Use the Internet and your life's an open book. From the Web sites you visit to the e-mail you send, someone may be watching. Here's what you can do to protect yourself.

Christopher Kantzes recently found out just how little privacy the Internet has to offer.

For about a year, the Fisher-Rosemount Systems engineer has occasionally prowled relatively noncontroversial discussion groups on the network--places such as rec.food.drink.beer--and added his opinions to dozens of others left at those sites. Kantzes figured this was an innocuous and reasonably anonymous activity. That is, until the Minneapolis Star-Tribune chose him at random to piece together a profile based on his online ruminations.

Using DejaNews, a Web site that lets you search Internet newsgroups by an individual's name, the newspaper produced a fairly complete dossier on Kantzes. He was born in Salisbury, Maryland; went to school at the University of Delaware and Syracuse University; worked at Magnavox in Fort Wayne, Indiana, before taking his current job; attends plays at Theatre de la Jeune Lune in Minneapolis; is partial to Garrison Keillor, microbrewed beer, good restaurants, and Macintosh computers; dislikes Bill Gates and Indiana (which he called a "socially repressive state"); and vacationed in Paris and Rome in 1995.

Soon after the Star-Tribune published its article, Kantzes moved. Within weeks, an Internet electronic white pages (www.switchboard.com) had a listing with his new address and phone number. "This is a lesson I never wanted to learn--that I can't hide even sitting alone at my computer," Kantzes says.

Although the Star-Tribune article was published with Kantzes's permission, it provides a chilling example of just how much personal data can be collected on the Net. Not only can anyone easily catalog every word you write on newsgroups and find out which World Wide Web sites you frequent, but everything from electronic mail to online shopping and banking are vulnerable to would-be snoops.

One reason for the lack of privacy, of course, is the open-ended nature of the Internet. With no rules--none with teeth, anyway--that define what information on the Net is personal, and with no limits on the use of this information by third parties, a lot of data about you is available for the taking. And there are plenty of takers. The Net has spawned a cottage industry of firms that monitor Web usage--culling through personal profiles created when you visit a site, and then selling this data to marketers.

Worse yet, the World Wide Web is notoriously insecure and fairly easy for hackers to eavesdrop on. Suppose you're looking through U.S. Patent Office files on the Internet to see if your product has already been patented. The last thing you want is a hacker stealing the details of it as you type into search fields.

The Internet is also becoming an electronic stalker's paradise. At least half a dozen sites offer millions of phone numbers and addresses; others can supply Social Security numbers and driver's license data; and some even track political campaign contributions.

Nor are e-mail messages and financial transactions on public networks entirely safe from prying eyes. The reason? A combination of weak security schemes by companies managing sites and carelessness by people transmitting information.

In short, whether you're online for business or pleasure, you're vulnerable to anyone bent on collecting data about you without your knowledge. Fortunately, by using tools like encryption and anonymous remailers--and by being selective about the sites you visit and the information you provide--you can minimize, if not completely eliminate,

Most electronic mail on the Internet is about as private as a postcard. After it leaves the sender's computer, the message careens from one network server to the next as it streams toward the recipient. The problem is, it's easy for a hacker to intercept the message en route--and impossible to tell if anyone else has read this supposedly private correspondence before it reaches its destination.

Hackers use various tricks to hijack e-mail as it passes between servers. Even a server protected by a firewall--software that denies unauthorized access to the system--offers no guarantee of security. Hackers could run a program that cycles through every permutation of simple passwords until it hits on one that unlocks the network. Or they could attach themselves to a company's World Wide Web server--which is often left outside the firewall, since it's considered an external site--and then slip into the company's network as if they were internal users.

E-mail is irresistible to eavesdroppers, because it's often full of juicy information, from secret corporate strategies to credit card numbers. Some e-mail contains headers with log-ins and passwords, allowing hackers to sign on and gain complete access, even to secure areas.

The only way to safeguard e-mail from eavesdroppers is by encrypting it--scrambling the message so it can be read only by the intended recipient. In essence, the e-mail is encased in a secure, digital envelope that hackers can't penetrate.

The unofficial encryption flagship on the Net is a program called Pretty Good Privacy, or PGP, developed by Phil Zimmermann, a computer security expert. A commercial version of PGPmail costs $129, but you can get an older freeware version at http://www.pgp.com or from PC World Online. RSA Data Security of Redwood City, California, makes more elaborate encryption programs, which can cost up to $1500 per workstation.

Both PGP and RSA adopt an approach known as public key/private key, which uses a complex algorithm to uniquely encode each e-mail with a so-called public key. The key includes data detailing who the recipient is. Only the corresponding private key can decode the message (see "How Encryption Works").

Many network operating systems and software adjuncts--Microsoft Windows NT, Novell NetWare, and Lotus Notes, among others--offer encryption programs as add-ons. These work well for closed networks and intranets because all users share the same software and, thus, the same security safeguards.

But encryption on an open network like the Internet is much more difficult. For it to work, the sender and the recipient must use compatible software. Although PGP and RSA software are compatible, other encryption schemes aren't.

One insidious gap in Internet security and privacy is located in the browser itself. Both Netscape Navigator and Microsoft's Internet Explorer contain tools that let Web sites reach into the hard disk of your PC and run programs. These applets--the best-known are Java and ActiveX--can customize visits to a Web site based on your prior entries.

The applet gathers details about your activities and then resides on your hard disk until you return to the site; when you do, it runs programs that let you avoid having to reinput your name, interests, and other information. Sometimes, the applet even moves you directly to the spot where you left off on your last visit.

But this efficiency carries a big price. Because the applet is stored on your PC, in the wrong hands it could surreptitiously steal data or programs from your hard drive. In addition, hackers could piggyback on the applet to gain access to your computer, or even roam through a network to download corporate data or embed viruses in other PCs.

Microsoft and Netscape have built layers of security into their browser applets to prevent misuse. However, computer teams at Princeton University have uncovered nearly a dozen Java and ActiveX security flaws. Both Netscape and Microsoft have released updated versions of their browsers to plug the holes, but researchers are still concerned about security problems, as hackers continue to develop hostile applets.

Applets present potential security problems, but they usually can't be downloaded without your knowing it; and you can delete the files from your hard drive (if you can figure out where they are). Other data-collecting mechanisms are harder to deal with.

One such device--an offshoot of applets--is called a cookie. These personalized "cover pages" are automatically created when you register at some Web sites, usually without your knowledge. They let site managers recognize you when you revisit and greet you with customized welcome screens and services. Like applets, cookies reside on your PC.

A cookie is primarily a marketing tool. It lets Web site owners gauge how often you visit a site and what you do there. A site manager can combine this data with information you shared when you registered, then create a demographic database of users to sell to marketers.

For instance, visits to World Wide Web sites are increasingly being monitored by auditing services like WebTrak and Doubleclick, which measure your interests according to what you do at the location, as well as by the ads that you read and respond to. These auditors create statistical user profiles based on your demographics and preferences, and then sell them back to the Web site owner, who can use the data to alter what you see the next time you visit.

Many consumers flinch when they learn about the information collected through cookies and Web site tracking.

"We're a culture that has a high regard for privacy," notes Marc Rotenberg, director of the Washington, D.C., Electronic Privacy Information Center. "To most people, list gatherers like these, while they may not be doing anything illegal, are doing something unethical and intrusive."

Marketers and site managers argue that gathering demographic information in this way isn't much different from what many supermarkets do with discount cards. (PC World Online also creates cookie files based on user profiles, but doesn't sell any of the data collected.)

Though it's difficult to avoid cookies altogether, it's not impossible. Cookie files can be removed by deleting Netscape's cookies.txt file or Explorer's cookies directory. But you'll have to reregister at some sites and may lose customized features.

Another alternative is to use the Anonymizer Web site ( http://www.anonymizer.com); this service prevents cookie files from being created while you're browsing. Later this year PGP Inc. plans to offer a product to keep you cookie-free.

Besides avoiding cookies, you can also limit the amount of junk e-mail you receive. One way is to complain to Web site managers, your Internet service provider, or your online service.

Last September America Online received enough complaints about electronic junk mail, or spam, that it decided to do something about it: The service started blocking messages coming from five of the most active junk e-mailers. Cyber Promotions Inc., which uses three of those sites for mailings, challenged AOL's decision in court. Last November, however, a federal district court judge ruled against the promoter. AOL subscribers can now block junk mail by using the Preferred Mail option.

The Interactive Services Association, a trade group of online companies, is creating a list of voluntary guidelines for electronic direct marketing. The proposed rules are intended to keep users informed of data collecting techniques, and give them the right to opt out of mailing lists.

"These guidelines are an important step to building an online community where consumers' privacy is protected while responsible marketing activities can take place," says Robert L. Smith, Jr., executive director of the ISA.

It's a simple fact, though perhaps a hard one for most people to accept: No one's anonymous and nothing's private in chat rooms and newsgroups. Every message you post is available not only for participants in the chat group to read at the time, but for anyone to retrieve from an archive months or years later. As Christopher Kantzes discovered, search sites like DejaNews and AltaVista let online sleuths and stalkers search by name for your entire online oeuvre. Give away enough data in your postings, and you'll supply the content for a fairly complete dossier of your whereabouts, history, relations, and thoughts.

For many legitimate reasons, law-abiding people may seek anonymity on the Net. What if you were employed by a large industrial concern and want to talk about a flaw in a new product that the company refuses to disclose? You wouldn't want your employer knowing you were the online whistle-blower.

Your postings can also affect your chances of landing a job. "If I'm a prospective employer, I can't ask about certain things because of the Americans with Disabilities Act," says Robert Gellman, a privacy and information policy consultant in Washington, D.C. "But if I check the Internet for your name and find out you're involved in a spina bifida newsgroup, asking questions about young girls with the condition, and I know that you have a 12-year-old daughter, well, maybe I don't want to hire you because you'll drive up my health insurance costs."

Even if you just want to avoid junk e-mail from marketers who cull lists based on people's preferences, you'd be wise to hide your identity online.

Fortunately, you can shield who you are in online newsgroups fairly easily by using a so-called anonymous remailer--a program that cloaks the heading of an electronic message so that the sender's name and address are effectively indecipherable. Anyone who subsequently responds to the encoded address actually posts it to the anonymous remailer, which transmits all answers directly to you. More than a dozen anonymous remailers are available at no cost on the Internet.

NECX Direct, a seller of computer products on the Internet, learned firsthand about the perils of using the Net as a virtual store. Last year it began letting customers buy products electronically by submitting electronic order forms.

The company felt it could safely offer this service because it had installed the latest version of Netscape Navigator, which supposedly offered fully secure transactions, impenetrable to hackers. NECX's sales instantly doubled.

Then computer scientists at Princeton University discovered a security flaw in Navigator and revealed their findings on the Internet. Netscape said it fixed the flaw within a few days, but for NECX the damage was done. Though no one broke into the site, the ensuing publicity forced the company to withdraw its promise that its site was secure. Online sales tumbled.

In many ways NECX and the hundreds of other companies struggling to make money from Internet shopping sites are fighting perception more than reality. A USA Today/IntelliQuest survey of computer users found that only 5 percent of respondents said they trust sending credit card and other financial data over the Net. In fact, shopping on the Net is somewhat safer than using your credit card to buy goods over the phone. The loss to businesses from Internet hacking is only $1 for every $1000 in revenue, compared to $1.41 for every $1000 in sales from MasterCard fraud, according to a report by Forrester Research.

"The biggest problem is not one of technology, but consumer caution," says Magdalena Yesil, who until recently was a vice president at CyberCash, which offers a secured payment system for the Internet.

Still, some analysts say that Internet retailing could be a $6 billion-plus market by the year 2000, once security solutions now in development are implemented. The most promising schemes are "wall-to-wall encryption" and electronic money.

In wall-to-wall encryption, data is encoded from the moment it leaves the consumer's PC and remains that way until it reaches the bank that is approving the sale. The most widely supported approach to encryption is a plan known as SET (for Secure Electronic Transactions). SET is backed by everyone from American Express, MasterCard, and Visa to IBM, Microsoft, and Netscape. The plan is expected to be ready for widespread use by early this year.

Electronic money, or e-cash, is a competing approach that isn't based on credit cards at all. Instead, you place money in an e-cash account at a bank on the Internet, usually by transferring it from your existing checking or savings account. When you want to buy something, you send an encrypted message to the Internet bank, asking to withdraw enough money to cover the purchase. Still encoded, the e-cash stays in an account file on your personal computer until you send it to the merchant as payment.

About a dozen companies--Digicash and CyberCash are two of the larger ones--are developing or implementing e-cash programs.

At least on its face, banking via the Internet should be much more secure than online shopping. The reason is simple: Shopping involves thousands of merchants and dozens of banks; if any are lax about safeguards, a hole is opened that a hacker can drive an electronic truck through. Banking, however, typically involves a one-to-one relationship between customer and institution. If the bank's system is secure, it seems less likely that snoops could steal account information or even money.

Unfortunately, many banks have set up online programs to let customers perform routine transactions--such as account transfers and bill payments--only to find that hackers are eager to get in. In its first months, the first Internet-only bank, Security First Network, had to fend off a dozen attempts by hackers to break into account files electronically. However, the company says the firewall protecting the system was never breached.

According to both the FBI and the Secret Service, numerous online financial and shopping services have had similar experiences. As a result, many large banks--such as Chase Manhattan and Wells Fargo--are shying away from the Internet. Instead, these institutions are teaming up with companies like Checkfree, Intuit, and Microsoft, which have all built private consumer banking networks that have powerful security schemes, including secure firewalls and automatic encryption for all of their transactions. Other financial institutions, including Bank of America and Citibank, are going it alone, hoping to lure customers to their Internet sites with better services.

The firewalls and other security approaches banks have used to set up their online systems run the gamut from very secure to houses of straw. At this point, prospective customers have no way of knowing which banks can be trusted with their Internet accounts.

Just because a bank is well known, don't assume its security is watertight. For instance, Citibank was embarrassed two years ago by a Russian hacker's daring raid in which $11 million was electronically transferred from the bank's mainframes in New York to accounts in Finland, Israel, and California (see "Hacked! Are Your Company Files Safe?" in the November 1996 issue of PC World).

Fortunately, things are looking up for online banking. Security First Network has used its unique firewall/security overlay, VirtualVault, for more than a year, and says it hasn't suffered any security breaches. Hewlett-Packard recently purchased VirtualVault and is now marketing it commercially. With these protections in place, even if hackers use a Web browser to break into the bank's data sites, the security gateway will keep them away from sensitive information.

So is there such a thing as complete privacy on the Internet? Unfortunately, not yet. Chances are slim that your local paper will publish the details of your life based on your e-mail trail, but your privacy may still be at risk. If you don't take the proper precautions, anytime you send an e-mail, access a Web site, post a message to a newsgroup, or use the Internet for banking and shopping, you're defenseless against would-be snoops. Says the Center for Democracy and Technology's Janlori Goldman, "People think they're invisible and secure when they go online. They're anything but."

As Internet usage grows, so does the amount of personal data it carries. And as Christopher Kantzes learned, private information can easily become public.

Public Key--Private Key

1. With your encryption software, you create a "key" with two parts--one public, one private. You distribute a file containing the public part of the key to those you want to communicate with. Only you can use your private key.

2. You write an e-mail message, then use the recipient's public key to encrypt it.

3. The encryption process puts a kind of digital lock on the message. Even if someone intercepts it en route, the message's contents are inaccessible.

4. When the message arrives, the recipient types a pass phrase. Then the software uses the private key to verify that the recipient's public key was used for encryption.

Encrypt Your E-mail

Don't send sensitive e-mail unless it's encrypted. To encode messages, use PGP or another program that has public-key/private-key encryption capabilities. Make sure recipients use the same encryption program or one that is compatible with it.

Conceal Your Identity

To shield your identity when posting correspondence on a newsgroup, use an anonymous remailer. This hides the heading of an e-mail message, making the name and address of the sender indecipherable.

Watch Where You Shop

Before shopping or banking electronically, ask the company about its security hardware and software. Its encryption scheme should be a public-key/private-key program with a 128-bit secret key. Firewalls that guard against hackers should be installed to shield the network from intruders.

Buy the Old-Fashioned Way

If you're not satisfied that the online retailer or bank has adequate security measures in place, ask if you can forward your credit card information by telephone or mail--not electronically--when placing an order.

Don't Talk to Strangers

When using an online service or visiting a Web site, don't give your number or password to anyone who seeks you out--even if they claim to be affiliated with the provider.

Stay Off the Lists

Two examples of warnings regarding web site visits and newsgroup postings.

DEJANEWS

"Be careful what you say about others. Please remember--you read netnews; so do as many as 3,000,000 people. This group quite possibly includes your boss, your friend's boss, your girlfriend's brother's best friend and one of your father's beer buddies. Information posted on the net can come back to haunt you or the person you are talking about."

ANONYMIZER.COM

The Center for Democracy and Technology

The Center for Democracy and Technology, a public- interest organization based in Washington, D.C., develops and advocates public policies to preserve civil rights and liberties in communications and computer technologies. Internet censorship, privacy, cryptography, and federal legislation regarding the Internet are all issues of CDT concern.

CDT Privacy Demonstration

If you're interested in seeing just how much information is collected when you browse, check out CDT's privacy demonstration page ( http://www.13x.com/cgi-bin/cdt/snoop.pl).

The page mirrors back your name and e-mail address, your geographic location, and the type of computer and browser you're using.

The demo also outlines various methods used to collect personal data, explains why you should be concerned, and provides links to sites that can help you protect your privacy.