E-comm policy allows free rein
Law would allow virtually any encryption
by James Baxter, jbaxter@southam.ca

The federal government plans to promote electronic commerce by getting out of the way.

Industry Minister John Manley tabled a bill in the House of Commons yesterday that places virtually no restrictions on individuals or companies developing and using cutting-edge encryption devices and software that allow for secure transmission of private information over the Internet. Once in effect, the law would allow Canadians to develop, import, and use any cryptography products they choose.

Mr. Manley's announcement places vast new responsibilities in the hands of Privacy Commissioner Bruce Phillips, who will be in charge of policing privacy issues in all federally regulated private-sector industries, including banking, insurance, medical, and telecommunications. The privacy commissioner will serve as a watchdog over how information is collected, used, and disclosed.

"It is very exciting," said Julien Delisle, executive director of the Office of the Privacy Commissioner. Mr. Delisle said the phase-in for the law will take roughly three years, during which the office will take on new staff specializing in Internet privacy

"Our present mandate is only privacy in the public sector. (Under the new law) we will likely see the majority of complaints originating in the commercial sector."

Neither the privacy commissioner nor Canadian police forces will have an easy time policing the Internet. One of the cornerstones of the new policy is that the government will not demand an access mechanism that would allow it to intercept and decode messages before licensing new products.

Cryptography allows users to encode and then pass sensitive information across the Internet, including credit-card numbers, medical records, stock portfolio information, private electronic correspondence and even telephone calls.

But it is also a valuable tool for organized crime, corporate sabotage and espionage. Despite efforts by many police forces, including the RCMP and Metro Toronto Police, to maintain stricter controls, the government has effectively surrendered the right to access encrypted information in order to promote greater public confidence that information is truly private.

"This announcement is good news," said David Jones, a computer science professor at McMaster University in Hamilton and president of Electronic Frontier Canada, a group that lobbied for the lightest possible regulatory structure.

"I think what is apparent from this is that John Manley gets it."

What Mr. Manley and his cabinet colleagues also get is that the relatively small number of e-comm transactions, which totalled about $4 billion worldwide in 1997, will explode to nearly $400 billion by 2002, provided consumer confidence in the security of electronic transactions continues to grow. In Canada, Internet transactions are expected to reach $13 billion in that same period.

"In short, with the right framework, electronic commerce has phenomenal growth prospects," Mr. Manley said. "But before we can capitalize on the opportunities of electronic commerce, we must address significant challenges. If we move fast, if we remove the uncertainties holding back electronic commerce on open networks, we can create a global centre of excellence for electronic commerce in Canada."

By introducing a law that practically deregulates the cryptography industry while bulking-up the powers of the nation's privacy commissioner and building on existing statutes against unlawful use of private information, Mr. Manley has ensured Canada has a chance to stay at the forefront of the emerging e-comm industry, Mr. Jones said.

He added that Canada's Department of Foreign Affairs now must deal with the biggest impediment to Canada being a world leader.

"The Wassenaar Arrangement (an 1994 international agreement intended to prevent the transfer of potentially destabilizing technology that could be used for hostile military or intelligence-gathering purposes) places severe restrictions on the export of encryption equipment and software," said Mr. Jones, adding that Ireland and the Czech Republic are among countries with burgeoning electronic commerce industries that are quickly catching up to Canada.

"These restrictions are hurting Canadian companies. The arrangement is being re-evaluated as part of a regular process. Canada could play a very significant role in the field of cryptology internationally" if restrictions are eased.

"The truth is that you may be able to block the transfer of technology, but you can't block the movement of people. The irony is that the technology of keeping a secret is no secret at all."

The Wassenaar Arrangement, international policing and privacy are all hot issues for next week's Organization of Economic Co-operation and Development ministerial conference on electronic commerce in Ottawa. Canada will be asking other countries to follow its lead in virtually deregulating the encryption industry. Both Russia and the United States have expressed strong opposition to unrestricted encryption, as have France, Australia, and New Zealand.

But in Canada, there were few dissenters to yesterday's announcement.