Caught in the Web

News from the ‘Net

by Al Massey

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It seems to be a sad, defining hallmark of the technology age that as soon as a thing becomes useful legions of politicians line up to paint it, salute it, tax it and regulate it. This is no less true of this “thing” we refer to as the Internet.

In the thirty-odd years since a few cyber-warriors strung four computers together proving that networking could work, 171 countries and over 40 million people have signed on to the mother of all networks, the Internet. Trouble is, they have brought with them almost as many regulators and taxing authorities as they have users. Governments, as a rule, can’t seem to grasp the concept that the Internet is a great borderless country where packets of data flow from any computer to any other computer in the wo rld, hindered only by firewalls, dirty lines and slow connections.

In the imperfect world we live in it seems that every country with Internet access is trying to enact everything from a bit-tax to electronic border control to information warfare. If they can’t make the world conform to their moral code of conduct they will just tax it to death or put up “electronic fences” and keep the bad guys out. Data crime is straining the knowledge base of legal experts the world over.

A random sampling of world headlines shows that China and Singapore are attempting to limit their citizens’ access to the Internet by making users register with the government. China has recently placed what it calls “choke points” on routers in an effor t to halt access to Web sites deemed immoral or politically sensitive. Sites accused of spreading “spiritual pollution” include the Los Angeles Times, China News Digest, Wall Street Journal, Washington Post and the New York Times, among others. “This is another example of China taking a step backward in the Information Age,” said one Beijing based diplomat.

Now that they have virtually doubled Singapore’s Internet capacity and weaned themselves off American servers onto their own fiber-optic cable, the Dilberts at the Singapore Broadcasting Authority (SBA) have found an ingenious new use for proxy servers. By storing the entire Internet on a local hard disk it becomes easier to remove those pages they find objectionable. Yes, friends, direct access to Web servers is blocked and users now have to use government owned proxy servers.

Charged with regulating the Internet, the SBA has issued a sweeping set of regulations that restrict viewing and prohibit interacting with Web sites. Utilizing filters, the SBA scans Usenet to exclude articles deemed “inappropriate.” ISPs and publishers have to register their sites with the SBA, which reserves the right to remove all content it doesn’t like. Some of the content Singapore bans is that which “excites disaffection against the government,” which covers “religious deviations or occult practi ces such as Satanism,” or “propagates sexual perversion, such as homosexuality and lesbianism.”

Other Asian countries such as Vietnam and South Korea are simply requiring users to get a permit before logging on to the ‘Net.

Further south, Australia is poised to implement stringent online censorship regulations by forcing Internet Service Providers to police their users. Under the proposed regulations ISPs are forbidden from knowingly allowing a person to use their service t o publish content that would be refused classification under the Office of Film and Literature Classification (OFLC) guidelines.

This is an interesting twist of whimsical logic. While R.E.M.’s “ Losing My Religion” video and Derek Humphry’s “Final Exit: The Practicalities of Self-Deliverance and Assisted Suicide for the Dying” are both considered potential incitements to undesirable behavior – homosexuality and suicide, respectively, Brett Easton Ellis’ violent novel American Psycho, which has actually been cited as a contributing factor in at least one Australian murder, is not.

“This whole concept of making service providers responsible for content is bizarre,” said Kimberly Heitman of Electronic Frontiers Australia. “It’s as senseless as making paper makers responsible for books published using their paper.” The end result of making service providers ferret out what OFLC might or might not think Australian citizens should see and hear will, fears Heitman, be over-zealous self-censorship. “ISPs whose skills are primarily technical are expected to enter the legal minefield of c ensorship classification,” he said. “This is an extraordinary burden which can only result in perfectly legal material being removed ‘just in case’.”

Meanwhile, Magnus Lemmel, deputy director of the European Commission’s Industry Department, warned against individual European Union countries taking their own initiative in regulating the Internet electronic commerce. “If this happens we will not be abl e to build up a coherent electronic commerce system in Europe,” he said. Lemmel went on to state that “electronic trading between EU member countries is a potential $100 billion per year, and encompasses buying and selling on the Internet, e-mail, fax, e lectronic data interchange and electronic payments.”

It appears that Lemmel and his cohorts have their work cut out for them, however, if a recent meeting in Bonn, Germany is any indication. Delegations from the European Union’s 15 countries, the United States, Japan, the World Trade Organization and sever al other international bodies are trying to decide the fate of this thing called the Internet and develop a global Internet regulation strategy. It appears everyone wants to lead and no one wants to cooperate in this effort as Germany, the U.S., Netherla nds, U.K. and France all have clear nationalistic ideas of who should govern CyberSpace.

Two plans are emerging as front runners: the “private-sector-should-lead” approach put forth by the Clinton Administration and Germany’s government-driven “comprehensive legal framework.” Germany’s Economic Minister is trying to persuade his European cou nterparts that the German approach is best suited to “realizing the potential” of the global information networks.

Key to the German initiative is a controversial German law, the new Information and Communications Services Bill, that basically tightens and extends to the Internet existing legislation for printed and audiovisual media. It addresses protection of minor s, certification of electronic transactions, personal privacy and liability for illegal content circulating over electronic networks.

The Clinton plan pushes to make the Internet a “global-free-trade-zone” with almost no new regulation except key certification, privacy and copyright policies. Apart from the question of encryption, the U.S. plan is more market driven, and appears to be more in tune with the way the Internet works, while the German plan is more an attempt to quickly extend the existing liability scheme into Cyberspace before there is sufficient experience, rather than starting from scratch and doing something specific t o the Internet.

According to noted German lawyer Christopher Kuner, of the Frankfurt firm of Gleiss, Lutz, Hootz and Hirsch, “Germany already has the most severe data protection law in the world, so complicated that nobody understands it.” The complications seem to stem from the fact that “this law uses old concepts to regulate a new reality.”

As this article is being prepared (July 23, 1997) Germany has announced that effective August 1, 1997 every PC capable of pulling audio or video off the Internet will be levied $200 per year. The law, due to take effect August 1st, could cost large compa nies hundreds of thousands of dollars in extra expenses — whether their PCs actually run video from the Internet or not — and possibly slam Europe’s already halting Internet movement into reverse.

Recognizing that Information Technology has contributed to a new economy, which has increased productivity without commensurate growth in jobs, a group headed by Luc Soete and Karin Kamp of the University of Maastricht in the Netherlands has taken up the challenge of finding new ways to distribute income resulting from this increased productivity. They have proposed that a “bit tax” be applied to interactive digital communications, which can provide the new fiscal framework for distribution of income wh en jobless growth becomes the rule.

This “bit tax” would replace value-added taxes (VAT) on immaterial goods and services and levy taxes only as “a proportion of the intensity of the information trasmission.” “Transmission,” not “transaction”; i.e the number of bits flowing across wires, n ot their “value.”

As global borders become blurred and our economy moves toward non-material goods, “it becomes very difficult to talk about a fee based on value added in any real or meaningful way,” Soete said. The cost of e-mail messages, for example, has no real relati onship to their value. “We need to adjust the taxation forms to make sure they will include these new activities,” Soete added. ”That’s urgent: the Internet is already undermining sales tax revenues such as VAT.”

This last thought has not been lost on the local, state and federal tax agents here at home, as Connecticut, New York and Texas are prime examples of taxing authorities well on their way to imposing new taxes on the Internet.

Generally speaking, the mood of the states is to expand existing tax statutes to the Internet, not to let the E-commerce industry blossom untethered.

The Internet holds a lot of promise and states won’t let go of this potential lightly.

Hypothetical Case

Consider a hypothetical case put forth recently by the United States Treasury Department. Why should the state of Maine get all of the tax revenue from L.L. Bean, if a portion of L.L. Bean’s Internet based sales is transacted on a server based in New Yor k? A Treasury Department official says E-commerce boom, particularly interstate and international Internet based sales of goods, services and information, has each and every state government scrambling to figure out how to get a piece of your revenue act ion.

In summing up this issue of “taxation and regulation,” of the Internet no one said it better than White House aide Ira Magaziner, speaking at a recent Conference on Computers, Freedom, and Privacy: “We have a lot of smart lawyers in the government, and if we locked them in a room and asked them to think of every way a person could get screwed on the Internet, they could promulgate thousands of regulations.”

Al Massey is a HAL-PC member.

E-mail me at webmaster@hal-pc.org with any comments you have and tell me what you want to see here.

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Last modified: 1997:08:31