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High tech's top 5 special interests

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By Stacy Collett

(IDG) -- A little lesson in cause and effect: During the first nine months of 1999, technology heavyweights such as AOL, Microsoft and Oracle coughed up a total of more than $3.8 million in soft money, PAC and individual contributions, according to the Center for Political Responsiveness in Washington, D.C.

What did they get for their investment? Some major political victories. That same year, lawmakers granted an extension on research and development tax breaks, the Internet sales tax moratorium was extended, visas for foreign workers were granted, and computer companies won liability protection against lawsuits spurred by the Y2K bug.

And so began the honeymoon between Washington and the high-tech industry. "There was a hands-off mentality because Congress didn't understand the issues," recalls Rick Lane, a high-tech lobbyist with the U.S. Chamber of Commerce. By the end of 2000, more than half of all House and Senate members had taken $22 million worth of political contributions from the technology industry, which makes high-tech one of Washington's most generous contributors.

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But the honeymoon may soon be over. Increasingly vocal "outsiders" are taking issue with Washington's laissez-faire attitude toward technology legislation -- and lawmakers are starting to feel the pressure.

Privacy advocates want strict curbs on consumer information gathered from websites. Educators want training for U.S. high-tech employees instead of visas for foreign programmers. Foreign governments want to impose widespread cybercrime protection. As these special interests butt heads with the technology lobby, hot-button issues could explode into controversy -- and affect the business strategies of the entire Fortune 500.

Read on for details of who wants Congress to do what in the areas of online privacy, cybersecurity, Internet taxation, intellectual property and foreign workers.

1. Online privacy

The tug-of-war over Internet privacy promises to be the most contentious debate in Washington this year.

On one side of the argument: protectors of individuals' rights to privacy, such as the ACLU Freedom Network and Americans for Computer Privacy. These groups want to restrict the collection and transfer of personal information on the Web.

On the other side: organizations such as the Online Privacy Alliance, a group of more than 90 corporations and associations that promote self-regulation of privacy guidelines. Until now, the Federal Trade Commission has monitored online privacy standards and has favored self-regulation. But in May 2000, the commission, led by Chairman Robert Pitofsky, reversed its thinking in a 3-2 decision and asked Congress to pass privacy legislation.

As the battle intensifies over whether privacy is a matter for self-regulation or legislation, companies with an Internet presence have become more divided and defensive about privacy practices. Even technology industry associations are split over the issue. The American Electronics Association, for example, is urging Congress to pass online privacy legislation, while the Information Technology Association of America (ITAA) opposes new laws.

Lane contends that any legislation could be dangerous.

"[Privacy legislation] potentially will cause a fundamental shift in how businesses interact with customers and vice versa," says Lane, whose lobbying efforts represent 3 million large and small businesses. He says legislation that restricts access to customer and financial information would cost companies billions of dollars.

Lane cites a recent Privacy Leadership Initiative study of the $13 billion remote retailing industry, which includes online and catalog sales. The report found that just small changes, such as implementing opt-in marketing campaigns and using outside sources to collect customer information, would cost retailers $1 billion and raise consumer prices 3 percent to 11 percent.

But privacy advocates counter that increasing privacy rights will benefit, not hurt, businesses. "[Legislators] need to support privacy to establish consumer confidence," says Marc Rotenberg, director of the Electronic Privacy Information Center in Washington, D.C. Rotenberg is optimistic that President Bush, who campaigned in favor of giving consumers more control of online personal information, will favor privacy legislation.

On the Hill, dozens of last year's bills targeting online, financial and medical privacy wait to be reintroduced this year. They range in severity from those that require consumer consent for businesses to collect or share personal information to bills that merely require companies to post and comply with a privacy policy.

2. Cybersecurity

Those who witnessed a major stock market downturn in February 2000 following an international hacker attack know the importance of securing the world's cyber and telecom infrastructure.

One international proposal that would affect U.S. businesses is the Council of Europe's Cyber Crime Convention, a treaty intended to integrate international cybercrime law and make it easier to prosecute cybercriminals worldwide.

While the United States is participating in the council only as an observer and cannot vote on the matter, U.S. companies own a substantial portion of information infrastructure abroad and would be affected by the council's decree. For example, one provision of the treaty would allow law enforcement agencies to require Internet service providers to retain all data traveling over their networks for a period of time, which would put financial and structural burdens on ISPs, the Chamber of Commerce's Lane explains. Moreover, he adds, U.S. companies could be held criminally liable for the actions of their employees who use corporate networks to commit a crime.

So what can the lobbyists do about an overseas decision? High-tech groups such as the ITAA, which represents hardware, software and telecom companies, maintains close contact with the U.S. officials participating in the talks. Global technology policy and management consultancies such as Washington, D.C.-based McConnell International, have been retained by technology businesses to analyze some 50 countries' cybercrime laws and measure their impact on U.S. companies.

The Council of Europe hammered out the last draft of the treaty at the end of last year, which attempted to address some U.S. concerns in an attached "explanatory memo." In it, the Unites States takes issue with the broad focus of the treaty and the lack of industry and commerce representation. "The Council of Europe usually deals with prisoners' rights, democracy and civil liberties. Not issues dramatically impacting the Internet," complains Douglas Sabo, ITAA vice president of information security in Arlington, Va.

3. Internet taxation

Whether to tax online sales is another high-profile issue in Washington this year. With the congressional moratorium on new Internet taxes set to expire in October, state lobbyists are pushing to define a tax plan that would allow states to tax online sales the same way they tax in-store sales. Business lobbyists, on the other hand, dislike Internet taxation and want an extension of the current moratorium.

They're likely to get part of their wish. In March, Sen. Byron Dorgan (D-N.D.) introduced the Internet Tax Moratorium and Equity Act, which would extend the tax moratorium by five years. It has already gained support from 15 senators on both sides.

But there's more. If the bill can successfully sidestep a 1992 Supreme Court ruling banning states from collecting sales tax on merchants with no physical presence in the state, it also calls for Internet taxation once states have simplified their tax codes sufficiently. The Dorgan bill proposes that once 20 states have met a set of simplification criteria that qualifies them to be members of a taxation compact, Congress would have 120 days to disapprove the compact. Unless Congress acts to stop it, any state in the compact could then require out-of-state vendors with more than $5 million in annual sales to collect and remit sales taxes for goods.

There's also a similar bill offered by Sen. Ron Wyden (D-Ore.) and Rep. Christopher Cox (R-Calif.) that is favored by the GOP. The Cox-Wyden bill contains a similar provision to the Dorgan bill but would require one tax rate per state. The legislation also requires Congress to sanction the bill, rather than to just enact it by proxy -- as it would under the Dorgan bill.

"We realize that Internet taxation is not going to happen until we simplify our sales tax system and get rid of the complexity, costliness and other burdens," says Neal Osten, director of the Commerce and Communication Committee for the National Conference of State Legislatures (NCSL), a bipartisan organization representing state governments in Washington, D.C. Not surprisingly, Osten's group is pushing for an Internet sales tax and is fighting for the tax both nationally and at the state level. Business lobbyists are spurning the Internet tax initiatives. Even if states are successful, the Chamber of Commerce's Lane is concerned with additional burdens on businesses, such as the possibility of a company being audited by 50 state jurisdictions and the cost of new tax software systems for collecting new sales tax.

4. Intellectual property and copyright issues

Though the copyright-violation charges facing music file-swapping website Napster appear to be a business-to-consumer issue, business lobbyists such as the Chamber of Commerce and the Computer & Communications Industry Association (CCIA) are concerned about the ramifications to their constituency. (Napster lost its fight to save its digital distribution system; it has been court ordered to remove copyrighted materials or be shut down.)

"Everybody scores high on intellectual property [protection], but if you have too much it may choke off different business models -- the way companies share information, what's communicated, what's protected," says Ed Black, CEO of CCIA.

The Commerce secretary, Senate Judiciary Committee, Senate Republican High-Tech Task Force and House Energy & Commerce Committee are all weighing in on IP and copyright issues. For example, on April 3, Senate Judiciary Committee Chairman Orrin Hatch (R-Utah) led hearings to address the clash between copyright law and digital file-sharing technologies.

The hearing, "Online Entertainment and Copyright Law: Coming Soon to a Digital Device Near You," included lobbyists representing technology companies, such as the Consumer Electronics Association and Digital Future Coalition, and entertainment industry supporters, like the Recording Industry Association of America and Motion Picture Association of America.

5. Technology visas

H1-B visas, which allow skilled foreign workers to take jobs in the United States for up to six years, continue to draw sparks.

Supporters such as the ITAA say corporations need the visas to bridge the skills gap while the United States revamps education and training programs. Opponents -- such as the lobbyists who represent educators and universities -- say U.S. workers should take U.S. jobs. Most H1-B visa holders work almost exclusively as programmers for low pay, and opponents say that companies just want to use these visa holders to save money. For each of the next three years, 195,000 H1-B visas will be allotted, representing less than 5 percent of the U.S. IT workforce.

"This is no longer a shortage just for the high-tech sector. All sectors use IT. If you're an HR director, you can't offer the salary [a high-tech company can], so you're looking at the bottom of the barrel," says Grant Mydland, director of the Technology Workforce Coalition, an Arlington, Va.-based industry alliance pushing for federal and state tax incentives and other programs to address the shortage.

In April, Arizona signed a tech-training tax credit into law that provides companies with 100 percent tax credits of up to $1,500 per year per person toward the cost of IT training. Seven other states are considering the law this year.

Although technology issues promise some lively debate during the next four years, there are many big question marks. The Bush administration is still too new to have voiced opinions on many of these debates, and President Bush has yet to make some key appointments that will affect these high-tech issues.

Meanwhile, the contributions continue. During the 2000 elections, tech lobbyists gave more than $38 million to lawmakers, with contributions divided equally between the political parties. Will this massive expenditure pay off? The lobbyists certainly hope so.

For more in this article, see








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