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California ahead on Net laws

Although the plans may be hard to enforce on a global medium, the state is out in front in trying to legislate Net issues.

California lawmakers appear to be leading the way in regulating the Net.

Although the plans may be hard to enforce on a global medium, observers say Silicon Valley's home is sending a message to Congress and other states to follow its lead, which could help bolster online usage and e-commerce.

"It is undeniable. A huge chunk of the industry is located in California and if you look state by state, California has the largest number of Internet bills introduced," said Paul Russinoff, state policy counsel for online industry group the Internet Alliance.

The California Senate and Assembly this week passed a bill to allow any email provider to sue spammers to recover losses caused by network clogs or crashes. Under the bill, providers can sue for $50 per message or up to $15,000 per day--whichever amount is greater. Just introduced in March by Rep. Gary Miller (R-Diamond Bar), the bill was sent to Gov. Pete Wilson today for his signature.

Also, on Monday, Wilson signed the California Internet Tax Freedom Act, which bars local governments from levying new or discriminatory taxes on Internet companies and transactions for three years.

But legislators in other states and on the federal level are not too far behind. Congress beat California in introducing proposals to limit unsolicited bulk email and shield the Net from "discriminatory" taxes.

For example, the state's Net tax law is similar to the federal Internet Tax Freedom Act, where the House and Senate must reconcile their versions of the legislation. The principal issue is the length of the moratorium, and whether existing taxes on Net access or services will remain in effect. Congress also is working to pass a spam amendment within a telecommunications bill to fine junk emailers who try hide their identities up to $15,000.

Moreover, about 700 state bills have been introduced this legislative year that would affect the Net, although few have passed, according to the Internet Alliance.

Still, California--along with Nevada and Washington--have moved more swiftly to pass legislation to curb spam. New York also is expected to pass its own Net Tax Freedom Act, and the National Conference of State Legislatures supports legislation temporarily prohibiting taxes on Net access or data transfers (known as bit taxes).

"The federal laws have been in the works for like a year and half now. It is an indicator that at the state levels the government is more in tune with what is going on in the world and realize that this is a daily problem," said Adam Engst, who is lead plaintiff in the first lawsuit filed against an alleged spammer for violating a Washington state law that prohibits the use of fake email return addresses, among other things.

Engst said his lawyers have been unable to find the owner of the junk email company they are suing in order to serve him papers--a sign of how hard it is to actually track down people who are accused of violating Net laws.

Even so, Engst said he is glad states are giving business owners and Net users some methods of recourse. "With the Net, it moves so fast, so [it's valuable] to just get something on the books," he noted. "The spammer we are suing is in California, and they are certainly up for more problems if [the current state spam bill] passes."

Some hope those inside the Beltway will take notice of California's action and get in gear to pass antispam or Net tax moratorium legislation before adjourning in October.

"One thing that will make it difficult for state spam bills to work is the question of whether [the laws] are constitutional under the Commerce Clause," which prohibits states from regulating activity outside their borders, said the Internet Alliance's Russinoff. At least one law to regulate speech on the Net was overturned by a federal judge in New York who cited the Commerce Clause.

"We don't want to see a whole patchwork of legislation. We would like to see uniform laws," Russinoff added.