Electronic commerce is the great pro- mise that has yet to be fulfilled. While 70 million Americans are signing onto the Web regularly, only a minority does so to purchase products. The majority of electronic commerce remains business-to-business transactions. Americans are still far more likely to get the latest news, rather than the latest fashions, in cyberspace. Yet there are clear successes: Amazon.com is America's biggest bookstore. Egghead Software holds hyperauctions in cyberspace to sell off surplus wares. Loyal Wal-Mart shoppers can browse for discounts at the retail giant's Web site.
And now Washington wants into the act. The House Commerce Committee, under the leadership of Thomas Bliley (R-Va.), has held a series of hearings on e-commerce. While governors are salivating at the prospect of taxing electronic transactions, the House has passed - and President Clinton promises to sign - a bill that would prohibit any such activity.
At the other end of Pennsylvania Avenue, The White House released "A Framework for Global Electronic Commerce" in June 1997, which articulated a minimalist approach to government intervention in electronic commerce. After providing a Universal Commercial Code for Electronic Commerce and protecting intellectual property, there's not much more for the government to do, according to the framework. And in November 1997, The TransAtlantic Business Dialogue, an international group composed of executives from such giants as Coca-Cola, Erickson, Ford, France Telecom, Goodyear, Pfizer, and Time Warner, released a report that called for governments to sit back and let markets evolve standards for privacy protection and encryption. Governments, the report asserted, should refrain from levying special taxes on electronic transactions, while working with the private sector to harmonize international legal standards and protecting intellectual property.
How do the nation's business leaders feel about the government's rightful role in fostering an environment in which e-commerce will flourish? CE asked several CEOs and thought leaders for their views on the issue.
Craig R. Barrett President and CEO Intel Corp.
To help ensure America's leadership in e-commerce, our government should first drive investments in bandwidth needed by homes and businesses by implementing the 1996 Telecom Reform Act, meant to allow local competition. And there should be a "firewall" between old-world telephone regulations and new-world Internet activity. General revenue funds should be used to connect schools and libraries to the Internet--not funds tied to the monopoly-based universal service system. Congress should enact the Internet Tax Freedom Act moratorium on Internet taxation, while we sort out how e-commerce is fairly and effectively taxed. Finally, industry and government should cooperate to guarantee on-line privacy and security and U.S. export controls on encryption should be eliminated.
Chris Cox (R-CA)
As we enter the Information Age, we should establish in law a very important principle: that information should be made available as freely and as widely as possible throughout the world. To the fullest extent possible, it should not be taxed, and it should not be regulated. Legislation that I wrote - the Internet Tax Freedom Act - bans taxes that single out the Internet - such as bit taxes, Internet access taxes, and levies on Internet-specific goods and services including e-mail, Internet relay chat, and file transfers of all kinds. It was recently passed by the House of Representatives and is awaiting action in the Senate. It's a good start - and a vital step forward in seeing to it that the Internet is not shackled by government regulation and taxes.
Robert Davis President and CEO Lycos Inc,
The Internet's prosperity thus far is clearly linked to its open and decentralized nature. To preserve that independence, industry leaders need to act decisively to develop a system for self-regulation - an international code of conduct or "Bill of Rights" - for electronic commerce. The code must include fair information and enforcement practices to give the consumer confidence in these basic principles. For self-regulation to be effective, industry leaders also need to put systems in place to ensure security and protect the privacy of users. Providing industry steps forward with a clear and responsible plan, government can maintain a "hands off"' role.
Michael Feuer CEO OfficeMax, Inc.
Many of the tens of thousands of customers who visit OfficeMax.com on a daily basis are gathering information for subsequent purchases at one of the company's 750 retail stores, located. in 48 states and Puerto Rico, plus Mexico and Japan. We estimate that about 25 percent of our site visitors actually make a purchase at our stores, rather than on or through the Internet. Infrequent users of the Internet are still suspicious of the medium. Precluding shopping today includes concerns about credit card fraud and ["Big Brother watching and gathering information."] To ameliorate the latter, the industry, and not the government, must develop and self-enforce appropriate practices that protect consumers' personal information and data. The best role that the government can play today for electronic commerce is to take a wait-and-see approach, allowing the industry to mature through evolution, rather than government intervention.
Samir F. Gibara Chairman, CEO, and President The Goodyear Tire & Rubber company
Goodyear supports the development of electronic commerce, but businesses and individuals must be assured that information is secure. Toward this end, Goodyear supports encryption policy and technology that is competitive in the global marketplace. Further, Goodyear believes the private sector should lead the effort to establish a framework for electronic commerce, while working with government to:
* Discourage unnecessary regulation or new taxes and insist that existing laws and regulations that may hinder electronic commerce be reviewed, revised, or eliminated.
* Ensure that laws supporting electronic commerce are consistent, regardless of jurisdiction.
* Ensure that where government action is necessary, it is focused primarily on promoting competition, protecting intellectual property, preventing fraud, and fostering dispute resolution.
Gerald M. Levin Chairman and CEO Time Warner Inc. @
In fostering electronic commerce, there is room for governmental intervention, such as in protecting intellectual property or in forging international agreements to keep the Internet from being clogged by rules and regulations imposed in every corner of the globe. Government's role in such international interactions is critical.
On the whole, however, as electronic commerce continues to grow, we believe that effective self-regulation will best protect consumers in a global medium and strike the critical balance between a variety of consumer interests and the immense opportunities provided by the development of the Internet.
Patrick J. McGovern Chairman of the Board International Data Group
It's important that electronic commerce be free of regulatory or legislative . constraints so it can have the freedom to let the market direct its development. Electronic commerce is affected by the rapid, yet unpredictable changes in technology, the industry that supplies that technology, and the application methods of its leading users.
The government should not try to anticipate possible problems in the evolution of electronic commerce before they occur, for most of the conceivable problems will actually never develop.
The best role for the government is to react promptly when called upon by the users of electronic commerce to solve problems that are restricting the growth of electronic commerce. Right now, the one issue that the federal government should address is to restrict the power of state and local governments to try to [constrain] the growth of electronic commerce through regulation and inconsistent or unreasonable taxation practices.
George Orban CEO and Chairman of the Board Egghead.com, Inc.
On-line commerce is a significant global opportunity for our country and its businesses. The U.S. business community can emerge as the world leader in the development of this new, fast-growing economic sector. Government serves best if it doesn't impede the opportunity for on-line commerce to grow quickly with new investment, employment, and innovation. Internet commerce is in its embryonic stage. As it evolves, it will affect the way we do business and the way we live. Government should monitor, not regulate; encourage, not inhibit. In the coming two to three years, all of us will have a better understanding of this powerful new business phenomenon.
Eckhard Pfeiffer President and CEO Compaq Computer corp.
Even in its infancy, electronic commerce is becoming an increasingly powerful force in the global economy. It is a seedbed of innovation that has the potential to revolutionize the way companies and countries do business. Although the private sector is driving most of these innovations, the growth of global electronic commerce also depends significantly on consistent government policies around the world. Governments play an important role in creating an environment in which electronic commerce can flourish. But they must act with restraint. This means avoiding regulations that will stifle commerce, including excessive taxation and restrictive encryption policies. Issues like these must be addressed on a global basis if we are to realize the true promise of electronic commerce. With the exception of encryption policy, the Clinton administration has set a standard that the rest of the world should emulate. We look to the administration to continue to provide strong, global leadership on electronic commerce.
Mary Weiss Chairman and CEO American Greetings
As the largest provider of content in our product category to the electronic marketplace, we've enjoyed a degree of success to this point without the benefit of, nor interference from, government intervention. And, as we look ahead to the growth of our electronic marketing endeavors, we are not forecasting any role for the government. On the contrary, we would view as potential risks the possibility of government policy towards taxation of on-line transactions, or censorship of on-line content. We believe the proper role for the government going forward is to allow free market forces to shape the evolution and structure of electronic commerce.
Randall C. Whiting President and CEO CommerceNet
The government already plays a critical role in all aspects of commerce, and as we continue to expand into electronic commerce, the role of government will be even more critical. There are four areas in which government must take an active role:
* to provide a stable and predictable legal environment in which business and consumers can operate;
* to extend protection against unscrupulous and illegal business dealings over the Internet;
* to lead in the deployment of electronic commerce at all levels of government procurement (from municipal to federal);
* to promote and encourage the use of electronic commerce throughout our economy.
The government must encourage continued economic growth from the widespread implementation of electronic commerce - from the smallest "mom and pop" shops to the largest multi-national corporations.
Craig A. Winn CEO Value America
By their actions, governments can facilitate or inhibit the growth of the Internet. Knowing when to act - and when not to act - will be crucial to the development of electronic commerce... Government can be a proactive force in assuring the transaction environment on the Internet is predictable and facilitative of innovation and growth. Potential areas for problematic governmental intrusion into electronic commerce include taxes, duties, censorship, licensing, and the potential for conflicting jurisdictions...
...Government should adopt a market-driven (non-regulatory) approach - one that facilitates the emergence of a transparent and predictable legal environment to support global business. Officials in decision-making roles in government should respect the unique nature of the medium and recognize that widespread competition and increased consumer choice should be the defining features of the new digital marketplace.
Strauss Zelnick President and CEO BMG Entertainment North America
While self-regulation will go a long way towards maintaining business flexibility and nurturing entrepreneurship in electronic commerce, the fact is this will be no complete substitute for government involvement.
We have to protect intellectual property. We have to protect privacy; we have to regulate things like pornography, and we have to prosecute fraud, whether it happens on the Internet or elsewhere.
We need to hold liable people playing a role in activities that violate public policy. So clearly, we need to regulate the Net. The question is how do we do so while still promoting and encouraging growth? It is a delicate, but important, balancing act.
Michael W. Lynch is the Washington editor of Reason magazine. Jason Brooks, summer fellow at Reason magazine, provided research assistance for this article.
