28 May 1999
Source: http://www.usia.gov/cgi-bin/washfile/display.pl?p=/products/washfile/latest&f=990527.clt&t=/products/washfile/newsitem.shtml

USIS Washington File

27 May 1999


(Administration funds research about Internet)(2520)

Washington -- President Clinton's adviser on science and technology
policy says the administration plans to spend $15 million in the next
fiscal year to study how the Internet is changing society and the

"We hear daily about ways in which the technology is challenging
traditional laws, policies, and institutions. But what we don't have
yet is a clear sense of the long-term social and economic
implications," Neal Lane said.

In a keynote address May 26 at a conference in Washington on
understanding the digital economy, Lane said more needs to be known
about the "significant economic, legal, social, ethical, political and
cultural changes" that the Internet is bringing.

The $15 million for social research is a small portion of the
administration's new initiative, Information Technology for the 21st
Century. The initiative, with a budget of $366 million, will bring the
administration's total spending for Information Technology (IT)
research to about $1,800 million in fiscal year 2000, which begins
October 1, Lane said.

In addition to investigating the social and economic implications of
the Information Revolution, Lane said, the initiative will carry out
basic research to advance
IT and promote the application of IT across all fields of science and

Lane listed four fields of inquiry into IT that the administration is
eager to pursue:

-- Privacy. Business people using the Internet are able to gather vast
amounts of personal information about individual consumers. "We need
research to tell us how consumers may feel about technology-enabled
options for specifying and enforcing their own privacy preferences or
requirements, including selling access to it on their own terms," Lane

-- The nature of IT innovation. Innovation in the digital economy in
some respects may be closer to the processes of pure scientific
research than to the development of new manufactured products, Lane
said. If this is true, it would affect policies and laws relating to
competition and intellectual property protection and the ways one
would measure productivity, he said.

-- Openness standards. Electronic commerce has developed quickly
because of its open, non-proprietary nature. Lane said more needs to
be known about whether the standards for openness are strong and
healthy and about the tradeoffs between openness and exclusivity as
drivers of investment.

-- Separation of users and non-users of the Internet. Lane said
Internet policies must be crafted carefully to minimize the number of
people who would be without access to the Internet. "Such segregation
not only diminishes the potential of those markets and communities,
but also raises the specter of a class of outsiders who face isolation
at many levels and in a growing number of contexts," Lane said.

Following is the text of Lane's speech:

(begin text)

Understanding the Digital Economy:
Data, Tools, and Research

Wednesday, May 26
Department of Commerce

Remarks by Dr. Neal Lane
Assistant to the President for Science and Technology

Good morning! I'm delighted to be here at this first public conference
examining how we can measure the economic and social effects of the
digital economy. I'm going to give a "placeholder" definition here
since, to some extent, we're treading in unfamiliar, though inviting,
waters. When I say "digital economy," I mean to emphasize the
convergence of computing and communications technologies in the
Internet and the resulting flow of information and technology that is
stimulating all of electronic commerce and vast organizational change.
I can't think of any current public policy issue that is more timely
or has the potential to affect more people.

One of the inescapable aspects of life in the new digital economy is
the flood of unwanted messages that arrive every day in our e-mail --
jokes, "top ten" lists, dictionaries of Southern slang, phony virus
warnings, Internet hoaxes, etc., many that are sent to us by friends.
I came across a list the other day that I think is appropriate for the
audience of this particular conference: It's a list of warning signs
that you may be living too deep in the digital age.

For example, one warning sign is that you have a list of 15 phone
numbers to reach your family of 3.

Or maybe you e-mail your son and daughter in their rooms to tell them
that dinner is ready, and they e-mail you back to ask, "What's for

Or you realize that you're chatting several times a day with a
stranger from South Africa, but you haven't spoken to your next door
neighbor yet this year.

And you're probably beyond all hope if you realize that you're getting
most of your jokes via e-mail instead of in person.

These are slight exaggerations, but only slight. The Internet, the
World Wide Web, e-commerce -- these are still very now phenomena in
our lives, and they are affecting our lives in ways that we're perhaps
not sufficiently prepared for. It's imperative that we begin now to
systematically analyze the ways these phenomena have changed -- and
will continue to change -- our world.

I want to talk today about how we are seeking to address some of the
long-range implications of the digital economy. I'm going to set some
context and then briefly describe the Administration's Information
Technology for the 21st Century Initiative or), which includes
research on the social and economic implications of information
technology. Finally, I will identify some of the key areas of research
within the scope of that initiative.

Twenty-two years ago, when the Commerce Department published a study
on "The Information Economy," digital information was found
principally in the back offices of large companies -- in payroll
records, typing pools, mailing databases, and the like. Today, it is
everywhere, in everyday content and communications, and as the logical
infrastructure that drives the digital economy. Not everyone agrees on
Just how large a role the digital economy plays within the economy as
a whole, but it is clearly a prominent driver of economic and social
change at present attracting investment, reducing inflation, and
increasing productivity. Twenty years ago the typical job was that of
an assembly-line worker. Today, it is in an office with a computer.

But how different is the digital economy, really? What should we
expect of it? We don't want the transformations underway in technology
and the marketplace to outpace our ability to make sense of them.
That's why, with this conference, we're trying to engage some very
intelligent and knowledgeable people (you) in trying to help us
understand these phenomena.

Among all the wealth of paper you've received at this conference is
this handout. You don't need to pull it out right now, but it helps to
make a point. The digital economy is driven by a convergence of
information, computing, and communications, which we have come to call
the Internet. This convergence is responsible for the widespread
growth of electronic commerce, new competitive strategies, and changes
in business processes and organizational structure. It is enabling new
networked forms of activity that are neither markets nor hierarchies
but are based on relationships.

We see examples all around us of how this new technology is used in
scientific research, health care, education, and government. We hear
daily about ways in which the technology is challenging traditional
laws, policies, and institutions. But what we don't have yet is a
clear sense of the long-term social and economic implications -- the
broad outer circle in the diagram.

Although we know that this technology is bringing significant economic
legal, social, ethical political, and cultural changes along with it,
the Federal government has sponsored little social science research in
this area.

The National Institutes of Health has its ELSI (Ethical, Legal, and
Social Implications) Research Program, but there Is no comparable
effort in the information technology field.

The Administration's new initiative, Information Technology for the
21st Century, known as IT2, is designed to help us perpetuate and
understand the Information Revolution, The initiative corresponds to
an increment of $366 million, a 28-percent increase in overall
spending on IT research, bringing the total to about $1.8 billion in
FY 2000. The IT2 initiative is a team effort involving the White House
and several Federal agencies. It is a high priority with the President
and with the Vice President.

The initiative has three central goals; (1) to carry out basic
research to advance IT, (2) to use the most advanced information
technology -- for example, computer simulation -- to enhance research
across all areas of science and engineering and hasten the pace of
discovery, and (3) to investigate the social and economic implications
of the Information Revolution. Today, I'm going to focus on this
latter element of the Initiative. We have proposed $15 million for the
coming fiscal year for research on the social and economic
Implications of IT that would be administered within existing agency
programs on top of existing funding. We expect this conference and the
resulting papers to provide some very useful guidance as we launch
this new initiative.

Several of the research topics that might be addressed have already
been sketched out at this conference. Let me suggest a few more.
Again, I emphasize that I'm posing these for further investigation,
not as areas in which we already have the answers or even all the

First, Privacy: using the Internet, businesses have discovered an
Improved ability to target advertising to individual consumers, making
it more cost-effective. This ability has also created an unprecedented
market for personal information as an adjunct to e-commerce
transactions, raising now concerns about privacy -- a potential
obstacle to wide acceptance of electronic commerce. We need research
to tell us how consumers may feel about technology-enabled options for
specifying and enforcing their own privacy preferences or
requirements, including selling access to it on their own terms.

Second, innovating in the Digital Economy: Extraordinarily rapid
technological and market innovation distinguishes the digital economy
from other parts of the information economy -- as well as from other
fields of technology, We still know little about how innovative
processes at the heart of the digital economy may differ from
innovation in physical, products and processes. In some sectors of the
digital economy innovation may be closer to the processes of
scientific research than to the incremental development of new
manufactured products. Or it may be so unique as to demand
understanding on its own terms. If this is true, how would it affect
policies and laws on competition, such as intellectual property
protection? And, by the way -- how does one measure productivity in
this environment? We need to know more here also.

Next, Standards: Most observers agree that openness is an underlying
technical and philosophical tenet of the expansion of electronic
commerce. The widespread adoption of the Internet as a platform for
business is due to its non-proprietary standards and open nature, as
well as the huge industry that has evolved to support it. Experience
to date shows us that open standards do not have to, be engineered by
international committees over many years, but can evolve within a
large, digitally connected professional community in parallel with
rapid development and roll-out of technology by competing companies.
Are critical open standards processes still strong and healthy? What
are the tradeoffs between openness and exclusivity as drivers of
investment? Obviously, network effects have a strong influence on
business strategy, but do they suggest a different balancing of
interests in policies, laws, and their administration?

Finally, the Divide: We know that the functionality of information
technology and Internet services has the potential to segregate
non-users from users. It can leave non-users out of important markets
and virtual communities within the digital economy. Such segregation
not only diminishes the potential of those markets and communities,
but also raises the specter of a class of outsiders who face Isolation
at many levels and in a growing number of contexts. Ultimately, these
outsiders may face increasing costs as services and sales performed
outside the digital economy lose scale and become comparatively
expensive to provide.

The President's Information Technology Advisory Committee (PITAC)
helped the Administration focus much needed attention on this area.
And PITAC concluded that we need more data anti a deeper understanding
of social, economic, and policy issues. The PITAC report stated: "The
research that is required to develop this knowledge should be
broad-based, long-term, and large-scale, in its scope and in its
promise for continuing the beneficial transformation of our society
and economy."

In particular, we need well-designed empirical research that lays a
foundation for others to test and build on, whatever their business
interests or political persuasion. Otherwise, decisions will be based
on guesswork, rhetoric, and politics as usual. The loudest voices may
be raised by those who feel most threatened by the currents of the
digital economy. Those most focused on creating new value may be least
able to take time out for advocacy or litigation.

Laws, once made, are difficult to undo. It would be nice to get the
law right in the first place, but that may be asking too much, given
how little we know yet about the future digital economy. Last year's
Digital Millennium Copyright Act mandates follow-up studies that may
tell us how well the law Is working, and we have proposed a similar
follow-up study for the database protection legislation currently
before Congress, At the same time, new laws are benchmarks that offer
opportunities to achieve a deeper understanding of how the digital
economy works.

Since the goal is to understand implications, the disciplines cannot
work in isolation. (Indeed, the disciplinary boundaries between the
technical, economic, business, and legal aspects of the digital
economy are as blurred and porous as other boundaries in cyberspace.)
We need research that draws on and integrates the language,
structures, and insights of the different disciplines. We need
research that speaks in dear and simple English -- the common currency
of Washington, Wall Street, Silicon Valley, Main Street, and the Net.

In closing, let me acknowledge that the digital economy is a moving
target. We might be holding conferences dedicated to understanding it
for decades to come.

But the digital economy is the major economic and social development
of our time, so our stake in making sense of it is high indeed. We
need to know how it is or isn't different. We need to know how to
pursue privacy, innovation, and other goals in its unfamiliar light.
We need to ensure that our exploration of digital technology and
applications is undertaken cognizant of the social and economic
implications -- and vice versa.

And we need to make sure that new knowledge and understanding of the
digital economy spreads throughout our society as quickly and widely
as the Internet has.

Thank you very much for the opportunity to speak to you, and best
wishes for success in the rest of your meetings today. We appreciate
your taking the time to participate in this important meeting. And, by
the way, if you have further thoughts you would like to share, send me
an email (nlane@ostp.eop.gov). Thank you.

(end text)