The government's leak crackdown and anti-terrorism surveillance program are having a real-world effect on American business, as two prominent secure email services have shut down, apparently under pressure from the federal government.
Lavabit, which provides encrypted email and was reportedly the service of choice of National Security Agency whistleblower Edward Snowden, shut service Thursday and directly blamed the U.S. government for the move.
"I have been forced to make a difficult decision: to become complicit in crimes against the American people or walk away from nearly ten years of hard work by shutting down Lavabit," Ladar Levinson, the company's founder, said in a letter to users.
Levinson went on to say he wasn't legally allowed to discuss the circumstances, but hinted he has been engaged in legal action with the government -- likely with the court that handles data seizure under the Foreign Intelligence Surveillance Act -- and lost.
"We've already started preparing the paperwork needed to continue to fight for the Constitution in the Fourth Circuit Court of Appeals," he wrote. "A favorable decision would allow me to resurrect Lavabit as an American company."
But he concluded with a warning, writing he would "strongly recommend against anyone trusting their private data to a company with physical ties to the United States."
Levinson wasn't immediately available for comment.
Lavabit has been fighting the government, but another company, Silent Circle, was not and it shut down its email service anyway. Silent Circle has encrypted phone, video and text services, but its email service -- which in theory would be subject to government search -- has been a "quandary," the company said in a blog post.
Amid growing concerns about government scrutiny of encrypted email in the United States, Silent Circle decided to give up on that part of its business. "We see the writing on the wall, and we have decided that it is best for us to shut down Silent Mail now," the company said, adding it was making the move, not because it had received government subpoenas or warrants, but rather to prevent such things from happening.
The Lavabit and Silent Circle moves make what has largely been a constitutional debate over the government's right to monitor communications into the realm of the free markets.
Indeed, as more information has moved to the cloud, data that is hosted in the U.S. has actually been seen as being less secure because of the government's Patriot Act powers -- and that could be a competitive disadvantage for companies based here.
How much? The Information Technology and Innovation Foundation [ITIF] says in a report that U.S. companies could lose as much as $35 billion over the next three years. That is based not on U.S. companies like Lavabit shutting down, but rather on customer loss, mostly at foreign companies who don't want their data subject to American search.
The government's surveillance "will likely have an immediate and lasting impact on the competitiveness of the U.S. cloud computing industry," the ITIF said.