Global Innovation Policy Center

In March, the Federal Communications Commission (FCC) released its proposed National Broadband Strategy – a grand plan to ensure all Americans have high-speed Internet access in the coming years. This is a vitally important goal, given the impact such an achievement could have on our economy and society, and the FCC should be commended for its efforts.

However, one cannot overlook the missed opportunity the FCC had to address one of the most egregious problems facing the U.S. economy today: the rampant theft of intellectual property (IP) on the Internet. Illegal online activities – from the stealing of copyrighted materials, such as music and movies, to the counterfeiting of goods, such as pharmaceuticals and apparel – are killing American jobs, stifling our recovery, and doing great harm to America’s creative industries. Consumers are being harmed as well, by inferior or toxic goods being sold online. Unfortunately, the FCC’s 300-page document pays almost no attention to IP theft, let alone ways to stop it, despite the prominence given this worsening problem by Congress and the White House, as well as by business and labor.

Copyright industries have long been important to the U.S. economy, representing more than 11 percent of our gross domestic product (GDP) and more than 8 percent of America’s work force, and growing at a rate that is twice that of the U.S. economy as a whole. Copyright industries provided more than 22 percent of the nation’s total real growth from 2006 to 2007, and in 2007 alone these industries provided 5.6 million jobs to the economy. And beyond the economic value of these sectors, movies, music, software and books have spread American culture around the world for generations, and helped advance the sharing of knowledge, all in countless ways that accrue positively for the United States in the long run.

The Internet has brought benefits to mankind in ways too numerous to list. At the same time, an online subculture has emerged where some folks think that the laws and norms of the physical world don’t exist in the online environment. While we all know it is a crime to steal a CD from a store shelf or shoplift a DVD, many think such rules don’t apply on the Internet. A common view among this subculture is that “if you can find it online, then taking it isn’t a crime.” Many also think illegal downloading is a “victimless” crime. This attitude not only has a direct detrimental financial impact on the copyright industries and creative community, it poisons the well for the overwhelming number of law-abiding folks who seek to consume legal content.

More than 90 percent of all Internet-based music is downloaded illegally. The rate for movies is growing, and similar problems exist for software, books and other copyrighted works. All of this IP theft results in forgone sales, which eventually translates into lost jobs and reinvestment. In the long term, the result may be fewer movies, songs and books if artists, authors and other creators – and the investors they depend on – don’t think the fruits of their hard work will be protected and rewarded. These facts, coupled with the equally damaging problem of counterfeit goods being sold online, have made IP theft on the Internet a serious economic and social problem, threatening not only jobs and economic growth, but consumer welfare as well. That’s why the FCC’s failure to seriously address online IP theft is so breathtaking and troubling.

Yet if these alarm bells ring hollow, one should look to the experience of South Korea for lessons learned on devising a national broadband plan.

Over the last decade, South Korea has built a vibrant Internet and communications environment that many view as a paragon of broadband network access. The country ranks fifth globally, 10 places ahead of the United States, when it comes to broadband access, and the number of users continues to grow. The government’s inattention to protecting IP rights early on, however, created a number of problems for the country, some of which still linger to this day. In short, Seoul’s failure to safeguard copyrights in the drafting of their Internet laws and regulations in 1999 hurt South Korea’s motion picture, recording and software industries as Internet piracy skyrocketed. Growth was stifled, jobs were lost and creativity withered owing to copyright infringement that ran amok.

The South Korean government responded with changes to its legal code, new enforcement agencies, a more aggressive approach to IP infringement, and creative strategies for combating Internet piracy. And while Seoul now recognizes that comprehensive and sustained action is required to safeguard IP rights and prevent the obvious downsides of piracy, the government still faces real difficulties in overcoming past neglect of IP rights. One lesson is clear: It is difficult to get the genie of IP theft back in the bottle.

While Korea may present some unique issues when it comes to IP protection, there are broader lessons learned about the need for building proactive IP solutions into a national broadband plan that can serve as a case study for the United States. With America’s economy 10 times the size of South Korea’s, and a population 600 percent larger as well, it is fair to say that the impact from government inattention to online IP protection could be much greater, and the consequences of bad policy much more difficult to remedy, if Washington fails to get it right the first time around. That’s something that, regrettably, seems to be the case right now.

But it is not too late. Expanding broadband, enabling more online choices for consumers and protecting IP should not be viewed as conflicting goals. In fact, they should be and are mutually reinforcing. As the FCC and other parts of the federal government begin to fine-tune, develop and implement the broadband plan, adjustments can be made to protect IP so that access is achieved without harming America’s creative sectors. Key provisions begin with preserving the right of Internet-service providers to manage their networks to enable new methods for delivering legal content and to guard against illicit content – whether it is copyrighted materials or child pornography. Ultimately, the federal government must exercise overall leadership in this area and take responsibility for enforcing the nation’s IP laws, both offline and online. In addition to beefing up its own direct enforcement efforts, this can include collaborative solutions to counter online counterfeiting and piracy that are developed between business and government.

The aim of 100 percent broadband access is indeed an ambitious, worthy and necessary goal, which will ensure U.S. global competitiveness and foster innovation in the 21st century. However, the failure to safeguard IP rights in this next critical phase in America’s broadband buildup – a goal completely compatible with expanding Internet access – would harm the United States’ long-term economic growth and ability to create high-paying jobs in the years ahead, and do great damage as well to those creative sectors that have helped spread knowledge and introduced American culture and values to the world for decades.

Mark Esper is the executive vice president of the U.S. Chamber of Commerce’s Global IP Center.