Advanced Computing in the Age of AI | Saturday, January 29, 2022

Study: NSA Spying Fallout Extends Beyond Cloud 

U.S. National Security Agency digital surveillance programs that were previously estimated to cost U.S. cloud vendors as much as $35 billion in sales by 2016 could "far exceed" that total as a ripple effect threatens the competitiveness of the entire U.S. tech sector, a new report asserts.

In response to revelations by whistleblower Edward Snowden, the Information Technology & Innovation Foundation, a Washington-based tech lobbyist, predicted in 2013 that U.S. cloud vendor sales would take a hit ranging from $21.5 billion to $35 billion. "Since then, it has become clear that the U.S. tech industry as a whole, not just the cloud computing sector, has underperformed as a result of the Snowden revelations," asserts an updated assessment of the impact of NSA spying released this week.

The report also accuses foreign competitors of using the anger over U.S. surveillance "as a cover for implementing a new wave of protectionist policies specifically targeting information technology." It cites numerous cases where European companies have decided not to store data in North America in response to NSA spying.

The trade group reported that U.S. surveillance revelations contributed to an estimated $124 million quarterly sales shortfall for Salesforce after a German insurer pulled to plug on a database deal in response to spying revelations.

The report also found that key enterprise vendors like Cisco Systems, Hewlett-Packard, IBM and Microsoft have lost sales in Brazil, China and Russia as a result of Snowden's revelations. In Cisco's case, reports that NSA was secretly inserting backdoor surveillance tools in routers, switches, servers and other networking equipment hurt foreign sales.

(It should be noted that Chinese Internet carriers were removing Cisco routers from their backbone networks prior to the Snowden revelations at a time when the U.S. and China were at odds over the proposed entry of Chinese networking vendors Huawei and ZTE into the U.S. market. Cisco has also faced criticism for allowing its routers to be used by Chinese authorities to block and monitor domestic Internet traffic.)

Growing anger over U.S. spying has also filtered into overseas marketing campaigns, the study reported. For example, a German cloud vendor pitches its services as "Cloud Service: Made in Germany." These efforts are seen as evidence of a growing European movement toward "data localization" and as a way to "promote deployment of cloud services entirely focused on the European market," the U.S. trade group asserts.

While the report advocates passage of a controversial trans-Pacific trade deal as a way to ban "digital protectionism," it also calls for stronger information security, including opposition to government efforts to weaken encryption.

Among the remedies proposed by the trade group is a fundamental shift in favor of U.S. economic competitiveness: "The U.S. government will need to set a new course that balances economic interests with national security interests," the authors concluded. While Congress has moved in recent weeks to rein in the NSA's bulk collection of domestic phone records—shifting the collection and storage of approved metadata to companies rather than spy agencies—the trade group called for greater transparency about U.S. surveillance practices.

Most observers agree that's a tall order.

At a practical level, the group called for passage of information security legislation that would ban government efforts to introduce backdoors into software or weaken encryption. Acknowledging that passage of such legislation is unlikely anytime soon, the group said the White House should issue an executive order formalizing U.S. policy against weakening data security.

About the author: George Leopold

George Leopold has written about science and technology for more than 30 years, focusing on electronics and aerospace technology. He previously served as executive editor of Electronic Engineering Times. Leopold is the author of "Calculated Risk: The Supersonic Life and Times of Gus Grissom" (Purdue University Press, 2016).

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