[Congressional Record Volume 144, Number 58 (Monday, May 11, 1998)]
[Senate]
[Pages S4613-S4615]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          THE EFFECT OF INFORMATION TECHNOLOGY ON THE ECONOMY

  Mr. McCAIN. Madam President, I want to quote from the Department of 
Commerce:

       During the past few years, the U.S. economy has performed 
     beyond most expectations. A shrinking budget deficit, low 
     interest rates, a stable macroeconomic environment, expanding 
     international trade with fewer barriers, and effective 
     private sector management are all credited with playing a 
     role in this healthy economic performance. Many observers 
     believe that advances in information technology driven by the 
     growth of the Internet have also contributed to creating this 
     healthier than expected economy.
       In recent testimony to Congress, Federal Reserve Board 
     Chairman Alan Greenspan noted:
       ``Our Nation has been experiencing a higher growth rate of 
     productivity--output per hour worked--in recent years. The 
     dramatic improvements in computing power and communication 
     and information technology appear to have been a major force 
     behind this beneficial trend.''

  Madam President, we all pay close attention to Federal Reserve Board 
Chairman Alan Greenspan, and usually, especially in this case, we 
agree.

       Some have even suggested that these advances will create a 
     long boom which will take the economy to new heights over the 
     next quarter century.
       While the full impact of information technology cannot yet 
     be precisely evaluated, its impact is significant. 
     Information technology industries have been growing at more 
     than double the rate of the overall economy, a trend that is 
     likely to continue. Investments in information technology now 
     represent over 45 percent of all business equipment 
     investment. Declining prices for information technology 
     products have lowered overall inflation.
       Because the Internet is new and its uses are developing 
     very rapidly, reliable economy-wide statistics are hard to 
     find and further research is needed. Therefore, we have to 
     use industry and company examples to illustrate the rapid 
     pace at which Internet commerce is being deployed and 
     benefits are being realized. Examples showing the growth of 
     the Internet in electronic commerce this past year are 
     numerous.
       Fewer than 40 million people around the world were 
     connected to the Internet during 1996. By the end of 1997, 
     more than 100 million people were using the Internet. As of 
     December 1996, about 627,000 Internet domain names had been 
     registered. By the end of 1997, the number of domain names 
     more than doubled to reach 1.5 million.
       Traffic on the Internet has been doubling every 100 days.

  Madam President, I feel compelled to repeat that.

       Traffic on the Internet has been doubling every 100 days.
       Cisco Systems closed 1996 having booked just over $100 
     million in sales on the Internet. By the end of 1997, its 
     Internet sales were running at a $3.2 billion annual rate.
       In 1996, Amazon.com, the first Internet bookstore, recorded 
     sales of less than $16 million. In 1997, it sold $148 million 
     worth of books to Internet customers.
       One of the Nation's largest book retailers, Barnes & Noble, 
     launched its own on-line

[[Page S4614]]

     bookstore in 1997 to compete with Amazon for this rapidly 
     growing on-line market.
       In January 1997, Dell Computers was selling less than $1 
     million of computers per day on the Internet. The company 
     reported reaching daily sales of $6 million several times 
     during the December 1997 holiday period.
       Auto-by-Tel, a web-based automotive marketplace, processed 
     a total of 345,000 purchase requests for autos through its 
     web site in 1996 for $1.8 billion in auto sales. As of the 
     end of November 1997, the web site was generating $500 
     million a month in auto sales, which is $6 billion 
     annualized, and processed over 100,000 purchase requests each 
     month.

  Madam President, that is just a few examples of the way this industry 
is exploding into American life and through all parts of it. How it is 
changing America is dramatic and, frankly, there are very few of us who 
know exactly what the end results are going to be. And there are 
differing opinions among different experts as to what these impacts are 
going to be, but there is one area of agreement, and that is it has 
changed American commerce and perhaps the world's commerce and flow of 
information in a way that will fundamentally change a lot of the 
precepts under which we have operated since the Industrial Revolution.

       If the trend suggested by this preliminary analysis 
     continues, it, and electronic commerce, can be expected to 
     drive economic growth for many years to come. To realize this 
     potential, however, the private sector and governments must 
     work together to create a predictable, market-driven legal 
     framework to facilitate electronic commerce, to create 
     nonbureaucratic means that ensure that the Internet is a 
     safe environment, and to create human resource policies 
     that endow students and workers with the skills necessary 
     for jobs in the new digital economy.

  Thus, in real terms, the expansion of the IT sector accounts for an 
even larger share of overall economic growth in the mid- to late 1990s. 
In recent years, IT industries have been responsible for more than one-
quarter of real economic growth.

       Despite these impressive trends, the digital revolution is 
     just beginning. Growth could accelerate in the coming years 
     not only in the IT sector itself, but across all sectors of 
     the economy as the number of people connected to the Internet 
     multiplies and as its commercial use grows. The growth will 
     be driven by four types of economic activity:
       Building out the Internet: In 1994, three million people, 
     most of them in the United States, used the Internet. In 
     1998, 100 million people around the world use the Internet. 
     Some experts believe that one billion people may be connected 
     to the Internet by 2005. This expansion is driving dramatic 
     increases in computer, software, services and communications 
     investments.
       Electronic commerce among businesses: Businesses began 
     using the Internet for commercial transactions with their 
     business partners about two years ago. Early users already 
     report significant productivity improvements from using 
     electronic networks to create, buy, distribute, sell, and 
     service products and services. By 2002, the Internet may be 
     used for more than $300 billion worth of commerce between 
     businesses.
       Digital delivery of goods and services: Software programs, 
     newspapers, and music CDs no longer need to be packaged and 
     delivered to stores, homes or news kiosks. They can be 
     delivered electronically over the Internet. Airline tickets 
     and securities transactions over the Internet already occur 
     in large numbers. Other industries such as consulting 
     services, entertainment, banking and insurance, education and 
     health care face some hurdles but are also beginning to use 
     the Internet to change the way they do business. Over time, 
     the sale and transmission of goods and services 
     electronically is likely to be the largest and most visible 
     driver of the new digital economy.
       Retail sale of tangible goods: The Internet can also be 
     used to order tangible goods and services that are produced, 
     stored and physically delivered. Though Internet sales are 
     less than 1 percent of total retail sales today, sales of 
     certain products such as computers, software, cars, books and 
     flowers are growing rapidly.
       Where advances in telecommunications and computing largely 
     occurred side-by-side in the past, today, they converge in 
     the Internet. Soon, virtually all information technology 
     investment will be part of interlinked communications system, 
     whether internal to a business, between businesses, between 
     individuals and businesses, or individual to individual.
       However measured, the Internet is expanding at a very rapid 
     pace.
       For instance, the number of Americans using the Internet 
     has grown from fewer than 5 million in 1993 to as many as 62 
     million by 1997. . . .
       The number of names registered in the domain name system 
     grew from 26,000 in July 1993 to 1.3 million in four years . 
     . .
       In January 1995, just over 27,000 top-level commercial 
     (com) domain names were assigned. Most businesses used them 
     for little more than posting product and company 
     descriptions, store locations, annual reports and information 
     about how to contact corporate headquarters. Two and a half 
     years later, commercial domain names number 764,000. Static 
     brochures and bulletin boards are giving way to full-fledged 
     businesses offering financial services, news and information, 
     manufactured goods, and travel and entertainment to 
     individuals and businesses.
       To meet this increased demand, consumer electronics 
     companies, media giants, phone companies, computer companies, 
     software firms, satellite builders, cell phone businesses, 
     Internet service providers, televisions cable companies and, 
     in a few cases, electric utilities, are aggressively 
     investing to build out the Internet.

  Madam President, I made the opening statement as we take up, frankly, 
what are some very modest bills, pieces of legislation which have to do 
with the telecommunications industry. I hope this is a beginning. My 
fundamental premise is, we should get out of the way and stay out of 
the way of this burgeoning, incredible revolution we are seeing take 
place throughout the world.
  But there are times where we have to act. I would argue that we have 
to act in a deregulatory manner and a procompetitive manner. One of the 
issues that the Senator from North Dakota and I have discussed on many 
occasions and will continue to discuss--and hopefully we can reach some 
agreement--is the issue of Internet taxation. Other issues that we are 
going to take up, which are visible and very important to many 
Americans, like this business of slamming, will have to be addressed.
  Madam President, the Presiding Officer now in the chair, you have 
been very significantly involved in this issue. Your findings and 
recommendations have been made part of this bill. I understand you may 
have additional changes that you wish to be made. But we are in 
agreement this abuse has to stop, and it has to stop immediately.
  I hope the Congress, as representatives of the people, will 
understand that this industry we are talking about today, the 
telecommunications industry, opens broad new vistas for our children 
and grandchildren. It also opens vistas for people and countries who 
have never had access to information and knowledge before. It opens up 
new vistas and ways for people in rural parts of America, and in low-
income parts of urban America, to receive information and knowledge. It 
seems to me that it has to be one of the most important issues that we 
address in a comprehensive, cooperative, bipartisan fashion.
  I see no reason for partisanship on an issue which really is so 
important to the future of America. I know we are in agreement that we 
want to see it grow and expand. And all of us are astonished, literally 
astonished, at the amount of growth that we have seen. It is not just 
us neophytes. Literally every expert who has studied the 
telecommunications industry has underestimated, sometimes by a factor 
of 10, the growth that has taken place in the past few years. So, 
therefore, it is very likely they are underestimating the dramatic 
changes and growth that we will see in the future.
  There are some who argue that the information technology we are 
exporting around the world makes our trade deficit far less meaningful 
than it has been in the past. There are some who argue that we, as a 
body, and as a nation, are going to have to address this issue of the 
proliferation of pornography that now penetrates and permeates every 
part of the Internet, to the point where young children today, when 
they go on the Internet and dial an innocuous word like ``White House'' 
or ``teen'' or ``nurse,'' are treated, as the search engine comes upon 
them, to enticements to people to take advantage of the pornography 
which is available. I am not advocating censorship here. I don't 
believe the majority of this body is. But it is a problem. It is an 
issue that we need to address as well. But it is one of many.
  I could spend many hours on the floor here, discussing the challenges 
of this telecommunications transformation that we are observing. I hope 
what we do in the next couple of days will do several things. One is to 
address these relatively modest issues, although slamming is certainly 
a very important one, but, at the same time, make a commitment that we, 
as a body, understand, appreciate, the importance of this industry to 
the future of America, and that we will address these issues in an 
orderly and bipartisan fashion.

[[Page S4615]]

  Madam President, I yield the floor.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. DORGAN. Madam President, I certainly share the sentiment offered 
by the Senator from Arizona about the excitement of the Internet, the 
fascinating, remarkable growth of the telecommunications industry and 
all that it means for the future of our country and the world. Things 
are moving so quickly, and changing so rapidly, it is just breathtaking 
and very hard to keep up with. From a public policy standpoint, 
regarding the kind of legislation that will be brought to the floor of 
the Senate at some point--for example, such as the Internet Tax Freedom 
Act--it is very important that we understand exactly what we are doing 
and what the consequences of what we are doing might be now and in the 
future.
  I would say the increased commerce over the Internet, that is 
increasing at a very dramatic pace, illustrates that there is nothing 
at the moment, nothing anywhere that I am aware of at the moment, that 
impedes the transaction of commerce on the Internet.
  The very growth of that commerce suggests there are no impediments. 
One way to do commerce in this country is to set up a web page and 
advertise and sell books, automobiles, travel services, or whatever it 
is you want to advertise over the Internet. That is one way to do 
business.
  Another way to do business is to rent a storefront someplace to get 
some inventory moved in, hire some people, open the door and put ``Open 
for Business'' and invite customers to come in and look at your 
merchandise and sell merchandise that way.
  Still another way is to have your merchandise in a warehouse 
somewhere and send a catalog through the mail and do business through 
mail-order catalogs.
  If the Congress decides to change the state and local Tax Codes 
related to all of those different ways of doing business, it is very 
important that we not create a circumstance where one way of doing 
business has preference over another way. I certainly hope that 
whatever we do to those involved in Internet transactions, we will say, 
``To whatever extent you are advantaged by this new legislation, the 
Main Street businesses will be similarly advantaged.''
  The Internet Tax Freedom Act is very controversial in my judgment. 
The concerns Governors and many others have about what impact it might 
or might not have on the State and local revenue bases are serious. The 
Internet Tax Freedom Act is a very significant piece of legislation and 
it is very controversial.
  Another issue that the Senator from Arizona mentioned is the slamming 
issue. For those who are not familiar with slamming, it refers to the 
unauthorized practice of a company changing a consumer's telephone 
exchange service or telephone toll service. In other words, a company 
says if you are using one long distance service, we are going to change 
that and your new long distance carrier is XYZ, and all of a sudden you 
begin getting bills from XYZ when, in fact, you never authorized 
changing your long-distance carrier. That is called slamming, and it is 
a growing, continual problem in this country.
  The FCC had about 20,000 complaints of slamming in the last year. We 
understand the ``king of slammers'' identified by Chairman Kennard of 
the FCC is a man named Daniel Fletcher. GAO investigators allege that 
Fletcher switched at least a half million customers' long-distance 
service without their knowledge or consent.
  I noticed a story in the paper this past weekend in North Dakota that 
one of the victims of slamming was the attorney general of North 
Dakota, Heidi Heitkamp. ``Heitkamp Victim of Phone Billing Scam'' reads 
one headline.
  This company that was slamming would have been well-advised to stay 
away from the attorney general of that State.
  I am confident that the North Dakota attorney general is on the case. 
She is aggressive and tough and will get to the bottom of who is 
involved in this slamming.
  To all the slammers out there I will say, ``Senator McCain, I and 
others will bring a piece of legislation to the floor that will attempt 
to shut the door on slamming. But, slammers might want to stay away 
from attorneys general and law enforcement officers, because it is 
against the law. We hope, prior to the legislation being passed, we can 
count on State authorities and the FCC to take appropriate action to 
levy fines and other penalties against those who are involved in this 
kind of activity.
  There are a number of other issues we will discuss when we talk about 
slamming. I expect the U.S. Senate will pass this legislation by a 
wide, wide majority. It is a good piece of legislation. I compliment 
Senator McCain for bringing it to the floor. Only because the majority 
leader and minority leader have not talked and reached agreement on the 
question of procedure we are not able to proceed at this point. But I 
expect in the coming hours, when Senator Lott and Senator Daschle will 
find a mechanism by which we are able to consider this legislation.
  I just received a note from someone else, from another Senator in the 
Chamber that says, ``I've been slammed twice.'' I don't know if that 
Senator wishes to be identified. In any event, it is not something that 
only relates to attorneys general. I have not been slammed once, and I 
am not looking forward to the first slam. Hopefully, before that 
happens, this kind of legislation can pass. Those who have been victims 
will be victims no more, and those who have been involved in slamming 
will begin to pay a significant price for criminal behavior.

  Madam President, I yield the floor, and I suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. LUGAR. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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