Holes in the Net

Fueled by the growing popularity of the Internet, California lawmakers have introduced a flood of measures designed to apply existing statutes to the global computer network as well as address issues unique to it.

State laws designed to regulate the largely uncharted territory of the electronic medium have more than quadrupled--from eight in early 1997 to 34 today--with 33 additional bills pending in the 1997-98 legislative session. That number could increase as the February deadline for introducing bills approaches.

It’s not surprising that California, home to more technology companies than any other state, is considered a bellwether for Internet-related legislation. How these bills fare will be of interest to government officials in other states, as well as those at the federal level, as they discover that taking on the Internet poses numerous challenges.

Measures dealing specifically with the Internet are a small part of legislators’ attempts to adapt existing state law to the Information Age--their numbers pale in comparison to the more than 250 bills introduced this session that mention technology in general.

Still, “California is the only state to have examined the issue of encryption in the state Legislature,� said Lucy Winkler, president of ECCO Interactive, a Washington-based consulting group that tracks Internet-related legislation at the state level. “It was the first state to introduce legislation exempting Internet and online services from taxation.�

One reason for the increase is a push by lawmakers to require state agencies to add information to their Web sites, such as a law that requires the state’s medical board to put physicians’ licensing and disciplinary records online.

The rush to fill the vacuum of Internet-related regulation has resulted in several premature bills that lawmakers withdrew or put on hold after they decided the issues would be better resolved at the federal level.

For example, Sen. Tim Leslie (R-Tahoe City) decided not to reintroduce a bill that would regulate gambling on the Internet because he believes the matter should be addressed by federal law.

Hot-Button Issues

Among the hot Internet-related topics under consideration are unsolicited commercial e-mail, taxation, education and technology, consumer protection, and privacy.

One of the most talked about bills is a measure introduced Jan. 5 by Assemblyman Gary Miller (R-Diamond Bar) that would prohibit unsolicited commercial e-mail unless a user specifically requests it or has a preexisting business or personal relationship with the sender.

Miller drafted the bill, which would expand an existing law prohibiting junk faxes, after a constituent complained that thousands of junk e-mail messages overloaded his computer system, causing his business to shut down for three days.

“It’s time for the law to catch up with technology,� Miller said. “The way technology is changing and evolving there has to be an attempt to safeguard the rights of individuals. There’s a lot of stuff going into people’s homes and businesses that they just don’t want.�

The measure would require firms that send commercial e-mail to identify themselves on the messages and to include return e-mail addresses or face a $500 penalty for each message sent to a Californian.

While the bill has received widespread support from legislators, opponents question how it would be enforced.

By their nature, e-mail addresses do not indicate where a subscriber lives. Consequently, commercial e-mail companies would be unable to tell if the address belonged to someone in California, a problem that could prevent them from sending messages at all. In addition, junk e-mailers--also known as spammers--have been known to disguise their return addresses, making it impossible for consumers to track them down.

Assemblywoman Debra Bowen (D-Marina del Rey) introduced a similar bill Wednesday that would require spammers to provide a toll-free number recipients could call to ask to stop receiving mail. Legislators said they decided to introduce state legislation that would regulate spam when a federal bill failed.

Another heavily watched bill is the “California Internet Tax Freedom Act,� which is awaiting action in the Senate. (The Assembly unanimously passed the bill in September.) The measure is designed to prohibit statewide taxation of the Internet until the federal government considers a national Internet taxation policy.

U.S. Rep. Christopher Cox (R-Newport Beach) introduced the federal “Internet Tax Freedom Act� in March. The bill, which has 103 co-sponsors, is awaiting a final hearing in several House subcommittees.

“If you expose this industry to 30,000-plus taxation entities in the U.S., that could significantly restrict the growth of a very important industry,� said Assemblyman Jim Cunneen (R-San Jose), one of the state bill’s sponsors.

About 25% of the Internet-related bills introduced in the 1997-98 session address education and technology. For example, a bill by Bowen would require the California State University system to establish pilot programs to train elementary and secondary school teachers to use the Internet and other technology. It awaits a committee hearing.

Protection and Privacy

California is one of many states expected to focus this year on applying consumer protection laws to the Internet. For instance, a measure introduced by Sen. Steve Peace (D-El Cajon) would allow current state laws on unfair-trade practices and false or deceptive advertising to be applicable to the Internet. The measure is being referred to the Senate’s Committee on Appropriations.

The bill’s opponents question the need for such legislation, saying it “reminds people that that which is against the law is against the law.� Supporters argue that it’s necessary to codify the fact that existing law applies to the Internet.

“We’re not trying to make a decision by the medium, but by the communication itself,� said Randy Chinn, a consultant to the Senate Energy and Utilities and Commerce Committee. “We think this will help in terms of Internet commerce by giving people more confidence in the system.�

Legal experts agree that some state statutes are written so narrowly that additional legislation is necessary to spell out that existing laws do indeed apply to the Internet.

“If the language used is very specific and says communication by mail, phone or person, it’s not automatic that the Internet would be included,� said Carla Oakley, a San Francisco-based partner in the law firm Morrison & Foerster, which specializes in intellectual property issues and commercial litigation.

Several Internet-related bills address privacy issues. Among them is one introduced by Leslie on Jan. 7 that would require state agencies that collect information about users on their Web sites--using a tool known as a cookie--to inform users when information is being collected and how it will be used.

It would also require state agencies to allow users to disable the cookie. Leslie drafted the bill after he discovered cookies were collecting information about him as he surfed the Web.

As in other states, Internet-related legislation in California has evolved from a series of bills devised in reaction to hype surrounding the Internet to a search for long-term solutions that “promote Internet commerce but also give citizens some assurance of what the regulatory scheme will be,� consultant Winkler said.

But the learning process about what will and what won’t work in regulating the Internet, in addition to a misunderstanding by some legislators of how the computer network operates, led to several bills that were quickly quashed by industry opposition.

“California was one of about three states that tried to dictate infrastructure on accessing the Internet--i.e., 80% of online subscribers must be able to access the system simultaneously--which is extremely ambitious and unrealistic,� Winkler said.

Who Makes the Rules?

California is also not alone in its efforts to more closely examine how, and if, states have jurisdiction over the Internet. Indeed, this is the key issue that will vex regulators, industry watchers say.

Many industry trade groups cite jurisdictional issues in calls to lawmakers to wait for federal guidelines to emerge before they introduce bills on a state-by-state basis. In this way, they argue, states would avoid enacting conflicting laws that would be unenforceable.

“We’re all sort of borderless companies, meaning the Internet is borderless. But we operate in real geographic localities, which is how laws are developed,� said Glee Harrah Cady, manager of public policy for Netcom and president of the California Internet Industry Alliance, a legislative watchdog group. “Certainly community standards in San Jose are different than they might be in Green Bay, Wis.�

Federal legislators have been slow when it comes to developing Internet policy--passing only one Net-related law last year. Slow going in Washington has prompted states to take the initiative.

The burgeoning number of Internet-related bills in legislatures has prompted technology companies to band together to try to influence policymaking.

The California Internet Industry Alliance, which includes America Online, CompuServe, Netscape, Microsoft Network and Netcom among its members, was formed last year in response to legislators’ increased interest in the Internet.

The group has hired a full-time lobbyist in Sacramento to monitor Internet-related legislation and to work with lawmakers to see that the industry’s viewpoints are represented, Cady said. But despite an industry movement to control regulation, legislators say they expect Internet-related issues will demand more of their attention.

“This is an ongoing conversation. There’s no end of the story,� Cunneen said. “We’re going to need to continue to examine this issue as the technology increases in relevance to all our lives.�