Snowden Fallout

Pursuing 'Local' Internet, Germany Attempts to Close Digital Drawbridge

The new networkers. Delegates play at Gamescom in Cologne.
  • Why it matters

    Why it matters

    Germany is the most connected country in the world. Can it, and should it, really focus on building national clouds and digital networks?

  • Facts


    • Germany has just launched a Digital Agenda, promising high-speed data lines, improving internet security and fostering cyber-related entrepreneurship.
    • The E.U.’s European Cloud strategy aims to deliver a net gain of 2.5 million new
      European jobs, and an annual boost of €160 billion to the European Union GDP, by 2020.
    • Cross-border Internet traffic grew 18-fold between 2005 and 2012.
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In July, executives from Deutsche Telekom’s digital arm T-Systems gathered in Biere, a town in central Germany, to open the country’s largest data center. The size of 30 soccer fields, T-Systems said the data center was built to satisfy a growing demand for “a cloud made in Germany.”

It is a strange statement for T-Systems, which for years has prided itself on its global ambitions and its co-operations and joint ventures with foreign companies.

Experts warn that the increasingly vocal talk in Germany of building a “national” Internet with national technology is unrealistic and anti-competitive and will hamper the government’s own aim, stated in the Digital Agenda launched on 20 August, to have the fastest digital growth in Europe in four years.

“Germany has in recent years had a very emotional response to issues of data and connectivity,” said Ravi Pather, a vice president at Perspecsys, company that specializes in cloud data protection . “There is a very strong desire to keep things inside the country, but it’s not always the most sensible option.”

In 2013, the whistleblower Edward Snowden revealed details of the U.S. National Security Agency’s global surveillance activities. It later emerged that U.S. intelligence agencies had eavesdropped on Chancellor Angela Merkel through her cellphone.

Britain’s GCHQ had monitored people too, intercepting data that flowed through undersea cables on their territory.

The revelations caused outrage all over the world, but had an extra impact on Germany, where the Stasi’s invasive surveillance of citizens in the former East Germany is still a recent memory.

The government took concrete steps to show its anger. The German government stopped giving its employees iPhones and switched to Blackberry handsets made by the Canadian company and encrypted with technology from a German company. In June, the German government cancelled a contract with U.S. telecoms Verizon.

Ms. Merkel in February called for a European communications network to be created to avoid protect data from U.S. government snooping and said she wanted to talk about “European providers that offer security to our citizens, so one shouldn’t have to send emails and other information across the Atlantic.”

Experts warn that the increasingly vocal talk in Germany of building a ''national'' internet with national technology is unrealistic and anti-competitive.

A whole host of companies have since cropped up, promising a secure, national Internet. A Hamburg based start-up, Protonet, raised over €1 million ($1.3 million) in just over three hours through a crowd-sourcing site to develop an encrypted cloud.

Deutsche Telekom said it is “in favor of keeping German Internet traffic within national borders.”

Lavaboom, a secure, encryption company, has based itself in Germany because it can only then answer to German authorities.

But this growing digital parochialism is alarming industry experts and the European Commission, who warn that Germany risks falling behind the rest of the world as it seeks unworkable, or inefficient solutions.

High-speed broadband is transmitted to homes and businesses through a complex network of cables, many of them under the sea, which do not correspond to national or continental borders.

A report by management consultant McKinsey shows that cross-border Internet traffic grew 18-fold between 2005 and 2012.

It notes that Germany, an export-based democratic country situated right in the middle of a densely populated landmass, bordering on nine countries, is the most globally connected country, in terms of data, services, people and finances, in the world. It is one of the hardest places to create a national network.

“At the moment the Internet is geographically agnostic,” said Tim Stronge, an analyst at telecoms research group Telegeography. “A lot of traffic that starts in Strasbourg goes to Frankfurt, and a lot travels via Amsterdam. It can’t be changed without vast, unviable expense.”

The debate on digital privacy in Germany has also spilled over into cloud technology where instead of building individual hardware and digital storage facilities, companies access shared infrastructure of companies such as Amazon, Microsoft and HP.

But after the U.S. spying revelations, things began to change in Germany.

Companies moved away from U.S. providers and began seeking European cloud providers. Daniel Castro of the Information Technology and Innovation Foundation in Washington estimates that the NSA revelations will cost the U.S. cloud computing industry $22 billion to $35 billion over three years.

European software providers such as SAP meanwhile reported that their cloud businesses were booming.

Deutsche Telekom said it is “in favor of keeping German Internet traffic within national borders."

But this switch to national providers will not actually ensure privacy. Mr. Castro said that most U.S. and European countries actually have very similar laws to one another in terms of accessing data, and have also signed treaties agreeing to cooperate on intelligence matters, which means the data is as secure in one cloud as another.

And at its worst, these national technology initiatives tend to lead to national monopolies that stop companies from harnessing the full range of technology available to them.

“In the short term, some policy makers will appreciate that these fears of foreign technology can be an advantage,” Mr. Castro said. “They can create anti-competitive laws that restrict dominant competitors, and allow nascent domestic provider to come up.”

The European Commission has been alarmed by talk of national clouds. It launched a plan in 2012 to develop a European cloud, but made clear it should be an open, cross-border project.

In October 2013, the European Commission warned in a policy document that the “fragmentation or segmentation of the cloud computing market along national or regional lines could unfortunately hold back the development of cloud computing in Europe.”

Neelie Kroes, the vice president of the European commission with responsibility for digital policy, has been outspoken on this matter.

In a speech in Bonn in 2013, Ms. Kroes said: “To lock up data in the EU is an impossible dream of independence. We’d lose opportunity without gaining sovereignty or security.”

Indeed it is already becoming clear that new technology rarely stays within national borders.

The German government emphasized that the encryption technology for its government-issued mobile phones was provided by a German company, Secusmart.

But in August, Secusmart announced it was being bought by Blackberry. T-Systems admits that most of the innovation at its data center in Biere comes from what it learned running a joint research data center in Munich with American company Intel.

“The idea of having a national secure network is unrealistic,” said Mr. Pather. “All the new models of computing being developed even by companies like SAP are, to be honest, North American. You could have a system built in Germany, but the value added components are outside German, in the U.S.”


The author is an editor at Handelsblatt Global Edition in Berlin. To contact her: 

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