The Department of Defense has an interest in stirring up fear of online attacks -- it wants to remain involved in cyber defense.
Over the last few years, the U.S. has developed the world's most sophisticated system to detect and prevent cyber attacks, Panetta said. He then set out why he believes the Department should be involved in national cyber security.
Panetta first addressed one of the biggest issues surrounding increased military involvement with the Internet: the possibility that the Department of Defense would monitor personal e-mail and communications between U.S. citizens.
"That it not our goal, that is not our job, that is not our mission," he said. "Our mission is to defend the nation. We defend. We defer. And if called upon, we take decisive action to protect our citizens. In the past we have done so through operations on land and at sea, in the sky and in space. In this century, the United States military must help defend the nation in cyber space as well." (See video of Panetta pledging not to monitor the communications of U.S. citizens.)
To do this, Panetta said the Department of Defense in investing more than $3 billion per year in developing new capabilities to fight cyber attacks and said the U.S. has the capability to go on the offensive when required.
"If we detect an incoming attack that will cause significant physical destruction in the United States, or kill American citizens, we need to have the option to take action against those who would attack us, to defend this nation when directed by the president" Panetta said. "For these kinds of scenarios, the department has developed the capability to conduct effective operations to counter threats to our national interests in cyber space."
"Let me be clear, that we will only do so to defend our nation, to defend our interests, to defend our allies. And we will only do so in a manner that is consistent with the policy principles and legal frameworks that the department follows for other domains, including the law of armed conflict," he said. (See video of Panetta's remarks on when the military would get step in to defend the national Internet.)
As a result of the increased focus on cyber security by several government agencies, Panetta said the Department of Defense is in the final stages of revising its rules of engagement in cyber space. The change is the largest in seven years and will spell out the duty of the military to defend its networks and also the nation should the U.S. come under major cyber attack.
Panetta closed with a call to his audience to share the responsibility to protect cyber space.
"Ultimately, no one has a greater interest in cyber security than the business that depend on a safe, secure, and resilient global digital infrastructure," he said. "To defend those networks more effectively, we must share information between the government and private sector."
"We've made real progress in sharing information with the private sector, but very frankly, we need Congress to act to ensure that this sharing is timely and comprehensive. Companies should be able to share specific threat information with the government without the prospect of lawsuits hanging over their head. And a key principle must be to protect the fundamental liberties and privacy in cyber space that we are all duty bound to uphold."
Martyn Williams covers mobile telecoms, Silicon Valley and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's email address is email@example.com.