e.Digital Corporation (fka EDIG)

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OT-Where Everybody Knows Your Name
By Quentin Hardy

Digital identity will be ubiquitous, unified, functional--and after your wallet.

Digital identity has been one of the biggest battlegrounds in tech this year, pitting Microsoft against a raft of rivals and big businesses looking to build a future on the Internet. Now, seemingly, the conflict is ending faster than anyone had expected, helped in part by a quiet revolt by big corporate customers pressing Microsoft and its foes to get along.

Sources: Microsoft; The Nilson Report; CTIA; Social Security Administration. By the Numbers
All About Me
Microsoft's Passport has an early lead in Internet identities, but that doesn't mean it is the only way that identities will be stored.

200 million Number of Microsoft Passports issued, worldwide.

1.67 billion Number of credit and debit cards in the U.S.

992 million Number of cell phones in use worldwide.

217 million Active number of Social Security card holders.


But it is likely to be a temporary truce. A range of players including Sun Microsystems (NasdaqNM:SUNW - News) , General Motors (NYSE:GM - News) and the airlines are bracing for even bigger wars ahead.

Digital identity uses software-based features to let people access a network, visit any Web site and be greeted personally and individually, without ever having to fill out a registration form or otherwise introduce themselves. The dream is that, eventually, everything about you--name, address, Social Security number, credit card accounts, medical history and more--will be instantly recognized and ready for secure delivery to a vendor with whom you'd like to do business. You can even reassemble the data however you like, adding a new screen name and a different mix of details to drop in on places where no one knows you go.

One ultimate goal: to let machines talk to machines to transact business for you (or your company), without your ever having to go online to issue the orders.

It all sounds remarkably geeky, deeply personal and numbingly huge. But so are the phone system and our national banking networks. Like those, digital identity involves a big payoff, with stakes including billions of dollars in sales of goods and services online; thousands of new computers to manage transactions; and side businesses in security, corporate identities and consolidation of all the data in a central repository.

When personal data is easily swapped and shared on the network, a couple of keystrokes gets you, say, a United reservation, frequent-flier number included, plus the kind of rental car you like and your hotel reservation--even listings of the movies or restaurants that have opened since your last visit.

Without digital ID, we are stuck with the greatest friction point in Web commerce: that redundant typing in of passwords and filling out of home address fields for the umpteenth time.

There was bound to be a fight over something this valuable and new. Particularly with Microsoft (NasdaqNM:MSFT - News) involved: The Redmond, Wash. monopolist made a big early move to try to impose a standard for digital ID, offering a crude version of its Passport service in 1999. (Novell had the digital identity idea even earlier but couldn't find customers). Passport logs just a user name and password but can be extended, if a user chooses, to add lots more information. Microsoft has registered 200 million Passport accounts, largely through its free Hotmail service and Windows XP.

Microsoft says 80% of the 200 million accounts are in use (but there has been no independent count). Lots of services offered by its online-access business, MSN, use Passport, such as MoneyCentral and a digital photo site. Companies including Starbucks and Office Depot have also incorporated Passport into their Web sites.

Consumer companies were initially content to hear Microsoft's promises and to track the progress of rival schemes such as the Yahoo Wallet and America Online's Magic Carpet. But by last spring some grew restive at the idea of Microsoft's owning and managing the personal data on their customers. Sun Microsystems, Microsoft's bitter nemesis, stoked the worries and in early summer began contacting companies to pitch the idea of "federating" to create a nonproprietary alternative to Passport, letting their sites link up more easily without Microsoft as middleman.

"We told them that if they didn't take hold of their customers' digital identities, someone else would," says Jonathan Schwartz, Sun's chief strategist. "We figured the online retailers would be freaked out by the threat, but they thought it was a tech issue. Financial services and media companies were more concerned."

Sun has a big stake in digital identity--managing the big databases requires special servers, called directories, good at fetching names. "To us, the economy sucks," Schwartz says. "People aren't going to buy a ton of new servers, but they are interested in consolidation and security. Our directory servers have the biggest sales growth." Microsoft has a similar product, called Active Directory, and Schwartz frets that Microsoft's Passport system will favor its own wares over other companies', much the way Windows steers users to sibling products.

Sun pulled in 33 big companies, including UAL, General Motors, Vodaphone and Sony, and last September they formed the Liberty Alliance . Liberty, now with more than 40 members, is finishing work on software standards for encryption, user authentication and other functions, which members and nonmembers will share.

Two weeks before the Liberty group was announced, Microsoft caught wind of the move and announced a strategy to create its own "federation" for Passport. The two sides have seemed implacably opposed for months. The rest of the industry may have to take sides. IBM has a dog in this fight, and Big Blue is leaning toward Microsoft over the Liberty Alliance. "For one thing, Sun makes us uncomfortable," says one IBM executive. "And besides, we don't know what their rules are."

The Liberty allies have gone so far as to invite Microsoft to join their group to ensure that Passport and Liberty are interoperable. The tacit message: The companies that would have been some of Passport's biggest customers may have successfully rebelled.

"Even Microsoft will find it congenial to offer Liberty-based [standards] in Passport," says the Liberty group's chairman, Eric Dean, chief information officer at United Airlines. "The rhetoric has changed." Neither side can afford to confuse consumers and corporate clients--imagine how carmakers would fare with incompatible versions of gasoline.

No one has made much off digital ID yet. So let the marketing begin: Companies want consumers using digital identity, and fast. Dean figures Liberty will have its first software out this summer and a more powerful version out to consumers by the end of 2002 or in early 2003.

Tony E. Scott, chief technology officer at General Motors, says digital identity will let automakers tie their customers closer to a single brand. "This could change the nature of a car from a single purchase to a lifetime stream of upgrades," he says. Computers in the car could access your entire driving and service history, perhaps even tapping into your medical records if you get into an accident.

The OnStar tracking system is an early effort, alerting the police to a car's location and owner whenever an air bag is deployed. Scott envisions a day when a driver's preferences and habits will be loaded into the new GM car when it's bought. Switch to Ford? Maybe you can forward that history--but maybe loading it is a little difficult, or it costs more to leave GM.

Companies like IBM and Sun, as well as myriad startups, see even bigger potential in building software for a corporate digital identity (see "It's Who Knows You"). An ID boom could also mean a huge business managing all those names and preferences in a secure and independent database. It would be something like the database that manages all the nation's phone numbers, listed and unlisted, only larger and more complex.

NeuStar, the 1999 management buyout from Lockheed Martin that acts as a third-party administrator of 160 million North American phone numbers (so one phone can reach another), is angling to be a digital-ID custodian. Jeffery Ganek, chairman and chief executive, says revenue from protecting digital identities could easily match its current custody revenue of almost $100 million annually.

Digital ID "will work like cash machines," he says. "The first ones were proprietary, then the big guys pressed the little guys to join them. We act like a Switzerland for the communications world; service providers like banks and airlines want an independent party to manage this."

Microsoft wanted to be in the custodian business, too, but recently retreated in the face of a customer revolt. Its Hailstorm project, later renamed the safer-sounding .NET My Services, was to be a central repository for ID accounts and other user-related services, but developers balked. Now Microsoft has scrapped the custodian role in favor of making and selling ID-storing software; MSN could use it, but so could others.

Lesson learned, says Adam Sohn, a Microsoft executive involved with both Passport and .NET My Services. "Customers said, ‘It's not like we don't trust you. We don't want anyone to own our data.'"

Privacy advocates may cringe at the idea of companies' keeping this much personal information on you. Maybe they should, but all the major players insist their first rule is that it's up to the consumer. "Privacy direction will be under user control," says UAL's Dean. "They decide what can and can't be shared."

Sohn says Passport will never track users to see where they go on the Internet or to learn more about their buying habits. He is quick to add, however, that other Microsoft services using Passport could do so, including MSN, Hotmail and the instant-messaging service. "Think of them as clients. It's a separate business." Translation: Passport won't track people, but businesses using it may.

Yet consumers have always been willing to show some leg in exchange for convenience. Sun's Schwartz freely admits he would reveal abundant personal data to an airline for a faster trip through security. "To the extent I elect to be part of this world, I'll be able to do more interesting stuff," he says.

The Sun executive has testified three times against Microsoft in the effort by nine state attorneys general to impose tougher sanctions on the software giant in the wake of its antitrust ruling.

"Microsoft has a lock on the desktop, which is a major channel to the Internet--an unbelievable franchise," Schwartz says. It will try to lock up digital ID in much the same way, he argues. Some way, somehow, he says, "there's no way they'll back off from competing." http://biz.yahoo.com/fo/020522/where_everybody_knows_your_name_1.html
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