Collateral Damage From the NSA Spying Debacle: Trust in U.S. IT Companies is Shattered

Linda Musthaler
By | September 23, 2013

Posted in: Network Security Trends

There’s an old proverb that goes something like this: Crap rolls downhill. (Well, the proverb uses an even more crude slang word instead of “crap,” but I’m trying to be polite here.)

I think this proverb aptly applies to the fallout from Edward Snowden revealing secret details of government mass surveillance programs initiated by the National Security Agency (NSA). Since it has become public knowledge that the U.S. government has spied on private citizens, foreign governments and all sorts of businesses, the crap is rolling, and who knows how far it will go? It’s certainly stirring controversy in Brazil.

The Associated Press just published an article about Brazil wanting to break away from the US-centric Internet, which could cause a ripple effect around the world.  According to the article:
 

  Brazil plans to divorce itself from the U.S.-centric Internet over Washington's widespread online spying, a move that many experts fear will be a potentially dangerous first step toward fracturing a global network built with minimal interference by governments.President Dilma Rousseff ordered a series of measures aimed at greater Brazilian online independence and security following revelations that the U.S. National Security Agency intercepted her communications, hacked into the state-owned Petrobras oil company's network and spied on Brazilians who entrusted their personal data to U.S. tech companies such as Facebook and Google.Internet security and policy experts say the Brazilian government's reaction to information leaked by former NSA contractor Edward Snowden is understandable, but warn it could set the Internet on a course of Balkanization.

While Brazil isn't proposing to bar its citizens from U.S.-based Web services, it wants their data to be stored locally as the nation assumes greater control over Brazilians' Internet use to protect them from NSA snooping.


According to the article, Brazilians collectively rank #3 in the world as users of Facebook, and #2 as users of both Twitter and YouTube. Now President Rousseff is urging Brazil’s congress to mandate that all data generated by Brazilians – whether it’s in these popular services or any other – be stored locally within the country.

Such a mandate already exists in the European Union through the European Data Directive. Cloud providers who want to do business in member countries have to figure out a way to ensure that private data does not exit country boundaries, and that usually means having to establish data centers or at least physical servers inside those countries.

Of course, people and businesses in those countries can simply go elsewhere rather than to U.S. cloud providers. According to the AP story:
 

  An August study by a respected U.S. technology policy nonprofit estimated the fallout from the NSA spying scandal could cost the U.S. cloud computing industry, which stores data remotely to give users easy access from any device, as much as $35 billion by 2016 in lost business.


But that’s not all that’s rolling downhill these days. Now there is a very large seed of doubt about privacy protections in American-made software, including web services. Many people believe that the NSA has created backdoors in such software in order to access private information at will. If that sounds like pure paranoia, consider that rumors have swirled for the past year or so about Chinese companies Lenovo and Huawei putting backdoors into the hardware they export to other countries. Certainly anything is possible.

None of this bodes well for American IT companies trying to do business in Brazil. If anything, the barriers to entry for that market will get higher. Last week I was speaking to an executive who used to work for an American company that sells security appliances, and he told me that tariffs and taxes imposed on imported equipment at least triples the price of such products in Brazil. Now it could be even harder to make a sale, not just because of price but also because of suspicions about data privacy.

This brings to mind another proverb that the NSA should heed: “Oh what a tangled web we weave when first we practice to deceive.

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