A logo of Google's 'Hummingbird' search algorithm is pictured at the garage where the company was founded on Google's 15th anniversary in Menlo Park, California September 26, 2013. REUTERS/Stephen Lam

By Tabassum Zakaria and David Ingram

WASHINGTON (Reuters) - Search giant Google Inc on Wednesday warned that U.S. spying operations risk fracturing the open Internet into a "splinter net" that could hurt American business.

In the first public testimony before Congress by a major technology company since former National Security Agency contractor Edward Snowden disclosed top secret surveillance programs, Google said it should be allowed to provide the public more information about government demands for user data.

"The current lack of transparency about the nature of government surveillance in democratic countries undermines the freedom and the trust most citizens cherish, it also has a negative impact on our economic growth and security and on the promise of an Internet as a platform for openness and free expression," Richard Salgado, Google's law enforcement and information security director, said.

Members of Congress are grappling with what changes to make to U.S. surveillance programs and laws after the Snowden leaks, which were published in June. The Senate Judiciary subcommittee hearing was on legislation proposed by Democratic Senator Al Franken of Minnesota that would provide more transparency.

Franken said the "Surveillance Transparency Act of 2013" would require NSA to disclose publicly how many people have their data collected and estimate how many were Americans.

It would also allow internet and phone companies to inform the public about the orders for data collection from the government and the number of users whose information has been produced in response to those orders.

"Right now, as a result of those gags, many people think that American internet companies are giving up far more information to the government than they likely are," Franken said.

Robert Litt, general counsel for the Office of the Director of National Intelligence, said requiring NSA to compile those statistics would be an intensive task that would take resources away from the mission of uncovering terrorism plots.

"I think those thousand mathematicians have other things that they can be doing in protecting the nation ... rather than trying to go through and count U.S. persons," Litt said.

"If you impose upon them some sort of obligation to identify U.S. persons, they're going to take an email address that may be, you know, Joe at hotmail.com. And they're going to have to dig down and say, 'what else can we find out about Joe at hotmail.com?'" he said. "And that's going to require learning more about that person than NSA otherwise would learn."

OVERSEAS DATA CENTERS

Google officials have expressed outrage and called for reform after a Washington Post report late last month said that the NSA had tapped directly into communications links used by Google and Yahoo Inc to move huge amounts of email and other user information among overseas data centres.

Salgado said the leaks about NSA operations have led to "a real concern" inside and outside the United States about the role of government and the Foreign Intelligence Surveillance Court, which decides in secret on legal issues about electronic surveillance efforts.

The fallout could result in greater internet restrictions that could hurt U.S. economic interests and some proposals could in effect create a "splinter net" by putting up internet barriers, he said.

While he did not mention any specific proposal, a government plan in Brazil would force global internet companies to store data on Brazilian users inside that country.

"You can certainly look at the reaction, both inside the United States and outside of the United States to these disclosures, to see the potential of the closing of the markets through data location requirements" and similar restrictions, Salgado told Reuters after the hearing.

"That's bad for all of the American companies, and frankly bad for the Internet generally," he said. "This is a very real business issue, but it is also a very real issue for the people who are considering using the cloud and for those who currently use the cloud and may have their trust in it rocked by the disclosures," Salgado told Reuters.

President Barack Obama's administration has defended the NSA programs and the secrecy around them as necessary in fighting terrorism and groups such as al Qaeda.

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