Apple’s Public Battle

Apple is in the spotlight for having kicked off a battle against the Federal Bureau of Investigation (FBI), after the FBI demanded that Apple unlock the encrypted iPhone belonging to San Bernardino, California shooter Syed Rizwan Farook. An encrypted iPhone means that nobody is supposed to be able to have access to the data on the device – including contacts, photos, emails etc. – unless the passcode is entered. The FBI is using a 227-year-old law, the All Writs Act of 1789, as legal justification for its request. By refusing the FBI’s demand that it make available a backdoor to get around its encryption, Apple’s CEO Tim Cook picked up the torch for privacy rights. Tech industry executives and privacy advocates rallied behind him; and the U.N. High Commissioner for Human Rights, Zeid Ra’ad Al Hussein, declared that Apple should be supported for acting as a beacon for privacy and freedom of expression.[1] The case then escalated further as the FBI’s parent agency, the US Justice Department, considered whether to bring a court case against the encryption used by Facebook’s WhatsApp – the world’s largest mobile messaging service.[2]

Is the tech industry’s stand a crusade based on political principle – a relinquishment of commercial self-interest by companies that are fired with public purpose?  How may we untangle the economic and political elements that are being expressed in this legal drama?[3]

Market-Driven Privacy Right

“At Apple, your trust means everything to us,”[4] proclaims the company in its privacy statement.  By showcasing that its products are secure from government’s hands, Apple has all but stolen the motto of one of its foremost rivals: “Don’t Be Evil.”  And in fact, through the FBI case, Tim Cook is attempting to differentiate Apple’s business model from that of Google and other competitors. On several occasions, Cook has reiterated that “our business model is very straightforward: We sell great products. We don’t build a profile based on your email content or web browsing habits to sell to advertisers.”[5] While he didn’t name-check Google, his statement was unmistakably aimed at the king of search, whose business is to sell ads predicated on user data.

Google, for its part, requires full encryption for Android phones and promotes end-to-end encryption in Gmail, ads platforms and other products; and Google also retains access to copious quantities of user data to exploit for its profit making.[6] Vint Cerf, Google’s Chief Internet Evangelist, confessed that:

We couldn’t run our system if everything in it were encrypted because then we wouldn’t know which ads to show you. So this is a system that was designed around a particular business model.[7]

Yet Google, like Microsoft and several other big tech companies, had little choice after Apple took on the FBI but to join Apple’s side.[8]  Though they are exposed, because the rely so heavily on user data, the risk of appearing to be a stooge of the US government was too great.

Cook tries to emphasize that, because Apple generates a majority of its profits by selling devices, not selling ads like Google, its economic interests align the company with privacy rights. This is, however, a convenient fiction. Apple not only collects lots of personal data through its App Store, but also has acquired Twitter’s fire hose of tweets to gain commercial access to particular types of behavior- and language data. Apple also has experimented with building its own ad-based businesses, attempting to figure out ways to tap into the gigantic and lucrative ads market. It was only after a five-year effort to monetize apps and challenge Google on the mobile ads front that Apple abandoned this business.

This said, it is in Apple’s commercial self-interest to proclaim its support for privacy rights. In 2014, Apple generated more than $130 billion from the sale of its iPhones and iPads, compared to $11.8 billion for Google’s mobile search revenue during the same year. In light of this, Apple’s strategy was refocused. For both offensive and defensive purposes, it began to promote ads-blocking apps on its devices.[9] Well before the current face-off, in other words, Apple began to sell privacy as a marketing feature – exactly as the US Government has recently charged.[10] Privacy is a business strategy rather than a political principle.

That Apple is not in fact acceding to principle is evident from developments touching a different corner of its global business. At the same time that it is loudly challenging the US government, Apple is willing to dance around to please the Chinese state by agreeing to comply with government security checks on all Apple products sold in China.[11] In 2014, after being criticized for iPhone’s national security risk by the Chinese media, likewise, Apple moved its Chinese consumer data to a Chinese facility operated by state-run China Telecom.[12] But the Apple-FBI drama possesses ramifications that go beyond all of this.

 Apple has plenty of reasons

Apple’s decision to showcase privacy rights betrays another, different purpose. The equipment-maker began to drum on privacy immediately after Edward Snowden’s leak on the NSA’s surveillance programs in 2013 – which revealed that the NSA was mining user data by tapping into 9 major Internet firms, including Apple.[13] This brought global outrage and put US-based multinational tech firms, again including Apple, on the defensive. Like the other US tech companies whose complicity was publicized by Snowden, Apple scrambled to deal with the global backlash. Its attempt at damage control began at once and persists today.[14]

Apple, along with other tech firms, began to demand NSA reforms to curb mass data collection by the US government.[15] In 2014, Apple introduced new encryption into its iPhone OS to prevent unlocking by law enforcement[16] and it has been using every opportunity to regain its reputation by demonstrating to the world that the company takes privacy seriously. This is also part of the context in which to understand Tim Cook’s apparently personal public campaign for strong encryption and against backdoor access.[17]

These efforts have paid off.  In 2015, Apple captured over 90 percent share of the world’s global smartphone profits.[18] However, now the market situation is changing. Despite its ultra-profitable smartphone business, Apple is facing its slowest growth since 2007[19] and is dealing with the economic downturn in China, which holds about 25% of Apple’s global sales (two-thirds of Apple’s overall sales come from outside the United States).[20] Rival smartphone makers, finally, are intensifying their competition. With an eye to preserving its present profitable dominance, Apple must be keenly alert to how news of its relations with the US Government will play in the international market.

Apple’s fight with the FBI thus is charged with both opportunity and danger. By taking up the public fight against FBI demands, Apple is sending a loud-and-clear message to the world: “You’re safe with Apple: We will protect our customers’ data from the US government.” On the other hand, were Apple to cave to the FBI, the message would be to reaffirm that the company indeed should be seen as the US government’s proxy.

This would not be completely correct, because federal agencies are not united on the question of encryption and privacy rights. While both the NSA and the CIA remain oddly silent in the current fray, the Secretary of Defense has publicly declared himself against building a back-door to assure access to encrypted user data for government agencies.[21]  The Departments of Commerce, State and the White House Office of Science and Technology Policy (OSTP) go beyond this, by affirming that encryption is serving the broader interests of the American tech sector.[22]

Weaving through this policy clash thus are more encompassing conflicts of economic interest. An immediate US economic issue looms. In Europe, the US and EU are currently working on a transatlantic data protection agreement, called “Privacy Shield,” after the EU’s Safe Harbor policy was invalidated last autumn.[23] If the FBI coerces Apple to unlock the encrypted phone and allow access to the data, this might jeopardize 260 billion dollars in trade across the Atlantic.[24]

In the aftermath of Snowden’s leak, many tech firms are releasing encrypted devices and implementing end-to-end encryption, which scrambles data traffic. End-to-end encryption is used very widely in e-commerce, since it secures financial transactions over the Internet, protects people’s credit card numbers and personal information, and guarantees secure message exchanges. In fact, encryption itself is a lucrative market. The hardware encryption market is forecast to be worth $167 Billion by 2018[25] and the software encryption market is slated to reach $4.8 Billion by 2019.[26] As a recent report by the right-wing Information Technology and Innovation Foundation underscores, if the government weakens or restricts encryption the result will be to “make it more difficult for companies to compete in global markets.”[27]

It is right to contest the FBI’s demand that Apple establish a backdoor into users’ smartphone data: there is a vital need to prevent any new legal precedent whose result is to aid law enforcement agencies in gaining access to our everyday communication tools.  We have tried to sketch, however, that Apple’s case against the FBI is complex and multifaceted; it is a mischaracterization to present it, simply, as a courageous company fighting on the public’s behalf against the brute force of the US government.  The deeper truth is that, evidently, our political economy is now organized so that we find ourselves relying on corporations to defend our rights – companies which have a long record of allying with governments for surveillance and repression when it suits them, from IBM’s alliance with Nazi Germany[28] to the more recent alliance of US tech firms with U.S. military and intelligence agencies. The first question is how we arrived at such a point, where Apple may claim to act as a guardian of the public’s rights to privacy.  The second is how we may organize our institutions differently, so that our basic rights are not left in the hands – and at the mercy – of self-interested, profit-driven corporations.

[1]Apple-FBI Case Could Have Serious Global Ramifications for Human Rights: Zeid,” UN High Commissioner for Human Rights, March 4, 2016.

[2] Matt Apuzzo, “WhatsApp Encryption Said to Stymie Wiretap Order,” New York Times, March 12, 2016.

[3] Susie Ochs, “Apple’s Latest Legal Filing: ‘The Founders Would be Appalled,’” MacWorld March 16, 2016.

[4]Apple’s commitment to your privacy,” Apple.com.

[5] Robert Hackett, “Apple CEO Tim Cook’s privacy letter is a huge shot at Google,” Fortune, September 29, 2015.

[6] Evan Dashevsky, “We Asked Experts What Would Happen If Everything Was Encrypted,” PC Magazine, February 17, 2016.

[7] Adam Clark Estes, “Why doesn’t Google Encrypt All Your Data,” Gizmodo, August 15, 2013.

[8] Alissa Walker, “Google CEO Finally Chimes In on FBI Encryption Case, Says He Agrees with Apple,” Gizmodo, February 17, 2016.

[9] Alex Hern, “A proxy war: Apple ad-blocking software scares publishers but rival Google is target,Guardian, January 1, 2016.

[10] Will Oremus, “Irate DOJ Dismisses Apple’s Fight With the FBI as a ‘Brand Marketing Strategy,’” Slate, February 19, 2016; Lauren Walker, “Apple’s Tim Cook Blasts Silicon Valley Firms for Selling Off Privacy,” Tech & Science, June 3, 2015.

[11] David Pierson, “While it defies US government, Apple abides by China’s orders — and reaps big rewards,” Los Angeles Times, February 26, 2016.

[12] Lorraine Luk, “Apple Adds State-Controlled China Telecom as Data Center Provider,Wall Street Journal, August 15, 2014.

[14]Apple’s Commitment to Customer Privacy,” Apple.com, June 16, 2013.

[15] Chris Smith, “Apple, Google and others demand NSA spying reform,” BRG, December 9, 2013.

[16] Kevin Poulsen, “Apple’s iPhone Encryption Is a Godsend, Even if Cops Hate It,” Wired, October 8, 2014.

[18] Luke Villapaz, “Apple Inc.’s iPhone 6, 6S Gobble Up 94 Percent Of Smartphone Industry Profit In 2015 Third Quarter,” International Business Times, November 16, 2015.

[19] Daisuke Wakabayashi, “Apple iPhone Sales Grow at Slowest Rate Ever,” Wall Street Journal, January 26, 2016.

[20] Daisuke Wakabayashi, “Can Apple’s Tim Cook Keep the iPhone Buzzing in China?Wall Street Journal, January 25, 2016.

[21] Nicole Perlroth, “Defense Secretary Takes Position Against a Data ‘Back Door,’” New York Times,  March 2, 2016.

[22] Joseph Menn and Dustin Volz “Apple case exposes ongoing government rift over encryption policy,” Reuters, March 7, 2016.

[23] Dan Schiller & ShinJoung Yeo, “Transborder Data Flow,” Information Observatory, December 5, 2015.

[24] Stephanie Bodoni, “Apple’s FBI Clash Risks Piercing Trust in EU Privacy Shield,Bloomberg Business, March 7, 2018.

[25]Hardware Encryption Market worth $166.67 Billion by 2018,” Markets and Markets.

[26]Software Encryption Market worth $4.82 Billion by 2019,” http://www.prweb.com/releases/encryption-software/market/prweb12487509.htm

[27] Daniel Castro and Allen McQuinn, “Unlocking Encryption: Information Security and the Rule of Law,Information Technology and Innovation Foundation, March 14, 2016.

[28] Edwin Black, IBM and the Holocaust: The Strategic Alliance Between Nazi Germany and America’s Most Powerful Corporation (New York: Crown Books, 2001).

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