Bloomberg News

NSA Fallout Tests Obama Relationship With Tech Companies

December 18, 2013

NSA Fallout Testing Obama Relationship With Technology Companies

President Barack Obama and Vice President Joe Biden meet with executives from leading technology companies, including Apple, Twitter, and Google on Dec. 17, 2913 in Washington, DC. Photographer: Mark Wilson/Getty Images

Technology company executives left a meeting with President Barack Obama with no commitment to limit government snooping on Internet traffic, according to an industry official briefed on the session.

The group included executives from seven companies, including Marissa Mayer of Yahoo! Inc. and Sheryl Sandberg of Facebook Inc. (FB:US), that are pressuring the administration and Congress to restrict the National Security Agency’s scooping up of their users’ data.

With government surveillance raising concerns from companies, civil liberties groups and U.S. allies, the White House today will release the recommendations of a five-member panel that scrutinized the government’s policies on gathering Internet and telephone data, Obama’s spokesman, Jay Carney, said. The panel made 46 recommendations and Obama has yet to decide which of those he’ll accept, he said.

Mayer, Yahoo’s chief executive officer and an Obama campaign donor, warned the president that backlash over U.S. spying may splinter the Internet as countries adopt different standards to thwart surveillance, according to the industry official, who asked not to be named because yesterday’s discussion was private.

Testing Relationship

Obama’s relationship with Silicon Valley is being tested by the damage from disclosures by former NSA contractor Edward Snowden about the government’s collection of Internet and phone data. Obama has said he wants a solution that balances national security with privacy interests of U.S. citizens. Also at stake is whether his broader policy agenda gets sidetracked by the furor over spying.

For the companies, it’s a matter of the bottom line.

“They see real risk to their market share,” said James Lewis of the Center for Strategic and International Studies in Washington. “You’ve got German, Chinese even Russian companies saying ‘Hey, buy from us, that way you won’t be at risk.’ It’s crazy. That’s what this has become -- an opportunity for commercial advantage as well as an uproar over privacy.”

Costing Business

Reports about U.S. spying abroad may cost U.S. companies as much as $35 billion in lost revenue through 2016 because of doubts about the security of their systems, according to the Information Technology & Innovation Foundation, a policy research group in Washington.

While the administration’s agenda included talking about fixes made to the government’s health-care website and federal information technology development, Obama senior adviser Valerie Jarrett said “99 percent” of the meeting was spent on discussing the NSA surveillance.

Jarrett said before Obama joined the meeting with executives that Jeffrey Zients led a discussion about healthcare.gov and ways to improve federal government technology. When Obama entered the room, the focus turned to surveillance, Jarrett said at a Politico breakfast today.

Yesterday’s White House meeting occurred a day after a U.S. district judge ruled that collecting bulk phone records -- such as numbers dialed and call durations -- of millions of Americans is probably unconstitutional, and four days after an advisory panel gave Obama recommendations for changes.

Obama’s Decision

Obama is set to make public next month his proposals for reining in NSA surveillance. He met this morning with the five-member advisory group in the White House situation room. Carney said the meeting and the decision to release the panel’s recommendations were unrelated to what the president heard from the executives.

Google Inc. Chairman Eric Schmidt discussed five principles the companies favor for changing the NSA programs, including limiting collections and being free to tell the public and their users what data the government is seeking from them, the official said.

The principles are posted on the Internet. They were part of a Dec. 9 letter to the president and members of Congress from Yahoo, Facebook, Google, Apple Inc., Microsoft Corp., Twitter Inc., LinkedIn Corp. and AOL Inc. All except AOL were represented at yesterday’s meeting.

In the letter, the companies said the U.S. must “ensure that government surveillance efforts are clearly restricted by law, proportionate to the risks, transparent and subject to independent oversight.”

No Commitment

Obama didn’t commit to a course of action to address the companies’ concerns, the official said. The White House said in a statement that the president promised to “consider their input as well as the input of other outside stakeholders as we finalize our review of signals intelligence programs.”

Lawmakers are poised to act as well.

The meeting “should be a wake-up call to government leaders that the law must keep up with technological advances in a way that protects the privacy rights of law-abiding Americans and the competitiveness of U.S. companies,” Senator Ron Wyden, an Oregon Democrat and critic of the NSA’s operations, said in a statement.

Also at the meeting, according to the White House, were: Tim Cook, CEO of Apple Inc., Dick Costolo, chief executive officer of Twitter; Brad Smith, general counsel at Microsoft; Erika Rottenberg, vice president and general counsel of LinkedIn; Chad Dickerson, CEO of Etsy Inc.; Reed Hastings, CEO of Netflix Inc.; Drew Houston, CEO of Dropbox Inc.; Burke Norton, chief legal officer of Salesforce.com Inc.; Mark Pincus, chairman of Zynga Inc.; Shervin Pishevar, co-CEO of Sherpa Global; Brian Roberts, CEO of Comcast Corp., and Randall Stephenson, CEO of AT&T Inc,

Administration’s Agenda

The White House first sought the meeting with the tech leaders to discuss fixing the federal health-care website and government information-technology stumbles. It was requested before the Dec. 9 letter was released, according to an administration official familiar with the details who wasn’t authorized to speak publicly.

The technology leaders held out for a guarantee that an NSA discussion would be on the agenda, according to another person who asked not to be named because the negotiations were private.

“This really comes down to people beginning to take seriously the reputational crisis we’re in, both for the U.S. government but also for these companies directly,” said Sascha Meinrath, director of the Open Technology Institute at the New America Foundation in Washington.

New Restrictions

A White House advisory committee, in a report to Obama last week that hasn’t been made public, said the government should continue collecting bulk records on every U.S. phone call with new restrictions to protect privacy, according to an administration official familiar with the report.

“What has been leaked of the review group’s recommendations are incredibly modest changes that are extremely unlikely to restore global trust,” Meinrath said.

That the review group recommended continuing with practices a federal court said are probably unconstitutional “reflects the remarkable divide that exists right now,” Meinrath said.

Public and political momentum is building for limiting the spying, Ed Black, president and chief executive officer of the Computer and Communications Industry Association in Washington, said.

“There’s no doubt that there’s an evolution and a greater appreciation of the harm caused by overly zealous surveillance collection,” said Black, whose association represents Facebook, Microsoft, Yahoo and Google.

No Specifics

The companies want to be allowed to disclose the number and types of orders they receive to give the government information about their users. They also have called for reforms to spy programs, without offering specific proposals.

It’s difficult for the companies to specify changes they want because they don’t fully understand all the surveillance activities taking place, Black said.

They support prohibiting the government from collecting phone records or e-mails in bulk, Black said.

Most Americans say they’re unhappy about at least some aspect of the government mining phone records. The revelations have eroded their trust in government and may have contributed to Obama’s declining approval rating.

Just 22 percent of Americans said they approved of Obama’s handling of the NSA’s surveillance programs, while 64 percent disapproved, according to a Bloomberg National Poll conducted Dec. 6-9.

Surveys in June for CBS News and Fox News showed only about one-third of Americans approved of collecting phone records, even to limit the chance of terrorist attacks. Last month, 39 percent said phone and internet surveillance programs have made the U.S. safer from terrorism, according to a Pew Research poll.

Obama’s approval ratings have continued to fall. After reaching a three-year high of 56 percent in a Bloomberg National poll in February, it fell to 53 percent in June and a new low of 46 percent this month. The drop comes after a botched debut of the healthcare.gov website, while there’s a surge in stock prices and a turnaround in the housing market.

To contact the reporters on this story: Margaret Talev in Washington at mtalev@bloomberg.net; Chris Strohm in Washington at cstrohm1@bloomberg.net

To contact the editors responsible for this story: Bernard Kohn at bkohn2@bloomberg.net; Steven Komarow at skomarow1@bloomberg.net


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