The Road Away
In the world today, computers, technology, and the Internet are increasingly seen as fads and short-term booms, a view bolstered by lagging computer sales and the collapse of the high-tech stock exchange blitz. However, the use of this technology has far outgrown its old uses. Increasingly, users turn to the Internet for new purposes, whether illegal � gambling, pornography, tax evasion � or revolutionary, as a massive global marketplace. Likewise, the number of sites offering these varied products and services has increased substantially. Currently the Silicon Valley entrepreneurs, the first Internet innovators, have come into an economic rut, but at the same time, their European and Asian counterparts have not. In fact, European Internet commerce will have multiplied tenfold and be at the same level as American e-commerce by 2004 (Gantz 2). Still, they have one thing in common: the need for privacy. The Internet explosion has fueled a backlash against the almost asphyxiating legal and public atmosphere of countries like the United States and Britain, and many companies have been forced to set up in so-called havens such as Antigua, Belize, or the government-less island, Sealand. For each controversial relocation and every new law put on the books, however, more evidence of growing consumer concern for more privacy, more regulation, and more responsibility has appeared. In the foreseeable future, a trend toward greater Internet freedom is evident. The overpowering effects of consumer spending and economic stability will tend to decrease or nullify altogether the legislation and efforts of those nations opposed to the rights of an economy growing without them.
Living in a world more attuned to democracy and a free market, the global population has been both blessed and cursed. The sheer number of opportunities that citizens of the 21st century have are precludes to future wealth and prosperity: �with a single personal computer, credit card�Internet link, Web site and Federal Express delivery account, anyone could sit in the basement and start his or her own..[business]� (Friedman 80). The kinds of products and services that any user can provide are endless; from any of these could �be transformed, much more quickly, from being an innovation..to being a commodity� (80). A good example of this is the so called �illegal� sector, now the fastest growing sector in business. In the gambling world alone, eighteen million players (half of whom are Americans) make �Net gaming worth $2.2 billion annually, a total projected to triple by 2002� (Schone 128). This is where the bad side comes into play; the Internet is growing exponentially, but not the legal precedent behind it. Some countries have responded well, acclimating their tax collection and legislative services to the economic benefits of freedom � but some have not.
The United States, bastion of democracy and land of plenty to the masses, is surprisingly one of the most belligerent nations when it comes to protecting the freedom and rights of its citizens on the Internet. In gambling cases, states like Minnesota and New York have been moving their jurisdiction away from home shores. Minnesota was able to successfully sue an offshore bookie and New York judges ordered an Antiguan casino to stop taking bets from New York residents. Most of the legal basis is extremely weak. Because the transaction takes place in both the casino server and the customer�s computer, some agree that the laws against phone wagering are being broken. In reality, that would not be easy to prove. The 1961 Interstate Wire Act provided for the illegality of phone bets, but it did not mention the Internet by name. Then, Senator Kyl from Wisconsin introduced an amendment to the bill which provided for the Net; it passed the Senate but was voted down by the House, which was more influenced by business. This �bodes ill for any comprehensive Web gaming ban: it was a clear sign that land-based US gaming interests realize there�s money in the Web� (Schone 144).
The unclear judicial atmosphere over these businesses in the United States has driven investors and these sites into Caribbean countries where it is easier to settle, easier to communicate, and easier to move money around. These countries are ideal because they have looser laws, a set language, a stable government, and most importantly, have little or no taxes (Dickinson 14). Some are still watching and waiting because they don't want to get meshed into regulation. Most of these countries are tax havens, where one could bank, set up trusts and corporations, and import and export with few or no taxes or regulations. Secrecy is part of the bargain; in return, the countries get foreign capital, industrial development, tourist growth, and mutual advantages between nations (14). Dummy corporations and asset transfer are also easily set up and extremely manageable (Equity 3). The countries that did not make it as �havens� were those countries foolish enough to try and squeeze the site owners for fees or suggest transferring all traffic through central government servers. The site owners could simply pack up their servers and leave on the next plane. Many of the successful countries such as Antigua, the e-gambling capital of the world, have EPZ�s or Export Processing Zones where these companies can operate without hassle (Schone 134).
However, before the economics of the situation can be fully understood, the legislation behind the scenes must be presented. The basis of international law rests on treaties, customs, and general principles of law. In the United States, jurisdictions rest on the Act of State Doctrine and Foreign Sovereign Immunities Act, which respect sovereignty and immunity for foreign nations, mostly with commercial activity, and these laws must be followed, even for tax havens (LaMar 1,2). Still, international law is different from collective law.
The Caribbean, as a focus, is being blamed by groups such as the OECD and the Financial Action Task Force for encouraging tax evasion or allowing money laundering (�Small States� 2). The Internet has been accused of making possible �secret transactions ..through the use of e-money and highly secure encryption� in these countries (�Net Losses� 2). The Hague Convention treaty, due to be signed in June, will enforce foreign judgments in matters such intellectual-property claims, contractual disputes and libel. Under this treaty, �an online store could be liable under laws in any of the 48 member-countries of the Hague conference� (�Stop Signs� 6). Nations that refuse to cooperate would face measures discouraging rich-country investment or business. Most small nations will be affected. Because most of these nations had rich European, US, or Asian country backing in the past, their relatively recent exposure to international economics and pressures have backed them into corners. They either follow international law and their traditional economies are eroded, or ignore it and let their online economies fail � which affects their independent stability in any case. Lester Bird, prime minister of Antigua and Barbuda, accused the world�s rich countries of the �most blatant disregard for the rules of international law�rules no longer apply�only might is right� (�Small States� 1). These international measures have these countries running scared; their independence and financial health is at stake.
Gambling has been the main example so far, along with its place in the issue of privacy on the Internet, solely because what goes into gambling touches upon so many aspects of what the Internet means to everyone. The gambling industry is huge and therefore expensive. Their money boosts up the economies of those small nations that would have difficulty finding other funding. Bribery and crooked deals fill the pockets of officials in these countries. Advertising alone can cost up to six million dollars annually; that money goes to American and European advertising firms. As of today, users in the First World, who are the main sources of income for gambling sites, still prefer to send their money to places with a First World address. Nations which regulate their casinos offer a sense of safety to their prospective customers, such as in Australia, one of fifty three countries worldwide that license or tolerate casinos. The growth of the semi-illicit online industry is an indication of the general economic boom to come.
Before this boom can take place, the world must deal with the issue of privacy and censorship for people in democratic First World countries, due to the interests of government and business. Governments like to keep track of customers, businesses, criminals, online activities, and the content of the sites, mainly because of tax evasion and breaking of laws. Governments looking back at the Asian financial crisis saw problems in too much freedom: the words and actions of maniacs in certain countries online stimulated a mad rush of investors out of Asian markets sparking a crash, a real downside to globalization (Fleck 2). In fields like gambling, the government can request that financial information be handed to them. That information would necessarily include credit card and private records. In other online activities, other sensitive information can also be gathered. The potential insecurity of such secret material is worrying. In a December 30th article on Wired.com, several commentators made predictions for the future: �..important issues..free speech, privacy..open content..privacy services..we'll see more censorship attempts! Especially by the United Nations and other global agencies� (McCullagh, �So Many� 3).
This comes back to what the consumer wants; more than ever, they want to have their financial information kept secret. If they are gambling, they do not want the government to poke its head in the window and spy on them. Consumers do not want their credit card information and personal tastes sold to mass marketers around the globe. They do not want to be exposed hiding money in Swiss or Jamaican banks away from the IRS. Recently, Robert Reich, in a broadcast on WITF 89.5 FM, complained of the invasion of advertisers everywhere people do not want them to be: in toilet stalls, at gas stations, at the country club, as the talking head that cannot be shut off (Marketplace). These advertisers beg for financial data; everyone else tries to keep it away. Every ATM or bank transaction, by law, is recorded, and agencies maintain credit histories � that is why someone will receive a credit card in the first place. Asset collectors routinely boast about their ability to locate �hidden� assets, even to the $10,000 sitting as debit at a gambling site. The privacy policies on websites today are no more encouraging; only 66% of the top sites had any policy at all, and of those, only 10% had a policy that would be considered adequate (Vogelstein 40).
The government acts as an intruder on many levels. It intervenes in one way as the tax collector. The rapid rise of the Internet is causing tax bodies like the IRS much trouble. �The Internet..makes it easier to avoid paying sales tax..make life harder for the taxman by cutting out middlemen [and] increases the mobility of firms and certain kinds of skilled workers� (�The End� 2). Mail order firms that operate in the United States do not have to collect taxes on sales in other states, allowing large leeway for companies and consumers trying to escape taxation. The great flood of material passing through countries, no matter if they are more strict than the United States, are usually too much to be able to go through individually, so most taxable goods escape scrutiny. As well, it is almost impossible to keep track of all digital products. �The taxation of electronic commerce faces technological constraints� (�Net Losses� 3). Currently, e-commerce does not make up a large part of total spending, so it will not make a big difference in taxation, but in the future, when more commerce will be done electronically, taxation will become a large issue. This frustrates the tax collectors, who are always one step behind, since bureaucracy slows the process of changing tax rules. British scientist Michael Faraday, said that �he did not know [what use his discovery would make], but the government would find a way to tax it� (�The End� 2).
A big reason that governments are so intent on destroying Internet privacy is because they need the tax money; a comparable situation is the police, drug busts, and bookstore invoices. In a �20/20� report, a police drug bust was profiled in which the police wanted hard evidence in the form of book invoices from a bookstore. The stores refused but the police said they had a right to because privacy was not being violated to others, just to the suspect on hand (�Give Me�). People did not see it that way. Reading was supposed to be private business, and as further proof against the police�s stance, the books one reads do not assure guilt. The same applies to the Internet. The fact that people shop and interact on the Internet is because of the ease of transfer and the high level of secrecy anyone can have in finding what he wants to know. Authority, however, feels that other goals are more important than individual freedom. The police need to catch their criminals and are willing to break what others see as their rights; the government needs their taxes and are willing to do what it takes to get that money, taking advantage of the unclear status of the Internet, both legally and technologically.
This comparison also illustrates the nature of the government�s involvement in security. In order to illustrate this point, the example of the gambling industry again returns. In the world of gambling, privacy is a critical matter. The need for more trustworthy Internet transactions rises directly in proportion to the rise in gambling deals because people want to know their money is safe. Currently, casino sites in the South Pacific offer 132-bit encryption for security while the highest export encryption product ever approved in the United States is only 128-bit (�Online gambling�). Large online casinos, in order to stay ahead of the game, usually keep up higher privacy standards than countries like the United States, who for supposed security reasons, regulates encryption and its related private communications.
For years, the cryptographic community in the United States has constantly had to fight Big Brother in the form of the National Security Agency. �For decades [they] had a virtual monopoly on all cryptographic research [and fought by] employing threats, counterthreats, and ultimately, punitive laws that could have sent some researchers to jail for just talking about [crypto]� (Kerstetter 22). The threat from that arena has disappeared, but now has brought along a new one: the use of Carnivore, a FBI Net surveillance system. Carnivore was recently in the spotlight when Attorney General John Ashcroft showed strong support of its capabilities, including email interception and chat room eavesdropping. It has already been used to view the correspondence of narcotics suspects, as FBI congressional testimony shows (McCullagh, �Ashcroft� 1). This eavesdropping issue prompted Congress to approve the Communications Assistance for Law Enforcement Act, which is currently stuck in court. It also prevented posting of encryption products on the Internet and shipment overseas until just over a year ago. Supposedly, crypto could allow drug gangs to �communicate with impunity� (Delio 1). A law expert from Yale added his side: �The government will try to limit our ability to defend ourselves against invasions of privacy� (McCullagh, �Privacy� 6).
British law is cracking down further: police there have suggested that the government record information on all telephone calls and e-mail messages for seven years, to protect against child pornography, drugs, data terrorism, illegal gambling, and other such issues. A recent bill passed in the UK could allow inspectors to copy the entire contents of a person�s hard drive. Under that bill, importing pornography would be considered a serious arrestable offence and chargeable as such (Delio 1). Yahoo! was recently ordered by French courts to ban French users from viewing Nazi memorabilia on its sites. Under a new European Union law, European consumers may now sue EU-based Internet sites in their own countries, and the rule is being considered internationally. The United States has endorsed the Council of Europe�s cybercrime treaty, which aims to align laws against hacking, Internet fraud and child pornography. Signatories to this treaty must have laws on their books that allow for quick seizure of incriminating computer data and its distribution to authorities in other countries (�Stop Signs� 5).
American politicians are bullheaded on the issue of rights on the Internet, both because they want to preserve old-fashioned American domination and because they want to save their own hides. Janet Reno, the former Attorney General, mentioned in a speech that �you can�t hide online and you can�t hide offshore� (Meeks 1). Colin Powell was more conciliatory in his comments; when asked about satellites, encryption, and technology, he said he wanted to guard "the nation's interests, protecting our secrets, but at the same time, not putting our nation at a competitive disadvantage� (McCullagh, �Ashcroft� 1). John Ashcroft is a strong supporter of legislation like the Communications Decency Act, a law that would reduce all online discourse to �inoffensive� status. It has already been struck down by the Supreme Court as unconstitutional, but his support for other such restriction legislation continues: �We are in the strange intersection between freedom of expression and the damage that can be done when freedom is abused�I think all we should legislate is morality. We shouldn't legislate immorality� (Meeks 1,3). Janet Reno, in a The Standard article, expressed her opinion on Internet freedoms: �Criminal organizations [use] the proceeds of IP-infringing products to facilitate .. guns, drugs, pornography.. tax evasion and money laundering. Small businesses � the lifeblood of modern economies � can be devastated by organized, commercial-scale piracy� (Reno 1).
At this time, the technology available could thwart Internet freedom, at least for the present. No networked communications are perfectly secure, and email is by nature two-way. A company named HavenCo, discussed later, converses with its customers by email (utilization of their own services), but that is not necessarily safe. Its CEO, Sean Hastings, admits that �you can have all the secrecy and protection in the world as long as you don't need to write a check or wire a dollar� (Markoff 1). Another expert commented: �What's so ironic about the Internet is, as impersonal as it is, it creates the ultimate paper trail� (1). Companies offering these kinds of data services can protect themselves by using filtering and blocking as a means of escape. These employ the user�s IP address, which is a number assigned to every computer on the Internet, to track users and can deem them unwanted or wanted. Still, this is not foolproof. Service providers usually assign new IP addresses every time someone goes online (�Stop Signs� 4). IPv6, a new extended IP address created by the Internet Engineering Task Force, contains the unique serial number of a user�s network-connection hardware, which would mean that every data packet sent has the user�s identity implanted in every packet (John Galt 2). An irony is that Akamai, a key investor to HavenCo, recently came out with a service called EdgeScape allowing websites to determine who, where, and when, every time a customer visits (�Stop Signs� 4). This is expected, because they are mainly advertising � but on Sealand?
Companies like DoubleClick come increasingly under fire by investors because of allegations that they misuse their advanced user-tracking technology. Some have compared DoubleClick to �the rogue computer HAL� and maintained that the company has been �developing a database to spy on Internet users� (Vogelstein 39). Because DoubleClick has long been a go-between in e-commerce, it already knows much of what customers do on the Web. Other companies, like Network Solutions, sell information to buyers, concerning the link between domain names and websites actively engaged in e-commerce (Perine 1). The stock value for these companies have been adversely affected because of their alleged recklessness.
Fortunately, there are real advances for every setback. Micropayments, started by Amazon founder Jeff Bezos, have enabled sites �to impose tiny charges for tiny bits of online content. The reason they are needed is that macropayments haven�t been working very well� (Cohen 81). Another law of economics: the customer is always right. Customers do not want to pay a lot to get everything; sometimes, it is only a little bit that they want and they also expect a similar price. Game sites, unlike gambling, have attracted 75 million people, or roughly half of the online population, an extremely large number. The advice to companies like Nabisco with their extension, Candystand.com, is to make the games an actual product, after which �yesterday�s pinball wizards could turn into paying customers� (Crockett 12).
For the cypherpunks, a libertarian group that believes in encryption technologies to create electronic privacy, the Internet is the ideal route. Sean Hastings, CEO and co-founder of HavenCo, says that "technology has made it easier to move information and hide information..soon it will be impossible to trace where money is and who has money, and that will eventually force governments to move away from income taxes and toward consumption taxes" (Markoff 2). The motto of the America�s Defense Department, an original sponsor of the Internet, is this: �The Internet interprets censorship as damage and routes around it� (�Stop Signs� 2) The flow of information will be extremely hard to stop, even if some of the network is destroyed, because information is sent around the Internet in small groups of data called packets, each traveling a different route. Censoring or eavesdropping would be limited because the Internet has no boundaries; the data would just hop jurisdictions.
Some even argue that the Internet cannot have laws precisely because it has no geographical boundaries. Data transmission is almost instant. Peer-to-peer technology and programs like FreeNet and Triangle Boy are also helpful in providing Internet freedom. FreeNet posts copies of files all around the Net so they are harder to remove; these so-called mirrors (exact copies filed elsewhere) have helped in distributing pirated files like the DeCSS DVD encryption source code and assorted financial documents. Triangle Boy can be used to turn computers in democratic countries into proxy servers which can be used by surfers in repressed countries to break past the country firewall (�Stop Signs� 7). In case of governmental intervention in one country, a user could easily use Triangle Boy to access the sites they want to get to by rerouting.
All the new legislation worries managers of sensitive businesses, dealing in finances or illicit activities. Since they have to go through some of these countries to be able to run their business, the very idea of being arrested for transporting bets, pictures, or other forms of transaction is frightening. Hope is not lost, though. The idea of a data haven is now coming into focus as a solution.
A case in point is that of Sealand. A sovereign nation located on an island, it has been occupied since the 1960�s by a former soldier and his family. HavenCo reached an agreement with the owners and has turned Sealand into �a fat-pipe Internet server farm and global networking hub that combines the spicier elements of a Caribbean tax shelter, Cryptonomicon, and 007� (Garfinkel 230). In other words, it will be a giant network of servers under no government, no laws, and tight secrecy. Its founders believe in the philosophy of �freedom [being] the next killer app� (230). HavenCo allows its customers shelter from lawyers, governments, and others just outside of flagrant wrongdoing. �If you run a financial institution that�s looking to operate an anonymous and untraceable payment system [or] if you�d like to send .. pornography into .. Saudi Arabia � HavenCo can help there, too� (232). They also allow gambling sites, commerce sites and data storage, but no corporate saboteurs, spammers or flagrantly illegal activities.
Some of their first backers and customers include Tibet Online, a good example of a rebel element taking advantage of the new data havens, Internet giant Infoseek and advertising maven Akamai (234). The fact that gambling and pornography sites already have their own economies puts HavenCo into a better position when those sites relocate onto Sealand. "HavenCo intends to use the Sealand site as a model to other small nations of how they can compete equally with, or at an advantage to, larger nations for e-commerce business" (McCullagh, �HavenCo� 2). Already, HavenCo is talking to the �friendly� nations, home to gamblers and tax runaways, about the immense profitability of hosting data havens, to �eliminate the single point of failure and provide our customers with greater redundancy� (2).
As advances like molecular electronics are being studied intensely in labs all over the world, the opportunities for greater data freedom are immense. �Assuming computers continue to get smaller, a single box on the moon could serve a whole bunch of customers!,� said one excited visionary (Garfinkel 239). Casino vendors, smut kings, and crooks would find their ways more easily paved if they could relocate on the moon, a place without national jurisdictions�yet. Others think that after a period of repression or a rerun of Prohibition under legislation like the Kyl Bill, these activities will become legal after countries admit the ban would not work. Despite the current legislative paranoia, the current state can only get better. Already, some European officials have admitted that despite tighter European Union regulation, sites within the EU are no better at telling users how they use their data than sites based in the United States. Some of the best privacy policies were to be found on American sites (Meeks 2). This amounts to the fact that economic pressures are more effective at protecting privacy than the best efforts of bureaucrats � good news to the world.
This technology explosion, sometimes down, sometimes up, is really the start of a new period in data freedom and personal privacy. Now-illicit businesses, like gambling, pornography, and shadowy finances, will continue to grow into possibly an income of trillions as the safety of transactions and personal information increase. Because of the advent of havens overseas, whether in a tropical country, a glacial Northern European island, or on the moon, money will start to revolve around privacy as these communities achieve economies. That goal might seem far away in light of the current legal wrangling, bullheadedness and red tape, but economic pressures and technological advances will overcome these stumbling blocks. With increased economic stability, countries will be caught under fire if they try to curb the flow and limit the freedom of expression and communication online, or prohibit the removal of business, assets, and data offshore. In all likelihood, this century will be called the Road Away: away from government control of the economy, away from legislation against semi-licit businesses, away from financial strangleholds, and toward those information havens and free communication portals at the end of the rainbow.
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