The Clinton administration's new policy, A Framework for Global Electronic Commerce -- still in draft stage at this writing -- is clearly designed to provide a safe and unbridled network environment that encourages all legitimate forms of American electronic enterprise.
"Many businesses and consumers are still wary of conducting extensive business in cyberspace," said an official summary of the new policy, "because of the lack of a predictable legal environment governing transactions and resulting concerns about contract enforcement, intellectual property protection, liability, privacy, security and other matters. Bold new initiatives will address these concerns."
At the same time, cyberspace is to remain an open, unregulated "duty- free zone" where there are no new taxes and where electronic payment systems are allowed to evolve without premature government involvement. "The Clinton administration firmly believes that all parties can gain from a non-regulatory, market-oriented approach to electronic commerce," the summary stated. "By acknowledging the unique characteristics of the Internet and avoiding undue restrictions, governments can take advantage of a historic opportunity and contribute to the growth of electronic commerce worldwide."
The new policy is to serve as a road map to help usher in greater prosperity for both U.S. and world economies through increased business efficiency and reduced operating costs. However, the policy's prominence and good sense should not completely overshadow another important document issued by the U.S. government in 1994 -- a study entitled Electronic Enterprise: Looking to the Future conducted by the now-defunct Office of Technological Assessment (OTA) at the request of the Senate Committee on Commerce, Science and Transportation and the House Committee on Science, Space and Technology.
This OTA study takes a strategic look at the future of electronic commerce, emphasizing that the way electronic markets evolve and the form they take "will have significant consequences for the functioning of the economy as a whole." And while it maintains that open, flexible and easily interconnected networks are necessary to allow businesses to move quickly and strategically to respond to changing circumstances in the global marketplace, it also points out that "it is unlikely that the future needs of all businesses will be adequately met through competition alone."
The Clinton administration's policy clearly embraces the global realities of the Internet and seeks to address the immediate concerns that many businesses and other organizations have with its free-
wheeling anarchy. What is missing from the new policy, however, is a balance between these concerns and the long-term economic issues and problems -- some of the very things which were examined in great detail in the OTA study.
As Roger C. Herdman, former assistant director of the OTA Industry, Commerce and International Security Division put it, "If American businesses are to benefit fully from electronic commerce ... adequate attention must also be given to the social and economic factors that govern the use of network technologies."
Much has changed in the three years since the OTA study was released. Yet it remains the most extensive look at the future of electronic commerce so far published by the U.S. government. It involved nearly 200 high-level participants representing business, labor, consumer and other private sector groups. And simply touching upon a few of the issues the study raised illustrates why it should not be forgotten.
Fair Competition
Historically, the diffusion of technology in the United States has tended to be uneven. In the case of the telephone, for example, major trunks linked Northeastern cities first, then smaller towns near these, then major Midwestern cities, and so on. The telephone was patented in 1876 but did not reach Chicago until 12 years later and transcontinental service was not inaugurated until 1915. Many rural areas were still without service as late as 1949. So businesses in the Northeast enjoyed a technological head start of several decades.
With the advent of electronic commerce, computer networks, particularly the Internet, have not only become the new means of doing business, the network, in effect, also becomes the marketplace itself. New technology such as high bandwidth access must be evenly and widely deployed if the economic benefits are to be shared broadly across all geographical areas.
Timing of this deployment can be critical to the future prosperity of a region. Computer networks benefit from economies of scale and scope, so latecomers can be heavily disadvantaged in attracting users and providing services. In theory, something like the Internet allows even small and rural businesses to participate in the global economy. But as communication and information technologies converge, and as bandwidth becomes of increasing importance, cheap high-speed access is unlikely to develop evenly and rapidly across all regions of the United States if left completely to market forces alone.
It is natural that any business will seek to secure economic advantage for itself. The OTA study pointed out that civilizations spanning centuries have recognized the power of information. The city of Venice at the height of its economic power sought to control all trade-related information. Similarly, in the bazaar economies of the Middle East, a fierce competition for privileged information drives events. "Just as the Venetian merchants and Middle East bazaars tried to secure their economic advantage by controlling information access, the powerful economic interests today are likely to attempt to do the same thing," the study suggested.
While commercial demand is small, most vendors are likely to pursue an open network strategy. However, once a critical mass builds, vendors may be increasingly tempted to adopt an alternative strategy of using software and other means to develop privileged, propriety networks which not only restrict access, but which also act as new barriers to market entry.
Issues such as these raise complex questions about the new meaning of both equitable access to the electronic marketplace and universal service. To operate on a level playing field, for instance, a new business will need to be able to access the electronic networks that serve as the market.
The OTA study points out, "Universal service is a relative term whose meaning is bound to change over time and in different circumstances. In the early years of the United States, the goal of universal service was to provide equitable access to the postal system. The concept had to be redefined repeatedly to take into account changes in the social and economic environment, as well as the development of new means of information delivery -- the public school system, mass media, telegraph and telephone.
"Once again, as the United States moves from the industrial era into an age where knowledge and information play an enhanced role, and the variety of information and communication services is continually evolving, the term 'universal service' must be revisited."
Role of Government
The OTA report, while suggesting that the private sector clearly should have the primary role in developing, deploying and operating the National Information Infrastructure, also emphasized that, "Government, however, cannot stand idly by. In its various roles as regulator, broker, promoter, educator and institution-builder, the government must establish the rules of the game and the incentive structure that will help determine private sector choices. The same is true of electronic commerce. In its role as regulator, the government will need to ensure that electronic networks and markets are evenly deployed, open and accessible on an equitable basis."
In a knowledge-based society such as ours, choices about the design, architecture and structure of information, or the rules governing their availability and use, will have far-reaching social and economic consequences. And once a decision is made, technology tends to become firmly established along a given path.
"Ironically," the report stated, "precisely at the moment when technological advances provide a unique opportunity for the United States to rethink its technological and socio-economic choices, the locus of decision making is being transferred from the public to the private sector. With deregulation and the shift of network intelligence and control to the user, many components that are needed to support electronic commerce now fall outside the government's traditional purview."
There is little doubt that electronic commerce will erode the lines of demarcation between domestic and foreign markets and, as a result, all governments will have to rethink their responsibilities toward the maintenance of their economies.
Coupled with the pace of change, the implications of electronic commerce are so far-reaching that they cannot be ignored in many other areas of government regulation and control. "If, for example, care is not taken to develop and maintain a highly educated and skilled workforce, global networks will likely facilitate the substitution of offshore labor for U.S. workers," the study stated. "Similarly, unless efforts are taken to diffuse and commercialize new information technologies more rapidly, their benefits will be realized elsewhere."
Unfortunately, most American workers today are not well-trained, especially when measured against international standards. Although some U.S. firms are world leaders in training, many others know little about best practices and so the training varies greatly.
A well-educated, technologically savvy workforce starts with American public schools. But effective life-long education must continue in the workplace. And the global realities of electronic commerce mean that government must take measures to do all it can to encourage better on-the-job training.
At the same time, American businesses themselves will have to change their attitudes and procedures significantly if information and communication technologies are going to yield substantive gains. "Although U.S. businesses investment in information technology has exceeded that of all other major industrial countries, U.S. productivity gains have essentially been stagnant in services, the very sector in which information technology investment has been highest."
Beyond the more obvious issues, the OTA report argues that we are in the midst of a profound social upheaval comparable to the shift from an agricultural- to an industrial-based economy which brought about the exodus of people from rural communities to urban areas and the decline of small, proprietary businesses in favor of large, vertically integrated firms. The impacts of the industrial revolution were both positive and negative and required "considerable time and social and economic restructuring before they could be fully absorbed."
We face a similar situation today with the prospect of both positive and negative results. "To the extent that policy makers and businesses grasp the implications of these developments, they can make knowledgeable choices about how the nation will deal with them and take steps to offset their negative consequences. Unlike the lawmakers and businessmen at the turn of the century, who only reacted after new technologies had restructured their society, citizens today have an opportunity to comprehend and prepare for the radical change taking place."
In such a context, government at all levels clearly has a part to play in ensuring that electronic commerce is conducted in a manner consistent with the nation's overall social and economic objectives.
"Technologies tend to embody social values and forms of organization; thus, their impacts are felt far beyond the realm of business itself," pointed out the OTA report. "Technology will also have an impact on the nation's competitiveness, the structure of the marketplace, workplace skills, values, tastes and preferences, and the quality of the environment."
The broad ramifications of electronic commerce mean that government will need to increasingly support the acquisitions of knowledge and learning, induce innovation, foster risk-taking and creative activity of all sorts, and rapidly move to resolve problems as they arise. These are critical factors that will determine widespread commercial success in the global economy of the 21st century.
An electronic copy of OTA's "Electronic Enterprise: Looking to the Future" is available from
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[ April Table of Contents]
