Wednesday, June 24, 2009

How Much Dough Did Clear Burn Through?

Clear was, as I said yesterday, a very expensive failure. With two or three people staffing its access lanes at 18 airports, and with one or two others staffing the enrollment kiosks in terminals, the weekly nut had to have been quite impressive.

And that doesn't count the money spent on the GE-produced electronic shoe-scanner kiosks that the TSA adamantly refused to approve for security use, or the equipment to produce biometric ID cards at each Clear location. Or the development of other technology, which was well underway.

Clear was the brand name of the version of the ill-fated "registered traveler" program that Steven Brill's Verified Identity Pass Inc. tried mightily, and futilely, to install as a component of airport security. The TSA, as I said yesterday, wanted no part of private-enterprise incursion on its security turf, and successfully bled Clear to death.

Kip Hawley, the TSA director for over three years (till January) always insisted to me that he supported the registered-traveler concept, as he was required to do by Congress. But he had what turned out to be intractable objections to various approaches, like Clear's shoe-scan machine and biometric ID cards, that inserted private enterprise into a federal security operation. Hawley always said that the TSA objections to the shoe machine, for example, could be overcome with improvements in the technology -- but it simply never happened.

Unaccountably, the wild-spending Homeland Security Department has not yet named a replacement for Hawley, who left with the change in administration in January. Clear suggested yesterday that not having someone in authority to deal with at the TSA was part of the reason it failed.

Meanwhile, what about the money?

The Wall Street Journal's venture capital blog today has some numbers about the venture capital side of the dough raised for Clear: A total of about $83 million over the six years since it was founded. As we have long known, major investors were Baker Capital, GE Security (which developed and produced the shoe-scanner and other technology), Lockheed Martin and (heh-heh) Lehman Brothers.

Steve Brill told me about 18 months ago that he had a lot of his own money invested in the company, but he wouldn't say how much.

Clear claimed about 250,000 members, and charged $199 a year for the card. However, there were many corporate discounts and hotel-loyalty program promotions that significantly reduced that price for an unknown number of card-holders

Some postmortems on Clear today get things wrong, as the media often has done over the years when trying to get a grip on the botched registered-traveler program. As Bill Moyers once said, "Reporters are paid to explain things they don't understand."

From the Journal blog:

"Verified Identity collected background checks and biometric information from frequent airline travelers and used the information to get its customers through a faster security line at the airport, through the federal government’s Registered Traveler program. The service was active at about 20 airports and the company boasted more than 230,000 customers, which it was charging between $100 and $199 each."

Not to quibble, but the information Clear collected was not used "to get its customers through a faster security line at the airport" through a "government" program. The information Clear collected turned out to be irrelevant in any security sense, and in the last year Clear even stopped referring to itself as a security program.

I'm amazed today by how many in the media, even people who have been covering the registered traveler program since it was first proposed, fail to understand that Clear had no "security" role whatsoever. The only operational association the TSA ever had with Clear was when it imposed a fee to routinely check applicants against the terrorist watch lists. The TSA dropped that association entirely last year, and Hawley told me the reason was that fliers are routinely checked by airlines against the lists anyway.

At that point, Clear (and a couple of tiny competitors) had no valid claim to being a security program.

What Clear membership got you was access to an special Clear lane, where you presented your Clear biometric ID card for scanning (which, it turned out, merely proved that your Clear membership was up to date and that you were the person on the card).

Once you made your pass through the Clear lane, you proceeded to the real TSA security checkpoint line, where like everybody else you had to produce a government-issued photo ID (Clear's biometric card was not accepted as proof of identity by the TSA) -- and then go through the TSA checkpoint just like everyone else.

So Clear access was the same access that airlines give their elite status customers at many airports, though Clear did employ "concierges" whose job was to provide assistance, if needed, to get your belongings up to the TSA checkpoint.

Clear did have its value to many members who frequently use airports where security lines can be unpredictable (Orlando, San Jose, etc.), but it was strictly value as a line-cut pass. That wasn't supposed to be how it worked under the "registered traveler" program, which was originally conceived by Congress (badly) to siphon out a portion of the traveling public who could be "trusted," and therefore get a special wave through TSA security. Never happened.

Meanwhile, in most airports, the TSA under Hawley improved checkpoint procedures so much that the issue of long lines pretty much went away.

Clear did collect financial and other background information during the enrollment process, as part of the original concept of the "registered traveler" idea that was so badly botched by Congress (and resisted by the TSA) -- but ultimately that information was irrelevant in any security sense.

In its demise, Clear is left with a lot of equipment at various airports; airports are left without the rent that Clear paid; and a large number of stiffed members who wonder what will be done with that personal information, including fingerprints and iris scans. Clear says it will be destroyed.

Clear also is left with a valuable asset, however: The names and addresses (other background personal information aside) of a couple of hundred thousand frequent fliers, most of them business travelers.

In a time when airlines and others are finding it difficult to identify who among their customers are business travelers (since business travelers are behaving more and more like leisure travelers), Clear has a List; said List has market value to someone.

Clear also has a proprietary biometric ID card system, and as Brill always pointed out, a biometric card -- implanted with iris scans and fingerprints -- is a foolproof identity system. In a scary age when various overstepping authorities and commercial interests will be demanding to see your ID (even at football stadiums, for example), a biometric ID card system has market value, though there are a lot of competitors.


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