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The Short History Of E-Commerce
by Heather Greenfield
The Mayflower Hotel is a Washington landmark that often houses presidential administrations during power transitions. Last week, it was the site where Software and Information Industry Association officials spoke of the transition to an Internet economy. They gathered to reflect on the past 10 years of e-commerce policy, present issues to address and the future of e-commerce.
Ten years ago this month, the Clinton administration released its "Framework for Global Electronic Commerce" with a national news conference. It is credited by some for setting the tone for a largely unregulated, untaxed Internet, and fueling both entrepreneur and investor interest in e-commerce.
The report noted the Internet's potential to become the most active trading vehicle over the next 10 years. It outlined basic principles that favored letting the private sector take the lead; refraining from new taxes, regulations or bureaucratic procedures; and involving the government only when needed "to ensure competition, protect intellectual property and privacy, prevent fraud, foster transparency, and facilitate dispute resolution."
Perhaps one indicator of how far the Internet has come in the last decade was the fact that the event featuring the report's author, former senior Clinton adviser Ira Magaziner, was webcast.
The Past: The Wild West
"In many ways, electronic commerce is like the wild West of the economy," President Clinton said during the release of the e-commerce document in July 1997. He noted that his first goal in advocating the minimalist government approach was to "do no harm."
Magaziner said last week that he was proudest of the report for what was not in it. "The greatest significance of the framework from my point of view was the dog that didn't bark -- the things that didn't happen," he said.
Magaziner reminded people that when the report was published, the European Union was talking about a bit tax on all transmitted data, and former IBM executive John Patrick said France was requiring that 15 percent of all Internet discussions happen in French. The FCC also had considered regulating the Internet as it did the telecommunications industry, an idea that SIIA President Ken Wasch said was "thankfully" rejected.
Magaziner said a series of lawsuits "could have degenerated into a situation where all different judges, who didn't understand what the Internet was about, [were] setting different standards." Wasch added, "If the Internet had developed into a patchwork quilt of thousands of different legal systems, you'd end up having all kinds of jurisdictional fights."
Magaziner also counted as a success the decision to keep the U.N. International Telecommunication Union out of Internet-addressing issues by forming the Internet Corporation for Assigned Names and Numbers, despite what he called ICANN's "blemishes."
He said Clinton administration policies fought censorship and kept other governments from creating national standards. "We couldn't predict what the future of the Internet was, so the worst thing we could do was try to regulate it," Magaziner said.
Magaziner also credited several laws with setting a tone for Internet growth: the Internet Tax Freedom Act (set to expire in November), which bans taxes on Internet access and taxes that treat e-commerce differently than other transactions; the Digital Millennium Copyright Act, an oft-criticized law that set intellectual property rules for the digital era; and a law that gave electronic signatures the same legal weight as handwritten signatures.
The Present: E-Commerce Infancy
Despite the volatility, Magaziner said Internet commerce has lived up to its promise 10 years ago to grow at 10 times the rate of the rest of the economy.
SIIA members created a list of the top 10 developments in e-commerce since Magaziner's document set the framework for Internet growth. The emergence of Google topped the list, followed by: high-speed Internet penetration reaching 50 percent in June 2004; eBay auctions; Amazon.com; Google AdWords; open Internet standards; Wi-Fi wireless technology; user-generated content; Apple Inc.'s iTunes music service; and the BlackBerry handheld device.
IBM's Patrick advocated adding encryption to the list, as he said there would be no e-commerce without the technology to protect financial data in online transactions.
Asked what he wished the Clinton administration had done differently, Stewart Baker, an assistant secretary at the Homeland Security Department, said more built-in security would help his agency catch people exploiting the system. He said the shift from young people hacking for publicity to organized criminals hacking for financial gain is "a much harder model to eradicate, and I don't think we're going to be able to do it."
Patrick said that while he sympathizes with the problem, growth likely would have stunted with better security. "The beauty of the Internet is it was not over-designed," he said.
Magaziner said the government could have created a better climate for competition among various media to build infrastructure. He said he has had better mobile telephone service during travels in Rwanda than in some parts of the United States and is disappointed with U.S. broadband deployment. "If anyone said the U.S. would be 15th in broadband deployment 10 years ago, I would have said no way," Magaziner noted. "If someone had said Korea would be one or two, I would have said they were smoking something."
He also agreed that the tech industry still has issues to fight. "Obviously when you take a non-regulatory approach, it's not something you do once," Magaziner said. "Those battles you all are fighting on a regular basis."
After the panel discussion, Keith Kupferschmid of SIIA, offered patent reform as an example of an existing law that needs updated for e-commerce. "I don't think anyone envisioned the damage piracy is causing right now," Kupferschmid said. "Certainly nobody thought legitimate e-commerce businesses like Google and eBay would be facilitating those pirates."
Wasch said other ongoing battles include better data-security regulations and changes to immigration law to access more highly skilled workers.
The Future: Imagining The Unimaginable
The next 10 years of e-commerce are considered as far beyond imagination as the past 10, but Patrick did offer some possibilities and predictions. He said going on the Internet, for instance, no longer will mean going to a computer. "Where is the Internet?" he asked, holding up his new Apple iPhone. "Wherever you are. That's a big shift."
Patrick envisions a healthcare information future in which a radio-frequency identification tag on a hospital gurney wheeling toward a treatment room would trigger a blog posting to the patient's primary physician. He also sees technology ultimately solving issues of censorship in China.
As for security, Patrick said technology exists now to make data as secure as people want. He said all major businesses have privacy policies now, but what they don't have is a way to know if they are following their own policies.
"The big task ahead is designing infrastructure to know if personal data has been touched," Patrick said. He hopes lawmakers and others will use technology, not laws, to block negatives like spam or security breaches.
Despite the focus on encryption, Baker said authentication should be a higher security priority. "I only wish I were smart enough to know how the government could successfully drive adoption [of authentication]," Baker said. "If there's someone in the government who knows how to do this, it's not [Homeland Security]," he said as the crowd laughed.
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