```

[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]

                    OVERVIEW OF THE CYBER PROBLEM: A
                      NATION DEPENDENT AND DEALING
                               WITH RISK

=======================================================================

                                HEARING

                                 of the

                     SUBCOMMITTEE ON CYBERSECURITY,
                 SCIENCE, AND RESEARCH, AND DEVELOPMENT

                               before the

                 SELECT COMMITTEE ON HOMELAND SECURITY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 22, 2003

                               __________

                           Serial No. 108-13

                               __________

    Printed for the use of the Select Committee on Homeland Security

 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house

                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
98-312                      WASHINGTON : 2005
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512�091800  
Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�0900012005
?

                 SELECT COMMITTEE ON HOMELAND SECURITY

                 CHRISTOPHER COX, California, Chairman

JENNIFER DUNN, Washington            JIM TURNER, Texas, Ranking Member
C.W. BILL YOUNG, Florida             BENNIE G. THOMPSON, Mississippi
DON YOUNG, Alaska                    LORETTA SANCHEZ, California
F. JAMES SENSENBRENNER, JR.,         EDWARD J. MARKEY, Massachusetts
Wisconsin                            NORMAN D. DICKS, Washington
W.J. (BILLY) TAUZIN, Louisiana       BARNEY FRANK, Massachusetts
DAVID DREIER, California             JANE HARMAN, California
DUNCAN HUNTER, California            BENJAMIN L. CARDIN, Maryland
HAROLD ROGERS, Kentucky              LOUISE McINTOSH SLAUGHTER,
SHERWOOD BOEHLERT, New York            New York
LAMAR S. SMITH, Texas                PETER A. DeFAZIO, Oregon
CURT WELDON, Pennsylvania            NITA M. LOWEY, New York
CHRISTOPHER SHAYS, Connecticut       ROBERT E. ANDREWS, New Jersey
PORTER J. GOSS, Florida              ELEANOR HOLMES NORTON,
DAVE CAMP, Michigan                    District of Columbia
LINCOLN DIAZ-BALART, Florida         ZOE LOFGREN, California
BOB GOODLATTE, Virginia              KAREN McCARTHY, Missouri
ERNEST J. ISTOOK, JR., Oklahoma      SHEILA JACKSON-LEE, Texas
PETER T. KING, New York              BILL PASCRELL, JR., New Jersey
JOHN LINDER, Georgia                 DONNA M. CHRISTENSEN,
JOHN B. SHADEGG, Arizona               U.S. Virgin Islands
MARK E. SOUDER, Indiana              BOB ETHERIDGE, North Carolina
MAC THORNBERRY, Texas                CHARLES GONZALEZ, Texas
JIM GIBBONS, Nevada                  KEN LUCAS, Kentucky
KAY GRANGER, Texas                   JAMES R. LANGEVIN, Rhode Island
PETE SESSIONS, Texas                 KENDRICK B. MEEK, Florida
JOHN E. SWEENEY, New York

                      JOHN GANNON, Chief of Staff

         UTTAM DHILLON, Chief Counsel and Deputy Staff Director

                  STEVE NASH, Democrat Staff Director

                    MICHAEL S. TWINCHEK, Chief Clerk

                                 ______

  SUBCOMMITTEE ON CYBERSECURITY, SCIENCE, AND RESEARCH AND DEVELOPMENT

                    MAC THORNBERRY, Texas, Chairman

PETE SESSIONS, Texas, Vice Chairman  ZOE LOFGREN, California
SHERWOOD BOEHLERT, New York          LORETTA SANCHEZ, California
LAMAR SMITH, Texas                   ROBERT E. ANDREWS, New Jersey
CURT WELDON, Pennsylvania            SHEILA JACKSON-LEE, Texas
DAVE CAMP, Michigan                  DONNA M. CHRISTENSEN,
ROBERT W. GOODLATTE, Virginia          U.S. Virgin Islands
PETER KING, New York                 BOB ETHERIDGE, North Carolina
JOHN LINDER, Georgia                 CHARLES GONZALEZ, Texas
MARK SOUDER, Indiana                 KEN LUCAS, Kentucky
JIM GIBBONS, Nevada                  JAMES R. LANGEVIN, Rhode Island
KAY GRANGER, Texas                   KENDRICK B. MEEK, Florida
CHRISTOPHER COX, CALIFORNIA, ex      JIM TURNER, Texas, ex officio
officio

                                  (ii)

                            C O N T E N T S

                              ----------                              
                                                                   Page

                               STATEMENTS

The Honorable Mac Thornberry, Chairman, Subcommittee on 
  Cybersecurity, Science, and Research and Development, and a 
  Representative in Congress From the State of Texas
  Oral Statement.................................................     1
  Prepared Statement.............................................     2
The Honorable Christopher Cox, Chairman, Select Committee on 
  Homeland Security, and a Representative in Congress From the 
  State of California
  Prepared Statement.............................................     3
The Honorable Robert E. Andrews, a Representative in Congress 
  From the State of New Jersey...................................    36
The Honorable Sherwood Boehlert, a Representative in Congress 
  From the State of New York.....................................    34
The Honorable Bob Etheridge, a Representative in Congress From 
  the State of North Carolina....................................     6
The Honorable Jim Gibbons, a Representative in Congress From the 
  State of Nevada
  Oral Statement.................................................    43
  Prepared Statement.............................................     4
The Honorable James R. Langevin, a Representative in Congress 
  From the State of Rhode Island.................................    45
The Honorable Sheila Jackson-Lee, a Representative in Congress 
  From the State of Texas
  Oral Statement.................................................    49
  Prepared Statement.............................................     5
The Honorable Zoe Lofgren, a Representative in Congress From the 
  State of California............................................     1
The Honorable Pete Sessions, a Representative in Congress From 
  the State of Texas.............................................    45
The Honorable Lamar S. Smith, a Representative in Congress From 
  the State of Texas.............................................    39
The Honorable Jim Turner, a Representative in Congress From the 
  State of Texas.................................................    47

                               WITNESSES

Mr. Alan Paller, Director of Research, The SANS Institute
  Oral Statement.................................................    27
  Prepared Statement.............................................    30
Mr. Richard D. Pethia, Director Cert Centers, Software 
  Engineering Institute, Carnegie Mellon University
  Oral Statement.................................................    19
  Prepared Statement.............................................    21
Mr. Bruce Schneier, Founder and Chief Technical Officer 
  Counterpane Internet Security, Inc.
  Oral Statement.................................................     7
  Prepared Statement.............................................     8

 
OVERVIEW OF THE CYBER PROBLEM: A NATION DEPENDENT AND DEALING WITH RISK

                              ----------                              

                        Wednesday, June 25, 2003

                      U.S.House of Representatives,
            Subcommittee on Cybersecurity, Science,
                      and Research and Development,
                     Select Committee on Homeland Security,
                                                    Washington, DC.
    The committee met, pursuant to call, at 11:30 a.m., in room 
345, Cannon House Office Building, Hon. Mac Thornberry 
[chairman of the subcommittee] presiding.
    Present: Representatives Thornberry, Sessions, Boehlert, 
Smith, Gibbons, Lofgren, Andrews, Jackson-Lee, Christensen, 
Etheridge, Lucas, Langevin, and Turner [ex officio].
    Mr. Thornberry. The hearing will come to order. The 
Subcommittee on Cybersecurity, Science, and Research and 
Development is meeting today to hear testimony on an Overview 
of the Cyber Problem: A Nation Dependent and Dealing with Risk. 
And Ms. Lofgren and I ask unanimous consent that all members be 
able to submit written opening statements but that oral written 
statements be waived beyond the Chairman and Ranking Member. 
Without objection, it is so ordered.
    We do have some time constraints on how long we can use 
this room, so we want to keep our comments to a minimum and get 
right to it. Let me just say that this subcommittee is charged 
with a number of homeland security responsibilities. One of the 
most complex is this issue of cyber security: the online world 
of computers, networks, information, and the physical and 
virtual lines that tie it all together. Obviously our country 
is becoming more and more dependent upon the Internet and 
information technologies. That growing dependence just as 
obviously leads to greater vulnerabilities, and part of our job 
in this subcommittee is to try to get our arms around those 
issues and see if there are other Federal actions that may need 
to be taken.
    We are pleased to have a distinguished group of witnesses 
to help us get our arms around those issues today. Before 
yielding to them, let me yield to the distinguished Ranking 
Member, Ms. Lofgren.
    Ms. Lofgren. Thank you, Mr. Chairman, and thanks for 
calling this hearing today. I first want to offer an apology. 
At noon I am chairing another meeting of the California 
delegation and so will have to slip out for a while, but I want 
to assure the panelists that I have read their testimony and 
look forward to working with them in the future.
    I think this is an important hearing to scope out the 
elements of the challenges that we face, and I hope with regard 
to the DHS itself, that the witnesses will share their opinions 
on the newly created Cybersecurity Division, talk about the 
meetings they have had, if they have had; if you have concerns 
about the placement of the division within DHS, please share 
that. Will it have access to the Secretary? Sit buried too 
deep? I have some skepticism about the DHS plan for 
cybersecurity. I fear that we are moving too slowly. If you 
think that is correct, let me know. If my fears are misplaced, 
I would love to know that as well.
    I would also--looking beyond DHS, I would hope that you 
could enlighten us as to what steps the Federal Government 
might take to encourage the private sector to make 
cybersecurity a higher priority. And I would especially like to 
welcome Bruce Schneier, who I have known for many, many years 
and thank him for coming all the way out to be a panelist as 
well as the two other really spectacular witnesses.
    So, Mac, it is great working with you, and I look forward 
to the hearing.
    [The information follows:]

 PREPARED STATEMENT THE HONORABLE MAC THORNBERRY, A REPRESENTATIVE IN 
                                CONGRESS

    I want to welcome Members, witnesses, and guests to this hearing. 
This subcommittee is charged with oversight of several important issues 
related to homeland security. One of the most complex and least 
understood resides in the world of ``cyberspace''--the on-line world of 
computers, networks, information, and the physical and virtual lines 
that tie it all together.
    Some have called cyberspace the information super highway. Its 
roads are becoming more crowded and more dangerous, and today's seat 
belts and guard rails may not be adequate for the challenges that lie 
ahead. Unlike our physical highways, however, governments do not own 
most of the roads, and there is much that we do not know about how to 
make them safe and secure for everyone to travel.
    The steady rise in electronic commerce, e-government, and 
Americans' everyday reliance on the Internet make it even more 
important that we better understand the threats, vulnerabilities, 
risks, and recovery options. Even more importantly, the public and 
private sectors must establish new partnerships and better ways to 
jointly establish appropriate rules of the road to promote commerce, 
protect privacy, and make the Internet safer for all travelers.
    We do not yet fully appreciate America's dependency on this 
borderless, virtual world, but we know it is growing--and it is growing 
fast. Only 90,000 Americans had Internet access in early 1993 (U.S. 
Internet Council, Apr. 1999). By 2002, the number of Internet users 
surpassed 665 million (Computer Industry Almanac, Inc., Dec. 2002).
    We don't know how all of the nation's critical infrastructures are 
linked and dependent upon each other, but we know adversaries, 
criminals, hackers, and terrorists are trying to figure out how to 
exploit our weaknesses. We may not fully appreciate the difference 
between a cyber crime and a cyber attack on our critical 
infrastructure, but we know the immediate results have cost us billions 
of dollars in productivity and financial loss. According to the 
Computer Emergency Response Team at Carnegie Mellon University the 
number of vulnerabilities have doubled each year for the past five 
years. According to Chief Security Officer Magazine, nine out of ten 
Chief Security Officers indicate their companies have been victimized 
by cyber attacks in the past year. There may come a time when a cyber 
incident could also cost American lives, especially if there are 
concurrent attacks on physical and virtual infrastructures.
    The Homeland Security Act of 2002 gives the Department of Homeland 
Security a central role in working with the private sector and with 
state, local, federal, and international entities to help secure 
cyberspace. Understanding threats to cyberspace, identifying 
vulnerabilities that could be exploited, and coordinating response and 
recovery efforts needed to ensure services are delivered across our 
critical infrastructure are some of the key functions for the new 
Department and the areas we will cover today. A panel of three academic 
and industry experts will help us understand three foundational 
issues--cyber threats, vulnerabilities, and response and recovery.
         Mr. Bruce Schneier is Founder and Chief Technical 
        Officer, Counterpane Internet Security, Inc., a consulting firm 
        specializing in cryptography and computer security. He will 
        focus on the cyber threats within the nation's critical 
        infrastructure.
         Mr. Richard Pethia is Director, CERT Centers, Software 
        Engineering Institute, Carnegie Mellon University. CERT has 
        provided a central response and coordination facility for 
        global information security incident response and 
        countermeasures for cyber threats and vulnerabilities since 
        1988. He will focus on the vulnerabilities facing the nation's 
        critical information infrastructure.
         Mr. Alan Paller is Director of Research, the SANS 
        Institute, a cooperative research organization that delivers 
        cybersecurity education to people who secure and manage 
        important information systems. He will focus on response and 
        recovery by the private sector and government to the threats 
        and vulnerabilities facing the nation's critical information 
        infrastructure.
    Their testimony will help us put into perspective the industry, 
academic, and government partnerships needed to help the Department of 
Homeland Security perform its mission as it relates to cyberspace. Our 
ultimate goal is a superhighway that is safe, accessible, fast, and 
free of unnecessary speed bumps.
    Before yielding, I want to thank Eric Fischer and his team from the 
Congressional Research Service who have again done significant work to 
help prepare for this hearing. Finally, I want to thank my partner on 
this subcommittee, Ms. Zoe Lofgren, for her leadership and expertise in 
these issues. And I would yield to her at this time.

 PREPARED OPENING REMARKS OF THE HONORABLE CHRISTOPHER COX, CHAIRMAN, 
                 SELECT COMMITTEE ON HOMELAND COMMITTEE

Since May 16th, what was thought to be a Trojan--named Stumbler, that 
carry potential computer viruses, had been randomly scanning internet 
connected machines. Private internet security companies, the FBI, and 
the Department of Homeland Security have been tracking this rogue 
activity since an employee at a defense contractor notified both the 
FBI and the CERT Coordination Center. What concerned most experts was 
the ease with which this ``Stumbler'' could be reprogrammed to make it 
more damaging.
    The ``Perimeter Defense Model'' for computer security has been used 
since the first mainframe operating systems were built. This model is 
primarily based on the assumption that we need to protect computer 
systems from the ``inside.'' Based on this underlying assumption, 
cybersecurity has emphasized ``firewalls'' and other mechanisms to keep 
outside attackers from penetrating our computer systems. The continued 
investigation has revealed that the attacker deliberately planted the 
``Stumbler'', clearly circumventing any internal firewalls.
    We need new solutions to prepare for increasingly aggressive 
attacks on our cyber-information infrastructure. Our society is 
increasingly interconnected. Our financial institutions, power plants, 
nuclear facilities, water treatment plants, factories, government 
agencies, borders, and other critical infrastructure rely upon 
internet-based technologies for remote monitoring and control of the 
facilities. While this capability has allowed for amazing advances and 
improvements in the delivery of services, it also allows for potential 
access of a cyber-terrorist to each network.
    As we begin to look outside established paradigms and partner with 
the private sector, we have to make securing our information 
infrastructure an urgent priority. By harnessing the technical 
resources of the private industry and the intelligence capability of 
the federal government, we begin a partnership that can prevent, 
protect, and respond to a Cyberattack.
    We lead the world in information technology. The exponential net 
gain of knowledge over the past decade has led to a pervasive 
dependence on information and communication systems that affects every 
aspect of our lives. The good news is the potential this represents to 
improve the quality of life around the world. But there is also bad 
news; this growing reliance makes our cyberspace a viable target for 
terrorists. The very same information technology that has enabled this 
country to be a leader in the world market can be co-opted by 
terrorists and used against this country's infrastructure. This type of 
technology is no longer the exclusive domain of states. Non-state 
sponsored groups with limited technical capabilities have the capacity 
to inflict great harm to our safety and economy. A serious attack could 
potentially cripple our emergency response, health care delivery, 
transportation, electric grids, and finance systems. A precision attack 
by a simple virus that would prevent for just one day our ability to 
cash a paycheck, prevent stocks from being traded or make a credit card 
purchase could bring much of our commerce to a halt. Consider the 
Saphire computer virus. It infected at least 75,000 hosts and caused 
network outages, cancelled airline flights, interfered with elections, 
caused ATM machines to fail, and shut down a 9-1-1 call center outside 
Seattle, which serves 14 fire departments, two police stations, and a 
community of 164,000 people.
    Essentially, every major critical infrastructure in this nation is 
a public/private partnership and cyberspace is its ``nerve center.'' We 
can not be successful in securing the vested common interest without a 
coordinated and focused partnership between the federal government and 
the private sector. The private sector brings to this partnership the 
expertise and technical capability. The government, in turn, can 
provide the intelligence information, set the standards, and provide 
the corporate incentives to bridge this partnership.
    Cyberspace challenges us with some urgency to define the role of 
the federal government in this partnership to secure our infrastructure 
and make America safe. For this reason, I established this subcommittee 
on Cybersecurity--the only such subcommittee in Congress. Cyberspace is 
indeed a new frontier that the United States must master. This 
Committee enthusiastically supports the steps that the Department of 
Homeland Security has taken in establishing the National Cyber Security 
Division (NCSD) under the Department's Information Analysis and 
Infrastructure Protection Directorate. Information exchange and 
cooperation will allow both the government and the private sector to 
address awareness, training, technological improvements, vulnerability 
remediation and recovery operations. We will continue to look to 
enhance the capability of DHS to stand up this office, to coordinate 
government Cyber programs and to partner with the private sector--all 
as a matter of the highest priority.
    I thank Chairman Thornberry for his leadership of the Subcommittee 
on Cybersecurity, Science, and Research and Development and I look 
forward to hearing from our three witnesses this morning.

 PREPARED STATEMENT OF THE HONORABLE JIM GIBBONS, A REPRESENTATIVE IN 
                   CONGRESS, FROM THE STATE OF NEVADA

Mr. Chairman, I would like to express to you my gratitude for 
theopportunity to hear from our expert witnesses and for bringing us 
together to address the issues before us today.
I would also like to thank Mr. Schneier, Mr. Pethia, and Mr. Paller for 
taking time out of their busy schedules to prepare their testimony and 
come before us today in an effort to make our country safer.
These gentlemen should be a great help in assisting us in understanding 
the nature of the challenges before us.
Certainly, the security of our cyber-infrastructure is extremely 
important to the safety of our country and our economy.
There is no doubt that our economy, the largest and most dynamic in the 
world, is extremely dependent on our country's cyber-infrastructure, 
and it needs to be protected with extreme vigilance.
However, I would like to express my concern about our understanding of 
the nature of the threats to our cyber-infrastructure, and how we are 
going about addressing these threats.
Unquestionably, an extremely wide variety and high volume of criminal 
threats to our cyber-infrastructure exist. These threats range from 
benign computer hacking committed by bored teenagers, to organized 
criminals stealing and laundering billions of dollars around the world 
via the internet.
However, while examples of criminal attacks abound, the examples of 
cyber-terrorism, at this point, are sparse, and this begs the question: 
Why?
Presently, the internet seems to be an extremely valuable tool to 
terrorists for the same reason it is an extremely valuable tool to 
legitimate commercial enterprises and private citizens: it is the 
supreme medium for communication.
To my knowledge, the only known terrorism-oriented web-launched attack 
on major infrastructure has occurred in Australia, where the individual 
responsible dumped sewage into public waterways.
While this certainly provides an example of the damage which can be 
caused by malicious individuals, it is only a single example, and does 
not seem to bear witness to the catastrophic cyber terrorism we often 
hear is at our doorstep.
My intent is not to dismiss the danger that is genuinely posed by our 
cyber vulnerabilities. It exists and is accepted.
However, it is my great concern that the nature of the threat of cyber-
terrorism is being overlooked, and therefore, being addressed 
improperly.
We cannot properly devise an effective strategy to counter cyber-
terrorism if we do not understand the nature of the capabilities of our 
enemies, and especially if we do not understand the nature of our own 
vulnerabilities.
I welcome the comments of our witnesses today on the nature of our 
infrastructure vulnerabilities, and specifically if these 
vulnerabilities are easily exploitable for mass-disruption attacks.
Further, I welcome comment on the nature of the intellectual and 
materiel capabilities needed by a terrorist organization to succeed in 
causing a major internet-based attack on our cyber-infrastructure, and 
especially our physical infrastructure.
In seeking to understand how best to address the threat of cyber-
terrorism, we must begin first by asking the right questions.
This must lead to an understanding of ourselves and our enemies, from 
which we can craft a successful strategy.
I welcome the candor of our witnesses in addressing these concerns, and 
thank them in advance.

       PREPARED STATEMENT OF THE HONORABLE SHEILA JACKSON-LEE, A 
           REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Chairman, I thank you for your efforts in creating this 
opportunity for this body to hear the testimony of the three panelists 
today. In our task of gauging the newly developed Department of 
Homeland Security against the projected needs of our nation, we must 
begin our evaluation at the most basic levels. Critical infrastructure 
protection is important to every member of our national and local 
communities. In order to implement a program of securing cyberspace at 
a national level, we must follow a course of risk assessment, 
education, and careful reaction at the local level to protect our 
schools, hospitals, and rescue facilities. These goals are part of the 
impetus for the amendments that I offered as to the Department of 
Homeland Security Appropriations Act and to the Project BioShield Act 
so that funding mechanisms and the Secretary's discretion contain the 
control provisions necessary to ensure the proper and effective 
allocation of resources to the places that have the most urgent needs.
    Just as we must ward against the large threats to our critical 
infrastructure, the small incidents must not be allowed to create a 
large problem.
    In Houston last year, a 21-year-old man was sentenced to three 
years in prison for a terrorist hoax concerning a plot to attack the 
opening ceremonies of the 2002 Winter Olympics in Salt Lake City. The 
Houston resident was sentenced by U.S. District Judge and ordered to 
pay $5,200 in fines. The Judge told the Defendant that she had 
sentenced him to three years because he had failed to demonstrate he 
understood the seriousness of his crime and disruption he had caused to 
federal agencies and private citizens.
    The perpetrator told the FBI in Houston that he had intercepted e-
mails between two terrorists plotting a missile attack during the 
opening Olympic ceremonies on February 8, 2002. The e-mails supposedly 
detailed plans to attack Salt Lake City with missiles launched from 
northern Russia.
He later confessed to making up the story during questioning, telling 
agents that stress led him to tell his tale and that he had fabricated 
the e-mails.
    Just a few months ago, Federal prosecutors charged a University of 
Texas student with breaking into a school database and stealing more 
than 55,000 student, faculty and staff names and Social Security 
numbers in one of the nation's biggest cases of data theft involving a 
university. The student, a twenty-year old junior studying natural 
sciences, turned himself in at the U.S. Secret Service office in 
Austin, Texas. He was charged with unauthorized access to a protected 
computer and using false identification with intent to commit a federal 
offense. This incident sent a wave of fear across the campus of the 
nation's largest university, causing students and staff to consider 
replacing credit cards and freezing bank accounts. The student-
perpetrator was released without bail and thereafter had limited access 
to computers. If convicted, the student faced as many as five years in 
prison and a $500,000 fine. After searching this student's Austin and 
Houston residences, Secret Service agents recovered the names and 
Social Security numbers on a computer in his Austin home. According to 
the indictment, Phillips wrote and executed a computer program in early 
March that enabled him to break into the university database that 
tracks staff attendance at training programs, reminding us how 
vulnerable we all are even when our Social Security number is misused. 
To combat the vulnerability linked to Social Security numbers, the 
university to limit its dependence on Social Security numbers as 
database identifiers and instead use an electronic identification 
number that matches only to Social Security numbers in an encrypted 
database. This data theft was probably the largest ever at a 
university.
    Therefore, since the threat to critical infrastructure is realized 
at a very local level, we must channel our resources and technology to 
the first-responders and leaders in the local communities. The movement 
to securing our homeland needs to be expansive, not retractive. If our 
local hubs and first-responders are disabled by a terror threat, we 
would have a hard time developing effective protective measures for our 
nation as a whole.
    Mr. Chairman, again, I thank you for your time and effort in this 
matter.

PREPARED STATEMENT OF THE HONORABLE BOB ETHERIDGE, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF NORTH CAROLINA

    Thank you, Chairman Thornberry and Ranking Member Lofgren, for 
holding this hearing. I would also like to welcome our witnesses to 
this important hearing on cybersecurity. I am looking forward to 
hearing how industry and academia view this issue.
    Cybersecurity is a critical, yet elusive, concept for many people 
to grasp. You cannot see cyberterrorists attacking a network. There are 
no burning buildings or collapsing structures. When a virus hits our 
computers we may experience the annoyance of slow e-mail, spam or the 
inability to access the Internet. What we do not see until later are 
the costs in lost productivity and lost business in our electronically 
connected world. Since the Y2K bugs were worked out at the change of 
the millennium, cybersecurity has largely disappeared from the public 
consciousness. Yet, it is critical that the Department of Homeland 
Security encourage and foster research into protecting our country from 
these stealth attacks.
    The Department must work in concert with private industry which not 
only owns more than 80 percent of our critical cyber infrastructure but 
also develops software products to run our businesses, our 911 
emergency systems and our personal computers.
    All of the witnesses today have made a number of suggestions for 
improving our nation's critical cyber infrastructure, and I am 
encouraged that they assign a great deal of responsibility to 
businesses to police their own systems and cooperate with the federal 
government in reporting attacks and breaches so that others may learn 
from the experience.
    The Department of Homeland Security must promote science and math 
education for our children who will be our future software programmers 
and cyberwarriors. In the 2001 Hart-Rudman report ``Road Map for 
National Security: Imperative for Change,'' the authors state that the 
greatest threat to our country, second only to the detonation of a 
weapon of mass destruction, would be ``a failure to manage properly 
science, technology and education for the common good over the next 
quarter century.''
    A number of studies have shown that American students sorely lag 
behind their counterparts in other nations in science and math 
education. Even though they use computers every day for homework or to 
play games, many students who do go on to college do not enter 
technology fields because they see it as ``too hard.''
    The federal government and private industry must work together with 
schools across the country to improve basic science and math education 
by providing teachers with the opportunities for advanced training in 
these fields, the proper equipment for labs and experiments, and time 
to teach. Gifted teachers prove every day that students can learn and 
come to love science and math. Our children are our future, and 
investment now in their education will provide benefits for many years 
to come.

    Mr. Thornberry. I thank you, and I do want to thank the 
witnesses, too. We have had some scheduling back and forth for 
this hearing because of the full committee schedule, and I 
thank each of you for your flexibility and help in putting this 
on.
    Finally I also want to thank Eric Fischer and his team at 
the Congressional Research Service who continue to help us in 
preparing for these hearings, as well as the folks in my office 
and Ms. Lofgren's office as well. Let me now turn to our 
witnesses. First we have Mr. Bruce Schneier, Founder and Chief 
Technical Officer of Counterpane Internet Security, Inc., a 
consulting firm specializing in cryptography and computer 
security. Mr. Schneier has written several books and articles. 
We are pleased to have you with us today, and your full 
statement will be made part of the record and you may summarize 
it as you see fit.

   STATEMENT OF BRUCE SCHNEIER, FOUNDER AND CHIEF TECHNICAL 
          OFFICER, COUNTERPANE INTERNET SECURITY, INC.

    Mr. Schneier. Thanks for having me. I am actually the 
Founder and CTO of Counterpane, but I am not here under the 
auspices of Counterpane. I am probably going to say things 
counter to my company's interest, but I am here as a security 
expert, as an author, as a lecturer. So I do want to make that 
clear.
    I was asked to talk about risks, and I talk about this in 
my written testimony. To summarize it very quickly, attacks are 
getting worse. I mean, every year we are seeing worse and worse 
attacks, primarily because, you know, hackers are getting more 
clever, and the tools they are writing are more interesting. At 
the same time, the expertise required to launch attacks is 
going down. Point/click interfaces--just as the word processors 
are easier to use, your hacker tools are easier to use.
    There is a rise in crime, and I think this is a very 
important trend. We are seeing far more criminal activity on 
the Net. My company does a lot of security monitoring, and a 
lot of times the hardest problem we have is finding the 
criminal attacks amongst all the kids, amongst all the 
vandalism, amongst all the petty things.
    Security is getting worse, and this is a hard thing to 
understand. I have written about it, and I urge you to read it. 
The complexity of software, of systems, causes lots of 
vulnerabilities, and these are getting worse faster than we are 
improving. Security products tend not to be very good. Software 
quality is abysmal. And I read the other testimonies you are 
going to hear, and we are all saying these sorts of things. The 
effect of this is that we are more and more insecure than we 
have ever been.
    You said that we are also relying on the Internet more. So 
we are seeing more insecurities, yet it is more important; and 
this is a problem that I actually can't solve. This is not a 
technology problem, and what I really want to say in sort of my 
few minutes is how I need your help. This is a political 
problem, not a technology problem. The problem is that each 
company, each individual, installs security products, does 
security commensurate with their own risk. So a home user 
doesn't have much risk, doesn't care much, won't do much. A 
business will do whatever it has to do for its own risk. A 
software company will produce as secure a software as it has 
to.
    The problem is most of the risks we face as a Nation are 
residual. So a company might have a risk to their business, but 
there is ancillary risk borne by everybody else, and that 
company is not going to secure itself to the level of the 
ancillary risk, only to the level of their risk. In economics 
it is called an externality. It is the effect of a decision 
that is not taken into account in the decision.
    So an example might be--in environmentalism, a plant might 
pollute a river because it makes business sense, but the people 
living downstream don't factor into their decision. Someone 
might choose not to get married--a welfare mother might choose 
not to get married because they will lose their welfare 
benefits, so they are making a rational decision based on their 
own interests; yet the effects to society of unwed people 
living together en masse, it doesn't factor in.
    And computer security is largely stuck with these 
externalities, and that is the basic problem I have. And the 
way we deal with this in society is we try to somehow take 
those externalities and bring them into the decision. So laws 
and regulations are ways to do that. Liability is a way to do 
that. These are ways to make the effects of the actions of an 
individual organization, to make them responsible for them.
    So for recommendations, I would like very much to see 
cybersecurity risks be subject to liabilities. To me it is 
absolutely insane that Firestone can produce a tire with a 
systemic flaw and be liable and for companies to produce 
software with, you know, three systemic flaws per month and not 
be liable. That just doesn't work. Liabilities will 
instantaneously improve security, because it will make it in a 
company's best interest to improve security.
    I would like to see the government use its own purchasing 
power to improve security. You guys have enormous procurement 
power. I would like you to secure your own networks, secure 
your own systems, buy products and demand security. The nice 
thing about software is you do the work once, and everybody 
benefits. If you do massive procurement and design--give us 
secure systems, everybody will benefit.
    This is not easy, all right? You are going to have other 
hearings. Software companies will tell you that liabilities 
will hurt them. Well, of course it will. An auto manufacturer 
will tell you the same thing. We would rather not be liable. We 
would like to produce features on our cars and we don't care if 
they crash.
    I would like to see ISPs produce firewalls for their 
individuals. They will tell you that will hurt our business. Of 
course it will. Just like a building will tell you to making 
our building to fire codes makes it more expensive. Well, yes, 
it does. The point of security is that it costs money, and 
unless we make it so that it is in business's best interest to 
spend it, they won't. We can solve the technical problems if 
the business impetus is there. We can't do it without. And I am 
pleased to take questions after the other two gentlemen.
    Mr. Thornberry. Thank you very much. I appreciate your 
testimony.
    [The statement of Mr. Schneier follows:]

  PREPARED STATEMENT MR. BRUCE SCHNEIER, FOUNDER AND CHIEF TECHNICAL 
              OFFICER COUNTERPANE INTERNET SECURITY, INC.

Mr. Chairman, members of the Committee, thank you for the opportunity 
to testify today regarding cybersecurity, particularly in its relation 
to homeland defense and our nation's critical infrastructure. My name 
is Bruce Schneier, and I have worked in the field of computer security 
for my entire career. I am the author of seven books on the topic, 
including the best-selling Secrets and Lies: Digital Security in a 
Networked World [1]. My newest book is entitled Beyond Fear: Thinking 
Sensibly About Security in an Uncertain World [2], and will be 
published in September. In 1999, I founded Counterpane Internet 
Security, Inc., where I hold the position of Chief Technical Officer. 
Counterpane Internet Security provides real-time security monitoring 
for hundreds of organizations, including several offices of the federal 
government.

Cyber Risks
When I began my long career in computer security, it was a marginal 
discipline. The only interest was from the military and a few scattered 
privacy advocates. The Internet has changed all that. The promise of 
the Internet is to be a mirror of society. Everything we do in the real 
world--all of our social and business interactions and transactions--we 
want to do on the Internet: conduct private conversations, keep 
personal papers, sign letters and contracts, speak anonymously, rely on 
the integrity of information, gamble, vote, publish authenticated 
documents. All of these things require security. Computer security is a 
fundamental enabling technology of the Internet; it's what transforms 
the Internet from an academic curiosity into a serious business tool. 
The limits of security are the limits of the Internet. And no business 
or person is without these security needs.
The risks are real. Everyone talks about the direct risks: theft of 
trade secrets, customer information, money. People also talk about the 
productivity losses due to computer security problems. What's the loss 
to a company if its e-mail goes down for two days? Or if ten people 
have to scramble to clean up after a particularly nasty intrusion? I've 
seen figures in the billions quoted for total losses from Internet 
epidemics like Nimda and the SQL Slammer; most of that is due to these 
productivity losses.
    More important are the indirect risks: loss of customers, damage to 
brand, loss of goodwill. When a successful attack against a corporation 
is made public, the victim may experience a drop in stock price. When 
CD Universe suffered a large (and public) theft of credit card numbers 
in early 2000, it cost them dearly in their war for market share 
against Amazon.com and CDNow. In the aftermath of public corporate 
attacks, companies often spent more money and effort containing the 
public relations problem than fixing the security problem. Financial 
institutions regularly keep successful attacks secret, so as not to 
worry their customer base.
    And more indirect risks are coming as a result of litigation. 
European countries have strict privacy laws; companies can be held 
liable if they do not take steps to protect the privacy of their 
customers. The U.S. has similar laws in particular industries--banking 
and healthcare--and there are bills in Congress to protect privacy more 
generally. We have not yet seen shareholder lawsuits against companies 
that failed to adequately secure their networks and suffered the 
consequences, but they're coming. Can company officers be held 
personally liable if they fail to provide for network security? The 
courts will be deciding this question in the next few years.
    This hearing was convened to address another type of risk: the 
risks of our nation's critical infrastructure that is largely in the 
hands of private companies. One of the great challenges of 
cybersecurity is the interdependencies between individual networks. The 
security decisions one company makes about their own network can have 
far-reaching effects across many networks, and this leads us to 
different sorts of risks. I call these ancillary risks because their 
effects are ancillary to the particular network in question. Ancillary 
risks abound in cyberspace. For example, home computer users are at 
risk of attack and of having their machines taken over by others, but 
an ancillary risk is created when their attacked and taken-over 
computers can be used for further attacks against other networks. 
Vulnerabilities in software create a risk for the corporation marketing 
that software, but they also creates an ancillary risk for those who 
use that software in their networks.
    The cybersecurity risks to our nation are largely ancillary; 
because our critical infrastructure is largely in the hands of private 
companies, there are risks to our nation that go beyond what those 
private companies are worried about. The telephone network has value to 
the telephone companies because that's how they get revenue, and those 
companies will secure their networks to that value. But the network has 
value to the country as a nationwide communications structure in 
addition to that, and there are ancillary risks as a result of that. 
Companies put themselves at risk when they purchase and use insecure 
software, but they also cause ancillary risks to everyone else on the 
Internet because that software is on a common network. These ancillary 
risks turn out to be critical to the current insecurities of 
cyberspace, and addressing them will give us the only real way to 
improve the situation.
    As risky as the Internet is, companies have no choice but to be 
there. The lures of new markets, new customers, new revenue sources, 
and new business models are just so great that companies have flocked 
to the Internet regardless of the risks. There is no alternative. 
Governments feel the same sorts of pressures: better ways of 
interacting with citizens, more efficient ways of disseminating 
information, greater involvement of citizens in government. The 
Internet is here to stay, and we're going to be using it for more and 
more things regardless of the risks. This, more than anything else, is 
why computer security is so important.
    Quantifying the Risks
    Quantifying the risks is difficult, because we simply don't have 
the data. Most of what we know is anecdotal, and what statistics we 
have are difficult to generalize. In summary, cyberattacks are very 
common on the Internet. Corporations are broken into regularly, usually 
by hackers who have no motivation other than simple bragging rights. 
There is considerable petty vandalism on the Internet, and sometimes 
that vandalism becomes large-scale and system-wide. Crime is rising on 
the Internet, both individual fraud and corporate crime. We know all 
this is happening, because all surveys, corporate studies, and 
anecdotal evidence agree. We just don't know exact numbers.
    For the past eight years, the Computer Security Institute has 
conducted an annual computer crime survey of U.S. corporations, 
government agencies, and other organizations [3]. The details are a bit 
numbing, but the general trends are that most networks are repeatedly 
and successfully attacked in a variety of ways, the monetary losses are 
considerable, and there's not much that technology can do to prevent 
it. In particular, the 2003 survey found the following:
         56% of respondents reported ``unauthorized use of 
        computer systems'' in the last year. 29% said that they had no 
        such unauthorized uses, and 15% said that they didn't know. The 
        number of incidents was all over the map, and the number of 
        insider versus outsider incidents was roughly equal. 78% of 
        respondents reported their Internet connection as a frequent 
        point of attack (this has been steadily rising over the six 
        years), 18% reported remote dial-in as a frequent point of 
        attack (this has been declining), and 30% reported internal 
        systems as a frequent point of attack (also declining).
         The types of attack range from telecommunications 
        fraud to laptop theft to sabotage. 36% experienced a system 
        penetration, 42% a denial-of-service attack. 21% reported theft 
        of proprietary information, and 15% financial fraud. 21% 
        reported sabotage. 25% had their Web sites hacked (another 22% 
        didn't know), and 23% had their Web sites hacked ten or more 
        times (36% of the Web site hacks resulted in vandalism, 35% in 
        denial of service, and 6% included theft of transaction 
        information).
         One interesting thing highlighted by this survey is 
        that all of these attacks occurred despite the widespread 
        deployment of security technologies: 98% have firewalls, 73% an 
        intrusion detection system, 92% access control of some sort, 
        49% digital IDs. It seems that these much-touted security 
        products provide only partial security against attackers.
    Unfortunately, the CSI data is based on voluntary responses to 
surveys. The data only includes information about attacks that the 
companies knew about, and only those attacks that they are willing to 
admit to in a survey. Undoubtedly, the real numbers of attacks are much 
higher. And the people who complete the CSI survey are those 
experienced in security; companies who are much less security savvy are 
not included in this survey. These companies undoubtedly experience 
even more successful attacks and even higher losses.
    The Honeynet Project is another source of data. This is an academic 
research project that measures actual computer attacks on the Internet. 
According to their most recent statistics [4], published in 2001, a 
random computer on the Internet is scanned dozens of times a day. The 
average life expectancy of a default installation of a Linux Red Hat 
6.2 server--that is, the time before someone successfully hacks it--is 
less than 72 hours. A common home user setup, with Windows 98 and file 
sharing enabled, was successfully hacked five times in four days. 
Systems are subjected to hostile vulnerability scans dozens of times a 
day. And the fastest time for a server being hacked: 15 minutes after 
plugging it into the network. This data correlates with my own 
anecdotal experience of putting computers on an unsecured home 
broadband network.
    At Counterpane Internet Security, we keep our own statistics. In 
2002, we monitored several hundred computer networks in over thirty 
countries. We processed 160 billion network events, in which we 
uncovered 105 million security alerts. Further processing yielded 
237,000 ``tickets'' which were investigated by our trained security 
analysts, resulting in 19,000 customer contacts from immediate security 
incidents. Assuming our data is representative, a typical company in 
the United States experiences 800 critical network security events--
events requiring immediate attention--each year. At Counterpane we're 
smart and experienced enough to ensure that none of those events 
results in financial losses for the companies we protect, but most 
companies do not have such vigilant cyber guards.
    Cybersecurity Trends
    Several cybersecurity trends are worth highlighting. First, over 
the past few decades attacks on individual computers, early networks, 
and then the Internet have continually gotten more severe. Attack tools 
have gotten more potent, more damaging, more effective. Attacks that 
were once slow to implement are now automated. Attacks that used to be 
defeatable by a single mechanism are now adaptive. Viruses, worms, and 
Trojans are more elaborate and intelligent; malicious programs that 
years ago took weeks to spread across cyberspace, and last year took 
hours, today spread in minutes.
    Second, over that same time period, the expertise required to 
launch those attacks has gone down. Many attack tools are easy to use. 
They have point-and-click interfaces. They are automated. They don't 
require any expertise to operate. ``Root kits'' are both easier to use 
and more effective.
    These two trends combine to exacerbate another trend: the rise of 
crime in cyberspace. The vast majority of cyberspace attacks are 
nothing more than petty vandalism: the Internet equivalent of spray 
painting. The attackers aren't after anything except a cheap thrill and 
bragging rights. Sometimes they're bored teenagers. Sometimes they're 
smart kids with no other outlet. But we're starting to see significant 
increases in real crime on the Internet. Criminals, who often don't 
have the computer expertise to break into networks, can employ these 
easy-to-use tools to commit crimes. Credit card thefts and other forms 
of fraud are on the rise. Identity theft is on the rise. Extortion is 
on the rise. At Counterpane, often the hardest job we have is detecting 
these criminal attacks among the hundreds of petty vandalism attacks. I 
expect this trend to continue as more criminals discover the value of 
committing their frauds in cyberspace.
    On the defensive side of things, cyberspace is becoming less secure 
even as security technologies improve. There are many reasons for this 
seemingly paradoxical phenomenon, but they can all be traced back to 
the problem of complexity. As I have said elsewhere [5], complexity is 
the worst enemy of security. The reasons are complex and can get very 
technical, but I can give you a flavor of the rationale: Complex 
systems have more lines of code and therefore more security bugs. 
Complex systems have more interactions and therefore more potential for 
insecurities. Complex systems are harder to test and therefore are more 
likely to have untested portions. Complex systems are harder to design 
securely, implement securely, configure securely, and use securely. 
Complex systems are harder for users to understand. Everything about 
complexity leads towards lower security. As our computers and networks 
become more complex, they inherently become less secure.
    Another trend is the ineffectiveness of security products. This is 
not due to failures in technology, but more to failures of 
configuration and use. As amazing as it seems, the vast majority of 
security products are simply not implemented in ways that are 
effective. The blame could be laid on the products themselves, which 
are too hard to use. The blame could be laid on the system 
administrators, who often install security products without thinking 
too much about them. But the real blame is in the culture: security 
simply isn't a priority in most organizations. Security is routinely 
ignored, bypassed, or paid lip service to. Products are purchased 
because an organization wants to pass an audit or avoid litigation, but 
much less attention is paid to how they are used. It's as if a 
homeowner bought an expensive door lock and installed it in a way that 
didn't provide any security.
    Along similar lines, the quality of software security is abysmal. 
Products routinely ship with hundreds or thousands of security 
vulnerabilities. Again, there are technical reasons for this. As a 
science, computer security is still in its infancy. We don't know, for 
example, how to write secure software. We have some tricks, and we know 
how to avoid some obvious problems, but we have no scientific theory of 
security. It's still a black art and, although we're learning all the 
time, we have a long way to go. But again, the real reason is that 
security isn't a priority for software vendors. It's far better for a 
company if they ship an insecure product a year earlier than a more 
secure product a year later.
    The result of these trends is that security technologies are 
improving slowly, not nearly fast enough to keep up with the new 
insecurities brought about by the increasing complexity of systems. 
Every year brings more new attacks, faster-spreading worms, and more 
damaging malicious code. Software products--operating systems as well 
as applications software--continue to have more and more 
vulnerabilities. As long as the trends of increasing complexity and 
security's low priority continue, cyberspace will continue to become 
less secure.
    Complexity is something we can't change. The only thing we can 
change is to make security a higher priority.
    Cyberterrorism or ``Digital Pearl Harbor''
    There is one often-discussed trend that I do not see: the rise of 
cyberterrorism [6]. An essay I wrote on this issue is included as 
Attachment #1. I believe that fears about cyberterrorism, or the 
likelihood of a ``Digital Pearl Harbor,'' are largely the result of 
companies and organizations wanting to stoke the fears of people and of 
the news media looking for sensationalist stories. Real terrorism--
attacking the physical world via the Internet--is much harder than most 
people think, and the effects of cyber attacks are far less terrorizing 
than might seem at first. Cyberterrorism is simply not a problem that 
we have to worry about.
    This does not mean that large-scale cyberspace threats are not a 
problem. A single vulnerability in a widely used software product can 
affect millions, and an attack that exploits that vulnerability can do 
millions of dollars of damage overnight. Attacks against popular 
Internet services, or critical information services that use the 
Internet to move data around, can affect millions.
    While people overplay the risks of cyberterrorism, they underplay 
the risks of cyber-crime. Today credit card numbers are no longer being 
stolen one at a time out of purses and wallets; they're being stolen by 
the millions out of databases. Internet fraud is big business, and it's 
getting bigger.
    And someday, cyberterrorism will become a real threat. Technology, 
especially technology related to cyberspace, is fast-moving and its 
effects are far-reaching. Just as some unknown attacker used the 
physical mail system to spread the anthrax virus, it is certainly 
possible that, someday, a terrorist may figure out how to kill large 
numbers of people via the Internet. But that day is not coming soon, 
and even then the same terrorist would probably have a much easier time 
killing the same number of people in a physical attack.

    The Resilience of the Internet
    Despite all of these risks, the Internet is reasonably safe from a 
catastrophic collapse. As insecure as each individual component or 
network that makes up the Internet is, as a whole it is surprisingly 
resilient. Often I have joked that the Internet ``just barely works,'' 
that it is constantly being revised and upgraded, and that it's a minor 
miracle that it functions at all.
    The Internet has seen examples of what many people have in mind 
when they think about large-scale attacks or terrorism, only they've 
been the result of accidents rather than maliciousness. Telephone 
switching stations shut down as the result of a software bug, leaving 
millions without telephone service. Communications satellites 
temporarily malfunctioned, disabling a nationwide pager network. On 9/
11, the World Trade Center fell on much of lower Manhattan's 
communications network. What we've learned from these episodes is that 
the effects are not devastating and they're only temporary; 
communications can be quickly restored, and people adapt until they are 
restored.
    Additionally, random events are still much more damaging than 
malicious actions. In the closest example of a cyberterrorist attack 
we've experienced, Vitek Boden hacked into a computer network and 
released a million liters of pollution into an Australian estuary. His 
damage was cleaned up in a week. A couple of months later, a bird 
landed on a transformer in the Ohio River valley, causing it to blow 
up; this set off a chain reaction that released about ten times as much 
sewage into the river. The cleanup was much more expensive and took 
significantly longer. Even today, random birds can do significantly 
more damage than the concerted effort of someone intent on damage.

    Security and Risk Management
    Companies manage risks. They manage all sorts of risks; cyber risks 
are just one more. And there are many different ways to manage risks. A 
company might choose to mitigate the risk with technology or with 
procedures. A company might choose to insure itself against the risk, 
or to accept the risk itself. The methods a company chooses in a 
particular situation depend on the details of that situation. And 
failures happen regularly; many companies manage their risks 
improperly, pay for their mistakes, and then soldier on. Companies, 
too, are remarkably resilient.
    To take a concrete example, consider a physical store and the risk 
of shoplifting. Most grocery stores accept the risk as a cost of doing 
business. Clothing stores might put tags on their garments and sensors 
at the doorways; they mitigate the risk with technology. A jewelry 
store might mitigate the risk through procedures: all merchandise stays 
locked up, customers are not allowed to handle anything unattended, 
etc. And that same jewelry store will carry theft insurance, another 
risk management tool.
    An appreciation of risk management is fundamental to understanding 
how businesses approach computer security. Ask any network 
administrator what he needs cybersecurity for, and he can describe the 
threats: Web site defacements, corruption and loss of data due to 
network penetrations, denial-of-service attacks, viruses, and Trojans. 
The list of threats seems endless, and they're all real. Ask senior 
management about cybersecurity, and you'll get a very different answer. 
He'll talk about return on investment. He'll talk about risks. And 
while the cyber threats are great, the risks are much less so. What 
businesses need is adequate security at a reasonable cost.
    Given the current state of affairs, businesses probably spend about 
the right amount on security. The threats are real and the attacks are 
frequent, but most of the time they're minor annoyances. Serious 
attacks are rare. Internet epidemics are rare. And on the other side of 
the coin, computer security products are often far less effective than 
advertised. Technology changes quickly, and it's hard to mitigate risks 
in such a rapidly changing environment. It is often more cost effective 
to weather the ill effects of bad security than to spend significant 
money trying to improve the level of security.

    Externalities and Our Critical Infrastructure
    If companies are so good at risk management, why not just let them 
manage their own risks? Companies can decide whether or not to have a 
guard in their corporate offices, install an alarm system in their 
warehouses, or buy kidnapping insurance for their key executives. 
Shouldn't we simply let companies make their own security decisions 
based on their own security risks? If they don't care whether they buy 
and use insecure software, if they don't bother installing security 
products correctly, if they don't implement good cybersecurity 
policies, why is that anyone else's problem? If they decide that it's 
cheaper to weather all the Internet attacks than it is to improve their 
own security, isn't it their own business?
    The flaw in that argument is the reason this hearing was convened: 
the ancillary threats facing our nation's critical infrastructure. The 
risks to that infrastructure are greater than the sum of the risks to 
the individual companies. We need to protect ourselves against attack 
from an enemy military. We need to protect ourselves against a future 
where cyberterrorists may target our electronic infrastructure. We need 
to protect the underlying economic confidence in the Internet as a 
mechanism for commerce. We need to protect the Internet above the risks 
to individual pieces of it. Companies are good at risk management, but 
they're only going to consider their own risks; the ancillary risks to 
our critical infrastructure will not be taken into account.
    One easy example is credit card numbers. Company databases are 
regularly broken into and credit card numbers are stolen, sometimes 
hundreds of thousands at a time. Companies work to secure those 
databases, but not very hard, because most of the risk isn't shouldered 
by those companies. When an individual finds that his credit card 
number has been stolen and used fraudulently or, even worse, that his 
entire identity has been stolen and used fraudulently, cleaning up the 
mess can take considerable time and money. The company secures the 
database based on its own internal risk; it does not secure the 
database based on the aggregate risk of all the individuals whose 
information it stores.
    Software security is another example. Software vendors do some 
security testing on their products, but it's minimal because most of 
the risk isn't their problem. When a vulnerability is discovered in a 
software product, the vendor fixes the problem and issues a patch. This 
costs some money, and there's some bad publicity. The real risk is 
shouldered by the companies and individuals who purchased and used the 
product, and that risk doesn't affect the vendor nearly as much. When 
the SQL Slammer worm spread across the Internet in January 2003, 
worldwide losses were calculated in the tens of billions of dollars. 
But the losses to Microsoft, whose software contained the vulnerability 
that the Slammer used in the first place, were much, much less. Because 
most of the risks to Microsoft are ancillary, security isn't nearly as 
high a priority for them as it should be.
    This brings us to the fundamental problem of cybersecurity: It 
needs to be improved, but those who can improve it--the companies that 
build computer hardware and write computer software, and the people and 
companies that own and administer the small networks that make up the 
Internet--are not motivated to do so.
    More specifically: Our computers and networks are insecure, and 
there every reason to believe that they will become less secure in the 
future. The threats and risks are significant, and there is every 
reason to believe that they will become more significant in the future. 
But at the same time, because much of the risks are ancillary, software 
and hardware manufacturers don't spend a lot of money improving the 
security of their products and private network owners don't spend a lot 
of money buying and installing security products on their networks.
    In economics, an externality is an effect of a decision that is not 
part of the decision process. Most pollution, for example, is an 
externality. A factory makes an economic decision about the amount of 
pollution it dumps into a river based on its own economic motivations; 
the health of the people living downstream is an externality. A welfare 
mother makes a decision whether to marry someone or live with him 
without marriage partly based on the economics of the welfare system; 
the societal degradation of the institution of marriage is an 
externality. Ancillary cyberrisks are an example of an externality.
    There are several ways to deal with externalities. They can be 
regulated through a legal system: Laws and regulations which prohibit 
certain actions and mandate others are a way to manage externalities. 
They can be internalized through taxation or liabilities, both of which 
provide economic incentives to take externalities into account. 
Sometimes societal norms modify externalities. And so on. The 
particular mechanism chosen will depend on politics, but the overall 
goal is to bring the various externalities into the decision process.
    I believe that externalities are the fundamental problem of 
cybersecurity. The security of a particular piece of the Internet may 
be good enough for the organization controlling that piece, but the 
external effects of that ``good enough'' security may not be good 
enough for the nation as a whole. Our nation's critical infrastructure 
is becoming more and more dependent on a secure and functioning 
Internet, but there's no one organization in charge of keeping the 
Internet secure and functioning. Our software has very poor security, 
and there is no real incentive to make it better. We are increasingly 
vulnerable to attacks that affect everyone a little bit, but that no 
one has enough incentive to fix.

    Recommendations
    This fundamental problem of cybersecurity is much more an economic 
one than a technical one. Our nation's computer infrastructure could be 
much more secure if the business incentives were there to make it so--
if the externalities were internalized, so to speak. Asking companies 
to improve their own security won't work. (We've tried this repeatedly; 
it's doomed to failure.) Trying to build a separate government network 
won't work. (The whole point of cyberspace is that it is one large 
interconnected network.) Hoping technology will improve won't work. (It 
doesn't matter how good the technology is if people don't want to use 
it.)
    The basic capitalist and democratic business process is capable of 
improving cybersecurity, but only if the proper incentives are in 
place. My general recommendation is that you pass laws and implement 
regulations designed to deal with the externalities in cybersecurity 
decisions so that organizations are motivated to provide a higher level 
of security--one that is commensurate with the threat against our 
nation's critical infrastructure--and then step back and let the 
mechanisms of commercial innovation work to solve the problems and 
improve security. Specifically:
    1. Stop trying to find consensus. Over the years, we have seen 
several government cyberspace security plans and strategies come out of 
the White House, the most recent one this year [7]. These documents all 
suffer from an inability to risk offending any industry. In the most 
recent strategy, for example, preliminary drafts included strong words 
about wireless insecurity that were removed at the request of the 
wireless industry, which didn't want to look bad for not doing anything 
about it. A recommendation that ISPs provide personal firewalls to all 
of their users was likewise removed, because the large ISPs didn't want 
to look bad for not already providing such a security feature. Unlike 
many other governmental processes, security is harmed by consensus. 
Cybersecurity requires hard choices. These choices will necessarily 
come at the expense of some industries and some special interests. As 
long as the government is unwilling to move counter to the interests of 
some of its corporate constituents, huge insecurities will remain.
    2. Expose computer hardware, software, and networks to liabilities. 
I have written extensively about the effect of liabilities on the 
computer industry [8]; one of my essays is included as Attachment #2. 
The major reason companies don't worry about the externalities of their 
security decisions--the effects of their insecure products and networks 
on others--is that there is no real liability for their actions. 
Liability will immediately change the cost/benefit equation for 
companies, because they will have to bear financial responsibility for 
ancillary risks borne by others as a result of their actions. With 
liabilities firmly in place, the best interests of software vendors, 
and the best interests of their shareholders, will be served by them 
spending the time and money necessary to make their products secure 
before release. The best interests of corporations, and the best 
interests of their shareholders, will be served by them spending the 
time and money necessary to secure their own networks. The insurance 
industry will step in and force companies to improve their own security 
if they want liability coverage at a reasonable price. Liability is a 
common capitalistic mechanism to deal with externalities, and it will 
do more to secure our nation's critical infrastructure than any other 
action.
    3. Secure your own networks. Fund programs to secure government 
networks, both internal networks and publicly accessible networks. Only 
buy secure hardware and software products. Before worrying about the 
security of everyone else, get your own house in order. This does not 
mean that it's necessary to redo what is already being done in 
industry. The government is a consumer of computer products, like any 
large corporation. The government does not need to develop its own 
security products; everyone's security is better served if the 
government buys commercial products. The government does not need to 
create its own organization to identify and analyze cyber threats; it 
is better off using the same commercial organizations that corporations 
use. The threats against government are the same as the threats against 
everyone else, and the solutions are the same. The U.S. government, 
specifically the Department of Homeland Security, should use and 
improve the resources that are available to everyone, since everyone 
needs those same resources.
    4. Use your buying power to drive an increase in security. U.S. 
government procurement can be a potent tool to drive research and 
development. If you demand more secure products, companies will 
deliver. Standardize on a few good security products, and continually 
force them to improve. There's a ``rising tide'' effect that will 
happen; once companies deliver products to the increasingly demanding 
specifications of the government, the same products will be made 
available to private organizations as well. The U.S. government is an 
enormous consumer of computer hardware, software, systems, and 
services. And because you're using the same commercial products that 
everyone else uses, those products will improve to the benefit of 
everyone. The money you spend on your own security will benefit 
everyone's security.
    5. Invest in security research; invest in security education. As 
the market starts demanding real security, companies will need to 
figure out how to supply it. Research and education are critical to 
improving the security of computers and networks. Here again, use your 
financial muscle to improve security for everyone. Research and 
education in this important field need to be increased. The benefits 
will be beyond anything we can imagine today.
    6. Rationally prosecute cybercriminals. In our society, we rarely 
solve security problems by technical means alone. We don't wear body 
armor or live in fortresses. Instead, we rely on the legal system to 
rationally prosecute criminals and act as a deterrent to future crimes. 
We need to beef up law enforcement to deal with real computer crimes. 
This does not mean charging sixteen-year-old kids as adults for what 
are basically 21st century pranks; this means going after those who 
commit real crimes on the Internet.

    Conclusion
    None of this is easy. Every computer company you bring into this 
room will tell you that liabilities will be bad for their industry. Of 
course they're going to tell you that; it's in their best interests not 
to be responsible for their own actions. The Department of Homeland 
Security will tell you that they need money for this and that massive 
government security program. Of course they're going to tell you that; 
it's in their best interests to get as large a budget as they can. The 
FBI is going to tell you that extreme penalties are necessary for the 
current crop of teenage cyberterrorists; they're trying to make the 
problem seem more dire than it really is to improve their own image. If 
you're going to help improve the security of our nation, you're going 
to have to look past everyone's individual self-interests toward the 
best interests of everyone.
    Our nation's cybersecurity risks are greater than those of any 
individual corporation or government organization, and the only way to 
manage those risks is to address them directly. I strongly recommend 
that you put the interests of our nation's cybersecurity above the 
interests of individual corporations or government organizations. The 
externalities of rational corporate cybersecurity decisions are hurting 
us all. It's the job of government to look at the big picture and the 
needs of society as a whole, and then to properly motivate individuals 
to satisfy those needs.
    Thank you for the opportunity to appear before your committee 
today. I would be pleased to answer any questions.
    References
[1] Bruce Schneier, Secrets and Lies: Digital Security in a Networked 
World, John Wiley & Sons, 2000.
[2] Bruce Schneier, Beyond Fear: Thinking Sensibly About Security in an 
Uncertain World, Copernicus Books, 2003.
[3] Computer Security Institute, ``2003 CSI/FBI Computer Crime and 
Security Survey,'' 2003. http://www.gocsi.com/press/20030528.html
[4] Honeynet Project, :Know Your Enemy: Statistics,'' 22 July, 2001. 
http://www.honeynet.org/papers/stats/
[5] Bruce Schneier, ``Software Complexity and Security,'' Crypto-Gram, 
March 15, 2000. http://www.counterpane.com./crypto-gram-0003.html
[6] Bruce Schneier, ``The Risks of Cyberterrorism,'' Crypto-Gram, June 
15, 2003. http://www.counterpane.com./crypto-gram-0306.html
[7] White House, National Strategy to Secure Cyberspace, Feb 2003. 
http://www.whitehouse.gov/pcipb/cyberspace--strategy.pdf
[8] Bruce Schneier, ``Liability and Security,'' Crypto-Gram, April 15, 
2002. http://www.counterpane.com./crypto-gram-0204.html

ATTACHMENT #1
The Risks of Cyberterrorism
Bruce Schneier
Reprinted from: Crypto-Gram, June 15, 2003.
http://www.counterpane.com./crypto-gram-0306.html
The threat of cyberterrorism is causing much alarm these days. We have 
been told to expect attacks since 9/11; that cyberterrorists would try 
to cripple our power system, disable air traffic control and emergency 
services, open dams, or disrupt banking and communications. But so far, 
nothing's happened. Even during the war in Iraq, which was supposed to 
increase the risk dramatically, nothing happened. The impending 
cyberwar was a big dud. Don't congratulate our vigilant security, 
though; the alarm was caused by a misunderstanding of both the 
attackers and the attacks.
These attacks are very difficult to execute. The software systems 
controlling our nation's infrastructure are filled with 
vulnerabilities, but they're generally not the kinds of vulnerabilities 
that cause catastrophic disruptions. The systems are designed to limit 
the damage that occurs from errors and accidents. They have manual 
overrides. These systems have been proven to work; they've experienced 
disruptions caused by accident and natural disaster. We've been through 
blackouts, telephone switch failures, and disruptions of air traffic 
control computers. In 1999, a software bug knocked out a nationwide 
paging system for a day. The results might be annoying, and engineers 
might spend days or weeks scrambling, but the effect on the general 
population has been minimal.
The worry is that a terrorist would cause a problem more serious than a 
natural disaster, but this kind of thing is surprisingly hard to do. 
Worms and viruses have caused all sorts of network disruptions, but it 
happened by accident. In January 2003, the SQL Slammer worm disrupted 
13,000 ATMs on the Bank of America's network. But before it happened, 
you couldn't have found a security expert who understood that those 
systems were dependent on that vulnerability. We simply don't 
understand the interactions well enough to predict which kinds of 
attacks could cause catastrophic results, and terrorist organizations 
don't have that sort of knowledge either--even if they tried to hire 
experts.
    The closest example we have of this kind of thing comes from 
Australia in 2000. Vitek Boden broke into the computer network of a 
sewage treatment plant along Australia's Sunshine Coast. Over the 
course of two months, he leaked hundreds of thousands of gallons of 
putrid sludge into nearby rivers and parks. Among the results were 
black creek water, dead marine life, and a stench so unbearable that 
residents complained. This is the only known case of someone hacking a 
digital control system with the intent of causing environmental harm.
    Despite our predilection for calling anything ``terrorism,'' these 
attacks are not. We know what terrorism is. It's someone blowing 
himself up in a crowded restaurant, or flying an airplane into a 
skyscraper. It's not infecting computers with viruses, forcing air 
traffic controllers to route planes manually, or shutting down a pager 
network for a day. That causes annoyance and irritation, not terror.
    This is a difficult message for some, because these days anyone who 
causes widespread damage is being given the label ``terrorist.'' But 
imagine for a minute the leadership of al Qaeda sitting in a cave 
somewhere, plotting the next move in their jihad against the United 
States. One of the leaders jumps up and exclaims: ``I have an idea! 
We'll disable their e-mail....'' Conventional terrorism--driving a 
truckful of explosives into a nuclear power plant, for example--is 
still easier and much more effective.
    There are lots of hackers in the world--kids, mostly--who like to 
play at politics and dress their own antics in the trappings of 
terrorism. They hack computers belonging to some other country 
(generally not government computers) and display a political message. 
We've often seen this kind of thing when two countries squabble: China 
vs. Taiwan, India vs. Pakistan, England vs. Ireland, U.S. vs. China 
(during the 2001 crisis over the U.S. spy plane that crashed in Chinese 
territory), the U.S. and Israel vs. various Arab countries. It's the 
equivalent of soccer hooligans taking out national frustrations on 
another country's fans at a game. It's base and despicable, and it 
causes real damage, but it's cyberhooliganism, not cyberterrorism.
    There are several organizations that track attacks over the 
Internet. Over the last six months, less than 1% of all attacks 
originated from countries on the U.S. government's Cyber Terrorist 
Watch List, while 35% originated from inside the United States. 
Computer security is still important. People overplay the risks of 
cyberterrorism, but they underplay the risks of cybercrime. Fraud and 
espionage are serious problems. Luckily, the same countermeasures aimed 
at cyberterrorists will also prevent hackers and criminals. If 
organizations secure their computer networks for the wrong reasons, it 
will still be the right thing to do.
ATTACHMENT #2
Liability and Security
Bruce Schneier
Reprinted from: Crypto-Gram, April 15, 2002.http://
www.counterpane.com./crypto-gram-0204.html
    Today, computer security is at a crossroads. It's failing, 
regularly, and with increasingly serious results. I believe it will 
improve eventually. In the near term, the consequences of insecurity 
will get worse before they get better. And when they get better, the 
improvement will be slow and will be met with considerable resistance. 
The engine of this improvement will be liability--holding software 
manufacturers accountable for the security and, more generally, the 
quality of their products--and the timetable for improvement depends 
wholly on how quickly security liability permeates cyberspace.
    Network security is not a problem that technology can solve. 
Security has a technological component, but businesses approach 
security as they do any other business risk: in terms of risk 
management. Organizations optimize their activities to minimize their 
cost * risk product, and understanding those motivations is key to 
understanding computer security today.
    For example, most organizations don't spend a lot of money on 
network security. Why? Because the costs are significant: time, 
expense, reduced functionality, frustrated end users. On the other 
hand, the costs of ignoring security and getting hacked are small: the 
possibility of bad press and angry customers, maybe some network 
downtime, none of which is permanent. And there's some regulatory 
pressure, from audits or lawsuits, that add additional costs. The 
result: a smart organization does what everyone else does, and no more.
    The same economic reasoning explains why software vendors don't 
spend a lot of effort securing their products. The costs of adding good 
security are significant--large expenses, reduced functionality, 
delayed product releases, annoyed users--while the costs of ignoring 
security are minor: occasional bad press, and maybe some users 
switching to competitors' products. Any smart software vendor will talk 
big about security, but do as little as possible.
    Think about why firewalls succeeded in the marketplace. It's not 
because they're effective; most firewalls are installed so poorly as 
not to be effective, and there are many more effective security 
products that have never seen widespread deployment. Firewalls are 
ubiquitous because auditors started demanding firewalls. This changed 
the cost equation for businesses. The cost of adding a firewall was 
expense and user annoyance, but the cost of not having a firewall was 
failing an audit. And even worse, a company without a firewall could be 
accused of not following industry best practices in a lawsuit. The 
result: everyone has a firewall, whether it does any good or not.
    Network security is a business problem, and the only way to fix it 
is to concentrate on the business motivations. We need to change the 
costs; security needs to affect an organization's bottom line in an 
obvious way. In order to improve computer security, the CEO must care. 
In order for the CEO to care, it must affect the stock price and the 
shareholders.
    I have a three-step program towards improving computer and network 
security. None of the steps have anything to do with the technology; 
they all have to do with businesses, economics, and people.
    Step one: enforce liabilities. This is essential. Today there are 
no real consequences for having bad security, or having low-quality 
software of any kind. In fact, the marketplace rewards low quality. 
More precisely, it rewards early releases at the expense of almost all 
quality. If we expect CEOs to spend significant resources on security--
especially the security of their customers--they must be liable for 
mishandling their customers' data. If we expect software vendors to 
reduce features, lengthen development cycles, and invest in secure 
software development processes, they must be liable for security 
vulnerabilities in their products.
    Legislatures could impose liability on the computer industry, by 
forcing software manufacturers to live with the same product liability 
laws that affect other industries. If software manufacturers produced a 
defective product, they would be liable for damages. Even without this, 
courts could start imposing liability-like penalties on software 
manufacturers and users. This is starting to happen. A U.S. judge 
forced the Department of Interior to take its network offline, because 
it couldn't guarantee the safety of American Indian data it was 
entrusted with. Several cases have resulted in penalties against 
companies who used customer data in violation of their privacy 
promises, or who collected that data using misrepresentation or fraud. 
And judges have issued restraining orders against companies with 
insecure networks that are used as conduits for attacks against others.
    However it happens, liability changes everything. Currently, there 
is no reason for a software company not to offer more features, more 
complexity. Liability forces software companies to think twice before 
changing something. Liability forces companies to protect the data 
they're entrusted with.
    Step two: allow parties to transfer liabilities. This will happen 
automatically, because this is what insurance companies do. The 
insurance industry turns variable-cost risks into fixed expenses. 
They're going to move into cyber-insurance in a big way. And when they 
do, they're going to drive the computer security industry. . .just like 
they drive the security industry in the brick-and-mortar world.
    A company doesn't buy security for its warehouse--strong locks, 
window bars, or an alarm system--because it makes it feel safe. It buys 
that security because its insurance rates go down. The same thing will 
hold true for computer security. Once enough policies are being 
written, insurance companies will start charging different premiums for 
different levels of security. Even without legislated liability, the 
CEO will start noticing how his insurance rates change. And once the 
CEO starts buying security products based on his insurance premiums, 
the insurance industry will wield enormous power in the marketplace. 
They will determine which security products are ubiquitous, and which 
are ignored. And since the insurance companies pay for the actual 
liability, they have a great incentive to be rational about risk 
analysis and the effectiveness of security products.
    And software companies will take notice, and will increase security 
in order to make the insurance for their products affordable.
    Step three: provide mechanisms to reduce risk. This will happen 
automatically, and be entirely market driven, because it's what the 
insurance industry wants. Moreover, they want it done in standard 
models that they can build policies around. They're going to look to 
security processes: processes of secure software development before 
systems are released, and processes of protection, detection, and 
response for corporate networks and systems. And more and more, they're 
going to look towards outsourced services.
    The insurance industry prefers security outsourcing, because they 
can write policies around those services. It's much easier to design 
insurance around a standard set of security services delivered by an 
outside vendor than it is to customize a policy for each individual 
network.
    Actually, this isn't a three-step program. It's a one-step program 
with two inevitable consequences. Enforce liability, and everything 
else will flow from it. It has to.
    Much of Internet security is a common: an area used by a community 
as a whole. Like all commons, keeping it working benefits everyone, but 
any individual can benefit from exploiting it. (Think of the criminal 
justice system in the real world.) In our society we protect our 
commons--our environment, healthy working conditions, safe food and 
drug practices, lawful streets, sound accounting practices--by 
legislating those goods and by making companies liable for taking undue 
advantage of those commons. This kind of thinking is what gives us 
bridges that don't collapse, clean air and water, and sanitary 
restaurants. We don't live in a ``buyer beware'' society; we hold 
companies liable for taking advantage of buyers.
    There's no reason to treat software any differently from other 
products. Today Firestone can produce a tire with a single systemic 
flaw and they're liable, but Microsoft can produce an operating system 
with multiple systemic flaws discovered per week and not be liable. 
This makes no sense, and it's the primary reason security is so bad 
today.

    Mr. Thornberry. And before turning to the next witness, let 
me thank the distinguished chairman of the Science Committee 
for allowing us the use of your facilities. As we continue to 
be homeless, we appreciate the chairman's generosity.
    Our next witness is Richard Pethia, Director of CERT 
Centers, Software Engineering Institute, Carnegie Mellon 
University. CERT provides the central response and coordination 
facility for global information security instant response and 
countermeasures for cyber threats and vulnerabilities since 
1988. We appreciate you being with us, sir. Your full statement 
will also be made a part of the record, and please summarize it 
as you would like.

                 STATEMENT OF RICHARD D. PETHIA

    Mr. Pethia. First, thank you, Mr. Chairman, members of the 
subcommittee, for the opportunity to testify on cybersecurity 
issues. It is something that we in Pittsburgh have been working 
on for a number of years and feel very passionate about.
    The current state of Internet security from our perspective 
is cause for concern. Security issues are not well understood. 
They are rarely given high priority by many software 
developers, vendors, network managers or consumers. At the same 
time, however, computers have become such an integral part of 
American government and business operation, that computer-
related risk can no longer be separated from national defense, 
general safety, health, business and privacy risks.
    We are increasingly dependent on our computers and the 
networks that hook them together, or planes won't fly, freight 
won't ship, oil won't pump, the things that--the physical 
things in our lives are as critically dependent on these 
systems are as things like financial transactions and business 
transactions that we all recognize.
    The data that we have and data from other groups in the 
security field indicates that the attacks are going up year 
after year. The damage is increasing, and that is happening 
even while government and the industry are actually investing 
increasing amounts of money to deal with the problem.
    There are a number of factors that contribute to this 
increased vulnerability. First of all, we are connecting 
everything to everything else. For many good business reasons, 
we are connecting more and more of our systems to the Internet. 
The phone system, the Internet, are merging and we are building 
a communications fabric where everything is tied together. And 
a number of systems, where once secure because of their 
isolation, are now insecure because they are connected to this 
web of computing that we have constructed.
    Cyberspace and physical space are becoming one. Supervisory 
control and data acquisition systems that control power grids, 
water treatment and distribution plans, oil and chemical 
refineries, other physical processes, are being linked to 
communications links in the Internet, and these systems are 
becoming potential targets of individuals bent on causing 
massive disruption and physical damage.
    Engineering for ease of use is driving a dramatic increase 
in the use of computers, but at the same time it is not been 
matched by engineering for ease of secure administration. The 
result is increasing numbers of vulnerable computers. 
Comprehensive security solutions are lacking. Engineering the 
security of a large complex system is often more difficult than 
engineering the system itself, and many organizations just 
don't have the skills.
    The Internet at the same time has become a virtual breeding 
ground for attackers. Intruders share information about 
vulnerable sites, about vulnerabilities in technology and 
attack tools. Internet attacks are difficult to trace, and the 
protocols make it easy for attackers to hide their true 
identity and location.
    With all these factors, there are two others that I think 
are especially important to focus on. One is vulnerabilities in 
the information technology products in the market today.
    Last year we received reports of over 4,000 separate new 
vulnerabilities. Weaknesses in products that an attacker can 
exploit compromise a system. Some of these are deep-seated and 
are likely to be long-lived, in that they are the result of 
architecture and design decisions that were made early in the 
product's development cycle, not decisions that can be changed 
easily.
    Others are the result of weak implementation in testing 
practices, bugs in the program. They can be quickly corrected. 
However, both of these require that system operators take 
action to protect their systems, and with so many of these 
problems being found every year, it is placing the system 
operators in a very hard spot. They have got a major challenge.
    The second major rea of vulnerability includes weakness in 
the management and operational practice of the system operators 
themselves. Typical problems include things like poor or 
ambiguous security policies, lack of security training for all 
levels of staff, poor account and access management, poor 
physical security, leading to open access to critical devices, 
lack of vulnerability management practices and lack of 
monitoring or auditing to detect security weaknesses and 
attacks.
    Putting these practices in place requires senior management 
understanding and commitment, and that is a condition that is 
still missing in many organizations. Working our way out of 
this vulnerable position will require a multipronged approach. 
First, hire quality products. Good software engineering 
practices can dramatically improve our ability to withstand 
attacks. We need operating systems and other products that are 
virtually virus-proof. We need to reduce the implementation 
errors that we have by at least two orders of magnitude, and we 
need to have vendors ship products with high security default 
configurations.
    We encourage the government to use its buying power to 
demand such high-quality software. Acquisition processes must 
be in place with more emphasis on security characteristics and 
perhaps the use of code integrity clauses that hold vendors 
more accountable for defects in their release products. 
Acquisition professionals should be trained in government 
security regulations and policies and also in the fundamentals 
of security concepts and architectures.
    Also needed is wider adoption of security practices. Senior 
management must be accountable for the use of the technology in 
their operation, and they must provide visible endorsement of 
security improvement efforts and the resources needed to 
implement those required improvements.
    And in the long term, research has to be an essential 
component of the answer. We need a unified and integrated 
framework for all information assurance analysis that leads to 
a new generation of products that are fundamentally more secure 
than those we have today. We need more rigorous methods to 
assess and manage risks and quantitative techniques to help us 
understand the cost/benefit analysis of doing that risk 
mitigation, along with simulation tools to analyze the cascade 
effects of attacks, accidents, and failures across our 
interdependent systems.
    We as a Nation need more qualified technical specialists. 
The government scholarship programs that are in place need to 
be expanded over the next 5 years to build an infrastructure 
that will meet the long-term needs of trained security 
professionals, and also needed is more awareness and security 
training for all Internet and technology users.
    So in conclusion, the incidents are almost doubling every 
year, and the attack technology will evolve to support attacks 
that are even more virulent and damaging. We can make 
significant progress by making changes in our software design 
and development practices, giving more management support to 
risk management activities, increasing the number of trained 
system managers and administrators, and increasing research in 
the secure and survivable systems. Thank you.
    Mr. Thornberry. Thank you. Appreciate it.
    [The statement of Mr. Pethia follows:]

                PREPARED STATEMENT OF RICHARD D. PETHIA

1. Introduction
Mr. Chairman and members of the Subcommittee: My name is Rich Pethia. I 
am the director of the CERT Centers, part of the Software Engineering 
Institute, a federally funded research and development center operated 
by Carnegie Mellon University. We have 14 years of experience with 
computer and network security. The CERT Coordination Center (CERT/CC) 
was established in 1988, after an Internet ``worm'' became the first 
Internet security incident to make headline news, acting as a wake-up 
call for network security. In response, the CERT/CC was established at 
the SEI. The center was activated in just two weeks, and we have worked 
hard to maintain our ability to react quickly. The CERT/CC staff has 
handled well over 200,000 incidents and cataloged more than 8,000 
computer vulnerabilities.
Thank you for the opportunity to testify on cyber security problem. 
Today I will discuss the vulnerability of information technology on the 
Internet and steps I believe we must take to better protect our 
critical systems from future attacks.
The current state of Internet security is cause for concern. 
Vulnerabilities associated with the Internet put users at risk. 
Security measures that were appropriate for mainframe computers and 
small, well-defined networks inside an organization are not effective 
for the Internet, a complex, dynamic world of interconnected networks 
with no clear boundaries and no central control. Security issues are 
often not well understood and are rarely given high priority by many 
software developers, vendors, network managers, or consumers.
Government, commercial, and educational organizations depend on 
computers to such an extent that day-to-day operations are 
significantly hindered when the computers are ``down.'' Currently many 
of the day-to-day operations depend upon connections to the Internet, 
and new connections are continuously being made to the Internet. Use of 
the Internet enhances the ability of organizations to conduct their 
activities in a cost-effective and efficient way. However, along with 
increased capability and dependence comes increased vulnerability. It 
is easy to exploit the many security holes in the Internet and in the 
software commonly used in conjunction with it; and it is easy to 
disguise or hide the true origin and identity of the people doing the 
exploiting. Moreover, the Internet is easily accessible to anyone with 
a computer and a network connection. Individuals and organizations 
worldwide can reach any point on the network without regard to national 
or geographic boundaries.
Computers have become such an integral part of American business and 
government that computer-related risks cannot be separated from general 
business, health, and privacy risks. Valuable government and business 
assets are now at risk over the Internet. For example, customer and 
personnel information may be exposed to intruders. Financial data, 
intellectual property, and strategic plans may be at risk. The 
widespread use of databases leaves the privacy of individuals at risk. 
Increased use of computers in safety-critical applications, including 
the storage and processing of medical records data, increases the 
chance that accidents or attacks on computer systems can cost people 
their lives.
Techniques that have worked in the past for securing isolated systems 
are not effective in the world of unbounded networks, mobile computing, 
distributed applications, and dynamic computing that we live in today. 
Today there is rapid movement toward increased use of interconnected 
networks for a broad range of activities, including commerce, 
education, entertainment, operation of government, and supporting the 
delivery of health and other human services. Although this trend 
promises many benefits, it also poses many risks. In short, 
interconnections are rapidly increasing and opportunities to exploit 
vulnerabilities in the interconnected systems are increasing as well.
2. Key Factors in the Current State of Internet Security
The current state of Internet security is the result of many factors. A 
change in any one of these can change the level of Internet security 
and survivability.
 We are connecting everything with everything else. Because of 
the dramatically lower cost of communication and ease of connecting to 
the Internet, use of the Internet is replacing other forms of 
electronic communication. As critical infrastructure operators strive 
to improve their efficiency and lower costs, they are connecting 
formerly isolated systems to the Internet to facilitate remote 
maintenance functions and improve coordination across distributed 
systems. Operations of the critical infrastructures are becoming 
increasingly dependent on the Internet and are vulnerable to Internet 
based attacks.
 Cyber space and physical space are becoming one. Most 
threatening of all is the link between cyber space and physical space. 
Supervisory control and data acquisition (SCADA) systems and other 
forms of networked computer systems have for years been used to control 
power grids, gas and oil distribution pipelines, water treatment and 
distribution systems, hydroelectric and flood control dams, oil and 
chemical refineries, and other physical systems. Increasingly, these 
control systems are being connected to communications links and 
networks to reduce operational costs by supporting remote maintenance, 
remote control, and remote update functions. These computer-controlled 
and network-connected systems are potential targets of individuals bent 
on causing massive disruption and physical damage. This is not just 
theory; actual attacks have caused major operational problems. Attacks 
against wastewater treatment systems in Australia, for example, led to 
the release of hundreds of thousands of gallons of sludge.
 There is a continuing movement to distributed, client-server, 
and heterogeneous configurations. As the technology is being 
distributed, the management of the technology is often distributed as 
well. In these cases, system administration and management often fall 
upon people who do not have the training, skill, resources, or interest 
needed to operate their systems securely.
 The Internet is becoming increasingly complex and dynamic, but 
among those connected to the Internet there is a lack of adequate 
knowledge about the network and about security. The rush to the 
Internet, coupled with a lack of understanding, is leading to the 
exposure of sensitive data and risk to safety-critical systems. 
Misconfigured or outdated operating systems, mail programs, and Web 
sites result in vulnerabilities that intruders can exploit. Just one 
naive user with an easy-to-guess password increases an organization's 
risk.
 There is little evidence of improvement in the security 
features of most products; developers are not devoting sufficient 
effort to apply lessons learned about the sources of vulnerabilities. 
The CERT Coordination Center routinely receives reports of new 
vulnerabilities. In 1995 we received an average of 35 new reports each 
quarter, 140 for the year. By 2002, the number of annual reports 
received had skyrocketed to over 4000. We continue to see the same 
types of vulnerabilities in newer versions of products that we saw in 
earlier versions. Technology evolves so rapidly that vendors 
concentrate on time to market, often minimizing that time by placing a 
low priority on security features. Until their customers demand 
products that are more secure, the situation is unlikely to change.
 When vendors release patches or upgrades to solve security 
problems, organizations' systems often are not upgraded. The job may be 
too time-consuming, too complex, or just at too low a priority for the 
system administration staff to handle. With increased complexity comes 
the introduction of more vulnerabilities, so solutions do not solve 
problems for the long term--system maintenance is never-ending. Because 
managers do not fully understand the risks, they neither give security 
a high enough priority nor assign adequate resources. Exacerbating the 
problem is the fact that the need for system administrators with strong 
security skills far exceeds the supply.
 Engineering for ease of use is not being matched by 
engineering for ease of secure administration. Today's software 
products, workstations, and personal computers bring the power of the 
computer to increasing numbers of people who use that power to perform 
their work more efficiently and effectively. Products are so easy to 
use that people with little technical knowledge or skill can install 
and operate them on their desktop computers. Unfortunately, it is 
difficult to configure and operate many of these products securely. 
This gap leads to increasing numbers of vulnerable systems.
 As we face the complex and rapidly changing world of the 
Internet, comprehensive solutions are lacking. Among security-conscious 
organizations, there is increased reliance on ``silver bullet'' 
solutions, such as firewalls and encryption. The organizations that 
have applied a ``silver bullet'' are lulled into a false sense of 
security and become less vigilant, but single solutions applied once 
are neither foolproof nor adequate. Solutions must be combined, and the 
security situation must be constantly monitored as technology changes 
and new exploitation techniques are discovered.
 Compared with other critical infrastructures, the Internet 
seems to be a virtual breeding ground for attackers. Although some 
attacks seem playful (for example, students experimenting with the 
capability of the network) and some are clearly malicious, all have the 
potential of doing damage. Unfortunately, Internet attacks in general, 
and denial-of-service attacks in particular, remain easy to accomplish, 
hard to trace, and a low risk to the attacker. While some attacks 
require technical knowledge--the equivalent to that of a college 
graduate who majored in computer science--many other successful attacks 
are carried out by technically unsophisticated intruders. Technically 
competent intruders duplicate and share their programs and information 
at little cost, thus enabling novice intruders to do the same damage as 
the experts. In addition to being easy and cheap, Internet attacks can 
be quick. In a matter of seconds, intruders can break into a system; 
hide evidence of the break-in; install their programs, leaving a ``back 
door'' so they can easily return to the now-compromised system; and 
begin launching attacks at other sites.
 Attackers can lie about their identity and location on the 
network. Information on the Internet is transmitted in packets, each 
containing information about the origin and destination. Senders 
provide their return address, but they can lie about it. Most of the 
Internet is designed merely to forward packets one step closer to their 
destination with no attempt to make a record of their source. There is 
not even a ``postmark'' to indicate generally where a packet 
originated. It requires close cooperation among sites and up-to-date 
equipment to trace malicious packets during an attack. Moreover, the 
Internet is designed to allow packets to flow easily across 
geographical, administrative, and political boundaries. Consequently, 
cooperation in tracing a single attack may involve multiple 
organizations and jurisdictions, most of which are not directly 
affected by the attack and may have little incentive to invest time and 
resources in the effort. This means that it is easy for an adversary to 
use a foreign site to launch attacks at U.S. systems. The attacker 
enjoys the added safety of the need for international cooperation in 
order to trace the attack, compounded by impediments to legal 
investigations. We have seen U.S.-based attacks on U.S. sites gain this 
safety by first breaking into one or more non-U.S. sites before coming 
back to attack the desired target in the U.S.
3. Categories of vulnerabilities
Protecting any complex system (hardware, software, people, and physical 
plant) and insuring its successful operation in the face of attacks, 
accidents and failures is a difficult task. Vulnerabilities (weaknesses 
that can be exploited to compromise the operation of the system) can 
creep into the system in a variety of areas. Deciding which 
vulnerabilities really matter and effectively dealing with them, are 
key steps in an organization's risk management process.
For discussion, it is useful to separate sources of vulnerability into 
two major categories: weaknesses in the information technology (IT) 
products as supplied by the vendor(s); and weakness in the ways 
organizations manage and use the technology.
IT Product Vulnerabilities
    As stated above, the number of vulnerabilities in IT products 
discovered each year is increasing dramatically: from 140 reported to 
the CERT/CC in 1995 to 4,129 reported in 2002. Each vulnerability 
represents a weakness in a product that can be exploited in some way to 
help an attacker achieve the objective of compromising a system.
    Some of these vulnerabilities are deep-seated and difficult to 
correct because they are the result of architecture and design 
decisions that were made early in the product's development cycle (e.g. 
operating system architectures that allow the unconstrained execution 
of application software and thereby allow the easy propagation of 
viruses). In these cases, the vulnerabilities can only be removed by 
changing the basic architecture of the product. These types of 
fundamental changes often have consequences that affect other aspects 
of the product's operation. In some cases these side effects will cause 
applications that inter-operate with the product to ``break'' (i.e. the 
new version of the product is no longer compatible with earlier 
versions and users may need to rewrite their applications). These types 
of vulnerability are typically long-lived and product users must find 
some other way to protect themselves from attacks that attempt to 
exploit the vulnerability (e.g. invest in anti-virus software in order 
to detect and remove viruses before they operate on the vulnerable 
system).
Other vulnerabilities are easier to correct since they are the result 
of low-level design decisions or implementation errors (bugs in the 
programs). It is often that case that these types of vulnerability, 
once discovered, can quickly be corrected by the vendor and the 
corrections (oftentimes called ``patches'') made available to the 
customers. However, even though the corrections may be available 
quickly, it is not always the case that they can be deployed quickly. 
System operators need to insure that the corrections do not have 
unintended side-effects on their systems and typically test the 
corrections before deployment. Also, in the case of a widely used 
product, system operators must often update the software used in 
thousands of computers to deploy the correction. This in itself is a 
labor intensive and time consuming task.
In either case, IT product vulnerabilities are often long-lived with 
many Internet connected systems vulnerable to a particular form of 
attack many months after vendors produce corrections to the 
vulnerability that was exploited by the attack.
Weaknesses in Management and Operational Practice
The second major category of vulnerability includes weaknesses in the 
management and operational practices of system operators. Factors that 
lead to weaknesses in operational practices include things like:
         Lack of, ambiguous or poorly enforced organizational 
        security policies and regulations; security roles and 
        responsibilities that are not clearly defined or lack of 
        accountability
         Failure to account for security when outsourcing IT 
        services
         Lack of security awareness training for all levels of 
        staff
         Poor account management or password management by all 
        users
         Poor physical security leading to open access to 
        important computers and network devices
         Weak configuration management practices that allow for 
        vulnerable configurations
         Weak authentication practices that allow attackers to 
        masquerade as valid system users
         Lack of vulnerability management practices that 
        require system administrators to quickly correct important 
        vulnerabilities
         Failure to use strong encryption when transmitting 
        sensitive information over the network.
         Lack of monitoring and auditing practices that can 
        detect attacker behavior before damage is done.
Weaknesses in any of these areas open the doors for attackers and give 
them opportunities to take advantage of the weaknesses to achieve their 
goals. Managing the risk associated with this category of vulnerability 
requires that organizations dedicate resources to the risk management 
task. Operations must be continuously assessed and corrective actions 
taken when needed.
4. Recommended Actions
Working our way out of the vulnerable position we are in requires a 
multi-pronged approach that helps us deal with the escalating near-term 
problem while at the same time building stronger foundations for the 
future. The work that must be done includes achieving these changes:
         Higher quality information technology products with 
        security mechanisms that are better matched to the knowledge, 
        skills, and abilities of today's system managers, 
        administrators, and users
         Wider adoption of risk analysis and risk management 
        policies and practices that help organizations identify their 
        critical security needs, assess their operations and systems 
        against those needs, and implement security improvements 
        identified through the assessment process
         Expanded research programs that lead to fundamental 
        advances in computer security
         A larger number of technical specialists who have the 
        skills needed to secure large, complex systems
         Increased and ongoing awareness and understanding of 
        cyber-security issues, vulnerabilities, and threats by all 
        stakeholders in cyber space
Higher quality products: In today's Internet environment, a security 
approach based on ``user beware'' is unacceptable. The systems are too 
complex and the attacks happen too fast for this approach to work. 
Fortunately, good software engineering practices can dramatically 
improve our ability to withstand attacks. The solutions required are a 
combination of the following:
         Virus-resistant/virus-proof software--There is nothing 
        intrinsic about digital computers or software that makes them 
        vulnerable to viruses, which propagate and infect systems 
        because of design choices that have been made by computer and 
        software designers. Designs are susceptible to viruses and 
        their effects when they allow the import of executable code, in 
        one form or another, and allow the unconstrained execution of 
        that code on the machine that received it. Unconstrained 
        execution allows code developers to easily take full advantage 
        of a system's capabilities, but does so with the side effect of 
        making the system vulnerable to virus attack. To effectively 
        control viruses in the long term, vendors must provide systems 
        and software that constrain the execution of imported code, 
        especially code that comes from unknown or untrusted sources. 
        Some techniques to do this have been known for decades. Others, 
        such as ``sandbox'' techniques, are more recent.
         Reducing implementation errors by at least two orders 
        of magnitude--Most vulnerabilities in products come from 
        software implementation errors. They remain in products, 
        waiting to be discovered, and are fixed only after they are 
        found while in use. Worse, the same flaws continue to be 
        introduced in new products. Vendors need to be proactive, and 
        adopt known, effective software engineering practices that 
        dramatically reduce the number of flaws in software products.
         High-security default configurations--With the 
        complexity of today's products, properly configuring systems 
        and networks to use the strongest security built into the 
        products is difficult, even for people with strong technical 
        skills and training. Small mistakes can leave systems 
        vulnerable and put users at risk. Vendors can help reduce the 
        impact of security problems by shipping products with ``out of 
        the box'' configurations that have security options turned on 
        rather than require users to turn them on. The users can change 
        these ``default'' configurations if desired, but they would 
        have the benefit of starting from a secure base.
To encourage product vendors to produce the needed higher quality 
products, we encourage the government to use its buying power to demand 
higher quality software. The government should consider upgrading its 
contracting processes to include ``code integrity'' clauses, clauses 
that hold vendors more accountable for defects in released products. 
Included here as well are upgraded acquisition processes that place 
more emphasis on the security characteristics of systems being 
acquired. In addition, to support these new processes, training 
programs for acquisition professionals should be developed that provide 
training not only in current government security regulations and 
policies, but also in the fundamentals of security concepts and 
architectures. This type of skill building is needed in order to ensure 
that the government is acquiring systems that meet the spirit, as well 
as the letter, of the regulations.
Wider adoption of security practices: With our growing dependence on 
information networks and with the rapid changes in network technology 
and threats, it is critical that more organizations, large and small, 
adopt the use of effective information security risk assessments, 
management policies, and practices. While there is often discussion and 
debate over which particular body of practices might be in some way 
``best,'' it is clear that descriptions of effective practices and 
policy templates are widely available from both government and private 
sources such as the National Institute of Standards and Technology, the 
National Security Agency, and other agencies. What is often missing 
today is management commitment: senior management's visible endorsement 
of security improvement efforts and the provision of the resources 
needed to implement the required improvements.

Expanded research in information assurance: It is critical to maintain 
a long-term view and invest in research toward systems and operational 
techniques that yield networks capable of surviving attacks while 
protecting sensitive data. In doing so, it is essential to seek 
fundamental technological solutions and to seek proactive, preventive 
approaches, not just reactive, curative approaches.

Thus, the research agenda should seek new approaches to system 
security. These approaches should include design and implementation 
strategies, recovery tactics, strategies to resist attacks, 
survivability trade-off analysis, and the development of security 
architectures. Among the activities should be the creation of
         A unified and integrated framework for all information 
        assurance analysis and design
         Rigorous methods to assess and manage the risks 
        imposed by threats to information assets
         Quantitative techniques to determine the cost/benefit 
        of risk mitigation strategies
         Systematic methods and simulation tools to analyze 
        cascade effects of attacks, accidents, and failures across 
        interdependent systems
         New technologies for resisting attacks and for 
        recognizing and recovering from attacks, accidents, and 
        failures
In this research program, special emphasis should be placed on the 
overlap between the cyber world and the physical world, and the 
analysis techniques developed should help policy and decision makers 
understand the physical impact and disruption of cyber attacks alone or 
of cyber attacks launched to amplify the impact of concurrent physical 
attacks.
More technical specialists: Government identification and support of 
cyber-security centers of excellence and the provision of scholarships 
that support students working on degrees in these universities are 
steps in the right direction. The current levels of support, however, 
are far short of what is required to produce the technical specialists 
we need to secure our systems and networks. These programs should be 
expanded over the next five years to build the university 
infrastructure we will need for the long-term development of trained 
security professionals.
More awareness and training for Internet users: The combination of easy 
access and user-friendly interfaces have drawn users of all ages and 
from all walks of life to the Internet. As a result, many Internet 
users have little understanding of Internet technology or the security 
practices they should adopt. To encourage ``safe computing,'' there are 
steps we believe the government could take:
         Support the development of educational material and 
        programs about cyberspace for all users. There is a critical 
        need for education and increased awareness of the security 
        characteristics, threats, opportunities, and appropriate 
        behavior in cyberspace. Because the survivability of systems is 
        dependent on the security of systems at other sites, fixing 
        one's own systems is not sufficient to ensure those systems 
        will survive attacks. Home users and business users alike need 
        to be educated on how to operate their computers most securely, 
        and consumers need to be educated on how to select the products 
        they buy. Market pressure, in turn, will encourage vendors to 
        release products that are less vulnerable to compromise.
         Support programs that provide early training in 
        security practices and appropriate use. This training should be 
        integrated into general education about computing. Children 
        should learn early about acceptable and unacceptable behavior 
        when they begin using computers just as they are taught about 
        acceptable and unacceptable behavior when they begin using 
        libraries.\1\ Although this recommendation is aimed at 
        elementary and secondary school teachers, they themselves need 
        to be educated by security experts and professional 
        organizations. Parents need be educated as well and should 
        reinforce lessons in security and behavior on computer 
        networks.
---------------------------------------------------------------------------
    \1\ National Research Council, Computers at Risk: Safe Computing in 
the Information Age, National Academy Press, 1991, recommendation 3c, 
p. 37.

5. Conclusion
Interconnections across and among cyber and physical systems are 
increasing. Our dependence on these interconnected systems is also 
rapidly increasing, and even short-term disruptions can have major 
consequences. Cyber attacks are cheap, easy to launch, difficult to 
trace, and hard to prosecute. Cyber attackers are using the 
connectivity to exploit widespread vulnerabilities in systems to 
conduct criminal activities, compromise information, and launch denial-
of-service attacks that seriously disrupt legitimate operations.
Reported attacks against Internet systems are almost doubling each year 
and attack technology will evolve to support attacks that are even more 
virulent and damaging. Our current solutions are not keeping pace with 
the increased strength and speed of attacks, and our information 
infrastructures are at risk. Solutions are not simple, but must be 
pursued aggressively to allow us to keep our information 
infrastructures operating at acceptable levels of risk. However, we can 
make significant progress by making changes in software design and 
development practices, increasing the number of trained system managers 
and administrators, improving the knowledge level of users, and 
increasing research into secure and survivable systems. Additional 
government support for research, development, and education in computer 
and network security would have a positive effect on the overall 
security of the Internet.
CERT

    Mr. Thornberry. Our final witness is Allan Paller, Director 
of Research at the SANS Institute of Cooperative Research, an 
organization that delivers education to people who secure and 
manage important information systems. As the others, we will 
include your full statement as part of the record, and you are 
now recognized to summarize it. Thank you again for being here.

   STATEMENT OF ALLAN PALLER, DIRECTOR OF RESEARCH, THE SANS 
                           INSTITUTE

    Mr. Paller. Thank you, Mr. Chairman. It is an honor to be 
here, but I think we are even more thankful that someone of 
your insight and foresight is chairing this subcommittee. I am 
not sure the other witnesses here know that 6 months before 
September 11th, you actually put a bill in the hopper to form a 
Department of Homeland Security to bring together the Federal 
initiatives, and you spoke eloquently of the technical 
dimension. I am hoping that others get it earlier on this issue 
of cybersecurity than we all did on physical security and that 
we get the connections right; and with your partner here, 
Congresswoman Lofgren, who represents easily the highest 
concentration of security expertise anywhere in the world, and 
computer companies, and has shown real leadership on cyber 
issues--I think this could be a wonderful change in 
policymaking in government, and we are looking forward to it.
    With that as an introduction, we at SANS train the system 
and network administrators--38,000 of them--on the front lines, 
and so we feel the pain when these attacks come. So my job is 
both to make some of what Bruce Schneier and Rich Pethia said 
real in terms of real-world examples, but also to say where we 
have succeeded and failed in trying to respond to them.
    Five months ago today, we learned several big lessons with 
a new worm, the fastest one ever. It was called Slammer, and it 
was attacking machines--attacking addresses at the rate of 55 
million every second, much faster than anything else had ever 
done. So from that worm, we learned several things. One is that 
we are in the middle of an arms race, that no matter how fast 
we build defenses, the attackers are going to continue to build 
attacks. So this isn't a war we are going to finish and get on 
with our lives. This is a war we are going to be fighting a 
long time.
    The second lesson is that government and industry 
partnerships actually work. We talk about them all the time as 
if they are important, but this was a case where it absolutely 
worked. I have written the details in my statement. But very 
briefly, because the connections had already been established 
and the trust relationships were already in place between some 
of the leaders in homeland security and the private companies 
that are getting attacked, there was instantaneous 
communication. They got together, got the word out fast enough, 
and protected a lot of people. So that was a very good example 
of where the public/private partnership can pay off and where 
homeland security certainly gets an 'A'. We also learned the 
limits to public/private partnerships, and I laid those out in 
my written testimony.
    Another lesson we learned is that the physical 
infrastructure really is connected to the cyber structure. I am 
not sure if people believed that before. They thought, OK, 
cyber attack. So my Web site went out. Who cares? It is just 
kids, right? But in this attack, the Bank of America ATM 
machines stopped serving up money? If you had asked Bank of 
America before that event ``Are your ATM machines connected to 
the Internet?'', the answer was no, and yet they stopped. 
Continental Airlines couldn't schedule flights. Microsoft 
couldn't even get its XPs authorized. You use that service to 
register your new software. They couldn't do that because of 
the attack. And Seattle's 911 system stopped answering. This is 
the physical system. This is the critical infrastructure, and 
it is directly connected to the cyber network, and vulnerable 
to cyber attacks. So that was an education for us.
    The fourth lesson that we learned, and I think the shocker, 
was that computer savvy organizations like Bank of America and 
Microsoft couldn't protect themselves. What Bruce and Rich were 
saying about the software being bad. It was so bad that the 
company that made the software that was being attacked 
Microsoft couldn't protect itself. So we are in a situation 
where users are getting software and hardware that is so hard 
to protect, that even the people who make it can't protect 
themselves. I think those lessons are useful.
    The DHS provided some leadership in another area, and 
Congressman Turner pointed it out in a speech he made at CSIS, 
I think last week. This is a fascinating good thing that is 
happening, another 'A' for DHS. A consensus of a group of 
government agencies [the National Security Agency and NIST and 
DHS] and private companies, companies from Intel to Mrs. 
Field's Cookies are getting together to agree on what it means 
to have a safe system. That is important because if you don't 
agree on it, the vendors can't deliver it. If you have 50 
people all arguing about what a sears system is, the vendors 
are stuck. Because of that user agreement, Dell was able to 
announce at the FTC hearings on June 4th--and Congressman 
Turner pointed this out publicly for the first time--that they 
would start delivering safely configured systems. We are hoping 
that is the first ``Volvo''. Remember, Volvo started delivering 
safe cars, and every other car company said, ``Sure, if the 
public wants safe cars, we will start delivering safe cars.'' 
We are hoping that Dell's announcement is the beginning of a 
movement of vendors to start delivering systems that can be 
kept secure. It is going to be hard, as Rich pointed out. It is 
not a ``3 weeks and we are done project,'' but it is a 
beginning.
    You also asked a couple of other questions. You asked about 
losses from these attacks; and you asked how we measure them? 
In February of 2000, MafiaBoy attacked eBay and Yahoo and also 
took down CNN and Dell. I was the expert witness in the 
MafiaBoy trial in Canada, so I have more data about it than I 
otherwise would. I saw the data about exactly what the victims 
said the attack cost them--it was confidential, but it went 
into the record. Remember that they were all hit exactly the 
same way. They were all down for about the same amount of time. 
They were all big organizations selling things on the Internet. 
So you would think that the estimates/damage would be nearly 
the same. They weren't. They ranged from zero to a few thousand 
dollars to one that said $5 million.
    So when you try to estimate how much did this attack cost, 
which one are you going to use? Are you are going to multiply 
the number of companies attacked by 5 million or zero? Until we 
have a protocol for defining what we mean by the costs of an 
attack, we are not going to get answers that you are going to 
like.
    One of the things you can do to help is to ask DHS to 
create such a protocol; how are we going to define the cost?
    You also asked about simulations and exercises in your 
letter. We haven't done much in simulations, so we don't know 
how good they are. But we know exercises matter in this area of 
disaster recovery. In this very institution, a fire drill found 
that people turned the fire drill horns off in the computer 
room. So when the fire drill went off, nobody in the computer 
room did anything. You need to test emergency plans, or you 
will never know what is wrong.
    The more important thing that can happen in tests is that 
mayors and governors, the first responders, would get to know 
the cyber people, and both groups would learn each other's 
needs a little bit, and they won't have to exchange cards after 
the attack comes. So I think the key benefit is that kind of 
sharing.
    I want to close with a clarification of something that 
Bruce put in his written testimony--I was sort of hoping he 
would say it in his oral testimony so I could respond directly 
to it--but he didn't. In his statement he described an attack 
by Vitek Boden on the sewage system of Maroochy Shire in 
Australia. Boden got into the computer system. He changed the 
valve settings. He put back pressure on the sewage system, and 
human waste rose up in the streets of the city, like it does in 
your sink. People who lived there said it felt like they were 
living in a toilet. But Bruce pointed out that a bird landed on 
a transformer a few weeks later and did more damage than Vitek 
Boden had done, so we shouldn't think about cyber attacks as 
cyber terrorism. We are going to have much more likelihood of 
physical damage from terrorist attack than from a cyber attack. 
That is absolutely true. But the difference between Boden's 
attack and the bird's accident is the bird isn't sitting around 
planning how to automate the attack. The bird isn't sitting 
around loading up software, analyzing it. The bird isn't 
testing, deciding how much damage it can do. The bird doesn't 
want to hurt us.
    We have seen, as you heard from the other witnesses, that 
the attacks are getting worse. They are getting worse at a rate 
of, I think close, to an order of magnitude each year and a 
half. The bird isn't getting that much better, but the Vitek 
Bodens of the world are getting that much better, and I think 
we ought to be ready.
    Thank you for your time.
    Mr. Thornberry. Lots of subject matter for further 
discussion, which I suspect we will get to.
    [The statement of Mr. Paller follows:]

                   PREPARED STATEMENT OF ALAN PALLER

Chairman Thornberry, Congresswoman Lofgren, distinguished Members of 
the Committee, I appreciate the opportunity to appear before you today. 
It is particularly gratifying to us in the cybersecurity field, Mr. 
Chairman, that a person with your foresight, vision and leadership in 
homeland security has decided to take on the challenges of 
cybersecurity. I am not sure whether my colleagues are aware that six 
months before the September 11, 2001 attack, you introduced a bill in 
the House of Representatives that called for consolidating the federal 
agencies responsible for protecting our homeland. You saw the threat 
clearly; you spoke eloquently of the technological dimension, but it 
took a major attack before others were able to share your vision. I am 
very hopeful that in the cybersecurity field progress can be made more 
quickly. With your leadership and that of Congresswoman Lofgren, who 
has been one of the most effective Members of Congress on high tech 
issues and whose district includes one of the largest concentration of 
computer companies and cyber security expertise anywhere in the world, 
Congress can help the Department of Homeland Security lead a rapid 
effort to reduce this nation's vulnerability to cyber attacks, turn the 
tide against cyber attackers, and increase our speed and effectiveness 
in responding to and recovering from the attacks that do succeed.
My name is Alan Paller and I am director of research at the SANS 
Institute. SANS is an educational institution. Last year, more than 
14,000 system administrators and computer security professionals, from 
nearly every government agency and large commercial organization in the 
US and from 42 other countries, spent a week or more in SANS immersion 
training. They learned the details of attacks that will likely be 
launched against them, learned how to build and manage defenses for 
those attacks, and learned how to respond once an attack has occurred. 
SANS 38,000 alumni are on the front lines in the fight against cyber 
attacks. Once they have returned to work, we continue to support them 
and more than 120,000 of their coworkers with early warnings of new 
attacks, weekly summaries of new vulnerabilities and a research program 
that makes available more than 1,400 timely security research briefs.
In 2001, SANS created the Internet Storm Center, a powerful tool for 
detecting rising Internet threats. Storm Center uses advanced data 
correlation and visualization techniques to analyze data collected from 
more than 2,000 firewalls and intrusion detection systems in dozens of 
countries. Experienced analysts constantly monitor the Storm Center 
data feeds and search for anomalies. When a threat is detected, the 
team immediately begins an extensive investigation to gauge the 
threat's severity and impact. Critical alerts are disseminated to the 
public via email and through the online press.
In my remarks today, I will share some of the successes and failures of 
the defensive community in responding to large cyber attacks, and I'll 
suggest ways that the lessons we learned might lead to effective 
initiatives for the Department of Homeland Security in improving 
response, recovery, and prevention.
Five months ago today, the Slammer worm attacked computers running 
Microsoft's widely used database management system. A worm, for those 
not steeped in the jargon of cyber security, is a malicious program 
that spreads from computer to computer without requiring users to take 
any action at all. Slammer represented a significant advance in attack 
technology. At its peak it was scanning 55,000,000 systems per second 
and that was 100 times as fast as Code Red scanned in July, 2001. 
Slammer infected 90% of the systems that were vulnerable in the first 
ten minutes of the attack and ultimately infected a total of 75,000 
hosts. Slammer reminded the defensive community that we are engaged in 
an arms race with the attackers--one the attackers are likely to 
continue for many years. It did not contain a destructive payload; if 
it had thousands of organizations would have lost valuable data.
Slammer's high intensity scanning continued to wreak havoc for days. It 
surprised many people when it showed them that the computer systems 
that make up the nation's critical infrastructure for banking and 
transportation and emergency management - that some naively presumed to 
be somehow separate and isolated - are actually connected to the 
Internet and can be significantly affected by Internet attacks. For 
example, because of Slammer, Bank of America's ATM machines stopped 
dispensing money, Seattle's emergency 911 system stopped working, 
Continental Airlines had to cancel some flights because its electronic 
check-in system had problems, and Microsoft couldn't activate user 
licenses for Windows XP. Those were just a sample of the more high 
profile problems. Many other organizations were damaged by Slammer, but 
they managed to stay out of the press. The cult of secrecy that 
surrounds cyber attacks is part of the challenge we face in determining 
costs and in helping people recover.
On a more positive note, Slammer brought our focus back to two valuable 
lessons. The first, learned in the summer of 2001 as we responded to 
the Code Red worm:

1. Federal and private security specialists, working together, can 
create a synergy that doesn't appear to exist when they act separately.
Slammer did a lot of damage, but it did much less damage than it would 
have if government and private industry had not worked together to 
fight it. A team of private sector experts from large internet service 
providers (ISPs) discovered the worm when it started flooding their 
networks. Within minutes they contacted technical experts in government 
and CERT/CC (Computer Emergency Response Team Coordination Center), and 
those three groups joined forces to analyze the problem. They learned 
that the worm targeted a specific entry point on each computer, and 
that they could stop most of the damage it was doing by blocking 
traffic to that entry point. The ISPs reconfigured their networks to 
stop all network traffic destined for the worm's target entry point, 
and their customers--at least the ones that did not have their own 
infected systems--stopped feeling the pain.
For Slammer, early discovery, effective analysis and widespread 
notification led to immediate extensive filtering of the worm traffic, 
and that action protected many organizations from being overwhelmed. 
This worked so well on Slammer that one might well ask why we do not 
use the same approach on all large, automated attacks. The answer is 
that two barriers get in the way and both can be eased by Department of 
Homeland Security initiatives.
The first barrier is that the high speed filtering used for Slammer 
does not work for many other attacks. Slammer exploited a special path 
that could be blocked easily by existing network routers, without 
harming valid traffic. The Code Red worm, on the other hand, exploited 
the path universally used to request web pages. Anyone who blocked that 
path would stop all web traffic to their site. For an organization that 
uses the web for business purposes, blocking that path could inflict 
more damage than the worm could cause. To filter for Code Red and other 
worms that use popular paths, the network infrastructure used by large 
companies and ISPs needs to be upgraded so that it can selectively 
block malicious traffic. That type of high-speed, intelligent filtering 
is not yet widely available from the network equipment manufacturers. 
The Department of Homeland Security could help speed the availability 
of high speed filtering routers through research support and targeted 
procurement.
The second barrier is that the government and the rest of the defensive 
community cannot respond to attacks if they do not know that attacks 
are occurring. Slammer flooded huge numbers of systems, so it was easy 
to find. Attacks aimed at electric power grids or e-commerce sites or 
emergency response networks are not nearly as visible. Early warning 
for targeted attacks is possible only if the first victims choose to 
report the attacks rapidly. But just as people infected with 
communicable diseases are loathe to make spectacles of themselves, so 
victims of cyber attacks can see insufficient benefit in making their 
pain public even to government officials who promise not to tell 
others.
How can we increase prompt reporting on cyber attacks? Let's take a 
closer look at the medical analogy. People who become sick, even with a 
highly communicable disease, do not usually call the Center for Disease 
Control. But their doctors do make the call, and the doctors maintain 
the confidentiality of their patients' identities. In the cyber defense 
arena, consulting companies serve as doctors to help companies analyze 
cyber attacks and recover from them. This year, the Department of 
Homeland Security (DHS) is spending millions of dollars to create a 
Cyber Warning Information Network (CWIN) that connects organizations 
active in cyber defense so they can get early access to important 
information. To ensure the ``doctors'' report attacks to the DHS, the 
Department could require that organizations that want access to CWIN 
must commit to providing immediate notification to DHS whenever they or 
one of their clients is attacked, without naming the victim.

Slammer also reminded us of another significant lesson we learned in 
responding to Code Red and Slapper and many other worms:

2. A severe shortage of individuals with technical security skills 
combined with a lack of management focus on security issues, prevents 
many organizations from fully recovering from attacks and improving 
their security. Better training is a partial solution, but joint action 
by government and industry to standardize security configurations and 
automate patching is already having a much larger impact.
Most attacks that do a lot of damage, like Slammer and Code Red, 
exploit vulnerabilities that are widely understood and for which 
remedies are known. Therefore it is surprising that two years after the 
Code Red worm swept through the Internet infecting vulnerable systems, 
30,000 of those systems are still infected and still searching for 
other systems to infect. The problem is that many organizations that 
own computers have no one who understands how to secure those 
computers. When we find a Code Red infected system and ask why it 
hasn't been fixed, we usually hear that the system owner didn't know 
that it is attacking other systems and also that there is no one with 
security skills available to fix it.
Even large organizations are security-challenged. Slammer's victims 
included several huge security-sensitive organizations; Bank of America 
and Microsoft are examples. Their systems were flooded because 
vulnerable software had not been patched and because they had not 
configured their firewalls to block unwanted traffic from the Internet. 
It is unreasonable to blame the software users in this case, because 
Microsoft made installing this particular patch an arduous task, much 
more difficult than installing the underlying software in the first 
place. And most users and system administrators had never been told 
they should block the offending traffic at the firewall.
Training is part of the answer. Security-savvy system administrators 
are very effective at keeping their systems running smoothly while 
maintaining their defenses, and several large organizations are now 
requiring all system administrators to demonstrate their mastery of 
security as a prerequisite for getting control of the systems. However, 
most computers are not managed by system administrators. They are 
managed by busy people with other responsibilities. I do not believe it 
is fair or wise to expect that every graduate student or scientist or 
librarian who tries to install a workstation should become a security 
expert. And what about the grandparents and teenagers and all the other 
people who simply want their computers to work? We cannot ask them to 
develop and maintain the technical security skills needed to configure 
their systems safely and keep them secure.
A better solution is to remove the pain of security by centralizing and 
standardizing safe configuration and security patching. Large 
organizations can do that themselves, as the Department of Energy and 
others are demonstrating. But few other organizations have the time and 
talent. Only the companies that sell computers and software are 
positioned to make security configuration and patching inexpensive and 
effective.
Happily for all of us, vendors are beginning to recognize that security 
is a critical market need, and they are putting their development 
dollars to work to help their clients with security. Three weeks ago at 
a Federal Trade Commission workshop, Dell announced it would sell 
Windows 2000 systems configured in accordance with consensus security 
benchmarks, improving security and reducing the security burden for 
Dell customers. Similarly, Oracle and the Department of Energy are 
partnering to deliver safe configurations of Oracle software to all 
users at all Department of Energy laboratories and offices. Other 
Oracle users will benefit as Oracle makes the safer version available 
to the general public. Both of these efforts were facilitated by an 
extraordinary public-private partnership involving the National 
Security Agency, the Defense Information Systems Agency, the Department 
of Energy, NIST, FedCIRC, SANS, and the Center for Internet Security 
(CIS). The CIS partnership has developed consensus benchmarks for safe 
configuration of many common operating systems and applications. Dell, 
for example, said that they would not have been able to create the new 
safer version of Windows 2000 without the work of the CIS partnership.
And automated patch delivery is maturing. For example, Red Hat delivers 
security updates for its software automatically as does Microsoft for 
some its Windows XP software.
It is common practice today for vendors to sell software and hardware 
with insecure configurations. Most users are not security experts and 
therefore are not aware of the configuration dangers, nor do they have 
the knowledge to find and apply appropriate security patches. All that 
means that millions of computers are at risk, and each of those 
vulnerable systems can be used by attackers to launch major denial of 
service attacks. With active leadership by the vendors and the federal 
government, worms and automated attacks will be denied easy access to 
all these systems. So what can the Department of Homeland Security do 
to accelerate this beneficial trend? DHS can require its vendors to 
deliver safe systems out of the box and ensure that patches are 
delivered automatically. As other federal agencies and companies follow 
the DHS lead, the market will reward vendors that take security burdens 
off their customers' shoulders.

In your letter of invitation, you also asked me to address the 
challenges in estimating the damage done by cyber attacks and the 
strengths and weaknesses of simulations and exercises for cyber 
security. I'll answer both briefly because the general knowledge base 
about both is limited.

How Much Do Cyber Attacks Cost The Victims?
In the MafiaBoy denial of service attack on eBay, Yahoo, Dell and 
several other marquee web sites in February of 2000, each victim 
confidentially reported its actual losses to the FBI. I know a little 
about that case because I was the expert witness for the prosecution in 
MafiaBoy's trial. The technical attack on each victim was basically 
identical, and the outages were roughly the same length, but victims 
reported radically different estimates of damage. Their estimates 
ranged from zero to $5,000,000 depending on whether they included lost 
revenue, damage to reputation, management time, the direct costs of 
staff involved in the investigation and recovery, or none of those. 
Estimating losses is much more of an art than a science.
Another example of the difficulty of estimating losses was illustrated 
by the Nimda worm that raged through the Internet seven days, nearly to 
the minute, after the first airliner crashed into the World Trade 
Center. I interviewed more than a dozen victims confidentially, and 
they consistently told me the damage they incurred was between $300 and 
$700 per system--the actual cost of removing the infections from the 
systems and reinstalling software and data. For 150,000 infected 
systems, that adds up to about $75 million dollars. Yet within days of 
the attack, an economics firm was telling the press that the price tag 
was $835 million. Other people gave estimates exceeding $2 billion. 
Before policy makers can rely on any damage assessments, a common 
protocol for damage estimation is needed. DHS can help develop that 
protocol.

How Important Are Simulations and Exercises?
Simulations and exercises are both valuable for improving America's 
effectiveness in responding to cyber attacks. The mathematical models 
simulating worms, created by organizations like CAIDA (Cooperative 
Association for Internet Data Analysis) at the University of 
California's San Diego Supercomputer Center, were instrumental in 
giving policy makers effective projections of the numbers of systems 
that would ultimately be infected by various worms. That kind of 
knowledge is extraordinarily valuable in the pressure cooker atmosphere 
of a worm infestation.
Simulating attacks through real world exercises are just as important 
for two reasons. The first reason is that emergency response systems 
rarely work as they were designed to operate. A few months ago a past 
deputy director of the House Information Systems (now called House 
Information Resource) told me a story about an exercise testing their 
fire emergency response plans. He wanted to ensure his organization 
would respond appropriately if a fire broke out in the building, so he 
scheduled a fire drill. When the alarm went off, most people, following 
patterns most of us developed in grade school, left, but no one in the 
computer room reacted at all. In a real fire they would probably have 
died. The problem: for some reason, in wiring the computer room, the 
electricians disconnected the power to the horns that sounded alarms. 
The computer room staff never heard the alarm. Without an exercise, no 
one would have known.
The other reason to run exercises involves the cyber dimension of 
physical attacks. Recall that in the aftermath of the September 11 
attack, not only buildings were destroyed. The networks and systems of 
the New York Stock Exchange and all of Wall Street were a shambles. 
Without rapid reconstitution, the negative economic impact of the 
September 11 attack would have been even greater than it was. Verizon 
staff worked with the city's leaders 24 hours a day every day to 
rebuild the telephone and cyber networks needed to get trading 
restarted on Wall Street. They did an extraordinary job under difficult 
conditions, and a substantial part of their success was made possible 
because Verizon had already built a strong relationship with the 
mayor's office and the emergency response teams through planning and 
exercising disaster recovery protocols. Most cyber teams have no such 
connection with first responders and they need to know one another 
before an incident occurs..
We cannot have those groups exchanging business cards after an attack. 
The first responders will do a better job of planning if they know the 
cyber experts who can help them recover their networks and the issues 
those people will face when responding to emergencies. At the same 
time, the cyber people will be better team members if they understand 
what the mayors and governors need and jointly develop the action 
plans. We need to give the cyber people a seat at the table when 
planning for emergencies. These groups should learn from each other in 
advance, test communication paths and their ability to work together, 
identify problems and potential solutions, learn how long things take 
and how to speed them up. Exercises are the best way to make that 
happen.

What Can DHS Do?
Finally, you asked about how the Department of Homeland Security should 
work with the private sector in improving response and recovery. Let me 
summarize two key suggestions that go beyond the recommendations I 
covered earlier:

1. A central goal of the Department's cyber initiative should be to 
provide a single, technically savvy coordination point that the experts 
can rally around in responding to major attacks. I have been extremely 
impressed by the quality of people the Department has recruited to set 
up and run the new Cyber Security Tracking, Analysis, & Response Center 
(CSTARC). That group proved it can do extraordinary work in bringing 
together the public and private sector, both in responding to a 
vulnerability in sendmail and in the Slammer worm response. The key to 
CSTARC's long-term success is establishing a core group of very skilled 
people who then build a network of experts inside and outside 
government. Through exercises and responding to actual attacks, this 
community of cyber first-responders can create protocols and allocate 
responsibility for isolating malicious code, analyzing it, developing 
automated diagnostic and repair tools, and disseminating the tools and 
knowledge to the right people very rapidly.
2. As important as response and recovery are, prevention should have 
equal priority. DHS should allocate a large share of its time, 
attention, and budget to reducing the cyber vulnerabilities this nation 
faces. DHS can help by encouraging and supporting development of 
consensus benchmarks for safer configurations, but the Department's 
greatest impact on vulnerability reduction will come from persuading 
vendors of software, hardware, and network services that the government 
is serious about buying and running safer systems. The federal 
government is the only buyer large enough to get the attention of big 
vendors. DHS should make it clear, through both talk and action, that 
success in selling to the federal government is contingent upon 
delivering safely configured systems and automating the process of 
keeping those systems secure over time.
Thank you again for inviting me today and for your leadership in 
holding these hearings. I would be happy to try to answer any questions 
you might have.

    Mr. Thornberry. Let me reserve my questions and turn to 
Chairman Boehlert.
    Mr. Boehlert. I thank all the witnesses for serving as 
resources. I really appreciate it. We have got a lot to learn. 
I am reminded of the story of the guy looking at his house 
burning down who turned around and said to the first person he 
saw, Where do I buy a fire extinguisher?
    I would agree with your analysis on the Chairman. He gets 
it. My concern is not enough people get it in positions of 
responsibility. I think we are beginning to get it, and it is 
appropriate that we have this meeting in this room, the Science 
Committee room, because in January of 2001 we introduced the 
Cybersecurity Research and Development Act, a very significant 
undertaking calling for the authorization of a lot of money, 
hundreds of millions of dollars, at a time when we are 
struggling to keep the budget balanced.
    But quite frankly the response, except for people who get 
it--and Mr. Smith right next to me gets it--the response was a 
muffled yawn; oh, we have got other things, bigger items on our 
agenda. 9/11 came. Then the House passed this new multimillion 
dollar--hundred million dollar authorization by a vote of, 
like, 400 to 12. There were 12 that still don't get it.
    So now we have this Cybersecurity Research and Development 
Act. We now have an agency with responsibility for coordinating 
the cybersecurity efforts of the Federal Government, the 
National Science Foundation. We have NIST engaged. DHS is 
engaged.
    My question is, do you think enough people in this town get 
it? I know the President does. He couldn't add his signature 
fast enough to that legislation that we passed, but still we 
had these massive authorizations, and the appropriations that 
are following are minimal.
    And Dr. McCrery over at DHS, I mean, part of the education 
process with him, the new Under Secretary for Research and 
Development, they have got to devote more resources to 
cybersecurity, because you can't build a building on the tenth 
floor. You have got to start with the foundation. We don't have 
students in our great universities with advanced-degree 
capability dealing with cybersecurity. There are a whole lot of 
problems. Do you think that people in this town are beginning 
to get it? Not fast enough, but beginning to get it?
    Mr. Paller. I get asked frequently ``How can I get the 
President of my company to pay attention to security?'' It 
happens often. I had two speeches yesterday and it came up in 
both of the speeches.
    Executives get it, but they don't internalize it, because 
it hasn't touched them where they live yet. As soon as it does, 
as soon as it touches them, everything changes, just the way 
everything changed after 9/11. So, no, I don't think this town 
gets it, and I don't think argument is going to get them there. 
I wish it would. I wish this kind of publicity would do it, but 
I think it is events that educate people. I do think we need to 
educate them about the events. Too few people know about that 
Slammer worm and how much damage it did to the Seattle 911 
system. I think we need to teach them so that they feel the 
events are real. But, no, I don't think most people feel 
internally that cyber threats matter to them at least not 
enough to invest in effective defenses.
    Mr. Boehlert. So many people think in terms of 
cybersecurity and they think they want to protect themselves 
against some brilliant 15-year-old hacker, but it is so much 
more than that. Quite frankly, I don't think it is far-fetched. 
It is not stuff of Buck Rogers to suggest that the next war 
could likely be fought without bullets and guns. It could be 
fought on computers.
    Mr. Paller. There is no question that our nuclear systems, 
that our electrical systems, that our infrastructure can be 
attacked through cyber means.
    Mr. Boehlert. The whole economy is dependent on it.
    Mr. Paller. And our banking system. But persuading people 
of that when it hasn't happened to them yet is just very 
difficult.
    Mr. Boehlert. You are a student. You watch what is 
happening in this arena, particularly in areas of assigned 
responsibility. Now, do you feel that under this new 
Cybersecurity Research and Development Act, the Federal 
Government is moving in the right direction with having a 
coordinated source of responsibility--the National Science 
Foundation for the R&D part of the effort and the education 
part of the effort--because if we don't train more people who 
have more knowledge about this subject and get them in 
positions of responsibility, we are still going to take a ho-
hum attitude.
    Mr. Paller. That bill was wonderful, and Carl Land over at 
NSF is doing a great job at concentrating the funds. The money 
you are spending on training students is very effective, but--
appropriations are tiny, so we haven't yet seen how much good 
that money can do.
    Mr. Boehlert. Well, you are preaching to the choir here, 
because we are all going to push for a lot more appropriations.
    Now, part of the problem has been--I remember talking a few 
years ago to a high official of a major credit card company, 
and he casually dropped the thought that they lose about $100 
million a year to fraud and abuse, and he said, But they view 
that as an acceptable loss because it would cost them more than 
100 million to prevent the $100 million loss.
    Well, I think that thinking is changing. But the problem 
has been and the whole industry's effort has been to get a 
product to the market that is faster and cheaper, and security 
hasn't even been factored in. Do you see any trend changes that 
customers are demanding that security be built into the product 
and--for example, like I am demanding that I have air bags in 
my car and seat belts, and am willing to pay a couple bucks 
more for it. Do you see the market changing?
    Mr. Paller. Yes.
    Mr. Schneier. I don't very much, unfortunately. And the 
problem is--I mean, I can hold two products; one is secure and 
one isn't. They use the same marketing speak, the same words. 
You, the consumer, can't tell the difference, and customers are 
just as happy with promises of security than reality as 
security. There is not much difference. And what I find--and 
this is--I am struggling with this. I mean, there are lots of 
great products. The average firewall out there is not installed 
properly. You know, good software design practices are not 
being followed. I mean, we have a lot of things we could do we 
are not doing. Policy, no one has a good policy. They exist. We 
can do this, but companies don't seem to be getting the 
message.
    Slammer is a great example. It did lots of damage, all 
sorts of things. The average CEO never heard of it. It didn't 
affect him. Your comment on Visa I think is perfect. Visa is 
saying, ``Look, we have these millions of dollars of losses it 
will cost us more to fix than to eat.'' That is a perfectly 
rational thing for a business to do. You have a risk. You 
either fix it or accept it, depending on the value. Maybe you 
insure it if that is cheaper.
    And so my problem is not the technologies. There are 
technologies. Technologies can improve. Education is great, but 
unless there is a pull, unless businesses have it in their best 
interest to produce this secure software, to build secure 
networks, they are just not going to do it. They are going to 
say, like Visa, you know, the losses are not great enough. But 
if possible, there were criminal penalties, if there were 
liabilities for identity theft, if the losses were greater 
because of whatever government mechanisms we like--and 
depending on your politics, you pick different mechanisms. It 
doesn't matter which ones you pick. If we raise the penalties, 
then the cost of fixing becomes comparatively cheaper and more 
companies will--Visa will say, hey, we are going to improve our 
security, because now it is cheaper than letting it go, because 
the penalties of letting it go are greater.
    To me, the business process is broken. It is not the tech.
    Mr. Thornberry. The gentleman from New Jersey, Mr. Andrews.
    Mr. Andrews. Thank you, Mr. Chairman. I would like to thank 
each of the three witnesses for outstanding and substantive 
testimony that has really added a lot to this discussion.
    Mr. Schneier, I wanted to talk to you about your 
conclusions about what I believe you characterized as an 
exaggeration of the threat of cyber terrorism, if I read your 
articles correctly. I agree with you that the ability to use 
the Internet as a tool of murder, a tool of death, is 
fictional, largely fictional. It may happen someday, but it is 
largely fictional. Our concern, though, tends to be a 
coordinated attack.
    I notice in your June 15th article, in the second 
paragraph, you say: The software systems controlling our 
Nation's infrastructure are filled with vulnerabilities. Our 
concern, frankly, would be a coordinated terrorist attack 
where, for example, the telecommunications system would be 
compromised in a city where simultaneously four or five 
explosions might occur which would disable people from calling 
the police, calling the ambulance, and so forth.
    And then the third is secondary-level response, would be 
the economic damage that will be done to the economy of that 
area. Do you agree that that is a viable threat?
    Mr. Schneier. It definitely is. You think of 9/11, that is 
what happened. The World Trade Center fell on top of most of 
the telecommunications infrastructure of lower Manhattan. So we 
see that, and, you know, I would give--if I were a terrorist 
and reasonably clever, I would think of those sorts of things. 
So for me, the cyber part is sort of in the noise--I mean, when 
you fly a plane into a building, making people's phones not 
work is kind of like the extra candles on the cake.
    Mr. Andrews. Of course our concern is not that they would 
fly into the building and make someone's phones not work, but 
that they would find a way through the cyberspace to make the 
phones not work and then couple that with a series of fairly 
low-tech physical attacks that would create chaos and panic and 
economic dislocation. Do you think that is a viable scenario?
    Mr. Schneier. I think it is definitely worth worrying 
about. And remember, attacks are getting worse. We are all 
saying that. So even if I say, Look, it can't happen today, 
call me back in 18 months and I will say, my God, this is a 
problem.
    Mr. Andrews. One of the common problems I saw from each of 
you was the government's use of purchasing power to raise 
standards of the cyber wall, if you will. I think Mr. Boehlert 
has done an extraordinarily good job by taking care of the 
research piece in the legislation that he got enacted last 
year. I think we are deficient in the use of that purchasing 
leverage, as well as we should. I have enormous faith in the 
private sector of this country in this area. I think this is 
one area where the private firms, the small ones and the large 
ones, the Microsofts and the ones we don't know the names of, 
have done an extraordinary job in providing technological 
solutions. And I think Mr. Schneier said a few minutes ago it 
is a business problem, not a technological problem, to make 
those solutions even more viable.
    How would each of the three of you suggest that we reorder 
the Federal Government's purchasing specifications and use of 
purchasing leverage so as to enhance cyber protection for the 
critical infrastructure providers not in the governmental 
section? To put it in plain English--and then I will stop--is 
how can we increase the quality and lower the price of a 
protective product that Verizon could buy or that the people 
who run the power grid could buy so they could make us more 
protected?
    Mr. Paller, would you like to start with that?
    Mr. Paller. Sure. I actually see change in procurement 
happening right now. You will hear an announcement in the next 
few weeks that the Department of Energy just awarded a huge 
contract to Oracle, and in it they required Oracle to deliver a 
safely configured version of Oracle's database software. Oracle 
agree to it because DOE had a lot of money to spend, and what 
made it possible was this consortium I talked about, and 
Congressman Turner talked about, that has created standards, 
benchmarks, so that DOE could order software with those 
benchmarks.
    The key fact here is that, when I mentioned the DOE 
contract to the CIO at Justice, who is also the chairman of the 
CIO Security Committee, his ears perked up, and he said, I have 
got to get on that.
    The hunger to use procurement for improved security is 
there. The actions of the vendors are not quite there yet. They 
honestly say ``We can't do that until you guys agree on what 
you mean by 'safer,' '' and that agreement is what NSA and NIST 
and DHS have been taking a lead in creating. Once you get that 
kind of leadership, I think you will find that the buyers are 
hungry for safer systems and will use procurement to get them.
    Mr. Andrews. So you see our role as setting viable and 
constantly improving technological standards that the market 
will meet if we set those standards correctly?
    Mr. Paller. I see your role as encouraging the industry and 
government to work together to do that.
    Mr. Andrews. To do that, not to buy products that don't 
meet those standards for our own use. Correct?
    Mr. Paller. Yes.
    Mr. Andrews. Mr. Pethia.
    Mr. Pethia. I think--I have two parts to the solution from 
the way I see it. First of all, the idea of standards I think 
is exactly on track. The problem with standards is the devil is 
always in the details, and trying to have a set of standards 
that actually demonstrate improved security is sometimes hard.
    So I think in the short term there are obvious kinds of 
product problems we know about. We have seen them year after 
year after year after year. We know about configuration 
weaknesses. We know about certain kind of coding errors. We 
know about certain kinds of testing problems. Simply setting a 
set of standards to deal with that class of problem alone I 
think is one step that takes us a long way towards a solution, 
and in fact we will probably get rid of about 80 percent of the 
vulnerabilities that we see out there.
    Once we go beyond that, however, we are going to find that 
the attackers will understand how to attack even those more 
secure systems, and that second step requires additional 
research, because we don't know how to build--.
    Mr. Andrews. My time is up. Thank you.
    Mr. Schneier, if you want to--then my time is up.
    Mr. Schneier. If you are a Fortune 500 company, you would 
standardize in a few good products, you would write yourself a 
really good purchase order and demand features that you want. 
That is what you should do. The devils are in the details, but 
you guys are a consumer of security. Unlike a lot of other 
areas of security, your problems are industry's problems. It is 
the same threats, the same attack tools, same hackers. So 
everything you do immediately benefits us. It is not like you 
are buying a missile, where it is all your requirements and we 
don't care.
    So I would like you to--I mean, with the help of whoever--
develop purchase orders, develop specifications that meet your 
security needs, and demand them. I mean, you are going to buy a 
whole lot of products, and companies will meet them. I agree 
industry can do this if there is demand, and once you do, they 
are going to offer those same products to us. They are not 
stupid.
    Mr. Andrews. Thank you very much.
    Mr. Thornberry. Thank the gentleman.
    The gentleman from Texas, Mr. Smith.
    Mr. Smith. Thank you, Mr. Chairman.
    Let me address my first question, I believe, to Mr. 
Schneier and Mr. Pethia, and this is a question that really 
comes from a number of meetings that I have had with 
constituent high-tech companies. I represent literally hundreds 
of high-tech firms and basically they tell me what I also hear 
here in Washington at various briefings, and that is that a 
cyber attack in some shape or form, which we know had been 
occurring, are going to continue to occur and inevitably they 
are going to be successful or semi-successful one way or the 
other. Also, as we know, a cyber attack using cyberspace might 
be in conjunction with a more conventional type of attack as 
well.
    But my point is this: They think we will be--that an attack 
will be successful. We don't know whether yet it is going to be 
planting viruses in computers, disabling energy grids in 
California or Texas or wherever, but their point is that we 
have the technology available now, and in many many cases these 
individual high-tech companies are giving the examples of that 
kind of--those kinds of solutions, but that the government is 
not yet taking advantage of the high-tech solutions that are 
available right now.
    And I would like for you all to address really two 
questions. One, to follow up on Mr. Andrews' questions, what 
kind of attack do you think is most likely? And, two, do we 
have the capability to defend ourselves against it? And if not 
or if so, are we using all the high-tech kind of solutions that 
are available to the best of our ability?
    Mr. Pethia. A likely attack, I don't know how to predict, 
other than the one lesson I think I learned from 9/11 is that 
we have an adversary who is patient, who is willing to do 
homework, who will do surveillance, who will find weaknesses, 
and wherever those weaknesses are that they think they can get 
the biggest benefit of, they will take advantage of. But I 
don't know how to predict human behavior beyond that, but I 
think it is going to happen someday.
    As far as do we have the technologies we need to protect 
ourselves, the answer is yes and no, unfortunately. Today if 
you are a very capable system operator and you are willing to 
invest a lot of time and money and you are willing to do things 
like install firewalls, intrusion detection systems, 
authentication devices, one-time password technology, use 
encryption in the right way, et cetera, et cetera, et cetera, 
then, yes, you can do a good job of protecting your systems. So 
that part of the answer is yes.
    But when you put all that together and understand how 
expensive it is and how complicated it is and understand that 
any mistake in that whole configuration at any point can make 
your systems as vulnerable as if you hadn't done anything, then 
the answer, unfortunately, is no.
    But we can secure our systems, but the problem is today it 
is just too hard and it is just too expensive.
    Mr. Smith. Mr. Schneier.
    Mr. Schneier. I agree with all of that. The great military 
strategist von Clausewitz would call this a position of the 
interior. All right. The defender is a unit, and he has to 
defend against every possible attack. The attacker just has to 
find one way in, one weakness. So in that way, the defender is 
at an enormous disadvantage.
    All right. The attack that is likely to come is the attack 
you didn't defend against, right? Because if I am the attacker, 
I am not going to attack you where you are defended. So sort of 
by definition, there are going to be weaknesses. Unless you 
defend against absolutely everything, right, there will always 
be a weak link.
    I would assume the kind of attacks that are coming are the 
kinds of attacks you have already seen and then the new ones 
you haven't seen yet. They are going to be all over the map. We 
probably have the ability to defend against some of them. These 
comments were really dead on. I mean, yes, you can--all right. 
If you took your computer and you turned it off and buried it 
underground, no one could attack it, but it is not terribly 
useful. Essentially by the very fact of we are using our 
infrastructure, we make it vulnerable. Right.
    Your house would be more secure if there were no door, but 
you need to put a door in. Therefore, there are insecurities. 
You can put a lock on your door, now there are all sorts of 
problems.
    Are we doing everything we can? Of course not. Because 
everything we can doesn't make any sense to do. There is always 
going to be a balance. Right. What is the risk, and then how do 
we defend against it rationally? And depending on who makes 
that balance, you are going to see different sorts of things. 
Right.
    The shed in my backyard doesn't have the same lock as my 
front door. The risks are really different. And this is where I 
sort of talk about making the risks--getting the equation 
right. A lot of the risks we are facing are residual risks. 
They are not risks that the companies are facing. So they are 
going to look at a lot of these measures, that great laundry 
list, and say that is too expensive, too complicated. We don't 
have that kind of risk. They don't. But we as a Nation do, and 
that is what scares me.
    Mr. Smith. Thank you for your answers on a complicated 
subject. Thank you, Mr. Chairman.
    Mr. Thornberry. Thank you.
    Mr. Etheridge.
    Mr. Etheridge. Thank you, Mr. Chairman.
    And let me thank each of you for being here today. This is 
not only very important but very instructive. Let me follow 
that line, but in just a little different way; because on the 
first hearing, the Chairman will remember, I asked a question 
about a number of our software now--because we are dealing with 
international companies--is done overseas. So in my State and 
nearly across the country now, we have talked a little bit 
about banks and others, because they are hiring a lot of 
foreign firms to write software for the businesses. But 
recently several banking firms have been instructed by their 
security specialists to start advising financial institutions 
to certify the integrity of the software that is written 
overseas, as you can appreciate.
    But me question is this: Do you believe software sabotage 
is a real threat? And number two, how will a company check the 
software to ensure the integrity of it? Who wants to tackle 
that one?
    Mr. Pethia. I think the problem of malicious code embedded 
in software is a real problem, and I don't know that offshore 
has anything to do with it. I think we have bad guys here as 
well as offshore. The big problem, however, is detecting that 
malicious code, and frankly, we don't have good ways to do 
that.
    Even in cases where the source code of the software is 
available--and often it isn't--even there it is very difficult 
to take a huge application, which may have literally millions 
and millions and millions of lines of code, and find the 20 or 
30 that cause some back door to open to let the bad guy do what 
he will do. So that is another area where I think we need a lot 
of research that helps us understand how to build software that 
is free of these kind of defects, or if they are there, that 
they can be detected. Frankly, the industry or the academic 
community doesn't know how to do that now.
    Mr. Schneier. Well, and luckily you get virulent agreement 
among the panel here. Everything you said is right. I don't 
think international makes it worse, although you can certainly 
imagine a concerted effort. I don't know, I am not impressed by 
that. We see a lot of sabotage for personal gain, for 
extortion. I mean, I can mail you dozens of real criminal 
cases. He is right. It is very hard to detect this.
    In a former life, I used to do consulting where I would 
look at source code, and I would tell companies, figure you 
should spend as much on evaluation as you spend on development. 
Now, of course, companies are never going to do that. It is 
just too much. But that is the sort of thing you have to think 
about. And when you look at, you know, sort of high-risk code--
now, code in Boeing aircraft, some code that the military does, 
maybe for nuclear launch codes--they do that. They will spend 
as much money on security and safety testing as they do on 
every other aspect of the project, because it is really 
important for them.
    Now we are sort of entering a world where every bit of code 
is slowly becoming that important; and, no, they are not ready 
to deal with that. That is going to be a big deal, and it is 
definitely worthy of concern.
    Less from the, you know, I am going to take down the 
Internet and I think more crime. Again, I think the risk of 
cyber terrorism is overstated, and we grossly underestimate the 
risks of cyber crime. We are seeing a lot more crime on the 
Net. So when I look at these attacks, I am worried about the 
ones that are criminally motivated, I am going to put something 
in the code, and then I am going to call the company and say, 
hey, give me a million dollars and I will tell you where it is. 
That kind of thing has been done.
    Mr. Etheridge. Let me follow that up, because you indicated 
you touched on this earlier, that the statistics indicate that 
about 80 percent of the critical cyber infrastructure is in 
private hands. And I think in most of the testimony of almost 
all three of you, you had suggested that how you work on that 
is to encourage software vendors to create better products, and 
that is really what we are about. And would you expand just a 
little bit more? You touched on it earlier about what the 
Federal Government can do.
    Mr. Schneier. It is two things. We need to encourage 
software vendors to produce better products. Then on the demand 
end, we need to encourage the consumers of those products to 
use them securely. I mean, there are lots of secure products 
that nobody is buying. And there are lots of insecure products 
that everyone is buying. And the problem--the reason we are 
here is because it is not in the best financial interest of 
either the software vendors or the network owners to increase 
their security.
    Mr. Etheridge. Let me follow it up, because I think this is 
critical. If there were--let's say I go out and buy a piece of 
equipment for my home. There is no coding today, whether I use 
that in my home or whether I use it in business or if I am with 
one of the largest banks, but if there were a code attached to 
it like a 1, 2, 3 to indicate a level of security or something 
on it, as you do with some other things, is that the kind of 
thing you are talking about would have an impact?
    Mr. Schneier. Well, I mean, completely finessing how you 
would get that code, I mean, magically there and magically 
accurate--I mean, that would at least provide some indication 
of quality.
    You know, what I want to see are the business processes 
getting involved. As a security guy, I can talk with a security 
person who says, yes, I am desperate for more security but when 
I go to my CEO or CFO they say the risk isn't that great, it is 
cheaper for us to ignore it than to fix it.
    Well, that is because the risk is primarily in other 
people's hands. If I am a company that owns a big database of 
credit card numbers, if it is stolen, if there is identity 
theft, it is not my problem. It is the problem of the people 
whose identity was stolen. So I am not going to protect it to 
the degree of the sum of the individual risk of my customers, 
because it is not my risk.
    And, I mean, there are several ways we have dealt with this 
in other areas of society. You know, in environmentalism, we 
passed some regulations. We have used some economic incentives. 
In things like automobile security, we have liability laws. We 
have also changed public perception so that air bags are 
considered a good thing. All right, that was the industry 
itself using security as a marketing tool. All right. That also 
works. Changes in technology work. If you--if there is a door--
a good example, our alarm systems. When they became wireless, 
they became a lot more prevalent, because they were cheaper and 
easier to install. So as policymakers, you have several levers. 
All right. You can deal with the regulation liabilities. You 
can deal with putting money into technology and making that 
better. You can deal with social norms.
    All right. You get to choose what levers you pull, and what 
the levers do is, they affect the business motivations, which 
then act both the supply, producing secure software, and the 
demand, wanting secure software.
    Mr. Etheridge. Thank you.
    Mr. Thornberry. Thank the gentleman.
    The gentleman from Nevada, Mr. Gibbons.
    Mr. Gibbons. Thank you very much, Mr. Chairman.
    And to our witnesses let me express my thanks as well, as 
my colleagues have done, for your presence here today and the 
testimony you have provided us. As I sit here, I have to admit 
that I am probably one of the few people on this panel who is 
not very well educated in computer technology, and it is an 
evolutionary process in my own mind to get my arms around it to 
understand a lot of this. And I presume that is pretty a much 
widespread problem with the American public today. They know a 
little bit about it but not a lot.
    The evolution of technology that is occurring in the 
computer industry is so rapid. Do we really have a real 
expectation that what we create today will be an answer for a 
15-year-old's bright inquisitive effort to break it tomorrow? 
Are you comfortable with what you are saying today is the 
protection and the security that we can create, will give us 
the real barrier that we need to some mass disruption, some 
mass attack? Anybody want to take that on? I mean, it is a 
hypothetical.
    Mr. Paller. My sense is that we can remove the vast 
majority of the easy ways to break into our systems. Rich said 
about 80 percent of the attacks--used well-known 
vulnerabilities. We can wipe those out. We are not yet wiping 
those out, and we have to do so right away, and that raises the 
bar.
    Next the research money that Chairman Boehlert was talking 
about has to be invested to find better ways of testing the 
code, of building more secure systems; but if we wait until we 
build the better systems, then we are simply leaving all of the 
doors and windows open and just saying to the attackers, ``come 
get us.''
    Mr. Gibbons. Well, then, Mr. Schneier, let me ask you a 
question; because if that is an answer that we have got to 
develop the research to provide for the capability of 
presenting the real serious or in-depth attack that we just 
talked about, are our universities providing a level of 
expertise and resources capable of being able to do that, or 
are our universities falling short in educating people?
    Mr. Schneier. Some are. There is some great research being 
done, some great education being done. It is not enough. The 
demand for computer security far outstrips supply. If you know 
any kids who are going into computers, tell them security is a 
whole way to make a whole lot of money, because there is a lot 
of demand for jobs, and there is great research out there, 
phenomenal work.
    CERT is an institution coming out of Carnegie Mellon. They 
have been doing phenomenal stuff since forever. You have to 
look at it as two different attacks, and what Alan was saying 
is exactly right. Most criminals are opportunists. They are 
getting a tool and using it. Most vulnerabilities being 
exploited are the obvious dumb ones.
    So security is an arms race against professionals, all 
right, the people out to do real damage. Most of the attacks 
are low level--it is low-hanging fruit. We can do a lot to get 
rid of that and that really does raise the bar. After we have 
done that, we have still got the arms race, and that is never 
going away; because you are right, you know, defense now, new 
attack, new defense, new attack, it is going to get worse. But 
the last thing we want is for all the old attacks to work as 
well as the new attacks.
    Mr. Schneier. I sit at Counterpane. We monitor companies, 
we monitor vulnerabilities, and the hardest thing we have is to 
get rid of the kids attacking and trying to find the real 
attacks.
    Mr. Gibbons. Well, if we do have the capability today and 
if we do have the resources that would allow for someone to 
attempt or succeed in a mass disruption of our information 
technology systems around the country or in any community, why 
have we not seen a major effort in this regard so far from the 
terrorist side? Not from our defensive side. Why have we not 
seen a terrorist really try this so far? Because we all we see 
today are the criminal-minded hackers.
    Mr. Schneier. I have written about this. I believe the 
answer is it is not terrorism. Sort of imagine Bin Laden 
sitting in his cave plotting the next attack against America, 
and he is not going to say, ``I know, let's disrupt their chat 
rooms.'' He is not going to say that.
    He is going to say, ``Let's kill a lot of people, let's 
cause mayhem, let's cause terror.''
    The Internet is important, but it is--it doesn't put bloody 
bodies on the front page of a paper, which if you are a 
terrorist is what you want to do. Eventually it might, but 
today, a terrorist is not--I don't see it as a way to cause 
terror.
    Mr. Gibbons. If he interrupts our business systems, the 
economy of this country is probably as critically important to 
the lives and well-being of everybody in this Nation as 
anything we can think about today.
    You interrupt the food supply, you interrupt the 
communications capability, people can't call a hospital, can't 
get an ambulance, you interrupt their ability to go to the 
store, that is as much a terrorist act as flying a plane into a 
building.
    Mr. Schneier. But it is harder than you think. When the 
phone system went down in New York City after 9/11, people 
picked up their cell phones, people used their pagers. There 
are a lot of networks that got up in a few days.
    Our infrastructure, even though vulnerable, is surprisingly 
resilient. You see bad effects. The strike on the West Coast 
closed the ports and had monstrous effects on American 
industry. That wasn't terrorism, that was labor relations. And, 
yes, an attack like that would cause those effects.
    But, to me, and I am just trying to put myself in a 
terrorist mind-set, it doesn't feel like the best bang for my 
buck. Maybe it is, and maybe we have just been lucky and that 
is another way to look at it. Eventually someone is going to 
think exactly along your lines and do it. I mean, the question 
is not if, the question is when, and maybe it will be something 
we can recover in a few days, maybe it will be something we 
can't recover and businesses that require the Internet will go 
out of business for a month.
    It is very hard to speculate. We all agree here that the 
problem is getting worse. So if we are talking about 5 or 10 
years, certainly I think everything you are thinking gets a lot 
more reasonable and a lot more likely.
    One more point I want to make based on your first comment. 
I actually have a book I am going to hand out. This hearing has 
homework. So I got a copy of this for all you guys, and you can 
either read it or give it somebody else to read. But I did a 
book sort of on computer security, and a lot of things we are 
talking about here, how to understand the issues. My mother 
read it, so don't be scared.
    Mr. Andrews. Mr. Chairman, this is a flagrant violation of 
the rules of Congress, to ask us questions and give us things 
to do. This is outrageous.
    Mr. Schneier. No one said you can't give homework.
    Mr. Gibbons. Well, gentlemen, thank you very much for your 
expertise. And thank you, Mr. Chairman.
    Mr. Thornberry. I thank the gentleman.
    My response is we need all the help we can get from 
whatever source.
    The gentleman from Rhode Island, Mr. Langevin.
    Mr. Langevin. Mr. Chairman, most of my questions have been 
answered. I am going to submit some questions for the record, 
but I will yield at this time.
    Mr. Thornberry. The Chair thanks the gentleman.
    The gentleman from Texas, Mr. Sessions, vice chairman of 
the subcommittee.
    Mr. Sessions. Thank you, Mr. Chairman, and I want to thank 
you for not only planning, but putting together, what is a very 
interesting hearing today.
    I would like to switch gears a little bit, if I can, and go 
to what would be the bottom bullet for each one of your 
testimonies and focus, if I can, for half a second on the 
attacker, who is the attacker, what is that level of 
sophistication?
    The second part of the question is how it is reported to 
law enforcement, what are those piece parts towards trying to 
catch the attacker?
    Lastly, in that chain, success in working together to 
identify the real threats versus what was said, to get rid of 
the kids, to get the kid stuff out of the way for the real 
attack.
    I am interested in this chain of information. I think from 
a primary aspect of business, identification, working with law 
enforcement, successful prosecution, I am interested in that 
summarization from any one of you.
    Mr. Paller. Two things. One is the FBI has gotten 
extraordinarily good at catching some of these people. The ones 
they catch are the ones who do stupid things like brag, 
however. So we are seeing lots and lots of successes, putting 
people in jail, and they are going to jail for longer periods 
of time.
    When you ask who these people, Mafia Boy, for example, was 
a very angry, person what teachers would call a rotten kid--who 
did a lot of damage independent of his cyber work. When he got 
cyber tools, he went after E-Bay and Yahoo! and took them all 
down. It was part of acting out as a bad kid, but it did a lot 
of damage.
    What we don't know is who the people are who will do the 
really complex attacks. Because we don't know who they are, we 
actually have to build the defenses with more vigor than we 
would if we could identify the attackers' targets and take them 
out. That is why this problem is so difficult, because they 
could be everywhere attacking us.
    I can offer answers to the other questions, but I will let 
other people speak.
    Mr. Sessions. Does that mean it could be across the world, 
it could start someplace and go to another, and go to 10 places 
before it actually was able to be seen and we just can't figure 
out the chain?
    Mr. Paller. I didn't mean that. I meant it could be a group 
of terrorists in Indonesia that right now is shooting guns at 
people and figures out a way to get some money and uses that 
money to hire some hackers who don't know that they are being 
used by terrorist. We just don't know who they could be. Even 
the smart hackers can be fooled into working for the bad guys. 
They don't know who they are working for. Somebody claims to be 
from the NSA, how does a hacker know he is not? We don't have a 
clue where the attackers are. That is why we have to build the 
walls so strong, instead of saying ``Let's go get those bad 
guys and take them out.''
    Mr. Schneier. Chapter 4 talks about who the attackers are.
    Mr. Sessions. I will read my homework.
    Mr. Schneier. They range from the kids to foreign 
governments who are going to use cyberspace as a theater for 
war, which is a perfectly reasonable thing. We do that kind of 
thing in our warfare. It would be crazy to assume that somebody 
won't. They are all over the map.
    How is it reported? Largely it isn't. This is where you 
start to think about what are the risks. There are the direct 
losses, the loss of whatever has been stolen. But, for many 
companies, the loss of face, the PR loss, reporting an attack 
is worse than the actual damage. If you are a bank and you have 
been hacked for a couple million dollars, you are likely to 
want to keep it quiet. Why scare your customers?
    Mr. Paller. Bruce, let me say something. I have testified 
here and in the Senate about this issue, can we get companies 
to report? If we get rid of the Freedom of Information Act 
exclusion, can we get them to report?
    The answer is, ``Hell no,'' but we were unable to prove 
that until Congress got rid of the exclusion and then found out 
companies still are not reporting. Now, we know that getting 
rid of the FOIA problem wasn't enough. But there is a way you 
can get them to report, and the analogy is medical. In medical 
reporting, people who get a disease don't call up CDC and say, 
``I have got a disease.'' They don't want to. It is just what 
Bruce was talking about, ``It is embarrassing. I am not going 
to tell anybody.'' The doctors tell; the patient doesn't
    I couldn't figure out for the longest time, but I recently 
discovered there are doctors in this field. They go into 
companies right after they are attacked and they clean up the 
mess under these contracts that are this long on 
confidentiality clauses spelling out who you won't tell about 
our being attacked.
    You guys are funding a big project at DHS called CWIN, the 
Cyber Warning Information Network, and you are giving free 
access to that system, to those ``doctors.'' I think there 
could be a quid pro quo for their right to get access to CWIN; 
if you are a doctor and you are helping somebody, you don't 
have to tell DHS who you are helping, but you must tell the 
specifics of the attack, so DHS can see if it is hitting 
anybody else. I think you have that lever right now, meaning 
these months, and it might actually help.
    Mr. Schneier. That is a great example of aligning the 
business processes to meet our technological needs, because 
companies don't want to report. And this will work. I mean, 
that is a great example. Here you can use your buying power. 
You can use your financial stick to get the data we need.
    We need the data. I mean, all the data we have just plain 
stinks. We don't know how often attacks happen. It is all 
anecdotal.
    In my testimony, I gave three pieces of data, I gave my 
data and two other pieces of data. They are all mediocre, 
because companies don't report.
    This is very much like the beginning of the AIDS crisis. We 
didn't know, or the beginning of SARS in China, things were 
just not being reported.
    There is a lot of success. The FBI has gotten way better. 
You look 4 or 5 years ago, they were completely clueless. Now, 
they are getting much better. It is attackers that make stupid 
mistakes. We tend not to find either the attackers that are 
good and just plain vicious.
    You only attack criminals. Criminals, there has to be some 
kind of financial pay off. There have been cases in England of 
extortion where the criminals were caught during the money 
handoff. Criminals are dumb.
    When you sort of ask the levels of the attackers, you have 
the smart attackers who aren't criminals, they are like Mafia 
Boy, just a bad kid. You have the criminals who tend not to be 
the good hackers, they are using somebody else's tools.
    The real worries are going to be when you start combining 
these things, right, the sort of quintessential criminal 
mastermind. These people are sort of rare, because if you are a 
mastermind, you tend to make more money in the private sector 
than you do in the criminal sector.
    But when you go to places like Russia, where you can 
actually make good money in the criminal sector if you are 
smart, there is a worry. Of course, on the Internet, every 
place is next door to every place else. If you own a warehouse 
in Des Moines, you just have to worry about criminals for whom 
driving to Des Moines is a reasonable commute. If you have a 
network in Des Moines, you have to worry about everybody on the 
planet. That is big difference. I forget who, someone talked 
about that. But that is an important difference.
    Mr. Sessions. I thank the gentleman.
    Mr. Thornberry. Does the distinguished ranking member wish 
to ask questions at this time?
    Mr. Turner. Thank you, Mr. Chairman. Our primary 
responsibility as a committee is to have oversight over the new 
Department of Homeland Security. As each of you know, the new 
department inherited the functions that previously came from a 
lot of other places. In the area of cyber security, we know 
that the National Infrastructure Protection Center at the FBI 
was transferred to the new Department, as was the Critical 
Infrastructure Assurance Office of the Department of Commerce, 
the Federal Computer Incident Response Center from the General 
Services Administration, and the National Communications System 
from the Department of Defense.
    When that transfer occurred, we had several things happen. 
One of which is, it appears to me, we lost some expertise, 
because the top-ranking individuals who were considered to be 
very capable in the cyber security area left the government.
    We also noticed that the budgets of the cybersecurity 
agencies transferred to the Department in fiscal year 2003 
totalled $180 million. According to the OMB, the current budget 
for the transferred functions within the Department will drop 
to about $55 million.
    In essence, the new cybersecurity responsibilities within 
the Department, within the newly created Cyber Security 
Division, will have in the neighborhood of 60 full-time 
employees.
    When you look at, as each of you I know do, from the 
outside, from the perspective of the private sector, the 
nonprofit community, and universities, at what this new 
department is currently doing to carry out the functions that 
it has been given to evaluate the threat through cyberspace and 
to assess our vulnerabilities and to prepare to defend against 
those threats, it would be easy to conclude that we are worse 
off today than we were a year ago before the new Department was 
created.
    As observers of that new Department and the cybersecurity 
functions which have been merged within that Department, I 
would like to know how each of you would grade the current 
status of the new Department in dealing with cyber security as 
compared to the way things were handled by the government prior 
to the creation of the Department and the transfer of 
cybersecurity responsibilities to it. I will start with Mr. 
Paller.
    Mr. Paller. A tough question. All right. The answer in my 
mind is that no organization will be able to have all the 
expertise within itself, and some of the money that was lost in 
forming DHS is still being spent on cybersecurity. There is an 
extraordinary team at the FBI of cybersecurity analysts. There 
are some phenomenal cybersecurity people at the NSA. If the new 
Department gets itself organized and builds the trust of those 
people in other agencies, and it is the public-facing part of a 
coordinated government-wide effort, it will be wonderful. But 
if you try to build the entire capability inside DHS, I think 
it will just take so long that it won't do enough good soon 
enough to be effective.
    So I guess my attitude is that we may be spending too 
little, but the way to find out is give them a lot of energy 
and a lot of visibility and get them moving fast and allow them 
to show what they can do with that money. Let them show us they 
can do so much good with that money that we should double or 
triple it, rather than saying right now we are not giving them 
enough. They are just people there and only have so many hours 
in the day.
    Mr. Pethia. From my perspective, I think it is a positive 
step to bring some of these functions together, because I think 
in the past they had a tendency to each go off in their 
separate direction, and there wasn't as much coordination and 
synergy and impact as there could have been. Having these 
groups together, I think, is a very positive thing. I am 
concerned about the budget level. I think it is a big job and 
there is a lot of work to do there. I know an awful lot of 
desire is to have folks rely on the private sector to make a 
lot of changes, but I think it is going to need a lot of 
coordination and oversight.
    I think the real thing to consider as we look at the 
department in fixing this problem is going to be something we 
are going to work at for years. This is not a sprint, it is a 
marathon. Having them have the time to get the right 
foundations and structures in place, build their relationships 
with the rest of the Federal Government and the private sector, 
I think that is the critical thing for them to do right now. 
Then, as that foundation is built, understand where to 
intelligently spend money for high impact is the next step. I 
hope that is what we will see next.
    Mr. Schneier. I actually wrote an essay really answering 
your question a few months ago. With the Chairman's permission, 
I will send it in afterwards.
    Nix, is my answer. My intuition is that security can't be 
the purview of one organization. It has to be diffuse. If you 
sort of think about your body fighting disease, there is no one 
organ in charge of disease fighting. There are lots of 
different things done by lots of different organs in your body. 
A lot of them overlap. This are redundancies. All of these 
things help our body's security against disease.
    I actually like it when multiple organizations are working 
on the same thing, because they are going to work on it 
differently. I like it when security is the responsibility of 
everybody, because everybody will do something. I don't like it 
when Department X can say well, security, that is Homeland's 
purview. We don't care.
    On the other hand, coordination is essential. You need to 
be able to work together, because a lot of these problems are 
bigger than any organization.
    So I like it when the Department of Homeland Security 
coordinates. I like it less when they subsume. The real answer 
is a little more complicated than that, and I will send it in 
for the record, but that is my intuition.
    There is good and bad here. The loss of funding is a 
perfect example of bad. There are actually few corporate 
mergers that work out well also. These sorts of things are 
common when corporations merge. We are seeing the same sorts of 
things with DHS. Eventually, it could be a good thing, it could 
be a bad thing. Right now, it is very mixed.
    Mr. Turner. Thank you.
    Mr. Thornberry. The gentlewoman from Texas, Ms. Jackson 
Lee.
    Ms. Jackson-Lee. Thank you very much, Mr. Chairman. I would 
like to ask unanimous consent that my opening statement be 
submitted into the record.
    I thank the panelists very much for their insight. I will 
be brief with respect to the issues of this committee because I 
have listened closely for the time that I was here. I apologize 
for my delay. I had responsibilities elsewhere in the Congress.
    I simply want to acknowledge that we have had the 
opportunity to be in field hearings across the country and have 
heard from those individuals who have to fight these issues 
directly with respect to port security and other issues and law 
enforcement who are on the ground, if you will. And the key 
statement that they make is how much is on the Internet, the 
Web, the voluminous information.
    I recall right after the 1995, I believe, bombing in 
Oklahoma City, that all of a sudden it seemed to be in vogue on 
how to make bombs with fertilizer. As a Member of the House 
Judiciary Committee, it is likewise equally amazing at the 
number of recipes for creative drug use that can be found.
    Then, of course, we go smack against this whole question of 
the first amendment and the protection of a nonencrypted Web 
system.
    So if I could ask Mr. Schneier to confront this head on, in 
terms of the backdrop of the constitutional protections, the 
industries' concern, and the freedom of commerce, I guess, that 
everything goes. But that means that terrorist cells can 
communicate, while students are communicating, so terrorist 
cells are communicating, but it also means signals can be sent 
and it also means directions in code can be sent.
    How do we confront that issue head on? You may have been 
answering it over and over again, and here we go again.
    Mr. Schneier. Actually, what I tend to do because I do get 
these questions a lot, is I tend to write the answers down, so 
I don't have to do them much. And I have written about this. It 
is a very hard question, balancing secrecy and security, 
because there is a notion that secrecy is somehow equal to 
security.
    You talk about bombmaking tools and drug recipes, I assure 
you, those things were available before the Internet, and you 
really can't bottle them up. And you are right in that, you 
know, all tools of our technology can be used for good and for 
ill. I mean, we drive to work and criminals use cars as get 
away vehicles. You know, demolitions have good and bad uses. 
Cell phones have good and bad uses. Even network security 
products have good and bad uses, and we are stuck with that. 
That is the way the world works.
    Everything we have ever built has uses for good and bad, 
and we as a society have to decide. We can live in a 
totalitarian regime and decide no one should have access to a 
photocopier or mimeograph, which was true in some countries in 
Eastern Europe. Or we can say the good uses outweigh the bad 
uses.
    I went to the Washington Monument yesterday because I got 
in a little early. I wanted to go up and see it since it was 
redone. I was looking at the security. You know something? We 
would have a better job securing it, if we didn't let people 
inside. It would be more secure. But we believe that letting 
people tour our national monuments is a worthy thing to do, and 
we are accepting the security risk.
    Ms. Jackson-Lee. Let me just say this. You are making what 
can be a creative analogy, but we have put in place since 9/11 
more structures, more security, more metal detectors, more 
procedures in going on airplanes, et cetera.
    What I would say to you is we are going to have to contend 
with this question of cyber security. We are going to have to 
be more responsible. I am a person that believes totally in the 
1st amendment and all of its yeas and nays, all of the 
positives and negatives. But I do believe cyber security is an 
enormous challenge.
    For example, as one of our witnesses in one of our hearings 
indicated, the economic collapse that could come about through 
the tinkering why our financial system could be dastardly in 
its results. Certainly loss of life, the emotion of loss of 
life, the absolute repugnant concept that we would lose lives 
in a terrorist act, certainly supersedes the thought as it 
relates to an economic collapse, but that still would shut us 
down.
    I guess what I am putting on the record is we have enormous 
challenges. If you have some suggestion or direction, I would 
be interested in it. I would be delighted if you would put that 
in writing for us to be able to handle that. If you have one 
sentence on that response, then I yield back my time.
    Mr. Schneier. The problem with secrecy is it is brittle. 
When you lose secrecy, you lose all securities. I prefer 
security measures that are resilient. If my front door is 
protected by a secret code, if someone knows the code, I have 
no security. If my front is protected by a guard and alarm, 
then there is more resilience. There is no secrecy that I am 
relying on for my security.
    That is the intuition in the relationship between secrecy 
and security. Sometimes it is valuable. Most of the time, I 
believe it is a red herring. Openness is better. We need 
security in addition.
    Ms. Jackson-Lee. I see the red light. I just want to say 
this: With all of my passion and commitment for the 1st 
amendment, I believe that this committee and the Department of 
Homeland Security has a moral and dictated obligation to deal 
with the question of cyber security, and we have got to 
confront it. I hope we will have the experts to help us do so.
    Thank you, Mr. Chairman.
    Mr. Thornberry. I thank the gentlewoman.
    It seems to me that all of you are pretty much in agreement 
that attacks are getting worse and attacks are getting easier 
and that we could do a lot to deal with 80 percent of these 
attacks, say, relatively easily, and then we are better able to 
concentrate on the more sophisticated ones.
    I want to be clear. What is it that is required to solve 
the 80 percent? We have talked some about incentives, 
liability, maybe taxes. Some people have talked about SEC 
disclosures and other kinds ever incentives for private 
companies. Or is it incentives for the software, ISP's and so 
forth that have been talked about?
    Just so I can be clear, first, how do we take care of the 
80 percent?
    Mr. Pethia. Let me start. For me, the first big piece is to 
take care of the, let me call them low-level defects in our 
information technologies. It can be done by vendors doing a 
better job of design and testing. The software engineering 
community knows how to do a better job of that. We know how not 
to get these kinds of bugs embedded in our software. People can 
be trained to do development, where they don't produce as many 
mistakes. We can do it with more concentrated testing. We can 
do it with testing labs that are established to find these 
problems before they are deployed out into the broad community, 
or even after things are deployed, to find them. And vendors do 
respond to reported problems. They do fix them when you bring 
them to their attention.
    So, first of all, I think we have to pay attention to the 
installed base of software, and there is a variety of different 
approaches to do that.
    The second thing is I think we need to do a better job, all 
of us, of working together. We have been talking about 
information sharing for a large number of years, but as Bruce 
said, it is often catch-as-catch-can; it is haphazard; it is 
anecdotal information.
    We needed to build a national system of data collection, 
analysis, indications and warnings, so we can begin to 
understand of all these things we see, which ones are serious 
and which ones are noise in the system. I think that is a 
combination of a research effort, but it also requires that 
organizations that run major networks do a better job of 
monitoring them.
    I think we start to touch on privacy issues when we get 
into that world. So we need to look at that balance between 
privacy and the need to understand what is happening to us. So 
there a set of policies and research questions there.
    But I think those two things alone can get us to the 80 
percent solution. And I don't think it is tens of years, I 
think it is years, not tens of years, to do that.
    Mr. Thornberry. Anyone else wish to address that?
    Mr. Paller. Mr. Chairman, we can fix two sets of problems. 
One is the vulnerabilities in machines that will be installed 
starting tomorrow, and the other is the vulnerabilities in the 
150 million machines that are already there.
    What Rich is talking about is looking at the machines that 
are going to be installed sometime after tomorrow. So we really 
have to go after both of those sets of problems.
    For the new machines, we either use regulation, as Bruce 
would like us to do, or liability, or we make the market solve 
the problem, and that is what I think Homeland Security can do.
    Homeland Security can lead the Federal Government in 
creating the procurement specifications that say, ``You can't 
sell us a system that has these certain vulnerabilities in it. 
We know what they are. You just have to sign this statement 
saying you have taken them out or you can't deliver the 
system.'' That would change the economics of the problem, and 
they will start delivering safer systems. That helps with the 
forward-looking machines, the ones that get installed after you 
write that specification.
    To go backwards to the installed base, I think we could 
take a lesson from the Department of Transportation. DOT has 
done an extraordinary job of wiping out vulnerabilities across 
the Department. I think DHS can learn from the agencies that 
have been successful. Homeland Security can be the model, and I 
think that model will spread. But we need to do both and go 
after new machines using procurement, and go after the old 
machines using vulnerability remediation.
    I need to add one more piece. People are building hardware 
with vulnerabilities, and you are buying them right now, and 
when you move to wireless, you are goint to see vulnerabilities 
in billions of devices. Every one of those devices can be used 
as an attack tool. So this isn't something we need to spend the 
next year and a half thinking about. We need to act now.
    I will give you an example. Every one of your storage 
devices, where you put your most important information, has 
something called IP management ports. The ports were put in for 
the convenience of the guy who sold the storage system to you 
so he can help you fix it if it breaks.
    Some of those IP ports come with known vulnerabilities, 
SANS and the FBI publish every year the top 20 Internet 
vulnerabilities. Storage devices come with many of these top 20 
built into the hardware.
    Your procurement people are continuing to buy that stuff, 
because the people who buy it don't know it has common 
vulnerabilities. That needs visibility. Homeland Security 
should be taking the lead on procurement programs, and then 
helping, maybe through a partnership with the Government Reform 
Committee, helping other agencies do the same thing.
    Mr. Thornberry. Let me just throw in another wrinkle for 
you, Mr. Schneier.
    Mr. Schneier. I will take wrinkles.
    Mr. Thornberry. I was in a meeting last week where a CEO of 
an information technology company said as bad as we think the 
security problems are for us with 300 million users on the 
Internet, whatever it is, think about how much worse it is 
going to be if that triples. And if you think about wireless, 
plus the number of additional devices that are going to be 
using the Internet, plus some natural growth in number of 
people around the world, that it nearly makes the problem 
insoluble.
    Sometimes I worry, as you all have described, we are 
getting further and further behind. Maybe we could do all of 
these things and solve this 80 percent, but there are going to 
be another 80 percent that takes its place in a way. How do we 
catch up and stay up?
    Mr. Schneier. It sounds like you got it.
    Mr. Thornberry. But I don't like what I have got.
    Mr. Schneier. Well, you know, sorry. A lot of it, the 
analogy I use is, you know, is curing malaria by draining the 
swamp. You have got all of this swampland out there. It is 
horribly insecure, and we are trying to improve security by 
fixing it. The problem, as you point out, is we are creating 
swampland at such an alarming rate, that we are falling behind.
    Yes, you are right. You are 100 percent right. The thing 
about these easy fixes, I mean the things we are talking about 
here, is they are actually easy. It is not things we discovered 
2 years ago that need to be fixed. It is things we discovered 
20, 30, 40 years ago and no one has fixed.
    The most common attack is something called a buffer 
overflow. It doesn't matter what it is. These were first 
identified in the sixties. They were first used to attack 
computers in the seventies. There was a very famous attack in 
1989, which was a buffer overflow.
    So here we are in 2003, and, still, the most common 
Internet attack is a buffer overflow. This is an easy one. We 
know how to fix this. This is trivial to fix. These guys will 
teach classes in how to write code buffer overflows. This isn't 
even a hard problem.
    So yes, we are creating new swampland, but the problems we 
are talking about here are so basic, they have been with us 
since the beginning of computing, and there has never been the 
business incentive to make them better. So once you do that, 
there will be a change.
    You are right, there will always be new vulnerabilities. We 
raise the bar, the bad guys will get smarter, guaranteed. But 
at least the ones who are not smarter, are out of business. We 
are better off than we were.
    So we are not here with a message of hope. We are here with 
a message of we can actually do better than we are doing.
    Mr. Thornberry. Good point. Practicality. The alternative 
is to do nothing, which is to accept the vulnerabilities, and 
that is not a good answer either.
    Take the 80 percent. Let's talk for a second about the 
other 20 percent. Do any of you have suggestions as to the way 
Federal research dollars and efforts ought to be directed to 
help deal with that 20 percent?
    Mr. Schneier. I can do that. Actually, you go. We'll flip 
for it.
    Mr. Pethia. Let me start. We have been talking a lot about 
sort of sticks we can use to encourage the right kind of 
behavior, but I think there are incentives as well.
    The Internet today is a result of the original DARPA 
projects, the ARPA net, which was focused on building a 
resilient network that could withstand physical attack. And it 
has done that job amazingly well. It has grown into this new 
infrastructure, it has created a whole new industry.
    I think we can do the same with security, if we think about 
not Internet II, but maybe Internet III or Internet IV, where 
the focus is not on resiliency from physical attack, or it is 
not on what, as Internet II is, on higher speeds, let's have 
the next grand project be focused on the ultimate high 
security.
    I think that mobilizes the research community, the 
industrial base, and they all begun to work on this new common 
set of solutions, which is technologies that are significantly 
more secure than the things we have today, from the beginning, 
security that is designed in, as opposed to what we do today, 
which is try to bolt it on to the outside edges of 
fundamentally insecure projects.
    Mr. Schneier. I like to see research money spent willy-
nilly. I think the most best research, the most interesting 
things, come out of the most surprising places. Because I write 
books and give lectures, I get a whole lot of people's term 
papers, and there is really cool stuff being done out there. 
Some of it is so interesting it never would have occurred to 
me.
    If we are going to fund research, now we are talking about 
many years ahead, we need to be broad. We need to recognize 
that this is a critical area of our society and that we need to 
fund research programs at a variety of institutions, maybe even 
internationally. There is great things being done in Europe and 
Asia. This problem is even bigger than our country. It is all 
the same Internet.
    I love the idea of procurement and research on a secure 
survival Internet. That is how we got the Internet. That is how 
we will get a secure Net that is great.
    And then keep in mind that we should just fund research 
institutions, universities, that are doing cutting edge work in 
computer security. Whether it is producing secure hardware and 
software, like the computers we are going to install tomorrow, 
or backfilling and securing the computers we installed 
yesterday.
    Research is good. Great stuff comes out of research. I love 
it when I see it, because it is creative, it is interesting, 
and it is looking at things that are off the horizon.
    So I encourage lots of research, because you never know 
what is going to bear fruit.
    Mr. Thornberry. Mr. Paller, I would like to ask you to 
answer however you like and throw in another wrinkle, and, I 
don't know how to say this, but do we need research on some of 
the cultural aspects of security, whether people on a keyboard 
are really going to do it, use it? How does that play in to 
making the whole Internet secure? The people vulnerability, I 
guess, is the way I would put it?
    Mr. Paller. It is really no fun to try to finish the job of 
figuring out how to do the technical security work when you 
know that having finished that, you still have an enormous 
vulnerability from people taking their laptop home, giving it 
to their 11-year-old, who downloads a really, really cool 
screensaver that has a trojan in it that the hackers use to get 
right back into the House systems, because you have a VPN that 
runs from your laptop at home into the system in the House. We 
know that is a problem. I would love to see research in solving 
it.
    My sense is that it is a safe driving type of problem, 
meaning it requires a long-term cultural change. This 
afternoon, for example, Bob Liskowsky and I are giving out 
awards to 10 kids from kindergarten to high school all over the 
USA who created posters on improving computer security.
    It is a tiny drop in a huge ocean, but a long time from now 
we hope kids will talk about safe computing at home the way 
they get mad at their parents for not wearing their seatbelts. 
It took a long time for kids to tell their parents to put their 
seat belts on. I think research will help. I think visibility 
like this subcommittee provides will help. It is a long-term 
program.
    Mr. Thornberry. I guess the question is how much pain we 
have to go through or how many people have to go through the 
windshield before we do it.
    Mr. Schneier. A lot.
    Mr. Thornberry. Does the gentleman from Texas have other 
questions?
    Mr. Sessions. Yes, I do, Mr. Chairman. Thank you so much.
    One of you gentleman has already accused our Chairman of 
``getting it,'' probably you, Bruce.
    Mr. Schneier. I probably did.
    Mr. Sessions. My question is, I have heard you allude to 
the FBI as being perhaps short of being a center of excellence, 
but you did accuse them of stepping up, understanding. Let me 
tee it up. Fighting city hall is hard. They are the experts. 
They know everything. They are the ones that set the standard 
and tell you stop or go or maybe so. You never really get a lot 
of answers out of them.
    Does our government, outside of this great subcommittee, 
the government, the agencies, do they get it? Do they listen to 
people? Do they respond? Or are they just at limitations with 
money or other things? Do they get it?
    I am talking about the computer security experts in these 
agencies sharing information, talking with you, being leading 
edge, knowing what is wrong, aiming at the problem, talking 
about things, leading to where our children understand it, all 
those things.
    Mr. Schneier. The computer security experts get it. We have 
any number of customers in local and Federal Governments. 
Uniformly, computer security experts either in governments or 
industries get it. The problem they have is going one level 
above them, convincing their boss, convincing the CEO, 
convincing whatever the legislature is that is appropriating 
funds.
    The security people always get it. I mean, they know the 
problems, they understand it. It is one level above that we 
have the problems at.
    This is where you find that people tend not to get it. 
Either they downplay the risks, or they overreact. We have 
seen, I forget the State, but some kid hacked into a school 
computer and changed grades, and he is being tried as an adult. 
To me that is huge overreaction. I mean, changing grades is an 
enormously big thing and should be dealt with as you would deal 
with that, maybe expulsion, but he is still just a kid, he is a 
dumb kid. You don't want to destroy their life by making them a 
felon.
    So you need to temper. Even our prosecution, it has to be 
sane. I see a lot of what I think is insane prosecutions 
because we are overreacting.
    I am reminded of the Wild West, when stealing a horse was 
punishable by hanging, because that was such an enormous part 
of the Wild West transportation infrastructure that the 
punishment exceeded the crime. We are seeing that again here.
    So, you know, I see ``don't get it'' at different levels. I 
see it at the level above the computer security people, the 
Governors, the Mayors, who tend to downplay the risks, just 
like corporate bosses do. And then I also see the prosecutors 
either, Federal or State, basically going to lynch kids.
    I think both are bad. How is that for inflammatory?
    Mr. Pethia. I would like to build on that. One of the 
things I think is very positive in the government right now is 
the whole list of regulations moving now to FISMA, and I think 
it has done a lot to have senior executives in the agencies 
begin to understand that there is a problem there.
    What I see though is we are starting to get stuck at the 
point where people are worried about compliance with 
regulations or compliance with standards, which says they are 
not quite far enough up that learning curve as we have to do.
    The thing to remember about computer security is it is a 
daily event. It is not just complying with a standard or a 
regulation, it is day-to-day having the awareness, to keep your 
eyes open, to watch for that strange thing that is some 
indicator that your systems are being compromised.
    So there I think we have to help the senior officials push 
up that next step, beyond compliance regulation, with a real 
understanding of there are critical assets that have to be 
protected, they can be attacked in a number of different ways, 
and everybody has to be trained, aware and vigilant.
    Mr. Paller. Let's bring these all back together. Yes, we 
have to persuade them in. But right now, when they get an 
expert in that expert comes with a price tag that is enormous, 
and when they ask, ``Is that enough?'', the expert will say 
``No!'' So you have a meeting with a guy who says, ``Spend $50 
million, but it won't keep your system safe.'' And you say come 
back to me when you get a clue.
    There are good models in governments. Congressman Smith was 
getting at it when he said we have to make security cheaper. 
People in government are figuring out how to lower the cost of 
security, and that is where we are going with using procurement 
to push vendors. The vendor push is not to put the costs on the 
vendor, the user still has to pay for it. The vendor push is to 
get the economies of scale that you get when the vendor does 
initial security instead of making every user do it.
    DOE's procurement is not trying to force Oracle out of 
business. It is saying, ``Look, Oracle, if you deliver safe 
systems, every one of the Energy labs can get those safe 
systems, instead of making every Energy user become a security 
expert before he ever installs the software.''
    I think that the other discussions we were having about 
pushing it back on the vendor to getting safer systems, allows 
senior management to say, ``OK, I can see that working, let's 
do that, let's get those vulnerabilities eliminated.'' And, in 
fact, FISMA requires the agencies actually test their systems. 
That is what I meant by going back over the old systems and 
making sure the security controls are in place. I think there 
is reason for hope. I don't think we will win the war, but I 
think there is reason for hope.
    Mr. Sessions. I have one last question. I have not 
participated in it, but evidently Microsoft, the way I 
understand it, they have an open chat page about all their 
products, the design problems, and all these millions of users 
e-mail in.
    Mr. Schneier. It sounds plausible.
    Mr. Sessions. Somebody evidently designs a system where 
they take user input and they fix things, and they have the 
user community try to provide input about fixing software 
programs.
    My question is, in all these chat rooms and all this 
feedback that comes from people, do they understand that if you 
are going to use this equipment that there is an ethics about 
it, or do they just think, hey, what I would say a 
skateboarder, whoever can do the next wild thing, go for it, 
and everybody sits there and applauds? Or is there an ethos 
within at all that is ever applied to these people?
    Mr. Paller. I have never seen an ethos. There was a survey 
done in Australia of how many kids in the 12th and 13th grades 
were breaking into other people's computers 4 years ago, and it 
was 3.2 percent of all the males. I don't think there is any 
ethos being taught.
    Mr. Schneier. But we should take heart in that. Most people 
are ethical. Most people are honest. The great majority of 
people on our planet are honest. That is why society works. We 
would just fall apart if that were not true. We are dealing 
with the few. I mean, three percent is still three percent. 
Cutting that down by a tenth would be really good.
    This is how we eventually win, I believe. Sort of imagine 
we are having this hearing about murder and how do we deal with 
murder? It is happening. I mean, there are no technological 
fixes. What do we do?
    All right, we don't prevent murder in our society by 
wearing body armor. We don't drive tanks, we don't live in 
fortresses. The reason murder is so low is that we have carrots 
and sticks. We teach ethics. We expect our children to behave 
ethically. We reward them if they do, and there is a criminal 
system to punish them if they don't. That is really how we deal 
with crime.
    No one says we think everyone should wear a bulletproof 
vest walking around the street, no matter how bad the murder 
rate is. I mean, it is not something we do.
    Now, this is very long-term, but in the end I think that is 
going to be the way out. But you still have to deal with the 
few, and, of course, the problem on the Net is the magnitude, 
right? The few can do a whole lot of damage.
    Mafia Boy, who we have brought up again and again, can 
attack dozens of web sites. The guy who wrote the Sequel 
Slammer Worm can have it spread across the Internet, some huge 
number of servers, in 15 minutes, in 20 minutes.
    So we can, through education, through deterrence, make sure 
most everyone is ethical. The few that are aren't can do so 
much damage, either out of maliciousness or even by accident, 
or out of carelessness, or out of, you know, dumb-kidness, that 
we need to have these high walls.
    There is in the military, I forget who it is, who looks at 
society, the danger in terms of how many people 10 armed men 
could kill before being subdued. He will go through history and 
calculate this. All right, that number is going up 
exponentially with technology.
    The Internet has all the kinds of characteristics of that 
exponential growth. One guy can do a whole lot of damage. So 
even if we have everybody ethical on the planet except 10, we 
are at risk. That is a hard position to be in. It is no fun to 
be here. This is the ugly side of technology.
    Mr. Thornberry. But that is where we are, as you said 
earlier, in all sorts of areas.
    I guess I have got one last question, because I don't think 
it has been touched on, and I am interested, Mr. Pethia, 
particularly in your perspective, on the kinds of information 
that government should provide to the private sector about 
threats that are out there, warnings perhaps, obviously this is 
part of what this new part of the Department is going to focus 
on.
    But can you address that a little bit, as well as 
addressing how you have to weigh, how much information about 
threats you put out there, versus the government's duty, if it 
has that, to say watch out, this is coming, when, as you have 
all already described, when something starts going it goes 
quickly, and it is going quicker and quicker.
    Mr. Pethia. I guess a couple of points. One of them is 
certainly, I think, the government, and it has been doing it 
through my organization and through NIPC and through a number 
of others, when there are recognized new forms of attack, to 
make sure that that is broadly and as quickly as possible sent 
out to the community so they know how to protect themselves. 
And a lot of that is with the hope people can react fast 
enough. As you say, these things are happening faster.
    One of my big concerns, which is yet another issue, is that 
we are reaching the limits of our reactive capability, I think 
nationally. We are all going to get incrementally better, but 
we have already got the 80 percent. We are already going about 
as fast as we can.
    So we have got to focus more on prevention. We have to look 
for earlier signs of attack. We have got to look for earlier 
indicators that something bad is coming at us. And there, I 
think, DHS ought to look at doing things like looking at the 
evolution of attack technology, and beginning to predict where 
it could go in the future, what we are likely to see in 6 
months, 8 months, 12 months, what have you, and trying to get 
that information out to the community.
    Real threats, I mean real people doing bad things, getting 
as much information as they can out to the likely targets of 
those classes of people, which industries are being attacked 
and how, so those industries now how to protect themselves.
    Mr. Thornberry. Does anybody else wish to address that?
    That is helpful.
    Mr. Andrews. Mr. Chairman, if you could yield for a moment, 
I wanted to express my appreciation to you and the staff, the 
majority and minority staff and the witnesses, for what I think 
has been a profoundly important hearing. I very much appreciate 
what the witnesses have had to say.
    What I wanted to suggest to you, Mr. Chairman, is that we 
consider working with the Government Reform Committee, which 
has primary jurisdiction over government purchasing, so the 
kind of purchase-based leverage that we have heard about from 
each of the three witnesses today, goes beyond what the 
Department of Homeland Security do, but reaches into every 
aspect.
    Frankly, the Department of Agriculture should be buying 
software that is as good as it can get for reasons of 
bioterrorism. The Department of Transportation should be buying 
software as good as it can get when it deals with issues of 
oceanography. The Department of Education should be buying 
software as good as it can get to protect the security of 
student records.
    This not only has benefit in carrying out the missions of 
those various departments, but it multiplies the leverage that 
these witnesses have talked about here today, and I think would 
expedite the process of raising the level of technology.
    One thing that Mr. Schneier said that I thought was an 
interesting analogy was the wireless burglar alarm systems in 
our homes. I would not have been able to afford a burglar alarm 
system 15 years ago, they were too expensive. Now, they are 
relatively inexpensive.
    That is the metaphor. I think that is the analogy we could 
achieve for the civilian sector, so when the CIO of a company 
hears from his or her outside consultant that you need to spend 
quite a bit of money to ramp up, it isn't nearly as much money 
as it is today. It fits those economies of scale.
    I think it has been very powerful testimony. I thank you 
and the staff for an excellent hearing.
    Mr. Thornberry. I thank the gentleman. I think you make a 
very good point. I would simply add, I also don't dismiss the 
Department itself's information technology. I think one of the 
things that I know is of interest to most members on this 
subcommittee is how the Department gets its own IT up and 
running and the security there. We have further work to do 
there, as well as working with the other departments.
    Let me again thank each of our witnesses. I agree it has 
been very helpful for me. Let me say there may be written 
questions that may be directed to you. We will try not to over 
burden you. At the same time, I want to offer each of you the 
opportunity to submit further comments if you think it would be 
helpful to us, because most of us do read that stuff, and we 
are interested in learning and trying to find solutions to 
these problems. I very much, again, appreciate your time and 
flexibility in being here today.
    Let me, finally, announce that I think this room is going 
to be used for another hearing of the full Homeland Security 
immediately after this, and they asked me to ask if we could 
clear the room so they can get ready for that hearing which 
begins at 2:00. In the meantime, we have votes on the floor.
    This hearing is adjourned.
    [Whereupon, at 1:25 p.m., the subcommittee was adjourned.]

                                 

```