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Is Dotcom really onto something

31 January 2013

The initial buzz surrounding the launch of Dotcom's MegaKey site has subsided and although it was right up there in the "top ten" (as measured by site-visits) for a few days, the encrypted drop-box service has taken a significant slide down the list now.

Perhaps this is because people now realise that it's just not another MegaUpload, where scoring free movies and music was an easy task.

Perhaps because, even though everyone has said "wow, cool idea", not so many people really had a use for such a service?

And maybe it's because potential users are worried that, as with MegaUpload, they could find their valuable files suddenly made inaccessible by the actions of an army of lawyers and complicit governments around the world.

However, after reading this story, where it's reported that the US government can (and almost certainly does) trawl the cloud servers of those companies within its jurisdiction -- without the need for a warrant -- it's easy to see why MegaKey is important.

If you've got data stored in a US-based cloud service you might as well leave your office or house door open and put some "cookies and milk" on the table for the US government agencies who you'll be inviting in and allowing to thumb through all your letters, reports, photos and other items.

Of course this is all done in the name of "security" -- but would we allow the police to conduct random dawn raids on our homes and offices, even though we know they'd possibly uncover stolen property, P labs, illegal immigrants and other "threats"?

Of course we wouldn't. For the time being at least, we still have a tiny trace of "the right to be presumed innocent" left in our legal system -- although I'm not sure how long that will last.

So why therefore, should we even think about using services that give the US government and its agencies the right to do exactly this, albeit in a virtual manner?

I'm starting to wonder if "the next big thing" might be totally encrypted cloud services.

I'm talking the Google Docs kind of setup but where, instead of storing data in plaintext on the servers and simply encrypting it in transit via SSL, the same type of encryption is used as has been harnessed by MegaKey. Governments and service providers would then be unable to engage in dawn cyber-raids on that data, effectively restoring the "right" to privacy which is rapidly being lost.

The more I think about the current situation with respect to US-based cloud providers, the more I wonder about things like the way Google avoids paying so much tax in the USA.

A few weeks ago, I was talking to a guy from the USA who's looking at relocating to NZ. He asked about the tax rates here and I explained to him that there was no capital gains tax. His reply was surprising...

"There is for me, I'm a US citizen so I have to file a tax return with the US government every year, regardless of where I'm living and if I make a capital gain on something, I have to pay them tax on that gain".

Surely, if that is the case for US citizens, why aren't US corporations bound by the same rule? If Google makes a zillion dollars in some other tax jurisdiction (such as Ireland) where the tax rates are low, why shouldn't it have to pay to the IRS, the difference between the Irish rate of tax and the US rate -- just as a US citizen would?

I can only think of two reasons why corporations such as Google get away with paying so little tax:

1. Corporate America "pwns" the government and has ensured that tax law gives them benefits that are not accorded to "mere voters".

2. The US government is prepared to let "cloud providers" such as Google and Amazon pay a lower rate of tax because they want them to grow and capture more of the world's cloud data -- in the full knowledge that they have full access to all data stored by those US companies.

Either way, it's a worry and very good reason to steer clear of US-based cloud services whenever possible.

Then of course, there are cloud providers such as Yahoo -- who (after my experiences of yesterday) couldn't organise a piss-up in a brewery anyway.

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