Q&A: Socio-economic impact of growing Internet usage

The number of Internet users worldwide has accelerated since 2004 and reached 1.8 billion in 2009. The advancement of technology means that the Internet can be accessed in a greater variety of ways, breaking down global barriers.

China overtook the USA to become the world’s biggest Internet user in 2008. Access to the Internet has positive implications for society and the economy but increased usage leads to a number of challenges.

  • How does Internet access benefit societies?
  • What are the challenges of rising Internet usage?
  • Who are the world’s biggest Internet users?
  • What are the prospects for the Internet in the future?

How does Internet access benefit societies?

World Internet usage increased by an annual average of 14.1% between 2004 and 2009 to reach 1.8 billion users. The biggest growth in Internet users has been in emerging countries with all BRIC countries among the world’s top ten Internet users in 2009.

Broadband (high-speed Internet) is becoming the dominant form of fixed-line connection, while wireless technologies have resulted in a boom in consumers who can access the Internet in remote areas. Internet and the accompanying infrastructures have beneficial implications for the economy, businesses and consumers:

  • The Internet provides consumers with a valuable tool for information, empowering them with knowledge, while access to online markets increases competition and improves prices;
  • The Internet enables e-government which will improve the delivery of public services and reduce corruption. Services such as healthcare will benefit from the Internet by improving information and efficiency, thus reducing costs;
  • Internet access will narrow regional divides especially between rural and urban areas. For example, the Internet helps the agricultural sector in developing countries by giving famers access to information and market prices. This in turn raises profits and incomes;
  • It enables flexible labour markets as Internet connectivity improves home/work life balances. This is particularly important in ageing countries that are looking to increase birth rates;
  • The Internet speeds up the globalisation process by reducing physical barriers. Many businesses are able to reduce travel costs as online communication has improved. The global economic downturn of 2008-2009 led to many companies cutting travel budgets and IT solutions have enabled this. This will prove invaluable at times of crisis such as when European airspace was closed down in April 2010 owing to volcanic ash from an eruption in Iceland.

What are the challenges of rising Internet usage?

While there are many benefits to the Internet, rising usage presents challenges. One of the biggest concerns is regarding the pressure on digital infrastructure. An OECD paper in 2008, for example, estimated that 85% of IPv4 addresses (protocol IP address) had been allocated:

  • There is a global digital divide. A lack of Internet and IT skills in countries with poor cable and IT infrastructure will mean they are unable to compete with economies which have highly-skilled and IT literate work-forces. In developing countries, mobile phones have taken off quicker than computers owing to the lack of fixed-line networks in rural and difficult to reach areas, with wireless access enabling consumers to “leap-frog” fixed-line methods for Internet access;
  • In the Middle East and Africa region in 2009, 64.9% of households had a mobile telephone compared to 11.1% owning an Internet enabled computer. In Asia Pacific, 63.0% of households had a mobile telephone and 15.1% an Internet enabled computer. In North America, however, the differences are less apparent – 85.2% of households had a mobile phone and 74.5% had an Internet enabled computer;
  • The rise in Internet usage has corresponded with growing concerns over privacy and data protection, while cyber attacks on businesses and governments remain a problem. Cyber security results in a lack of confidence in the Internet, while online fraud and identity theft leave consumers wary about online transactions;
  • Internet usage in developing countries is reliant on changes to the regulatory framework, government expenditure on infrastructure, and open and competitive markets to reduce costs.

Who are the world’s biggest Internet users?

  • Asia Pacific is home to the highest number of Internet users at 786 million in 2009 or 43.5% of the global total. Western Europe and North America are the next biggest Internet user regions with 308 million (17.1% of total) and 253 million (14.0% of total) users respectively;
  • Growth in world Internet users has been rapid since 2004 with the number of Internet users increasing to 1.8 billion in 2009 from 934 million in 2004. Growth has been fastest in developing markets with growth of 221.7% in the Middle East and Africa over 2004-2009, 155.3% in Asia Pacific and 139.0% in Latin America, as numbers increased quickly from a low base. This compares to slower growth in more established Internet markets such as 41.7% growth in Western Europe;
  • The BRIC countries are amongst the world’s biggest Internet users with China top of world rankings with 375 million users in 2009 followed by the USA, and then India with 119 million users. Brazil had 87 million users while Russia had 40 million;
  • However, it is when looking at Internet penetration rates that a more apparent digital divide remains. In 2009, South Korea and the Netherlands had the highest proportion of households with an Internet enabled computer at 97.8% and 88.4% respectively. Many European and advanced economies ranked highly in terms of Internet penetration while developing countries lagged behind. In China, the figure was 12.8% and in India just 4.6%;
  • In terms of broadband penetration, a similar pattern is seen. Broadband is now the dominant fixed-line method for the Internet and many advanced governments are seeking 100% broadband access. South Korea, well known for its high-tech economy and high speed broadband is nearly 100% broadband, owing in part to government incentives and strong investment– in 2009, 97.8% of households in South Korea had a broadband enabled computer (the highest in the world) compared to 74.2% in the USA and 62.7% in the UK.

What are the prospects for the Internet in the future?

In 2008, the Seoul declaration for the future of the Internet economy was agreed for OECD countries and included the “common desire to promote the Internet Economy and stimulate sustainable economic growth and prosperity by means of policy and regulatory environments that support innovation, investment, and competition in the information and communications technology (ICT) sector.”

Euromonitor International forecasts that there will be 3.2 billion Internet users worldwide in 2020 and that India will have overtaken the USA as the second biggest Internet user market:

  • The Middle East and Africa region will lead global Internet growth over 2010-2020 followed by Asia Pacific and Latin America. Euromonitor International forecasts that Asia Pacific will account for 50.2% of global Internet users in 2020;
  • The world digital divide will narrow as emerging countries improve access to the Internet and their regulatory frameworks. This can be seen in the case of China in the Networked Readiness Index of the World Economic Forum where it improved its rank to 37th of 133 countries in 2009-2010 from 46th (out of 134) a year earlier. No developing countries made the top 20 but this is likely to change;
  • Internet access in emerging countries will be driven by wireless technologies. Wi-Fi and WiMAX will continue to develop as this is less costly than wired connections. Near universal mobile telephone access is likely to be achieved in 2015-2020;
  • The global economic downturn in 2008-2009 has speeded up government focus on narrowing digital divdes and rolling out high speed broadband. Many stimulus packages had an ICT component. The US stimulus in 2009, for example, included about US$7 billion for expanding broadband. However, the economic downturn will dampen business investment potential;
  • India has a government target of 100 million broadband subscribers by 2014 compared to 8.8 million in 2009, with wireless technologies expected to drive growth;
  • In advanced economies, the number of fixed-telephone lines has been declining, dropping by 7.2% in Western Europe, for example, over 2004-2009 and will continue the downward trend. Consumers will upgrade mobile phone handsets in pursuit of instant wireless Internet access and the rise in popularity of smart phones. More laptops and notebooks will also encourage the spread of wireless Internet. Meanwhile, the South Korean government aims for residential broadband of one Gbps download speeds by 2012.