Moving Toward Patrick’s Dream

Recently I wrote about John Patrick’s dream of everyone holding a personal encryption key or digital ID.

A digital ID, like an old Chinese “chop” or an old English wax seal, would prove your identity in the 21st century. It would allow valid contracts to be signed, and offer “non-repudiation” on credit card transactions, meaning lower costs for web merchants, among other things. (For the full list of benefits, click here.)

That’s the light in which I saw VeriSign’s recent $21 billion purchase of Network Solutions. While other reporters commented on whether VeriSign could handle the deal or whether they paid too much, I thought about what this might mean for Patrick’s dream.

The problem is that, while there has always been a compelling reason for e-commerce sites to have encryption keys, there has been no “killer app” that would motivate consumers to get them. Transaction processors like NDC don’t yet support the certificates, so the savings from non-repudiation can’t be passed on. Attempts to enlist Visa or Master Card in the creation of “Internet credit cards” (which would include the IDs) have yet to meet with success. Internet wallets (into which such IDs might be placed) haven’t taken off due to a lack of standards and a basic distrust of Microsoft (and their Passport offering).

On the other side of the merger, NSI’s attempts to become an all-purpose transaction play through its Dot Com Directory hasn’t been the Second Coming of Netscape either. When you try to charge people for what you most need (listings from firms that registered elsewhere), you can’t have a complete index, and so NSI hasn’t gotten the kind of traffic it wanted.

All the emphasis on the business VeriSign and NSI do with sites has obscured the real ambition here to do business with users. A massive certificate authority will be needed to get 260 million digital IDs into Americans’ hands. A massive political effort will be needed to get them accepted. That’s where I think the play is here.

Without major fanfare, NSI has become a potent lobbying force in Washington. If you want to know where the laws on e-commerce are coming from, you should look inside NSI’s offices. The political arena (not the loud brassy one of presidential primaries, but the small, quiet one of restaurants and offices) is where the action is going next. How else do you justify VeriSign’s value of $20 billion on sales of $84.8 million against NSI’s $14 billion on sales of $221 million? (Do some more mathematics and you’ll see that, at $21.8 billion, NSI shareholders are getting more than half of the combined company.)

Based on its valuation, smart money expects VeriSign to get the massive digital ID job done, and if NSI is the way to do it, smart money will endorse the deal. If they succeed, Patrick’s point is that the benefits are yours.

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