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What if China Turned Off the Internet?

The Egyptian government's Internet service blackout cost the economy somewhere around $90 million over five days, according to the Organization for Economic Cooperation and Development (OECD). How much would it cost your company if it happened in China? How would the company's manufacturing supply chain run, notify suppliers of changes, and alert logistics companies?

Although unconfirmed by the Chinese government, at least one law enforcement officer watching the flow of information across the Internet tells me China has been developing a self-sustaining Internet. Most supply chain executives doing business in the country know government-run companies and Chinese-friendly companies in and around China are favored. Not difficult to imagine, given the troubles {complink 2294|Google} has faced in recent years and the strength Chinese search engine Baidu gained.

Long-term shifts in the global economy and changes in governmental infrastructures will put pressure on supply chains. Sixty-eight percent of global executives responding to a recent McKinsey survey said supply chain risks will increase in the coming five years.

A self-sustaining Internet would allow companies operating within China to continue in the event of a disruption but limit communication to the outside world. I'm not suggesting this will occur, but recent events in Egypt suggest the possibility, especially in an authoritarian country where companies require technology to run businesses and profits. It's not as likely for this to happen for those manufacturing in Vietnam or India, because these governments have not set up infrastructures like China's.

The Internet block in Egypt was lifted Wednesday, Feb. 2, but OECD estimates the daily loss to businesses at about $18 million. Telecommunications and Internet services account for between 3 percent and 4 percent of Egypt's GDP, according to a spokesperson for the OECD.

The spokesperson said one thing that struck organization officials about this outage has been its global impact. The Internet outage in Egypt affected customer service calls in New Zealand for mobile phone operator Vodafone, for example. He explains that Vodafone has a call center in Egypt with 180 staff that was unreachable when the Internet stayed down. They had to hire 100 new workers in New Zealand to handle their usual call volume.

The OECD warns that the long-term impact of the service disruption could become greater because the Egyptian government had cut off domestic and international high-tech firms that provide services globally, making it more difficult in the future to attract foreign companies and assure the network would remain a reliable business tool.

There had been workarounds — not for email and business communications, but to disseminate information from within the country to those on the outside about the protests and unrest. Engineers from Twitter, along with Google and its newly acquired social company, SayNow, built a service that launched Monday. The speak-to-tweet service lets people post Twitter messages via a landline phone. Messages are tweeted using #egypt by leaving a voicemail on a Google-supplied international phone number.

Would your company be willing to spend the money to build a workaround in China? What does your redundant back-up plan look like? And are you ready for manufacturing and shipping prices to rise?

17 comments on “What if China Turned Off the Internet?

  1. Parser
    February 7, 2011

    I don’t know what US companies are doing for the workaround, but I think it is good.

    We are trying to infer structure of the Chinese internet from unconfirmed reports. They need to do some guessing too. Giving away redundant communication plans defeats the purpose.  

  2. AnalyzeThis
    February 7, 2011

    As much I would love to say, “oh, you're being silly, this is something that'll never happen,” etc…. the reality is that I really do think this is a valid concern.

    To be honest, though, I do not currently have much of a backup plan for this situation.

    I know, I know, that's really bad.

    Obviously the worst case scenario is that China turns off outside Internet traffic for an extended period of time, but there are much more realistic and practical reasons for coming up with redundancy and building systems to workaround such a potential issue: I suppose we've been lucky with the reliability of International Internet service just in general. Even if China doesn't actively shut off outside access, who knows? A major cable could get accidently cut, there could be some sort of hacker attack, a sudden spike in activity could bog down servers, etc. Or what about wide-spread power outages in China due to a natural disaster or something like that?

    It's very easy to think, “oh, the Internet connection will always be there” because it generally is.

    As much as I don't want to, this is probably something supply chain professionals should spend more time thinking about.

  3. Barbara Jorgensen
    February 7, 2011

    What I find striking are the implications of a Chinese self-sustained Internet. If true, it indicates to me China doesn't really intend to engage in the global economy the way other regions do. At the same time, they'd be “shooting themselves in the foot” to limit contact with their biggest customers–us.

  4. Laurie Sullivan
    February 7, 2011

    Alternative plans are necessary if companies want to keep products and services flowing through their supply chain.

    Last week servers unrelated to the trading system on the NASDAQ in the U.S. were hijacked, the company that owns them confirmed Monday. People seem to think just because the Internet is always there it will remain there. The Secret Service and FBI are keeping the details quite because this is the not first time in recent months it has happened.

    Disruptions in the Internet and Web sites are more common than most people think. 

    Thank you, DennisQ, for the reply.

  5. jbond
    February 7, 2011

    As for back up plans, I don't think many companies have thought that this was a viable problem until now. The worldwide exposure and problems caused by Egypt have opened many peoples eyes. Most people are aware that China along with a few other countries police their internet. This is not surprising given these countries governments. It does concern me that China is talking about a self sustaining web. If they choose to segregate themselves, this would alienate large masses. With China being such a vital part to the world’s current economy, many investors are going to be left wondering about China’s future.

  6. Anand
    February 8, 2011

     Nice article and thought provoking one. I feel this threat is real and might happen anytime soon.

    I am sure Chinese government will be watching these developments keenly as repetation of Egypt like event happening in China is very high. If at all this event happes i think it will create havoc among global business community, as most of the goods is either produced in either China or India. I think this is where Advantage India comes into play. Manufacturing business will slowly shift from China to India.

  7. Parser
    February 8, 2011

    Looks like there many reasons for the internet to go down. From a government holding to power, through natural disasters to possibly terrorist attacks. Yes, we are relying on its functionality possibly too much and we need redundancy everywhere. 

  8. Eldredge
    February 8, 2011

    If China is creating a self-sufficient internet, it does pose some interesting questions. Are they doiing this to provide a good defensive position in the event of problems with the exrernal internet, or to provide economic offensive leverage?

  9. mfbertozzi
    February 8, 2011

    @ Laurie: wonderful article and very interesting posts. The note is really in line with recent political events that are impacting also on Internet availability. It is true: on one hand disruption happened, but on the other hand the ocean of features' “conceiving” to continuously running Internet and to avoid shutdown of contents carried is really hard to embank…isn't it? Ever heard about?

    -rgds

  10. elctrnx_lyf
    February 8, 2011

    I do not think it is really feasible for the indvidual organizations to actually have any backup options if the internet is turned off. Governments have lot of control to keep the country connected or not. Normally even the TV media will be completely controlled by the government and they can bring to a halt in emegency situations. So Internet is also one such media, it is actually much more powerful than any normal media.

  11. garyk
    February 8, 2011

    Amazing, China wants to isolate the rest of the world, who would have thought this could happen? Control all the manufacturing in the world.

    Guess what it can happen. India can help set-up an Internet in China, the USA tought them how. they already take care and trouble shoot computers and Internet problems in the USA. Good job USA. I wonder what Cisco Systems, Yahoo and all the other US Electronic Manufactures that set up operations in China feel now.

    Remmber 5-10 years ago contract manufactures were set-up in various counties through out the world,  then China pulled them back to China once the world got used to the cost saving they provided. The World got HOOKED.

  12. Hardcore
    February 10, 2011

    I do not think that Laurie is suggesting that China will switch off the internet, in fact I think she made a point in her post that it was unlikely.

    I've spent over 20 years in HK & China and it still surprises me to see comments posted where people think that there is some sort of massive entity in complete control in China.

    Yes to a larger degree that is what is projected and that is what many westerners feel happy to see.(it makes them secure or more often than not insecure)

    The further you get from Bei Jing the more flexability there is in the system, even with the current crop of government regulations and requirements related to the internet there is still ways through the system.

    to completely cut the internet to China , would be an act of gross stupidity:

    1. it would cut the business contacts

    2. I would limit  email communication

    3. it would prevent the gradual opening up of China. (yes the CN government does want it open, but at a speed that will not destroy the country)

    4. it would make western businesses far more nervous about investment prospects

    China is about flexibility and finding a way through the rules, it is what the general population excel at, certainly for the last 3,000 years, maybe for the next 3,000 years as well 😉

    Just like a child being told NO… the child will find an alternative route to accomplish its goals, that is not to say there is a 'childlike' mentality in China,rather it is a good parallel to draw as to the methodology employed, something westerners can relate to.

    But at the same time, why should any government expose its citizens to mass pornography, fraud, political bull and one sided viewpoints?

    And before we get all high ad mighty about  'freedom of speech', lets take a look at Wikileaks, Ok maybe the guy is an absolute ass and a criminal, but when you have American politicians calling for hit squads and making death threats, something is very wrong.

    One further point, read about the 'enforced' theft of domain names both by the American government and certain American states, now add to that, American government requesting/demanding to be able to have veto control over the internet domain system.

    Like anything , there are multiple viewpoints.

    HC.

  13. Laurie Sullivan
    February 10, 2011

    That's correct hardcore. I'm not suggesting it will happen, only providing insight as to what I have heard and can happen. Like any type of business or personal matters, I'm simply suggesting companies and people need a backup plan, a plan “B,” in the event plan “A” doesn't go as planned.

    Did you think Egypt's government would shut down the Internet to prevent the dissemination of information related to protesters? I'll admit I didn't.  

  14. itguyphil
    February 10, 2011

    I'm not surprised. The problem is that people seem to always think they have more power than they truly do. We think this would never happen because if it did, we would revolt and cause chaos. But if that time ever came, we would be stuck with our mouths wide open in shock.

    The reality is that it can happen (especially in the US) with the government domain over the telecommunications space.

  15. Mr. Roques
    February 11, 2011

    It wasn't too long ago that China “owned” the entire internet traffic for a few minutes. By declaring a few international paths as the shortest routes to the rest of the World, traffic was being redirected through China's routers.

    It went, for most, unnoticed but they proved it could be done. What would happen if they tried it again?

  16. itguyphil
    February 11, 2011

    Alot of people would be upset and I'm pretty sure A LOT of pressure would be directed towards them.

  17. Mr. Roques
    February 17, 2011

    Well, you would think but people didn't notice it. It just took “a bit” more (and that normally always goes unnoticed). 

    But really, what can be done? Who's the international internet police?

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