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“THE EFFECT OF INFORMATION TECHNOLOGY ON THE ECONOMY” mentioning the U.S. Dept. of Commerce was published in the Senate section on pages S4613-S4615 on May 11, 1998.
The publication is reproduced in full below:
THE EFFECT OF INFORMATION TECHNOLOGY ON THE ECONOMY
Mr. McCAIN. Madam President, I want to quote from the Department of Commerce:
During the past few years, the U.S. economy has performed beyond most expectations. A shrinking budget deficit, low interest rates, a stable macroeconomic environment, expanding international trade with fewer barriers, and effective private sector management are all credited with playing a role in this healthy economic performance. Many observers believe that advances in information technology driven by the growth of the Internet have also contributed to creating this healthier than expected economy.
In recent testimony to Congress, Federal Reserve Board Chairman Alan Greenspan noted:
``Our Nation has been experiencing a higher growth rate of productivity--output per hour worked--in recent years. The dramatic improvements in computing power and communication and information technology appear to have been a major force behind this beneficial trend.''
Madam President, we all pay close attention to Federal Reserve Board Chairman Alan Greenspan, and usually, especially in this case, we agree.
Some have even suggested that these advances will create a long boom which will take the economy to new heights over the next quarter century.
While the full impact of information technology cannot yet be precisely evaluated, its impact is significant. Information technology industries have been growing at more than double the rate of the overall economy, a trend that is likely to continue. Investments in information technology now represent over 45 percent of all business equipment investment. Declining prices for information technology products have lowered overall inflation.
Because the Internet is new and its uses are developing very rapidly, reliable economy-wide statistics are hard to find and further research is needed. Therefore, we have to use industry and company examples to illustrate the rapid pace at which Internet commerce is being deployed and benefits are being realized. Examples showing the growth of the Internet in electronic commerce this past year are numerous.
Fewer than 40 million people around the world were connected to the Internet during 1996. By the end of 1997, more than 100 million people were using the Internet. As of December 1996, about 627,000 Internet domain names had been registered. By the end of 1997, the number of domain names more than doubled to reach 1.5 million.
Traffic on the Internet has been doubling every 100 days.
Madam President, I feel compelled to repeat that.
Traffic on the Internet has been doubling every 100 days.
Cisco Systems closed 1996 having booked just over $100 million in sales on the Internet. By the end of 1997, its Internet sales were running at a $3.2 billion annual rate.
In 1996, Amazon.com, the first Internet bookstore, recorded sales of less than $16 million. In 1997, it sold $148 million worth of books to Internet customers.
One of the Nation's largest book retailers, Barnes & Noble, launched its own on-line bookstore in 1997 to compete with Amazon for this rapidly growing on-line market.
In January 1997, Dell Computers was selling less than $1 million of computers per day on the Internet. The company reported reaching daily sales of $6 million several times during the December 1997 holiday period.
Auto-by-Tel, a web-based automotive marketplace, processed a total of 345,000 purchase requests for autos through its web site in 1996 for $1.8 billion in auto sales. As of the end of November 1997, the web site was generating $500 million a month in auto sales, which is $6 billion annualized, and processed over 100,000 purchase requests each month.
Madam President, that is just a few examples of the way this industry is exploding into American life and through all parts of it. How it is changing America is dramatic and, frankly, there are very few of us who know exactly what the end results are going to be. And there are differing opinions among different experts as to what these impacts are going to be, but there is one area of agreement, and that is it has changed American commerce and perhaps the world's commerce and flow of information in a way that will fundamentally change a lot of the precepts under which we have operated since the Industrial Revolution.
If the trend suggested by this preliminary analysis continues, it, and electronic commerce, can be expected to drive economic growth for many years to come. To realize this potential, however, the private sector and governments must work together to create a predictable, market-driven legal framework to facilitate electronic commerce, to create nonbureaucratic means that ensure that the Internet is a safe environment, and to create human resource policies that endow students and workers with the skills necessary for jobs in the new digital economy.
Thus, in real terms, the expansion of the IT sector accounts for an even larger share of overall economic growth in the mid- to late 1990s. In recent years, IT industries have been responsible for more than one-
quarter of real economic growth.
Despite these impressive trends, the digital revolution is just beginning. Growth could accelerate in the coming years not only in the IT sector itself, but across all sectors of the economy as the number of people connected to the Internet multiplies and as its commercial use grows. The growth will be driven by four types of economic activity:
Building out the Internet: In 1994, three million people, most of them in the United States, used the Internet. In 1998, 100 million people around the world use the Internet. Some experts believe that one billion people may be connected to the Internet by 2005. This expansion is driving dramatic increases in computer, software, services and communications investments.
Electronic commerce among businesses: Businesses began using the Internet for commercial transactions with their business partners about two years ago. Early users already report significant productivity improvements from using electronic networks to create, buy, distribute, sell, and service products and services. By 2002, the Internet may be used for more than $300 billion worth of commerce between businesses.
Digital delivery of goods and services: Software programs, newspapers, and music CDs no longer need to be packaged and delivered to stores, homes or news kiosks. They can be delivered electronically over the Internet. Airline tickets and securities transactions over the Internet already occur in large numbers. Other industries such as consulting services, entertainment, banking and insurance, education and health care face some hurdles but are also beginning to use the Internet to change the way they do business. Over time, the sale and transmission of goods and services electronically is likely to be the largest and most visible driver of the new digital economy.
Retail sale of tangible goods: The Internet can also be used to order tangible goods and services that are produced, stored and physically delivered. Though Internet sales are less than 1 percent of total retail sales today, sales of certain products such as computers, software, cars, books and flowers are growing rapidly.
Where advances in telecommunications and computing largely occurred side-by-side in the past, today, they converge in the Internet. Soon, virtually all information technology investment will be part of interlinked communications system, whether internal to a business, between businesses, between individuals and businesses, or individual to individual.
However measured, the Internet is expanding at a very rapid pace.
For instance, the number of Americans using the Internet has grown from fewer than 5 million in 1993 to as many as 62 million by 1997. . . .
The number of names registered in the domain name system grew from 26,000 in July 1993 to 1.3 million in four years .
. .
In January 1995, just over 27,000 top-level commercial
(com) domain names were assigned. Most businesses used them for little more than posting product and company descriptions, store locations, annual reports and information about how to contact corporate headquarters. Two and a half years later, commercial domain names number 764,000. Static brochures and bulletin boards are giving way to full-fledged businesses offering financial services, news and information, manufactured goods, and travel and entertainment to individuals and businesses.
To meet this increased demand, consumer electronics companies, media giants, phone companies, computer companies, software firms, satellite builders, cell phone businesses, Internet service providers, televisions cable companies and, in a few cases, electric utilities, are aggressively investing to build out the Internet.
Madam President, I made the opening statement as we take up, frankly, what are some very modest bills, pieces of legislation which have to do with the telecommunications industry. I hope this is a beginning. My fundamental premise is, we should get out of the way and stay out of the way of this burgeoning, incredible revolution we are seeing take place throughout the world.
But there are times where we have to act. I would argue that we have to act in a deregulatory manner and a procompetitive manner. One of the issues that the Senator from North Dakota and I have discussed on many occasions and will continue to discuss--and hopefully we can reach some agreement--is the issue of Internet taxation. Other issues that we are going to take up, which are visible and very important to many Americans, like this business of slamming, will have to be addressed.
Madam President, the Presiding Officer now in the chair, you have been very significantly involved in this issue. Your findings and recommendations have been made part of this bill. I understand you may have additional changes that you wish to be made. But we are in agreement this abuse has to stop, and it has to stop immediately.
I hope the Congress, as representatives of the people, will understand that this industry we are talking about today, the telecommunications industry, opens broad new vistas for our children and grandchildren. It also opens vistas for people and countries who have never had access to information and knowledge before. It opens up new vistas and ways for people in rural parts of America, and in low-
income parts of urban America, to receive information and knowledge. It seems to me that it has to be one of the most important issues that we address in a comprehensive, cooperative, bipartisan fashion.
I see no reason for partisanship on an issue which really is so important to the future of America. I know we are in agreement that we want to see it grow and expand. And all of us are astonished, literally astonished, at the amount of growth that we have seen. It is not just us neophytes. Literally every expert who has studied the telecommunications industry has underestimated, sometimes by a factor of 10, the growth that has taken place in the past few years. So, therefore, it is very likely they are underestimating the dramatic changes and growth that we will see in the future.
There are some who argue that the information technology we are exporting around the world makes our trade deficit far less meaningful than it has been in the past. There are some who argue that we, as a body, and as a nation, are going to have to address this issue of the proliferation of pornography that now penetrates and permeates every part of the Internet, to the point where young children today, when they go on the Internet and dial an innocuous word like ``White House'' or ``teen'' or ``nurse,'' are treated, as the search engine comes upon them, to enticements to people to take advantage of the pornography which is available. I am not advocating censorship here. I don't believe the majority of this body is. But it is a problem. It is an issue that we need to address as well. But it is one of many.
I could spend many hours on the floor here, discussing the challenges of this telecommunications transformation that we are observing. I hope what we do in the next couple of days will do several things. One is to address these relatively modest issues, although slamming is certainly a very important one, but, at the same time, make a commitment that we, as a body, understand, appreciate, the importance of this industry to the future of America, and that we will address these issues in an orderly and bipartisan fashion.
Madam President, I yield the floor.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. DORGAN. Madam President, I certainly share the sentiment offered by the Senator from Arizona about the excitement of the Internet, the fascinating, remarkable growth of the telecommunications industry and all that it means for the future of our country and the world. Things are moving so quickly, and changing so rapidly, it is just breathtaking and very hard to keep up with. From a public policy standpoint, regarding the kind of legislation that will be brought to the floor of the Senate at some point--for example, such as the Internet Tax Freedom Act--it is very important that we understand exactly what we are doing and what the consequences of what we are doing might be now and in the future.
I would say the increased commerce over the Internet, that is increasing at a very dramatic pace, illustrates that there is nothing at the moment, nothing anywhere that I am aware of at the moment, that impedes the transaction of commerce on the Internet.
The very growth of that commerce suggests there are no impediments. One way to do commerce in this country is to set up a web page and advertise and sell books, automobiles, travel services, or whatever it is you want to advertise over the Internet. That is one way to do business.
Another way to do business is to rent a storefront someplace to get some inventory moved in, hire some people, open the door and put ``Open for Business'' and invite customers to come in and look at your merchandise and sell merchandise that way.
Still another way is to have your merchandise in a warehouse somewhere and send a catalog through the mail and do business through mail-order catalogs.
If the Congress decides to change the state and local Tax Codes related to all of those different ways of doing business, it is very important that we not create a circumstance where one way of doing business has preference over another way. I certainly hope that whatever we do to those involved in Internet transactions, we will say,
``To whatever extent you are advantaged by this new legislation, the Main Street businesses will be similarly advantaged.''
The Internet Tax Freedom Act is very controversial in my judgment. The concerns Governors and many others have about what impact it might or might not have on the State and local revenue bases are serious. The Internet Tax Freedom Act is a very significant piece of legislation and it is very controversial.
Another issue that the Senator from Arizona mentioned is the slamming issue. For those who are not familiar with slamming, it refers to the unauthorized practice of a company changing a consumer's telephone exchange service or telephone toll service. In other words, a company says if you are using one long distance service, we are going to change that and your new long distance carrier is XYZ, and all of a sudden you begin getting bills from XYZ when, in fact, you never authorized changing your long-distance carrier. That is called slamming, and it is a growing, continual problem in this country.
The FCC had about 20,000 complaints of slamming in the last year. We understand the ``king of slammers'' identified by Chairman Kennard of the FCC is a man named Daniel Fletcher. GAO investigators allege that Fletcher switched at least a half million customers' long-distance service without their knowledge or consent.
I noticed a story in the paper this past weekend in North Dakota that one of the victims of slamming was the attorney general of North Dakota, Heidi Heitkamp. ``Heitkamp Victim of Phone Billing Scam'' reads one headline.
This company that was slamming would have been well-advised to stay away from the attorney general of that State.
I am confident that the North Dakota attorney general is on the case. She is aggressive and tough and will get to the bottom of who is involved in this slamming.
To all the slammers out there I will say, ``Senator McCain, I and others will bring a piece of legislation to the floor that will attempt to shut the door on slamming. But, slammers might want to stay away from attorneys general and law enforcement officers, because it is against the law. We hope, prior to the legislation being passed, we can count on State authorities and the FCC to take appropriate action to levy fines and other penalties against those who are involved in this kind of activity.
There are a number of other issues we will discuss when we talk about slamming. I expect the U.S. Senate will pass this legislation by a wide, wide majority. It is a good piece of legislation. I compliment Senator McCain for bringing it to the floor. Only because the majority leader and minority leader have not talked and reached agreement on the question of procedure we are not able to proceed at this point. But I expect in the coming hours, when Senator Lott and Senator Daschle will find a mechanism by which we are able to consider this legislation.
I just received a note from someone else, from another Senator in the Chamber that says, ``I've been slammed twice.'' I don't know if that Senator wishes to be identified. In any event, it is not something that only relates to attorneys general. I have not been slammed once, and I am not looking forward to the first slam. Hopefully, before that happens, this kind of legislation can pass. Those who have been victims will be victims no more, and those who have been involved in slamming will begin to pay a significant price for criminal behavior.
Madam President, I yield the floor, and I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. LUGAR. Madam President, I ask unanimous consent that the order for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
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