SENATE Committee on Judiciary
Seventy-First Session
February 8, 2001
The Senate Committee on Judiciarywas called to order by Chairman Mark A. James, at 8:30 a.m., on Thursday, February 8, 2001, in Room 2149 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Mark A. James, Chairman
Senator Jon C. Porter, Vice Chairman
Senator Mike McGinness
Senator Maurice Washington
Senator Dina Titus
Senator Valerie Wiener
Senator Terry Care
STAFF MEMBERS PRESENT:
Bradley A. Wilkinson, Committee Counsel
Allison Combs, Committee Policy Analyst
Ann Bednarski, Committee Secretary
OTHERS PRESENT:
Kevin Higgins, Chief Deputy Attorney General, Fraud Control Unit for Industrial Insurance, Office of the Attorney General
James T. Endres, Lobbyist, AT&T
Robert Gastonguay, Lobbyist, Nevada State Cable Telecommunications Association
Robert A. Ostrovsky, Lobbyist, Cox Communications
C. Joseph Guild III, Lobbyist, Attorney, Motion Picture Association of America, Inc.
Chairman James opened the hearings on Senate Bill (S.B.) 47 and Senate Bill48.
SENATE BILL 47: Provides for judicial approval of certain contracts involving minors. (BDR 11-260)
As no action was taken on this measure, Chairman James placed it on hold.
SENATE BILL 48: Prohibits various acts related to Internet, networks, computers and electronic mail. (BDR 15-259)
The Chairman noted S.B. 48 comes to the Senate Committee on Judiciary from the interim Legislative Commission’s report regarding encouraging business to organize and conduct business in Nevada, as mandated by Senate Concurrent Resolution (S.C.R.) 19 of the Seventieth Session. From the Commission’s studies of economic development in Nevada and the feasibility of establishing a business court, the Commission identified a number of measures that are combined in this bill, paying particular regard to acts relating to the Internet, he said.
SENATE CONCURRENT RESOLUTION 19 OF THE SEVENTIETH SESSION: Directs Legislative Commission to conduct interim study of methods to encourage corporations and other business entities to organize and conduct business in this state. (BDR R-534)
Allison Combs, Committee Policy Analyst, Legislative Counsel Bureau, explained the bill from her perspective, saying section 2 of S.B. 48 provides definitions of an Internet or network site; section 3 defines “response cost”; section 4 provides that if a person is physically present or incorporated within the state and provides Internet service, a privacy statement must be posted on the Internet site indicating what type of personal information is collected. Section 4, subsection 2, paragraph (b), provides what must be included in the statement such as the personal identifying information, whether it is collected, and how it would be used.
Ms. Combs noted the next primary section of the bill came from a main recommendation out of the interim committee study. Section 8, subsection 4, deals with “anti-spamming” rules and protections for Internet sites. She said the proposed regulation provides that a person shall not willfully and without authorization transmit electronic mail with intent to disrupt an Internet site.
Senator Wiener asked whether spamming would include transmitting computer viruses. Ms. Combs responded in the affirmative. Bradley A. Wilkinson, Committee Counsel, Legislative Counsel Bureau, noted there was some possibility of some overlapping within the spamming provision. He said he does not think viruses are what were contemplated there. A section in chapter 205 of the Nevada Revised Statutes that specifically relates to the transmission of computer viruses was adopted during the last session, Mr. Wilkinson said.
Senator Wiener then asked about proposed section 8, subsection 6, which describes factors which would cause certain infractions to rise to the level of Category C felonies. She asked if there was some formula to determine the amount of restitution when talking about damages to a website.
Ms. Combs explained that damage or loss determinations would be at the discretion of the courts, who would take into consideration what types of financial burdens were incurred.
Chairman James invited Chief Deputy Attorney General Kevin Higgins, Fraud Control Unit for Industrial Insurance, Office of the Attorney General, to speak on the issue. Mr. Higgins said his office supports S.B. 48, although it is not a bill on which his office has worked. He said he believes it will coordinate with another upcoming bill. Mr. Higgins addressed a question from Senator Wiener regarding the malicious overloading of a website. He said he believes section 8 deals with denial of service issues. To illustrate, he used the problems and losses incurred by eBay Inc. and Ameritrade Inc. (E*TRADE Securities Inc.) because of deliberate jamming (pinging) of the sites in 2000. This “pinging” of these sites caused millions of dollars in lost revenue. Mr. Higgins said he considers this to be a criminal offense. He said the Category C felony classification ties it in as an impairment of public services. Last year, he said, he recalled when the state’s power service provider’s Internet service went down and the Office of the Secretary of State’s Internet service was interrupted because of denial of service attacks. He said there are higher penalties for the impairment of public services.
Senator James asked Mr. Higgins to clarify the phrase “denial of services,” questioning if it means jamming an Internet site or an Internet provider to deliberately keep others from using them. Mr. Higgins responded affirmatively.
Mr. Higgins explained the process by citing the case of the juvenile in Canada who managed to shut down eBay and several other big commerce sites by sending many e-mails simultaneously and “pinging” the sites. Pinging is a maneuver of electronically verifying a site is open that works by sending a query that generates an automatic response. In a denial of service attack, a number of computers send a barrage of requests to servers that host websites. The overwhelming stream of information often clogs the server network and paralyzes the sites it hosts. Mr. Higgins compared this practice to stuffing a mailbox until nothing else can be delivered. An example would be the brokerage firm that could not transmit its sell and buy orders incurring damages resulting in hundreds of millions of dollars, he said. Therefore, he continued, the restitution question is a big issue.
Mr. Higgins then addressed a bill draft request submitted by the Advisory Board for the Nevada Task Force for Technological Crime, which was created last session by S.B. 485 of the Seventieth Session. This proposed bill is concerned with privacy issues regarding children, Mr. Higgins said. In it, the board is requesting that any website designed for children or children’s markets be prohibited from asking for any personal, identifying information. He illustrated the problem using game sites where a child must disclose his name, his parents’ names, his address, his telephone number, and other personal information. Mr. Higgins said this kind of information is extremely valuable to marketing companies that may then begin to solicit minors.
SENATE BILL 485 OF THE SEVENTIETH SESSION: Makes various changes to provisions governing use of technology. (BDR 15-310)
Mr. Higgins stated Bill Draft Request (BDR) 15-442 deals with privacy, a national issue that currently has no national standards. “The problem is in the definition of privacy and what privacy means,” he said. “There is a huge debate in the Internet community that is concerned with terms and definitions, such as ‘opt in’ and ‘opt out.’” He said, “The debate expands to what information is sellable.” Mr. Higgins described the privacy issue as “the tip of the iceberg.”
BILL DRAFT REQUEST 15-442: Makes various changes concerning computers and Internet. (Later introduced as Senate Bill 551.)
Chairman James commented that the bills are being drafted to apply to Nevada with the objective to place Nevada in a better position to attract and encourage Internet/high-tech businesses. Chairman James announced the Judiciary Committee would work on S.B. 48 in conjunction with BDR 15-442.
Senator Care asked for a definition of “spamming.” He said he is bothered by the term and used his telephone and mailbox as incoming sources of communication that he knows he does not control. He compared it to advertisements e-mailed that are unsolicited. He questioned the meaning of “circumstances in which conduct is reasonably likely to prevent, impede, delay, or disrupt.”
With regard to questions from Senator Care, Mr. Higgins explained “spamming” as “junk e-mail.” He said it is extremely easy to get onto junk e-mail lists and added civil remedies were enacted 2 years ago. He noted e-mail subscribers generally pay for their service, some even paying by the minute. If your mailbox is full, the post office saves your mail; if your e-mail in-box is full, many service providers dump incoming items, he said.
“Spamming is an extremely cheap way to reach a lot of people at no cost to the sender,” Mr. Higgins continued, “. . . [they] fill up the bandwidth leaving no space for legitimate business.” Mr. Higgins used Amazon.com, a company in the business of selling millions of dollars’ worth of books daily, to illustrate spamming damage. The company’s incoming electronic mailbox was jammed with advertisements and malicious messages designed to shut down the website, which caused a major loss of business. He also mentioned losses when people are unable to trade stocks because of the spamming problem. Mr. Higgins said the entire area of commerce is affected. The argument against spamming differentiates between e-mail and regular mail, he said.
Senator Care asked if it is possible to be a “spammer” and not realize it. He asked if an insurance company could legitimately send unsolicited information, for example, and not be considered a spammer.
Mr. Higgins responded that there have been federal anti-spamming statutes passed. One way to get around them is the e-mail must contain the option to be removed from mailing list of unsolicited advertisers. He said, “This is referred to as providing a disclaimer or ‘out’ for recipients of such mailings.” Many spammers do not comply with the statute according to Mr. Higgins. Some spammers use the disclaimer to put names on many other lists, again unsolicited. The difficulty, he continued, is in determining what is spam and what is legitimate advertising.
Senator McGinness asked Mr. Higgins if he had some reticence about S.B. 48. Mr. Higgins stated the need to tackle the privacy issue, saying that in order to do it we have to look at it to see how everyone is affected. He mentioned the proposed bill is exclusive to companies that are physically present in this state. Mr. Higgins explained that if a website is accessible in Nevada, the question becomes “Is there jurisdiction in Nevada?” He said we need to narrowly define this to help Nevadans, but it should not be so broad that telecommunications companies are adversely affected elsewhere. Mr. Higgins noted that national companies would likely want one national privacy policy which, he said, presents difficulties.
Senator McGinness asked Mr. Wilkinson to add definitions of terms like “cookies” and “spam” to the bill. Mr. Wilkinson acknowledged the bill has a general definition but added the terms are not clearly defined.
Mr. Higgins then explained that a “cookie” is an identifying marker that allows individual Internet habits, what specific things a person likes or buys, and other information to be coordinated and tracked; sometimes the information is sold nationally, which violates privacy laws. He used Amazon.com as an example because the company kept track of clusters of information on people, such as the most popular book sold in Nevada or which book is most often purchased at the U.S. Supreme Court. Advocates of privacy do not feel that is anyone’s business; we lose our privacy without ever knowing it, Mr. Higgins said.
Senator Porter said he recently read an article about “spamming” on the telephone and cell phones. He said he feels S.B. 48 protects the provider and asked if cell phones will fall under the same guidelines, the same rules, as the Internet.
Mr. Higgins explained that a bill last session broadly defined the range of telecommunications devices that could be fraudulently used; however, the current statute does not anticipate how to deal with spamming on cell phones.
Senator Porter asked Mr. Wilkinson if it would be correct to include cell phones when dealing with problems of spamming on the Internet.
Mr. Wilkinson said an amendment to include cell phones would be appropriate. He mentioned BDR 15-442 would be discussed in conjunction with S.B. 48.
Chairman James stated that S.B. 48 was the “Internet Privacy Bill” and said the committee will consider it at a later time along with BDR 15-442. He said he feels the areas covered by Mr. Higgins were eye-opening and serious as privacy is a precious commodity. He also stated it is better for government to protect our privacy than to interfere with it, and he looks forward to working with Mr. Higgins’ committee.
Mr. Higgins volunteered to provide Internet privacy information to the Judiciary Committee.
Senator Wiener asked Mr. Higgins about the issue of enforceability. She spoke of the difficulty in tracking violators. Her question then addressed the issue of domicile in regard to Internet availability in a state. She asked if any federal legislation has been passed on the question.
Mr. Higgins said most efforts stopped because of the 2000 election and will have to be reintroduced. He noted former U.S. Senator Richard Bryan’s bill died in committee. Nationally, he said, there are huge debates about privacy and what Internet privacy is, with some proponents claiming the Internet will self-regulate if it is just left alone. Others think any regulation by government is not possible, he said, adding that there is a lot of chaos about this issue.
Senator James asked if anyone had any other questions or would like to testify.
James T. Endres, Lobbyist, AT&T, said his headquarters organization looked at S.B. 48 closely. Because of the privacy issue, AT&T is very interested because it expects to be fully engaged in the Internet industry in many different aspects, he said. AT&T agrees with much of what Kevin Higgins talked about today, Mr. Endres said, and agrees with the importance of privacy. He said he believes about 5 or 6 years ago there was a Joint Committee of Commerce and Government Affairs talking about technology and how it is emerging; AT&T representatives testified at that time. Mr. Endres said that AT&T is essentially supportive of S.B. 48, but in practice the company has concerns about how to implement it within the context of all the places and consumers it serves nationally and internationally. He said he learned today that AT&T is involved in a national and international study group that is comprised of many industries across these technology sectors; the purpose of the group is the management of privacy and how to implement it. “Technically, we would like more clarification. Generally we agree it should be examined further and see where Nevada is nationally and internationally,” Mr. Endres said. “AT&T would like to participate in polling that information. If you were to appoint a subcommittee to look at this bill and the one Mr. Higgins’ committee is studying regarding children’s issues, perhaps we could bring all that information together and look at it and bring back one recommendation to the committee,” he said.
Chairman James said he would like to have the information from the international study group in which AT&T participates. He said he is thinking about appointing a subcommittee.
Robert Gastonguay, Lobbyist, Nevada State Cable Telecommunications Association (NSCTA), noted he represents all cable television operators in Nevada, including AT&T. He said all operators are national players and have the same concerns that AT&T expressed. He said that under the Telecommunications Act of 1996, cable operators are mandated to provide a privacy policy statement on all their information. To have a wide variety of privacy statements could become inhibitive across the country; therefore, the NSCTA would like to participate in the subcommittee, and it also desires clarification, Mr. Gastonguay said.
Robert A. Ostrovsky, Lobbyist, Cox Communications, said he wants to echo what has already been said, noting Cox has trouble supporting the bill as drafted, and Cox wants to work on the privacy issues and penalties sections of S.B. 48. He said he wants to be very specific about concerns of (Cox Communications’ subsidiary) Cox Cable. One item is in section 2 of the bill, and concerns the wording “administered or controlled,” and what Cox Cable offers to its customers. He said Cox does not want to be responsible for which Internet sites are appropriate, nor does Cox want to become a judge. Another item in the bill is section 4, where it talks about a third party and the sharing of information. Cox believes better definition is needed in that section, Mr. Ostrovsky said. He noted this is an issue designed to attract business to this state and therefore legislators need to be careful that they do not create a situation in Nevada that regulates too much and discourages high-tech business. Finally, he differentiated between “good cookies” and “bad cookies,” using Southwest Airlines and The New York Times as examples of companies using “good cookies.” He said he thinks users should be notified when cookies are sent to their sites.
Chairman James explained that S.B. 48 is not “going after anybody” but is requiring disclosures to protect consumers. This bill is requiring Internet providers to give some disclosure, he said, adding consumers need to know about the cookies and have steps available to protect themselves and their private information. Chairman James noted that the ability and technology and software are there to protect individuals, but they do not know this unless they are informed.
Mr. Ostrovsky explained that some information must be passed from one site to another for efficient service to consumers. Using Cox Communications’ Access Las Vegas.com website as an example, Mr. Ostrovsky noted that when a customer is seeking a room, he may use this site as the vehicle to get him to the place he desires to stay, and information flows from one site to another without the consumer’s knowledge of this transfer of information. “We want to be sure not to adopt a law that would restrict the legitimate sharing of information to conduct commerce on the Internet,” Mr. Ostrovsky said.
Senator Titus used the example of a pizza place frequented by the same customers knowing what to put on the pizza when the customers order, and keeping the information in their computer files.
Senator Porter took this opportunity to discuss cell phones and advertising on them. He said he wants to know what is happening with the advertising business on cell phones. Mr. Endres of AT&T said the underlying protocol for phones is different than that of the Internet and the protection issues are different. He compared screen sizes and the differences in their uses. Senator Porter said he feels it is time now to address phone protection, too. He asked that Mr. Endres be invited to join in subcommittee hearings to discuss privacy and protection issues.
C. Joseph Guild III, Lobbyist, Attorney, Motion Picture Association of America Inc., expressed the Association’s concerns for privacy and its interest in participating in the subcommittee discussions. Chairman James said he wonders where the Motion Picture Association of America stands on the subject of Internet privacy. Mr. Guild explained that most film companies have Websites and become information providers for trailers, upcoming meetings, and other movie industry-related information. Privacy aspects of this information, such as opt-in or opt-out have to be the responsibility of the consumer rather than the companies, he said, noting many companies across the nation want the burden to shift away from the companies and onto the consumer.
Chairman James appointed a subcommittee, calling it the “High-tech Crimes and Internet Privacy Subcommittee,” consisting of Senator Porter, Senator Care, and himself. He invited the day’s speakers to attend the subcommittee meetings, saying the committee will have more than one hearing on the related bills.
Chairman James adjourned the meeting at 9:42 a.m.
RESPECTFULLY SUBMITTED:
Ann Bednarski,
Committee Secretary
APPROVED BY:
Senator Mark A. James, Chairman
DATE: