STC 391 Session 8

1
STC 391 Session 8

• Immigration as Free Trade?
• International Standards
• The Internet and Commercializing Technology
• Trade Classification and Encryption Technology
• Learning Outcomes Review

2
Immigration as Free Trade Policy

• Regulated Immigration mostly a 20th Century
  phenomena
• Is it part of Trade or more generically economic
  development?
• What are the market forces?
• What is Governments Role?

3
(No Transcript)
4
(No Transcript)
5
Role of Standards

• Reduce Risk
• Multiply Opportunities
• Open Systems (verb and adjective)
• Limit Liability
• Reduce Cost

• Reduce difficulty of technology
  integration/transfer
• Improve safety, reliability, interoperability,
  etc.
• Other?

6
Standards Definition

• Standards set by
• The market, de facto
• Government Regs
• Negotiated Consensus

• 1992 US study of standards found much confusion.
  Regs and standards often equated.
• They proposed
• Product Standards
• Control Standards
• Process Standards

7
Examples of Categories by Type
8
(No Transcript)
9
Governmental Policy Initiatives

• Standards Support
• WTOs Technical Barriers to Trade Agreement (TBT)
• MRAs (mutual recognition agreements) with EU and
  other trading countries and blocks
• Advocating recognition of voluntary consensus
  standards bodies as international and accepted
  by ISO/IEC

10
Standards Support

• Laboratory and Testing Accreditation w/a Goal of
• one test, accepted everywhere
• one standard-one test, suppliers declaration of
  conformity for worldwide acceptance
• Dual Labeling for Metrics
• Global Exchange of Standards Experts

HDTV, anyone?
11
International Challenges from Standards

• Dueling standards particularly problematic when
  a standard (domestic) is instantiated in a patent
  and international patents sought.
• Political imbalance in standards voting... One US
  vs. 15 EU.
• Standards dont equal Best.
• Demonstration of standards is an opening gambit
  for credibility

12
(No Transcript)
13
Team H on ISO

• The International Organization for
  Standardization (ISO)1 - is an international
  agency for the development of business and
  intellectual standards. It involves 140
  countries, which more than 70 percent are
  governmental standards institutions incorporated
  by public law.

1 ISO, http//www.iso.ch/iso/en/ISOOnline.frontp
age
14
Team H on ISO

• The US connection is the American National
  Standards Institute (ANSI). ANSI is very
  important for iSCSI business because of the
  associated standard bodies that communicate with
  ANSI. They are Institute of Electrical and
  Electronics Engineers, Inc. (IEEE)2 and
  InterNational Committee for Information
  Technology Standards (INCITS)3.

2 IEEE, http//www.ieee.org/portal/index.jsp?pag
eIDhome 3 INCITS, http//www.incits.org/
15
Example from Team H, 383

• Internet Society Organization Committee (ISOC)1
  covers over 100 countries for Internet design,
  engineering, and management. Four key groups
  under this umbrella are
• Internet Engineering Task Force (IETF) Covers
  protocol and development of the Internet.
• Internet Architecture Board (IAB) Defines
  overall architecture of the Internet and provides
  guidance to IETF.
• Internet Engineering Steering Group (IESG)
  Technical Management of IETF activities and the
  Internet standards process.
• Internet Research Task Force (IRTF) Research
  Arm of the Internet community

• 1 Internet Society, http//www.isoc.org/

16
Team H Research (cont)

• International Telecommunications Union (ITU)1
  It is a United Nations specialized agency. In
  other words, members of ITU are governments, and
  the U.S. representation is the Department of
  State. ITU is divided into three groups
• ITU-R Radio Communications
• ITU-T Telecom Standardization
• ITU-D Telecom Development
• The charter of ITU states that it is responsible
  for studying technical, operating, and tariff
  questions and issuing recommendations on them
  with a view to standardization telecommunications
  on a worldwide basis. ITU-T is formerly known as
  the International Telegraph and Telephone
  Consultative Committee (CCITT).

• 1 ITU, http//www.itu.int/home/

17
(No Transcript)
18
(No Transcript)
19
The World-Wide Web and Technology
Commercialization
20
All great changes are irksome to the human mind,
especially those which are attended with great
dangers and uncertain effects. - John Adams to
his friend James Warren, 1776
21
Globalization and the Internet

• The impact of the internet will not be fully
  comprehended for another decade or more but we
  already know that it has affected everything from
  democratization of countries to just-in-time
  global distribution, to phenomenal wealth
  generation.
• All done by an anarchic system that no one owns
  and no one manages, that was designed to be bomb
  proof...

22
Internet History--Context

• The Internet is the best success story that the
  US federal government has of successful
  technology commercialization.
• It was developed by DARPA (Defense Advanced
  Research Projects Agency) and forced into the
  market when DARPA contractors, companies and
  universities, were forced to submit bids and
  contract and grant reports via the rudimentary
  ArpaNet. DARPA and NSF teamed up to help the
  universities establish the telecom infrastructure
  and the universities began working on the
  utilities and software tools.

23
Internet History (cont)

• It was designed to be redundant and robust in
  order to survive any kind of attack. That design
  criteria let to the idea of redundant,
  decentralized, localized systems.
• Development of web enabling tools were developed
  primarily by universities and university
  consortia. Use of the internet was reserved to
  government and educational use during its
  formative years.

24
What do we currently know about the Internet?

• 940 million internet user worldwide in 2004 and
  native English speakers now represent only
  approximately 36 of the online population.
  http//www.glreach.com/globstats/
• 524 Billion of economic activity is attributable
  to the internet in 1999 -- double the previous
  year. (UT Internet Study, http//www.internetindic
  ators.com/)
• 83,726,450 Internet hosts (MIDS 2000 est.,
  www.mids.org)

25
International Digital Divide?
So What? Europes rate is growing slower than
the US for PCs, internet connections and secure
servers
26
What we know

• According to a market survey by the Verband der
  deutschen Internet-Wirtschaft (German Internet
  Economy Association), 7 of all German private
  households have access to the Internet. The
  European average is 8.3 . The German average is
  particularly low in comparison with that of the
  Scandinavian countries. Sweden ranks first with
  an average of 39 .
• There are great expectations for Internet
  commerce. For 2001 there were projections of an
  expected DM 3.5 billion turnover through German
  online shops. In 1997, their sales on the
  Internet totalled only DM 85 million.
• Euro is a great assistance to online shopping
  easy pricing comparisons!

27
What we know

• Most mature e-governments include Canada,
  Singapore, the United States, Finland, and United
  Kingdom. (country profiles agree...)
• E-government is also widely lauded as a method
  to enhance government transparency and
  accountability. This process may compel many
  countries to redouble efforts to ensure against
  corruption and wasteful government practices.

28
What We Know...

• Industrialized countries, with only 15 of the
  world's population, are home to 88 of all
  Internet users. Finland alone has more Internet
  users than the whole of Latin America.
• Internet related statistics screw up traditional
  statistics. An EU study shows that internet use
  has screwed up info on productivity and
  employment, CPI indices, business start-up and
  growth.

29
What We Know... mCommerce

• Third-generation (3G) Internet, mobile commerce
  (mCommerce)... Ericsson considers the wireless
  Internet to be "the biggest growth opportunity we
  will see in the communications industry."
• By 2005, mCommerce revenues in Europe will total
  1.7 billion in Europe 3.5 billion in Japan,
  and 600 million, in the US, according to Jupiter
  Research.
• In 2004, Forrester Research predicts North
  America to realize 3.5 trillion in eCommerce
  transactions, while the Asia-Pacific can expect
  1.6 trillion, and Europe should see 1.5
  trillion.

30
What we know

• Mexicos internet connectivity has been growing
  rapidly Mexico City had 100,000 internet hosts
  in July, 1999 and Monterrey had 10,000. The
  balance of the country only had about 1000 hosts.
  (MIDS publishes a quarterly update on NAFTA and
  the internet)
• Mexico had 259 secure server sites in 2001 --
  only .21 of the worlds total but ahead of
  Portugal, most of South America and Eastern
  Europe.

31
What We Know...

• According to comScore Media Matrix, 19.2 million
  Internet users from home and 7.9 million Internet
  users from work went online to personals sites in
  December 2002, with the at-work users accounting
  for 35 of the time spent on such sites (Source
  eMarketer).
• U.S. businesses spent 2.6 billion to clean up
  the Code Red virus alone (Source Computerworld).
  

32
What We Know...

• The research group Datamonitor forecasts that the
  online gaming market will grow from 670 million
  in 2002 to 2.9 billion in 2005. While the
  largest market for online gaming is currently
  South Korea, the United States will bring in the
  most online gaming revenue by 2005 (NUA Internet
  Surveys).
• According to a study by the Consumer Electronics
  Association (CEA), 22 of US consumers shop
  online from work in 2002, compared with only 12
  in 1999. A quarter of those who shop online at
  the office claim they do so because of the faster
  connection speed (Source eMarketer).

33
What do we Know?

• Web resources have dramatically changed the
  nature of market and other research. Sites on
  governmental programs and policy abound. Company
  websites are increasingly transparent. (e.g.
  http//www.lib.berkeley.edu/GSSI/eu.html

34
What we think we know

• Syria decriminalized faxes and the Internet
  within the country in 2000.
• Women in Saudi Arabia are creating e-businesses
  out of their homes since they arent free to do
  business as men do.
• China allows internet use but monitors and
  filters traffic through 3 (three) country exit
  portals

35
Marketing in the New Global Economy...

• the Internet is the closest thing in the world
  today to the model of perfect competition. In
  the model of perfect competitionthere are no
  barriers to entry, no protection from failure for
  unprofitable firms, and everyone (consumers and
  producers) has easy and free access to all
  information. These just happen to be the three
  main characteristics of Internet commerce
• Edward Yaredni, chief economist for Deutsche
  Bank, quoted in The Lexus and the Olive Tree,
  page 66.

36
US Internet Policy

• The United States Internet Council was formed in
  1996
• nonpartisan-educational resource for state and
  federal policy makers.
• Mission to provide reliable information and
  analysis on Internet policy issues.
• primary audience state legislators, the
  Congressional Internet Caucus and political
  leaders and technologists from overseas who are
  shaping Internet policy in their respective
  countries.

37
Internet Taxation

• Under the US Internet Tax Act, effective October
  1, 1998, for 3 years, states could not tax
  Internet access fees impose multiple or
  discriminatory taxes on Internet businesses or
  tax an Internet seller solely by virtue of the
  presence of a webserver or the customer's
  Internet Service Provider, in the taxing state,
  unless any of the above are grandfathered.

38
Internet Taxation

• On Nov. 28, 2001, President Bush signed H.R. 1552
  to extend the Internet Tax Freedom Act (ITFA)
  moratorium by two years (Nov. 1, 2003). The
  measure retains the original definition of
  Internet access found in the original Act as well
  as the grandfather clause, which preserved state
  taxes that were in existence prior to Oct. 1,
  1998.

39
Key Internet Taxation Issues

• States ready to pass uniform sales tax agreement
• Regularizes product definitions and tax code to
  make taxing remote transactions easier...
• Internet Use Taxes not directly affected by the
  uniform agreement.

40
USIC Warning

• Government regulations that seek to pick winners
  and losers in a competitive marketplace are a
  particularly acute danger to the vitality of this
  rapidly growing medium. Governments should not
  attempt to control content or regulate modes of
  access to Internet service under the guise of "a
  higher public good."

41
International Policies

• The UN Model Law on Electronic Commerce (the
  Model Law) sets an international standard for the
  resolution of legal issues arising from the use
  of EDI and electronic messaging in place of
  business documents. Several Countries, such as
  Australia, have used the Model Law as a basis for
  proposed national legislation.
• Model Law allows requirements for various kinds
  of paper records, e.g. for writing, or for
  signature, or for originals, can be satisfied
  electronically in certain ways, except ... where
  the implementing country chooses otherwise.

42
WTO E-Commerce Policy?

• WTO has not yet decided whether digitally
  delivered goods -- such as downloadable music and
  books -- should be classified as goods, services,
  or "something new altogether,"
• US Trade Rep said that whatever decision is
  reached "should not place digital products at a
  disadvantage in comparison to identical
  physically delivered products."
• WTO needs to decide if digital downloads are
  imports and what of auctions, web-hosting
  services, remote monitoring?

43
In-Class Internet Project...

• Look up the EU policy on data privacy
• Where/how did you look?
• What did you find?
• Discuss Implications...

44
In-class Project New Japanese Law on E-Business?

• Proposed law for an "electronic government"
  through the creation of a broadband network
  infrastructure, the promotion of e-commerce, and
  the protection of secure networks and private
  information.
• Would eliminate 733 regulations and 124 laws that
  currently inhibit Japan's e-commerce growth
• Did it pass? What is the current law?
• Japans main growth is through cell phone access
• Lack of credit cards a non-legal barrier.

45
What to Believe?

• Internet is self-governed.
• How to vet sources?
• Censorship not allowed on US sites but what is
  stopping other?
• Propaganda/fraud/exaggerated come-ons/spoofs
• Pollution
• New smart Browser?!!

46
How Many e-commerce Ways Are There to Get PAID?

• Web ads
• Software utility fees
• Profit from web sales
• Fees for hosting sales sites
• Commissions (buy.com)
• Split w/ telecom host per hit?
• Pyramids/clubs (Mary Kay move over!)
• ..????

Industry consolidation Experiments new
business processes Stupid VC
Ventures Smart VC Ventures
47
Implications of the Internet on Technology
Commercialization

• Internal RD more efficient
• Collaborative RD more efficient
• Licensing, cross licensing and joint venture
  development may be speeded up. Need for all may
  increase as the fastest way to respond to new
  internet-driven demands for real-time
  collaborative development efforts, products,
  services and new technologies.

48
Internet Implications

• Product specs, procurement, billing, inventory
  become real-time operations
• Standards development may accelerate
• Virtual teams can take advantage of 24x365.
• Investment sources no longer need to be
  local/regional capital sources increase (but so
  will the demand for them).

49
Internet Implications

• Sourcing for RD and product development speeds
  up and competitive pricing increases, reducing
  costs across the board
• Technology integration may become more
  challenging if the scope must happen, globally,
  simultaneously those who can do it well will
  have a competitive advantage
• Early adoptors may be easier to find
• Market research is much easier to perform
• Competitive information is easier to find

50
Barriers

• Competition may increase since it will be
  globally based and the cost of entry becomes
  lower for all players.
• Infrastructure is not consistent across the globe
  or even across the Triad countries and it will
  continue to hamper technology integration and
  communications for another decade

51
Barriers

• Standards processes may not keep up with the pace
  of new technology developments and new business
  processes
• Regional variations in Internet regulation may
  impede progress in any of the areas listed as
  opportunities if use is stifled, blocked or
  monitored.
• Global price comparison opportunities will make
  margins very SLIM

52
On the Horizon CSC Top 10 Forecast

• Ubiquitous Bandwidth as the world becomes
  increasingly wired, digital services like
  telecommuting, wireless communications and remote
  business operations will be available almost
  everywhere.
• Smart Environments and Objects homes, offices
  and the everyday objects within them will become
  networked and will use artificial intelligence
  capabilities.
• Internet-Centered Computing as the Internet
  permeates all systems, we will see new products,
  applications and services.

53
CSC Internet Technology Forecast

• 4. Knowledge Bases corporations will come to
  rely more on their stores of knowledge to make
  faster decisions that are more informed.
• 5. High-Performance Computing more powerful
  computers will enable companies to simulate
  complex business and technical processes and get
  more tangible benefits from their data.
• 6. Digital Money customized, electronic cash
  will usher in an age of pay-per-use services and
  micropayments, fees for products and/or services
  in sums that are so precise that they include
  even fractions of cents.

54
CSC Forecast

• 7. Privacy, Security and Information
  Survivability as systems become increasingly
  internetworked, companies will have to work
  harder to guarantee that data is private, secure
  and durable enough to withstand deliberate or
  unintentional mishaps.
• 8. Virtual Reality virtual environments will
  enable companies to test computer-generated
  prototypes in fields as diverse as engineering
  design, medicine, financial analysis and real
  estate.

55
CSC Forecast

• 9. Human-Computer Interaction communication with
  computers and computer-aided devices will become
  effortless with interfaces that depend on natural
  interactions like speech.
• 10. Miniaturization advances in nanotechnology
  will help engineers design smaller machines and
  microelectromechanical systems that can help run
  larger machines.

56
Conclusions

• What other implications can you identify?
• What other barriers can you identify?
• Based on the opportunities listed, which are most
  important to the venture you are analyzing, roles
  you are playing? Which barriers are most
  troublesome and realistic to you?

57
More Way Cool Sites!

• http//www.cybergeography.org/atlas/atlas.html
• http//www.usinternetcouncil.org/
• http//www.mids.org/mn/1003/crocker.html
• http//www.worldbiz.com/
• http//www.idiominc.com/worldwise offers a
  complete "how-to" guide for e-business
  globalization, providing actionable analysis,
  advice, and data.

58
Export Classification and Encryption Controls

• Processes and Resources

59
Export Control Issues

• US does not want to control your technology.
  Regs have been reduced to the essential minimum
• You must know what your classification is
  ignorance is not an excuse
• Transferring a technology to a foreign national
  in the US can be deemed a controlled export...

60
Export Control Issues

• A technology with a defense application may need
  an interagency review for classificiation
• Ultimate responsibility lies with whoever exports
  a technology

61
Key Definitions of EAR

• EAR Export Administration Regulations
• Technology Specific information necessary for
  the development production or use of a
  product
• Software A collection of one or more programs
  or microprograms fixed in any tangible medium
  of expression

62
Export Technology or Software Transfers

• Includes transfers regardless of media
• Includes electronic transfers (internet, email,
  etc)
• Includes direct transfers (consultations, phone
  conversations, seminars, etc).
• Publicly available software is not subject to EAR
  except Encryption 5D002.

63
Export Controls Classification...

• You try to classify your technology or software
  and if your classification is controlled, apply
  for export license
• You try and fail to classify request
  classification from BIS. With their
  determination, you apply for export license, if
  needed.
• Resource Code of Federal Regulations, 15 Parts
  300-799, Commerce and Foreign Trade

64
Encryption Controls Rationale

• US policy balances
• Global perspectives and inputs
• US Interests
• Commercial Requirements
• Technology Developments
• In December, 2000, 33 countries party to the
  Wassennar Arrangement agreed to remove the 64-bit
  key length restriction on mass market products.
• EU implemented new regulations effective March
  21, 2001

65
Encryption Controls

• Reasons
• Encryption Items (EI)
• National Security (NS)
• Anti-Terrorism (AT)
• Enhanced Proliferation Controls Initiative (EPCI)
• Commerce Control List CCL
• Governs technologies controlled for one of the
  four reasons

66
Encryption Items on CCL

• Controlled for EI, NS, AT
• 5A002 hardware
• 5D002 software
• 5E002 technology
• Controlled for AT
• 5A992 hardware
• 5D992 software
• 5E992 technology

67
Export to US Subsidiaries

• No review needed for any encryption item
  exported, reexported or transferred for internal
  company use
• Review or license is required prior to any sale
  or transfer outside of the company

68
Encryption Controls

• Retail and Mass Market are definitions that can
  be obtained for exporting encryption technology
  or software requires semiannual reporting.
  Minimal.
• For retail products low end uses, little tech
  support, not modified by customer. Or
• products substantially the same as a retail
  product
• Functional equivelency not applicable to mass
  markets. Mass market certification also requires
  more market data.

69
Encryption Controls

• Need a license?
• Fairly easy and straight forward in EU8. Some
  EU8 sales dont require license but outside
  those countries, same technology may be
  controlled
• Cuba, Iran, Iraq, Libya, N. Korea, Sudan and
  Syria (Country Group E1) license absolutely
  required as is regular reporting and reviews.

70
Resources!

• Bureau of Industry and Security, Office of
  Exporter Services, US Dept. of Commerce
• Angela Robinson, arobinso_at_bis.doc.gov
• George Loh, gloh_at_bis.doc.gov
• Norm LaCroix, nlacroix_at_bis.doc.gov
• Judith Currie, jurrie_at_bis.doc.gov
• William Arvin, warvin_at_bis.doc.gov
• www.bis.doc.gov/encryption
• crypt_at_bis.doc.gov

71
The Devil is in the details
72
Samplings of each
73
Partnering, Exporting and Trade Best Practices
Government Policy Initiatives

• Technical Assistance
• Export Assistance Centers
• Trade Information Center (TIC)
• Analysis of country assistance programs
• Training
• Partnership building
• DEC-like advisors
• Standards support

74
Partnering, Exporting and Trade Best Practices
Government Policy Initiatives

• Advocacy
• Trade Missions
• Direct project advocacy (early often)
• Big Emerging Markets Initiative
• Offset Policies
• Financing
• Anti-Bribery

75
UK Ireland

• Scotland and Rep. of Ireland have strong
  incentive programs for foreign manufacturing
  operations -- thus the presence of Compaq, Dell,
  Nortel, Fujitsu, Daewoo, etc.
• Northern Ireland has
• 0 property taxes and local income tax
• rapid write-off of fixed assets

76
Netherlands

• 100 digital telecommunications system
• main switching point for most European telecom
  traffic
• Marketing central call centers for all kinds of
  businesses -- telecom and language ability
• Investment policies are wide open

77
Japan

• Japan deregulating key industries throughout the
  90s in an attempt to be more competitive, but
  the effort has additional benefits it makes the
  rules of business play more easily understood and
  makes it easier for outsider competition.
  Industries which have been, or are being
  deregulated include
• Logistics
• Energy (Electricity, Petroleum, Gas)
• Information and Telecommunications
• Finance
• Land
• Distribution

78
Japan

• The serious down-turned economy is based on
  several problem areas. How many can you list?
• ...
• ...
• ...

79
Japan

• Japan is concerned
• Little venture capital.
• Equity financing is not part of their culture or
  methods.
• Huge banks have dominated -- debt financing is
  BOSS and the source of their current problems!
  
• Tough on small business and ignore start-ups.
• So, MITI launched repeated studies of the venture
  capital methods in the US and is trying to create
  a VC community in Japan it might take
  incentives such as the US capital gains tax
  (lower than straight profit taxes) but will also
  require re-education and training for the old
  bankers and different education for the young,
  potential entrepreneurs.
• It wont happen in a deflationary economy

80
Globalization of U.S. industrial RD
81
Denmark

• Denmark passed a law in January 1999, which
  allows faculty members to hold the rights to
  their own research. It is a strange process the
  faculty member must declare interest in his/her
  own research. The university or research
  institute then has two months to review the
  technology to see if they want march-in rights.
  If not, then the faculty member, who can spin it
  off, may hold all rights, license it, etc.

82
Denmark

• The fast turn-around is creating such an
  implementation nightmare that the Innovation
  Centeret (operator for universities innovation)
  has asked for training for the Quicklook process
  which you studied. They believe they could use
  it to better assess the technologies and do
  proper due diligence for Denmarks universities.
• They are hoping the entire process opens up the
  commercialization process and leads to more and
  better transfers. Innovations Centeret has a
  incubator, research park and educational mission.
  They are working to integrate this policy into
  their efforts and help create start-up companies
  from their universities.

83
Incubators as Country Policy

• Britain has a national policy to support
  incubators, primarily as a source of university
  and national lab KTT but they also support
  community-based incubators.
• Almost every major university has an incubator
  attached to it their success is a mixed bag and
  is very dependent upon the leadership. Well
  duhhh -- eh?
• Governments believe that the incubators will
  increase the number of indigenous companies and
  that technology centers might lure global
  companies into their countries. It isnt always
  that easy -- as you heard from Dave Gibson
  technopolies cannot necessarily be created from
  whole cloth and work if the surrounding culture
  and infrastructure arent present

84
Incubators

• Shanghai Z.J Hi-Tech Innovation Center has
  positioned itself to use returned overseas
  students to be the primary workforce for the
  entrepreneurial ventures created in the park as
  well as the state-owned, collectively-owned, and
  private enterprises wholly-foreign owned
  enterprises and joint ventures which it is
  attempting to attract to the Park specifically to
  support technology commercialization,
  industrialization and globalization.
• They will provide investment funding as well as a
  comprehensive infrastructure and a trained
  workforce as part of their incentive package.
  They also have an extensive set of tax incentives
  that mirror those for the UK.

85
Protectionism

• No country is free from cries for protectionism
  they may come from labor unions, from specific
  embattled industries and occasionally from the
  consuming public.
• The demands for protection from US growth hormone
  fed -beef, by European governments
  (http//www.parliament.uk/post/reports.htm) and
  consumers is very different from Brazils
  early-mid 80s failed effort to grow its own
  computer industry by disallowing any foreign
  imports of computers or foreign computer
  manufacturing efforts within Brazil.

86
STC391 Overarching Learning Objectives