Foreign Relations of the United States, 1969–1976, Volume XXXV, National Security Policy, 1973–1976

181. Memorandum From the President’s Assistant for National Security Affairs (Scowcroft) and the President’s Assistant for Domestic Affairs and Director of the Domestic Council (Cannon) to President Ford¹

Washington, January 6, 1977.

SUBJECT

• Securing U.S. Telecommunications

Background

Your earlier decision on securing U.S. telecommunications² included immediate steps to reduce the opportunities for Soviet communications intercept by moving government and defense contractor circuits from microwave to less vulnerable cable. However, the limited availability of cable and its exclusive control by a single common carrier impose the need for other means in achieving wider protection. These earlier decisions also directed development of technologies for wide-scale protection of microwave circuits, as well as preparation of implementation plans to achieve broad protection of both government and private sector communications.

The next major step is to decide whether or not to proceed at this time with wide-scale protection of the domestic telecommunications system. A decision to do so would require public explanation of the vulnerability of our communications network. In reaching a decision on total protection, two recently completed studies—an intelligence community damage assessment and a review of our technical readiness to proceed—provide valuable background data.

Damage Assessment

The intelligence community assessment of the damage resulting from Soviet intercept options (Tab A)³ confirms our earlier concerns and provides specific examples of damage to national interests resulting from Soviet intercept of private sector as well as defense contractor communications. [8½ lines not declassified] the circumstantial evidence makes a convincing case for extending protection to private sector communications on a broad scale.

Technology Assessment

An NSC technical advisory panel recently reviewed the status of the technology to determine if there were any major technical uncertainties or risks in proceeding with wide-scale protection of the domestic telecommunications network (Tab B).⁴ The Panel concluded that the technology program is sufficiently broad and the technical risks are sufficiently manageable that there is no technical reason to defer a decision to proceed. The Panel further pointed out that no single technology will provide a permanent solution to the telecommunications security problem. An evolutionary approach, involving successive application of a number of technologies, will be required, with the pace being set by Soviet advances in breaking our protection system and by the evolution of our domestic telecommunications system.

Decisions

There are two basic decisions that can be made at this time: whether to proceed with the protection of the private sector telecommunications, and whether to explain publicly the vulnerability of our telecommunications system and the need for protection.

Protection of the Private Sector

There are several advantages in moving ahead now with communications protection in the private sector:

• Such action would place further emphasis on the communications security problem, helping to assure that it receives continuing and timely attention by the next Administration.

• The damage to the national interests resulting from continuing intercept of private sector communications is great. Broad-scale remedial actions need to be implemented as soon as possible.

• The possibility of public disclosure of the problem without corresponding government action would likely result in disorganized responses by the telecommunications carriers and private sector users which could be disruptive to the domestic communications network and may not, in fact, substantially improve communications security.

The main problem, from a foreign intelligence perspective, in moving ahead with communications protection is that it may stimulate the Soviets to take even greater protective measures for their own telecommunications and thereby deny us a valuable and possibly irreplaceable source of information. However, a Presidential decision to knowingly permit the Soviets to listen to private telecommunications in the U.S.—when there is a technical means to halt it—in order to possibly preserve an external intelligence source would be highly criticized if such a decision became known. In addition there is an alternate view that the pace of the Soviet program to protect their communications is set by their recognition of the vulnerability of those communications and is relatively unaffected by U.S. communications security actions.

A secondary disadvantage of proceeding with the protection of the private sector is that some of the smaller common carriers, which depend almost entirely on microwave transmission, are currently suffering cash flow and capital problems. The cost of adding protective equipment, though not a major outlay and recoverable at least in part from user charges, could put these carriers at a competitive disadvantage relative to the larger common carriers.

Public Explanation

There are several reasons for making a public explanation of the vulnerability of the domestic telecommunications network and (possibly) the Soviet intercept problem at this time:

• Public explanation will alert private sector institutions to the potential damage from uncontrolled use of the telephone, allowing implementation of administrative procedures to reduce losses.

• Public explanation would place the actions of this Administration in the proper prospective. It is particularly important for the Government to create a favorable climate for public acceptance of communications security so that it is correctly perceived as a means to increased privacy and not as a threat to individual civil rights. Ongoing GAO investigations of the vulnerability of the telephone system to intercept and wiretap, the continuing activities of the House Government Information and Individual Rights Sub-committee staff in investigation of alleged government invasion of privacy, and possible inadvertent disclosure during transition might distort government actions, making them appear as an extension of the military/intelligence organizations.

• Even though some of the technologies will not be ready for application for a year or more, it will be necessary for many more people in both government and the private sector to become aware of the vulnerability problem within the next few months if planning and implementation of approved protection measures are to proceed without delay. For example, in the memorandum at Tab C, the Secretary of Defense proposes to inform all defense contractors of the intercept threat.⁵ Public explanation would facilitate dealing with the defense community, the commercial telecommunications carriers and the critical private sector institutions on this problem.

• Public explanation will place emphasis on this important problem and will assure that it receives continuing attention by the next Administration.

The disadvantages of public explanation are:

• It forewarns the Soviets, possibly increasing the sophistication of their efforts and making it more difficult to successfully counter their operations.

• It could be an additional stimulus for Soviet countermeasures against our own monitoring of their communications.

• It could trigger a strong, public anti-Soviet reaction.

• It could create demands for immediate remedial actions which are beyond current technical capabilities.

In the event of an affirmative decision, a public explanation could make the following points:

• The growth of microwave radio in our long-distance telephone system has greatly increased its vulnerability to foreign or domestic intercept.

• Microwaves are open and anyone with the proper equipment in the right location can intercept and record communications.

• Inexpensive and unobtrusive means for intercept are readily available on the commercial market and can be used by other foreign countries, organized crime, industrial espionage agents, or other unscrupulous domestic elements to eavesdrop on telephone conversations. [As an additional option, it could be stated that a foreign power is conducting telephone interception in certain localities.]

• Such actions are an invasion of individual privacy, are detrimental to national interests, and are a threat to national security.

• This has been a problem of real concern to your Administration, which has undertaken a major program to improve the security of communications:

—Special technologies are being developed for long-term, wide-scale, low-cost protection of the domestic communications network.

—In the interim, short-term steps have been taken to protect critical government and national security information.

• Continuing attention to improvement in telecommunications security will be an important problem for the new Administration. In the interim, care should be exercised in uses of these communications.

Implementation Alternatives

A long-range plan has been prepared for wide-scale application of communications protection in the domestic communications network, first in Washington, New York, and San Francisco areas, and eventually nationwide. This plan (a summary is at Tab D)⁶ provides for protection of all communications in these areas, both private and government, including protection of satellite communications as well as the terrestrial microwave network. Two major alternatives for the government/industry role are considered:

• The first alternative would minimize the government role through a cooperative government/industry effort. Required use of approved commercially-provided, secure communication services by government agencies and defense contractors would be expected to create a market demand for secure communications as well as providing needed improvements in security. These market forces, working in conjunction with a government-sponsored educational campaign to increase public awareness of the intercept threat, would be expected to provide the incentive for broad application of communications security. The drawback to this alternative is the lack of certainty that such broad protection would in fact materialize.

• The second alternative is surer but would require stronger government action to meet the threat through a Federally-mandated program directing implementation of approved protection techniques throughout the national microwave network. This approach would require implementing legislation and might well require the government to make sensitive choices as to which sectors of the private sector would be protected and which would not.

In either alternative, the government would need to establish policy, standards and regulations, would assist the private sector by making government-developed cryptographic technology available for commercial application, and would promote public acceptance of the need for communications security by making the private sector aware of the nature and scope of the threat. Industry would apply bulk protection techniques to the communications networks and would pass the added costs to the users. The total cost of protecting the Washington, New York and San Francisco areas is estimated to be $200–300 million, corresponding to less than a one percent increase in the telephone rate base. The cost of nationwide protection is estimated to be $1.0–2.0 billion.

The decision on which of the two alternative approaches to implementing protection cannot appropriately be made at this time. Consultations need to be carried out with the communications industry, key members of Congress, and the FCC before making a final decision.

Organizational Considerations

Since telecommunications security for the United States is a problem without precedent, no existing government entity is structured to deal with it on a permanent basis. This will be an important organizational issue for the new Administration. If you wish to move forward with the program now, a directive could be issued to establish a new organization on telecommunications security, possibly chaired by the Vice President.

A study has been recently completed by the NSC, Domestic Council, OMB, and OTP which considered a number of options for continuing oversight of the communication security problem (Tab E).⁷ Basically, the options are two-fold: either to vest a single agency with the mandate to implement a national telecommunication security program, or to deal with the problem on an interagency basis involving a continuing White House management role.

• The first alternative has the advantage of avoiding management by committee, and could be effective if the agency head accepted this program as a priority matter. The main disadvantage of selecting a single agency is that the obvious agency—the one with the expertise in encryption—is the Defense Department. It might be difficult to obtain Congressional support for having DOD involved in private sector telecommunications, both from the point of view that the defense/intelligence community does not belong in this area, and that DOD would not be sensitive to the business/commercial problems of the common carriers.

• A White House committee would assure continuing high priority to the implementation of the protection of private sector telecommunications, and by involving the domestic as well as national security interests, the objections mentioned above would be mitigated. Much of the programmatic work would still be carried out by DOD, but the interfaces with the communications industry, Congress, and the FCC would be through the committee.

Our discussions with the Vice President, who has been personally concerned for some time about the interception of U.S. telecommunications, support the concept of a joint committee being established by the National Security Council and the Domestic Council to take the lead in protecting telecommunications.

Recommendations

1. That you approve proceeding with a program to protect the private sector as well as government communications.

a. Approve⁸

b. Disapprove (defer the decision)

2. That you approve the public explanation of the vulnerability of U.S. telecommunications, possibly as part of the State of the Union address.

a. Approve

b. No public announcement at this time⁹

3. That you approve the establishment of a joint National Security Council/Domestic Council Committee on Telecommunications Security to oversee this effort.

a. Approve¹⁰

b. Approve, and chaired by the Vice President¹¹

c. Alternatively, direct the Secretary of Defense to take the responsibility

d. Disapprove (defer the organizational decision)

1. Source: Ford Library, NSC Institutional Files (H-Files), Box 69, NSDM 346 (2). Top Secret. Sent for action. A note at the top of the memorandum reads: “The President Has Seen.” Brackets are in the original. According to Connor’s January 12 memorandum to Ford, Counsel to the President Philip W. Buchen reviewed this memorandum and offered the following advice: “We concur in the NSC and Domestic Council recommendations and wish to stress the importance, in the Counsel’s office view, of the need to carefully explain the program to the Congress and the American public so that it will not be seen as a threat by military-intelligence communities to the privacy of the public’s communications network.” (Ibid., President’s Handwriting File, Box 32, Subject File, National Security—Intelligence (18))
2. NSDM 338 is Document 180.
3. The report, “An Assessment of Soviet Interception of Communications in the United States,” October 21, is attached, but not printed.
4. David’s December 17 letter to Scowcroft summarizing the report of the NSC’s Special Panel on Telecommunications Security is attached, but not printed.
5. Rumsfeld’s December 11 memorandum to Ford is attached, but not printed.
6. Director Thomas J. Houser forwarded the OTP’s “Plan for Further Improvements in Telecommunications Security” to Scowcroft under a covering memorandum, December 9. Houser’s memorandum and the report are attached, but not printed.
7. The report of the Special Task Group on Telecommunication Organization, December 1, is attached, but not printed.
8. Ford initialed his approval.
9. Ford disapproved, initialing option B.
10. Ford initialed his approval.
11. Ford initialed his approval.