E-commerce: Progress or pitfalls? Depends on government, experts say

ASPEN, Colo. -- Rosy predictions for the future of e-commerce are starting to come true.

ASPEN, Colo. -- Rosy predictions for the future of e-commerce are starting to come true. But will regulatory roadblocks slow e-commerce progress to a crawl?

That's one of the key questions technology experts and lawmakers are grappling with during the Progress & Freedom Foundation's 5th Annual Cyberspace and the American Dream conference, held here.

Will government regulation derail the e-commerce train? Add your comments to the bottom of this page.

The two-day conference kicked off with a roundtable discussion on e-commerce Monday. With companies such as Dell Computer Corp. (Nasdaq:DELL) raking in upwards of $6 million a day, the Web's sales potential is clear. Businesses also cut costs via the Web; airlines, for instance, save $7 for every ticket they sell online.

'We're looking at a world culture developing without a world government in place.'
-- Roberta Katz, general counsel, Netscape

Internet industry-watcher Lynn Margherio, an independent business strategy consultant, said that an unfettered e-commerce market could let consumers design their own clothes on the Web, buy life insurance at cheaper rates, and more easily do comparison shopping for the best deals on everything from banks' checking accounts to cars. But the lack of consistent international policies on privacy, taxes and the legal validity of online transactions could derail the booming Internet-based economy, Margherio and other experts warned.

"We're assuming that there will be a predictable legal environment, no discriminatory taxation, and no artificial barriers erected by governments" for e-commerce to continue to grow, she said. If it does, Forrester Research Inc. predicts a $300 billion e-commerce market by 2002.

Panelist William Archey, president of the American Electronics Association, said he thinks the number is "well within the ballpark" of the kind of growth that can be expected if overly restrictive legislation doesn't ensue.

"It's only taken about five years to draw 100 million users to the Internet - compare that to the growth rates of TV and radio," Archey said.

Government dedicated to tax-free Net
One representative of the Clinton administration taking part in the panel, Joseph Guttentag, the deputy secretary for international tax affairs at the Department of the Treasury, insisted the administration is committed to keeping Internet commerce tax free.

"The Internet has had a tremendous impact on our ability to keep inflation low," among other economic advantages, Guttentag said. "I think all the agencies of this administration share the view of wanting to keep a market-driven approach to e-commerce."

Ensuring the validity of online transactions, along with assuaging consumers' privacy fears, is key to the growth of e-commerce, maintained Christopher Caine, vice president of governmental programs at IBM.

"At IBM, we do see this market expanding significantly, but it's not without some potential speed bumps," Caine said. "The virtual marketplace has to be as secure as the physical marketplace. People want to know if they can really make money off this, or if it's just a fad."

U.S., Europe at odds over privacy
With the online privacy debate raging from Silicon Valley to Capitol Hill for the last year, "We're now at a very pregnant moment with regard to privacy" and legislation, said Roberta Katz, senior vice president, secretary and general counsel at Netscape Communications Corp.

The European Union has passed a privacy directive saying consumers must give "unambiguous consent" for their private data to be used by Web sites, a policy that is at odds with the way many U.S.-based sites use visitors' private information, Katz said. That policy takes effect October 25.

"What we're going to see is a nascent industry in auditing Web sites' privacy activities, by non-profits and by for-profit companies," she predicted.

Encryption a key
Another potential roadblock to e-commerce success, the U.S. encryption policies, could end up being the subject of new legislation this year, as companies continue to lobby lawmakers on the issue, Katz added.

One industry official said commerce on the Internet will "never be realized" if consumers aren't allowed to protect their online activities with strong crypto.

"How many people would use the Internet if their entire banking and medical background, and every purchase they made or even considered, was made available for anybody else online to see? Not too many," said Jim Bidzos, CEO of RSA Data Security Inc., one of the most outspoken voices in the encryption policy debate.

Bidzos maintained that law enforcement leaders' fears about data-scrambling software falling in the hands of terrorists could be quelled "with more investigators, more funds, and harder work."

Several experts predicted that the Clinton administration will be forced to ease the current encryption restrictions, but said that lawmakers are trying to delay the change as long as possible to placate nervous law enforcement officials.

The international wrangling over issues such as encryption underscores the way in which the Internet is driving society as a whole to be more global and less segmented, said Netscape's Katz, who holds a PhD in cultural anthropology.

"We're looking at a world culture developing without a world government in place," she said.


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