Clinton, governors discuss; states remain split over sales tax for e-commerce.

President Clinton and U.S. governors on Monday wrestled with whether states should tax online sales.

"The digital marketplace must be mirrored in a new digital government," says a report on the Internet's impact on government, issued by the National Governors' Association Monday in conjunction with the group's meeting at the White House.

After the meeting, governors remained split over whether online sales should be subject to state sales taxes. It's a crucial issue pitting states reliant on sales-tax revenues against those with booming Internet-driven economies.

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Lycos is expected to launch a free Internet access service tomorrow, joining a market already populated by several of its main Web portal rivals.

The Waltham, Mass., company is tapping CMGI-owned 1stUp.com to run the service, alongside AltaVista and Excite@Home on the upstart's client list, according to people familiar with the company's plans.

Lycos' move is in part a simple means of keeping up with the Yahoos, as several of its closest competitors have already attracted hundreds of thousands of users to their free Net access services. But the deal also underlines these services' new role as a critical piece of portals' business models, much as free email has now become commonplace on virtually every Web site with mass-market ambitions.

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Japan, one of the world's most high-tech nations, Tuesday suffered a series of computer problems due to the leap day rollover, including malfunctions in cash dispensers and weather forecast devices.

The Posts and Telecommunications Ministry said about 1,200 cash dispensers at post offices across Japan went down due to Y2K computer bugs triggered by the Feb. 29 leap day. There have been concerns computers would not recognize February 29, 2000, a leap year that occurs once in 400 years.

The ministry said it had sent scores of engineers to repair the dispensers and at least 830 machines have already been fixed. The ministry runs some 25,000 cash dispensers.

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Prices of computers sold at retail stores rose for the fourth consecutive month in January while the growth in sales slowed, according to a new report, an indication that the dizzying pace of the consumer PC market may be slowing.

Still, consumers likely need not fret yet. The industry's hyperkinetic ability to manufacture components and computers continues unabated, so low PC prices will likely still be a main feature of the landscape.

The price surge, which was predicted last October and started to be confirmed in December, is a result of a combination of factors, according to PC Data analyst Stephen Baker.

Cooling customer interest in sub-$600 PCs, for instance, has driven average prices up. Another key aspect is growing consolidation among PC makers. With IBM gone, only Compaq, Hewlett-Packard and Emachines, for the most part, define the retail market.

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The company, primarily known for its efforts to make music available over the Internet, today announced a new marketing effort for its Liquid Kiosk Network, software that allows customers to preview and purchase music as digital singles and create custom CDs.

The campaign marks the first time the product will be marketed to U.S. retailers. International retailers including The Music Company in Seoul, Korea, and TopShop/TopMan stores in London already use Liquid Kiosk Network software.

"We believe consumers entering today's stores have higher expectations and want a customized product and satisfying retail experience," Phil Wiser, co-founder and chief technology officer at Liquid Audio, said in a statement. "The Liquid Kiosk Network solution lets traditional retailers leverage Internet music to expand their product line while maintaining their current storefront real estate."

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Baan interim chief executive Pierre Everaert said he could not rule out a takeover of the troubled Dutch business-management software group.

"If someone comes along and offers a good price and can assure further growth at Baan, how can I say no?," Everaert said in an interview at the CeBIT trade fair in Hanover, Germany.

Money-losing Baan, Europe's second largest business-management software group behind Germany's SAP, is in a management crisis after staking its future on traditional applications while SAP and U.S. rivals such as Oracle offer their products via the Internet.

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Online auctioneer eBay Inc. is set to mount a $1.6 billion bid to take over troubled auction house Sotheby's, The Independent on Sunday reported.

The newspaper said eBay would take advantage of Sotheby's current turmoil to pounce after two senior executives resigned from the 250-year-old firm amid a widening price-fixing probe.

Antitrust probes in Britain, Australia and the United States are investigating whether Sotheby's and its rival, Christie's International Plc, fixed sale commissions. Between them, the two companies control 95 percent of the world's $4 billion auction business.

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America Online, which seems to be spending a lot of time in court these days, is back in legal hot water.

This time, it's the target of a class-action suit accusing the company of releasing its latest software, AOL 5.0, knowing that it could result in major changes to a user's operating system, making it unstable, even unusable. According to the suit, the software also prevents AOL customers from connecting to competing ISPs.

The lawsuit was filed on behalf of all AOL users in Washington state who have installed 5.0, said Steve Berman, a Seattle attorney who specializes in class-actions.

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Priceline.com Inc., the name-your-price specialist, is getting into the gas business.

The company said Friday that it will launch a new service allowing consumers to set their own price for gasoline and fill up their tanks at specially selected stations.

The announcement comes at an opportune time. Gasoline and oil prices have been jumping, and the Energy Department and the American Automobile Association have warned that low supplies could bump prices even higher in the coming months.

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Alex Vorobiev doesn't want to be embarrassed by a hacker, and he's got security vendors lining up to help him.

Vorobiev, director of systems support for a mathematics program at Swarthmore College, in Swarthmore, Pa., watched in horror this month as his colleagues in academia fell like dominoes to the now-infamous DDoS (distributed denial-of-service) attacks.

University computer systems, open by their very nature, are often called the Achilles' heel of the Internet because of their thin security. In the wake of the DDoS attacks, computers at schools such as the University of California at Santa Barbara were found to be the unwitting dupes of the hackers.

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Coming soon to an automated teller machine at a bank near you: not only cash and account balances, but tickets to the latest shows.

Tickets.com, which sells event information and tickets online, said it will join with ATM Tix to launch the service in Las Vegas this month. The pilot plan to turn ATMs into virtual box offices--allowing consumers to collect tickets at any time--could later be extended elsewhere, the company said.

"The ATM Tix partnership allows us to create another convenient and accessible ticket distribution point for consumers--their bank ATM machines," Thomas Gimple, chief executive of Tickets.com, said yesterday. "Consumers using these machines will no longer have to be dependent on the box office or retail outlet's operating hours to retrieve tickets."

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After years of low subscriber numbers, Microsoft now says it will offer its WebTV Internet access for free for a limited time, a move to bolster the service in the face of a huge threat from archrival AOL.

The promotion offers two months of free WebTV Interactive service to customers who purchase a WebTV Plus set-top box, which are priced around $199. Customers who sign up for the service and send in a coupon will receive two months of the service, priced at $25 per month.

Acquired by Microsoft in 1997, WebTV was the first company to offer Net access through the television. Despite the growing industry trend of accessing the Web through devices and appliances rather than the desktop PC, WebTV has struggled to turn initial buzz into steady growth.

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A day after issuing a public criticism against Yahoo, the Anti-Defamation League (ADL) said the Web portal has vowed to work to remove alleged racist and anti-Semitic "clubs" from its service.

The announcement follows a statement issued by the ADL yesterday that the Yahoo Clubs service contained sites that reportedly belonged to supporters of prominent hate groups. The ADL charged that the presence of these clubs was in violation of Yahoo's terms of service policy, which prohibits hate speech on its site.

"We are pleased that Yahoo has responded to our concerns by pledging to work on upholding its terms of service against hate," Abraham H. Foxman, ADL's national director, said in a statement. "We hope to continue to work with Yahoo and other Internet service providers to monitor hate and deny extremists a platform at Web sites where user policies strictly forbid offensive material."

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Tandy is expected to pick Excite@Home as the provider of fast Internet service over cable, to be sold through its RadioShack chain of more than 7,000 U.S. electronics stores, analysts said.

Tandy chief executive Leonard Roberts said he expects to have an agreement later this year with a company he didn't name to sell high-speed Internet connections using cable-TV lines. Excite@Home is the largest U.S. provider of the service that sells for about $40 a month.

RadioShack could attract more customers by selling cable modems alongside a rival high-speed Internet service provided by NorthPoint Communications Group that uses phone lines, analysts said. More than 16 million U.S. homes, about one-seventh of all households, are expected to use fast Internet service by 2004, up from about 1.5 million today, researcher Yankee Group said.

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A recent report could give new hope to hardware makers working diligently to expand their businesses in light of increasingly ominous signs that the PC market is on its last legs.

A research report released today claims that the recent boom in so-called Internet appliances--set-top boxes, handheld devices and other Web-enabled hardware--could help expand the sales of PCs and related technology in the next five years.

Analysts and industry experts have for some time been predicting the death of the traditional PC, as consumers and corporations clamor for less-expensive, easier ways to connect to the Internet. As hardware prices have fallen--recent estimates point to a clip of 15 percent annually--leading PC makers have scrambled to find other strategies to keep their businesses afloat.

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The tech giant is in the process of expanding its ambitions to sell and manufacture PCs more like rivals Dell Computer and Gateway. On Monday, the company will increase the number of products it sells directly to consumers and small businesses. IBM also plans to enter into a direct buying relationship with 14 of its largest customers.

In addition, IBM is building up its "build-to-order" manufacturing capabilities, a crucial element in selling PCs and servers directly, and a new campaign to promote direct buying. Big Blue outlined its plans at its Personal Systems Group headquarters here.

As with rival Compaq Computer, Big Blue is finally taking the inevitable steps toward direct sales. The cost advantages of selling direct--less inventory, no middleman mark-ups, etc.--have long been known in the industry. In the past, however, both companies concocted manufacturing and sales programs that sought to replicate some of the cost advantages achieved by direct sellers--without alienating their traditional dealers.

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Government officials will be on watch next week for any technology glitches related to what may be the last hurrah of the year 2000 technology bug.

White House officials now fear that Feb. 29, 2000 may cause problems for computers that don't recognize 2000 as a leap year. They say systems could erroneously mistake the last day of February as March 1.

But officials may have a tough time convincing corporate computer managers and consultants that the leap year problem is for real. The White House is still attempting to defend the billions of dollars spent to defend against a Y2K-related meltdown that never really happened.

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The United States will let a computer scientist put instructions for writing a powerful computer data-scrambling program on his Web site, but his high-profile lawsuit challenging U.S. export restrictions on encryption may continue, his lawyer said today.

President Clinton in January dramatically liberalized once-strict U.S. export limits on encryption programs, which scramble information and render it unreadable without a password or software "key." The changes recognized that encryption, used in everything from Web browsing software to cellular telephones, has become essential for securing e-commerce and global communications.

The move also followed a May 6 decision by a three-judge panel of the U.S. Ninth Circuit Court of Appeals that the old rules barring University of Illinois professor Daniel Bernstein from posting instructions for his "Snuffle" program on the Internet were an unconstitutional violation of the scientist's freedom of speech.

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Utah Governor Michael Leavitt and Virginia Governor James Gilmore III are exploring ways to compromise, at least on secondary issues, as a panel studying Internet tax policy moves to wrap up its work next month.

Leavitt and other officials revised a National Governor's Association proposal that calls for simplifying sales taxes while allowing an expansion of sales collections to Internet and mail order sales. The new version of the Leavitt plan softens a controversial element involving private businesses collecting sales taxes for states.

Gilmore, chairman of the Advisory Commission on Electronic Commerce, has proposed six resolutions that retain the heart of his anti-Internet tax message, yet seek to compromise on the timing. One Gilmore proposal, modifying a plan advanced by business leaders, would ban any sales and use taxes on consumers' purchases during a proposed five-year extension of the current Internet tax moratorium.

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Your notebook PC isn't the same size as your desktop PC--so why are you using the same size mouse on both machines? Soon, you won't have to.

Logitech will debut a smaller mouse designed for portable PC users, as well as a wireless trackball, company executives stated on Wednesday. Both announcements will be made at the CeBIT computer show, which officially opens on Thursday.

The Mini Wheel mouse is 20 percent smaller and sports a shorter cable than a standard mouse, and will be available in May with either a Universal Serial Bus or PS/2 connection. The company did not disclose pricing.

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Some predict the Internet will diminish the role of the PC. But two industry giants are betting just the opposite.

Intel and Sony are partnering to develop more connectivity and interoperability between PCs and Internet appliances such as digital cameras, music players, and video camcorders.

"The role of the PC is actually going to expand in the home as more and more people get on the Internet and download music and video," says Kurt Sehnert, strategic marketing manager for Intel's desktop products group. "The PC is a flexible device that will let people do a lot of different things, including storing and cataloguing content and making it accessible to other devices in the home."

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The consortium building the next-generation, ultra-high-speed Internet is looking for a few fast applications. Really fast applications.

The Internet2 effort is sponsoring a Land Speed Record competition "for the most demanding end-to-end, bandwidth-intensive Internet applications in the world." Internet2 representatives will announce the winners at an Internet2 meeting March 29 in Washington, D.C.

The title goes to the application that can prove (either through a live demonstration or verifiable documentation) that it has transmitted the most bits the farthest distance, says Greg Wood, an Internet2 spokesperson.

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Newest Media Metrix report says almost 40 percent of all time spent online in the U.S. last month was spent at AOL.

America Online Inc. continued to dominate Internet traffic during January, accounting for 38 percent of the total time U.S. residents spent online.

Survey firm Media Metrix said Tuesday that Americans spent 57.5 billion minutes online last month, an average of 13.2 hours per person.

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Taxpayers rushed to the Net last month, driving traffic to personal finance and other tax services sites, Media Metrix said today in its rankings of the top 50 most-visited Web sites.

The measurement firm's rankings for January came with two new metrics--average daily unique visitors and total usage minutes--that are believed to provide a more accurate portrait of how well a particular site is faring, Media Metrix said.

In the category of time spent online, America Online ranked highest, with visitors spending a total of 21.6 billion minutes, or 38 percent of Internet time, on its sites in January. Microsoft was second, accruing 4.2 billion minutes, or 7 percent of all time online, Media Metrix's report said.

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Only a small number of Europeans who have access to the Internet actually shop online, according to a survey by a U.S. research firm.

This is because people do not trust the Internet in general, and non-English speakers cannot always find sufficient Web sites in their language offering familiar products, Forrester Research analyst Reineke Reitsma said at a news briefing today.

In France, companies trying to promote online sales have an additional obstacle in the form of competition from Minitel, the country's widely used teletext service, she said.

The survey in July 1999 and August 1999 covered 17,000 households in Europe's three largest markets--Germany, Britain and France--as well as Sweden and the Netherlands.

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This week Palm adds color to its line of personal digital assistants. But for $449, are 256 colors enough to make the jump?

The Palm IIIc resembles the Palm III, but has a color screen. It runs on a 20-MHz Motorola Dragonball processor with 8MB of memory. Its bright display lets users view images, play games, and read text easily. PC World took a close look at it, along with the upgraded operating system (see "Palm Gets Color, OS Upgrade," link at right).

The Palm IIIc offers 8-bit color with 160-by-160 pixel resolution, which is not great for photos. The IIIc's color range is limited by the fact that the device maintains the small unit size and long battery life typical of Palm products.

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FBI cybersleuths, hunting those responsible for the attacks on some of the World Wide Web's most popular sites, said on Friday they have combined sophisticated computer tracing methods with old-fashioned police work in trying to catch computer hackers.

FBI officials said investigators attempt to gather evidence by tracing from the victim's computer, often through a series of complex intermediary steps, back to the hacker responsible for launching the attack.

But in addition to the technical computer techniques, they said they also use traditional investigative methods, such as interviewing cooperating witnesses and victims, court-ordered eavesdropping on communications and executing search warrants.

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A Colorado legislative committee has passed a bill that would require spammers to tag unsolicited email with a special subject line.

"[Senders must] use the exact characters 'ADV:' ... as the first four characters in the subject line of an unsolicited commercial electronic mail message," reads the so-called Colorado Junk Email Law, House Bill 1309.

Colorado is the latest among a gaggle of states nationwide seeking to put a dent in the flood of commercial email flooding in-boxes. Internet service providers say junk email dumped onto their servers daily costs them massive amounts of money in bandwidth charges. Many email users, meanwhile, despise the unwanted messages piling up in their in-boxes.

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Britain's first flat-fee Internet service has suffered a major failure in its launch week, with operator Telewest blaming the collapse of its e-mail system on overwhelming demand for the 10 pound ($16.04) a month deal.

Users of its Cable Internet service, including 15,000 subscribers to the unlimited access deal, were unable to receive e-mail from late on Thursday until 1100 GMT on Friday, Telewest said on its Web site.

It blamed a storage problem triggered by the ``huge success'' of the deal launched on Monday, which it trumpeted as an example of the cheap Internet services promised by Chancellor of the Exchequer Gordon Brown on Wednesday.

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A "free browser enhancement" from Internet portal GoHip.com may end up enhancing more than just your browser. According to Internet security firm Finjan, the browser enhancement, which is distributed through GoHip's Web site, uses Microsoft's ActiveX to automatically modify files on a user's PC.

The small print in the agreement to download the video browser enhancement offered on the Web site states the program will also change the user's default home page and search default to GoHip.com pages. But it also makes other changes that it doesn't mention at all, according to Finjan representatives.

When you accept GoHip's terms, the site copies an executable file to your system and executes automatically. In addition to modifying your default home page, the program also changes the default signature in your e-mail program.

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AdSubtract.com is trying to turn a heated privacy debate into profits. The company is giving away free software that blocks "cookies" and ads delivered by DoubleClick to Web browsers.

The company has singled out DoubleClick because it is the "most aggressive Internet advertising firm identifying and tracking people surfing the Web," says Ed English, president of AdSubtract.

As part of its marketing pitch, AdSubtract software (a 2.5MB download) comes preconfigured to block DoubleClick ads and cookies. But you can make the software block all Internet ads and decline all cookies, which are unique snippets of code that a Web site puts in a file in your browser, to "remember" you when you surf to that site. What's more, AdSubtract keeps a running scorecard on the number of items it blocks. English adds that while protecting privacy, the software also boosts download speeds of Web pages by removing banner ads.

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The Federal Trade Commission is conducting an informal probe into whether DoubleClick Inc. engaged in unfair or deceptive practices in collecting and maintaining data concerning Internet users.

DoubleClick (Nasdaq: DCLK ), the leading company placing banner ads on Web sites, said it received a letter from the federal consumer watchdog agency on Feb. 8 and is cooperating with the inquiry, according to a filing with the Securities and Exchange Commission.

DoubleClick's disclosure was found amid the details of a lengthy amended registration statement to sell 7.5 million shares of stock that was filed with the SEC on Feb 14.

Controversy about the company erupted last month when DoubleClick revealed a new plan to track Internet user's movements on the Web and combine that data with people's real names and addresses.

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Last week's hacker attacks on major Web sites have stoked widespread concern among home computer users. Almost half of U.S. online consumers will think twice before sharing credit card data over Internet, a poll released on Tuesday finds.

But while 90 percent of home computer users surveyed in a PC Data Online poll express fear in the wake of the attacks, less than a third say they believe the government should take the lead in policing the Web.

"Last week's Web attacks officially marked the end of our celebration with holiday e-tail. Reality set in," says Julie Oliver, senior manager of surveys at PC Data Online.

"The attacks served as a wake-up call to all concerned that this brave new world on the Internet may be growing faster than our ability to protect it and its users," she says.

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Justice Department and FBI officials Wednesday told a Senate panel that last week's denial of service attacks provide ample reason to give law enforcement bigger budgets and additional powers.

Attorney General Janet Reno testified that the Clinton administration's fiscal year 2001 budget request would give agents the "capacity to trace and detect cyber criminals around the world."

Neither Reno nor FBI Director Louis Freeh divulged details about suspects in last week's assault against prominent Web sites, except to say agents are interviewing people and reviewing records kept by the companies that were attacked.

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As the Internet becomes more integrated with Americans' lives, people are spending less time with friends and family, shopping in stores, or watching television and instead are working longer hours by bringing their work home, according to a new report.

The study, conducted by the Stanford Institute for the Quantitative Study of Society, assesses the social consequences of Internet use among a large portion of American households, including Internet users and nonusers.

The key finding of the study is that "the more hours people use the Internet, the less time they spend with real human beings," said Stanford professor Norman Nie, who was one of the principal investigators of the study.

The crux of the study, that people who engage in heavy Internet use are increasingly isolated from others, runs counter to the assertions by some Netizens, who maintain that the Internet brings them closer to a greater number of people through electronic relationships. Net enthusiasts claim that they can find people with similar interests through discussion groups and communities and that they also stay in better touch with friends and relatives through email.

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Sega today unveiled a new digital camera for its Dreamcast gaming system, a sign that gaming consoles are gaining momentum as PC alternatives.

Sega's Dreamcast machine has been at the forefront of the market for Internet devices, as the console offers both gaming capabilities and Internet access. Sega has painted the machine as the centerpiece of its digital entertainment and home networking strategy. With today's release of the digital camera, called the Dreameye, Sega is acting on its digital entertainment strategy.

Digital cameras may just be the tip of the iceberg. Dreamcast-like television-based Net appliances are already proving among the most popular ways for non-PC users to access the Web, according to a recent report from International Data Corp. Although many homes still don't own a PC, most have a television that can be used as an alternate medium to access the Net, analysts have said.

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The effort to bring Linux to Intel's next-generation Itanium chip moved forward today with the arrival of critical programming tools, another key step for the upstart operating system.

Linux distributor Red Hat today released the crucial software--called a "compiler"--that translates programs into instructions that can be understood by Intel's upcoming 64-bit Itanium chip. The move comes at a time when a similar development effort between Sun Microsystems and Intel has turned into an ugly spat.

Itanium is the first member of a new class of more powerful processors from the chipmaker. Hardware maker SGI said it will release its compiler as well, promising that its version will result in faster programs.

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America Online and copier company Kinko's said today that they will team to cross-sell products in a five-year, multimillion-dollar strategic alliance.

The agreement, whose terms were not disclosed, calls for AOL and privately held Kinko's to develop Internet Solutions Centers in the copier company's more than 1,000 stores. The centers will provide computers featuring AOL interactive services, including access to the Internet, the companies said.

The Ventura, Calif.-based Kinko's and AOL also will create a co-branded online destination for AOL members and small-business and home office customers. The sites also will be available on AOL.com, Netscape and Digital City.

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H&R Block's Web-based tax preparation service, which is the premier sponsor of Yahoo's Tax Center, experienced a technical glitch that accidentally switched some tax filers' records, the company confirmed today. As a result, when some registered users signed on to the service to work on their tax returns, they instead received someone else's filing--including a social security number, home address, annual income and other highly sensitive information.

"What we discovered was that some of our clients' data was appearing in other clients' data files," said Linda McDougall, vice president of communications for H&R Block.

"We discovered a problem with our site on Monday and took it down. We're keeping it down until we're convinced that he problem has been corrected," she said.

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Apple has announced a revamped line of notebooks for professional users, an upgraded iBook for consumers and faster chips in its professional desktop computers.

Apple chief executive Steve Jobs made the announcements in Japan at the Macworld Tokyo trade show. Jobs has a penchant for providing surprises at U.S. Mac trade shows, and, for the first time in recent memory, Macworld Tokyo was the scene for the introduction of a number of pieces of new hardware.

Apple added a new model to the iBook line that offers a 366-MHz PowerPC G3 chip, more memory and a larger hard disk drive.

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Two major music suppliers, Valley Media and Amplified.com, today announced that they will merge in a move that could hasten the adoption of digital downloading as a means of commercial distribution.

A leader in its field, Valley Media distributes CDs, cassettes, videos and DVDs to more than 200 nationwide retailers, including the Wherehouse and e-commerce sites such as Amazon.com and CDNow. Amplified supplies more than 200,000 digital music tracks to many of the same customers' Web sites.

Now the companies will combine their catalogs, allowing e-tailers or stores with kiosks to let consumers hear samples and read descriptions of all the songs in their database. The value of the merger was not disclosed.

"This is a very exciting merger of the digital and physical worlds of music distribution," said Wayne Parker, president of Amplified.com. "This merger will speed the availability of digital downloads and make it easier for people who want to sell music online and for artists and record companies that want to distribute music this way."

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Responding to growing criticism of its tracking of consumers as they make their way around the World Wide Web, DoubleClick, the Internet's leading advertising placement company, began a new service yesterday along with an educational campaign to help Web surfers protect their privacy.

The effort was immediately denounced by privacy advocates as a weak attempt at crisis management.

The campaign and the reaction to it are the latest point-counterpoint in the intensifying policy debate over when and how consumers should be given the option to keep their personal information personal.

DoubleClick's "Internet Privacy Education Campaign" comes only days after a leading privacy group filed a formal complaint against the company with the Federal Trade Commission and on the heels of a survey showing that the company was collecting personal information from Web sites that claimed such information was not being shared.

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Stuffed toys, computer systems and collectible lunch boxes are among the millions of items available at online auctions, one of the fastest growing areas of the Internet for both consumers and the con artists who prey on them.

Federal and state law enforcement agencies announced a crackdown Monday against Web scammers who offer goods