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Posted at 01:24 PM ET, 01/25/2012

Have we lost control of the Internet?

In the wake of the federal government’s takedown of Megaupload, Anonymous went on an Internet revenge crime spree, jamming access to the Justice Department’s Web site and promising future revenge-minded activities, including the creation of a new “cyberlocker” to replace Megaupload and a potential full-on attack of Facebook. Until a few days ago, most people had probably never heard of “cyberlockers” or envisioned zany characters like Kim Dotcom. They had never heard of off-the-shelf hackers for hire. They never believed that Facebook — a site used by 800 million people around the globe — could be the target of hacktivists. Now all of this is a reality.

Is it possible that we have lost control of the Internet?

For more than a year, there had already been talk of a vast new "Splinternet," governed by an expanding array of proprietary standards for a rapidly expanding array of devices that must connect to the Internet. These proprietary — and competing — standards threaten to erode the open standards that have made possible the rapid development of the Internet. At Le Web in Paris at the end of last year, the talk was of an application-based Internet that can no longer talk amongst itself. With all these competing standards and proprietary ecosystems, the Internet inevitably fractures into digital fiefdoms, controlled by players like Apple, Google and Facebook.

At the same time, the creation of “cyberlockers” like Megaupload — essentially file hosting services that make it possible to upload and download files at will — and new cloud computing solutions mean that information and files are no longer stored on physical devices or on computers; they are stored “in the cloud.” As you might imagine, this opens up a number of very real security questions. As The Washington Post’s Vivek Wadhwa pointed out at year-end, the risk of a "cloudburst" event where there is a major security breach of a cloud-based storage system is increasingly likely in 2012.

So where does all that leave the Internet?

The best comparison might be to the financial markets, where the major banks and financial intermediaries simply lost control of a system that rapidly spun out of control. Complex new derivative products made it impossible to understand how much money was at risk, and even with whom you were doing business. Massive hedge funds and investment bank trading desks created “dark pools” of liquidity where they can buy and sell large blocks of stock anonymously using computerized trading programs. A new “shadow banking system” developed, making it easier to put money to work without being subject to regulatory oversight or capital guidelines. The result was a dramatic increase in trading volatility, the collapse of entire markets and freakish events like the Flash Crash of 2010, when the market lost nearly 10 percent of its value in just minutes.

The major Internet players have lulled us into thinking that the Internet is a cute, friendly place where LOLcats hang out on our screens, our personal social networking profiles are safe from prying eyes and we’re able to download all the music and watch all the videos we want, as long as we get it from the same place every time. Just as we ignored Wall Street’s “shadow banking system” and “dark pools” until it was too late because we were too busy thinking how great it was to take out a half-million-dollar mortgage with no down payment, we risk ignoring the warning signals of an Internet that is slipping out of our control.

Thus far, we have been offered three possible scenarios: an Internet controlled by a handful of major players such as Google and Apple and Facebook; an Internet regulated by the federal government to keep us safe from outlaws, hackers and pirates; and a Wild West Internet where hacktivist organizations like Anonymous roam free.

Which of these are most preferable? For now, the answer is “none of the above.”

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