Obama Unveiling NSA Changes in Response to Snowden Leaks

President Barack Obama will put off decisions on the most controversial aspects of the U.S. government’s data-collection programs, including those faulted by phone and Internet companies that say customers are losing faith that their privacy is protected.

Obama’s speech today in Washington is his long-anticipated response to the global uproar set off by the leaks of former contractor Edward Snowden. The president will leave to Congress and a future review panel many details about how phone records and Internet data are collected, stored and disclosed, according to people familiar with the president’s plans.

“They’re going to punt,” James Lewis, a senior fellow at the Center for Strategic and International Studies in Washington, said of Obama and his aides. “For many of the big issues, they’ll express an opinion but leave it up to congressional action,” said Lewis, one of dozens of technology and privacy experts involved in the discussions for months.

The National Security Agency spying exposed by Snowden has enveloped companies from AT&T Inc. to Google Inc. in an international debate about privacy and the reach of government in the post-Sept. 11 world. The impact may be costly to companies and to the U.S. economy.

The domestic and international backlash could cost the U.S. economy $22 billion to $35 billion over the next three years, said Daniel Castro, an analyst with the Information Technology and Innovation Foundation.

“Pushing this off six months, three years, can have a dramatic impact on the growth of the U.S. economy,” he said. “It may be a good political move but a bad economic one.”

Review Panel

Obama will create a panel to examine how data-collection like the NSA’s affects Internet companies and privacy rights, two people familiar with White House deliberations said yesterday. The White House declined to preview the program.

Microsoft Corp., Yahoo! Inc. and Facebook Inc. have lobbied Obama to be able to disclose details about government orders for customer data and the number of user accounts affected. It’s unclear whether Obama will grant that request. Both people asked not to be named because they weren’t authorized to discuss the decisions.

Beyond the economic impact, the president’s announcement carries security, diplomatic and political implications. Corporations, foreign leaders who may have been spied on, civil libertarians and the intelligence community have been working behind the scenes to shape Obama’s decisions.

Foreign Leaders

The president favors some limits or greater oversight when it comes to U.S. spying on foreign leaders, especially allies, according to people familiar with his plans.

Obama called British Prime Minister David Cameron to update him on the NSA review, according to a statement from the White House. The president called German Chancellor Angela Merkel last week. Obama’s remarks at the Justice Department comes seven months after news organizations began publishing details about secret U.S. programs based on leaks from Snowden, a contractor who worked at the NSA. The Pentagon estimates he stole 1.7 million computer files.

Snowden, 30, has been charged with espionage and theft in the U.S. After fleeing first to Hong Kong, he’s living in Russia under temporary asylum.

Obama, a former constitutional law professor and critic of President George W. Bush’s spy policies, is weighing civil liberties against warnings to not overly relax policies aimed at protecting the U.S. against terrorism. The data collection programs came in response to the Sept. 11, 2001, attacks.

Security Concerns

“He starts from the absolute commitment to maintaining the security of the American people, the security of our nation, of our men and women in uniform overseas and our civilians serving overseas, as well as the commitments we have to our allies,” White House press secretary Jay Carney told reporters yesterday.

The president is expected to back limits on how the government can use data, greater privacy protections for foreigners and creating a public advocate to represent privacy interests before the secret court that oversees NSA spying, Lewis said.

Obama earlier rejected some of the recommendations put out last month by an advisory panel he appointed, such as splitting the NSA and U.S. Cyber Command. The president won’t call for ending the NSA’s ability to collect bulk metadata, such as phone records, according to a person familiar with the plans who spoke on condition of anonymity.

Undermining Growth

Revelations about the extent of NSA spying have “created a crisis of confidence” when it comes to worldwide users trusting U.S. Internet companies, undermining potential economic growth, said Kevin Bankston, policy director for the Washington-based Open Technology Institute.

Two panels were assigned by the administration to review government policies. Obama is pre-empting next week’s scheduled release of recommendations and legal findings by a citizen’s privacy board created by Congress and filled with the president’s picks.

Snowden exposed a program called Prism under which the NSA compels Internet companies through court orders to provide customer e-mails and other Internet activity. The companies are prohibited from disclosing or discussing the orders.

Documents he leaked also showed that the NSA spied on foreign leaders including Merkel, hacked into fiber-optic cables to get data from Google and Yahoo, and intercepted Americans’ communications without warrants.

Verizon, AT&T

AOL Inc. and Microsoft had no comment on Obama’s NSA plan. Several technology companies that set up a website urging changes to U.S. surveillance are expected to make a joint response following Obama’s remarks.

In a victory for Verizon Communications Inc. and AT&T, Obama plans to let the NSA keep bulk phones records instead of requiring the telecommunications companies to store them, until Congress decides on the matter, the person said.

“What matters is not so much the fact that they won’t be required to hold those records, but rather just to be out from any kind of requirement one way or another,” said Charles Golvin, an independent technology industry analyst. “That’s a big win for the carriers.”

Congressional leaders are divided on the phone record issue, raising the possibility they won’t pass legislation. Senator Dianne Feinstein, a California Democrat who heads the intelligence committee, wants the data programs to continue without forcing companies to collect and keep the records. She said last week it would cost U.S. carriers as much as $60 million a year.

Court Orders

Senator Patrick Leahy, a Vermont Democrat, and Representative James Sensenbrenner, a Wisconsin Republican, have introduced legislation to bar the NSA from collecting the phone records, as has Senator Rand Paul, a Kentucky Republican.

The NSA, or Federal Bureau of Investigation, would have to get a court order on a case-by-case basis to seek records from the phone companies under their bills.

Civil liberties advocates told reporters on the conference call yesterday that they’re prepared to take their fight to Congress if Obama doesn’t announce significant reforms.

“It is impractical to presume the executive branch will hold itself fully accountable,” said Angela Canterbury, director of public policy for the Washington-based nonprofit Project on Government Oversight.

It will be “a failure” if Obama doesn’t adopt the advisory panel’s recommendation to halt NSA collection of metadata, said Michelle Richardson, legislative counsel of the American Civil Liberties Union. “That will be the true test about whether he is sufficiently dealing with this NSA scandal.”

Third Party

A third party that could store the data doesn’t yet exist. An administration official familiar with the president’s thinking said Congress would have to enact legislation that would enable a third-party to retain the records.

AT&T Chief Executive Officer Randall Stephenson said he was “anxiously awaiting” Obama’s plan. Speaking at a Jan. 15 event in Washington, Stephenson declined to disclose his position on keeping the records.

“At the end of the day, the data needs to be provided only pursuant to a court order or a subpoena or a warrant,” he said. “Where the data is housed probably isn’t that important, as long as the rules are clarified.”

Stewart Baker, a former general counsel for the National Security Agency, said in an interview that Obama has been pulled back by his advisers from taking radical steps to curb spy programs.

“He came in with a set of views but he listened very hard to the interagency and all of the intelligence agencies and they moved him considerably on the value of the programs,” said Baker, now a Washington-based partner at Steptoe & Johnson LLP.

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