New headlines pop up daily about Russian cybercrime, but just as concerning is Russia’s recent efforts to restrict the Internet after almost 25 years of allowing an open Internet to develop into an engine of commerce and communication.
The Kremlin is increasingly taking steps to exert more control over the Internet by monitoring what information can be made available domestically and implementing regulations to ensure Russian consumers only access certain information. Since 2012, Russia has erected a wall of protectionist barriers in an effort to block online content. From increasing control over traditional and online media in 2014 to new data localization laws in 2015, Russia continues to disrupt market access for foreign technology companies by implementing more and more restrictive laws with high penalties for non-compliance.
Most recently, Vedomosti, a Russian business newspaper, reported that Russian authorities have drafted a bill that will create a new penalty allowing the government to slow down website speeds and temporarily block access to the Russian market for up to 90 days if a company is determined to be non-compliant with Russian laws.
This draft appears to be based on recommendations made in 2016 by the Russian Federal Antitrust Service (FAS) establishing a set of net neutrality principles. These principles included an exception in order to ensure the enforcement of Russian law. Many speculate that the current bill was created by the FAS and other agencies are utilizing this exception to apply pressure on foreign companies.
The new penalty will apply even if the company does not have a physical presence in Russia. Though it applies to both foreign and domestic companies, the draft regulation is targeting foreign companies that do not legally have to follow judgments from Russian courts because they are registered abroad rather than in Russia.
In response, Russia has already blocked LinkedIn from the market after a finding of non-compliance, even though the company has never had any physical presence in Russia. The reality is that such regulations are not a “penalty” but a market access barrier harming foreign firms that choose to operate in Russia.
The draft law will also allow the government to authorize which types of software will be allowed on devices. It calls for the creation of a register that will list the designated software that is permitted on devices. Any devices that use software not on the list could ultimately be banned from the Russian market and face financial penalties. This will cause manufacturers to be held liable for the services they provide on their devices.
In its current draft form, the bill will apply to both domestic and foreign companies if eventually passed into law. Some Russian technology leaders have anonymously spoken out against the draft bill, referencing the potential to seriously harm domestic companies as it could impact services that depend on streaming to operate Further, it will be difficult and costly for the Russian government to fully implement a mechanism capable of throttling access to online services.
Russian consumers will also be negatively impacted. Any regulation controlling what software is allowed on devices will severely limit user choice. Russia’s blocking of LinkedIn was met with little backlash but only impacted around 5 million Russian users.
However, more than 90 percent of Russian Internet consumers use social networks; for example, more than 20 million Russians use Facebook. Temporarily blocking or slowing down these popular sites could cause a backlash. It will also take longer for Russian consumers to gain access to new, innovative software that must first go through an approval process in order to become part of a designated list.
Further, customer service is extremely important as Russian users typically want immediate answers to their questions, with a maximum of 15 minutes waiting time. Any slowing of website access could potentially cause a backlash toward providers.
This new draft bill is especially concerning as a potential sign of more regulation to come. China and Russia are increasingly cooperating in the digital economy space. The blocking of LinkedIn and the proposed draft bill demonstrate that Russia is looking to adopt Chinese approaches to regulating the Internet.
Russia’s aggressive moves to block access to several Internet pages following the largest demonstrations in five years at the end of March suggest this trend may well continue. Yet, continuing on this path is unlikely to suppress resistance and will only heighten the isolation of the Russia economy from the global digital economy.