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August 13, 2015

U.S. IT Competitiveness Prediction: Cloud-y With Government Interference

 

Politicians routinely pay lip service to the goal that the U.S. must build an innovation economy for the long term, but then those same politicians push short-sighted actions, policies, laws, or regulations that limit the ability of the U.S. technology industry to compete globally.
 
Take one example: The U.S. is the clear leader in the cloud computing industry. Cloud computing, which is the remote storage of data with multiple redundant systems to ensure that the data is not lost, has become a critical part of the IT infrastructure of most competitive businesses. Unfortunately, many policy debates seem to have ignored the innovation or think of it as an opportunity to expand government.

  • Nearly 30 years ago, in 1986, Congress passed the Electronic Communications Privacy Act, or ECPA. The intention was to extend the already-existing restrictions on government wiretapping of telephone calls to the transmission of electronic data by computers, and adding provisions to the law to restrict access to stored electronic communications.

    But under the law, if stored communications (such as emails) are kept for more than 180 days, they are considered "abandoned," which has been interpreted to mean that the owner no longer has any expectation of privacy in what was stored.

    The result is that law enforcement can access that data without a warrant. Data stored less than 180 days still requires a search warrant for acquisition.

    Today, the availability of cheap, massive data storage has completely flipped our practice: the bias now is to save data, lots of data, for a long time. And an increasing amount of personal data, most easily described as "communications," is being stored in the cloud on remote servers designed to be kept for a long time. So messages stored on paper are safe, while messages stored in the cloud are potentially open to government snooping.
  • Recently, Chicago instituted a "cloud tax," which is a new extension of the existing "amusement tax," and "personal property lease transaction tax." At a whopping 9 percent, applied to streaming and cloud-based services, the tax is expected to generate $12 million in revenue per year. Said the correct way, innovative companies and consumers will lose $12 million every year. The Windy City's tech community has complained loudly about the impact this discriminatory tax will have on the city's innovation economy. Streaming customers and cloud dependent technology companies have effectively been told that they are not wanted. 
  • Not long ago, the revelations of the breadth of NSA spying caused a setback for domestic cloud computing companies. At the time surveys showed contracts being cancelled and a general hesitancy to engage with U.S. cloud computing suppliers for fear that the data stored by these companies would be fully available to U.S. spies. Whether true or not, the damage has been done, one more example of a tin-eared government policy causing real damage to American industry. While robust encryption is the solution to some of this concern, the Obama administration is already on record as wanting to require that all encryption software include a "backdoor" so that U.S. authorities can easily peruse stored documents.

Congressional inaction, municipal tax action, and administration bad action make progress difficult for the U.S. cloud computing industry. Elected officials need to start living up to the rhetoric, and remove the dark clouds from our cloud-based future.


 

  • TaxBytes-New

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