June 1995

*
ISSUE UPDATE ON INFORMATION SECURITY AND
PRIVACY IN NETWORK ENVIRONMENTS
*

Introduction and Summary

Controversies, problems, and proposed solutions related to
information security and privacy are becoming increasingly
prominent among government, business, academia, and the
general public. At the same time, use of information
networks for business has continued to expand, and ventures
to bring electronic commerce and "electronic cash" into
homes and offices are materializing rapidly. (see footnote
1) Government agencies have continued to expand both the
scale and scope of their network connectivities; information
technologies and networks are featured prominently in plans
to make government more efficient, effective, and
responsive. (see footnote 2)

Until recently, topics such as intrusion countermeasures for
computer networks or the merits of particular encryption
techniques were mostly of interest to specialists. However,
in the past few years, stories about controversial federal
encryption standards, "password sniffing" and unauthorized
intrusions on the Internet, the pursuit and capture of a
notorious computer "cracker," and export controls on
computer programs that perform encryption have become front-
page news. (see footnote 3)

The increased visibility and importance accorded information
security and privacy protection (see box 1-1) reflect a
number of institutional, social, and technological changes
that have made information technologies critical parts of
daily life. (see footnote 4)  We are in transition to a
society that is becoming critically dependent on electronic
information and network connectivity. This is exemplified by
the explosive growth of the Internet, which now has host
computers in over 85 countries, as well as the rapidly
expanding variety of online sources of information,
services, and entertainment. The growing dependence of both
the public and private sectors on electronic information and
networking makes the ability to safeguard information and
provide adequate privacy protections for individuals
absolutely essential.

In September 1994, the Office of Technology Assessment (OTA)
released the report Information Security and Privacy in
Network Environments (see box 1-2). (see footnote 5)  That
report was prepared in response to a request by the Senate
Committee on Governmental Affairs and the House Subcommittee
on Telecommunications and Finance. The need for
congressional attention to safeguarding unclassified
information has been reinforced in the months since the
release of the OTA report.

Introduction

This background paper is part of OTA's follow-on assistance
to the Senate Committee on Governmental Affairs after the
September 1994 OTA report on information security and
privacy. The Committee had requested additional
informational and analytical assistance from OTA in order to
prepare for hearings and legislation in the 104th Congress
(see the letter of request in appendix A).

This background paper is a companion and supplement to the
1994 report and is intended to be used in conjunction with
it. For the reader's convenience, however, pertinent
technical and institutional background material, drawn from
that report and updated where possible, is included in this
background in appendices B ("Federal Information Security
and the Computer Security Act"), C ("U.S. Export Controls on
Cryptography"), and D ("Summary of Issues and Options from
the 1994 OTA Report").

One purpose of this background paper is to is to update some
key issues that OTA had identified in the report, in light
of recent developments. Another purpose is to develop
further some of OTA's findings and options, particularly as
these relate to the effects of government policies on the
private sector and to federal-agency operations to safeguard
unclassified information. As in the 1994 report, the focus
is on safeguarding unclassified information. OTA's follow-on
activities were conducted at the unclassified level and
project staff did not receive or use any classified
information during the course of this work.

Chapter 2 of this background paper gives an overview of the
1994 report. It highlights the importance of information
security and privacy issues, explains why cryptography and
cryptography policies are so important, and reviews policy
findings and options from the 1994 report. Chapter 3
identifies major themes that emerged from a December 1994
OTA workshop, particularly regarding export controls and the
international business environment, federal cryptography
policy, and information-security "best practices." Chapter 4
provides an update on recent and ongoing cryptography,
privacy, and security-policy developments and their
relevance for possible congressional actions.

Information Security and
Privacy in a Networked Society

Information technologies are transforming the ways in which
we create, gather, process, and share information. Rapid
growth in computer networking is driving many of these
changes; electronic transactions and electronic records are
becoming central to everything from business to health care.
Within the federal government, effective use of information
technologies and networks is central to government
restructuring and reform.

The transformation being brought about by networking brings
with it new concerns for the security of networked
information and for our ability to maintain effective
privacy protections in networked environments. Unless these
concerns can be resolved, they threaten to limit
networking's full potential in terms of both participation
and usefulness. Therefore, information safeguards
(countermeasures) are achieving new prominence. Appropriate
safeguards for the networked environment must account for--
and anticipate--technical, institutional, and social changes
that increasingly shift responsibility for security to the
end users.

Computing power used to be isolated in large mainframe
computers located in special facilities; computer system
administration was centralized and carried out by
specialists. In today's networked environment, computing
power is decentralized to diverse users who operate desktop
computers and who may have access to computing power and
data at remote locations. Distributed computing and open
systems can make every user essentially an "insider." In
such a decentralized environment, responsibility for
safeguarding information is distributed to the users, rather
than remaining the purview of system specialists. The
increase in the number and variety of network service
providers also requires that users take responsibility for
safeguarding information, rather than relying on
intermediaries to provide adequate protection. (see footnote
6)

The new focus is on safeguarding the information itself as
it is processed, stored, and transmitted. This contrasts
with older, more static or insulated concepts of "document"
security or "computer" security. In the networked
environment, we need appropriate rules for handling
proprietary, copyrighted, and personal information--and
tools with which to implement them. (see footnote 7)
Increased interactivity means that we must also deal with
transactional privacy, as well as prevent fraud in
electronic commerce and ensure that safeguards are
integrated as organizations streamline their operations and
modernize their information systems.

Importance of Cryptography

Cryptography (see box 2-1 on page 46) is not arcane anymore.
It is a technology whose time has come--in the marketplace
and in society. In its modern setting, cryptography has
become a fundamental technology with broad applications.

Modern, computer-based cryptography began in the World War
II era. (see footnote 8)  Much of this development has been
shrouded in secrecy; in the United States, governmental
cryptographic research has historically been the purview of
the "national security" (i.e., defense and intelligence)
communities. Despite two decades of growth in
nongovernmental research and development, in the United
States, the federal government still has the most expertise
in cryptography. Nevertheless, cryptography is not just a
"government technology" anymore, either.

Because it is a technology of broad application, the effects
of federal policies about cryptography are not limited to
technological developments in the field, or even to the
health and vitality of companies that produce or use
products incorporating cryptography. Instead, these policies
will increasingly affect the everyday lives of most
Americans.

Encryption (see box 2-2 on page 48) transforms a message or
data files into a form that is unintelligible without
special knowledge of some secret information (called the
"decryption key"). (see footnote 9)  Encryption can be used
as a tool to protect the confidentiality of information in
messages or files--hence, to help protect personal privacy.
Other applications of cryptography can be used to protect
the integrity of information (that it has not been subject
to unauthorized or unexpected changes) and to authenticate
its origin (that it comes from the stated source or origin
and is not a forgery).

Thus, cryptography is a technology that will help speed the
way to electronic commerce. With the advent of what are
called public-key techniques, cryptography came into use for
digital signatures (see figure 2-3 on page 52) that are of
widespread interest as a means for electronically
authenticating and signing commercial transactions like
purchase orders, tax returns, and funds transfers, as well
as for ensuring that unauthorized changes or errors are
detected (see discussion of message authentication and
digital signatures in box 2-2). (see footnote 10)  These
functions are critical for electronic commerce.
Cryptographic techniques like digital signatures can also be
used to help manage copyrighted material in electronic form.
(see footnote 11)

The nongovernmental markets for cryptography-based
safeguards have grown over the past two decades, but are
still developing. Good commercial encryption technology is
available in the United States and abroad. Research in
cryptography is international. Markets for cryptography also
would be international, except for governmental restrictions
(i.e., export controls), that effectively create "domestic"
and "export" market segments for strong encryption products
(see section on export controls below and also appendix C.
(see footnote 12)  User-friendly cryptographic safeguards
that are integrated into products (as opposed to those that
the user has to acquire separately and add on) are still
hard to come by--in part, because of export controls and
other federal policies that seek to control cryptography.
(see footnote 13)

Cryptography and related federal policies (e.g., regarding
export controls and standards development) were a major
focus of the 1994 OTA report. (see footnote 14)  That focus
was due in part from the widespread attention being given
the so-called Clipper chip and the escrowed-encryption
initiative announced by the Clinton Administration in 1993.
Escrowed encryption, or key-escrow encryption, refers to an
encryption method where the functional equivalent of a
"spare key" must be deposited with a third party. The
rationale for key-escrow encryption is to ensure government
access to decryption keys when encrypted messages are
encountered in the course of lawful electronic surveillance
(see box 2-3 on page 54). The Escrowed Encryption Standard
(EES), promulgated as a federal information processing
standard (FIPS) in 1994, is intended for use in encrypting
unclassified voice, fax, or data communicated in a telephone
system. (see footnote 15)  At present, all the Clipper chip
(i.e., EES) "spare keys" are held within the executive
branch.

Government Efforts
To Control Cryptography

In its activities as a developer, user, and regulator of
safeguard technologies, the federal government faces a
fundamental tension between two policy objectives, each of
which is important: 1) fostering the development and
widespread use of cost-effective information safeguards; and
2) controlling the proliferation of safeguard technologies
that can impair U.S. signals-intelligence and law
enforcement capabilities. Cryptography is at the heart of
this tension. Export controls and the federal standards
process (i.e., the development and promulgation of federal
information processing standards, or FIPS) are two
mechanisms the government can use to control cryptography.
(see footnote 16)

Policy debate over cryptography used to be as arcane as the
technology itself. Even 5 or 10 years ago, few people saw a
link between government decisions about cryptography and
their daily lives. However, as the information and
communications technologies used in daily life have changed,
concern over the implications of policies traditionally
dominated by national security objectives has grown
dramatically.

Previously, control of the availability and use of
cryptography was presented as a national security issue
focused outward, with the intention of maintaining a U.S.
technological lead over other countries and preventing
encryption devices from falling into the "wrong hands"
overseas. More widespread foreign use--including use of
strong encryption by terrorists and developing countries--
makes U.S. signals intelligence more difficult.

Now, with an increasing policy focus on domestic crime and
terrorism, the availability and use of cryptography has also
come into prominence as a domestic-security, law enforcement
issue. (see footnote 17)  Within the United States, strong
encryption is increasingly portrayed as a threat to domestic
security (public safety) and a barrier to law enforcement if
it is readily available for use by terrorists or criminals:

... Powerful encryption threatens to make worthless the
access assured by the new digital law [i.e., the
Communications Assistance for Law Enforcement Act]. (see
footnote 18)

Thus, export controls, intended to restrict the
international availability of U.S. cryptography technology
and products, are now being joined with domestic
cryptography initiatives, like key-escrow encryption, that
are intended to preserve U.S. law enforcement and signals-
intelligence capabilities.

Standards-development and export-control issues underlie a
long history of concern over leadership and responsibility
(i.e., "who should be in charge?" and "who is in charge?")
for the security of unclassified information government-
wide. (see footnote 19)  Most recently, these concerns have
been revitalized by proposals presented by the Clinton
Administration's Security Policy Board staff (see footnote
20) to centralize information-security authorities under
joint control of the Office of Management and Budget (OMB)
and Defense Department (see discussion below and in chapter
4).

Other manifestations of these concerns can be found in the
history of the Computer Security Act of 1987 (see below and
appendix B) and in more recent developments, such as public
reactions to the Clinton Administration's key-escrow
encryption initiative and the controversial issuances of the
Escrowed Encryption Standard (see footnote 21) and Digital
Signature Standard (DSS) (see footnote 22) as federal
information processing standards. Another important
manifestation of these concerns is the controversy over the
present U.S. export control regime, which includes
commercial products with capabilities for strong encryption,
including mass-market software, on the Munitions List, under
State Department controls (see below and appendix C).

Federal Information
Processing Standards

The 1994 OTA report concluded that two recent federal
information processing standards based on cryptography are
part of a long-term control strategy intended to retard the
general, uncontrolled availability of strong encryption
within the United States, for reasons of national security
and law enforcement. (see footnote 23)  OTA viewed the
Escrowed Encryption Standard and the Digital Signature
Standard as complements in this overall control strategy,
intended to discourage future development and use of
encryption without built-in law enforcement access, in favor
of key-escrowed encryption and related encryption
technologies. If the EES and/or other key-escrow encryption
standards (e.g., for use in computer networks) become widely
used (or, at least, enjoy a large, guaranteed government
market), this could ultimately reduce the variety of
alternative cryptography products through market dominance
that makes alternatives more scarce or more costly.

The Escrowed Encryption Standard is a federal information
processing standard that uses a classified algorithm, called
"Skipjack," developed by the National Security Agency (NSA).
It was promulgated as a voluntary federal information
processing standard. The Commerce Department's announcement
of the EES noted that the standard does not mandate the use
of escrowed-encryption devices by government agencies or the
private sector; rather, the standard provides a mechanism
for agencies to use key-escrow encryption without having to
waive the requirements of another, extant federal encryption
standard for unclassified information, the Data Encryption
Standard (DES). (see footnote 24)

The secret encryption/decryption key for Skipjack is 80 bits
long. A key-escrowing scheme is built in to ensure "lawfully
authorized" electronic surveillance. (see footnote 25)  The
algorithm is classified and is intended to be implemented
only in tamper-resistant, hardware modules. (see footnote
26)  This approach makes the confidentiality function of the
Skipjack encryption algorithm available in a controlled
fashion, without disclosing the algorithm's design
principles or thereby increasing users' abilities to employ
cryptographic principles. One of the reasons stated for
specifying a classified, rather than published, encryption
algorithm in the EES is to prevent independent
implementation of Skipjack without the law enforcement
access features.

The EES is intended for use in encrypting unclassified
voice, fax, and computer information communicated over a
telephone system. The Skipjack algorithm can also be
implemented for data encryption in computer networks; the
Defense Department is using it in the Defense Message
System. At this writing, however, there is no FIPS
specifying use of Skipjack as a standard algorithm for data
communications or file encryption. Given that the Skipjack
algorithm was selected as a standard for telephony, it is
possible that an implementation of Skipjack (or some other
form of key-escrow encryption) will be selected as a FIPS to
replace the DES for computer communications and/or file
encryption. An alternative successor to the DES that is
favored by nongovernmental users and experts is a variant of
DES called triple-encryption DES. There is, however, no FIPS
for triple-encryption DES.

Unlike the Skipjack algorithm, the algorithm in the federal
Digital Signature Standard has been published. (see footnote
27)  The public-key algorithm specified in the DSS uses a
private key in signature generation, and a corresponding
public key for signature verification (see box 2-2).
However, the DSS technique was chosen so that public-key
encryption functions would not be available to users. (see
footnote 28)  This is significant because public-key
encryption is extremely useful for key management and could,
therefore, contribute to the spread and use of nonescrowed
encryption. (see footnote 29)  While other means of
exchanging electronic keys are possible, (see footnote 30)
none is so mature as public-key technology. In contrast to
the technique chosen for the DSS, the technique used in the
most popular commercial digital signature system (based on
the Rivest-Shamir-Adleman, or RSA, algorithm) can also
encrypt. Therefore, the RSA techniques can be used for
secure key exchange (i.e., exchange of "secret" keys, such
as those used with the DES), as well as for signatures. At
present, there is no FIPS for key exchange.

Federal Standards and the
Computer Security Act of 1987

The Computer Security Act of 1987 (Public Law 100-235) is
fundamental to development of federal standards for
safeguarding unclassified information, to balancing national
security and other objectives in implementing security and
privacy policies within the federal government, and to other
issues concerning government control of cryptography.
Implementation of the Computer Security Act has been
controversial, especially regarding the respective roles of
the National Institute of Standards and Technology (NIST)
and NSA in standards development and the chronic shortage of
resources for NIST's computer security program to fulfill
its responsibilities under the act (see detailed discussion
in chapter 4 of the 1994 OTA report). (see footnote 31)

The Computer Security Act of 1987 was a legislative response
to overlapping responsibilities for computer security among
several federal agencies, heightened awareness of computer
security issues, and concern over how best to control
information in computerized or networked form. The act
established a federal government computer-security program
that would protect all unclassified, sensitive information
in federal government computer systems and would develop
standards and guidelines to facilitate such protection. The
act also established a Computer System Security and Privacy
Advisory Board (CSSPAB). The board, appointed by the
Secretary of Commerce, is charged with identifying emerging
safeguard issues relative to computer systems security and
privacy, advising the former National Bureau of Standards
(now NIST) and the Secretary of Commerce on security and
privacy issues pertaining to federal computer systems. The
CSSPAB reports its findings to the Secretary of Commerce,
the Director of OMB, the Director of NSA, and to the
"appropriate committees of the Congress." Additionally, the
act required federal agencies to identify computer systems
containing sensitive information, to develop security plans
for identified systems, and to provide periodic training in
computer security for all federal employees and contractors
who manage, use, or operate federal computer systems.
Appendix B, drawn from the 1994 OTA report, provides more
background on the purpose and implementation of the Computer
Security Act and on the FIPS.

The Computer Security Act assigned responsibility for
developing government-wide, computer-system security
standards (e.g., the FIPS) and security guidelines and
security-training programs to the National Bureau of
Standards. According to its responsibilities under the act,
NIST recommends federal information processing standards and
guidelines to the Secretary of Commerce for approval (and
promulgation, if approved). These FIPS do not apply to
classified or "Warner Amendment" systems. (see footnote 32)
NIST can draw on the technical expertise of the National
Security Agency in carrying out its responsibilities, but
NSA's role according to the Computer Security Act, is an
advisory, rather than leadership, one.

Federal Standards and the Marketplace

As the 1994 OTA report noted, not all government attempts at
influencing the marketplace through the FIPS and procurement
polices are successful. However, the FIPS usually do
influence the technologies used by federal agencies and
provide a basis for interoperability, thus creating a large
and stable "target market" for safeguard vendors. If the
attributes of the standard technology are also applicable to
the private sector and the standard has wide appeal, an even
larger but still relatively stable market should result. The
technological stability means that firms compete less in
terms of the attributes of the fundamental technology and
more in terms of cost, ease of use, and so forth. Therefore,
firms need to invest less in research and development
(especially risky for a complex technology like
cryptography) and in convincing potential customers of
product quality. This can result in higher profits for
producers, even in the long run, and in increased
availability and use of safeguards based on the standard.

In the 1970s, promulgation of the Data Encryption Standard
as a stable and certified technology--at a time when the
commercial market for cryptography-based safeguards for
unclassified information was just emerging--stimulated
supply and demand. Although the choice of the algorithm was
originally controversial due to concerns over NSA's
involvement, the DES gained wide acceptance and has been the
basis for several industry and international standards, in
large part because it was a published standard that could be
freely evaluated and implemented. The process by which the
DES was developed and evaluated also stimulated private
sector interest in cryptographic research, ultimately
increasing the variety of commercial safeguard technologies.
Although domestic products implementing the DES are subject
to U.S. export controls, DES-based technology is available
overseas.

The 1994 OTA report regarded the introduction of an
incompatible new federal standard--for example, the Escrowed
Encryption Standard--as destabilizing. At present, the EES
and other implementations of Skipjack (e.g., for data
communications) have gained little favor in the private
sector. Features such as the government key-escrow agencies,
classified algorithm, and hardware-only implementation all
contribute to the lack of appeal. But, if key-escrow
encryption technologies ultimately do manage to gain wide
appeal in the marketplace, they might be able to "crowd out"
safeguards that are based upon other cryptographic
techniques and/or do not support key escrowing. (see
footnote 33)

The 1994 OTA report noted that this type of market
distortion, intended to stem the supply of alternative
products, may be a long-term objective of the key-escrow
encryption initiative. In the long term, a loss of
technological variety is significant to private sector
cryptography, because more diverse research and development
efforts tend to increase the overall pace of technological
advance. In the near term, technological uncertainty may
delay widespread investments in any new safeguard, as users
wait to see which technology prevails. The costs of
additional uncertainties and delays due to control
interventions are ultimately borne by the private sector and
the public.

Other government policies can also raise costs, delay
adoption, or reduce variety. For example, export controls
have the effect of segmenting domestic and export encryption
markets. This creates additional disincentives to invest in
the development--or use--of robust, but nonexportable,
products with integrated strong encryption (see discussion
below).

Export Controls

Another locus of concern is export controls on cryptography.
(see footnote 34) The United States has two regulatory
regimes for exports, depending on whether the item to be
exported is military in nature, or is "dual-use," having
both civilian and military uses (see appendix C). These
regimes are administered by the State Department and the
Commerce Department, respectively. Both regimes provide
export controls on selected goods or technologies for
reasons of national security or foreign policy. Licenses are
required to export products, services, or scientific and
technical data originating in the United States, or to re-
export these from another country. Licensing requirements
vary according to the nature of the item to be exported, the
end use, the end user, and, in some cases, the intended
destination. For many items under Commerce jurisdiction, no
specific approval is required and a "general license"
applies (e.g., when the item in question is not military or
dual-use and/or is widely available from foreign sources).
In other cases, an export license must be applied for from
either the State Department or the Commerce Department,
depending on the nature of the item. In general, the State
Department's licensing requirements are more stringent and
broader in scope. (see footnote 35)

Software and hardware for robust, user-controlled encryption
are under State Department control, unless State grants
jurisdiction to Commerce. This has become increasingly
controversial, especially for the information technology and
software industries. (see footnote 36)  The impact of export
controls on the overall cost and availability of safeguards
is especially troublesome to business and industry at a time
when U.S. high-technology firms find themselves as targets
for sophisticated foreign-intelligence attacks and thus have
urgent need for sophisticated safeguards that can be used in
operations worldwide, as well as for secure communications
with overseas business partners, suppliers, and customers.
(see footnote 37)  Software producers assert that, although
other countries do have export and/or import controls on
cryptography, several countries have more relaxed export
controls on cryptography than does the United States. (see
footnote 38)

On the other hand, U.S. export controls may have
substantially slowed the proliferation of cryptography to
foreign adversaries over the years. Unfortunately, there is
little public explanation regarding the degree of success of
these export controls and the necessity for maintaining
strict controls on strong encryption in the face of foreign
supply (see footnote 39) and networks like the Internet that
seamlessly cross national boundaries. (see footnote 40)

Appendix C of this background paper, drawn from the 1994 OTA
report, provides more background on export controls on
cryptography. In September 1994, after the OTA report had
gone to press, the State Department announced an amendment
to the regulations implementing section 38 of the Arms
Export Control Act. The new rule implements one of the
reforms applicable to encryption products that were
announced on February 4, 1994, by the State Department. (see
footnote 41)  Other announced reforms, still to be
implemented, include special licensing procedures allowing
export of key-escrow encryption products to "most end
users." (see footnote 42)  The ability to export strong,
key-escrow encryption products would presumably increase
escrowed-encryption products' appeal to private-sector
safeguard developers and users.

In the 103d Congress, legislation intended to streamline
export controls and ease restrictions on mass-market
computer software, hardware, and technology, including
certain encryption software, was introduced by
Representative Maria Cantwell (H.R. 3627) and Senator Patty
Murray (S. 1846). In considering the Omnibus Export
Administration Act of 1994 (H.R. 3937), the House Committee
on Foreign Affairs reported a version of the bill in which
most computer software (including software with encryption
capabilities) was under Commerce Department controls and in
which export restrictions for mass-market software with
encryption were eased. In its report, the House Permanent
Select Committee on Intelligence struck out this portion of
the bill and replaced it with a new section calling for the
President to report to Congress within 150 days of
enactment, regarding the current and future international
market for software with encryption and the economic impact
of U.S. export controls on the U.S. computer software
industry. (see footnote 43)

At the end of the 103d Congress, omnibus export
administration legislation had not been enacted. Both the
House and Senate bills contained language calling for the
Clinton Administration to conduct comprehensive studies on
the international market and availability of encryption
technologies and the economic effects of U.S. export
controls. In a July 20, 1994, letter to Representative
Cantwell, Vice President Gore had assured her that the "best
available resources of the federal government" would be used
in conducting these studies and that the Clinton
Administration would "reassess our existing export controls
based on the results of these studies." (see footnote 44)

At this writing, the Commerce Department and NSA are
assessing the economic impact of U.S. export controls on
cryptography on the U.S. computer software industry. (see
footnote 45)  As part of the study, NSA is determining the
foreign availability of encryption products. The study is
scheduled to be delivered to the National Security Council
by July 1, 1995. According to the National Security Council
(NSC), it is anticipated that there will be both classified
and an unclassified sections of the study; there may be some
public release of the unclassified material. (see footnote
46)  In addition, an ongoing National Research Council (NRC)
study that would support a broad congressional review of
cryptography (and that is expected to address export
controls) is due to be completed in 1996. (see footnote 47)
At this writing, the NRC study committee is gathering public
input on cryptography issues.

In the 104th Congress, Representative Toby Roth has
introduced the "Export Administration Act of 1995" (H.R.
361). This bill did not include any specific references to
cryptography. At this writing, it is not clear whether or
when the contentious issue of cryptography export controls
will become part of legislative deliberations.

Alternatively, the Clinton Administration could ease export
controls on cryptography without legislation. As was noted
above, being able to export key-escrow encryption products
would presumably make escrowed-encryption products more
attractive to commercial developers and users. Therefore,
the Clinton Administration could ease export requirements
for products with integrated key escrowing as an incentive
for the commercial development and adoption of such products
(see discussion of cryptography initiatives below and in
chapter 4).

OTA Workshop Findings

At the request of the Senate Committee on Governmental
Affairs, OTA held a workshop titled "Information Security
and Privacy in Network Environments: What Next?" on December
6, 1994 as part of its follow-on activities after the
release of the 1994 report. Workshop participants came from
the business, legal, university, and public-interest
communities. One workshop objective was to gauge
participants' overall reactions to the OTA report
Information Security and Privacy in Network Environments.
Another was to identify related topics that merited
attention and that OTA had not already addressed (e.g.,
network reliability and survivability or "corporate"
privacy--see chapter 3). A third objective was for
participants to identify as specifically as possible areas
ripe for congressional action.

The general areas of interest were:

1.	the marketplace for information safeguards and factors
affecting supply and demand;

2.	information-security "best practices" in the private
sector, including training and implementation, and their
applicability to government information security;

3.	the impacts of federal information-security and
policies on business and the public; and

4.	desirable congressional actions and suggested time
frames for any such actions.

Chapter 3 of this background paper highlights major points
and opinions expressed by the workshop participants. It is
important to note that the presentation in chapter 3 and the
summary below are not intended to represent conclusions
reached by the participants; moreover, the reader should not
infer any general consensus, unless consensus is
specifically noted.

Several major themes emerged from the discussion regarding
export controls and the business environment, federal
cryptography policy, and characteristics of information-
security "best practices" that are germane to consideration
of government information security. These have particular
significance, especially in the context of current
developments, for congressional consideration of several of
the information-security issues and options identified in
the 1994 OTA report. These themes include:

The mismatch between the domestic and international effects
of current U.S. export controls on cryptography and the
needs of business and user communities in an international
economy.

The need for reform of export controls was the number one
topic at the workshop and perhaps the only area of universal
agreement. Participants expressed great concern that the
current controls are impeding companies' implementation of
good security in worldwide operations and harming U.S.
firms' competitiveness in the international marketplace.
More than one participant considered that what is really at
stake is loss of U.S. leadership in the information
technology industry. As one participant put it, the current
system is "a market intervention by the government with
unintended bad consequences for both government and the
private sector."

Several participants asserted that U.S. export controls have
failed at preventing the spread of cryptography, because
DES- and RSA-based encryption, among others, are available
outside of this country. These considered that the only
"success" of the controls has been to prevent major U.S.
software companies from incorporating high-quality, easy-to-
use, integrated cryptography in their products.

The intense dissatisfaction on the part of the private
sector with the lack of openness and progress in resolving
cryptography-policy issues.

Participants expressed frustration with the lack of a
timely, open, and productive dialogue between government and
the private sector on cryptography issues and the lack of
response by government to what dialogue has taken place.
(see footnote 48)  Many stressed the need for a genuine,
open dialogue between government and business, with
recognition that business vitality is a legitimate
objective. Participants noted the need for Congress to
broaden the policy debate about cryptography, with more
public visibility and more priority given to business needs
and economic concerns. In the export control arena, Congress
was seen as having an important role in getting government
and the private sector to converge on some feasible middle
ground (legislation would not be required, if export
regulations were changed). Leadership and timeliness ("the
problem won't wait") were viewed as priorities, rather than
more studies and delay.

Many felt the information-policy branches of the government
are unable to respond adequately to the current leadership
vacuum; therefore, they felt that government should either
establish a more effective policy system and open a
constructive dialogue with industry or leave the problem to
industry.
The lack of public dialogue, visibility, and accountability,
particularly demonstrated by the manner in which the Clipper
chip was introduced and the EES promulgated, seemed to be a
constant source of anger for both industry representatives
and public interest groups. There were many concerns and
frustrations about the role of the National Security Agency.
Many participants suggested that this country desperately
needs a new vision of "national security" that incorporates
economic vitality. They consider that business strength is
not part of NSA's notion of "national security," so it is
not part of their mission. As one participant put it,
"saying that `we all have to be losers' on national security
grounds is perverse industrial policy."

The mismatch between the federal standards process for
cryptography-related FIPS and private sector needs for
exportable, cost-effective safeguards.

As noted above, many participants viewed export controls as
the single biggest obstacle to establishing international
standards for information safeguards, One participant also
noted the peculiarity of picking a national standard (e.g.,
a FIPS like the DES) and then trying to restrict its use
internationally.

The question of the availability of secure products
generated some disagreement over whether the market works
or, at least, the extent to which it does and does not work.
There was consensus that export controls and other
government policies that segmented market demand were
undesirable interventions. Though the federal government can
use its purchasing power to significantly influence the
market, most participants felt that this sort of market
intervention would not be beneficial overall.
The mismatch between the intent of the Computer Security Act
and its implementation.

There was widespread support for the Computer Security Act
of 1987, but universal frustration with its implementation.
NIST, the designated lead agency for security standards and
guidelines, was described as underfunded and extremely slow.
There was also a general recognition that people had been
complaining about NIST for a while, but nothing has happened
as a result of these complaints. Some participants noted the
importance of increased oversight of the Computer Security
Act of 1987 (Public Law 100-235), as well as possible
redirection of NIST activities (e.g., collecting information
about what industry is doing, pointing out commonalities and
how to interoperate, rather than picking out a "standard").

According to some participants, the government should get
"its house in order" in the civilian agencies and place more
emphasis on unclassified information security. There was a
perceived need for timely attention, because the
architecture and policy constructs of the international
information infrastructure are being developed right now,
but these are "being left to the technologists" due to lack
of leadership.

Several felt that the government has overemphasized
cryptography, to the exclusion of management and problems
like errors and dishonest employees that are not fully
addressed by a "technology" focus. Participants considered
that the real issue is management, not technology sloganism.
According to participants, existing policies [e.g., the
previous version of OMB Circular A-130, Appendix III]
attempt to mandate cost-based models, but the implementation
is ineffective. For example, after the Computer Security
Act, NIST should have been in a position to help agencies,
but this never happened due to lack of resources. Civil
agencies lack resources, then choose to invest in new
applications rather than spend on security. This is
understandable when the observation that "nothing happens"--
that is, no security incidents are detected--is an indicator
of good security. Participants observed that, if inspectors
general of government agencies are perceived as neither
rewarding or punishing, users get mixed signals and conclude
that there is a mismatch between security postures and
management commitment to security implementation.

The distinction between security policies and guidelines for
implementing these policies; and

the need for technological flexibility in implementing
security policies.
Sound security policies are a foundation for good security
practice. Importantly, these are not guidelines for
implementation. Rather, they are "minimalist" directives
that outline what must happen to maintain information
security, but not how it must be achieved.

One of the most important things about these policies is
that they are consistent across the entire company;
regardless of the department, information-security policies
are considered universally applicable. The policies have to
be designed in a broad enough fashion to ensure that all
company cultures will be able to comply. (Implementation of
these polices can be tailored to fit specific needs and
business practices.) Broad policy outlines allow information
to flow freely between company divisions without increased
security risk.

The workshop discussion noted the importance of auditing
security implementation against policy, not against
implementation guidelines. Good security policies must be
technology neutral, so that technology upgrades and
different equipment in different divisions would not affect
implementation. Ensuring that policies are technology
neutral helps prevent confusing implementation techniques
and tools (e.g., use of a particular type of encryption or
use of a computer operating system with a certain rating)
with policy objectives, and discourages "passive risk
acceptance" like mandating use of a particular technology.
This also allows for flexibility and customization.

Workshop participants noted that, although the state of
practice in setting security policy often has not lived up
to the ideals discussed above, many companies are improving.
At this point there are several road blocks frustrating more
robust security for information and information systems. A
primary road block is cost. Many systems are not built with
security in mind, so the responsibility falls on the end
user and retrofitting a system with security can be
prohibitively expensive.

The need for line-management accountability for, and
commitment to, good security, as opposed to "handing off"
security to technology (i.e., hoping that a "technological
fix" will be a cure-all).

The workshop discussion emphasized active risk acceptance by
management and sound security policies as key elements of
good information-security practice in the private sector.
The concept of management responsibility and accountability
as integral components of information security, rather than
just "handing off" security to technology, were noted as
very important by several participants. There was general
agreement that direct support by top management and upper-
management accountability are central to successful
implementation of security policies. Many participants
considered it vital that the managers understand active risk
acceptance and not be insulated from risk.

Most security managers participating in the workshop viewed
training as vital to any successful information-security
policy. Lack of training leads to simple errors potentially
capable of defeating any good security system for example,
employees who write their passwords on paper and tape it to
their computers. Several participants knew of companies that
have fallen into the technology trap and have designed
excellent computer security systems without sufficiently
emphasizing training. There is a core of training material
that is technology neutral and ubiquitous across the
company. The necessity for impressing upon employees their
role in information security was seen as paramount.

Issue Update

Chapter 4 provides an update on executive-branch and private
sector cryptography developments, business perspectives on
government policies, congressional consideration of privacy
issues, and government-wide guidance on information security
in the federal agencies. The last section of chapter 4
discusses the implications of these developments for
congressional consideration of some of the issues and
options identified in the 1994 OTA report.

Government Cryptography Activities

In mid-1994, the executive branch indicated an openness
toward exploring alternative forms of key-escrow encryption
(i.e., techniques not implementing the Skipjack algorithm
specified in the Escrowed Encryption Standard (EES) for use
in computer and video networks. (see footnote 49)  However,
there has been no formal commitment to eventually adopting
any alternative to Skipjack in an escrowed-encryption FIPS
for computer data. (see footnote 50)  Moreover, there has
been no commitment to consider alternatives to the EES for
telephony.

Furthermore, there has been no backing away from the
underlying Clinton Administration commitment to "escrowing"
encryption keys. With tightly integrated, or "bound"
escrowing, there is mandatory key deposit. In the future,
there may be some choice of escrow agencies or registries,
but at present, Clipper- and Capstone-chip keys are being
escrowed within the Commerce and Treasury Departments. (see
footnote 51)  The Clinton Administration has not indicated
an openness toward optional deposit of keys with registries,
which OTA referred as "trusteeship" in the 1994 report (to
distinguish it from the Clinton Administration's concept of
key escrowing being required as an integral part of
escrowed-encryption systems). (see footnote 52)

The questions of whether or when there will be key-escrow
encryption federal information processing standards for
unclassified data communications and/or file encryption is
still open. There is at present no FIPS specifying use of
Skipjack for these applications. Implementation of key
escrowing or trusteeship for large databases (i.e.,
encryption for file storage, as opposed to communications)
has not been addressed by the government. However,
commercial key depositories or data-recovery centers are
being proposed by several companies (see next section on
private sector developments).

Turning from encryption to digital signatures, acceptance
and use of the new  FIPS for digital signatures is
progressing, but slowly. As the 1994 report detailed in its
description of the evolution of the Digital Signature
Standard, patent problems complicated the development and
promulgation of the standard. (see footnote 53)  Patent-
infringement uncertainties remain for the DSS, despite the
government's insistence that the DSS algorithm does not
infringe any valid patents and its offer to indemnify
vendors that develop certificate authorities for a public-
key infrastructure. (see footnote 54)

Plans to implement the DSS throughout government are
complicated by the relatively broad private sector use of a
commercial alternative, the RSA signature system, and some
agencies' desire to use the RSA system instead of, or
alongside, the DSS. Cost, as well as interoperability with
the private sector, is an issue. The DSS can be implemented
in hardware, software, or firmware, but NSA's preferred
implementation is in the "FORTEZZA" card.
The FORTEZZA card (formerly called the TESSERA card) is a
Personal Computer Memory Card Industry Association (PCMCIA)
card. (see footnote 55)  The FORTEZZA card is used for data
communications; it implements the Skipjack algorithm, as
well as key-exchange and digital-signature functions.
FORTEZZA applications include the Defense Departments'
Defense Message System. Per-workstation costs are
significantly higher for the FORTEZZA card than for a
software-based signature implementation alone. To use
FORTEZZA, agencies must have--or upgrade to--computers with
PCMCIA card slots, or must buy PCMCIA readers (about $125
each).

According to NSA, current full costs for FORTEZZA cards are
about $150 each in relatively small initial production lots;
of this cost, about $98 is for the Capstone chip. About
3,000 FORTEZZA cards had been produced as of April 1995 and
another 33,000 were on contract. NSA hopes to award a large-
scale production contract in fall 1995 for 200,000 to
400,000 units. In these quantities, according to the agency,
unit costs should be below the $100 per unit target
established for the program. (see footnote 56)  Thus, the
FORTEZZA production contract would be on the order of $20
million to $40 million.

NIST is working on what is intended to become a market-
driven validation system for vendors' DSS products. This is
being done within the framework of overall requirements
developed for FIPS 140-1, "Security Requirements for
Cryptographic Modules" (January 11, 1994). NIST is also
developing a draft FIPS for "Cryptographic Service Calls"
that would use relatively high-level application program
interfaces (e.g., "sign" or "verify") to call on any of a
variety of cryptographic modules. The intention is to allow
flexibility of implementation in what NIST recognizes is a
"hybrid world." Unfortunately, this work appears to have
been slowed due to the traditional scarcity of funds for
such core security programs at NIST (see chapter 2 and the
1994 OTA report, pages 20 and 164).

The 1996 Clinton Administration budget proposals reportedly
do not specify funds for NIST work related to the DSS, or
the EES. (see footnote 57)  However, according to the draft
charter of the Government Information Technology Services
Public-Key Infrastructure Federal Steering Committee, NIST
will chair and provide administrative support for the
Public-Key Infrastructure Federal Steering Commmittee that
is being formed to provide guidance and assistance in
developing an interoperable, secure public-key
infrastructure to support electronic commerce, electronic
mail, and other applications.

The Advanced Research Projects Agency (ARPA), the Defense
Information Systems Agency (DISA), and NSA have agreed to
establish an Information Systems Security Research Joint
Technology Office (JTO) to coordinate research programs and
long range strategic planning for information systems
security research and to expedite delivery of security
technologies to DISA. Part of the functions of the JTO will
be to:

o  Encourage the U.S. industrial base to develop commercial
products with built-in security to be used in DOD systems.
Develop alliances with industry to raise the level of
security in all U.S. systems. Bring together private sector
leaders in information security to advise the JTO and build
consensus for the resulting program.

o  Identify areas for which standards need to be developed
for information systems security.

o  Facilitate the availability and use of NSA certified
cryptography within information systems security research
programs. (see footnote 58)

According to the Memorandum of Agreement establishing JTO,
its work is intended to improve DISA's ability to safeguard
the confidentiality, integrity, authenticity, and
availability of data in Defense Department information
systems, provide a "robust first line of defense" for
defensive information warfare, and permit electronic
commerce between the Defense Department and its contractors.
(See discussion of the Defense Department's "Information
Warfare" activities later in this chapter.)

Private Sector Cryptography Developments (see footnote 59)

At the end of January 1995, AT&T Corp. and VLSI Technology,
Inc., announced plans to develop an encryption microchip
that would rival the Clipper and Capstone chips. The
AT&T/VLSI chip will have the stronger, triple-DES
implementation of the Data Encryption Standard algorithm.
(see footnote 60)  It is intended for use in a variety of
consumer devices, including cellular telephones, television
decoder boxes for video-on-demand services, and personal
computers. (see footnote 61)  The AT&T/ VLSI chips do not
include key escrowing. Under current export regulations,
they would be subject to State Department export controls.

Industry observers consider this development especially
significant as an indicator of the lack of market support
for Clipper and Capstone chips because AT&T manufactures a
commercial product using Clipper chips (the AT&T Surity
Telephone Device) and VLSI is the NSA contractor making the
chips that Mykotronx programs (e.g., with the Skipjack
algorithm and keys) to become Clipper and Capstone chips.

The international banking and financial communities have
long used encryption and authentication methods based on the
DES. Because these communities have a large installed base
of DES technology; a transition to an incompatible (non-DES-
based) new technology would be lengthy. The Accredited
Standards Committee X9, which sets data security standards
for the U.S. banking and financial services industries,
reportedly announced that it will develop new encryption
standards based on triple DES and will designate a
subcommittee to develop technical standards for triple-DES
applications. (see footnote 62)

RSA Data Security, Inc., recently announced another
symmetric encryption algorithm, called RC5. (see footnote
63)  According to the company, RC5 is faster than the DES
algorithm, is suitable for hardware or software
implementation, and has a range of user-selected security
levels. Users can select key lengths ranging up to 2,040
bits, depending on the levels of security and speed needed.
The RSA digital signature system (see box 2-2 on page 48),
from the same company, is the leading commercial rival to
the Digital Signature Standard. RSA-based technology is also
part of a new, proposed industry standard for protecting
business transactions on the Internet. (see footnote 64)

Another private sector standards group, the IEEE P1363
working group on public-key cryptography, is developing a
voluntary standard for "RSA, Diffie-Hellman, and Related
Public-Key Cryptography" (see figure 2-5 on page 59). The
group held a public meeting in Oakland, California, in May
1995 to review a draft standard. (see footnote 65)

Several companies have proposed alternative approaches to
key-escrow encryption; these include some 20 different
alternatives. (see footnote 66)  Variously, these use
published, unclassified encryption algorithms, thus
potentially allowing software, as well as hardware,
implementations. The commercial approaches would make use of
commercial or private key-escrow systems, with data recovery
services that are available to individuals and
organizations, as well as to authorized law enforcement
agencies.

A brief description of two of the commercial approaches is
given in chapter 4, based on information provided by Trusted
Information Systems (TIS) and Bankers Trust. The Bankers
Trust system is hardware-based; the TIS system is software-
based. Bankers Trust has proposed its system to the U.S.
government and business community. The TIS system is under
internal government review to determine the sufficiency of
the approach to meet national security and law enforcement
objectives.

Business Perspectives

Representatives of major U.S. computer and software
companies have recently reaffirmed the importance of
security and privacy protections in the developing global
information infrastructure (GII). (see footnote 67)  But, as
the Computer Systems Policy Project's "Perspectives on the
Global Information Infrastructure" notes, there are strong
and serious business concerns that government interests,
especially in the standards arena, could stifle commercial
development and use of networks in the international arena.

In June 1994, the Association for Computing Machinery (ACM)
issued a report on the policy issues raised by introduction
of the EES. The ACM report identified some key questions
that need to be considered in reaching conclusions
regarding:

What cryptography policy best accommodates our national
needs for secure communications and privacy, industry
success, effective law enforcement, and national security?
(see footnote 68)

The U.S. Public Policy Committee of the ACM (USACM) issued a
companion set of recommendations, focusing on the need for:

o  open forums for cryptography policy development, in which
government, industry, and the public could participate;

o  encryption standards that do not place U.S. manufacturers
at a disadvantage in the global marketplace and do not
adversely affect technological development within the United
States;

o  changes in FIPS development, such as placing the process
under the Administrative Procedures Act;

o  withdrawal of the Clipper chip proposal by the Clinton
Administration and the beginning of an open and public
review of encryption policy; and

o  development of technologies and institutional practices
that will provide real privacy for future users of the
National Information Infrastructure. (see footnote 69)

Also in 1994, the International Chamber of Commerce (ICC)
issued its "ICC Position Paper on International Encryption
Policy." ICC noted the growing importance of cryptography in
securing business information and transactions on an
international basis and, therefore, the significance of
restrictions and controls on encryption methods as
"artificial obstacles" to trade. ICC urged governments "not
to adopt a restrictive approach which would place a
particularly onerous burden on business and society as a
whole." (see footnote 70)  ICC's position paper called on
governments to: 1) remove unnecessary export and import
controls, usage restrictions, restrictive licensing
arrangements and the like on encryption methods used in
commercial applications; 2) enable network interoperability
by encouraging global standardization; 3) maximize users'
freedom of choice; and 4) work together with industry to
resolve barriers by jointly developing a comprehensive
international policy on encryption. ICC recommended that
global encryption policy be based on broad principles
centered on openness and flexibility. (see footnote 71)

The United States Council for International Business (USCIB)
subsequently issued position papers on "Business
Requirements for Encryption" (see footnote 72) and
"Liability Issues and the U.S. Administration's Encryption
Initiatives." (see footnote 73)  The USCIB favored breaking
down the "artificial barriers" to U.S. companies'
competitiveness and ability to implement powerful security
imposed by overly restrictive export controls. The Council
called for international agreement on "realistic" encryption
requirements, including: free choice of encryption
algorithms and key management methods, public scrutiny of
proposed standard algorithms, free export/import of accepted
standards, and flexibility in implementation (i.e., hardware
or software). If key escrowing is to be used, the USCIB
proposed that:

o  a government not be the sole holder of the entire key
except at the discretion of the user;

o  the key-escrow agent make keys available to lawfully
authorized entities when presented with proper, written
legal authorizations (including international cooperation
when the key is requested by a foreign government);

o  the process for obtaining and using keys for wiretapping
purposes must be auditable;

o  keys obtained from escrowing agents by law enforcement
must be used only for a specified, limited time frame; and

o  the owner of the key must (also) be able to obtain the
keys from the escrow agent. (see footnote 74)

The USCIB has also identified a number of distinctive
business concerns regarding the U.S. government's position
on encryption and liability:

o  uncertainty regarding whether the Clinton Administration
might authorize strict government liability for
misappropriation of keys, including adoption of tamper proof
measures to account for every escrowed unit key and family
key (see box 2-3);

o  the degree of care underlying design of Skipjack, EES,
and Capstone (given the government's still-unresolved
degree, if any, of liability);

o  the confusion concerning whether the government intends
to disclaim all liability in connection with the EES and
Capstone initiatives, and the extent to which family keys,
unit keys, and law enforcement decryption devices will be
adequately secured; and

o  uncertainties regarding the liability of nongovernmental
parties (e.g., chip manufacturers, vendors, and their
employees) for misconduct or negligence. (see footnote 75)

These types of concerns have remained unresolved (see
related discussion and options presented in the 1994 OTA
report, pages 16-18 and 171-182).

Liability issues are important to the development of
electronic commerce and the underpinning institutional
infrastructures, including (but not limited to) escrow
agents for key-escrowed encryption systems and certificate
authorities for public-key infrastructures. Widespread use
of certificate-based, public-key infrastructures will
require resolution and harmonization of liability
requirements for trusted entities, whether these be federal
certificate authorities, private certificate (or
"certification") authorities, escrow agents, banks,
clearinghouses, value-added networks, or other entities.
(see footnote 76)

There is increasing momentum toward frameworks within which
to resolve legal issues pertaining to digital signatures and
to liability. For example:

o  The Science and Technology Section of the American Bar
Association's Information Security Committee is drafting
"Global Digital Signature Guidelines" and model digital-
signature legislation.

o  With participation by the International Chamber of
Commerce and the U.S. State Department, the United Nations
Commission on International Trade Law has completed a Model
Law on electronic data interchange (EDI).

o  Utah has just enacted digital signature legislation. (see
footnote 77)

Privacy Legislation

In the 104th Congress, bills have been introduced to address
the privacy-related issues of search and seizure, access to
personal records, content of electronic information, drug
testing, and immigration and social security card fraud
problems. In addition, Representative Cardiss Collins has
reintroduced the "Individual Privacy Protection Act of 1995"
(H.R. 184). H.R. 184 includes provisions to establish a
Privacy Protection Commission charged with ensuring the
privacy rights of U.S. citizens, providing advisory guidance
on matters related to electronic data storage, and promoting
and encouraging the adoption of fair information practices
and the principle of collection limitation..

Immigration concerns and worker eligibility are prompting
reexamination of social security card fraud and discussion
over a national identification database. At least eight
bills have been introduced in the 104th Congress to develop
tamper-proof or counterfeit-resistant social security cards
(H.R. 560, H.R. 570, H.R. 756, H.R. 785) and to promote
research toward a national identification database (H.R.
502, H.R. 195, S. 456, S. 269).

Four bills have been introduced modifying search and seizure
limitations: H.R. 3, H.R. 666, S. 3, and S. 54. The
"Exclusionary Rule Reform Act of 1995" (H.R. 666 and
companion S. 54), which revises the limitations on evidence
found during a search, passed the House on February 10,
1995. Similar provisions have been included in crime
legislation introduced in both houses, S. 3 and H.R. 3. The
Senate Committee on the Judiciary has held a hearing on
Title V of S. 3, the provisions reforming the exclusionary
rule.

Also this session, legislation has been introduced
increasing privacy protection by restricting the use or sale
of lists collected by communication carriers (H.R. 411) and
the U.S. Postal Service (H.R. 434), defining personal
medical privacy rights (H.R. 435, S. 7), detailing
acceptable usage of credit report information (H.R. 561),
and mandating procedures for determining the reliability of
drug testing (H.R. 153). These bills establish guidelines in
specific areas, but do not attempt to address the overall
challenges facing privacy rights in an electronic age.

The "Family Privacy Bill" (H.R. 1271) passed the House on
April 4, 1995. H.R. 1271, introduced by Representative Steve
Horn on March 21, 1995, is intended to provide parents the
right to supervise and choose their children's participation
in any federally funded survey or questionnaire that
involves intrusive questioning on sensitive issues. (see
footnote 78)  Some have raised concerns about the bill on
the grounds that it might dangerously limit local police
authority to question minors and threaten investigations of
child abuse, or hinder doctors in obtaining timely patient
information on children. (see footnote 79)

In addition, the Office of Management and Budget recently
published notice of draft privacy principles and draft
security tenets for the national information infrastructure.
(see footnote 80)  The draft privacy principles were
developed by the Information Infrastructure Task Force's
Working group on Privacy and are intended to update and
revise the Code of Fair Information Practices developed in
the early 1970s and used in development of the Privacy Act
of 1974.

Information-Security Policy
Initiatives and Legislation

The Defense Department's "Information Warfare" activities
address the opportunities and vulnerabilities inherent in
its (and the country's) increasing reliance on information
and information systems. The Department has a variety of
Information Warfare activities ongoing in its services and
agencies, the Office of the Secretary of Defense, and
elsewhere. (see footnote 81)  The Department's Defensive
Information Warfare program goals focus on technology
development to counter vulnerabilities stemming from the
Department's growing dependence on information systems and
the commercial information infrastructure (e.g., the public-
switched network and the Internet). The Information Systems
Security Research Joint Technology Office established by
ARPA, DISA, and NSA (see above) will pursue research and
development pursuant to these goals.

The increasing prominence of Information Warfare issues has
contributed to an increasing momentum for consolidating
information-security authorities government-wide, thereby
expanding the role of the defense and intelligence agencies
for unclassified information security overall:

... Protection of U.S. information systems is also clouded
by legal restrictions put forth, for example, in the
Computer Security Act of 1987.
Of concern to the Task Force is the fact that IW
[Information Warfare] technologies and capabilities are
largely being developed in an open commercial market and are
outside of direct Government control. (see footnote 82)

Such a consolidation and/or expansion would run counter to
current statutory authorities and to OMB's proposed new
government-wide security and privacy policy guidance (see
below).

The Joint Security Commission

In mid-1993, the Joint Security Commission was convened by
the Secretary of Defense and the Director of Central
Intelligence to develop a "new approach to security that
would assure the adequacy of protection within the contours
of a security system that is simplified, more uniform, and
more cost effective." (see footnote 83)  The Joint Security
Commission's report made recommendations across a
comprehensive range of areas.

The sections on information systems security (see footnote
84) and a security architecture for the future (see footnote
85) are of special interest. In the context of the
Commission's charter, they propose a unified security policy
structure and authority for classified and unclassified
information in the defense/intelligence community. (see
footnote 86)  However, the report also recommends a more
general centralization of information security along these
lines government-wide; the executive summary highlights the
conclusion the security centralization within the
defense/intelligence community described in the report
should be extended government-wide. (see footnote 87)  The
report also recommends "establishment of a national level
security policy committee to provide structure and coherence
to U.S. government security policy, practices, and
procedures." (see footnote 88)

The Security Policy Board

On September 16, 1994, President Clinton signed Presidential
Decision Directive 29 (PDD-29). PDD-29, "Security Policy
Coordination," established a new structure, under the
direction of the National Security Council (NSC), for the
coordination, formulation, evaluation, and oversight of U.S.
security policy. (see footnote 89)  According to the
description of PDD-29 provided to OTA by NSC, the directive
designates the former Joint Security Executive Committee
established by the Secretary of Defense and the Director of
Central Intelligence as the Security Policy Board.

The Security Policy Board (SPB) subsumes the functions of a
number of previous national security groups and committees.
The SPB members include the Director of Central
Intelligence, Deputy Secretary of Defense, Vice Chairman of
the Joint Chiefs of Staff, Deputy Secretary of State, Under
Secretary of Energy, Deputy Secretary of Commerce, and
Deputy Attorney General; plus one Deputy Secretary from
"another non-defense-related-agency" selected on a rotating
basis, and one representative each from the OMB and NSC
staff.

The Security Policy Forum that had been established under
the Joint Security Executive Committee was retained under
the SPB. The forum is composed of senior representatives
from over two dozen defense, intelligence, and civilian
agencies and departments; the forum chair is appointed by
the SPB chair. The Security Policy Forum functions are to:
consider security policy issues raised by its members or
others, develop security policy initiatives and obtain
comments for the SPB from departments and agencies, evaluate
the effectiveness of security policies, monitor and guide
the implementation of security policies to ensure coherence
and consistency, and oversee application of security
policies to ensure they are equitable and consistent with
national goals. (see footnote 90)

PDD-29 also established a Security Policy Advisory Board of
five members from industry. This independent,
nongovernmental advisory board is intended to advise the
President on implementation of the policy principles guiding
the "new" formulation, evaluation, and oversight of U.S.
security policy, and to provide the SPB and the intelligence
community with a "public interest" perspective. The SPB is
authorized to establish interagency working groups as
necessary to carry out its functions and to ensure
interagency input to and coordination of security policy,
procedures, and practices, with staffs to support the SPB
and any other groups or fora established pursuant to PDD-29.

PDD-29 was not intended to change or amend existing
authorities or responsibilities of the members of the SPB,
as "contained in the National Security Act of 1947, other
existing laws or Executive Orders." (see footnote 91) PDD-29
does not refer specifically to government information
security policy, procedures, and practices, or to
unclassified information security government-wide.
Nevertheless, the proposed detailed implementation of the
directive with respect to information security, as
articulated in the Security Policy staff report report,
"Creating a New Order in U.S. Security Policy," is a
departure from the information security structure set forth
in the Computer Security Act of 1987. The staff report
appears to recognize this mismatch between its proposal and
statutory authorities for unclassified information security,
noting the Computer Security Act under information-security
"actions required" to implement PDD-29. (see footnote 92)

The SPB staff's proposed "new order" for information
security builds on the Joint Security Commission's analysis
and recommendations to establish a "unifying body"
government-wide. (see footnote 93)  With respect to
information security, the new SPB structure would involve
organizing an Information Systems Security Committee (ISSC)
charged with "coupling the development of policy for both
the classified and the sensitive but unclassified
communities" and a "transition effort" for conversion to the
new structure. (see footnote 94)

This "comprehensive structure" would be the new ISSC, that
would be:
... based on the foundation of the current NSTISSC [see
appendix B of this background paper ] but will have
responsibility for both the classified and the sensitive but
unclassified world.

The ISSC would be jointly chaired at the SES [Senior
Executive Service] or General Officer level by DOD and OMB.
This new body would consist of voting representatives from
each of the agencies/departments currently represented on
the NSTISSC and its two subcommittees, NIST and the civil
agencies it represents, and other appropriate
agencies/departments, such as DISA, which are currently not
represented on the NSTISSC. This body would create working
groups as needed to address topics of interest.

The ISSC would eventually have authority over all classified
and unclassified but sensitive systems, and would report to
through the [Security Policy] Forum and Board to the NSC.
Thus, policies would have the full force and authority of an
NSC Directive, rather than the relatively "toothless"
issuances currently emanating from the NSTISSC. NSA would
continue to provide the secretariat to the new national
INFOSEC structure, since the secretariat is a well-
functioning, highly-efficient, and effective body.

... A joint strategy would have to be devised for a smooth
transition between the current and new structures, which
would ensure that current momentum is maintained and
continuity preserved. In addition, a new definition must be
developed for "national security information," and it must
be determined how such information relates to the
unclassified arena from a national security standpoint
[emphasis added]. Issues such as voting in such a
potentially unwieldy organization must also be resolved.
(see footnote 95)

At this writing, the extent to which the SPB information-
security proposals, ISSC, and the development of a new
definition of "national security information" have or have
not been "endorsed" within the executive branch is unclear.
Outside the executive branch, however, they have been met
with concern and dismay reminiscent of reactions to NSDD-145
a decade ago (see chapter 2 and appendix B). (see footnote
96)  Moreover, they run counter to the statutory agency
authorities set forth in the 104th Congress in the Paperwork
Reduction Act of 1995 (see below), as well as in the
Computer Security Act of 1987. At its March 23-24, 1995
meeting, the Computer Systems Security and Privacy Board
that was established by the Computer Security Act issued
Resolution 95-3, recommending that the SPB await broader
discussion of issues before proceeding with its plans "to
control unclassified, but sensitive systems."

Concerns have also been expressed within the executive
branch. The ISSC information security structure that would
increase the role of the defense and intelligence
communities in governmentwide unclassified information
security runs counter to the Clinton Administration's "basic
assumptions" about free information flow and public
accessibility as articulated in the 1993 revision of OMB
Circular A-130, "Management of Federal Information
Resources." (see footnote 97)

Moreover, some senior federal computer security managers
have expressed concern about what they consider premature
implementation of the SPB staff report's proposed
centralization of information security functions and
responsibilities. In a January 11, 1995, letter to Sally
Katzen, Director of the Office of Information and Regulatory
Affairs, Office of Management and Budget (released March 23,
1995), the Steering Committee of the Federal Computer
Security Program Manager's Forum (see footnote 98) indicated
"unanimous disagreement" with the Security Policy Board's
(SPB) proposal and urged OMB to "take appropriate action to
restrict implementation of the SPB report to only classified
systems." (see footnote 99)  This type of restriction
appears to have been incorporated in the proposed revision
to Appendix III of OMB Circular A-130 (see below).

In March and April 1995, OTA invited the Security Policy
Board staff to comment on draft OTA text discussing
information-security centralization, including the Joint
Security Commission report, PDD-29, and the SPB staff
report. OTA received SPB staff comments in early May 1995,
as this background paper was in press. According to the
Security Policy Board staff director, information systems
security policy is a "work in progress in its early stages"
for the SPB and the staff report was intended to be a
"strawman" starting point for discussion. Moreover,
according to the SPB staff, "recognizing the sensitivity and
complexity of Information Systems Security policy, the ISSC
was not one of the committees which was established, nor was
a transition team formed." (see footnote 100)  In order to
provide as much information as possible for consideration of
information security issues, including the SPB staff
perspective, OTA has included the SPB staff comments in box
1-3.

The Paperwork Reduction Act of 1995

The Paperwork Reduction Act was reauthorized in the 104th
Congress. The House and Senate versions of the Paperwork
Reduction Act of 1995 (H.R. 830 and S.244) both left
existing agency authorities under the Computer Security Act
of 1987 unchanged. (see footnote 101)  The Paperwork
Reduction Act of 1995 (Public Law 104-13) was reported on
April 3, 1995, (see footnote 102) passed in both Houses on
April 6, 1995, and signed by President Clinton on May 22,
1995.

Among its goals, the Paperwork Reduction Act of 1995 is
intended to make federal agencies more responsible and
publicly accountable for information management. With
respect to safeguarding information, the act seeks to:
... ensure that the creation, collection, maintenance, use,
dissemination, and disposition of information by or for the
Federal Government is consistent with applicable laws,
including laws relating to--

(A)	privacy and confidentiality, including section 552a of
Title 5;

(B)	security of information, including the Computer
Security Act of 1987 (Public Law 100-235); and

(C)	access to information, including section 552 of Title
5. (see footnote 103)

With respect to privacy and security, the Paperwork
Reduction Act of 1995 provides that the Director of OMB
shall:

1.	develop and oversee the implementation of policies,
principles, standards, and guidelines on privacy,
confidentiality, security, disclosure, and sharing of
information collected or maintained by or for agencies;

2.	oversee and coordinate compliance with sections 552 and
552a of title 5, the Computer Security Act of 1987 (40
U.S.C. 759 note), and related information management laws;
and

3.	require Federal agencies, consistent with the Computer
Security Act of 1987 (40 U.S.C. 59 note), to identify and
afford security protections commensurate with the risk and
magnitude of the harm resulting from the loss, misuse, or
unauthorized access to or modification of information
collected or maintained by or on behalf of an agency. (see
footnote 104)

The latter requirement for cost-effective security
implementation and standards is tied to the roles of the
Director of NIST and the Administrator of General Services
in helping the OMB to:

(A)	develop and oversee the implementation of polices,
principles, standards, and guidelines for information
technology functions and activities of the Federal
Government, including periodic evaluations of major
information systems; and

(B)	oversee the development and implementation of standards
under section 111(d) of the Federal Property and
Administrative Services Act of 1949 (40 U.S.C. 759(d)). (see
footnote 105)

Federal agency heads are responsible for ensuring that their
agencies shall:

1.	implement and enforce applicable policies, procedures,
standards, and guidelines on privacy, confidentiality,
security, disclosure, and sharing of information collected
or maintained by or for the agency;

2.	assume responsibility and accountability for compliance
with and coordinated management of sections 552 and 552a of
title 5, the Computer Security Act of 1987 (40 U.S.C. 759
note), and related information management laws; and

3.	consistent with the Computer Security Act of 1987 (40
U.S.C. 59 note), identify and afford security protections
commensurate with the risk and magnitude of the harm
resulting from the loss, misuse, or unauthorized access to
or modification of information collected or maintained by or
on behalf of an agency. (see footnote 106)

Proposed Revision of Appendix III
of OMB Circular A-130

At this writing, OMB had just completed the proposed
revision of Appendix III. The proposed revision is intended
to lead to improved federal information-security practices
and to make fulfillment of Computer Security Act and Privacy
Act requirements more effective generally, as well as with
respect to data sharing and secondary uses. As indicated
above, the Paperwork Reduction Act of 1995 has affirmed
OMB's government-wide authorities for information security
and privacy.

The new, proposed revision of Appendix III ("Security of
Federal Automated Information") will be key to assessing the
prospect for improved federal information security
practices. The proposed revision was posted for public
comment on March 29, 1995. According to OMB, the proposed
new government-wide guidance:

... is intended to guide agencies in securing information as
they increasingly rely on an open and interconnected
National Information Infrastructure. It stresses management
controls such as individual responsibility, awareness and
training, and accountability, rather than technical controls
...

The proposal would also better integrate security into
program and mission goals, reduce the need for centralized
reporting of paper security plans, emphasize the management
of risk rather than its measurement, and revise government-
wide security responsibilities to be consistent with the
Computer Security Act. (see footnote 107)

According to OMB, the proposed new security guidance
reflects the significant differences in capabilities, risks,
and vulnerabilities of the present computing environment, as
opposed to the relatively closed, centralized processing
environment of the past. Today's processing environment is
characterized by open, widely distributed information-
processing systems that are interconnected with other
systems within and outside government and by an increasing
dependence of federal agency operations on these systems.
OMB's "federal information technology world" encompasses
over 2 million individual workstations (e.g., PCs), but only
some 25,000 medium and large computers. (see footnote 108)
Accordingly, a major focus of OMB's new guidance is on end
users and decentralized information-processing systems--and
the information-processing applications they use and
support.

According to OMB, the proposed revision of Appendix III
stresses management controls (such as individual
responsibility, awareness, and training) and accountability,
rather than technical controls. OMB also considers that the
proposed security appendix would better integrate security
into agencies' program and mission goals, reduce the need
for centralized reporting of paper security plans, emphasize
the management of risk rather than its measurement, and
revise government-wide security responsibilities to be
consistent with the Computer Security Act. (see footnote
109)

OMB's proposed new security appendix:

... proposes to re-orient the Federal computer security
program to better respond to a rapidly changing
technological environment. It establishes government-wide
responsibilities for Federal computer security and requires
Federal agencies to adopt a minimum set of management
controls.

These management controls are directed at individual
information technology users in order to reflect the
distributed nature of today's technology. For security to be
most effective, the controls must be a part of day-to-day
operations. This is best accomplished by planning for
security not as a separate activity, but as part of overall
planning.

"Adequate security" is defined as "security commensurate
with the risk and magnitude of harm from the loss, misuse,
or unauthorized access to or modification of information."
This definition explicitly emphasizes the risk-based policy
for cost-effective security established by the Computer
Security Act. (see footnote 110)

The new guidance assigns the Security Policy Board
responsibility for (only) "national security policy
coordination in accordance with the appropriate Presidential
directive [e.g., PDD 29]." (see footnote 111)  With respect
to national security information:

Where an agency processes information which is controlled
for national security reasons pursuant to an Executive Order
or statute, security measures required by appropriate
directives should be included in agency systems. Those
policies, procedures, and practices will be coordinated with
the U.S. Security Policy Board as directed by the President.
(see footnote 112)

Otherwise, the proposed OMB guidance assigns government-wide
responsibilities to agencies that is "consistent with the
Computer Security Act." These agencies include the
Department of Commerce, through NIST; the Department of
Defense, through NSA; the Office of Personnel Management;
the General Services Administration; and the Department of
Justice. (see footnote 113)

A complete analysis of the proposed revision to Appendix III
is beyond the scope of this background paper. In brief, the
proposed new guidance reflects a fundamental and necessary
shift in emphasis from securing automated information
systems to safeguarding automated information itself. It
seeks to accomplish this through:

o  controls for general support systems (including hardware,
software, information, data, applications, and people) that
share common functionality and are under the same direct
management control; and

o  controls for major applications (that require special
attention due to their mission-critical nature).

For each type of control, OMB seeks to ensure managerial
accountability by requiring management officials to
authorize in writing, based on review of implementation of
the relevant security plan, use of the system or
application. For general support systems, OMB specifies that
use should be re-authorized at least every three years.
Similarly, major applications must be authorized before
operating and reauthorized at least every three years
thereafter. For major applications, management authorization
implies accepting the risk of each system used by the
application. (see footnote 114)

This type of active risk acceptance and accountability,
coupled with review and reporting requirements, is intended
to result in agencies ensuring that adequate resources are
devoted to implementing "adequate security." Every three
years (or when significant modifications are made), agencies
must review security controls in systems and major
applications and correct deficiencies. Depending on the
severity, agencies must also consider identifying a
deficiency in controls pursuant to the Federal Manager's
Financial Accountability Act. Agencies are required to
include a summary of their system security plans and major
application security plans in the five-year plan required by
the Paperwork Reduction Act.

Implications for
Congressional Action

Appendix D of this paper, based on chapter 1 of the 1994 OTA
report on information security and privacy, reviews the set
of policy options in that report. OTA identified policy
options related to three general policy areas:

1.	national cryptography policy, including federal
information processing standards and export controls;

2.	guidance on safeguarding unclassified information in
federal agencies; and

3.	legal issues and information security, including
electronic commerce, privacy, and intellectual property.

In all, OTA identified about two dozen possible options. The
need for openness, oversight, and public accountability--
given the broad public and business impacts of these
policies--runs throughout the discussion of possible
congressional actions. During its follow-on work, OTA found
that recent and ongoing events have relevance for
congressional consideration of policy issues and options
identified in the 1994 report, particularly in the first two
areas noted above.

In OTA's view, two key questions underlying consideration of
options addressing cryptography policy and unclassified
information security within the federal government are:

1.	How will we as a nation develop and maintain the
balance among traditional "national security" (and law
enforcement) objectives and other aspects of the public
interest, such as economic vitality, civil liberties, and
open government?

2.	What are the costs of government efforts to control
cryptography and who will bear them?

Some of these costs--for example, the incremental cost of
requiring a "standard" solution that is less cost-effective
than the "market" alternative in meeting applicable security
requirements--may be relatively easy to quantify, compared
with others. But none of these cost estimates will be easy
to make. Some costs may be extremely difficult to quantify,
or even to bound--for example, the impact of technological
uncertainties, delays, and regulatory requirements on U.S.
firms' abilities to compete effectively in the international
marketplace for information technologies. Ultimately,
however, these costs are all borne by the public, whether in
the form of taxes, product prices, or foregone economic
opportunities and earnings.

The remainder of this chapter discusses possible
congressional actions related to cryptography policy and
government information security, in the context of the
policy issues and options OTA identified in the 1994 report.
These options can be found in appendix D of this background
paper and pp. 16-20 of the 1994 report. For the reader's
convenience, the pertinent options are discussed in boxes 1-
4 through 1-7 in this chapter.

Cryptography Policy and
Export Controls

In the 1994 study and its follow-on work, OTA has observed
that many of the persistent concerns surrounding the Clinton
Administration's escrowed-encryption initiative focus on
whether key-escrow encryption will become mandatory for
government agencies or the private sector, if nonescrowed
encryption will be banned, and/or if these actions could be
taken without legislation. Other concerns still focus on
whether or not alternative forms of encryption would be
available that would allow private individuals and
organizations the option of depositing keys (or not) with
one or more third-party trustees--at their discretion (see
pp. 8-10, 14-18, 171-182 of the 1994 OTA report).

Congressional Review of
Cryptography Policy

OTA noted that an important outcome of a congressional
review of national cryptography policy would be the
development of more open processes to determine how
cryptography will be deployed throughout society, including
development of the public-key infrastructures and
certification authorities that will support electronic
delivery of government services and digital commerce.

In 1993, Congress asked the National Research Council to
conduct a major study that would support a broad review of
cryptography and its deployment; the results are expected to
be available in 1996. The NRC study should be valuable in
helping Congress to understand the broad range of technical
and institutional alternatives. However, if implementation
of the EES and related technologies continues at the current
pace, OTA has noted that key-escrow encryption may already
be embedded in information systems before Congress can act
on the NRC report.

Therefore, OTA's options for congressional consideration
(see box 1-4) included an option to place a hold on further
deployment of escrowed encryption within the government,
pending a congressional review, as well as options
addressing open policy implementation, and public visibility
and accountability. These are still germane, especially
given the NSA's expectation of a large-scale investment in
FORTEZZA cards and the likelihood that nondefense agencies
will be encouraged by NSA to join in adopting FORTEZZA.

There has been very little information from the Clinton
Administration as to the current and projected costs of the
escrowed-encryption initiative, including costs of the
current escrow agencies for Clipper and Capstone chips and
total expenditures anticipated for deployment of escrowed-
encryption technologies. (NSA has indicated that a FORTEZZA
procurement contract on the order of $20 million to $40
million may be awarded in fall 1995.)

Export Controls

Reform of the current export controls on cryptography was
certainly the number one topic at the December 1994 OTA
workshop. More generally, the private sector's priority in
this regard is indicated by the discussion of the industry
statements of business needs above. Legislation would not be
required to relax controls on cryptography, if this were
done by revising the implementing regulations. However, the
Clinton Administration has previously evidenced a
disinclination to relax controls on robust cryptography,
except perhaps for certain key-escrow encryption products.
(see footnote 115)

The Export Administration Act is to be reauthorized in the
104th Congress. The issue of export controls on cryptography
may arise during consideration of export legislation, or if
new export procedures for key-escrow encryption products are
announced, and/or when the Clinton Administration's market
study of cryptography and controls is completed this summer
(see box 1-5).

Aside from any consideration of whether or not to include
cryptography provisions in the 1995 export administration
legislation, Congress could advance the convergence of
government and private sector interests into some "feasible
middle ground" through hearings, evaluation of the Clinton
Administration's market study, and by encouraging a more
timely, open, and productive dialogue between government and
the private sector (see pages 11-13, 150-160, 174-179 of the
1994 OTA report.)

Responses to Escrowed
Encryption Initiatives

The 1994 OTA report recognized that Congress has a near-term
role to play in determining the extent to which--and how--
the EES and other escrowed-encryption systems will be
deployed in the United States. These actions can be taken
within a long-term, strategic framework. Congressional
oversight of the effectiveness of policy measures and
controls can allow Congress to revisit these issues as
needed, or as the consequences of previous decisions become
more apparent.
The Clinton Administration has stated that it has no plans
to make escrowed encryption mandatory, or to ban other forms
of encryption. But, absent legislation, these intentions are
not binding for future administrations and also leave open
the question of what will happen if the EES and related
technologies do not prove acceptable to the private sector.
Moreover, the executive branch may soon be using the EES
and/or related escrowed-encryption technologies (e.g.,
FORTEZZA) to safeguard--among other things--large volumes of
private and proprietary information.

For these reasons, OTA concluded that the EES and other key-
escrowing initiatives are by no means only an executive
branch concern. The EES and any subsequent escrowed-
encryption standards (e.g., for data communications in
computer networks, or for file encryption) also warrant
congressional attention because of the public funds that
will be spent in deploying them. Moreover, negative public
perceptions of the EES and the processes by which encryption
standards are developed and deployed may erode public
confidence and trust in government and, consequently, the
effectiveness of federal leadership in promoting responsible
safeguard use. Therefore, OTA identified options addressing
location of escrow agents, as well as criminal penalties and
civil liabilities for misuse or unauthorized disclosure of
escrowed key components (see box 1-6). These are still
germane, and the liability issues are even more timely,
given recent initiatives by the international legal
community and the states.

Safeguarding Unclassified Information in the Federal
Agencies

The need for congressional oversight of federal information
security and privacy is even more urgent in a time of
government reform and streamlining. When the role, size, and
structure of the federal agencies are being reexamined, it
is important to take into account the additional information
security and privacy risks incurred in downsizing and the
general lack of commitment on the part of top agency
management to safeguarding unclassified information.

A major problem in the agencies has been lack of top
management focus on, not to mention responsibility and
accountability for, information security. As the 1994 OTA
report noted:

The single most important step toward implementing proper
information safeguards for networked information in a
federal agency or other organization is for top management
to define the organization's overall objectives and a
security policy to reflect those objectives. Only top
management can consolidate the consensus and apply the
resources necessary to effectively protect networked
information. For the federal government, this means guidance
from OMB, commitment from top agency management, and
oversight by Congress. (p. 7)

All too often, agency managers have regarded information
security as "expensive overhead" that could be skimped on,
deferred, or foregone in favor of other expenditures (e.g.,
for new computer hardware and applications). Any lack of
priority and resources for safeguarding information is
increasingly problematic as we move toward increased
secondary use of data, data sharing across agencies, and
decentralization of information processing and databases. If
this mindset were permitted to continue during agency
downsizing and program consolidation, the potential--and
realized--harms from "disasters waiting to happen" can be
much greater. (See pages 1-8, 25-31, and 40-43 of the 1994
OTA report.) For example, without proper attention to
information security, staffing changes during agency
restructuring and downsizing can increase security risks
(due to unstaffed or understaffed security functions,
reductions in security training and implementation, large
numbers of disgruntled former employees, etc.).

OTA's ongoing work has spotlighted important elements of
good information-security practice in the private sector,
including active risk acceptance by line management. The
concept of management responsibility and accountability as
integral components of information security, rather than
just "handing off" security to technology, is very
important.

Sound security policies as a foundation for practice are
essential; these should be technology neutral. Technology-
neutral policies specify what must be done, not how to do
it. Because they do not prescribe implementations,
technology-neutral policies are longer lived. They are not
so easily obsoleted by changes in technology or business
practices; they allow for local customization of
implementations to meet operational requirements. Once these
are in place, security implementation should be audited
against policy, not against implementation guidelines. This
helps prevent confusing implementation techniques and tools
(e.g., use of a particular type of encryption or use of an
computer operating system with a certain rating) with policy
objectives, and discourages "passive risk acceptance" like
mandating use of a particular technology. This also allows
for flexibility and customization.

In the federal arena, however, more visible energy seems to
have been focused on debates over implementation tools--that
is, federal information processing standards like the Data
Encryption Standard, Digital Signature Standard, and
Escrowed Encryption Standard--than on formulating enduring,
technology-neutral policy guidance for the agencies.

Direction of Revised OMB Guidance

In the 1994 report, OTA identified the need for the revised
version of the security appendix (Appendix III) of OMB
Circular A-130 to adequately address problems of managerial
responsibility and accountability, insufficient resources
devoted to information security, and overemphasis on
technology, as opposed to management. In particular, OTA
noted the importance of making agency line management (not
just "information security officers") accountable for
information security and ensuring that privacy and other
policy objectives are met. Moreover, OTA noted that the
proposed new OMB guidance would have to provide sufficient
incentives--especially in times of budget cuts--to ensure
that agencies devote adequate resources to safeguarding
information. Similarly, the OMB guidance would have to
ensure that information safeguards are treated as an
integral component when systems are designed or modified.
The proposed revision to Appendix III of OMB Circular A-130,
as discussed above, shows promise for meeting these
objectives. OMB's proposed guidance is intended to
incorporate critical elements of the following: considering
security as integral (rather than an add-on) to planning and
operations, active risk acceptance, line management
responsibility and accountability, and focus on management
and people rather than technology. Taken as a whole, these
elements are intended to provide sufficient incentives for
agency managements to devote adequate resources to security;
the review and reporting requirements offer disincentives
for inadequate security. Moreover, if implemented properly,
the new OMB approach can make significant progress in the
ultimate goal of tracking and securing the information
itself, as it is gathered, stored, processed, and shared
among users and applications.

However, OMB's twofold approach is somewhat abstract and a
significant departure from earlier, "computer security"
guidance. Therefore, congressional review and oversight of
OMB's proposed revisions to Appendix III, as suggested in
the 1994 OTA report (see box 1-7), would be helpful in
ensuring that Congress, as well as federal agencies and the
public, understand the new information-security guidance and
how OMB intends for its new approach to be implemented.

This congressional review and oversight might also provide
additional guidance on how NIST's security activities might
best be refocused to meet federal information-security
objectives. For example, in addition to Commerce's (i.e.,
NIST's) traditional responsibilities for security standards
and training and awareness, the new Appendix III assigns
Commerce responsibilities for providing agencies with
guidance and assistance concerning effective controls when
systems are interconnected, coordinating incident response
activities to promote information-sharing regarding
incidents and related vulnerabilities, and (with Defense
Department technical assistance) evaluating new information
technologies to assess their security vulnerabilities and
apprising agencies of these in a timely fashion. (see
footnote 116)

Locus of Authority

Another reason for the importance and timeliness of
congressional oversight of governmentwide information-
security policy guidance is that there is renewed momentum
for extending the defense/intelligence community's
centralization of information-security responsibilities
throughout the civil agencies as well. If initiatives such
as the Information Systems Security Committee structure
presented in the Security Policy Board staff report come to
fruition, information-security responsibilities for both the
civilian agencies and the defense/intelligence agencies
would be merged.

An overarching issue that must be resolved by Congress is
where federal authority for safeguarding unclassified
information in the civilian agencies should reside and,
therefore, what needs to be done concerning the substance
and implementation of the Computer Security Act of 1987. If
Congress retains the general premise of the act--that
responsibility for unclassified information security in the
civilian agencies should not be placed within the
defense/intelligence community--then vigilant oversight and
clear direction will be needed to ensure effective
implementation, including assigning and funding a credible
focal point(s) for unclassified information security (see
discussion of OMB Appendix III above and also pp. 19-20 of
the 1994 OTA report).

Without doubt, leadership and expertise are needed for
better, more consistent safeguarding of unclassified
information government-wide. But it is not clear that there
are no workable alternatives to centralizing government-wide
information-security responsibilities under the
defense/intelligence community. Proposals to do so note
current information-security deficiencies; however, many of
these can be attributed to lack of commitment to and funding
for establishment of an alternative source of expertise and
technical guidance for the civilian agencies. For example,
the "efficiency" arguments (see below) made in the Joint
Security Commission report and the Security Policy Board
staff report for extending the responsibilities of the
defense/intelligence community to encompass government-wide
security for classified and unclassified information
capitalize on the vacuum in leadership and expertise created
by chronic underfunding of the designated civilian agency--
at present, NIST. (See pp. 13-16, 20, 138-150, and 182-183
of the OTA report.)

Proposals for centralizing security responsibilities for
both classified and unclassified information government-wide
offer efficiency arguments to the effect that:

1.	security policies, practices, and procedures (as well
as technologies) for unclassified information are for the
most part spin-offs from the classified domain;

2.	the defense and intelligence agencies are expert in
classified information security; and therefore

3.	the unclassified domain can best be served by extending
the authority of the defense/intelligence agencies.

The validity of the "spin-off" assumption about unclassified
information security is questionable. There are real
questions about NSA's ability to place the right emphasis on
cost-effectiveness, as opposed to absolute effectiveness, in
flexibly determining the most appropriate means for
safeguarding unclassified information. Due to its primary
mission in securing classified information, NSA's
traditional culture tends toward a standard of absolute
effectiveness, not trading off cost and effectiveness. By
contrast, the Computer Security Act of 1987, the Paperwork
Reduction Act of 1995, and the new, proposed revision of OMB
Appendix III all require agencies to identify and employ
cost-effective safeguards, for example:

With respect to privacy and security, the Director [of OMB]
shall ... require Federal agencies, consistent with the
Computer Security Act of 1987 (940 U.S.C. 759 note) security
protections commensurate with the risk and magnitude of the
harm resulting from the loss, misuse, or unauthorized access
to or modification of information collected or maintained by
or on behalf of an agency. (see footnote 117)

Moreover, the current state of government security practice
for unclassified information has been depressed by the
chronic shortage of resources for NIST's computer security
activities in fulfillment of its government-wide
responsibilities under the Computer Security Act of 1987.
Since enactment of the Computer Security Act, there has been
no serious (i.e., adequately funded and properly staffed),
sustained effort to establish a center of information-
security expertise and leadership outside the
defense/intelligence communities.

Even if the efficiency argument is attractive, Congress
would still need to consider whether the gains would be
sufficient to overcome the concomitant decrease in
"openness" in information-security policymaking and
implementation, and/or whether the outcomes would fall at an
acceptable point along the "efficiency-openness" possibility
frontier. In the area of export controls on cryptography,
for example, there is substantial public concern with the
current tradeoff between the needs of the
defense/intelligence and the business/user communities. With
respect to information-security standards and guidelines,
there has been continuing concern with the lack of openness
and accountability in policies formulated and implemented
under executive order, rather than through the legislative
process. It would be difficult to formulate a scenario in
which increasing the defense/intelligence community's
authority government-wide would result in more openness or
assuage public concerns. (In the 1980s, concerns over NSDD-
145's placement of governmental authority for unclassified
information security within the defense/intelligence
community led to enactment of the Computer Security Act of
1987.)

Oversight of the implementation of the Computer Security Act
is also important to cryptography policy considerations. The
cryptography-related FIPS still influence the overall market
and the development of recent FIPS (e.g., the DSS and EES)
demonstrates a mismatch between the intent of the act and
its implementation by NIST and NSA (see pp. 160-183 of the
1994 OTA report). The attributes of these standards do not
meet most users' needs, and their deployment would benefit
from congressional oversight, both in the strategic context
of a policy review and as tactical response to the Clinton
Administration's escrowed-encryption initiative (see pp. 16-
20 of the OTA report).

If the Computer Security Act is revisited, Congress might
wish to redirect NIST's activities away from "picking
technologies" for standards (i.e., away from developing
product-oriented FIPS like the EES) and toward providing
federal agencies with guidance on:

o  the availability of suitable commercial technologies,

o  interoperability and application portability, and

o  how to make best use of existing hardware and software
technology investments.

Also, targeting NIST's information-security activities
toward support of OMB's proposed guidance (with its focus on
end users and individual workstations) might enable NIST to
be more effective despite scarce resources.

*
CHAPTER 1 FOOTNOTES
*

1 See, e.g., Randy Barrett, "Hauling in the Network--Behind
the World's Digital Cash Curve," Washington Technology, Oct.
27, 1994, p. 18; Neil Munro, "Branch Banks Go Way of the
Drive-In," Washington Technology, Feb. 23, 1995, pp. 1,48;
Amy Cortese et al., "Cashing In on Cyberspace: A Rush of
Software Development To Create an Electronic Marketplace,"
Business Week, Feb. 27, 1995, pp. 78-86; Bob Metcalfe,
"Internet Digital Cash--Don't Leave Your Home Page Without
It," InfoWorld, Mar. 13, 1995, p. 55; "Netscape Signs Up 19
Users for Its System of Internet Security," The Wall Street
Journal, Mar. 20, 1995, p. B3; Saul Hansell, "VISA Will Put
a Microchip in New Cards--Product Is Designed for Small
Purchases," The New York Times, Mar. 21, 1995, p. D3; Jorgen
Wouters, "Brother, Can You Spare a Virtual Dime?" Washington
Technology, Mar. 23, 1995, pp. 1, 44.

2 See, e.g., Neil Munro, "Feds May Get New Infotech
Executive," Washington Technology, Feb. 23, 1995, pp. 1, 49;
Charles A. Bowsher, Comptroller General of the United
States, "Government Reform: Using Reengineering and
Technology To Improve Government Performance," GAO/T-OCG-95-
2, testimony before the Committee on Governmental Affairs,
U.S. Senate, Feb. 2, 1995; and Elena Varon, "Reinventing Is
Old Hat for New Chairman," Federal Computer Week, Feb. 20,
1995, pp. 22, 27.

3 See John Markoff, "Flaw Discovered in Federal Plan for
Wiretapping," The New York Times, June 2, 1994, pp. 1, D17;
Peter H. Lewis, "Hackers on Internet Posing Security Risks,
Experts Say," The New York Times, July 21, 1994, pp. 1, B10;
John Markoff, "A Most-Wanted Cyberthief Is Caught in His Own
Web," The New York Times, Feb. 16, 1995, pp. 1, D17; and
John Schwartz, "Privacy Program: An On-Line Weapon?" The
Washington Post, Apr. 3, 1995, pp. A1, A13. See also Jared
Sandberg, "Newest Security Glitch on the Internet Could
Affect Many `Host' Computers," The Wall Street Journal, Feb.
23, 1995, p. B8; Jared Sandberg, "Immorality Play:
Acclaiming Hackers as Heroes," The Wall Street Journal, Feb.
27, 1995, p. B1, B8; and Amy Cortese et al., "Warding Off
the Cyberspace Invaders," Business Week, Mar. 13, 1995, pp.
92-93.

4 See U.S. Congress, Office of Technology Assessment, Making
Government Work: Electronic Delivery of Government Services,
OTA-TCT-578 (Washington, DC: U.S. Government Printing
Office, September 1993); Electronic Enterprises: Looking to
the Future, OTA-TCT-600 578 (Washington, DC: U.S. Government
Printing Office, May 1994); and Wireless Technologies and
the National Information Infrastructure (forthcoming, 1995).
See also U.S. General Accounting Office, Information
Superhighway: An Overview of Technology Challenges,
GAO/AIMD-95-23 (Washington, DC: U.S. General Accounting
Office, January 1995).

5 U.S. Congress, Office of Technology Assessment,
Information Security and Privacy in Network Environments,
OTA-TCT-606 (Washington, DC: U.S. Government Printing
Office, September 1994). Available from OTA Online via
anonymous file transfer protocol (ftp://otabbs.
ota.gov/pub/information.security/) or World Wide Web
(http://www.ota.gov).

6 The trend is toward decentralized, distributed computing,
rather than centralized, mainframe computing. Distributed
computing is relatively informal and "bottom up," compared
with mainframe computing, and systems administration may be
less rigorous. See OTA, op. cit., footnote 5, pp. 3-5, 25-
32.

7 See ibid., chapter 3. "Security" technologies like
encryption can be used to help protect privacy and the
confidentiality of proprietary information; some, like
digital signatures, could be used to facilitate copyright-
management systems.

8 See, e.g., David Kahn, The Codebreakers (New York, NY:
MacMillan, 1967).

9 Figures 2-1 and 2-2 on pages 50 and 51 illustrate two
common forms of encryption: secret-key (or symmetric)
encryption and public-key (or asymmetric) encryption. Note
that key management--the generation of encryption and
decryption keys, as well as their storage, distribution,
cataloging, and eventual destruction--is crucial for the
overall security of any encryption system.
10 OTA, op. cit., footnote 5, pp. 69-77. See Peter H. Lewis,
"Accord Is Reached on a Common Security System for the
Internet," The New York Times, Apr. 11, 1995, p. D5.

11 OTA, ibid., pp. 96-110. For example, digital signatures
can be used to create compact "copyright tokens" for use in
registries; encryption could be used to create personalized
"copyright envelopes" for direct electronic delivery of
material to customers. See also Working Group on
Intellectual Property Rights, IITF, "Intellectual Property
and the National Information Infrastructure (Green Paper),"
July 1994, pp. 139-140.

12 OTA, ibid., pp. 11-13, 150-160.

13 Ibid., pp. 115-123, 128-132, 154-160.

14 Ibid., pp. 8-18 and chapter 4.

15 The EES is implemented in hardware containing the Clipper
chip. The EES (FIPS-185) specifies use of a classified,
symmetric encryption algorithm, called Skipjack, which was
developed by the National Security Agency. The Capstone chip
implements the Skipjack algorithm for use in computer
network applications. The Defense Department's FORTEZZA card
(a PCMCIA card formerly called TESSERA) contains the
Capstone chip.

16 For more detail, see OTA, op. cit., footnote 5, chapters
1 and 4 and appendix C. Other means of control have
historically included national security classification and
patent-secrecy orders (see ibid., p. 128 and footnote 33).

17 There is also growing organizational recognition of
potentials for misuse of encryption, such as by disgruntled
employees as a means to sabotage an employer's databases.
Thus, some "commercial key-escrow" or "data recovery"
facilities are being developed in the private sector (see
discussion below and in ch. 4).

18 Louis J. Freeh, Director, Federal Bureau of
Investigation, testimony before the U.S. Senate, Committee
on the Judiciary, Feb. 14, 1995,p. 27.

19 OTA, op. cit., footnote 5, pp. 8-20 and chapter 4.

20 U.S. Security Policy Board Staff, "Creating a New Order
in U.S. Security Policy," Nov. 21, 1994, pp. II-III, 14-18.

21 See box 2-3 in chapter 2 of this background paper and
OTA, op. cit., footnote 5, chapter 4.

22 See box 2-2 in chapter 2 of this background paper and
OTA, ibid., appendix C.

23 See OTA, op. cit., footnote 5, chapter 4.

24 See Federal Register, vol. 59, Feb. 9, 1994, pp. 5997-
6005 ("Approval of Federal Information Processing Standards
Publication 185, Escrowed Encryption Standard (EES)"),
especially p. 5998. Note however, that the DES is approved
for encryption of unclassified data communications and
files, while the EES is only a standard for telephone
communications at this time.

25 Federal Register, op. cit., footnote 22, p. 6003.

26 Federal Register, ibid., pp. 5997-6005.

27 See appendix C of OTA, op. cit., footnote 5, for a
history of the DSS.

28 According to F. Lynn McNulty, NIST Associate Director for
Computer Security, the rationale for adopting the technique
used in DSS was that, "We wanted a technology that did
signatures--and nothing else--very well." (Response to a
question from Chairman Rick Boucher in testimony before the
Subcommittee on Science of the House Committee on Science,
Space, and Technology, Mar. 22, 1994.)

29 Public-key encryption can be used for confidentiality
and, thereby, for secure key exchange. Thus, public-key
encryption can facilitate the use of symmetric encryption
methods like the DES or triple DES. See figure 2-3.

30 See, e.g., Tom Leighton, Department of Mathematics,
Massachusetts Institute of Technology and Silvio Micali, MIT
Laboratory for Computer Science, "Secret-Key Agreement
Without Public-Key Cryptography (Extended Abstract),"
obtained from S. Micali, 1993.

31 OTA, op. cit., footnote 5 and chapter 4 and appendix B.
NIST's FY 1995 computer-security budget was on the order of
$6.5 million, with $4.5 million of this coming from
appropriated funds for "core" activities and the remainder
from "reimbursable" funds from other agencies, mainly the
Defense Department.

32 The Warner Amendment (Public Law 97-86) excluded certain
types of military and intelligence "automatic data
processing equipment" procurements from the requirements of
section 111 of the Federal Property and Administrative
Services Act of 1949 (40 U.S.C. 795). Public Law 100-235
pertains to federal computer systems that come under section
111 of the Federal Property and Administrative Services Act
of 1949.

33 OTA, op. cit., footnote 5, pp. 128-132. A large, stable,
lucrative federal market could divert vendors from producing
alternative, riskier products; product availability could
draw private sector customers.

34 For more detail, see ibid. and chapters 1 and 4.

35 Ibid., pp. 150-154.

36 To ease some of these burdens, the State Department
announced new licensing procedures on Feb. 4, 1994. These
changes were expected to include to include license reform
measures for expedited distribution (to reduce the need to
obtain individual licenses for each end user), rapid review
of export license applications, personal-use exemptions for
U.S. citizens temporarily taking encryption products abroad
for their own use, and special licensing arrangements
allowing export of key-escrow encryption products (e.g., EES
products) to most end users. At this writing, expedited-
distribution reforms were in place (Federal Register, Sept.
2, 1994, pp. 45621-45623), but personal-use exemptions were
still under contention (Karen Hopkinson, Office of Defense
Trade Controls, personal communication, Mar. 8, 1995).

37 See, e.g., U.S. Congress, House of Representatives,
Subcommittee on Economic and Commercial Law, Committee on
the Judiciary, The Threat of Foreign Economic Espionage to
U.S. Corporations, hearings, 102d Congress, 2d sess., Apr.
29 and May 7, 1992, Serial No. 65 (Washington, DC: U.S.
Government Printing Office, 1992). See also discussion of
business needs and export controls in chapter 3 of this
background paper.

38 OTA, op. cit., footnote 5, pp. 154-160. Some other
countries do have stringent export and/or import
restrictions.

39 For example, the Software Publishers Association has
studied the worldwide availability of encryption products
and, as of October 1994, found 170 software products (72
foreign, 98 U.S.-made) and 237 hardware products (85
foreign, 152 U.S.-made) implementing the DES algorithm for
encryption. (Trusted Information Systems, Inc. and Software
Publishers Association, Encryption Products Database
Statistics, October 1994.) Also see OTA, op. cit., footnote
5, pp. 156-160.

40 For a discussion of export controls and network
dissemination of encryption technology, see Simson
Garfinkle, PGP: Pretty Good Privacy (Sebastopol, CA;
O'Reilly and Assoc., 1995). PGP is an encryption program
developed by Phil Zimmerman. Variants of the PGP software
(some of which are said to infringe the RSA patent in the
United States) have spread worldwide over the Internet.
Zimmerman has been under grand jury investigation since 1993
for allegedly breaking the munitions export-control laws by
permitting the software to be placed on an Internet-
accessible bulletin board in the United States in 1991. (See
Vic Sussman, "Lost in Kafka Territory," U.S. News and World
Report, Apr. 3, 1995, pp. 30-31.)

41 Department of State, Bureau of Political-Military
Affairs, 22 CFR parts 123 and 124, Federal Register, vol.
59, No. 170, Sept. 2, 1994, pp. 45621-45623. See note 36
above and also ch. 4 of the 1994 OTA report. The reform
established a new licensing procedure to permit U.S.
encryption manufacturers to make multiple shipments of some
encryption items directly to end users in approved
countries, without obtaining individual licenses (see
appendix C).

42 Martha Harris, Deputy Assistant Secretary for Political-
Military Affairs, U.S. Department of State, "Encryption--
Export Control Reform," statement, Feb. 4, 1994. See OTA,
op. cit., footnote 5, pp. 159-160.

43 A study of this type (see below) is expected to be
completed in mid-1995.

44 Vice President Al Gore, letter to Representative Maria
Cantwell, July 20, 1994. See OTA, op. cit., footnote 5, pp.
11-13.

45 Maurice Cook, Bureau of Export Administration, Department
of Commerce, personal communication, Mar. 7, 1995.

46 Bill Clements, National Security Council, personal
communication, Mar. 21, 1995.

47 For information about the NRC study, which was mandated
by Public Law 103-160, contact Herb Lin, National Research
Council, 2101 Constitution Avenue, NW, Washington, DC 20418
(crypto@nas.edu). See discussion in OTA, op. cit., footnote
5, chapters 1 and 4.

48 See ibid., pp. 11-13, 150-160, 174-179.

49 For background, see appendix D of this background paper
and OTA, op. cit., footnote 5, pp. 15-16, 171-174. The
Escrowed Encryption Standard is described in box 2-3 of this
paper.

50 See box 2-3. The Capstone chip refers to a hardware
implementation of the EES's Skipjack algorithm, but for data
communications. FORTEZZA (formerly TESSERA) is a PCMCIA card
implementing Skipjack for data encryption, as well as the
Digital Signature Standard (see box 2-2) and key-exchange
functions.

51 These chips implement the Skipjack algorithm for the EES
and FORTEZZA applications, respectively.

52 See OTA, op. cit., footnote 5, p. 171.

53 See OTA, op. cit., footnote 1, appendix C, especially pp.
220-221. For a more recent account of the various lawsuits
and countersuits among patent holders, licensers, and
licensees, see Simson Garfinkle, PGP: Pretty Good Privacy
(Sebastopol, CA: O'Reilly and Assoc., 1995), esp. ch. 6.

54 F. Lynn McNulty et al., NIST, "Digital Signature Standard
Update," Oct. 11, 1994. The government offered to include an
"authorization and consent" clause under which the
government would assume liability for any patent
infringement resulting from performance of a contract,
including use of the DSS algorithm or public-key
certificates by private parties when communicating with the
government. See also OTA, op. cit., footnote 5, chapter 3.

55 PCMCIA cards are slightly larger than a credit card, with
a connector on one end that plugs directly into a standard
slot in a computer (or reader). They contain microprocessor
chips; for example, the FORTEZZA card contains a Capstone
chip.

56 Bob Drake, Legislative Affairs Office, NSA, personal
communication, Apr. 7, 1995. To make the apparent price of
FORTEZZA cards more attractive to Defense Department
customers in the short term, NSA is splitting the cost of
the Capstone chip with them, so agencies can acquire the
early versions of FORTEZZA for $98 apiece (ibid.).

57 Kevin Power, "Fate of Federal DSS in Doubt," Government
Computer News, Mar. 6, 1995. The President's budget does
provide $100 million to implement the digital wiretap
legislation enacted at the close of the 103d Congress. See
U.S. Congress, Office of Technology Assessment, Electronic
Surveillance in Advanced Telecommunications Networks--
Background Paper, forthcoming, spring 1995.

58 "Memorandum of Agreement Between the Advanced Research
Projects Agency, the Defense Information Systems Agency, and
the National Security Agency Concerning the Information
Systems Security Research Joint Technology Office," Mar. 3,
1995 (effective Apr. 2, 1995).

59 This section highlights selected government and
commercial cryptography developments since publication of
the 1994 OTA report. This is not a coomprehensive survey of
commercial information-security products and proposals.
Mention of individual companies or products is for
illustrative purposes and/or identification only, and should
not be interpreted as endorsement of these products or
approaches.

60 In "triple DES," the DES algorithm is used sequentially
with three different keys, to encrypt, decrypt, then re-
encrypt. Triple encryption with the DES offers more security
than having a secret key that is twice as long as the 56-bit
key specified in the FIPS. There is, however, no FIPS
specifying triple DES.

61 Jared Sandberg and Don Clark, "AT&T, VLSI Technology To
Develop Microchips That Offer Data Security," The Wall
Street Journal, Jan. 31, 1995; see also Brad Bass, op. cit.,
footnote 19.

62 CIPHER (Newsletter of the IEEE Computer Society's TC on
Security and Privacy), Electronic Issue No. 4, Carl Landwehr
(ed.), Mar. 10, 1995, available from
(http://www.itd.nrl.navy.mil/ITD/5540/ieee/cipher/cipher-
archive.html).

63 Ronald L. Rivest, "The RC5 Encryption Algorithm," Dr.
Dobb's Journal, January 1995, pp. 146, 148.

64 Peter H. Lewis, "Accord Is Reached on a Common Security
System for the Internet," The New York Times, Apr. 11, 1995,
p. D5. The proposed standard will be used to safeguard World
Wide Web services.

65 Ibid. Draft sections are available via anonymous ftp to
rsa.com in the "pub/p1363" directory. The working group's
electronic mailing list is <p1363@rsa.com>; to join, send e-
mail to <p1363-request@rsa.com>.

66 See Dorothy E. Denning and Dennis Branstad, "A Taxonomy
for Key Escrow Encryption," forthcoming, obtained from the
author (denning@cs.georgetown.edu); and Elizabeth Corcoran,
"Three Ways To Catch a Code," Washington Post, Mar. 16,
1995, pp. B1, B12. The Corcoran article also discusses the
Hewlett-Packard Co.'s proposed "national flag card" approach
to government-approved encryption.

67 See Computer Systems Policy Project, Perspectives on the
Global Information Infrastructure, (Washington, DC: February
1995).

68 Susan Landau et al., Codes, Keys, and Conflicts: Issues
in U.S. Crypto Policy (New York, NY: Association for
Computing Machinery, Inc., June 1994).

69 U.S. Public Policy Committee of the ACM, "USACM Position
on the Escrowed Encryption Standard," June 1994.

70 International Chamber of Commerce, "ICC Position Paper on
International Encryption Policy," Paris, 1994, pp. 2,3. See
also United States Council for International Business,
Private Sector Leadership: Policy Foundations for a National
Information Infrastructure (NII), July 1994, p 5.

71 Ibid., pp. 3-4. See also chapter 4 of the 1994 OTA
report.

72 United States Council for International Business,
"Business Requirements for Encryption," Oct. 10, 1994.

73 United States Council for International Business,
"Liability Issues and the U.S. Administration's Encryption
Initiatives," Nov. 2, 1994.

74 USCIB, op. cit., footnote 72, pp. 3-4.

75 USCIB, op. cit., footnote 73, pp. 2-6.

76 See ibid. for discussion of liability exposure, legal
considerations, tort and contract remedies, government
consent to be liable, and recommendations and approaches to
mitigate liability.

77 Information on American Bar Association and United
Nations activities provided by Michael Baum, Principal,
Independent Monitoring, personal communication, Mar. 19,
1995. See also Michael S. Baum, Federal Certification
Authority Liability and Policy: Law and Policy of
Certificate-Based Public Key and Digital Signatures, NIST-
GCR-94-654, NTIS Doc. No. PB94-191-202 (Springfield, VA:
National Technical Information Service, 1994).

78 Representative Scott McInnis, Congressional Record, Apr.
4, 1995, p. H4126.

79 Representative Cardiss Collins, Congressional Record,
Apr. 4, 1995, p. H4126.

80 Office of Management and Budget, "National Information
Infrastructure: Draft Principles for Providing and Using
Personal Information and Commentary," Federal Register, vol.
60, No. 13, Jan. 20, 1995, pp. 4362-4370. These were
developed by the Privacy Working Group of the Information
Policy Committee, Information Infrastructure Task Force
(IITF). See also Office of Management and Budget, "Draft
Security Tenets for the National Information
Infrastructure," Federal Register, vol. 60, No. 28, Feb. 10,
1995, p. 8100. These were developed by the Security Issues
Forum of the IITF.

81 See, e.g., "Report of the Defense Science Board Summer
Study Task Force on Information Architecture for the
Battlefield," Office of the Under Secretary of Defense for
Acquisition and Technology, October 1994.

82 Ibid., p. 52.

83 Joint Security Commission, "Redefining Security: A Report
to the Secretary of Defense and Director of Central
Intelligence," Feb. 28, 1994 (quote from letter of
transmittal). See also U.S. Congress, House of
Representatives, Permanent Select Committee on Intelligence,
"Intelligence Authorization Act for Fiscal Year 1994," Rept.
103-162, Part I, 103d Congress, 1st session, June 29, 1993,
pp. 26-27.

84 Joint Security Commission, ibid., pp. 101-113.

85 Ibid., pp. 127 et seq.

86 Ibid., p. 105, first paragraph.; p. 110, recommendation;
pp. 127-130.

87 Ibid., p. viii, top.

88 Ibid., p. 130.

89 Although it is unclassified, PDD-29 has not been
released. This discussion is based on a fact sheet provided
to OTA by NSC; the fact sheet is said to be a "nearly
verbatim text of the PDD," with the only differences being
"minor grammatical ones." David S. Van Tassel (Director,
Access Management, NSC), letter to Joan Winston (OTA), and
enclosure, Feb. 16, 1995.
90 Ibid. (fact sheet).

91 Ibid.

92 U.S. Security Policy Board Staff, "Creating a New Order
in U.S. Security Policy," Nov. 21, 1994. p. 18.

93 Ibid., p. 3. See Elizabeth Sikorovsky, "NSC Proposes To
Shift Policy-Making Duties," Federal Computer Week, Jan. 23,
1995, pp. 1, 45. See also Kevin Power, "Administration
Floats New Information Security Policy," Government Computer
News, Jan. 23, 1995, p. 59.

94 U.S. Security Policy Board Staff , op. cit., footnote 92,
pp. II-III, p. 15.

95 Ibid., pp. 17-18. See appendix B of this paper and OTA,
op. cit., footnote 5, pp. 132-148 for discussion of NSDD-
145, the intent of the Computer Security Act of 1987, and
NSTISSC.

96 See Neil Munro, "White House Security Panels Raise
Hackles," Washington Technology, Feb. 23, 1995, pp. 6, 8.

97 OMB Circular A-130--Revised, June 25, 1993, Transmittal
Memorandum No. 1, sec. 7.

98 The Federal Computer Security Program Manager's Forum is
made up of senior computer security managers for civilian
agencies, including the Departments of Commerce, Health and
Human Services, Justice, and Transportation. The January 11,
1995, letter to Sally Katzen. Director of the Office of
Information and Regulatory Affairs, Office of Management and
Budget, was signed by Lynn McNulty, Forum Chair (National
Institute of Standards and Technology) and Sadie Pitcher,
Forum Co-chair (Department of Commerce). Text of letter
taken from the online EPIC Alert, vol. 2.05, Mar. 27, 1995.

99 Ibid.

100 Peter D. Saderholm (Director, Security Policy Board
Staff), memorandum for Joan D. Winston and Miles Ewing
(OTA), SPB 095-95, May 4, 1995.

101 Senator William V. Roth, Jr., Congressional Record, Mar.
6, 1995, p. S3512.

102 U.S. Congress, House of Representatives, "Paperwork
Reduction Act of 1995--Conference Report to Accompany
S.244," H. Rpt. 104-99, Apr. 3, 1995. As the "Joint
Explanatory Statement of the Committee of the Conference"
(ibid., pp. 27-39) notes, the 1995 act retains the
legislative history of the Paperwork Reduction Act of 1980.
Furthermore, the definition of  "information technology" in
the 1995 act is intended to preserve the exemption for
military and intelligence information technology that is
found in current statutory definitions of "automatic data
processing." The 1995 act accomplishes this by referring to
the so-called Warner Amendment exemptions to the Brooks Act
of 1965 and, thus, to section 111 of the Federal Property
and Administrative Services Act (ibid., pp. 28-29). See also
discussion of the Warner Amendment exemptions from the FIPS
and the Computer Security Act in appendix B of this
background paper.

103 Ibid., sec. 3501(8). The act amends chapter 35 of title
44 U.S.C.

104 Ibid., sec. 3504(g). The OMB Director delegates
authority to administer these functions to the Administrator
of OMB's Office of Information and Regulatory Affairs.

105 Ibid., section 3504(h)(1). See also "Joint Explanatory
Statement of the Committee of the Conference," ibid., pp.
27-29.

106 Ibid., section 3506(g).

107 Office of Management and Budget, "Security of Federal
Automated Information," Proposed Revision of OMB Circular
No. A-130 Appendix III (transmittal memorandum), available
via World Wide Web at http://csrc.ncsl.nist.gov/secplcy as
<a130app3.txt>.

108 Ed Springer, OMB, personal communication, Mar. 23, 1995.

109 Office of Management and Budget, op. cit., footnote 107.

110 Ibid., p. 4.

111 Ibid., p. 15.

112 Ibid., pp. 3-4.

113 Ibid., pp. 14-16.

114 Ibid., pp. 2-6.

115 See appendix C of this background paper, especially
footnote 10 and accompanying text.

116 OMB, op. cit., footnote 82, p. 7.

117 "Paperwork Reduction Act of 1995" (S. 244), section
3504(g)(3), Mar. 7, 1995, Federal Record, p. S3557.