Regulating the Internet to safeguard citizens' privacy and protect intellectual property, was a divisive issue at the Davos world political and economic forum which wound up in Switzerland on Tuesday.

Mr Geoff Mulgan, founder of Demos and who is an adviser to British Prime Minister Tony Blair, said his "worst fear" about the Internet was that it might go the same way as the nuclear industry which 20 or 30 years ago had appeared "very promising".

Mr Mulgan said he feared that privacy abuses could undermine user confidence in the Net.

Privacy will be "the biggest issue" for the Internet in the future, said Mr Scott McNealy, chairman and chief executive officer of Sun Microsystems.

But he cautioned: "People do get hysterical and don't really think through the issue."

People had to accept that there was a "trade-off between the benefits and convenience", he said.

For example, "you leave a trail of your spending habits every time you use a credit card, but accept it because of the convenience. Nobody would want their doctor not to pass on your medical history to another doctor treating you after an accident. He would not care if people found out he was an ice hockey fan."

But "companies have a responsibility to make sure they offer people . . . the right to privacy and anonymity," Mr McNealy said.

The second issue was that the "rules and codes have to be set up" to govern privacy, he said, noting that law enforcement should have the right to trace back messages with encrypted origin for anonymity if the anonymity was being used "to harm others".

He said he had spoken to one chief executive officer who had received anonymous death threats by email. "If people use anonymity to break the law and harm other people, that cannot be tolerated," he said.

He said he favoured serial numbers for software for this reason, as was the case for cars, but that only law enforcement agencies should be able to use them to trace origins of messages.

But public opinion was a strong weapon to punish companies that fail to meet privacy requirements. "Like a bank that loses our money . . . people will stop going to that bank . . . companies have a strong incentive to keep information private," he said.

Siemens chairman Mr Gerhard Schulmeyer said the Internet "is an industry which is exploring unknown dimensions; we need limitations."