**Towards Digital eQuality
**The U.S. Government Working Group****on Electronic Commerce**
2nd Annual Report, 1999
********
**Foreword******
On that sunny, butcold January day when we took office nearly seven years ago, few couldhave foreseen the economic revival we have experienced. Fewer still wouldhave predicted that this month we would be celebrating the creation ofthe 20 millionth new job. A central ingredient in our Nation�s virtuouscycle of economic reform has been the increased application of informationtechnology to all facets of our business cycle from research and developmentto manufacturing, sales and marketing. All told, information technologyhas been responsible for about one third of real economic growth in thepast few years.
Our Administration has seen the birth and evolutionof electronic commerce as a major factor in our economy and our lives.When we took office there were only 1.3 million computers connected tothe Internet on a worldwide basis; today there are 56.2 million. **(1)**Seven years ago there were fewer than five million Americans using theInternet; today that number exceeds 100 million.******(2)**When we created the Electronic Commerce Working Group a mere three yearsago the amount of commerce conducted over the Internet totaled less than$10 billion; now it is projected to exceed $1 trillion in the next fewyears. This transformation has been led by the private sector, but increasinglygovernment policies and attitudes towards e-commerce have played an indispensablerole in shaping the outcomes.
Over the last few years, electronic commerce hasbecome synonymous with the explosion of methods and applications of informationtechnology. Electronic commerce has come to mean many different thingsto our society. On one level, it represents a profoundly different wayin which businesses relate to each other. On another level, it representsa cornucopia of educational and shopping opportunities. Finally, electroniccommerce has challenged government at all levels � but especially at thefederal level � to determine what its role should be, when to intervene(if at all), and how to further the promise of the technology while protectingour citizens against the risks.
This annual report is another interim step towardsthe principled agenda our Administration has laid out. Grounded in innovationthat flows from research and development by both the public and privatesector, nurtured by robust competition, and fostered by a new role forgovernment, electronic commerce has blossomed in the past few years. Thechallenges laid out in July 1997 for e-commerce policy-making requiredprivate sector leadership, avoidance of unnecessary restrictions, and,when needed, government intervention that is supportive, predictable, minimalist,consistent and simple. These policy principles have �- at times �- beena challenge to implement because of the unique features of the Internetand its global reach.
The primary policy challenges for the past yearhave revolved around:-   the requirements for meaningful consumer protection;    the expanding policy issues associated with greater,faster and more ubiquitous broadband deployment, especially for small businessesand homes; 
 the challenge of improving governmental measurementand assessment of the new digital economy;
-   the need for an aggressive plan to more activelyengage developing countries in the world of possibility offered by e-commerce;and
-   the recognition that small and medium-sizedenterprises, and their rapid adoption of e-commerce, are crucial to ourcontinued economic success.

This report outlines the progress made oneach of these fronts and notes the many policy changes that have occurredin the past year which will serve to further the goals of this Administrationwith respect to e-commerce. These developments include: (1) a long termextension of the R&D (technically, the Research and Experimentation)tax credit to stimulate additional private sector research; (2) a dramaticincrease in federal funding for the information technology sector (basicand applied IT research); (3) new intellectual property protection forpatents and trademarks; and (4) substantial progress on international issuesrelating to taxation, consumer protection, non-discrimination against e-commercein international trade, and an emerging consensus on an extension of amoratorium on new tariffs for e-commerce. In addition, during the pastyear, the Administration announced and implemented new policies with respectto the export of certain types of computers and encryption products, furtherexpanding the market for e-commerce related products.
This interim snapshot of e-commerce policy isnecessarily a work in progress. There are two constants in e-commerce policy-making.First, the pace of change both in the technology and the marketplace frequentlyoutstrips the ability of the government to anticipate the perils of a fastgrowing field. This is why I continue to believe that the private sectormust play a vital leadership role. Second, the legal or jurisprudentialchallenges of e-commerce will far outpace the existing legal models. Forcenturies our legal systems have been �place based�. Yet the new cyberspacefrequently makes the exercise of governmental authority over conduct exceedinglydifficult. Thus, one of our greatest e-commerce policy challenges willbe how to adjust our existing domestic and international legal regimesto this new reality.
The Electronic Commerce Working Group has fashionedthree separate directives to guide its work for the next year. Each directivemoves us beyond the world of bits and bytes and into the fabric of oursociety. One directive instructs various federal agencies � in cooperationwith the private sector � to expand the opportunities offered by usingthis technology in order to enrich the education and lives of all of ourcitizens. A second directive requires an examination of policies that willtap this new technology to strengthen our civil society. The final directivepoints to the need to assure that there is no digital divide separatingthose who have access to the new technology from those who do not.
Ordinarily, when a report like this is transmitted,it is common to thank or congratulate our staff, as well as the variousfederal agencies that have been involved. Such thanks are surely due, butwhat is unique about this policy field is the serious, meaningful and,indeed critical, contributions that have been made by the private sector.University researchers have contributed research and policy suggestionson many issues. Private organizations have been created within the lastyear to lead and guide the business community into more intelligent andmeaningful self-regulation. Finally, many e-commerce firms have acceptedthe social responsibility that comes from operating in a space in whichthe rules are still under construction. Without active participation bythese business leaders and the cooperative engagement of the Congress,international institutions, and foreign governments, the achievements outlinedin this report would not have occurred.
***Al Gore********* ******
**Executive Summary******** 
When President Clintonand Vice President Gore first released the Administration�s strategy tofacilitate the growth of electronic commerce on July 1, 1997, they setin motion a worldwide debate on how policymakers should approach electroniccommerce and the rapidly growing Internet. Since that time, their visionhas achieved growing global acceptance in both private sector and governmentpolicy circles. These principles � private sector leadership, avoidanceof unnecessary restrictions, a minimalist government role � have provedboth durable and sufficiently flexible to apply in the Internet age.
As the Internet and electronic commerce continueto grow by leaps and bounds, expanding into the far reaches of the worldand transforming the way we live, work and shop, adherence to these principlesbecomes even more important. The new information age demands new approachesto old problems, as well as to the novel challenges and opportunities theInternet presents. The private sector has a particularly important roleto play in meeting these challenges. Many in the private sector, includingindustry, academics, and non-profit organizations have acknowledged thisresponsibility and have promoted the self-regulatory mechanisms best suitedfor this fast moving medium. Working together, we can ensure that cyberspaceis a safe place to shop and that the rights of consumers are protected.
Our vision for the future is one in which we canuse these technological tools to enhance our civil society, enrich ourlives by tapping the broader social benefits of the Internet, and movebeyond the digital divide to digital opportunity. Our vision builds onthe work we have done to promote the growth of the Internet and to createa safe and secure online environment. While continuing our previous work,our agenda for the upcoming year will challenge both government and theprivate sector to find new ways to bring the promise of the Internet toall people and move us towards a world of digital equality.
Last year, in his 1998 Directive on ElectronicCommerce, President Clinton asked us to examine several important areas:deployment of high speed Internet access; consumer protection; encouragingdeveloping country participation in electronic commerce; measuring thedigital economy; and facilitating small business participation in electroniccommerce. At the same time, the President asked us to report back on ouraccomplishments under his original 1997 Directive on Electronic Commerce.Our achievements under both directives have exceeded our expectations.
***Increasing Confidence in ElectronicCommerce: Consumer Protection, Privacy, and Security***
The robust projections for the growth of electroniccommerce are unlikely to hold true unless online consumers can shop onthe Web with confidence. Expanding the digital economy means assuring shopperstheir communications are secure, their personal data is protected, theywill get what they paid for, and the underlying infrastructure is stableno matter where they shop on the Internet. Bolstering consumer confidencemeans strengthening self-regulatory mechanisms and enforcing existing law.
The Administration has:-  Increased effective consumer protection online byencouraging industry self regulation and the aggressive prosecution offraudulent practices and misleading advertising in the online marketplaceunder existing consumer protection laws.
-  Successfully promoted codes of conduct developedand enforced by the private sector as the most effective way to protectprivacy online. In just over a year, websites with privacy policies orinformation practice statements have jumped from 14% to 66%. The Administrationalso has supported expanded legal protection for medical records, financialrecords, and children�s privacy.
-  Changed the Administration�s encryption policy toprovide U.S. firms new opportunities to sell encryption products abroad,and bring the benefits of strong encryption to individuals and businessesusing the Net around the world, while protecting the legitimate interestsof public safety and national security agencies (http://www.bxa.doc.gov/encryption).
-  Bolstered the security and reliability of the underlyingtelecommunications infrastructure through the President�s Critical InfrastructureProgram set forth in Presidential Decision Directive 63. The Critical InfrastructureCoordination Group has developed the first version of the National Planfor Information Systems Protection aimed at making the Federal governmenta model of information security and building a voluntary public/privatepartnership to protect the information infrastructure (http://www.info-sec.com/internet/99/internet_012799a_j.shtml).
-  The President�s Council on Year 2000 Conversion isworking with various industry sectors, international organizations, andcountries around the world to ensure that Y2K problems do not threatenthe vital telecommunications and information processing systems upon whichelectronic commerce depends. The Council�s Information Coordination Center,in cooperation with government and industry operations centers, will monitorand report on the status of critical system operations during the daterollover period.

***Facilitating the Growthof the Internet***
This year, we took important steps to promotethe growth of the Internet by furthering pro-competitive policies. Specifically,the Administration:-  Promoted the deployment of high speed Internet servicesby advocating policies that ensure that competitors can enter these marketsand by supporting policies that would eliminate regulation that could inhibitthe deployment of new facilities.
-  Successfully negotiated market opening agreementsfor telecommunications services and information technology products thatare the building blocks for electronic commerce and built an emerging consensusthat World Trade Organization rules and commitments, and their liberalizingeffects, apply to e-commerce.
-  Concluded agreements with the Internet Corporationfor Assigned Names and Numbers (ICANN) and Network Solutions Inc. (NSI)which will allow the further development of the domain name space and thecompetitive provision of new domain name registration services These developmentshave increased consumer choices and decreased prices (http://www.ntia.doc.gov/ntiahome/domainname/agreements). More than 70 entities around the worldhave received accreditation from ICANN to provide competitive domain nameregistration services and the wholesale price for domain registrationshas been reduced by 33%.

In addition, the Administration�s legislativeaccomplishments this year included a number of successes that will helpto facilitate the growth of the Internet and electronic commerce throughcontinued investment and innovation in the high tech industry, including:-  A 5-year extension of the research and experimentationtax credit, the longest extension ever, which will stimulate new privatesector investment in research and development. This measure encouragestechnological advancement, leads to higher productivity, and helps generatenew American jobs.
-  Important investments in long-term research and developmentin areas such as information technology and the Next Generation Internet.    Reform of our patent system that will be good forthe nation�s innovative companies and entrepreneurs. The legislation willstrengthen the U.S. patent system in a number of ways, such as extendingthe term of a patent when there is an administrative delay in patent process;requiring the timely domestic publication of patent applications that alsoare filed abroad; and making the Patent and Trademark Office a Performance-BasedOrganization in order to more effectively serve America�s entrepreneursand innovators.

***Promoting Opportunitiesfor Small Business***
The Internet means that anyone with a laptop andmodem can open a storefront and have access to a global marketplace. Wehave worked to make sure that even the smallest business can take advantageof the unprecedented access to national and global markets that the Internetaffords. Every business should have the opportunity to take advantage ofthe Internet�s geographical reach and potential for profit. Some highlightsinclude:-  Developed Virtual Trade Shows that help small companiespromote sales to overseas markets.
-  Provided small and medium-sized businesses with newaccess to an electronic bid-matching system that notifies minority firmsof sales and teaming opportunities via the Internet.    Created online services to provide information andother resources to small businesses.

***Promoting a Global Frameworkfor Electronic Commerce***
With the global reach of the Internet, electroniccommerce quickly connects buyers and sellers from around the world. Thus,in order for this global medium to flourish, it is critical that the legalframework supporting commercial transactions on the Internet be governedby consistent principles across state, national, and international borders.Over the past year, the Administration:-  Made significant progress towards achieving a consensusto extend the moratorium on tariffs on electronic transmissions at theWorld Trade Organization�s (WTO) Third Ministerial Conference which openedin Seattle in November 1999. WTO Members expect to formally adopt thisconsensus position when the Third Ministerial resumes.
-  Gained further acceptance of the Framework principlesthrough international and bilateral negotiations and agreements. New bilateralagreements include the U.S.-Australia Joint Statement on Electronic Commerceand the U.S.-Egypt Joint Statement Concerning Electronic Commerce.

***Measuring the DigitalEconomy***
The emerging digital economy requires us to sharpenour analytical tools and assess the economic impact of the Internet andelectronic commerce in the United States today. In furtherance of thisgoal, we:-  Published*The Emerging Digital Economy II*demonstrating the extraordinary growth of e-commerce and the positive impacton productivity resulting from growth in the information and telecommunicationssector (http://www.ecommerce.gov/ede).
-  Began to gather data on e-commerce retail sales andexamine other economic surveys that could provide useful information one-commerce developments. (http://www.ecommerce. gov/ecomnews/e-def.html)
-  Published the *Digital Work Force* which identifiedtrends in worker availability and cooperative measures for increasing it.The report is particularly significant given the key role that a skilledtechnical workforce plays in the growth of e-commerce (http://www.ta.doc.gov/reports/itsw).

***From Digital Divide toDigital Opportunity***
Currently, households with incomes of $75,000and higher, in urban areas, are more than *twenty times*as likelyto have access to the Internet than rural households at the lowest incomelevels, and more than *nine times* as likely to have a computer athome. Black and Hispanic households are two-fifths as likely to have Internetaccess as white households. As information technology plays an ever-increasingrole in Americans� economic and social lives, we cannot and will not leaveanyone behind. Some of the initiatives taken by the Administration include:-  Tripled investment in Community Technology Centersfrom $10 million in FY99 to $32.5 million in FY00.
-  Supported innovative applications of informationtechnology to link job seekers and workers with employers to fill jobsand upgrade skills through a suite of online services called America�sCareer Kit.
-  Challenged the private sector to develop new businessmodels for low-cost computers and Internet access to make universal accessat home affordable for all Americans.
-  Increased the number of classrooms connected to theInternet from 3 percent in 1994 to 51 percent in 1998.
-  Implemented the �e-rate� (part of the TelecommunicationsAct of 1996) which connected over one million classrooms to the Internet.
-  Encouraged the growth of the Internet and electroniccommerce in the developing world by providing assistance to a select groupof countries enabling them to use the Internet to energize their economies,gain access to knowledge that can improve standards of living, and fosterthe free flow of ideas.

Our agenda for the upcoming year will focuson additional programs and policies to move beyond the digital divide todigital opportunity.
***Future Work***
In the upcoming year, the Electronic CommerceWorking Group will take on three new initiatives that will help to bringthe benefits of the information revolution to all people by:-  Creating digital opportunity through increased accessto the Internet for all people;
-  Providing better, more efficient government servicesand increased government accountability for citizens; and    Promoting other uses of the Internet with potentialsocial benefits such as telemedicine and distance learning.

We also will continue to work on the manyissues addressed in the 1997 and 1998 directives. As these issues changeand evolve, the framework principles will continue to assist us in addressingthe challenges and achieving the promise of the Internet and electroniccommerce. Working together with the private sector, we will strive to bringthe benefits of the information age to all people. 
**Introduction** 
The Internet is rapidlytransforming the way we live, work, and shop in all sectors of the economy.The Internet makes it possible for anyone, whether a student, researcher,or concerned citizen, to have access to information that previously wasavailable only to those with physical access to a sophisticated researchlibrary. People the world over can shop for a wide range of goods and services,at any time of the day or night, from the convenience of their homes, offices,or even public libraries. Businesses of any size can communicate and coordinateonline with their suppliers, employees, and customers to provide improvedproducts and services at lower costs.
Electronic commerce, the ability to carry outtransactions over the Internet, can make a tremendous difference in people�slives. People are saving time and money, locating hard to find items andbecoming entrepreneurs themselves � all through the use of the Internet.The Internet also provides a wealth of information on virtually any productor service available. Over two billion orders will be placed over the Internetin 1999, **(3)**and that number will continue to grow exponentially.
Already significantly larger in terms of the dollaramount of the transactions, and growing even faster than business-to-consumerelectronic commerce, is business-to-business electronic commerce. The adoptionof Internet-based electronic commerce by the business community is makinga tremendous difference in how business is conducted, fundamentally alteringfirm behavior and industry structure. Competition in the new electronicenvironment will become increasingly intense as both buyers and sellersuse the Internet to make deals with customers and suppliers previouslybeyond their reach. As cost differentials shrink, firms increasingly willrely on innovations in products, services, and delivery to attract andretain their customers.
As technology creates an online experience wecan�t yet begin to imagine, the principles President Clinton and Vice PresidentGore first outlined in July of 1997 remain our guideposts. These principlesseek to protect the public interest while freeing private enterprise fromunnecessary regulations that would hinder growth and innovation. At theheart of the Administration�s approach is private sector leadership. Amarket driven approach is essential to allow electronic commerce to flourish,and to stimulate innovation, better services, and lower prices.
This report, the second annual report of the U.S.Government Working Group on Electronic Commerce, describes our progresson electronic commerce policy issues over the last year and sets a visionfor the future. As we enter the next century, and a new millennium, boththe government and the private sector must embrace policies and initiativesthat will allow the Internet and electronic commerce to grow and flourish,bringing numerous economic and social benefits to people everywhere. ****
**Working Group On Electronic Commerce** 
Under the directionof President Clinton and Vice President Gore, the Working Group on ElectronicCommerce is charged with developing and implementing the Administration�spolicy on electronic commerce. The Working Group consists of representativesfrom the White House and the principal Federal agencies involved in electroniccommerce, including the Departments of Commerce, Treasury, State, Justice,Agriculture, and Health and Human Services, the U.S. Trade Representative�sOffice, the General Services Administration, the Small Business Administration,the Federal Communications Commission, and the Federal Trade Commission.
In the fast changing world of the Internet, thefive policy principles that President Clinton and Vice President Gore setforth in July 1997 have proven sound and sufficiently flexible to applyto the new challenges arising daily. They are: -  The private sector should lead.
-  Governments should avoid undue restrictions on electroniccommerce.
-  Where governmental involvement is needed, its aimshould be to support and enforce a predictable, minimalist, consistentand simple legal environment.
-  Governments should recognize the unique qualitiesof the Internet .
-  Electronic commerce over the Internet should be facilitatedon a global basis.

These principles will continue to guide usas we address the many new opportunities and challenges the Internet presentsin the rapidly emerging digital economy.
In his 1997 and 1998 Presidential Directives onelectronic commerce, President Clinton asked Vice President Gore to overseethe work of this interagency group. Under the leadership of Vice PresidentGore, the Working Group strives to implement the Administration�s strategicvision to promote the growth of electronic commerce and allow its socialand economic benefits to reach all people. 
**The Emerging Digital Economy** 
Growth of the Internetcontinues to exceed expectations. When our *First Annual Report* wasreleased in November 1998, over 140 million people around the world wereconnected to the Internet. By September 1999, the figure had climbed toover 200 million people**(4)**�approximately40 percent higher than a year earlier. Reflecting this increased demand,over the same one year period, the number of Internet hosts rose by 46percent, the number of Web servers increased by 128 percent and the numberof new Web addresses rose by 137 percent.******(5)**Althoughthe United States represented approximately half of those online worldwidein September of this year, Internet usage is actually growing faster outsidethe United States. The number of Internet users outside the United Statesjumped from approximately 20 million to nearly 80 million in less thantwo years. **(6)**Growth in electronic commerce also continuesto exceed expectations as both firms and consumers increasingly look tothe Internet as a place to do business.
Business to ConsumerE-Commerce
For consumers, electronic commerce means greaterconvenience, easy access to a wide variety of goods and services, and savingsin time and money. Just as businesses can reach a global market by settingup a web-based storefront, online consumers have a wider variety of choicesbecause they can shop at stores from around the world. Recent researchsuggests that online prices of standardized products like books and CDsare lower
than at conventional outlets.**(7)**Auction
sites, retail portals and online catalogs aremaking it easier for consumers to get better deals while spending lesstime shopping online. Fierce competition among online retailers drivesprices down. In fact, some sites are now offering additional incentivessuch as free overnight shipping and gift certificates to lure customers.Online �best price� tools further spur competition by making it easierfor consumers to comparison shop. Product reviews and quality comparisonsalso are available for virtually all products.
In early 1998, estimates were that Internet retailingmight reach $7 billion by the year 2000. Forecasters now believe that numberwas exceeded in 1998 and will be in the range of $40 billion to $80 billionby 2002. According to one estimate, 17 million U.S. households will beshopping online by the end of this year, spending
approximately $20 billion.******(8)**E-commerce activity is increasing worldwide, not just in the United States.A recent report forecasts that one-third of fourth quarter e-commerce spendingwill be generated outside of the United States. This represents a three-foldincrease in non-U.S.
spending over the same period last year.**(9)**
Business-to-Business E-Commerce
The Internet is fundamentally changing the waycompanies do business. A recent survey of Chief Financial Officers estimatedthat the proportion of U.S. companies that sell their products over theInternet will jump from 24 percent in 1998 to 56 percent by 2000. **(10)**Using the Internet for selling, however, is only one facet of e-commerce.For businesses, electronic commerce means reduced inventory loads, lowercycle times, more efficient and effective customer service, lower salesand marketing costs, and new sales opportunities.
Businesses increasingly are adopting e-commerceto improve operating processes. One recent study predicted that U.S. companiesusing Internet technologies to improve core business processes will saveover $600 billion on an annual basis by 2002.**(11)**Firms are seeing efficiency improvementsin the area of handling and processing, supply chain management, procurement,marketing, and customer service. For example, one estimate suggests thatpurchase cards used in conjunction with an e-purchasing system can helpcompanies streamline the purchasing process with savings of up to 95 percentcompared to manual purchase orders.**(12)**
Given the efficiencies of electronic businessprocesses, firms of all sizes are considering how they can best utilizethe power of the Internet. Two recently announced initiatives in the automotiveindustry, one by Ford Motor Company and the other by General Motors, arelarge scale examples that illustrate the far reaching impact of electroniccommerce. Ford, in partnership with Oracle Corporation, has announced plansto develop an automotive e-business supply chain to streamline its $80billion in annual purchasing transactions with its more than 30,000 suppliersand $300 billion extended supply chain. The creation of this new marketplaceis expected to �dramatically reduce Ford�s purchasing costs and increaseits operating efficiencies through an integrated Internet supply chainsystem.� **(13)**
Similarly (and on the same day), General Motors,with its partner Commerce One, announced its own electronic commerce initiativeto develop �the world�s largest �virtual marketplace� for a wide arrayof products, raw materials, parts and services.� **(14)**While the Ford initiative is focused on its own supply chain, the GeneralMotors� plan is broader and seeks to leverage GM�s purchasing expertisebeyond the automotive supplier industry. Not only does General Motors anticipatenotable cost reductions in its own procurement costs, it expects the programto contribute significantly to its revenues.
Some companies have completely reengineered theirbusinesses to take advantage of the productivity improvements made possibleby the Internet. For instance, Cisco Systems not only produces Internetproducts such as routers, but it uses the Internet in virtually all facetsof its business. Cisco Systems gets 78 percent of its orders�some $30 millionper day and handles 80 percent of its customer-service issues over theInternet. The company estimates that the customer-service aspect of theirInternet strategy alone saves millions of dollars in product support costs.Cisco also recruits and screens job candidates over its website and itsfinancial systems are so completely integrated into the business processes,that within a year, Cisco hopes to become the first company capable of�virtually� closing its books any day of the quarter. Cisco also uses theInternet to improve its manufacturing operations. The company actuallyout sources most of its production and about half of the orders placedon its website flow directly to the outside company that actually makesthe product and ships it to the customer. �For these orders, no Cisco employeeever touches a piece of paper until a check arrives in the mail to payfor the goods. Soon, with E-payment, even the check could be a thing ofthe past.� **(15)**
The Internet also may prove to be an importanttool for reviving older industries. The Commonwealth of Pennsylvania recentlyannounced the formation of a new website that will provide potential customersof the Commonwealth�s 45 small and medium-size powdered-metals producerswith a one-stop location to put their work out for bid. Without the website,many of these small producers are being overlooked for metal-making contracts.Several industrial product manufacturers, such as Ingersoll-Rand, LockheedMartin, and AlliedSignal have agreed to use the site to source parts.**(16)**
In addition, the Internet enables new entrantsto compete with established firms and offers the possibility of rapid growth.For example, during the fourth quarter of 1998, web-based eToys moved aggressivelyinto the top-slot in online toy selling. Although eToys� fourth quarter1998 revenues of $22.9 million represent only a fraction of the $23 billionU.S. toy market, the company�s success against the Web-stores of establishedtoy sellers, such as Toys �R� Us and Wal-Mart, has made the brick-and-mortarfirms scramble to revamp their Web pages.**(17)** The ability of small firmsto profit from Internet use is demonstrated by the fact that some of thelargest e-commerce companies, such as Amazon.com and Ebay.com, were smallbusinesses only a few years ago or didn�t even exist.
Technological Developments
New technological developments are making theInternet faster and easier to use. Web-programming languages, such as ExtensibleMarkup Language (XML), the decreasing cost and increasing availabilityof Internet access devices, such as wireless Web browsers, and the wideravailability of broadband technologies, such as digital subscriber linesand cable modems, will make the Internet more useful for applications beyondthe delivery of text information.
The increasing availability and use of new Internetaccess devices is a key technological development underlying the growthof electronic commerce. Recent years have seen a proliferation of differentdevices to access the Internet, from Web-enabled TVs to Web-enabled mobiletelephones. The development of wireless application protocol (WAP) thatwill decrease cost and increase the availability of wireless Internet applianceswill be particularly important in this evolution.
Recent developments in broadband technologieswill continue to make access to the Internet faster. In particular, progressin bandwidth intensive graphics, along with streaming audio and video,will stimulate the development of new applications. Broadband connections,which function at speeds hundreds of times faster than today�s dial-uptelephone connections, will allow users to send and receive text, images,audio, and video with virtually no delay. Additionally, broadband offersthe benefit of an �always on� connection�eliminating the need to log onand off.
In addition to phone and cable lines, communicationscompanies are investing in the full range of technologies that may provideincreased broadband availability. While cable modems are presently leadingthe market, increasingly, satellites may be used to deliver broadband toremote locations and locations where infrastructure is of low quality,or is nonexistent. Other options for the future include delivering broadbandover the broadcasting spectrum allocated for digital television, deliveringmobile broadband over cellular or PCS networks, and the use of the fixedwireless spectrum, and direct fiber connections to homes and offices. 
**The Growing Global Concensus** 
In 1999, the Administration�sElectronic Commerce Working Group continued to build global acceptanceof the principles first outlined in 1997 in the *Framework for GlobalElectronic Commerce*. As we approach the new millennium, governments,multilateral organizations, and private sector groups increasingly havejoined a growing consensus that the *Framework* principles representthe most appropriate response to the challenges of the new informationeconomy.
This year, the United States and its trading partnerscontinued to incorporate these principles into a series of bilateral understandings.These include the U.S-Australia Joint Statement on Electronic Commerceand the U.S.-Egypt Joint Statement Concerning Electronic Commerce. We alsoexpect these principles to inform the work carried out under the BilateralElectronic Commerce Cooperation Initiative between the U.S. Departmentof Commerce and the Mexican Ministry of Commerce and Industrial Development.
Principles into Practice
Many economies, however, have moved beyond principleto practice. The *Framework* principles became the touchstones formultilateral, bilateral, and private sector action in 1999. Around theworld, Internet stakeholders made rhetoric a reality by fostering competitionand consumer choice on the World Wide Web. Governments, especially thosein the developed world, adapted to a new, more limited role: setting thegoals of self-regulation, helping make self-regulation effective and legislatingonly in limited areas.
In short, market-led electronic commerce madethe transition from principle to action. The *Framework* principlesshaped work plans, guidelines, tools, and policy recommendations in organizationsas diverse as the Organization for Economic Cooperation and Development(OECD), the Asia Pacific Economic Cooperation (APEC) forum, and the FreeTrade Area of the Americas (FTAA).
In the OECD, Ministers endorsed Taxation FrameworkConditions that treat online commerce no differently than offline commerce.The OECD also concluded Consumer Protection Guidelines that establish benchmarksfor transparent and effective consumer protection online. To foster thepragmatic implementation of its 1980 Privacy Guidelines, the OECD releaseda Privacy Inventory of Instruments and Mechanisms. It also developed aweb-based application, a �Privacy Policy Wizard,� to help private-sectororganizations establish privacy policies for their websites.
Private sector leadership was embraced in theFree Trade Area of the Americas (FTAA) talks, where countries in the WesternHemisphere agreed to establish a ground-breaking public-private sectorcollaboration on electronic commerce. Drafted with the full participationof private sector representatives from throughout the hemisphere and approvedby government delegates, the Joint Committee of Experts on Electronic Commercerecommended a broad range of market-led policies that would expand thebenefits of e-commerce to the region. In November, FTAA Ministers askedthe Joint Committee to continue this important work.
APEC demonstrated its commitment to market-ledelectronic commerce by establishing an Electronic Commerce Steering Groupand endorsing the OECD�s Taxation Framework Conditions and the UNCITRALModel Law on Electronic Commerce. The latter furthers electronic commerceby giving electronic documents the same legal validity as paper documents.APEC�s Telecommunications Working Group also joined the OECD in givingcritical support to the U.S. view that governments should allow marketforces to determine the development of electronic authentication systems.
Private Sector Leadership
In 1999, we saw tremendous growth in the scopeand depth of private sector leadership. Multilateral bodies once dominatedby governments increased private sector participation in their work orwelcomed it for the first time. The private sector also strengthened itscapacity for developing consensus positions on key policy questions andestablished significant new self-regulatory mechanisms.
In APEC, the Electronic Commerce Steering Groupdeveloped under private sector leadership an E-commerce Readiness AssessmentTool. This tool will help countries judge their openness to e-commerceand areas where policy reforms may be needed. Several APEC economies areexpected to use this tool over the coming year.
In the OECD, private sector representatives participatedin a joint OECD-private sector Workshop on Electronic Authentication andplayed a key role in a special OECD session on self-regulatory codes ofconduct. Over the coming year, the private sector also will participatein five technical advisory groups that will examine taxation issues.
Such groups as the Transatlantic Business Dialogue(TABD), the International Chamber of Commerce (ICC), the Global InformationInfrastructure Commission (GIIC), and the U.S.-Japan Business Council (USJBC),continued or launched innovative efforts to provide policy leadership.
The TABD continued its role advising the UnitedStates and the European Union (EU) on critical transatlantic policy issues.In 1999, the TABD urged the U.S. Government and the European Union to completerapidly a Safe Harbor understanding that would recognize the self-regulatorysystem for addressing privacy concerns being established by U.S. industry.The TABD also encouraged governments to adopt rules and regulations regardingelectronic authentication that are technology neutral and ensure equalityof treatment for certification service providers and users from other jurisdictions.
The past year also marked the emergence of twonew private sector-led groups, the Transatlantic Consumer Dialogue (TACD)and the Global Business Dialogue on e-commerce (GBDe).
Created to expand the U.S.-EU dialogue beyondbusiness groups, the TACD consists of consumer organizations. It held itsfirst meeting in April in Brussels and, ultimately, issued a total of 21recommendations to governments. These recommendations covered such issuesas unfair contracts, anti-competitive practices, and consumer protection.
The GBDe also quickly established itself as animportant new force for self-regulation and policy leadership. The GBDe�sfirst Conference in September demonstrated the private sector�s growingcapacity to address e-commerce issues on a worldwide basis. Senior representativesfrom 29 geographically and functionally diverse Internet corporations attendedand presented recommendations to governments in such areas as tariffs,taxes, electronic authentication, intellectual property rights and disputeresolution. Seven Ministers, including Secretary Daley, attended the conference.The GBDe plans to hold a follow-up conference in September 2000 that willtake stock of the progress made by governments in implementing its recommendations.
The private sector also took important steps towardestablishing additional effective self-regulatory mechanisms. The onlinedivision of the Better Business Bureau, BBB*Online*, established aprivacy seal program in March. The seal program assures users that businessesdisplaying the seals follow credible and effective online privacy practices.By September, BBB*Online* had announced that it had issued seals to100 companies and was considering 400 applications. The American and CanadianInstitutes of Certified Public Accountants also established a seal program,CPA WebTrust, designed to assure consumers that websites displaying itsseal adhere to approved business practices and provide assured transactionintegrity and information protection. The private sector also is activein developing codes of conduct for consumer protection, led by BBB*Online*andthe electronic commerce and consumer protection groups.
The Digital Age clearly requires businesses andother private sector groups to take on new responsibilities in establishingand enforcing the rules of the road. The distributed, networked economyrequires rules that are global, flexible, effective, and readily adaptableto technological change. It also requires concerted collective action bythe private sector to make that vision a reality. In 1999, the privatesector demonstrated that it is prepared to meet this challenge. 
**Progress on the PresidentialDirectives** 
On July 1, 1997,President Clinton issued the first of two directives designed to implementthe strategy laid out in *A Framework for Global Electronic Commerce.*Under this directive, the President assigned thirteen specific tasks tovarious cabinet agencies. Last year, with the release of the Working Group�s*FirstAnnual Report*, the President assigned responsibility for five new initiativesto implement the Administration�s strategic vision for electronic commerce.Progress on both sets of directives are outlined below:
A. 1998 Presidential Directives
1. High Speed Internet Access
The Secretary of Commerce, in appropriate consultationwith the Federal Communications Commission, shall encourage the deploymentof advanced telecommunications capabilities for all Americans while preservingthe vibrant and competitive free market that exists for the Internet andother interactive computer services. These agencies shall work with theOffice of the United States Trade Representative to help ensure the eliminationof foreign trade barriers to the deployment of advanced telecommunicationscapabilities.
Access to high speed Internet services � whathas come to be called �broadband� access � is critical in order to realizethe full benefits of the Internet. Widespread deployment of broadband servicesultimately will allow people to send video, audio, text and images withvirtually no delay and at an affordable price. People thousands of milesapart will be able to share virtual-reality experiences and work togetheron business, education or medical projects. A single service company ora single hookup could provide real-time high-fidelity music, videoconferencing,telephone, television and radio programs. Broadband networks also willpromote new entertainment options, such as movies-on-demand, and enablemore sophisticated approaches to distance learning, telemedicine and homehealth care, e-commerce, and community networking.
Our emerging digital economy thus increasinglydemands broadband networks, which in turn create jobs and demand for networkingequipment, appliances, and software. Deployment of these networks is importantfor our nation�s economic prosperity and advancement of Americans� standardof living.
The Administration has long championed competitionas the basic means of achieving widespread deployment of broadband services.The Telecommunications Act of 1996 reflects that approach, providing foraccelerating deployment of advanced telecommunications networks by openingall telecommunications markets to competition. In addition, the Act requiresthe Federal Communications Commission (FCC) to ensure that in all regionsof the nation, Americans have �access to advanced telecommunications andinformation services,� and to �encourage the deployment on a reasonableand timely basis of advanced telecommunications capabilities to all Americans.�**(18)**
Over the past year, the Administration has identified,advocated, and adopted policies that are: (1) accelerating the deploymentof broadband networks to homes, businesses, and non-profit institutions;(2) fostering a competitive market for broadband networks and servicesthat is resulting in greater customer choice, more affordable prices, andcontinuous innovation, and is reducing the need for government regulation;(3) promoting the availability of broadband networks to all Americans byencouraging faster deployment to areas that otherwise would be underserved;and (4) maximizing the economic and social benefits associated with broadbandnetworks by promoting broadband applications.
The Administration�s pro-competitive market drivenapproach to broadband deployment is producing the desired results. TheTelecommunications Act of 1996 opened up monopoly telecom markets and allowedfor the emergence of new competitive players.****As competition emergesbetween telephone companies and cable companies, between wireline and wirelessproviders, companies are investing in and building out high speed, broadbandnetworks of the future. Competition among equipment suppliers and serviceproviders is driving the innovation that is extending the reach of thesetechnologies, lowering their prices, and making them easier to installand use. Increased use of the Internet and other electronic networks totransmit data, video, and audio is creating the demand for broadband networks.
The Telecom Act established a framework that hasspurred investment in broadband networks and services by all industry segments,using a variety of technologies. Companies have invested tens of billionsof dollars in a broadband backbone and long-haul infrastructure. AT&Thas built more than 40,000 route miles of fiber and is investing billionsto boost its capacity and improve its network. **(19)**MCI quadrupled the speed of its Internet backbone in 1996 and doubled thatcapacity in 1997. **(20)**Competitive local exchange carriers haveinvested heavily ($15-$20 billion) in fiber rings and broadband technologiessuch as ATM, and frame relay to boost capacity.**(21)**Incumbent local exchange carriers have responded by increasing their investmentin broadband facilities.
There also has been considerable investment inproviding broadband connections to end-users. The majority of large businessesand many medium-sized businesses already can obtain access to broadbandcommunications via one of the many technologies�from wireline to terrestrialwireless to satellite�capable of carrying broadband communications. TheFederal Communications Commission (FCC) concluded in February 1999 that,as a whole, large and medium residential broadband markets are at an earlierstage of development. The availability of and investment in broadband technology�cable,digital subscriber lines (xDSL), and other technologies that are potentiallycapable of delivering small office/home office (SOHO) and residential broadband�havebeen increasing during recent years. The first regular, sustained commercialofferings of broadband for residential customers occurred in 1996. TheFCC estimates that in February 1999 there were at least 375,000 customerssubscribing to broadband, which represents a residential penetration offour percent. **(22)**As shown in Table 1, only a limited numberof existing broadband technologies�primarily cable and xDSL�are *currently*capable of cost-effectively delivering broadband over the last mile tothe SOHO/residential markets. But, taken together, these two technologiestoday are capable of delivering broadband to a large share of U.S. homes.
Data reveal considerable investment in deploymentof cable and xDSL to residential users. Currently, there are over 91 millionshomes in the United States passed by cable, **(23)**and cable that can support two-way cable modem transmissions passes about12 million homes. **(24)**Theindustry has spent or announced plans to spend $9 billion to upgrade thecable infrastructure to state-of-the-art systems. **(25)**One estimate is that 63 percent **(26)**of all cable systems will be broadband-ready by 2001.
Analysts estimate that 70 to 75 percent of U.S.homes and businesses can be reached with xDSL given the current state ofthe technology. **(27)**Local exchange carriers have announced aggressive programs for deployingxDSL to tens of millions of homes by the end of this year. The FCC CableServices Bureau�s October 1999 report on*Broadband Today* cited predictionsthat 78 million Americans would have access to broadband technology by2008. **(28)**
The Administration has advocated policies to ensurethat all competitors can enter these markets and that new competitors haveaccess to facilities that are necessary for competition to flourish. Atthe same time, the Administration has supported policies that would eliminateregulation that could inhibit the deployment of new facilities or disadvantageany particular market participant or technology. Thus, the Administrationsupported the continuing unbundling of network elements that were criticalfor the provision of broadband services by new entrants, but recognizedthat the presence of alternative sources of supply and the rise of effectivecompetition should lead to the elimination of such regulatory requirements.Similarly, the Administration supported �wholesale� discounts by incumbenttelephone companies of broadband services allowing Internet Service Providersto broaden the market for high speed services. The FCC recently has requiredincumbent telecommunications companies to allow new entrants to have accessto the �spectrum� required for the provision of broadband data servicesin the wires that they control to the home.
Considerable attention has been focused on thequestion of �open access� to broadband delivery over cable. At the heartof this issue is consumer choice and competition at all levels of the marketplace.We believe that competition should be encouraged in all markets and supportthe principle that customers should have choice in both their content andtheir Internet access provider. Our Administration has long recognizedthe importance of the open characteristics of the Internet. Anyone witha laptop computer and a modem can publish on the Internet, making it mucheasier for people to be producers as well as consumers of information.The Internet allows people to engage in �many-to-many� communication asopposed to solely �one-to-many� communication. This has created an explosionin the number of communities that are based on shared interests as opposedto geography. Moreover, the decentralized nature of the Internet acceleratesinnovation and entrepreneurship. Anyone with a good idea for a new applicationcan post it on the Internet, where it can spread like wildfire. We mustmaintain what is special, valuable and unique about the Internet, evenas it evolves to support broadband applications. The Administration hopesthat the continued promotion of pro-competitive policies and market forceswill achieve these goals.
The Telecommunications Act of 1996 is also helpingto bring broadband networks and services to our communities through theE-rate program. More than a million classrooms and libraries are wiredand connected to the Internet. Many of those schools and libraries havebroadband connections. Schools and libraries are providing an importantsource of access to computers and the Internet for members of the community,as well as generating demand for advanced telecom services.
Ensuring that broadband networks reach underservedcommunities is an important goal of the Administration. In September 1999,the National Telecommunication and Information Administration (NTIA) co-sponsoreda conference on economic development, and examined efforts to bring advancednetworks and the concomitant economic benefits, such as jobs and services,to underserved communities, including inner cities as well as rural areas.Currently, the NTIA and the Department of Agriculture�s Rural UtilitiesService (RUS) are conducting an assessment of deployment of advanced telecommunicationsservices, with particular emphasis on rural America compared to more denselypopulated areas. This assessment was initiated at the request of ten UnitedStates Senators from states with significant rural populations and areas.The report will be completed by early 2000.
RUS is one example of a program that has facilitatedsignificant deployment of advanced telecommunications in rural areas. In1993, President Clinton signed legislation which mandated that RUS-financedinfrastructure be capable of supporting data rates of one million bitsper second. Since then, the deployment of fiber optic cable has doubledso that fiber represents nearly one of every ten miles of plant in RUSfinanced systems. From then through 1998, RUS has financed over $1 billionin fiber optic facilities and $725 million in digital switching systemsand enhanced feature software. In fiscal year 1999, RUS added nearly halfa billion dollars of rural infrastructure financing. To facilitate theflow of investment to rural America, RUS has streamlined procedures toreduce loan processing and fund advance times.
The Department of Commerce, and the FCC are workingwith USTR to ensure that broadband access is deployed in foreign countriesso that both the United States and foreign countries can realize the fullbenefits of multi-media applications. Competition and market-based principleswill pave the way for people across the globe to tap the full potentialof broadband services. The principles of the WTO, as discussed in a latersection, establish the underlying infrastructure upon which broadband applicationscan be accessed on a global basis. Encouragement of rapid development ofhigh capacity international undersea cables, wireline facilities, satellitesystems, and terrestrial wireless infrastructure are necessary to supportthe widest range of broadband offerings around the world.
2. Consumer Protection
The Secretary of Commerce, in consultation withthe Federal Trade Commission and other relevant agencies, shall fosterappropriate consumer confidence in electronic commerce by working to ensureeffective consumer protection online. This shall include exploring opportunitiesfor global cooperation to enforce consumer protection laws and facilitatingpartnerships between industry and consumer advocates to develop redressmechanisms for online consumers. These agencies shall work with the Officeof the United States Trade Representative to help avoid the creation offoreign trade barriers while protecting the interests of consumers.
The electronic marketplace offers consumers unprecedentedchoice and twenty-four hour accessibility and convenience. It gives establishedmarketers and new entrepreneurs low-cost access to a virtually unlimitedcustomer base. With these benefits, however, also comes the challenge ofensuring that the virtual marketplace is a safe and secure place to purchasegoods, services, and digitized information. Consumers must be confidentthat the goods and services offered online are fairly represented and themerchants with whom they are dealing � many of whom may be located in anotherpart of the world � deliver their goods in a timely manner and are notengaged in illegal business practices such as fraud or deception. Consumerconfidence also requires that consumers have access to fair and effectiveredress if they are not satisfied with some aspect of the transaction.U.S. Government policymakers and law enforcement officials are workingto ensure consumer confidence in the virtual marketplace by enforcing existinglegal protections and encouraging private sector leadership
Last spring, Secretary of Commerce William M.Daley challenged industry to work with consumer representatives to developeffective consumer protection practices, including codes of conduct forbusiness-to-consumer electronic commerce and alternative, easy-to-use mechanismsfor consumer dispute resolution, redress and enforcement. This approachrecognizes that as e-commerce expands to encompass more international business-to-consumertransactions, alternative, easy-to-use mechanisms for consumer disputeresolution, redress and enforcement can help to ensure strong and effectiveconsumer protection in the online environment and obviate the need forimmediate resolution of the difficult issues surrounding jurisdiction andchoice of law.
The Administration is pleased to see a numberof significant responses to this challenge. In June of this year, the BetterBusiness Bureau�s online division, BBB*OnLine*, announced a projectto develop a *Code of OnLine Business Practices* (www.bbb.org). BBB*OnLine*is working with industry, consumer representatives and government to developa code to provide online merchants with guidelines to implement importantconsumer protections. In an effort to seek broad participation and comment,they posted their draft code on their website and are holding public meetingsacross the country.
A similar effort was initiated in August withthe formation of the *Electronic Commerce and Consumer Protection Group,*whose members include a number of industry leaders such as America Online,American Express, AT&T, Dell Computer Corp., IBM, Microsoft, Time WarnerInc., and VISA U.S.A. Inc. This group is committed to working with consumerleaders to address electronic commerce confidence issues by formulatingconcrete approaches to protect consumers and facilitate e-commerce. (www.ecommercegroup.org)
In the international arena, the U.S. Governmentcontinues to work to ensure effective consumer protections on the Internetthrough information sharing and policy development with its trading partners.Last June, the FTC conducted a public workshop to address consumer protectionin the global electronic marketplace. Foreign representatives, academics,industry members, consumer advocates and government officials, discussedemerging international issues such as jurisdiction, international agreements,and private sector initiatives.
Over the last two years, the FTC and Commerceworked with the Organization of Economic Cooperation and Development (OECD)to build international consensus for guidelines to strengthen consumerprotection in e-commerce. The OECD has adopted these guidelines and willbegin implementation in early 2000. Following this benchmark effort, theU.S. Government will work together with industry and consumer groups tofacilitate an international dialogue on ways to best provide effectiveconsumer redress through alternative dispute resolution (ADR), particularlyin cases of cross-border transactions.
Within the Free Trade Area of the Americas (FTAA),the U.S. Government helped to develop recommendations for consumer protectionin electronic commerce. We will continue to work with the many internationalpublic and private sector bodies, including the Trans-Atlantic ConsumerDialogue (TACD), the Trans-Atlantic Business Dialogue (TABD) and the GlobalBusiness Dialogue on Electronic Commerce (GBDe), to build and promote highindustry standards for protecting consumers online.
The U.S. Government continues to protect consumersonline by enforcing existing legal protections in the electronic marketplace.The Federal Trade Commission has brought over 100 enforcement actions againstsuch activities as garden variety pyramid schemes and �miracle cure� healthcare products to technologically sophisticated scams which alter consumers�ability to control their Internet access or the websites they visit****(http://www.ftc.gov/ opa/1999/9909/index.htm#22). The Department ofJustice also brought criminal charges for a variety of Internet-relatedfraud schemes such as securities and investment schemes, Internet auctionschemes, and immigration fraud.
Because fraud on the Internet is global, severalof the FTC actions have reached defendants and victims located in othercountries. In addition, the FTC has provided assistance to foreign lawenforcement authorities in obtaining relief for U.S. consumers. As president-electof the International Marketing Supervision Network, the FTC shares informationand cooperates in law enforcement investigations with the consumer protectionagencies of 27 countries. More information is available at http://www.imsnricc.org.
Just as consumers were discovering the benefitsof �surfing� the Internet for instant access to information, the FTC sawthe value of surfing to educate businesses and investigate potential lawviolations. Since the FTC�s first �surf� to ferret out pyramid schemesin late 1996, it has become clear that this tool gives new meaning to efficiency.To date, the FTC has led some 16 surfs, with over 120 other agencies and25 countries, identifying some 4,000 commercial websites making dubiousclaims, largely in the promotion of health and diet products, pyramid schemes,business opportunities, investments and credit repair.
Law enforcement also is taking advantage of newtechnologies in the fight against Internet fraud. This year, the FTC establishedan Internet Lab, equipped with hi-tech tools to investigate hi-tech consumerproblems. The Lab allows investigators to search for fraud and deceptionin a secure environment and preserve evidence for presentation in court.In addition, the FTC�s Consumer Sentinel fraud complaint database is usedby law enforcement officials across the country to securely access real-timedata about national and statewide trends and provides information aboutparticular wrongdoers. Since its inception in 1997, the database claimscontributions from more than 214 partner organizations and consists ofan estimated 200,000 complaints.
The Federal Bureau of Investigation (FBI), inpartnership with the National White Collar Crime Center, plans to openthe Internet Fraud Complaint Center (IFCC). The IFCC will receive onlinecomplaints about Internet fraud from the public through the FBI�s websiteand review those complaints for possible criminal investigation.
Education and training for law enforcement officialsalso is critical to protecting consumers in the electronic environment.In view of this, the Justice Department provided funding for a series ofInternet and telemarketing fraud training sessions for state and locallaw enforcement. The Justice Department also plans to conduct a major jointtraining course on Internet fraud for federal, local and foreign prosecutors.
Beyond enforcing current law and developing strongconsumer protection policies, consumers must be made aware of the availabilityof many tools to help them use the Internet safely. The U.S. Governmentcontinues to work with the private sector and other governments to educateindustry and consumers about these tools and how to recognize the telltalesigns of fraud, the importance of privacy in the information age and othercritical consumer protection issues.
In preparation for the holiday shopping season,the President announced a set of tips to help online shoppers have a safeholiday shopping season (www.consumer.gov). These tips were accompaniedby several similar private sector initiatives. These initiatives include:NetCoalition, a coalition of nine major Internet companies (Yahoo!, theglobe.com,Lycos, Inktomi, Excite@Home, Ebay, DoubleClick, America Online, and Amazon.com)answering questions about online privacy and consumer protection usingbanner ads, links, and e-mail confirmations; American Express promisingto take back any item purchased online with an American Express card (forpurchases up to $300 per item until December 31, 1999); and MasterCardteaming up with the National Consumer League to launch a new consumer educationinitiative � �Be e-Wise!� (http://204.193.246.62/public.nsf/docs/fc1ee58bdd58c23e852568350066888f).
Knowing that many consumers use the Internet toshop for information, the FTC develops �sting� sites that mimic the characteristicsthat make a site fraudulent. Metatags embedded in the FTC sites make theminstantly accessible to consumers who are using major search engines andindexing services as they look for products, services and business opportunities.The �sting� pages link back to the FTC�s page, where consumers can findthe practical, plain English information they need.
3. The Internet in Developing Countries
I direct the Secretary of State, in appropriatecooperation with the Agency for International Development, the Secretaryof Commerce, the Federal Communications Commission, the Overseas PrivateInvestment Corporation, and other relevant agencies, to initiate a programto help accelerate the spread of the Internet and electronic commerce todeveloping countries.
As the information technology revolution transformsthe economy and provides new opportunities, the President and Vice Presidentare committed to helping ensure that developing nations are not left behind.While 57% of Americans and Canadians have Internet access, only 0.6% ofAfricans can access the Internet
(www.ecommerce. gov/ede/chapter1. html).
In response to the Presidential directive to closethe digital divide, the Internet for Economic Development (IED) initiativewas launched in 1999 to spread the Internet and electronic commerce todeveloping countries. This initiative seeks to empower developing countriesto use the Internet to energize their economies, gain access to knowledgethat can improve standards of living, and foster the free flow of ideas.
The four major goals of this initiativeare:
1. Encouraging the creation of a pro-competitivepolicy and regulatory environment where the Internet and e-commerce canflourish.
2. Spurring the deployment of advanced informationinfrastructure to remote and urban areas through collaboration with multilateralorganizations, NGOs and the private sector.
3. Providing education and training to local entrepreneurs,knowledge workers, policy makers and regulators.
4. Fostering the use of specific Internet applicationssuch as micro-e-commerce, telemedicine, distance education, and improvedaccess to government services.
The initiative has begun work in an initial groupof 11 countries which the Vice President announced in June. Those countriesare Guatemala, Haiti, Jamaica, Bulgaria, Egypt, Morocco, Ghana, Guinea,Uganda, South Africa and Mozambique. The Administration hopes other developingcountries will join the program in the future.
The State Department, USAID, the Commerce Department,the FCC and other government agencies are working with host governments,multilateral organizations, and the private sector to implement specificprojects that respond to the country�s particular needs. Examples of someof the achievements include:
*Guinea* becamethe first country in Africa to extend high speed Internet access to itssecondary cities, through high speed satellite dishes and emerging wirelesstechnology provided by the USAID�s Leland Initiative. USAID microcreditprograms are now using this technology to extend and track small enterpriseloans to several thousand Guinean women who benefit from the program toearn additional money for their households.
In *Mozambique*,USAID is working closely with private Internet Service Providers to establishhigh-speed satellite dishes in four key secondary towns. These dishes willserve as portals to the information world for Mozambican businesses, educators,community and women�s groups and school children.
In *Uganda*,USAID in collaboration with the World Bank and Schools-online, has begunto install computer labs, Internet access, and teacher training in up to100 schools and teacher training institutes that will reach more than 7,000students a year. USAID also is providing computers, Internet connectivityand training to link a Kampala-based organization of professional womenwith the Association of Women organization in northern Uganda to facilitateinformation sharing on health, business development, and education issues.Meanwhile, the FCC is running a joint training program with the UgandaCommunication Commission.
In *South Africa*,an Emergency Medicine training partnership between Howard University MedicalSchool and the University of Transkei hospital will soon migrate from mailedvideocassettes to an Internet training platform, using equipment providedby USAID. This will help to increase the amount of training and the qualityof care for the Transkei Hospital, a facility that serves 45,000 emergencyroom trauma patients each year.
In *Ghana*,a Peace Corps volunteer in northwest Ghana established a computer trainingand support center that helped an association of women artisans establisha website through collaboration with PeopleLink. USAID is joining the WorldBank, Schools-online and the GLOBE program to link up schools; and is usingthe Internet to train local government officials and to begin linking thefield offices of the Electoral Commission.
In *Bulgaria*,the Global Technology Corps (GTC) sponsored an October 1999 visit to Sofiaby a U.S. telecommunications expert who volunteered to advise the BulgarianInternet Alliance for Economic Development (IAED), the main telecommunicationspolicy-making body in Bulgaria. The GTC is a State Department initiativeestablished in August 1999 to send high tech volunteers to assist withprojects identified by U.S. embassies. The Bulgaria visit was so successfulthat the American volunteer subsequently accepted an invitation to jointhe IAED Steering Committee, and continues to advise and assist the IAED.
In *Haiti*,Peace Corps volunteers plan to teach IT skills using an �Information TechnologyTraining-of-Trainers� module that was field-tested in Ghana and Thailandin September 1999. USAID is launching a program to expand Internet accessin secondary cities and rural areas and to provide training in electroniccommerce, spectrum management and telecommunications regulation.
In *Jamaica,*USAID is assisting the government in drafting bid documents necessary toallow for two additional cellular companies to operate in Jamaica, providingcompetition to the current monopoly. USAID also will assist in redraftingJamaica�s Telecommunications Act, developing a new regulatory framework,training of key individuals, and spectrum management.
In *Guatemala,*the U.S. Embassy proposes to facilitate establishment of an Internet-basedmarketing facility for an indigenous cooperative producing handicrafts.Under the auspices of the GTC, volunteers from a private consulting firmrecently completed a business feasibility study. Efforts are now underwayto develop a final business plan and to launch business operations.
In *Morocco*,USAID is supporting the development and use of in-service computer-basedtraining for teachers.
In *Egypt*,the U.S. Embassy is running workshops on processing online payments tohelp expand the use of e-commerce.
The U.S. Telecommunications Training Institute(USTTI), an institution whose board of directors includes the FCC and theDepartments of State and Commerce, is actively supporting the IED initiative.In August 1999, representatives from Bulgaria, Ghana, Guatemala, Jamaicaand Uganda participated in USTTI training in Internet technologies. InDecember 1999, USTTI included participants from all eleven IED countriesin an e-commerce seminar for developing countries.
4. Understanding the Digital Economy
The Assistant to the President for Economic Policy,in appropriate consultation with the Secretaries of Commerce, the Treasury,Labor, and other relevant agency heads, shall analyze the economic impactof the Internet and electronic commerce in the United States and internationally.This shall include convening a conference of experts from the public andprivate sectors to assess the impact of investments in information technologyand the influences of electronic commerce and related technologies on theeconomy. These experts shall consider new indicators for the informationeconomy, new types of data collection, and new research that could be undertakenby organizations in the public and private sectors. To broaden public understandingof the impact of electronic commerce, the Department of Commerce shallpublish a follow-up report to the �Emerging Digital Economy� report itissued this year.
The emerging digital economy presents difficultmethodological and resource allocation problems for statistics collectionand analysis, and poses challenging questions about long-term social andeconomic implications. The digitization of the economy is difficult toassess because it is so pervasive and is reflected in a series of interrelatedphenomena � new infrastructure, processes, and transactions. However, thereis growing recognition that better information about the digital economyis needed, whether for private investment decisions or for developing soundpublic policy.
This year, the Administration brought togetherinternationally renowned economists and other experts from academia, business,and government at a public conference, *Understanding the Digital Economy:Data, Tools, and Research*(www.digitaleconomy.gov*).*Papers anddiscussion assessed research to date on the scale, direction, and significanceof the emerging digital economy. Panels focused on key aspects of the digitaleconomy: macroeconomic assessment, market structure and competition, organizationalchange, employment and the workforce, small business, and access.
Two private-sector events were scheduled aroundthe conference during the last week in May: A seminar, �Gathering Dataabout the Digital Economy,� hosted by the IBM Institute for Advanced Commerce(www.ibm.com/iac/news-seminar-data-digital-economy.html) and a conferenceheld by the University of California�s E-conomy Project on �The DigitalEconomy in International Perspective� (http://e-conomy. berkeley.edu/events/deip/summary.html).In addition, the digital economy working group and the working group onthe Internet for economic development initiative held a meeting with outsideexperts on indicators for developing countries.
In June, the Department of Commerce published*The**Emerging Digital Economy II* (http://www.ecommerce.gov/ede/report.html), expanding on and updating the original 1998 *Emerging DigitalEconomy* study. The Department has committed to issuing a report onan annual basis as a vehicle for informing the public of the evolutionand growing significance of the digital economy.
A lack of appropriate data hampers analysis ofthe impact of the digitization of the economy. For example, it is not currentlypossible to separate out electronic commerce activities from other typesof commercial activities in the statistical series produced by the federalgovernment. Data specific to electronic commerce currently comes, for themost part, from market research firms that use divergent definitions andmethodologies. In order to address this problem, the major federal statisticalagencies (Bureau of Economic Analysis, Bureau of the Census, and Bureauof Labor Statistics) are working together to formulate an electronic commerceinitiative that will help ensure that official government statistics willaccurately reflect the new digital ecomony.
The Census Bureau, in consultation with the Bureauof Economic Analysis (BEA), other federal agencies, and the private sector,has begun developing definitions appropriate to the digital economy andplanning a measurement program (www.ecommerce.gov/ecmnews/e-def.html).Census is seeking to leverage its existing surveys to focus first on measuringelectronic commerce transactions. It has launched a pilot study to measurefourth quarter Internet sales by retailers, and if these data meet qualitystandards, they will be published in Spring 2000.
BEA has introduced several new estimating methodsinto its estimates of GDP and international trade, including quality-adjustedprice indexes for IT products and use of chain-type indexes. These changeswill result in a more accurate picture of economic growth, particularlythe increasingly important contribution of computers and other high-techproducts to U.S. economic growth and productivity (http://www.bea.doc.gov/bea/an/0597od/maintext.htm).
In addition, several new digital economy relatedmeasures were introduced into the national accounts framework in the recentlyreleased National Income and Product Accounts (NIPA) benchmarks (http://www.bea.doc.gov/bea/an/0899niw/ maintext.htm and http://www.bea.doc.gov/ bea/an/1099niw/maintext.htm). These include recognition of business expenditures on computer softwareas investment rather than current expense and new estimates of bankingservices to reflect the use of ATMs, electronic funds transfers, and otherfactors. BEA also co-funded a one-day workshop on measuring e-commerceat the Brookings Institution.
The National Science Foundation is building apublicly accessible integrated information resource for data and researchon the outcomes of information technologies. A pilot bibliographic databaseon the social and economic implications of IT is already available at http://srsweb.nsf.gov/it_site/index.htm.A series of literature reviews about the effects of information technologiesin different aspects of our lives (e.g., implications of IT for the home,service sector employment, community) will be released in the future.
SRS, a division of the National Science Foundation,is proceeding with design work for two related sample surveys. One willexamine innovation (i.e, new-to-the-firm products or processes) in U.S.-basedIT firms. The second survey will focus on IT users. The surveys will provideestimates of incidence and types of innovations, their sources, personnelbase, costs, and contribution to firm profitability. They also will gatherinformation on relevant market, financial, regulatory, and tax incentivesand barriers.
NSF also has funded a large number of projectsin areas such as information economics, information practices in organizations,use of information in research and innovation, competition and market structure,participation in electronic commerce, transformation of industries, globalization,and productivity, as well as the social and economic implications of informationtechnology. In addition, the National Research Council has launched a studyof workforce needs in information technology (http://nationalacademies.org/itworkforce) and an empirical study on intellectual property rights ina knowledge-based economy (http://nationalacademies.org/ipr).
Just as the reach of the Internet is global, thedesire to understand and measure the digital economy is universal. We areworking with our trading partners, both individually and in the Organizationfor Economic Cooperation and Development (OECD) and other venues, to harmonizedata collection efforts and analyze different aspects of the digital economy.The Census work on electronic commerce definitions is proceeding in coordinationwith related work by the OECD.
The Council of Economic Advisors has assumed aleading role in facilitating work on the digital economy. Work in progressincludes reviewing and improving data collection activities to better assessthe growth of electronic commerce and the digital economy; participationin the new OECD Growth Project (initiated at the May meeting of the OECDCouncil at Ministerial level; see http://www.oecd.org/ news_and_events/release/nw99-52a.htm,paragraph 5); and economic analysis of policy-related costs and barriersto electronic commerce.
The first phase of the digital economy initiativeopened up channels of communications with a wide range of experts and privatesector perspectives. We are now building on these relationships and encouragingothers, including academic programs, industry groups, and consumers ofgovernment data and analysis, to actively participate in these discussions.
5. Small Business and the Internet
The Secretary of Commerce and the Administratorof the Small Business Administration shall develop strategies to help smallbusinesses overcome barriers to the use of the Internet and electroniccommerce. The initiative shall consider the need to train Federal Governmentemployees who have contact with small businesses on the use of the Internetand electronic commerce; identify commonly used Government products andforms that should be moved to the Internet to enable small businesses touse the Internet to interact with the Government; and develop an outreachplan to enhance electronic access to information and services that canassist small businesses� development using the Internet and electroniccommerce.
Despite the benefits to businesses of utilizinginformation technologies and participating in the growth of e-commerce,many smaller businesses are not participating in this new way of doingbusiness. Although the Yankee Group found that 28 percent of companieswith less than 20 employees, 54 percent of companies with between 20 and99 employees, and 62 percent of companies with between 199 and 499 employeesmaintain a corporate web presence, these smaller companies are primarilyusing their websites as online brochures. Only a small percentage (lessthan one-third of those with a website) are using their sites to sell products,provide customer support, or reduce operating costs.******(29)**
Some small businesses may face barriers to adoptinge-commerce, including a lack of knowledge about the technology and itscosts, insufficient information about the benefits of e-commerce and potentiallyapplicable business models, a shortage of technically trained employees,complex and user-discouraging e-commerce implementations, and the absenceof unbiased, qualified assistance. However, by failing to participate ine-commerce, these companies are missing important opportunities for loweringcosts, increasing productivity, expanding market access, and improvingrelationships with customers and business partners alike. By not makingthe transition to this new way of doing business, small firms run a seriousrisk of becoming less competitive, affecting both their present marketpositions and long-term viability. As larger companies integrate e-commerceinto their business, small firms run the risk of being excluded if theyare unable to establish strong e-commerce ties with others in their supplychains.
The Department of Commerce and the Small BusinessAdministration, along with other federal agencies, have engaged in a numberof major initiatives to assist small companies in the use of electroniccommerce: -  In order to help companies market themselves internationallyvia the Internet, the Department of Commerce has developed Virtual TradeShows, or E-Expos USA, to supplement its foreign trade missions. E-ExpoUSA currently has more than 600 companies exhibiting their products tointernational buyers via this medium (http://www. e-expousa.doc.gov ).The e-commerce Task Force within the DOC�s International Trade Administrationis developing a system that will automatically deliver timely market researchand trade leads via e-mail to SMEs. DOC�s Commercial Service has conducteda nationwide series of e-commerce seminars targeted to U.S. exporters,reaching over 1,000 exporters in 20 cities. The Commercial Service hasprovided basic e-commerce training for over 60 international trade specialistsstationed across the nation. In addition, the Commercial Service is buildingvideo conferencing capabilities that will facilitate export transactionsby electronically linking U.S. exporters with potential international customersor agent/distributors.
-  The Minority Business Development Agency (MBDA) withinthe Department of Commerce is providing SMEs with new access to the Phoenix/OpportunitySystem, an electronic bid-matching system that notifies minority firmsof procurement and teaming opportunities via the Internet by deliveringinformation on business opportunities directly to a minority firm�s desktopor fax machine. MBDA is assisting minority businesses in accessing criticalmarket information and in locating local business development resources.MBDA has partnered with the National Institute for Standards and Technology(NIST) in DOC�s Technology Administration to develop �Electronic Commerce- The Future is Now,� a one-day course designed to introduce minority businessowners to the benefits of e-commerce. MBDA also has established virtualbusiness centers, accessible on the Internet, providing information aboutfranchising, international trade, and access to capital.
-  NIST has established an Electronic Commerce FocusArea on the Manufacturing Extension Program�s (MEP) Extranet site thatallows MEP Center staff to gain an understanding of e-commerce concepts,and provides a means for MEP staff to share e-commerce experience. Currently,approximately half of the MEP Centers are planning to offer some levelof e-commerce related service during FY2000. NIST�s MEP program sponsoreda National Manufacturing Summit on September 21 and 22, 1999 in Washington,D.C. Leaders from industry, government, and academia explored the challengesand opportunities facing America�s small manufacturers and developed anaction agenda to enable this sector to employ the tools of e-commerce.
-  The Economics and Statistics Administration withinthe Department of Commerce is working to broaden understanding of smallbusiness and e-commerce by reviewing the implementation of electronic commerceand, more generally, electronic business processes by small and medium-sizedfirms. A major section of last May�s Measuring the Digital Economy Conferencewas directed at the special e-commerce issues facing small businesses (www.digitaleconomy.gov).
-  The Small Business Administration has created a numberof online services for small businesses and is developing an electroniccommerce course for its Small Business Classroom on the Web (http://classroom.sba.gov).The course includes a variety of links to both governmental and non-governmentalsources. SBA is developing partnerships with credit card companies to increasethe number of small businesses that have been certified to conduct creditcard transactions with government and private sector credit card holders,and to provide more cost-effective credit card transaction processing feesfor participating small businesses.
-  The SBA also has developed several Internet basedsystems for providing information to small businesses. For instance, SBAand the National Partnership for Reinventing Government (NPR), in conjunctionwith an interagency task force, are creating a new *U.S. Business Advisor*(www.bus.gov) as a gateway to facilitate business access to governmentalinformation and services. PRO-NET is an electronic gateway of procurementinformation for and about small business (http://pronet.sba.gov) throughwhich contracting officers are linked to procurement opportunities. *SCOREOnline* offers e-mail assistance and counseling help for small firms.(http://www.score.org). The SBA�s*Women�s OnLine Business Resource Center*is an interactive site where women-owned small businesses can get a varietyof business development and financial assistance (http:www.onlinewbc.org).Finally, *Tech-Net* (http://tech-net.sba.gov) provides an electronicgateway of technology information and resources for and about small hightech businesses, a search engine for researchers and scientists, and alink to potential investment opportunities (http://www.sba.gov/advo/acenet.html).
-   The Extension Service of the U.S. Departmentof Agriculture also has been active on SME e-commerce issues. At its NationalConference for Agribusiness, conducted by Purdue University�s Center forAgricultural Business, e-commerce played an extensive role. As part ofthe background research for the National Conference, 3500 agribusinesseswere surveyed about their use of electronic commerce.
-  Vermont�s Cooperative Extension staff is providingworkshops on e-commerce and has conducted a number of e-commerce presentations.To help agriculture and other clientele the staff has created �The InternationalLink� featured on the USDA Direct Marketing website (www.usda.gov/ da/smallbus).The staff also manages several electronic discussion lists for Vermontexporters. The University of Minnesota Extension Service has developedInternet online learning modules, and is testing them with 250 rural businesseswho are considering starting up electronic commerce activities.
-   The Department of Labor (DOL) has developed�elaws Advisors� (Employment Laws Assistance for Workers and Small Businesses)which are web-based interactive systems that provide easy-to-understandinformation to employers and workers about the laws and regulations administeredby DOL. These Advisors give the regulated community access to informationabout their employment rights and responsibilities 24 hours a day, sevendays a week. The Advisors imitate the interaction a small business personmight have with a DOL expert about a particular law and/or regulation.The Advisors are expert systems that embed complex information, such asthe requirements of a regulation or a safety and health standard into acomputer model. Based on responses to questions posed by the Advisor, theuser is provided with customized information about how the law appliesin the users workplace.

Although substantial progress has been madeat the department and agency level, the full benefits of a proactive federalSME strategy will not be available without coordination between the leadagencies. The SBA, the Department of Commerce, and the United States Departmentof Agriculture have therefore established an interagency Small BusinessElectronic Commerce Working Group to coordinate SME e-commerce activities,prevent duplication of effort, and increase utilization of limited resourcesdirected at the 21 million SMEs in the United States.
The agencies involved in the Small Business ElectronicCommerce Working Group are creating new initiatives to serve SMEs. Basedon meetings with SMEs, academicians, consultants, market researchers, andfirms servicing the SMEs e-commerce market, these agencies are developinga collaborative proposal to help SMEs benefit from electronic commercethrough increased training and education. 
B. 1997 Presidential Directives
1. Tariffs
I direct the U.S. Trade Representative to workwith foreign governments to secure agreement within the next 12 monthsthat all products and services delivered across the Internet will not besubject to tariffs and that all equipment from which the Internet is builtwill also not be subject to tariffs. I direct the U.S. Trade Representativeto work with foreign governments to secure agreement within the next 12months that all products and services delivered across the Internet willnot be subject to tariffs and that all equipment from which the Internetis built will also not be subject to tariffs.
In May 1998, the World Trade Organization�s (WTO�s)Ministerial Conference adopted a declaration committing all WTO membergovernments to refrain from imposing customs duties on electronic transmissions.Over the past year, the United States has worked intensively with the now135 WTO countries to extend this moratorium. WTO Members developed an emergingconsensus to do so at the WTO�s Third Ministerial Conference which openedin Seattle in November 1999. This consensus is expected to be formallyadopted by WTO members when the Third Ministerial resumes.
Extension of the moratorium embodies a key policyobjective the United States has been advocating globally�namely that governmentsshould refrain from imposing unnecessary restrictions on electronic commercethat can inhibit its growth. The benefits of such a commitment to U.S.business and consumers are enormous, given the rapid growth in both internationaldata flows transmitted electronically and the value of the content embeddedin that data. The emerging consensus on the value of the moratorium reflectsrecognition by WTO members that imposing customs duties on electronic transmissionswould be an inefficient way to raise revenue and that the burden of institutingand complying with such a mechanism would outweigh any potential benefitsand could discourage investment in electronic commerce. It also reflectsrecognition that any attempt to discriminate on behalf of domestic suppliers(which is one of the trade-distortive effects of customs duties) is neitherpractical nor beneficial in a market whose dynamism is based on its globallyinterconnected nature.
The United States also has worked with its tradepartners to reduce tariffs on information technology equipment. Under theInformation Technology Agreement (ITA), 46 countries � representing nearly95 percent of the $600 billion global market for information technologyproducts � will reduce tariffs on IT products to zero, generally by theyear 2000. This agreement covers the core of information technology productsthat comprise the Internet�s hardware infrastructure, such as semiconductorsand printed circuit boards, computers, most telecommunications equipment,and computer networking equipment. The United States is currently leadingefforts to expand the scope of this agreement to include additional productsdriven by information technology and to address non-tariff barriers toinformation technology products.
2. Seamless Global Marketplace
I direct the U.S. Trade Representative to workwith foreign governments to enforce existing agreements and secure newagreements to make electronic commerce a seamless global marketplace. Thiswill include enforcing provisions of the recently concluded WTO TelecommunicationsServices Agreement; ensuring that product testing, certification, and approvalprocesses do not unnecessarily restrict trade; ensuring that service providershave nondiscriminatory access to customers worldwide; and other measuresthat ensure a free flow of commerce.
Through commitments on market access, nationaltreatment and regulatory safeguards by 70 WTO Members, the February 1998WTO Telecommunications Services Agreement has already encouraged billionsof dollars in international investment in new telecommunications facilities,much of it led by U.S. firms. As a result, the drastic reduction in longdistance rates that we are witnessing in the United States, based on low-costtelecommunications services, is being steadily replicated internationally,removing geography (and borders) as a constraint on the delivery of a broadrange of services and products. For instance, communication costs betweencountries where competition is most advanced, such as the United Kingdom,now differ little from****domestic long-distance costs.
Enforcement of the WTO agreement has been keyto ensuring that dominant carriers in foreign countries do not****keeprates artificially high and depress demand for telecommunications servicesand electronic commerce. Such enforcement has been critical to bringingdown rates by one-halfon calls between the United States and countriessuch as Japan and Mexico in****the 18 months since the WTO TelecommunicationsAgreement went into force � benefiting consumers in both the United Statesand foreign countries.
As a result of the broader market access and increasedinvestor stability provided by WTO commitments, it is estimated that newinvestment in undersea fiber optic cables will result in a fifty-fold increasein capacity by the end of 2001, compared to mid-1999. **(30)**Such expansion has created competitionfor investment to develop regional data and electronic commerce hubs, encouragingmany WTO members to unilaterally improve their market access commitments(e.g. Hong Kong, Korea, Japan, India, Singapore, Jamaica).
In addition to ensuring that existing WTO membersabide by their commitments, the United States has taken the lead in ensuringthat countries acceding to the****WTO take on robust commitments intelecommunications services. For countries without the institutions tosupport competitive telecommunications markets, the U.S. Government hasprovided technical assistance to encourage the development of a pro-competitiveregulatory framework consistent with WTO disciplines.
In order to deploy the advanced services thatare driving the digital economy, countries around the world are increasinglyaware of the need to ensure that service suppliers can install infrastructureand market consumer equipment in a timely manner, so as not to lag thetechnology curve. A major challenge for all countries has been streamliningthe testing and certification procedures which can cause such delay. Implementationof the June 1998 APEC Telecommunications Mutual Recognition Arrangement,designed to address this issue, has begun, with eight APEC economies scheduledto implement this arrangement this year. The United States was instrumentalto the October 1999 conclusion of a similar MRA in the Americas under theOrganization of American States (OAS).
Ensuring that WTO rules and commitments contributeto a liberalized global market for electronic commerce is the main themeof the WTO Electronic Commerce Work Program established in May 1998. TheUnited States is leading efforts to include positive results of the WorkProgram in the December 1999 Seattle WTO Third Ministerial, which openedin Seattle in November 1999, and is expected to resume in 2000. The UnitedStates has helped to foster continuation of the duty-free status of electronictransmissions and further agreements that WTO rules and commitments, andtheir liberalizing effects, apply to electronic commerce.
3. Copyright Protection
I direct the Secretary of Commerce to seek theprotection of copyright in the digital environment by working to achieveratification in the United States and overseas within the next 12 monthsof the World Intellectual Property Organization (WIPO) Copyright Treatyand the WIPO Performances and Phonograms Treaty.
On December 20, 1996, the Diplomatic Conferenceon Certain Copyright and Neighboring Rights Questions, convened by theWorld Intellectual Property Organization (WIPO), approved two Treatiesdesigned to ensure international protection of copyrighted works, performancesand sound recordings in the digital environment. The United States signedthe Treaties on April 12, 1997. The Senate ratified the treaties in October1998, and the implementing legislation, the Digital Millennium CopyrightAct (DMCA), was passed by the Congress and signed into law by PresidentClinton on October 28, 1998. On September 14, 1999, the United States depositedits instruments of ratification with the Director General of WIPO.
With ratification and implementation of the Treatiesby the United States complete, the Patent and Trademark Office (PTO) andother agencies are focusing their efforts on ratification and implementationof the Treaties by other nations. This involves every tool available tothe United States government � bilateral discussions, trade negotiations,the Special 301 process, multilateral fora such as the WTO and the FreeTrade Area of the Americas, conferences on intellectual property, and WIPOmeetings or programs promoting intellectual property protection. In eachof these fora, U.S. representatives discuss the importance of the Treatiesto the development of electronic commerce and how the treaties should beimplemented, explaining the features of the DMCA and its approach to protectionof anti-circumvention devices and systems, copyright management informationand limitations on liability of service providers.
For example, this past July, PTO co- sponsoredwith WIPO a conference for representatives from 30 African states on intellectualproperty in the digital age. PTO officials made presentations on the twoTreaties and emphasized the importance of African states ratifying theTreaties and adapting their laws to deal with electronic commerce issuessuch as limitations on liability for service providers. During the samemonth, the Commerce Department�s Commercial Law Development Program helda two-day seminar on intellectual property in Lagos, Nigeria, which alsodiscussed the importance of the Treaties. Explanation, discussion, andpromotion of the Treaties and the approach to implementation in the DMCAalso is a major element of the PTO�s annual Visiting Scholars Program andthe Copyright Office�s annual International Copyright Institute. Each year,these Washington-based programs attract dozens of government officialsfrom a variety of developing and emerging economies.
Another area of legislative and internationalactivity with significant effects on electronic commerce is the issue oflegal protection for databases. Two legislative proposals for databaseprotection are now pending before Congress: H.R. 354, sponsored by CongressmanCoble, and H.R. 1858, sponsored by Congressman Bliley. The Administrationoffered extensive commentary on these measures during hearings held earlierthis year. The Administration remains committed to working with the Houseand Senate on a database protection law that establishes adequate incentivesfor database production and distribution while ensuring a robust rangeof fair uses, particularly for scientific, research, and transformativeuses. Internationally, in 1999 the Administration made presentations onthese developments at WIPO regional consultations in Minsk, Buenos Aires,and Manila and at WIPO meetings in Geneva.
4. Patentable Innovations
I direct the Secretary of Commerce to update andmake more efficient our system for protecting patentable innovations tomeet the needs of the fast-moving electronic age and to seek agreementswith other governments to protect patentable innovations worldwide.
In updating our patent system for protecting patentableinnovations to meet the needs of the fast-moving electronic age, the Patentand Trademark Office (PTO) in the Department of Commerce has been receptiveto a continued expansion of subject matter eligibility in keeping withthe basic principles of our patent system. The PTO is committed to ensuringthat its practices and policies promote the innovation and disseminationof new technologies. It has followed suit by granting patents, when appropriate,in all advanced technologies, especially in the ever-evolving computer-relatedtechnologies. To this end, the PTO has processed and continues to processmultitudes of applications directed to electronic commerce, business-relatedInternet applications, and other Internet-related technologies. Some ofthe patents issued in this area are drawn to traditional computer hardwarepatents, while others are based on methods of doing business over the Internet.
To enhance the efficiency of our patent system,the PTO has embarked on an ambitious program aimed at improving the examinationof patent applications, particularly applications directed to computerand Internet-related technologies. The PTO continues to dedicate substantialresources to assembling a complete and comprehensive collection of computer-relatedtechnologies, as well as providing patent examiners with better accessto �prior art� literature. The PTO has already established an �ElectronicInformation Center� that provides examiners in computer-related technologieswith access to over 900 databases. Over one-third of these databases containbusiness and financial information. In addition, the PTO is expanding itsefforts to classify patent and non patent literature to maximize the abilityto conduct thorough patent searches. Moreover, the PTO is working continuallyto �upgrade� the skills and education of its examining corps. Along withhiring examiners with business, computer, and engineering backgrounds,the PTO is providing its patent examiners with training materials and coursesto handle the flurry of patent activity in the electronic commerce relatedtechnologies.
The PTO also has taken significant steps to improvedata access in the electronic age. Posting much of its patent search information,which includes over 30 million documents onto its website (http://www.uspto.gov/). Last year, the PTO recently expanded the content of its patentdatabases to provide access to the full text, as well as images and drawings,of all patents issued since 1976. As a result of this offering, the publicis able to search, by keywords, and retrieve the full text and associatedimages of patents contained in the database.
Finally, at the urging of the Administration,the World Intellectual Property Organization (WIPO) has agreed to establisha global information network in order to promote the greater use of informationtechnologies with the member countries of WIPO. The centerpiece of thisinitiative is a proposal to secure a global network that enables intellectualproperty offices to exchange information useful for patent examinationand grant activities. In addition, this network could make available intellectualproperty information to the public. WIPO has already designated funds toincrease connectivity among its offices, which will facilitate a globalprocess of patent examination and grants.
5. Domain Names System Privatization(ICANN)
I direct the Secretary of Commerce to supportefforts to make the governance of the domain name system private and competitiveand to create a contractually based self-regulatory regime that deals withpotential conflicts between domain name usage and trademark laws on a globalbasis.
We have taken huge strides towards fulfillingthe goals of the President�s directive on domain names in the last twelvemonths. The Department of Commerce and the private sector have worked togetherto make private sector management of the domain name system (DNS) a reality.During this same period, more than a dozen companies began offering domainname registrations on a competitive basis. And, notwithstanding the difficultyof finding consensus in the multifaceted Internet community, individualsrepresenting the full range of Internet stakeholders from around the globehave put aside their differences to work together to develop domain namepolicy based on traditional Internet values of consensus and bottom-updecision making. These achievements are a resounding affirmation of theprinciples established in the Administrations� policy statement on managementof internet names and addresses (the White Paper) (http://www. ntia.doc.gov/ntiahome/domainname/domainname.htm).
Only a year ago, in response to a call by theDepartment of Commerce, the global private sector came together to createthe Internet Corporation for Assigned Names and Numbers (ICANN) to replaceU.S. Government management of the domain name system with private sectorleadership. The Department of Commerce and ICANN are now working in partnershipto complete the transition of DNS functions to the private sector.
ICANN has already made tremendous progress inestablishing structures for the representative, bottom-up processes contemplatedin the White Paper. For example, ICANN has: -  Completed its organization structure and has begunto develop consensus-based policies on important topics such as the additionof new top level domains.
-  Accredited more than seventy new domain name registrarsfrom around the world to provide competitive registration services forthe .com, .net, and .org domains. Fourteen of these accredited registrarsare already offering retail registration services, and many more will soongo �live.� In just a few short months, competition has produced greaterconsumer choice and lower prices � some registrars are offering free domainnames in connection with other services.
-  Completed its first round of elections for the boardof directors and is now operating with a full board of nineteen directors.By the summer of 2000, ICANN plans to replace the ten appointed board membersthat are currently serving in an interim capacity with elected board members.
-  Adopted a uniform dispute resolution policy to cutdown on cybersquatting (the practice of deliberately registering domainnames in violation of an entity�s trademark) based on recommendations madeby the World Intellectual Property Organization (WIPO). The implementationof this policy will greatly reduce the time and cost associated with conflictsbetween domain name registrations and trademark laws on a global basis.
-  Worked with the Department of Commerce to increasethe security and stability of the root server system through a CooperativeResearch and Development Agreement (CRADA). ICANN�s Root Server SystemAdvisory Committee (RSSAC) undertook, as its first order of business, anassessment of the root server system worldwide to ensure its compliancewith Y2K requirements.

In order to facilitate a smooth transitionto private sector management of the DNS, it was necessary for the Departmentof Commerce, ICANN and Network Solutions, Inc. (NSI), the company thathas managed certain aspects of the domain name system on behalf of theU.S. Government since 1992, to reach agreement on a number of outstandingissues concerning the transition process. The three parties have now enteredinto a series of five agreements that, taken together, resolve the issuesthat had been a source of contention for some time. Some of the highlightsof these agreements include:-  A reduction in the wholesale price of a domain nameto $6 per year.
-  Increased choice for domain name registrars and registrantsto determine the length of the domain name registration and greater flexibilityfor registrants that wish to switch between domain name service providers.
-  Insured availability, on reasonable terms and conditions,of domain name registration data vital to third parties that wish to createnew and innovative value added services, while prohibiting use of the datato enable the transmission of mass unsolicited commercial solicitationsvia e-mail (spam).
-  A reduction in incentives for cybersquatting by requiringall domain name registrars to ensure adequate receipt of payment for adomain name at the time of registration.
-  Use of the �InterNIC� website as a global, publicinformation resource that will provide Internet users with domain nameregistration information, including a directory of all accredited registrars.

These agreements, executed on November 10,1999, pave the way for robust competition in domain name registration servicesand put ICANN and private sector management of the DNS on a firm foundationfor the future.
The President�s directive called for a bold experimentin private sector management of a critical global resource. The past yearhas demonstrated that a transition to private sector management to theInternet domain name system is achievable and is already bringing benefitsto Internet users across the globe.
Over the next year, the Department of Commercewill work closely with ICANN to ensure that the transition to private sectormanagement is completed in accordance with the Administration�s principlesfor DNS management: stability; competition; private, bottom-up coordination;and representation.
6. Tax
I direct the Secretary of the Treasury to workwith State and local governments and with foreign governments to achieveagreements that will ensure that no new taxes are imposed that discriminateagainst Internet commerce; that existing taxes should be applied in waysthat avoid inconsistent national tax jurisdiction and double taxation;and that tax systems treat economically similar transactions equally, regardlessof whether such transactions occur through electronic means or throughmore conventional channels of commerce.
President Clinton signed the Internet Tax FreedomAct into law on October 21, 1998. The Act imposes a three year moratoriumon certain state and local taxes and trade issues associated with electroniccommerce and comparable sales activities. The Act also created a CongressionalAdvisory Commission to consider these issues.
The Department of Treasury, the Department ofCommerce and the United States Trade Representative are represented onthe Advisory Commission on Electronic Commerce established by the InternetTax Freedom Act. This Commission of business and government leaders istasked with exploring such issues as sales and use taxes on sales madeover the Internet; taxes on Internet access; international tariffs on electronictransmissions; and Federal, State and local telecommunications excise taxes.The Commission is to issue a report to Congress by its statutory deadlineof April 21, 2000.
The Treasury Department played a key role in theNational Tax Association sponsored Communications and Electronic CommerceTax Project. The Project, which was composed of academics, business representatives,and state and local government officials, released a comprehensive reportin September 1999 on state and local taxation of electronic commerce.
With respect to international issues, Treasuryworked to develop an international consensus regarding implementation ofthe OECD�s taxation framework conditions. OECD countries agree that thoseconditions�neutrality, efficiency, certainty and simplicity, effectivenessand fairness, and flexibility�will underlie any taxation of the Internetor electronic commerce. The progress and results of the OECD work was reportedat an Asia Pacific Economic Cooperation (APEC) meeting in November 1998,in an effort to keep non-OECD member countries informed of the developmentswithin the OECD. This effort further contributes to the goal of achievinga truly global consensus regarding the taxation of electronic commerce.
Treasury and the OECD also seek input from allof the stakeholders involved in order to achieve global consensus and toensure that any tax rules appropriately take into account the evolvingtransactions and technology to which they would be applied. For example,the OECD work is being advanced through a precedent setting procedure toensure that its decisions are informed by the views of the private sectorand non-member countries.
Treasury also has been active in raising importanttax policy issues associated with electronic commerce taxation with ourtax treaty partners. In addition, Treasury has been working with OECD andnon-OECD countries to arrive at a consensus on the proper interpretationof treaties regarding electronic commerce transactions.
7. Uniform Legal Framework/ DigitalSignature
I direct the Secretary of Commerce to work withthe private sector, state and local governments, and foreign governmentsto support the development, both domestically and internationally, of auniform commercial legal framework that recognizes, facilitates, and enforceselectronic transactions worldwide. I further direct the Secretary of Commercewithin the next twelve months to seek to gain agreement with the privatesector, State and local governments and foreign governments on common approachesfor authentication of electronic transactions through technologies suchas digital signatures.
Following a two-year effort by commercial lawexperts in both the private and public sectors, the National Conferenceof Commissioners of Uniform State Laws (NCCUSL) this summer adopted andrecommended to the States a �Uniform Electronic Transactions Act� (UETA)(www.nccusl.org/pressrel/Eta799.htm). This model law, currently on �fasttrack� to be considered for enactment by all fifty States, sets forth aminimalist, predictable and transparent approach to electronic transactions.California has already adopted the UETA (which will go into effect thereon January 1, 2000). A survey of legislative plans for the year 2000 takenby NCCUSL suggests that at least twenty-seven States will see introductionand consideration of UETA in the year 2000.
The UETA is consistent with the basic principlesidentified in the *Framework* for revising commercial law so thatparties may enter into legally enforceable electronic transactions: partiesgenerally should be free to order the contractual relationship betweenthemselves as they see fit; rules should be technology-neutral (i.e., therules should neither require nor assume a particular technology) and forwardlooking (i.e., the rules should not hinder the use or development of technologyin the future); existing rules should be modified and new rules shouldbe adopted only as necessary or substantially desirable to support theuse of electronic technologies; and the process should involve the high-techcommercial sector as well as businesses that have not yet moved online.
Enactment of the UETA by all fifty States willtake several years under the most optimistic projections. In order to eliminateuncertainty about the legal status of electronic transactions during thatperiod, the Administration this year supported federal legislation (S.761) that would ensure the legal enforceability of contracts and signaturesin electronic form. A similar measure passed by the House of Representatives(H.R. 1714) contains in addition provisions permitting parties to a transactionto provide legally required notices and disclosures in electronic formand to satisfy recordkeeping requirements with electronic records. TheAdministration believes that it is important to revise laws requiring paperdocuments so that they do not prevent transactions from moving online,but that these revisions must ensure equivalent protection of the publicinterest in the online environment. We will work with Congress to craftlegislation that meets that test.
Neither the UETA nor the pending federal legislationeliminate all legal obstacles to electronic transactions. A variety ofother federal, state and local laws adopted before the advent of electroniccommerce � for example, licensing rules and technical standards � havethe unintended consequence of preventing some types of transactions fromtaking place online. Vice President Gore recently announced an initiativeto identify such laws and to propose changes to eliminate obstacles toelectronic transactions and at the same time ensure an equivalent levelof protection for the public interest so that electronic commerce is assafe for consumers as more traditional forms of commerce. The ElectronicCommerce Working Group is responsible for this project, which will involveconsultation with the private sector and with state and local governments.
Internationally, the United States continues topress other countries to develop commercial law frameworks that recognizeand enforce electronic transactions on the basis of four key principles:(1) eliminate paper-based legal barriers to electronic transactions byimplementing relevant provisions of the 1996 UNCITRAL Model Law on ElectronicCommerce; (2) reaffirm the rights of parties to a transaction to determinethe appropriate technological means of authenticating their agreements;(3) provide that parties to a transaction should have the opportunity toprove in court that the authentication technique used in the transactionis valid; and (4) commit national governments to treating providers andusers of authentication service providers from other countries in a non-discriminatorymanner.
This approach has received significant supportfrom the private sector. In its most recent statements, the TransAtlanticBusiness Dialogue (TABD) and the US-Japan Business Council expressed supportfor the goals of technology neutrality, party autonomy, non-discrimination,and removing paper-based barriers. Similarly, at its inaugural meetingin Paris in September, the Global Business Dialogue on electronic commerce(GBDe) (www.gbde.org) confirmed the essential elements of U.S. policy inthe area of authentication.
These principles were embodied in the Declarationon Authentication adopted by Ministers at the OECD Conference on ElectronicCommerce in Ottawa last year. They also were endorsed in Joint Statementswith the United Kingdom, Korea, and Australia in the last year, addingto the list of prior Joint Statements that includes Japan and France. Wecontinue to press for discussion of our proposed International Conventionon Electronic Transactions at the UN Commission on International TradeLaw in Vienna.
We are concerned that the European Union�s ElectronicSignatures Directive, recently adopted by the E.U. Parliament, takes amore regulatory approach establishing specific technical requirements forelectronic signatures and providing a presumption that electronic contractssigned using the government- endorsed methodology are legally binding.In our view, this approach should be reserved for specific categories oftransactions where the public interest requires direct government oversight.We have raised these concerns with the European Commission and we willclosely monitor implementation of the Directive by member states of theE.U. in the coming year to urge that the members states� legislation reflectthe principles of party autonomy, technology neutrality, and non-discriminationso that global transactions are enabled, and not impeded.
8. Privacy Codes of Conduct
I direct the Secretary of Commerce and the Directorof the Office of Management and Budget to encourage private industry andprivacy advocacy groups to develop and adopt within the next 12 monthseffective codes of conduct, industry developed rules, and technologicalsolutions to protect privacy on the Internet consistent with the PrivacyPrinciples issued by the Information Infrastructure Task Force (IITF) PrivacyWorking Group. I further direct the Director of OMB to develop recommendationson the appropriate role of government consistent with A Framework ForGlobal Electronic Commerce. I further direct the Secretary and theDirector to ensure that means are developed to protect the privacy of children.
The past year has seen important progress in theprotection of personal privacy online. Privacy policies have become farmore common on both federal and private-sector websites. Self-regulatoryefforts online have become more widespread and enforceable. And, for thehandling of especially sensitive information � for children, medical records,and financial records � the Administration has led the way toward puttinglegal protections in place to protect personal privacy.
Consistent with *A Framework for Global ElectronicCommerce*, the U.S. Government continues to believe that private sector-developedcodes of conduct are an effective way to protect privacy for many sortsof online transactions. In the last year, significant progress was madein this area. With consistent spurring by government calls for action,the private sector can now claim that nearly two-thirds (65.7%) of commercialsites have posted privacy policies or information practice statements (www.msb.edu/faculty/culnanm/ gippshome.html). This is up from merely 14% a year before (www.ftc.gov/reports/ privacy3/survey.htm#surveyofcommercialwebsites). This dramaticimprovement was led by private-sector groups including the Online PrivacyAlliance (www. privacyalliance. org), with enforcement provided by organizationssuch as TRUSTe, BBB*Online,*and CPA WebTrust (www.truste.org, www.bbb.org,www.cpawebtrust.org). Nearly 1,000 websites now carry privacy seals fromat least one of these third-party enforcement services and more than 1,000applications are in the process of being considered for seals.
The Administration continues to encourage industryto make privacy policies ubiquitous on the Net. Some of the largest companiesare showing the most leadership. In March, IBM announced that it wouldno longer advertise on websites that do not post privacy policies. In April,Secretary of Commerce William M. Daley sent letters to the other top webadvertisers urging them to take similar actions. To date, eight marketleaders � IBM, Microsoft, Disney, Intel, Compaq, Novell, Procter and Gambleand American Express � have done so. These companies, which account formore than one-third of America�s top 20 web advertisers, are using theirresources to bring real privacy protection to Internet users by creatingincentives for more websites to provide privacy protection.
Disney has gone even further. Disney not onlyrefuses to purchase advertisements on websites that lack privacy policies,it also will not accept Internet-based advertising from websites that lackprivacy policies. Microsoft, American Express, the Direct Marketing Association,and others have created online tools to assist partner websites in generatingtheir own privacy policies. The Administration will continue to keep thepressure on industry to work to spread the presence of effective privacypolicies.
Beyond actively encouraging the posting of privacypolicies, the Administration is also looking at other areas of online privacy.In July 1998, Vice President Gore asked the Department of Commerce to workwith the Federal Trade Commission to encourage companies that build profilesabout individuals to implement effective self-regulatory mechanisms. Inearly November of this year, the Department of Commerce and FTC hosteda workshop to explore �online profiling.� The focus of the workshop wason the practices of companies that gather personal information at othercompanies� websites, through techniques such as cookies placed by banneradvertisements. At the workshop, the leading companies announced the creationof a new self-regulatory group, called the Network Advertising Initiative(NAI) (www.network advertising.org). The NAI has committed to develop awebsite to provide consumers an opportunity to opt out from the servicesof these companies. The group also is working on a set of principles toprovide effective privacy protection in the area of profiling.
The U.S. Government will continue to monitor theprogress of self-regulation to determine whether the self-regulatory programsfulfill their promise of protecting the privacy of Internet users. To thatend, the FTC will conduct an online survey next year to reassess progressof websites� implementation of fair information practices.
While applauding the self-regulatory efforts thathave led to progress in online privacy protection, the Administration alsohas recognized that certain categories of sensitive records deserve protectionas a matter of law, rather than solely through self-regulation. First,in the area of children�s online privacy, the President supported and signedthe Children�s Online Privacy Protection Act of 1998 (COPPA). In the fallof 1999, the Federal Trade Commission issued the final regulations implementingCOPPA. The Rule:-  applies to commercial Websites or online servicesdirected to children under 13;
-  limits information collection to what is necessaryfor the child�s participation in an activity;
-  requires the operator to post a clear and prominentprivacy policy;
-  requires verifiable****parental consent priorto collecting, using or disclosing personal information from a child; and
-  allows the private sector to create self-regulatoryprograms and seek approval from the FTC for �safe harbor� status.

Second, in May, 1999, President Clinton announcedin the area of financial privacy that customers of banks, insurance companies,and securities firms should have effective and legally enforceable privacyprotections, including for their online transactions. Under the financialservices modernization law that the President signed in November, consumerswill have an absolute right to know if their financial institution intendsto share or sell their personal financial data, and will have the rightto block sharing or sale outside the financial institutions� corporatefamily. The new law gives regulatory agencies full authority to enforceprivacy protections, and expressly preserves the ability of states to providestronger privacy protections. Although the new law reflects a real improvementover the status quo, the President has promised to seek additional privacyprotections � especially for effective choice about whether personal financialinformation can be shared with affiliated companies.
Third, medical records are another area of especiallysensitive information. After Congress failed to pass legislation relatedto the protection of privacy of medical information by August 21, 1999as ordered by the Health Insurance Portability Act of 1996 (HIPAA), thePresident announced in October comprehensive proposed regulations for theprotection of medical records (www.hhs.gov/news/press/ 1999pres/991029.html).Consistent with HIPAA, the proposed rules would apply to all records onceplaced in electronic form. For those records, the rules would provide legalprotections for fair information practices � notice, opt-in choice beforerecords are used for non-medical purposes, access, security, and enforcement.The proposed regulations are scheduled to become final in early 2000. ThePresident also has called on Congress to enact comprehensive legislationfor medical records to address gaps in the current statutory authority.
As part of its overall efforts to bolster privacyonline, the Administration has taken steps to act as a good model for theprivate sector in the area of privacy protection. To coordinate privacypolicy across the Federal government, the Administration appointed a ChiefCounselor for Privacy, in the Office of Management and Budget. In June,the Director of OMB instructed agencies to post clear privacy policieson their websites. By the September 1, 1999 deadline, all federal agencieshad posted such policies, signaling to the private sector the feasibilityand importance of notifying web visitors of how their personal informationwill be handled. OMB is now reaching out to the States to explore waysto ensure that good privacy practices are created at the State and locallevels.
The U.S. Government has emphasized the potentialof privacy self-regulation in numerous international fora, including: theOrganization for Economic Cooperation and Development; the Free Trade Areaof the Americas; the Asia Pacific Economic Cooperation Forum; the GlobalBusiness Dialogue on Electronic Commerce; the TransAtlantic Business Dialogue;and the TransAtlantic Consumer Dialogue. Through the new Privacy Counselor,the United States participated for the first time in both the open andclosed sessions of the annual Conference of Data Protection Commissioners.
The United States has been addressing issues arisingout of the European Union�s Directive on Data Protection, an effort leadby the Under Secretary for International Trade in the Department of Commerce.The Directive, which went into effect in October 1998, allows transfersof personal data only to non-EU countries that provide an �adequate� levelof privacy protection. The Directive requires centralized data protectionauthorities and detailed legal rules for handling personal informationin both the on and offline environments.
Given that the United States uses a joint approachthat relies on a mix of legislation, regulation, and self-regulation, therehas been uncertainty about the impact of the �adequacy� standard on personaldata transfers from the European Union to the United States. To amelioratethat uncertainty and provide a more predictable framework for such datatransfers, the United States has developed a �safe harbor� proposal thatwould allow U.S. organizations to meet the E.U. �adequacy� standard byadhering voluntarily to a set of privacy principles and frequently askedquestions and answers. Data flows to those U.S. organizations in the �safeharbor� could continue uninterrupted. The safe harbor principal also providedthat: all 15 Member States would be bound by the European Commission�sfinding of adequacy; Member State requirements for prior approval of datatransfers would be waived or approval would be automatic; and U.S. companieswould have an interim period to implement safe harbor policies.
Substantial progress has been made on the principlesof the safe harbor arrangement. On the procedural and enforcement aspects,work is also progressing but further work is needed on both sides. Bothsides hope to finalize this safe harbor arrangement in the next few months.Updated drafts of the safe harbor principles and accompanying frequentlyasked questions and answers are available at www.ita.doc.gov/ecom.
9. Filtering/Rating System
I direct the Secretary of Commerce to encouragethe development and adoption within the next 12 months by industry of easyto use and effective rating systems and filtering technologies that empowerparents, teachers, and other Internet users to block content that is inappropriatefor children.
The Administration believes that empowering parents,teachers, and librarians with a wide range of tools, with which they canprotect children in their community in a manner consistent with their values,is ultimately the most effective approach and one that is most compatiblewith the First Amendment.
In May 1999, the major Internet portal companiesmade a commitment to Vice President Gore to launch an initiative withintwo months that would give parents and children easy assess to specificfiltering and monitoring tools, law enforcement contacts, and other onlineresources. In July 1999, U.S. industry launched this initiative, �GetNetWise,�a new, easy-to -access online resource for parents to help keep their childrensafe online. The new resource contains information on Internet safety tips,consumer content filtering products, law enforcement contacts, and a guideto quality educational and age-appropriate online content
Currently, schools and libraries are using a widerange of technology tools and monitoring techniques to ensure that childrendo not encounter inappropriate material or dangerous situations while online.These schools and libraries are determining what will work best in theirparticular schools and communities. Absent proof that local decision-makingis not working to protect our children, the Federal Government should notmandate a particular type of technology to filter or block material. Rather,we should encourage �acceptable use� policies by all public institutionsthat offer access to online resources, including the Internet. An acceptableuse policy should, while being sensitive to local needs and concerns, offerreasonable assurances to parents that safeguards will be in place in theschool and library setting that permit users to have educational experiencesconsistent with their values. To promote this policy, the Administrationsent a letter to the Federal Communications Commission urging the Commissionto require that any school or library that receives federal e-rate fundsmust have an �acceptable use� policy in place before such funds are awardedto them.
Children continue to use the Internet to enhancetheir learning and quality of life. In October, the Department of Commercereleased *How Access Benefits Children: Connecting Our Kids to the Worldof Information*. This report profiled projects funded by the Department�sTelecommunications and Information Infrastructure Assistance Program (TIIAP)and showed how young people across America are using the Internet and otherinformation age tools to connect with and enrich their communities.
In October 1998, Congress passed the Child OnlineProtection Act (COPA) that restricts the commercial distribution of materialthat is �harmful to minors� on the World Wide Web.****In response toa filing by a coalition of free speech advocates led by the ACLU, the U.S.District Court for the Eastern District of Pennsylvania issued a nationwidepreliminary injunction on February 1, 1999, barring enforcement of thestatute. The district court denied the government�s motion to dismiss theplaintiffs for lack of standing and granted plaintiffs� motion for an injunction,finding that the plaintiffs had established a likelihood of success onthe merits of their First Amendment facial challenge to the constitutionalityof the statute. The government has appealed the district court�s ruling.
The district court�s proceedings do not, however,affect COPA�s directive to establish a Commission on Child Online Protection.The Commission will examine the extent to which current technological toolseffectively help to protect children from inappropriate online content.Under the statute, the Speaker of the House and the Senator Majority Leaderselected 16 members of the Commission; the other three are designated governmentofficials. The Commission is expected to issue a report by November 2000.
In addition to these undertakings, the Departmentof Education and the Department of Justice are working with the NationalAcademy of Sciences on a study to ensure that children are protected frominappropriate material on the Internet.
10. Technical Standards
I direct the Secretary of Commerce to supportprivate sector development of technical standards for the Internet andthe U.S. Trade Representative to oppose efforts by foreign governmentsto impose standards or to use standards for electronic commerce as non-tarifftrade barriers.
The challenge to standards development and implementationwas summarized in June, 1999, in the *Emerging Digital Economy II*: �Electronic commerce and the information technology (IT) industries thatmake e-commerce possible are growing and changing at breathtaking speed.Not only were we unable to foresee five years ago how advances in informationtechnology would �alter the manner in which we do business and create value,�but the rate of change is racing ahead of estimates that only a year agoappeared optimistic.� This fact underscores the long-standing policy ofthe U.S. Government that timely and appropriate standards are criticalto the long-term commercial success of the Internet, as they allow productsand services from different vendors or industry sectors to work together,facilitate competition, and assist towards enabling the global electronicmarketplace.
In light of the tremendous changes underway affectingelectronic commerce, however, standard setting activities must be guidedby the requirements and processes of the marketplace, and not by governments.Governments should refrain from determining technical regulations and shouldrely, instead, on standards, protocols, and implementations developed byvoluntary, industry-led, consensus-based organizations at both the nationaland international levels.
To ensure this core principle is carried out internationally,the U.S. Government has worked with the U.S. private sector to secure itsacceptance. For example, the Office of the U.S. Trade Representative hasadvocated this policy objective in bilateral, regional, and multilateralfora. The Department of Commerce has vigorously advanced private sectorleadership in the development of voluntary, market-relevant, consensus-basedstandards at the international and regional level.
In partnership, U.S. industry and the U.S. Governmenthave reaffirmed the core principles of our policy on a global basis. InSeptember of last year, the Steering Committee for the successful GlobalStandards Conference (Brussels 1997) convened and reviewed actions takensince the Conference which endorsed private sector leadership in standardsdevelopment. The Steering Committee, composed of senior international representativesof industry, technical organizations, and governments, confirmed that theway forward is through market-relevant, globally accepted voluntary standards.
The *Framework* outlined a number of constructiveways that government can support the private-sector, market-led approachto standards. Consistent with this vision, the Department of Commerce�sNational Institute of Standards and Technology (NIST) has provided effectivesupport for industry-led standards. These efforts include: (1) buildingstandards road-maps with private-sector stakeholders; (2) providing technicalassistance to industry in the development and harmonization of open standards;(3) establishing neutral testbeds and developing reference implementationswith technical experts from the private sector; (4) developing test methodsand infrastructures for measurement and demonstration; and (5) contributingto implementation guidelines.
One globally recognized initiative in this areais the Department�s leadership in developing an Advanced Encryption Standard(AES). With the help of the global cryptography community, NIST has overseena private sector-led process of identifying potential candidates for AESthat included public workshops and a public process for receiving commentsand analyses. In August of this year, the five final candidates were announcedin what Secretary of Commerce William Daley described as a �critical milestonein developing the AES [that] will serve as an important security tool insupport of the dynamic growth of electronic commerce.�
(http://www.nist.gov/public_affairs/releases/g99-111.htm)
11. Electronic Payment Systems
I direct the Secretary of the Treasury to cooperatewith foreign governments to monitor newly developing experiments in electronicpayment systems; to oppose attempts made by governments to establish inflexibleand highly prescriptive regulations and rules that might inhibit the developmentof new systems for electronic payment; and as electronic payment systemsdevelop, to work closely with the private sector in order to keep appraisedabout policy development and to ensure that governmental activities flexiblyaccommodate the needs of the emerging marketplace.
Electronic payments have substantial advantagesover paper checks, including reduced manual processing, greater accuracy,more timely transactions, better information, and reduced costs. To accelerateuse of electronic payments in federal government financial transactionsand in the economy, the Administration developed the Electronic FederalTax Payment System (EFTPS) and the Electronic Fund Transfer program (EFT�99).
EFTPS was inaugurated in 1995 to collect tax paymentselectronically, and it converted a 37-step paper process that required7-10 days to complete to a six step electronic process that requires twodays. Two and a half million business taxpayers � 31% of all business taxpayers� are now enrolled in EFTPS. In FY 1998 the $1.2 trillion they paid electronicallyrepresented 84% of all business taxes collected and made EFTPS one of theworld�s largest electronic payment collection systems. An important additionalbenefit of EFTPS is that participating businesses develop the capabilityof sending and receiving electronic payments.
The EFT �99 program allows the Federal governmentto make benefit payments electronically. Treasury issues 700 million governmentpayments annually, 80% of which are benefits payments. Through a publiceducation program, EFT increased the number of benefit recipients receivingpayments electronically from 56% in FY 1996 to 75% by September 1999. Ninety-fivepercent of Department of Defense salary and retirement payments are currentlybeing made via EFT, and the portion of vendors receiving their paymentselectronically has increased from 16% in 1995 to 53% in September 1999.To increase vendor participation in EFT, Treasury developed the PaymentAdvice Internet Delivery system, which provides Federal agencies an alternativemethod to deliver remittance information to their vendors through the Internet.
Eight million federal beneficiaries could notreceive electronic payments because they lack a bank account. In 1999,Treasury introduced a program through which banks provide a low-cost bankaccount, the Electronic Transfer Account (ETA), for these recipients. Thusfar, over 200 banks offer ETAs for a monthly fee of $3 or less.
The payments volume that the Treasury moves electronically,and the government�s commitment to electronic transaction processing, giveTreasury significant influence in emerging technology development. To encourageuse of electronic payments, Treasury has focused on developing new applicationsthat increase efficiencies in government payments, on pilot programs, andon creating economies of scale in electronic payments applications. However,Treasury avoids picking �winners and losers� in the technology marketplace,and instead uses off�the-shelf technology and shops as a vendor for technologywith the lowest cost and best performance.
***Intra-Governmental ElectronicTransactions***
Through the Electronic Processes Initiatives Committee(EPIC) senior Federal officials coordinate government-wide electronic processinitiatives. EPIC formed the Intergovernmental Transfers Task Force todevelop requirements for processing intra-governmental transfers, and Federalagencies now utilize commercial purchase cards for processing large-volume,small-dollar intra-governmental transactions. In addition, Treasury andthe Federal Reserve Bank of Richmond are developing a system for processinglarge-dollar, low-volume transactions that uses next-generation web-basedtechnology and will be operational in May 2001.
***Card Services***
Under the SmartPay program, GSA makes purchaseand smart cards available for applications such as purchasing commercialproducts, paying travel and fleet expenses, and controlling access to buildingsand computers. The program also streamlines �backroom� functions such astransaction processing, accounting, invoicing, reconciliation, and payment.SmartPay established a testing process for the electronic access systemto evaluate the integrity and accuracy of end-to-end electronic interfaces,and agencies can combine business lines on a single card to simplify accountset-up and maintenance, card-issuance, and cardholder services.
***Securities Sales to the Public***
Treasury�s Bureau of the Public Debt (BPD) thisyear began offering a variety of transaction and information services usingthe Internet and other electronic delivery systems. *TreasuryDirect*Electronic Service allows customers to transact marketable securities businessvia the Internet, and permits account holders to buy Treasury bills, notes,and bonds and perform many of the functions needed to maintain an account.The Savings Bond Connection offers persons the opportunity to purchasesavings bonds over the Internet. BPD also is developing a new system forthe $163 billion state and local government securities program that willoffer subscription, redemption, and account information services withina secure Internet environment.
***E-filing***
This year, IRS unveiled a program through whichtaxpayers can make tax payments by credit cards. The program will expandin 2000 to accept taxpayers� estimated tax and extension payments and toallow taxpayers to authorize IRS to deduct tax payments from their bankaccounts. As individuals make and receive payments to IRS electronically,their capability and confidence in electronic commerce will likely increase.
***E-checks***
Small- and mid-sized vendors often cannot processelectronic payments because they lack information on the source of thepayment, the account number, and the purpose. FMS is testing an e-checkdisbursement mechanism for Federal vendor payments that, like a paper check,allows the government to combine payment with billing information. E-checksare of particular use where a digitally signed document must accompanypayment, and 50 vendors receiving Federal payments of at least $1 millionper day participate in the pilot. The first e-check was issued over theInternet in June 1998 and an evaluation will be completed by June 2000.If the pilot is considered successful, the technology may be used for otherclasses of payments and collections.
***Stored-Value Cards***
FMS is the largest user of stored value cards(SVCS) in the United States, and has engaged in pilots at 10 governmentlocations. For payments, the cards are used at four military installationsto eliminate payroll checks, and 150,000 cards with $60 million in valuehave been issued. FMS piloted SVCs at two VA Medical Centers: SVCs wereissued to employees, patients, and volunteers, who load value on the cardsat ATMs, and terminals were installed in cafeterias, retail stores, andvending machines. SVCs work well in closed environment by eliminating papertransactions, reducing the process steps associated with paper transactions,facilitating back-end financial operations, and streamlining workflow.FMS will include additional military sites and also is working with theBureau of Prisons to implement SVCs in prisons.
12. Securing the Internet for
E-Commerce
I direct all executive departments and agenciesto promote efforts domestically and internationally to make the Interneta secure environment for commerce. This includes ensuring secure and reliabletelecommunications networks; ensuring an effective means for protectingthe information systems attached to those networks; ensuring an effectivemeans for authenticating and guaranteeing confidentiality of electronicinformation to protect data from unauthorized use; and providing informationso that Internet users become well-trained and understand how to protecttheir systems and their data.
Assuring the safety and security of the Internetand other networks is a global priority. Consumers and businesses needto protect their sensitive information and communications from unauthorizedaccess over global shared information networks. Private sector demand forsecurity has only increased with the growth of electronic commerce. Therefore,the development and use of information security tools and technology mustbe encouraged and deployed. One tool that is essential to protecting thesecurity of electronic transactions is encryption.
Recognizing these needs, the Administration continuesto support the use of strong encryption products within the United States.However, unlimited access to strong encryption by terrorists, criminals,drug traffickers and rogue governments to conceal their illicit activitiesposes risk to our public safety and national security. Therefore, the Administrationcontinues to promote a balanced approach to encryption policy.
After several months of consultations with industry,privacy and law enforcement groups and the Congress, the Administrationrecently announced a new approach to its encryption policy that continuesto balance, and advance, important national interests: privacy, secureelectronic commerce, national security and public safety. This new frameworkis comprised of three elements � information security and privacy withinthe federal government, a new framework for export controls, and updatedtools for law enforcement.
First, the Administration will promote the developmentand use of information technology within the federal government. The Departmentof Defense, for example, hopes to serve as a model for the government andprivate sector by securing its own communications networks. This step recognizesthat sensitive government electronic information - as well as commercialand privacy information - requires strong protection from unauthorizedand unlawful access if the great promise of the electronic age is to berealized.
With respect to encryption export controls, theupdated policy will permit U.S. companies new opportunities to sell theirproducts to most end users in global markets. Under the new policy: -  Any encryption commodity and software of any keylength may be exported under license exception (without a license) to individuals,commercial firms, and other non-government and non-military end user inany country except the seven state supporters of terrorism. Thus, foreignbusinesses and individuals can have access to any U.S. encryption productto build their e-commerce systems and protect their communications.
-   Any retail encryption commodity of any keylength can be exported under license exception (without a license) to anyend user in any country, except the seven state supporters of terrorism.Thus, products that are sold over-the-counter and other mass-market productsthat are designed for individual or small office, business or home usewill be readily exportable from the United States without a license. Generalpurpose operating systems, with or without embedded networking features,and other widely-used security products also will be exportable from theUnited States without a license, thus promoting the growth of secure e-commerceand e-business.
-  Post export reporting requirements will be streamlinedand significantly reduced to be consistent with U.S. industry businessmodels, thus making it easier for U.S. industry to distribute their securityproducts in foreign markets.
-  Controls on software and non-commercial source codein the public domain, as well as open-source software, will be significantlyreduced and improved from current law.
-  U.S. encryption technology, such as encryption chipsand software development encryption tool kits, will be more easily exported,thus promoting the development of secure electronic commerce products basedon U.S. technology.

With these updates, individuals and businesseswill be able to secure their communications and data over global networks.Businesses will be able to conduct secure e-commerce transactions withtheir clients and business-to-business e-commerce can be protected fromunauthorized access. Commercial and individuals� web applications can beauthenticated and secured, and global businesses will have ready accessto encryption technology to secure their corporate databases, emails, andproprietary files and records. The Administration is in the process ofconsulting with U.S. industry and privacy groups to assist the draftingof the export regulations implementing the new policy by mid-January, 2000.
The United States Government continues a numberof other initiatives to ensure the security and reliability of our nationaland global communications infrastructures for the near future and beyond.
In the near term, the Administration is directingsubstantial effort to solve a crucial issue, the Year 2000 (Y2K) computerproblem, which threatens to undermine the efficacy of digital networks.In February 1998, President Clinton formed a Council on Year 2000 Conversionto address these issues. In addition to focusing on government computersystems, the Council is working with various industry sectors, internationalorganizations, and countries around the world to ensure that Y2K problemsdo not threaten the vital telecommunications and information processingsystems upon which electronic commerce depends. The Council�s InformationCoordination Center, in cooperation with government and industry operationscenters, will monitor and report on the status of critical system operationsduring the date rollover period.
The Administration also is taking steps to protectour national infrastructures over the longer term. As instructed by PresidentClinton in Presidential Decision Directive 63 (PDD-63),
Protecting America�s Critical Infrastructures,the Federal government is working to establish a reliable, interconnected,and secure information systems infrastructure by 2003. The Critical InfrastructureCoordination Group has developed the first version of the �National Planfor Information Systems Protection� called for in PDD-63. This draft planhas two main objectives: (1) making the Federal government a model of informationsecurity and (2) building a voluntary public-private partnership to protectnational information infrastructure. In an important first step, the privatesector has already begun to create information sharing and analysis centersto work among themselves to share threat information, research and developmentcosts, industry standards and best practices. Additionally, the Administrationhas put forward budget requests to fund important information securitytraining, research and development, secure systems procurement, and publickey infrastructure initiatives.
Because the electronic environment of the Internetis global and border-less, the PDD also requires the development of a planto expand international cooperation on critical infrastructure protectionwith like-minded and friendly nations, international organizations andmultilateral corporations. The Administration continues to make significantprogress in this area, fostering cooperative information exchanges, andconducting infrastructure protection exercises.
13. Government Procurement
I direct the Administrator of General Servicesto move the Federal Government into the age of electronic commerce by expanding�GSA Advantage,� its online shopping service for the Federal communityto cover four million items by 12 months from now.
Online systems for satisfying the purchasing needsof Federal agencies have become increasingly sophisticated. Sites suchas GSA Advantage and DOD Emall are providing fast and easy methods forpurchasing goods and services which increase choices, leverage Federalpurchasing power and improve the speed of delivery. Other aspects of theFederal purchasing process also have benefited from leveraging Internettechnologies to increase competition and improve Federal customer satisfaction.Online procurement and ordering efforts led the application of electroniccommerce within the Federal and state governments.The focus on improved efficiency ofFederal processes has begun to shift in perspective to providing fullyintegrated service delivery. A recent study looks at Federal, internationaland state government experiences in the delivery of services. A study onIntegrated Service Delivery is available at http://policyworks.gov/intergov.
***GSA Advantage! Grows To SatisfyFederal Customers***
GSA Advantage! allows Federal employees to accessquality products and services and order them directly over the Internetat a lower government price. Exciting improvements provided customers withquicker and more precise search results, and allowed customers to see mandatoryitems and those from preferred sources. The number of items on Advantagegrew by 30 percent and sales grew by 50 percent in 1999 with over a milliondollars per day in sales in late September. In October, another phase ofimprovements began; the catalog now includes all remaining contracts andmulti-award schedules available through the Federal Supply Service.
***Increased Access to FederalOpportunities***
The Electronic Posting System (EPS) could provideone-stop, convenient, universal Internet access for companies seeking businessopportunities across the Federal government. As a replacement to the government�scurrent paper-based solicitation process, agencies use the EPS to postcontract notices and solicitations, making them available through a singlepoint of entry for real-time viewing. During FY99, the Veterans Administrationand the Commerce Department, joined the Government Services Administration,the National Aeronautics and Space Administration, the Department of Transportationand the Department of the Air Force as****participants in the EPS.Currently, four other agencies are considering signing on. The EPS encouragesbest value buying by bringing in more potential vendors and increasingcompetition. Over 29,000 vendors are registered to receive automated noticesof opportunities, an increase of 24% over last fiscal year. The systemlevels the playing field for small and disadvantaged businesses by furtheropening the buying process. The EPS provides:-  A consistent posting of acquisition-related documents.
-  �One stop� electronic searching and identificationof business opportunities.
-  Automatic e-mail notification of Federal opportunitiesto interested vendors.
-  A reliable interface for fulfilling Federal synopsisrequirements.

The EPS is operated by the General ServiceAdministration�s Office of Acquisition Policy in partnership with six agencies,and the Office of Management and Budget (http://www.eps.gov/).
***Increasing Efficiency of GovernmentBuying***
An electronic purchase catalog interoperabilitypilot is underway among Federal agencies and CommerceNet, a non-profitconsortium, which promotes the adoption of electronic commerce. The pilotdemonstrated the technical feasibility of delivering best value comparisonsfor purchasing. The pilot tested Extensible Markup Language (XML) and varioustechnologies to prove the concept of a secure, interoperable, multi-electroniccatalog architecture. The system allowed users to search several federaland commercial online product catalogs simultaneously, reducing the effortrequired to do market research and best value buying. Phase 2 is well onits way in demonstrating an extensive end-to-end electronic commerce businessprocess with improved authentication and scalability. Eleven Federal agenciesparticipated in the testing. The pilot results are being evaluated againstthe strategic goals established by the President�s Buying and Paying taskforce. When fully operational, Federal shoppers will be able to quicklycompare products and take advantage of the best price using Public KeyInfrastructure and Smart Cards for end-to-end secure purchasing and payment.The Federal catalogs included in the pilot are from National Aeronauticsand Space Administration, the Department of Defense and GSA Advantage!The Federal Electronic Commerce Program is guiding the pilot.
***A Convenient Registry forContractors***
The Defense Department�s Central Contractor Registryis a World Wide Website where contractors provide basic information aboutthemselves before doing business with military services and Defense agencies.The system replaces lengthy duplicative paper forms, could replace themany vendor databases that exist across agencies, and could become theregistry for all government contractors. The General Services Administration,Veterans Affairs, Interior and National Aeronautics and Space Administrationare testing the system which contains about 140,000 contractors (with expectedgrowth to 300,000 contractors). The Department of Defense also is usingthis system to streamline the payment process. 
**New Initiatives** 
In the upcoming year,the Working Group will implement three new initiatives that will help tobring the benefits of the information revolution to all people by: -  Creating digital opportunity through increased accessto the Internet for all people;    Providing better, more efficient government servicesand increased government accountability for citizens;
-  Promoting other uses of the Internet with potentialsocial benefits, such as tele-medicine and distance learning.

Each of these initiatives is summarized below.
A. Digital Opportunity
The Internet and electronic commerce are now drivingthis nation�s economic growth. Information tools, such as the personalcomputer and the Internet, are increasingly critical to economic successand full participation in all aspects of American society. People withcomputers and Internet access can use these tools to find a job, acquirenew skills, start a small business, get lower prices for goods and services,and become more informed citizens.
Not all Americans, however, have access to newtechnologies or are able to enjoy the benefits of the Information Revolution.In July 1999, the National Telecommunications and Information Administrationissued a report, *Falling Through the Net: Defining the Digital Divide*,which found a growing gap between certain groups with access to these toolsand those without. Those who are low-income, Black or Hispanic, those livingin rural areas, and single-parent households are particularly unlikelyto have access to the information tools that are improving the economicand social lives of the technology �haves.�
Closing the digital divide is a priority for theAdministration. The new directives will establish a goal of making computersand Internet access available for every American who wants them. More specifically,the directives establish the following agenda: -  The Secretary of Commerce will work with the privatesector to develop a national strategy for closing the digital divide andwill report periodically on the level of connectivity among different demographicgroups throughout America;
-  The Secretaries of Education, Housing and Urban Development,Health and Human Services, and Labor will continue to establish CommunityTechnology Centers, which provide access to new technologies for thosewho can�t afford them, and also will encourage the development of informationtechnology applications, such as computer-based training, that can empowerlow-income Americans; and
-  The Secretaries of Education and Labor will workwith the private sector to upgrade the information technology skills ofAmerica�s workforce so that all Americans can obtain the skills they needto compete in our increasingly high-tech economy.

B. Electronic Government
The digital revolution requires a more efficientgovernment that provides unprecedented access for all of its citizens.In key agencies, such as the Department of Commerce and the Federal TradeCommission, electronic services are transforming the way citizens receiveservices from their government. The electronic revolution in the U.S. Governmentis eliminating paperwork and increasing efficiency.
The U.S. Government is striving to use informationtechnology to increase access to its goods and services for all Americans.Some examples of this effort include: -   Taxpayers can download and retrieve publicationsand forms as well as file taxes electronically with the Internal RevenueService. Last year over 10% (24.6 Million) taxpayers filed electronic returns.
-  Citizens can look for federal job postings and employerscan search tens of thousands of resumes electronically.
-  Students can apply for financial aid. The Departmentof Education�s Office of Student Financial Aid processed 672,728 loan applicationselectronically in the 98-99 loan cycle.
-  Consumers can access environmental information specificto local neighborhoods about drinking water, Superfund sites, air pollution,toxic releases, and hazardous waste.
-  Over 100 million citizens will be able to accessCensus forms in the year 2000.
-  Visitors at over 1,900 recreation sites can makereservations for more then 50,000 campsites and facilities.
-  Peace Corps volunteers can apply online.

Although the U.S. Government has taken significantsteps to move into the digital age, there is still much work to be done.
Therefore, the Electronic Commerce Working Groupwill strive to: -  Create one stop access for all citizens to the entireuniverse of existing government information.
-  Get citizens online and out of government lines.
-  Save taxpayers money through increased use of electroniccommerce in government procurement.
-  emonstrate leadership through the government�s useof technology.
-  ermit greater access for citizens to government officialsthrough technology.
-  Provide for secure communications across the FederalGovernment using digital signature technology.

C. E-Society
The Internet and other information and communicationstechnologies are shaping our economy and our society in the same way thatthe steam engine and electricity defined the Industrial Age.
But the Internet has the potential to enhancecitizenship****as well as commerce. Used creatively, the Internet andinformation technology more generally can be a powerful tool for tacklingsome of our toughest social****challenges as well as fostering economicgrowth. Information technology can and is being used to make it easierfor working adults to acquire new skills, increase access to healthcarein isolated rural communities, improve the quality of life for people withdisabilities, and strengthen our democracy. Caregivers for people withAlzheimer�s use the Internet to lend each other moral support. Workersin several high-tech companies are helping students improve their performancein math and science and go on to college by becoming �tele-mentors.� Asociety that uses information technology to expand opportunity and improvethe quality of life for all of its citizens is an �e-society.�
We have already made progress in harnessing thepower of information technology to meet broad societal objectives. Forexample, the Administration has led a national effort to ensure that allof our children are technologically literate. Our strategy, which involvesconnecting every classroom to the Internet, increasing access to multimediacomputers in the classroom, training teachers, and encouraging the developmentof high-quality educational software, has already delivered significantresults.
However, we can and must do more. Therefore theadministration will take concrete steps to promote the e-society. Thisnew initiative will direct federal agencies to use information technologyto: -  Expand access to higher-quality, more cost effectivehealth care.
-  Make it easier for parents to evaluate the performanceof schools in their communities.
-  Allow people to learn and acquire new skills at atime, place and pace that is convenient for them.
-  Change the way teachers teach and students learn,and prepare students for the high-tech workplace of the 21st century.
-  Make it easier to help people move from restrictivephysical workplace locations to virtual offices located anywhere.
-  Improve the quality of life for Americans with disabilitiesthrough new technologies such as speech recognition or text-to-speech programs.
-  Protect our environment for future generations ofAmericans.
-  Improve our ability to detect and respond to naturaland man-made disasters.

Taken together, these three initiatives willallow us to move beyond the commercial aspects of e-commerce and tap thewide range of societal benefits that information technology offers. Thisagenda will challenge both the government and the private sector to bringthe true promise of the Internet to all people.
Our achievementsover the last year reflect our continued commitment to the principles firstarticulated in July 1997. In an information economy characterized by constantinnovation and instant obsolescence, these principles have proven remarkablydurable. They have guided our efforts and gained the acceptance of governmentsand private sector representatives across the globe. They have become thetouchstones for policymaking worldwide.
We have made cyberspace a safer, simpler placeto work, learn, and play without compromising these core beliefs. The privatesector is increasingly exercising effective leadership on consumer protectionand privacy issues. We have intervened, however, to safeguard children�sprivacy and buttress protections for sensitive financial and medical information.We have strengthened online security for businesses and individuals byloosening rules governing the export of strong encryption products. Andwe have increased the resources available in various Federal agencies toaggressively pursue online fraud and deception. Internationally, we havefostered a continuing consensus to extend the current global moratoriumbarring customs duties on digital products ordered and delivered over theInternet. We have introduced greater competition into the registrationof new domain names and worked to narrow the gap between digital �haves�and �have nots� in the United States and in the developing world.
Many challenges remain, however. The InformationRevolution is still unfolding. New information technologies have not benefitedall institutions and all segments of our society equally. Over the comingyear, we will launch three new initiatives that address these gaps. Oneinitiative will ensure that government uses the Internet to provide citizensthe efficient service, comprehensive information and ease of access thatthey benefit from as consumers. Another will enrich our lives by tappingthe power of information technology to provide distance learning, telemedicineand telecommuting. A third initiative will help digitally disenfranchisedAmericans gain access to computers and the Internet access needed to participatein the Information Revolution. We must ensure that our government institutionsare as responsive to the benefits of technological change as our fleetestbusinesses. And we must ensure that the Internet fulfills its promise asan opportunity not a barrier for all Americans. The information revolutionmust be one that moves us towards digital equality and succeeds in benefitingall the world�s citizens. 
**Endnotes** 
**(1)** The surveymeasures the number of Internet hosts, where a host is any computer connectedto the Internet with its own, unique Internet Protocol (IP) address. InternetSoftware Consortium�Domain Survey (http://www.isc.org/).
**(2)**U.S. Departmentof Commerce, *The Emerging Digital Economy I Report* (1998) 8 (http://www.ecommerce.gov)and Nielsen//Net Ratings, Oct. 1999 (http://www.nielsen-netratings.com).
**(3)** �eCommerceSuccess Could Be Hindered by Order Fulfillment Chaos,� Forrester ResearchPress Release, 26 Aug. 1999 (http://www.forrester.com).
**(4)** �Numberof People Online� Sept. 1999 (www.nua.ie).
**(5)**MaryannJones Thompson, �My How We�ve Grown,� *The Industry Standard*, 26Apr. 1999 (http://www.thestandard.com/metrics/display/0,2149,880,00.html).
**(6)** See NuaInternet Surveys (http://www.nua.ie/surveys/how_many_online/n_america.htmland http://www.nua.ie/surveys/how_many_online/world.html).
**(7)**Erik Brynjolfssonand Michael D. Smith, �Frictionless Commerce?: A Comparison of Internetand Conventional Retailers,� paper presented at �Understanding the DigitalEconomy Conference,� May 1999 (Aug. 1999 version available at http://ecommerce.mit.edu/papers/friction).
**(8)** �Post-WebRetail�Market Overview,� Forrester Research Report, Sept. 1999 (http://www.forrester.com/ER/Research/Report/MarketOverview/0,1338,7772,FF.html).
**(9)** �GlobalWeb Sales to Top US12 Billion in Q499,� Nua Internet Surveys, 23 Sept.1999 (http://www.nua.ie).
**(10)** �CFOSurvey: Company Internet Sales and Purchases to Jump; Few Price Increases,Stronger Earnings Ahead,� FEI/Duke University Corporate Outlook Survey,29 Mar. 1999 (http://www.duke.edu/~jgraham/99q2/RelQ299.html).
**(11)**�GlobalAnnual Cost Savings From Electronic Commerce Will Reach $1.25 Trillionby 2002,� 5 Aug. 1999 (http://www.gigaweb.comGiga Information Group).
**(12)** �AmericanExpress Announces Expansion of Online Corporate Purchasing Through NewAlliances and New Solution Set,�American Express Press Release, 25 May1999 (http://www.home3.americanexpress.com/ corporateservices/purchasing_ center/leverage_ecommerce.html).
**(13)** �Fordand Oracle To Create Multi-Billion-Dollar Business-to-Business InternetVenture,� Ford Motor Company Press Release, 2 Nov. 1999 (http://www.ford.com).
**(14)** �GeneralMotors Joins Forces With Commerce One to Move into Business-to-BusinessE-Commerce with Innovative Internet Purchasing Enterprise,� General MotorsPress Release, 2 Nov. 1999 (http://www.gm.com).
**(15)**Andy Reinhardt,�The Man Who Hones Cisco�s Cutting Edge,� Business Week, 13 Sept. 1999.(http://www.businessweek.com/reprints/99-37/b3646008.htm).
**(16)**RobertGuy Matthews, �Powered-Metals Firms to Get Aid From Internet, � *TheWall Street Journal*, 20 Oct. 1999: B6.
**(17)**LarryArmstrong,**�The War Against E-toys is No Game. �*Business Week*,9 Aug. 1999.
**(18)** TelecommunicationsAct of 1996, Pub. L. No. 104-104, sec. 254(b)(2), 706, 110 Stat. 153 (codifiedat 47 U.S.C. S 157 note).
**(19)**FederalCommunications Commissions (FCC), �Deployment of Advanced TelecommunicationsCapability to All Americans in a Reasonable and Timely Fashion, and PossibleSteps to Accelerate Such Deployment Pursuant to Section 706 of The TelecommunicationsAct of 1996� . (1999) (http:www.fcc/gov/Bureaus/Common_carrier/orders/1999/fcc99005.wp).
**(20)**FCC Docket98-146 (1999) at 19.
**(21)**FCC Docket98-46 (1999) at 22.
**(22)**FCC Docket98-46 (1999) at 49.
**(23)**WarrenPublishing Inc. Television & Cable Factbook, Services Volume No. 67(1999) cited athttp://ncta.cyberserv.com/qs/user_pages/dev(statedata).cfm.
**(24)**�xDslBreaking the Local Loop Bottleneck,� Soloman Smith Barney, Equity Research:United States, Telecommunications Services, 9 Apr. 1999, at 8.
**(25)**�The Truthabout Broadband Cable Modem Services: Fostering Competition and ProvidingConsumer Benefit.� Excite@Home 1999 (http://www.home.net/source/thetruth.html).
**(26)**FCC DocketNo. 98-146 (1999) at 18.
**(27)**C.E. UnterbergTowbin, �Broadband Access: Solving the Bandwidth Bottleneck� (1999) at11 (70 percent) and �xDSL Breaking the Local Loop Bottleneck,� SolomanSmith Barney, Equity Research: United States, Telecommunications Services,9 Apr. 1999, at 3 (75 percent).
**(28)**John Schwartz,�How Much Room in the Fat Pipe?� The Washington Post, 19 Sept. 1999: 01,cited in Federal Communications Commission, �Broadband Today�. (Oct. 1999)9 (http://www. fcc.gov/csb).
**(29)**�Who�son First�Supply or Demand : SMBs Doing Business on the Web�, Audio Conferenceby The Yankee Group, 4 Nov. 1999 (http://www.yankeegroup.com).
**(30)**ING BaringsGlobal Research Report, International Long-distance Carriers (9 Sept. 1999). 
**Acknowledgements** 
Many individualsand their respective agencies contributed a great deal of time and effortto this report. We very much appreciate each of their important contributions.In particular, the Electronic Commerce Working Group would like to thankthe following people, many of whom serve as members of the Working Group.In alphabetical order, contributors include: Don Abelson, Julie Basile,Mark Bohannon, Patricia Buckley, Becky Burr, Kelly Carnes, Dan Chenok,Audrey Choi, Jane Coffin, William Corbett, Helen Domenici, Edward Drake,Mary Margaret Evans, Nicholas Flagler, Ivan Fong, Dawn Friedkin, Adam Golodner,Jason Gomberg, John Gribben, Joe Guttentag, Don Hammond, Anthony Haynes,Brian Hendesgaugh, Katie Hirning, Dick Griffin, Daniel Hill, Brian Kahin,Tom Kalil, Charlotte Knepper, Jim Kohlenberger, Karen Kornbluh, Wendy Lader,Julie Ann Lever, Kelly Levy, Elliot Maxwell, Bruce McConnell, JonathanMchale, Chris McLean, Mary Mitchell, Sabrina Montes, Mark Montgomery, DemetriosMarantis, Michael Mundaca, Bob Novick, Andrew Pincus, Kate Rodriguez, GregRohde, Karen Rose, Dana Rosenfeld, Lisa Rosenthal, Andrew Schneider, PattySefcik, Tom Stack, Anne Stauffer, Bob Stoll, Mary Streett, Peter Swire,Kyriakos Vassilakos, Regina Vargo, Barbara Wellbery, Andrew Weinschenk,Peter Weiss, Jacqueline Williams, Morley Winograd, Jonathan Womer, andDon Wynegar. If we have inadvertently left anyone out, we extend our sincereapologies and want you to know that your efforts are also very much appreciated.
The Working Group consists of representativesfrom the White House and the principal federal agencies involved in electroniccommerce, including the Departments of Commerce, Treasury, State, Justice,Agriculture, and Health and Human Services, the U.S. Trade Representative�sOffice, the General Services Administration, the Small Business Administration,the Federal Communications Commission, and the Federal Trade Commission.Under the leadership of Vice President Gore, the Working Group strivesto implement the Administration�s strategic vision to promote the growthof electronic commerce and allow its social and economic benefits to reachall people. The Chair of the Electronic Commerce Working is David Beier,Chief Domestic Policy Advisor for the Vice President. The Vice Chair isSally Katzen, Counselor to the Director, Office of Management and Budget.Elizabeth Echols is the Executive Director of the Working Group. Ron Keohaneis Senior Advisor to the Working Group and Director of the Secretariatfor Electronic Commerce at the Department of Commerce.
This report can be cited as *�Towards DigitaleQuality*, U.S. Government Working Group on Electronic Commerce, 2ndAnnual Report (1999). For further information, please contact the ElectronicCommerce Working Group office at (202) 456-7710 or visit our website atwww.ecommerce.gov.
The appearance in this report of any product,trademark, or copyright image does not constitute any endorsement by theU.S. Government. All products, trademarks, and copyrights used by permission.  

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