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Competitiveness
Economist Calls Tech Innovations Key To Growth
by Heather Greenfield
ASPEN, Colo. -- Harvard economist Dale Jorgenson offered plenty of charts and graphs Monday to show that the U.S. economy has potential but that innovation will be the key to unlocking it.
Jorgenson spoke here at the first day of the Progress and Freedom Foundation's annual Aspen Summit, telling technology industry executives and Washington regulators that after the dot-com crash and during the recovery, information technology innovations can contribute to a sustainable economic growth.
Jorgenson walked his audience through the IT growth from 1995 through 2000, noting that IT-producing industries comprised 3 percent of the economy but contributed 10 percent of the economic growth. He also said that during that time, technology produced half the innovation.
He said those innovations, implemented by IT-using firms that comprise 23 percent of the economy, helped boost productivity and growth during the recovery from 2000 to 2005. "It was the IT-using sectors that emerged as the leaders for innovation," Jorgenson said. "The shift in innovation is the biggest part of the story [from 2000 to 2005]."
As the dot-com crash unfolded, Jorgenson said, all the IT users investing massively in infrastructure made decisions and closed whole departments. He said some jobs were replaced with machines -- and the equipment worked.
"The result was a huge increase in productivity," he said. "The economy experienced an unprecedented boom in innovation."
Jorgenson compared the economic growth during the IT boom and post-crash recovery, and looked at what is sustainable. He said companies can increase employment, investment and output but warned, "If there is no innovation, there will be no output in excess of the input." So innovation, he said, is "very critical."
Jorgenson forecasts the future for economic growth at about the same on average as it has been since 1995 -- 2.9 percent a year, along with productivity growth of 2.1 percent.
He said U.S. growth compares well to that in other industrialized nations, but it will be slower than the overall world economy, including developing nations, which he said is expected to grow at an "unprecedented" 5.2 percent.
Jorgenson closed by saying the economy has plenty of potential, but other PFF panelists should "discuss how that future will be realized through IT technology."
The next panel wasted no time, with representatives from Comcast, Verizon Communications and the Internet telephone service Skype arguing over how FCC regulations or decisions not to regulate could help boost competition and innovation among those delivering Internet services.
Chris Libertelli of Skype said he hopes the FCC will rule against major telecom companies and said he wants a future that moves toward "increased price competition, innovation and consumer choice." Tom Tauke of Verizon insisted that there already is competition, and consumers have "more and more choices."
Stanford University professor Roger Noll joked about following those people arguing for and against regulation, saying that it is not a matter of political theology but who profits.
"Anyone from anywhere in the political spectrum has a regulatory agenda," Noll said. "They don't like market outcomes because someone who pays their salary doesn't like the world as it is and wants a different outcome."
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Health
Chinese Scares Spur A New Review Of Drug Imports
by Aliya Sternstein
Amid Chinese product scares, President Bush has charged Health and Human Services Secretary Michael Leavitt to head a Cabinet-level working group that will review the safety of all imports, including drugs imported from foreign Internet pharmacies.
On July 18, Bush issued an executive order establishing an interagency task force "to identify actions and appropriate steps that can be pursued, within existing resources, to promote the safety of imported products." The mission entails an examination of "existing cooperation" with foreign governments and manufacturers "regarding their inspection and certification of exported goods and factories producing exported goods."
The group is then to consider "whether additional initiatives should be undertaken with respect to exporting countries or companies."
Recommendations on next steps are due back to Bush by late September. Besides Leavitt, the 11 task force members include Homeland Security chief Michael Chertoff, Attorney General Alberto Gonzales, Commerce Secretary Carlos Gutierrez, Consumer Product Safety Commission Chairwoman Nancy Nord and Secretary of State Condoleezza Rice.
The group is probing "all types of products that are imported into the U.S. from all over the world," HHS spokeswoman Shiloh Roehl said.
The analysis of prescription imports will involve ensuring that legal products shipped to the United States are safe and ensuring that illegal products are intercepted. "Drug safety is a critical component of this examination," Roehl said.
When Leavitt visited Chicago's O'Hare Airport, where inspectors handle 100,000 pieces of mail daily from all over the world, he saw how a glass bead bracelet was used to disguise illegally imported medicines. "An integrated and effective system must be in place" for ensuring drug safety, Roehl said. "Innovative technology plays a significant role in that process."
The Internet can be "an extremely important tool" for quickly disseminating safety information to consumers, Roehl added. "For example, when there is a product recall, industries are talking about using e-mail alerts to warn consumers who purchased that item."
But some lawmakers say that lumping prescription imports into the review is geared more toward protecting U.S. pharmaceutical companies than protecting consumers. "The administration has been down this road before," Barry Piatt, a spokesman for Sen. Byron Dorgan, D-N.D., said in reference to a 2004 HHS task force on drug importation that was chaired by then-Surgeon General Richard Carmona. "That was not a serious inquiry," Piatt said.
Dorgan has introduced legislation that would allow Americans to buy drugs from abroad, including from foreign Internet pharmacies. "There is nothing about the creation of this task force" that leads Dorgan to believe this will be an objective assessment of drug safety, Piatt said.
"We don't need another report. ... We need action," he added, noting that Dorgan's bill would strengthen current protections.
Sen. Thad Cochran, R-Miss. disagrees. "Senator Cochran believes the comprehensive review of current import safety practices currently under way is necessary to identify areas of improvement in safeguarding our food and drug supply," spokeswoman Margaret McPhillips said.
Separately, in a survey released Monday, the brand-protection firm MarkMonitor reports that many Internet outfits peddling prescriptions attempt to mislead consumers as to where they are based.
The study found one "Canadian" online pharmacy that actually was hosted in the Russian Federation. While 59 percent of the pharmacies were hosted by U.S. servers, those sites could have been operated by foreign entities that had hijacked the servers, said Frederick Felman, MarkMonitor's chief marketing officer.
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Budget
Senate, House Diverge Over Broadband Loan Funding
by David Hatch
The Senate and House diverge sharply on proposed fiscal 2008 funding for a federal program that provides loans to rural areas to spur deployment of high-speed Internet access.
The Senate Appropriations Committee has recommended nearly $500 million for the broadband component of the Agriculture Department's Rural Utilities Service. But a House-passed spending bill would only provide $300 million.
In February, the Bush administration proposed $300 million for the initiative, which provides loans to communities with populations of 20,000 or less to enable broadband deployment. Congress has appropriated $495 million for the effort in fiscal 2007.
The annual spending measures are closer on another tech-related item. The Senate bill, S. 1859, would devote $34.8 million to telemedicine and distance-learning grants in rural areas, while the House version, H.R. 3161, would allocate $35 million.
In July, the Senate Appropriations Committee approved its version, which is to be considered on the floor in September. The House passed its bill Aug. 2 by a vote of 237-18.
The loan initiative, which has provided more than 70 loans totaling $1.2 billion since its creation five years ago, is the subject of scrutiny on Capitol Hill. Critics include Sens. Pat Roberts, R-Kan., and Ken Salazar, D-Colo., who offered legislation in May to overhaul the program and ensure that support reaches communities that need it the most.
In July, Rep. Zack Space, D-Ohio, amended a bill to reauthorize farm programs with similar language. In a videotaped interview with the U.S. Telecom Association released Tuesday, he said the loans should be "more accessible" to companies desiring to participate.
"If you're a manufacturing plant thinking about expanding and you're in southeastern Ohio," he said, "you're going to think twice if you don't have access to broadband."
In a committee report accompanying the House bill, appropriators were blunt in their criticism. "We continue to have reservations about this program," the report said. "Since the inception of the loan program, the department has failed to obligate available resources to fund viable broadband projects."
The report added that it's one thing for the federal government to help expand broadband and distance learning. "It is quite another for the government to both compete with and undermine the private sector where they would operate except for being undercut by the government."
By contrast, the accompanying Senate report does not criticize the initiative, a possible reflection of its importance to senators representing rural constituencies.
The Agriculture Department declined to comment for this story. In May, the department proposed several changes in the broadband program in an effort to respond to lawmakers' concerns. It hopes to issue new rules this year.
Thomas Dorr, undersecretary for rural development at the agency, told the U.S. Telecom Association in another videotaped interview that the department is simplifying the application process, improving its "targeting" of underserved areas and enhancing the incentives it offers.
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Budget
FBI's Budget Is Chock-Full Of Tech-Related Efforts
by Andrew Noyes
The FBI would get $6.4 billion for its increasingly high-tech crime-fighting mission in fiscal 2008 under the House-passed appropriations bill and $125 million less from the Senate measure, which awaits a floor vote when lawmakers return in September.
The House calculation is $148 million more than the Bush administration's request and $508 million more than fiscal 2007 funding. Both bills, H.R. 3093 and S. 1745, would assign $2.3 billion to counter terrorism, foreign counterintelligence, and related security activities, and the legislation would make substantial program changes.
The House committee report to the bill calls for 245 positions and $40 million to boost field resources dedicated to security investigations. Another 50 positions and $11 million would support surveillance operations.
The House and Senate reports propose 159 employees and $47 million for intelligence program requirements, including $11 million for the National Security Branch Analysis Center. Millions of dollars in increases also would be in store for anti-terrorism communications analysis, human intelligence management and other programs.
The FBI program that works on Internet, computer and network-based investigations would get 31 positions and $5 million; agents who collect and examine digital evidence would get $22 million; and regional computer forensics labs would receive $6 million to establish a new center.
Other House provisions include:
-- $80 million for the FBI's new case-management system, known as Sentinel;
-- $2.3 million and 14 positions for the Crimes Against Children and Innocent Images National Initiative;
-- $37 million and 41 positions to provide technical expertise and equipment to execute lawfully authorized electronic surveillance of data network facilities;
-- $10 million for operations and maintenance for the FBI's IT infrastructure;
-- $14 million to correct DNA data center backlogs;
-- $10 million to enhance audio and data collection for counterintelligence and counterterrorism;
-- And $25 million for advanced fingerprint search algorithms.
The Senate committee report calls for combining many of those programs into a $626 million kitty for criminal justice information services, which would be designed to "greatly improve the quality and timeliness of information provided to our federal, state and local law enforcement and authorized non-criminal justice agencies to reduce terrorist and criminal activities."
Cyber Security Industry Alliance President Tim Bennett lauded the proposed funding boon, saying "there's no way we can have a major law enforcement agency like the FBI be crippled by inadequate information systems."
"Fixing the problem is going to take a lot of money," he added.
The agency's shift to become a prevention and intelligence-driven organization "is taxing the FBI's physical surveillance and electronic surveillance intelligence-gathering capacities," FBI Director Robert Mueller told a Senate Appropriations panel in April.
Herbert Lin, staff director of a 2004 National Research Council FBI tech study, said the agency seems to be paying attention to how "all kinds of technology" can enhance its ability to perform its mission. The agency's leadership seems "completely committed" to that effort, he said.
The House report also articulated members' lingering concerns with the FBI's improper use of "national security letters," which let agents obtain telephone, e-mail and financial records without prior judicial approval. The document calls for a ban on the use of funds to authorize the letters in ways not approved by FBI policy.
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E-Government
An Eye Toward A Future With Electronic Passports
by Heather Greenfield
As the State Department tries to meet the demand for electronic passports, which the agency began issuing last August, the companies producing the chip technology are marking the anniversary by looking ahead to what's next.
Frank Moss, the former deputy assistant secretary for passport services at the State Department who oversaw the transition to e-passports, said as chips become faster and more reliable, it may be possible to issue visas electronically five years down the road.
"These first-generation chips are good, but they can certainly be better," Moss said. He looks forward to technical improvements to make it faster to write data to the electronic chips imbedded in the passports, faster to read the chips and easier to scan the passports in the readers.
Moss, who now has his own consulting firm, Identity Matters, with clients like Texas Instruments, said another possibility is that entry and exit stamps on passports could become electronic as well. He said if a visa expires, it would be more easily caught.
"An electronic record has an advantage over a guard," Moss said.
For the State Department, however, production speed rather than chip speed has been the challenge lately. It used to take four to six weeks to get a U.S. passport and now takes about 12.
In congressional hearings this summer, the department blamed an unforeseen increase in demand. The agency issued 7 million passports in 2003 and is expected to issue 17 million this year.
"This increase in requests -- over and beyond even the enormous demand we anticipated -- has resulted in longer than expected processing times for passport applications," Maura Harty, assistant secretary for consular affairs, explained in a video now posted on State's Web site.
Harty announced in June that those who have applied for passports, but not received them, could still travel to Bermuda, Canada, the Caribbean and Mexico through Sept. 30 by showing proof they applied for passports.
Moss said he didn't anticipate the spike in demand and attributes the biggest reason to the Western Hemisphere Travel Initiative, which would have required those traveling to Bermuda, Canada, the Caribbean and Mexico to have passports starting Jan. 23, 2007.
Moss said the new technology with an RFID chip probably does add some production time for passports, but mostly the lag is simply a matter of overwhelming demand.
State announced this week that it would take $20 instead of $6 out of passport fees, which are typically $97, to boost efforts to produce passports more quickly.
Moss predicts that as more people use the chip-based passports, privacy concerns will decrease. He said the United States is the only country to use three different identity protection measures -- anti-skimming material to block interception of the information, encrypted communication between chip and readers, and chips with ID numbers that change every time they are read.
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Lobbying
AT&T-Backed Group Won't Face Probe In Wisconsin
by Michael Martinez
The top law enforcer in Wisconsin has decided not to formally investigate an advocacy group that misrepresented a pair of state lawmakers' positions on a pending telecommunications bill.
State Reps. Joseph Parisi and Sondy Pope-Roberts asked Wisconsin Attorney General J.B. Van Hollen to determine whether the group TV4US broke the law by saying in materials distributed to legislators that the lawmakers voted for legislation to establish a statewide video-franchising system. Parisi and Pope-Roberts voted against bill, which was passed by their chamber and is now before the state Senate.
The legislation would let video service providers enter the state's market in one step by applying for statewide franchises. TV4US, which is partially funded by AT&T, listed Parisi and Pope-Roberts as supporters of the bill in a petition it submitted to the legislature.
But according to Van Hollen, it is not against state law to present legislators with inaccurate information. He said in a letter to Parisi and Pope-Roberts last week that TV4US did not violate the state's false advertising law because no commercial sales of goods or services were involved with the petition. He also said the state's ethics code for public officials does not apply because TV4US is a private entity.
"In the absence of any information indicating a violation of state law has occurred, a formal investigation into this matter is not warranted at this time," Van Hollen wrote.
Pope-Roberts, a Democrat, said in a telephone interview that she is now working on legislation with Parisi that would make it illegal to deliberately misrepresent the positions of lawmakers. "It just seems absurd that it isn't illegal already," she said.
The video-franchising proposal has led to other political dust-ups in Wisconsin this year. Several activist groups called on state Democratic Party Chairman Joe Wineke to resign after he registered as a lobbyist with AT&T in May, when the state House was considering the bill.
Large telecommunications companies have pushed for franchising reform in states across the country since the demise of a nationwide franchising proposal during the 109th Congress. Other states with bills on the table include Massachusetts, New York and Pennsylvania.
The Wisconsin Public Interest Research Group has been trying to rally opposition to the proposal there. Bruce Speight, the group's public-interest advocate, said that TV4US and AT&T have run an effective misinformation campaign and that the incident with Parisi and Pope-Robert is only part of it. He said he hopes more lawmakers will turn against the measure as they learn that it would not bring the competition and prices its supporters have promised.
"[The bill] was written for and by AT&T and the TV4US coalition," he said.
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Today's Feature:
Issue of the Week
Some technology firms want to breathe new life into a line from a film set in Dyersville, Iowa: "If you build it, they will come."
Every Monday, read the Issue of the Week by the Technology Daily staff.
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E-briefs
Net Governance: The group that manages the Internet-addressing system rejected rumors last week that it was expected to approve .kp as the domain ending for Web addresses in North Korea at its upcoming meeting in Los Angeles. There is currently no delegated operator for the .kp Web address, but the Internet Corporation for Assigned Names and Numbers has received a request to assign the domain, officials said. The request was discussed at ICANN's board meeting earlier this month, but no decision was made at that meeting and issues slated for discussion at the October gathering in California have not been finalized. Some media outlets, including Agence France-Presse, also incorrectly quoted Suh Jae-Chul as a member of the ICANN board. The group said that individual is not part of ICANN's board and is not approved to speak on behalf of the organization.
E-Government: The Internet home of a government watchdog agency has a new look. On Monday, the Government Accountability Office unveiled an updated site designed to help visitors find the latest reports and testimonies faster. The redesign also contains greater explanation regarding what the agency actually does. According to the site, the agency "is known as 'the investigative arm of Congress' and 'the people's watchdog.' GAO supports the Congress in meeting its constitutional responsibilities and helps improve the performance and ensure the accountability of the federal government for the benefit of the American people." The Web enhancements were based on user comments and will be refined according to user feedback. Comptroller General David Walker said: "We want to meet the needs of our various audiences with the most informative and helpful Web site we can offer. These new features go a long way toward meeting that goal."
Intellectual Property: The Patent and Trademark Office will publish rules in Tuesday's Federal Register aimed at making the patent examination process more effective. The change will encourage applicants to use greater precision in describing the scope of their inventions. The rules take effect Nov. 1. "Higher quality applications result in a more effective examination," PTO Director Jon Dudas said in a press release. "These rules better focus examination and will bring closure to the examination process more quickly, while ensuring quality and maintaining the right balance between flexibility for applicants and the rights of the public." Under the revision, applicants may file two new continuing applications and one request for continued examination. Also, each application may contain up to 25 claims -- no more than five of them independent claims -- without any additional effort on the part of the applicant. The policy shift comes as Congress debates more drastic changes.
Intellectual Property: The Motion Picture Association of America has teamed with New York City to place anti-piracy themed trailers in movie theaters and taxis equipped with passenger information monitors. The videos, which premiered last week, are part of a multi-pronged approach to increase public awareness and target bootleggers. The clips use scenes from the movies "Happy Feet," "The Sixth Sense" and "Titanic" to illustrate the low-quality product that consumers can expect to find on the streets from illegally copied digital videodiscs. The trailers assign mock MPAA ratings of "RO" for ripped-off, "PS" for poor sound and "F" for fake. A handful of theaters have begun running the spots, and more than 1,000 cabs will feature the videos. "We are sending a clear message: We will not tolerate movie piracy," city Mayor Michael Bloomberg said in a press release.
Politics: A liberal blogger has filed a complaint with the Federal Election Commission against former Sen. Fred Thompson, the actor and unannounced Republican candidate for president, accusing him of violating election laws as he ponders his entry into the race. AP reports that the blogger, Lane Hudson, submitted his complaint Monday, saying that Thompson has raised far more money than he needs to explore whether to run for president. Federal law allows potential candidates to raise money to travel, conduct polls and pay for other expenses related to "testing the waters" for a political campaign but prohibits those doing so from hoarding the money for use during actual campaigns. As of last month, Thompson had raised nearly $3.5 million and had spent $625,000. "We're following the law," a Thompson spokesman said. The FEC will give Thompson 15 days to respond to the complaint.
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