Yesterday, the OECD published a new report
on the development and future outlook of the Internet economy. Titled “OECD
Internet Economy Outlook”, this report reveals the importance of the Internet
economy for driving growth and innovation. The report shows how the Internet
economy has transformed peoples' and businesses’ lives in a decade full of
disruptive change. Below are some key facts that policymakers across the globe
should keep in mind when making policies that impact on a sector growing and creating
jobs at an unprecedented rate.
Particularly in Europe, a place where the word ‘crisis’ has dominated political
and economic discourse in the last couple of years, it is encouraging to hear
that the ICT sector has consistently grown over the last decade - despite the
overall economic downturn. ICT sector revenues have been growing 6 percent
annually between 2000 and 2011 for the top 250 ICT firms. These firms also
create new jobs hiring 14 million people in 2011 alone, a 6 percent increase
over 2010. Interestingly, the top 50 Internet firms outperformed the whole
sector with a 31 percent average annual revenue growth between 2000 and 2011.
On the consumer side, the report found that 70 percent of OECD households have
broadband Internet access, bringing access to a larger variety of goods and
services online at lower prices. Furthermore, wireless broadband connections
are now double that of fixed broadband subscriptions in the OECD changing the
way people interact and consume content. From the business perspective, the
report confirmed that the restructuring of business models in association with
Internet use has led to improved efficiency and rapid growth of new online
businesses. At the end of 2011, nearly all companies in OECD countries were connected
to the Internet. However, there is clearly room for improvement and growth in
the E-Commerce sector as, on average, only 18 percent of businesses with at
least 10 employees used the Internet for selling goods and services.
Even though the report admits that it is inherently hard to quantify the
economic impact of the Internet because of a lack of a widely accepted
methodology or single measure to capture the whole Internet economy, it
estimates that in the US at least 3 percent and up to 13 percent of business
sector value added could be related to Internet-related activities.
Corresponding to these trends, the ICT sector increasingly attracts venture
capital with the ICT sector accounting for more than 50 percent of all venture
capital in the US, the world’s largest market.
These encouraging findings also extend to the entertainment sector as the
report highlights that digital content is one of the most important drivers of
consumer Internet adoption, with revenues growing rapidly across all sectors.
E.g., according to numbers provided by the International Federation of the
Phonographic Industry (IFPI), digital music worldwide accounted for 29 percent
of recording companies’ revenues. It is worthwhile to add that there is a huge,
untapped potential for growth given that some sectors of the entertainment
industry still have to adapt to the digital environment. Moreover, this finding
essentially supports CCIA’s conclusions in its recent report “The
Sky is Rising,” which has revealed that despite the often very loud
statements to the contrary, the entertainment industry has grown over the last
decade - in tune with the growth of the Internet economy. This seems to
be increasingly recognized by the entertainment industry as well, as recently
seen by MPAA’s Chief Chris Dodd’s recent
outreach to Silicon Valley.
The report underlines the fact that in only a decade the ICT sector in general
and the Internet in particular have emerged as key drivers of economic growth.
In order to reap the full benefits of this transformative and revolutionary
process, policymakers must ensure that legislation will not harm the Internet
economy and ensure that vested interests do not impede these important
economic, political and social changes. Internet openness and balanced
approaches to intellectual property policy are among the most fundamental
ingredients for the tech sector to thrive and to help lead the economic recovery.
Last but not least, there is a clear opportunity for Europe to take advantage
of the growth generated by the ICT sector. What is needed now is a clear policy
framework supporting that growth and the identification of bottlenecks slowing
down the development of the digital economy. In the area of intellectual
property rights, a recent
report by Josh Lerner has shown that legal uncertainty around the scope of
copyright clearly disadvantages Europe relative to the US in attracting venture
capital for cloud computing companies. This is just one example of where
policymakers have yet to realize that a lot needs to be done to take full
advantage of the huge potential so clearly identified in the OECD report.
