Keynote Address of
Troy A. Eid
Executive Director and Chief Operating Officer
InfoTEST International

Before the
Konrad Adenauer Foundation
American-German Roundtable
San Francisco, California
September 26, 1996

hank you. I want to thank the Konrad Adenauer Foundation and Dr. Wolfgang Pordzik for inviting me to this important and timely event. Thanks also to Ursula Carpenter and the Foundation staff. In preparing these remarks, I quickly realized that the original title listed in the program - "Information Technologies: Paradigm Change/Impact on Societies" - was so expansive that I could not possibly do justice to it. Please forgive me, but as a practicing Lutheran, I could not possibly be that broad-minded. But seriously, during the next two days, we will all be privileged to hear from a variety of distinguished experts representing many different disciplines and viewpoints.

Before going further, let me say that it is a special honor for me to meet our German friends. I say "friends" deliberately because contrary to the conventional wisdom, the U.S.-German partnership is at least as important today - I think more so - than during the height of the Cold War. One of the formative experiences in my own life took place not far to the south of here, at Stanford University, where as an undergraduate student in the mid-1980s I was part of a special program at the Center for National Security and Arms Control. Among other things, we learned why NATO's deployment of the Pershing 2 and cruise missiles in Western Europe was needed to offset the Soviets' long-running intermediate and strategic nuclear forces build-up. It was then, during those often controversial and always challenging times, that I began to understand the strength and resolve of the German people. I also learned how critical it is for Americans and Germans to stand together.

As we look to the future tonight, we must always remember why that tomorrow is so profoundly optimistic: it is because of our friendship, the joining together of Germans and Americans, and the enduring foundation of mutual respect, admiration and yes, at times, the healthy competition between us. I cannot overemphasize this point. To paraphrases Mark Twain, Americans and Germans must hang together - or we will most surely hang separately.

As my remarks unfold, I ask that you please accept my comments in the spirit of friendship. For the New Millennium that we are entering will subject our respective nations to competitive pressures and national security challenges on a scale that previous generations could scarcely imagine. It will put our friendship to the test. So we must ask ourselves: How can we use these incredibly powerful and increasingly ubiquitous information technologies, popularized by the Internet, not just for our own sake, but to strengthen the U.S.-German relationship that served us so well during the Cold War? We must always remember that information technology is just that - a tool. It is what psychologists and philosophers call "non-normative": The Internet, and all it represents, lacks any set of inherent morality or ethics. The Information Society, as President Jacque Santer and the European Union like to call it, or the Internet Generation as it's sometimes nicknamed here in the States, is not necessarily an ethical society or a moral generation.

At risk of being politically incorrect, what is truly exciting about today's information technologies is not their scientific or engineering capabilities, but rather their potential to help Americans and Germans work with other civilized nations and peoples to apply these technologies to raise global living standards, protect the environment, and more generally to reinforce democratic values and institutions: individual liberty and personal responsibility; free markets; peace through strength and preparedness; representative governmental institutions; and the rule of law that protects and encourages respect for basic human rights. I say "civilized" because without our leadership, our moral authority, the juvenile behavior and technological anarchy that characterizes much of today's Internet and the so-called cyberculture will pale in comparison to the very real dangers we will face if terrorists, dictators, organized criminals, and other representatives of the uncivilized world somehow manage to use these same technologies to gain the upper hand over the rest of us.I'll have more to say about this a little later. In the meantime, let me say a few words about the promise of today's advanced information technologies, especially the Internet.

The Internet is the fastest-growing communications medium in human history. By the end of this year, the Net is expected to have more than 50 million users worldwide - amounting to roughly one new user every 30 seconds. The number of worldwide host computers (or "servers") on the Internet may reach 200 million by the year 2000, compared with 5 million last year and just 400,000 in 1991. And the Internet now connects 100,000 separate networks, up from 48,000 at this time last year. Businesses are racing to join up. The number of commercial addresses on the Internet rose six-fold last year, and business sites on the World Wide Web are doubling every two-and-a-half months.

By comparison, the United States has one Internet server for every 48 people, versus one server for every 179 people in Germany. But both nations tend to be far ahead of the rest of the world: In China, for instance, there are maybe 100 servers for a nation of 1.4 billion, and indeed only one telephone line for every 20 households according to official (and probably inflated) estimates. Yet despite our overwhelming statistical advantages, the reality is that most Americans and Germans aren't even aware of the Internet Revolution, let alone what it will mean to our lives.Let me just give you a few recent examples. Here's an article from the Sept. 10, 1996 edition of the Christian Science Monitor, an American newspaper published in Boston, entitled, "Germans Yawn at Internet and Other High-Tech":

The Internet 'is a large and very technically developed net usedby fishermen in the North Sea.'So one respondent told a questioner surveying German publicknowledge of technological issues.That's the funny part. The sad part is the survey found that '40percent of working-age Germans had never played or workedwith a computer,' says Hans-Dieter Over, chairman of theyoung entrepreneurs' group, WJD, which commissioned thesurvey, presented last week in Bonn. . . .Germany is a highly developed industrial society, but itsparticular strengths are in the mechanical and chemical sectors- 19th-century technologies - rather than in the late-20th-century technologies of microelectronics and biotechnology.The WJD survey found that more than 27 percent of theGerman public did not know what the Internet was, and of thosewho said they did, 56 percent could not define it with any accuracy.

A second article, entitled "German Companies Blame Internet for Export Decline," appeared in The Financial Times last March 27th. It shows how popular ignorance about the Internet can become a scapegoat for a host of social ills, and is based - to say the least - on what a lawyer might politely call an attenuated link between cause and effect:

German exporters, battling against a strong currency and high labor costs, have found another cause for their declining shareof international markets - the Internet.Mr. Michael Fuchs, the president of Germany's wholesale and foreign trade association, yesterday said companies were losinglucrative niche markets because the Internet made it easier tocompare prices and so was increasing competition.Where once a German company would offer to supply goodsabroad at a given price and be fairly sure of winning the order, itwas now likely to find the potential customer quoting morecompetitive prices from perhaps five other suppliers and puttingthe German company under pressure to improve its terms.The information used by a potential customer with suchdevastating effect has been garnered by surfing the Internet.

These and other writers suggest that ignorance about the Internet is somehow a uniquely German phenomena. Yet this is preposterous, as demonstrated right here in the United States. For instance, the latest issue of Telecommunications magazine (Sept. 1996) contains this poll by O'Reilly & Associates, Inc.: "[T]he vast majority of small [U. S.] companies (92 percent) are not connected to the Internet and most have no plans for future Internet access. . . . " This despite the enormous potential of the Internet to save time, money and resources for all companies, including the small concerns that are the source of most of the new jobs generated in the United States.

Even many American businesses obsessed with putting up a site on the World Wide Web aren't necessarily using the technology as a tool to achieve their strategic objectives. For instance, business columnist Holman W. Jenkins, Jr., writing last Jan. 30 for the Wall Street Journal, cites the apparent success of HotWired, the web site run by San Francisco-based Wired magazine, as an example of what he calls the Web's "less than inspiring" business performance thus far. HotWired aggressively promotes itself a one of the Web's most successful sites, boasting some 500,000 "hits" per month. A hit is simply an electronic file transfer of any kind from a Web server to a user, such as the down-loading of a home page or even the individual graphics posted on that or other pages. In fact, some Web pages may generate one hit, others dozens of hits depending on their design - making hits a virtually useless way to gauge user demand. In the case of HotWired, Jenkins notes that half of the 500,000 hits are to a single underground discussion group started anonymously by two junior HotWired employees. Many businesses, Jenkins concludes, "are spreading around opulent sums [for web sites] for no real purpose other than to acquire a stable of computer geeks and keep them happily employed plagiarizing the competition and figuring out what the technology is good for."

The real problem lies not with the German or the American public. Granted, a technological revolution of any kind - particularly a global paradigm shift - takes time for people to digest. But the larger problem, in my view, is a difficulty on the part of our respective governments, and most especially on the part of private industry, which is leading and must drive this revolution - to communicate the value of the Internet in clear and compelling terms that Americans, Germans and the rest of the world can understand. Once people understand in concrete terms what the Information Society will mean to their lives - how we live and work, how we learn, and the other vital issues we will explore this weekend - they will respond to our leadership. And then they will work together to take this vision off the drawing board and make it a reality.

To help make this point, let me briefly discuss how the Internet can benefit just one sector of our economy: manufacturing. U.S. manufacturers invested an unprecedented $3 billion in traditional information technologies in 1994. Those investments soared to $4 billion last year - a 30 percent increase. Yet until now, the benefit of Internet-related investments to manufacturing has been speculative. This is hardly surprising since the World Wide Web is only a couple years old, and the commercialization of the Internet has only just begun. We do know that Internet technologies tend to be less expensive than many traditional systems. They also rely on open systems technology, which means users can usually connect to the Internet, and use it to conduct business, without having to buy a particular company's products or services. For these reasons - low cost and open systems - it is reasonable to expect that manufacturers' information technology investments will be increasingly targeted toward the Internet and will integrate other networks and systems with Internet-related technologies.

Our real challenge is to measure how using the Internet instead of, or in addition to, traditional systems can make manufacturers more competitive. These same measurements, of course, can be extended to other economic sectors as well.InfoTEST International is a 35-member alliance of corporations, research centers and government departments and agencies that evaluates how the Internet can be applied to different lines of business to save time, money and resources. One of our InfoTEST initiatives, called Enhanced Product Realization, happens to be is the largest Internet-based manufacturing technology trial in the world today. The goal of the EPR initiative is to make manufacturers more competitive by putting their business and product development processes on the Internet, so that the entire product "supply chain" - manufacturers, suppliers, dealers, contractors and customers - can work together anywhere in the world.Specifically, InfoTEST's prototype EPR system will enable one of the world's largest manufacturing companies, Caterpillar - a worldwide maker of engines and construction and farm machinery - and other leading U.S. corporations, such as 3M, Hughes Electronics and Texas Instruments, to make product modifications or enhancements in as few as five days. By comparison, current industry response times to customers' product modification requests average several weeks or months. EPR is based on a simple premise: The faster manufacturers can respond to customers' needs, the more time, money and resources will be saved. InfoTEST expects that by using the Internet to enhance and extend both the capabilities and geographic reach of traditional networks and systems, we can help participating manufacturers save millions of dollars in the years ahead.

Let me stress that technology trials such as the InfoTEST EPR initiative offer only a glimpse of how the Internet Revolution will change how we do business in the years ahead. These lessons apply with equal force to both the United States and Germany. Both nations can become dramatically more competitive if we apply emerging Internet technologies to existing business systems and processes, no matter what sector of the economy.

I realize all this optimism about the Internet might seem hard to believe in light of the cryptic, slow-moving "network of networks" we know today. Yet it would be a mistake to conclude that the Internet of the new century will simply be a bigger version of the same thing. On the contrary, the Internet will change fundamentally as it is combined with other networks and computers. It will integrate what we think of today as entirely separate systems, such as landline telecommunications, cable television, satellite, cellular and many others. It will be dramatically faster, reliable, accessible and more secure.

Building tomorrow's Internet starts by frankly acknowledging today's problems. Yes, Internet security can and must improve. Yes, quality-of-service isn't sufficient at present to support most mission-critical applications. Yes, the interfaces, browsing features and search engines aren't all they could be. Yes, the overall volume of traffic on the Net still pales by comparison to private data communication networks. In fact, many large corporations, such as InfoTEST members Hewlett-Packard and IBM, still move more terabytes of data in a single day over their internal data communications networks than flow across much of the global Internet. (A terabyte, by the way, is a huge measurement that is roughly equivalent to the paper produced from 55,000 trees.)

But the key breakthrough has already occurred: The Internet is becoming a mass commodity, just as the telephone was commodified a century ago. And now, as then, some people just don't get it. Here's what Western Union had to say in 1882 about Alexander Graham Bell's plan to build the first municipal telephone network:

Bell's proposal to place his instrument in every home and business is, of course, fantastic in view of the capital cost involved in installing endless numbers of wires . . . Any development of the kind and scale which Bell so fondly imagines is utterly out of the question.

Think back to Bell's day, or to Werner Siemen's day, when the telephone, like today's Internet, was still a novelty for most Americans and Germans. Telephone exchanges were not just unreliable, but they usually closed on the weekends and after business hours. Operators routinely listened on calls - just as the folks down the road from my grandparents used to eavesdrop on their party line when I was a kid. Eventually, however, the telephone became a basic commodity for most people, like gas or electricity. So central is the telephone to our lives today that we speak of dial tone as "lifeline" service. A few decades from now, the concept of the Internet crashing for an hour or two will seem as foreign to our children as the thought of the telephone network being closed on the weeknights and weekends is to us today.

Of course, the rate at which our national and global information infrastructures will be integrated and improved depends on the legal and regulatory policies that our respective governments choose to adopt. I respectfully suggest that the goal of any public policy must be to discourage protectionism and to encourage free and open markets that accommodate rapidly changing technologies. Let me again offer two brief examples - one from Japan, one from the United States:I still remember how my sophomore economics professor used to trumpet Japanese industrial policy as "superior" to the free-enterprise system. In the '80s, Japan's powerful Ministry of Trade & Industry was investing heavily in supercomputers. Well, a decade and several billion dollars later, Japan is competitive in what turned out to be a dying industry. By 1993, a single desktop personal computer had all the power of a supercomputer occupying an entire room. PCs had captured more than 55 percent of the total computer market.

A more recent example is the cellular communications industry in the United States. When AT&T first started selling cellular telephones in the mid-'80s, it predicted a total U.S. market of 900,000 phones. Today, more than 20 million Americans own cellular phones; usage has doubled since 1992; and 14,000 new customers are signing up every day as rates continue to fall. It's one thing for AT&T to underestimate the potential of its own customers to buy its own products. But what if the U.S. Congress had adopted a national industrial policy a decade ago? Using AT&T's own market statistics, the Federal Communications Commission might well have concluded that cellular technology was a luxury item and given that share of the electromagnetic spectrum to other, "more promising" technologies.

The bottom line is that even the most enlightened public officials cannot predict the future of new technologies. Our chief goal must be to create incentives for the vigorous competition and private investment needed to modernize our information infrastructure and to lower its costs to benefit people from all walks of life.

Yet much more than money is at stake. We are entering an era in which extremely potent and relatively low-cost information technologies will empower individuals and groups as never before. The message I will leave you with tonight is that cyberspace does not necessarily mean cyber democracy. Not all of the individuals and groups we're empowering have our best interests at heart.

We are mindful of the Internet's role, for instance, as a digital safehouse for child pornographers, neo-Nazis and the underworld. Even as the U.S. federal courthouse was so sickeningly bombed last year in Oklahoma City, Internet bulletin board "authors" had posted the formulas for even more powerful explosives. Without question, the Internet allows like-minded people to find each other - for better and for worse - and to organize. Indeed, the potential for the Internet to strengthen the uncivilized world, including terrorists and organized criminal syndicates, is so powerful, particularly as we move toward digital cash and Internet commerce, that entire financial institutions and even governments are potentially at risk.

From a national security perspective, moreover, we are only beginning to understand the implications of "Information Warfare" or Info War: the vulnerability of the West to attacks upon the networked computer systems on which we depend. Our electrical power system, our banking system, our transportation system - all depend on advanced information infrastructure. At the same time, our military increasingly relies on off-site contractors linked remotely by computers. This presents a host of security challenges. Second, our governments now sometimes practice defense-related procurement by what's been nicknamed "weapon on a disk": keeping designs of completed weapons systems in electronic storage, without always building and testing them. The U.S. used this strategy in the Gulf War; in one reported case, specifications for smart bombs were taken from the "disk" into testing, production and deployment in just two weeks. This has many implications. An obvious point is that in the wrong hands, this kind of extremely sensitive information could be devastating.Conversely, our defense-related information systems are increasingly vulnerable to attack. Just yesterday, vandals (reportedly from Sweden) defaced the World Wide Web home page of the U.S. Central Intelligence Agency for 16 hours. According to a recent article in Time magazine, the U.S. military's computers "are probed by outsiders close to 500 times a day, Pentagon experts believe. But only about 25 of those are detected, and only two or three of those detected are reported to security officials. . . . The toughest Pentagon computer to crack is the first one; once inside, nearly 90 percent of the computers linked to the first computer will recognize the intruder as a legitimate user."

As we look toward the national security needs of the Information Society, at least two principles should guide our policy:

First, the United States and Germany, working together through the NATO alliance, should take the lead in developing stronger counter-measures to strengthen information surety - the protection of sensitive electronic information. We must also intensify our efforts to intercept and decode the encrypted communications of organized criminals, terrorists, aggressor states and others who threaten our legitimate rights of national security and self-defense. Instead of generals preparing to fight the last war, we need to anticipate the dramatically expanded capabilities of our enemies to threaten the NATO alliance. As the nature of warfare changes, so we too must adapt. That is just one reason why increased NATO support is more important now than at any point since the demise of the Soviet Empire.

Second, as we take these responsible countermeasures, we must also recognize the proper limitations of governmental power. This is a delicate balance to strike. Nonetheless, the ultimate answer to most kinds of "offensive" speech should not be to suppress that speech, as our enemies do - even when we condemn its content - but to provide opportunities for more speech so as to ensure the frank exchange of public views. Some of today's Internet is a sewer, but much of it is the most intellectually vigorous discourse to be found anywhere. It is precisely that openness that continually strengthens and expands our democracy. The Internet is a dictator's worst nightmare because of its democratizing effect.As I said at the outset, this is only the first word - not the last. Our real work has only just begun. Yet if we have the courage to use the Internet and all it represents for the betterment of humankind, there will be no doubt that America's best days, Germany's best days, and democracy's best days lie ahead. Thank you.

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