Even if users choose the less paranoid side of that spectrum of options, Merrill argues, his company will still be significantly less surveillance-friendly than existing phone companies, which have long represented one of the weakest links in the tech world’s privacy protections. All major US cellular carriers comply, for instance, with law enforcement surveillance orders like “tower dumps” that hand over data to the government on every phone that connected to a particular cell tower during a certain time. They’ve also happily, repeatedly handed over your data to corporate interests: Last year the Federal Communications Commission fined AT&T, Verizon, and T-Mobile nearly $200 million for selling users’ personal information, including their locations, to data brokers. (AT&T’s fine was later overturned by an appeals court ruling intended to limit the FCC’s enforcement powers.) Many data brokers in turn sell the information to federal agencies, including ICE and other parts of the DHS, offering an all-too-easy end run around restrictions on those agencies’ domestic spying.
Phreeli doesn’t promise to be a surveillance panacea. Even if your cellular carrier isn’t tying your movements to your identity, the operating system of whatever phone you sign up with might be. Even your mobile apps can track you.
But for a startup seeking to be the country’s most privacy-focused mobile carrier, the bar is low. “The goal of this phone company I’m starting is to be more private than the three biggest phone carriers in the US. That’s the promise we’re going to massively overdeliver on,” says Merrill. “I don’t think there’s any way we can mess that up.”
Merrill’s not-entirely-voluntary decision to spend the last 20-plus years as a privacy diehard began with three pages of paper that arrived at his office on a February day in New York in 2004. An FBI agent knocked on the door of his small internet service provider firm called Calyx, headquartered in a warehouse space a block from the Holland Tunnel in Manhattan. When Merrill answered, he found an older man with parted white hair, dressed in a trench coat like a comic book G-man, who handed him an envelope.
Merrill opened it and read the letter while the agent waited. The first and second paragraphs told him he was hereby ordered to hand over virtually all information he possessed for one of his customers, identified by their email address, explaining that this demand was authorized by a law he’d later learn was part of the Patriot Act. The third paragraph informed him he couldn’t tell anyone he’d even received this letter—a gag order.
Then the agent departed without answering any of Merrill’s questions. He was left to decide what to do, entirely alone.
Merrill was struck immediately by the fact that the letter had no signature from a judge. He had in fact been handed a so-called National Security Letter, or NSL, a rarely seen and highly controversial tool of the Bush administration that allowed the FBI to demand information without a warrant, so long as it was related to “national security.”
Calyx’s actual business, since he’d first launched the company in the early ’90s with a bank of modems in the nonfunctional fireplace of a New York apartment, had evolved into hosting the websites of big corporate customers like Mitsubishi and Ikea. But Merrill used that revenue stream to give pro bono or subsidized web hosting to nonprofit clients he supported like the Marijuana Policy Project and Indymedia—and to offer fast internet connections to a few friends and acquaintances like the one named in this surveillance order.
Merrill has never publicly revealed the identity of the NSL’s target, and he declined to share it with WIRED. But he knew this particular customer, and he certainly didn’t strike Merrill as a national security threat. If he were, Merrill thought, why not just get a warrant? The customer would later tell Merrill he had in fact been pressured by the FBI to become an informant—and had refused. The bureau, he told Merrill, had then retaliated by putting him on the no-fly list and pressuring employers not to hire him. (The FBI didn’t respond to WIRED’s request for comment on the case.)
Merrill immediately decided to risk disobeying the gag order—on pain of what consequences, he had no idea—and called his lawyer, who told him to go to the New York affiliate of the American Civil Liberties Union, which happened to be one of Calyx’s web-hosting clients. After a few minutes in a cab, Merrill was talking to a young attorney named Jameel Jaffer in the ACLU’s Financial District office. “I wish I could say that we reassured him with our expertise on the NSL statute, but that’s not how it went down,” Jaffer says. “We had never seen one of these before.”
Merrill, meanwhile, knew that every lawyer he showed the letter to might represent another count in his impending prosecution. “I was terrified,” he says. “I kind of assumed someone could just come to my place that night, throw a hood over my head, and drag me away.”
Despite his fears, Merrill never complied with the FBI’s letter. Instead, he decided to fight its constitutionality in court, with the help of pro bono representation from the ACLU and later the Yale Media Freedom and Information Access Clinic. That fight would last 11 years and entirely commandeer his life.
Merrill and his lawyers argued that the NSL represented an unconstitutional search and a violation of his free-speech rights—and they won. But Congress only amended the NSL statute, leaving the provision about its gag order intact, and the legal battle dragged out for years longer. Even after the NSL was rescinded altogether, Merrill continued to fight for the right to talk about its existence. “This was a time when so many people in his position were essentially cowering under their desks. But he felt an obligation as a citizen to speak out about surveillance powers that he thought had gone too far,” says Jaffer, who represented Merrill for the first six years of that courtroom war. “He impressed me with his courage.”
Battling the FBI took over Merrill’s life to the degree that he eventually shut down his ISP for lack of time or will to run the business and instead took a series of IT jobs. “I felt too much weight on my shoulders,” he says. “I was just constantly on the phone with lawyers, and I was scared all the time.”
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By 2010, Merrill had won the right to publicly name himself as the NSL’s recipient. By 2015 he’d beaten the gag order entirely and released the full letter with only the target’s name redacted. But Merrill and the ACLU never got the Supreme Court precedent they wanted from the case. Instead, the Patriot Act itself was amended to reign in NSLs’ unconstitutional powers.
In the meantime, those years of endless bureaucratic legal struggles had left Merrill disillusioned with judicial or even legislative action as a way to protect privacy. Instead, he decided to try a different approach. “The third way to fight surveillance is with technology,” he says. “That was my big realization.”
So, just after Merrill won the legal right to go public with his NSL battle in 2010, he founded the Calyx Institute, a nonprofit that shared a name with his old ISP but was instead focused on building free privacy tools and services. The privacy-focused version of Google’s Android OS it would develop, designed to strip out data-tracking tools and use Signal by default for calls and texts, would eventually have close to 100,000 users. It ran servers for anonymous, encrypted instant messaging over the chat protocol XMPP with around 300,000 users. The institute also offered a VPN service and ran servers that comprised part of the volunteer-based Tor anonymity network, tools that Merrill estimates were used by millions.
As he became a cause célèbre and then a standout activist in the digital privacy world over those years, Merrill says he started to become aware of the growing problem of untrustworthy cellular providers in an increasingly phone-dependent world. He’d sometimes come across anti-surveillance hard-liners determined to avoid giving any personal information to cellular carriers, who bought SIM cards with cash and signed up for prepaid plans with false names. Some even avoided cell service altogether, using phones they connected only to Wi-Fi. “Eventually those people never got invites to any parties,” Merrill says.
All these schemes, he knew, were legal enough. So why not a phone company that only collects minimal personal information—or none—from its normal, non-extremist customers? As early as 2019, he had already consulted with lawyers and incorporated Phreeli as a company. He decided on the for-profit startup route after learning that the 501c3 statute can’t apply to a telecom firm. Only last year, he finally raised $5 million, mostly from one angel investor. (Merrill declined to name the person. Naturally, they value their privacy.)
Building a system that could function like a normal phone company—and accept users’ payments like one—without storing virtually any identifying information on those customers presented a distinct challenge. To solve it, Merrill consulted with Zooko Wilcox, one of the creators of Zcash, perhaps the closest thing in the world to actual anonymous cryptocurrency. The Z in Zcash stands for “zero-knowledge proofs,” a relatively new form of crypto system that has allowed Zcash’s users to prove things (like who has paid whom) while keeping all information (like their identities, or even the amount of payments) fully encrypted.
For Phreeli, Wilcox suggested a related but slightly different system: so-called “zero-knowledge access passes.” Wilcox compares the system to people showing their driver’s license at the door of a club. “You’ve got to give your home address to the bouncer,” Wilcox says incredulously. The magical properties of zero knowledge proofs, he says, would allow you to generate an unforgeable crypto credential that proves you’re over 21 and then show that to the doorman without revealing your name, address, or even your age. “A process that previously required identification gets replaced by something that only requires authorization,” Wilcox says. “See the difference?”
The same trick will now let Phreeli users prove they’ve prepaid their phone bill without connecting their name, address, or any payment information to their phone records—even if they pay with a credit card. The result, Merrill says, will be a user experience for most customers that’s not very different from their existing phone carrier, but with a radically different level of data collection.
As for Wilcox, he’s long been one of that small group of privacy zealots who buys his SIM cards in cash with a fake name. But he hopes Phreeli will offer an easier path—not just for people like him, but for normies too.
“I don’t know of anybody who’s ever offered this credibly before,” says Wilcox. “Not the usual telecom-strip-mining-your-data phone, not a black-hoodie hacker phone, but a privacy-is-normal phone.”
Even so, enough tech companies have pitched privacy as a feature for their commercial product that jaded consumers may not buy into a for-profit telecom like Phreeli purporting to offer anonymity. But the EFF’s Cohn says that Merrill’s track record shows he’s not just using the fight against surveillance as a marketing gimmick to sell something. “Having watched Nick for a long time, it’s all a means to an end for him,” she says. “And the end is privacy for everyone.”
Merrill may not like the implications of describing Phreeli as a cellular carrier where every phone is a burner phone. But there’s little doubt that some of the company’s customers will use its privacy protections for crime—just as with every surveillance-resistant tool, from Signal to Tor to briefcases of cash.
Phreeli won’t, at least, offer a platform for spammers and robocallers, Merrill says. Even without knowing users’ identities, he says the company will block that kind of bad behavior by limiting how many calls and texts users are allowed, and banning users who appear to be gaming the system. “If people think this is going to be a safe haven for abusing the phone network, that’s not going to work,” Merrill says.
But some customers of his phone company will, to Merrill’s regret, do bad things, he says—just as they sometimes used to with pay phones, that anonymous, cash-based phone service that once existed on every block of American cities. “You put a quarter in, you didn’t need to identify yourself, and you could call whoever you wanted,” he reminisces. “And 99.9 percent of the time, people weren’t doing bad stuff.” The small minority who were, he argues, didn’t justify the involuntary societal slide into the cellular panopticon we all live in today, where a phone call not tied to freely traded data on the caller’s identity is a rare phenomenon.
“The pendulum has swung so far in favor of total information awareness,” says Merrill, using an intelligence term of the Bush administration whose surveillance order set him on this path 21 years ago. “Things that we used to be able to take for granted have slipped through our fingers.”
“Other phone companies are selling an apartment that comes with no curtains—where the windows are incompatible with curtains,” Merrill says. “We’re trying to say, no, curtains are normal. Privacy is normal.”
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