Regardless of where you stand on surveillance, civil liberties, and "the war on terror," I think almost everyone can agree with this point Barack Obama made today—intelligence agencies all over the world like to do spying:
There is a reason why Blackberries and iPhones are not allowed in the White House Situation Room. We know that the intelligence services of other countries—including some who feign surprise over the Snowden disclosures—are constantly probing our government and private sector networks, and accelerating programs to listen to our conversations, intercept our emails, or compromise our systems.
An important question about business and American economic policy is to ask which way this cuts at the end of the day. American technology companies are coming together these days to push for less government surveillance not because they believe in "privacy" as such (the entire business model of Google and Facebook is about collecting and deploying user data, and Microsoft and Twitter and Yahoo and to an extent Apple and Amazon are all at least a little bit in this business) but because they have global aspirations. You can't be a global company in a world of national rivalries if the use of your product is seen as a security vulnerability. Right now, Google and Facebook don't really exist in China because China insists on using online services as part of a China-controlled system of surveillance. At the same time, the House Intelligence Committee says that the use of Huawei and ZTE products in the United States is a threat to American national security. The U.K. is also looking at tighter rules on the use of Chinese technology products.
You can imagine a world in which this sort of fragmentation continues and we have no Chinese technology companies operating in the United States and no American technology companies operating in China.
Obama followed up:
Meanwhile, a number of countries, including some who have loudly criticized the NSA, privately acknowledge that America has special responsibilities as the world’s only superpower; that our intelligence capabilities are critical to meeting these responsibilities; and that they themselves have relied on the information we obtain to protect their own people.
Of course you and I can't assess how many countries that publicly protest are privately acknowledging this to American officials. Obama should also acknowledge that he can't assess how many countries that are privately acknowledging this to American officials don't actually mean it.
In a scenario where the Internet fragments, a question becomes how many countries are comfortable with their government officials, their citizens, and their firms being easily surveilled by the American government through the use of American technology products. China probably isn't on the list. Russia isn't on the list. You could imagine the European Union deciding to go its own way, with its own set of online services. If Brazil led Latin America into separatism, then that region would probably have to put up with somewhat inferior products. But it's hardly unprecedented for countries to ask citizens to put up with somewhat inferior products for the sake of trade protectionism, much less national security. We know the "five eyes" of Anglophone surveillance agencies have extensive collaboration, so we could have a little Anglophone Internet bloc together.
Obviously this is wildly speculative and the global Internet we know isn't going to vanish next month. But as the China case shows, the "global" Internet is already a bit of a myth. And to the extent that the American government wants to treat the dominance of American firms in the global market for Internet services as a source of national security advantage, that global Internet will tend to shrink with big implications for one of our leading industries. Everybody spies. But if it specifically turned out that the German government was using Volkswagen, BMW, and Mercedes products as surveillance tools that would have major implications for the global automotive industry and Germany's place in it.