broadband strategies handbook.pdf - Khazar University

Box 1.5: Capacity to Absorb Technology and the Economic Impactof Broadband-Enabled ICTs: The Examples of Italy and SwedenAn economy with a flexible facilitating structure,an entrepreneurial business environment,few technological regulatory restrictions,an ICT-educated workforce, highpenetration of complementary technologies(for example, electricity), a business-friendlyfinancing structure, and a responsive publicpolicy structure will experience faster diffusionof broadband-enabled applications andservices and a larger economic and socialimpact. The impact of broadband-enabledICTs on economic growth will be slower andsmaller in an economy that lacks some ofthese elements or that delays the changesneeded to adapt the facilitating structure tobroadband-enabled ICTs (for example, by notmodifying the regulatory framework to eliminatetechnological restrictions or to facilitatetheir diffusion). In relative terms, it can beput as follows: assuming that the maximumand fastest effect on the structure of theeconomy that a country can obtain frombroadband-enabled ICTs is 100 (that is, thepotential positive impact from broadband),the degree of absorptive capacity of theeconomy will determine how much and howfast that 100 value can be actually realized.Italy and Sweden provide good examplesof how this mechanism works. Both countrieshave relatively similar levels of GDP per capitaand an in-depth penetration of previous complementarytechnologies, such as electricityand telephone lines. However, their absorptivecapacity is different (table B1.5.1). Swedenperforms better in business environmentand human capital and has taken a very activerole in modifying the facilitating structure ofits economy to allow for faster diffusion ofbroadband (for example, by establishing apublic policy to enable the diffusion of broadbandand implementing e-literacy programs).Many other factors in place explain theability of Sweden’s economy to diffusebroadband-enabled ICTs, but the importantpoint is that Sweden has actively adapted thefacilitating structure of its economy to allowbroadband to diffuse faster and broader thanItaly has. As a result, the economic effects ofbroadband-enabled ICTs in Sweden havebeen larger and surfaced faster. For instance,from 1998 to 2007, average annual productivitygrew much faster in Sweden than in otherpeer countries (2.32 percent compared with0.39 percent in Italy and an average of 1.66percent among OECD countries). Eventhough this growth was not due exclusivelyto broadband, Sweden’s policy has transformedthe country into a broadband leader,and this transformation has played an importantrole in its economic growth.Table B1.5.1 Internet Adoption Proxies in Sweden and Italy, 2007Proxy Sweden Italy% of population with no Internet skills 22 58% of enterprises receiving Internet orders 26 4% of enterprises purchasing on the Internet 72 29Source: LECG 2009, table citing Commission of the European Communities 2008.Building Broadband 29