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janet napolitano: dr. ericschmidt, chairman of the board and ceo of google. since coming to google, erichas focused on building the infrastructure necessaryto maintain google's rapid growth. previously, eric served as thechairman and ceo of novell, marking a 20-year record ofachievement as an internet strategist, entrepreneur, anddeveloper of new and great technologies.

dr. schmidt? eric schmidt: thank youvery much, governor. i completely agree with whatrandall had to say. and i'd like you all to think ofinformation technology in a very different way. i'd like you think of it as away that people can actually change their viewsof government. we're now at the point wherethe quality and the way in which your informationtechnology services work for

your citizens will fundamentallyaffect how they view not only your leadership,but government as a whole. because unlike many otherpeople in our government worldwide, the buck stopswith you guys. you actually run these places,and you have tremendous services that you offer. it's also clear that broadband,as randall said, is about to cross atipping point. we're at 50, 60% percentoverall penetration.

at&t and other companies areleading this way, and they're doing a great job. as it crosses the 2/3 point ofactual usage in american homes, it will become the firstplace that people go that the businesseswill be built on. and i want you to think internetfirst, not second or third or fourth, because that'sultimately how you'll transform your fundamentalmission, which is serving your citizens, and reallychange the world.

what's nice about this thinkinternet first message is that the united states is the leaderin the internet, so you have all of the positivebenefits of both the investment that you make in yourstates, the creativity in your universities, representedhere as part of our leadership task force, and the great storythat is the american dream and entrepreneurship. now, most people, when theythink about the internet, think about, as an example,youtube and candidates.

and you all havelooked at this. and indeed, there is a bigdebate on monday, and then a subsequent one in september inflorida for the two major parties, involving youtube. what people do not appreciateis how fundamentally the internet is changing the normalcourse of business. i've give you the numbers. the internet, by far the fastestgrowing piece of media technology ever, three yearsto get to 50 million users.

it took 37 years to do thesame thing with radio and television. there are more than 1.3 billionusers worldwide. we're adding a couple hundredmillion a year now-- and most of those, of course,outside the united states. the mobile phone growth-- when i travel-- and randall and i do this[unintelligible] -- what sound do i hear?

i hear the sound of mobilephones ringing. it drives me crazy sometimes. i guess it always--he loves it. it's the perfect outcome,ring, ring, ring, ring. and it is of even greater impactto have american-led technology changing the world. and the numbers arefascinating. more than 2.5 billion phones,again, growing at on the order of 400 or 500 million a year.

this is all being driven bysomething called moore's law, which you've heard about before,roughly doubling the density of chips every18 months. there's another law calledkryder's law, which says that storage power is increasingby a factor of 1,000 every 10 years. so you say, oh, no big deal. this has some pretty interestingimplications. in the year 2019, you'll be ableto have in your iphone,

or equivalent, 85years of video. so when you're born, we canhand you this thing, and you'll never be able to watchall the video on your device until you're dead. the rate at which thisconsolidation of data storage and computing power ischanging our world is breathtaking. now, my observation is thatpeople everywhere pretty much want the same things.

they want good family,good health. they want safety, security,happiness, prosperity. and they have a lot to say. and they are going to say it inthis new medium, whether we like it or not. the statistics are phenomenal. there are more than 70 millionblogs that exists today, about 120,000 blogs being createdworldwide each day. so no one is readingthem, except for

their author, i guess. 76% of us internet users overthe age of 15 initiated a video stream monthly. 75% of the users 18 to 25are reading or writing user-generated content,as it is called. and few of them are passiveparticipants. and last night, in our ann arboroffice, where we have a nice big operation, i asked asurvey, how many of you have a home phone?-- which is a verystrange question to ask.

and that was clearlythe wrong question. so i said, how many of youdon't have a home phone? 90% of the people raised theirhands and said that their only phone is their mobile device. it gives you a senseof how rapid this change really is occurring. when you think about search,which is the business that google is in, it really fulfillsthe human need for information.

and of course, this is growingvery, very dramatically. and the billions of pages thatwe index and the many hundreds of millions of users that weservice have to deal with this all the time. our next product is reallyabout personalization. here we are in michigan. you do a search for wolverine. now, are you talking abouta sports team, or are you talking about a particularmarsupial?

we need to know a little bitabout you in order to do that. and we now have algorithms andtechniques where we can more or less figure out whetheryou're a sports fan or whether you're really very interestedin science. and if you're both,maybe we'll be a little bit confused. we're trying to close thegap between what i want and what i typed. and to me, google is reallybuilt around aha moments.

for me, the aha moment was i'vealways wanted to climb mount everest, which, if youlook at me, is clearly not going to happen. so i took google earth, and istarted at the bottom, and i climbed right up to the top inthe safety of my office. and i had a great view. you can't do that without thesekinds of technology. here's another example. all of us give a lotof speeches.

and i was told that the problemis speeches is that the microphone rubsagainst your-- [scratching sound] eric schmidt: everybodyknows this, right? so how do you solvethis problem? you tape it to your skin. how do you do that? you get double-sided tapethat's made for wicks. now, where am i goingto buy this?

how would you find outwhere to buy it? well, it turns out you canuse a search engine. and you'll find there, in fact,a whole industry of people who make thissort of thing. i never knew i neededthis product. and now, i have to have it. what's interesting about allof these aha moments-- and google is really builtaround aha moments-- is that they really do createtrust. and then, trust between

ourselves, company, the enduser, and their searches and information becomes paramount. and this is another issue thatyou all are going to face. how do people trustthe internet? in our case, we've changedour privacy policies. we don't keep logs more than 18months, the cookies that we put in place-- which are a technical term-- expire in two years, andother things like that.

but the important pointis it will face this, is everyone's online. what is the privacy? what is the trust factor? do they believe you? is it really true? if we look at information andmass innovation, it's having a lot of other interestingimpacts. the fellow who runs venezueladid not like a particular

television station,so he banned them. so now, they're rebroadcastingon youtube. very interesting. please don't tell him. i don't want him toshut down youtube. this process makes governingboth harder and more, i think, exciting. it's harder because you have,to some degree, less control over the voices.

on the other hand, you have theability to listen to them. and you can imagine that, notonly can google, for example, track all the things thatpoliticians say-- do we agree, disagree?-- but we can also give youinformation as to what people are thinking, more quickly. and then, you can decide whatyour view is and how you should react to it. this phenomena of jumping tothings is really occurring

very, very quickly. it may very well be that thenext watson and crick-- co-inventors or discoverersof dna-- might meet online insteadof a university. and we want them to be in usuniversities, talking to each other over this broadbandnetwork that randall and others are trying to build. so what should you all do? encourage the expansionof broadband.

we are 100% in agreementwith this. it is the basis of so muchof the future of america. the only analogy-- and it seems obvious-- is here we are in abeautiful part of relatively rural michigan. how do you get here? by a highway. what do you do whenyou're here?

you get on your broadbandnetwork, and you have access to the whole world. the interstate highway systemis the 1950s analogy. this is ours. by making information available,you can finally cross this issue of theopacity, or lack of capability, of governments. we have a project generallyknown as sitemaps. we have projects with statesthat we've done this, for

example, already-- arizona, california, michigan,utah, virginia. the states already hadinformation that was on their websites that none of the searchengines could get to. literally, almost all access togovernment services seems to be starting through thesearch engines, and they can't find your service. working together, a similarexample, arizona-- took, you'll be pleased to know,the governor 46 staff

hours to make all this work,available not just to google, but to the other searchengines, as well. and boom-- millions ofpeople in your state have access to this. let's do this together. it's easy to do. i believe when we talkabout education-- and this group has worked oneducation for a very long time-- we all understand howfundamental this issue of job

training and education andhigher learning is. i believe that this nextgeneration of children process information differentlythan we do. it is the generation gap ofwhich we are the elders and they are the juniors. that you face, we face, theissue of transforming the classroom from a classroomto an internet classroom. and i don't mean getting ridof teachers and so forth. they're crucial to makingthis happen.

when i was a young persongrowing up in virginia-- my home and a great state-- one of the things inseventh grade-- governor-- is that i had to memorize the50 counties in virginia. and i'd managed to do itcorrectly, by the way. and of course, i don't rememberthem anymore. why was that memorization soimportant, if i can carry a device that has that piece ofinformation and everything

else in the world withme at all times. what i really needed to do wasto learn how to search, understand, manipulate, andresearch, learn how to think about the state that i love andthe state of which i was a member, and all thethings going on. it's a fundamentally differentway of teaching. and we're not teachingthat way now. and the tools and the techniquesare now available and ubiquitous.

with energy needs, all of us-- craig and intel, and many othercompanies-- are working to deal with climateand climate issues. with innovation, we're allbuilding innovation models. google is particularlyinnovative because of a model called 70/20/10, where 70% ofour investments are in core things, 20% in adjacent,and 10% in others. i would challenge you asgovernors, how much of your budget is spent on trueinnovation that's not

described to you or regulatedto you, or lobbied to you by the many people who wanta piece of your budgets and your attention? how much of it is true discoverythat's going on in your states? reserve 5% or 10%, and theleverage is enormous. this is a remarkable time tobe here, to be part of the united states, theentrepreneurial system that's represented by randall myself'sview of the world.

school children in rural townsvery much have the same access to the students ofoxford, harvard, cambridge, what have you. it's very different fromwhat it used to be. we are very much at thebeginning of a real revolution in education, informationaccess, and governing, and in serving the citizens ofthe united states. so with that, thankyou very much. janet napolitano: well, thankyou very much, randall, eric,

for your remarks and yourcomments to us on the role of innovation as you see it. let me open up the table toquestions or comments from any of the governors who are here,on this or any of the other innovation topics. phil? you've got to press onit and keep it down. [inaudible] phil bredesen: you haveto hold it down.

all right, i'll hold it down. this is probably for mr.stephenson more. you talked as one of the legsof those [inaudible] free flow of capital. and of course, we had in ourlegislature this year, along with many other states,initiatives generated from you to open it up. it did not succeedin tennessee-- i think, as a sidebar, morebecause so many lobbyists were

making so much money out of itthan it did out of the basic approach of it. but the question i have is,there are real issues surrounding the free flow ofcapital and communications, and the absence of regulation. the phone industry that youdescribed grew in a highly regulated environment. the cable tv industry startedand grew in a highly regulated environment.

the internet may have exploded,but that would have been vastly slower without thehuge infrastructure of copper and fiber and so on that weredeveloped that way. what do you feel the role of astate is in terms of trying to ensure equality of access? mobile phones arevery important. there's huge pieces of tennesseewhere i can't get a mobile phone signal, wherepeople who live in those communities can't get it.

what is our role in makingthat happen? randall stephenson: i think,inherently, the role-- and many may not like this-- ismore and more to stay out of the way. the more truly competitive thesemarkets become, i think the less government interventionis required. there was a day-- eric schmidt: --side theunited states directly subsidized broadband deployment

literally with money. and they have a nationalbroadband policy. it's heavily subsidized. and it is, in fact,accelerating their economic growth. so in the american system,where such subsidies are probably not the right politicaloutcome, i can report to you that thefinancials of broadband are so positive that thetelecommunications companies

and the cable companies, and soforth, are in fact seeing economic returnsfrom broadband. the problem is that there arestill regulations in their way, as randall said. if i were a governor and i heardthis message, what i would do is have a broadbandtask force for my state. and i would sit down and iwould say, tell me the 10 things-- and i wouldn'task the industry. i'd ask my staff and thevarious end users--

what are the things that arepreventing us from getting what we want? and i'd go to the industry andsay, what are your problems? and i'd try to figure outa way to bridge them. there are many cases wherelocal, relatively antiquated laws are preventing widespreadadoption of something which is economically positive. the spread of broadband is sodirectly related to the creation of jobs in ruralareas, the use of the

internet, advertisingbusinesses, the business we're in, electronic commerce,and so forth, that it's fundamental. i was in rural nevada. and i happened to be driven bythe mayor of this small town. and he was explaining to me thathis basic problem was he could not get thetelecommunications company to put a fiber optic cable to histown because he wanted to create an outsourcing center.

we want all the mayors tothink about where is the fiber, and do they haveenough of it. and that will then putpressure on their own regulatory bodies to work withthe local guys to get this stuff built. janet napolitano: good. governor sebelius? kathleen sebelius: eric, sinceyou're here to give us a new way to look at a lot of theinitiatives moving forward,

i'm struck by the fact thatthe numbers that you gave, which i think all of us knowintuitively about phones-- who has a landline phone, whonow is just using a cell phone-- we can translateinto our own kids. but it has an interestingapplication when you go to polling. eric schmidt: states havemany overlapping lists of their citizens. they have polling data, driver'slicense data, other

kind of regulatory data. and there are tremendousinefficiencies in how those services are delivered becausethey don't have a way of seeing one person as the same. and there are some reasons thatthat structure exists, including concernover privacy. so to the degree that we canaddress privacy and misuse of driver's license data and soforth, it would be very good if states had a better modelof who their citizens were,

and they knew roughly wherethey were, or they had an ability to reach themin an emergency. i'm struck by, as an example,you find out that in your state, there's a mortgagecrisis. and your citizens-- a good percentage ofyour citizens-- are going to default. so you as a good legislatorfigure out a way to give them some credits.

how do you reach them? how do you reach them today? the television they don'twatch as much anymore? you can't call them at home. the canvassers are offdoing something else. you have to find a newway to reach them. and an obvious way would be tohave more use of the web, more use of electronic mail, andget them to choose to communicate with you on theirown terms. people are now

choosing to communicatedirectly. the polling question is muchharder because people are harder to find, if you will. and i think what we'll seein polling is many more estimates, which is notnecessarily good, but probably the best that we can do. janet napolitano: very good. governor sanford,let me just-- governor sanford, then we'llhave governor corzine,

governor douglas, governorbaldacci, and governor pawlenty. and then, we'll have to cutoff the questions-- eric schmidt: --taken strongpositions that more choices are good, whether it's vouchersor charters schools, or so forth. my personal view is that almostanything that we try will give us some experience ofdifferent models, and that we should encouragethat experiment.

one thing i will also tell youis that we now have the ability to measure outcomes. so rather than arguing aboutwhat could happen in these infinite strategy meetings thateverybody seems to have in this subject, why don't yousimply try five different initiatives and see what works, and measure the outcomes. and we'll accept anypositive outcome. janet napolitano: randall?

randall stephenson: verysimplistically, i don't care what endeavour it is, ingovernment, in business, or anything else, competitionis good. it's just inherently part ofa free market society. i just think more competitionis good in every endeavor. and so i would always encouragecompetition. janet napolitano: governorcorzine. jon corzine: thank you. let me first just make anobservation to randall that

this isn't just the spread ofbroadband and implementation of those programs, which we'vedone in new jersey. it isn't just an issueof rural consumers. there are the difficulties ofbringing this into urban areas and actually and may evenbe bigger hurdles associated with it. i wonder if you wouldcomment on that. and then, eric, it's very hardto argue with the evolution of how we disseminate informationand how we communicate.

but the oversight, some mightsay the regulation, of how the internet works is somethingthat's increasingly a concern to our citizenry, particularlyfrom predators who use what is obviously a great leveragedevice in a way that becomes harmful to society. and i wonder if you want tospeak to what you think the role of government is or isn'tin that world as we see this inevitable evolutionand strengthen the technology system.

randall stephenson: in terms ofurban areas and broadband coverage in urban areas, i can'tspeak to new jersey. we don't have thatin our footprint. but as a rule in our 22 states,the urban areas are very, very well covered. i would tell you we have donemore to make it available to urban areas in termsof pricing. we have a $10 broadband productavailable for anybody that wants broadband.

the dilemma we have onpenetrating urban areas that we're working-- and we're working thisvery aggressively-- is the cost of a computer. in urban areas, the density ofcomputers in the homes is not that great. so what can you doto improve that? we're working with intel on adevice that is not a full pc, but it's a device that canaccess and then utilize

internet, and hookto broadband. can you get $100or $200 device? we could subsidize that andtruly begin to penetrate urban areas with broadband access. but i think that is the longpole in the tent, if you will. can we get the computing devicein the house, that cost, down? janet napolitano: eric? eric schmidt: on the wirelessaspect for cities, one of the

good news about cities isthat they're dense. and so wireless broadbandsolutions, including some that are free or very, very low cost,are in developments. i think we have some hopethat technology can really help there. with respect to the oversightand regulation of the internet, one of the great sortof sadnesses of my career is to discover that there areevil people on the internet. those of us who were part of theinternet 20 years ago, we

didn't think therewould be any evil people on the internet. and now, we find themleft and right. and they spend an awful lotof time sending us really terrible emails inthe form of spam. there's a series of thingsthat society has to do. the first is to talk aboutit so that people are aware of it. schools need to spend a fairamount of time educating

children about it because nomatter what we do, on the margin, there willbe a new attack. and they'll find a 13-year-oldboy or girl and potentially put them at risk. and that's a trulyterrible thing. from a government perspective,the interesting thing is that virtually all of the things thatwe're upset about on the internet are, in fact, illegalin the states in which they are performed.

so it does not appear as thoughthere's a need for some a whole new national set of lawsin this area, but rather the development of the toolsand the techniques of law enforcement to discover,track, and so forth. and there, companies like googlecan actually help in the sense that we do have apretty good idea of what people are doing. and under the appropriatelegal systems, that information can be used to help,essentially, apprehend

the bad people. there are issues whenyou cross borders. so for example, you'll havesomebody who's doing something inappropriate, where theus law does not reach. and there are probably issuesaround trade agreements to make sure that we can have quickresponse for sorts of things, as well. janet napolitano: yeah, and iwould also add to that, i think the early childhoodcommittee meeting this week is

going to be talking about onlinepredators as one of their topics, so obviously,an issue of great concern to all of us. governor douglas. jim douglas: thank you. earlier this year, i signed intolaw a bill to create a telecommunications authority toboth get out of the way in terms of expediting permitting,and, as governor rendell suggested, make surethat we deploy infrastructure

in rural, remote parts of thestate that may not be economically feasible forthe telecom providers. but one discussion point thathas come up is, what is the future of infrastructure when,in this era, we have a phone becoming a computer becominga television, providing different types oftelecommunications services? are the federal grants we'regetting to deploy fiber optic cable really forward looking, orare they a generation that perhaps will pass?

we've got a satellite companyoffering to do a pilot program in a rural part of our state. what's the future ofinfrastructure for telecom? janet napolitano: inten words or less. eric schmidt: let me-- a quick summary is that fiberoptic bandwidth has almost no limit of the amount of bits thatyou can put in it with the appropriate upgradesof the ends. so you should be proudest ofall that fiber that you're

busy laying because that fiberwill last for 25, 50 years. and people will be doing amazingthings with that fiber in our lifetimes. randall stephenson: morefiber is a good thing. i don't care where you areor when you're doing it. more fiber is good. janet napolitano: so it'sa pro fiber diet for telecommunicationsis where we are. all right.

governor baldacci. john baldacci: and firstly, iwant to thank you, janet, for your leadership and the issuesthat are being discussed. i find them very interesting[unintelligible]. i would like to ask randall aquestion when he talked about the needs in rural america. governor douglas and governorlynch and myself in maine are coordinating, in the rural partof northern new england, an it cluster to [inaudible]

industry support, to give us acurriculum, to give us some of their recipes and needs fortheir work force, so that we can transition our peoplefrom the old economy to the new economy. and the challenges is to findthose companies that are willing to partner. and there's new studies comingout showing that it's probably better, more productive, moreretention, instead of outsourcing to india, it isto do it in rural america.

and we offer the opportunity inrural northern new england to be able to come out withthese sorts of things because we've changed our educationalsystem from two years of math and science to four years ofmath and science and have eliminated tracking, so thateverybody's thinking about higher education. but industry partnering, ithink, is a huge help to me and to our region. and i would just put thatat your doorstep.

and you're representingindustry today. so i'd appreciate any commentsyou have on that. and i think governor douglasasked the question i asked. at what point is it going tobe either the television or the telephone, or which one isit going to be that's going to end up being the onethat everything ends up coming through? because it just seems like itjust completely evolves and changes, so much sothat it's amazing.

so eric, if you could everlook down that road and just tell us. because it used to be everybodywas in their own compartments. and they had their ownresponsibilities. now, it seems like the wholething is merged. and they're all competing witheach other, which is great. but at what point [inaudible]? randall, and then eric.

randall stephenson: in termsof the partnering, i accept you laying that atour doorstep. i think it's importantfor industry and government to partner. in fact, a few leaders in ourarea where we do business prevalently, we are partneringwith in this regard, especially as it relates tobringing some of these jobs back from india, specifically,and trying to get the skill sets up to make sure that wehave a workforce that can

accommodate the volumesthat we're going to be bringing back. in terms of which device isgoing to win, there are three screens that matterin my world-- this wireless screen, thepc, and the television. all three are going to berelevant for a long time. i think the companies that canmake those kind of work together, and seamlessly,i think will stand a big advantage.

but i'll let mr. internetrespond to that, as well. eric schmidt: thank you. most people assume that allthe devices that you carry will end up as one. and unfortunately, i think theinverse is probably true. you'll probably unfortunatelyhave more devices. you'll have, what we say, ipaddresses even in your shoe because there'll be somethingthat's useful in your shoe that the internet will need toknow about, like how far you

are or where you are. i carry my old phone,my iphone, my blackberry, and my camera. and now, i have a zipdrive that doesn't fit any of the four. thank you very much. this is not convergence. the trick, as randall pointedout, is that all of these devices, along with theseamazing televisions that are

being built, and amazing new pcscreens, will have access to the same information. so you'll be able to use yourphone or your handheld device, or whatever other device youuse, to access the same then, when you go toyour office, you'll be able to see it. and when you go home, you'llbe able to see it. and then, you can workall the time. janet napolitano: oh, boy.

thank you. and governor pawlenty. tim pawlenty: thisis for eric. we talked about the it, or iguess, the internet classroom. we have, of course, thisgeneration behind us, absorbing informationfundamentally differently and transmitting it fundamentallydifferently than even my generation. and so our children-- my14-year-old, my 11-year-old--

they instant message,text message, myspace, youtube, email. it is completely different. and yet, we are in classrooms,even though we have smart boards and internet classroomopportunities, where we primarily still have peoplestanding up with erasers in front of white boards andlecturing, and boring children, particularly atthe high school level. and we are still usingstandardized textbooks, which

are a one-size-fits-all, kindof assembly line approach. beyond white boards, beyondsome internet classroom opportunities or online learningopportunities, what is the future of the internetclassroom in a way that might allow us to leverage technology,better customize learning opportunities acrossan array of needs and abilities and speeds? what do you see for the futurein that, and what policy suggestions wouldyou have for us?

eric schmidt: a coupleof observations. the teachers of america areamong the most isolated working professionals that wehave. they have relatively few opportunities to spend time withtheir peers, to learn how to be better teachers,and so forth. with the internet-- and thenational governors association has been part of it-- there arenow groups that are trying to standardize not just thetextbooks, but also the teaching tools, the teachingmethodologies, and in fact,

producing videos of the greatteachers to augment that. so that's observationnumber one. the internet, which is nowpresent in pretty much every classroom in one form oranother, we finally now have a way of getting intothat classroom. the second observation is thatthe modality, the way in which people are teaching, has tobecome more interactive. fundamentally, in thisnew world, it's an interactive world.

it's a personal world. and that means two things. it means the teachers actuallyhave to have a conversation. the students have to interactwith the media. and there needs to be a test.and the test needs to be based on the outcome, not the timespent in the classroom. and a simple change, a simplelegislative change, that would allow some flexibility and someexperiments with that and then, test the outcomes, wouldprobably begin to show the way

in each and every one of thestates represented here about how citizens really can takeadvantage of this [inaudible]. what is interesting to me is, ioriginally thought that this information was not availableon the internet. there are tremendous amountsof teaching resources available on the internet, andthey're not being used to teach our students. with that, thankyou very much. thank you, randall.

thank you, eric, very much.