While clamping down on private encryption is bad policy, both for the economy and for privacy, I don't think it's technically impossible to implement. Let me draw a couple of comparisons to show why.
As background, here is Cory Doctorow explaining, like many other commenters, that the Internet is too wild and wooly for major governments to possibly implement widespread surveillance:
For David Cameron's proposal to work, he will need to stop Britons from installing software that comes from software creators who are out of his jurisdiction. The very best in secure communications are already free/open source projects, maintained by thousands of independent programmers around the world. They are widely available, and thanks to things like cryptographic signing, it is possible to download these packages from any server in the world (not just big ones like Github) and verify, with a very high degree of confidence, that the software you've downloaded hasn't been tampered with.
With cellular phones, any phone that uses the relevant chunks of bandwidth is legally required to use certain protocols that are registered with the government. This has been bad economically, in that the telephone network has developed much more slowly than the relatively unregulated Internet. However, being bad economically has never exactly stopped rules from being put into place.
Yes, you can rig up a wireless network in your garage that breaks the rules. However, as soon as you try to use it over a wide geographic region, you're going to be relatively easy to catch. You will have to either broadcast a strong signal, or make use of the existing telephone backbone, or both.
To draw another comparison, consider the income tax. Income tax is easy to avoid with small operations, because you can just pay cash under the table. However, larger operations have to file a variety of paperwork, and the interlocking paperwork is what will get you. The more you take part in the above-ground economy, the harder it is to spin a big enough web of lies to get out of your taxes.
To get back to Internet protocols, it will certainly always be possible to break the rules on an isolated darknet you assemble in your garage. However, as soon as you send packets across the Internet backbone, any use of unregistered protocols is going to be very easy to detect.
To rub the point in further, don't forget that the authorities have no requirement to go after everyone who they detect doing something fishy. If they are anything like the American tax service, they'll randomly (or politically....) select people to target, and those people will then be required to undergo an audit at their own expense. If they survive the audit, the tax service just says "I'm sorry" and moves on to the next victim. Because of selective enforcement, law enforcement has no requirement to go after everyone using illegal encryption.
Of course all this is bad for the economy and for humanity's development at large. Don't oppose a cryptography clampdown because it's technically impossible, or you will look just as silly as the people that say DNS takedowns are technically impossible. Rather, oppose a cryptography clampdown because we don't want to live like that. We want to have private communications, and we want to allow innovation on the Internet. It's brand new, and if we clamp down on it, it will ossify in its current state the same way that the telephone network did.
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