Silicon Valley Scores Victory Against the Surveillance State

With the release of a highly anticipated report on U.S. intelligence practices, American technology executives appear to have scored a hard-fought victory. That report contains a set of recommendations that seem to incorporate the concerns of tech and business executives who have repeatedly argued that their reputations and bottom lines are at stake in the ongoing debate over how to reform intelligence gathering in the aftermath of Edward Snowden’s revelations about the activities of the National Security Agency.

Among other things, the report recommends that the government publish data on how frequently it compels companies to provide information about their users. It also recommends that companies be allowed to release such data and the frequency with which they comply with government demands. The panel also argued that the intelligence agencies should not be allowed to install so-called backdoors in software that allows intelligence agencies to clandestinely tap into software and systems. Additionally, the panel argued that the government should not compromise encryption technology, allowing it to unscramble protected communications.

Taken together, the panel appears to have incorporated the concerns of business executives who worry that users — especially abroad — may be scared away from their products amid fears that they may be compromised by the NSA. On Tuesday, President Obama met with a group of technology executives who pressed him for an explanation on the extent of NSA penetration of their system. Their message to the president, in the words of an industry insider quoted by the Washington Post: "What the hell are you doing? Are you really hacking into the infrastructure of American companies overseas? The same American companies that cooperate with your lawful orders and spend a lot of money to comply with them to facilitate your intelligence collection?"

In unmasking the NSA, Snowden didn’t just deeply embarrass the U.S. intelligence community. He also rattled technology executives in Silicon Valley. In setting up a veritable surveillance empire, the NSA has relied on major U.S. technology and telecommunications companies to gain access to user data, tap into fiber-optic cables, and plumb the reaches the Internet. In effect, the NSA has made it a goal to collect any and all data it thinks might be useful in protecting U.S. national security. In doing so, it has enlisted U.S. industry as an ally. Often they didn’t sign up willingly and were compelled to cooperate by court order.

But in the public relations catastrophe that has ensued that is a distinction without a difference. To clients and users around the world, many American companies are now seen as tainted by their association with the NSA. And that may be having a serious impact on their bottom lines. Tech giant Cisco claims that its sales have suffered internationally as a result of the Snowden revelations, and on Wednesday, Brazil announced that it would purchase 36 Swedish fighter jets instead of Boeing’s F-18, costing the American defense contractor some $4 billion. The Snowden revelations were cited as a key factor in Brasilia’s decision to snub Boeing, which had been seen as a front runner to secure what had been described as the most lucrative defense contract in the developing world. That may just be the tip of the iceberg.

The recommendations in Wednesday’s report include a series of proposed reforms that would begin to address the concerns of American businesses who argue that aggressive intelligence gathering activities could scare away potential clients and customers.

A group of eight prominent tech companies laid out their concerns in a letter on Monday. "We understand that governments have a duty to protect their citizens. But this summer’s revelations highlighted the urgent need to reform government surveillance practices worldwide," the letter, which was signed by Microsoft, Google, Apple, Facebook, LinkedIn, Yahoo, AOL, and Twitter, said. "The balance in many countries has tipped too far in favor of the state and away from the rights of the individual — rights that are enshrined in our Constitution. This undermines the freedoms we all cherish."

Telecom companies such as AT&T, T-Mobile, and Verizon have been at the center of Snowden’s revelations about American intelligence gathering, and some of those companies are now facing legal battles in which angry users are compelling them to reveal the extent of their cooperation with the U.S. government. According to one of the first reports in the Snowden saga, Verizon is handing over its users’ call records in bulk at the behest of the U.S. government. But as a result of the stringent security requirements of the laws that compel the company to do so, Verizon has been largely unable to detail the extent of its cooperation with the NSA. Responding to such concerns, Wednesday’s report argues that companies compelled to reveal user information should be able to "disclose on a periodic basis general information about the number of such orders they have received, the number they have complied with, the general categories of information they have produced, and the number of users whose information they have produced in each category." The government, the report argues, should adopt similar disclosure requirements for the requests it issues. If adopted, the rule change would be a major victory for tech companies.

The report — authored by Richard Clarke, a veteran counterterrorism official in the Clinton and Bush White Houses; Michael Morell, a former deputy director of the CIA; Cass Sunstein, a former Obama administration official and Harvard Law School professor; Peter Swire, an expert in privacy law at the Georgia School of Technology; and Geoffrey Stone, a professor of constitutional law at the University of Chicago — broadly comports with a brewing effort in the Senate to pass legislation that would overhaul U.S. intelligence practices. Under legislation championed by Sen. Ron Wyden, the Oregon Democrat, the NSA would no longer be allowed to collect on a mass-scale the communications logs of Americans and would adopt disclosure requirements similar to those contained in the report. The bill is co-sponsored by Sen. Mark Udall (D-Colo.), Sen. Richard Blumenthal (D-Conn.), and Sen. Rand Paul (R-Ky.)

Obama will be departing for Christmas vacation to Hawaii next week and is said to be bringing the report with him. He plans to consider its recommendations and return in January to make a decision on which of them to adopt. For now, the White House is staying mum on how it plans to approach the issue. "As a general matter, we’re going to take the next several weeks to review the Review Group’s report," Caitlin Hayden, a spokesperson for the National Security Council, wrote in an email.

The ball is now in the president’s court. Meanwhile, Silicon Valley has been handed a powerful argument in their effort to distance themselves from the NSA.

Whether Obama will accept that argument remains to be seen.

John Hudson contributed to the reporting of this story.