Computer-Based National Information Systems: Technology and Public Policy Issues

September 1981

NTIS order #PB82-126681 9

Library of Congress Catalog Card Number 81-600144

For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402 Foreword

This report presents the results of an overview study on the use of computer technology in national information systems and related public policy issues. The purposes of this study are: ● To provide a general introduction to computer-based national in formation systems. –Will help acquaint the nonexpert reader with the nature of computer-based national information systems and the role they play in American society. ● To provide a framework for understanding computer and information policy issues. —Develops a structure of information policy and presents brief essays on several of the more important issue areas, with an emphasis on how future applications of computer-based information systems may intensify or alter the character of the policy debate and the need for new or revised laws and policies. ● To provide a state-of-the-art survey of computer and related technologies and industries. –Highlights recent developments in computer and information technologies and describes the current status and likely evolution of the computer and information industries. ● To Provide a foundation for other related studies. While some observations can be made about national information systems in general, a full assessment of impacts and issues is best conducted in the context of specific systems. The report builds a foundation for three related OTA studies in the areas of computerized criminal history records, electronic mail, and electronic funds transfer. These three separate studies will be published later this year. As a set, the four studies comprise the OTA assessment of Societal Impacts of National Information Systems that was requested by the Senate Committee on the Judiciary, House Committee on the Judiciary, and House Post Office and Civil Service Committee. Supporting requests were received from the House Government Operations Subcommittee on Government Information and Indi- vidual Rights and the House Science and Technology Subcommittee on Science, Research, and Technology. OTA appreciates the participation of the many advisory panelists and others who helped bring this study to completion.

/jwf’~#. . JOHN H. GIBBONS Director

///. . — —

National Information Systems Advisory Panel

Susan Nycum, Chairwoman Attorney at Law, Gaston Snow & Ely Bartlett

Roy Amara Rob Kling James Rule President Professor of Information and Professor of Sociology Institute for the Future Computer Science State University of New York at University of California at Irvine Stony Brook Paul Baran President John C. LeGates* Richard M. Schmidt Cabledata Associates Director, Information Resources General Counsel Policy Program American Society of Newspaper Harold P, Belcher Harvard University Editors General Manager for Advanced Henry Lucas Sherry Turkle Mail R&D Chairman and Professor of Program in Science, Technology, U.S. Postal Service Computer Applications and and Society Information Systems Massachusetts Institute of Robert L. Chartrand, ex officio New York University Technology Senior Specialist in Information Technology and Policy Ron Uhlig Congressional Research Service Daniel McCracken Manager, Business and Services Past President Planning Kent W. Colton Association for Computing Bell Northern Research Professor of Public Management Machinery Laboratory Brigham Young University Arthur S. Miller Jacques Vallee Donald Dunn Professor of Law Emeritus President Professor of Engineering- The George Washington Infomedia University Economic Systems Carl Vorlander Stanford University Sharon Nelson Executive Director National Association for State Lawrence J. Gervais Attorney at Law Information Systems Vice President Consumers Union American Postal Workers Union Phil Nyborg Fred W. Warden Former General Counsel Former Director, Maurice W. Gregg Computer and Communications Telecommunication Relations Senior Vice President for Finance Industry Association IBM Corp. The Gap Stores, Inc. Russell Pipe Willis Ware Jeremiah Gutman President Senior Computer Specialist Attorney at Law Translational Data Reporting The Rand Corp. Levy, Gutman, Goldberg & Service, Inc. Kaplan Iram Weinstein Ithiel De Sola Pool System Planning Corp. J. Robert Harcharik Professor of Political Science Alan F. Westin President Massachusetts Institute of Professor of Political Science Tymnet, Inc. Technology Columbia University

*Resigned in late 1979 iv OTA National Information Systems Assessment Staff

John Andelin,* Assistant Director, OTA Science, Information% and Natural Resources Division

Stephen E. Doyle,** Program Manager Communication and Information Technologies Fred B. Wood, † Project Director Fred W. Weingarten, Study Director, NIS Overview Renee G. Ford,†† Writer-Editor Susan S. Stocker,†† Research Assistant Jean E. Smith, Analyst Elizabeth A. Emanuel, Administrative Assistant Teri Miles, Secretary Zalman A. Shaven, Senior Analyst Raymond B. Crewel.1, Senior Analyst

OTA Publishing Staff

John C. Holmes, Publishing Officer John Bergling Kathie S. Boss Debra M. Datcher Joe Henson

*Since March 1980; Eric H. Willis served as Assistant Director through February 1980. **Through February 1981 ; Sam Hale serving as Interim Program Manager since March 1981. † Since June 1979; Ruann E. Pengov served as Project Director through May 1979. †† OTA contract personnel. Special Advisory Panel on Information Technology

Paul Baran, Chairman Lance Hoffman Phil Nyborg President Professor of Electrical Former General Counsel Cabledata Associates Engineering and Computer Computer and Communications Science Industry Association The George Washington Craig Fields University Donn B. Parker Senior Program Manager Senior Consultant Defense Advanced Research SRI International Projects Agency Konrad K. Kalba President Ron Uhlig Kalba Bowen Associates, Inc. Manager, Business and Services Dean Gillette Planning Executive Director for Corporate Bell Northern Research Studies Daniel McCracken Laboratories Bell Telephone Laboratories, Inc. Past President Association for Computing Frederic Withington Vice President Vico Henriques Machinery Arthur D. Little, Inc. President Computerland Business Theodore Myer Paul G. Zurkowski Equipment Manufacturers Senior Scientist President Association Bolt, Beranek & Newman Information Industry Association

Acknowledgments

The following individuals contributed as contractors or reviewers during the course of the study: Charles C. Joyce and Jeffrey Held, Richard L. Fred Bernard Wood, Computer Social Impact Deal & Associates, Inc. Research Institute, Inc. Kenneth C. Laudon, Croton Research Group, John L. King and Kenneth L. Kraemer, Irvine Inc. Research Corp. Donald A. Marchand, University of South Fred M. Greguras, Kutak, Rock & Huie Carolina at Columbia Alan Lipis, Electronic Banking, Inc. Jeffrey A. Meldman, Massachusetts Institute of Technology . Contents

Chapter Page

● ix Overview ...... OO. O. OOOOOOO” “OOOOOO”O”COO.. *O

I. Summary ...... ovono”o”.”””~ ● “”” 3 2. Background and Purpose of Study...... +...... 29 3. information Systems and Computers ...... ~”~””””o.. 37 4. Information in Society ...... ””’.~”” .“”””+.”””” 47 5. The Structure of Information Policy ...... ””””””””” 55 6. Innovation, Productivity, and Employment...... 65

7. Privacy ...... ”90.0””””0 s“. ”” ”” ”” s”””.” ● “”” 73 8. The Security of Computer Systems ...... +””.”” .“”.””””” 81 9. Government Management of Data Processing ...... 89 10. Society’s Dependence on Information Systems ...... 97 11. Constitutional Rights ...... +”.”””” •.””~’”””.Go105

12. Regulatory and Other Issues ...... ”””””” ● “.””.”” 115 13. Trends in Computer Technology ...... ”~””<””~’”. ““”123

14. Industry Structure ...... ”.”””””””?. .“””os”oc””0.0147

vii Overview

Computers have become a major technological tool of American society during the last quarter of a century. New developments in computer and communication technology promise within this decade an even more radical revolution in the way that information is collected, stored, used, and disseminated. Large-scale integrated circuit technology, for example, allows hundreds of thousands of electronic components to be fabricated on a thin wafer smaller than a paper clip, thereby providing computing capability hundreds of times less expensive, less energy-consuming, and more reliable than was available only two or three decades ago. One result is the rapid growth in small, inexpensive computers that are the equivalent of machines selling for as much as a million dollars in the 1950’s. Data communication networks using satellite and microwave technologies make it possible to provide access economically to large data bases from anywhere in the country or the world. Thus, networks of remotely sited computers can provide services such as credit card and check authorization or airline scheduling to users nationwide. As these and other computer-based information systems–such as those used in air traffic control, military command and control, and electronic funds transfer–become more important to American society, they create corresponding public policy issues. Among the most important issues are the following: 9 Innovation, productivity, and employment. —Continued innovation in information technology is a prime requisite for a healthy information industry and also offers the tools for improving the productivity of many other sectors of the economy. Likely policy issues include: support for research and development on civilian applications of computer technology, vitality of academic computer science, support for computer impact research (e.g., the impact on employment), and maintaining U.S. international competitiveness in computers and information systems. ● Privacy. --New applications of computer and communication technology-e.g., an automated securities exchange, in-home information services, electronic publishing, and the automated office—may generate issues over secondary use of personal information, surveillance, and the possible need for new approaches to privacy policy. ● Security .-The technology for securing computer systems from theft, sabotage, natural hazards, privacy abuses, and the like is improving steadily. However, the increasingly complicated systems now being designed and built make secure operations more difficult and suggest likely issues concerning the adequate protection of Federal information systems and vital non-Federal systems, and the development of the necessary data security and cryptographic capability. ● Government management of data processing. —It appears that, in general, the Federal Government is rapidly falling behind the private sector in its use and management of up-to-date computer and information technology. The 96th Congress enacted Public Law 96-511 (Paperwork Reduction Act of 1980) to help address this problem. And other issues may arise with respect to the effects of large-scale information systems on Federal decisionmaking (the “automated bureaucracy”) and the process by which social values are reflected in information system design.

lx “ Society’s dependence on information systems.—As society moves toward electronic mail and other large extensively used information systems, likely new issues will concern the ways in which public policy can help balance the risks society may encounter versus the benefits, retain the option to end dependence on a particular system (avoid becoming “locked in”), and provide alternatives for those who prefer not to use electronic services. Research on the risks of system failure is needed, as is careful attention to how technology can be used to reduce these risks (for example, through distributed data bases and back-up computers). ● Constitutional rights. –Little legal precedent exists, in many cases, for applying constitutional law to issues raised by computer-based information systems. Areas of constitutional rights that may be affected by information systems include: freedom of speech and press (first amendment), protection against unreasonable search and seizure (fourth), protection against self-incrimination and guarantee of due process of law (fifth), right to a trial by impartial jury (sixth), and State guarantees of due process and equal protection of the laws (14th). ● Regulatory boundaries. –Evolving computer-based systems are crossing over and blurring traditional regulatory boundaries. Regulatory policy issues are likely to recur with respect to computer- v. communication- based services, electronic interstate branch banking, and electronic mail. As these systems expand geographically and move away from traditional definitions of industry structure, policy issues concerning interstate conflict of laws, Federal-State relationships, and antitrust may also arise. ● Other issues.— Four other issue areas were identified as important although not analyzed in great detail: computer crime, transborder data flow, information gap (for those who would be denied access due to technological illiteracy or other reasons), and computer software protection. ,,

, Chapter 1 Summary

* Contents

Introduction ...... 3 Computerland Information Systems ...... 3 National Information Systems ...... 5 Purpose and Limitations of the Study ...... ;...... 6 Computers, Information Systems, and Society...... 8 Nature of Computer-Based Information Systems...... 8 Future Trends in Computer-Based Information Systems...... 9 The Computer-Based Information Society, ...... 12 The Structure of Information Policy Issues ...... 13 Information Policy, Law, and Regulation ...... 13 System Issues ...... 14 Information Issues ...... 15 Secondary Policy Impacts...... 16 Long-Term Societal Effects...... 16 Public Policy Issues ...... 16 Innovation, Productivity, and Employment ..,...... 16 Privacy ...... ***. 18 Security ...... 19 Government Management of Data Processing...... 20 Society’s Dependence on Information Systems ...... 21 Constitutional Rights ...... 22 Regulatory Boundaries ...... 24 Other Issues...... 24

TABLE TableNo. Page l. Structure of Information Policy Issues...... 00,.. . . 14

LIST OF FIGURES

FigureNo. Page l. The One-Chip Computer: Offspring of the Transistor...... 3 2, Drop in Average Computer System Cost per 100,0OO Calculations From 1952-80...... 4 3. Increase in Capability of Semiconductor Chips From1956-80...... 4 4. Computer Technology in a National Information System ...... 6 5. Communication Technologyin a National Information System ...... 7 6. Four Sector Aggregation of the U.S. Work Force by Percent, 1860-1980. . 13 7. Value Triad of Information: Conflict and Competition Among Private,

Commercial, and Public Value ...... ● ***...... 15 Chapter 1 — Summary Introduction

Computers and Information Large-scale integrated circuit technology Systems allows hundreds of thousands of electronic components to be fabricated on a thin silicon Computers have become a major tech- wafer smaller than a paper clip (see fig. 1) nological tool of American society during the thus providing computing capability hun- past quarter of a century. New develop- dreds of times less expensive, less energy- ments in computer and communication tech- consuming, and more reliable than was avail- nology promise within this decade an even able only two or three decades ago, as shown more radical revolution in the way that in- in figure 2. Because these microelectronic formation is collected, stored, used, and devices are changing the economics of com- disseminated. puter access and use, they are dramatically

Figure 1. —The One-Chip Computer: Offspring of the Transistor

Photo cred~f Be// Labs

The MAC-4 one-chip computer, developed for a variety of telecommunications applications, is compared to a standard-sized paper clip. The chip’s numerous functional areas are labeled

3 —

4 . Computer-Based National Information Systems: Technology and Public Policy Issues

Figure 2.— Drop in Average Computer System Computers are becoming smaller and Cost per 100,000 Calculations From 1952-80 less expensive, thereby increasing their range of applications. Today, computer Cost per 100,000 logic is even being built into common L$1.26 Year calculatlonsa devices such as ovens and automobile 1.00 IA 1952 $1.26 carburetors, and complete small com- k 1958 0,26 1964 0.12 puter systems are being sold through k $0.26 1970 0.01 consumer retail outlets at a price ‘L 1976 0.005 0.1 k$o 12 1980 0.0025 equivalent to a first-rate high-fidelity stereo set. At the center of this transformation is the integrated circuit chip, 001 a tiny device capable of containing an entire computer system. The increasing capability of these circuit chips is 0001 shown in figure 3. As a result, the large computer that occupied one or several rooms in the late 1960 will soon fit in a desk drawer, and a medium-size com- 0.0001 puter will fit in a briefcase or even a coat pocket. Computers can be connected inexpen- 000001 sively to communication lines making it 1950 1960 1970 1980 Year possible to provide access economically to large computer data bases from any- aco~t per 100 OOCI Calcu Iat tons IS based on data for the followlng I EM com Puter systems (w I ;h year In parentheses) 701 (1952), 7090 ( 1958), 360/50 ( 1964), 370/1 66 (1970), 3033 (1976), 4300 (1980) SOURCE Off Ice of Technology Assessment and President’s Reorganlzatlon Figure 3.— Increase in Capability of Project, Federa/ Dafa Processing Fleorgan/zat/orr Sludy Basic Reporf of the Sc/ence and Technology Team, Washington, D C June 1978, Semiconductor Chips From 1956-80 pp 2930 107 affecting the ways in which computers are used, and who is using them. 106 This change has been accompanied by equally rapid improvement in communica- 105 tion technology. * New telecommunication technologies such as direct satellite broad- 104 casting, local area distribution cables, and long-distance data communication networks allow computers to be used in ways that 103 were unimagined a decade ago. Although ini- tially distinctly different, computer and com- 2 10 munication technologies are increasingly interdependent, and are being combined to form new products and services and to 10 change the nature of information systems in several ways: 1 1950 1960 1970 1980 1990 Year *The development of communication technology is ex- SOURCE: Instltute of Electrical and Electronic Engineers, IEEE Spectrum. vol. amined in detail in the OTA report, Telecommunication Tech- 17, June 1980, p 48, and VLSI/LSl IEEE Spectrum VOI. 18 January nology and Public Policy, in press. 1981, pp. 57-61 Ch. l—summary ● 5

where in the country or the world. Net- c the nationwide electronic mail services works of remotely sited computers pro- operated by several private firms and vide services such as credit card and soon to involve the U.S. Postal Service; check authorization or airline schedul- ● the nationwide computer-based credit ing to users nationwide. card and check authorization services c Techniques for the organization and (e.g., VISA, American Express, Master- display of information are improving as Card, Telecheck, Telecredit); are methods of instructing the com- ● the computerized air traffic control puter to perform its tasks, thus making system operated by the Federal Avia- it easier for nonexperts to obtain usable tion Administration; information. ● the computerized military command ● Information storage technology which and control systems operated by the is less costly and more compact makes Department of Defense; it feasible to store large amounts of in- ● the nationwide computer-based airline formation for long periods of time in reservation systems operated by major electronic form. In many cases it costs air carriers (e.g., United, TWA, Amer- less for electronic storage than to main- ican); and tain paper records, and access to spe- ● the computerized automatic quotation cific items is faster and more accurate. system for obtaining over-the-counter stock prices operated by the National National Information Systems Association of Securities Dealers. The focus of this study is on national in- A secondary focus of the study is on the formation systems that are made possible by use of personal computers* when intercon- advances in computer and communication nected as part of a larger network. For exam- technology. ple, MicroNet and The Source are new services, designed to link owners of personal com- The term “national information systems” puters with each other and with larger com- as used here means systems that: are sub- puters, data banks, and information proc- stantially national in geographic scope (i.e., essing services, over a nationwide network. multistate); are organized by Government or Also, in the future, stand-alone computer private organizations or groups to collect, games when combined, for instance, with a store, manipulate, and disseminate informa- television set and a telephone will be able to tion about persons and/or institutions; and serve as a terminal with similar access to a are in some significant manner based on nationwide network. computers and related information and communication technology. A typical national information system is illustrated in figures 4 and 5. In the example, Furthermore, the focus is primarily on there are seven cities (nodes) in the network: large, interconnected national systems New York, Washington, D. C., Chicago, Dal- where a substantial national interest is in- las, Atlanta, Los Angeles, and San Fran- volved (e.g., in the financial, postal, military, cisco. Information (for instance, on inven- and air traffic safety areas). Examples of tory, sales, credit transactions, and the like) such systems include: is stored by the headquarters office of a na- ● the computer-based National Crime In- tional retail sales company in a central (host) formation Center operated by the Fed- computer in Dallas, as shown in figure 4. The eral Bureau of Investigation; regional offices also store information in ● the FEDWIRE electronic funds trans- *Small but fully capable computers currently selling for fer network operated by the Federal Re- several hundred to a few thousand dollars and designed for serve System; use by individuals in the home, business, or school. 6 ● Computer-Based National Information Systems: Technology and Public Policy Issues

Figure 4.—Computer Technology in a National Information System (illustrative)

m’ Mlnl - Mini- computer computer Telephone Data r communication i Ilnk PI~See figure 1-4) Terminal “= Personal computer

Terminal Terminal 4. /Terminal Terminal —

ml- %~p Host Mink computer Chicago Washington, D C. New York L /\l Terminal

L!&&h Atlanta

SOURCE: Off Ice of Technology Assessment based onIEEE Specfrurn. vol 17, October 1980, p 24, and AR I NC CorrJ Overv/ew 01 L30rnesl/c Te/ecornrnun/caf /ens Common Carrier Industry, September 1979 their own minicomputers. * All terminals on ernment agency) rather than in one central the network can access the headquarters computer. Furthermore, owners of a per- data base (in the host computer) and the re- sonal computer could plug into such a net- gional data bases distributed around the work, with the appropriate code words and country. The information is disseminated authorization, via a telephone line (see fig. 4) from one city to another via the satellite and in their own home or office and actually microwave communication links illustrated transact business by computer. in figure 5.

This is an example of current technology Purpose— and Limitations used by a growing number of private firms of the Study and some Government agencies in what is known as a “distributed data processing net- This overview study is intended to be a work. Distributed means that the data broad introductory examination of com- bases (and computer capability) can be in puter-based national information systems several locations (e.g., branches of a retail and related technology and public policy store as above, or regional offices of a Gov- issues that Congress is likely to face over the next few years. It will also serve as a founda- *Small computer systems currently selling for under tion for the other OTA information systems $50,000. studies and for future in-depth examination ———

Ch. l—Summary ● 7

Figure 5.—Communication Technology in a National Information System (illustrative)

. ./ Data communication by satellite ! :. \.

Rooftop Rooftop station station1

, D.C. FI m . . . 1...... ---”Q-*”-- . .------...... ---- . . . ---. . ------. . . . . * -.. — I 4 aTerminal Terminal and minicomputer and minicomputer

Data communication by microwave

RooftoD City City Rooftop transceiver nod-e node transceiver

SOURCE Office of Technology Assessment based on /EEE Specfrurn VOI 17, October 1980, p 24, and ARINC Corp Overv/ew of Dornesf/c Te/ecofnrnun/caf/errs Common Carr/er /ndusfry, September 1979

of particular systems and issues. It also ex- Consequently, OTA is also conducting amines the increasingly critical role that na- case studies of three specific national in- tional information systems play in society. formation systems: 1. an assessment of the National Crime In- It would not be possible for any one study formation Center Computerized Crim- to capture succinctly a single set of policy inal History System; issues that would apply to all national in- 2. a preliminary assessment of the role of formation systems in American society. The the U.S. Postal Service in electronic specific system applications are too diverse, message systems; and the potentials and problems too complex, 3. a preliminary assessment of electronic and the parties-at-interest and relevant in- funds transfer systems. stitutional and legal frameworks too dis- These case studies will provide a more de- parate. Only a few of the many issues ex- tailed look at the impacts and issues asso- amined in this study will be important for ciated with a specific national information any particular system. system. 8 ● Computer-Based National Information Systems: Technology and Public Policy Issues

Computers, Information Systems, and Society

Nature of Computer-Based 2. Information storage. Computers can Information Systems store large amounts of information for long periods of time in an electronically Traditionally, computers have been readable form that is easily and quickly viewed as super calculators that automate recoverable. Depending on the par- processes that were previously performed by ticular application, the methods of people sitting at mechanical adding ma- storage vary widely, from signals in chines. However, computers carry out a wide electronic circuitry, to magnetic pulses variety of tasks associated with processing on tape, to holes in cards. New advances information. It is important to understand in memory technology eventually will the entire range of these capabilities in order allow trillions of characters of informa- to appreciate the nature and magnitude of tion to be stored conveniently and the potential social impacts of this tech- cheaply wherever there is even a small nology when used in information systems. computer. The cost of storing information electronically will soon be substan- Computer capabilities fall into seven main tially lower than the cost of storing the categories: same amount of information on paper. 1. Data collection. When attached to var- 3. Information organization. Computers ious sensing devices, computers can de- can be used to rearrange information so tect and measure such external physical that it is more suitable for particular ap- phenomena as temperature, time, pres- plications. For example, if the data in a sure, flow rate, or any number of other telephone directory were stored in a variables. Also, computers can keep a computer’s memory, it could be in- record of transactions. For example, a verted to allow one to look up a tele- computerized cash register can collect phone number that corresponds to a and store information about a sale that particular address. More generally, includes bookkeeping entries, taxes, computers can simplify and restructure commissions and inventory, and can vast amounts of raw data to assist peo- even reorder stock. Some computer- ple in drawing significant meanings or based door locks require individuals to conclusions. carry magnetic identity cards. Such 4. Calculations. Computers perform arith- locks not only can control access but metic calculations millions of times also can create a record of whose card faster than can human beings. They are was granted access, when, and for how used to make numerous simple calcula- long. tions, such as those required in proc- Technological advances are beginning essing the payroll for a sizable or- to provide computers with the ca- ganization; to make sophisticated sta- pability to directly process visual and tistical calculations on large amounts of audio input, thus greatly increasing data, such as those for social science re- their applicability to data collection. search; or to perform highly complex Computers already have a limited abili- scientific calculations, such as those ty to recognize human speech, to read needed for weather research or for directly a variety of typewritten forms modeling fusion energy systems. and handprinted texts, and to detect 5. Communication. Through connections patterns in video images. These func- over a communication system, com- tions will be improving rapidly over the puters can transmit data around the next decade and will soon appear in Nation and the world either to human commercial equipment. users or to other computers, which per- Ch. l—Summary ● 9

mits the sharing of work and data among groups of linked computers (known as computer networking). Pri- vate firms are beginning to offer special communication services to support computer networking. In addition, computers make possible the more effective use and management of the communication systems themselves. 6. Information presentation. Computers can put out information in a variety of forms. Through graphical display, and more recently through voice response, they can make data readily understandable and useful to nonexperts. It is possible to display data and computer

schematics on screens in a multicolored, Photo credit: Texas Insfrurnenfs. Inc. three-dimensional format for design and INSIGHT Series 10 Personal Information Terminal. Standing analytical purposes. Also, data such as only 12 i riches high with a 51A-inch swivel display screen numbers and statistics can be organized by the computer in an easy-to-under- chines that sold for as much as a million stand tabular presentation. Much of the dollars in the 1950’s. They may appear in programing effort in developing modern the guise of video games, television sets, management information is directed or telephones that will also have a com- toward designing ways in which the in- puter capability available for other pur- formation generated by the computer poses. This trend will stimulate more can be presented most clearly to the widespread computer literacy in society, manager who needs it. and in turn be reinforced by the conse- 7. Control. Computers can be used to con- quent increase in the ability of people to trol a machine tool or a production line program and use computers. The first without human intervention. Many con- generation to grow up with computers is sumer devices—including microwave now reaching maturity. These “computer ovens, automated home thermostats, literate” young adults accept computers automobile engines, television sets, and as a natural part of their world. Computer telephones— incorporate computer con- design and use will be taught more both in trols using new microprocessor technol- school and as part of adult education, and ogy. Such uses are increasing rapidly. will enhance an already thriving market for specialized application programs de- Future Trends in Computer-Based signed for small computers. Information Systems Expansion in the number and size of computer networks. By the end of the decade, The use of computers during the 1980’s most computers, even small ones, will be will likely follow the key trends discussed connected to a communication network at below and covered in depth in chapters 13 least part of the time. and 14. The communication system may be ● Growth in the use of personal computers. dedicated to a single application in which The small computer will become common all the machines on the network perform both in the home and in business. Despite portions of a larger task. Public data net- their small size, these systems will be works, on the other hand, provide any highly capable–the equivalent of ma- home or business computer with access to 10 ● Computer-Based National Information Systems: Technology and Public Policy Issues

a wide range of data bases or special pro- long term for the data communication in- grams that may be wanted for occasional dustry.* use. Such multiuser national networks ● Higher level integration of data services. that can be interconnected now exist, and Many individual networks for servicing the number of users is expected to grow at specific corporate and governmental a rapid rate. needs will continue to be built. Some of ● The trend toward information services. these networks will become integrated. The computer industry has traditionally For example, most airlines, car rental been concerned with selling hardware agencies, and large hotel chains have their (desktop, mini, and mainframe computers own reservation systems. It is now tech- and related auxiliary equipment). How- nically feasible to build an integrated ever, current trends in both pricing and system that would provide travel agents the structure of the market are driving the access to all of these reservation systems emphasis toward providing computer- through one desktop terminal. based information services, such as bib- Similar integrated information systems liographic and data base searches, elec- are also feasible in insurance, banking, tronic publishing, electronic banking, and travel, entertainment, law enforcement, the like. A number of these services will commodities exchanges, medical services, still require that the user possess a com- and many other sectors that now use sev- puter. However, many will be offered over eral separate information systems. How- data communication lines to homes and of- ever, implementation of these systems will fices, and will be accessible through a depend on perceived need, economic modified (“intelligent”) telephone or tele- viability, and other related factors. vision set. Examples include two-way ● The software bottleneck. According to cable television, videotext, and the AT&T many computer and industry experts, the Electronic Information Services experi- increasing capability of computer hard- ment that provides an electronic tele- ware is not being fully utilized due to prob- phone directory over a telephone line to a lems encountered in creating suitable soft- home terminal. Eventually, information ware programs for these new machines. services of all kinds will dominate the data The major problems are the relatively processing market in terms of dollar slow increase in the productivity of pro- volume. gramers—their cost efficiency—compared ● The competition among giant corpora- with that of the hardware, and the dif- tions for the data communication services ficulties encountered in managing large market. IBM, AT&T, Exxon, and GTE, programing projects. among others, are preparing to offer a These problems have created bottle- variety of data communication services. necks in the development of new applica- Large corporations such as these have actions. Computer programing has been cess to the capital required to install the relatively resistant to productivity im- technological base for the planned serv- provement, at least when compared with ices, such as communication satellite sys- corresponding improvements in hardware tems and fiber optic transmission lines. A performance. Programing is by nature series of recent rulings by the FCC, some labor intensive. Its cost is rising due to still under challenge, are intended to clear the increased programing requirements of the way for open competition among these new hardware coupled with a shortage of and other corporations to provide informa- programing personnel with the required tion services of all kinds over communica- training and experience, New mechanisms tion lines. Resolution of the pending

challenges by the courts or by Congress *For a detailed discussion, see the OTA report Telecommu- will have significant implications over the nication Technology and Public Policy, in press. Ch. 1—Summary ● 11 12 . Computer-Based National Information Systems: Technology and Public Policy Issues

one-third of the research effort at Bell impeded overall productivity growth. Labs is devoted to the software problem. Greater application of information technology has been proposed as a chief The Computer-Based remedy. For this reason, it is highly Information Society likely that in this decade the service sector will increasingly depend on the An information industry analyst recently use of computer-based information observed that “every society is an informa- systems. tion society.”* That is, all human organiza- ● The information sector itself has grown tions, no matter how simple, depend for their to account for over half of the U.S. work functioning on an intangible resource called force. An examination of the trends in ‘‘information. In any society, information the work force reveals the extent to serves several purposes. It can be, for exam- which the economy has shifted. The re- ple, a commodity of commerce, an indicator sults shown graphically in figure 6 il- of wealth or power, a basis for making de- lustrate the transitions from an econ- cisions, or a source of entertainment. omy dominated by agriculture, to one dominated by manufacturing, to a serv- Several key trends are transforming the ice and information economy. United States into a computer-based in- The information sector includes those formation society: who generate and sell information as ● The tasks being undertaken by the large well as those who produce information organizations that serve American SOC- technology. Included are typewriter ety are growing in complexity. The air and word processor manufacturers, traffic control system handles nearly 20 newspaper publishers, and producers of million flights yearly. Every year the films and broadway and television financial system clears over 30 billion shows, all of whom are rapidly in- checks, the U.S. Postal Service delivers corporating computer-based informa- over 100 billion pieces of mail, and the tion systems into their operations. The Internal Revenue Service (IRS) receives information sector also covers informa- more than 140 million tax returns. The tion services and products used by any use of computer-based systems is one organization for its own internal pur- way to cope with this vast and complex poses. Examples are internal account- information flow. ing and production management, and ● The service sector of the economy is inventory control systems, many of growing at a relatively faster rate than which are already computerized. the industrial and agricultural sectors. ● Greater international economic com- Many services such as medicine, law, petition coupled with the decreasing education, and Government involve the availability of basic resources are re- transfer of large amounts of informa- quiring industry and Government to tion. Resistance to productivity im- both improve and speed up their deci- provements in this sector, which rep- sionmaking capabilities. Computer- resents a large part of the economy, has based information systems are growing in importance for this purpose. Deci- sions about design, marketing, financing, and resource allocation all require a *Anthony G. Oettinger, “Information Resources: Knowl- edge and Power in the 21st Century, ” Science Magazine, vol. more sophisticated approach to the col- 209, July 1980, p. 191. lection and use of information. Ch. 1—SummarY ● 13

Figure 6.— Four Sector Aggregation of the U.S. Work Force by Percent, 1860-1980

(Using median estimates of information workers)

Stage Ill

----- #-.* Information

\. “% . Service -\* \ . / ‘-”---- # / “% Industry /’

:860 1880 1900 1920 1940 1960 1980 Year

SOURCE Marc V Porat The In formaflon Economy Stanford Unlverslty Inst!tute for CommunlcatlOn Research. report no 27, VOI 1, p 189, August 1976 See ch 4 for further discussion

The Structure of Information Policy Issues

Information Policy, Law, In the course of this study, OTA identified and Regulation 14 major areas of law and regulation* that affect information systems or are affected by As these computer-based systems become them. There are undoubtedly many others. more important to American society, particularly for Government administration, The analysis made by OTA has led to they create corresponding public policy these findings: issues. Current policies governing informa- s There are numerous laws and regulation systems are a composite of many spe- tions, some overlapping and some po- cific regulations and laws, which are based tentially or actually conflicting, that on three main factors: directly and indirectly affect the op- 1. the areas affected or the regulatory con- erators and users of information sys- cerns (privacy, freedom of information, tems, the consumers of information etc.); 2. the affected sector of society (banking, *These areas are privacy, freedom of information, first education, Government, etc.); and amendment, 14th amendment, due process, communication 3. the lawmakers and/or rulemakers (Con- regulation (Computer I I decision of the FCC), computer gress, the Federal Communications crime, proprietary rights (patent, trademark, copyright), evidence, liability, antitrust, taxation, Government provision Commission (FCC), State legislatures, of information, and Government procurement of information the Courts, etc.) systems. 14 ● Computer-Based National Information Systems: Technology and Public Policy Issues

services, and the’ subjects of personal developed by OTA for use in this and related information data banks. studies is shown in table 1. ● There appears to be neither a strong trend nor sentiment at present among System Issues policymakers in favor of a uniform Fed- eral information policy that would en- The policy issues related to information compass all the problems that could systems per se focus on their design, im- arise from the many possible uses of plementation, and operation. They generally data systems. * are concerned with whether the system per- ● There is a lack of focus on information forms the tasks expected of it with reliabili- policy as such, and consequently the ty, with appropriate security, and in an effi- emerging issues are not being directly cient and timely manner. These objectives addressed.** mainly are of interest to the organization ● Continuation of the present situation operating the system, and place major con- could inhibit many socially desirable ap- straints on the system designer. plications of information systems or Technical, operational, and reliability fac- could create even more intractable pol- tors all can have broader societal sig- icy problems in the future. nificance even though they originate in the The term “information policy” as used operational goals of the system itself. In re- here does not suggest that there is or should cent years, for example, public attention has be a single uniform policy governing all the been focused on areas such as: uses of information systems in both the pub- ● the safety and reliability of the air traf- lic and private sectors. In fact, no such pol- fic control system; icy exists, nor does one appear to be likely.

“Information policy” does suggest the Table 1 .—Structure of Information Policy Issues need for consideration of the currently confusing array of laws and regulations-and Level of issues Character of issues Example issues their strengths, overlaps, contradictions, System level Relate to the Government procure- design, implementa- ment policy, and deficiencies—within some overall policy tion, and operation Efficiency and issue structure or framework. The structure of particular in for- economy of mation systems. operation. Security of informa- *Some recently proposed legislation would establish a com- tion systems. prehensive approach to certain specific problem areas, e.g., Information level Relate to the hand- Privacy (record- privacy and freedom of information. See H.R. 2465, 96th ling of data: collec- keeping). Freedom of Cong., “Omnibus Right to Privacy Act of 1979. ” Also the Na- tion, storage, use, information regula- tional Telecommunications and Information Administration and dissemination. tions. Copyright (NTIA) of the Department of Commerce has made an effort and patents as re- to formulate—or at least to develop a framework for— lated to computer national information policies. See Arthur A. Bushkin and programs. Jane H. Yurow, The Foundations of United States Informat- Secondary policy Exist independent of Privacy (surveillance). ion Policy, NTIA, Washington, D. C., June 1980, and Jane H. impacts the particular infor- First Amendment Yurow, et al., Issues in Information Policy, Helen A. Shaw mation systems, but rights. are changed in mag- Fourth Amendment (cd.), NTIA, February 1981. See also, Donald A. Dunn, “In- nitude or character rights. formation Resources and the New Information Technologies: by use of Social vulnerability. Implications for Public Policy, ” National Science Foundation technology. Federal State Report to the President and Members of Congress, The Five- relations. Year Outlook on Science and Technology, vol. II, May 1980, Long-term societal Long-range societal Privacy (social pp. 493-507. effects impacts that are not attitudes). **The “paperwork Reduction Act of 1980” (Public Law currently reflected Psychological self- 96-51 1) enacted by the 96th Congress does set out a more in specific policy image of humans. comprehensive policy and management approach for Federal problems, but which Educational needs. Government information systems, The Act establishes may ultimately af - Social-political within the Office of Management and Budget (OMB) an Of- feet the nature of effects. fice of Information and Regulatory Affairs and assigns to U.S. society. Cultural impacts. that Office a broad range of authorities and required actions. SOURCE: Office of Technology Assessment, see ch. 5 Ch l—Summary ● 15

● the reliability, security, and control- Figure 7.— Value Triad of Information: Conflict and lability of military command and con- Competition Among Private, Commercial, trol systems, existing and proposed; and Public Value ● the security of large-scale electronic Private funds transfer systems; and value ● the reliability, accuracy, and respon- siveness of the social security information systems. There is a strong societal interest in the proper and reliable technical operation of each of the systems cited above, and poten- u- Value c} “9 tially high costs to society if they fail. Mad of information in society Information Issues y \ The three differing fundamental values of information shown in figure 7 motivate many of the laws and regulations affecting Commerical Public value Competition value information. Individual regulations or laws 4 * usually address only one aspect of informa- Conflict tion. Policy issues, then, arise from the inherent tensions between the particular Commercial value of Information: Information has been a commodity of commerce for centuries Books and newspapers, and in this values reflected in different laws. Congress century the broadcasting Industry, all sell Information. As society is called on to establish balances. These ten- becomes more dependent on Information, its value Increases. The very high growth rate of the computer-based information industry il- sions are illustrated below: lustrates this trend. ● Public v. private value. Freedom of in- Private value of information: In an Information society, economic competition is often based on access to special Information, such formation laws (reflecting public value) as a formula for a soft drink, an econometric projection, marketing can conflict with individual or pro- plans, or geological data. Commercially important information is considered by organizations to be proprietary Similarly, individuals prietary concerns (reflecting rights to often consider Information about themselves to be private, either privacy). For example, in serving the because damage can be done by its disclosure or simply because of public interest, Government collects an desiring to be left alone. Public value of informat/on: American society has always viewed in- extraordinary amount of information formation as having a public value, and has asserted the public in- about citizens, businesses, and other terest in a free flow of information. Examples include: the public support of Iibraries, schools, and museums; a tradition of academic organizations. Some of this information freedom and a system of open scholarly publication. the first theoretically has been available to the amendment guarantees, and freedom of information laws

public by law for a long time but has SOURCE Off Ice of Technology Assessment see ch. 4. been protected, in fact, by the amount of effort required to retrieve it from manual recordkeeping systems. Auto- terns, and those like the public mated systems reduce the cost and time librarians whose traditional role is to barriers to wider access to these public treat information as a public good avail- records, and thereby may accentuate able to all. These tensions may also the issue of the extent to which this in- stem from the competition between formation can and should be publicly Government-collected data, made avail- available. able through freedom of information ● Commercial v. public value. As informa- laws, and commercial data services. tion becomes a more valuable com- ● Commercial v. private value. Commer- mercial commodity, increasing tensions cially marketable information may in- are arising between those who wish to vade privacy or proprietary rights, as in sell it through new information sys- the case of computerized mailing lists 16 . Computer-Based National Information Systems: Technology and Public Policy Issues

that may be compiled from third-party Long-Term Societal Effects information sources without the knowledge or consent of the individuals in- Social scientists engaged in futures stud- volved. ies have suggested that the information revolution, spurred both by advances in computers and communication and by the Secondary Policy Impacts changing role of information in U.S. society, Computer-based information systems, by will have profound long-term effects as increasing the quantity of information col- dramatic as those caused by the invention of lected, the efficiency of its collection and the printing press. dissemination, its utility, and its ease of Just as the printing press, by stimulating storage can cause qualitative changes in the literacy and speeding the flow of ideas, sup- behavior of Government, individuals, and ported the Renaissance and the transition organizations as well as in the nature of from medieval society to the age of en- traditional conflicts. Thus, the use of auto- lightenment, so the new information sys- mated information systems can have sec- tems could profoundly transform the social ondary effects on policy problems that have and political environment of U.S. and world existed for years and in many ways are inde- society. Indeed television and sophisticated pendent of the technology. Because much computer-based polling technology have more information can be obtained, handled, already had observable effects on the po- processed, and distributed so much faster, litical processes in the United States. Third old problems are not merely exacerbated, World leaders calling on UNESCO for a but new ones are created. “new world information order” express the belief that information technology will have For example, the increased scale and a central influence on the social and presumed efficiency of computerized crim- economic development of their countries as inal justice recordkeeping intensifies the ten- well as on international relationships. sion society has always experienced between the needs of law enforcement and the in- This overview study has not attempted to dividual rights of citizens. Similarly, the address in detail these broader questions. tendency of the technology to encourage cen- However, given the potential for significant tralized record systems creates problems of social change, research funded publicly, Federal-State relationships, a particularly privately, or in some jointly developed proj- touchy issue in law enforcement. Some ex- ects could provide valuable insights into the perts believe this centralization trend could long-term societal effects of computer-based reverse through the use of of smaller com- information systems and related public pol- puters with distributed data bases. icy choices.

Public Policy Issues

The overview study examined the national and regulatory and other issues. See chap- information system issues judged by OTA ters 6 through 12 for further discussion. to be among the most important and likely to warrant congressional attention over the Innovation, Productivity, and next few years. These issue areas include: Employment innovation, productivity, and employment; privacy; security; Government management Innovation, the continual generation of of data processing; society’s dependence on new technological ideas and products and information systems; constitutional rights; services based on those ideas, is a prime req- Ch. 1—Summary ● 17 uisite for a healthy industry in a high tech- From a larger societal perspective, the in- nology field like computers and information creased productivity brought about by ad- systems. Innovation in information tech- vances in computer technology may be re- nology improves the productivity of the in- flected not only by greater output per em- formation industry itself and also offers the ployee, but perhaps also in terms of better tools for improving the productivity of many product quality, improved work environ- other sectors of the economy. ment and job satisfaction, and longer term social benefits such as improved job safety Based on anticipated advances in artificial and greater opportunities for on-the-job intelligence, robotics, computer control, and learning and career advancement. input-output technology over the next few years, computer-based factory automation Congress will be confronted by a number will make a substantial contribution to im- of issues concerned with innovation in com- proving manufacturing productivity. Word puter technology and its effects on produc- processing and other forms of office automa- tivity and employment: tion are already improving clerical produc- ● R&D support. Innovation in computer tivity and may have similar potential for and information technology depends on managerial productivity. Intelligent cash continued, aggressive R&D. Many U.S. registers and automated checkout are direct- corporations in the information in- ly improving the productivity of retail clerks dustry, realizing that their success de- and indirectly the productivity of retail man- pends on continued innovation, have es- agement (e.g., accounting, inventory control, tablished their own research centers. procurement). The full impact is yet to be Several Federal agencies* support com- felt of these and other applications that are puter R&D, although the major part of only now starting to be installed in the development support comes from the manufacturing and service sectors of the Department of Defense and related economy. However, they are likely to help re- agencies. An important issue is whether store an upward trend in the Nation’s pro- research in the applications of computer ductivity. technology to problems in the private (civilian) sector —in such areas as education,** health, transportation, environmental quality, and job safety—is receiving adequate Federal support, given the critical nature of computer technology to the Nation’s well-being. ● Vitality of academic computer science. Basic research in computer science is largely carried out in universities. Be- cause of the close connection between applied technology and basic research, the vitality of the computer industry is in part dependent on the vitality of academic computer science. However, university departments of computer sciences are experiencing problems in ob-

*Including the National Science Foundation, National

Photo credit: IBM Corp. Aeronautics and Space Administration, and Department of Energy. The I EM scanner uses holography, a technique for creating **Information Technology and Education is the subject of three-dimensional images, to read data on packages another OTA assessment in progress. 18 . Computer-Based National Information Systems: Technology and Public Policy Issues

taining the faculty, facilities, and funds portive public policies. * Because of needed to do the research and to train aggressive import competition from new experts. This situation is par- Europe, Japan, and Canada, even do- ticularly critical in systems design and mestic markets are vulnerable to any software engineering. faltering in the technological lead. ● Impacts on employment. It is still uncertain whether the productivity in- Privacy creases brought about by computer technology will increase or decrease the Privacy-related issues dealing with the overall employment level. Structural collection, dissemination, and use of per- shifts in the economy are likely to occur sonal information are likely to remain on the since any innovation which creates new congressional agenda for a number of products and new industries will elim- reasons: inate some jobs only to create others. ● An omnibus v. a selective privacy pol- Even if new jobs are created or old ones icy. The Federal Government has redefined, not all workers will find it deliberately chosen up to now to react easy or desirable to shift. Some em- to privacy issues associated with ployees may be unwilling or unable to recordkeeping on a case-by-case basis adapt themselves to the new technology rather than through omnibus legisla- or may be untrainable in the new pro- tion, which would cover all data sys- cedures. tems both public and private in which ● Support for computer impact research. personal information is maintained. The area of employment impacts is a With the selective approach, Congress good example of the need for computer will be considering a long series of pri- impact research, a new field developed vacy bills. To catch up with current over the last decade by computer and computerized recordkeeping practices social scientists. To date, however, will require a substantial legislative ef- university groups and others have ex- fort. An immediate concern is to de- perienced difficulty in securing financial velop privacy rules for computer ap- support, in part because this subject plications in banking, medicine, social does not fit comfortably into traditional and medical research, credit, insurance, scientific research programs. Computer and criminal justice. Privacy is also like- impact research is not pure computer ly to be a major issue in the develop- science; neither is it classifiable as pure- ment of electronic mail. ly social or political science. The results Congress may need to consider alter- of such research could supply valuable native approaches to privacy policy. input to the kinds of public policy issues ● New technologies, new problems. New identified in this overview study. applications for computer and commu- ● International competitiveness. Comput- nication technology, such as an auto- er and communication technologies are mated securities exchange, in-home in- moving ahead so rapidly that products formation services, electronic pub- can become obsolete within a few years. lishing, and the automated office, may Although the United States holds a create new environments for privacy substantial positive balance of trade (and employment) in certain areas of in- *Relevant policy instruments include taxation, antitrust, formation technology, the maintenance and standards, among others. U.S. industrial competitive- of this balance depends in part on con- ness in the international electronics and computer markets tinued R&D and innovation and on sup- is the subject of another OTA assessment in progress. Ch. 1—Summary ● 19

policy issues to arise. As Government may, if abused, raise in new forms the agencies such as the Department of classic issues of civil rights versus both Justice, IRS, or the Social Security law enforcement and the rights of em- Administration begin to use the latest ployers to monitor their employees. generation of information technology for their recordkeeping activities, pri- Security vacy problems that were not specifically addressed in previous legislation The technology for securing computer may have to be dealt with by Congress. systems from theft, sabotage, natural haz- ● Secondary use of personal information. ards, and the like is improving steadily, and A fundamental assumption underlying users are becoming more aware of the need much of the privacy debate in the to protect information. However, the in- 1970’s was that collecting personal increasingly complicated computer-based formation is in the nature of a trans- information systems being designed and action—the individual yields personal built make secure operation more and more information in exchange for some bene- difficult. fit. Thus, much of the fair practice doc- Among the several difficult issues involv- trine centers on the requirement that ing computer security that are likely to con- the recordkeeper abide by obligations front Congress, the following appear to be implicit in that transaction. However, the most significant: individuals will increasingly be encoun- tering computerized systems that col- c Protection of Federal systems. Federal lect and store information about them information systems control the dis- without their knowledge or consent. bursement of an enormous amount of Very little law exists pertaining to the money. The Social Security system it- ownership or disposition of such in- self disburses over $2 billion per week. formation, even when its use may be Other Federal systems contain infor- contrary to the individual’s perception mation that could be used directly or in- of his or her interests. directly to make profitable financial de- ● Microprocessors and surveillance. The cisions, e.g., information on Federal potential now exists for the develop- monetary policy, on commodity mar- ment and marketing of a wide variety of kets, and on energy resource estimates. microprocessor and computer/commu- Still others contain sensitive in- nication devices either specifically de- formation relating to personal privacy signed or capable of being used for the or national security. All would be highly surveillance of individuals without their attractive to theft, manipulation, or consent. Microprocessor-based locks eavesdropping. can provide detailed records of the These are not the only threats to Fed- whereabouts of anyone in a building. eral computer systems that Congress Devices called “pen registers” provide a will need to consider. A more subtle similar capability for monitoring tele- threat is a system’s potential diversion phone traffic. Abuse of this technology by the bureaucracy from its intended for illicit purposes may become a use; for example, the use of computer- serious problem. Even seemingly legit- ized criminal histories for employment imate applications (e.g., employer or licensing purposes. As the Gov- monitoring of employee phone calls to ernment continues to automate, prob- deter nonwork-related conversations) lems of bureaucratic accountability and 20 . Computer-Based National Information Systems: Technology and Public Policy Issues

the responsibility for oversight will con- technology. In this debate, the needs of front Congress with the need to better the private sector for increased com- understand and more closely monitor munication security, and hence for the the use of large Federal information existence of a civilian commercial cryp- systems. tographic capability, are set against the ● Protection of vital domestic information perceptions of the defense community systems. There is a Federal respon- that such development threatens na- sibility for certain information systems tional security concerns by putting sen- that, although privately operated, are sitive information in the public domain. fundamental to social well-being. The A related issue is the desire in the security and reliability of automated academic community for the freedom to systems for nationwide bank check conduct research on the mathematics clearing, electronic message systems, underlying cryptography. and computer-based commodity trading, for example, would all be under the Government Management of purview of Congress. The vulnerability Data Processing of such systems is of governmental concern because of the harm that a major In the early days of computing, the Fed- system failure could cause to the Na- eral Government as a user was a principal tion’s economy and to its citizens. stimulus to the development of the field. ● Development of data security and cryp- Although a few instances of Federal exper- tographic capability. The Federal Gov- tise at the leading edge of computer applica- ernment, due to its traditional concern tions remain, the Federal Government is for the protection of military and dip- rapidly falling behind the private sector in lomatic communications, has a high de- its use and management of up-to-date com- gree of expertise in the field of data puter and information technology. Such a security. For example, the National lag would penalize Government operations Bureau of Standards is developing com- in two ways: puter security guidelines and standards for use by Federal agencies. The first 1. potentially lost opportunities to use the standard to emerge from this effort is newest technology to improve the efficiency the Data Encryption* Standard (DES) and effectiveness of Government programs; for protecting data communication. and While the DES is public, much of the 2. increased cost and decreased reliability Federal expertise is either classified or resulting from operating systems that are in the hands of highly sensitive or- becoming obsolete, from archaic manage- ganizations such as the National Securi- ment procedures, and from burdensome pro- ty Agency. The appropriate role of the curement restrictions. Federal Government has not been defined in transferring this knowledge, Cheaper computing hardware, the emergence of data communication-based sys- supporting computer security research in both the public and private sectors, tems, and new software techniques are changing the way computers are used in in- setting standards for non-Federal sys- dustry. The next 10 years will see significant tems, and certifying security technology. movement in the private sector toward automating the flow of information in of- The lack of such policy definition is fices, toward experimenting with new man- visible in the current debate over agement structures based on high-volume Government control of cryptographic data communication, and toward auto- *Encryption is the coding of a message so that it is only mating decision support systems for use by understandable to a receiver who knows the secret decoding higher management. To the extent that procedure and/or key. these applications fulfill their promise of Ch. 1—Summary ● 21 improvement in both the quality and produc- sign that is proposed on a case-by- tivity of management, the Federal Govern- case basis. ment would be remiss in not making use of 2. Congress could codify a social impact them where appropriate. policy concerning all Federal information processing systems. An appro- The most recent legislative action to ad- priate agency could be designated as dress this problem is Public Law 96-511, responsible for seeing that all new known as the Paperwork Reduction Act of system designs are evaluated in rela- 1980, which establishes central oversight in tion to that policy. the Office of Management and Budget of the 3. Congress could continue to examine information policies and practices of the ex- agency proposals system by system, ecutive branch. Perhaps most important, but would base its evaluation on a this Act emphasizes the basic need for re- social impact framework encompass- structuring the way information resources ing a set of principles for the design and supporting technologies are managed in and operation of Federal information the Government. This represents a new and systems. as yet untested approach by giving management of information resources similar im- Whatever the approach, it will be nec- portance to that traditionally assigned to essary for Congress to balance the need to managing financial and personnel resources. speed up design and procurement of Federal Many other issues and questions also need systems, against the requirements that tax attention from this broader perspective. For money be spent as effectively and as example: equitably as possible and the necessity to consider carefully the societal impacts of ● Automated bureaucracy. There is a these systems. need to better understand the effects of ! large-scale information systems on the internal organization and management Society’s Dependence on of Government agencies and on Federal Information Systems decisionmaking. What effects do these systems have on the location of respon- The nature of risk is being changed by sibility, the quality of the decisions, the much of the new high technology on which nature of due process for clients af- modern society depends—jumbo commercial fected by those decisions, and the ac- airlines, nuclear powerplants, oil super- countability of the bureaucracy to tankers, or large computer-based informa- higher-leve policymakers in the ex- tion systems. In general, because new tech- ecutive branch and to Congress itself? nologies can be designed to operate more ● Social values and goals. The process by reliably than the ones replaced, the risk that which appropriate social values and any particular mechanism may fail has been goals are reflected in Federal informa- reduced. However, should an accidental or tion systems design needs clarification. deliberate disruption occur, its cost can be Major new systems will need to be much larger, even catastrophic. Further- evaluated for their effects on privacy, more, when society becomes highly depend- security, constitutional rights, and ent on the reliable functioning of a single in- many other issues that are not normally tegrated technological system or small col- the concern of the designer or operator lection of such systems, the possibility of a of an information system. “domino-like” collapse of several of the in- Three fundamental approaches are dividual connected units could also be available to deal with social value ques- disastrous. tions: 1. Congress could assess the potential This evolution to dependency can be seen social impacts of each new system de- already in the reliance of safe public air 22 ● Computer-Based National Information Systems: Technology and Public Policy Issues transport on the continuous operation of the reliability and to predict the failure rate of computerized air traffic control system. * In any particular part of the system, as well as the commercial sector, large stores and the effect of a failure on the operation of the banks rely on the smooth uninterrupted op- entire system. New research in risk analysis eration of their computer systems. is needed to address the problem of estimating risks under these conditions. Thus, as society moves toward electronic funds transfer systems, widely available electronic mail service, and other large ex- Constitutional Rights tensively used information systems, the Little legal precedent exists, in many following factors warrant consideration: cases, for applying constitutional law to the The ways in which public policy can issues raised by computer-based information help to allocate and balance the risks systems. This overview study identified sev- society may encounter from national in- eral areas of constitutional rights that may formation systems against the benefits be affected by information systems, as il- it may receive, under conditions where lustrated below: failure rates appear to be low but potential losses may be high should a failure The first amendment guarantees freedom occur. of religion, speech, the press, peaceable The ability of society to retain the op- assembly, and the right to petition for tion to end its dependence on a par- redress of grievances. ticular information system if it has unanticipated undesirable effects; in A principal first amendment issue other words, to avoid the possibility of facing the Government may be how to becoming “locked in” to the use of cer- encourage the maximum freedom of ex- tain information systems once they are pression–fostering the “marketplace of installed. ideas’ ‘— in new electronic media that The capability of providing alternatives have been tightly regulated in more to persons or institutions choosing not traditional forms. For example, the scarcity of frequency spectrum and to accept perceived risks in a new information system. channel capacity that provided a basis The ways in which technology can be for regulation of broadcast television utilized-to reduce the risks, for example may not apply to new versions of TV by introducing additional system re- such as cable, direct-to-home satellite, dundancy (alternative paths between and videotext. points in the system, distributed data Another first amendment issue may be bases, backup computers). The risks in- generated by extensive data collection herent in U.S. dependence on a nation- and possibly surveillance by Govern- wide, interconnected telephone system ment and private organizations that (which itself is rapidly being com- could, in fact, suppress or “chill” puterized) are minimized by the large freedoms of speech, assembly, and even number of circuit switching centers and religion by the implicit threats con- parallel trunklines. tained in such collection or surveillance. These threats might be directed as Large complex information systems con- much at the “listener” as the tain millions of logical connections and are “speaker.” Clearly, automated informa- controlled by programs that themselves can tion delivery systems possess a much be composed of millions of instructions. Con- greater capability for recording, stor- sequently, it is difficult to calculate their ing, and analyzing in detail the flow of *The airport and air traffic control system is the subject of information from all sources into homes another OTA assessment. and offices, than do manual svstems Ch. 1—Summary ● 23

such as bookstores, newspapers, and cisions in such areas as health benefits, the like. student loans, or tax returns may have subtle biases “built in” to the program The fourth amendment protects the per- or code of the computer. These systems sons, houses, papers, and effects of in- may react quickly to what the computer dividuals against unreasonable searches and recognizes as “normal” applications, seizures by the Federal Government. but reject “unusual” claims. If, as a ● Fourth amendment issues may develop consequence, citizens are subjected to from: an unacceptable amount of hassle, delay —the use of personal and statistical and/or error, the program or code used data contained in automated informa- by the computer to define “normal” or tion systems as a justification for the entire information system may be- search and seizure; come subject to due process challenge. —the search and seizure of information The sixth amendment guarantees, among per se as personal property, particularly in electronic form; and other things, the right of a speedy and public —the use of automated information sys- trial by an impartial jury. tems as a tool for search and seizure ● A sixth amendment issue may be raised operations. by the growing use of computerized An electronic mail cover illustrates the lat- dossiers of potential jurors along with ter type of fourth amendment issue. A noncomputer models for predicting juror electronic mail cover requires approval by behavior. At this time, computer-based the Postal Inspection Service but not a jury selection is very expensive and its search warrant because only the outside of value is controversial. However, future an envelope is examined. In an electronic computer technology and social scien- mail system, however, no distinction may ex- tific techniques may make this applica- ist between the “outside” (or address) and tion cheap and improve its effective- the “inside” (or contents) of a message. ness. If so, the entire concept of an “im- Therefore, it maybe difficult to distinguish a partial” jury may be challenged. mail cover from a wiretap, which would re- The 14th amendment guarantees that a quire a warrant issued by a court upon prob- State cannot deprive any person of life, liber- able cause, unless some form of coding was ty, or property without due process of law used to “seal” an electronic message as an nor deny any person within its jurisdiction envelope seals a physical one. the equal protection of the laws. The fifth amendment guarantees that a c Fifth and 14th amendment issues may person may not be compelled to be a witness develop from a similar application of against himself or be deprived of life, liberty, computer-based social science and sta- or property without due process of law. tistical models to predicting criminal ● A fifth amendment issue could arise behavior and to aid in such tasks as ap- from the use of personal or corporate proving credit, determining insurabili- computer data that have been collected ty, or hiring and promoting employees. by the Government for one purpose as Essentially, individuals may be denied evidentiary material in unrelated crim- rights, privileges, and benefits based, inal or regulatory cases. not on past performance, but on a ● Another fifth amendment issue could prediction of future tendencies. For ex- develop from the delivery of Govern- ample, society cannot imprison a person ment services by computer-based infor- that a computer model predicts may mation systems. For example, very someday rob a bank. But should that large systems that “mass produce” de- knowledge be “probable cause” to 24 ● Computer-Based National Information Systems: Technology and Public Policy lssues

monitor such a person closely or deny Commission to establish what services employment? and what technologies are already ‘‘communications, thus regulated, and Regulatory Boundaries what are ‘‘computer’ services and technologies, thus not regulatable. As computer-based information systems Their second inquiry on these ques- evolve, they challenge traditional concepts tions, which began in 1976, only re- of boundaries—physical or social—that are cently resulted in an opinion that is now reflected in the law and regulatory policy. under court challenge. Even if the The integration of computer and commu- definition is accepted, there is no reason nication technologies creates systems that to believe that the problem has been cross boundaries between nations, States, permanently resolved. and organizations. The issue of transborder ● Branch banking: Many States have data flow discussed in chapter 12 exemplifies laws that either prohibit or tightly regu- the kinds of international problems created. late branch banks. An issue that has Others include the following: been widely debated is whether the ● Interstate conflict of laws: When States automated extensions of banking (e.g., have conflicting laws involving informa- automatic teller machines or pay-by- tion or information processing, for ex- phone services) constitute “branches” ample, property laws that cover com- in the usual meaning of the law. ● puter data bases, an integrated data The status of electronic mail: Electronic system that exists in a number of dif- data transmission has opened a major ferent States can raise difficult ques- policy question about the definition of tions of legal jurisdiction. mail. As with the computer/communica- ● Federalism: Linking Federal data sys- tion issue above, this definition is sig- tems with State and local systems com- nificant because it places a class of serv- plicates problems even further. Issues ices under one or another set of reg- of federalism could arise with systems ulations. Unlike many other countries containing data on criminal history, that have combined postal and telecom- taxation, welfare, education, medical munication services under one national care, and drug abuse, among others. agency, the United States has pursued ● Antitrust: Policy issues may arise with completely different approaches to reg- respect to whether large integrated ulating each service category. Elec- data systems using shared facilities tronic mail, in its various forms, pro- create monopolistic barriers to new en- vides a new service with features of trants or are mechanisms for control of both manual delivery and telecommu- the market, or whether they encourage nication, and may pose new and dif- competition by reducing the cost of ac- ficult regulatory questions. cess for smaller firms. Information technology is changing form Other Issues so fast that it is tending to outstrip the working definitions of devices and services Four other issue areas were identified as that serve as the basis for law and regula- important although not analyzed in great tion. These definitional problems relate both detail: to the technology itself, and to the products and services that depend on it. 1. Computer crime: Crime directed against ● Computers or communication: The best computer-based information systems or known example is the continuing at- in which these systems are used as tools tempt by the Federal Communications for criminal activity. Ch. 1—Summary ● 25

2. Transborder data flow: Problems that vital to their survival in an information arise from differing national attitudes society because of technological illit- and laws regarding the increasing flow eracy, lack of economic resources, or of data and interconnection of informa- other reasons. tion systems across national bound- 4, Computer software protection: The con- aries. cern that continuing uncertainty about 3. Information gap: The possibility that copyright and patent protection for some individuals or groups would be computer software is significantly im- denied access to information services pairing software R&D and innovation. Chapter 2 Background and Purpose of the Study

* Contents

Page Introduction ...... 29 Congressional Requests ...... 30 OTA Response...... 31 NIS Study Goals ...... 32 Study Methodology...... 33

LIST OF TABLES Table No. Page 2. Summary of Congressional Requests for OTA Assessments Concerning National Information Systems ...... 31 3. Initial Working List of Impact and Issue Areas ...... 34 Chapter 2 Background and Purpose of the Study

Introduction

As computer-based national information particular Government systems, consti- systems become more important to Amer- tutional rights, innovation in the micro- ican society, particularly for Government ad- electronics industry, the use of com- ministration, they create corresponding pub- puters in education, and many other lic policy problems. Thus, over the past 10 to topics. 15 years Congress has been confronted with ● Regulatory and interagency jurisdic- a series of increasingly complex issues grow- tional issues—such as protracted coming out of the way computer-based systems puter regulation inquiries by the Fed- have been designed and used. These have eral Communications Commission covered a wide range of concerns such as: (FCC), and challenges to regulatory au-

● thorities involving the FCC and the the design, procurement, and operation Postal Rate Commission. of Government data systems; ● ● Studies–requests by the legislative the potential for Government agencies branch to the Office of Technology As- to abuse the large record systems they sessment (OTA), the Congressional Re- operate that contain personal data; ● search Service (CRS), and the General the effects of computer technology on Accounting Office (GAO) for studies on the structure and operations of the particular issues involving information banking industry; ● systems. These parallel extensive simi- the role of the Postal Service in pro- lar activities in both the executive and viding electronic message service; judicial branches. ● problems concerned with the protection of privacy and constitutional rights pre- Executive branch interest is illustrated by sented by the use of large automated the formation of the National Telecommuni- data systems; and cations and Information Administration ● the impact of information technologies (NTIA) in the Department of Commerce, by on copyright laws. research projects-on computer and telecom- Congressional and public interest in these munication impacts funded by the National and related issues has been illustrated by a Science Foundation, and by a variety of ex- variety of actions over the last decade. ecutive orders regarding Federal data processing practices. Interagency groups have New legislation—bills and acts concern- been formed to address domestic and inter- ing privacy, standards, and computer national information policy and planning crime. problems. Special commissions–the Privacy Pro- tection Study Commission, the Com- This overview is one of a group of four mission on Electronic Funds Transfer, studies collectively entitled “Assessment of the Commission on Postal Service, and Societal Impacts of National information the Commission on New Technological Systems. ” The individual studies are: Uses of Copyrighted Works. Hearings on privacy, Government rec- ● an overview assessment of technology ordkeeping practices, the impacts of and public policy issues relevant to

29 30) ● Computer-Based National Information Systems: Technology and Public Policy Issues

computer-based national information This overview report is intended to be a systems; broad introductory examination of comput- ● an assessment of the National Crime In- er-based national information systems and formation Center (NCIC) and Com- related technology and public policy issues puterized Criminal History (CCH) that Congress is likely to face over the next Systems; few years. It will also serve as a foundation for the other three OTA studies and for fu- ● a preliminary assessment of the role of ture in-depth examination of particular sys- the U.S. Postal Service in electronic tems and issues. It should also generate an message systems; and awareness of the increasingly critical role ● a preliminary assessment of electronic that national information systems play in funds transfer systems. society.

Congressional Requests

Over the last 5 years, OTA has received a was published in March 19771 and the NCIC number of requests from congressional com- preliminary assessment in December 1978.2 mittees and subcommittees to study and re- Additional Requests: Subsequently, OTA port on the impacts of national information received a number of congressional letters systems on society and on public policy. endorsing these assessments but also raising TAS and NCIC: In February 1976, the broader questions concerned with informa- House Ways and Means Committee and its tion policy. Some were directed at specific Subcommittee on Oversight requested that categories of systems under a particular OTA conduct an assessment of the new Tax committee’s jurisdiction; others dealt more Administration System (TAS) proposed by generally with social impacts in areas such the Internal Revenue Service. In September as privacy and constitutional rights. The 1976, the Subcommittee on Government In- concerns expressed in the requests spanned formation and Individual Rights of the a number of different applications in both House Government Operations Committee the private sector and the Federal Govern- also requested such a study in a letter that ment. A number of these requests and their raised, in addition, much broader questions particular areas of interest are shown in about Government information systems. table 2. Both requests stressed the issues of privacy In July 1980, a letter was sent to OTA by and the impact of TAS on the Government’s Cong. George E. Brown, a member of the use of tax return information. Technology Assessment Board and then In September 1977, the House Judiciary Chairman of the Subcommittee on Science, Committee, together with its Subcommittee Research, and Technology of the House Sci- on Civil and Constitutional Rights, re- ence and Technology Committee. It ex- quested an assessment of NCIC adminis- pressed an even broader and more compre- tered by the Federal Bureau of Inves- tigation. The requests expressed particular concern with the CCH Program and its possible detrimental effects on privacy and civil ‘U.S. Congress, Office of Technology Assessment, A Pre- liberties. liminary Analysis of the IRS Tax Administration System, OTA-TCI-43, March 1977. In response to these requests, OTA car- ‘U.S. Congress, Office of Technology Assessment, A Pre- liminary Assessment of the National Crime Information ried out preliminary assessments of both Center and the Computerized Criminal History System, systems. The TAS preliminary assessment OTA-I-80, December 1978. . .

Ch. 2—Background and Purpose of Study ● 31

Table 2.—Summary of Congressional Requests for OTA Assessments Concerning National Information Systems

Date Committee or subcommittee ‘Areas ‘of interest February 1977 House Committee on Post Office and Civil Requested an assessment of electronic mail, Service emphasizing the role of the U.S. Postal Service and employment impacts. September 1977 House Subcommittee on Government Reaffirmed a previous request for a TAS study Information and Individual Rights (of the and encouraged a wider look at the impact of House Committee on Government Government information systems on privacy, Operations) freedom of information. and other related issues, and asked OTA to explore a possible Government-wide policy on data systems. September 1977 House Subcommittee on Civil and Requested a full assessment of NCIC. Constitutional Rights (House Committee on the Judiciary) January-June 1978 Senate Committee on the Judiciary; Requested a full assessment of NCIC. Raised Subcommittee on Administrative Practice issues of constitutional rights, privacy, other and Procedure; Subcommittee on the civil Iiberty concerns, and Federalism. Constitution December 1978 Senate Committee on the Judiciary; Requested a study of the impact of Subcommittee on Administrative Practice telecommunications and domestic Information and Procedure; Subcommittee on Antitrust systems on constitutional rights, civil liberties, and Monopoly; Subcommittee on the privacy, freedom of information, antitrust and Constitution; Subcommittee on Criminal constitutional rights. Requested NCIC study. Law and Procedure Specifically mentioned electronic banking applications, electronic mail, and criminal justice systems.

SOURCE Off Ice of Technology Assessment

hensive range of concerns about the societal “map” of the field. This map would include impacts of information technology. Con- the major technologies, their areas of ap- gressman Brown requested that, given the plication, the impact issues, and the prin- breadth and complexity of the subject, OTA cipal current efforts by various agencies to undertake a preliminary study to create a study these problems.

OTA Response

In October 1978, the national information ment of the impacts of national information systems (NIS) assessment was initiated by systems. In time, however, they evolved into OTA, following a March 1978 approval by separate studies. The basis for this modifica- the Technology Assessment Board. It was tion was the following judgment, which was designed with four components: confirmed by the OTA Advisory Panel on National Information Systems and the OTA ● an assessment of NCIC/CCH; staff. ● an assessment of the role of the U.S. Postal Service in electronic message While some observations can be made systems; about national information systems in gener- ● an assessment of electronic funds trans- al, full assessments of their policy impacts fer systems; and can only be made in the context of particular ● an overview of the crosscutting impacts systems, particular applications, and/or par- of all information systems. ticular users, and legal/social environments. These were at first envisaged as case Consequently, each case study needed to study components in a single large assess- be carried out as an individual assessment in 32 ● Computer-Basd National Information Systems: Technology and Public Policy Issues which the characteristic issues raised by an assessment of telecommunication sys- that type of system would be addressed in tems was begun at OTA and conducted in its own legal, regulatory, social, and econom- parallel with the NIS assessment. The tele- ic environment. It was questionable, how- communication study focused on an ex- ever, whether the overview study would be amination of common carrier policy and im- effective as a unifying effort cutting across pacts.3 Both assessments have been closely the three other studies by generalizing their coordinated to avoid duplication of effort results. Thus, its goals had to be carefully particularly in the analyses of industry examined and clarified. structure and technology. In addition, in late 1978, in response to requests from the House and Senate Commit- 3U.S. Congress, Office of Technology Assessment, Tele- tees concerned with communication policy, communication Technology and Public Policy.

NIS Study Goals

It would not be possible for any one study which the specific issues raised in each to capture succinctly a single set of policy study can be explored. issues which would apply to all national in- ● To build a foundation for future studies: formation systems in American society. The Over the next few years, Congress will specific systems applications are too differ- continually be confronted with a num- ent, the potentials and problems too com- ber of issues loosely characterized as be- plex, and the parties-at-interest and relevant ing related to “information policy. ” institutional and legal framework too Congressional agencies such as OTA, diverse. CRS, and GAO, as well as executive branch agencies such as NTIA, are be- Faced with a complexity of possible ing asked to address these issues. topics, OTA established the following set of To date, most research and writing about limited goals for this overview study: the impacts of computerized information To provide a general introduction to systems have been unrelated. Different ter- minology, different concepts about the na- computer-based national information ture of the impacts, and different analytic systems: This study should acquaint methodologies have been used. There is a the nonexpert reader with the nature of need for some consistent structure, such as a computer-based national information map of the information technology field as systems, their roles in American soci- discussed by Congressman Brown in his let- ety, and the characteristics of their im- ter to OTA. A start is made toward develop- pacts and the policy issues that result ing such an analytic framework in chapter 5. from their use, To provide a foundation and context for This study’s assessment of the directions the other related OTA assessments: the development of computer technology The NCIC/CCH, electronic funds and its applications to national information transfer, and electronic message system systems will take provides a useful baseline studies all require fundamental state-of- for future work. The description of the cur- the-art surveys of the computer and rent status of the information industry and related technologies and industries. its likely evolution will be useful in project- This data base is provided by the over- ing possible future services and the nature of view report. In addition, a framework of the market and regulatory forces that may potential impacts is laid out within shape those services. Ch. 2—Background and Purpose of Study ● 33 ——

Study Methodology

The limited nature of this study’s goals, mation systems or to be affected by their ap- along with its role of providing a supporting plication. A brief working paper was drafted, framework for the three other studies, dic- reviewed by an ad hoc workshop of outside tated a modest plan using in-house staff sup- experts, revised in accordance with their plemented by an advisory panel and other ad comments, and integrated into chapter 4 and hoc expert review. The project was orga- the policy issue chapters (6 through 12). nized around the following information- Legal and Regulatory Environment: The gathering tasks: in-house staff examined the range of legal ● technology, and regulatory requirements, existing or ● industry structure, pending, that affect the use of computer- . social trends, based information systems. Analyses were ● legal and regulatory environment, and prepared in 13 areas of law and regulation. “ policy issues analysis. These were reviewed for accuracy and completeness by a pro bono mail review panel of Technology: This survey examines the legal experts, and then utilized in chapter 5 current state of computer technology and and in the policy issue chapters. projects its development over the next 10 to 20 years. It stresses the technology likely to Policy Issues Analysis: An initial list of be available to computer users, rather than issues was prepared by OTA staff (see table the leading-edge capabilities likely to exist 3). It was later modified by consideration of only in laboratories and on drawing boards. the following: A working paper prepared by OTA staff was ● concerns mentioned in the congression- reviewed by a special technology panel set al requests; up for that purpose. This was coordinated ● panel advice on priorities; with a parallel effort supporting the telecom- ● comparison with issues examined in the munication assessment. The technology sur- NCIC/CCH, electronic funds transfer, vey is highlighted in chapter 3, presented in and electronic mail studies; detail in chapter 13, and used throughout the ● comparison with issues developed in the report. parallel telecommunication study; and Industry Structure: This survey examines ● possible and likely future studies by the current state of the computer and in- OTA in related areas. formation industries, describes growth The topics selected for further analysis do trends, and projects their development over not represent a complete list of all the prin- the next decade. It, too, was an in-house cipal national information system issues staff effort, drawing on the technology panel that may confront Congress over the next for review and input, and coordinated with decade. In OTA’s judgment, however, these the telecommunication assessment. The sur- will be among the most important. The brief vey of industry structure and the technology essays presented in chapters 6 through 12 are highlighted in chapter 3, presented in de- are not intended as full analyses of these tail in chapter 14, and likewise used through- issues. Rather, they describe the general out the report. nature of the conflicts, and how future ap- Social Trends: A small task was under- plications of computer-based information taken to list those political, economic, and systems may intensify or alter the character social trends believed likely either to have an of the policy debate and the need for new impact on the use of computer-based infor- laws and policies. 34 . Computer-Based National Information Systems: Technology and Public Policy Issues

Table 3.— Initial Working List of Impact and Issue Areasa

Economic impacts and issues 6. Equity, social justice, and equality of access to 1. Costs, economic growth, and availability of services services 2. Technological displacement, obsolescence, and 7. Civil liberties (first, fourth, and fifth amendments)– Impact on the work force constitutional rights 3. Resource availability and demand 8. Surveillance and social control 4. Competition 9. Changes in the basic social structure and functioning 5. Regulation and standards of groups (e. g., families), organizations (e. g., schools), 6. Research and development (innovation in both and institutions (e. g., banking) hardware and software services) 10. Centralization and decentralization 7. Public goods 11, Educational changes 8. International markets and services 12. Public participation 9. Effects on other industries (e.g., travel) 13, Accountability and oversight 10. Employee rights and privilege; and labor-management Legal Impacts and Issues relations 1. Copyrights, patents, trade secrets, and ownership of Social impacts and issues information 1. Privacy 2. Antitrust 2. Confidentiality Political impacts and issues 3. Security 1. Federalism and intergovernmental relations 4. Due process and fairness (individual access, accuracy, 2. International sovereignty timeliness, currency, and purging) 3. National security 5. Freedom of information

a It is recognized that several topics fall under more than one group heading, however, they were not Iisted more than once e g certaln social impacts and Issues could

also be shown under legal Impacts and Issues and/or u rider political Impacts and Issues SOURCE Off Ice of Technology Assessment Chapter 3 Information Systems and Computers Contents

Page The Nature of Computer-Based Information Systems ...... 37 History of Computer Use ...... 38 Future Trends in Computer-Based Information Systems ...... 40 Chapter 3 Information Systems and Computers

The Nature of Computer-Based Information Systems

Traditionally, the popular view of com- patterns in video images. These func- puters has been that they are super calcu- tions will be improving rapidly over the lators that automate processes which were next decade and will appear in commer- previously performed by numbers of people cial equipment. sitting at mechanical adding machines. How- 2. Information storage. Computers can ever, computers carry out a wide variety of store large amounts of information for tasks associated with processing informa- long periods of time in an electronic- tion. It is important to understand the entire readable form that is easily and quickly range of these capabilities in order to ap- recoverable. Depending on the particu- preciate the nature and magnitude of the lar application, the methods of storage potential social impacts of this technology vary widely, from signals in electronic when used in information systems. circuitry, to magnetic pulses on tape, to holes in cards. New advances in mem- Computer capabilities fall into seven main ory technology eventually will allow categories: trillions of characters of information to 1. Data collection. When attached to vari- be stored conveniently and cheaply ous sensing devices, computers can wherever there is even a small com- detect and measure such external phys- puter. The cost of storing information ical phenomena as temperature, time, electronically will soon be substantially pressure, flow rate, consumption rate, lower than the cost of storing the same or any number of other variables. Also, amount of information on paper. computers can keep a record of trans- 3. Information organization. Computers actions. For example, a computerized can be used to rearrange information so cash register can collect and store in- that it is more suitable for particular ap- formation about a sale that includes plications. For example, if the data in a bookkeeping entries, taxes, commis- telephone directory were stored in a sions and inventory, and can even re- computer’s memory, it could be in- order stock. Some computer-based door verted to allow one to look up a tele- locks require individuals to carry mag- phone number that corresponds to a netic identity cards. Such locks not only particular address. More generally, can control access but also can create a computers can simplify and restructure record of whose card was granted ac- vast amounts of raw data to assist peo- cess, when, and for how long. ple in drawing significant meanings or Technological advances are begin- conclusions. ning to provide computers with the ca- 4. Calculations. Computers perform arith- pability to directly process visual and metic calculations millions of times audio input, thus greatly increasing faster than can human beings. They are their applicability to data collection. used to make numerous simple calcula- Computers already have a limited abili- tions, such as those required in process- ty to recognize human speech, to read ing the payroll for a sizable organiza- directly a variety of typewritten forms tion; to make sophisticated statistical and handprinted texts, and to detect calculations on large amounts of data,

37 38 ● Computer-Based National Information Systems: Technology and Public Policy Issues

such as those for social science re- be organized by the computer in an search; or to perform highly complex easy-to-understand tabular presenta- scientific calculations, such as those tion. Much of the programing effort in needed for weather research or for mod- developing modern management infor- eling fusion energy systems. mation systems is directed toward de- 5. Communication. Through connections signing ways in which the information over a telecommunication system, com- generated by the computer can be puters can transmit data around the presented most clearly to the manager Nation and the world either to human who needs it. users or to other computers, which per- 7. Control. Computers can be used to con- mits the sharing of work and data trol a machine tool or a production line among groups of linked computers without human intervention. Many con- (known as computer networking). Pri- sumer devices—including microwave vate firms are beginning to offer special ovens, automated home thermostats, communication services to support automobile engines, television sets, and computer networking. In addition, com- telephones— incorporate computer con- puters make possible the more effective trols using new microprocessor technol- use and management of the communica- ogy. Such uses are increasing rapidly. tion systems themselves. Several of these capabilities can be com- 6. Information presentation. Computers bined, for example in computer-aided design can put out information in a variety of of aircraft structures (or computer logic forms. Through graphical display, and elements, for that matter) and computer- more recently through voice response, based modeling of the saltwater penetration they can make data readily understand- in San Francisco Bay (a function of tidal ac- able and useful to nonexperts. It is pos- tion and ground water runoff). Both comput- sible to have data and computer sche- er-aided design and computer modeling are matics displayed on screens in a multi- finding wide application and are illustrative colored, three-dimensional format for of what is sometimes referred to as the design and analytical purposes. Also, “intelligence amplifying” capability of com- data such as numbers and statistics can puters.

History of Computer Use . Over the last 30 years, computer systems changes in historical information practices have evolved through stages that empha- that occur when computer systems are sub- sized particular capabilities and that have stituted for manual systems. altered the way society handles information. Some significant trends in the develop- The nature of these applications has been ment of computer applications are discussed shaped, in part, by the available technology, below: but also by the changing perception of computers and how they may be used most effec- Computer trends in the 1950’s: Increased tively. size and centralization. Few applications were new, however, at In the 1950’s, every announcement of a least in the beginning. Society has kept new, larger computer elicited the comment records and exchanged information for cen- that only a few would be needed to serve the turies. It is important to understand this computer needs of the entire country. background, since many computer impacts, “Grosch’s Law”- an empirical estimate that both beneficial and adverse, arise from the one could get four times the computing pow- Ch. 3—lnformation Systems and Computers ● 39 — . er at twice the cost—provided an economy- versity campuses and in research labora- of-scale rationale for large, centralized tories developed two design concepts that systems. fundamentally altered the way in which com- This underlying economic rationale forced puters would be used—the minicomputer organizations to pool their computing ap- and timesharing. plications in central computer centers that In the early years, many scientists learned would run them on as large a machine as pos- about using computers by sitting at them sible. This operating style, which can still be and programing them directly. Chafing at seen in many organizations, had two prin- the bureaucratic and physical barriers being cipal drawbacks. erected around the central system, these users developed small, specialized labora- One effect, seen immediately, was that tory computers which, although not cheap centralization separated the users from the by current standards, were far less expen- computer forcing them to gain access to the sive than the centralized systems that often machine through layers of bureaucracy. cost in excess of a million dollars. These Some applications were not harmed in such small machines, or minicomputers, were an environment. However, delays and bu- cheap enough so that a person sitting and reaucratic costs inhibited the work of such working at one could afford to use it at less users as scientists, engineers, and students. than optimum efficiency. The loss of ma- They often could not perform the type of chine efficiency was offset by the increase in creative work that the computer was ex- human efficiency. pected to foster. The second effect was more subtle. Econ- The other important concept, “timeshar- omy-of-scale no doubt existed technologi- ing,” was developed because a large system cally—multiplying two numbers was cheaper cost hundreds of dollars per minute to oper- on a larger machine. However, designers had ate. Thus, an individual could not engage in a rewarding working session sitting directly to generalize the computer hardware and at a large computer, which was dedicated to programs in order to handle all of the dif- that user, without enormous waste. Humans ferent types of applications that had been work slowly compared with computers. Con- pooled to justify the big machines. Thus, preparing a payroll, performing small engi- sequently, the computer would be idle most of the time while waiting for its user to ini- neering computations, and calculating a tiate some action. very complicated mathematical model, all might be handled by the same computer. Timesharing was designed to make that Some of the theoretical efficiency gain for a kind of direct use efficient by enabling a large general-purpose computer was lost in computer to serve many users simultaneous- the system overhead required to provide the ly. With such a system, each user sits at a facility for such a variety of applications. terminal. The computer transfers its atten- Despite these drawbacks, computer use tion rapidly from one user to another, per- grew rapidly during this period. Most ap- forming work as needed. Information is proc- plications concentrated on using computers essed so quickly that the computer, in effect, both as calculators and as controllers of appears to be totally dedicated to the work large (for that time) record systems, usually of each user. kept on magnetic tapes or punched cards. Once the concept of timesharing had been Computer trends in the 1960’s: The mini- incorporated, it became apparent that users computer and timesharing. did not have to be in the same room as the machine, but could communicate with it over In the 1960’s, motivated by the two communication lines from across the coun- above-mentioned drawbacks, users on uni- try or from anyplace in the world. 40 ● Computer-Based National Information Systems: Technology and Public Policy Issues .—

Thus, although large centralized systems technologists to refer to applications in continued to grow for applications such as which immediate action and response is pro- recordkeeping and laborious computations vided by the computer. ) for scientific research, the groundwork was Another example of a large communica- laid in the 1960’s for new types of computer tion-based centralized computer system with use and new ways of designing systems to decentralized access is the one operated meet specific goals. by the National Association of Securities Computer trends in the 1970’s: Commu- Dealers (NASD), known as NASDAQ nication-based computer systems and net- (NASD Automatic Quotation.) It allows works. securities dealers instant access from their desks to the latest bid and ask prices for any In the 1970’s, communication-based com- stock listed on the over-the-counter market. puter systems began to grow. Some types of The need here was clear for real time access recordkeeping applications were obviously to a data base by dealers across the country. handled best by large central computers, but to be useful they needed immediate data en- Another trend in the 1970’s was the link- try and retrieval of information from remote ing together of multiple computer systems— locations. both small and large ones—into “networks.” ARPANET, a project of the Department Airline reservation systems, for example, of Defense’s Advanced Research Projects were among the first large communication- Agency (ARPA), was an ambitious and tech- based computer systems to be developed in nically sophisticated experiment that linked the commercial sector. Reserving airline together several large ARPA research com- seats is clearly a complicated task, well- puters over high-speed communication lines. -suited to computerization. Agents all over This project was based on a new technique, the country can now check flight availability called “packet switching, ” that allowed ex- and reserve seats from their work stations, isting communication lines to be shared both in “real time. ” (This term is used by more efficiently for carrying computer data.

Future Trends in Computer-Based Information Systems

Three dominant economic factors can lim- ing hardware has dropped to the point it the range of computer applications: where, for many applications, possible economies of scale are offset by the overhead 1. the overall cost of computer hardware costs and the inconvenience of a large sys- and the associated economies of scale; tern. This trend is leading to the reliance on 2. the cost and difficulty of setting up and multiple smaller systems that are distrib- maintaining high-speed data communi- uted geographically. cation links; and 3. the cost of producing software–the Several companies, American Telephone programs required to operate the sys- & Telegraph and Satellite Business Systems, tem. for example, are building commercial data The first two limitations are being over- communication networks that promise to be come. While there is still a strong market for economic, efficient, and convenient to use for large expensive systems, the cost of comput- linking together data systems and users. Ch. 3—information Systems and Computers . 41

The remaining problem, the cost of the ● Expansion in the number and size of com- software, is the pacesetting factor.1 Progress puter networks. By the end of the decade, has been slow in the development of new most computers, even small ones, will be cost-cutting techniques for programing ap- connected to a communication network at plications. For many applications serving a least part of the time. sizable user market, programing costs can be The communication system may be ded- written off over a much larger user base. icated to a single application in which all However, for a number of large specialized the machines on the network perform por- applications, the programing, maintenance, tions of a larger task. Public data net- and operation costs will continue to be the works, on the other hand, provide any dominant factors in the cost of using com- home or business computer with access to puters. Some experts see the software prob- a wide range of data bases or special pro- lem as the major obstacle to new applica- grams that may be wanted for occasional tions of computers. For at least the first half use. Such multiuser national networks of the 1980’s, the cost of competent, sophis- that can be interconnected now exist, and ticated programing efforts will limit prog- the number of users is expected to grow at ress. a rapid rate. Based on the findings of this study, the ● The trend toward information services. use of computers will likely follow these The computer industry has traditionally trends in the 1980’s. been concerned with selling hardware (desktop, mini, and mainframe computers ● Growth in the use of personal computers. and related auxiliary equipment). How- The small computer will become common ever, current trends in both pricing and both in the home and in business. Despite the structure of the market are driving the their small size, these systems will be emphasis toward providing computer- highly capable–the equivalent of ma- based information services, such as biblio- chines that sold for as much as $1 million graphic and data base searches, electronic in the 1950’s. They may appear in the publishing, electronic banking, and the guise of video games, television sets, or like. A number of these services will still telephones that will also have a computer require that the user possess a computer. capability available for other purposes. However, many will be offered over data This trend will stimulate more widespread communication lines to homes and offices, computer literacy in society, and in turn and will be accessible through a modified be reinforced by the consequent increase (“intelligent”) telephone or television set. in the number of people able to program Examples include two-way cable televi- and use computers. The first generation to sion, videotext, and the AT&T Electronic grow up with computers is now reach- Information Services experiment that pro- ing maturity. These “computer literate” vides an electronic telephone directory young adults accept computers as a natu- over a telephone line to a home terminal. ral part of their world. Computer design Eventually, information services of all and use will be taught increasingly in kinds will dominate the data processing school and as part of adult education, and market in terms of dollar volume. (See ch. will enhance an already thriving market 14 for a detailed discussion. ) for specialized application programs designed for small computers. ● The competition among giant corporations for the data communication services market. IBM, AT&T, Exxon, and GTE, ‘ “Missing Computer Software, ” Business Week, Sept. 1, among others, are preparing to offer a 1980, pp. 46-53. variety of data communication services. 42 . Computer-Based National Information Systems: Technology and Public Policy Issues

. Large corporations such as these have ac- access to all of these reservation systems cess to the capital required to install the through one desktop terminal. technological base for the planned serv- Similar integrated information systems ices, such as communication satellite are also feasible in insurance, banking, systems and fiber optic transmission travel, entertainment, law enforcement, lines. A series of recent rulings by FCC, commodities exchanges, medical services, some still under challenge, are intended to and many other sectors that now use clear the way for open competition among several separate information systems. these and other corporations to provide in- There are a number of factors such as formation services of all kinds over com- system incompatibility, antitrust con- munication lines. Resolution of the pend- siderations, or competitive problems that ing challenges by the courts or by Con- may tend to resist this integration in the gress will have significant implications case of some systems. over the long term for the data com- ● The software bottleneck. According to munication industry. (See the OTA tele- many computer and industry experts, the communication study for a detailed dis- 2 increasing capability of computer hard- cussion. ) ware is not being fully utilized due to prob- At the same time, an examination of the lems encountered in creating suitable soft- computer industry (see ch. 14) shows that 3 ware programs for these new machines. small entrepreneurs have frequently been The major problems are the relatively innovators. This observation in no way slow increase in the productivity of pro- discredits the valuable fundamental ad- gramers-their cost efficiency–compared vances and product innovations origi- with that of the hardware, and the dif- nating from the research laboratories of ficulties encountered in managing large large firms such as AT&T and IBM. How- programing projects. ever, creative new systems and innovative These problems have created bottle- services increasingly arise from small, necks in the development of new applica- new, “spin-off” enterprises or from totally tions. Computer programing has been new entrants into the market. relatively resistant to productivity im- Thus, faced with the dominance of the provement, at least when compared with data communication field by large cor- corresponding improvements in hardware porations, others in the information in- performance. Programing is by nature dustry will press for a public policy that labor intensive. Its cost is rising due to will guarantee access to data communica- the increased programing requirements of tion networks by smaller firms and new new hardware coupled with a shortage of entrants that offer information services. programing personnel with the needed ● Higher level integration of data services. training and experience. New mechanisms Many individual networks for servicing such as structured programing will be specific corporate and governmental helpful in engineering computer programs needs will continue to be built. Some of and for managing their design and imple- these networks will become integrated. mentation. 4 For example, most airlines, car rental At the other end of the scale, microtech- agencies, and large hotel chains have their nology is making possible enormous in- own reservation systems. It is now technically feasible to build an integrated 3 system that would provide travel agents Computer and Business Equipment Manufacturers Asso- ciation, Industry Forecast Panel: Productivity, 1980 spring meeting. ‘Some progress in improving software has been made by ‘U.S. Congress, Office of Technology Assessment, Tele- use of structured programing methods such as FORTH. See communication Technology and Public Policy Issues, in John S. James, “What is FORTH? A Tutorial Introduction, ” press. Byte magazine, August 1980, pp. 100ff. Ch. 3—information Systems and Computers ● 43 creases in computational power through has now been given a very high priority the creation of new hardware structures for R&D. In the United States, although a from clusters of small computer chips. few defense agencies are investing in re- Technologists know how to physically search to solve some of the problems, Fed- construct such combinations, but not how eral R&D budgets for computer science to use them as effectively as their poten- and technology have not accorded soft- tial would suggest. ware a similar priority. Private industry is Eliminating software bottlenecks may the source of most activity in this area. be the key to maintaining the lead in com- Reportedly, one-third of the research ef- puter technology in the coming decade. In fort at Bell Labs is devoted to the soft- Japan, for example, the software problem ware problem. Chapter 4 Information in Society Contents

Page

The Information Society. . . . ● **** **** **** *.. **e* .. ******e*...**.*.* 47

The Nature of Information ● **. **. *.** **. **** **** **** .*** *.** .e ..* 48 The Commercial Value of Information ...... 49 The Private Value of Information...... 49 The Public Value of Information...... 49 The Information Economy ...... 50

●

m Chapter 4 —— . Information in Society The Information Society

An information industry analyst recently and the Internal Revenue Service (IRS) observed that ‘‘every society is an informa- receives more than 140 million tax returns. tion society.”] That is, all human organiza- The service sector of the economy is grow- tions, no matter how simple, depend for their ing at a relatively faster rate than the in- functioning on an intangible resource called dustrial and agricultural sectors (see fig. 6 in ‘‘information. In any society, information ch. 1). Many services such as medicine, law, serves several purposes. It can be, for exam- education, and Government involve the ple, a commodity of commerce, an indicator transfer of large amounts of information. Re- of wealth or power, a basis for making deci- sistance to productivity improvements in sions, or a source of entertainment. this sector, which represents a large part of The more complex a society, the more cen- the economy, has impeded overall produc- tral information is to its economic activities. tivity growth. Greater application of in- The United States seems to be entering what formation technology has been proposed as a some sociologists refer to as a ‘‘postin- chief remedy. For this reason, it is highly dustrial” period,2 characterized by several likely that in this decade the service sector trends: will increasingly depend on the use of computer-based information systems. emphasis is on a service economy rather than on manufacturing; Greater international economic competi- information is used as a resource, as a tion coupled with the decreasing availability factor of production, and as a commodi- of basic resources are requiring industry and ty; and Government to both improve and speed up scientific discover-y and technical in- their decisionmaking capabilities. Informa- novation drive economic growth. tion technology is growing in importance for this purpose. Decisions about design, mar- Whether or not this is a valid model of keting, financing, and resource allocation all societal evolution, the above trends are no require a more sophisticated approach to the doubt taking place in the United States. Fur- collection and use of information. thermore, they are combining to create a greater dependence on information process- Computer and communication technol- ing and technology. ogies, while not the direct causes of societal changes, are facilitating and in some cases The tasks being undertaken by the large accelerating them, thus helping generate the organizations that serve society are growing public policy issues confronting Congress. in complexity. The air traffic control system Some scholars see profound effects occur- handles nearly 20 million flights yearly. ring from the increased dependence on com- Every year the financial system clears more puter technology, and predict that the view than 30 billion checks, the U.S. Postal Ser- of humans as unique thinking beings will vice delivers over 100 billion pieces of mail, change fundamentally.3 Others see significant shifts in the balance of power between individuals and the organizations, private I Ant hon.v (i. oet, tinger, “ Information Resources: Knowl- edge a II(I I)ow.er in the 21 st Century. S’(i(’l)(c ,!lcl,kr[lzirl(’, frol. 209, July 1980, p. 191. ‘I)aniel Hell, The (’orning of the l)(),st lrt(iustrz”al .Voci(ttI. ,4 111 ru L’;’– ~1 az lich, “’l’he Irourth l)is(’on~inuit~r, ” ‘1’echn(~log.s b’{r~t{~rr in .~~)(i[~i ~’or(’custin~ (New }’ork: Basic Rooks, 19’711). (l)t(/’ ( ‘// Itli r{’ (s, pp 1-15,

47 48 ● Computer-Based National Information Systems.’ Technology and Public Policy Issues and governmental, that would directly affect types of data stored, and the profound our lives.’ These highly speculative views public policy issues it raises are the raise important questions about the effects same as those prevalent over the past an extremely automated society might have 100 years of recordkeeping in the crim- on individual freedom. These questions need inal justice community. continued examination. 2. The Postal Service is nearly as old as this Nation, and the telegraph is almost Some information policy experts take a 150 years old. The distinction between more pragmatic view, one more useful for physical and electrical transmission of assessing specific public policy issues aris- messages that has existed for a long ing from the applications of this technology. time without creating serious problems Their approach stresses these two points: is now being challenged. However, over 1. It is not information technology per se the years the Postal Service has become that creates public policy issues, but an integral part of American society. the particular choices that are made Decisions about its future role with re- concerning its use. spect to electronic mail need to take 2. Most policy problems involving auto- into account all of its historical roles: as mated-data- systems are rooted in tradi- a service provider, as an employer, and tional institutional attitudes and pro- as an agent for social communication cedures. Information systems must be and connection on which many sectors assessed in the context of that history. of U.S. society depend. 3. Banking has existed since ancient According to this view, technology itself times. Electronic funds transfer sys- does not restrict society to particular ac- tems are not so much changing the nations, but rather provides a widened range of ture of banking as they are helping alter choices.’ Thus, it is not the impacts of a traditional institutional practices in the technology that are examined, but the im- United States, such as restrictions on pacts of the particular choices made. The multistate banking, distinctions be- nature of those choices is dependent on the tween types of banking institutions, social and legal environment in which they and limitations on types of financial take place. For example, a totalitarian socie- services. The issues of privacy and secu- ty would build information systems overtly rity, which are examined in some detail designed to enhance Government control of in chapters 6 and 7, historically have its citizens. Such systems would be un- seriously concerned the banking com- acceptable in a democratic society. munity, and are thus shaped by its The necessity of considering the historical traditional attitudes and practices. context both of the systems and of the policy issues they raise is illustrated by the three The Nature of Information case studies in the overall assessment. The role of information in society is being 1. The National Crime Information Center changed under the influence of new informa- of the Federal Bureau of Investigation tion technology. Some of the changes taking is an automated criminal record system place are: that has been in existence for only 13 years. Yet the patterns of its use, the ● Information is becoming a significant economic commodity, but one with certain unique characteristics that dis- 4A. Mowshowitz, The Conquest of Will (Reading, Mass.: tinguish it from conventional commodi- Addison-Wesley, 1976). ties of commerce. ‘Daniel Bell, “Communications Technology—For Better or ● For Worse, ” Harl’ard Business Rel~ieu*, May-June 1979, The industry providing information p. 20. technology and information services Ch. 4—Information in Society ● 49

has become a major component of the ● The cost of its reproduction is usually U.S. economy. very low compared with that of its c Many more individuals, both as work- original assembly or creation. ers and as citizens, need more informa- ● It can be transported instantly any- tion and information technology to where in the Nation or the world over function effectively. communication lines. ● Thus, over the next two decades informa- Its lifetime, which can be very brief, is tion technology will likely change production thus a principal determinant of its processes and commercial goods, transporta- value. ● Its value is not additive. Two or more tion and working patterns, the nature and copies of the same item of information content of education, the content and style are not necessarily worth much more to of entertainment, and the way social values the possessor than one. are formed and political decisions made. There are three basic values of informa- These characteristics, magnified in some tion: commercial, private, and public (see fig. cases by the technology, have created policy 7 in ch. 1). Information technology is chang- problems with respect to computer crime, ing the relative importance of these values copyright and patent laws, the flow of data and throwing them into conflict.6 between nations, and property tax laws. The traditional rules and procedures of the U.S. economic and legal systems are oriented The Commercial Value of toward the commercial exchange of tangible Information goods and services rather than of information. Information has been a commodity of commerce for centuries. Books and newspapers, and in this century the broadcasting The Private Value of Information industry, all sell information. The classic In an information society, economic com- reference book on knowledge as a commodity 7 petition is often based on access to special in- was written in 1962. The value of informa- formation, such as a formula for a soft drink, tion increases as society becomes more dean econometric projection, marketing plans, pendent on it. The very high growth rate of or geological data. Commercially important the computer-based information industry il- information is considered by organizations lustrates this trend (see ch. 14). to be proprietary. Information, particularly in a technologi- Similarly, individuals often consider in- cal environment, has characteristics that formation about themselves to be private, distinguish it from more tangible com- either because damage can be done by its modities. disclosure or simply because they desire to . It is reproducible. Its theft does not be left alone. (See ch. 7 on privacy for a more deny it to the original owner. complete discussion. )

The Public Value of Information — American society has always viewed in- 6For a related discussion see Louis H. Mayo, Robert W. Anthony, Henry B. Freedman, et al., An Explomtory Assess- formation as having a public value, and has men t of Computer-Assisted Makeup and Imaging Systems asserted the public interest in a free flow of (Washington, D. C.: The George Washington University Pro- information. There are many examples: gram of Policy Studies in Science and Technology, January 1980). ● the public support of libraries, schools, ‘F. Machlup, The Production and Distribution of Knou.~l- edge in the United States (Princeton, N. J.: Princeton Univer- and museums to produce an informed sity Press, 1962). and literate citizenry; 50 . Computer-Based National Information Systems: Technology and Public Policy Issues

● a tradition of academic freedom and a books by aggregations of articles delivered system of open scholarly publication to electronically. promote the exchange of ideas and the advance of research; The social interest in guaranteeing equi- ● first amendment guarantees, which en- table access to information may conflict with sure an unfettered discussion of politi- the need to encourage private sector invest- cal ideas, freedom of religion, and a free ment in new information services by letting press; and a profitable market develop. It can also be ● freedom of information laws asserting argued that improvements in the quality the rights of citizens to know as much of information available to decisionmakers as possible about the actions of their both in the public and private sectors would Government. reduce errors in the allocation of resources, thereby benefiting society as a whole. These examples suggest that there is an assumption that American society has a right of access to information of various Many Federal agencies—the Census Bu- kinds, and that it is in the public interest to reau, IRS, the Securities and Exchange facilitate that access. Commission, the Environmental Protection Agency, and the Federal Elections Commis- This principle has historically brought sion, to name just a few—collect large and, in Government into opposition with private most cases, growing amounts of informa- sector interests. Public education competes tion, which could be personal or proprietary. with private, libraries compete with book- The right of the Government to collect the sellers, and so on. In the past, these conflicts information is established in law, pre- have not been serious. As the information sumably to further legitimate public pur- society grows, however, and the economic poses. However, such collection may strong- value of information rises, conflicts over its ly conflict with what individuals and orga- access and use will increase in severity and nizations believe to be their rights of become more difficult to resolve. Additional privacy, and thereby creates an obligation problems will be caused by changes in the on the Government to protect the informa- technologies for the distribution of information and use it only in carefully prescribed tion, such as the replacement of certain ways.

The Information Economy

Information plays a significant economic Another measure of the economic impor- role in U.S. society. The number of compa- tance of these industries is that AT&T and nies that manufacture and supply computer IBM are two of the largest corporations in and communication services is very large the world. AT&T ranks first and IBM is and still growing more rapidly than the among the top five American industrial cor- overall gross national product. The U.S. porations. (The computer industry is ex- computer industry, which sold over $40 bil- amined in more detail inch. 14. ) lion worth of hardware in 1979, has a projected annual growth rate for the near future Information services, a new but increas- of around 20 percent; and the worldwide ingly important industrial sector, use com- communication industry, which in 1979 had puter and communication technologies to revenues of over $60 billion, has a projected provide new types of products and services. annual growth rate of about 8½ percent. Some of these are: Ch. 4—Information in Society 51

● Teletext service, which provides certain An examination of the trends in the work types of consumer information (e.g., air- force reveals the extent to which the econ- line schedules, news reports, shopping omy has shifted. The results of the 1976 guides) over a regular television broad- analysis shown graphically in figure 6 (see cast signal. This transmission of inch. 1) illustrate the transitions from an formation does not interfere with the economy dominated by agriculture, to one regular video program and can be ac- dominated by manufacturing, to a service cessed with a special decoder on a and information economy. It can also be seen standard television receiver. that the growth of the information sector did ● Computerize paging services, which not start with the invention of the computer, provide elaborate remote messaging but considerably earlier. services by means of microcomputers in Because macroeconomic studies such as the paging unit itself. these are so broad, they tend to blur the line ● Specialized information services, which between industries that use information sys- are built into the voice telephone net- tems and those few remaining activities that work. are presently not directly affected by this This very young, small, innovative, and technology. However, the line separating rapidly growing industry will be the ex- these two sectors is shifting rapidly and ploiter of the potentially large consumer social impacts can flow across it. Thus, for markets for information technology services. example: (Information services are further examined computer graphics are changing the briefly inch. 14.) operating style of the film animation in- In addition to the above-mentioned sec- dustry; tors of the information economy, there is a traditional print publishers such as much broader sector. It was first studied Readers Digest and the Knight-Ridder and characterized in 1976. R In this analysis, newspapers have invested in new in- the two sectors of the information economy house computer/communication-based were identified as primary and secondary. information services to reach the public; the nature of public education may be The primary information sector includes transformed by new competing infor- those who generate and sell information as mation delivery systems; and well as those who produce information tech- computer-based systems for delivering nology, and is much more comprehensive television programing tailored to each than the computer and communication sec- home will change the role of network tors. Included are typewriter manufacturers, broadcasting in the United States. newspaper publishers, producers of films, and broadway and television shows. The transformation of much of the information industry that is being brought The secondary information sector is com- about by new information systems will prised of information services and products change the structure of the industry, the used by any organization for its own internal nature of the services provided, and the purposes. Examples are internal accounting skills needed by its employees. and production, management, and inventory control systems, many of which are already As technology reduces the cost as well 1 as computerized. the experience and training required for information retrieval, public library services, even in small cities and towns, will increasingly supply more and more up-to-date in- “Marc Porat, The Information Economy’, Ph.D. disserta- tion, Institute for Communication Research, Stanford formation from a variety of sources. In many University, Stanford, California, 1976. countries, automated card catalogs on ma- 52 ● Computer-Based National Information Systems: Technology and Public Policy Issues nipulateable filmstrips, and newspapers and The emerging and expanding information periodicals on microfilm and microfiche, are technologies are reducing the costs and im- expanding the resources of libraries in proving the accessibility of many kinds of in- schools, universities, and industry. How- formation. Their impact is also being felt in ever, this trend may conflict with the public the traditional hard print industries, which value of information, to the extent libraries must adapt their conventional ways of doing move in the direction of charging fees for ac- business to the new technologies or risk dis- cess to electronic information services. This placement by more technologically sophis- would run counter to the current free access ticated competitors entering the market- policies of most public libraries. place. Entire editions of newspapers and news- Some economists are beginning to exam- letters are centrally written and electronical- ine the information economy. They are build- ly duplicated and transmitted–via satellite ing information into traditional economic and microwave—to regional plants where theory and modifying economic models to in- they are printed and disseminated. High- corporate information as a commodity or fac- quality transmission of photographs and tor of production. Although this work is still schematic drawings can accompany the in its early stages, it will be important in the texts of these publications in a matter of development of usable economic models for minutes after the text is sent. the next quarter of a century. ——

Chapter 5 The Structure of Information Policy

. — ——- .—

Contents

Page Introduction to Information Law and Regulation...... 55 Structure of Policy Issues...... 56 System Issues ...... 57 Information Issues ...... 58 Secondary Policy Impacts...... 59 Long-Term Societal Effects...... 59

LIST OF TABLES Table No. Page 4. Principal Areas of Law and Regulation Regarding Information Systems. . 55 5. Structure of Information Policy Issues ...... 57

* Chapter 5 The Structure of Information Policy

Introduction to Information Law and Regulation

Current policies governing information mulation. Computer users face a confusing systems are a composite of many specific array of laws and regulations unless con- regulations and laws, which are based on sideration is given to their overall pattern— three main factors: their overlaps, their contradictions, and their 1. The areas affected or the regulatory deficiencies. Continuation of the present concerns (privacy, freedom of informa- situation could inhibit many socially desir- tion, etc.). able applications of information systems or 2. The affected sector of society (banking, could create even more intractable policy education, Government, etc.). problems in the future. 3. The lawmakers and/or rulemakers (Con- gress, the Federal Communications The term “information policy” as it has Commission, State legislatures, etc.) been used to describe the Federal Govern- ment’s involvement in this area is somewhat In the course of this study, OTA identified misleading. First, it is too broadly applied in 14 areas of law and regulation that affect in- reference to a miscellany of issues that information systems or are affected by them. clude, for example, the regulation of files of The classification shown in table 4 illus- personal data, Federal support of the Na- trates the breadth of legal and regulatory in- tion’s libraries, first amendment rights for volvement and the range of participants, but newspapers, and property rights associated does not reflect the variety of information with information products such as programs systems users (e.g., banking, insurance, and data bases. Government, or education). The applicable laws and regulations vary according to the Second, the term appears to suggest that particular sector involved. there is or should be a single uniform policy Such a diversity of concerns cannot be en- governing all the uses of information sys- compassed by any single simple policy for- tems both in the public and private sectors.

Table 4.—Principal Areas of Law and Regulation Regarding Information Systems

a Area of concern State Federal Regulatory Court International Privacy...... x x x x Freedom of information...... x x x x First amendment ...... x x x Fourth amendment ...... x x Due process ...... x x x x Communications regulations ...... x x x x x Computer crime ...... x x x Proprietary rights...... x x Evidence ...... x x x x Liability ...... x x x Antitrust ...... x x x Taxation...... x x x Government provision of information ...... x x x Government procurement of Information systems ...... x x aInvolvement that creates new law or interpretation SOURCE OTA working paper on The Legal Regulatory Environment of Information Systems, June 1980

55 56 ● Computer-Based National Information Systems: Technology and Public Policy Issues

In fact, no such policy exists, nor does one ● There are numerous laws and regula- appear to be likely. tions, some overlapping and some potentially or actually conflicting, that The analysis made by OTA has led to directly and indirectly affect the users these findings: of information systems, the consumers ● There appears to be neither a strong of information services, and the sub- trend nor sentiment at present among jects of personal information data policymakers in favor of a uniform Fed- banks. eral information policy that would en- ● There is a lack of congressional focus on compass all the problems that could information policy as such, and conse- arise from the many possible uses of quently the emerging issues are not be- data systems. * ing directly addressed. * *some recently proposed legislation would establish a comprehensive approach to certain specific problem areas, e.g., privacy and freedom of information. See H.R. 2465, 96th Cong., “Omnibus Right to Privacy Act of 1979. ” Also, the National Telecommunications and Information Administra- tion (NTIA) of the Department of Commerce has made an ef- *The “paperwork Reduction Act of 1980” (Public Law fort to formulate–or at least develop a framework for–na- 96-51 1) enacted by the 96th Congress does set out a more tional information policies. See Arthur A. Bushkin and Jane comprehensive policy and management approach for Federal H. Yurow, The Foundations of United States Information Government information systems. The Act establishes Policy, (Washington, D. C., NTIA, June 1980) and Jane H. within the Office of Management and Budget an Office of In- Yurow, et al., Issues in Information Policy, Helen A. Shaw formation and Regulatory Affairs and assigns to that Office (cd.), NTIA, February, 1981. a broad range of authorities and required actions.

Structure of Policy Issues

Few attempts have been made at integrat- Several studies have been carried out and ing the whole range of policy issues covered commissions formed to examine various as- by the term “information.” The subject area pects and issues related to information pol- relating to computers and public policy, how- icy. In the field of privacy alone, for example, ever, is being increasingly analyzed. A wide there have been a study project by the Na- range of intellectual approaches are being tional Academy of Sciences,5 an advisory taken, from narrow quantitative studies of committee to the Secretary of Health, Edu- the impacts of information systems on cor- cation, and Welfare, a Privacy Protection porate decisionmaking and the problems Study Commission, and a number of studies associated with implementation,l to broad and hearings conducted by congressional philosophical and historical examinations of committees. Of the more than 1,500 legisla- the long-term social effects of automating in- tive proposals submitted to either the House formation systems.’ 34 or the Senate during the 95th Congress, 74 new public laws emerged dealing with some aspect of information law or policy. Of these, 26 dealt with privacy, disclosure of informa- ‘Henry Lucas, Why Information Systems Fail (New York: tion, confidentiality or controls on data, and Columbia University Press, 1975). - transactions using computers.6 ‘James Rule, Private Lives and Public Surveillance: Social Control in the Computer Age (New York: Schocken Books, 1974). 3K. Laudon, Computers and Bureaucratt”c Reform (New ‘Alan Westin and Michael A. Baker, Databanks in a Free York: Wiley -Interscience, 1974). Society (New York: Quadrangle Books, 1972). 4Abby Mowshowitz, The Conquest of Will: Information ‘U.S. House of Representatives, Committee on House Ad- Processing in Human Affairs (Reading, Mass.: Addison- ministration, Information Policy: Public Laws From the 95th Wesley, 1976). Congress, Jan. 31, 1979. Ch. 5—The Structure of /formation Policy ● 57

Another indication of the extent of activi- Other system issues include the proper ty is the Congressional Research Service role of users in system design, the need for Listing of New and Completed Projects. It user education, and how to deal with poten- covers ongoing work and projects completed tial system impacts on the organizations, within the last 6 months that have been car- work groups, and individuals involved. ried out by the Congressional Research Serv- While skilled technically, system designers ice, the General Accounting Office, the Of- may not fully appreciate the implications for fice of Technology Assessment, and the Con- users. On the other hand, users frequently gressional Budget Office. The most recent do not understand enough about the system listing available to this study, published on itself. August 25, 1980, described nearly 100 proj- Technical, operational, and reliability fac- ects concerned with computer and telecom- tors all can have broader societal signifi- munication policy. The issues addressed by cance even though they originate in the all of these activities can be classified under operational goals of the system itself. In re- one or more of the categories shown in table cent years, for example, public attention has 5. been focused on areas such as: ● the safety and reliability of the air traf- System Issues fic control system; ● the reliability, security, and control- The policy issues related to information lability of military command and con- systems per se focus on their design, im- trol systems, existing and proposed; plementation, and operation. They generally ● the security of large-scale electronic are concerned with whether the system per- funds transfer systems; and forms the tasks expected of it with reliabili- ● the reliability, accuracy, and respon- ty, with appropriate security, and in an effi- siveness of the social security informa- cient and timely manner. These objectives tion systems. mainly are of interest to the organization operating the system, and place major con- There is a strong societal interest in the straints on the system designer. proper and reliable technical operation of

Table 5.—Structure of Information Policy Issues . .— —— —. Level of issues- Character of issues — Example issues System level Relate to the design, implementation, and Government procurement policy. operation of particular information systems Efficiency and economy of operation. Security of information systems. -. Information level Relate to the handling of data: collection, “ ‘Privacy (recordkeeping). - storage, use, and dissemination Freedom of Information regulations. Copyright and patents as related to computer programs. —-. -— Secondary policy impacts Exist Independent of the particular Privacy (surveillance). information systems, but are changed in First amendment rights. magnitude or character by use of Fourth amendment rights. technology. Social vulnerability. Federal-State relations.

Long-term societal effects Long-range societal impacts that are not ‘- Privacy social- attitudes). currently reflected in specific policy Psychological self-image of humans. problems, but which may ultimately affect Education needs. the nature of U.S. society. Social-political effects. Cultural Impacts. . . — SOURCE: Office of Technology Assessment 58 ● Computer-Based National Information Systems: Technology and Public Policy lssues each of the systems cited above, and poten- Automated systems reduce the cost tially high costs to society if they fail. The and time barriers to wider access to public policy issues that arise are those these public records, and thereby may associated with the formulation of a frame- accentuate the issue of the extent to work within which to develop the systems, which this information can and should to establish accountability for their design be publicly available. and operation, to assign responsibility for As information becomes a more valu- correcting their defects, and to mitigate the able commercial commodity, increasing impacts of system failures. tensions are arising between those who wish to sell it through new information Information Issues services, and those who recommend that the Government take steps to pre- Various laws and regulations affect the vent the social inequity that would use of information, independent of the par- possibly result from the increasing cost ticular technology employed in handling it. of access to information and the means As we become more and more an “informa- to use it. For example, the conflict is tion society, ” these legalities have a cor- likely to become heightened between respondingly greater impact on the activ- the evolving role of the public libraries ities of individuals and organizations. Since as seen by the librarians, and the new the laws and regulations arise from many companies that wish to sell similar in- sources and thus do not reflect a single formation services to the home. Related coherent view of the role of information in tensions stem from the competition society, they tend to conflict and to have un- between Government-collected data, intended effects on the operation of informa- made available through freedom of in- tion systems. Consequently, they can create formation laws, and commercial data unanticipated secondary effects. services. In addition, commercially marketable information may invade privacy The three differing fundamental values of or proprietary rights. information—commercial, private, and pub- The controversy over the public v. the lic-discussed in chapter 4 motivate the laws commercial value of information is ex- and regulations affecting information. Indi- emplified by the present difficulty that vidual regulations or laws usually address the United States is having in formulat- only one aspect of information. Policy issues, ing a consistent national position with then, arise from the inherent tensions be- respect to international negotiations tween the particular values reflected in dif- concerning information transmission ferent laws. Congress is called on to estab- across borders. Laws have already been lish equitable balances. For example: promulgated by several European na- ● Freedom of information laws (reflecting tions restricting the flow of personal or public value) can conflict with individu- corporate data across their borders. al or proprietary concerns (reflecting Some positions taken by the United private values). For example, in serving States appear to advocate the free flow the public interest, Government collects of information on the premise that in- an extraordinary amount of information formation is a public good, and there- about citizens, businesses, and other fore should be allowed to flow freely be- types of organizations. Some of this in- tween countries. The United States ap- formation that theoretically has been pears to emphasize the commodity- available to the public by law for a long related aspects of information, main- time has been protected, in fact, by the taining that controls or restrictions are, amount of effort required to retrieve it in effect, restraint of trade. While this from manual recordkeeping systems. position would presumably allow U.S. Ch. 5— The Structure of Information Policy ● 59

multinational firms to more freely de- munications Commission’s regulation of con- liver and sell information services tent be the pattern for protecting the new across borders, it may have adverse im- electronic information media? plications for the international protec- Ongoing issues such as privacy, security, tion of individual privacy. and social equity are still not resolved. Elec- tronic funds transfer (EFT), by changing the Secondary Policy Impacts scale and nature of information collection and storage in an environment of acceler- Computer-based information systems, by ating institutional changes in the industry, increasing the quantity of information col- may be forcing the reconsideration of such lected, the efficiency of its collection and issues in a totally new technological context. dissemination, its utility, and its ease of The OTA study of EFT, being conducted in storage can cause qualitative changes in the parallel, examines these issues in greater behavior of Government, individuals, and detail. organizations as well as in the nature of traditional conflicts. Thus, the use of auto- Computers may not only cause policy mated information systems can have second- problems but may also be useful in solving ary effects on policy problems that have ex- them, and information systems may have isted for years, and which in many ways are policy impacts that mitigate or enhance the independent of the technology. Because resolution of other policy conflicts. For ex- much more information can be obtained, ample, it has been suggested that a central handled, processed, and distributed so much computer file containing information about faster, old problems are not merely exacer- citizens and employable aliens would be bated, but new ones are created. useful in verifying employability while avoiding the complicated problems created For example, the increased scale and by a national I.D. card. (This suggestion is presumed efficiency of automated criminal not intended to be an endorsement of such a justice recordkeeping intensifies the tension system. ) Transmitting electronic mail in a society has always experienced between the coded form (encryption) could help resolve needs of law enforcement and the individual social concerns over wiretapping or mail rights of citizens. Similarly, the tendency of tampering. Services available through EFT, the technology to encourage centralized such as check authorization/guarantee and record systems creates problems of Fed- debit cards, can facilitate payment by other eral/State relationships, a particularly means than cash and thereby provide an ad- touchy issue in law enforcement. Some ex- ditional convenience to customers. perts believe this centralization trend could reverse through the use of smaller computers with distributed data bases. The OTA Long-Term Societal Effects study of the National Crime Information Center Computerized Criminal History sys- Social scientists engaged in futures tem, being conducted in parallel with this studies have suggested that the information study, examines this set of issues and rela- revolution, spurred both by advances in tionships in detail. computers and communication and by the changing role of information in U.S. society, Electronic mail will once more raise issues will have profound long-term effects as dra- of the inviolability of the mail. The rules matic as those caused by the invention of the governing access are different for letters and printing press. for telegrams. Which will take precedence in the new environment? Will the first amend- While such effects may, in fact, be socially ment rights enjoyed by the printed news significant in the long term, they are also the media or the tradition of the Federal Com- most difficult to predict and to relate direct- 60 ● Computer-Based National Information Systems: Technology and Public Policy Issues

ly to particular public policy choices. For ex- ideas, supported the Renaissance and ample: the transition from medieval society to the age of enlightenment, so the new . The nature of societal values attached information systems could profoundly to privacy in the United States may transform the social and political envi- change if larger and more ubiquitous in- ronment of U.S. and world society. formation systems gradually remove Indeed television and sophisticated the ability of individuals to hide their computer-based polling technology private activities. The permanency of have already had observable effects on data storage and ease of recall can limit the political processes in the United a criminal’s ability to start over with a States. Third World leaders calling in clean slate. It has been pointed out that the possession by large organizations of UNESCO for a “new world information order” express the belief that informa- personal data on individuals enhances tion technology will have a central influ- the power, real or perceived, of the 78 ence on the social and economic devel- organization over the person. These opment of their countries as well as on and similar effects may increase the international relationships. suspicion some citizens have of large ● The effects of information technology organizations –business, labor, or Gov- on culture have received little stud-y. ernment—and thus erode social cooper- Years ago, the noted Canadian econom- ation and a personal sense of well-being. ic historian Harold Adams Innes (and ● The self-image held by humans of their later his student, Marshall McLuhan) uniqueness, distinguished by their abili- discussed the profound effects on culty to think, may be threatened by the tural biases exerted by the forms in association with machines that increas- 11 12 which information is communicated. ingly demonstrate apparent characteristics of intelligence.9 Computer scien- Scholarly opinions differ concerning the nature of these effects. Some see in tists disagree about whether truly “in- broadcast television a lowering of social telligent” systems can ever be built. In values and a reduction in literacy, a the creation of social attitudes, how- debasing of culture resulting from mass ever, the perception of machine omnipo- communication. However, a single tele- tence may be as important as reality. vision broadcast of a Metropolitan The best chess machines already can beat 99.5 percent of human players. Opera performance reaches more viewers than have attended the Met in all its One effect of such a perception may of existence. Has “Sesame be to increase the uncritical reliance on years 10 Street” improved the educational level computers. The general public’s un- of its viewers, or has it conditioned questioning acceptance of computer young children to a short attention span output has concerned computer experts and to an orientation toward learning as for many years, and may be a contrib- entertainment, unsuitable for serious uting factor in criminal acts that use academic work? computer-generated information to establish credibility. This overview study has not attempted to ● Just as the printing press, by stim- address in detail these broader questions. ulating literacy and speeding the flow of The conflicts and problems are only identified here. Given the potential for signifi- 7Laudon, op. cit. cant social change, good or bad, research 8Westin and Baker, op. cit. funded publicly, privately, or in some jointly ‘S. Turkle, “Computer as Rorschach, ” Society, vol. 17, No. 2, January/February 1980, pp. 15-24. ——- —— ‘OJ. Weizenbaum, Computer Power and Human Reason 1 I House of l%epresent,atives, OP. Cit. (San Francisco: W. H. Freeman& Co., 1976). 1‘Turkle, op. cit. Ch. 5— The Structure of Information Policy 61 developed projects could provide valuable in- system’s effectiveness, also wants to know sights into the long-term societal effects of whether it satisfies a broader set of re- computer-based information systems and quirements, for example, whether it con- related public policy-choices. forms to a number of information policy con- The categories shown in table 5 are not in- straints such as protection of civil liberties, individual privacy, or freedom of informa- dependent of each other. Policies at various tion laws, and how the system might affect governmental and industrial levels interact these as well as other less well-defined with one another in areas such as the econ- secondary policy issues. omy. In a similar way, there is a complex interaction between the categories. Procedures Finally, as critics of information technol- set for system operation may affect prob- ogies and systems express concerns about lems of information handling in response, for the long-term social effects that may or may example, to privacy regulations. Rules for not occur, it has become apparent that these the handling of information may exacerbate effects would be difficult, if not impossible, or mitigate secondary policy impacts. On the to address solely through a legislative ap- other hand, they may also affect the way in proach. Congress can only seek to establish a which specific systems are designed and legislative basis for creating a balance be- operated. tween the public/social values, the commer- Various concerned parties view these cial/economic values, and the privacy/propri- issues from their particular perspectives. etary values associated with information. The stresses within that triad remain in a For example, an agency wishing to install a They are exacerbated or major new information system may be moti- dynamic state. mitigated by many other social factors in ad- vated by considerations of system utility: dition to lawmaking and policy formulation. whether the system will do its intended job and be economical to run, and whether the Society has not as yet learned how to predict the consequences of manipulating the nu- procurement has been handled fairly. Con- merous factors involved. gress, in addition to being interested in the Chapter 6 Innovation, Productivity, and Employment Contents

Page Introduction ...... *.*...*..****.*..***= 65

Research and Development ...... 65

Productivity. . . ● ☛☛✎☛☛☛☛☛☛ ...... *...*....*.****= 66 Unemployment ...... *..*...*****.*..*...**.***** 67

Issues...... O...... **..****** 68

R&D Support ● ✎☛☛✌☛✌☛✎✎ ...... 68 Computer Impact Research...... 68 Employment...... 69 Effects of Government Policy on Innovation...... 69 Chapter 6 Innovation, Productivity, and Employment

Introduction

Innovation, the continual generation of Information technology is central to these new technological ideas and products and concerns. Computer and communication services based on those ideas, is a prime req- technologies are moving ahead so rapidly uisite for a healthy industry in a high tech- that products can become obsolete within a nology field. Congress and the executive few years. Thus, although the United States branch have been particularly concerned holds a substantial positive balance of trade about possible economic and regulatory in- in certain areas of computer technology, the centives to innovation. The Congressional maintenance of this balance depends on con- Research Service (CRS) identified 30 sep- tinued research and development (R&D). arate bills concerned with stimulating inno- Because of aggressive import competition vation that were considered by the 96th from Europe, Japan, and Canada, even do- Congress.l A major executive branch study mestic markets are vulnerable to any falter- coordinated by the Secretary of Commerce ing in the technological lead. A parallel OTA culminated, in October 1979, in a Presiden- study is examining U.S. industrial com- tial message to Congress on industrial inno- petitiveness in the international electronics vation, in which a number of measures were and computer markets.3 proposed. ’ transmitting proposals for Fostering Industrial Innovation,” . . —— Oct. 31, 1979, Washington, D.C. (96th Cong., 1st sess., 1Congressional Research Service, “Industrial Innovation, ” House, Dec. 96-214). issue brief No. IB 80005; updated 10/24/80. ‘U.S. Congress, Office of Technology Assessment, Asess- 2U.S. Congress, House of Representatives, “Industrial In- men t of Impact of Technology on Competitiveness of U.S. novation message from the President of the United States Electronics Industry, in progress.

Research and Development

The structure of innovation and product Because of this close connection between development in the computer industry is technology and research, the vitality of the unusual, even for a high technology field. computer industry is in part dependent on Basic research in computer science, which is the vitality of academic computer science. largely carried out in universities, is based However, university departments of com- on the technology rather than on physical puter science are experiencing problems.5 laws.4 Thus, the leadtime between a fun- Rapidly growing departments face competi- damental theoretical advance in computer tion with private industry for the talented science and a practical application is, in faculty needed to do the research and to general, relatively short, a few years or less. train new experts. This situation is particularly critical in systems design and soft- ——— — ‘Bruce Arden (cd.), Il”hat (Tun Be Autc)rnuted? report of the Computer Science and F;ngineering Research Study (Cam- “National Science Foundation, Science and Engineer-t”ng bridge, hlass.: Massachusetts Institute of Technology Press, Education for the IWO’S and Be>mnd: A Report to the ~)re.~i- 1980). (ien t. October 1980.

65 66 ● Computer-Based National Information Systems: Technology and Public Policy Issues

ware engineering. The departments also Another aspect of innovation in the in- need to invest in the facilities necessary formation industry is the role played by for R&D and in experimental* computer small entrepreneurial firms in new product science. development. Many specialized areas at the leading edge of information technology are Several U.S. corporations in the informa- dominated by relatively small new com- tion industry, realizing that their success panies (see ch. 14). Indeed, some experts in depends on continued innovation, have the industry suggest that one important pat- established their own large research centers. tern for innovation in information technol- Bell Laboratories in the United States and ogy involves an entrepreneur who develops a IBM both here and overseas are notable ex- new product and then forms a company to amples. These centers produce outstanding produce and sell it. If successful, the new basic and applied research, and are also im- company’s need for capital expands. Fre- portant links between the basic research car- quently in the last decade, the only choice for ried out in the universities and the needs of the small company to meet this capital need industry. - was to be acquired by a larger firm. This is *Experimental computer science tries to develop new con still the predominant goal of most high tech- cepts of computer architecture and programing by working directly with the machines rather than through theoretical nology, high growth companies, although a analysis. Many vital areas of computer science cannot yet be few have been able to reach the public addressed through theory. They are approached through the market. experience of developing programs to do particular tasks.

Productivity

In the 1970’s, the rate of productivity entry into the job market of a large growth in the United States fell far below number of young and inexperienced historical trends, causing concern in Govern- workers, ment and industry. In addition to providing decline in the rate of technical innova- the basis for an increased standard of living, tion and investments in R&D, and productivity growth is a major defense growing Federal intervention in the against inflationary pressures, especially form of regulation and tax policies that those caused by cost increases for externally discourage innovation. provided resources such as oil. (Electronics There is reason to believe that innovation and agriculture, two sectors that have ex- in computer technology can help productivi- perienced very high productivity growth ty growth in the United States. In addition rates, have supplied the principal exports to lower cost and/or better quality retail con- offsetting the large international trade im- sumer products, the new technology also balance due to oil imports.) Productivity generates improved techniques and tools for growth also provides the leeway to meet cer- making those products. Experts have noted tain societal goals, such as a more equitable the positive correlation between innovation distribution of basic goods and services like 6 rates and productivity in several industries. food, medical care, and education. Based on anticipated advances in artificial Although not all economists agree on the intelligence, robotics, computer control, and causes of the productivity lag, four main fac- input-output technology over the next few tors in the last decade have commonly been noted by various experts: ‘Edwin Mansfield! “Research and Development, Produc- ● growth of the service sector of the tivity, and Inflation, ” Science, vol. 209, Sept. 5, 1980, pp. economy, 1,091-1,093. Ch. 6—innovation, Productivity, and Employment . 67 years, computer-based factory automation other applications that are only now starting will make a substantial contribution to im- to be installed in the service sector. How- proving manufacturing productivity. Word ever, they are likely to help restore an up- processing and other forms of office automa- ward trend in the Nation’s productivity. tion are already responsible for improving From a larger societal perspective, the in- clerical productivity and may have similar creased productivity brought about by ad- potential for managerial productivity. In- vances in computer technology may be re- telligent cash registers and automated flected not only in greater output per checkout are directly improving the produc- employee, but perhaps also in terms of better tivity of retail clerks and indirectly the pro- product quality, improved work environ- ductivity of retail management (e.g., ac- ment and job satisfaction, and longer term counting, inventory control, procurement). social benefits such as improved job safety Automated bank tellers (teller machines) are and greater opportunities for on-the-job reducing the service loads on human tellers. learning and career advancement. The full impact is yet to be felt of these and

Unemployment

It is self-evident that any innovation that puter automation. The “automated fac- creates new products and new industries will tory, ” a completely automated shop eliminate some jobs only to create others. capable of manufacturing a wide varie- Structural shifts in the economy will occur to ty of products on demand without the distress of the temporarily displaced. human intervention, may become a reality in the next decade or two. An innovation that creates a demand for highly skilled programmers while eliminating The assessment of the role of the U.S. the jobs of low-level clerical workers causes Postal Service in electronic mail is the only hardship through a short- to medium-term study in OTA’s examination of three nation- increase in unemployment. In certain indus- al information systems to specifically look at tries, such as insurance, automation has employment impacts. Preliminary research caused a significant reduction in clerical results suggest that electronically trans- staff. mitted mail would likely eliminate postal jobs as the volume of conventional mail de- Some believe that the nature of labor dis- creases. However, it appears that the rate of placement should be examined in more detail such job displacement would be unlikely to since there are likely to be marked dif- exceed ordinary attrition. Further research ferences between the well-recorded experi- is focusing on the rate of job displacement ence of computing technology’s first quarter and possible geographical discrepancies, the of a century and the coming decades. Some need for job retraining, the impacts on levels of these differences are said to include: and costs of service, and the broader implica- ● Cheaper and readily available com- tions for the future of the U.S. Postal Ser- munication and computer technology, vice. 7 which allows previously labor-intensive jobs—such as sales clerks, bank tellers, and secretaries—to be automated. ● New research results in fields such as process control, robotics, and the inter- ‘U.S. Congress, Office of Technology Assessment, Pre- face between humans and machines, liminaq’ A.9.se.f’sm Qnt of the Role of the [’. S. Postal Sercice in which widen the applicability of com- El~ctronic ,tle.s.sage Ser{ ices, in progress. 68 . Computer-Based National Information Systems: Technology and Public Policy Issues

Issues

Congress will be confronting a number of Computer Impact Research issues concerned with innovation in computer technology and its effects on produc- The very applicability and power for tivity and employment. change inherent in computer technology that makes it so promising as a means of R&D Support solving many societal problems has raised concerns that it might also have negative ef- For a number of years the vitality of U.S. fects. Many computer and social scientists, science and technology has depended, in aware of these potential problems, have been part, on Federal support. In times of low pro- developing a field of research on computer ductivity gains, taxpayer resistance to in- impacts. a Professional journals have been creased governmental spending is under- started, courses are being developed, and a standable as pressure grows to trim pro- few computer scientists are describing their grams, such as R&D, that do not satisfy principal professional interest to be “com- immediate needs. There has been a similar puter impacts. ” To date, however, it has tendency by some sectors in private in- been difficult to secure much Federal sup- dustry to cut R&D budgets when money is port for research because this subject does tight. Industry also cites tax disincentives not comfortably fit into traditional scientific to R&D investment, particularly prior to the basic research programs, and because the 1978 capital gains tax reduction. products of early research tended to be of mixed quality. Innovation in information technology improves the productivity of the information Computer impact research is not pure industry itself and also offers the tools for computer science; neither is it classifiable as improving the productivity of many other purely social or political science. It is also of sectors of the economy. Therefore, some no direct interest to the mission agencies, believe Federal R&D support is a wise such as the Departments of Energy and De- policy, particularly in light of international fense. However, the kinds of data and ideas competition for the same markets. that could be generated by long-term research in the societal impacts of computers Research in basic computer science is sup- could supply valuable input to the executive ported by the National Science Foundation branch and to congressional agencies such (NSF), the Office of Naval Research, the Ad- as the General Accounting Office, CRS, and vanced Projects Research Agency, and to a OTA. In addition, this research could help lesser extent by a few other agencies. Ap- public officials and administrators gain a plied R&D is supported by NSF and by mis- broader perspective of the social, economic, sion agencies such as the National Aero- political, and institutional issues involved nautics and Space Administration and the with managing information resources and Department of Energy, although the major technology in Government.9 part of development support comes from the Department of Defense. One issue to consider is whether research in the applications of computer technology to problems in the private (civilian) sector—in such areas as ‘R. L. Kling, “Social Issues and Impacts of Computing: education, health, transportation, environ- From Arena to Discipline, ” Proceedings of the M Conference mental quality, and job safety—is receiving on Computers and Human Choice, Vienna, Austria, June adequate Federal support, given the critical 1979. ‘See Donald A. Marchand, “Are Public Administrators nature of computer technology to the Na- Failing To DO Their Computer Homework?” (louernrnent tion’s well-being. Data Systems, September/October 1980, p. 22 ff. —

Ch. 6—Innovation, Productivity, and Employment ● 69

Employment firms, for R&D expenditures, and for investments in new processes and equip- It is still uncertain whether the produc- ment. tivity increases brought about by computer ● Antitrust: The purpose of antitrust en- technology will create or eliminate jobs. It forcement is presumably to encourage would be helpful to know more about the competition and, hence, innovation. long-term effects of automation. It is Some experts hold, however, that major assumed that there will be some local struc- antitrust actions or threats of such ac- tural impacts. Even if new jobs are created tions against companies that are large or old ones redefined, not all workers will principally because of a successful find it easy or desirable to shift. This disloca- record of innovation may dampen their tion could result even when an official policy enthusiasm for further product develop- of no job loss has been established by a comment. pany, if employees are unwilling or unable to ● Regulation: Regulation can encourage adapt themselves to the new technology or or discourage innovation depending on prove to be untrainable in the new pro- how it is applied. Regulators either try cedures. to direct innovation toward particular One OTA advisory panel member ob- societal needs (as in the cases of auto- served that, in periods of high demand and motive safety or environmental protec- relatively full employment, labor displace- tion), or to control it for social protec- ment is unlikely to occur; however, when try- tion (as in the cases of food and drug ing to pull out of a period of high unemploy- safety). The second order effects of this ment there is greater incentive for firms to innovation can dampen innovation else- make productivity gains by investing in where as industrial investment must automation rather than increasing their first respond to the regulatory demand. labor force. Substituting machines for labor Only the remaining capital is available is easier when it can be done by not hiring for investment. when market demand for the product in- ● International controls: Multinational re- creases rather than having to fire. strictions on the flow of data and computing hardware across national bound- On the other hand, it can be argued that aries affect the design of communica- the rising consumption of goods and services tion-based information systems, and to by the developing world will create a very some extent shape the nature of compe- large demand. Consequently, gains would be tition in the international marketplace. turned into increased production rather than ● Standards: Federal standards, * volun- decreased labor input. tary or mandatory, directed at Govern- ment or private sector applications can Effects of Government Policy also shape the nature of innovation and on Innovation competition. On the one hand, for example, some argue that standards for data Innovation seems to be very sensitive to a processing compatibility will encourage variety of governmental policies. Thus, when a competitive industry to develop exploring the potential impacts of new laws around so-called “plug-compatible and regulations, Congress needs to be sen- equipment” (independently manufac- sitive to possible unintended effects on the tured devices that plug into computers innovative process. For example:

● Taxation.. Industrial investment in in- ✎ novation is very sensitive to tax pol- * ~1()~ ~ d(,t~i]{,~ discussion of standards, see app. (’ to U.S. icies, particularly those that encourage (’ongress, office of Technology Assessment, ‘1’elem)mm unica- or discourage capital formation for new tion Tw’h nc)li)g> and 1)U hlic Polic>’y in press. 70 . Computer-Based National Information Systems: Technology and Public Policy Issues

made by major firms such as IBM). On The Federal Communications Com- the other hand, the premature imposi- mission is presently struggling with the tion of standards can freeze the technol- problem of videotext. * Many broad- ogy at an early stage and inhibit the de- casters and manufacturers have re- velopment of new products and ideas. peatedly maintained that they cannot What the United States does on its invest in developing hardware and serv- own here may become moot in the ices to support such service until they longer term. International data stand- get a clear message on standards. ards are developing rapidly. In the Others argue that the technology is so United States, the National Bureau of new that standards at this time could Standards has coordinated the U.S. inhibit new developments.l0 In short, position. The objective of the Interna- the relationship between standards and tional Standards Organization is to innovation is not well understood, and have, before the end of the 1980’s, com- could benefit from further study. patible protocols and interfaces to allow any one computer to “talk” to any other. Within the United States, pressure in this direction is being exercised *Videotext and related services are systems for providing through the mandatory Federal In- magazine-like information sources directly over the house- hold television set. formation Processing Standards for “’’’Upstart Television: Postponing a Threat,” Science vol. Federal Government procurement. 210, Nov. 7, 1980, pp. 611-615. Chapter 7 Privacy -—

Contents

Page

Historical Context ● * * * . * *,*.**.** ● ☛☛☛☛ **.90 *a. e *em***.**.*..**.*.* 73

Future Privacy Issues ...... ● ☛☛☛☛ m ***************s*.**.*****. 74 An Omnibus v. A Selective Policy● *****D**.*....*.*.*.**********.. 74

Collection of Data. ● ● ● ● ● ● . ● ● ● ● ● #● . * * * e * * * . * *, . . . * ***..*.** 75 Access ● *...*****.********,*** ● *9.******************.*.*******. 76 Microprocessors and Surveillance. ..*. **** ***o * * * * * * a * * * * * ***..*..* 77 The Glass House Society...... ● ...... ***. **** **** **** *8 ****8*.* 78

TABLE Table No. Page 6. Significant Milestones in the Development of the Recordkeeping Issue . . 73 Chapter 7 Privacy

Historical Context

Policy issues related to privacy date back on recordkeeping practices is shown in table many years before the existence of com- 6. In addition, a number of influential hear- puters.1 Such issues as the following have ing records and reports have been issued by long concerned Congress and the Courts: Congress. Government intrusion–the right of the Recordkeeping has not been the only area Government to physically intrude on of privacy that has concerned Congress. the premises or in the belongings or per- Over the last two decades, hearings have sonal effects of an individual. also been held on subjects such as wiretap- Surveillance of communication—the ping, psychological testing of Government right of the Government to intercept communication by reading mail and Table 6.—Significant Milestones in the Development monitoring telegraph traffic, by wire- of the Recordkeeping Issuea tapping telephone conversations, or by C. 1964 Proposal for a National Statistical Center and inspecting envelope exteriors to make a the resulting public debate on privacy and record of the senders (mail covers). Government data systems—culminating in a series of congressional hearings. Liability v. the first amendment–the 1967 Alan Westin’s influential book Privacy and right of authors to write—and publish- Freedom. b ers to print—within very broad limits, 1970 Fair Credit Reporting Act—provisions regarding credit records on individuals. c any information about a person or insti- 1971 Arthur R. Miller’s book The Assault on Privacy.’ tution, whether such information is true Computers, Data Banks, and Dossiers. d or false, authorized or not. 1972 National Academy of Sciences report: Databanks in a Free Society.e Privileged communication—the right of 1973 Health, Education, and Welfare Secretary’s the Government to seek information Advisory Committee on Automated Personal conveyed under certain special circum- Data Systems report: Records, Computers, and the Rights of Citizens. f stances, such as psychiatric treatment, 1974 Family Educational Rights and Privacy Act religious confession, legal counseling, or controlling access to educational records. g media news-gathering. 1974 Privacy Act of 1974 enacted. h 1977 Privacy Protection Study Commission report: These examples not only convey the his- Personal Privacy in an Information Society.1 1978 Right to Financial Privacy Act of 1978 enacted to torical nature of privacy debates but also the provide controls on release of bank extraordinary range of issues encompassed information. j

a– by the term. Note: There were also numerous hearings and reports by Senate and House congressional committees during thls period which are not Iisted here. James privacy as it relates to computers has Rule and collaborators list 60 major Committee hearings and reports dealing with information privacy from 1966 to 1977 k been more narrowly construed. Historically, bAlan West In, Privacy and Freedom New York Atheneum 1967 1 cFair Credit Reporting Act, 15 U S C 1681 (1970). the principal discussion has been concerned dArthur R. Miller, The Assauly on Privacy: Cornputers Data Banks, and Dossiers with computerized banks of information (Ann Arbor University of Michigan Press, 1971) eAlan Westln and Michael Baker Databanks in a Free Society (New York Quad- about individuals, the collection of such rangle/New York Times Book Co 1972). fDepartment of Health, Education, and Welfare, Secretary’s Advisory Commit- data, and the uses made of it. A chronology tee on Automated Personal Data Systems, Records. Computers and the Rlghts of major events in the development of policy of Citizens, Washington D C 1973 gPubllc Law 93568 hPublic Law 93579 IPrlvacy Protect Ion Study Commission, Personal Privacy in an Inforrnation So- ciety Washington D C 1977 IRlght to Financial Privacy Act of 1978 (Public Law 95-630) ‘David

73 74 . Computer-Based National Information Systems: Technology and Public Policy Issues

employees, and the use of polygraphs. Pri- ● new computer and communication tech- vacy issues have also been raised by congres- nologies will create new problems and sional committees concerned with the data change the nature of old ones; systems run by various agencies, in par- ● the public’s awareness of and sensitiv- ticular the Federal Bureau of Investigation ity to the privacy problems presented (FBI), the Internal Revenue Service (IRS), by large data systems appear to remain the Social Security Administration (SSA), high; and and the Census Bureau. ● the Federal Government has deliberately chosen to react to privacy issues Privacy-related issues will remain on the associated with recordkeeping on a congressional agenda over the coming dec- z case-by-case rather than on an omnibus ade for a number of reasons. basis. 2 L. Hoffman (cd.), Compu ter.s and 1%-z”[~ac}’ in the Next Decade (New York: Academic Press, 1980).

Future Privacy Issues

An Omnibus v. A Selective Policy With the selective approach, however, Congress will be considering a long series of Omnibus legislation, which would cover privacy bills. A substantial legislative effort all data systems both public and private in will be required to catch up with current which personal information is maintained, is computerized recordkeeping practices. An the approach European nations have taken. immediate concern is the development of In the United States this approach has been privacy rules for computer applications in rejected by the Privacy Commission and the banking, medicine, social and medical executive branch for several reasons. First, research, credit, insurance, and criminal there would be serious difficulties in drafting justice. Privacy is also likely to be a major such legislation in a way that would achieve issue in the development of electronic mail. the desired protection without seriously Furthermore, new applications for com- hampering legitimate data processing appli- puters and communications, such as an auto- cations. Furthermore, the variety of sys- mated securities exchange, in-home informa- tems, of applications, and of environments, tion services, electronic publishing, and the ranging from large banks and insurance automated office, may create new environ- companies to street corner drugstores and ments for privacy policy issues to arise. As individual homes, would be hard to accom- Government agencies such as the Depart- modate with any single piece of legislation. ment of Justice, IRS, or SSA begin to use the new generation of information tech- In addition, omnibus legislation could lead nology for their recordkeeping activities, pri- to the creation of another Federal regulatory vacy problems that were not specifically ad- agency that would exercise oversight over dressed in previous legislation may have to the information industry. Again, because of be dealt with by Congress. Recently, for ex- the wide variety of applications such an ample, the availability of low-cost data com- agency would find itself involved in most as- munication technology has raised the mes- pects of American life. The Swedish experi- sage-switching issue to prominence in the ence is often given as an illustration. In that congressional debate over the future of the much smaller country, a newly created data operations of the FBI National Crime bank licensing board had 20,000 applications Information Center Computerized Criminal to process in its first year of operation. History system. Ch. 7—Privacy ● 75

Unlike the executive branch, which can Collection of Data subject all proposed privacy legislation to a consistent agency review, Congress con- In an attempt to decrease the amount of siders the different bills in a variety of data collected by Government agencies, Con- committees depending on the applications gress specified in the Privacy Act of 1974 and users under consideration. Therefore, that data collected must be “relevant” to the careful coordination and the adoption of purposes of the collection. The Privacy Pro- principles for guiding the nature of Federal tection Study Commission reported finding policy concerned with the handling of per- a slight decrease in data collection following sonal information in automated information this legislation. systems is needed in order to prevent the However, the relevancy test is undeniably enactment of a patchwork of contradictory weak and difficult to enforce, and the small privacy legislation. decrease found in data collection was a one- This approach leads to legislation tailored time phenomenon. Recordkeeping is increas- to the needs of the specific sector affected by ing, both in the Government and in the pri- it. However, there are also hazards. A dan- vate sector. Furthermore, as more and more ger inherent in disorganized privacy legisla- transactions in the private sector become au- tion is that businesses that operate in areas tomated, data that would normally not have of overlapping authority would face a been collected or retained will now be en- variety of regulations, some even contra- tered into computer systems and stored, dictory, governing their data systems. thus becoming available to data collectors. Others might be able to find loopholes by op- The recent dispute between Prudential In- erating in the gray areas between regulated surance and the Department of Labor (DOL) sectors, thereby seriously abusing the intent over access to personnel tapes is illustra- of Congress. tive.4 To investigate possible discrimination Because the selective approach differs so in hiring, DOL has requested complete per- radically from the approach taken by most sonnel records held by Prudential. Without other developed nations, problems could judging the merits of the case, it can still be arise internationally. Many developed na- observed that, were the files in question not tions, for example those in the Organization integrated on magnetic tapes, DOL would for Economic Cooperation and Development, have been unlikely to make such a sweeping are attempting to coordinate their privacy request because of the burdensome task of legislation so that differences in their rules analyzing manual records. It should also be and practices will not hamper the exchange noted that computer technology allows such of information across their borders (see ch. files to be easily processed to create new 12). The rejection of an omnibus approach, tapes containing only the information DOL coupled with the lack of a centralized author- and Prudential would mutually agree is per- ity over data banks, is making it difficult for tinent. the United States to enter into these interna- Relevancy is also a weak requirement with tional agreements. Such a divergence could respect to its application to the timeliness of leave the United States as “odd man out” data. The Privacy Commission found that with respect to transborder data flow. This agencies were not particularly inclined to could have serious implications for trade and cull their files. As the cost of memory con- international relations and warrants serious tinues to drop and very large data systems 3 attention. become easier to operate, even existing economic and managerial incentives to clear ‘Donald Nlarchand, “ Privacy, Confidentiality and Com- puters: National and International Implications of U.S. information Policy, ” ‘rQ/WOTT7 m u nica tion.~ Polic?j, September ‘“Prudential Barred From U.S. Contracts,” The 14’a.sh- 1979, pp. 192-208. irlgtt)r) Po,r ~~~~~rds, years, wristwatch-size units will be avail- ‘/’hfJ lf”(l fhl n:ton /’os f, I)ec. 2, 1 !379. able. Although at least one State, Penn- 78 ● Computer-Based National Information Systems: Technology and Public Policy Issues sylvania, has a law requiring subject consent which is directed equally at Government and for use of such devices, its enforcement private data systems.6 would be quite difficult when the possession and use of a unit can be so easily hidden. Some social and political scientists suggest that the computer represents to the public the growing power of Government Currently available security systems and other large organizations over their based on magnetic cards and microproces- daily lives. ’ Thus, as the use of these in- sor-based locks allow an employer or build- formation systems grows, the public’s ap- ing manager to keep detailed records of the prehension is also expected to grow as will whereabouts of anyone in the building. De- pressures on public officials to control or vices called “pen registers” provide a similar even to stop certain types of computer capability for monitoring telephone traffic. applications. If voice recognition and picture processing capabilities improve as much as some ex- There appears to be a trend toward a perts expect over the next decade, other society in which information about a performs of inexpensive automated surveillance son’s finances, medical and educational his- will also become available. tories, habits as a consumer, daily move- ments, and communications with others Abuse of this technology for illicit pur- through the telephone or the mail will be col- poses may become a serious problem. How- lected, stored in a computer, possibly sold to ever, seemingly legitimate applications such others, and used in ways over which the in- as retail market surveillance of customers or dividual may have little or no control. There employer surveillance of employees may also may be many benefits in terms of the pro- cause concern if there are obvious abuses, ductivity and efficiency of institutions, and Arguments for socially sanctioned uses will in terms of broadened awareness and choices raise, in new forms, classic issues of civil available to individuals as citizens and con- rights v. both law enforcement and the sumers. But the long-term social and po- rights of employers to monitor their employ- litical effects of this trend–beneficial and ees. In this debate, the new information tech- adverse—are still largely unknown. It seems nology places powerful new tools in the likely, however, that they will be profound, hands of those who argue for greater social and will alter how individuals both perceive control. and relate to the institutions that affect their lives. Consequently, Congress will continue The Glass House Society to be a principal forum in which these conflicts will be deliberated and ultimately The issues that are likely to remain active resolved. during the next decade or two arise from the public’s misgivings that the use of large data “77he I)irnensions of Pn”lluc?: A ,4’ational opinion” l{e,~curch systems containing personal information is S’ur[’e]’ of A ttitudps ‘1’OUIU rd Prit ~ac~’ (.Steven:. Point, Vt’iscon- sin, 1 979) for Sentry Insurance. threatening to them. Recent polls have ‘,Ja mes Rule, et al., ‘1’hc I)olific. s of I)n”{ ‘a{’>’ (New York: shown a steadily rising concern over privacy, F~lsevier-?40rth }Iolland, 1980). Chapter 8 The Security of Computer Systems Contents

Page Concern and Need● **** ****“ **** **** *a. *.. *.. ,****e* m*** e **q*****+* 81 The Technology of Security ● ***.****.*.***.*.**...**.***.********** 82 Threats and Targets ● **. **** *.. ..9. w8@ti0~e O+v~~aa &**. .**. ... .*vb. e 82 Future security Issues ● .*. *.*...... , *.** *.** ***e e*** **** **e ****e** 84 Protection of Federal Systems ● ....,,.. * * * * * * . * * * * * . . . . ., *...**.** 84 Protection of Vital Domestic Information Systems ● ...... 85

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* Chapter 8 The Security of Computer Systems

Concern and Need

The security of computer systems, par- eral agencies to pay attention to the security ticularly those operated by the Federal of their data processing operations. The Government, has increasingly concerned memorandum required the agencies to con- Congress. Hearings have been held, studies duct risk analyses of the threats and vulner- have been published by the General Ac- abilities of their systems and to develop ap- counting Office, and legislation has been in- propriate security plans. traduced, ’ all addressing the problem of The National Bureau of Standards, under meeting threats to Federal data installa- 3 authorization by the Brooks Act, is continu- tions. ing to develop guidelines and standards in all Security concerns have also appeared in areas of computer security for use by Fed- congressional reaction to proposals for new eral agencies. The first standard to emerge advanced information systems by Federal from this effort is the Data Encryption* agencies, such as the proposed Social Securi- Standard for protecting data communica- ty system, the Tax Accounting System of tions. Its adoption may present difficulties the Internal Revenue Service, and the up- because of the rapidly changing technology grading of the National Crime Information and the extraordinarily wide range of types Center (NCIC) system of the Federal Bureau and uses of Federal information systems of Investigation. All of these proposals have that would have to be covered. been scrutinized carefully by congressional In the domestic sector, the security prob- committees, with particular emphasis on the lem is growing in importance due to several security of the systems. trends: Similar concerns have also been expressed c The rapidly increasing quantity of com- by the executive branch. Presidential Direc- puterized data stored and transmitted tive 24, published in February 1979, estab- over communication networks. lished policy for the security of Federal com- ● The increasing value of the data, both munications and assigned responsibility for as a marketable commodity and as rep- the protection of nonmilitary but sensitive resentative of value, for example, as in Government communications. This directive an electronic funds transfer or an auto- was motivated by a concern for national se- mated stock exchange transaction. curity, that is, the potential value of in- ● As has been pointed out, an increasing tercepted communications to an enemy. quantity of personal information is be- In a 1978 memorandum,’ the Office of ing collected, stored, and transmitted. Management and Budget directed all Fed- The security needs of electronic mail or — . of the NCIC system are motivated, in ‘See S. 2J0 (and H.R. 6192), 96th Cong., “Federal Com- part, by privacy concerns. puter Systems Protection Act of 1979, ” to prohibit the use, for fraudulent or other illegal purposes, of any computer orandum No. 1, “Security of Federal Automated Information owned or operated in interstate commerce or by the Federal Systems, ” 1978. Government or any financial institution. ‘Public Law 89-306. Qffice of Management and Budget; circular A-71, “Re- *Encryption is the coding of a message so it is only under- sponsibilities for the Administration and !Vlanagement of Au- standable to a receiver who knows the secret decoding pro- tomatic Data Processing Acti\’ities, ” transmittal mem- cedure.

81 82 . Computer-Based National Information Systems: Technology and Public Policy Issues

● An organization’s operations are be- can close down all sales registers in a de- coming more dependent on the reliable, partment store, the air traffic control secure functioning of the supporting system, or all the teller stations in a computer system. A computer failure bank.

The Technology of Security

There is a blend of optimism and pessi- afterthought rather than integrated into the mism in the computer technology commu- system from the beginning. Most designers nity about the future of computer security have not been trained to build security into problems. On the one side, experts correctly the systems they assemble, since security point out that the technology of securing features can increase the initial cost and computer systems is improving steadily (see operating overhead, and may be burdensome ch. 13). They also maintain that computer- to manage. ized systems, even if not perfectly secure, The second objection is that advances in are often far more secure than the manual the technology of protection may not be ade- systems they replaced. quate to deal with the complex systems now On the other side two main arguments are being built. In particular, the present trend advanced. First, since security has not been towards linking computers into networks historically a high-priority goal in the design that use new communication services, which of information systems, the existence of vastly increases the overall complexity of security technology does not necessarily the resulting systems, presents new and dif- guarantee its proper application. Security ficult challenges to the designer attempting hardware and software are often added as an to build a secure system.

Threats and Targets

Analysts view the security problem in sev- a number of computer scientists have focus- eral parts. Threats are the possible actions of ed their attention on computer security.4 5 outside forces that may compromise a Computer crime analysts note a number of system. Targets are those points within the types of threats: system against which an attack may be mounted. Assets are the resources of the ● theft; system (information, money, goods) that ● sabotage; may be lost. ● data alteration (i.e., in a credit file); ● blackmail; Because of the trends cited, threats ● extortion; against computer systems appear to be on ● corporate espionage; the increase. The transfer of funds elec- ● system failure; tronically is only one case in which the in- ● service interruption; formation processed is assuming a significant tangible value. Electronic mail and future systems for trading commodities and securities will also tempt criminals. As the ‘Lance J. Hoffman, Modern Methods for Computer Secu- society grows more information oriented, the rz”tv and Pn”uacy (Englewood Cliffs, N. J.: Prentice Hall, 1977). ‘Dorm B. Parker and Susan N. Nycum, Computer Abuse risk of theft will increase along with the and Con trol Study (Menlo Park, Calif.: SRI International, potential payoff for its success. In response, March 1979). Ch. 8— The Security of Computer Systems ● 83

● natural hazards (e. g., volcanic eruption, In some cases it is improving, in others flood); and worsening. ● unauthorized disclosure. The vulnerability of the system software Computer literacy is growing and with it a to intrusion should decrease as operating proportionate number of people sufficiently systems are designed with security as a prin- knowledgeable to compromise a computer cipal goal. They can be expected to be more system. In addition, access to low-cost per- immune to compromise than those currently sonal computing systems may provide such available. Data communication will be better criminals with more sophisticated tools. At protected, both by its changing basic least one such attack has already been made technology and by the incorporation of cryp- on the telephone system with the aid of a tographic protection. The language used to small in-home computer system. Recently, query the data base will be designed to more newspapers reported the alleged use of a easily isolate users from data that they are small computer by high school students to not authorized to use. Thus, in the future vir- break into the data banks of several Cana- tually every component of an information dian corporations.’ system will have better security technology designed into it. Certain social conditions may increase the threats to computer-based systems. A New vulnerability problems, however, will period of stagnation coupled with high infla- arise at the level of the overall system. As a tion could create economic pressures that system becomes larger and more complex, so might lead to an increase in white-collar in- do the managerial and technical problems of sider crime. In addition, some social and po- securing it at a system level. The trend to- litical scientists see the possibility of an in- ward linking a large number of computer crease in domestic terrorist activit y.7 systems together to be used for diverse ap- Foreign experience has shown that such ac- plications by many persons, scattered geo- tivity is often directed against computer and graphically, poses system design and man- communication systems, which the perpe- agement problems that are orders of trators assume, often rightly, to be at the magnitude larger than those faced in the heart of organizational operations. design of previous generations of informa- Forewarnings such as these, although tion systems. It will be difficult to assess the vulnerability of such complicated systems to based on expert opinion, are at best specula- accidental or deliberate misuse or failure. tive. Nevertheless, security plans must be developed against potentialities, not just Detecting that an untoward incident has oc- certainties. Thus, the possibility that an incurred would be even more difficult in such crease in certain social pressures could lead systems because of the high volume of work that flows through them and the lack in to economic and sabotage threats against the coming decade’s complex information many systems of full transaction logs. systems is a significant factor in any secu- Although the individual communication rity analysis. links may be more secure (say through encryption), data communication adds its own While threats to information systems and problems when integrated into information the potential losses from attacks are clearly systems. A network of computers that links increasing, the vulnerability of systems to together individual computer systems over successful attack is changing in character. — — telecommunication lines has numerous “’’I’he Great I)alton School Computer Tie-In ~lystm-y,” points that need to be protected in an en- ,1’e{<+ }’{)rk Times, tJul\ 7, 1980, p. 2, CO1. 1. vironment where failure or penetration at ‘I)onn 13. Parker, “’[’he Potent ial F; ffwts of Electronic any point compromises the entire system. In Funds ‘1’ransfer on National Security, ” f ‘r(]c{~cflirl,gs of t k c b’iftk In tcrnci tic)ncll (’onfer(’flcl” on {’ornpli t{r {’em m [~ rli

Future Security Issues

Among the several difficult issues involv- domestic activities as the air traffic control ing computer security that are likely to con- system or the computer-controlled national front Congress over the next decade, the fol- electric power distribution grid, whose dis- lowing appear to be the most significant. ruption could create significant social tur- moil. Electronic mail service or an electronic Protection of Federal Systems funds transfer network would be similarly vulnerable. Federal information systems control the disbursement of an enormous amount of Theft, eavesdropping, and sabotage are money. The Social Security system itself dis- not the only threats to Federal computer burses over $1.5 billion per week. Other systems that Congress will need to consider. Federal systems contain information that A more subtle threat is a system’s potential could be used directly or indirectly to make diversion by the bureaucracy from its in- profitable financial decisions, e.g., informa- tended use. This issue is raised in OTA’s tion concerning Federal monetary policy, NCIC assessment. Expressing similar con- commodity markets, energy resource esti- cern in a different area, Congress has imposed criminal sanctions for bureaucratic mates, and the like. Still others contain sen- 8 sitive information relating to personal pri- violations of the Privacy Act of 1974. vacy or national security. All would be The technology currently available is not highly attractive to theft, manipulation, or very useful for securing a system against eavesdropping. this type of bureaucratic abuse, although the There are many potential victims of secu- researchers in the field of electronic data rity failures. Taxpayers would suffer the los- processing auditing are looking at related ses from a fraudulent drain on the Federal problems. Many abuses do not involve viola- Treasury. Other types of attacks, for exam- tions of the computational procedures within ple on social service systems, could create the computer system, but rather represent severe hardship for individuals dependent on misuse of the data once it is out of the sys- those programs. In an extreme case, the na- tem. Thus, the most effective controls tional security could be threatened, not only by attacks on military and diplomatic computers but also by assaults on such major ‘Public Law 93-579. Ch. 8— The Security of Computer Systems ● 85 against bureaucratic abuse for now will like- There is also a Federal responsibility for ly be in the areas of policy, personnel, and certain information systems that although management, rather than technical. Strong privately operated, are fundamental to social criminal sanctions for misusing a system well-being. The security and reliability of au- may also have a deterrent effect. tomated systems for nationwide bank check clearing, for a national stock exchange, and As the Government continues to auto- for computer-based commodity trading, for mate, problems of bureaucratic account- example, would all be under the purview of ability and the responsibility for oversight Congress. The vulnerability of such systems will confront Congress with the need to bet- is of governmental concern because of the ter understand and more closely monitor the harm that a major system failure could cause use of large Federal information systems. to the Nation’s economy and to its citizens. Protection of Vital Domestic The continuing evaluation of the privacy Information Systems issue will undoubtedly lead to more stringent security provisions consistent with the There are a number of national interests evolution toward more communication- that will cause Congress to become con- based computer systems. cerned about the security of major non- If there is in fact a growing commercial federal national information systems. market in personal data, an illicit traffic in Regulations regarding the flow of personal stolen information could develop, thus in- information are proliferating in nations creasing the threat of piracy of personal data around the world. To date, most laws con- from these systems. This would call for cern the transfer of personal information and tougher and more specific standards for stem from national privacy laws. However, their security. there seems to be a distinct trend toward the The Federal Government, due to its tradi- extension of these laws to organizations, g tional concern for the protection of military which are designated as ‘‘legal persons ‘ and and diplomatic communications, has a high thus included under privacy laws designed degree of expertise in the field of data secu- to protect personal data. There is also a rity. A good deal of this expertise is either growing concern expressed by some nations, classified or in the hands of highly sensitive particularly those in the Third World, that organizations such as the National Security information originating within their borders Agency. The appropriate role of the Federal is a national resource over which they want 10 Government has not been defined in trans- to maintain control. ferring this knowledge, for supporting com- These trends may create additional fears puter security in both the public and private about the security of networked systems sectors, for setting standards, and for certi- that communicate beyond their boundaries. fying security technology. The relatively mild wording about security The lack of such policy definition is visible in current privacy legislation could reappear in the current debate over Government con- in much more stringent form in new legisla- trol of cryptographic technology. *l In this tion. debate, the needs of the private sector for increased communication security, and hence for the existence of a civilian commercial cryptographic capability, are set against the

.— — ‘ I I )a~id Kahn, ‘((’r j’ptograph~ (~oes Puhlic, ” F(~r(]ign A/_- fi~ir.s, Y{)]. 5X, N(), 1, fall 1979, pp. 141-159. 86 ● Computer-Based National Information Systems, Technology and Public Policy Issues perceptions of the defense community that the desire in the academic community for the such development threatens national secu- freedom to conduct research on the mathe- rity concerns by putting sensitive informa- matics underlying cryptography. tion in the public domain. ” A related issue is . 124’ Study Group Agrees to t’oluntary Restraints, ” Science, Seeks Cryptography Polic~, “ .$ci(~nce, Iol. 211, hlar. 18, 19H 1, vol. 210, Oct. 31, 1980. pp. 511-,512 and ‘‘ \l IT Committee pp. 1 ! 139-1,140.

. Chapter 9 Government Management of Data Processing contents

Page 89 GvernmentUse Of Information Technology ● *0. .*** *9** ***q **~ 9****”” 89 Problems . .,**. *.. *.. .**. .**. ***. **** **. ******~****"*"*"**"****" 92 Issues ● ● . . . . ● . ● ● ● . ● . ● , ,, ● ● , ● ● . ● ● ● ● ● ● . ● ● ● . . ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● . ● ● .

TABLE Table No. Page 7. Policies and Reguations Concerning Federal Data Processing ...... 90 Chapter 9 Government Management of Data Processing

Government Use of Information Technology

In the early days of computing, the Fed- Cheaper computing hardware, the emer- eral Government as a user was a principal gence of data communication-based sys- stimulus to the development of the field. tems, and new software techniques are Agencies such as the Census Bureau, the changing the way computers are used in in- Bureau of Standards, the Atomic Energy dustry. The next 10 years will see significant Commission, and the Department of Defense movement in the private sector toward auto- supported the design, programing, and uses mating the flow of information in offices, of the most sophisticated computer systems toward experimenting with new manage- in the world. In many cases, development ment structures based on high-volume data work funded by the Government was carried communication, and toward automating out in university and industrial laboratories. decision support systems for use by higher management. To the extent that these ap- A few instances of Federal expertise at the plications fulfill their promise of improve- leading-edge of computer applications re- ment in both the quality and productivity main, for example in the scientific research of management, the Federal Government field. However, it appears that, in general, would be remiss in not making use of them the Federal Government is rapidly falling where appropriate. behind the private sector in its use and man- Government, to a great extent, resembles agement of up-to-date computing tech- the service and information sectors of the nology. If this observation is correct such a lag would penalize Government operations economy with respect to the role of information technology in making productivity im- in two ways. provements. Any significant productivity 1. potentially lost opportunities to use the improvements brought about by this technology would have to be examined in the newest technology to improve the effi- light of their possible effects on: ciency and effectiveness of Government programs, and employment, particularly at the clerical 2. increased cost and decreased reliability and lower management levels; and resulting from operating systems that requirements for training to upgrade or are becoming obsolete, from archaic reorient the skills of employees forced management procedures, and from bur- to use information technology or dis- densome procurement restrictions. placed by its adoption.

Problems.

A host of new demands for Government systems, such as that of the Social Security recordkeeping requirements may arise, rang- Administration, due to population growth, ing from draft registration to the possible ex- the increased complexity of the programs pansion of Federal health-care benefits. In- that must be administered, and the demand creased demands are being made on existing for higher productivity by the bureaucracy.

89 90 ● Computer-Based National Information Systems: Technology and Public Policy Issues

New information technology will help to pro- upgrade is now being implemented. ) Other vide the tools to meet these needs. studies have shown that the ratio of personnel to hardware costs at Federal installations There are indications suggesting that the is nearly twice that of private industry. Government is now experiencing severe difficulties managing the computer technology Among the reasons proposed for these it currently has in place. The General Ac- problems are: counting Office (GAO) reports, congres- ● Bureaucratic red tape: Computer tech- sional hearings, the report from the recent nology is changing rapidly; however, Presidential reorganization project, personal the rules governing the procurement testimony from Federal electronic data proc- and management of automated data essing administrators, and OTA’S assess- systems are proliferating. Unless they ment of the National Crime Information are written with technological farsight- Center (NCIC) run by the Federal Bureau of edness, they can restrict the mod- Investigation (FBI), all indicate that, for a ernization of an installation’s opera- variety of reasons, the Federal Government tions. The numbers shown in table 7, does not seem to be managing its computing which have been taken from a 1977 re- resources effectively. port of the Office of Management and A sampling of over 200 GAO reports on Budget (OMB), ’ illustrate the welter of electronic data processing (EDP) that have rules under which the Federal comput- been published over the last few years show ing centers operate. the following titles: ● Organizational inflexibility: Recent re-

● search has shown that modern informa- Federal Productivity Suffers Because tion systems profoundly affect the deci- Word Processing Is Not Well Managed, April 1979. ● Problems Found With Government Ac- ‘Office of Management and Budget, Federal Data Process- quisition and Use of Computers From ing Policies and Regula tion—Annotated Bibliography, December 1978. November 1965 to December 1977 March 1977. ● Contracting for Computer Software De- Table 7.—Policies and Regulations Concerning velopment—Serious Problems Require Federal Data Processing Management Attention To Avoid ● 4 laws Wasting Additional Millions, Novem- ● 3 Executive orders ber 1979. ● 3 Presidential memoranda ● Inadequacies in Data Processing Plan- ● 10 Office of Management and Budget circulars ● 12 Office of Telecommunication Policy circulars ning in the Department of Commerce, ● 3 Federal management circulars May 1978. , ● 3 Federal procurement regulations ● IRS Can Better Plan For and Control ● 3 Federal Property Management Regulations (FPMR’s) ● 16 FPMR bulletins Its ADP Resources, June 1979. ● 2 FPMR temporary regulations ● 6 National Communication System Guidance The Federal data processing project of the Publications President’s reorganization project reported ● 60 Federal Information Processing Standards in April 1979 that, while there was a clear Publications (FIPS Pubs) ● 11 Federal Telecommunications Standards (some need for using advanced information tech- overlap with FIPS Pubs) nology, the Government was seriously mis- ● 11 Policy letters and memoranda managing its existing data processing. The ● 2 Department of Justice Office of Legal Counsel Opinions OTA assessment of the FBI’s NCIC system ● 3 Federal Communications Commission decisions shows that it has been obsolete for several ● 5 General Services Administration Management years and is growing more costly and un- Guidance Documents reliable to operate. (A recently approved SOURCE Off Ice of Management and Budget, 1977 Ch. 9—Government Management of Data Processing ● 91

sionmaking patterns in organizations.2 ented, and correspondingly expensive, The research suggests that computer- programing and systems analysis ized information systems are particu- talent. larly effective under special conditions; Furthermore, although job-hopping these depend on the operational level and staff turnover have been chronic and support for the system. At higher problems for private industry, this rota- levels of organizations, information tion also seems to produce a cadre of systems are more subject to the politics very broadly experienced, expert, and and conflicts of organizational life. up-to-date programmers in the labor pool. While at times these systems prove to Not only do these people learn faster, be effective, at other times they will be but as they change jobs they bring new unworkable because existing powerful ideas and techniques into each data groups will not cooperate in systems processing center. Government pro- development and use. Experience in the graming staff seems to be more static, private sector likewise suggests that at- moving less between agencies and tempts to force major new information almost never between private industry systems into rigidly traditional and un- and the Government. receptive management structures are In addition, a principal drawing card often doomed to failure.3 Yet, reorganiz- for talented programmers is the oping a bureaucracy is a difficult and portunity to work on state-of-the-art highly political process. systems. The job of maintaining a Procurement delays: Federal EDP decade-old operating system on an out- managers complain that the procure- of-date computer, even if very highly ment process is so complex, confusing, paid, is unlikely to attract an experi- and fraught with delay that by the time enced and talented programer. Thus, a new systems concept is actually the obsolescence of Federal systems realized in the installation of new hard- sets up a vicious circle-a disincentive ware, the system is already approach- to the kind of people who could best ing obsolescence. Estimates of delays in develop new systems. the procurement process for some large ● Debates over social impacts: The instal- systems run as long as 6 years, long lation of several large, new data proc- enough for the desired technology to essing systems has been delayed or, in become obsolete. Estimates do not in- some cases, completely halted in the clude the further delays imposed by dis- face of congressional concerns about im- cussions within the executive branch or pacts these systems might have on con- Congress of the appropriateness of the stitutional rights and other societal systems or of their possible social im- values such as privacy. Plans proposed pacts. for integrated Federal data banks have Staffing problems: There has been some also occasioned public debate. Thus, it concern expressed that Government is reasonable to assume that there will computer expertise itself has been be a great deal of social sensitivity and growing obsolete. In particular, the distrust or at least wariness about ma- Government has trouble competing jor new data systems. This concern will with private industry for highly tal- affect particularly those applications that are designed to handle personal data. 2R. Kling and W. Scacchi, ‘*Computing as Social Action, the Social Dynamics of Computing in Complex Organiza- It may be that a more clearly articulated tions, ” Aduances in Computers, vol. 19 (New York: set of social policy concerns with more con- Academic Press, 1980). 3Henry C. Lucas, V1’hy Information Sy.~tem.s Fail (New crete guidelines will aid Federal agencies to York: Columbia University Press, 1975). better anticipate the questions of societal 92 . Computer-Based National Information Systems: Technology and Public Policy Issues impacts before they arise. Furthermore, sys- these broader policy concerns, which can run tern managers and designers working in counter to more narrow engineering design these agencies need to be more sensitive to goals such as efficiency and reliability y.

Issues

There seems to be no doubt that several Congress and the public need to know major new data processing systems will be more about location of responsibility, needed by Federal agencies within this dec- the quality of the decisions, the nature ade. Congress will, therefore, be faced with a of due process for clients affected by number of problems involving planning, those decisions, and the accountability designing, procuring, and managing these of the bureaucracy to Congress and to systems. higher-level policy makers in the executive branch. A better understanding Some legislative attempts to rationalize of the broader and longer term social Federal EDP have been made. The most no- impacts of a massive automated bu- table is the 1967 amendment, which is reaucracy is also needed. known as the “Brooks Act, ” to the Federal Many questions are still unanswered. Property and Administrative Services Act. Can there be both increased efficiency This act set up authorities in the executive and fairness in Federal data processing? branch to regulate agency procurement of Are there inherent threats to the civil data processing equipment. The most recent liberties of the clients of agencies that significant bill was H.R. 6410/S. 1411 passed automate their decisionmaking? Will by Congress and signed into law December there be more subtle effects on social 11, 1980. This public law, known as the values and on the political attitudes of Paperwork Reduction Act of 1980, estab- citizens toward Government? lishes central oversight in OMB of the in- Some research on these topics, par- formation policies and practices of the ex- ticularly on managerial effects, has ecutive branch. Perhaps most important, been done in the context of private sec- this act emphasizes the basic need for re- tor organizations. A few investigators structuring the way information resources have also started to look at local and supporting technologies are managed in 5 government impacts. the Government. This represents a new ap- Some of these results maybe directly proach by giving management of informa- applicable to Federal agencies; other tion resources similar importance to that tra- findings can only be suggestive. For ex- ditionally assigned to managing financial ample, research suggests that some and personnel resources. Many issues and local agencies may use their informa- questions need attention from this broader tion systems for political purposes perspective. For example: rather than to improve administrative 6 ● There is a need to better understand the efficiency. Single, centralized policy- effects of large-scale information sys- oriented information systems may not tems on the internal organization and management of Government agencies and on decisionmaking in Federal agen- 5William Dutton and Kenneth Kraemer, “Management 4 Utilization of Computers in American Local Governments, ” cies. Communications of the Association of Computing Machinery, vol. 2, No. 1, March 1978, pp. 305-309. ‘Rob Kling, “Automated Welfare Client-Tracking and Service Integration: The Political Economy of Computing, ” ‘K. Laudon, “Privacy and Federal Data Banks, ” Society, Communications of the Association of Computing Ma- January/February 1980, pp. 50-56. chinery, vol. 21, No. 6, June 1978, pp. 484-493. ●

Ch. 9—Government Management of Data Processing ● 93 —

necessarily be more objective than their Four fundamental approaches are avail- manual counterparts (containing less able to deal with social value questions: data); much may be gained by having 1. 7 Congress could assess the potential so- competing systems. While these and cial impacts of each new system design other studies of private sector and local that is proposed on a case-by-case basis. government information systems may There are several dangers inherent in not shed much light on Federal informa- such an approach. Inconsistent policies tion systems, this existing body of em- may be set for different systems and pirical studies does provide a useful different agencies (or even for different 8 9 10 starting place. Careful similar versions of the same systems at dif- studies of Federal systems should be ferent times); the evaluation process undertaken, since these systems are can seriously delay procurements; and often large in scale, accountable to a because the system designer is not wider variety of interests, and managed aware of which issues will be deemed under somewhat different vendor and important and which requirements are civil service arrangements. likely to be placed on the system, the Little actual research has been done design is nearly always subject to the on these broader policy issues, although criticism that it is seriously deficient. there is an indication of some activity 2. Congress could codify a social impact among analysts working in this field. policy concerning all Federal informa- One possibility would be for some ap- tion processing systems. An appropri- propriate agency to be encouraged by ate executive branch agency could be Congress to support research in the im- designated as responsible for seeing portant areas of social impact. Such a that all new system designs are eval- program could fund long-term investi- uated in relation to that policy. gations that look beyond the short- The drawbacks would be the diffi- range focus of most current policy culty of developing such a policy in the 11 analysis. first place, and the loss of the ability to c The process by which appropriate social evaluate each new system in light of its values and goals are reflected in system own peculiar characteristics and the design needs clarification. Major new specific mission of the operating systems will need to be evaluated by agency. Congress for their effects on privacy, 3. Congress could continue to examine security, constitutional rights, and agency proposals system-by-system, many other issues that are not normally but would base its evaluation on a social the concern of the designer or operator impact framework encompassing a set of an information system. of principles for the design and operation of Federal information systems. . —.— This process has already been started ‘1/0}) Kling, “ Information !+y’stems in Public Policy Mak- by the Privacy Act of 1974, which ex- ing: (’t)mputer Technology and organizational Arrange- ments, TciwI(~nlIn unim tions P[)licj’, VO1. 2, No. 1, March pressed congressional concern about 1 !378, pp. 22-:32. one specific aspect of Federal agency ‘I)utton, and Kraemer, op. cit. recordkeeping practices, the effect on “R{)IJ Kling, “Social }\naljrses of Computing: Theoretical [~(~rsp(~(’t i~es in flecent ~~mpirical Research, c’ompu ting the privacy rights of individual citizens. S{ir((’)i, tol, 12, No, 1, Itlarch 19H0, pp. 61-110. 4. Proposals for simplifying the pro- ‘{’ Kling and Scacchi, op. cit. pp. 250-327. cedures for purchasing data processing ] See for example, HR. 4326, 96th Cong., to establish a comm iss ion on the i replications of information technology in equipment will probably be introduced education. A Iso see II. R, 8395 introduced by Rep. (Ieorge in Congress during this decade. It will Brown in the 96th [’ong., 2d sess. This bill would establish an be necessary for Congress to balance Institute for 1 nformation Polic> and Research to address national information polic?’ i%sues. the need to speed up design and pro- 94 ● Computer-Based National Information Systems: Technology and Public Policy Issues

curement of Federal systems, against to the installation of new information sys- the paramount requirements that tax tems that could turn out to be unnecessary money be spent as effectively and as or even harmful. However, if after careful equitably as possible and the necessity consideration Congress approves a partic- to consider carefully the societal im- ular information system, bureaucratic delay pacts of these systems. could be viewed as disadvantageous, under- mining the potential utility and performance Some opponents of large information sys- of the system and the effectiveness of the tems welcome delays as useful impediments relevant agency. Chapter 10 Society’s Dependence on Information Systems . Contents

Page Introduction **. .*. ***. **, * * * e * . . *, . . . . . * . * . * * ., *, ...... 97 Failure **** *.** * * . . * * * . . . * * . . . . * . . * * * . . * . * ...... 98 Issues ** ***** **** **** ***, , s * * * . * * * * * * * * * * * * . * * . . * *, *,.*.*... 100

Specific Systems and Threats ● **.***..*..,*****.*.**************** 100

Calculating Risk ● .*...*******.********,**...*.*****....*.....*.. 100 Assignment of Risk...... 100 Management of Risk ...... 101

& Chapter 10 Society’s Dependence on Information Systems

Introduction

The nature of risk is being changed by When examining technologies such as much of the new high technology on which electronic funds transfer (EFT) systems, modern society depends—jumbo commercial widely available electronic mail service airlines, nuclear powerplants, oil super- (EMS), and other large extensively used in- tankers, or large computer-based informa- formation systems, the following should be tion systems. In general, because new tech- taken into consideration. nologies can be designed to operate more reliably than the ones replaced, the risk that ● The ways in which public policy can any particular mechanism may fail has been help to allocate and balance the risks reduced. However, should an accidental or society may encounter from national in- deliberate disruption occur, its cost can be formation systems against the benefits much larger, even catastrophic. Further- it may receive, under conditions where more, when society becomes highly depend- failure rates appear to be relatively low ent on the reliable functioning of single inte- but potential losses may be high should grated technological systems or small collec- a failure occur. tions of such systems, the possibility of a ● The ability of society to retain the op- “domino-like” collapse of several of the indi- tion to end its dependence on a particu- vidual connected units could also be dis- lar information system if it has unan- astrous. The failure of the Northeast power ticipated undesirable effects; in other grid in 1965, which blacked out much of that words, to avoid the possibility of be- section of the United States including all of coming “locked in” to the use of certain New York City, is an example. ’ information systems once they are installed. Integrated systems are often created by ● information technology. There has been a The capability of providing alternatives strong historical trend toward connecting to persons or institutions choosing not components over communication lines to to accept perceived risks in a new inform complex distributed systems, while at formation system. ● The ways in which technology can be the same time computers have become smaller and more dispersed. In OTA’s ex- utilized to reduce the risks, for example amination of future technology (see ch. 13), it by introducing additional system re- was concluded that this trend toward in- dundancy (alternative paths between tegration would continue, driven by the ef- points in the system, distributed data fort to make information systems more con- bases, backup computers). The risks in- venient and more efficient. herent in U.S. dependence on a nationwide, interconnected telephone system .— (which itself is rapidly being computer- ‘Rob Kling, “Value Conflicts and Social Choice in Electron- ized) are mitigated to a degree by the ic Funds Transfer Systems Developments, Communica tion.$ large number of switching centers and of the A s.~ocia tion for (’ompu ting Machinery, vol. 21 No. 8, August 1978, pp. 642-657. parallel trunklines.

97 98 ● Computer-Based National Information Systems: Technology and Public Policy Issues

Failure

Large complex information systems con- against failure proved to be its Achilles tain millions of logical connections and are heel. controlled by programs that themselves can be composed of millions of instructions. Con- This example demonstrates how difficult sequently, it is difficult to calculate their it is to design large and complex systems reliability and to predict the failure rate of which are also reliable. Nonetheless, in many any particular part of the system, as well as situations a distributed system such as the effect of a failure on the operation of the ARPANET may be much more reliable than entire system. A further complication is that a centralized system of the same size, be- when a major failure does occur, it is often cause of the distributed system’s potential caused by a rare combination of multiple for isolating and therefore surviving local breakdowns of components. It is currently failures without a total system breakdown. not possible to incorporate all of these prob- Little data exist from which to calculate abilities into a single characterization of sys- failure probabilities because of the newness tem reliability. of information technology and its low failure This failure problem is illustrated by a re- rate. In addition, each system is uniquely cent breakdown of the ARPANET, a nation- designed for its purpose; therefore very little wide packet switched network intended to be useful experience has been accumulated that and normally regarded as highly reliable. would be applicable to calculating the probability of the potential failure rate for large ● The network’s builders recognized that complex systems in general. component failure is inevitable in any system and designed the network to be The problem of estimating risks under tolerant of such failures. The approach conditions characterized by an uncertain but taken was to design the network’s traf- very low probability of failure and by a very fic control algorithms so as to isolate high potential cost of failure has stimulated each failure to the processor or other a burst of new research in risk analysis. The system element in which the failure first National Science Foundation has initiated a occurred. program of research that should contribute ● The overall success of these algorithms to improving the ability to calculate more and the software that embodies them is accurately risks for large systems over the borne out by the rare occurrence of long term. failure conditions that affect any In addition, attempts are being made to significant portion of the network. design so-called “robust” systems. These ● But a recent failure did occur in the traf- systems have very high reliability, can fic control software itself–the very diagnose failure, and in some cases can even mechanism intended to minimize the replace failed components by switching to spread of failure. Bad data in one proc- alternative ones. The message-switching essor was rapidly and systematically computers that are custom-designed for use propagated throughout the network, in the telephone network employ some of bringing traffic to a standstill. Under these techniques to achieve very high reli- normal conditions such propagation is ability, as do on-board spacecraft computers necessary and desirable to allow the where long-term reliability is crucial. network to keep track of its current con- dition. Unfortunately, the propagation It is difficult to carry out risk analysis for of false data, like poison, proved fatal. integrated information systems for the fol- Thus, the network’s primary shield lowing reasons: Ch. 10—Society’s Dependence on Information Systems ● 99

● Their complexity, which makes some to-day security by supplying instant design errors inevitable but also makes backup to nodes that may fail. How- accurate estimations of system reli- ever, there may be also a greater risk ability very difficult. that the entire system will go down in ● The speed of computers, in which mil- the event of an unlikely or unexpected lions of transactions are processed combination of events. every minute, makes human monitoring ● Societal dependence on the uninter- virtually impossible. Consequently, sys- rupted operation of large information tem failures can quickly drive the sys- systems will increase along with poten- tem to a worst-case collapse before any tial societal loss from their failure. The human intervention can take place. This development of these systems is being criticism was made during the congres- motivated by the need for assistance in sional debate on the antiballistic missile managing the increasingly complex ac- system. It was argued that a system tivities of U.S. society and its organiza- malfunction could fire the missile before tions. These systems then become inte- any human intervention could detect gral parts of the processes–central to the error and cancel the action. their operation–rather than merely An automated national stock market tools. or centralized check clearing system could also be subject to such catas- This evolution to dependency can be trophes. Banks or brokerage houses seen already in the reliance of safe could be ruined in a matter of minutes, public air transport on the continuous long before it was discovered that the operation of the computerized air traffic system had failed. The potential victims control system. In the commercial sec- would be the owners of the failed sys- tor, large stores and banks rely on the tem, individuals with accounts, cor- smooth uninterrupted operation of their respondent organizations, and, were the centralized computer systems. Future failure to cascade through other institu- EMS and EFT systems will likely cre- tions, even all of society. ate similar societal dependencies much ● Centralization of data which occurs in larger in scale than current examples. many large information systems and is partly motivated by the higher security It is not hard to project into the 1980’s possible with a centralized system. and envision the potential damage that Even if failure rates continue to be as could be caused by the failure or misuse of low as predicted, this concentration such systems as they grow larger, more com- would greatly increase the size of a plex, and more centralized. Some of the risks potential loss should the very rare event may be physical as in the air traffic control occur. example or with a computerized nuclear reac- ● Interconnection between systems in- tor safety system. Others may be in the form creases their vulnerability to failure by of economic losses, such as the failure of an introducing another element, while at automated check clearing system or a na- the same time providing a connecting tional automated securities market. Still path through which a failure at one other risks may be social, as would occur if node can spread to others, as was the the larger data systems such as the National case with the power blackout referred to Crime Information Center or an EFT pay- earlier. ment system were misused by the Govern- A large, nationally networked infor- ment or by private concerns to exert undue mation system may provide more day- control over individuals. 100 ● Computer-Based National Information Systems: Technology and Public Policy Issues

Issues

Underlying all of these concerns is the for it may include major civilian domestic . realization that although the probability systems. that any catastrophic event will occur may Ever since Soviet interception of U.S. be low, the potential social cost of such an domestic telecommunications was reported, event can be extremely high—even a threat the executive branch has been working to national security. This problem of social toward securing civilian government com- vulnerability is crucial to many issues that munications. They have also been concerned Congress will be addressing relating to in- with the national security threats to domes- formation systems. tic private communications, but the development of a policy has been slow and dif- Specific Systems and Threats ficult due to the need to avoid substantial 5 Congress is already confronting these Federal intrusion into the private sector. larger social vulnerability issues in the con- Events over the next decade, such as a text of particular information systems: chilling of relations with foreign adversaries ● The air traffic control system has or an increase in domestic terrorism, would reportedly failed several times, leading focus congressional attention on the vulner- to pressures for a new improved sys- ability to attack of nonmilitary facilities tem. Possible new systems are being as- such as EFT, EMS, or civilian government sessed by OTA.2 An important but dif- data systems. ficult question is the degree to which any new system improves reliability. Calculating Risk ● Press reports have suggested that the Aside from the national security question, Defense Department’s WWMCCS* however, Congress will need to consider the command and control system is unreli- societal risks inherent in new information able, particularly when fully loaded systems. The concern about risk will lead under crisis conditions.3 ● Congress and other policymakers to search An article in the Washington Post sug- for more flexible information technologies to gests that the defense communication implement, whose failure will not be so system is highly vulnerable, not only to devastating to society. Such systems, if they full-scale nuclear attack, but to sabo- 4 can be developed, may appear to be less effi- tage by terrorist groups. cient or to cost more in the short run, but This last instance is the social vulner- would reduce the overall vulnerability of ability issue carried to the extreme, the vul- society to catastrophe. nerability of a U.S. defense communications network to hostile attack. However, the line Assignment of Risk demarcating information systems that are vital to national security is difficult to draw, In deciding how to define an acceptable risk, the extent to which American society as a whole will or should accept responsibility ‘U.S. Congress, Office of Technology Assessment, Assess- for losses incurred due to massive failures of ment of the Airport and Air Traffic Control System, in information systems must be taken into con- progress. sideration. *An acronym for the World Wide Military Command and Control System. 3 William J. Broad, “Computers and the U.S. Military ‘G. Lipsound, Private and Public Defenses Against Soviet Don’t Mix, ” Science, vol. 207, Mar. 14, 1980, pp. 1183-1187. Interception of U.S. Telecommunication: Probiem.~ and Pol- ‘Joseph Albright, “The Message Gap in Our Crisis Net- icy Points (Cambridge, Mass.: Harvard University Center for work, ” Washington Post, Oct. 19, 1980, pp. Cl, C4. Information Policy Research, 1979). Ch. 10—-Soc/ety’s Dependence on Information Systems ● 101 .

In the case of EFT, for example, the ques- used by Federal agencies. While these tion might be whether the Government standards do not apply directly to the should insure liability against a major private sector, they could provide incen- system collapse beyond the level currently tives for similar design, either by set- provided by the Federal Deposit Insurance ting a favorable example or by estab- Corporation. A national automated securi- lishing a minimum standard of practice ties market would raise similar problems. that the courts might recognize in liability suits. When such losses have an extremely low probability, the difficulties associated with Alternatives to regulations may also be assigning risk can be easily put aside. The considered. Two that have been proposed implication is that the policy decisions will are: be made on an ad hoc basis only after a 1. Liability: Liability law is the chief risk failure has occurred. However, the political deterrent through the legal mechanisms climate immediately after a major techno- available, e.g., lawsuits. logical failure may not be amenable to mak- Liability case law is very slow to ing policy that would be sound over the long develop, depending as it does on an term and applicable to new events. accumulation of court decisions and appeals. Management of Risk The message sent to organizations A case can be made that much current through court decisions can be vague Government regulation represents an at- and difficult to interpret. Thus, an tempt to manage risk in order to reduce unnecessarily conservative approach hazards from consumer products, from may be inadvertently encouraged, drugs, from the workplace, or from the and promising socially desirable tech- natural environment.6 If national informa- nological innovations may be pre- tion systems create significant social risks, cluded. The courts can find it difficult to deal and if Congress chooses to attempt to mitigate those risks, several possible mech- with highly complex technical issues in the context of litigation. anisms or mixes of mechanisms are available Liability law varies from State to for consideration. State, particularly in terms of the ● Regulation: Direct management ways in which negligence and non- through laws and administrative rules negligence are defined. This creates a is currently being questioned as an ef- climate of uncertainty with respect to fective means to regulate risk. For ex- how the law will be applied. ample, direct regulation was rejected by 2. Insurance: While secondary to liability the Privacy Commission as an approach law in importance, insurance is another to the privacy problem. However, in method of controlling risk by spreading specific sectors where the industry is it over a large number of persons or already federally regulated, such as organizations. Its cost is an incentive to banking or securities exchange, Gov- the client to reduce risk. This is par- ernment may choose to directly set ticularly true where there is a potential policies for protecting information for catastrophic loss. In such cases, in- systems. surance companies generally require an The Government is establishing extremely large deductible and/or im- standards for secure design of systems pose limited liability ceilings. However, any attempt to turn to insurance as a ~Da~id okrent, “(’omment on Societal ltisk, ” Sricncc), vol. mechanism to control risk must deal 208, Apr. 25, 1980, pp. 372-:195, with the following Problems: 102 ● Computer-Based National Information Systems: Technology and Public Policy Issues

● insurance can be discriminatory in are ignored or underrated; and ways not deemed to be in the social c when the cost of the insurance is not interest; a sufficient deterrent, it can actually ● by concentrating on minimizing loss encourage persons or organizations to the insured, broader social losses to assume risks that are not prudent. Chapter 11 Constitutional Rights Contents

Page Introduction ...... 105 First Amendment ...... 105 Fourth Amendment...... ,.....107 Justification for Data Collection...... 107 Information as an Object of Search and Seizure ...... 108 Information Technology as a Tool for Search and Seizure ...... 109

Other Constitutional Issues ● ✎☛☛☛☛☛ ● ☛☛✎✌✎✎☛ ✎✎☛✎☛☛✎✌ ● ✎✎☛☛☛✌✎ ✎☛✌☛☛☛✎✎ ✎ 110

Managerial Due Process . ● O*.*. ● 000...0 ...... ● ..,.0...... 110

Information Collection. . . ● ..*.** ● **.**** ...... *.,..* .,*,*..* . 111 . Social/Psychology-Based Applications ...... 111 Chapter 11 Constitutional Rights

Introduction

Little legal precedent exists, in many may be affected by information systems. cases, for applying constitutional law to the These are: issues raised by computer-based information systems. As the courts begin to deal with the first amendment rights, which guar- novel issues raised by the application of com- antee freedom of religion, speech, the press, peaceable assembly, and the puter technology, they will probably at- right to petition for redress of griev- tempt to apply traditional concepts. In this way, these new issues will become incorpo- ances; fourth amendment rights, which guar- rated into existing legal precedent. antee against unreasonable search and Legislative remedies may be called for seizure by the Federal Government; when the courts do not find constitutional fifth amendment rights, which guaran- protections for threats to individual rights tee that a person may not be compelled created by unforeseen technological devel- to be a witness against himself or be opments such as television cameras, elec- deprived of life, liberty, or property tronic wiretapping, and computer data without due process of law; banks. It is difficult to predict in advance sixth amendment rights, which guar- precisely which computer-raised constitu- antee the right of a speedy and public tional issues will create major legislative trial; and problems and which will be easily accommo- 14th amendment rights, which guaran- dated in the courts. Expert opinions vary tee that a State cannot deprive any per- widely, and little legal research has been son of life, liberty, or property without done as yet. due process of law nor deny any person within its jurisdiction the equal protec- The legal survey task of this study iden- tion of the laws. tified five areas of constitutional law that

First Amendment

The principal purpose of guaranteeing rial is tolerated with the exception of some freedom of speech is to ensure a free fairly limited and still contested restrictions marketplace of ideas. Courts have tended to in the areas of pornography, national secu- balance this freedom against other compel- rity, libel, and trade practices. The relatively ling social concerns, e.g., national security or low cost and ubiquity of printing technology public safety. For example, there have been usually guarantees universal access to it for a number of recent cases about the rights of those who have something to say. reporters to protect their sources. However, The common carriers are more restricted. certain characteristics of specific commu- Telephone and mail service are regulated nication media affect how that goal is monopolies that control the huge capital and achieved. institutional structures necessary to carry The printed page is the least regulated messages in various forms. Nevertheless, communication medium. No Government in- the communication capacity is very large. terference in the content of published mate- Without regulation, the potentiality would

105 106 . Computer-Based National Information Systems: Technology and Public Policy Issues

exist that an operator might restrict a per- Restricted ownership and control of son’s access to the medium. Regulation is physical facilities. Very high capital therefore oriented toward assuring universal investments are required to install access by requiring carriers to provide uni- physical communication channels into form service to all at regulated prices. As homes and businesses. Even if competi- with print, there are no limitations on mes- tion in providing information services is sage content aside from certain restrictions encouraged, it is likely that there will be on pornography and other illegal activities. relatively few suppliers of facilities, * leaving the control over the physical The broadcast medium has a limited communication lines to a few large orga- number of owners and operators as well as a nizations. limited capacity. Regulation must take into Much greater capacity. The capacity of account the existence of these inherent re- future communication lines into homes strictions on its use. Consequently, the and businesses will be much greater thrust of the regulation is not the right of all than the current telephone and broad- to speak, but rather the right of all to be ex- cast facilities. Cable and direct satellite posed to a “free market in ideas. ” Under this broadcast lines will provide more chan- interpretation, the Federal Communications nels and greater information capacity Commission (FCC) has actively specified per channel. In addition, communica- standards for broadcast content in such re- tion from the home back to the sender quirements as the “fairness” doctrine. will be possible. Some limited im- Cable services share both broadcast and plementations of two-way capability common carrier characteristics, since their already exist, and expansion is likely capacity is still limited but much greater over the next decade. than that of broadcast services. FCC, in its More producers. The larger number of early licensing policy, required cable stations communication channels into the home to provide public access channels that would coupled with low-cost national distribu- be available to any potential user. (This re- tion systems are expected to lead to a quirement, among others, was rendered proliferation of information producers moot by a Supreme Court decision restrict- and distributors beyond the current ing FCC’s authority to regulate in this area. )1 limited number of television net- If cable providers have local monopolies over works.** Services such as those provid- the delivery of information services to homes ed by the new “super stations” that and businesses, there is a public interest in operate nationwide over local cable net- preventing the cable provider from exercis- works, pay television networks such as ing religious, political, or artistic censorship Home Box Office, and upcoming direct over the content. satellite broadcast stations represent only the leading edge of such a trend in Since the nature of first amendment pro- the entertainment area. In data com- tections is so strongly dependent on the munications, MicroNet and The Source characteristics of the media, it is reasonable are new services designed to link own- to expect that new information services of ers of personal computers with each the future will force the development of new types of policy. Some of the significant characteristics that may determine these policies are: *The actual number of facility suppliers is growing (e.g., specialized common carriers and satellite carriers who supply a significant portion of their own facilities). However, this growth is much slower than that of the information producers.

‘Federal (’communications Commission v. Midwest Video, **The new cable TV systems being built in the United 440 U.S. 689, 59 L.E. D. 2d 693, 99 Supreme Court 1435 States have up to 50 TV channels; some will have as many as (1979). 100 TV channels. Ch. 17—Constitutional Rights 107

other and with larger computers, data even religion by the implicit threats contain- banks, and information processing served in such collection or surveillance. z These ices over a nationwide network. threats might be directed as much at the ● Low-cost access. Network broadcasters “listener” as the ‘‘speaker. Clearly, pay thousands of dollars per minute to automated information delivery systems generate and transmit information. The possess a much greater capability of record- new information and communication ing, storing, and analyzing in detail the flow technology will substantially reduce the of information from all sources into homes cost of distributing information. There- than do manual systems such as bookstores, fore, it will be easier to enter the mar- newspapers, and the like. ket, and a wider variety of information As a consequence, consideration needs to services will be made available. be given to the distinction between informa- The principal first amendment issue fac- tion that is regarded by people to be private ing the Government will be to encourage the in nature and that which is public. Such a maximum freedom of expression—fostering distinction may depend on whether the use the “marketplace of ideas’’—in new elec- of the information favors or is detrimental to tronic media that have been tightly regu- the interests of an individual. For example, lated in more traditional forms. Factors that one does not usually attempt to keep secret could work against this goal include pres- the titles of books borrowed from a public sures for Government censorship, monopoly library. However, an accurate profile of an in the production and distribution of certain individual’s interests and attitudes could be kinds of programs and services, and exces- provided by a complete dossier on that per- sive control over content by the operator or son’s reading habits. Since computer tech- operators of the physical communication nology has the potential capability of assem- channels. bling such data bases, it may necessitate creating new definitions of the boundary be- Another issue may serve to link first tween public and private information. amendment rights with privacy concerns. Extensive data collection and possibly surveillance by Government and private —.— ‘Sam J. Ervin, “The First Amendment: A I.iving Thought organizations could, in fact, suppress or in the Computer Age, Columbia Human Rights Rellieu’, vol. “chill” freedoms of speech, assembly, and 4, No. 1, 1972, pp. 13-47.

Fourth Amendment

The fourth amendment protects the per- 2. the search and seizure of information sons, houses, papers, and effects of in- per seas personal property, particularly dividuals against unreasonable searches and in electronic form; and seizures by the Federal Government. The 3. the use of automated information sys- study identified three significant areas in terns as a tool for search and seizure which new computer and communication operations. systems may affect the interpretation and application of the fourth amendment. Justification for Data Collection Criminal justice agencies have tradition- 1 the use of personal and statistical data ally kept files that form the basis of their in- contained in automated information vestigations. Depending on the system de- systems as a justification for search sign, however, automation can change the and seizure; nature of this recordkeeping in several ways: 108 . Computer-Based National Information Systems: Technology and Public Policy Issues

● there are more individuals as data sub- Information as an Object of jects; Search and Seizure ● there are more data per individual; ● there is more centralization and correla- The same information and information tion of diverse data sources; technology on which most institutions and ● there is wider access to the data by people in this country increasingly depend more persons; for the conduct of their everyday lives are ● there is faster access to the data; and also becoming of greater importance to in- ● there is more efficient remote access to vestigations conducted by the criminal jus- the data. tice system. Files, ledgers, correspondence, and address books have always been the ob- Using the technology to the fullest capac- jects of police searches in certain types of ity, it would be possible within the next crimes. The criminal justice system will in- decade for a policeman to obtain instantly a creasingly have to deal with their much more complete identification and dossier on an in- extensive computer equivalents, which may dividual stopped in the street. As criminal well raise new fourth amendment questions. justice information systems approach this capability, courts will become more inter- Two trends serve to increase the exposure ested in questions such as “reasonable of persons to searches. The first is that in- cause” for such police actions as stopping formation previously unrecorded in any form and searching an individual. There is also the will become collectable in computer data possibility of using statistical data as a basis banks; electronic mail and electronic point of for establishing probable cause. sale systems, for example, collect and store more data than the systems they replaced. In their concern, courts will probably look The second trend is that data previously in at issues of data quality. An erroneous the hands of individuals are now collected record in a local manual file could cause an and stored by third parties, throwing the individual some distress, but an erroneous or ownership of such data into question. incomplete record in a large, automated system with national or regional access could In a recent case,* the Supreme Court ruled lead to more serious compromise of indi- that an individual’s bank records belonged vidual rights unless the record was promptly to the bank and were not protected constitu- corrected. * This consideration combined tionally as his or her personal property. One with other related reasons could motivate basis for this ruling was that the use of a courts to mandate that stringent data qual- bank account was a voluntary action. Yet, it ity requirements must be met by automated is questionable whether future participation systems before information from them could in a computerized society can be construed be used as reasonable cause for criminal to be voluntary if the alternative is to forgo justice actions.** In theory, checking and all services necessary to live comfortably as correcting records could be done more quick- a member of that society. Extensions of such ly with an automated system. reasoning could leave only a hollow shell of fourth amendment protection for personal records, while eroding any substantive effective barriers against Government intrusion. As this happens, Congress will be asked to reestablish these protections legislatively. *In addition to the issues arising from the protections In the above cited case, a congressional guaranteed by the fourth amendment, if access to the system were loosely controlled, and data used for purposes other act** addressed the problem of protecting than criminal justice such as employment or credit, serious harm could result. * *The issue of data quality is explored in more detail in the *United States v. Miller, 425 U.S. 435 (1976). OTA study on NCIC/CCH, in progress. **The Right to Financial Privacy Act (12 U.S. C. 340). Ch. 17—Constitutional Rights ● 109

personal records held by financial institu- Rights. In such cases, a legislative remedy tions from access by the Federal Govern- will become necessary, ment. The search and seizure of computerized Information Technology as a Tool records will probably present courts and for Search and Seizure legislatures with a number of problems in balancing the needs of law enforcement with Despite the difficulties of collating in- fourth amendment protections. For example: formation that is dispersed and buried in very large geographically distributed com- ● When identifying records as objects of puter files, national information systems search and seizure, traditional stand- may provide mechanisms for surveillance ards that were reasonably effective with that penetrate more deeply into an individ- written documents may not apply when ual’s privacy than was previously possible. the information sought is buried in a very large, or even geographically dis- In determining when fourth amendment tributed, computer data file. protections apply, law enforcement dis- ● In its original or primary form, com- tinguishes between ‘‘surveillance’ and puter data is unreadable by human be- ‘‘search and seizure. There is no violation of ings, Thus, seized evidence may be in a this protection in observing an individual’s primary form, such as magnetic tape or daily public activity. It is the actual search disk, or it may be in a secondary form, of a person, a person’s premises, or the seiz- such as printouts or charts. The status ure of personal records that requires war- of this type of evidence may be con- rants. testable, particularly if a law enforcement agency is required to perform so- Information technology blurs the line be- phisticated file manipulation in order to tween public and private activity. A nonelec- pull out the particular information it is tronic mail cover requires approval by the trying to introduce as evidence. Postal Inspection Service but not a search ● If the information is in coded form (en- warrant because only the outside of an crypted) and the key to its decoding envelope is examined. In an electronic mail (decryption) is only in the head of the system, however, no distinction may exist suspect, fifth amendment protections between the “outside” (or address) and the may allow that person to withhold the “inside’ (or contents) of a message. encryption/decryption key or the en- Therefore, it maybe difficult to distinguish a cryption algorithm. Similar problems mail cover from a wiretap, which would re- exist even short of encryption. Informa- quire a warrant issued by a court upon prob- tion can be hidden in a large data bank able cause, unless some form of coding could in such ways that it would be nearly act to “seal” an electronic message as an impossible to find without knowing its envelope seals a physical one. precise location. Similarly, the observation of shopping It is expected that the normal evolution of habits by following a person from store to law in the courts will be able to deal with store is surveillance. However, the use of an many of these problems as they occur. How- electronic funds transfer system to gather ever, as the Miller case illustrates, the logical the same type of information would be far extension of legal principles into the in- more intrusive, since much more data, some formation age can on occasion seriously alter of it of a highly personal nature, could be col- the balance of power between individuals lected in secret. The question is whether and and government, threatening protections in- such transactions are to be considered public cluded in the U.S. Constitution and Bill of or private behavior. 110 Computer-Based National Information Systems: Technology and Public Policy Issues

The telephone created the possibility of This threat may become even more dan- wiretapping, which has stimulated numer- gerous, since the surveillance of an auto- ous debates balancing the needs of law en- mated information system can itself be forcement against those of individual pri- automated, permitting an agency to keep vacy and fourth amendment protection. The tabs on large numbers of individuals effi- courts and Congress have been struggling ciently. Ultimately, the information technol- for some time with interpretations of the ogy would permit both the tools and the op- fourth amendment in terms of wiretapping. portunity for widespread surveillance of Information systems that provide such serv- most of society. At present, the sizable ices as electronic mail and electronic funds amount of manpower needed to physically transfer will likely provoke similar debates observe a person over a period of time acts as in Congress. a check on such large-scale surveillance. There is no doubt that access to com- Finally, there may be a point beyond puterized information could assist law en- which a collection of comprehensive informa- forcement in detecting crime and in prose- tion about an individual, although comprised cuting offenders. Consequently, the benefits completely of information in the public do- afforded criminal justice will be a compelling main, may assume the characteristics of pri- argument. But no less compelling will be vate information. An individual’s concept of arguments citing the potential police-state private v. public information depends in part dangers of widespread uncontrolled informa- on the perception of its completeness and the tion surveillance of individuals. ways it could be used against him/her.

Other Constitutional Issues

This study has identified several ways in The following questions about an admin- which information systems are posing chal- istrative information system are likely to be lenges to interpretations of the fifth, sixth, of particular interest. and by extension to States, the 14th amend- Whether the information system pro- ments. (See beginning of this chapter for vides for making timely decisions. descriptions of these amendments.) While information technology can potentially speed bureaucratic processes, , Managerial Due Process their implementation can often have the 4 More and more individuals are receiving opposite effect. an increased number of benefits and services Whether the information in the system from the Government. Information systems is accurate and timely enough to ensure have become an indispensable tool for deal- “fair” decisions. This question is sim- ing with this growing workload (see ch. 8). To ilar to that of “reasonable cause’ raised the extent that access to these services in a in the criminal justice discussion above. timely and fair way is a constitutional “due Whether there are subtle biases “built process” concern, the effect of information in” to the automated system that are in- systems will be to increase scrutiny by the visible to the system operators and courts and by Congress of the “fairness” of agency administrators because they are the very large bureaucratic systems that will embedded in the code of the computer. become established in order to operate serv- Very large systems that “mass pro- ice programs.3 duce” decisions in such areas as health

‘J. I.. Mashaw, “’I’he Management Side of Due Process, ” ‘“DC Youth CETA Jobs Program Still Plagued by Delays (’ornell I.a(i Rv[ie/i, ,June 1974, pp. 772-824. in Pay, ” W’a.shirzgton Po.st, ,July 27, 1980, sec. 8, p. 1, co]. 1. —

Ch. 11—Constitutional Rights ● 111

benefits, student loans, or tax returns ess questions could be raised by their use in may react quickly to what the computer the criminal justice system. Three particular recognizes as “normal” applications, applications already appear to pose prob- but reject “unusual” claims. If, as a lems. consequence, clients are subjected to an 1. Jury selection: A small industry has unacceptable amount of hassle and de- grown up around the use of computer- lay, the definition of “normal” used by ized dossiers of potential jurors along the computer may become subject to with computer models for predicting due process challenge. juror behavior. At this time, the technology is very expensive and its value Information Collection is controversial. While some defense The increased recordkeeping and data col- lawyers have claimed success owing in lection requirements imposed by the Gov- part to the use of these systems, it is ernment on organizations and individuals hard to prove conclusively that the out- was one of the trends identified in this study. come of a particular trial was in any The quantity of information that individuals way due to specific juror selection. and organizations now must provide to the However, future computer technol- Government–either mandatorily (e.g., for ogy will make this application cheap, census, tax, or regulatory purposes), in order and far more personal data about poten- to receive benefits (e.g., loan guarantees or tial jurors will be available, legally or il- medical payments), or to justify manage- legally. Furthermore, there is a suffi- ment decisions—is already extensive and ciently sound social scientific basis growing larger. underlying this type of use to suggest that predictive techniques will be likely There may be a threat to fifth amendment to improve in effectiveness. If so, the protections stemming from the use of per- entire concept of an “impartial” jury as sonal or corporate computer data that have required by the sixth amendment may been collected by the Government for one be challenged.5 purpose as evidentiary material in unrelated 2. Lie detectors: Lie detecting technology criminal or regulatory cases. has already raised many difficult problems for Congress and the courts. Social/Psychology-BaSed Computer-based technology will add a Applications new dimension to these still unresolved issues. So called “voice stress” ana- In addition to the straightforward uses of lyzers are being manufactured and mar- information systems to collect data and keted for relatively low prices. This automate decisions, there are a number of type of lie detector, which analyzes the new computer applications that use analyti- degree of stress in a speaker’s voice, cal techniques being developed in social depends on the assumption that meas- psychology. The actual effectiveness of urable stress indicators appear when a these techniques, which purport to predict lie is being told. and analyze human behavior based on the Unlike older lie detector technology statistical analysis of information about in- based on the polygraph, voice stress dividuals, is still being debated. Social scien- devices can be used without the co- tists anticipate a steady improvement in the operation or even knowledge of the sub- ability to predict future social behavior based on the analysis of seemingly unrelated personal characteristics or of the results ‘John I,. M’anarnaker, “Computer and Scientific Jury Se- from batteries of tests. If these capabilities lection: A Calculated Risk, ” Lrni(IerSitJ of l)etroit .Journal of improve as expected, some serious due proc- Llrhan l,a~,, ~,{)]. ~~, winter 1978, pp. 345-370. 112 ● Computer-Based National Information Systems: Technology and Public Policy Issues

ject. This’ single difference puts the use of fifth and 14th amendment rights will of lie detectors into an entirely new be raised. Essentially, individuals may realm of fifth amendment problems, as be denied rights, privileges, and ben- well as opening up more generally new efits based, not on past performance, problems of social interaction in such but on a prediction of future tendencies. areas as employer-employee relation- Courts will be examining these predic- ships. tive models very carefully for their ac- There are three distinct problems to curacy, relevance, and fairness. They be addressed: the effectiveness of such will also be addressing the fundamental technology, the ways in which it is used question of the appropriateness of these by Government agencies and by police, models and their potential for dis- and its use by employers, reporters and crimination. others for whom it would be both a tool The problem will be to establish for their work and a possible means of proper boundaries. Important decisions abusing individual rights to privacy. have often been based on estimates of 3. Predicting criminal behavior: Much re- an individual’s future performance. An search has been done on the application employee who does well in one job of computer-based social science and might be expected to perform equally statistical models to files of personal well when promoted. On the other hand, data and the results of psychological society cannot imprison a person who a tests, in order to predict behavior. computer model predicts may someday Techniques are being studied for detect- rob a bank. But should that knowledge ing tendencies toward juvenile delin- be “reasonable cause” to monitor such a quency, drunken driving, or violent person closely or deny employment? antisocial behavior, and for security New information system applications checks by the Government. Conceiv- will increase the emphasis on drawing ably, such research could be applicable clear boundaries between what ways of not only to criminal justice problems, using them are and are not acceptable. but also to such tasks as approving Particularly difficult equity issues will credit, determining insurability, or hir- be raised if the results of such predic- ing and promoting employees. tive models were to discriminate among As social scientists improve this pre- groups that have experienced discrim- dictive capability, important questions ination historically. Chapter 12 Regulatory and Other Issues Contents

Page Regulatory Boundaries...... 115 Computer Crime ...... 0 . .00...... O. O. OO.OOO● 116

Transborder Data Flow .....s0 ● *****O* ● *.000* ..00.0. ....**** ● ****** 118

Information Gap ● .**.*.** ● ********* ● ********* ● ********* ● *****.*** 119 Computer Software Protection...... 120

TABLE

Table No. Page 8. States Passing or Considering Computer Crime Legislation...... 117

. Chapter 12 Regulatory and Other Issues

Regulatory Boundaries

As computer-based information systems gress). Similar problems could also arise evolve, they challenge traditional concepts by linking together Federal and State of boundaries—physical or social—that are systems that contain data concerning reflected in the law and regulatory policy. such matters as taxation, welfare, The integration of computer and communi- education, medical care, and drug cation technologies form systems that cross abuse. boundaries between nations, States, and ● Antitrust: The economics of large inte- organizations. The issue of transborder data grated data systems, coupled with the flow discussed below exemplifies the kinds potential for increased convenience to of international problems created by such the customer, may push service pro- integration. Others include the following: viders to use shared facilities for banking, transportation scheduling, reserva- ● Interstate con flict.” When States have tion systems, and so on. The Depart- conflicting laws involving information ment of Justice and other regulators or information processing, for example, will be interested in whether such property tax laws that cover computer shared facilities create monopolistic data bases, an integrated data system barriers to new entrants or are mecha- that exists in a number of different nisms for control of the market, or States can raise difficult questions of whether they encourage competition by legal jurisdiction. reducing the cost of access for smaller Furthermore, some States may be- firms. come data havens because they have weaker laws. * Computer networks also Information technology is changing form allow State-regulated services such as so fast that it is tending to outstrip the banking to be offered across State working definitions of devices and services borders, thus challenging traditional at- that serve as the basis for law and regula- titudes toward single State banking. tion. These definitional problems relate both Telephone bill payer accounts, for ex- to the technology itself, and to the products ample, can be used across State bound- and services that depend on it. aries. Computers or communication: The best c Federalism. ” Linking Federal data sys- known example is the continuing at- tems with local systems complicates tempt by the Federal Communications jurisdictional problems even further. Commission to establish what services The Federal Bureau of Investigation’s and what technologies are already National Crime Information Center ‘‘communications, thus regulated, and (NCIC) is an example where the tradi- what are “computer” services and tech- tional autonomy of local and State crim- nologies, thus not regulatable. Their inal justice organizations has com- second inquiry on these questions, plicated the Federalism issue (see the which began in 1976, only recently OTA assessment of NCIC/CCH, in pro- resulted in an opinion’ that is now under ...— ‘Second (?omputer Inquirjr I)ocket No. 20828, final decision *A system operator could maintain the computer and data adopted Apr. 7, 1980, N’(’ 80-189, and reported as 77 F’(7C 2d base in a State with a lenient legal environment, and access it 384 ( 19801. See also the hlemorandum opinion and order, by a terminal in a State with stricter laws adopted oct. 28, 1980, [’CC HO-62H.

115 116 ● Computer-Based National Information Systems: Technology and Public Policy Issues

court challenge. Even if the definition is pursued completely different ap- accepted, there is no reason to believe proaches to regulating each service that the problem has been permanently category. Electronic mail, in its various resolved. The general trend toward de- forms, provides a new service with regulation of all technology and serv- features of both manual delivery and ices, however, may render the question telecommunication, and may pose new less critical. and difficult regulatory questions (see ● Branch banking: Many States have the OTA assessment of the role of the laws that either prohibit or tightly Postal Service in electronic mail, in pro- regulate branch banks. An issue that gress). has been debated considerably is Bank information services: Some very whether the automated extensions of large banks have developed elaborate banking (e.g. automatic teller machines data processing hardware and software (ATMs) or pay-by-phone services) con- to support their operations. They have stitute “branches” in the usual meaning found that the sale of these products of the law. Since ATMs and telephone and information services to other service can be dispersed widely as well smaller banks can be a profitable enter- as cross borders, significant issues prise. In their view, it is a natural exten- centering on antitrust and interstate sion of their banking services. The serv- banking rest on the way in which a ice bureau industry, which sells access branch is defined (see the OTA assess- to computers and programs, does not ment of electronic funds transfers, in agree. It contends that banks are using progress). their enormous capital resources to ● The status of electronic mail: Electronic enter an entirely new, unrelated field, data transmission has opened a major and should not be allowed to do so policy question about the definition of under laws that strictly regulate the mail. As with the computer/communica- proper activities of banks. ’ The out- tion issue above, this definition is come may hinge on whether these new significant because it places a class of information services constitute banking services under one or another set of in a sense compatible with law. regulations. Unlike many other countries that have combined postal and telecommunication services under one “’Citibank: A Rising Giant in Computer Services, ” Busi- national agency, the United States has ness Week, Aug. 4, 1980, pp. 54-56.

Computer Crime

The changing nature of crime in our in- ● Traditional definitions, for instance of formation society creates problems in detect- theft, may be inapplicable when in- ing and prosecuting crimes against informa- formation is the object of the criminal tion systems.3 activity. ● Procuring evidence in information ● New types of abuses occur for which there are no appropriate laws. crimes can complicate or stop prosecu- tion. It may be that these problems will be ‘Susan H, Nvcum. The Criminal Luu Ast)ects of Computer Abuse: F’edera[Criminal Code and The Cn”rninal L)UUI Aspects temporary, and that the legal system will of Compu ter A buse: State Penal Lau’s, Stanford Research In- shortly be able to accommodate itself to stitute, 1976. these types of crimes. It has been suggested, Ch. 12—Regulatory and Other Issues ● 117

however, that the inherent nature of in- Table 8.—States Passing or Considering formation and computer crimes mandates Computer Crime Legislation — new laws. Passed Congress has recently considered two bills Arizona ...... , October 1978 California ...... , . January 1980 that address computer crime. The Senate bill Colorado. ., .“...... July 1979 would make it a Federal crime to use com- Florida ...... , . . August 1978 puters as tools for criminal assault or as its Hawaii...... , . . (a) Illinois...... September 1979 object. * The House** addressed the prob- Massachusetts ...... , ., ... (a) lem of protecting the providers of in-house Michigan...... , March 1980 information services, in particular cable and Missouri ...... (a) New Mexico ...... , ., April 1979 broadcast entertainment companies such as North Carolina ...... June 1980 Home Box Office, from what is called “pirat- Pennsylvania ...... (a) ing. “***4 The information industry feels Rhode Island ...... (a) that unless governmental sanctions are used Utah. ., ...... May 1979 to protect its products and services, there aLegislation Pending will be little incentive to provide them. The SOURCE Computer B usiness Equipment Manufacturers A sso- ciation, State Legislation Status Report 1980 radio hobbyists, who are among the major “pirates,” counter that to date practically no technological safeguards are used by off-the- inform the staffs of Federal and local law en- air pay TV and cable TV, and that reason- forcement and criminal justice agencies about the impact of this new type of criminal able use of more secure technology would 7 safeguard these signals without having to activity on their work. legislate a new class of criminals into ex- To date, studies of computer crime and istence, computer abuse have emphasized the acts of Although neither bill was passed by the an individual or group of individuals against 96th Congress, the problems that motivated an organization. Some observers have noted, them remain. It is likely that similar legisla- however, that the computer can also be used by organizations to take advantage of cus- tion will be introduced in the 97th Congress. a Computer crime laws have already been tomers or clients. Customers of organiza- passed by 10 States, and at least another 5 tions using electronic billing, funds transfer, have bills pending’ (see table 8). or calculating aids (e.g., supermarket scanners) may simply be defrauded. Further- With the support of the Federal Govern- more, computer systems are used for making ment, researchers are exploring the nature of many decisions that affect people’s lives, computer crime, the methods used and the from political apportionment to setting types and motives of criminals.’ Even with- pollution standards and assessing the effec- out new laws it is of particular importance to tiveness and hazards of a new drug. There- fore, there will likely be some temptation for various interests to misuse the systems they run, for their own purposes.

*S. 240. **1]. R, 7747 (11. R. 6 192).

*** pirating is stealing the signal and decoding it, and is easy to do with current technology. “’The Piracy Danger to Subscription TV, ” Business W’eek, Sept. 29, 1980, pp. 44. ‘Computer and Business Equipment Manufacturing Asso- ‘Department of Justice, (’ompu ter (’n”me: Cn”minal ,Justice ciation, “First State I,egislation Status Report, ” Washing- Resource Manual, 1979. ton, D. C., 1980. “Rob Kling, “Computer Abuse and Computer Crime as ‘Dorm B, Parker, (’rime b)’ Computer, Charles Scribners organizational Activities, ” Computers and I,au Journal, Series, New York, 1976. spring 1980, pp. 403-427. 118 . Computer-Based National Information Systems Technology and Public Policy Issues

Transborder Data F1OW

During the past several years, interna- to privacy law does not fit the Council model. tional attention has been focused on a collec- Thus, from the U.S. perspective the Council tion of issues referred to as transborder data approach does not provide a solution. flow. These diverse issues have a common The Organization for Economic Coopera- origin in the increased communication of tion and Development has developed a vol- data across national boundaries.’ In the de- untary agreement for its member states that veloped world, they have crystallized around 12 would be more flexible. The initial en- the proliferation of national privacy laws thusiasm for a third approach—an interna- that usually specify the treatment of per- tional treaty on information flow—appears sonal data in domestic systems, and also set to have been dampened by the difficulties in standards for the transfer of such data 10 getting even a general voluntary agreement. across national boundaries. Several potential problems have emerged that would act In general, the U.S. position on this issue to constrain the international flow of in- has been to favor the free flow of information formation. across borders, and to view the European privacy efforts as principally a disguise for ● Different and conflicting laws could protectionist control of international com- make the operation of distributed commercial data processing. Some Europeans puter systems by large multinational maintain that their actions derive principally corporations difficult if not impossible. from their deep concerns about privacy, ● Third-party organizations providing pointing to historical abuse by totalitarian computer services across national nations of government and private record borders could be inhibited from com- systems. peting with similar firms operating within countries. Another aspect of the transborder data ● The extension of privacy protection to flow issue is the concern by the Third World the concept of legal persons such as cor- countries that control over information and porations could vastly expand the types information flow is a form of international of information controlled, by restric- power exerted by the Western nations. This tions placed on transmission over na- attitude was manifested both in negotiations tional boundaries. at the World Administrative Radio Confer- ence14 and in proposals in the United Nations Some efforts are underway to reconcile Educational, Scientific, and Cultural Orga- these various constraints. The Ministers of nization (UNESCO) for a “New Information the Council of Europe have approved model Order. ” legislation that would provide guidelines for national privacy laws.11 However, the United States is not a member of the Council, and even more significantly, the U.S. approach ‘-’Council of the Organization for Economic Cooperation and Development, Recommend tion of the Council C’oncem - ‘R. Turn (cd.), Transborder Da ta Flouts, report ot the Amer- ing Guideline.q Go{ !eming the Protection of Pn”l’ac?f and ican Federation of Information Processing Societies, Panel Transborder F1OUI.S of Personal []ata, adopted Sept. 23, 1980. on Transborder Data Flow, 1979. “ 1‘Department of State, Bureau of Oceans and International ‘“Department of Commerce, Selected I’oreign National Environment and Scientific Affairs, Selected Papers on Inter- Data Protection Laus and Bills, Office of Telecommunica- national Policy Implications of Cornpu ters and Adoanced tion, special publication 78-19, 1978. Telecommunications Svsterns, January 1979. ‘iCouncil of Ministers of the Council of Europe, “Council of “See U.S. Congress, Office of Technology Assessment, As- Europe Convention for the Protection of Individuals With sessment of Radio Frequenc)! U.~e and Management Impacts Regard to Automatic Processing of Personal Data, ” ap- From the World Administrative Radio {’conference of 1979, in proved September 1980. progress. Ch. 12—Regulatory and Other Issues ● 119

The concerns that have been expressed goals of the various nations as expressed in are not just focused on computer systems. their negotiations over international in- They also cover such topics as international formation policy will undoubtedly shape the news-gathering, access to satellite commu- laws and regulations under which interna- nication, the spilling of broadcasts over tional data systems will be operated in the borders, and the exchange of scientific data. future. However, the fundamental attitudes and

Information Gap

Some observers have suggested that the turing and white-collar—unemployment advent of information technology will widen may result not so much from increased the gulf between the haves and the have- productivity as from the inability of ex- nots in society. This view is based on relative isting employees to adapt to the new differences in what might be called “informa- technology. If projections about an tion literacy, ” the ability to use information evolving information society and econ- technology to cope with everyday life. omy are correct (see ch. 5), information literacy could become an essential re- The technology itself is potentially highly quirement for entering the labor flexible. Information systems can be de- market. signed to make the use of devices and serv- ● ices far easier than before, for example by Relation with Government: To the providing access to people with language extent that information technology problems and physical handicaps. Research stands between the citizen and a gov- and development (R&D) in such subjects as ernmental obligation or service, a poten- computer speech, speech understanding, and tial barrier exists. Banks carried out ex- pictorial display will continue to improve the tensive studies with regard to consumer potential accessibility of information tech- acceptance before undertaking the de- nology. sign of ATM devices. Government agencies, on the other hand, because Whether these capabilities will be used by they do not have the same economic a system designer is a different question. motivation, may not necessarily be very Making a computer system accessible often concerned about the acceptability of imposes added costs for hardware or for their systems. (Incentives to have such more computation. Therefore a concern for concern may need to be imposed by law, efficiency or economy, or the system design- regulation, or executive policy. ) In- er’s biases or ignorance, can result in an individuals who are technologically il- formation system with unequal accessibility literate may be affected in several ways: built into it. ” —they may not exercise basic rights Should such an information gap develop, such as voting; it could affect the citizenry in areas such as: —they may be at a serious disadvan- tage in legal proceedings, both crimi- ● Employment: As automation pene- nal and civil; and trates the workplace—both manufac- –they may find access to such needed ‘‘>hlilton R. #’essel, h’r~eciorn “.s R{ige Th~ {’omput~r Threat services as welfare, health care, and to .$ociet~’ ( Reading, \lass.: Addison-\t’esley Publishing Co., educational benefits, barred or se- 1974). “T. Sterling, et al, “Humanizing Information Systems: A verely impeded. Report From Stanley House, ” (’communications of the .4,s.so- ciation for (’ompu ting A!achinery, November 1974, pp. To the extent that information illiteracy is 609-612. unevenly distributed among cultural or eco- 120 ● Computer-Based National Information Systems” Technology and Public Policy Issues

nomic groups, the consequences would fall only be increased but, due to such barriers as disproportionately on the poor and dis- a more limited access to jobs, societal efforts advantaged, in general. The gulf between the to bridge that gulf would be frustrated. haves and the have-nets in society might not

Computer Software Protection

As discussed in chapter 3 and later in by otherwise keeping the work confidential. chapter 13, the cost of computer software This of course makes the sharing of informa- has become a pacesetting factor in develop- tion in the software R&D community quite ment of new computer applications. Increas- difficult. ingly, computer hardware is being designed The Copyright Act of 1976 specifies that to fit the software. With the investment so high, the value of software research and computer programs are copyrightable as “literary works. ” But the extent of protec- development is even greater and the need for tion defined under the act and more recent proprietary protection felt even more strong- 17 ly. At the same time, however, there is a court decisions have left the situation am- strong need for innovation in software R&D, biguous. Amendments to the act were introduced and enacted in the 96th Congress the sharing of ideas, and breakthroughs as the “Computer Software Copyright Act of among researchers. 18 1980." However, the issue of computer Copyright and patent protection are the software protection appears sufficiently im- traditional means for protecting the com- portant and unsettled to warrant continued mercial value of information while providing congressional attention. 19 for public disclosure. But the continuing uncertainty concerning copyright and patent protection for computer software leads “Data Cash Systems, Inc. v. JS8ZA Group, Inc., U. S. D. C., many software researchers to use the trade for Northern Illinois, Sept. 26, 1979. ‘“H. R. 6934, Mar. 26, 1980, enacted as an amendment to secret approach to protect their time and H.R. 6933, “Government Patent Policy Act of 1980, ” Public dollar investment. Private firms doing soft- Law 96-517, Dec. 12, 1980, and based on a recommendation of ware R&D generally protect software trade the National Commission on New Technological Uses of Copyrighted Works, Final Report, Washington, D. C., 1979. secrets through employee nondisclosure ‘gSee “Court Broadens Rules on Patenting Software, ” agreements, restricted access measures, and Science, vol. 211, Mar. 20, 1981, pp. 1325, ff. Chapter 13 Trends in Computer Technology Contents Page Introduction ...... 123 Conclusions ...... 123 Hardware ..,...... 123 Software ...... 124 Human-Computer Interface ...... 126 Communication ...... 127 Processors ...... 127 Information Storage ...... 130

Fast Memory Storage ● +.**.. ● ******. ● .9...** ● *..**** ● ******* ● 9** 131 Intermediate Memory Storage ...... 131 Mass Memory Storage...... 132

Inexpensive Mass Storage .....** ..**.... .*...**. ..**..*. ● ..***,. 132 Software ...... 132 Limits ...... 133 Data Base Systems ...... 133 Languages ...... 134 Software Engineering ...... 134 Input-Output Technology...... 135 Graphics ...... 135 Voice Communication ...... 136 Image Recognition...... 136 Data Communication ...... 137 Digital Communication Technology...... 137 Digital Communication as Part of the System ...... 138 Security Capabilities...... 138 Classifications of Computer Security ...... 138 Specific Techniques of Security ...... 139 Encryption ...... 141

Authorization ● ****.* ● .*****, ● ******* ● *...**. ...**.*. ● .....*. . . . 141 Logging ...... 142 Operating Systems ...... 142 Data Base Security ...... 142

LIST OF FIGURES

Figure No. Page 8. Projections of Logic Cost per Gate...... 128 9. Increase in Capability of Semiconductor Chips From 1956 to 1980...... 128 1O. Drop in Average Computer System Cost per 100,000 Calculations From 1952 to 1980...... 128 11. Cost and Access Time of Memory Technologies ...... 130 12. Projections for Memory Cost per Character ...... :...... 131 Chapter 13 Trends in Computer Technology

Introduction

Computer technology is advancing rapid- panies that sold only general purpose com- ly, even explosively. To assess the impacts puter systems are beginning to market con- of information systems, the current state of sumer products that incorporate these this technology and where it is heading must systems. be understood. The capability that informa- For the purposes of this study, emphasis tion technology puts in the hands of the com- has been placed on what information sys- puter user determines the nature of the ap- tems can do rather than on the fundamental plications that are developed. nature of electronic technology. Many in- Developmental trends are already shaping teresting developments now in the labora- the nature of the information-based services tory, such as Josephson junctions, * may not that will be provided in the coming decade. fundamentally change either the nature of New services that make use of the growing the systems that are designed or the pur- integration of telecommunication and infor- poses to which they will be put, particularly mation technology are being designed and over the next 10 years. Other developments, implemented; and both industry and Gov- such as the microprocessor, are today revolu- ernment are looking at a wide range of inno- tionizing the ways in which computers are vative products and services that will be used as well as the thinking about their used by the in-home information system of potential social impacts. Overall, the an- the future. ticipated changes from laboratory developments over the next several years will be The nature of the technology as it evolves more of degree than of form. will also influence the structure of the industry associated with it. Companies that *A Josephson junction is a microscopic-size electronic specialized only in components are begin- logic device that operates at the temperature of liquid helium. ning to market computer systems; com- I t is very fast and uses very little power.

Conclusions

Several conclusions can be drawn from Hardware OTA’s analysis of the trends in the development of computer technology over the next ● Computer electronics are experiencing an 10 or 15 years. Spurred by both industrial extraordinary drop in price, increase in and Government research and development power, and reduction in size. (R&D) programs, information systems are undergoing a revolution that will be mani- In 1977, the Privacy Protection Study fested-by a proliferation of new products and Commission estimated that the cost of com- services affecting all sectors of American puting would drop by a factor of more than society. 100 during the 20-year period from 1970 to

123 124 . Computer-Based National Information Systems: Technology and Public Policy Issues

1990. This means that the million dollar com- engines, sprinkler systems, typewriters, fil- puter of the 1960’s will cost less than a thou- ing systems, electric lights, and cash regis- sand dollars in the late 1980’s. ters. Concomitantly, during this same period While many applications will involve calculating speed is expected to increase a simply substituting electronic for mechani- hundredfold. In 1970, the largest processors cal control, the increased “intelligence” in- performed 10 million operations per second, corporated in the products will be used to today they perform 100 million, and by 1990 provide such additional features as energy there will be a processor that will perform 1 conservation or self-diagnosis of errors, and billion. In addition to greater speed, new to give more flexible control to the user. designs can also greatly increase the power ● New products and services based on com- of future computer systems. puter and telecommunication technology The large computer that occupied one or will become available. several rooms in the late 1960’s will fit in a In addition to adding computer control to desk drawer by the late 1990’s, and a medi- familiar products, the new computer technol- um-size computer will fit in a briefcase or ogy will be used to provide a new range of even a coat pocket. These trends do not nec- products and services for the home and busi- essarily mean that in all cases the costs of ness. The video game and home computer purchasing, programing, and operating a are just the first of a long line of computer- large computer application system will de- based information products and services crease. Rather, more work will be done for that will appear. (Electronic funds transfer the equivalent number of dollars. and electronic mail, two examples of in- ● There will be a great expansion in the formation services, are examined in separate number of computers being used in busi- OTA reports.) ness, education, and the home. ● There will be a continuing, rapid increase This effect is already being seen. The in the power of very large computer sys- home computer boom, which was the first tems. big stimulus for the computer retailing Advances in speed, efficiency, and micro- stores, has fallen off slightly, only to give electronics coupled with new design con- way to a new marketing thrust aimed at cepts will produce computers in the 1980’s small businesses. The hand calculator, which that are far more powerful than the biggest has become a ubiquitous tool, is already be- ones now available. This type of power is ing supplanted. A small hand-held computer useful for a limited but important set of com- is now available in the consumer market, and putational applications, e.g., improved sys- electronic calculators are being built into tems for weather prediction. Furthermore, wristwatches. Computers are also being systems that manage very large data bases used as part of office automation. require very powerful computer processors, ● Computers will be used as components in particularly when sophisticated searches a wide range of consumer products. and analyses must be made. With the advent of an integrated circuit microprocessor that will sell in mass quan- Software tities for $1 or less, the use of the computer ● Software technology is expanding steadi- for controlling everyday devices in the home ly, although not as rapidly as the hard- and at work will become commonplace. Com- ware. puters are already being used or designed to control such devices as clothes washers, sew- Computer programs are sets of basic in- ing machines, home thermostats, automobile structions that tell the computer the steps to Ch. 13— Trends in Computer Technology ● 125 take in doing a task. Programs can contain mation industry will become increasingly millions of instructions, and their design is labor intensive. as varied as the number of ways computers This conclusion follows directly from the are used. While computer scientists have last two statements coupled with the labor been successful in developing theoretical intensive nature of programing. This trend models of computer hardware logic, efforts will influence the marketing practices of to build an equivalent theory of programs computer manufacturers, who will increas- have not been rewarding to date. Thus, de- ingly find profit in the sales of complete veloping systematic techniques for creating, systems—combinations of hardware and testing, and monitoring computer software software—rather than hardware by itself. has been a slow and tedious process. Some experts maintain that programing is still ● Software reliability, security, and audit- more of an art than a science. ability will improve slowly. The continuing R&D on programing lan- Large systems, because they are complex guages and software engineering will pro- and cumbersome, tend to suffer from the vide a flow of improved techniques and soft- kinds of reliability problems that are not ware tools, but the rate of improvement will solved by building more reliable hardware. not match the explosive growth in hardware The problems of assuring that a system is capability. actually performing as intended and cannot ● New software techniques will allow com- be compromised, accidentally or deliberate- puters to process a wider variety of data. ly, are inherent in the complexity of software design. Traditionally, computers have processed either numerical or alphabetic data struc- Furthermore, although computer software tured in very rigid formats. However, soft- experts are improving their understanding ware for processing text, graphic images, of how to increase the reliability of pro- and digitized voice is developing rapidly in grams, they are unable to keep pace with the addition to software for processing data growth in the size and complexity of the alone. The result will be new families of prod- systems being designed. Recently, system ucts and services affecting Government, in- designers have become more aware of the dustry, and the citizen at home. need to design secure and auditable applications, and users have become aware that ● Software technology is the limiting factor they can demand such capabilities from the in controlling the rate at which new ap- producers. Thus, although some improve- plications appear. ment is taking place, substantial progress The use of the new specialized hardware will depend on more R&D. that is being designed is confined to very ● New data base techniques will allow restricted purposes, or is merely putting ex- massive data banks that serve multiple isting software ideas into hardware form for uses. increased efficiency. The software basis for most new computer applications in the Data bases will grow; some will contain 1980’s exists now. There does not appear to trillions of units of information. At the same be much likelihood that a new concept of time, people will want to work with the data computer design will change the way com- in more varied ways. Today, sophisticated puters are used in the next decade. Rather, programing is often required in order to han- the changes will be in the scale of their use dle efficiently each different type of query a and in who will be using them. user might want to make of the data base. G The predominant cost of information sys- However, researchers are developing tems will be for the software; the infor- methods to improve the efficient use of large ●

126 . Computer-Based National Information Systems: Technology and Public Policy Issues data bases and to make them serve multiple together over communication lines will in- needs. This is being done through the devel- crease the amount of data captured at the opment of more powerful query languages, source and stored in computer-readable new ways of organizing the data within the form. Some types of information are cap- machine, and new hardware designs. tured deliberately, as in the case of the computerized register in a retail store. Other Human-Computer Interface types, which are captured only as a byprod- uct of automation, may be found to be useful People communicate with computers for enough to keep. For example, the system three basic reasons: to describe the task to data collected by word processing systems be done, to enter data for processing, and to may be considered useful by managers in derive results. Improvements in this tech- monitoring secretarial efficiency. The pro- nology will result not only in less costly liferation of capturing such data may raise systems, but also in a vast expansion of in- serious policy issues. formation systems capabilities and in their more efficient use. ● Output will be organized to present information that is more directly useful to ● There will be an increase in the direct use the user. of computers by nonexperts. It has been known from the earliest days Improvements in programing languages of computing that the form in which the will allow users to communicate more easily results of computations are presented can with the computer. Historically, programing determine, in great part, whether it is actual- and system control languages have been ly used or whether the answer being sought complicated and time-consuming to learn. is found. Advances in both the hardware and They often require understanding how a programing for image display and speech are computer operates. New, easy-to-learn but being brought out of the laboratory and into powerful languages will increase the number the commercial market. of people who will use computers directly without recourse to an intermediary expert. Research in information display is discov- In addition, the proliferation of computer in- ering how to filter significant information troductory courses in high schools will in- from insignificant data and present it to the crease the number of people who have a basic user in the most efficient way. There is now a knowledge of computer systems. new, burgeoning interest in the use of color This trend will allow many more simple graphics display, a technology long consid- applications to be developed by users in- ered the domain of the computer research dividually or in modest organizational set- laboratory, but too expensive for general tings. However, in larger organizations, or use. for applications that require integration with ● There will be increased interface with in- other systems, it will mean that much of the formation systems by consumers in their programing for modern small systems will homes and employees in their offices. be done by end users in industry and in the home who are not subject to control by cen- Many systems designed for entertain- tral data processing management. This may ment, education, information retrieval, and lead to such problems as misuse, poorly computational services are beginning to be functioning systems, or incompatibility. offered through a combination of evolving television sets and telephone instruments ● More data will be captured by computers because of easy-to-use software, data banks, and stored in machine-readable form. and the distribution medium provided by The distribution of computing power cable television (CATV). As a result, there is through the use of microprocessors linked a possibility that society as a whole will be Ch. 13—Trends in Computer Technology 127 substantially affected, but to what extent is tributed among all of their offices. All presently unknown. computer-based devices, even word processors, will be linked into the central system. Communication The problems in managing such a distributed system will be a major concern of large The rapidly increasing availability of organizations. In particular, procedures for inexpensive digital data communication controlling access and for ensuring data through specialized networks such as Tele- quality will be more difficult in a distributed net and Tymnet, coupled with the trend of environment. However, dealing with them manufacturers to design systems with elab- effectively will be crucial to the successful orate communication hardware and software operation of communication-based systems. built in, are motivating growth in the use of distributed, communication-based systems. s There will be increased availability of com- New satellite-based data communication puter services to the home and business services will further stimulate this trend. over communication lines. s The use of distributed data bases and Many homes will have small computers or distributed processing will grow rapidly. computer terminals, and those that do not will likely contain telephones and television Rather than centralizing data collection sets that have been equipped with computer and processing as in the past, the most effi- control. All of these devices will provide cient procedure in the future will be to links from the home and office to a multitude localize these functions at the point where of information services provided over a vari- the data are originally captured. Organiza- ety of communication channels such as tele- tions will have computational capacity dis- vision broadcast, telephone, or cable lines.

Processors

The 1970’s have seen continual dramatic tions per second. By 1990, there probably improvements in the characteristics of the will be computers that will execute a billion components from which computers are or more instructions per second, a thousand- made. It is expected that this trend will con- fold increase in speed. tinue through the 1980’s, with computing This combination of increased speed and hardware becoming remarkably inexpensive decreased cost for logic components results and efficient. in a steady decline in the cost of computa- The decline in cost per logic function from tion. The drop in the costs of computing on 1960 projected to 1990 is shown in figure 8. IBM systems that are roughly equivalent, In 1960, the price of a logic gate ranged from over the period 1952 through 1980, is shown $1 to $10 per unit, depending on speed. By in figure 10. 1990, that price is expected to range from a These gains have all been due to progress few thousandths of a cent to a few tenths of in integrated circuit technology, the process a cent per gate. This continuing decline is by which electronic components are printed based in large part on the dramatic increase on small chips of silicon. Using these chips in capability of semiconductor chips, as il- as components has resulted in a steady lustrated in figure 9. shrinkage of the size of computers from There has been a parallel increase in the assemblages that filled several rooms to the speed of processing. In 1960, the fastest current desk-top versions. Mass production machine executed about 1 million instruc- techniques have replaced the hand-wiring of 128 Computer-Based National Information Systems” Technology and Public Policy Issues

Figure 8.— Projections of Logic Cost per Gate Figure 10.— Drop in Average Computer System Cost per 100,000 Calculations From 1952 to 1980 1,000 10.00 Cost per 100,000 . A$l ,26 Year calcu Iat ion ● 100 1952 $1.26 1.00 1958 0.26 1964 0.12 10 0.1

1 0.01

0,1 0.001

001 00001

0.001 1960 1970 1980 1990 Year o1.00001 1950 1960 1970 1980 Office of Technology Assessment and Privacy ProtectIon Study Commtsslon Year

“Cost per 100,000 calculation IS based on data for the following IBM computer systems (with year In parentheses) 701 (1952), 7090 (1058), 360/50 (1964), Figure 9.— Increase in Capability of 370/168 (1970), 3033 (1976), 4300 ( 1980) Semiconductor Chips From 1956 to 1980 SOURCE Office of Technology Assessment and President’s Reorganlzatlon Project, Fecfera/ Dafa Processing Reorganlzaftorr Sfudy Basfc Reporf of the Scjence and Technology Team, Washington, D C June 1978, pp 2930

a decade ago, speeding up the manufacturing phase. Energy consumption, both to operate the computer system directly and for the necessary system cooling, has dropped enormously. The financial implications of these latter trends are significant in that they are stimulating a rapid growth in computer applications that will accelerate beyond their current high rate in the 1980’s. Facility costs have historically been a major expense to users installing computers. Now, many systems take up only a desk top, require no specialized environment control, and plug into a normal electrical wall socket. This flexibility - 1980 1990 1950 1960 1970 means that many computer systems can be Year installed at any site, from the home to the SOURCE Institute of Electrical and Electronic Enalneers /EEE .%ectrurn VOI 17 June 1980 p 48 U S Manufactures of semiconductor chips In business, with little or no added cost for cl ude f I rms such as Intel Mot urola Texas Inst rum en Is Rockwel 1, Na preparing the physical site. tlonal Semiconductor and Zlloq Ch. 13—Trends in Computer Technology 129

Inexpensive very large-scale integration types of applications as possible in order to (VLSI) based computer hardware will also justify acquiring a large computing machine, lead to lower maintenance costs in the and thereby benefit from economies of scale. 1980’s. Maintenance currently is estimated to cost about 5 percent of the computer’s These days, however, it is feasible to build purchase price per year for medium-size com- special-purpose machines, because the spe- puters. The figure is higher for smaller cialized markets have grown and because the machines. A reduction in these costs will cost of designing and marketing custom result from lower failure rates, easier main- tailored systems has dropped. As an exam- tenance by replacing larger modular units of ple, a variety of firms (some quite small) are the system, and built-in hardware redun- marketing so-called “array processors, ” dancy and fault diagnosis. computers designed to calculate the solutions to systems of mathematical equations Implications: These trends have several that display certain special characteristics. implications for computer hardware. In the These processors are designed to be con- first place, as illustrated in figure 10, there nected to a general purpose computer, and to has been and will continue to be a steady be called on only for the specific calculations drop in the cost of computing on general pur- at which they excel. In the jobs for which pose, medium- to large-scale computing sys- they are intended, these array processors, tems. which cost about as much as a large com- Second, small inexpensive, personal desk- puter, are hundreds of times more powerful top computers have appeared on the market than the biggest computers available. The in the last few years. These “microcom- market for this machine exemplifies the in- puters, while modest by present standards, creasing ability of small firms to enter the are quite powerful relative to the standards computer hardware business and carve out a of only a decade or two ago. The price of niche for themselves. these systems will drop rapidly, and their Basic R&D in hardware design is picking capacity will grow over the next decade. up again after a hiatus. It moved out of the These small systems will likely drive the academic and pure research laboratory in the development of a true mass market for com- 1960’s due to the high costs of building hard- puters, a market analogous to the current ware and the lack of enthusiasm for new de- one for hand calculators. sign concepts on the part of manufacturers. In addition to making the microcomputer Now, the costs and feasibility of experimen- possible, the ability to mass-produce chips tal research have improved dramatically. and to custom design them at the same time, The result should be a proliferation in the using the automated production machines, 1980’s of small specialized computers, tai- means that there will be a proliferation of lored to particular needs. This trend will special-purpose computers that are custom- reduce computing costs even more than made for specific applications. One of the would result from the drop in component motivations for the development of the so- costs alone. called “general purpose” computer was that In general, experts expect that a continu- a computer system was expensive and dif- ing trend will be seen toward modular com- ficult to design and build. Thus, many dif- puter architecture. Logical functions will be ferent user markets had to be identified for a distributed over the entire system. The cen- single design in order to provide a sufficient tral processor will be a traffic director con- customer base to justify its production. trolling the flow of work among the various This view of the manufacturers was repro- units. There will be specialized computation duced in miniature within each computer units like the array processor discussed center, which accumulated as many different above, file management processors for han- 130 . Computer-Based National Information Systems Technology and Public PoIicy Issues dling data bases, communications control ponents will not need to be in the same room units, specialized language processors, and or even the same city to be part of the others. Because of widespread high-speed system. digital communications, these various com-

Information Storage

A computer memory comes in a wide vari- nomically. It is measured in bits (the ety of sizes, speeds, and types. Any par- smallest fundamental unit of information), ticular system uses an assortment of or bytes, an 8-bit grouping roughly equiv- memories to support its operation. Its most alent in information content to a single significant design characteristics are alphabetic character or two numerical digits. retrieval time and capacity. There is a distinct tradeoff between speed Retrieval time is the time it takes to get a segment of information from the memory. and capacity. Therefore, in connecting a computer that performs millions of instruc- The technology currently available provides tions in a second with a world that operates a range of times from 1 nanosecond (1 billionth of a second) to a minute or more. in a much slower timeframe, a hierarchy of Retrieval time includes the time both to find memory types is used. The current selection and to read the information. of memory technology available to system designers is shown in figure 11, and the pro- Capacity is the amount of information jected drop in cost for information storage that can be stored conveniently and eco- through 1990 is shown in figure 12.

Figure 11.— Cost and Access Time of Memory Technologies

105 1.25

104 .125

103 .012

10’2 1 ,25m

10 .125m

1 .012m

10-1 1 ,2/1

10-2 12U

IOns IOOns 1}1s 10/1s 1 00/s 1 ms IOms IOOms 1s 10s 100s

Access time

SOURCE Inst It u!e Gf E ect rlcal and E Iect ror IC Engneers IEEE Spectrum m 18 March 1981 p 4 I Ch. 13—Trends in Computer Technology ● 131

Figure 12. —Projections for Memory Cost Fast Memory Storage per Character Fast memory storage constitutes the up- 100 per left-hand group in figure 11. It is the Solid state random-access memories most closely connected to the processor, and \ (bubbles, semiconductors) 10 hence its speed must be consistent with that of the computer hardware. Because of the 1 relatively high cost of fast memory, it is usually the smallest memory in the system.

10-’ For many years, core memories based on the magnetic properties of an iron compound

2 were the principal technology used for fast 10- memory storage. However, this technology seems to have reached its limit in cost, l@-’ speed, and size. Most new memories now are designed around VLSI semiconductor technology. 10-4

5 Intermediate Memory Storage 10- Conventional magnetic tape Intermediate memory storage, which is

6 reasonably fast but inexpensive enough to 10- t- Wdeo disc be used in large quantities, serves as a buffer between the high-speed semiconductor mem- 10-’ 1 1960 1970 1980 1990 ory and the very slow mass storage devices. Year In the long term, bubble memory may develop into the technology of choice for in- SOURCE: Off Ice of Technology Assessment and Privacy Protect Ion Study Commission termediate memory storage. Information is stored as tiny magnetic domains that circu- There are two other important character- late along a printed track in a semiconductor istics of various memory systems that affect medium. Some bubble memory products are their use in particular applications. These already on the market, and new improved are volatility and writability. ones are being announced continually. Volatility refers to the long-term stability One of the advantages of bubble memories of the memory. Many storage systems lose is that the domains are stable. Therefore, the information they contain when the power when a bubble memory is used in a terminal, source is removed or interrupted. Others for example, data can be entered and stored keep the information indefinitely until it is in it for later transmission without needing changed. to keep the terminal hooked up continuously to a power supply. The technology of bubble Writability refers to the ability to insert memories is progressing rapidly. One manu- information in the memory. Memory is clas- facturer has already announced plans to sified as read/write or read only, depending market a million-bit chip that will cost on whether or not the computer can copy around $2,000 in small quantities. new data back into the storage in about the same time scale as information can be read. High-speed magnetic disks are still widely Read only memories are written once and the used for intermediate memory, and will con- recording is permanent. In this discussion, tinue to be the most important technology memory is roughly categorized as fast, infor this decade. Steady improvements will be termediate, and mass storage. announced throughout the 1980’s. Some ex- 132 ● Computer-Based National Information Systems: Technology and Public Policy Issues

perts predict that disks will eventually be Inexpensive Mass Storage used in a more finely stratified memory hierarchy, rather than being replaced by The rising market for small inexpensive bubble memories. This may depend on computer systems is producing a demand for whether progress in expanding the capacity small, very cheap, bulk storage technology. of bubble memories continues as rapidly as it The technology is different from that pro- has. vided for large systems. The size of bulk storage needed is less, and there is more tolerance for slow search times. Currently, Mass Memory Storage personal computers are supported by two types of bulk storage, magnetic tape cas- Progress seems to be slower in the area of settes and “floppy” disks. very large storage devices. No radically new Tape readers are very cheap, as is the tape technology has appeared that seems to itself. However, read time is quite slow, even promise any breakthroughs. Magnetic tape by personal computer standards. Floppy will continue to be used heavily over the next disk hardware is more expensive, although decade. still within the requisite price range. The disks themselves are cheap and easily Many new mass storage technologies– stored. e.g., video disk—are difficult and expensive to write, but very cheap and easy to re- Some manufacturers, particularly those produce and read. Erasing and rewriting are marketing computer games, sell programs often impossible. Costs per bit of storage for permanently written on solid-state read only archival applications are low enough to be memories (ROM). While relatively expensive competitive with paper storage. Incremental as a medium, ROM has the advantage of be- improvements over the next decade should ing difficult to copy, thus discouraging the strengthen this advantage and stimulate a pirating of software. The ROM approach has trend toward permanent document storage not been well accepted by the marketplace, in electronic form. however.

Software

Computer software is also a form of Occasionally, a major breakthrough in technology. Although it is not a tangible programing can motivate new machine de- product like a piece of hardware, software signs. For example, a wave of new small shares many of the same characteristics. processors has appeared on the market to ‘ Much R&D carried out by computer scien- support signal processing applications. tists concern software problems. It often These processors are based on the “fast results in new concepts and basic techniques Fourier transform” algorithm, an important for organizing data and sequencing instruc- discovery made a few years ago that allowed tions to enable a computer to accomplish a the solutions to certain types of mathemati- particular task. cal computations to be calculated 10 times faster than previously.* Even greater speeds Very large programs are harder to analyze, design, and produce than are equally *The Fourier transform itself is a pre-20th century mathe- large machines that run them. Consequent- matical technique. The advance was a new way to perform ly, the state-of-the-art in software lags the numerous and tedious computations the technique re- behind that of hardware. quires. Ch. 13--- Trends in Computer Technology ● 133 . have been achieved by using special proces- data bases, but are appearing in commercial sors to take advantage of this algorithm. products for use with medium-sized systems. New developments in data handling Limits algorithms, and new hardware designs specifically tailored to the support of data ac- One area of research that will affect soft- cess systems, should provide continually im- ware development in the 1980’s is fundamen- proving capabilities during the 1980’s. tal research in computational complexity. Until recently, fundamental theory in com- Improved query languages will allow the puter science was concerned with computa- information user to interact directly with the bility–whether a computer could calculate computer to obtain the needed data. The in- an answer to a problem. However, the class tegration of better report generators* with of problems that the computer could theo- the data base system will allow the output to retically solve was enormous. More recently, be produced in a more directly usable form. researchers have been exploring the more These advances will provide the system user practical questions of how easily a problem with access to the data base which is much may be solved, how fast, and how much com- more direct than is now the case. Currently, puter power would be required. The answers the normal practice is to work through an in- have been surprising. Many categories of termediary, both to frame the initial inquiry problems have been found to be almost im- and to interpret the results. possible to solve, that is, the best program The capability to transfer information be- possible on the fastest computer available tween data bases over communication net- would take many years, even millions of works will also be improved. This capability, years, to calculate an answer. Such results already well-developed in some specific sys- have already had practical application. For tems, will allow more general exchange example, they have led to the development among systems connected to commercial of new types of cryptographic codes with in- data networks. Standard protocols and teresting new properties. Future research forms will be agreed on. True distributed may lead to the ability to calculate theo- data bases are systems in which the location retically the breakability of a code. of any particular item of information in the Over the next decade of ever increasing data base may be anywhere in a national or computer power, some types of problems are even international network, and in which ac- likely to remain intractable. Complexity cess to that data is handled totally by the theory will help improve the understanding system. These should start to appear com- of these limits of computers as they are now mercially in the 1980’s, designed. Furthermore, it may possibly The increasing size of data bases, the motivate some radical new concepts in com- multiplicity of their uses, the wider remote puter design. access to them, and their integration over telecommunication lines will all present Data Base Systems problems in preserving the security and integrity of the information. It will be more There is a trend toward the use of large in- challenging to protect the privacy of per- tegrated data base systems that support sonal data or the security of economically multiple applications. Researchers have valuable information on such distributed been developing methods for organizing data systems. so that it can be accessed in many ways, not all of which may be predicted when the system is designed. Some of the most general * Report generators retrieve information needed by a man- data structures, such as relational data ager, perform moderate calculations on it, and organize it in a bases, are not as yet efficient for very large readable and usable form. 134 ● Computer-Based National Information Systems: Technology and Public Policy Issues

Languages A principal driving force toward further language development is economics. Hard- Languages are the means by which users ware costs are decreasing while labor costs describe to the computer the kinds of opera- are increasing. Developing languages that tions they want performed by the system. will increase the productivity of programmers Machine language is the set of instructions has become a high priority. Ultimately, some that is wired into the computer. Although researchers envision automatic programing some machine language programing is still in which users specify the problem to be done, it is very difficult and inefficient to use solved in a language close to that used in due to the size and complexity of most appli- their environment—engineering, law, medi- cations. Modern systems on a medium-sized cine, and so on. The computer, using this computer may contain more than a million problem statement, would write its own pro- machine language instructions. gram. Faced with these difficulties, programmers Full development of such automatic pro- turn to a higher level language to write most graming systems is far in the future, al- software. As computers have grown larger though simple systems for preparing man- and more complex, and as the tasks de- agement reports and models derived from manded of them become more complicated, data bases are already in use. More short- there has been a continual trend toward the term effort is being concentrated on de- use of languages designed to be more rep- veloping tools that help the programer use resentative of the way humans express prob- the computer as an active agent assisting in lem-solving procedures. the creation of a system. In addition to increasing programing effi- Progress is expected to be slow. It will be ciency, developers of higher level languages impeded by the sheer difficulty of matching have other goals. Some special languages are the essential ambiguity of human thought tailored to produce efficient codes for par- and language with the absolute rigidity of ticular classes of applications. Others have computer language. It is also economically been developed based on the perception that difficult to implement radical new languages programing a computer is a form of mental that require substantial retraining of pro- problem-solving, and that the language as grammers. Finally, there is a reluctance to the vehicle for that effort is an intellectual write programs in languages that are not tool that can directly help thought proc- widely used and known, for the usefulness of esses. Finally, there has been a trend to de- a program so written may be unnecessarily velop languages that integrate users more restricted. closely with the system, thus lowering the degree of expertise required to program the computer. By programing in these user Software Engineering oriented languages, persons who are not For most of the history of computers, pro- computer specialists can interact directly graming has been considered an art rather with a system rather than through a profes- than a form of controlled design. Emphasis sional programer intermediary. was on the ingenuity and elegance of the The rapid expansion in the use of large product, rather than on more mundane data base systems that serve many users measures of utility. Creativity will always over communication networks is driving a have a place in good programing, but its em- major development effort in query lan- phasis conflicts with managerial imperatives guages. They are the means by which a user for economy, control, and predictability. In gains access to a data base, describes the particular, when the development of a major desired information and specifies the format system requires the coordination of hun- in which it is to be presented. dreds of programmers writing millions of lines Ch. 13—Trends in Computer Technology . 135 of code, the project must be managed in such Until the present time, efforts have been a way as to guarantee a usable product, on geared to developing both techniques for time, and at a reasonable cost. breaking a large proposed system into suc- cessively smaller logical subunits that can be The relatively new discipline of software assigned to programing teams, and ways in engineering has been attempting the dif- which to manage the work of the programmers ficult task of developing techniques both for and the communications among them. These programing and for managing the program- and related techniques will gradually become ing of large software systems. The operating commonplace over the next 5 to 10 years as system and support software of a large they are learned by the next generation of multiprocessor computer system is extraor- programing professionals and managers. dinarily complex. However, the economic im- perative will force work in this area and assure the quick adoption of new results.

Input-Output Technology

The principal means of communication the next few years for any but the most sim- with a computer has traditionally been ple types of pictures. through a form of typed input and alphanumeric printed output. Although this type Sharp cost breaks are expected for dis- of communication will continue to dominate plays with lower image quality. The use of in the near future, it is inadequate for many bit-mapped frame buffers, which store slow new applications. Advances in technology computer graphics output and play it back for human-computer interaction will change at normal speed over a display terminal, will the way in which computers are used by grow as the costs of memories drop. many people. Some research is being pursued on holographic output of three-dimensional images. However, holographic display is not ex- Graphics pected to become widely used in the next Graphical display of information is be- decade. coming more economically viable, and the Computer graphics technology is already technology, both hardware and software, is finding widespread commercial use for improving in its capability. In the last few creating animated films. It competes favor- years, researchers have developed efficient ably with traditional manual techniques. The techniques for removing hidden lines in uses range from pure and commercial art to order to display solid objects and for combin- the production of educational films. Com- ing half-tone, shaded image production with puter languages and graphics software have color. Some current research is focused on been developed to allow artists and de- developing techniques that model various signers to interact directly with the com- surface reflectivities and textures with re- puter, generally through the display screen, spect to different types of light sources. to create their images. While work is proceeding on improving In computer-aided design, the user is in- the speed of graphical computations to allow teractively coupled to a display screen with a the terminal to display very high resolution graphical data base and analytical programs pictures fast enough to depict motion, such a stored on a computer. Designers use the capability may remain very expensive over computer and the display to develop their 136 ● Computer-Based National Information Systems: Technology and Public Policy Issues

designs on a screen. For example, an ar- natural human-sounding sentences, the tech- chitect designing a building on the graphics nology is improving rapidly. It has already display can have an instantaneous computa- reached the point of commercial utility. tion of cost, and a civil engineer can do stress Several companies sell chips in the $10 calculations while designing a bridge. Com- range to synthesize speech sounds. Texas puter-aided design has emerged from its in- Instruments offers a mass-produced elec- fancy. Steady improvements in software and tronic toy, Speak and Spell® , to help chil- decreasing computing costs will likely make dren learn to spell. it the methodology of choice for most engineering design in the 1980’s. Even today, in- One important application of speech is a tegrated circuits and printed circuit boards reader for use by the blind that converts are preferentially designed by these tech- typed text into spoken words. While current- niques. ly very expensive, these devices should become more economical in the near future. Graphical output of computer data can transmit information that is difficult or even Speech recognition is a more difficult impossible to derive from a printout list of problem, since the system must deal with an numbers. Whether calculating stresses in an input having great variability. The voice and airplane wing, the water flow in a flood plain, style of speech varies widely among indi- or the molecular structure of an enzyme, the viduals; the computer recognize is poten- numerical output of the computer calcula- tially confronted by a wider array of poten- tions must be translated into a picture tial vocabulary to identify; and it must before any sense can be made from the analyze a multiplicity of grammatical struc- results. tures. Again, entrepreneurs have found that even the very limited capabilities now possi- Voice Communication ble are marketable. So-called “continuous speech” recogni- Voice communication with computers is tion, understanding natural speech, is still in on the verge of becoming commercially suc- the research laboratory. While large-scale cessful. The advances have been both in commercial systems are not expected in the developing better and cheaper computa- short term, the strong market already de- tional techniques for generating and rec- veloping for limited range speech recogni- ognizing speech and in learning more about tion systems will motivate R&D and en- the ways in which such systems could be courage the rapid commercialization of re- used. This new understanding has lowered search results as they appear. the estimates of what would constitute a commercially useful level of performance. The best performance to date in a research Capabilities far short of a human level of per- laboratory environment has been shown by a formance can markedly enhance communica- system that can recognize sentences 91 per- tion between human and computer. Some ex- cent of the time from multiple speakers perts even expect a voice-driven typewriter using a vocabulary of 1,011 words. Major re- to be on the market before the end of the search efforts are proceeding at IBM and at decade. a few university laboratories. Commercial devices with small vocabularies are now There are two basic problems in speech being marketed. synthesis—first, creating a voice tone carrying a phoneme (a fundamental linguistic ele- Image Recognition ment of speech), and second, stringing these phonemes together to make a sentence or Image recognition presents another form phrase. Although neither problem has been of the problem of recognizing patterns of solved to the ultimate point of producing data. The state-of-the-art is at a similar Ch. 13—Trends in Computer Technology ● 137 point. Simple self-contained patterns not in a more complicated task, one which, like confusing context can be recognized. De- speech, may depend upon some “under- vices on the market read standard type- standing” of the context of the pattern. writer and even handprinted characters. Point-of-sale scanners in stores read and rec- Slow but steady advances in pattern recognize the universal product code on pack- ognition technology are occurring. The sharp ages drawn across the unit at various speeds drop in cost for the requisite technology is and orientations. However, analyzing a more increasing the range of potential applica- general picture for a variety of elements is a tions.

Data Communication

The ability to move data quickly over long plexity of putting together a communi- distances through the use of new digital cation-based computer system restricted its communication technology has had a sig- use to applications, such as reservation nificant impact on the design and use of in- systems, that had an inherent need for re- formation processing systems. Designers mote data entry and display. now have the opportunity to build systems Existing communication carriers and new with greater power than was previously pos- enterprises are beginning to offer new data sible, enhancing their ability to process in- communication services. These services are formation and provide it to the user in a designed to provide inexpensive high-speed timely manner. More importantly, however, communication capacity specifically design- telecommunication has brought the user ed for use by computer systems. With these closer to the computer by allowing direct new services available, a host of new com- interaction with the processing system. As a munication-based applications will appear result, the use of information processing over the next decade. technology has become an integral part of the day-to-day work of many organizations Traditional communication systems have whose operations have become totally de- been tailored to carrying voice. The char- pendent on a computer system. acteristics of voice communication are quite different from those of data communication only technology that relates directly to between computers or between computers the development of computer-based informa- and people. The voice telephone network, tion systems is discussed here. (For a de- through switching, provides a temporary tailed analysis of communication tech- line connecting two users. The charges are nology, see the OTA assessment report en- based on the length of the line provided and titled, An Assessment of Telecommunica- the length of time it is made available. tion Technology and Public Policy. Data communication tends to come in Digital Communication very high-speed bursts, with long periods of Technology silence between transmissions. To perform this type of communication on a traditional The steady improvement of telecom- telephone network is inefficient, as the line is munication service over the last quarter cen- unused for most of the time. One approach tury has benefited the design of computer has been to design a network with multiple systems by decreasing their cost and im- path connections. Packets of information, proving their reliability. Significant applica- along with a destination address, are sent tions using communications date back to the over any instantaneously available path, and early 1960’s. However, the cost and com- the user is charged for the quantity of in- 138 . Computer-Based National Information Systems: Technology and Public PolIcy Issues formation transmitted and for the connec- Early implementations of the data com- tion with the network. One payoff in sharing munication programs were designed to take traffic from a larger community to obtain advantage of processor cycles that could not better line usage is lower user costs. Sec- be used productively by other applications. ondary benefits include error-free per- However, the growth in the communication formance and higher reliability. This type of workload, combined with other new tasks communication facility is called packet that may have been loaded onto the proc- switching, and is available as a commercial essor, can saturate it and create a need to service. Thus, a librarian in Washington, move the communication management from D. C., with a terminal can dial a local number the central computer to a peripheral proc- to access the Washington entry to a national essor. data communication network. Through that Fully programmable front-end processors network, the librarian can access a support the trend of moving communication bibliographic data base in Los Angeles, and processing away from the central computer, do so at a low cost. In some cases these devices have been specifically designed for communication proc- Digital Communication as essing. In other cases, general purpose mini- Part of the System computers are being used as front ends. Either way, the availability of inexpensive Viewed in the context of computer system logic and memory components has contrib- operations, data communications are no dif- uted to the further distribution of the com- ferent from any other application. However, munication function away from the central they do introduce new capabilities and prob- processor. lems to the design, implementation, and operation of information systems.

Security Capabilities

Computers have handled sensitive data Physical security refers to techniques that and programs for many years; however, it is physically isolate a computer system from only recently that the need to secure them access by unauthorized persons. It also in- has become a serious concern to system cludes protection of the facility from exter- designers and operators. During the social nal dangers such as earthquake, fire, flood, unrest of the 1960’s, concern arose over the or power failure. physical security of computer systems. They Procedural security is the set of rules by were expensive and visible symbols and, con- which a system operator manages the sys- sequently, attractive targets for sabotage. tem personnel and the flow of work in the or- Later, concerns over privacy and an aware- ganization. It can include such measures as ness of increasing incidents of financial com- preemployment screening of staff, work puter crime motivated the managers to take assignments that minimize opportunities to a more sophisticated look at protecting their act in inappropriate ways, auditing pro- systems and data. cedures, and controls on the flow of work through the system. Classifications of Computer Security Technical security refers to the software and hardware controls set up within the sys- Security experts distinguish between tem itself. Techniques used to provide three types of security: physical, procedural security may include cryptographic en- and technical. coding of data, complicated access and iden- Ch. 13—Trends in Computer Technology ● 139 tification procedures, and hardware which is the system, and keeping authorized persons dedicated to the auditing function. from using the system wrongly. Detection means catching an unauthorized procedure Some security experts claim that too when it is attempted and preventing its com- much attention on technological fixes has pletion. Auditing means the determination distracted system operators from more of whether unauthorized acts have occurred. traditional but effective measures they could A particular security technique is usually di- be instituting. However, the increased pro- rected toward one of these goals. liferation of small systems and the trend toward communication-based systems are making technical security more important. Specific Techniques of Security The techniques of physical and procedural Authentication: The first objective of security are well-understood and translate relatively easily from the noncomputer security is to assure that only authorized personnel can access the system. Identificat- world into that of the system operator. Tech- ion is the process of establishing a claim of nical security, a newer area of research, is identity to the system, either with a name or less understood, but is related directly to the an account number. Authentication is the problems of system design. process of verifying the claim. Computer scientists have proved that it is The simplest and oldest procedure is to theoretically impossible to achieve perfect use a password or number that is known security inside the program itself. That is, it only to the individual authorized to use the cannot be demonstrated that any particular system. The personal identification numbers combination of hardware and programing is assigned to bank customers for use on proof against some new unexpected type of ATMs are examples of such codes. attack. Improving the security of a computer system involves balancing the costs of The security provided by password protection against the expectation of loss schemes is limited, although more elaborate resulting from the threats and vulner- versions offering some improvements have abilities. While it cannot provide a final been developed. However, the security of answer, R&D in the field of computer secu- any password scheme depends fundamen- rity can substantially decrease protection tally on the ability and willingness of the costs. user to keep the code secret. Risk analysis, the process of weighing all Physical identification techniques, which these factors in a decision model, is a dif- depend on measuring certain personal phys- ficult job. The precise factors are unknown, ical characteristics, are being developed for and it is difficult to determine whether all use as authenticators in computer system possible alternatives have been covered. Re- access. To be useful, any such system must search can develop techniques for perform- be able to discriminate between persons, but ing risk analyses with greater precision, and at the same time be insensitive to changes in the Government has new research and the characteristics of a particular individual standards activities in this area. While the over time. standards are directed at Federal systems, The system operator, when selecting an they will provide useful guidance to the pri- authenticating technology, has to make a vate sector. choice in balancing two types of errors— Technological instruments for security classifying a fraudulent identity as correct fall into three categories, according to the in- (type I) and classifying a proper user as tent of the designer: prevention, detection fraudulent (type II). These two types of and auditing. Prevention means keeping errors have costs associated with them, and unauthorized persons from having access to are usually at opposite ends of a tradeoff 140 ● Computer-Based National Information Systems: Technology and Public Policy Issues curve for any specific technology. The type I authorized persons suffering from colds, error can be minimized only at the cost of hoarseness, or even emotional tension. maximizing the type I I error, and vice versa. Voice recognition systems are not yet Fingerprints: The technology exists for commercially available, although at least one reading and encoding fingerprints with mini- firm, Texas Instruments, has installed a mum delay, but the devices are expensive home-developed system for use in their (over $50,000). Although the pattern is com- facilities. plex, fingerprints can be encoded in a com- Since information collection is relatively puter using less than 100 characters by stor- cheap, requiring only a standard micro- ing only certain key data points. This stor- phone, amplification, and signal conversion age efficiency means that a complete set of hardware, the limitations of the technology fingerprints for every person in the United seem to be in the computational techniques. States could be stored easily in a com- As software improves, and as the cost of mercially available bulk memory. computer hardware drops, voice recognition The cost of directly reading fingerprints, could become a popular low-cost authentica- however, seems to suggest that it will not tion technique. become a widely used method of authentica- Signature Verification: Passive signature tion, at least in the near future. Its use will verification uses pattern-recognition tech- be restricted to very high security require- niques to analyze and encode a signature on ments, and to applications where finger- a check or form. It is a difficult task, because prints themselves represent significant data, a signature can vary depending on an indi- such as in police work. vidual’s mental and physical state, the type Hand Geometry: A new and surprisingly of writing implement used, and because effective form of physical identification is forgers can be quite skillful. One company the geometry of the hand. Individual finger has announced a product for providing pas- lengths vary from one person to another. sive signature verification for bulk applica- This variance is sufficiently significant and tion, particularly the processing of checks. It unique to be the basis for a relatively inex- is not clear whether such technology is pensive (around $3,000) identification de- operationally effective in identifying for- vice. It is based on the use of a high intensity geries, and whether it could be reduced in light shining on a pattern of photocells. It is cost sufficiently to be used at the point of sensitive both to external geometry and to sale. the translucence of the flesh near the finger- Dynamic signature verification systems tips. Thus, it is quite difficult to deceive it track the actual path of the pen point as the with any artificial device. individual creates a signature. Sensitive in- Voice Recognition: Research on the tech- struments measure variables such as the niques for voice analysis and voice synthesis pen’s speed and acceleration, the amount of has resulted in methods for distinguishing time the point remains on the paper, and the individuals by their speech. In these sys- changing pressure on the point. Several tems, a random list of words is shown to the organizations, including IBM, are working individual, who then speaks them into a on dynamic identification; however, no prod- microphone. By having the computer gen- ucts are as yet commercially available. Some erate a new list each time, the system makes experts judge this to be a promising tech- it impossible for an imposter to use a tape nology. recorder to fool the system. Much R&D is aimed at finding a more The system has high interpersonal dis- reliable substitute for the currently used crimination, but seems to be weaker on magnetic cards and passwords to identify intrapersonal differences. It may reject and authenticate individuals. To date only a Ch. 13—Trends in Computer Technology ● 141 few products have come on the market, and key to encrypt and another to decrypt a those have been designed for use in applica- message. Knowledge of the encryption key is tions with very high security requirements. no help in deriving the decryption key, even The cost limitation seems to depend on the though their mathematical relationship is characteristics of the sensor, since the known. Thus, the security of the code does microprocessor costs have dropped so low. not depend on the security of either the en- No doubt a growing demand could motivate coding key or of the secrecy of the mathe- a flurry of new products in the early 1980’s. matical relationships. Since one of the major problems in the use of cryptography is con- The amount of data required to store com- trol of the key itself, a system in which the puter representation of the pattern for any decoding key need not be known even to the of these candidate technologies is relatively data sender is promising for many applica- small—a few hundred characters. Thus any tions. of them, if they become widely implemented, could become the basis for a quasi-universal Public key codes also promise to be useful identification code used by all private and in electronic message systems, since they Government organizations. can be used for authenticating messages in the absence of signatures. Several applica- Encryption tions of this sort have been proposed. How- ever, public key codes are in their infancy, In the past, cryptography was principally and it is not known with certainty whether a tool for military and diplomatic com- unanticipated problems will arise as they are munication. Now, however, modern data used. communication systems increasingly are transmitting private information of high Encryption has uses other than merely value, and the need to protect these com- securing communications. Used internally in munications from interception and manip- a computer system, it can isolate sets of data ulation has prompted an explosion of in- from unauthorized users. It can also allow terest in civilian encryption. users to enter data but not to read it, or to read but not modify data. It can even sep- A standard for encryption technology, the arate the activities of various connected Data Encryption Standard (DES), has been computer processors. established by the National Bureau of Standards for Federal use. It is apparently Authorization also being widely adopted in the private sector, since several commercial manufacturers Most large-scale information systems are are producing devices based on it. While designed to serve several users simul- some experts have questioned the robust- taneously. The data bases in the machine ness of DES, it seems to have been accepted often contain clusters of information that generally as an inexpensive technology that serve multiple needs. It is necessary, then, to is at least effective for low- or middle-level control the access of users who are author- security needs. ized to be on the machine, but may not be authorized to have access to specific parts of Another set of techniques that has re- the data. ceived some attention lately has been labeled “public key” encryption. The idea behind For each user, the system must keep track these codes arose from basic research in com- of which parts of the file can be accessed and putational complexity, a field of computer manipulated, and what forms of access are science dealing with possible theoretical held (read the data, enter new data, and so limits on the ability of even the most power- on). The system also must control the giving ful computers to compute certain mathe- of permissions. Can one user, who is au- matical solutions. A public key code uses one thorized to see a file, give access permission 142 ● Computer-Based National Information Systems Technology and Public Policy Issues to another user? There are many situations system is a necessary prerequisite for any in which this is a legitimate and even nec- other software security. Although no system essary procedure, yet it complicates enor- can be designed to be perfectly secure, there mously the problems of access control. Re- is much that can be done to construct highly searchers are developing ways to model secure systems. these assignments mathematically and avoid unexpected loopholes in system access R&D is ongoing in this area, and results will be slowly incorporated into existing control. systems. However, progress will be hindered The continued growth in the size of in- by the difficulty in adapting current op- formation systems and in the numbers of erating system programs. These contain mil- people allowed to access them will continue lions of instructions, and have been modified to put pressure on system designers by com- and expanded over several years by many plicating the authorization process. programmers. The systems are difficult to change, as are the habits of their users. Logging Some computer installations still use Logging is the process of auditing the ac- operating systems written nearly 20 years cesses made to a data base by all users. Sys- ago. Computer operators fear that disrup- tems for keeping a complete or partial record tion and trauma would result from adopting of all access to the data have received more radically different operating systems, and attention since privacy has become an issue. manufacturers resist compromising invest- The system operator needs to account for all ments amounting to billions of dollars that accesses made to files of personal data. Since they have made in existing programs. Thus, the log itself is a file that contains potential- the most acceptable new techniques over the ly sensitive personal information, the need to short term will be those that can be adapted protect it may be even greater than that for to existing systems. However, it is the very the original data base. For this reason, some size, complexity, and growth history of these experts suggest the use of a separate small current systems that create their greatest machine to monitor accesses to the data weaknesses—the logical holes and flaws base. through which a determined outsider can gain access. The system operator can then examine the log for unusual patterns of file access or other significant actions of the users that Data Base Security may indicate that unauthorized use is being As data bases grow larger and are design- made of the system. When it is possible to ed to serve multiple purposes, the likelihood code certain unusual patterns of use, the log- increases that system operators will want to ging system itself can be programed to grant selective access. The problem is dif- watch for those events. It will then either ficult. In an employee data base, for exam- send a warning to the system operator, or ple, it may be desired to allow the personnel call on a special security surveillance pro- department access to some records, the fi- gram that collects as much detailed informa- nance department to others, and the medical tion as possible about the transaction. department to still others.

Operating Systems One of the major problems is that of authorization determining which user can do The operating system of a computer, the what. Another related issue is how to struc- set of programs that control its work, is the ture the data base to allow such authoriza- fundamental piece of software on which all tions to be enforced. The question of which other application programs depend. Conse- controls are even possible is, in itself, a com- quently, the integrity of the operating plicated one. Research in data structures is Ch. 13— Trends in Computer Technology . 143 developing new techniques which will prob- ping off identifiers and lumping them to- ably come into use rapidly as new data base gether in statistical clusters. It has been systems come on the market. shown, however, that aggregating data statistically does not always assure that a Encryption is one technique that will be clever inquirer cannot reverse the process used increasingly in cases where different and derive substantial personal information. groups of data and their users can be easily In the same way, merely stripping identifiers partitioned in terms of access control. It will off records of personal information may not be less useful when the data are highly in- preserve the integrity of the information, for tegrated, and when it is not known during a surprisingly small amount of descriptive the design stage where boundaries will even- information can serve to identify an individ- tually be drawn. ual uniquely. R&D is being conducted on Years ago, some hope was placed in the ways to transform data bases collected for use of so-called “aggregated files, ” par- social research purposes so that the individ- ticularly when used for research with sen- ual information is completely obscured, but sitive personal data. These files supposedly statistically relevant calculations can still be eliminate problems associated with main- done. taining personally identifiable data by strip- Chapter 14 * Industry Structure Contents

Page Introduction ...... 147 Computer Hardware ...... = ...... 148 Auxiliary Equipment ...... 151 The Data Communication Industry...... 154 Special Applications ...... 157 Computer Services ...... :...... +.160 Information Services...... +...... 163

LIST OF TABLES

Table No. Page 9. Top 20 EDP Companies in1979 ...... 147 10.Computer Industry Structure ...... 149 11. Desktop and Personal Computer 1980 Worldwide Shipments...... 150 12. Minicomputer and Small Business Computer 1980 Worldwide Shipments ...... = ...... 150 13. Computer Mainframe 1980 Worldwide Shipments ...... 150 14. Auxiliary Equipment Industry Structure ...... 152 15. Data Communication Industry Structure ...... 155 16. The Ranking and Revenues of the Top l0 Manufacturers of Data Communication Hardware...... 157 17. The 10 Leading Carriers of Digital Data and Their Data Communication Revenues ...... 157 18. Special Applications Industry ...... 159 19. The Computer Services Industry Structure ...... 161 20. Estimated 1979 Revenues for the Top Five Independent Computer Service Companies...... ;. ....162 21. Industry and Revenue Structure Of Computer Services Industry...... 162 22. The Information Services Industry Structure...... 166 Chapter 14 Industry Structure

Introduction

In less than 30 years the electronic data referred to in both the industry and this processing (EDP) industry has grown to be a report as mainframe computers. The rest major economic sector of the economy. The succeed, in general, by focusing on a more total revenues for the industry worldwide limited market sector—very small machines, were estimated to have been over $60 billion very large machines, specialized peripheral in 1979. The U.S. industry share of this mar- hardware, or various types of computer serv- ket was about $46 billion. ices. The top 20 domestic companies in the The companies examined in this study EDP business in order of size are listed in range widely in size. While the market is table 9. Some of these firms are also engaged clearly dominated in terms of size by the top in other types of business, but only their eight (70 percent of the total revenues), EDP revenues are shown. The total EDP much of the significant market shifting and revenues in 1979 of the leader, IBM, were innovation that will affect the future of com- over $18 billion, nearly eight times those of puter use are taking place among the smaller the next largest company, Burroughs. Reve- companies. It has been estimated that there nues of the eighth company, Hewlett-Pack- are over 4,000 firms in the EDP industry. ard, were nearly twice those of the ninth, Growth in the hardware side of the indus- Memorex. try will continue but not spectacularly. Rap- The top eight companies are those market- idly decreasing prices for hardware will be ing full lines of general purpose computers, more than offset by increased sales. How-

Table 9.—Top 20 EDP Companies in 1979

1979 EDP Percentage revenues Domestic Principal Rank Company ($ million) market product 1 IBM, $18.338 46 % Mainframe computers 2 Burroughs 2,434 59 Mainframe computers 3 NCR 2,404 46 Mainframe computers 4 Control Data 2,273 68 Mainframe computers 5 Sperry Rand. 2,270 55 Mainframe computers 6 Digital Equipment 2,032 62 Mainframe computers 7 Honeywell ., 1,453 67 Mainframe computers 8 Hewlett-Packard 1,030 52 Minicomputers 9 Memorex 664 51 Memories 10 Data General 540 73 Minicomputers 11 Storage Technology 480 88 Memories 12 Xerox 475 85 Peripherals 13 TRW : 440 77 Services 14 Texas Instruments 425 82 Minicomputers, terminals, and consumer goods 15 Computer Sciences 415 88 Services 16 Automatic Data Processing 401 92 Services 17 GE 350 79 Services 18 Electronic Data Systems 312 96 Services 19 3M 310 81 Peripherals 20 Northern Telecom 300 65 Peripherals SOURCE: Datamation, July 1980, pp. 98-99.

147 148 ● Computer-Based National Information Systems: Technology and Public Policy Issues

ever, those companies using new computer puter programing and time-sharing serv- and communication technologies to provide ices, and Readers Digest has purchased The innovative information services to individ- Source, a new on-line information service. uals and business will grow the most rapidly. This emergence in the 1980’s of technol- The advent of the microcomputer and low- ogy-based information service industries as cost digital communication opens new op- a major business sector is significant both portunities to entrepreneurs. Microproces- with respect to an overall analysis of market sors lower the cost of system implementa- trends and for this assessment. The nature tion to a mass-marketable level; and readily and social consequences of these new serv- available, inexpensive communication tech- ices are likely to have a major impact on Fed- nology provides a mechanism for mass dis- eral policies concerned with information and tribution that has been lacking in the past. information processing. The form and availability of these services will, in turn, be af- These developments do not necessarily fected by Government policy. imply that the principal participants will change drastically over the next 10 years. A final important characteristic of the The large EDP and communication corpora- U.S. computer and communication industry tions have been highly adaptable, and can be is its major role in the international market. expected to move into these new services. International sales are concentrated among The traditional information firms, research- the top nine corporations, which average ers, and publishers are merging with the from 40 to 50 percent of all the foreign sales. newer, high technology computer and com- The smaller firms are much less active inter- munication companies. For example, ABC nationally, probably because they view the has bought MacMillan Press. On the other domestic market as adequately rewarding hand, Dun & Bradstreet, an established and because of the high cost and uncertainty retailer of information, has purchased Na- surrounding the marketing of high technol- tional CSS, Inc., a major supplier of com- ogy abroad.

Computer Hardware

The computer industry has been highly minicomputer of today is, in some ways, segregated along product lines for some more powerful than a large computer of time. Several companies manufactured so- several years ago. Companies such as Texas called “super computers. ” Along with a few Instruments, that used to sell only electronic other firms, they produced a full line of small components for computers, now market en- to large systems. Others specialized in tire systems. minicomputers. However, the lines between these major categories have blurred as many The principal characteristics of the com- intermediate size systems, both general and puter hardware industry are summarized in special purpose, have arisen to fill the gaps. table 10 (also see tables 11, 12, and 13). For The needs of computer users have also analytical purposes, the industry has been shifted substantially, creating more op- divided into six sectors. Although the portunities for small specialized companies boundaries between them are vague, these to develop. sectors are generally recognized by the industry. This evolutionary shifting of products, producers, and user needs makes difficult The principal characteristics of change in any attempt to chart historical trends for a the computer hardware industry are the fol- particular class of machine. For example, the lowing: Table 10.—Computer Industry Structure —- Nature and size of Purpose and/or use Nature of present industry present market Future trends Characteristics of hardware— —. ——— — Microcomputer The smallest sized computers; Used as “intelligent” compo- Modest to small companies in Growing rapidly; over $1 billion Growth rate between 30 to 40 can fit on one circuit board, nents for games, appliances, terms of electronic data proc- by the early 1980’s. United percent per year. Sales and soon on a single silicon watches, etc., or as the heart essing revenues. States leads with increasing growth from $100 million in chip; inexpensive. of larger general computing competition from West Ger- 1977 to $1 billion in early systems. many and Japan. 1980’s. Small firms being acquired by large international conglomerates. Personal or desktop computer (see table 11) Small, but fully capable com- For use by individuals in the Many small entrepreneurs—”a Individual users. Storefront and Explosive growth of market in puter systems, costing sever- home, in business, or in cottage industry. ” Very suc- mail order sales. 1979 sales of next few years. Possible ac- al hundred to a few thousand school. cessful entry by a consumer $500 million. quisition by large consumer dollars. electronics retailer, Tandy product firms and retailers (Radio Shack). emulating Tandy success. Minicomputer (see table 12) Small computer systems sell- Designed to be used for a ded- Mix of large and small com- Shipments of $4.3 billion in Growth rate will slow to 25 per- ing for less than $50,000. icated set of applications with panies. Has provided opportu- 1979. Worldwide market cent per year; relative flatten- informal, hands-on access. nities for new entrepreneurs growth rate for past several ing of market in 1980’s; soft- such as Prime Computer. years of 35 percent. ware gaining in importance. Fewer new entrants. Mainframe computer (see table 13) Medium- to large-scale com- General purpose computers, Dominated by several large The bulk of general computer Continued steady growth, with puter systems, costing from a usually serving several users corporations, with IBM the sales—$8 billion in 1979. no major changes in relative few hundred thousand dollars and applications. revenue leader by a wide positions of the top seven to several millions. margin. companies. Increased foreign competition. Plug compatible computer Electronically equivalent to the Same as above, but with poten- A very few companies concen- Appears to be surviving new Risky market, very sensitive to equipment of other manufac- tially better performance, bet- trating narrowly on particular IBM product announcements IBM product and price an- turers—usually IBM. ter delivery, or lower price market opportunities. and growing. Strongest nouncements. Not likely to than IBM offers. growth is in specialized sys- become a significantly large tems. industry, but to prod big companies through competition. Supercomputer Extremely large, powerful com- Predominantly for scientific A few companies—most spe- Small, specialized market, esti- Market growing more diversi- puters. and technological applica- cialize in this type of system. mated at about $500 miIIion. fied. Will continue to be im- tions requiring large amounts portant but relatively small. of computing and data analy- IBM may bring in a totally sis, e.g., meteorological fore- new system; potential growth casting. of foreign sales.

SOURCE: Off Ice of Technology Assessment 150 . Computer-Based National Information Systems: Technology and Public Policy Issues

Table 11 .—Desktop and Personal Computer Table 13.—Computer Mainframe 1980 Worldwide Shipments 1980 Worldwide Shipments’

By units 444,000 units total Revenues Tandy-Radio Shack ., . . . . 25% Rank Company ($millions) Percent Commodore ...... 23 1 IBM ...... $10,650 62.4% Apple...... 17 2 HIS, ....,.,,,,., ,, .,.. 1,550 9.1 Hewlett-Packard ., . . . . ., ., 6 3 Sperry Univac,,,., ,...., 1,410 8.3 IBM ...... 2 4 Burroughs. , . . ..., 1,000 5.9 Others...... 27 5 NCR. ,, . ., . ., ..,.,..,. ., 480 2.8 By revenue $1.9 billion 6 CDC...... ,,,, ,., 400 2.3 Hewlett-Packard . . ., ... ., 21% 7 Amdahl .,,,..,, ,,, ,.,,, 380 2.2 Apple...... , . . ., 10 8 DEC ..,,.,,,,,. .., ,,.,, 205 1.2 IBM ...... ,., ,.,,,. 9 9 National ,,,,,,, ., ....,, 190 1,1 Tandy-RadioShack ...,., ...... 7 10 Cay...... ,,,,,,,.. 50 0.3 Tektronix ...... , ..., ., ., . 3 11 Magnuson. ..., . . 35 0.2 Others...... , ..., ., 50 12 IPL.,. ,,...... 10 0.1 — lb] Compatible peripherals, ., 700 4.1 SOURCE International Data Corp. 1981 Computer Indusfry Briefing Session, p.D-8 Totals ,,, ,, .,,,..,.,,. $17,060 100.070

a Shipments of large general purpose computers only Companies Iisted may derive significant additional revenue from shipments of other types of computer systems bValue of shipments of plug-compatible peripherals produced by many smaller companies SOURCE International Data Corporation 1981 Computer Industry Briefing Ses- Table 12.—Minicomputer and Small Business sion, p C-3. Computer 1980 Worldwide Shipments — Minicomputer a By units 137,000 units The mainframe business is still the ma- Digital Equipment Corp., ., ., ..., 44% jor component of computer sales and Data General ..., . ., ., 14 will be for the foreseeable future. IBM Hewlett-Packard ., ., ..., ., . . ., ., ., 8 IBM ...... 7 has the largest market share by far, and Honeywell Information Systems...... 4 there is no evidence that its lead is Others ...... , ,, ., .....,, 23 shrinking. By revenue $6.35 billion Digital Equipment Corp., ...... ,, 34% The growth rate for sales of very small Hewlett-Packard ,...,., ...... 16 systems–desk-top or personal comput- Data General ....,.., ...... 11 ers—will be very high, while the histori- Honeywell information Systems. ., lam. ..,.....,,,,,.,,...... ,., ; cally high rates of growth for larger sys- Others ..,..,, ...... ,., 26 tems will level off somewhat. Small business computerb In response to the changing nature of Byunits 71,000 units the computer marketplace, more em- IBM, ., ., . ., . .,,.,..,, ...... 33% Others ...... , . .,..,,.,, 23 phasis will be placed on retail marketing Digital Equipment Corp., ,, ,,..,, ., ....., 12 and customer services. Retail firms not National Cash Register . . ..., ...... 11 Wang ...... , ..., ., . . ..., 8 traditionally associated with computers Burroughs ...... , ., .,, . . 7 will enter the small computer field. Data General . . ..., ...... , ., 6 The explosive growth of the microproc- By revenue $3 billion Others ...... 33% essor industry maybe slowed by limited IBM ...,....,,...,.,., ...... 28 production capacity and by the increas- National Cash Register ., ...... 10 ingly high costs of design and tooling Wang ...... , ,, ...... 10 for new applications. Digital Equipment Corp.. . . ., ..., ,., . . 8 Burroughs ., ., ., . . . . ., ..., 7 There has been recent evidence of a Data General . . . . ~...... 4 trend toward acquisitions of small semi- alnternational Data Corp 1981Computer industry Briefing Session, p. D-4. conductor companies by large firms. bInternational Data Corp 1981Computer Industry Briefing Session, p.D-6 According to one report, of 36 new semi- Ch. 14—industry Structure 151

conductor companies formed since the domestic computer hardware mar- 1966, only seven remain independent. ket exists at present. The microproc- Many of the acquisitions have been by essor and personal computer markets foreign firms: French, West German, seem to be most vulnerable to such Japanese, Canadian, and Dutch. threats. ● While foreign competition has made Particularly in the small machine and some inroads in electronics sales, and special application markets, there ap- computer manufacturers are wary, par- pears to be wide opportunity for entre- ticularly of Japanese competition, no preneurs to innovate and make a suc- evidence of any substantial impact on cessful market entry.

Auxiliary Equipment

Many companies have successfully com- ● All of the major manufacturers offer a peted in the computer market by providing wide assortment of peripheral equip- the peripheral equipment—terminals, memo- ment for use with their systems, and ries, and the like—that extend the capabil- the sale of this equipment constitutes a ities of existing computer systems. This in- major portion of the market. However, dependent peripheral market can be roughly there is an active and profitable group divided into two parts–equipment in direct of independent manufacturers selling competition with that offered by the system equipment of all types. In many cases, vendor, and specialized hardware not com- the large computer corporations have monly manufactured by the mainframe com- an agreement whereby they purchase panies. this independent hardware and put their own brand name on it. Most mainframe computer companies sell ● Users are more likely to accept new and a wide range of peripheral devices for in- improved devices as they come on the formation storage and for input and output market, because it is much easier to of data. However, other manufacturers claim change auxiliary equipment with mini- that by specializing in some specific cate- mum disruption of their operations. gory of device they can offer better quality Furthermore, different auxiliary equip- at a lower price. Often, in fact, these units ment can perform an identical function are sold to the computer system manufac- with a greater variety of possible inter- turer, which in turn puts its own name on nal technologies and designs. These two them. The total auxiliary equipment market advantages lead to market opportu- is estimated at around $7 billion or more. nities for inventors and, hence, to profit- Thus, even though the major mainframe able new enterprises. manufacturers take a large portion of that ● Much of the interest in the area of data market, the remainder is well worth com- storage is concentrated on large and in- peting for. expensive bulk memories. Current ac- The categories of equipment shown in tivity is in bubble memory and floppy table 14 below are not a complete list. The disk technology, although the use of the range of accessory equipment sold for com- video disk for very cheap data storage puters is extremely wide. is also being explored and appears likely in a few years. The industry for auxiliary equipment has ● The terminal industry is growing quick- the following principal characteristics: ly, matching the growth in the use of Table 14.—Auxiliary Equipment Industry Structure — — ., . —.-. .— .—— Characteristics of hardware Purpose and/or use Nature and size or present industry Nature and size of present market Future trends Random access memory devices High-speed, usually uses large-scale The main storage for data while being All computer manufacturers sell these Market for Independent vendors has Independents are motivated to integration technology (500 + used by the computer as an integral part of their systems, developed, especially for IBM- com- develop products faster to compete circuits on a single chip), recently also sold by some independents, patible products with IBM cheap VLSI technology IBM Introduced very large-scale mostly as IBM compatible The market IS risky due to the Integration (VLSI) technology equipment uncertainty over IBM plans (several thousand circuits on a single chip) Connects directly to the computer processor Bulk memory devices (a) Magnetic tape and fixed head disks Communicates with the central An auxiliary memory device to hold Several Independent manufacturers, Independents can serve a larger Some Improvements are stall likely, processor through an Intermediary data not currently being used by the very competitive. Major suppliers potential customer base than any but major breakthroughs are unlike- controller, has slower access times system Include firms such as Memorex, mainframe vendor, because they can Iy It wiII still be a common and larger capacity. Storage Technology, 3M, Xerox, and design high-performance equipment technology during the next decade, Ampex that can be Interfaced with a variety but wiII eventually be replaced by of computer makes Over $1 5 electronic technologies billion in sales (b) Floppy disks Inexpensive, easy-to-handle, and Originally developed by IBM as a Successful area for small Because of applications to small com- The technology IS developing rapidly, reliable form of bulk memory control memory for the System 370 entrepreneurs Leading Independent puters (see Purpose and/or use col- driven by competetive pressures, and storage series of computers At present, It IS producer IS a small, California-based umn), its market IS somewhat dif- the demand IS growing due to the the medwm-of-choice for small company, founded in 1973–with ferent from the markets for the proliferation of small computers computer systems, Intelligent $18 million in sales that year predominantly medium- and large- terminals, word processing systems, Presently, more than a dozen large scale systems for magnitude tape and and similar applications and small manufacturers in the field fixed-head disks (c) Very large memories Stores trillions of bits of Information Acts as an archive for very large Very few manufacturers, principally Limited, special purpose market The demand for this type of storage A few very different technologies are quantities of data, where the Ampex and IBM wiII grow, but rapid growth wiII de- used, e.g., video tape and laser information IS rarely changed and pend on the development of new photographics Infrequently accessed technologies, such as holographic storage, and appropriate software techniques Graphical display equipment: (a) Video graphics Picture displayed on a cathode ray Presents computer output graphically Has been domain of a few, small The market for full video graphics IS The further Iowering of prices due to tube with the capability to display for such applications as computer- companies selling relatively growing rapidly as graphics-oriented the economy-of-scale effect, along color and fully shaded solids. aided design. Users can interact expensive systems to a narrow applications are becoming more with the accumulation of experience with the display to control range of users. As cost of accepted by users are expected to Increase market computation or put information into electronics has dropped and more demand inexpensive systems are the system efficient graphics software has been Increasingly being incorporated into developed, cost of graphics systems remote data terminals The has decreased markedly. prediction IS that by 1983, the market for all graphics display terminals wiII reach $500 million annually, and for graphical display equipment wiII grow to a billion dollars or more from the present quarter of a billion .

Table 14.—Auxiliary Equipment Industry Structure (continued) . . . . —-— Characteristics of hardware Purpose and/or use Nature and Size of present Industry Nature and size of present market Future trends —— -. ——————_—. -.— (b)Plotter graphics Picture IS drawn by a mechanically Gets graphical information out of a Dominated by California Computer The revenues of Calcomp exceed controlled pen computer in the form of hard copy Products (Calcomp) The plotters $100 million sold by most major computer vendors are made by this company (Vendors put their own names on ) Printers An alphanumeric text IS printed on The principal means of producing Mainframe manufacturers dominate, The revenues of the principal The market IS expected to reach $36 paper Offers a wide range of printed reports from a computer on but there are some successful Independent manufacturers are billion by 1985 The development of speeds and technologies from paper entries by Independents The about $100 million each a reliable printer in the 1980’s that impact printing to photo Xerox principal Independent manufacturers would sell below $1,000 would tap Imaging are Centronics and Dataproducts rapidly expanding small computer markets, and would not compete directly with industry giants Data entry systems Includes these products Keypunches Gets information into computers, Numerous small companies. IBM’s Sales, which were about $1 77 billion The market IS expected to grow (cards) Keyboard to tape and disk optical and magnetic readers as well domination through the emphasis on in 1977, are growing at about 15 rapidly in the 1980’s as the Terminals–wdeo and typewriter as direct data recorders transmit punched cards IS fading as new, percent per year The market for technology improves Data recorders Optical readers–bar code, marks, or data directly to the computer from better technologies are coming into voice recognizers has been WiII become more Important as characters Magnetic character the source For readers, the source use surprisingly good computers are used for controlling readers Direct data recorders Voice IS a machine-readable code, e g , processes both m industry and in data entry magnetic characters on a bank the home check and printed bar codes on grocery items For recorders, direct measurements are made of physical properties, e.g., temperature and pressure Voice recognizers convert oral communication to computer code — SOURCE Off Ice of Technology Assessment 154 ● Computer-Based National Information Systems: Technology and Public Policy Issues

communication-based computer appli- toward the use of other media such as cations. The current trend is toward magnetic disks. The most significant graphical display, and putting more trend in the 1980’s will be toward sys- computer processing logic in the ter- tems designed to capture information minal itself. directly from the source by voice recog- ● Data entry has been moving gradually nition, by image analysis, and by direct away from the use of punched cards and measurement.

The Data Communication Industry

The data communication industry pro- this income represents less than 1 per- duces goods and services necessary to cent of IBM total corporate income. transmit digital data between computers or ● There appear to be many healthy small between computers and a terminal. For con- firms in the communication hardware venience, the industry is split into two sec- business. Generally, they specialize tors, the hardware manufacturers and the very narrowly along specific product carriers, as shown in table 15. (The descrip- lines. Six of the 10 companies listed in tion of the industry presented in this study table 16 are small firms earning most or presents an information processing view. all of their income in the data commu- The OTA report on Telecommunication nication field. Technology and Public Policy, in press, ● The entire market for data communica- presents a common carrier view of the data tion is still not very large compared communication industry. ) with that for other services, principally voice. It is estimated at between $2 The magazine Datamation estimates the billion and $3 billion. Accurate numbers total data communication industry to be are hard to get, because the carriers running currently at over $4 billion per year, themselves do not always know when and to be growing rapidly. The carriers have their lines are being used to carry voice most of the action, nearly three-quarters of or data. the market; AT&T has the biggest individ- ● Most experts expect a major explosion ual share, about 56 percent of the total mar- of the market for data communication ket. The top 10 companies (other than over the next two decades. The most in- AT&T) in the data communication hardware teresting developments are the plans of market are listed in table 16, and the top 10 some very large corporations for pro- data carriers in table 17. All revenue esti- viding sophisticated data communica- mates are from Datamation. tion services in the near future. Al- The following comments about the data though behind schedule, AT&T’s ACS communication industry appear pertinent: (Advanced Communications System), should begin operation soon. IBM and ● The most apparent characteristic of the Aetna are underwriting a new corpora- data communication hardware market tion, SBS (Satellite Business Systems), is the continued presence of IBM at the to provide such services. Exxon is re- top of the list. Even though only one puted also to be planning services of product covered in the survey is offered, this kind. A highly flexible system will a communication front-end processor, be offered by these companies that is IBM’s revenues are more than double designed specifically for high-speed those of the next largest company. Yet data transfer in many forms—e.g., com- Table 15.—Data Communication Industry Structure

Characteristics of hardware Purpose and/or use Nature of present Industry Nature and size of present market Future trends . .— Hardware manufacturers (table 16) (a) FrorU-errd processors Small specialized processors Control communications by handling IBM dominates with the 370X Total sales approached $400 million WiII grow rapidly paralleling the dedicated to controlling all the messages between the main processor for it's own machines in 1979 Due to the growth of trend toward the application of communications they are located computer and the terminals Other major computer vendors are Communication based applications Integrating data communication and between the main computer and the also principal suppliers The two an independent industry IS anslng to computer systems communication network largest Independents are Comten market these processors which for lnc., with over $37 million in front- many years mainframe end processor revenues and manufacturers have been prowdlng Computer Communications Inc. as standard add-on equipment for with over $17 million The number their machines of minicomputers bought to serve in this capacity cannot be estimated (b) Modems and multiplexors Modems change the electric Adapt computer systems and AT&T IS a major supplier of modems 1979 Independent market estimated Similar to above, except that these characteristics of the data signal to terminals to the communication (estimates are that Bell has as many at over $450 million. functions may be Included to some be transmitted on the communication systems designed to carry voice in use as the entire Independent extent in new data communication Iine from digital to audio–to match market) services the requirement of a communication Mutiplexors are supplied mainly by system to transmit voice Independent manufacturers Multiplexors mix multiple data principally Motorola Racal-Mtlgo, messages into a single stream of General Data Comm Paradyne and information down the wtre Rixon All but the first one are small companies with their principal revenues from this market (c) Network/node controllers These are a recent concept which Principally control data flow through a Supplier picture IS not clear It A new market motivated by the Similar to above look and perform very much like complex network of computers and appears to be dominated by two evolution of distributed processing front-end processors They are communication lines Independents, Comten and Computer systems containing several located within the communication Communications Inc. computers Interconnected on a network communication network In 1979 sales were about $70 million -.

Table 1 S.—Data Communication Industry Structure (continued)

Characteristics of hardware Purpose and/or use Nature of present industry Nature and size of present market Future trends (d) Terminals Any human-operated input-output Connect a human user with a Appears to range from large, Estimated to be large–over $1 Terminal costs wiII fall, but not as device through which information computer mainframe manufacturers to small billion-and growing rapidly. A vast fast as electronics “lntelligent can enter or leave a communication specialist companies, Some merging market exists for high-quality, low- terminals” will dominate the 1980’s network may be possible between small cost hard-copy printed output, now market, and be indistinguishable computer and terminal industries, as too costly relative to the small from small computers with terminals become more ‘‘Intelligent’ computer to which it may be communication capabilities There and small computers gam more attached A high demand is will be a shift to more sophisticated communications capability anticipated for terminals, graphics terminals capabilities, concomitant with a projected including color and half-tone, will be explosive market growth for small built into terminals, thus obviating and networked systems the need for putting them on the main computers (e) Other devices A miscellaneous group of relatively These are for setting up and Racal-Milgo and Northern Telecom, A still quite small market relative to This will continue to be a relatively cheap specialized devices, for maintaining a data communication which largely produce test the entire communication market, small market managing and testing network Includes such devices as equipment, are the principal but amounts to over $100 million communication network those for monitoring communication suppliers lines for data accuracy and performance and those for tracing errors in a network system, also voice response units that interface a computer on one end of a telephone line with a human on the other Data carriers (see table 17) The medium that IS used to transport To transfer data such as computer Currently, AT&T is the principal data A large data communication market, A major explosion of the data or carry communication data or data, electronic mail, facsimile. and earner Most other major carriers ($4 billion in 1979) but still communication market IS predicted informatlin, e.g., AT&T long Iines, video conferencing with a high (see table 17) also predominantly relatively small when compared with over the next two decades Some satellites degree of flexibility at high speeds supply telephone service A voice Accurate figures are difficult very large corporations are moving competitive industry of pure data to obtain since earners often cannot toward providing sophisticated data communications IS developing The distinguish whether their lines are communication services m the near high capital requirement wiII keep carrying data or voice future. New services wiII be based the competition to a few large firms on communication networks with substantial built-m ‘‘Intelligence’ allowing data storage for future retrieval

SOURCE : Office of Technology Assessment Ch. 14—lndustry Structure ● 157

Table 16.—The Ranking and Revenues of the stantial “intelligence” built into them; Top 10 Manufacturers of Data thus, the services will not easily be Communication Hardware classified as pure data carriage or as in- 1979 formation processing. Since one indus- Rank Company revenues ($ million) try (communication) is regulated and 1 IBM ...... $158 the other (data processing) is not, acorn- 2 Racal-Milgo...... 121 plicated regulatory problem is created, 3 NCR ...... 82 4 Motorola ...... 81 the resolution of which will allocate a 5 Memorex...... 54 multibillion dollar market among com- 6 3M ...... 49 peting industrial giants. 7 General Datacom...... 42 8 Paradyne...... 41 ● The computer industry has two strong 9 Control Data...... 40 10 Rixon...... 36 but contradictory reactions to these developments. They see the evolution of SOURCE: Detamation, June 1980, pp. 120-121. these new services as providing exciting possibilities for new computer-com- Table 17.—The 10 Leading Carriers of Digital Data and Their Data Communication Revenues munication applications, some linked on a worldwide scale. Many of the new ap- 1979 placations being planned will serve large Rank Company revenues ($ million) multinational corporations or consor- 1 AT&T...... $2,309 2 GTE...... 798 tiums of smaller users, such as stock- 3 Western Union ...... 451 brokerage houses. 4 lTT World Communications . . . 170 5 United Telecommunications . . 68 6 TAR T ...... 28 On the other hand, some fear that a big 7 Tymnet ...... 24 8 Continental Telephone...... 21 winner of this competition for the data com- 9 Central Telephone ...... 20 munication market would be a monopoly 10 WUI ...... 16 controlling all data communication services SOURCE: Datamation, August 1980, p. 107 worldwide. While the carrier business is not a game for small players, such massive domi- puter data, electronic mail, facsimile, or nation by one supplier could be threatening video teleconferencing. to the hardware and service sectors that are These services will be based on commu- currently promising for the creative small nication networks that will have sub- business entrepreneur.

Special Applications

The emergence of microprocessor technol- Some of these products will be full com- ogy has led to a new type of industry that in- puter systems programed to perform spe- corporates the processor into a device that cific jobs; for example, the word processing performs a specialized function. This type of applications discussed later. Others, such as industry will grow rapidly during this dec- the popular computer games, incorporate in- ade, fueled by growing consumer demand for telligence but do not look like computers. computerized products. Eventually, such These applications are also distinguished markets for computers may dominate the in- from the incorporation of microprocessors in dustry and become analogous to those for common consumer goods such as microwave electric motors. Few consumers purchase ovens and automobile engines. The applica- them directly, but buy many products in tions discussed here are new products, offer- which they are incorporated. ing new, intelligence-based capabilities to 158 . Computer-Based National Information Systems: Technology and Public Policy Issues their users. It is impossible to describe such In 1978, Texas Instruments produced a an industry generically; therefore a few cur- small hand-held device that combined their rent examples are provided (see table 18) microcomputer technology with some new that illustrate the variety of ways in which speech synthesis capabilities to produce a this set of industries will develop. Clearly, combination toy and teaching aid called the opportunities are endless for inventive “Speak and Spell® .“ The device speaks a novel applications of this new technology. word and the learner types the word into the The analogy mentioned above with the elec- machine on a small keyboard. “Speak and tric motor is particularly useful in picturing Spell”” was an instant success, encouraging the future potential of this industry sector. Texas Instruments to plan not only improved versions of the original but to find Array Processors: An array processor is a other specialized products that combine special purpose computational unit designed speech synthesis and microcomputers. to solve specific types of mathematical problems. (See ch. 5.) It is normally attached to a Translators: The hand-held language general purpose computer system or mini- translator is a new consumer device that has computer that sets up the data, feeds the been appearing in the stores over the last 2 problem to the array processor, and puts the years. It resembles a pocket calculator but answer out in appropriate form. Array proc- has an alphabetic keyboard and a somewhat essors have become particularly popular for longer display window. A person types in a research and engineering applications that word or phrase in one language and reads the involve signal processing or the modeling of translated phrase on the display. large physical systems. The machine was invented by a small Over 15 firms market these units, ranging group of entrepreneurs who were not in the from IBM to small companies for which such electronics business at the time. Forming a a processor is the only product. The proc- company called “Friends Amis, ” they devel- essors cost between $5,000 for a small unit oped the design and specifications of the on a printed circuit card to several million logic chip required. They then contracted dollars for Control Data’s Star computer. with a microprocessor manufacturer to pro- Many small companies (such as Floating duce the specialized electronics, and ar- Point Systems) and larger ones (such as Ray- ranged with a distributor of consumer elec- theon and Westinghouse), which don’t tronics to retail them under the distributor’s engage in the general purpose computer brand name. business, have found the lower end (up to The translators were an instant hit, $150,000) of the array processor market to enough so that Texas Instruments and Lex- be attractive, and have thus far successfully icon have been drawn into the market. competed in it. Despite the competition, Friends Amis has Speak and Spell”: This is a specific prod- been a success, turning an initial investment uct invention of Texas Instruments, which is of $1 million into an $8 million profit last a leading manufacturer of microelectronics. year on sales of $30 million. Still growing, Unlike some of the other semiconductor com- the company soon plans to market a hand- panies, which sell their devices wholesale to held computer through an agreement with other manufacturers for incorporation into Matsushita. The Japanese corporation will products, Texas Instruments also produces provide the marketing capability the small a line of consumer devices that use their own company lacks. Besides making money, electronics. These are largely centered on Friends Amis has, in the words of Fortune electronic hand and desk calculators and a magazine, “managed to’ father a new branch recently announced personal computer. of consumer electronics. ” Table 18.—Special Applications Industry (examples)

Purpose and/or use Nature and size of present market Future trends Characteristics of hardware Nature of present Industry — . Array processors Specialized units for very economic Research and engineering applications Units marketed by over 15 firms from Research and engineering design More specialized designs targeted. al and fast solutions for particular involving signal processing or mod- IBM to small companies with proc- laboratories are principal users unique types of calculations The mathematical problems Usually at- eling large physical systems essor as their sole product cost potential large revenues from such tached to a mini- or general-purpose from $5000 for smallest unit on specialization wiII stimulate growth computer for control and input/output printed circuit card to several million dollars for the Iargest size opportunities for small entrepreneurs Speak and Spell n Consumer electronics device-small Combination toy and spelling teaching Specific product invention of Texas Instant consumer success The manufacturer wiII improve pres- hand held combining the manufac- aid—machine speaks word then Instruments ent product and develop additional turer's (Texas Instruments) micro child types it on small keyboard specialized products combining computer technology with speech speech synthesis and microcom synthesis capabilities pters. Language translators Consumer electronics device–a hand Type in word or phrase– read off Developed by entrepreneurs originally Consumer electronics success– com- Consumer electronics market still held language translator with an al- translation on display not in electronics business who con- pany that developed product had growing–several electronics com- phabetic keyboard and a display tracted electronics to microprocessor $30 million in sales in 1979 on an panies are entering The umt may window similar to but larger than firms Initial Investment of $t million evolve into a more general hand- that on normal calculators held personal computer Word processors A computerized ‘Intelligent’ Allows operator to edit and correct Principally companies that make or Over 80 percent growth in 1979 In 1980’s Integrated office systems typewriter that stores a document text directly in memory, and have made computers e g Wang, growth expected to continue over 50 wiII display sophisticated capabilities electronically as it is entered, and automates repagination, hyphen- IBM, and Digital Equipment Corp. percent in t 980 for correcting grammar and for- displays the image on a cathode ray ating and justification Some sys- Other firms are now entering, il- matting text They wiII merge with screen tems can correct spelling Iustrating new opportunities being new data communication services opened by cheap electronics, e g Iinking geographically separated of- Lamer Business Products, a leader fices through high speed data com- in Dictaphone sales Also major firms munication networks offering video, such as Xerox and Exxon are devel- audio, and computer conferencing. oping strong positions and distributed information processing. Electronic archival storage for storing and retrieving information efficiently and easily wiII be offered — SOURCE Off Ice of Technology Assessment 160 Computer-Based National Information Systems: Technology and Public Policy Issues

Word Processing Systems: These are im- entered with both stand-alone systems and portant new applications around which a ma- those using a shared computer that serves jor industry will grow in the 1980’s. Word several terminals. Lanier, principally viewed processing systems, the first entry in the of- as a firm with marketing expertise, pur- fice automation trend, are designed to in- chased interest in a small data products com- crease the productivity of information han- pany, AES Data Ltd., that designs and man- dling by automating its preparation and ufactures the word processing equipment. flow. The applicable technologies will be The most important trend that experts drawn from both computers and communica- think will dominate in the 1980’s is the merg- tion, and the trend will be toward the in- ing of these word processing systems with tegration of document preparation, storage, the new data communication services being and transmission. planned, such as SBS or AT&T’s ACS. Using these new services, geographically For now, the principal offering on the com- distributed organizations will be linked puter side is the word processor. It is essen- together through a very high speed data tially a computerized, intelligent typewriter communication network offering video and that stores a document electronically as it is audio conferencing, computer conferencing, entered, displays the image on a cathode ray and distributed information processing. screen, and allows the operator to edit and correct the text directly in its memory. The final ingredient for the integrated of- Tedious tasks such as repagination, hyphen- fice systems of the next decade is the devel- ating, and justification are taken care of opment of electronic archival storage. The automatically. Some systems even correct hardware base exists for storing information spelling, and some observers expect systems at a cost lower than that of filing paper. The in the 1980’s to display sophisticated in- need now is for appropriate software that telligence for correcting grammar and for- would allow the user to store and retrieve in- matting complicated text. The market for formation efficiently and easily. Some sys- sophisticated word processing systems grew tems are on the drawing broad. Systems De- over 80 percent last year, and next year velopment Corp. and Datapoint have an- market growth should still be over 50 per- nounced prototypes for systems they will cent. sell in a year or so. As these trends merge, whether small The principal actors in the word process- firms can continue to successfully develop ing business have tended to be companies and compete in the word processing market that make or have made computers, such as may depend on the degree to which inter- Wang, IBM, and Digital Equipment Corp. faces become standardized, allowing com- However, other firms are now entering the petition for particular components of an in- market, illustrating the opportunities for tegrated office system. Major firms such as new entries being opened by cheap elec- Xerox, IBM, and Exxon have taken aim at tronics. Lanier Business Products, for exam- the automated office market, and competi- ple, a leader in the sale of dictaphones, has tion will be severe.

Computer Services

The computer services industry, sum- for computer users. Some companies sell marized in table 19, performs a wide variety time on their own computers; others provide of tasks that make the computer more ac- programing or operations services (including cessible, more usable, and/or less expensive training, consulting, and facilities manage- — Table 19.—The Computer Services Industry Structure —— Future trends Services provided Purpose and/or use Nature of Industry Nature and size of market — Processing services- These firms called service bureaus For computer users preferring to pur- A relatively few very large companies About $67 billion worth of computer The coming generation of cheap com- provide access to computer time chase computer time from outside and a large number of small but time was purchased in 1980 and puters will be a threat to those com- They also provide access 10 pro- firms rather than owning and op- profitable Operations (See table 21 ) the market iS growing at nearly 20 panies that just provide computer grams designed for specific control erating their own systems Good opportunity for small com- percent per year time without adding market value in applications panies to compete successfully by the form of application packages and taking advantage of specialized serv- consulting Consequently the move ices targeted at a market in which iS toward providing programing and they have particular expertise other support activites that are less sensitive to the specific source of computer power Professional software products and services. (a) Software products Prewritten programs to do specific The majority are for applications A large number of small firms Over For the total software products in The growth rate for the next 5 years tasks that can be leased or purchas- although some are designed to im 90 percent of the companies fit into dustry, the market iS estimated at for this unusually fast growing in ed by users Because heavier pro prove the operation of the user’s ADAPSO’s category of those that are over $1.5 billion per year dustry iS estimated at 30 percent gram development costs can be writ- system They tend to be large and smallest in size The large hardware ten off against multiple users, this complex designed for broad appli- vendors also sell some software commercial software can be more cability e g large data manage- products tailored for their machines soundly based mathematically, more ment and file Inquiry systems op- flexible more reliable, and better timization programs, and packages documented than a home-grown proof sophisticated statistical routines gram would be In additlon, the vendor assumes the burden of the continued maintenance and improvement of the package (b) Software services Provides programing expertise to For a user’s own projects, and to A few small companies specialize in A market about equal to that for The industry predicts substantial develop a specific program for a par- assume the responsibilty for the programing Many large firms, hard- prewritten packages It iS estimated growth of over 20 percent annually ticular user major development efforts for which ware manufacturers, service bureaus at around $1 billion per year for the next few years, depending in the customer does not have the ap- etc., offer programing services to part on the continued scarcity of propriate staff support their customer’s needs skilled talent, which makes it costly, thus discouraging users from establishing their own staff of application programmers More market segmenta- tion and specialization seems Iikely Other services The Industry provides a variety of For consulting, for operating the Mostly very small firms No soild estimates of market size A new service Industry iS developing support services to users customer s computer center, for could be comparable to that of pro- providing books, magazines, soft- maintaining the hardware and for fessional software support market ware, exchange services, employee Integrated hardware/software education, and consulting, for small systems computer users. With the increase in the use of small computers in the 1980's, some major growth potential may exist for services designed to make these new systems most useful to a new class of inexperienced users —.— —— -— .— —— SOURCE: Office of Technology Assessment and Association of Data Processing Service Organizations 162 . Computer-Based National Information Systems: Technology and Public Policy Issues

ment) to users who own their systems. Still Table 21 shows the structure of the com- others sell prewritten programs or provide puter services industry in terms of size of access to those programs on a service bureau firm. computer. Most recently, some companies offer processing services through integrated The following observations can be made hardware/software systems. about the computer services industry: The Association of Data Processing Serv- ● The availability of inexpensive capable ice Organizations (ADAPSO) is the principal computer hardware will put pressure on organization representing this industry. service firms that only provide custom- They define the role of their industry as add- ers with access to computer time. Even ing “value to the computer hardware utility so, most observers do not expect the by integrating into the service people, exper- computer service bureaus to fold up. tise, products, distribution networks, and ● The service bureaus are showing a trend education. The structure of the computer toward offering an integrated set of service industry as discussed here reflects, services based not only on access to in part, that used by ADAPSO. pure computing services, but also to The largest publicly held independent specialized programs and data bases computer service corporations along with already present in the company’s system. their estimated 1973 revenues from com- ● puter services are shown in table 20. The service industry seems to be characterized by a few large firms and many, equally profitable, very small Table 20.—Estimated 1979 Revenues for the operations serving very specialized Top Five Independent Computer markets (such as law firms, pharmacies, Service Companies and civil engineering firms). The development of new data communication fa- Estimated 1979 cilities will make more of this type of Company revenues ($ million) – – - - specialized service possible by pro- Automatic Data Processing ...... $372 Computer Sciences Corp...... 343 viding a national marketplace for it. Electronic Data Systems...... 274 ● A new industry will develop to support Tymeshare ...... , 193 the personal and desk-top systems now Bradford National. ... , ...... 120 being marketed. These services will of- a The three Companies with the largest computer services revenues — IBM, Con- fer maintenance, programs, consulting, trol Data Corp., and Burroughs—derive their primary revenues from hardware sales and thus are excluded from this list and education specifically oriented to SOURCE Association of Data Processing Service Organizations owners of these very small systems.

Table 21 .—Industry and Revenue Structure of Computer Services Industrya

1979 gross Number of 1979 revenues profit Growth rate Size of operation companies ($ billion) margin (percent) (percent)

- - - - Over $25 million...... ~ ...... ‘“ -40 ‘ $ 4.0 1 0% 200/0 Between $10 million and $25 million . 70 1.5 7 23 Between $2 million and $10 million . . . . 450 2.0 9 22 Under $2 million...... 3,500 2.5 9 22 Total ...... 4,060 $10.0 — a This table includes estimated revenues for computer services provided by Independent computer service companies and computer hardware manufacturers. Numbers are rounded off SOURCE: Association of Data Processing Service Organizations Ch. 14—industry Structure ● 163

Information Services

Selling information is a centuries-old ervations, stock transfers and commodity business; however, the computer is forcing a prices, and even wire service news, are ex- radical change in the character of this in- amples of information already available in dustry. The nature of the information sold, electronic form. Much of it is already trans- the way it is provided, and the principal mitted on communication lines. organizations supplying information services are all changing rapidly, which will The next decade or two will see most of shape a new type of industry in this decade. the information needed to run people’s lives and businesses originated and stored in com- The traditional information industry has puters. This trend will stimulate the dis- always been predicated on the assumption tribution and retailing of information, be- that some information has tangible economic cause putting the information into computer value and can be treated as a commodity. readable form is a major cost of current The industry, taking this traditional ap- automated information services. proach, views itself as similar to any other Data communication technology is chang- industry in structure. That is, it is divided ing the rules for the distribution of informa- into producers, distributors, and retailers. tion. Traditional distributors such as broad- For example, an author might be a producer, cast networks, book publishers, and common a publisher, a distributor, and the bookstore carriers are looking carefully at the potential the retailer. Similarly, in broadcasting there advantages offered by data communication. are show producers, networks and syndi- The publishers see a new mechanism to dis- cates that distribute the programs, and the tribute newspapers, books, and magazines, local stations that broadcast them into in addition to possible new services; the com- homes. mon carriers and broadcasters see new uses Now the industry is computerizing. Tradi- for their facilities as vehicles for these tional information organizations such as services. Dun & Bradstreet, Macmillan Press, and the Many of these services will soon be re- Knight-Ridder newspaper publishers are ex- tailed directly to the home or office via ploring new uses of information technology telephone, television, and cable. Precursors to expand their offerings. On the other hand, to these services already exist in a few local computer service bureaus, as pointed out in cable systems, and experiments such as the the previous section, are moving away from recently canceled AT&T Electronic Informa- offering pure computer time and toward pro- tion Service provide an automated telephone viding program and data services that are directory and a selection of other informa- certainly classifiable as information services tion systems over a telephone line to a home even by the most traditional standards. terminal. Finally, new companies such as Data Re- sources, Inc. (now part of McGraw-Hill) Some information services are trans- have been formed specifically to provide formed by the use of technology, others are computer-based information services. The created. It is the new computer-based serv- computer’s impact is being felt by all three ices that are of particular interest to this sectors of the information industry. study. The Information Industry Association In the production of information, in- identifies nine categories of information increased computerization of social activities means that there is a swiftly growing pool of dustry. These are: information of all kinds that can be read by a 1. producers of primary information computer. Financial information, airline res- (books, journals, research studies, etc.); 164 . Computer-Based National Information Systems: Technology and Public Policy Issues

2. producers of secondary information (in- they maintain. Since a large on-line data dexes, bibliographies, data bases, mi- base can be searched far more effectively by croforms, directories, etc.); computer than by hand, the services pro- 3. communication companies (broadcast, vided by such a producer are qualitatively cable, switching, etc.); different from those provided by a tradi- 4. information distributors, agents, or tional bibliographic service. brokers (on-line service, sales represent- Such information, however, is currently atives, dealers, etc.); very expensive to prepare. Persons must 5. information transactors (banks, lending first read the printed material, then analyze, institutions, investment houses, etc.); index and otherwise code it, and put it into 6. consultants or contract suppliers of in- machine-readable form. In the future, when formation (designers, developers, etc.); most printed text will originate on computer- 7. information retailers or outlets (on- based text processors, automated computer- demand services, search services, etc.); ized indexing systems will eliminate most of 8. equipment or supplies companies (com- these tasks. puters, micrographics, text processing, graphic arts, etc.); and This high labor cost, coupled with the fact 9. popular media organizations (news, edu- that the initial significant market for such cation, advertising, etc. ) systems is the research community, means that most bibliographic systems now avail- Some of these classifications are of par- able were originally supported, at least particular interest to the computer and com- tially, by the Federal Government. Some are munication industry. now self-supporting, while others continue to Producers of Primary Information: For be subsidized, depending on their purposes. some time, the intermediate processes of Bibliographic information is the hardest publishing have been undergoing auto- case, however. mation. Computerized typesetting, on-line There have been some successful entre- editing and other uses of word processing, preneurial experiments in providing other and digital communication of edited text are forms of on-line data service. Data Re- being widely adopted and should increase sources, Inc. (DRI) is one of the best known. productivity substantially. Founded by the well-known econometrician, For the time being, the final product will Otto Eckstein, DRI provides econometric continue to be in paper form. However, the data and access to sophisticated computer- future widespread use of the video disks and based models to economists, particularly high-speed data communication systems those in private industry. Most of the major may gradually lead to products being pub- corporations in the United States now lished in digitized formats as well. subscribe to DRI services. Producers of Secondary Information: There are a number of such firms that Many producers of bibliographies and in- have been founded to provide computerized formation directories now regularly prepare databank services. Many are still quite them on computers. Some even offer the small, specializing in particular types of data final product on-line from a computer. The to serve narrowly targeted markets. The user dials in from a remote terminal to get range of services is quite broad. One in- the desired information. dustry analyst identified 22 different categories of databank service. These industries have found the computer to be useful not only to automate the more Data Transactors: There are many firms routine aspects of their operations, but also that create useful information in the course to provide more sophisticated analyses and of their business, although they may not be customized arrangements of the information in the primary information business. For ex- Ch. 14—Industry Structure ● 165 ample, banks, stockbrokers, airlines, and information service, in the same way that a credit card companies all create transac- grocery store carries soup made by different tional information. More and more of this in- producers. formation is in computer-readable form and, Many of the databank providers discussed furthermore, is possibly valuable to some in the section on secondary producers offer other party. This firm or individual may be very complicated systems that require some in a related business, or may have no connec- training and experience to use. Therefore, tion with the principal field of the original these services are often provided through an data collector. intermediary, such as a consultant, librarian, The market for such data is likely to grow or stockbroker. In a sense, these persons significantly over the next decade. Pools of serve as retailers of the information service, data from transactions will accumulate in marketing it to individual users. The charac- computer systems, and new enterprises will teristics of the information services sector spring up to collect, organize, and sell them. are summarized in table 22. The transactors will find that wholesaling The following conclusions can be made their data pools to such firms will be a prof- about the information services sector: itable side business. When that happens, pressures may well build to increase the ● Traditional information producers such amount of information collected beyond that as book publishers, newspapers and net- necessary to serve the immediate trans- work broadcasters will be converting action, thereby increasing the resale value of their services into computer and tele- a company’s data pool. These firms will then communication-based offerings. become principal actors in the information ● New information services will be trans- industry. mitted to the home over telephone, cable, and broadcast carriers. Some of Information Retailers: Information re- these services may be integrated with tailers provide computer-based information in-house computer systems and video products directly to the business or private disk and tape units. consumer. They may also be the producers, ● Libraries will extend their services be- or they may simply retail other producers’ yond mere provision of books into offer- products. So-called “videotext” service pro- ing computer-based services. Such new viders, which offer in-home information over activities may conflict with the new broadcast or cable television channels, usual- commercial in-house services mentioned ly serve as brokers, making their facility above. available to anyone who wants to provide an 166 ● Computer-Based National Information Systems: Technology and Public Policy Issues

Table 22.–The Information Services Industry Structure

How Information Nature of Industry Nature of the Information iS provided and/or market Future trends Producers of primary information Published materials For time being in paper form Traditional book, magazine and The Increasing adoption of computerized newspaper publishers typesetting, on-line editing and other uses of word processing, and digital communication of edited text should substantially increase productivity The future widespread use of video disks and high-speed data communication systems may gradually lead to the publication of products in other dlgitized formats such as in-home video Information systems Producers of secondary information Bibliographies, information dir- On Paper and on-line from a com- Most bibliographic systems available Most of this data wiII reside in computer ectories, econometric data, and puter. The user dials in from a were originally supported, at least in systems to be called up as needed by other particular types of data that remote terminal to get the desired part, by the Federal Government. customers serve narrowly targeted markets– Information because their initial chief market over 22 different categories of data was the research community Some bank services have been identified are now self-supporting, others, de- Most are prepared on a computer pending on their purpose, continue to be subsidized Data Resources, Inc., iS an example of a successful entrepreneurial experiment in providing other forms of on-line data serwces-econometric data and access to sophisticated computer. based models for economists Many small firms have been founded to provide a broad range of computerized data bank services Data transactors Firms create useful transactional in- Most IS in a computer-readable form Currently, the number of transactors Pools of data from transactions wiII ac- formation in the course of carrying that may be of value to some other IS growing but there iS only a small cumulate in computer systems, and new out their business, e.g., banks, firms or individuals market for their data enterprises wiII spring up to collect, stockbrokers, airlines, and credit organize, and sell them. Transactors card companies who profit from wholesaling their data pools to such firms, wiII be motivated to increase the quantity of Information collected in order to raise the resale value of their data pools These firms will then become principal members of the information industry. Information retailers Computer-based Information products Directly to businesses or private con- Retailers may also be information pro- Computers are having the effect of blurr- sumers. ducers or may just retail the prod- ing the distinction between the products ucts of other producers, e.g., so- and services offered by the computer in - called ‘‘videotext services that of- dustry This new hybrid industry wiII offer in-home information over broad- fer new forms of information services, cast or cable television channels marketed in new ways, to new users usually serve as brokers who make their facilities available to anyone wanting to provide an information service —— .- SOURCE: Office of Technology Assessment

U.S. GOVERNMENT PRINTING OFFICE: 1983-410-640