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Last Updated: Friday, 6 October 2006, 11:28 GMT 12:28 UK
Who is really in charge of the internet?
Playing card and betting chips
Online gambling is a global business
US laws to clamp down on online gaming show that the internet can be controlled, argues Bill Thompson.

The myth of the borderless internet, never very credible to those who had any real understanding of the interplay between politics and technology that underpins the network, took another hit last week when the US Congress voted to ban bank and credit card payments to gambling firms.

If President Bush signs the Unlawful Internet Gambling Enforcement Act into law, as he is expected to do, then within months US credit card companies and banks will be forced to check for and refuse payment for most forms of online gambling.

This has already had a catastrophic effect on UK-based companies like Sportingbet and PartyGaming, who face the loss of a major part of their market. Share prices are tumbling, directors are worried and revenue projections are being hastily scaled down.

Whether or not you approve of gambling or online gambling, and whether or not you think that this move smacks of hypocrisy or is a blatant attempt to protect the US gaming industry from overseas competition, the law provides a good example of how governments can control the internet.

Instead of trying to manage the technology by banning poker-playing software or insisting that service providers block online gaming sites - neither of which would be effective anyway - the law puts pressure on the banks who actually move the money around.

Bill Thompson
The internet has always been a bordered network, and we ignore this geopolitical reality at our peril

It's a method discussed in some detail by Jack Goldsmith and Tim Wu in their recent book Who Controls the Internet?. They point out that "the rise of networking did not eliminate intermediaries, but rather changed who they are", and governments can pass laws which control them.

Whenever people use the network to act there are always local intermediaries, especially where money is changing hands. And that means there is no way that a company that wants to trade in a territory can do so and remain immune from local laws and practices.

Clamped down

We've seen this before. In 2005 the US government clamped down on the sale of cigarettes over the net by using the same strategy, successfully restricting people from buying from states that had lower taxes.

It does not stop the trade completely, but makes it much harder work and so effectively deters most people.

It's the same in the People's Republic of China, where the government knows that the vast expenditure on its 'Great Firewall' and apparatus of censorship and control can never be completely effective but still thinks it worth doing.

There may be ways around the law and the technical measures, but they are too complex or risky for most people to use them.

It's interesting to note that none of the online gaming companies is proposing to commission gambling anonymisers or cloaked poker games that would allow people to use their services without being observed by the authorities.

Falling foul

Nor are UK credit companies stepping forward to offer oppressed US gamblers a way of paying for their flutters without falling foul of the law.

Online gaming image
Shares in UK gambling sites have been hit

Perhaps this is because these companies, many of them listed on the Stock Exchange, want to remain respectable, or perhaps it is because they know that such techniques would not work.

Perhaps they fear that if pushed US lawmakers might follow the path taken by the music industry and go after the users directly.

Instead we hear of threats to take the US to the World Trade Organisation, the WTO, on the grounds that the new law is an attempt to protect the US gambling industry from foreign competition rather than anything to do with morality.

The government of Antigua, host to many offshore gambling companies, has successfully challenged the US on the issue in the past, and is reported to be considering further action.

Expensive lobbying

One aspect of the new law that would seem to support the claim of protectionism is that betting on horses is explicitly permitted, a reflection of the intense and expensive lobbying that the National Thoroughbred Racing Association (NTRA) has undertaken over the years.

Unlike online poker, the NTRA has friends in high places and they have ensured that it will not be affected by the restrictions, so online betting on horse races will still be allowed.

Of course this just makes it even clearer that the issue is one of politics, not technology. The banks were targeted because companies offering financial services need to look honest.

Deliberately flouting the law is bad for customer and investor confidence, so they can be relied on to follow even unreasonable rules.

Whether or not they are effective in the long term, the new laws highlight the point made by Jack Goldsmith and Tim Wu when they say that the "dream of self-governing cyber-communities that would escape geography forever" has been replaced by "a bordered network where territorial law, government power and international relations matter as much as technological invention".

The "dream" sounds more like a nightmare to me, so I can't say that I regret its passing.

The internet has always been a bordered network, and we ignore this geopolitical reality at our peril.

If we want to make the network free, open and accessible to all we need to engage with it on these terms instead of resorting to virtual techno-utopianism.

The US Congress may have done us all a service by drawing our attention the reality of today's internet and the ease with which it can be controlled.


Bill Thompson is a regular commentator on the BBC World Service programme Digital Planet




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