COMMENTS OF BELL ATLANTIC CORPORATION
Bell Atlantic Corporation ("Bell Atlantic") is pleased to be able to offer these comments in this proceeding. Bell Atlantic is a telecommunications company with facilities and operations extending from Maine to West Virginia. Bell Atlantic provisions more than 41 million telephone access lines and has more than 6.7 million wireless communications customers. In addition, through Bell Atlantic's Internet Solutions, the Company offers Bell Atlantic.net, a dial-up Internet access service now available in selected cities in Maryland, Pennsylvania, New York and Rhode Island as well as in the District of Columbia. Through another subsidiary, Bell Atlantic also publishes an on-line directory, Big Yellow(sm) which carries thousands of separate ads for third parties with links to other sites. Bell Atlantic appreciated the FTC's invitation to participate in the June 8, 1999 workshop on Consumer Protection in the Global Marketplace, and Director Bernstein's invitation to submit additional, post-workshop comments.
Electronic Commerce: A Rapidly Changing Marketplace
Electronic commerce is in its infancy. Three years ago, there were only about 12 million Americans, at best, online. Today there are closer to 60 million, and that number is growing more rapidly than any other mass communications medium in our history. Moreover, electronic sales of goods are growing with even greater rapidity. From purchases of about $3.7 billion last year, online sales are expected to reach $6.1 billion of more this year. Clearly, therefore, we have a nascent industry, but one whose growth rate is phenomenal. Numbers such as these make the argument that consumer protection concerns are slowing the growth of electronic commerce problematical at best.
Our company clearly has a significant interest in ensuring that electronic commerce continues to grow. Anything that makes consumers wary of participating in this new medium is, by definition, a concern for us. Thus, strong consumer protection standards are both appropriate and helpful, both online and off. What we are concerned about, however, is the a priori assumption that electronic commerce, essentially because it is conducted over a new medium, needs a new and separate set of consumer protections. We believe that the concept of "first do no harm" has some application here. In the absence of clear, empirical evidence that new rules are required to
ameliorate unique harms, it is simply inappropriate and premature to discuss what new rules to write for the medium - especially since it is unclear of how it will impact the rapidly changing medium.
Regulation Is Not Costless - Least Of All To The Consumer
We recognize the salutary that government often plays in protecting the least sophisticated of consumers from the machinations of malevolent merchants and/or from the harmful consequences of consumers' own bad decisions. The creation of every new regulatory mandate, however, carries with it for business the cost of participation in the frequently attenuated process of regulatory promulgation. Moreover, compliance with the "spirit" rather than the "letter" of a regulation, once it is adopted, is clearly not an option. This often results in two additional costs: the cost of determining how best to implement externally imposed regulatory mandates - mandates which not infrequently ill fit the specifics of a particular business, because regulations necessarily are crafted to apply to a variety of businesses; and the costs businesses incur in trying to ensure that nothing "slips through the cracks," either upon initial implementation or as business specifics change. Finally, governmental regulation inherently lags behind changing technological and economic circumstances and impose heavier costs to change than other types of policies.
The crux of the issue of whether to write new regulations specific to a new medium such as the Internet is not whether the medium itself is sui generis; clearly in the case of the Internet, it is. Rather the test should be whether one can demonstrate, by clear and convincing empirical evidence - not anecdotes or theoretical possibilities - that there are harms so different in kind (or that are so demonstrably and quantifiably greater in magnitude as to constitute a difference in kind) that existing regulations do not address them, and that less intrusive approaches would be insufficient to remedy them.
The Internet Provides Consumers With Certain Unique Protections
There are two other extraordinarily unique and powerful aspects of the Internet generally that benefit consumers and that have particular relevance in the context of consumer protections. One is the medium's ability to provide consumers with powerful, ubiquitous and effective "feedback" and "broadcast" mechanisms." Those mechanisms operate in "Internet time," and allow individual consumers or groups of consumers to reach a much larger audience of potential buyers, quickly, with negative feedback about a merchant than is possible in any other medium. Any merchant who does business via the Internet would do well not to ignore the power that that medium places in the hands of customers. Purveyors of shoddy goods, providers of inadequate service, and those engaged in sharp practices or outright fraud can, and often are, widely advertised and exposed through the medium's feedback mechanisms.
The second unique aspect of the Internet is that it reduces, essentially to zero, the transaction costs of going to a different vendor if one is discomforted by the level of protections and/or disclosures a merchant provides. "Search engines" quickly enable consumers to seek out and identify other vendors selling a particular product if the consumer is unhappy with a particular vendor. In the physical world of commerce, as opposed to the virtual world, those transaction costs are often very high for a busy consumer. The Internet has the exactly the opposite impact on individuals, increasing their leveraging ability in a very profound way, and reducing, essentially to zero, the marginal transaction costs of leaving one vendor and purchasing from another whose policies and practices he or she may find more agreeable. Again, no merchant wishing to build his business in this new medium can ignore the fact that his or her competitor is only one or two mouse clicks away. Thus, merchants have a much higher incentive generally in the virtual world to provide the consumer with the quality of service that the customer requires, since in cyberspace there is no such thing as a captive customer.
Consumer Education Is The Most Effective Consumer Protection.
Finally, what consumer clearly can use, more than new, Internet-specific rules to protect them, is a more complete understanding of how existing rules apply and protect them in their online transactions. As well, consumers could also benefit from a heightened awareness of the kinds of things consumers themselves can do to decrease the chances of becoming a victim of fraud. Most such behaviors, in addition, will have application outside electronic commerce as well. Ordinary, informed consumer prudence coupled with increased awareness of where problems are likely to arise, and when necessary, application of already existing consumer protections, will dramatically reduce or eliminate most consumer concerns and problems. Such education programs provide opportunities for government as well as for responsible consumer and business organizations, working separately and together, to achieve substantial consumer benefits without imposing on businesses - and ultimately on customers - the costs that new and unnecessary regulatory regimes will require.
Bell Atlantic believes that the electronic media and electronic commerce are advantageous to both consumers and to businesses, enabling greater quantities of information to be provided in a more palatable way than was possible by conventional media. We believe that the Commission has made great advances in understanding the new media, both its promise and its dangers. At this time, the most pressing problems which are raised by electronic commerce are those which have always posed significant consumer protection issues: pyramid schemes and other outright frauds.
We urge the Commission to permit the unhindered growth of electronic commerce in its current fashion. We believe the Commission should focus on those areas where complaints reveal significant consumer problems with respect to electronic commerce. Those problems involving fraud, according to evidence presented at the workshops, appear to be concentrated in fairly specific and identifiable areas. It is in those areas, rather than in writing "across the board" rules for the Internet, that the FTC should focus its resources. Moreover, as this workshop demonstrates, the Commission, the private sector and consumer organizations can play important roles in the other area - consumer education - where clear impacts can best be made.
/s/ Haywood Torrence, Jr.
Haywood Torrence, Jr.