Kiplinger's Tech Alerts - March 2, 2016

In this issue: How the standoff between Apple and the FBI spells more business for security firms. Growing threats from phony e-mails. Cellular firms betting heavily on 5G networks as their next cash cow. AT&T and Intel testing wireless airwaves for drones. How good is your state for tech innovation? Facebook's new global telecom project. Good stock picks in the Nasdaq for dividend hunters.

Apple vs. FBI: The Business Impact

The Apple vs. FBI showdown will boost the use of strong online security and speed the rollout of encrypted communications for e-mails and chats. (Encryption software scrambles data so that only folks with keys, such as a PIN, can unscramble the data.) Apple and other tech companies, such as Google, Microsoft and Box, will push harder to protect hardware and software with security that's all but uncrackable, much to the dismay of law enforcement. It's not just the FBI asking for phone access: Police all over the U.S. want similar help with thousands of criminal cases.

That means more business for security firms that sell encryption tools. Businesses are spending a fatter portion of IT budgets on security software to fend off fallout from data breaches and cyberattacks, and that's likely to accelerate in light of Apple's battle with the feds, who want the tech giant to unlock the phone of one of the two San Bernardino shooters.

Worldwide spending on information security totaled $75 billion in 2015, driven by encryption and other emerging defenses, according to market research firm Gartner. Top spenders on encryption come from regulated industries, such as banking and health care, while laggards playing catch-up include firms involved with manufacturing, consumer products and hospitality, according to a new encryption trends report by the Ponemon Institute. Companies' top encryption priorities are their databases, Web communications and data centers. Security companies with high-quality tools to deploy encryption without bogging down computing performance are best-positioned to cash in. Sellers of encryption services include ID Quantique, CipherCloud, Ionic Security and Silent Circle. Other large vendors selling security software include IBM, Dell and Cisco. Sellers of encrypted hardware include Samsung, Micron and Broadcom. Note that tech giants are investing more in security as demand picks up.

Meanwhile, Congress is working on ways to help investigators. Under consideration: Fining companies that don't cooperate with the FBI. Forcing websites to monitor terrorist activity. Updating the 1994 wiretapping law, which applies to telecommunications companies but not to software firms. Much of the public sides with Uncle Sam: Most want Apple to unlock the phone for the FBI to help investigators uncover new clues in the deadly terrorist attack in San Bernardino, according to a Pew poll. Making it tougher for investigators: More consumers will flock to free apps that encrypt messages, such as Signal, WhatsApp and Telegram. Both Facebook, which owns WhatsApp, and Apple, which encrypts communications in its messaging service, stand to profit from more users. (Wondering whether your texts are private and secure? Here's a list of messaging apps with security rankings.) (Continued below.)

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Expect lawmakers to struggle to reach a consensus as tech firms dig in. Apple sees no middle ground in efforts to undermine its security. "Once the floodgates open, they cannot be closed," Apple writes in its latest court filing opposing the FBI's requests. Congress will launch a bipartisan commission to study the issue of digital security and encryption, and tech companies will be willing participants. "This moment calls for public discussion," says Apple CEO Tim Cook in an open letter. But it will take at least a year for the commission to come to any conclusions. In that time, more encryption will be rolled out and researchers will discover more advanced ways to ensure privacy. Law enforcement doesn't risk being kept in the dark for all digital data when they have a warrant, since the rising use of tech leaves a larger data trail. But investigators are now kept out of digital domains that were once easily accessible. That figures to get worse and impede certain investigations.

Rising Threats From Phony E-mails

E-mail scams pose an ever-widening security threat for businesses. Malicious software from Web links in legitimate-looking e-mails is getting harder to detect and prevent. The attacks, collectively known as phishing, plague banks, retailers, online services and others. Companies that do business overseas are often sought-after prey for online crooks. Especially vulnerable: finance department staffers working on invoices and payrolls. "Business e-mail phishing is going to be with us for a while," says Rod Rasmussen, vice president of cybersecurity at Infoblox. The problem was severe last year and will likely get worse in coming years. Small businesses are also a ripe target, as well as insurance, accounting and law firms.

Businesses will spend more to fend off e-mail attacks, including more on worker training to prevent phishing and new defensive software that trawls the Web for security threats. E-mail security tools help quarantine attacks to spam folders, but some still get through. And more fraudsters are posing as companies in e-mails to customers and suppliers, so firms are turning to services that monitor for reputation-damaging e-mail hoaxes. Security companies include MarkMonitor, IID and Wombat Security Technologies.

Even tech-savvy folks can fall for scams, especially when under deadline pressure. Tax season is an especially risky time. Some advice: Don't send e-mails with personal details, such as bank account information, Social Security numbers or home addresses. Look out for misspellings or altered graphics. Be extra wary when using smartphones for e-mail outside the office, since the small screens make it harder to see warning signs. If the e-mail looks suspicious, don't open attachments, which could contain viruses. Note that links in phishing e-mails may direct to realistic-looking but fake websites.

Coming Profits From 5G

Cellular companies are betting heavily on fifth-generation mobile networks as their next cash cow. Such networks, which will dramatically lift mobile Web speeds, requires tens of billions of dollars in new antennas and other cell equipment upgrades. That's made many analysts question 5G's potential profitability as companies pour more money into networks. But carriers such as Verizon and AT&T expect the speedy service to be such a hit with consumers that the hefty up-front investment in 5G will more than pay for itself. One estimate from ABI Research, a technology market research firm, predicts total sales in North America will top $200 billion in the first five years of 5G. No wonder carriers are racing to install the necessary hardware and roll out experimental trials.

Mobile Web traffic will explode once 5G networks are in place in a few years. The networks will roll out in densely populated areas first, but even rural areas stand to benefit from the new technology. By 2025, users in North America and Europe will consume five times as much data as they do now, much of it in the form of streaming video. And by that time there could be around 122 million subscribers using 5G in North America, as well as 57 million folks in Europe. Web connections for cars, machines, robotics, virtual reality and more will also depend heavily on 5G service. Plus, a big push for services aimed at businesses. Other U.S. firms involved in 5G include T-Mobile, Sprint, Intel, Cisco and Microsoft.

Tech Tidbits

AT&T is working with Intel on testing wireless airwaves for drones. The partnership could help answer questions about the potential for interference caused by the coming surge of commercial drones. AT&T is pushing hard to find additional uses of its LTE networks beyond consumer smartphones. Drone firms and regulators will pay close attention to any findings.

Is your state good for tech innovation? An industry trade group answers in a recent report. Top states for innovation include Massachusetts, Virginia and Texas, according to the Consumer Technology Association. The rating criteria include speed of Internet connections, number of residents with science and tech degrees, tax rates and business investment. Also included this year for the first time: state drone policies.

Facebook launches a new global telecom project. The Telecom Infra Project aims to bring mobile broadband to more folks around the globe and includes companies such as Deutsche Telekom and SK Telecom. The project underlines the social media giant's push to speed up the rollout of Internet access to more users. Facebook is also working on drones to beam Internet to far-flung places as well as free Internet plans for mobile users in foreign countries.

Dividend hunters can find good stock picks in the tech-heavy Nasdaq. Elizabeth Leary, a contributing editor to Kiplinger's Personal Finance magazine, picks six tech companies with generous dividends and potential to grow in "Looking for Good Dividend Stocks? Try Nasdaq." From the article: