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    Shannon Henry's The Download Live
    Tech Policy Discussion with Bill Archey

    Thursday, April 15, 1999 at 1 p.m.

    Shannon Henry Welcome to The Download Live. I'm your host, Shannon Henry. My guest today was tech policy expert Bill Archey (below, left), president and CEO of American Electronics Association, the largest trade organization representing the electronics and IT industry.

    Bill Archey We discussed tech policy. Should the government regulate high-tech and the Internet? How? Please bring us your questions especially with respect to the following issues, on which Archey's organization lobbies:

    • IT Worker shortage.
    • The relaxation of export controls including on encryption technology.
    • Tax issues, including the R&D tax credit.
    • China.

    Discussion Transcript

    Shannon Henry: Hi, Welcome to Bill Archey, CEO of the American Electronics Association. Send your tech policy questions now!

    Shannon Henry: Can you start off telling us a bit about AEA? Who are your members, not just electronics companies, right?

    Bill Archey: AEA is the largest high-tech trade association in the U.S. representing 3,000 direct member companies. We are the umbrella organization where technology converges. We represent segments of high-tech from manufacturing to software to Internet service providers.

    Shannon Henry: How do you decide which issues to concentrate on? Surveying members, research, or what?

    Bill Archey: We survey our members several times during the year to obtain their priorities. We also have four distinct policy committees of the Board that lay out their priorities. Those are in turn disseminated to the membership and we change priorities based on that input. For 1999 our priorities are: 1) Y2K remediation, 2) insuring that export controls are not further tightened on high-tech exports, 3) passage of a permanent R&D tax credit, 4) the doubling of the Federal government R&D budget for basic research, and 5) insuring that the United States government does not impose a command and control regulatory system on privacy on the Internet (we believe self-regulation is the best answer).

    Bethesda, MD: Regarding the shortage of IT workers, I and countless others responded to news stories last year about the unfilled demand for such workers in the Washington area and obtained computer training. -In my case, I trained as a Cobol programmer.- Now we are finding that companies are unwilling or unable to hire workers who have not had previous experience in the programming field. In addition, employers are looking for individuals with narrowly defined skillsets, and appear unwilling to hire those with the demonstrated potential of performing as a programmer, even if it means picking up a new programming language on the job.

    What advice would you have for those of us who are facing this dilemma: no experience, no job; and no job, no experience. Also, wouldn't it be in employers' long term interests to hire individuals with potential and allow them to expand their skills within the company framework?

    Bill Archey: This is a dilemma for many others beside yourself. It is now becomming a cliche that everyone in the workforce today is going to have to be retrained and reeducated five or six times over the course of their career. There is no question, though that there is a major shortage of qualified scientific and technical people currently. For example the unemployment rate for an electrical engineer is substantially less than 1%. The workforce problem is exacerbated by the fact that there has been an almost 7% decline in high-tech degrees granted in the 1990s.

    Cambridge, MA: I'm interested in patent policy as it relates to information-technology infrastructure. It seems that recently there have been a wave of reports of patent-holders coming forward to demand rights payments for broad ranges of activity -- any broadcast on the Internet, for example. In your opinion, is the patent process still functioning properly regarding software and other information-technology patents?

    Bill Archey: A number of our member companies are intensly interested in the patent protection issue. A number of our companies have been wrongly accused of usurping other patent rights because of certain parties using submarine patents. One of the major corrections for this problem is a current bill in front of the Congress that we believe is going to pass in this session of Congress. It will diminish the use of submarine patents as it will provide that the patent will be granted for a time period beginning when the patent application was submitted.

    Shannon Henry: What non-technology industries do you look to for guidance as you make policy decisions? How can we learn from the past in making information age laws and rules?

    Bill Archey: We frequently collaborate with the venture capital industry on our issues. However, I have to emphasize that the high-tech issues tend to be different, tend to be new, and therefore do not have an awful lot of history that is useful. Also, this is an industry that is relatively new to the political process so there is a certain amount of learning as we do taking place.

    Shannon Henry: Today (you all knew this, right) is tax day. What's the R&D tax credit?

    Bill Archey: There is a complicated and there is a simple answer. Let's go with the latter. Companies get a credit against their taxes for certain R&D expenses if they comport with a relatively complicated formula that is based on certain years when certain R&D expenses were incurred. Not all companies can use or benefit from the R&D tax credit though interestingly we find that disproportionately the smaller companies can. What our objective is is to end the annual Kabuki dance where the R&D tax credit is extended annually. We want to make that credit permanent so that companies can better plan their R&D expenditures and have a better idea of what the impact is on their bottom line.

    Shannon Henry: The Senate this week held a hearing on high-speed Internet access. AOL wants cable companies to be regulated; cable companies want to be left alone. What do you think?

    Bill Archey: We have not taken a final position on this issue. It is currently being vetted by a number of our policy committees.

    Arlington, VA: What do you know about long distance phone companies charging fees for email sent long distances? I heard a sick rumor that this may soon come true.

    Bill Archey: We have heard the rumor, but we don't believe the FCC is going to allow it, and we certainly do not want them to allow it. There are also very strong opponents of such a notion up on Capitol Hill with the power to be sure it doesn't happen.

    Shannon Henry: How do you educate members of Congress on high-tech issues?

    Bill Archey: Good question because AEA has stated publically that one of the biggest problems facing the high-tech industry over the next three to five years is the ignorance of it in the public policy arena. It is the reason why three years ago we established a reseach and statistics group to provide data that could be easily understood about this industry. We particularly emphasized the jobs, where the jobs are growing, how much high tech workers are being paid, and lots of other variables. We have published several "Cyber" publications entitled, Cyberstates, Cybernation, California Cybercities, and next month we are publishing Cybereductaion. So far, we have briefed 26 Congressional delegations on all of this data. We are convinced that having this data has been a seminal factor in our successes on Capitol Hill.

    Shannon Henry: Can you give us an encryption update? Should we expect any news on this issue soon?

    Bill Archey: The encryption bill we prefer called the SAFE Act was reintroduced in February in the House with 205 cosponsors. We are measurably more optimistic that in this session of Congress an encryption bill will pass. One reason is that the new Chairman of the Rules Committee, Rep. David Dreier from California is strongly in favor of loosening current encryption restrictions which his predecessor was not. The Administration remains opposed but we think that the efforts of this industry and the fundamental realities of the marketplace will result in a diminution in current restrictions.

    Shannon Henry: Tell us about the Potomac Council. What is that group's mission as a part of AEA?

    Bill Archey: The Potomac Council, which consists of primarily the greater Washington metropolitan area, is but one of the 17 local councils of AEA that is comprised of CEOs and senior executives of member companies throughout the country. We have recently invested considerable time and money in revitalizing our Potomac Council because of the extraordinary growth of the high-tech industry in the Washington area as we noted in our Cyberstate publication. Interestingly, the current Chairman of the entire Board of hte American Electronics Association was a former chairman of hte Potomac Council, namely Ed Bersoff the founder and CEO of BTG, Inc. in Fairfax County. The Council is now offering a wide diversity of programs directly germane to the bottom line of the companies.

    Vienna, Virginia: How does AEA back up its legislative agenda with corporate action? In other words, if the IT worker shortage is a concern, what are your member companies doind to help resolve it -- as a group?

    Bill Archey: On all of our issues, our biggest claim to fame is grassroots. The 17 local councils that I illuded to before is the most extraordinary built-in grassroots capability in the U.S. For example, on the H1B visa issue in the last Congress we had hundreds indeed well over a thousand CEOs and senior executives weighing in with their Congressmen and Senators and with a very salutary impact. We are entering a new era next month, as we will be having a clear state-of-the-art website which is really a term for a transforming communications capability between us and our members that will empower our members using our website to weigh in with their political representatives on a more emphatic and real-time basis than ever before.

    Vienna, VA: Who are the primary opponents of exporting 128 bit encryption? Don't they realize that this technology is already available on several web sites, so it is a moot point?

    Bill Archey: Virtually the entire intelligence and FEderal law enforcement community is opposed to 128 bit length encryption. We fully appreciate the concerns that the intelligence community and law enforcement have about strong encryption preventing them from intercepting messages some of which could be to further a crimminal enterprise or a terrorist act. However, the technology is becoming more and more available throughout the world and it may be just as important a notion of security that company and private traffic is not subjected to being intercepted by other parties. Furthermore, there is a serious issue of what the rights of privacy of individuals is in this issue.

    Vienna, Virginia: How do you coordinate your activities with those of other policy groups -- many of which I imagine represent the same companies? How do you ensure that you are not drowning one another out?

    Bill Archey: One mechanism for coordination is a group called the ITPC which is the Information Technology Policy Coalition. The ITPC consists of 15 high-tech trade associations. We meet bimonthly to compare notes and engage in a great deal of informal collaboration. I would also emphasize that our member companies do not want us stepping all over each other and demand that we coordinate our positions and perhaps most importantly our member company executives do not want to go to two or three meetings on the same subject.

    Rosslyn Hts., VA: Why can't the high-tech industry train its own workers? Why do communities have to do the bulk of the work?

    Bill Archey: I don't now what the exact data is but there isn't much question that the amount of money high-tech companies spend on training and retraining is in the scores of billions of dollars. We have one member company that last year spent $72 million on just remedial English and math. The problem is that when elementary and secondary schools fail to do the job, the companies pay for it three times. First in the taxes they pay. The second is in the decrease in productivity, and the third is the cost of the training adn retrainging directly. We don't think the companies should have to do that. Indeed, it is difficult to even ponder a Japanese company expendign $72 million for redmedial Japanese and remedial math.

    Vienna, Virginia: What do you consider to be AEA's single biggest "policy win"?

    Bill Archey: It was the same subject done twice. In 1994 specifically December 21st the Congress passed securities litigation reform over the veto of Bill Clinton. These were signficant reforms that sought to diminish frivilous lawsuits against high-tech companies. We revisited that issue in 1998 when the Congress passed the national standards for securities litigation which closed the loophole that enabled a handful of law firms to file frivilous lawsuits against high-tech companies in state courts. Until these reforms the average AEA public company was paying 8.6 million dollars to settle these frivilous lawsuits but more importantly for a smaller public company it absolutely paralyzed the company's managemetn during the period of the suit

    Vienna, Virginia: So you think Members of Congress are ready for Web-based lobbying? Is there any risk that things sent over the Web will be viewed as less official, as more remote?

    Bill Archey: You make a good point. Right now there is a substantial percentage of members of Congress who are using email to communicate with constituents. However, I don't think it is much more than 50-60%. But as one of our companies has noted, "the web changes everything." This will include how Congressmen and Senators communicate with constitutents. Also, the Congress is actually getting younger and the younger the member of the Congress the more likely he or she is technologically sophisticated and finds email the preferred method for communication.

    Ft. Myer Heights, VA: What do you think about the Internet tax moratorium? Why should this industry get a special break?

    Bill Archey: We were a strong proponent of the Internet tax moratorium. And we most emphatically do not think this is a break for special interests. Our position was and is that new taxes should not be imposed in a discrimatory manner against Internet transactions or access to the Internet. What we wanted and got was a period of time to look at the fact that there are 30,000 state and local taxing jurisdictions in the United States all of whom want a piece of the Internet. If that were to happen, the innovation which is the underlying fact or rality of the Inernaet woudl rather quickly come to a halt. What we are syaing is there will ultimately be reasons to tax the Internet but not because of the technology itself. For example, in the state of Conn. you get the Wall STreet Journal delivered to your home and you don't pay any tax. If you get the WSJ online delivered to your home through a computer, you pay a tax. That's discrimmating against the instrumentality itself and that is what we are against.

    Shannon Henry: Now that more and more tech companies are stepping up in-house lobbying efforts and even opening new DC offices to do so, does the lobbying landscape feel more crowded?

    Bill Archey: Yes

    Shannon Henry: Our time's up. Thanks, all, for joining us and to Bill for his insightful answers. Tune in again in 2 weeks. If you have tech issues you'd like to talk about, email me at

    © Copyright 1999 The Washington Post Company

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