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                         THE WHITE HOUSE

                  Office of the Press Secretary

_________________________________________________________________

For Immediate Release                           April 16, 1993


                STATEMENT BY THE PRESS SECRETARY


The President today announced a new initiative that will bring
the Federal Government together with industry in a voluntary
program to improve the security and privacy of telephone
communications while meeting the legitimate needs of law
enforcement.

The initiative will involve the creation of new products to
accelerate the development and use of advanced and secure
telecommunications networks and wireless communications links.

For too long there has been little or no dialogue between our
private sector and the law enforcement community to resolve the
tension between economic vitality and the real challenges of
protecting Americans.  Rather than use technology to accommodate
the sometimes competing interests of economic growth, privacy and
law enforcement, previous policies have pitted government against
industry and the rights of privacy against law enforcement.

Sophisticated encryption technology has been used for years to
protect electronic funds transfer.  It is now being used to
protect electronic mail and computer files.  While encryption
technology can help Americans protect business secrets and the
unauthorized release of personal information, it also can be used
by terrorists, drug dealers, and other criminals.

A state-of-the-art microcircuit called the "Clipper Chip" has
been developed by government engineers.  The chip represents a
new approach to encryption technology.  It can be used in new,
relatively inexpensive encryption devices that can be attached to
an ordinary telephone.  It scrambles telephone communications
using an encryption algorithm that is more powerful than many in
commercial use today.

This new technology will help companies protect proprietary
information, protect the privacy of personal phone conversations
and prevent unauthorized release of data transmitted
electronically.  At the same time this technology preserves the
ability of federal, state and local law enforcement agencies to
intercept lawfully the phone conversations of criminals. 

A "key-escrow" system will be established to ensure that the
"Clipper Chip" is used to protect the privacy of law-abiding
Americans.  Each device containing the chip will have two unique


                                2


"keys," numbers that will be needed by authorized government
agencies to decode messages encoded by the device.  When the
device is manufactured, the two keys will be deposited separately
in two "key-escrow" data bases that will be established by the
Attorney General.  Access to these keys will be limited to
government officials with legal authorization to conduct a
wiretap.

The "Clipper Chip" technology provides law enforcement with no
new authorities to access the content of the private
conversations of Americans.

To demonstrate the effectiveness of this new technology, the
Attorney General will soon purchase several thousand of the new
devices.  In addition, respected experts from outside the
government will be offered access to the confidential details of
the algorithm to assess its capabilities and publicly report
their findings.

The chip is an important step in addressing the problem of
encryption's dual-edge sword:  encryption helps to protect the
privacy of individuals and industry, but it also can shield
criminals and terrorists.  We need the "Clipper Chip" and other
approaches that can both provide law-abiding citizens with access
to the encryption they need and prevent criminals from using it
to hide their illegal activities.  In order to assess technology
trends and explore new approaches (like the key-escrow system),
the President has directed government agencies to develop a
comprehensive policy on encryption that accommodates:

     --   the privacy of our citizens, including the need to
          employ voice or data encryption for business purposes;

     --   the ability of authorized officials to access telephone
          calls and data, under proper court or other legal
          order, when necessary to protect our citizens;

     --   the effective and timely use of the most modern
          technology to build the National Information
          Infrastructure needed to promote economic growth and
          the competitiveness of American industry in the global
          marketplace; and 

     --   the need of U.S. companies to manufacture and export
          high technology products.

The President has directed early and frequent consultations with
affected industries, the Congress and groups that advocate the
privacy rights of individuals as policy options are developed.



                                3

The Administration is committed to working with the private
sector to spur the development of a National Information
Infrastructure which will use new telecommunications and computer
technologies to give Americans unprecedented access to
information.  This infrastructure of high-speed networks
("information superhighways") will transmit video, images, HDTV
programming, and huge data files as easily as today's telephone
system transmits voice.

Since encryption technology will play an increasingly important
role in that infrastructure, the Federal Government must act
quickly to develop consistent, comprehensive policies regarding
its use.  The Administration is committed to policies that
protect all Americans' right to privacy while also protecting
them from those who break the law.

Further information is provided in an accompanying fact sheet. 
The provisions of the President's directive to acquire the new
encryption technology are also available.  

For additional details, call Mat Heyman, National Institute of
Standards and Technology, (301) 975-2758.

---------------------------------


QUESTIONS AND ANSWERS ABOUT THE CLINTON ADMINISTRATION'S
TELECOMMUNICATIONS INITIATIVE




Q:   Does this approach expand the authority of government
     agencies to listen in on phone conversations?

A:   No.  "Clipper Chip" technology provides law enforcement with
     no new authorities to access the content of the private
     conversations of Americans.

Q:   Suppose a law enforcement agency is conducting a wiretap on
     a drug smuggling ring and intercepts a conversation
     encrypted using the device.  What would they have to do to
     decipher the message?

A:   They would have to obtain legal authorization, normally a
     court order, to do the wiretap in the first place.  They
     would then present documentation of this authorization to
     the two entities responsible for safeguarding the keys and
     obtain the keys for the device being used by the drug
     smugglers.  The key is split into two parts, which are
     stored separately in order to ensure the security of the key
     escrow system.

Q:   Who will run the key-escrow data banks?

A:   The two key-escrow data banks will be run by two independent
     entities.  At this point, the Department of Justice and the
     Administration have yet to determine which agencies will
     oversee the key-escrow data banks.

Q:   How strong is the security in the device?  How can I be sure
     how strong the security is?  

A:   This system is more secure than many other voice encryption
     systems readily available today.  While the algorithm will
     remain classified to protect the security of the key escrow
     system, we are willing to invite an independent panel of
     cryptography experts to evaluate the algorithm to assure all
     potential users that there are no unrecognized
     vulnerabilities.

Q:   Whose decision was it to propose this product?

A:   The National Security Council, the Justice Department, the
     Commerce Department, and other key agencies were involved in
     this decision.  This approach has been endorsed by the
     President, the Vice President, and appropriate Cabinet
     officials.

Q:   Who was consulted?  The Congress?  Industry?

A:   We have on-going discussions with Congress and industry on
     encryption issues, and expect those discussions to intensify
     as we carry out our review of encryption policy.  We have
     briefed members of Congress and industry leaders on the
     decisions related to this initiative.

Q:   Will the government provide the hardware to manufacturers?

A:   The government designed and developed the key access
     encryption microcircuits, but it is not providing the
     microcircuits to product manufacturers.  Product
     manufacturers can acquire the microcircuits from the chip
     manufacturer that produces them.

Q:   Who provides the "Clipper Chip"?

A:   Mykotronx programs it at their facility in Torrance,
     California, and will sell the chip to encryption device
     manufacturers.  The programming function could be licensed
     to other vendors in the future.

Q:   How do I buy one of these encryption devices? 

A:   We expect several manufacturers to consider incorporating
     the "Clipper Chip" into their devices.
     
Q:   If the Administration were unable to find a technological
     solution like the one proposed, would the Administration be
     willing to use legal remedies to restrict access to more
     powerful encryption devices?

A:   This is a fundamental policy question which will be
     considered during the broad policy review.  The key escrow
     mechanism will provide Americans with an encryption product
     that is more secure, more convenient, and less expensive
     than others readily available today, but it is just one
     piece of what must be the comprehensive approach to
     encryption technology, which the Administration is
     developing.

     The Administration is not saying, "since encryption
     threatens the public safety and effective law enforcement,
     we will prohibit it outright" (as some countries have
     effectively done); nor is the U.S. saying that "every
     American, as a matter of right, is entitled to an
     unbreakable commercial encryption product."  There is a
     false "tension" created in the assessment that this issue is
     an "either-or" proposition.  Rather, both concerns can be,
     and in fact are, harmoniously balanced through a reasoned,
     balanced approach such as is proposed with the "Clipper
     Chip" and similar encryption techniques.

Q:   What does this decision indicate about how the Clinton
     Administration's policy toward encryption will differ from
     that of the Bush Administration?  

A:   It indicates that we understand the importance of encryption
     technology in telecommunications and computing and are
     committed to working with industry and public-interest
     groups to find innovative ways to protect Americans'
     privacy, help businesses to compete, and ensure that law
     enforcement agencies have the tools they need to fight crime
     and terrorism.

Q:   Will the devices be exportable?  Will other devices that use
     the government hardware?

A:   Voice encryption devices are subject to export control
     requirements.  Case-by-case review for each export is
     required to ensure appropriate use of these devices.  The
     same is true for other encryption devices.  One of the
     attractions of this technology is the protection it can give
     to U.S. companies operating at home and abroad.  With this
     in mind, we expect export licenses will be granted on a
     case-by-case basis for U.S. companies seeking to use these
     devices to secure their own communications abroad.  We plan
     to review the possibility of permitting wider exportability
     of these products.
