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PRISM Could Put the Kibosh on US Trade Abroad

PRISM Could Put the Kibosh on US Trade Abroad

Europeans are not taking revelations about the U.S. government's PRISM surveillance program in stride, and that could be exceedingly bad for U.S. businesses. One sector that's already seeing cause for alarm is cloud services. Interest in using U.S.-based cloud service providers has dramatically waned since PRISM erupted -- and things could get much worse, a recent survey found.

By Richard Adhikari
07/26/13 5:00 AM PT

American cloud service providers seeking to do business abroad are feeling the fallout from the NSA's PRISM surveillance program, suggests a month-long online survey the Cloud Security Alliance initiated in June.

Fifty-six percent of more than 200 overseas respondents said they were less likely to use United States-based cloud providers, and another 10 percent had canceled projects to use U.S.-based cloud service providers.

However, 64 percent of more than 220 U.S.-based respondents said the disclosures about PRISM had not made it more difficult for them to do business, and only 36 percent said they did.

"IDC estimated revenue from cloud computing in the United States would grow to about US$43.2 billion by 2016, while the worldwide market for cloud computing will be worth $206.6 billion," Daniel Castro, senior analyst at the Information Technology & Innovation Foundation, told the E-Commerce Times.

Even a small loss in the share of a market that size, which is growing rapidly, "translates into serious economic consequences in terms of jobs and revenue," Castro continued.

Gleaned From the Survey

The survey drew responses from more than 450 CSA members worldwide.

The Patriot Act should be modified to provide greater transparency and tighten the oversight of permitted activities to mitigate concerns about PRISM, 45 percent of the 423 respondents on this issue said. Another 41 percent called for the Patriot Act to be repealed.

A question about transparency drew 438 respondents, 91 percent of whom said companies subpoenaed under FISA or other aspects of the Patriot Act should be able to publish summaries about the number of responses they have made.

Transparency has become the focus of efforts to modify the NSA's surveillance. Those challenges have come from corporations, public interest and privacy groups, and other organizations.

Google has called for more transparency, as has Microsoft, and Sen. Patrick Leahy, D-Vt., has introduced legislation to limit domestic surveillance.

Making America Uncompetitive

"Cloud service providers, companies doing SaaS, are all moving towards a majority of the revenue being outside of the U.S., which is a shrinking part of the overall global market," Jim Reavis, cofounder and executive director of the CSA, told the E-Commerce Times.

That won't be good for trade -- the U.S. trade deficit increased from about $40 billion in April to $45 billion in May, U.S. Census Bureau figures show.

Microsoft, which is planning to move from selling software packages to offering subscription-based services through the cloud, might have to rethink things, and it might further lose sales to governments and individuals abroad because of the ripple effect from the PRISM revelations.

It Ain't Me, Babe

The majority of potential cloud services customers concerned about PRISM are in Europe, "but it will spread to other areas as well," the CSA's Reavis predicted. "If this doesn't get fixed, we're looking at some big numbers."

Germany has called for strict global rules on the protection of personal data and criticized the NSA's spying on its citizens, while two French human rights groups have filed suit against the NSA, the FBI, and several U.S. high-tech firms reported to be involved in the PRISM program.

However, protests from Germany and the rest of Europe ring hollow, as Edward Snowden, who leaked details of the PRISM program, has said that governments there have worked closely with the NSA on a no-questions-asked basis.

Still, "long term, the question is whether a country steps in to be the equivalent of a digital Switzerland or digital Cayman Islands," Castro said. "If that happens, the U.S. will either have to adapt or say goodbye to its long-term prospects as a top exporter of digital goods and services."


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