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Why online government services are about to explode

Ask any driver: The worst traffic backups aren't on the highway, they're in motor vehicle department queues. Wouldn't it be great if you could register a car or get new license plates with your home computer, day or night? For millions of motorists, that's no fantasy. In Alabama, Alaska, Arizona, Michigan, and other states, such services are just a few mouse clicks away.

Welcome to the e-government era. After a slow start, public agencies at all levels are putting a growing array of services online. Over the next decade, local, state, and federal agencies could save millions on staffing and mailing as taxpayers reap the benefits of more convenient services.

Of course, with half the U.S. population lacking access to the Internet, "virtual government" will remain limited for the time being. And there are downsides: Proliferation of e-gov services will exacerbate the digital divide between technology haves and have-nots.

Still, in the long run, even the economy could benefit. As the cost of delivering services declines, governments might be better able to hold the line on tax increases despite population growth. "There's no question this can make delivery of services more efficient, so there will be savings," says Patricia McGinnis, CEO of the Washington-based Council on Excellence in Government.

Already, Georgians can purchase hunting, fishing, and boating licenses via the Net. Maryland professionals can renew their licenses by computer. Many North Carolina lawyers can file briefs electronically. And college kids can apply for financial aid via an Education Dept. Web site.

Online voting could be next. On Dec. 17, President Clinton ordered the National Science Foundation to conduct a one-year study of the feasibility of cyber voting. Arizona Democrats aren't waiting for the results: They'll be able to cast electronic ballots in the state's Mar. 11 Democratic Presidential primary.

Soon there could also be a burst of e-gov services for business. California is already spending $15 million to create databases for corporate filings. Bankers, for example, will be able to look up properties to search for liens.

"It's not simply a matter of putting existing services on the Net," says Greg Woods, chief operating officer for student financial assistance at the Education Dept. "What we're trying to do is what did to bookselling, which is to change [the system] forever," he says. Applying for student aid via the Web site ( reduces errors 25-fold because applicants are alerted when they've made a mistake.

Online systems also provide more bang for the tax buck (table). An electronic campaign- contribution filing system created for the Federal Election Commission by SDR Technologies Inc. in Westlake Village, Calif., has cut the time it takes to process donor data from weeks to minutes. "The amount of money flowing has doubled over the last three elections, [but] we haven't had to increase staff to process it," says FEC supervisory statistician Bob Biersack.

"WILD WEST." There's still a long way to go. Individuals and businesses annually do about $600 billion worth of government transactions, excluding paying taxes. But less than 1% of that occurs online. The public sector has been slow to adapt because of its risk-averse culture, shortage of technologists, and the Y2K bug. "Once Y2K gets out of everyone's hair, this is going to go nuts," predicts Janet Caldow, director of IBM's Institute for Electronic Government, an in-house think tank in Washington.

Spending by government at all levels on e-business-related hardware, software, and consulting services will rocket from $1.1 billion in 1999 to $4.9 billion in 2004, predicts James Macaulay, a government analyst at Dataquest Inc. "This market is like the Wild West," he says.

Indeed, while big systems integrators such as IBM, Lockheed Martin, and KPMG dominate the government e-commerce market, upstarts such as are muscling in by offering to put services online for free. They provide Web portals or application-specific solutions at no cost, generating revenues with transaction fees charged to the governments or directly to citizens and businesses.

It's a model that budget-constrained governments find appealing. "Governments don't want to invest in technology only to have to upgrade in a few years," says James B. Dodd, CEO of National Information Consortium Inc., an Overland Park (Kan.) provider of Internet services to eight states. NIC made a splash last July with an initial public offering that gave it a market cap of nearly $1 billion.

Atlanta-based lets citizens renew business and driver's licenses, pay parking tickets, and obtain building permits via its site or city and state government sites. charges fees of $1 to $5, which governments pay in full or pass on to users. So far, the state of Georgia and several cities and counties have signed up.

As governments rush online, they could turn the Net into a powerful political tool. Beyond more convenient services, the payoff from cyber government could be better-educated voters and greater turnout at elections. Wouldn't that be a shot in the arm for Democracy?

Before it's here, it's on the Bloomberg Terminal.