“Expanding the Connected Kingdom”: OII works with Google on policies for stimulating the UK Internet Economy

By | 18 November 2010

This is a guest post by Victoria Nash, OII Policy and Research Fellow. She discusses the topical issue of the UK’s Internet economy, an issue to be discussed at next week’s OII-Google forum on policies and strategies to support the Internet economy.

How much does the Internet contribute to the UK economy? This is broadly the question asked in The Connected Kingdom, a recent report by the Boston Consulting Group. Commissioned by Google, the report uses data from a variety of sources (including OxIS), to conclude that: “the UK Internet economy is worth £100 billion a year, is growing at 10% a year and directly employs 250,000 people.” [comment on The Connected Kingdom]

These impressive figures are undoubtedly encouraging, but the bigger question is surely whether we could do better. The OII is joining forces with Google next week to consider precisely this issue. Bringing together leading experts from industry, academia and government, our forum “Expanding the Connected Kingdom” asks whether there are any policies or strategies that could help the Internet economy flourish.

This is a highly topical question, with the government last week releasing two key reports: Technology and Innovation Futures: UK Growth Opportunities for the 2020s sets out expected areas for longer term innovation and growth, and Blueprint for Technology highlights key coalition policies to stimulate the technology industry.

If the aim is to boost the Internet’s economic contribution, it seems to me that relevant policy challenges might be divided into three key areas:

1. Developing skills and confidence

The most obvious way of increasing the Internet’s contribution to the UK economy is getting, and keeping, more people online. Figures from the OxIS 2009 Report show that 70% of British people are online, compared to 58% in 2003, but the rate of growth appears to be slowing. That leaves 30% of the population who are not able to contribute to the Internet economy by shopping, communicating or socialising online, or using it as part of their job.

Race Online 2012 is an excellent campaign that aims to get the missing 30% online, one community group at a time, but it is targeted mainly at those who have never used the Internet. In this era of severe cuts in public spending, high inflation and rising unemployment, there may be a whole new group of users who quickly become ex-users as they lose their job, or can no longer afford Internet access at home. The proportion of ex-users has been steady at 5 or 6% since 2003; we need to closely monitor this figure, but more importantly, we need to find ways of ensuring that a break in regular Internet use does not become a long-lasting habit, perhaps by expanding access in public institutions such as schools, libraries, job centres or GP surgeries, or by offering refresher courses to boost confidence rather than simply classes for beginners.

As well as intensifying efforts to get the ‘missing 30%’ online, there is a real need to address the potential skills gap. OxIS research shows that the proportion of Internet users who use the Internet at work has risen from 28% in 2003 to 41% in 2009, suggesting that it is becoming an increasingly important workplace skill. Yet in both 2007 and 2009, those with a basic education are much less likely to use the Internet compared to those with a university education, indeed the gap grew during that period. Given that the contribution of the Internet to the UK economy comes not just from its role in white-collar jobs, or even in the workplace at all, there is a real need to find ways of supporting employers in training their workforce to use the Internet more, even if initially just for recreational ends. This may have indirect benefits for employers if in the longer term it means that more communication or processes can be moved online. 

In addition, recently announced changes to the benefit system may mean that a large number of people previously on incapacity benefit are required to work. Given that we know those who have any sort of disability are less likely to be online (41% against 75% of those without a disability in 2009), but also that the possible advantages for this group of working at home would be significant, this would be an area that government training funds could be well spent in getting people online.

2. Improving infrastructure through investment and competition

UK broadband speeds are not outstanding. OECD figures for 2009 ranked the UK 13th out of 30 countries for average advertised broadband speed, and the UK government has committed £400 million to support investment in broadband infrastructure with a view to attaining ‘the best, superfast broadband network in Europe by 2015’ (Blueprint for Technology). It remains to be seen whether this is a realistic goal, and it is interesting to note that not all economically valuable applications of the Internet are bandwidth-hungry.

Given a limited pot of money to support development of the Internet economy, a useful study might attempt to assess the opportunity cost of spending £400 million on basic infrastructure as opposed to spending it on other enabling policies such as training and access schemes, investment incentives for SMEs, support for regional Internet economy ‘hubs’ or innovative policy efforts to build consumer confidence in the security and privacy of Internet transactions.

3. Reviewing regulations to ensure they support innovation

Whilst OfCom has traditionally maintained a light touch when it comes to regulating the Internet, the recentTechnology and Innovation Futures report actively explores the possibility of a greater role for government in the development of the Internet economy, for reasons of infrastructure, rights to access and even content concerns. Whilst there may be some areas where OfCom’s refusal to intervene can seem positively detrimental to innovation (such as in the case of net neutrality, for example, where it is currently acceptable for mobile network operators to forbid users from using VoIP services), there are others where a heavier touch could do great damage to the fragile ecology of bottom-up innovation.

But it is worth noting that the framework of laws and policies which impact on internet innovation is likely to be much greater than those which fall strictly within the usual ‘telecommunications’ remit. As outlined in a recent OII report on the ecology of laws and policies which impact freedom of expression online, there are multiple policy actors and multiple policy ‘games’ whose unintended consequences may shape the Internet and our use of it (see: Dutton, W., Dopatka, A., Hills, M., Law, G., and V. Nash (2010) Freedom of Connection – Freedom of Expression: the Changing Legal and Regulatory Ecology Shaping the Internet [forthcoming December]).

Thus, if governments are serious about reducing unnecessary red tape and ensuring that regulation supports innovation in the Internet economy, they should consider not just the traditional telecoms issues such as pricing, competition and standards, but also a broader array of policy areas such as:

  • Intellectual property: note the recently announced governmental review of intellectual property laws with a focus particularly on fair use bodes well for Internet innovators.
  • Access to employment schemes and benefit regulations to ensure that an imaginative approach to training and retraining recognises the great potential of the Internet to support home-working or the establishment of small online businesses.
  • Delivery of public services online and public procurement strategies to ensure that they are open to tender by SMEs and that where possible they are linked up to related e-commerce activities.
  • Privacy and security policy is an area where greater government intervention may be needed to shore up public trust in online transactions. As OII Fellow Ian Brown wrote recently, the Information Commissioner’s Office needs to be more publicly effective at protecting our personal data [Guardian, 4 Nov 2010] if we are to continue to give up personal and often highly sensitive personal data in our daily transactions online.

 [ You can read more about this, and contribute to the debate, at the Connected Kingdom website; look out for summary notes from next week’s OII-Google forum on the Oxford Internet Institute‘s website. ]