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Secretary's Speech

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CONTACT OFFICE OF PUBLIC AFFAIRS

Tuesday, January 9, 2007

202-482-4883

Secretary of Commerce Carlos M. Gutierrez
2007 Consumer Electronics Show International SuperSession
Las Vegas, Nevada

Thank you for the kind introduction.

I’m delighted to be here. This is my first visit to the Consumer Electronics Show. It’s as big and impressive as its reputation. Here we truly can see the future being invented.

So today, as I’m sure the leaders on the international panel that follows will give their own technology experiences, I’d like to discuss, from my perspective as Secretary of Commerce, the policies that will maintain the momentum of the technology and innovation revolution in the 21st century.

First of all, we must recognize that innovation has reshaped our communications landscape.

We’re looking at the game change of our lifetime.

Global market trends show that innovation and introduction of competition have increased use of communications, goods and services, in countries around the world.

Look at the market numbers:

  • Today, over 1 billion people worldwide have access to the Internet.
  • The international telecommunications equipment market has reached $1.8 trillion dollars. And it's growing at approximately 10% each year.
  • People who use the Internet to make phone calls rose by 83% during 2005, from 10.3 million at the beginning of 2005 to over 18.7 million subscribers worldwide by the end of the year.
  • In September 2003, there were just 11,000 coffee shops, gas stations, airport lounges and other places to access the Internet through wireless local area networks. Now there are nearly 132,000 "hotspots" for wireless Internet access in more than 130 countries.
  • Mobile phone content, including music, gaming and video, is accelerating at a breathtaking pace. Revenues are expected to reach $43 billion worldwide by 2010, up from $5.2 billion in 2004.
  • By 2010, the number of households watching TV over the Internet is forecast to reach 50 million, up from 3 million in 2005. Revenues could rise even more sharply, to $13.4 billion from nearly $400 million, according to market researcher Gartner.

Clearly, technology is reshaping the global landscape. And U.S. consumer electronic products are helping to lead the way.

Second, we need to continue to create a pro-growth, pro-competitive environment.

We need to keep Internet access tax free.

In 1998, the U.S. Congress enacted a wise policy of prohibiting taxes on Internet access. The Internet Tax Moratorium has been a resounding success.

The Moratorium is set to expire on November 1st of this year. Last week, legislation to keep Internet access tax free was introduced on the first day of the new Congress.

We look forward to working with Congress to extend the moratorium and make it permanent.

Additionally, competitive markets should be deregulated. Markets grow when they are allowed to grow through competition. Competition is the engine of economic growth.

New technologies and services are creating competition in the communications marketplace, allowing for continued deregulation.

Everyone is talking about convergence. It’s everywhere.

Traditional cable providers are competing for phone customers. Over 8.5 million consumers currently buy phone service from a cable company.

Phone providers such as Verizon and AT&T are converting traditional cable and satellite customers to their new video services.

Wireless providers are capturing an ever-growing share of the broadband Internet market. And they are competing for voice and television services as well.

In fact, on the show floor you can see wireless devices that incorporate high speed Internet, voice connections and possibility for TV and video services.

The point is this: these changes in the market aren’t just being enabled by new technology, they are being driven by enormous competitive pressures. We no longer live in a world where consumers are limited to buying discreet services from monopoly providers. Consumers increasingly choose from multiple service providers based on price, performance, mobility and associated services.

In the face of this new competitive marketplace we in government need to continue to remove legacy economic regulations that can stand as a barrier to continued innovation and investment.

Third, globally we need to allow market forces to take their course. Governments should not be involved in designing business models.

Government shouldn’t pick winners and losers. Consumers should pick winners and losers.

All of us have to recognize that too many of our communications policies are rooted in decades past.

When government uses its heavy hand to decide what is best for its citizens it warps the marketplace, often creating unintended, undesirable consequences.

So, we look with great concern when any country obstructs or creates a standard that hinders competition and impedes the creation of open markets.

We believe that tech neutrality, which rewards innovation and investment and takes the government out of technology decisions, is the best way forward.

Take the U.S. wireless experience, for example. We believe in open market driven approach toward standards development and spectrum allocation. When much of the rest of the world was selecting a single government-mandated wireless standard, we allowed companies to compete using different standards based solely on commercial and technological considerations. We created an environment where innovators would have access to the market without having to overcome government mandates. As a result, millions were invested in technologies like CDMA, WiFi, WiMax, and now these technologies are spreading in the global marketplace.

This expanding marketplace means a growing base of global consumers who increasingly are important to the bottom lines of American technology companies. And in these new market opportunities we expect our trading partners to allow U.S. companies equal access.

We’re working to ensure that tech neutrality is part of the free trade agreement with Korea.

We’re also working hard to ensure that China observes its commitment to tech neutrality with regard to third-generation mobile communication and commercial encryption.

While 3-G devices are readily accessible in other parts of the world, the opening of China’s 3-G market has been repeatedly delayed. This is because the Chinese government wants to use a local standard, instead of an international standard (e.g., WCDMA, CDMA).

We continue to encourage China to open its 3-G market.

While we appreciate China’s movement away from a mandated WAPI standard, we continue to monitor the situation.

We’re also engaging the French to ensure that companies with proprietary distribution solutions aren’t forced to share their intellectual property in order to advance government-mandated interoperability.

I’ll close with this: I want to assure you the Bush Administration understands we need policies that will promote and enhance an environment in which the entrepreneur can flourish, in which minds can expand, and in which technologies can reach new frontiers.

Thank you for your leadership, and I wish you the very best.