National Association of Broadcasters
April 11, 2000
E-Commerce: The New "Copernican Revolution"
I want to thank NAB president Eddie Fritts and his staff for inviting me to this conference and for their hospitality. I have enjoyed a good working relationship with Eddie and the staff of NAB for several years. I deeply respect their professionalism and I am grateful for their friendship.
I would also like to express my admiration and pay a short tribute to Eddie's predecessor, Vince Wasilewski, who literally committed his entire professional career to NAB. As many of you know, Vince served NAB for more than 30 years, including 17 years as President. He passed away last year and his passing meant the loss of an extraordinary figure in broadcasting. Although I never had the opportunity to meet Vince, I have the great privilege of having his son, Jim, serve as my Executive Staff Director at NTIA. In fact, Jim was the very first appointment I made at NTIA.
Las Vegas is a long way from my home of Bismarck, North Dakota. We have gambling there too, but nothing on this scale. For instance, about 8,000 people work between the Venetian hotel, casino, restaurants and shops. Thirty-six of the 53 counties in my home state of North Dakota have fewer people than the number of people who work at the Venetian. All these people on 45 acres of land -- that's about the size of a small parcel of land on a typical North Dakota family farm.
The New Copernican Revolution
Five centuries ago, a Venetian, Galileo, built a telescope to test the hypothesis of Nicholas Copernicus. Copernicus was a 15th century Polish astronomer, physician, and monk -- your basic medieval jack-of-all trades. Through his astronomical observations and calculations, he began to question the geocentric assumptions of his day. He hypothesized that the universe was not centered around the earth, but rather around the sun.
At the time, this shift in understanding carried with it enormous implications not only for science but for all of society. The Copernican revolution dramatically transcended not only human knowledge, but helped to spawn the Renaissance. I believe that we live in a time that is witnessing an equally dramatic revolution -- the information revolution and the rise of e-commerce.
E-commerce is reorienting the center of the economic universe. No longer is opportunity for economic prosperity and social development centered around access to natural resources, traditional markets or economies of scale. Rather, e-commerce makes access to information and telecommunications services the center of economic development.
Segments of our society that have, in the past, not had access to markets -- the poor inner-city neighborhoods and remote rural areas -- can now reach the center of the global marketplace through electronic commerce.
I grew up in one of those areas. My home state of North Dakota is one of the most rural states in the union. I can recall growing up in Bismarck and believing that because of our remote distance from metropolitan areas such as Minneapolis, Chicago, Kansas City, and Denver -- which are the hubs of commerce on the Great Plains -- we had fewer opportunities. Most of my high school class just assumed that we would one day have to leave our state to find jobs and career opportunities.
Electronic commerce and the information revolution change all that -- provided that all Americans have access to advanced telecommunications and information services. From the time of the ancient Greeks to the invention of the telegraph, information traveled, at best, at the speed of a horse. The advent of telephones, fax machines, and e-mail have made information travel instantaneous. It took 5 months for the mid-trip report of Meriwether Lewis, which was written at the Knife River Indian village in North Dakota, to reach the desk of President Jefferson in Washington.
Today, high speed Internet access makes it possible for people to communicate and engage in a whole range of business-to-consumer and business-to-business transactions across great distances in ways that were unimaginable just a decade ago.
Allow me give you a couple of examples of how the Internet is changing many aspects of our lives.
It is changing the way we shop. The Commerce Department just started regular quarterly reports on e-commerce sales. The first numbers for the last quarter of 1999 were $5.3 billion in retail sales over the Internet. One estimate for all of last year was that about $16.2 billion of goods were sold over the Internet.
It is changing the way we read books. I am not just talking about buying books through Amazon.com. I am talking about the new era of electronic books. Steven King's latest "e-novella" sold 400,000 electronic versions of Riding the Bullet in just 24 hours.
It is changing the way we use cell phones. In 2 years, more people (worldwide) are going to access the Internet through a cell phone than through a lap top or work station computer that most of us have in our homes and places where we work. There is a company in Japan that has caught on to this. A company called "i-mode" miniaturizes web sites so that they can be read easily on cell phones. Already, i-mode has over 5 million uses -- a five fold increase since Augut. I-mode allows subscribers to check whether their train is on time or delayed. People can subscribe to a discount-coupons service where they can simply access a coupon on their cell phone and show it to the waiter in the restaurant to get a discount. It also allows one to receive a new digital image of an animal each day.
The Internet and Television
The Internet is even changing television in many different ways. One of the most obvious ways is through advertising. Last year, dot-com companies spent more than $3 billion on advertising in traditional media -- representing a 389% increase from the previous year. Spending on network TV ads; local TV; and syndicated TV programs; and national radio spots are all reaping hundreds of millions of dollars in dot-com company advertising revenue.
The Internet and data services are also creating new lines of business for broadcasting in the digital world. As the broadcast industry converts to digital, new "datacasting" opportunities arise. Under the Telecommunications Act of 1996, the Congress envisioned that digital transmission would create new opportunities for broadcasters over the "digital" spectrum. Thus, Congress provided broadcasters with some flexibility in how to utilize the digital spectrum in addition to a digital television broadcast signal. Geocast, iBlast, and Granite Broadcasting are just a couple of examples of broadcasters using their digital spectrum for data services.
There are a host of exciting new opportunities that can complement digital television digital signals.
Another way in which the Internet is affecting broadcasting is through the marriage of content and delivery systems. I recently held a roundtable forum in Washington with industry experts to discuss ways in which we can ensure that small and rural markets receive local-into-local through satellite and other delivery systems. After listing to satellite providers, cable companies, MMDS providers, and Internet webcasters who participated in that forum, Chuck Sherman from NAB aptly described what broadcasters have to offer. He described broadcasters as "the most popular person at the prom" and ready to dance. Local broadcasters have the content that the ISPs want to deliver and that consumers want to access -- through a variety of technologies.
Because of that content, local broadcasters need not fear the Internet and electronic commerce. In spite of all the new access to movies, other entertainment sources, and data services that could be available in high quality over broadband facilities, I believe that there will always be a market for local broadcasting and a need for local news, information and entertainment. No matter how many options people have for entertainment and other electronic services, consumers will always want local programing.
Many broadcasters are already putting their local content online. TV and radio stations are streaming some local programming and are starting to recognize the value of another distribution channel. One radio station, WTOP in Washington, D.C., an all-news station, has created an Internet-only station.
Webcasting can help bring stations through the Internet to homes, while keeping the content under the control of the broadcaster. I ask you to go to our Website on the rural TV issue, at www.ntia.doc.gov, and participate in the proceeding being conducted by NTIA by reading our Federal Register notice and by posting comments.
At the same time, Internet companies have to realize what the broadcasters have to offer. In addition to their valuable content, they have name recognition and a certain amount of brand loyalty. And they have copyrights. Even if you as an Internet streamer believe that you are helping the broadcasters by making their shows more widely available, chances are the broadcasters take a different view.
Any of these differences in outlook can be overcome if everyone, from broadcaster to Webcaster, is willing to look at the issue of how can the two businesses join to create something greater than its parts.
Pay Attention To Privacy
Now, having taken up all this time to urge broadcasters to advantage of the Internet environment, let me also give you one little bit of advice -- not from me but from a comic strip. One good barometer of public opinion is the comic strip Cathy. Recently, the strip spent several days on the issue of online privacy. We don't need to do any more sophisticated polling to understand that Internet privacy is an area of serious public concern. If an issue like that gets play in the comics, you know it's hitting the public nerve. Cathy's catch phrase for what is going on now is: "The information snooper-highway."
The uproar over the Doubleclick data collection practices showed just how sensitive the public is to what people perceive to be an inappropriate use of their personal information.
As a test, I asked my staff to try an admittedly unscientific survey of how well the broadcasting industry is doing. We started by doing a simple Web search for the term "loyal listener." I'm not sure how many loyal listener clubs there are, but our Web search engines turned up more than 1,000 sites. I'm sure there are other names for viewer clubs or listener clubs, but this seemed to turn up a reasonable sample.
This is the kind of information that radio stations asked for:
3. Birth date
6. Marital Status
7. Employment Status
8. Favorite DJ
9. Favorite Artist or Group
10. What are your other Favorite radio stations?
11. Where do you listen to the radio?
Consumers should be given the chance to determine how their private information is being used, and that any information collected about them is accurate. There are a wealth of private sector resources on privacy. You can go to Web sites sponsored by the Online Privacy Alliance, by the Center for Democracy and Technology, Electronic Privacy Information Center and TrustE, to name a few.
No, I am not building up to some grand new announcement of privacy rules. Let's avoid government regulation. The best and most effective way to avoid that regulation today is for all web sites to follow the lead of the Online Privacy Alliance and others and adopt solid and understandable privacy policies. This will build consumer confidence and maximize the freedom of the Internet.
Electronic commerce and digital conversion have the potential to expand dramatically the horizons of TV and radio broadcasting. Broadband technologies create new delivery systems for local content. And the digital spectrum provides broadcasters with new ways to serve their communities.
It took a while for the world to appreciate Copernicus' hypothesis that the sun -- not the earth -- was the center of our universe. His work caused a great deal of disruption to the dogma of the past.
One day we will look back on this juncture in the development of technology and perceive the e-commerce revolution as obvious as the fact that the sun is the center of the solar system.
In a similar way, we too will have to awake from the dogmatic slumbers of our time and realize the enormous opportunities that lie ahead.