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Ambassador Kornbluh on Internet Intermediaries


US Ambassador to the OECD Karen Kornbluh

On Internet Intermediaries

At the OECD Internet Intermediaries Workshop 

June 16, 2010

Paris, France


Good morning everybody. Thank you Andy. I'm amazed that after completing the multi-year, multi Directorate, multi volume OECD Innovation Strategy to huge acclaim in the Economist and elsewhere that Andy isn't just resting on his laurels! Thank you also to your team who have worked so hard to get us here. And welcome to everyone here. Many good friends and many teachers - from whom I know we'll all learn today.

So. Internet Intermediaries.

I'm not a big fan of lingo. I found when I worked at the FCC that insider terms tend to obscure and divide us rather than clarify and connect us. So, last night, I cracked open my Oxford English Dictionary and looked up intermediary: an "intermediary "acts between others, as a mediator or a go-between." In other words, all we're really talking about here is what rides on top of the physical layer of the Internet and below the top layer of content and mediates our interaction with those two layers. As a result it's also what makes the Internet the mediator of our interactions with each other and with companies, governments, and NGOS.

But then I made the mistake of looking up the word "Internet." No luck there. My dictionary was printed in 1993.

As keynote speaker, my responsibility is to first, propose a framework - which you are encouraged to modify or reject -- for thinking about the many issues that will be flying at you throughout the day and second pose a few questions for you to attempt to answer.

For the framework, I'll suggest four points:

1. Internet is not a sideshow. It is tremendously important to us as consumers, as innovators and workers, and as citizens

2. It got that way because of specific policy strategies that resulted in some key principles or values

3. However, the world is changing

4. The OECD can be the right place to help think through how to respond to the changes without damaging the vibrancy of the Internet


1. Internet is not a sideshow.

The Internet is an increasingly important medium for us as innovators and workers, consumers and citizens.

Innovators and workers: Critically important as we attempt to climb out of the crisis, the OECD's report on Internet Intermediaries states that the Internet and the broader ICT sector is a driver of productivity and economic growth. A rough estimate indicates that in the United States in 2008, Internet intermediaries contributed at least 1.4% of GDP value added- 1.4%! By way of comparison, the telecommunications sector accounted for 2.5% while the publishing industry accounted for 1% of value added as a percentage of GDP in the same year.

In addition, there are 'spillover effects' in terms of innovation and efficiency gains in other sectors for example when barriers are lowered to starting and operating a small business or when the quality and quantity of information is improved at a far lower cost.

To give you a sense of the job impacts, the number of jobs in the IT sector in the US grew by 26 percent from 1998 to 2008, which is four times faster than the US employment rate as a whole.  By 2018, IT employment is expected to grow another 22 percent.

Consumers: From 1999 to 2007, business-to-consumer (B2C) Internet commerce has increased by 500 percent.  As the Internet Intermediaries paper puts it, "Intermediaries create significant market efficiencies by bringing suppliers and demanders closer together, thus decreasing transaction costs such as the cost of searching for a buyer or a seller. They ensure that markets work better and create more competition as well as allow for a greater internationalisation of markets. Indeed, Internet intermediaries facilitated trade by allowing the expansion, aggregation and globalisation of markets as well as the customisation of goods and services."

Citizens: The Internet puts formidable power in the hands of citizens. Disagree with a government action? Tweet about it, as many Iranians did after the election in 2009. During his visit to China in November, President Obama responding to a question sent in over the internet said "the more freely information flows, the stronger the society becomes, because then citizens of countries around the world can hold their own governments accountable...That generates new ideas.  It encourages creativity." 

I worked at the Federal Communications Commission when we put in place the E-rate program to connect classrooms to the Internet. When the Act was passed, only 3% of classrooms were connected. Today almost all are. And with new educational websites, math programs, assessment and informational sites and services, education has the potential to be transformed at school and at home.

2. The thriving Internet is not an accident. It occurred because of a largely US-European consensus on policy strategies that were employed at the birth of the Internet.

In the US, the Telecommunications Act of 1996 limited ISP liability clearly and broadly with three exceptions: if the user violates federal criminal law; violates IPRs; violates or communications privacy law. Then specific law spelled out responsibilities. In the case of child pornography, there is criminal liability for knowing distribution and an affirmative obligation to report to a specific law enforcement entity. For copyright law, the DMCA creates for web hosts a notice and takedown system. For privacy, an ISP can't intercept virtually any communication; government - especially Christine Varney and Bob Pitofsky at the FTC - nudged industry to self-regulate with FTC oversight and now California has an on-line privacy requirement. We also have very strong sectoral privacy requirements on the most sensitive information such as medical and credit information as well as on telephone and cable communications.

Europe took a similar though distinct approach via the Electronic Commerce Directive which provides significant immunity for ISPs and underscores that states cannot impose on internet intermediaries a general obligation to monitor content.

The OECD has been a part of this consensus with its Ottawa Ministerial in 1998 calling for an industry-led approach and then its Seoul Ministerial ten years later laying out high-level principles on the Future of the Internet Economy. The OECD 1999 e-commerce guidelines created a basic framework with high-level principles - transparency, cautions against practices that create "unreasonable" risks of harm to consumers - which helped e-commerce to expand by balancing protections with freedom of commerce.

In all, these policy strategies leaned away from placing the onus on internet intermediaries to police content created by others. The result was a system that fostered openness and decentralization while also creating a trusted environment. Of course it wasn't perfect but it was far better than the alternative: An Internet on which privacy, intellectual property and kids were unprotected would never have thrived. A system that forced intermediaries to protect themselves from liability would have led to the blocking of even lawful content or high monitoring costs that would have locked out smaller innovators. 

No wonder then that the OECD's Innovation Strategy states that to increase innovation, nations should not only invest in broadband but also, quote, "Uphold the open, free, decentralized and dynamic nature of the Internet."

3. This is the challenge. We are going to need international norms to respond to a changing world:

Increasing data flows across national boundaries both because people want to buy products and services from people in other countries and because of new technologies such as cloud computing.

Regulatory divergence: Increased concerns about privacy, consumer protection, intellectual property, and child protection have resulted in new approaches in different countries that can pose a real threat to the current framework.  An Italian court, for example, convicted three current and former Google executives on privacy violations, resulting from a video uploaded to its site - even though Google took the video down as soon as they heard about it. 

Censorship: Secretary Clinton has said, we in the US "stand for a single internet where all of humanity has equal access to knowledge and ideas. And we recognize that the world's information infrastructure will become what we and others make of it." But in the last year we've seen unfortunate spikes in threats to the free flow of information and there is a general lack of consensus about what are accepted norms on Internet monitoring and filtering by governments -- both among democracies and between democracies and repressive regimes -- and about how companies should respond to pressure from repressive regimes. 

Increased importance of the Internet. 

Emerging international debate: In Europe alone, the EC Consultation on the legal framework for protecting personal data, the Madrid Resolution on International Standards on the Protection of Personal Data and the Galway Project are all focused on pieces of this problem.

4. Fortunately, the OECD is the right place to have this discussion

OECD has historic mandates and ongoing work-streams 

  • In Ottawa in 1998 the OECD held a  Ministerial on Electronic Commerce
  • In Seoul in 2008, OECD Ministers signed a declaration for the Future of the Internet Economy affirming high-level principles and calling on member countries to further explore the role of internet intermediaries -- the project we're engaged in here.  
  • The review of the 10-year old OECD E-Commerce guidelines will begin next year 
  • The review of the 30-year old OECD Privacy Guidelines - described by Ambassador Philip Verveer, U.S. Coordinator for International Communications and Information Policy as "the ur-document for privacy requiresments for trans-border commercial activities" - will also begin next year.  
  • And the OECD is currently examining policies to incentivize investment in broadband.

Plus, the OECD is an attractive forum: 

  • OECD is "one of the preeminent thought leaders in matters of information policy."
  • It is also the place where regulators come to share best practices and develop "soft-law" agreements such as principles, guidelines, and conventions
  • Open to multi-stakeholders: member-country governments, volunteer group on Internet Intermediaries, child protection, privacy, and e-commerce volunteer groups. Business and Labor Advisory Groups to OECD ensure business and labor participation - though these groups have no vote
  • BRICS and other non-members can participate though they have no veto rights

So, what are next steps?

Larry Strickling, Assistant Secretary of Commerce for Communications and Information, heads the National Telecommunications and Information Agency. He has stated, "We have a responsibility to assure our design principles -- our policies -- are producing desirable outcomes. The challenge for governments today is to build on that cooperative, global, voluntary spirit."

I think that should be our challenge today.

The OECD released in April Phase I of its report on The Economic and Social Role of Internet Intermediaries, which developed a common definition and understanding of Internet Intermediaries. Phase II of the project addresses the policy implications of the ever-evolving role of these intermediaries and Phase III will focus on "lessons learned" from the experience of internet intermediaries to date. Together these papers can form a basis of a shared understanding of the basic economics of the Internet. It can also help us extract the principles and policy strategies that have fostered its vibrancy. And perhaps help us come to some consensus on principles that are essential to safeguard moving forward.

There will be a meeting at the end of September to discuss the way forward that will be informed by your discussion here today. To get you started, here are some questions you might think about in the discussion that follows:

 1. What data would be most helpful in terms of breaking through stale debates?

2. What are some of the high-level principles or values that have been essential to the vibrancy of the Internet?

3. What policy strategies are best in terms of addressing new challenges while limiting costs - economic costs and costs in terms of these values?

The OECD Secretariat, member governments, academics, NGOs, the private sector, everyone in this room - we all have a role in defining the future of the Internet. I wish you the very best in your discussions today.