part3

Enabling Policies
According to the government’s Ecommerce website (www.ecommerce.gov), the five primary guiding principles held by the US government with regards to this area are as follows:
• The private sector should lead.
• Governments should avoid undue restrictions on electronic commerce.
• Where governmental involvement is needed, its aim should be to support and enforce a predictable, minimalist, consistent and simple legal environment.
• Governments should recognize the unique qualities of the Internet.
• Electronic commerce over the Internet should be facilitated on a global basis.
By allowing the private sector to lead it was hoped that innovation and profit incentives would enable e-commerce to expand rapidly. The government's involvement under the Clinton/Gore principles was focused mainly on digital equality issues such as providing Internet access to schools, providing government information online, and on building consumer confidence in the Internet as a whole. A number of laws were passed that illustrate this. The Children's Online Privacy Protection Act that requires sites collecting information about minors to disclose what information they are collecting and how it will be used. The Uniform Electronic Transactions Act (UETA), provides that “contracts and records are not invalid simply because they are in an electronic format rather than on paper.” E-SIGN legislation proclaiming the legitimacy of digital signatures further promotes the legitimacy of electronic transactions. The National Institute of Standards and Technology has been working for several years to develop a Federal Public Key Infrastructure through its Computer Security Resource Center, which would hopefully increase consumer confidence in electronic transactions. These issues are not merely domestic, but extend to the international arena as well. For example, the Safe Harbor Accord between the U.S. and the European Union protects consumer information.
Prior to 2001, the Clinton Administration worked to accomplish the following goals with regards to Ecommerce:
• Increased effective consumer protection online by encouraging industry self- regulation and the aggressive prosecution of fraudulent practices and misleading advertising in the online marketplace under existing consumer protection laws.
• Successfully promoted codes of conduct developed and enforced by the private sector as the most effective way to protect privacy online. In just over a year, websites with privacy policies or information practice statements have jumped from 14% to 66%. The Administration also has supported expanded legal protection for medical records, financial records, and children’s privacy.
• Changed the Administration’s encryption policy to provide U.S. firms new opportunities to sell encryption products abroad, and bring the benefits of strong encryption to individuals and businesses using the Net around the world, while protecting the legitimate interests of public safety and national security agencies

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• Bolstered the security and reliability of the underlying telecommunications infrastructure through the President’s Critical Infrastructure Program set forth in Presidential Decision Directive 63. The Critical Infrastructure Coordination Group has developed the first version of the National Plan for Information Systems Protection aimed at making the Federal government a model of information security and building a voluntary public/private partnership to protect the information infrastructure (http://www.info- sec.com/internet/99/internet_012799a_j.shtml).
They also put fourth the following initiatives to facilitate the growth of the US Ecommerce:
• Tripled investment in Community Technology Centers from $10 million in FY99 to $32.5 million in FY00.
• Supported innovative applications of information technology to link job seekers and workers with employers to fill jobs and upgrade skills through a suite of online services called America’s Career Kit.
• Challenged the private sector to develop new business models for low-cost computers and Internet access to make universal access at home affordable for all Americans.
• Increased the number of classrooms connected to the Internet from 3 percent in 1994 to 51 percent in 1998 through the implementation of the ‘E-Rate Program’, which leverages a Universal Service Fund to provide significant capital for disadvantaged schools to narrow the digital divide. The funds are allocated to give these schools telecom services, internal connections and infrastructure as well as Internet access.
The US government attempted to demonstrate its recognition and commitment to the growth of Ecommerce through other initiatives such as:
• The Federal Communications Act of 1996
• The Electronic Commerce Working Group
• The release of ‘A Framework for Global Electronic Commerce’, a Whitehouse directive on Ecommerce
Other Enabling Factors
Historically, The US national government has always directly promoted and subsidized a large number of enabling factors in the rise of electronic commerce. It is highly doubtful that the Internet would have been created without the direct agency of the US national security apparatus. The Internet arose from a long tradition of US military investment in the development of information processing technologies (Edwards, 1996; King, Grinter and Pickering, 1997, Abbate, 1999). A great deal of this development work was done in universities, which for purposes of this discussion must be considered either governmental or quasi-governmental organizations. However, this takes nothing away from the powerful influence and contributions of private sector firms. Companies in the computer and communications industries were frequently central players in these developments, either as contractors for the government or as investors in their own right. But it is important to note that the US philosophy about letting the private sector lead belies a long-standing US tradition of creating opportunities for new technologies, new products, and new industries through its heavy investments in research and development. The most notable indirect enabling policies put fourth by the US government have been the efforts at deregulation in related industries (communications, transport, etc), the preservation of tax advantages for activities using the Internet, and investments in Telecommunications

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Deregulation
The trend toward deregulation seems likely to continue for some time, and there is an expectation that the liberalization of the markets will encourage new entrants and innovation in both products and services. Of the recently deregulated markets, the one that has the largest bearing on the diffusion of Ecommerce in the US telecommunications. The Telecommunications Act of 1996 pushed the limits of deregulation, specifying procedures whereby Local Exchange Carriers (LECs) could extend their services into long distance provision, while the International Exchange Carriers (IXCs) could enter the local loop. However, this has not yet happened to any great degree due to difficulties among the LECs in opening the local loop to real competition. However, the overall scheme of deregulation is expected to play a significant role in setting the long-term Ecommerce landscape in the US as the cost of telecom is expected to continue to drop dramatically in the next 5 years.
Ecommerce Sales Taxation
The question of taxing Ecommerce dollars is a vexing one indeed. It is currently being posed by Ecommerce tax proponents and it is this: ‘In the end, whether bought in a store or online, it is all commerce…therefore, shouldn’t the same tax rules apply? The answer to that question remains to be seen, but will have a large impact on the diffusion of Ecommerce in the US.
Currently there is no tax on state-to-state transactions; a fact which adds tremendous appeal to the option of online shopping. However, many state and local governments depend heavily on sales taxes. Indeed, due to various “tax revolts” over the past twenty-five years (often traced to California’s Proposition 13 passed in 1978), both property taxes and income taxes have been under pressure for reduction. Often, the proponents of such tax reductions publicly favor use of sales taxes or value-added taxes as more “fair” (i.e., less progressive). Yet the move to give preference to the Internet and electronic commerce in sales taxation imposes a serious risk to the abilities of state and local authorities to generate needed revenue. It seems that an unbalanced sales tax structure between electronic commerce and non-electronic commerce probably cannot be sustained indefinitely, as many states such as Ohio are pressing aggressively to change this.
A further look into this issue shows that the federal government exercises authority over most aspects of telecommunications in the US as a consequence of the “commerce clause” of the US Constitution. Under Article I, Section 8, clause 3, of the Constitution of the United States, Congress retains the power “…to regulate Commerce... among the several States...." It has never been completely clear exactly what the clause means. It is still in existence only to give more power to Congress than to the states in regulating business activities that affect more than one state. Generally, states are prohibited from restricting or burdening commerce that crosses their borders from another states. Many of the decisions under the commerce clause have dealt with taxation (e.g., when one state tries to impose higher taxes on a product made in another state), but in recent years the clause has been interpreted in a variety of different cases.
The states can set their own taxes related to income, property, sales and so forth. However, there has been a great deal of controversy in the past thirty years regarding whether a state can establish sales and other forms of tax on products and services provided by companies outside the state. The federal courts have ruled that a state may enforce collection of sales taxes only on products or services that are sold by companies that have an actual physical presence inside the state for purposes of the sale. Under this ruling, a company that lies outside a state’s boundaries, collects orders from customers inside the state, and delivers the merchandise to the customers using mail or package courier need not collect sales taxes. Thus, “mail-order” products and services are not currently taxed unless the selling company has at least one physical store operating within the state.

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This has been a very important issue in electronic commerce, because in many cases electronic commerce (especially business-to-consumer, or B2C) is similar to mail order sales. In those cases where states have attempted to tax electronic commerce sales, federal legislation blocking “taxing the Internet” have taken precedence. This gives electronic commerce the effect of a price discount compared to similar products and services delivered by non-electronic means. Companies engaged in electronic commerce argue that they need this tax advantage because varied and complicated state tax laws would deter online customers in a mode of commerce that is just getting started. However, the states (led by the National Governors Association) claim they are losing money on two fronts: the tax dollars they would have gained with taxation ability and the loss of business among bricks-and-mortar companies that are taxed.
The future of this issue remains to be seen, but as it stands it represents a key advantage to current and prospective E-merchants as they expand their businesses into the realm of the digital economy. If maintained it will certainly enable further Ecommerce growth, if repealed it will be a deal a blow to the potential of Ecommerce in the US.
Although the US does not know if the Bush administration will hold to the principles of its predecessor, take a more aggressive approach or make governmental involvement in Ecommerce less of a priority, it seems very clear however, that the importance to and potential impact of this phenomenon on the future of the US economy is unmistakable. Therefore, increased involvement by the government in the future as growth and expansion of Ecommerce occurs seems imminent. This involvement will likely come in the form of an expanded agenda on Ecommerce that will include:
• Implementation of security and encryption standards
• Taking a hard line on cybercriminals
• Bolstering of funding and support for Internet/Ebusiness oriented education in high schools and institutions of higher learning
• Regulation of content, access and quality
• Decision on taxation issues
• Intellectual property protection
• Privacy Issues
• Initiatives to foster B2B Ecommerce and to assure US global leadership in Ebusiness