AMERICAN ENTERPRISE INSTITUTE

CYBERSPACE POLICY AT HOME AND ABROAD: THE AGENDA FOR 2016 AND BEYOND

INTRODUCTORY REMARKS: JEFFREY EISENACH, AEI

KEYNOTE ADDRESS: RON JOHNSON, CHAIRMAN, SENATE HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS COMMITTEE (R-WI)

PANEL 1: MEETING THE GLOBAL CHALLENGE TO A FREE AND OPEN INTERNET

PANELISTS: CLAUDE BARFIELD, AEI GUS HURWITZ, AEI ROSLYN LAYTON, AEI SHANE TEWS, AEI

MODERATOR: JAMES K. GLASSMAN, AEI

PANEL 2: RESTORING A MARKET-BASED APPROACH TO US COMMUNICATIONS POLICY

PANELISTS: RICHARD BENNETT, AEI BABETTE BOLIEK, AEI MARK JAMISON, AEI DANIEL LYONS, AEI

MODERATOR: JEFFREY EISENACH, AEI

LUNCH ROUNDTABLE: A CYBER-ISSUES SMORGASBORD

PARTICIPANTS: ARI RABKIN, AEI BRET SWANSON, AEI TOM SYDNOR, AEI

9:00 AM – 1:00 PM THURSDAY, JANUARY 28, 2016

EVENT PAGE: http://www.aei.org/events/cyberspace-policy-at-home-and-abroad- the-agenda-for-2016-and-beyond/

TRANSCRIPT PROVIDED BY DC TRANSCRIPTION – WWW.DCTMR.COM

JEFFREY EISENACH: Now, let me ask folks to take their seats and we’ll get started here pretty much on time.

My name is Jeff Eisenach and I am the director of AEI’s Center for Internet Communications and Technology Policy. I want to welcome everyone here on this cold, but happily not snowy morning in Washington, D.C., and glad everyone made it here safely over some icy streets.

We’re here for half a day more or less to talk about Internet policy issues at home and abroad, looking down the road this year and then looking down the road past what will be a pretty important date about a year from now when we have a change I administration one way or another and all of the opportunities to affect U.S. policy that come every four years in our political system.

I’m going to move as quickly as I can to our keynote speaker and then we’ll talk more about the program after as we begin the next session.

Our keynote speaker today is someone we’re very proud to have with us. He has been a friend of AEI down at attending some of our events out of town. He tells me this is his first time to AEI headquarters. And I mentioned it will probably be his last time at this AEI headquarters because we’re hopefully moving sometime this spring to a fabulous new facility up on Mass Ave.

Senator Johnson is the chairman of the Senate Homeland Security and Governmental Affairs Committee as well as chairman of the Senate Subcommittee on European and Regional Security Cooperation. And as a result, he is at the center of the debate, which is getting, happily, increasing attention about the importance of U.S. cyber policy in general and cybersecurity in particular to our national security interest, to our economic interests, and to America’s national interests broadly defined.

Here at AEI, about two years ago, we began a project to develop a global Internet strategy for the next administration. Our first initial report growing out of that effort will be released in mid-June, and we’re looking forward to that.

Our belief is that America’s not winning in the cyber environment, that we’re unprepared as a matter of defense and inactive and ineffectual as a matter of offense and that that applies across the board. Whether you’re talking about diplomacy or military preparedness or law enforcement, everywhere you look we’re on defense and in retreat in the cyber environment. That doesn’t have to be the case. We think that can be turned around and that’s our overall objective.

Senator Johnson has been a leader on these issues. He has focused not only on the cyber issues but on ISIS and terrorism. He is an entrepreneur and a businessman. He founded his own business in Wisconsin in 1979 sleeping on a cot and running machine tools and was elected in 2010.

And I have to just say before – my last comment, Russ Feingold, who he defeated in 2010 for a seat in the U.S. Senate, was one of the most pleasant members of the U.S. Senate ever and an extremely funny guy and one half of an iota to the right of Bernie Sanders, so while we did a trade I think in getting a very pleasant guy to replace him, we certainly got somebody with much more sound ideas.

And, Senator Johnson, we’re delighted to have you here. Thank you. (Applause.)

SENATOR RON JOHNSON (R-WI): Thank you, Jeff. I appreciate that. I’ve got a great deal of respect for AEI. I think you – again, there are a lot of good think tanks here in town with fabulous scholars, but – I shouldn’t really say this but you’ve got good a stable as anybody. That’s probably the best way to do it.

And when you come and speak before a group like this, it’s a little intimidating. I mean, my own background, as Jeff was talking about, is I’m an accountant by education, plastics manufacturer by vocation. So I read the information from scholars from, you know, a place like AEI and I learn from you. So, you know, what can I tell you?

Let me – before I get into the subject matter of cyber threats against this nation, let me give you some good news. I think the greatest thing we’ve got going for this country politically is that as Americans we share the same goal. I don’t care where you are on the political spectrum, we all want a safe, a prosperous and secure America. We’re concerned about each other. There’s not one political party that has a monopoly on compassion. We all want every American to have the opportunity to build a good life for themselves and their family.

My approach, being a United States senator, really dates back to my approach in business. I did a lot of negotiating in business. I didn’t sit down at the negotiating table and start arguing. You know, what I would do in those negotiations is I would first lay out all the areas of agreement. And that technique allowed me to develop a relationship, a level of trust with my negotiating partners so when it came to the areas of disagreement, it was just a whole lot easier finding common ground.

So that’s how I’ve conducted myself as United States senator. It’s definitely how I’ve conducted myself as chairman of the Senate Committee on Homeland Security and Governmental Affairs.

Let me just give the example of – you know, what I did is we first started – as I first started this chairmanship, reached out to the former chairman, now my ranking member, Senator Tom Carper, who – let’s face it. You know, Tom wants a whole lot more government than I want, so we’re kind of far apart in the political spectrum, but he’s a person of integrity and we do agree that what government we have should be effective, efficient, and accountable.

So the first thing I did with Tom, I said, let’s do something kind of business like for our committee. Let’s develop a mission statement. And he was open to that so we developed a pretty simple one: to enhance the economic and national security of America.

That accomplished two goals. It first started our relationship out of an area of agreement but it also directed the activity of the committee as we moved forward. The next thing we did, we said, let’s establish some priorities.

Now, you have to understand about this committee is really two House committees combined into one in the Senate. It’s, you know, Homeland Security, then governmental affairs, which is like the Oversight Committee in the House. So it’s got enormous jurisdiction, a lot of responsibility.

Let me concentrate on the homeland security side. We established basically five priorities: border security, cybersecurity, protecting our critical infrastructure, including our electrical grid from things like cyberattack, physical terrorist attack, EMP, geomagnetic disturbance, OK, all those things. We are at risk. And then, what can we do really as a nation to protect ourselves and counter Islamic terror, you know, particularly the homegrown variety?

Fifth priority really is, you know, a little bit different. It’s just committing myself, committing our committee to doing everything we can to assist Jeh Johnson, Nick Rasmussen, James Comey, these individuals that are charged with the responsibility of these important agencies of succeeding in their mission of keeping this nation safe.

So, again, that’s kind of what we’ve set out to do. We have held I think 13 hearings on border security, multiple trips. We’ve held multiple hearings on cybersecurity. We actually got some results this year after being here five years. We finally passed the first step – and it’s just the first step in cybersecurity legislation. You know, how we accomplished that, by the way, is, again, looking for areas of agreement.

Dianne Feinstein and Saxby Chambliss had been working together for a number of years trying to come up with a Senate Intel Committee bill. When President Obama in the State of the Union address talked about cybersecurity as an important priority, Tom Carper and I immediately started talking.

Now, what we didn’t do, although people asked me to do, is I didn’t claim jurisdiction over the issue. I looked at the world that Dianne Feinstein had done with Saxby Chambliss and now with Richard Burr as a pretty good product, about as good as we were going to get out of the Senate. So I want to support their efforts.

And what we did in our committee is we passed the Federal Cybersecurity Enhancement Act, which, again, is an important first step particularly in light of the attacks we’ve seen on our federal cyber assets.

By doing that – you know, we passed that out of our committee I think unanimously. And then we were able to marry that with the Senate Intel bill. And because there were no sharp elbows or there was no disagreement, there were areas of agreement, we were finally able to get that thing attached to the omnibus and passed into law. We accomplished something. We got a result.

But what I want to talk about is why did it take us five years to just take that very first step? You know, ever since I got here – I got here in 2011, in homeland security, we’d been having hearings on cybersecurity. You know, time after time after time, the witnesses would tell us – because I’d always ask them, what are the priorities of actions? What are the steps we have to take?

And the first step was always we have got to share information between the federal government, allow businesses to share information with themselves and the federal government, you know, threat signatures that we can prevent some of these attacks.

But the resistance, the reason we couldn’t pass that was because of privacy concerns, as well the trial lawyers. Let’s face it. They do like the ability to sue people. And so that was always a stumbling block. We had to overcome that.

How did we overcome it? I think basically it was with information. And if there’s one message I want to convey to what you need to do, what we need to do as a nation, is we’ve have got to raise the profile of the serious threats we face in terms of just our basic critical infrastructure, primarily our electrical grid.

One of the things that’s been helpful to me, you know, going through those hearings and bringing myself up to speed – you know, I’m not expert at this stuff. I’m not an IT expert. By the way, one of our problems in America, you know, I’m old enough to remember “Gilligan’s Island.” Let’s face it. Most of us are Gilligan. There aren’t a whole lot of professors. You know, as technology moves forward, really, it’s leaving the vast majority of the population behind in terms of how does all this work? We really don’t know. This is incredibly complex.

And so, you know, we started seeing some of these cyberattacks, you know, kind of get some notoriety back in 2009 with the (Valspar ?) attack, and then there’s a Google attack. But where this really ramped up is, you know, 2013, 2014 with the Target attack and, you know, there’s just – again, you know all of them. I don’t have to go through the list. And then, of course, it really culminated with the attack on the IRS’s transcript, the big OPM attack, where we had almost 20 million background checks of former federal employees, 22 million Social Security numbers released.

It’s that kind of news, that kind of awareness that finally – even though since 2011, everybody in Congress was going, we’ve got to do something about this. We have to pass something. We just couldn’t do it until the public was fully aware of the imperative for doing it.

I brought this book. This was handed to me last weekend by my brother. And he was pretty panicked about it. He’d read it. And he goes, do you know about – you know, look at this. Actually, I know a fair amount about what Ted Koppel’s writing about here. I haven’t read the whole thing but let me just read a little part of this, page 96.

And Ted Koppel had met with Jeh Johnson, who, by the way, I’ve got a great deal of respect for. I really do. I think he’s a serious individual with a really tough job, in charge of a really important department, a department that has quite a few management issues.

But they were talking about these large power transformers, which is what our really big risk is in terms of our electrical grid. And we’ve seen, of course, the physical terrorist attack at Metcalf, California; actually pretty amazing that we didn’t lose the electrical grid supplying Silicon Valley at that point. We haven’t solved that one yet. You know, we do not know who perpetrated that attack. To me, that was just a little pilot test. It should really concern us but, you know, that’s not the only way that these things can happen, you know, that we can lose these large power transformers.

But anyway, Ted Koppel said he asked the secretary what would happen in the event that several transformers were knocked out. How would he go about replacing them? What kind of backlog exists? And this is quoting Jeh Johnson: “I’m sure FEMA has a capability to bring in back-up transformers.” He said, “If you want the inventory number, I couldn’t give that to you.” Now, this was in October 2014. I’m really – I’m not throwing Secretary Johnson under the bus. I’m just saying, you know, he thought FEMA has got this one covered.

Well, then, of course, Ted Koppel went to Craig Fugate, who’s head of FEMA, and was asking the same question. And this is quoting Director Fugate: “If you cause overloads and you cause significant damage to the very large transformers, that’s probably one of the most difficult things for us to respond to because there are very few manufacturers in the United States.” And then he asked him, would he say that Jeh Johnson or the president to ask FEMA if they were prepared for the scenario, Fugate’s response bluntly, “No. Most people expect that somehow we have enough tools in the chest to get power turned back on quickly. The answer is no.”

Now, I’ve got my own wounds, my own scars from raising this issue. We held a hearing in Homeland Security on electromagnetic pulse and geomagnetic disturbance as a threat to our electrical grid. And we had James Woolsey, former CIA director. We had Dr. Richard Garwin, who, by the way, worked with Enrico Fermi and Fermi referred to Richard Garwin as probably one of the true few geniuses he’d ever met.

Now, in that hearing, again, we were talking about, you know, what can we do to protect this? You know, we had the 2004 EMP commission. We had the 2008 EMP commission. They’d made recommendations, A through O for some quick fixes. They charged the Department of Energy, the Department of Homeland Security for, you know, implementing those quick fixes.

We found out in that hearing DHS has done nothing. Richard Garwin talked about there were two to seven hundred critical large power transformers that needed to be protected. Now, he also made the statement that for about $100,000 a copy, you can put a capacitor in there and could protect them from either EMP or GMD.

Now, you know, I’ve used committee staff in trying to do the general contracting on this myself because nobody is taking it seriously. And I’m not sure it’s $100,000, maybe $500,000. There’s a lot more complications to it. I’m not an electrical engineer. This is something serious.

One of the points that Richard Garwin talked about, Dr. Garwin talked about, is that because of these massive solar flares – that’s what geomagnetic disturbances are, if one of these things occur at that level, at the karantine (ph) effect, about one every 100 years which means every decade, we have a 10 percent chance of one of these massive solar flares wiping out big chunk of our electrical grid. Nobody can tell you exactly why because you’ve got the magnetic sphere and you don’t know exactly how it’s going to affect it. But we haven’t done anything about it since 2008.

Fast forward to the next week. We had Secretary Moniz, Secretary Lew, Secretary Kerry before Foreign Relations talking about the Iranian Agreement Review Act. Now, they were dodging questions from the other panel members so I took my time to question the panel, to talk to Secretary Moniz. As the head of the Department of Energy, one of the agencies charged with implementing the recommendations of the 2008 EMP Commission.

And I just asked him, you know, what have you done? Do you know that you are charged with this? He had – he had no clue. Now, he knew what EMP was. He knew who Dr. Richard Garwin is. He said he was a national treasure. So, again, you’ve got Secretary Jeh Johnson thinking FEMA’s got this covered. You’ve got Secretary Moniz that, you know, doesn’t even know that he’s charged to do some quick fixes. Now, again, I’m talking about EMP, GMD, but just talk about cyberattacks, talk about physical terrorist attacks.

And so, again, that’s my bottom line is in this town, in this government, we’re not addressing it. One of the attributes, by the way, I found in government is denying of reality across the board. Take a look at our debt and deficit. You know, we’re not facing up to that.

And the reason why you have this denying of reality is if you actually accept reality, if you talk about it – well, first of all, you get ridiculed. You know, Ben Carson’s getting ridiculed. They’re doing a “Saturday Night Live” skit on him because he raised the issue of EMP. I was ridiculed by the New York Times. I mean, I don’t care. This is an extremely important issue. But also, if you acknowledge these realities, you’ve got to something about it, and doing something about it is not particularly easy.

But let me just end on this note. This should depress you, but it will tell – it’s an example of the denial of reality. I mean, foreign policy. Now, this is going to sound a little political. It is, but it’s true.

You know, what did President Obama say about ISIS, they’re the JV team. You know, he’d say that because it’s just JV team, you don’t have to do anything about it. He talks about Vladimir Putin, you know, offer him off-ramps. I mean, any careful observer realized, no, Vladimir Putin’s looking for on ramps. The Iranian nuclear agreement from my standpoint, that was just basically, don’t do a nuke on my watch. I don’t want to have to deal with it. I will allow tens if not hundreds of billions of dollars to flow into your economy, OK? It’s just a denial of reality so you don’t have to do anything about it.

And here’s a little story on the debt and deficit. I was actually one of a small group of Republican senators working with the White House right after President Obama got reelected trying to find some areas of agreement on debt and deficit. And so from my part as an accountant, I laid out – because we always hear these unfunded liabilities, big numbers don’t mean anything to people. They don’t know what an unfunded liability is or net present value. So I talked about the 30-year deficit as a demographic bubble, the true definition of the problem. A hundred and three trillion dollars, by the way, is the projected deficit over the next 30 years.

So I’m in the White House to our meeting. President Obama comes in for the second half. And I’m sitting right next to him. I get my chance to make my pitch and say, Mr. President, you are a president. You’re the bully pulpit. Use it. I slid my 30-year deficit chart, that $103 trillion deficit under his nose, said, use your bully pulpit. Tell the American public the truth. Show them the depth of the problem so that collectively, as a society, we can take the first step in solving any problem, which is admitting you have one.

You know what he said to me? He said, Ron, we can’t show the American public numbers that big. If we do, they’ll get scared and give up hope. He said, besides, Ron, we can’t do all the work. We have to leave some work for future presidents, future Congresses.

Again, now, I want you taking that attitude – again, this is our president in August of 2013 is when he made that – he’s got his whole second term ahead of him, he doesn’t want to have to deal with it. This town doesn’t want to have to deal with this low probability, but high catastrophic type of events like a cyberattack or a physical terrorist attack or a geomagnetic disturbance attack that wipes out electrical grid. It’s just too awful to even contemplate. And so we’re just denying reality. We’re just not dealing with it.

But the same thing is true with all these cyberattacks. As General Keith Alexander said, it’s the greatest transfer of wealth in human history, but it’s complex. We really don’t understand it. We say, that won’t happen to me. Well, the fact is, now that we’ve seen the OPM breach, Target, Anthem, Sony, all those attacks, the public is – has greater awareness, enough awareness to put pressure on the political process, we at least took that first step in terms of information sharing and protecting our federal cybersecurity assets, but we have got a long way to go.

How about a national preemption on data breach? I don’t think companies can really try and respond to 50 or 100 or a couple thousands jurisdictions in terms of what their requirements are. I mean, to me, that’s table stakes. That should be so easy to accomplish. We haven’t been able to. We couldn’t attach that to the first step.

That’s, by the way, the second step. We’ve got other issues we’ve got to talk about, encryption. What are we going to do in terms of ICANN, in terms of the Internet? I’m sure you’ll probably be dealing with that if you’re talking about the Internet. We have a lot of issues we have to deal with. What are we going to do to respond to these bad actors? How can we deter this type of activity from whether it’s Russia or China or North Korea or Iran? Do we go on the offense?

These are serious issues we have to discuss. Nobody’s got the – you know, any kind of answer on it right now. But this is a very serious threat. And we’re just simply not taking it seriously.

So, again, my bottom line, the message of what I’m asking this group to do is we’ve got to highlight this. We’ve got to publicize it. We’ve got to make sure the American public is fully aware of the threat and the risk so you put pressure on the political process to start responding, to start passing some commonsense legislation that’s sorely needed to address it.

With that, I’m happy to answer any questions you’ve got. (Applause.)

Right there, sir. Right here. Oh, OK.

Q: Hi. I’m Mike Nelson at CloudFlare and I also teach cyber policy at Georgetown. I’ve worked in government on the Hill and in the White House, and I know that it’s great when politicians stand up and propose new programs, new ways to fix things. But at least half the time, some of the problems are existing laws that get in the way of fixing things.

SEN. JOHNSON: Oh, yeah.

Q: So I wanted to look at one case study and see if you have any insights on it. It’s called the Wassenaar Arrangement. It was passed a couple of years ago. It was a human rights initiative to stop people from exporting and sharing information on cyber vulnerabilities that people like Assad or other repressive dictators could use to snoop on their own people.

And so this very broad piece of international treaty was passed, 41 countries passed it, saying, don’t talk about – don’t share information on cyber vulnerabilities because the bad guys might use it. The only effect this is going to have, of course, is to stop the good guys from sharing information on how to stop the vulnerabilities.

How did this happen? How did the U.S. government and 40 other countries do this without realizing what they would do for cybersecurity? I know that Congress is working to pull it back, but it’s just a great example of how this is a broad issue that needs a lot of people talking to each other.

SEN. JOHNSON: Because there are a lot more Gilligans than there are professors. I mean, literally, this is so complex. You know, I have my kids set up my iPad, OK? I don’t do that. I have my kids do it. So these are incredibly complex issues.

I would say the definition of Washington, D.C., is negative unintended consequences. You know, so demagoguery sells. We’ve got a problem we’ve got to fix.

You know, I was actually in the smaller group – this is when we were working on this Lieberman-Collins bill, the kind of group of senators kind of coming down to crunch time to get this thing passed. And I’ll just tell you – this is not saying anything negative about my colleagues, but we just don’t have the knowledge to start talking about in detail what we’re going to do in a 400-page bill on cybersecurity. These are incredibly complex issues.

So we’ve got to be very careful about what kind of laws we pass which is – you know, we talked about encryption. I’m not sure that anything we do in Washington, D.C., wouldn’t do more harm than good, just as you’re talking about there. Let’s face it. Encryption really helps protect personal information. It’s crucial to that. I mean, I like the fact that, you know, somebody gets my iPhone, they’re going to have a hard time getting into it, OK?

And, oh, by the way, is it really going to solve any problems if we force our companies to do something here in the U.S.? Well, this is just going to move offshore. You know, determined actors, you know, terrorists are still going to be able to find a service provider that will be able to encrypt accounts.

So, no, it really is just not understanding the complexity. And I’m really not being critical here. It’s incredibly complex, which is the biggest problem you have in terms of cyberwarfare, cyberattacks, is the experts, the attackers are multiple steps ahead of the good guys trying to, you know, reel them in, trying to find them.

Q: Thank you.

SEN. JOHNSON: Anybody else? Sir.

Q: I liked what you just said about encryption. I just want to ask, do you have a sense what the mood is in Congress on this issue? Is the thing you said, the consensus of Congress? Is Congress closely divided? Are you feeling like you’re working on this?

SEN. JOHNSON: I mean, I don’t think anybody – we haven’t taken any test votes or – so I really don’t have a clue. I mean, the concern ought to be – because, by the way, I am in the camp that the threat of Islamic terror is real and it is growing and it has to be addressed, OK? And also I’m in the camp that our first line of defense against Islamic terrorism is an effective intelligence gathering capability. So, I mean, I’ve got all that.

I think what we have to do though is, again, lay out the reality, take a look at whatever the supposed solution is to this and go, are you really going to do more harm than good and is it really going to solve the problem?

The concern I always have is, you know, you end up with – you know, a rush to judgment, you know, you’ve got – by the way, it’s always – when you hear, we’ve got to do something about it, run for the hills. You know, this has got – this is what you really ought to have hearings about. This is where you need to employ experts at think tanks to really educate the public as well as members of Congress and their staff so that we don’t pass something that does more harm than good.

So I really can’t tell you where we’re at, but I tell you what we need to absolutely do is we’ve got to get that information so we really understand it before we rush to judgment and pass something that does more harm than good, OK?

MR. EISENACH: Senator, we promised we’d get you out of here at 9:30 a.m. so I think I’ve got two minutes. So I’m going to ask a last question, take that moderator’s prerogative.

We had a dinner last night with some folks from the European Union and, you know, as we look out at the landscape over the next decade or so, we’re clearly in a – “war” isn’t the right word, but in an adversarial position to some extent with countries like China and Russia and Iran who hold different values than we do. And all of this is playing out in the Internet space where economies of scale and network effects matter. The biggest ecosystem has a huge advantage and the Chinese sort of by definition on the face of it have the biggest ecosystem.

So as we think about the U.S.’s strategy here, we think about the importance of Europe and pulling our natural allies together. And what we ended up talking about a lot last night is the current fracas over the safe harbor and data protection.

So I’d wonder if you’d just talk for a second about broadly speaking America’s shared interest with the Europeans on cyber issues and some of the tensions that we face both in the data protection issue and more broadly kind of over commercial issues, their concerns about Facebook and so on and so forth.

SEN. JOHNSON: Again, I think probably the greatest transfer of wealth is in that industrial espionage space where, you know, European and – let’s face it, the West has invested enormous amounts of money into R&D, and through cyberattacks, you know, our adversaries, hopefully they’re friendly adversaries can just steal it and they get the benefit of all of our R&D without having to do the investment. I mean, that’s – you know, economic warfare and it works really well.

One interesting insight, because I’m also chairman now of the European Subcommittee on Foreign Relations – so right after Edward Snowden, we’d get delegations of Europeans coming in and that’s all they want to talk about is, you know, how awful America was for, you know, spying on their countries, you know, kind of like the Casablanca, you know, I’m shocked. After the Paris attack, you don’t hear that anymore. After Charlie Hebdo, you don’t hear that anymore. So, again, it all – it all boils down to let’s take a look at the reality situation.

Now, personally – you know, I think – I sell to China. You know, we export plastic to China. I would like to have them be no more than a friendly rival and I would really like to look at China as a 1.4 billion person potential market. But, you know, they’ve got to come into the, you know, legal framework so they’re with us in terms of helping us protect intellectual property.

They have to do that, but, again, it all goes back to – we’ve got to understand the reality of the situation. We need to understand how incredibly real this threat is and don’t let the demagoguery of a particular issue overwhelm the imperative of sticking together, coming up with a strong framework, doing what we need to do, you know, without violating people’s civil liberties, by protecting civil liberties, but doing the intelligence gathering, getting the assets in place, getting the protections in place to stay as close to the people trying to do us real harm as we possibly can, recognizing that it’s an enormous challenge. OK?

Thank you, Jeff.

MR. EISENACH: Senator, thank you so much for being here. We look forward to working with you. (Applause.)

Well, that was a good kickoff for our first panel this morning which focuses on global issues and foreign affairs and security issues. Let me ask Jim Glassman, who is moderating this panel, to come forward. And we’re just going to roll right into the next part of our conference.

Jim.

JAMES GLASSMAN: Well, good morning, everyone. You know, at a time when we consistently hear that government can’t do anything right, let me point to two things that government has done right in the last 20 years.

The first is PEPFAR, the President’s Emergency Plan for AIDS Relief, which now has nine million people around the world under anti-retrovirals, millions and millions of people that would have died otherwise, countries that are doing well economically like the United States a lot more than they did before the program was launched – bipartisan program, started under President Bush, continued under President Obama, support across Congress.

And second, Internet governance – a program that was essentially started 20 years ago by the Clinton administration, strongly supported by a Republican Congress and working extremely well. Over that 20 years, private investment in Internet infrastructure has totaled $1.4 trillion. The United States essentially dominates when it comes to Internet business. Three companies that never – that didn’t exist, Amazon – just three, Amazon, Google, Facebook among them, combined market cap of about $1 trillion out of thin air. And one major reason for it is the way that the Internet is governed.

So I want to talk for just a couple of minutes about that to sort of set the stage for the discussion that’s going to ensue, which is about challenges to freedom on the Internet.

And we have four excellent panelists, all of them affiliated with AEI. Shane Tews, a visiting fellow at the Center for Internet Communications and Technology Policy, former vice president for global policy at Verisign; Gus Hurwitz, also a visiting fellow at the CICT, assistant professor at the University of Nebraska College of Law; Roslyn Layton, another visiting fellow with the center. She is – among other things, studies Internet policy at Alborg University in Copenhagen, where she is pursuing and has almost caught her Ph.D. And Claude Barfield, resident scholar at AEI and our resident expert on trade and intellectual property issues.

So the Internet got off on the right foot in 1962, even before Al Gore invented it at DARPA. It was a government program. The idea was to link global computers. But the critical transition came in 1995, when the Internet essentially became commercialized.

And President Clinton’s adviser, Ira Magaziner, established a set of principles that have guided U.S. policy on Internet governance for decades, and they worked extremely well.

The first principle, Magaziner wrote two decades ago is that, in general, the Internet is a medium that has tremendous potential for promoting individual freedom and individual empowerment. Therefore, where possible, the individual should be left in control of the way in which he or she uses this medium. We should maximize the opportunity for human freedom. I don’t think there’s ever been a better example in public policy of the effectiveness of devolving decision-making onto individuals.

A problem is that in recent years, as the Internet has grown, the Internet’s own success has caused challenges that we want to talk about. And the regime that was developed, the multi-stakeholder model, essentially makes government one player, and in many cases a minor player, is changing mainly because of threats to governments. Challenges to those in authority, both democratic and despotic, has certainly been a lot easier to mount thanks to the Internet. And we’ve seen that over and over again, the Green Movement in Iran, the Arab Spring and so forth. And that has made many governments worried.

So that’s the first threat to the Internet is – or the first threat generated by the Internet is a threat to those in authority – not just governments, but also established businesses, but mostly governments.

The second threat is manifested in the success of ISIS to recruit fighters from all over the world. And the success of Russia and China and other authoritarian countries at what Christopher Walker calls the containment of democracy. And that is a serious threat to Internet freedom.

And the final threat that we’re going to talk about today is the threat to Internet governance itself – to this multi-stakeholder regime that I talked about earlier.

A report from Freedom House says fearing the power of new technologies, authoritarian states had devised subtle and not so subtle ways to filter, monitor, and otherwise obstruct or manipulate the openness of the Internet. Well, that’s absolutely true and as a result, over the last five years, freedom on the Internet, according to the Freedom House survey, has declined every year. Now, a lot of that freedom is within individual countries, and that is certainly lamentable. But what we’re really worried about or what we’re worried about in addition is the spreading of these kinds of policies so that global Internet governance, the regime that has worked so well is also being undermined. And we are seeing this over and over.

Again, let me quote Chris Walker, “The focus of such efforts is not merely defending authoritarianism at home, but reshaping the international norms that stigmatize such governance.”

So today we’d like to talk about not just the threats to Internet freedom, but also what’s happening in such areas as trade and IP, privacy issues. We have a whole new set of challenges as a result of the success of the Internet, and that’s what we want to discuss. So I’m going to sit down and be with the panel itself.

And I’d like to start with Shane Tews. I use the term multi-stakeholder model. Most of the people in this room probably know what that is. But I’d like Shane to talk about that for a few minutes so we can understand what seems to have worked over the last 20 years and is now under threat. Thanks.

SHANE TEWS: Thanks, Jim. So five years ago today, the headline in the New York Time was “Egypt cuts off most Internet and cell service.” It said, Friday government – country of 80 million people modernized economy cut off nearly all access to network and shut down cell phones so they had a 90 percent drop in data on both their cell phones and their Internet, crippling them.

And, of course, what we all remember is they kept one tube – they kept one lane open because they knew they needed it for not only government, but they needed it for their own markets, but for the most part, you know, for the civilian market they closed down their Internet.

That made me think of – we’d been there for the Internet Governance Forum just a little bit – a couple of years before that, and we were talking about another term, which is Internet governance. And the Egyptian host committee looked at us and they said, we don’t know what that means. We just hear government. And I was like, we’re like eight years into this thing and we’ve been using a word that to everybody else, when we think words are high and mighty talking about Internet governance, which was about individual freedom, they were just hearing the word government.

So it became clear that the vocabulary was very important in these dialogues that we were having, which gets to the point of multi-stakeholder versus multilateral. And we just went through a very strong year in 2015 of things at the U.N., the whole Internet Governance Forum being allowed to exist for another 10 years. And if you look at the dialogue and you listen, again, closely, there was a lot of intermingling of the two phrases of multi-stakeholder versus multilateral.

And the difference is multi-stakeholder means everyone has a seat at the table. They don’t necessarily need to take the seat if they don’t care to be there, but they have one. So you have the engineers. You have the policymakers. You have the civil liberties. You have governments, which do have a seat at the table but not – and not a bigger seat at the table than anyone else.

You have corporations that are allowing the networks, you know, to operate in, you know, multiple facets around the globe versus multilateral which is the inter- governmental agency process. Think of the ITU, or the U.N. in general where only governments ultimately at the end of the day get a vote. You can advise them. I mean, there are people that go to these conferences and Sherpa the dialogue, but, at the end of the day, it’s the U.S. representative from the State Department who sits behind the flag.

So that has been very interesting because we thought we put a lot of that to bed early on with, you know, the creation of the ICANN process and the creation of Internet governance. And it turned out that there are a lot of people that just were sort of saying – nodding their head but they were staying with the status quo and doing what they planned on doing like shutting down the Internet.

And now we’re seeing a little more of this with China and Russia and occasionally Brazil when it’s having a good day, you know, gets in there and says, you know, we want to more say at the table which means that they want governments in the hierarchy to have higher precedent than the individual users, the network operators that are creating this.

And it’s one of those things that, you know, I sit and watch it, as several of you in the room do all day long and then you step back and you expect people to kind of understand this. And we probably don’t spend enough time letting people know the importance is really staying in this dialogue because otherwise the stream starts to go towards thing – it’s going – they’re going to tell you how it’s going to run.

In December, they had – I can’t remember what the term of art was but the Chinese, you know, had their own World Internet Forum, and that’s what it was called, and they said, we think that the Internet needs to be standardized and anybody who works in this space knows that hat just sends chills down an engineer’s spine because this is not how the Internet runs.

Certain things need to be standardized because we want them to be interoperable at a very, you know, hardware process, but the rest of it needs to be best current practice. So if I come up with something that’s pretty cool and everybody on the panel decides that we’re going to use it, that’s great. And then Roslyn tops my idea and says, I figured out how to do it faster. And then we all migrate to how she does it. We don’t have to go talk to a bunch of governments and tell us that it’s OK to move. We just move. We migrate, which is one of the reasons why this continues to be, you know, such a great medium for communications and commerce that currently runs globally and our goal is to keep it that way.

MR. GLASSMAN: Thank you. One thing that I wanted to quote, and that kind of buttresses what Shane was just saying is, you know, December, WSIS – now I’ve forgotten what WSIS stands for. World –

MS. TEWS: World Summit on Information Society.

MR. GLASSMAN: World Summit on Information Society to celebrate its 10th anniversary and issued a paper and went through the usual U.N. kind of gyrations in order to produce this paper. And there were submissions by different countries, different groups.

And the submissions from the Group of 77, which now includes 134 countries, mostly developing countries, plus China, issued its contribution, part of which went like this: the management of the Internet involves both technical and public policy issues. And the overall authority for Internet-related public policy issues is the sovereign right of states. It went on to say it is necessary to ensure that the United Nations plays a facilitating role in setting up international public policies pertaining to the Internet. And we heard something similar from Russia, from Cuba, and from the usual suspects. So this is a serious threat.

The thing I wanted to start Roslyn on is Roslyn lives in Europe. And the Europeans have been allies in maintaining the multi-stakeholder model. And in the end at this WSIS+10 meeting, the document that was produced I think was quite a good one. But the threat was there and the threat will continue.

What do people – what is the situation in Europe when it comes to Internet freedom? There are a lot of important issues that are still bubbling up or is the United States and Europe or are the United States and Europe on the same page?

ROSLYN LAYTON: Well, good morning and thank you, everyone, for coming. And, Jim, let me answer your question in a little bit of a roundabout way. I want to just piggyback a bit on the multi-stakeholder discussion that Shane introduced.

As Jim mentioned, I live in Copenhagen and I’m at Aalborg University. I’ve been extremely fortunate the last three years under the Danish Innovation Fund to do a global study of what we might call net neutrality policy around the world, and my specific task has been to investigate this virtuous circle which the FCC has proffered as its justification to make open Internet rules and to bring Title II from the Communications Act, to bring that utility star regulation to the Internet.

So just what this virtuous circle idea is that we need a sort of state of net neutrality which is delivered by utility regulation from Title II to ensure that edge providers, that being the Internet companies or the entrepreneurs, can create their innovations, the traffic to which will stimulate the broadband telecom cable companies to invest in infrastructure. So this is kind of the idea of the theory. So what I’ve looked at over the last 10 years would be, you know, before and after rules are imposed or the rate of the traffic to the web, mobile networks and the rate of investment.

And what we – what’s interesting to find is that those countries that have soft net neutrality rules, specifically that use a multi-stakeholder model, actually have a better ecosystem for the edge providers. And that is to say there are more emergent edge providers. There’s more diversity amongst the distribution. And I actually find there’s absolutely no relationship between bringing a kind of a utility-style regulation like the FCC has proposed to increasing the investment in the infrastructure. So in the countries that have such hard rules, the investment has either stayed the same or gone down, certainly hasn’t increased.

So the interesting thing, however, is when you look at the traffic flows around the world, with the exception of Russia and China, the United States companies, United States application services, websites, do extremely well. In fact, I find about the average rate of local traffic would be only 37 percent. So the status quo of what’s gone this year to date, without having regulation, has been very good for U.S. companies.

So now, what I’m seeing is – you know, my concern going forward, what is our challenge to open Internet, if you will, is that the new imposition of Title II is going to reverse the trend for U.S. companies.

And so sort of anecdotally, what I’m hearing is that this sort of Title II has become a sword of Damocles for transit companies bringing the sort of sender party pays telecom models so when U.S. companies want to send their data to other countries, what used to have been done in a negotiated way and so on, there’s now sort of – but wait a second. You imposed Title II. You know, you need to pay us. You know, we’re going to be – you’re bringing – so this kind of changing the game, if you will.

So to also tap upon this Internet Freedom study Freedom House had done, open Internet sounds like a great thing but, gee, it’s a gift to a lot of countries to conduct a lot of other activities. We look at countries like Pakistan, Tunisia, Turkey have some of the highest rates of the obstacles that they put to their citizens to access the Internet, you know, imprisoning journalists and so on, even executing people in some cases. Of course there are also countries conducting open Internet activities. So, indeed, very interesting thing about we have more open Internet rules around the world and we are at a lower state, the lowest state yet of Internet freedom. So I find a very interesting trend.

So I would put out there – I mean, I don’t know if we’re going to come to predictions in this panel, but I have two things I see going forward. One would be – I will see – we’re already starting to see a number of companies who were initially very excited about open Internet kind of – (audio break) – I think Netflix is a great example. You know, they’re seeing that now with T-Mobile, this binge on – it’s been great for them. It turns out it’s great for all of the video providers. The video consumption is up higher than ever, across the board in T-Mobile’s network.

So I think we’re going to see more Internet companies who were the staunch supporters of this, and what I see going ahead is privacy, where we’re going to see the same kinds of campaigns that we saw around open net neutrality is going to now jump into the privacy domain, where you’re going to see the same kinds of groups, the same sort of fear-based sort of conjecture, lack of evidence – well, we have to make these rules now. We’re already seeing that now in the privacy domain.

So I guess to come back to multi-stakeholder, what’s going on in Europe, the interesting thing is European countries, the Nordics, Switzerland, Japan, South Korea have managed their open Internet policies with a multi-stakeholder model. And they have – amongst the European countries, those countries that have done have actually supported their edge providers better than the ones who haven’t.

So, you know, we can go back to this in the United States. You know, there’s still a possibility to go back to the status quo that worked, that had worked overwhelmingly in the last 20 years.

MR. GLASSMAN: Can you just explain how these Nordic countries manage open Internet on a multi-stakeholder model?

MS. LAYTON: Absolutely. So I think one of the interesting things going back to 2009, if you look at Denmark, Sweden, Norway, Norway and Sweden almost within a month of each other issued statements on net neutrality where Sweden, interestingly enough, they did a report about all – they actually did one of the things almost no regulators do. They did an assessment of the traffic management in the country. They took – this was the Swedish telecom authority.

And so they made a report that said, you know, we – we understand what the concerns are. We’re actually making a real assessment. We’re publishing it. And we have in place the competition laws. We have in place the telecom regulations that can address this issue already. So we don’t need to make further rules.

They don’t want to make rules as well because they’re also – they can’t really hire a lot more people to start regulating the Internet. They need solutions that they can implement that don’t cost money.

Within a month later, you had Norway issued what they called a co-regulatory solution, where the regulator and the telecom operators made a sort of code of conduct and a pact. And so, every year, they all get together. They discuss, is this working?

Now, interestingly, just the following year, Denmark was led by the industry association, without even a prodding of the telecom regulator issued a set of guidelines that they adhere to, which are actually in many respects beyond what some net neutrality rules are – higher transparency, quality requirements, so on their own accord.

So when I talk about multi-stakeholder, it means that there is an inclusive process within the country, where the regulator, the telecom operators, civil society organizations, edge providers have a forum where they can get together, they can discuss these things. Similarly, it was done in Switzerland, where they adopted a code of conduct; U.K., Ofcom has also conducted a similar process.

So it’s definitely time consuming but everyone gets a voice at the table. People are involved. They talk about things, you know. So, for example, there was – the operator says, I’d like to produce so and so model. They share it with the group.

And, basically, this is done – countries want to avoid going to making hard rules because it creates the culture of litigation, which they’ve not crazy about, but they also – the main reason it works is that it also allows the necessary experimentation, and especially when you look at the Nordic countries where there’s a small population, they have – you know, they’re not growing at, you know, multiple – at great multiples so they have to look at digital solutions to realize quality of life going forward. So this has been really important in those places to allow innovative business models, to allow different partnerships.

I think it’s significant that you look at a company like Spotify. They’re the only sort of non-U.S. app, other than some Chinese apps, that has a really major standing in the world. This is largely because Spotify has done lots of partnerships with telecom operators. They have, you know, wonderful service. But in order – so this kind of goes back to these innovation theories around complementary assets and so on.

But, at any rate, if you look at the record for the last six, seven years, there’s no incidence of violations. You have a collaborative, cooperative relationship. And, you know, the interesting thing to me is the Title II advocates love to talk about Nordic countries as the broadband utopia and yet they don’t want to adopt their net neutrality policy, so there’s a bit of inconsistency there.

MR. GLASSMAN: Gus, Roslyn just used the phrase culture of litigation. Maybe that’s a good way to get into what you want to talk about.

GUS HURWITZ: Oh, so what do I want to talk about? I want to build on actually I guess things that each of you three so far have contributed to the discussion.

I imagine – unfortunately, this paper can never be written but I imagine one day someone – well, two people getting together and writing a paper, Joe Schumpeter and – oh, this is terrible. I’m forgetting his name – “Field of Dreams” – Kevin Costner getting together and writing on paper, if you build it better, they will come.

This is I think the aspirational version or vision for the Internet that in a sense Shane was painting and I think it’s an optimistic version of what I am going to paint in a very pessimistic palette for the short-term future of the Internet, which is – I can’t help but think, but believe, but look at the world and see that the trajectory that we are on is one toward balkanization or fracturing of the Internet architecture of the global Internet into a number of national networks.

This has long been what ICANN and the aspirations of governance has been meant to avoid. Our goal has been to have a single, unified, free and open Internet. And in the short term, I don’t think that that’s going to happen.

And I’d like to actually go back to those early days in the United States, in 1995, post-commercialization of our Internet, and look at a chapter of our history that most folks have forgotten thanks to the Supreme Court.

In the ’96 Telecom Act there was a great big compromise for how to deal with certain aspects of the Internet. Now, I know when we talk about net neutrality, we don’t like to talk about the provisions of the ’96 Telecom Act that do mention the Internet, but there were two really important ones. We had Section 230 offering immunity for Internet intermediaries, for contents that is posted by or created by users. And we also had the Communications Decency Act basically saying pornography online is illegal, that ISPs had to have a way to filter out pornography online, protect the children from pornography. Apologies to Jeff, I think I’ve now said pornography four times in the last minute. Fortunately, in the United States, we’re allowed to say that and the Supreme Court struck down this portion of the acts saying, no, in this country, we’re not going to require ISPs to filter content.

But Congress did say, hey, ISPs, you need to filter content in exchange for this broad immunity that we’re going to give you, which really, in many ways over the last 20 years has been the bedrock for innovation in this country. In exchange for that, their initial compromise was you had to filter the content. Most countries around the world do not have the First Amendment. They do not have Supreme Courts that are going to strike down legislation or autocratic edict saying, hey, ISPs, you need to filter out content that we view harmful to our people, our policies, our government.

So I fully expect, and we’re already seeing this, that the short-term future of the Internet very likely is different laws in different countries, lots of incompatible laws that’s going to be very problematic for businesses and innovation and users in the marketplace.

Is this a good thing? Is this a bad thing? Well, it’s a pragmatic thing. I think it’s a practical thing. But my vision is hopefully more optimistic than this dark palette paints, which is if we build it better here, they will come.

The way to promote the values and export the values of democracy and freedom and openness that our Internet users have been able to enjoy, and, historically, over the last 20 years Internet users around the world have been able to enjoy is to continue doing what we’re doing here, continue supporting a vibrant slate of firms and companies developing innovative democracy, supporting applications and services that can be used wherever it is possible to use them around the world, and export our views, our policies by doing it better, not by trying to impose our views on the world. And there will be some give or take.

I’m certain that some of our views 10 years from now will not be the dominant views on the global Internet, but, hopefully, by trying to do it better than anyone else, we’ll be able to broadly speaking to unfortunately use adversarial terms win this fight.

What’s the role of the lawyer in all of this? What’s the role of litigation in all of this? This is where I think both the multi-stakeholder approach and the market-based approach really have the greatest stability to have positive effects and really have any effects.

Litigating our way to policies, either domestically or internationally, is a really terrible way of making policy in this area. Unfortunately, the U.S., I think we are – building on Roslyn’s comments, here in the United States we are not leaders in good Internet policy development, at least in the modern era where we have agencies like the Federal Communications Commission with the Open Internet Order and the Federal Trade Commission with its privacy efforts on the data security front. They’re really trying to be strongmen imposing almost in an autocratic sort of fashion their views of what good policy is.

A multi-stakeholder approach and an approach that brings technical expertise, civil society, government regulators, law enforcement together to address these issues I think will lead to a much better equilibrium set of compromises.

MR. GLASSMAN: Thank you, Gus. So when you say that if we build it better, they will come, are you referring to our policies that they’re going to copy our policies or do you mean literally someone in another country will want to access, let’s say, the U.S. version of Yahoo or Google or other edge providers?

MR. HURWITZ: Primarily the latter. And even if individuals in other countries don’t want to access or aren’t able to access our applications, our edge providers, our content, our services, what’s not, so long as we continue to be the envy of the world, the world will try and emulate what we’re doing here.

And the key is we need to make clear to the rest of the world the reason we have a vibrant ecosystem is because of our policies. We can’t export our policies and expect the world to follow those policies, to mimic what we have. What we want to do is export what we have, export the output of our policies so that the world – the rest of the world will want to recreate those policies in order to see the same flourishing happen.

MR. GLASSMAN: And you mentioned ICANN, which is obviously the hot political issue. We’ll get to that on the next round. I want Shane to kind of set the stage for that and then we’ll also, of course, move to the floor for questions.

But we’ll move to Claude now, talk about trade and IP, I imagine.

CLAUDE BARFIELD: No. Actually, I’m going to talk about trade. That’s the good news. I’ll do that at the end. I want to take up two issues or challenges on the cybersecurity side. The guys here at this project have dragged me into cybersecurity and I’ve had a steep learning curve. Some of you may think it may be not steep enough when I finish.

But I want to talk about two issues. One, the senator talked about encryption. And my point there, in looking ahead to the future, let’s say the next – 2016 or even to the next administration, the nation’s just too deeply divided.

Some of you who follow this may have noticed that Friday, two weeks ago, the administration sent what was really – to say all-star is really to underestimate what it was, a delegation of top administration security officials to Silicon Valley. This included the president’s chief of staff, Denis McDonough, Attorney General Loretta Lynch, National Security Head James Clapper, the FBI Director James Comey, the NSA Director Michael Rogers, the DHS Secretary Jeh Johnson.

And what they said was they were trying to find some way of getting the support of Silicon Valley, and they were very careful about what they were not doing but it was a week later that Comey had said that I am not going on that delegation unless we talk about encryption.

Well, he got what he wanted in the sense that there were very few CEOs from Silicon Valley who actually showed up but Tim Cook of Apple did, and he delivered another of his tongue lashings of the administration over its weak position on encryption. Loretta Lynch apparently stepped in to stop another corrosive exchange between Comey and Cook, which has happened before. But it kind of illustrates where we are.

And the other thing that illustrates is the administration is all over the map here. The president talked about having legislation on encryption and then backed away from it. But what he did not do was to stop his FBI director from continually – and also some elements of the Justice Department from continually saying we’ve got to have legislation that forces the companies, particularly the iPhone, with anti-encryption, to let us in.

The other side of this, as most of you in this audience know is that it’s not just the companies for business reason. It is the technology community says that if you let the good guys in, there’s no way with the way of technology is you will not also let the bad guys in. So that’s where we stand. And I think that’s where it’s going to continue.

To get to Congress, what we’ve got are two – are two tracks. One, Dianne Feinstein and Richard Burr are trying to put forward – are putting forward legislation which would force the companies that way.

The other is a kind of typical Congress compromise, which is good intentions – I mean, Senator Warner and I think Congressman McCaul to set up – this is classic in the United States – set up a commission to deal with this. One of my colleagues here at AEI has applauded this effort. I applauded too, except one thing to keep in mind. What they are saying is that we will – this commission will be representative of all viewpoints. If you have a commission that is representative of all viewpoints, in this situation they will come to no conclusion. They will divide. You will either – you’ll have a majority or minority or at least two opinions. So it’s not going to get us anywhere.

There are two things that could change this, I think. There are probably others but the two, let me just flag here. One, we could have an attack that’s so bad that Comey and others could say, look, if we had been able to get into the phones, if we had the encryption – he’s already arguing this in terms of California – we would have been able to – we could have been able to stop this.

The second thing that we pay too little attention to here in the United States is that this could – the decision could be preempted by other countries. David Cameron in England has legislation – this would force companies to do this as a matter of doing business in England. And the French new anti-terrorism law is so sweeping, it’s hard to know how it will be administered but it could very well go also in that direction. So I think that looking ahead is going to continue to be a challenge for ’16 and also the new president.

The second thing, just quickly, is the whole question of where do we stay in terms of the United States versus China in economic espionage? And, again, there’s this kind of strange limbo.

As most of you in this room know, there was an agreement that was counted as a breakthrough, and I wouldn’t challenge that that’s not the case if it really works between President Xi Jinping and President Obama in August of 2015 in which the Chinese agreed with the United States that economic espionage, the stealing of trade secrets and intellectual property would be henceforth off limits. We have since extended that to other countries. I think the G-7 or G-20 are adopting the same thing as a kind of international rule of thumb, if you will.

But we don’t know what actually is happening in terms of – what did the Chinese do after that? And here, the record is very – or the published record is very mixed. We’ve got cybersecurity companies who are arguing that the Chinese did not change anything – that they went right on with it. We’ve got others who are saying at least initially it seemed to – they seem to have – it had quieted down a bit. We also know that the Chinese moved their best, if you will, actors away from the units that the people had focused on and so it’s hard to see exactly what they’re doing.

The administration has been very quiet on this. And yet out of the blue, again – I mean, with all the ball games going on two Sundays ago, you may not have watched “60 Minutes” but “60 Minutes” featured Assistant Attorney General James Carlin, who’s been the lead in the anti-Chinese, if you will, on these security cases on a long segment in which was a blistering attack on Chinese theft of U.S. intellectual property. He did not say that – he did not give an example of what was going on now but what he was saying was that the implication was, yes, it was going to go on now, and, yes, the United States would do something about it.

So my only point here is that this is not – it seems to be settled. And the administration really needs to get its act together as to where we stand and when we will act. We can talk more about other things beyond this in the discussion, but this is part of a larger problem is that increasingly other countries don’t know, or the rest of the world, whether it’s the Chinese or allies, when the United States will act and under what conditions it’s a cyberattack, and we need to begin to flesh that out.

My final few minutes, few seconds is the good news on the trade side. I think e- commerce section and the telecom section, particularly the e-commerce section of the Trans-Pacific Partnership is a major triumph not only for the United States, but for Internet freedom in terms of Internet commerce freedom.

There are very strong provisions against localizations of servers, against localization of data. There is a strong affirmation of the necessity – and this is subject to dispute settlement if somebody challenges this of free flow of information. It is more than I thought we would get actually in this particular area. There’s also at the same time a fairly strong consumer protection section. So it is a nicely balanced, I think, set of trade rules.

Why this is important is because the international rules on Internet regulation and the free flow of data are just in their infancy. And the precedent that is set by the TPP is going to be highly important.

And I’ll end by saying on the slightly less optimistic note, I think what we’ve got with the TPP will be very difficult to match in our U.S.-EU free trade negotiation. Thank you very much.

MR. GLASSMAN: Thank you, Claude. Actually, your last comment is what I wanted to ask you about because the TPP countries are pretty terrific countries when you look at them – not all of them, but most of them are despite what we hear from, you know, Hillary Clinton and Donald Trump and people like that. This is quite a good trade agreement, maybe not all aspects of it but a lot of that is because of the countries that are involved.

And, as you say, it sets a precedent, but do you think that precedent is powerful enough to carry through to, for example, any agreement that we may have with the Europeans?

MR. BARFIELD: I think that’s going to be very difficult for reasons that, you know, people have talked about on this panel and we’ve had outside of the panel. I think, however, it’s important in the sense that if the United States doesn’t screw all this up a la Mr. Trump, Hillary Clinton or whoever and doesn’t pass the TPP, then of course all bets are off.

If the TPP passes and you have what is already planned, the TPP is the template for an expansion to ultimately – I’m not trying to be utopian here, but you already have a number of countries who want to come in. The Indonesians are coming in. The Philippines are coming in, sooner or later Thailand, the other nations – in other words, this will become a regional trade agreement that covers most if not all of Asia. And that means that you’ve got a strong group of countries that are major trading nations that have already adopted these rules.

Now, it might easier – I can’t see it happening in the next year in terms of the EU maybe, but it is the foundation for pulling those all back to the World Trade Organization, and that I think is the key. I mean, once you’ve done something, once you’ve got something done, it’s a lot easier than just talking about it. And the TPP, if we don’t screw it up, it will be a fact of life that people will be living with not just on the Internet stuff, but on other rules also.

MR. GLASSMAN: OK. So there are a few topics that we want to discuss up here for just a few minutes and then we’ll go to the floor. And one of them is what I alluded to earlier, the whole ICANN IANA issue.

In March of 2014, the Commerce Department, partly in response to the Snowden revelations perhaps, announced that it planned to give up its role managing the address system for the Internet. And there’s been much delay since then, much discussion. And let’s talk about that here. Is that a good thing or a bad thing? I’m going to turn to our resident expert on names and numbers, Shane.

MS. TEWS: So really basically for those of you who are not following this as closely. There’s something called the IANA function, which is the Internet Assigned Numbering Authority. And all it is is a table of numbers that is constantly updating. And what it does is it allows you to type something in your browser and hopefully go to where you want to go.

The reason why it’s so important is because we don’t crash into each other. We don’t have two Bloombergs.com, we don’t have, you know, two OPM.govs because the system is designed to just make sure that there’s always one of something. So that’s why it’s important. It works. It’s not in trouble. It’s doing great.

So when you put something that’s working really well up on the chopping block and say, hey, let’s mess with this, it’s a little disconcerting because it’s the core of what makes the Internet run. And I think it should mean that we should step back, take some time to make sure that this is being done, if it needs to be done at all, with some definite, specific measures.

And so Larry Strickling, the assistant secretary at NTIA, laid out four points basically which said, we need to make sure that nothing is harmed along the way – I’m paraphrasing – in these four key points. So there’s a whole group that are working on this on ICANN. And to their credit, they’re being exceptionally deliberative. It’s painful for the people that want to rush decision and they want to shove this through and they put it on an artificial political timeframe, trying to get it done while this administration is in place, which has nothing to do with anything, candidly.

So getting it done if it needs – if they decide at the end of the day should be done, needs to be done right, and it’s very important that the function stays technical, which is very tough in a politically challenged environment, especially what we’re in now. So that’s kind of the basic of what ICANN’s into. And that’s why you’re hearing members of Congress that have realized that this is still something that sits at the Department of Commerce. It’s a very light touch.

I’m going to lose the term of art right now but it’s – they don’t authorize things. We’ve had cases so when .XXX was going to be put in the root during the Bush administration, they got lots of correspondence in many ways, saying they didn’t want this to happen.

But the U.S. government didn’t step in with any authority, a point of view other than, you know, we don’t – we do what’s technically feasible. We’ve seen that with all the new top level domains that have come in that no one – you know, there are certain governments that would not like to see .GAY in. They would like to not see .CATHOLIC in. They’d like to see – you know, they don’t like, you know, conflict in this way and they want to keep it out. And that’s one of the things that the IANA function is technical, that they don’t – all they do is match a set of numbers to alphanumeric, you know, domain name.

So it seems funny that we’re having this conversation, that it’s very technical, why are we having it in a political environment. And it really goes back to your opening comments on Internet freedom and how do we manage the conversations we’re able to have online and how are we able to, you know, parse them in better ways. And, ultimately, there’s also a cybersecurity element of there’s way to start to build security into the system with a newer way to manage the technology, which is really being looked at. And that’s something that’s layered into this as well.

MR. GLASSMAN: Thank you. Let me just put a finer point on two issues here related to ICANN. One is that the function that the U.S. has performed has been essentially that of a kind of a watchdog to make sure that the multi-stakeholder model that operates ICANN continues to operate it. Now, ICANN itself is a California nonprofit. It’s an American corporation and that rankles a lot of people around the world.

The fact is, however, that, as Shane says, we don’t apply a heavy governmental hand to this because, you know, for the last 20 years, it has been U.S. policy not to do that. And the fact is we haven’t. Now, the rest of the world is saying to us, hey, you know, you guys are all supposed to be in favor of the multi-stakeholder model. And, by the way, what’s this – what are these Snowden revelations? And so why are you continuing to do this when we’re not supposed to do it? So I think that’s – I think that’s a very important issue.

The second important issue is kind of broader – relates more broadly to governance because around the world we’re seeing countries that are looking for governance – Internet governance institutions which at this point don’t really exist. They’re kind of all spread out. There are lots of different ones. And it may well be that if ICANN has changed in some way to make it multilateral, as Shane was talking about, that that could be the key governance institution for the Internet, maybe govern on a U.N. one-country, one-vote model, which would be pretty scary.

So those are the issues that are involved. And then there’s this sort of the general American exceptionalism issue.

So would others like to comment?

MS. TEWS: One other point which actually gets back a little bit to what Gus was saying is there are contracts that are involved in this. And so the one element about ICANN that does work very well and they’ve come – they’ve had long conversations but come in with good agreements is the ability of terms of use and what you can do and how you manage the relationships going forward.

So that is one area, you know, where we tend to see that everybody agrees that there is – you know, there are rules of law that you have to abide by in this and that terms of use are important. They get a little edgy sometimes on, you know, where you are if – you know, in the country as to whether or not you want to implement them, but at the end of the day that is something that does fall in front of ICANN.

And just a slight thing, that IANA isn’t a function that sits at ICANN. It’s a conflation issue which is a personal point with me but the IANA function does not sit at ICANN. We could actually have it as part of these clever, pragmatic people in – you know, in Norway and Denmark. You know, they could – they’re part of the process, too, actually in the way that the IANA function works.

MR. GLASSMAN: Anyone else on the panel want to chime in on the ICANN issue? OK.

MS. TEWS: Enough said.

MR. GLASSMAN: OK. All right. So the other thing I wanted to get to, which was raised earlier as well, is the fragmentation or balkanization – though apparently we’re not supposed to use that word – issue. You know, just how – I think Gus laid it out pretty well. I mean, how serious is this if every country has its own rules for operating within the country but is still connected – it’s a small end network, as somebody was saying, connected to the big end network? Why is that something we should worry about?

MR. HURWITZ: Well, one, to not answer the question, but to set some framework for thinking about how to answer the question, we need to understand how fragmentation might occur. And there are a number of different ways that fragmentation could occur.

You could have it at a completely legal level. So in my country, I say you cannot have service content online or you need to have these mechanisms in place in order to support the right to be forgotten or removal of certain information or the ability to bring a super breach of contract that occurs online, in which case anyone operating in that jurisdiction might need to support that so you could have a completely legal level.

You could have a data localization level, where firms need to have servers and resources and physical assets operating in each country in which they offer service.

You could have a soft architectural fragmentation. And this goes to IANA and ICANN. You could have a so-called split route, where if you are in Russia and you go to Bloomberg.com, you are directed to a state-run website. And if you’re in another country, you go to Bloomberg.com and you go to whatever we go to when we go to Bloomberg.com here in the United States. So that would be a softer level of fragmentation. And, importantly, at that level, savvy users can bypass it. They could at least in principle circumvent that sort of fragmentation.

Then you have the much stricter great Chinese firewall-level of fragmentation where there are actual physical barriers or disconnections or firewalls segmenting the different networks. So individuals in each country are physically unable to get to the resources on the rest of the world’s Internet.

So depending on which of these different approaches are taken to fragmentation, and it could happen differently in different jurisdictions. The economic, political, and technical effects are going to be very different.

MS. TEWS: I think the point about the economics is really important because part of it is, if you cut yourself off, you’re cutting your own citizens off from a lot of what makes the Internet great is the ability to, you know, compete and be part of the global Internet infrastructure that is largely based on commerce.

MR. BARFIELD: That was actually my question, which is one of ignorance. And I’m just thinking, how would the impact of let’s say General Motors in the United States, Siemens in Germany, Toyota in Japan, Samsung in Korea, and Huawei in China – they have an interest in this that is independent of their governments. I mean, they could be just borne over but other – in terms of the fragmentation, this is where IANA comes in. Is there a fragmentation that would allow international commerce to go on but would cut off other things that people didn’t want?

MS. TEWS: That was a little bit of the beginning when I was talking about Egypt. You know, Egypt didn’t want people using the medium to rally at that one day but they wanted to make sure the people that the – you know, people in the finance industry had the ability to connect to the European markets. That was the one – you know, they knew exactly which pipe they needed to keep open to make sure that their financial markets were available to the Europeans so they could, you know, stay online and stay going.

So as long there is a financial will, there is generally going to be a way to do it. The challenge is do you let certain people have an ability to get on that path and not allow others is a bit of challenge depending on what the government is that’s dictating it.

MR. HURWITZ: And fragmentation absolutely can occur at different levels, in different regions. One of the big things driving much of these discussions nowadays are concerns about privacy and consumer protection, so we’re likely I think to see fragmentation along that dimension or at that level of activity and an effort to preserve the international business relationships and international business transactions for those very reasons.

And we really see this. If you travel around the world, you already see this happening. If you travel to Europe from – and you’re used to a U.S.-style Internet experience, you’re going to be shocked very quickly by all these stupid little warnings about cookies that every website puts up. I was in Singapore in December and one of the things I noticed, I went to do a web search. And Google said, safe search has been turned back on because we are not allowed to have safe search turned off in this country. So there are very modest levels of fragmentation or forms of fragmentation that can be implemented and then there are – you can ratchet it all the way up to physical disconnection of networks, depending upon what the purpose or concerns are.

MR. GLASSMAN: And I think the Europeans have different rules about the information or advertising that a pharmaceutical company can transmit over the Internet. And so they’re – obviously, they’re – so they’re separate – they’re separate websites. But a European can simply can go to whatever it is, Merck.com, right? There’s no firewall that stops them from doing that. So that’s your build it and they will come issue? Build it better and they will come.

MR. HURWITZ: The build it better and they will come.

MR. GLASSMAN: As long as there is access to a U.S. website.

MR. HURWITZ: Well, so when I say this, I’m talking either at the user level or the policy level. So if we build our policy better in the United States and have more flourishing – a more flourishing Internet ecosystem then other countries, at the country level, might come to agree on what our policy is. They might adopt our policies or it could just be the users migrating.

MR. GLASSMAN: Right. OK. Let’s turn to the audience. I’m sure there’s lots of pent-up demand here. We’ll just start right up there. Just identify yourself please.

Q: Good morning. Philip Corwin. I wanted to bring up what’s going on in China. That will lead to a question about U.S. policy. Two things, one, last week – I’m a member of ICANN’s business constituency. I represent them on the GNSO Council where the stakeholders make policy for the domain name system.

Last week the business constituency filed a comment letter with ICANN. I think we may have been the only entity that filed a letter, where one of the new registries was asking to have its contract with ICANN changed so that it could sell its domains to people in China while complying with Chinese censorship regime; that is, they would agree not to sell any domain in China that referred to Tiananmen Square, or Tibet, or things like – forbidden terms. And we don’t know what ICANN is going to do with that. We did ask a lot of questions because we thought the application didn’t really get to what they would be doing.

The second thing is last month I published an article about the fact that Fadi Chehadé, ICANN’s current CEO, while attending the World Internet Conference in China last month announced that he along with Jack Ma would be co-chairing the advisory committee to the next World Internet Conference. He did this without advising ICANN’s board in advance. And as Shane wrote, that conference in China was dedicated to advocating government control of the Internet and rationalizing national censorship regimes.

In the course of writing that, I found out that China is in the midst of establishing something called the social credit system in which every Chinese citizen will be given a rating. If you get a –

MR. GLASSMAN: We need a – I think we need a question.

Q: OK. It’s basically surveillance, digitized big data surveillance regime, kind of like digitization of East German Stasi surveillance and social control. The question is should the U.S. be looking at activities of U.S. companies overseas and consider whether there should be any reporting and/or sanctions for compliance with either national censorship regimes or active participation in building cybersurveillance technologies?

MR. GLASSMAN: OK.

MS. TEWS: Well, do the Chinese actually give them a list, because that’s always the biggest challenge for anybody trying to do business in China is you have to guess your way to what is the appropriate outcome and then you can tend to find out after the fact that you might not have always guessed appropriately. So that’s sort of – I’m kind of curious to know what the letter said that you guys put in for the business – were they actually saying, these eight phrases can’t be used or they’re saying, use your best judgment?

Q: Well, our letter basically said, one, we don’t want any country being able to – being enabled by ICANN to export its censorship regime outside its own borders. And then we asked a lot of questions about how this would actually operate because the details were awfully sketchy in the request from the company.

MS. TEWS: So creating fragmentation with a contract in place. Yeah. That’s fascinating. I look forward to reading your letter. I haven’t read that. Did you post that?

Q: It’s posted.

MS. TEWS: OK.

MR. GLASSMAN: OK. Other questions?

MR. BARFIELD: But I don’t see how we can just quickly – whatever we might desire to do, we think across the world, for us to sort of intervene to say, you could not have this or that surveillance, it’s getting pretty – it’s really tough to do, I would think.

MS. TEWS: But I think the difference, what Phil is trying to say is that it’s – in China they do have a different Internet. I mean, we feed the full, you know, root zone file to the Chinese and the first thing they do is they filter it. We have nothing that we can do about that. You can not agree with it.

MR. BARFIELD: But maybe I missed the – maybe I missed the question but he was implying that somehow we should have a reaction to that, cut it off or do something about it.

MS. TEWS: So ICANN being an international body should – the business constituency is suggesting should not have an ability to bifurcate a contract to create a balkanized – to use that word – or fragmented, you know, ability – if you have a new – you have dot Shane going online and I’m saying I’m going to already agree with the Chinese and I – but I want ICANN to approve that I’m going to do that, you might decide to do that as part of your own business practice but we don’t want an international body condoning it I think is the point.

MR. GLASSMAN: I think one of the things that shows is that more and more political decisions or cultural decisions are being thrust upon ICANN and probably some other governance bodies as well. And it’s becoming – it’s becoming more and more difficult. Things have changed in the last five years or so.

MS. TEWS: So I was wondering if we could invert this topic a little bit, kind of what, you know, Claude’s been talking about and really to what you’ve been doing, which is – you know, we refer to this as zero-rating but, you know, the people that – getting some Internet is better than no Internet in a lot of places and how they’re starting to build that out mostly because they have the ability to do mobile, which is cheaper than the way that a lot of people in the United States (see ?) the Internet, and comments on that because I know you’ve done a lot of work in that area.

MS. LAYTON: Well, I’m not sure if the second panel will get into this. You know, we have an FCC meeting I think starting – already started today. You know, the interesting thing to come back to part of what’s so good about multi-stakeholder models and avoiding making hard laws to preempt certain kinds of practices and allow the experimentation, and then if there’s harm to do something about it. You know, the experiment is going on.

I mean, I think the big one that’s gotten a lot of attention is the Free Basics in India, which is, you know, an ad-free version of Facebook, which is – where local content, you know, that will be relevant for people in that community, people who’ve never tried the Internet, can try it for the first time on mobile networks.

They may – you know, an interesting thing. A lot of this got started with WhatsApp because there are Indian grandchildren in the United States who want to talk to their grandmothers. And they were never going to use the Internet. It was WhatsApp that got them started. So to sort of – so that was zero-rated and that was the families communicate.

And you know this now, the international families, they all get online together, on Skype or different kinds of Face Time, what have you. You know, it’s a wonderful way for them to be together.

So, you know, I guess what’s interesting is, you know, all of Title II advocates really hate – they hate zero-rating. They hate Free Basics, even though this is the no- brainer way to get people connected. You know, the world’s largest democracy but only 20 percent Internet penetration.

MS. TEWS: Can you just define zero-rating for those –

MS. LAYTON: Sure. Sure. Well, I mean, it’s not an – there’s no official – there’s not – but the way that it’s used in this discussion is when you will get a mobile subscription, certain data is not counted to your subscription. But in the Indian case, people have – they generally have prepay. They don’t even have subscription so you don’t even have to – you don’t even have to buy anything at all. You just have it enabled on your phone. And even if you have zero balance, you can still use this set of applications.

MS. TEWS: I think that’s an interesting way that you’ve got – you know, we’re worried about everybody having everything that’s possible that, you know, all the cat videos in the world that we have the ability to see her and there’s some places that they don’t even know that they can see cat videos.

MR. GLASSMAN: Let me raise another Title II issue that has to do with governance. And that is has the United States lost or are we in jeopardy of losing our moral authorities on issues related to Internet freedom and governance as a result of the application of a heavy government hand? Are we seeing any of that, Gus?

MR. HURWITZ: Over the last couple of years in international discussions it is absolutely an issue that has been raised by our international counterparts. They listen to us saying, you need to have a free and open Internet. You shouldn’t regulate the Internet. And they say, but your FCC is thinking about regulating the Internet under Title II.

So absolutely it is at least a powerful political rhetoric. And it ties into broader concerns about the U.S.’s moral authority or, to be less charitable, hypocrisy in positions that it takes in these areas, referring of course to the Snowden affair.

And also, another important aspect, and this also is – perhaps to give a response to another aspect of Phil’s question, on the cyberwarfare, cyberdefense front, we are engaged in a lot of activity online that other countries are engaged in against us, shall we say.

And this colors a lot of our policy, how we are willing to characterize the conduct that is being engaged in against us, knowing that if we call, for instance, a Chinese attack – a Chinese incursion against U.S. cyber assets an attack, suddenly, a lot of what our government is doing overseas would also be an attack. And we don’t want it to be characterized as an attack. So we use special language to talk about these incidents in order to maintain our moral position in conducting ourselves as do.

MR. BARFIELD: There are two things – there’s two things that strike me. One, in terms of the response to what happened here in 2013 and that the Europeans got really on a high horse but I think we’re seeing a slow change as they are facing – and they’re – we are vulnerable, as the senator talked about this morning, but they are much more vulnerable.

And so the attitude that Snowden, you know, that what he did just put us in a different realm is I think going to change. It’s changing – it already is changing over there. They are going far beyond us in terms of what they are allowing government to do in the name of security without the due process that is in place here.

MS. TEWS: Even beyond that is the suggestion of data localization – that because of the Snowden effect that you need to keep your information now local for Russian citizen or Brazilian citizens or South African citizens. And, for a lot of that, that makes it much easier for those governments that, you know, don’t protect their citizens for the way that they look at their information to have a very localized, you know, government effect that is – you know, they’re using Snowden as the excuse and they’re doing exactly what they’re accusing us of doing, which is look at all the information on their citizens.

MR. GLASSMAN: OK. Other questions. Yes?

Q: Hi. Michelle King. I have my own government affairs firm. The question is mostly for Gus but for anyone. You mentioned the balkanization of the Internet. You know, we’ve moving into changes in Congress, potential changes – obviously, we’ll have a new president. What advice would you have sort of going forward? And also, do you think the multi-stakeholder process needs to change? And if so, how would you change it to maybe prevent it? And also, we’ll have someone new running ICANN. And what advice would you have for that person?

MR. HURWITZ: Substantive advice is hard. I think I’m a bit of a pessimist on this front, too much – so much of a pessimist, I don’t know that I have good advice to give.

What I would probably say is our starting point needs to be a realistic understanding that balkanization is occurring and is likely to continue to occur. And our goal cannot be a naïve belief that at all costs it must be avoided. I think we need to be more realistic and pragmatic and say we want to slow it down. We want to reverse it in the long run.

But, in the short run, we should be prepared to exist in a fractured world. And I don’t think that that is a pragmatic – that element of pragmatism really has run through the policy discussions at this point. I would love – I’d be very sad but I would love it if Shane were to tell me that I’m wrong.

MS. TEWS: Well, I think that there’s tradeoffs. So what makes a system secure and stable but also open gives you the ability to close off the networks because by – you know, you’ve put portals in there that allow you to have a little more ability to say, go, no go, you know, on what you’re dealing with. So those are the challenges we’re dealing with.

Now, we’ve had this very open Internet, which we’ve all enjoyed but now we just saw the year of the hack. And, you know, people are still not completely understanding how their data is being used. And I’m sure all those OPM records are going to start showing up in ways that we don’t expect them to. And people are going to be more concerned about their security online, as they should be. We all have a collective interest in keeping the Internet secure. We’re just not completely sure on how we’re supposed to be helping in managing that.

So that is kind of our – what this project is about is looking at how do we keep those key elements of open, secure, interoperable, you know, a stable environment on the Internet without bumping into, you know, allowing governments to just run over their citizens using one of those as an excuse to lock down their Internet assets.

MR. BARFIELD: But the OPM, I think, is as distorting in terms of the public reaction as Snowden was several years ago in the sense that our security apparatus has openly and publicly said that there’s nothing – that this is – all you do is just tip your hat to the Chinese and say, that’s a good one. We’re sorry we didn’t do that. Clapper said that.

On the other hand, the Congress is coming back continually to – this is something – we ought to do something about. The Chinese have done something awful. They’ve broken the rules and they haven’t actually.

MS. TEWS: We didn’t make securing the data a priority. It’s not –

MR. BARFIELD: No. My point is in terms of the public reaction.

MS. TEWS: Right.

MR. BARFIELD: You’ve got the security apparatus on the one side saying, that’s the way it goes. We should have been better. On the other hand, the public opinion identifies this with Sony, with the kinds of things that – other things that Snowden did. And there’s no – there’s no real interaction I think yet.

MR. GLASSMAN: I think the public opinion is – I mean, part of the response is that, you know, we’re weak, we’re confused. How did this – how did this happen? It shows – it shows a lack of seriousness when it comes to security. It’s not so much necessarily the content or even the actual activity, but it just makes us worried. So, hey, if they can do this, then maybe they can shut down electricity –

MR. BARFIELD: But, somehow, it goes beyond that – that somehow the Chinese have stepped beyond the bounds. This has been said publicly in the Congress. It stepped beyond what – that they have broken some international rule or either a formal or informal in terms of cybersecurity, and it’s just not true.

MR. GLASSMAN: You know, it’s just spying. We do it. Everybody would like to do it.

MR. BARFIELD: Yeah.

MR. GLASSMAN: OK. So we only have one minute. And in that one minute, I do want to say something that maybe went without saying, and that is, you know, as I think many Internet pioneers said more than 20 years ago that the Internet, the technology itself has opened up a great space or a great opportunity for the spread of democracy and the kind of ideals that I hope everybody in this room believes in.

And one of the problems with fragmentation, balkanization, whatever we want to call it, and certainly a major problem with any changes in the governance regime is that the ability of the Internet to be a forum for ideas – ideas where at least I believe that notions of tolerance and freedom will triumph – maybe I’m being naïve but I think that’s really important, are now – is now in jeopardy and in serious jeopardy. So we’re not just talking about commercial issues here. We’re talking about really important ideas that those of us at AEI believe in and, as I said, I think everyone in this room believes in.

So that’s part of the threat and that’s a major part of the threat – that if every country can use its own rules to restrict what its – the access that its citizens have, then the full promise of the Internet is not going to be realized. And that promise is going to help the world be a better place to live in.

Anyway, thank you all. We’re going to move directly to the next panel, which our leader, Jeff Eisenach is going to moderate. Thank you.

Thanks, panel. (Applause.)

MR. EISENACH: Jim, thank you. And to the whole panel, that was excellent.

So as folks take their seats here, let me mention a couple of things and we’re going to move right into this panel.

First of all, I want to thank the previous panel. And I’ve got two reactions I can’t resist throwing out. The first is this concept of – that Jim mentioned which I think is Christopher Walker phrase that he quoted, which is the notion of the containment of democracy I think is one of the most chilling things, you know, I’ve heard in a long time. You know, for those of us who grew up during the Cold War and understood the containment was America’s strategy post-World War II to contain communism – the spread of communism, right?

And it was a successful strategy promoted first by George Kennan in a famous memo in 1948 that became the successful – largely successful strategy the U.S. pursued to keep communism contained within the borders and it motivated us in Korea and, tragically, not very successfully in Vietnam and in Afghanistan and elsewhere. And, ultimately, it was successful because when the Soviets weren’t successful in getting out of their box, they ultimately had to change.

But the notion that we’re now being subjected to the same strategy by our adversaries and the fact that it is working. So if you read Christopher Walker’s stuff, there’s a fabulous piece – I think you can probably find it Googling “Failure of Imagination,” Chris Walker in the Wall Street Journal, that everybody ought to read, about the failure of America’s efforts or really the lack of America’s efforts to advance American interests with respect to ideas, with respect to our ideology, with respect to human freedom and prosperity and human liberty, our failure to advance or even to make a real effort to advance our ideas in the cyber environment in the 21st century is a sad story and one of the things we’re hoping to have some ideas about how to change.

So that was one. The other point I want to make – and Claude, I agree with about 98 percent of the time, but there are two ways of thinking about the cyberattacks in general and the OPM attack in particular. And one of them is in terms of deterrence and retaliation which are inherently interrelated concepts, right.

So I retaliate – I threaten to retaliate in order to deter you from doing the bad act in the first place, right? And we’re very – you know, particularly because, again, in the Cold War we spent 50 years in which our primary defense policy, national security policies were wrapped up in this concept of mutual assured destruction, the concept that Ronald Reagan couldn’t stomach and ultimately brought to a close.

But the question that we asked ourselves in a nuclear environment is if the other guy does something bad to us as in nukes us, what would we do to them and how do we make sure that the thing we would do to them is sufficiently bad that they wouldn’t really want to do the first thing to us in the first place? That’s retaliation and deterrence, and it governs a lot of our thinking in general.

In the cyber environment though, the question I think ought to be less about, what do we after someone does something bad to us, which is – again, dominates our thinking. And I think Claude’s right. Once the Chinese were successful in penetrating OPM and committing a heinous act in the sense of its effect on America’s national security and on millions and millions of us as citizens in terms of our welfare and our privacy, once that occurred, yeah, it was an act of espionage. I mean, not an act of war, right? And so the question of how do you retaliate, it’s not an obvious answer.

The question of what do you do about it, though, should not be limited to how do you – what should our rules be for how we would retaliate if somebody does something like that to us again. The question we need to be asking is, what do we do to make sure it doesn’t happen again? I mean, what are we doing actively? What are we doing preemptively? What are we doing to interdict, to prevent, to stop other nation states or private actors from doing that to us in the future?

And part of what I hope we’re thinking about is how we put in the place a set of policies that are not focused on what do we do when they hit us next time, but how do we make sure that we don’t get hit the next time.

So now we turn to domestic policy. And I can’t resist saying that, you know, one of the lessons that we’ve learned in terms of thinking about foreign policy and international cyber policy is that good Internet policy hygiene has to begin at home. And on that front, you know, we’re not getting straight A’s either.

So, you know, we spent a lot of time over the last couple of years listening to people from the State Department, Danny Sepulveda I think in particular, out explaining to us that passing Title II, imposing Title II regulation on the Internet would not have any impact on the way foreign governments think about their rights and authorities to regulate the Internet. That’s turned out to be, as I think many of us tried to say at the time, not correct.

In fact, once the FCC turned Title II loose on the Internet, foreign governments began moving very rapidly as India is doing now on zero rating, for example, to regulate the Internet in ways that it hasn’t been regulated before. So that’s an example of how domestic policy affects not just what happens here at home but abroad.

Another kind of set of issues – and I moderated the conference at the Heritage Foundation yesterday on anti-trust issues and the Federal Trade Commission. And one of the concerns that was expressed there is that America, which has always led in terms of the intellectual framework for competition policy around the world has, quote, “completely lost legitimacy,” one of the panelists, former general counsel to the FTC said yesterday on this panel, lost all legitimacy in terms of our intellectual leadership on competition policy around the world.

And why is that? Well, it’s partly because we’ve contravened, we’ve run roughshod over administrative process. So for 50 years America has been out in the world saying to other countries, you need to set up independent regulatory agencies which are insulated from politics and make decisions on the basis of the facts and analysis, not on the basis of majoritarian mob rule.

What we saw at the Federal Communications Commission last year was not just that the commission was pressured into making a decision on the basis of mob rule, but it embraced it and bragged about it and said, really our job is to count the number of e- mails, of form letters that we receive and consider this sort of a plebiscite on good Internet policy. That’s utterly antithetical not only to the principles of administrative governance and administrative law, but to 50 years of American policy urging foreign countries to set up independent regulatory agencies insulated from precisely that kind of corrupting influence.

So I throw those things out as examples of the ways in which both domestic and international policy come together and, more broadly, the extent that we’re all now living in this very permeable world, where it’s really kind of hard to draw the line on cybersecurity, economic policy or anything else. And I think we’re not very well equipped for that.

So with that introduction to the issues – or random comments, if you like – let me introduce our panel. And I think we’ll just go down the line.

Richard Bennett is a visiting fellow at CICT, a co-inventor of Wi-Fi and the modern Ethernet, standards – his resume I think people are very familiar with. Richard has written a lot for us and is an engineer and brings actually some technological competence to all these issues which is refreshing. He is the professor I think in Ron Johnson’s – to our Gilligans.

Babette Boliek is a professor of law at Pepperdine University, formerly from George Mason University, where she has both a law degree and a Ph.D. in economics. She’s published in every law review that counts and is also a visiting fellow – I will say we have an embarrassment of riches at AEI. And with a little bit of apologies, we’ve kind of got an all-AEI line up here today but we think we’ve got, you know, a pretty good line up so we do that actually without apology. We’re delighted to have these folks who are not exclusively affiliated with AEI but affiliated with us be part of our program.

Mark Jamison is a director and Gunter professor of the Public Utility Research Center at the University of Florida. Mark has worked not only on domestic telecommunications and Internet policy issues, but also has worked all over the world, and some of my comments earlier on what’s happening with – on the role of public utility commissions and the toxic influence of America’s recent retreat from principle on that front have affected our ability to encourage good policy around the world.

And then lastly, Daniel Lyons, who’s an associate professor at Boston College Law School and focuses on technological development and legacy regulatory regimes.

So we’ll start with Richard, go down the line. I’ve asked folks to talk for about three to five minutes. We’ll maybe do kind of a lightening round after they’re done, and then we’re going to turn pretty quickly to questions from the audience.

RICHARD BENNETT: OK. So we’re going to talk about what’s going to take place domestically in Internet policy and Internet policy in the year to come and probably take off from there and maybe dig down into some deeper issues.

And I’m not going to talk about net neutrality first because if I do, I won’t have enough time for all the other things. And, you know, that’s kind of – we don’t want that to consume all the oxygen in the room.

I think the FCC is going to be really busy this year, not just because it’s an election year but I think that Tom Wheeler is kind of a – you know, he’s a guy who only has one speed, and that’s fast.

So some of the other issues on the table are the Allvid order, which deals with a 10-year-old problem related to set-top boxes, or independent markets for set-top boxes, which is probably best forgotten but, for some reason, the FCC’s, you know, indicated a desire to deal with that immediately.

Privacy obviously is going to be I think the next huge issue that occupies center stage at the FCC now that the Title II order is on the books, and it’s pretty much the same folks who were involved in the net neutrality controversy are going to be taking sides on privacy. And here, we have to deal with the fact that the impact of Title II is to separate privacy regulations for broadband carriers into the FCC’s jurisdiction while leaving privacy regulations for edge services, websites, for like Facebook in the hands of the Federal Trade Commission. So how are we going to get consistent, even-handed regulations to bear on privacy when there are two independent agencies that are dealing with the problem, who, frankly, compete with each other.

The spectrum auction – a good likelihood that the spectrum incentive auction will take place this year, which will be good. Sprint won’t bid. They’ve made that pretty clear.

So the question really – I think the question really about Sprint is, given that they basically have stopped investing in a network, stopped expanding their footprint, who’s going to buy them as the current ownership really doesn’t have the stomach, I think, to deal with the competitive pressures in the American market. Things were a lot easier in Japan.

And so my guess is Dish will, but we don’t know at what point they will do that. And I think it’s probably not unlikely that Dish will participate in the incentive auction as well. And, at some point, that huge spectrum portfolio they have is going to have to be monetized.

We also had the rural broadband issue, which is to increase broadband deployment in rural areas, who are frankly lagging further and further behind urban areas when it comes to broadband speed, capacity and quality. The FCC released a statement recently that – sort of a scorecard on broadband progress that indicated that the average broadband speeds across the United States have tripled in the last three and a half years, which, you know, should be pretty good news, right? That’s faster than Moore’s law.

But I think what’s hidden in that is that probably what that means is that in urban areas, in suburban and exurbs, speeds have probably quadrupled, but in rural – as far as rural areas, they’ve stagnated. So this is a – this is a continually vexing problem which I think is ultimately going to be solved by mobile broadband because it’s cheaper to deploy wireless systems in sparsely populated areas than to upgrade cabling across rural America.

Which brings us to I think probably the most exciting development – now, it is kind of good to remember that, you know, most technology is optimistic and positive and constructive and makes life better: 5G, the advent of 5G mobile broadband networks which are not going to start deploying until next year, until 2017, when Verizon has indicated that they will start, you know, doing their transformation.

If you don’t know anything else about 5G, bear in mind that one of its goals is to essentially provide gigabit service to every handset. So how does that change the competitive dynamic in the broadband Internet market? I think substantially. We have competitors there that’s – the best service – that’s all the service you’re going to need probably for the next 10 years, so that’s really cool.

But it’s also important to understand that, you know, while – and the net neutrality order, you know, when the court decision comes down in March, April, May, whenever it is, there will be a lot of scrambling. It’s I think probably likely that at least some portions of the FCC’s order will be struck down and it’s equally likely that some portions will be upheld. And in that scenario, we can expect to further court challenge. So this will be a background activity that I think continues to preoccupy the FCC and the industry for I think at least another couple of years.

It’s kind of unfortunate, but I don’t actually see an enormous amount of change taking place in the – across the Internet as a result of that order. And that’s not good news, right? So if the Internet a year from now is exactly the way it is now, that’s a failure. And I think that was – that’s the problem with the FCC’s general approach, the Title II, is to preserve the Internet the way it’s always been. And that’s not really the appropriate expectation in technology.

Silicon Valley, it appears, is going to concentrate on apps for another year and also on virtual reality. There are a lot of stories about virtual reality stuff at CES that it seemed to kind of occupy center stage. Virtual reality is a kind of an exciting application, especially for gaming. And there are a lot of health care and communication opportunities that come up with virtual reality. It’s actually being used to – as a therapeutic tool to help people deal with phobias, for example.

But it’s a prelude to something called augmented reality, which is a kind of situation where you can – you have glasses that overlay information on what you see in the actual physical world. That can’t really happen until we have 5G.

So a couple of years from now, that will be an exciting application area sort of independent of anything that FCC does as long as the 5G spectrum, the millimeter wave high-frequency, high bandwidth spectrum is available to – we have networks that implement 5G and we have – we’ll naturally have devices that can use it.

Video is going to be everywhere. And, of course, you know, Silicon Valley makes its money selling ads these days, so better targeting of ads, you know, makes them more lucrative and that’s certainly not going to stop. That’s in an indirect conflict with some of the privacy wishes of certain people and it’s kind of good that that portion of the industry is regulated by the trade commission rather than the FCC.

And, of course, the Internet of thing is changing the way we deal with health, security, transportation, energy, food, you know, pretty much anything you can name.

MR. EISENACH: Richard, thank you.

Babette?

BABETTE BOLIEK: Well, first, hello to everybody and welcome. To carry on the Gilligan’s analogy, if you’re the professor, I’m from Malibu so I’m Ginger. (Laughter.) So I’m having a good day.

MR. BENNETT: She’s really more like Mary Ann.

MS. BOLIEK: Yes, at least my wardrobe. So it’s always hard to follow the engineer because in my view, when it comes to the Internet the engineer is the rock star. And I am by training both an economist, which means I generate statistics and understand numbers, and a lawyer, so I can talk about that for hours on end, which makes me incredibly unpopular at cocktail parties.

But I do want to switch gears a little bit and start with the open Internet order and the implications and the concerns I have. And know the concerns I have – I’ll come back to – and Richard touched upon this – is innovation and how we make sure to have sufficient space for the engineers, for the rock stars, for the people who are willing to take risk to do so.

And the problem I have with the open Internet order are twofold. One, as a lawyer I am concerned at what its broader implications are for the administration state. There is angles in that when you contemplate it of how expansive is the jurisdiction of any given agency.

When you get into the weeds of this open Internet order and see the way the FCC has looked at its original mandate, its statutory framework and the way it has self-crafted this open Internet order and in fact added out of whole cloth new parts, it has a great implication for how much control the FCC will have over the development of the Internet in the future. To the extent that it stays – certain aspects of it stay undisturbed, that means the FCC will have incredible control to dictate how development, how innovation occurs.

Also, as an economist – and Bret Swanson just blogged about this so I love to free-ride on him as much as possible – that’s the economist in me. And looking at the underlying expert conversation that the FCC built the record that it built the open Internet order, I’m very concerned because there is no sincere economic discussion by what is an industrial regulator about the impact of these rules – the need for the rules and the impact of the rules. It’s economics-free, especially when it comes to talk about innovation and how innovation is created.

Innovation is an incredibly complex human endeavor. It was not a bureaucrat who told Ford how to – who built the assembly line. It was not any regulator who told Einstein how to develop his theory.

So innovation has had a huge amount of literature written about in the economics field with no definitive answer as to its cause, and yet, in one simple sentence, without any justification, the FCC declared it knows and it’s going to set up very controlling regulation to fulfill its vision of how innovation is created.

So that’s problematic and can be very restrictive of the future. And part of that is this new conduct standard that really is ill-defined that we’re seeing innovators in the business field brought to task, for example, for introducing zero rating in the T-Mobile context and free streaming and the other things that Roslyn talked about at our prior panel that we can talk about later.

So I’m very concerned that it’s going to have a very chilling effect on development and innovation. And so I want to turn to that because I was brought up by Richard too is that innovation is not controlled. This moment that you think you can control it, it will find a different way. And it has a very sort of chaotic feel to it. And I feel like the FCC and our current regulated movement is wanting complete control. In fact, advocates for net neutrality are very clear that they want one answer, one solution, perhaps even one provider.

Now, that is concerning because as much as we talked about fragmentation being a problem perhaps at the international legal level, it’s definitely not a problem at the innovation level of our technologies and the economic development here in this country. Why move to monopoly when we’ve seen that story? We’ve seen that film and it was called Ma Bell, and it was not part of the story of innovation which was the modern Internet.

So this movement towards control, towards wanting monopoly, wanting one answer, not permitting mobile being part of that conversation is a concern to me – this fear of innovation not only in technology innovation, in business models, innovation in the way that we present these products to our consumers.

So these are my concerns moving forward – that this failure of imagination goes to our regulators who are either – who lack a certain humility in thinking that they can control what has been a chaotic and innovated process much to all our benefit.

MR. EISENACH: Mark.

MARK JAMISON: OK. I’d also just like to thank all of you for being here and thank the American Enterprise Institute for including me in this.

I’ll talk about two basic issues. One is what might be happening in 2016 and then kind of what’s an agenda perhaps for a next administration.

In 2016, I don’t have a crystal ball to know what will happen. What I’m told is that depending upon what the courts do with respect to Title II, we may see some legislation about net neutrality and about the FCC in general. And my understanding from listening to Senator Nelson, who’s one of the people working on that, is that it will have some fairly strong net neutrality provisions in that.

So taking that as a given, how would we want to think about that? In my preference, it would be that whatever legislation we would see, its emphasis would be on competition, its emphasis would be on innovation, and its emphasis would be on protecting those among us who are most vulnerable.

And in doing that, for net neutrality, it needs to provide some safety valves. And you can have open safety valves or closed ones. I’d prefer open ones. It says that the FCC has authority to act if something done while an ISP or a network provider hinders competition or hinders innovation or hurts the most vulnerable among us.

What we are more likely to see if we have any safety valves at all is something that says, here’s our net neutrality rules. You can release them if you find that these rules hinder competition, hinder innovation, or hinder the most vulnerable among us. But that’s – that’s the kind of thing that I would like to see with respect to whatever we might see in 2016 regarding legislation.

But I think that the bigger challenge for us is something that Jeff was alluding to earlier and that is what happens for the next administration, because I think the primary agenda with respect to the Federal Communications Commission for the next administration is how do we revitalize it.

We’ve seen very clearly that we have a divided FCC. It’s divided along political lines. It’s divided along advocacy lines. There are just – there are people with policy agendas within the FCC. And that’s caused the divisions. That’s made it fairly dysfunctional. It’s kept it from being the independent agency that it’s supposed to be. As Jeff said, I go around all over the world talking with executives in regulatory commissions and we talk about those pressures of how do you maintain political independence. Because all the research we’ve had over the years – I’m an economist as well – shows that the more independent that regulatory agency is, the more investment you have, the more infrastructure you have, the more invention you have, the system provides better because the rules are clearer. Everyone knows what they are. And the rules are legitimate. And indeed the rules carry out the mission that they’re supposed to have.

So that’s – so how do you revitalize the FCC? You have to do it both inside and outside. Inside, it’s dealing with those divisions. So the people at the top saying that, yes, we understand what’s going on outside of us. We are going to focus on being an expert agency that deals with the laws that we have. Our job isn’t about the politics. It’s about being very expert, being very credible, being very legitimate in the work that we do.

And then also having the right relationships outside, which is really hard in the U.S. because of the way the FCC is overseen. It doesn’t have a strong accountability except to the courts. It’d be nice to have something that dealt with how the FCC is held accountable for what it does, but that’s not something that we really have.

As I look at those issues, how you revitalize the FCC, I think back to things that I’ve seen former commissioners, former chairmen of commissions do. One that did something well, and also something not so well, was Reed Hundt, who was the first chairman under the Clinton administration. One thing he did well is – my understanding talking with his staff – is he told them, so your job is analysis. Your job is to give the commissioners the very best analysis they can have and make recommendations based upon those analyses. And then, it’s our job to say, OK, you just told us what should be, now given the political realities we’ll have to make a decision on what can be and try to find that intersection between what should and what can.

And I think that’s a very good approach. Unfortunately, you know, the open secret during that period of time as well is on some particular issues – I mean, I think Universal was one of the main ones – if you wanted to influence the FCC, you went to the vice president’s office. And so the politics crept in that way. And so there’s things that should be done there, probably some things that should not.

The other thing I think is also important and fires as revitalizing the FCC goes is to take some lessons from Mark Fowler and Dennis Patrick, who were chairmen under the Reagan administration, they were chairmen during the breakup of AT&T, a very difficult time to be a regulator because you were not created for that particular scenario. The lessons they had and what they didn’t necessarily announced publicly, but told their own staff was they said, in this environment, we only have a certain amount of political capital that we can spend. And we have to spend that only on the very most important issues. Pick two, three, things that you can do. That’s where your political capital gets spent. You don’t spend it on everything else. And that’s how you accomplish the things that are most important.

MR. EISENACH: Thank you.

Daniel?

DANIEL LYONS: Thanks. So, yeah, my remarks I think are going to dovetail nicely with the last two. I think 2016 is going to be seen as the year that net neutrality became real to people and I think as a result, really less popular. It’s one thing for us to go and discuss abstractly the idea that imposing controls on broadband providers harms innovation. It’s quite another for us to say T-Mobile wants to allow you to stream music for free and the FCC is insisting that you have to pay for it.

Right, the broadband market is increasingly competitive, particularly in wireless, where we’re so saturated that growth only comes from stealing customers from your competitor. And companies are going to be getting creative in order to be able to distinguish themselves from their competitors. And as they do so, I think they’re going to run up against the outer limits of the FCC’s Open Internet policy, at least the way the activists have been interpreting it, because the whole point of that is to prohibit companies from distinguishing themselves one from another.

And we’ve already started seeing this with regard to two key issues that are already playing out in 2016, right, usage-based pricing and zero-rating, which was mentioned earlier. Now, I’m on record is as being a big fan of allowing carriers at least to experiment with usage-based pricing in the absence of any anti-consumer effects. I think usage-based pricing helps companies to shift their fixed costs just proportionately onto those who use the network the most, those who – the result, right, is that those who use the network more end up paying more, and those who use a network less end up paying less. And that seems like a fair way – not the only way you have, but a fair way to try to distribute the cost among your customer base.

The counterargument has always been that, you know, some – it can be used anti- competitively, and that’s true. But the fact that there’s a risk somewhere that somebody might behave badly isn’t enough by itself to justify banning the practice outright. And so for example, a cable company could put a hard cap on all of its broadband customers and say, you can’t download above X amount of gigabytes. And if X is pretty close to the amount that you would have downloaded if you’d cancel cable and switched to Netflix, that might give you pause. And maybe you’d say, that’s something the government might want to look at and see if there’s a problem there.

But that’s not what we’re seeing in this space, right? Nobody that I’m aware of is imposing a hard cap on consumers. This is more – usage-based pricing practices, I think are much more mild. Comcast, I think, in the areas where they’re trialing it, they say, here, you can have 300 gigabytes as part of your standard plan and if you go over that, there’re some additional charges, $10 per extra 50 gigs, something like that. And so it’s not a way to stop people from cutting the cable cord. It’s simply a way to make sure that those who are streaming lots of data on their network end up paying a fair share for doing so.

I think the more high profile issue that we’re seeing just the beginning salvos of, right, is the battle over zero-rating, both here and abroad. T-Mobile has been getting a lot of accolades for disrupting the wireless model, including with its music freedom plan and more recently with its Binge On program. And AT&T and Verizon are rolling out sponsored data, which is sort of like, you know, toll-free telephone numbers back in the long distance toll time. So that’s where you can go without incurring a hit to your data plan because the company is paying for that cost.

And this is great for consumers. As a first order approximation, this is a good thing. Right now, instead having a four-gigabyte amount wireless plan or whatever, you have four gigs, plus a whole bunch of free content that somebody else is paying for.

But opponents are pretty much convinced that giving free stuff to consumers is evil because that’s not fair to other Internet companies. And the starkest example, I think, is what we’re seeing with regard to Facebook’s Free Basics program in India, where the goal is, you know, we want to connect people who can’t afford a traditional Internet model. We’re giving them Facebook and we’re giving them some other localized content, the content they would be most interested in that’s relatively cheap to give them. And they’re being condemned for it. Right, because the idea is you’re better off with no Internet access than some. I don’t think that’s quite right.

So I think people generally think net neutrality sounds good in the abstract, but in 2016, what we’re going to see is the next level of that argument, which is trying to convince people, both here and abroad, that it means we need to protect you by making sure people don’t give you free stuff. It’s like the proverbial Vietnamese village, right, when you destroy consumer choice in order to be able to save it. And I think people are going to start second-guessing their support when they see these principles being deployed in ways that are actually limiting what they’re going to do online.

So what should the next administration be focusing on? I think one of the calling cards for the next administration’s communications policy should be getting back to the original goal of the Open Internet Order, right? Which was not focusing on the hypothetical next Facebook, which, by the way, has an enormous number of problems beyond accessing broadband lines in order to be able to compete against a company that has 6 billion installed consumers or whatever.

I think what they need to focus on, get the focus back on the consumers. When the Four Freedoms were rolled out by Chairman Powell back in 2005, the whole focus was on empowering consumers, not empowering edge providers, making sure we have room for the next Facebook. It was about making sure consumers were protected.

And we need to remember that lesson of antitrust law, right, that competition policy means that the rules that we make should protect competition, not competitors. Companies need to be able to innovate in order to be competitive. If we require T-Mobile to give everybody exactly the same service that AT&T and Verizon give everybody, then it’s going to fail because T-Mobile does not have the scale of AT&T and Verizon. And so forcing them to do the same thing as AT&T and Verizon gives them one hand – forces them to compete with one hand tied behind their back. And Sprint is learning this. T- Mobile, in order to compete, needs to be able to offer something different, to be able to reach those consumers that are not being well served by the traditional broadband model.

The FCC, I think is – now that it’s sort of stepping up and displaced the Federal Trade Commission as the primary competition authority in this area, it needs to make sure that it’s learned those lessons that the FTC learned over the years, which is that competition really flourishes when regulators allow experimentation and intervene only in instances where they see that a company has market power and is exploiting the market power in a way that’s actually harming consumers.

MR. EISENACH: Daniel, thank you, and to all the panelists. So I’ve got one round of follow up questions and I have just sort of a lightning round and then we’ll probably turn it over to the audience. But – so let me start, Richard, with you, and I think – you know, I frankly, you know, have been a – I think a techno optimist when it comes to the pace of technological change, you know, particularly in the network space, which I think is, you know, broadly ignored. People think about the Moore’s Law and microprocessors or software change, rapid improvements in software, numbers of new apps or whatever, or devices. They don’t think about it so much as the – in the network space, and your recent paper I think hits on that, which I’d recommend to everyone.

But as optimistic as, you know, I tend to be, I didn’t think 5G was coming in 2017. I thought it was coming later. And I guess I still don’t have an easy time making concrete what it is, right? So both – probably of less interest is how it works, but that’s of interest, but of greater interest is what will it do. And I know you’re following it more closely anyone in this room, so, you know, how’s 5G going to change things starting next year?

MR. BENNETT: Well, it’ll be like the rollout of 4G was where, you know, it was – it didn’t take place in all locales at the same time. It didn’t take place at the same rate everywhere. The United States was a world leader in the deployment of 4G, which has really helped our mobile economy and the economy as well.

But yeah, well, I believe that the announcements from Verizon and some other companies have indicated that they are going to start the rollout in 2017. How extensive it is, it kind of remains to be seen. But from a technology standpoint, there’s actually still some debate over what the content of 5G is going to be, but, you know, there’re a couple of ideas that are fairly clear, which is that it will add some features to the radio access network that allow for the use of higher frequencies. And so there’s the millimeter wave and above and higher frequencies are pretty much unencumbered by incumbent uses. And there’s enormous amounts of bandwidth there, so that’s the goal that probably drives it, more than anything else, is gigabit capacities at the radio level. And then, that actually will force some reexamination of certain aspects of the IP – Internet Protocol stack to operate on mobile devices at those high speeds.

It’s going to, I think, force a reexamination – you know, the Internet protocols are like 35 years old and which is, you know, how many generations, like 10 generations in Moore’s Law time, 20 generations in Moore’s Law time. So they really are due for a reexamination and there are a lot of good technical ideas that have been forwarded about how to change the way the TCP and IP, a way the Internet works at that level so that it’s more robust and more secure.

And a lot of us in the engineering community think that the cybersecurity issues really aren’t solvable within the context, TCP, IP, the way people would like them to be. There were always going to be bailing water on security as long as they’re reliant on protocols that are fundamentally insecure, were never meant to be secure – were, in fact, designed for their transparency because in a research environment, you want to be able to examine a network and see everything that’s going on.

When you’re in a commercial setting, you clearly don’t want that. You want to be able to see nothing of what’s going on except when you have permission. So there’s that. So yeah, I mean, I think that’s the potential.

But the fly in the ointment there is that the allocation of those 5G, those high frequencies – well, let me see, who’s the agency that does that? (Laughter.) How friendly have they been towards innovation and network technologies recently? I mean, that’s – you know, they’re in a position to essentially cede the leadership in 5G to other countries. Because – especially Korea, Japan, and certain parts of Western Europe will really – their feelings are really hurt about the United States being the world leader in 4G because those other countries, you know, when 2G and 3G were the norm, they could take great pride in the fact that they had better mobile networks than the U.S. did.

And I, you know, they’re really eager and it’s just a point of national pride actually, you know, just as those of us in Denver are always happy when the Broncos win the Super Bowl – (laughter) – as frequent as that is, I know, they want to be the leaders – you know, the technology leadership is really important in Korea, especially, and also in Japan, the rest of East Asia.

MR. EISENACH: Well, thanks for that and we can come back to all these issues I’m going to raise here during Q&A.

Babette, you talked about the role of permissionless innovation. I think you used that term. But the Open Internet Order and the other kind of ways in which the FCC is getting more engaged in the innovative process, I just wanted to give you an opportunity to kind of talk a little bit about that. And you know, do you really see, you know, administrative process, the regulatory overhang, the threat of regulation, as a meaningful inhibitor of innovation or is it just something out on the horizon to worry about?

MS. BOLIEK: I think it is a meaningful inhibitor because we’ve already had data that it can be incredibly meaningful. I myself, back in the day when it was 2G and it was awesome, I looked at the mobile phone network as it’s moving to 3G as well. Some of you may not realize, but mobile phones have had a special place in our regulatory world. It started out as sort of people didn’t know what to do with that as regulators, and it came into different regulatory pockets than what was Ma Bell at the time.

Some of you might even know that mobile in and of itself took a long time to be approved. In fact, the technology was there long before we got the first licenses. And so the FCC finally, when it allowed them to come – so talk about inhibiting innovation, it’s literally permission to even exist in the first instance, as what you’re looking at with 5G and, of course VoIP looked at it as well.

So that’s the first threshold permission. And then, when it was regulated, the FCC was actually pretty open to having competition being a soft regulator, having use it as antitrust does to say that competition itself will regulate these providers. So we know that it probably should only be one, but we’re going go out on a limb and we’re going to authorize two. So that was their big innovation.

But it worked in some ways. The problem is no one wrote the memo to the states and the states were still regulating mobile like Ma Bell. In other words, mother, may I, to the regulator, which meant we had to file tariffs. We had to perhaps get permission for our different power sources. Of course, putting cells on – cell towers up any place was always controversial.

So we had a lot of innovation on the state level, and then some states were very sort of laissez-faire. So we have this wonderful comparison of what happens when you do basically a net neutrality where you controlled wholesale prices, wholesale access and also did some price regulation of consumers, like we’re seeing with – look at usage pricing, et cetera.

You got not good results – definitely not good for consumers, not good for innovation. In fact, the whole goal of regulating wholesale prices was to get more operators out there, more different business plans out there. They would, you know, wholesale the infrastructure not have to make that input, and yet they would be able to innovate. That did not happen. The moment those regulations went away, it exploded. It exploded. Not only the operators, but operators being in joint ventures where their joint venture partner had complete control over the business model. In other words, the wholesale market that regulators had hoped for only happened when they relieved the wholesale regulation.

So innovation can be inhibited by the regulator, has been inhibited. That process arguably slowed down innovation in the mobile market by many years. We see similar stories that happened with Ma Bell itself not being allowed to go into Internet access and cable took the lead because it was more lightly regulated. Now, arguably, we have sort of an off-sided market power with cable being ahead arguably because they were more lightly regulated.

So we have evidence. And that’s in some ways why I’m concerned, because we definitely have seen this before.

MR. EISENACH: Thank you.

Mark, you’re an economist, but you spend a lot of time studying administrative process and the design, regulatory design when it comes to particularly regulation of communications services. And one of the questions that’s been batted back and forth, you know, I guess ever since the U.S. went down this road with the Interstate Commerce Commission and 1887 was the wisdom of independent regulatory agencies and just the whole concept of trying to separate policy from politics or implementation of policy from politics. Both thinking about it in terms of the U.S. and around the world, does that basic concept still have chops? Does it still – does it still feel like the right thing to do? Or ought we to be thinking, you know, that was an interesting experiment; maybe it worked in the 20th century, but let’s get real politics is going to play a role and then we ought to just accept it?

MR. JAMISON: Yeah. And I get some pushback from the World Bank and a few others on this as well, but the data are very consistent on this. To the extent we can measure independence, which we look at laws and we look at practices as well of regulatory institutions, the more independent the agency, and also the more independent the judiciary, the more investments you get. And it’s very simple when you stop and think about it.

That the planning horizon for infrastructure is five, 10, maybe even 20 years in some instances. When you get into the energy space, it gets even longer than that, and water as well. The planning horizon for politics is the next election. And those two worlds do not coexist very well. And so we impose between them this regulatory agency, which by its design, we try to have it insulated as much as we can from politics, while holding it accountable to the public values expressed through politics, but then also have it deal with the investment environment as well, without being captured by it.

One think I’d remind people is that a regulation by an agency – we had regulation without agencies for many, many years. We imposed an agency for a reason. But the regulation had basically then three purposes. One was to deal with the market power issue. These were monopolies in railroads, et cetera, and the role they played in the economy meant that exercising monopoly power was going to be very bad. The other was information. We needed expertise in the government to deal with whatever issues come up, and so you have an expert agency to do that.

But the third reason, and this is the one that’s actually the hardest is to keep the politics out of the business decision-making. And that’s the hard part. And that’s why you need the independent agency. Otherwise, you’ll end up with things like we had with BTOP. With BTOP, you look at the stimulus bill, it said, we will provide subsidies for broadband and a few other things based upon helping minorities, helping low income rural areas. I think those were the primary ones.

But you look at the data, who got funded? Well, you got funded if you were from a state that had a Democrat governor. You got funded if your area, your state had a congressman or senator on a powerful committee, and if you were Native American. And that’s what the data show. And it’s because the – there’s no insulation between the politics and those decision-makings. And that’s where we don’t want to give up our independence.

MR. EISENACH: Well, that’s a perfect lead-in to my question for Daniel. So in the – a year ago at this time, the president, to many people’s amazement, jumped with both feet into the net neutrality debate. And you know, while sort of saying sort of soto voce that of course it’s an independent regulatory agency, he made very clear what his preferred outcome was in terms of Title II. And immediately thereafter, Chairman Wheeler, who had been indicating a, you know, much more light touch approach up until that point, did 180 degree turnabout, and I think was questioned. I think Jon Sallet, general counsel to the FCC, who we all know as a friend, kind of came under some fairly hot questioning from Judge Tatel in the recent hearing on the net neutrality litigation about exactly what had changed between the time Chairman Wheeler had one opinion and the time he had the other opinion, other than the president’s Facebook appearance – excuse me, YouTube appearance.

So the question I have for you is do you think that that issue is front and center in the litigation? Opponents of the net neutrality rules are trying to use that issue as a lever to reduce the degree of deference that the commission normally would enjoy in a decision like this. Do you think that’ll be successful?

MR. LYONS: So yeah, I think it’s deeply problematic, right, for all the reasons why – that Mark was highlighting earlier. What we want is for our agencies to be as independent as possible. So that we have this like Aristotelian model of agency behavior that we want our important issues to be made by this sort of aristocracy of gentlemen, these people who are really well trained in these ideas, but are acting without personal interest.

The difficulty is always how do you mind the minders, right? Agency oversight can be done in one or two ways, through the political process or through judicial review. The political process oversight is one that seems to have been brought down very heavily here and has its own problems, which are starkly on display in this case. Right, so one of the things I try to teach my administrative law class is we’ve delegated so much substance to these agencies that we need to make sure that we maintain – we hold their feet to the fire with regard to process. And the administrative process is relatively clear. The agency proposes an idea. It allows comment on that idea and then it proposes a final rule. And if the final rule differs too much from the original rule, we can say, the process was flawed because you haven’t given the public adequate ability to weigh in.

I don’t think we’ve crossed that line in this case, but we’ve come awfully close. The FCC stepped forward and said, I want a light touch Title I regime in order to implement these rules. And we think maybe Title II is on the table. And then, after a long period of comment, they go 180 degrees and say, we decided we’re adopting the Title II option, which is like a paragraph in the notice of proposed rulemaking, right?

Why is that, well, lo and behold, it turns out there’s a shadow FCC that’s been existing in the White House that was developing this robust Title II proposal and the final rule of the FCC looks an awful lot like the material that was developed in the White House. So the final rule’s much more, I think, as a matter – explanation – so I tell my kids, all right, I tell my students, explain this case in a way that an eight-year-old or a journalist would understand it, right? And the way – I’m sorry, I didn’t mean it that way – the way – so it translates to the common man on the front page of the Times. And the way that story translates is the process was going one way, the president decided it should go another, and the agency bowed to its will.

And for an independent agency to allow that much White House pressure to shift it so far I think is really problematic. One vignette, just in particular, before I kind of back, is a question about interconnections. So the ability of the FCC to regulate, not broadband networks, but the interconnection between those broadband networks and the rest of the Internet, right? So the notice of proposed rulemaking said almost nothing about interconnection. And when pressed on it, Chairman Wheeler said in no uncertain terms, we’re not regulating interconnection. Interconnection is beyond the scope of this proposed rulemaking. Don’t worry about it. We’re not going to discuss interconnection in this context.

Then Netflix and Comcast sign interconnection agreement. Everyone says this is a net neutrality violation. That’s nothing to do with net neutrality. And lo and behold, right, this draconian Title II regime ends up giving the FCC oversight over interconnection.

Those of us who were concerned about oversight over interconnection would have filed comments during the comment, except that we were deterred by the FCC saying, don’t worry, we’re not covering that in this proceeding. So now that it’s in the final rules, there’s a strong argument, an argument that some of us have made that we were not allowed adequate opportunity to highlight to the FCC all the problems with this approach. And as a result, I think the interconnection rules are probably one of the most ripe for being overturned.

MR. EISENACH: Thank you. I want to turn it, open it up to the audience. Before I do, I want to make just a couple of housekeeping points. First of all, the ideas that you’ve heard talked about today are on display daily. I haven’t mentioned our daily blog yet. I want to give the address for that, both for people here in the room and for people watching this streaming, at TechPolicyDaily.com. T-E-C-H-P-O-L-I-C-Y Daily.com, TechPolicyDaily.com. If you’re not currently subscribed, go to TechPolicyDaily.com, sign up. You’ll get a daily newsletter and all of the folks who you’ve heard today write regularly for TechPolicyDaily.com.

Secondly, let me just explain a little bit what we’re going to do for lunch. We’ll finish in about 15 minutes here. Lunch will be served out in the hallway, here in the reception area. Go out, get some lunch, go through the buffet line. As people come back in from the buffet line, we’re going to have a cyber issues smorgasbord – I thought that was a clever title – with Ari Rabkin, Bret Swanson, and Tom Sydnor talking about some issues that didn’t quite fit perfectly in these two panels. And it is going to be a roundtable, so you know, they’ll sit up here and talk from the podium, but – from the dais here, but we do want to actively engage everyone in what will be a much more interactive discussion than these panels this morning. And then, we’ll have lunch and be done around one o’clock.

So with that, let me turn the floor open for questions. I’ve got some of my own, but I bet some people out there have questions on some of the provocative ideas these focus have put out so far. I see one in the back here. And if you could state your name and affiliation, that’d be great.

Q: Sure. Todd Wiggins, a local blogger on to MeetMEDC.com. Several years ago, at an event called CTAM, cable television manufacturers’ gathering, Mark Cuban, outstanding spokesperson, mentioned that he didn’t think that broadband would ever compete effectively with cable. So he didn’t see 5G coming down the pike right away. But do you think it’s going to directly affect the revenue generating capacity of cable if it’s going to be a head on competitor as far as advertising and content? And then, could you speak a little bit about the downloading speeds that 5G will bring us and how that might affect the movie industry or any other aspects of telecom?

MR. BENNETT: I guess that’s directed at me, right? Yeah, I think that 5G does make all the mobile carriers competitors with the incumbent cable company. The download speeds will at least in the one to 10 gigabit per second range. So it’s more than ample. It really only needs to sustain download speeds of 10 megabits per second to be competitive with cable. The issue that we have today is data caps. And data caps on mobile services are a function of limited spectrum. So when there’s more spectrum available, then those data caps can go higher. And Binge On, with Binge On, I mean, it’s – I think the only way to see that is it’s a frontal assault on the traditional cable model.

And yeah, Mark Cuban is a bright guy and I appreciate his opinions, especially about NBA referees – (laughter) – but you know, there’re some instances in which he’s a little shortsighted.

While I’ve got the mic, I want to just add something to the points that have been made about the FCC’s independence. And I think one of the issues there is that inside the agency there’s a very poor structure because the FCC actually has two functions to perform that are sometimes in conflict with each other.

On the one hand, the FCC is a finder of facts. It collects information about, you know, what broadband speeds are and how many people are using it and the deployment and prices, et cetera. And then, so it has this data collection function, and it also has an enforcement function. And there are times when, because of the vagueness of the statute that it’s operating under, it can find that, say, the threshold for – it can define the threshold for what’s an adequate broadband connection and set that at 25 megabits per second, which increase – has the effect of increasing the agency’s power.

And so the fact-finding thing is directly in conflict. And I think what we actually need to have inside the FCC is a firewall between the fact-finding function of the FCC and the enforcement function. And so just, you know, it’s like the – on cable – the local loop unbundling. I mean, I think the fact-finders need to be unbundled from the enforcers. And the appointments to the FCC should go back to the mode they were in, in the early days, when they were actually engineers were FCC commissioners.

MS. BOLIEK: Well, I would just add to that because I’ve just read an article that you can download on SSRN, called “The FCC’s Evidentiary Problem,” which is exactly that and what I referred to before about a lack of economic analysis of what exactly, for example, defines a competitor, what are we looking for. Because it has serious ramifications on the breadth and scope of the jurisdiction of the FCC itself.

So by being less rigorous on the facts, which they’ll receive judicial discretion for – there’s really no way to call those findings back in an effective way – they literally define known jurisdiction. That’s problematic. For a statistician, we know the old adage when it comes to data, garbage in, garbage out. And so that jurisdiction is based on these thinly veiled findings which are outcome determinative and they know it is of concern.

And just to follow up on the, is mobile ever going to be competitor, I’ve been fighting this fight for about 20 years. Because – OK, I was ahead of my time. I thought it was going to be a competitor before now. But that said, absolutely, absolutely. In fact, we already see that the uptake on mobile is much higher. Certain millennials, who – two of students are in the back and they’re millennials. Hi. But as a celebration of that generation, many of them never even think about going to a landline. They only go to the mobile because there is attributes to mobile which cannot be replicated. The one attribute that you pointed to wisely is this download and ability to stream, which is, of course, of vital importance, especially when they’re in the middle of one of my lectures, they need their Netflix connection. (Laughter.) Not them, they were angels.

But – (laughs) – but once that is corrected with spectrum and with speed, then that mobile ability is just going to just carry on mobile to a much more competitive stance. It’s always been positioned that way and we’re currently seeing it in 4G that there is consumer preference revealing that they will be indeed a strong competitor.

MR. EISENACH: Mark, Daniel, do you want to weigh in on this?

MR. LYONS: Yeah, I think one point that Richard brought up is the broader question of FCC process reform, which is not a sexy topic, but it’s one that’s getting a lot of headlines lately because it’s really important. So we have two basic competition police in broadband right now, right? One is the Department of Justice Antitrust Division. If the Department of Justice sees a problem, they can bring a case, but all they do is prosecute that case. They have to bring the case before a judge who is independent and can decide up or down whether the government’s theory of the case holds water.

Inside the FCC, right, if the FCC sees a violation of one of its competition rules or whatever, it adjudicates that internally. And you can eventually appeal that decision, but it comes with a heavy thumb on the scale of agency propriety and the whole reason is because we think the FCC is fairly independent. That’s why one of the big stories for those of us who are inside baseball, right, over the last year has been the dysfunction in the agency, not just between the information gatherers and the enforcers, but between the majority side of the House and the minority, right? Matthew Berry has been talking consistently about the fact that stuff’s being going out to the three Democrats and not getting to the two Republicans until much later in the process.

That is really problematic for an agency that gets judicial deference because of its supposed independence from politics. And these are the sorts of things that I think we need to continue to shine a light on in order to fix what’s wrong internally.

MR. JAMISON: And I’d just add that with respect to the problems that Richard and others have been pointing out, that while the agency, you know, in the past few years has been doing a great job collecting data, its interpretation is sometimes a little difficult. My favorite solution, I’ve seen around the world, I think it’s best done in the UK, is to separate the decision makers – here’s what the regulatory decision is from the administrators. These are separate people in certain agencies around the world and that protects the staff from politics. It’s not perfect and I have no empirical evidence to say that it gives you a better result, but just anecdotally, it seems to be working better.

MR. EISENACH: And let me just address the market technological part of the question in terms of the role of wireless going forward. So the Pew Center for the Internet and –

MR. JAMISON: American Life.

MR. EISENACH: – American Life, thank you, which I’m on the advisory board – sure, I should remember their name, though – (laughter) – they released a survey and they’re kind of one of the authoritative sources of data on broadband penetration. And released a survey back in December, just a month or so ago, in which they showed that wire line Internet penetration in the United States peaked in about 2012-2013 at about 70 percent and is now declining down to 67 percent. And once those – once those – the first derivative turns negative, it tends to stay that way and gets deeper going down.

So, you know, it appears that on the broadband front, as a decade ago in the voice front, that the wire line penetration peak of the curve has been reached and we’re now in the cord-cutting phase. And that increase in wire line – excuse me, decrease in wire line penetration is almost precisely matched by an increase in smart phone only, wireless only broadband homes, which are up from 8 to 13 percent over the same period of time. So about 70 percent of Americans today, 68 percent of Americans today have both a wire line connection, broadband connection, residential wire line in their home broadband, and a wireless connection. But about 13 percent of Americans only have the smart phone or the mobile broadband connection, and that percentage is growing, you know, very rapidly.

So the cord-cutting has started and, you know, ironically, and you know, when you look at the way that we measure broadband penetration in the U.S., the government still, you know, has set kind of universal wire line broadband penetration from the 1990s, you know, the metrics we would have used in the 1990s as the, you know, as the policy objective. So just an indication of kind of how far policy can lag behind the realities in the marketplace. Other question – Richard.

MR. BENNETT: Yeah, and it’s not just the U.S. where this is happening. We see the same pattern in Korea, where the millennials in Korea basically just don’t see – I mean, they can get incredibly fast and cheap fiber connections to their apartments and they just don’t see any use for it.

MR. EISENACH: So let me – Richard, let me ask this then. So there’s a debate, which I think is just a perfectly legitimate debate. None of us can see the future. I just bought a new television. So that’s a 4K television set, ultra-high definition. I got it hooked up to a fast, you know, wire line connection, fiber, you know, fiber wire line connection. And God is it a beautiful thing. I mean, watching football on that thing, I mean, it’s exciting. I can’t wait for the Super Bowl. So that’s a compelling value proposition –

MR. BENNETT: Must be a Samsung or something.

MR. EISENACH: – right, it’s not cheap. Right? I mean, that’s – that was an expensive thing to buy, so that was my Christmas present this year and next year. But – so – but it was not cheap, but it is pretty cool. You know, on the other hand so is this, right? And watching the basketball game on this doesn’t look anything like, you know, watching the basketball game on that. But on the other hand, I can carry it around with me and watch it when I’m sitting at the stoplight, never when I’m moving. (Laughter.) So do you have any sense – and it has policy consequences, right? Which of those two things do you think is more compelling and will be more compelling for consumers, determines whether you think 253 or something even higher is the right standard for aspiration for wire line broadband network?

MR. BENNETT: The data is pretty clear that around the world the millennials pretty much – millennials pretty much watch their videos on their smart phones. And I think it’s a – well, I mean, they’re younger, so they have better vision than we do, right? (Laughter.) But if you’re accustomed to that mode of viewing, it’s just natural to you. So yeah, we like big flat screen TVs to see, you know, the Broncos crashing the Patriots and ripping the hearts out of all their fans, you know – (laughter) – in the best interest of sportsmanship, but – (laughter) – you know, that’s because we’re used to that, you know, that’s just – that’s our customary way of, you know, we have a nice comfortable chair in front of the big flat screen and, you know, surround sound. And that’s just the way – that’s the way we think television’s supposed to be.

But it’s a completely different experience for young people that haven’t been, you know, that aren’t acculturated or sort of accustomed to viewing it that way. And there’s certainly nothing in the world that prevents you from projecting an image from your smart phone on to a big screen, right? I mean, this is actually one of the, you know, one of the happening things, too, is that you can – you know, there’re various ways where you can actually plug your iPhone or whatever into your TV set and, you know, get a big screen version of it. Because this is – you know, they’re incredibly powerful, you know, quad core computers that –

MR. EISENACH: Well, including Bluetooth, right? So I don’t need a wire line connection to watch TV on my TV set. I just need my Wi-Fi, I just need to tether my broadband connection to my smart TV, with the Wi-Fi built in and I’m watching TV online.

MR. BENNETT: Yeah. Yeah.

MR. EISENACH: So it’s three minutes ‘till noon. I think we need a few minutes to go through lunch. Please join me in thanking this panel for great presentations. (Applause.) Everyone, go get some lunch, go through the line, and as we assemble, we’ll start with our next set of speakers.

(Break.)

MR. EISENACH: OK. Everyone can keep eating and we’re going to have an informal discussion over lunch here. So Ari Rabkin, Bret Swanson, Tom Sydnor are going to throw out some ideas on three different topics. One has to do with the role of education in the Internet. Sorry, the role of the Internet and technology in education, Ari’s topic. Bret is going to talk about – I hope he’s going to talk a little about something wasn’t originally on his agenda, which is his blog in Tech Policy Daily today and kind of picking up on the discussion we were having in the last panel. But then, he will turn to this debate about the impact of technology on productivity and incomes, the great stagnation or technology renaissance.

And then Tom Sydnor is going to talk about a topic that I’m sure will generate no comments or controversy at all because it never does, that being protecting intellectual property rights on the Internet. So I’m going to ask each of them to keep it very brief going – starting out, five minutes or so if they can. And then, we’re going to throw the floor open to questions, comments of all kinds. So presumably, hopefully focused on some of these topics, but we’re just going to have a free-for-all until 1:00 or so. Ari, with that, let me turn the program to you.

ARI RABKIN: All right. One of the striking things about the economy in the last few years has been the immense rise in the value of software development, right? And in consequence, we’ve seen a spectacular run-up in employment for software developers, in salaries for software developers, in San Francisco real estate and we’ve seen this percolate out.

And in consequence, there’s been sort of increasing interest in reforming education to sort of emphasize software and to sort of teach people about programming. President Obama, a year ago, explained to a journalist that, you know, everybody’s got to learn to code earlier and we need to do this in schools. And in this year’s State of the Union, he said that we should offer every student in like middle schools and high schools hands on computer science and math classes to make them job ready on day one.

I think computer science education is good. Teaching people how to program is good. These are not actually the same. Getting people job ready is not actually maybe the thing we should be doing in high schools. And if we try and conflate all our different goals into one goal of CS, good, we are in danger of disappointing ourselves and making our students unhappy.

There’re sort of a few different changes in the educational landscape which we should think of separately, one of which is this pressure to do computer science in the lower level instead of or supplemental to math. And I’m in favor of this, right. Computer science is an intellectual topic as deep as other branches of mathematics. Our theorems are as good as the things that they do in trig and I think better than the things they do in trig. So yes, let’s teach Turing. Let’s talk about automata theory.

Separately, there’s been this trend towards, say, vocational education in computer science. We’ve seen this huge rise in undergraduate CS enrolments. Computer science is now the biggest major at a whole bunch of universities, certainly Stanford, I think also Harvard, certainly UC Berkeley and I think elsewhere. We’ve also seen this rise in non- college computer science education. There’s been this boom in so-called programming boot camps, where you go for seven to 12 weeks and you come out hopefully with a job in software.

These are not the same thing – these are not trying to achieve the same thing and the thing that is useful for an adult who wants a job is not the thing that is useful for a teenager who like doesn’t know what they’re interested in. And we ought not to sort of fold all these goals together. That these are all sort of, in a way, reactions to the increased value of software, but it doesn’t make any sense to treat teenagers like people who are about to go off into a job because they’re not, right? They should be exposed to a bunch of different things. They should be exposed to ways of thinking more than to the thing that will get them a job on day one because actually it isn’t day one. Day one for them is years away. And vocational education for someone who is 14 doesn’t make a lot of sense because they forget things, right?

And if our goal is to improve the employment prospects of teenagers, vocational education and programming is maybe not the thing to do. The thing to do is to try and develop habits of mathematical thought and the kind of instruction you would do for that is not, let’s all write some programs necessarily. Or if it is, it should be with an eye to why are programs interesting and how should one think about them, rather than here’s what you need to know to get a job, right?

The boot camps are extremely focused on you will do a project that is impressive to employers and you will learn whatever the employers want this year. And they work very closely with employers, so that next year, they’ll do a different boot camp that meets the employment desires of that year.

This is not a business high schools are going to be any good at. They’re not tied to industry in the right way. There’s too long a pipeline. They shouldn’t try and compete on that. They should try and compete on the development of, as they say, non-cognitive skills, or at least of cognitive skills, but they should be doing human capital development and not pre-employment training.

And I think that a public debate that sort of folds or a public discourse that folds this all together is likely to result in disappointed young people and poor outcomes.

BRET SWANSON: Thank you. There we go. Sorry. Thanks, Ari. Jeff wanted me to talk a little bit about a blog I wrote this morning for Tech Policy Daily before I get to my main topic. About two weeks, Tim Brennan, who was the chief economist at the FCC during the height of the net neutrality battles, I think during 2014 maybe into 2015, gave a talk where he summarized the new paper of his talking about his sort of very thoughtful observations on the economics of the whole net neutrality issue.

And – but in the introduction to this talk, he called the process by which the net neutrality policy came about an economics-free zone. And to a lot of us who had made that criticism over the last two years, five years, 10 years, this is a really extraordinary statement. I mean, it sort of confirmed what we had been saying. And Babette mentioned this in the previous panel. But it got me to thinking about how powerful narratives and storytelling is in making policy.

And you know, we all like stories. They are very powerful. And the previous panel also talked about how independent agencies have sort of gotten off track and are not using data and analysis and economics and really even legal analysis to make policy. And so this confirmed what we thought about the net neutrality story. Of course, the net neutrality decision was, in a sense, a great victory for the storytellers over the last 10 years. And you would have thought that they may have been content with their great policy victory. But in fact, you see already the next narratives being developed. And so in the blog this morning, I talk about what are the new narratives being developed and try to critique those.

One of them is, you know, building more, building government – nationwide government networks. One of them is zero-rating, which we discussed, having the FCC take up privacy enforcement, having the FCC regulate the video market in a broader way. And so we already see these new narratives being developed. And I just think it’s important to sort of point this out at the outset of these new debates.

I’m going to talk a little about the broader effect of technology on the economy, on the macro-economy, what it means for incomes and jobs and – we talked about inequality the last several years. It’s been a big topic.

So we can – you know, there’s this – I like to think about it this way, some people say that, you know, there’s a great stagnation. Technological innovation has slowed dramatically and it’s leading to stagnant incomes and inequality and all these things. On the other hand, you know, sometimes on the same page of the – in the same newspaper or the same website, you might see stories about robots and artificial intelligence are poised to take all our jobs. And this is a really interesting dichotomy, which is it? Can we have both of these things? Are they – can they both be true or is this dichotomy proof that maybe neither of them is true? I just find this funny.

I’m going to skip through some of these. A couple of years ago, Tyler Cowen made popular the great stagnation thesis that we really, over the last 40 years, haven’t had much innovation, despite all of the hoopla in some areas. Robert Gordon, who has written a bunch of articles and just has a new book out, says that we’re really in the demise of U.S. economic growth. And he says, even in information technology, which he admits is a little bit more powerful than some other areas, say transportation and so forth, he thinks it’s not nearly as powerful as some of the previous industrial revolutions. And that he says, in fact, the information age has already maybe come to an end.

Of course, one of my other favorite quotes is at the bottom of the screen there about how the Internet would be no more powerful than the fax machine looking ahead to 2005.

So these are some of the themes that we see and the people that are skeptical of innovation. And they also say that it has really led to a huge new problem that should be the focus of policy, which is the rise of inequality and a stagnating middle class.

This dismal view, I guess, can be summarized in a very popular chart that’s going around showing how productivity has kept going up, but middle class incomes have totally stagnated over a period of decades. Another way to look at this, another popular chart in this view says that middle class, which they define as sort of the bottom 90 percent of households is no better off in real income terms than they were in 1968. This has been very powerful in, again, promoting another narrative.

I think that there are lots of problems with this chart, having to do with measurement, having to do with technology, and so forth. And over the last year, I sort of started detailing some of these problems with this measurement and I also – I did it in one place in my Moore’s Law paper from last year. Just, for instance, using a different price index, makes a widely – makes a huge difference in what sorts of measurements you get of income over time.

The, you know, dismal view I think also doesn’t measure productivity correctly. The dismal view doesn’t count something like $20 trillion in retirement savings, in 401(k)s and IRAs. That’s a pretty good, important number to count, say, if you’re making these projections. It doesn’t account for household size. So if a normal household, four decades ago, was three or four, five people and today’s normal household is, you know, two people or something, you probably had more income earners, depending, and so that’s an important factor.

Real consumption has tripled in the last several decades. And I don’t think it measures the consumer surplus and innovation very well. Well, in fact, where all these numbers come from – not all of them, a lot of them – the economists who originally put out these numbers, Piketty and Saez, had one of the biggest books of 2014, “Capital in the Twenty-First Century,” have just come out with a new paper incorporating many of these effects and finding that their downward curve of a huge new surge in inequality and stagnation for the middle class over the last 40 years shrinks dramatically the effect that they had been saying.

So I think in a sense we’re making progress towards trying to get real numbers to what’s actually happening. Having said all that, I do think what you’re seeing in the election today does show you that in more recent years there is a middle class problem. There’s a lot of anxiety, a lot of frustration, probably some actual real income stagnation. And like I said, that’s probably coming out on the political campaign trail. We have, you know, a shrinking labor force participation, which we’re still trying to understand, but it’s rather startling.

My view is that with 2 percent growth, which we’ve had for the last, say, almost 10 years now, people in Silicon Valley, people with high levels of, you know, human capital and so forth, can do really well. But with just 2 percent growth, compared to our historical rate of 3 percent growth, it’s really, really tough for the middle class. There’s not nearly as enough capital investment, new business starts, and so forth to keep wages and benefits growing for the middle class.

So in my view, we’ve really had a policy stagnation – not a secular stagnation, but a policy stagnation of, you know, regulation in energy, in health care and finance and technology, and so forth, and these things have led to a much slower growth than we’d like and I think than which the economy is capable of.

So I still see huge promise for technology if we would only unleash it. And, you know, I’d love to find these old examples that show us, you know, just how much is possible if we sort of imagine a little bit. And I’ve shown some of these before.

This one is from October of 1903, New York Times. The title of the editorial was “Flying Machines Which Do Not Fly.” And in this editorial – there had just been a disastrous case of a project by the Smithsonian Science Institute where this flying machine crashed. And they started off the article by saying, the ridiculous fiasco of this flying machine experiment. And they estimated that it would take between one million and ten million years for humanity to produce an actual flying machine. Of course, we know that, two months later, the Wright Brothers successfully flew at Kitty Hawk.

And so my view is that we sort of unleash the economy – we can see all sorts of innovations that can lift economic growth, lift middle class incomes and, you know, all we have to do is let the American people build the future. So thank you.

Thank you.

TOM SYDNOR: Tom Sydnor. I cover intellectual property issues for the center. And I was asked – Jeff asked me to sort of focus on, OK, what if anything interesting might be happening over the next year. And if not much, what should the next administration be focusing on?

I have to admit, I think if you work on law and policy in Washington, one of the things you like presidential election years, it’s kind of – a chance to like catch your breath because you know nothing much is going to happen for a while. This is not going to be that sort of year in the area that I focus on. We’re actually in a very interesting year. There’s going to be a lot going on, some of it quite interesting and with potentially international consequences.

So I want to focus on sort of outlining some of the things that I think are going to be coming up this next year because – in part, because it is possible that the next president may inherit a situation that is slightly different from the one we face today. To a certain extent, some of the old assumptions hold true, and if you ask me, do I think we’ll have major patent reform legislation get through Congress this year, the answer is no. Actually, it would be – no. But, nevertheless, that issue – you know, that is an issue that the next administration will inherit.

On the other hand, if you turn to the issues that I tend to cover more closely which involves really how do you enforce rights, intellectual property rights on the Internet? It’s an important issue. We’re going to have a lot going on this year. One of the most important things actually underway, I think its significance and the risks that it poses are somewhat underestimated perhaps.

At the moment, we have – we’ve seen over the past few months – and the United States has been involved in negotiation of one of the first multilateral free trade agreement that it has been involved in for a while, the Trans-Pacific Partnership Agreement, TPP. It has proved – the results have proved to be controversial. We have – did not see the initial sort of outpouring of support for the negotiated TPP that we have with some past U.S. free trade agreements. That is perhaps understandable. Multilateral agreements are much more complicated – by the way, worked on the aspects of the U.S.- Korea Free Trade Agreement. Multilaterals are much different.

So that’s not surprising. We have seen increasing support for the agreement beginning to form. But, nevertheless, as a result of the election year, it is likely that – it’s not likely that there will be any movement on the U.S. side on that quickly. That puts us in a very interesting position. We have seen – you know, we have seen in the past that some of the online or Internet activists, many of them oppose TPP and quite vehemently.

The question – you know, some of the major U.S. technology companies seem to support it, so do we need to worry about that? Do we not? I think actually we do. We’re going to be – that agreement is going to be kind of out there for a while.

And while the United States, because of the way that we – because of the unique – our sort of unique system of separated powers, we are very – our government operates very differently than the parliamentary systems of government that most other – you know, stable representative democracies rely on, it has to enter to free trade agreements, through a complicated process called trade promotion authority that really makes it extremely difficult for us to agree to make material – potentially controversial changes to our laws other than tariff schedules when entering into free trade agreements.

So in the United States, TPP won’t change anything. Now, some people will tell you otherwise. This is the Electronic Frontier Foundation giving 54 reasons why your digital rights would be affected if we enter into TPP. I’ve been through them. Fifty-three of them relate to TPP’s intellectual property chapter; 48 of those relate to – it’s copyright related provisions, and after going through the 48 copyright related provisions, they all have one thing in common. They’re all wrong. None of them are actually true.

In the United States, whether we adopt – whether we implement or reject TPP, your, my existing digital rights do not necessarily change. In other countries, they will. And what we have seen – sometimes seen in the past is that when the United States has not been engaged or invested in a particular agreement internationally, the issues can actually spin out of our control to the point that we can’t fix them. That happened a couple of years ago with a treaty called ACTA, the Anti-Counterfeiting Trade Agreement. The United States entered into it as an executive agreement, meaning we were not willing to change any of our existing laws – none of them, not a one.

So to us, you know, it was basically other countries agreeing to sort of normalize their customs procedures with ours. It was useful, but not – I never wrote about it because it was not a huge step forward. There were riots in some places in Europe stirred up by people who thought that this was really going to fundamentally change their ability to access the Internet.

So we’re going to have TPP lurking out there next year. It will have some opposition. We need to take that seriously. And I think focusing on that is going to be important.

The next year is also going to be interesting for a couple of other reasons. We have a – we have one longstanding problem that may actually get a little bit better next year. For a long time, our copyright creators and creative industries that are based on copyrights encountered a problem called decentralized peer-to-peer file sharing.

This is an issue I’ve worked on throughout really the entire time I spent in the governmental or non-governmental public interest sector. And it’s been around for about 15 years. Was the result of a case that just came down in the – a decision just came down in the eastern district of Virginia, BMG vs. Cox. We actually may see a bit more cooperation between copyright owners and Internet access service providers that if it scales up actually could significantly decrease that problem, not make it go away. Counterfeiting, piracy never do. We never made them go away in the brick-and-mortar world. We’ll never make them go away on the Internet, but we can temp them down to a dull roar, and this actually might be a step towards doing that. And that will be very interesting to watch.

The U.S. Copyright Office in March will also be taking public comments on a study of the so-called – of the online service providers, so-called safe harbors in Section 512 of the Copyright Office. That is a very interesting proceeding. It’s going to attract a lot of attention. There will be comments from a variety of different perspectives. One of the things I’m most interested in seeing is whether the content – the comments that come from the creators and creative industries exactly what they focus on.

There are two – there’s sort of – I think there’s a – in that community, I think there’s a general consensus that breaks down into two different sort of sub-groups. There’s consensus that the notice-and-take-down process that is provided by 512 C and D, the safe harbors for hosting services and information and location services just – it was never intended to produce a situation in which we had people sending out a million notices a day to – over a million notices a day to one company. They’re frustrated by that. There are some who say, well, Congress has got to step in and rewrite the – you know, rewrite and narrow the scope of safe harbors.

There are others, like me, who say that’s not really – you know, actually, the text is fine. The problem is that judges haven’t done a very good job of interpreting it. There’s still a lot of uncertainty. We need to resolve that and we need to do a better job explaining to judges what that text is actually – what the text that actually exists is supposed to mean.

Very interesting to see how those divide because that may have a big effect on what the Copyright Office has to say about the 512 safe harbor. So that will be – I don’t know that that process necessarily concludes in 2016, but sometime – you know, sometime near the end of the year, beginning of the next administration, I wouldn’t be surprised to see something come out.

So there’s actually a lot going on that in this – you know, what is usually a kind of a quiet period for us, do I think we will see major intellectual property related legislation? Except in a case – possible case of TPP, and I don’t have any predictions as to when or whether that moves in 2016.

The answer is probably no, but there are a lot – you know, there’s some very interesting litigation out there and there’s some other interesting administrative proceedings and lurking in the background of it is the TPP, which also has potential effects on our ability to negotiate with Europe for a TTIP agreement.

So it will be an interesting – we will actually have an interesting 2016 in this space, I think.

MR. EISENACH: Those are three sets of ideas, not necessarily related or related by intent but three sets of ideas which I’m guessing somebody had some thoughts on one way or another. All of these topics are up for discussion.

How we educate – I do want to say one thing about Ari’s topic, and that is one of the things we’ve run into in the Global Internet Strategy Project as we think about cybersecurity is a dearth of talent in the U.S., particularly talent that’s available to go to work for the U.S. government and U.S. government salaries in the cybersecurity arena.

So you think – you know, the NSA has got kind of a particular specific draw in terms of once you’re in the NSA, you’ve got some reputational human capital that you can sell on the free market later on. But if you’re not the NSA, it’s pretty hard to attract talented cybersecurity experts into government these days. So the question more broadly, you know, how do we – how do we improve or enhance our human capital in the cyberspace is pretty important.

So, anyway, all those topics are open for discussion. I see Mike Nelson’s already got his hand up so let’s pass him the mic and have at it.

Q: Tom, I want to thank you for a really nice tour of the horizon. There’s some really important issues out there. I wanted to dwell on three things that people don’t talk about very much. The focus is usually on patent and copyright but there’s some things going on in the trademark world where we see some new court cases. My company, CloudFlare, got cut up as a non – we weren’t a litigant, but we got pulled into the Grooveshark case. That’s sort of worked its way, but I’d be interested in your take on whether copyright is going to be enforced more vigorously, particularly online.

And then, second, two other more obscure intellectual property rights – the right to panorama and the concern now being that particularly in Europe, people are starting to say, you can’t take pictures of my building. My building is intellectual property. When we’re all walking around with self-cameras, this may be a problem.

And then the other favorite obscure copyright – intellectual property right for me is the database right which the European Union created back in the late ’90s. And the idea was that you don’t get a copyright for just pulling together data. They decided that that was a good idea and haven’t paid attention to the data that indicates it was a terrible idea.

So I’d be interested in all three of those if you have any thoughts on whether we’re going to see changes on those three areas.

MR. SYDNOR: Thanks. Those are all excellent questions. Thank you. On the – let me just sort of take it one at a time.

On the issue of what I think is fairly called third-party injunctive relief in intellectual property cases I have to say I have somewhat mixed feelings about it. Here’s the thing. I mean, there’s no doubt there is plenty of judicial precedent for the proposition that in an inappropriate case you get injunctive relief against a third party whose actions might facilitate wrongdoing by the defendant. No doubt about that. I mean, there are precedents there. It’s clear. It exists in the trademark context and it exists in the copyright context.

On the other hand, I have – what I wonder about that is – your question was really, OK. Do you think we’re really going to see a lot more of that? I don’t know. The problem with third-party injunctive relief, it is – there is precedent for it. You can get it. It is not easy. And if you look at a lot of these online enforcement problems, they really relate to I think scalability.

In other words, you know, how do you deal – you’ve got a volume of counterfeiting and willful copyright infringement that, you know, we really haven’t seen in the developed world. We have seen it in the developing world, by the way, and its effects are devastating over the long term. We do know that. Plenty of countries made that clear.

But that’s one of the reasons why we’re such a successful net exporter is we didn’t kill our domestic industries. So this is an important issue. My concern is I don’t – I would not be surprised to see more cases that raise those issues. But my question is does that solution scale? And I just don’t – I don’t – I don’t know that it does.

As for the right to panorama, yeah, we – that’s one of those issues that all I can say is I think – I’m aware of what the legal basis for those arguments is. I can’t agree with them. We’ve resolved them a long time ago in the United States. And I think if you look at the physics of how photons bounce off matter, it’s pretty clear that, you know, your building is actually projecting an image of itself out into the perfectly public spaces.

I think we will – there actually have been – you’re right. That is a temporary problem. I do hope over time it will tend to get fixed. I mean, the physics of it just sort of leave me remarkably unsympathetic.

And I’m sorry. Your third question related to?

Q: (Off mic.)

MR. SYDNOR: Yeah. Sure. You know, it’s actually a great question and I have to admit maybe the interesting thing is I haven’t thought about it in quite a while. You know, the last time I looked into this, it doesn’t seem to have caused huge problems in Europe, and yet – right. And yet, in the United States, we did move in that direction.

You know, there is an effort to get European-like database protection in the United States. It did not succeed and we have continued to rely on basically our common law misappropriation claims. And to date, that seems to be relatively successful. There are – you know, I do think some of the – the recent efforts to get federal trade secret protection do reflect the fact that, you know, we’re now seeing levels of commercial espionage that, you know, do present a challenge to our state – the state common law rights that we’ve relied upon.

So I think that so far it’s interesting that that – we really have not seen much movement on those issues either in Europe or in the United States with, like I said, the exception for this new problem – for this just increasing problem of industrial espionage by hacking which I think we need to take very seriously, and I compliment Jeff and the center for doing so.

MR. EISENACH: Other questions. Here in front and then we’ll go to the back. Here first.

Q: Bob Hershey (sp). I’m a consultant. I’d like to talk about this question of education for the Internet. In particular, I think everybody has to be aware there’s an Internet out there and be able to use it. I think the degree of work orientation of the education depends on the students and their families, of what are their capabilities and what they’re after. And I would say if they want to do something immediately that will get them a job right out of high school, that’s up to them.

MR. EISENACH: Ari.

MR. RABKIN: Yes.

MR. EISENACH: We can agree on that. So let’s go back in the corner.

MR. SYDNOR: Can I actually add something on that?

MR. EISENACH: Yes, of course.

MR. SYDNOR: Ari, I just want to echo, not in my professional capacity but in my personal parental capacity, both my kids are in the AP program in Fairfax County public schools which means we’re getting one of the best free public educations that you can get in the country.

And I am stunned by the extent – I have been genuinely surprised that – you know, I don’t see much change in the math curriculum as a result of the increasing importance of computer science. And I don’t see much – the emphasis that I would have expected on understanding how those technologies and devices work.

My children are very heavy users of technology, but do they understand really how the thing works? Well, as the de facto chief technical officer for our family, I can afford to answer is no, and that that concerns me. And so I thought I’d love to hear your point about the need to improve this is spot on. It’s consistent with my experience.

MR. EISENACH: Let me pick up. I’ve got to follow up on this just a little bit and it ties into also something Bret was talking about in his blog today and that is this notion, this progressive era notion – and progressives, by the way, weren’t just Woodrow Wilson wanting government to take over everything. You know, that’s kind of valid and you hear a lot about it on conservative talk radio. But progressivism was a lot more than that. It’s an intellectual movement.

And part of progressivism was spawned by a guy name Frederick Taylor who wrote about industrial technology and industrial processes, and came up with the notion that for any industrial process there was one best way that it could be accomplished. And Taylor was incredibly influential. He actually – was it Brandeis who was the first chairman of the SEC? Brandeis who was – it was Brandeis who I’m talking about.

Brandeis was a litigator and Brandeis actually used Frederick Taylor in his big litigation against the railroad companies getting him to keep rates low because he asked the railroad executives on the stand, have you read and implemented Frederick Taylor’s one best way to reduce your cost? The executive said, no. And Taylor said, aha, well, you don’t need a rate – sorry, Brandeis said, well, you don’t need a rate increase because you haven’t implemented Taylor’s one best way. That’s how influential it was.

And this concept was – you know, drove institutional design in the United States for half a century or longer. And we see it, you know, still persisting, we see it in Susan Crawford’s view of the way we ought to run the Internet. There’s one best technology. It’s fiber to the home. Government ought to build it and we’ll run it as a monopoly. There is will be one best way and the government will always be on top of what that one best way is. Most people today look at that and think, well, that’s silly. If you think about it very long, that doesn’t seem to be the way that things work today. But it is the way things work in the public education system, right?

So the long and short of it is when you try to homogenize a system and have one best way to each math, one best way to teach English, one best way to develop a curriculum, you’re going to have problems in a society that is as diverse as the digital economy that we live in today.

So I can’t resist saying that. but let’s go back to the back of the room.

Q: Hi. My name is Alexander Cefalo (ph), Cybersecurity Trends in Latin America and the Caribbean. My question is for Mr. Rabkin. When it comes to education in the class, technology polls in the classroom, have you researched how other countries have modeled their curriculums to carry this out, Japan, Korea, India, China, Western Europe, how is the U.S. doing compared to other countries in that sense?

MR. RABKIN: I have done no systematic investigation of that. I can say very few things. My impression is that we do very well at the college and university level – that this is maybe not a quite fair comparison because our college is four years and most of the rest of the world does three. You see a steady flow of students coming into the United States to get American credentials in computer science and engineering. You do not see quite the same elsewhere. So that’s I guess a – people are voting with their feet that ours is OK. Now, some of that may just be branding, but I think we’re doing that part right.

As to the secondary level, my wife is an education policy researcher and the main thing I have learned from listening to her is no one knows how to measure anything. And I would not trust these comparisons very far.

MR. EISENACH: We’re coming down to our last question. We’ll take one more if there is one more. I think you had your hand up first.

Q: Hi. My name is Dirgan Chu (ph) and I’m from Korea. And also our country decided to make a curriculum about software to high school students and it is mandatory. And everyone says it’s not fair because high school students do not have learn about software like C language or something.

So my opinion is understanding technology is a very good thing, but is it mandatory for high school students? Well, I know it is very important that, well – I know that developers always care about user-centered design and everything, but why then should users understand backward like –

MR. RABKIN: Yes. Right. We have a confusion of goals here, right? There’s the goal of people should have some general understanding of how the machines work. There’s the goal of offering people the like insight of what it might be like to do it for a living. There’s actually preparing them to do it for a living. And there’s what I think actually the school should be doing is just trying to give people a sort of foundation in discrete mathematics and algorithmic thinking, right – that the version of this that I think makes the most sense is to treat computer science as parallel to statistics or calculus as a sort of application of mathematical reasoning for practical purposes. And we should teach this not with the vision of, oh, they’ll all go off to be engineers, but just so that they get practice at disciplined thinking.

MR. EISENACH: Tom wants to have the last word so it’s 12:15 p.m. and we are going to stop at – when Tom gets done talking, which will not be later than 1:02 p.m.

MR. SYDNOR: Due to mental limitations. I actually like simple solutions to problems. And Jeff mentioned one that I thought was extremely important and I wanted to offer my extremely simple take on it. He mentioned that the United States government is having trouble hiring and retaining people who have expertise in cybersecurity, and that does not surprise me.

I would like to point out the following fact, that actually there may be a solution that could be adapted to help fix that problem to some extent. At least in the context of lawyers who work for the federal government, there are two different pay scales because the lawyers who work for agencies that are designated as finance related, you know, those – finance is a good way to make a lot of money if you’re a lawyer, so the argument was in those areas, we need to pay lawyers more in order to retain and recruit good people who have expertise – you know, the expertise you need to run the Treasury Department, the SEC and other related federal agencies. You know, for pity’s sake we should do something similar in the case of cybersecurity.

MR. EISENACH: I thought you were going to say we should do something similar for economists, which is like the obvious – the obvious conclusion from my perspective. (Laughter.)

Listen, we’ve covered a lot of ground today and, you know, it’s indicative of what we’re all trying to keep up with. And I think we all feel like we’re drinking from a fire hose. I’m not going to apologize if we’ve contributed a little bit to the flow of ideas today, but hopefully in a way that helps people frame the issues and think about them more productively and constructively. Thank you all for being here. Pay attention and stay in touch with Tech Policy Daily and we look forward to having you back again soon. (Applause.)

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