The Australian federal government has announced that it will establish compulsory censorship of Internet traffic, with trials starting by the end of the year. The censorship proposal originally included an opt-out provision that would have allowed individuals to arrange not to have their Internet traffic blocked by the government, but permission to opt-out has been scratched from the current proposal.

What will this mean for Australian companies that do business using the Web, e-mail, real-time communications, social networking tools, unified communications tools, and so forth? How will it affect anyone outside of Australia doing business with companies in the country?

Initially, the impact is likely to be minimal other than possibly slowing Internet traffic.

The intent of the law is to block traffic that contains illegal and extremely offensive material – a noble, if likely ineffective, goal. However, for some reason the censorship law exempts peer-to-peer file-sharing systems, meaning lots of objectionable content will simply migrate more toward these tools.

Longer term, however, the impact could become more interesting. In order to block content, the government will obviously have to inspect it. That means that proposals, contracts, orders and other sensitive content you might send to an Australian company, or that they might send to you, will be subject to scanning upon entering or leaving the country. Although there will likely be laws to protect against unauthorized access to sensitive information, reports over the past few months in the United States indicating government workers’ access to personal data indicate that laws will probably not be effective at stopping such breaches.

The result, in my opinion, will be to immediately increase demand for encryption technologies to hide sensitive content, which will negate the impact of the censorship law. While this is a best practice today that organizations should be doing anyway, the law will simply help to accelerate the deployment of encryption.

Depending on the technology selected by the Australian government and regulators’ determination of what is considered objectionable, there could be false positives that would block legitimate content from reaching end users in your company. Further, the government could decide that all encrypted e-mail, etc., will be blocked.

Michael Osterman is principal analyst of Osterman Research.