Computer underground Digest    Wed  Feb 4, 1998   Volume 10 : Issue 09
                           ISSN  1004-042X

       Editor: Jim Thomas (cudigest@sun.soci.niu.edu)
       News Editor: Gordon Meyer (gmeyer@sun.soci.niu.edu)
       Archivist: Brendan Kehoe
       Shadow Master: Stanton McCandlish
       Shadow-Archivists: Dan Carosone / Paul Southworth
                          Ralph Sims / Jyrki Kuoppala
                          Ian Dickinson
       Field Agent Extraordinaire:   David Smith
       Cu Digest Homepage: http://www.soci.niu.edu/~cudigest

CONTENTS, #10.09 (Wed, Feb 4, 1998)

File 1--Air Force & an Incomptent prosecution of "hacker"?
File 2--THREE MYTHS ABOUT GOVERNMENT, MARKETS, AND THE NET (fwd)
File 3--"Growing Up Digital", Don Tapscott
File 4--Cu Digest Header Info (unchanged since 7 May, 1997)

CuD ADMINISTRATIVE, EDITORIAL, AND SUBSCRIPTION INFORMATION APPEARS IN
THE CONCLUDING FILE AT THE END OF EACH ISSUE.

---------------------------------------------------------------------

Date: Wed, 7 Jan 1998 23:32:22 -0500
From: "George Smith [CRYPTN]" <70743.1711@compuserve.com>
Subject: File 1--Air Force & an Incomptent prosecution of "hacker"?

Source - CRYPT NEWSLETTER 46 January 1998

AIR FORCE INVESTIGATIVE OFFICE DEEMED INCOMPETENT DURING
ROME LABS 'INFO-WAR' BREAK-IN

"The cream of US military intelligence last week had their
bungled attempt to prosecute a bedroom hacker thrown out by a British
court," screamed the lead of a November 28, 1997 piece in the United
Kingdom newspaper, The Guardian.

Even as the President's Commission on Critical Infrastructure Protection
was spinning yet more scenarios of imminent techno-Gotterdammerung, the
wheels were coming off one of the U.S. military's most extensive
public relations campaigns. Aimed at creating the image of menacing
hackers in the employ of foreign powers, U.S. Air Force claims fell
apart in English court, out of sight of the U.S. newsmedia as the U.K.
press looked on and smirked.

Matthew Bevan, 23, a hacker known as Kuji, walked out of a south London
Crown Court a free man as prosecutors confessed it wasn't worth trying
him on the basis of flimsy claims made by the U.S. military. Further,
he was deemed no threat to national computer security.

Since 1994, the U.S. government has used Bevan, and a younger partner,
Richard Pryce, in reports by the Air Force, the Government Accounting
Office, the Pentagon's Defense Science Board report on information warfare
and the recent Marsh Commission, on the dangers posed by international
terrorists using the worldwide computer networks to attack the
United States.

". . . [the] story of the Bevan and Pryce cases shows [the Air Force's]
forensic work to have been so poor it would have been unlikely to have
stood up in court and convicted Bevan. The public portrayal of the two
Britons as major threats to U.S. national security was pure hype," wrote
Duncan Campbell for The Guardian.

However, events really began in 1994, when the two young men broke
into an Air Force installation known as Rome Labs, a facility at the now
closed Griffiss Air Force Base, in New York. This break-in
became the centerpiece of a Government Accounting Office report on network
intrusions at the Department of Defense in 1996 and also constituted
the meat of a report entitled "Security and Cyberspace" by Dan Gelber
and Jim Christy, presented to the Senate Permanent Subcommittee on
Investigations during hearings on hacker break-ins the same year.
It is interesting to note that Christy, the Air Force Office of Special
Investigations staffer/author of this report, was never at Rome while
the break-ins were being monitored.

Before delving into this in detail, it's interesting to read what
a British newspaper published about Richard Pryce, known as Datastream
Cowboy, then seventeen, about a year before he was made the poster boy
by the GAO.

In a brief article, blessedly so in contrast to the reams of propaganda
published on the incident for Congress, the July 5, 1995 edition of The
Independent wrote, "[Datastream Cowboy] appeared before Bow Street
magistrates yesterday charged with unlawfully gaining access to a series
of American defense computers. Richard Pryce, who was 16 at the time of
the alleged offences, is accused of accessing key U.S. Air Force systems
and a network owned by Lockheed, the missile and aircraft
manufacturers."

Pryce, a resident of a northwest suburb of London, was charged with 12
separate offenses under the British Computer Misuse Act.  He was arrested
on May 12, 1994, by New Scotland Yard. The Times of London reported when
police came for Pryce, they found him at his PC on the third floor of
his family's house.  Knowing he was about to be arrested, he "curled up
on the floor and cried."

The Air Force's tracking of Pryce, and to a lesser extent, Bevan,
was recounted in an eight page appendix to Gelber's and Christy's
"Security and Cyberspace," entitled "The Case Study: Rome Laboratory,
Griffiss Air Force Base, NY Intrusion."

Pryce's entry into Air Force computers was originally noticed on
March 28, 1994, when personnel discovered a sniffer program he had
installed on one of the Air Force systems in Rome.  The Defense Information
System Agency (DISA) was notified.  DISA subsequently called the Air
Force Office of Special Investigations (AFOSI) at the Air Force
Information Warfare Center (AFIWC) in San Antonio, Texas. AFIWC then
sent a team to Rome to appraise the break-in, secure the system and
trace those responsible.  During the process, the AFIWC team
of computer scientists -- not AFOSI investigators, a point not
clearly made by the Air Force authors and one that becomes more important
upon viewing the fallout and repercussions of the case -- discovered
Datastream Cowboy had entered the Rome Air Force computers for the
first time on March 25.  Passwords had been compromised, electronic
mail read and deleted and unclassified "battlefield simulation" data
copied off the facility. The Rome network was also used as a staging
area for penetration of other systems on the Internet.

Air Force personnel initially traced the break-in back one step to
the New York City provider, Mindvox. According to the Christy
report, this put the NYC provider under suspicion because "newspaper
articles" said Mindvox's computer security was furnished by two "former
Legion of Doom members." "The Legion of Doom is a loose-knit computer
hacker group which had several members convicted for intrusions into
corporate telephone switches in 1990 and 1991," wrote Gelber and
Christy.

The Air Force then got permission to begin monitoring -- the
equivalent of wiretapping -- all communications on the Rome Labs network.
Limited observation of other Internet providers being used during the
break-in was conducted from the Rome facilities.  Monitoring told the
investigators the handles of hackers involved in the break-in were
Datastream Cowboy and Kuji.

Since the monitoring was of limited value in determining the
whereabouts of Datastream Cowboy and Kuji, investigators resorted to
"their human intelligence network of informants, i.e., stool pigeons,
that 'surf the Internet.' Gossip from one 'Net stoolie to Air Force
investigators uncovered that Datastream Cowboy -- [Richard Pryce] -- was
from Britain. The anonymous source said he had e-mail correspondence
with Datastream Cowboy in which the hacker said
he was a 16-year old living in England who enjoyed penetrating ".MIL"
systems. Datastream Cowboy also apparently ran a bulletin board system
and gave the telephone number to the AFOSI source.

The Air Force team contacted New Scotland Yard and the British law
enforcement agency identified the residence, the home of Richard
Pryce, which corresponded to Datastream Cowboy's system phone number.
English authorities began observing Pryce's phone calls and noticed
he was making fraudulent use of British Telecom.  In addition,
whenever intrusions at the Air Force network in Rome occurred, Pryce's
number was seen to be making illegal calls out of Britain.

Pryce travelled everywhere on the Internet, going through South America,
multiple countries in Europe and Mexico, occasionally entering the Rome
network.  From Air Force computers, he would enter systems at Jet
Propulsion Laboratory in Pasadena, California, and the Goddard Space
Flight Center in Greenbelt, Maryland. Since Pryce was, according to
Air Force investigators, capturing the logins
and passwords of the networks in Rome Labs, he was then able to
get into the home systems of Rome network users, defense contractors
like Lockheed.

By mid-April of 1994 the Air Force was monitoring other systems being
used by the British hackers. On the 14th of the month, Kuji logged on
to the Goddard Space Center from a system in Latvia and copied data
from it to the Baltic country.  According to Gelber's report, the
Air Force observers assumed the worst, that it was a sign that someone
in an eastern European country was making a grab for sensitive
information.  They broke the connection but not before Kuji had
copied files off the Goddard system.  As it turned out, the Latvian
computer was just another system the British hackers were using as
a stepping stone; Pryce had also used it to cover his tracks when
penetrating networks at Wright-Patterson Air Force Base in Ohio, via
an intermediate system in Seattle, cyberspace.com.

The next day, according to the AFOSI report, Kuji was again observed
trying to probe various systems at NATO in Brussels and The Hague as
well as Wright-Patterson. On the 19th, Datastream Cowboy successfully
returned to NATO systems in The Hague through Mindvox.  The point Gelber
and Christy were laboriously trying to make was that Kuji -- Matthew
Bevan -- a 21-year old, was coaching Pryce during some of his attacks
on various systems.

By this point, New Scotland Yard had a search warrant for Pryce
with the plan being to swoop down on him the next time he accessed
the Air Force network in Rome.

In April, Datastream Cowboy penetrated a system on the Korean
peninsula and copied material off a facility called the Korean Atomic
Research Institute to an Air Force computer in Rome. At the time, the
investigators had no idea whether the system was in North or South Korea.
The impression created was one of hysteria and confusion at Rome. There
was fear that the system, if in North Korea, would trigger an international
incident, with the hack interpreted as an "aggressive act of war." The
system turned out to be in South Korea.

It's worth noting that while the story was portrayed as the work of
an anonymous hacker, New Scotland Yard already had a suspect.
Further, according to Gelber's and Christy's report, English authorities
already had a search warrant for Pryce's house.

On May 12, British authorities pounced.  Pryce was arrested
and his residence searched.  He crumbled, according to the Times of
London, and began to cry.  Gelber and Christy write that Pryce promptly
admitted to the Air Force break-ins as well as others.  Pryce
confessed he had copied a large program that used artificial intelligence
to construct theoretical Air Orders of Battle from an Air Force computer
to Mindvox and left it there because of its great size, 3-4 megabytes.
Pryce paid for his Internet service with a fraudulent credit card number.
At the time, the investigators were unable to find out the name and
whereabouts of Kuji. A lead to an Australian underground bulletin board
system yielded nothing.

On June 23 of 1996, Reuters reported that Matthew Bevan had been
arrested and also charged in connection with the 1994 Air Force break-ins
in Rome.

Bevan was found in the same low-tech manner as Pryce. His phone number
was eventually lifted by Scotland Yard from Pryce's seized PC. "Had it not
been for Scotland Yard, the relatively innocuous Pryce and Bevan would
never have been found and the U.S. Senate would still be hearing about
cyberterrorists from faraway lands," wrote the Guardian's reporter.

Lacking much evidence for conspiratorial computer-waged
campaigns of terror and chaos against the U.S., the makers of
Congressional reports nevertheless resorted to telling the same story
over and over in 1996, three times in the space of the hearings on the
subject.

As a result, Pryce and Bevan appeared in "Security in Cyberspace" and
twice in Government Accounting Office reports AIMD-96-84 and T-AIMD96-92
in 1996, which were essentially rewritten versions of the former with
additional editorializing.

Jack Brock, the author of these now famous GAO reports on hacker
intrusions at the Department of Defense wrote, ". . . Air Force officials
told us that at least one of the hackers [of Rome Labs] may have been
working for a foreign country interested in obtaining military research
data or areas in which the Air Force was conducting advanced
research."

This was not even close to the truth.

[Alert Crypt Newsletter readers will recall Mr. Brock was a
nominee in the 1996 Computer Virus Hysteria Awards.]

But what were Bevan and Pryce really after?

Not Air Force advanced research! Unless . . . you are one of those
who are convinced the U.S. military is really hiding a flying saucer
at Area 51 in Nevada.  According to the Guardian account, Matthew
Bevan was interested in little but gathering evidence confirming
that Area 51 was a secret hangar for captured alien spacecraft.

The Guardian news report was also extremely critical of Air Force
computer scientist Kevin Ziese.

Ziese, said the Guardian, "led a six-strong team [from San Antonio]
whose members, or so he told Fortune magazine, slept under their desks
for three weeks, hacking backwards until Pryce was arrested."

"Since then, Ziese has hit the US lecture circuit and [privatized]
his infowar business. As the WheelGroup corporation of San Antonio, he
now sells friendly hacking services to top U.S. corporations," reported
the Guardian.

However, while the Guardian was accurate in its assessment of the
trivial menace of Bevan and Pryce, it was off in its characterization
of Ziese, missing the real target -- investigators from AFOSI and the
authors of the Gelber/Christy report, according to information
supplied in interviews with Ziese.

Ziese commented to Crypt Newsletter that he "[had] not hit the lecture
circuit." He added that he was amused by the content of the article in
the Guardian and that "to date, no one has ever asked me even one question
-- beyond my initial deposition to New Scotland Yard in 1996 --
regarding the Rome Lab case!"

Digging more deeply into the story, the evidence gathered on
the Rome Labs break-in can be separated into two distinct classes.
"The first," said Ziese," [was] the deposition I gave sometime in
and about May of 1996 to New Scotland Yard." The second is the
same shopworn story the "extremely incompetent criminal investigators
had gathered originally," he added.

It was the investigators from the Air Force Office of Special
Investigations, not the group of computer scientists from the Air Force's
Information Warfare Center in San Antonio -- which Ziese led --
who peddled the Rome Labs break-in as evidence of international
spying.

"Unbeknownst to the public at large, we had a very complete set of
tools [and a] chronology," said Ziese. "It was the criminal
investigators who tied our hands, lost critical pieces of data and
refused to allow us to testify/discuss the case. "They wanted to make
a mountain out of a molehill."

In this, they were successful.

". . . it was incompetent criminal investigators who saw a spy under
every rock," Ziese continued, "not the computer scientists I brought
with me to Rome." AFOSI was responsible for the "hogwash that has been
published to date about the Rome Lab attacks."

By the English account, the evidence submitted by the U.S. military
investigative team was almost worthless: "[E-mails] of edited files
that had been relayed to Ziese and others."

A desire for secrecy also backfired on the Air Force. In May
of this year, the Air Force declined to allow Bevan's defense to look
at the test programs they claimed to have used to monitor his
intrusions and " . . . having set traps to catch hackers, [the Air Force]
neglected to produce before and after file dumps of the target
computers."

The result was: "In the end, all the Americans handed over was patchy
and circumstantial evidence that their computers had been hacked from
Britain."

In March of this year, Richard Pryce -- now 19 -- was fined 1,200 pounds
for offenses related to unauthorized access in connection with the
break-ins at Rome Labs.
============================

In sort of related news:

About the same time the wheels were coming off the Rome Labs
myth, a similar fate was being meted out to the hoary tale of
electromagnetic pulse gun attacks on banks in the United
Kingdom.

Alert Crypt Newsletter readers already know the publication
has dissed the legend of the non-nuclear electromagnetic pulse
(HERF, microwave, radio frequency) gun as the chupacabras of
cyberspace for the last two years.

On December 4, a British journalist for TechWeb dubbed
them the same.

These stories are nonsense, said Michael Corcoran of Britain's
Defense Evaluation and Research Agency, for TechWeb.
"There are no radio-frequency weapons out there that anyone is in a
position to use against banks." Corcoran then waffled for the
publication and equivocated that they might be sometime in the
future.

=======================

Editor: George Smith, Ph.D.
INTERNET: 70743.1711@compuserve.com
          crypt@sun.soci.niu.edu
http://www.soci.niu.edu/~crypt

Mail to:
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1635 Wagner St.
Pasadena, CA 91106
ph: 626-568-1748

------------------------------

Date: Thu, 22 Jan 1998 09:43:09 -0500
From: Paul Kneisel <tallpaul@nyct.net>
Subject: File 2--THREE MYTHS ABOUT GOVERNMENT, MARKETS, AND THE NET (fwd)

Since we've been talking about the proper role of the government in the IT
market, I thought I'd post a quickie critique I wrote of the Clinton
Admin's "Framework for Global Economic Commerce," which a number of issues
that have appeared in the discussion of Microsoft.

Anders Schneiderman
Progressive Communications
<aschneid@ix.netcom.com>
Wed, 21 Jan 1998

   ----------------------------------------

      THREE MYTHS ABOUT GOVERNMENT, MARKETS, AND THE NET:
      A SPECIAL REPORT ON THE CLINTON ADMINISTRATION'S PLANS
      FOR GLOBAL ELECTRONIC COMMERCE


"A cutting-edge, history-making blueprint."  That's what Newsweek columnist
Steven Levy calls the Clinton Administration's grand plan for the
Internet's future.  "A Framework for Global Electronic Commerce" was
released on July 1 to a chorus of favorable reviews.  Some commentators
fretted about its position on encryption and privacy, but overall, it
earned high marks.

The reason for this praise?  Because, as Levy says, "the report bluntly
asserts that the most important thing the govern can do about [the Net] is
_get the hell out of the way_."  Let the free market work its magic.

The Clinton Administration report is a perfect example of how far Newt
Gingrich and others have come in creating the myth of Government Bad, Free
Enterprise Good. If we patiently troll through this document's murky prose,
we can reveal glimpses of our society's confusion about how markets and
government work.


MYTH #1: THE MARKET IS ALWAYS SMARTER THAN THE GOVERNMENT.

The Clinton Administration's report is based on a simple principle:  "the
private sector should lead."  Why?  Because  "innovation, expanded
services, broader participation, and lower prices will arise in a
market-driven arena, not in an environment that operates as a regulated
industry."

This raises an obvious question.  If the government is so incompetent, why
did the Internet come from Uncle Sam and not CompuServe or AOL?  Why did
the private sector have to play catch-up with this stellar innovation?

The report knows this is a problem, so it tries to gloss over this
unpleasantness as quickly as possible. It says, "though government played a
role in financing the initial development of the Internet, its expansion
has been driven primarily by the private sector."

But the only reason the private sector is in the driver's seat is that
Uncle Sam handed over the keys. Netscape succeeded because it ripped off the
University of Illinois and U of I didn't fight back.  More generally, the
Clinton Administration pulled the government out of the business of
developing the Net.   You can argue whether or not this was a good
decision, but it's hard to see the Net's history as evidence that the
private sector _must_ lead.

Our myopia about the Net's history is a classic example of the trouble
Americans have acknowledging how government facilitates the economy.
Conservatives like to say, let's get back to the glory days of the 1950s,
when the government left the private sector alone. And they're right, it
did mostly stay out of the market. Except for the military, which nurtured
the electronics and computer industries. And the FHA and VA, which
underwrote half the houses in the 'burbs. And the massive highway building
programs that helped people commute between the 'burbs and the city and
expanded the auto market. And the GI Education Bill and government grants
that paid for the explosive growth of higher education. And the NIH, the
NSF. Medicare, and Medicaid programs that poured massive money into the
health care system. And the tax breaks that underwrote a new system of
pensions. And of course there's agriculture. And banking.  But aside from
computers, electronics, housing, construction, cars, education, health
care, agriculture, and banking--and, indirectly, steel, plastic, and
concrete--government hasn't done a thing to help our economy.


MYTH #2: GOVERNMENT REGULATIONS ARE BAD FOR MARKETS

Even if the government did a great job creating the Internet, maybe it's
time to turn it over to the free market.  The Internet is moving so fast
that government bureaucrats may not be able to keep up.  That's what the
Clinton Administration thinks.   According to the Executive Summary, "The
Internet should develop as a market driven arena not a regulated industry."

But this bold statement isn't the whole story.  The report also says that
"governments must adopt a non-regulatory, market-oriented approach to
electronic commerce, one that facilitates the emergence of a transparent
and predictable legal environment to support global business and
commerce."  In other words, the government should butt out, except for
one, little, minor task.  It must create a vast new infrastructure to make
Net commerce work.

The problem is simple.  If the government really butts out, Internet
commerce will die.  The day the report came out, Sun Microsystems director
Dennis Tsu complained to the press that the U.S. wasn't aggressive enough
about expanding intellectual property rights, patents, and copyright
protection.  Net commerce depends on them.  So if Net commerce is to
flourish, we need to radically change our legal system.

For example, in the next few years  there will  be a huge brawl over
copyright law.  Right now, most Netizens ignore copyright rules.  The Net
grew so rapidly because no one worried about whether they were violating
intellectual property law. "Information wants to be free!" was the Net's
motto.  But now that there's money to be made, Sun and Microsoft and IBM
and Times-Warner and all the other players want a new set of rules that
make damn sure this attitude goes away.  And they need the government to do
it for them.

The government is also needed to create online equivalents of money,
signatures (for signing contracts), and other fundamental features of Net
mass commerce.  The industry can take the lead in developing these
standards, but none of it will work if the government doesn't enforce them,
because ultimately only the government can create legally-binding courts or
cash.

The report tries to get around this paradox by using one of the clever
shell games conservatives have adopted:  we don't want 'government,' just
contracts and courts. When the government must intervene, the report says,
it "should establish a predictable and simple legal environment based on a
decentralized, contractual model of law rather than one based on top-down
regulation."

For those of you who have an infant, I have a piece of advice: tape that
sentence over their crib.  It's the Corporate Lawyer Full Employment Act.
The computer world is already lawsuit-crazy, and if Clinton--a lawyer by
training--has his way, we'll be up to our eyebrows in 'em.  This isn't less
government, it is more lawyers.

Far from decreasing the scope of regulation, this approach will increase
it. Nathan's column in this issue of E-Node tells the story of the ISPs
and AT&T, where attempts to get the government out of the market have led
to more government, not less.

This paradox is evident throughout the report. The report warns against
"potential areas of problematic regulation," one of which is "rate
regulation of [Internet] service providers."   But while protecting us from
Internet service providers (ISPs) is bad, protecting ISPs from the phone
companies is good.  The report warns that "monopolies or dominant telephone
companies often price interconnection well above cost, and refuse to
interconnect because of alleged concerns." In other words, if Clinton
really let competition loose, the phone companies would simply refuse to
let ISPs connect up to their customers:  you want to serve 'em, you run
wires to their houses.  So government should butt out--except where it must
butt in.

As a result of this sophistry, the report is littered with sentences like,
"genuine market opening will lead to increased competition, improved
telecommunications infrastructures, more customer choice, lower prices and
increased and improved services."  Translation: every few years, we will
hold a fascinating philosophical debate over the proper definition of a
"genuine market." Federal courts and bureaucrats will hand out
billion-dollar prizes to the debate winners in the form of regulations and
court decisions, which spell out in excruciating detail how we will ensure
we have "genuine markets."  This is less government?

Finally, as someone who loves the Internet, I'd argue that if some of the
anti-government fears are realized and the government does slow down the
pace of innovation a little, that might not be such a bad thing.
Today, companies scrambling to survive are forced to throw in new
features and create new toys without knowing whether they work well or are
even useful. To solve many serious Net problems, we need more
thoughtfulness, not more speed.  Maybe a little sand in the wheels is a
good thing.


MYTH #3: IF THE GOVERNMENT GETS OUT OF THE WAY, WE'LL ALL BENEFIT.

The last myth is that market competition is good for everybody. As noted
above, the report insists that "Innovation, expanded services, broader
participation, and lower prices will arise in a market-driven arena, not in
an environment that operates as a regulated industry."  That's why  "where
governmental involvement is needed, its aim should be to support and
enforce a predictable, minimalist, consistent and simple legal environment
for commerce," and not, say, justice, fairness, or other bleeding-heart
concerns.

This approach makes cheery assumptions about the world that experience does
not bear out.  In a recent issue of Salon Magazine, Andrew Leonard points
out one example that's already reared its ugly head:  privacy.  The
Administration wants the market to take the lead in developing standards
for protecting consumer privacy.  But so far, says Leonard, the
market-driven Open Profiling Standard proposal has no means "for taking
care of the basic problem of whether or not information should be collected
in the first place."  There's a good reason for that:  "The desire for
online privacy runs directly at odds with one of the most attractive
aspects of doing business online -- the Net's capacity for helping target
marketing and advertising efforts directly at specific users."  Consumer
choice ends where corporate needs begin.

Experience has also shown us that increased competition can have a
paradoxical effect:  sometimes more competition means that fewer, not more,
people benefit. In a terrific article in Newsweek last year, Marc Levinson
showed that in the the financial world, banks don't _want_ to compete for
most of us.  On average, "20 percent of households account for almost all
of consumer-banking profits, while three out of five customers are money
losers."  That means that if there's more competition, the banks will
compete to attract the 20 percent who generate profits and they will
compete to dump the 60 percent who don't.

As Nathan demonstrated in his last two E-Node columns, we see similar
economics in electrical and telephone services.  When competition kicks
into high gear in some markets, companies understandably focus on "cream
skimming" the customers who can turn a profit.  If the same holds true for
Internet commerce in general, then far from leading to high-quality
universal access, more competition could leave a lot of us worse off.

The final example of the disconnect between who markets are supposed to
help and who they really do help is the tricky issue of taxes.  Most
accounts of the report's conclusions about taxes make the same mistake that
Steven Levy makes.  According to Levy, the report argues that "one thing
governments should most decidedly _not_ do is tax the Internet"--it should
be  a "tariff-free zone."  In other words, the government should not stifle
the Net's explosive growth with taxes.

There's an obvious problem with this approach.  If the Net is tax-free,
then anybody with any sense will move every sales transaction onto the Net
that they can.  Even if Net commerce isn't more efficient--even if it's a
little less efficient--you'll save money.  Needless to say, that would
strongly penalize many people who don't have access to the Net,
particularly poor folk.  But the most devastating effect would be on state
and local government.

On June 24th, a few days before the report was due out, the U.S. Conference
of Mayors passed a resolution telling the Feds to butt out of the question
of how Net commerce should be taxed.  That's because state and local
governments are terrified.  Without revenue from sales taxes, local
services and the people that depend on them will be road kill (for more
details, see the report, "Prop 13 Meets the Internet," at
http://garnet.berkeley.edu:3333/).

And that's the reason why the Administration's report does _not_ advocate
making the Net tax-free. This is what the report says:  "the United States
believes that no new taxes should be imposed on Internet commerce."  No new
taxes, but what about the old ones? The report doesn't really say.  Its
authors know that there is a problem.  At one point, it proclaims that  "no
tax system should discriminate among types of commerce, nor should it
create incentives that will change the nature or location of transactions."
 But this is more of a wish than an answer.

So how does the Administration propose solving this problem, this
life-and-death issue that will determine the fate of all state and local
governments and the people who rely on them?  Very simply:  "No new taxes
should be applied to electronic commerce, and states should coordinate
their allocation of income derived from electronic commerce."    Got it?
No "new" taxes.  Just somehow, magically, we're going to collect the same
revenue local governments used to obtain from sales tax and we'll divvy it
up so it works out just like it used to.

Having dumped the readers into a very murky swamp, the report then pushes
us in further with its next sentence:  "Of course, implementation of these
principles may differ at the [state and local] level where indirect
taxation plays a larger role." And in case our heads are still above water,
one more shove: "the system should be simple and transparent," "capable of
capturing the overwhelming majorities of appropriate revenues" while
"minimiz[ing] burdensome record keeping and costs for all parties."

This is a cutting-edge, history-making blueprint?  This is more like one of
those challenges they give engineering students where they say, here's 20
boxes of toothpicks, 100 bowls of Lime Jello, and a magnifying glass, now
build us a working model of La Guardia Airport. This is a recipe for disaster.


CONCLUSION

Economic markets are a wonder to behold.  Like natural ecosystems, they can
produce marvels that are hard to imagine occurring any other way.  And like
nature, ultimately they resist our control. Even with the best of
intentions, clumsy attempts to nurture or direct economic markets can turn
around and bite us.  The experience of Europe's ham-handed attempts to
force the creation of a European computer industry was not so different
from the experience of people who live in flood plains, who learn the hard
way that Mother Nature respects no engineer.

But at the same time, we need to be careful that in respecting the power of
markets we don't blind ourselves to the crucial role played by our
government.  Because when we do turn a blind eye, we stop debating an
important question:  who benefits?  Who will reap the harvest from our tax
dollars?  Instead, those questions are settled in private, behind closed
doors.  That's not right.  If Uncle Sam must ask his family to help tend
the garden of the Internet, then all members of his family should partake
of its bounty.

------------------------------

Date: Tue, 3 Feb 1998 07:54:42 -0800
From: "Rob Slade" <rslade@sprint.ca>
Subject: File 3--"Growing Up Digital", Don Tapscott

BKGRUPDI.RVW   971107

"Growing Up Digital", Don Tapscott, 1997, 0-07-063361-4,
U$22.95/C$32.95
%A   Don Tapscott
%C   300 Water Street, Whitby, Ontario   L1N 9B6
%D   1997
%G   0-07-063361-4
%I   McGraw-Hill Ryerson/Osborne
%O   U$22.95/C$32.95 800-565-5758 fax: 905-430-5020
%O   lisah@McGrawHill.ca
%P   256
%T   "Growing Up Digital: The Rise of the Net Generation"

Don Tapscott apparently gets a lot of mileage out of the story about
his kids being unimpressed by Tapscott's TV appearance that had him
demonstrating how to surf the Web.  According to Tapscott, this proves
that his kids are N-Geners: yet another "generation", this one that
has grown up with, and is attuned to, the massive international
networks, and the technology behind them.  Experienced network users
might take a different interpretation from the story.  Web surfing is
a particularly pedestrian skill, if it is a skill at all, and
"demonstrating" the use of a graphical browser, with its point and
click interface, tends to be both pointless and rather boring for the
observer.

This book takes a rather dubious premise, and extends it as far as
possible, and probably considerably beyond.  In the first chapter
Tapscott looks at demographics to chart the Baby Boom generation
(those born from 1946 to 1964), Douglas Coupland's Generation X (1964
to 1978), and N-Gen (1978 to 2000).  However, a look at real
demographic statistics points out an unfortunate fact: while most of
those in the N-Gen group will have heard of the net, and a great
number might have had some experience on it, even among the singularly
fortunate population of North America only a minority elite have
regular and consistent access to it.  The book itself appears to be
based on research conducted with a small sample of subjects culled
from a single site representing a ridiculously small number of
individuals in comparison to the population of the United States
alone.  (A great deal of the book is based on self-reports from those
subjects.)  The N-Gen may come, but it probably hasn't been born yet.

(The author does, rather frequently, admit that the presence of
technology "haves" and "have nots" is a problem, but he never really
analyzes the situation, the potential outcomes, or possible fixes.
While there is an entire chapter devoted to the topic, it tends to
recycle anecdotes rather than look seriously at the issue.  In the
course of the review I burst out laughing, and had to explain the
guffaw to my wife by reading the sentence on page 266 that occasioned
it: "Homeless people online at the local library can log on to the
community information bulletin board to find beds in a shelter, a hot
shower, or even medical and counseling services."  Her response was an
immediate and disbelieving "Yeah, right!" followed by the observation
that the statement was pathetically naive and unrealistic.  I really
couldn't argue with her.  I spend considerable time at our regional
libraries, and while we are blessed with access to Freenet through all
the card catalogue terminals, and have, in addition, a number of
graphical Web browsing terminals, I can't say that I've ever seen one
of the homeless looking up a shelter.  The Vancouver CommunityNet and
Victoria TeleCommunity Net seem to agree with me: they don't even have
a listing for shelter for the homeless, although Vancouver does have
one for wildlife.  I think Tapscott has been getting his information
from "Doonesbury.")

One of the great unchallenged assertions of our day is that children
feel more comfortable with technology, and learn it faster than
adults.  Tapscott holds fast to this premise, and uses it frequently
in telling how our kids are going to be much different than we are, or
were.  His most important assertion based upon this fact is the
Generation Lap, which he uses to mean that traditional teaching roles
are becoming reversed as children are becoming instructors of their
parents in regard to computers.  There is only one problem: the
central statement is not true.  Those under the age of eighteen do not
have any magical skill or empathy with technology.  They are just as
confused and frightened about technology as anyone else.  If they tend
to learn more than those around them, that has more to do with the
general lack of experience with computing in the population as a
whole.  If I have dealt with many adults who couldn't remember that a
Window out of sight is not also necessarily out of memory, I have
equally taught children who were so afraid of computers that they
wouldn't input a program without typing on a typewriter first, and
others who had so much trouble with the concept of double clicking
that they had to be taught to click and then hit return in order to
invoke a program.  Even if it were true, though, that children learn
software applications by some sort of effortless osmosis, I fail to
understand why that would automatically lead to an understanding of
the fundamental technologies involved, as Tapscott implies when
talking about education.

The book does make some interesting observations.  Those who use the
net tend to accept diversity, to be more curious, and to be confident.
However, these occasional insights tend to be buried in a mass of
commentary that is either trivial and obvious (computers are fun!) or
questionable (the Internet automatically teaches children how to
learn).  Repeated statements about the "success" enjoyed by some of
the young people contacted in the course of writing the book seem to
say much more about entrepreneurship than technology.  A defence of
the violence of video games makes a weak nod toward the work of
Bandura, but unconvincingly states that it really isn't important.
(The makers of violent computer games, toys, and television programmes
will undoubtedly be relieved to hear it.)

Some points in the book may well be true, but unhelpful.  Tapscott's
statement that mass education is a product of the industrial economy
falls into this category.  "Individual" instruction probably *is*
better for the student.  The text fails, however, to look at how such
education might realistically (and economically) be provided, and how
a free-for-all curriculum might result in some kind of graduation or
assessment that would convince potential employers as to the skills of
the products of this type of schooling.  (OK, that statement is a
product of an industrial economy too.  Generalize it, then: how are we
to know anything about the success of such an educational system?)

Other parts of the book are best described as pseudoprofound.  There
are frequent quotes from the young participants that, on first glance,
seem to point out some kind of new age wisdom.  Chapter ten has the N-
Gen focus group express surprise that adults would have trouble
sharing information: a relatively easy statement to make if you have
never put a lot of work into study and the development of information.
Given a moment's thought, though, the statements tend to demonstrate a
kind of naive ignorance.  This is simply a result of lack of
experience and study of history on the part of the young.  It is not
their fault, of course, and may provide a brief moment of amusement in
comparing their blind spots with our own.

Those who are experienced with the net will find that this book
doesn't say anything that isn't pretty widely known already.  But I
dare say the knowledgeable user is not the target audience.  For the
uninitiated, then, Tapscott provides a bewildering variety of new
insights.  I use the word bewildering deliberately, since many of
these insights are either trivial or untrue, and it will be quite
difficult for the reader from the general public to sort the wheat
from the chaff.

copyright Robert M. Slade, 1997   BKGRUPDI.RVW   971107

------------------------------

Date: Thu, 7 May 1997 22:51:01 CST
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Subject: File 4--Cu Digest Header Info (unchanged since 7 May, 1997)

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