Mr. Chairman, distinguished members of the Committee, thank you for the opportunity to speak to you today about the strategic importance of encryption technologies, and the SAFE act. I will focus my testimony on Cisco Systems’ overall objectives for integrating cryptography in networking products, the emerging international network and e-commerce market, and an alternative to Key Recovery and Key escrow called "private doorbell."

Cisco Background

Cisco Systems is the worldwide leader in networking for the Internet. We sell products in approximately 115 countries around the world. We characterize our four major market segments as Enterprise, Telco and Internet Service Provider, Small-to-Medium Businesses, and Consumer products.

Cisco’s Market Position in Security

Cisco Systems is also the leading US provider of firewall and Virtual Private Network (VPN) gateways. We were second in revenues worldwide in 1997 for these technology areas. Many of our general-purpose networking products also include optional cryptographic components, including routers, cable modems, and enterprise campus switches.

The Strategic Value of Cryptography for Worldwide Networking

Although much of the encryption debate revolves around lost revenues for US businesses, our interest in cryptography is not based on dollars. We believe that data encryption is one of the fundamental enablers of future network growth. The early, open deployment of the domestic Internet is proving to be the exception, not the rule. Both overseas and in the United States, strong encryption that enables trust and secure data transfer is a precondition to the continued strong growth of networking and e-commerce. We began our efforts to resolve the policy stalemate on encryption because we and our customers need this technology to ensure the continued success of our businesses. Overly restrictive controls on encryption technology will either stall the networking market, or create a major market advantage for foreign competitors with integrated product offerings.

The Problem with Existing Export Controls

The existing export controls for network products with integrated encryption have several detrimental effects:

They prevent us from reaching the fastest-growing segment of our market: Telcos and Internet Service Providers;

They prevent our US customers, such as Ford, from deploying our technology for secure business-to-business solutions with their own partners, customers, or suppliers; We are already seeing European business to-business networks emerge that may well be forced not to consider our technology.

The reporting burden is so onerous that it is often unsupportable with today’s business and distribution models.

We foresee three potential outcomes to the current export regime:

The networking market as a whole may stall, since businesses will be unable to deploy security sufficient to support their needs;

US companies will be "pecked to death by chickens," their leadership eroded by different local competitors in each foreign market;

US companies will be "eaten by Jaws," knocked out by a single, powerful competitor, most likely the result of a merger or acquisition.

The Private Doorbell Solution

Much of the encryption policy stalemate has arisen from the inability of industry, law enforcement, and the intelligence community to reach a reasonable understanding of where customer and government interests are at odds, and where they intersect. Cisco, with its partners, has spent several years building just such an understanding, and we have offered a solution called "private doorbell" that has been well reviewed by law enforcement and by intelligence.

We arrived at Private Doorbell (also called "Clearzone" and "Operator Action" by the public and "Recoverable" in the Export Administration Regulations) after a lengthy study of Key Recovery, and many discussions with our customers, with Intelligence, and with Law Enforcement. Our analysis led us to reject the available Key Recovery technologies due to strong market resistance as well as significant technical challenges. Our customers and Law Enforcement both insisted that our products needed to expose plaintext in response to a warrant process: the challenge was to do so without compromising the customer’s overall data security.

Private Doorbell is an alternative to Key Recovery that enables customers to deploy any cryptographic algorithm of any strength, but still comply instantly with a warrant for plaintext data. It is a management function that allows the entity who controls one endpoint of an encrypted connection to expose data to authorized parties in a selective way. It is based on a data filtering capability that is present in every standards-compliant encryption gateway from any vendor.

The Value Proposition for Private Doorbell

The Private Doorbell approach offers compelling value proposition for our customers, for industry, for law enforcement, and for intelligence.

Our customers can deploy strong encryption without assuming the unnecessary risk of trapdoors or weakened encryption. Unlike proprietary Key Recovery schemes, Private Doorbell is a standards-compliant, multi-vendor mechanism. Of course, we would prefer that people purchase their gear from us, but they can buy Private Doorbell products from many other vendors.

Law Enforcement has supported this initiative. It preserves the status quo, and is fully consistent with existing processes for lawful warrants.

Private Doorbell cannot offer the intelligence community an encryption-free world, but it does give them a well-known consistent mechanism to expose plaintext. As Private Doorbell products gain significant marketshare, they will extend the "home field" advantage for intelligence, and will defend against the possible broad deployment of foreign encryption technology actively hostile to US interests. The Intelligence community has also suggested that broad availability of Private Doorbell products may slow the deployment of end-to-end encryption products, although we have no direct evidence to support that claim.

"Alliance for Network Security"

Cisco formed a coalition of fourteen US companies in support of the "private doorbell" solution called the Alliance for Network Security ("ANS"). The purpose of ANS is to advance our understanding with the government, and to build on our initial license approvals. The other ANS members share our conviction that the resolution of encryption export control debate should be industry-led, market-driven, and must satisfy national security and law enforcement requirements. We and ANS support passage of H.R. 850, the SAFE act.

H.R. 850: The SAFE Act

The provisions of the SAFE Act would remove most license requirements for exports of recoverable products. It would remove existing barriers to secure e-commerce and business-to-business transactions. The SAFE Act would not absolve Cisco or its partners of our obligations to our customers, to Law Enforcement, and to the Intelligence community. We are not seeking to dodge these obligations, but to continue to lead the greatest technical revolution in recent history, at the same time strengthening our partnership with our customers and with our government.