Blackberrys, cell phones and communications devices are tagged with post-its during a briefing on Afghanistan and Pakistan in the Cabinet Room of the White House, March 26, 2009. (Official White House Photo by Pete Souza)

The upcoming release of the final version of the White House “National Strategy for Trusted Identities in Cyberspace” highlights three key trends that face the world in 2011: online identity, privacy and security. Governments need ways to empower citizens to identify themselves online to realize both aspirational goals for citizen-to-government interaction and secure basic interactions for commercial purposes.

Earlier today, Stanford hosted an event today where U.S. Commerce Secretary Gary Locke and White House cybersecurity coordinator Howard Schmidt talked about the Obama administration’s efforts to improve online security and privacy at the Stanford Institute for Economic Policy Research (SIEPR). Here’s the NSTIC fact sheet the administration posted last year.

“As we look at the innovation engine that drives many of the things we’re doing, what does it mean to sit there as we’ve come together today,” asked Schmidt, “bringing these things together to overcome some of these risks associated with the technology we’ve deployed over the past 20 some odd years?”

The administration took public feedback on the document at NSTIC IdeaScale, which is now closed. (For a screenshot, see the story on IdeaScale on MSNBC.com.) “Every day at the end of the day. I would go back and read some of those comments,” said Schmidt today. “Some of them quite honestly were pretty silly. Other of them were very insight full and gave us some good thoughts about how can we do this right? How can we create a document that really does those things the secretary mentioned such as privacy enhancing but also giving us better trust?”

Schmidt took to the White House blog again today to announce a “National Program Office for Enhancing Online Trust and Privacy.”

Today, at Stanford University, Commerce Secretary Gary Locke and I were pleased to announce that the Commerce Department will host a National Program Office (NPO) in support of the National Strategy for Trusted Identities in Cyberspace (NSTIC).  As I’ve written previously, the NSTIC fulfills one of the action items in theCyberspace Policy Review (pdf) and is a key building block in our efforts to secure cyberspace.

This holiday season, consumers spent a record $30.81 billion in online retail spending, an increase of 13 percent over the same period the previous year.  This striking growth outshines even the notable 3.3-5.5 percent overall increase in holiday spending this past year.  While clearly a positive sign for our economy, losses from online fraud and identity theft eat away at these gains, not to mention the harm that identity crime causes directly to millions of victims.  We have a major problem in cyberspace, because when we are online we do not really know if people, businesses, and organizations are who they say they are. Moreover, we now have to remember dozens of user names and passwords. This multiplicity is so inconvenient that most people re-use their passwords for different accounts, which gives the criminal who compromises their password the “keys to the kingdom.”

We need a cyber world that enables people to validate their identities securely, but with minimal disclosure of information when they’re doing sensitive transactions (like banking) – and lets them stay anonymous when they’re not (like blogging). We need a vibrant marketplace that provides people with choices among multiple accredited identity providers – both private and public – and choices among multiple credentials. For example, imagine that a student could get a digital credential from her cell phone provider and another one from her university and use either of them to log-in to her bank, her e-mail, her social networking site, and so on, all without having to remember dozens of passwords. Such a marketplace will ensure that no single credential or centralized database can emerge. In this world, we can cut losses from fraud and identity theft, as well as cut costs for businesses and government by reducing inefficient identification procedures. We can put in-person services online without security trade-offs, thereby providing greater convenience for everyone.

This is the world envisioned in the NSTIC.  We call it the Identity Ecosystem.  We will be working to finalize the NSTIC in the coming months, but that is only the beginning of the process. I’m excited to be working with Secretary Locke. The Commerce Department is perfectly suited to work with the private sector to implement the NSTIC. In addition, there are other departments and agencies with strategic roles to play as well. Above all though, we look to the leadership of the private sector. Therein lies the key to success. Now is the time to move forward with our shared vision of a better, more secure cyberspace.

Why NSTIC Matters

The policy that the United States government makes towards the Internet has the potential to affect every person online in 2011, as advocates know, so how this is carried out bears close watching. The Center for Democracy and Technology filed key comments on NSTIC last year, including a key issue: “We alerted the Commerce Department to our concern about NSTIC’s current focus on the use of government credentials for private transactions: A pervasive government-run online authentication scheme is incompatible with fundamental American values,” wrote Heather West regarding the cybersecurity policy proposal.

The issue is at once simple and enormously complex, as Jim Dempsey from the Center for Democracy and Technology highlighted today. Government needs a better online identity infrastructure to improve IT security, online privacy, and support ecommerce but can’t create it itself, said Dempsey, outlining the key tension present. Dempsey advocated for a solution for online identity that lies within a broader trust framework and that is codified within a baseline federal consumer privacy law.

Some of the answers to the immense challenge of securing online privacy and identity won’t be technical or legislative at all. They lie in improving the digital literacy of for online citizens. That very human reality was highlighted after the massive Gawker database breach last year, when the number of weak passwords used online became clear. Schmidt highlighted the root caused of passwords today:

The reason most people do that is because we have to worry about remembering so many different passwords and then there’s so many layers of complexity and, complexity that we have to worry about, we have different time frame. We replace them every 30-day, 60 days, 90 days and it becomes really cumbersome. And recent survey found that 46% of the people surveyed never ever have changed their passwords and 71% use the same password with over and over and over again. From reading an on-line blog to doing sensitive financial transactions.

Others answers may be founded in creating online trust frameworks, which were a key initiative in 2010 for the federal government. Multifactor authentication, where more than one forms of identity are used in transactions, will be part of that vision. Schmidt described, loosely, what that might look like.

I go to a store. I go to a grocery store in some cases. I do some level of proofing, whatever I want to wind up doing, whether it’s the lowest level or the highest level to get an online identity stored on a token. A digital identity. Whether it’s on a USB drive or whether it’s on a smart card, I have the ability to do something beyond what I’m doing now. I go to log-in to these accounts. I use the USB device, I use a smart card. I use a one time password on my mobile device that no longer puts me in a position where I’ve been in the past where I can wind up making one small mistake and paying for it for years. But then I also get the log-in to my web mail account. That credential is passed on as well. So I have the ability to do these things seamlessly without all the baggage and overhead that goes with it. But then here comes the true test – this web mail – this phishing e-mail – comes in, and working together between the token and my digital identity and the browser, it stops me from doing things that are going to be harmful. And I had the ability to control that. I have the ability to set this up. And then it keeps me from becoming a victim of fraud.

That combination of physical tokens that interface with commercial and communications infrastructure to authenticate a consumer or online user are one vision of an identity ecosystem. Given the commercial needs of the moment, it should not be a surprise that the Department of Commerce is a key player. Secretary Locke offered perspective on the challenges that face the nation in 2011. [Full unedited transcript]

Let’s flash forward to today to 2011. Nowadays the world does an estimated $10 trillion of business online. Nearly every transaction you can think of is being done over the Internet. Consumers paying their utility bills, even from smartphones. People downloading music, movies and books online. Companies from the smallest local store to bed and breakfasts, to multinational corporations, ordering goods, paying vendors, selling to customers, all around the world. All over the Internet. E-commerce sales for the third quarter of 2010 were estimated at over $41 billion, up almost 14% over last year. And early reports indicate that the recent holiday buying season saw similar growth with year over year sales up by over 13%.

But despite these ongoing successes, the reality that the Internet still faces something of a trust issue. And it will not retch its full potential until users and consumers feel more secure than they do today when they go on-line. The threats on the Internet seem to be proliferating just as fast as the opportunities. Data breaches, malware, ID theft and spam are just some of the most commonly known invasions of a user’s privacy and security. And people are worried about their personal information going out and parents, like me, are worried about unwarranted sexually explicit material coming in before their children. And the landscape is getting more complex as dedicated hackers undertake persistent targeted attacks and develop ever more sophisticated frauds.

The approach that Locke outlined will apparently be housed within the Department of Commerce, a choice that is likely relevant to the scale and growth of e-commerce online:

The end game of course, is to create an identity ecosystem where individuals and organizations can complete online transactions with greater confidence, putting greater trust in the online identities of each other, and greater trust in the infrastructure that the transactions run over. Let’s be clear, we’re not talking about a national ID card. We’re talking about a government controlled system. But what we are talking about is enhancing online security and privacy, and reducing, and perhaps even eliminating, the need to memorize a dozen password through the creation and use of more trusted digital identities. To accomplish this, we’re going to need your help. And we need the private sector’s expertise and involvement in designing, building and implementing this identity ecosystem. To succeed we’ll also need a national program office at the Department of Commerce focused on implementing our trusted identities strategy.

For more context, look back to Schmidt’s introduction of the NSTIC at the WhiteHouse.gov blog last year:

Cyberspace has become an indispensable component of everyday life for all Americans. We have all witnessed how the application and use of this technology has increased exponentially over the years. Cyberspace includes the networks in our homes, businesses, schools, and our Nation’s critical infrastructure. It is where we exchange information, buy and sell products and services, and enable many other types of transactions across a wide range of sectors. But not all components of this technology have kept up with the pace of growth. Privacy and security require greater emphasis moving forward; and because of this, the technology that has brought many benefits to our society and has empowered us to do so much — has also empowered those who are driven to cause harm.

Today, I am pleased to announce the latest step in moving our Nation forward in securing our cyberspace with the release of the draft National Strategy for Trusted Identities in Cyberspace (NSTIC). This first draft of NSTIC was developed in collaboration with key government agencies, business leaders and privacy advocates. What has emerged is a blueprint to reduce cybersecurity vulnerabilities and improve online privacy protections through the use of trusted digital identities.

The NSTIC, which is in response to one of the near term action items in the President’s Cyberspace Policy Review, calls for the creation of an online environment, or an Identity Ecosystem as we refer to it in the strategy, where individuals and organizations can complete online transactions with confidence, trusting the identities of each other and the identities of the infrastructure that the transaction runs on. For example, no longer should individuals have to remember an ever-expanding and potentially insecure list of usernames and passwords to login into various online services. Through the strategy we seek to enable a future where individuals can voluntarily choose to obtain a secure, interoperable, and privacy-enhancing credential (e.g., a smart identity card, a digital certificate on their cell phone, etc) from a variety of service providers – both public and private – to authenticate themselves online for different types of transactions (e.g., online banking, accessing electronic health records, sending email, etc.). Another key concept in the strategy is that the Identity Ecosystem is user-centric – that means you, as a user, will be able to have more control of the private information you use to authenticate yourself on-line, and generally will not have to reveal more than is necessary to do so.

This is all wonky stuff that may seem a bit dry to some readers, but it’s important. The intertwined issues of identify, security and online privacy are increasingly relevant to every citizens as more commerce, education, communication and elements of everyday life move onto the Internet and mobile infrastructure. This strategy is central to how the United States government will work with industry, nonprofits, citizens and other states to improve the status quo. On that count, Bob Gourley, CTO of Crucial Point, commented extensively on the NSTIC at CTOVision.

It won’t be easy. Supporting the creation of identity infrastructure and improvements to online privacy in the private sector has the potential to make the Internet more secure and convenient for users and consumers but could have unintended consequences if not carefully pursued. There’s a lot at stake. As the Stanford event organizers highlighted, “e-commerce worldwide is estimated at $10 trillion of business online annually.”

Wired’s Ryan Singel highlighted a key issue for the White House plan for online identity, perhaps even the fundamental one in today’s online identity landscape: Facebook.

Philip Kaplan, the outspoken founder of Blippy, AdBrite and Fucked Company, added a Silicon Valley developer voice to event’s panel, arguing that any system has to be simple to implement, so that developers working in their living room making a website can concentrate on building new features, not worrying about security.

The closest thing to that currently is Facebook Connect, which lets you use your Facebook credentials to login you in around the net and on mobile apps..

“I can put in one line of JavaScript and I have a login system,” Kaplan said. “But that doesn’t I’m not going to pay my taxes using Facebook Connect.”

Which is another way of it might be as dangerous for a single company to be the world’s online ID vault as it would for the government to handle that task.

And right now, with Facebook at 600 million users and $50 billion in valuation, that future seems much more likely than a standards-based, interoperative system built by geeks at the behest of the feds.

Whether an online trust framework can be a viable alternative to Facebook’s play to be the identity provider online is a first-order question, and one that deserved examination. Kudos to Singel for putting the event in that context.

Weekend Reading: The most recent version of the NSTIC follows. Look for more reporting, both here or at another outlet, once the final version is released.

National Strategy for Trusted Identities in Cyberspace http://d1.scribdassets.com/ScribdViewer.swf