Remarks by Under Secretary Catherine A. Novelli
Department of State Senior Coordinator for International Information Technology Diplomacy
APEC TEL Ministerial
March 30, 2015
Good afternoon. I am pleased to join you all in Malaysia at this year’s APEC TEL Ministerial. I would like to personally thank the Government of Malaysia for hosting this meeting and, in particular, Minister Dato’ Sri Ahmad Shabery Cheek, our chair.
Taken together, APEC and its 21 member economies represent three billion people and three-fifths of the global economy. And, over the next five years, nearly half of total economic growth is projected to come from right here, in Asia.
Today, APEC economies rank among the world’s strongest digital economies. Years ago, many APEC member economies developed policies that enhanced competition, allocated spectrum efficiently, and promoted private sector investment in their telecommunications infrastructure. As a result, these economies now benefit from strong broadband adoption rates and thriving e-commerce markets. In the Republic of Korea, 80% of the population is online – that’s the highest rate in the world. Moreover, the Internet economy is responsible for approximately 9% of Korea’s GDP and 30% of its exports. Another example is: Japan. Among the top 250 largest Internet companies, Japanese firms received a full 20% share of total revenues, according to a recent McKinsey study.
Thanks to its government policies and practices, I am thrilled that Malaysia has also emerged as a strong leader in the region. Malaysia’s telecom sector has grown significantly in the last decade, with a remarkable 67% broadband Internet penetration among households. And today, six of the eight biggest publically-traded ASEAN Internet companies are located in Malaysia.
The Internet – this marvelous engine of economic growth and innovation – did not develop by happenstance in these economies. These economies are now digital leaders because of a regulatory environment that encouraged investment rather than government micromanagement. In Asia, and everywhere, the Internet of tomorrow will have its roots in the public policy of today.
In the United States, it was massive private sector investment that moved the Internet from a government project into every home in the nation. That’s why we hope that APEC member economies will adopt a “light touch approach” to the Internet – one that encourages investment and fosters innovation.
To ensure that the Internet continues to grow and benefit an increasingly wide and diverse global population, I urge APEC Ministers to promote policies that first increase broadband access; and second facilitate the free flow of information across borders.
First – broadband access. We remain concerned that every country does not share equally in the Internet’s benefits, particularly in the developing world. Three years ago, the United States announced the creation of the Alliance for an Affordable Internet. This multinational, multi-stakeholder coalition advises government policymakers in developing markets on how to build stronger markets that will attract investment and lower prices for their citizens.
We hope that more APEC member economies join the United States in supporting the Alliance in 2015. As I noted, because of their underlying government policies, many APEC economies are currently experiencing tremendous innovation and growth in their Internet economies. These APEC Members are role models for other countries throughout the world. They are uniquely situated to guide developing countries and other emerging markets on how to best extend the Internet’s benefits to their citizens.
Through public-private initiatives like the Alliance, we can drastically accelerate economic growth in developing countries. Of the developing world’s 1.4 billion extremely poor people, 70 percent live in rural areas. Their lives can be transformed by connecting villages to the web, bringing telemedicine to remote rural health centers, providing accurate weather information to farmers and fisherman, and supplying up-to-date market information to producers. For every ten percent increase in a country’s Internet penetration, its total economic growth expands by one to two percent.
In the 2014 APEC Leaders Statement, we recognized the critical role of the Internet Economy in “empowering economic participation” and we urged Ministers to put forward proposals for action that bridge the global digital divide. In advance of the next APEC Leaders Meeting, the United States wants to work with all of you to help ensure that the necessary resources, training, and technology are available to bring the benefits of the Internet to everyone.
APEC has long focused on broadband deployment and bridging the digital divide. In 2008, APEC was on the cutting edge. We worked hard to produce a Digital Prosperity Checklist that outlined plans for APEC economies and the private sector to foster greater participation in the digital economy. But frankly, since then, APEC’s work has fallen behind. At the upcoming APEC Leaders meeting, we should recommit ourselves to close the global digital divide with specific proposals for programs and future work.
The second priority is ensuring an open Internet. Economically, companies of all types and sizes share in the benefits of cross-border data flows – not just companies that we think of as digital. A recent study, for example, highlighted how 75 percent of the value added by data flows on the Internet, accrues to “traditional industries”, like oil and gas or manufacturing and retail companies.
However, policies that restrict data flows, such as localization requirements, impair this economic growth. Data localization requirements stem from a fundamental misunderstanding of how the Internet works. Imagine a world where every country adopted such requirements. In this world, data stops at national borders. Then, it is examined to see whether it is allowed to leave the country and possibly taxed when it does. As a result, all technology or Internet start-ups would face much higher barriers to market entry – they would have to build a physical local infrastructure in every jurisdiction in which they operate. And, these infrastructure costs are staggering.
To build a data center in Brazil, Chile or the United States, per some estimates, a Korean, Japanese or Malaysian technology start-up would spend $60.9 million in Brazil, $51.2 million in Chile, and $43 million in the U.S., with enormous additional energy and other operating costs. That creates extremely high barriers of entry for indigenous Internet and technology companies in Asia and across the world. Working together, we must oppose these efforts.
APEC has a proud tradition of promoting discussions around trade among APEC member economies. Such discussions have significantly advanced multilateral negotiations. APEC-TEL should now play an analogous role in promoting norms that will preserve the Internet’s future. We are all here today because we care about the future of the Internet.
Working with like-minded governments, like Malaysia and other APEC member countries, we look forward to ensuring that the Internet remains vibrant and continues to be a conduit to better the lives of people worldwide. The Internet belongs to everyone. Let’s take steps at APEC TEL and at the upcoming APEC Leaders Meeting to help keep it that way.