Balancing trust and innovation in the internet industry

During the last few months we have seen several security breaches into large companies’ online networks. Does this call for more regulation for internet companies? During the eG8 Forum in Paris last month, internet leaders and government regulators had the opportunity to exchange ideas concerning the future of the internet and whether it should be further regulated. The main discussion point is the boundaryless freedom enjoyed by internet companies and the huge amount of customer info captured in their databases that include both personal and financial details.

On the one side we have European telecom companies such as Vodafone and several national government bodies, arguing that there is too much at stake and that therefore trust, privacy and copyrights have to be guaranteed. Also from a fair practice viewpoint, telecom giants urge for regulation; why should internet companies be excluded from regulation when companies in all other industries aren’t?

Meanwhile the other side, including companies such as Google and Facebook, argue that innovation should be maintained. A McKinsey study revealed that the internet contributed during the last 5 years 21% of growth in mature economies. By imposing regulation on internet companies, they claim, this growth will level off. Furthermore, they argue, self-governing processes are present in many internet companies, such as eBay and Amazon.

Is there a middle ground between trust and innovation? Is it possible to implement a set of laws which prevents data misuse and enforces consumer rights, but at the same time allows for the internet industry to realize its full potential within a legal framework? Next to this, regulation often lags behind innovation. Basel III, for example, is a set of laws responding to those invented financial products which have caused the financial crisis of 2008. Should we be proactive or reactive when dealing with the new possibilities of the internet?

New legislation required for future online transactions?

In the last weeks of April, the largest cyber attack ever took place when criminals successfully hacked into Sony's two online gaming networks, PSN and Sony Online Entertainment. Financial details of millions of online customers worldwide were extracted during the cyber attack.

As an immediate outcome of this disaster, Sony faced several lawsuits. Also on a broader level, this disaster has provoked drastic consequences. In the US, Republican Mary Bono Mack, who heads the Commerce Committee's Consumer Protection Panel, said she would introduce a new bill. According to her and others, the existing legislation falls short in obligating companies to secure sensitive information and to timely inform clients about such security breaches. Because more and more people become active online purchasers, large online companies such as Amazon, Sony and Apple contain vital financial information of an increasing amount of people, to such an extent that legislation should become updated to make companies safeguard this valuable information. Not only is an increased security needed, but also concerns about privacy and the potential trade in personal data should be considered.

Does this security breach mean that online consumers should doubt the security of their online transactions on all e-platforms? Are iPhone users OK with the fact that Apple can track their users? This matter can also be applied for companies; should companies which purchase online services such as cloud computing also be worried?