26 May 1999
Source: http://www.usia.gov/cgi-bin/washfile/display.pl?p=/products/washfile/latest&f=99052501.clt&t=/products/washfile/newsitem.shtml

USIS Washington File

25 May 1999


(Government looks for indicators for e-commerce) (2120)

Washington -- U.S. Commerce Secretary William Daley has opened a
conference devoted to finding methods to measure the impact of the
Internet, which he says will dominate the future economy.

"More and more people in the private sector are making what amounts to
billions of dollars in decisions about e-commerce. And they are doing
it without a reliable base of information," Daley said at the opening
of the Digital Economy Conference May 25.

The secretary said that many of the current economic indicators are
useless to help Internet-based businesses make informed decisions.

"The old pigeon holes don't work anymore," Daley said.

For example, the Commerce Department is starting to collect more
information about how retail sales are made. In the past, no one
wanted to know whether sales were made by knocking on a door, sending
a letter or advertising on a World Wide Web site, Daley said.

During the two-day conference, Daley said, panels will address a
number of topics crucial to spurring electronic commerce:

-- implications for small businesses. The Internet offers the
opportunity for small businesses to become huge international
operations, such as Amazon.com, AOL, and Yahoo. Daley said medical
establishments, also small businesses, are stunted by insufficient use
of the Internet.

-- access. The secretary said everyone must have access to the
Internet, not just the wealthier and more educated segments of
society. At present, white households are more than twice as likely to
own a computer than African-American or Hispanic households. "We can
not be the society we hope to be if whole segments are systematically
excluded," Daley said.

-- work force. At present, high-technology companies have trouble
attracting and keeping skilled workers. "Jobs go begging because not
enough people have the high-tech skills to fill them," Daley said.

-- organizational change. Daley says businesses must adapt their
organizations to Internet methods of sales, services and manufacturing
or cease to exist. "There won't be Internet companies and non-Internet
companies. A company will either be an Internet company or it will not
be a company at all," Daley said.

Following are terms used in the text:

-- billion: 1,000 million.
-- e-commerce: electronic commerce, conducted by means of the Internet
and computers.

Following is the text of Daley's speech, as prepared for delivery:

(begin text)

May 25, 1999

(Text as Prepared for Delivery)

They warned me the turnout for this conference kept growing like an
Internet stock. We maxed out on registration ... there's an overflow
room for people to watch on TV ... and we are broadcasting live on the

So let me welcome all of you to the U.S. Department of E-Commerce.
Obviously the turnout is a reflection of the importance of the
Internet. I absolutely believe in the history of commerce there has
never been anything like it.

I also believe we need to have a far better grasp on how it is
affecting the economy as a whole. President Clinton and Vice President
Gore wanted us to hold this meeting.

They know, as you know, more and more people in the private sector are
making what amounts to billions of dollars in decisions about
e-commerce. And they are doing it without a reliable base of
information. E-commerce is everywhere, and we want to do a better job
of tracking it, in government statistics. We want to better measure
what e-commerce means and doesn't mean to the economy -- so decisions
are not made in a vacuum.

To be frank with you, I don't expect this conference to end with a
nice neat set of conclusions. The questions we raise are too tough.
But we hope to achieve a better understanding of how to proceed from
here. Let me begin by saying later this spring, Vice President Gore
and I will release an up-dated report on the Emerging Digital Economy
-- showing its size and growing importance.

I released the first one last year, and we will make this an annual
activity. The numbers showed our country's incredible economy is very
much tied to information technologies. About a third of our growth has
come from information technologies. And the declining price of IT
products have lowered overall inflation by one percentage point or

Without getting into details, let me preview the forthcoming report by
saying this. I know nothing surprises all of the optimists on how
important information technologies are. But even you will be pleased
with the new numbers. But the fact is, e-commerce is still relatively
small, compared to the rest of the economy.

Last year, even though retail sales on the Internet tripled, they
still accounted for much less than one percent of all retail trade.
Business to business transactions are larger -- four to five times
larger, with equally large rates of growth. But even they are less
than a percent of our $9 trillion economy.

Still, e-commerce's potential to change the way we work we shop ... we
get our news ... we conduct business -- is enormous. It is creating
businesses that would not exist without it. It is creating whole new
forms of businesses. We are seeing firms like Dell using e-commerce to
bond itself to business and individual customers and to link its
entire supply chain up electronically.

For the last decade, we have watched companies manage their
inventories better -- and no doubt, e-commerce will take this to new
levels. Because of all of this, the way government collects key
economic performance indicators has to change.

The old pigeon holes don't work anymore. And to be frank with you, we
have to run to catch up. SIC codes began when Franklin Roosevelt was
President and not only were there no computers then, the adding
machines had cranks on them. Even up until last year, computers were
classified in a category called non-electrical machinery.

We have changed that. This year, we introduced the North American
Industry Classification System. It thoroughly modernizes the industry
groupings in our statistics. But in order for it to take hold across
all agencies and businesses -- it will take time -- years -- far
longer than it takes to develop Internet technology.

Let me point something out.

For as long as the government has collected information, people have
not been very interested in how somebody makes a sale. Whether it's
knocking on a door ... or sending letters ... or having a sale at the
mall -- people didn't pay much attention. So, we have collected very
little information on how sales are made.

But now, with e-commerce, people are interested. So, at Commerce, we
are changing. We are starting to collect information on retail sales
-- but we have a lot of questions about how to categorize businesses.
In the e-world, what is a retail site, anyway?

Obviously, there is great interest in monitoring e-commerce in
manufacturing and service industries. But let me just point out, there
is a trade-off here. We can gather the information -- but is the cost
worth it for business and government? If the business community wants
us to collect a certain kind of data, and is willing to supply it, we
stand ready to do it.

And obviously, we want to get the job done by using the Internet --
both for collection and distribution. In short, we want to webify

I am the last Commerce Secretary of this century -- assuming I can
keep my job. But what is more important is to be the first E-Commerce
Secretary of the next century. So I hope you provide us with insights
today. The data we collect is meant to help you. We need your input.

Beyond economics, there are other areas that are key, if e-commerce is
to meet its promise. We are working in many of these areas at
Commerce. Today, there will be panels about each of them. I want to
highlight some of them.

First, what does all of this mean for small businesses? For me, one of
the most interesting aspects of the Internet is now a mom-and-pop
store in rural America, can sell to the world, just like a Fortune
100, with a massive distribution system. Remember -- names like
Amazon.com ... AOL ... and Yahoo were all small businesses, if they
were businesses at all, five years ago.

Working with the Small Business Administration, we have begun to
mobilize resources to help small companies be a part of Internet
growth. In the future, I hope we reach out to medical establishments
that are also small businesses, and do not use the Internet and
information technologies as much as they should. What we learn over
the next several days will help shape our strategies.

Second, the issue of access is very important to me. For some years
now, Commerce has looked at whether all parts of our society are
participating in the digital economy -- or whether we are creating a
digital divide. The numbers show there is not equal participation.

White households are more than twice as likely to own a computer than
African-American or Hispanic households. There is a widening gap in
computer ownership between those at upper and lower income levels --
and in between urban and rural areas. We cannot be the society we hope
to be, if whole segments are systematically excluded.

Recognizing this, President Clinton and Vice President Gore want every
school and library connected to the Internet by next year. We are well
on the way -- about 90 percent there. On Thursday, the Federal
Communications Commission is expected to vote on full funding for the
e-rate. This, as you know, allows schools to connect to the Internet
at a discount.

Yesterday, Secretaries Glickman, Riley, and I sent the FCC
Commissioners a letter expressing our support for fully funding the
e-rate. I cannot overestimate how crucial it is. It is important to
ensuring our economy continues to grow strong and that all people have

When you think about this -- the Internet is color blind. No one knows
the owner of the dot.com store is an African American or an Hispanic
or an Asian or a Native American. Some barriers that have existed in
business in the 20th century should not exist on the Internet in the
next century. That is very, very positive for our society.

Let me make one other point about access -- this time access to
bandwidth. We closely follow issues of market structure and
competition in telecommunications. In the months to come, many
decisions will need to be made on to how to continue to stimulate
competition, and how to broaden access to bandwidth. Without more
bandwidth, the Internet will never reach its full potential.

Third, we need to look closely at the workforce. It is no secret our
high-tech companies have faced terrible obstacles attracting and
keeping workers. Jobs go begging because not enough people have the
high-tech skills to fill them.

This past year, President Clinton asked me to lead a national dialogue
to better understand the situation. We have learned a lot about the
importance of information technology workers. Today's discussion will
add more knowledge, I hope. I will issue our findings and
recommendations next month at the National Press Club.

Fourth, and finally, is the issue of organizational change -- what
happens internally with all these new technologies? This year,
Commerce, the Small Business Administration, and the Agriculture
Department are working hard to help firms, large and small, to deal
with Y2K issues. We are working to help the health care industry, move
from manila folders to electronic records. Our Manufacturing Extension
Partnerships, all around the country, are working with small

E-commerce is much more than a service sector tool. It is becoming a
basic element for most manufacturing operations -- from design, to
development, to product, and to distribution. To paraphrase Andy
Grove, there won't be Internet companies and non-Internet companies. A
company will either be an Internet company or it won't be a company at
all. So, today we also are looking for your thoughts on organizational
changes and what role government can play.

Usually as Secretary of Commerce, I am asked to give answers to
questions. But today, let me end by saying I don't have the answers. I
am just interested in getting your help to frame the right questions
about the digital economy. For I really believe we need to ask the
right questions, if we are to get the right answers on how to grow the
digital economy to its fullest potential.

Thank you very much.

(end text)