The Thomas Jefferson Institute for Public Policy is a non-partisan research and education organization devoted to improving the lives of the people in Virginia. The Institute was organized in 1996, and was the only state and local government focused public policy foundation in Virginia based on a philosophy of limited government, free enterprise and individual responsibility. It is a “solutions tank” seeking better ways to accomplish the policies and programs currently being undertaken by state and local government – always based on the Institute’s underlying philosophy.
The work of the Thomas Jefferson Institute for Public Policy is geared toward educating our political, business and community leadership about the issues facing our society here in Virginia. The Institute offers suggested solutions to these problems in a non-partisan manner.
The Thomas Jefferson Institute is a fully approved foundation by the Internal Revenue Service. It is designated a 501 (c) 3 organization and contributions are tax-deductible under the law. Individuals, corporations, associations and foundations are invited to contribute to the Thomas Jefferson Institute and participate in our programs.
For more information on the programs and publications of the Thomas Jefferson Institute, please contact:
Thomas Jefferson Institute for Public Policy
9035 Golden Sunset Lane Springfield, Virginia 22153
703/440-9447
email: mikethompson@erols.com
This Campaign *99 Issue Paper, “Public Policy and the Internet in Virginiais published by the Thomas Jefferson Institute for Public Policy. It is sent to all state elected officials, all candidates running for state office in 1999, business executives, academic leaders, policy experts, and the media in Virginia.
The ideas in this Issue Paper do not necessarily reflect the views of the Thomas Jefferson Institute or its Board of Directors and nothing in this study should be construed as an attempt to hinder or aid any legislation. _
Foreword
Virginia is the Internet Capital of the world. Today there are as many Virginians working in the telecommunications and information technology industries as there are working for the federal government. The Internet industry has chosen Virginia as its corporate home office for a whole variety of reasons. We should be proud that our state is at the forefront of this technology.
The Internet and technology industries have positioned Virginia to be a worldwide leader in these fields. But the biggest hindrance to the future of the Internet and to the emerging technology industries is the threat of government regulation.
Congress understood this when it passed the Internet Tax Freedom Act last year. It was understood that this new and expanding industry should not be crippled at the very beginning of its growth cycle. And government taxation would have done just that.
And Virginia has taken a lead in this effort to limit government regulation of the technology industry by having the nation’s first technology secretary in a Governor’s Cabinet, creating the Governor’s Commission on Information Technology, and implementing the most comprehensive set of Internet laws in the nation. Our Governor has made it clear that government regulation should be kept at a minimum if this industry is to truly prosper.
It is important for our elected leaders here in Virginia to carefully consider, and thoroughly understand, the consequences of government involvement in the Internet industry in particular and the overall high tech industry in general. Government regulation tends to distort economic reality and restrict the progress. So our elected leaders and our business leaders need to be very carefiil in what they ask government to do and not do when it comes to these emerging industries.
Govermfrent involvement in our economy is being reviewed at the current time. Deregulation of the airline industry, the electric industry, the telephone industry, the energy production industry have either proven successful or are in the process of completion. This move away from government controls must be carefully considered before new government controls and regulation of the Internet and high tech industries are allowed to take hold.
Andy Madden who works the technology issue for the highly respected and bi-partisan American Legislative Exchange Council, an organization representing over 4,000 state elected officials in this country, is the author of the enclosed paper.
Michael W. Thompson Chairman and President Thomas Jefferson Institute for Public Policy September 1999
Public Policy and the Internet in Virginia
W
By: Andy Madden
Overview
The speed at which transactions from opposite ends of the globe can take place over the Internet is dramatically changing the way companies of all sizes conduct business. Ideas and data can now be instantaneously disseminated around the world. This medium has already significantly altered the way we communicate, learn, transact financial services and access entertainment. Everyday the nature of the Internet changes, as faster computers are developed, cheaper means of electronic storage are created, software is improved, and more capable communications are advanced. Government policies should not hinder the creation of a workable infrastructure in which electronic commerce can flourish. Policy makers must resist any temptation to apply tax policy or regulations to the Internet in a discriminatory manner that hinders growth. In the most ambitious study on electronic commerce to date, University of Chicago economist Austan Goolsbee found that applying state sales taxes to the Internet would result in a reduction of sales by 25% and a reduction of nearly one third of total online spending.1 The incredible growth of the Internet defies any one-size-fits-all approach to public policy. Electronic commerce has become a vital component of the national economy and will continue to set the course well into the new millennium.
Virginia and the Internet
Virginia has established itself as a national leader in information technology, electronic commerce and the Internet. Some have even dubbed it the Internet capital of the world. Virginia’s Center for Innovative Technology reports that the information technology and telecommunications industry employs over 142,000 people with salaries averaging $54,000. The center anticipates this number rising to more than 186,000 workers with an average salary of over $73,000 by the year 2002.11 The state’s technology sector is growing at three times the rate of the overall economy and has contributed 63 percent of the growth of the state’s gross product over the last five years.111 According to the Northern Virginia Technology Council each new job created in the technology sector generates an additional job in another sector and for every $10,000 of earnings in the technology sector other sectors generate wages of $6,250.IV Maintaining the continued success and growth of this industry should be a high priority for all elected and appointed officials.
To date, Virginia has implemented the most comprehensive package of Internet laws in the country. Governor Jim Gilmore established the Governor’s Commission on Information Technology in May of last year. This commission was designed to enable the members of the Internet Industry to play a maj or role in the formation of Internet policy in the Commonwealth. This spring. Governor Gilmore enacted proposals designed to protect the integrity of the Internet. The recently enacted laws included provisions that: extend the Privacy Protection Act to cover
information managed or collected over the Internet, restricts the transmission of unwanted bulk email, establishes the use of encryption to commit a crime a separate crime, establishes public databases of appropriate public information and created the Secretary of Technology cabinet position. Theses laws and the guidance provided by the Governor’s advisory committee put Virginia on the cutting edge of electronic commerce policy.
Important Policy Issues
In Virginia and across the country candidates and public officials are being confronted with several key issues that continue to surface around electronic commerce. The manner in which lawmakers address these areas will have a tremendous impact on the future of the Internet as well as the economy at the state, local and national levels. These key issue areas include:
• Access to high-speed infrastructure
• Consumer Privacy Protection
• Content Regulation
• Converging Technologies
• Facilitating Electronic Commerce
• Fraud and Law Enforcement
• Security and the Role of Encryption
• Taxation
• Unwanted Email
• Web Enabled Government
Access to High-Speed Infrastructure
Possibly the hottest issue facing the Internet industry is that of high-speed data transmission. It is estimated that 18 million people around the world go online for the first time each month. There is no doubt that globally the Internet is being embraced as the communications medium of the new millennium.
One complaint however that continually resonates from users, whether private or commercial, is the speed at which online transactions take place. Internet users wait for their computer to boot up. They then wait while the computer dials and connects the Internet Service Provider (assuming the line is not busy) and then they must wait as they move from web site to web site or to download or upload any information. Clearly, Internet users want faster service and the Internet industry is racing to provide this high-speed service at the best price.
The most prominent choices for a user to connect to the Internet are: Asymmetric Digital Subscriber Lines (DSLs), coaxial cable lines, satellite links, and fixed wireless. Each has particular benefits for consumers and each has drawbacks. The fixed wireless connection currently gives the user the fastest speed. The fixed wireless can download and upload at a rate of 155 megabits per second. The biggest drawback for this service is that it requires a direct line
of site between the service transmitter and the customer facility. This raises the cost in providing the service and might be hindered by inclement weather.
The coaxial cable wire downloads data at a rate of 20 megabits per second although the speed may be slower if usage is high. DSL lines can handle up to 6 megabits per second.
DSL connections use regular phone lines to send information and allow users to talk on the line at the same time they are using it to access the Internet. Coaxial cable is the same network used to receive cable television stations. While the cable network is much faster at downloading data from the Internet uploading information such as sending emails is often just as fast or faster on DSL lines. It is estimated that there are currently 50,000 homes and businesses using DSL in the United States and nearly half a million use a cable modem.v Users of DSL and Cable access represents less than 2 percent of Internet users in the U.S.^ According to the Richmond Times Dispatch on July 29th, Bell Atlantic is quickly expanding the availability of DSL lines in the 13
| states serviced by this local telephone company, eligible for the DSL high speed Internet service. | y next April, 21 million phone lines will be |
Most homes across America have access to both a phone line and a cable line. However, a large portion of both these networks still need to be upgraded before they can provide high-speed Internet service. Both the cable and phone companies are investing a significant amount of resources on upgrading their current services.
The cable industry is pouring billions of dollars into their networks to upgrade them for Internet use. At this time the upgraded cable line is the most reliable means for users to obtain highspeed access to the Internet. Other alternatives are also reliable.
AtHome and RoadRunner are two Internet service providers (ISP) that offer Internet access over these high-speed cable lines. Cable industry giants like AT&T and Time Warner have significant stakes in both these ISPs. If customers would like to use a different, non-cable ISP they can, but they must first subscribe to the required cable company ISP. This is an effort by the cable companies to regain some of the resources used to upgrade their systems.
A coalition of non-cable controlled ISPs is pushing for government regulation for equal access to the cable network. They feel the cable industry should open its systems to all competitive ISPs in order for non-cable providers to provide high-speed service over cable lines at the cable companies’ “basic package” price.
OpenNET is the leading coalition for so-called equal access to the cable networks. It is comprised of companies such as AOL, Mindspring and MCIWorldCom and is calling for the Federal Communications Commission (FCC) and/or the courts to require cable companies to “unbundle” their networks allowing other ISPs to access and provide service over the high-speed coaxial cable lines. Open access legislation was introduced in seven states this year and is currently being debated in nine localities™ Such legislation has yet to pass.
There are only two cities where local regulation of Internet access has passed. Portland, Oregon officials recently ordered AT&T to allow access by Internet competitors to its high-speed cable lines. AT&T subsequently sued, but early this summer a federal judge supported the Portland decision.vm AT&T has appealed this ruling and a decision is expected as early as this fall. Officials in Broward County, Florida voted to require local cable companies to open their networks. AT&T and Comcast, another one of the nation’s largest cable providers, have since sued.ix
Other localities have opposed requiring open access. For example, San Francisco County has blocked a decision that would have forced AT&T to open its network, and a Los Angeles
committee studying the issue recommended against forced open access.34
*
The proponents of equal access argue that the cable industry has a monopoly on its high-speed lines. The OpenNET Coalition attests that telephone companies cannot force their customers to use their ISP, which is what they say cable is doing. The cable industry points out that it needs the revenue it generates from the ISPs they control to help pay for the costs of building and upgrading a national high-speed network. Without this revenue the cable industry claims that there is little incentive to develop a national high-speed network. The cable industry goes further to argue that customers are not restricted from accessing the Internet through an ISP of their choice. Besides being able to gain access to the non-cable ISP service through their cable service, people can logon to their favorite ISP through their regular phone line, high-speed phone line, wireless connection or even through satellite links. The cable industry contends that with this many options, and with technology developing so quickly, there is ample competition in the area of Internet access.
When developing policy in this area lawmakers must be reminded that the success of the Internet thus far has evolved in an environment virtually free of government regulation. The technologies surrounding this industry continue to be developed at an amazing rate. The quickest most reliable connection might be cable today but tomorrow it may become fixed wireless or satellite or some other technology.
Government officials at all levels should advance with extreme caution, and be very careful not to shackle future developments and competition with regulations geared at current, but soon to be obsolete, technology. Opening the door to government regulation in one field of Internet commerce makes it more likely that government regulations will be imposed in other areas of this industry down the road. Lawmakers should be concerned that a wide array of different regulations throughout the country would dramatically hinder the development of this industry. With over thirty thousand separate regulatory and taxing districts nationwide the compliance costs associated with a myriad of different regulations could be devastating.
Consumer Privacy Protection
Increasing citizen trust and confidence in the Internet is the key to continuing the medium’s rapid development. The cornerstone to any such confidence building is the protection of individual privacy. The states should thus support all efforts that seek to build trust and confidence while protecting privacy. The best way to achieve this is through market-driven initiatives and consumer empowerment. In July the Federal Trade Commission (FTC) released a report to the
House Commerce Committee stating that new Internet privacy laws are not needed to protect consumers. The report cites a recent study conducted by Georgetown University, which reveals that 66% of Web sites currently post privacy policies. Only 14 percent of sites posted their privacy policies a year ago.50
The Internet industry has actively encouraged companies to implement clear privacy policies that give web surfers both a choice and control over what personal information is collected. The Online Privacy Alliance, a market led coalition of companies involved in electronic commerce, has produced significant, detailed guidelines for what such a policy should contain. This includes the ability to opt-out, mechanisms to measure and verify that the policy is being followed, and consequences for not following the policy. Citizens using the Internet will thus be on notice of what is to be done, if anything, with their information. They can then decide whether or not they approve. If they disapprove, they can retreat to a site where the privacy policy is more to their liking. As sites with strong consumer-friendly privacy policies begin to reap these benefits, others will follow suit. Other industry groups that enforce privacy policies include Trust-E or the Better Business Bureau. Citizens’ ability to make informed decisions regarding their own personal privacy should be one of the ultimate rights on the Internet.
Lawmakers should commit to the prosecution of those using deceptive privacy policies and those who are fraudulently disregarding their own policies. Existing laws against fraud and deception are completely applicable to the Internet and privacy violators must know that they will be prosecuted. Law enforcement authorities in the states should be sufficiently staffed, educated, trained and empowered to work with others to combat those engaging in such behavior. During the last legislative session the Virginia legislature did a great job in protecting consumer privacy by changing definitions in the Privacy Protection Act to cover information managed or collected while online.
Content Regulation
The U.S. Constitution protects freedom of speech and prohibits censorship on the Internet just as it does in other forms of media. There is, however, a category of speech that is not constitutionally protected in any medium. The Internet, like other mediums before it, must have a zero tolerance approach to obscenity, including child pornography, and its distribution. When illegal content is appropriately brought to the attention of Internet companies, and they have control over it, they should remove it. Subject to constitutional and statutory privacy safeguards, they should cooperate fully with law enforcement officials conducting investigations. Law enforcement agencies should prosecute perpetrators of obscenity and other forms of illegal content on the Internet.
In addition to illegal content, there is some constitutionally protected content, which may be appropriate for adults but is clearly inappropriate for children. On the Internet, however, parents have a tremendous ability to control access to content by their children through the use of available technology. Filtering devices such as Net Nanny, Cyber Patrol, GuardiaNet and Kid Web among many others are readily available to interested parents. Parents should be informed
and encouraged to supervise their children when it comes to viewing material on the Internet. Lawmakers should vigorously support education regarding this message.
In institutions where parents are not available to provide supervision, such as schools and libraries, one way to monitor content without unduly restricting use of the medium is by requiring an appropriate use or filtration policy at the most local of levels, the schools and libraries themselves. The level of restrictions will vary greatly from one region to another. Lawmakers should embrace legislation that (1) requires an appropriate use or filtration policy regarding access to the Internet by minors in schools and libraries, and (2) requires these policies be made available to members of the public. This type of solution encourages active involvement that will not hamper the benefits of the medium or curtail freedom of speech while reflecting local choice and local responsibility.
Converging Technologies
The telecommunications industry has always been heavily regulated as have the cable TV and broadcast industries. The computer industry on the other hand has been fortunate to function in a virtually regulation free environment. Many feel this lack of government regulation has been the key component in the rapid growth of the computer, Internet and digital technology industry.
The Internet and advancing digital technology have created common services that can be offered by both the cable and telecommunications industries. As digital systems advance, several completely different industries, each operating under a unique set of rules and regulations, are
able to develop and offer one all-inclusive service. For example, through a system provided by a single company an individual could order movies, access email, connect to a bank, make phone calls, research over the Internet and much more. What happens as these systems merge into one? Should it be regulated like a telecommunications provider, a cable TV provider, the broadcast industry or the computer industry? As companies begin to provide more than one service they enter a gray area, where it is unclear what regulations should and should not apply. Futurist Richard Adler suggests that by 2009 the traditional distinctions between telephone, broadcasting cable and Internet service will have virtually disappeared. Companies will compete to transmit all voice, data and video bits the fastest.
The decisions made in regards to convergence will likely have the greatest impact on the future of Internet and other digital systems. Before creating a web of regulations lawmakers should study the success the Internet and computer industry have shared in a regulation free environment.
Facilitating Electronic Commerce
Business transactions that are legal and binding in the analog environment should also be legal in the digital environment. The state’s commercial statutes should not be an impediment to doing business electronically. Lawmakers should encourage and set the legal framework for the authenticity and integrity of electronically transmitted documents and facilitate the creation of enforceable electronic contracts. Further, because of the dynamic and competitive nature of
electronic commerce, effective and enforceable codes of industry self-regulation will be the most significant factor in consumer protection. Policymakers should also encourage reciprocity with other states in recognizing and accepting state required documents for companies and individuals that conduct business over the essentially “borderless” Internet.
Fraud and Law Enforcement
As the size of the Internet grows it is inevitable that so will online crime. The Internet industry has the greatest incentive to ensure the safety of online consumers. If safety fears drive consumers off the net the industry will dwindle. An effort of industry led initiatives will enable lawmakers, law enforcement officials and Internet users to most effectively combat electronic criminal activity.
In general, any activity that is illegal in the analog world should also be illegal in cyberspace. Policy makers should redefine, where necessary, legislation and regulations currently on the books that govern criminal and civil violations so they might apply in the digital world.
Security and the Role of Encryption
Citizens should be empowered to protect, assure and secure their privacy and intellectual property from intrusion or piracy. Advanced technologies, including encryption, that empower people to protect themselves, need to be available in the marketplace and should not be limited by government regulations.
Encryption is the process of scrambling a readable document into an unreadable format, which can then only be read by someone with the proper key to decipher or unscramble the document. The key is similar to the combination of a lock or the PIN number for an ATM card. Encryption on the Internet is used to protect the privacy of personal email messages as well as commercial transactions. It is essential that all transactions, whether personal or commercial, have a strong reliable means to protect the security of their data.
The strength of an encryption code is measured in “bits”. American-based companies are prohibited from exporting any encryption technology over the strength of 40-bits. Companies have been producing 56-bit strength encryption and higher for over twenty years. Earlier this year, in an effort to demonstrate the weakness of the allowed 40-bit encryption, a non-profit group cracked a 56-bit encryption code in less that 22 hours.*11 The accepted world standard for encryption is currently 128-bit strength. Realizing that even 56-bit is not strong to reliably protect data, the National Institute of Standards and Technology, a subdivision on the Department of Commerce, is busy developing a new standard for government encryption based on ^S-bit.*1” This new encryption standard however would be limited to government use only.
Even though foreign companies presently produce encryption technologies for distribution up to 128 bits, and the government has shown that encryption strength above 56-bit is necessary for secure transaction, U.S. companies are still prohibited from exporting these technologies.
The ability to protect property is unquestioned in the terrestrial world, subject to lawful search and seizure. The same protections should exist in the digital world, subject to lawful warrants. In order to create a system that will be trusted, citizens should be free to select the strength and type of encryption technology necessary to secure their privacy.
States should petition the federal government to lift antiquated, onerous restrictions on encryption and encourage a position that would allow its citizens access to the strongest encryption possible. This resolution will send the message that encryption is at the heart of consumer privacy and security issue. Every citizen should be authorized to protect, assure and secure their privacy and digital property from intrusion or piracy.
Taxation
Electronic commerce has become a driving force in the economy of the nation and the world. Business-to-business commerce conducted over the Internet is currently projected to be in excess of S300 billion by 2003. Virginia’s Center for Innovative Technology expects the information technology industry in Virginia to increase by more than thirty percent by the year 2002. Government policies should not hinder the creation of a workable infrastructure in which electronic commerce can flourish. Policy makers must resist any temptation to apply tax policy to the Internet in a discriminatory manner that hinders growth. Discriminatory taxation will stunt the growth of the Internet and deny business the full use of a tool that will significantly improve performance and customer satisfaction. Last year Majority Leader Dick Armey (R-TX) conducted a survey online, which revealed that 97% of those surveyed, favored keeping the Internet tax-free.™
Last year Congress passed the Internet Tax Freedom Act in an effort to protect the Internet from undue taxation before it has a chance to mature and before policymakers are able to acquire a greater understanding of its true potential. Congressman Chris Cox (R-CA) and Senator Ron Wyden (D-OR) led the bipartisan effort. Essentially, the Act establishes a three-year moratorium on special taxation of the Internet. During this moratorium, an Advisory Commission on Electronic Commerce will study and recommend what, if any, tax policy should be applied to the Internet and how. The Commission met for the first meeting in Williamsburg this June, and elected Governor Jim Gilmore as chairman. The Commission is composed of eight members from private industry, eight from state and local governments, the secretaries of Treasury and Commerce and a U.S. trade representative. Virginia is uniquely positioned on this commission with Governor Gilmore as Chairman, Virginia State Delegate Paul Harris from Charlottesville representing state government, and several members representing Virginia’s private sector interests including America Online.
This tax “time-out” established by the Internet Tax Freedom Act is necessary because there are over 30,000 separate state and local taxing districts in the United States. If each district were to implement a certain variety of taxes on the Internet, the burden would become nearly impossible to administer. A great uncertainty exists in the electronic marketplace about when and where a transaction is actually taking place. A single transaction could arguably cross through several or even dozens of taxing districts. The unparalleled potential of the Internet is only beginning to be
realized. Technologies surrounding the Internet and electronic commerce are changing on a daily basis.
A big question on taxing in the digital world is defining sufficient nexus. A state can impose a tax on a transaction only if the tax does not impose an undue burden on interstate commerce and the business conducting the transaction has a sufficient nexus with the state. In the 1992 Supreme Court decision Quill v. North Dakota, the court stated that a business must have a “physical presence” in the state before the state can impose a sales or use tax on its transactions. Using current tax policy, which is geared to the terrestrial world, and applying it to the digital world raises many complications.
Unwanted Email
Like all mass media, legitimate advertising on the Internet plays a critical role in supporting other activities. As is also true with other media, a certain percentage of ads are fraudulent, deceptive, inappropriate or otherwise unwanted. Unfortunately, some unscrupulous individuals misuse the Internet’s electronic mail capabilities by deluging Internet users and their service providers with unwanted advertisements for dubious products, pyramid schemes and pornography.
Fraudulent bulk email, known commonly as junk email or spam, hurts consumers and undermines their confidence and trust in the Internet as a whole. Junk email slows communications, drains resources, and can seriously harm networks. The distribution of fraudulent, unauthorized or otherwise illegal communications over the Internet should be prosecuted just as it would be in any other medium. Virginia took a major step last spring to regulate the sending of unwanted bulk email without threatening the future of advertising over
the Internet. The state also strengthened trespass laws to include computer trespass and made it illegal to tamper with ones email or software. In addition to private enforcement actions, state law enforcement agencies should be staffed, educated, and trained to adequately identify and prosecute those engaging in such behavior.
Web-Enabled Government
Many states have already come a long way in putting their agencies on the Internet so that they can interact simply, directly and conveniently with citizens regardless of geography. Legislation to protect and encourage this approach may be appropriate. The states of Washington, Wisconsin and Florida have developed numerous policies in this area, creating a more efficient and approachable government. Additionally, an education program for the public should be established to ensure that citizens know about the tremendous resources made available to them by the state via the vital and empowering Internet medium.
Conclusion
While the Internet is by its very nature a global medium, its impact is largely local. Lawmakers should recognize that policies enacted locally, nationally and globally need to be implemented in a consistent manner. A myriad of different laws and regulations across state and local borders would stifle growth, limit innovation and would ultimately prevent the Internet from reaching its full potential. Lawmakers should oppose additional unnecessary or unwarranted regulations that would impede increased access to the Internet, market competition, consumer choice, security of personal information, or the conducting of electronic commerce.
The rate at which the Internet is growing and the technologies driving this medium are unparalleled. The true potential of the Internet is still unfathomable. Public officials must take every precaution to preserve electronic commerce and nurture it as it develops. Through a partnership between federal, state and local governments, with the private sector sharing in the responsibility to develop this medium in a positive manner, the Internet will become an invaluable mechanism for all citizens and businesses across the country and the world.
1 Lynch, Michael, “Run for the Border,” Investors Business Daily, May 6, 1999.
“ Tolle, Wolfgang, “Establishing Virginia as the Knowledge Capitol of the World” Virginia’s Center for Innovative Technology, April 1999.
111 Hayes, Heather, “Virginia Moves IT Front and Center,” Hard Copy@civic.com, June 1998.
“Ibid.
v “No More World Wide Wait: DSL Access,” CNET, 1999. Located at www.CNET.com. v‘ Derived from numbers released by the federal communications commission.
vu Cleland, Scott, “Precursor Watch: The Regulatory Landscape on Cable Access”, Legg Mason, May 18, 1999.
VU1 Borland, John “Living up to the Broadband Hype,” CNET News, July 28, 1999.
“ Ibid. x Ibid.
50 Clausing, Jeri, “FTC Finds No Need for Privacy Laws Protecting Online Privacy,” Technology Cybertimes, July 13, 1999.
xii Testimony of the Center for Democracy’ and Technology’ before the House Judiciary Subcommittee on Courts and
Intellectual Property’, March 4, 1999.
i » ■ *
X121
xiv
Ibid.
Why?, ALEC Issue Analysis, Spring 1999.
North Dakota Eager to Tax the Internet,
A Set of Guiding Principles for Crafting Policies that Impact the Internet and Electronic
Commerce.
The following set of principles is an easy reference for candidates and elected officials alike to utilize when considering policies that will impact the Internet. These principles as well as a large portion of the above report have been derived from a set of guidelines adopted by the American Legislative Exchange Council and a report released by the Virginia Commission on Information Technology last winter.
Dynamic Competition. New electronic and/or digital technologies are converting industries once characterized by economies of scale and natural monopolies into prototypical competitive markets. Government policies, laws and regulations should support the Internet and Internet access by allowing free entry into markets and replacing government mandates with market competition. Laws and regulations designed for a regulated utility market environment should not be applied to the Internet.
<
Growth. The Internet’s future expansion depends on continuing growth in its capacity. Public policies should be designed to foster ongoing expansion of useful and affordable bandwidth, encourage development of innovative technologies and do this with a minimum of government involvement.
Self-Governance. The Internet has flourished in large part due to the unregulated environment in which it has developed and grown. Voluntary codes of conduct, industry-driven standards and individual empowerment, together with a market environment hold greater future promise than does intrusive governmental regulation.
Free Speech. The Internet allows people from all around the world to communicate and share ideas more efficiently than ever before. Federal and state government policy should rigorously protect freedom of speech and expression on the Internet. New electronic and/or digital technologies adequately enable individuals, families and schools to protect themselves and students from communications and materials they deem offensive or inappropriate.
Electronic Commerce and Taxation. Electronic commerce promises to become an increasingly vital component of our states’ and national economies. Government policies should not hinder the creation of a workable infrastructure in which electronic commerce can flourish. Policy makers must resist any temptation to apply tax policy to the Internet in a discriminatory manner that hinders growth.
Privacy and Security. Citizens should be empowered to protect, assure and secure their privacy and intellectual property from intrusion or piracy. Advanced technologies, including encryption, that empower people to protect themselves should be available in the marketplace without government controls, restrictions or technical mandates.
Digital Government. State Governments should place their agencies and departments on the Internet in order to facilitate efficient and convenient citizen/govemment interactions.
Transactions, such as permits, licenses and property records are examples that can be handled electronically. Education programs for the public should be developed so that citizens are aware of the resources available through the Internet.
All candidates and public officials should oppose unnecessary or unwarranted federal legislation or regulation that would impede efforts by states to promote access to the Internet, limit competition or increased consumer choice, or ensure the security of personal information of consumers conducting electronic commerce transactions.
Glossary of Common Telecommunication arid Internet Public Policy Terms
Access: 1) The method, time, circuit or facility used to enter the network. 2) The service provided by local exchange carriers (LEC) or alternate access providers, that connects an interexchange carrier with its customers. Switched access provides such service over the public switched network; special access provides dedicated access for private line services and sometimes at the closed end of the switched services
ADSL: Asynchronous Digital Subscriber Line. A technology to transmit information by high frequency bandwidths on existing phone lines to homes and businesses.
Bandwidth: A measure of the communications capacity or data transmission rate of a circuit. Bandwidth is the total frequency spectrum, in hertz or cycles per second that is allocated or available to a channel. It is also the amount of data that can be carried in bits per second (BPS).
Bit: The smallest amount of information that can be transmitted. In binary digital transmission, a bit is either a 0 or 1. A combination of bits indicates an alphabetic character, a numeric digit, or performs a signaling, switching or other function.
Convergence: Convergence is a term for the combining of personal computers, telecommunications and television into a user experience that is accessible to everyone.
ESP: Enhanced Service Provider. Company that produces Internet related services, other than access, to individuals and other companies.
Encryption: The process of encoding a message to make its contents unintelligible to unauthorized persons.
FCC: Federal Commerce Commission. Independent federal agency charged with regulating interstate and international communications by radio, television, wire, satellite and cable. FCC’s authority covers all 50 states, Washington, D.C. and all United States possessions.
FTC: Federal Trade Commission. Investigates and enforces a variety of federal antitrust and consumer protection laws.
HTTP: HyperText Transfer Protocol. Technical standard used for communication on the World Wide Web (see WWW).
*
Internet: A large international communications network that connects government agencies, technical universities, commercial customers and private individuals. It grew out of a United States Armed Force maintained system, ARPANET.
ISP: Internet Service Provider. A company that provides individuals and other companies access to the Internet and hosting for Web sites.
Internet Tax Freedom Act: Act of Congress set a three-year moratorium on any discriminatory taxes specifically aimed at the Internet. The act also created an advisory commission to study electronic commerce and taxation. Governor Gilmore (VA) chairs the commission.
ISDN: Integrated Services Digital Network. ISDN is a digital telephone service that can run over the same copper wires used for the old-fashioned analog telephone system.
Mail-order sellers: Company that sells goods and services via catalog or the Internet.
Nexus: Legal term used for taxation purposes. The United States Supreme Court has ruled that states have taxing jurisdiction over only those out-of-state sellers of tangible personal property who have nexus (sufficient physical contact) with the state.
OSP: Online Service Provider. A business that provides access to a proprietary subscriber network. Many OSPs also provide their customers the ability to access the Internet. OSPs are generally very large businesses that provide services on the Internet. They usually have a vast array of services available to an individual or another company.
Piracy: The illegal act of copying and distributing computer software without giving due payment to the creators of the software.
Spam: Unsolicited, email that is sent to a large number of different email accounts. The same as junk mail.
SAFE Act: A measure being considered in Congress which would loosen federal restriction on the exportation of encryption technologies.
UBE: Unwanted Bulk Email (see Spam).
Web site: A collection of files on a particular subject accessible through the Internet at a specific address.
WWW: World Wide Web. All the resources and users of the Internet use HTTP (see http).
Additional Sources
American Legislative Exchange Council, www.alec.org
Federal Communications Commission, http://www.fcc. gov
Federal Trade Commission, http://www.ftc.gov
Florida Access to Government, www.state.fl.us/fgsd_html/access.html
Hands Off the Internet, www.handsofftheintemet. org
Internet Alliance, www.intemetalliance.org
The Internet Tax Fairness Coalition, www. stopnettax. org
Internet Tax Freedom Act Home Page, http://cox.house.gov/
OpenNet Coalition, www, opennetcoalition. org Oregon Online, http://www.state.or.us State of Arizona, www.state.az.us
Virginia Commission on Information Technology, www.sotech.state.va.us Virginia Technology Council, www.vtc.org
Washington Interactive Technologies, www.wa.gov/dis/wit/services/intemet/index.htm State of Wisconsin Information Center, www.badger.state.wi.us/statewide.html The Digital State: How Governments are Using Technology, The Progress and Freedom Foundation, August 1997.
:
t
«■
About the Author
Andy Madden is the Director of the American Legislative Exchange Council’s (ALEC’s) Telecommunications and Information Technology Task Force. ALEC is the largest bipartisan membership organization of state legislators in the country. ALEC, which was founded on the Jeffersonian principles of free markets and limited government, works with legislators from across the country to develop policy and model legislation. Andy is also responsible for the operations of ALEC’s Trade and Transportation Task Force. Prior to working with ALEC Andy worked in public policy at the National Policy Forum and at the FTC Watch, He received his BA from Tulane University in New Orleans. Currently he resides in Alexandria, Virginia with his wife Heather.