Appearing on the front (lower-right corner) page of the Thursday NY Times.

> New York Times - March 20, 1997
> 
> 
> Code Set Up to Shield Cellular Calls Breached
> 
> By JOHN MARKOFF
> 
> SAN FRANCISCO -- A team of well-known computer security experts will
> announce on Thursday that they have cracked a key part of the electronic
> code meant to protect the privacy of calls made with the new, digital
> generation of cellular telephones.
> 
> The announcement, intended as a public warning, means that -- despite their
> greater potential for privacy protection -- the new cellular telephones may
> in practice be little more secure from eavesdropping than the analog
> cellular phones in use the last 15 years. It was such eavesdropping, for
> example, that caused trouble for House Speaker Newt Gingrich when a Florida
> couple listened to his cellular phone conversation in December about the
> congressional ethics inquiry.
> 
> Now that digital wireless networks are coming into use around the nation,
> the breaking of the digital code by the team of two computer security
> consultants and a university researcher confirms fears about privacy that
> were raised five years ago when the communications industry agreed under
> government pressure to adopt a watered-down privacy technology.
> 
> According to several telecommunications industry officials, that pressure
> came from the the National Security Agency, which feared that stronger
> encryption technology might allow criminals or terrorists to conspire with
> impunity by cellular phones.
> 
> But independent security experts now say that the code is easy enough to
> crack that anyone with sufficient technical skills could make and sell a
> monitoring device that would be as easy to use as a police scanner is.
> 
> Such a device would enable a listener to scan hundreds of wireless channels
> to listen in randomly on any digital call within a radius ranging from
> 1,000 feet to a number of miles. Or, as with current cellular technology,
> if a specific person was the target of an eavesdropper, the device could be
> programmed to listen for any nearby digital call to that person's telephone
> number.
> 
> Other possible transgressions would include using the device to
> automatically harvest all calling card or credit card data transmitted with
> nearby digital wireless phones.
> 
> And, because of a loophole in the Communications Act of 1934, making and
> selling such devices would not be illegal, though actually using one would
> technically be against the law.
> 
> These monitoring devices are not yet available, but security experts said
> that a thriving gray market was certain to develop. And with technical
> details of the security system already circulating on the Internet,
> instructions for cracking it will almost certainly make their way into the
> computer underground, where code breaking and eavesdropping are pursued for
> fun and profit.
> 
> Technical details of the security system were supposed to be a closely
> guarded secret, known only to a tight circle of industry engineers. But the
> researchers performed their work based on technical documents that were
> leaked from within the communications industry and disseminated over the
> Internet late last year.
> 
> "The industry design process is at fault," said David Wagner, a University
> of California at Berkeley researcher who was a member of the team that
> broke the code. "We can use this as a lesson, and save ourselves from more
> serious vulnerabilities in the future."
> 
> Communications industry technical experts, made aware of the security flaw
> earlier this year, have been meeting to determine whether it is too late to
> improve the system's privacy protections. Already the digital technology is
> in use in metropolitan areas, including New York and Washington, where
> either the local cellular networks have been modified to support digital
> technology or where new so-called wireless personal communications services
> are being offered.
> 
> "We're already in the process of correcting this flaw," said Chris Carroll,
> an engineer at GTE Laboratories, who is chairman of the industry committee
> that oversees privacy standards for cellular phones.
> 
> But Greg Rose, a software designer for the Qualcomm Inc., a leader in
> digital cellular systems, said that fixing the flaw would be "a nightmare."
> Tightening the security system, Rose said, would involve modifying software
> already used in the computerized network switching equipment that routes
> wireless digital telephone calls, as well as the software within individual
> phones.
> 
> Currently, about 45 million Americans have cellular phones, though most of
> them so far are based on an older analog standard that offers no
> communications privacy. But cellular companies are gradually converting
> their networks to the new digital standard, and the new personal
> communications services networks going into operation around the country
> also employ the digital-encryption system. Nearly a million PCS phones have
> been sold in the United States, according to cellular industry figures.
> 
> Besides Wagner, the other researchers who cracked the code were Bruce
> Schneier and John Kelsey of Counterpane Systems, a Minneapolis consulting
> firm. Schneier is the author of a standard textbook on cryptography.
> 
> The new digital wireless security system, which was designed by cellular
> telephone industry engineers, was never intended to stop the most
> determined wiretappers.
> 
> But because digital calls are transmitted in a format corresponding to the
> 1's and 0's of computer language, they are more difficult to eavesdrop on
> than conventional analog calls, which are transmitted in electronic
> patterns analogous to sound waves. And digital calls protected with
> encryption technology -- basically a mathematical formula in the software
> that scrambles the signal -- would be all the harder for a third party to
> listen to surreptitiously.
> 
> Because the encryption system that the industry adopted in 1992 was
> deliberately made less secure than many experts had recommended at the
> time, privacy rights advocates have been warning since that the code could
> be broken too easily. An announcement Thursday that the code has indeed
> been cracked would seem to bear out those concerns.
> 
> "This should serve as a wake-up call," said James Dempsey, senior staff
> counsel for the Center for Democracy and Technology, a public interest
> group. "This shows that government's effort to control encryption
> technology is now hindering the voice communications industry as well as
> the data and electronic communication realm."
> 
> Industry executives acknowledged that steps must be taken to address the
> problem.
> 
> "We need strict laws that say it is illegal to manufacture or to modify a
> device which is designed to perpetrate the illegal interception of PCS
> telephone calls," said Thomas Wheeler, president of the Cellular Telephone
> Industry Association, a Washington-based trade group.
> 
> Wheeler said the weaker privacy technology had been adopted not simply to
> appease the government but because makers of wireless communications
> hardware and software had wanted to embrace a technical standard that would
> meet federal export regulations. Those rules, based on national security
> considerations, sharply curtail the potency of American-made encryption
> technology.
> 
> The three computer researchers who broke the code belong to an informal
> group of technologists who believe strongly that powerful data-scrambling
> technologies are essential to protect individual privacy in the information
> age.
> 
> These technologists, who planned to release their findings in a news
> release on Thursday, argue that the best way to insure that the strongest
> security codes are developed is to conduct the work in a public forum. And
> so they are sharply critical of the current industry standard setting
> process, which has made a trade secret of the underlying mathematical
> formulas used to create the security codes.
> 
> "Our work shows clearly why you don't do this behind closed doors,"
> Schneier said. "I'm angry at the cell phone industry because when they
> changed to the new technology, they had a chance to protect privacy and
> they failed."
> 
> Carroll, head of the industry's privacy committee, said it planned to
> revise the process for reviewing proposed technical standards.