Privacy, Net tax lead Congress' agenda

Washington is more eager than ever to get its arms around the Internet, and much of the work of the 107th Congress will revolve around e-commerce and other online issues.

For all the conventional hand-wringing over the perceived perils of a Congress closely divided along party lines, insiders say e-commerce-related initiatives will sidestep partisan loyalties. Thoroughly mulled over in the last Congress, online issues--including measures to regulate security, taxes, copyrights, broadband deployment and Internet telephony--are ripe for action.

The top technology priority on Capitol Hill this year is privacy. Until now, the industry has successfully staved off efforts to regulate the collection of personal information online by arguing that companies can protect citizens' privacy through voluntary measures. Now, however, grass-roots pressure is forcing lawmakers to act.

Immediately after the congressional swearing-in ceremonies Jan. 3, several familiar Internet bills--to regulate the use of personally identifiable information, to direct the Federal Trade Commission to protect privacy and to prohibit spam e-mail--were reintroduced. Dozens of members are preparing variations on privacy measures sponsored before.

Moderate regulation
Industry insiders say the hard-line "no regulation" stance voiced by many in the past will soften in an effort to minimize populist fears. Companies with a moderate stance will figure prominently in the debate.

"Hewlett-Packard (NYSE: HWP) supports a modest privacy measure that would simply mandate disclosure of a company's privacy policies," said Gary Fazzino, vice president of government and public affairs at Hewlett-Packard, in San Jose, Calif. "I think many companies would be willing to accept a disclosure and [state regulation] pre-emption bill."

The debate is headed toward determining the level of consent required to gather personal information. Consumer advocates favor requiring Web-surfing consumers to "opt in" before relinquishing personal information, while the industry favors retaining the ability to collect data unless browsers "opt out."

The matter will be taken up first in the House Committee on Energy and Commerce, where Rep. Billy Tauzin, R-La., has just taken over the chairmanship. Ken Johnson, adviser and aide to Tauzin, said the congressman will focus the privacy debate on the opt-out model.

Others on the committee are likely to press for more stringent safeguards and for recourse when safeguards fail. The ranking Democrat on the telecommunications subcommittee, Rep. Edward Markey, of Massachusetts, plans to examine the nature of disclosure notices, according to Colin Crowell, a legislative aide. Additionally, Markey will look at whether privacy rights are the same for personal information of varying sensitivity--for example, health and financial data--and whether consumers have the right to sue over privacy violations.

In the Senate, the ranking Democrat on the Commerce, Science and Transportation Committee, Sen. Ernest Hollings, of South Carolina, plans to reintroduce a bill mandating the opt-in plan.

"Certainly, Sen. Hollings does not want to be heavy-handed regulatorywise, but this measure will be good for business," said Andy Davis, a spokesman for the senator. "Good privacy is good business because it boosts consumer confidence."

Hollings faces formidable bipartisan opposition, however, from Committee Chairman John McCain, R-Ariz., and Sen. John Kerry, D-Mass., who last session co-sponsored an approach that is less distasteful to the industry.

Taxes back on the agenda
Internet taxation proposals, too, will return, but this time with enough critical mass to spur action. A three-year moratorium on state Internet taxes, passed in 1998, will expire in October. At a minimum, Congress will vote to extend the moratorium, but many members said they see this as a stopgap measure that evades the real issue of how to find an equitable means of taxing goods sold both online and offline.

What will be different in the tax debate this session will be a redoubled effort by the retail community, in alliance with state and local governments, sources said.

The IT industry speaks with several voices on the matter of Internet taxes.

"HP believes this is a great opportunity to step back and restructure the entire tax system," Fazzino said. "We do not take the philosophy of no Internet taxes now or ever. It's not realistic."

In the trade area, lawmakers are set to take up the matter of the level of computing power authorized for overseas sales. The power measures used today have long been considered antiquated, even by the Department of Defense and the Clinton administration.

"We need a system of export controls that doesn't necessarily focus on computers," said Melanie Geness, a spokeswoman for Dell Computer Corp., of Round Rock, Texas. "The current controls have made things difficult."

Telecommunications policy makers on Capitol Hill will also be heavily involved in seeking ways to more widely deploy advanced broadband services. Tauzin's Commerce Committee will spend considerable time on an effort to allow Regional Bell Operating Companies to deliver long-distance data services within their own territories before they've clinched the Federal Communications Commission's approval to provide in-region long-distance telephony.

The measure's supporters say it will bring increased competition -- hence more innovative services and competitive pricing -- to broadband delivery.