Posts Tagged ‘iCloud’

Apple Shares Rally as Company Outlines Life Beyond the iPhone

January 30, 2019

Apple Inc. convinced investors that life beyond the iPhone won’t be so bad, sparking a relief rally in the stock.

The Cupertino, California-based company reported its first holiday-quarter sales decline since 2001 as revenue from the iconic handset tumbled 15 percent. But Chief Executive Officer Tim Cook and Chief Financial Officer Luca Maestri focused on a growing services business and rising sales of other devices.

Mac revenue grew 9 percent, while iPad sales climbed 17 percent. The company’s Wearables business, which includes the Apple Watch and AirPods, surged 50 percent.

On services, the Apple executives pointed to increased usage of Apple Pay and Apple Music. They also made a new prediction: The number of subscriptions will top half a billion by 2020, up from 360 million now. Without getting into detail, Cook suggested Apple will get further into the original video content business.

The company reported other growth stats on specific services:

  • The Apple Pay app handled 1.8 billion transactions in the holiday quarter, twice the volume in the year-ago quarter
  • Apple News had 85 million monthly active users in the period
  • Cloud services revenue, which comes from iCloud storage upgrades, was up more than 40 percent
  • Apple Music topped 50 million subscribers, generating record music-related revenue
  • A record quarter for Search Ads, which let developers place ads in the App Store

Apple shares rose 5.5 percent in extended trading on Tuesday. The company had lost about a third of its market value since October as investors adjusted to the reality of a saturated smartphone market and the end of growth for Apple’s most-important product.

Suppliers to the iPhone maker in Europe followed the company higher Wednesday. Dialog Semiconductor Plc gained as much as 2.2 percent in London, STMicroelectronics NV as much as 3.2 percent in Paris, and AMS AG as much as 6.4 percent in Switzerland. In Asia, Hon Hai Precision Industry Co. Ltd.Pegatron Corp., and Wistron Corp. also followed the upward trend.

Apple executives confirmed that customers are taking longer to upgrade their handsets, but said older iPhones will support the services business, while sales of other devices boost revenue. Cook noted the installed base of active Apple devices hit a record 1.4 billion in the fiscal first quarter. That’s the gateway through which customers access existing and future services from the company.

The recent slump in Apple shares may already reflect falling iPhone sales, leaving investors willing to buy into the company’s vision for services. Despite a fiscal second-quarter forecast that missed most analysts’ estimates, the company’s shares rallied late Tuesday.

Still, the company will ultimately need iPhone sales to rebound or a major new hardware product. If fewer people use Apple devices, they will be less likely to pay for the company’s services.

Shira Ovide: Apple needs to hone its post-iPhone pitch.

Apple has been working on an augmented reality headset, which it plans to have ready as early as next year. It’s also been adding health-tracking capabilities and iPhone features to the Watch.

And while the services numbers impressed some investors, growth has slowed. The company blamed that on an accounting change, foreign exchange headwinds, approval delays for games in the Chinese App Store, and “some level” of deceleration for the AppleCare warranty business.


Apple’s Cook to Trump: Embrace Open Trade — “Countries that embrace openness, that embrace trade, that embrace diversity are the countries that do exceptionally.” — Tim Cook has a good social credit rating

March 24, 2018

Cook also calls for regulations to protect privacy during forum in Beijing

Apple CEO Tim Cook arrives at the China Development Forum in Beijing on Saturday.
Apple CEO Tim Cook arrives at the China Development Forum in Beijing on Saturday. PHOTO: GIULIA MARCHI/BLOOMBERG NEWS

BEIJING—Apple Inc. Chief Executive Tim Cook urged U.S. President Donald Trump to support free-trade policies as a series of tariffs and other actions raise tensions between the U.S. and China.

“Countries that embrace openness, that embrace trade, that embrace diversity are the countries that do exceptionally,” Mr. Cook said during a panel discussion at an economic forum here Saturday, when asked what message he would like to bring home to Mr. Trump. “And the countries that don’t, don’t,” he added, without mentioning the president by name.

Larry Fink, chief executive of investment firm BlackRock Inc., who also attended the China Development Forum, said the U.S. and China shouldn’t fight a trade war. “The world needs a strong China and a strong U.S. The world does not need a public fight in which we reduce mutual opportunities,” he said.

The comments from Messrs. Cook and Fink came after the U.S. this week proposed tariffs on as much as $60 billion of Chinese products and tighter restrictions on acquisitions and technology transfers.

A separate, previously announced round of U.S. tariffs on Chinese steel and aluminum products took effect Friday. The U.S. on Friday also lodged a dispute at the World Trade Organization against China’s technology licensing practices, which the Trump administration says favor Chinese companies.

China responded with plans to impose tariffs on $3 billion of U.S. goods. On Saturday, Chinese Vice Premier Liu He told U.S. Treasury Secretary Steven Mnuchin during a phone call that China is ready to defend its national interests, according to China’s state-run news agency Xinhua.

A Chinese Commerce Ministry spokesman also expressed regret at the U.S.’s case at the WTO and said China protects intellectual property rights.

Lou Jiwei, China’s former finance minister who is now the chairman of the National Council for Social Security Fund, said at the forum that he thought China’s response was too soft.

“It did not hit the spot where it hurts” the U.S., Mr. Lou said, adding that he believed a negotiated settlement was possible.

“The important thing is that he’s a businessman,” Mr. Lou said, referring to Mr. Trump. “We fight a bit, then we could talk it through.”

The three-day China Development Forum, held at Beijing’s Diaoyutai State Guesthouse, gives global business chiefs with big stakes in the Chinese market an opportunity to build relationships with China’s senior officials, and vice versa.

Top executives of other foreign companies including Alphabet Inc.’s Google, Qualcomm Inc.and Daimler AG are also attending the conference. Mr. Cook is this year’s co-chairman.

Like most companies at the conference, Apple depends on smooth bilateral relations between the U.S. and China. The iPhone is a product of U.S. engineering talent and Chinese manufacturing prowess, with each phone carrying the line “Designed by Apple in California Assembled in China.”

China, the world’s biggest smartphone market, is a crucial market for the iPhone.

Members of the U.S. business community are set to meet senior Chinese officials over the next few days to exchange views on trade and business environment.

That is expected to include a meeting next week with China’s new vice president, Wang Qishan, whose tasks includes managing the critical but increasingly fraught relationship with the U.S., people familiar with the matter said.

In a forum at the event, Mr. Cook also called for regulations to protect privacy. “I think this certain situation is so dire and has become so large that probably some well-crafted regulation is necessary,” he said.

How technology firms handle their users’ data has become a pressing issue since Facebook Inc. said a firm with ties to the 2016 Trump campaign improperly kept data for years even though it said it has destroyed those records.

Mr. Cook said that businesses or governments shouldn’t be able to know intimate details of individuals’ lives. “The ability for anyone to know what you’ve been browsing about for years, who your contacts are, who their contacts are, things you like and dislike and every intimate detail of life: from my point of view, it shouldn’t exist,” he said.

Recently, Apple has been criticized by privacy experts over its move to store encryption keys in China for local iCloud users. Some experts said such a move could risk access to user data by Chinese authorities. Apple has said it will store the keys in a secure locationand retain control over them. Mr. Cook didn’t touch on the issue during his speech at the forum.

Write to Yoko Kubota at

Big data meets Big Brother as China moves to rate its citizens

The Chinese government plans to launch its Social Credit System in 2020. The aim? To judge the trustworthiness – or otherwise – of its 1.3 billion residents

Kevin Hong

On June 14, 2014, the State Council of China published an ominous-sounding document called “Planning Outline for the Construction of a Social Credit System”. In the way of Chinese policy documents, it was a lengthy and rather dry affair, but it contained a radical idea. What if there was a national trust score that rated the kind of citizen you were?

Imagine a world where many of your daily activities were constantly monitored and evaluated: what you buy at the shops and online; where you are at any given time; who your friends are and how you interact with them; how many hours you spend watching content or playing video games; and what bills and taxes you pay (or not). It’s not hard to picture, because most of that already happens, thanks to all those data-collecting behemoths like Google, Facebook and Instagram or health-tracking apps such as Fitbit. But now imagine a system where all these behaviours are rated as either positive or negative and distilled into a single number, according to rules set by the government. That would create your Citizen Score and it would tell everyone whether or not you were trustworthy. Plus, your rating would be publicly ranked against that of the entire population and used to determine your eligibility for a mortgage or a job, where your children can go to school – or even just your chances of getting a date.

A futuristic vision of Big Brother out of control? No, it’s already getting underway in China, where the government is developing the Social Credit System (SCS) to rate the trustworthiness of its 1.3 billion citizens. The Chinese government is pitching the system as a desirable way to measure and enhance “trust” nationwide and to build a culture of “sincerity”. As the policy states, “It will forge a public opinion environment where keeping trust is glorious. It will strengthen sincerity in government affairs, commercial sincerity, social sincerity and the construction of judicial credibility.”

Others are less sanguine about its wider purpose. “It is very ambitious in both depth and scope, including scrutinising individual behaviour and what books people are reading. It’s Amazon’s consumer tracking with an Orwellian political twist,” is how Johan Lagerkvist, a Chinese internet specialist at the Swedish Institute of International Affairs, described the social credit system. Rogier Creemers, a post-doctoral scholar specialising in Chinese law and governance at the Van Vollenhoven Institute at Leiden University, who published a comprehensive translation of the plan, compared it to “Yelp reviews with the nanny state watching over your shoulder”.

For now, technically, participating in China’s Citizen Scores is voluntary. But by 2020 it will be mandatory. The behaviour of every single citizen and legal person (which includes every company or other entity)in China will be rated and ranked, whether they like it or not.

Kevin Hong

Prior to its national roll-out in 2020, the Chinesegovernment is taking a watch-and-learn approach. In this marriage between communist oversight and capitalist can-do, the government has given a licence to eight private companies to come up with systems and algorithms for social credit scores. Predictably, data giants currently run two of the best-known projects.

The first is with China Rapid Finance, a partner of the social-network behemoth Tencent and developer of the messaging app WeChat with more than 850 million active users. The other, Sesame Credit, is run by the Ant Financial Services Group (AFSG), an affiliate company of Alibaba. Ant Financial sells insurance products and provides loans to small- to medium-sized businesses. However, the real star of Ant is AliPay, its payments arm that people use not only to buy things online, but also for restaurants, taxis, school fees, cinema tickets and even to transfer money to each other.

Sesame Credit has also teamed up with other data-generating platforms, such as Didi Chuxing, the ride-hailing company that was Uber’s main competitor in China before it acquired the American company’s Chinese operations in 2016, and Baihe, the country’s largest online matchmaking service. It’s not hard to see how that all adds up to gargantuan amounts of big data that Sesame Credit can tap into to assess how people behave and rate them accordingly.

So just how are people rated? Individuals on Sesame Credit are measured by a score ranging between 350 and 950 points. Alibaba does not divulge the “complex algorithm” it uses to calculate the number but they do reveal the five factors taken into account. The first is credit history. For example, does the citizen pay their electricity or phone bill on time? Next is fulfilment capacity, which it defines in its guidelines as “a user’s ability to fulfil his/her contract obligations”. The third factor is personal characteristics, verifying personal information such as someone’s mobile phone number and address. But the fourth category, behaviour and preference, is where it gets interesting.

Under this system, something as innocuous as a person’s shopping habits become a measure of character. Alibaba admits it judges people by the types of products they buy. “Someone who plays video games for ten hours a day, for example, would be considered an idle person,” says Li Yingyun, Sesame’s Technology Director. “Someone who frequently buys diapers would be considered as probably a parent, who on balance is more likely to have a sense of responsibility.” So the system not only investigates behaviour – it shapes it. It “nudges” citizens away from purchases and behaviours the government does not like.

Friends matter, too. The fifth category is interpersonal relationships. What does their choice of online friends and their interactions say about the person being assessed? Sharing what Sesame Credit refers to as “positive energy” online, nice messages about the government or how well the country’s economy is doing, will make your score go up.

Alibaba is adamant that, currently, anything negative posted on social media does not affect scores (we don’t know if this is true or not because the algorithm is secret). But you can see how this might play out when the government’s own citizen score system officially launches in 2020. Even though there is no suggestion yet that any of the eight private companies involved in the ongoing pilot scheme will be ultimately responsible for running the government’s own system, it’s hard to believe that the government will not want to extract the maximum amount of data for its SCS, from the pilots. If that happens, and continues as the new normal under the government’s own SCS it will result in private platforms acting essentially as spy agencies for the government. They may have no choice.

Posting dissenting political opinions or links mentioning Tiananmen Square has never been wise in China, but now it could directly hurt a citizen’s rating. But here’s the real kicker: a person’s own score will also be affected by what their online friends say and do, beyond their own contact with them. If someone they are connected to online posts a negative comment, their own score will also be dragged down.

So why have millions of people already signed up to what amounts to a trial run for a publicly endorsed government surveillance system? There may be darker, unstated reasons – fear of reprisals, for instance, for those who don’t put their hand up – but there is also a lure, in the form of rewards and “special privileges” for those citizens who prove themselves to be “trustworthy” on Sesame Credit.

If their score reaches 600, they can take out a Just Spend loan of up to 5,000 yuan (around £565) to use to shop online, as long as it’s on an Alibaba site. Reach 650 points, they may rent a car without leaving a deposit. They are also entitled to faster check-in at hotels and use of the VIP check-in at Beijing Capital International Airport. Those with more than 666 points can get a cash loan of up to 50,000 yuan (£5,700), obviously from Ant Financial Services. Get above 700 and they can apply for Singapore travel without supporting documents such as an employee letter. And at 750, they get fast-tracked application to a coveted pan-European Schengen visa. “I think the best way to understand the system is as a sort of bastard love child of a loyalty scheme,” says Creemers.

Higher scores have already become a status symbol, with almost 100,000 people bragging about their scores on Weibo (the Chinese equivalent of Twitter) within months of launch. A citizen’s score can even affect their odds of getting a date, or a marriage partner, because the higher their Sesame rating, the more prominent their dating profile is on Baihe.

Sesame Credit already offers tips to help individuals improve their ranking, including warning about the downsides of friending someone who has a low score. This might lead to the rise of score advisers, who will share tips on how to gain points, or reputation consultants willing to offer expert advice on how to strategically improve a ranking or get off the trust-breaking blacklist.

Indeed, the government’s Social Credit System is basically a big data gamified version of the Communist Party’s surveillance methods; the disquieting dang’an. The regime kept a dossier on every individual that tracked political and personal transgressions. A citizen’s dang’an followed them for life, from schools to jobs. People started reporting on friends and even family members, raising suspicion and lowering social trust in China. The same thing will happen with digital dossiers. People will have an incentive to say to their friends and family, “Don’t post that. I don’t want you to hurt your score but I also don’t want you to hurt mine.”

We’re also bound to see the birth of reputation black markets selling under-the-counter ways to boost trustworthiness. In the same way that Facebook Likes and Twitter followers can be bought, individuals will pay to manipulate their score. What about keeping the system secure? Hackers (some even state-backed) could change or steal the digitally stored information.

The new system reflects a cunning paradigm shift.

As we’ve noted, instead of trying to enforce stability or conformity with a big stick and a good dose of top-down fear, the government is attempting to make obedience feel like gaming. It is a method of social control dressed up in some points-reward system. It’s gamified obedience.

In a trendy neighbourhood in downtown Beijing, the BBC news services hit the streets in October 2015 to ask people about their Sesame Credit ratings. Most spoke about the upsides. But then, who would publicly criticise the system? Ding, your score might go down. Alarmingly, few people understood that a bad score could hurt them in the future. Even more concerning was how many people had no idea that they were being rated.

Currently, Sesame Credit does not directly penalise people for being “untrustworthy” – it’s more effective to lock people in with treats for good behaviour. But Hu Tao, Sesame Credit’s chief manager, warns people that the system is designed so that “untrustworthy people can’t rent a car, can’t borrow money or even can’t find a job”. She has even disclosed that Sesame Credit has approached China’s Education Bureau about sharing a list of its students who cheated on national examinations, in order to make them pay into the future for their dishonesty.

Penalties are set to change dramatically when the government system becomes mandatory in 2020. Indeed, on September 25, 2016, the State Council General Office updated its policy entitled “Warning and Punishment Mechanisms for Persons Subject to Enforcement for Trust-Breaking”. The overriding principle is simple: “If trust is broken in one place, restrictions are imposed everywhere,” the policy document states.

For instance, people with low ratings will have slower internet speeds; restricted access to restaurants, nightclubs or golf courses; and the removal of the right to travel freely abroad with, I quote, “restrictive control on consumption within holiday areas or travel businesses”. Scores will influence a person’s rental applications, their ability to get insurance or a loan and even social-security benefits. Citizens with low scores will not be hired by certain employers and will be forbidden from obtaining some jobs, including in the civil service, journalism and legal fields, where of course you must be deemed trustworthy. Low-rating citizens will also be restricted when it comes to enrolling themselves or their children in high-paying private schools. I am not fabricating this list of punishments. It’s the reality Chinese citizens will face. As the government document states, the social credit system will “allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step”.

According to Luciano Floridi, a professor of philosophy and ethics of information at the University of Oxford and the director of research at the Oxford Internet Institute, there have been three critical “de-centering shifts” that have altered our view in self-understanding: Copernicus’s model of the Earth orbiting the Sun; Darwin’s theory of natural selection; and Freud’s claim that our daily actions are controlled by the unconscious mind.

Floridi believes we are now entering the fourth shift, as what we do online and offline merge into an onlife. He asserts that, as our society increasingly becomes an infosphere, a mixture of physical and virtual experiences, we are acquiring an onlife personality – different from who we innately are in the “real world” alone. We see this writ large on Facebook, where people present an edited or idealised portrait of their lives. Think about your Uber experiences. Are you just a little bit nicer to the driver because you know you will be rated? But Uber ratings are nothing compared to Peeple, an app launched in March 2016, which is like a Yelp for humans. It allows you to assign ratings and reviews to everyone you know – your spouse, neighbour, boss and even your ex. A profile displays a “Peeple Number”, a score based on all the feedback and recommendations you receive. Worryingly, once your name is in the Peeple system, it’s there for good. You can’t opt out.

Peeple has forbidden certain bad behaviours including mentioning private health conditions, making profanities or being sexist (however you objectively assess that). But there are few rules on how people are graded or standards about transparency.

China’s trust system might be voluntary as yet, but it’s already having consequences. In February 2017, the country’s Supreme People’s Court announced that 6.15 million of its citizens had been banned from taking flights over the past four years for social misdeeds. The ban is being pointed to as a step toward blacklisting in the SCS. “We have signed a memorandum… [with over] 44 government departments in order to limit ‘discredited’ people on multiple levels,” says Meng Xiang, head of the executive department of the Supreme Court. Another 1.65 million blacklisted people cannot take trains.

Where these systems really descend into nightmarish territory is that the trust algorithms used are unfairly reductive. They don’t take into account context. For instance, one person might miss paying a bill or a fine because they were in hospital; another may simply be a freeloader. And therein lies the challenge facing all of us in the digital world, and not just the Chinese. If life-determining algorithms are here to stay, we need to figure out how they can embrace the nuances, inconsistencies and contradictions inherent in human beings and how they can reflect real life.

Kevin Hong

You could see China’s so-called trust plan as Orwell’s 1984 meets Pavlov’s dogs. Act like a good citizen, be rewarded and be made to think you’re having fun. It’s worth remembering, however, that personal scoring systems have been present in the west for decades.

More than 70 years ago, two men called Bill Fair and Earl Isaac invented credit scores. Today, companies use FICO scores to determine many financial decisions, including the interest rate on our mortgage or whether we should be given a loan.

For the majority of Chinese people, they have never had credit scores and so they can’t get credit. “Many people don’t own houses, cars or credit cards in China, so that kind of information isn’t available to measure,” explains Wen Quan, an influential blogger who writes about technology and finance. “The central bank has the financial data from 800 million people, but only 320 million have a traditional credit history.” According to the Chinese Ministry of Commerce, the annual economic loss caused by lack of credit information is more than 600 billion yuan (£68bn).

China’s lack of a national credit system is why the government is adamant that Citizen Scores are long overdue and badly needed to fix what they refer to as a “trust deficit”. In a poorly regulated market, the sale of counterfeit and substandard products is a massive problem. According to the Organization for Economic Co-operation and Development (OECD), 63 per cent of all fake goods, from watches to handbags to baby food, originate from China. “The level of micro corruption is enormous,” Creemers says. “So if this particular scheme results in more effective oversight and accountability, it will likely be warmly welcomed.”

The government also argues that the system is a way to bring in those people left out of traditional credit systems, such as students and low-income households. Professor Wang Shuqin from the Office of Philosophy and Social Science at Capital Normal University in China recently won the bid to help the government develop the system that she refers to as “China’s Social Faithful System”. Without such a mechanism, doing business in China is risky, she stresses, as about half of the signed contracts are not kept. “Given the speed of the digital economy it’s crucial that people can quickly verify each other’s credit worthiness,” she says. “The behaviour of the majority is determined by their world of thoughts. A person who believes in socialist core values is behaving more decently.” She regards the “moral standards” the system assesses, as well as financial data, as a bonus.

Indeed, the State Council’s aim is to raise the “honest mentality and credit levels of the entire society” in order to improve “the overall competitiveness of the country”. Is it possible that the SCS is in fact a more desirably transparent approach to surveillance in a country that has a long history of watching its citizens? “As a Chinese person, knowing that everything I do online is being tracked, would I rather be aware of the details of what is being monitored and use this information to teach myself how to abide by the rules?” says Rasul Majid, a Chinese blogger based in Shanghai who writes about behavioural design and gaming psychology. “Or would I rather live in ignorance and hope/wish/dream that personal privacy still exists and that our ruling bodies respect us enough not to take advantage?” Put simply, Majid thinks the system gives him a tiny bit more control over his data.

Kevin Hong

When I tell westerners about the Social CreditSystem in China, their responses are fervent and visceral. Yet we already rate restaurants, movies, books and even doctors. Facebook, meanwhile, is now capable of identifying you in pictures without seeing your face; it only needs your clothes, hair and body type to tag you in an image with 83 per cent accuracy.

In 2015, the OECD published a study revealing that in the US there are at least 24.9 connected devices per 100 inhabitants. All kinds of companies scrutinise the “big data” emitted from these devices to understand our lives and desires, and to predict our actions in ways that we couldn’t even predict ourselves.

Governments around the world are already in the business of monitoring and rating. In the US, the National Security Agency (NSA) is not the only official digital eye following the movements of its citizens. In 2015, the US Transportation Security Administration proposed the idea of expanding the PreCheck background checks to include social-media records, location data and purchase history. The idea was scrapped after heavy criticism, but that doesn’t mean it’s dead. We already live in a world of predictive algorithms that determine if we are a threat, a risk, a good citizen and even if we are trustworthy. We’re getting closer to the Chinese system – the expansion of credit scoring into life scoring – even if we don’t know we are.

So are we heading for a future where we will all be branded online and data-mined? It’s certainly trending that way. Barring some kind of mass citizen revolt to wrench back privacy, we are entering an age where an individual’s actions will be judged by standards they can’t control and where that judgement can’t be erased. The consequences are not only troubling; they’re permanent. Forget the right to delete or to be forgotten, to be young and foolish.

While it might be too late to stop this new era, we do have choices and rights we can exert now. For one thing, we need to be able rate the raters. In his book The Inevitable, Kevin Kelly describes a future where the watchers and the watched will transparently track each other. “Our central choice now is whether this surveillance is a secret, one-way panopticon – or a mutual, transparent kind of ‘coveillance’ that involves watching the watchers,” he writes.

Our trust should start with individuals within government (or whoever is controlling the system). We need trustworthy mechanisms to make sure ratings and data are used responsibly and with our permission. To trust the system, we need to reduce the unknowns. That means taking steps to reduce the opacity of the algorithms. The argument against mandatory disclosures is that if you know what happens under the hood, the system could become rigged or hacked. But if humans are being reduced to a rating that could significantly impact their lives, there must be transparency in how the scoring works.

In China, certain citizens, such as government officials, will likely be deemed above the system. What will be the public reaction when their unfavourable actions don’t affect their score? We could see a Panama Papers 3.0 for reputation fraud.

It is still too early to know how a culture of constant monitoring plus rating will turn out. What will happen when these systems, charting the social, moral and financial history of an entire population, come into full force? How much further will privacy and freedom of speech (long under siege in China) be eroded? Who will decide which way the system goes? These are questions we all need to consider, and soon. Today China, tomorrow a place near you. The real questions about the future of trust are not technological or economic; they are ethical.

If we are not vigilant, distributed trust could become networked shame. Life will become an endless popularity contest, with us all vying for the highest rating that only a few can attain.

This is an extract from Who Can You Trust? How Technology Brought Us Together and Why It Might Drive Us Apart (Penguin Portfolio) by Rachel Botsman, published on October 4. Since this piece was written, The People’s Bank of China delayed the licences to the eight companies conducting social credit pilots. The government’s plans to launch the Social Credit System in 2020 remain unchanged

Updated 28.11.17: An amendment has been made to clarify a comparison between the Chinese government’s Social Credit System and Communist Party surveillance methods.

China takes a bite out of Apple privacy claims — Privacy advocates and human rights activists are appalled

February 28, 2018

What happens when an unstoppable force meets an immovable object? We may be witnessing the answer with Apple, a long-time privacy advocate, acceding to Chinese demands on access to its iCloud services in the country.

Iphone X (Reuters/T. Peter)

China is not big on privacy. The Communist Party government in the People’s Republic is currently in the process of developing a so-called “social credit system” for its citizens, which will use various forms of data, much of it personal and obtained through mass surveillance, to establish a national “reputation” database.

That might sound like something from a dystopian TV drama, but bit by bit, Xi Jinping’s government has been legislating to bring about such a reality. One example is the new cybersecurity law introduced last summer, one of the provisions of which requires companies that hold the data of Chinese citizens to store that data on Chinese servers and effectively make it available to the Chinese government.

Apple, the world’s largest IT company by revenue, is big on privacy. The California-based tech superpower has doggedly refused various FBI and US government requests to extract data from locked iPhones, most notably in 2016 when the FBI wanted to extract data from the iPhone of one of the terrorists from the 2015 San Bernardino attack.

The pioneering company regularly promotes its own privacy and encryption standards — in 2016, CEO Tim Cook sent a public letter talking about the intrinsic importance of privacy to Apple.

“Here’s the situation,” said Cook, in an interview around the same time. “On your iPhone today, there is likely health information, financial information, there are intimate conversations with family and co-workers and there are probably business secrets and you should have the ability to protect it.”

Except, it seems, in China, where the company earns tens of billions of dollars a year. From today (February 28), Apple is transferring the operation of its iCloud service for Chinese users to a local, state-owned firm called Guizhou-Cloud Big Data (GCBD).

Read more: China’s Xi Jinping urges respect for ‘cyberspace sovereignty’ at internet summit

That means that the Chinese government will now have far easier access to whatever Chinese users store on Apple’s cloud services within the country. Privacy advocates and human rights activists are appalled but Apple claims that not agreeing to the move would have actually led to less privacy and security for its Chinese users.

The Apple of China’s omnipresent eye

The move has been in the offing since last year, when Apple and GCBD announced a partnership agreement. Apple wrote in an email to its users in mainland China that the move “enables us to continue improving the speed and reliability of iCloud and to comply with Chinese regulations.”

Chinese President Xi Jinping, Apple's Tim Cook (Getty Images/S. Ted S. Warren-Pool)Chinese President Xi Jinping meets with Apple CEO Tim Cook

Those Chinese regulations show scant regard for users’ rights to privacy, particularly if Chinese police or government officials argue that “national security” is at stake. For example, if Chinese authorities approach GCBD in the future about accessing the data of a Chinese-based iCloud user for a criminal investigation, the company has a legal obligation to provide access.

Access is provided to iCloud accounts via cryptographic keys and until now, all such keys have been based on US servers, meaning any attempts — by China or anyone else — to access them had to go through the US legal system.

However, Apple’s acquiescence to the Chinese means that for the first time, those keys will be stored on Chinese servers meaning access to them is subject to Chinese legal processes only.

“While we advocated against iCloud being subject to these laws, we were ultimately unsuccessful,” Apple said. It claims it will still maintain control over encryption keys for users, but it is hard to square that claim with the fact that access will now be a mere Chinese legal ruling away for whatever entity in China pursues it.

Likewise, Apple’s claim that there will be no “backdoors” — ways for hackers to access iCloud accounts by copying or learning from how others were accessed — is largely irrelevant, given that users’ accounts will be easily accessed through legal means.

Human rights groups such as Amnesty International and Human Rights Watch have heavily criticized the move by Apple, while Jeremy Daum, an attorney and research fellow at Yale Law School’s Paul Tsai China Center in Beijing, told Reuters that any attempts by Apple to block Chinese access will be easily overcome.

“Even very early in a criminal investigation, police have broad powers to collect evidence,” he said. “(They are) authorized by internal police procedures rather than independent court review, and the public has an obligation to cooperate.”

Profit before privacy?

To be fair to Apple, it has given its Chinese users plenty of notice of the change. It also says it will not switch customers’ accounts to the Chinese data center until they agree to new terms of service — something 99.9 percent of users have already done — and has reminded them that they can opt out of iCloud if not happy with the new arrangements.

As well as that, Apple has until now been seemingly resilient in resisting attempts from the Chinese government to access user data, saying it turned down all 176 requests from the Chinese government from mid-2013 to mid-2017, before the new Chinese cybersecurity laws came into place.

Iphone X (Reuters/T. Peter)Apple has returned to growth in China after a brief period of decline

The softening since towards Chinese surveillance must be seen in the context of Apple’s increasing business presence in the world’s second largest economy. Apple recently returned to growth in China after a period of stagnation, taking in $9.8 billion (€8.02 billion) in revenue in the third quarter of 2017.

China is a huge potential growth market for Apple and the latest bow to Chinese legislation follows last year’s move by the company to remove VPN apps from its app store in China, VPNs being devices used to hide an internet user’s information. Apple has also been criticized for blocking Chinese users’ access to the different news apps, a move reflective of China’s strict censorship culture.

Other large US tech companies, such as Amazon and Microsoft, have made similar concessions to China recently, in an attempt to further access the market there.

Apple often talks of its “values,” privacy high among them. Discarding some of those “values” appears to be the price that must be paid if a large international company wants to maximize its business in Xi Jinping’s China.

Apple Sets Date for China Data Handover

January 10, 2018

Plan to transfer cloud data to local partner, as required by Chinese law, was announced last summer

An Apple store in Beijing; the company will turn over its iCloud operation in China to a local partner next month, as required by Chinese law.
An Apple store in Beijing; the company will turn over its iCloud operation in China to a local partner next month, as required by Chinese law.PHOTO: NG HAN GUAN/ASSOCIATED PRESS

BEIJING— Apple Inc. AAPL -0.01% said it will turn over its cloud operations in China to a state-owned local partner Feb. 28, complying with Chinese law mandating that customer data collected on the mainland be stored here.

With the handover, photos, documents and messages uploaded by Apple users throughout China will be stored at a data center in the southwest province of Guizhou operated by the local partner, Guizhou-Cloud Big Data Industry Co., Ltd.

Customers who log on to the Chinese iCloud service are notified of the change, and informed that they can either keep using iCloud or deactivate it on Feb. 28.

Apple said that over the next seven weeks it will seek to make sure customers know about the coming changes, adding that the company “has strong data-privacy and security protections in place and no backdoors will be created into any of our systems.”

China has tightened its cloud-computing oversight, saying it needs to ensure the privacy of its citizens’ data. Late last year, to comply with the new rules, Amazon Inc.’s Amazon Web Services unit sold computing equipment used for its cloud services in China to its local partner.

Apple announced its plans to transfer the cloud data to its Guizhou partner last summer. This week’s announcement, first reported by People’s Daily, set the date and other details.

Last year, following Beijing’s requests, Apple shut down hundreds of virtual private network apps, or VPNs, that allow users to access blocked websites. Apple chief executive officer Tim Cook defended that action at a business forum last month in Guangzhou, saying Apple needs to abide by Chinese laws so it can participate in the market and not be a bystander.

Apple to build massive data centre at China’s new hi-tech hub in Guizhou province

July 12, 2017

The facility, estimated to house more than 30,000 server cabinets, is part of Apple’s US$1bn investment programme in one of the country’s poorest areas

By Bien Perez
South China Morning Post

PUBLISHED : Wednesday, 12 July, 2017, 5:53pm
UPDATED : Wednesday, 12 July, 2017, 5:59pm

Apple is looking to double down on its business in mainland China by establishing a data centre in Guizhou province to comply with rigid cybersecurity laws, while supporting Beijing’s efforts to develop one of the country’s poorest areas into a world-class hi-tech hub.

The 41-year-old technology giant, which counts the mainland as its second-biggest market after the United States, said it has partnered with Guizhou-Cloud Big Data Industry Co (GCBD), a government-backed data centre developer and operator, to build the facility in that southwestern province.

The data centre project forms part of a US$1-billion investment programme that Apple has drawn up for the province, according to a Reuters report on Wednesday that cited an Apple spokesman.

“Apple’s new data centre in Guizhou could potentially cover an area of up to 1 million square feet (92,903 square metres), or a total capacity of more than 30,000 server cabinets, supported by 150 megawatts of critical load capacity,” Jabez Tan, the research director at Toronto-based Structure Research, told the South China Morning Post.

Tan said the estimates for Guizhou’s most high-profile international investor were based on recent data centre developments in the province by e-commerce powerhouse Alibaba Group Holding, as well as telecommunications network operators China Mobile, China Unicom and China Telecom.

“The Guizhou provincial government has been offering a set of incentives, including discounts on electricity from the area’s plentiful supply of hydropower, which has resulted in cloud computing and data centre firms establishing test sites and pilot programmes there,” he said.

New York-listed Alibaba, which owns the Post, signed a framework agreement with the Guizhou provincial government in 2014 to set up an industrial base for its cloud computing business and so-called big data operations.

Hon Hai Precision Industry, the world’s largest contract electronics manufacturer known by its Foxconn trade name, had set up a factory and 46,451 sq m data centre in an industrial zone just outside the provincial capital of Guiyang. The Taiwanese company is the main supplier for Apple’s iPhone.

Data centres are secure, temperature-controlled facilities used to house large-capacity servers and data storage systems, and equipped with multiple power sources and high-bandwidth internet connections.

These facilities are used by enterprises to remotely store large amounts of data, manage their business applications and host cloud computing operations. Cloud services enable companies to buy, lease or sell software and other digital resources online on demand, just like electricity from a power grid.

“The addition of this data centre [in Guizhou] will allow us to improve the speed and reliability of our products and services, while also complying with newly passed regulations,” Apple said in a statement. “These regulations require cloud services be operated by Chinese companies, so we’re partnering with GCBD to offer iCloud.”

 Craig Federighi, Apple’s senior vice president of software engineering, speaks about Chinese translation during Apple’s developer conference last month. Photo: Reuters

Launched in 2011, iCloud is Apple’s own online storage and cloud computing service for users of its Mac line of personal computers, iPads, iPhones and iPods.

The mainland’s Cybersecurity Law came into force on June 1, introducing data localisation measures and invasive forms of technology regulation, according to law firm Hogan Lovells.

Paul Haswell, a partner at international law firm Pinsent Masons, said “many overseas businesses will have to follow Apple’s lead [in setting up new data centre arrangements] in the coming months, as they wrestle with the ambiguities contained in the new cybersecurity law”.

Prior to its Guizhou project, Apple has been a so-called co-location tenant in a mainland data centre provider.

Apple reported in May its fifth consecutive quarter of revenue decline for its greater China business. It posted a 14 per cent decrease in combined first-quarter revenue from mainland China, Hong Kong and Taiwan to US$10.7 billion, compared with US$12.5 billion a year ago.

Apple Forecasts Second Sales Drop as iPhone Woes Deepen — China Sales Bite

April 27, 2016

By Alex Webb

Apple Inc.’s streak of 51 consecutive quarters of uninterrupted sales growth is over — and its expansion may not resume until late this year.

A boom in demand for smartphones, music players and other electronic devices propelled Apple’s annual revenue by $227 billion in the 13 years since the last quarterly drop, resulting in a skyrocketing stock price that made Apple the world’s most valuable company.

That era of untrammeled expansion hit a wall in the quarter that ended in March as fewer people upgraded to the latest iPhones, and the company is predicting another decline in the current period.

With the introduction of a new model still months away, Apple investors are seeking answers on whether lackluster sales of the device, the company’s biggest revenue generator, reflect a broader slowdown in the market for high-end smartphones — or just the pause before the next upgrade frenzy. Forecasts from suppliers such as Qualcomm Inc. and Taiwan Semiconductor Manufacturing Co. have suggested demand is cooling, and stalled economic growth in China is paring Apple’s sales in that region.

“I see nothing on the horizon from a component or a technology perspective that’s going to drive these major upgrades,” Bob O’Donnell, chief analyst at TECHnalysis Research LLC, said in a televised interview on Bloomberg West. “We’re going to see people hold onto these things longer, just like we saw with PCs.”

Second-quarter sales slid 13 percent to $50.6 billion from $58 billion a year earlier, the company said Tuesday in a statement. That compared with the average analyst estimate of $52 billion. Net income declined to $10.5 billion, and IPhone shipments fell 16 percent. Sales in the third quarter, which ends in June, will be $41 billion to $43 billion, Apple said. On average, analysts estimated revenue of $47.4 billion, according to a Bloomberg survey.

The smartphone market “is currently not growing,” Chief Executive Officer Tim Cook said a conference call. “That’s an overhang of the macroeconomic environment in many places in the world.”

The stock dropped as much as 8.5 percent to $95.51 in extended trading after the report. Concerns about decelerating smartphone demand have contributed to an almost 20 percent decline in Apple shares in the past 12 months. The stock fell less than 1 percent to $104.35 at Tuesday’s close in New York. That gave Apple a market capitalization of about $579 billion — still the world’s largest company by that measure.

Growth Streak

The last time Apple’s quarterly profit dropped compared with the same period a year earlier was in the second quarter of fiscal 2003, when it cited higher expenditures on developing new products. The introduction of the iTunes Store the following quarter was the starting point for surging iPod growth, which would ultimately birth the iPhone four years later.

The Cupertino, California-based company on Tuesday also said it will boost its share-repurchase program to $175 billion, from the $140 billion announced last year. Apple will increase its quarterly dividend, as it did a year ago, to 57 cents a share from 52 cents.

The second-quarter report showed that Apple is no longer able to count on China as a growth engine. Sales in that country, Taiwan and Hong Kong fell 26 percent in the period, a major shift from just a couple of years ago, when sales in the region were more than doubling with regularity. Apple attributed the decline primarily to lower sales in Hong Kong, where the local currency peg with the U.S. dollar made products more expensive to visitors.

“China is particularly worrisome for Apple because it has risen quite quickly to become Apple’s second-most important region,” said Brian Blau, a San Francisco-based analyst at Gartner Inc. “That makes us wonder what the issue is, whether it’s a temporary issue or whether it’s going to be something longer-term.”

IPhone sales in the recent period fell to 51.2 million from 61.2 million a year earlier. Analysts on average had predicted the company would sell 50.7 million iPhones in the quarter, according to a Bloomberg survey.

Legal Battles

The quarterly report is Apple’s first since a high-profile legal skirmish with the U.S. government over data privacy, encryption and law enforcement. The U.S. dropped two separate demands that the company help it break passcodes to get data from the iPhones used by a drug dealer in New York and a shooter in a December terrorist attack in San Bernardino, California. Apple had vehemently fought against both orders, saying that helping the government would jeopardize security for hundreds of millions of users and the cases could pose a dangerous precedent for law enforcement agencies’ access to encrypted iPhone data. The Department of Justice had argued it only wanted access to specific phones in limited instances, and abandoned the two cases after finding alternate methods for unlocking the phones in question.

As iPhone sales slow, Apple investors are increasingly asking what might fuel the company’s next growth spurt. A number of possibilities have surfaced: virtual reality gear, a self-driving car or a live television service, for example. Yet Apple’s secretive approach to development makes it hard to predict when, in what form, or even if any of these innovations will someday surface.

Virtual reality gained headlines back in January, when Cook said VR wasn’t a “niche” and had some “interesting applications.” Meanwhile the potential allure of the automotive industry for Apple and other technology companies has been highlighted in recent weeks as Tesla secured more than 325,000 pre-orders for its latest electric car in a matter of days.

Seeking Acquisitions

As growth slows, Cook said Apple may look to acquisitions to speed up product development or help the company enter new product categories. Apple has made 15 acquisitions over the past 12 months, most of them small. “We’re always looking,” Cook said.

Analyst project sales will be little changed in the fiscal fourth quarter, which ends in September, and on average they predict sales growth of 4 percent in the last three months of the year, when a new version of the full-sized iPhone is likely to be on the market.

In the meantime, the company has been adding to its product line. In March, the company rolled out the new iPhone SE, partially seen as a move to bolster sales in emerging economies such as India and China. Yet analysts cautioned that the smaller phone, starting at $399 in the U.S., could risk cannibalizing sales of the more expensive flagship 6-series handsets, and may reduce the average price at which Apple sells its phones.

Price Impact

The lower price point of the iPhone SE is one of the main reasons for Apple’s lower-than-projected third-quarter sales forecast, Chief Financial Officer Luca Maestri said in an interview. The company has been unable to manufacture enough iPhone SEs to meet demand, he added.

“Every time we launch a new product we know there is an element of overlap,” Maestri said. “We look at the opportunity to attract the first-time smartphone buyers.”

Last month Apple also unveiled a new, smaller iteration of the iPad Pro, incorporating the power and some features of its larger Pro model for business users, aimed at stemming a persistent decline in sales of the tablet. IPad shipments in the recent quarter fell 19 percent from a year earlier to 10.3 million, topping analysts’ average projection of 9.4 million.

To help make up for dwindling growth in smartphones and other devices in the shorter term, Apple has been trying to bolster its services business, which includes its iCloud storage platform, Apple Music and the App Store. Not only is the profit margin wider on these offerings, buying them usually commits customers to subscription services that generate stable recurring revenue streams over months or years. Services was a bright spot in the second quarter, with revenue jumping 20 percent.

Sales of Mac computers declined 12 percent to 4.03 million units, less than estimates of 4.6 million.

Watch Next: Here’s Why Apple Has a Big iPhone Problem

Here’s Why Apple Has a Big iPhone Problem


China Pegatron Corp

Does Encryption Really Help ISIS?

December 7, 2015



There’s the war on terrorism, and then there’s the war on how to fight the war on terrorism.

With recent attacks in Paris, Beirut and Mali, some in governments and law-enforcement agencies are renewing their calls to expand electronic surveillance to thwart potential attacks. Communications that can’t be tapped or unscrambled pose a serious national-security risk, authorities argue, because they can be used by terrorists to hide their activities and planning. Technology companies and cybersecurity experts generally take a different view: If encrypted communications can be accessed by the government or a company — or anyone other than the sender and intended recipient — they inherently are vulnerable to bad actors and prying eyes.

Why is this such a complex and often heated debate with no apparent resolution in sight? For starters, encryption is really complicated. Here’s what you need to know to understand the issues:

Q: What is encryption?

Encryption, sometimes called “crypto” by techies, is a fancy word for a type of code. Encryption schemes transform words into seeming gibberish. Here’s a mere portion of encrypted text that, if printed in full, would translate to “happy holidays:”

hQIMA2dX93ZaYL95AQ//ZSZ/n0VSK7ZZ9kkRk3X8nn+m2YLzHj5L4zrsrCesPOKw ZQG5FXuHz9/02Be3tyXelAiFpGdCh+Tdnx0r1wLOChitSPaydW0hcReG6cp9Nplk QZL5sYRr0NYWjx2EkwFO0j6lNcGMNo3qAoxMNe3rfENPjxpv1UCRl6nHfEmSk1BO swjBOUXrsWxbbphdJqSZtdWoPLlOnFftRjgqLe9hC9rmWF/Q7/RIkZ5TEYmSfJkI aGB3Vrf/XEwXOHuss+HgE9z/XalJtaNLCZeCgNgO/Lk26nVyS0R5XfNz9VtFszhT pjk2rpxMecOlCs4a62oSYykI63E04G0OZkZaPrUlir4GoSV4OVivFgbFDNtIq5Lk hX1TF3y/PsuVb8bF7XhvqCt/q9HF0n0LY9v+tJfMOT885c6uNX9Rm6ZUUFR++jgv X4EfNYSmX6HjmYTflqQyivWeTpGl13tQP7b+UppJr0v9vH7Wd0PmRdvLDhKHqCiq

Only a user or machine with the so-called encryption key can unscramble the message to get its meaning. So the same phrase — “Happy Holidays” — would be encrypted differently depending on the software used and the people involved.

Q: How is encryption used?

Once the province of spies, encryption is widely used on the Internet. The little padlock next to a Web address indicates the connection is encrypted. Wi-Fi routers, Gmail, Yahoo mail, Snapchats, tweets and 4G cellular phones all use some form of encryption, to protect personal  information, such as passwords, location coordinates, bank-account and credit-card numbers and sometimes — depending on the type of encryption used — the text of messages and other content.

Q: Who has the keys?

In addition to those receiving the data who need to decipher it, the companies that employ this technology typically hold keys, so they can ​get to the information if they need to. Among other things, this lets customers reset passwords, etc. It also allows companies to decrypt messages for the authorities when faced with lawful requests for customer records or the contents of  communications.

Q: Then what’s the problem?

In the past few years, several tech companies have adopted encryption schemes for which they say they don’t hold the keys. Most notably, Apple Inc. and Alphabet Inc.’s Google in 2014 released smartphone operating systems that, by default, they said precluded them from unlocking phones for law enforcement, even with a warrant. That’s because the companies said they would no longer maintain a key to unlock their devices’ encryption. Those keys would only be on the devices themselves and could only be unlocked with users’ passwords. Before the switch, companies could comply with court orders to unlock phones, and usually did.

Here is FBI Director James Comey — who has called these actions an assault on law enforcement – testifying before Congress on the issue:


But tech and telecommunications companies were criticized after documents leaked by Edward Snowden showed some firms cooperating with governments to allow access to some of their users’ communications. Companies also said the government was overstepping its monitoring activities without their knowledge, compromising user confidence in the privacy of their information. A lot of trust between the two sides was broken. Companies say that the new encryption protocols will make their products safer, because thieves – and spies – would have a harder time seeing and stealing their contents or communications.

Here’s Apple CEO Tim Cook, making this point at the Wall Street Journal’s WSJDLive tech conference in October:


The debate has widened as U.S. and European officials also started criticizing makers of apps designed to encrypt messages, such as Wickr, Signal and Telegram. Makers of these apps have not changed their systems since the Paris attacks. But Telegram, which features both private chat and a Twitter-like public bulletin feature, said recently that it had deactivated some public channels linked to the Islamic State. The shift, if small, was notable given Telegram founder Pavel Durov’s previous statements that his company “shouldn’t feel guilty” for reports that the app has been used by terrorists.

Q: But did encryption play any role in the Paris attacks?

There is no evidence it played a role in the shootings and bombings in Paris. To the contrary, French media have reported some of the attackers coordinated using ordinary SMS text messages, which usually are easy for law enforcement to tap. However, Islamic State members have documented that they use some messaging apps that rely on strong encryption. Some U.S. officials have said this is a problem if the goal is to prevent another Islamic State attack. Here’s a tutorial used by the Islamic State to rate the relative strength of various communication apps:

Q: So, why don’t the technology companies just tweak the systems?

Several reasons. One, technology companies in general chafe at the idea of the government telling them how to make products. When the Clinton administration in the 1990s proposed a system where the government would maintain the ability to decipher commercial communications through a so-called “Clipper chip,” the proposal was beat back due to civil liberties concerns. One alternative would have technology companies maintain all or part of the so-called master key, which they would only use if faced with a court order. Technology companies don’t like this solution because they fear it makes the key a target for hackers. In short, if someone steals the digital key, everything is potentially lost. It’s also unclear how such a system would work in practice.

Q: Is it really that black and white?

Privately, some government officials say technology companies are overstating the risks of creating such a system. But technology companies counter the risks are real. The catch is that a lot of the risks are assumed and hypothetical. Building extra keys and loopholes into secure systems could, for example, introduce weaknesses from bugs, but it’s hard to know what those bugs are ahead of time. “The complexity of today’s Internet environment, with millions of apps and globally connected services, means that new law enforcement requirements are likely to introduce unanticipated, hard to detect security flaws,” wrote 15 cryptographers in a paper published by the Massachusetts Institute of Technology this summer. There is some precedent though for this concern. Washington once required American firms sell foreign customers only weaker, more easily cracked encryption to help U.S. spies keep tabs on overseas targets. Even though that requirement was dropped in the 1990s, the weakened encryption can still be found on computers and can now be exploited by other hackers. Lobbyists for tech firms such as Apple argue these problems would only be worse now. Because companies do more business overseas, they would likely have to replicate any deal they make with the United States. For instance, Apple sells a lot of iPhones in China. What if overseas governments demand the same types of keys?

Q: What if I back up the contents of my device to the cloud?

In that case, all bets could be off.  For instance, if an iPhone user uses iCloud backups for the content on their phone, Apple is able to hand over the latest backup if faced with a court order, the company says.  Some cloud providers automatically erase such data after a period of time, but policies and procedures vary.

Q: What are U.S. government and military officials saying?

In January, Mr. Obama said, “If we find evidence of a terrorist plot… and despite having a phone number, despite having a social media address or email address, we can’t penetrate that, that’s a problem.” The president and Mr. Comey have said they believe Silicon Valley should be able to come up with a solution. Congress also is examining the issue. On the other hand, former NSA Director Mike McConnell and other retired national security officials have publicly said that finding a way to maintain access to encrypted communications could be bad for security. The Obama administration has indicated that, for now, it doesn’t want to issue orders to tech firms or push Congress for new laws.

Here’s Adm. Michael Rogers, head of the National Security Agency, at the WSJDLive conference urging government and the tech industry to bridge the gaps:


Q: What have courts said?

In 1999, a federal appeals court more or less ended the first “Crypto wars” when it ruled computer code, including encryption schemes, is protected speech under the First Amendment. Apple is fighting the Justice Department in a New York federal court over whether it should be forced to figure out a way to unlock an encrypted iPhone.

Q: So what’s next?

White House and congressional staffers have reached out to some Silicon Valley executives, asking them to come to Washington, D.C., for another round of encryption talks. Some lawmakers are seeking a so-called “Blue Ribbon” committee that would include experts from both sides of the debate. Sen. John McCain (R., Ariz.) has pledged to conduct hearings on the matter and pursue legislation. The British parliament meantime is exploring a new spy powers measure that could give authorities more power to force companies to be able to unscramble customer data.

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