[Nettime-bold] High-tech titans put the squeeze on privacy regs

[Henk <henk@waag.org>]

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High-tech titans put the squeeze on privacy regs
By Ted Bridis, WSJ Interactive Edition
March 13, 2001 5:15 AM PT
URL:

WASHINGTON -- A group of companies and industry organizations have quietly
undertaken a campaign to nip Internet-privacy legislation in the bud.

Aiming to halt the advance of dozens of privacy bills in Congress and in
state legislatures across the country, the group Monday went public with
four industry-funded studies asserting that privacy legislation would cost
consumers billions of dollars annually.

Led by the Online Privacy Alliance in Washington, the loosely organized
campaign is attacking legislative proposals on three fronts: identifying
expensive regulatory burdens, raising questions about how any U.S. Internet
law would apply to non-Internet industries, and assuring lawmakers that
privacy is best guarded by new technology, not new laws.

Members of the Online Privacy Alliance include Microsoft, AOL Time Warner,
IBM, AT&T, BellSouth and Sun Microsystems . These companies also have been
working with the Direct Marketing Association and others. The DMA, based
here, is the largest trade association for direct-mail and marketing
companies.

"I fundamentally object to carving out the Internet. Let's not single out
and attack the medium," said Richard Purcell, director of privacy at
Microsoft, who last week showed some lawmakers the company's privacy tools
in its new Internet-browser software.

Participants concede the campaign is largely pre-emptive, since none of the
privacy bills pending in Congress have made significant headway. But they
candidly express fears that any major privacy breach on the Internet could
jump-start legislation. And the group members are increasingly concerned
about the patchwork of state privacy laws passed amid broad public support
for online-privacy protections.

"There is a real fear that some politician riding his horse is going to say,
'I'm going to tell my constituents that I'm protecting their privacy,' "
said Michael Turner of the Information Services Executive Council, which
wrote one of the studies, which was published for the Direct Marketing
Association.

"These horror stories, these anecdotes, are really driving the issue."

Support for protection, too
Supporters of privacy-protection measures, however, contend lawmakers face
enormous public pressure to move ahead, noting that some high-tech companies
-- including Intel, Hewlett Packard and AOL--now favor modest protections
and believe new laws may be inevitable.

"This is not an issue on the radar screen. It is the radar screen," said
Marc Rotenberg of the Electronic Privacy Information Center in Washington.
"It's hard to imagine that Congress is not going to act on the privacy issue
... [but] I don't think anyone expected a bill to be flying to the floor at
this point."

The studies published Monday conclude that proposals to limit companies from
sharing or selling customer information without permission would cost 90 of
the largest financial institutions $17 billion a year of added expenses, and
would result in a $1 billion "information tax" on consumers through costs
tacked onto products from catalogs and Internet retailers. The studies also
said tougher privacy rules would boost the risk of fraud and identity theft
and restrict available consumer credit. Their argument: If an Internet
retailer can't verify address information with a credit company, fraud
becomes harder to police.

Fred H. Cate, head of Indiana University's Information Law and Commerce
Institute and a critic of new privacy laws, said the overall financial
impact of privacy protections on all of the U.S. economy would be "in the
trillions." At a news conference Monday, Cate took the lead role in
introducing the reports' authors and fielding questions about their
conclusions.

The economists who wrote the reports said they didn't try to calculate any
possible revenue increases from Internet transactions tied to greater
consumer confidence. Public-opinion polls show many consumers are afraid to
buy products online because of privacy and fraud concerns.

The money spent to produce the four studies underscores the importance the
industry attaches to the issue. Turner said his study, which examined
catalog sales, cost $50,000. Another was funded with a $10,000 grant from
the World Bank. The two other studies, funded by Ernst & Young LLP and the
Tower Group consulting firm, each cost more than $50,000, but the firms
declined to say exactly how much they spent.


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