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Memo to e-Business: Prepare Now for New Government Challenges
If e-business leaders continue to ignore goverment concerns about customer privacy, the next few years might seem like a rerun of the Titanic for dot coms.
Posted Jan 19, 2001
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The 107th Session of Congress is open and ready for business. Its members come to the table prepared to confront very controversial issues surrounding e-business, not the least of which is customer privacy. Perched on the other side of the table like a row of sitting ducks sits the e-business community, strangely unprepared to meet the formidable policy challenges it will be confronted with by federal and state governments in the next few years.

This e-somnolence is curious in light of the clear and unmistakable warnings issued by Congress and state legislatures last year as well as the legal and economic setbacks the industry has suffered in recent months.

The e-business industry seems content to remain, as always, insular and self absorbed, rather than prepare to constructively engage regulators and lawmakers. In the past, e-business leaders have done little more than stonewall officials with a "just say no" attitude, or worse yet, ignore the process as much as possible in the hopes that it will just go away.

Unfortunately for all of us, their passive/aggressive approach has worked lately. For example, despite Congress's heated interest in Internet and privacy issues, the only law recently enacted was the Children's Online Privacy Protection Act (COPPA). The state legislatures considered over 200 privacy-related bills last session with little action. Even in California, a so-called cutting-edge state, lengthy consideration of privacy proposals produced only minor pieces of legislation along with the creation of an Office of Privacy Protection.

Nonetheless, the issue is not going to go away. Various studies continue to show high public concern over Internet privacy and security. Accordingly, government officials will continue to move their agendas forward. Internet and privacy will be high on the federal legislative agenda, note observers of the 107th Congress. In California, several privacy measures have already been introduced, and the state attorney general has stated that he might present a privacy initiative directly to the voters if the Legislature does not enact meaningful protection for the public this session.

In some respects, e-business's attitude is understandable. The various high-tech corridors are insular communities, but so are centers of government. The most natural reaction by e-business would be to ignore the governmental arena as much as possible and do what it does best. The grave danger to the industry, however, lies in the bedrock fact that the raw power to make or break any business lies in the political beltways, from Washington, D.C., to Sacramento, California.

Some industry interests have started to send their own in-house government affairs representatives to the capitols on an as-needed basis. This approach raises its own set of problems. While these liaisons may be helpful in transmitting information back to their principals, they are no substitute for savvy, professional lobbyists who are in the capitols daily and are intimately familiar with the intricate nuances of politics as well the players (both officials and staff) who make the real decisions on any given issue. It takes 5 to 10 years of full-time, on-the-scene exposure to become a truly effective legislative lobbyist. In addition, the in-house employee is no match for the seasoned advocate. It would be like a new lawyer trying her first case against F. Lee Bailey. The case would be decided before the trial began.

Policy makers do not want to unduly hinder e-business, particularly with signs of a bear market swirling about us and a reduction in available venture capital. However, they do want to ensure that citizens are protected against intentional and negligent breaches of their privacy rights. If this is done with the cooperation and constructive engagement of e-business with the aid of knowledgeable professional lobbyists, the industry will be able to continue doing business without harmful governmental interference. If, however, e-business continues on the course it set in the past, then the next few years may seem like a rerun of the Titanic.

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