The Real deal

States brace for costs and integrators for business, to comply with federal requirements under the Real ID Act

"The question is can it be done in three years? In 10 years?" ? Cheye Calvo, National Conference of State Legislatures

Companies specializing in driver's licensing and biometrics see rich opportunities in helping states comply with the Real ID Act passed earlier this year. But new opportunities may be slow to come, as states crunch cost estimates and wait for the federal government to offer guidance on how they should comply.

As much as the lack of clear-cut regulations, it is the uncertainty over funding holding states back, said Scott Carr, corporate executive for marketing and development at Digimarc Corp., Beaverton, Ore.

"States have to address where the money comes from to get this done," he said. "I believe it's going to be an expensive process, one that we can't expect the states to fund on their own."

The Real ID Act passed by Congress and signed into law by President Bush May 11 will require states by 2008 to overhaul and upgrade their driver's licenses and issuance processes, and build a linked network to house information proving the identity of hundreds of millions of driver's license holders.

It won't just be motorists who need the new IDs. Anyone ? even children ? wishing to board an airplane or enter a national park or federal building might need them.

Early estimates show the market opportunity could range from hundreds of millions to several billions of dollars.

Meanwhile, states are waiting for the Homeland Security Department to issue guidance that they need before they can revise or overhaul their systems and processes, industry observers said. It could be several months, perhaps longer, before any guidelines are ready.

"I wouldn't expect proposed regulations until, at earliest, the end of the year," said Cheye Calvo, transportation committee director for the National Conference of State Legislatures in Denver. "Final regulations, we may not see until the spring or next summer."

COST CONCERNS

The Real ID Act calls for anyone applying for a license to present a photo identity document, documentation of birth, proof of Social Security number and proof of name and address. States then must verify each document ? ranging from birth certificates to utility bills ? with the document's issuing agency.

No state has a system that can handle these jobs, which include scanning and keeping archival records of all the documents, Calvo said. The more than 297 million birth certificates alone are dispersed across 30,000 vital records offices.

"The question is: Can it be done in three years? Can it be done in 10 years?" Calvo said.

NCSL has suggested that the direct cost of implementing Real ID will be between $500 million and $700 million nationally. But that would only cover the new licenses and systems. The largest cost is likely to be in hiring more staff, training personnel and opening new offices, many of which were closed over the last decade as states realized the efficiencies of renewing licenses over the Internet. The final cost of Real ID is likely to be much higher, Calvo said.

"Certainly, it's going to rise into the billions. I don't believe there is any question about that," he said.

Larry Dzieza, Washington state's budget director for the licensing department, has done the best estimate yet of what Real ID implementation will cost.

According to Dzieza, Washington will have to hire 500 employees and spend roughly $150 million over the first three years of implementation. The cost of a license to the customer will go up by $33, from $25 to $58. The state will recoup its expenses after six years, he said.

Washington state will not have to open any new Department of Motor Vehicle offices, but it will have to expand 10 of its 64 offices and lease a large office to house its central issuance system, he said.

Virginia has estimated a one-time cost of $167 million, plus $66 million in ongoing annual costs.

But states may not have to go it alone. The House of Representatives has proposed offering $100 million to states for the first year of implementation, and the Senate has proposed $40 million.

HELP WANTED

Even before they get clearly defined rules to guide improvements, states are looking for help, Digimarc's Carr said. Digimarc makes driver's licenses for 32 states and the District of Columbia.

"It's all in the early stages, but it's starting up," he said

Digimarc already has seen an unusually high number of bids, Carr said. Although he would not discuss specific projects, Carr said the bids are either to assess the scope of future Real ID projects, or to implement the company's document scanning, authentication and archival system.

Because the Real ID Act calls for new driver's licenses to include physical security features to help prevent counterfeiting and fraud, there likely will be opportunities for biometric technologies companies. One of Digimarc's partners, Identix Inc. of Minnetonka, Minn., does facial recognition.

Identix can examine a digital photo and assess a person's facial geometry and skin texture and check for duplicates against a database of tens of millions of photos, said Identix spokeswoman Frances Zelazny. Even identical twins have different skin textures, she said.

Facial biometrics would seem a logical security feature, as Real ID will require all new licenses to include digital photographs.

But other biometrics are available. Northrop Grumman Corp. reportedly is in discussions with Florida about creating an ID with biometric identifiers such as fingerprints and optical scans that would be assigned at birth. Company officials weren't available for comment.

State officials don't want DHS to choose one security solution for all states. They prefer trying different technologies with various business partners, Calvo said.

"The concern is if you have one way, a uniform way, it becomes very static, and it ceases to keep up with the innovations and the wrong-doers," he said. "The counterfeiters are innovating, so you need to have different technologies constantly emerging to deal with the problems."

Staff Writer Ethan Butterfield can be reached at ebutterfield@postnewsweektech.com.

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