Mobile privacy sells in post-Snowden world

Mon Feb 24, 2014 8:28am EST

* Interest in mobile encryption sparked by privacy fears

* "Mobile security management" market seen at $1 bln by 2015

* Blackphone to be unveiled at Mobile World Congress

* Deutsche Telekom prepares to launch encryption app

By Harro Ten Wolde

BARCELONA, Feb 24 (Reuters) - Following the Snowden snooping revelations, there is growing interest in a range of mobile phone products with one central selling point: privacy.

The latest contender is the Blackphone, an Android software-based mobile which encrypts texts, voice calls and video chats and will be launched at the Mobile World Congress in Barcelona on Monday.

It aims to tap into the market for so-called mobile security management (MSM) products, which was estimated at $560 million in 2013 and is expected to nearly double in size to $1 billion a year by 2015, according to ABI Research.

Deutsche Telekom is also preparing to launch a smartphone app that encrypts voice and text messages, making it the first major network operator with a mass market-compatible product that will be rolled out to all its users.

Edward Snowden set off a global furore when he told newspapers last year the U.S. National Security Agency (NSA) was mining the personal data of users of firms such as Google , Facebook and Skype in a secret programme codenamed Prism.

Further leaks from the former NSA contractor, who faces espionage charges at home and has temporary asylum in Russia, suggested the United States had monitored phone conversations of some 35 world leaders, including Germany's Angela Merkel.

The Blackphone is the result of cooperation between security software company Silent Circle and Spanish handset maker GeeksPhone and they will launch it at the Barcelona event, Europe's largest annual phone industry conference.

While details about the handset have been closely guarded, analysts expect it to cost less than high-end iPhone models.

The Deutsche Telekom cloud-based app service, which will be officially unveiled at the CeBIT trade fair in Hanover next month, will be run with Germany's Sichere Mobile Kommunikation mbH (GSMK), a provider of encrypted phone services and devices.

GSMK, which has seen the number of customer inquiries it receives rise fivefold since the Snowden leaks, has long been offering phones with encryption services to governments and firms willing to fork out 1,300-2,500 euros per handset.

However, such new offerings as the app and the Blackphone mean such secure communications are ready to reach mass-market consumers.

WHATSAPP

Free text messaging service WhatsApp, which Facebook agreed to acquire for $19 billion last week, is a well-known product which has reaped the benefit of growing consumer awareness of privacy issues.

Private communication is one of its appeals - it does not store the names of its more than 450 million users and instead simply uses phone numbers - making it hard to identify who is chatting with whom.

Mobile operator Swisscom said last week it has seen a tripling of downloads for its secure messaging service iO, which encrypts chats and calls and stores all its data in Switzerland. Swiss mobile messaging services myENIGMA and Threema also encrypt users' exchanges.

Deutsche Telekom has already launched its SiMKo 3-Smartphone, an adapted version of Samsung's Galaxy, which encrypts e-mails, contact data, appointments, text messages, photos, audio recording and voice conversations.

The open-source Guardian Project is another service offering free applications for secure communication over smartphones and tablets.

It aims to help human rights groups and journalists to safely communicate in hostile environments, and its Tor version for Android has been downloaded 2 million times so far, said project founder Nathan Freitas.

With its app, users can gain access to Internet services such as Twitter or Facebook, bypassing any government efforts to control the Internet. Most recently it saw interest in its software rise in the Ukraine, Turkey, Vietnam and Venezuela.

"Every time when there is a crisis, you see an increase in people talking about our software," Freitas said.

Still, it is almost impossible to ensure total privacy, security experts say. Every phone with a digital transmitter can be traced and followed. And metadata, information about who calls who, can be as valuable as the content of conversations.

"I know it is a habit hard to unlearn, but it is better to leave your mobile at home, if you want to remain unnoticed," Freitas said.

(Additional reporting by Caroline Copley; Editing by Pravin Char)