Free-form Reform

The White House’s recent policy statement on the Internet reveals a surprisingly hands-off approach. But will this libertarian turn benefit American democracy — or corporate interests?


“This is a daunting room,” Ira Magaziner remarked as he began an address to about 100 interested listeners on January 30th. He was talking about the physical space — a long, balconied ballroom at Washington’s Mayflower Hotel — but as he looked out at the audience of journalists, lawyers and technology mavens, Magaziner might have been referring to them too. As architect of the Clinton administration’s first comprehensive policy statement on the Internet, Magaziner spoke to this gathering in a concerted push to convince the various groups with enormous stakes in the future of the Net that the government is on their side.

Released in December 1996, “ A Framework for Global Electronic Commerce” represents the U.S. government’s first foray into Internet regulatory policy. As forays go, it isn’t much of one. The dominant assumption behind the policy is that since cyberspace is not geographically limited, the best thing the U.S. government, and every other country’s government, can do, is butt out. Hence, the laissez-faire, libertarian language of the Magaziner report: “Governments should refrain from imposing new and unnecessary regulations…or new taxes and tariffs on commercial activities that take place on the Internet.” In the event that governments need to concern themselves with matters of Internet business transactions, they should do so only within “a predictable, minimalist, consistent, and simple legal environment for commerce.” Above all, the paper advises, “governments should recognize the unique qualities of the Internet…[and] encourage the evolving industry self-regulation and support the efforts of the private sector organizations…to facilitate the successful operation of the Internet.”

It’s not hard to figure out what’s going on here. The Clintonites seem to have caught Internet fever. They believe the Net represents the next, untapped frontier of international business. Within ten years, Magaziner predicted in his speech at the Mayflower, “exports and trade across the Internet will be the largest sector in the whole economy.” And because most rules governing Internet trade and commerce — about who can sell what to whom and for how much — haven’t been written yet, the White House is launching a pre-emptive strike. By pledging that the U.S. government has no plans to seriously police cyberbusiness within its own “borders,” the administration hopes our trading partners will follow suit, thus delivering lucrative markets and millions of online customers to American businesses.

What’s missing…

Following his talk in Washington last month, Magaziner was roundly applauded by a panel of lawyers and tech company officials for his sensibly free-market policy. (They did, however, denounce the paper’s stance on software encryption, which reiterates the White House’s hard line on exports of such products.) For the small coterie of critics of the report, however, that’s precisely the cause for alarm. So relaxed — or non-existent — are the proposed regulations on Internet business that they could conceivably leave Internet consumers vulnerable to massive amounts of unwanted advertising, commercial fraud and invasions of privacy.

Indeed, the paper is notable for what it does not address, or even seem to consider. As James Love of the Center for the Study of Responsive Law has pointed out, the paper ignores the question of how current advertising regulations should be applied to the Internet. In fact, regulation of advertising got only one small mention in the paper:

Some countries regulate television advertising in a manner that would stringently restrict the language, amount, frequency, and duration of teleshopping and advertising spots. While recognizing the legitimate cultural concerns, these reasons should not be invoked as anti-competitive inhibitors to trade on the Internet.

In an e-mail to Magaziner, Love wonders how the public, which benefits in many ways from ad regulations in other media, would be affected by their absence on the Internet. Would tobacco companies who have agreed to curtail advertising aimed at children, be so restrained on the Web? How would the government monitor, say, who surfs to the Joe Camel or Marlboro Man homepage? The same goes for other industries, such as pharmaceutical and medical device manufacturers, whose advertising is required under current law to include health information. Would drug companies need operate under similar mandates in cyberspace? And how would the government ensure promotions of securities on the Internet, and provide consumers with truthful assessments of a stock’s performance? The paper answers none of these questions. It doesn’t even ask them.

Another shortcoming of the administration’s framework is its flimsy language on the protection of consumer privacy. The paper’s “privacy principles” state merely that “data-gatherers should inform consumers what information they are collecting, and how they intend to use such data” and that such gatherers should “provide consumers with a meaningful way” to “limit use and re-use” of information about themselves.

Requiring that data-gatherers notify people of their collection practices, Marc Rotenberg of the Electronic Privacy Information Center says, skirts the reason why privacy is under threat in the first place: the exchange of personal data often occurs when the affected person isn’t even involved, and thus has no control over what’s being exchanged. In a memo to Magaziner last year, Rotenberg pointed out one instance where a company bought data from a credit agency, then turned around and sold Social Security numbers and unlisted phone numbers to subscribers of a personal locator service. “It’s just a very disappointing document,” he says. “The facade of it is attractive — it’s something people feel strongly about, keeping the government out of the Internet — but on the privacy issue in particular [the administration is] totally out of touch.”

…and why

How did this happen? How did an administration that invests in the Internet the very health of American democracy concoct a plan that seems to put people last?

Unfortunately, it’s an old answer. MCI and Wired might be touting the “people power” of the Internet, but in the end, when it comes to Internet policy, it’s corporate interests that have the ear of the Clinton Administration.

A duty-free Internet that imposes few if any restraints on their business activities is a market of unparalleled potential riches. The White House knows well the financial and political power of the technology industry’s elites — many of whom helped re-elect the Democrats in November — so it is careful not to upset them. Al Gore’s campaign for president in 2000, after all, began when Clinton’s second term did last month.

There’s one final irony. Just who is the man who oversaw the creation of this surprisingly free-market document? Ira Magaziner headed the task force in 1993 that drew up the Clinton health care plan, which became a caricature of big-government liberalism run amok. At his warmly-received speech last month, Magaziner looked as gaunt and rumpled as he did in 1993, but his rhetoric could not have sounded more different. “Widespread competition should be the defining feature of the new digital age,” he said. “It is a mistake for governments to interfere in this organic world.” But in his rush to deliver to Internet patrons a policy that appears to be the precise opposite of the chunky, chart-heavy one he designed four years ago, Magaziner may be composing another dramatic failure. As Love puts it: “What we see in this report is an organizational chart that has nothing on it altogether.”

Romesh Ratnesar is a reporter/researcher for The New Republic.