My State of the Net Comments on the Importance of the Internet to Economic Growth

I had the pleasure of presenting, along with Marvin Ammori, at last week’s State of the Net Conference on the economic impact of the Internet and how to maximize it.  Among the points I made on the impact:

• The Dot-com domain makes global economy $1.5 trillion larger and will add $3.8 trillion annually to the global economy in 2020 - more than the total GDP of Germany
• IT workers contribute significantly more to productivity than non-IT workers and IT has more impact on productivity than non-IT capital
• Between 2001 and 2011, jobs  in IT occupations increased 22% while non-IT jobs were stagnant. Between 2007-2011, jobs declined 4.5%, while IT jobs up 6.8%, contributing $37 billion to the economy.

Among the points I made on how to maximize its impact:

• First, we should recognize that Internet freedom does not mean Internet anarchy. In other words we should promote Internet innovation and free speech, but also work to limit Internet crime (like malware and copyright theft).
• Second, we need to get a clearer overall framework to guide Internet policy. Right three competing narratives compete for attention: Abdicate, Regulate, Facilitate. Abdicate says that there is little for government to do but get out the way. Regulate says that the risks from the digital economy are so great that government must step in with a heavy hand, including on areas around privacy and competition. Facilitate says that the role of government is to help support the Internet economy.

There are six key areas involved in facilitation:

1) Spur universal digital use by all Americans

2) Transform government at all levels to Internet-based government

3) Support digital platforms through tax incentives, investment, smart regulation and/or public procurement (these include health IT, rural broadband, spectrum, digital signatures, intelligent transportation systems, smart grid, etc.)

4) Support Internet innovation including support for R&D, through things like a better R&D credit, support for STEM skills, and federal funding of IT research

5) Fight digital protectionism nationally and internationally. This can take the form of fighting against regulations to protect incumbents against Internet competition (e.g., taxi regulators who want to ban systems like Uber) while at the same time not intentionally favoring Internet competitors (e.g., ensuring sales tax fairness).  It also includes fighting foreign innovation mercantilism efforts, such as cloud data center localization polices.

6) Fight Internet crime, including content piracy, malware and SPAM.  Government needs to step up their efforts to ensure that the Internet is a safe place.

In short, the Internet economy of the future can be a robust, dynamic engine for jobs and income growth, but only if government gets the policy framework right. In other words, government needs to be a good facilitator.

Image credit: Wikimedia Commons User Rock1997