Trust issue looms large for tech companies capitalizing on personal data

Privacy issues may cause a stumbling block for companies capitalizing on a growing stream of user data

As tech companies increasingly rely on analyzing and selling user data to boost revenue, trust is emerging as one of the defining issues of the year for the IT sector.

Tech vendors say that by collecting user data, they can offer better, personalized services. However, user wariness about exposing personal data may throw a wrench in plans for such new services, which are fueling growth not only for tech companies but, industry insiders say, the larger global economy as well.

"The transition to the digital world raises a new awareness of security and privacy issues," said Michel Combes, CEO of Alcatel-Lucent, in an interview at last week's Mobile World Congress in Barcelona. "We all know that if we don't solve these issues we'll face a trust issue in the usage of digital networks, which will be of major concern, because the whole economy is moving toward digital."

Well-publicized data breaches over the past year and the revelations of former U.S. government contractor Edward Snowden about U.S. National Security Agency snooping have exacerbated growing unease about the amount of personal data that is being collected by Internet companies such as Google and Facebook, telecom companies and retailers, tech industry leaders said.

"With the discussion around the NSA and the Snowden affair I think consumers are getting sensitized," said Deutsche Telekom CEO Tim Hottges, at an MWC keynote address.

Just about every tech executive at MWC in private interviews, keynotes and panel discussions touched on the issue of trust. U.S. executives in particular faced pointed questions about how the Snowden revelations may affect how their businesses are perceived.

"The government kinda blew it on us," said Facebook CEO Mark Zuckerberg in a question-and-answer session at MWC. "The NSA issues, I think, are a real issue especially for American Internet companies," Zuckerberg said. "Trust is just such an important thing when you're thinking about using any service where you're gonna share important and personal information, and we continue to work to just make sure that we can share everything that the government is asking from us."

Recently the NSA has allowed tech companies to share the number of government requests they receive, so the public realizes that such requests amount to thousands, not millions, Zuckerberg stressed.

Even so, "there has been an underestimation of how big all these revelations are and as they've piled up on top of one another, how disappointed consumers feel," said Ovum analyst Mark Little.

Concerns about the collection of personal data have been growing for years, Little noted. For example, news broke years ago that Google's Street View program picked up Wi-Fi data including passwords and email, causing legal issues for the search giant in various countries, Little said. Google's Street View cars roamed streets in locations around the world in order to aid the company's mapping software.

Facebook faced fierce criticism and a class-action lawsuit in 2011 when it introduced the "sponsored stories" feature, which showed a user's profile photo near an advertisement if the user had "liked" the brand, Little said. Facebook's privacy policies continue to be subject to close scrutiny.

Increasing user resistance to exposing personal data and Internet use habits to such tech giants has created an opportunity for other players, Little said. One such example is DuckDuckGo, an Internet search engine that does not profile its users, Little said. Other examples cited by Little include Epic, a Web browser that ensures that session data such as cookies and history are deleted when a user exits the software; Snapchat, the photo-messaging service that deletes images from its servers once they are viewed; and the Mydex Personal Data Vault, which allows users to collect all their personal information in an encrypted storage space and manage how third parties such as online services can access the data.

Aggressive vendor exploitation of big data -- the use of business intelligence software to analyze massive amounts of data collected from various online, mobile, point of sale and other sources -- will only serve to increase interest in services that profess to allow people control over how their data is used, Little said.

The big data phenomenon is only going to get bigger, as network-connected sensors are incorporated into devices, such as thermostats, that in the past were stand-alone appliances,

industry representatives said at MWC. This trend has been called the "Internet of things," (IoT) and was much discussed last week in Barcelona.

By connecting devices over the Internet and wirelessly over mobile networks and analyzing the data that can be collected this way, companies can manage a wide range of new services for their customers. This is why Google announced in January that it would pay more than US$3 billion for Nest's smart thermostat and smoke alarm technology, multiple tech executives pointed out.

"It's inevitable that every business will become an IoT business," said Jahangir Mohammed, CEO of Jasper Wireless, in an MWC keynote address. "IoT transforms businesses that are [about a] product, into products and services."

From all the talk and some concrete product offerings announced last week, it appears that tech vendors and telecom companies are starting to realize that to successfully monetize subscribers' data they need to first earn far greater trust from them, Ovum's Little said. Ovum calls this approach "Big Trust," he noted.

An announcement from Swisscom and WiseKey is an example of this approach, Little said. The companies announced a partnership to provide Trusted Encrypted Personal Clouds stored in Switzerland.

Several industry executives called for tech vendors, telecom companies and politicians to work together to formulate policies to create a transparent global regulatory framework for how personal data can be exploited.

"We need a new arrangement between European regulation, local regulation and the global market" as well as harmonization of data protection laws across Europe, said Deutsche Telekom's Hottges. In Germany, operators are not allowed to analyze big data "so all of our private data is going out of the country, being analyzed" by U.S. companies and being sold back to Europeans, Hottges said.

Alcatel-Lucent's Combes agreed that a multiple-stakeholder approach is needed.

"It's clear that if we want to tackle this issue it can't be tackled by just one entity in the value chain," Combes said. "It's something which has to be tackled by all the protagonists together, from the governments to the regulators to the service providers to the vendors -- we need to be clear on how we empower users in order for them to protect their privacy."

Many industry insiders, however, doubt that government regulations will keep up with the speed of change in technology.

"I think technology will be ahead of governments," said Bob Sell, chief executive of Accenture's Communications, Media & Technology operating group.

Whether or not private industry works with governments to build a more coherent international regulatory data privacy regime, it's clear that the issue of trust has come to the fore for a tech industry that wants to capitalize on a continually growing stream of personal data.

As Combes noted: "My major concern is to rebuild trust in the digital infrastructure."

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