NYT on NTT/RSA Chips

[jya@pipeline.com (John Young)]

Connecting Declan's three dots [...]: 
 
 
   The New York Times, June 4, 1996, pp. D1, D4. 
 
 
   Japanese Chips May Scramble U.S. Export Ban 
 
   By John Markoff 
 
 
   Washington, June 3 -- The Nippon Telegraph and Telephone 
   Corporation has quietly begun selling a powerful data- 
   scrambling chip set that is likely to undermine the Clinton 
   Administration's efforts to restrict the export of the 
   fundamental technology for protecting secrets and commerce 
   in the information age. 
 
   The existence of the two-chip set, which will have broad 
   potential application for local computer networks, the 
   Internet and telephone switching networks, was disclosed 
   here in a speech today at a public policy workshop by the 
   chief executive of RSA Data Security, a Silicon 
   Valley-based company that has frequently dueled with the 
   Administration over its export-control policies. 
 
   The executive, Jim Bidzos, said that his company was 
   negotiating with N.T.T., the giant telecommunications 
   concern, to resell the chips in the United States. Mr. 
   Bidzos also said that N.T.T. had already made sales in 15 
   countries, including in the United States to I.B.M. 
 
   "N.T.T. has done a lot of research and development work on 
   this product" he said. "There is clearly going to be a lot 
   of demand for their chips." 
 
   An executive at NTT America said that although there were 
   no restrictions on the export of cryptographic hardware or 
   software from Japan, his company was still anxious to 
   obtain software from RSA Data to use in its chips. That 
   software is still controlled by United States export law, 
   he said. 
 
   "We'd like to use this technology," said Junichi Kishigami, 
   director of NTT America, which is based in Mountain View, 
   Calif. "It is important to employ good international 
   standards." 
 
   Mr. Bidzos has been a vocal and longtime opponent of United 
   States export laws that prohibit the sale, without a 
   special license, of products that have powerful 
   data-scrambling capabilities. The Government's policy is 
   directed at limiting the spread of systems that could make 
   it more difficult for American intelligence and 
   law-enforcement agencies to conduct electronic 
   surveillance. 
 
   Such restrictions have been bitterly opposed in recent 
   years by American computer and telecommunications 
   companies; they have argued that the technology is already 
   widely available internationally and that manufacturers and 
   software developers in the United States are in danger of 
   losing markets to foreign competitors. The N.T.T. 
   technology would seem to support those contentions. 
 
   "The United States export controls are at risk from 
   Japanese competition," said Stewart Baker, a Washington 
   lawyer who is the former general counsel for the National 
   Security Agency. 
 
   The N.T.T. device also underscores fundamental differences 
   that exist between Japan and the United States on the issue 
   of privacy in the information age. 
 
   While United States officials have struggled to maintain 
   their ability to conduct electronic surveillance, Article 
   21 of Japan's Constitution specifically forbids 
   wiretapping. 
 
   "It's very interesting that the Japanese regard for privacy 
   in their Constitution translates into better cryptographic 
   technology," said Marc Rotenberg, director of the 
   Electronic Privacy Information Center, a Washington public 
   policy group and an organizer of today's workshop on data 
   scrambling. 
 
   Mr. Bidzos said that N.T.T.'s chips, which have been 
   developed and manufactured by a subsidiary, N.T.T. 
   Electronic Labs, were far more powerful than the so-called 
   Clipper chip, a data-scrambling system that the Clinton 
   Administration proposed for the nation's telephone system. 
 
   While the Clipper system has a built-in "back door" 
   intended to permit the F.B.I. to gain wiretap information, 
   the N.T.T. system has no such surveillance feature, It also 
   uses much stronger data-encryption algorithms than United 
   States export laws permit. 
 
   Those laws restrict the export of encryption systems which 
   employ digital "keys" of more than 40 bits in length. The 
   new N.T.T chips, however, are based on the United States 
   data encryption standard, which has a 56-bit key, and 
   actually triples the strength of that standard. Such a 
   scrambling system is believed to be beyond the capability 
   of the most powerful code-breaking system. 
 
   In addition to the "private" key system for scrambling 
   data, N.T.T. uses RSA Data's "public" key method to permit 
   computer users who have not previously exchanged 
   information to swap-private key information safely. The 
   N.T.T. system uses the RSA Data key, which is 1,024 bits in 
   length, also far stronger than the United States export 
   regulations permit. 
 
   "If there is anyone in the Government who hasn't already 
   seen the writing on the wall, here it is," Mr. Bidzos said. 
 
   He said that RSA Data had set up a small subsidiary in 
   Japan last year and that he was now negotiating with N.T.T. 
   to make a minority investment in that subsidiary in 
   exchange for N.T.T.'s gaining access to the RSA Data public 
   key technology. 
 
   The N.T.T. technology is at least partly the result of an 
   initiative by Japan's Ministry of International Trade and 
   Industry, which 18 months ago made a $120 million national 
   commitment to develop products to facilitate electronic 
   commerce. 
 
   "This is a major business opportunity that the Japanese see 
   clearly," said Deborah Hurley, an official at the 
   Organization for Economic Cooperation and Development, the 
   Paris-based international group. 
 
   RSA Data was acquired in April by Security Dynamics 
   Technologies Inc., a computer security company based in 
   Cambridge, Mass., in a stock deal valued at $250 million. 
   Mr. Bidzos said that the two companies had continued to 
   operate relatively independently. 
 
   [End]