The Digital Economy

Investing in the digital economy

Paolo Tancredi / Dec 2015

Matteo Renzi. Photo: European Union

Last month, at the Italian Chamber of Deputies, we approved a parliamentary motion asking the government to extend the Italian Bill of Rights for web users. This resolution is undoubtedly a first important step for a better governance of the Internet and to ensure rights for Internet users. We already knew how important this infrastructure has become for our everyday lives. Involvement in the democratic process, the improvement of the relationship between citizens and bureaucracy and access to information are some of the positive benefits of the expansion of the Internet.

We should also understand that the Internet is an immense opportunity for business, growth, investment and creating jobs, especially for the younger generation. Making investments in fix and mobile broadband means enables the Internet to be faster and more accessible to the end users.

So, as an important member state, Italy must clearly say that the European Union is lagging behind with too much regulation (28 different laws) that doesn't allow companies to invest . This situation has the only merit of generating an even greater digital divide. We have the political, economic and social responsibility to change our attitude from the “old” continent to being the most innovative continent in the world.

In our country, for instance, almost one third of the population has never used the Internet. There is therefore a value in stimulating demand for digital technologies, but to date most policy efforts have focused on ensuring access to broadband networks. These measures are typically pursued by telecom regulators because they have the authority to enforce rules on providers. However, these efforts have limited ability to support adoption, as the long term empirical work in the area shows that increased digital adoption requires policies that focus on the socioeconomic characteristics of the user: skills, education, occupation, gender, and age. This is a set of factors that proves highly predictable in whether a person goes online: for example, having a high education level is highly correlated with going online but this also requires long term policy initiatives.

A few international comparisons help us to understand better. In the U.S. the private sector spent $1.3 trillion over the past 15 years to deploy broadband infrastructure. That is money that went into laying fibre, upgrading cable systems, launching satellites, building towers, and deploying spectrum. U.S. wireless providers have also invested twice as much per person as counterparts in Europe ($110 per person compared to $55) and the same situation occurs on the wireline side where U.S. providers invested more than twice than European ones have done ($562 per household versus $244). Lastly average mobile speeds in the U.S. are about 30% faster than they are in Western Europe and turning to wired broadband, 82% of Americans and 48% of rural Americans have access to 25 Mbps broadband speeds compared to the 54% and 12% in Europe.

All these data cited clearly explain that our approach is not enough. We can talk about rights and access, about information and net neutrality but if we forget what allowed the Internet to grow, to expand and to become the most incredible instrument to drive growth and innovation, we will lose our future challenges. Obviously there is not a single economic formula for success in the digital economy:  it is based upon a complex mix of factors including investment, networks, devices, regulatory regimes, human capital, and technology.  Our role as policy makers is to work with all the other key stakeholders to find the right mix of these factors for the good of our beautiful country.

Paolo Tancredi

Paolo Tancredi

December 2015

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