cloud.) This would ensure that data was physically and digitally subject to relevant compliance and security legislation while allowing greater freedom of movement of digital goods and digital services. 

 

However, recent security and data protection events have pushed the topics of federated clouds and secure networks into unforeseen areas.

 

Security implications in light of the ongoing reeling within the ICT industry from the Edward Snowden/NSA shocks could lead to not just regional clouds but different types of cloud blocs and communications networks. 

 

Germany says it wants to build a European Communications Network. This is to keep communications data away from US’ NSA or the UK’s GCHQ (intelligence headquarters). 

 

Angela Merkel, the German chancellor, does not like the idea of having her phone hacked. One of the reasons cited is that Germany doesn’t want all of its emails transiting the US. The French reacted positively to the move. 

 

Great Firewalls

Now imagine a world of multiple networks and Great Firewalls with data being refused entry across borders based on where it originated and where it has been on the network. I asked an expert. He said short of building a whole new physical network layer and encrypting everything at the logical layer to such a degree that it would too expensive to bother trying to hack the notion of a new network could be an expensive folly. And no public network could be 100% secure. 

 

While we contemplate the far-reaching implications for the telecoms industry, closer to the data center industry we should ask what impact the slowing or restriction of movement of data across the network would have on colocation companies and cloud service providers. 

 

Merkel also criticized companies such as Google and Facebook for building data centers in countries with softer data protection requirements than that of Germany, which has some of the world’s toughest data protection laws. At a personal, business and national level data, and its security, is your currency and the Germans take this stuff pretty seriously. 

 

Speaking with a senior exec from one of the large colocation houses about how it assesses potential locations for new builds we touched upon many aspects of the subject. His decisions are guided first by the market demand then power, connectivity and data protection and security. The conversation turned to what would stop a company building in a particular country. 

 

The first thing on the list is an unstable political environment. The second item is a political system, even if stable, that is not subject to rule of law. Not as uncommon as you’d think. It is fair to say that direct foreign data center investment in Ukraine is not booming right now. He wasn’t too keen on the idea of Turkey either. 

 

Own Goal

The fall-out from the Snowden affair will continue. It is a spectacular own goal that the US has scored. The irony of the Snowden revelations is that it has shifted the security focus away from issues such as China and its Great Firewall, from Russia and its criminal elements and restrictions on freedom onto the US and its spies. 

 

Companies are already asking for cloud maps of where their data is stored. What networks it will transit? What territorial law will it be subject to? A company such as investment house Blackrock assesses network security and political stability for its and data center locations.

 

We are potentially facing a confluence of more regulation and nationally or regionally operated secure networks leading to a world where movement of data is restricted. From revolutions to shopping, data velocity has changed the world. Any attempt to block or decelerate data movement will have huge implications. It looks like we’re a step closer to Internet Fragmentation coming through the front door.

 

Financial Regulation

As the world emerges slowly from the wreckage of the criminal excesses of the financial services sector, the global economy remains in a fragile state. We are starting to see the first real attempts at regulation and closer monitoring of the sector extending even to shadow banking. A recently adopted EU proposal “provides a set of measures aiming to enhance regulators’ and investors’ understanding of securities financing transactions (STFs). These transactions have been a source of contagion, leverage and procyclicality during the financial crisis and they have been identified in the Commission’s Communication on Shadow Banking as needing better monitoring.” Regulation means slow down, says the industry. 

 

And as Allan Grody argues, slowing down may not be a bad thing.

This article first appeared in FOCUS issue 34. To read the full digital edition, click here. Or download a copy for the iPad from DCDFocus.