Building Consumer Trust and Confidence in
the Internet Age:
An Internet Alliance White
Paper
April 2000
Executive Summary
The sector of the American economy represented by the consumer
Internet has vast potential for continued growth. Indeed, it has
been a major factor in the sustained economic expansion of the
decade just ended. However, the consumer Internet is at a critical
stage, and temptation is mounting to regulate it in haste, to levy
new taxes on those who use it or to otherwise impose new conditions
adversely affecting consumers.
The Internet Alliance has enhanced its agenda and perspective
by building consumer trust and confidence not only by looking at
issues in political buckets, but also by seeing the overall
interconnectedness of these issues. The issues surrounding the
consumer Internet are not insular. Instead, they must be addressed
as a totality, in order to bring about a true understanding of the
larger picture. In examining the public policy issues related to
consumer trust and confidence, several themes recur: avoiding the
unintended consequences of government action; strengthening
reliability and predictability of consumers' Internet experience;
preserving and strengthening consumer choice; promoting consumer
education on the Internet; looking first to technological solutions
rather than to regulation to solve societal concerns; and avoiding
gross mischaracterizations and fear-based attacks on the Internet as
a medium. The Internet Alliance has identified key policy principles
related to each of these topics. They include:
- Policymakers must carefully weigh the complete range of
available information before acting on Internet issues, in order
to avoid harmful unintended consequences.
- Consumer Internet policy should avoid creating an
unpredictable marketplace environment, one where consumers face a
"hit-or-miss" electronic shopping experience.
- Policies adopted for the Internet should reflect the
importance of consumer choice in the marketplace.
- Policies addressing the consumer Internet must reflect the
need to help educate consumers about use of the new medium.
- Technological tools can be and frequently are more effective
than government regulations at dealing with social issues related
to the Internet.
- Consumer Internet policy must not be rooted in alarmist
depictions of the Internet, and policymakers should strive not to
let the abusive actions of a few websites obscure the unquestioned
utility and benefits of the new medium.
For 15 years, the Internet Alliance has been the only trade
association to address online issues from a consumer company
perspective. Through public policy, advocacy, consumer outreach and
strategic alliances, the IA is building the trust and confidence
necessary for the Internet to become the global mass-market medium
of this century. Over the course of the next several months, the
Internet Alliance will publish a series of white papers on various
issues related to the consumer Internet. Papers will be published
every two to three months. Topics will include Fraud, Law
Enforcement and Security on the Internet; Children on the Internet;
Privacy in Internet Transactions; and Internet Taxation. Additional
topics will be addressed as well, as new subjects affecting the
consumer Internet emerge. The Internet Alliance's team of experts is
constantly monitoring such issues, and is prepared to react quickly
to new issues as they arise.
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Introduction
Coming as it did at the end of the last millennium, the sudden
and exponential growth of the consumer Internet over the past ten
years will undoubtedly be seen as a portent of things to come in the
new "Internet Age." Less than a decade after the development of the
first Web browser, billions of dollars were spent online in 1999.
The range of transactions was broad indeed - from books and records
to food and wine, from computers and exercise equipment to
automobiles and houses, from pay-to-view webcasts and news alert
subscriptions to online banking and computer training. In short,
practically anything that can be bought and sold is available on the
Internet in one form or another.
The rise of the consumer Internet has important implications. For
consumers, the new medium has brought a range of new options,
accompanied by some new and different worries. For business, the
Internet has brought new methods of reaching customers, as well as
new competition from unfamiliar places. For the U.S. government,
online commercial activity has created a vast new economic sector,
an engine of productivity that generates many familiar challenges
and a few new ones.
By any reasonable measure, however, the Internet has been a
positive development for consumers, business and government. By most
accounts, the rise of the Internet has been a key factor in the
sustained economic growth of 1990s America, helping to put record
numbers of Americans to work and generating productivity increases
that have in turn helped buy down federal and state budget deficits,
tame inflation, create the circumstances for a sustained period of
economic growth, and push consumer interest rates down to levels
unknown for decades.
Of course, the Internet is a young medium, and while it will
continue to flourish for years to come, it remains unclear just how
and where it will grow. Because it is an unfamiliar environment to
many, one that lacks many of the traditional signposts for gauging
reliability, the continued growth of the consumer Internet is
largely dependent on consumer confidence in the medium. Can
consumers trust unfamiliar, or for that matter even familiar,
Internet vendors? Will their credit card numbers be abused? Will
their privacy be invaded? Will products arrive in working order?
Will returns be accepted? Will hidden charges pile up? And so on.
This is not, of course, the first time that new technology has
changed the way business is done. Television, the telephone, direct
marketing technologies and the photocopier are all examples of
technology developments that triggered transformations in retail
sales. Each new development has framed particular challenges for the
businesses, consumers and government alike, and, in turn, each has
triggered a corresponding evolution in business norms. Thus has the
framework of consumer confidence developed and grown over the years.
Just as the deployment of these other technologies in the
marketplace has led to rapid transformation and subsequent
rethinking of consumer trust and confidence issues, the Internet
revolution has reached the stage where serious thought must be given
to the mechanisms that will help build the consumer confidence so
vital to the medium's continued growth.
It is imperative that whatever policy reforms result from this
process be well considered. Because the Internet is so young, and
because consumers approach it with a mixture of wonder and
apprehension, missteps now could be devastating to the long-term
growth of the medium.
What are the essential elements of consumer trust and confidence?
And what must be done to promote these critical factors in these
rapid growth days of the consumer Internet?
These are the questions at the heart of this Internet Alliance
white paper, the first in a series of white papers presenting
information and analysis on the issues at stake for the Internet's
continued development as a means of commerce.
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A Refocused Agenda
The Internet Alliance embarks on this series of white papers
after a lengthy period of examination and discussion about emerging
issues and the role of the IA. In the past, the Internet Alliance
has focused its energies on seven core issues: Consumer Privacy;
Unwanted Email; Content Regulation; Internet Taxation; Internet
Security, Fraud and Law Enforcement; Children's Marketing Online;
and Consumer Commerce and Privacy-Promoting Encryption.
With the rapid transformation of the consumer Internet has come
an understanding that the issues surrounding it should not and, in
fact, cannot be viewed as discrete and insular. Hence, the refined
agenda dispenses with the assignment of issues to political
"buckets," and instead looks to the inherent interconnectedness of
all the issues. The new agenda is built around the certain knowledge
that the most important factor in the success of the Internet is the
degree of confidence that consumers have in this new medium.
At the same time the Internet Alliance is formulating its new
policy perspective, it is organizing important new councils and task
forces that will be crucial to a positive and beneficial consumer
experience on the Internet.
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Many Perspectives on Consumer Trust
The concept of consumer trust and confidence can be addressed
from a number of different, sometimes overlapping perspectives. In a
legal sense, for example, the phrase "consumer protection"
arises in the context of such laws as the Federal Trade Act. Though
the legal nuances of consumer protection are important in the
context of the Internet (and will be addressed in subsequent white
papers), they are not of primary importance here. Instead, the aim
of this introductory document is to address the conceptual
aspects of consumer trust and confidence, the broad issues most
businesspeople and consumers are concerned with when they think of
electronic commerce.
In the context of the Internet, consumer confidence and trust
encompass a potentially enormous array of concerns. The issues range
from privacy and fraud to taxation and protection of children on the
Internet. To the extent that each of these issues constitutes its
own microcosm of policy issues, each deserves its own distinct and
thorough analysis. The Alliance has chosen to focus its first
detailed White Papers on four of the aspects of consumer trust and
confidence: Fraud, Law Enforcement and Security; Children as
Internet Users; Privacy; and Internet Taxation. We address these
issues not because they stand alone as distinctly important
categories, but because they are actually tied together by each of
the themes below. Based on feedback from policymakers and
marketplace developers, we may of course shift the themes or focus
of our series as circumstances warrant.
In examining these elements of consumer confidence and trust,
certain themes recur: the unintended consequences of government
action, predictability for the consumer, consumer choice, consumer
education, the role of technological solutions for societal
concerns, and the unfortunate tendency to stigmatize the Internet in
response to the abuses of a few irresponsible actors.
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Theme One: Unintended Consequences of
Government Action
The first and potentially most important issue is one common to
any area of lawmaking and regulation, but one particularly relevant
where new technologies are concerned: the unintended consequences of
government action. Every legislative or regulatory decision is based
on forecasts of likely outcomes, and a weighing of probable
advantages against disadvantages. But no human can hope to have the
absolute knowledge and wisdom necessary to anticipate every
significant consequence of a decision or action. Sometimes these
unintended consequences can be benign, even advantageous, but other
times they can be harmful.
In the case of the Internet, it is vital to minimize unintended
consequences. In aspects of the economy grounded in many years of
social, commercial and legal tradition, unintended consequences may
be less frequent and severe because actions can be compared against
previous choices and their outcomes. With the Internet, though, each
action is groundbreaking. Additionally, technology, business models,
and markets change so rapidly that what may be a reasonable decision
today requires rethinking and revision in three months. In this new
world, policymakers must not reflexively grasp for old solutions or
rush to judgment without sufficient information; good intentions
will not prevent market distortions, and virtuous goals cannot
restore lost functionality or consumer choices. The policymakers'
mission, therefore, must be to analyze Internet situations
thoroughly before acting, so that sound decisions can be made the
first time.
- Internet Alliance Policy
Principle: Policymakers must carefully weigh the complete
range of information before acting on Internet issues, to avoid
potentially harmful unintended consequences.
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Theme Two: Predictability in the Internet
Marketplace
The next important theme is predictability. In any consumer
market, one of the most important considerations is ensuring that
the consumer is empowered to get what he or she expects when making
a consumer choice. An unpredictable environment where consumers are
forced to guess how things work will inevitably drive them away.
Inconsistent government requirements can lead to unclear
environments. On the Internet, geo-political borders are essentially
invisible and irrelevant to consumers, and they are much more porous
than in the world of bricks and mortar. As a result, inconsistent
local, state, national and regional-national regulations that rely
on these traditional boundaries will make far less sense to
consumers on the Internet. Indeed, they will make commerce on the
Internet more, if not completely, unpredictable, with the eventual
result that disempowered, dissatisfied consumers will shy away from
the medium, threatening its viability at this early stage in its
development.
- Internet Alliance Policy Principle: Consumer Internet
policy should seek to support a consistent marketplace, so that
consumers will not face a seemingly random e-commerce
experience.
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Theme Three: Consumer
Choice
The fundamental characteristic of the Internet is the ability to
tailor the experience to each individual's needs and wants. Choice
is the essence of the new medium. As a result, the promise of the
consumer Internet rests squarely on the idea that there are unique
benefits to the ability of interactive technology to allow users to
tailor their online experience to their own needs and desires in
ways never before possible. Thus consumers expect and demand more
and more options, driving the competition that fuels the
marketplace. By way of analogy, the freedom consumers have to choose
offline from among a range of bricks-and-mortar stores, indeed, to
select various means by which they reach those stores, is highly
valued by consumers. Yet, it does not compare with the level of
choice the Internet offers, a circumstance already taken for granted
by consumers. Since different users have different preferences,
valuing time, cost, service, ease of use, and a range of other
factors in different ways, choices that represent this diversity of
needs are even more necessary on the Internet than they are in the
real world.
- Internet Alliance Policy Principle: Policy on the
Internet should reflect the importance of consumer choice in the
marketplace.
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Theme Four: Education
Directly related to the concept of choice is education. The
Internet is truly unique because it is technology that empowers the
user to define the terms of the experience. This notion of
empowerment leads to greater control for the user and also a more
enhanced experience. Therefore, the rise of the consumer Internet
allows us to look at the concept of education differently than
before. No longer does education mean telling someone how to act,
but instead, it means pointing out new and existing resources that
empower the consumer. As economies and political systems make their
transition to the digital marketplace, it is critical that industry,
government, and even consumers themselves craft appropriate roles in
furthering this notion of education in the context of this new
medium.
- Internet Alliance Policy Principle: Policy on the
consumer Internet must reflect the new conception of education as
a key component of consumer empowerment in the new medium.
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Theme Five: Technology As a Solution to
Online Social Concerns
A number of current concerns regarding the Internet include
social problems, such as privacy and children's access to adult
material. Calls for government regulation of Internet access
providers and site operators as a means to address such societal
concerns often overlook an important reality about the medium:
technological solutions are by nature faster and more effective than
government regulation.
In addressing these types of concerns, regulations suffer from
several indisputable drawbacks. First, they are inherently
territorial. One state cannot regulate web activity in another, the
same way that a country cannot regulate activity outside its
borders. Second, they are inherently slow-moving and therefore
unable to adjust quickly to changing circumstances. Governments, by
design, cannot move quickly, particularly if they are upheld by
democratic institutions, adhering to principles such as due process.
Finally, tools to address problems cannot be narrowly tailored or
customized using government regulation. Quite the contrary; they
impose majority and "one-size-fits-all" requirements.
By contrast, technological tools are far more effective. They can
be instantaneously global, accessible to users literally
overnight. They can be instantly updated and modified to meet
changing needs and circumstances - something that the market forces
typically demand. Finally, technological tools are highly
customizable. Users can create and specify individualized features
to address their particular needs.
- Internet Alliance Policy Principle: Technological tools
can be and frequently are more effective than government
regulations at dealing with social issues related to the
Internet.
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Theme Six: Fear-based Mischaracterizations
of the Internet
As with every new communications medium over the years, the
Internet had barely begun to attract significant use by the public
at large before concerns about pornography, hate speech, political
dissent and other content issues were raised. Unfortunately, some
activists, while well intentioned, spoke in terms suggesting the
Internet's unparalleled empowerment of individual choice and
communication would be employed primarily to spread undesirable
content, thereby hastening the demise of civilized society. Others
have participated and continue to participate in positive
conversations between industry and policymakers aimed at crafting
policies that balance the vast beneficial uses of the Internet
against potential abuses, and at fostering business practices and
technological tools that respect freedom of choice while protecting
those who object. These are the same kinds of necessary compromises
that have been reached in offline media. This process has only just
begun in the Internet space, but it will proceed with greater speed,
and succeed in delivering greater actual benefits, if we seek
balance while avoiding the inflamed rhetoric that stampedes us
toward unsustainable and unworkable "solutions." During the coming
decades, the Internet will be the means of accomplishing far more
good in the world than any damage it causes. Losing this perspective
is a sure way of squandering our time-dependent opportunities to
work together in pursuit of common values.
- Internet Alliance Policy Principle: Consumer Internet
policy must not be rooted in inflamed characterizations of the
Internet.
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The Substantive Issue
Context
Next, having identified concepts important for judging policy
responses, it will be useful to survey the landscape of consumer
trust and confidence concerns according to broad substantive
categories. The white paper series focuses first on four general
topic areas under consumer trust and confidence: Fraud, Law
Enforcement and Security; Children as Internet Users; Privacy; and
Internet Taxation. Each is addressed briefly here, but a more
thorough discussion of each topic will be reserved for future white
papers, to be published every two to three months over the course of
2000. These papers will more thoroughly examine their subjects in
the light of the themes that we have identified.
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Fraud, Law Enforcement and Security on the
Internet
The first major topic area is Fraud, Law Enforcement and
Security. Though the Internet provides a wealth of opportunities and
resources for consumers and businesses, like any communications
medium it is inherently neutral, and can also be used by criminals.
Because criminal acts can be performed with unusual speed online,
and without any face-to-face or even telephone contact, it may seem
that Internet criminality is a unique animal. Instead, most acts of
fraud and other crimes are "Internet versions" of crimes with long
histories in the world of bricks and mortar. Examples may include
credit card fraud, theft of proprietary data, get-rich-quick
schemes, libel, unlawful solicitation, conspiracy, and more.
Therefore, as policymakers confront online crime, they must remember
that the fight is not with the Internet as a medium, but rather with
criminals who have imported an old crime to a new venue.
One key to solving problems of crime on the Internet is increased
familiarity on the part of law enforcement officials with existing
law and its potential applications in cyberspace. Toward that end,
the Internet Alliance's coming white paper will assess crimes that
affect Internet users. It will address the role industry can play in
helping prevent crime and prosecute criminals, and address a variety
of issues related to law enforcement and security. It will explore
the idea that the best method of dealing with most consumer online
security issues is to effectively enforce existing law. The paper
will draw on IA's leadership in bringing together representatives of
industry and law enforcement agencies in its Law Enforcement and
Security Council.
The white paper will examine security issues through the lens of
the several key themes outlined earlier, with particular attention
paid to the question of unintended consequences of government
action. Finally, the white paper will reflect on the need for
increased consumer education, so that consumers may better
understand potential consequences of choices and behaviors.
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Children on the Internet
The next white paper will examine issues related to Children on
the Internet. Plainly, some content and activities on the Internet
are appropriate for adults but not for children. The challenge is
identifying and using strategies directing children's access while
at the same time preserving for society at large the functionality
and freedom of this great new communications medium. This goal is
not advanced by campaigns to portray the Internet in general as a
danger to children.
In the future, the Internet will be the means by which today's
youth carry out job assignments, find others who share their
interests, publish their thoughts and creative works to the world,
and experience other cultures and viewpoints in ways never before
possible. These children are tomorrow's electronic consumers and
merchants, parents and educators. Imbuing them with a fear or
dislike of the Internet as a medium handicaps them economically and
culturally.
Nevertheless, it is important to develop safeguards against some
of the excesses of those who abuse the Internet, and to finds ways
to empower parents to customize their children's experiences
according to their own individual values and priorities. Important
among these are industry backed, child-focused programs such as the
Internet Alliance's Online Public Education Network (Project OPEN)
and the Internet Education Foundation's GetNetWise campaign, as well
as the development of screening and blocking software tools that
limit children's access to undesirable areas of the Internet. These
educational resources teach children and parents alike how to
navigate the Internet and how, for example, to preserve children's
personal privacy and avoid being victimized online. IA believes the
correct direction is educating parents and giving them the tools to
make effective choices. The Children's White Paper will explore the
leading industry initiatives, their goals and their impact. It will
also describe valuable research that has been undertaken to discern
the behavior and perceptions of children vis-à-vis the Internet.
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Privacy
The next white paper topic is probably the most complex in the
Internet policy arena: privacy.
From colonial times, Americans have jealously guarded their
privacy from government and neighbors alike, even as conceptions of
just what privacy is have continued to evolve. Today, there is
little doubt that the ability to control the collection and flow of
their personal data is a key concern of Internet users and
prospective users. However, as in other policy areas, the public
debate over privacy must not be one-sided. It must recognize the
essential differences between aggregate data and personally
identifiable information. It must accommodate differences in privacy
expectations among individuals. It must take into account that the
more information available to web site operators, search engines,
and marketers, the more they can help tailor the user's online
experiences in ways the user finds worthwhile.
There must be, then, a balance in the collection and use of data.
As elsewhere, an absolutist approach is neither desirable nor
workable. Industry has recognized this, and has undertaken several
initiatives aimed at inducing Internet sites to post privacy
policies and to disclose the types of information gathered, if any,
and the uses to which such information may be put (the so-called
"profiling" issue). A concern for privacy is what encouraged the
Internet Alliance, in 1996, to work jointly with the Direct
Marketing Association to jointly develop and endorse the first
Internet online privacy principles. It appears that a combination of
such initiatives, together with new software tools and consumer
education on their use, coupled with government policy changes to
prohibit the forging of email addressing and routing information,
may result in the greatest improvement for consumers.
At the same time, reports of identity and credit card number
theft are beginning to focus public attention on the security of
both commercial and government databases in which information is
archived, on server security, and on the confidentiality of data
transmissions. Some of these concerns may call for the development
of industry standard practices, or even legislation, while others
may best be addressed through technology.
Because of its resonance with voters, the issue of privacy may be
the most politically sensitive consumer confidence issue related to
the Internet. The Privacy White Paper will explore all of its
facets, in an attempt to discern what the concept of privacy needs
to look like for a thriving consumer-embraced Internet.
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Internet Taxation
The final Internet Alliance white paper will cover the topic of
Internet Taxation. The tax status of electronic transactions has
become an increasingly pressing issue as the potential scale of the
consumer Internet has become clear. A wise solution will be uniform,
fair, certain, and administratively simple. As policymakers consider
options, it is clear that one disastrous scenario would be the
development of different state-by-state Internet taxation schemes,
creating an unpredictable consumer market on the Internet, and
likely having a chilling effect. If businesses are burdened with
unpredictable tax regimes governing the Internet, the medium's
potential economic benefits to consumers could be seriously
thwarted. For their part, some state and local officials claim loss
of sales tax revenues will devastate their budgets. In fact, many
estimates of potential tax revenue lost due to electronic commerce
are seriously overstated. It is also important to balance any
potential loss in sales tax revenue with the significantly increased
benefits to the economy brought about by electronic commerce.
The Internet Alliance white paper on Internet Taxation will
address the range of issues related to taxation schemes for the
Internet.
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Conclusion
The concept of consumer confidence and trust is clearly
multi-faceted. In order for the Internet to live up to its potential
as the global mass market medium of the 21st century, policymakers
must recognize this complexity and the unique dynamics at work in
the Internet marketplace as they perform their valuable role of
public oversight. Industry must respond to consumer expectations
with improving products and services, and with business practices
that improve the online consumer experience.
Because this is a policy document, it bears repeating that
policymakers, in particular, must realize that in the infancy of an
industry, mistaken policy decisions, even if well intended, will
have ramifications that are enormously magnified with time. For the
benefit of us all - politicians, consumers, businesses, children,
adults, law enforcement - we must take the time and exercise the
wisdom to get it right the first time.
It makes far more sense for us to take a deep breath and a moment
for reflection now, in the early development of the consumer
Internet, to assess where we have been and where we might go rather
than being forced to revisit and correct our errors in five or ten
years. It is therefore vital that policy-making on questions of the
consumer Internet be driven by a reasoned and fact-based dialogue.
It is in the furtherance of constructive dialogue that the Internet
Alliance offers these White Papers. 
The Internet Alliance is the leading consumer Internet industry
association representing the industry on the state, federal and
international levels. Through public policy, advocacy, consumer
outreach and strategic alliances, IA is seeking to build the
confidence and trust necessary for the Internet to become a leading
global market medium of the 21st Century. Visit IA's Web Site at http://www.internetalliance.org/
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