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A Borderless World: Realizing the Potential for Global Electronic Commerce

ILPF Announces Self-Regulation Initiative

ILPF announced today that it has commenced a working group to address the call for self-regulation of the Internet as an alternative to direct government regulation. The working group begins with the following statement of work:


ILPF has commenced a working group concerning self-regulation of the Internet. The initiative comes in response to both industry and government calls for more activity in this area. ILPF proposes to create a Bibliography of Self-Regulation Literature, an inventory and study of the various mechanisms and modes of self-regulation, and recommendations for moving forward with a framework for self-regulation.

The bibliography is work-in-progress and now available for public comment and input. The bibliography is the creation of Matthew J. McCloskey who will monitor the discussion and add to the bibliography over the coming months. The inventory phase will be conducted over the next few months. The results of the ILPF initiative will be made available at the Ottawa meeting of OECD ministers http://www.oecd.org/dsti/sti/it/index.htm.

I. Introduction

All of the major government assessments to date concerning the future promise of the Internet have recognized that private sector leadership is essential to the growth of electronic commerce and the realization of the Internet Economy. Governments also have acknowledged that regulatory forbearance is the necessary corollary to industry self-regulation.

However, for governments to forbear from direct regulation of the Internet, industry must move beyond the rhetoric of self-regulation and demonstrate that the needs of consumers and the public at large can be met effectively by industry initiatives.

There is a wide array of self-regulatory tools with proven track records as substitutes for government regulation. Codes of conduct, voluntary standards, accreditation, third-party certification, audits, best practices and performance goals and objectives all have withstood scrutiny in lieu of prescriptive regulation in a variety of industry settings.

For example, there have been notable successes in self-regulation. The wide-spread adoption and implementation of voluntary quality assurance standards under the auspices of the International Standards Organization is one case in point. Adaptive management is another private-sector concept that has gained wide acceptance, especially when applied to those systems that are dynamic or about which little is known. In a corporate environment, internal audits and compliance planning have become part of normal business activities.

At the most basic level, private contracts form a web of self-regulation by and between multiple parties. Model contracts and template terms and conditions quickly become norms, often internationally, often almost overnight. Common contract practices then become codified in uniform commercial codes, illustrating the practical evolution of self-regulation to default rules.

The challenge facing industry is to demonstrate that consumer satisfaction and the public interest can be served without directgovernment intervention. This is not to say that governments have no role in the emerging Internet Economy. But direct regulatory intervention should be a last resort, considered only after all of the self-regulatory tools have been exhausted. In short, the growth of the Internet Economy should be private sector led and market-driven, but mindful of larger responsibilities.

One government's regulation alone may not hinder the growth of the Internet, but inconsistent regulation across the globe certainly will adversely affect the promise of the Internet. Governments must recognize when forbearance is preferable to regulatory action. Industry can and should take the lead to demonstrate the value of private sector governance.

II. The Work Plan

The first step in the process is to assemble the literature. By creating a bibliography, and categorizing the scholarship ofself-regulation, it is possible to develop a common lexicon of self-regulation. Before one can achieve self-regulation, it isnecessary to understand what it is one is achieving and to ensure internationally that there is consensus on what it means to "self-regulate."

The next step is the identification of all of the "tools in the toolkit" that are available and that have proven effective. This "governance inventory" will identify and report on the self-regulatory activities occurring around the globe in major industries. A qualitative and trend analysis will be performed to discern the effectiveness and direction of these initiatives. The characteristics of self-regulatory programs also would be identified. Thus, for example, the inventory would disclose whether an industry code of practice is followed at large, whether the industry adopting it is self-policing or imposes penalties for non-compliance, whether it has been effective in reducing abuses or complaints, and what metrics are used to evaluate the program. Finally, the inventory would propose or recommend a set of initiatives that would be most applicable to the Internet environment.

Finally, there is no U.S. monopoly on industry or private sector initiatives. Given the global nature of the Internet, any inventorymust be global in its reach. This proposal is not intended to suggest that current Internet initiatives somehow are disqualified. To the contrary, the inventory and report should specifically address those efforts to date -- ranging from technical standards work (e.g., the W3C's PICS standard) to industry codes of conduct (U.K.'s ISP Code of Practice) -- that have been undertaken or put into practice by the Internet industry.


ILPF welcomes comments, suggestions or contributions to this work-in-progress.


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