Global profits at stake as Apple, tech fight U.S. on security
SAN FRANCISCO — Apple's refusal to help the FBI break into the iPhone of San Bernardino, Calif., shooter Syed Rizwan Farook is not just about principles. It's about profits, too.
At stake are the sweeping international ambitions of the entire U.S. technology industry, billions of dollars in potential global growth that hinges on customers entrusting the most intimate details of their lives to Apple, Google, Microsoft and Facebook, especially in areas of the world where people have far greater qualms about the government gaining unfettered access to their personal information.
None of these tech giants with sprawling overseas operations can afford the perception they are cooperating with U.S. intelligence or forking over customer data. Damaging revelations from former National Security Agency contractor Edward Snowden in 2013 undercut tech companies around the globe, leaving them to reassure users that their personal communications were safe from the prying eyes of U.S. intelligence agencies.
"American tech companies, in general, face a much higher bar in every single country around the world to demonstrate that they are trustworthy suppliers of technology that respect their users," says David Kirkpatrick, a long-time tech journalist and founder of the Techonomy tech conference business. "All of those tech companies that build consumer products and operate globally have to be watching this with intense concern."
IBM, Cisco, Microsoft and others reported declines in business in China after the NSA surveillance program was exposed in 2013. The Information Technology & Innovation Foundation estimated the NSA imbroglio would cost U.S. businesses $22 billion through the end of this year.
Apple, whose second largest market is China, has positioned itself as a model global citizen whose devices command a premium because of the lengths it goes to safeguard customers' personal data.
Both Apple and Google engineered their software no one beside the owner can unlock a device.
Most of Apple's revenue is generated overseas. Its Americas revenue was $29.3 billion in its fiscal first quarter, accounting for 38.6% of total revenue. That number fell 4% year over year. The greater China region had the fastest growth rate, up 14%.
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Apple is legitimately concerned about its ability to retain the trust of users globally," Kirkpatrick said. "The last thing (Apple CEO) Tim Cook wants to do is shoot himself in the foot by making customers in Peru, China, India, Indonesia, Nigeria and Saudi Arabia think that his company would cooperate with their governments in infringing on their privacy."
A federal judge ordered Apple this week to bypass security functions on the iPhone used by Farook, one of the assailants in the December mass shootings in San Bernardino, Calif., that killed 14 people.
The order ignited a public fight between the Obama administration and Apple, with the world's most valuable company declaring it would not comply with the order to hack into the phone.
The U.S. government "has asked us for something we simply do not have, and something we consider too dangerous to create," Cook wrote in a letter published on the Cupertino, Calif.-headquartered firm's website. Cook termed this a "backdoor to the iPhone." The Obama Administration responded, saying it wants something more narrow — just a way to get at the information on one particular iPhone.
Facebook, Google respond
Google CEO Sundar Pichai publicly sided with Cook, saying "forcing companies to enable hacking could compromise users’ privacy" and would set a "troubling precedent."
Facebook released a statement, saying it complies with "lawful requests" from authorities but opposes tampering with the security functions of consumer tech products.
"We will continue to fight aggressively against requirements for companies to weaken the security of their systems," the statement read. "These demands would create a chilling precedent and obstruct companies' efforts to secure their products."
Twitter CEO Jack Dorsey expressed his solidarity on Twitter. "We stand with@tim_cook and Apple (and thank him for his leadership)!" he wrote.
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The reaction from other major technology companies has been more muted, possibly because they don’t want to jeopardize government sales or become a target themselves during the heated presidential election season. Yahoo and Microsoft declined to comment, referring reporters to statements from industry trade groups.
“Governments should not require the weakening of these necessary security standards. All Americans should be concerned with a precedent that mandates vulnerabilities in encryption," said a statement from Michael Beckerman, president and CEO of the Internet Association, one of the groups named by Yahoo.
Administration pressure
U.S. tech companies have come under growing pressure from the Obama administration. Top U.S. intelligence officials visited Silicon Valley last month to press tech companies to be more proactive in countering extremist groups.
That pressure has only intensified in the wake of the mass shootings in Paris and San Bernardino, Calif. Tech companies have been working to strike a balance between curbing the activity of extremist groups and protecting the privacy of their users.
At issue: Extremist groups use Twitter and other online platforms to radicalize and recruit followers and plan attacks. Facebook and Twitter, like other tech companies, do not permit content that promotes terrorism or incites violence, but they've struggled to keep up with policing content.
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Twitter said earlier this month that it suspended 125,000 accounts linked to the Islamic State over the past six months, and it's begun more aggressively policing the presence of ISIL.
In another signal of growing cooperation, within hours of the San Bernardino attacks, Facebook informed law enforcement that Tashfeen Malik, who carried out the attacks with her husband Farook, praised the leader of the Islamic State group minutes after the attack began. Malik posted the material under an alias account. Facebook removed the profile from public view and reported the contents to law enforcement.
"We condemn terrorism and have total solidarity with victims of terror. Those who seek to praise, promote, or plan terrorist acts have no place on our services," Facebook said in Thursday's statement.
As Google, Facebook, Apple, Amazon and others become ever more steeped in data-rich devices and services such as wearables, the Internet of Things and cloud computing, user trust is “essential” and privacy policies crucial, says Neil Richards, a law professor at Washington University in St. Louis.
On Thursday, Apple launched Apple Pay, its mobile-payment service, in China with hopes of establishing its largest market.
“Data is at the core of every single thing we do and interact with today," says Nathan Wenzler, executive director of security at software company Thycotic, echoing a common refrain among tech executives. "Protecting the privacy of our personal information has never been more important."