Professor Ed Leahy:

Thank you all for being here today. This is a great honor for me, because Larry Irving is an old friend of about ten years standing now, and someone who I desperately wanted to get for last semester's International Telecommunications class. However every time I called him he was in Rome, or in Paris, or in London, or in Athens, or in India, or in Tokyo. So, when I realized I wasn't going to get him for last semester's class, I said `I'd like to get two things from you.' I said `I'd like to get a commitment that you'd come to this semester's class in International Telecommunications, and a secondary commitment that when you leave your job, I get a recommendation to take your slot.'
Although that isn't always as much fun as it's cracked up to be, having done it for twenty-seven years. Larry and I got to know each other in 1987 when we both worked together on the House Telecommunications and Finance Subcommittee and Larry had the office next to me. So I could hear him talk to the presidents of CBS, NBC, ABC and tell them in a nice, diplomatic, absolutely firm way what we were going to do and how they were going to follow. And they were going to like it. At least they were going to like it publicly. Larry knows more about international telecommunications than anyone else in the US Government. Flat out, he knows more about international telecom than anyone. He went to Northwestern for undergrad, went to Stanford Law School, got out in, don't tell me. . . 1979. He went to work for a law firm, Hogan and Hartson in Washington DC, and then how many years later? 2? No 3, went to work for Congressman Leland of Texas for about four years and then went up to work for Congressman Markey for Massachusetts when Ed [Markey] became chairman of Subcommittee on Telecommunications and Finance. And then when President Clinton was elected, Larry was appointed head at NTIA, National Telecommunications Information Administration, and made Assistant Secretary of Commerce. Having worked with him I can say that he not only brings a lot of smarts, a lot of native intelligence, and a lot of experience to the job, but one of the reasons that America has been so profoundly successful in international telecommunications in the last three to four years is because he also brings a lot of integrity to the job. He has done a phenomenal job for this administration. As I said he knows more about international telecommunications than anybody you're going to talk to. And without any more, Larry Irving.

Larry Irving:

Thank you. This may be the most fun part of my job, is getting to talk to people. Following Ed is hard, because Ed is slow, and dispassionate and intellectual. I am from Queens. All that means, and most of that means I am frenetic and a little crazed. And I talk in hyperspeed, and I don't drink coffee for that reason. You may notice, I stay away from coffee and sugar, even at nine o'clock in the morning. I do all this travel without caffeine, which drives a lot of people crazy.
Now listening to Ed talk about me knowing more about international telecom than anybody in the US Government may say something about the US Government; I'm not sure it says much about me. It has been a great ride. I came into the administration right after the election. I joined the transition team from Ed [Markey]'s staff in November of 1992. And what was amazing about that opportunity was, this is an administration that cared from day one about these issues.

I've got some handouts and I was going to bring some techie stuff and my laptop and do PowerPoint, and then realized one, I didn't know what the capabilities here were, two I didn't feel like having a bad back; I didn't feel like carrying my laptop. So instead I carried this, which is heavier than my laptop. It didn't really make sense, but I want to show you something. This is really the preface to what I want to talk about. It really is just some charts, and it will take about three minutes to run through them. I want to give you a sense of why Bill Clinton and Larry Irving and Bill Haley and Al Gore care so desperately about what's going on in global telecommunications.

So I'm looking at these charts, in which you'll notice a couple of things. First of all, that every one of these charts is in a straight line up almost. You're going to see more happening in telecommunications over the next four to five years than you've seen in the last decade, and this has been a phenomenal growth decade. First chart you look at shows you telecom industry equipment services projected in the year 2000. [Chart 1] I just got back from China, in December I'm going with the Secretary to India. There is tremendous investment opportunity in China and if you look at these statistics, a few of you know, you'll hear a lot of statistics from me cause I love statistics. They illustrate things. Forty percent of the world's population lives in Indonesia, China, or India. Fewer than six percent of the people in those countries have telephone service right now. What that means is - and they are building in China an RBOC [Regional Bell Operating Company] a year. In other words, they are building the equivalent of NYNEX every year in China and have been doing it since 1991. Fifteen million telephone lines in China every year, and they've been building it for the last five years and they're going to continue I think. There are some problems there. Because even with their growth, they are still not going to have more than twenty-five [percent] telephone penetration if they keep the monopoly system. But it is amazing that a country can build the equivalent of NYNEX every year and sustain that growth for at least two or three decades.

If you look at wireless, telecom revenues are going right up. [Chart 3] [Chart 4] When you look at world-wide web users, what's amazing is that North America is estimated to maintain its lead. I think that that's a little bit wrong. I actually believe that Asia and Western Europe, those current lines [in the graph] are actually understating what's going to happen. That's graph five. [Chart 5] In terms of what's going to happen. In graph six, which shows world-wide web sales in 1998, I also believe that's an underestimate; I'm certain that 1997 was an underestimate and I'm pretty sure that 1998's an underestimate. [Chart 6] You're going to see more sales on the world-wide web than they predict. Revenue outlook on total internet services, I think that's also wrong. That's graph seven. [Chart 7] And when we look at the Cyberleague, computers per 100 people, I think the United States is going to continue to out-pace most nations with regards to computers per one hundred people. [Chart 8] But you're gonna begin to see that change also. Countries like Finland, Great Britain, Australia, they may catch us or exceed us in the near term because they are very very focused on what's happening in Europe with this new electronic commerce. Electronic Commerce Turnover Business to Business Forecast, one hundred sixty billion by the year 2000 is the most optimistic, by a group called IDC, that's graph nine. [Chart 9] Absolutely positively [I] think that's an understatement. I have nothing to base this on except having watched what's happening with the web, but there is no way you're only going to have one hundred and sixty billion dollars in business when Cisco is selling a billion dollars worth of routers this year. That is not going to happen. We're going to see much more than one hundred sixty billion business to business. Cisco doesn't sell a lot of routers to individuals. If they're selling one billion right now, trust me, you're going to see a lot more than 160 billion by the year 2000.
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Electronic Commerce: In terms of the Consumer Forecast, there's no way it's only going to be a ten billion dollar business by the year 2000, particularly when people say they're going sell 1.6 billion records on-line by the year 2005. [Chart 10] CDs alone are going to be at 1.6 billion up from eighteen million. This year we're gonna sell eighteen million records on-line. For 1996 they sold eighteen million records on-line. They are expecting 1.6 billion records on-line in 2002 or 2005, in that frame. You're going to see consumers [buying] on-line a lot more.

The next chart I think is kind of interesting because it kind of shows internet connectivity and where the great opportunities are. [Chart 11] Finland's got about one server per twenty-five - one link per twenty-five people. US is second, Australia is third. But look at Thailand, Indonesia, China and India, and a tremendous opportunity is there. When you talk about those numbers, that graph is going to compress and shrink if they get telecommunications policy right. We're going to work with them to get it right. And if you look at Households and Internet Access, we're still showing in 1996 about two thirds of the people on the net, in the household access to the net, in the United States, that's expected to grow from twenty-three million to about sixty-six million over that four year period, and Americans will still have about fifty-eight percent of households. [Chart 12] I think that's going to be wrong.

One of the things you have to remember, about forty percent of Americans have computers at home, only fourteen percent of Americans are hooked up to the internet at home. Now everyone of you when you leave school is going to get hooked up to the internet. You're going to have internet access, you are going to. It is not going to change. My grandmother, just this weekend, called me. Her husband, my grandfather, at eighty-three years old went out and bought a WebTV They bought a WebTV for a very simple reason. They wanted to be able to get in touch with their grandchildren and great-grandchildren. My nephew's at UVA. They wanted to talk to my nephew at UVA. He is never in his room. His mother, my sister, uses the internet to contact her son. My grandmother, who loves her grandson, wants to contact her grandson. For ninety-nine dollars, after the rebate, they went out and bought themselves a WebTV Three hundred and ninety-nine dollars this Christmas, my mother will probably get a WebTV, because now that Granny has access to her great-grandson, my mom wants access to her grandson. . . . Things like WebTV, network computers, the fact that all of you are going to have p.c.'s, I think are going to drive the numbers in terms of electronic activity up, and I think it will drive electronic commerce up. Because people get familiar and comfortable with using these products, they're going to want to use technology.

Personal Computer Shipments. [Chart 13] Again, if you start looking at what's happening in the United States, Western Europe, Asia and the rest of the world. All of those numbers are up. Generally almost geometrically, sometimes exponentially. And this overview of industry growth that I really kind of want to start talking about before I start talking about policy. [Chart 14]

There is nothing that's going to improve our economy quite like technology. Thirty-two percent of our GDP growth in the last year came from information tech industries, consumers and businesses are spending about two hundred and eighty-two billion dollars in info technology hardware alone. When the market went south on Monday, technology stocks went south. I'm from New York. I'm a New York chauvinist. I believe there's no place quite like New York even though I'm in Washington. And, it troubles me to say this, but it is honest to say this. Our economy is Silicon Valley based. There is no place in our country as important to the economy as Silicon Valley, not withstanding Redmond, Washington. Microsoft has a market cap exceeding the combined market capital of all three of our big three auto companies. Chrysler, GM, Ford market capital combined does not equal Microsoft market capitalization. In Silicon Valley, five companies that none of us have ever heard of before, five companies Intel, Sun, Netscape, Yahoo, and Oracle combined exceed the big three auto companies. Now ten years ago, none of us had ever heard of those companies, and yet they are the drivers of our economy. When you look at what's happening, the publicly held technology companies in and around Silicon Valley approximate the value of the French stock market, just Silicon Valley. . . . Silicon Valley is the largest exporting county in the United States, that's including all of Manhattan, and all of the county that the car automobile manufacturers are, Silicon Valley out-exports them and that's without taking into account software, because software is counted as a service, not a good. This is why the Clinton administration is very focused on electronic commerce. Because our standard of living as a people is going to be very dependent upon what happens in that part of the world. When you think that in Silicon Valley, sixty-two millionaires are created every day. Every day, three hundred sixty-five days a year, sixty-two, freshly-minted new millionaires are created in Silicon Valley and when you realize that a Valley company goes public, about every five days, you begin to realize what a phenomenon that is. Forty-five percent of US investment growth last year was a result of production of computers and semi-conductors. That's an amazing statistic. I mean, when I start looking at what we're looking at and why we're doing it.
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Now, where does electronic commerce fit into this? Let me give you a couple of statistics, and then I'm going to start talking a little bit about policy. Insurance industry. I read a report on the insurance industry. If you're doing marketing expenses. Market expense to sales. You have about twenty-five percent market expenses ratio if you use agents. You have about eighteen percent market expenses sales if you use direct marketing. You have a ten percent for direct response, but five percent if you do your marketing on the internet. This is about one fourth the expenses to use the internet as it is to use an agent. Or, we talk about financial institutions and transactions. . . Booz-Allen did a study: If you go to a bank, it's about a dollar and eight cents. Over the telephone, it's about fifty-four cents per transaction. If you use PC software, it's about twenty-six cents per transaction. Use the internet, it's about thirteen cents per transaction. Again, almost orders of magnitude savings by using the internet as opposed to using traditional means.

We're talking about, right now, by the year 2001, a minimum of three hundred billion [dollars in] commercial web site revenues. Last year if you went on Yahoo and had the advertising things coming across on Yahoo, about eighty-five percent of the ads were for [computer] hardware and software. This year, one year later, about eighty percent of the ads on Yahoo, what are they for? General merchandise. General commercial merchandise. Now, there are a lot of issues there. One of the things I'm not crazy about, and I'm going to talk about this a little bit, is that Yahoo kind of can figure out where I'm going and where I've been, so I come back to Yahoo and they know I've been to ESPN Sports Zone and I'm in the rotisserie football league so I spend a lot of time in the ESPN Sports Zone. When I come back all of the sudden, and they know that I'm in the New York Giants page, they can, if they want to, target to me, and send me information about the New York Giants sweatshirts that happen to be on sale. I not sure I'm excited about that. But I do know that it is a great opportunity to get more sales of New York Giants paraphernalia.

Cisco last year, as I mentioned, did one third of their sales on the net, one billion dollars of their sales last year were internet sales. There is a company called ________. They were able to cut their telephone bill from one thousand dollars a month to one hundred and fifty dollars a month by placing its orders over the internet. One of Cisco's customers spent about one thousand dollars every month on average, talking to the people at Cisco about their needs. When they started using internet for those same communications, they cut their cost by eight hundred and fifty dollars per month. It's not a bad thing for a small company that is trying to find ways to cut costs. Let's talk about some other people doing things on-line. Schwabb manages fifty billion dollars of assets for one hundred thousand on-line accounts. Fifty billion dollars of assets for about one hundred thousand on-line accounts. And when you start thinking about Nick Negroponte up at MIT, saying that there will be one trillion dollars US traded over the internet by the year 2000, I think Nick's a little high. But, it's the fact that somebody can actually utter the words "one trillion" and be [credible]. . .

How many people use the internet for e-mail? How many of you used the internet for e-mail five years ago? How many of you used it daily five years ago? How many used it daily seven years ago?

[One hand is up, from a student who explains that he was a software engineer.]

My wife is an engineer. It scares the devil out of my wife that the President is a lawyer, the Vice President attended law school, the Secretary of Commerce is a lawyer, the Assistant Secretary of Commerce is a lawyer, and we're the nation's chief technology officers. Frightening thought. If you're looking to aspire to the technology bit there is another way to go. She's an engineer with an MBA and everyday I come home and she shakes her head and goes "Our country is being run, all the technology, run by lawyers. No wonder it's such a mess." But, this year (and I'm trying to make sure this number's right. Vincent Cerf, by the way, disagrees with this number and he's going to do his own cut), there will be 2.7 trillion, with a "T," e-mails exchanged around the world. 2.7 trillion, with a "T," e-mails exchanged around the world this year. That's a phenomenal number. . . . I love Ed Markey. Ed Markey has a technology vision beyond any. I never sent an e-mail the entire time I was on Ed Markey's staff. I left his staff. I will go home today to three hundred e-mails. I left last night, will go home to three hundred e-mails. I don't filter them. I do them myself. I don't have a secretary, I don't filter them, I go through them. If I'm gone a day, day and a half, I will have three hundred e-mails. And that's how a large part of my day is spent. First hour of every day, middle of the day, and end of the day, I have to have at least forty-five minutes to an hour to go through e-mails. And most of them I can dispose of pretty quickly. It's stuff I don't care about. And I'm on a lot of listservs. And I get a lot of stuff pushed at me. You know Wall Street Journal, WiReD, they all have these new little e-mail news clippings and I get all of that stuff, so I can get them pretty quickly. Print out the ones I think I might want and go through the rest. But it's just amazing that, you know, for somebody who didn't use e-mail before, I'm getting three hundred every day. Two thirds of ________ companies now have sites, but only three percent have figured out how to do business-to-business on them. And, as I mentioned to you, we're talking about 1.6 billion records sold on-line by the year 2002, according to the recording industry and that's up from eighteen million.
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That's going to change a whole bunch of things. And that's what this administration's been trying to focus on. We're really trying to focus on the policy. I mean with all those numbers and all that opportunity, we try to figure out what we should do. And the President, I think to his credit, figured one thing we needed to do in this country was we needed to reform our telecommunications laws. I don't think they've been the success they need to be. I don't think they're the success they should be. I'm concerned about what happened domestically. Because I think what happened around the world really turns on what happens in this country with regards to telecommunications. We are the leaders. When we started liberalizing here in this country, we were going to open our own market to competition, we believed that certain principles should be adhered to. Had we not had telecommunications reform in the United States in 1996, we would not have been successful in reforming the World Trade Organization's rule in regards to telecommunications services globally in 1997. There was a quid pro quo almost. The rest of the world was watching. I was part of the team for the President that helped to define what our domestic laws were going to look like. For good or for bad, if you see more concentration, or you don't see your prices go down, you can send nasty e-mails to me.

But I will tell you the fact that the United States said that the only way to get bandwidth, and what this really is about is a race to bandwidth. These numbers that I'm talking about, the reason I think those numbers that I think are going to go up exponentially, is because when I started using the web, I had never been on the internet when I took this job. The country's chief technology policy person (at least one of them, for the President, Vice President, Secretary of Commerce are certainly superior to me, and they all have that portfolio as well), I had never been on the net. In 1993, as most of you know, the net was basically a text-based kind of a operation. [In] 1993-94's web we started seeing a little more graphics. By 1994-95 we started seeing audio. And all of the sudden you had some pretty robust audio, things like liquid audio and RealAudio, and other things. By 1995-96 you started seeing video over the internet. Now, I like the fact that when I'm in Singapore, when I'm in Washington, I can pull up the Singapore News. On-line is eight minute clips every day. I like the fact that I can sit at my desktop and either watch C-span on t.v. or watch C-span on-line. I like the fact that if I'm over in Singapore I can pull up National Public Radio with my laptop. Got a sound-card, if I can find a line that's robust enough, I can get in, use my RealAudio software and pull in National Public Radio and find out about the United States. I love that. But I hate that fact that it's so slow. And I hate the fact that it's bursty, and I hate the fact that it's all torn up. And the reason is that we don't have the bandwidth. If you're really going to grow the net, the way we can grow the net, it's got to be about building up bandwidth.

But how do you get bandwidth? You can either let the monopoly provide the bandwidth (and as you see neither the cable industry nor the telephone industry as monopolies have done really what they should be doing), or you can create a competitive model. What we're trying to do is get the wireless companies, the satellite companies, the cable companies and telephone companies competing in this market to drive bandwidth up and drive prices of that bandwidth down. In Washington DC we have five or six on-line providers. We've seen a thirty-four percent reduction in the last two years in charges for cell phones. Where you have competition, prices usually go down. You have an innovation, you get more bandwidth. It's true here. It's going to be true globally. And we've got to create that competitive environment. But ninety-five percent of the countries in the world (and 47.2 percent of all statistics are made up); but ninety-five percent of the countries in the world have basically monopoly telephone providers. And that monopoly telephone provider generally is a cash cow. The reason you see so little willingness to open up telecommunications markets is because it's a way to get hard currency for developing nations.
And then there's another issue that we have to talk about when we're talking about developing nations. In the United States we had a social policy for sixty years. If you lived in urban America or you were a business person, you were going to underwrite the cost of people who lived in rural America and or residential residents. We have ninety-four percent telephone penetration. When I go to India and I say, "You know what you really need, Sir, Mr. Minister, what you really need is competition. What you really need is to open up your market. What you really need is robust competition, to drive prices down and drive bandwidth up." He says, "Well, Mr. Irving, I like you a lot. You seem like a nice guy and I'm sure you're well-intended, but for sixty years you had subsidy system to get to ninety-four percent and you're telling us today we've got to turn on our heads and go to a market-based system. Aren't you being just a little bit disingenuous?" And I am. And I tell him, "Yes I am. But sixty years ago we didn't know what we know today. And sixty years ago you didn't have engineers in Bangelor who are doing engineering work for companies in either Bonn or Silicon Valley." There are literally projects right now that I know about where a software company will have people doing work twenty-four hours a day, seven days a week, three hundred and sixty-five days a year, on-line. They're just flipping it. When one group goes to bed, another group takes it up in Bangelor. And when Bangelor goes to bed it goes to Germany. And when Germany goes to bed it comes back to Silicon Valley. And they're floating it around the world. Well, if you're going to do that, if you're going to grow your economy, if you've got one hundred thousand software engineers a year that are graduating out of just a couple of schools in India, they're going to have to keep them employed, they're going to have to have robust telecommunications systems. We're going to have to find a way to make sure that system works. And you're not going to do that with the kind of tired system we used for sixty years. It doesn't work anymore. Those are the kinds of debates that you have to have.

I'm going to talk to you a lot about telecommunications. I'm going to give you some statistics (and these are not made up statistics, these are from IT and I can show you where I found these statistics), and these statistics frighten me and they scare me because it shows you how far away it's going. Each one of us uses e-mail. Each one of us has a computer. Each one of us uses technology. If you go around the world, fifty percent of the people alive on this planet as I'm speaking to you right now have never used a telephone. Half the world, half of the world has never used a telephone one time. Half the people alive on this planet as I'm speaking to you right now, one half the people on this planet right now have to travel two or more hours to get to the nearest telephone. Eighty percent of people on this planet do not have a telephone at home. If you go to Africa, between the Sahara desert and South Africa, take the country's average phone density, the average telephone penetration rate is one percent. One percent telephone density, on the continent of Africa. It ain't much better in India; it's about 1.5 percent. Not much better in Indonesia; it's about four to five percent. It's only 7.5 percent in China because they've made a massive investment. For all the things we're talking about there's a lot that has to be done. So we can sit here and talk about global electronic commerce. What happens when those numbers are seventy, eighty, ninety percent of people [who] have access to the telephones? Or the internet numbers are much worse. I mean, about ninety-nine percent of the people in this planet do not have a computer at home, and 99.9 percent don't have internet connectivity at home. Those numbers are off the chart. The point I'm trying to make is that those numbers are going to change, because we're seeing competition. We're seeing those systems build up. What happens to global electronic commerce when those numbers do change, when more people have access to telephones, when more people have access to the internet?

There are kiosks - I just got back up from China. You can go to the Great Wall in China, and you can go downstairs, and you can get on the internet, and you can get onto everything but about one hundred and eighty sites Chinese government won't let you into. But, you can do almost anything else you want to on the internet out in China. China's going to build a couple of different things. There are thirty internet providers in Beijing. There are two in a city called Dalyan. I'd never been to Dalyan before. I went to Dalyan. I talked to this young entrepreneur about twenty-eight years old. Very hip; knew more than I knew about the internet. He was saying, "I'm going to compete against MPT." I'm not sure it's going to be successful competing against the Ministry for Post and Telegraph in China, but he's going to try. And he's going to try to create fast modems and he wants to talk to the US cable companies and wanted names and numbers of people who might be able to get him fast modems. I agree with him on technology. If I can get a faster pipe, then people want me instead of MPT, which is not building a faster pipe, [but is addressing] universal service obligations.
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But for every nation it's a trade-off, and for us, those of us in government, we've got to focus on the fact that all this electronic commerce stuff is wonderful. It's amazing. It's great. We need to do it. We also have to focus on the fact that for a lot of nations, getting basic telephone connectivity is their first priority. But what I try to explain to them is that when they get high bandwidth, I can do things for them in agriculture. I can right now go on-line if I was in Gaborone, Botswana. There are two internet providers in Gaborone, Botswana. I've never been to Gaborone, Botswana, but I brought some baskets back [from Gaborone]. I happen to like the baskets I bought back from Gaborone, Botswana and gave them to friends and family as gifts. I have more friends, I guess, than I thought I had, and several people I didn't give a basket to heard about the baskets and wanted a basket. Well Christmas is coming and I had to have more baskets. I went on-line to Botswana Crafts. You can order baskets from Botswana on-line. I've not been to Morocco but I happen to like crafts. I just ordered some rugs for somebody else for Christmas. They're not going to get baskets, they're getting rugs, from a Moroccan rug-weaver that I found on-line. I travel to Mexico in this job about four times [a year]. I happened to find a potter I like. She now sends me e-mails and I can go to the gallery that has her work, Blue Rain gallery in Taos, New Mexico (wonderful gallery, I should send you out there), and I can order her work on-line using the internet. Well, for each of these people what does it do? It cuts out the middle-man to some extent. Because for me to get Theresa Youngblood's (or her sister's because Theresa's stuff is way beyond my price limit) work, if I go to a gallery, it's a mark-up. If I go directly to Theresa and her family-owned gallery, the mark-up's not as high. And imagine for the Moroccan rug-weaver. They can sell me a rug out of Morocco for twenty-five bucks. By the time I get it into the United States it's seventy-five, eighty one hundred bucks because of the middle man. Cut out the middle man, she sells it to me for forty, and she gets more money than she's going to get normally, from her wholesale price, and I get it cheaper than I'd pay for it retail. They're beginning to get disintermediation because of the internet, cutting out some of the middle-men and creating new opportunities. That's what I think you want to do. I think that's what policy should be trying to do. Get people out there to create their own wealth, their own opportunities. And that's what we're all about.

Let me talk a little about policy, because we in the administration spent about a year trying to figure out what are the right ways to get electronic commerce going in this country. What is the right way to get it going in the world? How can we provide some more leadership? I think we've done a pretty good job. In 1993, September of `93, we came out with something called the NII Agenda for Action. [We] came up with the National Information Infrastructure, one the worst terms in history. I have the worst title in government. The Assistant Secretary of Commerce for Communications Information and Administrator of the National Telecommunications Information Administration. We have followed that up with calling things like the "National Information Infrastructure." The "Information Superhighway." Bricks and mortars, things that are not soft and warm and fuzzy. But I think we made a mistake a little bit in doing that. Please don't tell the Vice President I said that. He happens to like those terms. But I think we've made some mistakes by not relating them to people. I think one of the things the Europeans did that was very smart was to talk of the "Information Society." People, warm, fuzzy, what does it mean to you and me? And I really think you've got to break all of this jargon down to things like "how does it affect you?" You can understand this. You might want to buy something from the Moroccan rug weaver. I can find you everything from hot sauce, to records, to New York Giants , to season's tickets to the Washington Wizards, if you happen to be a Jawan Howard fan (and I happen to like Jawan but don't like Chris). But I mean, you can do all those things on-line. If you explain to people how this works for them, I think it matters a lot more. When you talk about things like infrastructure, I think it doesn't matter. But we did a thing called the "National Information Infrastructure." We laid out some principles. We talked about how we're going to get to where we want to get as a nation. We talked about things such as flexible regulatory environment, universal service, open axis, competition and private sector investment. And we kind of laid a marker for the rest of the world. We followed up the next year with something called a "Global Information Infrastructure Agenda for Cooperation." And we began to talk to the rest of the world: `this thing only works if all of us are connected.' . . . The reason electronic commerce works is because everybody gets what's in it for them. This year we decided we need to talk about a Framework for Electronic Commerce. If we're really going to do something with electronic commerce, some things need to be done. We believe the Government has to be out of the way. We also believe the Government can be a catalyst for change. Let me talk about some of the principles.

The first principle Al Gore and Bill Clinton have we call the `Internet Hippocratic Oath.' First, do no harm. Nothing we do - not the hypocritic oath, the Hippocratic oath - first do harm, we're trying very hard not to screw this up. Most of the wealth creation, most of the opportunity, most of the technological advances, why are they happening? Because we haven't regulated. Take something like internet telephony - But let's say somebody tried to regulate internet telephony. We'd have screwed it up. One of the things that's happening, because no one is regulating it, [is that] people are investing. So internet telephony, which was a hobbyist's dream three years ago, is now real, and it may cost something between one and three billion dollars worth of telephone revenue from the telephone companies into internet services. You're going to see some of the major companies AT&T, Deutshe Telekom, France Telecom, they're going to lose money because of internet telephony. That means you're going to save money. If I've got a friend living in Botswana, and I now do, and I want to call him or her, I've got a choice. I can use internet services now and make a telephone call from a [local] phone call. Pick an eight hundred number, call, and use the internet to make a telephone call to him or her. Or I can use the on-line carriers. Now if I use calling him over the internet to make that phone call, I get some latency. You get that little bounce you get when you don't have a satellite and it's pretty bad latency. But if I'm just talking to a friend and it's not business do I care about the latency? If one is three or four cents a minute and one is seventy or eighty cents a minute, what am I going to do? I'm going to suffer some latency. I am willing to [say], `Hello,' [and] wait a second. I'll even say "roger" or "copy" or whatever in-between if it's three cents a minute. I am a government servant. I don't make a lot of money. Three cents a minute has a resonance as opposed to seventy cents a minute. . . . But who would've invested in internet telephony if they thought the government was going to regulate it? If you thought that all the sudden you're going to have Larry Irving, the FCC, state department, tax guy, in your door, you're not going to make the same investment. Deutsche Telekom invested in Vocal Tech, a company out of Israel. AT&T, GTE, all these companies beginning to try and figure out how they can become a part of internet telephony. If we strangle that baby in its crib, the internet telephony baby, we would never see it grow into what I think is going to be a competing adult against the traditional type of telecom providers.

Let me talk about the principles you're talking about. First, private sector leadership. We believe we have to leave to industry self-regulation and private sector organizations, the ability to develop governing mechanisms. Let the private sector lead. Let them figure out how to do it. We need to watch them and make sure they're not gaming the system. We need to make sure they're doing what they need to do. But we want them to lead. We want them to continue to push the technology. We have to refrain from opposing new and unnecessary regulations. We have to get out of the business of providing bureaucratic procedures. We do not want to put taxes and tariffs on that are going to stunt the growth. We have to make sure that when Government involvement is needed, that the aim is to enforce a predictable, minimalist, consistent and simple legal environment for commerce. If we could do that, I think people would like us a lot more. We are generally not capable in Washington, or in Boston, or in Albany of doing that. But that's what we should aim for. Consistent, minimalist, flexible, those are the kinds of things we want to do.

We need to know that government should recognize a new quality to the internet. It is a decentralized process. It is not something that any of us can really regulate. . . . You cannot really regulate the internet from any one place. I spend a lot of time trying to keep Geneva, and Brussels, and Washington with their hands off of the internet. But, you know, if you think nature abhors a vacuum, try a regulator. Any time something's not regulated, there's some guy, or gal, trying to figure out, "how can I become important and powerful by regulating this thing."
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Or, if you're fearful of something. . . one of the things about life you learn is when people are scared of something, they want to control it. And there are people all over this planet, people in this country who are scared of the internet. We made a mistake in the United States in my opinion. We passed something called the Communications Decency Act. We passed it when we didn't understand the internet. The Communications Decency Act was fundamentally flawed because it was a violation of the First Amendment Rights of the American people. And fortunately the courts found that. Now there was a robust debate within the United States government about whether this is a good thing or a bad thing. I'm not going to say where I came out on the debate. The Supreme Court said it's unconstitutional. So it is unconstitutional. We need to find ways to make sure that we protect kids from stuff on the internet they shouldn't have access to. But we shouldn't abridge the first amendment rights of adults in trying to find ways to protect our children. We have to find ways to use technology. And we're working with industry to find technological blocking agents and other ways to keep kids out of smutty places on the net.

The goals should be to facilitate electronic commerce on a global basis. It's not enough to come up with a US solution. It's not enough to come up with a European Union solution. It's not enough to come up with a South American solution. We've got to talk to each other. And those of us from government have got to realize that the needs of somebody in Bolivia are very different from the needs of somebody in Boston. That what you're talking about in terms of infrastructure - incomes needs, uses - all those things are different. You've got to be focused on, `what does he get out of it, or she get out of it' when I'm talking to this person. When I'm talking to the Indian Subminister for Telecommunications, what does he really need? What are his real objectives? When I'm talking to a guy from Ghana, what is the Ghanaian incentive to be a part of this electronic commerce? Wanting to build up the economy, but he's also scared to death [of what] we're going to become; I've been called a techno-facist. I've been a called an economic colonialist, because people think we're trying to impose our values, our culture, our way of life, and our companies on them. What I try to explain to them is, the internet is English-based today because sixty-six percent of the traffic on the net is the United States traffic. But you know, if you think about the fact that there are forty-four billion Asians, the likelihood is that it could very well have Asian language dominance in a few years if you get connected.

If you go to China, and you see the number of Chinese language sites, or go to France and see the number of French language sites, it's amazing. Now the thing that the French keep saying is that `you're going to impose your culture upon us because our children want your culture' and I'm saying, `it's a free market.' If a kid would rather listen to Bob Dylan than, and I don't know anything about French music so I can't give you any French artists, but if they'd rather. . . On-line right now, [I] can pull down anything I want to. Isn't that what every democracy wants? To give its people the freedom to do want they want to do? And that's what I try to explain. We're not going to impose anything on anybody. The Rolling Stones are a British group. I happened to go out and sit in the cold a couple weeks ago and watch a bunch of fifty year old guys in tight pants dance around the stage. It was my choice. Nobody made me do this. You know, the next time I'll download it off the internet. It was freezing out there. I didn't wear a hat which is when its cold you don't have a hat and you have my hair line, it gets really problematic. But, I mean it was my choice. It doesn't mean that the English are imposing the Rolling Stones on me because I have a choice. The same things are happening with the net. With a push of a button, you'll be able to get information from anywhere and any kind of content from any part of the world. For some people who believe that their cultures are being dominated by the US, that's a problem. But my theory is, `put your culture out there and [let them have the] culture people want. That's what a market-based society should be about. Not government saying, `we're going to keep something out because we think this is superior.' It's about letting the people in your country choose what they want to do.

We talk about areas where global agreements are needed. We're working on those. You've heard a lot about a tariff-free zone and no new taxes. And I am not an expert on tax and I'll tell you the things I'm not an expert on so you can ask me questions and I can say I already told you I'm not an expert on that. I'm not an expert on taxes. What we're talking about in regards to tariff-free zones is no new taxes. Don't tax internet traffic differently from how you tax other traffic. Now there are a lot of issues that Bob Rubin in the Treasury Department is gonna have to deal with and these are among them. How do we make sure that we don't come up with taxing regimes, or taxing regimes, that have the effect of stifling traffic on the internet. We don't want people to come up with specific taxes tied to the internet. We think that existing taxes should be paid. If I buy something from Land's End over an eight hundred number and Land's End has a facility somewhere near I may have to pay taxes. I know Neimann Marcus has a store in Washington, DC. If I buy something from Neimann Marcus in San Francisco and they ship it to me or I buy it from the catalog and they ship it to me, I pay DC taxes. If I shop at some other stores that don't have physical offices in Washington, DC, I don't pay sales tax. That's pretty much how it works today. I don't think we want to start [an] eight hundred number tax system; there is one, it works. I don't think we need a new different system for internet. I don't think we should pay no tax; if I pay for something it's for me to pay those taxes. But I shouldn't have a new tax regime set up.

The second thing we're talking about: electronic money and electronic payment systems have got to be developed. People have got to feel safe and secure and figure out ways to make payments on-line. Third thing is we're going to need a uniform commercial code for cyberspace. Absolutely, positively, one hundred percent agreed, we're going to figure out one way to regulate commerce once in cyberspace. We're going to have to come up with clear, effective, copyright, patent and trademark protection. And one of the things about music, there's a ton of music on-line. And if you are a recording industry executive, you are scared to death about how you're going to protect your copyright. If you're an artist you're scared to death. There are museums in Washington DC that won't build or put out web sites because they're afraid people are going to download it and they're going to steal the property of the artist. There are legitimate fears and we have got to figure out ways. If we're going to grow this technology, we've got to find ways to protect peoples' [property]. I'm not going to produce anything of value if you can put it on-line and then appropriate it, and sell it to somebody else. If I write a book, do I want that book on-line, and then have somebody else download it and then steal it, and have my work appropriated? No, I'm not going to sit around, in some New Hampshire hovel, writing my great masterpiece for twenty years that I can't sell in the bookstore. You've got to find ways to protect people's legitimate copyright. We've got to protect the property rights of individuals. The privacy rights of individuals.
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Privacy is a big thing for me. When I found out, about two years into my net surfing, that as I go into a web site every place I went before and every place I'm going after can be retained. When I started finding out that people know more about me than I want them to know when I'm surfing the net, that began to trouble me. So if I go into ESPN Sport Zone and then I go into Northwestern's area, and then I go into Stanford's area (my three favorite institutions in the world - the Giants are having a good year; Northwestern [and] Stanford alas are not); but I do go around and get a lot of sports material. I don't want people marketing to me because they happen to know that about me. But let's take something different. Suppose somebody in my family had AIDS. Or suppose I'm incontinent. Or suppose I happen to be gay. Or suppose I'm a member of a political party that's not in favor, and I'm surfing the net. And my on-line provider, or some other person, knows I'm surfing those sites. Does anybody other than me have a right to know that? Do I want that information out as a public figure? Is it information that anybody should have the right to either appropriate, sell, use or disseminate? Absolutely not. And we've got to find ways to insure that people's privacy rights are protected. We've got to make sure that the data that the these folks get is protected for consumers so consumers know what is being collected and consumers know what is being done with data that is being collected, or they have the right to say "don't collect that data on me." We've got to figure out, we've got to get this privacy thing right or people will never want to use the net.

Encryption rules. I do not do [work on] encryption. But encryption is a huge issue. And encryption basically comes down to: people want privacy, they want security. I want to make sure that a document that I send on-line is secure. If I'm going to do that right, I've got to make sure that there's some encryption. I agree with that. But then what's the rule of government? You know when Louis Freeh or the CIA, or the National Security Council [or the] Defense Department talks about encryption, they talk about wanting to make sure that no terrorist can use the net for the purpose of terrorism, no drug dealers can use it for the purpose of drugs, no criminals can use it for the purpose of crime. The argument always is, "Do you want blood on your hands if you don't come up with the right thing on encryption?" It's a very hard thing for an elected official or a policy maker to say "I'm going to err on the side of more commerce," when Louis Freeh says "If I have the right encryption policy I can prevent another world trade disaster. I can prevent another Oklahoma City. If you deprive me the ability to do what I can do right now over the telephone lines, I'm not going to prevent that." The fluke to that is we are losing dollars. And a fluke to that is what are legitimate privacy rights to Americans and people in the global community to privacy? I mean, these are very very tough thorny issues. I've sat through the debate. I don't have a silver bullet. Nobody has a silver bullet, which is why we've had four years of tough intense debate over what the right encryption policy in this nation should be.

We have to talk about modern, seamless, global telecommunications networks. And that's where the World Trade Organization Agreement on Basic Telecoms come into effect. [link to Senunas article] Sixty-nine nations said a couple things in February. They said we're going to have competitive markets. They said we're going to have independent regulators. They said we're going to have seamless networks the maximum extent possible. You have no idea the magnitude of the change. Four years ago, you would not have had sixty-nine nations in this world saying we're going to open up our telecommunications markets, and we're going to divest the ministry of post and telegraphs in our country from owning and running the telecommunications. It didn't happen. It took leadership. It took hard work. And I really think its going to benefit everybody in this planet with lower telephone rates and with more bandwidth across the globe.

Content. We've got to find ways to deal with content. We're talking about children. I happen to believe that we've got to do the right thing about our nation's children. I also happen to believe that it's not the Government's business to tell adults what they can and can't get on the net. This is going to be a very very tough issue. But there's one thing I think we're beginning to realize in Washington. It's not enough to tell parents and kids where their kids can't go. We've got to give choices. I'll give you an example. When I was a kid my parents had a certain place I can't go, "You Larry Irving can't go to certain kids' houses. Certain parks you can't go play in." Well, there were places I could go play. I couldn't go to Rodney Booth's house because my mother thought he was thug. I could go to Blair Compton's house because my mother happened to know his mother and liked him. For our kids we've got to find places that they can go, that are exciting places that aren't boring places, that keep their attention.

On technical standards. We've got to find ways to deal with technical standards, but again it's got to be industry-led. We in Government don't know a whole lot about technology. You know most of us are bureaucrats, most of us are lawyers. A lot of us know a lot about policy, not an awful lot about technical standards. Places like the National Institute of Standards and Technology out in Gaithersberg, Maryland and out in Boulder, Colorado, do know a lot. They can work with industry, but I don't want government mandating standards, particularly not in an area that's growing as fast as this. No one foresaw the web two months before the web was developed. No one foresaw how fast RealAudio and RealVideo and liquid audio and video live would capture the imagination of the American people. No one foresaw how fast internet telephony was going to take off, and if Government tried to manage standards for any of those, all we would have done is screwed it up. We've got to find ways to get that right.
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And one last area that we're really spending a lot of time on is domain names. We've really got to fix domain names. Right now it's a monopoly provider. We've gone from zero to two million, in terms of people who want domain names. The URLs. Trying to find a system that works, that gives people protection of, and if you're "Hertz" Company you want to make sure that somebody isn't stealing... that Fred Hertz isn't stealing your name and putting up hertz.com. If I'm looking for the Hertz company, I'm probably going to go to www.hertz.com. If instead I'm going to get Fred Hertz's auto repair shop and at Hertz Company I'm going to lose some dollars on that transaction. They have a legitimate right that they're going to be able to use their trademark and their copyrighted product. How many Pepe's Pizza's are there around the world. And so you know the first guy who's pepespizza.com gets it and every other Pepe's Pizza in America doesn't have an access. How do we fix this kind of situation? I'm not going to fix the Pepe's Pizza problem. I think we can fix the Hertz problem. But more importantly, we could fix a system that lowers the cost of domain names, ensures a competitive environment, and make sure the rest of the world feels they're fairly treated. And right now there is a big debate as to whether or not the existing system works. It doesn't work. It doesn't work well for lots of reasons but mostly because nobody knew how fast this was going to grow and how many different people were going to be on-line, and how many web sites there were going to be and how many different URLs we were going to need. We are right in the middle, as I'm speaking to you, and I won't be able to speak a lot to you about [this] because we're fashioning some recommendations for the President and Vice President on domain names. But I do know, I've spent a lot of time testifying on domain needs.

My goal as a Government official on this stuff is not to be the czar of the internet, not to be the smartest person on the internet, but to be a capitalist. What I think I can do best, what I think we should do best when we're in Government is to make sure that the private sector gets the opportunity to do what it does best, which is to innovate, to create opportunity, to create wealth, to create jobs. I don't want to do anything that stops this great miracle. I love the fact that in Camden, Maine I think it is, they held a conference where they attracted people like Ira Magaziner and Nick Negroponte, and other thinkers to talk about how states like Maine can use technology to help their indigenous businesses. How can they promote what Maine's about? How can they create more wealth in Maine using on-line technologies? Small and medium-sized businesses who capture the power of the internet, who capture the power of electronic commerce, are the ones that are really going to benefit. Yes, large companies will do well by this. G.M. is not going to go away because of the net. But think of the wealth and opportunities created if you have a niche product, and instead of having a market of all the people in Camden, Maine, you have everybody in the world who's on the internet over the next ten or fifteen years. That's what you want to do. You want to give that kind of opportunity to people. You want people thinking outside of the box, thinking new and novel ways of creating a product and getting that product out. I met [the inventor of WebTV] for the first time a few months ago. [He] had a vision as to how you could use technology to help promote video on-line. And that is a wonderful thing, WebTV. There have been lots of people talking for years about merging computers and television. At least one person I know and love decided he had a pretty good idea that ninety-nine bucks was a worth a shot. Now I really do think that it's going to change how we look at television. And if you look at television now and watch the ads, how many commercials have you seen recently that don't end with a `www.something, if you want information on our product.' That's with fourteen percent of this country connected. What's going to happen when fourteen percent of the world's going to be connected? What's going to happen when it's fifty percent of the world? And I think it will happen in your lifetime if not mine.

[fnA] Larry Irving is Assistant Secretary of Commerce for Communications Information and Administrator of the National Telecommunications Information Administration. A full biography is available at http://www.ntia.doc.gov/ntiahome/irvbio.html.