Monday, June 11, 2012

Commerce Official on U.S.-China Information Technology Cooperation

U.S. Department of Commerce
International Trade Administration
Assistant Secretary of Commerce Nicole Y. Lamb-Hale
U.S.-China Information & Communications Technology Development Forum
Thursday, June 7, 2012
Dallas, Texas
As prepared for delivery

Thank you, Grant, for your kind introduction. I want to start by welcoming our Chinese guests, led today by Director General Zhang. We are so glad you could make the trip today.

I also want to thank TIA and USITO for organizing today's event, along with their Chinese partner, the China Academy of Telecommunications Research.

These organizations have long been valuable partners for the Department of Commerce. USITO was formed by leading high-tech trade associations, including TIA, in 1994 with seed funding from the Market Development Cooperator Program, administered by my unit at the Department of Commerce. The goal of the program is to establish partnerships between the International Trade Administration and industry groups in order to enhance the global competitiveness of U.S. industries. While USITO is now entirely funded by its five parent associations, it remains a model of what the Market Development Cooperator Program was founded to accomplish. The organization is a crucial interlocutor for both the Chinese and U.S. governments on information and communications technology, or ICT, issues of mutual importance. Along with its parent organizations and Chinese counterparts, it has played an invaluable role in supporting the U.S.-China Joint Commission on Commerce and Trade, or the JCCT.

The JCCT is the one of the primary vehicles for bilateral exchanges on trade and commercial issues, and we are heavily dependent on industry for its success. Today's event is part of a robust tradition of cooperative activities organized through sector-specific JCCT working groups, such as the Information Industry Working Group, or IIWG, which is chaired by the Department of Commerce and the Ministry of Industry and Information Technology. Since 1994, we've used the IIWG and its forerunners to better understand our mutual challenges and opportunities in the ICT sector, and to promote business relationships and trade between our companies. I'm confident today's event will contribute to these goals.

I'm very pleased to be here speaking on the important topic of ICT development in China and the United States, during such an exciting time for the ICT sector in our two countries. Today's agenda has a robust line-up of speakers who will talk about the myriad changes happening in the ICT world. It is clear to me from my work as a trade official at the Department of Commerce that the rapid pace of technological change, level of complexity, and intertwined development cycles for new products and services will only increase the importance of our cooperation on trade and ICT issues. It is also clear that they will create new opportunities for companies and consumers in both of our countries.

China and the United States are two of the world's most important ICT markets, and nowhere is this fact more apparent than in the wireless sector. Combined, there are over 1.2 billion mobile subscribers in the two countries. Moreover, we are increasingly facing similar challenges. Only five years ago, the world had never heard of a smart phone. Now analysts predict that mobile Internet traffic will exceed traditional, computer-based traffic by 2015. The annual growth rate for global mobile data traffic between 2008 and 2014 is estimated to be 108 percent. It is doubling every year and it is not expected to slow down anytime soon. In the United States, we expect that spending on wireless data services will nearly double during the next four years to $144 billion in 2014, up from $74 billion in 2011. This explosion in demand for data services is driving demand for faster, smarter equipment both in the network and in consumers' hands.

U.S. carriers were among the first to grapple with the tremendous strain on their networks from spiraling mobile data demand. When the iPhone was introduced on AT&T's network in 2007, data usage skyrocketed. According to the carrier, it grew 20,000 percent in the last five years. The introduction of game-changing smart phones and the associated services they spawned drove investment in better networks. AT&T invested over $50 billion in improvements to its network between 2007 and the end of 2010.

The introduction of smart phones and tablets has also created a new industry surrounding mobile applications. A recent study commissioned by TechNet, a non-profit network of executives from the high-technology sector, estimates that there are approximately 311,000 jobs in the 'App Economy' in the United States alone, and that is before you account for any spillover effects.

With the introduction of the iPhone in China and more handset makers debuting new smart phones and tablets there, I know Chinese carriers will be facing similar challenges and opportunities. In fact, earlier this year, China began exceeding the United States in the number of new Android and Apple smart phones and tablets activated each month. By the end of 2011, China had become the second largest mobile application economy, as measured by the number of mobile application sessions per month, behind only the United States. This statistic is even more remarkable when you consider that, at the beginning of 2011, China ranked 10th.

Governments undoubtedly have a role to play in addressing the challenges created by increasing data usage by making more spectrum available for use by the wireless industry. That's why the Obama Administration launched the 500 megahertz initiative in June 2010. Our goal is to make an additional 500 megahertz of Federal and nonfederal spectrum available over the next 10 years for mobile and fixed wireless broadband use. However, we know that spectrum is ultimately a finite resource that needs to be used more efficiently. Advanced technologies like those developed by the companies in this room will ultimately provide the solutions carriers need to offer their customers more capacity at higher speeds.

Another emerging area of importance for China and the United States, and indeed the entire world, is cloud computing. While cloud computing itself is not a new technology as companies have been renting on-line capacity for a while, its widespread deployment is drastically changing the ICT landscape. Cloud computing has transformed the means by which a wide range of ICT (or ICT-enabled) products and services are consumed, lowering costs and increasing efficiencies for consumers and businesses alike. By outsourcing applications to the cloud, companies can share computing resources and allocate those resources more efficiently. The cloud also allows companies to make better use of a mobile or distributed workforce and interact more efficiently with customers and partners, while still managing their security needs.

Small companies are accessing computing resources that were once cost-prohibitive to all but the largest corporations and governments. For example, an Oregon-based business services firm that provides governance, risk-management, and compliance services deployed a cloud-based customer relationship management system with the goal of improving efficiency in its client services. It was able to replace a high-touch model relying on agent-client interaction with a cloud-based solution whereby the client received service through a web-based portal into the company's cloud service. It reduced client service interaction by 30 percent, creating savings of more than $300,000 a year, while still maintaining a renewal rate of more than 98%. In another example, a technology equipment company in Alabama used a cloud system to increase its sales efficiency, decreasing the amount of time required for contract approvals from several weeks to 24 hours. It was also able to improve engage

ment with its partners, resulting in a 4 percent increase in sales through resellers in the first year. Cloud computing is also having positive impacts on the broader economy. According to an International Data Corporation study commissioned by Microsoft, cloud computing helped organizations around the world generate more than $400 billion in revenue and 1.5 million jobs in the last year alone.

The cloud has also facilitated new analytical and research possibilities by enabling governments, academic institutions and businesses alike to store and process ever increasing amounts of data, or 'big data,' as it is generally known. As with the increase in mobile data traffic, cloud computing and big data activities will place new demands on communications networks as computing is moved to the cloud and becomes ever more complex.

Moreover, the business opportunities (and let's not forget trade opportunities) presented by cloud computing are astounding. Global revenues from cloud computing are expected to double from $68.3 billion in 2010 to $148.8 billion in 2014. Even as cloud computing is reducing costs for computers and services at the company level, lower costs are spurring demand for new applications and services and corresponding investment in infrastructure as a result. Demand for these technologies will increase data transmission, usage and storage needs, leading to investments in servers and networking equipment for data centers, as well as higher bandwidth network connections for both consumers of cloud services (particularly at the enterprise level) and the data centers that host them.

I am pleased to report on our recent bilateral cooperation in this area. We are happy to be working with China on issues related to cloud computing in several forums. At APEC, we developed a system of voluntary cross border privacy rules, which will create a crucial foundation for global cloud computing. Our leaders endorsed this system in the 2011 APEC Leaders' Declaration. The Obama Administration highlighted the APEC system as an example of international frameworks that promote interoperability and portability while preserving privacy protections in our Blueprint for Data Privacy, released in February of this year. In April, the Department of Commerce and MIIT organized a cloud computing seminar in Beijing, fulfilling a 2011 JCCT commitment. This successful event drew over 150 participants from Chinese and U.S. industry and government. Participants identified areas for future cooperation, such as standards and promoting trust in the cloud computing model, that will promote the widespread adoption of cloud computing. And finally, I understand that the delegation here today also participated in the National Institute of Science and Technology's 5th Cloud Computing Forum and Workshop in Washington, D.C. earlier this week. All of these events have a public and private sector component and advance our cooperation on both policy and technical issues supporting the deployment of cloud computing, and we are looking forward to continued cooperation.

The rapid changes in the ICT sector have had a monumental impact in the trade arena. Just as faster networks, better equipment and new business models have changed the way consumers and enterprises use products and services, they have also changed the way these products and services move around the world. Data from the United States is demonstrative of this trend. According to a recent presentation by the U.S. Bureau of Economic Analysis at a colloquium hosted by the Coalition of Service Industries, the share of digitally-enabled services in total U.S. exports increased from 45 to 61 percent between 1998 and 2010. Similarly, the share of digitally-enabled services imports grew from 34 to 56 percent. Clearly, digital trade is changing the way we do business.

Fortunately for the group gathered here today, the explosions in mobile data, cloud computing, and digitally-enabled trade in services is inextricably linked to demand for ICT equipment. To accommodate the surge in wireless data traffic and large gains in Internet traffic, significant increases in infrastructure spending will be required. For trade officials, this is a dream come true. As with the smart phone example I discussed earlier, new technology allows for innovative services, which in turn create demand for even better networks and equipment, which then spur even more innovative services. The result of this boom is a global import market for communications network and transmission equipment that was valued at over $455 billion in 2010, with an average annual growth rate of approximately 10 percent over the previous decade. According to TIA, in the United States alone, we will spend $296 billion on wireless and wired network infrastructure during the next 4 years

, a 41 percent increase from the $210 billion spend during the past 4 years. The United States and China lead the world in overall telecommunications spending (for both equipment and services), at $1 trillion and $354 billion in 2010, respectively, highlighting the huge potential for partnerships in the ICT sector.

Finally, I am pleased to highlight the opportunities that all of the changes in the ICT world hold for broader economic development. Like many companies, ICT firms make important, direct contributions to their home economies. But the ICT industry is unique in that it underpins growth and innovation across a variety of industries. Manufacturing industries from aerospace to consumer products are dependent on ICT to manage their production facilities and supply chains for maximum efficiencies. ICT also enables societies to find more effective solutions to meeting critical challenges, such as renewable energy, smarter transportation, and improved health care. Never has this been truer than it is today. That TIA's show here in Dallas is styled, "Inside the Network," speaks volumes about the current state of the ICT industry. In the coming years, more people, devices, and machines will be connected to the network than ever before. Widespread deployment and adoption of the most advanced technologies, regardless of where they are developed or manufactured, are among the most critical inputs for economic growth. ICT plays an important role in enabling innovation, improving education and productivity, and enhancing competitiveness in all sectors.

The companies gathered at this trade show are among the most innovative in the world. They range from small, niche manufacturers to large multinational corporations. They are the firms that will enable the achievement of our countries' mutual ICT goals. They are constantly innovating and developing technologies that will result in faster networks to enable new services. These companies will help to manage everything from smart meters on the power grid, to the newest, data-hungry mobile applications, to big data activities in the cloud. I encourage you all to take full advantage of the opportunity we have in today's event to connect with these innovative companies and learn what they have to offer at this exciting new time for the ICT industry.

Thank you.

(Distributed by the Bureau of International Information Programs, U.S. Department of State. )

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