TikTok grab could extend -- or undermine -- U.S. online dominance

08 Aug 2020 11:48 AM
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A tie-up of TikTok with Microsoft could extend American dominance of the web and social media world. But it may involve some unintended, negative consequences too for U.S. companies and the open internet.

The offer being negotiated with the administration of President Donald Trump would carve out elements of the popular video software for Microsoft, which would gain a foothold in the fast-growing, youth-focused social media environment and join the ranks of rivals like Facebook.

Such a deal "would strengthen American preeminence in technology by moving a significant consumer product from Chinese ownership," said Darrell West, director of the center for technology innovation at the Brookings Institution.

"But it addittionally could inspire data nationalism by fueling calls in lots of nations for local control over internet platforms and data storage within their own national borders."

Other analysts said the offer could have far-reaching effects for the thought of an open internet, a longstanding position of Washington on the other hand with that of China and other authoritarian regimes which restrict online content.

"It could cross a rubicon when it comes to internet governance," said Graham Webster, editor of the DigiChina Project at the Stanford University Cyber Policy Center.

"This would lead to the U.S. appearing to support the longstanding Chinese position, which is that if indeed they do not like the way another country's companies operate, they are able to ban or seize them. That would be an enormous step."

Microsoft said it has been in talks with TikTok parent firm ByteDance to acquire TikTok's operations in the United States, Canada, Australia and New Zealand and address Washington's concerns about data security in light of claims that the social platform could become an espionage tool.

Trump said he's likely to approve such a deal, and set a mid-September deadline and he'd ban TikTok in the United States.

Any deal would give Microsoft a large chunk of the estimated billion-user TikTok base and technology which includes helped make the software wildly favored by young smartphone users.

The talks come against a backdrop of growing dominance in a lot of the world of U.S.-based Big Tech firms in social media, online search and advertising, cloud computing and other sectors which have become more important during the coronavirus pandemic.

Patrick Moorhead, analyst with Moor Insights & Strategy, said the U.S. could be justified in its move because of China's limits on U.S. firms operating for the reason that country.

"China has been imposing these rules on us for the last 25 years," he said.

"If you are an American company establishing in China you desire a 49 percent local owner and you will need to stop intellectual property. A Chinese firm in U.S. doesn't need a U.S. owner sponsor, you merely start shop. The U.S. wants symmetric trade rules."

Susan Aaronson, a professor and head of the Digital Trade and Data Governance hub at George Washington University, said any effort to carve up TikTok could face major hurdles and cause negative consequences.

"They can not divide up the app, no such thing has ever been done," Aaronson said, adding that there's been no clarity on how a sale would affect TikTok in a large number of countries.

Aaronson said Trump's "bullying" of TikTok and ByteDance could motivate other countries to take similar actions, possibly against American businesses which dominate the non-Chinese internet ecosystem.

"The complete thesis of the web is data should flow freely across borders," Aaronson said. "If you are bullying and acting as a nationalist the internet gets more divided."

Webster said the large U.S. tech firms could face consequences from what could possibly be viewed as an "expropriation" of TikTok.

"It may be extremely costly if among these (U.S.) organizations is forced to spin off part of its operations," he said.

More fundamentally, Webster said a forced TikTok sale would represent a step away from globalization which includes benefitted the Silicon Valley giants.

"The U.S. position has been that companies will be able to do business across borders, and that openness is beneficial to U.S. companies," he said.

The divesting of TikTok "might set in place a pattern of localization of online services" which the U.S. and its own companies have opposed, he added.