Study: NSA Spying May Cost U.S. Companies $35 Billion

Network spying could discourage $35 billion in cloud-computing sales through 2016.

The National Security Agency building in the Washington suburb of Fort Meade, Md., is pictured on Jan. 25, 2006.
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International concern about digital spying by the National Security Agency could make it difficult for U.S. companies to gain customers in the growing cloud-computing business, and could cost them up to $35 billion through 2016.

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European cloud computing businesses could gain customers by portraying themselves as less vulnerable to data requests and spying than U.S. companies, according to a report from the Information Technology and Innovation Foundation, which called for greater transparency about government monitoring to combat this perception.

If the U.S. loses about 10 percent of foreign business to European or Asian competitors and keeps its projected domestic market share, American cloud-computing providers might lose $21.5 billion over the next three years, explained Daniel Castro, the senior analyst at ITIF who wrote the report.

"On the high end, U.S. cloud computing providers might lose $35.0 billion by 2016," Castro said in the report. "This assumes the U.S. eventually loses 20 percent of the foreign market to competitors and retains its current domestic market share."

Europeans were concerned about the U.S. government having access to international data via cloud companies based in the U.S. even before former NSA contractor Edward Snowden began leaking classified documents to the press in June, the ITIF report explained. Reports that the NSA monitored the phone calls of European citizens and leaders, including German Chancellor Angela Merkel, have accentuated those concerns, and the European Commission has proposed stricter data privacy laws in response.

The ITIF report uses data from Gartner, a market research firm, to determine the size of the cloud-computing market, global spending data from market research firm MarketsandMarkets and results from a survey about industry response to NSA spying conducted by the Cloud Security Alliance in June and July.

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Cloud-computing providers in the U.S. may be singled out as complicit with government monitoring, but most developed nations have mutual legal assistance treaties that allow their governments to access data regardless of where it is stored, the ITIF report explained.

The Patriot Act grants intelligence agencies in the U.S. vast powers to request data from companies including Google and Yahoo! in the name of national security, but those agencies also report requests for phone and Internet data to the Foreign Intelligence Surveillance Court.

That kind of oversight and transparency is rare in many developed nations, where information requests made in the name of national security are often exempt from data protection laws, according to a recent report from the Center for Democracy & Technology, a digital rights group.

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