The tech industry continues to play Cassandra, warning anyone who will listen that federal surveillance practices could have dire consequences if the National Security Agency (NSA) continues on its course. At a recent Silicon Valley event, Google's Eric Schmidt cautioned that the NSA is a bull in a virtual china shop threatening to break the Internet as we know it. The Hill's Julian Hattem reports:

Schmidt said the revelations about U.S. surveillance could prompt countries to wall off their networks. "The simplest outcome: We're going to end up breaking the Internet," Schmidt said, "because what's going to happen is governments will do bad laws of one kind or another, and eventually what's going to happen is: 'We're going to have our own Internet in our own country, and we're going to do it our way.'"

Fearing the pervasive powers of the NSA—or perhaps feeling a bit jealous—foreign governments have already begun imposing limits on American tech companies and erecting barriers in the name of protecting data:

Some countries, including Russia, have taken steps to require that companies keep data centers within their geographic borders — a potentially prohibitive cost for start-ups and small companies.

Many in the tech industry predict a so-called balkanization of the Internet, that is, a curtailment of the free flow of information between countries. Such restrictions could establish "nationalistic clouds" for data storage within individual countries. Box co-founder and CEO Aaron Levie recently warned that this could jeopardize global commerce itself, saying it "would be an incredibly bad outcome for the type of interconnectedness we're starting to see from global companies."

Michael Kickins echoes Levie, writing in The Wall Street Journal:

CIOs of multinational companies may have to find multiple vendors to host applications or internal software development platforms in the cloud — defeating one of the benefits of cloud-based services, namely simplification.

Large companies like Amazon have taken steps to anticipate the coming data fragmentation, although, as Kickins writes, "these investments are hardly trivial, even for such large vendors."

The biggest loser in this fiasco—other than us plebs whose privacy is being violated—is America's tech industry. As domestic surveillance becomes more of a concern, distrustful consumers and governments may seek to take their business elsewhere. Writes Hattem:

According to analysis firm Forrester Research, the losses for the tech industry from the NSA backlash could amount to as much as $180 billion over the next two years.

Schmidt's warnings should not be taken lightly, especially by those in Congress with the power to reign in the NSA's excesses. But lawmakers seem content to blithely look the other way, skipping town before voting on the issue and continuing to let the tech industry's admonitions fall on deaf ears.