Good morning Classmates:
There is an article in the Wall Street Journal this morning about some of the backlash for USA multinational companies from the leaks from Edward Snowden. The German government is ending its contract with Verizon Communications due to concerns about network security and using Deutsch Telekom. This is a problem for USA technology companies and an opportunity for non USA technology companies. Germany and other European countries have strict privacy laws and the revelations about the NSA snooping has caused a real problem for USA companies.
Microsoft believes the issue is getting worse, not better and both Cisco and AT&T have stated that this will have negative implications for sales and more aggressive competition from non USA competitors. I have read that a possible solution is for the USA technology firms is to open storage facilities in foreign countries (FDI) and thereby alleviate fears that information is not being acquired by the NSA. I see the problem as a loss of confidence in these companies and once you lose that it is difficult to regain the customers trust. Using the cloak of national security the US government may have seriously hurt some of our most successful multinational companies competitive advantage and helped the competition gain an edge.
http://online.wsj.com/articles/german-government-ends-verizon-contract-1403802226
David
David,
This story is near and dear to my heart for two of reasons:
(1) After 9/11 the FBI began strongly pushing the CALEA agenda. CALEA or the Communications Assistance for Law Enforcement Act is a law passed in 1994, which requires telecommunications providers (in reality all service providers) to install hardware and software to enable real-time surveillance of any communication. Interestingly, the FBI didn’t really begin pushing until after 9/11.
(2) I work very closely with Cisco and many other network and communications equipment manufacturers. Unfortunately, with the proliferation of he Internet, there is very little a network provider needs to do to allow snooping of communications. It’s not the hardware or software. It’s just how the Internet works.
As a “Networker”, I was deeply involved in these discussions, so when the Snowden story broke, I was thoroughly confused about the fuss everyone was making. I assumed everyone knew about CALEA and about the capabilities of the protocols that make the Internet work. I guess I was wrong.
In any case, as you stated, we betrayed the world’s trust. Regaining their confidence will not be easy. More importantly, our government isn’t showing any signs of remorse. We should fully expect some of our multinationals to pay dearly. Cisco, Verizon and Microsoft are just the tip of the iceberg. We’re likely to see a new Internet be formed.
Fun times!
Leo
excellent comment David. a great illustration of how much nationality matters in a global world (recall last class?). and how dire could the consequences be, on matters on which the companies involved had no influence none whatsoever, which is the case in this story.
examples like these abound. think about the challenges of Japanese firms in China (on several grounds, most recently because of the political dispute on a small island’s sovereignty); of French firms in China because France expressed support for Tibet, to name but a few.
the challenge is that firms cannot ‘run away’ from their nationality being a central part of their image, in the eyes of all the stakeholders involved.
on the flip side – in other cases, it could be an enormous advantage, as we discussed in class.