The first is because it will remind the public that Silicon Valley-based Apple, Google and Yahoo all have histories with U.S. spies that many find unnerving — even if they weren’t eagerly cooperating, as AT&T reportedly did. The second is because the AT&T leak illustrates yet again that the U.S. government isn’t good at keeping secrets — meaning past examples of corporate cooperation with mass invasions of privacy could come to light in the future.

But the third reason may be the most consequential: the potential fallout this could have for Silicon Valley’s designs on the constantly growing China market. Vinod Aggarwal, a UC Berkeley business and political science professor and the director of the Berkeley Asia Pacific Economic Cooperation Study Center, warns that revelations about ties between tech firms and U.S. spies could easily be used as a reason to keep U.S. products out of any foreign market — China in particular:

The fallout from the NSA scandal is already starting to crimp U.S. corporate expansion plans in Europe. Analysts had expected AT&T to acquire Vodafone Group, whose cellphone operations cover many EU states. Accusations that AT&T gives the NSA data on customers’ telephone calls is raising red flags in those European countries, like Germany, where privacy is taken seriously. Regulators and legislators are already making noises about this deal. If AT&T does go ahead – and even if it prevails and acquires Vodafone — there will be strings attached and much more oversight from European government agencies. Potential regulatory risk has suddenly soared for AT&T.

 

For many foreign companies and governments, there is a certain justice in AT&T paying a price for its links to the U.S. government. After all, it was Huawei’s apparent links to the Chinese military that so enraged one U.S. congressional committee that they recommended that no U.S. public agency or firm should buy Huawei’s telecoms equipment. That effectively shut Huawei out of the U.S. market.

That’s from an essay that Aggarwal co-authored in the Harvard Business Review in late 2013 after the first mass wave of leaks by former NSA contractor Edward Snowden, which included inflammatory revelations about AT&T that hinted at the company’s vast cooperation with the NSA that was reported this week.

Apple’s biggest market may be imperiled

This hostility toward Huawei could easily be invoked by Beijing to hamper Apple at any time. Given that the Cupertino-based company sees China as absolutely crucial to its future, it may consider taking Aggarwal’s advice that tech companies need to sell themselves as international brands, not American ones, so they’re not seen as “as an extension of a troubled hegemon.”

In April, Apple confirmed that China had passed the U.S. in iPhone sales. As Quartz magazine reported in June, Apple has deliberately cultivated the Chinese market.

When Apple first made the iPhone available in gold color — with the 5S in 2013 — smart observers identified it as a play for the Chinese consumer. And, Tim Cook says, the glitter has proved golden in the world’s largest smart-phone market.

 

In an interview with the the Hong Kong edition of Bloomberg Businessweek (available only in print), the Apple CEO points to the gold iPhone — subsequent generations of the phone and the iPad are available in that color — as but one example of how the company localized for the Chinese market.

 

“A big reason for why we released the gold iPhone as because many Chinese consumers like the color gold,” Cook told the publication. “To be clear, sales for the gold iPhones in China have far, far exceeded other markets.”

 

Cook also noted how the introduction of third-party keyboards in iOS 8 was partially inspired by requests from China’s iPhone owners. Typing in Chinese can be very tedious, and many of China’s most popular third-party keyboards had moved from PC to Android seamlessly but weren’t available on Apple phones.

China’s economy and stock market have had a rough few weeks. The Beijing regime is already accused of trying to distract the public from its economic headaches with saber-rattling in the South China Sea, building a military airstrip on a disputed island over the strong objections of the U.S. and Japan. Adopting policies that invoke economic nationalism to keep out or limit Silicon Valley firms in the world’s most populous nation would be an even bigger distraction.

Beyond federal and state efforts, California’s tech titans have upped the ante with momentous new investments that promise to revolutionize electricity production.

For years, solar power has been touted by advocates as a major future source of “alternative energy.” Most recently, fresh off promising Californians a measure of federal drought relief, U.S. Interior Secretary Sally Jewell debuted Desert Sunlight. It’s a new 4,000-acre solar energy “farm” in the hot and dry outer reaches of of Riverside County and one of the largest such projects in the world.

But as the Los Angeles Times reported, the farm “opens at time of uncertainty for future utility-scale solar development in California, which has been slowing in recent years as federal assistance begins to disappear and investor interest fades.”

Meanwhile, Silicon Valley has turned its attention to solar power. Despite the prospect of a 20 percent drop in federal investment tax credits, tech entrepreneurs have taken steps to scale solar power use in a way that promises almost immediate results.

First Solar

USA Today reported First Solar received nearly $1.5 billion in federal loan guarantees to build out Desert Sunlight. But now priorities are shifting.

According to Market Watch, First Solar just inked a huge new deal to supply power to tech behemoth Apple Inc.:

“Apple committed $848 million for clean energy from First Solar’s California Flats Solar Project in Monterey County, Calif. Apple will receive electricity from 130 megawatts (MW)AC of the solar project under a 25-year power purchase agreement (PPA), the largest agreement in the industry to provide clean energy to a commercial end user.”

Although Apple CEO Tim Cook heartened environmentalists by casting the decision as a blow against climate change, it was ultimately driven by a simple imperative: making a good business bet.

“By 2016,” Mother Jones noted, “solar is projected to be as cheap or cheaper than electricity from the conventional grid in every state except three.”

In a substantial irony, Silicon Valley observers pointed out solar power has benefited greatly from rising costs for traditional energy, which California’s emissions law drives upward. As the Silicon Valley Business Journal observed:

“Chris Shea, who heads up the Silicon Valley territory for Livermore-based installer Solar Universe, a SolarCity competitor, said the industry has had a tailwind thanks to rising rates for conventional power. ‘Going green is a secondary benefit of the whole thing,’ he said. ‘Ultimately, it’s, “How do I get my cost of living down?” We’ve seen, since we started, almost a doubling of electrical cost that PG&E charges even to their lowest tier,’ said Shea, who employs about 20 out of his Santa Clara office.”

Solving the storage problem

SolarCity, one of the most important players in the industry, also recently figured into a massive new technological twist on alternative energy. Although state and federal regulators had pushed Americans to buy zero-emission cars, the technology faced a simple problem: battery life often didn’t measure up to what drivers’ hopes.

Now developments in car batteries are spreading to other areas of life that use batteries.

Tesla Motors CEO Elon Musk has partnered with SolarCity with an eye toward revolutionizing storage capacity — a challenge to the landscape dominated by public utilities. SolarCity, run by Musk’s cousin Lyndon Rive, has begun to install Tesla batteries.

And The Verge reported Musk and Rive have gone public with their big plans to scale stored solar energy well beyond cars:

“Musk and Rive mentioned that every SolarCity unit would come with battery storage within five to ten years, and that the systems would supply power at a lower cost than natural gas. Those batteries will come from the [Tesla] gigafactory, currently being built in Nevada. Once the factory comes online, the strong demand for energy storage will allow it to immediately ramp up production and achieve economies of scale. Tesla CTO JB Straubel (who has said that he “might love batteries more than cars”) says that the market for stationary batteries “can scale faster than automotive” and that a full 30 percent of the gigafactory will be dedicated to them.”

California officials, The Verge pointed out, have set out a policy goal of 1.3 gigawatts of storage by 2020.

The way things are turning out, it may be the private sector, not government-subsidized projects, that charges the electric future.

While the president called for cooperation between government and industry to increase the security of online systems, Tim Cook, leading tech speakers, called for industry to address the problem.

The texts of the speeches are not yet available online. But Stanford News reported Obama said, “This has to be a shared mission. Government cannot do this alone. But the private sector cannot do it alone, either.”

The president also brought up a controversial topic that has brought opposition from Silicon Valley titans, most of whom supported him during his election campaigns: government abuse of its snooping powers. It was on his watch that Edward Snowden, currently in exile in Russia, revealed the National Security Agency spies on most digital communications.

“Grappling with how the government protects the American people from adverse events while making sure the government itself is not abusing its capabilities is hard,” Obama said. “The cyber world is the wild, wild west. To some degree, we’re asked to be the sheriff.”

But he asked, “What safeguards do we have against the government intruding on our own privacies?”

‘Best protection’

Taking the podium right before Obama, Cook spoke of cooperating with government. “Safeguarding the world of digitized personal information is an enormous task,” Cook said. “And no single company or organization can accomplish it on its own. That is why we’re committed to engaging productively with the White House and Congress and putting the results of these conversations into action.”

However, according to the San Jose Mercury News, Cook also said, “People have entrusted us with their most personal and precious information. We owe them nothing less than the best protection that we can possibly provide.”

That was a reference to Apple automatically encrypting all data on its devices, despite being denounced by Obama’s FBI. Apple’s action was followed by Google on its Android devices.

As the Mercury News reported, “In his speech, Cook emphasized the importance of protecting consumer privacy and took a veiled shot at critics in the administration and law enforcement who have complained that Apple’s encryption practices have made it difficult for them to pursue criminals and other bad actors. Cook argued that his company and others have an obligation to protect customer data.”

Cybersecurity Executive Order

As part of his actions in this area, yesterday Obama signed Executive Order 13636, “Improving Critical Infrastructure Cybersecurity.” According to the White House’s website:

“The Executive Order is designed to increase the level of core capabilities for our critical infrastructure to manage cyber risk. It does this by focusing on three key areas: (1) information sharing, (2) privacy, and (3) the adoption of cybersecurity practices.

“The EO tasked the National Institute for Standards and Technology (NIST) to work with the private sector to identify existing voluntary consensus standards and industry best practices and build them into a Cybersecurity Framework. The Administration recognizes that there are private-sector cyber leaders who are already implementing strong cybersecurity controls, policies, procedures and innovations and asked these companies to help us shape best practices across critical infrastructure. The President then directed DHS [Department of Homeland Security] to establish a voluntary program to promote the adoption of the Framework.”

However, given Silicon Valley’s leeriness toward government actions, as expressed by Cook, time will tell how much cooperation there will be on this program.

He’ll talk at the White House Summit on Cybersecurity and Consumer Protection. According to Stanford News, participants include other government leaders, law-enforcement officials, consumer advocates, students and executives from finance, technology, security and communications companies.

Most watched will be the president’s remarks on information security and the reaction of top Silicon Valley executives, Jim Harper told CalWatchdog.com; he’s a senior fellow in information studies at the Cato Institute. He said that, because the president now is a lame duck and doesn’t face re-election, he might not “feel he has to be too strong on cybersecurity” by his own government.

It’s been less than two years since National Security contract employee Edward Snowden exposed how the NSA essentially scoops up almost all data in America. Yet neither the president nor Congress has advanced any substantial changes in policy.

“Obama has essentially allowed the NSA free rein,” Harper said. “And what the NSA has done is a major setback for Silicon Valley” because potential customers, especially overseas, can’t be sure American services aren’t bugged by the NSA from the start. That situation encourages business moving to the foreign competition.

Harper said he expects “some of the speeches from Silicon Valley will give him a piece of their mind” on the security issue. Most watched will be the comments of Tim Cook, the CEO of Apple Inc., the Valley’s most glittering and profitable company.

And because of the president’s problem with government spying on data, Harper added, anything he says about private security networks will be questioned.

FCC regulations

The president’s visit also comes as his appointees on the Federal Communications Commission seek heavier regulation of the Internet through what is called “Net Neutrality” or the “Open Internet.” It’s a topic he also might address.

According to the FCC’s website, “Under this principle, consumers can make their own choices about what applications and services to use and are free to decide what lawful content they want to access, create, or share with others. This openness promotes competition and enables investment and innovation.”

Critics charge Net Neutrality would mean 1930s-era telephone regulations applied to the Internet, with heavy handed government involvement stifling innovation.

Harper said Obama now is “at the mercy of the bureaucrats” he appointed. And because the president is a lame duck, he doesn’t have a compelling reason to go against the FCC.

The Federal Election Commission also is getting into the act. The Washington Examiner reported today, “Claiming that thousands of public comments condemning ‘dark money’ in politics can’t be ignored, the Democrat-chaired Federal Election Commission on Wednesday appeared ready to open the door to new regulations on donors, bloggers and others who use the Internet to influence policy and campaigns.”

Silicon Valley

Silicon Valley remains the driving engine of California’s economy, as well as much of the U.S. and world economies. So the reactions of tech luminaries to the president’s words will be telling on how the industry, which has been increasingly active in politics, will be reacting to Obama administration actions.

Just last October, Apple offered stronger encryption on its communications, bringing down a condemnation from the Obama administration.

Reported the Guardian, “The latest version of Apple’s operating system for desktop and laptop computers, Mac OS X 10.10 ‘Yosemite,’ encourages users to turn on the company’s FileVault disk encryption, as the company hardens its pro-security stance. … The FBI’s director, James Comey, decried the company’s decision to offer similar tools on mobile devices running iOS 8.”

Google quickly followed suit with its Android operating system.

Speakers

According to the White House agenda, in addition to Cook, those in the private sector scheduled to speak or on panels include:

• Stanford President John Hennessy;
• Michael Brown, CEO, Symantec;
• Lorrie Faith Cranor, Professor, Carnegie Mellon University and Advisory Board Member, Electronic Frontier Foundation;
• Stina Ehrensvard, CEO and Founder, Yubikey;
• Mark Kelsey, CEO, LexisNexis;
• Scott Charney, Corporate VP Trustworthy Computing, Microsoft;
• Eric Grosse, VP for Security Engineering, Google;
• Melody Hildebrandt, Global head of cyber security, Palantir;
• Alex Stamos, Chief Information Security Officer, Yahoo;
• Joe Sullivan, Chief Information Security Officer, Facebook.

In addition to the president, government speakers include:

• Lisa Monaco, National Security Council;
• Jeff Zients, National Economic Council;
• Administrator Maria Contreras-Sweet, U.S. Small Business Administration;
• Alejandro Mayorkas, Deputy Secretary, U.S. Department of Homeland Security;
• Matt Olsen, Former Director, National Counterterrorism Center;
• Joseph Demarest, Federal Bureau of Investigation;
• Ed Lowery, U.S. Secret Service;
• Jamie Saunders, Director National Cyber Crime Unit, United Kingdom National Crime Agency;
• Bilal Sen, United Nations Office of Drug and Crime.