From June to August 2013, the Obama administration was shaken up by the revelations of Edward Snowden, who introduced the world to the extent of the National Security Agency’s (NSA’s) espionage activities. The NSA’s intelligence programs were originally created to collect information on individuals and groups suspected of terrorism. However, documents released by the former security consultant tell us that the U.S. Secret Service has used their monitoring devices for purposes far removed from the original ones. The program’s targets included the following:
- German Chancellor Angela Merkel
- Diplomats from the United Nations and European Union
- State-owned energy corporation Petroleo Brasileiro S.A.
- Brazilian President Dilma Rousseff
A survey showed that 25% of the affected organizations and people have already initiated procedures to relocate their data outside the United States. An article published by the Information Technology & Innovation Foundation (ITIF) reported similar findings, adding that US cloud service providers could lose 21.5 to 35 billion or 10-20% of their market shares to foreign competitors over the next three years.
Understanding How Surveillance Affects the Telecommunications Market
There are two things to keep in mind when it comes to surveillance and its effect on the telecommunications market. First, the general public doesn’t truly understand the NSA’s intrusive surveillance programs and how these programs contribute to industrial espionage and undermine confidence in American businesses. Secondly, European countries, as well as Brazil, are beginning to organize boycott actions and add protective measures to their businesses in order to stay safe from the NSA’s surveillance. It makes sense that a company frustrated by a spying program would prefer to relocate, change services, drop market shares, or even completely cease operations rather than invest in safety procedures that would eat into profits.
This protection of data is key in industries involved in very large transactions such as oil, mining, or aircraft, for which information security is a key investment. For example, an aerospace company that manufactures and sells airliners would be ready to significantly increase their spending to ensure the protection of sensitive information rather than risk losing a contract because of a leak.
Changes Are Coming
The ability of the NSA to eavesdrop into private affairs means they can easily access almost any smartphone using the Android or iOS operating system, and in turn get a hold of sensitive information. This explains why some governments are starting to build protectionist measures that promote the development of new local suppliers and are urging companies to store data in local databases so that the government regains its full sovereignty.
Germany is rich in examples that confirm an opening of the market following the NSA scandal. While Chancellor Angela Merkel called for the unification of privacy standards to protect data last summer, Minister of State Jorg-Uwe Hahn appealed for a boycott of American companies. In fact, several remarks reported in the media show a high degree of frustration within the European political class overall. Increasingly, Germans are turning to local businesses to meet their connectivity needs.
New Business Opportunities Arise
This is good news for local business ventures. For example, CloudSafe, a German competitor of DropBox, has seen a 20% growth in its customer base since the beginning of the NSA scandal. And then there’s Deutsche Telekom, Germany’s leading connectivity provider, which rode the wave of discontent by launching its own email program operated from local servers.
In short, Snowden’s revelations and the NSA scandal marked the beginning of a great upheaval in the telecommunications sector. Everything suggests that small players who position themselves intelligently in the coming years will be able to gain a foothold in a competitive market that many once believed was unique to the United States.
How about you? Do you think that new startups can pick up where the US tech giants left off?