- The Washington Times - Monday, June 24, 2013

The revelations about secret surveillance programs that the National Security Agency uses to collect data and sometimes spy on people aren’t making life easy for U.S. technology giants such as Google and Facebook that now lie under a cloud of suspicion as they try to expand in foreign markets.

In fact, the U.S. government’s efforts to use top tech companies to spy could cost the industry billions of dollars, analysts say, as it tries to recover from the unintentional damage to its reputation.

“The Googles and the Facebooks, I don’t know how they cope with this issue,” said Gary Hufbauer, senior fellow for trade and economics at the Peterson Institute for International Economics. “There will always be that suspicion.”

When information technology specialist and former National Security Agency employee Edward Snowden first revealed details of the secret surveillance programs this month, it did more than stir up resentment against the United States; it also raised concerns about such familiar American brand names as Google, Facebook, Apple, Microsoft, Yahoo, YouTube and Skype, which all gave the NSA access to their servers.

At least nine companies participated in an NSA surveillance program known as Prism, which collects Internet and phone records and can, with a court order, gather the content of video chats, photos, emails and documents.

Officials say the NSA used this information to foil more than 50 terrorist plots since Sept. 11, 2001, but many Americans are upset that the U.S. government would spy on millions of people to do so, and they see the program as reminiscent of the omnipresent Big Brother of “1984.”

But tech firms that participated in Prism have larger worries than irate U.S. citizens. They have a worldwide presence and customer base, and will face intense scrutiny abroad after their cooperation with the U.S. government, industry analysts said.

Indeed, one of the companies’ principal public defenses — that they are not turning over anything to spy agencies beyond their legal obligations — could aggravate foreigners’ fears of using a U.S. technology company for email or videoconferencing. U.S. law, like that of most other countries, protects its own citizens’ privacy more vigorously than that of foreigners.

A handful of European governments are rallying against Washington and these technology companies.

France has taken the lead, giving Google three months to explain exactly what type of data it collects from customers, or face a fine.

The French National Commission on Computing and Freedom is working with Spain to get Google to be more upfront about the information it collects and says Germany, Britain, Italy and the Netherlands will join the efforts.

This won’t help Facebook’s reputation, either.

“There’s already a sentiment out there that Facebook captures people’s data,” said Brian Blau, research director at Garnter, a technology research firm. “So the real question is whether this will change anybody’s perception about Facebook.”

Although Google, Facebook and other major Internet companies are not likely to go out of business or be banned from these countries, they may have to work through expensive barriers that will give their competitors an inherent advantage.

“I think they’re going to be required to somehow demonstrate that some European or Asian person who uploads a photo or uses Gmail, that their information is not intercepted,” Mr. Hufbauer said. “They’re going to have to prove that they can put up some kind of a Chinese wall to stop the NSA from getting this information. And that will be very expensive for these firms.”

These additional compliance measures and the business the companies lose overseas could cost the U.S. technology industry billions of dollars and “be a handicap for U.S. firms,” Mr. Hufbauer said.

What’s worse, tech firms that were not even named on the Prism list will be subject to suspicion.

“It’s very difficult for any company to prove that it does not do business with the NSA or CIA,” Mr. Hufbauer said. “So now you have this suspicion out there.”

Trade publication Computerworld reported last week that U.S. companies trying to market in-demand “cloud” computing services abroad also are facing headwinds, with rivals in Europe playing up the privacy issues facing such American companies as Amazon Web Services and Rackspace from the revelations of U.S. government surveillance programs.

“I think it will be really damaging for U.S. companies in terms of competing abroad. It is not something we have played up when marketing our services, but it is a fact that customers are going to discriminate,” Robert Jenkins, CEO at Swiss company CloudSigma, told the publication.

For that matter, all U.S. tech companies may be required to go to great lengths to show they are not connected to the government.

Meanwhile, their international competitors could use this to gain market share overseas.

“They’ll have an easier time doing business, while the Googles will have a harder time doing business,” Mr. Hufbauer said.

In many ways, U.S. tech companies will face the same pressures that Chinese firms such as telecommunications giant Huawei have faced here.

“What American tech firms will go through from competitors is akin to the whisper campaign Chinese firms like Huawei now face,” said Peter Singer, director of the Center for 21st Century Security and Intelligence at the Brookings Institution. “Local firms will say privately, ‘Don’t buy them; this shows how you can’t trust them like you can trust us.’”

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