International anger over the National Security Agency's Internet surveillance is hurting global sales by U.S. technology companies and setting back U.S. efforts to promote Internet freedom.
Disclosures of spying abroad may cost U.S. companies as much as $35 billion in lost revenue through 2016 because of doubts about the security of information on their systems, says the Information Technology & Innovation Foundation, a policy research group in Washington whose board includes representatives of companies such as IBM and Intel.
"The potential fallout is pretty huge, given how much our economy depends on the information economy for its growth," said Rebecca MacKinnon, a senior fellow at the New America Foundation, a Washington policy group. "It's increasingly where the U.S. advantage lies."
Any setback in the U.S. push to maintain an open Internet also could inflict indirect damage on companies such as Apple and Google that benefit from global networks with few national restrictions.
Almost 40 percent of the world's population, or 2.7 billion people, are online, says the International Telecommunication Union, a Geneva-based U.N. agency.
Cisco Systems, the world's largest maker of computer networking equipment, said this month that the NSA disclosures are causing some hesitation among customers in emerging markets.
Cisco orders in China fell 18 percent in the three months ended Oct. 26. Elsewhere, Robert Lloyd, head of development and sales, said on a conference call Nov. 13 that "it’s not having a material impact, but it's certainly causing people to stop and then rethink decisions."
News about U.S. surveillance disclosed by former NSA contractor Edward Snowden has "the great potential for doing serious damage to the competitiveness" of U.S. companies such as Cupertino, California-based Apple, Facebook, and Microsoft, Richard Salgado, Google's director for law enforcement and information security, told a U.S. Senate panel Nov. 13.
"The trust that's threatened is essential to these businesses," Salgado said.
The spying revelations have led governments around the world to consider "proposals that would limit the free flow of information," Salgado said. "This could have severe unintended consequences, such as a reduction in data security, increased cost, decreased competitiveness, and harm to consumers."
Technology companies aren't the only ones facing potential damage from disclosure of the NSA's surveillance, said Myron Brilliant, an executive vice president with the U.S. Chamber of Commerce in Washington.
Studies show products and services that rely on cross-border data flows are expected to add an estimated $1 trillion in value to the U.S. economy annually over the next 10 years, he said.
"This is a priority issue, not just for technology or web-based companies, but also small- and medium-sized businesses," Brilliant said, listing finance, manufacturing, healthcare, education, shipping, "and other areas not commonly thought of as Internet companies."
Information technology companies were the first to see fallout after Snowden fled to Hong Kong in May and began releasing details of U.S. surveillance programs.
Snowden is now living in Russia.
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