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FACEBOOK INC

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VPN Providers Pull Out of Hong Kong -- WSJ

07/17/2020 | 02:48am EST

Withdrawal highlights concerns over creeping censorship from mainland China

By Eva Xiao 

HONG KONG -- At least three providers of virtual private networks, which let internet users circumvent censorship and protect their privacy, are suspending their Hong Kong operations, citing concerns over Beijing's new national-security law for the city.

The shift comes after Facebook Inc., Alphabet Inc.'s Google and other large U.S. technology companies said they would suspend government requests for user data in Hong Kong because of the law. The legislation has spooked companies because it compels them to hand over user data in national-security investigations under penalty of fines and potential jail time.

Citing the broadly defined powers bestowed on police under the new law, which include the right to search electronic devices -- without a warrant, in some cases -- the VPN providers said they felt it was safer to close down their servers and avoid routing online traffic to Hong Kong.

The national security law endangers "the privacy of our users and all Hong Kong residents," said Colorado-based Private Internet Access, which shut down its Hong Kong servers on Tuesday, a day after TunnelBear of Toronto said it was disabling its servers in the city.

On Wednesday, IPVanish said that it was decommissioning servers and suspending operations in the international financial hub. "With this legislative change, we, unfortunately, have to consider Hong Kong and China as one," it said.

The impact of removing VPN servers from Hong Kong is likely to be limited, given that users can connect to other servers in the region and many VPN providers say they don't save personal information anyway -- mitigating any breach of privacy if servers are seized by authorities or hackers.

The withdrawal of the servers, however, shows how widely fear is spreading over creeping censorship and surveillance from mainland China. The law empowers police to remove content and collect information on online messaging, a target of the legislation after monthslong protests last year that were frequently organized via social media apps on phones.

Virtual private networks, which let users mask their location by encrypting and routing their traffic through other countries, operate servers around the world. In mainland China, where international sites such as YouTube and Twitter are blocked, VPNs are often used to circumvent censorship.

Hong Kong officials have repeatedly said the new legislation won't affect people's basic freedoms. But its passage at the end of June has already sparked a wave of self-censorship on social media platforms such as Twitter, where a number of pro-democracy activists have deactivated or wiped their accounts of protest content.

Fears of surveillance have also powered a surge in demand for VPNs, with ProtonVPN of Switzerland reporting a 3,000% increase in usage from Hong Kong users after the Chinese government announced plans to impose national security rules on the city at the end of May. Surfshark, a VPN operator based in the British Virgin Islands, said it reported over 400% growth in sales after the law came into effect. Neither company disclosed actual numbers.

Surfshark -- like most of the VPN providers contacted by The Wall Street Journal -- said it would continue to operate in Hong Kong, though it would monitor any changes in government policy or enforcement. A requirement to log user activity, for instance, would trigger a shutdown of its local servers, said Gabrielle Racai, communications manager at Surfshark.

"Right now there is nothing indicating that our users are in any danger, " said Laura Tyrell, a spokeswoman for NordVPN, adding that the company will react swiftly if it sees risk, citing its shutdown of servers in Russia last year as an example.

ProtonVPN, which now considers Hong Kong a high-risk region -- a designation the company applies to Russia and Turkey -- said that while it is concerned about censorship at the app store-level, it too will continue to run servers in the finance hub.

"Our worry is that the Hong Kong authorities will begin demanding the removal of news apps, communications apps and VPNs," said a spokesman for ProtonVPN, adding that the company would challenge moves to compromise its users' privacy or security in court first, before deciding to pull out of Hong Kong.

"Pre-emptively abandoning Hong Kong to its fate without even a symbolic resistance sends the wrong message to authoritarian governments around the world that would seek to deny people their fundamental rights," he said.

Write to Eva Xiao at eva.xiao@wsj.com

 

Stocks mentioned in the article
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ALPHABET INC. -4.67% 1818.94 Delayed Quote.3.78%
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PERFECT WORLD CO., LTD. -4.49% 26.16 End-of-day quote.-11.32%
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US DOLLAR / RUSSIAN ROUBLE (USD/RUB) 0.06% 75.8204 Delayed Quote.1.53%
US DOLLAR / TURKISH LIRA (USD/TRY) 0.17% 7.40497 Delayed Quote.-0.45%
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Sales 2020 84 258 M - -
Net income 2020 27 050 M - -
Net cash 2020 60 362 M - -
P/E ratio 2020 29,0x
Yield 2020 -
Capitalization 775 B 775 B -
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EV / Sales 2021 6,68x
Nbr of Employees 56 653
Free-Float 83,8%
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Average target price 321,54 $
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NameTitle
Mark Elliot Zuckerberg Chairman & Chief Executive Officer
Sheryl Kara Sandberg Chief Operating Officer & Director
David M. Wehner Chief Financial Officer
Michael Todd Schroepfer Chief Technology Officer
Atish Banerjea Chief Information Officer
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