Chairman Bennett and distinguished members of the Subcommittee, on behalf of the over 11,000 direct and affiliate member companies of the Information Technology Association of America (ITAA), I thank you for inviting me to participate in today's hearing on the "Digital Signature and Electronic Authentication Law of 1998," S. 1594. Our companies are involved in software, services, the Internet, electronic commerce, professional services, information services, and telecommunications. In addition to serving as ITAA President, I am President of the World Information Technology and Services Alliance (WITSA), consisting of 28 information technology associations around the world. Because electronic commerce is a global issue, ITAA is interested in the topic of today's hearing from both a national and international perspective.
ITAA member companies are helping to shape the information age by creating thousands of new sources of information, turning local and regional markets into global markets, and giving businesses and consumers new and efficient means of trading goods and services. In short, our members are at the forefront of the revolution called "electronic commerce."
The importance of electronic commerce to the U.S. economy and to American consumers cannot be understated. The estimates of the growth and size of the electronic marketplace vary widely, the Department of Commerce predicts that electronic commerce will account for more than $70 billion in sales in the year 2000, and Forrester Research projects that more than $327 billion will change hands over the Internet by 2002. Based on ITAA's own recent survey, we see a doubling of the electronic commerce marketplace in just the next six months. Our survey also showed that financial services, wholesale/retail trade, information technology, and manufacturing industries lead the way in adopting electronic commerce solutions. The value American consumers place in electronic commerce is easily demonstrated by the overnight success stories of companies such as Amazon.com. Given this dramatic growth, the creation of a secure environment for electronic commerce is vital to both American consumers and the American economy.
Let me explain briefly why the IT industry believes digital signatures and electronic authentication are so important. The full potential of electronic commerce cannot be realized unless every party in the electronic transaction-buyers and sellers alike-have confidence that those with whom they communicate in cyberspace are who they say they are. The New Yorker cartoon says the great thing about the Internet is that no one knows you're a dog. That is humorous, but it is not want buyers and sellers really want. They want to know they are not dealing with dogs. Protecting the integrity of the content is also critical. They want to know you mean what you communicated you mean. The continued growth of electronic commerce depends on the development of a legal framework of contract law that will supply uniformity and legal certainty to transactions in cyberspace.
ITAA has embraced a number of important principles on authentication and digital signatures:
Mr. Chairman, we applaud your leadership on this issue. In particular, the thrust of your bill is to establish an environment through the creation of a flexible yet secure electronic authentication system driven by private-sector initiatives and supported by government regulation only where necessary. Your bill permits the use of electronic authentication where a third-party has agreed to its use or where an established system of electronic authentication and accompanying rules exist. Such a scheme is superior to a rigid, government-driven system of electronic authentication that is incapable of evolving with the fast-paced growth of the electronic marketplace.
One major concern, however, is with the scope of the bill, which, as drafted, applies only to financial institutions and their affiliates. In today's economy, banks are not the only providers of financial services. Insurance companies, brokerage houses, mutual funds, and new Internet businesses provide various types of financial services to American consumers and are involved in business to business transactions. Also, not all types of communications involving electronic authentication are financial. AR companies and their customers should be able to benefit from the same secure electronic authentication scheme afforded to banks and their affiliates.
Mr. Chairman, it is important to note that a lot of activity is occurring on the topic of today's hearing. To date, over 30 US states have adopted digital signature legislation. Several countries, most notably Germany and Italy in Europe, have done the same, and the European Union proposed in October, 1997, a regulatory initiative for the legal recognition of digital signatures and the establishment of minimum criteria for verification authorities. ITAA has held discussions with European Commission officials about the EU initiative. The United Nations Commission on International Trade Law (UNCITRAL) is developing rules that would encourage the use of digital signature technology linked to a public key infrastructure.
On the state level, ITAA has been working with the National Association of State Information Resource Executives (NASIRE) on its project on accreditation standards for CAs. The National Conference of Commissioners on Uniform State Laws (NCCUSL) has also embarked on an effort that will result in recommendations to the states in this area.
Legislation that establishes a general scheme for electronic authentication and thereby creates a comprehensive and secure environment for electronic commerce will maximize the benefits of the global electronic marketplace for American consumers and the economy. We believe that a major roadblock in the path of the growth of electronic commerce is a lack of trust in the security of electronic payments. Companies other than financial institutions must have access to secure payment and contracting systems in order to provide consumers the level of security they demand in this electronic age.
We would like to work with you, Chairman Bennett, to develop an electronic authentication scheme applicable to both financial and non-financial institutions that is based on the fundamental budding blocks of flexibility and private-sector leadership already established in your bill. Perhaps a broader hearing by this Subcommittee incorporating additional representatives from the various stakeholders in electronic commerce would be valuable. In that hearing, you might want to focus on an issue we believe is also important, namely, encouraging the federal government to take advantage of electronic commerce, using appropriate authentication techniques.
Again, thank you for your leadership. ITAA stands ready to work with this Subcommittee
and the Senate on this critically important topic.
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