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The Privacy Advisor | Senator, Tech Leaders Call on Congress to Act on Surveillance; “National Emergency” Brewing Related reading: Cato Conference: We Have Problems, Is NSA Biggest One?

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The Snowden disclosures have not only exposed U.S. intelligence efforts at home and abroad, they’ve also exposed a slew of U.S. businesses to a growing mistrust by their users around the world. In an attempt to open the public debate and to force Congress to take action, Sen. Ron Wyden (D-OR) held a roundtable at a Palo Alto, CA, high school on Wednesday with some of the tech industry’s most influential leaders.

Among the biggest concerns for the leaders present—including those from Google, Microsoft, Facebook, Dropbox and Greylock Partners—were the loss of consumer trust in U.S. businesses, the need for transparency and encryption and the potential costs of a fragmented and less secure Internet.

“This is one of the first times Congress has focused squarely on the economic impact of the overreach of government intelligence,” Wyden said. The Senate Finance Committee chairman repeatedly expressed strong words about the negative impact U.S. intelligence programs—at one point calling bulk surveillance “worthless”—are having on some of the most successful U.S.-based companies.

Google Executive Chairman Eric Schmidt said the “American brand” has been undermined and that things are getting worse. He said there’s been a fundamental loss of trust between the U.S. and other countries and warned that current trends toward data localization, a move generated from that loss of trust, could “end up breaking the Internet.” He said the cost and flow of data would be crippling.

“The notion that you’d have to place data centers within regions around the world is fundamentally at odds with how the Internet is architected,” said Facebook General Counsel Colin Stretch. He noted the Internet would become slower, less personalized and increasingly less secure.

Data localization would also harm smaller businesses, Dropbox General Counsel Ramsey Homsany explained. IBM, for example, will spend billions of dollars to build data centers around the world. “We don’t have that kind of money,” he said. Plus, Greylock Partner John Lilly said, such fragmentation would create serious obstacles for start-ups and venture capitalists looking to fund new tech.

That loss of trust was also Microsoft Executive Vice President and General Counsel Brad Smith's biggest concern. He noted that people would not put their money in a bank they don’t trust; likewise, users are reluctant to place their personal information with U.S. businesses. “If we don’t address it, there will be new regulations,” he warned. “You own the photos and all the content you create; even if you put those on our servers, you still own it. We will not rebuild trust until the government fundamentally recognizes that straightforward principle,” he added.

Homsany said it’s crucial to build trust at home and a start to that would be for Congress to pass the USA FREEDOM Act. “The U.S. at the government level needs to lead again by showing the rest of the world that there is accountability and transparency,” he intoned. “We’ve built a huge economic engine, but loss of trust starts to rot it from the inside out—not to use dramatic language—but I think it’s that serious.”

The Electronic Communications Privacy Act “is almost 30 years old,” Smith pointed out. “If this law were a technology product, it would be in a museum. We need Congress to step forward and strike the right balance” between public safety and consumer privacy. Facebook’s Stretch said that transparency helps expose the necessary line between public safety and privacy, noting, “We need a public debate about where we draw the line between public safety and civil liberties.”

In addition to bolstering consumer trust and increasing transparency, all of the panelists agreed that encryption should be a basic necessity and that such protections will not stifle law enforcement from doing its job.

“It’s a key business objective for all of us,” Stretch said, adding that Facebook had always prided itself on following legal mandates, but some of the Snowden disclosures—particularly unauthorized access of user information overseas—“put the relationship between industry and government on completely different footing.” He said they found the programs “disturbing” and created renewed focus for Facebook to make its data more secure, thereby prompting law enforcement to come at user data through legal avenues, such as obtaining warrants.

Summing things us, Schmidt said there’s a “national emergency” brewing, warning that the government is “screwing around with this industry that has contributed to much of the economic growth” for the U.S. in recent years. There are not only patriotic reasons for changing the current ecosystem, he said, but economic and moral reasons as well.

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