States Expand Barriers to Online Commerce

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States Expand Barriers to Online Commerce

By Neil Munro

Staff Writer

Political barriers to online commerce are proliferating in all 50 states, prompting the federal government, governors and industry executives to consider controversial deregulatory measures.

In 1996, Indiana, Oklahoma, Connecticut and Arizona joined several other states in barring out-of-state doctors from serving local patients unless the doctor gains a state medical license. The infotech industry opposes these barriers, saying they hinder telemedicine.

In Nebraska, the Public Service Commission has barred a local company from providing Internet-carried phone service until it applies for a $50 license fee. The state joins a slew of others that have imposed various regulations and taxes on Internet companies, despite opposition from the online industry. If the company accepts the license, state phone regulations will force its online customers to pay much higher phone charges to the local phone companies, said Steve Reichenbach, president of Internet Nebraska Corp., Lincoln, Neb.

State-level barriers are "an area that we are just starting to work on," said Jay Kayne, director of policy studies for economic development and commerce at the Washington-based office of the National Governors Association. In cooperation with officials from the White House, "we are trying to decide what are the priority issues we need to deal with first and who the [government] group should talk to first," he said.

One early task, he said, is a listing of various barriers to online commerce. These can include state-designed laws and regulations governing professional licenses, insurance liability, signatures and taxes. The group is slated to deliver an initial report to the National Governors Association in July. Without some relief, states may end up producing "a potentially crazy quilt of laws ... [that] will kill the Internet," claimed Jerry Berman, director of the industry-backed Center for Democracy and Technology in Washington.

Berman is a member of the Washington-based U.S. Internet Council, established late last year by the infotech industry to lobby for favorable laws and regulations in state legislatures. The council works alongside a growing array of state-level infotech lobbying organizations and companies such as Internet Nebraska, which is promoting a state bill that would bar the state's Public Service Commission from overseeing Internet-carried phone services.

Another option being pushed by industry is a congressional pre-emption of state laws. For example, Rep. Chris Cox, R-Calif., and Sen. Ron Wyden, D-Ore., have introduced a bill that would bar state-level taxation of the Internet until the federal government and the states devise a uniform alternative.

"We need a national framework [for online commerce] that makes sense. It is not federalizing anything," responded Bill Burrington, the Washington-based public policy chief for America Online, Dulles, Va. "That's not to say states can't tax. It is just to say let's work together," he said.

But one state official said state governments oppose many federal deregulatory measures. For example, each state medical board sends considerable revenues to state governments, which would oppose any federal threat to those revenues, said a staff member at the Washington-based American Medical Association.

"Politically, I think it is highly doubtful" that Congress could impose nationwide medical licensing rules, he said. Already, Congress is trying to harmonize state-level medical privacy laws, but likely won't be able to get any new rules for at least five years, he said. Infotech executives say they need standard privacy rules to ease nationwide telemedicine and billing.

Moreover, state-level medical associations are partly motivated by a desire to exclude competition from out-of-state conglomerates, while state politicians fear that such competition would close local hospitals and reduce employment, said one industry official. "For any action, there is an equal and opposite reaction" said the AMA staff member.

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