The New York Times
Wednesday, September 16, 1998

Adminstration Announces New Concessions on Encryption Policy

by Jeri Clausing,

WASHINGTON -- The White House on Wednesday announced plans to update its controversial encryption policy by further relaxing export restrictions on strong data scrambling software used by key business sectors.

In an effort to balance the needs of companies that engage in electronic commerce with those of law enforcement agencies, Vice President Al Gore said the Administration would abandon, in some instances, its demand that the export of strong data scrambling technology be accompanied by a system that guarantees law enforcement agencies access to the keys needed to unscramble encrypted communications.

In return, the Administration said it would support the creation of a so-called Net Center to boost the technical expertise of law officers so they can fight technology with technology.

"We must ensure that new technology does not mean new and sophisticated criminal and terrorist activity which leaves law enforcement outmatched", Gore said. "And we must ensure that the sensitive financial and business transactions that now cruise along the information superhighway are 100 percent safe."

The new policy would broaden an exemption granted in July to financial institutions to online merchants as well as medical, insurance, health and proprietary information businesses in 45 approved countries.

These exemptions, the result of nearly six months of negotiations with high-tech leaders and Congress, are "a very positive step in the right direction", said Aaron W. Cross, public policy director for International Business Machines. "It should help our customers a lot."

Privacy advocates, however, said it was more like a "half step". "This does not resolve the issue of encryption policy", said Barry Steinhardt, president of the Electronic Frontier Foundation, a nonprofit civil liberties organization based in San Francisco. "It's a nod to the corporate community but it does very little to enhance the capacity of individuals to increase access to strong encryption to protect our private communications."

Instead, he said, the concessions will more likely divide what has been a diverse and strongly united coalition pushing for legislation that would lift all export controls and prohibit the creation of any spare key system for law enforcement.

"It will have the unfortunate effect of dividing the corporate community from the broader privacy community because it does grant some relief to some sectors of the corporate community", Steinhardt. "I'm sure that was the intention, to relieve a pressure point."

Indeed, industry representatives were cautiously optimistic that the announcement was a sign the Administration was moving away from some policies that have been very unpopular in the high-tech industry.

Americans for Computer Privacy, a coalition of high-tech companies and privacy groups that helped force the concessions from the White House, said the announcement is a "positive first step toward a sensible long-term policy." Still, ACP and others emphasized that more relief is needed.

Noticeably absent from the new list of exemptions are mass market products like Lotus Notes, word processing programs and software used by individuals to keep the information on their computers private.

Although there are no restrictions on those products domestically, Steinhardt said the export controls have had the effect of "dumbing down" what is available because companies do not want to produce two versions of their products.

The Administration promised to continue its dialogue with high-tech companies and review the encryption export policy again in a year.

"This is the right direction. I think they understand there is a lot of work to go", said Cross, of IBM.

The current policy only allows companies to export strong encryption technologies if they have a plan for developing "software keys" that would give law enforcement officials the ability to unscramble communications.

That will now be waived for the exempt business sectors. Other businesses will continue to be able to apply for permission to export strong encryption if they have a plan for developing "recoverable" products.

Louis Freeh, director of the Federal Bureau of Investigation, led the call for a spare key system, saying law enforcement agencies need new tools for fighting terrorists, drug cartels and other criminals in the digital age.

To balance law enforcement needs, the Administration said it would support the creation of a special center to advance law enforcement's technical capabilities.

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