U.S. companies are expected to significantly cut IT spending this year, according to a Merrill Lynch survey released yesterday. The growth of U.S. IT budgets will fall from 11 percent in 2000 to 5 percent in 2001, according to the survey. The hardest hit sector is likely to be IT services, which will see an estimated 8 percent growth in spending this year after large gains the past two years. Software spending will increase the most at 19 percent, while hardware spending will grow 14 percent. However, IT spending could face even larger cuts because the survey took place at the beginning of December and nearly a third of respondents did not consider the economic downturn, says Merrill Lynch. By contrast, European companies will maintain IT spending growth at 13 percent this year, down only slightly from 14 percent last year. The Merrill Lynch results are similar to a Morgan Stanley Dean Witter report last month, which predicted U.S. IT spending would decline to 8 percent this year, compared with 12 percent in 2000. Although these forecasts offer bleak news for U.S. tech companies, experts say customers will look to lower costs by implementing e-business and IT infrastructure, which could drive business to some tech firms.

Computer Associates International has terminated at least 10 employees from its Herndon, Md., office for sending inappropriate emails over the company network, according to several of the company's former workers who lost their jobs. Former administrative assistant Michelle Layne, fired Dec. 21, said Computer Associates' management would not let her see the emails that led to her termination. However, she added that many at the company, including those in management, have sent one another emails containing sexually explicit material. Although Layne was uncertain as to whether she broke the company's email policy, she says she did not believe the messages were a problem because similar email often came from senior vice presidents and other managers. The firings are the latest public incident for Computer Associates, which lost CEO Charles Wang earlier this year after many investors soured on the company.
http://washingtonpost.com/wp-dyn/articles/A16350-2001Jan3.html

PC makers are expected to continue struggling until at least the middle of this year, although Windows 2000 and other new technologies are likely to spur demand, analysts say. The corporate PC market fell into a slump following pre-Y2K spending sprees, and the consumer market has also been weak with PCs already in more than half of U.S. households and few compelling reasons for consumers to upgrade at this time. However, computer makers believe that the corporate market will improve as Windows 2000 sales pick up over the next six months. Meanwhile, consumers could be motivated to purchase new PCs with the release of new multimedia applications, broadband Internet service, and faster chips such as Intel's Pentium 4 that improve gaming. Microsoft's consumer-oriented Whistler operating system will also debut this year, possibly driving consumer demand. Although PC makers hope the slowdown is only temporary, some companies are turning to other markets. Compaq, for example, is emphasizing mobile devices such as handhelds and pagers. In addition, PC makers are offering significant price cuts that are helping to reduce surplus inventory, experts say. Despite the slowing growth rate, PC makers are expected to see 16 percent growth this year and to continue seeing double-digit growth for the next several years.

President-elect George W. Bush is scheduled to meet today with several executives from the high-tech industry. Observers say the executives are likely to show strong support for Bush and his agenda but will press hard for their own particular interests. Among those attending today's meeting are Hewlett-Packard CEO Carly Fiorina, who will ask Bush to allow even more foreign workers with high-tech skills to enter the country, and Intel CEO Craig Barrett, who hopes to persuade Bush to finalize China's entry into the World Trade Organization. Also on the industry executives' agenda are issues such as trade, copyright concerns, and education. Observers say the executives are likely to be split on the topic of e-commerce taxation, while most executives will likely support a continuation of the Clinton administration's hands-off policy on Internet privacy issues. Also on today's agenda, ClickAction CEO Gregory Slayton has said he will suggest that Bush introduce incentive-based compensation to the public sector, while Sage Software executive Dave Hanna will ask Bush to reduce software tax write-offs from three years to one.

Dubai last year unveiled Dubai Internet City (DIC), an attempt to lure foreign Internet companies to the Gulf state. Already, 195 companies including big-name firms such as Oracle and Microsoft have opened offices in the DIC. If the project succeeds, Dubai officials believe that the state will transform into an Internet hub for the Gulf region. Dubai claims that only 17 countries in the world have greater Internet penetration than it does. Officials expect that the $735 million project will appeal to companies that may have avoided Dubai in the past because of laws requiring domestic majority ownership of all businesses in the country. Companies with offices in the DIC can have foreign ownership. However, the DIC has drawn some criticism. Analysts question where Dubai will get the programmers necessary to run Internet companies. Although Dubai officials hope programmers from India and other countries will emigrate, analysts doubt that foreign workers would find the citizenship laws in Dubai very attractive. Analysts also wonder what will happen to the DIC should the downturn in the Internet market continue or worsen.
http://globalarchive.ft.com/globalarchive/articles.html?id=010105001303

Dot-coms will continue to collapse in the new year, with job cuts and shutdowns culminating in January and February, analysts say. Many startups saw disappointing fourth-quarter revenue and are now deciding whether to stay in business. Some of these companies would have gone under before the holidays, but cut costs through layoffs and other means, says John Challenger, CEO of Challenger, Gray & Christmas. Although consumers spent $8.7 billion online during the holiday season, according to Goldman Sachs, much of that total went to large players such as Amazon.com. Meanwhile, many small e-tailers saw weak holiday sales, and online retail is expected to face the most severe impact of the ongoing dot-com shakeout. Other at-risk sectors include Web consulting, media, and infrastructure, says Challenger. However, the shakeout is a necessary stage for the maturing e-commerce industry, says Challenger, noting that strong companies with solid business plans will survive. On another positive note, Challenger says the pace of dot-com layoffs is slowing.

Smart jewelry with mobile computing capabilities is expected to move out of the lab and into the consumer market this year. "As computers get smaller and smaller, why not put them in things we're already using?" suggests Cameron Miner of IBM's Almaden Research Center. Charmed Technology is planning to sell the Charmed Badge, a computerized brooch, later this year. Using technology licensed from MIT's Media Lab, the badges are wearable art linked to Web pages that hold the wearer's personal data. The badges can search out specific products at trade shows with infrared beams and exchange contact information between wearers. Digital jewelry such as necklaces with microphones and earrings with stereo speakers could debut within a year or two. IBM's DesignLab is building prototypes of such jewelry, as well as sunglasses that can display text and pictures with the help of a digital projector and a mouse-embedded ring device. Commercial products will not be seen for about five to 10 years, predicts Miner. Dallas Semiconductor produces rings and watches with Java-powered "virtual machines" that can store user names, passwords, and PC preferences, while NCR's M-Bracelet is designed to exchange information and act as a bank card, Web link, and a send/receive device. Other smart jewelry under development includes Charmed Technology's "love bracelet," a band capable of transmitting tactile messages between wearers, and IBM's "inverse mood ring," a similar product.
http://www.latimes.com/print/techtimes/20010104/t000000694.html

Civil liberties advocates are worried that Yahoo!'s decision to keep its Web sites free of Nazi and Ku Klux Klan memorabilia and other types of hate material--a move that had been urged by a French court--could encourage other world governments to impose their laws on the Internet. Likewise, civil libertarians are concerned that the Yahoo! decision will lead to further concessions by Yahoo! and other service providers--such as limitations on religious speech or adult content in chat rooms. "Where will online services draw the line about whose laws they will try to implement or be sensitive to?" says Alan Davidson of the Center for Democracy and Technology. Davidson cautions service providers against attempting to "accommodate every complaint." Service providers may have no choice if the International League Against Racism and Anti-Semitism (LICRA) has its way. "With this decision I can tap on the door of other companies and request that they align themselves with Yahoo!," says the group's spokesman, Marc Knobel. Knobel insists that service providers impose more restrictions on neo-Nazi activity on the Internet. Knobel says LICRA may decide to file lawsuits in Germany, France, and Belgium because extreme-right Web sites in those countries are conducting illegal activities. Meanwhile, Yahoo! denies that its decision on hate material was meant as a concession to the French courts. Indeed, Yahoo! says that it will continue to explore a possibility of an appeal to the French ruling.

India's teenage computer hackers are being recruited by India's National Association of Software and Service Companies (Nasscom) to help police the security of the country's government and commercial Web sites. "They will tell us where our soft spots are--where government and industry Web sites are most vulnerable, thus helping us strengthen our e-security," says Nasscom President Dewang Mehta. India's software industry has set up the National Cyber Cop Committee, which will receive advice from the white-hat teen hackers. The teen hackers will not be paid for their efforts but will receive recommendations for e-security jobs in the public sector. Cyber crime has become a top concern with the Indian government, which recently passed a cybercrime and e-commerce transactions law. The new law imposes prison terms of up to five years for the distribution of pornography and up to three years for computer hacking attacks.
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But a day into its existence, the 107th Congress has already introduced legislation addressing online privacy, along with a trio of other high-tech bills that address spam and caller ID protections. All the bills have been introduced in the House, three of them by Rep. Rodney Frelinghuysen (R-N.J.). Frelinghuysen's H.R. 89 would complement the Children's Online Privacy Protection Act by forcing the FTC to extend online privacy protections to children above the age of 12. H.R. 90, also introduced by Frelinghuysen, would require telemarketers to make their identities visible to caller ID services. Frelinghuysen's H.R. 91 is another online privacy bill, one that gives interactive service users greater control over the commercial online use of their Social Security numbers and other personally identifying data. Rep. Gene Greene (D-Texas) is attacking spam with H.R. 95, legislation that aims to ward off spam for "individuals, families, and Internet service providers." Meanwhile, Rep. David Dreier (R-Calif.) weighed in on Yahoo!'s recent troubles with France over Nazi memorabilia by introducing a resolution that would give ISPs immunity from liability when customers use their online services to produce illegal content or engage in illegal activity. "If successful, efforts to hold ISPs criminally liable for third-party content will have a profoundly negative effect on the Internet" and "seriously degrade the ease and speed of consumer access to the Internet," Dreier said. The Council of Europe's draft cybercrimes convention is moving closer toward making ISPs liable for illegal content, Dreier warned.
http://www.newsbytes.com/news/01/160051.html
For information regarding ACM's work in the area of public policy, visit http://www.acm.org/usacm.

President-elect George W. Bush will need to act on the issues of privacy and taxation on the Internet, but doing so will be difficult because his supporters are sharply divided on both issues, writes Dan Gillmor. During his campaign, Bush failed to define his stance on either issue, Gillmor says. In terms of data privacy on the Internet, Bush walks a fine line between high-tech companies that favor self-regulation of the Internet and consumers who do not want their financial, medical, and other information sold. While Bush showed concern about companies sharing private consumer data, he does not want to alienate the tech industry. Companies do not want any limits on their ability to profit from selling consumer data, says Gillmor, adding that self-regulation "is really no regulation at all." Therefore, Gillmor says the federal government needs to act on the privacy issue, but he questions whether Bush "will have the stomach to say no to some of his primary backers." Internet taxation will be an equally complicated matter for Bush, Gillmor says. Tech companies argue against online taxes, but Main Street businesses, long-time Republican supporters, will increasingly protest that online companies have an unfair tax advantage, especially if the economy worsens, Gillmor says.
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The high-tech industry hopes that its political maturation continues to serve it well during the 107th Congress. During the 106th session, the industry grew from a collective of companies that did not want anything to do with government into an organized group that now understands how Washington can impact the bottom line and business. After tackling issues such as H-1B visas and digital signatures, the high-tech industry now turns its attention to privacy, Internet security, and the Internet tax moratorium. Perhaps the most controversial issue, privacy involves how companies collect personal information, the degree to which companies protect that data, as well as communication and enforcement of privacy policies. The industry wants members of Congress to move slowly on the issue. However, if Congress moves too slowly, the states could move in and create a "patchwork quilt" of privacy legislation that would stifle the growth of e-commerce. "There must be a preemption of the array of state legislative proposals, as well as the need to have a baseline standard for Web site operators to disclose their privacy policy and give people the option to opt out," says Rep. Bob Goodlatte (R-Va.), co-chair of the Congressional Internet Caucus.

Many companies are increasing profits and efficiency by implementing software based on complexity science, a broad field that includes chaos theory. Complexity researchers use genetic algorithms, artificial neural networks, and other tools to create models of real world systems ranging from steel production to the immune system. Many companies such as Bios Group, i2 Technologies, Prediction, and Artificial Life are developing complexity applications for the business world. Bios Group, for example, designed an application that helped streamline cargo operations for Southwest Airlines. Bios simulated Southwest's cargo operations by using software agents to represent freight forwarders, ramp personnel, packages, and airplanes. The simulation showed that Southwest's freight handlers often rerouted cargo onto more direct flights without noting the ultimate destination of the plane that originally carried the cargo. Bios helped Southwest correct this inefficiency by creating a "same plane" cargo routing plan, saving the airline millions of dollars in storage rentals and wages. Meanwhile, i2 uses genetic algorithms to optimize production-scheduling models, mapping variables such as customer orders and distribution capability into the system. International Truck and Engine used i2 software to reduce schedule disruptions by 90 percent at five of its factories. Another company offering complexity software, Artificial Life, simulates biological processes by using neural patterning in bots. Artificial Life's bots analyze speech patterns on the Internet to communicate more effectively with humans, and can automate a firm's email thereby cutting costs by about a third. Meanwhile, researchers at IBM's T.J. Watson Research Center are using software agents and computer models to study how cyclical price wars and niche markets develop.
http://www.sciam.com/2001/0101issue/0101techbus1.html

Supporters of the Uniform Computer Information Transactions Act (UCITA) plan to push several additional states to adopt the bill in 2001, but critics are gearing up for the battle as well. UCITA is designed to bring uniformity to the rules that govern software contracts, but critics say the law favors vendors and sacrifices user rights. Many end-user companies object to UCITA because they say the bill will increase their IT expenses. Nationwide Insurance, for example, says UCITA could increase its IT costs by at least $20 million as a result of higher contracting and negotiation costs and security problems stemming from UCITA's self-help provision. In addition, Nationwide says its quality assurance costs would soar because UCITA restricts vendor's liability for flawed products. Meanwhile, the Digital Commerce Coalition intends to lobby for UCITA's approval in a number of states, which could include Oregon, Texas, and Washington. Maryland and Virginia are the only states that have passed UCITA so far, and 2001 is expected to be a critical year for the bill. A study commission in Oregon conditionally endorsed UCITA and the state could adopt the bill this year, according to Peter Bragdon, head of the state subcommittee that reviewed UCITA.
http://www.computerworld.com/cwi/story/0,1199,NAV47-81_STO55695,00.html
For information about ACM's UCITA activities, visit http://www.acm.org/usacm/IP

The Internet industry can expect the Internet Corporation for Assigned Names and Numbers (ICANN) to continue into next year its work of finding new top level domain (TLD) names for the Internet. ICANN Chief Policy Officer Andrew McLaughlin says the process of reviewing applications from companies that want to become a future registry for a TLD name is moving along smoothly. ICANN will place a heavy priority on determining whether registry applicants have the financial resources as well as the technical capabilities to become new TLD name registries. McLaughlin says ICANN must "maintain the stability of the Internet" by "adding the new TLDs without technical problems." Some 44 companies are in the running to be registries for TLD names. In November, ICANN tentatively approved .biz, .info, .name, .pro., .aero, .museum, and .coop as new TLD names. However, the organization is considering more than 30 other TLD name proposals, including .sex and .church. McLaughlin says more TLD names could be approved next year. And the group also plans to review its policy for settling disputes such as those involving online trademarks. Aside from Internet names, major issues for the new year will include Internet privacy, taxes, and regulations for email.

For information regarding ACM's Internet governance work related to ICANN, visit http://www.acm.org/serving/IG.html

Sen. Orrin Hatch (R-Utah) wants his colleagues to clarify what constitutes "fair use" of music, movies, and literature in the digital age. Although the courts may rule in favor of the recording industry in its suit against Napster, and the music-swapping service's deal with Bertelsmann could make the legal dispute moot, Hatch, once a staunch supporter of the recording industry, says he wants Congress to take a closer look at the legal dispute. "We have to ask ourselves what are the rights of creators to decide how their work is presented and to get paid for its exploitation?" asks Hatch. "What are the rights of consumers who have purchased copies of copyrighted works and put those works into other formats?" During the first hearing on the future of digital music last July, the chairman of the influential Judiciary Committee said the recording industry had taken a hard line stance on swapping music online. Hatch maintains that he is not wavering in his long-held view that the marketplace should resolve such matters. However, Hatch, a songwriter who has seen his songs among those posted on Napster, feels more deeply about the value of intellectual property. The recording industry still views Hatch as a friend, but it does not think any legislation is needed.
http://www.thestandard.com/article/display/0,1151,20999,00.html

Wall Street analysts are bemoaning the computer industry due to reports of slowing sales. The industry will experience 16.6 percent growth in 2001, down from an average yearly growth rate of over 20 percent in recent years, according to International Data (IDC). Despite this outlook, PC makers are still expected to do well in niche markets for portable products such as laptops, digital cameras, MP3 music players, and handhelds. Cahners In-Stat Group projects sales of handhelds to jump 31 percent to 8.7 million units this year and for sales of digital music players to grow 59 percent to $1 billion. The number of manufacturers selling digital music players has swelled from five to more than 50 in the past year. Demand will also grow for heavy server computers that power the Internet and e-commerce functions. Server appliances will almost double their sales in 2001 and reach $5.2 billion, predicts IDC. Sales of Unix-enabled servers that cost from $100,000 to $1 million will grow by nearly one-third this year, leading to 25 percent revenue growth, according to Forrester Research. Data storage devices are also expected to experience a sales boom, with IBM and Hitachi rivaling EMC for market leadership. Dataquest forecasts 27.5 percent growth in semiconductor sales, but this figure may be tempered by only 11 percent growth in earnings this year, as projected by First Call. Earnings growth last year was 94 percent, and analysts are predicting chip capacity to surpass demand by mid 2001. Memory chip and microprocessor manufacturers are likely to experience a revenue slump because of falling prices, but companies that sell digital signal processors and analog chips will probably enjoy revenue increases of 30 percent or more.

Sweden is sometimes considered one of the most wired nations, with computer and Internet penetration rates of 60 percent and mobile phone penetration rates of 70 percent. However, the nation is also at risk of creating a society of IT haves and have-nots--more and more Swedes without Internet access cannot do banking, business with government agencies, information-gathering, or tax filing. Union leaders fear that blue-collar workers without online access at work or home are being excluded from online training programs and cannot participate in online democracy. Banking is a problem; institutions are cutting costs by closing branch offices, particularly in rural areas, and are suggesting Internet services as a replacement. But Pensionaires' National Organization (PRO) executive secretary Leif Karlsson says that Internet banking is not an option for everyone, especially the older population. Just 8 percent of those between the ages of 65 and 74 say they have access to computers, according to government statistics, and what access they do have is frequently at public locations, which makes it hard to use the encrypted software that some services need. PRO is protesting the shutdown of some rural banking services and has taken a $120,000 state grant to educate members on using computers and the Internet. The Swedish Trade Union Confederation has a program that helps members buy computers through the confederation with low-cost financing, and it also offers training and support. The Swedish government has begun a nationwide broadband network to try to get broadband everywhere, but the costs will vary with location.