With an abruptness reminiscent of its decision to sever its connection with the world, Egypt restored Internet access on Wednesday amidst continuing unrest directed against beleaguered President Hosni Mubarak. While the political cause of the shutdown looks unlikely to be resolved any time soon, analysts and observers are already trying to peg an economic cost to the incident.

Taking a first guess at the damage, OECD (Organization for Economic Cooperation and Development) ventured that the Internet shutdown cost Egypt $90 million. I think Craig Labovitz, chief scientist at Arbor Networks summed up the entire situation well when he wrote: "Put simply, we have never seen a country as connected as Egypt completely lose Internet connectivity for such an extended period." With Egypt still in turmoil and without similar examples of equivalent magnitude with which to reference, the truth is that we might never be able to determine the actual cost.  Still, the debacle could well trigger a paradigm shift in how businesses view the Internet.

The business of the Internet

In the early days, the loss of the Internet equated to nothing more than a communication disruption as emails and chat rooms were cut off. Later, advancements in search engine technology and the sheer volume of information uploaded onto the global Internet meant that a loss of connectivity became an obstruction to free access to knowledge and news. These characteristics were precisely what instigated Egypt to strong-arm the nation's service providers to break off from the Internet and silence the protests.

The Internet has since evolved beyond communication and knowledge, however. Reports are still coming in, but it is clear that any losses cannot be pegged merely to the loss of revenue on the telecommunications front. The disruption in connectivity has had a direct and immediate impact on businesses that needs the Internet to operate, which range from a growing outsourcing sector to e-commerce providers. Other affected sectors include indirect activities such as online backup or even business continuity and disaster recovery plans that rely on the Internet. As OECD science and technology researcher Arthur Mickoleit put it: "There is a business layer sitting on top of the Internet employing people, because the Internet is there."

The value of geographical dispersion

After 9/11, enterprises threw out the conventional wisdom that says data backup in two separate locations is good enough, and started storing their data backups in different states instead. While the same situation is unlikely to take place in the United States, Egypt's flipping of the Internet switch essentially opened Pandora's Box and ignited fears of the same situation happening elsewhere. Suddenly, having one's data backups and services dispersed across geographical regions or continents--not just countries--started to look more like a necessity than a luxury.

So where does this all lead to for Egypt? Well, the Internet has been switched on again, but the loss of confidence could well ratchet up an economic debt far into the future. I think it is fair to say that no foreign (or many local) businesses will want to base their Internet services in the country, for the short to mid-term at least. - Paul Mah  (Twitter @paulmah)