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* Apple's encryption stance questioned by mobile operators
* Mobile operators balance users, regulators and states
* Operators struggle with surging encrypted network traffic
* Encryption challenges telco operators' big data ambitions
By Eric Auchard
BARCELONA, Feb 26 (Reuters) - Apple Inc's stance onprivacy in the face of a U.S. government demand to unlock aniPhone belonging to one of the San Bernardino attackers hasraised awkward questions for the world's mobile networkoperators.
Top executives at this week's global telecom industrygathering in Barcelona admit they are constantly trying tostrike a balance between the expectations and demands of theirown users, government regulators and national politicians.
Apple's stand -- it argues that to unlock the iPhone wouldviolate its free speech rights -- has brought questions overthese competing forces to the fore, exposing gaps in sometelecoms operators' own approaches.
"It's very complicated, we don't have a clear position,"Vodafone Chief Executive Vittorio Colao said, addingthat the UK-based mobile operator is in more than 25 countriesand must respect the security laws in each of those and more.
"We have privacy and customer safeguards as our number onevalue...I understand why Apple has a similar concern" he said.
However for others it is more clear-cut.
"Do I understand Apple's position? No, honestly, it'sdifficult for us to say that we share it," Orange CEO StephaneRichard told journalists at the Barcelona event.
Richard, who runs France's biggest telecom provider said heappreciates Apple's position on user privacy, but this must beconsidered alongside the need for security services "to have themaximum means to catch people who have bad intentions".
Network operators are often subject to wiretapping and other"lawful interception" demands by governments.
FLYING BLIND
One factor complicating life for Vodafone's Colao and hispeers is the loss of control over traffic running through theirnetworks as customer data "goes dark", which means it isencrypted automatically when using their phones or web browsers.
While no one has precise figures, industry experts say thatsoon, if not already, a majority of traffic buzzing aroundmobile networks will use end-to-end encryption.
This often leaves network operators, not to mention lawenforcement agencies, blind to what's being communicated.
It also has commercial consequences, with network managementexperts agreed that managing completely encrypted networktraffic is posing new problems for operators already strugglingto manage exploding user demand for video and other data.
Strong encryption interferes with operators' dreams of using"big data" analytics on customer behaviour for everything fromimproved call routing to fraud detection, marketing campaignsbased on location or social network connections to developingnew products and services, as their networks fill up withunrecognisable, encrypted data.
One study of a big Asian operator's network by Japanesenetwork equipment maker NEC Corp found that 63 percentof its traffic uses full-scale encryption.
This means network operators have to keep more sparecapacity available at times of peak network usage to ensurequality of service.
"Encryption does affect back-end operational systems," AT&TChief Strategy Officer John Donovan said in an interview.
Industry experts say there are ways to manage differenttypes of network traffic - video or voice calls need to arrivein real-time, while email, text messages and some audio andvideo can be delivered with short delays.
Operators can also calculate what kind of traffic transitsover their networks without needing to know the content of datapackets, several network management firms told Reuters, althoughkeeping the plumbing going is not getting any easier for them. (Additional reporting by Paul Sandle and Harro ten Wolde;Editing by Alexander Smith)
