Worldwide fallout from the recent revelations that the National Security Agency is monitoring Internet communications could damage the ability of U.S. IT companies to work with customers worldwide, and could even change the fabric of the Internet itself.

Officials from worldwide governments — some of which have stronger data privacy laws than does the U.S. — leapt to condemn the NSA’s PRISM program.

And this wasn’t just a “Shocked! Shocked, I am!” reaction. These government officials were really pissed off.

Now it’s looking as though companies worldwide — many of which had already expressed concern about data sovereignty issues — are putting their money where their mouth is and reconsidering working with U.S. companies, which are subject to U.S. government oversight even when operating in other countries. And non-U.S. competitors are apparently encouraging such concerns. “The move reflects powerful differences in the way that Americans and Europeans view privacy — and just happens to coincide quite nicely with the commercial interests of European Internet companies,” notes Steve Rosenbush in the Wall Street Journal.

This is particularly the case for cloud vendors. In June and July, the Cloud Security Alliance surveyed its members and found that 10 percent of respondents who didn’t reside in the U.S. had already cancelled a project with a U.S.-based cloud computing provider, while 56 percent said that they would be less likely to use a U.S.-based cloud computing service. For U.S. residents, 36 percent indicated that the NSA leaks made it more difficult for them to do business outside of the United States (though 64 percent said they didn’t).

“The U.S. cloud computing industry stands to lose $22 to $35 billion over the next three years as a result of the recent revelations about the NSA’s electronic surveillance programs,” predicts the Information Technology and Innovation Foundation in its report How Much Will PRISM Cost the U.S. Cloud Computing Industry?, released earlier this month. That would mean U.S. companies could lose from 10 to 20 percent to non-U.S. vendors by 2016. “It is clear that if the U.S. government continues to impede U.S. cloud computing providers, other nations are more than willing to step in to grow their own industries at the expense of U.S. businesses,” the report concludes.

“If European cloud customers cannot trust the United States government, then maybe they won't trust US cloud providers either,” Neelie Kroes, the European Commission vice-president who speaks on digital affairs, told The Guardian. “If I were an American cloud provider, I would be quite frustrated with my government right now."

James Staten of Forrester is even more pessimistic, expecting costs of up to $180 billion, or 25 percent, because he thinks U.S. companies will bypass the cloud as well. Moreover, he warns, non-U.S. companies could also take a hit due to similar actions by other governments.

And it’s not just computer companies — Brazil is even considering scuttling a $4 billion plan to buy fighter jets from the U.S. “"We cannot talk about the fighters now … . You cannot give such a contract to a country that you do not trust," Reuters quoted a high-level Brazilian official as saying.

In addition, Germany’s leading telecom company announced that all email flowing among three of the nation’s email services will remain on German servers at all times, reports Rosenbush. Such international siloing adds complexity and cost to IT operations, David Horrigan, an analyst and attorney at 451 Research, told the Journal. Not to mention, it defeats the entire purpose for which the Internet was intended.

Consequently, the NSA revelations could affect the way the Internet itself is governed. Against worldwide pressure, the U.S. has worked to maintain its major role in Internet governing agencies such as the Internet Corporation for Assigned Names and Numbers, or ICANN, which maintains the Domain Name System.

Now, some countries, notably Russia, where NSA whistleblower Edward Snowden fled after making his revelations, are saying that that the U.S. shouldn’t be trusted with such a pivotal role. These countries, a number of which have already indicated that they would like more control over how their citizens use the Internet, have been suggesting that the U.N. should have a large role in how the Internet is managed.

“The Russian Senate is also proposing the creation of a United Nations agency to monitor collection and use of personal data, akin to the International Atomic Energy Agency, which oversees nuclear materials, to keep tabs on firms like Facebook and Google that harvest personal data,” reports the New York Times. “Many independent advocates for Internet freedom have for years, however, characterized the Russian policy proposals as deeply worrying, for their potential to hamper free communication across borders and expose political dissidents inside authoritarian states to persecution.” The Russian proposal is getting support from some other countries, like Brazil.

Such efforts have been going on for several years, but the NSA revelations may have given their backers new ammunition, and the potential to change the Internet for years to come.

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