BSA Letter to Interagency Working Group on Encryption



November 8, 1996

Mr. Bruce McConnell
Information Policy & Technology
Office of Management & Budget
New Executive Office Building - Room 10236
17th & Pennsylvania Avenue, NW
Washington, DC 20504

Mr. Ed Appel
National Security Council
Old Executive Office Building - Room 300
17th & Pennsylvania Avenue, NW
Washington, DC 20504

Dear Bruce and Ed:

On behalf of America's leading publishers of software I wanted to thank you again for the Administration's recent decision to liberalize export controls for commercial encryption products. As BSA said at the time, it is clearly a step in the right direction. However, as we have also explained on numerous occasions since the announcement, there were some notable omissions as well as a great number of unanswered questions. Therefore, we sincerely appreciate your willingness to work with us on an expedited basis to hopefully resolve remaining issues and to make further progress. .

Based on our recent discussions and meetings with Administration officials, we believe there are four major outstanding areas that need immediate clarification. This letter is intended to provide the Administration with BSA's reactions to what we have heard to date as well as our concrete recommendations for moving forward in these areas.

1. Interim Export Control Relief.

BSA's members have said for some time now that the ability to immediately export 56-bit encryption products is critical to maintaining the international competitiveness of the software industry and to providing computer users worldwide with acceptable information security. This also was the major recommendation of the National Research Council Study. Such exports also were clearly permitted under legislation pending before Congress.

Therefore, we welcome your decision to permit the export under Department of Commerce General License beginning January 1, 1997 of products using 56-bit encryption keys. We believe that many American software companies will be ready to ship such products on January 1st. We trust that any necessary government action will be completed by then.

Our specific concerns and suggestions follow:

Licensing Procedures and Rewrite of Regulations: We expect that: We appreciate the time constraints under which the Administration is laboring; however, we also believe it is essential to get the regulations done right. Therefore we strongly urge you to involve industry associations in the drafting of the new rules. Industry involvement is essential if the Administration is to make good on the promise of achieving liberalized export controls through transfer of jurisdiction over encryption software from State to Commerce. Otherwise the new regime may be more restrictive than the current dual agency regime.

Periodic Upward Adjustments in Key Lengths. We were disappointed that the Administration did not also institute automatic, periodic adjustments in key lengths that simply would maintain the same level of information protection in the future. Such adjustments are necessary because predictable advances in computing power will make attacks on encrypted information cheaper and easier. This was the rationale behind BSA's earlier recommendation of a "cost of cracking adjustment." The NRC CRISIS Report also called for periodic adjustments. We note again that such adjustments would not further disadvantage the government in performing any required brute force attacks because it is precisely these attacks that benefit from the advances in computing power!

Financial Applications. While the announcement confirms that longer key lengths will continue to be approved for products dedicated to the support of financial applications, no specific decision was made to permit the export of such products with 128-bit encryption keys (under General License GTDU (TSU)). Immediate action in this area is critical as the worldwide financial sector currently demands this level of information security, foreign competitors already are providing it, and safeguards are available to ensure that such products are not used as general confidentiality products. (Industry is familiar and comfortable with the binding standards currently used by NSA - essentially a "work factor" test in which it would take more effort to reconfigure the program than to do a separate one.) It is essential to remember that if the U.S. Government does not provide immediate export control relief in this area that foreign software companies are now, and will become even more aggressive in, supplying such products - but without the safeguards - thereby defeating our government's efforts to limit such encryption worldwide. For example, a German product explicitly advertises on the Internet its ability to provide "highly secure 128 bit transaction encryption despite U.S. export restrictions."

Personal Use Exemption. We also believe further progress needs to be made in the areas of the so-called "personal use exemption" and non-confidentiality uses of encryption. Specifically, reporting requirements should be eliminated or significantly simplified to ease administrative burdens. Moreover, the exemption should be extended to foreign nationals (except those from embargoed countries) employed by U.S. or Canadian companies or subsidiaries/affiliates of U.S. companies.

2. Definition of Key Recovery.

Importantly, the Administration's announcement conditions the export of 56-bit encryption products upon "industry commitments to build and to market future products that support key recovery." Such products would have no algorithm restrictions or key length limits.

To be successful, any key recovery initiative must be voluntary and market-driven. Users must see the value of key recovery features and want to use them. American companies cannot sell what users will not buy. In this regard, BSA's members have said for some time that they believe there may well be commercial demand for products that enable the recovery of stored data and that could be saleable worldwide.

We think it also is in the government's interest to see the deployment of such key recovery products for stored data. We believe the government should focus on what is "doable" in the near term. See what works; get real world experience.

What Key Recovery Means. As we have repeatedly explained, we believe a "key recovery" encryption confidentiality product should be exportable if it includes features making the recovery of "plain text" stored information accessible without the assistance of the individual who has encrypted the information.

Key Recovery Is Different Than Key Escrow. A purchaser or user of a product being able to recover his data is different than, and separate from, the decision whether to voluntarily empower a trusted third party to be able to recover the data. Indeed, this distinction between a "key recovery" product that enables third party access to stored information. and "key escrow" which requires such advance third party access, makes all the difference in terms of industry and user acceptance. Quite simply, there should be no requirement that a copy of the user's key, or the means to access or reconstruct the key, be given to anyone (let alone required to do so with government certified agents or with a U.S entity). Indeed, we also note that even if certain individuals wanted to give a copy of their key to a third party, the existence of a trusted third party infrastructure in each country does not yet exist and could take some time to develop.

Thus, while we believe that in many cases businesses and other entities would have access to keys used by their employees and (in time) commercial key recovery services would be able to recover keys of their subscribers, yet other computer users might choose not to give a copy of their key to anyone (instead perhaps printing out a copy on a floppy disk or paper or content to have it reside in a separate file on their hard drive). The analogy to what people do with their house keys seems apt -- some give a copy to a neighbor or friend, businesses often hold "passkeys" to their employees offices, others put a copy in a safe deposit box or a drawer. Importantly, in each situation the government can obtain the plain text of information by lawfully obtaining the key where ever it might be kept.

Key Recovery Should Be A Condition Of Export Only For Stored Data. As we have explained on many occasions, there is little if any commercial demand for a key recovery function in real-time communications. The reason is simple: if the communication is unsuccessful then it is simply tried again until the transfer of information is successfully completed. Users only want the ability to recover in plain text form their stored encrypted information after the fact of transmission. Moreover, software companies have been focusing on meeting this user demand - recovery of stored data. They understand technically how to do this. In the short run, it is an achievable objective.

We are concerned, however, that some in government seem intent on arguing that because a few products can technically perform key recovery for communications it should be a widespread requirement. To the contrary, our members have seen nothing to suggest that any
product developed to date can work on a mass market scale or that there is significant commercial demand for such products.

Therefore, an encryption product that provides key recovery for stored data should be exportable even if it also encrypts communications without key recovery.

Licensing Procedures. Finally, BSA believes that key recovery encryption products for stored data should be exportable:

3. Industry Commitments.

Based on what we have heard to date, unfortunately we believe the Administration may adopt an approach that is based much more on sticks than carrots. We think there is a better way.

The Administration's Tentative Approach. We understand that the Administration may interpret "industry commitments" to building and marketing key recovery products so as to require each company to provide detailed information to the government regarding its plans for developing, producing and marketing key recovery products and services. Moreover, under such an approach companies would have to make resource commitments and concrete benchmarks. The government would review each company's plan every six months. If the government decided that inadequate progress had been made then it could end a company's interim General License to export 56-bit products.

We believe this approach is misguided and unnecessary. Undoubtedly it would subject the Administration to charges of micromanagement and industrial policy. Moreover, such detailed governmental involvement could well threaten the continued success of America's highly dynamic and competitive software and hardware industries. Finally, the burdens of such an approach would limit the ability of companies to participate, thereby reducing the number of companies who could afford to develop key recovery products.

A Better Way. As we explained, we believe that a much more productive and efficient approach is to rely on the fundamental incentive inherent in the government's decision: after two years companies wishing to export encryption programs with long key lengths will only be allowed to do so if those programs and products have key recovery functions for stored data.

We understand that the Administration is nervous about industry actually moving forward with development of key recovery products. But the government already knows that companies will develop and offer key recovery programs for stored data because a number of companies either have such products now, are currently working on such products, or have announced individual or joint efforts to develop such products. They are doing so because users want such products. Indeed, Administration officials have already acknowledged that a "critical mass" of companies are at work on such key recovery products.

We believe these activities should be sufficient and that any company should be allowed to immediately begin exporting 56-bit products. We do not think it is appropriate or wise to condition each individual company's ability to export 56-bit encryption products on that company's plans to develop or offer key recovery products.

However, if the Administration nevertheless believes such a requirement is necessary, then we strongly urge you to adopt the simplest possible process: make such a commitment to develop or offer key recovery products a term of the General License (or Exception). By exporting products pursuant to the General License, companies would have "self certified" that they are making the requisite commitment. This would obviate the need for an entire separate regulatory scheme, with letters, meetings, reviews, etc. We also believe it is essential that the license simply require a commitment to develop or offer key recovery products generally, not a key recovery version of each and every 56-bit product being exported pursuant to the General License.

4. What Happens After Two Years

There are several issues presented by the Administration's announcement that after two years American companies will be unable, as a general proposition, to continue exporting 56 bit encryption products without key recovery.

Interoperability. The Administration maintains that the "domestic use of key recovery will be voluntary, and any American will remain free to use any encryption system domestically." As we have explained all along, we do think that there always will be some demand for non-key recovery encryption programs and products. Thus, we understand the Administration's decision to mean: The Installed Base. Any interim export control relief will be a mirage unless it meets serious business needs. No commercial user will purchase such products unless they know they can purchase similar products in the future for expanding needs (e.g. a bigger site license), can get replacement products if something is wrong, can install upgrades in the product (even if the encryption remains the same), and can get continued service and customer support. Yet we have heard nothing that addresses these issues. The Administration's decision must be implemented so that whatever is permissible at the end of two years will continue to be so (i.e. approvals already granted must be reasonably interpreted in the future).

BSA and its member companies remain committed to working with the Administration to specifically address these important questions and implementation details.

Sincerely,

[signature]

Becca Gould
Vice President, Public Policy

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Posted on December 5, 1996