Posted at 10:04 p.m. PDT Wednesday, Oct. 24, 2001
National ID plan could mean windfall for tech firms
BY ELISE ACKERMAN AND PAUL ROGERS
Mercury News
Since the recent terrorist attacks, national identity cards have become a heated issue in the United States, triggering emotional debates about individual freedom and personal safety.
For Silicon Valley, something else is at stake: billions, perhaps even tens of billions, of dollars in orders for technology and services to make the system work.
``When a country goes to a new ID, it typically involves a huge IT infrastructure,'' said Tate Preston, an executive at DataCard, an identity solutions company in Minnetonka, Minn., that is involved in 15 different national ID projects.
But the high cost of a sophisticated ID system -- as well as the technical difficulty of setting it up -- could just as easily doom such a project before it gets off the ground.
``If you set aside the civil liberties issues, it's very expensive, it's technologically challenging and the logistics are enormous,'' said Chris Christiansen, an analyst at research firm IDC.
Countries as diverse as Italy, Argentina, South Africa and Finland are starting to implement high-tech ID systems. Last spring, government officials in China approved a plan to distribute microchip-embedded smart cards to 1.3 billion Chinese.
And in 2000, the U.S. government launched a 10-year, $1.5 billion program for federal agencies to experiment with smart ID cards for their employees.
If the United States adopts national ID cards for its 285 million residents, it could give a boost to all kinds of tech companies, from European smart-card makers like Gemplus and Schlumberger to valley infrastructure providers like Oracle and Sun Microsystems.
For regular citizens, high-tech IDs can offer convenience at the price of privacy. In the most complex systems, the credit-card-sized devices can simultaneously function as passports, driver's licenses and a way to receive pension checks and make phone calls. The new IDs are also harder to counterfeit and can encrypt personal information on the card.
Governments can see benefits from increased security, greater efficiency and reduced fraud.
But installing and maintaining an ID system is expensive. Depending on the type of card, the government has to buy a host of tech goods and services.
A massive rollout of 4 million new ID cards at the U.S. Defense Department serves as an example of how a national ID system might be established -- and how it could affect Silicon Valley.
Essentially miniature computers, the department's Common Access Cards contain a 32-bit processor and 32 kilobytes of memory.
Mary Dixon, director of the Access Card Office, said the cards will initially be used to provide access to buildings and computers, encrypt e-mail and create digital signatures. In the future, the military could track everything from holders' medical history to their weapons training.
Since the project was launched in October 2000, the department has issued 75,000 cards and spent $33 million.
But that doesn't include the millions of dollars the department had to spend to update its database technology and computer networks, develop a process for issuing the new cards, create an encryption system and install card readers, PCs and other hardware and software.
``When you start getting into budget numbers, it is a mess,'' Dixon said.
The mess is profitable for Silicon Valley companies. Besides software and servers from Oracle and Sun, Fremont-based ActivCard is supplying software for issuing the cards and managing digital identities and Redwood City-based Ingrian Networks is contributing security hardware.
Not surprisingly, valley tech executives are urging the United States to adopt a national ID.
Oracle Chairman and CEO Larry Ellison so strongly supports a national ID that he has offered to donate database software to make it happen, although the Redwood Shores company would charge for maintenance and upgrades.
Ellison's proposal has attracted attention from influential public officials, including U.S. Attorney General John Ashcroft and U.S. Sen. Dianne Feinstein, D-Calif., who chairs the Senate subcommittee on terrorism.
In an interview, California Attorney General Bill Lockyer said he would personally volunteer to get a card, although he would like to learn more before broadly endorsing it. ``I was on an airplane 159 times last year, and I'm not enthusiastic about the two-hour waits that are routine now,'' he said. ``I'm a licensed teacher and have a driver's license. They've already got lots of information about me.''
On Wednesday, White House press secretary Ari Fleischer said he wasn't aware of President Bush's position on a national ID or any White House discussions about it.
Industry observers say a U.S. ID card system could cost $2 billion to $10 billion for the cards alone. The associated infrastructure and systems integration could cost 10 times as much, said Peter Cattaneo, director of Java Card business development at Palo Alto-based Sun.
That's far more than the current $1 billion to $2 billion world market for national IDs, which includes infrastructure spending.
Regardless of whether the United States approves a card, observers expect the digital ID market to grow as countries move away from paper cards.
The ultimate size of the market depends on the kinds of cards chosen. Simple magnetic-stripe or bar-code cards can store data and cost less than $2 each. Smart cards, which can run software applications, cost as much as $20.
Italy is currently deploying a sophisticated ID system based on optical memory cards made by Drexler Technology of Mountain View.
The first phase of the Italian project, which consists of distributing 1.2 million IDs, is budgeted at $93 million. Steve Larson, Drexler's vice president of finance, said the cards and readers account for about $10 million, with the rest going for network expenses. Within five years, the Italian government hopes to provide all 50 million Italians with the new IDs.
But Drexler's experience with the U.S. government shows how such plans can get delayed. Since 1997, Drexler has provided 15.6 million green cards and border crossing cards to the Immigration and Naturalization Service. The cards contain data and microscopic images that verify the identity of their holders.
The data isn't much help to the INS, however. Its $111 million budget for the cards didn't include funds to buy card readers.
``Budgetary situations and priorities can shift at a moment's notice,'' said Christiansen. |
