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The Internet Economy

Richard C. Beaird, Senior Deputy Coordinator for International Communications and Information Policy
Remarks to the American Bar Association, Section of Business Law Annual Meeting
New York City
August 9, 2008

I would like to thank the sponsors of this panel–particularly Henry Judy and David Satola–for the opportunity to be here today with my distinguished colleagues, who are certainly expert in the area of Internet governance.

I have offered a personal view of the key international developments that have formed the basis for the debate on Internet governance in my prepared remarks for the ABA’s Business Law meeting in Dallas this spring. In those remarks, I made the point that the United States Government’s goals have remained remarkably constant from the period dating from the late 1990s: ensure stability of the Internet; support competition and consumer choice; rely on private sector to perform the technical management of the Internet; and ensure international input in decision-making.

In this connection, I reference the letter of July 30, 2008, from Acting NTIA Administrator Meredith Baker to Peter Dengate-Thrush, Chairman of the Board of Directors, ICANN, in which Ms. Baker lays out the Government’s views with respect to improving institutional confidence in ICANN. Among other relevant points in the letter, Ms. Baker cites the 2005 U.S. Principles on the Internet’s Domain Name and Addressing System. These Principles are well known within our community:

  • The United States Government intends to preserve the security and stability of the Internet’s domain name and addressing system (DNS);
  • Governments have legitimate interest in the management of their country code and top level domains (ccTLD);
  • ICANN is the appropriate technical manager of the Internet DNS;
  • Dialogue related to Internet governance should continue in relevant multiple fora.

For the purposes of my remarks today, I would like to focus on the role of the Internet in shaping the Internet Economy. In doing so I will focus on the recent OECD Ministerial on the Internet Economy held in Seoul from 17-18 June. This was the first OECD Ministerial ever held in Asia. The last OECD Ministerial on information and communications technology was in Ottawa in October 1998.

In 1998, we spoke of a Ministerial devoted to “A Borderless World: Realizing the Potential of Global Electronic Commerce.” In 1998, we said, “OECD governments recognized the importance of collaboration among governments, and with business, labor and consumers in the development and use of electronic commerce, and the need for co-operative approaches to its application across sectors and national borders.”

But in 2008, the scope of our vision was significantly different. In 2008, in Seoul, we spoke of “The Future of the Internet Economy.” OECD governments stated their “common desire to promote the Internet Economy and stimulate sustainable economic growth and prosperity by means of policy and regulatory environments that support innovation, investment, and competition….” Ministers also stated that they were “determined to work together to promote ubiquitous access to ICT networks and services enabling widespread participation in the Internet Economy.” And with confidence, governments stated their belief that “the further expansion of the Internet Economy will bolster the free flow of information, freedom of expression, and protection of individual liberties, as critical components of a democratic society and cultural diversity.”

OECD governments adopted the Seoul Declaration, and an additional nine non-members joined with their OECD colleagues in its adoption. Included among the non-members were India, Egypt, Indonesia and Senegal.

Drawing upon the conclusions of the Seoul Ministerial, I would like to adapt the working definition of Internet governance, offered in 2003 at the Geneva phase of the World Summit on the Information Society, to the results of the Seoul ministerial. I would like to focus on the Internet’s impact, not the impact of Internet governance, but the Internet’s impact, on “the development and application by Governments, the private sector and civil society, in their respective roles, of shared principles, norms, rules, decision-making procedures, and programs that shape the evolution and use” of, not the Internet, but the Internet Economy.

There were two documents that came from the Seoul Ministerial. Both the Declaration adopted by Ministers, and a supporting document entitled, “Shaping Policies for the Future of the Internet Economy” were conveyed by the OECD to the Ministerial. Based on these two documents, an understanding of the OECD governments’ perspective emerges on the Internet’s impact on their economies. These two documents also offer an understanding of their vision of the Future of the Internet Economy.

But first what is the Internet Economy? It is, in the words of the Ministerial, “the full range of our economic, social and cultural activities supported by the Internet and related information and communications technologies (ICTs).”

The Internet as supporting infrastructure
As technology evolves and services become ever more innovative the Internet has a considerable multiplier effect on the economy. This point cannot be separated from the uptake of broadband. First, OECD studies have found that “broadband networks allow the expansion, aggregation and globalization of markets” and as goods and services become more customized then productivity gains increase. Second, broadband and networked ICTs can “address challenges such as making government services more accessible, improving health care and providing access to quality education and better managing the environment.”

The ministers in Seoul understood that these well-held views of OECD governments need further evaluation. Reliable indicators and metrics are still a goal. The great “diversity of IP-based networks,” and of economic and social information flowing over these networks, is a challenge to the development of reliable statistics. The development of these statistical techniques is vital for the full social and economic benefits of the Internet to be understood.

Benefiting from convergence
In Seoul, OECD Ministers spoke of “ubiquitous networks,” of sensor-based environments, and of the “Internet of things.” At the core of this discussion is the expectation that next-generation networks and convergence will enable voice, video, data services and sensors to migrate towards Internet Protocol platforms. This migration brings further change and challenges. The OECD called for a reassessment of the “applicability of existing regulation to encourage investment by the private sector and competitive choice in the marketplace.” In addition, the OECD noted that in this robust Internet environment “all devices connected to the Internet need IP addresses to communicate.” Therefore, Ministers highlighted the importance of policies related to the management of IPv4 and the deployment of IPv6.

Promoting creativity and innovation
The Seoul Ministerial began at a familiar point: “As a major depository of information, the Internet also facilitates co-ordination and co-operation among researchers and entrepreneurs, linking the creativity of individuals and allowing organizations to collaborate, pool distributed computing power and exploit new ways of disseminating information.” From this point, the picture becomes both more exciting and more challenging. The Internet and ICTs are “profoundly changing” our understanding of the methods of research and the rules of creativity. The new forms of networks involving grid and cloud computing, virtual simulation, and virtual worlds links “science more closely to business, and facilitates the development of informal creative networks.” Understanding this growing development, ministers encouraged “universities, government, public research users and business to work together in collaborative innovation networks.” However, Ministers were also aware that the new environment for creativity and innovation with its “new collaborative Internet-based models and social networks” must also “recognize the rights of creators and the interests of users.”

Building confidence
Ministers were clear in Seoul that as the Internet is integral to the global economy, “its continuous availability, reliability and security are vital to governments, businesses and individuals.” A “global culture of cyber-security” is needed to protect critical information infrastructures, personal identity, and privacy, as well as protection of consumers and the vulnerable in our societies. Heightened forms of cooperation are needed to “reduce malicious activity online.” This can be accomplished, Ministers agreed, “through reinforced national and international co-operation among all stakeholder communities in their steps for effective prevention, protection, information sharing, response, business continuity and recovery.”

We have selectively examined the Seoul Ministerial’s understanding of the variety of transformative effects that the Internet is having on our economy, society and culture. How should future policy agendas address a phenomenon that is unprecedented? Ministers in Seoul spoke of reassessing current policy instruments and best practices, of research on the impacts of the Internet, of improving techniques of measurement, of supporting cross-border co-operation, and reviewing within 3 years of its adoption, “the progress made at national and international levels in light of this Declaration.”

The Ministerial observed that “as the Internet now serves more than one billion users, the world’s economy is now an Internet economy.” If we return to the theme of Internet governance and its future, the Seoul Ministerial offers much to consider. We all know that the Internet is based on a distributed design and decentralized control. New applications and services are always emerging – many call this creating value or innovation at the edges. The extent to which the Internet itself mirrors the economy as a whole conjures an image that will not diminish but will become richer as the future unfolds. At the core of the U.S. vision of Internet governance is stability, competition, multi-stakeholder and international dialogue. This has been the case from the beginning in 1997 and remains so to the present. This vision has proven resilient. There is every possibility that the U.S. vision will remain resilient, as the Internet continues to foment change, and continues to shape the future of the Internet Economy.

Thank you.

Released on August 12, 2008

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