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Apple Must Decrypt iPhones, Lose sales, or Face Lawsuits

Apple Inc. has repeatedly taken sides with its users as the fight between government cum law enforcement agencies and Americans over privacy continues. Apple believes that the government has no business on its citizens and it has refused to yield to repeated requests for a backdoor through which law enforcement can access data on people’s iPhone and iPads.

Apple Inc. (NASDAQ:AAPL)

In fact, Apple has gone the other way to strengthen the encryption of its devices such that government officials can’t break in and Apple itself can’t access the little data it has on users. Apple says, if the government wants to access data on its citizens’ smartphones or tablets, the government should ask the person to release the information instead of coming to Apple break its privacy promise to buyers. However, Apple’s refusal to play nice with government backdoor requests might be coming at a cost.

New York to Ban the Sale of iPhone and encrypted smartphones

Apple and other tech firms have made it clear that they won’t decrypt their phones or provide a backdoor for law enforcement to access encrypted data. However, a proposed bill in New York might force the firms to think twice about their stance against decryption or lose sales in some critical markets.

A proposed bill in New York’s state assembly requires smartphones that will be sold in the state to be designed in a way that allows their decryption or unlocking. If the proposed bill pass thorough the state assembly and senate to become a law, Apple would pay a $2,500 fine on each device sold in the state after January 1, 2016.

The proposed bill doesn’t insist that Apple provide a backdoor into its devices – the law just makes it practically impossible for Apple to sell its devices in the state unless it has a backdoor. Apple would also be forced to pay a fine for all the devices it has sold this year, and the firm would be facing a lawsuit for any other encrypted device that it sells afterwards.

Lawmakers seem to be in support of sacrificing privacy/security of an individual for the security of the state; hence, they are mostly in support of government demands for backdoors into encrypted devices. However, tech firms believe that making such backdoors only weakens the security of their systems and that the backdoors could actually be exploited (in the wrong hands) to create havoc.  Apple CEO Tim Cook told The Daily Telegraph that “Any back door is a back door for everyone. Everybody wants to crack down on terrorists. Everybody wants to be secure,”

Can Apple afford to stop selling its iPhones?

One of Apple’s key selling points for the iPhone is its commitment to the security and privacy of the buyers. The firm encrypts its devices end-to-end, in a bid to prevent law enforcement (even with a search warrant) from accessing your device data. The latest encryption in the iOS 8 is strong – Apple says, “Unlike our competitors, Apple cannot bypass your passcode and therefore cannot access this data… So it’s not technically feasible for us to respond to government warrants for the extraction of this data from devices in their possession running iOS 8.”

If the proposed bill passes into law, Apple might be forced to provide the backdoor (most unlikely), raise the price tag of the iPhone to cover the fines (probable), or outright stop selling its iPhone in the state (most likely) people can still go out of state to buy an iPhone.

However, if congress adopts a similar bill/law at the national level, Apple might have a particularly dicey situation on its hands. Apple can easily afford to stop selling its iPhones in a couple of U.S. states but it is doubtful that the firm can afford stop selling its devices in the whole of the United States.

 

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.