the new great game

8182019 The New Great Game

httpslidepdfcomreaderfullthe-new-great-game 114

101 36 18

Europersquos digital power 1013618 is an ongoing

research project by ECFR supported by BBVA

Telefonica and Cellnex

Research in progress This non-paper is to serve as the basis of a

series of initial discussions ndash it is not to be cited or circulated

without the permission of the authors

design amp layout Alberto Miranzo (ECFR)

The New Great Game



Andrew Puddephatt Joseacute Ignacio Torreblanca

and Nika Prislan1

Executive Summary1013618 These figures represent the huge challenges facingEurope today stemming from the digital sphere but affectingalmost every other 101 is the number of start-ups valued atover $1 billion in the USA 36 in China and just 18 in EuropeAs digital radically redefines and redistributes economic andpolitical power on an international scale we enter into a newgame with new rules In response to a recognition that Europemust engage in digital developments to ensure its continuingimportance in the global arena the European Council on Fo-reign Relations launched lsquoEuropersquos Digital Powerrsquo a projectaimed at highlighting the challenges confronting Europe andfinding the solutions

The digital revolution has ushered in a new era in which powerand the means of acquiring and retaining it has been dras-tically redefined As digital inexorably transforms every facetof communication and organisation it dramatically reconfi-

gures the political and the socioeconomic spheres Traditionalactors vying for power in this uncharted territory continue toemploy traditional Great Game geo-political and geo-econo-mic strategies in the digital world

This scramble to master an entity with no centralised gover-nance nor international standards or policies for access and

1We would like to thank BBVA Cellnex Telefonica and all the participants at theMadrid Brainstorming sessions which took place on the 9th of December 2015 for their

input We would also like to thank Carla Hobbs for helping to draft an earlier version Ashorter version of this non-paper is available at httpwwwecfreupage-Connectivi-ty_Warspdf

The New Great Game

1013618



usage is redefining the very nature of the internet Initially concei-ved of as an open model and developed in the libertarian traditionit is increasingly dominated by a desire to assert national sove-reignty the creation of firewalls information wars surveillanceand cyberattacks States increasingly try to subordinate the inter-net and digital domains for nationally strategic purposes while ahandful of economic actors swell with unrivalled market capitali-sations

Europe is conspicuously absent in the battle looking on as theinternet is increasingly carved up and distributed A fragmentedinternal market inconsistent and reactionary regulation and po-litical disengagement are some of the many obstacles to Europebecoming a player in the digital world It is essential that Europe

now enters the fray to challenge attempts to impose antiquatedmachinations of geo-political and geo-economic control and en-sure its open society values govern the digital realm

Two major challenges for Europe consist in accessing the digitalmarket and in ensuring that the market remains open and gover-ned by diverse stakeholders Market access hinges on the EUrsquosability to effectively create a Digital Single Market in which di-gitisation is uniform across member states and an entrepreneu-

rial environment is fostered with the attendant venture capitalIn terms of internet governance the EU must take an active rolein shaping the structures and standards that are to oversee digitalarchitecture This must be cautiously carried out to avert a poten-tial transatlantic rift of which there are already hints spurred bycyber security and industrial disagreements

In order to achieve this Europe must build a virtuous alliancebetween the private and public sectors engage its political elites

develop a strategic relationship with the USA and must createand promote its own vision of the internet based on its open so-ciety values Europe traditionally a strong soft power actor isuniquely placed to prosper in the digital world a world in whichsoft power mechanisms excel It is essential that Europe rapidlytakes advantage of this and acts to limit the outdated Great Gamegeo-political and geoeconomic manoeuvrings that are fundamen-tally undermining the internet infrastructure It is the New GreatGame and Europe with its twenty-first century vision need notonly play but change the rules of the game itself



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1 0 1

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8

Tus lsquoTe Great Gamersquo continuesmuch as it did beore Te phrase itseloriginated in the nineteenth century usedto describe the intense conflict between

the Russian and British Empires over theate o Asia Russiarsquos ambitions to radicallyexpand its sphere o influence provokedBritish ears that such an expansion intoCentral Asia threatened its hold on IndiaTis gave birth to the Great Game perioda century o complex geopolitical maneu-

verings between two o the great powers vying to maintain and urther expandtheir empires Henceorth the phrase isgenerally applied to describe the geopo-litical chess games played by nations orregions in the pursuit o power and in-fluence in a certain area Accordingly thegeopolitical jostling or control over thedigital ambit can be reerred to as lsquoGreatGamersquo machinations

Meanwhile a different battle o thegeo-economic variety is being wagedWith some countries and regions poi-sed to reap the monetary benefits o the

digital revolution and others tipped tosustain major losses the distribution oglobal power is expected to alter as thecards are reshuffled along economic li-nes Meanwhile a small number o glo-bal tech companies with market capita-lisations larger than many medium-sizedstates dominate the digital market andthreaten to stifle competition by virtue otheir technical aptitude capacity to und

research amp development and increasingability to shape the digital ecosystem intheir avour Market logic continues togovern in this ecosystem rom battlesbetween regulators and tax smart globalcompanies to the battles waged by entireeconomic sectors and proessions in dan-ger o disappearing

The digital revolutionTe digital revolution is the most trans-ormative orce o our time effecting seis-mic changes on politics economics and

social relations It heralds the transorma-tion o communication and the reconfi-guring o organisational structures It is aset o tools and an environment an actorand a site Its very nature will proound-ly reshape how governments operate andrelate to citizens how industries developand relate with consumers and how indi-

viduals relate with one anotherDigital developments offer a co-

lossal opportunity or governments eco-nomic actors and individuals to advancetheir goals but also represent a threat orthose who ail to embrace this new waveo innovation History dictates that revo-lutions reorder politics and society em-powering some actors and institutions atthe expense o others Te Mongols wereovertaken by the advent o gunpowderand the Chinese ailed to keep up withthe first Industrial Revolution Te digital

revolution will be no different and repre-sents disruption and turmoil as much asprogress

Te major powers now appreciatethe significance o the internet as a site ogeopolitical competition collaborationand conrontation From being seen byits libertarian developers as existing out-side o politics and or the benefit o allit is now steeped in politics o the most

traditional kind Tese struggles are beingwaged across a number o ronts rom in-tellectual property thef to DDOS attacksand rom weaponised viruses to demandsto establish a global regulatory body orthe internet I politics is both a norma-tive dispute about which values shouldprevail in a community and a negotiationabout ldquowho gets what how and whenrdquo itis undeniable that the digital revolutionhas become politicised both at home andglobally



5

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the application o digital developments totraditional occupations will have a pro-ound impact on the power and economicrelations that have so ar underpinned the

current wave o globalisation In enablingglobal manuacturing firms to reabsorbglobal supply chains and relocate them incountries where consumers are locatedit undamentally undermines sweatshopcountries banking on cheap labour andraw materials

For developing economies strug-gling to catch up on manuacturing and

job creation the impact could be devas-tating countries such as India and Chinaare already expressing concern about howthe introduction o robots in manuac-turing industries may by making skilledworkers redundant trump the emergenceo a middle class and block the countryrsquosprogress to the upper tier o per capitaincome Tis particularly threatens Chi-nese aspirations to match the US as a su-perpower as it is uncertain as to whetherthe Chinese will succeed in transorming

their manuacturing industry into a 40one Meanwhile Narendra Modi Indiarsquostech-savvy Prime Minister has voicedsimilar ears and accordingly launched alsquoDigital Indiarsquo campaign in 2015

Tis offers an immense opportu-nity or countries theoretically bound tobe the losers o the twenty-first centurya century presumed to be entirely AsianDue to its capacity to innovate and to

und innovation the US stands to gainthe most and so is poised to remain thedominant superpower or the oreseeableuture For all the talk about Americandecline the US is leading the digital revo-lution on the economic ront with its fir-ms being able to create much more valuethan any others Only two decades agoseven o the worldrsquos top ten companies interms o market capitalisation were Japa-nese and just three were US based Nowin 2015 the top ten are all US companies

Geoeconomic winners and

losersFor many major industries such as trans-port or hospitality the cards have already

been shuffled by sharing networks likeUumlber or Airbnb who do not own the as-sets their businesses are based on Or takethe print media or telecoms companiesoverwhelmed by new digital media out-lets and communications platorms suchas Facebook Google Skype or Whatsapp

Tese highly disruptive changespale in comparison with the impact digi-tal will have on manuacturing Coined bythe German government lsquoIndustry 40rsquoinvolves the application o increasinglysophisticated technology to productionprocesses generating hyper-connecteddecentralised and streamlined productsSimply put this means that industrialproduction machinery no longer simplylsquoprocessesrsquo the product but that the pro-duct communicates with the machineryand instructs it Industry 40 will spaneverything rom artificial intelligence to

the internet o things and wearable healthtechnology

Te social and political impact othese changes on industrial societies willbe dramatic as the workorce is radicallyreshaped While the uture may see thecreation o high-end digital and ldquopersua-sion-basedrdquo jobs (in marketing and salesor example) it may also witness the ero-sion o middle ranking jobs particularly

in transportation logistics manuactu-ring as well as office and administrativesupport and their substitution by lowpaid and low ulfilment jobs with theensuing socio-political consequences associeties become more dual and unequal

Meanwhile in so ar as the US ca-pacity to exploit non-conventional energy(shale oil and gas) has led to energy inde-pendence and is already reshaping global

power and economic relations particu-larly those o the US with the Middle East



6

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1 0 1

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8

with technological change catapulting theUS ar ahead o Japan

Just a cursory glance at the start-upscene points towards the US as the main

source o innovation globally O the 174 venture-backed private companies valuedat almost euro1 billion worldwide 101 are inthe US 36 in Asia and just 18 in Europe1the latterrsquos market valuations alling wellshort o their US and Chinese rivals Out-side the start-up world the picture is verymuch the same with Amazon AppleFacebook and Googlersquos market capitalisa-tions now greater than the GDP o SouthKorea2

Facilitating this is the unrivalledavailability o venture capital in the USAccording to the National Venture Capi-tal Association US venture capital undshave invested $160 billion since 2012with $70 billion o that alone directed atSilicon Valley Meanwhile venture capitalunding or European digital groups in2014 was a fifh ($775 billion) o that othe US ($ 379 billion)3 Te World Eco-

nomic Forum I Report or 2015 ranked venture capital availability in countriesaround the world and those emerging atthe top are (in order) Qatar MalaysiaUSA UAE and Hong Kong Note the cons-picuous absence o Europeans in the list4

1 Te Unicorn List Fortune last updated on 31st oMarch 2016 available at httportunecomunicorns

2 Denning Steve Te Future o Amazon AppleFacebook and Google Forbes 9th o April 2015 httpwwworbescomsitesstevedenning20150409the-uture-o-amazon-apple-acebook-google543c-4313c1

3 Ahmed Murad European tech In Silicon Valleyrsquosshadow Financial imes 21st o July 2015 httpwwwfcomintlcmss2d1507b96-1b24-11e5-8201-cb-db03d71480htmlaxzz3gReGrg1o

4 World Economic Forum Te Global Inormationechnology Report 2015 httpwww3weorumorgdocsWEF_Global_I_Report_2015pd

The new great game has

already startedTe US has been similarly savvy in appl-ying geopolitical logic to the digital do-

main to urther its strategic objectives Ithas defined its digital inrastructure as aldquostrategic national assetrdquo and Obama wasquick to appoint a ormer head o securityat Microsof as his cyber-security advisorRecognising cyberspace as the fifh mili-tary domain afer land sea air and spaceit has doubled the NSArsquos budget since 2001and quadrupled the personnel assigned toits new US Cyber Command in two years

now standing at somewhere between3000 and 4000 cyber soldiers As suchthe US has effectively incorporated digitaldevelopments to bolster its military capa-city thus being able to prolong militarysuperiority over eventual challengers orlonger than expected

Te very architecture o the internetis shaping by US ideology and interestsAs the place where the internet was builtrom a desire to construct a communica-

tion network resilient enough to survivenuclear attack and now home to someo the most powerul and wealthy com-panies on the planet it has long been thedominant power online It also has everyinterest in maintaining the status quo aslong as possible and it is likely its politi-cal business and ree speech culture willcontinue as the dominant ideology o theinternet

Compared to the US China ismore ocused on establishing a state-cen-tric model o internet governance whilstusing the internet to project itsel interna-tionally Xi Jinping has taken direct con-trol o digital policy with the aim o shi-ting China rom being a ldquolarge internetcountryrdquo to a ldquostrong internet countryrdquowhich equals greater national commandover the internet and more active oreign

engagement Becoming a cyber power isnow a key element o the lsquoChina Dreamrsquo



7

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

zizi in unisia would not have had sucha rapid and massive effect had the youthin these countries not had access to Fa-cebook witter Youtube and other social

media which allowed the protesters toorganise and share videos and inorma-tion But the digital playing field is one inwhich all actors can play As exemplifiedby Daesh the Internet has also allowed

jihadists to significantly reduce the timeand distance required to recruit new figh-ters to their cause very effectively usingthe Internet or propaganda purposesWhereas in the past oreign intelligenceservices would tap the physical networ-ks created around mosques in Europeancities to infiltrate and deactivate terroristcells today yihadist recruitment has gone

virtual making counter-terrorist effortsmuch more difficult

What Daeshrsquos use o the Internetreveals is how hyperconnectivity is re-configuring power relations hard or sofeconomic or military and also politica-lly Across the world hyperconnectivity

is empowering non-state actors openingnew channels o direct people-to-peoplecommunication undermining citizentrust in authority and making it more di-fficult or governments to pursue diplo-matic goals Tis can work to the advan-tage o human rights activists now able tostay online and connect globally 247 365days a year but also or governments de-mocratic or not who can monitor to the

same effect and eventually repress

Challenges for EuropeEurope aces two undamental challengesTe first is market access relating to itscapacity to take part in and benefit romthe digital revolution Te second concer-ns the nature o the internet itsel and theneed to ensure that the right conditionscontinue to prevail without provokingtransatlantic tensions However or these

goals Te Chinese government is increa-singly dominant in international debatesabout internet governance deploying sofpower initiatives like the World Internet

Conerence to bolster Chinarsquos push or in-ternet sovereignty rather than the openmultistakeholder approach advocated bythe West Tese moves are not only exp-lained by ears o unbridled internet butalso by Chinarsquos wider aim to take an activerole in shaping and establishing interna-tional rules

As or Russia it is also concernedwith securing control over the global ar-chitecture o the internet to urther itsdomestic and oreign policy On the na-tional level the Kremlin seeks to assertWestphalian notions o sovereignty overthe internet particularly ollowing thestreet protests against Putin that gave riseto serious alarm that the internet was be-ing used as a channel o subversion by theUS undermining the Kremlinrsquos variant odemocracy

On the international level the Kre-

mlin understands the internet as a oreignpolicy tool with borders that correspondto physical state borders Tis representsa huge challenge or both NAO andEuropean governments as Russia is tar-geting some member states such as theBaltic countries with asymmetric digitalcriminal activities espionage and propa-ganda aimed at bullying and destabilisingthem In May 2014 Russia announced the

creation o its rather revealing named lsquoin-ormation troopsrsquo employed to carry outsuch inormation wars Russia on theother hand due to its ocus on inorma-tion security has a lower dependency oninormation systems than the West whichhas afforded it greater protection rom cy-ber threats

Other examples o how the digitalrevolution is disrupting politics aboundin the Middle East It is widely recognisedthat the immolation o Mohamed Boua-



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1 0 1

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8

ponse But well understood and playedgeopolitical pressures could add the senseo purpose the strategic vision and thecohesion which Europe currently lacks

Europe does not need to be a lo-ser in this game Many have stated thatthe 21st century belongs to Asia Howe-

ver the 21st century will be rather thanAsian digital Anyone large or smallmastering the algorithm as it has beenput can thrive Whoever misses this revo-lution will be sidelined and become irre-levant in economic and security terms5 Tis should come as a relie to Europe asit will be much easier or it to competein the digital sphere Europe clearly can-not compete with Asiarsquos cheap labor andmanuacturing but it can compete in thedigital arena i it ensures that a DigitalUnion will be the result o a strategic vi-sion and not a reactionary response to therise o geopolitical challenge

ake Germany Itrsquos investmentsand advances in the digital sphere havebeen impressive in the last ew years and

the presentation o its recent Digital Stra-tegy or 2025 which creates among otherthings a 10euro billion und to finance uturedigital projects demonstrates that strate-gic digital visions are present in Europe Itis also necessary to highlight that not onlyis the Digital Single Market one o the cu-rrent European Commissionrsquos principalpolicy areas but also that the EuropeanCommission has set aside a large chunk o

its 315 billion euro Fund or Strategic In- vestments or the digital field 8 or digi-tal inrastructure and 4 or innovation

5 Valladao GA Alredo Masters o the AlgorithmsTe Geopolitics o the New Digital Economy romFord to Google German Marshall Fund 2nd o May2014 httpwwwgmusorgpublicationsmasters-al-gorithms-geopolitics-new-digital-economy-ord-goo-gle

challenges to be efficiently conronted theEuropean Union needs to understand thegeopolitics behind the digital revolutionin relation to its own digital ambitions

A Digital UnionTe European Union has been workingon a more coordinated and commonapproach towards the digital revolutionor years a Digital Agenda was presen-ted by the previous European Commis-sion and is one o the seven pillars o theEurope 2020 strategy while the currentPresident o the European CommissionJean-Claude Juncker presented in 2014lsquoA Connected Single Digital Marketrsquo asone o the ten policy areas that the newEuropean Commission would under-take However more than a decade laterthe EUrsquos digital economy continues to beragmented signaling the need or Euro-pe to get its act together and achieve ge-nuine digital integration or what we havelabeled a Digital Union

o achieve a Digital Union a trulyintegrated zone and not just loosely coor-dinated positions on digital matters areneeded However Europe also needs totake into account the ailures that prece-ded the creation o the Monetary Bankingor Energy Union which should serve as acaution In these three cases individualreactionary responses and a lack o coor-dination at the European level meant that

EU member states had to conront thesechallenges separately and thorough costlymeasures Tis resulted in a loss o cre-dibility internal tensions lack o solida-rity and external weakness which othergeopolitical rivals have exploited wellNow instead o learning rom the ailuresthat preceded the creation o the BankingUnion and Energy Union the EU is onceagain ailing to understand the geopoli-tical and geo-economic consequences oits inadequate slow and ragmented res-



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T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

Commissioner Neelie Kroes revealedldquoWhen I took over the digital portolioin Brussels many people offered me theircondolencesrdquo While Germany already

poised to progress to Industry 40 is wellqualified to weather the storm other Eu-ropean countries may not prove capableand sink Tis may in turn open yet ano-ther wealth and productivity gap betweenNorthern and Southern parts o Europewhich would make the EU project verydifficult to sustain

Despite these asymmetries Europedoes not need to all on the loserrsquos side othe digital revolution It is worth remem-bering that the top US internet companiesare not inallible In terms o retail Ma-cyrsquos which initially sustained major losseswith the advent o Amazon has ar outs-tripped its competitor in terms o stockreturns over the past 5 years MeanwhileGoogle is being chipped away at by Fa-cebook and the burgeoning app cultureAlso while some say barriers to entry areincreasing due to increasingly eudal na-

ture o the internet it could be argued thatinnovation is becoming more inclusiveMany o the important inputs or startupsare migrating online eg venture capitaland computing capacity mentorship andcollaboration Tis creates possibilities orentrepreneurship to expand beyond thetraditional boundaries o high-tech clus-ters o Silicon Valley or example

With the appropriate incentives Eu-

ropersquos huge and wealthy internal marketcomprising more than 500 million peoplemay provide seamless opportunities orcreating value Even its welare state whichitrsquos usually described as a remora preven-ting Europeans rom competing efficient-ly with others across the globe could turninto a goldmine i Europeans where ableto successully apply the digital revolu-tion to healthcare education and ageing

However Europersquos entry into the di-gital market would not be solely a sel-ser-

Improving market accessWith regards to the first challenge Eu-rope must rapidly address its absence inthe digital market A comparison o the

EUrsquos global economic position and itspresence in the digital economy reveals astriking disjuncture In the World Bankrsquosglobal GDP rankings our Europeancountries are present in the top ten Ger-many the United Kingdom France andItaly Meanwhile in the World EconomicForumrsquos Global Competitiveness Indexor 2014-2015 six European economiesare present in the top ten SwitzerlandFinland Germany Netherlands UnitedKingdom and Sweden It is o note thatonly the UK and Germany are in the samelist Yet o the twenty internet companieswith the greatest market capitalisation

just one is EuropeanEurope is in a precarious position

currently lacking key tools to survive thedigital revolution a single digital market

venture capital investment o the requisi-te scale appropriate regulation on open-

ness and platorms resilient broadbandtelecom networks and inrastructure andsecurity integration It also suffers rom ahuge digital divide between its membersEurope remains 28 separate marketssome looking east some south with diffe-rent levels o concern o avoid such a di-gital divide Europe should set its eyesighton achieving similar levels o common re-gulation as the ones achieved through the

Banking and Energy Unions Accordingto the Digital Economy and Society Index(DESI) developed by the European Com-mission as a means o evaluating Euro-persquos digital perormance and tracking thedevelopment o digital competivenessmember states are at very different stagesand rates o progression (Romania witha 035 DESI score hal that o Denmarkwhich leads on 068)

It is little wonder that in an inter- view with Spiegel ormer Digital Agenda



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1 0 1

3 6 1

8

ving endeavour as it is essential there ishealthy competition to saeguard againstmonopoly control over the internet Teenergy market is an instructive example

o the benefits o having many players involved Tis prevented Chinese or OPECattempts to entirely control it and createa global web o debilitating dependenceon a ew monopolistic actors Tis modelshould be replicated or digital marketensuring an openness and competitive-

ness that preserves its nature

Maintaining an openinternet and fostering

transatlantic

cooperationTis brings us to the second challengeacing Europe ensuring that the internetdoes remain open and ree while avertinga potential transatlantic rif rom deve-loping Te international rules gover-ning the internet have yet to be fixed and

the process o doing so provides ertileground or conflict Currently the US ba-sed Internet Assigned Number Authority(IANA) oversees global IP address allo-cation Domain Name System root zonemanagement and other technicalities orthe unctioning o the internet Much othe international community sees US mo-nopoly on IANA unctions as undemo-cratic and open to abuse and there havebeen widespread calls or IANA unctionsto be transerred to a more representativebody Tis transition to a multistakehol-der international ramework is currentlytaking place but ears abound as truly in-ternational internet governance could bedysunctional or dominated by anti-ree-dom o speech countries

Surveillance revelations and cybersecurity threats pose another danger orboth internet openness and transatlantic

relations Te adept use o the internet

by transgressive actors rom criminalsto terrorists is increasingly preoccupyingpolicy makers A medium that should beopen ree and secure is becoming closed

weaponised and constantly monitoredTere is a risk that the mistrust arisingrom surveillance and hacking o tele-communications could lead governmentsand publics to push or a more protec-tionist and a closed internet Revelationsconcerning the US and UK intelligen-ce services caused outrage in Germany(even though the BND collaborated withthe NSA) and prompted three separate in-telligence reviews in the UK Meanwhilethe recent Schrems decision by the Euro-pean Court o Justice invalidating the SaeHarbor Agreement between Europe andthe US had added another layer o conflictto transatlantic relations Tis could im-pede much needed cooperation on cybersecurity against Russia China and ISIS(in areas o critical inrastructure and te-rrorism or example)

Simultaneously another risk is that

the battle being waged between Googleand the European Commission escalatesinto political tensions and rising protec-tionist instincts in Europe In an essaypublished in the Frankurter Allgemei-ne Zeitung newspaper ormer GermanEconomics Minister Sigmar Gabriel drewattention to the ldquobrutal inormation capi-talismrdquo o the leading US internet com-panies In his essay he claims ldquoonly the

European Union has the power requiredto change the political course and rewri-te the rulesrdquo Tis was echoed by MathiasDoepner chairman o Germanyrsquos biggestmedia company Axel-Springer SE whenhe wrote an open letter to Eric Schmidt inwhich he conessed his ear o Google andaccused it o acting in an uncompetitiveashion6

6 An open letter to Eric Schmidt rom Mathias Doumlp-ner httpwwwaxelspringerdedl433625LetterMa-thiasDoepnerEricSchmidtpd



11

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

per cent and five million jobsoday the European Commission

has estimated that the construction oa digital single market could contribu-

te euro415 billion per year to the economyA successul market necessitates impro- ved access or consumers and businessesacross borders an environment in whichdigital innovation can flourish and a so-ciety and economy equipped with thetools to maximise the potential o thedigital economy Te enhancing o a re-silient broadband telecom network as ameans to reinorce net neutrality is alsoundamental as it will help avoid certaindiscrimination regarding data and trafficflows It is essential that Europe meet thetransitional challenge o analogue to digi-tal For the successul establishment andunctioning o the single market integra-tion o financial services is undamentalFinance and payments underpin all sec-tors and so the elimination o all barriersthat hinder cross-border activity o the fi-nancial industry (via mechanisms such as

banking and capital markets union or theestablishment o the Service Euro Pay-ments Area) is pivotal

Te economic misortune o Japanprovides a cautionary tale on the conse-quences o ailing to make such a transi-tion As mentioned beore just two deca-des ago seven o the worldrsquos top ten valuedcompanies were Japanese while only twowere US based In 2015 ollowing the di-

gital shif the US has catapulted ahead oJapan with the top ten companies now allUS companies It is an important lessonor Europe on the costs o remaining ana-logical the costs o no-Europe o trulyengage in the digital world Europe mustbuild an alliance between the private andpublic sector engage political elites andcitizens build a strategic alliance with theUS and change the rules o the game it-sel

Much as a the nineties saw transat-lantic tensions emerging when Brusselsrsquocompetition authorities started to takeon American companies (Boeing Mi-

crosof) a new ware o transatlantic mis-trust is emerging precisely at a momentin which Russia and China are growingmore assertive and the Middle East andNorth Arica risk spamming out o con-trol Te overall picture is one o transat-lantic digital rifs due to lack o mutualtrust different industrial visions and con-trasting regulatory preerences

While China Russia and their alliesrepresent a genuine threat to an open in-terconnected internet it would be atal orthe US and Europe to ail to work togetherto deend those core principles globallyAs with other geopolitical issues the po-sitions adopted by the G77 group couldbe decisive internationally Europe needsto leverage its own diplomatic outreach tothe countries o the global south to ensurethey support an open and inter connectedworld

Conclusion What should

Europe doMuch as in the 1980rsquos when Europe re-medied its poor economic perormance

via urther integration and the creationo a single market what is again requiredis the removal o all barriers to achieveanother major boost in competitiveness

In the late 1980rsquos European actors mo-bilised to tackle an economy plagued byhuge unemployment rising inflation anddeclining growth Te amous Cecchinireports o 1983 and 1988 that estimatedlsquoTe Cost o Non-Europersquo put the figureat 200 billion while the construction o asingle European market would produce a45 per cent increase in GDP and createtwo million jobs Coupled with the co-

rrect economic policy measures thesebenefits could total a GDP increase o 7



12

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1 0 1

3 6 1

8

Establish public-

private partnershipsAn environment that is inherently inter-national and pervasive across both the

public and private domains does not res-pond easily to traditional policy creationmechanisms Te internetrsquos blurring otraditional demarcations renders a go-

vernment-led top-down approach ana-chronistic and unproductive Te digitalenvironment demands a multistakehol-der approach defined particularly by aneffective liaison between governmentsand the private sector With the majorityo digital inrastructure in Europe ownedby the private sector collaboration is notmerely an option it is a necessity

In the area o cyber security orexample public-private partnership is a

vital instrument or securing cyberspaceAs sponsored crime and cyber attacks in-crease there is a heightened need to shareintelligence between the two sectors andor the state to access the industry insightand financing o the business world while

the business world must access the Euro-pean vision and public interest o the stateand civil society

Te Internet Governance Forum(IGF) has taken significant steps in this di-rection IGF is an open orum that bringstogether various stakeholder groups indiscussion on Internet public policy is-sues Te debate outcomes seek to inormpolicymakers on how to maximise Inter-

net opportunities while minimising risksParticipants take part on an equal ootingand maximum representation o the di-

verse global actors embroiled in internetdebates is sought It is an instructive mo-del or Europe

Engage political elites

and citizens

European political elites must grasp thesize o the change ahead and the dis-

ruptive effects it will have at home andabroad And in parallel citizens mustbe made aware o the immense challen-ges and opportunities that digital deve-

lopments present Governments shouldpromote the drafing o digital strategiesto help raise awareness and to identiypolicy challenges bottlenecks and ope-nings Tis should be an inclusive effortbringing together industry social actorsmedia national parliaments and citizens

For understanding the changednature o communications in the digitalworld is essential We have lived throughthe Gutenberg era rom the 15th centuryto the 20th an age defined by the autho-rity o the written word Many merely seethis however as an interruption in thebroader arc o human communicationthat is oral and that the discursive archi-tecture o the web is slowly returning usto a state in which orality (conversationgossip rumour the ephemeral) all lac-king in authority define our communi-cation culture Such a culture presents a

unique challenge to any policy maker andwill require new tools to navigate

Political elites must understand thescale o the organisational reconfiguring(moving rom hierarchy to peer to peermodels) that will be required to turn ana-logue state apparatuses and services intoa shape appropriate or the digital ageUsers consumers and citizens expect tobe involved in the way society is governed

and increasingly we have the tools to rein- vent government or the twenty-first cen-tury i we have the political will and ima-gination lsquoEstoniarsquo has led the way withthis last year becoming the first countryin the world to offer e-residency to citi-zens providing digital identities that giveEstonians access to services such as heal-thcare education and online banking Itis essential others ollow



13

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

Build a strategic

relationship with the

USWhile commercial and privacy tensions

with the US may be recurrent the EU andthe US cannot afford to become conten-ders in the New Great Game In so ar asthey have maintained the liberal inter-national order through both the BrettonWoods institutions and NAO the USand the EU are key allies and must worktogether to ensure a digital divide doesnot open between them neither on in-dustrial nor security issues

Te EU must be very cautious in thesetting up o its Digital Single Market As astrategy that seeks to create the regulatoryand market conditions in which compa-nies can innovate and drive growth itcould well serve to align the EU urtherwith the US Reorms would oster a flou-rishing transatlantic digital economy inwhich both EU and US businesses couldprosper However overregulation or tar-geted discriminatory regulation towardsUS companies will damage transatlanticrelations and could lead to an insular anddeensive digital economy in Europe

Consequently or the EuropeanUnion to build a strategic relationshipwith the US it must also have a discussionwith itsel on how it wants to go about inthe setting up o its Digital Single Marketand its digital business Tere exist di-fferent positions on this shelter the EU

market or certain services to aid in theestablishment o the EUrsquos own capabili-ties and business in this sector or openup the market through a shock therapyapproach Protectionist and liberalizationpositions are quite clear between indivi-dual EU member states however Euro-pe as whole has not embarked on a cleardiscussion on how to establish and ensurethe sustainability o its digital industry

An ensuing potential Balkanizationo the internet would not only render a

strategic relationship with the US im-possible but would also be in completedisagreement with the EUrsquos vision o anopen internet Healthy competition must

be ostered or a robust digital economyand rhetoric must ocus less on EU needto counter US technological might andinstead emphasise need to match it andfind areas o potential cooperation

Change the rulesPower has been redefined in the digitalera and Europe is well poised to obtainit As Moiseacutes Naiacutem observed in his re-cent book Te End o Power lsquoin the 21stcentury power is easier to get harder touse ndash and easier to losersquo Recent develop-ments he argues are undermining tradi-tional sources o power now vulnerableto attacks rom smaller actors Te digitalrevolution has made it easier to achievescale without mass as access to resourcesbecomes more important than ownershipo them Ownership in this new environ-

ment provides uncertain and momentaryadvantage Tis is particularly evident incyber warare or example where offen-ce is easier and cheaper than deenceGeopolitically this makes highly advan-ced countries more vulnerable to attacksrom less developed states particularlyas the barriers to entry in cyberspace are

very low Tis redefines the very nature opower itsel and the strategies that must

be employed to maintain itIt is likely that sof power elevatesgreatly in importance in this new erawith the ability to persuade and attractmore significant than the ability to attackor control Tis provides ertile groundor Europe to excel traditionally strongin exercising and deploying influence viasof methods as opposed to harder me-thods o orce and coercion Tis does notsignal the abandonment o hard powernor is sof power in this context merely



14

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1 0 1

3 6 1

8

traditional diplomacy As UK House oLords 2014 report lsquoPower and Persuasionin the Modern Worldrsquo explains lsquonew andmore subtle combinations o both hard

and sof methods o power deploymentare now necessary or national effective-ness and advancement on the global sta-gersquo Tese combinations are lsquosmart powerrsquoand Europe is well poised to harness andimplement it

Digital power is now the underpin-ning o all sof power both as an environ-ment and a set o capacities and so Eu-ropersquos lsquosmart powerrsquo hinges on changingthe rules o the game It needs to developits own vision o how it sees the internetdeveloping as a ree open and securemedium one that supports post war Eu-ropean values based on democracy andhuman rights It must stand or an openmultilateral rule-based governance sys-tem and fight attempts to nationalise clo-se or privatise the Internet Europe is theembodiment o the concept o the opensociety and the internet must be used as

a key tool or promoting European valuesacross the world A look at how ChinaRussia and other actors use the internet topromote their values and interests makesit palpably clear that the Internet is theplace where the great ideological battleso our time will be won and lost Europecannot stay behind

It is not lsquoTe Great Gamersquo but ra-ther lsquoTe New Great Gamersquo only the pro-

blem is that the players are still playing bythe ormerrsquos rules Europe neither a statenor an integrated market cannot hope tocompete with lsquoGreat Gamersquo geopoliticsnor geo-economics What it can do is playby a whole new set o rules defined by aorward looking twenty first century vi-sion ar removed rom the Anglo-Russianconflict o the nineteenth century



Andrew Puddephatt Joseacute Ignacio Torreblanca

and Nika Prislan1

Executive Summary1013618 These figures represent the huge challenges facingEurope today stemming from the digital sphere but affectingalmost every other 101 is the number of start-ups valued atover $1 billion in the USA 36 in China and just 18 in EuropeAs digital radically redefines and redistributes economic andpolitical power on an international scale we enter into a newgame with new rules In response to a recognition that Europemust engage in digital developments to ensure its continuingimportance in the global arena the European Council on Fo-reign Relations launched lsquoEuropersquos Digital Powerrsquo a projectaimed at highlighting the challenges confronting Europe andfinding the solutions

The digital revolution has ushered in a new era in which powerand the means of acquiring and retaining it has been dras-tically redefined As digital inexorably transforms every facetof communication and organisation it dramatically reconfi-

gures the political and the socioeconomic spheres Traditionalactors vying for power in this uncharted territory continue toemploy traditional Great Game geo-political and geo-econo-mic strategies in the digital world

This scramble to master an entity with no centralised gover-nance nor international standards or policies for access and

1We would like to thank BBVA Cellnex Telefonica and all the participants at theMadrid Brainstorming sessions which took place on the 9th of December 2015 for their

input We would also like to thank Carla Hobbs for helping to draft an earlier version Ashorter version of this non-paper is available at httpwwwecfreupage-Connectivi-ty_Warspdf

The New Great Game

1013618












4

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8
















5

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141



















6

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8




















7

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141


















8

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8














9

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141


















10

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8





transatlantic













11

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

















12

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8

Establish public-











and citizens










13

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

Build a strategic
















14

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8


















4

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8
















5

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141



















6

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8




















7

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141


















8

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8














9

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141


















10

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8





transatlantic













11

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

















12

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8

Establish public-











and citizens










13

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

Build a strategic
















14

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8









5

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141



















6

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8




















7

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141


















8

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8














9

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141


















10

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8





transatlantic













11

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

















12

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8

Establish public-











and citizens










13

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

Build a strategic
















14

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8









6

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8




















7

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141


















8

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8














9

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141


















10

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8





transatlantic













11

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

















12

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8

Establish public-











and citizens










13

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

Build a strategic
















14

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8









7

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141


















8

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8














9

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141


















10

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8





transatlantic













11

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

















12

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8

Establish public-











and citizens










13

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

Build a strategic
















14

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8









8

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8














9

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141


















10

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8





transatlantic













11

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

















12

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8

Establish public-











and citizens










13

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

Build a strategic
















14

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8









9

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141


















10

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8





transatlantic













11

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

















12

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8

Establish public-











and citizens










13

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

Build a strategic
















14

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8









10

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8





transatlantic













11

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

















12

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8

Establish public-











and citizens










13

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

Build a strategic
















14

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8









11

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

















12

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8

Establish public-











and citizens










13

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

Build a strategic
















14

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8









12

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8

Establish public-











and citizens










13

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

Build a strategic
















14

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8









13

T983144983141 983150983141983159 983143983154983141983137983156 983143983137983149983141

Build a strategic
















14

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8









14

A P983157983140983140983141983152983144983137983156983156 JI T983151983154983154983141983138983148983137983150983139983137 983078 N P983154983145983155983148983137983150

1 0 1

3 6 1

8







the new great game

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