Quantum Market Research

2014 market study &
business opportunities
assessment
BY
D R . T HOMAS J ENNEWEIN , A SSOCIATE P ROFESSOR & E RIC C HOI , S ENIOR T ECHNICAL A SSOCIATE
INSTITUTE FOR QUANTUM COMPUTING
market study
quantum
cryptography
1. executive summary
2. introduction
2.1. Relevance and Implications of Quantum Information
2.2. About the Institute for Quantum Computing
3. overview of quantum cryptography
3.1. Inherent Vulnerabilities of Conventional Cryptography
3.2. Quantum Cryptography and Quantum Key Distribution (QKD)
3.3. Examples of Terrestrial QKD Implementations
11
3.4. Satellite-Based QKD: The Quantum Space Race
18
4.market overview
23
4.1. Financial Cost of Information Security Breaches
23
4.2. Current Market for IT Security and Encryption
25
5. competitive landscape
29
5.1. Current Commercial Vendors
29
5.2. Recent Commercial Market Activity
37
6. market potential
39
6.1. Discussion of Market Potential
39
6.2. Quantum Cryptography
41
6.3. Market Segmentation
43
6.4. Satellite-Based QKD
43
7. conclusion
45
8. endnotes
47
9. appendices
50
9.1. Appendix A: List of Acronyms
50
9.2. Appendix B: Acknowledgements
53
1. executive summary
There is a serious threat to the current cryptographic systems upon which
modern information and communications technology depends. Most current
encryption techniques are based upon assumptions of mathematical
complexity that are actually not proven. Therefore, a sudden or unexpected
algorithmic innovation could immediately compromise many modern security
systems. In the longer term, quantum computers will be able to quickly solve
the mathematical problems upon which most current key establishment
methods are based, rendering them useless.
Quantum key distribution is not science fiction, but a present day reality. A
number of companies are currently selling commercial QKD systems, and
several other firms oer related products and services. QKD has attracted the
attention of high technology firms such as Alcatel-Lucent, Raytheon, HP, IBM
and Toshiba. Terrestrial QKD networks using fibre optic cables or free-space
atmospheric transmission are in operation today for both research and niche
commercial applications such as secure bank transactions and data transfers.
Due to some fundamental physical constraints, a complementary solution
would be required to cover distances beyond a few hundred kilometers. Light
signals inevitably attenuate as they are transmitted through fibre optic cables,
and conventional signal amplifiers cannot be used because they would
compromise the quantum mechanical phenomena upon which QKD depends
for the detection of eavesdropping. Free-space atmospheric QKD links are
limited to line-of-sight, subject to local geographical constraints and ultimately
I NSTITUTE FOR QUANTUM C OMPUTING : U NIVERSITY OF W ATERLOO
Only systems based on quantum cryptography can oer long-term data

security. Since quantum cryptography relies upon fundamental laws of physics
rather than mathematical assumptions, it will never be threatened by new
algorithms or more powerful computers. Quantum key distribution (QKD)
establishes highly secure keys between distant parties by using single photons
to transmit each bit of the key. Since photons behave according to the laws of
quantum mechanics they cannot be tapped, copied or measured without
leaving tell-tale signs of observation. Such systems provide the peace of mind
knowledge that any eavesdropping can be immediately detected and
addressed.
the curvature of the Earth. The only way to oer long-distance QKD services
with current technology is to use satellites as complementary trusted nodes
bridging the distance between geographically dispersed QKD ground
networks, for example, between cities or continents. Teams in Canada, Europe,
the U.S., Japan, China and other nations are currently engaged in a Quantum
Space Race, vying to be the first to demonstrate QKD from space. The
winning team would not only claim a historic scientific accomplishment but
would also be the front-runner to seize a potentially lucrative future business
opportunity.
Currently, the market for quantum cryptography is estimated to be on the
order of $30-million. Over the long-term, as regulatory requirements for
quantum-resistant cryptosystems are expected to become enacted, it is
anticipated that the market will grow significantly. IQC estimates the potential
overall global market for quantum cryptography could reach $23-billion within
twenty years. Satellite-based QKD for long-distance secure key distribution
would be a subset of this overall quantum cryptography market. Such a
service could be implemented with either a constellation of low Earth orbit
(LEO) microsatellites or hosted payloads aboard geostationary (GEO)
satellites. IQC estimates a potential global market for satellite-based QKD of
up to $382-million per year within the next two decades.
2.introduction
2.1. RELEVANCE AND IMPLICATIONS OF
QUANTUM INFORMATION
Each force of Nature that humanity has harnessed has had a lasting impact on
society. Fire, steam, electromagnetism and the splitting of atomic nuclei
represent the most compelling examples. What could be the next force of
nature that we can harness? What forces remain untamed?
Ironically, it is quantum mechanics that poses both the greatest threat to

conventional cryptography and the best means of securing it. Today, most
encryption technologies are based on unproven assumptions of mathematical
complexity. There is a significant likelihood that practical quantum computers
will be able to solve these problems, and this probability is too significant to
ignore. Quantum cryptography, however, which relies upon the same
fundamental physical laws, will deliver long-term data security, never to be
threatened by new algorithms or increased computational power.
Quantum theory was discovered at the beginning of the 20th Century and is
used to describe the behaviour of atoms, molecules, photons (quanta of light)
and their constituents. As a better understanding of this domain was
developed, we have often been left perplexed about the seemingly paradoxical
behaviour of nature at the atomic scale: particles that cannot be pinpointed
because of the uncertainty principle; photons and atoms that act as if they are
in two places at the same time; the interchangeability of particles and waves.
For most of the 20th Century, these phenomena were thought to be only
curiosities. Over the last 25 years, however, physicists and chemists started to
develop better technologies with which to explore the intricacies of the
quantum domain. They were able to demonstrate that indeed Nature behaves
precisely as this theory predicts. A great deal of thought and experiment has
been applied attempting to understand the phenomena presented by
quantum mechanics.
2.2. ABOUT THE INSTITUTE FOR QUANTUM COMPUTING

The mission of the Institute for
Quantum Computing (IQC), a
research institution located at the
University of Waterloo, is to
aggressively explore and advance
the application of quantum
mechanical systems to a vast array
of relevant information processing
techniques. The idea for founding a
large-scale quantum information
program in Waterloo was a result of
discussions among founder and
former co-CEO of BlackBerry Mike
Lazaridis, the University of Waterloo
and Professor Michele Mosca, and
the founding Executive Director of
the Perimeter Institute for
Theoretical Physics, Howard Burton.
IQC was ocially established in
October 2002 and has since built an
international reputation as a leader
in quantum information science and
technology. The Institute is devoted
to interdisciplinary research
bridging foundational issues to
technology development through
both theoretical and experimental
investigations. The main themes of
research are quantum computing,
communications and sensors. IQC is
strongly involved in the
standardization of quantum key
distribution systems within the
European Telecommunications
Standards Institute (ETSI).
The Institute operates a free-space
quantum link test-bed that can
transfer entanglement and
cryptographic keys between
buildings on the campus of the
University of Waterloo (see Section
3.3.1). This is a double-link
configuration, where the entangled
photon pairs are sent along two
dierent paths of about 1.3 km in
length. IQCs test system is unique
4
in Canada and has allowed the

institute to gain important knowhow that is leading to collaborations
with other universities and
organizations including
Communications Security
Establishment Canada (CSEC), the
Canadian Space Agency (CSA) and
the University of Calgary. Since
2010, IQC has been working with
partners in government and
industry to advance concepts for
demonstrating long-distance
quantum key distribution via Earthorbiting satellite (see Section 3.4.1).
Figure 1 IQC Executive Director, Professor Raymond Laflamme
3. overview of quantum
cryptography
3.1. INHERENT VULNERABILITIES OF
CONVENTIONAL CRYPTOGRAPHY
Most current encryption technologies are based on public key cryptography

that uses assumptions of computational complexity such as the diculty to
factor the product of two prime numbers back into the original primes, or
discrete logarithms and elliptical curve schemes. For example, it is estimated
that it would take a century for a conventional computer to break 1024-bit
RSA.1 There are, however, a number of problems:
The assumption of mathematical complexity behind the factoring large numbers,

discrete logarithms or elliptic curve schemes is actually not proven. A sudden or
unexpected algorithmic innovation would comprise many modern security
systems.
Peter Shor discovered 20 years ago that quantum computers will break prime
factoring and discrete-logarithm based cryptographic systems. Fortunately, there
were no quantum computers at the time. The prevailing scientific consensus,
however, is that practical and widespread quantum computing capabilities will
likely be available within the next 10 to 25 years.2 When this happens, most
current encryption methods will be rendered useless.
Current cryptographic systems are not future-proof. Many organizations need to

secure data over the long-term, for example, for 20 years or more. An unexpected
A serious catastrophe is looming that threatens to compromise the current

cryptographic systems upon which the information and communications
technology (ICT) infrastructure of the modern world depends. It is
cryptography that allows us to leverage a relatively small amount of physical
security and trust in order to be able to use the wider untrusted ICT
infrastructure in a practical manner with reasonable assurances of privacy and
security. Reliable cryptography is absolutely fundamental both to the global
economy and to our daily lives. Section 4.1 describes the financial cost of
information security breaches.
innovation in conventional algorithms or the advent of quantum computers would

not only compromise contemporary data security but would also make historical
records vulnerable.
With regard to the specific threat of the quantum computer, one may ask if
this is really something that needs to be a concern at the present time. This
depends on three variables x, y and z:
x is the number of years that cryptography must remain unbroken, i.e. how long
are you supposed to protect health information, or national security information,
or trade secrets?
y is the number of years it will likely take to replace the current system with one
that is quantum-safe or not based on unproven assumptions of mathematical
complexity
z is the number of years it will take to break the current encryption tools, using
quantum computers or otherwise
If x + y > z, then there is a problem right now and immediate action needs to
be taken. This means that for the latter part of those y years, we will have to
either stop doing business or continue to use the current tools with the
knowledge that they will be compromised in z years.3 Neither of these are
desirable options and near-term alternatives are essential, if only to protect
against unexpected algorithmic advances. These alternatives should also be
quantum-safe in order to provide protection against the imminent threat
posed by quantum computers.
There are two possible complementary solutions. The first are post-quantum
or quantum resistant techniques, which are new codes and protocols based
on NP complete problems for which there are currently no known quantum
algorithms capable of breaking these schemes. While post-quantum methods
would not require a lot of new hardware and could be deployed quickly on
existing ICT infrastructures, the inherent vulnerability of being based on
unproven mathematical assumptions remains.
Quantum cryptography is the other solution. To date, quantum mechanics is
possibly the most thoroughly tested model of the Universe that has been
devised by science. For data security over the long-term only systems based
on quantum cryptography, to the extent of our current best understanding of
the laws of physics, are secure against both conventional and quantum
computers. This is due to the fact that quantum cryptography relies upon
fundamental laws of physics rather than assumptions of mathematical
complexity, and hence will never be threatened by innovative algorithms or
increased computational power.
3.2. QUANTUM CRYPTOGRAPHY AND QUANTUM KEY

DISTRIBUTION (QKD)
This section presents a brief high-level overview of quantum cryptography and
quantum key distribution (QKD) intended for general audiences. Readers
6
seeking a more rigorous discussion are encouraged to consult the scientific

literature.
3.2.1. Overview of Cryptographic Theory

Cryptography, which is derived from the Greek words krypts (hidden or
secret) and graphein (to write), is the study and practice of techniques for
encoding and decoding messages in order to render them unintelligible to all
but the intended receiver. The two primary forms of cryptographic systems are
secret key (symmetric) and public key (asymmetric).
In symmetric cryptosystems, a single secret key is used both by the sender to
encrypt the message and the receiver to decrypt it. One of the most common
symmetric key algorithms is the Advanced Encryption Standard (AES), which
is a standard that was established by the U.S. National Institute of Standards
and Technology (NIST) in 2001. A drawback of symmetric cryptosystems is the
need for both parties to do a secure initial exchange of one or more secret
keys prior to initiating message exchange.
An unconditionally secure or perfect cryptosystem is one that cannot be

compromised even with unlimited time and computational power. The
standard example of a perfect cryptosystem is a type of symmetric
cryptography called the Vernam cipher or one-time pad (OTP). In this
technique, each bit or character of a message is encrypted by combining it
with a corresponding bit or character from a random secret key (the pad)
using modular addition. If each key is used only once (one-time), is truly
random and unpredictable and is at least as long as the message itself, then
the resulting encryption will be impossible to break.
A number of practical problems, in particular, the need to constantly generate
new keys and for those keys to be as long as the messages themselves, have
prevented OTP from widespread use. For example, the encryption and
transmission of a multi-gigabyte message over a non-secure channel would
first require the transmission of an OTP key of the same size over a bandwidth
limited secure channel. Symmetric cryptography algorithms such as AES
Public key or asymmetric cryptography uses two separate keys, one public
(open) and one private (secret). The open public key is used by the sender to
encrypt a message or verify a digital signature, and the secret private key is
used by the recipient to decrypt a message or create a digital signature. These
key pairs are linked mathematically, based upon computational relationships
that are assumed to be extremely dicult to solve such as the prime product
factorization, discrete logarithms and elliptic curve schemes. Public key
encryption allows users to communicate securely over an open channel
without having to agree on a shared secret key beforehand. This distributed
trust is essential to the success of Internet applications such as electronic
commerce, however, as discussed in Section 3.1 public key cryptography is
inherently vulnerable to increasing computational power or unexpected
algorithmic advancements.
achieve practicality by using long but finite length secret random keys,
however, there are a number of challenges that need to be addressed.
First, it is not possible for conventional computers to generate truly random
numbers. The random number functions in most programming languages are
not suitable for cryptography, and even those that are suitable employ some
methodologies whose security is unproven. Random numbers generated
deterministically by conventional computers are more correctly described as
pseudo-random. Second, the security of AES and other symmetric schemes
is only as good as the security of the key exchange itself. Even today, for many
financial, military and diplomatic applications, secret keys are often delivered
manually using a trusted human courier. While the image of a briefcase
handcued to a courier has been made famous by many spy movies, modern
digital storage media such as USB sticks or DVDs are often used to carry
secret keys from one place to another in a less conspicuous manner.
Distributing keys in this manner is expensive, inconvenient and poses a
significant security risk. In addition to the risk of compromise during transit
(for example, a pickpocket swiping, copying and replacing the pad), there is
no guarantee that the couriers themselves can be trusted. Anyone who
manages to copy or steal the key would be able to decrypt the messages
eortlessly, thereby defeating the purpose of encryption.
Both of these problems can be solved by quantum mechanics. Contrary to
Newtonian or classical physics, quantum physics is fundamentally nondeterministic by nature. Quantum random number generators (QRNG) exploit
the intrinsic randomness of phenomena such as radioactive decay or photonic
transmission and reflection to generate true random numbers. These devices
are available commercially from companies like ID Quantique (see profile in
Section 5.1.1) and have application in numerical simulations and the gaming
industry as well as cryptography.
Quantum key distribution (QKD) solves the key exchange security problem. As
described in Section 3.2.2, QKD establishes highly secure keys between distant
parties by using single photons (or similarly suitable quantum objects) to
transmit each bit of the key. Since single photons behave according the laws of
quantum mechanics they cannot be tapped, copied or directly measured
without leaving tell-tale signs of manipulation. The huge benefit for users of
such systems is the peace of mind of knowing that any attack, manipulation or
copying of the photons can be immediately detected and addressed.
Since many symmetric encryption algorithms are resistant to known attacks
by quantum computers, addressing the emerging threats described in Section
3.1 will not require all of the current foundational blocks of data security to be
replaced. QKD can be used to generate the private keys in a symmetric
encryption algorithm such as block cipher AES. It would thus be deployed as a
complementary technology that enhances and gradually replaces public key
cryptography systems. Most of the current AES and Data Encryption Standard
(DES) key management schemes will still be relevant when augmented by
QKD.
Another interesting property of quantum key distribution is universal

composability, which implies that one could use some of the key generated
by QKD to authenticate the messages in the next round of QKD with a

negligible decrease in security. Thus, it is possible to continue QKD more or
less indefinitely, having started only with a relatively short authentication key.
Even if the original authentication keys are revealed after the first QKD
exchange, the subsequent keys from QKD remains information theoretically
secure.4 By contrast, conventional public key exchange schemes do not have
this feature. Although one could employ a protocol in which a new key is
transmitted encrypted under the old key, an eavesdropper who logs all
communications and subsequently breaks the first key can read all future
communications. With QKD, new session keys are completely independent of
all prior keys and messages.
3.2.2. Principle of Quantum Key Distribution

Quantum mechanics is a set of scientific principles that describes the
behaviour of energy and matter on the scale of atoms and subatomic particles.
Rather than relying on unproven assumptions of mathematical complexity, the
security of quantum key distribution (QKD) is derived from these fundamental
and demonstrated scientific principles.
A number of QKD protocols have been devised. The BB84 protocol, which was
developed by Charles Bennett and Gilles Brassard in 1984, is based on the nocloning theorem. To illustrate the technique, consider two parties Alice and
Bob who wish to exchange a secret key between them.
Alice transmits a stream of random binary bits as single photons and encodes
the values of 0 or 1 as a quantum state (for example, polarization) in two
dierent non-overlapping bases (for example, rectilinear and diagonal). The
encoding base of each transmitted photon is also selected randomly. For each
received photon, Bob randomly chooses a measurement base and records the
observed polarization of that photon. If Bob happens to measure a given
photon in the same base in which it was originally transmitted by Alice, he will
get the same value. Otherwise, a random polarization will be measured.
When the transmission is complete, Bob contacts Alice over an authenticated
conventional communications channel (in order to prevent man in the middle
attacks) and they compare the sequence of receiver measuring bases Bob had
used versus the transmitter encoding bases that Alice had used. Since they are
only talking about the measurement bases and not the actual transmitted
Instead of human couriers with handcued briefcases or USB sticks, QKD uses
a stream of single photons to transmit the encryption key. According to
Heisenbergs Uncertainty Principle, there is a fundamental limit to the precision
with which the position and momentum of a particle can be known
simultaneously. For example, the more precisely the position of a particle is
determined the less precisely its momentum can be known, and vice versa.
The related observer eect means that the very act of measuring a particle
such as a photon will inevitably aect some characteristic of that particle. It is
therefore impossible to make a perfect copy of a quantum state, a principle
known as the no-cloning theorem.
values, this base reconciliation step could take place over a public or
unsecured channel. Alice and Bob keep the photon measurements (bits)
where both had used the same bases and discard the rest. The shared
encryption key is generated from these bits.
To check for the presence of an eavesdropper Eve, Alice and Bob then
compare a random subset of the remaining bit string. By the laws of quantum
mechanics, any attempt by Eve to tap into the transmission or copy the bits
will result in detectable errors in Bobs measurements. If the error rate exceeds
a certain threshold, Bob and Alice can discard the compromised key and try
again either at a later time or through a dierent quantum channel.
Devised by Artur Eckert in 1991, the E91 protocol is an alternative QKD scheme
that involves a trusted third-party Charlie with an entangled photon source.
Charlie gives Alice and Bob each a quantum state in an entangled pair and
their key is created using consecutive measurements of this pair. The key
exchange then proceeds exactly as BB84 except that in the basis
reconciliation step Alice and Bob both compare their measurement bases
instead of comparing Alices encoding bases to Bobs measurement bases.
The next year Bennett and Brassard published the BBM92 protocol as a followup to E91 in which it was proven that it is not necessary for Charlie to be
trusted because Alice and Bob can perform a Bell test on their
measurements to confirm shared entanglement. For example, a pair of
photons may be entangled in such a way that their polarizations are opposite
to each other. By the laws of quantum mechanics, the polarization of one of
these photons is indeterminate until it is observed. This act of observation,
however, will automatically determine the polarization of the other entangled
photon even if the pair is physically separated. Austrian physicist Erwin
Schrdinger introduced the term entanglement, which was later referred to by
Albert Einstein as spooky action at a distance.
QKD can also be implemented using continuous variables (CV-QKD) carried
by weak optical signals.5 The light fields will have intrinsic noise in their phase
and amplitudes due to quantization of the field, which enables Alice to encode
the phases for signals that are indistinguishable to Eve, as is the case for some
of the polarisation states used in the BB84. CV-QKD has can be implemented
using standard telecom components such as laser sources, phase modulators
and regular photo diodes, however, at larger transmission losses the system
becomes less ecient than single photon based QKD.
10
3.3. EXAMPLES OF TERRESTRIAL QKD

IMPLEMENTATIONS
Using the QKD protocols described in Section 3.2.2, cryptographic keys can be
transmitted photonically either across fibre optic cables or through free-space.
Summarized here are a few selected examples of many QKD systems and
networks that have been implemented for research and experimental purposes as
well as some niche commercial applications. It is not an exhaustive list. See
Section 5.1 for profiles of current commercial vendors of quantum cryptography
products and services.
Fiber optic cable is a convenient channel for QKD, as they can be acquired
relatively cheaply and do not have requirements on the local landscape like freespace links, however, silica glass is not a perfect transmitter so fiber optic cables
suffer from exponential losses over the length of the fiber. For the best-case ultralow loss fiber, the power of any light is reduced by half in its output after
approximately 16 km. In addition, telecom fibers are often optimized for
minimizing attenuation for a wavelength of 1550 or 1310 nm whereas detectors
typically have the best detection efficiency in the visible spectrum, leading to a
performance trade-off between these technologies. To a lesser extent,
polarization and chromatic dispersion can also affect the quantum signals, which
lead to further errors.
QKD can be also done between any two points with direct line-of-sight using
free-space links. Unlike fiber links, free-space experiments do not suffer from
losses exponential in distance, although they do suffer in turbulence, dispersion
and scattering. Free-space experiments can cross much larger distances than
fiber links, but they are often difficult to achieve, as it is difficult to find two large
telescopes separated at a long distance with a direct line of sight. At the moment,
the distance record for free-space QKD on the ground is 144 km, which was done
between two observatories in the Canary Islands.6
11
3.3.1. Institute for Quantum Computing

IQC operates a free-space quantum link test-bed that can transfer
entanglement and cryptographic keys between buildings on the campus of the
University of Waterloo (see Figure 2). This is a double-link configuration in
which the entangled photon pairs are sent along two dierent paths each
about 1.3 km in length. IQCs test system is unique in Canada and has attracted
collaborative projects with other universities and institutions including the
Canadian Space Agency (CSA), Communications Security Establishment
Canada (CSEC) and the University of Calgary. As described in Section 3.4.1,
IQC is also actively pursuing satellite-based QKD.
Figure 2 IQCs Free-Space Quantum Link Test-Bed
12
3.3.2. Canary Islands

The current distance record for a free-space QKD implementation is 144 km,
which was achieved in 2006 between two of the Canary Islands under the
Quantum Information and Quantum Physics in Space (QIPS) program funded
by the European Space Agency (ESA).7 As shown in Figure 3, the link was
established between the islands of La Palma and Tenerife, the latter being the
location of ESAs Space Debris Telescope at the Teide Observatory which was
used as an optical ground station to receive the single photons. Dr. Thomas
Jennewein of IQC was one of the co-investigators for this experiment. One of
the significant outcomes of this investigation was to demonstrate that
quantum links between orbiting satellites and the Earth are feasible (see
Section 3.4).
Figure 3 Distance Record for Free-Space QKD Between Canary Islands
13
3.3.3. QKD with Airborne Platforms

In 2012, a team led by Sebastian Nauerth of Ludwig-Maximilians-Universitt
and Florian Moll of DLR proved the feasibility of QKD using the BB84 protocol
over a distance of 20 km between an optical ground station and an airplane
moving at 290 km/h.8 These results are representative of typical
communication links to satellites or other high-altitude platforms. In March
2014, IQC was awarded a Flights for the Advancement of Science and
Technology (FAST) grant from the Canadian Space Agency (CSA) to conduct
an end-to-end airborne demonstration of QKD between a receiver payload on
a stratospheric balloon and a mobile transmitter on the ground. A Chinese
group had reported the demonstration of downlink QKD using a transmitter on
a balloon, however, the IQC teams project will address the more innovative
and dicult challenge of demonstrating uplink QKD with the receiver on the
balloon, thereby establishing the feasibility of stratospheric QKD up to a
moving airborne platform.
3.3.4. Los Alamos National Laboratory

Los Alamos National Laboratory has been operating a QKD network with a
hub-and-spoke topology since 2011. Provided the central hub is secure, the
network as a whole remains secure. In 2007, a team of researchers from Los
Alamos and the National Institute of Standards and Technology (NIST) set a
distance record of 148.7 km for QKD over a fibre optic cable, using the BB84
protocol described in Section 3.2.2.
14
3.3.5. DARPA
In 2003, the U.S. Department of Defense started backing several quantum
cryptography experiments as part of a $20.6-million quantum information
initiative at the Defense Advanced Research Projects Agency (DARPA).9 As
shown in Figure 4, DARPA developed a Quantum Network has been running in
Massachusetts since 2004. This network was developed in partnership with
Raytheon BBN Technologies, Harvard University and Boston University. The
secure key rate is 500 bps and the average length of the links is 10 km. See the
profile of BBN Technologies in Section 5.1.6 for more information.
Figure 4 The DARPA Quantum Network
One of the first computer networks protected by QKD was implemented in

2008 at the Secure Communication Based on Quantum Cryptography
(SECOQC) conference in Vienna, Austria. This network used 200 km of fibre
optic cable to connect six locations across Vienna and the town of Sankt
Plten located 69 km to the west. It had a secure key rate of more than a
dozen kilobits per second. The objectives of the European Union funded
SECOQC project were to standardize QKD technology through a crossplatform interface allowing the integration on various QKD systems into a
single network and demonstrate one-time pad encrypted telephone
communication.
3.3.7. SwissQuantum
The main goal of the SwissQuantum network (see Figure 5), which was
installed in the Geneva metropolitan area in March 2009, was to validate the
3.3.6. SECOQC
15
reliability and robustness of QKD in continuous operation in a field

environment over an extended period of time. Led by the University of Geneva
with the participation of CERN, ID Quantique and other partners, the threenode network accumulated over 45,000 hours of operation time between
March 2009 and January 2011 and successfully demonstrated stable key
distributions despite interruptions caused by external factors such as power
outages and air conditioning failures.
Figure 5 The SwissQuantum QKD Network (2009-2011)
3.3.8. Tokyo QKD Network

The Tokyo QKD Network was inaugurated on the first day of the 2010
Updating Quantum Cryptography and Communications (UQCC) conference
and involved an international collaboration between numerous partners
including NTT, Toshiba and ID Quantique (see company profiles in Section 5.1).
Some demonstrated commercial applications included secure QKD
videoconferencing and a QKD smart phone
3.3.9. Examples of Commercial Application

In 2013, the Battelle Memorial Institute installed a commercial QKD system
built by ID Quantique between their headquarters in Columbus, Ohio and
another oce in nearby Dublin. Details can be found in Section 5.2.
Past examples of commercial application include the worlds first bank transfer
using QKD, which was undertaken in Vienna, Austria in 2004 by the research
group of Dr. Anton Zeilinger at the Vienna Institut fr Experimentalphysik in
collaboration with the Quantum Technologies group of Dr. Christian Monyk at
ARC Seibersdorf Research GmbH. The bank transfer was initiated by Viennas
mayor Dr. Michael Hupl and executed by the director of the Bank Austria
Creditanstalt Dr. Erich Hampel. Encrypted information was sent via fibre optic
16
cable between Vienna City Hall and the Bank Austria Creditanstalt branch
oce Schottengasse using the one-time pad technique described in Section
3.2.1.
QKD technology provided by the company ID Quantique (see profile in
Section 5.1.1) was used by the Swiss canton of Geneva to transmit ballot results
from polling stations to a data centre in the capital, a distance of 100 km, in
the national election of October 2007. For this application, the issue was not
confidentiality but integrity, making sure that no one could connect to the link
and change the values of the vote counting. The system (see Figure 6) was
installed in September 2006 and operated continuously for more than seven
weeks prior to the Election Day in October 2007. It has subsequently been
used five more times in subsequent elections and remains available for future
utilization. Another ID Quantique customer is Siemens IT Services and
Solutions B.V. in the Netherlands, which uses QKD to secure communications
between a pair of data centres in The Hague and Zoetermeer.
Figure 6 Use of Quantum Cryptography During the October 2007 Swiss National Election
17
There are currently four companies oering complete turn-key commercial

QKD systems: ID Quantique, MagiQ Technologies, QuintessenceLabs and
SeQureNet. Several other companies oer related products and services or
have active research programs. Profiles of these companies can be found in
Section 5.1.
3.4. SATELLITE-BASED QKD: THE QUANTUM

SPACE RACE
Ground-based QKD networks such as the examples described in Section 3.3
have a number of commercially viable applications. There are, however, some
fundamental physical constraints that would require the implementation of a
complementary solution for distances beyond a few hundred kilometers. Even
with the best-case ultra-low attenuation fibre optic cables, light will suer
exponential signal losses as well as polarization and chromatic dispersion as it
is transmitted through the material. Conventional signal amplifiers cannot be
used because doing so would eectively constitute an observation of the
quantum state of the single photons, thereby invalidating the very quantum
mechanical techniques upon which QKD depends for the detection of attack
or manipulation. Losses for free-space QKD within the atmosphere are
significantly reduced, however, these links are limited to line-of-sight and are
therefore subject to geographical constraints such as local landscape and
ultimately the curvature of the Earth.
Figure 7 Satellite Trusted Node to Bridge Terrestrial Networks Over Long Distances
18
In the absence of practical quantum repeaters, Earth orbiting satellites

represent the only way using current technology to provide complementary
long-distance QKD services. Satellites would be used as complementary
trusted nodes to bridge the distance between geographically dispersed QKD
ground networks, for example, between cities or continents as shown in Figure
7. Even with quantum repeaters, however, there would still be role for satellites
as the most optimistic quantum repeater protocols would still only facilitate
distances up to about 1,000 km.10
Key transfers through space could be accomplished by either a constellation

of low Earth orbit (LEO) microsatellites or a geostationary (GEO) satellite. At
the present time, the technology has not yet been demonstrated and there are
no companies oering satellite-based long-distance QKD services. An article
in Physics World magazine11 describes the Quantum Space Race that is now
underway for the first team to successfully demonstrate long-distance QKD
from space. The winning team would not only
claim a historic first-in-the-world scientific
Figure 8 QEYSSat Model (Bottom) and Key
accomplishment but would also be the frontTransfer with Optical Ground Station (Top)
runner to seize a potentially lucrative future
business opportunity. Descriptions of some of
the current leading contenders in the Quantum
Space Race are provided in the following
sections, and an estimate of the future market
potential for satellite-based QKD is given in
Section 6.4.
For the past four years, a proposed

microsatellite mission called QEYSSat
(Quantum EncrYption and Science Satellite)
that could demonstrate long-distance QKD
from space has been advanced by IQC and its
partners through a series of
technical studies funded initially
by Defence Research and
Development Canada (DRDC) and
subsequently by the Canadian
Space Agency (CSA). The highlevel mission objectives are
maintained by a CSA chartered
Core User Team chaired by
QEYSSat principal investigator Dr.
Thomas Jennewein whose
membership includes other IQC
researchers as well as
3.4.1. Institute for Quantum

Computing
19
representatives from the Perimeter Institute, DRDC, Communications Security

Establishment Canada (CSEC) and a number of Canadian and international
universities.
IQC commenced a CSA-funded technical risk retirement project in October
2013 to develop and demonstrate a compact prototype quantum key
distribution receiver (QKDR) that has the required form, fit and function
suitable for the proposed QEYSSat spacecraft. In March 2014, IQC was
awarded a grant from the CSA to conduct an end-to-end airborne
demonstration of QKD between a modified QKDR payload on a stratospheric
balloon and a mobile transmitter on the ground as further risk retirement. The
QEYSSat program has achieved a level of technical maturity to the point of
Phase A readiness and is currently believed to be ahead of competing projects
in the United States, Europe and China. IQC has also collaborated with the
Space Flight Laboratory (SFL) at the University of Toronto to develop a
preliminary design for a rapid and low-cost QKD demonstration mission using
a nanosatellite platform.
3.4.2. Los Alamos National Laboratory

The first demonstration of QKD over practically significant distances was
performed in 2002 by Richard Hughes, Jane Nordholt, Derek Derkacs and
Charles Peterson of Los Alamos. This team successfully conducted QKD over a
10 km range during both day and night-time conditions and were able to use
the experimentally achievable parameters (such as air-mass extinction,
background optical noise and achievable optical quality) to infer that freespace QKD to satellites is feasible. The team headed by Richard Hughes and
Beth Nordholt pioneered the concept of satellite-based QKD and conducted
several other ground-breaking theoretical and experimental studies. U.S.
Patent US005966224A for Secure Communications with Low Orbiting
Spacecraft Using Quantum Cryptography was granted to Hughes and his
team in 1999. As discussed in Section 3.3.4, Los Alamos has been operating a
terrestrial QKD network with a hub-and-spoke topology since 2011.
3.4.3. European Space Agency

Starting in 2001, the European Space Agency (ESA) supported a number of
studies on quantum physics in space including Quantum Communications in
Space (2001), Accommodation of a Quantum Communication Transceiver in
an Optical Terminal (2004) and Quantum Information and Quantum Physics
in Space (2005). The latter program culminating in the record-setting 144 km
horizontal free-space QKD link between the Canary Islands of La Palma and
Tenerife that was described in Section 3.3.2, which demonstrated that
quantum links between orbiting satellites and the Earth are feasible.
In 2008, researchers led by Dr. Paolo Villoresi of the University of Padua
demonstrated single photon exchange (albeit not true QKD) between the
Matera Laser Ranging Observatory in Italy and the Japanese Ajisai geodetic
20
satellite in medium Earth orbit (MEO) at altitude of 1,485 km (see Figure 9).
The satellite-to-Earth quantum channel was simulated by reflecting attenuated
laser pulses o the optical retro-reflectors on the surface of Ajisai. Although
Villoresis experiment did not implement a QKD protocol, it did show the
feasibility of sending and receiving single photons between a satellite and an
optical ground station on the Earth. QEYSSat principal investigator Dr. Thomas
Jennewein of IQC was a co-investigator on all of these European activities.
Thomas Scheidl and Rupert Ursin of the Institute for Quantum Optics and
Quantum Information at the Austrian Academy of Sciences have submitted a
proposal called Space-QUEST (QUantum Entanglement for Space
ExperimenTs) for consideration by the European Life and Physical Sciences in
Space Program of ESA. As shown in Figure 9, Space-QUEST would conduct
space-to-ground quantum communications tests from the International Space
Station (ISS), simultaneously distributing entangled photon pairs to separated
locations on Earth to demonstrate QKD and perform fundamental quantum
physics experiments.
3.4.4.NICT
Figure 9 The Matera-Ajisai Demo (Top) and the Proposed

Space-QUEST Experiment (Bottom)
The National Institute of Information

and Communications Technology
(NICT) of Japan have described plans
for a quantum transceiver on a
microsatellite based on their small
optical transponder assembly (SOTA).
This system has a dedicated pulsed
laser source for testing a channel for a
quantum communication link from
space-to-ground, however the
transmission will be much too
powerful for actual QKD. Japanese
researchers are also planning a small
quantum experiment on a laser
communication spacecraft named
SOCRATES (Space Optical
Communications Research Advanced
Technology Satellite) that is scheduled
for launch later this year.
21
3.4.5. Chinese Academy of Sciences

In June 2013, Dr. Pan Jian-Wei and a team from the University of Science and
Technology of China in Hefei revealed the results of an experiment in which
they successfully sent single photons on a round trip to an orbiting satellite,
then detected those same photons back on Earth. Interestingly, the group
claimed to have used a German satellite called CHAMP (Challenging
Minisatellite Payload) that was deorbited in 2010, meaning that Pans team has
purposely elected not to publicize the outcome of the experiment for at least
three years.12
Building on this success, the Chinese Academy of Sciences has announced
plans to launch a Quantum Science Satellite before the end of the decade that
will transmit entangled photon pairs to ground receivers. This satellite would
demonstrate several technologies including quantum key distribution,
entanglement distribution and quantum teleportation. The China National
Space Administration (CNSA) has budgeted $554-million towards funding five
scientific satellites over the coming years, including the Quantum Science
Satellite. This is a new direction for China, which has in the past launched more
than 100 satellites but until now only one for dedicated scientific experiments.
If the Quantum Science Satellite13 succeeds, China intends to deploy a fleet of
spacecraft that could make global quantum communication a reality. Potential
users would include commercial banks and China's armed forces.14
22
4. market overview
This section is a top-down overview of the general information security
market. It should be noted that money spent on encryption and security
technologies are not necessarily interchangeable with quantum cryptography
because many products deal with the complexity of things such as key
management and security policy, of which encryption is only one part. The
purpose of this section is to illicit some market questions that should be
considered when evaluating the commercialization of quantum cryptography.
On March 10, 2014, National Security Agency (NSA) whistleblower Edward

Snowden addressed the attendees of South by Southwest Interactive Austin
via videocast from Russia. The image was choppy and the audio was muddy
because the signal was being routed through multiple proxies in the interest of
security, but the conference attendees nevertheless found the presentation
compelling. Snowdens revelations have led companies such as Google and
Yahoo to bolster their security measures, which is helping to protect online
data from being watched by governments and other prying eyes. Encryption is
eective unless the keys are compromised, Snowden said, and thats going to
continue to be the case until our understanding of math and physics changes
on a fundamental level.15
The Snowden aair has brought the issue of information security and
cybercrime to the forefront of public consciousness and discourse. Cybercrime
is a complex problem to solve, and it is growing at an exponential rate. Yet,
most large businesses today continue to run on security technology and
infrastructure built 20 years ago. Unfortunately, the information security
landscape is indeed set to change at a very fundamental level. Practical and
widespread quantum computing capabilities will most likely be available
within the next 10 to 25 years,16 and with it, the ability to readily break current
4.1. FINANCIAL COST OF INFORMATION

SECURITY BREACHES
23
RSA or ECC cryptosystems. Even without the threat posed by quantum

computers, the financial cost of information security breaches today can be
devastating:
Legal fees, class action lawsuits and public relations costs
Regulatory fines and victim notification for state disclosure laws
Service downtime, breach investigations, lost customers and lost revenue
Credit monitoring services and other free goods and services to retain customers
Brand damage and loss of stakeholder confidence
According to the Ponemon Institute, in 2010 malicious attacks were the root
cause of 31% of data breaches, up from 24% in 2009 and 12% in 2008. About
85% of all U.S. companies have experienced data breaches, however, the actual
figure is probably higher because many companies do not currently have the
ability to detect exposed information. The Privacy Rights Clearinghouse
estimated that security breaches compromised more than 500 million U.S.
records since 2005, and again those are just the reported events. According to
the Identity Theft Resource Center, at least 662 data breaches occurred in the
U.S. in 2010, exposing more than 16 million records. Nearly two-thirds of those
breaches exposed Social Security numbers, and 26% involved credit card or
debit card data. The majority of these attacks were malicious hacks or insider
theft. Since 2005, it is estimated that security breaches have compromised
more than 500 million U.S. records. CSO magazines 2011 CyberSecurity Watch
Survey found that 81% of U.S. respondents experienced a security event during
the preceding 12 months, compared with 60% in 2010, while 28% of
respondents saw an increase in the number of security events as compared
with the previous year. In the United Kingdom, a survey found that 94% of
respondents ranked protecting personal information as their top concern,
equal to their concerns about crime, and two-thirds said they would avoid
interacting with firms that they knew had lost confidential information.17
Dr. Cedric Jeannot, the CEO of I Think Security, estimates the average cost of a
data breach to an enterprise is $5.5-million and malicious cyber activity costs
the U.S. economy as much as $100-billion a year.18 Attacks against computer
data and systems, identity and intellectual property theft, and the
perpetuation of online financial fraud incur a global estimated cost of between
$70-billion and $400-billion a year according to new data recently released by
the Centre for Strategic and International Studies (CSIS).19 An earlier 2004
study analyzed 225 security breaches and found that security breaches of firm
data were associated on average with a loss of 2.1% of the firms market value,
or around $1.65-billion of market capitalization, within two days of the
announcement.20 In the medical sector, a 2010 report found that U.S. health
organizations may have to spend $834.3-million in total costs to address
violations of the Health Insurance Portability and Accountability Act (HIPAA).21
The following representative case studies are summarized from the Sophos
State of Data Security Report (2011)22 and highlight how data security
incidents have a serious eect on organizations:
24
Massachusetts General Hospital The oldest and largest hospital in New England
drew a $1-million fine from the U.S. Department of Health and Human Services
(HHS) for losing 192 patient medical records. This violation of the HIPAA Privacy
Rule cost the hospital approximately $15,000 per patient file.
BP An employee lost a laptop containing data on 13,000 oil spill claimants during
routine business travel. The laptop included unencrypted names, Social Security
numbers, addresses, phone numbers and birthdates of people who had filed
claims related to the Deepwater Horizon accident. About 12,000 laptops are lost
every week at U.S. airports alone, or approximately one every 50 seconds.
Epsilon The marketing services provider fell victim to a massive data breach that
compromised email address data belonging to many of the worlds biggest
brands. Epsilon is the largest provider of permission-based email marketing and
sends more than 40 billion emails a year on behalf of 2,500 brands, including
Kroger, Marriott Rewards and Ritz Carlton Rewards.
Nationwide Building Society The U.K. Financial Services Authority (FSA) fined
the company nearly 1-million for lax security procedures and controls that led to
the exposure of the personal details when a company laptop containing
confidential records for nearly 11 million customers was stolen. In addition to the
substantial fine, the company had to bear the cost of notifying the millions of
people whose records were stolen.
4.2. CURRENT MARKET FOR IT SECURITY

AND ENCRYPTION
One important subset of the IT security product market that is relevant to

discussions of quantum cryptography is the global encryption software
market. As shown in the chart from TechNavio24 in Figure 10, the global
encryption software market was valued at $1.2-billion in 2010 and is expected
to reach $2-billion in 2014, representing a compound annual growth rate
(CAGR) of 13%.
Table 1 summarizes the worldwide IT security products market for the period
from 2009 to 2017 as compiled by International Data Corporation (IDC).23
Worldwide market sizes and trends are provided for 2009 to 2012, and a fiveyear growth forecast for this market is shown for 2013 to 2017. According to
IDC, the worldwide IT security products market achieved a revenue level of
$29.8-billion in 2012. This market is forecasted to reach $42-billion in 2017,
representing a compound annual growth rate of 7.1% from 2012 to 2017. The
largest security products market segment in 2012 was endpoint security, which
is driven primarily by consumer spending. At the end of the IDC forecast
period, endpoint security is expected to continue to be the largest market,
however, network security is expected to be a very close second. As discussed
in Section 6.3, over the long-term the steady-state segmentation of the
quantum cryptography market is expected to approximate that of the current
IT security market.
25
Table 1 Worldwide IT Security Product Revenues by Segment (Source: IDC)
Revenues
by segment
($M USD)
2009
2010
2011
2012
2013
2014
2015
Endpoint
$7,016.8
$7,352.2
$7,676.4
$8,085.6
$8,608.2
$9,166.5
$9,758.9
$10,373.0 $11,007.1
Network
$6,574.4
$6,990.2
$7,435.1
$7,936.0
$8,445.7
$8,972.8
$9,461.0
$10,097.4 $10,671.1
Messaging
$2,754.9
$2,305.4
$2,414.0
$2,476.5
$2,622.2
$2,787.6
$2,964.3
$3,139.4
$3,320.6
Web
$1,516.8
$1,692.8
$1,913.6
$1,990.5
$2,121.3
$2,266.1
$2,417.3
$2,569.9
$2,728.7
Identity and
Access
Management
$3,348.5
$3,598.5
$4,018.8
$4,418.3
$4,859.7
$5,331.7
$5,842.6
$6,376.2
$6,927.1
Security and
Vulnerability
Management
$2,875.8
$3,365.3
$3,832.6
$4,191.5
$4,603.5
$5,030.6
$5,495.5
$5,979.0
$6,473.4
Other
$694.8
$698.4
$724.8
$729.5
$760.6
$792.5
$828.7
$868.5
$911.5
$24,782.0 $26,002.8 $28,015.3 $29,827.9 $32,021.2
2016
$34,347.8 $36,768.3 $39,403.4 $42,039.5
The main drivers of the global encryption software market are growing
regulatory compliance requirements for data security imposed by
governments, the increasing adoption of mobile devices and the high financial
cost of data loss (see Section 4.1). These factors are driving end-users to
continuously adopt improved IT security and data encryption solutions, so the
global encryption software market should continue to grow at a healthy rate.
This is good news for the future quantum cryptography market, which will be
driven by similar regulatory and financial factors over the long-term as the
need for cryptosystems resistant to quantum computing becomes increasingly
important over the coming years.
As shown in the chart from TechNavio in Figure 11, the Americas currently
account for the majority of the market share for encryption software at 49%.
The tightening of government regulations and the high frequency of data loss
is leading to the increasing demand for encryption software from dierent
sectors, particularly in the United States. Europe, the Middle East and Africa
(EMEA) follow with a current market share of 34%. Like the U.S., increasing
security breaches are prompting European companies to increase their IT
security budgets, and the growing frequency of cyber-attacks against
European Union government infrastructures is driving the public sector to also
adopt improved encryption software solutions.
The Asia-Pacific (APAC) region currently has a market share of 17%. Although
its present share of the encryption software market is today relatively small,
some of the countries in the region such as Australia and South Korea are
expected to make significant investments in the near future. In the Association
of South East Asian Nations (ASEAN) area, countries such as Vietnam and
26
2017
Figure 10 Global Encryption Software Market 20102014 (US$ Billions). Source: TechNavio Analysis
1.5
0.5
2010
2011
2012
2013
2014
Indonesia are expected to experience strong growth of over 15%. The reasons
for this high growth are two-fold. First, as with the other geographical regions
growth, in Asian countries will be driven by increasing public and private
sector IT security spending. Furthermore, since most of these countries
currently have a low adoption rate, as a percentage the growth rate is
therefore expected to increase rapidly.
The mid-market segment, which includes small/medium-sized enterprises

(SMEs), follow next at 20% of the total market. Not only are these companies
now coming under the same regulatory purview as large enterprises, but SMEs
are often relatively more dependent on Web access, email and instant
messaging (IM) for sales, marketing and business communications. Cyberattacks against SMEs have also been growing. The remaining 10% of the
market consists of small businesses, non-profits, educational institutions and
others. Amongst these, educational institutions and small business are the
strongest adopters of encryption solutions. As with SMEs, small businesses are
heavily dependent on Web access, email and IM for communication. This is
Finally, the chart from TechNavio25 in Figure 11 also shows the current
encryption software market by end-user segmentation. The major adopters of
encryption software solutions are large enterprises and various government
departments. Since industries such as financial services and retail as well as
critical government departments such as health, finance and defense are
among the most targeted destinations for cyber-attacks, they are the most
prominent users at 48% of the total market. Other government departments
follow large enterprises at 22% of the total market, with agencies of the United
States and European Union governments being the most prominent adopters
of encryption software solutions.
27
resulting in the high adoption of email and IM encryption solutions among

small businesses.
Over the long-term, the steady-state segmentation of the quantum
cryptography market is expected to approximate that of the current
encryption market (see Section 6.3).
Figure 11 Encryption Software Market by Geography (Top) and End-User (Bottom). Source: TechNavio
Analysis
Others
10%
Mid-market
20%
EMEA
34%
Large Enterprises
48%
Government Departments
22%
28
APAC
17%
Americas
49%
5. competitive landscape
5.1. CURRENT COMMERCIAL VENDORS
Four companies currently oer complete turn-key commercial QKD systems:
ID Quantique, MagiQ Technologies, QuintessenceLabs and SeQureNet. Several
other companies oer related products and services or have active research
programs. Other commercial QKD activities are described in Sections 3.3.9
and 5.2. At the present time, there are no companies oering satellite-based
long-distance QKD services.
23, avenue dltalie 75013 Paris, France

www.sequrenet.com
Paul Jouguet Chief Executive Ocer

Sbastien Kunz-Jacques Chief Technical Ocer
Romain Allaume Principal Scientist
Established in 2010, SeQureNet is a spin-o from the quantum information team of Telecom
ParisTech. The company sells encryption products that employ continuous variable quantum
key distribution (CVQKD) for high security network services and practical applications. Areas
of expertise include continuous variable quantum key distribution, cryptography and network
security. Building on the work done on continuous variables prototypes during the SECOQC
and SEQURE research projects, SeQureNet brings CVQKD to the market through turnkey
software and hardware products and services that are aimed at both the academic and the IT
security markets.
5.1.1. SeQureNet SarL
29
5.1.2. ID Quantique SA
Chemin de la Marbrerie, 3 1227 Carouge /
Geneva , Switzerland
www.idquantique.com
Grgoire Ribordy Chief Executive Ocer

Kelly Richdale Vice President, Sales and Marketing (Network Encryption)
Antonio Matteo Manufacturing Manager
Patrick Trinkler Vice President, Engineering
ID Quantique SA (IDQ) was founded in Geneva, Switzerland in 2001 by four scientists who
anticipated the important forthcoming impact of quantum physics on information technology.
The company initially operated as a small university spin-o with an initial investment of
100,000 CHF. In late 2003, IDQ raised 1-million from i2i, a venture capital fund based in
Luxemburg, which allowed the company to accelerate its growth. The company sells quantum
encryptors, which are packaged with traditional enterprise-level encryptors. IDQs best-selling
product is a quantum random number generator with a USB interface. This type of device is
often purchased by organizations that require non-deterministic random number generators
for their cryptographic primitives, as well as online casinos. Also popular are IDQs single
photon detector modules and QKD research stations, which are primarily sold to research
laboratories. IDQ has customers in more than 60 countries and maintains close ties with
academic institutions by participating in several Swiss and European R&D programs and has
played a leading role in projects such as the SwissQuantum QKD testbed. The company
currently has 20 employees and three business units (scientific instrumentation, random
number generator, network encryption). A pair of QKD systems has a list price of $82,000.26
5.1.3. MagiQ Technologies Inc.

11 Ward Street Somerville, MA 02143
www.magiqtech.com
Bob Gelfond Founder and Chief Executive Ocer

Audrius Berzanskis Chief Operating Ocer
Andrew Hammond Vice President, Business Development
Michael LaGasse Vice President, Engineering
Founded in 1999, MagiQ Technologies Inc. is a privately-held quantum information processing
(QIP) company. In 2003, MagiQ launched its QKD product commercially. The company
currently oers quantum cryptography on the hardware product side rather than the service
side. Its areas of expertise include fiber optics, high-speed electronics and RF, acoustics,
active feedback, FPGAs and software. Products for commercial applications include advanced
quantum communication, single photon sources, quantum data deciphering and encryption,
single photon detectors, fibre optic sensors, tunable lasers and interferometers. The company
is planning to commercialize simple quantum optical operations, algorithms for multi-qubit
processors and an interface between quantum communication qubits and quantum memory.
Its current customers are primarily American government agencies including the U.S. Navy,
the U.S. Army, DARPA and NASA. A QKD system from MagiQ costs between $70,000 to
$100,000.27
30
5.1.4. QuintessenceLabs Inc

Suite 23, Physics Building #38, Science Road
Australian National University Acton, ACT
Australia
www.quintessencelabs.com
Peter Shergold Chairman of the Board
Vikram Sharma Founding Director and Chief Executive Ocer
QuintessenceLabs is a spino of Australian National University, incorporated in 2006 to
commercialize new information security systems premised on the practical application of
advanced quantum physics. It is working to develop quantum cryptographic technology to
enable secure communication of sensitive information. Researchers at QuintessenceLabs were
awarded the 2006 Eureka Prize for Scientific Research for an entry entitled Inventing
Australias Own Unbreakable Code with Quantum Physics. In March 2014, QuintessenceLabs
was named by the Australian Information Industry Association (AIIA) as that countrys most
innovative small company.
5.1.5. Alcatel-Lucent SA
3, avenue Octave Grard 75007 Paris,
France
www.alcatel-lucent.com
Alcatel-Lucent SA was formed in 2006 through the merger of Alcatel and Lucent
Technologies. The company provides end-to-end solutions including mobile, fixed and
integrated broadband access, enterprise and carrier IP technologies, and other related
services to support government, enterprises and service providers in delivering video, voice,
and data communication services to clients. Its subsidiary Bell Labs has been working on
novel architectures to enable large capacity quantum communications networking. The goal
of this work is to achieve quantum communication networks that have the required capacity
and compatibility with existing fiber optic data networks. Bell Labs expertise in integrated
optics is critical for implementing the low-loss optical components that would be required for
quantum transmission.
Michel Combes Chief Executive Ocer

Philippe Guillemot Chief Operating Ocer
Philippe Keryer Chief Strategy and Innovation Ocer
Federico Guilln President, Fixed Networks
Tim Krause Chief Marketing Ocer
31
5.1.6. Raytheon BBN Technologies

10 Moulton Street Cambridge, MA 02138
www.bbn.com
Ed Campbell President
Steve Milligan Chief Technologist
Susan Wuellner Vice President, Human Resources
BBN Technologies was acquired by Raytheon in October 2009. The company develops
advanced networking, cyber security, immersive learning technologies, information and
knowledge technologies, quantum information processing technologies and sensor systems
for government and business customers. Under DARPA sponsorship, BBN Technologies
collaborated with Boston University and Harvard University to develop, build and operate one
of the worlds first QKD networks. This DARPA Quantum Network, which became operational
in 2003, deploys 247 quantum cryptography to oer high security for a range of standard
Internet trac flows including streaming video, e-commerce and web browsing. BBN
Technologies continues to work on new hardware, software and network protocols for
quantum cryptography as well as high-speed detectors, cryptographic systems and defenses
against quantum hacking techniques.
5.1.7. HP Laboratories
1501 Page Mill Road Palo Alto, CA 94304
www.hpl.hp.com
Martin Fink Chief Technology Ocer and Director of HP Labs

Chandrakant Patel Senior Fellow and Chief Engineer
HP Labs is the exploratory and advanced research group for Hewlett-Packard, with
responsibility for taking new technologies from prototype to market-ready commercialization
for the next generation of products and services while pushing the frontiers of fundamental
science. Areas of strategic focus include cloud security and information optimization as well
as key areas such as mobility, content and printing, sustainability and future computing
platforms and capabilities. HP Lab Quantum Information Processing (QIP) Group, a part of
the Information and Quantum Systems Laboratory, is associated with research on quantum
cryptography. At present, the QIP Group is focused on developing improved QKD
technologies and to creating new applications of quantum cryptography. Some of the
applications being developed include authentication systems capable of preventing
impersonation and enabling secure remote auctions. In 2007, HP Labs collaborated with
researchers at the University of Bristol to develop a functional prototype of a portable
quantum secure device.
32
5.1.8. IBM
New Orchard Road Armonk, NY 10504
www.ibm.com
Virginia Rometty Chairman, President and Chief Executive Ocer

Erich Clementi Senior Vice President, Global Technology Services
Jon Iwata Senior Vice President, Marketing and Communications
John Kelly Senior Vice President, Director of IBM Research
Robert LeBlanc Senior Vice President, Software and Cloud Solutions Group
Steven Mills Senior Vice President and Group Executive, Software and Systems
Tom Rosamilia Senior Vice President, Systems and Technology Group
IBM is a global technology company with operations in over 170 countries. The company
develops and sells software and systems hardware and a broad range of infrastructure, cloud
and consulting services. Its four growth initiatives are business analytics, cloud computing,
growth markets and Smarter Planet. Areas of research focus include nanotechnology
(including atomic-scale storage), fundamental science, human-computer interaction and
health care infomatics. The company has also made significant R&D investments in quantum
information and expects to commercialize quantum cryptography in the near future. IBM
Research on Quantum Information is focused on exploring the fundamental physical limits of
communication and computation, developing experimental quantum computers,
implementing real-world long-distance quantum cryptography and understanding the role of
quantum physics in information theory. The companys research centre at Almaden has
developed a quantum cryptography system focused on typical telecom optical fiber,
detectors and lasers. A next generation system is configured for operation over an optical
fiber network covering a distance of up to 10 km.
3-1, Otemachi 2-chome

Chiyoda-ku, Tokyo 100-8116, Japan
www.ntt.co.jp
Satoshi Miura Chairman of the Board
Hiroo Unoura President and Chief Executive Ocer
Hiromichi Shinohara Executive Vice President
Nippon Telegraph and Telephone (NTT) is a Japanese telecommunications firm that provides
fixed and mobile voice related services, IP/packet communications services,
telecommunications equipment, system integration and other telecommunications-related
services in Japan. It oers regional communications services including intra-prefectural
communications and related ancillary services, long-distance and international
communications services, mobile communications services and data communications services
such as system integration and network system services. NTT has demonstrated a QKD
system over a fibre optic network that succeeded in establishing a secure key rate of 12 bits/
sec over a distance of 200 km. In 2009, NTT employed dierential phase shift quantum key
distribution (DPS-QKD) to attain a key rate of over 1 Mbit/sec, and a year later, the company
tested the achievements of its DPS-QKD by employing a 90 km loop-back experimental
optical fiber network between Otemachi and Koganei in Tokyo. These experiments
demonstrated a constant secure key distribution with a 2kbit/sec generation rate.
5.1.9. Nippon Telegraph and Telephone (NTT) Corporation
33
5.1.10. QinetiQ Group PLC

Cody Technology Park, Ively Road
Farnborough, Hampshire GU14 OLX, United
Kingdom
www.qinetiq.com
Leo Quinn Chief Executive Ocer
David Mellors Chief Financial Ocer
Mike Howarth Operations Director
Sanjay Razdan Managing Director, Space/IP
Jeremy Ward Managing Director, C4ISR
QinetiQ Group PLC is a U.K.-based company engaged in the supply of technical support,
training, test and evaluation, and know-how to government and commercial customers in the
global security, aerospace and defense markets. The company has a long-standing presence
in the quantum cryptography field, being one of the first to demonstrate the practicability of
quantum cryptography over optical fiber link in 1993. In 2002, the company successfully
established a free-space QKD link of 23 km, and three years later delivered a free-space
quantum cryptography system to BBN Technologies as part of the Quantum Network
initiative funded by DARPA. QinetiQ started a partnership with AboveNet, a major provider of
IP and fibre optic connectivity solutions, in 2009. The partnership would exploit an advanced
cryptography solution to oer high security for communications intended to realize quantum
cryptography across optical networks.
5.1.11. Nucrypt LLC

1840 Oak Avenue, Suite 212S Evanston, IL
60201-3697
www.nucrypt.net
Prem Kumar Founder and Former Chief Executive Ocer
Gregory Kanter Chief Executive Ocer
Nucrypt is an Illinois-based company that sells compact polarization-entangled photon
sources and measurement devices. The company was founded in 2003 and is an outgrowth of
research initially performed at the Centre for Photonic Communication and Computing at
Northwestern University. Nucrypt holds a patent on a quantum-noise based QKD system and
also develops other technologies including secure radio frequency communication systems,
sources of entangled light and high-resolution photonic assisted analog-to-digital converters.
34
5.1.12. Toshiba
1-1, Shibaura 1-chome
Minato-ku, Tokyo 105-8001, Japan
www.toshiba.co.jp
Atsutoshi Nishida Chairman of the Board
Norio Sasaki Vice Chairman of the Board
Toshiba was founded in 1875 and today operates a global network of more than 500
consolidated companies with over 200,000 employees worldwide. The company is at the
forefront of quantum information R&D and is currently seeking commercial partners to further
develop applications for quantum cryptography. Toshibas Quantum Information Group (QIG)
is led by Dr. Andrew Shields and is actively researching the application of quantum physics to
information technology. The group developed a quantum key server capable of generating
approximately one hundred 256 bit keys every second over a fiber optic network spanning a
distance of 120 km.
In 2005, the company employed quantum cryptography to relay video and voice over a
secure optical fiber network, demonstrating the feasibility of single photon encryption over
commercial networks. Two years later, researchers at Toshiba Europe in the United Kingdom
claimed to have successfully integrated decoy photons into quantum signals for secure
QKD. These decoy pulses are arbitrarily scattered within the quantum cryptographic signal
and are intended to reduce the chance of the pulses containing multiple photons and thereby
enable easy detection of attacks during data transmission. The decoy method also allows the
use of more power laser pulses, which should increase both the bit rate and the transmission
distance. Toshiba achieved a transmission rate of 5.5 kbits/sec over a distance of 25 km.
Toshiba has undertaken several field trials for its QKD networks, including the SECOQC
network in Vienna. The SECOQC collaboration was aimed at developing protocols and
hardware for operational QKD networks and was in operation from 2004 to 2008. In 2010,
Toshiba deployed its QKD technology demonstrator at Tokyo's National Institute of
Information and Communications Technology (NICT). This system was capable of operating
over long distances exceeding 120 km using standard telecom fibres.
35
5.1.13. Oki Electric Industry Company Ltd.

1-7-12 Toranomon
Minato-ku, Tokyo 105-8460 Japan
www.oki.com
Hideichi Kawasaki President
Naoki Sato Senior Executive Vice President
Sei Yano Executive Vice President
Founded in 1881, Oki Electric is best known for its manufacturing and sales of products,
technologies, software and solutions for telecommunications systems and information
systems, including IT services distribution services related to these businesses. In 2012, the
Japanese company partnered with Dr. Shuichiro Inoue of the Institute of Quantum Science at
Nihon University to build and test a prototype commercial polarization entangled photon
source designed to be part of a future QKD system. The entangled photon source is based on
cascaded nonlinear optical eects using a proprietary periodically poled lithium niobate
(PPLN) ridge-waveguide device and can operate at room temperature using conventional
optical communications bands. Transmission tests using this source with standard optical
fibers successfully transmitted quantum entangled photon pairs over a distance of 140 km,
demonstrating the feasibility of next generation QKD systems covering metropolitan areas.
5.1.14. Universal Quantum Devices

295 Hagey Boulevard, 1st Floor, West
Entrance
Waterloo, Ontario N2L 6R5 Canada
www.uqdevices.com
Thomas Jennewein Chief Executive Ocer
Raymond Laflamme Chief Strategy Ocer
Steve MacDonald Chief Financial Ocer
Universal Quantum Devices (UQD) is a spin-o company from the Institute for Quantum
Computing (IQC) at the University of Waterloo that oers highly specialized quantum
measurement devices for use in sophisticated optics labs around the world. UQD has
provided devices to laboratories in Asia, Australia and North America. The instruments are
intended for use in the measurement of entangled photon sources, the implementation of
quantum cryptography systems in both free-space and fibre-optics, and for photon
correlation experiments with quantum dots. Devices oered by UQD can be utilized for
experiments in high count rate entanglement sources, multi-photon experiments such as
optical quantum computing, quantum cryptography with single and entangled photons, feedforward experiments including gated detectors and triggered optical modulators, and time
correlated fluorescence.
36
5.2. RECENT COMMERCIAL MARKET ACTIVITY

In March 2013, Doug Fregin and IQC founding supporter and current board
member Mike Lazaridis established Quantum Valley Investments
(QuantumValleyInvestments.com), a $100-million private fund to support the
commercialization of breakthrough technologies and applications in quantum
information science headquartered in Waterloo, Ontario. IQC executive
director Dr. Raymond Laflamme and former Canadian Space Agency astronaut
and president Dr. Steve Maclean are on the QVI scientific advisory committee.
Lazaridis has reportedly spent over $250-million investing in quantum
computer research eorts in Waterloo and has worked to raise about $750million over the last twelve years for quantum computing innovation from both
investor and government sources of capital.28 He and Fregin believe that in
the same way discoveries at Bell Labs led to commercialization opportunities
that created Silicon Valley, so will the breakthroughs that occur at IQC, the
Perimeter Institute for Theoretical Physics and the Waterloo Institute for
Nanotechnology likewise lead to transformative commercialization
opportunities.
As discussed in Section 6.1, the current market for quantum cryptography is
estimated to be on the order of $30-million but in the long-term is expected to
grow substantially to tens of billions of dollars as the need for cryptosystems
resistant to quantum computing becomes increasingly important over the
coming years. Despite its current relatively modest size from a financial
standpoint, there is already significant commercial activity in the quantum
cryptography market.
In October 2013, QWave Capital invested $5.6-million in the Swiss QKD

company ID Quantique (see profile in Section 5.1.1). The details of the deal
have not been disclosed, however, in a statement QWave said that it invested
$4.5-million in the companys business and spent another $1.1-million on
buying out the shares of ID Quantiques other shareholder. QWave was
founded by the senior partner of venture fund Runa Capital, Sergei Belousov
and a number of other partners. The $30-million fund specializes in financing
A privately held start-up company called GridCOM Technologies secured seed

funding in April 2013 from Ellis Energy Investments to develop quantum
encryption technology for protecting the U.S. electrical grid from cyber
terrorism. For a monthly subscription fee, wired and wireless devices can
access GridCOMs quantum key server over the Internet to receive
incorruptible keys that are used in performing symmetric key encryption. The
company claims that no specialized hardware or dedicated optical fibers are
required on the device side and no significant data latency is introduced by
the technique, which is an important requirement for grid compatibility. In
September 2013, GridCOM was awarded an Energy Innovations Small Grant
(EISG) from the California Energy Commissions Public Interest Energy
Research (PIER) program. GridCOM plans to install and operate their first
prototype in the greater San Diego area before the end of 2014, and thereafter
oer their services to other regions of the United States.
37
start-ups developing quantum computers, new materials and sub-micron

transistors.
Concurrent with the QWave investment, ID Quantique partnered with the
Battelle Memorial Institute to install the commercial QKD protected network in
the United States. Using ID Quantique hardware and fiber optic lines installed
between Battelles headquarters in Columbus, Ohio and another oce in
Dublin, Ohio and hardware from ID Quantique, the institute is now able to
transmit sensitive information such as financial data and intellectual property
in a highly secure fashion. The line between Columbus and Dublin was installed
in October 2013. In the next few years, all Battelle locations in central Ohio will
be connected to the network and by 2015 its oces in Washington, D.C. will
also be connected.
Quantum cryptography has even caught the attention of U.S. defense and
aerospace giant Lockheed Martin, which has partnered with Australias
QuintessenceLabs to develop QKD-based information security solutions for
their respective national markets. QuintessenceLabs second generation QKD
technology is supposed to be user-friendly and integrate seamlessly with
current communications infrastructures to provide one-time pad encryption in
real-time. In March 2014, QuintessenceLabs was named by the Australian
Information Industry Association (AIIA) as that countrys most innovative small
company.
38
6. market potential
6.1. DISCUSSION OF MARKET POTENTIAL
6.1.1. General Considerations
To get a sense of how the quantum cryptography market may develop over
time, a comparison with the historical uptake of conventional cryptography
could be considered:
Phase 1 Governments, militaries and research institutions
Phase 2 Financial institutions and large companies
Phase 3 Public utilities and small/medium enterprises (SMEs)
Phase 4 Other users
Section 3.3 provided examples of terrestrial QKD implementations by

governments, militaries and research institutions. As described in Section
3.3.9, the worlds first bank transfer using QKD was undertaken in Austria in
2004. European banks remain leaders in the transition process to quantumsafe encryption technologies. Most financial institutions and large companies
still conduct cryptographic key management in a very labour intensive manner.
Teams of human couriers are employed to do key exchanges manually using
tamper resistant hardware security module (HSM) boxes that cost between
$20,000 and $80,000 each. Keys are typically changed daily or every couple
of hundred transactions, whichever comes first, and master keys are usually
changed every couple of years. In general, financial institutions are fairly
conservative and information security is driven by regulation and compliance.
Over the next two decades, it is expected that international regulatory
frameworks will drive network security and encryption stakeholders to take
active steps in implementing quantum resistant cryptosystems, of which
quantum cryptography will be a significant component.
39
NIST (National Institute of Standards and Technology), ETSI (European

Telecommunications Standards Institute) and others have begun to look at
quantum-safe cryptography and paths to migrate the current set of
39
cryptographic tools to quantum-safe ones. The establishment of standards

and procedures for certification will be crucial for the widespread acceptance
of QKD devices. In the short-term, acceptance could be gained by having QKD
complement rather than replace conventional cryptography. For example, a
hybrid system could use both conventional public key cryptography and QKD
in parallel, in which the final key is a mixture of the conventional and quantum
keys. A certification laboratory like NIST or ETSI would be able to assess such
a hybrid system and give it a stamp of approval that it is compliant with
current standards because QKD cannot make the solution any weaker than the
public key element alone. A hybrid system would give users the option of
using QKD with the regulatory peace of mind that there will always at least be
the conventional cryptography element that has been certified as secure.29 ID
Quantique (see profile in Section 5.1.1) has employed this strategy through its
partnership with an Australian firm Senetas.
In addition to certification, other near-term considerations for market
acceptance include the number of use cases and the cost of implementation.
Currently, the only application for QKD is the encryption of links between two
parties. The identification of other applications would significantly advance the
development of the market and reduce implementation costs through
economies of scale. For example, consider the representative implementation
costs of one QKD link versus four links. The single link would require two QKD
key generators and two encryptors, one at each end. For illustrative purposes,
assume that an encryptor costs $30,000 each and a QKD system costs
$50,000 each. Hence, for a single link the total cost would be $160,000 of
which the quantum premium is more than 100% (i.e. the QKD element more
than doubles the total cost). On the other hand, in a system of four links there
would need to be eight encryptors but still only two QKD systems. In this case,
the total cost would be $340,000 of which the quantum premium would be
less than 50%.
As an additional general consideration, there is a saying that people dont
want drills, they are really buying holes. While the quantumness of the
product or service is important, at the end of the day what people really want
is a solution to a problem rather than just being provided with a cool
technology. For marketing quantum cryptography, the message should be, If
you need a strong key, here is a new and better approach. Ultimately,
customers really only want to know the details and benefits of the solution,
and of course, the price.
6.1.2.Considerations for Satellite-Based QKD

In Section 3.3, it was explained that while ground-based QKD networks have a
number of commercially viable applications, there are fundamental physical
constraints that would require the implementation of a complementary
solution for distances beyond a few hundred kilometers. Earth orbiting
satellites represent the only way using current technology to provide
complementary long-distance QKD services, in which they would serve as
complementary trusted nodes to bridge the distance between geographically
40
dispersed QKD ground networks. There is another benefit of satellite-based

QKD to be considered with respect to regulatory compliance.
Banks and other financial institutions are required to back-up their data for
disaster recovery purposes. In Europe the recommended minimum distance is
50 km, however, this is increasingly considered as too short. The requirement
in the United States is 250 km, the rationale being that a broad area disaster
like an earthquake or tornado in one location should not aect the backup site.
American banks are not planning new backup data centres at the increased
distance mandate. This represents a significant business opportunity for
commercial satellite-based QKD. For such a service to be competitive,
however, it would have to cost much less than the comparable terrestrial fibre
optic solution (if and where the latter is technically feasible). The cost of
dark (unlit or unused) fibre for the quantum channel has been a major
challenge for terrestrial QKD to date, on the order of $15,000 per month for
deployed lengths of 50 km or greater.30
6.2. QUANTUM CRYPTOGRAPHY
All financial values in this and the following sections are expressed in 2013 U.S.
dollars. Financial values without citation are IQC internal estimates.
Figure 12 IQC Long-Term Estimate of Quantum Cryptography Market Potential
IQCs long-term estimate of the overall market potential for quantum

cryptography is shown in Figure 12. A twenty year horizon was selected to
reflect the prevailing scientific consensus that practical and widespread
quantum computing capabilities will most likely be available within the next 10
to 25 years,31 and with it, the ability to readily break RSA or ECC
cryptosystems. Hence, the long-term market potential estimate is based on
the assumption that over the next two decades international regulatory
frameworks will drive network security and encryption stakeholders to take
active steps in implementing quantum resistant cryptosystems, of which
quantum cryptography will be a significant component.
41
International Data Corporation (IDC) had estimated a quantum cryptography

market of $30-million in 2008.32 Of course, that year turned out to be the
start of the worldwide financial crisis, and for the time being quantum
cryptography remains a niche application with users primarily in research
institutions and governments. For these reasons, IQC estimates that the
current market for quantum cryptography has remained at approximately the
same order of magnitude. Over the long-term, however, as regulatory
requirements for quantum resistant cryptosystems are expected to become
more prevalent over the next two decades, it is reasonable to expect that the
market potential for quantum cryptography should grow significantly.
IQC estimates a potential global market of up to $23-billion by the end of the
forecast period. As a comparative reference, the global market for
conventional network security services was estimated at $10-billion in 2008,33
and the global market for conventional communications encryption was
estimated at $20-billion in 2013.34 Global Industry Analysts forecasted a
global quantum cryptography market of up to $1-billion by 2018,35 and Icon
Group International predicted a market of up to $1.2-billion for that same year.
36 IQC believes these estimates to be overly optimistic in the near-term and
does not foresee the global market for quantum cryptography exceeding a
billion dollars within the current decade. Over the long-term, however, IQC
believes the market potential for quantum cryptography will experience very
significant growth as regulations mandating quantum resistant cryptosystems
are expected over the next twenty years.
Figure 13 IQC Long-Term Estimate of Quantum Cryptography Market by User Segment
42
6.3. MARKET SEGMENTATION

To get an indication of how the quantum cryptography market may develop
over time, the historical uptake of conventional cryptography could be
examined. As discussed in Section 6.1, it is foreseen that the market for
quantum cryptography will evolve over the forecast period in the following
manner:
Phase 1 Governments, militaries and research institutions
Phase 2 Financial institutions and large companies
Phase 3 Public utilities and small/medium enterprises (SMEs)
Phase 4 Other users
Following this phased timeline and assuming that adoption by each market
segment follows a Bass diusion model, IQCs long-term estimate of the
market potential for quantum cryptography by user segment is shown in
Figure 13. As discussed in Section 4.2, the market segmentation for the global
encryption software market in 2012 was 48% large enterprises, 22%
government departments, 20% mid-market and 10% other users. The IQC
forecast model assumes that over the long-term the steady-state
segmentation of the quantum cryptography market will approximate that of
the current encryption market.
As discussed in Section 3.4, while ground-based QKD systems have a number

of commercially viable applications, there are some fundamental physical
constraints that would require the implementation of a complementary
solution for distances beyond a few hundred kilometers. In the absence of
practical quantum repeaters, the only way to oer long-distance QKD services
is by using satellites as complementary trusted nodes to bridge the distance
between geographically dispersed QKD ground networks, for example,
between cities or continents. Even with quantum repeaters, however, there
would still be a role for satellites as the most optimistic quantum repeater
protocols would still only facilitate distances up to about 1,000 km.37 The
distance benefits of satellite-based QKD would also help banks and other
financial institutions comply with regulations pertaining to the physical
distance requirement between primary and backup data sites, as discussed in
Section 6.1.2.
Figure 14 shows the estimated market potential for satellite-based QKD. Since
satellites would only be used to cover long-distances between nodes of
terrestrial fibre networks, the IQC forecast model assumes that the steadystate market share of satellite-based QKD as a proportion of the overall market
for quantum cryptography estimated in Section 6.1 will approximate that of
6.4. SATELLITE-BASED QKD
43
the current worldwide market for satellite communications as a proportion of

the overall global telecommunications industry. If low Earth orbit (LEO)
microsatellite platforms are utilized, an initial QKD satellite constellation could
be developed and launched in approximately five years. Key transfers could
also be done by geostationary (GEO) satellites. Finally, it is expected that the
initial users of satellite-based QKD will be predominantly from governments,
militaries, financial institutions and large companies. Based on these
assumptions, IQC estimates a potential global market for satellite-based QKD
of up to $382-million per year by the end of the forecast period.
Figure 14 IQC Estimate for Satellite-Based QKD Market Potential
44
2. conclusion
For over a decade, the Institute for Quantum Computing (IQC) has been
aggressively exploring and advancing the application of quantum mechanical
systems to a vast array of relevant information processing techniques,
particularly as they apply to quantum computing, communications and
sensors, and of course cryptography. Since its discovery at the beginning of
the 20th Century, researchers around the world have been working on how to
harness quantum mechanics for the benefit of humanity, in the manner that
chemical, electromagnetic and nuclear phenomena became understood and
utilized in past centuries.
Quantum key distribution (QKD) is not science fiction. It is a present day

reality, and one that has the potential to be a significant business opportunity.
Several major firms including Alcatel-Lucent, Raytheon, HP, IBM, QinetiQ and
Toshiba are either actively researching QKD or are already oering related
products and services. A number of start-ups are selling commercial end-toend QKD systems, and several terrestrial QKD networks using fibre optic
cables or free-space atmospheric transmission are operating today for both
research and niche commercial applications.
Due to fundamental physical constraints, however, a complementary solution is
required for distances beyond a few hundred kilometers. Free-space
atmospheric QKD links require line-of-sight and are subject to local
geographical constraints and ultimately the curvature of the Earth. Using
satellites as complementary trusted nodes to bridge geographically dispersed
QKD networks is the only way with current technology to provide longdistance QKD services.
It is quantum mechanics that, ironically, poses both the greatest threat to

conventional cryptography and the best means of securing it. Within the next
two decades, it is expected that practical quantum computers will be able to
routinely and quickly solve the mathematical problems upon which most
current encryption methods are based, rendering them useless. Quantum
cryptography, relying upon the same fundamental laws of physics, promises to
provide long-term data security that will never to be threatened by new
algorithms or increased computational power.
45
A new Quantum Space Race is on, with teams in Canada, Europe, the U.S.,
Japan, China and other nations vying to be the first to demonstrate QKD from
space. The winning team would not only claim a historic scientific achievement
but would also be the front-runner to seize a potentially lucrative future
business opportunity. The current market for quantum cryptography is
relatively modest, however, it is expected to grow significantly over the longterm as regulatory requirements for quantum-resistant cryptosystems are
expected to become enacted. Within twenty years, IQC estimates the potential
overall global market for quantum cryptography could reach $23-billion within
twenty years. Satellite-based QKD for long-distance secure key distribution,
using either a constellation of low Earth orbit (LEO) microsatellites or hosted
payloads on geostationary (GEO) satellites, would be a subset of this overall
quantum cryptography market. IQC estimates a potential worldwide market
for satellite-based QKD of up to $382-million per year within the next two
decades.
The quantum revolution is on. Quantum information science is moving from
the realm of research to the world of business. The need, the science, the
technology, and the business opportunity are there for those who wish to
seize it.
46
3. endnotes
Corker, D., Ellsmore, P., Abdullah, F., Howlett, I. Commercial Prospects for Quantum
Information Processing, Quantum Information Processing Interdisciplinary Research
Collaboration, 1 December 2005.
2.
Schlosshauer, M., Kofler, J., Zeilinger, A. A Snapshot of Foundational Attitudes Toward

Quantum Mechanics, Stud. Hist. Phil. Mod. Phys. 44, 222-230 (2013).
3.
M. Mosca, G. Lenhart, M. Pecen (editors), Proceedings of 1st Quantum-Safe-Crypto

Workshop, Sophia Antipolis, September 26-27, 2013.
4.
Stebila, D., Mosca, M., Ltkenhaus, N., The Case for Quantum Key Distribution, arXiv:
0902.2839v2 [quant-ph] 2 Dec 2009.
5.
Warwick P. Bowen, Nicolas Treps, Ben C. Buchler, Roman Schnabel, Timothy C. Ralph,
Hans A. Bachor, Thomas Symul and Ping Koy Lam, Experimental Investigation of
Continuous Variable Quantum Teleportation, arXiv:quant-ph/0207179v1, 31 Jul 2002.
6.
R. Ursin, F. Tiefenbacher, T. Schmitt-Manderbach, H. Weier, T. Scheidl, M. Lindenthal, B.

Blauensteiner, T. Jennewein, J. Perdigues, P. Trojek, B. mer, M. Frst, M. Meyenburg, J.
Rarity, Z. Sodnik, C. Barbieri, H. Weinfurter and A. Zeilinger. Entanglement-Based
Quantum Communication Over 144 km, Nature Physics 3, 481-486 (2007).
7.
Ibid.
8.
Nauerth, S., Moll, F., Rau, M., Fuchs, C., Horwath, J., Frick, S., Weinfurter, H. Air-toGround Quantum Communication, Nature Photonics 7, 382386 (2013).
9.
Better Encryption Techniques Spur Fiber Research, Communications Today, 16 July

2003.
10.
N. Sinclair, E. Saglamyurek, H. Mallahzadeh, J. A. Slater, M. George, R. Ricken, M. P.

Hedges, D. Oblak, C. Simon, W. Sohler, and W. Tittel. A Solid-State Memory for
Multiplexed Quantum States of Light with Read-Out on Demand, arXiv:1309.3202v1
[quant-ph], 13 September 2013.
11.
T. Jennewein, B. Higgins. The Quantum Space Race, Physics World, March 2013.
1.
47
48
12.
Alba, D., China Unveils Secret Quantum Communications Experiment, IEEE

Spectrum, 13 June 2013, http://spectrum.ieee.org/tech-talk/aerospace/satellites/
china-unveils-secret-quantum-communications-experiment
13.
Mann, A., The Race to Bring Quantum Teleportation to Your World, Wired, 3
October 2012, http://www.wired.com/wiredscience/2012/10/quantum-satelliteteleportation/all/
14.
A New Dawn for Chinas Space Scientists, Science, Volume 336, 29 June 2012, pp.
1632-1633.
15.
McCracken, H., SXSW: Edward Snowden Has No Regrets About NSA Leaks, Time, 10
March 2014, http://time.com/18691/edward-snowden-talks-privacy-and-security-atsxsw-interactive/
16.

17.
The State of Data Security: Defending Against New Risks and Staying Compliant,
Sophos Security Report 5.11v1.dNA, 2011.
18.
Rethinking Data Security in a Cloud-Based World, Watch, Issue 3, 2013.
19.
Battling the Cyber Threat, Watch, Issue 3, 2013.
20.
Cavusoglu, H., Mishra, B., Raghunathan, S. (2004). The eect of internet security
breach announcements on market value: Capital market reactions for breached firms
and Internet security developers, International Journal of Electronic Commerce, 9,
70104.
21.
Nicastro, D. (2010, August 12). HIPAA breaches near $1-billion, HealthLeaders Media,
10 April 2011, http://www.healthleadersmedia.com/content/ TEC-255015/HITRUSTHIPAA-Breaches-Near-1-Billion
22.
The State of Data Security: Defending Against New Risks and Staying Compliant,
Sophos Security Report 5.11v1.dNA, 2011.
23.
Kolodgy, C.J. et al, Worldwide IT Security Products 2013-2017 Forecast, IDC Report
#245102, December Rev2013.
24.
Global Encryption Software Market: 2010-2014, TechNavio Insights Report, 2012.
25.
Ibid.
26.
Graham-Rowe, D. Quantum Cryptography for the Masses, MIT Technology Review,

28 August 2009, http://www.technologyreview.com/news/415073/quantumcryptography-for-the-masses/
27.
Stix, Gary. Best-Kept Secrets, Scientific American, January 2005, Volume 292, Issue
1, pp.78-83.
28.
Wilkinson, K., How Mike Lazaridis Plans to Turn Waterloo into the Silicon Valley of
Quantum Computing, Canadian Business, 9 November 2013.
29.
Bringing Quantum Technology to the Marketplace, Presentation by Grgoire

Ribordy (CEO of ID Quantique) at the Institute for Quantum Computing, 9 August
2011.
30.
Bringing Quantum Technology to the Marketplace, Presentation by Grgoire

Ribordy (CEO of ID Quantique) at the Institute for Quantum Computing, 9 August
2011.
31.

32.
Corker, D., Ellsmore, P., Abdullah, F., Howlett, I. Commercial Prospects for Quantum
Information Processing, Quantum Information Processing Interdisciplinary Research
Collaboration, 1 December 2005.
33.
Quantum Cryptography: A Market at an Embryonic Stage, Asian Technology

Information Program, ATIP Document ID 071306R, 13 June 2007.
34.
QWave Invests $4.5M in Quantum Encryption Developer ID Quantique, Russia & CIS
Business & Investment Weekly, 18 October 2013.
35.
Quantum Cryptography: A Global Market Report, Global Industry Analysts Inc.,

MCP-1812, June 2013.
36.
Parker, P.M. The 2013-2018 World Outlook for Quantum Cryptography, Icon Group
International, ISBN 1-114-88185-6, 2012.
37.
N. Sinclair, E. Saglamyurek, H. Mallahzadeh, J. A. Slater, M. George, R. Ricken, M. P.

Hedges, D. Oblak, C. Simon, W. Sohler, and W. Tittel. A Solid-State Memory for
Multiplexed Quantum States of Light with Read-Out on Demand, arXiv:1309.3202v1
[quant-ph], 13 September 2013.
49
9. appendices
9.1. APPENDIX A: LIST OF ACRONYMS
50
AES
Advanced Encryption Standard
AIIA
Australian Information Industry Association
APAC
Asia Pacific
ASEAN
Association of South East Asian Nations
BB84
Bennett and Brassard 1984 (QKD protocol)
BBM92
Bennett, Brassard and Mermin 1992 (QKD protocol)
BBN
Bold, Beranek and Newman (Raytheon subsidiary)
BP
British Petroleum
CEO
Chief Executive Ocer
CERN
Conseil Europen pour la Recherche Nuclaire
CHAMP
Challenging Minisatellite Payload
CNSA
China National Space Administration
CRYPTREC
Cryptography Research and Evaluation Committee (Japan)
CSA
Canadian Space Agency
CSEC
Communications Security Establishment Canada
CSIS
Centre for Strategic and International Studies
CV-QKD
continuous-variable quantum key distribution
DARPA
Defense Advanced Research Projects Agency
DES
Data Encryption Standard
DPS-QKD
dierential phase shift quantum key distribution
DVD
digital video disc
Eckert 1991 (QKD protocol)
ECC
elliptic curve cryptography
EISG
Energy Innovations Small Grant
EMEA
Europe, the Middle East and Africa
ESA
European Space Agency
FAST
Flights for the Advancement of Science and Technology
FPGA
field programmable gate array
FSA
Financial Services Authority (United Kingdom)
GEO
geostationary Earth orbit
HSM
hardware security module
HHS
Health and Human Services
HIPAA
Health Insurance Portability and Accountability Act
ICT
information and communications technology
IDC
International Data Corporation
IDQ
ID Quantique SA
IM
instant messaging
IP
Internet protocol
ISS
International Space Station
IT
information technology
IQC
Institute for Quantum Computing
LEO
low Earth orbit
LLC
limited liability corporation
NASA
National Aeronautics and Space Administration
NICT
National Institute of Information and Communications Technology

(Japan)
NIST
National Institute of Standards and Technology
NSA
National Security Agency
NTT
Nippon Telegraph and Telephone
NP
nondeterministic polynomial time (complexity class)
OTP
one-time pad
PIER
Public Interest Energy Research
PLC
private limited company
PPLN
periodically poled lithium niobate
QEYSSat
Quantum Encryption and Science Satellite
QIP
Quantum Information Processing
E91
51
52
QIPS
Quantum Information and Quantum Physics in Space
QKD
quantum key distribution
QRNG
quantum random number generator
QUEST
Quantum Entanglement for Space Experiments
R&D
research and development
RF
radio frequency
RSA
Rivest, Shamir and Adleman
SECOQC
Secure Communication based on Quantum Cryptography
SEQURE
Symmetric Encryption with Quantum key Renewal
SOCRATES
Space Optical Communications Research Advanced Technology

Satellite
SFL
Space Flight Laboratory
SME
small/medium-sized enterprises
SOTA
small optical transponder assembly
U.K.
United Kingdom
UQCC
Updating Quantum Cryptography and Communications Conference
UQD
Universal Quantum Devices
U.S.
United States
USB
universal serial bus
UTIAS
University of Toronto Institute for Aerospace Studies
9.2. APPENDIX B: ACKNOWLEDGEMENTS

The authors of this study gratefully acknowledge the contributions of the following:
Sharilyn Allen, Communitech

Lucas Armstrong, MaRS Market Intelligence
Gillian Clinton, Clinton Research
Dr. Audrey Dot, Institute for Quantum Computing
Nabil Fahel, Communitech
Dr. Brendon Higgins, Institute for Quantum Computing
Catherine Holloway, Institute for Quantum Computing
Dr. Thomas Jennewein, Institute for Quantum Computing
Dr. Raymond Laflamme, Institute for Quantum Computing
Joe Lee, MaRS Market Intelligence
Dr. Vadim Makarov, Institute for Quantum Computing
Bridget Moloney, University of Waterloo
Dr. Michele Mosca, Institute for Quantum Computing
Brian Neill, Independent Reviewer
Matthew Rosato, COM DEV Ltd
.
53
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2014 market study &

INSTITUTE FOR QUANTUM COMPUTING

2.1. Relevance and Implications of Quantum Information

2.2. About the Institute for Quantum Computing

3. overview of quantum cryptography

3.1. Inherent Vulnerabilities of Conventional Cryptography

3.2. Quantum Cryptography and Quantum Key Distribution (QKD)

3.3. Examples of Terrestrial QKD Implementations

3.4. Satellite-Based QKD: The Quantum Space Race

4.1. Financial Cost of Information Security Breaches

4.2. Current Market for IT Security and Encryption

5.1. Current Commercial Vendors

5.2. Recent Commercial Market Activity

6.1. Discussion of Market Potential

6.2. Quantum Cryptography

6.3. Market Segmentation

6.4. Satellite-Based QKD

9.1. Appendix A: List of Acronyms

9.2. Appendix B: Acknowledgements

I NSTITUTE FOR QUANTUM C OMPUTING : U NIVERSITY OF W ATERLOO

Only systems based on quantum cryptography can oer long-term data

Ironically, it is quantum mechanics that poses both the greatest threat to

I NSTITUTE FOR QUANTUM C OMPUTING : U NIVERSITY OF W ATERLOO

2.2. ABOUT THE INSTITUTE FOR QUANTUM COMPUTING

in Canada and has allowed the

Most current encryption technologies are based on public key cryptography

The assumption of mathematical complexity behind the factoring large numbers,

Current cryptographic systems are not future-proof. Many organizations need to

I NSTITUTE FOR QUANTUM C OMPUTING : U NIVERSITY OF W ATERLOO

A serious catastrophe is looming that threatens to compromise the current

innovation in conventional algorithms or the advent of quantum computers would

3.2. QUANTUM CRYPTOGRAPHY AND QUANTUM KEY

seeking a more rigorous discussion are encouraged to consult the scientific

3.2.1. Overview of Cryptographic Theory

An unconditionally secure or perfect cryptosystem is one that cannot be

I NSTITUTE FOR QUANTUM C OMPUTING : U NIVERSITY OF W ATERLOO

Another interesting property of quantum key distribution is universal

by QKD to authenticate the messages in the next round of QKD with a

3.2.2. Principle of Quantum Key Distribution

I NSTITUTE FOR QUANTUM C OMPUTING : U NIVERSITY OF W ATERLOO

3.3. EXAMPLES OF TERRESTRIAL QKD

I NSTITUTE FOR QUANTUM C OMPUTING : U NIVERSITY OF W ATERLOO

3.3.1. Institute for Quantum Computing

Figure 2 IQCs Free-Space Quantum Link Test-Bed

3.3.2. Canary Islands

Figure 3 Distance Record for Free-Space QKD Between Canary Islands

I NSTITUTE FOR QUANTUM C OMPUTING : U NIVERSITY OF W ATERLOO

3.3.3. QKD with Airborne Platforms

3.3.4. Los Alamos National Laboratory

One of the first computer networks protected by QKD was implemented in

I NSTITUTE FOR QUANTUM C OMPUTING : U NIVERSITY OF W ATERLOO

reliability and robustness of QKD in continuous operation in a field

3.3.8. Tokyo QKD Network

3.3.9. Examples of Commercial Application

I NSTITUTE FOR QUANTUM C OMPUTING : U NIVERSITY OF W ATERLOO

There are currently four companies oering complete turn-key commercial

3.4. SATELLITE-BASED QKD: THE QUANTUM

In the absence of practical quantum repeaters, Earth orbiting satellites

Key transfers through space could be accomplished by either a constellation

For the past four years, a proposed

I NSTITUTE FOR QUANTUM C OMPUTING : U NIVERSITY OF W ATERLOO

3.4.1. Institute for Quantum

representatives from the Perimeter Institute, DRDC, Communications Security

3.4.2. Los Alamos National Laboratory