The Internet: A Walled World Under Constant Surveillance?

What happens when the physical and virtual worlds converge?  After all, the digital age is only in its infancy, and already, the boundaries between the two are becoming increasingly blurred. 

Will this dual reality "move toward more networked individualism based on continued technological progress and trust in computer and human networks—including the withering of boundaries"? Or, will it move toward walled surveillance, and corporate ownership of everyone and everything?

"The Individual in a Networked World: Two Scenarios". suggests two scenarios. One, "Collaborative Agents In Augmented Reality", and two, "A Walled and Surveilled World".

I'm betting on #2.