1. ITAA PRAISES NEW RULES AS SPEEDING BROADBAND TECHNOLOGY - Better competitive access to incumbent facilities has been ITAA priority
2. AARON UPDATES ITAA PUBLIC POLICY CONFERENCE ON EU PRIVACY NEGOTIATIONS - "Safe Harbor" Negotiations with Europeans Continue
3. CONGRESSIONAL LEADERS SEEK FCC COOPERATION TO KEEP THE INTERNET FREE FROM LONG DISTANCE CHARGES - ITAA continues Internet advocacy on "access charges"
4. ENCRYPTION EXPORT LEGISLATION PROGRESSES - ITAA backed bill moves forward
5. NEW SURVEY OF INTERNATIONAL ELECTRONIC AND DIGITAL SIGNATURE INITIATIVES - Also New British E-commerce Legislation: Encryption and Digital Signatures Provisions, Seen as Promising
6. ITAA TO OPPOSE BELL ATLANTIC-GTE RETENTION OF INTERNET BACKBONE BUSINESS
7. ANTI-SPAMMING LEGISLATION ON THE RISE IN THE US
8. ITAA PROGRAM UPDATE

1. ITAA PRAISES NEW RULES AS SPEEDING BROADBAND TECHNOLOGY - Better competitive access to incumbent facilities has been ITAA priority

Information Technology Association of America (ITAA) President Harris N. Miller praised the Federal Communications Commission's adoption on March 18th of several measures to enable competitive providers of advanced services, such as high-speed Internet access, to deploy new technologies on a faster, more cost-effective basis to consumers.

"Consumers are the direct beneficiary of the FCC's actions. The Commission has taken a valuable step to encourage the deployment of broadband access and that means more flexible options and more affordable prices for everyone," said Miller. "ITAA believes that this is just one more example of how the FCC is using the Telecommunication Act of 1996 to promote competition and encourage investment in the advanced technology. We applaud Chairman Kennard and the other Commissioners for putting consumers first."

The experience of one ITAA member company, Covad Communications underscores the importance of the FCC's ruling. Dhruv Khanna, ITAA Information Services & Electronic Commerce Division board member and co-founder of Covad Communications told the San Francisco Chronicle: "If I can get into a central office in one month rather than six months, it helps the consumer. And if my costs are considerably reduced, I can go into central offices that I wouldn't necessarily go into and offer service in more places.''

The FCC ruling came after Covad and other competitive local exchange carriers have complained about being denied access to competitors central offices. The San Francisco Chronicle quoted Khanna, that Covad has often waited six months before gaining access to a site and has been charged up to $400,000 for locating its equipment in 10-foot by 10-foot cages. And once allowed into the office competitive companies are not given access to the entire central office and are told where they can place their equipment.

"Most of the incumbents have insisted on a separate entrance for us, a separate walled- off area and separate cage for our equipment,'' Khanna said.

The FCC's order (CC Docket No. 98-147) facilitates the ability of new competitors to access space in the incumbent's central office (collocation space). The Commission adopted rules to strengthen collocation requirements and to reduce the costs and delays associated with collocation. In particular, the Commission required incumbent local exchange carriers to make new collocation arrangements, including cageless and shared collocation, available to competing carriers. New entrants will be able to locate all equipment necessary for interconnection, whether or not such equipment has a switching function.

ITAA has actively participated in the FCC proceedings on behalf of the information technology and Internet industries. More information on ITAA's telecommunications activities can be found at . Improved collocation access has been a policy priority of ITAA's Telecommunications Committee over the past year.

"The FCC deserves great credit for eliminating the barriers that keep consumer homes and businesses locked out from the latest digital technologies." said Mark Uncapher, Vice President & Counsel of ITAA's Information Services & Electronic Commerce Division. "The elimination of unnecessary capital costs, and improved access rules mean consumers will receive access to digital services sooner and at better prices than have generally been made available by incumbent local telephone companies."

2. AARON UPDATES ITAA PUBLIC POLICY CONFERENCE ON EU PRIVACY NEGOTIATIONS - "Safe Harbor" Negotiations with Europeans Continue

David L. Aaron, Commerce Department under secretary for international trade, told ITAA's Public Policy Conference that the scope of the U.S. safe harbor proposals is limited to U.S. companies' dealings with Europe. "Safe harbor principles have been developed and are aimed at a specific situation-reassuring the Europeans that their privacy, according to their standards, would be protected in their transactions with American subscribers to the principles," he explained on March 15th.

Aaron elaborated on the Clinton administration efforts over recent months to gain U.S. private-sector backing for "safe harbor" online privacy principles, stressing that the "safe harbor" negotiations with the European Union aren't intended to establish "precedents" for changing the U.S. domestic privacy regime.

Aaron held talks on March 16th with his EU counterpart John Mogg over mutual implementation of the European Commission's data privacy directive.

At the ITAA conference Ambassador Aaron acknowledged that terms of access by users to personal data in online databases and adequate enforcement mechanisms remain the sticking points in the U.S.-EU data privacy talks. He said Europe wants individuals to have access to personal information, as well as the right to correct any mistakes in that information. U.S. industry continues to oppose the requirement, citing its high cost and other drawbacks.

The U.S. approach envisions "free access" to public records, which is not embraced by European negotiators, he added. "We have much more common ground than we do differences, but the differences have to be overcome," he acknowledged.

Because the United States does not have broad regulatory privacy protections written into law like the European Union, US industry and government officials are concerned that the directive may disrupt business between the United States and Europe. Aaron has been negotiating with EU officials on developing a safe harbor for U.S. businesses that agree to comply by certain privacy principles.

Aaron and Mogg hope to conclude discussions in time for the EU-US June summit in Germany. While there were no breakthrough at prior talks, some progress was made on one of the major sticking points: what type of access US companies must provide EU citizens to information the companies may have about individuals. However, they did not make much progress on another issue, enforcement. The EU wants to ensure there is effective third party enforcement of whatever privacy principles are agreed to. But the United States has expressed concern during all the discussions that US companies not be subject to a higher standard than European companies.

The implementation of the EU privacy directive already has impacted some non-European businesses. In one incident, American Airlines last month was told to stop transmitting information -- including meal preferences, requests for wheelchair assistance and specific hotel arrangements -- about Swedish passengers to the airline's Sabre reservation system in the United States. This was due to a new Swedish law implementing the provisions of the European Union Data Protection Directive (Directive 95/46/EC).

3. CONGRESSIONAL LEADERS SEEK FCC COOPERATION TO KEEP THE INTERNET FREE FROM LONG DISTANCE CHARGES

House Majority Leader Dick Armey and several other Republican members of Congress sent the attached letter to FCC Chairman William Kennard applauding his March 11 comments that “as long as I am chairman of the Federal Communications Commission, we will not regulate the Internet.” The letter seeks Chairman Kennard’s cooperation in codifying his pledge that the FCC will not regulate the Internet.

ITAA had actively participated in recent Federal Communications Commission (FCC) proceeding, defending dial-up Internet traffic from classification as an interstate service. A letter from ITAA's outside telecommunications counsel Jonathan Jacob Nadler of Squire, Sanders & Dempsey to FCC Chairman Kennard argued that the traffic should be considered "jurisdictionally mixed." . A copy of the ITAA letter is available at http://www.itaa.org/isec.htm.

The interstate vs. local treatment of data traffic has been a sensitive issue for the Internet and the IT industry. In the past, by arguing that Internet traffic is local (that is that a call terminates when it reaches an Internet Service Providers [ISPs]), the IT industry has avoided paying expensive per minute “access charges” that are assessed on long distance traffic. Treating DSL (digital subscriber line) and dial-up Internet access as an interstate service could put this in jeopardy. It is ITAA's position that data traffic to the Internet is “jurisdictionally mixed.” This position maintains that Internet traffic retains “local” characteristics when considering whether long distance access charges apply. The position also allows our industry to take regulatory advantage of some of the benefits of interstate status.

ITAA has argued that a particular Internet "call" cannot be readily classified as interstate or intrastate. With a traditional voice call, the subscriber and the Local Exchange Carrier (LEC) know the precise points of origination and termination. In contrast, neither the subscriber, nor the Internet Service Provider (ISP), nor the LEC, knows the geographic location of the server at which a given call to the Internet terminates. Indeed, many on-line sessions involve subscriber interaction with multiple servers, some of which are interstate and some of which are intrastate. In some cases, such as sending a "broadcast" email, the subscriber may interact with both interstate and intrastate servers simultaneously. Consequently it simply is not possible to classify a given dial-up call to the Internet (or even a portion of all dial-up calls to the Internet) as interstate or intrastate.

The FCC had concluded in late February that dial-up calls to ISPs were substantially interstate in nature, although the Commissioners denied their ruling would result in access long distance access charges.

The FCC took up the issue of Internet jurisdiction as part of their consideration of reciprocal compensation agreements between incumbent local exchange carriers and their competitors. Reciprocal compensation are payments made to carriers at the point of a call termination. Many Competitive Local Exchange Carriers have benefited from state commission rulings that state that dial-up calls to ISPs qualify as local calls. Therefore, those calls are subject to reciprocal compensation provisions in local network interconnection agreements. That has allowed CLECs to reap the benefits of reciprocal compensation fees when providing service to ISPs. (Which many CLECs pass on to ISPs.) The Regional Bell Operating Companies have contended that some CLECs and their ISP customers have been received billions of dollars in windfall profits from “gaming” reciprocal compensation system.

The full text of the Congressional letter reflects important support for ITAA's advocacy on behalf of Internet consumers:

March 18, 1999
The Honorable William E. Kennard
Chairman, Federal Communications Commission
445 12th Street, S.W.
Washington, DC 20554

Dear Chairman Kennard:

We are writing regarding the concerns voiced by many of our constituents that the FCC intends to impose per-minute access charges on Internet services.

We were pleased to learn of your recent statement, in a March 11 speech, that “as long as I am chairman of the Federal Communications Commission, we will not regulate the Internet.” As you make clear in your speech, the fact that the Internet is unregulated by the FCC has been an indispensable factor in the Internet’s development and explosive growth. As you so clearly put it: “The Internet grew so fast that regulators hardly had a chance to regulate it even if they wanted to. And that’s a good thing.”

We support these efforts, and agree with you that the Internet should remain unregulated by the FCC and, specifically, that the government should not hit Internet users with per-minute access charges. Still, we note that at least one commissioner has voiced concern that the FCC’s recent reciprocal compensation decision in fact “put in jeopardy” the longstanding rule that bars local phone companies from assessing usage-sensitive access charges on Internet service providers.

To end this uncertainty once and for all-and to stop the thousands of emails and phone calls from concerned Internet users-we are writing to ask you to work with us on legislation to clarify the 1934 Communications Act to make it clear that the FCC will not regulate the Internet or impose access charges on Internet service. Without such a clarification, there will always be a reason for Internet users to suspect that FCC regulation could be right around the corner.

We appreciate your consideration of this request, and look forward to working with you for such a clarification of the FCC’s desire not to regulate the Internet.

Sincerely,
CRIS COX
JOHN McCAIN
DICK ARMEY
PAUL COVERDELL
TOM CAMPBELL
TOM DAVIS
J.C. WATTS
LEE TERRY
DAVID DREIER
JENNIFER DUNN
BOB GOODLATTE

4. ENCRYPTION EXPORT LEGISLATION PROGRESSES - ITAA backed bill moves forward

The House Judiciary Committee's Courts and Intellectual Property subcommittee approved the Security and Freedom Through Encryption (SAFE) Act (HR 850) on March 11. The full Judiciary and International Relations Committees also must approve the bill before it goes to the House floor.

The SAFE Act was introduced on February 25 by Representatives Bob Goodlatte (R-VA) and Zoe Lofgren (D-CA) and is supported by 205 bipartisan original cosponsors .. It seeks to protect Americans' right to use the strongest possible encryption, while lifting export restrictions on U.S.-made encryption. The Information Technology Association of America (ITAA) expressed strong support for the legislation. In addition ITAA is also a member of Americans for Computer Privacy, a broad-based coalition of more than 100 companies and 40 associations advocating the lifting of current export restrictions on U.S.-made encryption support for the reintroduction of the Security and Freedom through Encryption (SAFE) Act.

The SAFE Act includes three key components. The bill ensures Americans the right to choose any level of encryption, prohibits governments from mandating back doors into computer systems, and relaxes export controls on U.S. encryption products. ITAA believes the bill serves the national interests of infrastructure protection, law enforcement, national security, robust electronic commerce, and privacy.

"Protecting consumer privacy is a key element in the continued expansion of electronic commerce. Congress is providing the leadership needed to remove encryption as a stumbling block to more rapid economic growth," said ITAA President Harris Miller.

The Clinton administration opposes the measure, which would end most limits on exporting encryption products and prohibit law enforcement agencies from imposing mandatory key escrow requirements on domestic sales of encryption products. The Clinton administration has objected that the measure's export control provisions are too lax and could jeopardize national security and public safety.

This year's legislation is essentially the same as a bill that was held off the House floor last year because Gerald Solomon (R.-NY.), who then was Rules Committee Chairman, opposed it. Solomon has retired from Congress. His successor as Rules Committee Chairman, David Drier (R. -Calif.), a co-sponsors of this year's version.

5. NEW SURVEY OF INTERNATIONAL ELECTRONIC AND DIGITAL SIGNATURE INITIATIVES - Also New British E-commerce Legislation: Encryption and Digital Signatures Provisions, Seen as Promising

The Internet Law & Policy Forum (ILPF), a global organization of Internet-centric companies with a common interest in fostering the growth of Internet electronic commerce and communications, recently released an analysis of electronic authentication initiatives in jurisdictions outside of the United States, including international efforts at the United Nations Commission on International Trade Law (UNCITRAL), the Organization for Economic Cooperation and Development (OECD), and the European Union (EU). This report complements, and in many respects builds on, the ILPF Survey of Electronic and Digital Signature Legislative Initiatives in the United States (the "ILPF US Survey").

The ILPF report notes how few non-US legislative initiatives there have been to date. This report identifies only six countries that have enacted legislation specifically relating to electronic authentication: Argentina, Germany, Italy, Malaysia, Russia, and Singapore. By contrast, according to the ILPF US Survey, 36 states have introduced or are considering legislation concerning electronic signatures, with 26 states having enacted some type of legislation.

As in the United States, however, there have been a number of official studies and proposed legislative initiatives that have not yet come to fruition. Australia, Austria, Belgium, Colombia, Denmark, Hong Kong, South Africa, South Korea, and the United Kingdom are in the process of reviewing and adopting proposed legislation. Canada, Finland, France, Ireland, Japan, the Netherlands, and New Zealand are reported to have published reports, consultative papers or policy statements on electronic authentication issues, and other countries are in the process of preparing similar reports.

It is difficult to compare national approaches to electronic authentication legislation because so few countries have conceived of the purpose of such legislation in quite the same way. Some countries, like Germany and Japan, have, to date, focused only on the technical standards for the operation of a Public Key Infrastructure ("PKI"). Others, like Singapore and Malaysia, have spanned the entire range of issues associated with the legal effect of electronic signatures, the legal framework for the operation of a PKI, and the establishment of a regulatory apparatus to oversee Certificate Authorities ("CAs"). The report mentions several international initiatives that are underway to harmonize national approaches to electronic authentication. These initiatives include the draft EU Directive on electronic authentication, the work of the UNCITRAL Experts Group in preparing Uniform Rules on electronic authentication, and a proposed international convention on electronic authentication.

The entire study is available for review

Also on March 5, the British government unveiled a draft proposal for e-commerce guidelines, intended to spur its growth and boost confidence in using e-mail and the Internet. In a notable change of direction from only two weeks earlier, the final proposal entitled "Building Confidence in Electronic Commerce" abandoned key escrow provisions that would have required encryption service providers, known as Trusted Third Parties (TTPs), to hand over secret encryption keys to the police in order to get a license.

The current proposal comes as good news to the Computing Services & Software Association (CSSA), the UK sister organization to ITAA, which had stepped up its efforts to explain to all interested parties in the UK government about the impracticality of a mandatory escrow scheme. CSSA has on numerous occasions pointed out that the imposition of such a scheme would seriously disadvantage the UK's position in the global electronic marketplace.

During a 3-week consultation period, the UK government requests industry to provide alternative ideas for what sort of criteria it should establish to grant licenses for encryption services and to access criminal communication. In a controversial move, the British Internet Service Providers Association (ISPA) on March 9 proposed that the UK government employ hackers in a central policing unit to access suspect material and to track down cybercriminals. ISPA argued that hackers would be a far better alternative to unpopular key escrow requirements.

The proposed legislation would also recognize digital signatures as legally binding, and would seek not to discriminate between traditional and electronic ways of doing business by eliminating obstacles in current law which require the use of paper.

UK Trade Secretary Stephen Byers said the new legislation, if enacted into law, would give Britain the most attractive legal framework in the world for conducting electronic commerce. The British government hopes to introduce the legislation to parliament in April with a view to the new laws being passed later in the year.

6. ITAA TO OPPOSE BELL ATLANTIC-GTE RETENTION OF INTERNET BACKBONE BUSINESS

ITAA will oppose an attempt by Bell Atlantic Corp. and GTE Corp. to have the FCC to grant them "interim relief" allowing them to retain GTE Internetworking's Internet backbone business after the companies merge. Bell Atlantic wants to keep the business despite restrictions preventing Bell companies from providing long distance (local access and transport area) services, including Internet backbone service. The decision was made at the March 18th Telecommunication Policy Committee.

In a joint filing with the FCC, Bell Atlantic and GTE addressed the thorny long distance issues raised by their proposed merger. The Telecommunications Act of 1996 freed GTE to offer in-region long distance services, but section 271 of the Act maintains a ban on the provision of long distance services by the incumbent local companies, such as Bell Atlantic, until the FCC finds they have opened their local markets to competitors. So far, none of the incumbent local companies have satisfied the pro-competition requirements.

The FCC has already concluded that the long distance restrictions on Bell companies apply not only to voice services but also to data services. This decision kept the Bells from entering the Internet backbone business. Opponents of the Bell Atlantic-GTE merger argue that Bell Atlantic should not be able to "end run" around the requirement of the Telecommunications Act of 1996 and want the companies to divest GTE's long distance voice and data operations within Bell Atlantic's local exchange territory. Opponents would challenge any decision that allows the merged company to offer long distance services before Bell Atlantic has met the competitive requirements entitling them to offer long distance..

7. ANTI-SPAMMING LEGISLATION ON THE RISE IN THE US

Anti-spamming legislation is on the rise in the US. On February 23, Virginia became the second US state to criminalize spamming, following California's lead last year. Two other states, Nevada and Washington, also have passed anti-spamming legislation permitting civil fines for law-breakers. Eighteen other states have been reported to be considering various draft anti-spamming laws.

Many spammers use false online identities and send e-mail under fake addresses. In Virginia, that will be a misdemeanor punishable by fines ranging from US $10 per message up to US $25,000 per day. But violations could rise to a felony punishable by up to five years in prison if spamming is caused by a "malicious act" and results in more than US $2,500 in damages to the victim.

The Virginian legislation also applies to all out-of-state junk mail sent through any Internet service provider based in Virginia. The reach of the law thus becomes very significant because about half of the US Internet traffic is routed through Virginia by companies such as America Online (AOL), which has more than 16 million subscribers around the country.

8. ITAA PROGRAM UPDATE

The Digital Planet: The Global Information Economy, the first global comparative study of the ICT market, provides an in-depth look at Global ICT spending and expansion in over 50 countries worldwide. Free Executive Summaries of the study are available through World Information Technology Services Alliance. Filled with important statistics, charts and information on global spending, the Digital Planet study is for all companies competing or hoping to compete on a global scale.

More information on the Digital Planet, including an order form, can be found at http://www.witsa.org/press/digplan.htm. For ITAA members, the full study is available for U.S. $300 plus shipping and handling, and $500 plus shipping and handling for non-members.

Taxation Of Cyberspace (book and CD), second edition. Compiled by Deloite & Touche LLP for ITAA, Taxation of Cyberspace contains the most comprehensive and up-to-date information on Internet taxation. It covers state, federal, and international policies and initiatives, as well as state-by-state discussion of Internet-related tax laws.

Member:$175, Non-member:$225

ITAA E-Commerce Webcasts- ITAA continues to host a series of Webcasts on topics on interest in eCommerce. The schedule can be found at ITAA 1999 eCommerce Webcast Schedule: http://www.itaa.org/ecomm/calpro/schedule.htm)

An ITAA Webcast is a multimedia presentation consisting of PowerPoint slides, pushed over the Internet (visual), and a simultaneous conference call (audio). The user requirements are access to the Internet with a reasonably current version of a popular browser and a long distance phone line. The only cost to the member participants is the cost of the phone call to the conference center. Upon registration for a Webcast, the registrant will receive instructions and password for access to both the visual and audio portions off the presentation.

Once the participant is logged on to the URL and the conference call - no further action is necessary. The Webcasts generally last for one hour: 45 minutes for the presentation and 15 minutes for Q&A and Discussion. The next ecommerce webcast will be:

4/8/99 1PM-2PM EST Webcast: Constructing Materials Supply Chain

ITAA to Unveil ITAA Finance Market Update Webcast - In late Spring the IT Services and Information Services & Electronic Commerce Divisions of ITAA will begin a series of monthly Webcasts focusing on issues affecting financial transactions in the industry. Initially, the Finance Market Update will be working with Cherry Tree & Co., an investment banking firm specializing in the IT industry, to kickoff the series.

The ITAA Finance Market Update will be a FREE service for ITAA members and will focus on a new topic each month. Industry experts will deliver insightful and timely presentations that continue to shape the future of the industry. Topics will include, but not be limited to the following:

Capital Financing Options

• Who is the Right Buyer for My IT Services Firm
• How to Create Additional Value
• Establishing a Vertical Industry Focus
• Member Best Practices and Testimonials

Sponsorship Opportunities are available for interested parties. If you would like to participate in the upcoming Webcasts as a sponsor or online attendee, please contact Nathan Ridnouer, at (703) 284-5308, nridnouer@itaa.org. or Mark Uncapher, 703-284-5344, muncapher@itaa.org.