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JUNE 7, 2000

© Copyright 2000 Hewlett-Packard Development Company, L.P
All rights reserved. Do not use without written permission from HP.

Thank you, Committee Chairmen, and thank you for that gracious introduction, Senator Boxer. I want to thank you and the Joint Economic Committee for hosting this annual high-tech summit and for giving me the opportunity to participate in this important discussion about removing barriers to the New Economy.

The theme of this year's summit reflects the recognition that we should usher in and fully embrace the benefits that this New Economy brings. I commend this committee for taking this view, and I praise members of the House and Senate - from both parties - who are choosing a similar, forward-looking path on the critical issue of permanently normalizing trade with China.

Few issues are more vital and fundamental to U.S. economic growth than trade policies that open markets and remove barriers to American products and services. I urge the Senate to move quickly on this issue, recognizing that it is among the most important votes you will make. This vote for permanent normal trade relations (PNTR) is not simply about opening a huge market to American business, although it is surely that. It is also about a vote of confidence for China's reformist leadership and about giving them the tools of technology that will hasten positive change.


Now, as we chart the course for this new century, I believe we must be guided by a clear purpose and take a principled path to reaching our goals. And while we come from different roles and perspectives, our common purpose is the same: to better the lives of our constituents. In your case, constituents are the citizens of your district and state - and more broadly - this country. In my case, they are HP's customers, partners, employees and shareowners, and the communities in which we live and work.

The principled path to serving our shared constituency must have the following elements:

  • Our efforts must be cooperative - bipartisan and reaching across both real and virtual borders.
  • They must be for the good of the many, while minimizing potential negative impacts to the few.
  • And they must promote creative, inventive solutions, rather than jumping to quick-fix, simplistic approaches.
To provide a better life for our constituents in the New Economy we must provide this principled leadership in at least three areas. The first is open trade policies, and I've already addressed that as it relates to China. The second is education. And the third is consumer trust. So let me move to education, if I might.


For some time, I have been talking about education, and Hewlett-Packard has a long-standing and distinguished history of involvement in education through philanthropy, though technology and through the time and effort of HP people all around the world. And it is clear that education is critically important to our nation, to our businesses, to our children, and to our future. In fact, I believe that education is at the heart of everything.

As we help to bridge the digital divide, we are promoting what HP calls "e-inclusion" - that is, providing opportunities for everyone, people of all ages, sizes, shapes and colors - to participate in our economy through education, access to technology and community outreach. But we know that to get to the root of the problem - to make a real difference, to be truly committed - we must give more than just technology, more than just money. Although giving money is essential, frankly, it is the easy thing to do. Giving people well-prepared teachers, career development paths, mentoring, training - the one-on-one stuff - that is the important thing. And it's hard to do.

I'll mention just three examples of federal initiatives that are making important contributions in this area: the Dwight D. Eisenhower Professional Development Funds, the National Science Foundation and the TRIO programs. Whether through outstanding government programs like these or though private sector initiatives like HP's education and diversity initiatives, we must do more to achieve e-inclusion for the students of today and the work force of tomorrow. Education must be a national priority. It must be a corporate priority. It must be an urgent priority. The pace of technology is such that if we do not deal seriously with this issue now, we will lose a generation of children forever.

Working together, I believe we can ensure that our schools have the resources they need - whether in funding and people, teaching materials and facilities, standards and research - to give every student the opportunity and the tools to learn and succeed in the New Economy.


Now, I believe, we are entering the renaissance of the information age. To realize the full promise of this new economy, education is clearly critical, open trade is clearly critical, but trust is paramount. Inspiring trust depends on a range of ethical business practices. It is the ongoing commitment to delivering on our promise to customers that leads to business success. If our customers trust us, especially online, they vote with their dollars, or their yen, or their euros, which is why public policy compatibility on the issue of trust is so crucial: The borderless nature of this technology calls for increasingly compatible public policies. Policies that will coordinate - not conflict - between states, regions and countries.

So, how will we - as business and government leaders - protect consumers and promote trust in the online world of this New Economy? How should we address issues of online privacy? How should we resolve consumer disputes in Internet transactions? How should we protect individuals and our businesses against cyberterrorism? All of these issues strike at the heart of consumer trust, which is a prerequisite for the growth of global e-commerce in the emerging Internet or dot.com industry.

Cybersecurity truly brings home the reality of this new and borderless economy. With each "cyberattack," which can strike from any part of the world - as we've recently experienced - trust and confidence in the online world is shaken. Following Hewlett-Packard's participation in the White House summit on cybersecurity in February, we are participating in an industry coalition to address this issue. The coalition is developing a voluntary mechanism to share cybersecurity information among IT companies, establishing a communication system to alert companies to attacks and identifying solutions.

As the IT industry joins together to combat cyberterrorism, it may prove necessary for Congress to consider removing some of the potential barriers to these efforts. As arose with the Y2K issue, companies are concerned about liability in sharing information or running afoul of antitrust regulations. We must also be cautious about making our companies vulnerable to civil, product-liability lawsuits as security weaknesses are shared openly. And if we share security information with the government, how can we ensure that we don't give the public access to sensitive, proprietary product information through the Freedom of Information Act?

In each of these areas, Congress could help clear the way for greater collaboration to strengthen cybersecurity by reducing the barriers to information-sharing between and among businesses and government.


Let me now turn to privacy - another critical element of consumer trust. Consumers now have access to a tremendous amount of information to help them negotiate prices, terms and conditions. They are no longer limited in where they shop, when they shop, or with whom they do business. But these benefits cannot be fully realized if consumers are concerned about how their personal information is treated online.

  • In a recent Business Week/Harris Poll, 92 percent of Internet users expressed discomfort with sites' sharing personal information with other sites. And 57 percent of respondents to the survey said that government should pass laws on how personal information is collected.
  • A recent Federal Trade Commission report on online privacy echoes this sentiment - concluding that industry's self-regulatory efforts to ensure consumer privacy have not advanced far enough and that legislation is needed.
  • State governments from New York to California have considered - or are considering - privacy legislation that ranges from narrowly focused to very broad in scope.
I worry about nonuniform state actions on Internet privacy, and I am concerned about "regulatory overkill" at all levels of government. While industry self-regulation may not be the complete solution, I believe the private sector has done a good job of responding to privacy concerns during the seminal growth of e-commerce. Still, I know we can and must do better. So let me start with five principles that I believe we need to keep in mind as we deal with this important issue of privacy:
  • First, we must deal with the whole issue. We cannot discriminate against the online world.
  • Second, I believe we should focus on a floor of minimally acceptable standards of disclosure - rather than reach for an aspirational program - because that is the most practical thing we can do.
  • Third, I think we must support dispute resolution mechanisms, and I'll mention a couple of these in a moment.
  • Fourth, we must give consumers the information they need to choose. We must give consumers the power to decide. This is why we believe disclosure is important.
  • Fifth, and perhaps most importantly, consumers' information belongs to them. Consumers should be empowered to use their own property - that is, their personal information - the way that they choose.
Now as an example of our concern on this issue, HP is making an offer that we hope will encourage many more companies to join HP as a member of the Better Business Bureau Privacy Program.

Beginning this month through September 2000, HP will pay other companies' application fees and up to $5,000 for each company's first year of membership to join the BBBOnLine Privacy Program. We are also offering limited, free consultation from HP's Privacy Managers to help each company get started. This offer reflects, I believe, our commitment to addressing consumer privacy concerns. And in fact, the BBB program has been singled out by the European Commission as the kind of program that gives them confidence that an American "safe harbor" will meet European adequacy standards for privacy.

What I think the FTC "Privacy Online" report points out, however, is that self-regulatory efforts need to be made more effective by requiring all commercial Web sites to inform consumers about their privacy policy - recognizing that as we address privacy, we cannot discriminate against the online world. We must deal with privacy of consumer information in both the offline and the online world. The fact is that, offline or online, consumers have the right to know what is being done with their private information. Such a disclosure requirement would require that the Web site inform consumers - in a clear and conspicuous manner - what the site does with consumer information.

This approach, coupled with broad-based consumer awareness programs, would empower consumers to do business only with those sites that have privacy policies that satisfy their needs. And whether they prefer opt-in or opt-out, whether they want to share some information in exchange for discounts or customization - which is a legitimate business model in this e-world - they can reward businesses, both offline and online, that meet their privacy needs, and avoid those that do not.

Support for a privacy disclosure requirement is the one step that all five FTC commissioners agree on. And this pro-consumer initiative would build on and enhance our industry's self-regulatory efforts.


But to truly earn the trust of consumers, we cannot stop there. We also need to expand self-regulatory efforts internationally. For example, consumers need to have confidence that when they do business across national borders, that there will be a redress system if anything goes wrong with the transaction.

It would be difficult - and probably not cost-effective for the court system to resolve consumer complaints when the business is based in another country. That's why, again, we in Hewlett-Packard have been working with the Better Business Bureau, trade associations and consumer groups in a number of countries to develop a system of third-party mediation to help resolve cross-border consumer complaints. I am pleased that we have the active support of the FTC and the European Commission in these efforts.

I am also working with more than 60 CEOs from around the world to develop worldwide industry consensus on global standards through the Global Business Dialogue on electronic commerce. Current concerns about consumer confidence should not turn into barriers to empowering consumers through global e-commerce. HP believes that the high-tech industry has a stewardship responsibility to ensure that this new, online marketplace remains a clean, well-lighted venue for businesses and consumers.

Given differing views about the best approach to online consumer protection, what do we recommend? We recognize that government has a role in protecting consumers online and offline. To guide these decisions, I will presume to give you four "do"s and one "don't":

  • Do work to harmonize conflicting consumer protection legislation. Better yet, use a compatible approach to federal, state and international public policies governing online consumer protection before conflicts arise.
  • Do support disclosure: a requirement that all commercial Web sites clearly and conspicuously state what their Web site does with personal information
  • Do work to establish global alternative dispute resolution systems to instill consumer confidence in cross-border e-commerce.
  • Do recognize that the online industry is still very young and is operating in a rapidly evolving marketplace. Allow the industry to make greater progress in strengthening and expanding online consumer-protection self-regulation.
And here is the one "don't": Don't enact legislation that would be premature and could impose standards that are difficult and costly to implement, especially for small businesses.

In that last caution, it's important to note that HP is a leader in online consumer protection and supports enforcement of the four fair data-handling practices outlined by the FTC, BBBOnline and EU Safe Harbor requirements: notice,choice,access and security.

It's not that we are concerned about our own ability to comply. We are concerned that legislation that is too onerous or too restrictive could negatively impact smaller, emerging online businesses, and that U.S. regulations developed in isolation could conflict with international policies.


Now before I take questions, let me just say a word on Internet taxation. Let me acknowledge the important progress and general consensus on the absence of Internet access fees and tariffs. And let me make a few additional points.

To apply the current system of taxation to the online world would be disastrous. The current system is unwieldy, overly complex, inefficient and comes from a vastly different, "old economy" world. However, to exempt, forever, online commerce from taxation is unrealistic.

So let's start at the beginning. Let's do the heavy lifting - a burden the states must first bear - to simplify and modernize the tax system to be fit to apply to the online world. Such an effort will require serious, ongoing commitment. Then, and only then, should we apply such a system to electronic commerce.

And now in closing let me reiterate, if I may, the important principles of leadership that we, in our respective roles, must embrace in this renaissance of the information age: First, let us create cooperative efforts reaching across both real and virtual borders. Second, let us focus on what is good for the many, while not neglecting the few. And third, let us aspire to creative, inventive solutions, not quick-fix, simplistic approaches.

With this formula, I believe we're sure to realize the benefits of the New Economy for our constituents - young and old - who represent the values of our past and the promise of our future. Thank you.

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