Internet Australia welcomes the release of the first in-depth economic study into the likely detrimental impact of TOLA (Telecommunications and Other Legislation Amendment (Assistance and Access) Act 2018, also known as “Assistance and Access Act”) anti-encryption legislation passed in 2018.
The report identifies the TOLA Act measures have the potential to result in multiple billions of dollars of significant economic harm for the Australian economy and produce negative spillovers that will amplify that harm globally. Economic harms are likely to be broad and long-lasting.
The report, ‘The Economic Impact of Laws that Weaken Encryption’, authored by George Barker, William
Lehr, Mark Loney, and Douglas Sicker, of respected global economics consulting firm Law and Economics Consulting Associates (LECA), was commissioned by the Internet Society to understand the impact on the Australian economy, and by extension the detrimental effect on the global digital economy should other nations follow this path.
“This is the first study that focusses on the economic impact – direct and indirect loss of billions of dollars that laws such as this have and will have on Australian digital business” noted Dr Paul Brooks, Chair of Internet Australia. “The government did not commission any economic impact assessment of these laws when initially proposed, despite the dangers of significant economic impact being highlighted throughout several parliamentary and independent enquiries over the past years”.
LECA surveyed 79 companies, 54 of which are based in Australia, and interviewed several in depth, gaining a deep understanding of Australian and international experiences and concerns with anti-encryption laws. 36 percent of those who had been impacted by the TOLA Act stated that the risk environment for their business has been negatively impacted. And around 20 percent said the law had had a negative impact on their business. A further 21 percent believed that the TOLA Act would negatively impact the future operating costs of their business, including compliance and remediation.
“One business estimated a direct economic impact in potential lost sales in the order of AUD$1 billion as a direct result of the TOLA Act.” Dr Brooks highlighted.
The biggest source of adverse economic effects is the indirect threat that the TOLA Act poses is the erosion of trust in digital services and all electronic equipment, including the Internet itself. If people cannot trust Internet services and equipment to keep their private data and sensitive information safe – if they feel the security of the system may have been deliberately weakened – then they will instead seek alternatives to Australian services. The increased costs of people using alternative, less efficient methods to Australian services are significant, as are the increased costs to services and businesses of attempts to offset the harms resulting from the reduction in trust, and the direct loss of custom for Australian firms.
As pointed out by Internet Australia to several Parliamentary committees, as well as the Independent National Security Legislation Monitor (INSLM) in 2020, the legislation would impair Australian businesses exports because international customers were unlikely to want to buy Australian products and services if those products’ security could be compromised by an Australian government agency. “The existence of these compulsive laws and mere threat of them being used is clearly beginning to damage the export prospects of numerous Australia software companies – international customers now cannot trust that Australian technology hasn’t been compromised by Government mandated backdoors.” noted Dr Brooks at the time.
The LECA report is now available here.