UK: Deloitte TMT – Value Of Connectivity

Economic And Social Benefits Of Expanding Internet Access

FOREWORD

The knowledge economy is the future of the world economy and the Internet is its backbone. Yet, currently, only about 1 out of every 3 people can go online. Internet.org's goal to make access available to the remaining two thirds of the world will bring the same opportunities available in the connected parts of the world to everyone.

As a global partnership, Internet.org is working to harness the experience, wisdom and resources of people and companies across the world to understand and solve the challenges of the connectivity gap. Driven by this goal, Facebook engaged Deloitte to assess the economic and social impact of extending Internet access in the developing world. This report is the outcome of that initiative. And Deloitte's conclusions are compelling: global connectivity will help lift millions out of poverty and drive important positive social and economic change.

This project is the first in an ongoing series of sponsored research projects that will also examine barriers to affordable access and the efficacy of potential solutions. We look forward to engaging with other independent research organisations and academics on projects that support the goal of extending access to the Internet.

At our core, we believe everyone, everywhere, should have the same opportunity and ability to be connected to each other and to connect to the knowledge economy.

Facebook, on behalf of Internet.org

EXECUTIVE SUMMARY

Internet connectivity has already changed many aspects of the lives of individuals in developed economies and provided far-reaching economic and social benefits. Extending these opportunities is critical to accelerating economic and social growth in developing economies, while enabling the transition from a resource-based to a knowledge-based economy.

Of the world's 7 billion people, only 2.7 billion have access to the internet while the vast majority of the 4.3 billion that remain unconnected live in developing countries. The unconnected are typically the world's poorest and most disadvantaged populations.

Internet connectivity has already changed many aspects of the lives of individuals in developed economies: creating new ways to communicate and socialise, new business models and industries, and more efficient ways for firms and workers to operate. Innovations such as social media, search engines and online marketplaces as well as the convergence of these platforms with nearly all existing activities have permeated society and impacted productivity, economic growth and business creation. These platforms have also changed the way in which public services, healthcare and education are provided and shared. Many governments have recognised the role of internet access in enabling economic activity and social developments and have set out ambitious plans to promote investment in internet access, such as the National Broadband Plan in the US and the Digital Agenda in Europe, and capitalise on this opportunity.

In developing countries, the internet has the potential to do not just the same but more, as it allows the delivery of the knowledge economy of today without the need for some of the infrastructure that these countries have lacked for many years.

The internet is all about services to people and communities, allowing them to achieve their potential.

Facebook has launched a global partnership, Internet.org, with the goal of making internet access available and affordable to all. It has commissioned this study to examine the ways in which extending access can change economies and societies in developing countries and what benefits this would generate on a number of economic and social dimensions.

Deloitte has addressed this issue by combining analysis of a wide range of economic and academic studies, our own original quantitative research on technology impacts in developing economies and a review of a series of examples of how the internet has impacted developing economies. The findings suggest that if developing countries could bridge the gap in internet penetration to reach levels developed economies enjoy today, they would experience large increases in GDP growth and productivity and improvements in health conditions and education opportunities. Beyond the benefits that the internet is already bringing, this provides a clear potential to reduce poverty and promote long run economic and social development.

By acting as an enabler of economic activity and as an engine for information sharing, the internet complements primary necessities and basic economic activities, facilitating access to and provision of fundamental services. The internet accelerates economic and social growth and enables the transition from an economy based on resources, which typically cannot be shared, to one based on knowledge where ideas can be freely circulated to spur collaboration and innovation. Economic development is not about choosing between access to the internet and basic necessities: they need to work together to allow societies to flourish.

How the internet enables economic growth

The internet offers unprecedented opportunities for economic growth in developing countries. By providing access to information, connecting people to businesses everywhere, and opening up new markets, the internet can transform the very nature of an economy and support economic development.

In developing countries where agriculture represents on average 40% of economic activity, mobile telephony and the internet enable access to market pricing information, weather forecasts, disease control information and livestock tracking. Small-scale farmers can access this type of information and markets directly instead of through costly intermediaries. In India, farmers and fishermen tracking weather conditions and comparing wholesale prices through mobile phones increased their profits by 8% and better access to information resulted in a 4% drop in prices for consumers. These benefits have the potential to be even greater with more sophisticated internet-based applications and extend more widely across the developing world.

The positive effects are potentially greater than in developed economies due to the reduced quality of physical and administrative infrastructure to support the functioning of markets. Small and medium size enterprises (SMEs) in developing countries are amongst the biggest winners from receiving access to the internet. By reducing transaction costs and the constraints of distance, throughout the world the internet has reduced barriers to market entry and allowed SMEs to innovate and reach a broader market. In countries as diverse as Mexico, Malaysia and Morocco, SMEs with internet access have been found to have experienced an average 11% productivity gain. Extending internet access to levels seen in developed countries today means that long run productivity could be enhanced by as much as 25% in developing economies.

Deloitte estimates that the resulting economic activity could generate $2.2 trillion in additional GDP, a 72% increase in the GDP growth rate, and more than 140 million new jobs.

The internet fosters productivity and innovation across all sectors of the economy. In developing countries it has often spurred and enabled creative solutions to overcome the limitations arising from economic constraints and limited infrastructure. Extending internet access can give these regions an opportunity to leap-frog developed countries with the adoption of cutting-edge technologies, as observed for example with mobile banking. In regions that were largely "unbanked", mobile banking services, from M-Pesa in Kenya to Wing Mobile in Cambodia, have successfully connected millions of people to banking facilities, reducing access costs and travel time and further supporting economic activity. Technology hubs such as Bangalore in India and Lagos in Nigeria have helped innovators and entrepreneurs share ideas and connect with investors across the world, leading to the emergence of new industries, increasing economic growth and skilled employment.

A number of policy and business actions aimed at reducing administrative burdens for SMEs and supporting investment can complement the success of these applications to unlock further economic benefits and support the development of local businesses. While more needs to be done in order to replicate and further scale these benefits, these experiences suggest that expanding internet access has the potential to lead to fundamental advancements in the structure of economies across the developing world. Countries that have implemented strategic infrastructure investments to ensure robust connectivity, such as Rwanda, have benefitted from increased investment in their economy.

Expanded access to information, increased business and job opportunities, and ultimately higher incomes are all factors that can combine to eradicate extreme poverty. Deloitte estimates that extending internet access in developing economies to the level seen in developed countries can raise living standards and incomes by up to $600 per person a year, thus lifting 160 million people out of extreme poverty in the regions covered by this study.

How the internet enables health improvements

Access to the internet can improve health conditions by reducing the incidence of diseases through better information for both patients and health practitioners. In addition to extending access to medical information, the internet has the potential to improve medical behaviours for patients and healthcare professionals as well as the delivery of medical services.

The internet provides a route through which to improve awareness of diseases and provide information on health treatments. A number of free mobile-based and web-based applications exist in developing countries that provide information related to nutrition, hygiene and prevention of common illnesses. Evidence on the link between health literacy and mortality rates suggests that access to the internet has the potential to save nearly 2.5 million lives across the regions covered by this study, if they were to achieve the level of internet penetration seen in developed economies. In particular, Deloitte estimates that improved health information to expecting mothers and health workers could lead to a reduction of child mortality, saving 250,000 children who may otherwise have died during their first year of life.

Internet-enabled devices are already transforming the way healthcare professionals operate in developing countries by allowing remote diagnosis and more efficient ways of treatment.

Patient information is sent to hospitals via mobile and internet applications, thus saving travel time and service costs and substantially improving access to healthcare, especially for rural populations. The internet complements and improves existing medical facilities. Health workers can connect a microscope to a mobile phone with a camera, take pictures of microscope images and send them to a central server, which clinicians can access to make diagnosis of diseases such as malaria and tuberculosis.

Monitoring of illnesses can also be enhanced by mobile and internet applications designed to remind patients of their treatments and control the distribution of medicine stocks.

These types of services can increase compliance with treatment and play a crucial role in improving life expectancy for patients with diseases such as tuberculosis and HIV/AIDS. Across the developing world, Deloitte estimates that extending internet access has the potential to increase life expectancy for more than 2.5 million people affected by HIV/AIDS.

How the internet unlocks universal education

The internet plays a pivotal role in extending access to educational resources and in accelerating knowledge sharing.

Access to the internet improves access to education by providing students with learning opportunities and materials online.

Deloitte estimates that by extending internet penetration another 640 million children may be able to access the internet and the wealth of information it makes available while they study.

The internet spurs access to secondary and tertiary education. Online courses offer the affordability and flexibility that many students need as in developing economies barriers to secondary and tertiary school arise not only from tuition costs, but also from the opportunity cost of attending school instead of working.

The internet also provides numerous resources for teachers, including access to professional development courses. In developing countries, higher internet penetration provides the opportunity to increase the skills of teachers in a cost-effective manner, which is particularly crucial when there is a shortage of qualified teachers. As developing countries struggle to improve the quality of their educational systems with limited budgets, the use of ICT to support teachers and students could play a major role.

The internet makes learning resources available to students and teachers; it allows learning and consultation online and can be a valuable complement to the classroom experience. The potential exists for students anywhere to have access to online educational eBooks, tests and courses. These resources can substitute traditional textbooks which may not be readily available or are prohibitively expensive in developing countries.

Initiatives and programmes across the developing world aimed at supporting educational efforts through ICT could also benefit from access to the knowledge base that the internet provides. Although the evidence to evaluate these efforts is still at an early stage and needs to be improved, initial results suggest that education bundled with ICT can enhance students' performance in certain educational outcomes and, when coupled with effectiveness of teaching, ICT provides a powerful complement to education. In developing countries, studies show that providing computers to improve mathematical skills has a significant impact on maths grades and children who went to schools where computer-assisted learning was provided had a better maths performance than students who went to schools where the programme was not implemented.

Extending internet access is likely to require to be complemented by other measures in order to realise wider and scalable benefits on education: combining access to the internet with targeted education policies such as improved curricula and an increase in the teacher-student ratio has the potential to significantly extend the impacts of the internet in increasing quality of education and ultimately academic proficiency, attainment levels and employment outcomes.

Improved educational outcomes can have a strong positive impact on individuals' income and health outcomes as well as on the economy. Importantly, in addition to these effects, technology can expand opportunities for students to engage in collaborative learning, with great potential for learning and circulation of ideas.

How the internet promotes public services, social cohesion and digital inclusion

ICT technologies have long been recognised for promoting and facilitating social inclusion, i.e. the participation of individuals and groups in society's political, economic and societal processes. One way in which ICT technologies expand inclusion is through effective public services that rely on ICT infrastructure and through digital inclusion, i.e. the ability of people to use technology. These three aspects are deeply intertwined, and they span dimensions as diverse as disaster relief, food security, and the environment, as well as citizenship, community cohesion, self- expression and equality.

Public authorities can enhance disaster relief efforts by promoting the spread of information online and by implementing early-warning systems. The internet also enables relief efforts through crowd-sourcing: during Typhoon Haiyan in the Philippines, victims, witnesses and aid workers used the web to generate interactive catastrophe maps through free and downloadable software, helping disseminate information and reduce the vulnerability of people affected by the disaster.

Communities can also be strengthened by connectivity, thereby promoting the inclusion of marginalised groups. In Uganda, a web-based application enables village registration agents to send birth registration details of new-borns through to connected local hospitals.

People around the world can make their voices heard through the internet, feel connected to their communities through social networks and participate more actively in local and global governance. Anyone with an internet connection is empowered to express themselves through countless opportunities. Through the Voices of Africa programme, young reporters from Zimbabwe, Malawi, Uganda and South Africa were trained to create video news using internet-enabled devices, allowing them to choose the issues they consider relevant to their communities.

Governments should recognise the importance of the internet in complementing the delivery of healthcare, education and other social services and should promote investment in the development of innovative solutions in these areas targeted to their communities.

Where do we go from here?

This paper shows that the internet is already transforming the lives of people in developing countries and has the potential to create even greater benefits if more people had access. It is clear that the internet is not a substitute for other primary necessities, but rather should be viewed as a complement that can accelerate the provision of primary services such as healthcare, education and disaster relief, while strengthening social and economic outcomes and delivering far reaching improvements in life conditions at the same time. Analogously to natural resources, the internet has a role in facilitating the development of solutions to benefit society. Viewed in this way the delivery of ambitious development targets such as those set out in the UN Millennium Development Goals, including halting the spread of deadly diseases and achieving universal education, are consistent with, and can be accelerated by widening internet access.

By allowing people and businesses to share information without barriers, expanding internet access can lead to a more fundamental advancement in the structure of economies across the world. While many economies remain dependent on agriculture and natural resources, the internet can unlock a knowledge-based economy. People and enterprises across the developing world would have greater access to information, and the ability to develop specialised expertise and adopt new business methods, also changing the balance of jobs within the economy. Internet-enabled applications allow the developing world to skip the adoption of technologies that have quickly become obsolete in developed economies and develop creative solutions tailored to their nations' needs. At the same time, increased demand in sectors such as software development combined with an increase in innovation and the emergence of new technology-led enterprises will increase demand for high-skilled labour.

The effects of extending internet access could be particularly important for rural communities. Constraints on the flow of information have limited these communities' access to wider markets and to a variety of employment opportunities. Access to mobile and internet-based applications can extend the range of business services that become available to these communities. Internet access is also valuable to rural development-oriented organisations that act as local communication conduits or intermediaries. Improvements in connectivity play an important role in overcoming the urban-rural divide and stimulating economic growth in rural areas.

Extending internet access to the majority of the population remains an ambitious target for developing countries, especially for the poorest sectors of the population and in rural and remote areas. Similarly to the growth of the mobile telecommunications sector, affordability of internet access remains the biggest barrier today, while service availability, especially in rural and remote areas, is also a significant constraint. In addition, burdensome regulatory policies often act to discourage investment in supporting telecommunications infrastructure.

Recognising the importance of the internet as an enabler of social and economic development, a coalition of stakeholders spanning different sections of society needs to coordinate efforts to make internet access a reality for today's unconnected. Governments, international and regional organisations, NGOs and the wider telecommunications and technology industry have an opportunity to partner together and make internet access available to enable the delivery of economic and social benefits.

Internet.org and Deloitte recognise that this study is just a starting point for a critical debate on economic and social development. While this paper focuses on the importance of extending internet access, it represents the beginning of a series of research papers that will discuss barriers to access as well as policies, technology innovation and advancements, business solutions and initiatives to extend internet access. We are inviting others to join the debate to advance the discussion and suggest critical policies and actions to bring more people online.

The internet allows all of the world to join the knowledge economy.

To read this Report in full, please click here.

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