Cisco, like Apple and other tech giants, now wants new federal privacy law

Cisco, like Apple and other tech giants, now wants new federal privacy law

On Thursday, Cisco formally joined the parade of major tech companies that have been calling for a comprehensive federal privacy law that would once and for all set a clear standard for tech companies nationwide.

Currently in the United States, there is a patchwork of laws governing how various types of data are handled—health, financial, etc.—but there isn’t a clear set of rules for Silicon Valley giants that traffic in vast amounts of information sharing. As a hardware networking giant, however, Cisco does not profit from user data in the same way that a company like Google or Facebook does.

In a blog post, Cisco’s top lawyer, Mark Chandler, called the current legal framework “not adequate.” Cisco hasn’t put forward specific bill language just yet; it is speaking for now in generalities.

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Without proof, is Huawei really a national security threat?

It’s Huawei vs. the U.S., the U.K., Canada, Australia, New Zealand, and most of Europe and Japan.

It’s almost as if the world’s biggest surveillance superpowers don’t want Huawei cell tower and networking router equipment inside critical networks in their countries, amid concerns of the company’s links to the Chinese military.

Huawei, they say, could be spying for the Chinese — and that presents a national security risk.

But there’s a problem. Years of congressional hearings and “inconclusive” hardware inspections have presented a mixed picture on the threat that Huawei may, or may not pose. Despite the fact that the company’s founder and president is a former officer in China’s People’s Liberation Army and the company remains heavily funded by the Chinese government, there’s also no public, direct evidence that Huawei is using its equipment to spy on network traffic inside the U.S. or any other country. In any case, Huawei can’t prove a negative, so all it can do is allow governments to assess its devices — which has so far found some issues but nothing conclusive to tie it to Chinese espionage actors.

That’s the crux of the argument: nobody thinks Huawei is spying now. To get caught would be too dangerous. But nobody knows that it won’t spy in the future.

The worst case nightmare scenario is that telcos will snap up Huawei’s technology and install its equipment in every nook, cranny and corner of their networks. Why wouldn’t they? The technology is cheap, said to be reliable, and is necessary for the impending 5G expansion. Then years later China exploits a hidden vulnerability that either lets its hackers steal economic secrets from businesses.

At that point, it would be too late. The network operators can’t just rip out their routers and switches. The damage is done.

Telcos need Huawei as much as Huawei needs them. But the North American and European telcos are finding it increasingly difficult to navigate pressures from their governments, which treat them as critical national infrastructure and a constant national security concern.

The reality is that China is no more a national security threat than the U.S. is to China, which has its own burgeoning networking equipment business. Just as much as the U.S. and Canada might not want to use Huawei or ZTE equipment in their networks for fear of a surprise cyberattack ten years down the line, why should China, Russia, or any other “frenemy” state choose HPE or Cisco technologies?

Companies have an option: Is the enemy you know better than the one you don’t?

Ren Zhengfei, founder and chief executive officer of Huawei Technologies Co., attends an interview at the company’s headquarters in Shenzhen, China, on Tuesday, Jan. 15, 2019. Ren, the billionaire telecom mogul, broke years of public silence to dismiss U.S. accusations the telecoms giant helps Beijing spy on Western governments and to praise Donald Trump for his tax cuts. Photographer: Qilai Shen/Bloomberg via Getty Images

The U.S. government has persisted across administrations with its fiery rhetoric over Huawei’s links to the Chinese government, since a House Intelligence Committee report in 2012 pushed for a domestic ban on equipment built by Huawei and ZTE, another Chinese electronics maker, and even warning against using their consumer phones. Noticeably absent from the House’s report was any specific proof of Chinese spying.

Core to the panel’s claim that “a router that turns on in the middle of the night, starts sending back large data packs, and it happens to be sent back to China,” said former congressman Mike Rogers (R-MI). Huawei, which has always denied the claims, has long called for evidence. Only this week, the U.S. said it doesn’t need to show proof, citing the company’s ability to be “leveraged by the Chinese government.”

The report contained claims of bribery and corruption, copyright infringement and more, but there was no smoking gun that proved that the company was spying — only that it could at the request of Beijing.

China’s authoritarian rule notwithstanding, the country says that it doesn’t have a single law that can compel a company to spy on its behalf or put backdoors in its products. Westerners are rightfully skeptical: in China, the government doesn’t need a law to say it can or can’t do something.

Yet ironically, it’s the U.S. and the U.K. — and more recently Australia — that have laws in place that can in fact compel a company to turn over data, or force a company to install backdoors. After the Edward Snowden disclosures that revealed the scope of U.S. surveillance, China retaliated by dropping U.S. technology from its networks and systems. That was no bother for China; it has its own booming tech industry, and just started using its own homegrown equipment instead.

Other countries aren’t so lucky, and more often than not are stuck between buying their tech from the two spying giants.

Western nations would rather trust U.S. technology with its powerful surveillance laws, while the rest of the world either trusts Chinese technology or simply doesn’t care.

Any technology can be a national security risk. It’s less selecting the right gear, and more picking your poison.

A look back at the Israeli cyber security industry in

2018 saw a spate of major cyber attacks including the hacks of British Airways, Facebook and Marriott. Despite growing emphasis on and awareness of cyber threats, large organizations continue experiencing massive data breaches. And as the world becomes increasingly connected (cars and medical devices, among others), attack vectors are evolving and exposures multiply.

The Israeli cybersecurity industry has long been recognized as a hotbed for innovative solutions, and 2018 to be yet another strong year. Early stage companies raised more money than ever before to tackle emerging security threats like protecting the proliferating number of internet-connected devices and enabling blockchain technologies to thrive in more secure environments.

Growing seed rounds chasing greenfield opportunities

In 2018, the total amount of funding for Israeli cybersecurity companies across all stages grew 22 percent year-over-year to $1.03B. This closely matched the funding trends of 2016 and 2017 that each saw 23 percent year-over-year growth in funding amount. At the same time, 2018 saw 66 new companies founded, an increase of 10 percent over 2017, which represented a rebound after a dip last year (60 new companies in 2017 vs. 83 in 2016). Notably, average seed round increased to $3.6M in 2018 from $3.3M in 2017. 2018 marked the fifth consecutive year the size of Israeli cyber seed rounds grew. Since 2014, the average seed round size has increased 80 percent.

With industry growth metrics of Israeli cybersecurity up across the board in 2018, 2017’s dip in new cyber startups appears to have been an outlier. Not only does entrepreneurial interest in cyber look to be on the rise, investor enthusiasm, especially at the early stages, signals a market brimming with opportunity. Growing round sizes are interesting, but more revealing is following where this capital is flowing.

Emerging fields supplanting “traditional” technologies

The top emerging fields among new startups in 2018 included new verticals within IoT security, security for blockchain and cryptocurrencies, cloud-native security and SDP (Software Defined Perimeter). These nascent verticals drew considerably more attention than more “traditional” cyber sectors such as network security, email security and endpoint protection. Of all the emerging sectors, IoT drew the most investment with funding reaching $229.5M across all stages. What makes IoT particularly interesting is its continual branching into various new sub-domains including automotive, drones and medical devices.

Shai Morag, CEO and co-founder of Secdo, an Israeli cybersecurity firm acquired for $100M by Palo Alto Networks in mid-2018, sees these trends accelerating. “Innovation is going to keep happening in these areas for the next few years. We’ll also see innovation in third-party supply-chain risk assessment and management. Another wide-open field for innovation is SMBs. They are an underserved market hungry for full-stack solutions. These emerging fields are where I’m seeing the most excitement.”

Breaking out data on seed round funding into cyber startups targeting emerging vs. traditional markets reveals an even more pronounced growth trend. 2018’s aggressive early stage funding rounds disproportionately focused on companies pursuing emerging fields within cybersecurity. Of the 33 seed rounds raised in 2018, 20 (61 percent) went to companies in emerging fields. Even more striking, the sum of all seed rounds for emerging tech companies in 2018 was $79M, a 76 percent year-over-year increase. The numbers are clear, there is overwhelming investor interest in emerging cyber tech.

For example, the two largest seed funding rounds this year were in the IoT security domain. VDOO, founded by ex-Cyvera entrepreneurs (acquired by Palo Alto Networks in 2014 for $200M) and which develops security solutions for IoT vendors, raised an abnormally high seed round of $13M. Toka Cyber has secured $12.5M seed funding from Andreessen Horowitz and others, to develop and expand their IoT cybersecurity platform for governmental agencies. Twistlock, a pioneer developer of cloud-native security solutions raised $33M series C this year. BigID which protects sensitive data in light of GDPR and other privacy regulations raised both A ($14M) and B ($30M) rounds during 2018.

As the more traditional cybersecurity markets continue to consolidate and mature, prospects dim for “me too” cyber startups. We see that the industry still faces pressing problems in need of innovative solutions. Looming labor shortages, GDPR and other global data privacy legislation and the IoT explosion, are major challenges presenting substantial opportunities to incumbents able to provide relief. Investors and entrepreneurs sense greenfield opportunities on the horizon and are racing to plant their flags before the competition. This new divergent ecosystem is more selective of sophisticated, savvy investors and specialized, seasoned entrepreneurs.

Greenfields, not green founders

In 2018, 60 percent of founders had more than a decade’s worth of experience in the private sector–a 28 percent increase from 2017. The experience of these more seasoned founders came mostly from working in startups either as an executive or as an entrepreneur. Although Israel’s cybersecurity ecosystem relies heavily on the technical training potential entrepreneurs receive during service in the Israeli Defense Forces (IDF), in 2018, the proportion of founders coming straight out of the IDF fell to 2 percent, dropping from 10 percent the year before.

While nearly all Israeli founders leverage the skills and know-how acquired in the IDF’s various technological units, the need for experience from the private sector, either as an executive or an employee, seems to be more prevalent. Larger seed checks and larger ambitions are fuelling this push for more mature, veteran founders. Rising founders are not simply looking to build a novel technology and score a lucrative acquihire exit from an existing giant–they want to push into greenfield territory and stake a market-leading claim all their own.

Amichai Shulman, co-founder & former CTO of Imperva and a Venture Advisor at YL Ventures, gives such founders aiming to “own a market” the following advice: “Make sure you’re able to explain – primarily to yourselves – how your offering and product becomes something bigger than what it inherently is in the beginning. Be able to articulate how you expand (in the future) further into organizations, not just by ‘selling more’ but by solving bigger and more general problems.”

Cyber exits continue to overperform

Beyond general trends, 2018 also had many exciting individual exits. Checkpoint-Dome9 and CyberArk-Vaultive were notable because both acquirer and acquiree were Israeli — a mark of true market maturity. The acquisition of Sygnia by Singaporean holding giant Temasek also was remarkable because it shows that the Israeli cyber market continues to attract new classes and kinds of global strategic players each year. In addition, Thoma Bravo’s  $2.1B acquisition of Israeli cyber firm Imperva made waves throughout the industry.

Tsahy Shapsa, co-founder of Cloudlock, which was acquired by Cisco in 2016 for $293M, reflected on the potential he sees coming from growing global investment. “From an entrepreneurial perspective, there is a constant dilemma between short-/mid-term exits and building a legacy company. As funding floods into Israel from around the world, temptation to sell early only increases. But all these exits have an advantage. They grow the pool of experienced, ‘repeat’ entrepreneurs and set the stage for more legacy companies to originate locally.” Zohar Alon, CEO and co-founder of Dome9 Security, which was acquired by Checkpoint in 2018 for $175M added the following guidance: “Israeli entrepreneurs should establish and maintain a constant communication channel with the local corporate development leaders, same as most do with the VC community focusing on product and go-to-market synergies.”

Israeli cybersecurity maintaining momentum

In 2018, investors became more domain-focused and preferred emerging fields. With traditional cybersecurity consolidating, emerging greenfields signal much stronger potential. Furthermore, growth continued both in cybersecurity startups as well as their fundraising across all stages, indicating rising confidence in the Israeli cybersecurity market.

The 2018 Israeli cybersecurity market boasted an excellent exit climate, highlighted not only by Imperva’s large-scale acquisition but also by the diversity in the types of players in the space. As such, the local cybersecurity market signals its ability to create and nurture large-scale security vendors, thereby attracting variety of both international and local players which continue identifying and capitalizing opportunities in this domain. For 2018, as has been the case for many years past, the state of the cyber nation is strong–and 2019 appears to promise more of the same.

Cisco to acquire silicon photonics chip maker Luxtera for $660 million

As networks get put under increasing pressure from ever-growing amounts of data, network equipment manufacturers are facing huge challenges to increase data transmissions speeds over further distances. As a premiere networking equipment company, Cisco wants to be prepared to meet that demand. Today, it opened up its checkbook and announced its intent to acquire Luxtera for $660 million.

Luxtera, which was founded in 2001 and raised over $130 million, will give Cisco a photonic solution for that data networking problem. Rob Salvagno, head of Cisco’s M&A and venture investment team sees a company that can help modernize Cisco’s networking equipment.

“That’s why today we announced our intent to acquire Luxtera, Inc., a privately-held semiconductor company that uses silicon photonics technology to build integrated optics capabilities for webscale and enterprise data centers, service provider market segments, and other customers. Luxtera’s technology, design and manufacturing innovation significantly improves performance and scale while lowering costs,” he wrote in a blog post announcing the acquisition.

Photonics uses light to move large amounts of data at higher speeds over increased distances via fiber optic cable. Cisco sees this as a way to future-proof customer networking requirements, while keeping them on Cisco equipment. “The combination of Cisco’s and Luxtera’s capabilities in 100GbE/400GbE optics, silicon and process technology will enable customers to build future-proof networks optimized for performance, reliability and cost,” Salvagno wrote.

While Cisco has been acquiring its share of high-profile software properties in recent years including AppDyanmics for $3.7 billion in 2017 and Jasper Technologies for $1.4 billion in 2016, it also acquired Israeli chip designer Leaba Semiconductor for $320 million in 2016 for its advanced chip making capability.

Today’s announcement would seem to build on that earlier purchase as Cisco tries to modernize its hardware offerings to meet increasingly stringent demands inside large-scale data centers.

The acquisition is subject to the typical regulatory scrutiny, but Cisco expects it to close in its fiscal year 2019 Q3. It reported its Q1 2019 earnings in November.

US tech giants decry Australia’s ‘deeply flawed’ new anti-encryption law

A group of U.S. tech giants, including Apple, Google and Microsoft, have collectively denounced the new so-called “anti-encryption” law passed by the Australian parliament last week.

The bill was passed less than a day after the ruling coalition government secured the votes from opposition Labor lawmakers, despite strong objection from tech companies and telcos.

“The new Australian law is deeply flawed, overly broad, and lacking in adequate independent oversight over the new authorities,” said the Reform Government Surveillance coalition in a statement. The tech companies added that the law would “undermine the cybersecurity, human rights, or the right to privacy of our users.”

It’s the latest rebuke since the bill’s passing, following an extensive lobbying effort by Silicon Valley to push back on the anti-encryption proposals.

The law allows Australian police and the intelligence agencies wide-reaching powers to issue “technical notices” — essentially forcing companies and even websites operating in Australia to help the government undermine encryption or insert backdoors at the behest of the government. Critics argue that there’s little oversight, potentially allowing abuse of the system. And because the notices will almost always be issued with a gag order, any technical notices are served behind closed doors in secret.

Companies that refuse to comply with the demands in a technical notice can be served heavy financial penalties.

The Australian government won in part by accusing Labor of using scare tactics, saying that the opposition party was choosing to “allow terrorists and pedophiles to continue their evil work in order to engage in point scoring,” said Australian defense minister Christopher Pyne, in a since-deleted tweet. Labor caved in to the pressure, and party leader Bill Shorten instructed his members to vote for the bill. He promised that the party would offer amendments to the law once passed in the coming months, while keeping “Australians safer over Christmas.”

The tech coalition said it’ll hold the Australian parliament’s feet to the fire, urging lawmakers to “promptly address these flaws when it reconvenes” in the new year.

The group, which also includes Dropbox, Facebook, Google and Yahoo parent company Oath (which also owns TechCrunch) — was set up after the companies were named in classified U.S. documents as participants in the secret National Security Agency program, dubbed PRISM. All of the companies denied their willing involvement, and began a collective effort to lobby the government to reform its surveillance operations — many of which rely on compelled assistance from tech companies and telcos.

Evernote, LinkedIn, Snap and Twitter, which weren’t named as PRISM partners, later joined the coalition, and also signed on to the letter.

Cisco and Mozilla joined other companies in separately filing complaints with Australian lawmakers ahead of the planned vote, arguing that the law “could do significant harm to the Internet.”

Australia rushes its ‘dangerous’ anti-encryption bill into parliament, despite massive opposition

Australia’s controversial anti-encryption bill is one step closer to becoming law, after the two leading but sparring party political giants struck a deal to pass the legislation.

The bill, in short, grants Australian police greater powers to issue “technical notices” — a nice way of forcing companies — even websites — operating in Australia to help the government hack, implant malware, undermine encryption or insert backdoors at the behest of the government.

If companies refuse, they could face financial penalties.

Lawmakers say that the law is only meant to target serious criminals — sex offenders, terrorists, homicide and drug offenses. Critics have pointed out that the law could allow mission creep into less serious offenses, such as copyright infringement, despite promises that compelled assistance requests are signed off by two senior government officials.

In all, the proposed provisions have been widely panned by experts, who argue that the bill is vague and contradictory, but powerful, and still contains “dangerous loopholes.” And, critics warn (as they have for years) that any technical backdoors that allow the government to access end-to-end encrypted messages could be exploited by hackers.

But that’s unlikely to get in the way of the bill’s near-inevitable passing.

Australia’s ruling coalition government and its opposition Labor party agreed to have the bill put before parliament this week before its summer break.

Several lawmakers look set to reject the bill, criticizing the government’s efforts to rush through the bill before the holiday.

“Far from being a ‘national security measure’ this bill will have the unintended consequence of diminishing the online safety, security and privacy of every single Australian,” said Jordon Steele-John, a Greens’ senator, in a tweet.

Tim Watts, a Labor member of Parliament for Gellibrand, tweeted a long thread slamming the government’s push to get the legislation passed before Christmas, despite more than 15,000 submissions to a public consultation, largely decrying the bill’s content.

The tech community — arguably the most affected by the bill’s passing — has also slammed the bill. Apple called it “dangerously ambiguous”, while Cisco and Mozilla joined a chorus of other tech firms calling for the government to dial back the provisions.

But the rhetoric isn’t likely to dampen the rush by the global surveillance pact — the U.S., U.K., Canada, Australia and New Zealand, known as the so-called “Five Eyes” group of nations — to push for greater access to encrypted data. Only earlier this year, the governmental coalition said in no uncertain terms that it would force backdoors if companies weren’t willing to help their governments spy.

Australia’s likely to pass the bill — but when exactly remains a mystery. The coalition government has to call an election in less than six months, putting the anti-encryption law on a timer.

In venture capital, it’s still the age of the unicorn

This month marks the 5-year anniversary of Aileen Lee’s landmark article, “Welcome To The Unicorn Club”.

At the time, the piece defined a new breed of startup — the $1 billion privately held company. When Lee did her first count, there were 39 “unicorns”; an improbable, but not impossible number.. Today, the once-scarce unicorn has become a global herd with 376 companies on the roster and counting.

But the proliferation of unicorns begs raises certain questions. Is this new breed of unicorn artificially created? Could these magical companies see their valuations slip and fall out of the herd? Does this indicate an irrational exuberance where investors are engaging in wish fulfilment and creating magic where none actually existed?

List of “unicorn” companies worth more than $1 billion as of the third quarter of 2018

There’s a new “unicorn” born every four days

The first change has been to the geographic composition and private company requirement of the list. The original qualification for the unicorn study was “U.S.-based software companies started since 2003 and valued at over $1 billion by public or private market investors.” The unicorn definition has changed and here is the popular and wiki page definition we all use today: “A unicorn is a privately held startup company with a current valuation of US$1 billion or more.”

Beyond the expansion of the definition of terms to include a slew of companies from all over the globe, there’s been a concurrent expansion in the number of startup technology companies to achieve unicorn status. There is a tenfold increase in annual unicorn production.

Indeed, while the unicorn is still rare but not as rare as before. Five years ago, roughly ten unicorns were being created a year, but we are approaching one hundred new unicorns a year in 2018.

As of November 8, we have seen eighty one newly minted unicorns this year, which means we have one new unicorn every four days.

There are unicorn-sized rounds every day

These unicorns are also finding their horns thanks to the newly popularized phenomena of mega rounds which raise $100 million or more. These deals are ten times more common now, than they were only five years ago.   

Back in 2013, there were only about four mega rounds a month, but now there are forty mega rounds a month based on Crunchbase data. In fact, starting from 2015, public market IPO has for the first time no longer been the major funding source for unicorn size companies.

Unicorns have been raising money from both traditional venture capital but also more from the non-traditional venture capital such as SoftBank, sovereign wealth funds, private equity funds, and mutual funds.

Investors are chasing the value creation opportunity.   Most people probably did not realize that Amazon, Microsoft, Cisco, and Oracle all debuted on public markets for less than a $1 billion market cap (in fact only Microsoft topped $500 million), but today they together are worth more than $2 trillion dollars  

It means tremendous value was created after those companies came to the public market.  Today, investors are realizing the future giant’s value creation has been moved to the “pre-IPO” unicorn stage and investors don’t want to miss out.

To put things in perspective, investors globally deployed $13 billion in almost 20,000 seed & angel deals, and SoftBank was able to deploy the same $13 billion amount in just 2 deals (Uber and WeWork).  The SoftBank type of non-traditional venture world literally redefined “pre-IPO” and created a new category for venture capital investment.

Unicorns are staying private longer

That means the current herd of unicorns are choosing to stay private longer. Thanks to the expansion of shareholders private companies can rack up under the JOBS Act of 2012; the massive amount of funding available in the private market; and the desire of founders to work with investors who understand their reluctance to be beholden to public markets.

Elon Musk was thinking about taking Tesla private because he was concerned about optimizing for quarterly earning reports and having to deal with the overhead, distractions, and shorts in the public market.  Even though it did not happen in the end, it reflects the mentality of many entrepreneurs of the unicorn club. That said, most unicorn CEOs know the public market is still the destiny, as the pressure from investors to go IPO will kick in sooner or later, and investors expect more governance and financial transparency in the longer run.

Unicorns are breeding outside of the U.S. too

Finally, the current herd of unicorns now have a strong global presence, with Chinese companies leading the charge along with US unicorns. A recent Crunchbase graph indicated about 40% of unicorns are from China,, 40% from US, and the rest from other parts of the world.

Back in 2013, the “unicorn” is primarily a concept for US companies only, and there were only 3 unicorn size startups in China (Xiaomi, DJI, Vancl) anyways.  Another change in the unicorn landscape is that, China contributed predominantly consumer-oriented unicorns, while the US unicorns have always maintained a good balance between enterprise-oriented and consumer-oriented companies.  One of the stunning indications that China has thriving consumer-oriented unicorns is that China leads US in mobile payment volume by hundredfold.

The fundamentals of entrepreneurship remain the same

Despite the dramatic change of the capital market, a lot of the insights in Lee’s 5-year old blog are still very relevant to early stage entrepreneurs today.

For example, in her study, most unicorns had co-founders rather than a single founder, and many of the co-founders had a history of working together in the past.

This type of pattern continues to hold true for unicorns in the U.S. and in China. For instance, the co-founders of Meituan (a $50 billion market cap company on its IPO day in September 2018) went to school together and had co-founded a company before

There have been other changes. In the past three months alone, four new US enterprise-oriented unicorns have emerged by selling directly to developers instead of to the traditional IT or business buyers; three China enterprise-oriented SaaS companies were able to raise mega rounds.  These numbers were unheard of five years ago and show some interesting hints for entrepreneurs curious about how to breed their own unicorn.

The new normal is reshaping venture capital 

Once in a while, we see eye-catching headlines like “bubble is larger than it was in 2000.”   The reality is companies funded by venture capital increased by more than 100,000 in the past five years too. So the unicorn is still as rare as one in one thousand in the venture backed community.

What’s changing behind the increasing number of unicorns is the new normal for both investors and entrepreneurs. Mega rounds are the new normal; staying private longer is the new normal; and the global composition of the unicorn club is the new normal. 

Just look at the evidence in the venture industry itself. Sequoia Capital, the bellwether of venture capital, raised a whopping $8 billion global growth mega fund earlier this year under pressure from SoftBank and its $100 billion mega-fund. And Greylock Partners, known for its focus and success in leading early stage investment, recently led a unicorn round for the first time in its 53-year history.  

It’s proof that just as venture capitalists have created a new breed of startups, the new startups and their demands are reshaping venture capital to continue to support the the companies they’ve created.

China splits the internet while the U.S. dithers

There are few stories as important right now as the internet being ripped asunder by the increasing animosity between the U.S. and China. Eric Schmidt, the former chairman of Alphabet, said last week at a private event in San Francisco that “I think the most likely scenario now is not a splintering, but rather a bifurcation into a Chinese-led internet and a non-Chinese internet led by America.”

He should know: Alphabet and its Google subsidiary are on the front lines of that split, experiencing a massive furor over the company’s Project Dragonfly to launch a censored search engine in the Middle Kingdom. It’s hardly alone though, with Apple facing militant criticism from Chinese netizens over its iPhone presentation and Facebook finding its application for a corporate entity on the mainland being returned and rejected.

At the heart of this split is the death of the internet as we once knew it: a unified layer for the transfer of human knowledge. As the internet has gained more and more power over society and our everyday lives, the need by governments worldwide to tame its engineering to political and moral ends has increased dramatically.

About four years ago, I wrote a piece called “From internet to internets” in which I argued that this sort of split was obvious. As I wrote at the time: “Across the world, it is becoming abundantly clear that the internet is no longer the independent and self-reliant sphere it once was, immune to the peculiarities of individual countries and their laws. Rather, the internet is firmly under the control of every government, simultaneously.”

Yet, the rules that countries like Spain put in place around media and news didn’t split the internet as I had predicted. The economic power of the U.S. and China did. Alibaba, Tencent, and Baidu may have declined in value this year, but their combined market caps is still in the trillions of dollars. WeChat, which is owned by Tencent, has more than a billion users, and while only 10% of its user base is estimated to be outside China, the ties are growing as more countries build economic bridges with the mainland.

Sometimes, those bridges are quite literal. Through the Belt and Road initiative and fledgling institutions like the Asian Infrastructure Investment Bank, China has provided massive outlays to other nations primarily around infrastructure, building partnerships and deepening economic ties.

China and the U.S. are increasingly fighting a global battle for tech legitimacy (Photo by Jason Lee / AFP / Getty Images)

That infrastructure is sometimes roads, but it can also be in areas like telecommunications. Huawei has made massive inroads into Africa, both in smartphones and in core infrastructure. Chinese-owned Transsion, which most Westerners have probably never heard of, is the dominant smartphone manufacturer on the continent.

Chinese-made telecom infrastructure. Chinese handsets. Increasingly Chinese apps. For all of the concerns of Congress and national security officials about Huawei and ZTE equipment entering the American or Australian markets, the real fight for the future of the internet is going to be in precisely these developing regions which have no incumbent technology.

That’s what has made the Trump administration’s strategy toward trade negotiations with China so miserable to watch. The focus has been on repeated rounds of tariffs that will ensure that Chinese goods — particularly in high-tech industries — are more expensive to American consumers, allowing domestic manufacturers to better compete. Yet, the policies have done nothing to ensure that American values around the internet are exported to continents like Africa or South America, or that Cisco’s equipment will be chosen over Huawei’s.

That might be changing at long last. The Financial Times reported yesterday that the Trump administration is preparing to double down on the Overseas Private Investment Corporation, which offers commercial lending facilities to developing countries. It would be merged into another agency and given a much more rich budget (as high as $60 billion) to go and compete with Chinese financing around the world.

Maybe that measure will be successful in closing the strategic distance between the two countries. Maybe rumors that the administration is going to broadly double down on the trade war will lead to a much more comprehensive set of policies.

But along the way, regardless of what happens, these skirmishes will lead to a fracturing of the internet, and along with it, the death of the internet as a bastion and voice of freedom and knowledge for all people everywhere.