Internet Commerce Boomed in Past Decade

Published April 12, 2010

American e-commerce has grown 400 percent over the past ten years, according to a study marking the 25th anniversary of the debut of the first Web site with the “dot-com” suffix. Tech industry watchers warn, however, proposals to tax and regulate the digital economy threaten to slow that progress.

“In total, surveying the 25 years since the first .com domain name was registered, one can rightly describe the commercial Internet as a general purpose technology, one whose significance to society should be viewed as on par with the advent of inexpensive steel, the telephone, the internal combustion engine, or electricity,” says the report published by the Washington, DC-based Information Technology and Innovation Foundation.

The report, “The Internet Economy 25 years after .com: Transforming Commerce & Life,” notes “the potential for innovation and the pace of technology moves so fast that predicting the next 25 years of the Internet economy is difficult.”

Potential Barriers to Growth
Carl Tate, a former U.S. Department of Commerce official during the Bush administration, says the vibrancy of the digital economy is threatened by government taxation and regulation.

“The only thing that can stand in the way of the growth of e-commerce is unnecessary government and burdensome taxes levied by greedy government officials,” Tate said. “The only reason we saw such innovation and growth during the ’90s in that area was because government got out of the way.”

Internet Taxation Rising
Braden Cox, policy counsel for Washington, DC-based NetChoice, says the growing trend of states such as Colorado and New York imposing taxation on Internet commerce and music downloads will harm small Web businesses.

“More states are trying to regulate digital downloads, which makes it very difficult for a lot of smaller companies to figure out what they have to do to comply with the taxing rules in each state,” Cox said. “It will create a lot of problems for smaller companies without an accountant on staff.

Privacy vs. Vibrancy
Donald W. R. Allen II, editor in chief of Independent Business News, says the federal government’s attempts to fight crime on the Internet also have a chilling effect on Web commerce.

“The IRS, FBI, Secret Service, and Homeland Security Department have been monitoring Internet marketing and e-commerce Web sites,” Allen said. “And sometimes they shut down the traffic and dollars that flow into these online Internet businesses with little justification.”

Beware Web Ad Regulation
Proposals to restrict behavior-based advertising strategies—which track where a consumer browses, to better direct ads toward their interests—could also impede further development of the Internet, says Cox.

“The current model of the Internet [gives consumers] a lot of stuff for free, but you have to see advertisements,” Cox said. “That pays the freight.”

Krystle Russin ([email protected]) writes from Texas.

For more information …

“The Internet Economy 25 years after .com: Transforming Commerce & Life,” Robert D. Atkinson, Stephen J. Ezell, Scott M. Andes, Daniel D. Castro, and Richard Bennett, Information Technology and Innovation Foundation, March 2010.