Security software maker Zero-Knowledge Systems announced that it would shut down the premium service component of its Freedom Network, which let peoplesurf the Internet and send e-mail with almost complete privacy by using pseudonyms.
Although more than 70,000 people signed on to the free test of the servicetwo years ago, the swell of interest didn't wash up more than a smallnumber of paying subscribers, said Austin Hill, co-founder and vicepresident of the company.
"Scaling the network, the price of bandwidth--there's a significant costwith running an overlay network, and we didn't get enough interest to beable to offer the service with that price tag," he said.
After announcing the service in 1998 at the Def Con hacking convention,it took the company almost 18 months to release the first version of theproduct.
Encryption experts designed the service so that the identity of the Internet surfer could be hidden by hopping through several computers, eachjump increasing the difficulty of matching up a Web user's online identity withthat person's real one.
The network was designed so that even a court order could not reveal aWeb user's identity because even the company did not know who used whichidentities and the information was not stored on the system.
The Montreal-based company will now focus on its Freedom 3.0 suite of security software. The package includes a personal firewall, a passwordmanager, an ad manager and a cookie manager, placing the software in directcompetition with Symantec's Norton Internet Security and NetworkAssociates' McAfee Internet Security products. The company plans to alsoadd an antivirus component to its consumer offering to better compete with Symantec and Network Associates products.
Shifting direction
The move marks a large step for Zero-Knowledge and Hill--who once said his company "was out to change the world"--from a hotbed of pro-privacy advocacy to a pure software business.
"I think the company has matured," Hill said. "Some of the roles that wewere going to play before, we are not going to be in."
Chris Christiansen, senior analyst for market researcher IDC, agrees.
"The new privacy model is not so much concerned with consumer privacy butprotecting corporations from privacy violations," he said. "I think this isan affirmation that they are going in a new direction and they are cuttingthemselves loose from a losing prospect."
Zero-Knowledge is moving along those lines, with a new application indevelopment--dubbed privacy rights management software--that aims to helpcompanies audit their use of customer information to prevent misuse.
However, the decision to drop the Freedom Network is another chip off themovement to strengthen privacy on the Internet, which has suffered several setbacks in recent days.
On Thursday, the Federal Trade Commission--the agency spearheading theattack on businesses for inadequate privacy safeguards--did an about-face.In a speech, FTC Chairman Timothy Muris, a Bush administration appointee,said that no new legislation is needed to regulate privacy.
The decision came as the Bush administration and Republican lawmakersfought to aid law enforcers' ability to search for terrorists in the wakeof the Sept. 11 attacks with several new pieces of legislationthat significantly weaken citizens' privacy.
Even the ability to use strong encryption, the granting of which has beenconsidered a great win for privacy advocates, is again under renewedattack. Sen. Judd Gregg, R-N.H. has suggested that all encryptionsoftware should contain a backdoor to allow easy access to the scrambled contents by law enforcement.
Not a reaction
Zero-Knowledge's Hill stressed that the decision to pull the service was made before the Sept. 11 terrorist attacks on the World Trade Centerand the Pentagon.
However, sticking by a service that could be used to hide wrongdoers wouldhave been an unpopular decision, said William Malik, security research director for market analyst Gartner.
"An amazing number of their customers are probably people you wouldn't wantin your neighborhood," he said.
Although Zero-Knowledge executives have repeatedly denied such accusations,Hill admits that the customers of the service have always been part of thehacker fringe or cyberrights advocates.
"When we released the tool, we had strong interest, but we were dealingwith early adopters--the civil libertarians, the cypherpunk crowd," hesaid. "But when you deal with the home consumer, the issues are different."
IDC's Christiansen agrees that the home consumer is a different beast.
"For the most part, consumers are interested in privacy, but for a 10percent coupon they are willing to give away most of their information," hesaid. "It's a hard model to make work."
The fate of the network is still undecided, Hill said. The company has received queries from research labs and universities about the FreedomNetwork technology, and the service could find itself in some futureincarnation of academic or open-source projects.