Thank you Mr. Chairman.  This morning I’d like to share some thoughts about the beauties of new technology and eternal Constitutional law.

The Walt Disney Company, like America’s other creative content companies, loves new technology, especially as it is represented by the Internet.  But, the Internet can only achieve its full potential if it is governed by a regard for property rights as grounded in the United States Constitution.  If this does not occur, then the development of the Internet will stall and we will risk undermining one of the most positive contributors to our nation’s balance of payments – America’s copyright industries.

A little perspective will illustrate what is at stake.  America’s copyright industries contribute more to the U.S. economy and employ more workers than any single manufacturing sector, including chemicals, industrial equipment, electronics, food processing, textiles and apparel and aircraft!  What’s more, American copyright industries lead all major industry sectors in foreign sales and exports.  It is not an overstatement to say that any threat to the ownership rights that underpin America’s copyright industries is a threat to the overall American economy.

There is no question that the Internet is a wondrous tool.  At Disney, we believe it represents the future of entertainment and are investing substantial amounts of time and money into our GO.com network, which includes Disney.com, ESPN.com, ABCNews.com, ABC.com, and Family.com.

But, the same technology that is giving us exciting new ways to create and distribute copyrighted works also has the potential to deprive us of our fundamental rights of ownership.  With the click of a mouse, pirated copies of intellectual property can be transmitted around the world.  The artists who compose and perform music have already been victimized.  Millions of pirated musical works are now being transferred over the Internet every day.  As broadband connections progress, movies will be next.  Soon it will be possible to transmit perfect copies of a high tech masterpiece like our new film “Dinosaur” around the globe without our knowledge, participation or consent.

Our founding fathers got it right when they recognized the importance of copyright protection in the Constitution.  Copyrights supply the economic incentive for artists and authors -- and the companies that support them -- to create works of literature, culture, art, education and entertainment. If the creators of content are deprived of the rights of ownership of their creations, they will put their energies elsewhere.

What’s more, the development of the Internet itself will ultimately be placed in jeopardy.  The fact is that no one uses the Internet because of its hubs and routers.  Rather, people flock to the Internet because of its content – content that will not be there tomorrow if piracy destroys the incentives that fuel its creation.

Just as our society is beginning to address other security threats posed by the internet, we must address the security of copyrights.  With this in mind, our company is undertaking a wide-ranging strategy to make the Internet truly secure for intellectual property.  This strategy consists of five main elements.

First of all, we are turning to our representatives in Washington with both offensive and defensive requests.  On defense, we ask the Congress to refrain from mandating a compulsory license for redistribution of creative works over the Internet.  There are numerous factors that make compulsory licensing ill suited to a global medium like the Internet.

On offense, we ask you to begin to explore with us legislation that would assure the efficacy of technology solutions to copyright security.  As we seek to develop measures such as watermarking, we need the assurance that the people who manufacture computers and the people who operate ISP’s will cooperate by incorporating the technology to look for and respond to the watermarks.  This same mandate could be part of the solution to a host of other Internet security issues as well.

The second element of our strategy is to work with governments around the world to respect our rights.  We are actively involved in the Global Business Dialogue on E-Commerce, and our company is serving as chair of the Intellectual Property Work Group.  The Internet is international.  The issues involving it cannot be viewed with a myopic American eye.  Instead, we must think and act globally.

The third element is education.  Most people are honest and want to do the right thing.  But they can’t do the right thing if they don’t know that they’re doing a wrong thing.  Working with the MPAA, we are advocating a more aggressive campaign to make people aware of intellectual property rights on the Internet, in much the same way as the FBI warning at the front of videotapes.
 Fourth, we believe that the Internet industry as a whole – and I mean all the companies with a stake in the e-future - must take meaningful technological measures to assure the security of intellectual property.  Piracy is a technical problem and must be addressed with technical solutions.  The studios, broadcasters and record companies – working in cooperation with the technology companies – need to develop innovative and flexible watermarking or encryption systems that can stay one step ahead of the hackers.

The fifth and final of our initiatives is economic.  History has shown that one of the best deterrents to pirated product is providing legitimate product at appropriate prices.  In the music industry, we have already seen that people will gladly pay fair prices for legally produced product even when it can be easily reproduced and unlawful copies can be easily acquired.

 To be sure, none of these measures represents a silver bullet that will stop piracy in its tracks.  But, that’s O.K.  Markets are messy, and, over time, these initiatives will be refined and new ones will emerge.  But, there first needs to be a recognition and a commitment – in government, in industry and among the general populace – that theft will not be tolerated in any form … whether it’s someone shoplifting in a store or downloading on the Net.

 All we need is for this basic rule of society to be acknowledged and enforced in the cyber world as it is in the real world.  If this can be achieved, then the possibilities of the Internet – for communication, for education, for entertainment and for commerce – will be as limitless as the lightspeed at which it has brought the world together.