From this week’s National Journal cover story on the relationship between NSA and the telecoms:
Then, in the late 1990s, a furor erupted over export controls on software encryption. The NSA sought to bar exports of the best encryption technology, fearing what would happen if enemies got hold of it. As it had done with the Clipper chip, Silicon Valley countered that by holding the tech sector back, the government was hurting U.S. national security. It argued that the U.S. would fall far behind other nations in a critical industry unless those controls were lifted.
After months of battles, a quiet quid pro quo was struck, according to a former senior intelligence official: We’ll let you export first-rank encryption, the government said, but we want to get a first look at what you’re developing and a back door into it. A Clipper chip wasn’t needed, after all, if the government was going to get access to servers and telecom data. “The way the encryption deal was worked out was that, in the end, controls were liberalized in various stages, in 1997, ’98, and ’99, and all of the liberalizations had a single bottom line: All products had to be reviewed by the NSA,” says William Reinsch, who was undersecretary of Commerce during a critical period in the 1990s when the NSA was undergoing a dramatic decline from the chief innovator of America’s spying technologies, and instead finding itself falling behind Silicon Valley and the telecom industry. “That review meant [NSA] got to look at them.… It was a source of considerable irritation to companies—not the basic fact of it but that NSA wanted to continue to do it for every product.
Hence, the need to ban this kind of thing going forward.