AmEx joins Sun's Liberty Alliance

American Express, which is already allied with Sun because its Blue credit card uses Java software, joined the Liberty project just one day after AOL Time Warner did the same.

The finance giant believes that the alliance's technology will improve customer convenience by simplifying the sign-on process on Web sites while providing a way to protect customer information, American Express spokesman Tony Mitchell told CNET News.com.

The Liberty Alliance hopes to create a standard way that computer users can establish their identities on the Internet, either through passwords or more sophisticated authentication technology.

The alliance has yet to describe publicly how its technology will work, but the new support from American Express undermines Microsoft CEO Steve Ballmer's earlier position that the alliance "has absolutely zero probability of mattering to the world."

In March, when Microsoft launched its .Net My Services Web services initative, which is closely tied to Passport, the company touted American Express as providing "partner support" for the plan.

But Mitchell said American Express has not made any formal agreement with Microsoft about being part of the initiative, and has no immediate plans to do so. American Express also has no plans to support Passport, Mitchell said. The two companies do work together to provide consumer financial planning services and other initiatives.

Sun, one of Microsoft's bitterest enemies, initiated the Liberty Alliance in September, drawing support from major airlines, security software companies and financial services companies.

Gartner analyst Avivah Litan says many consumers don't want to risk privacy for the convenience of having their online identities managed. But that won't stop major vendors from trying to pique their interest. see commentary

The corporate maneuverings are an important part of rivals' attempts to secure their power by weaving their own authentication technologies into the fabric of the future Internet. Authentication is the gateway to the vaunted Web services universally proclaimed to be the future of the Internet. And ultimately, Microsoft hopes to charge for the services that people tap into via Passport.

Earlier members of the Liberty Alliance include Fidelity Investments, Bank of America, Sony, eBay, Sprint, Nokia, Cingular Wireless, NTT DoCoMo, American Airlines, United Airlines, VeriSign and General Motors. But the absence of a credit card company such as Visa, MasterCard or American Express was conspicuous, given that the alliance is addressing a key concern of the credit card industry: assuring that people are who they claim to be.

The alliance got a major boost Tuesday when AOL Time Warner joined. America Online has 32 million subscribers for its Internet service. Ballmer had pointed to AOL's earlier absence from the Liberty Alliance as evidence of its weakness.

Ballmer blunder?
Two weeks after the Liberty Alliance was first announced, Ballmer lambasted it at a Gartner conference: "I think the Sun thing has absolutely zero probability of mattering to the world...AOL and Sun have a huge joint venture, and they couldn't even get AOL to participate in this thing? What kind of craziness is that? It just shows you the weak foundation on which they build."

Dwight Davis, a Summit Strategies analyst, said Microsoft was foolish to bad-mouth the Liberty Alliance, given its prestigious membership.

"It's one thing saying that about direct competitors such as Sun and Real Networks. But when you've got an organization that includes a lot of big users, it's pretty foolish to cast aspersions at the group as a whole and alienate your customers," Davis said.

It's possible that detente is at hand, though.

For one thing, Microsoft is being more circumspect these days. Asked whether Microsoft is joining the alliance, a representative said only, "We don't have anything to say about that right now."

Davis sees the situation changing.

"I wouldn't be surprised if (Microsoft) joined Liberty and made amends with some of the members it may have alienated," Davis said. "I wouldn't be surprised if Microsoft realizes it went a little bit far in the rhetoric."

One tantalizing hint comes from Sun itself. Sun Chief Strategy Officer Jonathan Schwartz said a "very large player in the Windows software space" is expected to join soon.

AOL, though, is the "coup de grace," Schwartz said. "AOL is the only desktop Internet company that has momentum in terms of deploying a subscription-based identity service." AOL has its own identity authentication system, code-named "Magic Carpet," but Schwartz said he believes AOL will use Liberty standards.

And in the credit card arena, there is still a bigger fish to catch--Visa.

Visa, which is a strong backer of the use of Java in chip-enabled "smart cards," began on Monday a program called Verified by Visa that would dovetail neatly with Liberty. The program lets credit card users assign a password to their credit cards in an effort to make it harder for others to use them.

"Visa is working to define security and authentication in the payments space," the company said in a statement. "We are evaluating how we can and will play with the Liberty Alliance, Passport and AOL Magic Carpet in a cooperative fashion in the future."

Microsoft's head start
The alliance has more work ahead of it. It hasn't released its specification yet, much less demonstrated software that shows Liberty in use or built the technology into anybody's Internet services.

Schwartz said the alliance plans to detail its plans in two or three weeks. The technology also could get a boost Thursday when Sun CEO Scott McNealy gives a keynote address at Oracle Openworld in San Francisco, where he is expected to demonstrate the use of a smart card.

By contrast, Microsoft has a major head start. Passport is running, has numerous business partners and 200 million users.

The magnitude of that membership is tempered by the fact that most are just people who signed up for free Hotmail e-mail accounts. Only "a tiny percentage of those, about 1 percent, have gone beyond the basic profile of username and password to filling out a more detailed profile with credit card information" that can be used in Microsoft's electronic wallet service, Davis said.

American Express did go out of its way to avoid disparaging Passport.

"Our decision to join the alliance wasn't at all a reaction to or step against Microsoft or Passport," Mitchell said.

However, others have complained about the privacy and security implications of Passport--complaints Microsoft says have no basis.

American Express' motives for picking Liberty are twofold, Mitchell said. "We agree with Sun and the other members that there is a lot of potential benefit to consumers in being able to have secure access across multiple Web sites through single sign-on," he said. "And we're very strongly motivated by the fact that...consumer privacy and security and ultimately control over data is at the forefront of that initiative."

American Express had 4 million Blue card users at the end of 2000, Mitchell said, with many more joining this year. Among the advantages of the card is a password-protected system that approves Web-based purchases without transmitting the actual credit card over the Internet or allowing it to be stored in potentially insecure merchant databases.

News.com's Mike Ricciuti contributed to this report.