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Apple vs. FBI: "Extraordinary" Government Actions May Cause U.S. Companies To Move Offshore

Apple Inc. logo There may be unintended consequences of the Federal Bureau of Investigation (FBI) is successful with forcing Apple, Inc. to build back doors into its iPhones. What might some of those unintended consequences be? TechCrunch reported that Lavabit filed an amicus brief supporting Apple. Never heard of Lavabit? Forgot about Lavabit? You may remember:

"... Lavabit, a technology company that previously judged it necessary to shutter its own service after receiving similarly “extraordinary” government demands for assistance to access user data, in the wake of the 2013 disclosures by NSA whistleblower Edward Snowden... the FBI sought the private encryption key used by Lavabit to protect the Secure Socket Layer (“SSL”) and Transport Layer Security (“TLS”) connections to their servers. With the SSL/TLS private key in hand, the FBI would be able to impersonate Lavabit on the Internet. This would allow them to intercept, decrypt, inspect, and modify (either with intent, or by accident) all of the connections between Lavabit and the outside world..."

Federal Bureau of Investigation logo In its brief, Lavabit argues that by being forced to build back doors into its devices. not only would Apple's brand be tarnished, but that the ability of iPhone users to receive reliable and secure operating-system security updates would be degraded. Some updates might include malware. If users' trust decreases and they choose to stop receiving security updates, then their devices become more vulnerable than otherwise. That's not good. And, if people blame government for starting this security mess, then that's not good either since it would erode trust in government.

Would companies relocate out of the United States due to privacy and surveillance concerns? Consider:

"... Silent Circle, moved its global headquarters from the Caribbean to Switzerland back in May 2014 — citing the latter’s “strong privacy laws” as one of the reasons to headquarter its business in Europe. Various other pro-encryption startups, including ProtonMail and Tutanota, have also chosen to locate their businesses in countries in Europe that have a reputation for protecting privacy."

Plus, there are money concerns. Since 1982, at least 51 companies completed tax inversions: moved their headquarters (and sometimes some employees) out of the United States to another country to enjoy lower taxes. So, Burger King is now a Canadian company. Pfizer is now an Irish company. And, lower tax payments by companies make government deficits (federal, state, local) worse. The bottom line: profitability matters. When companies suffer lower profitability -- as tarnished brands often do -- their executives take actions to improve profits. It's what they do.

Want to learn more about Lavabit? At about the two-thirds mark in the film "CitizenFour," Lavabit founder Ladar Levison shares some of his experiences.

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