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The demand for privacy is there, and there is an opportunity for profit.
As the scope of NSA spying becomes clear, Internet users around the world – i.e., just about all of us – are feeling vulnerable and wishing for more privacy in their emailing, social networking, web browsing, etc. Unfortunately, their current options for a more private online existence are limited. This needs to change, and hopefully it soon will. The demand for privacy is there, and there is an opportunity for profit. The question is: which companies and countries will lead the way in creating a "no spy zone" on the Internet?
Due to various historical circumstances, U.S. companies dominate the Internet today. As we now know, the U.S. government took advantage of the unique role these companies play in providing online services, and most of these major American companies have been implicated in the recent spying revelations.
Daniel Bryant, center, joins a small group at Klyde Warren Park to protest the National Security Agency's surveillance program Thursday, July 4, 2013 during a "Restore the Fourth" rally in Dallas. (Photo: AP/The Dallas Morning News, Rex C. Curry)
If the U.S. government’s response so far is any indication, no major changes are in order, and the spying will continue. So if we can’t look to America for help, is there anywhere else people can turn for privacy protection in what has become a necessary part of daily life?
China has a large domestic market, and many of its Internet companies provide the same services. But no one thinks that the Chinese government is going to be better on privacy issues. Over in Europe, it turns out that France has been spying on its Internet users as well. Will any country step up to create an Internet zone free of government snooping? Germany? Iceland? Anyone?
Hopefully some government will take this path soon. They may not realize it, but they have a financial incentive do so. Beyond the goal of respecting the privacy of citizens and others – which should be enough – this is also about the bottom line. Strong privacy protections can provide a competitive advantage. Better privacy policies can encourage companies to locate to a specific territory, as it will allow them to offer a service that competitors located in countries without such guarantees cannot provide.
Change will not come easily, however. It will need to involve a combination of government and private sector actions.
First, governments need to offer strong privacy protection for information stored and transmitted in their territory. There must be clearly defined privacy rules set out in law, imposing constraints on government access to the data. Companies can then rely on these protections to fight off requests (and intrusions) from governments intent on spying.
As for the private sector, companies may need to develop new business models. Currently, tracking of online activities provides much of the profit of the major Internet companies. This tracking has always been creepy, but with the recent spying revelations, there are now more significant implications.
One option for a business model would be a purely subscription-based service. At this point, many people are probably willing to pay a bit in order to ensure privacy. Free services have lost a lot of their allure. We have learned that "free" still comes at a price.
Another model is to attract a large number of users, and use more general, non-targeted advertising to provide revenue. At this point, privacy-based services are likely to appeal to a lot of people, creating a large user base.
Finally, these companies should be more open about what information they are tracking. They could allow users to select the areas in which they are tracked. Maybe one person cares about their location, while another cares about the search terms used.
The major U.S. Internet companies have done a bad job with all this. Recently, they seem to be desperately trying to reassure users that they have acted reasonably. However, the revelations make clear that, regardless of their compliance with the law and their attempts to fight off government demands in some instances, we have far less privacy than we thought when we use their services.
There is still time to make amends if U.S. companies take the right steps. Otherwise new companies – American or foreign – may move in to fill the void.
The Internet is still in its infancy. The privacy scandals reflect growing pains. Hopefully we are moving towards a more mature Internet, in which consumers look carefully at how they are being treated, and companies and governments realize that if they abuse their power, consumers will look elsewhere. Companies need to step in to meet the demand for a more private Internet, and governments need to adopt policies that respect privacy rights and limit government intrusion. Those who do will be rewarded; there is money to be made, and there are jobs to be gained, for the first movers.
Simon Lester is a trade policy analyst with Cato’s Herbert A. Stiefel Center for Trade Policy Studies.
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