Big Brother joins scramble for data: How America plans to bug the electronic age

A HIGH-RANKING official of the National Security Agency, America's largest and most secretive intelligence arm, is in London with the task of selling the 16 governments of the European Union and European Free Trade Association on the virtues of a controversial electronic scrambling technology.

The Clinton administration hopes that the encryption devices will become the global standard for anyone wanting privacy while using cellular phones, computer networks and fax transmissions. They have a serious drawback for anyone looking for total privacy, however. The devices have a built-in 'back door' that will allow spy agencies to listen in on all communications, or read faxes and electronic mail.

Spy agencies in the US and Europe, with nearly 50 years' experience of advanced technology in surveillance of citizens, suspected criminals and foreign governments, have been concerned for some time about developments that have put sophisticated encryption devices within reach of many.

The agencies want to ensure that they are not left behind by the rapid advances in high technology which have made telephone scramblers and the mathematical codes used to encrypt computer and fax data relatively cheap and easy to use.

The governments fear that electronic eavesdropping will be set back decades if and when terrorists, money-launderers, drug traffickers and unfriendly governments gain widespread access to the technology. The NSA is concerned that, despite the dollars 30bn ( pounds 21bn) a year it spends monitoring global communications, it cannot keep pace with technological change and the massive spread of encryption codes.

The NSA official, James Hearn, who until recently was the deputy director for information security at NSA's sprawling headquarters near Washington DC, is heading up a 'liaison office' in London with a colleague, Clint Brooks, according to reliable sources in the computer security community on both sides of the Atlantic. The US Embassy in London issued a pro forma denial about Mr Hearn's presence yesterday, saying: 'There's nobody by that name here.'

Mr Hearn is well known, however, to UK and European officials at the cutting edge of efforts to control the spread of highly sophisticated scrambling devices. These encryption codes, developed by private software companies, are putting communication beyond easy reach of the NSA, Britain's GCHQ at Cheltenham and France's DGSE, to name but a few 'Big Ear' agencies.

As a response, the US has developed an encoding device for telephones and computers known as the 'Clipper Chip', with a 'back door' that will allow spy agencies armed with special electronic keys to eavesdrop. When the Clinton administration decided to press ahead with the controversial coding devices last week, the computer industry and privacy campaigners reacted with outrage.

'It's like trying to order people to use only resealable envelopes for correspondence, so that no communication can ever be private again,' said David Bannisar of Computer Professionals for Social Responsibility.

Big computer companies, including IBM and Apple, are bitterly opposed to the new monitoring devices. But AT&T, the US telephone company, which is fast establishing itself in Europe, will put the eavesdropping technology into the telephone scrambling devices it sells in high street shops for about pounds 800 each.

The US is keen to ensure that similar electronic monitoring technology becomes standard in the rest of the industrialised world. The NSA's Mr Hearn has the task of persuading governments that the controversial Clipper Chip for telephones and a technology called Tessera, for computer modems, is quickly adopted, despite mounting opposition.

The US, European Commission and four European Union countries - Britain, Germany, France and the Netherlands - are already deciding how to administer the dawning electronic age of 'information highways' which will bring an explosion in the use of hi-tech in everyday lives.

A consultant to the European Commission who has worked on the new encryption standards claims that those who object to US efforts to regulate the market for encryption are 'politically naive'.

'Whether we like it or not, the authorities will want to listen in on our communications,' he said. 'The Americans are to be admired for being up front about it, when other countries are doing the same thing anyway.'

Experts in the field of information security often speak of physical boundaries that now define the world being replaced by electronic boundaries. In this Orwellian world, which is at most five years away, people will be issued with so-called 'smartcards' with microchips that can store their entire personal history. The identity cards will be a passport for ordinary citizens, used to store health records, for personal banking, paying for travel and for identity checks at borders.

In the same way, companies and even countries will be expected to use technology like the encryption Clipper Chip for data transmissions.

'We are defining our new electronic world - which will become increasingly important in a borderless Europe,' the EU security consultant said.