Testimony from June 15, 1999

 

Prepared Testimony from Dr. Eric Schmidt, Novell

Mr. Chairman and members of the Committee:
 

My name is Eric Schmidt.  I am the Chairman and CEO of Novell, Inc., which is the world’s largest provider of directory enabled network software.

I want to thank you, Chairman Mack, for holding this hearing.  And I want to add a special note of thanks to Senator Bennett and the Business Software Alliance who have been so instrumental in making it a success.  As you have heard from previous witnesses, the US high-tech sector has made an extraordinary contribution to America’s economy.  Hearings such as this one help keep open the lines of communication between Washington, DC and Silicon Valley, which is crucial to the success of the new digital economy.  In my comments, I will discuss the evolution of the Internet and note some of the major public policy questions facing us.

When discussing the new, networked economy, I firmly believe we’re at the beginning, not the end, of something very big. And even though these are still the early days of the Internet, it is clear that the network is becoming the centerpiece of every unique computing activity.

The first phase of the Internet explosion was all about getting connected. It was the “hook-up and infrastructure” wave. Once people overcame the problem of getting connected, the growth of the network exploded. The only problem was, no one could find anything or anyone! This created a critical need to manage the profiles of the people, devices, and objects on the network.

The second wave of the Internet is all about managing the relationships that people develop over the web.

THINK ABOUT IT: Every time you register with a web site—whether to buy books on Amazon.com or airline reservations with Sabre—you are creating a relationship with an outside organization.  But in doing so, you are providing information about your life, some of it quite personal. At the very least, online enrollment forms want your name, street address, email address, and telephone number.  They would also like a credit card number, thank you, if you’d like make a purchase.  Do you prefer window or aisle?  Do you like mysteries or romance?  Manual transmission or automatic? What is your shoe size?  Could we have your Social Security Number? Do you take any prescription medicines?  Do you have any pre-existing medical conditions?

When you visit a website, the website is actually visiting you!

The trail of data individuals leave behind when they use the Internet---what some call digital fingerprints---is a rich source of information about their habits, their preferences and the company they keep.

In disclosing this information to a variety of online organizations, you are establishing a digital identity---a virtual you---on the virtual world of the Internet.  But who manages that relationship?  The stark answer is that nobody does. There’s no IT manager acting on your behalf.  There’s no way of preventing one organization from sharing information with another.  Conversely, there’s no way of encouraging some information to be shared if it’s in your best interest.

If anyone should manage the relationship, it should be you!

This is the position that the industry is advocating, and it also happens to be an issue that Novell is taking very seriously. Our mission is to provide people with a coherent way to manage everything they want to do on the Net.

The explosion of Internet identities and the need for managing them has powerful public policy implications. The debate about online privacy shows just how serious they are.  For now, government’s role should be to encourage private sector solutions, investigate and prosecute deceptive business practices, and monitor privacy abuses to determine the actual harm to consumers.  It is only through a clear understanding of genuine consumer needs and the private-sector’s ability to meet them that we will be able to craft appropriate policies.  The last thing Congress should do is rush to judgement about the need to regulate this new medium.

But there is an area where Congress does have an immediate and compelling role to play, which is on the minds of many of my peers in the industry: That is, the role of the Federal Government in supporting fundamental research.

As a scientist by training, I am keenly aware of the tremendous power of research. It is thanks to Federal funding for research in the post-war years that we have the Internet. One of the best investments Congress can make is to assure strong support for Federal research and systematic incentives for commercial R&D.  Today, we are short-changing both of these.  Except for small increases in the past three years, overall Federal support for research has been flat or declining for a decade.  Moreover, Washington has treated the R&D Tax Credit as a temporary political fix rather than as a sustained incentive for innovation. We must make substantial, consistent increases in Federal funding for basic science, engineering and technology research.  And we must make the R&D Tax Credit permanent!   A permanent R&D Tax Credit is not just an issue for the BSA or the software industry, but for all of high tech.  It is TechNet’s top priority for 1999.

Phase One of the Internet took many people by surprise.  The second wave will be just as dynamic.  We are entering an era that will be defined by an always on, always aware network… and a network that is always aware of the identity of the user. With its arrival, I believe, we will see the fulfillment of the Internet's great promise to enable and enhance digital communities in business, government services, education, medical research, culture, and every other area of human endeavor and interest. A more human network, has the potential to improve our lives in ways we haven't yet imagined.

Thank you very much.