Remarks for the OECD Workshop on the Economic and Social Benefits of an Open Internet

Ambassador Daniel A. Sepulveda
Deputy Assistant Secretary and U.S. Coordinator for International Communications and Information Policy, Bureau of Economic and Business Affairs
Washington, DC
September 30, 2015

As prepared

Thank you. I appreciate the opportunity to speak on and discuss with you today “The Economic and Social Benefits of an Open Internet.”

For those of us lucky enough to be among the more than three billion people connected to the Internet today, its myriad benefits are vividly apparent in our daily lives: it makes information easier to access, it makes business easier to conduct, it makes it easier for us to express ourselves freely and associate with others as we wish, and it shrinks social distances by easing our ability to communicate with friends and relatives.

From its conception in the 1970’s, the Internet was designed to connect disparate local networks. Researchers had already been building small computer networks for years, but the key Internet insight was that different individual computer networks could make their own local decisions about protocols and operation, yet still communicate with each other through a meta-level “Internetworking Architecture.”

Openness to individual design differences and local choice is still an integral part of the Internet DNA today—both in technology and in its culture. Yes, the Internet, which is part technology and part community, has a culture. And its culture, as well as the technology itself, is built on the principle of openness. And this openness is not a key, but rather THE key, to supporting the Internet’s nimble adaptability and broad use. That is why openness plays a central role in the OECD’s 2011 Principles for Internet Policy Making, which the US strongly supports.

Although the Internet originally connected just a handful of nodes, its technical foundations have been very adaptable in growing to its current scale – now connecting billions of devices worldwide, far beyond anything its original creators ever envisioned.

The data on the resulting economic benefits of this kind of Internet connectivity are clear and compelling.

By 2016, the Internet economy will have expanded to $4.2 trillion in the G-20 economies. If it were a national economy, it would rank as one of the world’s top five, behind only the U.S., China, Japan, and India, and ahead of Germany. Overall, the Internet contributes 5 to 9 percent to total GDP in developed markets; and in developing markets, the Internet economy is growing at 15 to 25 percent per year.

And unlike technologies built for a single purpose, the Internet is a general-purpose technology that adds value to many other industries. A 2011 McKinsey & Co. report predicts that 75% of the Internet’s value added will actually be in traditional industries.

Intuitively, we know much of the Internet’s economic benefits are due to its openness. By that term, we mean its flat architecture on which anyone can build without preapproval or permission from a higher authority and without the traditionally required relationships with large institutions that success in so many other enterprises requires.

As a function of design and operation, the global Internet economy can respond to new technology and business opportunities fluidly and quickly. But among the many potential sources of “friction” that might constrain the digital economy and inhibit that capacity to respond to change (Boston Consulting Group enumerates 55 of them), some kinds of government activities are important to mention, in particular, regulations that mandate technologies or impose design and operational restrictions on firms and people, can and often do hinder the growth of ICT in that market. The BCG report finds that the digital economy accounts for a larger share of the overall economy in “low-friction” countries than it does in “high-friction” countries. The difference is roughly 2.5% of GDP. Frictions on free commerce and discourse can cause highly-regulated countries to fall behind economically.

Today, we are in the midst of a technology progression towards the so-called Internet-of-Things (IoTs). With IoTs, physical devices as wide-ranging as thermostats, refrigerators, cars and pacemakers benefit from data sharing and communication. Cisco forecasts over 24 billion internet-connected devices by 2019, and of these, over 10 billion are expected to be machine-to-machine connections, rather than facing human users. As with some of the Internet’s previous technology inflection points, the emergence of IoT has caused some to call for increased governmental roles in standardization and regulation. But the diversity of potential IoT applications and device technologies alone leads us to conclude that there are many IoTs. And we believe it would be detrimental to this ecosystem to shackle it with regulation, particularly one-size-fits-all regulation. Nonetheless, it is an important conversation and debate. It is one worth having. And we engage it in good faith.

In addition to the Internet’s economic role, its role for social and political justice is just as fundamentally important if not more so. ICT technology has catalyzed a wide range of social benefits. Over recent years, the world has seen ICTs help people earn a living via mobile-phone based businesses and pull themselves from poverty; help governments improve their transparency and fight against corruption using Internet-searchable land records and e-payments; and help capture and communicate videos and news coverage when individuals speak out publicly for change and justice from their governments.

We believe firmly that the same human rights that people have offline must also be protected online. As we state in our recent input to the WSIS+10 High-Level Meeting, “The international community has worked hard to develop a shared understanding of the human rights that adhere inalienably to all people, regardless of race, religion, or nationality. These human rights and fundamental freedoms are responsible in large part for creating the kind of intellectual, political, and economic conditions that have fostered the tremendous innovation, creativity, and connectivity that constitute today’s Information Society. Those rights, which have endured through wars, economic crises, and all sorts of other stress tests, must continue to guide us as we endeavor to develop norms and responsibilities appropriate for the Internet and the diffusion of ICTs.”

We have plenty of stories that support the linkage between Internet openness and economic and social benefits. But what we don’t have are sufficient numbers to back them up. More quantitative data and sharper definitions would help us advocate for a free and open Internet.

This won’t be easy but the OECD, with its rich history of collecting and analyzing data to draw evidence-based conclusions is just the right organization to take on this challenge.

Take the term “openness.” I gave our interpretation of the term earlier in this speech but we could devote this whole workshop to exploring all the things different parties mean when they use the term. This ambiguity and complexity makes the benefits and challenges difficult to define, much less quantify.

In addition to the framework I have presented, openness could refer to how the hardware and software are designed, or the ease with which new Internet services and businesses can be formed, or the degree to which domestic government policy affects Internet usage, or the presence or absence of policies regarding cross-border data flows.

I appreciate your effort to tease apart these factors and to further quantify aspects of Internet openness and cross-border data flows. We look forward to being able to draw from such data in making a case for Internet openness in our bilateral relationships and our discussions with multilateral organizations.

As we move forward, I see three key areas of both opportunities and challenges:

The first of these three areas is Internet access and affordability. Though it carries secondary benefits, the Internet can only reach its full potential as an economic and social driver for those who have access to it. Currently, 3.2 billion people have internet access, and Cisco projects that over half the world’s population – 3.9 billion – will have Internet access by 2019. But economic inequality around access issues will persist until everyone is connected.

Within the 34 OECD member countries, over 70% of households have Internet access, and there are 81 mobile phone subscriptions for every 100 people. These averages are encouraging, but in the OECD and in the world overall, the progression towards universal Internet access is occurring unevenly. There is a wide distance, both in numbers and metaphorically, between the most connected and least connected countries. Within the OECD, Korea has nearly universal Internet access. Other OECD member countries are at or below 50% of households connected.

The US is working on several fronts to encourage more universal connectivity. Last week on the margins of the UNGA proceedings, Under Secretary Cathy Novelli launched a new State Department initiative called Global Connect, which intends to catalyze public-private partnerships to bring 1.5 billion people online by 2020. In 2013, the United States helped to create A4AI, the Alliance for Affordable Internet. In A4AI, a coalition of governments, industry, and civil society works with policy makers to expand Internet access while keeping prices low.

Universal connectivity will also be a key topic of discussion at the United Nations General Assembly this December during its High-Level Meeting to culminate the WSIS+10 review. The meeting will take stock of the last ten years of progress in the global information society and how ICTs are contributing to global development.

For achieving universal Internet access—moving from talk to action—will be most effective when their plans and policies can be informed by better per-country and cross-border metrics both within the OECD and worldwide. In particular, while connectivity data itself is often available, more detail is still needed. We need to quantify how access varies with demographics like age and gender, with urban versus rural households, and with government policies. For example, in 2050, 27% of the population of Europe is projected to be over 65 years old, and 37% of the population of Japan. There are no one-size-fits-all solutions to meet challenges like that one. Gathering more detailed data will help find correlations—with demographics and with government policies—that are useful in guiding future policy decisions.

A second key issue surrounds Internet governance, particularly how it relates to the “openness” on which your work focuses. The Internet benefits broadly from the technical and policy views of many different people and groups, from the private sector, civil society, academics, engineers and governments. The Internet has weathered technical and scaling challenges in the past, and its consensus-based, bottom-up, multi-stakeholder processes have proven to be up to the task. As one example, in the 1980’s, the trend to shift from mainframes and department-level computer servers towards individual desktops and personal computers caused some observers to question whether the Internet would be able to deal successfully with the scaling challenge as its node count greatly increased. But the multi-stakeholder approach to Internet governance kept pace with such changes.

There are those who see current Internet trends—including IoT—as reasons (or opportunities) to reshape Internet governance, advocating for a more centralized approach with increased control for governments and inter-governmental organizations. We believe that they are misguided, and that they would stunt Internet growth and slow the march towards universal access.

As we look forward, a third set of issues revolve around privacy. Each individual’s confidence in their privacy regarding the collection, communication, and analysis of their personal data is central to the continuing uptake of new ICT services and technologies—including IoTs.

We believe strongly and have a deep commitment in law and practice to the idea that people should not be subject to arbitrary or unlawful interference with their privacy, consistent with countries’ obligations under international human rights law. It is important, however, to decouple as much as possible any particular government’s data privacy policies from the broader and multi-stakeholder Internet governance processes and ensure that whatever we do domestically, our policies still allow for the free flow of data across borders and do not inhibit the economies of scale that the Internet enables.

Clearly, the Internet is very much an economic and social catalyst. Beyond that, it is also a tangible, fundamental and thriving example of cross-border, multi-stakeholder cooperation. It is also, very simply, a human constructed miracle. We must value it, we must preserve it, we must protect it, and we must enable its growth.

With that in mind, this workshop’s exploration of the economic and social benefits of Internet openness is timely. We welcome the OECD panel’s work to quantify cross-border data flows and the impact of openness on economic and social factors. I look forward to learning about your discussions and findings.

Thank you. I appreciate your time and look forward to answering any questions you might have.