NSA revelations mean business for Silent Circle, blow to US tech

Spooked by Edward Snowden’s revelations about National Security Agency (NSA) surveillance programs, wary customers may end up costing the U.S. computing industry billions of dollars in lost income, information technology (IT) industry analysts say. But the fallout also means more business for companies like Silent Circle, which specialize in encrypted communications.

Jon Callas, Silent Circle co-founder and chief technology officer, told Al Jazeera that the company’s subscription request are up 400 percent since Snowden began revealing the NSA’s spy programs in June.

"Some friends in security have told me, 'Gosh, the NSA has become your greatest marketing organization,'" Callas said, before noting that the NSA was unable to tap the phone he was using.

Silent Circle shut down its secure-email service Thursday in response to reports suggesting the government was attempting to gain access to a different encrypted-email service used by Snowden.

In a statement published on Silent Circle’s website, Callas said the government had not even contacted him for his clients’ information, as another encrypted communications service, Lavabit, suggested it had in a similar press release hours earlier.

"We have not received subpoenas, warrants, security letters, or anything else by any government, and this is why we are acting now," he wrote.

After scrubbing 20 terabytes of emails, Silent Circle's other services -- including mobile phone and text -- are still available. The immediate reasons for Silent Circle’s closure of its email service was not immediately apparent.

Asked if he hoped Silent Circle's preemptive measure would result in more customers, Callas said, “I’m not expecting it.” However, he did admit to having his “fingers crossed” for becoming a more “profitable” company.

"All this is good news for us, in that it gets our message out," he added.

Canceling the service was a solid business move, said Daniel Castro, an analyst at The Information Technology & Innovation Foundation (ITIF).

“This is what some of these companies basically have to do if they want to distinguish themselves, and say we are separate from everyone else,” said Castro.  

But the “Snowden Effect” isn’t good news for everyone. An ITIF study published this month found that the U.S. cloud-computing industry may lose up to $35 billion over the next three years as a result of consumer distrust stemming from the leaks about NSA spy programs like PRISM, the agency’s electronic data-mining arm.

"The concern is that over the long-term, people will look for services based in other countries," said Castro, "The question is, will other countries make new [electronic privacy] laws to give themselves a competitive advantage, if [Washington] doesn’t respond in time?"

President Barack Obama said U.S. surveillance programs "must be more transparent," in a public address Friday, after meeting with the representatives from some of Silicon Valley’s biggest names like Google and AT&T.

But Castro isn’t optimistic that the United States is working to give his industry a competitive edge.

"In the immediate term, I don’t think the federal government has recognized the urgency and potential negative impact. Obama’s speech on Friday [made] some good first steps. Given the level of discussion we’ve had already, I felt it really fell short," he said.

Castro noted various companies are trying to meet the new demand for privacy that has helped Silent Circle's sales.

"Google is considering how they can implement client-side encryption for Google Drive. The only one holding keys to that would be the user," Castro said.

When asked about this issue, Google declined to comment.

"Data requests could be made, but as long as company's employees have key to data, turning over the data doesn’t really affect users.”

In the aftermath of the Snowden fallout, client protections are playing an increasingly important role in new electronic-communication businesses.

Hours before Silent Circle announced it would discontinue its email service, Lavabit, another encrypted-communications company, canceled its email service.

"I have been forced to make a difficult decision: to become complicit in crimes against the American people or walk away from nearly 10 years of hard work by shutting down Lavabit," owner Ladar Levison said in a statement.

Russian human-rights campaigner Tanya Lokshina, who met with Snowden last month at a Moscow airport, mentioned in a Facebook message that Snowden had contacted her using a Lavabit email address, The Associated Press reported Thursday.

Due to subscriber protections, Callas said that he didn’t even know if Snowden had ever used Silent Circle's now-defunct email service.

Lavabit will make a comeback once Levison has pushed for the kind of court ruling that would make U.S. data computing and communications companies competitive again, experts say.

According to his statement, Levison is "preparing the paperwork needed to continue to fight for the Constitution in the Fourth Circuit Court of Appeals," hoping for a "favorable decision [that] would allow me [to] resurrect Lavabit as an American company."

Referencing Lavabit's move, Callas wrote of Silent Circle's email service closure, "We see the writing on the wall."

Silent Circle has long contemplated scrapping its email services, Callas said, but Lavabit's move marked a tipping point.   

"It was something we had been discussing," he said, "Emails have a lot of problems – a lot of metadata in it, even when messages are encrypted."

Callas explained that information like IP addresses are "stored with the email themselves."

While Silent Circle realized its email services were never perfect, the prevailing philosophy before the Lavabit decision was, "it’s probably better than any email system you’ve used before, and that made a lot of sense," Callas said.

Al Jazeera