Independent Study Concludes Some Government E-Commerce Activities Go Too Far

BY CCIA Staff
October 12, 2000

Economists Propose New Guidelines for Government’s Role in Digital Age

Washington, DC- A new report authored by three leading U.S. economists finds that outdated government rules and guidelines have provided an ambiguous environment in which some federal agencies develop highly beneficial Internet initiatives, while others create ventures that encroach dangerously on businesses already served by private enterprise, according to a leading information technology industry group.

The study, released today by the Computer & Communications Industry Association (CCIA), proposes a major review of how government agencies are participating in the new Internet economy. The report, entitled “The Role of Government in a Digital Age,” was commissioned by the CCIA to serve as a blueprint that will help policymakers determine the proper role for the government’s online offerings.

“The Government was never meant to use information technology and the Internet to become a publicly funded market competitor,” said Ed Black, President and CEO of CCIA. “Many government IT projects have resulted in beneficial new services for our citizens. But more and more government IT initiatives today are venturing beyond simply boosting efficiency and improving service quality. Instead, they are engaging in private-sector businesses. Some agencies seem to have discovered a back door to rebuilding Big Government – and that back door is the Internet.

“CCIA commissioned this study because there is an immediate need to find a way to draw distinctions between activities that are suitable for e-government, and those which more appropriately belong in the private-sector world of e-commerce,” said Black.

The 150-page study by Sebago Associates, Inc., was co-authored by Dr. Joseph Stiglitz, Professor of Economics at Stanford University, former Chairman of the President’s Council of Economic Advisers and former Chief Economist of the World Bank; Dr. Peter Orszag, President of Sebago Associates, and former Special Assistant to the President for Economic Policy; and Jonathan Orszag, Managing Director of Sebago Associates, and former Assistant to the Secretary of Commerce and Director of the Office of Policy and Strategic Planning.

The study lays out 12 principles (see box below) to help policy-makers decide which online activities the government should engage in, and which activities it should avoid. The authors organized the principles into “green light,” “yellow light,” and “red light” activities, according to the degree of public policy concern generated by them. The economists then used the principles to examine five case studies of government information technology initiatives that had a potential or actual impact on private-sector enterprises.

“There are plenty of reports out there about government regulation of the Internet,” Black said. “But this is the first comprehensive analysis of how individual government agencies should decide whether to provide online offerings to American consumers. This report provides a clear-cut, common-sense set of guidelines for deciding what government should and should not be doing.

“We are confident that this report will help further CCIA’s efforts to combat the inappropriate competitive activity, lack of privacy protections and conflicts of interest that characterize a number of initiatives in which the government clearly has overstepped its bounds,” said Black.

“Our study should serve as a roadmap to policymakers about the proper role of government in the digital economy,” said Stiglitz, who also serves as Chairman of the Advisory Committee at Sebago Associates. “Policymakers should use the principles developed in our study to guide them. In some cases, policymakers will determine that their activities are appropriate, and they should move forward with them. In other cases, governmental e-commerce activities raise concerns and should be further examined. And in still other cases, the government should suspend what it is doing.”

The report emphasized that existing guidelines were not written for today’s policy-makers struggling with the issues raised by the Internet. “The appropriate role of government in the economy is not a static concept: It must evolve as the economy and technology do,” said another of the report’s authors, Peter Orszag.

“The 12 principles we developed are intended to be consistent with both current and immediately foreseeable forms of information technologies,” Orszag said, “However, the principles should be applied repeatedly over time, to existing as well as new on-line activities. Such an approach will help to ensure that an activity that is appropriate initially does not expand into one that is inappropriate.”

The report applies these 12 principles to 5 case studies, including:

  • The Department of Labor’s on-line job market information system;
  • The United States Postal Service eBillPay program;
  • Private-sector dissemination of legal information;
  • A fee-based search engine from the National Technical Information Service.

“The case studies help illuminate the boundaries of appropriate governmental action,”

Jonathan Orszag stated. “For example, the government seems to have found an appropriate balance among conflicting pressures in some cases, such as the Department of Labor’s America’s Job Bank.

“However, the government seems to have overstepped the boundaries that should apply to public provision of goods and services in several other cases, such as the United States Postal Service’s eBillPay program,” he added.

In examining the case studies, the report concludes that the Internal Revenue Service should not provide direct on-line tax preparation services, that the government should more aggressively disseminate legal information on-line, and that the government acted appropriately in stopping the National Technical Information Service from providing a fee-based search engine.

“Two of these cases — the Postal Service’s eBillPay program and IRS plans to provide direct on-line tax preparation services — are key examples of ways in which government initiatives are entering into inappropriate competition with existing private-sector businesses,” said CCIA’s Black. “Furthermore, these ventures are ‘going into business’ without resolving outstanding privacy and conflict-of-interest concerns.

“At the most basic level,” Black said, “these two initiatives conflict with a long-established federal non-competition principle contained in Office of Management and Budget Circular A-76, which states: ‘The Government should not compete with its citizens.’”

According to Stiglitz, the most important element going forward is an active debate.

“As more agencies move toward an e-government concept, the issues explored in this report become more acute,” Stiglitz said, “Some may disagree with some of the principles and conclusions reached in our analysis. But this report will have served its purpose if it helps to spur debate over these issues, regardless of whether all its conclusions are accepted. The issue of the proper role of government is too important for the topic to be ignored.”

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