DATE: Wednesday, July 9, 1997               TAG: 9707090015

SECTION: LOCAL                   PAGE: B10  EDITION: FINAL 

TYPE: Editorial 

                                            LENGTH:   53 lines

HOW OPEN A HIGHWAY? CONGRESS IS NOW FACED WITH THE NEED TO WRITE RULES OF THE ROAD.

In a few short years, the Web, the Net, the digital superhighway has gone from curiosity to engine of commerce. And suddenly Congress is faced with the need to write rules of the road to govern content, copyright and tolls.

A first ill-advised foray, attempting to curb smutty content, recently was struck down by the Supreme Court for violating free-speech protections. Content will remain relatively wide open. Let the browser beware.

But free speech shouldn't be confused with a free lunch. Creators of content - whether in the form of text, video, audio, or software - must be compensated for their work. That's the purpose of copyright protection.

Applying copyright to the Internet presents unique challenges, but the first steps have been taken. Congress faces a vote soon on two World Intellectual Property Organization treaties negotiated in December. They will serve, in part, to extend copyright protection to cyberspace.

This is a pressing necessity. The United States is a world leader in the production of intellectual property in the form of television and film, recordings and software. And intellectual piracy is rampant. Such theft in 97 countries in 1995 cost the United States at least $14 billion. China remains the leading culprit with $2.3 billion in exports of pirated material in 1996.

Policing the Net will be a neat trick, but the first step is enacting the treaties.

Another vexing issue is tolls or taxes. Pioneers of Internet commerce vocally support its continuation as a free-trade zone. The Clinton administration has tentatively, and perhaps hastily, endorsed a hands-off approach.

The rationale appears plausible at first glance, to keep Internet commerce growing by keeping it unfettered. By some estimates, Net trade could reach $200 billion by 2000. But freeing electronic commerce from taxation has big implications.

For one thing, it tends to give Net merchants a competitive advantage over traditional bricks and mortar retailers. That may be all right. Cyber enthusiasts liken the coming of the Internet to the arrival of the auto. The triumph of internal combustion was undoubtedly progress, the misery of buggy whip makers notwithstanding.

But there are also civic implications to the rise of the Net. States and localities rely on sales taxes for revenues that are used to pay police or maintain schools or build sewers. That revenue stream will shrink if the local computer, clothing or bookstore is supplanted by retail.com and it escapes the sales tax. How will jurisdictions that rely on such revenues to supply needed services make up the loss?

Taxing Web commerce may not be the answer. But before legislators rush to declare the Internet a duty-free zone, they at least have to confront the questions that such a stance raises. And the time to do it is now, when the industry is in its infancy.

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