1. ITAA WARNS AGAINST INTERNET REGULATION
2. ITAA HAILS INDUSTRY SELF REGULATION OF ONLINE PRIVACY
3. CONGRESSIONAL ROUND-UP - BROADBAND & E-COMMERCE LEGISLATION
4. ITAA COMMENTS ON U.S. - E.U. SAFE HARBOR PRIVACY PRINCIPLES
5. WHITE PAPER EXPLORES POTENTIAL IMPACT OF INTERNET RECIPROCAL COMPENSATION
6. E-COMMERCE ENHANCES "E-SERVICE," SAY CFOs - SURVEY POINTS OUT BENEFITS OF WEB GO BEYOND MARKETING ALONE
7. ANOTHER NET APPLICATION: FEC MULLS MATCHING FOR NET CAMPAIGN GIFTS
8. ITAA E-COMMERCE PROGRAMS UPDATE

1. ITAA WARNS AGAINST INTERNET REGULATION

In testimony to the House Small Business Committee and in a letter to the Federal Trade Commission (FTC) Chairman, ITAA has warned against efforts to increase Federal Internet regulation. ITAA President Harris N. Miller told a Congressional panel that: "The opportunity of small business to compete in electronic commerce could be threatened by ill considered policies…small businesses should not have to hire a lawyer to review each change they make to a consumer-oriented web site."

In his Small Business Committee testimony, Miller also noted the need for small businesses to have access to broadband technology in order to compete effectively in e-commerce. "We should be skeptical of the claim made by some large telecommunications incumbents that the pro-competitive regulatory requirements contained in the Telecommunications Act of 1996 have deterred them from deploying broadband services necessary to provide high-speed access to the Internet and other information services. The real reason for the incumbent local carriers' failure to deploy advanced telecommunications services is that, in the absence of competition, they have no incentive to do so. Small businesses have a very large stake in the creation of a more competitive telecommunications marketplace. Only through competition will small businesses be able to access many of the telecommunications resources that larger businesses enjoy. And only through competition will carriers have the necessary incentives to make advanced telecommunications services broadly available."

In a May 7, 1999 letter to FTC Chairman Robert Pitofsky, Miller had cautioned the Commission on following through with publicly reported plans to create a new office for monitoring Electronic Commerce within the Commission. Although noting few details had been made available on the functions and responsibilities of the proposed new entity, ITAA argued that it would create a new layer of bureaucracy aimed at regulating burgeoning e-commerce transactions.

Miller noted that the FTC has already demonstrated that it has the authority and resources to address Internet consumer issues, such as spam, deceptive marketing, privacy and trademark violation. "Congress should first have the opportunity to carefully review the Federal Trade Commission's Internet proposal," said Miller. "The FTC has already demonstrated, in a variety of enforcement cases, that it has both the authority and the resources to address Internet-related consumer issues. Whatever good intentions this proposal might have, establishing a special FTC Internet bureaucracy is the wrong signal to send to foreign governments about Internet regulation."

Responding to the ITAA letter, Chairman Pitofsky denied that the FTC was considering the establishment of an 'E-Commerce Enforcement Bureau' but noted that the FTC had begun a new project to examine online advertising . Pitofsky wrote: "The FTC already has the authority and resources to address Internet consumer protection issues. In fact, our efforts to do just that is what has perhaps been misconstrued in the press as the creation of a new E-Commerce Enforcement Bureau."

ITAA also participated in a FTC-sponsored Electronic Commerce workshop on May 14th and submitted comments to the Commission in previous forums on its role in regulating E-Commerce. At the workshop, and in its filed comments, ITAA noted that one of Internet shopping's advantages is the opportunity for collaborative communications, in which consumers share information online about products and services. Shoppers reading other shoppers online comments is an effective new means to empower consumers with information. Consumers are using the Internet to access far more product and service information than was previously available to them.

Comments are available on the ITAA website at: itaa.org/isec/archive/pr19990326.htm and http://www.itaa.org/isec/archive/p974102.htm.

2. ITAA HAILS INDUSTRY SELF REGULATION OF ONLINE PRIVACY

The Information Technology Association of America (ITAA) applauded the results of a survey confirming the successful efforts of the high-tech industry to voluntarily post privacy policies on the Web, without the imposition of burdensome regulations by government. ITAA said that release of the Georgetown University privacy study, which revealed a one-year 370% rise in percentage of web sites offering privacy postings, signifies what the association believed all along: industry self regulation works in this consumer-driven medium.

The Georgetown study, conducted under the direction of Prof. Mary Culnan, showed that 66% of all Web sites have posted privacy policies, up from 14% a year ago, and that 94% of the top 100 sites have enforceable privacy policies. ITAA hailed the good news, while emphasizing the need to educate smaller companies on consumer concerns and the benefits of self-regulation.

"These Web sweep results demonstrate that our industry has responded in 'Internet time' to the challenge of establishing credible self-regulation for on-line privacy," commented ITAA President Harris N. Miller. "Internet companies understand that on-line consumers expect their personally identifiable information to be treated with care."

"Were a government agency charged with regulating online privacy, heavy handed regulation could choke off the dynamism and innovation of thousands of smaller and emerging companies doing business on the Internet. The success of industry self-regulation demonstrates that new government regulation is not necessary."

ITAA is a founding member the Online Privacy Alliance, a diverse group of corporations and associations who have come together to introduce and promote business-wide actions that create an environment of trust and foster the protection of individuals' privacy online. (For more information see http://www.privacyalliance.org)

3. CONGRESSIONAL ROUND-UP - BROADBAND & E-COMMERCE LEGISLATION

The past month was marked by the introduction of a number of significant legislative proposals potentially impacting on telecommunication competition and Electronic Commerce.

BLILEY DIGITAL SIGNATURE BILL
House Commerce Committee Chairman Thomas J. Bliley Jr. (R., Va.) has introduced legislation encouraging consumers and businesses to use digital signatures for online business transactions. His Electronic Signatures in Global and National Commerce Act (HR 1724) would provide for the acceptance of electronic signatures and records in interstate commerce conducted over the Internet. It would direct the National Telecommunications and Information Administration to promote the bill's core principles overseas and permit digital signatures and records to be accepted by the securities industries.

According to Chairman Bliley the measure aims to remove many of the "legal uncertainties" surrounding electronic signatures. Cosponsors include Reps. Tom Davis (R., VA.), Michael Oxley (R., OH), and W.J. (Billy) Tauzin (R., LA.), chairman of the Commerce Committee's telecom subcommittee. ITAA President Harris N. Miller will testify at a May 27 Senate Commerce Committee hearing in favor of a similar bill previously introduced by Sen. Spencer Abraham (R. MI).

McCAIN INTERNET SERVICES BILL
Legislation introduced by Senate Commerce Committee Chairman John McCain (R. AZ) would reduce the FCC's authority to require that incumbent telephone companies meet competitive requirements. The Internet Regulatory Freedom Act of 1999 (S 1043) would eliminate regulations that Sen. McCain believes are hindering deployment of the "advanced data networks necessary to give more Americans access to high-speed Internet service at a cheaper price and with a greater array of service possibilities." In 1996 Sen. McCain was the only Republican Senator to vote against the Telecommunications Act.

The McCain proposal would free incumbent local exchange carriers (ILECs) from having to selling their "unbundled network elements" for Internet services to competitors. It also would remove the FCC's authority with respect to "the imposition of wholesale discount obligations on [ILECs] bulk offerings of advanced services to providers of Internet services or telecom carriers."

BROWNBACK BROADBAND INTERNET RELIEF REGULATORY ACT
Sen. Sam Brownback (R., KS) introduced the Broadband Internet Regulatory Relief Act of 1999 (S. 877) along with Sen. Don Nickles (R. OK) and Sen. Larry Craig (R. ID). Like the McCain bill it seeks to speed up the deployment of broadband networks by freeing incumbent telephone companies from complying with the pro-competitive requirements of the Telecommunications Act of 1996. The bill would free the ILECs from having to comply with the competitive safeguards of Sec. 251 when providing broadband digital subscriber line service.

The key provision of the bill provides that incumbent local exchange carriers (ILEC, ie, the phone company) will not have to sell or make available their broadband access services to their competitors, as would be required under Section 251 of the Telecommunications Act of 1996 if they make 70% of their loops ready to support broadband access.

GOODLATTE AND BOUCHER HIGH SPEED SERVICES PROPOSALS
Similar legislation introduced by Reps. Bob Goodlatte (R., VA) and Rick Boucher (D., VA.) incorporates the broadband provisions referring separate, but similar, broadband bills to the Judiciary and Commerce Committees. They opted to do so because it would give both committees the ability to weigh in on the issues.

Rep. Goodlatte, a member of the Judiciary Committee, wanted his committee to have a more active role in shaping broadband legislation. Rep. Henry Hyde (R., Il), the Judiciary Committee Chairman, has agreed to schedule hearings on the bill. Rep. Boucher, who is a member of both the Judiciary and Commerce Committees, said Commerce also plans to review the legislation.

Reps. Goodlatte and Boucher said their bills, the Internet Freedom Act (HR 1686) and the Internet Growth and Development Act (HR 1685), respectively, intend to reduce the burden of competitive safeguards on incumbent local telephone companies in order to end FCC regulations that are "inhibiting the development and rollout of broadband services" in non-urban and rural areas. The legislation also seeks to ensure consumer choice for broadband services through "open competition," according to the lawmakers.

Their legislation, like the others, would ease some of the regulatory restrictions on the local phone companies' provision of long distance data services. Like the other bills, the assumption is that competitive requirements are keeping incumbent phone companies from offering high-speed services.

Still more proposed broadband legislation is expected soon from Sen. Conrad Burns (R., Mont.), chairman of the Commerce Committee's communications subcommittee, and Rep. W.J. (Billy) Tauzin (R., La.), chairman of the House telecommunications, trade, and consumer protection subcommittee.

4. ITAA COMMENTS ON U.S. - E.U. SAFE HARBOR PRIVACY PRINCIPLES

ITAA offered support for the ongoing negotiations between the U.S. and the European Commission on Safe Harbor Privacy Principles in a letter to Ambassador David Aaron.

"While it's difficult to predict how the principles might shape up in the next few weeks, overall, we believe the Department of Commerce is pushing the principles in the right direction," said ITAA President Harris Miller. He added that the next round of negotiations is critical for establishing successful principles.

"The principles go a long way in bridging the different approaches to data protection in the U.S. and Europe," Miller continued. Last October the E.U. directive on the protection of personal data took effect in 15 European countries. The directive would prevent the trans- border flow of data to countries outside the E.U. that do not provide "adequate" privacy protection. The U.S. and E.U. are now negotiating a set of privacy principles to which U.S. companies could voluntarily adhere in order to be granted safe harbor.

ITAA called on the Department of Commerce to be mindful of the precedent the Safe Harbor Principles may set for any potential domestic regulation on privacy. "There are few cross-industry data protection benchmarks out there, like the OECD Guidelines," said Miller, "This could very well be another benchmark, so it is important to get it right."

ITAA registered concern about the language of several of the principles, including one that covers an individual's right to access information collected on them. "Access is provided to maintain the quality and accuracy of data," the ITAA comments read. The comments went on to state that the principles should provide for reasonable access rather than absolute access.

ITAA also recommended that if negotiations between the U.S. and the E.U. are successful, U.S. companies should be given an adequate grace period to comply with the principles and implement them. "U.S. companies should not be given less time to adhere to the Principles than European companies would be given to abide by the directive," said Miller.

The U.S. and the European Commission hope to finalize the Safe Harbor Principles at the U.S.-E.U. Summit on June 21st. ITAA's comments can be found online at http://www.itaa.org/safeharbor.htm.

5. WHITE PAPER EXPLORES POTENTIAL IMPACT OF INTERNET RECIPROCAL COMPENSATION

With over 84 million Internet users in 1998, the potential revenue for reciprocal compensation for Internet traffic is over $12 billion, as found in The Strategis Group's latest industry white paper, Reciprocal Compensation for Internet Traffic: An Economic and Strategic View.

In the first in a series of telecom industry white papers, this document examines the implications of recent FCC and state regulations regarding the classification of Internet traffic as local or long distance. Competitive Local Exchange Carriers (CLECs), Internet Service Providers (ISPs), and Enhanced Service Providers (ESPs) clearly have a financial stake in preserving Internet call classification as local service. Long hold times for customers, which are inherent to Internet dial-up traffic, drive the potential reciprocal compensation revenues to a possible size of $12.7 billion, against projected 1999 payments of only $1 billion. If the FCC sides with the states in classifying Internet calls as local service, this classification would then apply to all 50 states, practically doubling the number of states where Internet calls are considered local and subject to reciprocal compensation. This would likely result in a much higher share of the $12.7 billion potential revenues actually collected by ISPs and CLECs.

Reciprocal Compensation for Internet Traffic: An Economic and Strategic View provides identification, sizing, and description of the likely markets for Internet reciprocal compensation, as well as current and potential regulatory issues surrounding the payment of interconnection fees for the Internet industry.

The study, which costs $495, is available for ITAA members. Contact Brice David at 202/530-7500 (phone), 202/530-7550 (fax), or bdavid@strategisgroup.com (e-mail).

6. E-COMMERCE ENHANCES 'E-SERVICE,' SAY CFOs- SURVEY POINTS OUT BENEFITS OF WEB GO BEYOND MARKETING ALONE

Electronic commerce not only allows firms to reach the broadest possible audience, it also enables them to make big strides in customer service and cost efficiencies, according to a recent nationwide poll of chief financial officers (CFOs). While one in three CFOs (37 percent) said they look to e-commerce to expand their client base, one-fifth believe that value-added service to customers will be the primary benefit over the next five years. Seventeen percent cited reduced operational costs as the chief advantage going forward.

The survey was developed by RHI Management Resources, North America's largest consulting firm providing senior-level accounting and finance professionals on a project basis - Robert Half International. (http://www.rhimr.com.) It was conducted by an independent research firm and includes responses from 1,400 CFOs from a stratified random sample of companies with more than 20 employees.

CFOs were asked, "What is the greatest benefit to be derived from offering e-commerce in your business over the next five years?" Their responses:

• A means of reaching a broader range of prospective clients 37%
• A value-added benefit to existing customers 21%
• Reduced operational costs 17%
• Faster service/product delivery 13%
• Other 2%
• Don't know/no answer 10%

"While most CFOs already regard the Internet as a tool for expanding a company's marketing reach, they also recognize the medium's tremendous potential for improving customer service," said Cecil Gregg, executive director of RHI Management Resources. "Electronic commerce enables firms to meet ever-increasing client expectations for easier access to product information, accelerated ordering and fulfillment, and more competitive pricing." Gregg added, "Web-based business-to-business transactions can also result in significant savings, particularly within a company's purchasing department. Handling orders via e-commerce can promote better inventory control and enhanced cash flow."

7. ANOTHER NET APPLICATION: FEC MULLS MATCHING FOR NET CAMPAIGN GIFTS A CNET story by Courtney Macavinta

URL: http://www.news.com/News/Item/0,4,36805,00.html

Presidential hopefuls are welcome to take campaign contributions via the Net, but there is just one problem: the government won't match payments made with plastic.

But that rule could be on the path to revision. Spurred by former New Jersey senator and Democratic White House contender Bill Bradley, the Federal Elections Commission (FEC) is tomorrow expected to consider a groundbreaking proposal that the rule be overhauled to accommodate the recent burst in cyber democracy.

Individuals can donate up to $1,000 to presidential candidates, and under the federal Match Act, the government meets those contributions by up to $250 per person. Due to fraud concerns, however, there are strict rules regarding matching that narrow the forms of acceptable payment to signed checks and money orders.

But on the Net, credit cards are the common currency. About 55 percent of voting-age Americans have Net access, according to Dataquest, and although it is easy for candidates to collect money online, for now they are giving up the valuable public matching dollars.

The FEC's pending decision underscores the myriad ways the Net stands to affect the election process. Already campaign contribution records are online, and some states are taking steps to allow citizens to cast their votes online.

Bradley, who has pledged not to take political action committee money and is raising funds via his Web site, is one candidate who obviously doesn't want to miss out on the lucrative matching funds. So Bradley is out to change the system. He asked the FEC to amend the rule, which will then have to be approved by Congress and signed by the president.

To curb fraud, Bradley's fundraising committee has proposed to submit hard copies of the electronic donation forms to the FEC and will use a processing vendor that will compare contributor information to the name and address on the credit card account. Online contributors also will have to attest that they are not donating on behalf of another party, labor organization, corporation, or bank.

"We have all these precautions to ensure that the person is a person and to distinguish who they are," said FEC spokesman Ian Stirton. In a draft opinion by FEC staff, the scales tilt toward Bradley's request and call for a revision of the Match Act to accept credit cards.

"The commission notes the rising popularity of the Net, both as a form of information gathering and as a vehicle for financial transactions," the draft opinion states.

"The commission observes the numerous safeguards built into your proposal," it continues. "The consistent and full implementation of all these procedures would offer substantial assurance that your proposal to solicit and accept contributions through the Internet, by submission of an electronic form and use of a credit card, would comply with the Match Act." If the rule is changed it will be retroactive to affect contributions to presidential candidates made after January 1, 1999. The move would no doubt bolster Bradley's budget; according to the FEC's March tallies, he has raised $4 million, compared with Vice President Al Gore's $8.8 million fund and Republican front-runner Texas Gov. George W. Bush's $7.5 million.

Maybe that's why the Net's role in the 2000 election is not lost on Bradley.

"I don't know if it's going to be 2000 or 2004, but one presidential election very soon is going to be decided because somebody understood how important the Internet was, respected the people who were on it, and wanted them to be a part of something new and different that made America a better place," Bradley states on his site.

8. ITAA E-COMMERCE PROGRAMS UPDATE

• Virginia Congressman Tom Davis to Address First ITAA-GMU E-Commerce Breakfast Series
  On May 26, 1999 at George Mason University's Arlington Campus, ITAA and George Mason University (GMU) launched an E-Commerce breakfast series with a presentation by Congressman Tom Davis. Davis spoke on the "Information Technology Agenda of the 106th Congress."

  The new series of breakfast meetings is focused entirely on Electronic Commerce, and will be held the last Wednesday of each month. The series will feature speakers from the legal community, government and the business sector and attempt to broaden cooperation between the players in issues related to E-Commerce. Upcoming speakers include Jonathan Band, Morrison & Foerster, on The Great Database Debate, on June 23 and Scott Charney, Chief, Computer Crimes and IP Section, DOJ, An Overview of the Activities of the Section, on July 28. Cost of the breakfast series is $15.

• Bob Davis, CEO of Lycos, to Deliver Keynote at STRATEGIC SOLUTIONS '99.
  Robert J. Davis, president and chief executive officer of Lycos, Inc., will be a keynote speaker at ITAA's Strategic Solutions '99. Davis has helped Lycos to rapidly evolve from an Internet search engine to one of the most powerful Internet hubs and Web media companies worldwide. In less than four years, Davis has led Lycos from a company with $2 million in venture capital to a multi-billion dollar business. Davis will share his vision for where the Internet will take American business. For programmatic and registration information on Strategic Solutions '99, visit http://www.itaa.org/events/ssindex.htm.

• ITAA Member Benefit: Electronic Commerce Vendor Directory
  ITAA is now listing over 100 member companies in it's on-line Electronic Commerce Vendor Directory (http://www.itaa.org/ecomm/resources/vendor.cfm). If your company is not listed, it should be. The directory will be printed in a hard copy version in the very near future. Listing applications and sponsorship opportunities are still available.

• State and Local E-Commerce Opportunities Offered
  ITAA's seat on The National E-Commerce Coordinating Council has opened the door for member participation on a number of electronic commerce working groups. The Council is comprised of representatives from NASIRE (State CIOs), NASPO (State Purchasing Officers) and NASC (State Comptrollers). The focus of the Council is to promote and facilitate the implementation of electronic commerce solutions in state government in a collaborative environment. Joining the working groups is an opportunity to work side by side with state and local government customers on projects of mutual benefit aimed at problem solving, sharing experiences and promoting e-commerce solutions in government.