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Concerns about the Department of Commerce’s Proposed Export Rule under the Wassenaar Arrangement

Today, Cisco filed comments on a Proposed Rule published by the Department of Commerce’s Bureau of Industry and Security (BIS) in an effort to comply with an international agreement called the Wassenaar Arrangement. The proposal would regulate a wide array of technologies used in security research as controlled exports, in the same manner as if they were munitions. Cisco, along with many other stakeholders in the cybersecurity research field, has identified a number of significant concerns that we believe require BIS to revisit the text of the Proposed Rule.

BIS’ focus on limiting the cross-border trafficking of weaponized software is well-intentioned, but the current text would cause significant unintended consequences that must be addressed in a revised draft of the Proposed Rule. If implemented in its current form, the Proposed Rule would present significant challenges for security firms that leverage cross border teams, vulnerability research, information sharing, and penetration testing tools to secure global networks, including Cisco. The result would be to negatively impactrather than to improvethe state of cybersecurity.

The goal of regulating the export of weaponized software is understandable. However, many of the same techniques used by attackers are important to developers testing their defenses and developing new effective responses. Cisco needs access to the very tools and techniques that attackers use if we have any hope of maintaining the security of our products and services throughout their anticipated lifecycles. The development of new export control requirements must, therefore, be done carefully and based upon the needs of legitimate security researchers. Otherwise, we will leave network operators blind to the attacks that may be circulating in the criminal underground—and ultimately blind to the very weaponized software that the proposed rule intends to constrain.

The requirements in the Proposed Rule are far broader than necessary to address BIS’ stated intent—controlling the export of weaponized software. We look forward to working with the Department of Commerce to ensure that the goals of the proposal can be met in a manner that is technology neutral, narrowly tailored to the actual risks faced by the nation, and reflective of the needs of legitimate security researchers seeking to protect the information technologies upon which we increasingly rely.

We look forward to continuing the conversation.


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Statement of Jennifer Sanford on Passage of Trade Package

Congress has now approved a landmark trade package including Trade Promotion Authority and Trade Adjustment Assistance.  This is a significant accomplishment that just a week ago looked in serious doubt.

This trade package will give President Obama the ability to conclude negotiations on the TransPacific Partnership; it gives Congress the authority to establish priorities in those negotiations, and it provides $1.8 billion for worker re-training.

Free trade supports American jobs.  At our facility in Research Triangle Park, North Carolina, for instance, some 4,500 plus jobs are supported by free trade, including hundreds of jobs at our technical assistance center.  Put simply, our engineers in North Carolina couldn’t help customers in Europe, Asia and the Americas if data is not able move freely around the world. The TPA bill supports this kind of digital trade.

The economic impact of free trade goes well beyond one company or one industry.  It affects every sector of every industry in the economy.  According to the Business Roundtable, free trade supports 39.8 million jobs across the nation.

On behalf of Cisco, I’d like to thank President Obama for his leadership on trade, as well as Republican and Democratic members of both the House and the Senate for their courageous votes on this issue.

Enacting this legislation is a critical part of ensuring American competitiveness over the next generation.

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Statement by Mark Chandler on Senate Judiciary Committee Passage of Patent Reform

The Senate Judiciary Committee today overwhelmingly approved patent litigation reform, clearing a hurdle which proved insurmountable in the last Congress. This is a major milestone that demonstrates strong bipartisan, bicameral support for meaningful patent reform. It clears the way for the Senate to act.

The bill approved by Committee takes a major step toward restoring fairness and balance to our patent litigation system.  It makes sure that patent assertion entities which bring objectively unreasonable lawsuits can be held to account for the costs they impose and makes sure they can’t hide behind shells to avoid that responsibility. It has meaningful discovery and heightened pleading provisions that will help avoid costly fishing expeditions; it helps stop abusive demand letters; and it includes provisions that protect the rights of universities and small inventors.

Like any bill, this legislation is not perfect. But we will work with Senators on and off the Judiciary Committee to refine the legislation as it moves to the floor, especially to assure that there continues to be an effective Inter Partes Review process to protect consumers and businesses from weak patents that should have never been granted in the first place.

Our great thanks go to Senators Chuck Grassley, Patrick Leahy, John Cornyn, Chuck Schumer, Orrin Hatch, Mike Lee and Amy Klobuchar, as well as all the members of the committee who ultimately supported the bill. This is a huge step in the right direction — one that at last opens the door to meaningful reform.


Cisco Welcomes Introduction of Senate Patent Litigation Reform Bill

The introduction of Protecting American Talent and Entrepreneurship (PATENT) Act of 2015 represents a major milestone on the long road to patent reform. On behalf of Cisco, let me thank Senators Grassley, Leahy, Cornyn, Schumer, Lee, Hatch and Klobuchar for their work to forge bipartisan support for this legislation.

The problem of abusive patent litigation lawsuits continues to grow, costing our nation’s economy billions of dollars every year. Patent assertion entities don’t make or produce anything, instead they use abusive tactics to force settlements and drive up legal fees. This has got to stop.

The legislation introduced today is a significant step forward. It has strong fee-shifting provisions, makes important discovery reforms, and protects users of technologies from abusive demand letters.

Cisco stands ready to work with the bill sponsors and other stakeholders to make this legislation even stronger as it moves its way through the legislative process. Now is the time for Congress to pass meaningful patent reform and end the abusive business model of patent assertion entities.


The Paradox of ICT’s Impact on Growth and Inequality

Thirty years ago a UN commission published the Maitland Report, proposing that by the early 21st century, every individual on the planet should “be within easy reach of a telephone” given the economic benefits. That was interpreted as being within a one day walk of a phone. Anyone suggesting back then that over 90% of the global population would be covered by mobile cellular signals, and over half of the world’s population would have a phone in their pocket, would have been labeled a crazy optimist. Yet, today it’s all about high-speed broadband connections, which total over 3.4 billion as of 2014 – nearly half of the world’s population.

This year’s Global Information Technology Report, and chapter 1.2 in particular, details this history of ICTs as a powerful driver of economic growth, and discusses the remaining barriers to more inclusive prosperity. While ICTs have a multiplying effect on income and growth, unconnected countries and people are being left behind. To address a widening income gap, particularly within countries, more needs to be done to increase broadband adoption, particularly through policies that focus on universal access, affordability, digital skills and the gender gap.

Evidence from the last two decades demonstrates that ICTs, particularly broadband Internet, are an income multipliers. At the country level, macroeconomic data links fixed telephony, mobile telephony, Internet use, and broadband use to gross domestic product (GDP) growth in a causal relationship across developed and developing countries. , And increasing the intensity of data use also drives per capita income growth. This growing body of evidence highlights the fact that we are long past the days of the “Solow paradox,” when, in 1987, Nobel Prize–winning economist Robert Solow noted, “you can see the computer age everywhere but in the productivity statistics.”

At the microeconomic level, emerging analysis highlights the impact that ICTs can have on driving income growth at the bottom of the economic pyramid. Mobile phones in particular, have spread across the developing world and this ‘mobile miracle’ is contributing to income growth as handsets act not only as a communications device for sharing public and private information, but also as educational tools delivering learning content, and as a financial transfer and savings device.

A direct result of ICT adoption is the steady decline in absolute poverty across developing regions. The global extreme poverty rate (those individuals surviving on less than US$1.25 per day) dropped from 1.9 billion people in 1981 to 1.3 billion in 2010 according to the World Bank: extreme poverty rates in developing countries dropped from more than 50 percent to 21 percent. This decline in extreme poverty has been driven by long-run economic growth in China and India, recent growth across Africa, and the impact of social programs in Latin America.


The picture is more mixed, however, when looking at ICTs’ impact on income inequality. At the global level, the latest available data from the World Bank show income inequality (the distribution of income across all people in the world) to be on the decline. The most recent analysis finds that global income inequality has fallen steadily from a Gini coefficient of 72.2 in 1988 to 70.5 in 2008 with the decrease attributed to the large overall income gains of the global median (around the 50th percentile) of the population.

However, the decrease in global income inequality masks the income inequality increases observed within individual countries. With-in country income inequality appears to be rising in many countries (developed and developing) and one analysis by the International Monetary Fund suggests that technological progress, measured as the share of ICT capital stock, has a statistically significant impact on inequality. The available evidence presents a paradox where ICTs are driving economic growth and decreasing global inequality while at the same time contributing to rising within-country income inequality.

While this paradox appears, the full benefit of ICTs has yet to accrue to lower income groups. For example, network effects and externalities that multiply the impacts of ICTs require minimum adoption thresholds before those impacts begin to materialize. One analysis finds a positive impact of a 2.8% increase on GDP resulting from a 10% increase in telecommunications infrastructure, but only once a minimum threshold density is reached. In this case, the threshold was at 24% of the population. In other words, countries will only experience the full growth impacts of ICTs once penetration passes that point. Similarly, a 2009 analysis determined that increasing returns to broadband investment occurs when a critical mass of penetration—above 20% (20 subscriptions per 100 people)—is reached. Greater access and adoption of ICTs in lower-income groups will further accelerate income gains at the base of the economic pyramid.

To counter the disparity in the utilization of ICTs between lower- and higher-income groups, immediate actions should focus on closing the disparity in ICT adoption/penetration. To ensure that benefits of ICT accrue to lower income populations, more needs to be done to increase broadband availability and adoption, particularly through policies that achieve universal access, increase affordability, increases digital skills and close the gender gap. These include:

1) Focusing public resources and incentives for building broadband Internet access out to rural and underserved communities
2) Connecting schools and libraries to broadband Internet service and ensure widespread connectivity within schools
3) Removing excessive taxation on devices and access, and consider targeted subsidies for certain populations
4) Developing robust ICT training curricula and programs
5) Focusing on closing the gender gap in ICTs

The data in this year’s Global Information Technology Report leave no question that the adoption and use of ICTs has a positive effect on income and growth on lower-income countries and populations. However, the challenge to accelerate ICT adoption, particularly among lower-income groups, remains. Combining the positive economic growth impact of ICTs with targeted interventions focusing on alleviating poverty, will improve the well-being of citizens everywhere, especially those in absolute poverty at the bottom of the pyramid.


On Wednesday, April 15, at 10am US EDT, please join me and colleagues from the World Economic Forum to discuss the findings of the 2015 Global Information Technology Report. 

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