From a law enforcement point of view, digital communication is a two-edged sword. On the one hand, it allows for the simple collection, sorting, and processing of massive amounts of information (such as in the FBI's Carnivore system), but on the other hand, it is much easier for users to encrypt their communications with almost unbreakable codes. Now that VoIP calls are becoming commonplace, governments around the world are struggling to adapt to the new technology, and Skype has found itself under extra scrutiny.

The reason is that Skype uses 256-bit, industry-standard AES encryption that is nearly impossible to break without the key. The Skype privacy FAQ explains the system this way:

"Skype uses AES (Advanced Encryption Standard) - also known as Rijndael - which is also used by U.S. Government organizations to protect sensitive, information. Skype uses 256-bit encryption, which has a total of 1.1 x 10^77 possible keys, in order to actively encrypt the data in each Skype call or instant message. Skype uses 1024 bit RSA to negotiate symmetric AES keys. User public keys are certified by the Skype server at login using 1536 or 2048-bit RSA certificates."

All Skype traffic is automatically encrypted end-to-end without requiring any user intervention, and this encryption is posing a problem to authorities who need (or want) to listen in on conversations. Skype executives state that their software is free of all backdoors, and a security researcher who saw some (but not all) of the code agrees. Still, the company claims that it "cooperates fully with all lawful requests from relevant authorities," which may mean that they turn over keys to governments upon request.

The call can also be tapped once it leaves the Skype system and enters the normal telephone network, so calls to a landline are inherently insecure. Still, strong AES encryption is enough to defeat real-time surveillance of telephone calls of the kind possibly used by the NSA. That doesn't mean that nothing can be gleaned from watching the traffic, which can be used to identify who the call is routed to and how long it lasts, but it does mean the contents of the call remain secure.

Rather than being a new issue for law enforcement, though, this is actually just a new version of an old problem: how to access encrypted data on a suspect's computer? Encryption algorithms have been good enough for some time to prevent all but the most determined brute force attacks, but there are obviously other ways of solving the problem. For the FBI, keyloggers are a popular choice; they obviate the need for backdoors or for sophisticated computer solutions. They simply steal the password. The same (metaphorical) approach may give them access to Skype calls; rather than breaking the encryption, they simply grab the key and decrypt the data.

The FCC ruled last year that VoIP providers need to offer backdoors into their systems for wiretapping reasons, but Skype isn't based in the US and so is not subject to the rule. It is subject to the EU's new Data Retention Directive, though, which may require them to retain call logs and decryption keys for a period of time. If so, real-time monitoring of Skype calls would still be out, but after-the-fact review of recorded calls from people of interest might well be possible for the government.