Blog : Obama NSA Speech Reaches Out to Tech Sector

by Ed Zwirn on January 17th, 2014

The surveillance conducted by the U.S. government against its own citizens has been rightly seen through a civil liberties lens. With the government keeping track of everything from our phone calls to our internet usage, it is feared, our Constitutional protections against unwarranted searches and seizures would soon become empty phrases, assuming in fact they haven't already become so.

But, as the president's speech Friday on his plans to "reform" the spying activities of the government's National Security Administration makes clear, the revelations of former government contractor Edward Snowden about these activities have lead to real concern on the part of a key business sector.

Barack Obama, part of a Democratic party which gets a significant amount of campaign money from Silicon Valley, used his speech send out peace feelers to the tech sector.

And the tech sector has in fact been fuming against the administration since the leaks. There are the ideological reasons for this. Technology entrepreneurs tend to be younger and more liberal than the captains of industry are generally. And they have bristled as the Snowden leaks have exposed them as the tools of government data surveillance programs.

But the objections to NSA spying go much beyond questions of ideology and image-minding. There is a clear question of dollars and cents involved.

As I pointed out in an October penny stock blog, Silicon Valley companies, including many penny stock companies with a significant presence in the Cloud, stand to lose out on billions of dollars if the U.S. does not quickly move to sort out international concerns about Cloud data security.

Until recently, U.S. companies have held an overwhelming lead in the provision of Cloud services, currently holding about 85% of the global market share. The global market for cloud computing is expected to grow from $148 billion in 2014 to $207 billion in 2016. Most of this growth is expected to come from outside the U.S., where the market is expected to grow over 50%.

In addition to pumping up the U.S. tech sector, the Cloud has also enabled many smaller innovative penny stock companies to get a leg up by sparing them the expense and trouble of maintaining their own computer systems.

Silicon Valley has so far enjoyed an overwhelming lead in the provision of Cloud services, if only because it was first out of the gate. While the Valley's market share is bound to decrease in any case as international competitors arrive, experts agree that this market share will only decrease even more rapidly as international concerns mount about the security of data entrusted to U.S. Cloud providers. According to one worst-case scenario, this would entail $35 billion of lost revenues through 2016, assuming the U.S. market share declines by 20%.

Obama's Olive Branches

To mend the rift with Silicon Valley, Obama's speech and the presidential executive directive it announced offered a few olive branches.

Perhaps the most significant in the long run of these may prove to be the president's order that the State Department "designate a senior officer to coordinate our diplomacy on issues related to technology and signals intelligence."  In other words, Obama has let out the word that he wants to avoid a Cloud crisis through negotiation. In this regard, he directed the establishment of a White House advisory group to see "whether we can forge international norms on how to manage this data; and how we can continue to promote the free flow of information in ways that are consistent with both privacy and security."

Also revealing is some of the language contained in the executive order itself, which--for foreigners at least--go farther than U.S. legal rulings that do not require Constitutional protections for non-U.S. persons.

One example that is already being scrutinized around the globe: "All persons should be treated with dignity and respect, regardless of their nationality or wherever they might reside, and all persons have legitimate privacy interests in the handling of their personal information."

Another is even more revealing, promising that "personal information shall be disseminated only if the dissemination of comparable information concerning U.S. persons would be permitted under section 2.3 of Executive Order 12333"and "be retained only if the retention of comparable information concerning U.S. persons would be permitted."

These and other pledges made by the president have been made to address the concerns of a key and growing economic sector, one that is particularly dependent upon international cooperation for growth, and that is the reason Obama made more concessions on the NSA issue to critics abroad than he gave to domestic critics of the spying program.

The tech sector is not surprisingly divided on the Obama proposals, with Wired.com lauding the president for addressing tech sector concerns and others predictably opining that these proposals fall far short of what is needed. At the same time, governments and companies in Europe and elsewhere are probably looking closely at the proposals to see if they can at least serve as a starting point for a problem that threatens the internet and all the companies, not to mention civil liberties.