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Remarks of Department of Commerce Director of Digital Economy Alan Davidson at the 10th Annual Southeast Venture Conference

March 17, 2016

Remarks of Alan Davidson
Director of Digital Economy
U.S. Department of Commerce

10th annual Southeast Venture Conference
Tysons Corner, Va.
March 17, 2016

--As prepared for delivery--

Thank you for that introduction, and good afternoon. Thank you to TechMedia for including us in this event. It is exciting to be in the presence of so many promising emerging technology firms from the Southeast Region.

As the first Director of Digital Economy at the Department of Commerce, I am pleased to be here today to outline our work to advance innovation, and to address the major policy opportunities and challenges we see.

Our country and the entire world are living through one of the most remarkable economic and societal transformations in history, driven by technology. In this changing world, we know that economic growth and competitiveness are increasingly tied to the digital economy.

Twenty years ago, about 1 percent of the world’s population was online. Last year roughly 3 billion people -- approximately 43 percent of the global population -- used the Internet. This is phenomenal growth, and the pace of change is continuing.

We know the digital economy has a huge impact on U.S. growth and economic opportunity.

  • The Internet economy already represents over 5 percent of U.S. GDP.
  • In G-20 developed markets, the Internet economy is expected to grow at an annual rate of 8 percent over the next five years, outpacing just about every traditional sector.

For many people, the digital economy will be the best place to find their next job or business opportunity. In 2013, roughly 60 percent of unemployed American Internet used the Internet to search for a job.

In the U.S., entrepreneurship remains a key driver of economic growth. Sixty-five percent of new jobs created since 1995 have come from startups and small enterprises.

The mission of the Department is to create the conditions for that economic growth and opportunity. Today, I will talk briefly about four things:

  • the Department’s digital economy agenda;
  • some of  the biggest public policy challenges we see, and why the voice of new businesses is so important in those debates;
  • what we’re doing to support innovation and entrepeneurship;
  • and finally, a little about how we might help you and how you might help us with a few important initiatives.

Commerce and the Digital Economy

To start, the Commerce Department is making technology and Internet policy a top priority.

One thing many people don’t know is the scope of digital activity within Commerce. The Department is a far-flung enterprise, with 46,000 employees and twelve bureaus working on trade, patents, standards, Internet policy, and the weather. That includes bureaus like:

  • the Patent and Tradmark Office;
  • National Institute of Standards and Technology (NIST);
  • International Trade Administration (ITA), with offices in the U.S. and around the world offering export assistance to companies like yours;
  • National Telecommunications and Information Adminstration (NTIA), known for it’s efforts on broadband, spectrum management, and Internet policy; and
  • NOAA, which includes the National Weather Service.

The Department’s work in this space is driven by a conviction that the Internet and digital economy are a critical part of the future success of the broader American economy.

The digital economy already accounts for over five percent of GDP, but that number does not capture its true potential. For example, experts estimate that digitization has the potential to boost annual U.S. GDP up to $2.2 trillion by 2025. This would increase GDP by 6-8 percent above baseline projections.

The United States is also the world’s largest net exporter of Internet-related services and products. Within ten years, products and services reliant on cross-border information flows will add over $1 trillion annually to the global economy.

But we cannot take success for granted. Global competition is increasing, and I don’t need to tell this audience how dynamic these markets are. We also see new forms of regulation -- such as data localization requirements -- that threaten to undermine the open and global nature of the digital economy, and its inclusiveness.

The open digital economy today, where innovation happens without permission, and a startup can get instant access to markets worldwide, is something we need to continually make the case for worldwide.

The Commerce Digital Economy Agenda

These strategic interests are what drove the Department last fall when Secretary Pritzker unveiled the Department’s digital economy agenda.  It focuses on four key opportunities, promoting:     

  • a free and open Internet;
  • trust, including privacy and security;
  • access and skills; and
  • innovation.

First, promoting the free flow of information worldwide is a top priority. We know the Internet functions best for our businesses and workers when data and services can flow unimpeded across borders.  That means access to new markets for small businesses, and more diverse content that enriches and entertains people around the world.

An example of the importance of the free flow of information across borders includes our work with the EU to finalize the EU-U.S. Privacy Shield. This is a tremendous achievement for privacy and for individuals and companies on both sides of the Atlantic. It provides certainty that will help grow the digital economy. It will ensure that thousands of European and American businesses and millions of individuals can continue to access services online.

To head off issues like this in the future, last week we announced an exciting new program of “digital attaches,” commercial service officers who will work abroad in our embassies. These digital attaches will support and assist U.S. businesses to successfully navigate digital economy issues in foreign markets and expand exports.

This initiative will enhance efforts to advance commercial diplomacy, drive policy advocacy on technology issues, ensure linkages between trade policy and trade promotion efforts, and provide front-line assistance to U.S. SMEs. This pilot project will run through September 2016 in Brazil, China, Japan, India, the EU, and Southeast Asia. We hope you will take advantage of them.

We continue to embrace the use of bottom-up, multistakeholder approaches to resolving technical and policy challenges related to the Internet. Over the past two years, the global Internet multistakeholder community – made up of businesses, technical experts, academics and civil society – has shown the world how well this model can work to resolve even the most challenging issues.  After more than 26,000 hours of work and hundreds of meetings, the stakeholder community last week submitted a plan to transition the Department’s historical stewardship role related to Internet’s Domain Name System to the global multistakeholder community. Commerce’s goal is to complete its review of the proposal within 90 days.

Our second Departmental focus is promoting trust online. Security and privacy are essential if electronic commerce is to flourish.

Commerce priorities in this area include:

  • Promoting the use of the NIST Cybersecurity Framework to help organizations implement a risk-based approach to cybersecurity. This is a non-regulatory standards-based solution developed in active collaboration with the private sector. I encourage all of you interested in this topic to look at it.
  • Privacy and lawful access to data, including support for reform of the Electronic Communications Privacy Act and for the development of strong encryption standards.
  • Multistakeholder processes on privacy and transparency for use of unmanned aircraft systems, facial recognition technology, and security vulnerability disclosures.

Recent milestones to advance trust and security include:

  • The expansion of the National Cybersecurity Center of Excellence at the National Institute of Standards and Technology.
  • We are also supporting the President’s newly-announced Commission on Enhancing National Cybersecurity. It will provide recommendations on actions that can be taken over the next decade to strengthen cybersecurity in both the public and private sectors.

A third priority is access and skills. High-speed networks are essential to economic success in the 21st century. Yet, about a quarter of U.S. households still do not have Internet access at home. We are working on projects that promote broadband access for workers, families, and companies. 

  • For example, NTIA’s broadband grant program has expanded access and adoption in many communities. Grantees deployed more than 116,000 miles of new or upgraded networks, and connected almost 26,000 schools, libraries, medical facilities and other community anchor institutions.
  • This month the Department announced that NTIA's BroadbandUSA program would be partnering with national organizations representing millions of Americans across the country to develop the Community Connectivity Initiative. The Initiative is part of a broader effort by the White House to connect 20 million more Americans to the Internet by 2020.
  • And finally, the Department is working closely with industry, other federal agencies and the Federal Communications Commission to meet the President’s goal of making 500 MHz of spectrum available for commercial use by 2020.  We are about half way to achieving that goal, and are on a sound path to fulfilling it.

Our fourth area of focus is promoting innovation, through smart intellectual property rules and support for the next generation of exciting new technologies.

  • For example, the Patent and Trademark Office is working on ways to modernize the U.S. patent system and reduce litigation barriers.  
  • We are working to advance effective and balanced copyright protection in today’s digital environment. The Internet Policy Task Force in January issued recommendations on how copyright policy can best promote creativity and innovation in the digital age.
  • More broadly, we are seeking to support promising new technologies as the pace of technological change increases.
    • For example, I don’t have to tell you that the Internet of Things has the potential to transform our lives and society. The benefits of increased connectivity include fewer traffic accidents, improved healthcare, and applications for emergency services. But the sheer scope and scale of Internet of Things raises a host of complex policy challenges. We will issue a request for comment shortly to determine what role the Department could play to support innovation and investment in the Internet of Things. We welcome your feedback.
  • From driverless cars to drones, we see value in engaging with industry and stakeholders to promote new technologies -- and to address potential policy concerns early in the development life cycle.

Supporting Innovation and Entrepreneurship

Today I also want to touch on the Department’s work to promote innovation and help entrepreneurs.

Start-ups are the engine of economic growth in this country. Companies less than one year old have created an average of 1.5 million jobs per year over the past three decades.

We know the government cannot create new companies – but we can help create the conditions that make entrepreneurship possible through smart programs, smart policies, and strategic investments.

The Department of Commerce has a number of specific initiatives to support entrepreneurs:

  • We launched our Startup Global pilot program. This initiative will connect early-stage companies at incubators in select locations across the country with Department of Commerce resources that will help prepare them to export.
  • We have a new partnership between the Census Bureau and the Kauffman Foundation to improve the way we track entrepreneurship.
  • Our Economic Development Administration supplies grants to smart Regional Innovation Strategies, as well as incubators, around the country. Last month, the Department announced 25 awardees who will receive a total of $10 million under the program.
  • The Secretary Chairs the President’s Ambassadors for Global Entrepreneurship, a partnership between U.S. government agencies and the private sector to inspire entrepreneurship in the U.S. and around the world. 
  • Commerce Secretary Penny Pritzker will lead the largest-ever  U.S. delegation to Hannover Messe, the world’s foremost trade fair for industrial technology, next month in Hannover, Germany. The digital economy will feature prominently in this event.

We also see entrepreneurship as a tool to tackle some of the world’s greatest challenges. Every day, startups like you come up with new ideas to combat climate change, preserve the environment, or guard against disease.

Conclusion – We need your help

In closing, I want to underscore that realizing the potential of the digital economy will require an ongoing partnership between the public and private sector.

Today the Internet and broader digital economy are providing opportunity and access to information around the world. But as I said before, we cannot take that success for granted.

For the digital economy to realize its full potential, we need to make the case to people everywhere that freedom and openness on the Internet is good for them too – that they will be safe and secure when they use it, and that they will have the the access and skills to thrive in a new digitalized economy that works for them.

We want to partner with you. We hope you will take advantage of the tools we offer: our export assistance programs, our new digital attaches program, the incubators and regional efforts we support. And we value your input as we address big policy issues that might impact small business, and as you create new products that are changing the world.

We know that the digital economy is a key to the success of the future American economy. It is a driver of growth, productivity, and innovation. It is where people all over the world share ideas, learn new skills, and gain access to the storehouse of human knowledge. With your help, we can better shape that future together. Thank you.