26 May 1999
Source: http://www.usia.gov/cgi-bin/washfile/display.pl?p=/products/washfile/latest&f=99052501.clt&t=/products/washfile/newsitem.shtml

USIS Washington File
_________________________________

25 May 1999

### COMMERCE SECRETARY DALEY ON E-COMMERCE

    (Government looks for indicators for e-commerce) (2120)

    Washington -- U.S. Commerce Secretary William Daley has opened a
    conference devoted to finding methods to measure the impact of the
    Internet, which he says will dominate the future economy.

    "More and more people in the private sector are making what amounts to
    billions of dollars in decisions about e-commerce. And they are doing
    it without a reliable base of information," Daley said at the opening
    of the Digital Economy Conference May 25.

    The secretary said that many of the current economic indicators are
    useless to help Internet-based businesses make informed decisions.

    "The old pigeon holes don't work anymore," Daley said.

    For example, the Commerce Department is starting to collect more
    information about how retail sales are made. In the past, no one
    wanted to know whether sales were made by knocking on a door, sending
    a letter or advertising on a World Wide Web site, Daley said.

    During the two-day conference, Daley said, panels will address a
    number of topics crucial to spurring electronic commerce:

    -- implications for small businesses. The Internet offers the
    opportunity for small businesses to become huge international
    operations, such as Amazon.com, AOL, and Yahoo. Daley said medical
    establishments, also small businesses, are stunted by insufficient use
    of the Internet.

    -- access. The secretary said everyone must have access to the
    Internet, not just the wealthier and more educated segments of
    society. At present, white households are more than twice as likely to
    own a computer than African-American or Hispanic households. "We can
    not be the society we hope to be if whole segments are systematically
    excluded," Daley said.

    -- work force. At present, high-technology companies have trouble
    attracting and keeping skilled workers. "Jobs go begging because not
    enough people have the high-tech skills to fill them," Daley said.

    -- organizational change. Daley says businesses must adapt their
    organizations to Internet methods of sales, services and manufacturing
    or cease to exist. "There won't be Internet companies and non-Internet
    companies. A company will either be an Internet company or it will not
    be a company at all," Daley said.

    Following are terms used in the text:

    -- billion: 1,000 million.
    -- e-commerce: electronic commerce, conducted by means of the Internet
    and computers.

    Following is the text of Daley's speech, as prepared for delivery:

    (begin text)

    REMARKS BY
    COMMERCE SECRETARY WILLIAM M. DALEY
    DIGITAL ECONOMY CONFERENCE
    WASHINGTON, D.C.
    May 25, 1999

    (Text as Prepared for Delivery)

    They warned me the turnout for this conference kept growing like an
    Internet stock. We maxed out on registration ... there's an overflow
    room for people to watch on TV ... and we are broadcasting live on the
    Internet.

    So let me welcome all of you to the U.S. Department of E-Commerce.
    Obviously the turnout is a reflection of the importance of the
    Internet. I absolutely believe in the history of commerce there has
    never been anything like it.

    I also believe we need to have a far better grasp on how it is
    affecting the economy as a whole. President Clinton and Vice President
    Gore wanted us to hold this meeting.

    They know, as you know, more and more people in the private sector are
    making what amounts to billions of dollars in decisions about
    e-commerce. And they are doing it without a reliable base of
    information. E-commerce is everywhere, and we want to do a better job
    of tracking it, in government statistics. We want to better measure
    what e-commerce means and doesn't mean to the economy -- so decisions
    are not made in a vacuum.

    To be frank with you, I don't expect this conference to end with a
    nice neat set of conclusions. The questions we raise are too tough.
    But we hope to achieve a better understanding of how to proceed from
    here. Let me begin by saying later this spring, Vice President Gore
    and I will release an up-dated report on the Emerging Digital Economy
    -- showing its size and growing importance.

    I released the first one last year, and we will make this an annual
    activity. The numbers showed our country's incredible economy is very
    much tied to information technologies. About a third of our growth has
    come from information technologies. And the declining price of IT
    products have lowered overall inflation by one percentage point or
    more.

    Without getting into details, let me preview the forthcoming report by
    saying this. I know nothing surprises all of the optimists on how
    important information technologies are. But even you will be pleased
    with the new numbers. But the fact is, e-commerce is still relatively
    small, compared to the rest of the economy.

    Last year, even though retail sales on the Internet tripled, they
    still accounted for much less than one percent of all retail trade.
    Business to business transactions are larger -- four to five times
    larger, with equally large rates of growth. But even they are less
    than a percent of our $9 trillion economy.

    Still, e-commerce's potential to change the way we work we shop ... we
    get our news ... we conduct business -- is enormous. It is creating
    businesses that would not exist without it. It is creating whole new
    forms of businesses. We are seeing firms like Dell using e-commerce to
    bond itself to business and individual customers and to link its
    entire supply chain up electronically.

    For the last decade, we have watched companies manage their
    inventories better -- and no doubt, e-commerce will take this to new
    levels. Because of all of this, the way government collects key
    economic performance indicators has to change.

    The old pigeon holes don't work anymore. And to be frank with you, we
    have to run to catch up. SIC codes began when Franklin Roosevelt was
    President and not only were there no computers then, the adding
    machines had cranks on them. Even up until last year, computers were
    classified in a category called non-electrical machinery.

    We have changed that. This year, we introduced the North American
    Industry Classification System. It thoroughly modernizes the industry
    groupings in our statistics. But in order for it to take hold across
    all agencies and businesses -- it will take time -- years -- far
    longer than it takes to develop Internet technology.

    Let me point something out.

    For as long as the government has collected information, people have
    not been very interested in how somebody makes a sale. Whether it's
    knocking on a door ... or sending letters ... or having a sale at the
    mall -- people didn't pay much attention. So, we have collected very
    little information on how sales are made.

    But now, with e-commerce, people are interested. So, at Commerce, we
    are changing. We are starting to collect information on retail sales
    -- but we have a lot of questions about how to categorize businesses.
    In the e-world, what is a retail site, anyway?

    Obviously, there is great interest in monitoring e-commerce in
    manufacturing and service industries. But let me just point out, there
    is a trade-off here. We can gather the information -- but is the cost
    worth it for business and government? If the business community wants
    us to collect a certain kind of data, and is willing to supply it, we
    stand ready to do it.

    And obviously, we want to get the job done by using the Internet --
    both for collection and distribution. In short, we want to webify
    government.

    I am the last Commerce Secretary of this century -- assuming I can
    keep my job. But what is more important is to be the first E-Commerce
    Secretary of the next century. So I hope you provide us with insights
    today. The data we collect is meant to help you. We need your input.

    Beyond economics, there are other areas that are key, if e-commerce is
    to meet its promise. We are working in many of these areas at
    Commerce. Today, there will be panels about each of them. I want to
    highlight some of them.

    First, what does all of this mean for small businesses? For me, one of
    the most interesting aspects of the Internet is now a mom-and-pop
    store in rural America, can sell to the world, just like a Fortune
    100, with a massive distribution system. Remember -- names like
    Amazon.com ... AOL ... and Yahoo were all small businesses, if they
    were businesses at all, five years ago.

    Working with the Small Business Administration, we have begun to
    mobilize resources to help small companies be a part of Internet
    growth. In the future, I hope we reach out to medical establishments
    that are also small businesses, and do not use the Internet and
    information technologies as much as they should. What we learn over
    the next several days will help shape our strategies.

    Second, the issue of access is very important to me. For some years
    now, Commerce has looked at whether all parts of our society are
    participating in the digital economy -- or whether we are creating a
    digital divide. The numbers show there is not equal participation.

    White households are more than twice as likely to own a computer than
    African-American or Hispanic households. There is a widening gap in
    computer ownership between those at upper and lower income levels --
    and in between urban and rural areas. We cannot be the society we hope
    to be, if whole segments are systematically excluded.

    Recognizing this, President Clinton and Vice President Gore want every
    school and library connected to the Internet by next year. We are well
    on the way -- about 90 percent there. On Thursday, the Federal
    Communications Commission is expected to vote on full funding for the
    e-rate. This, as you know, allows schools to connect to the Internet
    at a discount.

    Yesterday, Secretaries Glickman, Riley, and I sent the FCC
    Commissioners a letter expressing our support for fully funding the
    e-rate. I cannot overestimate how crucial it is. It is important to
    ensuring our economy continues to grow strong and that all people have
    access.

    When you think about this -- the Internet is color blind. No one knows
    the owner of the dot.com store is an African American or an Hispanic
    or an Asian or a Native American. Some barriers that have existed in
    business in the 20th century should not exist on the Internet in the
    next century. That is very, very positive for our society.

    Let me make one other point about access -- this time access to
    bandwidth. We closely follow issues of market structure and
    competition in telecommunications. In the months to come, many
    decisions will need to be made on to how to continue to stimulate
    competition, and how to broaden access to bandwidth. Without more
    bandwidth, the Internet will never reach its full potential.

    Third, we need to look closely at the workforce. It is no secret our
    high-tech companies have faced terrible obstacles attracting and
    keeping workers. Jobs go begging because not enough people have the
    high-tech skills to fill them.

    This past year, President Clinton asked me to lead a national dialogue
    to better understand the situation. We have learned a lot about the
    importance of information technology workers. Today's discussion will
    add more knowledge, I hope. I will issue our findings and
    recommendations next month at the National Press Club.

    Fourth, and finally, is the issue of organizational change -- what
    happens internally with all these new technologies? This year,
    Commerce, the Small Business Administration, and the Agriculture
    Department are working hard to help firms, large and small, to deal
    with Y2K issues. We are working to help the health care industry, move
    from manila folders to electronic records. Our Manufacturing Extension
    Partnerships, all around the country, are working with small
    manufacturers.

    E-commerce is much more than a service sector tool. It is becoming a
    basic element for most manufacturing operations -- from design, to
    development, to product, and to distribution. To paraphrase Andy
    Grove, there won't be Internet companies and non-Internet companies. A
    company will either be an Internet company or it won't be a company at
    all. So, today we also are looking for your thoughts on organizational
    changes and what role government can play.

    Usually as Secretary of Commerce, I am asked to give answers to
    questions. But today, let me end by saying I don't have the answers. I
    am just interested in getting your help to frame the right questions
    about the digital economy. For I really believe we need to ask the
    right questions, if we are to get the right answers on how to grow the
    digital economy to its fullest potential.

    Thank you very much.

    (end text)