The Internet and Electronic Commerce
The Internet defies a detailed one-size-fits-all approach to public policy and regulation. America's federal and state lawmakers, as well as policy makers from other countries should be guided by principles that foster the Internet's development while protecting the security and privacy of individual users.
Our nation's state legislatures are well-aware of the impact that access to the Internet and electronic commerce have on the economic vitality of our states and communities. State legislatures also recognize that the marketplace for electronic commerce is global, not just in the United States. State legislatures share the concern of many in Congress that ill-conceived over-regulation and taxation of the Internet and electronic commerce services could harm our nation's ability to compete globally. However, state legislatures also recognize that they have an obligation to act, when and if necessary, to protect the general welfare of their constituents. As the use of the Internet continues to expand, any future or existing regulations must be balanced against market forces in a competitive and technologically neutral manner, as government must not choose the winners or losers of the digital age.
Nothing in this policy statement is to be construed as limiting or affecting the right of any state to regulate alcohol according to its local norms and standards pursuant to the 21st Amendment.
NCSL opposes unnecessary or unwarranted federal legislation or regulation that would impede efforts by states to promote access to the Internet, enhance competition or increased consumer choice, or ensure the security of personal information of consumers conducting electronic commerce transactions.
The National Conference of State Legislatures (NCSL) supports the following principles in formulating laws and regulations that impact the Internet and electronic commerce:
Data Privacy and Security
With the proliferation of data online, including the internet of things and mobile devices, the regulation of the collection, sales, and transmission of consumer data is increasingly a priority for state and federal lawmakers. NCSL recognizes the importance of consumer data privacy and security protections, as well as the role of the states as leaders in establishing those protections for their constituents.
In response to many high-profile security breaches and violations of consumer privacy, data privacy and security have become the subject of increasing regulation, most notably the General Data Protection Regulation (GDPR) in Europe. States and the federal government are working to protect against data breaches, mishandling of data, and non-transparent sale of consumer data in a way that balances myriad competing interests and allows for innovation while safeguarding the rights of consumers. Congress has yet to enact any significant or comprehensive legislation that addresses consumer data privacy and security protection. Meanwhile, state activity in the areas of data privacy and security has significantly increased in the past few years and states will not hesitate to act in the absence of federal legislation.
NCSL opposes blanket state preemption in federal data privacy and security legislation. However, because of the interstate nature of the internet and data transmission, NCSL recognizes the need for uniformity in the regulatory environment. Although data privacy and security legislation has traditionally followed a sector-by-sector approach, NCSL further urges Congress to consider comprehensive legislation in setting any national standard.
NCSL strongly urges Congress to engage in regular and meaningful consultation of state lawmakers when considering federal privacy and security legislation. State lawmakers should be included in hearings, review of draft language, principle setting, and other Congressional activity intended to impact state regulatory regimes.
If Congress develops a national standard, NCSL strongly encourages consultation with states and recognition of state expertise in addressing the varied interests of each state’s unique constituency. In any federal legislation, NCSL urges Congress to prioritize transparency and informed privacy decisions, and to carefully consider the best method for consumer notice, disclosure, and consent. NCSL further encourages Congress to consider issues of third-party access and sales, disposal of data, consumer rights to control data, and the burden of protecting consumer data. States have also engaged in significant deliberation over the applicability of consumer protections to various data types, including how to define personal data and how categories of data collectors or sellers should be regulated. NCSL supports recognition by Congress of states’ expertise on these issues and opposes any legislation that preempts state law without meaningful consideration of state priorities or established consumer protections.
NCSL also recognizes the rapidly evolving nature of data collection and urges Congress to consider biometric data, location data, and technologies like facial recognition and artificial intelligence when considering federal legislation.
States should retain the right to establish their own legal rights of action, enforcement regimes, and oversight authority. NCSL urges Congress to protect the right of the states to enforce data privacy provisions in any federal legislation.
NCSL recognizes the increase in telemarketing activity and robocalls across the nation and the work of the Consumer Financial Protection Bureau and Federal Communications Commission on expanding consumer rights in this area. NCSL encourages Congress to pass legislation to protect consumers from harassment and predatory telemarketing activity, including requiring telephone service providers to, at no cost to the customer:
- Make robocall mitigation technology available to any customer;
- Implement call authentication technology to identify likely spoofed calls; and
- Offer call blocking technology.
The Internet allows people to communicate and share ideas with others with an ease never before possible. Federal government policy should rigorously protect freedom of speech and expression on the Internet, but not restrict states or local governments from oversight protecting freedom of speech. New technologies should adequately enable individuals, families and schools to protect themselves and students from communications and materials they deem offensive or inappropriate. State law enforcement, with federal assistance and resources, must be able to enforce criminal statutes against predators that use the Internet to harm or abuse children.
NCSL requests that Congress to maintain the current self-governance approach that allows the competitive marketplace to drive broadband and broadband-related applications development and deployment. Congress should avoid adopting new mandates and provide the Federal Communications Commission (FCC) with defined and limited authority to oversee, but not proactively intervene in, the broadband Internet marketplace consistent with principles that focus on assessing whether the market continues to ensure that consumers can:
- Receive meaningful information regarding their broadband service plans;
- Have access to their choice of legal Internet content, recognizing the limits on bandwidth and quality of service of their service plan;
- Run applications of their choice, subject to the needs of law enforcement and the limits on bandwidth limits and quality of service of their service plans, as long as they do not harm the provider’s network or interfere with other consumers’ use of the broadband service; and
- Be permitted to attach any devices they choose to their broadband connection at the consumer’s premise, so long as they operate within the limits on bandwidth and quality of service of their service plans and do not harm the provider’s network, interfere with other consumers’ use of the broadband service, or enable theft of services.
Public policies must be designed to foster continuing expansion of useful and affordable bandwidth, encourage development of innovative technologies and promote broad universal access. Federal and state governments must work together to ensure that all Americans, regardless of where they live, have competitive access to high-speed broadband technologies. Government must work to guarantee open and competitive markets for broadband services.
Information technology (IT) is a global industry. A strong American IT industry enhances and strengthens the economic well-being of our states and nation. States and the federal government must work together to ensure a climate that allows America’s IT companies to continue to perform research and technology development, to generate innovative new products and services and to solve customer problems. States must have the unfettered ability to continue to seek ways to use IT to better the lives of their residents. Therefore, NCSL opposes any attempt by the federal government to restrict or penalize states’ efforts to utilize information technology services and products that allow states to provide more efficient government services to residents at lower costs to taxpayers.
Congress must respect the sovereignty of states to allow or to prohibit Internet gambling by their residents.
The Wire Act of 1961 prohibits using an interstate wire communication to transmit bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest. The law also made it illegal to use interstate wire communications transmissions to provide remuneration for winning bets or wagers or for information assisting in the placing of bets or wagers.
In 2018, the Supreme Court’s ruling in Murphy vs. National Collegiate Athletic Assn. allowed states to legalize and regulate sports betting for the first time, and many states have passed or are considering legislation that allows online gaming. Additionally, states currently engage in online gaming markets, interstate online poker pools, online lottery sales, and interstate lottery pools, among other online gaming activities. States and bettors also use the internet for marketing and payment processing. Some states currently utilize technology that restricts sportsbooks and users to operate within state lines.
The Department of Justice has issued several memos on the application of the Wire Act that may impact the ability of states to operate and regulate a variety of online betting and gaming activities. In 2019, the Office of Legal Counsel in the Department of Justice issued a revision of their 2011 opinion. The revision stated that the restrictions in the Wire Act apply to any form of gambling that crosses state lines, and may impact many currently legal state gambling activities, including the passing of data through intermediaries. The revision creates uncertainty in the regulatory environment and may cause disruption in state markets as litigation follows.
NCSL recognizes the importance of state sovereignty in the operation and regulation of online gaming and the importance of a predictable and stable regulatory environment. NCSL encourages Congress and the Department of Justice to engage in regular and meaningful consultation of state lawmakers and regulators when considering bills, opinions, or other actions that may disrupt current state markets or affect the ability of states to regulate online gaming. NCSL recognizes that states are best suited to regulate online gambling and encourages the Department of Justice to revise its current interpretation of the Wire Act to recognize state sovereignty in regulating these activities and provide market stability.
NCSL also urges Congress to clarify the Wire Act to protect the ability of states to operate and regulate online gambling activities as they see fit, including currently legal activities threatened by the revision of the OLC opinion. NCSL further recognizes that the Wire Act contains language that is out of date and does not reflect the reality that states, markets, consumers, and regulators operate in the age of the internet and digital commerce. NCSL supports a revision of the Wire Act that updates the Act to more accurately represents current technology and communications capabilities.
Electronic Commerce and Taxation
Government policies should create a workable infrastructure in which electronic commerce can flourish. Policy makers must resist any temptation to apply tax policy to the Internet in a discriminatory or multiple manner that hinders growth. Government tax systems should treat transactions, including telecommunications and electronic commerce, in a competitively neutral and non-discriminatory manner. The federal government and America’s industries should work with state legislatures in ensuring equal tax treatment of all forms of commerce and should encourage state efforts to achieve simplification and uniformity through the streamlining of state and local sales and telecommunications tax systems.
NCSL supports the reform of the discriminatory taxation of communications services and believes that if state and local governments were to take such action, the need for the federal moratorium on Internet access would cease to exist.
Video Franchise Reform
Innovation and convergence of existing technologies are radically expanding communications and information services, blurring distinctions between telephone, Internet services, cable, wireless and satellite. These rapid changes often outpace abilities of federal, state and local regulatory regimes to adapt. It is important that video regulatory policy assure that like services are treated alike, investment is encouraged, and services are in a non-discriminatory manner.
State Administration Will Preserve State Authority
Local jurisdictions are the creation of either state constitutions or law. The powers that these political subdivisions of the state exercise were granted to them over time by state legislatures. Those local jurisdictions that have franchise authority have it as a result of state legislation or the state constitution. Therefore, any attempt by Congress to preempt current local franchise authority is a preemption of state sovereignty.
While NCSL rarely advocates the consideration of legislation in state legislatures, NCSL has at times, when states are facing a crisis or a serious threat of federal preemption, urged state legislatures to take action. NCSL endorses efforts that remove barriers to entry for or inequity of regulation among video competitors and foster additional consumer choices in the video marketplace ultimately ensuring competitive neutrality.
Government should encourage competition and consumer choices for broadband and video services and promote the deployment of broadband services and technologies, as well as including options for public-private partnerships where applicable.
Fees and Taxation of Video Providers
Franchise fees today are levied, imposed or collected as a percentage of gross revenues, used for general revenue purposes and not based on the actual direct and identifiable costs of any benefit to the entity that pays the fee. To the extent such fees are intended as payment for use of public rights-of-way, that fee should be limited to the actual, direct and identifiable cost of such use, and that portion of the fee should be applied only to those who use the rights-of-way. Franchise fees should be collected and administered by one central agency per state.