Europe’s Digital Economy Strengthening, Says Report

Europe's digital economy is growing in strength, spreading throughout all sectors of the economy and reaching into all areas of the lives of its citizens, according to a report published by the European Commission.

But if Europe wants to exploit the potential benefits of the digital economy to their full extent, it will have to provide faster broadband, work toward an Internet that people can trust, improve citizens' skills, and encourage more ICT innovation.

The European Commission will soon propose specific measures in these areas with its Digital Agenda for Europe, a flagship of the Europe 2020 strategy. (UPDATE: Digital Agenda web site.)

The report identifies the ICT sector as one of the key drivers of the European economy. Since 1995, ICTs have driven half of productivity gains in the EU, thanks to technological progress and investments in the sector.

Data for 2004-2007 suggests that this investment has more recently started to deliver efficiency gains in the rest of the economy. The added value of the ICT industry to the European economy is around EUR 600 billion (4.8% of GDP). The sector accounts for 25% of the total business investments in R&D in the EU.

However, benefits from ICT in the US are greater. Europe needs structural reforms and a consistent digital agenda to unleash similar impacts.

About 60% of the European population use the Internet regularly, 48% on a daily basis. These levels compare well to the US where 56% use the Internet daily and 65% used it in the last three months. Nevertheless, in both the EU (30%) and the US (32%) about one third of the population has never been online.

Important socioeconomic and geographical divides exist. In particular, the elderly, less educated and those on low incomes use the Internet less and have lower skills levels. Increasing digital skills is crucial for building a European digital society.

Again, the EU compares well to the US, although web-use is higher in older Americans – 46% of people over 55 in the US have never used the Internet compared to 59% in the EU. By contrast, in South Korea and Japan differences between socioeconomic groups are less marked.

In 2009 the EU broadband market was the largest in the world. Almost a quarter of EU citizens (24.8%) have a fixed broadband subscription. Although connection speeds are increasing, with 80% of fixed broadband lines in the EU now offering speeds above 2Mbps, only 18% of them are above 10Mbps.

While these speeds are sufficient for basic web applications, they are not sufficient for more advanced applications like TV on demand. The "Europe 2020" goals set ambitious targets for all Europeans to have access to broadband of 30Mbps or above.

But higher speeds will require a move to NGNs. The EU lags significantly behind countries like South Korea and Japan in the deployment of such networks. Migration to higher broadband capacity is an important structural challenge for the whole telecoms sector.

Apart from playing a significant role in the growth of the European economy, the Internet has a huge potential to strengthen the single market. However, the level of eCommerce and eBusiness varies across member states and cross-border transactions are limited. Although 54% of Internet users buy or sell goods via the Internet, only 22% of them do so from other EU countries.

By contrast, in the US eCommerce is more commonplace with 75% of Internet users buying or selling online. This shows that Europe lacks a genuine digital single market, which is essential to stimulate the growth of European small and medium sized enterprises and to provide consumers with more choice at competitive prices.

Download the report and other relevant studies here.

Read the full press release.

Source: EC

Related: Europe's €25bln digital deficit (ECTA press release).

Related: The Atlantic Century - Benchmarking EU and U.S. Innovation and Competitiveness (ITIF report).

Related: Most countries now have national information technology strategies (UN).

Also Noteworthy: Government of Canada Launches National Consultations on a Digital Economy Strategy.

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