Can Zero-Knowledge Hush Up the Net?

TORONTO (04/05/2000) - In an age where most Web sites leave hidden cookies on your computer and marketing-driven "free" PC offers are a dime-a-dozen, a 26-year-old Canadian is helping people use the Net the old fashioned way -- anonymously.

"There is no Faustian bargain required," said Austin Hill, president of Zero-Knowledge Systems Inc., in his keynote speech today before the "Computers, Freedom and Privacy" conference. Hill dismissed offers of so-called free equipment or Internet access in exchange for revealing personal information or looking at ads: "People don't need to sell their lives or their data cheap."

In his tie-less black suit, bright blue eyes, blondish short hair and Vandyke goatee, Hill stands out from most other conference speakers and attendees who cling to their casual dress and long hair. He founded Zero-Knowledge with his father and brother after selling off his first company, ISP TotalNet, which is now Canada's third-largest ISP (Internet service provider), which he founded at age 21.

Hill's interest in privacy began at 17, while working as a consultant showing companies how easy it was to hack into their networks. The advent of online direct marketing and other security exploits cleared the path for Zero-Knowledge to bust onto the scene and politicians to join the bandwagon. "I wouldn't be surprised if privacy becomes a presidential issue this year," Hill says.

Privacy has long been a concern for consumers, but the ease with which data can be exchanged and compromised online has pushed it closer to the forefront.

While U.S. business has tended to place higher importance on enabling commerce and advertising over privacy guarantees, the government has been struggling to hold onto anachronistic encryption export policies in the name of national security and quibbling with the European Commission over strong data privacy protections for citizens.

People are growing more concerned as they find out how readily some Web sites give up subscribers' identities when slapped with a subpoena, and as they realize how much information ad firms collect about them as they surf the Web.

Public outcry led online ad agency DoubleClick to back off plans to merge its online and offline user profiles, but privacy advocates worry that DoubleClick might be just the tip of the iceberg.

Soon mobile phones and OnStar computer systems in Ford and GM cars may pitch pizzas to people based on their location or dining plans. One could also mention the planned network intelligence in household appliances like refrigerators that will "anticipate" people's needs.

"We're building tracking at every single point," so global positioning system locators can be used for direct advertising, Hill says. "I don't want to live in a world where my every move is tracked because I happen to own a cell phone."

The slow but steady moves towards creating digital certificate authorities and networks that verify people for e-commerce, voting and other activities are also problematic, according to Hill. "We've developed an online national ID card" that can be hacked or otherwise compromised, he adds.

"Going forward, (privacy) will be one of the most important issues this century," Hill says, likening it to the civil rights and environmental movements of the 1960s. "The next five years will be the deciding factor."

If privacy is not built into the networking protocols and computer systems, "I believe privacy will be one of those things heard talked about, like 'Remember the good old days?," he says. "Like memories or old movies."

In addition to embedding privacy into technology, Hill says the industry needs self-regulation and governmental oversight through legislation. "No one of those alone will solve the problem."

In reality, Hill advocates using pseudonyms, not total anonymity.

Zero-Knowledge's Freedom tool allows people to surf the Web, send and receive e-mail and participate in chat rooms without revealing personal information.

Since people may want different identities and personal data revealed depending on what Web site they're visiting or what activity they are doing, they can create different pseudonyms.

"You can't build relationships using anonymity," Hill says. Users of Freedom can disclose information about themselves as they build trust with Web sites they visit. So someone may have one pseudonym disclosing financial information at online bank Wingspan and another pseudonym disclosing only their entertainment and news preferences at Yahoo. "With pseudonymity, you know as much about me as I'm willing to tell you."

Zero-Knowledge routes its traffic over encrypted servers so Web sites they visit don't even see customers' IP addresses. Customers pay US$10 per pseudonym per year, and nothing for the software.

Hill won't say how many subscribers his company has, but did disclose that there were 85,000 for the beta test, which ended when the commercial product was launched December 1. Zero-Knowledge partners with about 180 ISPs, including PSINet. The system is built so it would be impossible for Zero-Knowledge or its partners to reconstruct a subscriber's identity. This contrasts with emerging infomediaries, which are responsible for disclosing subscriber information selectively, but also can disclose the identity if necessary, says Hill.

Meanwhile, Zero-Knowledge is taking off. His firm's 80 employees in December have grown to about 200 now and he expects to have 600 by the end of the year.

The company has raised $38 million, led by Platinum Venture Partners and Strategic Acquisitions Ventures, and is planning another round in the next two months. The company, which isn't profitable yet, has an IPO in its future.

In December, Zero-Knowledge acquired patents that enable anonymous electronic cash transactions and other anonymous credentials that would allow people to prove to an adult Web site that they're over 18 or a U.S. citizen, or show an auction site that they have credit without revealing other information, for example. Commercial products using that technology are expected early next year. "We're giving people the ability to stop the collection of (their) data," says Hill. "From there, we'll give them the ability to manage their IDs."

In addition, Zero-Knowledge is talking to backbone providers, networking equipment and computer manufacturers, portals and others about bundling privacy technology into their products and services, he says, declining to name names.

"Our goal is to have privacy kits ubiquitous the same way browsers are now."

And what of the burgeoning field of direct marketing? It will evolve into permission-based marketing, which gets response rates of 18 percent to 28 percent, as opposed to the usual online ad, which has a response rate of 1 percent or less, Hill says: "Profile-based marketing is dead."

Basically, Hill is hoping to bring the Web back to the days when the saying "On the Internet, nobody knows you're a dog" was true.

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