Zero-Knowledge, NAI PGP - terrorism victims?

Privacy Is Hot, But Sales Are Not
John Schwartz New York Times Service
Tuesday, November 6, 200*

Some Encryption Tools Scaled Back

NEW YORK Software that helps Internet users protect their privacy has received a great deal of attention since Sept. **. Some say the government's new powers to snoop on the Web could lead to a boom for such services. Others say regulators will crack down on these tools, which can help terrorists hide.

So when Zero-Knowledge Systems Inc. announced last month that it was shutting down a service that ensures anonymity for Internet users, speculation ran high that the company had been pressured by law enforcement officials to do so. One participant in a discussion on Slashdot, an online news service frequented by the technoscenti, s***ested that maybe "someone (or more likely, some government entity) approached them, and they, ahem, decided to stop."

Hamnett Hill, an executive of Zero-Knowledge, had a more mundane explanation - the company could not make its privacy tool pay.

Zero-Knowledge's decision came just as another company, Network Associates Inc., said it was looking for a buyer for its PGP Security unit, which sells a leading encryption product.

What law enforcement officials have been unable to do, the market has done for them. Bottom-line considerations have dictated that the companies get out of these segments of the privacy business.

These examples underscore a gap between the discussions surrounding the antiterrorism bill signed by President George W. Bush last month, which have tended to focus on what individuals or terror networks could do, and what business and investigative experience s***ested people actually do.

Companies that provide tools that ensure privacy on the Internet have been criticized since the attacks, as security experts and commentators all but accuse them of abetting terrorists by selling tools that can cloak their acts.

The response from companies that sell privacy tools to the new legislative climate has been to refine their focus. For instance, Zero-Knowledge said it would shut down its Freedom Network mostly because operating it required the company to maintain the Internet servers on which the service functioned. That is a much larger expense than selling tools to safeguard privacy that ********s can run on their own PCs.

The new tools, sold as Freedom *.0, are for consumers who want help dealing with "the more benign day-to-day threats" to privacy, Mr. Hill said, including computer intrusion by malicious Internet programs like viruses.

Mr. Hill said that while the new product did not offer the kind of "bulletproof" privacy protection of Freedom Network, it had been well received by ********s. The company does not release figures on sales, profit or loss.

As for Network Associates, the decision to find a buyer for PGP was simple, said Sandra England, the president of the security business unit. "The individual consumers, though they do buy our product, are not our target market," she said.

The company found that few consumers were willing to spend the ***** or the time buying and learning a cryptography program. But the company does a brisk business selling encryption products to businesses that want to protect data on their central computers, Ms. England said.

The shifts in corporate strategy and moves by the government do not mean that the issue of privacy is going away, said Lance Cottrell, the founder of Anonymizer.com, another company that sells tools for Web visitors to surf anonymously. "In many ways, personal privacy is, if anything, more important than before," he said. His company has tried to show that its products can help law enforcement by creating an anonymous online tip site.

Mr. Cottrell said police and investigators are "quite heavy users of our service - they use it to keep tabs on the bad-guy sites, without leaving FBI.gov fingerprints on the servers."