A Time of Reckoning Address by Bob…

                               A Time of Reckoning
 Address by Bob Wright, Vice Chairman, GE, and Chairman and CEO, NBC Universal

  Delivered to the attendees of the third annual anti-counterfeiting and piracy summit:
   Threatening Health, Safety, and Jobs: The True Cost of Counterfeiting and Piracy
       at the U.S. Chamber of Commerce, Washington, D.C., September 29, 2006


Thank you, Dan [Christman], for that introduction.

Let me begin by applauding Tom Donahue and the U.S. Chamber of Commerce for their
commitment to confronting the worldwide epidemic of counterfeiting and piracy. The
Chamber, representing the broad sweep of U.S. business, recognizes the severity of this
epidemic and understands what is at stake.

Any civil society rests upon two strong pillars: physical security and economic security.

Five years ago, we learned, tragically, that our physical security is under attack. Since
then, we've been a nation at war, with immense resources mobilized to fight a difficult
struggle against an elusive enemy.

Today, I want to suggest that the second pillar, our economic security, is also being
challenged.

Our nation is being tested in a way that we have not been since the start of the Cold War.
These are the words of our President, delivered two and a half weeks ago to the nation.
His subject was the war on terror. Of course no one could equate the horrific loss of life
we've suffered over the last five years with our theme at this Summit, but I do want to
suggest that we indeed are being tested by piracy and counterfeiting, across all sectors of
our economy, with enormous implications for our future.

I stand here as a chief executive of a media company. Too frequently, the fight against
counterfeiting and piracy gets downplayed as just being about movies and music. But let
me tell you: we in the media are one of the canaries in the coal mine. We're the Redcoats
in the French and Indian War. Every other industry is lined up right behind us.

As this conference makes clear, and the presence here of the Attorney General, the
Secretary of Commerce, and the U.S. Trade Representative emphasizes, significant
portions of the U.S. economy are threatened by the increases of counterfeiting and piracy
in sectors as diverse as automobiles, aerospace, computer software, defense contractors,
fashion design, high-tech manufacturing, pharmaceuticals, and software.

At risk is every sector of our economy where creativity, innovation, and invention drive
the creation of economic value and of high-wage jobs.
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If we do not step up our efforts to protect the foundation of future economic growth, our
nation and our children have a bleak future. This issue needs to be moved up on the
agenda of every business leader, every trade organization, and every congressional office.

Many policymakers are paying attention. As the Bush administration's Report on
Intellectual Property Enforcement and Protection, just released yesterday, clearly shows,
the current administration has done more than any previous one to focus attention on this
issue. President Bush and President Barroso have been forceful in calling for global
piracy to be a top action item for the U.S. and the European Union. But from where I sit,
we are not close to where we need to be.

Too many in policymaking and law enforcement still view counterfeiting and piracy as
relatively minor crimes that pale beside the many other demands on law enforcement,
such as terrorism and violent crime. Of course, we must respond vigorously to those
threats.

But we don't seek a future for our children that is physically secure and economically
impoverished. We seek a future that is physically secure, and economically vibrant. And
this means escalating the fight to protect our most precious resource--our innovation and
creativity.

Let me point out that when I speak about the piracy threat to my particular industry, it is
the only sector of the economy with a positive balance of trade in every nation in the
world. It is big. It is growing. And its product is 100% intellectual property. It is crucial
that it receive the protection it deserves. Jobs, tax revenues, and economic growth depend
upon it.

So what is our response to this threat? As business leaders, government officials, or
policy analysts, what are the action steps we need to take to answer this call to arms?

I want to suggest the following four steps that will lead to real progress in this battle.

First, we need to recognize the impact piracy and counterfeiting have on our economy
today and recognize the threat they pose to our future. We need to understand that it cuts
across all business sectors.

Recognizing the extent of piracy means collecting data. Important work in this area has
begun. The Chamber is involved. So is the International Chamber of Commerce. The
well-respected Organization for Economic Cooperation and Development is conducting a
major worldwide study. And in our own sector, we are taking significant steps to
document the extent and the cost of piracy.

As an example of what I am talking about, I want to announce today the findings from a
new study that tackles one of the businesses I know best--film. This study weighs the
true economic impact of movie piracy. Similar evaluations in other sectors would provide
a much more disciplined look than we've ever had at the real economic costs of piracy
and counterfeiting in every business sector.
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I will say more about this in a moment, but first let me thank Tom Giovanetti and his
colleagues at the Institute for Policy Innovation, who published the study, and Steve
Siwek from Economists Inc., who wrote it, for allowing me to announce these findings
today.

Second, business and government must use all the powers of persuasion they can to get
the message out that IP piracy and counterfeiting are not nuisance crimes. This isn't just a
problem of one or two sectors or a few big companies. We're talking about organized
crime. We're talking about a problem that touches pharmaceuticals, automobiles,
aerospace, defense contractors, software ... every sector. We're talking about the future
economic security of our nation.

Third, we must significantly increase resources at all levels of government, in this
country and globally, to enforcement against IP crime.

And fourth, key players in the private sector must take steps within their control to reduce
piracy. We must collaborate, public and private, and across industry sectors, with special
attention to technological solutions.

I: Recognize the Cost

Now, let me elaborate a bit on each of these four prongs of attack. First, we must
recognize the enormous cost posed by counterfeiting and piracy--not just in terms of lost
revenues to the business sectors involved, but in terms of lost jobs, lost wages, lost taxes,
and lost growth for the future.

If you look at the literature generated over the past few years on the cost of piracy, you'll
see numbers that are all over the map. Obviously, measuring this activity is not easy. But
recently we have made very good progress.

Last year, we commissioned a study from Steve Siwek entitled Engines of Growth:
Economic Contributions of the U.S. Intellectual Property Industries. The study was
designed to answer an important question: How dependent is our economy on those
industry sectors that are driven by innovation, invention and creativity?

The Siwek study aggregated the "IP industries"--industries that rely heavily on copyright
or patent protection--and measured their revenue, employment, compensation to
workers, and growth.

The Siwek study found that these industries are essential contributors to U.S. GDP,
responsible for 20% of the total U.S. private industry's contribution to GDP and 40% of
the contribution of U.S. exportable products and services to GDP.

And it found that they are the most important growth drivers in the U.S. economy,
contributing nearly 40% of the growth achieved by all U.S. private industry and nearly
60% of the growth of U.S. exportable products and services.
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Engines of Growth put some numbers on what was already quite evident: IP industries
are our economic future. These sectors are the driving force behind our ability to sell
goods and services around the world.

And they are being seriously damaged by piracy. But what does this mean specifically in
terms of lost output, lost jobs, and lost tax revenues?

We decided to try to make progress toward solving this puzzle by starting with the movie
sector, where we are close to the source material.

The Motion Picture Association of America had undertaken a comprehensive study of
global movie piracy, based on consumer research. The study established that the six
MPAA companies lost $6.1 billion to worldwide piracy in 2005.

But why should policymakers--and the general public--care?

In the study I mentioned earlier, which will be released today at a press conference
immediately following the Summit, the Institute for Policy Innovation has answered this
question.

When a studio loses revenues to piracy, it doesn't have that money to reinvest into
making more movies and television. But the important point is that not only does this
affect the individual studio, but it impacts all the companies that would have contributed
to or benefited from these unmade productions.

It reduces the revenue both of the upstream suppliers of entertainment products, and of
the downstream industries, like movie theaters, DVD retailers, and video rentals.

How can these losses be measured? The U.S. Department of Commerce, through its
Bureau of Economic Analysis, has developed a method of measuring these cascading
effects. It uses what are called input-output multipliers to quantify how much the change
in the output of one industry will change the output of other, related, industries.

Using these analytical tools, the IPI study found that:

   ·   Motion picture piracy results in total lost output among all U.S. industries of
       $20.5 billion annually.
   ·   Motion picture piracy costs U.S. workers $5.5 billion a year in lost earnings, $3.6
       billion of which would have been earned by workers in other U.S. industries.
   ·   Motion picture piracy costs jobs. Absent piracy, 141,000 new jobs would have
       been added to the U.S. economy.
   ·   And finally, motion picture piracy costs governments at all levels, conservatively,
       $837 million in lost tax revenue.

This first step--which takes as its starting point the losses in one industry, the motion-
picture industry--starts to indicate how damaging the true cost of piracy and
counterfeiting is.
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Imagine if we included the losses of other industries that are hit hard by IP theft, such as
software, luxury goods, and automotive parts. The numbers would be staggering. For
example, the software industry conducted a study recently and concluded that a 10-point
drop in the global piracy rate in their industry would yield 2.4 million new jobs and $400
billion in economic growth over four years. It is clear we are talking about hundreds of
billions in lost productivity and many millions of jobs.

This study focuses only on the United States. But, as we all know, piracy and
counterfeiting are also a significant global problem, both for developed and developing
nations. What is it costing them?

Today's public policy debates have not benefited from a documentation of the overall
impact of these crimes on our economy. A full accounting would galvanize a far greater
appreciation of the extent to which our economic security is at stake.

II: Communicate the Findings

My second point is that we need to do a better job of communicating how important this
issue has become. As I said at the beginning, this discussion demands the same degree of
urgency as our policy debates about physical security.

To my colleagues in the business community, I say these issues need to be recognized as
CEO-level issues, deserving personal time and leadership. To policymakers at all levels
of government and to the senior leaders in the law enforcement community, I recognize
the many demands on you and your organizations. But I urge that we all need to
communicate forcefully that economic security has a rightful place near the top of our
agenda and that counterfeiting and piracy have reached crisis levels and require more
attention and more resources.

Events like this Summit are, of course, an important step. I want to commend the
Chamber of Commerce, the National Association of Manufacturers, and the Coalition
Against Counterfeiting and Piracy for their efforts. Internationally, we have a similar
effort under way with BASCAP, the Business Alliance to Stop Counterfeiting and Piracy,
which is spearheaded by Jean-Rene Fourtou and the International Chamber of
Commerce. These are crucial cross-sector efforts, and they are gaining momentum.

All of us--in the private sector and government--have a responsibility to convey to our
customers and constituencies that intellectual property rights are vital to our economic
future.

We need to call upon private industry to step up worldwide campaigns to educate
consumers and policymakers about the moral and economic reasons to protect intellectual
property.

We need to call upon the administration to ensure, in its negotiations with trading
partners, that it makes the case that this is an economic security issue.

We need to call upon our elected representatives, through the Commerce Committees, as
well as through the Judiciary Committees and the International Relations Committees,
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which do not normally deal with this issue, to keep the spotlight focused on our economic
security.

We need to call upon both political parties, as the election season draws near, to make IP
protection a centerpiece in the effort to keep the U.S. competitive.

III: Enforce the Law

My third prong is enforcement.

This is a time of constrained resources. But failing to act is penny wise and pound
foolish, because future tax receipts will more than offset today's enforcement
expenditures.

Globally we must wage this battle in Beijing and Barcelona as well as in Boise. Whether
it is a counterfeit drug, a computer-generated car design, the theft of a valve technology
from a French industrial parts supplier, or a pirated copy of King Kong distributed online,
counterfeiting and piracy must receive priority enforcement attention.

We need to fight it on the street, where it operates in the shadows of organized crime.
Just as we are doing in our fight against threats to our physical security, we need to
analyze the support structures, identify the facilitators and target the chokepoints.

The media sector, of course, faces special challenges. I do want to applaud the Attorney
General and the IP Task Force for their efforts in prosecuting international online gangs
that illegally supply movies, music, and software to peer-to-peer networks. Cutting out
that supply and driving consumers toward the many legitimate online services that are
available, is a critical step.

In the wake of the Supreme Court's Grokster ruling, enterprises based on theft--Napster,
Kazaa, and Grokster itself, have either gone legit ... or moved out of the United States.

But these are, unfortunately, only initial victories. Technology makes it easier than ever
to illegally access and distribute copyrighted materials from anywhere in the world.
Practically anyone with a computer can make copyrighted content available instantly to
millions of people.

This makes enforcement efforts at once more difficult and more important. At the federal
level, we've seen the Department of Justice increase its prosecutorial resources in this
area significantly.

But I urge Congress to act this year to appropriate funds for significant increases in FBI
investigative resources devoted to IP crime.

We need more resources at the Department of Homeland Security dedicated to stopping
counterfeit and pirated goods from coming into this country. We need more enforcement
resources at the state and local levels, and I urge the National Governors Association, the
National Association of Attorneys General, the U.S. Conference of Mayors, and the
National Association of Chiefs of Police to make IP protection a major priority for 2007.
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In particular, I hope we will see significant leadership in plans to combat IP crime from
some of our largest cities and states in the coming months.

Overseas, the U.S. must continue and step up efforts to ensure that our trading partners--
including Russia and China--respect and enforce intellectual property laws.

Internationally, the media sector faces two different challenges. On the one hand, there
are entire countries in many parts of the world where the piracy rates are so astronomical
that doing business is virtually impossible. Plenty of people consume our products, but it
is all stolen property. This is a huge opportunity for growth that is completely foreclosed
by piracy. But it is not a hopeless situation. Where there is the political will, the tide can
be turned. Taiwan and Hong Kong, for example, have made good progress when their
governments made strong enforcement a serious priority.

On the other hand, there are the more industrial countries where our business is
traditionally strong but is beginning to be eroded by piracy. This is the case in Spain and
Mexico, for example.

We need both these situations to be addressed. Where piracy dominates the market, we
need serious criminal enforcement commitments from governments that have historically
allowed piracy to go unchecked. Where piracy is eroding established markets, we need
modernized enforcement initiatives from governments that have historically enforced IP
protection but are falling behind in adapting enforcement to today's more sophisticated
and dedicated IP criminals.

The commitment made by Presidents Bush and Barrosa at the June EU-US summit
represents a major step in the right direction. But a huge amount remains to be done
internationally.

IV: Work in Partnership

Fourth, we need cooperation within and across sectors. We need all industries to be
committed to taking action in areas that are under their control and also to support wider
public policy efforts. We should recognize, too, that effective solutions will require a
heavy measure of technology. Technology, for example, that will help identify
counterfeit goods at the border.

Again, let me use my own business as an example. In confronting our piracy problem, it
is imperative that we have our partners on the technology side as part of the solution.

The media industry has long been criticized for resisting technology and protecting old
business models. Today, nothing could be further from the truth. We and our competitors
are embracing new digital delivery systems as quickly as they appear. Consumers can
download our TV shows on the iTunes service. They can get our movies from
Amazon.com. They can watch streams of our programs on NBC.com or MSNBC.com, or
even on AOL.

We are entering an era marked by an incredible wealth of video choices at your
fingertips.
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All this has a dark side, however. It makes our most valuable products incredibly
vulnerable to theft.

We need our business partners to be as aggressive in deploying technology for fighting
theft as they are in deploying technology for new digital distribution.

It is ironic that some of the very same parties who suggest content companies aren't
moving fast enough to embrace new technologies for distributing our content, fail to call
on technology and distribution companies to accelerate the development of technology to
fight piracy.

All too often, our business partners act as if digital piracy is a problem just for the content
industry. It is terrific that ISPs are investing billions to roll out broadband services. Yet
independent firms report that well over half of broadband traffic is devoted to P2P
filesharing, which is dominated by the illegal exchange of movies, music, software and
games, not to mention pornography. We need ISPs to work in partnership with content
companies, passing notices to and if necessary terminating customers who abuse their
networks by illegal downloading.

Moreover, ISPs and content companies should be working together to find ways in the
future, always consistent with subscribers' legitimate privacy concerns, to filter out
illegal content while speeding along legal content. This is an acute issue on college
campuses, where students all-too-often use ultra-fast computer networks not for academic
research, but for illegal downloading.

We need university administrators to take much stronger action, including most
importantly the use of blocking technologies, to stop wholesale illegal downloading and
exchange of stolen copyrighted works on campus. Their action or inaction sends an
important message to students about whether illegal activity is condoned or condemned. I
pledge the full support of my company--including the formidable capabilities of the GE
Research Lab--in these efforts. Together, we will find a way.

The fact is, technological steps that would significantly reduce much of the piracy
problem for media companies are available right now. We have the ability to insert a
digital "tag" or "watermark" in our content. I am delighted that the CE, IT and content
industries have cooperated in developing technological standards for the new HD
generation of DVDs, which will include provisions for detecting copyright watermarks in
order to interfere with the playback of pirated material.

It is absolutely critical that we continue down this path. Technological sophistication
should be our partner in the fight against digital theft. We need our business partners to
help us apply the same technology to our content viewed in the context of the PC and the
hard drive, to the new devices that will facilitate moving digital material from device to
device within the home, from computers to handheld devices to TV sets and so on.

In this connection, I applaud the recent formation of the Digital Watermarking Alliance,
consisting of companies that are at the forefront of developing technologies devoted to
the protection of copyrighted and proprietary content.
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I mention these issues as examples of how we in the media industry need cooperation to
make progress. But every business sector needs to look at ways specific to their industries
to address this problem.

Sometimes all it takes is the recognition that no competitive advantage is worth violating
intellectual property rights. That's the position PepsiCo took when a Coca-Cola employee
came to them with trade secrets. They promptly alerted their rival and enabled the FBI to
set up a string operation to catch those responsible.

Conclusion

I've discussed--at some length--four steps that will lead to progress on this issue. By
way of conclusion, let me suggest four specific things that need to happen between now
and when we gather again at next year's Summit.

First, we need to have hard numbers on the table that reveal the full impact of piracy and
counterfeiting on our economy. The IPI study is a great start but it needs to be expanded
and complemented by other studies, in industries from manufacturing to pharmaceuticals.
That is going to take a commitment of resources and data from government and from
other business sectors.

Second, we need to see stepped-up advocacy by both the private and public sectors. On
the private side, this means companies in every sector, from aerospace to automotive,
working together with organizations like the Chamber of Commerce's CACP and the
International Chamber's BASCAP to convey the scope of the problem and the urgent
need for solutions. On the government side, it means clear pronouncements from the
administration, Congress, and both political parties that our future growth depends on
rigorously protecting intellectual property.

Third, law enforcement at the federal, state, and local levels needs to be in a much better
state of readiness, with adequate resources in place. Congress should follow through on
the effort to add 65 agents at the FBI and Customs dedicated, educated, and well-
equipped to investigate IP crime, in sectors ranging from financial services to fashion. I
would also call on the governors and attorneys general in our ten largest states, and the
mayors and chiefs of police in our twenty largest cities to have adopted coordinated,
model IP protection enforcement programs in their jurisdictions.

Fourth, when we reconvene next year, we need to have made real progress in
implementing technological solutions to the counterfeiting and piracy problem. In our
own industry, I hope we are well on the way to partnering with the CE, IT, and ISP
industries, as well as the university community, and putting serious resources and effort
into developing and implementing effective technological solutions that create real
roadblocks to the digital distribution and playback of pirated products.

I titled my remarks today, "A Time of Reckoning." To reckon means to consider or to
weigh something. But in its earliest definition, it has to do with counting. Today, both
definitions apply. IPI is literally announcing a new reckoning when it comes to piracy
and counterfeiting.
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By accurately measuring the scope of the problem, communicating its importance,
ensuring adequate enforcement both here and abroad, and working in tandem with our
technology partners, we can make a real difference.

NBC Universal has made a commitment to work with the CACP domestically and with
BASCAP internationally and with all governments here and abroad. I hope you all will
join us in support of these important efforts. The time of reckoning is right now.

Thank you.