Denham Sadler
December 11, 2018

Encryption: Tech sector is reeling

Encryption: Tech sector is reeling

Scott Handsaker: New laws damage the credibility of Australian digital exports

The Australian tech sector has been left reeling following the shock passage of controversial encryption legislation last week, with fears the new laws will do “significant damage” to the industry.

The sector is now looking to become more politically active and galvanise the current public outcry in order to lobby for a watering down of the contentious new powers.

The legislation, which gives agencies the power to compel tech companies to provide access to encrypted data through a range of methods, was passed late on the last sitting day of the year after Labor capitulated and approved the bill without any amendments.

The tech sector has reacted with shock and anger following the move. There are concerns that some companies may relocate overseas and international businesses leave Australian shores.

Startup representative group StartupAus said the move was a “big step backwards for Australian technology” that would create a “significant burden for the local technology sector”.

“Given these laws are relatively unique to Australia, it means that Australian companies are really going to be at a competitive disadvantage compared to international peers,” StartupAus chief operating officer Alex Gruszka said.

“If you are trying to develop these technologies and only have a small presence in Australia, it seems sensible or might be the correct course of action to simply remove that presence in Australia and work on it somewhere else, and not subject yourself to the difficulties of this legislation,” he said.

“That would be a terrible shame to lose either international R&D or local promising software developers to overseas markets.”

The local cybersecurity sector, in particular, is concerned with the bill’s passage, CyRise chief executive Scott Handsaker said.

“It’s the government’s attempt to get around end-to-end encryption, but the impact may actually be to cripple a crucial export market,” Mr Handsaker told InnovationAus.com.

“The legislation has been rushed through in such a haphazard manner that no thought has been given to the impact on Australia’s fledgling cybersecurity startup industry.

“For a cybersecurity industry to flourish in Australia, we need to ensure the safety of the public without hindering the Australian industry’s ability to compete globally. This bill fails on both counts.”

The cybersecurity industry “deserves better”, Mr Handsaker said.

“It will damage the credibility of Australia security exports, with blow-back from our trading partners likely to smother export opportunities before they’ve even begun."

“It remains unclear how an order will be technically implemented, without making the entire development team of the target company aware of its existence,” he said.

“This cannot be what good government policy looks like, and we shouldn’t have to tolerate it.”

Much of the tech sector’s recent anger has been directed at the Labor Party, which showed signs of recognising the concerns surrounding the bill but ultimately relented and passed it without amendments.

Addressing the media on Friday after passing the bill, opposition leader Bill Shorten said he had achieved a “half win”.

“There are legitimate concerns about the encryption legislation but i wasn’t prepared to walk away from my job and leave matters in a standoff and expose Australians to increased risk in terms of national security,” Mr Shorten said.

“I will take a half win and move forward than simply continue this sort of angry shouting, which I think does mark the government’s conduct,” he said.

An open letter written by Melbourne-based software engineer Terence Huynh – titled “you bunch of idiots” – calls on members of the sector to not vote for Labor at next year’s election after the Opposition caved and supported the bill’s passage through Parliament.

“Words cannot describe how angry we feel after your gutless and spineless decision to blindly support the government’s so-called Assistance and Access Bill. You let us down. You let the entire industry down. You have shown us what you really are – a bunch of spineless weasels,” the open letter said.

“Companies such as Amazon, Apple, Atlassian, Microsoft, Slack, Zendesk and others now have to view their Australian staff and teams as ‘potentially compromised’.

"You have also just made it almost impossible to export Australian tech services because no-one wants a potentially vulnerable system that might contain a backdoor. Who in their right mind will buy a product like that?”

The new laws will “do damage” to the sector, Mr Huynh said.

“People are worried about what will happen to their jobs since companies now have to consider the impact the bill has. Australian companies that export tech services will suffer the most since you have to ask, ‘who would knowingly buy something that could have the potential to have a backdoor or systemic weakness?’,” My Huynh told InnovationAus.com.

“Many have made the comment that the laws make any Australian product incompatible with the EU’s GDPR, meaning we are potentially locking our startups out of a big market.”

The open letter has already attracted widespread attention.

“I felt the need to do something given this bill will do damage to the industry that I work in. I did not expect to see startup founders, designers, tech executives and some of the big names within our community attaching their names to it too. It’s been outstanding. I hope it galvanises more and more people in our community to be more politically active,” Mr Huynh.

Girl Geek Academy chief executive Sarah Moran said she has already talked with employees of big tech companies and local entrepreneurs that are considering moving overseas to escape the new laws.

“I’m having conversations with people working for international companies and they’re asking what this means for them and if they need to pull out of Australia. I deal with a lot of founders and they’re all wondering if they should start a company here,” Ms Moran told InnovationAus.com.

“We’ve always been proud to build great tech and export from Australia, but should we just grab a cheap Air NZ flight and start somewhere else from the get-go?”

“My job is to encourage more people to found companies and to encourage more women to found startups in Australia, but now what do I tell them? We’ve just been shunted,” she said.

“What they’ve done is say, ‘we know you rely on exporting your business to global economies but we’re going to really put a stick in that for you and make your job really hard to do’.”

The industry had been left shocked by the rapid passage of the laws, despite the widespread criticism of the new powers, M8 Ventures partner Alan Jones said.

“My greatest concern is that the Parliament appears to have entirely ignored the grave concerns of expert submissions from across the spectrum – from the tech industry, investors, legal bodies and cyber security,” Mr Jones told InnovationAus.com.

“We elect parliamentary representatives to listen, learn and act on the best expert advice they receive, not to pursue dogma or belief-based agendas,” Mr Jones said.

“It’s caught me by surprise and it’s caught many others by surprise too, because as an industry we expected that the expert advice presented would be listened to.”

Many members of the tech sector are now looking to formalise these concerns and work together to lobby against the laws and for further changes. With a federal election looming in May, attention has turned to pressuring Labor to consider amendments if it takes power.

“Labor has said that they want to change the law, so one of the next steps is to make sure they do what they say. Labor isn’t the only party that passed it, but they are the party most likely to form government,” Mr Huynh said.

StartupAus is also expected to be lobbying for the legislation to be watered down.

“We need some further clarity about some of the wording around the bill and what extent these powers give. At the moment there have been very few practical examples, but now that the bill has become a reality we need to get really clear on exactly what the government mandates,” Mr Gruszka said.

“And if there are some things that are simply unconscionable then we will have to lobby to see if we can reduce the scope as it is implemented.”

Ms Moran is looking to work with other members of the startup community to work out the next step forward.

“The tech community is not an organised community politically, and that has really come to my attention. The government has largely let us be and left us alone. But this affects our jobs and our ability to think about the future of our industry,” she said.

“As a community we’ve had a bias to action and that has been invested in building companies, but now if we invest that in political action – did the government really want to poke that hornet’s nest?

“This won’t be the end of this story, because we’re still sifting through what is even possible and what is going to happen.”

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