Economics

Technology and Innovation

  • China
    C.V. Starr & Co. Annual Lecture on China: The U.S.-China Technology Competition
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    Panelists discuss the U.S.-China technology competition, including China’s advances in the field, U.S. universities’ competition and collaboration with China, and the concerns of the U.S. business community in relying on technology supply chains based in China. The C.V. Starr & Co. Annual Lecture on China was established in 2018 to honor the trailblazing career of C.V. Starr and the Chairman and Chief Executive Officer of C.V. Starr & Co., Maurice R. Greenberg.
  • China
    Securing Digital Supply Chains: A Conversation With Ajit Pai
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    Federal Communications Commission (FCC) Chairman Ajit Pai discusses the potential for surveillance and espionage if equipment from Chinese telecommunications companies, including Huawei and ZTE, is used in U.S. communications networks. CARUSO-CABRERA: Good morning, everyone. Welcome to today’s Council on Foreign Relations meeting with FCC Chairman Ajit Pai. I am Michelle Caruso-Cabrera, CNBC contributor. I’m going to be presiding over today’s discussion. First, we’re going to hear from Chairman Pai. He’s the chairman of the Federal Communications Commission. You already knew that. He was designated chairman by President Donald Trump in January 2017, and he had previously served as commissioner at the FCC, appointed by then-President Barack Obama, and confirmed unanimously by the U.S. Senate in May of 2012. You can read the rest of his bio in your packet, but welcome, Chairman Pai. Come on up. (Applause.) PAI: Well, thank you so much, Michelle, for that kind introduction. Thanks to all of you for coming here. It’s such an honor to be her at the Council of Foreign Relations. In the speakers room alone looking at pictures on the wall of presidents, and prime ministers, even an emperor, you see pictures of the very first edition of Foreign Affairs, which hearkens back to my mind a high school student in rural Kansas in the 1980s who was desperately reading Foreign Affairs to learn about all of the issues around the world, since he was competing in foreign extemporaneous speech competitions. To finally be here is such an honor and a privilege. And I certainly hope I acquit myself of the opportunity. Last week I was in Egypt as part of the U.S. delegation to the World Radio Communications Conference. Today, of course, I’m at the Council on Foreign Relations. And tonight I’m hoping to see my beloved home state Kansas Jayhawks play the evil empire of Duke in Madison Square Garden. I’m afraid my decision to be Mike Pompeo for Halloween has gone a little bit too far. But I think it’s fair to say that a CFR appearance by the chairman of the FCC is out of the ordinary. But these are extraordinary times. We are at a pivotal moment in the evolution of communications technology. Across America and around the world private companies have been rolling out the next generation of wireless connectivity, commonly known as 5G. These networks will bring exponential increases in speed, and responsiveness, and capacity. They will enable new and improved services and applications that will grow our economy and improve our standard of living, from connected cars, to telemedicine, to precision agriculture, and beyond. Another way to think about our 5G future is that we are moving to a world in which everything will be connected. Ericsson projects that an additional thirteen billion devices will come online between now and 2024. Some people call this future the Internet of Things. Others call it the fourth industrial revolution. I simply call it transformative. The United States is poised to seize these transformative opportunities. At the FCC, we are implementing a plan to facilitate America’s superiority in 5G technologies, which we call the 5G fast plan. And that plan is already helping ensure that our nation leads the way in the development and deployment of 5G technologies. We are freeing up more spectrum for the commercial marketplace, we are deploying small cells in the other wireless infrastructure components of the future, and we are modernizing our rules to encourage the deployment of optical fiber, which is critical for carrying that wireless traffic back into the core of the networks. But for all of the opportunities that 5G will unlock, it will also create new challenges. Chief among these is the main subject of my remarks: network security. When 5G is embedded in almost every aspect of our society and economy, from businesses to homes, hospitals to transportation networks, manufacturing to the electrical grid, that means securing our networks will become much more important, and much more difficult. A recent CFR white paper explained well how 5G will change the cybersecurity landscape. It stated, and I quote, 5G networks will expand the number and scale of potential vulnerabilities, increase incentives for malicious actors to exploit those vulnerabilities, and make it difficult to detect malicious cyber activity. Now, an important part of network security is the integrity of the communications supply chain—that is, the process by which products and services are manufactured, distributed, sold, and ultimately integrated into our communications networks. For years, U.S. government officials have expressed concern about the national security threats posed by curtain foreign communications equipment providers. The hidden backdoors, as they are called, to our networks in routers, and switches, and other network equipment, can allow hostile foreign powers to inject viruses and other malware to steal Americans’ private data, to spy on U.S. companies, and more. The equipment at the heart of 5G networks currently comes from just a few global suppliers. And the largest right now is the Chinese company called Huawei. And this is a major concern. Huawei positions itself as a private company, but it has significant ties to the Chinese government—namely, the Chinese Communist Party—as well as China’s military. Moreover, China’s law requires all companies subject to its jurisdiction to comply with requests from China’s intelligence services. These requests, also per that same law, cannot be disclosed to any third parties, such as Huawei’s customers in China or abroad. And that means that China could compel Huawei to spy on foreign individuals and businesses and prevent Huawei from disclosing such surveillance requests. Now, you don’t need to look hard to find evidence that the Chinese government is willing and able to use its growing influence over global commerce to advance its own interests. In the past month alone, Chinese officials pressured the National Basketball Association to stamp out criticism from anyone within the NBA of the country’s policies in Hong Kong. Gaming company Blizzard Entertainment, which is partially owned by the Chinese tech giant Tencent, suspended a professional gamer for speaking out in support of Hong Kong protesters. And Apple, which has extensive business operations in China, removed the Taiwanese flag emoji for iPhone users in Hong Kong and Macau. These cases reflect a disturbing and growing pattern of behavior by the Chinese government. They also raise a broader concern about the security of the United States. If China is willing to use its leverage over basketball, e-gaming, and emojis, imagine what could happen if we let Chinese companies’ equipment into tomorrow’s 5G wireless networks. This would open the door to surveillance, espionage, and other harms—stakes much higher than sports and entertainment. And for too many years some have dismissed this concern as hypothetical or as a smokescreen for protectionism. But if there is a silver lining to the episodes of the past month it is that millions of Americans have now come to understand that the threats posed by the Chinese Communist Party are comprehensive and call too real. Now, even before these latest developments, however, there was no shortage of red flags about Huawei. Earlier this year the Justice Department charged Huawei individuals with fraud and theft of trade secrets from T-Mobile. The indictment stated that Huawei offered bonuses to employees who succeeded in stealing confidential information from other companies. In announcing the charges, FBI Director Christopher Wray described Huawei’s transgressions as brazen and persistent. Independent experts too have raised similar concerns. A report issued earlier this year by the cybersecurity firm Finite State found that a majority of the Huawei firmware images they analyzed had at least one potential backdoor. And earlier this year the United Kingdom’s Huawei’s cybersecurity evaluations center oversight board issued a damming assessment of the company. It found that a lack of basic engineering competence in cybersecurity hygiene makes Huawei equipment vulnerable to just about anyone, bringing significantly increased risk to U.K. operators. Now, on top of all of this, the Chinese government subsidizes Huawei, enabling it to undercut its competitors on price even if the quality is lacking. Whether this violates World Trade Organization rules and other laws, I will leave to the trade lawyers. But this practice demonstrates China’s strategic determination to choose Huawei as a national champion, to make it a key component in its Belt and Road Initiative, and to crush foreign competitors by any means necessary. For our part, when it comes to 5G and America’s security we cannot afford to take a risk and hope for the best. The stakes are simply too high. So what can we do to secure our networks? First, we need to make sure that the equipment going into 5G networks is from trusted vendors, that the companies entering this space won’t risk our national security, threaten our economic security, or undermine our values. Now, this type of upfront solution is just common sense. Making the right choices when deployment is just beginning is much easier than trying to correct mistakes once network construction is already underway. And the good news is that we’re seeing a government-wide effort to carry this out. In 2018 Congress passed a law prohibiting federal agencies from purchasing telecommunications equipment or services that would pose a national security risk, including from Huawei. In May of this year, the president issued an executive order to prohibit the purchase and installation of telecommunications equipment in the United States deemed a security threat. The Department of Commerce was charged with developing regulations, and proposed rules are due to be released soon. And at the FCC, we are doing our part. In two weeks, the FCC will vote on prohibiting those that receive money from our annual $8.5 billion universal service fund from using that money to purchase equipment or services from companies like Huawei that pose a threat to the security of our communications networks. But of course, it’s not enough to ensure that risky equipment won’t be installed into the networks of the future. That is why we’re also working to secure existing networks. America’s largest telecom providers have generally refrained from installing Chinese equipment, but others—and particularly some rural wireless carriers—currently have Chinese equipment in those networks. And this poses an unacceptable risk. So at our November public meeting in a few weeks, the FCC will also vote on launching a process to remove and replace equipment from USF funded communications networks. My plan calls first for an assessment to find out exactly how much equipment from Huawei and other Chinese company, ZTE, is in these networks, followed by financial assistance to make carriers make the transition to more trusted vendors. We’ll seek public input on how big this so-called rip and replace program needs to be and how best to finance it. Our goal here is pretty simple: To close security gaps in a fiscally responsible way. And the third thing we need to do is to continue to engage with our international partners. We need to remind our allies that decisions impacting 5G security need to be made with the long term in mind. Focusing too heavily on short-term considerations could lead to decisions that are pennywise but dollar foolish. The more that we can work together and make security decisions based on shared principles, the safer that our 5G networks will be. When I meet with my foreign counterparts, I stress the importance of 5G security. And I have done that personally and extensively over the past year, both as part of a cross-administration team and solely on behalf of the FCC I’ve visited and spoken with senior leadership in Bahrain, Germany, Portugal, Saudi Arabia, Israel, and the United Emirates, among other places. And I’ve met with decisionmakers from many other countries such as Brazil, and Chile, and India, and Australia. And this May, I was honored to be a part of the U.S. delegation at a 5G security forum in Prague, where more than 140 representatives from thirty-two countries came together to build a consensus approach for protecting next-generation networks. We developed a set of recommendations called the Prague Proposals, which you can see online. This security framework is based on the simple principles of competition, transparency, and the rule of law. Having spent the past week meeting with other government officials at the World Radio Communications Conference, I’m encouraged that these principles are gaining traction. There is growing awareness of the importance of integrity of the supply chain. Indeed, in the last twelve months we have seen allies like Japan, and Australia, and New Zealand take similar action to prevent equipment from unsafe vendors into their networks. The fourth and final thing that I’ll highlight this morning is the need to leverage our nation’s leadership and software to mitigate security risks. If we can virtualize functions of the radio access network, we can not only reduce the cost of deploying these 5G networks, we can also reduce our reliance on foreign equipment manufacturers. I’m encouraged by the work that American companies are doing in this space, and I certainly hope to see significant breakthroughs soon. As I and my colleagues at sister agencies have made clear to our counterparts in foreign countries, America’s current leadership in 5G and our support of virtualized networks of the future demonstrate that the choice between 5G deployment and security is a false one, today and going forward. A country need not choose between the two. And the United States certainly will not do so. In closing, ultimately the Chinese government’s increasingly brazen actions to leverage its commercial influence and stifle free expression should be a wake-up call for the United States. They remind us that action is needed now to secure America’s 5G networks. The FCC and our federal partners are doing just that. We are on track for a strong and secure 5G future. Thank you very much for your attention, and I look forward to an interesting conversation to come. (Applause.) CARUSO-CABRERA: Thank you for those remarks to set the stage for us here at the Council on Foreign Relations. Reminder: This is an on-the-record discussion. PAI: OK. CARUSO-CABRERA: First question: The concern about backdoors with Huawei equipment and Chinese equipment. Is it that the other competitors out there from whom the U.S. companies could purchase—Ericsson and Nokia in particular—is it that they don’t have backdoors, or is it that yes, they have backdoors but at least they’re from a country that has similar values in terms of human rights, protection of intellectual property, et cetera? Which is it of those? PAI: That’s a great question. And I think the answer is a little bit of both. If you look at some of the independent experts that examine equipment and service, software in particular, that come from these vendors, they will consistently find that equipment from Huawei and other Chinese vendors tends to be more insecure, that there are more opportunities to insert malicious lines of code, and the like. And secondly, I do think it is the case, by any reasonable observers anyway, that those countries have more of a framework of the rule of law than does China. There is no veritable national intelligence law in Sweden and Finland, for example, as you would find in China. There is no judicial—there is a judicial framework for handling requests like that, there might not be in China. So I think it’s probably a little bit of both—that the vendors are untrustworthy and that the rule of law is not as strong in China as it is elsewhere. CARUSO-CABRERA: Cisco does produce some of the networking equipment required, but not enough really. I mean, it’s Huawei, Ericsson, and Nokia. Any chance out on the horizon, do you see anywhere that a U.S. company will actually fill the gap at some point? PAI: The economics of the traditional network equipment industry are challenging, of course. There used to be many more suppliers. And thanks in part to Chinese subsidies, I think Huawei’s gained a leading market share. And there are arguably network effects that come from that. But one of the reasons why I think it’s important for us to think about the virtualization of these networks, essentially software driven networks, which is what 5G will be, is that that enables American companies, smaller companies in particular, to innovate. If we can virtualize the radio access network and some of the other core parts of the network, that essentially allows us to rely on the equipment manufacturers that are—that are new, that we can rethink the way that these networks are architected and then move forward accordingly. CARUSO-CABRERA: One of the—I don’t know if it’s persistent—but there have been repeated reports that there’s an arm of the administration that would like to nationalize the 5G network, take it over. And it’s been beaten back. Larry Kudlow, for example, came out and expressly said no, no, no. But my reporting indicates that the reason that keeps coming up is because our telecom equipment providers are very indebted in this country. And there’s worry that they don’t have the money to do a 5G rollout. In this race with the Chinese, that we will be behind because of it. Do you have those concerns? PAI: Well, first and foremost, I would strongly oppose any plan to nationalize 5G networks. I think the legacy of 4G LTE development here in the United States shows that the private market, not the government, is best positioned to drive innovation and investment in wireless networks. And that concern would be amplified when it comes to 5G, where things are even more dynamic, where the spectrum assets and infrastructure necessary, if anything, would be even stronger. And so I think the case for nationalization is relatively weak. To the extent that people have other concerns about the speed, I think it’s critical for all of the levels of the government, but especially the FCC, to put those building blocks in place, which we’re doing through the 5G fast plan, then let private companies innovate around some of those building blocks. And we’re seeing that now. I mean, nontraditional players, for example, are entering into our spectrum auctions. And it’s not inconceivable in the future you’ll see players that may not currently be in the wireless sector enter that space. So we’re seeing fixed wireless providers like Starry, we’re seeing nibbling from cable companies, we’re seeing interest from Google, and Amazon, and Facebook, and some of the spectrum that we’re putting on—into the commercial marketplace. And so I think 5G is going to come from a variety of places, because there are so many different use cases. And so there too I think there’s an option. The other piece of it I will mention, although it’s not traditionally thought of as 5G, but the innovation that we’re seeing from American companies in space is really going to drive a lot of our economic growth. And you’re seeing companies like SpaceX, and One Web, and even smaller ones like Swarm now start to think about low-Earth orbit satellites that would provide internet access—whether it’s industrial IoT or residential broadband service—in a way that would be essentially competitive with some of the traditional players. CARUSO-CABRERA: Yeah, with the efforts of Elon Musk and other folks in the private space industry, there’s many, many more satellites in the air, which provide a lot more opportunity for distribution, et cetera. Is that your point? PAI: Absolutely. You have reusable rockets that really decrease the cost element for launch. The form factor for these satellites is just incredibly small compared to what it was at the dawn of the satellite age. And so there too, I think, we’re seeing a lot of American innovation that our country should be proud of. CARUSO-CABRERA: There’s one school of thought, small, I think the audience would be most familiar with it if they’re read Holman Jenkins a couple times in the Wall Street Journal, where they’ve argued: It’s a mistake to prohibit Huawei. Instead, force them to follow our rules. Follow the U.K. and have an equipment analysis process done by the intelligence service. You know, if they list on the U.S. stock exchange they’ll be forced to follow all kinds of rules that they wouldn’t otherwise. And that would be a better way to almost kind of force regulation on them. Thoughts? PAI: I mean, I do think that the Prague Proposals that I mentioned earlier do encompass a more risk-based framework, as opposed to singling out a particular company. But the problem in this particular case is, number one, that the company itself is essentially beholden under the rules of the country where it is cited to comply with these requests from the intelligence services. And in addition to that, there are any number of cases—I mentioned the indictment involving T-Mobile. That’s certainly not the only problematic case that we’ve seen in which the company is simply not comporting with some of those principles that we talked about. CARUSO-CABRERA: If you haven’t read that indictment I highly recommend it. It’s very, very interesting. They had a spy literally go into the headquarters out in—I think it was Seattle? Somewhere on the West coast. They had a robot. They called it Tappy. And Tappy was really good at being really fast at testing phones. And so they would figure out, you know, this phone will die. This phone will die too quickly. We don’t want to sell it. And the Chinese phones were failing a lot. So the Chinese, at least according to the indictment, the allegation is that they sent an employment who literally took the arm out, and put it in the briefcase, and took it home, took pictures, and then brought it back the next day and said, oh, sorry, this, you know, happened by mistake. It was incredibly brazen, if it’s proven to be true in the court case. PAI: And this exhibits a larger concern I have, which is that this is not isolated behavior to one company, or even one industry. I mean, look at—I don’t know if any of you saw the New York Times story yesterday by Gina Kolata about Chinese researchers taking information in the health care system and feeding that back into—I mean, this is a comprehensive problem that we’ve seen across industries. And I have to think that at some level we just need to have a whole conversation about some of the holistic problems we’re seeing. There’s a blanket refusal to abide by some of these norms of trade, and free dealing, and the like. CARUSO-CABRERA: You mentioned some countries that have agreed with the United States when it comes to not deploying Chinese equipment for their 5G networks. But they tend to be wealthier countries. How’s the diplomacy going with poorer countries that would like to have 5G, and if the Chinese equipment is cheaper, so be it. They don’t seem to care. Are you making any headway there? PAI: We are. I’ve mentioned some of the countries that I’ve visited. And I can say that many of them, while still developing, nonetheless understand that the choice between 5G deployment and security need not be one that they have to make. And so we’ve pointed out, for example, through my travels in the Middle East that we have shared security interests. And that’s one reason why we need to understand the risk profile of the vendors that go into our networks. And they understand as well that even though they may get a good deal—for example, one of the—many of the officials from Bahrain and elsewhere told me that typically what the Chinese vendors will do will come in and say: OK, we know you’re getting a certain bid from Ericsson, with a certain percentage of interest, and whatnot. We’ll give you a thirty-year interest free loan, and we’ll even staff, you know, your offices of 150-200 people that will do nothing ese but serve your carriers. And they understand that the only problem with free is it eventually costs too much. And when you’re talking about these networks that need to be updated with software over time, there are too many—there’s too much of an attack surface to insert malware. And in addition, once you’re locked in, it’s very, very difficult to break free of that particular vendor. And so— CARUSO-CABRERA: Are you saying the Chinese knew about—knew all the details about the other bid? Or they just knew generally about bid? Or whatever the bid is we’ll undercut it? PAI: Oh, just generally speaking. Generally speaking because they’re subsidized by the Chinese government they can come in at 50 percent cheaper. Just a significant amount cheaper. And so I think the countries that I’ve spoken to, at least, understand that even though it might be cheaper the equipment might not be as trustworthy, it might not be as high quality. And eventually, the deal won’t be as inexpensive as it purports to be. CARUSO-CABRERA: If we can move onto another topic? PAI: Oh, sure. We do other things. (Laughter.) CARUSO-CABRERA: Yeah. Mark Zuckerberg at Facebook and over at Twitter, they’ve come down very different positions on political ads. Twitter says they’re not going to carry them at all, and Zuckerberg has said that they’re going to follow the rules, the regulations that the broadcasters follow, which is they’re not going to decide whether or not an ad from somebody running for office is correct, incorrect. Thoughts on that, and the decision that has been made by Mark Zuckerberg? PAI: No particular thoughts, to the extent that the FCC doesn’t regulate those companies. We certainly don’t regulate the content decisions that they make. I would simply observe that it’s fascinating, though, to see—just as a citizen, not so much as a regulator—that these discussions about free speech that we’ve had for many, many years are now taking on a new dimension in the online world. And it’s very unclear where things are going to go. I think many people at the dawn of the commercial internet certainly embraced the notion of the marketplace of ideas transformed to the digital world, just let all voices be heard. And now you’re seeing a lot more—a lot more of a two-sided conversation, I think, where people see the upside, of course, to having these digital platforms giving everyone a voice, but also see some of the potential downside. And where Congress ends up or where any relevant regulator at the Federal Election Commission or whoever ends up is quite unclear at this point. CARUSO-CABRERA: I wonder if him endorsing broadcast regulations—because those broadcasters are regulated by you when it comes to political ads, right? If he endorses that model, does that bring on the possibility of people saying, oh, OK, well, we are going to regulate you like a broadcaster, which would have all kinds of implications for them? PAI: Legally, it certainly doesn’t. I mean, if Congress changes the law, of course, then there is a different conversation to have. And that’s one of the things you see members of both parties in both houses of Congress now talking about is, across all of these different points of—you know, whether it’s election ads or whatnot—people are starting to have conversations about how to think about these digital platforms that were unthinkable just five years ago, ten years ago. CARUSO-CABRERA: But I’m going to do that hypothetical thing. So you’re chair of the FCC. You do not regulate Facebook, and so therefore you have nothing—that’s up to Congress. If you were a member of Congress—(laughter)—what do you think would be a good policy prescription, if any, or nothing? PAI: Well, what I can say definitively is that I am not now, and I have no plans to be, a candidate for elected office. (Laughter.) And so I would have to—you know, in the grand-tradition of would-be politicians, dodge that question, respectfully. CARUSO-CABRERA: (Laughs.) One final question, then we’re going to go to the audience. So you approved the Sprint-T-Mobile merger. So that will be now three competitors, and then the hope is—or, the belief is that Dish, having acquired some of the assets, will roll out service and therefore be the fourth wireless provider in the country to help keep costs lower. Are you convinced you’re going to have the money to do that? And are you convinced that the attorneys general are going to fail—the ones that are suing to stop the merger? Is that going to hurt that deal at all, or do you think it’s going to make it through the court system? PAI: With respect to the second question it’s an unknowable. Litigation, of course, is always—it creates uncertainty. And so we don’t know how the judge in that case is going to rule. But I certainly do think—I certainly do hope that the state AGs do not prevail in that case because I do believe that the consummation of this merger, along with the divestiture to Dish that you mentioned, would be tremendously beneficial for the public interest. I mean, if you look at some of the conditions that are on the table, 99 percent deployment of 5G service is defined at fifty megabit per second service or greater to the American public within six years. That is a huge benefit. Look at some of Sprint’s 2.5 gigahertz assets that are current underutilized, if not unused. Putting those to work—mid-band spectrum for 5G—within the next three to six years is going to be a tremendous benefit. Again, the divestiture which would create a fourth competitor. That preserves the competitive framework and, along with the price commitment that the emerging parties had made, would ensure that wireless services remain affordable. So in the long run, I think the—you know, putting aside the politics of litigation and whatnot—I do think this is an important deal for the public interest, and I hope that it approved. CARUSO-CABRERA: Terrific. OK, so at this time I’d like to invite members to join our conversation with questions. A reminder that this meeting is on the record. Wait for the microphone, speak directly into it, please stand, state your name and affiliation, one question to keep it concise, and any speeches, you know me, I’ll cut you off. (Laughter.) Right here in the front row. PAI: And it goes for me too. (Laughter.) Q: Thank you, Mr. Chairman, for coming today. Really appreciate it. As many of— CARUSO-CABRERA: Your name? Q: Oh, sorry. Jove Oliver with Oliver Global. PAI: Already violated the rules! CARUSO-CABRERA: Yeah, already! Q: I’m out. Kick me out. PAI: There’s always one. Q: As many of the companies that sort of own the so-called pipes of the internet increasingly get into the media content business, and with the sort of relaxation of the net neutrality regulations, how concerned are you that some of those bigger conglomerates might, you know, throttle some of their competitors with those—with the current net neutrality regulations? And if you’re not concerned, why not? And then just any comment on the state-by-state sort of patchwork approach that looks like will proceed on net neutrality. Thank you. PAI: OK, so a lot of threads in there. First and foremost, I would say that we made the right decision. And I think the proof is in the pudding now. It’s almost two years since we made the decision to relax the utility-style regulations imposed by the prior administration. And when we made the decision, I tallied a lot of the predictions that would be made. This is the end of the internet as we know it. You’re going to have to pay $5 per tweet. The internet is going to work for one word at a time. Fast forward. Now, two years later, according to Ookla—not according to us—average speeds in the United States for fixed broadband are up over 57 percent over two years. Infrastructure investment was up $3 billion in 2018, the second consecutive annual increase. The internet is freer and more open than ever. The best metric of that, of course, would be venture capital funding to startups, which set a record in 2018, which one would not expect if we were talking about startups that were at the mercy of some of these broadband providers. And more generally, I think that other countries are now seeing that because we have an internet economy that does have that incentive to deploy internet infrastructure as well as a free market for startups to innovate, we are continuing to lead the world in terms of technology. So to the extent that there is concern about any competitive behavior I will say today what I’ve said consistently since this issue first flared up, and since I became a recovering antitrust lawyer, which is this is squarely a question of an antitrust. To the extent that a country is vertically integrated and discriminating against an unaffiliated competitor, that is a question for the Federal Trade Commission and the Department of Justice to evaluate. If it’s a question about an unfair deceptive trade practice, that is squarely something for the Federal Trade Commission to evaluate under section five of the FTC Act. If it’s a question about broadband privacy, here too the FTC and state and local—or, state authorities have comprehensive jurisdiction over the internet economy to decide whether or not a particular privacy practice violates consumer interest. So thus far, at least, as I said, the early evidence is that things are good. And to the extent they’re not, we are going to make sure that both the FCC through our transparency rule and the FTC and DOJ through their administration of competition law stand at the vanguard in terms of protecting the public interest. CARUSO-CABRERA: And the other question he had was about the patchwork effect that some states have said— PAI: Oh, yes. Right, right, yeah. CARUSO-CABRERA: Just so the audience understands. So the FCC has said, OK, net neutrality. But some states with certain leanings have said, OK, you’re not going to do it, then we’re going to do it. On the one hand a Republican administration would say, well, you know, states’ rights, and, you know, let’s have fifty experiments. And then on the other hand then you have the issues about different regulation in different states. PAI: Yes, I do admire the newly developed affinity for the Tenth Amendment by some of these states. But no, I think the D.C. circuit decision made very clear that conflict preemption still exists. And to the extent that a state makes a determination that is conflict with a federal policy, then that policy could be preempted. And that’s a determination we’ll have to make on a case-by-case basis. But more generally, I think it’s—this goes to a larger conversation that goes well-beyond net neutrality. It goes to, I would argue, the entire concept of the internet. If you send me an email, if you tweet at me, if you post something on Instagram that I see, even though we’re in the same room the chances are that that communication traverses a state boundary. Anything associated with the internet, I would argue, is inherently an interstate service. And so we are quickly reaching a time when it doesn’t make sense as a country for—if only for purposes of national competitiveness and allowing entrepreneurs to have regulatory certainty and the like—to have federal, state, local, and in some cases even tribal regulatory review. All of these different levels of government cannot have a bite at the regulatory apple. Or, they can, but we can’t expect then to be a country that incentivizes investment in innovation, whether in networks or in services. And so that’s one of the things I think is very important. And you’re seeing it now on the privacy side, where Google, Facebook, others are resisting California’s privacy law. And those companies are now coming to Washington and saying: Well, we need a federal privacy law to preempt all of these state determinations. So I think it’s just evocative of a broader concern that many companies have, that we need to know what the rules of the road are. CARUSO-CABRERA: Right here. Q: I’m Ricardo Tavares from Techpolis, a California-based technology policy consulting company. So 4G was the first single wireless standard. All previous generations have several different regional and competing standards in the same country sometimes. But the current—do you see the current U.S.-China competition in technology driving us to a future that we’re going to have more than one wireless standard, even through very dramatic tweaking of 5G—the process of standardization is still going on—and also, for future generations? CARUSO-CABRERA: You mean in the United States or all over the world? Q: Over the world, because we have the single global standard for the first time with 4G. PAI: That’s a good question. Thus far, at least, I hope that there will be a single technical standard or set of standards anyway. We see it in IEEE, 3GPP and other technical standard-setting bodies that everyone in the world’s participating, including the Chinese. And at the end of the day, I think we don’t want to see that segmentation of technology where what kind of services or applications you happen to get depend on the accident of where you happen to be at that moment in time. So I still hold out hope that we’ll see a consistent set of standards that will allow everyone around the world to innovation and allow everybody to gain the network effects—the beneficial network effects of harmonization and standardization. CARUSO-CABRERA: Right there, and then you. Q: Thank you, Mr. Chairman. I’m David Braunschvig. To follow up on standard setting, this time with respect to naming domains, the United States being at the inception of the commercial internet controlled this—had the prerogative to control it. Under pressure from other countries, this control may be ceded to an international multilateral organization—ICANN being ceded to it. What is your view on the risks and opportunities of that trend? Do you see a little bit patterned after the United Nations shortly after World War II to have something like a Security Council of the new globalized ICANN, where the U.S. could at least have a veto power? PAI: That’s a good question. The previous administration, as you probably know, already made the decision to relinquish the contract. The Department of Commerce decided not to renew that contract. And so now the Internet Corporation for Assigned Names and Numbers, or ICANN as you pointed out, is essentially the administrator for some of those domain name services. And so thus far I’m not aware of any particular concerns that have manifested themselves. But if that changes, I would certainly welcome wisdom from whatever quarter to educate us about it. We don’t have a role here as well. This is, as I said, is a Department of Commerce—or, was a Department of Commerce function. But I think the governance of the internet is something that’s so important that it is important for all federal regulators like me to be aware of how it’s developing. CARUSO-CABRERA: There’s a lady right behind this pole here. Q: Hi. Danah boyd, Microsoft research. I’m curious for you to go deeper into the supply chain, right? I understand the Huawei battles and what’s going on in Europe in terms of the manufacturing of different network tools, but when we’re talking about a lot of semiconductors and a lot of chip manufacturers, there’s a much narrower world of competition. And a huge chunk of it is currently happening in Taiwan semiconductors, where the geopolitics are different than both China and Western Europe. So how do you think about those areas where there actually is no competition really at play right now, and where the geopolitics could put us in a very awkward place? PAI: That’s a really good question. So thus far, we have focused mainly on some of the more macro-level equipment vendors that are supplying equipment. Of course, those macro vendors don’t operate in a vacuum. They, themselves, rely on semiconductor and other software companies to—essentially integrating all those parts. And there, there are some positives, which is that American companies have an important role in supplying equipment to Chinese vendors, among others. But there is a risk which, as you point out, there may be bottlenecks, so to speak, in terms of the supply chain. That’s one of the things from and competition and an interest perspective I do have significant concerns about. I mean, any anti-competitive market is one in which you will not see consumer benefit on the micro level or national interest on a macro level being vindicated. So as to the geopolitical concerns too, that’s another—that’s beyond my pay grade but, of course, it is something that we do think about quite a bit, is where are these vendors located, what effects—or, what influence could the host government have on some of those network vendors? It’s a constant concern. And I think especially as time has gone one we’ve seen a lot of these supply chains change dramatically. And I mentioned on the macro level it used to be, when I first started working in this industry about twenty years ago, that you’d see a whole bunch of equipment vendors. Now they’ve shrunk essentially down to, you know, three to five. And that is a trend that is concerning. That’s part of the reason why we’re putting so much of an emphasis on looking at what’s around the corner. Virtualization of the RAN is one of them, but there are many others too. But we’re trying to encourage that as a way of escaping the bottlenecks that you mentioned. CARUSO-CABRERA: Virtualization of the RAN sounds like a sci-fi novel. (Laughs.) PAI: Whenever I describe it—my wife’s a doctor, so whenever I describe what I do at home her eyes glaze of. I’m like, well, what did you do? I saved a life. Like, all right, you got me. (Laughter.) CARUSO-CABRERA: There’s a lady back here. Q: Hi. Lydia Moynihan, Fox Business. When will the FCC release the order approving T-Mobile-Sprint? And will there be language in that order that bolsters T-Mobile’s case against the state AGs? PAI: So as to the second I can quite easily tell you stay tuned. You’ll see for yourself when the order’s released, which begs the first question. So we’re still going through the internal processes. Commissioners have to issue statements and the like. And so we’re in the process of doing some of that, the legwork that typically comes with those types of orders, so I can’t give you a definitive timeframe on that. CARUSO-CABRERA: Question here. Q: OK. Rus Brandom, policy editor at the Verge. I was surprised and encouraged to hear you speak so enthusiastically about antitrust action from the FTC and the DOJ. I think part of what you’re referencing is there’s sort of a growing desire from—for antitrust action against edge providers—your Google, your Facebook—as part of what we need to maintain the open internet that, you know, often folks talk about in terms of the FCC. Is that something—obviously, you know, it’s on the FTC and DOJ not you folks—but is that something you increasingly see as necessary? PAI: You shouldn’t be surprised. I started off my career as an antitrust lawyer at the Department of Justice, but my teeth in the wake of the 1996 Telecom Act on everything from box entry into the long-distance market to the WorldCom-Sprint merger. I mean, antitrust is what have me my raison d'être to start—and the start of my legal career. And I think now those same tools of antitrust remain more relevant than ever. And I think part of the reason why you’re seeing such a discussion about these tech platforms through the prism of antitrust is that that is how many people see these marketplaces. If they perceive that a particular player has market power, well, it’s not just up to, you know, state—people to complain about it. It’s up to the antitrust regulation to ensure that there’s competitive market. So now you’re seeing everyone from presidential candidates to even the Department of Justice itself and the FTC trying to have a conversation. OK, what is the market structure? What is the market power? What are the potential anti-competitive effects? What are the potential remedies and the like? And to me, at least, that’s an important conversation to have. I certainly don’t have jurisdiction to make a determination, of course, since I head a sister agency. But I do think that it flags something—or, it highlights something that I flagged in a speech I gave in November of 2017, which remains more relevant than ever, that when it comes to an open internet there is an important conversation to be had about some of the Silicon Valley tech giants. And at the time it was thought avant-garde. I can’t believe the FCC chairman is saying that. But the entire internet economy we want to be competitive. We want everyone to be transparent, and open, and pro-competitive. And that’s now the conversations that we are seeing were, again, virtually unthinkable just two years ago. And we’ll see where it goes. CARUSO-CABRERA: And since you brought up presidential candidates— PAI: I’m not running, again. I have no plans. I’m not running. (Laughter.) CARUSO-CABRERA: Elizabeth Warren says you suffer from the dreaded bureaucratic disease called regulatory capture. PAI: (Laughs.) Yeah, right. CARUSO-CABRERA: Do you? PAI: (Laughs.) It’s utter nonsense. I mean, look at the decisions we’ve made. I mean, they’ve consistently embraced my philosophy of technological neutrality. I mean, when you talk about promoting more broadband deployment, relaxing our rules to encourage companies to invest in fiber instead of copper, encouraging next-generation innovators like fixed wireless companies, and space innovators, and the like. We’re simply looking to provide a marketplace in which every company, every technology has a full and fair chance to compete. CARUSO-CABRERA: But she says you haven’t done enough for the poor and living in rural areas to get broadband. PAI: You know, that would be news to the folks in the New Orleans public housing project I visited last year who, thanks to our policies, are getting broadband and fiber for the first time. That would be news to Cullen Quill, a farmer I met in rural Mandan, North Dakota just two months ago who that very day, thanks to our policies, was getting gigabyte fiber. And to look into his eyes and to ask him what it meant to get internet or the first time. And he thought about it. And he said, you know what? Now we don’t have to drive thirty minutes west so my kids can sit outside of McDonald’s and upload their homework using McDonald’s wi-fi connection. To me, that means a lot more than whatever some politician might criticize us for. CARUSO-CABRERA: I want some gigabyte service. It’s just thirty blocks south of here, if you can manage that. (Laughter.) Go ahead. (Laughs.) PAI: No, I really mean that, by the way. I mean, if you—now— CARUSO-CABRERA: So do I. (Laughter.) PAI: Yeah. No, but I’ve been to all 48 states and the territories of Puerto Rico and the Virgin Islands. And I’m telling you, there are so many challenges in our country, but when you see the benefits of closing that digital divide. I mean, I’ve been in tribal schools in the Jemez Pueblo. I’ve been to the Gulf of Mississippi. I mean, these are poor communities that are getting broadband for the first time. And I truly believe—I mean, we’ve talked a lot about 5G and security—but our top priority at the FCC is closing that digital divide. And I firmly believe that regardless of who you are, what you look like, or where you happen to live you should have access to what I call digital opportunity. It’s going to be such a gamechanger for our country. And just as a matter of digital equity, it’s something I believe in in my core, having grown up in a relatively poor, rural part of the country. Sorry to get on my soapbox there. Q: Thanks. Mary Brooks (sp), ARC Media. Can you speak a little bit more about this concern that the world is moving to two internets, that the push against Huawei is the start of a difference between a Western internet and an authoritarian internet? And can you talk about whether or not you think that’s actually likely, what it would look like, and what the consequences would be? PAI: Well, I don’t think the push is the impetus for it. If anything, it is an effect of some of what we’ve seen is that obviously the Chinese have made a very strategic determination to pick network champions not just in terms of network operators and vendors, but also the internet companies themselves. If you look at some of the companies like Tencent and Baidu, and the like. I mean, they’re essentially shutting out a lot of foreign competitors. There’s a reason why Silicon Valley companies have not established strong beachheads in China. It’s because it’s very difficult to do business there. The company erects all kinds of artificial—or, very real barriers that I don’t think a free market type economy would erect. And over time, I do worry that that has the end result in creating essentially two different internets. And that is something that I think would be unfortunate for consumers and potentially dangerous in the long run. I mean, we don’t want the internet to become Balkanized. That was the entire point of the internet in the beginning is that everyone had access to the exact same information as long as you had a digital connection to the outside. And if your ability to understand what happened in a particular time depends on what happened—whether the search engine complies with the request of the Chinese Communist Party, that’s not a good place to be. And so that’s something I do worry about in the long run quite a bit. CARUSO-CABRERA: Back there, the gentleman. Q: Sander Gerber, Hudson Bay Capital. Thanks for joining us. I’m not sure, what is the current assessment of the Europeans with respect to the threat of Huawei 5G? I thought that the Europeans didn’t share our intelligence assessment for a period of time. And where are they now? PAI: What I can say is that in my conversations with counterparts, both in member states of the EU as well as some EU officials and European Union officials, is that I think they do understand the security risk that particular vendors might pose. They might not agree necessarily with the remedy that we are prescribing in terms of making sure that our networks are secure going forward, as well as taking steps to replace the equipment that is already in our networks. But I think there is an ongoing conversation there to be had. But by and large, I think that the assessment has—in my experience, at least—been the consensus assessment. This has not been an area where we’ve been disputing what the facts are on the ground. Q: Thank you so much for coming in. I’m Pierre Henry. I’m from Trine Acquisition Corp. My question is, with 5G there’s a lot of discussion about equipping terrestrial operators with what they need spectrum-wise to get us there. And C band a lot of what’s up in space—as you mentioned, the geostationary satellite operators—that’s very important for the discussion. And I just wanted to know your color and your view on what would be an equitable reallocation of that C band, and what would be included under what formula? PAI: I know there was going to be— CARUSO-CABRERA: Define C band for us. PAI: Oh, yes. So for those of you who are blissfully unaware, which is hopefully most of you, the C band is the band—includes the five hundred megahertz of spectrum between 3.7 gigahertz and 4.2 gigahertz. CARUSO-CABRERA: That clears it up. (Laughter.) PAI: Yeah. (Laughs.) What did Gandalf say in Lord of the Rings? You know, all that is left for us to choose is what to do with the time we are given. And here we are, right? CARUSO-CABRERA: I’m teasing. Go ahead. Keep going. PAI: But so essentially this spectrum, in a nutshell, is used by satellite companies to deliver video programming for broadcasters, for cable news networks, for other programmers and the like. And so there’s been a question about how much of that spectrum could be or should be repurposed for 5G services, because it’s in the so-called mid-band, which is highly prized because of its mix of coverage and capacity. So I’ll say here, I won’t be making any news, it won’t shock you to know, but I still stick with the four principles that I outlined, you know, when I testified before the Senate two weeks ago. It’s that whatever the decision on the C band is going to be, it will respect those four principles of freeing up a substantial amount of spectrum for 5G, doing so as quickly as possible, making sure that the federal government gets some of the revenue from that decision, and then, fourth, ensuring that the services that are currently provided using that C band—namely, the delivery of video programming—will continue to be delivered into the future. So we’re still evaluating the different options on the table, haven’t made a decision. But I can assure that those four factors are going to be respected. CARUSO-CABRERA: If you haven’t looked at the—there’s a spectrum map you can—the FCC publishes. It’s on the internet, where else? And it’s an incredible— PAI: Which again, still exists. (Laughs.) CARUSO-CABRERA: (Laughs.) Which is really interesting to look at. Like, all these little different colored spaces. I think of it as a map of the sky. The government still controls all of that. People understand this intuitively from the Titanic, right? (Laughter.) This all came from—right? No, this is—the whole issue of spectrum started with the Titanic, right? And then— PAI: Yeah, sorry, I thought you were making a movie reference. And so I was thinking, oh no, to talk Leo in this forum is going to just be very surreal. CARUSO-CABRERA: (Laughs.) But that’s why this discussion exists. And so for a long time, spectrum was allocated by the government. The broadcasters got it for free. And that’s why they have certain things that they have to do for having received this for free. Then there was privately the privatization to some extent, auctioning rather, so the government could make some money. Where are we in the process? Now, can you trade spectrum? Or do have to give it back to the government for it to be reauctioned? Or can I keep it and then somebody else wants it from me I can sell it to them? PAI: Good questions, all. So it really depends. So the federal government has a fair amount of spectrum currently. That federal government is administered not by the FCC but by the Department of Commerce, which has an office, the National Telecommunications and Information Administration, which essentially speaks on behalf of the entire administration on federally held spectrum. The FCC is an independent agency. We don’t have the ability to compel the NTIA to do anything. So if we want to take federal spectrum, either have it shared with the commercial sector or reallocated to the commercial sector altogether, then the NTIA, the FCC, and any other affected federal agencies have to have a conversation. And that’s part of what we’ve been doing over the last two and a half years across a number of different bands is figuring out to do that. On the commercial side, though, you’re correct that 1959, sixty years ago, Ronald Coase wrote a seminal paper where he called for competitive bidding for auctions of spectrum. We started—Congress gave us that authority in 1993. We’ve now held over a hundred auctions. CARUSO-CABRERA: Just thirty years later. (Laughs.) PAI: Yeah. So we’ve raised now something like $110-120 billion for the U.S. Treasury. And now that auction mechanism is one that is widely agreed to be the most efficient way of allocating a scarce resource. And so on the commercial side at last, we encouraged auctions. So we think it’s the fairest way to do it. And to the extent there’s a secondary market transaction—which is somebody has spectrum, wants to sell it to somebody else—that’s one of the things we’ve encouraged as well, to speed up—to make sure that spectrum arrives at its highest-valued use, as the economists might say. CARUSO-CABRERA: I saw back here. Q: Thank you for being here today. I was a little bit confused— CARUSO-CABRERA: You name? Your name and title. Q: David Shuman, Northwoods Capital. I was a little bit confused by your question about our allies’ view of our position, in like of Angela Merkel’s announcement that Germany is going to allow Huawei equipment into their networks, that their carriers are already doing it. The U.K. seems to be following a similar path. And Macron is currently in China, and I’m sure is being pressured to do the same. So I guess my question is, you know, how was the U.S. caught so flat-footed on this? And if we don’t succeed in turning this around, who will own that failure? And if we are successful, who will own the success? (Laughter.) PAI: That is what we call in the business a loaded question, my friend. Well, three loaded questions, and it turns out. So again, I can only speak to the conversations that I have had with some of my counterparts in Europe, both in the public and private sector. And, again, what will say is there is an appreciation for the unique risk profile that some of the vendors that we’ve been talking about present. And then it’s a question for the policymakers to decide, well, what remedy if any should we apply to that security assessment? And I can’t say what happens at other levels of government among the decisionmakers. I’ll simply say again that we’ve had very positive conversations. And I don’t think we are at the end of the story. We’re certainly in the middle of the story at this point. And so things are changing even in Germany, as you might have seen, with recent reports. And so I remain confident that we’ll be able to reach a shared understanding of not just the assessment but what to do about the assessment in the time to come. CARUSO-CABRERA: Can you give us a hint about why it is that they would resist the idea, why they would be comfortable with a company that could spy on them? PAI: I wouldn’t want to characterize some of their views. I would probably leave it to them to describe publicly whatever they—or, however they want to characterize their position. CARUSO-CABRERA: Right here. Q: Thank you. Good morning. Roy Keblaugh (ph). I have a very simple question. The likes of Facebook and Google have taken a lot of share in the local media market. Would you be in favor of more deregulation of local media, local radio, and et cetera, to encourage consolidation, maybe foreign investment, for the sector to defend itself? PAI: A simply question but a complex one. So what I’ll say is this: I do think that the marketplace is more competitive than ever. And if you just think about the market for advertising, from a local broadcast perspective I consistently hear when I meet with broadcasters, not just from big cities. I met recently with Louisiana broadcasters who told me that for the first time they are seeing a significant amount of share from the car dealers they used to rely on as advertisers now going to Google and Facebook. Even though there’s no Google sales team calling them up. There’s no Facebook sales—ad sales team calling them up. It’s just a fact that the digital advertising has migrated to those two companies in particular. And so from my perspective, at least, I think it’s important to have an intellectually honest assessment of what the denominator is when it comes to competition. By which I mean, that we need to understand now just who these companies are competing with, and make sure that all companies that are competing in the same market are regulated similarly, but also that we need to understand that some of the revenue, when it comes to digital advertising and the like, to have an intellectually honest assessment of where some of those ad dollars are flowing. And once you do that, I think it becomes obvious that the rules we have on the books are woefully outdated. I mean, it doesn’t make any sense anymore that when you’re talking about what many have argued is a digital ad duopoly of two companies in Silicon Valley, that the FCC still considers the 1975 prohibition on the joint ownership of a newspaper and a broadcast radio station in Tama, Iowa being some sort of unique anti-competitive threat. I mean, I think we’re—most reasonable people would agree that the marketplace for media has changed dramatically in the last forty-four years. And so how we move forward I’m not quite sure yet, but what I will say is that it’s important for us to modernize our regulations to give everyone a full and fair chance to compete. Not to give a leg-up to anyone. Not to bestow regulatory largess on anyone. Just simply to recognize that the marketplace has changed. And we’ve been doing that over the last two years, as you might have seen. And when I came into office we were still requiring every broadcaster in the United States to maintain a paper copy of our rules—I mean, a huge set of books—in their broadcast stations in case someone wanted to come by and read them. I mean, it’s just nonsensical some of these regulations. And that’s just obviously a very clear example. There are more subtle ones, like this one. But I think at the end of the day the bedrock proposition—or, one of the bedrock propositions across the—my administration of the FCC has been: Let’s modernize our rules to reflect the marketplace that we’re in. The most powerful force in government is often inertia. That rules are on the books, in many cases, simply because they’ve always been on the books. And so I want to take a fresh look at some of these rules and make sure that we’re updating them, because otherwise we’ll be diverting investment, or disincentivizing innovation, or hamstringing would-be competitors. And that’s not a good thing for the consumer, at the end of the day. Q: (Off mic.) PAI: You’ve been great, everybody. All right, so. (Laughter.) No— CARUSO-CABRERA: The question was foreign—what about foreign ownership, which is prohibited for all radio stations and TV stations in the United States, correct? Yeah. PAI: Yeah, we’ve done some modernization there. I can’t forecast if we’re going to do any further. CARUSO-CABRERA: Final question: One website describes you—that covers you a lot—that you’re the greatest fan of AM radio in the country. Is that true? Are you a huge fan of AM radio? PAI: Wow. I am. I grew up, as I mentioned, in Parsons, Kansas. And my outlet—I mean, it’s so hard for people to remember nowadays, especially people under the age of 35—but in the ’70s and ’80s as a kid in a small town, there were very few outlets to the outside world. Three broadcast channels, the Parson Sun. And for me, KLKC 1530 AM. And I still remember my freshman year my high school basketball team made it to the state championship up in Topeka, I think it was. And my mom refused to let me go. And I was gnashing my teeth in my bedroom. And I tuned into KLKC to hear how Cortez White (sp) stole the ball at the last minute to seal the win for us. And just those memories of AM radio really—I have warm, nostalgic feelings for, but it’s not just nostalgia. When I travel around the country, I’ve been to KZPA Radio in Fort Yukon, Alaska. I’ve been to WAGG in Birmingham, Alabama—an African American gospel station. Even though they might not be the dominant players in the landscape, to some of these communities they quite literally are the lifeblood. And these are the folk who are going to cover the Friday night football game. These are the folks who are going to cover the Sunday morning church service. These are the glue of these communities. And I want AM broadcasters, just like any other media outlet, to have a chance to thrive in the twenty-first century. It’s more competitive than ever, but, look, AM radio’s seen all of the challenges we just talked about. They’ve seen FM radio. They’ve seen TV. They’ve seen cable. Now they’re seeing satellite radio, and Pandora, and Spotify. And they still, I think, have a value proposition that’s pretty unique. So let’s see where it goes. There are obviously big challenges but, you know, who knows, KLKC and others like it might have a future. CARUSO-CABRERA: As a fan of WRKF in Boston, congratulations. Thank you very much for doing this. PAI: (Laughs.) Really appreciate it. (Applause.) (END)
  • Cybersecurity
    How Much Cyber Sovereignty is Too Much Cyber Sovereignty?
    China has championed the idea of 'cyber sovereignty'. While the U.S. and its allies have long opposed this concept, it has become more attractive to some countries as a way of managing cyber threats and mass demonstrations. These developments urge us to question: how much cyber sovereignty is too much cyber sovereignty?
  • United States
    Connecting the World: The Internet's Next Billion Users
    Play
    Panelists discuss the prospect of an inclusive internet, how the technology industry is reaching and interacting with developing countries, and the policy implications of a connected world. HAMMER: OK. Ladies and gentlemen, welcome to today’s Council on Foreign Relations meeting. The topic is “Connecting the World: The Internet’s Next Billion Users.” I am Craig Hammer. I’m a program manager at the World Bank, and I’ll be presiding over our discussion this evening. Our discussion will take two parts this evening. I’ll kick things off with a facilitated discussion until about seven p.m., and then we’ll open up to members for a thirty-minute Q&A, and we’ll end at 7:30 sharp. Let me begin by briefly introducing our distinguished speakers by their titles, since you have their detailed bios. Robert Pepper is head of global connectivity policy and planning at Facebook. Jen Spies is product manager of the Next Billion Users Initiative at Google. And Mike Pisa is a policy fellow at the Center for Global Development here in D.C. Welcome. The implications of adding a billion users to the internet from across the world from a range of cultures and contexts, with all their infinite complexities, is vast. The pendulum swings a full 180 degrees, from the tremendous potential of the social and economic development implications of internet connectivity to the truly terrifying: from the collision between social media and surveillance, to the incitement of genocide through social media platforms. My sense is that we’ll cover a lot of ground in our discussion this evening. But I’d like to begin on a slightly more positive side of the spectrum. Jen, Google’s Next Billion Users Initiative is making products specifically with emerging markets in mind. Talk about the local benefits that can occur with the expansion of large digital platforms in emerging markets. SPIES: Sure. And thanks for having us tonight. I think from Google’s perspective on of the primary benefits of building for the next billion users is that in 2019 if you can make a product that succeeds in emerging markets, it’s really a product that can succeed globally in scale. And I think one of the key factors contributing to that is building a product that works on a mobile device. So I think one of the key trends that we see in this market is what we call the leapfrog effect. So if you think about who are these users getting online today, they’ve often never been on a desktop PC. If you think about my internet user journey, I came online first on a computer, and then around 2010 there was this huge shift to mobile where people actually started spending more time on mobile than they did on a desktop PC. And actually, the internal team structure of these companies, Google and Facebook, was completely pivoted to accommodate this shift in time spent that was seen. If you think about, you know, a twenty-year-old coming online in South Africa today, they’re coming online through perhaps a $20 smartphone, and that’s their experience of the internet. And so understanding how to build products that are mobile first and that are native to that platform is really critical to winning in NBU markets. So I think that that’s a key component that can contribute success both in the U.S. and in these markets. HAMMER: In terms of the local development, though, I mean, speak to what NBU is thinking about in terms of local economic growth and social development. SPIES: Yeah. One of our key tenets is to grow economies in NBU markets, and the internet is a true democratizing force that can help do that. I think if you think about—one of the really big engines of growth we’ve seen is small business empowerment. In many regions in NBU you have shopkeepers coming online. Oftentimes they’re inheriting these businesses from an older generation, and they really understand the power of digital and the power of using their phone and internet platforms to sell goods. And so using platforms like Google and Facebook and WhatsApp to help find new customers, to grow their business, to have secure payments and secure transaction is really something that we’re seeing happening in NBU markets that’s sort of growing the size of the digital economy, and helping local economies, and helping people participate in the digital economy in a way that is accelerating every year. HAMMER: Robert, Facebook is working with governments and others around the world to extend connectivity to the 49 percent of the global population that’s not yet connected. Can you talk about some of the major issues or barriers that you see and what’s happening as you address them? PEPPER: Sure. Thank you. And again, thanks for putting this together. So the 49 percent is a reference to the fact that there’s three-and-a-half—3.8 billion people connected and 3.8 billion people not connected. There’s a little bit more—the ITU just came out just recently and said it’s just crossed that line. That’s a real milestone. So we think of it not as the next billion, but as the next 3.8 billion. And so—and the reason that that’s really important goes to some of the reasons that Jen just talked about. Each year now for the last four—we’re into our fourth year—we do a study with the Economist Intelligence Unit called the Inclusive Internet Index. And it looks at over time 120 countries, fifty-three indicators for each country, looking at availability, affordability, relevance, and readiness. And one of the things that the Economist found in the most recent study, released earlier this year, was that the progress that we’ve seen over the last decade seems to have stalled out for the lowest-income countries. In other words, the upper-income, upper-middle-, and lower-middle-income countries are continuing to improve; the lowest-income countries did not improve year over year. So you look at that, and then you combine that with something we do as part of that project, a study called the Value of Internet Survey, and each year the theme shifts. The theme last year that we looked at was how do people view the internet in terms of livelihood. And this is across the globe, so this is, right, low income—I mean, it’s all one hundred countries. It didn’t make any difference: 75—73 to 78 percent, so call it 75 percent of people in a country said the internet helped them get a job, they used the internet to help them do better at work, they used the internet to learn more as it relates to their livelihood. If that’s the case, the fact that we have this, you know, stalling out at the lowest income, at the bottom of the pyramid, that’s a real problem, right? We don’t know whether it was a one-year data anomaly. We’ll find out when our—we get the latest data in. That’s bad enough, but if it’s a trend that’s really bad. And that’s why, if you’re looking at the economic development and the benefits—whether it’s small business or individuals or healthcare, education—it can’t be about the next billion. It has to be about everybody. And that’s why we’re looking at it in that respect. So in terms of the barriers, going back to the analysis, the barriers to getting another billion, two billion, four billion—by the way, out of the 3.8 (billion), probably a billion and a half are children you don’t want online. So it’s not quite as big a number, but it’s still important. It’s a combination of supply side and demand side. The prerequisite, you need the network. You need the connection. You need a minimum of 3G, preferably 4G connection. It’s all mobile. That’s the minimum that you need. If it doesn’t exist, you have to have it. But that’s only the necessary but not sufficient prerequisite. It’s all about the applications, the demand driving local content, local language, relevant content, including e-gov applications, e-commerce, e-entertainment. Those are all things that you need. And people on the readiness side need to know how to get on safely. So it’s about digital literacy. It’s about knowing how to set your settings. It’s knowing how to prevent not just spam, but fraud, phishing attacks. So all of those things need to be in place for people to be able to get online and then benefit from being online. So some of the things that, you know, we’ve been doing—and we work with government—those are the barriers. We work with governments, using the analysis from the Inclusive Internet Index as a diagnostic, on how to build digital—national digital strategies. But for example, in Uganda, there’s an—multiple operators. Airtel, which is an Indian company which has networks in Africa, has a 3G network. They’re building out a 4G network in Kampala and the cities, but not in the rural areas. In the rural areas, what prevents them from doing that is they don’t have what’s called backhaul, right? They’re using narrowband microwave, which won’t even support a single smartphone, right? They need fiber to the towers. So we coinvested with them and jointly built a 770-kilometer fiberoptic network. It’s an open fiber. We do everything on an open basis. Any of the operators can use dark fibers. They’ve now connected cell sites and they’re converting from 2G directly to 4G. They’re leapfrogging, all right? That’s supply side. That’s a prerequisite. We’ve co-built—we’re building a subsea cable from Brazil to Argentina which is the first new subsea cable to Argentina in eighteen years. The single cable is going to triple the international capacity to Argentina. Again, open fiber; it’s not just for us. So those are, you know—and we can talk more about some of the other infrastructure investments with technologies, but we’re also working on the applications side with zero-rated services, digital literacy, education applications, just like you are. I mean, there—you know, the internet companies all have programs to build local content, local language, relevant content, working with governments to create those kinds of applications. HAMMER: Let’s zoom out a bit and talk about the larger kind of governance context. So, Mike, we’ve had some discussion already of the pros of digital platform penetration to emerging economies. Let’s talk about the greater international cooperation, what it could or should look like. Is some version of some global governance mechanism feasible, from a policy perspective? PISA: Well, so let me start by—I know we’ve heard about the pros, but I think because I focus on governance, and often the discussions about governance kind of drift towards dealing with challenges and mitigating risks, they kind of have a negative—take a negative tint. So before I start talking about the governance issues, I do want to underline, especially from a lower-income-country perspective, the benefits that the things we have I think started to take for granted here—you know, reducing transaction costs, reducing the cost of search, enabling greater access to information—what this means. And I think oftentimes when we’re talking about this through a development lens we tend to forget that some of the benefits that we’re debating here in OECD and rich countries play out very differently in lower-income countries. So one quick example would be the gig economy that shared—that two-sided platforms enable. I mean, here we have concerns about what gig workers—are gig workers losing out in terms of the level of informality attached to their jobs, the level of worker protections? Whereas in poorer countries this is not a debate, right? First of all, those worker protections don’t exist. And they actually can be a step—and most of the economic activity is in the informal economy, so there’s actually a step towards formalization by just participating on one of these platforms. So I think another issue is that these benefits are quite diffuse, so they tend to I think get discounted in debates around the benefits of certain policies. So, actually, I want to start at a national level rather than go into global governance first, if you don’t mind, and that’s because I think you have to understand this from the perspective of national policymakers. And actually, I think where I want to start is the idea of why are governments in the position of assessing or reassessing how they approach data governance? Which inevitably means: Why are they assessing or reassessing their relationship vis-à-vis big tech platforms? And I think it’s two reasons. One is, you know, we’re more aware today of the risks of the misuse of personal data. And, two, there’s a growing recognition of the value of data as an economic input. And so I’ll start with the second, actually. From the perspective of policymakers—and let’s just say policymakers in poorer countries—again, the benefits are diffuse, but they also—there’s also an aspect of very concentrated wealth being generated from personal data. So if you look at—you know, one quick stat is 90 percent of the—let’s just start with market capitalization. Ninety percent of market capitalization of digital platforms in the world accrues to companies in the U.S. and China, and two-thirds of that value accrues to eight companies, and we all know their names. Now, if you’re a policymaker in a poorer country, and you’ve listened to the World Bank and others rightfully tell you that in order to take the next step in the global economy and the digital economy you need to build an enabling framework, and that will lead to wealth creation, you’re going to look—first of all, the benefits, again, diffuse, oftentimes not feeding into GDP statistics for reasons we can touch on, oftentimes not feeding into revenue. And yet, you see the pie growing elsewhere. And to me, I think that leads to—that’s why the data-as-oil metaphor has had so much staying—sticking power. It’s not—we all know that it’s not a very apt metaphor for a number of reasons, right? But there is a feeling among at least the policymakers we’ve spoken to at the Center for Global Development, where I work—and maybe it’s because we talk to folks from ministries of finance and central banks more often than not—but that they’re being shortchanged somehow in this—in this interaction. And I think the worst thing about the data-as-oil metaphor is it leads to this idea that data is inherently valuable or valuable on its own, right? And it’s kind of like the flip of the Hal Varian argument, that the real value that platforms provide is not the data—not the value they derive from the data, but it’s the knowhow and it’s the—you know, the proprietary algorithms and it’s the human capital. And of course, the truth is somewhere in the middle. But once you’ve kind of accepted this frame as data-as-oil, it becomes all about this idea of, oh, well, I have to somehow grasp or hold that data to have a better negotiating position in this discussion. And that leads to forced localization. And I think—I mean, and these localization policies have been around since the internet, but there has been an acceleration of their use and there also has been a change in the rhetoric around them. It’s much more—you see it much more frequently that countries justify the use of localization policy for economic reasons. I think the clearest example is the India—the draft data protection bill, which says we are arguing in favor of localization because it’s going to help India develop its digital infrastructure and its AI industry. And I think—my concern in this space is that right now the policymakers we talk to seem to think that there’s a continuum of policies: on one hand you let big tech platforms run free, and on the other you kind of pursue these forced data-localization policies, and there’s not much in the middle. I do think eventually you’ll have to have some enlightened taxation policies that will fill that middle, and that’s maybe something we can talk about in the future. HAMMER: So, Jen, how are technologies of the internet impacting users in sub-Saharan Africa specifically? SPIES: Yeah. We think about it in terms of a multistep journey. And in sub-Saharan Africa specifically, the first pillar of that is access and affordability. I think if you compare those economies to others in Asia, Southeast Asia, Latin America, data as a percent of income is the highest, there’s the lowest smartphone penetration. And so access to internet, access to smartphones is really the key pillar to participating in the digital economy, to getting online. That’s step one. Step two is what we sort of call ecosystem and platform development. So you can imagine you bought your first smartphone, you bought a prepaid data plan, you’re getting online; if there’s not content that’s locally translated, that’s relevant for you—if you’re going on YouTube to watch celebrities that you care about and you don’t recognize any of the names—that’s not a great experience. And like you said, there’s a lot of job hunting that happens online. I think the behaviors on the internet are fairly similar. Like, people are talking to their friends. They are watching content that they care about. They are searching for jobs or ways to make money. And if that is not comprehensible or relevant or localized to you, then it’s also inaccessible. So a lot of parts of Google are focused on making sure that there are local Indian content creators uploading videos on YouTube and using machine learning algorithms to translate into local dialects and making sure that Google Assistant can translate into vernacular languages that are maybe more intuitive for a first-time internet user to talk to and to access. And I think the third stage, and the pillar that we think about, is platform development and business creation. And so once you have all of these stages of, you know, you’re online, you can afford a device, you can afford internet there is content in your local language, you can sort of participate in the internet as we experience it in the U.S., then there’s this opportunity to create businesses that are localized, that are taking advantage of trends like social commerce, of digital payments, of, you know, people really sort of hacking our products and using them in interesting ways. But you can build an ecosystem on top of that. So I think this trend of leapfrogging to mobile, of really leaning into social commerce and using platforms like WhatsApp to sort of run a business end-to-end on a mobile device, of developing content locally in local languages are all trends we see that are really pronounced in sub-Saharan Africa, but also apply to other NBU markets. HAMMER: Robert, maybe you can speak to some of the public goods that Facebook is doing to help support that leapfrogging process. PEPPER: Yeah. So just picking up a little bit on that. One of the things that we’ve looked at in terms of analysis goes to the devices. Out of the three-point-eight billion people., we believe that there’s about a billion people who actually could receive a 3G or 4G signal but cannot afford the device. In Africa, it’s 240 million people. So I mean, you don’t have to build a new network, right? You have to make the device more affordable, but it has to be a good enough device so that it’s actually either a very high-end feature phone or a low-end smartphone. But that actually works and that’s not hackable, in terms of the device. So you know, as we were discussing earlier, one of the things they are doing is working on that, plus other variables, with the World Bank on its Africa moonshot project, which was just launched. I guess it was at the annual meeting about ten days ago. And if you haven’t—if any people here haven’t seen that, you should take a look at it. It’s a great document. It was actually a working group paper that was released by the U.N. Broadband Commission, put together by the Bank in conjunction with the Bank on the Africa moonshot. And it goes through, you know, what needs to be done. And, you know, it’s—you have to take a deep breath, right? The goal of the moonshot is to have everybody over ten years old in Africa connected by 2030—eleven years, right? They estimate it’s going to cost $100 billion. What’s interesting is about twenty-three, twenty-four billion (dollars) is capex for networks, supply—pure supply side. Eighteen billion (dollars) is the demand side. It’s building the applications, the local content, the e-gov applications. Creating local businesses that do that. There’s a small policy piece and some others. The biggest chunk, over forty-five billion (dollars), is what you don’t even think about, which is opex, maintenance, replacement, right? The really boring stuff that makes it work, right? And so the question is, where does that come from? And that’s going to have to be—and the Bank’s talking about putting a lot of money into it. And the device affordability is a chunk, and that’s one of the things we’re working on. So there are these great opportunities. And in terms of some of the public good aspects, you know, what we’ve seen is that there are literally thousands of businesses that in just sub-Saharan Africa—that exist only online. There is no brick and mortar. So it’s not like there was a shop that then went online. These are businesses that would not exist if they were not online. And they’re selling things not just in their communities but broadly in their—in their region, or their country, and even sometimes to other countries in the region, or internationally outside of their continent. So we know these benefits, but they’re—again, I want to come back on to—there are these, you know, very legitimate concerns and questions. And I think you have to separate—and I thought it was really good the way you laid out, for example, data localization. Data localization in many places is really sort of an industrial policy that, you know, usually starts off as being dressed up as we need it for security. But localizing data actually makes your data less secure. We know that. And the irony, by the way, of the India draft localization bill, if you think about the India BPO industry, their back-office industry, literally it employs millions of people, it’s worth billions of dollars. And it only existed because Indian companies could process data and build call centers for companies based in the U.S. and Europe and have customers in the U.S. and Europe. If there was data localization, right, and it applied in the reverse, that industry would never exist in India, right? They don’t think about it that way. HAMMER: So, Mike, let me ask you one question. I think, just because these issues are very much alive in much of the work where we happen to be, it may not be the case elsewhere around the world, but let’s talk briefly about data privacy, disinformation. As the digital platform market concentration expands, let’s say, to emerging economies, have these issues like data privacy and disinformation manifested in lower-income countries? And how have policymakers in those countries begun to respond? PISA: So I think all countries are grappling with these issues. I mean, I’m not going to go through the list of how they’ve manifested themselves—(laughs)—but I think all countries are grappling with these issues in different ways. I’m actually—since I punted on your question on the global governance I’m going to punt back to that global governance question around these issues, because I think it’s going to point to why governance is going to be so tricky to do at the global level on these questions. So I think you can make an argument around data privacy and data protection. I’m going to stick with data protection, because I think privacy is such a culturally laden term. That there are efficiency gains to be made by having a harmonized approach globally, right, that would allow companies—big tech companies—to apply the same standards globally, rather than having bespoke models for different countries that they work in. And frankly, I mean, you know, countries have been willing—I’m sorry—companies have been willing to change, often at great cost, how they go about their business in order to comply with GDPR because Europe is the world’s second-biggest market. If Benin, or Bhutan, or another country asked—you know, enacts privacy regulations that are quite different and viewed by industry as quite onerous, then they probably won’t make that same distinction. So I think there’s a stronger argument for harmonization in that space. Other rationales for global governance. When you have cross-border spillovers. So I came from U.S. Treasury, where there’s a—you know, a large architecture around protecting against banking crisis spillovers, right? So we have the FSB, we have the Basel Committee, and many other structures. And we don’t have those similar things for digital platforms, even though there may be some spillovers—I think the spillovers are less acute and less immediate. But you can have some arguments around, you know, whether there are spillovers, about how companies managed or regulated in one country affect political stability in another country. And there are more clear spillovers in the areas like cybersecurity. But I think the one argument I want to make is I think the overarching need for global governance in this space is we need to make the experience for individual users, but also for governments of using the open internet better, in the sense that there is now a more clear challenge to the open internet. And actually, I watched Robert’s—his Turing speech in 2015 over the weekend, like we talked about it. He said in 2015, we’re at the crossroads because national governments are reasserting more control over internet policy, and they’re often going towards a more closed model. You said this two years before President Xi in China says, you know, we’re going to make China a cyber superpower, and we are going to treat—we are going to, you know, kind of set China as a model, in his words it was, for countries who want to speed development while preserving independence, which I think is code for closed—have a closed internet system. So I think we’re still at the crossroads. We’ve probably gone a few steps in the wrong direction. But these debates are still happening. And my view is, the reason you want to pursue—you might want to think about pursuing global governance over specific issues areas related to how you regulate digital platforms, is because you want to make governments more comfortable with the open internet model. And right now, there’s a lot of reasons to not be comfortable. Having said all that, I think the challenges of having effective global governance in this space are huge. I mean, just take disinformation. I mean, how countries go about regulating, or monitoring, or treating, or dealing with disinformation is going to depend on how they value privacy, how they value transparency, how they value freedom of speech. As we can tell from debates that have happened here in Washington over the last few weeks, and speeches, that we’re still figuring this out. And why do we have any belief that having, you know, a global discussion on disinformation on digital platforms would be any different than a discussion on freedom of press in the more analog world? So I don’t think we’re likely to actually have productive conversations unless we take very narrow, specific areas where cross-border spillovers are real, and the efficiency gains from cooperation are really clear. HAMMER: Thank you, Mike. PISA: Yeah. HAMMER: So at this time I’d like to invite members to join our conversation with your questions. So let me first begin by reminding everyone this meeting is on the record. When I call you, please wait for the microphone and speak directly into it. Please stand and state your name and affiliation before asking a question. And please do limit yourself to one question and keep it concise. This will allow as many members as possible to ask questions and share insights. So let’s begin here. Q: All right. Thank you. My name’s Dave Harden, and actually my colleague Sara Agarwal is over there. And we run a tech company that has its research and development lab in Ramallah. So imagine kind of all the big challenges that you all have described and think about, and then add the political overview on that. All of our employees have stock options, and there could be a dramatic impact if we were able to drive a big exit. One of the challenges that we have, and this goes to the question of how do you get to the next billion or three-point-eight billion, if they’re only users as opposed to developers, or creators, or value-adders into the internet. And so it’s very easy to pick up rick capital in Palo Alto, or in Cambridge, or in Shanghai. Not so easy to do it when you have operations in Ramallah, and Amman, and you’re struggling to do that. So how do you see kind of the nature of capital over the next—this next ten-year period where you’re trying to increase the number of actors that have access to the internet? Thank you. HAMMER: So I think should looking, I think, closely at Jen and Robert on this one. But I think we can start with you. SPIES: Yeah. I can answer somewhat narrowly, in terms of how the company has thought about expanding in a probably conservative but effective way in these markets. So we’ve actually opened offices globally. And we think about product development offices, which are probably the analog to the startups, and the engineers, and coders, and people building these products. We’ve opened tech hubs in Bangalore and in Singapore, in markets that are just closer than mountain view to our next billion users. So I know there is a balance between rapidly expanding everywhere and trying to be in every market, and have engineers in every market, and trying to build centers where you have sort of hubs and knowledge that builds up over time. I know that’s one way that the companies thought about just sort of expanding slowly and methodically and trying to find a product market fit with various initiatives before expanding too quickly. So it’s perhaps not like on the capital allocation side, but at least internally it’s who we’ve thought about expanding our footprint. PEPPER: No, we think about it very similarly in terms of, you know, where the engineers are, and growing globally. But that doesn’t—I mean, that’s toward Facebook. That’s not really your question. Your question is, you know, where are the—where’s the venture capital going to come from to fund startups in Ramallah, Kinshasa, you know, Cape Town, Bangkok? And that—and that is a challenge. In fact, earlier today I was having a conversation with a former minister from an African country, who is trying—he’s now in the U.S., at one of our major universities, two-year fellowship. And one of the things that he’s working on is trying to figure out exactly that. He was telling me that, you know, there’s capital available in Africa, but the—but the people in Africa who can write the checks are writing checks in Europe, not in Africa. And that really bothers him. The question is, why and what can be done about that. And what he was saying is that, you know, you have to have the right—create an ecosystem in terms of law, local law, and also taxation, bankruptcy law, rule of—you know, rule of law—all of the things that we take for granted—before people are going to write checks, whether it’s at—you know, for a startup, an angel writing a small check, or a VC writing a large check. And that’s not always easy. So this is—this is one of the big questions. The only optimism I see, right, near-term optimism, is if you go back ten years, fifteen years—no, not even fifteen. Ten years, when I was having meetings with startups in China, when I was—actually I worked for CISCO then—they were asking the same question, right? They now have loads of money, capital markets. You went to Europe, you went to Berlin and talked to startups, they were struggling. They couldn’t get capital, right? At that point it was beginning to go to London, right? So I think that they’re—you know, the optimism is that it is happening, but it’s happening too slowly. But that is an issue, because we see huge talent globally. Huge talent—for example, there are startups in—and incubators, for example, in Kenya that are struggling to get capital to get to the next stage, right? It’s not for the lack of talent. It’s not for the lack of effort. It’s not for the lack of market, right? And so it’s—this is something that as a broader global community I think we need to—need to address. HAMMER: Let’s come here, please. Q: Thank you very much. Miriam Sapiro from— PEPPER: Put the mic closer, Miriam. Q: Oh! Can you hear me now? Is that better? Closer? I don’t—I have to eat it, like an ice cream code? How’s that? HAMMER: There you go. (Laughter.) Q: (Laughs.) Mmm, delicious. Anyway, I want to focus for a minute more on the challenges because in some ways part of the conversation hasn’t really changed much in the last five, ten, fifteen years. Pepper’s nodding. And so, whether we’re talking about capital or infrastructure, we’re also talking about governments that either need to get out of the way or, better scenario, is to facilitate the kind of investment that’s needed. And yet, in the last few years, we’ve seen how in the developed world, especially in the U.S., the darker side of the internet has become more obvious. Whether it’s influencing elections, or cybercrime, or extremism, et cetera. And so how—you know, what do each of you, in your different roles, say to the governments, especially middle-income and lower where we really do want to be able to help more people get online, what is the ability that you think we have to try to make a difference in that regard and build, if not a governance structure, which is proving very challenging, at least some ways to acknowledge that we’ve learned some lessons from what we’ve seen in the developed world. And we will be able to try to help the less-developed world learn from them. PISA: So maybe I’ll start on that. I think—so the Pathways for Prosperity Commission from Oxford University Blavatnik School just did a survey of developing country policymakers, and what were their priorities around digital technology and the internet? And their first priority was job creation and the second was digital infrastructure. And much further down were these issues of data protection and data privacy. And then cybersecurity was up near the top, and also revenue collection—which I kind of alluded to before, right? So they want to see some direct benefit into their own coffers, but again the highest priority for poorer countries—at least in the policymakers in that sample—were: How do we make the digital economy work for us? And I think the trust issue—you know, we’ve—my remarks have focused on governance, and I’ve talked about why I’m skeptical of a broad-based global governance framework. I think one step could be the U.S. taking useful steps to regulate the industry from here. And then the other, and I’ll turn this over to you guys, is the large platforms convincing their users and the governments where they operate, the countries where they operate, that they’ve kind of corrected from, learned from some of the missteps in the past. SPIES: And I can give a really specific, but hopefully enlightening, example. I’m a product manager on Google Station, which is Google’s free public wi-fi initiative in emerging markets. And we generally have, like, the most success when we go into a market and at launch we are partnering with local governments and, you know, the minister of telecommunications is on stage with us at launch championing the arrival of free public wi-fi to his country. So we like to look at this as a partnership with local government. And often we find partners in government who are really excited to bring this product to their country and champion it. I think on the—on the technical and regulatory aspect of it, we try to hold our product to the same data standards as GDPR, which means oftentimes when we’re evaluating new markets to go into if the local government has requests around data sharing or data—like, data regulation that is outside of the bounds of that threshold, it prevents us from going into market. And we just don’t have the—I think, the technical capabilities, because we do really value encrypted data and user privacy in a way that’s incompatible with some requests from governments that would like Station to be in market. So I think that’s just a concrete example, where we’re prevented in operating in certain markets where we are holding ourselves to the standard that’s perhaps different than, like, the local government. PEPPER: In terms of the product—very similar. We have something called Express Wi-Fi, which is very similar to the Google Station. And there are issues, right, because there are some countries in which they want it to be open, so they have access to the data. And that’s not what we do. But going to another way to think about your question is, you know, you’re all familiar with Mark’s op-ed back in April, where he called for sensible regulation. It’s not—it’s no—you know, the shift has been—again, from ten years ago to today it was the internet is different, the internet is special, don’t regulate the internet, all right? The internet has now grown up. And we realize that there will be regulation. The question is, what form, what type? And, you know, we think the regulation needs to be not only—you know, how do you—what do you mean by sensible, proportionate, targeted, and not sort of overreaching? And you have to get this balance between—you want to continue the innovation, but you’d need frameworks and guardrails. You also have a continuum of what we mean by regulation. There are some things in which we think it’s completely appropriate, it’s within the remit of government. One of the big issues is election advertising. We think actually just tell us what the law is; we will abide by it. We don’t think we should be making law based upon, or decisions about—we probably have greater transparency than any medium—broadcast, print, certainly more than print. We have more transparency on election advertising than anybody anywhere. You want to take a—you want to find an ad and find out who bought it, where it ran, how many people saw it—in political advertising, we make that available. But that’s not the regulatory side, so what should the framework be? What should the rules be? So there are some things—and we believe, by the way—again, picking up on what Mike said, having harmonized privacy regulation we think is actually very important, because you don’t want—in the U.S. we don’t want 51 different flavors. And globally, you can’t be a global company without having a framework. GDPR’s a good starting point. We abide by it. Could it be improved here and there? Absolutely. But as a place to start for an approach to being able to have a global framework of, in quotes, “governance for privacy,” yeah. And that’s a regulation. But there are other things that we believe are going to be sort of regulated in more traditional self-regulatory ways, but there’s still going to be—so there’ll be industry codes. And the analogies there in the U.S., for example, are the ratings from MPA—it’s now MPA; it’s no longer MPAA—MPA promotion of pictures. So again, that’s a form of self-regulation. So you’re going to see, I think, a range of what the instruments are and the relative participation of governments in that process. But we’re already regulated and the question is what type of regulation makes the most sense to get the balance right between protecting users/consumers, protecting democracy and protecting and fostering continuing—to foster innovation and investment. HAMMER: More questions? Here, please? Q: Thanks. Hi. I’m Sabeen Dhanani with the Center for Digital Development at USAID. One thing we hear a lot about is 5G and how it’s going to completely again change the digital landscape. Given the infrastructure challenges you mentioned earlier and the regulatory challenges, what really—what is the realistic timeline on 5G in some of the emerging markets, and how should we all prepare to deal with the new set of challenges that that might pose? PEPPER: I’m somewhat of a 5G cynic. I think 5G actually is going to be transformational, but not in the way we’re hearing about the hype. Most people talk about—especially at a very publicity-driven level or certainly globally at the political level, it’s being characterized as this is going to be super AK, high-definition video to your smart phone. No. Maybe eventually. That’s not the transformational part of it. To me, 5G’s transformational, first of all, in terms of the types of applications that will be enabled by 5G are, in the first instance, the most transformational ones are going to be on the industrial side. It’s going to be smart factories. It’s going to be augmented transportation. It’s going to be precision agriculture. In previous years people called it the internet of things. That will be enabled by 5G. That is going to have very significant transformational impact in terms of economies globally in the developed world and developing world. That architecture and the types of deployments that are going to happen with that are very different than sort of rebuilding our consumer-oriented mobile networks. They are converting to 5G, but I can tell you that I’ve talked to CEOs of operators in developing countries, one in particular in the Middle East, and it’s a state-owned operator and he was told by the government, the king, this 5G thing, this is really important. I want you to build 5G right away. So he did. He converted his network to 5G. He said, I’m dying. I have no business case. Nobody’ll pay extra. My margins are crushed. I had to make these big investments. He said maybe, I hope someday, I’ll be able to justify that investment. So we hear a lot about 5G and I think it is going to be transformational, but not necessarily in the near term in the ways we’re hearing about. But I think it’s really important. But that’s going to be a very different type of deployment. The last point on that, what’s interesting is Germany just made some 5G spectrum available. Guess who won the auction for it? It was not a mobile operator. It was Siemens. They wanted that spectrum for 5G for smart factories and building smart factory systems. To me that was really interesting and a harbinger, I think, of what we may be seeing. HAMMER: We have a question here. Q: Welby Leaman, from Walmart. I totally buy the importance of social media, search, e-government to create that critical mass of demand for the next billion users to come online. Where do you rank retail in that, among the other sectors? Does retail have a big role to play in pulling people into the digital economy? And since the retail world’s now in sort of a big fight between Walmart and Amazon and others, between sort of a digital native approach and a Walmart approach which would be basically blending increasingly digitally enabled stores with e-commerce, do you see one or the other as more likely to pull people into the digital economy? Because our proposition has been that the blending gives people more on-ramps. So for example digital payment, you can go into a store, digitize your cash in Walmart Mexico and thus join the digital economy. SPIES: I think from everything I’ve seen it is—it can be really tough to go completely digitally native from a retail perspective in these markets. And the challenges often look very different than what a U.S. retailer would think about. So cash on demand, or cash on delivery is still a huge percentage of payments in many of these markets and a lot of major retailers have built the option to pay through credit card, through online payments and then cash on delivery. I think Uber offered this option before offering it in the U.S., Trust and Safety. So there’s a ton of issues with scam and fraud and being able to have a verified checkmark by your badge or by your store and know that you’re not participating in a fraudulent purchase is incredibly important, more so than it is in the U.S. And I think lastly even just logistics. So there’s a ton of focus on being able to map out cities that previously maybe didn’t have a formal address system and it was informal directions that even the national post office wasn’t delivering to, like building an e-commerce company around those logistics is often something that’s going to be done, often it’s proprietary to local startups, if they’re able to crack that in a city. So yeah, I would say that for retail and e-commerce specifically, localization is incredibly important because the challenges are so unique to these markets. Retail is still a much bigger percent of online shopping than e-commerce, and often this blended approach is something that has to happen just by nature of business there. HAMMER: We’ll come here. Q: Mike Jobbins with Search for Common Ground. A lot of the societies that you’re talking about—Congo, Mali, Yemen, where these next billion people live, are as divided as Myanmar was five years ago and have the same level of internet penetration as Myanmar did. So what are the lessons that you take from Myanmar or any of these places as they come online to shift the social norms of accepted and expected behavior on your platforms? PEPPER: So Myanmar’s a good example, but it’s not alone. That I mentioned earlier being prepared and digital literacy. Getting the first 3 billion people, 3.5 billion people online was relatively easy, compared to the next 3.5 billion. You take a look at basic literacy rates, you take a look at who’s connected and who’s not, even in emerging markets, and so the needs for even very basic digital literacy are extremely important. The training—and I mentioned earlier, giving people basic skills that when they go online, how do they set their settings on their phone? How do they—how can they know if there’s a somebody’s—a phishing attack for information? How do they keep their passwords safe, or even know that they’re supposed to? So these actually, I think, are extremely important and—for example, we’re working—we have multiple digital literacy programs that we have in place and others, new ones that we’re building all the time. And in fact, one of the most effective ones which we used to call OTG, On The Ground, which nobody knew what that meant, and I kept saying, OK, it’s a great program but that’s a silly name. They actually now call it Internet 101, which I thought was—makes more sense. The first place they launched it was in Myanmar, and it’s been actually quite effective. And if you’re interested, I can get you information about that. But that to us is extremely important for a safe internet experience going forward, especially in places with low literacy and very limited digital literacy. We’re also working with NGOs, for NGOs to develop their own digital literacy programs in particular countries. SPIES: I’d say for us, often our values are baked into the product itself. With free wi-fi specifically, as we’ve looked into other companies, what you see is there’s a much lower standard of user data privacy and protection. A lot of people have gotten onto wi-fi networks that are not secure and they get hacked in some ways. And so we’ve talked a lot internally about how do you even shift the perception of this product experience in this industry, because what we’re offering is a much more secure encrypted experience that really prioritizes user privacy. HAMMER: (Off mic.) PISA: Sure, I think it’s a great question. I think if you look at the infrastructure that Facebook very belatedly put in place in Myanmar, the thing that’s striking to me is how expensive it must have been to deal with that problem ex-post. They have hundreds of local language content moderators. Obviously the development of new AI systems, those can scale rather cheaply. But I think as digital platforms broadly step into new countries and are used en masse in new countries where they have to kind of get up to speed with local language content moderation, it seems like to me that one question that arises is when is it not going to make sense as a business proposition? Because if you look at—I know the Facebook average revenue per user last year in the United States was $27 per user, and in most—in sub-Saharan Africa was less than two dollars. So at a certain stage—and the next billion users, it’s a long game, right? And it’s a numbers game, but it’s not hugely profitable in the short term, or maybe even the medium term. And then the questions around how you do—how do you mitigate those risks, it seems like it can be a very costly exercise. So I wonder at some point does it become—do companies just kind of wash their hands of certain problematic situations? HAMMER: I think we have one more in the back, please. Q: Hi. Thank you for this session. My name is Ibrahim. I’m from Deloitte. My question is around cybersecurity and future threats with Google’s Sycamore quantum computer. We have things in place that ensure that these nations are secured in the future, especially around cybersecurity, encryption algorithm, and things like that? Also, looking atm, like, the World Bank report, which is set from I believe 2020 to 2030, which is around the time that quantum computer and things like that will start being really widespread. Are there strategies in place to ensure that these nations are also secured from infrastructure and capacity building? SPIES: Yeah, and I wish I could speak more specifically to quantum computing and some of the cybersecurity efforts. I know on the policy side we are working mostly with some of the transnational bodies that are thinking about policies to put in place and what are global regulations that could be a template for countries on this. Some of the points raised earlier, any time you can get a framework that is globally applicable and scalable, that’s easier for a company whether you’re talking about privacy or cybersecurity. So I know we’re participating in those forums, but I don’t have more detail on them. Maybe Robert can speak to the Facebook efforts. PEPPER: We’re not doing quantum at this point. (Laughter.) SPIES: Yeah, just to pass that over to you. PISA: Neither is CGD, so—yeah. (Laughter.) HAMMER: Neither is the World Bank. And so, with that—(laughter)—I am so grateful to each of you for coming this evening. Thank you very much for spending your time and please thank your panelists for the insight they shared. (Applause.)
  • Sierra Leone
    Behind Sierra Leone’s Ambitious, Tech-Driven Development Plan
    Adam Valavanis is a former intern with the Africa Program at the Council on Foreign Relations. He received a master’s degree in conflict studies from the London School of Economics and Political Science. Sierra Leone currently ranks as one of the least developed countries in the world, with a GDP per capita of less than $300 and high levels of poverty. But President Julius Maada Bio has charted an ambitious development plan for the small West African country. Since 2017, President Bio has overseen increased investment in advanced technologies in the hopes of spurring development. Much of Bio's inspiration comes from Estonia, the small Baltic state that has been dubbed a “digital republic.” The country has for years now been working to digitize government and society under the project e-Estonia. Citizens in Estonia can do things such as vote and pay taxes entirely online. Additionally, non-citizens are able to apply for e-Residency, a gambit to increase foreign investment and business in the country. In February, Sierra Leone announced a three-year partnership with the e-Governance Academy of Estonia "to establish technical collaboration on e-governance for public service delivery and administration in Sierra Leone." Bio hopes to make the country the “Estonia of Africa.”  Sierra Leone has also courted support from top research institutions such as Yale University.  At the center of Bio's plans for Sierra Leone is the Directorate of Science, Technology, and Innovation (DTSI), headed by David Moinina Sengeh. Sengeh received his PhD from MIT and was named to the Forbes 30 Under 30 list in 2014 for technology. He was part of a larger team that trained at Estonia's e-Governance Academy in May. From this trip came DTSI's six core projects: Integrated Geographic Information System, Education Data Hub, Financial Data Mapping, Ease of Doing Business, GoSL Appointment System, and Sierra Leone Drone Corridor. These projects, some of which are still under construction, are all meant to improve government efficiency and service delivery. The Integrated Geographic Information System provides minute data on things such as access to healthcare, education, and water for every region and town in the country. In September, President Bio unveiled the world's first portable DNA sequencer, which can provide "rapid, meaningful information in the fields of healthcare, agriculture, food, and water surveillance and education." The sequencer can also be used by police investigating sex crimes; earlier this year, President Bio declared a national rape emergency. The data provided by DTSI could have a transformative effect on the government’s ability to ensure its citizens' needs are met and governance is improved. Sierra Leone could provide a model for the rest of the continent, which generally suffers from a perennial lack of reliable data. Bridging the data gaps in Africa would go a long way to increasing government capacity and realizing economic potential across the continent.  
  • Cybersecurity
    Preparing for the Future: An Assessment of Emerging Cyber Threats
    Robert K. Knake testifies before The U.S. House of Representatives Subcommittee on Cybersecurity and Infrastructure Protection of the Committee on Homeland Security on how the technology landscape may change in the next five years and what that may mean for emerging cyber threats.
  • Russia
    Stemming the Tide of Global Disinformation
    Play
    Panelists discuss the extent of disinformation, its impact on democracy, and what can be done to prevent, mitigate, and stop its spread. THOMPSON: Welcome to today’s Council on Foreign Relations meeting on “Stemming the Tide of Global Disinformation.” I’m Nicholas Thompson. I’m the editor-in-chief of Wired. I’ll be your moderator today. Let’s get crackin’. Rick, how are you? STENGEL: Good. How are you? THOMPSON: Great. You have just spent the last three years writing about disinformation. He has a new book; it will be available later. You spent the last three years thinking about disinformation. Tell me how your thoughts deepened as you went along, because we all know why disinformation’s a problem. There’re some obvious reasons why it’s a problem. But now that you’ve spent more time thinking about it than anybody else, tell us what you learned that we don’t know. STENGEL: I don’t think I’ve spent more time thinking about it than the president has. (Laughter.) What a way to begin! THOMPSON: Yeah. (Laughter.) STENGEL: The other false premise of your question is that my thinking has deepened about it. So my book, Information Wars, is about the time I spent at the State Department countering disinformation, countering Russian disinformation, countering ISIS propaganda. And I had never really seen it before. I’d been a—I was editor of Time for a bunch of years, had always been in media, and after the annexation of Crimea by Putin in 2014, we saw this tsunami of disinformation around it, you know, recapitulating Putin’s lies about it, and it was a kind of a new world. And the idea of disinformation as opposed to misinformation is disinformation is deliberately false information used for a strategic purpose. Misinformation is something that’s just wrong, something that we all, you know, can get in the habit of it. And I saw this whole new world being born. I don’t mean to steal your thunder with the question, but inside we were talking about whether there’s more disinformation relative to correct information now in history than ever before. I don’t know the answer to that, but what I do know is it’s easier to access it. And once upon a time the Russians, who pioneered something called “active measures,” which was their idea that warfare, the future or the present of warfare is about information, not just kinetic warfare. The way they used to do it in the ’50s was they bought out a journalist in a remote newspaper in India to put out a false story about something and then the Russian media would start echoing it and then it would get into the mainstream. Now, they hire a bunch of kids to work in a troll farm in St. Petersburg and put it up on social media with no barrier to entry, no gatekeepers to prevent it from happening. And I don’t know the answer to whether there’s more of it, but there’s easier access to it. And I do think as we approach 2020, part of the other problem of disinformation is it’s not just a supply problem; it’s a demand problem. People want it. You know, confirmation bias means we seek out information that we agree with. If you’re likely to think that Hillary Clinton is running a child sex trafficking ring out of a pizza parlor in Washington, D.C., you’re likely to believe anything and seek out information that confirms that. That’s a problem, and that’s a human nature problem. THOMPSON: Paul, let me ask you a variation on this, having just listened to Rick. You’ve just published a report on this very topic. You could have written reports on lots of topics. BARRETT: I suppose. (Laughter.) THOMPSON: You’ve got a varied career. Look at the man’s bio. You know a lot of things. Why are you so worried about disinformation right now? BARRETT: Because it is a foot in the land, it is pervasive, and without a good distinction between real facts and fake facts, we can’t run a democracy in an effective way. People can only make honest political choices with real information. And I think we have at key moments and in key places a lot of false information, and intentionally false information. THOMPSON: And is it getting worse? Is it worse today than it was yesterday? Is it worse today than it was four years ago? BARRETT: I think that’s hard to say. I mean, I think it is—it was present and significant in 2016 and has not stopped since, and I think there’s every reason to think that we’ll see it kick up again as we get closer to the next election as well. THOMPSON: Amanda, how worried are you? BENNETT: You know, I’m going to—I’m going to be the dull and boring person at this party, because nothing I do has—I was going to say has anything to do with tech or bots or deep fakes or anything like that. THOMPSON: Help people set up zingers. (Laughter.) BENNETT: Well, let’s hope that that’s true. But my argument is that we are under-valuing the pursuit of straightforward, truthful, honest news and information in our fight to push back this other thing, these fake things. And that disinformation, misinformation—give me your definition of disinformation again. STENGEL: Deliberately false information used for a strategic purpose, nefarious purpose. BENNETT: So I’m the director of Voice of America and yes, we still exist; no, I don’t wear the funny hats anymore; and no, we don’t do propaganda. Thank you. But that definition right there, I will maintain that half of the world at least lives under that condition daily, with no other—no other news or information. And so this is nothing new, the thing that we’re talking about. If you’re talking about the kind of technologically sophisticated things, I’m going to be the boring person to say that this exists in great proliferation throughout the world already, and that what seems to be an antidote to it in many ways is putting something straightforward in front of people. THOMPSON: So I totally buy that. Are you also saying that we talk about disinformation too much in this country? BENNETT: No, I’m saying—I stipulate that everything you guys say is true. Everything is true, we should be worried, these deep fakes are a problem and we should— THOMPSON: And we should talk about it, or does talking about it so much make us think there’s more of it than there is? BENNETT: And this—the article that we just read back there that talks about cynicism, I think if you talk about this type of disinformation and misinformation and its goal being to breed cynicism and confusion, the fact that when you talk about straightforward truthful news and information being possible or desirable people roll their eyes at you, says to me that they’ve already kind of won, that we’ve already come to the idea that we—that that is not an effective way of pushing back at things, but actually we need technological solutions to things. STENGEL: I mean, the thing that has exponentially increased is user-generated content. Remember, the biggest platform in the world, in the history of the world, is all created by content that we put on it, not professional journalists. It’s not vetted. I mean—and so that has—is the thing that has exponentially increased, and because it is created by regular folks and isn’t professional content, the possibility for disinformation, misinformation, anything wrong is that much higher. And one of the things we’ve also—and we will chat about—is the fact—is that the law, the Communications and Decency Act that created all these platforms, does give primacy to third-party content and doesn’t give them any liability for publishing false content if it’s put on by a third-party person, as opposed to a professional journalist like we all are or were. THOMPSON: All right, but let me give each of you a hypothetical. So let’s assume I have two kids; they’ve just graduated from college. They’re really interested in this problem. One of them says, I’m going to go into deep fake detection. I’m going to figure out how to get rid of disinformation. I’m going to help Facebook fix their algorithms so they can identify disinformation. And the other says, I’m going to go be a reporter and I’m just going to tell the truth about everything and I’m going to tweet out all my stories. BARRETT: Well, one will have a job and the other one likely won’t. (Laughter.) THOMPSON: True. But who’s doing the more important work, the work that we need right now? BARRETT: Well, it’s—seem like equally important work. Sorry not to—(laughs)—not to go for your bait, but— BENNETT: I would have said I’ve been a really good parent if that’s—if I have—I have that choice there, I’d say I’ve been a really good parent, that both those things—(laughter)—are incredibly, incredibly useful. THOMPSON: Probably my kids are going to work for troll farms. But anyway—(laughter). STENGEL: You wouldn’t say the reporter. BENNETT: No, not necessarily. I’m not—I’m not saying that one of them is more. I’m saying that right now all this attention is going onto things that, actually, a lot of people out here in the room, it’s more scary because we can’t touch it—we can’t do anything about it—when, in fact, I think what’s happening is that your attention is being turned away from the fact that really truthful—people can distinguish truth from lies. One of the ways they can do it is by seeing things head-to-head and they can make decisions. I mean, the famous example is the Chinese trail (sic; train) derailment. Remember that, when they said nothing here to watch, nobody hurt? And the people that were there doing their—you know, uploading their photos, were showing that there actually was. And that caused a lot of dissonance in the Chinese media ecosystem. So I’m maintaining that not just there’s too much of it or we shouldn’t be doing it, just that there’s something else out there. There’s something else. STENGEL: I would—I’d actually tell my kid to do the deep fake detection, and I’ll tell you why. Because disinformation warfare—information warfare is asymmetrical warfare, right? It’s like a bunch of young people in a troll factory in St. Petersburg, which costs a relatively tiny amount of money compared to an F-35, can do more damage than an F-35. And so it’s asymmetric warfare in that countries that can’t afford missiles or jets or tankers or whatever can engage in this. So that, in that sense, what has also happened is the offensive weapons in disinformation war have matured and evolved faster than defensive weapons. We actually need better defensive weapons, and we need to spend more money on it. So I would argue that somebody who could figure out a system to detect deep fakes instantly would be doing a lot of good for the world. THOMPSON: I appreciate that answer and I also appreciate something you said in there, which is offensive weapons. Should the United States have offensive weapons when it comes to disinformation? STENGEL: (Pause.) Are you talkin’ to me, Nick? (Laughter.) THOMPSON: Based on the way you paused, I am 100 percent talking to you. (Laughter.) STENGEL: Well, I mean, we do have—I mean, I’m not in government anymore, but I think I’m still—have to abide by the strictures of classified information and all of that, or I’ll be prosecuted by the State Department. But I—you know, we do have offensive weapons. I mean, there are—there are well-publicized examples of us using them in Iran, for example. I actually think— BARRETT: But those are cyberattack weapons, as opposed to actually spreading— STENGEL: Yes. BARRETT: —you know, spreading bad information. So what the U.S. Cyber Command does is actually pretty distinct from what we the United States could be doing, which is matching what the Russians are doing with information operations. And we—so far as I know, we don’t do that, at least not anymore, and I think that’s a good policy. I don’t think we should do that. I don’t think we should be in the truth-twisting business. STENGEL: Yeah. So Paul makes a good point, and I talk about this in the book. There’s a—on the spectrum of hard and soft power of information, the hard end of information war is cyberattacks, malware, things like that. The soft end is propaganda, content and this and that. On the soft end we don’t do—I mean, I was involved in the creation of the—of what is now known as the Global Engagement Center, which is a not-completely-funded department which is a kind of whole-of-government department residing at the State Department to combat disinformation. But again, it’s all done in a non-classified way. All the content is labeled U.S. Government. It doesn’t create false information or disinformation. THOMPSON: So what about—OK, so let’s take another example. So Amazon has this thing where they pay tons of people, some of whom work for Amazon, and they pay them to tweet what an amazing place it is to work at Amazon, and they give them scripts, right? And so there’s this kind of this steady flow of—it’s not false; these people may genuinely like to work for Amazon, particularly since they’re being paid to tweet. And so they tweet out, but just kind of garbage. Should the U.S. pay people to tweet out positive things about the U.S. image and tweet The Star-Spangled Banner in Russia? STENGEL: (Pause.) You’re still lookin’ at me. (Laughter.) Well, I— THOMPSON: We got a definitive answer of no. STENGEL: So Amanda and I— BARRETT: But that’s a little different. I mean, the idea of someone—you know, tweeting the United States is great and its enemies are not great. And doesn’t the State Department set up projects and programs that essentially do that? STENGEL: Look, once upon a time, the U.S. Information Agency, which was then folded into the State Department, did create what I would call positive propaganda about the U.S. I was dinged here on another panel a couple of years ago for saying that there’s such a thing as good propaganda as well as negative propaganda. I don’t think propaganda just is automatically a terrible thing and that nations do practice it. So all those trolls will get upset again. But we don’t really do what USIA used to do anymore, you know, in terms of Frank Capra—why we fight and documentaries about great black athletes and things like that. I mean, all of which was true content, it just was used to give people a better picture of the United States. And I always argued when I was in government that we do that already. I think U.S.—I would always want to make people around the world be able to see U.S. media and not only what we say about ourselves that’s good, but what we say about ourselves that’s critical, so people see that we have an open press and what that’s like. I think that sends a great message, which is essentially the message that you send, Amanda. BENNETT: Hmm. The word “message” is a very, very dirty word at the Voice of America because that implies that you are deliberately moving your content in order to achieve a particular end. Yes, I say that we have an offensive weapon, and I do say that this whole argument has in fact won a little bit, because I’m going to tell you what I think our offensive weapon is and I’m going to see a collective eye-roll around the room, which is our most effective weapon is our First Amendment. And I say that we export the First Amendment and that people can tell the difference. Not completely. I stipulate that everything you guys are saying is true, that deep fakes and all this stuff in troll farms are bad and dangerous and hazardous. I’m glad that you guys are paying attention to it. But I’m also saying that—and I’m so glad you brought up that F-35, because my personal budget at the Voice of America is less than two F-35s. If anybody’s out there listening would like to help fix that problem anyplace, that would be great, because I think that we reach, you know, hundreds of millions of people around the world for a very small amount of money. And so the First Amendment, neutral news, truthful news, not messaging, independent of a government. People can tell if it’s—if it’s being moved around. Here’s my—here’s my question right now. You guys all read newspapers still, right? In paper? Any of you in this room? Somebody? Thank you. And sometimes you see these inserts like from the China Daily or from, you know, Abu Dhabi, the City of the Future that kind of stuff? How many of you read them? Have you ever read a single word of them? One word? OK, a couple words out there. And why don’t you read them? Because you know that they are moving something, they are trying to sell you something. You’ll read the newspaper that surrounds it, but you’re not going to read the thing inside. That’s what I’m saying that propaganda is like, and that you can tell the difference. Maybe not if you have good deep fake that’s doing things, but—so I agree that you guys are good, but people can tell the difference and it’s a worthwhile thing to do. It’s a very worthwhile thing to do. (Applause.) THOMPSON: All right, let’s move to the platforms, the social media platforms. That was a good answer. BENNETT: That wasn’t the eyeroll I was expecting. (Laughter.) THOMPSON: Standing up for truthful news? Journalists are going to—I’m certainly going to applaud that. All right, let’s talk about the technology platforms. Paul, you’ve just published a report on what they’re doing, what they need to do. Last time when we talked about the 2016 election, we mostly complained about Facebook and Twitter. After 2020 when we’re all diagnosing what went horribly wrong on the social media platforms, which ones will we be looking at? BARRETT: Well, I say in my report that Instagram, which is owned by Twitter, a photo- and video-based— STENGEL: Owned by Facebook. THOMPSON: Owned by Facebook. BARRETT: Excuse me. Forgive me. By Facebook, I apologize—deserves more attention. And the main reason for that is because we already know that it is a disinformation magnet. The Russian Internet Research Agency, the main trolling operation that the Russians ran in 2016, had more engagement on Instagram than it did on either Facebook or Twitter. And experts in this area have pointed out to me that increasingly, disinformation is being conveyed visually, and that is Instagram’s specialty. And I think that’s the platform to focus one’s attention on, at least initially. STENGEL: It’s also harder to find— BARRETT: Harder to detect, that’s a very good point. THOMPSON: Rick, would you agree? STENGEL: I do agree. I mean, I—Paul’s report, by the way, is absolutely terrific, and it’s a great primer, I think, on disinformation, both what happened in 2016 and going forward. The Senate Intelligence Committee report that came out, I think two days ago— THOMPSON: Yeah. STENGEL: —you know, had a lot that Robert Mueller had, and the stuff in my book that Robert Mueller didn’t have—I’m just telling you that too. But one of the things that they did have is that the Russians have actually increased in terms of volume what they’ve been doing since 2016, and largely on Instagram and other platforms that we probably don’t even know about. What Mueller didn’t have—and I want to get to the platform things in a second—is that what the Internet Research Agency was doing was completely integrated with what Russian mainstream media was doing, with Russia Today and Sputnik and TASS. And with the Russian, you know, foreign minister, who used to echo canards and misinformation that was created from the Internet Research Agency and start talking about it at a press conference, and then it was covered worldwide. So it had a much greater impact than just the audiences that the Internet Research Agency was going for. But in terms of the platforms, I do think—and we—and Paul also talks about this in his report—they need to have more responsibility and more liability for the content that they publish. They cannot escape this idea that they’re—that they’re not publishers anymore. The gentleman from NewsGuard here, which is a fantastic new organization that is fact-checking information on the web. I actually stole some language from you about what the companies need to do. They can’t be liable the way Time magazine or Wired is for every word that they publish, but they have to make a good-faith effort to take down demonstrably false content, as Paul talks about. I would argue hate speech, speech that leads to violence, those—there’s no excuse for that, even if it’s framed as political speech. That should just be off, and they should be liable if they don’t take it off. THOMPSON: So let’s do an example. Let’s talk about, I don’t know, the famous example that came up was the video of Nancy Pelosi slowed down so it looked like she was slurring her speech and drunk. So you can make the argument that’s demonstrably false or you can make the argument it was satire. Satire’s got to be a protected form of speech. What do you guys think? Would you take that down if you were Mark Zuckerberg, would you knock that off the internet? STENGEL: I— BARRETT: Well—I don’t want to—I say yes. STENGEL: I say yes. I mean, and I think also one of the things that they did, so they slug-did (ph) or—“slugged” is a journalism word. They had a—you know, a chyron up saying this is not true content, or this is manipulated content. One of the things that influences all of this, and I write a little bit about it in my book, are these cognitive biases. And there’s a terrific dissertation, and I forget the young woman’s name who wrote it, about belief echoes, she called it, which is that this idea that if you see something false, even if you then immediately are told that it’s false, and even are persuaded that it’s false, it creates a belief echo in your head that never gets erased. So to me, part of the problem of putting a caption under the Nancy Pelosi video is that you can’t un-ring the bell. You can’t un-see that. That stays in your brain. It should not—it should not have been on the platform at all. THOMPSON: So you would knock Andy Borowitz off the platform too? I mean, political satire, making fun of things that—pretending that Trump said things that he didn’t say? Because there could be belief echoes with that, even though it’s slugged as humor. STENGEL: You’re trying to trick me now, Nick. I am—(laughter)— THOMPSON: I’m just trying to get some of the complexities here. BENNETT: Do you—do you remember when the People’s Daily re-ran the story about Kim Jong-un being the world’s sexiest man, that was written as satire? And they were like, “world’s sexiest man declared by U.S. publication,” right? THOMPSON: I ran traffic analytics at the New Yorker and sometimes Andy Borowitz’s post would be picked up as true in China, and the traffic spikes we got were killer. (Laughter.) BENNETT: Yeah. Yeah. THOMPSON: All right, so let’s—so we’re kind of ragging on the platforms right now and talking about some of the problems they have. 2016, obviously lots of problems. We had a 2018 election and as far as I can tell, wasn’t a whole lot of misinformation. The only thing that I read about was a bunch of Democrats running a test to try to take—to criticize Roy Moore in Alabama, right? We had very different disinformation problems. So maybe it’s under control. Maybe we’re over-indexing on 2016. BARRETT: Maybe, but I don’t think we should take the risk that that’s the case. You’re absolutely right that the Russians’ level of interference was negligible immediately around the time of the election. We don’t know exactly why that is; they’re keeping their powder dry for 2020, a much more important engagement perhaps. Perhaps the platforms deserve some credit for having gotten more on the stick and more in the business of taking down phony accounts which they are now doing in some numbers, whereas in 2016 they were completely asleep to that. The Cyber Command that we mentioned earlier reportedly ran an operation that shut down the IRA, at least for a few days, around the election itself so that they were taken off the internet temporarily. All those things may have played a role. But the general problem continues. There is disinformation flowing from abroad, not just Russia but also Iran. And I just don’t think this is the kind of problem that you say, well, we had one good outing, so we’re done, all our problems are taken care of. THOMPSON: But are the signs that you’re seeing, right—we’re a year out. Are you starting to pick up a sense that it’s going to be like 2016 or are you picking up a sense that’s going to be like 2018? STENGEL: One of the things in the Senate Intelligence report that I found interesting was this idea that the Russians masquerading as Americans would seduce or entice actual Americans to do their bidding on the Web. You wrote about some examples that they did in 2016. BARRETT: Right. STENGEL: The one that still kills me that actually wasn’t in the final Mueller report—it was in the first Mueller indictment, and I think you mentioned it in your report—that from St. Petersburg the guys from the Internet Research Agency create—did a rally, a pro-Trump rally in Palm Beach where they hired a flatbed truck and an actress to play Hillary Clinton in a prison cell on the back of a flatbed truck, and they did that from St. Petersburg. That was in the first Mueller indictment. I don’t know why he didn’t put it into the Mueller report. But in terms of them using Americans to do their bidding, I would worry about that in 2020. That’s very hard to detect. Because if you persuade somebody in Palm Beach to do something like that again, then that’s an American person expressing their First Amendment rights to, you know, say Hillary Clinton should be in prison. THOMPSON: All right. Let’s spend the last five minutes we have before we go to Q&A, coming up with an agenda for the United States of America, for citizens of America, for the government of America, to lessen the risk of disinformation. Because, as Paul said at the very beginning, democracy can’t function if nobody believes anything. So we should have engineers looking for deep fakes. We should have true and faithful news. The platforms should be looking for this stuff much harder. What else do we need to do? BARRETT: And cooperating with each other to a greater degree than they do, and cooperating with the government to a greater degree than they do in order to exchange information and, you know, sort of suss out threats sooner than otherwise they might. And they need to do a lot of what—a lot more of what they’ve already been doing, hiring more people to review content and continuing to improve their artificial intelligence filters. THOMPSON: Amanda, what else do we put on the agenda? BENNETT: You know, I would go back to the same thing, which is keep your eye on the ball. What are you trying to push back disinformation for? What is—what is the thing you are trying to push it away from? And that, I would definitely strengthen that, and I would not roll our eyes at the 1999 concept that this stuff actually has value. And that it—and it can be believed, that people can believe it. STENGEL: I agree with all that we’ve said. I think vetting mechanisms like NewsGuard and others are valuable. I also think a long-term solution—I mean, one of the things I say in the book is we don’t have a fake news problem; we have a media literacy problem. Lots and lots of people—once I left journalism I realized wow, lots and lots of people can’t actually tell the provenance of information and where it comes from and what’s a reliable source and what’s not a reliable source. It has to be taught in schools, starting like in elementary school. And that’s the reason that so much of this has purchase is that people can’t tell that it’s false and they’re more susceptible to believe it. THOMPSON: All right, so let’s give a lesson to everybody in this room. We’re all going to—at some, point we’re going to see information that might be false. How should people evaluate it? How can we learn media literacy? Members of the Council on Foreign Relations, well educated, but they’re not going to go back to school for this. STENGEL: Well, actually, one of the proposals I have is about—is about journalism, digital journalism being way, way, way more transparent, right? So when—in the day when we did stories, we did interviews, we did research, we talked to people, it was fact-checked, we wrote an outline. I think all of that—you should be able to link to that, that you write the story, in the New York Times there’s a link to “here’s my interview with the national security adviser.” “Here are the photographs we took that we didn’t use.” “Here’s the research I did, this chapter from this great new book by Rick Stengel.” (Laughter.) Oh, sorry. And would every reader look at that? No, but it would show the kind of the—how the building is created and it would create more confidence in the result. THOMPSON: How about changing the law? Should we make the social media companies liable if there’s an excessive amount of disinformation on their platforms? STENGEL: I think so. BENNETT: And I will say what I always say, is write the laws as if your adversaries are going to be the ones implementing them. Just make sure you know what’s going on. You can write them because you think of what you want, but think about—think about a law like that in the hands of somebody you don’t like. BARRETT: And interestingly, Mark Zuckerberg has actually proposed something roughly along those lines, has talked about having some type of government body that would assess the prevalence of bad content on the sites and sort of superintend whether the sites were making progress. I doubt he would go for actually creating, you know, private liability and litigation to flow from that, but the idea is not as far out as you might think. THOMPSON: But he might go for that, because the only company to be able to comply with those laws is his. STENGEL: Is his. Exactly. THOMPSON: And any start-up would be wrecked because they won’t be able to hire all the lawyers and lobbyists they need, which is one of the problems with these laws is locking in monopolies. But, Rick, you said yes, we should change the law. Which laws? STENGEL: Section 230 of the Communications and Decency Act, which basically gives all of these companies zero liability for the content that they publish, because it’s third-party content. Now, when it was written—when you write a law to incentivize some behavior, like you write a law saying hey, we need to have more people go to Staten Island, let’s—you know, I’m going to create a law where you can build a bridge, you can have a toll for it for ten years, but then you change the law. The law from 1996 did incentivize this, in a massive way, in a way that unintendedly created all of this other stuff. Needs to be changed now. These platforms need to make a good-faith effort to do that. And one reason they don’t take content down is because if they took content down Congress would go, oh, you’re an editor after all, so you should have liability for the stuff on your content. That’s why—one reason that Facebook is so loath to take things down, because they don’t want people to say, hey, you’re performing an editorial function. THOMPSON: All right. It’s 1:30. I’d like to invite members to join our conversation with their questions. A reminder, the meeting is on the record. Second reminder, the Council on Foreign Relations is not liable for any defamatory statements that you put in your questions. (Laughter.) Please wait for the microphone. Speak directly into it. Stand. State your name and affiliation. Please ask just one question and keep it concise so we can get as many as possible. All right. In the back, in the light blue. Q: Hi. Kathryn Harrison, CEO of the Deep Trust Alliance. You talked about media literacy. That’s like telling everyone who drives their car poorly that they need to go back to school. STENGEL: I agree with that too. (Laughter.) Q: An important—an important part of the solution for sure. But as the equivalent of cars, as the technology for creating videos, images, text get better, faster, stronger, cheaper, is there not an opportunity to make in the technology itself standards, labels, or other elements that would provide the guardrails, the seatbelts, or the airbags for consumers who are viewing that content? STENGEL: What would that be? Q: You could have a very simple labeling system, human-generated, computer-generated. You need to be able to track the provenance—what’s the source, how is it manipulated—but that would at least give you a signal, much like when you go to the movies, you know if you’re going into an R-rated movie that there’s going to be violence or sex or language, versus if you go into a G-rated movie. That’s the first place where we’ve shown kind of information that isn’t real. How can we use some of the models that we already have in society to tackle some of these problems? Because it definitely needs technological as well as human remedies. BENNETT: I often thought that was really interesting. You know, like, I’ve got friends who forward really stupid things like the one-cent tax on emails. How many of you have got friends that forward the one-cent tax on email thing? I think, oh, guys, get a grip, you know? (Laughter.) But on the other hand, I would really love to see something. This thing was posted by something that in the last thirty seconds posted ten thousand other things. I just think that would be a really useful thing to have and it wouldn’t be that hard to do. I mean, Facebook and Twitter can both do that right now. STENGEL: So what—I’m a little wary about the content purveyor creating the definition. Now one of the things that a lot of bills that are out there, like the Honest Ads Act for political advertising, or almost any advertising, is to show the provenance of the advertising. Why were you selected to get this particular ad? Well, it turns out that you bought a pair of Nikes last year and they’re looking for people who bought Nikes in Minnesota. I think all advertising that—and I actually think advertising has a role to play in the rise of disinformation, because automated advertising, when people started buying audience as opposed to brands, that allowed disinformation to rise. So I think the kind of transparency in terms of political advertising and other advertising insofar as that could be applied to content, without prejudging it, I would—I would welcome that. THOMPSON: All right. In the back, who also might be in turquoise—slightly misleading my initial calling. Yes. Q: My name is Aaron Mertz. I direct the Aspen Institute Science and Society Program. A lot of the examples you gave came from very large entities, governments, major corporations, often for quite nefarious aims. I’m thinking about individuals who might have ostensibly good intentions, parents who want the best for their children, but then who are propagating false information about things like vaccines. How do you counteract that kind of disinformation that’s coming from individuals who then can band together, form these groups and then potentially even lobby governments to change policy? BENNETT: I think you’ve just put your finger on one of the real—the real, you know, radioactive things about this whole discussion. How far do you go from vaccines which we don’t agree with to a form of religion we don’t agree with? Let’s talk about Christian Scientists. Would you like to ban that from the internet? I mean, that’s—you’ve just put your finger on the third rail. THOMPSON: So how do we solve the third rail? BARRETT: Well, I would encourage the platforms to diminish the distribution of or take down altogether phony life-threatening medical information. So, I mean, you have to do it carefully, you have to be very serious-minded about it, but I— THOMPSON: Who determined—who gets to determine what’s phony? BARRETT: Hmm? THOMPSON: Who determines what’s phony? BARRETT: I would go with doctors and scientists. (Laughter.) BENNETT: Me. BARRETT: You? BENNETT: I’m going to do it, yeah. BARRETT: Well, I’m less impressed by you. (Laughter.) STENGEL: But to say something that will also be unpopular, when I went into government, and having been a journalist, I was as close to being a First Amendment absolutist as you could be, you know? Justice Holmes, the First Amendment doesn’t just protect ideas that we love, it protects ideas that we hate. And traveling around the world, particularly in the Middle East, and people would say, why did you allow that reverend in Florida burn a Quran? Well, the First Amendment. There’s no understanding of the First Amendment around the world. It’s a gigantic outlier. All of these societies don’t understand the idea that we protect thought that we hate. I actually think that, particularly the platforms, the platforms have their own constitutions; they’re called terms of service agreements. They are not—they don’t have to abide by the First Amendment as private companies. Those need to be much stricter about content closer to what the—what the EU regards as hate speech and other countries do. There’s a phrase called dangerous speech, which is speech that indirectly leads to violence. I think we have to be stricter about that, and I—and the platforms can do that because they are private entities. THOMPSON: All right. I’ve got so many follow-ups. We’ve got a lot of questions. George Schwab in the front center here. Q: Thank you. George Schwab, National Committee on American Foreign Policy. From the perspective of international law, does state-sponsored misinformation constitute aggression? BENNETT: Not my thing. STENGEL: Well, one of the things I’ve been saying for a long time is that the Russians didn’t meddle in our election; they did an act of cyber warfare against the foundation of our democracy. That’s not meddling. I think when there’s state-sponsored disinformation, I think there should be repercussions for it. And part of the reason there’s more and more is that no country pays any consequences for it. I mean, yes, we sanctioned the Russians, or a few Russians, but it’s not a disincentive for them to do more. THOMPSON: So what should we have done? STENGEL: I’m sorry? THOMPSON: What should we have done to the Russians after 2016? We’re not going to nuke them, right? (Laughter.) Like, where’s the line that we’re going to— STENGEL: Well, I think we should have declared—there’s a—something akin to a kind of information national emergency, that our election is being interfered with by a foreign hostile power in ways that we still don’t know, and people have to be wary. THOMPSON: OK. Far right here. Q: Peter Varis, from TechPolis. Richard, you mentioned two cases that you actually worked on, the ISIS misinformation and the Russians after Crimea. It’s obvious that we have a lot more misinformation because the cost has declined. But what’s the difference from a terrorist group or, ditto, an insurrection like ISIS, and a state-sponsored little campaign of misinformation, which is—both are linked to actual kinetic warfare. STENGEL: Yeah. Q: But what’s the difference? Because that helps us to understand the budget difference. With $50 you can have a lot of impact with targeting on the internet, but what did you feel, hands-on, on those two experiences? STENGEL: So I write about both trying to counter ISIS messaging and Russian disinformation. And the former is easier in the sense that the ISIS disinformation, they weren’t masquerading. They weren’t pretending to be other people or Americans. They were digital jihadis, and when then advocated violence, right there was stuff that you could take off. I mean some—and I, in the book I talk about how—what great things that Facebook and Google and YouTube did in taking down violent extremist content. In fact, someone at Facebook likened it to child pornography, where the image itself is the crime; you’re under arrest. Promotion of violence, you’re out. The problem with the Russians is they pretended to be Americans. They pretended to be other people. They were hidden in plain sight, and that is—that’s a lot more difficult, and it’s still more difficult. THOMPSON: All right, let’s get some questions on the left. As far left as we can go. Right here. Q: Speaking of far left. (Laughter.) Peter Osnos with Public Affairs Books. So some of us grew up with Russian propaganda. Then it was called Soviet propaganda. And what we all agreed was that it was incredibly clumsy. So in 2016 and beyond, suddenly those same Russians, now a new generation, managed to create vast amounts of bits and pieces that were considered effective. And you referred to the stuff up in St. Petersburg, and there are people who say it was in Moldavia or some other places. Who was doing all that stuff? Who—low-paid trolls? Who created tens and tens of millions of these bits and pieces, many of which were, I’m sorry to say, very effective? BARRETT: Well, there was a—the main engine for the information operation side of it, as opposed to the cyberattack against the DNC computers, which was brought off by the GRU, the intelligence wing of the Russian military. The information side, the IRA, was run like a company that was owned by a crony of Putin’s and allegedly, according to Robert Mueller and U.S. intelligence agencies, was something that Putin himself approved of. So— Q: That’s not the answer. BARRETT: Not the answer? STENGEL: But Peter, I’d make a distinction between effective and sophisticated. What they did was effective; it wasn’t sophisticated. I was a recipient of all the stuff from trolls. I can’t even—I can’t say the words that they said. They couldn’t even spell them. The grammar was atrocious; they had terrible English. We looked at the handbook that the trolls would get when they went to the Internet Research Agency; it’s laughable. But as someone said to me, a marketing guy said to me, you know the emails you get from the Nigerian prince who needs $20,000 to get out of prison and you’re going to get $10 million? I said, yeah. He said, and you know they’re like filled with spelling errors and grammatical mistakes? And I said, yeah. He said, that’s deliberate. Why? Because if you respond to it, they know they’ve got a live wire. So the stuff that the Russians did were for people, as I said before, who will believe these strange conspiracies people, who don’t really know about the Oxford comma. (Laughter.) So they don’t really care about it, and that’s why it’s effective. THOMPSON: All right. Let’s go to the back. The very, very back. Q: Steve Hellman, Mobility Impact Partners. Do you expect more vectors of interference in the 2020 election, particularly Chinese, for example? Do we expect foreign adversaries to weigh in on both sides of the election at this stage? What do you think? BARRETT: Possibly. I mean, I think the Chinese are a possibility. We’ve just seen them active in Hong Kong, where they used Facebook and Twitter accounts, some of them English language, to try to undermine the democracy protestors in Hong Kong. I see shifting the attention over to the United States as only a minor potential adjustment. I think the Russians could be back and the Iranians have already test-driven their information operation. So I think there’s every possibility that there could be more vectors, as you put it, coming from abroad. And in terms of volume, we should remember that the vast majority of dis- and misinformation comes from right here at home where we’re doing this to ourselves, in a sense. So there’ll be that aspect of it as well. THOMPSON: But isn’t one of the interesting questions when you try to think about what countries will try to influence our election is which country has a clear goal in the outcome, right? So who—will China want Trump or his Democratic opponent to win? Like, Russia had a clear goal in ’16— BARRETT: In promoting Trump, and presumably China would have the opposite goal. THOMPSON: Perhaps, unless they think that the backlash Trump has created is beneficial to them. I mean, I’m not a China foreign policy expert, but— BARRETT: Me either. THOMPSON: Who is going to—who has a clear interest in the outcome? STENGEL: One of the things that we saw about Chinese disinformation and propaganda operations was that it wasn’t directed outward. It was much more directed inward, both for the Chinese audience itself and also for marketing the Chinese miracle around the world. They weren’t trying to effect particular political outcomes. I mean, that may have changed, and what’s going on in Hong Kong is evidence that they’re getting more sophisticated about it. But they were not nearly as aggressive as the Russians, of course, and the Iranians, who do also have an interest. But I also would quibble a little bit with—the Russians did end up of course helping Trump, but in the beginning, I mean, their whole goal, and has been— THOMPSON: Helping Bernie first. STENGEL: Well, but their whole goal was sewing disunity, discord, grievance. That’s what they’ve been doing since the ’40s and ’50s and ’60s. It was only when they saw Trump starting to lead the pack and praising Putin to the skies that they turned and started marshaling resources about it. I mean, one of the things I write about is that in the beginning, the first six weeks, you know, Trump was made fun of by the Russians just like people here were doing. THOMPSON: All right. Do we have a Chinese foreign policy expert who wants to raise their hand? BENNETT: This poor lady’s been right in front waving her hand. It’s driving me crazy. (Laughter.) Q: I’m Lucy Komisar. I’m a journalist. In the New York Times yesterday there was a story with the headline Ukrainian President Says ‘No Blackmail’ In Phone Call With Trump by Michael Schwirtz. He said Mr. Zelensky also said “he ‘didn’t care what happens’ in the case of Burisma, the Ukrainian gas company that once employed” a son of former Vice President Joe Biden. “In the phone call, President Trump had asked Mr. Zelensky to do him a ‘favor’ and investigate the debunked theory that Mr. Biden had directed Ukraine to fire” an anti-corruption “prosecutor who had set his sights on the company.” “Debunked” was the word of the author, not of Trump. Well, go back to January 23, 2018. In this room, Joe Biden, speaking to the Council, on the record. “And I went over, I guess, the twelfth or thirteenth time to Kyiv and I was supposed to announce that there was another billion-dollar loan guarantee, and I’d gotten a commission from Poroshenko and from Yatsenyuk that they would take action against the state prosecutor, and they didn’t.” I’m eliminating a couple of paragraphs just for time, just to get to the nut-graph. “I looked at them and said, I’m leaving in six hours. If the prosecutor is not fired, you’re not getting the money. Well, son of a bitch—(laughter)—he got fired.” Now what would you say about this disinformation in the New York Times yesterday? And do you think that they should take down this demonstrably false information? STENGEL: What are you saying is false about it? Q: Well, the writer says that it was a “debunked theory” that Biden directed the Ukraine to fire an anti-corruption prosecutor who had his sights on the company. In this—in the Council here, Biden says exactly that he said we would not give the billion-dollar loan guarantee unless you fired this prosecutor. It seems to me that Biden in one place is telling the truth and in another place he’s not. Maybe we have to figure out that, but I don’t think he lied to the Council. It’s all online; anybody can see it. Therefore, it seems to me the Times wrote fake news and they should be asked to take it down. BENNETT: I think the point that you’re—that you’re actually making the larger point I think people would be interested in is that a reputable organization that does this looks at errors and puts—researches them and corrects them when they make them. If it in fact is an error, then people should correct it. But that’s a generalized principle, and I don’t know anything about the truth or falsehood of what you just said. I’m just saying that’s one of the things you want that Rick’s talked about, is transparency and correction. THOMPSON: Let’s not—I don’t think we want to litigate this, because we don’t— BENNETT: Yeah, we— THOMPSON: We’re not experts on that particular statement. BENNETT: We’re not expert on that. We don’t— STENGEL: If I could just to go in the weeds for a second, having gone to Ukraine several times at the same time that Vice President Biden was there—he was there twelve or thirteen times; I went three times. That prosecutor was a corrupt prosecutor who was shaking down the people he would potentially prosecute who already had exonerated Burisma, the company that his son worked for. So he was saying the prosecutor that exonerated Burisma needed to be fired. And you know who else was saying it? The IMF, the World Bank, the EU, everybody else. It was a corrupt prosecutor. Q: He now says he—(off mic). THOMPSON: All right. Woman at the table behind. Right there. Yes, you. Yes. Q: Going back to the question of whether there was disinformation— THOMPSON: Oh, and your name and affiliation. Q: Oh, sorry. Absolutely. Ann Nelson, Columbia University. The question of disinformation in the 2018 campaign, I wonder whether you were looking at U.S. intermediaries at state-level campaigns. So specifically the National Rifle Association, which has its own apps and its own dedicated social media platforms and they have repurposed Russian memes and as the Senate Commerce Committee minority report pointed out last week, the NRA, Maria Butina, were very heavily involved with the Russian campaigns over a few years, including supporting her attendance at the Council for International Policy. So looking at campaigns such as Heidi Heitkamp and Claire McCaskill, where the NRA was extremely involved both online and on the ground, do you still think they weren’t very involved in 2018? BARRETT: Not sure exactly how to answer that. The NRA was active in—I mean, the Russians had certain contact with the NRA. I’m not sure that that is—fits in exactly the same frame as the information operations that we’ve been talking about, but certainly you’re right that the NRA is reputed, certainly by its foes, to stretch the truth on a regular basis and they have that intertwining with certain Russian agents, namely that woman. Beyond that, I don’t really have the—know what else to say. THOMPSON: OK. Gentleman in the far back, in the blue jacket. Q: Hi. Jamaal Glenn, Alumni Ventures Group. What’s your prescription for how to deal with information that doesn’t fall in the demonstrably false category? I want to challenge this notion that some of the Russian operation weren’t sophisticated. I would argue—maybe not technically sophisticated, but incredibly sophisticated if you look at their ability to identify American political fault lines and play to those. Things like race. I have friends exceptionally well educated who played right into the hands of some of these actors. And many of these things weren’t technically false. So I’m curious. What’s your prescription for these things that sort of fit in this non-demonstrably false gray area? BARRETT: Well, I was going to say the platforms, but mainly Facebook, already has a mechanism for what they end up calling false news, which would be broader than in my—in my thinking than demonstrably false information, and they down-rank it and label it, if they—if their fact-checkers have found it to be false, they label it so that when you go to share it, you’re told with a little pop-up that what you’re trying to share here is false, so, you know, think twice before you do it. I think that mechanism, for something that’s determined to be false, but where there’d be some difficulty in calling it demonstrably false, might be the way to deal with that. A certain amount of misleading information, you’re not going to be able to do anything with because you’re not going to be able to know in the first instance where it came from or who’s manipulating it. THOMPSON: But what if it’s true? Q: But what if it’s true? BARRETT: OK, well— THOMPSON: So what if the Russian government is spending money to promote stories that are irrefutably true. Say they’re about— BARRETT: Yeah, then you’re looking for categories of behavior that indicate that there’s some inauthenticity to the accounts that are sending it. The platforms have been moving more in that direction, taking down accounts on that basis. But all of this points to the fact that you’re not going to be able to get everything. No matter how aggressive you are, and not everyone wants to be that aggressive, this environment is going to be shot through with material of questionable provenance. THOMPSON: OK. Right here on the right, gentleman in the orange tie. Q: Michael Skol of Skol and Serna. Isn’t this partially a generational problem? I am one of those who does read the morning papers on—in paper. the Times, the Journal, the Post when there’s a funny headline. But I don’t—I don’t think there’s a lot of people a lot younger than I am who follow this, and which—what are the implications of this, that this problem is only going to get worse because the younger people who don’t pay attention, who don’t prioritize demonstrably true media outlets, are growing up and they overwhelmingly, possibly, there will be a population that’s worse than it is now. BENNETT: Again, let me—let me be the cheerful, non-cynical person in the room. Because we are able to look at digital behavior around the world, and let’s just stipulate that based on what you said, paper is for our generation; digital’s for everybody else. One thing we are finding that is fascinating is that people are coming to look for news and coverage from other countries, and I’ll give you one specifically. In China, what we found in the last six months or so is that the volume of traffic coming out and looking for news on Venezuela has just gone through the roof. Now, why would that be, and who is it? I think it’s because they’re trying to find out things that they’re not being told at home. I think that is a really interesting thing. It says to me that these things are true that we’re saying here.  It is also true that people want to know what’s really going on and they have a search for truth. I know this is, like, 1990s, 1980s, but I still believe that that is true. And we’re watching our digital behavior. When there were the street protests in Iran, our traffic went crazy. Our Instagram traffic went crazy. This is all people coming off of cell phones, so it’s young people carrying their cell phones. They were looking for stuff. So we saw this happening. And so I’m saying that I’m not sure you can say that everybody under the age of 65 is kind of undiscerning and stupid. I don’t actually believe that. Well, sometimes I do, but— BARRETT: Some of us are. (Laughter.) BENNETT: But not often. Anyway— THOMPSON: I would just add that the data from 2016 shows that there is a real generational problem with fake news. But it’s the older people. (Laughter.) BARRETT: Yeah. BENNETT: Yeah. THOMPSON: On the left. (Laughter.) Q: Jove Oliver, Oliver Global. My question is with your journalist hats on, when you see , say, a public figure, maybe the president of the U.S. breaking the terms of service on a certain platform, whether that’s by spreading, you know, disinformation on maybe Twitter or something, what’s the—what’s the remedy for that with your journalist hat on? It’s a public figure. Arguably, what they’re saying is in the public interest. At the same time, they could be causing violence against people or certainly spreading disinformation, which is against the terms of service of these platforms? Thank you. THOMPSON: Or we could even make it more specific. Rick, you sit on the board of Snapchat. Should you kick Trump off? STENGEL: Well, I’ll—(laughter)—I’ll answer that in a second, but I’m going to—the previous question. It’s a well-known fact that stories on paper are more factual than stories on telephones. Wasn’t that the implication of your question? That’s a joke. Q: Depending on which paper. (Laughter.) STENGEL: OK. I think the highest order of magnitude—and again, one of the things that’s been great about this panel, Nick, is you’ve actually caused us to have to think while we’re up here, which is usually not allowed on panels. But to me, the highest value is whether something is demonstrably true or false, rather than the news value of a certain story or the news value of a certain news figure making that statement or the higher protections that political speech has than regular speech. So that was the—that was the story about Facebook and the—now taking off that ad. They were privileging political speech over regular speech, and they—basically they were saying, to me, was that political speech, even if it’s false, is protected, whereas regular speech, if it’s false, is not protected. I would say the highest order is the falseness or trueness and even if it’s a public figure, then that content should be taken off. THOMPSON: Banning Trump from Snapchat? STENGEL: You know, not everything he says is false. And there is a—he is a newsmaker, I believe, and one of the things that—and as Nick mentioned, I’m an adviser to Snapchat. Snapchat does more of a traditional curation of news where the news is linked to a brand, rather than a topic or audience. And in fact, one of the things that I also say in the book is that the rise of automated advertising where you buy an audience, as opposed to buying an ad in Time magazine or the Economist or Wired, is one of the reasons that all of this disinformation becomes out there. And I’m going to say something very unpopular now among my news brethren, that I actually think the movement toward subscriptions also creates a greater volume of disinformation because the true content is now behind a paywall that very—that relatively fewer people can get, whereas the bad content is open and free. So talking about this age discrepancy, young people are now going to think well, I got to pay $68 a month to subscribe to the New York Times but I can get all this other stuff for free, free is a very powerful word in our society. And in fact, I used to say in the early days was, you know, when people used to say information wants to be free, I would say people want free information and we gave it to them and that’s why they are biased in favor of it. So I think the subscription paywall model is also a recipe for the increase of disinformation. THOMPSON: Well, there’s only one way to solve that problem and that’s for everybody in this room to subscribe to Wired. (Laughter.) All right. It’s 2:00. We’re done. Thank you very much to this panel. Please turn on your phones and spread some true information. (Applause.) (END)
  • Education
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  • China
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  • Technology and Innovation
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    Admiral William H. McRaven, professor at the Lyndon B. Johnson School of Public Affairs, discusses the CFR-sponsored Independent Task Force report, Innovation and National Security: Keeping Our Edge, with James M. Lindsay. The report outlines a strategy to ensure the United States remains the predominant power in a range of emerging technologies, and the national security implications if it fails to do so.
  • Global Governance
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  • Technology and Innovation
    Keeping Our Edge: Restoring Federal Funding for Research and Development
    This post is based on some of the findings of the CFR-sponsored task force, Innovation and National Security: Keeping Our Edge, which was released September 18, 2019. The United States has led the world in innovation, research, and technology development since World War II, but that leadership is now at risk because of a decades-long stagnation in federal support and funding for research and development (R&D). Many of the technology breakthroughs underlying the United States’ economic and military strength—GPS, internet, AI, genomics—have drawn on federally funded R&D, with work carried out in federal laboratories, universities, and industry. But despite its importance to the nation’s innovation base, federal spending on R&D as a percentage of the overall economy has declined since the end of the Cold War. Sufficient federal investment in research is vital to advancing national goals in the areas of health, defense, and the economy. While the private sector has significantly increased its investment in R&D, from $70 billion in 1980 to $300 billion in 2016, the United States cannot rely on its private sector to make the type of investments in large-scale, risky research projects that lead to new discoveries and breakthroughs in science and engineering. The decline in U.S. federal spending on R&D is even more apparent in comparison to China, which increased its R&D expenditure thirtyfold between 1991 and 2015. China has set ambitious targets for the development of critical technology through strategic, government-funded industrial policies, aiming to surpass the United States and become the leading technological power. And with the rising importance of dual-use technologies to national security, China is working to bridge the gap between the civilian industrial base and the military. Addressing the challenge from China and other rising science powers will require an ambitious plan of national investment in science and technology. To ensure the United States’ continued technological, military, and economic edge, the White House and Congress should first restore funding for R&D to its historical average. This would mean increasing funding from 0.7 percent to 1.1 percent of GDP annually, or from $146 billion to about $230 billion (in 2018 dollars). Funding also needs to be protected from political and budget instability. The sustainability of funding for basic research over predictable time spans is as important as raising the total amounts of support. The federal and state governments should also make an additional strategic investment in universities. These investments, up to $20 billion a year for five years, should support cross-disciplinary work in areas of pressing economic and national security interest and sustained programs that support fundamental research targeted at critical technologies. Often, the U.S. policy default is to unleash the private sector through tax reform and deregulation. Deregulatory actions are certainly required in many sectors. The United States ranks fifteenth in the OECD in terms of the frequency in which it updates its regulations, and seventeenth in regulatory quality by the Global Innovation Index. Patchwork regulations, high compliance costs, and regulatory complexity slow, for example, the development and deployment of autonomous vehicles, blockchain and financial technology, and commercial drones. But deregulation itself cannot cope with the scale of disruption and intensity of the challenge from other countries, particularly China.   The United States should not replicate the Chinese model, but the current policy approach is too narrow in scale, uncoordinated, and incremental. The White House should announce moonshot approaches to industrial policy that address society-wide national security problems. This would support innovation in foundational and general-purpose technologies, including AI and data science, advanced battery storage, advanced semiconductors, genomics and synthetic biology, 5G, quantum information systems, and robotics. Special interagency subcommittees representing a number of government agencies and working with academia and the private sector should be organized to coordinate the selection, development, and execution of R&D programs that address pressing issues such as threat detection networks; commercial, gate-based quantum computers; and carbon-capture technologies. Faced with the rise of China as a strategic and technological competitor, the United States must once again heavily invest in its scientific base. By increasing federal funding for R&D, the United States can ensure that there is sufficient funding and talent available to make scientific breakthroughs that will ensure continued economic success and national security.
  • Technology and Innovation
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  • Technology and Innovation
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    The United States has led the world in innovation, research, and technology development since World War II, but that leadership is now at risk. Addressing the challenge from China and other rising science powers requires an ambitious plan of national investment in science and technology. Innovation and National Security: Keeping Our Edge focuses on the need for a comprehensive national security innovation strategy to ensure the United States is the predominant power in a range of emerging technologies.