02/11/1998 04:05 PM House TEL
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HOUSE SPECIAL COMMITTEE ON TELECOMMUNICATIONS
February 11, 1998
4:05 p.m.
MEMBERS PRESENT
Representative Brian Porter, Chairman
Representative Ivan Ivan
Representative Fred Dyson
Representative Ethan Berkowitz
MEMBERS ABSENT
Representative Jeannette James
OTHER HOUSE MEMBERS PRESENT
Representative J. Allen Kemplen
COMMITTEE CALENDAR
* HOUSE BILL NO. 345
"An Act relating to electronic records and signatures, revising
certain requirements that signatures be notarized or verified, and
providing for electronic records in the state archives; relating to
the permanency of records in the state archives; and providing for
an effective date."
- MOVED HB 345 OUT OF COMMITTEE
(* First public hearing)
PREVIOUS ACTION
BILL: HB 345
SHORT TITLE: STATE ARCHIVES RECORDS
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
01/23/98 2116 (H) READ THE FIRST TIME - REFERRAL(S)
01/23/98 2116 (H) TEL, LABOR AND COMMERCE
01/23/98 2117 (H) ZERO FISCAL NOTE (GOV/ALL DEPTS)
01/23/98 2117 (H) GOVERNOR'S TRANSMITTAL LETTER
02/11/98 (H) TEL AT 4:00 PM CAPITOL 120
WITNESS REGISTER
ANDY KLINE, Special Staff Assistant
Office of the Lieutenant Governor
P.O. Box 110015
Juneau, Alaska 99811-0015
Telephone: (907) 465-3520
POSITION STATEMENT: Presented HB 345 and answered questions.
ACTION NARRATIVE
TAPE 98-1, SIDE A
Number 0001
CHAIRMAN BRIAN PORTER called the House Special Committee on
Telecommunications meeting to order at 4:05 p.m. Members present
at the call to order were Representatives Porter, Ivan and Dyson.
Representative Berkowitz arrived at 4:13 p.m.
CHAIRMAN PORTER advised listeners that the committee had been
established the previous year by resolution to look at
telecommunications issues for the House, and had met during the
interim.
HB 345 - STATE ARCHIVES RECORDS
CHAIRMAN PORTER announced the committee would hear HB 345, "An Act
relating to electronic records and signatures, revising certain
requirements that signatures be notarized or verified, and
providing for electronic records in the state archives; relating to
the permanency of records in the state archives; and providing for
an effective date." He called on Andy Kline to present the bill.
Number 0063
ANDY KLINE, Special Staff Assistant, Office of the Lieutenant
Governor, advised members he is a special assistant for
telecommunications to Lieutenant Governor Fran Ulmer, who chairs
the Telecommunications Information Council (TIC), the main policy-
making body in state government for telecommunications and
information technology. Mr. Kline added that he staffs that
council and had therefore been chosen to testify on this bill.
MR. KLINE said through their telecommunications planning effort,
the TIC had identified electronic signatures as an important issue
to resolve in state government, and in December of 1996 they had
released a state plan on telecommunications and information
technology. In that plan, recommendation number 56 is that the
state should address the use of electronic signatures, which will
streamline many internal processes and will position the state for
a method of authentication and verification of electronic
communications with the public.
MR. KLINE advised members that 28 other states have enacted
electronic signature and digital signature legislation. Alaska is
not on the leading edge but is trying to stay in the pack, ready
and open for business on the Information Highway.
Number 0216
MR. KLINE told members that a number of internal state government
functions and other types of functions that electronic signatures
will help have been identified nationwide, and even
internationally. Utah is probably the leading state in electronic
signatures, and many other states lean on Utah's progress and
mistakes in developing statutes and regulations regarding
electronic signatures.
MR. KLINE stated, "I can tell you from Utah's point of view, they
have a short list in that packet that I gave you of the things that
they see as specific applications, including court filings and
corporation filings, procurement, grant applications, motor vehicle
titling, real estate transactions. I mean, the list kind of is
endless, with the way that business interacts with state
government, ... with the way that business interacts with other
business in a state, and in the way the public interacts, in a
transactional way, with state government." Mr. Kline said this
allows a person, with a click of a mouse button, to encrypt a
document and make it verifiable who sent it.
Number 0303
MR. KLINE pointed out that someone receiving an E-mail message
today has no way of really knowing whom it came from without
verification, because there are simple ways to electronically
modify addresses and so forth to indicate that a message came from
another source. Verification can be done through a number of
methods.
MR. KLINE informed members that three kinds of legislation have
been passed nationally dealing with electronic signatures, as
described by the Internet Law and Policy Forum, a think-tank
organization. The three types of legislation are: prescriptive,
the most detailed; criteria-based, which is in the middle; and
signature-enabling, which reduces barriers existing in law today
that say things like "must be signed," which in legal terms means
a piece of paper signed.
MR. KLINE cited Utah's as the best example of prescriptive
legislation. In Utah, they had set out detailed implementation in
statute. Although on-target at the time, it became problematic
because of rapidly changing technology, resulting in one revising
piece of legislation already. Therefore, Utah's legislation is a
good example of going too far.
Number 0430
MR. KLINE said Massachusetts has the best example of signature-
enabling legislation. It doesn't get into any technical standards
or criteria upon which a signature is determined to be verifiable.
Instead, it says electronic signatures are as good as written
signatures.
MR. KLINE advised members that California and Georgia have
criteria-based legislation, which is middle ground. "And that's
the model that we chose to go with," Mr. Kline explained. "We felt
that there needed to be some language that talked about what the
state would accept ... as a verifiable signature. So, that's in
the law itself."
MR. KLINE referred to page 2, beginning on line 29, which sets out
criteria: "'electronic signature' means an electronic or digital
method, executed or adopted by a person with the intent to be bound
by or to authenticate a record, that is unique to the person using
it, is capable of verification, is under the sole control of the
person using it, and is linked to data in such a manner that if the
data are changed the electronic signature is invalidated ...." Mr.
Kline noted that Massachusetts' legislation hadn't gone that far.
Number 0548
MR. KLINE said the main things they want to address in HB 345 are
removing those legal barriers and setting these simple criteria for
potential technologies. He pointed out that different methods
exist to obtain digital signatures, such as using public and
private keys; for example, a person may hold a private diskette
that uses encryption technology, to put together with a public
"key" for verification. Mr. Kline explained that they had not been
specific with the criteria in the framework because of foreseeable
technological changes. In addition, few citizens or industries in
Alaska today are really ready to start using these complicated and
sometimes costly methods of getting public and private keys. Mr.
Kline said they want to allow industry to come in and answer those
questions, with technology that fits into the law.
Number 0669
CHAIRMAN PORTER recognized Representative Kemplen, who had joined
members at the table. Noting that signatures are essential to some
documents, he asked Mr. Kline what the thought is on litigation
relating to lack of specific criteria for verification.
MR. KLINE explained that the specifics of the technology that will
be used to make verifiable signatures will be handled through a
regulation process. The state will speak to what technologies are
acceptable, but they believe it is best handled not through statute
but through regulation, in order to adapt more easily to changing
technologies. Mr. Kline said they are not leaving it wide-open.
However, following the problems that Utah, especially, has had,
they didn't believe it was appropriate to address that in the
original legislation.
Number 0781
CHAIRMAN PORTER advised members that present to answer questions
were Sarah Felix from the Office of the Attorney General; John
Stewart and George Smith from the Division of Libraries, Archives
and Museums; and Mike Monagle from the Division of Banking,
Securities and Corporations.
Number 0795
REPRESENTATIVE J. ALLEN KEMPLEN asked which industries Mr. Kline
envisions as most likely to take advantage of this change in the
law.
MR. KLINE said he believes banks will be the first to do so. From
there, economies of scale come in. Large industries will find a
small savings per transaction by using electronic signatures, and
an entity with numerous transactions, or with transactions
involving large dollar amounts, will benefit most. Mr. Kline said
they see this as a wave of the future, noting that four years ago,
many people wouldn't have predicted how much electronic mail has
changed the business process. "And we feel that this is the next
logical step," he concluded.
Number 0879
REPRESENTATIVE KEMPLEN asked whether Mr. Kline has information from
other states about the volume and rate of growth of the demand for
electronic signatures.
MR. KLINE answered that except in Utah, this really isn't happening
much in practice. Utah, he explained, is forward-thinking when it
comes to technology, and they are attracting technology businesses
and industry through this type of legislation. There is some
information on the Utah Website concerning demand, mostly around
high technology industries that want to use electronic signatures
as part of a paperless way of doing business.
MR. KLINE noted that electronic signatures, inasmuch as they allow
for paperless government and business transactions, can be a part
of incredible efficiencies. As an example he cited Cisco Systems,
a large company whose chief information officer had said that by
going completely paperless - and by using other, purely electronic,
ways of dealing with employees, including training, travel
reimbursements and payroll - that company saves $360 million
yearly. Mr. Kline suggested that high-technology industries with
numerous transactions see this as something friendly to their
businesses.
Number 0998
REPRESENTATIVE KEMPLEN asked whether this is mostly interstate or
intrastate.
MR. KLINE replied, "It's both, and also internationally. And
that's a difficult part of the law: How do you mesh what different
states and different countries are doing, and are saying are
verifiable signatures?" He indicated that isn't really addressed
in HB 345, then added that it can be problematic to specify which
types of technology will be accepted. Mr. Kline stated, "What
we're saying is that ... if there's two parties and they're both
agreeing, and the signature is verifiable through a mutually agreed
verification process that the state has approved through
regulations, then that's an acceptable signature."
MR. KLINE pointed out that firms in Washington State and Pacific
Rim countries are conducting business with electronic signatures.
He said in Washington State, digital signature legislation was
recently passed, largely because Microsoft wanted to see it passed
because they want to conduct business this way.
Number 1083
REPRESENTATIVE KEMPLEN asked whether if this legislation is passed,
it would it be a significant incentive for some industry to locate
here in Alaska because of the state's providing this flexibility.
MR. KLINE replied that it is a signal to high-technology firms,
especially, that Alaska is a technologically aware state. He
hadn't seen anything that says industries are some quantifiable
percent more likely to locate in an area that has electronic
signature legislation. However, high-technology firms look for
states that are forward-thinking in technology legislation when
they are locating.
Number 1149
REPRESENTATIVE ETHAN BERKOWITZ asked whether there is any provision
for facsimile signatures.
MR. KLINE replied that it doesn't address faxes specifically, and
faxes are problematic. Most digital signature legislation assumes
use of a computer and that a person can encrypt something using a
logarithmic encryption device; that is not really possible on a
fax. Mr. Kline pointed out that faxes are some of the most easily
forged types of documents, because everything is already fuzzy and
it is easy to make something look authentic.
Number 1207
REPRESENTATIVE BERKOWITZ explained that part of the reason he'd
asked is that on page 21, it says, "'electronic record' means any
information that is recorded in machine-readable form." He
suggested that signatures could be read into machines.
MR. KLINE said that is a good point, for which he didn't have a
specific answer.
Number 1240
REPRESENTATIVE IVAN IVAN referred to the zero fiscal note and asked
about any technological requirements to use this.
MR. KLINE responded that it is difficult to answer only because
they haven't specified a technology associated with this bill.
However, most encryption programs are software, which work on
existing mainframe computers or existing personal computers (PCs).
Although he couldn't say that there wouldn't be a penny spent on
software or a scanner, for example, there certainly are no
widespread, large costs associated with passing legislation about
using verifiable electronic signatures on legal documents.
Number 1321
CHAIRMAN PORTER noted that to be consistent with this law, if data
on the document were altered, the electronic signature would be
invalidated. He suggested it would require software.
MR. KLINE agreed, saying it requires software on both ends. He
suggested that if the state is concerned about costs, they could
say, "The state recognizes a certain type of signature as a
verifiable electronic signature, but we're not going to be the
certifying agency; we're not going to be the certification
authority. Key Bank, National Bank of Alaska, will be the
certification authority. They will buy a license from us to become
that certification authority. They'll own the software, own the
hardware, ... and people will have to take a document to them to
verify it." Mr. Kline pointed out that there are different ways of
doing it. It could be set up in-house, with the Department of
Administration, for example, having a certification authority
within it that verifies electronic signature documents. "And we've
left that up to regulation, as well," Mr. Kline added.
Number 1387
CHAIRMAN PORTER asked about the evolution in other states, and
whether this might become a nationally recognized system, for
example.
MR. KLINE referred to a 133-page document from the American Bar
Association, which he said was an attempt to make a nationwide
model legislation. "They couldn't do it," he explained. "They
came up with digital signature guidelines, which ... actually
shaped what Utah ended up doing. But the short answer is no,
different states have tended to want to do different types of
things. As I said, Washington's very concerned about dealing with
Japan, for instance. Other states are concerned with other types
of activities. ... And then ... there are different philosophies on
how detailed ... the initial statute should be. And for that
reason, there isn't a nationwide standard yet."
MR. KLINE continued, "And that's one reason why we're holding back
on specifying a standard, because ... we're recognizing here that
this is technology that is not fully and widespread developed to
this point. The technology is there, and people understand how to
use it. There's not a huge, widespread demand at this point.
There may be by next January. Next February, there may be a huge
demand, and we all know how fast technology moves. And that's why
... we don't want to have unnecessary legal barriers in the way of
that happening, if it becomes a widespread-type of thing, or
something that industry ... is demanding."
Number 1475
REPRESENTATIVE BERKOWITZ said, "The reason why we're addressing
this sort of legislation, it seems to me, is the banks, or whatever
group decides to use electronic signatures, is going to do so at
its own peril. But we need to put some kind of enabling
legislation down in order that they can venture out into that
minefield?"
MR. KLINE replied, "That's right. That's one part of it. And the
other part of it is we want state government to be able to interact
with business and citizens, and do it in a way that's consistent
with our laws. ... And in large part, it's recognizing something
brand new, that wasn't envisioned when laws were passed about
having a signature on a piece of paper, to verify that."
Number 1520
CHAIRMAN PORTER asked whether there were further questions. He
expressed his understanding that the bill is not trying to answer
all questions available to be asked on this type of technology.
Chairman Porter added, "And I think if there was ever an area that
was conducive to regulation, as opposed to statute, it would be
telecommunications." He asked the wish of the committee.
Number 1545
REPRESENTATIVE FRED DYSON responded, "Move it."
CHAIRMAN PORTER noted the motion to move the bill with individual
recommendations and fiscal notes as attached. He asked whether
there was any objection. There being none, HB 345 was moved from
the House Special Committee on Telecommunications.
Number 1591
CHAIRMAN PORTER called an at-ease at 4:28 p.m. in order to prepare
for the joint work session with the Telecommunications Information
Council policy committee. [See cover sheet relating to that
portion of the meeting.]
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