BUSINESSWEEK ONLINE: APRIL 10, 2000 ISSUE

Readers Report

Finding a Way to Guard Net Privacy

I applaud ''It's time for rules in Wonderland'' (Special Report, Mar. 20). I could not agree more that the time is ripe for federal legislation to protect consumer privacy. The Alice in Wonderland analogy was a humorous way to describe the world of cyberspace.

I have concluded that industry self-regulation has not worked and will not work without federal standards to back it up. Absent effective privacy protections, several results are inevitable. First, the dissatisfaction of U.S. consumers will only increase. Second, a patchwork of state laws to protect online privacy will create a confusing environment for consumers, marketers, and the courts. Finally, it is possible that the absence of online privacy protection will continue to undermine consumer confidence and hinder the advancement of electronic commerce.

Federal legislation and industry self-regulation are not mutually exclusive. By analogy, Section 5 of the FTC Act has not deterred the advertising community from robust self-regulation through the Better Business Bureau's National Advertising Division (NAD). It is worth noting that over the years, the NAD has been the model for effective self-regulation because its process is independent, objective, public, and enforceable. Overall, industry self-regulation in the privacy area has fallen far short of the NAD model.

Sheila F. Anthony
Commissioner
Federal Trade Commission
Washington

It would be incredibly naive to believe that companies' self-serving efforts at self-regulation would be of any value to the public. Not to pick on eBay Inc., an excellent Net company, but their privacy policy may be illustrative: It contains so many caveats as to be useless.

Privacy violations are not unique to the Internet. Computer networks have been used for years, and the Internet is just another network, albeit a big one. I recently took over the bookkeeping for an elderly aunt. I asked her bank, Wells Fargo & Co., to send my aunt's statements directly to me. Within two months, junk mail started arriving, addressed to my aunt at my address. She even got a Citibank credit card solicitation, courtesy of Wells Fargo. Only strict government regulation can halt such breaches of confidence.

Howard H. Hill
Pleasanton, Calif.

Your four-point plan for e-privacy leans too heavily on regulation. While the creation of regulation is a laborious process, cross-border enforcement is an additional headache.

Privacy concerns can perhaps be more easily tackled within the market framework. Certification of the privacy policies of Web sites by private agencies can yield the benefits of economies of scale. The user will not have to read and interpret a new set of fine-print-laden privacy policies each time she visits a new Web site. Instead, the rating systems developed by the certification agencies will enable the user to quickly assess the risks involved. When such ''information intermediaries'' emerge, the market should be able to provide just the right amount of privacy the customer desires.

Richard PonArul
Professor of Finance
California State University
Chico, Calif.

The privacy issues surrounding medical information on the Internet are more complicated than those addressed in your story. Although the potential for abuse certainly exists, we believe that the rewards to consumers by far outweigh the risks involved.

The health-care system is not a system but a series of disparate entities that are primarily unable to share information to improve patient care. The potential of the Internet is that it can link patients, health plans, insurers, and providers together in a forum to closely monitor people with chronic diseases so they get the treatment and advice they desperately need.

Over the next few months, we will see heath-care online transform from delivering static medical information to providing personalized solutions to individual problems. A patient will be able to provide information about medical history, the medications being taken, frequency of doctors visits, etc., to a Web site and receive customized information about best practices and research-based approaches. Health-care providers will be better informed and be able to reach out to deliver better care and enhanced services.

Of course, the consumer should be protected and have the right to say ''No, I do not want to share my personal medical history with anyone.'' But some of the protective measures under consideration also limit the power of the Internet to help save lives. The Internet offers this country a unified platform, for the first time, to create a true health care system.

Dr. Jeffrey Rice, CEO
Dr. Mark Ridinger, President
Axonal Health Solutions
Washington

You raise some very thought-provoking (and sometimes unrealistic) ideas on creating federal regulations for consumer privacy but fail to tell the whole story. It is true that the Internet can provide opportunities for unscrupulous or careless companies to breach privacy and annoy consumers. However, the article overlooks much of the opportunity that these same customer-profiling technologies offer.

Besides enabling Internet junk mail and data-sharing between companies, user-profiling and data-mining technologies also enable companies to gain a greater understanding of who their customers are and what they want. This understanding results in users getting more of what they want and getting to it faster. In return, companies get the loyalty of these users. This give-and-take is at the heart of the new, customer-centric economy.

What is more annoying, getting an e-mail from a travel site that informs you of special rates and discounts on packages to your favorite locations, or a travel site that makes you click back and forth through a barrage of screens just to get to the same information? In the end, profiling technology is what enables the Internet to go from a one-size-fits-all scenario to ''one-size-fits-me.''

John Lee
New York

I am disappointed in your proposals. Government intervention is much more dangerous and would likely trigger a variety of disastrous consequences greater than the current problem itself.

I agree that private companies have been slow to respond to consumer desires for online privacy, but how long do you think that will last? The free market abhors a vacuum. Consider how an unregulated Internet has solved other initially menacing problems, such as children's access to Internet pornography. We didn't need to create a new government bureaucracy (or invite an existing one, like the FTC) to come in and clog up cyberspace with red tape. Instead, new products like Cybersitter and companies like Net Nanny Software International Inc. sprang up and capitalized. Now kids are safe, parents are happy, and jobs in these new companies support families.

Under government solutions, the element of choice disappears entirely. People can vote with their dollars and choose to buy or not buy blocking software. But a government solution is forced down the throats of those who don't even want it. Also, if the feds are given the opportunity to implement their solution to this problem, it is safe to assume it will be costly to taxpayers, unnecessarily burdensome on consumers and private companies, and largely ineffective. It will also never go away.

If left alone, the free market will likely satisfy the privacy niche as well. Perhaps a startup company will establish a rating system using icons that will quickly become as ubiquitous as those used for G, PG-13, and R-rated movies. Market-savvy Internet companies with strong privacy policies will proudly display a good rating atop their home pages, happily paying the rating company's fee for the privilege (again, creating jobs, not destroying them). The caveat to such tidy solutions is that the government must not interfere.

Think of how foolish it is to trust the government to track, regulate, and ''protect'' our personal information. Remember, the government has unlimited power to tax us, send us off to die in war, or throw us in prison. By contrast, companies just want to sell us stuff. You tell me which is more dangerous.

Michael McGinty
La Jolla, Calif.



Knight-Ridder Won't Give Up Majority Control

''No magic in this dot-com idea'' (News: Analysis & Commentary, Mar. 20) inaccurately characterized my responses to your hypothetical questions about merging with another media company. Knight-Ridder Inc. has absolutely no interest in any merger that would require us to relinquish majority control.

The article appropriately credited The New York Times for its strong online strategy and national reach, but it's worth noting that Knight-Ridder's network of sites at least equals the Times's in both national reach and revenue.

The article also cast doubt on the newspaper industry's future but ignored some fundamental strengths. Newspapers have proven to be remarkably resilient and profitable, even in this hyper-competitive age. This is true precisely because we provide comprehensive local information not readily available elsewhere. What we do, as would-be competitors have learned, is complicated and expensive to produce regardless of the medium.

In virtually every local market, the daily newspaper has the largest (and, I dare say, most talented) reporting staff, the largest advertising staff, the largest reach, and the predominant share of local advertising dollars. Fortunately, our readers and advertisers appreciate these talents and strengths.

Tony Ridder
Chairman & CEO
Knight-Ridder Inc.
San Jose, Calif.



GTE Played Fair in the FCC Auction

In attempting to expose potential inefficiencies in the auction process, ''Going, going,gonesucker!'' (Economics, Mar. 20) mistakenly implies that GTE Corp. was allowed to gain an unfair advantage through inefficiencies in the Federal Communications Commission's auction process. With a net revenue of over $7 billion, almost $400 million of which was paid by GTE, the FCC auction was extremely efficient and a bargain for the bidders and for Americans.

The reasons GTE ended the dollar amounts of 66% of its 178 bids in ''483'' did not include announcing its presence. GTE's presence, like all auction participants, was ably ''signaled'' by their name, associated with each of their bids in the round results, published at the conclusion of each of the 112 rounds of the auction. GTE won only 4 of the 37 markets on which it bid. An analysis of the winning bids reveals that GTE paid the second-highest average dollar per population for the markets it won. Also, contrary to the ''offline'' characterization, the spectrum auction was conducted ''online.''

John Giuli
Director, Technical Operations
Federal Communications
Commission Auctions
Washington



More Jobs for People with Disabilities

Thank you for ''The new workforce'' (Special Report, Mar. 20), focusing on workers with disabilities. Informing and educating the general public about the benefits of hiring workers with disabilities can only improve their employment options. But I was disappointed that no mention was made of the National Business & Disability Council's pivotal role in some of the activities mentioned. Despite the fact that the Able to Work program was created through a partnership between Microsoft Corp. and our center, only Microsoft was credited. And while you highlight several of the Executive Leadership members, there's no mention of the help our council has provided to these companies.

The National Business & Disability Council is part of the National Center for Disability Services, a not-for-profit organization that provides education, employment, training, and research for people with disabilities. Each year, our national employment services place more than 1,500 workers with disabilities into jobs. We also operate a school for more than 200 students with severe physical and medical disabilities.

As a not-for-profit, the Council gains nothing from the recognition, except for the ability to help more companies in hiring more workers with disabilities.

Edmund L. Cortez
President and CEO
National Center for
Disability Services
Albertson, N.Y.

Your report serves as a poignant reminder of the struggles that Americans with disabilities have faced in coping with seemingly endless barriers that have kept them from fulfilling their dream of supporting themselves and their families through employment.

We must continue to strengthen our resolve to educate employers of the true worth of a largely ignored workforce that is ready and able to contribute their talent and energy. To become productive citizens today is a reachable goal for Americans with disabilities. Barriers of all kinds must be removed, and I, too, am confident that changing attitudes, a robust economy, and new work-incentive legislation signed by President Clinton last December will at long last make it possible for Americans with disabilities to become productive employees.

Susan M. Daniels
Deputy Commissioner for Disability
& Income Security Programs
Social Security Administration
Baltimore

I can't thank you enough for including such a wide-ranging report on the opportunities and possibilities for us gimps. (As a disabled person, I can't say I'm fond of the word.)

Multiple sclerosis knocked me off my pins, and I've been out of the workforce for eight years, studying to be a minister. But when I read about artificial brain cells that might address the myelin deficiencies on the surface of my brain? Fascinating. If the workplace adjusts to the needs of smart, energetic, wise folks who live with chronic auto-immune disorders, you'll tap an even larger pool of workers.

Therry Neilsen-Steinhardt
Brookline, N.H.

Your report affirms what those of us in the disability community have known for a long time: that people with disabilities can compete successfully in the workplace. People with disabilities for the most part are not sick. We have disabilities that enable us to function in sometimes different ways. Thanks to an explosion of assistive technologies and other human supports, people are equal to the demands of work. All across the nation, researchers are working on new technologies and support systems to enhance our productivity and function.

Much of this work is sponsored by the National Institute on Disability & Rehabilitation Research, a small and little known agency of the Education Dept., which has led the way in helping to fulfill the promises of the Americans with Disabilities Act. For too long, the only thing missing has been the chance to show what we can do.

William G. Stothers
Deputy Director
Center for an Accessible Society
San Diego, Calif.



High Tech: A Big Help in Recruiting Workers

Ironies abound in the movement from people to equipment (''Tight labor? Tech to the rescue,'' News: Analysis & Commentary, Mar. 20). While the tight labor market spawns ever newer technologies to deal with the shortage, use of those technologies has made it easier and faster for our executive search firm to recruit those individuals whose scarcity led to the changes in the first place.

Stanley Herz
Somers, N.Y.



It's Only Fair: Japan Must Reduce Its Trade Surplus

Donald Esmond, Toyota's Div. General Manager, claims that ''we just want our fair share'' of the U.S. truck market (''Those truck guys from Tokyo,'' News: Analysis & Commentary, Mar. 20). Arguably, Toyota has long since exceeded its ''fair share'' of the U.S. auto market, given its generous access to the U.S. market and Japan's astronomical trade surpluses in vehicles and other manufactures.

Foreign automakers doubtless wonder when their comparatively negligible share of Japan's market will approach ''fair'' levels. Japan Inc. first must reduce its trade surplus and cede foreign competitors more domestic share before demanding even greater access to overseas markets.


A. L. Dennison
Tempe, Ariz.



''The Business Week 50'' (Cover Story, Mar. 27, 2000)

Because of an error by Standard & Poor's Institutional Market Services, ''The BUSINESS WEEK 50'' (Cover Story, Mar. 27) reported an incorrect performance grade for Paychex Inc. The correct sales figure for the past 12 months is $1.272 billion, with a one-year sales growth of 15% and three-year annual sales growth of 25.6%. The correct three-year sales growth grade for Paychex is an ''A.''



''The Talented Ms. Redstone'' (Entertainment, Apr. 3, 2000)

''The Talented Ms. Redstone'' (Entertainment, Apr. 3) inaccurately said Mel Karmazin will become CEO of Viacom after its merger with CBS. Karmazin will be president and chief operating officer but will have many of the responsibilities normally assigned to a CEO. Sumner Redstone will remain Chairman and CEO of Viacom.





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LETTERS:
Finding a Way to Guard Net Privacy

Knight-Ridder Won't Give Up Majority Control

GTE Played Fair in the FCC Auction

More Jobs for People with Disabilities

High Tech: A Big Help in Recruiting Workers

It's Only Fair: Japan Must Reduce Its Trade Surplus

CORRECTIONS & CLARIFICATIONS:
''The Business Week 50'' (Cover Story, Mar. 27, 2000)

''The Talented Ms. Redstone'' (Entertainment, Apr. 3, 2000)

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