Computer-Based National Information

Systems: Technology and Public Policy

Issues

September 1981

NTIS order #PB82-126681
Library of Congress Catalog Card Number 81-600144

For sale by the Superintendent of Documents,

U.S. Government Printing Office, Washington, D.C. 20402
Foreword

This report presents the results of an overview study on the use of computer

technology in national information systems and related public policy issues. The

purposes of this study are:

●

●

●

●

To provide a general introduction to computer-based national in formation systems. –Will help acquaint the nonexpert reader with the nature

of computer-based national information systems and the role they play in

American society.

To provide a framework for understanding computer and information

policy issues. —Develops a structure of information policy and presents

brief essays on several of the more important issue areas, with an emphasis on how future applications of computer-based information

systems may intensify or alter the character of the policy debate and the

need for new or revised laws and policies.

To provide a state-of-the-art survey of computer and related technologies

and industries. –Highlights recent developments in computer and information technologies and describes the current status and likely evolution of the computer and information industries.

To Provide a foundation for other related studies. While some observations can be made about national information systems in general, a full

assessment of impacts and issues is best conducted in the context of

specific systems. The report builds a foundation for three related OTA

studies in the areas of computerized criminal history records, electronic

mail, and electronic funds transfer. These three separate studies will be

published later this year.

As a set, the four studies comprise the OTA assessment of Societal Impacts

of National Information Systems that was requested by the Senate Committee

on the Judiciary, House Committee on the Judiciary, and House Post Office and

Civil Service Committee. Supporting requests were received from the House

Government Operations Subcommittee on Government Information and Individual Rights and the House Science and Technology Subcommittee on Science,

Research, and Technology.

OTA appreciates the participation of the many advisory

others who helped bring this study to completion.

panelists and

#

/jwf’~.

.

JOHN H. GIBBONS

Director

. . ///
— —

National Information Systems Advisory Panel

Susan Nycum, Chairwoman

Attorney at Law, Gaston Snow & Ely Bartlett

Roy Amara

President

Institute for the Future

Paul Baran

President

Cabledata Associates

Harold P, Belcher

General Manager for Advanced

Mail R&D

U.S. Postal Service

Robert L. Chartrand, ex officio

Senior Specialist in Information

Technology and Policy

Congressional Research Service

Kent W. Colton

Professor of Public Management

Brigham Young University

Donald Dunn

Professor of EngineeringEconomic Systems

Stanford University

Lawrence J. Gervais

Vice President

American Postal Workers Union

Maurice W. Gregg

Senior Vice President for Finance

The Gap Stores, Inc.

Jeremiah Gutman

Attorney at Law

Levy, Gutman, Goldberg &

Kaplan

J. Robert Harcharik

President

Tymnet, Inc.

Rob Kling

Professor of Information and

Computer Science

University of California at Irvine

John C. LeGates*

Director, Information Resources

Policy Program

Harvard University

Henry Lucas

Chairman and Professor of

Computer Applications and

Information Systems

New York University

Daniel McCracken

Past President

Association for Computing

Machinery

Arthur S. Miller

Professor of Law Emeritus

The George Washington

University

Sharon Nelson

Attorney at Law

Consumers Union

Phil Nyborg

Former General Counsel

Computer and Communications

Industry Association

Russell Pipe

President

Translational Data Reporting

Service, Inc.

Ithiel De Sola Pool

Professor of Political Science

Massachusetts Institute of

Technology

James Rule

Professor of Sociology

State University of New York at

Stony Brook

Richard M. Schmidt

General Counsel

American Society of Newspaper

Editors

Sherry Turkle

Program in Science, Technology,

and Society

Massachusetts Institute of

Technology

Ron Uhlig

Manager, Business and Services

Planning

Bell Northern Research

Laboratory

Jacques Vallee

President

Infomedia

Carl Vorlander

Executive Director

National Association for State

Information Systems

Fred W. Warden

Former Director,

Telecommunication Relations

IBM Corp.

Willis Ware

Senior Computer Specialist

The Rand Corp.

Iram Weinstein

System Planning Corp.

Alan F. Westin

Professor of Political Science

Columbia University

*Resigned in late 1979

iv
OTA National Information Systems Assessment Staff

John Andelin,* Assistant Director, OTA

Science, Information% and Natural Resources Division

Stephen E. Doyle,** Program Manager

Communication and Information Technologies

Fred B. Wood, † Project Director

Fred W. Weingarten, Study Director, NIS Overview

Renee G. Ford,†† Writer-Editor

Susan S. Stocker,†† Research Assistant

Jean E. Smith, Analyst

Elizabeth A. Emanuel, Administrative Assistant

Teri Miles, Secretary

Zalman A. Shaven, Senior Analyst

Raymond B. Crewel.1, Senior Analyst

OTA Publishing Staff

John C. Holmes, Publishing Officer

John Bergling Kathie S. Boss Debra M. Datcher Joe Henson

*Since March 1980; Eric H. Willis served as Assistant Director through February 1980. **Through February 1981 ; Sam Hale serving as Interim Program Manager since March 1981.

† Since June 1979; Ruann E. Pengov served as Project Director through May 1979.

†† OTA contract personnel.
Special Advisory Panel on Information Technology

Paul Baran, Chairman

President

Cabledata Associates

Craig Fields

Senior Program Manager

Defense Advanced Research

Projects Agency

Dean Gillette

Executive Director for Corporate

Studies

Bell Telephone Laboratories, Inc.

Vico Henriques

President

Computerland Business

Equipment Manufacturers

Association

Lance Hoffman

Professor of Electrical

Engineering and Computer

Science

The George Washington

University

Konrad K. Kalba

President

Kalba Bowen Associates, Inc.

Daniel McCracken

Past President

Association for Computing

Machinery

Theodore Myer

Senior Scientist

Bolt, Beranek & Newman

Phil Nyborg

Former General Counsel

Computer and Communications

Industry Association

Donn B. Parker

Senior Consultant

SRI International

Ron Uhlig

Manager, Business and Services

Planning

Bell Northern Research

Laboratories

Frederic Withington

Vice President

Arthur D. Little, Inc.

Paul G. Zurkowski

President

Information Industry Association

Acknowledgments

The following individuals contributed as contractors or reviewers during the course of the study:

Charles C. Joyce and Jeffrey Held, Richard L. Fred Bernard Wood, Computer Social Impact

Deal & Associates, Inc. Research Institute, Inc.

Kenneth C. Laudon, Croton Research Group, John L. King and Kenneth L. Kraemer, Irvine

Inc. Research Corp.

Donald A. Marchand, University of South Fred M. Greguras, Kutak, Rock & Huie

Carolina at Columbia Alan Lipis, Electronic Banking, Inc.

Jeffrey A. Meldman, Massachusetts Institute of

Technology .
Contents

Chapter Page

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

I. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..ovono”o”.”””~ ● “””

2. Background and Purpose of Study. . . . . . . . . . . . . . ..+...... . . . . . . . . .

3. information Systems and Computers . . . . . . . . . . . . . . . ....~”~””””o..

4. Information in Society . . . . . . . . . . . . . . . ........””’.~”” .“”””+.””””

5. The Structure of Information Policy . . . . . . . . . . . . . . . . .....”””””””””

6. Innovation, Productivity, and Employment. . . . . . . . . . . . . . . . . . . . . . . .

7. Privacy . . . . . . . . . . . . . . . . . . . . .....”90.0””””0 s“. ”” ”” ”” s”””.” ● “””

8. The Security of Computer Systems . . . . . . . . . . . . . ...+””.”” .“”.”””””

9. Government Management of Data Processing . . . . . . . . . . . . . . . . . . . . . .

10. Society’s Dependence on Information Systems . . . . . . . . . . . . . . . . . . . . .

ix

3

29

37

47

55

65

73

81

89

97

11. Constitutional Rights . . . . . . . . . . . . . . . . .......+”.”””” •.””~’”””.Go105

12. Regulatory and Other Issues . . . . . . . . . . . . . . . .......”””””” ● “.””.”” 115

13. Trends in Computer Technology . . . . . . . . . . . . . . . ....”~””<””~’”. ““”123

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

vii
Overview

Computers have become a major technological tool of American society during the last quarter of a century. New developments in computer and communication technology promise within this decade an even more radical revolution in the way that information is collected, stored, used, and disseminated.

Large-scale integrated circuit technology, for example, allows hundreds of

thousands of electronic components to be fabricated on a thin wafer smaller than

a paper clip, thereby providing computing capability hundreds of times less expensive, less energy-consuming, and more reliable than was available only two

or three decades ago. One result is the rapid growth in small, inexpensive computers that are the equivalent of machines selling for as much as a million dollars

in the 1950’s. Data communication networks using satellite and microwave technologies make it possible to provide access economically to large data bases

from anywhere in the country or the world. Thus, networks of remotely sited

computers can provide services such as credit card and check authorization or

airline scheduling to users nationwide.

As these and other computer-based information systems–such as those

used in air traffic control, military command and control, and electronic funds

transfer–become more important to American society, they create corresponding public policy issues. Among the most important issues are the following:

9 Innovation, productivity, and employment. —Continued innovation in information technology is a prime requisite for a healthy information industry and also offers the tools for improving the productivity of many

other sectors of the economy. Likely policy issues include: support for

research and development on civilian applications of computer technology, vitality of academic computer science, support for computer impact research (e.g., the impact on employment), and maintaining U.S. international competitiveness in computers and information systems.

● Privacy. --New applications of computer and communication technology-e.g., an automated securities exchange, in-home information

services, electronic publishing, and the automated office—may generate

issues over secondary use of personal information, surveillance, and the

possible need for new approaches to privacy policy.

● Security .-The technology for securing computer systems from theft,

sabotage, natural hazards, privacy abuses, and the like is improving

steadily. However, the increasingly complicated systems now being

designed and built make secure operations more difficult and suggest

likely issues concerning the adequate protection of Federal information

systems and vital non-Federal systems, and the development of the

necessary data security and cryptographic capability.

● Government management of data processing. —It appears that, in general, the Federal Government is rapidly falling behind the private sector

in its use and management of up-to-date computer and information technology. The 96th Congress enacted Public Law 96-511 (Paperwork

Reduction Act of 1980) to help address this problem. And other issues

may arise with respect to the effects of large-scale information systems

on Federal decisionmaking (the “automated bureaucracy”) and the process by which social values are reflected in information system design.

lx
“ Society’s dependence on information systems.—As society moves toward

electronic mail and other large extensively used information systems,

likely new issues will concern the ways in which public policy can help

balance the risks society may encounter versus the benefits, retain the

option to end dependence on a particular system (avoid becoming

“locked in”), and provide alternatives for those who prefer not to use

electronic services. Research on the risks of system failure is needed, as is

careful attention to how technology can be used to reduce these risks (for

example, through distributed data bases and back-up computers).

● Constitutional rights. –Little legal precedent exists, in many cases, for

applying constitutional law to issues raised by computer-based information systems. Areas of constitutional rights that may be affected by information systems include: freedom of speech and press (first amendment), protection against unreasonable search and seizure (fourth), protection against self-incrimination and guarantee of due process of law

(fifth), right to a trial by impartial jury (sixth), and State guarantees of

due process and equal protection of the laws (14th).

● Regulatory boundaries. –Evolving computer-based systems are crossing

over and blurring traditional regulatory boundaries. Regulatory policy

issues are likely to recur with respect to computer- v. communicationbased services, electronic interstate branch banking, and electronic mail.

As these systems expand geographically and move away from traditional

definitions of industry structure, policy issues concerning interstate conflict of laws, Federal-State relationships, and antitrust may also arise.

● Other issues.— Four other issue areas were identified as important

although not analyzed in great detail: computer crime, transborder data

flow, information gap (for those who would be denied access due to technological illiteracy or other reasons), and computer software protection.
,,

,

Chapter 1

Summary

*
Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Computerland Information Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

National Information Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Purpose and Limitations of the Study . . . . . . . . . . . . . . . . . ..;...... . . . .

Computers, Information Systems, and Society. . . . . . . . . . . . . . . . . . . . . . . . .

Nature of Computer-Based Information Systems. . . . . . . . . . . . . . . . . . . . .

Future Trends in Computer-Based Information Systems. . . . . . . . . . . . . . .

The Computer-Based Information Society, . . . . . . . . . . . . . . . . . . . . . . . . . .

The Structure of Information Policy Issues . . . . . . . . . . . . . . . . . . . . . . . . . . .

Information Policy, Law, and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . .

System Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Information Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Secondary Policy Impacts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Long-Term Societal Effects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Public Policy Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Innovation, Productivity, and Employment ..,. . . . . . . . . . . . . . . . . . . . . .

Privacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

...*** .

Government Management of Data Processing. . . . . . . . . . . . . . . . . . . . . . . . .

Society’s Dependence on Information Systems . . . . . . . . . . . . . . . . . . . . . . .

Constitutional Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Regulatory Boundaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other Issues... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

3

5

6

8

8

9

12

13

13

14

15

16

16

16

16

18

19

20

21

22

24

24

TABLE

TableNo. Page

l. Structure of Information Policy Issues... . . . . . . . . . . . . . . . . . ..00,.. . . 14

LIST OF FIGURES

FigureNo. Page

l. The One-Chip Computer: Offspring of the Transistor. . . . . . . . . . . . . . . . . . 3

2, Drop in Average Computer System Cost per 100,0OO Calculations

From 1952-80. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

3. Increase in Capability of Semiconductor Chips From1956-80. . . . . . . . . . . 4

4. Computer Technology in a National Information System . . . . . . . . . . . . . . 6

5. Communication Technologyin a National Information System . . . . . . . . . 7

6. Four Sector Aggregation of the U.S. Work Force by Percent, 1860-1980. . 13

7. Value Triad of Information: Conflict and Competition Among Private,

Commercial, and Public Value . . . . . . . . . . . . . . . . . . . . . . ● ***... . . . . . . . 15
Chapter 1

— Summary

Introduction

Computers and Information

Systems

Computers have become a major technological tool of American society during the

past quarter of a century. New developments in computer and communication technology promise within this decade an even

more radical revolution in the way that information is collected, stored, used, and

disseminated.

Large-scale integrated circuit technology

allows hundreds of thousands of electronic

components to be fabricated on a thin silicon

wafer smaller than a paper clip (see fig. 1)

thus providing computing capability hundreds of times less expensive, less energyconsuming, and more reliable than was available only two or three decades ago, as shown

in figure 2. Because these microelectronic

devices are changing the economics of computer access and use, they are dramatically

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

,.

Photo cred~f Be// Labs

The MAC-4 one-chip computer, developed for a variety of telecommunications applications, is compared

to a standard-sized paper clip. The chip’s numerous functional areas are labeled

3
—

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

Figure 2.— Drop in Average Computer System

Cost per 100,000 Calculations From 1952-80

1.00

0.1

001

0001

0.0001

000001

L

Cost per

100,000

$1.26 Year calculatlonsa

IA 1952 $1.26

k 1958 0,26

k $0.26 1964 0.12

1970 0.01

‘L 1976 0.005

k$o 12 1980 0.0025

1950 1960 1970 1980

Year

aco~t per 100 OOCI Calcu Iat tons IS based on data for the followlng I EM com Puter

systems (w I ;h year In parentheses) 701 (1952), 7090 ( 1958), 360/50 ( 1964),

370/1 66 (1970), 3033 (1976), 4300 (1980)

SOURCE Off Ice of Technology Assessment and President’s Reorganlzatlon

Project, Federa/ Dafa Processing Fleorgan/zat/orr Sludy Basic Reporf

of the Sc/ence and Technology Team, Washington, D C June 1978,

pp 2930

affecting the ways in which computers are

used, and who is using them.

This change has been accompanied by

equally rapid improvement in communication technology. * New telecommunication

technologies such as direct satellite broadcasting, local area distribution cables, and

long-distance data communication networks

allow computers to be used in ways that

were unimagined a decade ago. Although initially distinctly different, computer and communication technologies are increasingly

interdependent, and are being combined to

form new products and services and to

change the nature of information systems in

several ways:

*The development of communication technology is examined in detail in the OTA report, Telecommunication Technology and Public Policy, in press.

Computers are becoming smaller and

less expensive, thereby increasing their

range of applications. Today, computer

logic is even being built into common

devices such as ovens and automobile

carburetors, and complete small computer systems are being sold through

consumer retail outlets at a price

equivalent to a first-rate high-fidelity

stereo set. At the center of this transformation is the integrated circuit chip,

a tiny device capable of containing an

entire computer system. The increasing

capability of these circuit chips is

shown in figure 3. As a result, the large

computer that occupied one or several

rooms in the late 1960 will soon fit in a

desk drawer, and a medium-size computer will fit in a briefcase or even a coat

pocket.

Computers can be connected inexpensively to communication lines making it

possible to provide access economically

to large computer data bases from anyFigure 3.— Increase in Capability of

Semiconductor Chips From 1956-80

107

106

105

104

103

102

10

1

1950 1960 1970 1980 1990

Year

SOURCE: Instltute of Electrical and Electronic Engineers, IEEE Spectrum. vol.

17, June 1980, p 48, and VLSI/LSl IEEE Spectrum VOI. 18 January

1981, pp. 57-61
Ch. l—summary ● 5

where in the country or the world. Networks of remotely sited computers provide services such as credit card and

check authorization or airline scheduling to users nationwide.

c Techniques for the organization and

display of information are improving as

are methods of instructing the computer to perform its tasks, thus making

it easier for nonexperts to obtain usable

information.

● Information storage technology which

is less costly and more compact makes

it feasible to store large amounts of information for long periods of time in

electronic form. In many cases it costs

less for electronic storage than to maintain paper records, and access to specific items is faster and more accurate.

National Information Systems

The focus of this study is on national information systems that are made possible by

advances in computer and communication

technology.

The term “national information systems”

as used here means systems that: are substantially national in geographic scope (i.e.,

multistate); are organized by Government or

private organizations or groups to collect,

store, manipulate, and disseminate information about persons and/or institutions; and

are in some significant manner based on

computers and related information and communication technology.

Furthermore, the focus is primarily on

large, interconnected national systems

where a substantial national interest is involved (e.g., in the financial, postal, military,

and air traffic safety areas). Examples of

such systems include:

●

●

the computer-based National Crime Information Center operated by the Federal Bureau of Investigation;

the FEDWIRE electronic funds transfer network operated by the Federal Reserve System;

c

●

●

●

●

●

the nationwide electronic mail services

operated by several private firms and

soon to involve the U.S. Postal Service;

the nationwide computer-based credit

card and check authorization services

(e.g., VISA, American Express, MasterCard, Telecheck, Telecredit);

the computerized air traffic control

system operated by the Federal Aviation Administration;

the computerized military command

and control systems operated by the

Department of Defense;

the nationwide computer-based airline

reservation systems operated by major

air carriers (e.g., United, TWA, American); and

the computerized automatic quotation

system for obtaining over-the-counter

stock prices operated by the National

Association of Securities Dealers.

A secondary focus of the study is on the

use of personal computers* when interconnected as part of a larger network. For example, MicroNet and The Source are new services, designed to link owners of personal computers with each other and with larger computers, data banks, and information processing services, over a nationwide network.

Also, in the future, stand-alone computer

games when combined, for instance, with a

television set and a telephone will be able to

serve as a terminal with similar access to a

nationwide network.

A typical national information system is

illustrated in figures 4 and 5. In the example,

there are seven cities (nodes) in the network:

New York, Washington, D. C., Chicago, Dallas, Atlanta, Los Angeles, and San Francisco. Information (for instance, on inventory, sales, credit transactions, and the like)

is stored by the headquarters office of a national retail sales company in a central (host)

computer in Dallas, as shown in figure 4. The

regional offices also store information in

*Small but fully capable computers currently selling for

several hundred to a few thousand dollars and designed for

use by individuals in the home, business, or school.
6 ● Computer-Based National Information Systems: Technology and Public Policy Issues

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

m’ Mlnl - Minicomputer Data

computer Telephone

PI

“=

r

communication i

Ilnk

Terminal

/

~See figure 1-4)

%~p -

Terminal Terminal Terminal Terminal 4

—

Mink Host

computer

Chicago Washington, D C. New York L

Personal

computer

.

ml

/\l Terminal

L!&&h

Atlanta

SOURCE: Off Ice of Technology Assessment based on IEEE Specfrurn. vol 17, October 1980, p 24, and AR I NC CorrJ Overv/ew 01 L30rnesl/c Te/ecornrnun/caf /ens

Common Carrier Industry, September 1979

their own minicomputers. * All terminals on

the network can access the headquarters

data base (in the host computer) and the regional data bases distributed around the

country. The information is disseminated

from one city to another via the satellite and

microwave communication links illustrated

in figure 5.

This is an example of current technology

used by a growing number of private firms

and some Government agencies in what is

known as a “distributed data processing network. Distributed means that the data

bases (and computer capability) can be in

several locations (e.g., branches of a retail

store as above, or regional offices of a Gov-

*Small computer systems currently selling for under

$50,000.

ernment agency) rather than in one central

computer. Furthermore, owners of a personal computer could plug into such a network, with the appropriate code words and

authorization, via a telephone line (see fig. 4)

in their own home or office and actually

transact business by computer.

Purpose and Limitations —

of the Study

This overview study is intended to

broad introductory examination of

be a

computer-based national information systems

and related technology and public policy

issues that Congress is likely to face over the

next few years. It will also serve as a foundation for the other OTA information systems

studies and for future in-depth examination
———

Ch. l—Summary ● 7

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

A

.

! :.

./

Rooftop

station

Data communication by satellite

FI

m

, D.C.

1

\.

Rooftop

station

1

a

--

. . .

----------

. . . . . . . ----

. . . . . . . . . . ---”Q-*” . . . . . . . . . .

--- ------ *

I

-..—

4

Terminal

and minicomputer

Terminal

and minicomputer

Data communication by microwave

RooftoD City City Rooftop

transceiver nod-e node transceiver

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

Common Carr/er /ndusfry, September 1979

of particular systems and issues. It also examines the increasingly critical role that national information systems play in society.

It would not be possible for any one study

to capture succinctly a single set of policy

issues that would apply to all national information systems in American society. The

specific system applications are too diverse,

the potentials and problems too complex,

and the parties-at-interest and relevant institutional and legal frameworks too disparate. Only a few of the many issues examined in this study will be important for

any particular system.

Consequently, OTA is also conducting

case studies of three specific national information systems:

1.

2.

3.

an assessment of the National Crime Information Center Computerized Criminal History System;

a preliminary assessment of the role of

the U.S. Postal Service in electronic

message systems; and

a preliminary assessment of electronic

funds transfer systems.

These case studies will provide a more detailed look at the impacts and issues associated with a specific national information

system.
8 ● Computer-Based National Information Systems: Technology and Public Policy Issues

Computers, Information Systems, and Society

Nature of Computer-Based

Information Systems

Traditionally, computers have been

viewed as super calculators that automate

processes that were previously performed by

people sitting at mechanical adding machines. However, computers carry out a wide

variety of tasks associated with processing

information. It is important to understand

the entire range of these capabilities in order

to appreciate the nature and magnitude of

the potential social impacts of this technology when used in information systems.

Computer capabilities fall into seven main

categories:

1. Data collection. When attached to various sensing devices, computers can detect and measure such external physical

phenomena as temperature, time, pressure, flow rate, or any number of other

variables. Also, computers can keep a

record of transactions. For example, a

computerized cash register can collect

and store information about a sale that

includes bookkeeping entries, taxes,

commissions and inventory, and can

even reorder stock. Some computerbased door locks require individuals to

carry magnetic identity cards. Such

locks not only can control access but

also can create a record of whose card

was granted access, when, and for how

long.

Technological advances are beginning

to provide computers with the capability to directly process visual and

audio input, thus greatly increasing

their applicability to data collection.

Computers already have a limited ability to recognize human speech, to read

directly a variety of typewritten forms

and handprinted texts, and to detect

patterns in video images. These functions will be improving rapidly over the

next decade and will soon appear in

commercial equipment.

2.

3.

4.

5.

Information storage. Computers can

store large amounts of information for

long periods of time in an electronically

readable form that is easily and quickly

recoverable. Depending on the particular application, the methods of

storage vary widely, from signals in

electronic circuitry, to magnetic pulses

on tape, to holes in cards. New advances

in memory technology eventually will

allow trillions of characters of information to be stored conveniently and

cheaply wherever there is even a small

computer. The cost of storing information electronically will soon be substantially lower than the cost of storing the

same amount of information on paper.

Information organization. Computers

can be used to rearrange information so

that it is more suitable for particular applications. For example, if the data in a

telephone directory were stored in a

computer’s memory, it could be inverted to allow one to look up a telephone number that corresponds to a

particular address. More generally,

computers can simplify and restructure

vast amounts of raw data to assist people in drawing significant meanings or

conclusions.

Calculations. Computers perform arithmetic calculations millions of times

faster than can human beings. They are

used to make numerous simple calculations, such as those required in processing the payroll for a sizable organization; to make sophisticated statistical calculations on large amounts of

data, such as those for social science research; or to perform highly complex

scientific calculations, such as those

needed for weather research or for

modeling fusion energy systems.

Communication. Through connections

over a communication system, computers can transmit data around the

Nation and the world either to human

users or to other computers, which per-
Ch. l—Summary ● 9

6.

7.

mits the sharing of work and data

among groups of linked computers

(known as computer networking). Private firms are beginning to offer special

communication services to support

computer networking. In addition, computers make possible the more effective

use and management of the communication systems themselves.

Information presentation. Computers

can put out information in a variety of

forms. Through graphical display, and

more recently through voice response,

they can make data readily understandable and useful to nonexperts. It is

possible to display data and computer

schematics on screens in a multicolored,

three-dimensional format for design and

analytical purposes. Also, data such as

numbers and statistics can be organized

by the computer in an easy-to-understand tabular presentation. Much of the

programing effort in developing modern

management information is directed

toward designing ways in which the information generated by the computer

can be presented most clearly to the

manager who needs it.

Control. Computers can be used to control a machine tool or a production line

without human intervention. Many consumer devices—including microwave

ovens, automated home thermostats,

automobile engines, television sets, and

telephones— incorporate computer controls using new microprocessor technology. Such uses are increasing rapidly.

Future Trends in Computer-Based

Information Systems

The use of computers during the 1980’s

will likely follow the key trends discussed

below and covered in depth in chapters 13

and 14.

● Growth in the use of personal computers.

The small computer will become common

both in the home and in business. Despite

their small size, these systems will be

highly capable–the equivalent of maPhoto credit: Texas Insfrurnenfs. Inc.

INSIGHT Series 10 Personal Information Terminal. Standing

only 12 i riches high with a 51A-inch swivel display screen

chines that sold for as much as a million

dollars in the 1950’s. They may appear in

the guise of video games, television sets,

or telephones that will also have a computer capability available for other purposes. This trend will stimulate more

widespread computer literacy in society,

and in turn be reinforced by the consequent increase in the ability of people to

program and use computers. The first

generation to grow up with computers is

now reaching maturity. These “computer

literate” young adults accept computers

as a natural part of their world. Computer

design and use will be taught more both in

school and as part of adult education, and

will enhance an already thriving market

for specialized application programs designed for small computers.

Expansion in the number and size of computer networks. By the end of the decade,

most computers, even small ones, will be

connected to a communication network at

least part of the time.

The communication system may be

dedicated to a single application in which

all the machines on the network perform

portions of a larger task. Public data networks, on the other hand, provide any

home or business computer with access to
10 ● Computer-Based National Information Systems: Technology and Public Policy Issues

●

●

a wide range of data bases or special programs that may be wanted for occasional

use. Such multiuser national networks

that can be interconnected now exist, and

the number of users is expected to grow at

a rapid rate.

The trend toward information services.

The computer industry has traditionally

been concerned with selling hardware

(desktop, mini, and mainframe computers

and related auxiliary equipment). However, current trends in both pricing and

the structure of the market are driving the

emphasis toward providing computerbased information services, such as bibliographic and data base searches, electronic publishing, electronic banking, and

the like. A number of these services will

still require that the user possess a computer. However, many will be offered over

data communication lines to homes and offices, and will be accessible through a

modified (“intelligent”) telephone or television set. Examples include two-way

cable television, videotext, and the AT&T

Electronic Information Services experiment that provides an electronic telephone directory over a telephone line to a

home terminal. Eventually, information

services of all kinds will dominate the data

processing market in terms of dollar

volume.

The competition among giant corporations for the data communication services

market. IBM, AT&T, Exxon, and GTE,

among others, are preparing to offer a

variety of data communication services.

Large corporations such as these have access to the capital required to install the

technological base for the planned services, such as communication satellite systems and fiber optic transmission lines. A

series of recent rulings by the FCC, some

still under challenge, are intended to clear

the way for open competition among these

and other corporations to provide information services of all kinds over communication lines. Resolution of the pending

challenges by the courts or by Congress

will have significant implications over the

●

●

long term for the data communication industry.*

Higher level integration of data services.

Many individual networks for servicing

specific corporate and governmental

needs will continue to be built. Some of

these networks will become integrated.

For example, most airlines, car rental

agencies, and large hotel chains have their

own reservation systems. It is now technically feasible to build an integrated

system that would provide travel agents

access to all of these reservation systems

through one desktop terminal.

Similar integrated information systems

are also feasible in insurance, banking,

travel, entertainment, law enforcement,

commodities exchanges, medical services,

and many other sectors that now use several separate information systems. However, implementation of these systems will

depend on perceived need, economic

viability, and other related factors.

The software bottleneck. According to

many computer and industry experts, the

increasing capability of computer hardware is not being fully utilized due to problems encountered in creating suitable software programs for these new machines.

The major problems are the relatively

slow increase in the productivity of programers—their cost efficiency—compared

with that of the hardware, and the difficulties encountered in managing large

programing projects.

These problems have created bottlenecks in the development of new applications. Computer programing has been

relatively resistant to productivity improvement, at least when compared with

corresponding improvements in hardware

performance. Programing is by nature

labor intensive. Its cost is rising due to

the increased programing requirements of

new hardware coupled with a shortage of

programing personnel with the required

training and experience, New mechanisms

*For a detailed discussion, see the OTA report Telecommunication Technology and Public Policy, in press.
Ch. 1—Summary ● 11
12 . Computer-Based National Information Systems: Technology and Public Policy Issues

one-third of the research effort at Bell

Labs is devoted to the software problem.

The Computer-Based

Information Society

An information industry analyst recently

observed that “every society is an information society.”* That is, all human organizations, no matter how simple, depend for their

functioning on an intangible resource called

‘‘information. In any society, information

serves several purposes. It can be, for example, a commodity of commerce, an indicator

of wealth or power, a basis for making decisions, or a source of entertainment.

Several key trends are transforming the

United States into a computer-based information society:

●

●

The tasks being undertaken by the large

organizations that serve American SOCety are growing in complexity. The air

traffic control system handles nearly 20

million flights yearly. Every year the

financial system clears over 30 billion

checks, the U.S. Postal Service delivers

over 100 billion pieces of mail, and the

Internal Revenue Service (IRS) receives

more than 140 million tax returns. The

use of computer-based systems is one

way to cope with this vast and complex

information flow.

The service sector of the economy is

growing at a relatively faster rate than

the industrial and agricultural sectors.

Many services such as medicine, law,

education, and Government involve the

transfer of large amounts of information. Resistance to productivity improvements in this sector, which represents a large part of the economy, has

*Anthony G. Oettinger, “Information Resources: Knowledge and Power in the 21st Century, ” Science Magazine, vol.

209, July 1980, p. 191.

●

●

impeded overall productivity growth.

Greater application of information technology has been proposed as a chief

remedy. For this reason, it is highly

likely that in this decade the service

sector will increasingly depend on the

use of computer-based information

systems.

The information sector itself has grown

to account for over half of the U.S. work

force. An examination of the trends in

the work force reveals the extent to

which the economy has shifted. The results shown graphically in figure 6 illustrate the transitions from an economy dominated by agriculture, to one

dominated by manufacturing, to a service and information economy.

The information sector includes those

who generate and sell information as

well as those who produce information

technology. Included are typewriter

and word processor manufacturers,

newspaper publishers, and producers of

films and broadway and television

shows, all of whom are rapidly incorporating computer-based information systems into their operations. The

information sector also covers information services and products used by any

organization for its own internal purposes. Examples are internal accounting and production management, and

inventory control systems, many of

which are already computerized.

Greater international economic competition coupled with the decreasing

availability of basic resources are requiring industry and Government to

both improve and speed up their decisionmaking capabilities. Computerbased information systems are growing

in importance for this purpose. Decisions about design, marketing, financing, and resource allocation all require a

more sophisticated approach to the collection and use of information.
Ch. 1—SummarY ● 1 3

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

(Using median estimates of information workers)

Stage Ill

. *

----- Informatio n #-

\.

“% . Service -\*\ / ‘-”----

#

.

/ “% Industry

/ ’

:860 1880 1900 1920 1940 1960 1980

Year

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

further discussion

The Structure of Information Policy Issues

Information Policy, Law, In the course of this study, OTA identified

and Regulation 14 major areas of law and regulation* that

affect information systems or are affected by

As these computer-based systems become them. There are undoubtedly many others.

more important to American society, particularly for Government administration, The analysis made by OTA has led to

they create corresponding public policy these findings:

issues. Current policies governing informa- s There are numerous laws and regulation systems are a composite of many spe- tions, some overlapping and some pocific regulations and laws, which are based tentially or actually conflicting, that

on three main factors: directly and indirectly affect the op1.

2.

3.

the areas affected or the regulatory concerns (privacy, freedom of information,

etc.);

the affected sector of society (banking,

education, Government, etc.); and

the lawmakers and/or rulemakers (Congress, the Federal Communications

Commission (FCC), State legislatures,

the Courts, etc.)

erators and users of information systems, the consumers of information

*These areas are privacy, freedom of information, first

amendment, 14th amendment, due process, communication

regulation (Computer I I decision of the FCC), computer

crime, proprietary rights (patent, trademark, copyright),

evidence, liability, antitrust, taxation, Government provision

of information, and Government procurement of information

systems.
14 ● Computer-Based National Information Systems: Technology and Public Policy Issues

●

●

●

services, and the’ subjects of personal

information data banks.

There appears to be neither a strong

trend nor sentiment at present among

policymakers in favor of a uniform Federal information policy that would encompass all the problems that could

arise from the many possible uses of

data systems. *

There is a lack of focus on information

policy as such, and consequently the

emerging issues are not being directly

addressed.**

Continuation of the present situation

could inhibit many socially desirable applications of information systems or

could create even more intractable policy problems in the future.

The term “information policy” as used

here does not suggest that there is or should

be a single uniform policy governing all the

uses of information systems in both the public and private sectors. In fact, no such policy exists, nor does one appear to be likely.

“Information policy” does suggest the

need for consideration of the currently confusing array of laws and regulations-and

their strengths, overlaps, contradictions,

and deficiencies—within some overall policy

issue structure or framework. The structure

*Some recently proposed legislation would establish a comprehensive approach to certain specific problem areas, e.g.,

privacy and freedom of information. See H.R. 2465, 96th

Cong., “Omnibus Right to Privacy Act of 1979. ” Also the National Telecommunications and Information Administration

(NTIA) of the Department of Commerce has made an effort

to formulate—or at least to develop a framework for—

national information policies. See Arthur A. Bushkin and

Jane H. Yurow, The Foundations of United States Information Policy, NTIA, Washington, D. C., June 1980, and Jane H.

Yurow, et al., Issues in Information Policy, Helen A. Shaw

(cd.), NTIA, February 1981. See also, Donald A. Dunn, “Information Resources and the New Information Technologies:

Implications for Public Policy, ” National Science Foundation

Report to the President and Members of Congress, The FiveYear Outlook on Science and Technology, vol. II, May 1980,

pp. 493-507. **The “paperwork Reduction Act of 1980” (Public Law

96-51 1) enacted by the 96th Congress does set out a more

comprehensive policy and management approach for Federal

Government information systems, The Act establishes

within the Office of Management and Budget (OMB) an Office of Information and Regulatory Affairs and assigns to

that Office a broad range of authorities and required actions.

developed by OTA for use in this and related

studies is shown in table 1.

System Issues

The policy issues related to information

systems per se focus on their design, implementation, and operation. They generally

are concerned with whether the system performs the tasks expected of it with reliability, with appropriate security, and in an efficient and timely manner. These objectives

mainly are of interest to the organization

operating the system, and place major constraints on the system designer.

Technical, operational, and reliability factors all can have broader societal significance even though they originate in the

operational goals of the system itself. In recent years, for example, public attention has

been focused on areas such as:

● the safety and reliability of the air traffic control system;

Table 1 .—Structure of Information Policy Issues

Level of issues Character of issues Example issues

System level Relate to the Government procuredesign, implementa- ment policy,

tion, and operation Efficiency and

of particular in for- economy of

mation systems. operation.

Security of information systems.

Information level Relate to the hand- Privacy (recordling of data: collec- keeping). Freedom of

tion, storage, use, information regulaand dissemination. tions. Copyright

and patents as related to computer

programs.

Secondary policy Exist independent of Privacy (surveillance).

impacts the particular infor- First Amendment

mation systems, but rights.

are changed in mag- Fourth Amendment

nitude or character rights.

by use of Social vulnerability.

technology. Federal State

relations.

Long-term societal Long-range societal Privacy (social

effects impacts that are not attitudes).

currently reflected Psychological selfin specific policy image of humans.

problems, but which Educational needs.

may ultimately af - Social-political

feet the nature of effects.

U.S. society. Cultural impacts.

SOURCE: Office of Technology Assessment, see ch. 5
Ch l—Summary ● 1 5

●

●

●

the reliability, security, and controllability of military command and control systems, existing and proposed;

the security of large-scale electronic

funds transfer systems; and

the reliability, accuracy, and responsiveness of the social security information systems.

There is a strong societal interest in the

proper and reliable technical operation of

each of the systems cited above, and potentially high costs to society if they fail.

Information Issue s

The three differing fundamental values of

information shown in figure 7 motivate

many of the laws and regulations affecting

information. Individual regulations or laws

usually address only one aspect of information. Policy issues, then, arise from the

inherent tensions between the particular

values reflected in different laws. Congress

is called on to establish balances. These tensions are illustrated below:

●

●

Public v. private value. Freedom of information laws (reflecting public value)

can conflict with individual or proprietary concerns (reflecting rights to

privacy). For example, in serving the

public interest, Government collects an

extraordinary amount of information

about citizens, businesses, and other

organizations. Some of this information

theoretically has been available to the

public by law for a long time but has

been protected, in fact, by the amount

of effort required to retrieve it from

manual recordkeeping systems. Automated systems reduce the cost and time

barriers to wider access to these public

records, and thereby may accentuate

the issue of the extent to which this information can and should be publicly

available.

Commercial v. public value. As information becomes a more valuable commercial commodity, increasing tensions

are arising between those who wish to

sell it through new information sysFigure 7.— Value Triad of Information: Conflict and

Competition Among Private, Commercial,

and Public Value

Private

value

y

u- Value c}

\

“9

Mad of

information

in society

Commerical Competition Public

value value 4 *

Conflict

Commercial value of Information: Information has been a commodity of commerce for centuries Books and newspapers, and in this

century the broadcasting Industry, all sell Information. As society

becomes more dependent on Information, its value Increases. The

very high growth rate of the computer-based information industry illustrates this trend.

Private value of information: In an Information society, economic

competition is often based on access to special Information, such

as a formula for a soft drink, an econometric projection, marketing

plans, or geological data. Commercially important information is

considered by organizations to be proprietary Similarly, individuals

often consider Information about themselves to be private, either

because damage can be done by its disclosure or simply because of

desiring to be left alone.

Public value of informat/on: American society has always viewed information as having a public value, and has asserted the public interest in a free flow of information. Examples include: the public

support of Iibraries, schools, and museums; a tradition of academic

freedom and a system of open scholarly publication. the first

amendment guarantees, and freedom of information laws

SOURCE Off Ice of Technology Assessment see ch. 4.

●

terns, and those like the public

librarians whose traditional role is to

treat information as a public good available to all. These tensions may also

stem from the competition between

Government-collected data, made available through freedom of information

laws, and commercial data services.

Commercial v. private value. Commercially marketable information may invade privacy or proprietary rights, as in

the case of computerized mailing lists
16 . Computer-Based National Information Systems: Technology and Public Policy Issues

that may be compiled from third-party

information sources without the knowledge or consent of the individuals involved.

Secondary Policy Impacts

Computer-based information systems, by

increasing the quantity of information collected, the efficiency of its collection and

dissemination, its utility, and its ease of

storage can cause qualitative changes in the

behavior of Government, individuals, and

organizations as well as in the nature of

traditional conflicts. Thus, the use of automated information systems can have secondary effects on policy problems that have

existed for years and in many ways are independent of the technology. Because much

more information can be obtained, handled,

processed, and distributed so much faster,

old problems are not merely exacerbated,

but new ones are created.

For example, the increased scale and

presumed efficiency of computerized criminal justice recordkeeping intensifies the tension society has always experienced between

the needs of law enforcement and the individual rights of citizens. Similarly, the

tendency of the technology to encourage centralized record systems creates problems of

Federal-State relationships, a particularly

touchy issue in law enforcement. Some experts believe this centralization trend could

reverse through the use of of smaller computers with distributed data bases.

Long-Term Societal Effects

Social scientists engaged in futures studies have suggested that the information revolution, spurred both by advances in computers and communication and by the

changing role of information in U.S. society,

will have profound long-term effects as

dramatic as those caused by the invention of

the printing press.

Just as the printing press, by stimulating

literacy and speeding the flow of ideas, supported the Renaissance and the transition

from medieval society to the age of enlightenment, so the new information systems could profoundly transform the social

and political environment of U.S. and world

society. Indeed television and sophisticated

computer-based polling technology have

already had observable effects on the political processes in the United States. Third

World leaders calling on UNESCO for a

“new world information order” express the

belief that information technology will have

a central influence on the social and

economic development of their countries as

well as on international relationships.

This overview study has not attempted to

address in detail these broader questions.

However, given the potential for significant

social change, research funded publicly,

privately, or in some jointly developed projects could provide valuable insights into the

long-term societal effects of computer-based

information systems and related public policy choices.

Public Policy Issues

The overview study examined the national and regulatory and other issues. See chapinformation system issues judged by OTA ters 6 through 12 for further discussion.

to be among the most important and likely

to warrant congressional attention over the Innovation, Productivity, and

next few years. These issue areas include: Employment innovation, productivity, and employment;

privacy; security; Government management Innovation, the continual generation of

of data processing; society’s dependence on new technological ideas and products and

information systems; constitutional rights; services based on those ideas, is a prime req-
Ch. 1—Summary ● 1 7

uisite for a healthy industry in a high technology field like computers and information

systems. Innovation in information technology improves the productivity of the information industry itself and also offers the

tools for improving the productivity of many

other sectors of the economy.

Based on anticipated advances in artificial

intelligence, robotics, computer control, and

input-output technology over the next few

years, computer-based factory automation

will make a substantial contribution to improving manufacturing productivity. Word

processing and other forms of office automation are already improving clerical productivity and may have similar potential for

managerial productivity. Intelligent cash

registers and automated checkout are directly improving the productivity of retail clerks

and indirectly the productivity of retail management (e.g., accounting, inventory control,

procurement). The full impact is yet to be

felt of these and other applications that are

only now starting to be installed in the

manufacturing and service sectors of the

economy. However, they are likely to help restore an upward trend in the Nation’s productivity.

Photo credit: IBM Corp.

The I EM scanner uses holography, a technique for creating

three-dimensional images, to read data on packages

From a larger societal perspective, the increased productivity brought about by advances in computer technology may be reflected not only by greater output per employee, but perhaps also in terms of better

product quality, improved work environment and job satisfaction, and longer term

social benefits such as improved job safety

and greater opportunities for on-the-job

learning and career advancement.

Congress will be confronted by a number

of issues concerned with innovation in computer technology and its effects on productivity and employment:

●

●



R&D support. Innovation in computer

and information technology depends on

continued, aggressive R&D. Many U.S.

corporations in the information industry, realizing that their success depends on continued innovation, have established their own research centers.

Several Federal agencies* support computer R&D, although the major part of

development support comes from the

Department of Defense and related

agencies. An important issue is whether

research in the applications of computer

technology to problems in the private

(civilian) sector—in such areas as education,** health, transportation, environmental quality, and job safety—is

receiving adequate Federal support,

given the critical nature of computer

technology to the Nation’s well-being.

Vitality of academic computer science.

Basic research in computer science is

largely carried out in universities. Because of the close connection between

applied technology and basic research,

the vitality of the computer industry is

in part dependent on the vitality of

academic computer science. However,

university departments of computer sciences are experiencing problems in ob-

*Including the National Science Foundation, National

Aeronautics and Space Administration, and Department of

Energy.

**Information Technology and Education is the subject of

another OTA assessment in progress.
18 . Computer-Based National Information Systems: Technology and Public Policy Issues

●

●

●

taining the faculty, facilities, and funds

needed to do the research and to train

new experts. This situation is particularly critical in systems design and

software engineering.

Impacts on employment. It is still uncertain whether the productivity increases brought about by computer

technology will increase or decrease the

overall employment level. Structural

shifts in the economy are likely to occur

since any innovation which creates new

products and new industries will eliminate some jobs only to create others.

Even if new jobs are created or old ones

redefined, not all workers will find it

easy or desirable to shift. Some employees may be unwilling or unable to

adapt themselves to the new technology

or may be untrainable in the new procedures.

Support for computer impact research.

The area of employment impacts is a

good example of the need for computer

impact research, a new field developed

over the last decade by computer and

social scientists. To date, however,

university groups and others have experienced difficulty in securing financial

support, in part because this subject

does not fit comfortably into traditional

scientific research programs. Computer

impact research is not pure computer

science; neither is it classifiable as purely social or political science. The results

of such research could supply valuable

input to the kinds of public policy issues

identified in this overview study.

International competitiveness. Computer and communication technologies are

moving ahead so rapidly that products

can become obsolete within a few years.

Although the United States holds a

substantial positive balance of trade

(and employment) in certain areas of information technology, the maintenance

of this balance depends in part on continued R&D and innovation and on supportive public policies. * Because of

aggressive import competition from

Europe, Japan, and Canada, even domestic markets are vulnerable to any

faltering in the technological lead.

Privacy

Privacy-related issues dealing with the

collection, dissemination, and use of personal information are likely to remain on the

congressional agenda for a number of

reasons:

● An omnibus v. a selective privacy policy. The Federal Government has

deliberately chosen up to now to react

to privacy issues associated with

recordkeeping on a case-by-case basis

rather than through omnibus legislation, which would cover all data systems both public and private in which

personal information is maintained.

With the selective approach, Congress

will be considering a long series of privacy bills. To catch up with current

computerized recordkeeping practices

will require a substantial legislative effort. An immediate concern is to develop privacy rules for computer applications in banking, medicine, social

and medical research, credit, insurance,

and criminal justice. Privacy is also likely to be a major issue in the development of electronic mail.

Congress may need to consider alternative approaches to privacy policy.

● New technologies, new problems. New

applications for computer and communication technology, such as an automated securities exchange, in-home information services, electronic publishing, and the automated office, may

create new environments for privacy

*Relevant policy instruments include taxation, antitrust,

and standards, among others. U.S. industrial competitiveness in the international electronics and computer markets

is the subject of another OTA assessment in progress.
Ch. 1—Summary ● 19

policy issues to arise. As Government

agencies such as the Department of

Justice, IRS, or the Social Security

Administration begin to use the latest

generation of information technology

for their recordkeeping activities, privacy problems that were not specifically addressed in previous legislation

may have to be dealt with by Congress.

● Secondary use of personal information.

A fundamental assumption underlying

much of the privacy debate in the

1970’s was that collecting personal information is in the nature of a transaction—the individual yields personal

information in exchange for some benefit. Thus, much of the fair practice doctrine centers on the requirement that

the recordkeeper abide by obligations

implicit in that transaction. However,

individuals will increasingly be encountering computerized systems that collect and store information about them

without their knowledge or consent.

Very little law exists pertaining to the

ownership or disposition of such information, even when its use may be

contrary to the individual’s perception

of his or her interests.

● Microprocessors and surveillance. The

potential now exists for the development and marketing of a wide variety of

microprocessor and computer/communication devices either specifically designed or capable of being used for the

surveillance of individuals without their

consent. Microprocessor-based locks

can provide detailed records of the

whereabouts of anyone in a building.

Devices called “pen registers” provide a

similar capability for monitoring telephone traffic. Abuse of this technology

for illicit purposes may become a

serious problem. Even seemingly legitimate applications (e.g., employer

monitoring of employee phone calls to

deter nonwork-related conversations)

may, if abused, raise in new forms the

classic issues of civil rights versus both

law enforcement and the rights of employers to monitor their employees.

Security

The technology for securing computer

systems from theft, sabotage, natural hazards, and the like is improving steadily, and

users are becoming more aware of the need

to protect information. However, the increasingly complicated computer-based

information systems being designed and

built make secure operation more and more

difficult.

Among the several difficult issues involving computer security that are likely to confront Congress, the following appear to be

the most significant:

c Protection of Federal systems. Federal

information systems control the disbursement of an enormous amount of

money. The Social Security system itself disburses over $2 billion per week.

Other Federal systems contain information that could be used directly or indirectly to make profitable financial decisions, e.g., information on Federal

monetary policy, on commodity markets, and on energy resource estimates.

Still others contain sensitive information relating to personal privacy

or national security. All would be highly

attractive to theft, manipulation, or

eavesdropping.

These are not the only threats to Federal computer systems that Congress

will need to consider. A more subtle

threat is a system’s potential diversion

by the bureaucracy from its intended

use; for example, the use of computerized criminal histories for employment

or licensing purposes. As the Government continues to automate, problems of bureaucratic accountability and
20 . Computer-Based National Information Systems: Technology and Public Policy Issues

●

●

the responsibility for oversight will confront Congress with the need to better

understand and more closely monitor

the use of large Federal information

systems.

Protection of vital domestic information

systems. There is a Federal responsibility for certain information systems

that, although privately operated, are

fundamental to social well-being. The

security and reliability of automated

systems for nationwide bank check

clearing, electronic message systems,

and computer-based commodity trading, for example, would all be under the

purview of Congress. The vulnerability

of such systems is of governmental concern because of the harm that a major

system failure could cause to the Nation’s economy and to its citizens.

Development of data security and cryptographic capability. The Federal Government, due to its traditional concern

for the protection of military and diplomatic communications, has a high degree of expertise in the field of data

security. For example, the National

Bureau of Standards is developing computer security guidelines and standards

for use by Federal agencies. The first

standard to emerge from this effort is

the Data Encryption* Standard (DES)

for protecting data communication.

While the DES is public, much of the

Federal expertise is either classified or

in the hands of highly sensitive organizations such as the National Security Agency. The appropriate role of the

Federal Government has not been defined in transferring this knowledge,

supporting computer security research

in both the public and private sectors,

setting standards for non-Federal systems, and certifying security technology.

The lack of such policy definition is

visible in the current debate over

Government control of cryptographic

*Encryption is the coding of a message so that it is only

understandable to a receiver who knows the secret decoding

procedure and/or key.

technology. In this debate, the needs of

the private sector for increased communication security, and hence for the

existence of a civilian commercial cryptographic capability, are set against the

perceptions of the defense community

that such development threatens national security concerns by putting sensitive information in the public domain.

A related issue is the desire in the

academic community for the freedom to

conduct research on the mathematics

underlying cryptography.

Government Management of

Data Processing

In the early days of computing, the Federal Government as a user was a principal

stimulus to the development of the field.

Although a few instances of Federal expertise at the leading edge of computer applications remain, the Federal Government is

rapidly falling behind the private sector in

its use and management of up-to-date computer and information technology. Such a

lag would penalize Government operations

in two ways:

1. potentially lost opportunities to use the

newest technology to improve the efficiency

and effectiveness of Government programs;

and

2. increased cost and decreased reliability

resulting from operating systems that are

becoming obsolete, from archaic management procedures, and from burdensome procurement restrictions.

Cheaper computing hardware, the emergence of data communication-based systems, and new software techniques are

changing the way computers are used in industry. The next 10 years will see significant

movement in the private sector toward

automating the flow of information in offices, toward experimenting with new management structures based on high-volume

data communication, and toward automating decision support systems for use by

higher management. To the extent that

these applications fulfill their promise of
Ch. 1—Summary ● 2 1

improvement in both the quality and productivity of management, the Federal Government would be remiss in not making use of

them where appropriate.

The most recent legislative action to address this problem is Public Law 96-511,

known as the Paperwork Reduction Act of

1980, which establishes central oversight in

the Office of Management and Budget of the

information policies and practices of the executive branch. Perhaps most important,

this Act emphasizes the basic need for restructuring the way information resources

and supporting technologies are managed in

the Government. This represents a new and

as yet untested approach by giving management of information resources similar importance to that traditionally assigned to

managing financial and personnel resources.

Many other issues and questions also need

attention from this broader perspective. For

example:

● Automated bureaucracy. There is a

need to better understand the effects of

large-scale information systems on the

internal organization and management

of Government agencies and on Federal

decisionmaking. What effects do these

systems have on the location of responsibility, the quality of the decisions, the

nature of due process for clients affected by those decisions, and the accountability of the bureaucracy to

higher-leve policymakers in the executive branch and to Congress itself?

● Social values and goals. The process by

which appropriate social values and

goals are reflected in Federal information systems design needs clarification.

Major new systems will need to be

evaluated for their effects on privacy,

security, constitutional rights, and

many other issues that are not normally

the concern of the designer or operator

of an information system.

Three fundamental approaches are

available to deal with social value questions:

1. Congress could assess the potential

social impacts of each new system de2.

3.

sign that is proposed on a case-bycase basis.

Congress could codify a social impact

policy concerning all Federal information processing systems. An appropriate agency could be designated as

responsible for seeing that all new

system designs are evaluated in relation to that policy.

Congress could continue to examine

agency proposals system by system,

but would base its evaluation on a

social impact framework encompassing a set of principles for the design

and operation of Federal information

systems.

Whatever the approach, it will be necessary for Congress to balance the need to

speed up design and procurement of Federal

systems, against the requirements that tax

money be spent as effectively and as

equitably as possible and the necessity to

consider carefully the societal impacts of

these systems. !

Society’s Dependence on

Information Systems

The nature of risk is being changed by

much of the new high technology on which

modern society depends—jumbo commercial

airlines, nuclear powerplants, oil supertankers, or large computer-based information systems. In general, because new technologies can be designed to operate more

reliably than the ones replaced, the risk that

any particular mechanism may fail has been

reduced. However, should an accidental or

deliberate disruption occur, its cost can be

much larger, even catastrophic. Furthermore, when society becomes highly dependent on the reliable functioning of a single integrated technological system or small collection of such systems, the possibility of a

“domino-like” collapse of several of the individual connected units could also be

disastrous.

This evolution to dependency can be seen

already in the reliance of safe public air
22 ● Computer-Based National Information Systems: Technology and Public Policy Issues

transport on the continuous operation of the

computerized air traffic control system. * In

the commercial sector, large stores and

banks rely on the smooth uninterrupted operation of their computer systems.

Thus, as society moves toward electronic

funds transfer systems, widely available

electronic mail service, and other large extensively used information systems, the

following factors warrant consideration:

The ways in which public policy can

help to allocate and balance the risks

society may encounter from national information systems against the benefits

it may receive, under conditions where

failure rates appear to be low but potential losses may be high should a failure

occur.

The ability of society to retain the option to end its dependence on a particular information system if it has

unanticipated undesirable effects; in

other words, to avoid the possibility of

becoming “locked in” to the use of certain information systems once they are

installed.

The capability of providing alternatives

to persons or institutions choosing not

to accept perceived risks in a new information system.

The ways in which technology can be

utilized-to reduce the risks, for example

by introducing additional system redundancy (alternative paths between

points in the system, distributed data

bases, backup computers). The risks inherent in U.S. dependence on a nationwide, interconnected telephone system

(which itself is rapidly being computerized) are minimized by the large

number of circuit switching centers and

parallel trunklines.

Large complex information systems contain millions of logical connections and are

controlled by programs that themselves can

be composed of millions of instructions. Consequently, it is difficult to calculate their

*The airport and air traffic control system is the subject of

another OTA assessment.

reliability and to predict the failure rate of

any particular part of the system, as well as

the effect of a failure on the operation of the

entire system. New research in risk analysis

is needed to address the problem of estimating risks under these conditions.

Constitutional Rights

Little legal precedent exists, in many

cases, for applying constitutional law to the

issues raised by computer-based information

systems. This overview study identified several areas of constitutional rights that may

be affected by information systems, as illustrated below:

The first amendment guarantees freedom

of religion, speech, the press, peaceable

assembly, and the right to petition for

redress of grievances.

A principal first amendment issue

facing the Government may be how to

encourage the maximum freedom of expression–fostering the “marketplace of

ideas’ ‘—in new electronic media that

have been tightly regulated in more

traditional forms. For example, the

scarcity of frequency spectrum and

channel capacity that provided a basis

for regulation of broadcast television

may not apply to new versions of TV

such as cable, direct-to-home satellite,

and videotext.

Another first amendment issue may be

generated by extensive data collection

and possibly surveillance by Government and private organizations that

could, in fact, suppress or “chill”

freedoms of speech, assembly, and even

religion by the implicit threats contained in such collection or surveillance.

These threats might be directed as

much at the “listener” as the

“speaker.” Clearly, automated information delivery systems possess a much

greater capability for recording, storing, and analyzing in detail the flow of

information from all sources into homes

and offices, than do manual svstems
Ch. 1—Summary ● 2 3

such as bookstores, newspapers, and

the like.

The fourth amendment protects the persons, houses, papers, and effects of individuals against unreasonable searches and

seizures by the Federal Government.

● Fourth amendment issues may develop

from:

—the use of personal and statistical

data contained in automated information systems as a justification for

search and seizure;

—the search and seizure of information

per se as personal property, particularly in electronic form; and

—the use of automated information systems as a tool for search and seizure

operations.

An electronic mail cover illustrates the latter type of fourth amendment issue. A nonelectronic mail cover requires approval by

the Postal Inspection Service but not a

search warrant because only the outside of

an envelope is examined. In an electronic

mail system, however, no distinction may exist between the “outside” (or address) and

the “inside” (or contents) of a message.

Therefore, it maybe difficult to distinguish a

mail cover from a wiretap, which would require a warrant issued by a court upon probable cause, unless some form of coding was

used to “seal” an electronic message as an

envelope seals a physical one.

The fifth amendment guarantees that a

person may not be compelled to be a witness

against himself or be deprived of life, liberty,

or property without due process of law.

●

●

A fifth amendment issue could arise

from the use of personal or corporate

computer data that have been collected

by the Government for one purpose as

evidentiary material in unrelated criminal or regulatory cases.

Another fifth amendment issue could

develop from the delivery of Government services by computer-based information systems. For example, very

large systems that “mass produce” decisions in such areas as health benefits,

student loans, or tax returns may have

subtle biases “built in” to the program

or code of the computer. These systems

may react quickly to what the computer

recognizes as “normal” applications,

but reject “unusual” claims. If, as a

consequence, citizens are subjected to

an unacceptable amount of hassle, delay

and/or error, the program or code used

by the computer to define “normal” or

the entire information system may become subject to due process challenge.

The sixth amendment guarantees, among

other things, the right of a speedy and public

trial by an impartial jury.

● A sixth amendment issue may be raised

by the growing use of computerized

dossiers of potential jurors along with

computer models for predicting juror

behavior. At this time, computer-based

jury selection is very expensive and its

value is controversial. However, future

computer technology and social scientific techniques may make this application cheap and improve its effectiveness. If so, the entire concept of an “impartial” jury may be challenged.

The 14th amendment guarantees that a

State cannot deprive any person of life, liberty, or property without due process of law

nor deny any person within its jurisdiction

the equal protection of the laws.

c Fifth and 14th amendment issues may

develop from a similar application of

computer-based social science and statistical models to predicting criminal

behavior and to aid in such tasks as approving credit, determining insurability, or hiring and promoting employees.

Essentially, individuals may be denied

rights, privileges, and benefits based,

not on past performance, but on a

prediction of future tendencies. For example, society cannot imprison a person

that a computer model predicts may

someday rob a bank. But should that

knowledge be “probable cause” to
24 ● Computer-Based National Information Systems: Technology and Public Policy lssues

monitor such a person closely or deny

employment?

Regulatory Boundaries

As computer-based information systems

evolve, they challenge traditional concepts

of boundaries—physical or social—that are

reflected in the law and regulatory policy.

The integration of computer and communication technologies creates systems that

cross boundaries between nations, States,

and organizations. The issue of transborder

data flow discussed in chapter 12 exemplifies

the kinds of international problems created.

Others include the following:

●

●

●

Interstate conflict of laws: When States

have conflicting laws involving information or information processing, for example, property laws that cover computer data bases, an integrated data

system that exists in a number of different States can raise difficult questions of legal jurisdiction.

Federalism: Linking Federal data systems with State and local systems complicates problems even further. Issues

of federalism could arise with systems

containing data on criminal history,

taxation, welfare, education, medical

care, and drug abuse, among others.

Antitrust: Policy issues may arise with

respect to whether large integrated

data systems using shared facilities

create monopolistic barriers to new entrants or are mechanisms for control of

the market, or whether they encourage

competition by reducing the cost of access for smaller firms.

Information technology is changing form

so fast that it is tending to outstrip the

working definitions of devices and services

that serve as the basis for law and regulation. These definitional problems relate both

to the technology itself, and to the products

and services that depend on it.

● Computers or communication: The best

known example is the continuing attempt by the Federal Communications

●

●

Commission to establish what services

and what technologies are already

‘‘communications, thus regulated, and

what are ‘‘computer’ services and

technologies, thus not regulatable.

Their second inquiry on these questions, which began in 1976, only recently resulted in an opinion that is now

under court challenge. Even if the

definition is accepted, there is no reason

to believe that the problem has been

permanently resolved.

Branch banking: Many States have

laws that either prohibit or tightly regulate branch banks. An issue that has

been widely debated is whether the

automated extensions of banking (e.g.,

automatic teller machines or pay-byphone services) constitute “branches”

in the usual meaning of the law.

The status of electronic mail: Electronic

data transmission has opened a major

policy question about the definition of

mail. As with the computer/communication issue above, this definition is significant because it places a class of services under one or another set of regulations. Unlike many other countries

that have combined postal and telecommunication services under one national

agency, the United States has pursued

completely different approaches to regulating each service category. Electronic mail, in its various forms, provides a new service with features of

both manual delivery and telecommunication, and may pose new and difficult regulatory questions.

Other Issues

Four other issue areas were identified as

important although not analyzed in great

detail:

1. Computer crime: Crime directed against

computer-based information systems or

in which these systems are used as tools

for criminal activity.
Ch. 1—Summary ● 2 5

2.

3.

Transborder data flow: Problems that

arise from differing national attitudes

and laws regarding the increasing flow

of data and interconnection of information systems across national bound- 4,

aries.

Information gap: The possibility that

some individuals or groups would be

denied access to information services

vital to their survival in an information

society because of technological illiteracy, lack of economic resources, or

other reasons.

Computer software protection: The concern that continuing uncertainty about

copyright and patent protection for

computer software is significantly impairing software R&D and innovation.
Chapter 2

Background and

Purpose of the Study

*
Contents

Page

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Congressional Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

OTA Response... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

NIS Study Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Study Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

LIST OF TABLES

Table No. Page

2. Summary of Congressional Requests for OTA Assessments

Concerning National Information Systems . . . . . . . . . . . . . . . . . . . . . . . . . 31

3. Initial Working List of Impact and Issue Areas . . . . . . . . . . . . . . . . . . . . . 34
Chapter 2

Background and

Purpose of the Study

Introduction

As computer-based national information

systems become more important to American society, particularly for Government administration, they create corresponding public policy problems. Thus, over the past 10 to

15 years Congress has been confronted with

a series of increasingly complex issues growing out of the way computer-based systems

have been designed and used. These have

covered a wide range of concerns such as:

●

●

●

●

●

●

the design, procurement, and operation

of Government data systems;

the potential for Government agencies

to abuse the large record systems they

operate that contain personal data;

the effects of computer technology on

the structure and operations of the

banking industry;

the role of the Postal Service in providing electronic message service;

problems concerned with the protection

of privacy and constitutional rights presented by the use of large automated

data systems; and

the impact of information technologies

on copyright laws.

Congressional and public interest in these

and related issues has been illustrated by a

variety of actions over the last decade.

New legislation—bills and acts concerning privacy, standards, and computer

crime.

Special commissions–the Privacy Protection Study Commission, the Commission on Electronic Funds Transfer,

the Commission on Postal Service, and

the Commission on New Technological

Uses of Copyrighted Works.

Hearings on privacy, Government recordkeeping practices, the impacts of

●

●

particular Government systems, constitutional rights, innovation in the microelectronics industry, the use of computers in education, and many other

topics.

Regulatory and interagency jurisdictional issues—such as protracted computer regulation inquiries by the Federal Communications Commission

(FCC), and challenges to regulatory authorities involving the FCC and the

Postal Rate Commission.

Studies–requests by the legislative

branch to the Office of Technology Assessment (OTA), the Congressional Research Service (CRS), and the General

Accounting Office (GAO) for studies on

particular issues involving information

systems. These parallel extensive similar activities in both the executive and

judicial branches.

Executive branch interest is illustrated by

the formation of the National Telecommunications and Information Administration

(NTIA) in the Department of Commerce, by

research projects-on computer and telecommunication impacts funded by the National

Science Foundation, and by a variety of executive orders regarding Federal data processing practices. Interagency groups have

been formed to address domestic and international information policy and planning

problems.

This overview is one of a group of four

studies collectively entitled “Assessment of

Societal Impacts of National information

Systems. ” The individual studies are:

● an overview assessment of technology

and public policy issues relevant to

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

●

●

●

computer-based national information

systems;

an assessment of the National Crime Information Center (NCIC) and Computerized Criminal History (CCH)

Systems;

a preliminary assessment of the role of

the U.S. Postal Service in electronic

message systems; and

a preliminary assessment of electronic

This overview report is intended to be a

broad introductory examination of computer-based national information systems and

related technology and public policy issues

that Congress is likely to face over the next

few years. It will also serve as a foundation

for the other three OTA studies and for future in-depth examination of particular systems and issues. It should also generate an

awareness of the increasingly critical role

that national information systems play in

funds transfer systems. society.

Congressional Requests

Over the last 5 years, OTA has received a

number of requests from congressional committees and subcommittees to study and report on the impacts of national information

systems on society and on public policy.

TAS and NCIC: In February 1976, the

House Ways and Means Committee and its

Subcommittee on Oversight requested that

OTA conduct an assessment of the new Tax

Administration System (TAS) proposed by

the Internal Revenue Service. In September

1976, the Subcommittee on Government Information and Individual Rights of the

House Government Operations Committee

also requested such a study in a letter that

raised, in addition, much broader questions

about Government information systems.

Both requests stressed the issues of privacy

and the impact of TAS on the Government’s

use of tax return information.

In September 1977, the House Judiciary

Committee, together with its Subcommittee

on Civil and Constitutional Rights, requested an assessment of NCIC administered by the Federal Bureau of Investigation. The requests expressed particular

concern with the CCH Program and its possible detrimental effects on privacy and civil

liberties.

In response to these requests, OTA carried out preliminary assessments of both

systems. The TAS preliminary assessment

was published in March 19771 and the NCIC

preliminary assessment in December 1978.2

Additional Requests: Subsequently, OTA

received a number of congressional letters

endorsing these assessments but also raising

broader questions concerned with information policy. Some were directed at specific

categories of systems under a particular

committee’s jurisdiction; others dealt more

generally with social impacts in areas such

as privacy and constitutional rights. The

concerns expressed in the requests spanned

a number of different applications in both

the private sector and the Federal Government. A number of these requests and their

particular areas of interest are shown in

table 2.

In July 1980, a letter was sent to OTA by

Cong. George E. Brown, a member of the

Technology Assessment Board and then

Chairman of the Subcommittee on Science,

Research, and Technology of the House Science and Technology Committee. It expressed an even broader and more compre-

‘U.S. Congress, Office of Technology Assessment, A Preliminary Analysis of the IRS Tax Administration System,

OTA-TCI-43, March 1977.

‘U.S. Congress, Office of Technology Assessment, A Preliminary Assessment of the National Crime Information

Center and the Computerized Criminal History System,

OTA-I-80, December 1978.
. .

Ch. 2—Background and Purpose of Study ● 31

Table 2.—Summary of Congressional Requests for OTA Assessments

Concerning National Information Systems

Date Committee or subcommittee

February 1977 House Committee on Post Office and

Service

September 1977 House Subcommittee on Government

Information and Individual Rights (of

House Committee on Government

Operations)

September 1977 House Subcommittee on Civil and

Civil

the

Constitutional Rights (House Committee on

the Judiciary)

January-June 1978 Senate Committee on the Judiciary;

Subcommittee on Administrative Practice

and Procedure; Subcommittee on the

Constitution

December 1978 Senate Committee on the Judiciary;

Subcommittee on Administrative Practice

and Procedure; Subcommittee on Antitrust

and Monopoly; Subcommittee on the

Constitution; Subcommittee on Criminal

Law and Procedure

SOURCE Off Ice of Technology Assessment

‘Areas ‘of interest

Requested an assessment of electronic mail,

emphasizing the role of the U.S. Postal Service

and employment impacts.

Reaffirmed a previous request for a TAS study

and encouraged a wider look at the impact of

Government information systems on privacy,

freedom of information. and other related

issues, and asked OTA to explore a possible

Government-wide policy on data systems.

Requested a full assessment of NCIC.

Requested a full assessment of NCIC. Raised

issues of constitutional rights, privacy, other

civil Iiberty concerns, and Federalism.

Requested a study of the impact of

telecommunications and domestic Information

systems on constitutional rights, civil liberties,

privacy, freedom of information, antitrust and

constitutional rights. Requested NCIC study.

Specifically mentioned electronic banking

applications, electronic mail, and criminal

justice systems.

hensive range of concerns about the societal “map” of the field. This map would include

impacts of information technology. Con- the major technologies, their areas of apgressman Brown requested that, given the plication, the impact issues, and the prinbreadth and

undertake a

complexity of the subject, OTA cipal current efforts by various agencies to

preliminary study to create a study these problems.

OTA Response

In October 1978, the national information

systems (NIS) assessment was initiated by

OTA, following a March 1978 approval by

the Technology Assessment Board. It was

designed with four components:

● an assessment of NCIC/CCH;

● an assessment of the role of the U.S.

Postal Service in electronic message

systems;

● an assessment of electronic funds transfer systems; and

● an overview of the crosscutting impacts

of all information systems.

These were at first envisaged as case

study components in a single large assessment of the impacts of national information

systems. In time, however, they evolved into

separate studies. The basis for this modification was the following judgment, which was

confirmed by the OTA Advisory Panel on

National Information Systems and the OTA

staff.

While some observations can be made

about national information systems in general, full assessments of their policy impacts

can only be made in the context of particular

systems, particular applications, and/or particular users, and legal/social environments.

Consequently, each case study needed to

be carried out as an individual assessment in
32 ● Computer-Basd National Information Systems: Technology and Public Policy Issues

which the characteristic issues raised by

that type of system would be addressed in

its own legal, regulatory, social, and economic environment. It was questionable, however, whether the overview study would be

effective as a unifying effort cutting across

the three other studies by generalizing their

results. Thus, its goals had to be carefully

examined and clarified.

In addition, in late 1978, in response to requests from the House and Senate Committees concerned with communication policy,

an assessment of telecommunication systems was begun at OTA and conducted in

parallel with the NIS assessment. The telecommunication study focused on an examination of common carrier policy and impacts. 3 Both assessments have been closely

coordinated to avoid duplication of effort

particularly in the analyses of industry

structure and technology.

3U.S. Congress, Office of Technology Assessment, Telecommunication Technology and Public Policy.

NIS Study Goals

It would not be possible for any one study

to capture succinctly a single set of policy

issues which would apply to all national information systems in American society. The

specific systems applications are too different, the potentials and problems too complex, and the parties-at-interest and relevant

institutional and legal framework too

diverse.

Faced with a complexity of possible

topics, OTA established the following set of

limited goals for this overview study:

To provide a general introduction to

computer-based national information

systems: This study should acquaint

the nonexpert reader with the nature of

computer-based national information

systems, their roles in American society, and the characteristics of their impacts and the policy issues that result

from their use,

To provide a foundation and context for

the other related OTA assessments:

The NCIC/CCH, electronic funds

transfer, and electronic message system

studies all require fundamental state-ofthe-art surveys of the computer and

related technologies and industries.

This data base is provided by the overview report. In addition, a framework of

potential impacts is laid out within

which the specific issues raised in each

study can be explored.

● To build a foundation for future studies:

Over the next few years, Congress will

continually be confronted with a number of issues loosely characterized as being related to “information policy. ”

Congressional agencies such as OTA,

CRS, and GAO, as well as executive

branch agencies such as NTIA, are being asked to address these issues.

To date, most research and writing about

the impacts of computerized information

systems have been unrelated. Different terminology, different concepts about the nature of the impacts, and different analytic

methodologies have been used. There is a

need for some consistent structure, such as a

map of the information technology field as

discussed by Congressman Brown in his letter to OTA. A start is made toward developing such an analytic framework in chapter 5.

This study’s assessment of the directions

the development of computer technology

and its applications to national information

systems will take provides a useful baseline

for future work. The description of the current status of the information industry and

its likely evolution will be useful in projecting possible future services and the nature of

the market and regulatory forces that may

shape those services.
Ch. 2—Background and Purpose of Study ● 33

— —

Study Methodology

The limited nature of this study’s goals,

along with its role of providing a supporting

framework for the three other studies, dictated a modest plan using in-house staff supplemented by an advisory panel and other ad

hoc expert review. The project was organized around the following informationgathering tasks:

● technology,

● industry structure,

. social trends,

● legal and regulatory environment, and

“ policy issues analysis.

Technology: This survey examines the

current state of computer technology and

projects its development over the next 10 to

20 years. It stresses the technology likely to

be available to computer users, rather than

the leading-edge capabilities likely to exist

only in laboratories and on drawing boards.

A working paper prepared by OTA staff was

reviewed by a special technology panel set

up for that purpose. This was coordinated

with a parallel effort supporting the telecommunication assessment. The technology survey is highlighted in chapter 3, presented in

detail in chapter 13, and used throughout the

report.

Industry Structure: This survey examines

the current state of the computer and information industries, describes growth

trends, and projects their development over

the next decade. It, too, was an in-house

staff effort, drawing on the technology panel

for review and input, and coordinated with

the telecommunication assessment. The survey of industry structure and the technology

are highlighted in chapter 3, presented in detail in chapter 14, and likewise used throughout the report.

Social Trends: A small task was undertaken to list those political, economic, and

social trends believed likely either to have an

impact on the use of computer-based information systems or to be affected by their application. A brief working paper was drafted,

reviewed by an ad hoc workshop of outside

experts, revised in accordance with their

comments, and integrated into chapter 4 and

the policy issue chapters (6 through 12).

Legal and Regulatory Environment: The

in-house staff examined the range of legal

and regulatory requirements, existing or

pending, that affect the use of computerbased information systems. Analyses were

prepared in 13 areas of law and regulation.

These were reviewed for accuracy and completeness by a pro bono mail review panel of

legal experts, and then utilized in chapter 5

and in the policy issue chapters.

Policy Issues Analysis: An initial list of

issues was prepared by OTA staff (see table

3). It was later modified by consideration of

the following:

●

●

●

●

●

concerns mentioned in the congressional requests;

panel advice on priorities;

comparison with issues examined in the

NCIC/CCH, electronic funds transfer,

and electronic mail studies;

comparison with issues developed in the

parallel telecommunication study; and

possible and likely future studies by

OTA in related areas.

The topics selected for further analysis do

not represent a complete list of all the principal national information system issues

that may confront Congress over the next

decade. In OTA’s judgment, however, these

will be among the most important. The brief

essays presented in chapters 6 through 12

are not intended as full analyses of these

issues. Rather, they describe the general

nature of the conflicts, and how future applications of computer-based information

systems may intensify or alter the character

of the policy debate and the need for new

laws and policies.
34 . Computer-Based National Information Systems: Technology and Public Policy Issues

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

Economic impacts and issues

1. Costs, economic growth, and availability of services

2. Technological displacement, obsolescence, and

Impact on the work force

3. Resource availability and demand

4. Competition

5. Regulation and standards

6. Research and development (innovation in both

hardware and software services)

7. Public goods

8. International markets and services

9. Effects on other industries (e.g., travel)

6.

7.

8.

9.

10.

11,

12.

13,

Equity, social justice, and equality of access to

services

Civil liberties (first, fourth, and fifth amendments)–

constitutional rights

Surveillance and social control

Changes in the basic social structure and functioning

of groups (e. g., families), organizations (e. g., schools),

and institutions (e. g., banking)

Centralization and decentralization

Educational changes

Public participation

Accountability and oversight

10. Employee rights and privilege; and labor-management Legal Impacts and Issues

relations 1. Copyrights, patents, trade secrets, and ownership of

Social impacts and issues information

1. Privacy 2. Antitrust

2. Confidentiality Political impacts and issues

3. Security

4. Due process and fairness (individual access, accuracy,

1. Federalism and intergovernmental relations

timeliness, currency, and purging)

2. International sovereignty

5. Freedom of information

3. National security

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

also be shown under legal Impacts and I

ssues and/or u rider political Impacts and Issues

SOURCE Off Ice of Technology Assessment
Chapter 3

Information Systems

and Computers
Contents

Page

The Nature of Computer-Based Information Systems . . . . . . . . . . . . . . . . . . . 37

History of Computer Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Future Trends in Computer-Based Information Systems . . . . . . . . . . . . . . . . 40
Chapter 3

Information Systems and Computers

The Nature of Computer-Based

Information Systems

Traditionally, the popular view of computers has been that they are super calculators that automate processes which were

previously performed by numbers of people

sitting at mechanical adding machines. However, computers carry out a wide variety of

tasks associated with processing information. It is important to understand the entire

range of these capabilities in order to appreciate the nature and magnitude of the

potential social impacts of this technology

when used in information systems.

Computer capabilities fall into seven main

categories:

1. Data collection. When attached to various sensing devices, computers can

detect and measure such external physical phenomena as temperature, time,

pressure, flow rate, consumption rate,

or any number of other variables. Also,

computers can keep a record of transactions. For example, a computerized

cash register can collect and store information about a sale that includes

bookkeeping entries, taxes, commissions and inventory, and can even reorder stock. Some computer-based door

locks require individuals to carry magnetic identity cards. Such locks not only

can control access but also can create a

record of whose card was granted access, when, and for how long.

Technological advances are beginning to provide computers with the capability to directly process visual and

audio input, thus greatly increasing

their applicability to data collection.

Computers already have a limited ability to recognize human speech, to read

directly a variety of typewritten forms

and handprinted texts, and to detect

2.

3.

4.

patterns in video images. These functions will be improving rapidly over the

next decade and will appear in commercial equipment.

Information storage. Computers can

store large amounts of information for

long periods of time in an electronicreadable form that is easily and quickly

recoverable. Depending on the particular application, the methods of storage

vary widely, from signals in electronic

circuitry, to magnetic pulses on tape, to

holes in cards. New advances in memory technology eventually will allow

trillions of characters of information to

be stored conveniently and cheaply

wherever there is even a small computer. The cost of storing information

electronically will soon be substantially

lower than the cost of storing the same

amount of information on paper.

Information organization. Computers

can be used to rearrange information so

that it is more suitable for particular applications. For example, if the data in a

telephone directory were stored in a

computer’s memory, it could be inverted to allow one to look up a telephone number that corresponds to a

particular address. More generally,

computers can simplify and restructure

vast amounts of raw data to assist people in drawing significant meanings or

conclusions.

Calculations. Computers perform arithmetic calculations millions of times

faster than can human beings. They are

used to make numerous simple calculations, such as those required in processing the payroll for a sizable organization; to make sophisticated statistical

calculations on large amounts of data,

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

5.

6.

such as those for social science research; or to perform highly complex

scientific calculations, such as those

needed for weather research or for modeling fusion energy systems.

Communication. Through connections

over a telecommunication system, computers can transmit data around the

Nation and the world either to human

users or to other computers, which permits the sharing of work and data

among groups of linked computers

(known as computer networking). Private firms are beginning to offer special

communication services to support

computer networking. In addition, computers make possible the more effective

use and management of the communication systems themselves.

Information presentation. Computers

can put out information in a variety of

forms. Through graphical display, and

more recently through voice response,

they can make data readily understandable and useful to nonexperts. It is possible to have data and computer schematics displayed on screens in a multicolored, three-dimensional format for

design and analytical purposes. Also,

data such as numbers and statistics can

7.

be organized by the computer in an

easy-to-understand tabular presentation. Much of the programing effort in

developing modern management information systems is directed toward designing ways in which the information

generated by the computer can be

presented most clearly to the manager

who needs it.

Control. Computers can be used to control a machine tool or a production line

without human intervention. Many consumer devices—including microwave

ovens, automated home thermostats,

automobile engines, television sets, and

telephones— incorporate computer controls using new microprocessor technology. Such uses are increasing rapidly.

Several of these capabilities can be combined, for example in computer-aided design

of aircraft structures (or computer logic

elements, for that matter) and computerbased modeling of the saltwater penetration

in San Francisco Bay (a function of tidal action and ground water runoff). Both computer-aided design and computer modeling are

finding wide application and are illustrative

of what is sometimes referred to as the

“intelligence amplifying” capability of computers.

History of Computer Use .

Over the last 30 years, computer systems

have evolved through stages that emphasized particular capabilities and that have

altered the way society handles information.

The nature of these applications has been

shaped, in part, by the available technology,

but also by the changing perception of computers and how they may be used most effectively.

Few applications were new, however, at

least in the beginning. Society has kept

records and exchanged information for centuries. It is important to understand this

background, since many computer impacts,

both beneficial and adverse, arise from the

changes in historical information practices

that occur when computer systems are substituted for manual systems.

Some significant trends in the development of computer applications are discussed

below:

Computer trends in the 1950’s: Increased

size and centralization.

In the 1950’s, every announcement of a

new, larger computer elicited the comment

that only a few would be needed to serve the

computer needs of the entire country.

“Grosch’s Law”- an empirical estimate that

one could get four times the computing pow-
—

er at twice the cost—provided an economyof-scale rationale for large, centralized

systems.

This underlying economic rationale forced

organizations to pool their computing applications in central computer centers that

would run them on as large a machine as possible. This operating style, which can still be

seen in many organizations, had two principal drawbacks.

One effect, seen immediately, was that

centralization separated the users from the

computer forcing them to gain access to the

machine through layers of bureaucracy.

Some applications were not harmed in such

an environment. However, delays and bureaucratic costs inhibited the work of such

users as scientists, engineers, and students.

They often could not perform the type of

creative work that the computer was expected to foster.

The second effect was more subtle. Economy-of-scale no doubt existed technologically—multiplying two numbers was cheaper

on a larger machine. However, designers had

to generalize the computer hardware and

programs in order to handle all of the different types of applications that had been

pooled to justify the big machines. Thus,

preparing a payroll, performing small engineering computations, and calculating a

very complicated mathematical model, all

might be handled by the same computer.

Some of the theoretical efficiency gain for a

large general-purpose computer was lost in

the system overhead required to provide the

facility for such a variety of applications.

Despite these drawbacks, computer use

grew rapidly during this period. Most applications concentrated on using computers

both as calculators and as controllers of

large (for that time) record systems, usually

kept on magnetic tapes or punched cards.

Computer trends in the 1960’s: The minicomputer and timesharing.

In the 1960’s, motivated by the two

above-mentioned drawbacks, users on uniCh. 3—lnformation Systems and Computers ● 39

.

versity campuses and in research laboratories developed two design concepts that

fundamentally altered the way in which computers would be used—the minicomputer

and timesharing.

In the early years, many scientists learned

about using computers by sitting at them

and programing them directly. Chafing at

the bureaucratic and physical barriers being

erected around the central system, these

users developed small, specialized laboratory computers which, although not cheap

by current standards, were far less expensive than the centralized systems that often

cost in excess of a million dollars. These

small machines, or minicomputers, were

cheap enough so that a person sitting and

working at one could afford to use it at less

than optimum efficiency. The loss of machine efficiency was offset by the increase in

human efficiency.

The other important concept, “timesharing,” was developed because a large system

cost hundreds of dollars per minute to operate. Thus, an individual could not engage in

a rewarding working session sitting directly

at a large computer, which was dedicated to

that user, without enormous waste. Humans

work slowly compared with computers. Consequently, the computer would be idle most

of the time while waiting for its user to initiate some action.

Timesharing was designed to make that

kind of direct use efficient by enabling a

computer to serve many users simultaneously. With such a system, each user sits at a

terminal. The computer transfers its attention rapidly from one user to another, performing work as needed. Information is processed so quickly that the computer, in effect,

appears to be totally dedicated to the work

of each user.

Once the concept of timesharing had been

incorporated, it became apparent that users

did not have to be in the same room as the

machine, but could communicate with it over

communication lines from across the country or from anyplace in the world.
40 ● Computer-Based National Information Systems: Technology and Public Policy Issues

. —

Thus, although large centralized systems

continued to grow for applications such as

recordkeeping and laborious computations

for scientific research, the groundwork was

laid in the 1960’s for new types of computer

use and new ways of designing systems to

meet specific goals.

Computer trends in the 1970’s: Communication-based computer systems and networks.

In the 1970’s, communication-based computer systems began to grow. Some types of

recordkeeping applications were obviously

handled best by large central computers, but

to be useful they needed immediate data entry and retrieval of information from remote

locations.

Airline reservation systems, for example,

were among the first large communicationbased computer systems to be developed in

the commercial sector. Reserving airline

seats is clearly a complicated task, well-

-suited to computerization. Agents all over

the country can now check flight availability

and reserve seats from their work stations,

both in “real time. ” (This term is used by

technologists to refer to applications in

which immediate action and response is provided by the computer. )

Another example of a large communication-based centralized computer system with

decentralized access is the one operated

by the National Association of Securities

Dealers (NASD), known as NASDAQ

(NASD Automatic Quotation.) It allows

securities dealers instant access from their

desks to the latest bid and ask prices for any

stock listed on the over-the-counter market.

The need here was clear for real time access

to a data base by dealers across the country.

Another trend in the 1970’s was the linking together of multiple computer systems—

both small and large ones—into “networks.”

ARPANET, a project of the Department

of Defense’s Advanced Research Projects

Agency (ARPA), was an ambitious and technically sophisticated experiment that linked

together several large ARPA research computers over high-speed communication lines.

This project was based on a new technique,

called “packet switching, ” that allowed existing communication lines to be shared

more efficiently for carrying computer data.

Future Trends in Computer-Based

Information Systems

Three dominant economic factors can lim- ing hardware has dropped to the point

it the range of computer applications: where, for many applications, possible econ1. the overall cost of computer hardware omies of scale are offset by the overhead

and the associated economies of scale; costs and the inconvenience of a large sys2. the cost and difficulty of setting up and tern. This trend is leading to the reliance on

maintaining high-speed data communi- multiple smaller systems that are distribcation links; and uted geographically.

3. the cost of producing software–the Several companies, American Telephone programs required to operate the system. & Telegraph and Satellite Business Systems,

for example, are building commercial data

The first two limitations are being over- communication networks that promise to be

come. While there is still a strong market for economic, efficient, and convenient to use for

large expensive systems, the cost of comput- linking together data systems and users.
Ch. 3—information Systems and Computers . 41

The remaining problem, the cost of the

software, is the pacesetting factor.1 Progress

has been slow in the development of new

cost-cutting techniques for programing applications. For many applications serving a

sizable user market, programing costs can be

written off over a much larger user base.

However, for a number of large specialized

applications, the programing, maintenance,

and operation costs will continue to be the

dominant factors in the cost of using computers. Some experts see the software problem as the major obstacle to new applications of computers. For at least the first half

of the 1980’s, the cost of competent, sophisticated programing efforts will limit progress.

Based on the findings of this study, the

use of computers will likely follow these

trends in the 1980’s.

● Growth in the use of personal computers.

The small computer will become common

both in the home and in business. Despite

their small size, these systems will be

highly capable–the equivalent of machines that sold for as much as $1 million

in the 1950’s. They may appear in the

guise of video games, television sets, or

telephones that will also have a computer

capability available for other purposes.

This trend will stimulate more widespread

computer literacy in society, and in turn

be reinforced by the consequent increase

in the number of people able to program

and use computers. The first generation to

grow up with computers is now reaching maturity. These “computer literate”

young adults accept computers as a natural part of their world. Computer design

and use will be taught increasingly in

school and as part of adult education, and

will enhance an already thriving market

for specialized application programs designed for small computers.

‘ “Missing Computer Software, ” Business Week, Sept. 1,

1980, pp. 46-53.

●

●

●

Expansion in the number and size of computer networks. By the end of the decade,

most computers, even small ones, will be

connected to a communication network at

least part of the time.

The communication system may be dedicated to a single application in which all

the machines on the network perform portions of a larger task. Public data networks, on the other hand, provide any

home or business computer with access to

a wide range of data bases or special programs that may be wanted for occasional

use. Such multiuser national networks

that can be interconnected now exist, and

the number of users is expected to grow at

a rapid rate.

The trend toward information services.

The computer industry has traditionally

been concerned with selling hardware

(desktop, mini, and mainframe computers

and related auxiliary equipment). However, current trends in both pricing and

the structure of the market are driving the

emphasis toward providing computerbased information services, such as bibliographic and data base searches, electronic

publishing, electronic banking, and the

like. A number of these services will still

require that the user possess a computer.

However, many will be offered over data

communication lines to homes and offices,

and will be accessible through a modified

(“intelligent”) telephone or television set.

Examples include two-way cable television, videotext, and the AT&T Electronic

Information Services experiment that provides an electronic telephone directory

over a telephone line to a home terminal.

Eventually, information services of all

kinds will dominate the data processing

market in terms of dollar volume. (See ch.

14 for a detailed discussion. )

The competition among giant corporations for the data communication services

market. IBM, AT&T, Exxon, and GTE,

among others, are preparing to offer a

variety of data communication services.
42 . Computer-Based National Information Systems: Technology and Public Policy Issues

.

Large corporations such as these have access to the capital required to install the

technological base for the planned services, such as communication satellite

systems and fiber optic transmission

lines. A series of recent rulings by FCC,

some still under challenge, are intended to

clear the way for open competition among

these and other corporations to provide information services of all kinds over communication lines. Resolution of the pending challenges by the courts or by Congress will have significant implications

over the long term for the data communication industry. (See the OTA telecommunication study for a detailed discussion. 2

)

At the same time, an examination of the

computer industry (see ch. 14) shows that

small entrepreneurs have frequently been

innovators. This observation in no way

discredits the valuable fundamental advances and product innovations originating from the research laboratories of

large firms such as AT&T and IBM. However, creative new systems and innovative

services increasingly arise from small,

new, “spin-off” enterprises or from totally

new entrants into the market.

Thus, faced with the dominance of the

data communication field by large corporations, others in the information industry will press for a public policy that

will guarantee access to data communication networks by smaller firms and new

entrants that offer information services.

● Higher level integration of data services.

Many individual networks for servicing

specific corporate and governmental

needs will continue to be built. Some of

these networks will become integrated.

For example, most airlines, car rental

agencies, and large hotel chains have their

own reservation systems. It is now technically feasible to build an integrated

system that would provide travel agents

‘U.S. Congress, Office of Technology Assessment, Telecommunication Technology and Public Policy Issues, in

press.

●

access to all of these reservation systems

through one desktop terminal.

Similar integrated information systems

are also feasible in insurance, banking,

travel, entertainment, law enforcement,

commodities exchanges, medical services,

and many other sectors that now use

several separate information systems.

There are a number of factors such as

system incompatibility, antitrust considerations, or competitive problems that

may tend to resist this integration in the

case of some systems.

The software bottleneck. According to

many computer and industry experts, the

increasing capability of computer hardware is not being fully utilized due to problems encountered in creating suitable software programs for these new machines.3

The major problems are the relatively

slow increase in the productivity of programers-their cost efficiency–compared

with that of the hardware, and the difficulties encountered in managing large

programing projects.

These problems have created bottlenecks in the development of new applications. Computer programing has been

relatively resistant to productivity improvement, at least when compared with

corresponding improvements in hardware

performance. Programing is by nature

labor intensive. Its cost is rising due to

the increased programing requirements of

new hardware coupled with a shortage of

programing personnel with the needed

training and experience. New mechanisms

such as structured programing will be

helpful in engineering computer programs

and for managing their design and implementation. 4

At the other end of the scale, microtechnology is making possible enormous in3Computer and Business Equipment Manufacturers Association, Industry Forecast Panel: Productivity, 1980 spring

meeting.

‘Some progress in improving software has been made by

use of structured programing methods such as FORTH. See

John S. James, “What is FORTH? A Tutorial Introduction, ”

Byte magazine, August 1980, pp. 100ff.
Ch. 3—information Systems and Computers ● 43

creases in computational power through

the creation of new hardware structures

from clusters of small computer chips.

Technologists know how to physically

construct such combinations, but not how

to use them as effectively as their potential would suggest.

Eliminating software bottlenecks may

be the key to maintaining the lead in computer technology in the coming decade. In

Japan, for example, the software problem

has now been given a very high priority

for R&D. In the United States, although a

few defense agencies are investing in research to solve some of the problems, Federal R&D budgets for computer science

and technology have not accorded software a similar priority. Private industry is

the source of most activity in this area.

Reportedly, one-third of the research effort at Bell Labs is devoted to the software problem.
Chapter 4

Information in Society
Contents

Page

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

The Nature of Information ● **. **. *.** **.   ** **   .** * *.** .e ..* 48

The Commercial Value of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

The Private Value of Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

The Public Value of Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

The Information Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

●

m
Chapter 4

Information in Society —— .

The Information Society

An information industry analyst recently

observed that ‘‘every society is an information society.”] That is, all human organizations, no matter how simple, depend for their

functioning on an intangible resource called

‘‘information. In any society, information

serves several purposes. It can be, for example, a commodity of commerce, an indicator

of wealth or power, a basis for making decisions, or a source of entertainment.

The more complex a society, the more central information is to its economic activities.

The United States seems to be entering what

some sociologists refer to as a ‘‘postindustrial” period,2

characterized by several

trends:

emphasis is on a service economy rather

than on manufacturing;

information is used as a resource, as a

factor of production, and as a commodity; and

scientific discover-y and technical innovation drive economic growth.

Whether or not this is a valid model of

societal evolution, the above trends are no

doubt taking place in the United States. Furthermore, they are combining to create a

greater dependence on information processing and technology.

The tasks being undertaken by the large

organizations that serve society are growing

in complexity. The air traffic control system

handles nearly 20 million flights yearly.

Every year the financial system clears more

than 30 billion checks, the U.S. Postal Service delivers over 100 billion pieces of mail,

I Ant hon.v (i. oet, tinger, “ Information Resources: Knowledge a II(I I)ow.er in the 21 st Century. S’(i(’l)(c ,!lcl,kr[lzirl(’, frol.

209, July 1980, p. 191.

‘I)aniel Hell, The (’orning of the l)(),st lrt(iustrz”al .Voci(ttI. ,4

b’{r~t{~rr in .~~)(i[~i ~’or(’custin~ (New }’ork: Basic Rooks, 19’711).

and the Internal Revenue Service (IRS)

receives more than 140 million tax returns.

The service sector of the economy is growing at a relatively faster rate than the industrial and agricultural sectors (see fig. 6 in

ch. 1). Many services such as medicine, law,

education, and Government involve the

transfer of large amounts of information. Resistance to productivity improvements in

this sector, which represents a large part of

the economy, has impeded overall productivity growth. Greater application of information technology has been proposed as a

chief remedy. For this reason, it is highly

likely that in this decade the service sector

will increasingly depend on the use of

computer-based information systems.

Greater international economic competition coupled with the decreasing availability

of basic resources are requiring industry and

Government to both improve and speed up

their decisionmaking capabilities. Information technology is growing in importance for

this purpose. Decisions about design, marketing, financing, and resource allocation all

require a more sophisticated approach to the

collection and use of information.

Computer and communication technologies, while not the direct causes of societal

changes, are facilitating and in some cases

accelerating them, thus helping generate the

public policy issues confronting Congress.

Some scholars see profound effects occurring from the increased dependence on computer technology, and predict that the view

of humans as unique thinking beings will

change fundamentally.3 Others see significant shifts in the balance of power between

individuals and the organizations, private

111 ru L’;’– ~1 az lich, “’l’he Irourth l)is(’on~inuit~r, ” ‘1’echn(~log.s

(l)t(/’ ( ‘// Itli r{’ (s, pp 1-15,

47
48 ● Computer-Based National Information Systems.’ Technology and Public Policy Issues

and governmental, that would directly affect

our lives.’ These highly speculative views

raise important questions about the effects

an extremely automated society might have

on individual freedom. These questions need

continued examination.

Some information policy experts take a

more pragmatic view, one more useful for

assessing specific public policy issues arising from the applications of this technology.

Their approach stresses these two points:

1.

2.

It is not information technology per se

that creates public policy issues, but

the particular choices that are made

concerning its use.

Most policy problems involving automated-data- systems are rooted in traditional institutional attitudes and procedures. Information systems must be

assessed in the context of that history.

According to this view, technology itself

does not restrict society to particular actions, but rather provides a widened range of

choices.’ Thus, it is not the impacts of a

technology that are examined, but the impacts of the particular choices made. The

nature of those choices is dependent on the

social and legal environment in which they

take place. For example, a totalitarian society would build information systems overtly

designed to enhance Government control of

its citizens. Such systems would be unacceptable in a democratic society.

The necessity of considering the historical

context both of the systems and of the policy

issues they raise is illustrated by the three

case studies in the overall assessment.

1. The National Crime Information Center

of the Federal Bureau of Investigation

is an automated criminal record system

that has been in existence for only 13

years. Yet the patterns of its use, the

4A. Mowshowitz, The Conquest of Will (Reading, Mass.:

Addison-Wesley, 1976).

‘Daniel Bell, “Communications Technology—For Better or

For Worse, ” Harl’ard Business Rel~ieu*, May-June 1979,

p. 20.

2.

3.

types of data stored, and the profound

public policy issues it raises are the

same as those prevalent over the past

100 years of recordkeeping in the criminal justice community.

The Postal Service is nearly as old as

this Nation, and the telegraph is almost

150 years old. The distinction between

physical and electrical transmission of

messages that has existed for a long

time without creating serious problems

is now being challenged. However, over

the years the Postal Service has become

an integral part of American society.

Decisions about its future role with respect to electronic mail need to take

into account all of its historical roles: as

a service provider, as an employer, and

as an agent for social communication

and connection on which many sectors

of U.S. society depend.

Banking has existed since ancient

times. Electronic funds transfer systems are not so much changing the nature of banking as they are helping alter

traditional institutional practices in the

United States, such as restrictions on

multistate banking, distinctions between types of banking institutions,

and limitations on types of financial

services. The issues of privacy and security, which are examined in some detail

in chapters 6 and 7, historically have

seriously concerned the banking community, and are thus shaped by its

traditional attitudes and practices.

The Nature of Information

The role of information in society is being

changed under the influence of new information technology. Some of the changes taking

place are:

●

●

Information is becoming a significant

economic commodity, but one with certain unique characteristics that distinguish it from conventional commodities of commerce.

The industry providing information

technology and information services
Ch. 4—Information in Society ● 4 9

has become a major component of the

U.S. economy.

c Many more individuals, both as workers and as citizens, need more information and information technology to

function effectively.

Thus, over the next two decades information technology will likely change production

processes and commercial goods, transportation and working patterns, the nature and

content of education, the content and style

of entertainment, and the way social values

are formed and political decisions made.

There are three basic values of information: commercial, private, and public (see fig.

7 in ch. 1). Information technology is changing the relative importance of these values

and throwing them into conflict.6

The Commercial Value of

Information

Information has been a commodity of

commerce for centuries. Books and newspapers, and in this century the broadcasting

industry, all sell information. The classic

reference book on knowledge as a commodity

was written in 1962.7 The value of information increases as society becomes more dependent on it. The very high growth rate of

the computer-based information industry illustrates this trend (see ch. 14).

Information, particularly in a technological environment, has characteristics that

distinguish it from more tangible commodities.

. It is reproducible. Its theft does not

deny it to the original owner.

— 6

For a related discussion see Louis H. Mayo, Robert W.

Anthony, Henry B. Freedman, et al., An Explomtory Assessmen t of Computer-Assisted Makeup and Imaging Systems

(Washington, D. C.: The George Washington University Program of Policy Studies in Science and Technology, January

1980).

‘F. Machlup, The Production and Distribution of Knou.~ledge in the United States (Princeton, N. J.: Princeton University Press, 1962).

●

●

●

●

The cost of its reproduction is usually

very low compared with that of its

original assembly or creation.

It can be transported instantly anywhere in the Nation or the world over

communication lines.

Its lifetime, which can be very brief, is

thus a principal determinant of its

value.

Its value is not additive. Two or more

copies of the same item of information

are not necessarily worth much more to

the possessor than one.

These characteristics, magnified in some

cases by the technology, have created policy

problems with respect to computer crime,

copyright and patent laws, the flow of data

between nations, and property tax laws. The

traditional rules and procedures of the U.S.

economic and legal systems are oriented

toward the commercial exchange of tangible

goods and services rather than of information.

The Private Value of Information

In an information society, economic competition is often based on access to special information, such as a formula for a soft drink,

an econometric projection, marketing plans,

or geological data. Commercially important

information is considered by organizations

to be proprietary.

Similarly, individuals often consider information about themselves to be private,

either because damage can be done by its

disclosure or simply because they desire to

be left alone. (See ch. 7 on privacy for a more

complete discussion. )

The Public Value of Information

American society has always viewed information as having a public value, and has

asserted the public interest in a free flow of

information. There are many examples:

● the public support of libraries, schools,

and museums to produce an informed

and literate citizenry;
50 . Computer-Based National Information Systems: Technology and Public Policy Issues

●

●

●

a tradition of academic freedom and a

system of open scholarly publication to

promote the exchange of ideas and the

advance of research;

first amendment guarantees, which ensure an unfettered discussion of political ideas, freedom of religion, and a free

press; and

freedom of information laws asserting

the rights of citizens to know as much

as possible about the actions of their

Government.

These examples suggest that there is an

assumption that American society has a

right of access to information of various

kinds, and that it is in the public interest to

facilitate that access.

This principle has historically brought

Government into opposition with private

sector interests. Public education competes

with private, libraries compete with booksellers, and so on. In the past, these conflicts

have not been serious. As the information

society grows, however, and the economic

value of information rises, conflicts over its

access and use will increase in severity and

become more difficult to resolve. Additional

problems will be caused by changes in the

technologies for the distribution of information, such as the replacement of certain

books by aggregations of articles delivered

electronically.

The social interest in guaranteeing equitable access to information may conflict with

the need to encourage private sector investment in new information services by letting

a profitable market develop. It can also be

argued that improvements in the quality

of information available to decisionmakers

both in the public and private sectors would

reduce errors in the allocation of resources,

thereby benefiting society as a whole.

Many Federal agencies—the Census Bureau, IRS, the Securities and Exchange

Commission, the Environmental Protection

Agency, and the Federal Elections Commission, to name just a few—collect large and, in

most cases, growing amounts of information, which could be personal or proprietary.

The right of the Government to collect the

information is established in law, presumably to further legitimate public purposes. However, such collection may strongly conflict with what individuals and organizations believe to be their rights of

privacy, and thereby creates an obligation

on the Government to protect the information and use it only in carefully prescribed

ways.

The Information Economy

Information plays a significant economic

role in U.S. society. The number of companies that manufacture and supply computer

and communication services is very large

and still growing more rapidly than the

overall gross national product. The U.S.

computer industry, which sold over $40 billion worth of hardware in 1979, has a projected annual growth rate for the near future

of around 20 percent; and the worldwide

communication industry, which in 1979 had

revenues of over $60 billion, has a projected

annual growth rate of about 81⁄2 percent.

Another measure of the economic importance of these industries is that AT&T and

IBM are two of the largest corporations in

the world. AT&T ranks first and IBM is

among the top five American industrial corporations. (The computer industry is examined in more detail inch. 14. )

Information services, a new but increasingly important industrial sector, use computer and communication technologies to

provide new types of products and services.

Some of these are:
Ch. 4—Information in Society 51

● Teletext service, which provides certain

types of consumer information (e.g., airline schedules, news reports, shopping

guides) over a regular television broadcast signal. This transmission of information does not interfere with the

regular video program and can be accessed with a special decoder on a

standard television receiver.

● Computerize paging services, which

provide elaborate remote messaging

services by means of microcomputers in

the paging unit itself.

● Specialized information services, which

are built into the voice telephone network.

This very young, small, innovative, and

rapidly growing industry will be the exploiter of the potentially large consumer

markets for information technology services.

(Information services are further examined

briefly inch. 14.)

In addition to the above-mentioned sectors of the information economy, there is a

much broader sector. It was first studied

and characterized in 1976. R In this analysis,

the two sectors of the information economy

were identified as primary and secondary.

The primary information sector includes

those who generate and sell information as

well as those who produce information technology, and is much more comprehensive

than the computer and communication sectors. Included are typewriter manufacturers,

newspaper publishers, producers of films,

and broadway and television shows.

The secondary information sector is comprised of information services and products

used by any organization for its own internal

purposes. Examples are internal accounting

and production, management, and inventory

control systems, many of which are already

computerized.

“Marc Porat, The Information Economy’, Ph.D. dissertation, Institute for Communication Research, Stanford

University, Stanford, California, 1976.

An examination of the trends in the work

force reveals the extent to which the economy has shifted. The results of the 1976

analysis shown graphically in figure 6 (see

ch. 1) illustrate the transitions from an

economy dominated by agriculture, to one

dominated by manufacturing, to a service

and information economy. It can also be seen

that the growth of the information sector did

not start with the invention of the computer,

but considerably earlier.

Because macroeconomic studies such as

these are so broad, they tend to blur the line

between industries that use information systems and those few remaining activities that

are presently not directly affected by this

technology. However, the line separating

these two sectors is shifting rapidly and

social impacts can flow across it. Thus, for

example:

computer graphics are changing the

operating style of the film animation industry;

traditional print publishers such as

Readers Digest and the Knight-Ridder

newspapers have invested in new inhouse computer/communication-based

information services to reach the public;

the nature of public education may be

transformed by new competing information delivery systems; and

computer-based systems for delivering

television programing tailored to each

home will change the role of network

broadcasting in the United States.

The transformation of much of the information industry that is being brought

about by new information systems

change the structure of the industry,

nature of the services provided, and

skills needed by its employees.

As technology reduces the cost as well

will

the

the

1 as

the experience and training required for information retrieval, public library services,

even in small cities and towns, will increasingly supply more and more up-to-date information from a variety of sources. In many

countries, automated card catalogs on ma-
52 ● Computer-Based National Information Systems: Technology and Public Policy Issues

nipulateable filmstrips, and newspapers and

periodicals on microfilm and microfiche, are

expanding the resources of libraries in

schools, universities, and industry. However, this trend may conflict with the public

value of information, to the extent libraries

move in the direction of charging fees for access to electronic information services. This

would run counter to the current free access

policies of most public libraries.

Entire editions of newspapers and newsletters are centrally written and electronically duplicated and transmitted–via satellite

and microwave—to regional plants where

they are printed and disseminated. Highquality transmission of photographs and

schematic drawings can accompany the

texts of these publications in a matter of

minutes after the text is sent.

The emerging and expanding information

technologies are reducing the costs and improving the accessibility of many kinds of information. Their impact is also being felt in

the traditional hard print industries, which

must adapt their conventional ways of doing

business to the new technologies or risk displacement by more technologically sophisticated competitors entering the marketplace.

Some economists are beginning to examine the information economy. They are building information into traditional economic

theory and modifying economic models to incorporate information as a commodity or factor of production. Although this work is still

in its early stages, it will be important in the

development of usable economic models for

the next quarter of a century.
——

*

Chapter 5

The Structure of

Information Policy

.
— ——- .—

Contents

Page

Introduction to Information Law and Regulation. . . . . . . . . . . . . . . . . . . . . . . 55

Structure of Policy Issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

System Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Information Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Secondary Policy Impacts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Long-Term Societal Effects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

LIST OF TABLES

Table No. Page

4. Principal Areas of Law and Regulation Regarding Information Systems. . 55

5. Structure of Information Policy Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

*
Chapter 5

The Structure of Information Policy

Introduction to Information Law and Regulation

Current policies governing information

systems are a composite of many specific

regulations and laws, which are based on

three main factors:

1.

2.

3.

The areas affected or the regulatory

concerns (privacy, freedom of information, etc.).

The affected sector of society (banking,

education, Government, etc.).

The lawmakers and/or rulemakers (Congress, the Federal Communications

Commission, State legislatures, etc.)

In the course of this study, OTA identified

14 areas of law and regulation that affect information systems or are affected by them.

The classification shown in table 4 illustrates the breadth of legal and regulatory involvement and the range of participants, but

does not reflect the variety of information

systems users (e.g., banking, insurance,

Government, or education). The applicable

laws and regulations vary according to the

particular sector involved.

Such a diversity of concerns cannot be encompassed by any single simple policy formulation. Computer users face a confusing

array of laws and regulations unless consideration is given to their overall pattern—

their overlaps, their contradictions, and their

deficiencies. Continuation of the present

situation could inhibit many socially desirable applications of information systems or

could create even more intractable policy

problems in the future.

The term “information policy” as it has

been used to describe the Federal Government’s involvement in this area is somewhat

misleading. First, it is too broadly applied in

reference to a miscellany of issues that include, for example, the regulation of files of

personal data, Federal support of the Nation’s libraries, first amendment rights for

newspapers, and property rights associated

with information products such as programs

and data bases.

Second, the term appears to suggest that

there is or should be a single uniform policy

governing all the uses of information systems both in the public and private sectors.

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

Area of concern State Federal Regulatory Court a

International

Privacy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x x x x

Freedom of information. . . . . . . . . . . . . . . . . . . . x x x x

First amendment . . . . . . . . . . . . . . . . . . . . . . . . x x x

Fourth amendment . . . . . . . . . . . . . . . . . . . . . . x x

Due process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x x x x

Communications regulations . . . . . . . . . . . . . . . x x x x x

Computer crime . . . . . . . . . . . . . . . . . . . . . . . . x x x

Proprietary rights. . . . . . . . . . . . . . . . . . . . . . . . x x

Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x x x x

Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x x x

Antitrust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x x x

Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x x x

Government provision of information . . . . . . x x x

Government procurement of

Information systems . . . . . . . x x

a

Involvement that creates new law or interpretation

SOURCE OTA working paper on The Legal Regulatory Environment of Information Systems, June 1980

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

In fact, no such policy exists, nor does one

appear to be likely.

The analysis made by OTA has led to

these findings:

● There appears to be neither a strong

trend nor sentiment at present among

policymakers in favor of a uniform Federal information policy that would encompass all the problems that could

arise from the many possible uses of

data systems. *

*some recently proposed legislation would establish a comprehensive approach to certain specific problem areas, e.g.,

privacy and freedom of information. See H.R. 2465, 96th

Cong., “Omnibus Right to Privacy Act of 1979. ” Also, the

National Telecommunications and Information Administration (NTIA) of the Department of Commerce has made an effort to formulate–or at least develop a framework for–national information policies. See Arthur A. Bushkin and Jane

H. Yurow, The Foundations of United States Information

Policy, (Washington, D. C., NTIA, June 1980) and Jane H.

Yurow, et al., Issues in Information Policy, Helen A. Shaw

(cd.), NTIA, February, 1981.

●

●

There are numerous laws and regulations, some overlapping and some potentially or actually conflicting, that

directly and indirectly affect the users

of information systems, the consumers

of information services, and the subjects of personal information data

banks.

There is a lack of congressional focus on

information policy as such, and consequently the emerging issues are not being directly addressed. *

*The “paperwork Reduction Act of 1980” (Public Law

96-51 1) enacted by the 96th Congress does set out a more

comprehensive policy and management approach for Federal

Government information systems. The Act establishes

within the Office of Management and Budget an Office of Information and Regulatory Affairs and assigns to that Office

a broad range of authorities and required actions.

Structure of Policy Issues

Few attempts have been made at integrating the whole range of policy issues covered

by the term “information.” The subject area

relating to computers and public policy, however, is being increasingly analyzed. A wide

range of intellectual approaches are being

taken, from narrow quantitative studies of

the impacts of information systems on corporate decisionmaking and the problems

associated with implementation,l to broad

philosophical and historical examinations of

the long-term social effects of automating information systems.’ 3

4

‘Henry Lucas, Why Information Systems Fail (New York:

Columbia University Press, 1975). -

‘James Rule, Private Lives and Public Surveillance: Social

Control in the Computer Age (New York: Schocken Books,

1974).

3K. Laudon, Computers and Bureaucratt”c Reform (New

York: Wiley -Interscience, 1974).

4Abby Mowshowitz, The Conquest of Will: Information

Processing in Human Affairs (Reading, Mass.: AddisonWesley, 1976).

Several studies have been carried out and

commissions formed to examine various aspects and issues related to information policy. In the field of privacy alone, for example,

there have been a study project by the National Academy of Sciences,5 an advisory

committee to the Secretary of Health, Education, and Welfare, a Privacy Protection

Study Commission, and a number of studies

and hearings conducted by congressional

committees. Of the more than 1,500 legislative proposals submitted to either the House

or the Senate during the 95th Congress, 74

new public laws emerged dealing with some

aspect of information law or policy. Of these,

26 dealt with privacy, disclosure of information, confidentiality or controls on data, and

transactions using computers.6

‘Alan Westin and Michael A. Baker, Databanks in a Free

Society (New York: Quadrangle Books, 1972).

‘U.S. House of Representatives, Committee on House Administration, Information Policy: Public Laws From the 95th

Congress, Jan. 31, 1979.
Ch. 5—The Structure of /formation Policy ● 5 7

Another indication of the extent of activity is the Congressional Research Service

Listing of New and Completed Projects. It

covers ongoing work and projects completed

within the last 6 months that have been carried out by the Congressional Research Service, the General Accounting Office, the Office of Technology Assessment, and the Congressional Budget Office. The most recent

listing available to this study, published on

August 25, 1980, described nearly 100 projects concerned with computer and telecommunication policy. The issues addressed by

all of these activities can be classified under

one or more of the categories shown in table

5.

System Issues

The policy issues related to information

systems per se focus on their design, implementation, and operation. They generally

are concerned with whether the system performs the tasks expected of it with reliability, with appropriate security, and in an efficient and timely manner. These objectives

mainly are of interest to the organization

operating the system, and place major constraints on the system designer.

Other system issues include the proper

role of users in system design, the need for

user education, and how to deal with potential system impacts on the organizations,

work groups, and individuals involved.

While skilled technically, system designers

may not fully appreciate the implications for

users. On the other hand, users frequently

do not understand enough about the system

itself.

Technical, operational, and reliability factors all can have broader societal significance even though they originate in the

operational goals of the system itself. In recent years, for example, public attention has

been focused on areas such as:

●

●

●

●

the safety and reliability of the air traffic control system;

the reliability, security, and controllability of military command and control systems, existing and proposed;

the security of large-scale electronic

funds transfer systems; and

the reliability, accuracy, and responsiveness of the social security information systems.

There is a strong

proper and reliable

Table 5.—Structure of Information Policy Issues

. .— ——

Level of issues-

— .

Character of issues —

System level Relate to the design, implementation, and

operation of particular information systems

Information level Relate to the handling of data: collection, “

storage, use, and dissemination

Secondary policy impacts

—-.

Exist Independent of the particular

information systems, but are changed in

magnitude or character by use of

technology.

Long-term societal effects Long-range societal impacts that are not ‘-

currently reflected in specific policy

problems, but which may ultimately affect

the nature of U.S. society.

. .

SOURCE: Office of Technology Assessment

Government

societal interest in the

technical operation of

Example issues

procurement policy.

Efficiency and economy of operation.

Security of information systems.

-.

‘Privacy (recordkeeping). -

Freedom of Information regulations.

Copyright and patents as related to

computer programs.

-—

Privacy (surveillance).

First amendment rights.

Fourth amendment rights.

Social vulnerability.

Federal-State relations.

Privacy social - attitudes).

Psychological self-image of humans.

Education needs.

Social-political effects.

Cultural Impacts.

—
58 ● Computer-Based National Information Systems: Technology and Public Policy lssues

each of the systems cited above, and potentially high costs to society if they fail. The

public policy issues that arise are those

associated with the formulation of a framework within which to develop the systems,

to establish accountability for their design

and operation, to assign responsibility for

correcting their defects, and to mitigate the

impacts of system failures.

Information Issues

Various laws and regulations affect the

use of information, independent of the particular technology employed in handling it.

As we become more and more an “information society, ” these legalities have a correspondingly greater impact on the activities of individuals and organizations. Since

the laws and regulations arise from many

sources and thus do not reflect a single

coherent view of the role of information in

society, they tend to conflict and to have unintended effects on the operation of information systems. Consequently, they can create

unanticipated secondary effects.

The three differing fundamental values of

information—commercial, private, and public-discussed in chapter 4 motivate the laws

and regulations affecting information. Individual regulations or laws usually address

only one aspect of information. Policy issues,

then, arise from the inherent tensions between the particular values reflected in different laws. Congress is called on to establish equitable balances. For example:

● Freedom of information laws (reflecting

public value) can conflict with individual or proprietary concerns (reflecting

private values). For example, in serving

the public interest, Government collects

an extraordinary amount of information

about citizens, businesses, and other

types of organizations. Some of this information that theoretically has been

available to the public by law for a long

time has been protected, in fact, by the

amount of effort required to retrieve it

from manual recordkeeping systems.

Automated systems reduce the cost

and time barriers to wider access to

these public records, and thereby may

accentuate the issue of the extent to

which this information can and should

be publicly available.

As information becomes a more valuable commercial commodity, increasing

tensions are arising between those who

wish to sell it through new information

services, and those who recommend

that the Government take steps to prevent the social inequity that would

possibly result from the increasing cost

of access to information and the means

to use it. For example, the conflict is

likely to become heightened between

the evolving role of the public libraries

as seen by the librarians, and the new

companies that wish to sell similar information services to the home. Related

tensions stem from the competition

between Government-collected data,

made available through freedom of information laws, and commercial data

services. In addition, commercially marketable information may invade privacy

or proprietary rights.

The controversy over the public v. the

commercial value of information is exemplified by the present difficulty that

the United States is having in formulating a consistent national position with

respect to international negotiations

concerning information transmission

across borders. Laws have already been

promulgated by several European nations restricting the flow of personal or

corporate data across their borders.

Some positions taken by the United

States appear to advocate the free flow

of information on the premise that information is a public good, and therefore should be allowed to flow freely between countries. The United States appears to emphasize the commodityrelated aspects of information, maintaining that controls or restrictions are,

in effect, restraint of trade. While this

position would presumably allow U.S.
Ch. 5— The Structure of Information Policy ● 59

multinational firms to more freely deliver and sell information services

across borders, it may have adverse implications for the international protection of individual privacy.

Secondary Policy Impacts

Computer-based information systems, by

increasing the quantity of information collected, the efficiency of its collection and

dissemination, its utility, and its ease of

storage can cause qualitative changes in the

behavior of Government, individuals, and

organizations as well as in the nature of

traditional conflicts. Thus, the use of automated information systems can have secondary effects on policy problems that have existed for years, and which in many ways are

independent of the technology. Because

much more information can be obtained,

handled, processed, and distributed so much

faster, old problems are not merely exacerbated, but new ones are created.

For example, the increased scale and

presumed efficiency of automated criminal

justice recordkeeping intensifies the tension

society has always experienced between the

needs of law enforcement and the individual

rights of citizens. Similarly, the tendency of

the technology to encourage centralized

record systems creates problems of Federal/State relationships, a particularly

touchy issue in law enforcement. Some experts believe this centralization trend could

reverse through the use of smaller computers with distributed data bases. The OTA

study of the National Crime Information

Center Computerized Criminal History system, being conducted in parallel with this

study, examines this set of issues and relationships in detail.

Electronic mail will once more raise issues

of the inviolability of the mail. The rules

governing access are different for letters and

for telegrams. Which will take precedence in

the new environment? Will the first amendment rights enjoyed by the printed news

media or the tradition of the Federal Communications Commission’s regulation of content be the pattern for protecting the new

electronic information media?

Ongoing issues such as privacy, security,

and social equity are still not resolved. Electronic funds transfer (EFT), by changing the

scale and nature of information collection

and storage in an environment of accelerating institutional changes in the industry,

may be forcing the reconsideration of such

issues in a totally new technological context.

The OTA study of EFT, being conducted in

parallel, examines these issues in greater

detail.

Computers may not only cause policy

problems but may also be useful in solving

them, and information systems may have

policy impacts that mitigate or enhance the

resolution of other policy conflicts. For example, it has been suggested that a central

computer file containing information about

citizens and employable aliens would be

useful in verifying employability while

avoiding the complicated problems created

by a national I.D. card. (This suggestion is

not intended to be an endorsement of such a

system. ) Transmitting electronic mail in a

coded form (encryption) could help resolve

social concerns over wiretapping or mail

tampering. Services available through EFT,

such as check authorization/guarantee and

debit cards, can facilitate payment by other

means than cash and thereby provide an additional convenience to customers.

Long-Term Societal Effects

Social scientists engaged in futures

studies have suggested that the information

revolution, spurred both by advances in

computers and communication and by the

changing role of information in U.S. society,

will have profound long-term effects as dramatic as those caused by the invention of the

printing press.

While such effects may, in fact, be socially

significant in the long term, they are also the

most difficult to predict and to relate direct-
60 ● Computer-Based National Information Systems: Technology and Public Policy Issues

ly to particular public policy choices. For example:

. The nature of societal values attached

●

●

to privacy in the United States may

change if larger and more ubiquitous information systems gradually remove

the ability of individuals to hide their

private activities. The permanency of

data storage and ease of recall can limit

a criminal’s ability to start over with a

clean slate. It has been pointed out that

the possession by large organizations of

personal data on individuals enhances

the power, real or perceived, of the

organization over the person.78 These

and similar effects may increase the

suspicion some citizens have of large

organizations –business, labor, or Government—and thus erode social cooperation and a personal sense of well-being.

The self-image held by humans of their

uniqueness, distinguished by their ability to think, may be threatened by the

association with machines that increasingly demonstrate apparent characteristics of intelligence.9 Computer scientists disagree about whether truly “intelligent” systems can ever be built. In

the creation of social attitudes, however, the perception of machine omnipotence may be as important as reality.

The best chess machines already can

beat 99.5 percent of human players.

One effect of such a perception may

be to increase the uncritical reliance on

computers. 10 The general public’s unquestioning acceptance of computer

output has concerned computer experts

for many years, and may be a contributing factor in criminal acts that use

computer-generated information to establish credibility.

Just as the printing press, by stimulating literacy and speeding the flow of

7

Laudon, op. cit.

8Westin and Baker, op. cit.

‘S. Turkle, “Computer as Rorschach, ” Society, vol. 17, No.

2, January/February 1980, pp. 15-24.

‘OJ. Weizenbaum, Computer Power and Human Reason

(San Francisco: W. H. Freeman& Co., 1976).

●

ideas, supported the Renaissance and

the transition from medieval society to

the age of enlightenment, so the new

information systems could profoundly

transform the social and political environment of U.S. and world society.

Indeed television and sophisticated

computer-based polling technology

have already had observable effects on

the political processes in the United

States. Third World leaders calling in

UNESCO for a “new world information

order” express the belief that information technology will have a central influence on the social and economic development of their countries as well as on

international relationships.

The effects of information technology

on culture have received little stud-y.

Years ago, the noted Canadian economic historian Harold Adams Innes (and

later his student, Marshall McLuhan)

discussed the profound effects on cultural biases exerted by the forms in

which information is communicated. 11 12

Scholarly opinions differ concerning

the nature of these effects. Some see in

broadcast television a lowering of social

values and a reduction in literacy, a

debasing of culture resulting from mass

communication. However, a single television broadcast of a Metropolitan

Opera performance reaches more viewers than have attended the Met in all its

years of existence. Has “Sesame

Street” improved the educational level

of its viewers, or has it conditioned

young children to a short attention span

and to an orientation toward learning as

entertainment, unsuitable for serious

academic work?

This overview study has not attempted to

address in detail these broader questions.

The conflicts and problems are only identified here. Given the potential for significant social change, good or bad, research

funded publicly, privately, or in some jointly

——- —— 1 I House of l%epresent,atives, OP. Cit.

1‘Turkle, op. cit.
Ch. 5— The Structure of Information Policy 61

developed projects could provide valuable insights into the long-term societal effects of

computer-based information systems and

related public policy-choices.

The categories shown in table 5 are not independent of each other. Policies at various

governmental and industrial levels interact

with one another in areas such as the economy. In a similar way, there is a complex interaction between the categories. Procedures

set for system operation may affect problems of information handling in response, for

example, to privacy regulations. Rules for

the handling of information may exacerbate

or mitigate secondary policy impacts. On the

other hand, they may also affect the way in

which specific systems are designed and

operated.

Various concerned parties view these

issues from their particular perspectives.

For example, an agency wishing to install a

major new information system may be motivated by considerations of system utility:

whether the system will do its intended job

and be economical to run, and whether the

procurement has been handled fairly. Congress, in addition to being interested in the

system’s effectiveness, also wants to know

whether it satisfies a broader set of requirements, for example, whether it conforms to a number of information policy constraints such as protection of civil liberties,

individual

tion laws,

these as

secondary

Finally,

ogies and

privacy, or freedom of informaand how the system might affect

well as other less well-defined

policy issues.

as critics of information technolsystems express concerns about

the long-term social effects that may or may

not occur, it has become apparent that these

effects would be difficult, if not impossible,

to address solely through a legislative approach. Congress can only seek to establish a

legislative basis for creating a balance between the public/social values, the commercial/economic values, and the privacy/proprietary values associated with information.

The stresses within that triad remain in a

dynamic state. They are exacerbated or

mitigated by many other social factors in addition to lawmaking and policy formulation.

Society has not as yet learned how to predict

the consequences of manipulating the numerous factors involved.
Chapter 6

Innovation, Productivity,

and Employment
Contents

Page

Introduction . . . . . . . . . . . .

Research and Development 

Productivity. . .

Unemployment

Issues. . . . . . . .

R&D Support

● ☛☛✎☛☛☛☛☛ ☛

. ............

. ..... .

● ✎☛☛✌☛✌☛✎ ✎

. ...............*.*...*..****.*..*** =

.. ... .... ............................................... .

... ... . ... ... .. . .*...*....*.**** =

. ..........*..*...*****.*..*...**.**** *

.. ... .. ... ... ... .. O........**..***** *

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Computer Impact Research. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Effects of Government Policy on Innovation. . . . . . . . . . . . . . . . . . . . . . . . .

65

65

66

67

68

68

68

69

69
Chapter 6

Innovation, Productivity,

and Employment

Introduction

Innovation, the continual generation of

new technological ideas and products and

services based on those ideas, is a prime requisite for a healthy industry in a high technology field. Congress and the executive

branch have been particularly concerned

about possible economic and regulatory incentives to innovation. The Congressional

Research Service (CRS) identified 30 separate bills concerned with stimulating innovation that were considered by the 96th

Congress.l A major executive branch study

coordinated by the Secretary of Commerce

culminated, in October 1979, in a Presidential message to Congress on industrial innovation, in which a number of measures were

proposed. ’

1

. . ——

Congressional Research Service, “Industrial Innovation, ”

issue brief No. IB 80005; updated 10/24/80.

2U.S. Congress, House of Representatives, “Industrial Innovation message from the President of the United States

Information technology is central to these

concerns. Computer and communication

technologies are moving ahead so rapidly

that products can become obsolete within a

few years. Thus, although the United States

holds a substantial positive balance of trade

in certain areas of computer technology, the

maintenance of this balance depends on continued research and development (R&D).

Because of aggressive import competition

from Europe, Japan, and Canada, even domestic markets are vulnerable to any faltering in the technological lead. A parallel OTA

study is examining U.S. industrial competitiveness in the international electronics

and computer markets.3

transmitting proposals for Fostering Industrial Innovation,”

Oct. 31, 1979, Washington, D.C. (96th Cong., 1st sess.,

House, Dec. 96-214).

‘U.S. Congress, Office of Technology Assessment, Asessmen t of Impact of Technology on Competitiveness of U.S.

Electronics Industry, in progress.

Research and Development

The structure of innovation and product

development in the computer industry is

unusual, even for a high technology field.

Basic research in computer science, which is

largely carried out in universities, is based

on the technology rather than on physical

laws. 4 Thus, the leadtime between a fundamental theoretical advance in computer

science and a practical application is, in

general, relatively short, a few years or less.

——— —

‘Bruce Arden (cd.), Il”hat (Tun Be Autc)rnuted? report of the

Computer Science and F;ngineering Research Study (Cambridge, hlass.: Massachusetts Institute of Technology Press,

1980).

Because of this close connection between

technology and research, the vitality of the

computer industry is in part dependent on

the vitality of academic computer science.

However, university departments of computer science are experiencing problems.5

Rapidly growing departments face competition with private industry for the talented

faculty needed to do the research and to

train new experts. This situation is particularly critical in systems design and soft-

“National Science Foundation, Science and Engineer-t”ng

Education for the IWO’S and Be>mnd: A Report to the ~)re.~i-

(ien t. October 1980.

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

ware engineering. The departments also

need to invest in the facilities necessary

for R&D and in experimental* computer

science.

Several U.S. corporations in the information industry, realizing that their success

depends on continued innovation, have

established their own large research centers.

Bell Laboratories in the United States and

IBM both here and overseas are notable examples. These centers produce outstanding

basic and applied research, and are also important links between the basic research carried out in the universities and the needs of

industry.

*Experimental computer science tries to develop new concepts of computer architecture and programing by working

directly with the machines rather than through theoretical

analysis. Many vital areas of computer science cannot yet be

addressed through theory. They are approached through the

experience of developing programs to do particular tasks.

Another aspect of innovation in the information industry is the role played by

small entrepreneurial firms in new product

development. Many specialized areas at the

leading edge of information technology are

dominated by relatively small new companies (see ch. 14). Indeed, some experts in

the industry suggest that one important pattern for innovation in information technology involves an entrepreneur who develops a

new product and then forms a company to

produce and sell it. If successful, the new

company’s need for capital expands. Frequently in the last decade, the only choice for

the small company to meet this capital need

was to be acquired by a larger firm. This is

still the predominant goal of most high technology, high growth companies, although a

few have been able to reach the public

market.

Productivity

In the 1970’s, the rate of productivity

growth in the United States fell far below

historical trends, causing concern in Government and industry. In addition to providing

the basis for an increased standard of living,

productivity growth is a major defense

against inflationary pressures, especially

those caused by cost increases for externally

provided resources such as oil. (Electronics

and agriculture, two sectors that have experienced very high productivity growth

rates, have supplied the principal exports

offsetting the large international trade imbalance due to oil imports.) Productivity

growth also provides the leeway to meet certain societal goals, such as a more equitable

distribution of basic goods and services like

food, medical care, and education.

Although not all economists agree on the

causes of the productivity lag, four main factors in the last decade have commonly been

noted by various experts:

● growth of the service sector of the

economy,

entry into the job market of a large

number of young and inexperienced

workers,

decline in the rate of technical innovation and investments in R&D, and

growing Federal intervention in the

form of regulation and tax policies that

discourage innovation.

There is reason to believe that innovation

in computer technology can help productivity growth in the United States. In addition

to lower cost and/or better quality retail consumer products, the new technology also

generates improved techniques and tools for

making those products. Experts have noted

the positive correlation between innovation

rates and productivity in several industries.6

Based on anticipated advances in artificial

intelligence, robotics, computer control, and

input-output technology over the next few

‘Edwin Mansfield! “Research and Development, Productivity, and Inflation, ” Science, vol. 209, Sept. 5, 1980, pp.

1,091-1,093.
Ch. 6—innovation, Productivity, and Employment . 67

years, computer-based factory automation

will make a substantial contribution to improving manufacturing productivity. Word

processing and other forms of office automation are already responsible for improving

clerical productivity and may have similar

potential for managerial productivity. Intelligent cash registers and automated

checkout are directly improving the productivity of retail clerks and indirectly the productivity of retail management (e.g., accounting, inventory control, procurement).

Automated bank tellers (teller machines) are

reducing the service loads on human tellers.

The full impact is yet to be felt of these and

other applications that are only now starting

to be installed in the service sector. However, they are likely to help restore an upward trend in the Nation’s productivity.

From a larger societal perspective, the increased productivity brought about by advances in computer technology may be reflected not only in greater output per

employee, but perhaps also in terms of better

product quality, improved work environment and job satisfaction, and longer term

social benefits such as improved job safety

and greater opportunities for on-the-job

learning and career advancement.

Unemployment

It is self-evident that any innovation that

creates new products and new industries will

eliminate some jobs only to create others.

Structural shifts in the economy will occur to

the distress of the temporarily displaced.

An innovation that creates a demand for

highly skilled programmers while eliminating

the jobs of low-level clerical workers causes

hardship through a short- to medium-term

increase in unemployment. In certain industries, such as insurance, automation has

caused a significant reduction in clerical

staff.

Some believe that the nature of labor displacement should be examined in more detail

since there are likely to be marked differences between the well-recorded experience of computing technology’s first quarter

of a century and the coming decades. Some

of these differences are said to include:

● Cheaper and readily available communication and computer technology,

which allows previously labor-intensive

jobs—such as sales clerks, bank tellers,

and secretaries—to be automated.

● New research results in fields such as

process control, robotics, and the interface between humans and machines,

which widen the applicability of computer automation. The “automated factory, ” a completely automated shop

capable of manufacturing a wide variety of products on demand without

human intervention, may become a

reality in the next decade or two.

The assessment of the role of the U.S.

Postal Service in electronic mail is the only

study in OTA’s examination of three national information systems to specifically look at

employment impacts. Preliminary research

results suggest that electronically transmitted mail would likely eliminate postal

jobs as the volume of conventional mail decreases. However, it appears that the rate of

such job displacement would be unlikely to

exceed ordinary attrition. Further research

is focusing on the rate of job displacement

and possible geographical discrepancies, the

need for job retraining, the impacts on levels

and costs of service, and the broader implications for the future of the U.S. Postal Service. 7

‘U.S. Congress, Office of Technology Assessment, Preliminaq’ A.9.se.f’sm Qnt of the Role of the [’. S. Postal Sercice in

El~ctronic ,tle.s.sage Ser{ ices, in progress.
68 . Computer-Based National Information Systems: Technology and Public Policy Issues

Issues

Congress will be confronting a number of

issues concerned with innovation in computer technology and its effects on productivity and employment.

R&D Support

For a number of years the vitality of U.S.

science and technology has depended, in

part, on Federal support. In times of low productivity gains, taxpayer resistance to increased governmental spending is understandable as pressure grows to trim programs, such as R&D, that do not satisfy

immediate needs. There has been a similar

tendency by some sectors in private industry to cut R&D budgets when money is

tight. Industry also cites tax disincentives

to R&D investment, particularly prior to the

1978 capital gains tax reduction.

Innovation in information technology improves the productivity of the information

industry itself and also offers the tools for

improving the productivity of many other

sectors of the economy. Therefore, some

believe Federal R&D support is a wise

policy, particularly in light of international

competition for the same markets.

Research in basic computer science is supported by the National Science Foundation

(NSF), the Office of Naval Research, the Advanced Projects Research Agency, and to a

lesser extent by a few other agencies. Applied R&D is supported by NSF and by mission agencies such as the National Aeronautics and Space Administration and the

Department of Energy, although the major

part of development support comes from the

Department of Defense. One issue to consider is whether research in the applications

of computer technology to problems in the

private (civilian) sector—in such areas as

education, health, transportation, environmental quality, and job safety—is receiving

adequate Federal support, given the critical

nature of computer technology to the Nation’s well-being.

Computer Impact Research

The very applicability and power for

change inherent in computer technology

that makes it so promising as a means of

solving many societal problems has raised

concerns that it might also have negative effects. Many computer and social scientists,

aware of these potential problems, have been

developing a field of research on computer

impacts. a Professional journals have been

started, courses are being developed, and a

few computer scientists are describing their

principal professional interest to be “computer impacts. ” To date, however, it has

been difficult to secure much Federal support for research because this subject does

not comfortably fit into traditional scientific

basic research programs, and because the

products of early research tended to be of

mixed quality.

Computer impact research is not pure

computer science; neither is it classifiable as

purely social or political science. It is also of

no direct interest to the mission agencies,

such as the Departments of Energy and Defense. However, the kinds of data and ideas

that could be generated by long-term research in the societal impacts of computers

could supply valuable input to the executive

branch and to congressional agencies such

as the General Accounting Office, CRS, and

OTA. In addition, this research could help

public officials and administrators gain a

broader perspective of the social, economic,

political, and institutional issues involved

with managing information resources and

technology in Government.9

‘R. L. Kling, “Social Issues and Impacts of Computing:

From Arena to Discipline, ” Proceedings of the M Conference

on Computers and Human Choice, Vienna, Austria, June

1979.

‘See Donald A. Marchand, “Are Public Administrators

Failing To DO Their Computer Homework?” (louernrnent

Data Systems, September/October 1980, p. 22 ff.
—

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

Employment

It is still uncertain whether the productivity increases brought about by computer

technology will create or eliminate jobs. It

would be helpful to know more about the

long-term effects of automation. It is

assumed that there will be some local structural impacts. Even if new jobs are created

or old ones redefined, not all workers will

find it easy or desirable to shift. This dislocation could result even when an official policy

of no job loss has been established by a company, if employees are unwilling or unable to

adapt themselves to the new technology or

prove to be untrainable in the new procedures.

One OTA advisory panel member observed that, in periods of high demand and

relatively full employment, labor displacement is unlikely to occur; however, when trying to pull out of a period of high unemployment there is greater incentive for firms to

make productivity gains by investing in

automation rather than increasing their

labor force. Substituting machines for labor

is easier when it can be done by not hiring

when market demand for the product increases rather than having to fire.

On the other hand, it can be argued that

the rising consumption of goods and services

by the developing world will create a very

large demand. Consequently, gains would be

turned into increased production rather than

decreased labor input.

Effects of Government Policy

on Innovation

Innovation seems to be very sensitive to a

variety of governmental policies. Thus, when

exploring the potential impacts of new laws

and regulations, Congress needs to be sensitive to possible unintended effects on the

innovative process. For example:

● Taxation.. Industrial investment in innovation is very sensitive to tax policies, particularly those that encourage

or discourage capital formation for new

●

●

●

●

✎

firms, for R&D expenditures, and for investments in new processes and equipment.

Antitrust: The purpose of antitrust enforcement is presumably to encourage

competition and, hence, innovation.

Some experts hold, however, that major

antitrust actions or threats of such actions against companies that are large

principally because of a successful

record of innovation may dampen their

enthusiasm for further product development.

Regulation: Regulation can encourage

or discourage innovation depending on

how it is applied. Regulators either try

to direct innovation toward particular

societal needs (as in the cases of automotive safety or environmental protection), or to control it for social protection (as in the cases of food and drug

safety). The second order effects of this

innovation can dampen innovation elsewhere as industrial investment must

first respond to the regulatory demand.

Only the remaining capital is available

for investment.

International controls: Multinational restrictions on the flow of data and computing hardware across national boundaries affect the design of communication-based information systems, and to

some extent shape the nature of competition in the international marketplace.

Standards: Federal standards, * voluntary or mandatory, directed at Government or private sector applications can

also shape the nature of innovation and

competition. On the one hand, for example, some argue that standards for data

processing compatibility will encourage

a competitive industry to develop

around so-called “plug-compatible

equipment” (independently manufactured devices that plug into computers

* ~1()~ ~ d(,t~i]{,~ discussion of standards, see app. (’ to U.S.

(’ongress, office of Technology Assessment, ‘1’elem)mm unication Tw’h nc)li)g> and 1)U hlic Polic>’y in press.
70 . Computer-Based National Information Systems: Technology and Public Policy Issues

made by major firms such as IBM). On

the other hand, the premature imposition of standards can freeze the technology at an early stage and inhibit the development of new products and ideas.

What the United States does on its

own here may become moot in the

longer term. International data standards are developing rapidly. In the

United States, the National Bureau of

Standards has coordinated the U.S.

position. The objective of the International Standards Organization is to

have, before the end of the 1980’s, compatible protocols and interfaces to allow

any one computer to “talk” to any

other. Within the United States, pressure in this direction is being exercised

through the mandatory Federal Information Processing Standards for

Federal Government procurement.

The Federal Communications Commission is presently struggling with the

problem of videotext. * Many broadcasters and manufacturers have repeatedly maintained that they cannot

invest in developing hardware and services to support such service until they

get a clear message on standards.

Others argue that the technology is so

new that standards at this time could

inhibit new developments.l0 In short,

the relationship between standards and

innovation is not well understood, and

could benefit from further study.

*Videotext and related services are systems for providing

magazine-like information sources directly over the household television set.

“’’’Upstart Television: Postponing a Threat,” Science vol.

210, Nov. 7, 1980, pp. 611-615.
Chapter 7

Privacy
Content s

-—

Historical Context ● * * * . * *,*.**.**

Future Privacy Issues . . . . . . . . . . . .

An Omnibus v. A Selective Policy

Collection of Data. ● ● ● ● ● ● . ● ● ● ● ● #

Access ● *...*****.********,***

Microprocessors and Surveillance.

The Glass House Society. . . . . . . .

Table No.

6. Significant Milestones in the

● ☛☛☛☛ **.90 *a. e *em***.**.*..**.*. *

● ☛☛☛☛ m ***************s*.**.***** .

● *****D**.*....*.*.*.**********. .

● . * * * e * * * . * *, . . . * ***..*.**

● *9.******************.*.******* .

..*. **** ***o * * * * * * a * * * * * ***..*.. *

● ... ... ***.   ** ** **** *8 ****8*. *

Page

73

74

74

75

76

77

78

TABLE

Page

Development of the Recordkeeping Issue . . 73
Chapter 7

Privacy

Historical Context

Policy issues related to privacy date back

many years before the existence of computers. 1 Such issues as the following have

long concerned Congress and the Courts:

Government intrusion–the right of the

Government to physically intrude on

the premises or in the belongings or personal effects of an individual.

Surveillance of communication—the

right of the Government to intercept

communication by reading mail and

monitoring telegraph traffic, by wiretapping telephone conversations, or by

inspecting envelope exteriors to make a

record of the senders (mail covers).

Liability v. the first amendment–the

right of authors to write—and publishers to print—within very broad limits,

any information about a person or institution, whether such information is true

or false, authorized or not.

Privileged communication—the right of

the Government to seek information

conveyed under certain special circumstances, such as psychiatric treatment,

religious confession, legal counseling, or

media news-gathering.

These examples not only convey the historical nature of privacy debates but also the

extraordinary range of issues encompassed

by the term.

privacy as it relates to computers has

been more narrowly construed. Historically,

the principal discussion has been concerned

with computerized banks of information

about individuals, the collection of such

data, and the uses made of it. A chronology

of major events in the development of policy

‘David <J. Seipp, The }{igh t to Pn’I IacjI in American }{i.ston’,

Iiar\’ard LJniversity Program on Information Resources

Policy, P-7R-3, 1978.

on recordkeeping practices is shown in table

6. In addition, a number of influential hearing records and reports have been issued by

Congress.

Recordkeeping has not been the only area

of privacy that has concerned Congress.

Over the last two decades, hearings have

also been held on subjects such as wiretapping, psychological testing of Government

Table 6.—Significant Milestones in the Development

of the Recordkeeping Issuea

C. 1964 Proposal for a National Statistical Center and

the resulting public debate on privacy and

Government data systems—culminating in a

series of congressional hearings.

1967 Alan Westin’s influential book Privacy and

Freedom. b

1970 Fair Credit Reporting Act—provisions regarding

credit records on individuals. c

1971 Arthur R. Miller’s book The Assault on Privacy.’

Computers, Data Banks, and Dossiers. d

1972 National Academy of Sciences report: Databanks

in a Free Society.e

1973 Health, Education, and Welfare Secretary’s

Advisory Committee on Automated Personal

Data Systems report: Records, Computers, and

the Rights of Citizens. f

1974 Family Educational Rights and Privacy Act

controlling access to educational records. g

1974 Privacy Act of 1974 enacted. h

1977 Privacy Protection Study Commission report:

Personal Privacy in an Information Society.1

1978 Right to Financial Privacy Act of 1978 enacted to

provide controls on release of bank

information.j

a–Note: There were also numerous hearings and reports by Senate and House

congressional committees during thls period which are not Iisted here. James

Rule and collaborators list 60 major Committee hearings and reports dealing

with information privacy from 1966 to 1977 k

bAlan West In, Privacy and Freedom New York Atheneum1 1967

c

Fair Credit Reporting Act, 15 U S C 1681 (1970).

dArthur R. Miller, The Assauly on Privacy: Cornputers Data Banks, and Dossiers

(Ann Arbor University of Michigan Press, 1971)

eAlan Westln and Michael Baker Databanks in a Free Society (New York Quadrangle/New York Times Book Co 1972).

fDepartment of Health, Education, and Welfare, Secretary’s Advisory Committee on Automated Personal Data Systems, Records. Computers and the Rlghts

of Citizens, Washington D C 1973

gPubllc Law 93568

hPublic Law 93579

IPrlvacy Protect Ion Study Commission, Personal Privacy in an Inforrnation Society Washington D C 1977

IRlght to Financial Privacy Act of 1978 (Public Law 95-630)

k

James Rule, et al., The Politics of Privacy (New York Elsevier North Holland.

19801

SOURCE: Office of Technology Assessment

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

employees, and the use of polygraphs. Pri- ●

vacy issues have also been raised by congressional committees concerned with the data

systems run by various agencies, in par- ●

ticular the Federal Bureau of Investigation

(FBI), the Internal Revenue Service (IRS),

the Social Security Administration (SSA),

and the Census Bureau. ●

Privacy-related issues will remain on the

congressional agenda over the coming decade for a number of reasons. z

2L. Hoffman (cd.), Compu ter.s and 1%-z”[~ac}’ in the Next

Decade (New York: Academic Press, 1980).

new computer and communication technologies will create new problems and

change the nature of old ones;

the public’s awareness of and sensitivity to the privacy problems presented

by large data systems appear to remain

high; and

the Federal Government has deliberately chosen to react to privacy issues

associated with recordkeeping on a

case-by-case rather than on an omnibus

basis.

Future Privacy Issues

An Omnibus v. A Selective Policy

Omnibus legislation, which would cover

all data systems both public and private in

which personal information is maintained, is

the approach European nations have taken.

In the United States this approach has been

rejected by the Privacy Commission and the

executive branch for several reasons. First,

there would be serious difficulties in drafting

such legislation in a way that would achieve

the desired protection without seriously

hampering legitimate data processing applications. Furthermore, the variety of systems, of applications, and of environments,

ranging from large banks and insurance

companies to street corner drugstores and

individual homes, would be hard to accommodate with any single piece of legislation.

In addition, omnibus legislation could lead

to the creation of another Federal regulatory

agency that would exercise oversight over

the information industry. Again, because of

the wide variety of applications such an

agency would find itself involved in most aspects of American life. The Swedish experience is often given as an illustration. In that

much smaller country, a newly created data

bank licensing board had 20,000 applications

to process in its first year of operation.

With the selective approach, however,

Congress will be considering a long series of

privacy bills. A substantial legislative effort

will be required to catch up with current

computerized recordkeeping practices. An

immediate concern is the development of

privacy rules for computer applications in

banking, medicine, social and medical

research, credit, insurance, and criminal

justice. Privacy is also likely to be a major

issue in the development of electronic mail.

Furthermore, new applications for computers and communications, such as an automated securities exchange, in-home information services, electronic publishing, and the

automated office, may create new environments for privacy policy issues to arise. As

Government agencies such as the Department of Justice, IRS, or SSA begin to use

the new generation of information technology for their recordkeeping activities, privacy problems that were not specifically addressed in previous legislation may have to

be dealt with by Congress. Recently, for example, the availability of low-cost data communication technology has raised the message-switching issue to prominence in the

congressional debate over the future of the

operations of the FBI National Crime

Information Center Computerized Criminal

History system.
Ch. 7—Privacy ● 7 5

Unlike the executive branch, which can

subject all proposed privacy legislation to a

consistent agency review, Congress considers the different bills in a variety of

committees depending on the applications

and users under consideration. Therefore,

careful coordination and the adoption of

principles for guiding the nature of Federal

policy concerned with the handling of personal information in automated information

systems is needed in order to prevent the

enactment of a patchwork of contradictory

privacy legislation.

This approach leads to legislation tailored

to the needs of the specific sector affected by

it. However, there are also hazards. A danger inherent in disorganized privacy legislation is that businesses that operate in areas

of overlapping authority would face a

variety of regulations, some even contradictory, governing their data systems.

Others might be able to find loopholes by operating in the gray areas between regulated

sectors, thereby seriously abusing the intent

of Congress.

Because the selective approach differs so

radically from the approach taken by most

other developed nations, problems could

arise internationally. Many developed nations, for example those in the Organization

for Economic Cooperation and Development,

are attempting to coordinate their privacy

legislation so that differences in their rules

and practices will not hamper the exchange

of information across their borders (see ch.

12). The rejection of an omnibus approach,

coupled with the lack of a centralized authority over data banks, is making it difficult for

the United States to enter into these international agreements. Such a divergence could

leave the United States as “odd man out”

with respect to transborder data flow. This

could have serious implications for trade and

international relations and warrants serious

attention. 3

‘Donald Nlarchand, “ Privacy, Confidentiality and Computers: National and International Implications of U.S. information Policy, ” ‘rQ/WOTT7 m u nica tion.~ Polic?j, September

1979, pp. 192-208.

Collection of Data

In an attempt to decrease the amount of

data collected by Government agencies, Congress specified in the Privacy Act of 1974

that data collected must be “relevant” to the

purposes of the collection. The Privacy Protection Study Commission reported finding

a slight decrease in data collection following

this legislation.

However, the relevancy test is undeniably

weak and difficult to enforce, and the small

decrease found in data collection was a onetime phenomenon. Recordkeeping is increasing, both in the Government and in the private sector. Furthermore, as more and more

transactions in the private sector become automated, data that would normally not have

been collected or retained will now be entered into computer systems and stored,

thus becoming available to data collectors.

The recent dispute between Prudential Insurance and the Department of Labor (DOL)

over access to personnel tapes is illustrative.4 To investigate possible discrimination

in hiring, DOL has requested complete personnel records held by Prudential. Without

judging the merits of the case, it can still be

observed that, were the files in question not

integrated on magnetic tapes, DOL would

have been unlikely to make such a sweeping

request because of the burdensome task of

analyzing manual records. It should also be

noted that computer technology allows such

files to be easily processed to create new

tapes containing only the information DOL

and Prudential would mutually agree is pertinent.

Relevancy is also a weak requirement with

respect to its application to the timeliness of

data. The Privacy Commission found that

agencies were not particularly inclined to

cull their files. As the cost of memory continues to drop and very large data systems

become easier to operate, even existing

economic and managerial incentives to clear

‘“Prudential Barred From U.S. Contracts,” The 14’a.shirlgtt)r) Po,<t, (July 29, 1980, SW. A, p. 1.
76 . Computer-Based National Information Systems: Technology and Public Policy issues

data bases of old and useless information

disappear.

A fundamental assumption underlying

much of the privacy debate in the 1970’s was

that collecting personal information is in

the nature of a transaction—the individual

yields personal information in exchange for

some benefit. Thus, much of the fair practice

doctrine centers on the requirement that the

recordkeeper abide by obligations implicit in

that transaction. However, individuals will

increasingly be encountering computerized

systems that collect and store information

about them without their knowledge or consent. Very few laws exist pertaining to the

ownership or disposition of such information, even when its use may be contrary to

the individual’s perception of his or her best

interests.

The mailing list systems were among the

involuntary systems studied in depth by the

Privacy Commission. Persons have no idea

whether or how information about themselves is being compiled. Since, at the time of

the study, the Commission deemed mail solicitation to be a socially benign activity,

they did not consider this type of recordkeeping to be of serious concern.

However, pressures from users of such

systems for greater selectivity in their

mailing lists has led to collection of more

personal data on individuals. Political solicitation lists, for example, may contain information about a person’s organizational

affiliations, religious beliefs, charitable

contributions, income, and history of support for various causes. This type of information can be used to predict the likelihood

that a person would support a particular

candidate or political cause and is, therefore,

useful in compiling a targeted mailing list.

Such personal information, which is often

collected without the consent of the subject

through the exchange or purchase of mailing

lists or access to other open sources of information, assumes the character of a political

dossier. It is not clear that existing controls,

either over the use of such data systems for

purposes beyond computing mailing lists or

over the original collection of the information, are adequate to deal with the increasing

capability modern technology offers to collect data and compile such lists.

Modern computer technology through the

1980’s will facilitate the collection of personal data, as well as make possible its instantaneous nationwide distribution. Pointof-sale systems are an example of this trend.

A sale made at a store and recorded through

a terminal will collect a variety of information about a customer, such as what was purchased, the exact time and location of the

transaction, and possibly the customer’s financial status. This will not only be recorded

at the bank, and thus fall under bank privacy

rules, but may also be retained by the store

management for its own use, or perhaps even

sold to third parties.

Acces s

The controls in current privacy legislation

that concern access to Government-held

data by other agencies depend on a “use”

rule. That is, with some exceptions, data

may not be given to a third party for any

purpose other than one “compatible” with

that for which such data were originally collected, Such routine uses must be made

known to the data subject either at the time

the data is solicited from him or constructively through publication in the Federal

Register.

The Privacy Protection Study Commission found this rule to be relatively ineffective. The word “compatible” is vague and

subject to a variety of agency interpretations. In addition, there are a host of exceptions, both within the Privacy Act and in

other laws, governing the ways in which

agencies exchange information. The provision of notice was found to be equally ineffective. Finally, privacy rules conflict with

freedom of information laws. For example,

Iowa’s attorney general recently ruled that

the State’s open records laws superseded
Ch. 7—Privacy ● 7 7

any rights to user privacy with respect to

library records. ’

The proliferation of personal data collection without either the subject’s permission

or knowledge implies that even if such a use

provision were extended to the private sector and its ambiguities clarified, its effectiveness would be limited. The rule assumes

a voluntary relationship between the primary data collector and the subject, and a

willing yielding of personal information.

Where such an agreement does not exist, the

subject of the data is not the “owner” of the

information.

The data collector argues, usually correctly, that the information being collected is

already in the public domain. The issue may

boil down to the difficult question of whether

a compilation of information in the public domain along with statistical inferences drawn

from it can become so comprehensive as to

constitute an intolerable invasion of an individual’s privacy. Some States are already

considering bills to restrict the access to

public records, in particular to auto licensing

data.

OTA’s study of the FBI’s National Crime

Information Center/Computerized Criminal

History (NCIC/CCH) record system documents the difficulty in enforcing access rules

for very large distributed information systems that serve many users and contain information of value to a variety of people.

Even if tight security measures could solve

the difficult problem of stopping access by

unauthorized persons, no controls within the

system can keep the data, once extracted by

an authorized user, from being used improperly.

Furthermore, the overlap of authority (in

the case of NCIC, between Federal, State,

and local agencies), along with the concomitant overlapping assortment of rules and

procedures, means that it is very difficult to

establish a single consistent policy for accessing and using data.

-1 t)}~ ~ [,itjraries F’lght %-utin~’ of l~orro~r~>r ~~~~~rds,

‘/’hfJ lf”(l fhl n:ton /’os f, I)ec. 2, 1 !379.

This problem is duplicated in the private

sector. Retailers of personal data, such as

credit bureaus or mailing list operators, have

no control over how the information they sell

is used. Large corporate information systems, where many employees or even outside

users have access to the data, will have

similar problems of control.

The question is not just the adequacy of

the security of the internal system against

unauthorized use, but who is authorized access to the data and how they use it. Many

new information systems are characterized

by their wide distribution and easy accessibility over communication lines. In fact,

they are designed for just these characteristics. In such complex environments, with

multiple data bases in the system and multiple users accessing it from anywhere in the

Nation, procedural control of data use could

be almost impossible.

A final access problem, suggested above,

is the impact on privacy of the computerization of traditionally public Government files.

Lists of property transfers, licenses, births,

deaths, and so on have always been open,

but difficult to get at and use. Certainly,

they have not been easily absorbed into privately held data bases. Computerized files

have changed that access capability, and as

a market for such information develops the

interest in using it will likely increase.

Microprocessors and Surveillance

The potential now exists for the development and marketing of a wide variety of devices either specifically designed or capable

of being used for the surveillance of individuals without their consent. Microprocessor technology is progressing to the

point where it will be common for computer

logic and data storage capability to be built

into inexpensive consumer goods of all

kinds. Pocket-size, voice-stress “lie detectors” are already being marketed, although

their reliability is unproven. Within a few

years, wristwatch-size units will be available. Although at least one State, Penn-
78 ● Computer-Based National Information Systems: Technology and Public Policy Issues

sylvania, has a law requiring subject consent

for use of such devices, its enforcement

would be quite difficult when the possession

and use of a unit can be so easily hidden.

Currently available security systems

based on magnetic cards and microprocessor-based locks allow an employer or building manager to keep detailed records of the

whereabouts of anyone in the building. Devices called “pen registers” provide a similar

capability for monitoring telephone traffic.

If voice recognition and picture processing

capabilities improve as much as some experts expect over the next decade, other

forms of inexpensive automated surveillance

will also become available.

Abuse of this technology for illicit purposes may become a serious problem. However, seemingly legitimate applications such

as retail market surveillance of customers or

employer surveillance of employees may also

cause concern if there are obvious abuses,

Arguments for socially sanctioned uses will

raise, in new forms, classic issues of civil

rights v. both law enforcement and the

rights of employers to monitor their employees. In this debate, the new information technology places powerful new tools in the

hands of those who argue for greater social

control.

The Glass House Society

The issues that are likely to remain active

during the next decade or two arise from the

public’s misgivings that the use of large data

systems containing personal information is

threatening to them. Recent polls have

shown a steadily rising concern over privacy,

which is directed equally at Government and

private data systems.6

Some social and political scientists suggest that the computer represents to the

public the growing power of Government

and other large organizations over their

daily lives. ’ Thus, as the use of these information systems grows, the public’s apprehension is also expected to grow as will

pressures on public officials to control or

even to stop certain types of computer

applications.

There appears to be a trend toward a

society in which information about a person’s finances, medical and educational histories, habits as a consumer, daily movements, and communications with others

through the telephone or the mail will be collected, stored in a computer, possibly sold to

others, and used in ways over which the individual may have little or no control. There

may be many benefits in terms of the productivity and efficiency of institutions, and

in terms of broadened awareness and choices

available to individuals as citizens and consumers. But the long-term social and political effects of this trend–beneficial and

adverse—are still largely unknown. It seems

likely, however, that they will be profound,

and will alter how individuals both perceive

and relate to the institutions that affect their

lives. Consequently, Congress will continue

to be a principal forum in which these conflicts will be deliberated and ultimately

resolved.

“77he I)irnensions of Pn”lluc?: A ,4’ational opinion” l{e,~curch

S’ur[’e]’ of A ttitudps ‘1’OUIU rd Prit ~ac~’ (.Steven:. Point, Vt’isconsin, 1 979) for Sentry Insurance.

‘,Ja mes Rule, et al., ‘1’hc I)olific. s of I)n”{ ‘a{’>’ (New York:

F~lsevier-?40rth }Iolland, 1980).
The

Chapter 8

Security of

Computer Systems
Contents

Concern and Need “ Page

● ****   ** ** **** *a. *.. *.. ,****e* m*** e **q*****+* 81

The Technology of Security ● ***.****.*.***.*.**...**.***.********** 82

Threats and Targets ● **. **** *.. ..9. w8@ti0~e O+v~~aa &**. .**. ... .*vb. e 82

Future security Issues ● .*. *.*. ... .., *.** *.** ***e e***   ** e ****e** 84 Protection of Federal Systems ● ....,,. .

Protection of Vital Domestic Information

* * * * * * . * * * * * . . . . ., *...**.** 84

Systems ● . . . . . . . . . . . . . . . . . . 85

●

*

,

.

*
Chapter 8

The Security of

Computer Systems

Concern and Need

The security of computer systems, particularly those operated by the Federal

Government, has increasingly concerned

Congress. Hearings have been held, studies

have been published by the General Accounting Office, and legislation has been intraduced, ’ all addressing the problem of

meeting threats to Federal data installations.

Security concerns have also appeared in

congressional reaction to proposals for new

advanced information systems by Federal

agencies, such as the proposed Social Security system, the Tax Accounting System of

the Internal Revenue Service, and the upgrading of the National Crime Information

Center (NCIC) system of the Federal Bureau

of Investigation. All of these proposals have

been scrutinized carefully by congressional

committees, with particular emphasis on the

security of the systems.

Similar concerns have also been expressed

by the executive branch. Presidential Directive 24, published in February 1979, established policy for the security of Federal communications and assigned responsibility for

the protection of nonmilitary but sensitive

Government communications. This directive

was motivated by a concern for national security, that is, the potential value of intercepted communications to an enemy.

In a 1978 memorandum,’ the Office of

Management and Budget directed all Fed-

— .

‘See S. 2J0 (and H.R. 6192), 96th Cong., “Federal Computer Systems Protection Act of 1979, ” to prohibit the use,

for fraudulent or other illegal purposes, of any computer

owned or operated in interstate commerce or by the Federal

Government or any financial institution.

Qffice of Management and Budget; circular A-71, “Responsibilities for the Administration and !Vlanagement of Automatic Data Processing Acti\’ities, ” transmittal memeral agencies to pay attention to the security

of their data processing operations. The

memorandum required the agencies to conduct risk analyses of the threats and vulnerabilities of their systems and to develop appropriate security plans.

The National Bureau of Standards, under

authorization by the Brooks Act,3 is continuing to develop guidelines and standards in all

areas of computer security for use by Federal agencies. The first standard to emerge

from this effort is the Data Encryption*

Standard for protecting data communications. Its adoption may present difficulties

because of the rapidly changing technology

and the extraordinarily wide range of types

and uses of Federal information systems

that would have to be covered.

In the domestic sector, the security problem is growing in importance due to several

trends:

c The rapidly increasing quantity of computerized data stored and transmitted

over communication networks.

● The increasing value of the data, both

as a marketable commodity and as representative of value, for example, as in

an electronic funds transfer or an automated stock exchange transaction.

● As has been pointed out, an increasing

quantity of personal information is being collected, stored, and transmitted.

The security needs of electronic mail or

of the NCIC system are motivated, in

part, by privacy concerns.

orandum No. 1, “Security of Federal Automated Information

Systems, ” 1978.

‘Public Law 89-306.

*Encryption is the coding of a message so it is only understandable to a receiver who knows the secret decoding procedure.

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

● An organization’s operations are be- can close down all sales registers in a decoming more dependent on the reliable, partment store, the air traffic control

secure functioning of the supporting system, or all the teller stations in a

computer system. A computer failure bank.

The Technology of Security

There is a blend of optimism and pessimism in the computer technology community about the future of computer security

problems. On the one side, experts correctly

point out that the technology of securing

computer systems is improving steadily (see

ch. 13). They also maintain that computerized systems, even if not perfectly secure,

are often far more secure than the manual

systems they replaced.

On the other side two main arguments are

advanced. First, since security has not been

historically a high-priority goal in the design

of information systems, the existence of

security technology does not necessarily

guarantee its proper application. Security

hardware and software are often added as an

afterthought rather than integrated into the

system from the beginning. Most designers

have not been trained to build security into

the systems they assemble, since security

features can increase the initial cost and

operating overhead, and may be burdensome

to manage.

The second objection is that advances in

the technology of protection may not be adequate to deal with the complex systems now

being built. In particular, the present trend

towards linking computers into networks

that use new communication services, which

vastly increases the overall complexity of

the resulting systems, presents new and difficult challenges to the designer attempting

to build a secure system.

Threats and Targets

Analysts view the security problem in several parts. Threats are the possible actions of

outside forces that may compromise a

system. Targets are those points within the

system against which an attack may be

mounted. Assets are the resources of the

system (information, money, goods) that

may be lost.

Because of the trends cited, threats

against computer systems appear to be on

the increase. The transfer of funds electronically is only one case in which the information processed is assuming a significant tangible value. Electronic mail and future systems for trading commodities and

securities will also tempt criminals. As the

society grows more information oriented, the

risk of theft will increase along with the

potential payoff for its success. In response,

a number of computer scientists have focused their attention on computer security.4 5

Computer crime analysts note a number of

types of threats:

●

●

●

●

●

●

●

●

theft;

sabotage;

data alteration (i.e., in a credit file);

blackmail;

extortion;

corporate espionage;

system failure;

service interruption;

‘Lance J. Hoffman, Modern Methods for Computer Securz”tv and Pn”uacy (Englewood Cliffs, N. J.: Prentice Hall, 1977).

‘Dorm B. Parker and Susan N. Nycum, Computer Abuse

and Con trol Study (Menlo Park, Calif.: SRI International,

March 1979).
Ch. 8— The Security of Computer Systems ● 83

● natural hazards (e. g., volcanic eruption,

flood); and

● unauthorized disclosure.

Computer literacy is growing and with it a

proportionate number of people sufficiently

knowledgeable to compromise a computer

system. In addition, access to low-cost personal computing systems may provide such

criminals with more sophisticated tools. At

least one such attack has already been made

on the telephone system with the aid of a

small in-home computer system. Recently,

newspapers reported the alleged use of a

small computer by high school students to

break into the data banks of several Canadian corporations.’

Certain social conditions may increase

the threats to computer-based systems. A

period of stagnation coupled with high inflation could create economic pressures that

might lead to an increase in white-collar insider crime. In addition, some social and political scientists see the possibility of an increase in domestic terrorist activit y.7

Foreign experience has shown that such activity is often directed against computer and

communication systems, which the perpetrators assume, often rightly, to be at the

heart of organizational operations.

Forewarnings such as these, although

based on expert opinion, are at best speculative. Nevertheless, security plans must be

developed against potentialities, not just

certainties. Thus, the possibility that an increase in certain social pressures could lead

to economic and sabotage threats against

the coming decade’s complex information

systems is a significant factor in any security analysis.

While threats to information systems and

the potential losses from attacks are clearly

increasing, the vulnerability of systems to

successful attack is changing in character.

— —

“’’I’he Great I)alton School Computer Tie-In ~lystm-y,”

,1’e{<+ }’{)rk Times, tJul\ 7, 1980, p. 2, CO1. 1.

‘I)onn 13. Parker, “’[’he Potent ial F; ffwts of Electronic

Funds ‘1’ransfer on National Security, ” f ‘r(]c{~cflirl,gs of t k c

b’iftk In tcrnci tic)ncll (’onfer(’flcl” on {’ornpli t{r {’em m [~ rli<u tion,

octotmr IW), pp. 4’70-476.

In some cases it is improving, in others

worsening.

The vulnerability of the system software

to intrusion should decrease as operating

systems are designed with security as a principal goal. They can be expected to be more

immune to compromise than those currently

available. Data communication will be better

protected, both by its changing basic

technology and by the incorporation of cryptographic protection. The language used to

query the data base will be designed to more

easily isolate users from data that they are

not authorized to use. Thus, in the future virtually every component of an information

system will have better security technology

designed into it.

New vulnerability problems, however, will

arise at the level of the overall system. As a

system becomes larger and more complex, so

do the managerial and technical problems of

securing it at a system level. The trend toward linking a large number of computer

systems together to be used for diverse applications by many persons, scattered geographically, poses system design and management problems that are orders of

magnitude larger than those faced in the

design of previous generations of information systems. It will be difficult to assess the

vulnerability of such complicated systems to

accidental or deliberate misuse or failure.

Detecting that an untoward incident has occurred would be even more difficult in such

systems because of the high volume of work

that flows through them and the lack in

many systems of full transaction logs.

Although the individual communication

links may be more secure (say through encryption), data communication adds its own

problems when integrated into information

systems. A network of computers that links

together individual computer systems over

telecommunication lines has numerous

points that need to be protected in an environment where failure or penetration at

any point compromises the entire system. In

addition, such systems are deliberately designed to distribute access, to make it easier
84 ● Computer-Based National Information Systems: Technology and Public Policy Issues

for users to get at the system, and to decentralize administrative control of the data

processing. Consequently, security management—setting up and overseeing administrative and personnel controls—becomes

more difficult, both because of the increased

number of persons with direct access to the

system and because of the geographical

dispersion of the organizations involved.

Problems of overlapping or inadequate authority can complicate attempts to control a

system’s security. This would be the case,

for example, with a Federal system that

links with State systems, because different

nodes in the system would have different

rules, practices, and assignments for system

security. Yet to be most effective, controls

over data access, usage, and security must

be applied uniformly over an entire system.

A private industry information system that

linked together data processing nodes under

different authorities would face similar problems.

The problems of controlling access in a

widely distributed data network are exemplified by NCIC. (They are discussed in

detail in OTA’s NCIC assessment, in progress.)

Future Security Issues

Among the several difficult issues involving computer security that are likely to confront Congress over the next decade, the following appear to be the most significant.

Protection of Federal Systems

Federal information systems control the

disbursement of an enormous amount of

money. The Social Security system itself disburses over $1.5 billion per week. Other

Federal systems contain information that

could be used directly or indirectly to make

profitable financial decisions, e.g., information concerning Federal monetary policy,

commodity markets, energy resource estimates, and the like. Still others contain sensitive information relating to personal privacy or national security. All would be

highly attractive to theft, manipulation, or

eavesdropping.

There are many potential victims of security failures. Taxpayers would suffer the losses from a fraudulent drain on the Federal

Treasury. Other types of attacks, for example on social service systems, could create

severe hardship for individuals dependent on

those programs. In an extreme case, the national security could be threatened, not only

by attacks on military and diplomatic computers but also by assaults on such major

domestic activities as the air traffic control

system or the computer-controlled national

electric power distribution grid, whose disruption could create significant social turmoil. Electronic mail service or an electronic

funds transfer network would be similarly

vulnerable.

Theft, eavesdropping, and sabotage are

not the only threats to Federal computer

systems that Congress will need to consider.

A more subtle threat is a system’s potential

diversion by the bureaucracy from its intended use. This issue is raised in OTA’s

NCIC assessment. Expressing similar concern in a different area, Congress has imposed criminal sanctions for bureaucratic

violations of the Privacy Act of 1974.8

The technology currently available is not

very useful for securing a system against

this type of bureaucratic abuse, although the

researchers in the field of electronic data

processing auditing are looking at related

problems. Many abuses do not involve violations of the computational procedures within

the computer system, but rather represent

misuse of the data once it is out of the system. Thus, the most effective controls

‘Public Law 93-579.
Ch. 8— The Security of Computer Systems ● 85

against bureaucratic abuse for now will likely be in the areas of policy, personnel, and

management, rather than technical. Strong

criminal sanctions for misusing a system

may also have a deterrent effect.

As the Government continues to automate, problems of bureaucratic accountability and the responsibility for oversight

will confront Congress with the need to better understand and more closely monitor the

use of large Federal information systems.

Protection of Vital Domestic

Information Systems

There are a number of national interests

that will cause Congress to become concerned about the security of major nonfederal national information systems.

Regulations regarding the flow of personal

information are proliferating in nations

around the world. To date, most laws concern the transfer of personal information and

stem from national privacy laws. However,

there seems to be a distinct trend toward the

extension of these laws to organizations,

which are designated as ‘‘legal persons ‘g and

thus included under privacy laws designed

to protect personal data. There is also a

growing concern expressed by some nations,

particularly those in the Third World, that

information originating within their borders

is a national resource over which they want

to maintain control. 10

These trends may create additional fears

about the security of networked systems

that communicate beyond their boundaries.

The relatively mild wording about security

in current privacy legislation could reappear

in much more stringent form in new legislation.

There is also a Federal responsibility for

certain information systems that although

privately operated, are fundamental to social

well-being. The security and reliability of automated systems for nationwide bank check

clearing, for a national stock exchange, and

for computer-based commodity trading, for

example, would all be under the purview of

Congress. The vulnerability of such systems

is of governmental concern because of the

harm that a major system failure could cause

to the Nation’s economy and to its citizens.

The continuing evaluation of the privacy

issue will undoubtedly lead to more stringent security provisions consistent with the

evolution toward more communicationbased computer systems.

If there is in fact a growing commercial

market in personal data, an illicit traffic in

stolen information could develop, thus increasing the threat of piracy of personal data

from these systems. This would call for

tougher and more specific standards for

their security.

The Federal Government, due to its traditional concern for the protection of military

and diplomatic communications, has a high

degree of expertise in the field of data security. A good deal of this expertise is either

classified or in the hands of highly sensitive

organizations such as the National Security

Agency. The appropriate role of the Federal

Government has not been defined in transferring this knowledge, for supporting computer security in both the public and private

sectors, for setting standards, and for certifying security technology.

The lack of such policy definition is visible

in the current debate over Government control of cryptographic technology. *l In this

debate, the needs of the private sector for increased communication security, and hence

for the existence of a civilian commercial

cryptographic capability, are set against the

.— —

‘ I I )a~id Kahn, ‘((’r j’ptograph~ (~oes Puhlic, ” F(~r(]ign A/_-

fi~ir.s, Y{)]. 5X, N(), 1, fall 1979, pp. 141-159.
86 ● Computer-Based National Information Systems, Technology and Public Policy Issues

perceptions of the defense community that the desire in the academic community for the

such development threatens national secu- freedom to conduct research on the matherity concerns by putting sensitive informa- matics underlying cryptography.

tion in the public domain. ” A related issue is

.

124’ Study Group Agrees to t’oluntary Restraints, ” Science, Seeks Cryptography Polic~, “ .$ci(~nce, Iol. 211, hlar. 18, 19H 1,

vol. 210, Oct. 31, 1980. pp. 511-,512 and ‘‘ \l IT Committee pp. 1 ! 139-1,140.

.
Chapter 9

Government Management of

Data Processing
contents

Gvernmen t

Problems . .

Page

Use Of Information Technology ● *0. .*** *9** ***q **~ 9 ”” 89

,** . *.. *.. .**. .**. ***.   ** . ******~****"*"*"**"****" 89

Issues ● ● . . . . ● . ● ● ● . ● . ● , ,, ● ● , ● ● . ● ● ● ● ● ● . ● ● ● . . ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● . ● ● .

92

TABLE

Table No.

7. Policies and

Page

Reguations Concerning Federal Data Processing . . . . . . . . . 90
Chapter 9

Government Management of Data

Processing

Government Use of Information Technology

In the early days of computing, the Federal Government as a user was a principal

stimulus to the development of the field.

Agencies such as the Census Bureau, the

Bureau of Standards, the Atomic Energy

Commission, and the Department of Defense

supported the design, programing, and uses

of the most sophisticated computer systems

in the world. In many cases, development

work funded by the Government was carried

out in university and industrial laboratories.

A few instances of Federal expertise at the

leading-edge of computer applications remain, for example in the scientific research

field. However, it appears that, in general,

the Federal Government is rapidly falling

behind the private sector in its use and management of up-to-date computing technology. If this observation is correct such a

lag would penalize Government operations

in two ways.

1. potentially lost opportunities to use the

newest technology to improve the efficiency and effectiveness of Government

programs, and

2. increased cost and decreased reliability

resulting from operating systems that

are becoming obsolete, from archaic

management procedures, and from burdensome procurement restrictions.

Cheaper computing hardware, the emergence of data communication-based systems, and new software techniques are

changing the way computers are used in industry. The next 10 years will see significant

movement in the private sector toward automating the flow of information in offices,

toward experimenting with new management structures based on high-volume data

communication, and toward automating

decision support systems for use by higher

management. To the extent that these applications fulfill their promise of improvement in both the quality and productivity

of management, the Federal Government

would be remiss in not making use of them

where appropriate.

Government, to a great extent, resembles

the service and information sectors of the

economy with respect to the role of information technology in making productivity improvements. Any significant productivity

improvements brought about by this technology would have to be examined in the

light of their possible effects on:

employment, particularly at the clerical

and lower management levels; and

requirements for training to upgrade or

reorient the skills of employees forced

to use information technology or displaced by its adoption.

.

Problems

A host of new demands for Government systems, such as that of the Social Security

recordkeeping requirements may arise, rang- Administration, due to population growth,

ing from draft registration to the possible ex- the increased complexity of the programs

pansion of Federal health-care benefits. In- that must be administered, and the demand

creased demands are being made on existing for higher productivity by the bureaucracy.

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

New information technology will help to provide the tools to meet these needs.

There are indications suggesting that the

Government is now experiencing severe difficulties managing the computer technology

it currently has in place. The General Accounting Office (GAO) reports, congressional hearings, the report from the recent

Presidential reorganization project, personal

testimony from Federal electronic data processing administrators, and OTA’S assessment of the National Crime Information

Center (NCIC) run by the Federal Bureau of

Investigation (FBI), all indicate that, for a

variety of reasons, the Federal Government

does not seem to be managing its computing

resources effectively.

A sampling of over 200 GAO reports on

electronic data processing (EDP) that have

been published over the last few years show

the following titles:

●

●

●

●

●

Federal Productivity Suffers Because

Word Processing Is Not Well Managed,

April 1979.

Problems Found With Government Acquisition and Use of Computers From

November 1965 to December 1977

March 1977.

Contracting for Computer Software Development—Serious Problems Require

Management Attention To Avoid

Wasting Additional Millions, November 1979.

Inadequacies in Data Processing Planning in the Department of Commerce,

May 1978. ,

IRS Can Better Plan For and Control

Its ADP Resources, June 1979.

The Federal data processing project of the

President’s reorganization project reported

in April 1979 that, while there was a clear

need for using advanced information technology, the Government was seriously mismanaging its existing data processing. The

OTA assessment of the FBI’s NCIC system

shows that it has been obsolete for several

years and is growing more costly and unreliable to operate. (A recently approved

upgrade is now being implemented. ) Other

studies have shown that the ratio of personnel to hardware costs at Federal installations

is nearly twice that of private industry.

Among the reasons proposed for these

problems are:

● Bureaucratic red tape: Computer technology is changing rapidly; however,

the rules governing the procurement

and management of automated data

systems are proliferating. Unless they

are written with technological farsightedness, they can restrict the modernization of an installation’s operations. The numbers shown in table 7,

which have been taken from a 1977 report of the Office of Management and

Budget (OMB), ’ illustrate the welter of

rules under which the Federal computing centers operate.

● Organizational inflexibility: Recent research has shown that modern information systems profoundly affect the deci-

‘Office of Management and Budget, Federal Data Processing Policies and Regula tion—Annotated Bibliography,

December 1978.

Table 7.—Policies and Regulations Concerning

Federal Data Processing

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

4 laws

3 Executive orders

3 Presidential memoranda

10 Office of Management and Budget circulars

12 Office of Telecommunication Policy circulars

3 Federal management circulars

3 Federal procurement regulations

3 Federal Property Management Regulations (FPMR’s)

16 FPMR bulletins

2 FPMR temporary regulations

6 National Communication System Guidance

Publications

60 Federal Information Processing Standards

Publications (FIPS Pubs)

11 Federal Telecommunications Standards (some

overlap with FIPS Pubs)

11 Policy letters and memoranda

2 Department of Justice Office of Legal Counsel

Opinions

3 Federal Communications Commission decisions

5 General Services Administration Management

Guidance Documents

SOURCE Off Ice of Management and Budget, 1977
Ch. 9—Government Management of Data Processing ● 91

sionmaking patterns in organizations.2

The research suggests that computerized information systems are particularly effective under special conditions;

these depend on the operational level

and support for the system. At higher

levels of organizations, information

systems are more subject to the politics

and conflicts of organizational life.

While at times these systems prove to

be effective, at other times they will be

unworkable because existing powerful

groups will not cooperate in systems

development and use. Experience in the

private sector likewise suggests that attempts to force major new information

systems into rigidly traditional and unreceptive management structures are

often doomed to failure.3 Yet, reorganizing a bureaucracy is a difficult and

highly political process.

Procurement delays: Federal EDP

managers complain that the procurement process is so complex, confusing,

and fraught with delay that by the time

a new systems concept is actually

realized in the installation of new hardware, the system is already approaching obsolescence. Estimates of delays in

the procurement process for some large

systems run as long as 6 years, long

enough for the desired technology to

become obsolete. Estimates do not include the further delays imposed by discussions within the executive branch or

Congress of the appropriateness of the

systems or of their possible social impacts.

Staffing problems: There has been some

concern expressed that Government

computer expertise itself has been

growing obsolete. In particular, the

Government has trouble competing

with private industry for highly tal2R. Kling and W. Scacchi, ‘*Computing as Social Action,

the Social Dynamics of Computing in Complex Organizations, ” Aduances in Computers, vol. 1 9 (New York:

Academic Press, 1980).

3Henry C. Lucas, V1’hy Information Sy.~tem.s Fail (New

York: Columbia University Press, 1975).

●

ented, and correspondingly expensive,

programing and systems analysis

talent.

Furthermore, although job-hopping

and staff turnover have been chronic

problems for private industry, this rotation also seems to produce a cadre of

very broadly experienced, expert, and

up-to-date programmers in the labor pool.

Not only do these people learn faster,

but as they change jobs they bring new

ideas and techniques into each data

processing center. Government programing staff seems to be more static,

moving less between agencies and

almost never between private industry

and the Government.

In addition, a principal drawing card

for talented programmers is the opportunity to work on state-of-the-art

systems. The job of maintaining a

decade-old operating system on an outof-date computer, even if very highly

paid, is unlikely to attract an experienced and talented programer. Thus,

the obsolescence of Federal systems

sets up a vicious circle-a disincentive

to the kind of people who could best

develop new systems.

Debates over social impacts: The installation of several large, new data processing systems has been delayed or, in

some cases, completely halted in the

face of congressional concerns about impacts these systems might have on constitutional rights and other societal

values such as privacy. Plans proposed

for integrated Federal data banks have

also occasioned public debate. Thus, it

is reasonable to assume that there will

be a great deal of social sensitivity and

distrust or at least wariness about major new data systems. This concern will

affect particularly those applications

that are designed to handle personal

data.

It may be that a more clearly articulated

set of social policy concerns with more concrete guidelines will aid Federal agencies to

better anticipate the questions of societal
92 . Computer-Based National Information Systems: Technology and Public Policy Issues

impacts before they arise. Furthermore, sys- these broader policy concerns, which can run

tern managers and designers working in counter to more narrow engineering design

these agencies need to be more sensitive to goals such as efficiency and reliability y.

Issues

There seems to be no doubt that several

major new data processing systems will be

needed by Federal agencies within this decade. Congress will, therefore, be faced with a

number of problems involving planning,

designing, procuring, and managing these

systems.

Some legislative attempts to rationalize

Federal EDP have been made. The most notable is the 1967 amendment, which is

known as the “Brooks Act, ” to the Federal

Property and Administrative Services Act.

This act set up authorities in the executive

branch to regulate agency procurement of

data processing equipment. The most recent

significant bill was H.R. 6410/S. 1411 passed

by Congress and signed into law December

11, 1980. This public law, known as the

Paperwork Reduction Act of 1980, establishes central oversight in OMB of the information policies and practices of the executive branch. Perhaps most important,

this act emphasizes the basic need for restructuring the way information resources

and supporting technologies are managed in

the Government. This represents a new approach by giving management of information resources similar importance to that traditionally assigned to managing financial

and personnel resources. Many issues and

questions need attention from this broader

perspective. For example:

● There is a need to better understand the

effects of large-scale information systems on the internal organization and

Congress and the public need to know

more about location of responsibility,

the quality of the decisions, the nature

of due process for clients affected by

those decisions, and the accountability

of the bureaucracy to Congress and to

higher-level policy makers in the executive branch. A better understanding

of the broader and longer term social

impacts of a massive automated bureaucracy is also needed.

Many questions are still unanswered.

Can there be both increased efficiency

and fairness in Federal data processing?

Are there inherent threats to the civil

liberties of the clients of agencies that

automate their decisionmaking? Will

there be more subtle effects on social

values and on the political attitudes of

citizens toward Government?

Some research on these topics, particularly on managerial effects, has

been done in the context of private sector organizations. A few investigators

have also started to look at local

government impacts.5

Some of these results maybe directly

applicable to Federal agencies; other

findings can only be suggestive. For example, research suggests that some

local agencies may use their information systems for political purposes

rather than to improve administrative

efficiency. 6

Single, centralized policyoriented information systems may not

management of Government agencies

and on decisionmaking in Federal agen- 5William Dutton and Kenneth Kraemer, “Management

Utilization of Computers in American Local Governments, ” cies.4

Communications o f the Association of Computing

Machinery, vol. 2, No. 1, March 1978, pp. 305-309.

‘Rob Kling, “Automated Welfare Client-Tracking and

Service Integration: The Political Economy of Computing, ”

‘K. Laudon, “Privacy and Federal Data Banks, ” Society, Communications of the Association of Computing MaJanuary/February 1980, pp. 50-56. chinery, vol. 21, No. 6, June 1978, pp. 484-493.
●

—

necessarily be more objective than their

manual counterparts (containing less

data); much may be gained by having

competing systems.7 While these and

other studies of private sector and local

government information systems may

not shed much light on Federal information systems, this existing body of empirical studies does provide a useful

starting place. 8 9 10 Careful similar

studies of Federal systems should be

undertaken, since these systems are

often large in scale, accountable to a

wider variety of interests, and managed

under somewhat different vendor and

civil service arrangements.

Little actual research has been done

on these broader policy issues, although

there is an indication of some activity

among analysts working in this field.

One possibility would be for some appropriate agency to be encouraged by

Congress to support research in the important areas of social impact. Such a

program could fund long-term investigations that look beyond the shortrange focus of most current policy

analysis. 11

c The process by which appropriate social

values and goals are reflected in system

design needs clarification. Major new

systems will need to be evaluated by

Congress for their effects on privacy,

security, constitutional rights, and

many other issues that are not normally

the concern of the designer or operator

of an information system.

. —.—

‘1/0}) Kling, “ Information !+y’stems in Public Policy Maki ng

: (’t)mputer Technology and organizational Arrangements, TciwI(~nlIn unim tions P[)licj’, VO1. 2, No. 1, March

1 !378, pp. 22-:32.

‘I)utton, and Kraemer, op. cit.

“R{)IJ Kling, “Social }\naljrses of Computing: Theoretical

[~(~rsp(~(’t i~es in flecent ~~mpirical Research, c’ompu ting

S{ir((’)i, tol, 12, No, 1, Itlarch 19H0, pp. 61-110.

‘

{

’ Kling and Scacchi, op. cit. pp. 250-327.

] See for example, HR. 4326, 96th Cong., to establish a

comm iss ion on the i replications of information technology in

education. A Iso see II. R, 8395 introduced by Rep. (Ieorge

Brown in the 96th [’ong., 2d sess. This bill would establish an

Institute for 1 nformation Polic> and Research to address national information polic?’ i%sues.

Ch. 9—Government Management of Data Processing ● 93

Four fundamental approaches are available to deal with social value questions:

1.

2.

3.

Congress could assess the potential social impacts of each new system design

that is proposed on a case-by-case basis.

There are several dangers inherent in

such an approach. Inconsistent policies

may be set for different systems and

different agencies (or even for different

versions of the same systems at different times); the evaluation process

can seriously delay procurements; and

because the system designer is not

aware of which issues will be deemed

important and which requirements are

likely to be placed on the system, the

design is nearly always subject to the

criticism that it is seriously deficient.

Congress could codify a social impact

policy concerning all Federal information processing systems. An appropriate executive branch agency could be

designated as responsible for seeing

that all new system designs are evaluated in relation to that policy.

The drawbacks would be the difficulty of developing such a policy in the

first place, and the loss of the ability to

evaluate each new system in light of its

own peculiar characteristics and the

specific mission of the operating

agency.

Congress could continue to examine

agency proposals system-by-system,

but would base its evaluation on a social

impact framework encompassing a set

of principles for the design and operation of Federal information systems.

This process has already been started

by the Privacy Act of 1974, which expressed congressional concern about

one specific aspect of Federal agency

recordkeeping practices, the effect on

the privacy rights of individual citizens.

4. Proposals for simplifying the procedures for purchasing data processing

equipment will probably be introduced

in Congress during this decade. It will

be necessary for Congress to balance

the need to speed up design and pro-
94 ● Computer-Based National Information Systems: Technology and Public Policy Issues

curement of Federal systems, against

the paramount requirements that tax

money be spent as effectively and as

equitably as possible and the necessity

to consider carefully the societal impacts of these systems.

Some opponents of large information systems welcome delays as useful impediments

to the installation of new information systems that could turn out to be unnecessary

or even harmful. However, if after careful

consideration Congress approves a particular information system, bureaucratic delay

could be viewed as disadvantageous, undermining the potential utility and performance

of the system and the effectiveness of the

relevant agency.
Society’s

Chapter 10

Dependence on

Information Systems
. Contents

Page

Introduction **. .*. ***. **, * * * e * . . *, . . . . . * . * . * * ., *, . . . . . . . . . . . . . . . 97

Failure **** *.** * * . . * * * . . . * * . . . . * . . * * * . . * . * . . . . . . . . . . . . . . . . . . . . . . 98

Issues ** *****   ** ** ***, , s * * * . * * * * * * * * * * * * . * * . . * *, *,.*.*... 100

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

Calculating Risk ● .*...*******.********,**...*.*****....*.....*. . 100

Assignment of Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........100

Management of Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........101

&
Chapter 10

Society’s Dependence on

Information Systems

Introduction

The nature of risk is being changed by

much of the new high technology on which

modern society depends—jumbo commercial

airlines, nuclear powerplants, oil supertankers, or large computer-based information systems. In general, because new technologies can be designed to operate more

reliably than the ones replaced, the risk that

any particular mechanism may fail has been

reduced. However, should an accidental or

deliberate disruption occur, its cost can be

much larger, even catastrophic. Furthermore, when society becomes highly dependent on the reliable functioning of single integrated technological systems or small collections of such systems, the possibility of a

“domino-like” collapse of several of the individual connected units could also be disastrous. The failure of the Northeast power

grid in 1965, which blacked out much of that

section of the United States including all of

New York City, is an example. ’

Integrated systems are often created by

information technology. There has been a

strong historical trend toward connecting

components over communication lines to

form complex distributed systems, while at

the same time computers have become

smaller and more dispersed. In OTA’s examination of future technology (see ch. 13), it

was concluded that this trend toward integration would continue, driven by the effort to make information systems more convenient and more efficient.

.—

‘Rob Kling, “Value Conflicts and Social Choice in Electronic Funds Transfer Systems Developments, Communica tion.$

of the A s.~ocia tion for (’ompu ting Machinery, vol. 21 No. 8,

August 1978, pp. 642-657.

When examining technologies such as

electronic funds transfer (EFT) systems,

widely available electronic mail service

(EMS), and other large extensively used information systems, the following should be

taken into consideration.

●

●

●

●

The ways in which public policy can

help to allocate and balance the risks

society may encounter from national information systems against the benefits

it may receive, under conditions where

failure rates appear to be relatively low

but potential losses may be high should

a failure occur.

The ability of society to retain the option to end its dependence on a particular information system if it has unanticipated undesirable effects; in other

words, to avoid the possibility of becoming “locked in” to the use of certain

information systems once they are installed.

The capability of providing alternatives

to persons or institutions choosing not

to accept perceived risks in a new information system.

The ways in which technology can be

utilized to reduce the risks, for example

by introducing additional system redundancy (alternative paths between

points in the system, distributed data

bases, backup computers). The risks inherent in U.S. dependence on a nationwide, interconnected telephone system

(which itself is rapidly being computerized) are mitigated to a degree by the

large number of switching centers and

parallel trunklines.

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

Failure

Large complex information systems contain millions of logical connections and are

controlled by programs that themselves can

be composed of millions of instructions. Consequently, it is difficult to calculate their

reliability and to predict the failure rate of

any particular part of the system, as well as

the effect of a failure on the operation of the

entire system. A further complication is that

when a major failure does occur, it is often

caused by a rare combination of multiple

breakdowns of components. It is currently

not possible to incorporate all of these probabilities into a single characterization of system reliability.

This failure problem is illustrated by a recent breakdown of the ARPANET, a nationwide packet switched network intended to be

and normally regarded as highly reliable.

●

●

●

The network’s builders recognized that

component failure is inevitable in any

system and designed the network to be

tolerant of such failures. The approach

taken was to design the network’s traffic control algorithms so as to isolate

each failure to the processor or other

system element in which the failure first

occurred.

The overall success of these algorithms

and the software that embodies them is

borne out by the rare occurrence of

failure conditions that affect any

significant portion of the network.

But a recent failure did occur in the traffic control software itself–the very

mechanism intended to minimize the

spread of failure. Bad data in one processor was rapidly and systematically

propagated throughout the network,

bringing traffic to a standstill. Under

normal conditions such propagation is

necessary and desirable to allow the

network to keep track of its current condition. Unfortunately, the propagation

of false data, like poison, proved fatal.

Thus, the network’s primary shield

against failure proved to be its Achilles

heel.

This example demonstrates how difficult

it is to design large and complex systems

which are also reliable. Nonetheless, in many

situations a distributed system such as

ARPANET may be much more reliable than

a centralized system of the same size, because of the distributed system’s potential

for isolating and therefore surviving local

failures without a total system breakdown.

Little data exist from which to calculate

failure probabilities because of the newness

of information technology and its low failure

rate. In addition, each system is uniquely

designed for its purpose; therefore very little

useful experience has been accumulated that

would be applicable to calculating the probability of the potential failure rate for large

complex systems in general.

The problem of estimating risks under

conditions characterized by an uncertain but

very low probability of failure and by a very

high potential cost of failure has stimulated

a burst of new research in risk analysis. The

National Science Foundation has initiated a

program of research that should contribute

to improving the ability to calculate more

accurately risks for large systems over the

long term.

In addition, attempts are being made to

design so-called “robust” systems. These

systems have very high reliability, can

diagnose failure, and in some cases can even

replace failed components by switching to

alternative ones. The message-switching

computers that are custom-designed for use

in the telephone network employ some of

these techniques to achieve very high reliability, as do on-board spacecraft computers

where long-term reliability is crucial.

It is difficult to carry out risk analysis for

integrated information systems for the following reasons:
Ch. 10—Society’s Dependence on Information Systems ● 99

●

●

●

●

Their complexity, which makes some

design errors inevitable but also makes

accurate estimations of system reliability very difficult.

The speed of computers, in which millions of transactions are processed

every minute, makes human monitoring

virtually impossible. Consequently, system failures can quickly drive the system to a worst-case collapse before any

human intervention can take place. This

criticism was made during the congressional debate on the antiballistic missile

system. It was argued that a system

malfunction could fire the missile before

any human intervention could detect

the error and cancel the action.

An automated national stock market

or centralized check clearing system

could also be subject to such catastrophes. Banks or brokerage houses

could be ruined in a matter of minutes,

long before it was discovered that the

system had failed. The potential victims

would be the owners of the failed system, individuals with accounts, correspondent organizations, and, were the

failure to cascade through other institutions, even all of society.

Centralization of data which occurs in

many large information systems and is

partly motivated by the higher security

possible with a centralized system.

Even if failure rates continue to be as

low as predicted, this concentration

would greatly increase the size of a

potential loss should the very rare event

occur.

Interconnection between systems increases their vulnerability to failure by

introducing another element, while at

the same time providing a connecting

path through which a failure at one

node can spread to others, as was the

case with the power blackout referred to

earlier.

A large, nationally networked information system may provide more day-

●

to-day security by supplying instant

backup to nodes that may fail. However, there may be also a greater risk

that the entire system will go down in

the event of an unlikely or unexpected

combination of events.

Societal dependence on the uninterrupted operation of large information

systems will increase along with potential societal loss from their failure. The

development of these systems is being

motivated by the need for assistance in

managing the increasingly complex activities of U.S. society and its organizations. These systems then become integral parts of the processes–central to

their operation–rather than merely

tools.

This evolution to dependency can be

seen already in the reliance of safe

public air transport on the continuous

operation of the computerized air traffic

control system. In the commercial sector, large stores and banks rely on the

smooth uninterrupted operation of their

centralized computer systems. Future

EMS and EFT systems will likely create similar societal dependencies much

larger in scale than current examples.

It is not hard to project into the 1980’s

and envision the potential damage that

could be caused by the failure or misuse of

such systems as they grow larger, more complex, and more centralized. Some of the risks

may be physical as in the air traffic control

example or with a computerized nuclear reactor safety system. Others may be in the form

of economic losses, such as the failure of an

automated check clearing system or a national automated securities market. Still

other risks may be social, as would occur if

the larger data systems such as the National

Crime Information Center or an EFT payment system were misused by the Government or by private concerns to exert undue

control over individuals.
100 ● Computer-Based National Information Systems: Technology and Public Policy Issues

Issues

Underlying all of these concerns is the

. realization that although the probability

that any catastrophic event will occur may

be low, the potential social cost of such an

event can be extremely high—even a threat

to national security. This problem of social

vulnerability is crucial to many issues that

Congress will be addressing relating to information systems.

Specific Systems and Threats

Congress is already confronting these

larger social vulnerability issues in the context of particular information systems:

●

●

●

The air traffic control system has

reportedly failed several times, leading

to pressures for a new improved system. Possible new systems are being assessed by OTA.2 An important but difficult question is the degree to which

any new system improves reliability.

Press reports have suggested that the

Defense Department’s WWMCCS*

command and control system is unreliable, particularly when fully loaded

under crisis conditions.3

An article in the Washington Post suggests that the defense communication

system is highly vulnerable, not only to

full-scale nuclear attack, but to sabotage by terrorist groups.4

This last instance is the social vulnerability issue carried to the extreme, the vulnerability of a U.S. defense communications

network to hostile attack. However, the line

demarcating information systems that are

vital to national security is difficult to draw,

‘U.S. Congress, Office of Technology Assessment, Assessment of the Airport and Air Traffic Control System, in

progress.

*An acronym for the World Wide Military Command and

Control System.

3William J. Broad, “Computers and the U.S. Military

Don’t Mix, ” Science, vol. 207, Mar. 14, 1980, pp. 1183-1187.

‘Joseph Albright, “The Message Gap in Our Crisis Network, ” Washington Post, Oct. 19, 1980, pp. Cl, C4.

for it may include major civilian domestic

systems.

Ever since Soviet interception of U.S.

domestic telecommunications was reported,

the executive branch has been working

toward securing civilian government communications. They have also been concerned

with the national security threats to domestic private communications, but the development of a policy has been slow and difficult due to the need to avoid substantial

Federal intrusion into the private sector.5

Events over the next decade, such as a

chilling of relations with foreign adversaries

or an increase in domestic terrorism, would

focus congressional attention on the vulnerability to attack of nonmilitary facilities

such as EFT, EMS, or civilian government

data systems.

Calculating Risk

Aside from the national security question,

however, Congress will need to consider the

societal risks inherent in new information

systems. The concern about risk will lead

Congress and other policymakers to search

for more flexible information technologies to

implement, whose failure will not be so

devastating to society. Such systems, if they

can be developed, may appear to be less efficient or to cost more in the short run, but

would reduce the overall vulnerability of

society to catastrophe.

Assignment of Risk

In deciding how to define an acceptable

risk, the extent to which American society as

a whole will or should accept responsibility

for losses incurred due to massive failures of

information systems must be taken into consideration.

‘G. Lipsound, Private and Public Defenses Against Soviet

Interception of U.S. Telecommunication: Probiem.~ and Policy Points (Cambridge, Mass.: Harvard University Center for

Information Policy Research, 1979).
Ch. 10—-Soc/ety’s Dependence on Information Systems ● 101

.

In the case of EFT, for example, the question might be whether the Government

should insure liability against a major

system collapse beyond the level currently

provided by the Federal Deposit Insurance

Corporation. A national automated securities market would raise similar problems.

When such losses have an extremely low

probability, the difficulties associated with

assigning risk can be easily put aside. The

implication is that the policy decisions will

be made on an ad hoc basis only after a

failure has occurred. However, the political

climate immediately after a major technological failure may not be amenable to making policy that would be sound over the long

term and applicable to new events.

Management of Risk

A case can be made that much current

Government regulation represents an attempt to manage risk in order to reduce

hazards from consumer products, from

drugs, from the workplace, or from the

natural environment.6 If national information systems create significant social risks,

and if Congress chooses to attempt to

mitigate those risks, several possible mechanisms or mixes of mechanisms are available

for consideration.

● Regulation: Direct management

through laws and administrative rules

is currently being questioned as an effective means to regulate risk. For example, direct regulation was rejected by

the Privacy Commission as an approach

to the privacy problem. However, in

specific sectors where the industry is

already federally regulated, such as

banking or securities exchange, Government may choose to directly set

policies for protecting information

systems.

The Government is establishing

standards for secure design of systems

~Da~id okrent, “(’omment on Societal ltisk, ” Sricncc), vol.

208, Apr. 25, 1980, pp. 372-:195,

used by Federal agencies. While these

standards do not apply directly to the

private sector, they could provide incentives for similar design, either by setting a favorable example or by establishing a minimum standard of practice

that the courts might recognize in liability suits.

Alternatives to regulations may also be

considered. Two that have been proposed

are:

1.

2.

Liability: Liability law is the chief risk

deterrent through the legal mechanisms

available, e.g., lawsuits.

Liability case law is very slow to

develop, depending as it does on an

accumulation of court decisions and

appeals.

The message sent to organizations

through court decisions can be vague

and difficult to interpret. Thus, an

unnecessarily conservative approach

may be inadvertently encouraged,

and promising socially desirable technological innovations may be precluded.

The courts can find it difficult to deal

with highly complex technical issues

in the context of litigation.

Liability law varies from State to

State, particularly in terms of the

ways in which negligence and nonnegligence are defined. This creates a

climate of uncertainty with respect to

how the law will be applied.

Insurance: While secondary to liability

law in importance, insurance is another

method of controlling risk by spreading

it over a large number of persons or

organizations. Its cost is an incentive to

the client to reduce risk. This is particularly true where there is a potential

for catastrophic loss. In such cases, insurance companies generally require an

extremely large deductible and/or impose limited liability ceilings. However,

any attempt to turn to insurance as a

mechanism to control risk must deal

with the following Problems:
102 ● Computer-Based National Information Systems: Technology and Public Policy Issues

● insurance can be discriminatory in

ways not deemed to be in the social

interest;

● by concentrating on minimizing loss

to the insured, broader social losses

are ignored or underrated; and

c when the cost of the insurance is not

a sufficient deterrent, it can actually

encourage persons or organizations

to assume risks that are not prudent.
Chapter 11

Constitutional Rights
Contents

.

Page

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... ....105

First Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. ... ... ....105

Fourth Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......,.....107

Justification for Data Collection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..107

Information as an Object of Search and Seizure .. .. .. .. .. .. ... ... ....108

Information Technology as a Tool for Search and Seizure .. .. ... ... ....109

Other Constitutional Issues

Managerial Due Process .

Information Collection. . .

● ✎☛☛☛☛☛ ● ☛☛✎✌✎✎☛ ✎✎☛✎☛☛✎✌ ● ✎✎☛☛☛✌✎ ✎☛✌☛☛☛✎✎ ✎ 110

● O*.*. ● 000...0 . . . . . . . . ● ..,.0.. . . . . . . . . . . 110

● ..*.** ● **.**** . . . . . . . . ..*.,..* .,*,*..* . 111

Social/Psychology-Based Applications . ............................111
Chapter 11

Constitutional Rights

Introduction

Little legal precedent exists, in many

cases, for applying constitutional law to the

issues raised by computer-based information

systems. As the courts begin to deal with the

novel issues raised by the application of computer technology, they will probably attempt to apply traditional concepts. In this

way, these new issues will become incorporated into existing legal precedent.

Legislative remedies may be called for

when the courts do not find constitutional

protections for threats to individual rights

created by unforeseen technological developments such as television cameras, electronic wiretapping, and computer data

banks. It is difficult to predict in advance

precisely which computer-raised constitutional issues will create major legislative

problems and which will be easily accommodated in the courts. Expert opinions vary

widely, and little legal research has been

done as yet.

The legal survey task of this study identified five areas of constitutional law that

may be affected by information systems.

These are:

first amendment rights, which guarantee freedom of religion, speech, the

press, peaceable assembly, and the

right to petition for redress of grievances;

fourth amendment rights, which guarantee against unreasonable search and

seizure by the Federal Government;

fifth amendment rights, which guarantee that a person may not be compelled

to be a witness against himself or be

deprived of life, liberty, or property

without due process of law;

sixth amendment rights, which guarantee the right of a speedy and public

trial; and

14th amendment rights, which guarantee that a State cannot deprive any person of life, liberty, or property without

due process of law nor deny any person

within its jurisdiction the equal protection of the laws.

First Amendment

The principal purpose of guaranteeing

freedom of speech is to ensure a free

marketplace of ideas. Courts have tended to

balance this freedom against other compelling social concerns, e.g., national security or

public safety. For example, there have been

a number of recent cases about the rights of

reporters to protect their sources. However,

certain characteristics of specific communication media affect how that goal is

achieved.

The printed page is the least regulated

communication medium. No Government interference in the content of published material is tolerated with the exception of some

fairly limited and still contested restrictions

in the areas of pornography, national security, libel, and trade practices. The relatively

low cost and ubiquity of printing technology

usually guarantees universal access to it for

those who have something to say.

The common carriers are more restricted.

Telephone and mail service are regulated

monopolies that control the huge capital and

institutional structures necessary to carry

messages in various forms. Nevertheless,

the communication capacity is very large.

Without regulation, the potentiality would

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

exist that an operator might restrict a person’s access to the medium. Regulation is

therefore oriented toward assuring universal

access by requiring carriers to provide uniform service to all at regulated prices. As

with print, there are no limitations on message content aside from certain restrictions

on pornography and other illegal activities.

The broadcast medium has a limited

number of owners and operators as well as a

limited capacity. Regulation must take into

account the existence of these inherent restrictions on its use. Consequently, the

thrust of the regulation is not the right of all

to speak, but rather the right of all to be exposed to a “free market in ideas. ” Under this

interpretation, the Federal Communications

Commission (FCC) has actively specified

standards for broadcast content in such requirements as the “fairness” doctrine.

Cable services share both broadcast and

common carrier characteristics, since their

capacity is still limited but much greater

than that of broadcast services. FCC, in its

early licensing policy, required cable stations

to provide public access channels that would

be available to any potential user. (This requirement, among others, was rendered

moot by a Supreme Court decision restricting FCC’s authority to regulate in this area. )1

If cable providers have local monopolies over

the delivery of information services to homes

and businesses, there is a public interest in

preventing the cable provider from exercising religious, political, or artistic censorship

over the content.

Since the nature of first amendment protections is so strongly dependent on the

characteristics of the media, it is reasonable

to expect that new information services of

the future will force the development of new

types of policy. Some of the significant characteristics that may determine these policies

are:

‘Federal (’communications Commission v. Midwest Video,

440 U.S. 689, 59 L.E. D. 2d 693, 99 Supreme Court 1435

(1979).

Restricted ownership and control of

physical facilities. Very high capital

investments are required to install

physical communication channels into

homes and businesses. Even if competition in providing information services is

encouraged, it is likely that there will be

relatively few suppliers of facilities, *

leaving the control over the physical

communication lines to a few large organizations.

Much greater capacity. The capacity of

future communication lines into homes

and businesses will be much greater

than the current telephone and broadcast facilities. Cable and direct satellite

broadcast lines will provide more channels and greater information capacity

per channel. In addition, communication from the home back to the sender

will be possible. Some limited implementations of two-way capability

already exist, and expansion is likely

over the next decade.

More producers. The larger number of

communication channels into the home

coupled with low-cost national distribution systems are expected to lead to a

proliferation of information producers

and distributors beyond the current

limited number of television networks.** Services such as those provided by the new “super stations” that

operate nationwide over local cable networks, pay television networks such as

Home Box Office, and upcoming direct

satellite broadcast stations represent

only the leading edge of such a trend in

the entertainment area. In data communications, MicroNet and The Source

are new services designed to link owners of personal computers with each

*The actual number of facility suppliers is growing (e.g.,

specialized common carriers and satellite carriers who supply

a significant portion of their own facilities). However, this

growth is much slower than that of the information producers.

**Th e new cable TV systems being built in the United

States have up to 50 TV channels; some will have as many as

100 TV channels.
Ch. 17—Constitutional Rights 107

●

other and with larger computers, data

banks, and information processing services over a nationwide network.

Low-cost access. Network broadcasters

pay thousands of dollars per minute to

generate and transmit information. The

new information and communication

technology will substantially reduce the

cost of distributing information. Therefore, it will be easier to enter the market, and a wider variety of information

services will be made available.

The principal first amendment issue facing the Government will be to encourage the

maximum freedom of expression—fostering

the “marketplace of ideas’’—in new electronic media that have been tightly regulated in more traditional forms. Factors that

could work against this goal include pressures for Government censorship, monopoly

in the production and distribution of certain

kinds of programs and services, and excessive control over content by the operator or

operators of the physical communication

channels.

Another issue may serve to link first

amendment rights with privacy concerns.

Extensive data collection and possibly

surveillance by Government and private

organizations could, in fact, suppress or

“chill” freedoms of speech, assembly, and

even religion by the implicit threats contained in such collection or surveillance. z These

threats might be directed as much at the

“listener” as the ‘‘speaker. Clearly,

automated information delivery systems

possess a much greater capability of recording, storing, and analyzing in detail the flow

of information from all sources into homes

than do manual systems such as bookstores,

newspapers, and the like.

As a consequence, consideration needs to

be given to the distinction between information that is regarded by people to be private

in nature and that which is public. Such a

distinction may depend on whether the use

of the information favors or is detrimental to

the interests of an individual. For example,

one does not usually attempt to keep secret

the titles of books borrowed from a public

library. However, an accurate profile of an

individual’s interests and attitudes could be

provided by a complete dossier on that person’s reading habits. Since computer technology has the potential capability of assembling such data bases, it may necessitate

creating new definitions of the boundary between public and private information.

—.—

‘Sam J. Ervin, “The First Amendment: A I.iving Thought

in the Computer Age, Columbia Human Rights Rellieu’, vol.

4, No. 1, 1972, pp. 13-47.

Fourth Amendment

The fourth amendment protects the per- 2. the search and seizure of information

sons, houses, papers, and effects of in- per seas personal property, particularly

dividuals against unreasonable searches and in electronic form; and

seizures by the Federal Government. The 3. the use of automated information sysstudy identified three significant areas in terns as a tool for search and seizure

which new computer and communication operations.

systems may affect the interpretation and

application of the fourth amendment. Justification for Data Collection

1

Criminal justice agencies have traditionthe use of personal and statistical data ally kept files that form the basis of their incontained in automated information vestigations. Depending on the system desystems as a justification for search sign, however, automation can change the

and seizure; nature of this recordkeeping in several ways:
108 . Computer-Based National Information Systems: Technology and Public Policy Issues

●

●

●

●

●

●

there are more individuals as data subjects;

there are more data per individual;

there is more centralization and correlation of diverse data sources;

there is wider access to the data by

more persons;

there is faster access to the data; and

there is more efficient remote access to

the data.

Using the technology to the fullest capacity, it would be possible within the next

decade for a policeman to obtain instantly a

complete identification and dossier on an individual stopped in the street. As criminal

justice information systems approach this

capability, courts will become more interested in questions such as “reasonable

cause” for such police actions as stopping

and searching an individual. There is also the

possibility of using statistical data as a basis

for establishing probable cause.

In their concern, courts will probably look

at issues of data quality. An erroneous

record in a local manual file could cause an

individual some distress, but an erroneous or

incomplete record in a large, automated system with national or regional access could

lead to more serious compromise of individual rights unless the record was promptly

corrected. * This consideration combined

with other related reasons could motivate

courts to mandate that stringent data quality requirements must be met by automated

systems before information from them could

be used as reasonable cause for criminal

justice actions.** In theory, checking and

correcting records could be done more quickly with an automated system.

*In addition to the issues arising from the protections

guaranteed by the fourth amendment, if access to the system

were loosely controlled, and data used for purposes other

than criminal justice such as employment or credit, serious

harm could result.

* *The issue of data quality is explored in more detail in the

OTA study on NCIC/CCH, in progress.

Information as an Object of

Search and Seizure

The same information and information

technology on which most institutions and

people in this country increasingly depend

for the conduct of their everyday lives are

also becoming of greater importance to investigations conducted by the criminal justice system. Files, ledgers, correspondence,

and address books have always been the objects of police searches in certain types of

crimes. The criminal justice system will increasingly have to deal with their much more

extensive computer equivalents, which may

well raise new fourth amendment questions.

Two trends serve to increase the exposure

of persons to searches. The first is that information previously unrecorded in any form

will become collectable in computer data

banks; electronic mail and electronic point of

sale systems, for example, collect and store

more data than the systems they replaced.

The second trend is that data previously in

the hands of individuals are now collected

and stored by third parties, throwing the

ownership of such data into question.

In a recent case,* the Supreme Court ruled

that an individual’s bank records belonged

to the bank and were not protected constitutionally as his or her personal property. One

basis for this ruling was that the use of a

bank account was a voluntary action. Yet, it

is questionable whether future participation

in a computerized society can be construed

to be voluntary if the alternative is to forgo

all services necessary to live comfortably as

a member of that society. Extensions of such

reasoning could leave only a hollow shell of

fourth amendment protection for personal

records, while eroding any substantive effective barriers against Government intrusion.

As this happens, Congress will be asked to

reestablish these protections legislatively.

In the above cited case, a congressional

act** addressed the problem of protecting

*United States v. Miller, 425 U.S. 435 (1976).

**The Right to Financial Privacy Act (12 U.S. C. 340).
Ch. 17—Constitutional Rights ● 1 0 9

personal records held by financial institutions from access by the Federal Government.

The search and seizure of computerized

records will probably present courts and

legislatures with a number of problems in

balancing the needs of law enforcement with

fourth amendment protections. For example:

● When identifying records as objects of

search and seizure, traditional standards that were reasonably effective with

written documents may not apply when

the information sought is buried in a

very large, or even geographically distributed, computer data file.

● In its original or primary form, computer data is unreadable by human beings, Thus, seized evidence may be in a

primary form, such as magnetic tape or

disk, or it may be in a secondary form,

such as printouts or charts. The status

of this type of evidence may be contestable, particularly if a law enforcement agency is required to perform sophisticated file manipulation in order to

pull out the particular information it is

trying to introduce as evidence.

● If the information is in coded form (encrypted) and the key to its decoding

(decryption) is only in the head of the

suspect, fifth amendment protections

may allow that person to withhold the

encryption/decryption key or the encryption algorithm. Similar problems

exist even short of encryption. Information can be hidden in a large data bank

in such ways that it would be nearly

impossible to find without knowing its

precise location.

It is expected that the normal evolution of

law in the courts will be able to deal with

many of these problems as they occur. However, as the Miller case illustrates, the logical

extension of legal principles into the information age can on occasion seriously alter

the balance of power between individuals

and and government, threatening protections included in the U.S. Constitution and Bill of

Rights. In such cases, a legislative remedy

will become necessary,

Information Technology as a Tool

for Search and Seizure

Despite the difficulties of collating information that is dispersed and buried in

very large geographically distributed computer files, national information systems

may provide mechanisms for surveillance

that penetrate more deeply into an individual’s privacy than was previously possible.

In determining when fourth amendment

protections apply, law enforcement distinguishes between ‘‘surveillance’ and

‘‘search and seizure. There is no violation of

this protection in observing an individual’s

daily public activity. It is the actual search

of a person, a person’s premises, or the seizure of personal records that requires warrants.

Information technology blurs the line between public and private activity. A nonelectronic mail cover requires approval by the

Postal Inspection Service but not a search

warrant because only the outside of an

envelope is examined. In an electronic mail

system, however, no distinction may exist

between the “outside” (or address) and the

“inside’ (or contents) of a message.

Therefore, it maybe difficult to distinguish a

mail cover from a wiretap, which would require a warrant issued by a court upon probable cause, unless some form of coding could

act to “seal” an electronic message as an

envelope seals a physical one.

Similarly, the observation of shopping

habits by following a person from store to

store is surveillance. However, the use of an

electronic funds transfer system to gather

the same type of information would be far

more intrusive, since much more data, some

of it of a highly personal nature, could be collected in secret. The question is whether

such transactions are to be considered public

or private behavior.
110 Computer-Based National Information Systems: Technology and Public Policy Issues

The telephone created the possibility of

wiretapping, which has stimulated numerous debates balancing the needs of law enforcement against those of individual privacy and fourth amendment protection. The

courts and Congress have been struggling

for some time with interpretations of the

fourth amendment in terms of wiretapping.

Information systems that provide such services as electronic mail and electronic funds

transfer will likely provoke similar debates

in Congress.

There is no doubt that access to computerized information could assist law enforcement in detecting crime and in prosecuting offenders. Consequently, the benefits

afforded criminal justice will be a compelling

argument. But no less compelling will be

arguments citing the potential police-state

dangers of widespread uncontrolled information surveillance of individuals.

This threat may become even more dangerous, since the surveillance of an automated information system can itself be

automated, permitting an agency to keep

tabs on large numbers of individuals efficiently. Ultimately, the information technology would permit both the tools and the opportunity for widespread surveillance of

most of society. At present, the sizable

amount of manpower needed to physically

observe a person over a period of time acts as

a check on such large-scale surveillance.

Finally, there may be a point beyond

which a collection of comprehensive information about an individual, although comprised

completely of information in the public domain, may assume the characteristics of private information. An individual’s concept of

private v. public information depends in part

on the perception of its completeness and the

ways it could be used against him/her.

Other Constitutional Issues

This study has identified several ways in

which information systems are posing challenges to interpretations of the fifth, sixth,

and by extension to States, the 14th amendments. (See beginning of this chapter for

descriptions of these amendments.)

Managerial Due Process

More and more individuals are receiving

an increased number of benefits and services

from the Government. Information systems

have become an indispensable tool for dealing with this growing workload (see ch. 8). To

the extent that access to these services in a

timely and fair way is a constitutional “due

process” concern, the effect of information

systems will be to increase scrutiny by the

courts and by Congress of the “fairness” of

the very large bureaucratic systems that will

become established in order to operate service programs.3

‘J. I.. Mashaw, “’I’he Management Side of Due Process, ”

(’ornell I.a(i Rv[ie/i, ,June 1974, pp. 772-824.

The following questions about an administrative information system are likely to be

of particular interest.

Whether the information system provides for making timely decisions.

While information technology can potentially speed bureaucratic processes, ,

their implementation can often have the

opposite effect.4

Whether the information in the system

is accurate and timely enough to ensure

“fair” decisions. This question is similar to that of “reasonable cause’ raised

in the criminal justice discussion above.

Whether there are subtle biases “built

in” to the automated system that are invisible to the system operators and

agency administrators because they are

embedded in the code of the computer.

Very large systems that “mass produce” decisions in such areas as health

‘“DC Youth CETA Jobs Program Still Plagued by Delays

in Pay, ” W’a.shirzgton Po.st, ,July 27, 1980, sec. 8, p. 1, co]. 1.
—

Ch. 11—Constitutional Rights ● 111

benefits, student loans, or tax returns

may react quickly to what the computer

recognizes as “normal” applications,

but reject “unusual” claims. If, as a

consequence, clients are subjected to an

unacceptable amount of hassle and delay, the definition of “normal” used by

the computer may become subject to

due process challenge.

Information Collection

The increased recordkeeping and data collection requirements imposed by the Government on organizations and individuals

was one of the trends identified in this study.

The quantity of information that individuals

and organizations now must provide to the

Government–either mandatorily (e.g., for

census, tax, or regulatory purposes), in order

to receive benefits (e.g., loan guarantees or

medical payments), or to justify management decisions—is already extensive and

growing larger.

There may be a threat to fifth amendment

protections stemming from the use of personal or corporate computer data that have

been collected by the Government for one

purpose as evidentiary material in unrelated

criminal or regulatory cases.

Social/Psychology-BaSed

Application s

In addition to the straightforward uses of

information systems to collect data and

automate decisions, there are a number of

new computer applications that use analytical techniques being developed in social

psychology. The actual effectiveness of

these techniques, which purport to predict

and analyze human behavior based on the

statistical analysis of information about individuals, is still being debated. Social scientists anticipate a steady improvement in the

ability to predict future social behavior

based on the analysis of seemingly unrelated

personal characteristics or of the results

from batteries of tests. If these capabilities

improve as expected, some serious due process questions could be raised by their use in

the criminal justice system. Three particular

applications already appear to pose problems.

1.

2.

Jury selection: A small industry has

grown up around the use of computerized dossiers of potential jurors along

with computer models for predicting

juror behavior. At this time, the technology is very expensive and its value

is controversial. While some defense

lawyers have claimed success owing in

part to the use of these systems, it is

hard to prove conclusively that the outcome of a particular trial was in any

way due to specific juror selection.

However, future computer technology will make this application cheap,

and far more personal data about potential jurors will be available, legally or illegally. Furthermore, there is a sufficiently sound social scientific basis

underlying this type of use to suggest

that predictive techniques will be likely

to improve in effectiveness. If so, the

entire concept of an “impartial” jury as

required by the sixth amendment may

be challenged.5

Lie detectors: Lie detecting technology

has already raised many difficult problems for Congress and the courts.

Computer-based technology will add a

new dimension to these still unresolved

issues. So called “voice stress” analyzers are being manufactured and marketed for relatively low prices. This

type of lie detector, which analyzes the

degree of stress in a speaker’s voice,

depends on the assumption that measurable stress indicators appear when a

lie is being told.

Unlike older lie detector technology

based on the polygraph, voice stress

devices can be used without the cooperation or even knowledge of the sub-

‘John I,. M’anarnaker, “Computer and Scientific Jury Selection: A Calculated Risk, ” Lrni(IerSitJof l)etroit .Journal of

Llrhan l,a~,, ~,{)]. ~~, winter 1978, pp. 345-370.
112 ● Computer-Based National Information Systems: Technology and Public Policy Issues

3.

ject. This’ single difference puts the use

of lie detectors into an entirely new

realm of fifth amendment problems, as

well as opening up more generally new

problems of social interaction in such

areas as employer-employee relationships.

There are three distinct problems to

be addressed: the effectiveness of such

technology, the ways in which it is used

by Government agencies and by police,

and its use by employers, reporters and

others for whom it would be both a tool

for their work and a possible means of

abusing individual rights to privacy.

Predicting criminal behavior: Much research has been done on the application

of computer-based social science and

statistical models to files of personal

data and the results of psychological

tests, in order to predict behavior.

Techniques are being studied for detecting tendencies toward juvenile delinquency, drunken driving, or violent

antisocial behavior, and for security

checks by the Government. Conceivably, such research could be applicable

not only to criminal justice problems,

but also to such tasks as approving

credit, determining insurability, or hiring and promoting employees.

As social scientists improve this predictive capability, important questions

of fifth and 14th amendment rights will

be raised. Essentially, individuals may

be denied rights, privileges, and benefits based, not on past performance,

but on a prediction of future tendencies.

Courts will be examining these predictive models very carefully for their accuracy, relevance, and fairness. They

will also be addressing the fundamental

question of the appropriateness of these

models and their potential for discrimination.

The problem will be to establish

proper boundaries. Important decisions

have often been based on estimates of

an individual’s future performance. An

employee who does well in one job

might be expected to perform equally

well when promoted. On the other hand,

society cannot imprison a person who a

computer model predicts may someday

rob a bank. But should that knowledge

be “reasonable cause” to monitor such a

person closely or deny employment?

New information system applications

will increase the emphasis on drawing

clear boundaries between what ways of

using them are and are not acceptable.

Particularly difficult equity issues will

be raised if the results of such predictive models were to discriminate among

groups that have experienced discrimination historically.
Chapter 12

Regulatory and Other Issues
Contents

Page

Regulatory Boundaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........115

Computer Crime . . . . . . . . . . . . . . . . . . . . . 0 . .00...... .. ... .O. O. OO.OOO ● 116

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

Information Gap ● .**.*.** ● ********* ● ********* ● ********* ● *****.*** 119

Computer Software Protection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ....120

TABLE

Table No. Page

8. States Passing or Considering Computer Crime Legislation. . .........117

.
Chapter 12

Regulatory and Other Issues

Regulatory Boundaries

As computer-based information systems

evolve, they challenge traditional concepts

of boundaries—physical or social—that are

reflected in the law and regulatory policy.

The integration of computer and communication technologies form systems that cross

boundaries between nations, States, and

organizations. The issue of transborder data

flow discussed below exemplifies the kinds

of international problems created by such

integration. Others include the following:

● Interstate con flict.” When States have

conflicting laws involving information

or information processing, for example,

property tax laws that cover computer

data bases, an integrated data system

that exists in a number of different

States can raise difficult questions of

legal jurisdiction.

Furthermore, some States may become data havens because they have

weaker laws. * Computer networks also

allow State-regulated services such as

banking to be offered across State

borders, thus challenging traditional attitudes toward single State banking.

Telephone bill payer accounts, for example, can be used across State boundaries.

c Federalism. ” Linking Federal data systems with local systems complicates

jurisdictional problems even further.

The Federal Bureau of Investigation’s

National Crime Information Center

(NCIC) is an example where the traditional autonomy of local and State criminal justice organizations has complicated the Federalism issue (see the

OTA assessment of NCIC/CCH, in pro-

*A system operator could maintain the computer and data

base in a State with a lenient legal environment, and access it

by a terminal in a State with stricter laws

●

gress). Similar problems could also arise

by linking together Federal and State

systems that contain data concerning

such matters as taxation, welfare,

education, medical care, and drug

abuse.

Antitrust: The economics of large integrated data systems, coupled with the

potential for increased convenience to

the customer, may push service providers to use shared facilities for banking, transportation scheduling, reservation systems, and so on. The Department of Justice and other regulators

will be interested in whether such

shared facilities create monopolistic

barriers to new entrants or are mechanisms for control of the market, or

whether they encourage competition by

reducing the cost of access for smaller

firms.

Information technology is changing form

so fast that it is tending to outstrip the

working definitions of devices and services

that serve as the basis for law and regulation. These definitional problems relate both

to the technology itself, and to the products

and services that depend on it.

Computers or communication: The best

known example is the continuing attempt by the Federal Communications

Commission to establish what services

and what technologies are already

‘‘communications, thus regulated, and

what are “computer” services and technologies, thus not regulatable. Their

second inquiry on these questions,

which began in 1976, only recently

resulted in an opinion’ that is now under

...—

‘Second (?omputer Inquirjr I)ocket No. 20828, final decision

adopted Apr. 7, 1980, N’(’ 80-189, and reported as 77 F’(7C 2d

384 ( 19801. See also the hlemorandum opinion and order,

adopted oct. 28, 1980, [’CC HO-62H.

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

●

●

court challenge. Even if the definition is

accepted, there is no reason to believe

that the problem has been permanently

resolved. The general trend toward deregulation of all technology and services, however, may render the question

less critical.

Branch banking: Many States have

laws that either prohibit or tightly

regulate branch banks. An issue that

has been debated considerably is

whether the automated extensions of

banking (e.g. automatic teller machines

(ATMs) or pay-by-phone services) constitute “branches” in the usual meaning

of the law. Since ATMs and telephone

service can be dispersed widely as well

as cross borders, significant issues

centering on antitrust and interstate

banking rest on the way in which a

branch is defined (see the OTA assessment of electronic funds transfers, in

progress).

The status of electronic mail: Electronic

data transmission has opened a major

policy question about the definition of

mail. As with the computer/communication issue above, this definition is

significant because it places a class of

services under one or another set of

regulations. Unlike many other countries that have combined postal and

telecommunication services under one

national agency, the United States has

pursued completely different approaches to regulating each service

category. Electronic mail, in its various

forms, provides a new service with

features of both manual delivery and

telecommunication, and may pose new

and difficult regulatory questions (see

the OTA assessment of the role of the

Postal Service in electronic mail, in progress).

Bank information services: Some very

large banks have developed elaborate

data processing hardware and software

to support their operations. They have

found that the sale of these products

and information services to other

smaller banks can be a profitable enterprise. In their view, it is a natural extension of their banking services. The service bureau industry, which sells access

to computers and programs, does not

agree. It contends that banks are using

their enormous capital resources to

enter an entirely new, unrelated field,

and should not be allowed to do so

under laws that strictly regulate the

proper activities of banks. ’ The outcome may hinge on whether these new

information services constitute banking

in a sense compatible with law.

“’Citibank: A Rising Giant in Computer Services, ” Business Week, Aug. 4, 1980, pp. 54-56.

Computer Crime

The changing nature of crime in our in- ●

formation society creates problems in detecting and prosecuting crimes against information systems.3

● New types of abuses occur for which ●

there are no appropriate laws.

Traditional definitions, for instance of

theft, may be inapplicable when information is the object of the criminal

activity.

Procuring evidence in information

crimes can complicate or stop prosecution.

‘Susan H, Nvcum. The Criminal Luu Ast)ects of Computer

Abuse: F’edera[Criminal Code and The Cn”rninal L)UUI Aspects

of Compu ter A buse: State Penal Lau’s, Stanford Research Institute, 1976.

It may be that these problems will be

temporary, and that the legal system will

shortly be able to accommodate itself to

these types of crimes. It has been suggested,
Ch. 12—Regulatory and Other Issues ● 117

however, that the inherent nature of information and computer crimes mandates

new laws.

Congress has recently considered two bills

that address computer crime. The Senate bill

would make it a Federal crime to use computers as tools for criminal assault or as its

object. * The House** addressed the problem of protecting the providers of in-house

information services, in particular cable and

broadcast entertainment companies such as

Home Box Office, from what is called “pirating. “***

4 The information industry feels

that unless governmental sanctions are used

to protect its products and services, there

will be little incentive to provide them. The

radio hobbyists, who are among the major

“pirates,” counter that to date practically no

technological safeguards are used by off-theair pay TV and cable TV, and that reasonable use of more secure technology would

safeguard these signals without having to

legislate a new class of criminals into existence,

Although neither bill was passed by the

96th Congress, the problems that motivated

them remain. It is likely that similar legislation will be introduced in the 97th Congress.

Computer crime laws have already been

passed by 10 States, and at least another 5

have bills pending’ (see table 8).

With the support of the Federal Government, researchers are exploring the nature of

computer crime, the methods used and the

types and motives of criminals.’ Even without new laws it is of particular importance to

Table 8.—States Passing or Considering

Computer Crime Legislation

—

Passed

Arizona . . . . . . . . . . . ., October 1978

California . . . . ... . . . . . . . . ., . January 1980

Colorado. ., .“. . . . . . . . . . . . . . . . . . . July 1979

Florida ... . . . . . . . . . ., . . August 1978

Hawaii. ... ... ... ., . . (a)

Illinois. . . . . . . . . . . . . . . . . . . . . . September 1979

Massachusetts . . . . . . ., ., ... (a)

Michigan. . ... . . . . . . . ., March 1980

Missouri . . . . . . (a)

New Mexico . . . . . . . . . . . . . . . . . . . . ., ., April 1979

North Carolina . . . . . . . . . . . . June 1980

Pennsylvania . . . . . . . ... . . . . . . . (a)

Rhode Island ... . . . . . . . . . . (a)

Utah. ., . . . . . . . . . . . . . May 1979

a

Legislation Pending

SOURCE Computer B usiness Equipment Manufacturers A ssociation, State Legislation Status Report 1980

inform the staffs of Federal and local law enforcement and criminal justice agencies

about the impact of this new type of criminal

activity on their work.7

To date, studies of computer crime and

computer abuse have emphasized the acts of

an individual or group of individuals against

an organization. Some observers have noted,

however, that the computer can also be used

by organizations to take advantage of customers or clients. a Customers of organizations using electronic billing, funds transfer,

or calculating aids (e.g., supermarket scanners) may simply be defrauded. Furthermore, computer systems are used for making

many decisions that affect people’s lives,

from political apportionment to setting

pollution standards and assessing the effectiveness and hazards of a new drug. Therefore, there will likely be some temptation for

various interests to misuse the systems they

run, for their own purposes.

*S. 240.

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

*** pirating is stealing the signal and decoding it, and is

easy to do with current technology.

“’The Piracy Danger to Subscription TV, ” Business W’eek,

Sept. 29, 1980, pp. 44.

‘Computer and Business Equipment Manufacturing Asso- ‘Department of Justice, (’ompu ter (’n”me: Cn”minal ,Justice

ciation, “First State I,egislation Status Report, ” Washing- Resource Manual, 1979.

ton, D. C., 1980. “Rob Kling, “Computer Abuse and Computer Crime as

‘Dorm B, Parker, (’rime b)’ Computer, Charles Scribners organizational Activities, ” Computers and I,au Journal,

Series, New York, 1976. spring 1980, pp. 403-427.
118 . Computer-Based National Information Systems Technology and Public Policy Issues

Transborder Data F1OW

During the past several years, international attention has been focused on a collection of issues referred to as transborder data

flow. These diverse issues have a common

origin in the increased communication of

data across national boundaries.’ In the developed world, they have crystallized around

the proliferation of national privacy laws

that usually specify the treatment of personal data in domestic systems, and also set

standards for the transfer of such data

across national boundaries. 10 Several potential problems have emerged that would act

to constrain the international flow of information.

●

●

●

Different and conflicting laws could

make the operation of distributed computer systems by large multinational

corporations difficult if not impossible.

Third-party organizations providing

computer services across national

borders could be inhibited from competing with similar firms operating

within countries.

The extension of privacy protection to

the concept of legal persons such as corporations could vastly expand the types

of information controlled, by restrictions placed on transmission over national boundaries.

Some efforts are underway to reconcile

these various constraints. The Ministers of

the Council of Europe have approved model

legislation that would provide guidelines for

national privacy laws.11 However, the United

States is not a member of the Council, and

even more significantly, the U.S. approach

to privacy law does not fit the Council model.

Thus, from the U.S. perspective the Council

approach does not provide a solution.

The Organization for Economic Cooperation and Development has developed a voluntary agreement for its member states that

would be more flexible.12 The initial enthusiasm for a third approach—an international treaty on information flow—appears

to have been dampened by the difficulties in

getting even a general voluntary agreement.

In general, the U.S. position on this issue

has been to favor the free flow of information

across borders, and to view the European

privacy efforts as principally a disguise for

protectionist control of international commercial data processing. Some Europeans

maintain that their actions derive principally

from their deep concerns about privacy,

pointing to historical abuse by totalitarian

nations of government and private record

systems.

Another aspect of the transborder data

flow issue is the concern by the Third World

countries that control over information and

information flow is a form of international

power exerted by the Western nations. This

attitude was manifested both in negotiations

at the World Administrative Radio Conference14 and in proposals in the United Nations

Educational, Scientific, and Cultural Organization (UNESCO) for a “New Information

Order. ”

‘R. Turn (cd.), Transborder Da ta Flouts, report ot the American Federation of Information Processing Societies, Panel

on Transborder Data Flow, 1979. “

‘“Department of Commerce, Selected I’oreign National

Data Protection Laus and Bills, Office of Telecommunication, special publication 78-19, 1978.

‘

iCouncil of Ministers of the Council of Europe, “Council of

Europe Convention for the Protection of Individuals With

Regard to Automatic Processing of Personal Data, ” approved September 1980.

‘-’Council of the Organization for Economic Cooperation

and Development, Recommend tion of the Council C’oncem -

ing Guideline.q Go{ !eming the Protection of Pn”l’ac?f and

Transborder F1OUI.S of Personal []ata, adopted Sept. 23, 1980.

1‘Department of State, Bureau of Oceans and International

Environment and Scientific Affairs, Selected Papers on International Policy Implications of Cornpu ters and Adoanced

Telecommunications Svsterns, January 1979.

“See U.S. Congress, Office of Technology Assessment, Assessment of Radio Frequenc)! U.~e and Management Impacts

From the World Administrative Radio {’conference of 1979, in

progress.
Ch. 12—Regulatory and Other Issues ● 119

The concerns that have been expressed goals of the various nations as expressed in

are not just focused on computer systems. their negotiations over international inThey also cover such topics as international formation policy will undoubtedly shape the

news-gathering, access to satellite commu- laws and regulations under which internanication, the spilling of broadcasts over tional data systems will be operated in the

borders, and the exchange of scientific data. future.

However, the fundamental attitudes and

Information Gap

Some observers have suggested that the

advent of information technology will widen

the gulf between the haves and the havenots in society. This view is based on relative

differences in what might be called “information literacy, ” the ability to use information

technology to cope with everyday life.

The technology itself is potentially highly

flexible. Information systems can be designed to make the use of devices and services far easier than before, for example by

providing access to people with language

problems and physical handicaps. Research

and development (R&D) in such subjects as

computer speech, speech understanding, and

pictorial display will continue to improve the

potential accessibility of information technology.

Whether these capabilities will be used by

a system designer is a different question.

Making a computer system accessible often

imposes added costs for hardware or for

more computation. Therefore a concern for

efficiency or economy, or the system designer’s biases or ignorance, can result in an information system with unequal accessibility

built into it. ”

Should such an information gap develop,

it could affect the citizenry in areas such as:

● Employment: As automation penetrates the workplace—both manufac-

‘‘>hlilton R. #’essel, h’r~eciorn “.s R{ige Th~ {’omput~r Threat

to .$ociet~’ ( Reading, \lass.: Addison-\t’esley Publishing Co.,

1974).

“T. Sterling, et al, “Humanizing Information Systems: A

Report From Stanley House, ” (’communications of the .4,s.sociation for (’ompu ting A!achinery, November 1974, pp.

609-612.

●

turing and white-collar—unemployment

may result not so much from increased

productivity as from the inability of existing employees to adapt to the new

technology. If projections about an

evolving information society and economy are correct (see ch. 5), information

literacy could become an essential requirement for entering the labor

market.

Relation with Government: To the

extent that information technology

stands between the citizen and a governmental obligation or service, a potential barrier exists. Banks carried out extensive studies with regard to consumer

acceptance before undertaking the design of ATM devices. Government

agencies, on the other hand, because

they do not have the same economic

motivation, may not necessarily be very

concerned about the acceptability of

their systems. (Incentives to have such

concern may need to be imposed by law,

regulation, or executive policy. ) Individuals who are technologically illiterate may be affected in several ways:

—they may not exercise basic rights

such as voting;

—they may be at a serious disadvantage in legal proceedings, both criminal and civil; and

–they may find access to such needed

services as welfare, health care, and

educational benefits, barred or severely impeded.

To the extent that information illiteracy is

unevenly distributed among cultural or eco-
120 ● Computer-Based National Information Systems” Technology and Public Policy Issues

nomic groups, the consequences would fall only be increased but, due to such barriers as

disproportionately on the poor and dis- a more limited access to jobs, societal efforts

advantaged, in general. The gulf between the to bridge that gulf would be frustrated.

haves and the have-nets in society might not

Computer Software Protection

As discussed in chapter 3 and later in

chapter 13, the cost of computer software

has become a pacesetting factor in development of new computer applications. Increasingly, computer hardware is being designed

to fit the software. With the investment so

high, the value of software research and

development is even greater and the need for

proprietary protection felt even more strongly. At the same time, however, there is a

strong need for innovation in software R&D,

the sharing of ideas, and breakthroughs

among researchers.

Copyright and patent protection are the

traditional means for protecting the commercial value of information while providing

for public disclosure. But the continuing

uncertainty concerning copyright and patent protection for computer software leads

many software researchers to use the trade

secret approach to protect their time and

dollar investment. Private firms doing software R&D generally protect software trade

secrets through employee nondisclosure

agreements, restricted access measures, and

by otherwise keeping the work confidential.

This of course makes the sharing of information in the software R&D community quite

difficult.

The Copyright Act of 1976 specifies that

computer programs are copyrightable as

“literary works. ” But the extent of protection defined under the act and more recent

court decisions17 have left the situation ambiguous. Amendments to the act were introduced and enacted in the 96th Congress

as the “Computer Software Copyright Act of

1980." 18 However, the issue of computer

software protection appears sufficiently important and unsettled to warrant continued

congressional attention. 19

“Data Cash Systems, Inc. v. JS8ZA Group, Inc., U. S. D. C.,

for Northern Illinois, Sept. 26, 1979.

‘“H. R. 6934, Mar. 26, 1980, enacted as an amendment to

H.R. 6933, “Government Patent Policy Act of 1980, ” Public

Law 96-517, Dec. 12, 1980, and based on a recommendation of

the National Commission on New Technological Uses of

Copyrighted Works, Final Report, Washington, D. C., 1979.

‘gSee “Court Broadens Rules on Patenting Software, ”

Science, vol. 211, Mar. 20, 1981, pp. 1325, ff.
Chapter 13

Trends in Computer

Technology
Contents

Page

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....................123

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................123

Hardware ..,... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............123

Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............124

Human-Computer Interface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......126

Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................127

Processors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...................127

Information Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............130

Fast Memory Storage ● +.**.. ● ******. ● .9...** ● *..**** ● ******* ● 9 * * 131

Intermediate Memory Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....131

Mass Memory Storage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........132

Inexpensive Mass Storage .....** ..**.... .*...**. ..**..*. ● ..***, . 132

Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..................132

Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................133

Data Base Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............133

Languages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .....................134

Software Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........134

Input-Output Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........135

Graphics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............135

Voice Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............136

Image Recognition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........136

Data Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............137

Digital Communication Technology. . ..............................137

Digital Communication as Part of the System . . . . . . . . . . ..............138

Security Capabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............138

Classifications of Computer Security . ..............................138

Specific Techniques of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...139

Encryption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........141

Authorization ● ****.* ● .*****, ● ******* ● *...**. ...**.*. ● .....*. . . . 141

Logging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............142

Operating Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............142

Data Base Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............142

LIST OF FIGURES

Figure No. Page

8. Projections of Logic Cost per Gate. . . . . . . . . . . . . ...................128

9. Increase in Capability of Semiconductor Chips From 1956 to 1980. .. ...128

1O. Drop in Average Computer System Cost per 100,000 Calculations

From 1952 to 1980. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........128

11. Cost and Access Time of Memory Technologies . ....................130

12. Projections for Memory Cost per Character . . . . . . ...:..... . ........131
Chapter 13

Trends in Computer Technology

Introduction

Computer technology is advancing rapidly, even explosively. To assess the impacts

of information systems, the current state of

this technology and where it is heading must

be understood. The capability that information technology puts in the hands of the computer user determines the nature of the applications that are developed.

Developmental trends are already shaping

the nature of the information-based services

that will be provided in the coming decade.

New services that make use of the growing

integration of telecommunication and information technology are being designed and

implemented; and both industry and Government are looking at a wide range of innovative products and services that will be

used by the in-home information system of

the future.

The nature of the technology as it evolves

will also influence the structure of the industry associated with it. Companies that

specialized only in components are beginning to market computer systems; companies that sold only general purpose computer systems are beginning to market consumer products that incorporate these

systems.

For the purposes of this study, emphasis

has been placed on what information systems can do rather than on the fundamental

nature of electronic technology. Many interesting developments now in the laboratory, such as Josephson junctions, * may not

fundamentally change either the nature of

the systems that are designed or the purposes to which they will be put, particularly

over the next 10 years. Other developments,

such as the microprocessor, are today revolutionizing the ways in which computers are

used as well as the thinking about their

potential social impacts. Overall, the anticipated changes from laboratory developments over the next several years will be

more of degree than of form.

*A Josephson junction is a microscopic-size electronic

logic device that operates at the temperature of liquid helium.

I t is very fast and uses very little power.

Conclusions

Several conclusions can be drawn from

OTA’s analysis of the trends in the development of computer technology over the next ●

10 or 15 years. Spurred by both industrial

and Government research and development

(R&D) programs, information systems are

undergoing a revolution that will be maniHardware

Computer electronics are experiencing an

extraordinary drop in price, increase in

power, and reduction in size.

In 1977, the Privacy Protection Study

fested-by a proliferation of new products and Commission estimated that the cost of comservices affecting all sectors of American puting would drop by a factor of more than

society. 100 during the 20-year period from 1970 to

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

1990. This means that the million dollar computer of the 1960’s will cost less than a thousand dollars in the late 1980’s.

Concomitantly, during this same period

calculating speed is expected to increase a

hundredfold. In 1970, the largest processors

performed 10 million operations per second,

today they perform 100 million, and by 1990

there will be a processor that will perform 1

billion. In addition to greater speed, new

designs can also greatly increase the power

of future computer systems.

The large computer that occupied one or

several rooms in the late 1960’s will fit in a

desk drawer by the late 1990’s, and a medium-size computer will fit in a briefcase or

even a coat pocket. These trends do not necessarily mean that in all cases the costs of

purchasing, programing, and operating a

large computer application system will decrease. Rather, more work will be done for

the equivalent number of dollars.

● There will be a great expansion in the

number of computers being used in business, education, and the home.

This effect is already being seen. The

home computer boom, which was the first

big stimulus for the computer retailing

stores, has fallen off slightly, only to give

way to a new marketing thrust aimed at

small businesses. The hand calculator, which

has become a ubiquitous tool, is already being supplanted. A small hand-held computer

is now available in the consumer market, and

electronic calculators are being built into

wristwatches. Computers are also being

used as part of office automation.

● Computers will be used as components in

a wide range of consumer products.

With the advent of an integrated circuit

microprocessor that will sell in mass quantities for $1 or less, the use of the computer

for controlling everyday devices in the home

and at work will become commonplace. Computers are already being used or designed to

control such devices as clothes washers, sewing machines, home thermostats, automobile

engines, sprinkler systems, typewriters, filing systems, electric lights, and cash registers.

While many applications will involve

simply substituting electronic for mechanical control, the increased “intelligence” incorporated in the products will be used to

provide such additional features as energy

conservation or self-diagnosis of errors, and

to give more flexible control to the user.

● New products and services based on computer and telecommunication technology

will become available.

In addition to adding computer control to

familiar products, the new computer technology will be used to provide a new range of

products and services for the home and business. The video game and home computer

are just the first of a long line of computerbased information products and services

that will appear. (Electronic funds transfer

and electronic mail, two examples of information services, are examined in separate

OTA reports.)

● There will be a continuing, rapid increase

in the power of very large computer systems.

Advances in speed, efficiency, and microelectronics coupled with new design concepts will produce computers in the 1980’s

that are far more powerful than the biggest

ones now available. This type of power is

useful for a limited but important set of computational applications, e.g., improved systems for weather prediction. Furthermore,

systems that manage very large data bases

require very powerful computer processors,

particularly when sophisticated searches

and analyses must be made.

Software

● Software technology is expanding steadily, although not as rapidly as the hardware.

Computer programs are sets of basic instructions that tell the computer the steps to
Ch. 13— Trends in Computer Technology ● 125

take in doing a task. Programs can contain

millions of instructions, and their design is

as varied as the number of ways computers

are used. While computer scientists have

been successful in developing theoretical

models of computer hardware logic, efforts

to build an equivalent theory of programs

have not been rewarding to date. Thus, developing systematic techniques for creating,

testing, and monitoring computer software

has been a slow and tedious process. Some

experts maintain that programing is still

more of an art than a science.

The continuing R&D on programing languages and software engineering will provide a flow of improved techniques and software tools, but the rate of improvement will

not match the explosive growth in hardware

capability.

● New software techniques will allow computers to process a wider variety of data.

Traditionally, computers have processed

either numerical or alphabetic data structured in very rigid formats. However, software for processing text, graphic images,

and digitized voice is developing rapidly in

addition to software for processing data

alone. The result will be new families of products and services affecting Government, industry, and the citizen at home.

● Software technology is the limiting factor

in controlling the rate at which new applications appear.

The use of the new specialized hardware

that is being designed is confined to very

restricted purposes, or is merely putting existing software ideas into hardware form for

increased efficiency. The software basis for

most new computer applications in the

1980’s exists now. There does not appear to

be much likelihood that a new concept of

computer design will change the way computers are used in the next decade. Rather,

the changes will be in the scale of their use

and in who will be using them.

G The predominant cost of information systems will be for the software; the information industry will become increasingly

labor intensive.

This conclusion follows directly from the

last two statements coupled with the labor

intensive nature of programing. This trend

will influence the marketing practices of

computer manufacturers, who will increasingly find profit in the sales of complete

systems—combinations of hardware and

software—rather than hardware by itself.

● Software reliability, security, and auditability will improve slowly.

Large systems, because they are complex

and cumbersome, tend to suffer from the

kinds of reliability problems that are not

solved by building more reliable hardware.

The problems of assuring that a system is

actually performing as intended and cannot

be compromised, accidentally or deliberately, are inherent in the complexity of software

design.

Furthermore, although computer software

experts are improving their understanding

of how to increase the reliability of programs, they are unable to keep pace with the

growth in the size and complexity of the

systems being designed. Recently, system

designers have become more aware of the

need to design secure and auditable applications, and users have become aware that

they can demand such capabilities from the

producers. Thus, although some improvement is taking place, substantial progress

will depend on more R&D.

● New data base techniques will allow

massive data banks that serve multiple

uses.

Data bases will grow; some will contain

trillions of units of information. At the same

time, people will want to work with the data

in more varied ways. Today, sophisticated

programing is often required in order to handle efficiently each different type of query a

user might want to make of the data base.

However, researchers are developing

methods to improve the efficient use of large
●

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

data bases and to make them serve multiple

needs. This is being done through the development of more powerful query languages,

new ways of organizing the data within the

machine, and new hardware designs.

Human-Computer Interfac e

People communicate with computers for

three basic reasons: to describe the task to

be done, to enter data for processing, and to

derive results. Improvements in this technology will result not only in less costly

systems, but also in a vast expansion of information systems capabilities and in their

more efficient use.

● There will be an increase in the direct use

of computers by nonexperts.

Improvements in programing languages

will allow users to communicate more easily

with the computer. Historically, programing

and system control languages have been

complicated and time-consuming to learn.

They often require understanding how a

computer operates. New, easy-to-learn but

powerful languages will increase the number

of people who will use computers directly

without recourse to an intermediary expert.

In addition, the proliferation of computer introductory courses in high schools will increase the number of people who have a basic

knowledge of computer systems.

This trend will allow many more simple

applications to be developed by users individually or in modest organizational settings. However, in larger organizations, or

for applications that require integration with

other systems, it will mean that much of the

programing for modern small systems will

be done by end users in industry and in the

home who are not subject to control by central data processing management. This may

lead to such problems as misuse, poorly

functioning systems, or incompatibility.

● More data will be captured by computers

and stored in machine-readable form.

The distribution of computing power

through the use of microprocessors linked

together over communication lines will increase the amount of data captured at the

source and stored in computer-readable

form. Some types of information are captured deliberately, as in the case of the computerized register in a retail store. Other

types, which are captured only as a byproduct of automation, may be found to be useful

enough to keep. For example, the system

data collected by word processing systems

may be considered useful by managers in

monitoring secretarial efficiency. The proliferation of capturing such data may raise

serious policy issues.

● Output will be organized to present information that is more directly useful to

the user.

It has been known from the earliest days

of computing that the form in which the

results of computations are presented can

determine, in great part, whether it is actually used or whether the answer being sought

is found. Advances in both the hardware and

programing for image display and speech are

being brought out of the laboratory and into

the commercial market.

Research in information display is discovering how to filter significant information

from insignificant data and present it to the

user in the most efficient way. There is now a

new, burgeoning interest in the use of color

graphics display, a technology long considered the domain of the computer research

laboratory, but too expensive for general

use.

● There will be increased interface with information systems by consumers in their

homes and employees in their offices.

Many systems designed for entertainment, education, information retrieval, and

computational services are beginning to be

offered through a combination of evolving

television sets and telephone instruments

because of easy-to-use software, data banks,

and the distribution medium provided by

cable television (CATV). As a result, there is

a possibility that society as a whole will be
Ch. 13—Trends in Computer Technology 127

substantially affected, but to what extent is

presently unknown.

Communicatio n

The rapidly increasing availability of

inexpensive digital data communication

through specialized networks such as Telenet and Tymnet, coupled with the trend of

manufacturers to design systems with elaborate communication hardware and software

built in, are motivating growth in the use of

distributed, communication-based systems.

New satellite-based data communication

services will further stimulate this trend.

s The use of distributed data bases and

distributed processing will grow rapidly.

Rather than centralizing data collection

and processing as in the past, the most efficient procedure in the future will be to

localize these functions at the point where

the data are originally captured. Organizations will have computational capacity distributed among all of their offices. All

computer-based devices, even word processors, will be linked into the central system.

The problems in managing such a distributed system will be a major concern of large

organizations. In particular, procedures for

controlling access and for ensuring data

quality will be more difficult in a distributed

environment. However, dealing with them

effectively will be crucial to the successful

operation of communication-based systems.

s There will be increased availability of computer services to the home and business

over communication lines.

Many homes will have small computers or

computer terminals, and those that do not

will likely contain telephones and television

sets that have been equipped with computer

control. All of these devices will provide

links from the home and office to a multitude

of information services provided over a variety of communication channels such as television broadcast, telephone, or cable lines.

Processors

The 1970’s have seen continual dramatic

improvements in the characteristics of the

components from which computers are

made. It is expected that this trend will continue through the 1980’s, with computing

hardware becoming remarkably inexpensive

and efficient.

The decline in cost per logic function from

1960 projected to 1990 is shown in figure 8.

In 1960, the price of a logic gate ranged from

$1 to $10 per unit, depending on speed. By

1990, that price is expected to range from a

few thousandths of a cent to a few tenths of

a cent per gate. This continuing decline is

based in large part on the dramatic increase

in capability of semiconductor chips, as illustrated in figure 9.

There has been a parallel increase in the

speed of processing. In 1960, the fastest

machine executed about 1 million instructions per second. By 1990, there probably

will be computers that will execute a billion

or more instructions per second, a thousandfold increase in speed.

This combination of increased speed and

decreased cost for logic components results

in a steady decline in the cost of computation. The drop in the costs of computing on

IBM systems that are roughly equivalent,

over the period 1952 through 1980, is shown

in figure 10.

These gains have all been due to progress

in integrated circuit technology, the process

by which electronic components are printed

on small chips of silicon. Using these chips

as components has resulted in a steady

shrinkage of the size of computers from

assemblages that filled several rooms to the

current desk-top versions. Mass production

techniques have replaced the hand-wiring of
128 Computer-Based National Information Systems” Technology and Public Policy Issues

Figure 8.— Projections of Logic Cost per Gate

1,000

100

10

1

0,1

001

0.001

1960 1970 1980 1990

Year

Office of Technology Assessment and Privacy ProtectIon Study

Commtsslon

Figure 9.— Increase in Capability of

Semiconductor Chips From 1956 to 1980

1950 - 1960 1970 1980 1990

Year

SOURCE Institute of Electrical and Electronic Enalneers /EEE .%ectrurn VOI

17 June 1980 p 48 U S Manufactures of semiconductor chips In

cl ude f I rms such as Intel Mot urola Texas Inst rum en Is Rockwel 1, Na

tlonal Semiconductor and Zlloq

Figure 10.— Drop in Average Computer System Cost

per 100,000 Calculations From 1952 to 1980

10.00

Cost per

100,000

. A$l ,26 Year calcu Iat ion ●

o

1.00

0.1

0.01

0.001

00001

1.00001

1952 $1.2 6

1958 0.26

1964 0.12

1950 1960 1970 1980

Year

“Cost per 100,000 calculation IS based on data for the following IBM computer

systems (with year In parentheses) 701 (1952), 7090 (1058), 360/50 (1964),

370/168 (1970), 3033 (1976), 4300 ( 1980)

SOURCE Office of Technology Assessment and President’s Reorganlzatlon

Project, Fecfera/ Dafa Processing Reorganlzaftorr Sfudy Basfc Reporf

of the Scjence and Technology Team, Washington, D C June 1978,

pp 2930

a decade ago, speeding up the manufacturing phase. Energy consumption, both to

operate the computer system directly and

for the necessary system cooling, has

dropped enormously.

The financial implications of these latter

trends are significant in that they are

stimulating a rapid growth in computer applications that will accelerate beyond their

current high rate in the 1980’s. Facility costs

have historically been a major expense to

users installing computers. Now, many systems take up only a desk top, require no specialized environment control, and plug into a

normal electrical wall socket. This flexibility

means that many computer systems can be

installed at any site, from the home to the

business, with little or no added cost for

preparing the physical site.
Ch. 13—Trends in Computer Technology 129

Inexpensive very large-scale integration

(VLSI) based computer hardware will also

lead to lower maintenance costs in the

1980’s. Maintenance currently is estimated

to cost about 5 percent of the computer’s

purchase price per year for medium-size computers. The figure is higher for smaller

machines. A reduction in these costs will

result from lower failure rates, easier maintenance by replacing larger modular units of

the system, and built-in hardware redundancy and fault diagnosis.

Implications: These trends have several

implications for computer hardware. In the

first place, as illustrated in figure 10, there

has been and will continue to be a steady

drop in the cost of computing on general purpose, medium- to large-scale computing systems.

Second, small inexpensive, personal desktop computers have appeared on the market

in the last few years. These “microcomputers, while modest by present standards,

are quite powerful relative to the standards

of only a decade or two ago. The price of

these systems will drop rapidly, and their

capacity will grow over the next decade.

These small systems will likely drive the

development of a true mass market for computers, a market analogous to the current

one for hand calculators.

In addition to making the microcomputer

possible, the ability to mass-produce chips

and to custom design them at the same time,

using the automated production machines,

means that there will be a proliferation of

special-purpose computers that are custommade for specific applications. One of the

motivations for the development of the socalled “general purpose” computer was that

a computer system was expensive and difficult to design and build. Thus, many different user markets had to be identified for a

single design in order to provide a sufficient

customer base to justify its production.

This view of the manufacturers was reproduced in miniature within each computer

center, which accumulated as many different

types of applications as possible in order to

justify acquiring a large computing machine,

and thereby benefit from economies of scale.

These days, however, it is feasible to build

special-purpose machines, because the specialized markets have grown and because the

cost of designing and marketing custom

tailored systems has dropped. As an example, a variety of firms (some quite small) are

marketing so-called “array processors, ”

computers designed to calculate the solutions to systems of mathematical equations

that display certain special characteristics.

These processors are designed to be connected to a general purpose computer, and to

be called on only for the specific calculations

at which they excel. In the jobs for which

they are intended, these array processors,

which cost about as much as a large computer, are hundreds of times more powerful

than the biggest computers available. The

market for this machine exemplifies the increasing ability of small firms to enter the

computer hardware business and carve out a

niche for themselves.

Basic R&D in hardware design is picking

up again after a hiatus. It moved out of the

academic and pure research laboratory in the

1960’s due to the high costs of building hardware and the lack of enthusiasm for new design concepts on the part of manufacturers.

Now, the costs and feasibility of experimental research have improved dramatically.

The result should be a proliferation in the

1980’s of small specialized computers, tailored to particular needs. This trend will

reduce computing costs even more than

would result from the drop in component

costs alone.

In general, experts expect that a continuing trend will be seen toward modular computer architecture. Logical functions will be

distributed over the entire system. The central processor will be a traffic director controlling the flow of work among the various

units. There will be specialized computation

units like the array processor discussed

above, file management processors for han-
130 . Computer-Based National Information Systems Technology and Public PoIicy Issues

dling data bases, communications control ponents will not need to be in the same room

units, specialized language processors, and or even the same city to be part of the

others. Because of widespread high-speed system.

digital communications, these various comInformation Storage

A computer memory comes in a wide variety of sizes, speeds, and types. Any particular system uses an assortment of

memories to support its operation. Its most

significant design characteristics are

retrieval time and capacity.

Retrieval time is the time it takes to get a

segment of information from the memory.

The technology currently available provides

a range of times from 1 nanosecond (1

billionth of a second) to a minute or more.

Retrieval time includes the time both to find

and to read the information.

Capacity is the amount of information

that can be stored conveniently and economically. It is measured in bits (the

smallest fundamental unit of information),

or bytes, an 8-bit grouping roughly equivalent in information content to a single

alphabetic character or two numerical digits.

There is a distinct tradeoff between speed

and capacity. Therefore, in connecting a

computer that performs millions of instructions in a second with a world that operates

in a much slower timeframe, a hierarchy of

memory types is used. The current selection

of memory technology available to system

designers is shown in figure 11, and the projected drop in cost for information storage

through 1990 is shown in figure 12.

Figure 11.—Cost and Access Time of Memory Technologies

105

104

103

10’2

10

1

10-1

10-2

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

1.25

.125

.012

1 ,25m

.125m

.012m

1 ,2/1

12U

Access time

SOURCE Inst It u!e Gf E ect rlcal and E Iect ror IC Engneers IEEE Spectrum m 18 March 1981 p 4 I
Figure 12. —Projections for Memory Cost

per Character

100

10

1

10-’

10-2

l@-’

10-4

10-5

10-6

10-’

\

Solid state random-access memories

(bubbles, semiconductors)

Conventional

magnetic tape

tWdeo disc

1

1960 1970 1980 1990

Year

SOURCE: Off Ice of Technology Assessment and Privacy Protect Ion Study

Commission

There are two other important characteristics of various memory systems that affect

their use in particular applications. These

are volatility and writability.

Volatility refers to the long-term stability

of the memory. Many storage systems lose

the information they contain when the power

source is removed or interrupted. Others

keep the information indefinitely until it is

changed.

Writability refers to the ability to insert

information in the memory. Memory is classified as read/write or read only, depending

on whether or not the computer can copy

new data back into the storage in about the

same time scale as information can be read.

Read only memories are written once and the

recording is permanent. In this discussion,

memory is roughly categorized as fast, intermediate, and mass storage.

Ch. 13—Trends in Computer Technology ● 131

Fast Memory Storage

Fast memory storage constitutes the upper left-hand group in figure 11. It is the

most closely connected to the processor, and

hence its speed must be consistent with that

of the computer hardware. Because of the

relatively high cost of fast memory, it is

usually the smallest memory in the system.

For many years, core memories based on

the magnetic properties of an iron compound

were the principal technology used for fast

memory storage. However, this technology

seems to have reached its limit in cost,

speed, and size. Most new memories now are

designed around VLSI semiconductor technology.

Intermediate Memory Storage

Intermediate memory storage, which is

reasonably fast but inexpensive enough to

be used in large quantities, serves as a buffer

between the high-speed semiconductor memory and the very slow mass storage devices.

In the long term, bubble memory m a y

develop into the technology of choice for intermediate memory storage. Information is

stored as tiny magnetic domains that circulate along a printed track in a semiconductor

medium. Some bubble memory products are

already on the market, and new improved

ones are being announced continually.

One of the advantages of bubble memories

is that the domains are stable. Therefore,

when a bubble memory is used in a terminal,

for example, data can be entered and stored

in it for later transmission without needing

to keep the terminal hooked up continuously

to a power supply. The technology of bubble

memories is progressing rapidly. One manufacturer has already announced plans to

market a million-bit chip that will cost

around $2,000 in small quantities.

High-speed magnetic disks are still widely

used for intermediate memory, and will continue to be the most important technology

for this decade. Steady improvements will be

announced throughout the 1980’s. Some ex-
132 ● Computer-Based National Information Systems: Technology and Public Policy Issues

perts predict that disks will eventually be

used in a more finely stratified memory

hierarchy, rather than being replaced by

bubble memories. This may depend on

whether progress in expanding the capacity

of bubble memories continues as rapidly as it

has.

Mass Memory Storage

Progress seems to be slower in the area of

very large storage devices. No radically new

technology has appeared that seems to

promise any breakthroughs. Magnetic tape

will continue to be used heavily over the next

decade.

Many new mass storage technologies–

e.g., video disk—are difficult and expensive

to write, but very cheap and easy to reproduce and read. Erasing and rewriting are

often impossible. Costs per bit of storage for

archival applications are low enough to be

competitive with paper storage. Incremental

improvements over the next decade should

strengthen this advantage and stimulate a

trend toward permanent document storage

in electronic form.

Inexpensive Mass Storage

The rising market for small inexpensive

computer systems is producing a demand for

small, very cheap, bulk storage technology.

The technology is different from that provided for large systems. The size of bulk

storage needed is less, and there is more

tolerance for slow search times. Currently,

personal computers are supported by two

types of bulk storage, magnetic tape cassettes and “floppy” disks.

Tape readers are very cheap, as is the tape

itself. However, read time is quite slow, even

by personal computer standards. Floppy

disk hardware is more expensive, although

still within the requisite price range. The

disks themselves are cheap and easily

stored.

Some manufacturers, particularly those

marketing computer games, sell programs

permanently written on solid-state read only

memories (ROM). While relatively expensive

as a medium, ROM has the advantage of being difficult to copy, thus discouraging the

pirating of software. The ROM approach has

not been well accepted by the marketplace,

however.

Software

Computer software is also a form of

technology. Although it is not a tangible

product like a piece of hardware, software

shares many of the same characteristics.

‘ Much R&D carried out by computer scientists concern software problems. It often

results in new concepts and basic techniques

for organizing data and sequencing instructions to enable a computer to accomplish a

particular task.

Very large programs are harder to analyze, design, and produce than are equally

large machines that run them. Consequently, the state-of-the-art in software lags

behind that of hardware.

Occasionally, a major breakthrough in

programing can motivate new machine designs. For example, a wave of new small

processors has appeared on the market to

support signal processing applications.

These processors are based on the “fast

Fourier transform” algorithm, an important

discovery made a few years ago that allowed

the solutions to certain types of mathematical computations to be calculated 10 times

faster than previously.* Even greater speeds

*The Fourier transform itself is a pre-20th century mathematical technique. The advance was a new way to perform

the numerous and tedious computations the technique requires.
Ch. 13--- Trends in Computer Technology ● 133

.

have been achieved by using special processors to take advantage of this algorithm.

Limit s

One area of research that will affect software development in the 1980’s is fundamental research in computational complexity.

Until recently, fundamental theory in computer science was concerned with computability–whether a computer could calculate

an answer to a problem. However, the class

of problems that the computer could theoretically solve was enormous. More recently,

researchers have been exploring the more

practical questions of how easily a problem

may be solved, how fast, and how much computer power would be required. The answers

have been surprising. Many categories of

problems have been found to be almost impossible to solve, that is, the best program

possible on the fastest computer available

would take many years, even millions of

years, to calculate an answer. Such results

have already had practical application. For

example, they have led to the development

of new types of cryptographic codes with interesting new properties. Future research

may lead to the ability to calculate theoretically the breakability of a code.

Over the next decade of ever increasing

computer power, some types of problems are

likely to remain intractable. Complexity

theory will help improve the understanding

of these limits of computers as they are now

designed. Furthermore, it may possibly

motivate some radical new concepts in computer design.

Data Base Systems

There is a trend toward the use of large integrated data base systems that support

multiple applications. Researchers have

been developing methods for organizing data

so that it can be accessed in many ways, not

all of which may be predicted when the system is designed. Some of the most general

data structures, such as relational data

bases, are not as yet efficient for very large

data bases, but are appearing in commercial

products for use with medium-sized systems. New developments in data handling

algorithms, and new hardware designs specifically tailored to the support of data access systems, should provide continually improving capabilities during the 1980’s.

Improved query languages will allow the

information user to interact directly with the

computer to obtain the needed data. The integration of better report generators* with

the data base system will allow the output to

be produced in a more directly usable form.

These advances will provide the system user

with access to the data base which is much

more direct than is now the case. Currently,

the normal practice is to work through an intermediary, both to frame the initial inquiry

and to interpret the results.

The capability to transfer information between data bases over communication networks will also be improved. This capability,

already well-developed in some specific systems, will allow more general exchange

among systems connected to commercial

data networks. Standard protocols and

forms will be agreed on. True distributed

data bases are systems in which the location

of any particular item of information in the

data base may be anywhere in a national or

even international network, and in which access to that data is handled totally by the

system. These should start to appear commercially in the 1980’s,

The increasing size of data bases, the

multiplicity of their uses, the wider remote

access to them, and their integration over

telecommunication lines will all present

problems in preserving the security and integrity of the information. It will be more

challenging to protect the privacy of personal data or the security of economically

valuable information on such distributed

systems.

* Report generators retrieve information needed by a manager, perform moderate calculations on it, and organize it in a

readable and usable form.
134 ● Computer-Based National Information Systems: Technology and Public Policy Issues

Languages

Languages are the means by which users

describe to the computer the kinds of operations they want performed by the system.

Machine language is the set of instructions

that is wired into the computer. Although

some machine language programing is still

done, it is very difficult and inefficient to use

due to the size and complexity of most applications. Modern systems on a medium-sized

computer may contain more than a million

machine language instructions.

Faced with these difficulties, programmers

turn to a higher level language to write most

software. As computers have grown larger

and more complex, and as the tasks demanded of them become more complicated,

there has been a continual trend toward the

use of languages designed to be more representative of the way humans express problem-solving procedures.

In addition to increasing programing efficiency, developers of higher level languages

have other goals. Some special languages are

tailored to produce efficient codes for particular classes of applications. Others have

been developed based on the perception that

programing a computer is a form of mental

problem-solving, and that the language as

the vehicle for that effort is an intellectual

tool that can directly help thought processes. Finally, there has been a trend to develop languages that integrate users more

closely with the system, thus lowering the

degree of expertise required to program the

computer. By programing in these user

oriented languages, persons who are not

computer specialists can interact directly

with a system rather than through a professional programer intermediary.

The rapid expansion in the use of large

data base systems that serve many users

over communication networks is driving a

major development effort in query languages. They are the means by which a user

gains access to a data base, describes the

desired information and specifies the format

in which it is to be presented.

A principal driving force toward further

language development is economics. Hardware costs are decreasing while labor costs

are increasing. Developing languages that

will increase the productivity of programmers

has become a high priority. Ultimately, some

researchers envision automatic programing

in which users specify the problem to be

solved in a language close to that used in

their environment—engineering, law, medicine, and so on. The computer, using this

problem statement, would write its own program.

Full development of such automatic programing systems is far in the future, although simple systems for preparing management reports and models derived from

data bases are already in use. More shortterm effort is being concentrated on developing tools that help the programer use

the computer as an active agent assisting in

the creation of a system.

Progress is expected to be slow. It will be

impeded by the sheer difficulty of matching

the essential ambiguity of human thought

and language with the absolute rigidity of

computer language. It is also economically

difficult to implement radical new languages

that require substantial retraining of programmers. Finally, there is a reluctance to

write programs in languages that are not

widely used and known, for the usefulness of

a program so written may be unnecessarily

restricted.

Software Engineering

For most of the history of computers, programing has been considered an art rather

than a form of controlled design. Emphasis

was on the ingenuity and elegance of the

product, rather than on more mundane

measures of utility. Creativity will always

have a place in good programing, but its emphasis conflicts with managerial imperatives

for economy, control, and predictability. In

particular, when the development of a major

system requires the coordination of hundreds of programmers writing millions of lines
Ch. 13—Trends in Computer Technology . 135

of code, the project must be managed in such

a way as to guarantee a usable product, on

time, and at a reasonable cost.

The relatively new discipline of software

engineering has been attempting the difficult task of developing techniques both for

programing and for managing the programing of large software systems. The operating

system and support software of a large

multiprocessor computer system is extraordinarily complex. However, the economic imperative will force work in this area and

assure the quick adoption of new results.

Until the present time, efforts have been

geared to developing both techniques for

breaking a large proposed system into successively smaller logical subunits that can be

assigned to programing teams, and ways in

which to manage the work of the programmers

and the communications among them. These

and related techniques will gradually become

commonplace over the next 5 to 10 years as

they are learned by the next generation of

programing professionals and managers.

Input-Output Technology

The principal means of communication

with a computer has traditionally been

through a form of typed input and alphanumeric printed output. Although this type

of communication will continue to dominate

in the near future, it is inadequate for many

new applications. Advances in technology

for human-computer interaction will change

the way in which computers are used by

many people.

Graphics

Graphical display of information is becoming more economically viable, and the

technology, both hardware and software, is

improving in its capability. In the last few

years, researchers have developed efficient

techniques for removing hidden lines in

order to display solid objects and for combining half-tone, shaded image production wit h

color. Some current research is focused o n

developing techniques that model variou s

surface reflectivities and textures with re -

spect to different types of light sources.

While work is proceeding on improving

the speed of graphical computations to allow

the terminal to display very high resolution

pictures fast enough to depict motion, such a

capability may remain very expensive over

the next few years for any but the most simple types of pictures.

Sharp cost breaks are expected for displays with lower image quality. The use of

bit-mapped frame buffers, which store slow

computer graphics output and play it back

at normal speed over a display terminal, will

grow as the costs of memories drop.

Some research is being pursued on holographic output of three-dimensional images.

However, holographic display is not expected to become widely used in the next

decade.

Computer graphics technology is already

finding widespread commercial use for

creating animated films. It competes favorably with traditional manual techniques. The

uses range from pure and commercial art to

the production of educational films. Computer languages and graphics software have

been developed to allow artists and designers to interact directly with the computer, generally through the display screen,

to create their images.

In computer-aided design, the user is interactively coupled to a display screen with a

graphical data base and analytical programs

stored on a computer. Designers use the

computer and the display to develop their
136 ● Computer-Based National Information Systems: Technology and Public Policy Issues

designs on a screen. For example, an ar-

chitect designing a building on the graphics

display can have an instantaneous computation of cost, and a civil engineer can do stress

calculations while designing a bridge. Computer-aided design has emerged from its infancy. Steady improvements in software and

decreasing computing costs will likely make

it the methodology of choice for most engineering design in the 1980’s. Even today, integrated circuits and printed circuit boards

are preferentially designed by these techniques.

Graphical output of computer data can

transmit information that is difficult or even

impossible to derive from a printout list of

numbers. Whether calculating stresses in an

airplane wing, the water flow in a flood plain,

or the molecular structure of an enzyme, the

numerical output of the computer calculations must be translated into a picture

before any sense can be made from the

results.

Voice Communication

Voice communication with computers is

on the verge of becoming commercially successful. The advances have been both in

developing better and cheaper computational techniques for generating and recognizing speech and in learning more about

the ways in which such systems could be

used. This new understanding has lowered

the estimates of what would constitute a

commercially useful level of performance.

Capabilities far short of a human level of performance can markedly enhance communication between human and computer. Some experts even expect a voice-driven typewriter

to be on the market before the end of the

decade.

There are two basic problems in speech

synthesis—first, creating a voice tone carrying a phoneme (a fundamental linguistic element of speech), and second, stringing these

phonemes together to make a sentence or

phrase. Although neither problem has been

solved to the ultimate point of producing

natural human-sounding sentences, the technology is improving rapidly. It has already

reached the point of commercial utility.

Several companies sell chips in the $10

range to synthesize speech sounds. Texas

Instruments offers a mass-produced electronic toy, Speak and Spell® , to help children learn to spell.

One important application of speech is a

reader for use by the blind that converts

typed text into spoken words. While currently very expensive, these devices should become more economical in the near future.

Speech recognition is a more difficult

problem, since the system must deal with an

input having great variability. The voice and

style of speech varies widely among individuals; the computer recognize is potentially confronted by a wider array of potential vocabulary to identify; and it must

analyze a multiplicity of grammatical structures. Again, entrepreneurs have found that

even the very limited capabilities now possible are marketable.

So-called “continuous speech” recognition, understanding natural speech, is still in

the research laboratory. While large-scale

commercial systems are not expected in the

short term, the strong market already developing for limited range speech recognition systems will motivate R&D and encourage the rapid commercialization of research results as they appear.

The best performance to date in a research

laboratory environment has been shown by a

system that can recognize sentences 91 percent of the time from multiple speakers

using a vocabulary of 1,011 words. Major research efforts are proceeding at IBM and at

a few university laboratories. Commercial

devices with small vocabularies are now

being marketed.

Image Recognition

Image recognition presents another form

of the problem of recognizing patterns of

data. The state-of-the-art is at a similar
Ch. 13—Trends in Computer Technology ● 137

point. Simple self-contained patterns not in a

confusing context can be recognized. Devices on the market read standard typewriter and even handprinted characters.

Point-of-sale scanners in stores read and recognize the universal product code on packages drawn across the unit at various speeds

and orientations. However, analyzing a more

general picture for a variety of elements is a

more complicated task, one which, like

speech, may depend upon some “understanding” of the context of the pattern.

Slow but steady advances in pattern recognition technology are occurring. The sharp

drop in cost for the requisite technology is

increasing the range of potential applications.

Data Communication

The ability to move data quickly over long

distances through the use of new digital

communication technology has had a significant impact on the design and use of information processing systems. Designers

now have the opportunity to build systems

with greater power than was previously possible, enhancing their ability to process information and provide it to the user in a

timely manner. More importantly, however,

telecommunication has brought the user

closer to the computer by allowing direct

interaction with the processing system. As a

result, the use of information processing

technology has become an integral part of

the day-to-day work of many organizations

whose operations have become totally dependent on a computer system.

only technology that relates directly to

the development of computer-based information systems is discussed here. (For a detailed analysis of communication technology, see the OTA assessment report entitled, An Assessment of Telecommunication Technology and Public Policy.

Digital Communication

Technology

The steady improvement of telecommunication service over the last quarter century has benefited the design of computer

systems by decreasing their cost and improving their reliability. Significant applications using communications date back to the

early 1960’s. However, the cost and complexity of putting together a communication-based computer system restricted its

use to applications, such as reservation

systems, that had an inherent need for remote data entry and display.

Existing communication carriers and new

enterprises are beginning to offer new data

communication services. These services are

designed to provide inexpensive high-speed

communication capacity specifically designed for use by computer systems. With these

new services available, a host of new communication-based applications will appear

over the next decade.

Traditional communication systems have

been tailored to carrying voice. The characteristics of voice communication are quite

different from those of data communication

between computers or between computers

and people. The voice telephone network,

through switching, provides a temporary

line connecting two users. The charges are

based on the length of the line provided and

the length of time it is made available.

Data communication tends to come in

very high-speed bursts, with long periods of

silence between transmissions. To perform

this type of communication on a traditional

telephone network is inefficient, as the line is

unused for most of the time. One approach

has been to design a network with multiple

path connections. Packets of information,

along with a destination address, are sent

over any instantaneously available path, and

the user is charged for the quantity of in-
138 . Computer-Based National Information Systems: Technology and Public PolIcy Issues

formation transmitted and for the connection with the network. One payoff in sharing

traffic from a larger community to obtain

better line usage is lower user costs. Secondary benefits include error-free performance and higher reliability. This type of

communication facility is called packet

switching, and is available as a commercial

service. Thus, a librarian in Washington,

D. C., with a terminal can dial a local number

to access the Washington entry to a national

data communication network. Through that

network, the librarian can access a

bibliographic data base in Los Angeles, and

do so at a low cost.

Digital Communication as

Part of the System

Viewed in the context of computer system

operations, data communications are no different from any other application. However,

they do introduce new capabilities and problems to the design, implementation, and operation of information systems.

Early implementations of the data communication programs were designed to take

advantage of processor cycles that could not

be used productively by other applications.

However, the growth in the communication

workload, combined with other new task s

that may have been loaded onto the proc -

essor, can saturate it and create a need t o

move the communication management fro m

the central computer to a peripheral proc -

essor.

Fully programmable front-end processors

support the trend of moving communication

processing away from the central computer,

In some cases these devices have been specifically designed for communication processing. In other cases, general purpose minicomputers are being used as front ends.

Either way, the availability of inexpensive

logic and memory components has contributed to the further distribution of the communication function away from the central

processor.

Security Capabilities

Computers have handled sensitive data

and programs for many years; however, it is

only recently that the need to secure them

has become a serious concern to system

designers and operators. During the social

unrest of the 1960’s, concern arose over the

physical security of computer systems. They

were expensive and visible symbols and, consequently, attractive targets for sabotage.

Later, concerns over privacy and an awareness of increasing incidents of financial computer crime motivated the managers to take

a more sophisticated look at protecting their

systems and data.

Classifications of Computer

Security

Security experts distinguish between

three types of security: physical, procedural

and technical.

Physical security refers to techniques that

physically isolate a computer system from

access by unauthorized persons. It also includes protection of the facility from external dangers such as earthquake, fire, flood,

or power failure.

Procedural security is the set of rules by

which a system operator manages the system personnel and the flow of work in the organization. It can include such measures as

preemployment screening of staff, work

assignments that minimize opportunities to

act in inappropriate ways, auditing procedures, and controls on the flow of work

through the system.

Technical security refers to the software

and hardware controls set up within the system itself. Techniques used to provide

security may include cryptographic encoding of data, complicated access and iden-
Ch. 13—Trends in Computer Technology ● 139

tification procedures, and hardware which is

dedicated to the auditing function.

Some security experts claim that too

much attention on technological fixes has

distracted system operators from more

traditional but effective measures they could

be instituting. However, the increased proliferation of small systems and the trend

toward communication-based systems are

making technical security more important.

The techniques of physical and procedural

security are well-understood and translate

relatively easily from the noncomputer

world into that of the system operator. Technical security, a newer area of research, is

less understood, but is related directly to the

problems of system design.

Computer scientists have proved that it is

theoretically impossible to achieve perfect

security inside the program itself. That is, it

cannot be demonstrated that any particular

combination of hardware and programing is

proof against some new unexpected type of

attack. Improving the security of a computer system involves balancing the costs of

protection against the expectation of loss

resulting from the threats and vulnerabilities. While it cannot provide a final

answer, R&D in the field of computer security can substantially decrease protection

costs.

Risk analysis, the process of weighing all

these factors in a decision model, is a difficult job. The precise factors are unknown,

and it is difficult to determine whether all

possible alternatives have been covered. Research can develop techniques for performing risk analyses with greater precision, and

the Government has new research and

standards activities in this area. While the

standards are directed at Federal systems,

they will provide useful guidance to the private sector.

Technological instruments for security

fall into three categories, according to the intent of the designer: prevention, detection

and auditing. Prevention means keeping

unauthorized persons from having access to

the system, and keeping authorized persons

from using the system wrongly. Detection

means catching an unauthorized procedure

when it is attempted and preventing its completion. Auditing means the determination

of whether unauthorized acts have occurred.

A particular security technique is usually directed toward one of these goals.

Specific Techniques of Security

Authentication: The first objective of

security is to assure that only authorized

personnel can access the system. Identification is the process of establishing a claim of

identity to the system, either with a name or

an account number. Authentication is the

process of verifying the claim.

The simplest and oldest procedure is to

use a password or number that is known

only to the individual authorized to use the

system. The personal identification numbers

assigned to bank customers for use on

ATMs are examples of such codes.

The security provided by password

schemes is limited, although more elaborate

versions offering some improvements have

been developed. However, the security of

any password scheme depends fundamentally on the ability and willingness of the

user to keep the code secret.

Physical identification techniques, which

depend on measuring certain personal physical characteristics, are being developed for

use as authenticators in computer system

access. To be useful, any such system must

be able to discriminate between persons, but

at the same time be insensitive to changes in

the characteristics of a particular individual

over time.

The system operator, when selecting an

authenticating technology, has to make a

choice in balancing two types of errors—

classifying a fraudulent identity as correct

(type I) and classifying a proper user as

fraudulent (type II). These two types of

errors have costs associated with them, and

are usually at opposite ends of a tradeoff
140 ● Computer-Based National Information Systems: Technology and Public Policy Issues

curve for any specific technology. The type I

error can be minimized only at the cost of

maximizing the type I I error, and vice versa.

Fingerprints: The technology exists for

reading and encoding fingerprints with minimum delay, but the devices are expensive

(over $50,000). Although the pattern is complex, fingerprints can be encoded in a computer using less than 100 characters by storing only certain key data points. This storage efficiency means that a complete set of

fingerprints for every person in the United

States could be stored easily in a commercially available bulk memory.

The cost of directly reading fingerprints,

however, seems to suggest that it will not

become a widely used method of authentication, at least in the near future. Its use will

be restricted to very high security requirements, and to applications where fingerprints themselves represent significant data,

such as in police work.

Hand Geometry: A new and surprisingly

effective form of physical identification is

the geometry of the hand. Individual finger

lengths vary from one person to another.

This variance is sufficiently significant and

unique to be the basis for a relatively inexpensive (around $3,000) identification device. It is based on the use of a high intensity

light shining on a pattern of photocells. It is

sensitive both to external geometry and to

the translucence of the flesh near the fingertips. Thus, it is quite difficult to deceive it

with any artificial device.

Voice Recognition: Research on the techniques for voice analysis and voice synthesis

has resulted in methods for distinguishing

individuals by their speech. In these systems, a random list of words is shown to the

individual, who then speaks them into a

microphone. By having the computer generate a new list each time, the system makes

it impossible for an imposter to use a tape

recorder to fool the system.

The system has high interpersonal discrimination, but seems to be weaker on

intrapersonal differences. It may reject

authorized persons suffering from colds,

hoarseness, or even emotional tension.

Voice recognition systems are not yet

commercially available, although at least one

firm, Texas Instruments, has installed a

home-developed system for use in their

facilities.

Since information collection is relatively

cheap, requiring only a standard microphone, amplification, and signal conversion

hardware, the limitations of the technology

seem to be in the computational techniques.

As software improves, and as the cost of

computer hardware drops, voice recognition

could become a popular low-cost authentication technique.

Signature Verification: Passive signature

verification uses pattern-recognition techniques to analyze and encode a signature on

a check or form. It is a difficult task, because

a signature can vary depending on an individual’s mental and physical state, the type

of writing implement used, and because

forgers can be quite skillful. One company

has announced a product for providing passive signature verification for bulk application, particularly the processing of checks. It

is not clear whether such technology is

operationally effective in identifying forgeries, and whether it could be reduced in

cost sufficiently to be used at the point of

sale.

Dynamic signature verification systems

track the actual path of the pen point as the

individual creates a signature. Sensitive instruments measure variables such as the

pen’s speed and acceleration, the amount of

time the point remains on the paper, and the

changing pressure on the point. Several

organizations, including IBM, are working

on dynamic identification; however, no products are as yet commercially available. Some

experts judge this to be a promising technology.

Much R&D is aimed at finding a more

reliable substitute for the currently used

magnetic cards and passwords to identify

and authenticate individuals. To date only a
Ch. 13—Trends in Computer Technology ● 141

few products have come on the market, and

those have been designed for use in applications with very high security requirements.

The cost limitation seems to depend on the

characteristics of the sensor, since the

microprocessor costs have dropped so low.

No doubt a growing demand could motivate

a flurry of new products in the early 1980’s.

The amount of data required to store computer representation of the pattern for any

of these candidate technologies is relatively

small—a few hundred characters. Thus any

of them, if they become widely implemented,

could become the basis for a quasi-universal

identification code used by all private and

Government organizations.

Encryptio n

In the past, cryptography was principally

a tool for military and diplomatic communication. Now, however, modern data

communication systems increasingly are

transmitting private information of high

value, and the need to protect these communications from interception and manipulation has prompted an explosion of interest in civilian encryption.

A standard for encryption technology, the

Data Encryption Standard (DES), has been

established by the National Bureau of

Standards for Federal use. It is apparently

also being widely adopted in the private sector, since several commercial manufacturers

are producing devices based on it. While

some experts have questioned the robustness of DES, it seems to have been accepted

generally as an inexpensive technology that

is at least effective for low- or middle-level

security needs.

Another set of techniques that has received some attention lately has been labeled

“public key” encryption. The idea behind

these codes arose from basic research in computational complexity, a field of computer

science dealing with possible theoretical

limits on the ability of even the most powerful computers to compute certain mathematical solutions. A public key code uses one

key to encrypt and another to decrypt a

message. Knowledge of the encryption key is

no help in deriving the decryption key, even

though their mathematical relationship is

known. Thus, the security of the code does

not depend on the security of either the encoding key or of the secrecy of the mathematical relationships. Since one of the major

problems in the use of cryptography is control of the key itself, a system in which the

decoding key need not be known even to the

data sender is promising for many applications.

Public key codes also promise to be useful

in electronic message systems, since they

can be used for authenticating messages in

the absence of signatures. Several applications of this sort have been proposed. However, public key codes are in their infancy,

and it is not known with certainty whether

unanticipated problems will arise as they are

used.

Encryption has uses other than merely

securing communications. Used internally in

a computer system, it can isolate sets of data

from unauthorized users. It can also allow

users to enter data but not to read it, or to

read but not modify data. It can even separate the activities of various connected

computer processors.

Authorizatio n

Most large-scale information systems are

designed to serve several users simultaneously. The data bases in the machine

often contain clusters of information that

serve multiple needs. It is necessary, then, to

control the access of users who are authorized to be on the machine, but may not be

authorized to have access to specific parts of

the data.

For each user, the system must keep track

of which parts of the file can be accessed and

manipulated, and what forms of access are

held (read the data, enter new data, and so

on). The system also must control the giving

of permissions. Can one user, who is authorized to see a file, give access permission
142 ● Computer-Based National Information Systems Technology and Public Policy Issues

to another user? There are many situations

in which this is a legitimate and even necessary procedure, yet it complicates enormously the problems of access control. Researchers are developing ways to model

these assignments mathematically and

avoid unexpected loopholes in system access

control.

The continued growth in the size of information systems and in the numbers of

people allowed to access them will continue

to put pressure on system designers by complicating the authorization process.

Loggin g

Logging is the process of auditing the accesses made to a data base by all users. Systems for keeping a complete or partial record

of all access to the data have received more

attention since privacy has become an issue.

The system operator needs to account for all

accesses made to files of personal data. Since

the log itself is a file that contains potentially sensitive personal information, the need to

protect it may be even greater than that for

the original data base. For this reason, some

experts suggest the use of a separate small

machine to monitor accesses to the data

base.

The system operator can then examine the

log for unusual patterns of file access or

other significant actions of the users that

may indicate that unauthorized use is being

made of the system. When it is possible to

code certain unusual patterns of use, the logging system itself can be programed to

watch for those events. It will then either

send a warning to the system operator, or

call on a special security surveillance program that collects as much detailed information as possible about the transaction.

Operating Systems

The operating system of a computer, the

set of programs that control its work, is the

fundamental piece of software on which all

other application programs depend. Consequently, the integrity of the operating

system is a necessary prerequisite for any

other software security. Although no system

can be designed to be perfectly secure, there

is much that can be done to construct highly

secure systems.

R&D is ongoing in this area, and results

will be slowly incorporated into existing

systems. However, progress will be hindered

by the difficulty in adapting current operating system programs. These contain millions of instructions, and have been modified

and expanded over several years by many

programmers. The systems are difficult to

change, as are the habits of their users.

Some computer installations still use

operating systems written nearly 20 years

ago. Computer operators fear that disruption and trauma would result from adopting

radically different operating systems, and

manufacturers resist compromising investments amounting to billions of dollars that

they have made in existing programs. Thus,

the most acceptable new techniques over the

short term will be those that can be adapted

to existing systems. However, it is the very

size, complexity, and growth history of these

current systems that create their greatest

weaknesses—the logical holes and flaws

through which a determined outsider can

gain access.

Data Base Security

As data bases grow larger and are designed to serve multiple purposes, the likelihood

increases that system operators will want to

grant selective access. The problem is difficult. In an employee data base, for example, it may be desired to allow the personnel

department access to some records, the finance department to others, and the medical

department to still others.

One of the major problems is that of

authorization determining which user can do

what. Another related issue is how to structure the data base to allow such authorizations to be enforced. The question of which

controls are even possible is, in itself, a complicated one. Research in data structures is
Ch. 13— Trends in Computer Technology . 143

developing new techniques which will probably come into use rapidly as new data base

systems come on the market.

Encryption is one technique that will be

used increasingly in cases where different

groups of data and their users can be easily

partitioned in terms of access control. It will

be less useful when the data are highly integrated, and when it is not known during

the design stage where boundaries will eventually be drawn.

Years ago, some hope was placed in the

use of so-called “aggregated files, ” particularly when used for research with sensitive personal data. These files supposedly

eliminate problems associated with maintaining personally identifiable data by stripping off identifiers and lumping them together in statistical clusters. It has been

shown, however, that aggregating data statistically does not always assure that a

clever inquirer cannot reverse the process

and derive substantial personal information.

In the same way, merely stripping identifiers

off records of personal information may not

preserve the integrity of the information, for

a surprisingly small amount of descriptive

information can serve to identify an individual uniquely. R&D is being conducted on

ways to transform data bases collected for

social research purposes so that the individual information is completely obscured, but

statistically relevant calculations can still be

done.
Chapter 14

Industry Structure

*
Contents

Page

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .....................147

Computer Hardware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . = . . . . . . . . . .148

Auxiliary Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............151

The Data Communication Industry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .154

Special Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............157

Computer Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..:...... +.160

Information Services. . . . . . . . . . . . . . . . . . . . . . .....+... . ..............163

LIST OF TABLES

Table No. Page

9. Top 20 EDP Companies in1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..147

10.Computer Industry Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...149

11. Desktop and Personal Computer 1980 Worldwide Shipments. . ........150

12. Minicomputer and Small Business Computer 1980 Worldwide

Shipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .= ..........150

13. Computer Mainframe 1980 Worldwide Shipments . . . . . . . ............150

14. Auxiliary Equipment Industry Structure . . . . . . . ...................152

15. Data Communication Industry Structure . . . . . . . ...................155

16. The Ranking and Revenues of the Top l0 Manufacturers of

Data Communication Hardware. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...157

17. The 10 Leading Carriers of Digital Data and Their Data

Communication Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......157

18. Special Applications Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...159

19. The Computer Services Industry Structure . .......................161

20. Estimated 1979 Revenues for the Top Five Independent

Computer Service Companies. . . . . . . . . . . . . . . . . . . . . . . .......;. ....162

21. Industry and Revenue Structure Of Computer Services Industry. .. ....162

22. The Information Services Industry Structure. . .....................166
Chapter 14

Industry Structure

Introduction

In less than 30 years the electronic data

processing (EDP) industry has grown to be a

major economic sector of the economy. The

total revenues for the industry worldwide

were estimated to have been over $60 billion

in 1979. The U.S. industry share of this market was about $46 billion.

The top 20 domestic companies in the

EDP business in order of size are listed in

table 9. Some of these firms are also engaged

in other types of business, but only their

EDP revenues are shown. The total EDP

revenues in 1979 of the leader, IBM, were

over $18 billion, nearly eight times those of

the next largest company, Burroughs. Revenues of the eighth company, Hewlett-Packard, were nearly twice those of the ninth,

Memorex.

The top eight companies are those marketing full lines of general purpose computers,

referred to in both the industry and this

report as mainframe computers. The rest

succeed, in general, by focusing on a more

limited market sector—very small machines,

very large machines, specialized peripheral

hardware, or various types of computer services.

The companies examined in this study

range widely in size. While the market is

clearly dominated in terms of size by the top

eight (70 percent of the total revenues),

much of the significant market shifting and

innovation that will affect the future of computer use are taking place among the smaller

companies. It has been estimated that there

are over 4,000 firms in the EDP industry.

Growth in the hardware side of the industry will continue but not spectacularly. Rapidly decreasing prices for hardware will be

more than offset by increased sales. HowTable 9.—Top 20 EDP Companies in 1979

1979 EDP Percentage

revenue s Domestic Principal

Rank Company

1 IBM,

2 Burroughs

3 NC R

4 Control Dat a

5 Sperry Rand .

6 Digital Equipmen t

7 Honeywell .,

8 Hewlett-Packar d

9 Memore x

10 Data Genera l

11 Storage Technolog y

12 Xerox

13 TRW :

14 Texas Instrument s

15 Computer Science s

16 Automatic Data Processing

17 G E

18 Electronic Data Systems

19 3 M

20 Northern Teleco m

SOURCE: Datamation, July 1980, pp. 98-99.

($ million)

$18.338

2,434

2,404

2,273

2,270

2,032

1,453

1,030

664

540

480

475

440

425

415

401

350

312

310

300

market

46 %

59

46

68

55

62

67

52

51

73

88

85

77

82

88

92

79

96

81

65

product

Mainframe computers

Mainframe computers

Mainframe computers

Mainframe computers

Mainframe computers

Mainframe computers

Mainframe computers

Minicomputers

Memories

Minicomputers

Memories

Peripherals

Services

Minicomputers, terminals, and

consumer goods

Services

Services

Services

Services

Peripherals

Peripherals

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

ever, those companies using new computer

and communication technologies to provide

innovative information services to individuals and business will grow the most rapidly.

The advent of the microcomputer and lowcost digital communication opens new opportunities to entrepreneurs. Microprocessors lower the cost of system implementation to a mass-marketable level; and readily

available, inexpensive communication technology provides a mechanism for mass distribution that has been lacking in the past.

These developments do not necessarily

imply that the principal participants will

change drastically over the next 10 years.

The large EDP and communication corporations have been highly adaptable, and can be

expected to move into these new services.

The traditional information firms, researchers, and publishers are merging with the

newer, high technology computer and communication companies. For example, ABC

has bought MacMillan Press. On the other

hand, Dun & Bradstreet, an established

retailer of information, has purchased National CSS, Inc., a major supplier of computer programing and time-sharing services, and Readers Digest has purchased The

Source, a new on-line information service.

This emergence in the 1980’s of technology-based information service industries as

a major business sector is significant both

with respect to an overall analysis of market

trends and for this assessment. The nature

and social consequences of these new services are likely to have a major impact on Federal policies concerned with information and

information processing. The form and availability of these services will, in turn, be affected by Government policy.

A final important characteristic of the

U.S. computer and communication industry

is its major role in the international market.

International sales are concentrated among

the top nine corporations, which average

from 40 to 50 percent of all the foreign sales.

The smaller firms are much less active internationally, probably because they view the

domestic market as adequately rewarding

and because of the high cost and uncertainty

surrounding the marketing of high technology abroad.

Computer Hardware

The computer industry has been highly

segregated along product lines for some

time. Several companies manufactured socalled “super computers. ” Along with a few

other firms, they produced a full line of small

to large systems. Others specialized in

minicomputers. However, the lines between

these major categories have blurred as many

intermediate size systems, both general and

special purpose, have arisen to fill the gaps.

The needs of computer users have also

shifted substantially, creating more opportunities for small specialized companies

to develop.

This evolutionary shifting of products,

producers, and user needs makes difficult

any attempt to chart historical trends for a

particular class of machine. For example, the

minicomputer of today is, in some ways,

more powerful than a large computer of

several years ago. Companies such as Texas

Instruments, that used to sell only electronic

components for computers, now market entire systems.

The principal characteristics of the computer hardware industry are summarized in

table 10 (also see tables 11, 12, and 13). For

analytical purposes, the industry has been

divided into six sectors. Although the

boundaries between them are vague, these

sectors are generally recognized by the industry.

The principal characteristics of change in

the computer hardware industry are the following :
Table 10.—Computer Industry Structure

Nature and size of

present market Future trends

—-

—.

Nature of present industry Characteristics of hardware ——— — Purpose and/or use —

Microcomputer

The smallest sized computers; Used as “intelligent” compocan fit on one circuit board, nents for games, appliances,

and soon on a single silicon watches, etc., or as the heart

chip; inexpensive. of larger general computing

systems.

Growth rate between 30 to 40

percent per year. Sales

growth from $100 million in

1977 to $1 billion in early

1980’s. Small firms being acquired by large international

conglomerates.

Explosive growth of market in

next few years. Possible acquisition by large consumer

product firms and retailers

emulating Tandy success.

Growth rate will slow to 25 percent per year; relative flattening of market in 1980’s; software gaining in importance.

Fewer new entrants.

Continued steady growth, with

no major changes in relative

positions of the top seven

companies. Increased foreign

competition.

Risky market, very sensitive to

IBM product and price announcements. Not likely to

become a significantly large

industry, but to prod big companies through competition.

Market growing more diversified. Will continue to be important but relatively small.

IBM may bring in a totally

new system; potential growth

of foreign sales.

Modest to small companies in

terms of electronic data processing revenues.

Growing rapidly; over $1 billion

by the early 1980’s. United

States leads with increasing

competition from West Germany and Japan.

Personal or desktop computer (see table 11)

Many small entrepreneurs—”a

cottage industry. ” Very successful entry by a consumer

electronics retailer, Tandy

(Radio Shack).

Individual users. Storefront and

mail order sales. 1979 sales of

$500 million.

Small, but fully capable computer systems, costing several hundred to a few thousand

dollars.

For use by individuals in the

home, in business, or in

school.

Minicomputer (see table 12)

Small computer systems selling for less than $50,000.

Mix of large and small companies. Has provided opportunities for new entrepreneurs

such as Prime Computer.

Designed to be used for a dedicated set of applications with

informal, hands-on access.

Shipments of $4.3 billion in

1979. Worldwide market

growth rate for past several

years of 35 percent.

Mainframe computer (see table 13)

Medium- to large-scale computer systems, costing from a

few hundred thousand dollars

to several millions.

General purpose computers,

usually serving several users

and applications.

Dominated by several large

corporations, with IBM the

revenue leader by a wide

margin.

The bulk of general computer

sales—$8 billion in 1979.

Plug compatible computer

Electronically equivalent to the

equipment of other manufacturers—usually IBM.

A very few companies concentrating narrowly on particular

market opportunities.

Same as above, but with potentially better performance, better delivery, or lower price

than IBM offers.

Appears to be surviving new

IBM product announcements

and growing. Strongest

growth is in specialized systems.

Supercomputer

Extremely large, powerful computers.

Predominantly for scientific

and technological applications requiring large amounts

of computing and data analysis, e.g., meteorological forecasting.

Small, specialized market, estimated at about $500 miIIion.

A few companies—most specialize in this type of system.

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

Table 11 .—Desktop and Personal Computer

1980 Worldwide Shipments

Table 13.—Computer Mainframe

1980 Worldwide Shipments’

By units 444,000 units total

Tandy-Radio Shack ., . . . . 2 5 %

Commodore . . . . ... . . 23

Apple. . . . . . . . . ... 17

Hewlett-Packard ., . . . . ., ., 6

IBM . . . . . . . . . . . . . . . 2

Others. . . . . . . . . . . . . . . . . . . . . . . 27

By revenue $1.9 billion

Hewlett-Packard . . ., ... ., 21%

Apple. . . . . . . . . ., . . ., 10

IBM . . . . . . . . . . . . . . . . . . . . . . ,., ,.,,,. 9

Tandy-RadioShack ...,., . . . . . . 7

Tektronix . . . . ..., ..., ., ., . 3

Others. . . ..., ..., ., 50

SOURCE International Data Corp.

—

1981 Computer Indusfry Briefing Session,

p.D-8

Table 12.—Minicomputer and Small Business

Computer 1980 Worldwide Shipments

—

Minicomputer a

By units 137,000 units

Digital Equipment Corp., ., ., ... , 44%

Data General ..., . ., ., 14

Hewlett-Packard ., ., ..., ., . . ., ., ., 8

IBM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Honeywell Information Systems. . . . . . 4

Others . . . . . . . . . . . . . . . . . ., ,, ., .....,, 23

By revenue $6.35 billion

Digital Equipment Corp., . . . . . . . . . . . . . .,, 34%

Hewlett-Packard ,...,., . . . . . . . . 16

Data General ....,.., . . . . . . . . . . . . . . . . 11

Honeywell information Systems. . ,

lam. ..,.....,,,,,.,,. . . . . . . . . . . . . ,., ;

Others ..,..,, . . . . . . . . . . . . . . . . . . . . ,., 26

Small business computerb

Byunits 71,000 units

IBM, ., ., . ., . .,,.,..,, . . . . . . . . . . . . . . . . 33%

Others . . . . . . . . . . . . . . . . . . . ., . .,..,,.,, 23

Digital Equipment Corp., ,, ,,..,, ., ....., 12

National Cash Register . . ..., . . . . . . 11

Wang . . . . . . ..., ..., ., . . ..., 8

Burroughs . . . . . . . . . . . . . . . . . . ., ., .,, . . 7

Data General . . ..., . . . . . . . . ., ., 6

By revenue $3 billion

Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33%

IBM ...,....,,...,.,., . . . . . . . . . . . . . . . . 28

National Cash Register ., . . . . . . . 10

Wang . . . . . . . . . . . . . . . . ..., ,, . . . . . . 10

Digital Equipment Corp.. . . ., ..., ,., . . 8

Burroughs ., ., ., . . . . ., ..., 7

Data General . . . . ~. . . . . . . . . . . . . 4

a

lnternational Data Corp 1981Computer industry Briefing Session, p. D-4.

b

International Data Corp 1981Computer Industry Briefing Session, p. D-6

Revenues

Rank Company ($millions) Percent

1 IBM . . . . . . . . . . . . . . . . . . . . $10,650 62.4%

2 HIS, ....,.,,,,.,,, .,.. 1,550 9.1

3 Sperry Univac,,,., ,...., 1,410 8.3

4 Burroughs. , . . ..., 1,000 5.9

5 NCR. ,, . ., . ., ..,.,..,.., 480 2.8

6 CDC. .....,,,, ,., 400 2.3

7 Amdahl .,,,..,,,,, ,.,,, 380 2.2

8 DEC ..,,.,,,,,. .., ,,.,, 205 1.2

9 National ,,,,,,, ., ....,, 190 1,1

10 Cay. .....,,,,,,,. . 50 0.3

11 Magnuson. ..., . . 35 0.2

12 IPL.,. ,,. . . . . . . 10 0.1

lb] Compatible peripherals, ., 700 4.1

Totals ,,, ,, .,,,..,.,,. $17,060 100.070

aShipments of large general purpose computers only Companies Iisted may

derive significant additional revenue from shipments of other types of computer systems

bValue of shipments of plug-compatible peripherals produced by many smaller

companies

SOURCE International Data Corporation 1981 Computer Industry Briefing Session, p C-3.

The mainframe business is still the major component of computer sales and

will be for the foreseeable future. IBM

has the largest market share by far, and

there is no evidence that its lead is

shrinking.

The growth rate for sales of very small

systems–desk-top or personal computers—will be very high, while the historically high rates of growth for larger systems will level off somewhat.

In response to the changing nature of

the computer marketplace, more emphasis will be placed on retail marketing

and customer services. Retail firms not

traditionally associated with computers

will enter the small computer field.

The explosive growth of the microprocessor industry maybe slowed by limited

production capacity and by the increasingly high costs of design and tooling

for new applications.

There has been recent evidence of a

trend toward acquisitions of small semiconductor companies by large firms.

According to one report, of 36 new semi-
Ch. 14—industry Structure 151

conductor companies formed since

1966, only seven remain independent.

Many of the acquisitions have been by

foreign firms: French, West German,

Japanese, Canadian, and Dutch.

● While foreign competition has made

some inroads in electronics sales, and

computer manufacturers are wary, particularly of Japanese competition, no

evidence of any substantial impact on

the domestic computer hardware market exists at present. The microprocessor and personal computer markets

seem to be most vulnerable to such

threats.

Particularly in the small machine and

special application markets, there appears to be wide opportunity for entrepreneurs to innovate and make a successful market entry.

Auxiliary Equipment

Many companies have successfully competed in the computer market by providing

the peripheral equipment—terminals, memories, and the like—that extend the capabilities of existing computer systems. This independent peripheral market can be roughly

divided into two parts–equipment in direct

competition with that offered by the system

vendor, and specialized hardware not commonly manufactured by the mainframe companies.

Most mainframe computer companies sell

a wide range of peripheral devices for information storage and for input and output

of data. However, other manufacturers claim

that by specializing in some specific category of device they can offer better quality

at a lower price. Often, in fact, these units

are sold to the computer system manufacturer, which in turn puts its own name on

them. The total auxiliary equipment market

is estimated at around $7 billion or more.

Thus, even though the major mainframe

manufacturers take a large portion of that

market, the remainder is well worth competing for.

The categories of equipment shown in

table 14 below are not a complete list. The

range of accessory equipment sold for computers is extremely wide.

The industry for auxiliary equipment has

the following principal characteristics:

●

●

●

●

All of the major manufacturers offer a

wide assortment of peripheral equipment for use with their systems, and

the sale of this equipment constitutes a

major portion of the market. However,

there is an active and profitable group

of independent manufacturers selling

equipment of all types. In many cases,

the large computer corporations have

an agreement whereby they purchase

this independent hardware and put

their own brand name on it.

Users are more likely to accept new and

improved devices as they come on the

market, because it is much easier to

change auxiliary equipment with minimum disruption of their operations.

Furthermore, different auxiliary equipment can perform an identical function

with a greater variety of possible internal technologies and designs. These two

advantages lead to market opportunities for inventors and, hence, to profitable new enterprises.

Much of the interest in the area of data

storage is concentrated on large and inexpensive bulk memories. Current activity is in bubble memory and floppy

disk technology, although the use of the

video disk for very cheap data storage

is also being explored and appears likely

in a few years.

The terminal industry is growing quickly, matching the growth in the use of
Table 14.—Auxiliary Equipment Industry Structure

— — ., . —.-. .— .——

Characteristics of hardware Purpose and/or use Nature and size or present industry Nature and size of present market Future trends

Random access memory devices

High-speed, usually uses large-scale The main storage for data while being

integration technology (500 + used by the computer

circuits on a single chip), recently

IBM Introduced very large-scale

Integration (VLSI) technology

(several thousand circuits on a

single chip) Connects directly to the

computer processor

Bulk memory devices (a) Magnetic tape and fixed head disks

Communicates with the central An auxiliary memory device to hold

processor through an Intermediary data not currently being used by the

controller, has slower access times system

and larger capacity.

(b) Floppy disks

Inexpensive, easy-to-handle, and

reliable form of bulk memory

storage

(c) Very large memories

Stores trillions of bits of Information

A few very different technologies are

used, e.g., video tape and laser

photographics

Originally developed by IBM as a

control memory for the System 370

series of computers At present, It IS

the medwm-of-choice for small

computer systems, Intelligent

terminals, word processing systems,

and similar applications

Acts as an archive for very large

quantities of data, where the

information IS rarely changed and

Infrequently accessed

Graphical display equipment: (a) Video graphics

Picture displayed on a cathode ray Presents computer output graphically

tube with the capability to display for such applications as computercolor and fully shaded solids. aided design. Users can interact

with the display to control

computation or put information into

the system

All computer manufacturers sell these

as an integral part of their systems,

also sold by some independents,

mostly as IBM compatible

equipment

Several Independent manufacturers,

very competitive. Major suppliers

Include firms such as Memorex,

Storage Technology, 3M, Xerox, and

Ampex

Successful area for small

entrepreneurs Leading Independent

producer IS a small, California-based

company, founded in 1973–with

$18 million in sales that year

Presently, more than a dozen large

and small manufacturers in the field

Very few manufacturers, principally

Ampex and IBM

Has been domain of a few, small

companies selling relatively

expensive systems to a narrow

range of users. As cost of

electronics has dropped and more

efficient graphics software has been

developed, cost of graphics systems

has decreased markedly.

Market for Independent vendors has

developed, especially for IBM- compatible products

Independents can serve a larger

potential customer base than any

mainframe vendor, because they can

design high-performance equipment

that can be Interfaced with a variety

of computer makes Over $1 5

billion in sales

Because of applications to small computers (see Purpose and/or use column), its market IS somewhat different from the markets for the

predominantly medium- and largescale systems for magnitude tape and

fixed-head disks

Limited, special purpose market

The market for full video graphics IS

growing rapidly as graphics-oriented

applications are becoming more

accepted by users

Independents are motivated to

develop products faster to compete

with IBM cheap VLSI technology

The market IS risky due to the

uncertainty over IBM plans

Some Improvements are stall likely,

but major breakthroughs are unlikeIy It wiII still be a common

technology during the next decade,

but wiII eventually be replaced by

electronic technologies

The technology IS developing rapidly,

driven by competetive pressures, and

the demand IS growing due to the

proliferation of small computers

The demand for this type of storage

wiII grow, but rapid growth wiII depend on the development of new

technologies, such as holographic

storage, and appropriate software

techniques

The further Iowering of prices due to

the economy-of-scale effect, along

with the accumulation of experience

are expected to Increase market

demand inexpensive systems are

Increasingly being incorporated into

remote data terminals The

prediction IS that by 1983, the

market for all graphics display

terminals wiII reach $500 million

annually, and for graphical display

equipment wiII grow to a billion

dollars or more from the present

quarter of a billion
.

Characteristics of hardware

(b)Plotter graphics

Picture IS drawn by a mechanically

controlled pen

Printers

An alphanumeric text IS printed on

paper Offers a wide range of

speeds and technologies from

impact printing to photo Xerox

Imaging

Data entry systems

Includes these products Keypunches

(cards) Keyboard to tape and disk

Terminals–wdeo and typewriter

Optical readers–bar code, marks, or

characters Magnetic character

readers Direct data recorders Voice

data entry

Table 14.—Auxiliary Equipment Industry Structure (continued)

. . . . —-— Purpose and/or use ——

Gets graphical information out of a

computer in the form of hard copy

The principal means of producing

printed reports from a computer on

paper

Gets information into computers,

optical and magnetic readers as well

as direct data recorders transmit

data directly to the computer from

the source For readers, the source

IS a machine-readable code, e g ,

magnetic characters on a bank

check and printed bar codes on

grocery items For recorders, direct

measurements are made of physical

properties, e.g., temperature and

pressure Voice recognizers convert

oral communication to computer

code

SOURCE Off Ice of Technology Assessment

Nature and Size of present Industry

-.

Dominated by California Computer

Products (Calcomp) The plotters

sold by most major computer

vendors are made by this company

(Vendors put their own names on )

Mainframe manufacturers dominate,

but there are some successful

entries by Independents The

principal Independent manufacturers

are Centronics and Dataproducts

Numerous small companies. IBM’s

domination through the emphasis on

punched cards IS fading as new,

better technologies are coming into

use

—

Nature and size of present market Future trends ——————_—. -.—

The revenues of Calcomp exceed

$100 million

The revenues of the principal

Independent manufacturers are

about $100 million each

Sales, which were about $1 77 billion

in 1977, are growing at about 15

percent per year The market for

voice recognizers has been

surprisingly good

The market IS expected to reach $36

billion by 1985 The development of

a reliable printer in the 1980’s that

would sell below $1,000 would tap

rapidly expanding small computer

markets, and would not compete

directly with industry giants

The market IS expected to grow

rapidly in the 1980’s as the

technology improves Data recorders

WiII become more Important as

computers are used for controlling

processes both m industry and in

the home
154 ● Computer-Based National Information Systems: Technology and Public Policy Issues

●

communication-based computer appli- toward the use of other media such as

cations. The current trend is toward magnetic disks. The most significant

graphical display, and putting more trend in the 1980’s will be toward syscomputer processing logic in the ter- tems designed to capture information

minal itself. directly from the source by voice recogData entry has been moving gradually nition, by image analysis, and by direct

away from the use of punched cards and measurement.

The Data Communication Industry

The data communication industry produces goods and services necessary to

transmit digital data between computers or

between computers and a terminal. For convenience, the industry is split into two sectors, the hardware manufacturers and the

carriers, as shown in table 15. (The description of the industry presented in this study

presents an information processing view.

The OTA report on Telecommunication

Technology and Public Policy, in press,

presents a common carrier view of the data

communication industry. )

The magazine Datamation estimates the

total data communication industry to be

running currently at over $4 billion per year,

and to be growing rapidly. The carriers have

most of the action, nearly three-quarters of

the market; AT&T has the biggest individual share, about 56 percent of the total market. The top 10 companies (other than

AT&T) in the data communication hardware

market are listed in table 16, and the top 10

data carriers in table 17. All revenue estimates are from Datamation.

The following comments about the data

communication industry appear pertinent:

● The most apparent characteristic of the

data communication hardware market

is the continued presence of IBM at the

top of the list. Even though only one

product covered in the survey is offered,

a communication front-end processor,

IBM’s revenues are more than double

those of the next largest company. Yet

●

●

●

this income represents less than 1 percent of IBM total corporate income.

There appear to be many healthy small

firms in the communication hardware

business. Generally, they specialize

very narrowly along specific product

lines. Six of the 10 companies listed in

table 16 are small firms earning most or

all of their income in the data communication field.

The entire market for data communication is still not very large compared

with that for other services, principally

voice. It is estimated at between $2

billion and $3 billion. Accurate numbers

are hard to get, because the carriers

themselves do not always know when

their lines are being used to carry voice

or data.

Most experts expect a major explosion

of the market for data communication

over the next two decades. The most interesting developments are the plans of

some very large corporations for providing sophisticated data communication services in the near future. Although behind schedule, AT&T’s ACS

(Advanced Communications System),

should begin operation soon. IBM and

Aetna are underwriting a new corporation, SBS (Satellite Business Systems),

to provide such services. Exxon is reputed also to be planning services of

this kind. A highly flexible system will

be offered by these companies that is

designed specifically for high-speed

data transfer in many forms—e.g., com-
Table 15.—Data Communication Industry Structure

Characteristics of hardware Purpose and/or use

.

Hardware manufacturers (table 16) (a) FrorU-errd processors

Small specialized processors

dedicated to controlling

communications they are located

between the main computer and the

communication network

(b) Modems and multiplexors

Modems change the electric

characteristics of the data signal to

be transmitted on the communication

Iine from digital to audio–to match

the requirement of a communication

system to transmit voice

Multiplexors mix multiple data

messages into a single stream of

information down the wtre

(c) Network/node controllers

These are a recent concept which

look and perform very much like

front-end processors They are

located within the communication

network

Control communications by handling

all the messages between the main

computer and the terminals

Adapt computer systems and

terminals to the communication

systems designed to carry voice

Principally control data flow through a

complex network of computers and

communication lines

Nature of present Industry

IBM dominates with the 370X

processor for it's own machines

Other major computer vendors are

also principal suppliers The two

largest Independents are Comten

lnc., with over $37 million in frontend processor revenues and

Computer Communications Inc.

with over $17 million The number

of minicomputers bought to serve in

this capacity cannot be estimated

AT&T IS a major supplier of modems

(estimates are that Bell has as many

in use as the entire Independent

market)

Mutiplexors are supplied mainly by

Independent manufacturers

principally Motorola Racal-Mtlgo,

General Data Comm Paradyne and

Rixon All but the first one are small

companies with their principal

revenues from this market

Supplier picture IS not clear It

appears to be dominated by two

Independents, Comten and Computer

Communications Inc.

Nature and size of present market

Total sales approached $400 million

in 1979 Due to the growth of

Communication based applications

an independent industry IS anslng to

market these processors which for

many years mainframe

manufacturers have been prowdlng

as standard add-on equipment for

their machines

1979 Independent market estimated

at over $450 million.

A new market motivated by the

evolution of distributed processing

systems containing several

computers Interconnected on a

communication network In 1979

sales were about $70 million

Future trends

.—

WiII grow rapidly paralleling the

trend toward the application of

Integrating data communication and

computer systems

Similar to above, except that these

functions may be Included to some

extent in new data communication

services

Similar to above
-.

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

Characteristics of hardware Purpose and/or use Nature of present industry Nature and size of present market Future trends

(d) Terminals

Any human-operated input-output

device through which information

can enter or leave a communication

network

(e) Other devices

A miscellaneous group of relatively

cheap specialized devices, for

managing and testing

communication network

Data carriers (see table 17)

The medium that IS used to transport

or carry communication data or

informatlin, e.g., AT&T long Iines,

satellites

Connect a human user with a

computer

These are for setting up and

maintaining a data communication

network Includes such devices as

those for monitoring communication

lines for data accuracy and

performance and those for tracing

errors in a network system, also

voice response units that interface a

computer on one end of a telephone

line with a human on the other

To transfer data such as computer

data, electronic mail, facsimile. and

video conferencing with a high

degree of flexibility at high speeds

Appears to range from large,

mainframe manufacturers to small

specialist companies, Some merging

may be possible between small

computer and terminal industries, as

terminals become more ‘‘Intelligent’

and small computers gam more

communications capability

Racal-Milgo and Northern Telecom,

which largely produce test

equipment, are the principal

suppliers

Currently, AT&T is the principal data

earner Most other major carriers

(see table 17) also predominantly

supply telephone service A

competitive industry of pure data

communications IS developing The

high capital requirement wiII keep

the competition to a few large firms

Estimated to be large–over $1

billion-and growing rapidly. A vast

market exists for high-quality, lowcost hard-copy printed output, now

too costly relative to the small

computer to which it may be

attached A high demand is

anticipated for terminals,

concomitant with a projected

explosive market growth for small

and networked systems

A still quite small market relative to

the entire communication market,

but amounts to over $100 million

A large data communication market,

($4 billion in 1979) but still

relatively small when compared with

voice Accurate figures are difficult

to obtain since earners often cannot

distinguish whether their lines are

carrying data or voice

Terminal costs wiII fall, but not as

fast as electronics “lntelligent

terminals” will dominate the 1980’s

market, and be indistinguishable

from small computers with

communication capabilities There

will be a shift to more sophisticated

graphics terminals capabilities,

including color and half-tone, will be

built into terminals, thus obviating

the need for putting them on the

main computers

This will continue to be a relatively

small market

A major explosion of the data

communication market IS predicted

over the next two decades Some

very large corporations are moving

toward providing sophisticated data

communication services m the near

future. New services wiII be based

on communication networks with

substantial built-m ‘‘Intelligence’

allowing data storage for future

retrieval

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

Table 16.—The Ranking and Revenues of the

Top 10 Manufacturers of Data

Communication Hardware

Rank

1

2

3

4

5

6

7

8

9

10

1979

Company revenues ($ million)

IBM . . . . . . . . . . . . . . . . . . . . $158 

Racal-Milgo. . . . . . . . . . . . . 121

NCR . . . . . . . . . . . . . . . . . . . . 82

Motorola . . . . . . . . . . . . . . 81

Memorex. . . . . . . . . . . . . . . . 54

3M . . . . . . . . . . . . . . . . . . . . . 49

General Datacom. . . . . . . . 42

Paradyne. . . . . . . . . . . . . . . . 41

Control Data.... . . . . . . . . . 40

Rixon. . . . . . . . . . . . . . . . . . . 36

●

SOURCE: Detamation, June 1980, pp. 120-121.

Table 17.—The 10 Leading Carriers of Digital Data

and Their Data Communication Revenues

1979

Rank Company revenues ($ million)

1 AT&T. . . . . . . . . . . . . . . . . . . . . . $2,309

2 GTE. . . . . . . . . . . . . . . . . . . . . . 798

3 Western Union . . . . . . . . . . . . . . 451

4 lTT World Communications . . . 170

5 United Telecommunications . . 68

6 TAR T . . . . . . . . . . . . . . . . .. . . . 28

7 Tymnet . . . . . . . . . . . . . . . . . . . . 24

8 Continental Telephone.. . . . . . 21

9 Central Telephone . . . . . . . . . 20

10 WUI . . . . . . . . . . . . . . . . . . . . . . . 16

SOURCE: Datamation, August 1980, p. 107

puter data, electronic mail, facsimile, or

video teleconferencing.

These services will be based on communication networks that will have substantial “intelligence” built into them;

thus, the services will not easily be

classified as pure data carriage or as information processing. Since one industry (communication) is regulated and

the other (data processing) is not, acornplicated regulatory problem is created,

the resolution of which will allocate a

multibillion dollar market among competing industrial giants.

The computer industry has two strong

but contradictory reactions to these

developments. They see the evolution of

these new services as providing exciting

possibilities for new computer-communication applications, some linked on

a worldwide scale. Many of the new applacations being planned will serve large

multinational corporations or consortiums of smaller users, such as stockbrokerage houses.

On the other hand, some fear that a big

winner of this competition for the data communication market would be a monopoly

controlling all data communication services

worldwide. While the carrier business is not

a game for small players, such massive domination by one supplier could be threatening

to the hardware and service sectors that are

currently promising for the creative small

business entrepreneur.

Special Applications

The emergence of microprocessor technology has led to a new type of industry that incorporates the processor into a device that

performs a specialized function. This type of

industry will grow rapidly during this decade, fueled by growing consumer demand for

computerized products. Eventually, such

markets for computers may dominate the industry and become analogous to those for

electric motors. Few consumers purchase

them directly, but buy many products in

which they are incorporated.

Some of these products will be full computer systems programed to perform specific jobs; for example, the word processing

applications discussed later. Others, such as

the popular computer games, incorporate intelligence but do not look like computers.

These applications are also distinguished

from the incorporation of microprocessors in

common consumer goods such as microwave

ovens and automobile engines. The applications discussed here are new products, offering new, intelligence-based capabilities to
158 . Computer-Based National Information Systems: Technology and Public Policy Issues

their users. It is impossible to describe such

an industry generically; therefore a few current examples are provided (see table 18)

that illustrate the variety of ways in which

this set of industries will develop. Clearly,

the opportunities are endless for inventive

novel applications of this new technology.

The analogy mentioned above with the electric motor is particularly useful in picturing

the future potential of this industry sector.

Array Processors: An array processor is a

special purpose computational unit designed

to solve specific types of mathematical problems. (See ch. 5.) It is normally attached to a

general purpose computer system or minicomputer that sets up the data, feeds the

problem to the array processor, and puts the

answer out in appropriate form. Array processors have become particularly popular for

research and engineering applications that

involve signal processing or the modeling of

large physical systems.

Over 15 firms market these units, ranging

from IBM to small companies for which such

a processor is the only product. The processors cost between $5,000 for a small unit

on a printed circuit card to several million

dollars for Control Data’s Star computer.

Many small companies (such as Floating

Point Systems) and larger ones (such as Raytheon and Westinghouse), which don’t

engage in the general purpose computer

business, have found the lower end (up to

$150,000) of the array processor market to

be attractive, and have thus far successfully

competed in it.

Speak and Spell”: This is a specific product invention of Texas Instruments, which is

a leading manufacturer of microelectronics.

Unlike some of the other semiconductor companies, which sell their devices wholesale to

other manufacturers for incorporation into

products, Texas Instruments also produces

a line of consumer devices that use their own

electronics. These are largely centered on

electronic hand and desk calculators and a

recently announced personal computer.

In 1978, Texas Instruments produced a

small hand-held device that combined their

microcomputer technology with some new

speech synthesis capabilities to produce a

combination toy and teaching aid called

“Speak and Spell® .“ The device speaks a

word and the learner types the word into the

machine on a small keyboard. “Speak and

Spell”” was an instant success, encouraging

Texas Instruments to plan not only improved versions of the original but to find

other specialized products that combine

speech synthesis and microcomputers.

Translators: The hand-held language

translator is a new consumer device that has

been appearing in the stores over the last 2

years. It resembles a pocket calculator but

has an alphabetic keyboard and a somewhat

longer display window. A person types in a

word or phrase in one language and reads the

translated phrase on the display.

The machine was invented by a small

group of entrepreneurs who were not in the

electronics business at the time. Forming a

company called “Friends Amis, ” they developed the design and specifications of the

logic chip required. They then contracted

with a microprocessor manufacturer to produce the specialized electronics, and arranged with a distributor of consumer electronics to retail them under the distributor’s

brand name.

The translators were an instant hit,

enough so that Texas Instruments and Lexicon have been drawn into the market.

Despite the competition, Friends Amis has

been a success, turning an initial investment

of $1 million into an $8 million profit last

year on sales of $30 million. Still growing,

the company soon plans to market a handheld computer through an agreement with

Matsushita. The Japanese corporation will

provide the marketing capability the small

company lacks. Besides making money,

Friends Amis has, in the words of Fortune

magazine, “managed to’ father a new branch

of consumer electronics. ”
Characteristics of hardware

Array processors

Specialized units for very economic

and fast solutions for particular

mathematical problems Usually attached to a mini- or general-purpose

computer for control and input/output

Speak and Spell n Consumer electronics device-small

hand held combining the manufacturer's (Texas Instruments) micro

computer technology with speech

synthesis capabilities

Language translators

Consumer electronics device–a hand

held language translator with an alphabetic keyboard and a display

window similar to but larger than

that on normal calculators

Word processors

A computerized ‘Intelligent’

typewriter that stores a document

electronically as it is entered, and

displays the image on a cathode ray

screen

—SOURCE Off Ice of Technology Assessment

Table 18.—Special Applications Industry (examples)

Purpose and/or use

Research and engineering applications

involving signal processing or modeling large physical systems

Combination toy and spelling teaching

aid—machine speaks word then

child types it on small keyboard

Type in word or phrase– read off

translation on display

Allows operator to edit and correct

text directly in memory, and

automates repagination, hyphenating and justification Some systems can correct spelling

Nature of present Industry

Units marketed by over 15 firms from

IBM to small companies with processor as their sole product cost

from $5000 for smallest unit on

printed circuit card to several million

dollars for the Iargest size opportunities for small entrepreneurs

Specific product invention of Texas

Instruments

Developed by entrepreneurs originally

not in electronics business who contracted electronics to microprocessor

firms

Principally companies that make or

have made computers e g Wang,

IBM, and Digital Equipment Corp.

Other firms are now entering, ilIustrating new opportunities being

opened by cheap electronics, e g

Lamer Business Products, a leader

in Dictaphone sales Also major firms

such as Xerox and Exxon are developing strong positions

Nature and size of present market — .

Research and engineering design

laboratories are principal users

Instant consumer success

Consumer electronics success– company that developed product had

$30 million in sales in 1979 on an

Initial Investment of $t million

Over 80 percent growth in 1979

growth expected to continue over 50

percent in t 980

Future trends

More specialized designs targeted. al

unique types of calculations The

potential large revenues from such

specialization wiII stimulate growth

The manufacturer wiII improve present product and develop additional

specialized products combining

speech synthesis and microcom

pters.

Consumer electronics market still

growing–several electronics companies are entering The umt may

evolve into a more general handheld personal computer

In 1980’s Integrated office systems

wiII display sophisticated capabilities

for correcting grammar and formatting text They wiII merge with

new data communication services

Iinking geographically separated offices through high speed data communication networks offering video,

audio, and computer conferencing.

and distributed information processing. Electronic archival storage

for storing and retrieving information

efficiently and easily wiII be offered
160 Computer-Based National Information Systems: Technology and Public Policy Issues

Word Processing Systems: These are important new applications around which a major industry will grow in the 1980’s. Word

processing systems, the first entry in the office automation trend, are designed to increase the productivity of information handling by automating its preparation and

flow. The applicable technologies will be

drawn from both computers and communication, and the trend will be toward the integration of document preparation, storage,

and transmission.

For now, the principal offering on the computer side is the word processor. It is essentially a computerized, intelligent typewriter

that stores a document electronically as it is

entered, displays the image on a cathode ray

screen, and allows the operator to edit and

correct the text directly in its memory.

Tedious tasks such as repagination, hyphenating, and justification are taken care of

automatically. Some systems even correct

spelling, and some observers expect systems

in the 1980’s to display sophisticated intelligence for correcting grammar and formatting complicated text. The market for

sophisticated word processing systems grew

over 80 percent last year, and next year

market growth should still be over 50 percent.

The principal actors in the word processing business have tended to be companies

that make or have made computers, such as

Wang, IBM, and Digital Equipment Corp.

However, other firms are now entering the

market, illustrating the opportunities for

new entries being opened by cheap electronics. Lanier Business Products, for example, a leader in the sale of dictaphones, has

entered with both stand-alone systems and

those using a shared computer that serves

several terminals. Lanier, principally viewed

as a firm with marketing expertise, purchased interest in a small data products company, AES Data Ltd., that designs and manufactures the word processing equipment.

The most important trend that experts

think will dominate in the 1980’s is the merging of these word processing systems with

the new data communication services being

planned, such as SBS or AT&T’s ACS.

Using these new services, geographically

distributed organizations will be linked

together through a very high speed data

communication network offering video and

audio conferencing, computer conferencing,

and distributed information processing.

The final ingredient for the integrated office systems of the next decade is the development of electronic archival storage. The

hardware base exists for storing information

at a cost lower than that of filing paper. The

need now is for appropriate software that

would allow the user to store and retrieve information efficiently and easily. Some systems are on the drawing broad. Systems Development Corp. and Datapoint have announced prototypes for systems they will

sell in a year or so.

As these trends merge, whether small

firms can continue to successfully develop

and compete in the word processing market

may depend on the degree to which interfaces become standardized, allowing competition for particular components of an integrated office system. Major firms such as

Xerox, IBM, and Exxon have taken aim at

the automated office market, and competition will be severe.

Computer Services

The computer services industry, summarized in table 19, performs a wide variety

of tasks that make the computer more accessible, more usable, and/or less expensive

for computer users. Some companies sell

time on their own computers; others provide

programing or operations services (including

training, consulting, and facilities manage-
— Table 19.—The Computer Services Industry Structure

Services provided

Processing servicesThese firms called service bureaus

provide access to computer time

They also provide access 10 programs designed for specific control

applications

Professional software products and services.

Prewritten programs to do specific

tasks that can be leased or purchased by users Because heavier pro

gram development costs can be written off against multiple users, this

commercial software can be more

soundly based mathematically, more

flexible more reliable, and better

documented than a home-grown program would be In additlon, the vendor assumes the burden of the continued maintenance and improvement of the package

(b) Software services

Provides programing expertise to

develop a specific program for a particular user

Other services

The Industry provides a variety of

support services to users

Purpose and/or use

For computer users preferring to purchase computer time from outside

firms rather than owning and operating their own systems

(a) Software products

The majority are for applications

although some are designed to im

prove the operation of the user’s

system They tend to be large and

complex designed for broad applicability e g large data management and file Inquiry systems optimization programs, and packages

of sophisticated statistical routines

For a user’s own projects, and to

assume the responsibilty for the

major development efforts for which

the customer does not have the appropriate staff

——

Nature of Industry Nature and size of market

A relatively few very large companies About $67 billion worth of computer

and a large number of small but time was purchased in 1980 and

profitable Operations (See table 21 ) the market iS growing at nearly 20

Good opportunity for small com- percent per year

panies to compete successfully by

taking advantage of specialized services targeted at a market in which

they have particular expertise

A large number of small firms Over For the total software products in

90 percent of the companies fit into dustry, the market iS estimated at

ADAPSO’s category of those that are over $1.5 billion per year

smallest in size The large hardware

vendors also sell some software

products tailored for their machines

A few small companies specialize in A market about equal to that for

programing Many large firms, hard- prewritten packages It iS estimated

ware manufacturers, service bureaus at around $1 billion per year

etc., offer programing services to

support their customer’s needs

For consulting, for operating the Mostly very small firms

customer s computer center, for

maintaining the hardware and for

Integrated hardware/software

systems

No soild estimates of market size

could be comparable to that of professional software support market

—.— —— SOURCE: Office of Technology Assessment and Association of Data Processing Service Organizations

-— .—

Future trends —

The coming generation of cheap computers will be a threat to those companies that just provide computer

time without adding market value in

the form of application packages and

consulting Consequently the move

iS toward providing programing and

other support activites that are less

sensitive to the specific source of

computer power

The growth rate for the next 5 years

for this unusually fast growing in

dustry iS estimated at 30 percent

The industry predicts substantial

growth of over 20 percent annually

for the next few years, depending in

part on the continued scarcity of

skilled talent, which makes it costly,

thus discouraging users from establishing their own staff of application

programmers More market segmentation and specialization seems Iikely

A new service Industry iS developing

providing books, magazines, software, exchange services, employee

education, and consulting, for small

computer users. With the increase in

the use of small computers in the

1980's, some major growth potential

may exist for services designed to

make these new systems most useful to a new class of inexperienced

users

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

ment) to users who own their systems. Still

others sell prewritten programs or provide

access to those programs on a service bureau

computer. Most recently, some companies

offer processing services through integrated

hardware/software systems.

The Association of Data Processing Service Organizations (ADAPSO) is the principal

organization representing this industry.

They define the role of their industry as adding “value to the computer hardware utility

by integrating into the service people, expertise, products, distribution networks, and

education. The structure of the computer

service industry as discussed here reflects,

in part, that used by ADAPSO.

The largest publicly held independent

computer service corporations along with

their estimated 1973 revenues from computer services are shown in table 20.

Table 20.—Estimated 1979 Revenues for the

Top Five Independent Computer

Service Companies

Estimated 1979

Company revenues ($ million)

Automatic Data Processing . . . . . . – $372 – - -

Computer Sciences Corp. . . . . . . . . . . 343

Electronic Data Systems. . . . . . . . . . . 274

Tymeshare . . . . . . . . . . . . . . . . . . . . ., 193

Bradford National. ... , . . . . . . . . . . . 120

a

The three Companies with the largest computer services revenues — IBM, Control Data Corp., and Burroughs—derive their primary revenues from hardware

sales and thus are excluded from this list

SOURCE Association of Data Processing Service Organizations

Table 21 shows the structure of the computer services industry in terms of size of

firm.

The following observations can be made

about the computer services industry:

●

●

●

●

The availability of inexpensive capable

computer hardware will put pressure on

service firms that only provide customers with access to computer time. Even

so, most observers do not expect the

computer service bureaus to fold up.

The service bureaus are showing a trend

toward offering an integrated set of

services based not only on access to

pure computing services, but also to

specialized programs and data bases

already present in the company’s

system.

The service industry seems to be characterized by a few large firms and

many, equally profitable, very small

operations serving very specialized

markets (such as law firms, pharmacies,

and civil engineering firms). The development of new data communication facilities will make more of this type of

specialized service possible by providing a national marketplace for it.

A new industry will develop to support

the personal and desk-top systems now

being marketed. These services will offer maintenance, programs, consulting,

and education specifically oriented to

owners of these very small systems.

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

1979 gross

Number of 1979 revenues profit Growth rate

Size of operation companies ($ billion) margin (percent) (percent)

Over $25 million. . . . . . . . . . . ~ . . 

. . . . . . . ‘“ - --40 ‘-

$ 4.0 1 0% 200/0 -

Between $10 million and $25 million . 70 1.5 7 23

Between $2 million and $10 million . . . . 450 2.0 9 22

Under $2 million. . . . . . . . . . . . . . . . . . . . 3,500 2.5 9 22

Total . . . . . . . . . . . . . . . . . . . . . ... 4,060 $10.0 —

aThis table includes estimated revenues for computer services provided by Independent computer service companies and computer hardware manufacturers. Numbers

are rounded off

SOURCE: Association of Data Processing Service Organizations
Ch. 14—industry Structure ● 163

Information Services

Selling information is a centuries-old

business; however, the computer is forcing a

radical change in the character of this industry. The nature of the information sold,

the way it is provided, and the principal

organizations supplying information services are all changing rapidly, which will

shape a new type of industry in this decade.

The traditional information industry has

always been predicated on the assumption

that some information has tangible economic

value and can be treated as a commodity.

The industry, taking this traditional approach, views itself as similar to any other

industry in structure. That is, it is divided

into producers, distributors, and retailers.

For example, an author might be a producer,

a publisher, a distributor, and the bookstore

the retailer. Similarly, in broadcasting there

are show producers, networks and syndicates that distribute the programs, and the

local stations that broadcast them into

homes.

Now the industry is computerizing. Traditional information organizations such as

Dun & Bradstreet, Macmillan Press, and the

Knight-Ridder newspaper publishers are exploring new uses of information technology

to expand their offerings. On the other hand,

computer service bureaus, as pointed out in

the previous section, are moving away from

offering pure computer time and toward providing program and data services that are

certainly classifiable as information services

even by the most traditional standards.

Finally, new companies such as Data Resources, Inc. (now part of McGraw-Hill)

have been formed specifically to provide

computer-based information services. The

computer’s impact is being felt by all three

sectors of the information industry.

In the production of information, increased computerization of social activities

means that there is a swiftly growing pool of

information of all kinds that can be read by a

computer. Financial information, airline reservations, stock transfers and commodity

prices, and even wire service news, are examples of information already available i n

electronic form. Much of it is already transmitted on communication lines.

The next decade or two will see most o f

the information needed to run people’s live s

and businesses originated and stored in computers. This trend will stimulate the distribution and retailing of information, be -

cause putting the information into compute r

readable form is a major cost of curren t

automated information services.

Data communication technology is changing the rules for the distribution of information. Traditional distributors such as broadcast networks, book publishers, and commo n

carriers are looking carefully at the potentia l

advantages offered by data communication .

The publishers see a new mechanism to distribute newspapers, books, and magazines,

in addition to possible new services; the common carriers and broadcasters see new uses

for their facilities as vehicles for these

services.

Many of these services will soon be retailed directly to the home or office via

telephone, television, and cable. Precursors

to these services already exist in a few local

cable systems, and experiments such as the

recently canceled AT&T Electronic Information Service provide an automated telephone

directory and a selection of other information systems over a telephone line to a home

terminal.

Some information services are transformed by the use of technology, others are

created. It is the new computer-based services that are of particular interest to this

study.

The Information Industry Association

identifies nine categories of information industry. These are:

1. producers of primary information

(books, journals, research studies, etc.);
164 . Computer-Based National Information Systems: Technology and Public Policy Issues

2. producers of secondary information (indexes, bibliographies, data bases, microforms, directories, etc.);

3. communication companies (broadcast,

cable, switching, etc.);

4. information distributors, agents, or

brokers (on-line service, sales representatives, dealers, etc.);

5. information transactors (banks, lending

institutions, investment houses, etc.);

6. consultants or contract suppliers of information (designers, developers, etc.);

7. information retailers or outlets (ondemand services, search services, etc.);

8. equipment or supplies companies (computers, micrographics, text processing,

graphic arts, etc.); and

9. popular media organizations (news, education, advertising, etc. )

Some of these classifications are of particular interest to the computer and communication industry.

Producers of Primary Information: For

some time, the intermediate processes of

publishing have been undergoing automation. Computerized typesetting, on-line

editing and other uses of word processing,

and digital communication of edited text are

being widely adopted and should increase

productivity substantially.

For the time being, the final product will

continue to be in paper form. However, the

future widespread use of the video disks and

high-speed data communication systems

may gradually lead to products being published in digitized formats as well.

Producers of Secondary Information:

Many producers of bibliographies and information directories now regularly prepare

them on computers. Some even offer the

final product on-line from a computer. The

user dials in from a remote terminal to get

the desired information.

These industries have found the computer

to be useful not only to automate the more

routine aspects of their operations, but also

to provide more sophisticated analyses and

customized arrangements of the information

they maintain. Since a large on-line data

base can be searched far more effectively by

computer than by hand, the services provided by such a producer are qualitatively

different from those provided by a traditional bibliographic service.

Such information, however, is currently

very expensive to prepare. Persons must

first read the printed material, then analyze,

index and otherwise code it, and put it into

machine-readable form. In the future, when

most printed text will originate on computerbased text processors, automated computerized indexing systems will eliminate most of

these tasks.

This high labor cost, coupled with the fact

that the initial significant market for such

systems is the research community, means

that most bibliographic systems now available were originally supported, at least partially, by the Federal Government. Some are

now self-supporting, while others continue to

be subsidized, depending on their purposes.

Bibliographic information is the hardest

case, however.

There have been some successful entrepreneurial experiments in providing other

forms of on-line data service. Data Resources, Inc. (DRI) is one of the best known.

Founded by the well-known econometrician,

Otto Eckstein, DRI provides econometric

data and access to sophisticated computerbased models to economists, particularly

those in private industry. Most of the major

corporations in the United States now

subscribe to DRI services.

There are a number of such firms that

have been founded to provide computerized

databank services. Many are still quite

small, specializing in particular types of data

to serve narrowly targeted markets. The

range of services is quite broad. One industry analyst identified 22 different categories of databank service.

Data Transactors: There are many firms

that create useful information in the course

of their business, although they may not be

in the primary information business. For ex-
Ch. 14—Industry Structure ● 165

ample, banks, stockbrokers, airlines, and

credit card companies all create transactional information. More and more of this information is in computer-readable form and,

furthermore, is possibly valuable to some

other party. This firm or individual may be

in a related business, or may have no connection with the principal field of the original

data collector.

The market for such data is likely to grow

significantly over the next decade. Pools of

data from transactions will accumulate in

computer systems, and new enterprises will

spring up to collect, organize, and sell them.

The transactors will find that wholesaling

their data pools to such firms will be a profitable side business. When that happens,

pressures may well build to increase the

amount of information collected beyond that

necessary to serve the immediate transaction, thereby increasing the resale value of

a company’s data pool. These firms will then

become principal actors in the information

industry.

Information Retailers: Information retailers provide computer-based information

products directly to the business or private

consumer. They may also be the producers,

or they may simply retail other producers’

products. So-called “videotext” service providers, which offer in-home information over

broadcast or cable television channels, usually serve as brokers, making their facility

available to anyone who wants to provide an

information service, in the same way that a

grocery store carries soup made by different

producers.

Many of the databank providers discussed

in the section on secondary producers offer

very complicated systems that require some

training and experience to use. Therefore,

these services are often provided through an

intermediary, such as a consultant, librarian,

or stockbroker. In a sense, these persons

serve as retailers of the information service,

marketing it to individual users. The characteristics of the information services sector

are summarized in table 22.

The following conclusions can be made

about the information services sector:

●

●

●

Traditional information producers such

as book publishers, newspapers and network broadcasters will be converting

their services into computer and telecommunication-based offerings.

New information services will be transmitted to the home over telephone,

cable, and broadcast carriers. Some of

these services may be integrated with

in-house computer systems and video

disk and tape units.

Libraries will extend their services beyond mere provision of books into offering computer-based services. Such new

activities may conflict with the new

commercial in-house services mentioned

above.
166 ● Computer-Based National Information Systems: Technology and Public Policy Issues

Table 22.–The Information Services Industry Structure

How Information Nature of Industry

Nature of the Information iS provided and/or market Future trends

Producers of primary information

Published materials For time being in paper form Traditional book, magazine and

newspaper publishers

Producers of secondary information

Bibliographies, information directories, econometric data, and

other particular types of data that

serve narrowly targeted markets–

over 22 different categories of data

bank services have been identified

Most are prepared on a computer

Data transactors

Firms create useful transactional information in the course of carrying

out their business, e.g., banks,

stockbrokers, airlines, and credit

card companies

On Paper and on-line from a com- Most bibliographic systems available

puter. The user dials in from a were originally supported, at least in

remote terminal to get the desired part, by the Federal Government.

Information because their initial chief market

was the research community Some

are now self-supporting, others, depending on their purpose, continue

to be subsidized Data Resources,

Inc., iS an example of a successful

entrepreneurial experiment in providing other forms of on-line data

serwces-econometric data and access to sophisticated computer.

based models for economists Many

small firms have been founded to

provide a broad range of computerized data bank services

Most IS in a computer-readable form Currently, the number of transactors

that may be of value to some other IS growing but there iS only a small

firms or individuals market for their data

Information retailers

Computer-based Information products Directly to businesses or private con- Retailers may also be information prosumers. ducers or may just retail the products of other producers, e.g., socalled ‘‘videotext services that offer in-home information over broadcast or cable television channels

usually serve as brokers who make

their facilities available to anyone

wanting to provide an information

service

The Increasing adoption of computerized

typesetting, on-line editing and other

uses of word processing, and digital

communication of edited text should

substantially increase productivity The

future widespread use of video disks

and high-speed data communication

systems may gradually lead to the publication of products in other dlgitized formats such as in-home video Information

systems

Most of this data wiII reside in computer

systems to be called up as needed by

customers

Pools of data from transactions wiII accumulate in computer systems, and new

enterprises wiII spring up to collect,

organize, and sell them. Transactors

who profit from wholesaling their data

pools to such firms, wiII be motivated to

increase the quantity of Information collected in order to raise the resale value

of their data pools These firms will then

become principal members of the information industry.

Computers are having the effect of blurring the distinction between the products

and services offered by the computer in -

dustry This new hybrid industry wiII offer new forms of information services,

marketed in new ways, to new users

—— SOURCE: Office of Technology Assessment.-

U.S. GOVERNMENT PRINTING OFFICE: 1983-410-64 0