The Internet economy: Towards a better future

Director, OECD Science, Technology and Industry Directorate

©David Rooney

Can you remember life before the Internet? Though quite a new technology, already a world without the web has become as unthinkable for many of us as a world without telephones. But what of the future? Can the benefits of this extraordinary technology be multiplied, and how can the thornier challenges be met?

The Future of the Internet Economy will be the subject of the first OECD ministerial meeting ever to be hosted in Asia. Taking place 17-18 June 2008 in Seoul, Korea, it will examine the implications of the rapid growth in the use of the Internet for our economies and societies and the policies needed for continued growth.

How times have changed since the OECD convened its first-ever ministerial conference on e-commerce in Ottawa, Canada, in 1998. Then, the Internet was only just becoming mainstream, and that meeting tried to make sense of it all. Strategic direction was given to policies in many areas that still concern us today, such as access, privacy, taxation and consumer protection, directions that have been instrumental in nurturing online activity and helping to make it a part of our daily lives.

But a great deal of “Internet time” has passed since that Ottawa meeting. Back then, Google was a month old, and was still operating in a garage with just three employees. Amazon and eBay were fledgling ventures, but have since gone on to become successful mainstream companies. And in the last few years, new services, such as iTunes, Skype and YouTube, have become part of the daily vocabulary of millions of people around the world.

Underneath, the network’s infrastructure has also fundamentally transformed in the last decade. Dial-up Internet access has given way to always-on broadband technology.

Broader range


Moreover, users are accessing the Internet via all manner of wireless devices, from laptops to mobile phones. Along the way, communications became the fastest-growing part of household expenditure since 1993, even faster than health and education.

Millions of people now use the Internet for everything from doing homework to buying books, or playing or downloading games, music and movies. Levels of user participation and publication on the Internet have also surged, from blogs, podcasts and interactive wikis that anyone can modify, through to services for sharing photos and video clips, such as Flickr and Daily Motion. Social networking sites such as Bebo, Facebook and MySpace represent another rapidly developing frontier of communication.

New spending priorities


What is perhaps less apparent is that Internet-based applications underlie major advances in science, business organisation, environmental monitoring, transport management, education and e-government. Nowadays, without the Internet, planes would not fly, financial markets would not operate, supermarkets would not restock, taxes would not get paid and the power grid would not balance the supply and demand for electricity.

This reflects our increasing reliance on the Internet for business and social activity, including health and education. Indeed, looking for information on health is becoming one of the most frequent uses of the Internet. In 2006, no less than 40% of adults in Finland, Iceland and the Netherlands turned to the web for information about health, as did over 30% in Canada, Norway and Germany, to identify symptoms, understand their prescriptions, and so on. In 2005, in the Czech Republic, almost 80% of hospitals offered online consulting via emails to their patients. There is every reason to think that in the future, the network of networks will continue to reach further into our daily lives and into other infrastructures which we rely on. Whereas the Internet now connects just over a billion people, in the future it will potentially connect many billions of objects, from refrigerators to recycling bins.

Radio-frequency identification (RFID) and sensor-based networks, for example, can potentially be used to track and trace everything, from what is in our shopping baskets to checking the water quality of our reservoirs. All of this information will be tied together by the Internet. Transportation is set to be transformed as cars and trucks are fitted with communication technology enabling the provision of traffic warnings, roadside services, route prioritisation and even information about movements or distance between nearby vehicles to enhance safety, for instance.

Information technology has the potential to meet some of our most pressing needs, such as in helping health systems improve quality, accessibility and outcomes, all the while becoming more cost-effective. It can also help policymakers address issues such as medical error.

The creativity and innovation being fostered across a range of areas is impressive, but so too are the daunting challenges for privacy and security in an Internet-centric world. For just as all new technologies have downsides, so too does the Internet, though in this case, the ramifications are particularly serious. Indeed, the Internet is the scene of increasingly severe and sophisticated attacks against consumers, business and government.

There is the recent rise of “botnets”, for instance, which are networks of compromised computers that can be used to launch cyber attacks on other computers and networks. Fending off these and other types of attacks and preventing widespread disruption demand increasing co-operation between all stakeholders, and action across several different policy domains, including education, law enforcement and the technical community. Furthermore, this co-operation must occur at the global level.

In a nutshell, what we will discuss at the June 2008 ministerial meeting in Seoul (see below) is how to continue to make improved infrastructure and services available, encourage the creativity and innovation necessary to ensure economic growth and secure the future of this now critical infrastructure and the services it generates.

Nowadays it is difficult to think of a policy domain that is not affected by the Internet. An obvious example is the need for regulatory reform for communication networks, or the many considerations surrounding digital content. Whereas separate and distinct networks (data, video, telephony) once provided critical communication functions, these infrastructures are now converging towards the Internet. These changes cut across and challenge legal and regulatory frameworks born of a less blurry era of telecommunication and broadcasting. They may disrupt many existing business models in areas such as media and content production, but they also create enormous opportunities for innovation and growth, as companies like Apple, Salesforce.com, Electronic Arts, eBay and Google have all shown. New opportunities can also arise from more efficient delivery of government services, greater access to public sector or cultural activities, and new ways of scientific collaboration.

This makes the future of the Internet all the more critical for policymakers too. Whether in addressing ageing societies, climate change and environmental management, energy efficiency, business, poverty reduction, conservation or healthcare, the implications for economic and social activities have simply become more far-reaching and profound than many imagined possible. And now our expectations of the Internet and what it can deliver are higher than ever and are likely to go on growing.

Take radio frequency identification and sensor networks, for instance. These hold the promise of improving supply chain and logistics management, tracking and tracing everything from airline luggage to patient care in hospitals or homes. Are we ready for this? Are the right incentives, measures and policies in place to assure the potential is realised, without interfering with individual liberties?

Clearly, policies need to be carefully crafted and co-ordinated to guide the future of the Internet economy. Moreover, as the Internet is a global good, no policy discussion will go far without discussion at the broadest international level.

In Ottawa, ministers laid the ground for a decade of policies which have proven remarkably successful despite many tests, whose severity was largely unforeseen at the time, from spam to fraud and piracy. Our mission ten years later as we prepare the road to Seoul remains largely the same and reflects the OECD’s own raison d’être: to forge a collective vision of a better future economy and society for the entire world. And that inevitably demands a vision for the future of the Internet and the policy frameworks required to support it. Realising this vision over the coming years will, more than ever, require everyone’s action and preparedness. After all, who knows what the next opportunities and challenges will be?

 

References

©OECD Observer No 268 June 2008



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