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<H2 ALIGN="right">
  <B>NOTE-framework-970706</B>
</H2>
<H1 ALIGN="center">
  W3C&nbsp;Activities Related to the US "Framework for Global Electronic Commerce"
</H1>
<P>
<B>This version:</B>
<A HREF="NOTE-framework-970706.html" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706.html">http://www.w3.org/TR/NOTE-framework-970706.html</A>
<P>
<B>Latest version:</B>
<A HREF="http://www.w3.org/pub/WWW/Policy/Documents/NOTE-framework-970706.html">http://www.w3.org/TR/NOTE-framework-970706</A>
<P>
<B>Author:</B> <A HREF="http://www.w3.org/People/Reagle">Joseph Reagle Jr.</A>,
W3C, &lt;<A HREF="mailto:/reagle@w3.org">reagle@w3.org</A>&gt;
<P>
  <HR>
<H2>
  <A NAME="Status of This Document"></A>Status of This Document
</H2>
<P>
This document is a NOTE made available by the <A HREF="http://www.w3.org/">World
Wide Web Consortium</A> (W3C) for discussion only. It places Consortium
activities in the context of the
<A HREF="http://www.iitf.nist.gov/eleccomm/ecomm.htm">Framework for Global
Electronic Commerce</A>, Washington, DC, 1 July 1997. Another note
(<A HREF="http://www.w3.org/pub/WWW/Policy/Documents/eu-conf-970711.html">W3C
Activities Related to the Bonn Declaration</A>) discusses the relation between
W3C activities and the EC Ministerial
<A HREF="http://www2.echo.lu/bonn/final.html">Bonn Declaration</A> and its
accompanying <A HREF="http://www2.echo.lu/bonn/themepaper.html">Theme
Paper</A>. The text of the
<A HREF="http://www.iitf.nist.gov/eleccomm/ecomm.htm">Framework</A> is included
for reference within this note and is briefly annotated with permission of
the US Administration.
<P>
This note does not indicate an endorsement of content, nor that the Consortium
has, is, or will be allocating any resources to the issues addressed by the
NOTE other than indicated on the appropriate
<A HREF="http://www.w3.org/Areas">Activities </A>page. A list of current
NOTEs can be found at:
<A HREF="./" W3MIRHREF="http://www.w3.org/TR/">http://www.w3.org/TR/</A>. This NOTE will
not be maintained, so we kindly ask you to refer to the included URLs for
the latest information.
<H3>
  Content
</H3>
<OL>
  <LI>
    <A HREF="#Introduction" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#Introduction">Summary and Analysis</A>
  <LI>
    <A HREF="#Annotated%20Version" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#Annotated%20Version">Annotated version of the Framework for Global
    Electronic Commerce</A>
</OL>
<P>
  <HR>
<H2>
  <A NAME="Introduction">Summary and Analysis</A>
</H2>
<P>
The potential for global electronic commerce is immense; much of this potential
will be realized by the continued development and application of Internet
and Web technologies. Since the invention of the Web by W3C Director Tim
Berners-Lee, the W3C has been working with its
<A HREF="http://www.w3.org/Consortium/Member/List">members</A> to provide
technologies which realize the full potential of the Web. W3C activities
have an amazing degree of synergy with recent government proposals, including
the <A HREF="http://www2.echo.lu/bonn/final.html">Bonn Declaration</A> and
the US Administration's
<A HREF="http://www.iitf.nist.gov/eleccomm/ecomm.htm">Framework for Global
Electronic Commerce</A>. The purpose of this Note is to document the synergy
between the
<A HREF="http://www.iitf.nist.gov/eleccomm/ecomm.htm">Framework</A> and the
activities of the W3C.
<H3>
  <A HREF="#principles" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#principles">Principles for Developing Global Electronic Commerce</A>
</H3>
<P>
Principles of the framework are akin to those principles which guide the
development of global, interoperable technologies at the W3C. Principles
include (W3C comments are in italics):
<OL>
  <LI>
    "The private sector should lead." <EM>The Web Industry and the W3C has been
    proactive in addressing concerns of those using the Web (including content
    control, Web privacy. intellectual property, access for the disabled,
    etc.)</EM>
  <LI>
    "Governments should avoid undue restrictions on electronic
    commerce<EM>.</EM>"<EM> The Web is growing and changing very quickly -- often
    for the better, consequently it is often better to allow the Web to mature
    on its own rather than to potentially impede its development.</EM>
  <LI>
    "Where governmental involvement is needed, its aim should be to support and
    enforce a predictable, minimalist, consistent and simple legal environment
    for commerce<EM>.</EM>"<EM> Stability leads to user and market confidence,
    key elements to the Web's success.</EM>
  <LI>
    "Governments should recognize the unique qualities of the Internet." <EM>The
    Internet and Web are unique.</EM>
  <LI>
    "Electronic Commerce over the Internet should be facilitated on a global
    basis." <EM>The Web has no boundaries or borders; the W3C is a global
    consortium.</EM>
</OL>
<H3>
  <A HREF="#issues" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#issues">Issues Addressed by the Framework</A>
</H3>
<P>
Issues addressed in the framework include online payment, intellectual property
protection, security, privacy, content control and standards development.
While the W3C may not agree with the framework on every issue there is a
common vision between the framework and W3C activity. A common and important
theme to both documents is the importance of trust and user confidence on
the Web. The following are specific issues raised by the Framework in relation
to W3C projects.
<H4>
  <A HREF="#electronic" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#electronic">[2] Electronic Payment</A>
</H4>
<P>
The <A HREF="http://www.w3.org/Payments/">Joint Electronic Payment
Initiative</A> is our primary activity in this area. Phase I of the project
addresses the need for a standardized way of negotiating payment methods
between browsers and servers on the World Wide Web. Working in partnership
with CommerceNet, W3C staff and Member companies have built a working
demonstration and produced a specification for the protocols PEP and UPP,
which together allow "automatable payment negotiation". A white paper,
summarizing all experiences from JEPI project, has been published as a W3C
note. Next steps are being considered by the Consortium and will likely include
micropayments and smart cards.
<H4>
  <A HREF="#intellectual" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#intellectual">[4] Intellectual Property Right</A> (IPR)
</H4>
<P>
The W3C acknowledges that IPR will continue to be extremely important to
the development of the Web. The W3C plans to address this issue by making
it easier for users to comply with IPR policies. Combining payment and labeling
technologies will make it simple for IP owners to express the terms and
conditions related to their materials, and for users to comply with the stated
policies.
<H4>
  <A HREF="#privacy" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#privacy">[5] Privacy</A>
</H4>
<P>
In all commercial media, there is a constant tension between a desire by
the public for privacy and a need for information about the viewing audience.
Sometimes the tension is left to be resolved in the marketplace; governments
have often mediated it through various data protection regulation. As the
Web continues to mature as a commercial media, it is particularly prone to
this dissonance due to its interactive nature. Users often wish to provide
information so as to customize their experience without forfeiting all privacy.
Services wish to oblige users, while also complying with disparate legislation
across multiple countries.
<P>
W3C addresses these questions in the <A HREF="http://www.w3.org/P3/">Platform
for Privacy Preferences</A> (P3) Project which has been
<A HREF="http://www.w3.org/Talks/970612-ftc/">demonstrated</A> before the
<A HREF="http://www.ftc.gov/">Federal Trade Commission</A>.
<H4>
  <A HREF="#security" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#security">[6] Security and Integrity</A>
</H4>
<P>
It is important that Web users have a reliable mechanism to help them decide
which agents, services, or active content they can trust. Digital signatures
allow one to attach digitally signed assertions to on-line documents. These
signatures serve to identify the origin and integrity of a document. Currently,
engineers from a dozen Member companies are working on the
<A HREF="http://www.w3.org/Security/DSig/Overview.html">Digital Signature
Initiative</A>. The result will have applications in a number of domain including
IPR, privacy, and content control.
<H4>
  <A HREF="#content" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#content">[8] Content Control</A>
</H4>
<P>
The <A HREF="http://www.w3.org/PICS/">Platform for Internet Content Selection
(PICS)</A> was created as an alternative model to centralized government
controls on indecent content. PICS encourages decentralized parental empowerment
when addressing children's access to inappropriate material.
<P>
PICS is a pair of protocols that allows labels to be applied to Internet
content. These protocols empower any individual or organization to design
and distribute labels reflecting their views about the content. PICS was
spearheaded by the Consortium as a practical alternative to global governmental
censorship of the Internet. In addition, the same technology facilitates
searching the Web, and providing a foundation for establishing trust in
information on the Web.
<H4>
  <A HREF="#technical" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#technical">[9] Technical Standards</A>
</H4>
<P>
The W3C was founded in 1994 to develop common protocols for the evolution
of the World Wide Web. W3C is an international industry consortium, jointly
hosted by the <A HREF="http://web.mit.edu/">Massachusetts Institute of
Technology</A> <A HREF="http://www.lcs.mit.edu/">Laboratory for Computer
Science</A> [MIT/LCS] in the United States; the
<A HREF="http://www.inria.fr/">Institut National de Recherche en Informatique
et en Automatique</A> [INRIA] in Europe; and the
<A HREF="http://www.keio.ac.jp/">Keio University</A> Shonan Fujisawa Campus
in Asia. The Consortium develops common specifications for the Web in areas
such as network protocols, graphical user interface, and technology and society.
The Consortium is a global and neutral technology development forum.
<H2>
  Conclusion
</H2>
<P>
The amount of agreement between the Framework and W3C activities is significant.
Both wish to promote the Web as a unique personal and commercial communication
medium. Similarities between W3C activities, and issues raised in the
<A HREF="http://www2.echo.lu/bonn/final.html">Bonn Declaration</A> and the
<A HREF="http://www.iitf.nist.gov/eleccomm/ecomm.htm">Framework</A> present
a clear set of tasks which the W3C and its members can work towards in promoting
the full potential of the Web.
<P>
&nbsp;
<P>
&nbsp;
<P>
  <HR>
<H1 ALIGN="center">
  <A NAME="Annotated Version">A Framework For Global Electronic Commerce</A>
</H1>
<H3 ALIGN="center">
  President William J. Clinton<BR>
  Vice President Albert Gore, Jr.<BR>
  Washington, D.C.
</H3>
<P ALIGN="center">
<FONT COLOR="#408080">[with W3C Annotations]</FONT>
<P>
  <HR>
<BLOCKQUOTE>
  <I>"We are on the verge of a revolution that is just as profound as the change
  in the economy that came with the industrial revolution. Soon electronic
  networks will allow people to transcend the barriers of time and distance
  and take advantage of global markets and business opportunities not even
  imaginable today, opening up a new world of economic possibility and
  progress."</I>
  <P>
  <I>Vice President Albert Gore, Jr.</I>
</BLOCKQUOTE>
<P>
  <HR>
<P>
<A HREF="#background" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#background">BACKGROUND</A>
<P>
<A HREF="#principles" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#principles">PRINCIPLES</A>
<P>
<A HREF="#issues" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#issues">ISSUES</A>
<P>
<A HREF="#financial%20issues" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#financial%20issues">I. Financial Issues</A><BR>
<A HREF="#customs" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#customs">1. Customs and Taxation</A><BR>
<A HREF="#electronic" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#electronic">2. Electronic Payment Systems</A>
<P>
<A HREF="#legal%20issues" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#legal%20issues">II. Legal Issues</A><BR>
<A HREF="#uniform" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#uniform">3. Uniform Commercial Code for Electronic Commerce</A><BR>
<A HREF="#intellectual" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#intellectual">4. Intellectual Property Protection</A><BR>
<A HREF="#privacy" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#privacy">5. Privacy</A><BR>
<A HREF="#security" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#security">6. Security</A>
<P>
<A HREF="#market%20access%20issues" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#market%20access%20issues">III. Market Access Issues</A><BR>
<A HREF="#telecomm" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#telecomm">7. Telecommunications Infrastructure and Information
Technology</A><BR>
<A HREF="#content" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#content">8. Content</A><BR>
<A HREF="#technical" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#technical">9. Technical Standards</A>
<P>
<A HREF="#strategy" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#strategy">A COORDINATED STRATEGY</A>
<P>
  <HR>
<P>
<A NAME="background"><B>BACKGROUND</B></A>
<P>
The Global Information Infrastructure (GII), still in the early stages of
its development, is already transforming our world. Over the next decade,
advances on the GII will affect almost every aspect of daily life -- education,
health care, work and leisure activities. Disparate populations, once separated
by distance and time, will experience these changes as part of a global
community.
<P>
No single force embodies our electronic transformation more than the evolving
medium known as the Internet.<A HREF="#no.1" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#no.1"><SUP>1</SUP></A> Once a tool
reserved for scientific and academic exchange, the Internet has emerged as
an appliance of every day life, accessible from almost every point on the
planet. Students across the world are discovering vast treasure troves of
data via the World Wide Web. Doctors are utilizing tele-medicine to administer
off-site diagnoses to patients in need. Citizens of many nations are finding
additional outlets for personal and political expression. The Internet is
being used to reinvent government and reshape our lives and our communities
in the process.<A HREF="#no.2" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#no.2"><SUP>2</SUP></A>
<P>
As the Internet empowers citizens and democratizes societies, it is also
changing classic business and economic paradigms. New models of commercial
interaction are developing as businesses and consumers participate in the
electronic marketplace and reap the resultant benefits. Entrepreneurs are
able to start new businesses more easily, with smaller up-front investment
requirements, by accessing the Internet's worldwide network of customers.
<P>
Internet technology is having a profound effect on the global trade in services.
World trade involving computer software, entertainment products (motion pictures,
videos, games, sound recordings), information services (databases, online
newspapers), technical information, product licenses, financial services,
and professional services (businesses and technical consulting, accounting,
architectural design, legal advice, travel services, etc.) has grown rapidly
in the past decade, now accounting for well over $40 billion of U.S. exports
alone.<A HREF="#no.3" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#no.3"><SUP>3</SUP></A>
<P>
An increasing share of these transactions occurs online. The GII has the
potential to revolutionize commerce in these and other areas by dramatically
lowering transaction costs and facilitating new types of commercial transactions.
<P>
The Internet will also revolutionize retail and direct marketing. Consumers
will be able to shop in their homes for a wide variety of products from
manufacturers and retailers all over the world. They will be able to view
these products on their computers or televisions, access information about
the products, visualize the way the products may fit together (constructing
a room of furniture on their screen, for example), and order and pay for
their choice, all from their living rooms.
<P>
Commerce on the Internet could total tens of billions of dollars by the turn
of the century.<A HREF="#no.4" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#no.4"><SUP>4</SUP></A> For this potential to be
realized fully, governments must adopt a non-regulatory, market-oriented
approach to electronic commerce, one that facilitates the emergence of a
transparent and predictable legal environment to support global business
and commerce. Official decision makers must respect the unique nature of
the medium and recognize that widespread competition and increased consumer
choice should be the defining features of the new digital marketplace.
<P>
Many businesses and consumers are still wary of conducting extensive business
over the Internet because of the lack of a predictable legal environment
governing transactions. This is particularly true for international commercial
activity where concerns about enforcement of contracts, liability, intellectual
property protection, privacy, security and other matters have caused businesses
and consumers to be cautious.
<P>
As use of the Internet expands, many companies and Internet users are concerned
that some governments will impose extensive regulations on the Internet and
electronic commerce. Potential areas of problematic regulation include taxes
and duties, restrictions on the type of information transmitted, control
over standards development, licensing requirements and rate regulation of
service providers. Indeed, signs of these types of commerce-inhibiting actions
already are appearing in many nations. Preempting these harmful actions before
they take root is a strong motivation for the strategy outlined in this paper.
<P>
Governments can have a profound effect on the growth of commerce on the Internet.
By their actions, they can facilitate electronic trade or inhibit it. Knowing
when to act and -- at least as important -- when not to act, will be crucial
to the development of electronic
commerce.<A HREF="#no.5" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#no.5"><SUP>5</SUP></A> This report articulates the
Administration's vision for the emergence of the GII as a vibrant global
marketplace by suggesting a set of principles, presenting a series of policies,
and establishing a road map for international discussions and agreements
to facilitate the growth of commerce on the Internet.
<P>
<A NAME="principles"><B>PRINCIPLES</B></A>
<P>
1. <B><I>The private sector should lead.</I></B>
<BLOCKQUOTE>
  Though government played a role in financing the initial development of the
  Internet, its expansion has been driven primarily by the private sector.
  For electronic commerce to flourish, the private sector must continue to
  lead. Innovation, expanded services, broader participation, and lower prices
  will arise in a market-driven arena, not in an environment that operates
  as a regulated industry.
  <P>
  Accordingly, governments should encourage industry self-regulation wherever
  appropriate and support the efforts of private sector organizations to develop
  mechanisms to facilitate the successful operation of the Internet. Even where
  collective agreements or standards are necessary, private entities should,
  where possible, take the lead in organizing them. Where government action
  or intergovernmental agreements are necessary, on taxation for example, private
  sector participation should be a formal part of the policy making process.
</BLOCKQUOTE>
<P>
2. <B><I>Governments should avoid undue restrictions on electronic
commerce.</I></B>
<BLOCKQUOTE>
  Parties should be able to enter into legitimate agreements to buy and sell
  products and services across the Internet with minimal government involvement
  or intervention. Unnecessary regulation of commercial activities will distort
  development of the electronic marketplace by decreasing the supply and raising
  the cost of products and services for consumers the world over. Business
  models must evolve rapidly to keep pace with the break-neck speed of change
  in the technology; government attempts to regulate are likely to be outmoded
  by the time they are finally enacted, especially to the extent such regulations
  are technology-specific.
  <P>
  Accordingly, governments should refrain from imposing new and unnecessary
  regulations, bureaucratic procedures, or taxes and tariffs on commercial
  activities that take place via the Internet.
</BLOCKQUOTE>
<P>
3. <B><I>Where governmental involvement is needed, its aim should be to support
and enforce a predictable, minimalist, consistent and simple legal environment
for commerce.</I></B>
<BLOCKQUOTE>
  In some areas, government agreements may prove necessary to facilitate electronic
  commerce and protect consumers. In these cases, governments should establish
  a predictable and simple legal environment based on a decentralized, contractual
  model of law rather than one based on top-down regulation. This may involve
  states as well as national governments. Where government intervention is
  necessary to facilitate electronic commerce, its goal should be to ensure
  competition, protect intellectual property and privacy, prevent fraud, foster
  transparency, support commercial transactions, and facilitate dispute resolution.
</BLOCKQUOTE>
<P>
4. <B><I>Governments should recognize the unique qualities of the
Internet.</I></B>
<BLOCKQUOTE>
  The genius and explosive success of the Internet can be attributed in part
  to its decentralized nature and to its tradition of bottom-up governance.
  These same characteristics pose significant logistical and technological
  challenges to existing regulatory models, and governments should tailor their
  policies accordingly.
  <P>
  Electronic commerce faces significant challenges where it intersects with
  existing regulatory schemes. We should not assume, for example, that the
  regulatory frameworks established over the past sixty years for
  telecommunications, radio and television fit the Internet. Regulation should
  be imposed only as a necessary means to achieve an important goal on which
  there is a broad consensus. Existing laws and regulations that may hinder
  electronic commerce should be reviewed and revised or eliminated to reflect
  the needs of the new electronic age.
</BLOCKQUOTE>
<P>
5. <B><I>Electronic Commerce over the Internet should be facilitated on a
global basis.</I></B>
<BLOCKQUOTE>
  The Internet is emerging as a global marketplace. The legal framework supporting
  commercial transactions on the Internet should be governed by consistent
  principles across state, national, and international borders that lead to
  predictable results regardless of the jurisdiction in which a particular
  buyer or seller resides.
</BLOCKQUOTE>
<P>
<A NAME="issues"><B>ISSUES</B></A>
<P>
This paper covers nine areas where international agreements are needed to
preserve the Internet as a non-regulatory medium, one in which competition
and consumer choice will shape the marketplace. Although there are significant
areas of overlap, these items can be divided into three main subgroups: financial
issues, legal issues, and market access issues.
<P>
<B>Financial Issues</B>
<UL>
  <LI>
    customs and taxation
  <LI>
    electronic payments
</UL>
<P>
<B>Legal Issues</B>
<UL>
  <LI>
    'Uniform Commercial Code' for electronic commerce
  <LI>
    intellectual property protection
  <LI>
    privacy
  <LI>
    security
</UL>
<P>
<B>Market Access Issues</B>
<UL>
  <LI>
    telecommunications infrastructure and information technology
  <LI>
    content
  <LI>
    technical standards
</UL>
<P>
<A NAME="financial issues"><FONT SIZE="4"><B>I. Financial
Issues</B></FONT></A>
<P>
<A NAME="customs"><B>1. CUSTOMS AND TAXATION</B></A>
<P>
For over 50 years, nations have negotiated tariff reductions because they
have recognized that the economies and citizens of all nations benefit from
freer trade. Given this recognition, and because the Internet is truly a
global medium, it makes little sense to introduce tariffs on goods and services
delivered over the Internet.
<P>
Further, the Internet lacks the clear and fixed geographic lines of transit
that historically have characterized the physical trade of goods. Thus, while
it remains possible to administer tariffs for products ordered over the Internet
but ultimately delivered via surface or air transport, the structure of the
Internet makes it difficult to do so when the product or service is delivered
electronically.
<P>
Nevertheless, many nations are looking for new sources of revenue, and may
seek to levy tariffs on global electronic commerce.
<P>
Therefore, the United States will advocate in the World Trade Organization
(WTO) and other appropriate international fora that the Internet be declared
a tariff-free environment whenever it is used to deliver products or services.
This principle should be established quickly before nations impose tariffs
and before vested interests form to protect those tariffs.
<P>
In addition, the United States believes that no new taxes should be imposed
on Internet commerce. The taxation of commerce conducted over the Internet
should be consistent with the established principles of international taxation,
should avoid inconsistent national tax jurisdictions and double taxation,
and should be simple to administer and easy to understand.
<P>
Any taxation of Internet sales should follow these principles:
<UL>
  <LI>
    It should neither distort nor hinder commerce. No tax system should discriminate
    among types of commerce, nor should it create incentives that will change
    the nature or location of transactions.
  <LI>
    The system should be simple and transparent. It should be capable of capturing
    the overwhelming majority of appropriate revenues, be easy to implement,
    and minimize burdensome record keeping and costs for all parties.
  <LI>
    The system should be able to accommodate tax systems used by the United States
    and our international partners today.
</UL>
<P>
Wherever feasible, we should look to existing taxation concepts and principles
to achieve these goals.
<P>
Any such taxation system will have to accomplish these goals in the context
of the Internet's special characteristics -- the potential anonymity of buyer
and seller, the capacity for multiple small transactions, and the difficulty
of associating online activities with physically defined locations.
<P>
To achieve global consensus on this approach, the United States, through
the Treasury Department, is participating in discussions on the taxation
of electronic commerce through the Organization for Economic Cooperation
and Development (OECD), the primary forum for cooperation in international
taxation.
<P>
The Administration is also concerned about possible moves by state and local
tax authorities to target electronic commerce and Internet access. The
uncertainties associated with such taxes and the inconsistencies among them
could stifle the development of Internet commerce.
<P>
The Administration believes that the same broad principles applicable to
international taxation, such as not hindering the growth of electronic commerce
and neutrality between conventional and electronic commerce, should be applied
to subfederal taxation. No new taxes should be applied to electronic commerce,
and states should coordinate their allocation of income derived from electronic
commerce. Of course, implementation of these principles may differ at the
subfederal level where indirect taxation plays a larger role.
<P>
Before any further action is taken, states and local governments should cooperate
to develop a uniform, simple approach to the taxation of electronic commerce,
based on existing principles of taxation where feasible.
<P>
<A NAME="electronic"><B>2. ELECTRONIC PAYMENT SYSTEMS</B></A>
<P>
New technology has made it possible to pay for goods and services over the
Internet. Some of the methods would link existing electronic banking and
payment systems, including credit and debit card networks, with new retail
interfaces via the Internet. "Electronic money," based on stored-value, smart
card, or other technologies, is also under development. Substantial private
sector investment and competition is spurring an intense period of innovation
that should benefit consumers and businesses wishing to engage in global
electronic commerce.
<P>
At this early stage in the development of electronic payment systems, the
commercial and technological environment is changing rapidly. It would be
hard to develop policy that is both timely and appropriate. For these reasons,
inflexible and highly prescriptive regulations and rules are inappropriate
and potentially harmful. Rather, in the near term, case-by-case monitoring
of electronic payment experiments is preferred.
<P>
From a longer term perspective, however, the marketplace and industry
self-regulation alone may not fully address all issues. For example, government
action may be necessary to ensure the safety and soundness of electronic
payment systems, to protect consumers, or to respond to important law enforcement
objectives.
<P>
The United States, through the Department of the Treasury, is working with
other governments in international fora to study the global implications
of emerging electronic payment systems. A number of organizations are already
working on important aspects of electronic banking and
payments.<A HREF="#no.6" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#no.6"><SUP>6</SUP></A> <FONT COLOR="#408080">[See
</FONT><A HREF="http://www.w3.org/Payments/"><FONT COLOR="#408080">W3C
JEPI</FONT></A><FONT COLOR="#408080">] </FONT>Their analyses will contribute
to a better understanding of how electronic payment systems will affect global
commerce and banking.
<P>
The Economic Communique issued at the Lyon Summit by the G-7 Heads of State
called for a cooperative study of the implications of new, sophisticated
retail electronic payment systems. In response, the G-10 deputies formed
a Working Party, with representation from finance ministries and central
banks (in consultation with law enforcement authorities). The Working Party
is chaired by a representative from the U.S. Treasury Department, and tasked
to produce a report that identifies common policy objectives among the G-10
countries and analyzes the national approaches to electronic commerce taken
to date.
<P>
As electronic payment systems develop, governments should work closely with
the private sector to inform policy development, and ensure that governmental
activities flexibly accommodate the needs of the emerging marketplace.
<P>
<A NAME="legal issues"><FONT SIZE="4"><B>II. Legal Issues</B></FONT></A>
<P>
<A NAME="uniform"><B>3. 'UNIFORM COMMERCIAL CODE' FOR ELECTRONIC COMMERCE
</B></A>
<P>
In general, parties should be able to do business with each other on the
Internet under whatever terms and conditions they agree upon.
<P>
Private enterprise and free markets have typically flourished, however, where
there are predictable and widely accepted legal environments supporting
commercial transactions. To encourage electronic commerce, the U.S. government
should support the development of both a domestic and global uniform commercial
legal framework that recognizes, facilitates, and enforces electronic
transactions worldwide. Fully informed buyers and sellers could voluntarily
agree to form a contract subject to this uniform legal framework, just as
parties currently choose the body of law that will be used to interpret their
contract.
<P>
Participants in the marketplace should define and articulate most of the
rules that will govern electronic commerce. To enable private entities to
perform this task and to fulfill their roles adequately, governments should
encourage the development of simple and predictable domestic and international
rules and norms that will serve as the legal foundation for commercial activities
in cyberspace.
<P>
In the United States, every state government has adopted the Uniform Commercial
Code (UCC), a codification of substantial portions of commercial law. The
National Conference of Commissioners of Uniform State Law (NCCUSL) and the
American Law Institute, domestic sponsors of the UCC, already are working
to adapt the UCC to cyberspace. Private sector organizations, including the
American Bar Association (ABA) along with other interest groups, are participants
in this process. Work is also ongoing on a proposed electronic contracting
and records act for transactions not covered by the UCC. The Administration
supports the prompt consideration of these proposals, and the adoption of
uniform legislation by all states. Of course, any such legislation will be
designed to accommodate ongoing and possible future global initiatives.
<P>
Internationally, the United Nations Commission on International Trade Law
(UNCITRAL) has completed work on a model law that supports the commercial
use of international contracts in electronic commerce. This model law establishes
rules and norms that validate and recognize contracts formed through electronic
means, sets default rules for contract formation and governance of electronic
contract performance, defines the characteristics of a valid electronic writing
and an original document, provides for the acceptability of electronic signatures
for legal and commercial purposes, and supports the admission of computer
evidence in courts and arbitration proceedings.
<P>
The United States Government supports the adoption of principles along these
lines by all nations as a start to defining an international set of uniform
commercial principles for electronic commerce. We urge UNCITRAL, other
appropriate international bodies, bar associations, and other private sector
groups to continue their work in this area.
<P>
The following principles should, to the extent possible, guide the drafting
of rules governing global electronic commerce:
<UL>
  <LI>
    parties should be free to order the contractual relationship between themselves
    as they see fit;
  <LI>
    rules should be technology-neutral (i.e., the rules should neither require
    nor assume a particular technology) and forward looking (i.e., the rules
    should not hinder the use or development of technologies in the future);
  <LI>
    existing rules should be modified and new rules should be adopted only as
    necessary or substantially desirable to support the use of electronic
    technologies; and
  <LI>
    the process should involve the high-tech commercial sector as well as businesses
    that have not yet moved online.
</UL>
<P>
With these principles in mind, UNCITRAL, UNIDROIT, and the International
Chamber of Commerce (ICC), and others should develop additional model provisions
and uniform fundamental principles designed to eliminate administrative and
regulatory barriers and to facilitate electronic commerce by:
<UL>
  <LI>
    encouraging governmental recognition, acceptance and facilitation of electronic
    communications (i.e., contracts, notarized documents, etc.);
  <LI>
    encouraging consistent international rules to support the acceptance of
    electronic signatures and other authentication procedures; and
  <LI>
    promoting the development of adequate, efficient, and effective alternate
    dispute resolution mechanisms for global commercial transactions.
</UL>
<P>
The expansion of global electronic commerce also depends upon the participants'
ability to achieve a reasonable degree of certainty regarding their exposure
to liability for any damage or injury that might result from their actions.
Inconsistent local tort laws, coupled with uncertainties regarding jurisdiction,
could substantially increase litigation and create unnecessary costs that
ultimately will be born by consumers. The U.S. should work closely with other
nations to clarify applicable jurisdictional rules and to generally favor
and enforce contract provisions that allow parties to select substantive
rules governing liability.
<P>
Finally, the development of global electronic commerce provides an opportunity
to create legal rules that allow business and consumers to take advantage
of new technology to streamline and automate functions now accomplished manually.
For example, consideration should be given to establishing electronic registries.
<P>
The Departments of Commerce and State will continue to organize U.S.
participation in these areas with a goal of achieving substantive international
agreement on model law within the next two years. NCCUSL and the American
Law Institute, working with the American Bar Association and other interested
groups, are urged to continue their work to develop complementary domestic
and international efforts.
<P>
<A NAME="intellectual"><B>4. INTELLECTUAL PROPERTY PROTECTION</B></A>
<P>
Commerce on the Internet often will involve the sale and licensing of
intellectual property. To promote this commerce, sellers must know that their
intellectual property will not be stolen and buyers must know that they are
obtaining authentic products.
<P>
International agreements that establish clear and effective copyright, patent,
and trademark protection are therefore necessary to prevent piracy and fraud.
While technology, such as encryption, can help combat piracy, an adequate
and effective legal framework also is necessary to deter fraud and the theft
of intellectual property, and to provide effective legal recourse when these
crimes occur. Increased public education about intellectual property in the
information age will also contribute to the successful implementation and
growth of the GII.
<P>
<B>Copyrights</B>
<P>
There are several treaties that establish international norms for the protection
of copyrights, most notably the Berne Convention for the Protection of Literary
and Artistic Works. These treaties link nearly all major trading nations
and provide them with a means of protecting, under their own laws, each other's
copyrighted works and sound recordings.
<P>
In December 1996, the World Intellectual Property Organization (WIPO) updated
the Berne Convention and provided new protection for performers and producers
of sound recordings by adopting two new treaties. The two treaties -- the
WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty --
will greatly facilitate the commercial applications of online digital
communications over the GII.
<P>
Both treaties include provisions relating to technological protection, copyright
management information, and the right of communication to the public, all
of which are indispensable for an efficient exercise of rights in the digital
environment. The U.S. Government recognizes private sector efforts to develop
international and domestic standards in these areas. The Administration
understands the sensitivities associated with copyright management information
and technological protection measures, and is working to tailor implementing
legislation accordingly. <FONT COLOR="#408080">[See
</FONT><A HREF="http://www.w3.org/IPR/"><FONT COLOR="#408080">W3C IPR
Overview</FONT></A><FONT COLOR="#408080">]</FONT>
<P>
Both treaties also contain provisions that permit nations to provide for
exceptions to rights in certain cases that do not conflict with a normal
exploitation of the work and do not unreasonably prejudice the legitimate
interests of the author (<I>e.g</I>., "fair use"). These provisions permit
members to carry forward and appropriately extend into the digital environment
limitations and exceptions in their national laws which have been considered
acceptable under the Berne Convention. These provisions permit members to
devise new exceptions and limitations that are appropriate in the digital
network environment, but neither reduce nor extend the scope of applicability
of the limitations and exceptions permitted by the Berne Convention.
<P>
The Administration is drafting legislation to implement the new WIPO treaties,
and looks forward to working with the Senate on their ratification.
<P>
The two new WIPO treaties do not address issues of online service provider
liability, leaving them to be determined by domestic legislation. The
Administration looks forward to working with Congress as these issues are
addressed and supports efforts to achieve an equitable and balanced solution
that is agreeable to interested parties and consistent with international
copyright obligations.
<P>
The adoption of the two new WIPO treaties represents the attainment of one
of the Administration's significant intellectual property objectives. The
U.S. Government will continue to work for appropriate copyright protection
for works disseminated electronically. The Administration's copyright-related
objectives will include:
<UL>
  <LI>
    encouraging countries to fully and immediately implement the obligations
    contained in the Agreement on Trade-Related Aspects of Intellectual Property
    (TRIPS);
  <LI>
    seeking immediate U.S. ratification and deposit of the instruments of accession
    to the two new WIPO treaties and implementation of the obligations in these
    treaties in a balanced and appropriate way as soon as possible;
  <LI>
    encouraging other countries to join the two new WIPO treaties and to implement
    fully the treaty obligations as soon as possible; and
  <LI>
    ensuring that U.S. trading partners establish laws and regulations that provide
    adequate and effective protection for copyrighted works, including motion
    pictures, computer software, and sound recordings, disseminated via the GII,
    and that these laws and regulations are fully implemented and actively enforced.
</UL>
<P>
The United States will pursue these international objectives through bilateral
discussions and multilateral discussions at WIPO and other appropriate fora
and will encourage private sector participation in these discussions.
<P>
<B><I>Sui Generis</I></B><B> Protection of Databases</B>
<P>
The December 1996 WIPO Conference in Geneva did not take up a proposed treaty
to protect the non-original elements of databases. Instead, the Conference
called for a meeting, subsequently held, to discuss preliminary steps to
study proposals to establish <I>sui generis</I> database protection.
<P>
Based on the brief discussion of <I>sui generis</I> database protection that
took place before and during the Diplomatic Conference, it is clear that
more discussion of the need for and the nature of such protection is necessary
domestically and internationally.
<P>
The Administration will seek additional input from, among others, the scientific,
library, and academic communities and the commercial sector, in order to
develop U.S. policy with respect to <I>sui generis</I> database protection.
<P>
<B>Patents</B>
<P>
Development of the GII will both depend upon and stimulate innovation in
many fields of technology, including computer software, computer hardware,
and telecommunications. An effectively functioning patent system that encourages
and protects patentable innovations in these fields is important for the
overall success of commerce over the Internet. Consistent with this objective,
the U.S. Patent and Trademark Office (PTO) will (1) significantly enhance
its collaboration with the private sector to assemble a larger, more complete
collection of prior art (both patent and non-patent publications), and provide
its patent examiners better access to prior art in GII-related technologies;
(2) train its patent examiners in GII-related technologies to raise and maintain
their level of technical expertise; and (3) support legislative proposals
for early publication of pending patent applications, particularly in areas
involving fast moving technology.
<P>
To create a reliable environment for electronic commerce, patent agreements
should:
<UL>
  <LI>
    prohibit member countries from authorizing parties to exploit patented inventions
    related to the GII without the patent owner's authority (i.e., disapproval
    of compulsory licensing of GII- related technology except to remedy a practice
    determined after judicial or administrative process to be anti-competitive);
  <LI>
    require member countries to provide adequate and effective protection for
    patentable subject matter important to the development and success of the
    GII; and
  <LI>
    establish international standards for determining the validity of a patent
    claim.
</UL>
<P>
The United States will pursue these objectives internationally. Officials
of the European, Japanese, and United States Patent Offices meet, for example,
each year to foster cooperation on patent-related issues. The United States
will recommend at the next meeting that a special committee be established
within the next year to make recommendations on GII-related patent issues
.
<P>
In a separate venue, one hundred countries and international intergovernmental
organizations participate as members of WIPO's permanent committee on industrial
property information (PCIPI). The United States will attempt to establish
a working group of this organization to address GII-related patent issues.
<P>
<B>Trademark and Domain Names</B>
<P>
Trademark rights are national in scope and conflicts may arise where the
same or similar trademarks for similar goods or services are owned by different
parties in different countries. Countries may also apply different standards
for determining infringement.
<P>
Conflicts have arisen on the GII where third parties have registered Internet
domain names that are the same as, or similar to, registered or common law
trademarks. An Internet domain name functions as a source identifier on the
Internet. Ordinarily, source identifiers, like addresses, are not protected
intellectual property (i.e., a trademark) <I>per se</I>. The use of domain
names as source identifiers has burgeoned, however, and courts have begun
to attribute intellectual property rights to them, while recognizing that
misuse of a domain name could significantly infringe, dilute, and weaken
valuable trademark rights.
<P>
To date, conflicts between trademark rights and domain names have been resolved
through negotiations and/or litigation. It may be possible to create a
contractually based self- regulatory regime that deals with potential conflicts
between domain name usage and trademark laws on a global basis without the
need to litigate. This could create a more stable business environment on
the Internet. Accordingly, the United States will support efforts already
underway to create domestic and international fora for discussion of
Internet-related trademark issues. The Administration also plans to seek
public input on the resolution of trademark disputes in the context of domain
names.
<P>
Governance of the domain name system (DNS) raises other important issues
unrelated to intellectual property. The Administration supports private efforts
to address Internet governance issues including those related to domain names
and has formed an interagency working group under the leadership of the
Department of Commerce to study DNS issues. The working group will review
various DNS proposals, consulting with interested private sector, consumer,
professional, congressional and state government and international groups.
The group will consider, in light of public input, (1) what contribution
government might make, if any, to the development of a global competitive,
market-based system to register Internet domain names, and (2) how best to
foster bottom-up governance of the Internet.
<P>
<A NAME="privacy"><B>5. PRIVACY</B></A>
<P>
Americans treasure privacy, linking it to our concept of personal freedom
and well- being. Unfortunately, the GII's great promise -- that it facilitates
the collection, re-use, and instantaneous transmission of information --
can, if not managed carefully, diminish personal privacy. It is essential,
therefore, to assure personal privacy in the networked environment if people
are to feel comfortable doing business.
<P>
At the same time, fundamental and cherished principles like the First Amendment,
which is an important hallmark of American democracy, protect the free flow
of information. Commerce on the GII will thrive only if the privacy rights
of individuals are balanced with the benefits associated with the free flow
of information. <FONT COLOR="#408080">[See W3C
</FONT><A HREF="http://www.w3.org/P3/"><FONT COLOR="#408080">P3</FONT></A><FONT COLOR="#408080">]</FONT>
<P>
In June of 1995, the Privacy Working Group of the United States government
Information Infrastructure Task Force (IITF) issued a report entitled, PRIVACY
AND THE NATIONAL INFORMATION INFRASTRUCTURE: Principles for Providing and
Using Personal Information. The report recommends a set of principles (the
"Privacy Principles") to govern the collection, processing, storage, and
re-use of personal data in the information age.
<P>
These Privacy Principles, which build on the Organization for Economic
Cooperation and Development's GUIDELINES GOVERNING THE PROTECTION OF PRIVACY
AND TRANSBORDER DATA FLOW OF PERSONAL DATA and incorporate principles of
fair information practices, rest on the fundamental precepts of awareness
and choice:
<UL>
  <LI>
    Data-gatherers should inform consumers what information they are collecting,
    and how they intend to use such data; and
  <LI>
    Data-gatherers should provide consumers with a meaningful way to limit use
    and re-use of personal information.
</UL>
<P>
Disclosure by data-gatherers is designed to stimulate market resolution of
privacy concerns by empowering individuals to obtain relevant knowledge about
why information is being collected, what the information will be used for,
what steps will be taken to protect that information, the consequences of
providing or withholding information, and any rights of redress that they
may have. Such disclosure will enable consumers to make better judgments
about the levels of privacy available and their willingness to participate.
<P>
In addition, the Privacy Principles identify three values to govern the way
in which personal information is acquired, disclosed and used online --
information privacy, information integrity, and information quality. First,
an individual's reasonable expectation of privacy regarding access to and
use of, his or her personal information should be assured. Second, personal
information should not be improperly altered or destroyed. And, third, personal
information should be accurate, timely, complete, and relevant for the purposes
for which it is provided and used.
<P>
Under these principles, consumers are entitled to redress if they are harmed
by improper use or disclosure of personal information or if decisions are
based on inaccurate, outdated, incomplete, or irrelevant personal information.
<P>
In April, 1997, the Information Policy Committee of the IITF issued a draft
paper entitled Options For Promoting Privacy on the National Information
Infrastructure. The paper surveys information practices in the United States
and solicits public comment on the best way to implement the Privacy Principles.
The IITF goal is to find a way to balance the competing values of personal
privacy and the free flow of information in a digital democratic society.
<P>
Meanwhile, other federal agencies have studied privacy issues in the context
of specific industry sectors. In October 1995, for example, the National
Telecommunications and Information Administration (NTIA) issued a report
entitled Privacy and the NII: Safeguarding Telecommunications-Related Personal
Information. It explores the application of the Privacy Principles in the
context of telecommunications and online services and advocates a voluntary
framework based on notice and consent.<A HREF="#no.7" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#no.7"><SUP>7</SUP></A> On
January 6, 1997, the FTC issued a staff report entitled Public Workshop on
Consumer Privacy on the Global Information Infrastructure. The report, which
focuses on the direct marketing and advertising industries, concludes that
notice, choice, security, and access are recognized as necessary elements
of fair information practices online. In June of 1997, the FTC held four
days of hearings on technology tools and industry self-regulation regimes
designed to enhance personal privacy on the Internet.
<P>
The Administration supports private sector efforts now underway to implement
meaningful, consumer-friendly, self-regulatory privacy regimes. These include
mechanisms for facilitating awareness and the exercise of choice online,
evaluating private sector adoption of and adherence to fair information
practices, and dispute resolution.
<P>
The Administration also anticipates that technology will offer solutions
to many privacy concerns in the online environment, including the appropriate
use of anonymity. If privacy concerns are not addressed by industry through
self-regulation and technology, the Administration will face increasing pressure
to play a more direct role in safeguarding consumer choice regarding privacy
online.
<P>
The Administration is particularly concerned about the use of information
gathered from children, who may lack the cognitive ability to recognize and
appreciate privacy concerns. Parents should be able to choose whether or
not personally identifiable information is collected from or about their
children. We urge industry, consumer, and child-advocacy groups working together
to use a mix of technology, self-regulation, and education to provide solutions
to the particular dangers arising in this area and to facilitate parental
choice. This problem warrants prompt attention. Otherwise, government action
may be required.
<P>
Privacy concerns are being raised in many countries around the world, and
some countries have enacted laws, implemented industry self-regulation, or
instituted administrative solutions designed to safeguard their citizens'
privacy. Disparate policies could emerge that might disrupt transborder data
flows. For example, the European Union (EU) has adopted a Directive that
prohibits the transfer of personal data to countries that, in its view, do
not extend adequate privacy protection to EU citizens.
<P>
To ensure that differing privacy policies around the world do not impede
the flow of data on the Internet, the United States will engage its key trading
partners in discussions to build support for industry-developed solutions
to privacy problems and for market driven mechanisms to assure customer
satisfaction about how private data is handled.
<P>
The United States will continue policy discussions with the EU nations and
the European Commission to increase understanding about the U.S. approach
to privacy and to assure that the criteria they use for evaluating adequacy
are sufficiently flexible to accommodate our approach. These discussions
are led by the Department of Commerce, through NTIA, and the State Department,
and include the Executive Office of the President, the Treasury Department,
the Federal Trade Commission (FTC) and other relevant federal agencies. NTIA
is also working with the private sector to assess the impact that the
implementation of the EU Directive could have on the United States.
<P>
The United States also will enter into a dialogue with trading partners on
these issues through existing bilateral fora as well as through regional
fora such as the Asia Pacific Economic Cooperation (APEC) forum, the Summit
of the Americas, the North American Free Trade Agreement (NAFTA), and the
Inter-American Telecommunications Commission (CITEL) of the Organization
of American States, and broader multilateral organizations.
<P>
The Administration considers data protection critically important. We believe
that private efforts of industry working in cooperation with consumer groups
are preferable to government regulation, but if effective privacy protection
cannot be provided in this way, we will reevaluate this policy.
<P>
<A NAME="security"><B>6. SECURITY</B></A>
<P>
The GII must be secure and reliable. If Internet users do not have confidence
that their communications and data are safe from unauthorized access or
modification, they will be unlikely to use the Internet on a routine basis
for commerce.
<P>
A secure GII requires:
<OL>
  <LI>
    secure and reliable telecommunications networks;
  <LI>
    effective means for protecting the information systems attached to those
    networks;
  <LI>
    effective means for authenticating and ensuring confidentiality of electronic
    information to protect data from unauthorized use; and
  <LI>
    well trained GII users who understand how to protect their systems and their
    data.
</OL>
<P>
There is no single "magic" technology or technique that can ensure that the
GII will be secure and reliable. Accomplishing that goal requires a range
of technologies (encryption, authentication, password controls, firewalls,
etc.) and effective, consistent use of those technologies, all supported
globally by trustworthy key and security management infrastructures.
<P>
Of particular importance is the development of trusted certification services
that support the digital signatures<FONT COLOR="#408080"> [see W3C
</FONT><A HREF="http://www.w3.org/Security/DSig/Overview.html"><FONT COLOR="#408080">DSig</FONT></A><FONT COLOR="#408080">] </FONT>that will permit users to know whom they are
communicating with on the Internet. Both signatures and confidentiality rely
on the use of cryptographic keys. To promote the growth of a trusted electronic
commerce environment, the Administration is encouraging the development of
a voluntary, market-driven key management infrastructure that will support
authentication, integrity, and confidentiality.
<P>
Encryption products protect the confidentiality of stored data and electronic
communications by making them unreadable without a decryption key. But strong
encryption is a double-edged sword. Law abiding citizens can use strong
encryption to protect their trade secrets and personal records. But those
trade secrets and personal records could be lost forever if the decrypt key
is lost. Depending upon the value of the information, the loss could be quite
substantial. Encryption can also be used by criminals and terrorists to reduce
law enforcement capabilities to read their communications. Key recovery based
encryption can help address some of these issues.
<P>
In promoting robust security needed for electronic commerce, the Administration
has already taken steps that will enable trust in encryption and provide
the safeguards that users and society will need. The Administration, in
partnership with industry, is taking steps to promote the development of
market-driven standards, public-key management infrastructure services and
key recoverable encryption products. Additionally, the Administration has
liberalized export controls for commercial encryption products while protecting
public safety and national security interests.
<P>
The Administration is also working with Congress to ensure legislation is
enacted that would facilitate development of voluntary key management
infrastructures and would govern the release of recovery information to law
enforcement officials pursuant to lawful authority.
<P>
The U.S. government will work internationally to promote development of market-
driven key management infrastructure with key recovery. Specifically, the
U.S. has worked closely within the OECD to develop international guidelines
for encryption policies and will continue to promote the development of policies
to provide a predictable and secure environment for global electronic commerce.
<P>
<A NAME="market access issues"><FONT SIZE="4"><B>III. Market Access Issues
</B></FONT></A>
<P>
<A NAME="telecomm"><B>7. TELECOMMUNICATIONS INFRASTRUCTURE AND INFORMATION
TECHNOLOGY </B></A>
<P>
Global electronic commerce depends upon a modern, seamless, global
telecommunications network and upon the computers and "information appliances"
that connect to it.<A HREF="#no.8" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#no.8"><SUP>8</SUP></A> Unfortunately, in too
many countries, telecommunications policies are hindering the development
of advanced digital networks. Customers find that telecommunications services
often are too expensive, bandwidth is too limited, and services are unavailable
or unreliable. Likewise, many countries maintain trade barriers to imported
information technology, making it hard for both merchants and customers to
purchase the computers and information systems they need to participate in
electronic commerce.
<P>
In order to spur the removal of barriers, in March 1994, Vice President Gore
spoke to the World Telecommunications Development Conference in Buenos Aires.
He articulated several principles that the U.S. believes should be the foundation
for government policy, including:
<OL>
  <LI>
    encouraging private sector investment by privatizing government-controlled
    telecommunications companies;
  <LI>
    promoting and preserving competition by introducing competition to monopoly
    phone markets, ensuring interconnection at fair prices, opening markets to
    foreign investment, and enforcing anti-trust safeguards;
  <LI>
    guaranteeing open access to networks on a non-discriminatory basis, so that
    GII users have access to the broadest range of information and services;
    and
  <LI>
    implementing, by an independent regulator, pro-competitive and flexible
    regulation that keeps pace with technological
    development.<A HREF="#no.9" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#no.9"><SUP>9</SUP></A>
</OL>
<P>
Domestically, the Administration recognizes that there are various constraints
in the present network that may impede the evolution of services requiring
higher bandwidth. Administration initiatives include Internet II, or Next
Generation Internet. In addition, the FCC has undertaken several initiatives
designed to stimulate bandwidth expansion, especially to residential and
small/home office customers.
<P>
The goal of the United States will be to ensure that online service providers
can reach end-users on reasonable and nondiscriminatory terms and conditions.
Genuine market opening will lead to increased competition, improved
telecommunications infrastructures, more customer choice, lower prices and
increased and improved services.
<P>
Areas of concern include:
<UL>
  <LI>
    <U>Leased lines</U>: Data networks of most online service providers are
    constructed with leased lines that must be obtained from national telephone
    companies, often monopolies or governmental entities. In the absence of effective
    competition, telephone companies may impose artificially inflated leased
    line prices and usage restrictions that impede the provision of service by
    online service providers.
  <LI>
    <U>Local loops pricing</U>: To reach their subscribers, online service providers
    often have no choice but to purchase local exchange services from monopoly
    or government-owned telephone companies. These services also are often priced
    at excessive rates, inflating the cost of data services to customers.
  <LI>
    <U>Interconnection and unbundling</U>: Online service providers must be able
    to interconnect with the networks of incumbent telecommunication companies
    so that information can pass seamlessly between all users of the network.
    Monopolies or dominant telephone companies often price interconnection well
    above cost, and refuse to interconnect because of alleged concerns about
    "network compatibility" or "absence of need for other providers."
  <LI>
    <U>Attaching equipment to the network</U>: Over the years, some telecommunication
    providers have used their monopoly power to restrict the connection of
    communication or technology devices to the network. Even when the monopoly
    has been broken, a host of unnecessary burdensome "type acceptance" practices
    have been used to retard competition and make it difficult for consumers
    to connect.
  <LI>
    <U>Internet voice and multimedia</U>: Officials of some nations claim that
    "real time" services provided over the Internet are "like services" to
    traditionally regulated voice telephony and broadcasting, and therefore should
    be subject to the same regulatory restrictions that apply to those traditional
    services. In some countries, these providers must be licensed, as a way to
    control both the carriage and content offered. Such an approach could hinder
    the development of new technologies and new services.
</UL>
<P>
In addition, countries have different levels of telecommunications infrastructure
development, which may hinder the global provision and use of some Internet-based
services. The Administration believes that the introduction of policies promoting
foreign investment, competition, regulatory flexibility and open access will
support infrastructure development and the creation of more data-friendly
networks.
<P>
To address these issues, the Administration successfully concluded the WTO
Basic Telecommunications negotiations, which will ensure global competition
in the provision of basic telecommunication services and will address the
many underlying issues affecting online service providers. During those
negotiations, the U.S. succeeded in ensuring that new regulatory burdens
would not be imposed upon online service providers that would stifle the
deployment of new technologies and services.
<P>
As the WTO Agreement is implemented, the Administration will seek to ensure
that new rules of competition in the global communications marketplace will
be technology neutral and will not hinder the development of electronic commerce.
In particular, rules for licensing new technologies and new services must
be sufficiently flexible to accommodate the changing needs of consumers while
allowing governments to protect important public interest objectives like
universal service. In this context, rules to promote such public interest
objectives should not fall disproportionately on any one segment of the
telecommunications industry or on new entrants.
<P>
The Administration will also seek effective implementation of the Information
Technology Agreement concluded by the members of the WTO in March 1997, which
is designed to remove tariffs on almost all types of information technology.
Building on this success, and with the encouragement of U.S. companies, the
administration is developing plans for ITA II, in which it will to seek to
remove remaining tariffs on, and existing non-tariff barriers to, information
technology goods and services. In addition, the Administration is committed
to finding other ways to streamline requirements to demonstrate product
conformity, including through "Mutual Recognition Agreements" (MRAS) that
can eliminate the need for a single product to be certified by different
standards laboratories across national borders.
<P>
Bilateral exchanges with individual foreign governments, regional fora such
as APEC and CITEL, and multilateral fora such as the OECD and ITU, and various
other fora (<I>i.e.</I> international alliances of private businesses, the
International Organization of Standardization [ISO], the International
Electrotechnical Commission [IEC]), also will be used for international
discussions on telecommunication-related Internet issues and removing trade
barriers that inhibit the export of information technology. These issues
include the terms and conditions governing the exchange of online traffic,
addressing, and reliability. In all fora, U.S. Government positions that
might influence Internet pricing, service delivery options or technical standards
will reflect the principles established in this paper and U.S. Government
representatives will survey the work of their study groups to ensure that
this is the case.
<P>
In addition, many Internet governance issues will best be dealt with by means
of private, open standards processes and contracts involving participants
from both government and the private sector. The U.S. government will support
industry initiatives aimed at achieving the important goals outlined in this
paper.
<P>
<A NAME="content"><B>8. CONTENT</B></A>
<P>
The U.S. government supports the broadest possible free flow of information
across international borders. This includes most informational material now
accessible and transmitted through the Internet, including through World
Wide Web pages, news and other information services, virtual shopping malls,
and entertainment features, such as audio and video products, and the arts.
This principle extends to information created by commercial enterprises as
well as by schools, libraries, governments and other nonprofit entities.
<P>
In contrast to traditional broadcast media, the Internet promises users greater
opportunity to shield themselves and their children from content they deem
offensive or inappropriate. New technology, for example, may enable parents
to block their children's access to sensitive information or confine their
children to pre-approved websites.
<P>
To the extent, then, that effective filtering technology becomes
available<FONT COLOR="#408080"> [see W3C
</FONT><A HREF="http://www.w3.org/PICS/"><FONT COLOR="#408080">PICS</FONT></A><FONT COLOR="#408080">]</FONT> content regulations traditionally imposed on radio
and television would not need to be applied to the Internet. In fact, unnecessary
regulation could cripple the growth and diversity of the Internet.
<P>
The Administration therefore supports industry self-regulation, adoption
of competing ratings systems, and development of easy-to-use technical solutions
(<I>e.g.</I>, filtering technologies and age verification systems) to assist
in screening information online.
<P>
There are four priority areas of concern:
<UL>
  <LI>
    <U>Regulation of content</U>. Companies wishing to do business over the Internet,
    and to provide access to the Internet (including U.S. online service providers
    with foreign affiliates or joint ventures) are concerned about liability
    based on the different policies of every country through which their information
    may travel.
    <P>
    Countries that are considering or have adopted laws to restrict access to
    certain types of content through the Internet emphasize different concerns
    as a result of cultural, social, and political difference. These different
    laws can impede electronic commerce in the global environment.
    <P>
    The Administration is concerned about Internet regulation of this sort, and
    will develop an informal dialogue with key trading partners on public policy
    issues such as hate speech, violence, sedition, pornography and other content
    to ensure that differences in national regulation, especially those undertaken
    to foster cultural identity, do not serve as disguised trade barriers.
  <LI>
    <U>Foreign content quotas</U>. Some countries currently require that a specific
    proportion of traditional broadcast transmission time be devoted to "domestically
    produced" content. Problems could arise on the Internet if the definition
    of "broadcasting" is changed to extend these current regulations to "new
    services." Countries also might decide to regulate Internet content and establish
    restrictions under administrative authority, rather than under broadcast
    regulatory structures.
    <P>
    The Administration will pursue a dialogue with other nations on how to promote
    content diversity, including cultural and linguistic diversity, without limiting
    content. These discussions could consider promotion of cultural identity
    through subsidy programs that rely solely on general tax revenues and that
    are implemented in a nondiscriminatory manner.
  <LI>
    <U>Regulation of advertising</U>. Advertising will allow the new interactive
    media to offer more affordable products and services to a wider, global audience.
    Some countries stringently restrict the language, amount, frequency, duration,
    and type of tele-shopping and advertising spots used by advertisers. In
    principle, the United States does not favor such regulations. While recognizing
    legitimate cultural and social concerns, these concerns should not be invoked
    to justify unnecessarily burdensome regulation of the Internet.
    <P>
    There are laws in many countries around the world that require support for
    advertising claims. Advertising industry self-regulation also exists in many
    countries around the globe. Truthful and accurate advertising should be the
    cornerstone of advertising on all media, including the Internet.
    <P>
    A strong body of cognitive and behavioral research demonstrates that children
    are particularly vulnerable to advertising. As a result, the U.S. has well
    established rules (self- regulatory and otherwise) for protecting children
    from certain harmful advertising practices. The Administration will work
    with industry and childrens advocates to ensure that these protections are
    translated to and implemented appropriately in the online media environment.
    <P>
    The rules of the "country-of-origin" should serve as the basis for controlling
    Internet advertising to alleviate national legislative roadblocks and trade
    barriers.
  <LI>
    <U>Regulation to prevent fraud</U>. Recently, there have been a number of
    cases where fraudulent information on companies and their stocks, and phony
    investment schemes have been broadcast on the Internet. The appropriate federal
    agencies (i.e., Federal Trade Commission and the Securities and Exchange
    Commission) are determining whether new regulations are needed to prevent
    fraud over the Internet.
    <P>
    In order to realize the commercial and cultural potential of the Internet,
    consumers must have confidence that the goods and services offered are fairly
    represented, that they will get what they pay for, and that recourse or redress
    will be available if they do not. This is an area where government action
    is appropriate.
    <P>
    The Administration will explore opportunities for international cooperation
    to protect consumers and to prosecute false, deceptive, and fraudulent commercial
    practices in cyberspace.
</UL>
<P>
Federal agencies such as the Department of State, U.S. Trade Representative
(USTR), the Commerce Department (NTIA), the FTC, the Office of Consumer Affairs
and others have already engaged in efforts to promote such positions, through
both bilateral and multilateral channels, including through the OECD, the
G-7 Information Society and Development Conference, the Latin American
Telecommunications Summits, and the Summit of the Americas process, as well
as APEC Telecommunications Ministerials. All agencies participating in such
fora will focus on pragmatic solutions based upon the principles in this
paper to issues related to content control.
<P>
<A NAME="technical"><B>9. TECHNICAL STANDARDS</B></A>
<P>
Standards are critical to the long term commercial success of the Internet
as they can allow products and services from different vendors to work together.
They also encourage competition and reduce uncertainty in the global marketplace.
Premature standardization, however, can "lock in" outdated technology. Standards
also can be employed as <I>de facto</I> non-tariff trade barriers, to "lock
out" non-indigenous businesses from a particular national market.
<P>
The United States believes that the marketplace, not governments, should
determine technical standards and other mechanisms for interoperability.
Technology is moving rapidly and government attempts to establish technical
standards to govern the Internet would only risk inhibiting technological
innovation. The United States considers it unwise and unnecessary for governments
to mandate standards for electronic commerce. Rather, we urge industry driven
multilateral fora to consider technical standards in this area.
<FONT COLOR="#408080">[See
</FONT><A HREF="http://www.w3.org/"><FONT COLOR="#408080">The World Wide
Web Consortium</FONT></A><FONT COLOR="#408080">]</FONT>
<P>
To ensure the growth of global electronic commerce over the Internet, standards
will be needed to assure reliability, interoperability, ease of use and
scalability in areas such as:
<UL>
  <LI>
    electronic payments;
  <LI>
    security (confidentiality, authentication, data integrity, access control,
    non-repudiation);
  <LI>
    security services infrastructure (<I>e.g.</I>, public key certificate
    authorities);
  <LI>
    electronic copyright management systems;
  <LI>
    video and data-conferencing;
  <LI>
    high-speed network technologies (<I>e.g.</I>, Asynchronous Transfer Mode,
    Synchronous Digital Hierarchy); and
  <LI>
    digital object and data interchange.
</UL>
<P>
There need not be one standard for every product or service associated with
the GII, and technical standards need not be mandated. In some cases, multiple
standards will compete for marketplace acceptance. In other cases, different
standards will be used in different circumstances.
<P>
The prevalence of voluntary standards on the Internet, and the medium's
consensus- based process of standards development and acceptance are stimulating
its rapid growth. These standards flourish because of a non-bureaucratic
system of development managed by technical practitioners working through
various organizations. These organizations require demonstrated deployment
of systems incorporating a given standard prior to formal acceptance, but
the process facilitates rapid deployment of standards and can accommodate
evolving standards as well. Only a handful of countries allow private sector
standards development; most rely on government- mandated solutions, causing
these nations to fall behind the technological cutting edge and creating
non-tariff trade barriers.
<P>
Numerous private sector bodies have contributed to the process of developing
voluntary standards that promote interoperability. The United States has
encouraged the development of voluntary standards through private standards
organizations, consortia, testbeds and R&amp;D
activities.<A HREF="#no.10" W3MIRHREF="http://www.w3.org/TR/NOTE-framework-970706#no.10"><SUP>10</SUP></A> The U.S. government also has
adopted a set of principles to promote acceptance of domestic and international
voluntary standards.
<P>
While no formal government-sponsored negotiations are called for at this
time, the United States will use various fora (i.e., international alliances
of private businesses, the International Organization for Standardization
[ISO], the International Electrotechnical Commission [IEC], International
Telecommunications Union [ITU], etc.) to discourage the use of standards
to erect barriers to free trade on the developing GII. The private sector
should assert global leadership to address standards setting needs. The United
States will work through intergovernmental organizations as needed to monitor
and support private sector leadership.
<P>
<A NAME="strategy"><FONT SIZE="4"><B>A COORDINATED STRATEGY</B></FONT></A>
<P>
The success of electronic commerce will require an effective partnership
between the private and public sectors, with the private sector in the lead.
Government participation must be coherent and cautious, avoiding the
contradictions and confusions that can sometimes arise when different
governmental agencies individually assert authority too vigorously and operate
without coordination.
<P>
The variety of issues being raised, the interaction among them, and the disparate
fora in which they are being addressed will necessitate a coordinated, targeted
governmental approach to avoid inefficiencies and duplication in developing
and reviewing policy.
<P>
An interagency team will continue to meet in order to monitor progress and
update this strategy as events unfold. Sufficient resources will be committed
to allow rapid and effective policy implementation.
<P>
The process of further developing and implementing the strategy set forth
in this paper is as important as the content of the paper itself. The U.S.
Government will consult openly and often, with groups representing industry,
consumers and Internet users, Congress, state and local governments, foreign
governments, and international organizations as we seek to update and implement
this paper in the coming years.
<P>
Private sector leadership accounts for the explosive growth of the Internet
today, and the success of electronic commerce will depend on continued private
sector leadership. Accordingly, the Administration also will encourage the
creation of private fora to take the lead in areas requiring self-regulation
such as privacy, content ratings, and consumer protection and in areas such
as standards development, commercial code, and fostering interoperability.
<P>
The strategy outlined in this paper will be updated and new releases will
be issued as changes in technology and the marketplace teach us more about
how to set the optimal environment in which electronic commerce and community
can flourish.
<P>
There is a great opportunity for commercial activity on the Internet. If
the private sector and governments act appropriately, this opportunity can
be realized for the benefit of all people.
<P>
  <HR>
<P>
<B>NOTES:</B>
<P>
<A NAME="no.1">1.</A> The Administration's concept of the Global Information
Infrastructure (GII) includes wired and wireless networks; information appliances
such as computers, set-top boxes, video phones, and personal digital assistants;
all of the information, applications and services accessible over these networks;
and the skills required to build, design and use these information and
communications technologies. The Internet is a global matrix of interconnected
computer networks using the Internet Protocol (IP) to communicate with each
other. For simplicity, the term "Internet" is used throughout this paper
to encompass all such data networks and hundreds of applications such as
the World Wide Web and e-mail that run on those networks, even though some
electronic commerce activities may take place on proprietary or other networks
that are not technically part of the Internet. The term "online service provider"
is used to refer to companies and nongovernmental institutions such as libraries
and schools that provide access to the Internet and other online services,
and groups that create content that is delivered over those networks.
<P>
<A NAME="no.2">2.</A> The Administration has directed federal agencies to
employ digital communications tools in their day to day operations. Examples
include enabling students to apply for and receive federal college loans
online, automating and streamlining federal procurement or grant applications,
and providing small business owners with information and guidance about business
opportunities overseas. See "Government Information Technology Board, Access
America", <I>formalized by</I> Executive Order <I>Federal Information
Technology</I> (July 6, 1996).
<P>
<A NAME="no.3">3.</A> "Bureau of Economic Analysis, U.S. Department of Commerce,
Survey of Private Services Transactions" (Nov. 1996). The estimate covers
1995 and does not include transactions between affiliated companies, which
could add as much as $47 billion in additional exports.
<P>
<A NAME="no.4">4.</A> Such commercial activity already has begun, with 1995
sales estimated at $200 million. <I>See</I> "American Electronics
Association/American University, Internet Commerce" (Sept. 1996).
<P>
<A NAME="no.5">5.</A> Recognizing the important role that government can
play, the Administration already has provided strong support for the development
of the GII. In 1993, it issued a report entitled "NII: Agenda for Action".
The 1995 "GII: Agenda for Cooperation" extended the vision of the National
Information Infrastructure (NII) to a global platform.
<P>
<A NAME="no.6">6.</A> <I>E.g.</I>, the Committee on Payments and Settlement
Systems of the Bank for International Settlements, the Basle Committee on
Banking Supervision, and the Financial Action Task Force.
<P>
<A NAME="no.7">7.</A> NTIA concluded that opt-in consent (information cannot
be used without the data subject's explicit authorization) is necessary for
sensitive information, such as personally identifiable medical information,
and opt-out consent (information may be used if the data subject does not
explicitly say that it may not be used after meaningful notice) is sufficient
for non-sensitive information. Since publishing its report, NTIA has continued
to investigate how the private sector can develop and implement meaningful
self-regulatory regimes.
<P>
<A NAME="no.8">8.</A> For purposes of this paper, the term "telecommunications"
encompasses voice telephony and data services, including information access
technology.
<P>
<A NAME="no.9">9.</A> These principles were elaborated in "Global Information
Infrastructure: An Agenda for Cooperation," released by the Administration
in February, 1995.
<P>
<A NAME="no.10">10.</A> Examples include government support for 6bone, an
IPv6 testbed; DARPA's support for CommerceNet, the World Wide Web Consortium,
and research on multicast and quality of service; NSF's support for the
Lightweight Directory Access Protocol; and NIST's development of tools for
testing compliance with the Virtual Reality Modeling Language (VRML) standard.
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